<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996 Commission file number 0-23732
WINSTON HOTELS, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1872141
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2209 CENTURY DRIVE
RALEIGH, NORTH CAROLINA 27612
(Address of principal executive offices)
(Zip Code)
(919) 510-6010
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
The number of shares of Common Stock, $.01 par value, outstanding on May 8,
1996 was 9,913,217.
<PAGE> 2
WINSTON HOTELS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. WINSTON HOTELS, INC. (unaudited)
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Income - For the three
months ended March 31,1996, and the three months
ended March 31, 1995 4
Consolidated Statements of Cash Flows - For the
three months ended March 31, 1996 and the three
months ended March 31, 1995 5
Notes to consolidated financial statements 6
WINSTON HOSPITALITY, INC. (unaudited)
Balance Sheets - March 31, 1996 and December 31, 1995 8
Statements of Income - For the three months ended
March 31, 1996, and the three months ended March 31, 1995 9
Statements of Cash Flow - For the three months ended
March 31, 1996 and the three months ended March 31, 1995 10
Note to financial statements 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II. OTHER INFORMATION
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 18
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
WINSTON HOTELS, INC.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Investment in hotel properties:
Land $ 13,879 $ 13,879
Buildings and improvements 103,742 103,264
Furniture and equipment 6,662 5,753
-------- --------
124,283 122,896
Less accumulated depreciation (6,200) (5,033)
-------- --------
Net investment in hotel properties 118,083 117,863
Cash and cash equivalents 220 2,496
Lease revenue receivable 3,027 2,547
Deferred expenses, net 1,172 841
Prepaid expenses and other assets 1,471 222
-------- --------
$123,973 $123,969
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Due to banks $ 34,500 $ 34,000
Accounts payable and accrued expenses 1,634 1,574
Dividends and distributions payable 2,475 2,785
Amounts due to Lessee 1,457 1,187
Minority interest in Partnership 3,527 3,551
Shareholders' equity:
Preferred stock, $.01 par value, 10,000,000
shares authorized, no shares issued and
outstanding - -
Common stock, $.01 par value, 50,000,000 shares
authorized, 9,880,114 shares issued and
outstanding 99 99
Additional paid-in capital 82,988 82,988
Unearned directors' compensation (238) (256)
Deficit (2,469) (1,959)
-------- --------
Total shareholders' equity 80,380 80,872
-------- --------
$123,973 $123,969
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
WINSTON HOTELS, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31,1996 March 31,1995
------------- -------------
<S> <C> <C>
Revenue:
Percentage lease revenue $ 4,540 $ 3,035
Interest and other income 16 26
---------- ---------
Total revenue 4,556 3,061
---------- ---------
Expenses:
Real estate taxes and property and
casualty insurance 320 216
General & administrative 424 227
Interest expense 674 538
Depreciation 1,167 745
Amortization 31 26
---------- ---------
Total expenses 2,616 1,752
---------- ---------
Income before allocation to
minority interests 1,940 1,309
Income allocation to minority interest 80 79
---------- ---------
Net income applicable to
common shareholders $ 1,860 $ 1,230
========== =========
Net income per common share $ .19 $ .18
========== =========
Distributions declared per common share $ .24 $ .22
========== =========
Weighted average number of common
shares and common share equivalents 10,382,685 7,216,539
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
WINSTON HOTELS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31,1996 March 31,1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,860 $ 1,230
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority Interest 80 79
Depreciation 1,167 745
Amortization of franchise fees 13 8
Amortization recorded as interest expense 57 10
Unearned compensation amortization 18 18
Writeoff of deferred acquisition costs 7
Changes in assets and liabilities:
Lease revenue receivable (480) (578)
Prepaid expenses and other assets (187) 81
Current liabilities (200) (273)
------- -------
Net cash provided by operating activities 2,328 1,327
------- -------
Cash flows used in investing activities:
Deferred acquisition costs (140)
Prepaid acquisition costs (1,062)
Investment in hotel properties (1,117) (288)
------- -------
Net cash used in investing activities (2,319) (288)
------- -------
Cash flows used in financing activities:
Purchase of interest rate cap agreements (113)
Increase in line of credit borrowing 500
Payment of distributions (2,668) (1,423)
Distributions to minority interest (117) (91)
------- -------
Net cash provided by financing activities (2,285) (1,627)
------- -------
Net decrease in cash and cash equivalents (2,276) (588)
Cash and cash equivalents at beginning of period 2,496 1,114
------- -------
Cash and cash equivalents at end of period $ 220 $ 526
======= =======
Supplemental disclosures:
Cash paid for interest $ 601 $ 529
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
WINSTON HOTELS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ AMTS IN THOUSANDS)
1. ORGANIZATION
Winston Hotels, Inc. (the "Company") operates so as to qualify as a
real estate investment trust ("REIT") for federal income tax purposes.
The accompanying unaudited consolidated financial statements reflect,
in the opinion of management, all adjustments necessary for a fair
presentation of the interim financial statements. All such
adjustments are of a normal and recurring nature. Due to the
seasonality of the hotel business, the information for the three
months ended March 31, 1996 and the information for the three months
ended March 31,1995 are not necessarily indicative of the results for
a full year.
2. PRO FORMA FINANCIAL INFORMATION
This unaudited pro forma condensed statement of income of the Company
is presented as if the Company had acquired the five hotels it
acquired in May 1995 as of January 1, 1995, thereby owning all 21
Current Hotels for the three month period ended March 31, 1995. This
unaudited pro forma condensed statement of income is not necessarily
indicative of what actual results of operations of the Company would
have been assuming such transactions had been completed as of January
1, 1995, nor does it purport to represent the results of operations
for future periods (in thousands, except per share data):
<TABLE>
<CAPTION>
Pro Forma
Three Months Ended
March 31, 1995
------------------
<S> <C>
Percentage lease revenue $4,183
Net income applicable to common shareholders $1,728
Net income per common share $ 0.18
Weighted average number of common shares
and common shares equivalents 10,322
</TABLE>
3. SUBSEQUENT EVENTS:
The Company, through the Partnership, contracted to acquire 10 hotels
(the "Acquisition Hotels") with an aggregate of 1,323 rooms for
purchase prices aggregating approximately $73.4 million. In May 1996,
the Company acquired five of the Acquisition Hotels for an aggregate
purchase price of approximately $28 million with borrowings under its
existing line of credit and an interim unsecured line of credit.
On April 25, 1996 the Company filed a registration statement on Form
S-3 (the "Follow-on Offering") to sell up to 5 million shares (not
including approximately 0.8 million shares subject to underwriters
over-allotment) of its common stock for which it expects to receive
net proceeds of approximately $55.9 million. The Company will
contribute all of the net proceeds of the Follow-on Offering to the
Partnership and, after such contribution will own an approximately
91.5% interest in the Partnership. The net proceeds from the sale of
its common stock will be used to complete the acquisition of five
hotels, to repay certain indebtedness, to refurbish certain of the
Company's hotels and to transfer franchise licenses.
Additionally, the Company has entered into an agreement with Promus
Hotel Corporation ("Promus"), under which Promus will invest up to $15
million over time in newly issued shares of the Company's common stock
and the Company will purchase existing or under development
Promus-owned hotels (including one Acquisition Hotel) at prices
aggregating approximately $38.8 million over the next few years.
6
<PAGE> 7
WINSTON HOTELS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 1996, the Company obtained a commitment from a group of
lenders led by Wachovia Bank for a $125 million line of credit ("New
Line"). The commitment is conditioned upon the closing of the
Follow-on Offering. Amounts outstanding under the existing line of
credit will remain outstanding under the New Line. Amounts outstanding
under the New Line generally will bear interest at LIBOR plus 1.75%.
The Company initially will secure the New Line with 28 of its hotels,
and will initially be able to borrow up to $85 million. The amount
available to borrow will be calculated quarterly, and will increase if
cash flow attributable to the collateral hotels increases and / or the
Company adds additional hotels as collateral. The Company has obtained
an interim unsecured line of credit in the amount of $17 million , at
a rate of LIBOR plus 1.75%, to partially finance the acquisition of
four of the hotels it acquired in May 1996. It is anticipated that
this unsecured line of credit will be repaid from the proceeds of the
Follow-on Offering.
4. STOCK OPTION PLANS
On January 1, 1996 the Company adopted Statement of Accounting
Standards No. 123, Accounting for Stock Based Compensation. As
permitted by SFAS 123, the Company has chosen to apply APB Opinion 25
and related Interpretations in accounting for its stock option plans
and, accordingly, no compensation cost has been recognized for its
stock option plans. If compensation cost for the Company's stock
option plans had been determined based on the fair value at the grant
dates for awards under those plans consistent with the method of SFAS
123, the impact on the Company's net income and earnings per share
would not have been material.
5. SUMMARIZED NONCASH FINANCING AND INVESTING ACTIVITIES FOR THE PERIOD
The following summarizes the noncash financing and investing
activities for the three month period ended March 31, 1996:
Included in accounts payable and accrued expenses and amounts due to
Lessee at March 31, 1996 are additions to investment in hotel
properties of $1,457 due to the Lessee, and $260 related to the
acquisition of hotel properties due to occur during the second quarter
of 1996. On March 29, 1996, the Company declared a $0.24 per share
cash distribution of $2,475 which was paid on April 16, 1996.
7
<PAGE> 8
WINSTON HOSPITALITY, INC.
BALANCE SHEETS
($ IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,833 $2,249
Accounts receivable:
Trade 966 836
Lessor 1,457 1,187
Affiliates 226 79
Prepaid expenses and other assets 104 117
------ ------
Total current assets 5,586 4,468
------ ------
Furniture, fixtures and equipment:
Furniture and equipment 191 186
Leasehold improvements 110 106
------ ------
301 292
Less accumulated depreciation and
amortization 112 95
------ ------
189 197
------ ------
Total assets $5,775 $4,665
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 644 $ 450
Percentage lease payable 3,027 2,547
Accrued salaries and wages 429 607
Accrued sales and occupancy taxes 369 219
Other current liabilities 619 357
------ ------
Total current liabilities 5,088 4,180
------ ------
Shareholders' equity:
Common stock, $.01 par value, 100 shares
authorized, issued and outstanding 1 1
Additional paid-in capital 49 49
Retained earnings 637 435
------ ------
Total shareholders' equity 687 485
------ ------
Total liabilities and
shareholders' equity $5,775 $4,665
====== ======
</TABLE>
The accompanying note is an integral part of the financial statements.
8
<PAGE> 9
WINSTON HOSPITALITY, INC.
STATEMENTS OF INCOME
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31,1996 March 31,1995
------------- -------------
<S> <C> <C>
Revenue:
Room revenue $10,709 $7,373
Other operating revenue, net 308 213
Interest income 19 10
------- ------
Total revenue 11,036 7,596
------- ------
Expenses:
Property operating expenses 4,015 2,675
Repairs and maintenance 524 328
General and administrative 484 341
Franchise costs 905 623
Management fees 316 155
Percentage lease payments 4,540 3,035
------- ------
Total expenses 10,784 7,157
------- ------
Net income $ 252 $ 439
======= ======
</TABLE>
The accompanying note is an integral part of the financial statements.
9
<PAGE> 10
WINSTON HOSPITALITY, INC.
STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31,1996 March 31,1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 252 $ 439
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 17 15
Changes in assets and liabilities:
Accounts receivable (130) (162)
Prepaid expenses and other assets 13 (9)
Accounts payable - trade 194 40
Percentage lease payable 480 578
Accrued expenses and other liabilities 234 73
------ ------
Net cash provided by operating
activities 1,060 974
------ ------
Cash flows from investing activities:
Purchases of furniture, fixture & equipment (9)
Proceeds from sale of furniture,
fixtures & equipment 3
Advances to lessor and affiliates (417) (674)
------ ------
Net cash used in investing activities (426) (671)
------ ------
Cash flows used in financing activities:
Distributions to shareholders (50)
------
Net cash used in financing activities (50)
------
Net increase in cash and cash equivalents 584 303
Cash and cash equivalents at beginning of period 2,249 2,120
------ ------
Cash and cash equivalents at end of period $2,833 $2,423
====== ======
</TABLE>
The accompanying note is an integral part of the financial statements.
10
<PAGE> 11
WINSTON HOSPITALITY, INC.
NOTE TO FINANCIAL STATEMENTS
The accompanying unaudited financial statements reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the interim
financial statements. All such adjustments are of a normal and recurring
nature.
PROFIT SHARING PLAN
On January 1, 1996, the Winston Hospitality, Inc. ("Hospitality") adopted the
Winston 401 (k) Plan (the "Plan") for substantially all employees, except any
highly compensated employee as defined in the Plan, who have attained the age
of 21 and completed one year of service. Under the plan, employees may
contribute from 1% to 15% of compensation, subject to an annual maximum as
determined under the Internal Revenue Code. Hospitality will make matching
contributions of a specified percentage of the employee's contribution,
currently 3% of the first 6% of the employee's contribution, and may make
additional discretionary contributions.
11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
($ AMOUNTS IN THOUSANDS)
OVERVIEW
Winston Hotels, Inc. (the "Company"), which consummated an underwritten initial
public offering in June, 1994 and a second underwritten public offering in May,
1995 operates as a real estate investment trust to invest in hotel properties.
The Company acquired 10 hotels in conjunction with its initial public offering
(the "Initial Hotels"), six hotels during the remainder of 1994 and five hotels
in May, 1995 in connection with a second public offering (the "Acquired
Hotels"). It currently leases all 21 hotels (the "Current Hotels") to Winston
Hospitality, Inc. (the "Lessee") under percentage lease agreements (the
"Percentage Leases") through which it receives its principal source of revenue.
RESULTS OF OPERATIONS
For the three months ended March 31, 1996 and the comparable period for 1995,
the differences in operating results are primarily attributable to the fact
that the Company owned all of the Current Hotels during the three months ended
March 31, 1996 as compared with sixteen of the Current Hotels for three months
ended March 31, 1995. Below is a comparison of the actual results of operations
for the three months ended March 31, 1996 to the actual results of operations
for the three months ended March 31, 1995. In order to present a meaningful
comparison of operations, also presented is a comparison of the actual results
of operations for the three months ended March 31, 1996 to the pro forma
results of operations for the three months ended March 31, 1995, as if the
acquisition of the five Acquisition Hotels which were acquired in May 1995, and
the May 1995 follow-on offering had occurred as of January 1, 1995.
THE COMPANY
ACTUAL - THREE MONTHS ENDED MARCH 31, 1996 VS ACTUAL -
THREE MONTHS ENDED MARCH 31, 1995
The Company had revenues of $4,556 in 1996, consisting of $4,540 of Percentage
Lease revenues and $16 of interest and other income. Percentage Lease revenues
increased by $1,505, or 50%, to $4,540 in 1996 from $3,035 in 1995. This
increase was comprised of: (i) $58 for 16 of the Current Hotels that were owned
for the first three months of 1996 and 1995, which was due to the rent formulas
in the Percentage Leases which resulted in rent payments by the Lessee
increasing by an average of 33% of the $176 increased room revenues
attributable to inflation, plus an average of 66% of $418 of increased room
revenues, which were attributable primarily to higher rates, and (ii) $1,170
for five of the Acquired Hotels that were acquired in May 1995.
Real estate taxes and property insurance costs incurred in 1996 were $320, an
increase of $104 from $216 in 1995. This increase was attributable to the five
additional Acquired Hotels in 1996 that were not owned in the same period in
1995. General and administrative expenses increased $197 to $424 in 1996 from
$227 in 1995. The increase was attributable to: (i) costs attributable to the
increase in size and activities of the Company in 1996 over 1995; (ii) the
Company becoming self-administered in 1996 and incurring costs associated
therewith, offset in part by savings from costs not incurred under its previous
advisory agreement; (iii) inflationary cost increases; and (iv) the write-off
of $22 in costs related to acquisition projects abandoned in 1996. Interest
expense increased by $136 to $674 in 1996 from $538 in 1995, due to: (i)
additional interest of $73 due to borrowings related to the purchase of the
five Acquired Hotels acquired in May 1996; (ii) $34 of amortization of
additional fees incurred in connection with obtaining the $50 million credit
line in May 1995; and (iii) $29 of amortization of interest rate cap agreement
costs. Depreciation increased $422 to $1,167 in 1996 from $745 in 1995,
primarily due to depreciation related to the last five Acquired Hotels and the
additional depreciation on renovations completed during 1995 and 1996.
12
<PAGE> 13
ACTUAL - THREE MONTHS ENDED MARCH 31, 1996 VS PRO FORMA -
THREE MONTHS ENDED MARCH 31, 1995
The Company had revenues of $4,556 for the three months ended
March 31, 1996, consisting of $4,540 of Percentage Lease revenues and $16 of
interest and other income. Percentage Lease revenues increased by $357, or 9%,
to $4,540 in 1996 from $4,183 in 1995. This increase was due to: (i) an average
of 27% of the $111 of increased room revenues at the Current Hotels
attributable to inflation, and (ii) an average of 67% of $491 of increased room
revenues at the Current Hotels, which were primarily attributable to higher
rates.
Real estate taxes and property insurance costs incurred in 1996 were $320, an
increase of $16 from $304 in 1995. This increase was attributable primarily to
increased tax rates. General and administrative expenses increased $185 to $424
in 1996 from $239 in 1995. The increase was attributable to the Company
becoming self-administered in 1996 and the timing of additional costs incurred
therewith, offset in part by: (i) savings from costs not incurred under its
previous advisory agreement; (ii) inflationary cost increases; and (iii)
increased write-offs of $15 in costs related to abandoned acquisition projects.
Interest expense decreased by $32 to $674 in 1996 from $706 in 1995, resulting
from lower interest costs due to lower interest rates in 1996 than in 1995,
offset in part by amortization of interest rate cap agreement costs in 1996.
Depreciation increased $35 to $1,167 in 1996 from $1,132 in 1995 primarily due
to additional depreciation on renovations completed during 1995 and 1996.
THE LESSEE
ACTUAL - THREE MONTHS ENDED MARCH 31, 1996 VS ACTUAL -
THREE MONTHS ENDED MARCH 31, 1995
The Lessee had room revenues of $10,709 in 1996, up $3,336, or 45%, from $7,373
in 1995. The increase in room revenues was due to: (i) an increase in room
revenues of $594, or 8%, for 16 of the Current Hotels that were owned for the
first three months of both 1996 and 1995, and (ii) room revenues for the three
months ended March 31, 1996 in the amount of $2,742 for five of the Acquired
Hotels that were acquired in May 1995.
The Lessee had property and operating expenses in 1996 of $4,015, up $1,340
from $2,675 in 1995, and repairs and maintenance costs of $524 in 1996, up $196
from $328 in 1995. These increases in expenses were attributable primarily to
the fact that the Lessee operated 21 of the Current Hotels in 1996 as compared
to 16 of the Current Hotels for the three months ended March 31, 1995.
ACTUAL - THREE MONTHS ENDED MARCH 31, 1996 VS PRO FORMA -
THREE MONTHS ENDED MARCH 31, 1995
The Lessee had room revenues of $10,709 in 1996 and $10,107 in 1995, as further
analyzed in the following table:
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1996 1995 % Change
---- ---- --------
<S> <C> <C> <C>
Current Hotels
--------------
Room Revenues $10,709 $10,107 6.0%
Occupancy 77.4% 80.4% (3.7%)
Average Daily Rate $ 56.26 $ 51.68 8.9%
Revenue Per Available Room $ 43.52 $ 41.52 4.8%
</TABLE>
The Lessee had property and operating expenses of $4,015 in 1996, up $309, or
8%, from $3,706 in 1995. Repairs and maintenance costs totaled $524 in 1996, up
$69, or 15%, from $455 in 1995, which increase was attributable to the
unseasonably cold weather that was experienced during the first quarter of
1996. General and administrative costs increased to $484 in 1996, up $143 or
42% from 1995. This increase was attributable to inflation and the increased
activity that the Lessee has been preparing to handle in 1996. Management fees
totaled $316 in 1996, up $30 from $286 in 1995. The increase is due to the
participation by the third party manager in the improvement in profits at ten
of the Acquired Hotels in 1996 vs. 1995. Percentage Lease payments totaled
$4,540 in 1996 compared to $4,183 in 1995, an increase of $357.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations from operating cash flow, which is
principally derived from Percentage Leases. For the quarter ended March 31,
1996, cash flow provided by operating activities was $2,328 and funds from
operation, which is equal to net income before minority interest plus
depreciation, was $3,107. Under Federal income tax law provisions applicable to
REITs, the Company is required to distribute at least 95% of its taxable income
to maintain its tax status as a REIT. Because the Company's cash flow from
operating activities is expected to exceed its taxable income due to
depreciation and amortization expenses, the Company expects to be able to meet
its distribution requirements out of cash flow from operating activities. In
March 1996, the Company declared distributions of $2,371 to its shareholders.
The Company's net cash used in investing activities for the quarter ended March
31, 1996 totaled $2,319 primarily related to deposits and other prepaid costs
incurred in connection with hotel acquisitions and capital improvements to its
Current Hotels. In connection with the 10 Acquired Hotels, which were purchased
between November 1994 and May 1995, the Company spent approximately $1.0
million in 1996, and anticipates spending an additional $0.2 million during
1996 to complete the refurbishment of these hotels. These expenditures are in
addition to reserves of 3% of room revenues for the first year and 5% for the
years thereafter which the Company is required to set aside under its
Percentage Leases for periodic capital improvements and the refurbishment and
replacement of furniture, fixtures and equipment at all of its Current Hotels.
For new acquisitions, the Company will be required to set aside 5% of room
revenues from limited- service hotels, and 7% of gross room, food and beverage
revenues from full-service hotels. In the first quarter of 1996 the Company set
aside $481 for such reserves. These reserves are expected to be funded from
operating cash flow, and possibly also form borrowings under the Company's line
of credit, which sources are expected to be adequate to fund such capital
requirements. These reserves are in addition to amounts spent on normal repairs
and maintenance which have approximated 4.9% and 4.5% of room revenues in 1995
and 1996, respectively, and are paid by the Lessee.
The Company's net cash used in financing activities in the first quarter of
1996 totaled $2,285. Net cash used included a distribution to the Company's
shareholders and minority partners of $2,785. This was offset by additional
borrowing under the Company's line of credit of $500.
The Company has a $50 million line of credit with Wachovia Bank ("Existing
Line"), which limits the amount that may be borrowed for dividends, capital
expenditures and working capital to $8,300, and expires in June 1997.
Borrowings under the line of credit generally bear interest at LIBOR plus
1.25%. The line of credit is collateralized by a first mortgage on each of the
Current Hotels. The Company's Articles of Incorporation limit its total amount
of indebtedness to 45% of the purchase prices paid by the Company for its
investments in hotel properties (the "Debt Limitation"). As of March 31, 1996
the Company had $15,500 available under the Existing Line. Under the Debt
Limitation the Company has additional borrowing capacity of approximately $80
million, assuming it invests all of its borrowings in additional hotels.
The Company intends to acquire and develop additional hotel properties,
including those described below, that meet its investment criteria and is
continually evaluating acquisition opportunities. It is expected that future
hotel acquisitions will be financed, in whole or in part, from additional
follow-on offerings, from borrowings under the line of credit, from joint
venture agreements, and from the issuance of other debt or equity securities.
There can be no assurances that the Company will make an investment in any
additional hotel properties that meet its investment criteria.
On April 25, 1996 the Company filed a registration statement for a Follow-on
Offering to sell up to 5 million shares (not including approximately 0.8
million shares subject to underwriters over-allotment) of its common stock for
which it expects to receive net proceeds of approximately $55.9 million. The
net proceeds from the sale of its common stock will be used to complete the
acquisition of five hotels, to repay certain indebtedness, to refurbish certain
of the Company's hotels and to transfer franchise licenses. Additionally under
the terms of the Stock Purchase Agreement ("Promus Agreement") dated April 24,
1996, between the Company and Promus Hotel Inc. ("Promus"), Promus will invest
$3 million in newly issued Company common stock in connection with the
Company's acquisition of one of the five hotels to be acquired upon completion
of the Follow-on Offering ("Promus Agreement").
In April 1996, the Existing Line was amended and restated to provide for an
increase in the total commitment to $125 million, and an extension of the term
to June 1998 ("New Line"), subject to the successful completion of the
Follow-on
14
<PAGE> 15
Offering. The Company will initially secure the New Line with certain of its
hotel properties, which are expected to provide borrowing availability ("Line
Availability") of approximately $85 million. The Line Availability will be
calculated quarterly, and will increase if cash flow attributable to the
collateral hotels increases and / or the Company adds additional hotels as
collateral. The terms of the New Line permit borrowings for dividends, capital
expenditures and working capital of up to 17% of the Line Availability, and new
hotel development of up to 50% of the Line Availability. The New Line bears
interest generally at LIBOR plus 1.75%. The Company has also obtained an
interim unsecured line of credit from its current lenders in the amount of $17
million ("Unsecured Line") to partially finance the acquisition of the four
hotels it acquired on May 7, 1996. It is anticipated that the Unsecured Line,
which bears interest at LIBOR plus 1.75%, will be repaid from proceeds of the
Follow-on Offering.
On May 6, 1996 the Company acquired one hotel with 191 rooms for $4.4 million
with borrowings from the Existing Line. On May 7, 1996 it acquired four hotels
with an aggregate of 505 rooms for $23 million and two parcels of land adjacent
to two of the four hotels for $0.6 million, which were financed in part with
borrowings under the Existing Line and with $17 million of borrowings from the
Unsecured Line. In addition the Company has contracted to acquire five
additional hotels with an aggregate of 627 rooms for an aggregate price of
$39.8 million, conditional upon the closing of the Follow-on Offering. Two of
the additional five hotels are currently in the final stage of construction and
the Company intends to acquire them within 15 days after the later of the
issuance of a certificate of occupancy for such hotels or the opening of such
hotels.
The Promus Agreement, which is subject to the successful completion of the
Follow-on Offering, provides for Promus to invest up to $15 million over time
in newly issued shares of the Company's common stock and for the Company to
purchase one existing and three under development Promus-owned hotels.
Specifically, Promus will invest $3 million of the $15 million upon the
Company's acquisition of an existing 92-suite Homewood Suites in the
Houston-Clear Lake area upon the completion of the Follow-on Offering. It will
also make additional investments at the rate of $12.5 per room in connection
with the acquisition of three Homewood Suites hotels that are currently under
development in Baltimore, MD; Dallas, TX; and Richmond, VA. On April 24, 1996,
the Company executed a purchase agreement with Promus relating to these three
hotels (the "Development Hotel Agreement"). The acquisitions, which are
expected to occur over the next few years, are at prices which approximate
Promus' development cost and are subject to the Company's approval of building
specifications and Promus' completion within certain cost limitations and
delivery dates. On April 24, 1996, the Company and Promus executed an option
agreement (the "Option Agreement") pursuant to which Promus offered the Company
options to acquire future newly developed Homewood Suites properties over the
next several years. Promus will also make additional investments at the rate of
$12.5 per room in connection with such acquisitions until its cumulative
investment reaches $15 million. Pursuant to a non-binding memorandum of
understanding, dated March 15, 1996, between the Company, the Lessee and
Promus, (i) the Company agreed to use its best efforts to spend up to $100
million toward the acquisition or development of Promus hotel properties
(including the hotels relating to the Promus Development Hotel Agreement, the
Option Agreement and the two development hotels described in the paragraph
below) over the next eight years, (ii) Promus agreed to enter into management
agreements with the Lessee for all such hotels acquired by the Company and the
Homewood Suites hotel in the Houston-Clear Lake area, and (iii) Promus and the
Company agreed to the material terms of the purchase agreement for the Homewood
Suites hotel in the Houston-Clear Lake area, the Promus Agreement, the Option
Agreement and the Promus Development Hotel Agreement. Additionally, Promus
would enter into long-term management agreements for each of these hotels.
The Company has entered into contracts to purchase an approximately 5.3 acre
site for development of a 136-room Homewood Suites hotel near the Crabtree
Valley Mall in Raleigh, North Carolina and an approximately 2.7 acre site for
the development of a 100-room Homewood Suites hotel in Alpharetta, Georgia.
Total development costs are expected to approximate $12.0 million and $9.0
million, respectively, for these projects. Construction is tentatively expected
to commence on both of these hotels in mid 1996, with completion tentatively
scheduled for mid 1997. However, there is no assurance that such development
will be undertaken, or if commenced, that it will be completed on schedule.
SEASONALITY
The hotels' operations historically have been seasonal in nature, reflecting
higher REVPAR during the second and third quarters. This seasonality and the
structure of the Percentage Leases, which provide for a higher percentage of
room revenues above stated equal quarterly levels to be paid as Percentage
Rent, can be expected to cause fluctuations in the Company's quarterly lease
revenue under the Percentage Leases.
15
<PAGE> 16
PART II - OTHER INFORMATION
Item 5. Other Information.
(a) None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Memorandum of Understanding, dated march 15, 1996,
among Winston Hotels, Inc. , Winston Hospitality, Inc. and Promus
Hotels, Inc.
10.2 Stock Purchase Agreement, dated April 24, 1996,
between Promus Hotels, Inc. and Winston Hotels, Inc.
10.3 Agreement of Purchase and Sale, dated April 24,
1996, between WINN Limited Partnership and Promus Hotels, Inc.
relating to three hotel properties being developed by Promus
Hotels, Inc.
10.4 Agreement of Purchase and Sale, dated April 24,
1996, between WINN Limited Partnership and Promus Hotels, Inc.
relating to a hotel property located in Clear Lake, Texas.
10.5 Option to Purchase Additional Hotels, dated April
24, 1996 between WINN Limited Partnership and Promus Hotels, Inc.
10.6 Agreement of Purchase and Sale, dated February 1,
1996, among WINN Limited Partnership, Dallas Lodging Associates,
Inc., A.B. Lodging Associates, Inc., London Lodging Associates
and Duncanville Lodging Associates I, Ltd.
10.7 Management Agreement dated April 25, 1996, between
Winston Hospitality, Inc. and Impac Hotel Group, Inc.
10.8 Agreement of Purchase and Sale, dated April 24,
1996, between WINN Limited Partnership and Cary Suites, Inc.
10.9 Agreement of Purchase and Sale, dated April 24,
1996, between WINN Limited Partnership and RWW, Inc.
10.10 Agreement of Purchase and Sale, dated April 24,
1996, between WINN Limited Partnership and WJS, Associates.
10.11 Agreement of Purchase and Sale, dated April 24,
1996, between WINN Limited Partnership and Hotel II,
Incorporated.
10.12 Sales Contract, dated March 31, 1996, among WINN
Limited Partnership, Louis Bowie and Title Company of North
Carolina.
10.13 Sales Contract, dated February 9, 1996, among WINN
Limited Partnership, Russell Parman, Ruby Parman and Title
Company of North Carolina.
10.14 Commitment Letter, dated April 24, 1996, to Winston
Hotels, Inc. and WINN Limited Partnership, L.P. from Wachovia
Bank of North Carolina, N.A., Branch Banking & Trust Company,
South Trust Bank of Alabama, N.A., and NationsBank, N.A.
16
<PAGE> 17
10.15 Commitment Letter, dated May 7, 1996, to Winston
Hotels, Inc. and WINN Limited Partnership, L.P. from Wachovia
Bank of North Carolina, N.A., Branch Banking & Trust Company.
27. Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
period for which this report is being filed.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WINSTON HOTELS, INC.
Date 5/14/96 /s/ Robert W. Winston, III
--------------------- --------------------------
Robert W. Winston, III
Chief Executive Officer
and President
Date 5/14/96 /s/ Philip R. Alfano
--------------------- ---------------------------
Philip R. Alfano
Senior Vice President and
Chief Financial Officer
18
<PAGE> 19
WINSTON HOTELS, INC.
FORM 10-Q for the quarter ended March 31, 1996
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- - ------ ----------------------
<S> <C>
10.1 Memorandum of Understanding, dated March 15, 1996, among Winston Hotels, Inc. , Winston
Hospitality, Inc. and Promus Hotels, Inc.
10.2 Stock Purchase Agreement, dated April 24, 1996, between Promus Hotels, Inc. and Winston Hotels,
Inc.
10.3 Agreement of Purchase and Sale, dated April 24, 1996, between WINN Limited Partnership and Promus
Hotels, Inc. relating to three hotel properties being developed by Promus Hotels, Inc.
10.4 Agreement of Purchase and Sale, dated April 24, 1996, between WINN Limited Partnership and Promus
Hotels, Inc. relating to a hotel property located in Clear Lake, Texas
10.5 Option to Purchase Additional Hotels, dated April 24, 1996 between WINN Limited Partnership and
Promus Hotels, Inc.
10.6 Agreement of Purchase and Sale, dated February 1, 1996, among WINN Limited Partnership, Dallas
Lodging Associates, Inc., A.B. Lodging Associates, Inc., London Lodging Associates and
Duncanville Lodging Associates I, Ltd.
10.7 Management Agreement dated April 25, 1996, between Winston Hospitality, Inc. and Impac Hotel
Group, Inc.
10.8 Agreement of Purchase and Sale, dated April 24, 1996, between WINN Limited Partnership and Cary
Suites, Inc.
10.9 Agreement of Purchase and Sale, dated April 24, 1996, between WINN Limited Partnership and RWW,
Inc.
10.10 Agreement of Purchase and Sale, dated April 24, 1996, between WINN Limited Partnership and WJS,
Associates.
10.11 Agreement of Purchase and Sale, dated April 24, 1996, between WINN Limited Partnership and Hotel
II, Incorporated.
10.12 Sales Contract, dated March 31, 1996, among WINN Limited Partnership, Louis Bowie and Title
Company of North Carolina.
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C>
10.13 Sales Contract, dated February 9, 1996, among WINN Limited Partnership, Russell Parman, Ruby
Parman and Title Company of North Carolina.
10.14 Commitment Letter, dated April 24, 1996, to Winston Hotels, Inc. and WINN Limited Partnership,
L.P. from Wachovia Bank of North Carolina, N.A., Branch Banking & Trust Company, South Trust Bank
of Alabama, N.A., and NationsBank, N.A.
10.15 Commitment Letter, dated May 7, 1996, to Winston Hotels, Inc. and WINN Limited Partnership, L.P.
from Wachovia Bank of North Carolina, N.A., Branch Banking & Trust Company.
27. Financial Data Schedule (For SEC use only)
</TABLE>
20
<PAGE> 1
EXHIBIT 10.1
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING, dated as of March 15, 1996
("Memorandum") expresses the intent of Winston Hotels, Inc., a North Carolina
corporation ("WHI"), Promus Hotels, Inc., a Delaware corporation ("Promus"),
and Winston Hospitality, Inc., a North Carolina corporation (the "Lessee"), in
pursuing the transactions described herein, including having WHI buy certain
hotels from Promus, having WHI lease the hotels to the Lessee, having Promus
manage the hotels under agreements with the Lessee and having Promus make
certain investments in WHI, on the terms and subject to the conditions
described herein.
1. Purchase of Hotels.
a. Agreement. WHI has reviewed the information provided
by Promus, including but not limited to development and operating budgets for
each of the Development Hotels (as defined below), and will agree to buy from
Promus, and Promus will agree to sell to WHI, the Homewood Suites hotels
described on Exhibit A (the "Hotels"), one of which has been developed (the
"Developed Hotel") and the balance of which are being or will be developed by
Promus (the "Development Hotels"). WHI's obligation to purchase the Hotels is
subject to satisfactory completion of its due diligence with respect to the
Hotels, which due diligence shall be completed no later than June 1, 1996. WHI
has reviewed the marketing studies and financial projections prepared by or on
behalf of Promus and presented by Promus to WHI with respect to the Development
Hotels, and finds them acceptable.
b. Purchase Price. The purchase prices for the Hotels
will be as set forth on Exhibit A.
c. Reviews/Reports. Promus will agree to provide WHI
with monthly progress reports on the Development Hotels, including such detail
as WHI reasonably requires to confirm Promus' actual development and building
costs. WHI and its agents will also have the right from time to time, on
reasonable notice to Promus and accompanied by a Promus representative, to
visit the sites of the Development Hotels and to meet with Promus' contractors,
architects and vendors to review the progress and status of the development and
construction processes and for due diligence purposes.
d. Closings. WHI will agree to close on the
purchase of the Developed Hotel within ten days after closing its next public
offering of common stock (the "Offering"), which is presently expected to be
closed by May 30, 1996. Promus will agree to use its reasonable best efforts
to develop and construct the Development Hotels in order to open the
Development Hotels by the respective estimated opening dates set forth on
Exhibit A. Subject to subsections e. and f. below, WHI will agree in any
Purchase Agreement (defined below) executed by the parties to
<PAGE> 2
close on the purchase of each Development Hotel within 30 days after the later
of (i) the issuance of the related certificate of occupancy and all other
licenses and permits required to operate the Hotel as it is intended to be
operated and (ii) the first day that the Hotel is open for business. At each
closing, WHI will deliver to Promus cash, in immediately available funds, equal
to the portion of the purchase price allocated to the Hotel as set forth on
Exhibit A. At each closing, Promus will deliver to WHI good, unencumbered
title to the real estate, improvements, personal property and inventory
comprising the Hotel, subject only to permitted exceptions agreed upon by the
parties. Promus will agree to pay to complete the items identified on any
"punch list" which is reasonably prepared by the Hotel architect, after
consultation with Promus, at or prior to closing, whether the items are
completed before or after closing.
e. Cost Overruns and Savings.
(1) If Promus' actual development and building
costs for a Development Hotel, which shall not include fees paid to Promus or
its affiliates, exceed the total budgeted cost for the Development Hotel set
forth on Exhibit A (the "Budgeted Cost") less fees included therein which are
payable to Promus or its affiliates, Promus shall so notify WHI, and for a
period of 30 days after the latest of (i) the delivery of the notice, (ii) the
issuance of the certificate of occupancy for the Hotel, or (iii) the first day
that the Hotel is open for business, WHI will have an option, but not the
obligation, to buy the Hotel for a purchase price equal to (i) the Budgeted
Cost plus (ii) the actual development, building and interest costs in excess of
the amount referenced in clause (i) incurred by Promus in the development and
building of the Hotel. The excess costs may include only (A) costs actually
paid to third parties which are not affiliated with Promus or any of its
affiliates or (B) expenses of a category normally incurred by Promus (i.e.,
salaries) that have been actually incurred by Promus and were attributable
directly to the Development Hotel, which attribution shall be documented in
reasonable detail to WHI and shall not include any management, development, or
similar fees paid to Promus or any of its affiliates.
(2) If Promus' actual development and building
costs for a Development Hotel, which shall not include fees paid to Promus or
its affiliates, are less than the Budgeted Cost less fees included therein
which are payable to Promus or its affiliates, the purchase price referenced in
Section 1.b. above and the portion of the purchase price allocated to the Hotel
as set forth on Exhibit A shall be reduced by an amount equal to 100% of cost
savings in excess of 4% of the Budgeted Cost.
f. Delay. If the certificate of occupancy is not issued
and the opening has not occurred for a Development Hotel
2
<PAGE> 3
within (a) 120 days after the date estimated by Promus for such events as set
forth on Exhibit A then WHI shall not be required, but shall have the option,
exercisable within 30 days after the later of (i) the issuance of the
certificate of occupancy for the Development Hotel and (ii) the first day that
the Development Hotel is open for business, to purchase the Development Hotel
for the price and on the terms set forth herein.
g. Definitive Documentation. WHI and Promus agree to
negotiate in good faith the terms and conditions of one or more definitive
agreements (the "Purchase Agreement") relating to WHI's purchase of the Hotels,
which shall incorporate the relevant terms of this Memorandum, and contain such
other terms and conditions as are customary or necessary, including but not
limited to the following:
(1) the right of WHI to review and approve plans
and specifications relating to each Development Hotel, when the Purchase
Agreement is signed to the extent that they are available, and in any event
before construction commences on a Development Hotel, and to approve all change
orders which (a) are, either alone or together with other change orders,
reasonably expected to result in an additional development or construction cost
or savings of more than $25,000 at a Development Hotel or, (b) except if the
change is required to secure the fundamental integrity of the structure or
systems at the Development Hotel, would or could diminish the value or
operating efficiency of the Development Hotel.
(2) the right of WHI to approve Promus'
contractors and architects with respect to each Development Hotel, which
approval shall not be unreasonably withheld;
(3) customary representations and warranties by
Promus, which will be given when the Purchase Agreement is signed and at each
closing, including but not limited to those relating to unencumbered title, the
environment, zoning, due authorization, that the transactions do not violate
law, Promus' organizational documents or its material agreements and that to
its knowledge the improvements conform to the approved plans and
specifications;
(4) customary representations and warranties by
WHI, which will be given when the Purchase Agreement is signed and at each
closing, including those relating to due authorization and that the
transactions do not violate law, WHI's organizational documents or its material
agreements;
(5) the right for WHI to assign its rights
thereunder to any entity in which it or its wholly-owned subsidiaries own at
least a majority interest;
3
<PAGE> 4
(6) exculpation and indemnification provisions by
Promus such that, except as specifically set forth therein, WHI and its
assignee shall have no liability to any party for any costs, expenses or fees
related or owing to or incurred by any party in connection with the Purchase
Agreement or any aspect of the Hotel, including but not limited to its
development and construction of the Hotel, and on its ownership or operation
prior to closing; and
(7) exculpation and indemnification provisions by
WHI such that, except as specifically set forth therein, Promus shall have no
liability to any party for any costs, expenses or fees related or owing to or
incurred by any party in connection with the ownership or operation of the
Hotel after the closing date; and
(8) conditions to each party's obligation to
close the purchase of each Hotel, which shall include but not be limited to the
following conditions to WHI's obligations: (i) Promus obtaining all necessary
licenses and permits to commence and complete construction and permit operation
of the Hotel, (ii) Promus' issuance to the Lessee of a Homewood Suites
franchise license with a term of at least 20 years, (iii) Promus obtaining a
certificate of occupancy for the Hotel within the completion period specified
for the Hotel on Exhibit A, and (iv) satisfactory completion of WHI's due
diligence, including environmental, title, survey and zoning reviews.
h. Option on Additional Hotels.
(1) In each of the four consecutive 12-month
periods beginning with the month following the month in which the Purchase
Agreement is executed (the "Option Period"), Promus will agree to present WHI
with the opportunity to review with a view toward purchasing additional
Homewood Suites hotels, other than the Hotels, which have been approved for
development by Promus (each, an "Additional Hotel"). Promus will grant WHI
options on up to, (a) with respect to the first twelve-month period in the
Option Period, three Additional Hotels, and (b) with respect to each subsequent
twelve-month period in the Option Period, the lesser of (I) three Additional
Hotels or, (II) if Promus granted WHI options to acquire at least three
Additional Hotels in the previous twelve-month period, a number of Additional
Hotels equal to the number of Additional Hotels on which WHI was granted an
option in such previous twelve- month period and for which WHI executed
Purchase Agreements. There are no assurances that Promus will approve any
Homewood Suites hotels for development in the Option Period, and Promus, at its
option, may offer WHI the option to purchase more than three Additional Hotels
in any year in the Option Period.
4
<PAGE> 5
WHI will have the right to purchase Additional Hotels on terms
consistent with its purchase rights with respect to the Hotels. The option
shall include terms providing for Promus to deliver written notice of each
Additional Hotel on which it is offering WHI the option to purchase (each, an
Additional Hotel Offer"). The Additional Hotel Offer shall include (i) a
market study, financial projections, development cost data and any other
relevant information Promus considered in making its decision to approve the
development of the Hotel and (ii) a purchase agreement in the form of the
Purchase Agreement, which shall set forth a purchase price equal to Promus'
budgeted development costs for the Additional Hotel (including a development
fee in an amount equal to 4% of the budgeted costs for the Additional Hotel
less the development fee and less amounts for contingencies consistent with
those included in the budgeted costs of the Hotels). Within the later of (i)
30 days after receiving the Additional Hotel Offer and (ii) seven days after
approval of the development opportunity by Promus' Capital Committee, WHI may
exercise its right to acquire the Additional Hotel on the terms set forth in
the Additional Hotel Offer by delivering to Promus an executed copy of the
Additional Hotel purchase agreement, or shall be deemed to have waived its
rights.
(2) Modified as indicated below, the substantive
provisions of subsections d., e(1), f. and g. above shall be applicable to
each Additional Hotel on which WHI has exercised an option:
(a) the first sentence of subsection d. shall be
inapplicable and all references in the subsections to "Development Hotels" and
"Hotels" shall be to "Additional Hotel;"
(b) the "Budgeted Cost" of each Additional Hotel shall be
the price referred to in subsection h.(1)(ii); and
(c) the information referred to in subsection h.(1)(i) shall
include the estimated opening date of the Additional Hotel to be used for
purposes of subsection f.
(3) If Promus' development and building costs for
an Additional Hotel, which shall include the development fee described in
subsection h.(1)(ii), are less than the Budgeted Cost, the purchase price for
the Additional Hotel shall be reduced by 100% of the cost savings.
(4) The substantive provisions of Section 2.
below shall be applicable to each Additional Hotel on which WHI has exercised
an option.
5
<PAGE> 6
2. Lease and Management.
a. Percentage Lease. The Purchase Agreement will
provide that simultaneously with WHI's closing of the purchase of each Hotel,
WHI will execute a percentage lease ("Percentage Lease") with the Lessee
relating to the Hotel, in substantially the form of lease executed to date by
WHI and the Lessee with respect to WHI's currently owned hotels and with
economic terms which, on a pro forma basis using Promus' budget for the Hotel,
will produce Lessee GOP (as defined in subsection (1) below) on the Hotel equal
to at least 5% of the gross revenues of the Hotel.
b. Management Agreement. The Purchase Agreement will
provide that simultaneously with WHI's closing of the purchase of each Hotel,
the Lessee and Promus will execute a management agreement ("Management
Agreement") pursuant to which Promus will manage the Hotel. The parties agree
to negotiate in good faith on the form of the Management Agreement, which shall
incorporate the terms of this Section and contain such other terms and
conditions as are customary or necessary, including but not limited to the
following:
(1) Management Fee. Promus will receive a
management fee under each Management Agreement equal to the greater of (i) 1%
of the gross revenues from the related Hotel or (ii) (A) 50% of the Lessee's
"gross operating profit" ("GOP") for the Hotel plus, (B) if the Lessee's GOP
exceeds 5% of the gross revenues of the Hotel, (x) 100% of such excess up to an
amount equal to 1% of the gross revenues of the Hotel and (y) 50% of such
excess thereafter. The Lessee's GOP for a Hotel means the gross revenues of
the Hotel for a period, less all operating expenses borne by the Lessee (which
does not include real property taxes and casualty insurance premiums, which are
paid by WHI), and less any amounts payable by the Lessee for the period under
the related Percentage Lease. The management fee will be payable monthly, in
arrears. If WHI and its affiliates have not spent at least $50 million to
develop hotels, including any Additional Hotels, with franchises offered by
Promus in the four year period after the date of the Purchase Agreement, the
management fee for each Hotel managed by Promus on that date shall adjust
upward, beginning on that date but not retroactively for any previous period,
by substituting "60%" for "50%" in the fee calculation described above.
Management fees for a hotel payable for any period in excess of 1% of the gross
revenues of the hotel for the period shall be subordinated to the payment of
rent for such period under the Percentage Lease for the hotel.
(2) Term. The Management Agreement will have a
term at least equal to the term of the related Percentage Lease, which shall
have a term of at least 10 years, subject to early termination by the Lessee
upon the occurrence of customary
6
<PAGE> 7
defaults, operating license suspensions, condemnations or casualty, or
termination of franchise license, and terminable upon the occurrence of certain
other events to be specified in the Management Agreement, including but not
limited to:
(a) subject to the cure provisions
described in the subparagraphs below, at the option of the Lessee, in the event
that at the end of any of the consecutive twelve month periods (each, a "Test
Period") beginning with the thirteenth month after a Hotel is acquired by WHI,
the Lessee's GOP for a Hotel was less than 5% of the gross revenues for the
Hotel (the "Minimum Margin") for such period.
i) The default will be cured if at
the end of the six month period immediately subsequent to the Test Period in
which the Lessee's GOP was less than the Minimum Margin (a "Cure Period"), the
Lessee's GOP for the twelve month period then ended is at least equal to the
Minimum Margin.
ii) If such a default is not cured
at the end of a Cure Period, Promus may cure such default, by making a cash
payment to the Lessee, within 15 days after the end of the period (a "Shortfall
Payment"), equal to the difference between (i) the Lessee's GOP for (A) the
Test Period and (B) the Cure Period and (ii) the Minimum Margin for such
periods.
iii) If Promus cures such a default
by making a Shortfall Payment, the Management Agreement may be terminated, at
the Lessee's option, if the Lessee's GOP is less than the Minimum Margin for
either (A) the Test Period ending 6 months after the end of the Cure Period or
(B) any subsequent Test Period, unless, within 15 days after the end of the
Test Period, Promus makes a second Shortfall Payment equal to the difference
between (i) the Lessee's GOP for the Test Period and (ii) the Minimum Margin
for such periods.
iv) With respect to any Hotel,
Promus may make only two Shortfall Payments and shall have only one Cure
Period.
v) Without in any way limiting or
affecting WHI's right to terminate a Management Agreement on the terms and upon
the occurrences described above, WHI will consider in determining whether to
exercise such rights market conditions, unforseen occurrences and any other
relevant facts which may have affected the performance of the subject Hotel.
(b) at the option of the Lessee, upon
any sale by WHI or its affiliate of a Hotel or Additional Hotel; provided,
however, that the Lessee shall provide to Promus within 120 days of such sale
either (i) a cash amount equal to 50% of the fair market value of the Lessee's
then-remaining leasehold
7
<PAGE> 8
estate in such hotel as of the closing date of the sale (the "Cash Amount") or
(ii) written notice of its offer to have Promus manage a substitute hotel
facility (a "Substitute Hotel") under a comparable Management Agreement;
provided further, however, that if the Lessee provides Promus with an offer to
manage a Substitute Hotel and Promus rejects the offer within 15 days, Lessee
shall deliver the Cash Amount to Promus within 10 days of such rejection.
(c) at the option of Promus, upon 60
days written notice to the Lessee; and
(d) at the option of the Lessee, upon a
foreclosure by a holder of a lien on the Hotel.
(3) Force Majeure. The provisions of Section
2.b.(2)(a) above shall not apply to a Hotel in any Test Period in which the
operation of the Hotel, or the use of the Hotel's facilities, are significantly
disrupted by casualty loss, strike, eminent domain, or events of Force Majeure
that are beyond the reasonable control of Promus.
(4) Right of First Refusal on Sale of Lessee.
Within 10 days after the Lessee and any nationally recognized hotel franchisor
with brands which compete with those then-offered by Promus (a "Third Party")
commence negotiations on an agreement under which the Lessee would merge and
not survive the merger or sell its assets (a "Third Party Offer"), the Lessee
will notify Promus of such negotiations and shall regularly apprise Promus of
the material terms agreed upon by the parties. The Lessee's communications
with Promus on such matters shall be limited by the provisions of any
confidentiality agreements with between Lessee and Third Parties. Promus will
have a right of first refusal to acquire the Lessee or its assets on the same
terms as are provided in any Third Party Offer. The right of first refusal
shall include terms providing for the Lessee to deliver a written notice
offering Promus the opportunity to acquire the Lessee or its assets for the
price and on the terms set out in the Third Party Offer (a "Lessee Offer").
Within 15 days of receipt of the Lessee Offer, Promus shall agree to acquire
the Lessee or its assets on the terms set forth in the Lessee Offer by
delivering a written notice to the Lessee, or shall be deemed to have waived
its rights. If Promus fails to accept a Lessee Offer or if for any reason
other than the Lessee's act or omission the transaction based on the Lessee
Offer does not close within 60 days after receipt by Promus of the Lessee
Offer, the Lessee may complete the proposed transaction based on the Third
Party Offer within 180 days after receipt by Promus of the Lessee Offer by
Promus on the terms set forth in the Third Party Offer.
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(5) Reports, Budgeting and Accounting. The
Lessee will agree to review in good faith the form and delivery schedule of
Promus's standard Homewood Suites management reports package. Before executing
the Purchase Agreement, Promus and the Lessee will agree on the form of
financial, operating and other reports and budgets to be provided by Promus to
the Lessee and WHI with respect to the Hotels and any Additional Hotels
acquired by WHI. With respect to each WHI-owned hotel managed by Promus,
Promus and the Lessee will also agree
(a) that Promus will prepare financial
statements in accordance with GAAP, consistently applied, and deliver such
statements to the Lessee and WHI for each month within 10 days after the end of
the month; and
(b) that Promus will deliver to the
Lessee and WHI capital and operating budgets for a calendar year no later than
60 days before the end of the immediately preceding calendar year. Lessee
shall resolve any disputes regarding or arising in connection with budgets and
accounting policies.
(6) Capital Expenditures. The Lessee shall
retain control of all capital projects and shall approve all plans related to
capital projects and any change orders thereon. The parties agree to
negotiate in good faith the timing and scope of major repairs and refurbishment
of a Hotel, with the intent to minimize disruptions of operations consistent
with sound hotel capital improvement, upkeep and repair practices.
c. Franchise Agreement. The Purchase Agreement will
provide that, simultaneously with WHI's closing of the purchase of each Hotel,
a Homewood Suites franchise agreement ("Franchise Agreement") shall be executed
and a Homewood Suites franchise license shall be issued to the Lessee for the
Hotel for a term at least equal to the greater of (i) 20 years or (ii) the term
of the related Percentage Lease, each in the form executed for Homewood Suites
hotels on the date hereof, including the current rate and fee schedules. In
the Franchise Agreement, Promus will approve the Lessee as an operator of the
Hotel.
d. Gross Revenues. As used in this Memorandum, "gross
revenues" means gross revenues net of certain customary adjustments including
(i) interest, (ii) excise, room and sales and use taxes, (iii) insurance and
condemnation proceeds, (iv) commissions, (v) refunds and (vi) vendor payments
and splits (i.e., from video rentals, vending machines, laundry, etc.).
3. Promus Purchase of WHI Stock.
a. Agreement. When the Purchase Agreement is executed,
Promus will execute a purchase agreement (the "Stock Purchase Agreement")
under which it will agree to invest an aggregate of
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<PAGE> 10
$15 million (the "Investment Amount") in the common stock of WHI.
b. Definitive Documentation. The parties agree to negotiate in
good faith the Stock Purchase Agreement, which shall incorporate the terms of
this Section and contain such other terms and conditions as are customary or
necessary, including but not limited to the following:
(1) on the day of the closing of WHI's purchase of (i)
the Developed Hotel, Promus will buy $3 million of WHI common stock directly
from WHI and (ii) each Development Hotel or Additional Hotel, Promus will buy
WHI common stock directly from WHI in an aggregate amount equal to $12,500
multiplied by the number of guest rooms in the hotel acquired. Promus will
receive a number of shares of WHI common stock upon making such payments equal
to the aggregate amount invested divided by (A) the offering price in the
Offering, for purchases made within six months after the closing of the
Offering, or (B) the average of the closing prices of the WHI common stock on
The Nasdaq Stock Market for the 10 trading days ending on the second business
day immediately preceding the closing date, for all other purchases.
(2) Regardless of whether WHI has purchased any
Development Hotels or Additional Hotels, Promus may elect to satisfy the
obligations referred to in Section 3.b.(1) above by purchasing WHI common stock
from WHI in an amount up to the Investment Amount, less any amounts previously
invested by Promus under Section 3.b.(1), at per share price equal to the
offering price in the Offering. Promus may make such election by only by
delivering written notice to WHI within six months after the Offering.
(3) Promus will agree not to transfer or dispose of the
common stock purchased under the Stock Purchase Agreement for a period of 12
months after purchase.
(4) WHI, at its expense, will file a registration
statement covering the resale of the common stock acquired by Promus under the
Stock Purchase Agreement, so that Promus may freely resell such shares under
the federal securities laws, and Promus shall agree, subject to its counsel's
reasonable approval, to sign all documents and to take all actions reasonably
requested by WHI in connection therewith. WHI shall have no liability for
failure to register the stock if Promus does not sign documents or take actions
reasonably requested by WHI that, in the opinion of the federal securities
authorities or WHI's securities counsel, are required under applicable
securities laws or regulations to be signed or taken in order to effect such
registration.
4. Development of Promus Hotels.
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WHI and its affiliates agree to use their best efforts to
spend at least $100 million to develop hotels, including any Additional Hotels,
with franchises offered by Promus in the eight-year period after the date of
the Purchase Agreement. This obligation will be subject to the presence of
acceptable market conditions, the availability of capital to WHI, the
availability of acceptable sites, and such other conditions and criteria as
WHI, in its sole discretion, deems relevant to the making of a prudent
investment in hotel properties.
5. General.
a. Respective Board Approvals/Non-Binding Expression of Interest.
(1) Promus agrees that it will present this Memorandum
and the transactions contemplated by it to the Promus Capital Committee and, if
approved by the Capital Committee, to Promus's Board of Directors no later than
March 15, 1996, and will recommend approval to the Capital Committee and the
Board. The Promus Board of Directors may accept or reject the transactions
described in this Memorandum in its sole and absolute discretion.
(2) WHI agrees that it will present this Memorandum and
the transactions contemplated by it to the WHI Board of Directors no later than
March 31, 1996, and will recommend approval to the Board. The WHI Board of
Directors may accept or reject the transactions described in this Memorandum in
its sole and absolute discretion.
(3) The parties hereto agree that this Memorandum
expresses the current intent of the parties to negotiate and, if the Promus and
WHI Boards of Directors both approve the transactions described herein and
agreement is reached, execute definitive documentation agreeing to effect the
transactions and provisions referenced herein and ancillary transactions and
provisions. Other than as set forth Sections 5.a.(1) and (2) above, this
Memorandum is not, and is not intended to be, a binding agreement on any party
to take or not take any action, which shall only be contained in definitive
documentation executed by the parties.
b. Arbitration. The parties agree that any disputes,
controversies or differences arising under the Purchase, Management, or
Franchise Agreements for the Hotels or the Additional Hotels shall be finally
and exclusively settled by arbitration. The arbitration shall be conducted in
a mutually agreed upon location in accordance with the rules of the American
Arbitration Association, before an arbitrator or arbitrators appointed pursuant
to such rules, and that determination of such arbitrator or arbitrators shall
be final, binding and conclusive on the parties.
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IN WITNESS WHEREOF, this Memorandum is executed as of the date first set forth
above.
WHI:
WINSTON HOTELS, INC,
By: ______________________________
Robert W. Winston, III
Its: President
LESSEE:
WINSTON HOSPITALITY, INC.
By: ______________________________
John B. Harris, Jr.
Its: President
PROMUS:
PROMUS HOTELS, INC.
By: ____________________________
Its:
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EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Stock Purchase Agreement") is made
and entered as of this 24th day of April, 1996, by and between PROMUS HOTELS,
INC. ("Promus"), a Delaware corporation, and WINSTON HOTELS, INC. (the
"Company"), a North Carolina corporation.
RECITALS
WHEREAS, Promus owns, operates and franchises hotels under, among
others, the trademark and service mark "Homewood Suites."
WHEREAS, as of the date hereof, the Company and Promus executed (A)
purchase agreements ("Purchase Agreements") providing for the acquisition by
WINN Limited Partnership, a North Carolina limited partnership (the
"Partnership"), of (i) a Homewood Suites hotel located in Houston, Texas (the
"Developed Hotel") and (ii) three Homewood Suites hotels currently under
construction in Richmond, Virginia, BWI, Baltimore, Maryland, and Dallas, Texas
(the "Development Hotels"), (B) an option agreement ("Option Agreement")
requiring Promus to provide the Partnership with the option to acquire certain
other hotel properties developed from time to time hereafter by Promus (the
"Additional Hotels" and, together with the Developed Hotel and the Development
Hotels, the "Hotels"), and (C) management agreements providing for the
management of the Hotels by Promus (the Purchase, Option and Management
Agreements, collectively, as in effect on such date, including any acquisition
agreements for Additional Hotels executed subsequently pursuant to the Option
Agreement, and without regard to any subsequent amendments or modifications
thereto, the "Acquisition Documents").
WHEREAS, Promus has agreed to purchase from the Company up to $15
million of common stock of the Company, par value $.01 per share ("Common
Stock"), from time to time as the Partnership acquires Hotels, generally to
provide a source of funds for such acquisitions, on the terms and conditions
set forth in this Stock Purchase Agreement.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledge, the parties do hereby
agree as follows:
1. TERMS OF SUBSCRIPTION - AGREEMENT TO PURCHASE AND SELL COMMON STOCK
(a) (i) STOCK PURCHASES UPON HOTEL CLOSINGS. Promus hereby subscribes
for and agrees to purchase from the Company, and the Company agrees to sell to
Promus, from time to time, Common Stock subject to the limitations set forth in
Section 1(c) below, at the purchase price determined in accordance with Section
2 below (the "Purchase Price"). Subject to the limitations set forth in
<PAGE> 2
Section 1(c) below, Promus hereby subscribes for and agrees to consummate the
acquisition of Common Stock for
(a) Three Million Dollars ($3,000,000), at the per share
Purchase Price determined in accordance with Section 2 below, on the date on
which the Partnership acquires the Developed Hotel, and
(b) the product of Twelve Thousand Five Hundred Dollars
($12,500) and the number of guest rooms in a Development Hotel or an Additional
Hotel, at the per share Purchase Price determined in accordance with Section 2
below, on the date on which the Partnership acquires the Development Hotel or
Additional Hotel.
(ii) OPTION TO PURCHASE WITHIN SIX MONTHS. Notwithstanding Section
1(a)(i), Promus may elect to satisfy any or all of its obligations under this
Stock Purchase Agreement at one or more times within six months after the
Company's next public offering of Common Stock (the "Public Offering"), by
notifying the Company in writing within such period, indicating the gross
dollar amount that it is committing to invest in Common Stock. The closing of
Promus' acquisition of such Common Stock will occur within 30 days after the
Company's receipt of such notice, at a per share price determined in accordance
with Section 2 below.
(b) OWNERSHIP LIMITATION. Promus shall only acquire Common Stock
hereunder unless, at the time of any Common Stock purchase hereunder (each an
"Incremental Purchase"), the Company's counsel determines that Promus owns the
maximum amount of Common Stock permitted under the Amended and Restated
Articles of Incorporation of the Company (the "Limit") and that no waiver of
such Limit can be made without jeopardizing the Company's status as a real
estate investment trust. In that event, the appropriate officer(s) of the
Company will recommend that the Board of Directors consider in good faith
waiving the Limit to the extent that a waiver can be made without jeopardizing
its status as a real estate investment trust. In such cases, if no waiver is
made, Promus shall (i) acquire units of limited partnership interest in the
Partnership in the Incremental Purchase, which, under the Amended and Restated
Agreement of Limited Partnership of the Partnership, are redeemable at the
option of the holder for shares of Common Stock (or, at the Company's election,
an equivalent value in cash), for the same Purchase Price and on the same terms
as it would acquire Common Stock and (ii) be admitted as a limited partner of
the Partnership, entitled to all of the rights, preferences and privileges as
all existing limited partners. References in this Agreement to "Common Stock"
shall be deemed to mean "Units" when the provisions of this Section 1(b) are
applicable and the context requires.
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<PAGE> 3
(c) AGGREGATE SUBSCRIPTION LIMIT. Promus' agreement herein to purchase
Common Stock shall not exceed at any time the amount (the "Aggregate
Subscription Limit") equal to the lesser of (i) Fifteen Million Dollars
($15,000,000) or (ii) the sum of Three Million Dollars ($3,000,000) and the
aggregate Closed Hotel Amount. The "Closed Hotel Amount" shall equal the
product of (A) Twelve Thousand Five Hundred Dollars ($12,500) and (B) the
number of guest rooms in each Development Hotel or Additional Hotel purchased
by the Partnership pursuant to the Acquisition Documents or any documents
executed subsequently by the parties pursuant to the Acquisition Documents
regarding the Partnership's acquisition of Additional Hotels.
(d) LOCK-UP. Promus may not sell to the public any Common Stock (i)
purchased pursuant to this Stock Purchase Agreement or (ii) received upon
redemption of Units purchased pursuant to this Stock Purchase Agreement
(through the operation of Section 1(b)), until at least one year after the
Common Stock or Units, respectively, are acquired by Promus.
2. PURCHASE PRICE. The number of shares of Common Stock received by
Promus at each closing of its purchase of Common Stock hereunder shall be equal
to the gross purchase price paid by Promus at such closing divided by, (i) with
respect to Common Stock acquired within six months after the Public Offering,
the price per share at which shares of Common Stock are sold in the Public
Offering and, (ii) with respect to all other Common Stock, an amount equal to
the Market Price of a share of Common Stock on the date of acquisition. For
purposes of this Agreement, "Market Price" shall mean, for any date, the
average of the high and low sales prices of the Company's Common Stock as
quoted on the Nasdaq Stock Market for the 10 consecutive business days ending
on the second business day preceding such date.
3. PURCHASE CLOSINGS. At each closing of the acquisition of Common Stock
hereunder,
(a) Promus shall pay to the Company, by wire transfer or by
certified or bank cashier's check, an amount determined under section 1 above,
subject to the aggregate amount not exceeding the Aggregate Subscription Limit;
and
(b) The Company shall issue to Promus one or more certificates
representing the whole number of issued and outstanding shares of Common Stock
equal to the quotient of (i) the gross amount paid by Promus to the Company
under Section 3(a) above divided by (ii) the Purchase Price determined under
Section 2 above. The Company shall not be required to issue fractional shares
of Common Stock in connection with any Incremental Purchase and, in lieu
thereof, the Company shall refund to Promus the cash amount represented by the
fractional share of Common Stock based upon the Purchase Price. In addition to
the legends
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<PAGE> 4
required by the Company's Articles of Incorporation, each certificate or
instrument representing shares of the Common Stock shall bear a legend in
substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
AND QUALIFICATION WITHOUT AN OPINION OF COUNSEL FOR THE HOLDER THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED, WHICH OPINION OF
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY.
Such legend shall be removed by the Company upon (i) the U.S.
Securities and Exchange Commission ("SEC") declaring effective a Registration
Statement (as defined in Section 7 below) covering such Common Stock or (ii)
delivery to it of an opinion of counsel reasonably satisfactory to the Company
and its counsel that a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), other than a Registration Statement, is at
the time effective with respect to the transfer of the legended security or
that such security can be transferred without such registration statement being
in effect and without the requirements of a legend on the certificate in the
hands of the transferee.
4. TERM. Promus' obligations in connection with this Stock Purchase
Agreement shall terminate upon the earliest to occur of (i) the date that
Promus shall have reached the Aggregate Subscription Limit, (ii) the day after
the date on which the Partnership acquires the last Additional Hotel under the
Option Agreement, (iii) delivery of written notice to Promus that the Company
has terminated Promus' obligations hereunder or (iv) April __, 2001.
5. REPRESENTATIONS AND WARRANTIES OF PROMUS. Promus hereby represents
and warrants to the Company as follows:
(a) The execution, delivery and performance of this Agreement by Promus has
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding obligation of Promus, enforceable in accordance
with its terms.
(b) Neither the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated hereby by Promus Company will
conflict with or result in a breach or violation of any of the terms and
provisions of, or (with or without the giving of notice or passage of time or
both) constitute a default under, any agreement to which Promus is a party, the
certificate of incorporation or bylaws of Promus, any indenture, mortgage, deed
of trust, loan agreement, note, lease or other agreement or instrument to which
the Promus is a party
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<PAGE> 5
or to which any of its properties or other assets is subject, or any applicable
statute, judgment, decree, rule or regulation of any court or governmental
agency or body applicable to Promus or its assets, or result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or asset
of Promus.
(c) No consent, license, permit or filing of or with any governmental
authority or any person is required in connection with Promus' execution,
delivery and performance of this Stock Purchase Agreement except as has been
obtained by Promus.
(d) No finder, broker, agent, financial advisor or other intermediary has
acted on behalf of Promus in connection with the purchase of the Common Stock
pursuant to this Stock Purchase Agreement or the negotiation or consummation
hereof.
(e) It is familiar with the business and financial condition of the
Company and the Partnership and is not relying upon any representations made to
it by the Company or any of its officers, directors, employees, partners or
agents that are not contained herein.
(f) It is aware of the risks involved in making an investment in the Common
Stock (or Units if required under Section 1(b)). It has had an opportunity to
ask questions of, and to receive answers from, the Company, or a person or
persons authorized to act on its behalf, concerning the terms and conditions of
this investment. Promus confirms that all documents, records and books
pertaining to its investment in the Company (or the Partnership, if necessary
under Section 1(c) above) that have been requested by it have been made
available or delivered to it prior to the date hereof.
(g) It understands that the Common Stock has not been registered under the
Securities Act, or any state securities acts, and is being offered and sold to
Promus in reliance on an exemption from such registration requirements. The
Common Stock for which Promus hereby subscribes is being acquired solely for
its own account, for investment, and is not being purchased with a view to, or
for resale in connection with, any distribution, subdivision or
fractionalization thereof in violation of such laws, and Promus has no present
intention to enter into any contract, undertaking, agreement or arrangement
with respect to any such resale.
(h) It is an "accredited investor" as that term is defined in Rule 501 and
Regulation D promulgated under the Securities Act.
The foregoing representations and warranties are true and accurate as of the
date hereof and shall be true and accurate as of the date of the purchase of
Common Stock made hereunder in
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<PAGE> 6
connection with the acquisition of the Developed Hotel and on the date of each
Incremental Purchase pursuant to the terms of this Stock Purchase Agreement,
and shall survive such dates.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Promus as follows:
(a) The Company has full legal right, power and authority to enter into this
Stock Purchase Agreement and the Registration Rights Agreement referred to in
Section 7 hereof, and to consummate the transactions contemplated herein and
therein. This Stock Purchase Agreement has been, and the Registration Rights
Agreement referred to in Section 7 hereof will be, duly authorized by all
necessary corporate action, and each will constitute the valid and binding
obligation of the Company, enforceable in accordance with their respective
terms.
(b) The Common Stock has been validly authorized and, when issued to Promus,
will be duly and validly issued, fully paid, nonassessable and free of
preemptive or similar rights. Authorized and unissued shares of Common Stock
sufficient to satisfy the Company's obligation to issue such shares to Promus
shall at all times be reserved by the Company. Units, if issued to Promus in
lieu of Common Stock in accordance with Section 1(b) above, will upon issuance
to Promus be validly issued, fully paid and nonassessable, shall not obligate
Promus to restore capital to the Partnership except as may be required by the
North Carolina Revised Uniform Limited Partnership Act and shall not be subject
to any preemptive or similar rights.
(c) Assuming the accuracy of the representations of Promus set forth in Section
5 hereof, (i) the Common Stock will have been issued, offered and sold to
Promus in compliance with all applicable laws (including, without limitation,
federal and state securities laws) and (ii) each consent, approval,
authorization, order, license, certificate, permit, registration, designation
or filing by or with any governmental agency or body necessary for the valid
authorization, issuance, sale and delivery of any Common Stock to Promus, the
execution, delivery and performance of this Agreement and the Registration
Rights Agreement referred to in Section 7 hereof and the consummation by the
Company of the transactions contemplated hereby and thereby has been made or
obtained and is in full force and effect.
(d) Neither the issuance, sale and delivery to Promus by the Company of the
Common Stock, nor the execution, delivery and performance of this Agreement and
the Registration Rights Agreement referred to in Section 7 hereof, nor the
consummation of the transactions contemplated hereby or thereby by the Company
will conflict with or result in a breach or violation of any of the terms and
provisions of, or (with or without the giving of notice or passage of time or
both) constitute a default under,
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<PAGE> 7
any agreement to which the Company is a party, the certificate of
incorporation, bylaws of the Company, any indenture, mortgage, deed of trust,
loan agreement, note, lease or other agreement or instrument to which the
Company is a party or to which any of its properties or other assets or any
hotel is subject, or any applicable statute, judgment, decree, rule or
regulation of any court or governmental agency or body applicable to the
Company or its assets, or result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property or asset of the Company.
(e) No consent, license, permit or filing of or with any governmental
authority or any person is required in connection with the Company's execution,
delivery and performance of this Stock Purchase Agreement except as has been
obtained by the Company.
(f) No finder, broker, agent, financial advisor or other intermediary has
acted on behalf of the Company in connection with the purchase of the Common
Stock pursuant to this Stock Purchase Agreement or the negotiation or
consummation hereof.
The foregoing representations and warranties are true and accurate as of the
date hereof, or such other date as of which they are deemed to be made, and
shall be true and accurate as of the date of the purchase of Common Stock made
hereunder in connection with the acquisition of the Developed Hotel and on the
date of each Incremental Purchase pursuant to the terms of this Stock Purchase
Agreement, and shall survive such dates.
7. REGISTRATION RIGHTS. Prior to the first anniversary of the
acquisition of the Developed Hotel, the Company shall enter into with Promus a
registration rights agreement ("Registration Rights Agreement") in form and
substance agreeable to Promus and the Company, providing, among other things,
for the following with respect to Common Stock acquired by Promus pursuant to
this Stock Purchase Agreement:
(a) In the time periods and with the frequency described in Section 7(b)
below, the Company shall file and use its best efforts to cause to become
effective, registration statements under the Securities Act, and all necessary
qualifications or registrations under the securities laws covering the resale by
Promus of shares of Common Stock issued to Promus hereunder (each, a
"Registration Statement").
(b) A Registration Statement shall be filed within 60 days after (i) the
first anniversary of the acquisition of the Partnership's acquisition of the
Developed Hotel, and (ii) each subsequent anniversary if Promus has acquired
Common Stock which is not covered by a Registration Statement and which is not
then-subject to the provisions of subsection 1(d) above.
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<PAGE> 8
(c) The Company shall use its best efforts to maintain the effectiveness
of each Registration Statement until the earlier of (i) such time as all of the
shares of Common Stock covered thereby have been issued to and sold by Promus
and (ii) such time as all of the shares of Common Stock covered thereby may be
resold by Promus without restriction under the Securities Act.
(d) During any consecutive three month period, Promus shall be prohibited,
unless the Company shall otherwise consent thereto in writing, from selling
more than 25% of the outstanding shares of Common Stock, whether pursuant to a
Registration Statement or otherwise, except in an underwritten public offering
in which the managing underwriter is one reasonably acceptable to the Company.
(e) All expenses of such Registration Statement shall be borne by the
Company, other than (i) any underwriting discounts or commissions or transfer
taxes and (ii) the fees and expenses of all separate counsel for Promus in
excess of the reasonable fees and expenses of one separate counsel retained by
Promus to (A) review the Registration Statement as requested by the Company, (B)
review or prepare information to be provided at the Company's request and (C)
review documents and instruments to be executed by Promus at the request of the
Company.
(f) (i) Promus shall refrain from the sale of any shares of Common Stock
for one or more periods of not more than sixty (60) days following written
notice from the Company that the relevant Registration Statement is not then
current, due to the existence of material non-public information disclosure of
which would materially adversely affect the business interests of the Company,
and prior to Promus' receipt from the Company of written notice that such
Registration Statement is again current, provided that Promus shall not be
precluded from effecting sales pursuant to this clause (i) for more than ninety
(90) days during any 360-day period.
(ii) Following written notice from the Company that it has filed and caused
to become effective a registration statement including an offering of shares of
Common Stock for sale by the Company to the public in an underwritten public
offering, Promus shall enter into agreements with the underwriters of such
public offering, substantially in the same form and for the same time period as
agreements entered into by the officers and directors of the Company,
precluding the sale of Common Stock by Promus for a period not to exceed one
hundred eighty (180) days following such notice, provided that Promus was given
the opportunity to include its shares for sale in such public offering.
(g) With respect to a Registration Statement, the following procedures
shall apply:
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<PAGE> 9
(i) The Company will, prior to filing a Registration
Statement or prospectus or any amendment or supplement thereto,
furnish to Promus and counsel designated by Promus, copies of such
registration statement or prospectus as proposed to be filed, together
with exhibits thereto, which documents will be subject to review by
the foregoing, and thereafter furnish to Promus, such number of copies
of such Registration Statement, each amendment and supplement thereto,
the prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents as Promus may
reasonably request in order to facilitate the disposition of the
Common Stock covered by the Registration Statement.
(ii) The Company will use its best efforts to register or
qualify the Common Stock under such other securities or blue sky laws
of such jurisdictions in the United States as Promus reasonably
requests; provided, that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify, (B) subject itself to taxation
in any such jurisdiction or (C) consent to general service of process
in any such jurisdiction.
(iii) The Company will immediately notify Promus at any time
when a prospectus included in a Registration Statement is required to
be delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Common Stock, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will promptly make available to Promus any such
supplement or amendment.
(iv) The Company will otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC.
(v) The Company shall promptly notify Promus (A) when the
prospectus or any prospectus supplement has been filed, and, with
respect to the Registration Statement or any post-effective amendment,
when the same has been declared effective, (B) of any request by the
SEC for amendments or supplements to the Registration Statement or the
prospectus or for additional information, (C) of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, and
(D) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Common Stock for sale in
any
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<PAGE> 10
jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(vi) Promus and each officer, director and controlling person
of Promus shall be indemnified by the Company for all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation) caused by any untrue or alleged untrue statement or any
omission or alleged omission in the then-current prospectus included
in a Registration Statement, unless based upon information (if any)
furnished to the Company by Promus expressly for use in a Registration
Statement in a writing signed by or on behalf of Promus.
(f) The Company and each officer, director and controlling
person of the Company shall be indemnified by Promus for all losses,
claims, damages, liabilities and expenses (including reasonable costs
of investigation) caused by any untrue or alleged untrue statement or
any omission or alleged omission in the then-current prospectus
included in a Registration Statement, if based upon information (if
any) furnished to the Company by Promus expressly for use in a
Registration Statement in a writing signed by or on behalf of Promus.
(g) Promus agrees to promptly provide information or
execute and deliver documents reasonably determined by the Company to
be necessary to facilitate the preparation or filing of a
Registration Statement.
8. MISCELLANEOUS.
(a) All notices or other communications given or made hereunder shall be in
writing and shall be delivered in person or mailed by registered or certified
mail, return receipt requested, postage prepaid, or by Federal Express
overnight mail, (A) to Promus at 785 Crossover Lane, Suite 141, Memphis,
Tennessee 38117, Attention: General Counsel, with a copy to the same address,
Attention: Chief Financial Officer, and (B) to the Company at 2209 Century
Drive, Suite 300, Raleigh, North Carolina 27612, with a copy to Mark Murphy,
Hunton & Williams, Riverfront Plaza-East Tower, 951 E. Byrd Street, Richmond,
Virginia 23219.
(b) NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF
THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL OF THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES), APPLICABLE TO AGREEMENTS MADE AND TO BE WHOLLY PERFORMED THEREIN.
(c) This Agreement (i) supersedes all other agreements or understandings, by
and between Promus and the Company, and (ii)
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constitutes the entire agreement between the parties hereto, in each case with
respect to the subscription by Promus for shares of Common Stock of the
Company. This Agreement may be amended only by an instrument in writing
executed by all parties. Promus may assign and transfer its rights and
obligations hereunder, and the Common Stock it acquires, to any direct or
indirect subsidiary thereof.
(d) This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto.
(e) All terms used herein shall be deemed to include the masculine and the
feminine and the singular and the plural as the context requires. Captions
herein are for convenience of reference only and shall not alter or affect the
meaning or construction of the paragraphs hereof to which they relate.
(f) The parties hereto agree to take all actions, including the entering
into of any documents, agreements or instruments, or amendments thereof, as may
be necessary or appropriate to effectuate the intents and purposes hereof and
consummate and make effective the transactions contemplated hereby.
(g) This Agreement may be executed in two or more counterparts, any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement on and as of the date first above written.
PROMUS HOTELS, INC.,
a Delaware corporation
By:
Name:
Title:
WINSTON HOTELS, INC.,
a North Carolina corporation
By:
Name:
Title:
RI-CS:\Winston\subagr.5
12
<PAGE> 1
EXHIBIT 10.3
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the
Date of this Agreement defined hereinafter, between WINN Limited Partnership, a
North Carolina limited partnership, or its assigns, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser") and
Promus Hotels, Inc., a Delaware corporation ("Seller").
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PROPERTY AND BUSINESS
On the terms and subject to all of the conditions set forth in this
Agreement, the Purchaser agrees to purchase and the Seller agrees to sell, for
the purchase price set forth herein, all of the following property
(collectively the "Premises"):
(a) the real estate described as Tract 1 (Richmond, Virginia),
Tract 2 (BWI, Baltimore, Maryland) and Tract 3 (Dallas-Market Center, Texas) on
Schedule 1 attached hereto and made a part hereof by this reference, together
with all tenements, appurtenances, easements, agreements, development rights,
air rights, rights-of-way, strips, gores, rights in adjacent avenues, streets
and alleys, rights and uses appurtenant thereto (collectively the "Real
Property");
(b) all improvements now or hereafter located on the Real Property,
including but not limited to that certain 123 room/suite Homewood Suites hotel
to be constructed by Seller on Tract 1, that certain 147 room/suite Homewood
Suites hotel to be constructed by Seller on Tract 2 and that certain 137
room/suite Homewood Suites hotel to be constructed by Seller on Tract 3 and all
fixtures which are affixed to the Real Property or Improvements (the
"Improvements");
(c) all furniture, fixtures (not part of the Real Property and
Improvements or affixed thereto), equipment, machinery, furnishings, carpets,
drapes, blinds or mini-blinds, service and maintenance equipment, linens (not
less than two and one-half (2 1/2) turns of linens shall be included), tools,
signs, landscaping equipment, supplies, pool equipment, television systems,
intercom equipment and systems, and replacement parts (the "Equipment");
(d) moneys advanced for future reservations ("Prepaid Items");
(e) all contracts, agreements, licenses, contract rights, rights
to use and other similar rights used in connection with the
<PAGE> 2
Real Property and Improvements entered into by Seller in accordance with
Article XIV, Paragraph C hereof, specifically excluding trademarks and service
marks owned by Seller (the "Contracts");
(f) all leases and rights to use the Improvements or all or any
part thereof in third parties entered into by Seller in accordance with Article
XIV, Paragraph C hereof (the "Leases");
(g) all transferable permits, licenses, government licenses,
certificates of occupancy and approvals necessary to operate the Real Property,
Improvements, Equipment, Contracts, Leases, Intangible Rights and the other
property and rights transferred under this Agreement (the "Permits");
(h) all inventory, supplies and other materials used in connection
with the Real Property and Improvements and the hotel business operated thereon
(excluding gift shop items owned by third parties) (the "Inventory");
(i) all plans, specifications and "as-built" drawings and surveys
relating to the Real Property and Improvements in the possession of Seller or
to which Seller has access, all books and records relating to the operation or
management of the Real Property and Improvements and all warranties and
guaranties in favor of or delivered to Seller pertaining to the Premises; and
(j) all intangible property, guest ledgers, customer and mailing
lists, catalogues and brochures, telephone numbers and similar property used in
connection with the operation of the Real Property, Improvements and the
businesses known as the Homewood Suites hotel located on Tract 1, Tract 2 and
Tract 3 on Schedule 1 (collectively the "Hotels" and individually a "Hotel"),
and any telephone numbers assigned thereto (the "Intangible Rights").
Notwithstanding the foregoing, Purchaser shall not be entitled to the foregoing
information in connection with Seller's national accounts.
II. TERMS OF PURCHASE AND SALE
The purchase price for the Premises shall be as follows: (i) the
portion of the Premises pertaining to the Hotel to be constructed on Tract 1 on
Schedule 1 - $8,571,969.00; (ii) the portion of the Premises pertaining to the
Hotel to be constructed on Tract 2 on Schedule 1 - $11,917,000.00; and, (iii)
the portion of the Premises pertaining to the Hotel to be constructed on Tract
3 on Schedule 1 - $11,602,314.00, each adjusted as provided in Article IX
hereof, (the "Purchase Price"). If Seller's actual development and building
costs for a Hotel, which shall not include fees paid to Seller or its
affiliates, exceed the portion of the Purchase Price allocable to such Hotel,
less fees included therein which are
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payable to Seller or its affiliates, Seller shall so notify Purchaser, and for
a period of 30 days after the latter of (i) the delivery of such notice, (ii)
the issuance of the certificate of occupancy for such Hotel, or (iii) the first
day that such Hotel is open for business, Purchaser shall have an option, but
not the obligation, to buy such Hotel for a purchase price equal to (i) the
Purchase Price plus (ii) the actual development, building and interest costs in
excess of the Purchase Price incurred by Seller in the development and building
of such Hotel ("the Option Price"). The excess costs may include only (A)
costs actually paid to third parties which are not affiliated with Seller or
any of its affiliates or (B) expenses of a category normally incurred by Seller
(i.e., salaries) that have been actually incurred by Seller and were
attributable directly to such Hotel, which attribution shall be documented in
reasonable detail to Purchaser and shall not include any management,
development or similar fees paid to Seller or any of its affiliates. If
Seller's actual development and building costs for a Hotel, which shall not
include fees paid to Seller or its affiliates, are less than the Purchase
Price, less fees included therein which are payable to Seller or its
affiliates, the Purchase Price shall be reduced by an amount equal to 100% of
cost savings in excess of 4% of the Purchase Price. The Purchase Price or
Option Price, as applicable, shall be payable by Purchaser to Seller as
follows:
A. The sum of One Hundred Fifty Thousand and N0/100 Dollars
($150,000.00) (the "Deposit") for each Hotel within five (5) days after the
receipt by Purchaser of notice from Seller that Seller has obtained a building
permit for the construction of such Hotel by check subject to collection,
payable to The Title Company of North Carolina, Inc., as agent for First
American Title Insurance Company, as Escrow Agent (the "Escrow Agent"). The
Escrow Agent shall maintain the Deposit in an interest bearing account subject
to the provisions of Article XIII. The Escrow Agent shall not disburse the
Deposit except in accordance with the terms of this Agreement. Upon the
satisfaction of all of the conditions contained in this Agreement, on the
Closing Date (as hereinafter defined) for a Hotel, the Deposit for such Hotel
shall be paid to Seller and reduce the portion of the Purchase Price or Option
Price, as applicable, for such Hotel payable at Closing pursuant to Article II,
Paragraph B hereof. In the event that this transaction is not consummated for
any reason, the Deposit for such Hotel shall be paid as provided in Article
XIII of this Agreement. Purchaser shall be entitled to payment of or a credit
for any interest earned on the Deposit unless the Deposit is forfeited in which
event interest shall be paid to Seller.
B. The balance of the Purchase Price or Option Price, as applicable,
for such Hotel, plus or minus any closing adjustments, by certified or bank
funds or by wire transfer on the Closing Date
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<PAGE> 4
(as hereinafter defined) for such Hotel to an account designated in writing by
Seller to Purchaser at least five (5) days prior to Closing.
C. Upon the Closing of a Hotel, the Seller shall deliver to the
Purchaser the portion of the Premises pertaining to such Hotel, including, but
not limited to, the Real Property, Improvements, Equipment and Inventory
pertaining to such Hotel, free and clear of all liens and encumbrances of
whatever type or description other than the Permitted Exceptions as defined in
Article IV, Paragraph A hereof. In accordance with the foregoing, the
outstanding balance of all secured indebtedness encumbering the portion of the
Premises pertaining to such Hotel, including, but not limited to, the portion
of the Real Property, Improvements, Equipment and Inventory pertaining to such
Hotel, shall be paid in full at or prior to Closing by Seller.
III. FEASIBILITY PERIOD; OTHER REQUIREMENTS AND CONTINGENCIES
A. This Agreement is contingent upon Purchaser's approval of the
Premises, including but not limited to, approval of the Inspection Items (as
hereinafter defined). The Inspection Items have been submitted to Purchaser on
or prior to the Date of this Agreement, or as specifically provided herein, are
available to Purchaser for inspection at the Improvements. Purchaser shall
have the period of time from the Date of this Agreement until and through June
3, 1996 to review the Inspection Items and to otherwise inspect the Premises
and its or their condition (such period is hereinafter referred to as the
"Feasibility Period"). On or prior to the expiration of the Feasibility
Period, the Purchaser shall notify the Seller whether or not the Purchaser
elects to purchase the Premises, which election shall be made in the sole,
absolute and unreviewable discretion of the Purchaser. If Purchaser notifies
Seller that it elects not to proceed with this transaction, on or prior to the
expiration of the Feasibility Period, then this Agreement shall terminate and
shall be null, void and without further force or effect, any Deposit (together
with all interest) made as of such time shall be promptly refunded to Purchaser
by Escrow Agent and neither party shall have any further liability to the
other, except for the indemnity by Purchaser set forth in Article III,
Paragraph E, which shall survive such termination of this Agreement. The
Inspection Items shall remain the property of Seller until Clsoing, after which
Purchaser shall be entitled to retain the Inspection Items, however, in the
event Purchaser terminates this Agreement pursuant to the provisions set forth
in this Agreement, Purchaser shall destroy all copies of the Inspection Items
in Purchaser's possession and return all originals thereof to Seller. Further,
prior to Closing, Purchaser shall be prohibited from sharing any information in
the Inspection Items with any third party other than Purchaser's Lender,
Purchaser's accountants, attorneys or other professionals employed or retained
by Purchaser to assist Purchaser in Purchaser's review and analysis of the
Inspection Items;
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<PAGE> 5
provided, however, nothing herein shall prevent or restrict Purchaser relative
to any disclosures which Purchaser may be required to make pursuant to any
rules and regulations of the Securities and exchange Commission applicable to
Purchaser. The conditions enumerated in this Article III are for Purchaser's
benefit only and the non-occurrence of a state of facts sufficient to satisfy
any of such conditions may not be used or pleaded by Seller as a defense to the
enforceability of this Agreement.
For purposes of this Agreement, the term "Inspection Items" shall
mean:
(a) the marketing studies and financial projections prepared by or
on behalf of Seller with respect to the Hotels; and,
(b) to the extent available, plans and specifications relating to
the Hotels; and,
(c) when received by Seller, all engineer's reports, appraisals,
environmental reports, surveys or other reviews, evaluations
or studies of or with respect to the Premises.
B. Purchaser and Seller acknowledge that Seller has not yet
commenced the construction of any of the Hotels. In that regard, Seller
hereby agrees that Purchaser shall have certain rights and approvals pertaining
to the construction of the Hotels as follows: (i) the right to approve the
plans and specifications relating to each Hotel prior to the commencement of
the construction thereof; (ii) the right to approve all change orders which (a)
are, either alone or together with other change orders, reasonably expected to
result in an additional development or construction costs or savings of more
than $25,000.00 for a Hotel or, (b) except if the change is required to secure
the fundamental integrity of the structure or systems at the Hotel, would or
could diminish the value or operation efficiency of the Hotel; (iii) the right
to approve Seller's contractors and architects with respect to each Hotel,
which approval shall not be unreasonably withheld; and, (iv) Seller shall
provide Purchaser with monthly progress reports for each Hotel, including such
detail as Purchaser reasonably requires to confirm Seller's actual development
and building costs for each Hotel.
C. Purchaser and Seller acknowledge that the estimated date for the
issuance of a certificate of occupancy and the opening for each of the Hotels
is as follows: (i) the Hotel to be constructed on Tract 1 on Schedule 1 -
April, 1997; (ii) the Hotel to be constructed on Tract 2 on Schedule 1 -
October, 1997 __________; and, (iii) the Hotel to be constructed on Tract 3 on
Schedule 1 - August, 1997______. Notwithstanding anything contained in this
Agreement to the contrary, in the event the foregoing events have not occurred
within 120 days after the date set forth above for a Hotel, then Purchaser
shall not be required to purchase such Hotel, but shall have the option,
exercisable within 30 days after
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<PAGE> 6
the latter of (i) the issuance of the certificate of the occupancy for such
Hotel or (ii) the first day that such Hotel is open for business, to purchase
such Hotel for the Purchase Price or Option Price, as applicable, and on the
terms set forth in this Agreement.
D. Purchaser and Seller have entered into that certain Stock
Purchase Agreement dated April __, 1996 ("the Stock Purchase Agreement") and
in accordance therewith, on the Closing Date defined hereinafter for a Hotel,
Seller shall purchase common stock directly from Winston Hotels, Inc., the
general partner of Purchaser, in an aggregate amount equal to $12,500
multiplied by the number of guest rooms/suites in such Hotel. The number of
shares of such common stock to be received by Seller upon the Closing defined
hereinafter of such Hotel shall be determined as set forth in the Stock
Purchase Agreement. The purchase of such common stock shall be upon the terms
and conditions expressly set forth in the Stock Purchase Agreement relative
thereto.
E. Simultaneous with Closing of a Hotel defined hereinafter,
Purchaser shall enter into a percentage lease ("the Percentage Lease") with
Winston Hospitality, Inc., a North Carolina corporation ("the Lessee"),
relative to such Hotel, in substantially the form of lease executed to date by
and between Purchaser and the Lessee with respect to Purchaser's currently
owned hotels and with economic terms which, on a proforma basis, using Seller's
budget for such Hotel, will produce a gross operating profit to Lessee for such
Hotel equal to at least five percent (5.0%) of the gross revenues of such
Hotel; provided, however, it is expressly acknowledged and understood by
Purchaser that Seller's budget is prepared on a proforma basis and Seller makes
no warranty with respect thereto. Simultaneous with the execution of the
Percentage Lease, the Lessee and Seller shall execute a management agreement
("the Management Agreement") pursuant to which Seller shall manage such Hotel.
The form of Management Agreement agreed to between the Lessee and Seller to be
executed at Closing of a Hotel is attached hereto as Schedule 2 and
incorporated herein by this reference. As used herein, "gross operating
profit" shall mean the gross revenues of such Hotel for a period (gross
revenues shall mean gross revenues net of customary adjustments including (i)
interest, (ii) excise, room and sales and use taxes, (iii) insurance and
condemnation proceeds, (iv) commissions, (v) refunds and (vi) vendor payments
and splits (i.e., from video rentals, vending machines, laundry, etc.), less
all operating expenses borne by the Lessee (which does not include real
property taxes and casualty insurance premiums, which are paid by Purchaser),
and less any amounts payable by the Lessee for the period under the Percentage
Lease.
F. Simultaneous with Closing of a Hotel defined hereinafter,
Seller shall cause a Homewood Suites franchise agreement ("the Franchise
Agreement") to be executed for such Hotel and a Homewood Suites franchise
license to be issued to the Lessee for such Hotel for a term at least equal to
the greater of (i) twenty (20) years or
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(ii) the term of the Percentage Lease, each to be in the form then being
executed and issued for Homewood Suites hotels as of the Closing Date of such
Hotel, including the then current rate and fee schedules. Seller shall approve
the Lessee as an operator of such Hotel in the Franchise Agreement.
G. Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close this
transaction shall be conditioned upon Purchaser obtaining the approval of this
Agreement and the transaction contemplated herein from the board of directors
of the general partner of Purchaser, which approval shall be obtained or denied
on or before March 31, 1996.
Seller and Purchaser shall cooperate and take all actions reasonably
necessary, in a diligent and expeditious manner, to effectuate the inspections,
transfers and other reviews required by this Article III during the Feasibility
Period and during the course of construction of each of the Hotels. The
Purchaser and its representatives and agents shall have the right from time to
time up to Closing, on reasonable notice to Seller and accompanied by a
representative of Seller, to visit the sites of each of the Hotels and to meet
with Seller's contractors, architects and vendors to review the progress and
status of the development and construction processes and for due diligence
purposes, in order to inspect the Premises, including but not limited to,
taking soil samples and test borings, and conducting environmental studies,
physical surveys, engineering studies and other such inspections and reviews
that the Purchaser shall deem reasonably necessary to determine the condition
and financial status of the Premises. Purchaser shall conduct all of the
foregoing in such a manner so as not to disturb guests at the Hotel or disrupt
the construction or operations thereof and shall immediately restore any damage
or disturbance to the Premises caused by any of the foregoing to the condition
in which same existed immediately prior to such damage or disturbance.
Purchaser does hereby covenant and agree to indemnify, defend and hold Seller
harmless from and against any and all loss, damage and liability which may
arise as a result of Purchaser and Purchaser's agents and employees taking
advantage of the foregoing access to the Premises prior to Closing of a Hotel.
The indemnity by Purchaser set forth herein shall survive Closing of a Hotel
and any termination of this Agreement.
IV. TITLE; TITLE POLICY; SURVEY
A. Within ten (10) days after receipt thereof by Seller, Seller shall
furnish to Purchaser a copy of Seller's owner's title insurance policy issued
to Seller relative to the portion of the Real Property upon which a Hotel is to
be constructed. Within sixty (60) days after receipt of a copy of Seller's
owner's title insurance policy for the portion of the Real Property upon which
a
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Hotel is to be constructed, Purchaser shall procure, at Purchaser's cost, a
preliminary title report and title insurance binder (the "Title Commitment")
from First American Title Insurance Company (the "Title Company") pursuant to
which the Title Company shall commit to issue a current A.L.T.A. Form B owner's
fee simple title insurance policy (or its equivalent issued in the state where
the subject Hotel is located) or other policy of title insurance as shall be
reasonably satisfactory to Purchaser and to any lender of Purchaser (the
"Lender") in the amount of the Purchase Price for such Hotel (the "Title
Policy") insuring that the Purchaser shall receive at closing, good, marketable
and indefeasible fee simple title to such portion of the Real Property, free
and clear of ALL liens, exceptions, encumbrances or defects other than the
matters expressly approved in writing by Purchaser as permitted exceptions to
title as set forth hereinafter (the "Permitted Exceptions").
Prior to the expiration of such sixty (60) day period, the Purchaser
shall notify (the "Title Notice") the Seller as to which of the liens, defects,
encumbrances or exceptions set forth in the Title Commitment are objectionable
to Purchaser ("the Title Defects") and which of such matters are acceptable to
Purchaser as the Permitted Exceptions. Within ten (10) days after receipt by
Seller of the Title Notice, the Seller shall use reasonable best efforts to
attempt to cure the Title Defects to the reasonable satisfaction of the
Purchaser; provided, however, Seller shall not be obligated to expend any of
Seller's funds to cure any Title Defects, except Title Defects in the form of
money judgments, mortgages and statutory liens which Seller shall be obligated
to remove of record at or prior to Closing. In the event the Seller is unable
to cure the Title Defects to the reasonable satisfaction of the Purchaser
(except for those Title Defects that Seller is obligated to remove of record in
accordance with the immediately preceding sentence) within such ten (10) day
period or the Purchaser does not agree to waive such Title Defects, then this
Agreement shall terminate and shall be null, void and without further force or
effect, the portion of the Deposit allocated to such Hotel (together with all
interest) shall be returned to Purchaser and neither party shall have any
further liability to the other with respect to such Hotel. Seller represents
that to the best of Seller's knowledge, there are no and will be no liens or
other secured indebtedness encumbering any portion of the Premises.
B. When available, Seller shall deliver a copy of Seller's as
built survey of the Real Property and the Improvements currently located
thereon ("the As-Built Survey"), prepared by a surveyor duly licensed under the
laws of the state in which the portion of the Real Property is located,
reasonably acceptable to the Purchaser and the Lender in accordance with ALTA
or such other standards as shall be reasonably satisfactory to Purchaser. The
As-Built Survey shall be in form and substance satisfactory to the Purchaser,
the Title Company and the Lender. Purchaser shall, at Purchaser's election,
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cause the As-Built Survey to be updated, obtain a new survey or, if acceptable
to the Title Company and Lender, obtain a certification from Seller that there
have been no improvements, structures or other changes subsequent to the date
of the As-Built Survey which would be revealed by a more current survey
thereof, whereby the elected method shall be certified to the Purchaser, Title
Company and Lender (the form of certification to be reasonably satisfactory to
the Title Company, Purchaser and Lender) ("the Current Survey"). The Current
Survey shall show, among other things, that all buildings are within lot and
building lines, the location of such lines, the dimensions and total area of
the Real Property and Improvements, the location and number of parking spaces,
ingress and egress to adjoining streets, all benefiting and burdening
easements, improvements, appurtenances, rights of way and utilities whether
above or below ground, all encroachments from or into the Premises, all
structures and improvements on the Real Property and all easements, rights of
way and other restrictions of record properly identified with recording
information and certifying that the Premises are not within a flood plain or
other flood hazard area. The Current Survey shall be made in accordance with
the Minimum Standard Detail Requirements for Land Title Surveys adopted by the
American Land Title Association (or its equivalent in the state where the Hotel
is located). The Current Survey and certification shall be sufficient to
remove the survey exception from the Title Policy without indemnity by
Purchaser. Within fifteen (15) days after the delivery of the As-Built Survey
for a Hotel to Purchaser, the Purchaser shall notify the Seller of any
objections of Purchaser or Lender to the As-Built Survey ("Survey Defects").
Survey Defects shall be deemed to be Title Defects for purposes of this
Agreement and Seller shall cure such Survey Defects according to the same
procedure as for Title Defects.
C. The Purchaser and Seller shall each be responsible for the
payment of its own transaction costs, including counsel fees. Purchaser shall
be responsible for the costs incurred with the physical inspection and any
survey of the Real Property and Improvements which Purchaser causes to be
conducted and prepared, including any environmental and engineering studies
other than those delivered by Seller to Purchaser in accordance with Article
III, Paragraph A hereof and this Article IV. At Closing, Purchaser shall pay
all premiums for the Title Policy. Any and all transfer taxes, real estate
excise taxes and sales taxes payable in connection with the transfer of the
Premises, or any portion thereof, and the Personalty (as hereinafter defined)
shall be paid by Seller. Unless otherwise stated in this Agreement, the
Purchaser and Seller shall pay all costs in connection with the Closing of this
transaction as are customary in the locale where the subject Hotel is located.
V. CLOSING
A. The closing of each Hotel shall occur within thirty (30) days
after the latter to occur of (i) the issuance of the
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certificate of occupancy and all other licenses and permits required to operate
such Hotel as it is intended to be operated, or (ii) the first day that such
Hotel is open for business, and shall be deemed to occur at the offices of
Brown & Bunch, 4900 Falls of Neuse Road, Suite 210, Raleigh, North Carolina
27609, without the requirement that Purchaser and Seller be physically present
thereat, or such other date or place as shall be mutually acceptable to
Purchaser and Seller (the "Closing Date"). The closing of each Hotel
contemplated by this Agreement shall be deemed effective as of 12:01 a.m. on
the Closing Date ("Closing"). If the date of Closing falls on a Saturday,
Sunday or banking holiday, the Closing shall take place on the next business
day thereafter.
B. At the Closing of each Hotel, the Seller shall deliver to
Purchaser and perform the following with respect to each Hotel:
1. A Special Warranty Deed conveying good, marketable, insurable
and indefeasible fee simple title to the Real Property free and clear of all
defects, exceptions, liens or encumbrances, except for the Permitted
Exceptions.
2. Seller shall pay and discharge any special assessment which on or
before the date of Closing, (a) has been levied, imposed, or confirmed against
the Premises, (b) affects or is a lien upon the Premises or (c) although not
yet a lien upon the Premises, is attributable to improvements which benefit or
will benefit the Premises. If any of the foregoing assessments are for
improvements which have been fully constructed as of Closing and may be paid in
installments, all installments shall be deemed payable as of the day prior to
the Closing and shall be discharged of record by Seller. If any of the
foregoing assessments are for improvements which have not been fully
constructed as of Closing and may be paid in installments, Seller shall be
responsible for and shall pay all such installments due through the Closing
Date and Purchaser shall be responsible for the payment of all such
installments accruing subsequent to the Closing Date. If, at the Closing, any
amount which Seller is required to pay with respect to the foregoing has not
been determined, Seller agrees to pay such amount as can be reasonably
estimated at the Closing and the final amount shall be adjusted within fifteen
(15) days after Purchaser gives Seller notice that same has been determined.
This provision shall survive the Closing of such Hotel and delivery of the
deed.
3. A Bill of Sale conveying the Equipment, Inventory, Real Property
not conveyed by other instruments provided for herein, and other personal
property and intangible property included in the Premises ("Personalty"), free
and clear of any lien or encumbrance, other than the Permitted Exceptions, and
containing a general warranty of title to the Equipment, Inventory and
Personalty and an inventory of all Equipment, Inventory and Personalty.
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4. An assignment of Seller's interest in and to all Permits,
Contracts, Leases, Intangible Rights, Prepaid items and other items of the
Premises, free and clear of any lien or encumbrance, together with written
evidence reasonably satisfactory to Purchaser of any required third party
consent to such assignment. Seller shall deliver to Purchaser all original
Contracts and Leases; the Permits, including the certificates of occupancy for
the Premises and evidence that the Premises are legally constructed and
properly zoned in accordance with all applicable laws; all warranties and
guarantees (and assignments thereof to Purchaser) issued in connection with the
initial construction of the Real Property and Improvements; any Personalty, and
any repairs or additions thereto; moneys advanced for future registrations;
guest registration records; keys; transferrable permits, approvals and licenses
issued by all appropriate governmental authorities and fire underwriting
organizations with respect to the construction and use of the Premises or any
part thereof; and any existing copies of architectural plans and
specifications, blueprints and building plans which may be in Seller's
possession.
5. At Purchaser's option, an assignment of all fire and extended
coverage insurance policies, liability policies and loss of rental policies,
affecting any of the Premises to the extent assignable (if assigned, premiums
to be prorated at Closing).
6. Tax certificates or other evidence of payment from all
appropriate taxing authorities certifying the payment of all real and personal
property taxes up to the current tax year.
7. A certificate of Seller dated as of the Closing that Seller is
not a foreign person or corporation within the meaning of Sections 1445 and
7701 of the Internal Revenue Code of 1986 (the "IRC").
8. A bring down certificate dated as of the Closing certifying
the truth and accuracy of each representation and warranty set forth in Article
XII as of the Closing Date.
9. An affidavit of title reasonably satisfactory to the Title
Company enabling the Title Company to issue the Title Policy without exception
for mechanic's or materialman's or any other statutory liens, or for the
rights of parties in possession other than temporary hotel patrons.
10. Seller shall purchase the common stock of Winston Hotels, Inc.
in accordance with the Stock Purchase Agreement and as set forth in Article
III, Paragraph D.
11. The Management Agreement in accordance with Article III,
Paragraph E.
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12. Seller shall execute and deliver the Franchise Agreement and
issue and deliver a Homewood Suites franchise license in accordance with
Article III, Paragraph F.
C. At the Closing of each Hotel, the Purchaser shall deliver to the
Seller the following:
1. Subject to Article IX, the balance of the Purchase Price or
Option Price, as applicable, for such Hotel.
2. Proof of authority for Purchaser to complete the
transaction reasonably satisfactory to Seller.
3. The Lessee shall execute and deliver the Management
Agreement and the Franchise Agreement.
VI. DELIVERY OF POSSESSION
Seller shall deliver actual and exclusive possession of the portion of
the Premises relative to the subject Hotel to Purchaser on the Closing Date,
subject to the rights of temporary guests and patrons of such Hotel.
Seller hereby grants to Purchaser the right to enter the Premises at
any reasonable time after the date hereof for the purpose of inspecting,
testing and examining the Premises, which purpose is more particularly provided
in Article III hereof.
VII. DAMAGE TO PROPERTY
Seller shall give Purchaser immediate notice of any fire or other
casualty or of any pending or threatened condemnation occurring to all or any
portion of the Premises between the date hereof and the Closing. If prior to
the Closing, there shall occur:
(i) damage to the portion of the Premises relative to a Hotel caused
by fire or other casualty, which would cost $100,000.00 or more to repair or
replace; or
(ii) the taking or condemnation of all or any portion of the Premises
relative to a Hotel (including any parking areas) as would materially interfere
with the use thereof, as determined by Purchaser; then, if any of the events
set forth in (i) or (ii) above occurs, Purchaser, at its option, may terminate
this Agreement as to the affected Hotel by written notice given to Seller
within fifteen (15) days after Purchaser has received the notice referred to
above or at the Closing, whichever is earlier. If Purchaser does not
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elect to terminate this Agreement relative to the affected Hotel, the Closing
of the affected Hotel shall take place as provided herein without an abatement
of the Purchase Price or Option Price, as applicable, and there shall be
assigned to the Purchaser at Closing of the affected Hotel, all interest of the
Seller in and to any insurance proceeds or condemnation awards which may be
payable to Seller on account of such occurrence.
If, prior to the Closing, there shall occur:
(x) damage to the portion of the Premises relative to a Hotel
caused by fire or other casualty which would cost less than
$100,000.00 to repair or replace; or
(y) the taking or condemnation of all or any portion of the
Premises relative to a Hotel which is not material to the use
thereof, as determined by Purchaser;
then, if any of the events set forth in (x) or (y) above occurs, Purchaser
shall have no right to terminate this Agreement (solely as a result of the
occurrence of such events), and Seller shall, at its sole expense, with respect
to subparagraph (x), restore or replace the damaged Premises to its original
condition and, if necessary, Closing shall be extended so as to give Seller
sufficient time to accomplished same; and, with respect to subparagraph (y),
there shall be assigned to Purchaser at the Closing of the affected Hotel all
interest of Seller in and to any condemnation awards which may be payable to
Seller on account of any such occurrence.
VIII. REMEDIES
A. If the transaction contemplated by this Agreement relative to the
Closing of a Hotel is not consummated solely by reason of Purchaser's failure
to perform its obligations under this Agreement relative to such Hotel, then
Seller, as its sole and exclusive remedy, shall be entitled to retain the
portion of the Deposit allocated to such Hotel as full liquidated damages in
complete and total accord and satisfaction, the parties hereby acknowledging
and agreeing to the difficulty of ascertaining Seller's actual damages in such
circumstances. Seller and Purchaser agree that it is impossible to accurately
assess the Seller's damages in the event of the Purchaser's default and that
the Deposit for such Hotel constitutes Seller's and Purchaser's best estimate
of such damages.
B. If the Closing of a Hotel is not consummated by reason of:
(i) cancellation by Purchaser as permitted by the terms
of this Agreement, including but not limited to,
cancellation by Purchaser at any time on or prior to
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the termination of the Feasibility Period;
(ii) the inability of Purchaser to obtain any approval or
consent required pursuant to or otherwise satisfy any
condition or contingency set forth in Article III
hereof within the period of time expressly provided
therefor;
(iii) the occurrence of any of the events described in
Article VII; or
(iv) Title Defects and Survey Defects which are not cured
as provided in this Agreement (except for those Title
Defects which Seller is obligated to cure),
then Purchaser shall be entitled to a return of the Deposit (together with all
interest thereon) for such Hotel and this Agreement shall be null and void and
all parties relieved from any further liability hereunder as it pertains to
such Hotel (except the liability of Purchaser pursuant to the indemnity by
Purchaser set forth in Article III, Paragraph E, which indemnity shall survive
any such termination of this Agreement), unless Purchaser elects to waive any
of the items or occurrences set forth in this Article VIII, Paragraph B. The
items enumerated in this Article VIII, Paragraph B are for Purchaser's benefit
only and the non-occurrence of a state of facts sufficient to satisfy any of
such items may not be used or pleaded by Seller as a defense to the
enforceability of this Agreement.
C. If the transaction relative to the Closing of a Hotel is not
consummated because of a default on the part of Seller or if Seller fails to
close a Hotel in breach of its obligation to do so, then Purchaser, at its
option, may
(i) seek specific performance of this Agreement; or
(ii) receive a return of the portion of the Deposit
allocated to such Hotel (together with all interest
thereon), whereupon Seller shall be released of all
liability arising under this Agreement for such
Hotel.
D. In the event of a dispute, controversy or difference arising
under this Agreement, such dispute, controversy or difference shall be finally
and exclusively settled by arbitration. The arbitration shall be conducted in
a mutually agreed upon location in accordance with the rules of the American
Arbitration Association, before an arbitrator or arbitrators appointed pursuant
to such rules, and the determination and ruling of such arbitrator or
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arbitrators shall be final, binding and conclusive on Purchaser, Seller and
Lessee.
IX. PRORATIONS
The matters and prorations set forth hereinafter shall apply and
pertain to each Hotel as expressly set forth hereinafter. All income
(excluding cash on hand and accounts receivable for the period prior to the day
preceding the Closing Date, which shall be and remain the property of Seller),
current operating expenses, accounts payable, real estate taxes, other taxes
and assessments, all utilities, water and sewer charges, licenses or permit
fees relating to the operation of the Premises, real estate and personal
property ad valorem taxes, prepayments made under the Contracts and Leases (to
be assumed by Purchaser pursuant to Article III hereof) and insurance premiums
(if applicable), shall be adjusted and prorated as of the Closing. All
maintenance and service agreements (whether or not service is continued by
Purchaser) and utility charges shall be determined as of Closing and paid by
Seller or appropriate adjustments made if Purchaser at its option accepts an
assignment of any such agreement. If such charges and expenses are unavailable
on the Closing Date, a re-adjustment of such charges and expenses shall be made
within thirty (30) days after the Closing. The parties agree to cooperate in
good faith in effecting such a final reconciliation and each party shall
promptly pay (or reimburse the other party for) any expense item that is
chargeable to the former party and shall promptly remit any income item to the
other party if entitled thereto. Seller shall use reasonable efforts to
arrange for the rendition of final bills by the utility companies involved as
of the Closing Date.
Guest room revenues of the Premises, whether in cash or in accounts receivable,
arising from occupancy for the night beginning on the day preceding the Closing
Date and ending on the Closing Date shall be credited one-half to Purchaser and
one-half to Seller. Seller shall collect all income and other sums payable by
tenants or guests (or otherwise) for such time period and the responsibility
for the payment of all expenses on account of services and supplies furnished
to and for the benefit of the Premises for such time period shall be debited
one-half to Purchaser and one-half to Seller. Purchaser shall be credited with
any deposits from tenants or guests of the Premises which are refundable to
such tenants or guests. Seller shall remit to Purchaser at closing all prepaid
income items. In addition, at Closing, Seller shall deliver to Purchaser a
schedule of all unpaid accounts receivable and other income items as of
Closing. All such accounts receivable and other income items collected by or
for Purchaser after Closing shall be promptly remitted to the order of Seller;
provided, however, payments received by Purchaser following the Closing with
respect to receivables shall be deemed to be in payment of receivables of
Purchaser unless the payment received specifically identifies that it is in
payment of a receivable attributed to Seller or there is no
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<PAGE> 16
receivable due to Purchaser with respect to such payment. Seller and Purchaser
agree to attempt to reconcile and prorate the accounts receivable within sixty
(60) days after Closing. Except for sums actually received by Purchaser
pursuant to the immediately preceding sentence, Purchaser shall assume no
obligation to collect or enforce the payment of any amounts that may be due to
Seller, except that Purchaser shall render reasonable assistance, at no expense
to Purchaser, to Seller after Closing in the event Seller proceeds against any
third party to collect any accounts receivable or other income items due
Seller. Nothing contained in this Article shall be deemed to prohibit
Purchaser and Seller from entering into an agreed settlement in writing of all
prorations at or following Closing.
In the event any adjustments pursuant to this Article are, subsequent
to Closing, found to be erroneous, then either party hereto is entitled to
additional monies and shall invoice the other party for such additional amounts
as may be owing, and such amount shall be paid promptly by the other party upon
receipt of the invoice. Such invoice shall be accompanied by reasonable
substantiating evidence.
Purchaser shall have no obligation with respect to Seller's on-site
employees whatsoever, which employees shall be compensated by Seller and
Seller shall have the right to retain and employ such employees at Seller's
election in order to perform pursuant to the Management Agreement.
The provisions of this Article IX shall survive Closing of each Hotel
and the delivery of the Deed.
X. NOTICES
Any notice to be given by either party to this Agreement shall be in
writing and shall be either delivered personally or by certified or registered
U.S. Mail, postage prepaid, or by overnight courier delivery service with
charges to the sender, or by telecopier or facsimile, with follow-up by means
of one of the other notice methods set forth herein, with its notice complete
upon receipt of the telecopy or facsimile, as follows:
To Seller: Promus Hotels, Inc.
785 Crossover Lane
Suite 141
Memphis, Tennessee 38117
Attention: Thomas Keltner, Senior Vice
President, Development
Facsimile number: (901) 374-5051
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With Copy to: Ronald Halpern, Esquire
Promus Hotels, Inc.
Deputy General Counsel, Vice President
785 Crossover Lane
Suite 141
Memphis, Tennessee 38117
Facsimile number: (901) 374-5050
To Purchaser: WINN Limited Partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
Facsimile number: (919) 571-7330
With copies to: William W. Bunch, III, Esquire
Brown & Bunch
4900 Falls of Neuse Road,
Suite 210 (street zip code 27609)
Post Office Box 19409
Raleigh, North Carolina 27619-9409
Facsimile number: (919) 878-8062
Any notice, demand or other communication shall be deemed given and effective
as of the date of delivery in person, by transmission or by receipt set forth
on the verification of delivery or return receipt. The inability to deliver
because of changed facsimile number and/or address of which no notice was
given, or rejection or other refusal to accept any notice demand or other
communication, shall be deemed to be receipt of the notice, demand or other
communication as of the date of such attempt to transmit, deliver or rejection
or refusal to accept. Any party may change addresses for notices by delivering
written notice of such change in accordance with this Article X.
XI. INDEMNITY
A. Purchaser and Seller warrant and represent each to the other
that neither of them has employed a real estate broker in this transaction and
neither of them has any knowledge of any party with a claim for any real estate
commission, brokerage fee or finder's fee. Seller shall indemnify and hold the
Purchaser harmless from and against any claim for any real estate commission,
brokerage fee or finder's fee made by any person, firm or corporation, claiming
by, through or under the Seller. Purchaser shall indemnify and hold the Seller
harmless from and against any claim for any real estate commission, brokerage
fee or finder's fee made BY any person, firm or corporation, claiming by,
through or under the Purchaser. This warranty and representation shall
survive the Closing of each Hotel
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and the parties shall indemnify each other from any liability, cost or loss
arising out of a breach of said warranty and representation, including
consequential damages.
B. The Seller shall indemnify and hold the Purchaser harmless
from and against any and all liabilities, claims, demands, costs and expenses
of any kind or nature, including but not limited to, reasonable attorney's
fees, arising out of or incurred for each Hotel in connection with (i) any
breach of the representations and warranties of Seller set forth in this
Agreement, (ii) the ownership, use, maintenance or operation of the Premises on
or prior to the Closing or the transfer of the Premises to the Purchaser
(including the payment of all taxes),or (iii) compliance or failure to comply
with the notice provisions relating to bulk sales laws applicable to the
transfer of all or any part of the Premises. Purchaser shall indemnify and
hold Seller harmless from and against any and all liabilities, claims, demands,
costs and expenses of any kind or nature, including reasonable attorney's fees,
arising after the date of Closing of each Hotel and which arise out of the
ownership or operation of the relevant portion of the Premises by the Purchaser
following the Closing of each respective Hotel. Such indemnities shall survive
Closing of each Hotel and delivery of the deed.
C. If Purchaser or Seller propose to make any claim for
indemnification under any Article or Paragraph of this Agreement (the
"Indemnitee"), the Indemnitee shall deliver to the other party (the
"Indemnitor") a certificate signed by the Indemnitee which certificate shall
(i) state that a loss has occurred and (ii) specify in reasonable detail each
individual item of loss or other claim including the amount thereof and the
date such loss was incurred. The Indemnitor shall have the right in its
discretion and at its expense to participate in and control (a) the defense or
settlement of any claim, suit, action or proceeding (including appeals) in
respect of such item (or items) by any person other than a party hereto, (b)
any and all negotiations with respect thereto, and (c) the assertion of any
claim against any insurer with respect thereto, and the Indemnitee shall not
settle any such claim, suit, action or proceeding or agree to extend any
applicable statute of limitation without the prior written approval of the
Indemnitor. The rights of participation, control and approval granted to the
Indemnitor shall be subject as a condition precedent to the Indemnitor's
acknowledging to the Indemnitee, in writing, the obligation of the Indemnitor
to indemnify the Indemnitee in respect of such third party's claim, suit,
action or proceeding giving rise to such item. Upon satisfaction of such
condition precedent, the Indemnitee shall provide the Indemnitor with all
reasonably available information, assistance and authority to enable the
Indemnitor to effect such defense or settlement and upon the Indemnitor's
payment of any amounts due in respect of such claim, suit, action or
proceeding, the Indemnitee shall, to the extent of such payment, assign or
cause to be assigned to the Indemnitor the
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claims of the Indemnitee, if any, against such third parties in respect of
which such payment is made. If the Indemnitor is not so willing to acknowledge
such obligation, the parties shall jointly consult and proceed as to any such
third party claim, suit, action or proceeding.
XII. PURCHASER'S AND SELLER'S REPRESENTATIONS AND WARRANTIES.
The Seller represents and warrants to the Purchaser that:
A. Seller is a Delaware corporation duly organized, and
existing and in good standing under the laws of the state of its incorporation
and authorized to do business in the State in which the Premises are located.
B. Seller is authorized to enter into this Agreement and
to consummate the transaction contemplated hereby, and the individuals
executing this Agreement on behalf of Seller are also duly authorized to
execute this Agreement and to bind Seller to consummate such transaction,
subject to the effect of any bankruptcy, reorganization, moratorium, insolvency
or other laws affecting the rights of creditors generally. The execution and
delivery of this Agreement and the conveyance of the Premises by Seller,
pursuant to this Agreement, do not require the consent of any person, agency or
entity not a party to this Agreement. The execution of this Agreement by
Seller and the transaction contemplated herein have been duly authorized by
proper corporate action, including the board of directors and capital committee
of Seller.
C. There are no pending or, to the knowledge of Seller,
threatened, condemnation or similar proceedings affecting the Premises, or any
portion thereof. Seller has not received any written notice that any such
proceeding is contemplated, and no part of the Premises has been destroyed or
damaged by any casualty.
D. To the best of Seller's knowledge, the maintenance,
operation, use or occupancy of the Premises as hotels does not and will not
violate any building, health, zoning, environmental, fire or similar law,
ordinance, regulation or restrictive covenant. To the best of Seller's
knowledge, the Premises do not and will not violate any federal, state, county,
or municipal laws, ordinances, orders, regulations or requirements nor has
Seller received any notice of such a violation.
E. There are no options to purchase, rights of first
refusal or other similar agreements with respect to the Premises which give
anyone the right to purchase the Premises or any part thereof. There are no
contracts or agreements which affect or cover the Premises, except for the
Contracts and the Permitted Exceptions. There are no and will be no unpaid
bills or claims in connection with the construction, repair or replacement of
the Premises. There
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are no and will be no agreements allowing for any reduction, concession or
abatement of room rates.
F. The Seller has duly filed and will duly file in a
timely manner all federal, state, county and local income, franchise, excise,
withholding, sales, occupancy, payroll, property (real, personal and
intangible), and any other tax returns and reports required to have been filed
or to be filed, and has paid and will pay all taxes, interest, penalties and
all assessments that have or will become due. The Seller has paid or will make
adequate provision for the payment of, all taxes with respect to the conduct of
its business upon the Premises through the Closing. Neither the Seller nor its
agents have been advised or notified of any tax deficiency, assessment or
penalty with respect to the Seller, nor does the Seller know of any basis for
any additional claim or assessment for taxes, interest or penalties. No liens
for taxes, federal, state or local, have been filed against the Seller or its
assets.
G. Certificates of Occupancy for all buildings and other
improvements will be duly issued such that the buildings and improvements may
be legally occupied as a hotel/motel. The Real Property is zoned properly for
the uses contemplated herein to be made thereof.
H. Except as may be set forth in the Title Commitment,
the Seller will own and will have good and marketable title to all of its
assets and properties which constitute the Premises free and clear of any
security interest, mortgage, pledge, lien, conditional sale or other
encumbrance or charge. The Premises to be purchased is all of the property of
every kind and nature necessary for the operation of the Hotels in the ordinary
course.
J. To the best of Seller's knowledge, the Premises are
and will be in compliance with and have not violated and will not violate any
statute, law, ordinance, rule, regulation, order and directive (including,
without limitation, all labor and environmental control and antipollution laws,
ordinances, rules, regulations or directives) of any and all Governmental
Agencies pertaining to the use or occupancy of the Premises.
To the best of Seller's knowledge, the Seller has not received any notice of
and the Seller and the Premises have not been charged with, are not under
investigation or threatened investigation for failure to comply with and are in
compliance with, any and all statutes, laws, ordinances, rules, regulations,
orders and directives of any and all Governmental Agency or Agencies pertaining
to the use, generation, dumping, releasing, burying or disposing of or emitting
of any particles, materials, substances, or emissions that are now or have
heretofore been determined by any and all Governmental Agency or Agencies to be
of a hazardous, toxic,
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pollutive, or ecologically or environmentally damaging nature, including but
not limited to asbestos ("Hazardous Materials"). Seller has not previously
disposed of any Hazardous Materials at the Premises.
For purposes of this Agreement, the term "Hazardous Materials" shall include,
but not be limited to, those materials or substances now or heretofore defined
as "hazardous substances," "hazardous materials," "hazardous waste," "toxic
substances," or other similar designations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C., Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C., Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C., Section 1801, et seq. and other laws, whether or not of a similar
nature, applicable to the Premises and adopted by, enacted in or applicable to
the State of Texas.
For purposes of this Agreement, the term "Governmental Agency or Agencies"
means, whether of the United States of America, of any state or territory
thereof or of any foreign jurisdiction, any government, political subdivision,
court, agency, or other entity, body, organization or group exercising any
executive, legislative, judicial, regulatory or administrative function of
government.
To the best of Seller's knowledge, the Real Property has never appeared on any
federal or state registry of active or inactive hazardous waste disposal sites.
Seller has never received any notice of claim from a Governmental Agency
concerning the alleged release or threatened release of Hazardous Materials at
the Real Property. To the best of Seller's knowledge and without inquiry, no
hazardous waste sites exist within a one mile radius of the Real Property.
J. To the best of Seller's knowledge, there are no and will be no
employment or union agreements in effect and no employee has received or will
receive a commitment from the Seller or Seller's manager for continued
employment at the Premises after Closing.
K. Seller has no knowledge of and has received no notice of any
causes of action, actions, or proceedings of whatever type or description which
have been instituted or threatened or are pending relating to the Premises or
any interest therein.
L. Seller shall cause the Hotels to be constructed in
substantial conformity with the plans and specifications approved by Purchaser
pursuant to Article III, Paragraph B hereof for each Hotel and in accordance
with the terms and provisions of this Agreement. Seller agrees to pay to
complete the items on any "punch list" which is reasonably prepared by the
architect for each Hotel after
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consultation with Seller and submitted at or prior to the Closing of a Hotel,
regardless of whether such items are completed before or after Closing of a
Hotel.
M. To the best of Seller's knowledge, no representation or
warranty made by the Seller, nor, to the best of Seller's actual knowledge, in
any statement or document furnished or to be furnished to the Purchaser
hereunder, or in connection with the transaction contemplated hereby, contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained therein not
misleading. The Seller has disclosed herein to the Buyer all facts or
developments of any kind known to Seller which are material to the assets,
prospects, financial condition and business of the Seller as it pertains to the
Hotels, and is solely responsible for the accuracy and completeness of the
contents thereof and all other statements and documents submitted in connection
with this Agreement and the transactions contemplated hereby.
The Purchaser represents and warrants to the Seller that:
A. Purchaser is a limited partnership duly organized, and
existing and in good standing under the laws of the state of its formation and
will be authorized to do business in the states in which the Premises are
located prior to Closing of the portion of the Premises located therein.
B. Purchaser has the right, power and authority to execute this
Agreement and, upon receipt of the approval from the board of directors of the
general partner of Purchaser, will have the right, power and authority to
purchase the Premises from Seller in accordance with the terms and conditions
hereof, and to execute, deliver and perform its obligations under this
Agreement and all other instruments, conveyances, executed or to be executed
and delivered, by Purchaser in connection with the transactions contemplated
herein. This Agreement and all other documents executed and delivered, or to
be executed and delivered, by Purchaser in connection with the transactions
contemplated herein have been or at the appropriate time will be, duly executed
and delivered and constitute or, upon such execution and delivery, will
constitute the valid, legal and binding obligations of Purchaser, enforceable
in accordance with their respective terms and provisions, subject, however, to
receipt of the foregoing approval from the board of directors of the general
partner of Purchaser, to the effect of any bankruptcy, reorganization,
moratorium, insolvency, or other laws affecting the rights of creditors
generally. Purchaser has taken all action, corporate or otherwise, required to
authorize its execution and delivery of this Agreement. There are no claims,
defenses, personal or otherwise, or offsets whatsoever to the validity or
enforceability with respect to this Agreement or any other documents executed
and delivered, or to be
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executed and delivered, by Purchaser in connection with the transactions
contemplated herein, nor is there any basis for any such claim, defense, or
offset known to Purchaser. With the execution of the foregoing required
approval from the board of directors of the general partner of Purchaser, there
is no consent or approval of any person, firm, corporation, court, trustee,
judge or governmental authority required to be obtained by Purchaser in order
for Purchaser to enter into this Agreement or any such other document or to
perform fully all of Purchaser's obligations under this Agreement or under any
such other document except those that have been obtained and are in full force
and effect.
C. Neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated herein will conflict with, or
result in a breach of, the terms, conditions or provisions of, or constitute a
default under, any agreement or instrument to which Purchaser is a party.
Purchaser, in Purchaser's sole and absolute discretion, may waive any
condition to close or breach of any representation or warranty provided for
herein or any Title or Survey Defect, and in such event, this transaction shall
be consummated as if such condition, representation, warranty or defect was
satisfied. All of the representations and warranties contained in this
Agreement shall survive the Closing of each Hotel. The representations and
warranties set forth above shall be true, correct and accurate on the date
hereof and as of the date of Closing of each Hotel.
XIII. ESCROW
The Escrow Agent shall acknowledge receipt of the Deposit for each Hotel
and agrees to hold the Deposit for each Hotel in escrow until the Closing of
such Hotel or sooner termination of this Agreement and shall pay over and apply
the proceeds thereof in accordance with the terms of this Agreement. If, for
any reason, the Closing of a Hotel does not occur and either party makes a
written demand upon the Escrow Agent for payment of the Deposit for such Hotel,
the Escrow Agent shall give written notice to the other party of such demand.
If the Escrow Agent does not receive a written objection from the other party
to the proposed payment within ten (10) business days after the giving of such
notice, the Escrow Agent is hereby authorized to make such payment. If the
Escrow Agent does receive such written objection within such ten (10) day
period, or if for any reason the Escrow Agent in good faith shall elect not to
make such payment, the Escrow Agent shall continue to hold the Deposit for such
Hotel until otherwise directed by written instructions from the parties to this
Agreement or until a determination and ruling is made by the arbitrator or
arbitrators appointed in accordance with Article VIII, Paragraph D hereof
disposing of such Deposit for such Hotel.
23
<PAGE> 24
The Escrow Agent shall be liable as a depository only and its duties
hereunder are limited to the safekeeping of the Deposit for each Hotel and the
delivery of same in accordance with the terms of this Agreement. The Escrow
Agent shall not be liable for any act or omission done in good faith, or for
any claim, demand, loss or damage made or suffered by any party to this
Agreement, except such as may arise through or be caused by the Escrow Agent's
willful misconduct or negligence.
XIV. COVENANTS
A. Upon the completion of the construction of a Hotel and up to
and including the Closing of such Hotel, the Seller (i) shall observe normal
and prudent maintenance and management of such Hotel, (ii) shall maintain
supplies and payroll at the necessary and customary level, and (iii) shall
operate the Hotel in the ordinary course of business.
B. All taxes levied against the Premises which were or shall be
due and payable prior to the Closing have been or shall be paid in full by the
Seller on or prior to the Closing.
C. All Contracts and Leases shall be current and not in default
as of the Closing. Seller shall not enter into Contracts or Leases except in
the ordinary course of business, and provided that any such Contract or Lease
shall either provide that it may be cancelled on not more than 30 days notice
by Seller at no penalty or cost or, Purchaser shall consent to such Contract or
Lease in writing prior to Seller's execution thereof.
D. Seller shall maintain fire and casualty insurance on the
Premises up to and including the Closing in amounts reasonably necessary to
adequately insure the Premises.
E. Prior to the Closing of each Hotel, representatives of Seller
and Purchaser shall meet at such Hotel and prepare a schedule of the Equipment,
which schedule shall be attached hereto and made a part hereof at such time.
XV. BINDING EFFECT; MISCELLANEOUS
A. This Agreement shall be binding upon and shall inure to the
parties hereto, their respective heirs, successors, legal representatives and
assigns. This Agreement sets forth the entire Agreement between the parties
hereto and no other prior written or oral statement or agreement or
understanding shall be recognized or enforced. All modifications or amendments
shall be in writing and signed by the parties. This Agreement is to be
construed according to the laws of the State of Tennessee. This Agreement may
be executed in two or more counterparts all of which shall constitute one and
the same instrument. The singular shall include the plural and vice versa.
24
<PAGE> 25
B. Provided Purchaser does not terminate this Agreement prior to
the expiration of the Feasibility Period, after the expiration of the
Feasibility Period, the Purchaser may assign this Agreement to a corporation,
partnership or other entity in which Purchaser or its wholly owned subsidiaries
own at least a majority interest.
C. Purchaser acknowledges that the portions of the Real Property
described on Schedule 1 as Tract 2 and Tract 3 are not currently owned by
Seller, but under contracts by Seller to purchase such Tract 2 and Tract 3. In
the event Seller shall fail to acquire Tract 2 and/or Tract 3, the Hotel or
Hotels contemplated herein to be constructed by Seller on such Tract or Tracts
shall be deleted from this Agreement and Seller shall be thereby released from
all liability and responsibility under this Agreement for such Hotel or Hotels.
D. In the event any period of time provided for in this Agreement
expires on a Saturday, Sunday or banking holiday, such period of time shall be
automatically extended to and through the next business day thereafter.
E. As used herein, "the Date of this Agreement" shall mean the date
noted below as the date upon which this Agreement was executed by the latter of
the Purchaser or the Seller.
F. This Agreement shall not be recorded in the public records of any
county where the Premises are located.
25
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Date of this Agreement.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation,
General Partner
(Corporate Seal) By:___________________________
_______ President
Attest:
___________________
______Secretary
Date signed by Purchaser:
___________________________
26
<PAGE> 27
Seller:
Promus Hotels, Inc.,
a Delaware corporation
(Corporate Seal)
By:___________________________________
___________President
Attest:
___________________
_____Secretary
Date signed by Seller:
_____________________
27
<PAGE> 28
Escrow Agent:
The Title Company of North Carolina, Inc.
as agent for First American Title Insurance
Company
By:____________________________________
Title:_________________________________
Winston Hospitality, Inc., as the Lessee defined hereinbefore, joins
in the execution of this Agreement for the sole purpose of acknowledging and
agreeing to the provisions of Article III, Paragraph C relative to the
Percentage Lease and the Management Agreement.
Winston Hospitality, Inc.,
a North Carolina corporation
(Corporate Seal) By:_______________________________
______________President
Attest:
___________________
_____Secretary
28
<PAGE> 29
STATE OF __________________
COUNTY OF _________________
I, a Notary Public of the County and State aforesaid, certify that
__________________________, personally came before me this day and acknowledged
that _he is ______________ Secretary of Winston Hotels, Inc., a North Carolina
corporation, General Partner of WINN Limited Partnership, a North Carolina
limited partnership, and that by authority duly given and as the act of the
corporation, as such General Partner, the foregoing instrument was signed in
its name by its ______ President, sealed with its corporate seal and attested
by ___________________ as its ________ Secretary.
Witness my hand and seal, this the _____ day of _____________, 199__.
My commission expires:_____ _____________________________
Notary Public
(SEAL)
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
__________________________________________ personally appeared before me this
day and acknowledged that _he is ________ Secretary of Promus Hotels, Inc., a
Delaware corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ___
President, sealed with the corporate seal and attested by _____ as its _____
Secretary.
Witness my hand and seal, this the ____ day of _____________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
29
<PAGE> 30
STATE OF _________
COUNTY OF ________
I, a Notary Public of the County and State aforesaid, certify that
___________________________ personally appeared before me this day and
acknowledged that _he is ____ Secretary of Winston Hospitality, Inc., a North
Carolina corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ____
President, sealed with the corporate seal and attested by ____ as its ____
Secretary.
Witness my hand and seal, this the ___ day of _______________, 1996.
My commission expires:_____ __________________________
Notary Public
30
<PAGE> 31
Schedule 1
Tract 1 - Richmond, Virginia
Tract 2 - BWI, Baltimore, Maryland
Tract 3 - Dallas- Market Center, Texas
31
<PAGE> 32
Schedule 2
Management Agreement
Winston Hospitality, Inc.
Promus Hotels, Inc.
WINN Ltd. Partnership
32
<PAGE> 33
MANAGEMENT AGREEMENT
DATED AS OF _______ __, 199_
BY AND AMONG
WINSTON HOSPITALITY, INC.
PROMUS HOTELS, INC.
WINN LIMITED PARTNERSHIP
<PAGE> 34
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. THE HOTEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. The Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
[SECTION 2.01. OPENING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1]
Section 2.02. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3. MANAGER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.01. Manager's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4. LESSEE'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.01. Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5. MANAGEMENT FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.01. Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6. CLAIMS AND LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.01. Claims and Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.02. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 7. CLOSURE, EMERGENCIES AND DELAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.01. Events of Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.02. Emergencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8. CONDEMNATION AND CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.01. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.02. Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 9. DEFAULT AND TERMINATIONS RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.01. Manager Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.02. Lessee Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.03. Termination Upon Event of Default; Other
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9.04. Termination for Failure to Achieve
Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 9.05. Manager's Early Termination Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.06. Right to Terminate Upon Sale or
Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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<PAGE> 35
<TABLE>
<S> <C>
Section 9.07. Employment Solicitation Restriction Upon
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 10. APPLICABLE LAW AND ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.01. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.02. Arbitration of Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.1. Matters to be Submitted to
Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.2. The Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.3. Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.03. Performance During Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.01. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.02. Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.03. Manager's Contractual Authority in the
Performance of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.04. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.05. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.07. Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.08. Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.09. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.10. Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.11. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.13. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.14. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.15. Travel and Out-of-Pocket Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.16. Set off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.17. Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.18. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.19. Survival of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.20. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.21. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.22. Periods of Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.23. Preparation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.24. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.25. Attorney's Fees and Other Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.26. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<PAGE> 36
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement"), made and entered into as of
this _____ day of March 1996 ("Effective Date"), between Winston Hospitality,
Inc., a North Carolina corporation ("Lessee"), whose address is 2209 Century
Drive, Suite ___, Raleigh, North Carolina 27612, and Promus Hotels, Inc., a
Delaware corporation ("Manager"), whose address is 755 Crossover Lane, Memphis,
TN 38117, recites and provides as follows:
RECITALS
WHEREAS, WINN Limited Partnership, a North Carolina limited
partnership ("Owner"), whose address is 2209 Century Drive, Suite 300, Raleigh,
North Carolina 27612, and which is a third party beneficiary as described
herein, has acquired the Hotel (as defined below) and leases the Hotel to
Lessee; and
WHEREAS, Lessee desires to engage Manager, and Manager desires to be
engaged, to manage the Hotel on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
THE HOTEL
The subject matter of this Agreement is the management of the "Hotel,"
as defined in the Commitment Agreement to issue a Homewood Suites License
Agreement and the Homewood Suites License Agreement attached hereto as Exhibit
"A" (hereinafter collectively referred to as the "License Agreement"), by
Manager. The License Agreement shall exclusively govern Lessee's right to use
the Homewood Suites "System" (as defined in the License Agreement) in the
operation of the Hotel. Lessee hereby expressly acknowledges that it shall not
derive any rights in or to the use of the "Homewood Suites" name or the
Homewood Suites System from this Agreement.
ARTICLE 2.
TERM
[SECTION 2.01. OPENING DATE. MANAGER SHALL OPEN THE HOTEL TO THE
PUBLIC AND COMMENCE DOING BUSINESS AS A HOMEWOOD SUITES
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<PAGE> 37
HOTEL ON THE DATE ALL THE CONDITIONS PRECEDENT IN THIS AGREEMENT AND THE
LICENSE AGREEMENT TO THE OPENING OF THE HOTEL AS A HOMEWOOD SUITES HOTEL HAVE
BEEN SATISFIED ("OPENING DATE"), WHICH DATE SHALL BE CONFIRMED IN AN ADDENDUM
TO THIS AGREEMENT.]
SECTION 2.02. TERM. The term shall commence on the Effective Date
and, subject to the terms contained herein, continue for the term of years from
the [OPENING DATE SET FORTH ON EXHIBIT "B"/EFFECTIVE DATE] ("Term").
ARTICLE 3.
MANAGER'S OBLIGATIONS
SECTION 3.01. MANAGER'S OBLIGATIONS. Manager shall, on behalf of
Lessee and at Lessee's expense, direct the operation of the Hotel pursuant to
the terms of this Agreement and meet the standards imposed under the License
Agreement. Manager shall be exclusively responsible for directing the
day-to-day activities of the Hotel and establishing all policies and procedures
relating to the management and operation of the Hotel. Except as specifically
otherwise provided, all cost(s) and expense(s) incurred by Manager in
association with the performance of the obligations hereinafter set forth shall
be [PRE-OPENING EXPENSES IF INCURRED PRIOR TO THE OPENING DATE AND] operating
costs [IF INCURRED AFTER THE OPENING DATE] and shall accordingly be paid from
the [PRE-OPENING BANK(S) ACCOUNT AS HEREINAFTER DEFINED IN SECTION 3.01(i) OR
THE] Bank Account(s) as hereinafter defined in Section 3.01(iv) below.
Manager, during the Term, shall have the following obligations:
[(i) PRE-OPENING. SIX (6) MONTHS PRIOR TO THE SCHEDULED OPENING
DATE, MANAGER SHALL COMMENCE IMPLEMENTATION OF A
PRE-OPENING PROGRAM WHICH SHALL INCLUDE ALL ACTIVITIES
NECESSARY TO FINANCIALLY AND OPERATIONALLY PREPARE THE
HOTEL FOR OPENING. TO IMPLEMENT THE PRE-OPENING PROGRAM,
MANAGER SHALL PREPARE A COMPREHENSIVE PRE-OPENING BUDGET
WHICH SHALL BE SUBMITTED TO LESSEE FOR LESSEE'S APPROVAL
NINETY (90) DAYS AFTER THE EFFECTIVE DATE ("PRE-OPENING
BUDGET"). ALL COSTS AND EXPENSES OF THE PRE-OPENING
PROGRAM SHALL BE PAID FROM A SPECIAL BANK ACCOUNT(S) OPENED
BY MANAGER IN THE NAME OF LESSEE UPON WHICH ONLY MANAGER'S
DESIGNEES SHALL BE AUTHORIZED TO DRAW ("PRE-OPENING BANK
ACCOUNT(S)"). AFTER ALL PRE-OPENING EXPENSES HAVE BEEN
PAID, THE BALANCE IN THE PRE-OPENING BANK ACCOUNT(S) SHALL
BE RETURNED TO LESSEE AND THE PRE-OPENING BANK ACCOUNT(S)
CLOSED.]
(ii) Personnel. Manager shall be the sole judge of the fitness
and qualification of all personnel working at the Hotel
("Hotel Personnel") and shall have the sole and absolute
right to hire, supervise, order,
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<PAGE> 38
instruct, discharge and determine the compensation,
benefits and terms of employment of all Hotel Personnel.
All Hotel Personnel shall be employees of Manager. Manager
shall also have the right to use employees of Manager,
Manager's parent and subsidiary and affiliated companies,
not located at the Hotel to provide services to the Hotel
("Off-Site Personnel"). The expenses of Off-Site Personnel
shall be prorated based on the actual amount of time spent
on Hotel matters compared to total time worked. Lessee
reserves the right to require all employees to be on-site
personnel. All expenses, costs (including, but not limited
to, salaries, benefits and severance pay), liabilities and
claims which are related to Hotel Personnel and Off-Site
Personnel shall be [PRE-OPENING EXPENSES OR] operating
expenses [AS APPROPRIATE].
Manager shall provide Lessee an opportunity to interview
each proposed general manager for the Hotel prior to the
appointment of said individual to the position of Hotel
general manager. Manager shall solicit and obtain the
Lessee's recommendation on said individual prior to making
a final decision on the appointment of such individual to
the position of Hotel general manager.
(iii) Hotel Policies. Manager shall determine the terms of guest
admittance to the Hotel, establish room rates, and use of
rooms for commercial purposes.
(iv) Bank Accounts. Manager shall open and operate the Hotel's
bank accounts. All sums received from the operation of the
Hotel and all items paid by Manager arising by virtue of
Manager's operation of the Hotel shall pass through
interest bearing bank account(s) established by Manager in
Lessee's name at such banks as Manager and Lessee shall
mutually agree ("Bank Account(s)"); Lessee's designees and
Manager's designees shall be authorized to operate and draw
from the Bank Account(s). Each fiscal month Manager, on
behalf of Lessee, shall disburse funds from the Bank
Account(s) in the order of priority and to the extent
available in accordance with the priority schedule set
forth on Exhibit "B". Interest earned on amounts in the
Bank Accounts shall be for the account of the Lessee.
(v) Operating Budgets. Manager [SHALL, NOT LESS THAN SIXTY
(60) DAYS PRIOR TO THE SCHEDULED OPENING DATE, SUBMIT/HAS,
PRIOR TO THE EFFECTIVE DATE, SUBMITTED] to Lessee and
Owner, for their approval, a proposed
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<PAGE> 39
operating budget for the ensuing full or partial fiscal
year, as the case may be (an "Operating Budget" and in the
case of the first such Operating Budget, the "Initial
Operating Budget"). Thereafter, Manager shall, not less
than sixty (60) days prior to the commencement of each full
fiscal year, submit to Lessee and Owner, for their
approval, a proposed monthly Operating Budget for the
ensuing full or partial fiscal year, as the case may be.
Manager shall include with the monthly Operating Budgets
shall include reasonable detail on all material assumptions
on which such Operating budgets are based. Lessee may
object to the Operating Budget and, after soliciting
Manager's opinion and input regarding the disputed item(s)
and considering such opinions and input in good faith,
Lessee shall resolve such disputes in its sole discretion.
Manager shall revise the Operating Budget from time to
time, as necessary, to reflect any unpredicted significant
changes, variables or events or to include significant,
additional, unanticipated items of income or expense.
Manager shall be permitted to reallocate part or all of the
amount budgeted with respect to any line item to another
line item and to make such other modifications to the
Operating Budget as Manager deems reasonably necessary.
Lessee and Owner acknowledge that the Operating Budget is
intended only to be a reasonable estimate of the Hotel's
income and expenses for the ensuing fiscal year. Manager
shall not be deemed to have made any guarantee, warranty or
representation whatsoever in connection with the Operating
Budget;
(vi) Operating Statement. Manager shall prepare and furnish
Lessee and Owner with a detailed operating statement
setting forth the results of the Hotel's operations for
each fiscal month. Manager shall use its best efforts to
provide such reports within ten (10) days after the end of
each fiscal month, and shall provide such reports in no
event later than fifteen (15) days after the end of each
fiscal month. Within fourty-five (45) days after the end
of each fiscal year, Manager shall furnish Lessee and Owner
with a detailed operating statement setting forth the
results of the Hotel's operations for the fiscal year.
Operating statements shall include a comparison of actual
results for the relevant period with the budgeted amounts
for such period as set forth in the applicable Operating
Budget;
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<PAGE> 40
(vii) Capital Budgets and Statement. Manager shall, not less
than sixty (60) days prior to the commencement of each
fiscal year, submit to Lessee and Owner a recommended
"Capital Budget" for the ensuing full or partial fiscal
year, as the case may be, for furniture, fixtures and
equipment, ordinary Hotel capital replacement items as
shall be required to operate the Hotel in accordance with
the standards referred to in the License Agreement and
non-routine items. Before Manager expends any funds on
capital items and other non-routine items or commences or
commissions work on such items, Manager agrees to obtain
the specific approval of the Lessee of the time and manner
in which (i) such funds will be spent and (ii) such items
will be completed. Manager acknowledges that the Lessee
shall have the right, exercisable in its sole discretion,
to control, direct and supervise all work on and
expenditures for all capital items and other non-routine
items. If Lessee exercises the right described in the
previous sentence, Lessee shall solicit and consider
Manager's opinions on the nature, manner and timing of such
work and periodically apprise Manager of the progress of
such work and any material changes in the scope, manner or
timing of such work. Manager shall prepare and furnish
Lessee and Owner, on or before the twenty-fifth (25th) day
of the fiscal month immediately following the close of a
fiscal month, with a detailed status report and accounting
of all expenditures on non-routine and capital items that
the Lessee has not elected to control, direct and
supervise. Such accountings shall include a comparison of
actual expenditures on such items for such period with the
budgeted amounts for such period as set forth in the
applicable Capital Budget.
(viii) General Maintenance Non-Capital Replacements. Manager
shall supervise the maintenance, repair and replacement of
non-Capital Replacements.
(ix) Operating Equipment. Manager shall select and purchase all
operating equipment for the Hotel such as linens, utensils,
uniforms and other similar items.
(x) Operating Supplies. Manager shall select and purchase all
operating supplies for the Hotel such as food, beverages,
fuel, soap, cleansing items, stationery and other
consumable items.
(xi) Accounting Standards. Manager shall maintain the books and
records reflecting the operations of the
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Hotel and in conformity with generally accepted accounting
practices consistently applied and shall adopt and follow
the fiscal accounting periods utilized by Manager in its
normal course of business. The Hotel-level generated
accounting records reflecting detailed day-to-day
transactions of the Hotel's operations, shall be kept by
Manager at the Hotel or at the Manager's regional offices
or corporate headquarters, or at such other location as
Manager shall reasonably determine.
(xii) Audits. Lessee and Owner shall have the right to have
their employees and independent accounting firms examine,
audit, and copy the books and records of the Hotel at any
reasonable time upon forty- eight (48) hours notice to
Manager;
(xiii) Marketing and Advertising. Manager shall advertise and
promote the Hotel in coordination with the sales and
marketing programs of Manager and other Homewood Suites
hotels. Manager may participate in sales and promotional
campaigns and activities involving complimentary rooms.
Manager, in marketing and advertising the Hotel, shall have
the right to use marketing and advertising services of
employees of Manager and its parent and affiliated
companies not located at the Hotel. Manager may charge the
Hotel for personnel and other costs and expenses incurred
in providing such services; provided that (i) Manager's
allocation of such costs and expenses among hotels,
including the Hotel, shall be pro rata among all hotels
owned or managed by Manager and (ii) the annual allocation
of such costs and expenses to the Hotel shall not exceed
$10,000. Such costs and expenses shall be reflected in the
budgets and operating statements required to be prepared
and submitted by Manager under this Management Agreement.
Other than as specifically provided for in this Section
3.01(xiii), without specific, advance approval by Lessee,
such services shall be without cost other than the charges
otherwise incurred by Lessee for marketing and related
services under the License Agreement.
(xiv) Permits and Licenses. Manager shall assist Owner and
Lessee in obtaining the various permits and licenses
required to operate the Hotel in accordance with the terms
of this Agreement and the License Agreement.
(xv) Meetings. The Hotel's general manager shall meet with
Lessee's and Owner's Representative (as hereinafter defined
in Section 4.01(viii)) monthly to
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review and discuss the previous and future month's
operating statement, cash flow, budget, capital
expenditures, important personnel matters and the general
concerns of Lessee, Owner and Manager ("Monthly Meeting").
Also, a representative of Manager's corporate staff shall
meet with the Representative quarterly to review and
discuss the previous and future quarter's operating
statement, cash flow, budget, capital expenditures,
important personnel matters and the general concerns of
Lessee, Owner and Manager ("Quarterly Meeting").
In addition to the Monthly and Quarterly Meetings, once
each year, in connection with the Manager's preparation of
the Operating and Capital Budgets for the upcoming year,
the Hotel's general manager and one or more representatives
of Manager's corporate staff shall meet with Lessee's and
Owner's Representative to review and discuss (i) the
operating performance of the Hotel, (ii) the anticipated
operating performance for the upcoming year, (iii) the
marketing and advertising history and plans for the Hotel,
(iv) the repair and maintenance history and plans for the
Hotel, (v) the need for, scope and timing of capital and
other non-routine projects and (vi) such other matters
regarding the Hotel or its operation as any of the
attendees deem appropriate ("Annual Meeting").
Monthly Meetings shall be held telephonically unless either
party requests that a Monthly Meeting be held in person to
discuss material deviations from budget or other material
matters identified in advance of the meeting. Except to
the extent otherwise mutually agreed upon by Lessee, Owner
and Manager, all Monthly Meetings held in person, Quarterly
Meetings and Annual Meetings shall be held at the Hotel;
(xvi) Insurance. Manager shall procure and maintain throughout
the Term the insurance coverages set forth on Exhibit "D;"
(xvii) Chain Services. Lessee and Manager contemplate that
certain services (collectively, "Chain Services"), such as
advertising, training and computer payroll, can be provided
for the Hotel better, more efficiently and more
economically on a central, regional or group basis rather
than on an individual basis. Manager may provide Chain
Services to the
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Hotel, and in such event the Hotel's fair and equitable
share of the cost thereof shall constitute an operating
expense, so long as (i) the Manager or its affiliates are
not obligated to provide such services under the License
Agreement, (ii) the cost of the Chain Services shall be
allocated on a fair and equitable basis among the Hotel and
the other hotels benefitting therefrom; (iii) the basis for
such allocation shall be explained by Manager in each
Operating Budget; (iv) the costs of the Chain Services
shall be fair and reasonable and shall not exceed the costs
that would be charged by an unaffiliated third party and
(v) both the cost of the Chain Services and the allocation
of a share of that cost to the Hotel and other hotels
benefitting therefrom shall be subject to audit by Lessee
pursuant to the terms of Section 4.01(ix) of this
Agreement.
(xviii) G&A Expenses. Except to the extent permitted by Section
3.01(xiii), no part of Manager's central office overhead or
general or administrative expenses including the cost of
travel by Manager's corporate or regional officers or for
travel related to any other hotel operated by Manager or
its Affiliates shall be (i) deemed to be an operating
expense or (ii) reimbursed under Section 11.14 or any other
provision hereof.
(xix) Competitive Bidding. All contracts for repairs, capital
improvements, foods and services exceeding $10,000 shall be
awarded on the basis of competitive bidding. In its
operation of the Hotel under this Agreement, Manager may
purchase goods, supplies and services from itself or any
affiliated or subsidiary companies or individuals so long
as the prices and terms thereof are competitive with, and
are not less favorable than, prices and terms which could
be obtained from independent parties.
(xx) Labor Relations. All employees working at the Hotel are
and will be employees of the Manager, and are not and will
not be employees of the Lessee, the Owner or any of their
affiliates. None of such employees shall be offered,
receive or be eligible to receive any benefits offered to
or received by Lessee's employees. Prior to entering into
any collective bargaining agreement concerning any
employees of the Hotel, Manager will so inform Lessee, but
Lessee shall have not right of approval or disapproval, and
Manager shall have complete discretion and authority to
negotiate, enter into and perform such agreements.
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To the extent applicable, Manager: (a) represents that it
is an equal opportunity employer as described in Section
202 of Executive Order 11246 dated September 24, 1965, as
amended, and as such agrees to comply with the provisions
of Paragraphs 1 through 7 of Section 202 of said Executive
Order during the performance of this Operating Agreement,
(b) agrees to comply with the affirmative action
requirements of Part 60.741 of Title 41, Code of Federal
Regulations, with respect to handicapped workers during the
performance of this Operating Agreement, (c) agrees to
comply with the affirmative action requirements of Part
60.250 of Title 41, Code of Federal Regulations, with
respect to Disabled Veterans and Veterans of the Vietnam
Era during the performance of this Operating Agreement, and
(d) shall submit to Lessee in the form approved by the
Director of the Office of Federal Contract Compliance, U.S.
Department of Labor, a certification that Manager does not
and will not maintain any facilities that provide for their
employees in a segregated manner, or permit their employees
to perform their services at any location under its
control, where segregated facilities are maintained, and
that Manager will obtain a similar certification from its
contractors. By so agreeing, neither party intends to
imply that the aforementioned Executive Orders and federal
regulations are applicable to Manager.
(xxi) Capital Leases. Notwithstanding anything herein to the
contrary, all obligations and payments required under any
lease characterized as a capital obligation under generally
accepted accounting principles shall be owed and paid by
the Owner or Lessee, and not Manager, and such obligations
and payments shall not be an operating or capital expense
charged to the Hotel for purposes of this Agreement.
ARTICLE 4.
LESSEE'S OBLIGATIONS
SECTION 4.01. LESSEE'S OBLIGATIONS. During the Term, Lessee shall
have the obligations set forth below:
(i) License Agreement. Lessee shall comply with all of the
terms and conditions of the License Agreement (specifically
including, but not limited to, Licensee's obligation to pay
the fees, charges and contributions set forth in paragraph
3.C. of the License Agreement) and keep the License
Agreement in full force and effect from the Effective Date
through
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the remainder of the Term. Nothing in this Agreement shall
be interpreted in a manner which would relieve Lessee of
any of its obligations under the License Agreement;
(ii) Licenses and Permits. Lessee shall obtain and maintain,
with Manager's assistance and cooperation, all governmental
permissions, licenses and permits necessary to enable
Manager to operate the Hotel in accordance with the terms
of this agreement and the License Agreement;
[(iii) PRE-OPENING FUNDS. TWO (2) DAYS PRIOR TO THE COMMENCEMENT
OF THE PRE-OPENING PROGRAM DESCRIBED IN SECTION 3.01(i),
LESSEE SHALL MAKE AN INITIAL DEPOSIT OF THE SUM SPECIFIED
ON EXHIBIT "B" IN THE PRE-OPENING BANK ACCOUNT(S).
THEREAFTER, LESSEE SHALL DEPOSIT SUCH FUNDS IN THE
PRE-OPENING BANK ACCOUNT(S) AS ARE SET FORTH IN THE FUNDING
SCHEDULE ATTACHED TO THE PRE-OPENING BUDGET;]
(iv) Operating Funds. Lessee shall provide all funds necessary
to enable Manager to arrange and operate the Hotel in
accordance with the terms of this Agreement and the License
Agreement. Lessee and Manager will agree on the amount of
funds to be delivered by Lessee to Manager for deposit into
the Bank Account(s) on the [OPENING DATE/EFFECTIVE DATE],
and thereafter will agree from time to time on the minimum
amount of funds to be maintained in the Bank Account, for
working capital for the Hotel's operations (as agreed by
the parties, the "Minimum Balance"). Lessee agrees, upon
Manager's written request, to immediately furnish Manager
with sufficient funds to make up any deficiency in the
agreed upon Minimum Balance;
(v) Capital Funds. Lessee or Owner shall, consistent with the
Operating Budget, expend such amounts for renovation
programs, furnishings, equipment and ordinary Hotel capital
replacement items as are required from time to time to (a)
maintain the Hotel in good order and repair; (b) comply
with the standards referred to in the License Agreement;
and (c) comply with governmental regulations and orders.
Lessee and Owner shall cooperate with Manager in
establishing appropriate procedures and timetables for
Lessee or Owner to undertake capital replacement projects.
Lessee shall have the right, but not the obligation,
exercisable in its sole discretion, to control, direct and
supervise all work on and expenditures for all capital
items and other non-
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routine items. If Lessee exercises the right described in
the previous sentence, Lessee shall solicit and consider
Manager's opinions on the nature, manner and timing of such
work and periodically apprise Manager of the progress of
such work and any material changes in the scope, manner or
timing of such work;
(vi) Payments to Manager. Lessee shall promptly pay to Manager
all amounts due Manager under this Agreement.
(vii) Representative. Lessee and Owner shall appoint a
representative to represent them in all matters relating to
this Agreement and/or the Hotel ("Representative"). The
initial Representative shall be the individual named on
Exhibit "B." Manager shall have the right to deal solely
with the Representative on all such matters. Manager may
rely upon statements and representations of the
Representative as being from and binding upon Lessee and
Owner. Lessee and Owner may change the Representative, or
appoint separate representatives, from time to time by
providing written notice to Manager in the manner provided
for herein. The Representative shall attend all Monthly
Meetings and Quarterly Meetings; and
(viii) Quiet and Peaceable Operation. Lessee shall ensure that
Manager is able to peaceably and quietly operate the Hotel
in accordance with the terms of this Agreement, free from
molestation, eviction and disturbance by Lessee or by any
other person or persons claiming by, through or under
Lessee. Lessee shall undertake and prosecute all
reasonable and appropriate actions, judicial or otherwise,
required to assure such quiet and peaceable operations by
Manager.
(ix) Amendments to Percentage Lease. Lessee will not execute
any amendments to the economic terms of the Percentage
Lease which, on a pro forma basis using Promus' Initial
Operating Budget (as defined in Section 3.01(v)), would
result in the Hotel producing Lessee GOP (as defined in
Exhibit C) equal to less than 5% of the budgeted gross
revenues of the Hotel set forth in the Initial Operating
Budget.
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ARTICLE 5.
MANAGEMENT FEE
SECTION 5.01. MANAGEMENT FEE. Manager is authorized by Lessee to pay
itself from the Bank Account(s) the Management Fees calculated and payable in
the manner set forth on Exhibit "C."
ARTICLE 6.
CLAIMS AND LIABILITY
SECTION 6.01. CLAIMS AND LIABILITY. Lessee and Owner, for themselves
and on behalf of their affiliates, agree for the benefit of Manager, and
Manager, for itself and on behalf of its affiliates, agrees for the benefit of
Lessee and Owner, to look only to the appropriate insurance coverages in effect
pursuant to this Agreement in the event any demand, claim, action, damage,
loss, liability or expense occurs as a result of injury to person or damage to
property regardless of whether any such demand, claim, action, damage, loss,
liability or expense is caused or contributed to, by or results from the
negligence of Lessee or Manager or their subsidiaries, affiliates, employees,
directors, officers, agents or independent contractors and regardless whether
the injury to person or damage to property occurs in and about the Hotel or
elsewhere as a result of the performance of this Agreement. Nevertheless, in
the event the insurance proceeds are insufficient or there is no insurance
coverage to satisfy the demand, claim, action, loss, liability or expense and
the same did not arise out of the negligence or willful misconduct of Manager,
Lessee agrees, at its expense, to indemnify and hold Manager and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability. If such claim or
liability arises out of the gross negligence or willful misconduct of Manager
then Manager agrees at its expense to indemnify and hold Lessee and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability.
SECTION 6.02. SURVIVAL. The provisions of this Article 6 shall
survive any cancellation, termination or expiration of this Agreement and shall
remain in full force and effect until such time as the applicable statute of
limitations shall extinguish all demands, claims, actions, damages, losses,
liabilities or expenses which are the subject of the provisions of this Article
6.
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ARTICLE 7.
CLOSURE, EMERGENCIES AND DELAYS
SECTION 7.01. EVENTS OF FORCE MAJEURE. If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease
operation of the Hotel in order to protect the Hotel and/or the health, safety
and welfare of the guests and/or employees of the Hotel for reasons beyond the
reasonable control of Manager, such as, but not limited to, acts of war,
insurrection, civil strife and commotion, labor unrest, governmental
regulations and orders, shortage or lack of adequate supplies or lack of
skilled or unskilled employees, contagious illness, catastrophic events or acts
of God ("Force Majeure"), then in such event or similar events Manager may
close and cease operation of all or any part of the Hotel, reopening and
commencing operation when Manager deems that such may be done without jeopardy
to the Hotel, its guests and employees.
Manager and Lessee agree, except as otherwise provided herein, that
the time within which either party is required to perform an obligation and
Manager's right to manage the Hotel under this Agreement shall be extended for
a period of time equivalent to the period of delay caused by an event of Force
Majeure.
SECTION 7.02. EMERGENCIES. If a condition of an emergency nature
should exist which requires that immediate repairs be made for the preservation
and protection of the Hotel, its guests or employees, or to assure the
continued operation of the Hotel, Manager is authorized to take all actions and
to make all expenditures necessary to repair and correct such condition,
regardless of whether provisions have been made in the applicable budget for
such emergency expenditures. Expenditures made by Manager in connection with
an emergency shall be paid, in Manager's sole discretion, out of the Bank
Account(s). Lessee shall immediately replenish such funds paid from the Bank
Account(s).
ARTICLE 8.
CONDEMNATION AND CASUALTY
SECTION 8.01. CONDEMNATION. If the Hotel is taken in any eminent
domain, expropriation, condemnation, compulsory acquisition or similar
proceeding by a competent authority, this Agreement shall automatically
terminate as of the date of taking or condemnation. Any compensation for the
taking or condemnation of the physical facility comprising the Hotel shall be
paid to Lessee. Manager, however, with the full cooperation of Lessee, shall
have the right to file a claim with the appropriate
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authorities for the loss of Management Fee income for the remainder of the Term
and any extension thereof because of the condemnation or taking, so long as
such claim can be filed in a separate proceeding and does not adversely affect
the payment to Lessee. If only a portion of the Hotel is so taken and the
taking does not make it unreasonable or imprudent, in Manager's and Lessee's
opinion, to operate the remainder as a hotel of the type immediately preceding
such taking, this Agreement shall not terminate. Any compensation shall be
used, however, in whole or in part, to render the Hotel a complete and
satisfactory architectural unit as a hotel of the same type and class as it was
immediately preceding such taking or condemnation. The foregoing provisions
are subject to the rights of any first mortgagee with respect to the Hotel.
SECTION 8.02. CASUALTY. In the event of a fire or other casualty,
Lessee shall comply with the terms of the License Agreement and this Agreement
shall remain in full force and effect so long as the License Agreement remains
in full force and effect, except that the Management Fee shall be abated until
any damage to the Hotel is repaired and the Hotel is open for business.
ARTICLE 9.
DEFAULT AND TERMINATIONS RIGHTS
SECTION 9.01. MANAGER DEFAULTS. Each of the following shall
constitute an Event of Default by Manager:
(i) If sufficient funds are available, and assuming that all
funds are expended in accordance with the terms of this
Agreement, the failure of Manager to pay to Lessee an
amount sufficient to fund the Lessee's obligations under
the Percentage Lease with respect to a month within ten
(10) days after the end of the month. If such a sum of
money is not paid on the date same becomes due and payable
under this Agreement, such sum shall bear interest from the
date due until actually paid at a rate equal to the lesser
of twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an operating expense under
this Agreement.
(ii) If sufficient funds are available, and assuming that all
funds are expended in accordance with the terms of this
Agreement, the failure of Manager to pay any other sum of
money to Lessee provided for herein when the same is
payable, if such failure is not cured within thirty (30)
days after written notice specifying such failure is given
by Lessee to
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Manager. If any sum of money is not paid within ten (10)
days following the date same becomes due and payable under
this Agreement, such sum shall bear interest from the date
due until actually paid at a rate equal to the lesser of
twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an operating expense under
this Agreement.
(iii) An assignment by Manager in violation of the provisions of
Section 11.05 hereof.
(iv) If Manager shall fail to keep, observe or perform any other
material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Manager, or
if Manager shall fail to obtain or maintain any required
Permits that Manager is required or permitted by law to
obtain or maintain, and such failure shall continue for a
period of thirty (30) days, provided that if such failure
is incapable of cure within such thirty (30) day period and
if Manager shall promptly, diligently and continuously
pursue the cure thereof, then Manager shall have a period
of ninety (90) days after notice thereof by Lessee to
Manager within which to effectuate the cure. If, at end of
such ninety (90) day period the cure has not been
effectuated notwithstanding Manager's diligent and
continuous attempts to cure, then at the request of
Manager, Lessee shall extend the cure period for up to an
additional thirty (30) days, if in Lessee's reasonable
opinion, the default is capable of cure within such
additional period as Lessee may permit and the extension
will not have a materially negative effect on the financial
performance of the Hotel.
(v) If because of any act or omission on the part of Manager,
and without the fault of Lessee, the License Agreement or
any other material license critical to the operation of the
Hotel is at any time suspended, terminated or revoked, and
such suspension, termination or revocation shall continue
unstayed and in effect for a period of more than ninety
(90) consecutive days in the Hotel shall otherwise be
suspended for a period of more than ninety (90) consecutive
days; in the event of any such suspension, termination or
revocation, Manager shall immediately proceed to use
Manager's best efforts to cause the prompt reinstatement of
such Agreement, license or right. If, at the end of such
ninety (90) day period the cure has not been effectuated
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notwithstanding Manager's diligent and continuous attempts
to cure, then at the request of Manager, Lessee shall
extend the cure period for up to an additional thirty (30)
days, if in Lessee's reasonable opinion, the default is
capable of cure within such additional period as Lessee may
permit and the extension will not have a materially
negative affect on the financial performance of the Hotel.
(vi) If Manager shall fail to maintain and operate the Hotel in
accordance with the standards required under Section 3.01
and such failure shall not be due to a refusal on the part
of Owner and Lessee to approve the Operating Budget
submitted by Manager under Section 3.01(v), or Lessee's
failure to provide funds requested pursuant to the
provision of Section 4.01(vii) and shall continue for a
period of thirty (30) days after written notice by Lessee
to Manager specifying the matters or conditions which
constitute the basis for such Event of Default, provided
that if such failure is incapable of cure within such
thirty (30) day period and if Manager shall promptly,
diligently and continuously pursue the cure thereof, then
Manager shall have a period of ninety (90) days after
notice thereof by Lessee to Manager within which to
effectuate the cure. If, at the end of such ninety (90)
day period the cure has not been effectuated
notwithstanding Manager's diligent and continuous attempts
to cure, then at the request of Manager, Lessee shall
extend the cure period for up to an additional thirty (30)
days, if in Lessee's reasonable opinion, the default is
capable of cure within such additional period as Lessee may
permit and the extension will not have a materially
negative affect on the financial performance of the Hotel.
(vii) If Manager shall apply for or consent to the appointment of
a receiver, trustee or liquidator of Manager or of all of a
substantial part of its assets, admit in writing its
inability to pay its debts as they come due, make a general
assignment for the benefit of creditors, take advantage of
any insolvency law, or file an answer admitting the
material allegations of a petition filed against Manager in
any bankruptcy, reorganization or judgment or decree shall
be entered by any court of competition jurisdiction, on the
application of a creditor, adjudicating Manager bankrupt or
insolvent or approving a petition seeking reorganization of
Manager or appointing a receiver, trustee or liquidator of
Manager or of all of its assets or a
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decree shall continue unstayed and in effect for any period
of 90 consecutive days.
(viii) The filing of a voluntary petition in bankruptcy or
insolvency or a petition for liquidation or reorganization
under any bankruptcy law by Manager, or Manager shall
consent to, acquiesce in, or fail timely to controvert, an
involuntary petition in bankruptcy, insolvency or an
involuntary petition for liquidation or reorganization
filed against it.
(ix) The filing against Manager of a petition seeking
adjudication of Manager as insolvent or seeking liquidation
or reorganization or appointment of a receiver, trustee or
liquidator of all or a substantial part of Manager's
assets, if such petition is not dismissed within 90 days.
(x) Failure of Manager (but excluding such a failure which
results from the default by Lessee in paying amounts
payable hereunder by Lessee) to maintain at all times
throughout the term hereof all of the insurance required to
be maintained by Manager hereunder, if such failure is not
cured within 30 days after written notice specifying such
failure is given by Lessee to Manager.
(xi) If there shall occur an Event of Default or Termination
under the Percentage Lease due to Manager default
hereunder.
(xii) If there shall occur a default under the License Agreement
which may, if uncured, permit licensor to terminate the
License Agreement and such default shall continue beyond
applicable grace periods, if any.
(xiii) The occurrence of an event or transaction after which the
Manager is no longer owned or controlled by the franchisor
under the License Agreement.
SECTION 9.02. LESSEE DEFAULTS. Each of the following shall constitute
an Event of Default by Lessee:
(i) The failure of Lessee to pay or furnish to Manager any
money Lessee is required to pay or furnish to Manager in
accordance with the terms hereof on the date the same is
payable, if such failure is not cured within 30 days after
written notice specifying such failure is given by Manager
to Lessee. If any sum of money is not paid within ten (10)
days following the date same becomes due and payable under
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this Agreement, such sum shall bear interest from the date
due until actually paid at a rate equal to the lesser or
twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an Operating Expense under
this Agreement.
(ii) If Lessee shall apply for or consent to the appointment of
a receiver, trustee or liquidator of Lessee of all or a
substantial part of its assets, or admit in written its
inability to pay its debts as they come due, make a general
assignment for the benefit of creditors, take advantage of
any insolvency law, or file an answer admitting the
material allegations of a petition filed against Lessee in
any bankruptcy, reorganization or insolvency proceeding, or
if an order, judgment or decree shall be entered by any
court of competent jurisdiction, on the application of a
creditor, adjudicating Lessee a bankrupt or insolvent or
approving a petition seeking reorganization of Lessee or
appointing a receiver, trustee or liquidator of Lessee or
of all or a substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect
for any period of sixty (60) consecutive days.
(iii) The filing of a voluntary petition in bankruptcy or
insolvency or a petition for liquidation or reorganization
under any bankruptcy law by Lessee, or Lessee shall consent
to, acquiesce in, or fail timely to controvert, an
involuntary petition in bankruptcy, insolvency or an
involuntary petition for liquidation or reorganization
filed against it.
(iv) The filing against Lessee of a petition seeking
adjudication of Lessee as insolvent or seeking liquidation
or reorganization or appointment of a receiver, trustee or
liquidator of all or a substantial part of Lessee's assets,
if such petition is not dismissed within 90 days.
(v) Failure of Lessee or Owner to maintain at all times
throughout the term hereof all of the insurance required to
be maintained by Lessee under Section 4.01(iii), if such
failure is not cured within 30 days after written notice
specifying such failure is given by Manager to Lessee.
(vi) The failure of Lessee to perform, keep or fulfill any of
the other covenants, undertakings, obligations or
conditions set forth in this Agreement, or the
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failure of Lessee to approve expenditures or to authorize
procedures necessary to maintain the standards of the Hotel
in accordance with the License Agreement, if such failure
is not cured within 60 days after written notice specifying
such failure is given by Manager to Lessee, provided,
however, that if such failure is incapable of cure within
said 60 day period, and Lessee proceeds during such 60 day
period, and Lessee proceeds during such 60 day period to
commence to cure with all due diligence such failure until
the same is cured, then no Event of Default shall be in
existence under this Paragraph.
SECTION 9.03. TERMINATION UPON EVENT OF DEFAULT; OTHER REMEDIES. Upon
the occurrence of an Event of Default, the non-defaulting party may: (i)
terminate this Agreement, effective thirty (30) days after the giving of
written notice of termination to the defaulting party, provided that
termination may be effective immediately in the case of willful misconduct,
criminal conduct or misappropriation of funds; and (ii) pursue any and all
other remedies available to the non-defaulting party at law or in equity.
SECTION 9.04. TERMINATION FOR FAILURE TO ACHIEVE FINANCIAL RESULTS.
(a) Notwithstanding anything to the contrary in this Agreement,
Lessee shall have the right to terminate the Agreement in accordance
with this Section 9.04 in the event that at the end of any of the
consecutive twelve months periods (each, a "Test Period") beginning
with [APRIL] 1997, the GOP (as defined in Exhibit C) for the Hotel
for the Test Period was less than 5% of the gross revenues for the
Hotel (the "Minimum Margin") for such period, provided that:
(i) The default will be cured if at the end of the six
month period immediately subsequent to the Test Period in
which the GOP was less than the Minimum Margin (a "Cure
Period"), the GOP for the twelve month period then ended is
at least equal to the Minimum Margin.
(ii) If such a default is not cured at the end of a Cure
Period, Manager may cure such default, by making a cash
payment to the Lessee, within 21 days after the end of the
period (a "Shortfall Payment"), equal to the difference
between (i) the GOP for (A) the Test Period and (B) the
Cure Period and (ii) the Minimum Margin for such periods.
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(iii) If Manager cures such a default by making a
Shortfall Payment, the Management Agreement may be
terminated, at the Lessee's option, if the GOP is less than
the Minimum Margin for either (A) the Test Period ending 6
months after the end of the Cure Period or (B) any
subsequent Test Period, unless, within 15 days after the
end of that Test Period, Manager makes a second Shortfall
Payment equal to the difference between (i) the GOP for
that Test Period and (ii) the Minimum Margin for such
periods.
(iv) Manager may make only two Shortfall Payments and
shall have only one Cure Period.
(v) Without in any way limiting or affecting the Lessee's
right to terminate this Agreement on the terms and upon the
occurrences described above, Lessee will consider in
determining whether to exercise such rights, market
conditions, unforseen occurrences and any other relevant
facts which may have affected the performance of the Hotel.
The provisions of this Section 9.04(a) shall not apply to
the Hotel in any Test Period in which the operation of the
Hotel, or the use of the Hotel's facilities, are
significantly disrupted by casualty loss, strike, eminent
domain, or events of Force Majeure that are beyond the
reasonable control of Manager.
(b) If Lessee elects to terminate this Agreement under Section
9.04, such right may be exercised provided that (i) notice of
termination shall be given within sixty (60) days after the receipt by
Lessee of the annual accounting for such fiscal period; and (ii) the
notice shall specify a termination date no sooner than ninety (90)
days after the giving of such notice.
SECTION 9.05. MANAGER'S EARLY TERMINATION RIGHT. Manager, at its
option, may terminate this Agreement upon sixty (60) days written notice to
Lessee.
SECTION 9.06. RIGHT TO TERMINATE UPON SALE OR FORECLOSURE.
(a) Upon any sale by Owner of the Hotel, Lessee shall have the
right to terminate this Agreement ; provided, however, that the Lessee shall
provide to Manager within 120 days of such sale either (i) a cash amount equal
to 50% of the fair market value (as determined under the Percentage Lease) of
the Lessee's then-remaining leasehold estate in the Hotel as of the closing
date of the sale (the "Cash Amount") or (ii) written notice of its offer to
have Manager manage a substitute hotel facility (a "Substitute Hotel") under a
comparable Management Agreement; provided further, however, that if the Lessee
provides Manager
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with an offer to manage a Substitute Hotel and Manager rejects the offer within
15 days, Lessee shall deliver the Cash Amount to Manager within 10 days of such
rejection.
(b) Lessee shall also have the right to terminate this
Agreement upon a foreclosure by, the taking of possession by or a transfer in
lieu of foreclosure to a holder of a lien on the Hotel, without penalty to the
Lessee. The rights of the Lessee hereunder may be assigned to any first
mortgagee of the Hotel and exercised by such assignee.
SECTION 9.07. EMPLOYMENT SOLICITATION RESTRICTION UPON TERMINATION.
Lessee and its affiliates and subsidiaries and their successors hereby agree
not to solicit the employment of the Hotel general manager or assistant general
manager at any time during the term of this Agreement without Manager's prior
written approval. Furthermore, Lessee and its affiliates and subsidiaries and
successors agree not to employ the Hotel's general manager or assistant general
manager for a period of twelve (12) months after the termination or expiration
of this Agreement, without Manager's prior written approval.
ARTICLE 10.
APPLICABLE LAW AND ARBITRATION
SECTION 10.01. APPLICABLE LAW. The interpretation, validity and
performance of this Agreement shall be governed by the procedural and
substantive laws of the state where the Hotel is located and any and all
disputes, except those specifically referred to below, shall be brought and
maintained within that state. If any judicial authority holds or declares that
the law or another jurisdiction is applicable, this Agreement shall remain
enforceable under the laws of that jurisdiction.
SECTION 10.02. ARBITRATION OF FINANCIAL MATTERS.
SUBSECTION 10.02.1. MATTERS TO BE SUBMITTED TO ARBITRATION. In the
case of a dispute with respect to any of the following matters, either party
may submit such matter to arbitration which shall be conducted by the
Accountants (as hereinafter defined in Subsection 10.02.2);
<TABLE>
<S> <C>
(a) computation of the Management Fees;
(b) reimbursements due to Manager under the
provisions of Section 11.15;
(c) any adjustment in the Minimum Balance under
the provisions of Section 4.01(v); and
(d) any adjustment in dollar amounts of insurance
coverages required to be
maintained.
</TABLE>
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All disputes concerning the above matters shall be submitted to the
Accountants. The decision of the Accountants with respect to any matters
submitted to them under this Subsection 10.02.1 shall be binding on both
parties hereto.
SUBSECTION 10.02.2. THE ACCOUNTANTS. The "Accountants"
shall be one of three (3) firms of certified public accountants of recognized
national standing in the hotel industry. Until otherwise agreed to by the
parties, the three (3) firms shall be Arthur Andersen & Co., Coopers and
Lybrand, and Pannell Kerr Forster, notwithstanding any existing relationships
which may exist between Lessee and such accounting firms or Manager and such
accounting firms. The party desiring to submit any matter to arbitration under
Subsection 10.02.1 shall do so by written notice to the other party, which
notice shall set forth the items to be arbitrated and such party's choice of
one of the three (3) accounting firms. The party receiving such notice shall
within fifteen (15) days after receipt of such notice either approve such
choice, or designate one of the remaining two (2) firms by written notice back
to the first party, and the first party shall within fifteen (15) days after
receipt of such notice either approve such choice or disapprove the same. If
both parties shall have approved one of the three (3) firms under the preceding
sentence, then such firm shall be the "Accountants" for the purposes of
arbitrating the dispute; if the parties are unable to agree on an accounting
firm, then the third firm, which was not designated by either party, shall be
the "Accountants" for such purpose. The Accountants shall be required to
render a decision in accordance with the procedures described in Subsection
10.02.3 within fifteen (15) days after being notified of their selection. The
fees and expenses of the Accountants will be paid by the non-prevailing party.
SUBSECTION 10.02.3. PROCEDURES. In all arbitration proceedings
submitted to the Accountants, the Accountants shall be required to agree upon
and approve the substantive position advocated by Lessee or Manager with
respect to each disputed item. Any decision rendered by the Accountants that
does not reflect the position advocated by Lessee or Manager shall be beyond
the scope of authority granted to the Accountants and, consequently, may be
overturned by either party. All proceedings by the Accountants shall be
conducted in accordance with the Uniform Arbitration Act, except to the extent
the provisions of such act are modified by this Agreement or the mutual
agreement of the parties. Unless otherwise agreed, all arbitration proceedings
shall be conducted at the Hotel.
SECTION 10.03. PERFORMANCE DURING DISPUTES. It is mutually agreed
that during any kind of controversy, claim, disagreement or dispute, including
a dispute as to the validity of this Agreement, Manager shall remain in
possession of the Hotel as
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Manager; and Lessee and Manager shall continue their performance of the
provisions of this Agreement and its exhibits, but unless otherwise agreed by
the parties all funds shall be held in a separate escrow account pending the
resolution of such dispute. Either party shall be entitled to injunctive
relief from a civil court or other competent authority to maintain possession
in the event of a threatened eviction during any dispute, controversy, claim or
disagreement arising out of this Agreement.
ARTICLE 11.
GENERAL PROVISIONS
SECTION 11.01. AUTHORIZATION. Lessee and Manager represent and
warrant to each other that their respective corporations have full power and
authority to execute this Agreement and to be bound by and perform the terms
hereof. On request, each party shall furnish the other evidence of such
authority.
SECTION 11.02. RELATIONSHIP. Manager and Lessee shall not be
construed as joint venturers or partners of each other by reason of this
Agreement and neither shall have the power to bind or obligate the other except
as set forth in this Agreement.
SECTION 11.03. MANAGER'S CONTRACTUAL AUTHORITY IN THE PERFORMANCE OF
THIS AGREEMENT. Manager is authorized to make, enter into and perform in the
name of and for the account of Lessee any contracts deemed necessary by Manager
to perform its obligations under this Agreement.
SECTION 11.04. FURTHER ACTIONS. Lessee and Manager agree to execute
all contracts, agreements and documents and to take all actions necessary to
comply with the provisions of this Agreement and the intent hereof.
SECTION 11.05. SUCCESSORS AND ASSIGNS. Subject to Section 9.01(vii),
the acquisition of Manager or its parent company by a third party shall not
constitute an assignment of this Agreement by Manager and this Agreement shall
remain in full force and effect between Lessee and Manager. Except as herein
provided, Manager shall not assign any of its obligations hereunder without the
prior written consent of Lessee, which shall not be unreasonably withheld or
delayed. Lessee shall be deemed to have consented to such an assignment of
this Agreement if Lessee has not notified Manager in writing to the contrary
within fifteen (15) business days after Lessee has received Manager's request
for Lessee's consent to an assignment. Manager shall have the right to pledge
or assign its right to receive the Management Fees hereunder without the prior
written consent of Lessee. In the event of any such pledge or assignment,
Lessee shall have no right of set off, counterclaim or defense of payment
against assignee. Lessee's sole remedy for breach of Manager's
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obligations under this agreement shall be suit for damages or specific
performance against Manager.
Lessee shall have the right to assign this Agreement to (i) the person
or entity which has obtained title to the Hotel and a Homewood Suites
Commitment Agreement or License Agreement for the Hotel or (ii) any mortgagee
in connection with any mortgage placed on the Hotel. Except as hereinabove
provided, Lessee shall not have the right to assign this Agreement.
SECTION 11.06. NOTICES. All notices or other communications provided
for in this Agreement shall be in writing and shall be either hand delivered,
delivered by certified mail, postage prepaid, return receipt requested,
delivered by an overnight delivery service, or delivered by facsimile machine
(with an executed original sent the same day by an overnight delivery service),
addressed as set forth on Exhibit "B." Notices shall be deemed delivered on
the date that is four (4) calendar days after the notice is deposited in the
U.S. mail (not counting the mailing date) if sent by certified mail, or, if
hand delivered, on the date the hand delivery is made, or if delivered by
facsimile machine, on the date the transmission is made. If given by an
overnight delivery service, the notice shall be deemed delivered on the next
business day following the date that the notice is deposited with the overnight
delivery service. The addresses given above may be changed by any party by
notice given in the manner provided herein.
SECTION 11.07. DOCUMENTS. Lessee shall furnish Manager copies of all
leases, title documents, property tax receipts and bills, insurance statements,
all financing documents (including notes and mortgages) relating to the Hotel
and such other non-confidential documents pertaining to the Hotel as Manager
shall reasonably request.
SECTION 11.08. DEFENSE. Manager shall defend and/or settle any claim
or legal action brought against Manager or Lessee, individually, jointly or
severally in connection with the operation of the Hotel. Manager shall, with
the consent of Lessee, retain and supervise legal counsel, accountants and such
other professionals, consultants and specialists as Manager deems appropriate
to defend and/or settle any such claim or cause of action, with the consent of
Lessee. All liabilities, costs, and expenses, including attorneys' fees and
disbursements, incurred in defending and/or settling any such claim or legal
action which are not covered by insurance and which were not caused by the
gross negligence or willful misconduct of Manager, its officers, directors,
employees, or agents shall be paid by Lessee.
SECTION 11.09. WAIVERS. No failure or delay by Manager or Lessee to
insist upon the strict performance of any covenant, agreement, term or
condition of this Agreement, or to exercise
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any right or remedy consequent upon the breach thereof, shall constitute a
waiver of any such breach or any subsequent breach of such covenant, agreement,
term or condition. No covenant, agreement, term, or condition of this
Agreement and no breach thereof shall be waived, altered or modified except by
written instrument. No waiver of any breach shall affect or alter this
Agreement, but each and every covenant, agreement, term and condition of this
Agreement shall continue in full force and effect with respect to any other
then existing or subsequent breach thereof.
SECTION 11.10. CHANGES. Any change to or modification of this
Agreement including, without limitation, any change in the application of this
Agreement to the Hotel, must be evidenced by a written document signed by both
parties hereto.
SECTION 11.11. CAPTIONS. The captions for each Article and Section
are intended for convenience only.
SECTION 11.12. SEVERABILITY. If any of the terms and provisions
hereof shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any of the other terms or provisions hereof.
If, however, any material part of a party's rights under this Agreement shall
be declared invalid or unenforceable (specifically including Manager's right to
receive its Management Fees), the party whose rights have been declared invalid
or unenforceable shall have the option to terminate this Agreement upon thirty
(30) days written notice to the other party, without liability on the part of
the terminating party.
SECTION 11.13. INTEREST. Any amount payable to Manager or Lessee by
the other which has not been paid when due shall accrue interest at the lesser
of: (a) the highest legal limit in the state in which the Hotel is located or
(b) two percentage points (2%) over the published base rate of interest charged
by Citibank, N.A., New York, New York, to borrowers on ninety (90) day
unsecured commercial loans, as the same may be changed from time to time.
SECTION 11.14. REIMBURSEMENT. The performance by Manager of its
responsibilities under this Agreement are conditioned upon Lessee providing
sufficient funds consistent with the Operating Budget to Manager on a timely
basis to enable Manager to perform its obligations hereunder. Nevertheless,
Manager shall be entitled, at its option, to advance funds or contribute
property, on behalf of the Lessee, to satisfy obligations of Lessee in
connection with the Hotel and this Agreement. Manager shall keep appropriate
records to document all reimbursable expenses paid by Manager, which records
shall be made available for inspection by Lessee or its agents upon request.
Lessee agrees to reimburse Manager with interest upon demand for money paid or
property contributed by Manager to satisfy obligations of Lessee in
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connection with the Hotel and this Agreement. Interest shall be calculated at
the rate set forth in Section 11.13 from the date Lessee was obligated to remit
the funds or contribute the property for the satisfaction of such obligation to
the date reimbursement is made.
SECTION 11.15. TRAVEL AND OUT-OF-POCKET EXPENSES. Manager shall be
reimbursed for all travel and out-of-pocket expenses of Manager's employees
reasonably incurred in the performance of this Agreement, but not to exceed
amounts included therefor in the Operating Budget. Manager shall have sole
discretion, which shall not be unreasonably exercised, to determine the
necessity for such travel or other expenses.
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SECTION 11.16. THIRD PARTY BENEFICIARY. This Agreement is
exclusively for the benefit of the parties hereto and it may not be enforced by
any party other than the parties to this Agreement and shall not give rise to
liability to any third party other than the authorized successors and assigns
of the parties hereto, specifically including any mortgagee to which the rights
of the Lessee have been assigned.
SECTION 11.17. BROKERAGE. Manager and Lessee represent and warrant
to each other that neither has sought the services of a broker, finder or agent
in this transaction, and neither has employed, nor authorized, any other person
to act in such capacity. Manager and Lessee each hereby agrees to indemnify
and hold the other harmless from and against any and all claims, loss,
liability, damage or expenses (including reasonable attorneys' fees) suffered
or incurred by the other party as a result of a claim brought by a person or
entity engaged or claiming to be engaged as a finder, broker or agent by the
indemnifying party.
SECTION 11.18. SURVIVAL OF COVENANTS. Any covenant, term or
provision of this Agreement which, in order to be effective, must survive the
termination of this Agreement, shall survive any such termination.
SECTION 11.19. ESTOPPEL CERTIFICATE. Manager and Lessee agree to
furnish to the other party, from time to time upon request, an estoppel
certificate in such reasonable form as the requesting party may request stating
whether there have been any defaults under this Agreement known to the party
furnishing the estoppel certificate and such other information relating to the
Hotel as may be reasonably requested.
SECTION 11.20. OTHER AGREEMENTS. Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall
be deemed to modify any other agreement between Lessee and Manager with respect
to the Hotel or any other property.
SECTION 11.21. PERIODS OF TIME. Whenever any determination is to be
made or action is to be taken on a date specified in this Agreement, if such
date shall fall on a Saturday, Sunday or legal holiday under the laws of the
state in which the Hotel is located, then in such event said date shall be
extended to the next day is not a Saturday, Sunday or legal holiday.
SECTION 11.22. PREPARATION OF AGREEMENT. This Agreement shall not be
construed more strongly against either party regardless of who is responsible
for its preparation.
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<PAGE> 63
SECTION 11.23. EXHIBITS. All exhibits attached hereto are
incorporated herein by reference and made a part hereof as if fully rewritten
or reproduced herein.
SECTION 11.24. ATTORNEY'S FEES AND OTHER COSTS. The parties to this
Agreement shall bear their own attorneys' fees in relation to negotiating and
drafting this Agreement. Should Lessee or Manager engage in litigation to
enforce their respective rights pursuant to this Agreement, the prevailing
party shall have the right to indemnity by the non- prevailing party for an
amount equal to the prevailing party's reasonable attorneys' fees, court costs
and expenses arising therefrom.
SECTION 11.25. COUNTERPARTS. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an original.
SECTION 11.27. CAPITALIZED TERMS. Capitalized terms used but not
defined herein shall be as defined in the Exhibits hereto, which shall be
incorporated by reference herein and deemed a part hereof as if fully set forth
herein.
[Signature Page to Follow]
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<PAGE> 64
The parties have respectively caused this Agreement to be executed as
of the respective dates shown below.
<TABLE>
<S> <C>
LESSEE:
------
WINSTON HOSPITALITY, INC.
By: /s/
- - ---------------------------- ------------------------------------------
Witness John B. Harris, Jr.
Its: President
MANAGER:
-------
PROMUS HOTELS, INC.
By:
- - -------------------------- ------------------------------------------
Witness
Its:
-----------------------------------------
OWNER:
-----
WINN LIMITED PARTNERSHIP, which is a signatory
hereto only to evidence its agreement to the
obligations set forth in Sections 4.01(iii)
and (v) and as a third party beneficiary to
Sections 3.01(v) - (vii), (xii), (xiv) -
(xvi), (xx), 9.06 and Exhibit D
By: Winston Hotels, Inc., its general partner
By: /s/
- - --------------------------- -------------------------------------------
Witness Robert W. Winston, III
Its: President
</TABLE>
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<PAGE> 65
EXHIBIT "A"
LICENSE AGREEMENT
<PAGE> 66
EXHIBIT "B"
DEAL SPECIFIC TERMS
DEFINITIONS: The following terms which are used but not defined in the
Agreement or otherwise in the exhibits shall have the respective meanings
specified below:
"Purchase Agreement" shall mean the purchase agreement dated
______________ between Owner and Promus.
"Percentage Lease" shall mean the percentage lease agreement dated
___________, 1996 between Lessee and Owner relating to the Hotel,
which is attached hereto as Exhibit B-1.
TERM: The term of this Management Agreement shall equal the term of the
Percentage Lease.
[INITIAL DEPOSIT IN PRE-OPENING BANK ACCOUNT(S):]
INITIAL MINIMUM BALANCE FOR THE BANK ACCOUNT(S):
INITIAL REPRESENTATIVE:
DISBURSEMENT PRIORITY SCHEDULE:
Each fiscal month Manager, on behalf of Lessee, shall disburse funds
from the Bank Account(s) in the following order of priority and to the extent
available:
(a) the Management Fee to the extent not subordinated to
payments required under the Percentage Lease;
(b) all fees, assessments and charges due and payable under the
Commitment Agreement and License Agreement when issued;
(c) all reimbursable expenses due Manager;
(d) all other Hotel operating costs, as such costs and expenses
are defined under the accounting practices of Manager in
conformity with generally accepted accounting practices
consistently applied, specifically including, but not
limited to, (i) the cost of operating equipment and
operating supplies, wages, salaries and employee fringe
benefits, advertising and promotional expenses, the cost of
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<PAGE> 67
personnel training programs, utility and energy costs,
operating licenses and permits, grounds and landscaping
maintenance costs and equipment rentals approved by Manager
as an operating cost; (ii) all expenditures made for
maintenance and repairs to keep the Hotel in good condition
and repair, specifically excluding expenditures for Capital
Replacements; (iii) premiums and charges on the insurance
coverages specified in Exhibit "D" incurred after the
[OPENING DATE/EFFECTIVE DATE]; and (iv) any lease payments
(other than payments under the Percentage Lease). There
shall be excluded from the operating costs of the Hotel the
following, which shall be ownership costs of the Hotel:
(i) depreciation of the Hotel, furnishings, fixtures and
equipment; (ii) rental pursuant to a ground lease, if any,
or any other lease payments; (iii) debt service (interest
and principal) on any mortgage(s) encumbering the Hotel;
(iv) property taxes and assessments; [(V) AMORTIZATION OF
PRE-OPENING EXPENSES;] (vi) expenditures for Capital
Replacements; (vii) audit, legal and other professional or
special fees; (viii) equipment rentals approved by Manager
as an ownership cost; (ix) administrative and general
expenses and disbursements of Lessee, including
compensation of employees of Lessee; (x) Federal, State and
local Franchise and Income Taxes; (xi) amortization of bond
discounts and mortgage expenses; and (xii) such other costs
or expenses which are normally treated as ownership costs
under the accounting practices of Manager in conformity
with generally accepted accounting practices consistently
applied;
(e) Amounts payable or accrued under the Percentage
Lease; and
(f) the balance of the Management Fee.
After the disbursements set forth above, any excess funds remaining in
the Bank Account(s) over the Minimum Balance shall be distributed to Lessee.
If after making the disbursements set forth above, there shall be a deficiency
in the Minimum Balance, Lessee shall immediately provide such funds as may be
required to maintain the Minimum Balance in the Bank Account(s).
<TABLE>
<S> <C> <C>
NOTICES: LESSEE: MANAGER:
Winston Hospitality, Promus Hotels, Inc.
Inc. 755 Crossover Lane
2209 Century Drive Memphis, TN 38117
Suite __ Fax: 901/374-5050
</TABLE>
B-2
<PAGE> 68
<TABLE>
<S> <C>
Fax: (919) 571-7330 Attn: Corporate Secretary
Attn: President
OWNER:
WINN Limited Partnership
c/o Winston Hotels, Inc.
2209 Century Drive
Suite 300
Fax: (919) 571-7330
Attn: President
</TABLE>
B-3
<PAGE> 69
EXHIBIT "C"
MANAGEMENT FEES
The "Management Fee" shall mean and refer to a fee equal to the
greater of (i) 1% of the Adjusted Gross Revenues (as hereinafter defined) from
the Hotel or (ii) (A) 50% of the Lessee's "Gross Operating Profit" ("GOP") for
the Hotel plus, (B) if the Lessee's GOP exceeds 5% of the gross revenues of the
Hotel, (x) 100% of such excess up to an amount equal to 1% of the gross
revenues of the Hotel and (y) 50% of such excess thereafter. The Lessee's GOP
means the Gross Revenues of the Hotel for a period, less all operating expenses
borne by the Lessee (which does not include real property taxes and casualty
insurance premiums, which are paid by Owner or Winston Hotels, Inc., a North
Carolina corporation and the general partner of Owner ("WHI"), and less any
amounts payable by the Lessee for the period under the Percentage Lease. The
Management Fee will be payable monthly, in arrears, within 30 days after the
end of the month.
If WHI, Owner and their affiliates have not spent at least
$50 million to develop hotels with franchises offered by Manager in the four
year period ending April __, 2000 (the "Development Period"), the Management
Fee for the Hotel shall adjust upward, beginning on that date but not
retroactively for any previous period, by substituting "60%" for "50%" in the
fee calculation described above. The amount spent shall include amounts
budgeted to be spent completing hotels on which development has commenced in
the Development Period. The Management fee for the Hotel payable for any
period in excess of 1% of the Adjusted Gross Revenues of the Hotel for the
period shall be subordinated to the payment of rent for such period under the
Percentage Lease.
The term "Gross Revenues" shall be defined as all revenues and income
of any nature derived directly or indirectly from the Hotel or from the use or
operation thereof, whether on or off the site, including total room sales, food
and beverage sales, if any, laundry, telephone, telegraph and telex revenues,
other income, rental or other payments from lessees, sublessees, licensees and
concessionaires (but not the gross receipts of such lessees, sublessees,
licensees or concessionaires) and the proceeds of business interruption, use,
occupancy or similar insurance.
The term "Adjusted Gross Revenues" shall be defined as Gross Revenues
less the following revenues actually received by the Hotel and included in
Gross Revenues: (i) any gratuities or service charges added to a customer's
bill; (ii) any credits or refunds made to customers, guests or patrons; (iii)
any sums and credits received by Lessee for lost or damaged merchandise; (iv)
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<PAGE> 70
any sales taxes, excise taxes, gross receipt taxes, admission taxes,
entertainment taxes, tourist taxes or charges; (v) any proceeds from the sale
or other disposition of the Hotel, furnishings and equipment or other capital
assets; (vi) any fire and extended coverage insurance proceeds; (vii) any
condemnation awards; (viii) any proceeds of financing or refinancing of the
Hotel; (ix) commissions, (x) refunds, (xi) vendor payments and splits, and
(xii) any interest on the Bank Account(s).
C-2
<PAGE> 71
EXHIBIT "D"
INSURANCE
In accordance with Section 3.01(xvi), Manager shall, on behalf of
Lessee and at Lessee's expense, procure the insurance coverages hereinafter set
forth and ensure that they are in full force and effect at the time the Term
commences and that they remain in full force and effect throughout the Term of
this Agreement. All cost(s) and expense(s) incurred by Manager in procuring
the following insurance coverages shall be [PRE-OPENING EXPENSES IF INCURRED
PRIOR TO THE OPENING DATE AND] operating costs [IF INCURRED AFTER THE OPENING
DATE] and shall be paid from [THE PRE-OPENING BANK ACCOUNT(S) AND] the Bank
Account(s) [RESPECTIVELY]:
<TABLE>
<CAPTION>
Coverages: Amounts Of Insurance:
- - --------- --------------------
<S> <C>
Comprehensive General Liability $10,000,000
------------------------------- per location
Including -
Premises - Operations
Products/Completed Operations
Contractual
Personal Injury
Liquor Liability/Dram Shop
(if applicable)
Elevators and Escalators
Automobile Liability $10,000,000
--------------------
Owned Vehicles
Non-Owned Vehicles
Uninsured Motorist where
Required by Statute
Automobile Physical Damage (Optional)
--------------------------
Comprehensive (To Value
Collision if insured)
Workers' Compensation Statutory
---------------------
Employer's Liability $1,000,000
--------------------
Fidelity (Employee Dishonesty) As required
--------
Money and Securities As required
--------------------
</TABLE>
D-1
<PAGE> 72
<TABLE>
<S> <C>
Protective Liability $5,000,000
--------------------
All risks from construction
and renovation projects costing
more than $250,000 occurring
after the Effective Date
Builders Risk Completed value of the Hotel
-------------
All risk for term of Hotel
construction and renovation
Subsequent to the Effective Date.
</TABLE>
Business Interruption
Blanket Coverage for the perils insured against under Real and
Personal Property in this Exhibit "D." This coverage shall
specifically cover Manager's loss of Management Fees. The business
interruption insurance shall be for a twelve (12) month indemnity
period. Calculated yearly based on estimated Hotel revenues.
All insurance coverages provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to
do business in the state in which the Hotel is located; and (ii) that are of
good reputation and of sound and adequate financial responsibility, having a
Bests Rating of B+ VI or better, or a comparable rating if Bests ceases to
publish its ratings or materially changes its rating standards or procedures.
Manager shall deliver to Owner and Lessee duly executed certificates
of insurance with respect to all of the policies of insurance procured,
including existing, additional and renewal policies.
Each policy of insurance maintained in accordance with this Exhibit
"D," to the extent obtainable, shall specify that such policies shall not be
canceled or materially changed without at least thirty (30) days prior written
notice to Owner, Lessee and Manager.
Except as otherwise provided in the Agreement, Manager and Lessee each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
of
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whether any such claim or demand may arise because of the fault or negligence
of the other party or its subsidiaries, affiliates, officers, employees,
directors, agents or independent contractors. Each policy of insurance
maintained in accordance with this Exhibit "D" shall insure against the
negligent acts of a party hereto and shall contain a specific waiver of
subrogation reflecting the above.
All policies of insurance provided for under this Exhibit "D" shall be
carried in the name of the Manager. Lessee's interests, Owner's interests, and
the interests of any other applicable party will be included in the coverage by
an additional insured endorsement.
All such policies of insurance shall be written on an "occurrence"
basis to the extent obtainable in the insurance market.
Either Manager or Lessee, by notice to the other, shall have the right
to require that the minimum amount of insurance to be maintained with respect
to the Hotel under this Exhibit "D" be increased to make such insurance
comparable with prudent industry standards and to reflect increases in
liability exposures, taking into account the size and location of the Hotel.
[LESSEE AND OWNER HEREBY AUTHORIZE MANAGER TO UTILIZE THE SERVICES OF
AND/OR PLACE THE INSURANCE SET FORTH IN THIS EXHIBIT "D" WITH (I) ANY
SUBSIDIARY OR AFFILIATED COMPANY OF PROMUS HOTEL CORPORATION OR ITS SUCCESSOR
CORPORATION IN THE INSURANCE BUSINESS AS MANAGER DEEMS APPROPRIATE, OR (II) A
THIRD PARTY INSURANCE CARRIER MEETING THE SPECIFICATIONS SET FORTH ABOVE.]
D-3
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RI-RE\t:\pjm\winston\manage.10
May 10, 1996
D-4
<PAGE> 1
EXHIBIT 10.4
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the
Date of this Agreement defined hereinafter, between WINN Limited Partnership, a
North Carolina limited partnership, or its assigns, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser") and
Promus Hotels, Inc., a Delaware corporation ("Seller").
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PROPERTY AND BUSINESS
On the terms and subject to all of the conditions set forth in this
Agreement, the Purchaser agrees to purchase and the Seller agrees to sell, for
the purchase price set forth herein, all of the following property
(collectively the "Premises"):
(a) the real estate described on Schedule 1 attached hereto and
made a part hereof by this reference, together with all tenements,
appurtenances, easements, agreements, development rights, air rights,
rights-of-way, strips, gores, rights in adjacent avenues, streets and alleys,
rights and uses appurtenant thereto (collectively the "Real Property");
(b) all improvements now or hereafter located on the Real Property,
including but not limited to that certain three story 92 suite (including 6 two
bedroom suites) Homewood Suites hotel located on Bay Area Boulevard, Houston,
Texas and all fixtures which are affixed to the Real Property or Improvements
(the "Improvements");
(c) all furniture, fixtures (not part of the Real Property and
Improvements or affixed thereto), equipment, machinery, furnishings, carpets,
drapes, blinds or mini-blinds, service and maintenance equipment, linens (not
less than two and one-half (2 1/2) turns of linens shall be included), tools,
signs, landscaping equipment, supplies, pool equipment, television systems,
intercom equipment and systems, and replacement parts (the "Equipment");
(d) moneys advanced for future reservations ("Prepaid Items");
(e) all contracts, agreements, licenses, contract rights, rights
to use and other similar rights used in connection with the Real Property and
Improvements and set forth on Schedule 2 attached hereto and made a part hereof
by this reference and which the Purchaser elects to purchase and assume as
provided in Article III, Paragraph A hereof, specifically excluding trademarks
and service marks owned by Seller (the "Contracts");
<PAGE> 2
(f) all leases and rights to use the Improvements or all or any
part thereof in third parties as more particularly identified on Schedule 3
attached hereto and made a part hereof by this reference and which the
Purchaser elects to purchase and assume as provided in Article III, Paragraph A
hereof (the "Leases");
(g) all transferable permits, licenses, government licenses,
certificates of occupancy and approvals necessary to operate the Real Property,
Improvements, Equipment, Contracts, Leases, Intangible Rights and the other
property and rights transferred under this Agreement (the "Permits");
(h) all inventory, supplies and other materials used in connection
with the Real Property and Improvements and the hotel business operated thereon
(excluding gift shop items owned by third parties) (the "Inventory");
(i) all plans, specifications and "as-built" drawings and surveys
relating to the Real Property and Improvements in the possession of Seller or
to which Seller has access, all books and records relating to the operation or
management of the Real Property and Improvements and all warranties and
guaranties in favor of or delivered to Seller pertaining to the Premises; and
(j) all intangible property, guest ledgers, customer and mailing
lists, catalogues and brochures, telephone numbers and similar property used in
connection with the operation of the Real Property, Improvements and the
business known as the Homewood Suites located on Bay Area Boulevard, Houston,
Texas (the "Hotel"), and any telephone numbers assigned thereto (the
"Intangible Rights"). Notwithstanding the foregoing, Purchaser shall not be
entitled to the foregoing information in connection with Seller's national
accounts.
II. TERMS OF PURCHASE AND SALE
The purchase price for the Premises shall be Six Million Nine Hundred
Fifteen Thousand Four Hundred Ninety Seven and N0/100 Dollars ($6,915,497.00),
adjusted as provided in Article IX hereof, (the "Purchase Price"), payable by
Purchaser to Seller as follows:
A. The sum of One Hundred Fifty Thousand and N0/100 Dollars
($150,000.00) (the "Deposit") within five (5) days after the Date of this
Agreement by check subject to collection, payable to The Title Company of North
Carolina, Inc., as agent for First American Title Insurance Company, as Escrow
Agent (the "Escrow Agent"). The Escrow Agent shall maintain the Deposit in an
interest bearing account subject to the provisions of Article XIII. The Escrow
Agent shall not disburse the Deposit except in accordance with the terms of
this Agreement. Upon the satisfaction of all of
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the conditions contained in this Agreement, on the Closing Date (as hereinafter
defined), the Deposit shall be paid to Seller and reduce the portion of the
Purchase Price payable at Closing pursuant to Article II, Paragraph B hereof.
In the event that this transaction is not consummated for any reason, the
Deposit shall be paid as provided in Article XIII of this Agreement. Purchaser
shall be entitled to payment of or a credit for any interest earned on the
Deposit unless the Deposit is forfeited in which event interest shall be paid
to Seller.
B. The balance of the Purchase Price, plus or minus any closing
adjustments, by certified or bank funds or by wire transfer on the Closing Date
(as hereinafter defined) to an account designated in writing by Seller to
Purchaser at least five (5) days prior to Closing.
C. Upon the Closing, the Seller shall deliver to the
Purchaser the Premises, including, but not limited to, the Real Property,
Improvements, Equipment and Inventory, free and clear of all liens and
encumbrances of whatever type or description other than the Permitted
Exceptions as defined in Article IV, Paragraph A hereof. In accordance with
the foregoing, the outstanding balance of all secured indebtedness encumbering
the Premises, including, but not limited to, the Real Property, Improvements,
Equipment and Inventory shall be paid in full at or prior to Closing by Seller.
D. In addition to and exclusive of the Purchase Price,
Seller shall install a lighted Homewood Suites sign to the front of the
Improvements, at such location as is mutually acceptable to Purchaser and
Seller. The actual costs of such sign and the installation thereof to be
reimbursed by Purchaser to Seller at Closing, which reimbursement shall be in
addition to the payment of the Purchase Price. Purchaser and Seller
acknowledge that the estimated costs for such sign and the installation thereof
is approximately $10,000.00.
III. FEASIBILITY PERIOD; OTHER REQUIREMENTS AND CONTINGENCIES
A. This Agreement is contingent upon Purchaser's approval of the
Premises, including but not limited to, approval of the Inspection Items (as
hereinafter defined). The Inspection Items have been submitted to Purchaser on
or prior to the Date of this Agreement, or as specifically provided herein, are
available to Purchaser for inspection at the Improvements. Purchaser shall
have the period of time from the Date of this Agreement until and through June
3, 1996 to review the Inspection Items and to otherwise inspect the Premises
and its or their condition (such period is hereinafter referred to as the
"Feasibility Period"). On or prior to the expiration of the Feasibility
Period, the Purchaser shall notify the Seller whether or not the Purchaser
elects to purchase the Premises, which election shall be made in the sole,
absolute and unreviewable discretion of the Purchaser. On or prior to the
expiration of the
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Feasibility Period, the Purchaser shall notify the Seller which of the
Contracts and Leases the Purchaser shall accept and assume if Purchaser does
not terminate this Agreement prior to the expiration of the Feasibility Period
and the Seller shall retain and not assign to Purchaser those Contracts and
Leases not acceptable to Purchaser. In the event Purchaser fails to notify
Seller, on or prior to the expiration of the Feasibility Period as to which of
the Contracts and Leases the Purchaser shall accept and assume, or whether or
not the Purchaser elects to proceed with the purchase, all items shall be
deemed approved. If Purchaser notifies Seller that it elects not to proceed
with this transaction, on or prior to the expiration of the Feasibility Period,
then this Agreement shall terminate and shall be null, void and without further
force or effect, the Deposit (together with all interest) shall be promptly
refunded to Purchaser by Escrow Agent and neither party shall have any further
liability to the other, except for the indemnity by Purchaser set forth in
Article III, Paragraph E, which shall survive such termination of this
Agreement. The Inspection Items shall remain the property of Seller until
Closing, after which Purchaser shall be entitled to retain the Inspection
Items, however, in the event Purchaser terminates this Agreement pursuant to
the provisions set forth in this Agreement, Purchaser shall destroy all copies
of the Inspection Items in Purchaser's possession and return all originals
thereof to Seller. Further, prior to Closing, Purchaser shall be prohibited
from sharing any information in the Inspection Items with any third party other
than Purchaser's Lender, Purchaser's accountants, attorneys or other
professionals employed or retained by Purchaser to assist Purchaser in
Purchaser's review and analysis of the Inspection Items; provided, however,
nothing herein shall prevent or restrict Purchaser relative to any disclosures
which Purchaser may be required to make pursuant to any rules and regulations
of the Securities and Exchange Commission applicable to Purchaser. The
conditions enumerated in this Article III are for Purchaser's benefit only and
the non-occurrence of a state of facts sufficient to satisfy any of such
conditions may not be used or pleaded by Seller as a defense to the
enforceability of this Agreement.
For purposes of this Agreement, the term "Inspection Items" shall
mean:
(a) any existing engineer's reports, architectural plans,
appraisals, title reports, title insurance commitment, title
insurance policies, environmental reports, surveys or other
reviews, evaluations or studies of or with respect to the
Premises in Seller's possession or to which Seller has access;
(b) the Leases, Contracts and Permits;
(c) the utility bills for the period commencing September 22,
1995;
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<PAGE> 5
(d) Seller's market and feasibility report for the Hotel and 1996
budget;
(e) guest registration records (to be available for inspection at
the Improvements);
(f) employee records, if any (to be available for inspection at
the Improvements); and,
(g) financial statements (the "Financial Statements") for the
Premises prepared and warranted by the Seller (including
balance sheets, income statements, operating statements and
statements of changes in financial position) for the period
commencing September 22, 1995 and for the period from the end
of 1995, including year to date for calendar year 1996, ended
thirty (30) days prior to the Closing Date, together with
monthly Financial Statements for the same periods. An
itemized breakdown of room sales per month, occupancy and ADR
for the period commencing September 22, 1995. The books and
records of the operations of the Premises necessary to confirm
the accuracy of the Financial Statements shall be made
available to Purchaser or its agents at the Premises.
B. Purchaser and Seller have entered into that certain Stock
Purchase Agreement dated April __, 1996 ("the Stock Purchase Agreement") and in
accordance therewith, on the Closing Date defined hereinafter, Seller shall
purchase common stock directly from Winston Hotels, Inc., the general partner
of Purchaser, in the amount of Three Million and N0/100 Dollars ($3,000,000.00)
upon the terms and conditions expressly set forth in the Stock Purchase
Agreement relative thereto. The price of such common stock shall be the
offering price in the Offering defined hereinafter.
C. Simultaneous with Closing defined hereinafter, Purchaser
shall enter into a percentage lease ("the Percentage Lease") with Winston
Hospitality, Inc., a North Carolina corporation ("the Lessee"), relative to the
Hotel, in substantially the form of lease executed to date by and between
Purchaser and the Lessee with respect to Purchaser's currently owned hotels and
with economic terms which, on a proforma basis, using Seller's budget for the
Hotel, will produce a gross operating profit to Lessee for the Hotel equal to
at least five percent (5.0%) of the gross revenues of the Hotel; provided,
however, it is expressly acknowledged and understood by Purchaser that Seller's
budget is prepared on a proforma basis and Seller makes no warranty with
respect thereto. Simultaneous with the execution of the Percentage Lease, the
Lessee and Seller shall execute a management agreement ("the Management
Agreement") pursuant to which Seller shall manage the Hotel. The form of
Management Agreement agreed to between the Lessee and Seller
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to be executed at Closing is attached hereto as Schedule 4 and incorporated
herein by this reference. As used herein, "gross operating profit" shall mean
the gross revenues of the Hotel for a period (gross revenues shall mean gross
revenues net of customary adjustments including (i) interest, (ii) excise, room
and sales and use taxes, (iii) insurance and condemnation proceeds, (iv)
commissions, (v) refunds and (vi) vendor payments and splits (i.e., from video
rentals, vending machines, laundry, etc.), less all operating expenses borne by
the Lessee (which does not include real property taxes and casualty insurance
premiums, which are paid by Purchaser), and less any amounts payable by the
Lessee for the period under the Percentage Lease.
D. Simultaneous with Closing defined hereinafter, Seller shall
cause a Homewood Suites franchise agreement ("the Franchise Agreement") to be
executed for the Hotel and a Homewood Suites franchise license to be issued to
the Lessee for the Hotel for a term at least equal to the greater of (i) twenty
(20) years or (ii) the term of the Percentage Lease, each to be in the form
then being executed and issued for Homewood Suites hotels as of the Closing
Date, including the then current rate and fee schedules. Seller shall approve
the Lessee as an operator of the Hotel in the Franchise Agreement.
E. Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close this
transaction shall be conditioned upon Purchaser obtaining the approval of this
Agreement and the transaction contemplated herein from the board of directors
of the general partner of Purchaser, which approval shall be obtained or denied
on or before March 31, 1996.
Seller and Purchaser shall cooperate and take all actions reasonably
necessary, in a diligent and expeditious manner, to effectuate the inspections,
transfers and other reviews required by this Article III during the Feasibility
Period. The Purchaser and its representatives and agents shall, upon notice to
the on site manager of the Hotel of not less than twenty four (24) hours in
advance thereof, be provided with access to the Premises at all reasonable
times during the Feasibility Period and thereafter, provided Purchaser does not
terminate this Agreement prior to the expiration of the Feasibility Period, up
to Closing, in order to inspect the Premises, including but not limited to,
taking soil samples and test borings, and conducting environmental studies,
physical surveys, engineering studies and other such inspections and reviews
that the Purchaser shall deem reasonably necessary to determine the condition
and financial status of the Premises. Purchaser shall conduct all of the
foregoing in such a manner so as not to disturb guests at the Hotel or disrupt
the operations thereof and shall immediately restore any damage or disturbance
to the Premises caused by any of the foregoing to the condition in which same
existed immediately prior to such damage or disturbance.
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Purchaser does hereby covenant and agree to indemnify, defend and hold Seller
harmless from and against any and all loss, damage and liability which may
arise as a result of Purchaser and Purchaser's agents and employees taking
advantage of the foregoing access to the Premises prior to Closing. The
indemnity by Purchaser set forth herein shall survive Closing and any
termination of this Agreement.
IV. TITLE; TITLE POLICY; SURVEY
A. Within ten (10) days after the Date of this Agreement, Seller
shall furnish to Purchaser a copy of Seller's existing and most current owner's
title insurance policy issued to Seller relative to the Premises. Thereafter,
during the Feasibility Period Purchaser shall procure, at Purchaser's cost, a
preliminary title report and title insurance binder (the "Title Commitment")
from First American Title Insurance Company (the "Title Company") pursuant to
which the Title Company shall commit to issue a current Texas Form T-1 Owner's
Policy of Title Insurance in the amount of the Purchase Price (the "Title
Policy") insuring that the Purchaser shall receive at closing, good and
indefeasible fee simple title to the Real Property, free and clear of ALL
liens, exceptions, encumbrances or defects other than the matters expressly
approved in writing by Purchaser as permitted exceptions to title as set forth
hereinafter (the "Permitted Exceptions").
Prior to the expiration of the Feasibility Period, the Purchaser shall
notify (the "Title Notice") the Seller as to which of the liens, defects,
encumbrances or exceptions set forth in the Title Commitment are objectionable
to Purchaser ("the Title Defects") and which of such matters are acceptable to
Purchaser as the Permitted Exceptions. Within ten (10) days after receipt by
Seller of the Title Notice, the Seller shall use reasonable best efforts to
attempt to cure the Title Defects to the reasonable satisfaction of the
Purchaser; provided, however, Seller shall not be obligated to expend any of
Seller's funds to cure any Title Defects, except Title Defects in the form of
money judgments, mortgages and statutory liens which Seller shall be obligated
to remove of record at or prior to Closing. In the event the Seller is unable
to cure the Title Defects to the reasonable satisfaction of the Purchaser
(except for those Title Defects that Seller is obligated to remove of record in
accordance with the immediately preceding sentence) within such ten (10) day
period or the Purchaser does not agree to waive such Title Defects, then this
Agreement shall terminate and shall be null, void and without further force or
effect, the Deposit (together with all interest) shall be returned to Purchaser
and neither party shall have any further liability to the other. Seller
represents that to the best of Seller's knowledge, there are no liens or other
secured indebtedness encumbering the Premises.
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B. Within ten (10) days after the Date of this Agreement, Seller
shall furnish to Purchaser a copy of Seller's most current survey of the Real
Property and the Improvements prepared by Wade Pike, Professional Land
Surveyor, RPLS No. 4757, dated January 10, 1993 ("the Existing Survey"). The
Existing Survey shall be in form and substance satisfactory to the Purchaser,
the Title Company and the Lender. Purchaser shall, at Purchaser's election,
cause the Existing Survey to be updated, obtain a new survey or, if acceptable
to the Title Company and Lender, obtain a certification from Seller that there
have been no improvements, structures or other changes subsequent to the date
of the Existing Survey which would be revealed by a more current survey
thereof, whereby the elected method shall be certified to the Purchaser, Title
Company and Lender (the form of certification to be reasonably satisfactory to
the Title Company, Purchaser and Lender) ("the Current Survey"). The Current
Survey shall show, among other things, that all buildings are within lot and
building lines, the location of such lines, the dimensions and total area of
the Real Property and Improvements, the location and number of parking spaces,
ingress and egress to adjoining streets, all benefiting and burdening
easements, improvements, appurtenances, rights of way and utilities whether
above or below ground, all encroachments from or into the Premises, all
structures and improvements on the Real Property and all easements, rights of
way and other restrictions of record properly identified with recording
information and certifying that the Premises are not within a flood plain or
other flood hazard area. The Current Survey shall be in accordance with the
standards of a Category 1-A, Condition II survey as set forth in the Manual of
Practice for Land Surveying in the State of Texas, 1991 Revised Eighth Edition,
prepared by the Texas Society of Professional Surveyors. The Current Survey
and certification shall be sufficient to remove the survey exception from the
Title Policy without indemnity by Purchaser. Prior to the expiration of the
Feasibility Period, the Purchaser shall notify the Seller of any objections of
Purchaser or Lender to the Current Survey ("Survey Defects"). Survey Defects
shall be deemed to be Title Defects for purposes of this Agreement and Seller
shall cure such Survey Defects according to the same procedure as for Title
Defects.
C. The Purchaser and Seller shall each be responsible for the
payment of its own transaction costs, including counsel fees. Purchaser shall
be responsible for the costs incurred with the physical inspection and any
survey of the Real Property and Improvements which Purchaser causes to be
conducted and prepared, including any environmental and engineering studies
other than those delivered by Seller to Purchaser in accordance with Article
III, Paragraph A. At Closing, Purchaser shall pay all premiums for the Title
Policy. Any and all transfer taxes, real estate excise taxes and sales taxes
payable in connection with the transfer of the Premises, or any portion
thereof, and the Personalty (as hereinafter defined) shall be paid by Seller.
Unless otherwise stated in this Agreement, the Purchaser and Seller shall pay
all costs in
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connection with the Closing of this transaction as are customary in Houston,
Texas.
V. CLOSING
A. The closing of this transaction shall occur within ten (10)
days following the latter to occur of (i) conclusion of a secondary public
offering of Winston Hotels, Inc.'s common stock ("the Offering"), or, (ii) the
expiration of the Feasibility Period, but in no event later than July 1, 1996,
and shall be deemed to occur at the offices of Brown & Bunch, 4900 Falls of
Neuse Road, Suite 210, Raleigh, North Carolina 27609, without the requirement
that Purchaser and Seller be physically present thereat, or such other date or
place as shall be mutually acceptable to Purchaser and Seller (the "Closing
Date"). The closing of the transaction contemplated by this Agreement shall be
deemed effective as of 12:01 a.m. on the Closing Date ("Closing"). If the date
of Closing falls on a Saturday, Sunday or banking holiday, the Closing shall
take place on the next business day thereafter.
B. At the Closing, the Seller, shall deliver to Purchaser and
perform the following:
1. A Special Warranty Deed conveying good, and indefeasible fee
simple title to the Real Property free and clear of all defects, exceptions,
liens or encumbrances, except for the Permitted Exceptions.
2. Seller shall pay and discharge any special assessment which
on or before the date of Closing, (a) has been levied, imposed, or confirmed
against the Premises, (b) affects or is a lien upon the Premises or (c)
although not yet a lien upon the Premises, is attributable to improvements
which benefit or will benefit the Premises. If any of the foregoing
assessments are for improvements which have been fully constructed as of
Closing and may be paid in installments, all installments shall be deemed
payable as of the day prior to the Closing and shall be discharged of record by
Seller. If any of the foregoing assessments are for improvements which have
not been fully constructed as of Closing and may be paid in installments,
Seller shall be responsible for and shall pay all such installments due through
the Closing Date and Purchaser shall be responsible for the payment of all such
installments accruing subsequent to the Closing Date. If, at the Closing, any
amount which Seller is required to pay with respect to the foregoing has not
been determined, Seller agrees to pay such amount as can be reasonably
estimated at the Closing and the final amount shall be adjusted within fifteen
(15) days after Purchaser gives Seller notice that same has been determined.
This provision shall survive the Closing and delivery of the deed.
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3. A Bill of Sale conveying the Equipment, Inventory, Real Property
not conveyed by other instruments provided for herein, and other personal
property and intangible property included in the Premises ("Personalty"), free
and clear of any lien or encumbrance, other than the Permitted Exceptions, and
containing a general warranty of title to the Equipment, Inventory and
Personalty and an inventory of all Equipment, Inventory and Personalty.
4. An assignment of Seller's interest in and to all Permits,
Contracts to be assumed by Purchaser in accordance with Article III, Paragraph
A, Leases to be assumed by Purchaser in accordance with Article III, Paragraph
A, Intangible Rights, Prepaid items and other items of the Premises, free and
clear of any lien or encumbrance, together with written evidence reasonably
satisfactory to Purchaser of any required third party consent to such
assignment. Seller shall deliver to Purchaser all original Contracts and
Leases which Purchaser has elected to purchase pursuant to Article III hereof;
the Permits, including the existing certificates of occupancy for the Premises
as presently constituted and if no such certificates are available, evidence
that the Premises are legally constructed and properly zoned in accordance with
all applicable laws; all warranties and guarantees (and assignments thereof to
Purchaser) issued in connection with the initial construction of the Real
Property and Improvements; any Personalty, and any repairs or additions
thereto; moneys advanced for future registrations; guest registration records;
keys; transferrable permits, approvals and licenses issued by all appropriate
governmental authorities and fire underwriting organizations with respect to
the construction and use of the Premises or any part thereof; and any existing
copies of architectural plans and specifications, blueprints and building plans
which may be in Seller's possession.
5. At Purchaser's option, an assignment of all fire and extended coverage
insurance policies, liability policies and loss of rental policies, affecting
any of the Premises to the extent assignable (if assigned, premiums to be
prorated at Closing).
6. Tax certificates or other evidence of payment from all appropriate
taxing authorities certifying the payment of all real and personal property
taxes up to the current tax year.
7. A certificate of Seller dated as of the Closing that Seller is not a
foreign person or corporation within the meaning of Sections 1445 and 7701 of
the Internal Revenue Code of 1986 (the "IRC").
8. A bring down certificate dated as of the Closing certifying the truth
and accuracy of each representation and warranty set forth in Article XII as of
the Closing Date.
9. An affidavit of title reasonably satisfactory to the Title
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Company enabling the Title Company to issue the Title Policy without exception
for mechanic's or materialman's or any other statutory liens, or for the
rights of parties in possession other than temporary hotel patrons.
10. Seller shall purchase the common stock of Winston Hotels, Inc. in
accordance with the Stock Purchase Agreement and as set forth in Article III,
Paragraph B.
11. The Management Agreement in accordance with Article III, Paragraph C.
12. Seller shall execute and deliver the Franchise Agreement and issue and
deliver a Homewood Suites franchise license in accordance with Article III,
Paragraph D.
C. At the Closing, the Purchaser shall deliver to the Seller the following:
1. Subject to Article IX, the Balance of the Purchase Price.
2. Proof of authority for Purchaser to complete the transaction
reasonably satisfactory to Seller.
3. The Lessee shall execute and deliver the Management Agreement
and the Franchise Agreement.
VI. DELIVERY OF POSSESSION
Seller shall deliver actual and exclusive possession of the Premises to
Purchaser on the Closing Date, subject to the rights of temporary guests and
patrons of the Hotel.
Seller hereby grants to Purchaser the right to enter the Premises at any
reasonable time after the date hereof for the purpose of inspecting, testing
and examining the Premises, which purpose is more particularly provided in
Article III hereof.
VII. DAMAGE TO PROPERTY
Seller shall give Purchaser immediate notice of any fire or other
casualty or of any pending or threatened condemnation occurring to all or any
portion of the Premises between the date hereof and the Closing. If prior to
the Closing, there shall occur:
(i) damage to the Premises caused by fire or other casualty, which would
cost $100,000.00 or more to repair or replace; or
(ii) the taking or condemnation of all or any portion of the Premises
(including any parking areas) as would materially interfere
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with the use thereof, as determined by Purchaser; then, if any of the events
set forth in (i) or (ii) above occurs, Purchaser, at its option, may terminate
this Agreement by written notice given to Seller within fifteen (15) days after
Purchaser has received the notice referred to above or at the Closing,
whichever is earlier. If Purchaser does not elect to terminate this Agreement,
the Closing shall take place as provided herein without an abatement of the
Purchase Price and there shall be assigned to the Purchaser at Closing, all
interest of the Seller in and to any insurance proceeds or condemnation awards
which may be payable to Seller on account of such occurrence.
If, prior to the Closing, there shall occur:
(x) damage to the Premises caused by fire or other casualty which
would cost less than $100,000.00 to repair or replace; or
(y) the taking or condemnation of all or any portion of the
Premises which is not material to the use thereof, as
determined by Purchaser;
then, if any of the events set forth in (x) or (y) above occurs, Purchaser
shall have no right to terminate this Agreement (solely as a result of the
occurrence of such events), and Seller shall, at its sole expense, with respect
to subparagraph (x), restore or replace the damaged Premises to its original
condition and, if necessary, Closing shall be extended so as to give Seller
sufficient time to accomplish same; and, with respect to subparagraph (y),
there shall be assigned to Purchaser at Closing all interest of Seller in and
to any condemnation awards which may be payable to Seller on account of any
such occurrence.
VIII. REMEDIES
A. If the transaction contemplated by this Agreement is not
consummated solely by reason of Purchaser's failure to perform its obligations
under this Agreement, then Seller, as its sole and exclusive remedy, shall be
entitled to retain the Deposit as full liquidated damages in complete and total
accord and satisfaction, the parties hereby acknowledging and agreeing to the
difficulty of ascertaining Seller's actual damages in such circumstances.
Seller and Purchaser agree that it is impossible to accurately assess the
Seller's damages in the event of the Purchaser's default and that the Deposit
constitutes Seller's and Purchaser's best estimate of such damages.
B. If this transaction is not consummated by reason of:
(i) cancellation by Purchaser as permitted by the terms
of this Agreement, including but not limited to,
cancellation by Purchaser at any time on or prior to
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the termination of the Feasibility Period;
(ii) the inability of Purchaser to obtain any approval or
consent required pursuant to or otherwise satisfy any
condition or contingency set forth in Article III
hereof within the period of time expressly provided
therefor;
(iii) the occurrence of any of the events described in
Article VII; or
(iv) Title Defects and Survey Defects which are not cured
as provided in this Agreement (except for those Title
Defects which Seller is obligated to cure).
then Purchaser shall be entitled to a return of the Deposit (together with all
interest thereon) and this Agreement shall be null and void and all parties
relieved from any further liability hereunder (except the liability of
Purchaser pursuant to the indemnity by Purchaser set forth in Article III,
Paragraph E, which indemnity shall survive any such termination of this
Agreement), unless Purchaser elects to waive any of the items or occurrences
set forth in this Article VIII, Paragraph B. The items enumerated in this
Article VIII, Paragraph B are for Purchaser's benefit only and the
non-occurrence of a state of facts sufficient to satisfy any of such items may
not be used or pleaded by Seller as a defense to the enforceability of this
Agreement.
C. If this transaction is not consummated because of a default on
the part of Seller or if Seller fails to close this transaction in breach of
its obligation to do so, then Purchaser, at its option, may
(i) seek specific performance of this Agreement; or
(ii) receive a return of the Deposit (together with all
interest thereon), whereupon Seller shall be released
of all liability arising under this Agreement.
D. In the event of a dispute, controversy or difference arising
under this Agreement, such dispute, controversy or difference shall be finally
and exclusively settled by arbitration. The arbitration shall be conducted in
a mutually agreed upon location in accordance with the rules of the American
Arbitration Association, before an arbitrator or arbitrators appointed pursuant
to such rules, and the determination and ruling of such arbitrator or
arbitrators shall be final, binding and conclusive on Purchaser, Seller and
Lessee.
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<PAGE> 14
IX. PRORATIONS
All income (excluding cash on hand and accounts receivable for the
period prior to the day preceding the Closing Date, which shall be and remain
the property of Seller), current operating expenses, accounts payable, real
estate taxes, other taxes and assessments, all utilities, water and sewer
charges, licenses or permit fees relating to the operation of the Premises,
real estate and personal property ad valorem taxes, prepayments made under the
Contracts and Leases (to be assumed by Purchaser pursuant to Article III
hereof) and insurance premiums (if applicable), shall be adjusted and prorated
as of the Closing. All maintenance and service agreements (whether or not
service is continued by Purchaser) and utility charges shall be determined as
of Closing and paid by Seller or appropriate adjustments made if Purchaser at
its option accepts an assignment of any such agreement. If such charges and
expenses are unavailable on the Closing Date, a re-adjustment of such charges
and expenses shall be made within thirty (30) days after the Closing. The
parties agree to cooperate in good faith in effecting such a final
reconciliation and each party shall promptly pay (or reimburse the other party
for) any expense item that is chargeable to the former party and shall promptly
remit any income item to the other party if entitled thereto. Seller shall
use reasonable efforts to arrange for the rendition of final bills by the
utility companies involved as of the Closing Date.
Guest room revenues of the Premises, whether in cash or in accounts receivable,
arising from occupancy for the night beginning on the day preceding the Closing
Date and ending on the Closing Date shall be credited one-half to Purchaser and
one-half to Seller. Seller shall collect all income and other sums payable by
tenants or guests (or otherwise) for such time period and the responsibility
for the payment of all expenses on account of services and supplies furnished
to and for the benefit of the Premises for such time period shall be debited
one-half to Purchaser and one-half to Seller. Purchaser shall be credited with
any deposits from tenants or guests of the Premises which are refundable to
such tenants or guests. Seller shall remit to Purchaser at closing all prepaid
income items. In addition, at Closing, Seller shall deliver to Purchaser a
schedule of all unpaid accounts receivable and other income items as of
Closing. All such accounts receivable and other income items collected by or
for Purchaser after Closing shall be promptly remitted to the order of Seller;
provided, however, payments received by Purchaser following the Closing with
respect to receivables shall be deemed to be in payment of receivables of
Purchaser unless the payment received specifically identifies that it is in
payment of a receivable attributed to Seller or there is no receivable due to
Purchaser with respect to such payment. Seller and Purchaser agree to attempt
to reconcile and prorate the accounts receivable within sixty (60) days after
Closing. Except for sums actually received by Purchaser pursuant to the
immediately preceding sentence, Purchaser shall assume no obligation to collect
or enforce
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<PAGE> 15
the payment of any amounts that may be due to Seller, except that Purchaser
shall render reasonable assistance, at no expense to Purchaser, to Seller after
Closing in the event Seller proceeds against any third party to collect any
accounts receivable or other income items due Seller. Nothing contained in
this Article shall be deemed to prohibit Purchaser and Seller from entering
into an agreed settlement in writing of all prorations at or following Closing.
In the event any adjustments pursuant to this Article are, subsequent
to Closing, found to be erroneous, then either party hereto is entitled to
additional monies and shall invoice the other party for such additional amounts
as may be owing, and such amount shall be paid promptly by the other party upon
receipt of the invoice. Such invoice shall be accompanied by reasonable
substantiating evidence.
Purchaser shall have no obligation with respect to Seller's on-site
employees whatsoever, which employees shall be compensated by Seller and
Seller shall have the right to retain and employ such employees at Seller's
election in order to perform pursuant to the Management Agreement.
The provisions of this Article IX shall survive Closing and the
delivery of the Deed.
X. NOTICES
Any notice to be given by either party to this Agreement shall be in
writing and shall be either delivered personally or by certified or registered
U.S. Mail, postage prepaid, or by overnight courier delivery service with
charges to the sender, or by telecopier or facsimile, with follow-up by means
of one of the other notice methods set forth herein, with its notice complete
upon receipt of the telecopy or facsimile, as follows:
To Seller: Promus Hotels, Inc.
785 Crossover Lane
Suite 141
Memphis, Tennessee 38117
Attention: Thomas Keltner, Senior Vice
President, Development
Facsimile number: (901) 374-5051
With Copy to: Ronald Halpern, Esquire
Promus Hotels, Inc.
Deputy General Counsel, Vice President
785 Crossover Lane
Suite 141
Memphis, Tennessee 38117
Facsimile number: (901) 374-5050
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<PAGE> 16
To Purchaser: WINN Limited Partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
Facsimile number: (919) 571-7330
With copies to: William W. Bunch, III, Esquire
Brown & Bunch
4900 Falls of Neuse Road,
Suite 210 (street zip code 27609)
Post Office Box 19409
Raleigh, North Carolina 27619-9409
Facsimile number: (919) 878-8062
Any notice, demand or other communication shall be deemed given and effective
as of the date of delivery in person, by transmission or by receipt set forth
on the verification of delivery or return receipt. The inability to deliver
because of changed facsimile number and/or address of which no notice was
given, or rejection or other refusal to accept any notice demand or other
communication, shall be deemed to be receipt of the notice, demand or other
communication as of the date of such attempt to transmit, deliver or rejection
or refusal to accept. Any party may change addresses for notices by delivering
written notice of such change in accordance with this Article X.
XI. INDEMNITY
A. Purchaser and Seller warrant and represent each to the other that
neither of them has employed a real estate broker in this transaction and
neither of them has any knowledge of any party with a claim for any real estate
commission, brokerage fee or finder's fee. Seller shall indemnify and hold the
Purchaser harmless from and against any claim for any real estate commission,
brokerage fee or finder's fee made by any person, firm or corporation, claiming
by, through or under the Seller. Purchaser shall indemnify and hold the Seller
harmless from and against any claim for any real estate commission, brokerage
fee or finder's fee made BY any person, firm or corporation, claiming by,
through or under the Purchaser. This warranty and representation shall
survive the Closing and the parties shall indemnify each other from any
liability, cost or loss arising out of a breach of said warranty and
representation, including consequential damages.
B. The Seller shall indemnify and hold the Purchaser harmless
from and against any and all liabilities, claims, demands, costs and expenses
of any kind or nature, including but not limited to, reasonable attorney's
fees, arising out of or incurred in connection
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<PAGE> 17
with (i) any breach of the representations and warranties of Seller set forth
in this Agreement, (ii) the ownership, use, maintenance or operation of the
Premises on or prior to the Closing or the transfer of the Premises to the
Purchaser (including the payment of all taxes),or (iii) compliance or failure
to comply with the notice provisions relating to bulk sales laws applicable to
the transfer of all or any part of the Premises. Purchaser shall indemnify and
hold Seller harmless from and against any and all liabilities, claims, demands,
costs and expenses of any kind or nature, including reasonable attorney's fees,
arising after the date of Closing and which arise out of the ownership or
operation of the Premises by the Purchaser following the Closing. Such
indemnities shall survive Closing and delivery of the deed.
C. If Purchaser or Seller propose to make any claim for
indemnification under any Article or Paragraph of this Agreement (the
"Indemnitee"), the Indemnitee shall deliver to the other party (the
"Indemnitor") a certificate signed by the Indemnitee which certificate shall
(i) state that a loss has occurred and (ii) specify in reasonable detail each
individual item of loss or other claim including the amount thereof and the
date such loss was incurred. The Indemnitor shall have the right in its
discretion and at its expense to participate in and control (a) the defense or
settlement of any claim, suit, action or proceeding (including appeals) in
respect of such item (or items) by any person other than a party hereto, (b)
any and all negotiations with respect thereto, and (c) the assertion of any
claim against any insurer with respect thereto, and the Indemnitee shall not
settle any such claim, suit, action or proceeding or agree to extend any
applicable statute of limitation without the prior written approval of the
Indemnitor. The rights of participation, control and approval granted to the
Indemnitor shall be subject as a condition precedent to the Indemnitor's
acknowledging to the Indemnitee, in writing, the obligation of the Indemnitor
to indemnify the Indemnitee in respect of such third party's claim, suit,
action or proceeding giving rise to such item. Upon satisfaction of such
condition precedent, the Indemnitee shall provide the Indemnitor with all
reasonably available information, assistance and authority to enable the
Indemnitor to effect such defense or settlement and upon the Indemnitor's
payment of any amounts due in respect of such claim, suit, action or
proceeding, the Indemnitee shall, to the extent of such payment, assign or
cause to be assigned to the Indemnitor the claims of the Indemnitee, if any,
against such third parties in respect of which such payment is made. If the
Indemnitor is not so willing to acknowledge such obligation, the parties shall
jointly consult and proceed as to any such third party claim, suit, action or
proceeding.
XII. PURCHASER'S AND SELLER'S REPRESENTATIONS AND WARRANTIES.
The Seller represents and warrants to the Purchaser that:
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<PAGE> 18
A. Seller is a Delaware corporation duly organized, and existing
and in good standing under the laws of the state of its incorporation and
authorized to do business in the State in which the Premises are located.
B. Seller is authorized to enter into this Agreement and to
consummate the transaction contemplated hereby, and the individuals executing
this Agreement on behalf of Seller are also duly authorized to execute this
Agreement and to bind Seller to consummate such transaction, subject to the
effect of any bankruptcy, reorganization, moratorium, insolvency, or other laws
affecting the rights of creditors generally. The execution and delivery of
this Agreement and the conveyance of the Premises by Seller, pursuant to this
Agreement, do not require the consent of any person, agency or entity not a
party to this Agreement. The execution of this Agreement by Seller and the
transaction contemplated herein have been duly authorized by proper corporate
action, including the board of directors and capital committee of Seller.
C. There are no pending or, to the knowledge of Seller,
threatened, condemnation or similar proceedings affecting the Premises, or any
portion thereof. Seller has not received any written notice that any such
proceeding is contemplated, and no part of the Premises has been destroyed or
damaged by any casualty.
D. To the best of Seller's knowledge, the maintenance, operation,
use or occupancy of the Premises as a hotel does not violate any building,
health, zoning, environmental, fire or similar law, ordinance, regulation or
restrictive covenant. To the best of Seller's knowledge, the Premises do not
violate any federal, state, county, or municipal laws, ordinances, orders,
regulations or requirements nor has Seller received any notice of such a
violation.
E. There are no options to purchase, rights of first refusal or
other similar agreements with respect to the Premises which give anyone the
right to purchase the Premises or any part thereof. To the best of Seller's
knowledge, there are no contracts or agreements which affect or cover the
Premises, except for the Contracts and the Permitted Exceptions. There are no
unpaid bills or claims in connection with the construction repair or
replacement of the Premises. There are no agreements allowing for any
reduction, concession or abatement of room rates.
F. The Financial Statements are, or with respect to Financial
Statements for periods of time subsequent to the Date of this Agreement will
be, true, correct and accurate in all material respects and fairly present the
results of operations of the Premises for the periods then ended. During the
period of operation of the Hotel, no single customer (or its or their
affiliates) comprised more than 10% of gross room sales.
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G. The Seller has duly filed in a timely manner all federal,
state, county and local income, franchise, excise, withholding, sales,
occupancy, payroll, property (real, personal and intangible), and any other tax
returns and reports required to have been filed up to the date hereof, and has
paid all taxes, interest, penalties and all assessments that have become due.
The Seller has paid, or made adequate provision for the payment of, all taxes
with respect to the conduct of its business upon the Premises through the
Closing. Neither the Seller nor its agents have been advised or notified of
any tax deficiency, assessment or penalty with respect to the Seller, nor does
the Seller know of any basis for any additional claim or assessment for taxes,
interest or penalties. No liens for taxes, federal, state or local, have been
filed against the Seller or its assets.
H. Certificates of Occupancy for all buildings and other
improvements have been duly issued and the buildings and improvements may be
legally occupied and are presently being occupied as a hotel/motel. The Real
Property is zoned properly for the present uses made thereof.
I. Except as set forth in the Title Commitment, the Seller owns
and has good and indefeasible title to all of its assets and properties which
constitute the Premises free and clear of any security interest, mortgage,
pledge, lien, conditional sale or other encumbrance or charge. The Premises
to be purchased is all of the property of every kind and nature necessary for
the operation of the Seller's business in the ordinary course.
J. To the best of Seller's knowledge, the Premises are in
compliance with and have not violated any statute, law, ordinance, rule,
regulation, order and directive (including, without limitation, all labor and
environmental control and antipollution laws, ordinances, rules, regulations or
directives) of any and all Governmental Agencies pertaining to the use or
occupancy of the Premises.
To the best of Seller's knowledge, the Seller has not received any notice of
and the Seller and the Premises have not been charged with, are not under
investigation or threatened investigation for failure to comply with and are in
compliance with, any and all statutes, laws, ordinances, rules, regulations,
orders and directives of any and all Governmental Agency or Agencies pertaining
to the use, generation, dumping, releasing, burying or disposing of or emitting
of any particles, materials, substances, or emissions that are now or have
heretofore been determined by any and all Governmental Agency or Agencies to be
of a hazardous, toxic, pollutive, or ecologically or environmentally damaging
nature, including but not limited to asbestos ("Hazardous Materials"). Seller
has not previously disposed of any Hazardous Materials at the Premises.
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<PAGE> 20
For purposes of this Agreement, the term "Hazardous Materials" shall include,
but not be limited to, those materials or substances now or heretofore defined
as "hazardous substances," "hazardous materials," "hazardous waste," "toxic
substances," or other similar designations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C., Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C., Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C., Section 1801, et seq. and other laws, whether or not of a similar
nature, applicable to the Premises and adopted by, enacted in or applicable to
the State of Texas.
For purposes of this Agreement, the term "Governmental Agency or Agencies"
means, whether of the United States of America, of any state or territory
thereof or of any foreign jurisdiction, any government, political subdivision,
court, agency, or other entity, body, organization or group exercising any
executive, legislative, judicial, regulatory or administrative function of
government.
To the best of Seller's knowledge, the Real Property has never appeared on any
federal or state registry of active or inactive hazardous waste disposal sites.
Seller has never received any notice of claim from a Governmental Agency
concerning the alleged release or threatened release of Hazardous Materials at
the Real Property. To the best of Seller's knowledge and without inquiry, no
hazardous waste sites exist within a one mile radius of the Real Property.
K. To the best of Seller's knowledge, there are no employment or
union agreements in effect and no employee has received a commitment from the
Seller or Seller's manager for continued employment at the Premises after
Closing.
L. Seller has no knowledge of and has received no notice of any
causes of action, actions, or proceedings of whatever type or description which
have been instituted or threatened or are pending relating to the Premises or
any interest therein.
M. To the best of Seller's knowledge, no representation or
warranty made by the Seller, nor, to the best of Seller's actual knowledge, in
any statement or document furnished or to be furnished to the Purchaser
hereunder, or in connection with the transaction contemplated hereby, contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained therein not
misleading. The Seller has disclosed herein to the Buyer all facts or
developments of any kind known to Seller which are material to the assets,
prospects, financial condition and business of the Seller as it pertains to the
Hotel, and is solely responsible for the accuracy and completeness of the
contents thereof and all other statements
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and documents submitted in connection with this Agreement and the transactions
contemplated hereby.
The Purchaser represents and warrants to the Seller that:
A. Purchaser is a limited partnership duly organized, and existing
and in good standing under the laws of the state of its formation and will be
authorized to do business in the state in which the Premises are located prior
to Closing.
B. Purchaser has the right, power and authority to execute this
Agreement and, upon receipt of the approval from the board of directors of the
general partner of Purchaser, will have the right, power and authority to
purchase the Premises from Seller in accordance with the terms and conditions
hereof, and to execute, deliver and perform its obligations under this
Agreement and all other instruments, conveyances, executed or to be executed
and delivered, by Purchaser in connection with the transactions contemplated
herein. This Agreement and all other documents executed and delivered, or to
be executed and delivered, by Purchaser in connection with the transactions
contemplated herein have been or at the appropriate time will be, duly executed
and delivered and constitute or, upon such execution and delivery, will
constitute the valid, legal and binding obligations of Purchaser, enforceable
in accordance with their respective terms and provisions, subject, however, to
receipt of the foregoing approval from the board of directors of the general
partner of Purchaser, to the effect of any bankruptcy, reorganization,
moratorium, insolvency, or other laws affecting the rights of creditors
generally. Purchaser has taken all action, corporate or otherwise, required to
authorize its execution and delivery of this Agreement. There are no claims,
defenses, personal or otherwise, or offsets whatsoever to the validity or
enforceability with respect to this Agreement or any other documents executed
and delivered, or to be executed and delivered, by Purchaser in connection with
the transactions contemplated herein, nor is there any basis for any such
claim, defense, or offset known to Purchaser. With the execution of the
foregoing required approval from the board of directors of the general partner
of Purchaser, there is no consent or approval of any person, firm, corporation,
court, trustee, judge or governmental authority required to be obtained by
Purchaser in order for Purchaser to enter into this Agreement or any such other
document or to perform fully all of Purchaser's obligations under this
Agreement or under any such other document except those that have been obtained
and are in full force and effect.
C. Neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated herein will conflict with, or
result in a breach of, the terms, conditions or provisions of, or constitute a
default under, any agreement or instrument to which Purchaser is a party.
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Purchaser, in Purchaser's sole and absolute discretion, may waive any
condition to close or breach of any representation or warranty provided for
herein or any Title or Survey Defect, and in such event, this transaction shall
be consummated as if such condition, representation, warranty or defect was
satisfied. All of the representations and warranties contained in this
Agreement shall survive the Closing. The representations and warranties set
forth above shall be true, correct and accurate on the date hereof and as of
the date of Closing.
XIII. ESCROW
The Escrow Agent hereby acknowledges receipt of the Deposit and agrees
to hold the Deposit in escrow until the Closing or sooner termination of this
Agreement and shall pay over and apply the proceeds thereof in accordance with
the terms of this Agreement. If, for any reason, the Closing does not occur
and either party makes a written demand upon the Escrow Agent for payment of
the Deposit, the Escrow Agent shall give written notice to the other party of
such demand. If the Escrow Agent does not receive a written objection from the
other party to the proposed payment within ten (10) business days after the
giving of such notice, the Escrow Agent is hereby authorized to make such
payment. If the Escrow Agent does receive such written objection within such
ten (10) day period, or if for any reason the Escrow Agent in good faith shall
elect not to make such payment, the Escrow Agent shall continue to hold the
Deposit until otherwise directed by written instructions from the parties to
this Agreement or until a determination and ruling is made by the arbitrator or
arbitrators appointed in accordance with Article VIII, Paragraph D hereof
disposing of such Deposit for such Hotel.
The Escrow Agent shall be liable as a depository only and its duties
hereunder are limited to the safekeeping of the Deposit and the delivery of
same in accordance with the terms of this Agreement. The Escrow Agent shall
not be liable for any act or omission done in good faith, or for any claim,
demand, loss or damage made or suffered by any party to this Agreement, except
such as may arise through or be caused by the Escrow Agent's willful misconduct
or negligence.
XIV. COVENANTS
A. Following the date of this Agreement and to and including the
Closing, the Seller (i) shall continue normal and prudent maintenance and
management of the Premises, (ii) shall continue to maintain supplies and
payroll at their current level, and (iii) shall operate the Hotel in the
ordinary course of business.
B. All taxes levied against the Premises which were or shall be
due and payable prior to the Closing have been or shall be paid
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in full by the Seller on or prior to the Closing.
C. All Contracts and Leases which the Purchaser elects to assume
in accordance with Article III shall be current and not in default as of the
Closing. Seller shall not enter into new Contracts or Leases except in the
ordinary course of business, and provided that any such new Contract or Lease
shall either provide that it may be cancelled on not more than 30 days notice
by Seller at no penalty or cost or, Purchaser shall consent to such Contract or
Lease in writing.
D. Seller shall maintain fire and casualty insurance on the
Premises up to and including the Closing in its current amount.
E. Seller shall deliver to Purchaser a report itemizing room
sales per month, occupancy and ADR through a date which is not later than one
month prior to the Closing Date ("Monthly Report").
F. During the Feasibility Period, representatives of Seller and
Purchaser shall meet at the Premises and prepare a schedule of the Equipment,
which schedule shall be attached hereto and made a part hereof at such time.
XV. BINDING EFFECT; MISCELLANEOUS
A. This Agreement shall be binding upon and shall inure to the
parties hereto, their respective heirs, successors, legal representatives and
assigns. This Agreement sets forth the entire Agreement between the parties
hereto and no other prior written or oral statement or agreement or
understanding shall be recognized or enforced. All modifications or amendments
shall be in writing and signed by the parties. This Agreement is to be
construed according to the laws of the State of Texas. This Agreement may be
executed in two or more counterparts all of which shall constitute one and the
same instrument. The singular shall include the plural and vice versa.
B. Provided Purchaser does not terminate this Agreement prior to
the expiration of the Feasibility Period, after the expiration of the
Feasibility Period, the Purchaser may assign this Agreement to a corporation,
partnership or other entity in which Purchaser or its wholly owned subsidiaries
own at least a majority interest.
C. In the event any period of time provided for in this Agreement
expires on a Saturday, Sunday or banking holiday, such period of time shall be
automatically extended to and through the next business day thereafter.
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D. As used herein, "the Date of this Agreement" shall mean the date
noted below as the date upon which this Agreement was executed by the latter of
the Purchaser or the Seller.
E. This Agreement shall not be recorded.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Date of this Agreement.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation,
General Partner
(Corporate Seal) By:__________________________
_______ President
Attest:
__________________
______Secretary
Date signed by Purchaser:
_________________________
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Seller:
Promus Hotels, Inc.,
a Delaware corporation
(Corporate Seal) By:____________________________
___________President
Attest:
__________________
_____Secretary
Date signed by Seller:
______________________
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Escrow Agent:
The Title Company of North Carolina, Inc.
as agent for First American Title Insurance
Company
By:____________________________________
Title:_________________________________
Winston Hospitality, Inc., as the Lessee defined hereinbefore, joins
in the execution of this Agreement for the sole purpose of acknowledging and
agreeing to the provisions of Article III, Paragraph C relative to the
Percentage Lease and the Management Agreement.
Winston Hospitality, Inc.,
a North Carolina corporation
(Corporate Seal) By:_______________________________
______________President
Attest:
________________
_____Secretary
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STATE OF __________________
COUNTY OF _________________
I, a Notary Public of the County and State aforesaid, certify that
__________________________, personally came before me this day and acknowledged
that _he is ______________ Secretary of Winston Hotels, Inc., a North Carolina
corporation, General Partner of WINN Limited Partnership, a North Carolina
limited partnership, and that by authority duly given and as the act of the
corporation, as such General Partner, the foregoing instrument was signed in
its name by its ______ President, sealed with its corporate seal and attested
by ___________________ as its ________ Secretary.
Witness my hand and seal, this the _____ day of _____________, 199__.
My commission expires:_____ _____________________________
Notary Public
(SEAL)
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
__________________________________________ personally appeared before me this
day and acknowledged that _he is ________ Secretary of Promus Hotels, Inc., a
Delaware corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ___
President, sealed with the corporate seal and attested by _____ as its _____
Secretary.
Witness my hand and seal, this the ____ day of _____________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
27
<PAGE> 28
STATE OF _________
COUNTY OF ________
I, a Notary Public of the County and State aforesaid, certify that
___________________________ personally appeared before me this day and
acknowledged that _he is ____ Secretary of Winston Hospitality, Inc., a North
Carolina corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ____
President, sealed with the corporate seal and attested by ____ as its ____
Secretary.
Witness my hand and seal, this the ___ day of _______________, 1996.
My commission expires:_____ __________________________
Notary Public
28
<PAGE> 29
MANAGEMENT AGREEMENT
DATED AS OF _______ __, 199_
BY AND AMONG
WINSTON HOSPITALITY, INC.
PROMUS HOTELS, INC.
WINN LIMITED PARTNERSHIP
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. THE HOTEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. The Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
[SECTION 2.01. OPENING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1]
Section 2.02. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3. MANAGER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.01. Manager's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4. LESSEE'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.01. Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5. MANAGEMENT FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.01. Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6. CLAIMS AND LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.01. Claims and Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.02. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 7. CLOSURE, EMERGENCIES AND DELAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.01. Events of Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.02. Emergencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8. CONDEMNATION AND CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.01. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.02. Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 9. DEFAULT AND TERMINATIONS RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.01. Manager Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.02. Lessee Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.03. Termination Upon Event of Default; Other
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9.04. Termination for Failure to Achieve
Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 9.05. Manager's Early Termination Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.06. Right to Terminate Upon Sale or
Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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<TABLE>
<S> <C>
Section 9.07. Employment Solicitation Restriction Upon
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 10. APPLICABLE LAW AND ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.01. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.02. Arbitration of Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.1. Matters to be Submitted to
Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.2. The Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.3. Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.03. Performance During Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.01. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.02. Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.03. Manager's Contractual Authority in the
Performance of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.04. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.05. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.07. Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.08. Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.09. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.10. Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.11. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.13. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.14. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.15. Travel and Out-of-Pocket Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.16. Set off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.17. Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.18. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.19. Survival of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.20. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.21. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.22. Periods of Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.23. Preparation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.24. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.25. Attorney's Fees and Other Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.26. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<PAGE> 32
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement"), made and entered into as of
this _____ day of March 1996 ("Effective Date"), between Winston Hospitality,
Inc., a North Carolina corporation ("Lessee"), whose address is 2209 Century
Drive, Suite ___, Raleigh, North Carolina 27612, and Promus Hotels, Inc., a
Delaware corporation ("Manager"), whose address is 755 Crossover Lane, Memphis,
TN 38117, recites and provides as follows:
RECITALS
WHEREAS, WINN Limited Partnership, a North Carolina limited
partnership ("Owner"), whose address is 2209 Century Drive, Suite 300, Raleigh,
North Carolina 27612, and which is a third party beneficiary as described
herein, has acquired the Hotel (as defined below) and leases the Hotel to
Lessee; and
WHEREAS, Lessee desires to engage Manager, and Manager desires to be
engaged, to manage the Hotel on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
THE HOTEL
The subject matter of this Agreement is the management of the "Hotel,"
as defined in the Commitment Agreement to issue a Homewood Suites License
Agreement and the Homewood Suites License Agreement attached hereto as Exhibit
"A" (hereinafter collectively referred to as the "License Agreement"), by
Manager. The License Agreement shall exclusively govern Lessee's right to use
the Homewood Suites "System" (as defined in the License Agreement) in the
operation of the Hotel. Lessee hereby expressly acknowledges that it shall not
derive any rights in or to the use of the "Homewood Suites" name or the
Homewood Suites System from this Agreement.
ARTICLE 2.
TERM
[SECTION 2.01. OPENING DATE. MANAGER SHALL OPEN THE HOTEL TO THE
PUBLIC AND COMMENCE DOING BUSINESS AS A HOMEWOOD SUITES
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<PAGE> 33
HOTEL ON THE DATE ALL THE CONDITIONS PRECEDENT IN THIS AGREEMENT AND THE
LICENSE AGREEMENT TO THE OPENING OF THE HOTEL AS A HOMEWOOD SUITES HOTEL HAVE
BEEN SATISFIED ("OPENING DATE"), WHICH DATE SHALL BE CONFIRMED IN AN ADDENDUM
TO THIS AGREEMENT.]
SECTION 2.02. TERM. The term shall commence on the Effective Date
and, subject to the terms contained herein, continue for the term of years from
the [OPENING DATE SET FORTH ON EXHIBIT "B"/EFFECTIVE DATE] ("Term").
ARTICLE 3.
MANAGER'S OBLIGATIONS
SECTION 3.01. MANAGER'S OBLIGATIONS. Manager shall, on behalf of
Lessee and at Lessee's expense, direct the operation of the Hotel pursuant to
the terms of this Agreement and meet the standards imposed under the License
Agreement. Manager shall be exclusively responsible for directing the
day-to-day activities of the Hotel and establishing all policies and procedures
relating to the management and operation of the Hotel. Except as specifically
otherwise provided, all cost(s) and expense(s) incurred by Manager in
association with the performance of the obligations hereinafter set forth shall
be [PRE-OPENING EXPENSES IF INCURRED PRIOR TO THE OPENING DATE AND] operating
costs [IF INCURRED AFTER THE OPENING DATE] and shall accordingly be paid from
the [PRE-OPENING BANK(S) ACCOUNT AS HEREINAFTER DEFINED IN SECTION 3.01(i) OR
THE] Bank Account(s) as hereinafter defined in Section 3.01(iv) below.
Manager, during the Term, shall have the following obligations:
[(i) PRE-OPENING. SIX (6) MONTHS PRIOR TO THE SCHEDULED OPENING
DATE, MANAGER SHALL COMMENCE IMPLEMENTATION OF A
PRE-OPENING PROGRAM WHICH SHALL INCLUDE ALL ACTIVITIES
NECESSARY TO FINANCIALLY AND OPERATIONALLY PREPARE THE
HOTEL FOR OPENING. TO IMPLEMENT THE PRE-OPENING PROGRAM,
MANAGER SHALL PREPARE A COMPREHENSIVE PRE-OPENING BUDGET
WHICH SHALL BE SUBMITTED TO LESSEE FOR LESSEE'S APPROVAL
NINETY (90) DAYS AFTER THE EFFECTIVE DATE ("PRE-OPENING
BUDGET"). ALL COSTS AND EXPENSES OF THE PRE-OPENING
PROGRAM SHALL BE PAID FROM A SPECIAL BANK ACCOUNT(S) OPENED
BY MANAGER IN THE NAME OF LESSEE UPON WHICH ONLY MANAGER'S
DESIGNEES SHALL BE AUTHORIZED TO DRAW ("PRE-OPENING BANK
ACCOUNT(S)"). AFTER ALL PRE-OPENING EXPENSES HAVE BEEN
PAID, THE BALANCE IN THE PRE-OPENING BANK ACCOUNT(S) SHALL
BE RETURNED TO LESSEE AND THE PRE-OPENING BANK ACCOUNT(S)
CLOSED.]
(ii) Personnel. Manager shall be the sole judge of the fitness
and qualification of all personnel working at the Hotel
("Hotel Personnel") and shall have the sole and absolute
right to hire, supervise, order,
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instruct, discharge and determine the compensation,
benefits and terms of employment of all Hotel Personnel.
All Hotel Personnel shall be employees of Manager. Manager
shall also have the right to use employees of Manager,
Manager's parent and subsidiary and affiliated companies,
not located at the Hotel to provide services to the Hotel
("Off-Site Personnel"). The expenses of Off-Site Personnel
shall be prorated based on the actual amount of time spent
on Hotel matters compared to total time worked. Lessee
reserves the right to require all employees to be on-site
personnel. All expenses, costs (including, but not limited
to, salaries, benefits and severance pay), liabilities and
claims which are related to Hotel Personnel and Off-Site
Personnel shall be [PRE-OPENING EXPENSES OR] operating
expenses [AS APPROPRIATE].
Manager shall provide Lessee an opportunity to interview
each proposed general manager for the Hotel prior to the
appointment of said individual to the position of Hotel
general manager. Manager shall solicit and obtain the
Lessee's recommendation on said individual prior to making
a final decision on the appointment of such individual to
the position of Hotel general manager.
(iii) Hotel Policies. Manager shall determine the terms of guest
admittance to the Hotel, establish room rates, and use of
rooms for commercial purposes.
(iv) Bank Accounts. Manager shall open and operate the Hotel's
bank accounts. All sums received from the operation of the
Hotel and all items paid by Manager arising by virtue of
Manager's operation of the Hotel shall pass through
interest bearing bank account(s) established by Manager in
Lessee's name at such banks as Manager and Lessee shall
mutually agree ("Bank Account(s)"); Lessee's designees and
Manager's designees shall be authorized to operate and draw
from the Bank Account(s). Each fiscal month Manager, on
behalf of Lessee, shall disburse funds from the Bank
Account(s) in the order of priority and to the extent
available in accordance with the priority schedule set
forth on Exhibit "B". Interest earned on amounts in the
Bank Accounts shall be for the account of the Lessee.
(v) Operating Budgets. Manager [SHALL, NOT LESS THAN SIXTY
(60) DAYS PRIOR TO THE SCHEDULED OPENING DATE, SUBMIT/HAS,
PRIOR TO THE EFFECTIVE DATE, SUBMITTED] to Lessee and
Owner, for their approval, a proposed
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operating budget for the ensuing full or partial fiscal
year, as the case may be (an "Operating Budget" and in the
case of the first such Operating Budget, the "Initial
Operating Budget"). Thereafter, Manager shall, not less
than sixty (60) days prior to the commencement of each full
fiscal year, submit to Lessee and Owner, for their
approval, a proposed monthly Operating Budget for the
ensuing full or partial fiscal year, as the case may be.
Manager shall include with the monthly Operating Budgets
shall include reasonable detail on all material assumptions
on which such Operating budgets are based. Lessee may
object to the Operating Budget and, after soliciting
Manager's opinion and input regarding the disputed item(s)
and considering such opinions and input in good faith,
Lessee shall resolve such disputes in its sole discretion.
Manager shall revise the Operating Budget from time to
time, as necessary, to reflect any unpredicted significant
changes, variables or events or to include significant,
additional, unanticipated items of income or expense.
Manager shall be permitted to reallocate part or all of the
amount budgeted with respect to any line item to another
line item and to make such other modifications to the
Operating Budget as Manager deems reasonably necessary.
Lessee and Owner acknowledge that the Operating Budget is
intended only to be a reasonable estimate of the Hotel's
income and expenses for the ensuing fiscal year. Manager
shall not be deemed to have made any guarantee, warranty or
representation whatsoever in connection with the Operating
Budget;
(vi) Operating Statement. Manager shall prepare and furnish
Lessee and Owner with a detailed operating statement
setting forth the results of the Hotel's operations for
each fiscal month. Manager shall use its best efforts to
provide such reports within ten (10) days after the end of
each fiscal month, and shall provide such reports in no
event later than fifteen (15) days after the end of each
fiscal month. Within fourty-five (45) days after the end
of each fiscal year, Manager shall furnish Lessee and Owner
with a detailed operating statement setting forth the
results of the Hotel's operations for the fiscal year.
Operating statements shall include a comparison of actual
results for the relevant period with the budgeted amounts
for such period as set forth in the applicable Operating
Budget;
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<PAGE> 36
(vii) Capital Budgets and Statement. Manager shall, not less
than sixty (60) days prior to the commencement of each
fiscal year, submit to Lessee and Owner a recommended
"Capital Budget" for the ensuing full or partial fiscal
year, as the case may be, for furniture, fixtures and
equipment, ordinary Hotel capital replacement items as
shall be required to operate the Hotel in accordance with
the standards referred to in the License Agreement and
non-routine items. Before Manager expends any funds on
capital items and other non-routine items or commences or
commissions work on such items, Manager agrees to obtain
the specific approval of the Lessee of the time and manner
in which (i) such funds will be spent and (ii) such items
will be completed. Manager acknowledges that the Lessee
shall have the right, exercisable in its sole discretion,
to control, direct and supervise all work on and
expenditures for all capital items and other non-routine
items. If Lessee exercises the right described in the
previous sentence, Lessee shall solicit and consider
Manager's opinions on the nature, manner and timing of such
work and periodically apprise Manager of the progress of
such work and any material changes in the scope, manner or
timing of such work. Manager shall prepare and furnish
Lessee and Owner, on or before the twenty-fifth (25th) day
of the fiscal month immediately following the close of a
fiscal month, with a detailed status report and accounting
of all expenditures on non-routine and capital items that
the Lessee has not elected to control, direct and
supervise. Such accountings shall include a comparison of
actual expenditures on such items for such period with the
budgeted amounts for such period as set forth in the
applicable Capital Budget.
(viii) General Maintenance Non-Capital Replacements. Manager
shall supervise the maintenance, repair and replacement of
non-Capital Replacements.
(ix) Operating Equipment. Manager shall select and purchase all
operating equipment for the Hotel such as linens, utensils,
uniforms and other similar items.
(x) Operating Supplies. Manager shall select and purchase all
operating supplies for the Hotel such as food, beverages,
fuel, soap, cleansing items, stationery and other
consumable items.
(xi) Accounting Standards. Manager shall maintain the books and
records reflecting the operations of the
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<PAGE> 37
Hotel and in conformity with generally accepted accounting
practices consistently applied and shall adopt and follow
the fiscal accounting periods utilized by Manager in its
normal course of business. The Hotel-level generated
accounting records reflecting detailed day-to-day
transactions of the Hotel's operations, shall be kept by
Manager at the Hotel or at the Manager's regional offices
or corporate headquarters, or at such other location as
Manager shall reasonably determine.
(xii) Audits. Lessee and Owner shall have the right to have
their employees and independent accounting firms examine,
audit, and copy the books and records of the Hotel at any
reasonable time upon forty- eight (48) hours notice to
Manager;
(xiii) Marketing and Advertising. Manager shall advertise and
promote the Hotel in coordination with the sales and
marketing programs of Manager and other Homewood Suites
hotels. Manager may participate in sales and promotional
campaigns and activities involving complimentary rooms.
Manager, in marketing and advertising the Hotel, shall have
the right to use marketing and advertising services of
employees of Manager and its parent and affiliated
companies not located at the Hotel. Manager may charge the
Hotel for personnel and other costs and expenses incurred
in providing such services; provided that (i) Manager's
allocation of such costs and expenses among hotels,
including the Hotel, shall be pro rata among all hotels
owned or managed by Manager and (ii) the annual allocation
of such costs and expenses to the Hotel shall not exceed
$10,000. Such costs and expenses shall be reflected in the
budgets and operating statements required to be prepared
and submitted by Manager under this Management Agreement.
Other than as specifically provided for in this Section
3.01(xiii), without specific, advance approval by Lessee,
such services shall be without cost other than the charges
otherwise incurred by Lessee for marketing and related
services under the License Agreement.
(xiv) Permits and Licenses. Manager shall assist Owner and
Lessee in obtaining the various permits and licenses
required to operate the Hotel in accordance with the terms
of this Agreement and the License Agreement.
(xv) Meetings. The Hotel's general manager shall meet with
Lessee's and Owner's Representative (as hereinafter defined
in Section 4.01(viii)) monthly to
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review and discuss the previous and future month's
operating statement, cash flow, budget, capital
expenditures, important personnel matters and the general
concerns of Lessee, Owner and Manager ("Monthly Meeting").
Also, a representative of Manager's corporate staff shall
meet with the Representative quarterly to review and
discuss the previous and future quarter's operating
statement, cash flow, budget, capital expenditures,
important personnel matters and the general concerns of
Lessee, Owner and Manager ("Quarterly Meeting").
In addition to the Monthly and Quarterly Meetings, once
each year, in connection with the Manager's preparation of
the Operating and Capital Budgets for the upcoming year,
the Hotel's general manager and one or more representatives
of Manager's corporate staff shall meet with Lessee's and
Owner's Representative to review and discuss (i) the
operating performance of the Hotel, (ii) the anticipated
operating performance for the upcoming year, (iii) the
marketing and advertising history and plans for the Hotel,
(iv) the repair and maintenance history and plans for the
Hotel, (v) the need for, scope and timing of capital and
other non-routine projects and (vi) such other matters
regarding the Hotel or its operation as any of the
attendees deem appropriate ("Annual Meeting").
Monthly Meetings shall be held telephonically unless either
party requests that a Monthly Meeting be held in person to
discuss material deviations from budget or other material
matters identified in advance of the meeting. Except to
the extent otherwise mutually agreed upon by Lessee, Owner
and Manager, all Monthly Meetings held in person, Quarterly
Meetings and Annual Meetings shall be held at the Hotel;
(xvi) Insurance. Manager shall procure and maintain throughout
the Term the insurance coverages set forth on Exhibit "D;"
(xvii) Chain Services. Lessee and Manager contemplate that
certain services (collectively, "Chain Services"), such as
advertising, training and computer payroll, can be provided
for the Hotel better, more efficiently and more
economically on a central, regional or group basis rather
than on an individual basis. Manager may provide Chain
Services to the
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Hotel, and in such event the Hotel's fair and equitable
share of the cost thereof shall constitute an operating
expense, so long as (i) the Manager or its affiliates are
not obligated to provide such services under the License
Agreement, (ii) the cost of the Chain Services shall be
allocated on a fair and equitable basis among the Hotel and
the other hotels benefitting therefrom; (iii) the basis for
such allocation shall be explained by Manager in each
Operating Budget; (iv) the costs of the Chain Services
shall be fair and reasonable and shall not exceed the costs
that would be charged by an unaffiliated third party and
(v) both the cost of the Chain Services and the allocation
of a share of that cost to the Hotel and other hotels
benefitting therefrom shall be subject to audit by Lessee
pursuant to the terms of Section 4.01(ix) of this
Agreement.
(xviii) G&A Expenses. Except to the extent permitted by Section
3.01(xiii), no part of Manager's central office overhead or
general or administrative expenses including the cost of
travel by Manager's corporate or regional officers or for
travel related to any other hotel operated by Manager or
its Affiliates shall be (i) deemed to be an operating
expense or (ii) reimbursed under Section 11.14 or any other
provision hereof.
(xix) Competitive Bidding. All contracts for repairs, capital
improvements, foods and services exceeding $10,000 shall be
awarded on the basis of competitive bidding. In its
operation of the Hotel under this Agreement, Manager may
purchase goods, supplies and services from itself or any
affiliated or subsidiary companies or individuals so long
as the prices and terms thereof are competitive with, and
are not less favorable than, prices and terms which could
be obtained from independent parties.
(xx) Labor Relations. All employees working at the Hotel are
and will be employees of the Manager, and are not and will
not be employees of the Lessee, the Owner or any of their
affiliates. None of such employees shall be offered,
receive or be eligible to receive any benefits offered to
or received by Lessee's employees. Prior to entering into
any collective bargaining agreement concerning any
employees of the Hotel, Manager will so inform Lessee, but
Lessee shall have not right of approval or disapproval, and
Manager shall have complete discretion and authority to
negotiate, enter into and perform such agreements.
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To the extent applicable, Manager: (a) represents that it
is an equal opportunity employer as described in Section
202 of Executive Order 11246 dated September 24, 1965, as
amended, and as such agrees to comply with the provisions
of Paragraphs 1 through 7 of Section 202 of said Executive
Order during the performance of this Operating Agreement,
(b) agrees to comply with the affirmative action
requirements of Part 60.741 of Title 41, Code of Federal
Regulations, with respect to handicapped workers during the
performance of this Operating Agreement, (c) agrees to
comply with the affirmative action requirements of Part
60.250 of Title 41, Code of Federal Regulations, with
respect to Disabled Veterans and Veterans of the Vietnam
Era during the performance of this Operating Agreement, and
(d) shall submit to Lessee in the form approved by the
Director of the Office of Federal Contract Compliance, U.S.
Department of Labor, a certification that Manager does not
and will not maintain any facilities that provide for their
employees in a segregated manner, or permit their employees
to perform their services at any location under its
control, where segregated facilities are maintained, and
that Manager will obtain a similar certification from its
contractors. By so agreeing, neither party intends to
imply that the aforementioned Executive Orders and federal
regulations are applicable to Manager.
(xxi) Capital Leases. Notwithstanding anything herein to the
contrary, all obligations and payments required under any
lease characterized as a capital obligation under generally
accepted accounting principles shall be owed and paid by
the Owner or Lessee, and not Manager, and such obligations
and payments shall not be an operating or capital expense
charged to the Hotel for purposes of this Agreement.
ARTICLE 4.
LESSEE'S OBLIGATIONS
SECTION 4.01. LESSEE'S OBLIGATIONS. During the Term, Lessee shall
have the obligations set forth below:
(i) License Agreement. Lessee shall comply with all of the
terms and conditions of the License Agreement (specifically
including, but not limited to, Licensee's obligation to pay
the fees, charges and contributions set forth in paragraph
3.C. of the License Agreement) and keep the License
Agreement in full force and effect from the Effective Date
through
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<PAGE> 41
the remainder of the Term. Nothing in this Agreement shall
be interpreted in a manner which would relieve Lessee of
any of its obligations under the License Agreement;
(ii) Licenses and Permits. Lessee shall obtain and maintain,
with Manager's assistance and cooperation, all governmental
permissions, licenses and permits necessary to enable
Manager to operate the Hotel in accordance with the terms
of this agreement and the License Agreement;
[(iii) PRE-OPENING FUNDS. TWO (2) DAYS PRIOR TO THE COMMENCEMENT
OF THE PRE-OPENING PROGRAM DESCRIBED IN SECTION 3.01(i),
LESSEE SHALL MAKE AN INITIAL DEPOSIT OF THE SUM SPECIFIED
ON EXHIBIT "B" IN THE PRE-OPENING BANK ACCOUNT(S).
THEREAFTER, LESSEE SHALL DEPOSIT SUCH FUNDS IN THE
PRE-OPENING BANK ACCOUNT(S) AS ARE SET FORTH IN THE FUNDING
SCHEDULE ATTACHED TO THE PRE-OPENING BUDGET;]
(iv) Operating Funds. Lessee shall provide all funds necessary
to enable Manager to arrange and operate the Hotel in
accordance with the terms of this Agreement and the License
Agreement. Lessee and Manager will agree on the amount of
funds to be delivered by Lessee to Manager for deposit into
the Bank Account(s) on the [OPENING DATE/EFFECTIVE DATE],
and thereafter will agree from time to time on the minimum
amount of funds to be maintained in the Bank Account, for
working capital for the Hotel's operations (as agreed by
the parties, the "Minimum Balance"). Lessee agrees, upon
Manager's written request, to immediately furnish Manager
with sufficient funds to make up any deficiency in the
agreed upon Minimum Balance;
(v) Capital Funds. Lessee or Owner shall, consistent with the
Operating Budget, expend such amounts for renovation
programs, furnishings, equipment and ordinary Hotel capital
replacement items as are required from time to time to (a)
maintain the Hotel in good order and repair; (b) comply
with the standards referred to in the License Agreement;
and (c) comply with governmental regulations and orders.
Lessee and Owner shall cooperate with Manager in
establishing appropriate procedures and timetables for
Lessee or Owner to undertake capital replacement projects.
Lessee shall have the right, but not the obligation,
exercisable in its sole discretion, to control, direct and
supervise all work on and expenditures for all capital
items and other non-
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routine items. If Lessee exercises the right described in
the previous sentence, Lessee shall solicit and consider
Manager's opinions on the nature, manner and timing of such
work and periodically apprise Manager of the progress of
such work and any material changes in the scope, manner or
timing of such work;
(vi) Payments to Manager. Lessee shall promptly pay to Manager
all amounts due Manager under this Agreement.
(vii) Representative. Lessee and Owner shall appoint a
representative to represent them in all matters relating to
this Agreement and/or the Hotel ("Representative"). The
initial Representative shall be the individual named on
Exhibit "B." Manager shall have the right to deal solely
with the Representative on all such matters. Manager may
rely upon statements and representations of the
Representative as being from and binding upon Lessee and
Owner. Lessee and Owner may change the Representative, or
appoint separate representatives, from time to time by
providing written notice to Manager in the manner provided
for herein. The Representative shall attend all Monthly
Meetings and Quarterly Meetings; and
(viii) Quiet and Peaceable Operation. Lessee shall ensure that
Manager is able to peaceably and quietly operate the Hotel
in accordance with the terms of this Agreement, free from
molestation, eviction and disturbance by Lessee or by any
other person or persons claiming by, through or under
Lessee. Lessee shall undertake and prosecute all
reasonable and appropriate actions, judicial or otherwise,
required to assure such quiet and peaceable operations by
Manager.
(ix) Amendments to Percentage Lease. Lessee will not execute
any amendments to the economic terms of the Percentage
Lease which, on a pro forma basis using Promus' Initial
Operating Budget (as defined in Section 3.01(v)), would
result in the Hotel producing Lessee GOP (as defined in
Exhibit C) equal to less than 5% of the budgeted gross
revenues of the Hotel set forth in the Initial Operating
Budget.
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<PAGE> 43
ARTICLE 5.
MANAGEMENT FEE
SECTION 5.01. MANAGEMENT FEE. Manager is authorized by Lessee to pay
itself from the Bank Account(s) the Management Fees calculated and payable in
the manner set forth on Exhibit "C."
ARTICLE 6.
CLAIMS AND LIABILITY
SECTION 6.01. CLAIMS AND LIABILITY. Lessee and Owner, for themselves
and on behalf of their affiliates, agree for the benefit of Manager, and
Manager, for itself and on behalf of its affiliates, agrees for the benefit of
Lessee and Owner, to look only to the appropriate insurance coverages in effect
pursuant to this Agreement in the event any demand, claim, action, damage,
loss, liability or expense occurs as a result of injury to person or damage to
property regardless of whether any such demand, claim, action, damage, loss,
liability or expense is caused or contributed to, by or results from the
negligence of Lessee or Manager or their subsidiaries, affiliates, employees,
directors, officers, agents or independent contractors and regardless whether
the injury to person or damage to property occurs in and about the Hotel or
elsewhere as a result of the performance of this Agreement. Nevertheless, in
the event the insurance proceeds are insufficient or there is no insurance
coverage to satisfy the demand, claim, action, loss, liability or expense and
the same did not arise out of the negligence or willful misconduct of Manager,
Lessee agrees, at its expense, to indemnify and hold Manager and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability. If such claim or
liability arises out of the gross negligence or willful misconduct of Manager
then Manager agrees at its expense to indemnify and hold Lessee and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability.
SECTION 6.02. SURVIVAL. The provisions of this Article 6 shall
survive any cancellation, termination or expiration of this Agreement and shall
remain in full force and effect until such time as the applicable statute of
limitations shall extinguish all demands, claims, actions, damages, losses,
liabilities or expenses which are the subject of the provisions of this Article
6.
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<PAGE> 44
ARTICLE 7.
CLOSURE, EMERGENCIES AND DELAYS
SECTION 7.01. EVENTS OF FORCE MAJEURE. If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease
operation of the Hotel in order to protect the Hotel and/or the health, safety
and welfare of the guests and/or employees of the Hotel for reasons beyond the
reasonable control of Manager, such as, but not limited to, acts of war,
insurrection, civil strife and commotion, labor unrest, governmental
regulations and orders, shortage or lack of adequate supplies or lack of
skilled or unskilled employees, contagious illness, catastrophic events or acts
of God ("Force Majeure"), then in such event or similar events Manager may
close and cease operation of all or any part of the Hotel, reopening and
commencing operation when Manager deems that such may be done without jeopardy
to the Hotel, its guests and employees.
Manager and Lessee agree, except as otherwise provided herein, that
the time within which either party is required to perform an obligation and
Manager's right to manage the Hotel under this Agreement shall be extended for
a period of time equivalent to the period of delay caused by an event of Force
Majeure.
SECTION 7.02. EMERGENCIES. If a condition of an emergency nature
should exist which requires that immediate repairs be made for the preservation
and protection of the Hotel, its guests or employees, or to assure the
continued operation of the Hotel, Manager is authorized to take all actions and
to make all expenditures necessary to repair and correct such condition,
regardless of whether provisions have been made in the applicable budget for
such emergency expenditures. Expenditures made by Manager in connection with
an emergency shall be paid, in Manager's sole discretion, out of the Bank
Account(s). Lessee shall immediately replenish such funds paid from the Bank
Account(s).
ARTICLE 8.
CONDEMNATION AND CASUALTY
SECTION 8.01. CONDEMNATION. If the Hotel is taken in any eminent
domain, expropriation, condemnation, compulsory acquisition or similar
proceeding by a competent authority, this Agreement shall automatically
terminate as of the date of taking or condemnation. Any compensation for the
taking or condemnation of the physical facility comprising the Hotel shall be
paid to Lessee. Manager, however, with the full cooperation of Lessee, shall
have the right to file a claim with the appropriate
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authorities for the loss of Management Fee income for the remainder of the Term
and any extension thereof because of the condemnation or taking, so long as
such claim can be filed in a separate proceeding and does not adversely affect
the payment to Lessee. If only a portion of the Hotel is so taken and the
taking does not make it unreasonable or imprudent, in Manager's and Lessee's
opinion, to operate the remainder as a hotel of the type immediately preceding
such taking, this Agreement shall not terminate. Any compensation shall be
used, however, in whole or in part, to render the Hotel a complete and
satisfactory architectural unit as a hotel of the same type and class as it was
immediately preceding such taking or condemnation. The foregoing provisions
are subject to the rights of any first mortgagee with respect to the Hotel.
SECTION 8.02. CASUALTY. In the event of a fire or other casualty,
Lessee shall comply with the terms of the License Agreement and this Agreement
shall remain in full force and effect so long as the License Agreement remains
in full force and effect, except that the Management Fee shall be abated until
any damage to the Hotel is repaired and the Hotel is open for business.
ARTICLE 9.
DEFAULT AND TERMINATIONS RIGHTS
SECTION 9.01. MANAGER DEFAULTS. Each of the following shall
constitute an Event of Default by Manager:
(i) If sufficient funds are available, and assuming that all
funds are expended in accordance with the terms of this
Agreement, the failure of Manager to pay to Lessee an
amount sufficient to fund the Lessee's obligations under
the Percentage Lease with respect to a month within ten
(10) days after the end of the month. If such a sum of
money is not paid on the date same becomes due and payable
under this Agreement, such sum shall bear interest from the
date due until actually paid at a rate equal to the lesser
of twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an operating expense under
this Agreement.
(ii) If sufficient funds are available, and assuming that all
funds are expended in accordance with the terms of this
Agreement, the failure of Manager to pay any other sum of
money to Lessee provided for herein when the same is
payable, if such failure is not cured within thirty (30)
days after written notice specifying such failure is given
by Lessee to
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Manager. If any sum of money is not paid within ten (10)
days following the date same becomes due and payable under
this Agreement, such sum shall bear interest from the date
due until actually paid at a rate equal to the lesser of
twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an operating expense under
this Agreement.
(iii) An assignment by Manager in violation of the provisions of
Section 11.05 hereof.
(iv) If Manager shall fail to keep, observe or perform any other
material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Manager, or
if Manager shall fail to obtain or maintain any required
Permits that Manager is required or permitted by law to
obtain or maintain, and such failure shall continue for a
period of thirty (30) days, provided that if such failure
is incapable of cure within such thirty (30) day period and
if Manager shall promptly, diligently and continuously
pursue the cure thereof, then Manager shall have a period
of ninety (90) days after notice thereof by Lessee to
Manager within which to effectuate the cure. If, at end of
such ninety (90) day period the cure has not been
effectuated notwithstanding Manager's diligent and
continuous attempts to cure, then at the request of
Manager, Lessee shall extend the cure period for up to an
additional thirty (30) days, if in Lessee's reasonable
opinion, the default is capable of cure within such
additional period as Lessee may permit and the extension
will not have a materially negative effect on the financial
performance of the Hotel.
(v) If because of any act or omission on the part of Manager,
and without the fault of Lessee, the License Agreement or
any other material license critical to the operation of the
Hotel is at any time suspended, terminated or revoked, and
such suspension, termination or revocation shall continue
unstayed and in effect for a period of more than ninety
(90) consecutive days in the Hotel shall otherwise be
suspended for a period of more than ninety (90) consecutive
days; in the event of any such suspension, termination or
revocation, Manager shall immediately proceed to use
Manager's best efforts to cause the prompt reinstatement of
such Agreement, license or right. If, at the end of such
ninety (90) day period the cure has not been effectuated
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notwithstanding Manager's diligent and continuous attempts
to cure, then at the request of Manager, Lessee shall
extend the cure period for up to an additional thirty (30)
days, if in Lessee's reasonable opinion, the default is
capable of cure within such additional period as Lessee may
permit and the extension will not have a materially
negative affect on the financial performance of the Hotel.
(vi) If Manager shall fail to maintain and operate the Hotel in
accordance with the standards required under Section 3.01
and such failure shall not be due to a refusal on the part
of Owner and Lessee to approve the Operating Budget
submitted by Manager under Section 3.01(v), or Lessee's
failure to provide funds requested pursuant to the
provision of Section 4.01(vii) and shall continue for a
period of thirty (30) days after written notice by Lessee
to Manager specifying the matters or conditions which
constitute the basis for such Event of Default, provided
that if such failure is incapable of cure within such
thirty (30) day period and if Manager shall promptly,
diligently and continuously pursue the cure thereof, then
Manager shall have a period of ninety (90) days after
notice thereof by Lessee to Manager within which to
effectuate the cure. If, at the end of such ninety (90)
day period the cure has not been effectuated
notwithstanding Manager's diligent and continuous attempts
to cure, then at the request of Manager, Lessee shall
extend the cure period for up to an additional thirty (30)
days, if in Lessee's reasonable opinion, the default is
capable of cure within such additional period as Lessee may
permit and the extension will not have a materially
negative affect on the financial performance of the Hotel.
(vii) If Manager shall apply for or consent to the appointment of
a receiver, trustee or liquidator of Manager or of all of a
substantial part of its assets, admit in writing its
inability to pay its debts as they come due, make a general
assignment for the benefit of creditors, take advantage of
any insolvency law, or file an answer admitting the
material allegations of a petition filed against Manager in
any bankruptcy, reorganization or judgment or decree shall
be entered by any court of competition jurisdiction, on the
application of a creditor, adjudicating Manager bankrupt or
insolvent or approving a petition seeking reorganization of
Manager or appointing a receiver, trustee or liquidator of
Manager or of all of its assets or a
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decree shall continue unstayed and in effect for any period
of 90 consecutive days.
(viii) The filing of a voluntary petition in bankruptcy or
insolvency or a petition for liquidation or reorganization
under any bankruptcy law by Manager, or Manager shall
consent to, acquiesce in, or fail timely to controvert, an
involuntary petition in bankruptcy, insolvency or an
involuntary petition for liquidation or reorganization
filed against it.
(ix) The filing against Manager of a petition seeking
adjudication of Manager as insolvent or seeking liquidation
or reorganization or appointment of a receiver, trustee or
liquidator of all or a substantial part of Manager's
assets, if such petition is not dismissed within 90 days.
(x) Failure of Manager (but excluding such a failure which
results from the default by Lessee in paying amounts
payable hereunder by Lessee) to maintain at all times
throughout the term hereof all of the insurance required to
be maintained by Manager hereunder, if such failure is not
cured within 30 days after written notice specifying such
failure is given by Lessee to Manager.
(xi) If there shall occur an Event of Default or Termination
under the Percentage Lease due to Manager default
hereunder.
(xii) If there shall occur a default under the License Agreement
which may, if uncured, permit licensor to terminate the
License Agreement and such default shall continue beyond
applicable grace periods, if any.
(xiii) The occurrence of an event or transaction after which the
Manager is no longer owned or controlled by the franchisor
under the License Agreement.
SECTION 9.02. LESSEE DEFAULTS. Each of the following shall constitute
an Event of Default by Lessee:
(i) The failure of Lessee to pay or furnish to Manager any
money Lessee is required to pay or furnish to Manager in
accordance with the terms hereof on the date the same is
payable, if such failure is not cured within 30 days after
written notice specifying such failure is given by Manager
to Lessee. If any sum of money is not paid within ten (10)
days following the date same becomes due and payable under
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this Agreement, such sum shall bear interest from the date
due until actually paid at a rate equal to the lesser or
twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an Operating Expense under
this Agreement.
(ii) If Lessee shall apply for or consent to the appointment of
a receiver, trustee or liquidator of Lessee of all or a
substantial part of its assets, or admit in written its
inability to pay its debts as they come due, make a general
assignment for the benefit of creditors, take advantage of
any insolvency law, or file an answer admitting the
material allegations of a petition filed against Lessee in
any bankruptcy, reorganization or insolvency proceeding, or
if an order, judgment or decree shall be entered by any
court of competent jurisdiction, on the application of a
creditor, adjudicating Lessee a bankrupt or insolvent or
approving a petition seeking reorganization of Lessee or
appointing a receiver, trustee or liquidator of Lessee or
of all or a substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect
for any period of sixty (60) consecutive days.
(iii) The filing of a voluntary petition in bankruptcy or
insolvency or a petition for liquidation or reorganization
under any bankruptcy law by Lessee, or Lessee shall consent
to, acquiesce in, or fail timely to controvert, an
involuntary petition in bankruptcy, insolvency or an
involuntary petition for liquidation or reorganization
filed against it.
(iv) The filing against Lessee of a petition seeking
adjudication of Lessee as insolvent or seeking liquidation
or reorganization or appointment of a receiver, trustee or
liquidator of all or a substantial part of Lessee's assets,
if such petition is not dismissed within 90 days.
(v) Failure of Lessee or Owner to maintain at all times
throughout the term hereof all of the insurance required to
be maintained by Lessee under Section 4.01(iii), if such
failure is not cured within 30 days after written notice
specifying such failure is given by Manager to Lessee.
(vi) The failure of Lessee to perform, keep or fulfill any of
the other covenants, undertakings, obligations or
conditions set forth in this Agreement, or the
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failure of Lessee to approve expenditures or to authorize
procedures necessary to maintain the standards of the Hotel
in accordance with the License Agreement, if such failure
is not cured within 60 days after written notice specifying
such failure is given by Manager to Lessee, provided,
however, that if such failure is incapable of cure within
said 60 day period, and Lessee proceeds during such 60 day
period, and Lessee proceeds during such 60 day period to
commence to cure with all due diligence such failure until
the same is cured, then no Event of Default shall be in
existence under this Paragraph.
SECTION 9.03. TERMINATION UPON EVENT OF DEFAULT; OTHER REMEDIES. Upon
the occurrence of an Event of Default, the non-defaulting party may: (i)
terminate this Agreement, effective thirty (30) days after the giving of
written notice of termination to the defaulting party, provided that
termination may be effective immediately in the case of willful misconduct,
criminal conduct or misappropriation of funds; and (ii) pursue any and all
other remedies available to the non-defaulting party at law or in equity.
SECTION 9.04. TERMINATION FOR FAILURE TO ACHIEVE FINANCIAL RESULTS.
(a) Notwithstanding anything to the contrary in this Agreement,
Lessee shall have the right to terminate the Agreement in accordance
with this Section 9.04 in the event that at the end of any of the
consecutive twelve months periods (each, a "Test Period") beginning
with [APRIL] 1997, the GOP (as defined in Exhibit C) for the Hotel
for the Test Period was less than 5% of the gross revenues for the
Hotel (the "Minimum Margin") for such period, provided that:
(i) The default will be cured if at the end of the six
month period immediately subsequent to the Test Period in
which the GOP was less than the Minimum Margin (a "Cure
Period"), the GOP for the twelve month period then ended is
at least equal to the Minimum Margin.
(ii) If such a default is not cured at the end of a Cure
Period, Manager may cure such default, by making a cash
payment to the Lessee, within 21 days after the end of the
period (a "Shortfall Payment"), equal to the difference
between (i) the GOP for (A) the Test Period and (B) the
Cure Period and (ii) the Minimum Margin for such periods.
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(iii) If Manager cures such a default by making a
Shortfall Payment, the Management Agreement may be
terminated, at the Lessee's option, if the GOP is less than
the Minimum Margin for either (A) the Test Period ending 6
months after the end of the Cure Period or (B) any
subsequent Test Period, unless, within 15 days after the
end of that Test Period, Manager makes a second Shortfall
Payment equal to the difference between (i) the GOP for
that Test Period and (ii) the Minimum Margin for such
periods.
(iv) Manager may make only two Shortfall Payments and
shall have only one Cure Period.
(v) Without in any way limiting or affecting the Lessee's
right to terminate this Agreement on the terms and upon the
occurrences described above, Lessee will consider in
determining whether to exercise such rights, market
conditions, unforseen occurrences and any other relevant
facts which may have affected the performance of the Hotel.
The provisions of this Section 9.04(a) shall not apply to
the Hotel in any Test Period in which the operation of the
Hotel, or the use of the Hotel's facilities, are
significantly disrupted by casualty loss, strike, eminent
domain, or events of Force Majeure that are beyond the
reasonable control of Manager.
(b) If Lessee elects to terminate this Agreement under Section
9.04, such right may be exercised provided that (i) notice of
termination shall be given within sixty (60) days after the receipt by
Lessee of the annual accounting for such fiscal period; and (ii) the
notice shall specify a termination date no sooner than ninety (90)
days after the giving of such notice.
SECTION 9.05. MANAGER'S EARLY TERMINATION RIGHT. Manager, at its
option, may terminate this Agreement upon sixty (60) days written notice to
Lessee.
SECTION 9.06. RIGHT TO TERMINATE UPON SALE OR FORECLOSURE.
(a) Upon any sale by Owner of the Hotel, Lessee shall have the
right to terminate this Agreement ; provided, however, that the Lessee shall
provide to Manager within 120 days of such sale either (i) a cash amount equal
to 50% of the fair market value (as determined under the Percentage Lease) of
the Lessee's then-remaining leasehold estate in the Hotel as of the closing
date of the sale (the "Cash Amount") or (ii) written notice of its offer to
have Manager manage a substitute hotel facility (a "Substitute Hotel") under a
comparable Management Agreement; provided further, however, that if the Lessee
provides Manager
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with an offer to manage a Substitute Hotel and Manager rejects the offer within
15 days, Lessee shall deliver the Cash Amount to Manager within 10 days of such
rejection.
(b) Lessee shall also have the right to terminate this
Agreement upon a foreclosure by, the taking of possession by or a transfer in
lieu of foreclosure to a holder of a lien on the Hotel, without penalty to the
Lessee. The rights of the Lessee hereunder may be assigned to any first
mortgagee of the Hotel and exercised by such assignee.
SECTION 9.07. EMPLOYMENT SOLICITATION RESTRICTION UPON TERMINATION.
Lessee and its affiliates and subsidiaries and their successors hereby agree
not to solicit the employment of the Hotel general manager or assistant general
manager at any time during the term of this Agreement without Manager's prior
written approval. Furthermore, Lessee and its affiliates and subsidiaries and
successors agree not to employ the Hotel's general manager or assistant general
manager for a period of twelve (12) months after the termination or expiration
of this Agreement, without Manager's prior written approval.
ARTICLE 10.
APPLICABLE LAW AND ARBITRATION
SECTION 10.01. APPLICABLE LAW. The interpretation, validity and
performance of this Agreement shall be governed by the procedural and
substantive laws of the state where the Hotel is located and any and all
disputes, except those specifically referred to below, shall be brought and
maintained within that state. If any judicial authority holds or declares that
the law or another jurisdiction is applicable, this Agreement shall remain
enforceable under the laws of that jurisdiction.
SECTION 10.02. ARBITRATION OF FINANCIAL MATTERS.
SUBSECTION 10.02.1. MATTERS TO BE SUBMITTED TO ARBITRATION. In the
case of a dispute with respect to any of the following matters, either party
may submit such matter to arbitration which shall be conducted by the
Accountants (as hereinafter defined in Subsection 10.02.2);
<TABLE>
<S> <C>
(a) computation of the Management Fees;
(b) reimbursements due to Manager under the
provisions of Section 11.15;
(c) any adjustment in the Minimum Balance under
the provisions of Section 4.01(v); and
(d) any adjustment in dollar amounts of insurance
coverages required to be
maintained.
</TABLE>
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All disputes concerning the above matters shall be submitted to the
Accountants. The decision of the Accountants with respect to any matters
submitted to them under this Subsection 10.02.1 shall be binding on both
parties hereto.
SUBSECTION 10.02.2. THE ACCOUNTANTS. The "Accountants"
shall be one of three (3) firms of certified public accountants of recognized
national standing in the hotel industry. Until otherwise agreed to by the
parties, the three (3) firms shall be Arthur Andersen & Co., Coopers and
Lybrand, and Pannell Kerr Forster, notwithstanding any existing relationships
which may exist between Lessee and such accounting firms or Manager and such
accounting firms. The party desiring to submit any matter to arbitration under
Subsection 10.02.1 shall do so by written notice to the other party, which
notice shall set forth the items to be arbitrated and such party's choice of
one of the three (3) accounting firms. The party receiving such notice shall
within fifteen (15) days after receipt of such notice either approve such
choice, or designate one of the remaining two (2) firms by written notice back
to the first party, and the first party shall within fifteen (15) days after
receipt of such notice either approve such choice or disapprove the same. If
both parties shall have approved one of the three (3) firms under the preceding
sentence, then such firm shall be the "Accountants" for the purposes of
arbitrating the dispute; if the parties are unable to agree on an accounting
firm, then the third firm, which was not designated by either party, shall be
the "Accountants" for such purpose. The Accountants shall be required to
render a decision in accordance with the procedures described in Subsection
10.02.3 within fifteen (15) days after being notified of their selection. The
fees and expenses of the Accountants will be paid by the non-prevailing party.
SUBSECTION 10.02.3. PROCEDURES. In all arbitration proceedings
submitted to the Accountants, the Accountants shall be required to agree upon
and approve the substantive position advocated by Lessee or Manager with
respect to each disputed item. Any decision rendered by the Accountants that
does not reflect the position advocated by Lessee or Manager shall be beyond
the scope of authority granted to the Accountants and, consequently, may be
overturned by either party. All proceedings by the Accountants shall be
conducted in accordance with the Uniform Arbitration Act, except to the extent
the provisions of such act are modified by this Agreement or the mutual
agreement of the parties. Unless otherwise agreed, all arbitration proceedings
shall be conducted at the Hotel.
SECTION 10.03. PERFORMANCE DURING DISPUTES. It is mutually agreed
that during any kind of controversy, claim, disagreement or dispute, including
a dispute as to the validity of this Agreement, Manager shall remain in
possession of the Hotel as
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<PAGE> 54
Manager; and Lessee and Manager shall continue their performance of the
provisions of this Agreement and its exhibits, but unless otherwise agreed by
the parties all funds shall be held in a separate escrow account pending the
resolution of such dispute. Either party shall be entitled to injunctive
relief from a civil court or other competent authority to maintain possession
in the event of a threatened eviction during any dispute, controversy, claim or
disagreement arising out of this Agreement.
ARTICLE 11.
GENERAL PROVISIONS
SECTION 11.01. AUTHORIZATION. Lessee and Manager represent and
warrant to each other that their respective corporations have full power and
authority to execute this Agreement and to be bound by and perform the terms
hereof. On request, each party shall furnish the other evidence of such
authority.
SECTION 11.02. RELATIONSHIP. Manager and Lessee shall not be
construed as joint venturers or partners of each other by reason of this
Agreement and neither shall have the power to bind or obligate the other except
as set forth in this Agreement.
SECTION 11.03. MANAGER'S CONTRACTUAL AUTHORITY IN THE PERFORMANCE OF
THIS AGREEMENT. Manager is authorized to make, enter into and perform in the
name of and for the account of Lessee any contracts deemed necessary by Manager
to perform its obligations under this Agreement.
SECTION 11.04. FURTHER ACTIONS. Lessee and Manager agree to execute
all contracts, agreements and documents and to take all actions necessary to
comply with the provisions of this Agreement and the intent hereof.
SECTION 11.05. SUCCESSORS AND ASSIGNS. Subject to Section 9.01(vii),
the acquisition of Manager or its parent company by a third party shall not
constitute an assignment of this Agreement by Manager and this Agreement shall
remain in full force and effect between Lessee and Manager. Except as herein
provided, Manager shall not assign any of its obligations hereunder without the
prior written consent of Lessee, which shall not be unreasonably withheld or
delayed. Lessee shall be deemed to have consented to such an assignment of
this Agreement if Lessee has not notified Manager in writing to the contrary
within fifteen (15) business days after Lessee has received Manager's request
for Lessee's consent to an assignment. Manager shall have the right to pledge
or assign its right to receive the Management Fees hereunder without the prior
written consent of Lessee. In the event of any such pledge or assignment,
Lessee shall have no right of set off, counterclaim or defense of payment
against assignee. Lessee's sole remedy for breach of Manager's
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<PAGE> 55
obligations under this agreement shall be suit for damages or specific
performance against Manager.
Lessee shall have the right to assign this Agreement to (i) the person
or entity which has obtained title to the Hotel and a Homewood Suites
Commitment Agreement or License Agreement for the Hotel or (ii) any mortgagee
in connection with any mortgage placed on the Hotel. Except as hereinabove
provided, Lessee shall not have the right to assign this Agreement.
SECTION 11.06. NOTICES. All notices or other communications provided
for in this Agreement shall be in writing and shall be either hand delivered,
delivered by certified mail, postage prepaid, return receipt requested,
delivered by an overnight delivery service, or delivered by facsimile machine
(with an executed original sent the same day by an overnight delivery service),
addressed as set forth on Exhibit "B." Notices shall be deemed delivered on
the date that is four (4) calendar days after the notice is deposited in the
U.S. mail (not counting the mailing date) if sent by certified mail, or, if
hand delivered, on the date the hand delivery is made, or if delivered by
facsimile machine, on the date the transmission is made. If given by an
overnight delivery service, the notice shall be deemed delivered on the next
business day following the date that the notice is deposited with the overnight
delivery service. The addresses given above may be changed by any party by
notice given in the manner provided herein.
SECTION 11.07. DOCUMENTS. Lessee shall furnish Manager copies of all
leases, title documents, property tax receipts and bills, insurance statements,
all financing documents (including notes and mortgages) relating to the Hotel
and such other non-confidential documents pertaining to the Hotel as Manager
shall reasonably request.
SECTION 11.08. DEFENSE. Manager shall defend and/or settle any claim
or legal action brought against Manager or Lessee, individually, jointly or
severally in connection with the operation of the Hotel. Manager shall, with
the consent of Lessee, retain and supervise legal counsel, accountants and such
other professionals, consultants and specialists as Manager deems appropriate
to defend and/or settle any such claim or cause of action, with the consent of
Lessee. All liabilities, costs, and expenses, including attorneys' fees and
disbursements, incurred in defending and/or settling any such claim or legal
action which are not covered by insurance and which were not caused by the
gross negligence or willful misconduct of Manager, its officers, directors,
employees, or agents shall be paid by Lessee.
SECTION 11.09. WAIVERS. No failure or delay by Manager or Lessee to
insist upon the strict performance of any covenant, agreement, term or
condition of this Agreement, or to exercise
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<PAGE> 56
any right or remedy consequent upon the breach thereof, shall constitute a
waiver of any such breach or any subsequent breach of such covenant, agreement,
term or condition. No covenant, agreement, term, or condition of this
Agreement and no breach thereof shall be waived, altered or modified except by
written instrument. No waiver of any breach shall affect or alter this
Agreement, but each and every covenant, agreement, term and condition of this
Agreement shall continue in full force and effect with respect to any other
then existing or subsequent breach thereof.
SECTION 11.10. CHANGES. Any change to or modification of this
Agreement including, without limitation, any change in the application of this
Agreement to the Hotel, must be evidenced by a written document signed by both
parties hereto.
SECTION 11.11. CAPTIONS. The captions for each Article and Section
are intended for convenience only.
SECTION 11.12. SEVERABILITY. If any of the terms and provisions
hereof shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any of the other terms or provisions hereof.
If, however, any material part of a party's rights under this Agreement shall
be declared invalid or unenforceable (specifically including Manager's right to
receive its Management Fees), the party whose rights have been declared invalid
or unenforceable shall have the option to terminate this Agreement upon thirty
(30) days written notice to the other party, without liability on the part of
the terminating party.
SECTION 11.13. INTEREST. Any amount payable to Manager or Lessee by
the other which has not been paid when due shall accrue interest at the lesser
of: (a) the highest legal limit in the state in which the Hotel is located or
(b) two percentage points (2%) over the published base rate of interest charged
by Citibank, N.A., New York, New York, to borrowers on ninety (90) day
unsecured commercial loans, as the same may be changed from time to time.
SECTION 11.14. REIMBURSEMENT. The performance by Manager of its
responsibilities under this Agreement are conditioned upon Lessee providing
sufficient funds consistent with the Operating Budget to Manager on a timely
basis to enable Manager to perform its obligations hereunder. Nevertheless,
Manager shall be entitled, at its option, to advance funds or contribute
property, on behalf of the Lessee, to satisfy obligations of Lessee in
connection with the Hotel and this Agreement. Manager shall keep appropriate
records to document all reimbursable expenses paid by Manager, which records
shall be made available for inspection by Lessee or its agents upon request.
Lessee agrees to reimburse Manager with interest upon demand for money paid or
property contributed by Manager to satisfy obligations of Lessee in
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<PAGE> 57
connection with the Hotel and this Agreement. Interest shall be calculated at
the rate set forth in Section 11.13 from the date Lessee was obligated to remit
the funds or contribute the property for the satisfaction of such obligation to
the date reimbursement is made.
SECTION 11.15. TRAVEL AND OUT-OF-POCKET EXPENSES. Manager shall be
reimbursed for all travel and out-of-pocket expenses of Manager's employees
reasonably incurred in the performance of this Agreement, but not to exceed
amounts included therefor in the Operating Budget. Manager shall have sole
discretion, which shall not be unreasonably exercised, to determine the
necessity for such travel or other expenses.
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<PAGE> 58
SECTION 11.16. THIRD PARTY BENEFICIARY. This Agreement is
exclusively for the benefit of the parties hereto and it may not be enforced by
any party other than the parties to this Agreement and shall not give rise to
liability to any third party other than the authorized successors and assigns
of the parties hereto, specifically including any mortgagee to which the rights
of the Lessee have been assigned.
SECTION 11.17. BROKERAGE. Manager and Lessee represent and warrant
to each other that neither has sought the services of a broker, finder or agent
in this transaction, and neither has employed, nor authorized, any other person
to act in such capacity. Manager and Lessee each hereby agrees to indemnify
and hold the other harmless from and against any and all claims, loss,
liability, damage or expenses (including reasonable attorneys' fees) suffered
or incurred by the other party as a result of a claim brought by a person or
entity engaged or claiming to be engaged as a finder, broker or agent by the
indemnifying party.
SECTION 11.18. SURVIVAL OF COVENANTS. Any covenant, term or
provision of this Agreement which, in order to be effective, must survive the
termination of this Agreement, shall survive any such termination.
SECTION 11.19. ESTOPPEL CERTIFICATE. Manager and Lessee agree to
furnish to the other party, from time to time upon request, an estoppel
certificate in such reasonable form as the requesting party may request stating
whether there have been any defaults under this Agreement known to the party
furnishing the estoppel certificate and such other information relating to the
Hotel as may be reasonably requested.
SECTION 11.20. OTHER AGREEMENTS. Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall
be deemed to modify any other agreement between Lessee and Manager with respect
to the Hotel or any other property.
SECTION 11.21. PERIODS OF TIME. Whenever any determination is to be
made or action is to be taken on a date specified in this Agreement, if such
date shall fall on a Saturday, Sunday or legal holiday under the laws of the
state in which the Hotel is located, then in such event said date shall be
extended to the next day is not a Saturday, Sunday or legal holiday.
SECTION 11.22. PREPARATION OF AGREEMENT. This Agreement shall not be
construed more strongly against either party regardless of who is responsible
for its preparation.
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<PAGE> 59
SECTION 11.23. EXHIBITS. All exhibits attached hereto are
incorporated herein by reference and made a part hereof as if fully rewritten
or reproduced herein.
SECTION 11.24. ATTORNEY'S FEES AND OTHER COSTS. The parties to this
Agreement shall bear their own attorneys' fees in relation to negotiating and
drafting this Agreement. Should Lessee or Manager engage in litigation to
enforce their respective rights pursuant to this Agreement, the prevailing
party shall have the right to indemnity by the non- prevailing party for an
amount equal to the prevailing party's reasonable attorneys' fees, court costs
and expenses arising therefrom.
SECTION 11.25. COUNTERPARTS. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an original.
SECTION 11.27. CAPITALIZED TERMS. Capitalized terms used but not
defined herein shall be as defined in the Exhibits hereto, which shall be
incorporated by reference herein and deemed a part hereof as if fully set forth
herein.
[Signature Page to Follow]
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<PAGE> 60
The parties have respectively caused this Agreement to be executed as
of the respective dates shown below.
<TABLE>
<S> <C>
LESSEE:
------
WINSTON HOSPITALITY, INC.
By: /s/
- - ---------------------------- ------------------------------------------
Witness John B. Harris, Jr.
Its: President
MANAGER:
-------
PROMUS HOTELS, INC.
By:
- - -------------------------- ------------------------------------------
Witness
Its:
-----------------------------------------
OWNER:
-----
WINN LIMITED PARTNERSHIP, which is a signatory
hereto only to evidence its agreement to the
obligations set forth in Sections 4.01(iii)
and (v) and as a third party beneficiary to
Sections 3.01(v) - (vii), (xii), (xiv) -
(xvi), (xx), 9.06 and Exhibit D
By: Winston Hotels, Inc., its general partner
By: /s/
- - --------------------------- -------------------------------------------
Witness Robert W. Winston, III
Its: President
</TABLE>
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<PAGE> 61
EXHIBIT "A"
LICENSE AGREEMENT
<PAGE> 62
EXHIBIT "B"
DEAL SPECIFIC TERMS
DEFINITIONS: The following terms which are used but not defined in the
Agreement or otherwise in the exhibits shall have the respective meanings
specified below:
"Purchase Agreement" shall mean the purchase agreement dated
______________ between Owner and Promus.
"Percentage Lease" shall mean the percentage lease agreement dated
___________, 1996 between Lessee and Owner relating to the Hotel,
which is attached hereto as Exhibit B-1.
TERM: The term of this Management Agreement shall equal the term of the
Percentage Lease.
[INITIAL DEPOSIT IN PRE-OPENING BANK ACCOUNT(S):]
INITIAL MINIMUM BALANCE FOR THE BANK ACCOUNT(S):
INITIAL REPRESENTATIVE:
DISBURSEMENT PRIORITY SCHEDULE:
Each fiscal month Manager, on behalf of Lessee, shall disburse funds
from the Bank Account(s) in the following order of priority and to the extent
available:
(a) the Management Fee to the extent not subordinated to
payments required under the Percentage Lease;
(b) all fees, assessments and charges due and payable under the
Commitment Agreement and License Agreement when issued;
(c) all reimbursable expenses due Manager;
(d) all other Hotel operating costs, as such costs and expenses
are defined under the accounting practices of Manager in
conformity with generally accepted accounting practices
consistently applied, specifically including, but not
limited to, (i) the cost of operating equipment and
operating supplies, wages, salaries and employee fringe
benefits, advertising and promotional expenses, the cost of
B-1
<PAGE> 63
personnel training programs, utility and energy costs,
operating licenses and permits, grounds and landscaping
maintenance costs and equipment rentals approved by Manager
as an operating cost; (ii) all expenditures made for
maintenance and repairs to keep the Hotel in good condition
and repair, specifically excluding expenditures for Capital
Replacements; (iii) premiums and charges on the insurance
coverages specified in Exhibit "D" incurred after the
[OPENING DATE/EFFECTIVE DATE]; and (iv) any lease payments
(other than payments under the Percentage Lease). There
shall be excluded from the operating costs of the Hotel the
following, which shall be ownership costs of the Hotel:
(i) depreciation of the Hotel, furnishings, fixtures and
equipment; (ii) rental pursuant to a ground lease, if any,
or any other lease payments; (iii) debt service (interest
and principal) on any mortgage(s) encumbering the Hotel;
(iv) property taxes and assessments; [(V) AMORTIZATION OF
PRE-OPENING EXPENSES;] (vi) expenditures for Capital
Replacements; (vii) audit, legal and other professional or
special fees; (viii) equipment rentals approved by Manager
as an ownership cost; (ix) administrative and general
expenses and disbursements of Lessee, including
compensation of employees of Lessee; (x) Federal, State and
local Franchise and Income Taxes; (xi) amortization of bond
discounts and mortgage expenses; and (xii) such other costs
or expenses which are normally treated as ownership costs
under the accounting practices of Manager in conformity
with generally accepted accounting practices consistently
applied;
(e) Amounts payable or accrued under the Percentage
Lease; and
(f) the balance of the Management Fee.
After the disbursements set forth above, any excess funds remaining in
the Bank Account(s) over the Minimum Balance shall be distributed to Lessee.
If after making the disbursements set forth above, there shall be a deficiency
in the Minimum Balance, Lessee shall immediately provide such funds as may be
required to maintain the Minimum Balance in the Bank Account(s).
<TABLE>
<S> <C> <C>
NOTICES: LESSEE: MANAGER:
Winston Hospitality, Promus Hotels, Inc.
Inc. 755 Crossover Lane
2209 Century Drive Memphis, TN 38117
Suite __ Fax: 901/374-5050
</TABLE>
B-2
<PAGE> 64
<TABLE>
<S> <C>
Fax: (919) 571-7330 Attn: Corporate Secretary
Attn: President
OWNER:
WINN Limited Partnership
c/o Winston Hotels, Inc.
2209 Century Drive
Suite 300
Fax: (919) 571-7330
Attn: President
</TABLE>
B-3
<PAGE> 65
EXHIBIT "C"
MANAGEMENT FEES
The "Management Fee" shall mean and refer to a fee equal to the
greater of (i) 1% of the Adjusted Gross Revenues (as hereinafter defined) from
the Hotel or (ii) (A) 50% of the Lessee's "Gross Operating Profit" ("GOP") for
the Hotel plus, (B) if the Lessee's GOP exceeds 5% of the gross revenues of the
Hotel, (x) 100% of such excess up to an amount equal to 1% of the gross
revenues of the Hotel and (y) 50% of such excess thereafter. The Lessee's GOP
means the Gross Revenues of the Hotel for a period, less all operating expenses
borne by the Lessee (which does not include real property taxes and casualty
insurance premiums, which are paid by Owner or Winston Hotels, Inc., a North
Carolina corporation and the general partner of Owner ("WHI"), and less any
amounts payable by the Lessee for the period under the Percentage Lease. The
Management Fee will be payable monthly, in arrears, within 30 days after the
end of the month.
If WHI, Owner and their affiliates have not spent at least
$50 million to develop hotels with franchises offered by Manager in the four
year period ending April __, 2000 (the "Development Period"), the Management
Fee for the Hotel shall adjust upward, beginning on that date but not
retroactively for any previous period, by substituting "60%" for "50%" in the
fee calculation described above. The amount spent shall include amounts
budgeted to be spent completing hotels on which development has commenced in
the Development Period. The Management fee for the Hotel payable for any
period in excess of 1% of the Adjusted Gross Revenues of the Hotel for the
period shall be subordinated to the payment of rent for such period under the
Percentage Lease.
The term "Gross Revenues" shall be defined as all revenues and income
of any nature derived directly or indirectly from the Hotel or from the use or
operation thereof, whether on or off the site, including total room sales, food
and beverage sales, if any, laundry, telephone, telegraph and telex revenues,
other income, rental or other payments from lessees, sublessees, licensees and
concessionaires (but not the gross receipts of such lessees, sublessees,
licensees or concessionaires) and the proceeds of business interruption, use,
occupancy or similar insurance.
The term "Adjusted Gross Revenues" shall be defined as Gross Revenues
less the following revenues actually received by the Hotel and included in
Gross Revenues: (i) any gratuities or service charges added to a customer's
bill; (ii) any credits or refunds made to customers, guests or patrons; (iii)
any sums and credits received by Lessee for lost or damaged merchandise; (iv)
C-1
<PAGE> 66
any sales taxes, excise taxes, gross receipt taxes, admission taxes,
entertainment taxes, tourist taxes or charges; (v) any proceeds from the sale
or other disposition of the Hotel, furnishings and equipment or other capital
assets; (vi) any fire and extended coverage insurance proceeds; (vii) any
condemnation awards; (viii) any proceeds of financing or refinancing of the
Hotel; (ix) commissions, (x) refunds, (xi) vendor payments and splits, and
(xii) any interest on the Bank Account(s).
C-2
<PAGE> 67
EXHIBIT "D"
INSURANCE
In accordance with Section 3.01(xvi), Manager shall, on behalf of
Lessee and at Lessee's expense, procure the insurance coverages hereinafter set
forth and ensure that they are in full force and effect at the time the Term
commences and that they remain in full force and effect throughout the Term of
this Agreement. All cost(s) and expense(s) incurred by Manager in procuring
the following insurance coverages shall be [PRE-OPENING EXPENSES IF INCURRED
PRIOR TO THE OPENING DATE AND] operating costs [IF INCURRED AFTER THE OPENING
DATE] and shall be paid from [THE PRE-OPENING BANK ACCOUNT(S) AND] the Bank
Account(s) [RESPECTIVELY]:
<TABLE>
<CAPTION>
Coverages: Amounts Of Insurance:
- - --------- --------------------
<S> <C>
Comprehensive General Liability $10,000,000
------------------------------- per location
Including -
Premises - Operations
Products/Completed Operations
Contractual
Personal Injury
Liquor Liability/Dram Shop
(if applicable)
Elevators and Escalators
Automobile Liability $10,000,000
--------------------
Owned Vehicles
Non-Owned Vehicles
Uninsured Motorist where
Required by Statute
Automobile Physical Damage (Optional)
--------------------------
Comprehensive (To Value
Collision if insured)
Workers' Compensation Statutory
---------------------
Employer's Liability $1,000,000
--------------------
Fidelity (Employee Dishonesty) As required
--------
Money and Securities As required
--------------------
</TABLE>
D-1
<PAGE> 68
<TABLE>
<S> <C>
Protective Liability $5,000,000
--------------------
All risks from construction
and renovation projects costing
more than $250,000 occurring
after the Effective Date
Builders Risk Completed value of the Hotel
-------------
All risk for term of Hotel
construction and renovation
Subsequent to the Effective Date.
</TABLE>
Business Interruption
Blanket Coverage for the perils insured against under Real and
Personal Property in this Exhibit "D." This coverage shall
specifically cover Manager's loss of Management Fees. The business
interruption insurance shall be for a twelve (12) month indemnity
period. Calculated yearly based on estimated Hotel revenues.
All insurance coverages provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to
do business in the state in which the Hotel is located; and (ii) that are of
good reputation and of sound and adequate financial responsibility, having a
Bests Rating of B+ VI or better, or a comparable rating if Bests ceases to
publish its ratings or materially changes its rating standards or procedures.
Manager shall deliver to Owner and Lessee duly executed certificates
of insurance with respect to all of the policies of insurance procured,
including existing, additional and renewal policies.
Each policy of insurance maintained in accordance with this Exhibit
"D," to the extent obtainable, shall specify that such policies shall not be
canceled or materially changed without at least thirty (30) days prior written
notice to Owner, Lessee and Manager.
Except as otherwise provided in the Agreement, Manager and Lessee each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
of
D-2
<PAGE> 69
whether any such claim or demand may arise because of the fault or negligence
of the other party or its subsidiaries, affiliates, officers, employees,
directors, agents or independent contractors. Each policy of insurance
maintained in accordance with this Exhibit "D" shall insure against the
negligent acts of a party hereto and shall contain a specific waiver of
subrogation reflecting the above.
All policies of insurance provided for under this Exhibit "D" shall be
carried in the name of the Manager. Lessee's interests, Owner's interests, and
the interests of any other applicable party will be included in the coverage by
an additional insured endorsement.
All such policies of insurance shall be written on an "occurrence"
basis to the extent obtainable in the insurance market.
Either Manager or Lessee, by notice to the other, shall have the right
to require that the minimum amount of insurance to be maintained with respect
to the Hotel under this Exhibit "D" be increased to make such insurance
comparable with prudent industry standards and to reflect increases in
liability exposures, taking into account the size and location of the Hotel.
[LESSEE AND OWNER HEREBY AUTHORIZE MANAGER TO UTILIZE THE SERVICES OF
AND/OR PLACE THE INSURANCE SET FORTH IN THIS EXHIBIT "D" WITH (I) ANY
SUBSIDIARY OR AFFILIATED COMPANY OF PROMUS HOTEL CORPORATION OR ITS SUCCESSOR
CORPORATION IN THE INSURANCE BUSINESS AS MANAGER DEEMS APPROPRIATE, OR (II) A
THIRD PARTY INSURANCE CARRIER MEETING THE SPECIFICATIONS SET FORTH ABOVE.]
D-3
<PAGE> 70
RI-RE\t:\pjm\winston\manage.10
May 10, 1996
D-4
<PAGE> 1
EXHIBIT 10.5
OPTION TO PURCHASE ADDITIONAL HOTELS
THIS OPTION TO PURCHASE ADDITIONAL HOTELS ("Option"), dated as of the
Date of this Option defined hereinafter, is made and granted by Promus Hotels,
Inc., a Delaware corporation ("Seller") to and for the benefit of WINN Limited
Partnership, a North Carolina limited partnership, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser");
WITNESSETH THAT:
WHEREAS, Purchaser and Seller entered into that certain Memorandum of
Understanding dated as of March 15, 1996 providing for, among other provisions,
an option for the benefit of Purchaser to purchase certain Homewood Suites
hotels which may be approved for development by Seller (collectively "the
Additional Hotels" and individually "an Additional Hotel"); and
WHEREAS, such Memorandum of Understanding also provided for the
purchase and sale by Seller to Purchaser of three hotels defined therein as the
Development Hotels and Purchaser and Seller have entered into that certain
Agreement of Purchase and Sale dated of even date herewith with respect to such
Development Hotels, a copy of which is attached hereto as Exhibit A and
incorporated herein by this reference ("the Agreement"); and
WHEREAS, the Development Hotels are defined and referred to in the
Agreement collectively as "the Hotels" and individually as "a Hotel" and such
definitions shall have the same meanings when used herein as defined in the
Agreement; and
WHEREAS, Purchaser and Seller have also entered into that certain
Agreement of Purchase and Sale dated of even date herewith with respect to that
certain existing Homewood Suites hotel located on Bay Area Boulevard, Houston,
Texas, which is referred to in such Memorandum of Understanding as the
Developed Hotel ("the Developed Hotel"); and
WHEREAS, the purpose of this Option is to set forth the terms and
provisions agreed to by and between Purchaser and Seller relative to the
Additional Hotels;
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Option Period. The period of this Option shall be and include
each of the four consecutive twelve month periods
<PAGE> 2
beginning April 1, 1996 and expiring on March 31, 2000 (the "Option Period").
During the Option Period, Seller agrees to present Purchaser with the
opportunity to review with a view toward purchasing approximately forty percent
(40%) of the Additional Hotels, which shall be in addition to and exclusive of
the Hotels and the Developed Hotel. Seller does hereby grant Purchaser a
first and prior right and option to purchase up to (a) with respect to the
first twelve month period in the Option Period, up to three (3) Additional
Hotels, not to exceed approximately forty percent (40%) of the Additional
Hotels; and (b) with respect to each subsequent twelve month period in the
Option Period, the lesser of (i) three (3) Additional Hotels, not to exceed
approximately forty percent (40%) of the Additional Hotels or, (ii) if Seller
granted Purchaser options to acquire at least three (3) Additional Hotels in
the previous twelve month period, a number of Additional Hotels equal to the
number of Additional Hotels on which Purchaser was granted an option to
purchase in such previous twelve month period and for which Purchaser executed
purchase agreements in the form and content of the Agreement, modified and
amended as expressly set forth hereinafter. It is expressly understood and
acknowledged by Purchaser that there are no assurances that Seller will approve
Additional Hotels in the Option Period; provided, however, if Seller does
approve any Additional Hotels during the Option Period, this Option shall
pertain and apply to such Additional Hotels in the numbers and for the time
periods expressly set forth hereinbefore. Seller, at its option, may offer
Purchaser the option to purchase more than three (3) Additional Hotels in any
twelve month period of the Option Period.
2. Notice to Purchaser. Seller shall deliver written notice to
Purchase for each of the Additional Hotels, which notice shall be delivered in
accordance with the provisions relative to notice set forth in Article X of the
Agreement (each, "an Additional Hotel Offer"). Each Additional Hotel Offer
shall include a market study, financial projections, development costs data and
any other relevant information (including, but not limited to, title
information, boundary surveys, environmental reports and soils reports, to the
extent same are in existence and available to Seller) Seller considered in
making its decision to approve the development of such Additional Hotel.
3. Exercise of Option. Within the latter of (i) thirty (30) days
after receipt of an Additional Hotel Offer or (ii) seven (7) days after
approval of the Additional Hotel subject to such Additional Hotel Offer by
Seller's capital committee, Purchaser may exercise its right to purchase and
acquire such Additional Hotel on the terms set forth in such Additional Hotel
Offer by delivering to Seller an executed copy of a purchase agreement in the
form and content of the Agreement, with modifications and amendments thereto as
expressly set forth
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hereinafter, and failing to do so, Purchaser shall waive its rights hereunder
to purchase and acquire such Additional Hotel. The purchase agreement for each
Additional Hotel for which Purchaser exercises its option to purchase set forth
herein, shall be in the same form and content as the Agreement with amendments
thereto as follows:
(a) The purchase price for an Additional Hotel shall be an amount
equal to Seller's budgeted development cost for such Additional Hotel
(including a development fee in an amount equal to four percent (4.0%)
of the budgeted costs for such Additional Hotel less the development
fee and less amounts for contingencies consistent with those included
in the budgeted costs of the Hotels) ("the Purchase Price");
(b) The estimated date for the issuance of a certificate of occupancy
and the opening of such Additional Hotel shall be utilized for
purposes of Article III, Paragraph C of the purchase agreement for
such Additional Hotel;
(c) In the event Seller's actual development and building costs for an
Additional Hotel are less than the Purchase Price computed in
accordance with (a) above, the Purchase Price for such Additional
Hotel shall be reduced by one hundred percent (100%) of such cost
savings, which shall be in lieu of and replace the last sentence of
the first paragraph of Article II of the Agreement;
(d) Purchaser shall not have a Feasibility Period for any of the
Additional Hotels beyond the Feasibility Period defined in the
Agreement, which expires on June 1, 1996; and
(e) Such other modification or amendment as is necessary to make such
purchase agreement applicable to such Additional Hotel rather than the
Hotels, such as the legal description for such Additional Hotel and
the number of rooms/suites which will be included in such Additional
Hotel.
Unless expressly modified or amended hereinbefore, all of the other
terms and provisions of the Agreement shall be set forth and utilized in the
purchase agreement contemplated herein with respect to each of the Additional
Hotels.
4. Development by Purchaser. Purchaser and its affiliates agree
to use their best efforts to spend at least One Hundred Million Dollars
($100,000,000.00) to develop hotels, including any Additional Hotels purchased
by Purchaser hereunder, with franchises offered by Seller in the eight (8) year
period after the Date of this Option. This obligation is subject to the
presence of acceptable market conditions, the availability of capital to
Purchaser, the availability of acceptable sites and
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such other conditions and criteria as Purchaser, in its sole discretion, deems
relevant to the making of a prudent investment in hotel properties.
5. Arbitration. In the event of a dispute, controversy or
difference arising under this Option, such dispute, controversy or difference
shall be finally and exclusively settled by arbitration. The arbitration shall
be conducted in a mutually agreed upon location in accordance with the rules of
the American Arbitration Association, by an arbitrator or arbitrators appointed
pursuant to such rules, and the determination and ruling of such arbitrator or
arbitrators shall be final, binding and conclusive on Purchaser and Seller.
6. Status and Effect of Option. Seller warrants and represents
that there are and will be no other options or rights to purchase the forty
percent (40%) of the Additional Hotels subject hereto which are prior or
superior to this Option. This Option shall be binding upon and shall inure to
the parties hereto, their respective heirs, successors, legal representatives
and assigns. This Option sets forth the entire agreement between the parties
hereto with respect to the Additional Hotels and no other prior written or oral
statement or agreement or understanding shall be recognized or enforced. All
modifications or amendments to this Option shall be in writing and signed by
the parties. This Option is to be construed according to the laws of the State
of Tennessee. This Option may be executed in two or more counterparts, all of
which shall constitute one and the same instrument. The singular shall include
the plural and vice versa. This Option shall not be recorded in the public
records of any county where the Additional Hotels are located.
7. Approval by Purchaser. Seller acknowledges that Purchaser is
a real estate investment trust and in accordance therewith, this Option as it
pertains to Purchaser, shall be conditioned upon Purchaser obtaining the
approval of this Option and the transactions contemplated herein from the board
of directors of the general partner of Purchaser, Winston Hotels, Inc., which
approval shall be obtained or denied on or before March 31, 1996. Upon receipt
of such approval, this Option shall constitute the valid, legal and binding
obligation of Purchaser in accordance with the terms and provisions expressly
set forth herein.
8. Authority of Seller. Seller represents and warrants that it
is authorized to enter into this Option and to consummate the transactions
contemplated herein with respect to the Additional Hotels and, the individuals
executing this Option on behalf of Seller are also duly authorized to execute
this Option and to bind Seller and Seller is and shall be bound in accordance
herewith. The execution and delivery of this Option by Seller
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does not require the consent of any person, agency or entity not a party to
this Option. The execution of this Option by Seller and the transactions
contemplated herein with respect to the Additional Hotels have been duly
authorized by proper corporate action, including the board of directors and
capital committee of Seller.
9. Date of this Option. As used herein, "the Date of this
Option" shall mean the date noted below as the date upon which this Option was
executed by the latter of Purchaser or Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Option as of
the Date of this Option.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation
(Corporate Seal) By:________________________________
_________President
Attest:
____________________
_______Secretary
Date signed by Purchaser:
_________________________
Seller:
Promus Hotels, Inc.,
a Delaware corporation
(Corporate Seal) By:________________________________
________President
Attest:
____________________
_______Secretary
Date signed by Seller:
______________________
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STATE OF NORTH CAROLINA
COUNTY OF _____________
I, a Notary Public of the County and State aforesaid, certify that
__________________________________________________, personally came before me
this day and acknowledged that __he is ______________ Secretary of Winston
Hotels, Inc., a North Carolina corporation, general partner of WINN Limited
Partnership, a North Carolina limited partnership, and that by authority duly
given and as the act of the corporation as such general partner, the
foregoing instrument was signed in its name by its _______ President, sealed
with its corporate seal and attested by ______ as its ___________Secretary.
Witness my hand and official stamp or seal, this the ____ day of _____________,
1996.
My Commission Expires: _________ ______________________
Notary Public
(SEAL)
STATE OF ______________
COUNTY OF _____________
I, a Notary Public of the County and State aforesaid, certify that
__________________________________________________, personally came before me
this day and acknowledged that __he is ______________ Secretary of Promus
Hotels, Inc., a Delaware corporation, and that by authority duly given and as
the act of the corporation, the foregoing instrument was signed in its name
by its _______ President, sealed with its corporate seal and attested by ______
as its ___________Secretary. Witness my hand and official stamp or seal, this
the ____ day of _____________, 1996.
My Commission Expires: _________ ______________________
Notary Public
(SEAL)
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<PAGE> 1
EXHIBIT 10.6
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the
Date of this Agreement as defined hereinafter, by and among WINN Limited
Partnership, a North Carolina limited partnership, or its assigns, with
offices at 2209 Century Drive, Suite 300, Raleigh, North Carolina 27622
("Purchaser") and Dallas Lodging Associates I, Ltd., a Kentucky limited
partnership ("Dallas L.A."), A.B. Lodging, Inc., a Virginia corporation
("ABL"), London Lodging Associates, Inc., a Kentucky corporation ("LLA") and
Duncanville Lodging Associates I, Ltd., a Kentucky limited partnership
("Duncanville L.A."), Dallas L.A., ABLA, LLA and Duncanville L.A. are sometimes
referred to herein individually and collectively as "Seller" and "Sellers".
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PROPERTY AND BUSINESS
On the terms and subject to all of the conditions set forth in this
Agreement, the Purchaser agrees to purchase and the Seller agrees to sell, for
the purchase price set forth herein, all of the following property
(collectively, the "Premises"):
(a)
(A) Dallas L.A. is the owner of the Dallas Hotel, Dallas, Texas
(as hereinafter defined), currently licensed and operated as a Holiday Inn
Select hotel.
(B) ABL is the owner of the Abingdon Hotel in Abingdon, Virginia
(as hereinafter defined), currently licensed and operated as a Holiday Inn
Express hotel.
(C) LLA is the owner of the London Hotel, London, Kentucky (as
hereinafter defined), currently licensed and operated as a Comfort Suites
hotel.
(D) Duncanville L.A. is the owner of the Duncanville Hotel, City
of Dallas, Texas (as hereinafter defined), currently licensed and operated as a
Hampton Inn hotel.
(E) Each of the Sellers desire to sell their respective Hotel (as
hereinafter defined) to Purchaser, and Purchaser desires to purchase the Hotels
from Sellers, on the terms and conditions hereinafter set forth.
<PAGE> 2
(b) HOTELS
(A) DALLAS HOTEL. As used in the Agreement, the term "Dallas
Hotel" shall mean and refer to the following:
(1) The real property located in the City of Dallas,
Dallas County, Texas and more particularly described on Schedule I-A attached
hereto and together with all rights and interests appurtenant thereto
(collectively the "Dallas Real Property"); and
(2) The four (4) building, 244-room hotel and all other
buildings, structure, parking areas and other improvements presently located on
the Dallas Real Property (collectively the "Dallas Improvements").
(B) ABINGDON HOTEL. As used in the Agreement, the term "Abingdon
Hotel" shall mean and refer to the following:
(1) The real property located at 940 East Main Street,
Abingdon, Virginia 24210, and more particularly described on Schedule I-B
attached hereto and together with all rights and interests appurtenant thereto
(collectively, the "Abingdon Real Property"); and
(2) The three (3) story 80-room hotel and all other
buildings, structures, parking areas, and other improvements presently located
upon the Abingdon Real Property (collectively the "Abingdon Improvements").
(C) LONDON HOTEL. As used in the Agreement, the term "London
Hotel" shall mean and refer to the following:
(1) The real property located at 1918 West 192 By-Pass,
London, Kentucky 40741, and more particularly described on Schedule I-C
attached hereto and together with all rights and interests appurtenant thereto
(collectively, the "London Real Property").
(2) The three (3) story, 62-room hotel and all other
buildings, structure, parking areas and other improvements presently located
upon the London Real Property (collectively, the "London Improvements").
(D) DUNCANVILLE HOTEL. As used in this Agreement, the term
"Duncanville Hotel" shall mean and refer to the following:
(1) The real property located at 4154 Preferred Placed,
City of Dallas, County of Dallas, Texas 75237 and more particularly described
on Schedule I-D attached hereto and together with all rights and interests
appurtenant thereto (collectively, the "Duncanville Real Property"); and
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(2) The three (3) building, 119-room hotel located on the
Duncanville Real Property (collectively, the "Duncanville Improvements").
The above set forth four (4) properties shall collectively be the
"Real Property" and the "Improvements."
(c) all furniture, fixtures (not part of the Real Property and
Improvements or affixed thereto, (equipment, machinery, furnishings, carpets,
drapes, blinds or mini-blinds, service and maintenance equipment, linens (not
less than two and one half (2 1/2) turns of linens for each of the Hotels shall
be included), tools, signs, landscaping equipment, supplies, pool equipment,
television systems, intercom equipment and systems, and replacement parts,
excepting any proprietary information of Impac Hotel Group, Inc., including but
not limited to the GuesTrak Kiosk System (the "Equipment") excepting those
personal property leases set forth and identified in Schedules 2-A, 2-B, 2-C
and 2-D hereof, which Purchaser shall assume, if legally assignable, subject to
their respective terms and conditions (the "Assumed Leases");
(d) moneys advanced for future reservations ("Prepaid Items");
(e) all contracts, agreements, licenses, contract rights, rights
to use and other similar rights used in connection with the Real Property and
Improvements and set forth on Schedules 3-A, 3-B, 3-C and 3-D attached hereto
and made a part hereof by this reference and which the Purchaser elects to
purchase and assume as provided in Article III, Paragraph A hereof (the
"Contracts"). The Contracts shall not include any and all rights to use the
names, trademarks, trade names, servicemarks, patents, copyrighted items or
other trade registrations of Promus Hotels, Inc., of Holiday Inns Franchising,
Inc., and of Choice Hotels International, Inc., or any parent, subsidiary
(direct or indirect), or affiliate of each of the above, in connection with the
operation of each of the Premises, or any other business on each of the
Premises, except in accordance with the terms and conditions of any license
agreements. (It being understood and agreed that the name of the respective
hotel chains to which the Hotels are affiliated by franchise or other license
agreement are protected names or registered service marks of each such hotel
chain and cannot be transferred to Purchaser by this Agreement.) The Contracts
shall not include any proprietary information of Impac Hotel Group, Inc.,
including but not limited to the GuesTrak Kiosk System;
(f) all leases and rights to use the Improvements, Equipment or
all or any part thereof in third parties as more particularly identified on
Schedules 4-A, 4-B, 4-C and 4-D attached hereto and made a part hereof by this
reference and which the Purchaser elects to purchase and assume as provided in
Article III, Paragraph A hereof; provided, however, it is expressly understood
and agreed that Seller shall convey the Premises, including the Improvements
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<PAGE> 4
and Equipment, to Purchaser at Closing in accordance with Article II, Paragraph
C hereof (the "Leases");
(g) all permits, licenses, government licenses, certificates of
occupancy and approvals necessary to operate the Real Property, Improvements,
Equipment, Contracts, Leases, Intangible Rights and the other property and
rights transferred under this Agreement, but only to the extent each is legally
transferable or assignable to Purchaser (the "Permits");
(h) all inventory, supplies and other materials used in connection
with the Real Property and Improvements and the hotel business operated thereon
(excluding gift shop items owned by third parties) (the "Inventory");
(i) all plans, specifications and "as-built" drawings and surveys
relating to the Real Property and Improvements, all books and records relating
to the operation or management of the Real Property and Improvements and all
warranties and guaranties of Seller pertaining to the Premises; and
(j) all intangible property, guest ledgers, customer and mailing
lists, catalogues and brochures, telephone numbers and similar property used in
connection with the operation of the Real Property, Improvements and the
business known as the Holiday Inn Select located in Dallas, Texas, the Holiday
Inn Express located in Abingdon, Virginia, the Comfort Suites located in
London, Kentucky and the Hampton Inn located in Duncanville, Texas
(collectively the "Hotels" and individually a "Hotel"), and any telephone
numbers assigned thereto (the "Intangible Rights").
II. TERMS OF PURCHASE AND SALE
The purchase price for the Premises shall be Twenty Three Million and
NO/100 Dollars ($23,000,000.00), adjusted as provided in Article IX hereof,
(the "Purchase Price"), payable by Purchaser to Seller as follows:
A. The sum of Five Hundred Thousand and NO/100 Dollars ($500,000.00)
(the "Initial Deposit") within three (3) days after the Date of this Agreement
by check subject to collection, payable to The Title Company of North Carolina,
Inc., as agent for First American Title Insurance Company, as Escrow Agent (the
"Escrow Agent"). At the option of Purchaser, Purchaser may deposit an
additional sum of Two Hundred Thousand and NO/100 Dollars ($200,000.00) ("the
Extension Deposit") with the Escrow Agent prior to the expiration of the
initial sixty (60) day period of the Feasibility Period, as hereinafter
defined, which shall extend the Feasibility Period for an additional fifteen
(15) days. The Initial Deposit and the Extension Deposit, if deposited by
Purchaser as aforesaid, or, the Initial Deposit alone if Purchaser elects not
to
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make the Extension Deposit, shall hereinafter be referred to as "the Deposit".
The Escrow Agent shall maintain the Deposit in an interest bearing account
subject to the provisions of Article XIII. The Escrow Agent shall not disburse
the Deposit except in accordance with the terms of this Agreement. Upon the
satisfaction of all of the conditions contained in this Agreement, on the
Closing Date (as hereinafter defined), the Deposit shall be paid to Seller and
reduce the portion of the Purchase Price payable at Closing pursuant to Article
II, Paragraph B hereof. In the event that this transaction is not consummated
for any reason, the Deposit shall be paid as provided in Article XIII of this
Agreement. Purchaser shall be entitled to payment of or a credit for any
interest earned on the Deposit unless the Deposit is forfeited in which event
interest shall be paid to Seller.
B. The balance of the Purchase Price, plus or minus any closing
adjustments, by certified or bank funds or by wire transfer on the Closing Date
(as hereinafter defined) to an account designated in writing by Seller to
Purchaser at least five (5) days prior to Closing.
C. Upon the Closing, the Seller shall deliver to the
Purchaser the Premises, including but not limited to the Real Property,
Improvements, Equipment and Inventory, free and clear of all liens and
encumbrances of whatever type or description other than the Permitted
Exceptions as defined in Article IV, Paragraph A of this Agreement for each of
the Premises.
III. FEASIBILITY PERIOD; PURCHASER'S CONTINGENCIES
A. This Agreement is contingent upon Purchaser's approval of the
Premises during the Feasibility Period as hereinafter defined, including but
not limited to, approval of the Inspection Items (as hereinafter defined). The
Inspection Items have been submitted to Purchaser on or prior to the date of
this Agreement, or as specifically provided herein, are available to Purchaser
for inspection at the Improvements or at Sellers' home offices located at the
Lenox Building - Suite 1220, 3399 Peachtree Road, Northeast, Atlanta, Georgia
30326. Purchaser shall have a period of sixty (60) days from and after the Date
of this Agreement, which Purchaser may extend to seventy five (75) days from
and after the Date of this Agreement by virtue of making the Extension Deposit
as aforesaid, to review the Inspection Items and to otherwise inspect the
Premises and its or their condition (such period is hereinafter referred to as
the "Feasibility Period"). On or prior to the termination of the Feasibility
Period, the Purchaser shall notify the Seller whether or not the Purchaser
elects to purchase the Premises, which election shall be made in the sole,
absolute and unreviewable discretion of the Purchaser. In the event that the
Purchaser elects to proceed with this transaction, then on or prior to the
termination of the Feasibility Period, the Purchaser shall notify the Seller,
which of the Contracts and Leases, exclusive of
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<PAGE> 6
the Assumed Leases, the Purchaser shall accept and assume and the Seller shall
retain and not assign to Purchaser those Contracts and Leases not acceptable to
Purchaser. In the event Purchaser fails to notify Seller, on or prior to the
expiration of the Feasibility Period, whether or not the Purchaser elects to
proceed with the purchase, all items shall be deemed approved. If Purchaser
notifies Seller that it elects not to proceed with this transaction, on or
prior to the expiration of the Feasibility Period, then this Agreement shall
terminate and shall be null, void and without further force or effect, the
Deposit (together with all interest) shall be promptly refunded to Purchaser by
Escrow Agent and neither party shall have any further liability to the other.
The conditions enumerated in this Article III are for Purchaser's benefit only
and the non-occurrence of a state of facts sufficient to satisfy any of such
conditions may not be used or pleaded by Seller as a defense to the
enforceability of this Agreement.
For purposes of this Agreement, the term "Inspection Items" shall, to
the extent in existence and available, mean:
(a) any engineer's reports, architectural plans, appraisals,
environmental reports, surveys or other reviews, evaluations
or studies of or with respect to the Premises that are in
Sellers' respective possession or under their respective
control;
(b) the Leases, Contracts and Permits;
(c) the utility bills for the twenty-four month (24) period
immediately preceding the Date of this Agreement;
(d) tax returns and proof of payment of all taxes for the
twenty-four (24) month period immediately preceding the Date
of this Agreement (including, but not limited to, all income,
franchise, employment, sales or occupancy taxes);
(e) guest registration records (to be available for inspection at
the Improvements);
(f) employee records (to be available for inspection at the
Improvements);
(g) financial statements (the "Financial Statements") for the
Premises prepared and warranted by the Seller (including
balance sheets, income statements, operating statements and
statements of changes in financial position) for each of the
three preceding fiscal years or during the term of Sellers'
respective ownerships and operations of the Premises,
whichever is less, as to each of the four (4) Premises, and
for the period ended thirty (30) days prior to the Closing
Date, together with monthly Financial Statements for the same
period. An itemized breakdown of
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room sales per month, occupancy and ADR for the last preceding
thirty six (36) month period. The books and records of the
operations of the Premises necessary to confirm the accuracy
of the Financial Statements shall be made available to
Purchaser or its agents at the Premises; and,
(h) Star Reports for the immediately preceding thirty six (36)
month period.
B. Seller shall request and have prepared, a new Product
Improvement Plan (the "PIP") from the respective franchisor for each of the
Hotels setting forth all items that must be completed as a prerequisite to the
issuance of a new franchise license agreement to the Purchaser by each such
existing franchisor and shall deliver the PIP to Purchaser within thirty (30)
days of this Agreement. In the event Closing occurs and Purchaser acquires the
Hotels hereunder, Purchaser shall be responsible for all costs and expenses
required in order to comply with the requirements set forth in the PIP for all
of the Hotels. In connection with the application for such franchises,
Purchaser shall pay for the initial franchise fee to such franchisors, and
other associated costs to obtain such franchises as long as such costs are
acceptable to Purchaser in Purchaser's sole, absolute and unreviewable
discretion.
C. Purchaser's obligation to close this transaction shall be
conditioned on the Purchaser's receipt of an acceptable franchise license
agreement of Purchaser's choice for each of the Hotel with a term of not less
than ten (10) years, which condition shall lapse and expire at the expiration
of the Feasibility Period.
D. Purchaser's obligation to close this transaction shall be
conditioned on Purchaser having received, effective as of the Closing Date, all
necessary governmental approvals and licenses for operation of the Premises as
a hotel, provided that Purchaser has made good faith and timely applications
for such approvals and licenses and has provided the applicable governmental
authorities with all required information reasonably necessary for such
authority to grant such approval or license, which condition shall lapse and
expire at the expiration of the Feasibility Period.
E. Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close this
transaction shall be conditioned upon Purchaser obtaining the approval of this
Agreement and the transaction contemplated herein from the board of directors
of the general partner of Purchaser, which approval shall be obtained or denied
prior to the expiration of the Feasibility Period.
Seller and Purchaser shall cooperate and take all actions necessary,
in a diligent and expeditious manner, to effectuate the inspections, transfers
and other reviews required by this Article
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<PAGE> 8
III during the Feasibility Period. The Purchaser and its representatives and
agents shall be provided with access to the Premises at all reasonable times
(subject to the notice to Seller required hereinafter), in order to inspect the
Premises, including but not limited to, taking soil samples and test borings
(upon receipt of prior written consent from Seller as set forth hereinafter)
and conducting environmental studies, engineering studies and other such
inspections and reviews that the Purchaser shall deem reasonably necessary to
determine the condition and financial status of the Premises.
In the event that the transaction contemplated by this Agreement does
not close for any reason, Purchaser shall have the obligation to restore any
damage caused by Purchaser or its representatives and agents to the Hotels to
their condition prior to Purchaser's damage, which obligation shall survive any
termination of this Agreement. The terms of this Agreement and all information
furnished by Sellers to Purchaser in accordance with the provisions of this
Agreement or obtained by Purchaser in the course of its investigations shall be
treated as confidential information by Purchaser, except that Purchaser may
disclose such information to prospective investors and lenders, as well as
attorneys and other parties assisting or representing Purchaser in connection
with the subject transaction and, provided, however, nothing herein shall
restrict or impair any disclosures which Purchaser may be required to make by
virtue of rules and regulations of the Securities and Exchange Commission
applicable to Purchaser. The foregoing obligation to treat such information as
confidential shall survive any termination of this Agreement but shall not
survive Closing. Purchaser covenants and agrees that the Hotels shall not be
damaged or impaired in any way as the result of its activities on the Hotels
premises, and hereby agrees to indemnify and hold Sellers harmless from and
against any claims, causes of action, damages and expenses (including
attorneys' fees) to the extent incident to, resulting from or in any way
arising out of the presence in, on or about the Hotels of Purchaser, or
Purchaser's agents or representatives, or out of any such test or inspection
conducted by Purchaser on the Premises. Such indemnity shall survive the
Closing or any termination of this Agreement and not be merged therein.
Purchaser shall not make any borings or holes in any part of the
Premises or otherwise damage any part of the Premises in any manner or to any
extent unless prior written consent is given by Sellers thereto, which consent
shall not be unreasonably withheld, and provided, further, that Sellers may
prohibit any boring that might void any roof warranty and that all borings,
holes, or other damage shall be repaired by Purchaser.
Purchaser shall make such inspections in good faith and with due
diligence. All inspection fees, appraisal fees, engineering fees and other
expenses of any kind (including, without limitation, expenses related to
environmental and engineering studies) incurred
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by Purchaser relating to the inspection of the Premises will be solely
Purchaser's expense. Sellers shall hereby reserve the right to have a
representative present at the time of making any such inspection. In making
any inspection hereunder, Purchaser will, and will cause any representative of
Purchaser to, use discretion so as to not disrupt any guest, tenant or customer
of the Premises. Purchaser shall notify Sellers not less than one (1) business
day in advance of making any such inspection. Purchaser agrees to indemnify
and hold harmless each of the Sellers against and from any and all losses,
damages, liabilities, claims, costs or expenses, including, without limitation,
attorneys' fees, sustained by Sellers or any of them which are caused as a
result or arising out of any inspections by Purchaser or its authorized
representatives, and this provision shall survive the termination of this
Agreement notwithstanding anything contained herein to the contrary.
If the tests, studies and investigations performed in accordance with
this Paragraph E do not warrant, in Purchaser's sole, absolute and unreviewable
discretion, the purchase of the Premises for the purposes contemplated by
Purchaser, then Purchaser shall give written notice thereof to Seller and the
Escrow Agent prior to the expiration of the Feasibility Period, in which event,
the Deposit shall be promptly returned to Purchaser and Purchaser and Sellers
shall be released from all further liability or obligation hereunder, except
those which expressly survive a termination of this Agreement.
If, for any reason, Purchaser shall terminate this Agreement,
Purchaser shall return to Sellers the originals and all copies of all material
relating to the Premises furnished to Purchaser pursuant to this Agreement and
shall not make or retain any copies thereof and shall also deliver to Sellers
copies of all reports or other documents obtained by Purchaser and relating in
any way to Purchaser's inspections and investigations hereunder.
In the event Purchaser fails to notify Seller that Purchaser is
unsatisfied with the results of its inspections made pursuant to the provisions
of this Paragraph E prior to the expiration of the Feasibility Period, then
Purchaser shall be deemed to have elected to proceed forward with the
transaction envisioned by this Agreement, Purchaser shall be deemed to have
accepted the Premises in their present conditions in which event the
contingencies as set forth in this Paragraph shall be waived and the parties
shall proceed to Closing as otherwise contemplated by this Agreement.
Subsequent to the expiration of the Feasibility Period, Sellers agree
to provide Purchaser with access to the Premises upon reasonable notice.
During the Feasibility Period and thereafter until Closing, Sellers shall, upon
reasonable notice from Purchaser, during usual business hours, make available
to Purchaser, its agents, auditors, engineers, attorneys and other designees,
for
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inspection and/or copying at the place where such records are kept, all
information and materials reasonably related to the Premises.
IV. TITLE; TITLE POLICY; SURVEY
A. Within ten (10) days after the Date of this Agreement, Seller
shall furnish to Purchaser at Seller's cost a preliminary title report and
title insurance binder (the "Title Commitment") from First American Title
Insurance Company (the "Title Company") pursuant to which the Title Company
shall commit to issue a current A.L.T.A. Form B owner's fee simple title
insurance policy or other policy of title insurance as shall be reasonably
satisfactory to Purchaser and to any lender of Purchaser (the "Lender") in the
amount designated by Purchaser, with the aggregate of such amounts being equal
to the Purchase Price (the "Title Policy") insuring that the Purchaser shall
receive at closing, good, marketable and indefeasible fee simple title to the
Real Property, free and clear of ALL liens, exceptions, encumbrances or defects
other than the matters expressly approved in writing by Purchaser as permitted
exceptions to title or waived by Purchaser as set forth hereinafter. Seller
shall furnish to Purchaser copies of all liens, exceptions, encumbrances or
defects set forth in the Title Commitment at the same time as the Title
Commitment is so furnished to Purchaser. The Seller shall not, after the Date
of this Agreement, subject the Real Property to any liens, encumbrances,
covenants, conditions, restrictions, easements or other title matters or seek
any zoning changes or take any other action which may affect or modify the
status of title without Purchaser's prior written consent.
Within twenty (20) days after the Date of this Agreement, the
Purchaser shall notify (the "Title Notice") the Seller as to which of the
liens, defects, encumbrances or exceptions set forth in the Title Commitment,
including those Proposed Title Exceptions set forth on Schedules 5-A, 5-B, 5-C
and 5-D attached hereto, which are objectionable to Purchaser ("the Title
Defects"). Within five (5) days after receipt by Seller of the Title Notice,
the Seller shall notify Purchaser as to which of the Title Defects Seller is
willing or able to cure. In the event the Seller is unable or unwilling to
cure the Title Defects to the reasonable satisfaction of the Purchaser (except
for those Title Defects that can be cured with the payment of money such as
deeds of trust, mortgages, mechanics' liens, tax liens or other liens or
charges in a fixed sum or capable of computation as a fixed sum, which will be
satisfied of record by Seller at or prior to Closing) within such five (5) day
period or the Purchaser does not agree to waive such Title Defects, then at
Purchaser's election, this Agreement shall terminate and shall be null, void
and without further force or effect, the Deposit (together with all interest)
shall be returned to Purchaser and neither party shall have any further
liability to the other or, Purchaser may waive such of the Title Defects as it
elects and proceed to Closing without any abatement to the Purchase Price. The
exceptions to title set forth in the Title Commitment which are
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either not objected to in the Title Notice or waived by Purchaser as provided
hereinbefore shall be deemed and referred to hereinafter as "the Permitted
Exceptions".
B. Within thirty (30) days after the Date of this Agreement, the
Seller shall deliver to Purchaser, at Seller's expense, a survey (the "Survey")
of the Premises, dated after the Date of this Agreement, prepared by a surveyor
duly licensed under the laws of the state in which the respective Real Property
is located and reasonably acceptable to the Purchaser and the Lender in
accordance with ALTA or such other standards as shall be reasonably
satisfactory to Purchaser. The Survey shall be in form and substance
satisfactory to the Purchaser, the Title Company and the Lender. The Survey
delivered to Purchaser and Title Company within thirty (30) days after the Date
of this Agreement, shall be certified to Seller and the Title Company and prior
to the Closing, the Seller shall cause, at its expense, the Survey to be
recertified to the Purchaser, Title Company and Lender (the form of
certification in each case to be in conformance with 1992 ALTA standards as set
forth on Schedule 5 attached hereto). The Survey shall show that all buildings
are within lot and building lines, the location of such lines, the dimensions
and total area of the Real Property and Improvements, the location and number
of parking spaces, ingress and egress to adjoining streets, all benefiting and
burdening easements, improvements, appurtenances, rights of way and utilities
whether above or below ground (to the extent that the Surveyor is able to
determine and certify to the below ground location), all encroachments from or
into the Premises, all structures and improvements on the Real Property and all
easements, rights-of-way and other restrictions of record properly identified
with recording information and certifying that the Premises are not within a
flood plain or other flood hazard area. The Survey shall be made in accordance
with the Minimum Standard Detail Requirements for Land Title Surveys adopted by
the American Land Title Association. The Survey and certification shall be
sufficient to limit the survey exception on the Title Policy to matters
disclosed thereon without indemnity or additional premium. On or prior to the
tenth (10th) day following receipt by Purchaser of the Survey, the Purchaser
shall notify the Seller of any title or other defects which relate to the
Survey and are objectionable to Purchaser or Lender ("Survey Defects"). Survey
Defects shall be deemed to be Title Defects for purposes of this Agreement and
Seller shall cure such Survey Defects according to the same procedure as for
Title Defects.
C. PURCHASE OF ALL HOTELS: In the event that Purchaser has
objections, pursuant to this Article IV, only with respect to matters
(reflected in or concerning the Title Commitments, the Surveys, any documents
or items delivered by Sellers to Purchaser, or the results of any other tests
or inspections of the Hotels made by Purchaser) as they relate to one or more,
but not all, of the Hotels, Purchaser may only elect (in its sole discretion)
to
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terminate this Agreement as to all of the Hotels, in which event this Agreement
will terminate.
D. The Purchaser and Seller shall each be responsible for the
payment of its own transaction costs, including counsel fees. Purchaser shall
be responsible for the costs incurred with the physical inspection of the Real
Property and Improvements, including any environmental and engineering studies
other than those delivered by Seller to Purchaser in accordance with Article
III, Paragraph A. At Closing, Purchaser shall pay all premiums for the Title
Policy. The Seller shall pay for the Title Commitment and the Survey. Any and
all transfer taxes, real estate excise taxes and sales taxes payable in
connection with the transfer of the Premises, or any portion thereof, and the
Personalty (as hereinafter defined) shall be paid by Seller. Unless otherwise
stated in this Agreement, the Purchaser and Seller shall pay all costs in
connection with the Closing of this transaction as are customary in the
respective locale where each of the Hotels is located.
V. CLOSING
A. The closing of this transaction shall occur on or about the
fifteenth (15th) day following the conclusion of a successful secondary public
offering of Winston Hotels, Inc.'s common stock in an amount sufficient to
consummate the transaction contemplated herein (the "Closing Date"); provided,
however, in no event shall the Closing Date be extended beyond May 1, 1996. It
is expressly understood and agreed by Purchaser and Seller that the failure of
the occurrence of such stock offering shall not be a basis for Purchaser to
obtain the return of the Deposit after the expiration of the Feasibility
Period. The closing of the transaction contemplated by this Agreement shall
occur at the offices of Brown & Bunch, 4900 Falls of Neuse Road, Suite 210,
Raleigh, North Carolina 27609 and shall be deemed effective as of 12:01 a.m.
on the Closing Date ("Closing"). If the date of Closing falls on a Saturday,
Sunday or banking holiday, the Closing shall take place on the next business
day thereafter.
B. At the Closing, the Seller, shall deliver to Purchaser and
perform the following:
1. Special or Limited Warranty Deeds conveying good, marketable,
insurable and indefeasible fee simple title to each Tract of the Real Property
free and clear of all defects, exceptions, liens or encumbrances, except for
the Permitted Exceptions.
2. Seller shall pay and discharge any special assessment which on or
before the date of Closing, (a) has been levied, imposed, or confirmed against
the Premises, (b) affects or is a lien upon the Premises or (c) although not
yet a lien upon the Premises,
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is attributable to improvements which benefit or will benefit the Premises or
the property in the vicinity of the Premises for which improvement work has
been commenced. If any of the foregoing assessments may be paid in
installments, all installments shall be deemed payable as of the day prior to
the Closing, and shall be discharged of record by Seller. If, at the Closing,
any amount which Seller is required to pay with respect to the foregoing has
not been determined, Seller agrees to pay such amount as can be reasonably
estimated at the Closing and the final amount shall be adjusted within fifteen
(15) days after Purchaser gives Seller notice that same has been determined.
This provision shall survive the Closing.
3. A Bill of Sale for each Hotel conveying the Equipment, Inventory,
Real Property not conveyed by other instruments provided for herein, and other
personal property and intangible property included in the Premises
("Personalty"), free and clear of any lien or encumbrance, other than the
Permitted Exceptions, and containing a special or limited warranty of title
(with representation that Seller has no knowledge of any claims which purport
to be superior to the title of Seller) to the Equipment, Inventory and
Personalty and an inventory of all Equipment, Inventory and Personalty.
4. An assignment for each Hotel of Seller's interest in and to all
Permits, Contracts (to the extent legally assignable) to be assumed by
Purchaser in accordance with Article III, Paragraph A, Leases (to the extent
legally assignable) to be assumed by Purchaser in accordance with Article III,
Paragraph A, Intangible Rights, Prepaid Items and other items of the Premises,
free and clear of any lien or encumbrance, together with written evidence
satisfactory to Purchaser of any required third party consent to such
assignment. Seller shall deliver to Purchaser all original Contracts and
Leases, and if the originals of any Contracts or Leases are not available,
copies, which Purchaser has elected to purchase pursuant to Article III hereof;
the Permits, including the existing certificates of occupancy for the Premises
as presently constituted and if no such certificates are available, evidence
that the Premises are legally constructed and properly zoned in accordance with
all applicable laws; all warranties and guarantees, to the extent available
(and assignments thereof to Purchaser), issued in connection with the initial
construction of the Real Property and Improvements; any Personalty, and any
repairs or additions thereto; cash bank; moneys advanced for future
registrations; guest registration records; keys; permits, approvals and
licenses issued by all appropriate governmental authorities and fire
underwriting organizations with respect to the construction and use of the
Premises or any part thereof; and any existing copies of architectural plans
and specifications, blueprints and building plans which may be in Seller's
possession.
5. At Purchaser's option, an assignment of all fire and extended coverage
insurance policies, liability policies and loss of
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rental policies, affecting any of the Premises to the extent assignable (if
assigned, premiums to be adjusted pro-rata at Closing).
6. Tax certificates or other evidence of payment from all
appropriate taxing authorities certifying the payment of all real and personal
property taxes through the current tax year.
7. A certificate of Seller dated as of the Closing that Seller is
not a foreign person or corporation within the meaning of Sections 1445 and
7701 of the Internal Revenue Code (the "IRC").
8. A bring down certificate dated as of the Closing certifying
the truth and accuracy of each representation and warranty set forth in Article
XII as of the Closing Date.
9. An affidavit of title reasonably satisfactory to the Title
Company enabling the Title Company to issue the Title Policy without exception
for mechanic's or materialman's or other statutory liens or for the rights of
parties in possession other than temporary hotel patrons.
C. At the Closing, the Purchaser shall deliver to the Seller the
following:
1. The balance of the Purchase Price.
2. Proof of authority for Purchaser to complete the transaction
reasonably satisfactory to Seller.
3. The assignments of Leases duly executed and acknowledged by
Purchaser.
4. Such other instruments as are customarily executed by
purchasers to effectuate the purchase of property similar to the Hotels.
VI. DELIVERY OF POSSESSION
Seller shall deliver actual and exclusive possession of the Premises
to Purchaser on the Closing Date.
Seller hereby grants to Purchaser the right to enter the
Premises at any reasonable time after the date hereof for the purpose of
inspecting, testing and examining the Premises, which purpose is more
particularly provided in Article III hereof.
VII. DAMAGE TO PROPERTY
Seller shall give Purchaser immediate notice of any fire or other
casualty or of any pending or threatened condemnation occurring to all or any
portion of the Premises between the date
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hereof and the Closing. If prior to the Closing, there shall occur:
(i) damage to any one of the Hotels caused by fire or other casualty,
which would cost $300,000.00 or more to repair or replace; or
(ii) the taking or condemnation of all or any portion of any one of
the Hotels (including any parking areas) as would materially interfere with the
use thereof, as reasonably determined by Purchaser; then, if any of the events
set forth in (i) or (ii) above occurs, Purchaser, at its option, may terminate
this Agreement by written notice given to Seller within fifteen (15) days
after Purchaser has received the notice referred to above or at the Closing,
whichever is earlier. If Purchaser does not elect to terminate this Agreement,
the Closing shall take place as provided herein without an abatement of the
Purchase Price and there shall be assigned to the Purchaser at Closing, all
interest of the Seller in and to any insurance proceeds or condemnation awards
which may be payable to Seller on account of such occurrence.
If, prior to the Closing, there shall occur:
(x) damage to any one of the Hotels caused by fire or other
casualty which would cost less than $300,000.00 to repair or
replace; or
(y) the taking or condemnation of all or any portion of any one of
the Hotels which is not material to the use thereof, as
reasonably determined by Purchaser;
then, if any of the events set forth in (x) or (y) above occurs, Purchaser
shall have no right to terminate this Agreement (solely as a result of the
occurrence of such events), and Seller shall, at its sole expense, with respect
to subparagraph (x), restore or replace the damaged Hotel(s) to its or their
original condition; and, with respect to subparagraph (y), there shall be
assigned to Purchaser at Closing all interest of Seller in and to any insurance
proceeds or condemnation awards which may be payable to Seller on account of
any such occurrence.
VIII. REMEDIES
A. If the transaction contemplated by this Agreement is not
consummated solely by reason of Purchaser's failure to perform its obligations
under this Agreement, then Seller, as its sole and exclusive remedy, shall be
entitled to retain the Deposit as full liquidated damages in complete and total
accord and satisfaction, the parties hereby acknowledging and agreeing to the
difficulty of ascertaining Seller's actual damages in such circumstances.
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B. If this transaction is not consummated by reason of:
(i) cancellation by Purchaser as permitted by the terms
of this Agreement, including but not limited to,
cancellation by Purchaser at any time on or prior to
the termination of the Feasibility Period;
(ii) the inability of Purchaser to obtain any approval or
consent required pursuant to or otherwise satisfy any
condition or contingency set forth in Article III
hereof;
(iii) the occurrence of any of the events described in
Article VII;
(iv) Title Defects and Survey Defects which are not cured
as provided in this Agreement (except for those Title
Defects or Survey Defects which Seller is obligated
to cure); or
(v) cancellation by Purchaser pursuant to any other
applicable provisions of this Agreement,
then Purchaser shall be entitled to a return of the Deposit (together with all
interest thereon) and this Agreement shall be null and void and all parties
relieved from any further liability hereunder, unless Purchaser elects to waive
any of the items or occurrences set forth in this Article VIII, Paragraph B.
The items enumerated in this Article VIII, Paragraph B are for Purchaser's
benefit only and the non-occurrence of a state of facts sufficient to satisfy
any of such items may not be used or pleaded by Seller as a defense to the
enforceability of this Agreement.
C. If this transaction is not consummated solely by reason of
default on the part of Seller or if Seller fails to close this transaction in
breach of its obligation to do so, then Purchaser, at its option, may
(i) seek specific performance of this Agreement; or
(ii) receive a return of the Deposit (together with all
interest thereon) and to recover its actual, monetary
costs, fees and disbursements not to exceed
$500,000.00.
IX. PRORATIONS
All income (excluding cash on hand and accounts receivable which shall
be and remain the Property of Seller), current operating expenses, accounts
payable, real estate taxes, other taxes and assessments, all utilities, water
and sewer charges, licenses or permit fees relating to the operation of the
Premises, real estate
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and personal property ad valorem taxes, prepayments made under the Contracts
(to be assumed by Purchaser pursuant to Article III hereof) and insurance
premiums (if applicable), shall be adjusted and prorated as of the Closing.
All franchise fees, maintenance and service agreements (whether or not service
is continued by Purchaser) and utility charges shall be determined as of
Closing and paid by Seller or appropriate adjustments made if Purchaser at its
option accepts an assignment of any such agreement. If such charges and
expenses are unavailable on the Closing Date, a re-adjustment of such charges
and expenses shall be made within sixty (60) days after the Closing. The
parties agree to cooperate in good faith in effecting such a final
reconciliation and each party shall promptly pay (or reimburse the other party
for) any expense item that is chargeable to the former party and shall promptly
remit any income item to the other party if entitled thereto. Seller shall
use reasonable efforts to arrange for the rendition of final bills by the
utility companies involved as of the Closing Date.
Guest room revenues of the Premises, whether in cash or in accounts receivable,
arising from occupancy for the night beginning on the day preceding the Closing
Date, including any tax thereon, but exclusive of food, beverage, telephone and
similar charges, which shall be retained by Sellers (the "Room Ledger") and
ending on the Closing Date shall be credited one-half to Purchaser and one-half
to Seller. Seller shall collect all income and other sums payable by tenants
or guests (or otherwise) and shall be responsible for the payment of all
expenses on account of services and supplies furnished to and for the benefit
of the Premises through and including the Closing. Purchaser shall be credited
with any deposits from tenants or guests of the Premises which are refundable
to such tenants or guests. Seller shall remit to Purchaser at closing all
prepaid income items. In addition, at Closing, Seller shall deliver to
Purchaser a schedule of all unpaid accounts receivable and other income items
as of Closing. All such accounts receivable and other income items paid to and
collected by Purchaser after Closing shall be promptly remitted to the order of
Seller. Except for sums actually received by Purchaser pursuant to the
immediately preceding sentence, Purchaser shall assume no obligation to collect
or enforce the payment of any amounts that may be due to Seller, except that
Purchaser shall render reasonable assistance, at no expense to Purchaser, to
Seller after Closing in the event Seller proceeds against any third party to
collect any accounts receivable or other income items due Seller. Nothing
contained in this Article shall be deemed to prohibit Purchaser and Seller from
entering into an agreed settlement in writing of all prorations at or following
Closing.
In the event any adjustments pursuant to this Article are, subsequent
to Closing, found to be erroneous, then either party hereto is entitled to
additional monies and shall invoice the other party for such additional amounts
as may be owing, and such amount shall be paid promptly by the other party upon
receipt of the
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invoice. Such invoice shall be accompanied by reasonable substantiating
evidence. Notwithstanding anything contained in this Article IX to the
contrary, in order to provide security for all of the adjustments and
prorations set forth in this Article IX to be made after Closing, Purchaser and
Seller agree that the sum of $25,000.00 ($10,000.00 for the Holiday Inn Select,
Dallas, Texas and $5,000.00 for each of the other Hotels) from the net sales
proceeds portion of the Purchase Price available to Seller at Closing shall be
deposited with Escrow Agent and shall be held by Escrow Agent until all such
adjustments and prorations are deemed final by Purchaser and Seller, which
Purchaser and Seller shall use their best efforts to accomplish within sixty
(60) days after the Closing Date. Escrow Agent shall not disburse such amount
or any portion thereof except in accordance with written instructions relative
thereto signed by both Purchaser and Seller.
Purchaser shall have no obligation with respect to Seller's employees
whatsoever all of whom shall be compensated and terminated by Seller as of
Closing, though Purchaser reserves the right to employ any such employees.
The provisions of this Article IX shall survive the delivery of the
Deeds.
X. NOTICES
Any notice to be given by either party to this Agreement shall be in
writing and shall be either delivered personally or by certified or registered
U.S. Mail, postage prepaid, or by overnight courier delivery service with
charges to the sender, or by telecopier or facsimile, with follow-up by means
of one of the other notice methods set forth herein, with its notice complete
upon receipt of the facsimile copy, as follows:
To Seller: c/o Impac Hotel Group, Inc.
The Lenox Building, Suite 1220
3399 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Robert S. Cole
Telephone No. (404) 364-9400
Facsimile No. (404) 364-0088
With copies to: Reece & Lang, P.S.C.
The Lenox Building, Suite 2000
3399 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David D. Robinson
Telephone No. (404) 365-0456
Facsimile No. (404) 365-0629
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To Purchaser: WINN Limited Partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
Telephone No. (919-510-6004)
Facsimile No. (919-782-1285)
With copies to: William W. Bunch, III, Esquire
Brown & Bunch
4900 Falls of Neuse Road,
Suite 210 (street zip code 27609)
Post Office Box 19409
Raleigh, North Carolina 27619-9409
Telephone No. (919) 878-8060
Facsimile No. (919) 878-8062
Any notice, demand or other communication shall be deemed given and effective
as of the date of delivery in person, by transmission or by receipt set forth
on the verification of delivery or return receipt. The inability to deliver
because of changed facsimile number and/or address of which no notice was
given, or rejection or other refusal to accept any notice demand or other
communication, shall be deemed to be receipt of the notice, demand or other
communication as of the date of such attempt to transmit, deliver or rejection
or refusal to accept. Any party may change addresses for notices by delivering
written notice of such change in accordance with this Article X.
XI. INDEMNITY
A. Seller shall indemnify and hold the Purchaser harmless from
and against any claim for any real estate commission, brokerage fee or finder's
fee made by any person, firm or corporation, claiming by, through or under the
Seller. Purchaser shall indemnify and hold the Seller harmless from and
against any claim for any real estate commission, brokerage fee or finder's fee
made BY any person, firm or corporation, claiming by, through or under the
Purchaser. Notwithstanding the foregoing, Seller warrants and represents that
there are no brokerage fees, real estate commissions, finder's fees or other
acquisition costs or any other compensation payable by Seller and due to any
third party in connection with this transaction other than a commission to be
paid to Hodges, Ward and Elliott. Seller shall pay such commission in full to
such broker upon the Closing of the transaction contemplated hereby. This
warranty and representation shall survive the Closing and the parties shall
indemnify each other from any liability, cost or loss arising out of a breach
of said warranty and representation, including consequential damages.
B. For a period of one (1) year following the Closing Date, the
Seller shall indemnify and hold the Purchaser harmless from and against any and
all liabilities, claims, demands, costs and expenses
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of any kind or nature, including but not limited to, reasonable attorney's
fees, arising out of or incurred in connection with (i) any breach of the
representations and warranties of Seller set forth in this Agreement, (ii) the
ownership, use, maintenance or operation of the Premises on or prior to the
Closing or the transfer of the Premises to the Purchaser (including the payment
of all taxes), or (iii) compliance or failure to comply with the notice
provisions relating to bulk sales laws applicable to the transfer of all or any
part of the Premises. Purchaser shall indemnify and hold Seller harmless from
and against any and all liabilities, claims, demands, costs and expenses of any
kind or nature, including reasonable attorney's fees, arising after the date of
Closing and which arise out of the ownership, use, maintenance or operation of
the Premises by the Purchaser following the Closing or other transfers of the
Premises to the Purchaser. Such indemnities shall survive Closing.
C. If Purchaser or Seller propose to make any claim for
indemnification under any Article or Paragraph of this Agreement (the
"Indemnitee"), the Indemnitee shall deliver to the other party (the
"Indemnitor") a certificate signed by the Indemnitee which certificate shall
(i) state that a loss has occurred and (ii) specify in reasonable detail each
individual item of loss or other claim including the amount thereof and the
date such loss was incurred, together with all information in the possession or
under the Control of Indemnitee or reasonably available to it. The Indemnitor
shall have the right in its discretion and at its expense to participate in and
control (a) the defense or settlement of any claim, suit, action or proceeding
(including appeals) in respect of such item (or items) by any person other than
a party hereto, (b) any and all negotiations with respect thereto, and (c) the
assertion of any claim against any insurer with respect thereto, and the
Indemnitee shall not settle any such claim, suit, action or proceeding or agree
to extend any applicable statute of limitation without the prior written
approval of the Indemnitor. The rights of participation, control and approval
granted to the Indemnitor shall be subject as a condition precedent to the
Indemnitor's acknowledging to the Indemnitee, in writing, the obligation of the
Indemnitor to indemnify the Indemnitee in respect of such third party's claim,
suit, action or proceeding giving rise to such item. Upon satisfaction of such
condition precedent, the Indemnitee shall provide the Indemnitor with all
reasonably available information, assistance and authority to enable the
Indemnitor to effect such defense or settlement and upon the Indemnitor's
payment of any amounts due in respect of such claim, suit, action or
proceeding, the Indemnitee shall, to the extent of such payment, assign or
cause to be assigned to the Indemnitor the claims of the Indemnitee, if any,
against such third parties in respect of which such payment is made. If the
Indemnitor is not so willing to acknowledge such obligation, the parties shall
jointly consult and proceed as to any such third party claim, suit, action or
proceeding.
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XII. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
The Purchaser represents and warrants to the Sellers, individually
that:
A. The Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of North Carolina,
and has all requisite partnership powers and all governmental licenses,
authorizations, consents and approvals to carry on its business as now
conducted and to enter into and perform its obligations under this Agreement
and under any document or instrument required to be executed and delivered on
behalf of the Purchaser hereunder; provided, however, it is acknowledged that
as of the Date of this Agreement, Purchaser has not yet qualified to do
business in the States of Texas and Kentucky, but will take such actions as are
required to accomplish such qualifications in due course.
B. Purchase is authorized to enter into this Agreement and to
consummate the transaction contemplated hereby, and the individuals executing
this Agreement on behalf of Purchaser are also duly authorized to execute this
Agreement and to bind Purchaser to consummate such transaction. The execution
and delivery of this Agreement and, upon receipt of approval by the board of
directors of the general partner of Purchaser, the conveyance of the Premises
to Purchaser pursuant to this Agreement, do not require the consent of any
person, agency or entity not a party to this Agreement. The execution of this
Agreement by Purchaser has been duly authorized by proper partnership action,
as the case may be, including the board of directors of the general partner of
Purchaser.
C. Purchaser is not a foreign entity, foreign corporation,
foreign partnership, foreign trust or foreign estate (as those terms are
defined in the Internal Revenue Code and Income Tax regulations).
D. Neither the entry into nor, upon receipt of approval by the
board of directors of the general partner of Purchaser, the performance of, or
compliance with, this Agreement by Purchaser has resulted, or will result, in
any violation of, or default under, or result in the acceleration of, any
obligation under any existing corporate charter, certificate of incorporation,
bylaws, articles of organization, limited liability company agreement or
regulations, partnership agreement, mortgage indenture, lien agreement, note,
contract, permit, judgment, decree, order, restrictive covenant, statute, rule
or regulation applicable to Purchaser.
E. There is no action, suit or proceeding, pending or known to be
threatened, against or affecting the Purchaser in any court or before any
arbitrator or before any Governmental Body which (a) in any manner raises any
question affecting the validity or enforceability of this Agreement or any
other agreement or
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instrument to which the Purchaser is a party or by which it is bound and that
is to be used in connection with, or is contemplated by, this Agreement, (b)
could materially and adversely affect the business, financial position or
results of operations of the Purchaser, (c) could materially and adversely
affect the ability of the Purchaser to perform its obligations hereunder, or
under any document to be delivered pursuant hereto, (d) could create a lien on
the Premises, any part thereof or any interest therein or (e) could adversely
affect the Premises, any part thereof or any interest therein or the use,
operation, condition or occupancy thereof.
F. Brokerage Commission. The Purchaser has not engaged the
services of, nor is it or will it become liable to, any real estate agent,
broker, finder or any other person or entity for any brokerage or finder's fee,
commission or other amount with respect to the transaction described herein.
As used herein, Purchaser's "actual knowledge" shall mean the
knowledge of the following person: Robert W. Winston, III, President of
Winston Hotels, Inc., the sole general partner of Purchaser.
Each of the four (4) Sellers individually (and specifically
not jointly and severally by and among
the Sellers) represents and warrants to the Purchaser the following, as to each
Seller or as to the specific Premises owned by that Seller:
A. Sellers are corporations and limited partnerships, each
existing and in good standing under the laws of the state of its incorporation
or formation and authorized to do business in the State in which the Premises
are located.
B. Sellers are authorized to enter into this Agreement and to
consummate the transaction contemplated hereby, and the individuals executing
this Agreement on behalf of Sellers are also duly authorized to execute this
Agreement and to bind Sellers to consummate such transaction. The execution
and delivery of this Agreement and upon receipt of approval by the shareholders
of ABL and of LLA, the conveyance of each of the four (4) Premises by Sellers,
pursuant to this Agreement, do not require the consent of any person, agency or
entity not a party to this Agreement. The execution of this Agreement by
Sellers has been duly authorized by proper corporate or partnership action, as
the case may be, including the board of directors of Sellers, if any of Sellers
is a corporation. In the event that either ABL or LLA is unable to obtain the
approval as set forth herein, the failure or inability to obtain such approval
shall not affect the enforceability of this Agreement by Purchaser.
Accordingly, in the event that either ABLA or LLA is unable to obtain the
approval as set forth herein, and as a direct and sole result thereof this
transaction is not consummated, then Purchaser may seek specific performance or
recover damages as set forth in Article VIII Remedies, Paragraph (C)(i) or
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(ii), at Purchaser's option.
C. There are no pending or, to the knowledge of Sellers,
threatened, condemnation or similar proceedings affecting the Premises, or any
portion thereof. Sellers have not received any written notice that any such
proceeding is contemplated, and no part of the Premises has been destroyed or
damaged by any casualty.
D. Sellers have no knowledge of any options to purchase, rights
of first refusal or other similar agreements with respect to the Premises which
give anyone the right to purchase the Premises or any part thereof. There are
no contracts or agreements which affect or cover the Premises, except for the
Contracts, Permits and Leases. Sellers have no knowledge of any unpaid bills
or claims in connection with the construction repair or replacement of the
Premises. There are no agreements allowing for any reduction, concession or
abatement of room rates, except in the ordinary course of business.
E. To Sellers' knowledge, the Financial Statements for each of
the Hotels that have been or will be made available to Purchaser pursuant to
this Agreement are true, correct and accurate in all respects and fairly
present the results of operations of the Premises for the periods then ended.
Seller shall continue to provide Financial Statements to Purchaser as soon as
reasonably practical upon receipt of reasonable requests from Purchaser through
the Closing Date.
F. To Sellers' knowledge, each Seller has filed all federal,
state, county and local tax returns required of each to be filed and has paid
all taxes, interest and penalties and assessments that have become due and
payable. Neither the Sellers nor their agents have been advised or notified of
any tax deficiency, assessment or penalty with respect to the Seller, nor do
the Sellers know of any basis for any additional claim or assessment for taxes,
interest or penalties.
G. Sellers have received no notice and have no knowledge that any
of them lack any permit, license, certificates or authority, including, but not
limited to, Certificates of Occupancy, necessary for the present use and
occupancy of each of the Improvements. Sellers have received no notice and
have no knowledge that the Real Properties are not zoned properly for the
present uses made thereof.
H. Sellers each own and have good and marketable title to the
Premises, subject to the matters that are set forth in the Title Commitment for
each Premises, when completed by the Title Company. To Sellers' knowledge,
each of the Premises owned or leased by Sellers are in a reasonable condition
and working order and will remain so until Closing, reasonable wear and tear
and acts
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<PAGE> 24
beyond Sellers' control excepted. The Premises to be purchased are, as to
each, all of the property of every kind and nature necessary for the operation
of the Sellers' businesses in the ordinary course, except as otherwise set
forth in this Agreement by specific reservation from sale, rejection by
Purchaser or inability on the part of Sellers to assign to Purchaser.
I. To the best of Sellers' knowledge, the Premises are in
compliance in all material respects with all statutes, laws, ordinances, rules,
regulations, orders and directives (including, without limitation, all
building, health, zoning, fire, labor and environmental control and
antipollution laws, ordinances, rules, regulations or directives) of any and
all Governmental Agencies pertaining to the use or occupancy of the Premises.
The Sellers have not received any notice of and the Sellers and the Premises
have not been charged with, are not, to Sellers' knowledge, under investigation
or threatened investigation for failure to comply with any and all statutes,
laws, ordinances, rules, regulations, orders and directives of any and all
Governmental Agency or Agencies pertaining to the use, generation, dumping,
releasing, burying or disposing of or emitting of any particles, materials,
substances, or emissions that are now or have heretofore been determined by any
and all Governmental Agency or Agencies to be of a hazardous, toxic, pollutive,
or ecologically or environmentally damaging nature, including but not limited
to asbestos ("Hazardous Materials").
For purposes of this Agreement, the term "Hazardous Materials" shall include,
but not be limited to, those materials or substances now or heretofore defined
as "hazardous substances," "hazardous materials," "hazardous waste," "toxic
substances," or other similar designations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C., Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C., Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C., Section 1801, et seq. and other laws, whether or not of a similar
nature, applicable to the Premises and adopted by, enacted in or applicable to
the respective state where the Hotel is located.
For purposes of this Agreement, the term "Governmental Agency or Agencies"
means, whether of the United States of America, of any state or territory
thereof or of any foreign jurisdiction, any government, political subdivision,
court, agency, or other entity, body, organization or group exercising any
executive, legislative, judicial, regulatory or administrative function of
government.
To the best of Sellers' knowledge, the Real Property has never appeared on any
federal or state registry of active or inactive hazardous waste disposal sites.
Sellers have never received any notice of claim from a Governmental Agency
concerning the alleged release or threatened release of Hazardous Materials at
the Real
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Property.
J. The employee records delivered or to be delivered to
Purchaser set forth or shall set forth the actual citizenship to the extent
presently disclosed in the Sellers' records of employees and known by the
Sellers and compensation of all employees at the Premises for the period set
forth thereon, and the vacation time, bonuses and benefits to which each is
entitled all of which the Sellers shall, at their sole expense, satisfy prior
to the Closing Date. There are no employment or union agreements in effect and
no employee has received a commitment from the Sellers for continued employment
at any of the Hotels after Closing. The number of the Sellers' employees at
each Hotel is as follows:
Dallas Hotel:_______
Abingdon Hotel:_______
London Hotel:________
Duncanville Hotel:________
K. Sellers have no knowledge of and have received no
notice of any causes of action, actions, or proceedings of whatever type or
description which have been instituted or threatened or are pending relating to
the Premises or any interest therein, except as set forth for each Premises on
Schedule 5 attached hereto.
L. Sellers make no representations and warranties to
Purchaser other than as specifically set forth herein;
The Premises will, on the Closing Date, be transferred "as is,"
without warranty or representation of any kind or character except as
specifically set forth herein, including without limitation any representations
as to physical condition, value, compliance with legal requirements or the
existence or status of contracts affecting the Premises. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THERE IS NO WARRANTY, EXPRESS OR IMPLIED, OF
MERCHANTABILITY OR FITNESS FOR A SPECIFIC PURPOSE. Purchaser will make
inspection of the Premises as it deems appropriate, and has not received any
warranties or representations of any kind, whether written or oral, except as
specifically set forth herein.
The term "to the best of Seller's knowledge or similar phrase shall
mean the knowledge of the following persons after making inquiry into the files
in their possession relating to the operation, ownership, maintenance and
management of the Premises: Robert S. Cole, the President of the general
partner of Sellers or President of Sellers, as the case may be, and Robert M.
Flanders, the chief financial officer of the general partner of Sellers or of
the Seller, as the case may be.
Each of the representations and warranties contained in this Article
XII and its various Paragraphs are intended for the benefit of the Purchaser
and may be waived in whole or in part, by the
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<PAGE> 26
Purchaser, but only by an instrument in writing signed by the Purchaser.
Purchaser, in Purchaser's sole and absolute discretion, may waive any
condition to close or breach of any representation or warranty provided for
herein or any Title or Survey Defect, and in such event, this transaction shall
be consummated as if such condition, representation, warranty or defect was
satisfied. All of the representations and warranties contained in this
Agreement shall survive the Closing for the earlier to occur of a period of one
(1) year or a sale, assignment or other transfer of the Premises by Purchaser.
The representations and warranties set forth above shall be true, correct and
accurate on the date hereof and as of the date of Closing.
Each of said representations and warranties of this Article XII shall
survive the Closing of the transaction contemplated hereby for the earlier to
occur of one (1) year after the Closing Date or a sale, assignment or other
transfer of the Premises by Purchaser (unless Purchaser makes a claim by notice
in writing to Sellers in connection with the untruth or inaccuracy of such
representation or warranty within such one (1) year period, in which event the
representation or warranty that is the subject of such claim shall survive
until such claim is finally resolved), except to the extent that Sellers give
Purchaser written notice prior to Closing of the untruth or inaccuracy of any
representation or warranty, or Purchaser otherwise obtains actual knowledge
prior to Closing of the untruth or inaccuracy of any presentation or warranty,
and Purchaser nevertheless elects to close this transaction. Except to the
extent otherwise expressly provided in the immediately preceding sentence, no
investigation, audit, inspection, review or the like conducted by or on behalf
of Purchaser shall be deemed to terminate the effect of any such
representations and warranties, it being understood that Purchaser has the
right to rely thereon and that each such representation and warranty
constitutes a material inducement to Purchaser as a result of the inaccuracy or
breach of any of the representations and warranties of Seller hereunder to the
extent provided herein other than representations and warranties as to which
Seller has given Purchaser written notice prior to Closing of the untruth or
inaccuracy or which Purchaser otherwise obtains actual knowledge of the untruth
or inaccuracy; provided, however, the foregoing limitation on Seller's
indemnity shall not limit Purchaser's remedy as otherwise described herein.
XIII. ESCROW
The Escrow Agent hereby acknowledges receipt of the Deposit and agrees to
hold the Deposit in escrow until the Closing or sooner termination of this
Agreement and shall pay over and apply the proceeds thereof in accordance with
the terms of this Agreement. If, for any reason, the Closing does not occur
and either party makes a written demand upon the Escrow Agent for payment of
the
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Deposit, the Escrow Agent shall give written notice to the other party of such
demand. If the Escrow Agent does not receive a written objection from the
other party to the proposed payment within five (5) business days after the
giving of such notice, the Escrow Agent is hereby authorized to make such
payment. If the Escrow Agent does receive such written objection within such
five (5) day period, or if for any reason the Escrow Agent in good faith shall
elect not to make such payment, the Escrow Agent shall continue to hold the
Deposit until otherwise directed by written instructions from the parties to
this Agreement or until a final judgment (beyond any applicable appeal period)
by a court of competent jurisdiction is rendered disposing of such Deposit.
The Escrow Agent shall be liable as a depository only and its duties
hereunder are limited to the safekeeping of the Deposit and the delivery of
same in accordance with the terms of this Agreement. The Escrow Agent shall
not be liable for any act or omission done in good faith, or for any claim,
demand, loss or damage made or suffered by any party to this Agreement, except
such as may arise through or be caused by the Escrow Agent's willful misconduct
or negligence.
XIV. COVENANTS
A. Following the date of this Agreement and to and including the
Closing, the Seller (i) shall continue normal and prudent maintenance and
management of the Premises, (ii) shall continue to maintain supplies and
payroll at their current level, and (iii) shall operate the Hotel in the
ordinary course of business.
B. All taxes levied against the Premises which were or shall be
due and payable prior to the Closing have been or shall be paid in full by the
Seller on or prior to the Closing.
C. All Contracts and Leases, if legally assignable, which are
assumed by Purchaser in accordance with Article III shall be current and not in
default on the part of Sellers as of the Closing, and Seller shall provide
notice to Purchaser of any known default on the part of any other contracting
party or Lessee. Seller shall not enter into new Contracts or Leases except in
the ordinary course of business, and provided that any such new Contract or
Lease shall either provide that it may be cancelled on not more than 30 days
notice by Seller at no penalty or cost or, Purchaser shall consent to such
Contract or Lease in writing.
D. Seller shall maintain the present level of fire and casualty
insurance on each of the Premises up to and including the Closing.
E. Seller shall deliver to Purchaser a report itemizing room
sales per month, occupancy and ADR through a date which is not later than one
month prior to the Closing Date ("Monthly Report").
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F. During the Feasibility Period, representatives of Seller and
Purchaser shall meet at the Premises and prepare a schedule of the Equipment,
which schedule shall be attached hereto and made a part hereof at such time.
XV. BINDING EFFECT; MISCELLANEOUS
A. This Agreement shall be binding upon and shall inure to the
parties hereto, their respective heirs, successors, legal representatives and
assigns. This Agreement sets forth the entire Agreement between the parties
hereto and no other prior written or oral statement or agreement or
understanding shall be recognized or enforced. All modifications or amendments
shall be in writing and signed by the parties. This Agreement is to be
construed according to the laws of the State of North Carolina. This Agreement
may be executed in two or more counterparts all of which shall constitute one
and the same instrument. Each of the four (4) individual Sellers are hereby
acknowledged to be separate and distinct legal entities, wholly independent
from each other, with separate shareholders, or general and limited partners,
and each Seller shall be liable only for such claims or demands made by
Purchaser or otherwise with respect to that Seller's Premises and the
representations, warranties and covenants made by that Seller as set forth in
this Agreement, and it is specifically agreed by and between the Purchaser and
each of the individual Sellers hereto that liability is and shall be individual
only and is not and shall not be joint and several among the Sellers. The
singular shall include the plural and vice versa.
B. The Purchaser may assign this Agreement to a corporation,
partnership or other entity in which Purchaser or the president of its general
partner is a principal participant, and no assignment shall release Purchaser
of any liability or responsibility to perform the terms of this Agreement.
C. (1) As to each of the Premises of the individual Sellers, for
the earlier to occur of a period of five (5) years immediately following the
Closing or a sale, assignment or other transfer of the individual Premises
concerned by the restrictions placed on the Seller by this paragraph by
Purchaser to an unrelated third party, Seller agrees that it shall not,
directly or indirectly, for its own account or as agent, employee, officer,
director, trustee, lessor, sublessor, consultant or as a stockholder of any
corporation or any other entity, or as a member of any firm or otherwise,
engage or attempt to engage within the Restricted Area (as hereinafter
defined), in the hotel, motel or other business which is the same as,
substantially similar to or competitive with the operation of the Hotels
purchased pursuant to this Agreement. For purposes of this Agreement, the term
"Restricted Area" shall mean an area which
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shall consist of a circle the radius of which is five (5) miles for the Dallas
Hotel and the Duncanville Hotel purchased pursuant to this Agreement and a
radius of which is twenty (20) miles for the Abingdon Hotel and the London
Hotel purchased pursuant to this Agreement, with the center point of each such
circle being located at each of the Hotels purchased pursuant to this
Agreement.
(2) For a period of one (1) year immediately following the
Closing, Seller agrees that it shall not, directly or indirectly, for its own
account or as agent, employee, officer, director, trustee, lessor, sublessor,
consultant or as a stockholder of any corporation or any other entity, or as a
member of any firm or otherwise, employ or solicit the employment of any
employees of Seller at any of the Hotels purchased pursuant to this Agreement,
except with regard to present employees in management positions at the Hotels,
the names and positions for each of which shall be disclosed to Purchaser
within ten (10) days after the Date of this Agreement.
(3) As to each of the Premises of the individual Sellers, for the
earlier to occur of a period of two (2) years immediately following the Closing
or a sale, assignment or other transfer of the individual Premises concerned by
the restrictions placed on the Seller by this paragraph by Purchaser to an
unrelated third party, Seller covenants and agrees that it shall not use any
business information which it obtained solely as a result of the ownership and
operation of the Hotels, such as guest lists and customer accounts, and other
confidential information pertaining to the Hotels, in competition with and to
the detriment of the Hotels and in accordance therewith, Seller does hereby
covenant and agree that it shall not solicit any of the existing customer
accounts at any of the Hotels in competition with or to the detriment of the
Hotels during the time period as set forth hereinbefore.
Each of Purchaser and Seller acknowledges, warrants, represents and
agrees that the foregoing territorial, time and other limitations and
restrictions contained in this Article XV, Paragraph C are reasonable and
properly required for the adequate protection of the business and affairs of
the Purchaser, and in the event that any one or more of such territorial, time
or other limitations is found to be unreasonable by a court of competent
jurisdiction, each of Purchaser and Seller hereby agree to submit to the
reduction of the said territorial, time or other limitation, to such an area,
period or otherwise as the court may determine to be reasonable. In the event
that any limitation or restriction under this Article XV, Paragraph C is found
to be unreasonable or otherwise invalid in any jurisdiction in whole or in
part, each of Purchaser and Seller acknowledges, warrants, represents and
agrees that such limitation shall remain and be valid in all other
jurisdictions. Each of Purchaser and Seller acknowledges, warrants, represents
and agrees that the restrictive covenants contained in this Article XV,
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Paragraph C are necessary for the protection of Purchaser's legitimate
business interests and are reasonable in scope and content, and Seller
represents and warrants that its attorneys have thoroughly and completely
reviewed this Article XV, Paragraph C with it, and it understands the contents
hereof. Each of Seller and Purchaser acknowledges and agrees that in addition
to all other remedies available to Purchaser, due to the fact that such other
remedies may be inadequate, Purchaser shall have the remedies of a restraining
order, injunction or other equitable relief to enforce the provisions hereof.
All expenses, including reasonable attorneys' fees and expenses arising out of
claims under this Article XV, Paragraph C shall be borne by the losing party to
the fullest extent permitted by law. The provisions of this Article XV,
Paragraph C shall survive the Closing and the delivery of the Deeds.
D. As used herein, "the Date of this Agreement" shall mean the
date noted below as the date upon which this Agreement was executed by the
latter of the Purchaser or the Seller.
E. Indemnification by Sellers. Each Seller agree to, and hereby
does, indemnify and save harmless Purchaser and its affiliates and their
respective successors and assigns against and from any loss, liability or
expense, including reasonable attorneys' fees, arising out of any claim or
claims for commissions or other compensation for bringing about this Agreement
or the transactions contemplated hereby made by any broker, finder, consultant
or like agent if such claim or claims made by any such broker, finder,
consultant or like agent are based in whole or in part on any agreements
entered into with such Seller or its representatives for a commission or other
compensation. Each Seller shall likewise indemnify and save harmless Purchaser
and its affiliates and their respective successors and assigns against and from
any loss, liability or expense, including reasonable attorneys' fees, arising
out of any claim or claims for commissions or other compensation relating to
the Leases.
F. Indemnification by Purchaser. Purchaser agrees to, and hereby
does, indemnify and save harmless Sellers and their affiliates and their
respective successors and assigns against and from any loss, liability or
expense, including reasonable attorneys' fees, arising out of any claim or
claims for commission or other compensation for bringing about this Agreement
or the transactions contemplated hereby made by any broker, finder, consultant
or like agent if such claim or claims any such broker, finder, consultant or
like agent are based on any agreements entered into with Purchaser or its
representatives for commissions or other compensation.
G. No delay or omission in the exercise of any right or remedy
accruing to Sellers or Purchaser upon any breach under this Agreement shall
impair such right or remedy or be construed as a waiver of any such breach
theretofore or thereafter occurring. The waiver by Sellers or Purchaser of any
breach of any term, covenant
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or condition therein stated shall not be deemed to be a waiver of any other
breach, or of a subsequent breach of the same or any other term, covenant or
condition herein contained. All rights, powers, options or remedies afforded
to Sellers or Purchaser either hereunder or by law shall be cumulative and not
alternative, and the exercise of one right, power, option or remedy shall not
bar other rights, powers, options or remedies allowed herein or by law, unless
expressly provided to the contrary herein.
H. Schedules. All schedules referred to in this Agreement and
attached hereto are hereby incorporated in this Agreement by reference.
I. Article Headings. Article headings and article and section
numbers are inserted herein only as a matter of convenience and in no way
define, limit or prescribe the scope or intent of this Agreement or any part
thereof and shall not be considered in interpreting or construing this
Agreement.
J. Time Periods. Time is of the essence as to all matters
contained in the Agreement. If the final day of any time period or limitation
set out in any provision of this Agreement falls on a Saturday, Sunday or legal
holiday under the laws of the State of North Carolina or the federal
government, then and in such event the time of such period shall be extended to
the next day which is not a Saturday, Sunday or legal holiday.
K. Further Acts. In addition to the acts, deeds, instruments and
agreements recited herein and contemplated to be performed, executed and
delivered by Purchaser and Sellers, Purchaser and Sellers shall perform,
execute and deliver or cause to be performed, executed and delivered at the
Closing or after the Closing, any and all further acts, deeds, instruments and
agreements and provide such further assurances as the other party or the Title
Company may reasonably require to consummate the transaction contemplated
hereunder. However, the foregoing shall not be deemed to (i) require Sellers
to expend a sum of money which it could not reasonably have anticipated on the
date of execution of this Agreement, except to cure Title Defects or Survey
Defects, or (ii) require Purchaser to expend a sum of money which it could not
reasonably have anticipated on the expiration of the Review Period.
L. Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
M. Attorneys' Fees. Should any party employ an attorney or
attorneys to enforce any of the provision hereof or to protect its interest in
any manner arising under this Agreement, or to recover
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damages for breach of this Agreement, the non-prevailing party or parties in
any action pursued in a court of competent jurisdiction (the finality of which
is not legally contested) agrees to pay to the prevailing party or parties all
reasonable costs, damages, and expenses, including attorneys' fees, expended or
incurred in connection therewith.
N. Liquor Licenses. Purchaser or its management company as lessee
for each of the Hotels shall execute such forms, license applications and other
documents as may be necessary for the Purchaser or its management company as
lessee (hereinafter "Operator") to obtain all liquor licenses and alcoholic
beverage licenses necessary to operate any restaurants, bars and lounges
presently located within the Hotels. If permitted under the laws of the
jurisdiction which the Hotels are located, Operator shall execute and file all
necessary forms, applications and other documents (and Sellers shall reasonably
cooperate with the Operator's execution in filing such forms, applications and
other documents) with the appropriate liquor and alcoholic beverage authorities
prior to the Closing, and such acquisition of the necessary liquor and
alcoholic beverage licenses as defined above shall take effect, if possible,
simultaneously with or upon completion of Closing. If not so permitted,
Operator agrees that it will promptly execute all forms, applications and other
documents required to effect such acquisition of such liquor licenses and
alcoholic beverage licenses at the earliest date reasonably practicable,
consistent with the laws of the States where the Property is located, in order
that all liquor licenses and alcoholic beverage licenses may be acquired by
Operator at the earliest reasonably practicable time after Closing. Sellers
shall cooperate reasonably with Operator's execution and filing of such forms,
applications and other documents. Operator's attempts to obtain the alcoholic
beverage licenses and liquor licenses shall not diminish, prior to the Closing,
the full force and effect of the liquor licenses and alcoholic beverage
licenses maintained by Sellers in its operation of the restaurant, lounges and
bars presently located within the Hotels. If such licenses cannot be obtained
by Operator until after Closing, then Sellers covenant and agree that Sellers
shall cooperate reasonably with Operator in keeping open the bars and lounges
and liquors facilities of the Hotels between the Closing and the time when such
liquor licenses are obtained by Operator, or a period not to exceed sixty (60)
days following the Closing Date, whichever is less (unless Operator has during
this time period following Closing diligently and continuously sought to obtain
such licenses, in which event Operator shall have the right to obtain an
extension of such time period from Sellers, not to exceed two (2) thirty-day
(30 day) extensions) by entering into a "Liquor License Agreement" in the form
attached hereto as Schedule 6. In no event shall Sellers be required to obtain
any additional liquor or alcoholic beverage licenses which Sellers do not
possess at the time of Closing and Operator shall maintain in full force and
effect, at all times during the Liquor License Agreement insurance required by
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the franchisor of each of the Hotels.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation,
General Partner
(Corporate Seal) By:___________________________
_______ President
Attest:
________________________
______Secretary
SELLERS:
Dallas Lodging Associates I, Ltd.
a Kentucky limited partnership
By: Dallas Lodging Associates, Inc.,
a Texas corporation,
General Partner
(Corporate Seal) By: _____________________________________
Attest: Robert S. Cole, president
______________________________
Robert M. Flanders, Secretary
A.B. Lodging, Inc.
a Virginia corporation
(Corporate Seal) By: _____________________________________
Attest: Robert S. Cole, President
______________________________
Robert M. Flanders, Secretary
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London Lodging Associates I, Ltd.,
a Kentucky limited partnership
By: London Lodging Associates, Inc.
a Kentucky corporation,
General Partner
(Corporate Seal) By: _____________________________________
Attest: Robert S. Cole, President
______________________________
Robert M. Flanders, Secretary
Duncanville Lodging Associates I, Ltd.
a Kentucky limited partnership
By: Duncanville Lodging Associates, Inc.
a Texas corporation,
General Partner
(Corporate Seal) By: ____________________________________
Attest: Robert S. Cole, President
______________________________
Robert M. Flanders, Secretary
Escrow Agent:
The Title Company of North Carolina, Inc.
as agent for First American Title
Insurance Company
By: _________________________________
Name:_________________________________
Title:________________________________
34
<PAGE> 35
STATE OF __________________
COUNTY OF _________________
I, a Notary Public of the County and State aforesaid, certify that
__________________________, personally came before me this day and acknowledged
that _he is ______________ Secretary of Winston Hotels, Inc., a North Carolina
corporation, General Partner of WINN Limited Partnership, a North Carolina
limited partnership, and that by authority duly given and as the act of the
corporation, as such General Partner, the foregoing instrument was signed in
its name by its ______ President, sealed with its corporate seal and attested
by ___________________ as its ________ Secretary.
Witness my hand and seal, this the _____ day of _____________, 199__.
My commission expires:_____ _____________________________
Notary Public
(SEAL)
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
Robert M. Flanders personally came before me this day and acknowledged that he
is Secretary of Dallas Lodging Associates, Inc., a Texas corporation, General
Partner of Dallas Lodging Associates I, Ltd., a Kentucky limited partnership,
and that by authority duly given and as the act of the corporation, as such
General Partner, the foregoing instrument was signed in its name by its
President, sealed with its corporate seal, and attested by him as its
Secretary.
Witness my hand and seal, this the ___ day of _______________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
35
<PAGE> 36
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
Robert M. Flanders personally came before me this day and acknowledged that he
is Secretary of A.B. Lodging, Inc., a Virginia corporation, and that by
authority duly given and as the act of the corporation, the foregoing
instrument was signed in its name by its President, sealed with its corporate
seal and attested by him as its Secretary.
Witness my hand and seal, this the ____ day of _____________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
STATE OF ___________
COUNTY OF __________
I, a Notary Public of the County and State aforesaid, certify that
Robert M. Flanders, personally came before this day and acknowledged that he is
Secretary of London Lodging Associates, Inc., a Kentucky corporation and
General Partner of London Lodging Associates I, Ltd., a Kentucky limited
partnership, and that by authority duly given and as the act of the
corporation, as such General Partner, the foregoing instrument was signed in
its name by its President, sealed with its corporate seal, and attested by him
as its Secretary.
Witness my hand and seal, this the ___ day of______________, 199__.
My commission expires:_____ ____________________________
Notary Public
(SEAL)
36
<PAGE> 37
STATE OF _____________
COUNTY OF ____________
I, a Notary Public of the State and County aforesaid, certify that
Robert M. Flanders personally came before me this day and acknowledged that he
is Secretary of Duncanville Lodging Associates, Inc., a Texas corporation and
General Partner of Duncanville Lodging Associates I, Ltd., a Kentucky limited
partnership, and that by authority duly given and as the act of the
corporation, as such General Partner, the foregoing instrument was signed in
its name by its President, sealed with its corporate seal, and attested by him
as its Secretary.
Witness my hand and seal, this the ___ day of _______________, 199__.
My commission expires:______ ___________________________
Notary Public
(SEAL)
37
<PAGE> 1
EXHIBIT 10.7
MANAGEMENT AGREEMENT
This AGREEMENT dated this 25th day of April, 1996, by and between
Winston Hospitality, Inc., a North Carolina corporation having its principal
office at 2209 Century Drive, Suite 300, Raleigh, North Carolina 27622 ("WHI")
and Impac Hotel Group, Inc., a Florida corporation having its principal office
at 3399 Peachtree Road, N.E., Suite 1220, Atlanta, Georgia 30326 (the
"Manager").
WHEREAS, WHI intends to lease that certain hotel property (including
the land, improvements, fixtures and personal property) known as the
Dallas-Holiday Inn Select, located at 11350 LBJ Freeway, Dallas, Texas 75238
(the "Hotel" or the "Property") from WINN Limited Partnership, a North Carolina
limited partnership (the "Owner"); and
WHEREAS, the parties intend for Manager to manage the operation of the
Property on behalf of WHI pursuant to the terms hereof.
NOW, THEREFORE, in consideration of Ten ($10.00) Dollars and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties do hereby agree as follows:
ARTICLE 1. THE APPOINTMENT
1.1 Hotel Management Services. WHI hereby engages Manager and
Manager hereby accepts such engagement to provide management services for the
benefit of and on behalf of WHI with respect to the operation of the Hotel, and
in accordance with and subject to the terms and conditions set forth herein.
Pursuant to this Agreement, Manager shall serve as the exclusive authorized
agent of WHI for the management of the operations of the Hotel. The services
to be provided by Manager shall consist of the management of the day-to-day
operations of the Hotel ("Management" or "Management Services"), which
Management Services shall include the activities described in Article 3 hereof
and shall also include the following:
(a) Accounting. Manager shall maintain all standard accounts and
bookkeeping records reflecting the operations of the Hotel, and shall submit
monthly balance sheets and profit and loss operating statements to WHI
reflecting the operations of the Hotel on or before the tenth (10th) day of the
succeeding month. Manager shall also prepare and submit to WHI on a quarterly
basis more detailed financial information and guest surveys concerning the
operation of the Hotel on or before the tenth day of the first month succeeding
the applicable quarter. Manager will effectuate the accounts payable, accounts
receivable and payroll functions for the operations of the Hotel, such
functions to be maintained and effectuated from Manager's central office in
Atlanta, Georgia. Annual and monthly operating budgets will be prepared by
Manager for review by WHI. Manager agrees that it will endeavor to comply with
all reasonable requests of WHI concerning the
<PAGE> 2
content and form of all balance sheets, statements, budgets and other
information that Manager shall submit to WHI pursuant to this Section 1.1(a) of
this Agreement.
(b) Other Financial and Operating Reports. In addition to the
balance sheets, statements, budgets and other information that Manager shall
provide to WHI pursuant to Section 1.1(a) of this Agreement, Manager shall
furnish to WHI on or before the tenth (10th) day of each month, financial and
operating reports for the Hotel for the prior month in such form and detail as
may be agreed upon by Manager and WHI. Within forty-five (45) days after the
end of each calendar year, Manager shall furnish to WHI an annual financial and
operating report covering the Hotel in such detail as may be agreed upon by
Manager and WHI.
(c) Marketing. Manager will provide its expertise and services
for the marketing of the Hotel facility. Marketing plans with monthly action
steps will be prepared contemporaneously with the Yearly Budget by Manager for
review by WHI.
(d) Food and Beverage Services. Manager will provide support,
expertise, and consultation in all facets of the food, beverage, and function
profit centers.
(e) Quality Assurance. Manager will provide, no less than
quarterly, the following reports of Guest Satisfaction Results, Employee
Satisfaction Results, and Product Quality Results through detailed property
inspections and surveys.
(f) Employee Training. Manager will provide initial orientation
and training services for Manager's employees working at the Hotel (including
the general manager), and will continue to provide training and management
services for such employees, including systems training.
(g) Legal Actions. Manager will take such steps as Manager deems
necessary and appropriate to address and respond to legal matters affecting or
relating to the Hotel including, without limitation, utilizing legal counsel
selected by Manager and approved by WHI, and instituting or responding to legal
actions.
ARTICLE 2. TERM AND TERMINATION
2.1 Term and Termination. This Agreement shall commence on the
date (the "Commencement Date") on which percentage lease agreement between WHI
and the Owner, pursuant to which WHI shall acquire a leasehold interest in the
Property (the "Percentage Lease"), shall become effective and shall continue
for a term of one (1) year. In the event that WHI and the Owner do not execute
the Percentage Lease, this Agreement shall be null and void. Manager may
terminate this Agreement in the event that the Management Fees and/or
reimbursements are not paid to Manager in a timely manner for
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<PAGE> 3
any reason as required by Article 5, and WHI fails to satisfy all such
Management Fees and reimbursements within thirty (30) days after written notice
from Manager to WHI that such Management Fees and/or reimbursements have not
been paid. In the event that Manager shall have committed a material breach of
this Agreement, or otherwise failed to observe or perform any material covenant
or provision of this Agreement, and WHI shall have served written notice upon
Manager setting such alleged breach and Manager shall not have cured such
alleged breach within thirty (30) days after the receipt of such notice from
WHI, WHI may terminate this Agreement upon ten (10) days prior written notice
to Manager. In the event of a termination of the "Percentage Lease" as that
term is hereinafter defined, WHI may terminate this Agreement by paying all
Management Fees. WHI may terminate this Agreement without cause on sixty (60)
days written notice to the other party.
2.2 Final Accounting. Upon termination of this Agreement for any
reason, Manager shall immediately deliver to WHI all records, books, accounts,
contracts, leases, receipts for deposits, unpaid bills and other papers or
documents which pertain to the Property. Manager shall have the right to keep
and maintain copies of any records which it delivers to WHI, provided that the
same be kept in confidence by Manager. WHI shall have the right to obtain
access to the Property during the normal business hours to inspect employee
records. In the alternative, the Manager shall provide WHI with copies of
these records, upon WHI's request. Upon such termination or withdrawal WHI
will assume responsibility for payments of all approved or authorized unpaid
bills of the Property.
ARTICLE 3. MANAGER'S RESPONSIBILITIES
3.1 Management. Manager will consult with WHI from time to time
as reasonably necessary with respect to plans and proposals for the provision
of Management Services, and Manager shall accommodate and carry out the
instructions and decisions of WHI with respect to the provision of Management
Services. Subject to any contrary instructions from WHI with respect to any
particular matter in connection with the provision of Management Services,
Manager shall be WHI's exclusive authorized agent for the provision of
Management Services, and in such capacity and on behalf of WHI, Manager shall
have full and complete authority to take all actions necessary and appropriate
for the management of the day-to-day operations of the Hotel, including but not
limited to those matters set forth in this Agreement and the Percentage Lease
the form of which is attached hereto as Exhibit A. Manager shall provide
prompt written notice to WHI of all legal proceedings affecting the Hotel other
than routine collection actions having an amount in controversy of less than
$1,000.
3.2 Employees, Independent Contractor As the exclusive authorized
agent of WHI in the management and operation of the Hotel, Manager shall be
vested by WHI with the full power and authority to hire and discharge all
employees of WHI at the Hotel, including resident manager, and fix compensation
levels, allowances for rooms, food, and other privileges and other terms and
conditions of such employment. WHI shall have in its
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<PAGE> 4
employ a sufficient number of employees to enable Manager to properly,
adequately, safely and economically manage, operate, maintain, and account for
the Property. All matters pertaining to the employment, supervision, training,
compensation, promotion and discharge of such employees are the responsibility
of the Manager. Manager agrees that it will recruit, train and employ an
initial staff for the Hotel on behalf of WHI prior to its opening by WHI.
Manager may negotiate with any union lawfully entitled to represent such
employees and may execute, with WHI approval as agent for WHI, collective
bargaining agreements or labor contracts resulting therefrom.
3.3 Budget. Upon the execution hereof, Manager shall prepare and
submit to WHI an initial Budget (the "Initial Budget") to be delivered to WHI
within 10 business days. The Initial Budget shall be from the date of
commencement of the Percentage Lease and be for the balance of the applicable
calendar year. Thereafter, Manager shall prepare and submit to WHI, prior to
the 1st of November, 1996, an operating Budget for the promotion, operation,
repair, management and maintenance of the Property for the forthcoming calendar
year (the "Yearly Budget"). WHI shall have final approval over the contracts
of such budgets. Variances will be explained on a quarterly basis. Manager
shall incorporate a Capitalized Expenditure Budget into the Initial Budget and
the Yearly Budget, which shall contain (i) an estimate of the amounts to be
dedicated to the repair, replacement or refurbishment of "Furniture and
Equipment," (as hereinafter defined) during the term of the Initial Budget and
Yearly Budget respectively, including a breakdown of such amounts to be so
dedicated in each quarter of the Initial Budget and Yearly Budget, (ii) an
estimate of any amounts WHI will be required to provide for required or
desirable capital improvements to the Hotel or any of its components, and (iii)
an estimate of any amounts WHI will be required to provide as working capital.
For purposes of the Capital Expenditures Budget, "Furniture and Equipment"
shall mean all furniture, furnishings, wall coverings, fixtures and hotel
equipment and systems located at, or used in connection with, the Hotel,
together with all replacements therefor and additions thereto, including,
without limitation (i) all equipment and systems required for the operation of
kitchens and bars, if any, laundry and dry cleaning facilities, (ii) office
equipment, (iii) dining room wagons, materials handling equipment, cleaning and
engineering equipment, (iv) telephone and computerized accounting, property
management, sales and reservation systems and (v) vehicles.
(a) WHI shall review the proposed Initial Budget and Yearly Budget
and deliver to Manager its comments and suggested changes in written form
within thirty (30) days after WHI's receipt of such budget. If Manager is not
in agreement with some or all of WHI's comments or suggested changes, then
Manager shall communicate its objections to WHI and the parties will make all
reasonable efforts to resolve all disputed items. If WHI approves any proposed
Initial Budget and Yearly Budget, whether before or after any such exchange of
comments and suggestions, then such proposed Initial Budget and Yearly Budget
shall become the approved Yearly Budget for the fiscal year to which it
relates. WHI shall have final authority over approval of the Initial Budget
and Yearly Budget. Manager may prepare updated forecasts from time to time to
reflect any unpredicted significant changes,
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<PAGE> 5
variables or events or to include significant additional unanticipated items of
income or expense. Any such revision shall be submitted to WHI for approval
which approval shall not be unreasonably withheld and shall be deemed given
unless a specific written objection thereto is delivered by WHI to Manager
within thirty (30) days after submission thereof. Manager shall not be deemed
to have made any guarantee, warranty or representation whatsoever in connection
with the Initial Budget and Yearly Budget or with respect to the economic
performance or profitability of the Hotel, and WHI acknowledges that the
Initial Budget or Yearly Budget and any other projections previously or
hereafter prepared by Manager are intended only to be reasonable estimates and
that actual results may vary due to unanticipated events and circumstances
occurring subsequent to the date of such Initial Budget or Yearly Budget or
projection.
(b) Manager shall operate the Hotel in compliance with the Initial
Budget or Yearly Budget, as applicable. Notwithstanding the foregoing,
expenditures which in the aggregate do not exceed the Initial Budget or Yearly
Budget, by more than 5% shall be permitted without WHI's approval; and further,
Manager may expend in excess of the Initial Budget or Yearly Budget upon
providing a written notice and explanation to WHI, but without the need for
WHI's approval in either of the following circumstances:
(1) As the result of increased costs due to increases in
the volume of total rents, revenues and income (less any refunds and excluding
interest income) of every kind delivered directly or indirectly from the
operation of the Hotel and all departments or parts thereof during such month,
determined in accordance with generally accepted accounting principles and the
Uniform System of Accounts for Hotels (8th Revised Edition, 1986) as published
by the Hotel Association of New York City, Inc., as may be hereafter revised
("Gross Hotel Revenues") (in which event the Initial Budget or Yearly Budget
may be appropriately adjusted to reflect such increases); or
(2) As the result of uncontrollable expenditures such as
insurance, real estate taxes, weather related costs, and increases in the cost
of utilities based upon utility rates, and emergency expenditures.
(c) In the event WHI shall disapprove or raise any objections to
the proposed Yearly Budget, and WHI and Manager are unable to resolve the
disputed or objectionable matters submitted by WHI prior to the commencement of
the applicable fiscal year the aggregate amount of the Initial Budget or Yearly
Budget for the preceding fiscal year shall be increased by an appropriate
adjustment to reflect increases in the projected volume of Total Sales, and
shall be further increased by the percentage increase in the Consumer Price
Index for Urban Wage Earners and Clerical Workers (CPI-W) -- U.S. City Average
for all items (1982-84 = 100) as published by the United States Bureau of Labor
Statistics. During the preceding twelve (12) month period, and as so
increased, shall be deemed to be the Yearly Budget in effect until such time as
new Yearly Budget has been approved. In addition, if WHI disapproves of the
proposed Yearly Budget and if as a result thereof Manager determines,in its
reasonable discretion, that the failure to make the expenditures
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<PAGE> 6
proposed by Manager in such Yearly Budget will render the Hotel incapable of
performing up to the levels of the operational standards for prior years of
operation of the Hotel by Manager, Manager shall have the right to terminate
this Agreement upon sixty (60) days' prior written notice to WHI.
3.4 Contracts. Manager may enter into contracts, commitments,
licenses, leases and other agreements with vendors and other third parties for
the provision of goods and services reasonably necessary, in Manager's sole
judgment, for the operation and management of the Hotel ("Vendor Contracts"),
provided that such Vendor Contracts are terminable without penalty on thirty
(30) days' notice or less, otherwise such Vendor Contracts shall be subject to
prior approval by WHI, which approval shall not be unreasonably withheld or
unduly delayed.
3.5 Maintenance and Repair. Manager shall maintain the Hotel in
accordance with its existing standards and such standards as are from time to
time established by WHI or the Licensor provided, however, that any such
existing or established standards shall be no less than Manager's standards for
the Hotel during the year ended December 31, 1995, including, but not limited
to (i) interior cleaning and janitorial service, (ii) exterior grounds and
landscaping services, (iii) maintenance of mechanical systems and equipment,
(iv) tenant alterations and refurbishing, (v) safety and security of tenants,
hotel guests, patrons and the property of Owner and WHI, and (vi) such other
normal maintenance, alteration and repair work as may be reasonably advisable
or necessary. In circumstances which Manager shall reasonably deem to be an
emergency in which repairs are immediately necessary for the preservation and
safety of persons or property, or to avoid the suspension of any essential
services to the Hotel, or to avoid danger to life or property, such emergency
repairs may and shall be made by Manager at WHI's cost without the prior
approval of WHI, whether or not such cost is provided for or allowed by the
Internal Budget or Yearly Budget. Manager shall promptly, and in no event
later than forty-eight (48) hours from the time Manager learns of any such
emergency, notify WHI in writing and in reasonable detail of such emergency.
Manager shall negotiate and, when approved by WHI, enter into and supervise the
performance of contracts covering alterations and capital improvements to the
Hotel, provided that any such contract which, when originally executed,
required the approval of WHI, shall not be modified, amended or terminated
without the approval of WHI, which approval shall not be unreasonably withheld
or delayed.
3.6 Payments. Manager shall pay and satisfy, from the Accounts as
defined herein or from other funding made available by WHI, all costs and
expenses of operating and managing the Hotel including, without limitation
except as noted below, the following costs, expenses and expenditures:
(a) Food, beverage and operating supplies, and similar costs;
(b) Salaries and expenses of employees of WHI working at the
Hotel;
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<PAGE> 7
(c) All taxes, insurance premiums and similar expenses shall be
bourne by WHI (as set forth in Section 4.1 of this Agreement),
except that for property taxes and casualty insurance which
shall be bourne by the Owner as set forth in Section 4.2 of
this Agreement;
(d) Management Fees and reimbursements due to Manager hereunder;
(e) Expenditures for routine repairs and maintenance of the Hotel
and all components thereof, together with capital expenditures
as deemed necessary by Manager or as directed by WHI, except
that all expenditures for items that under generally accepted
accounting principles are required to be capitalized rather
than expensed as well as all other non-routine items shall
require the prior approval of WHI;
(f) Costs of utilities and all payments pursuant to leases,
service agreements and similar contracts;
(g) Franchise or license fees and expenses relating to the Hotel
for which WHI is obligated; and
(h) Any other expenditures for which WHI gives authorization to
Manager for payment.
"Accounts" shall mean accounts bearing the name of the Hotel,
established by WHI in a bank or trust company within the vicinity of the Hotel
selected by WHI. Manager shall cause deposits to be made into the Account on a
daily or such other periodic basis as shall be agreed to by WHI; and such funds
shall be used as set forth this Section 3.6 of this Agreement. Manager and WHI
shall each have signatory power on, and authority to withdraw or direct the
withdrawal of funds from, the Account.
3.8 Protection from Liability and Losses. WHI acknowledges and
agrees that all payments which Manager is authorized to make hereunder shall be
made from WHI's Accounts for the Hotel or from other funding made available to
Manager by WHI, and that Manager shall have no liability or obligation to
utilize its own funds (or any other funds) for the payment of any such items.
WHI further acknowledges and agrees that Manager shall be managing the Hotel as
the exclusive authorized agent of WHI and shall take actions, transact business
with third parties and execute contracts and other documents as the authorized
agent of WHI and, as such, Manager may be subject to claims from such third
parties. Accordingly, WHI shall indemnify Manager, its officers, directors,
employees, shareholders and agents (collectively, "Indemnitees") against and
hold each of the Indemnitees harmless from any and all claims, charges, suits,
losses, judgments or expenses (including reasonable attorney's fees) incurred
by or asserted against any of the Indemnitees resulting from or arising out of
the activities of Manager, except for Manager's gross
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<PAGE> 8
negligence, as set out herein or the performance by Manager of any other
Management Services hereunder.
3.9 Preparation and Execution of Leases. All leases (except the
Percentage Lease), concessionaire agreements and licenses (other than the
customary use of meeting and banquet rooms on a daily basis) are to be prepared
by Manager.
3.10 Cooperation. Should any claims, demands, suits or other legal
proceedings be made or instituted by any person against WHI, the Manager shall
give WHI all pertinent information and reasonable assistance in the defense or
other disposition thereof.
3.11 Franchisor Requirements. Manager agrees to accept, abide by
and to provide the Management Services in such a manner that the Hotel is
operated and maintained in compliance with the rules, regulations, inspections
and requirements of the license agreement between WHI and Holiday Inns
International, pertaining to the Hotel (the "License Agreement"). In the event
of conflicting requirements originating from WHI and the License Agreement, the
terms and conditions of the License Agreement in effect at that time shall
govern and control. In the event the License Agreement is terminated, Manager
shall cease operating the Hotel under the applicable License Agreement. The
consent of Holiday Inns International to this Agreement shall not affect the
liability of WHI with respect to the License Agreement. Notwithstanding the
consent of Holiday Inns International to this Agreement, WHI and all guarantors
under the License Agreement shall remain liable to Holiday Inns International
under the terms of the License Agreement.
3.12 Permits. Manager and WHI shall mutually cooperate, at WHI's
sole expense, and as an Operating Cost, to obtain and keep in full force and
effect all necessary licenses and permits, including liquor, bar, restaurant,
sign and hotel licenses, as may be required for the operation of the Hotel.
Subject to the following provisions of this Section, and recognizing that where
Manager generally will take the initiative for obtaining and maintaining all
such licenses and permits, the ultimate responsibility for obtaining such
licenses and permits shall be borne by WHI. All licenses and permits are to be
in effect on the Commencement Date, and shall be in the name of WHI, Manager,
or WHI and Manager jointly as required under local law and practice. Manager
undertakes to comply with all material requirements relating to such licenses
and permits and at all times to operate and manage the Hotel in accordance with
such requirements and all material requirements of applicable laws,
regulations, rules, and orders of governmental agencies and authorities.
Promptly following Manager's knowledge (including without limitation receipt of
written notice from any governmental agency) of any violation or alleged
violation of any of such requirements, or the existence of any condition which
results or could result in any such violation, Manager shall give WHI
reasonably detailed notice of same. Upon sale or transfer of the Hotel, or
termination of this Agreement, or at any time prior thereto at WHI's request,
Manager will use all reasonable efforts to assign to WHI or WHI's designee, all
licenses and permits in the name of Manager which owner requests to be so
assigned,
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subject to any legal requirements that such licenses and/or permits remain in
the name of Manager.
ARTICLE 4. INSURANCE
4.1 WHI's Maintenance of Insurance
(a) WHI agrees to obtain, provide and maintain the following
insurance:
(i) Building insurance on the "Special Form" (formerly "All
Risk" form) (including earthquake and flood) in an amount not
less than 100% of the then Full Replacement Cost of the Hotel
(as defined below) or such other amount which is acceptable to
Owner, and personal property insurance on the "Special Form"
in the full amount of the replacement cost thereof;
(ii) Insurance for loss or damage (direct and indirect) from
steam boilers, pressure vessels or similar apparatus, now or
hereafter installed in the Hotel, in the minimum amount of
$5,000,000 or in such greater amounts as are then customary or
as may be reasonably requested by Owner from time to time;
(iii) 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 Owner, and "all risk
legal liability" (including liquor law or "dram shop"
liability, if liquor or alcoholic beverages are served at the
Hotel or on the property of the Hotel) with respect to Owner
and WHI;
(iv) Insurance covering such other hazards and in such amounts
as may be customary for comparable properties in the area of
the Hotel and is available from insurance companies, insurance
pools or other appropriate companies authorized to do business
in the state in which the Hotel is located at rates which are
economically practicable in relation to the risks covered as
may be reasonably requested by Lessor; and
(v) Vehicle liability insurance for owned, non-owned, and
hired vehicles, in the amount of $1,000,000.
(b) The term "full replacement cost" as used herein shall mean the
actual replacement cost of the Hotel requiring replacement from time to time
including an increased cost of construction endorsement, if available, and the
cost of debris removal.
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<PAGE> 10
4.2 Responsibility for Premiums. Manager acknowledges that Owner
is obligated to pay for any premium or premiums, or to reimburse WHI for any
premium or premiums paid by WHI, for the coverages referred to in Sections
4.1(i), except to the extent that the premium or premiums relate to coverages
for property owned by WHI, which shall be disclosed to Manager, and 4.1(ii), as
well as any other casualty coverages required by Owner.
4.3 Manager's Insurance. Manager shall have workers' compensation
coverage for its employees. Manager shall have Employer Dishonesty and
Depositors Forgery Insurance in an amount to cover all business liabilities,
but WHI shall fully indemnify Manager if Manager's insurance fails or refuses
to cover such losses or claims.
4.4 Subcontractor's Insurance. Manager shall require that all
subcontractors have insurance coverage to be subcontractor's expense, in the
following minimum amounts:
(a) Worker's Compensation - Statutory Amount
(b) Employer's Liability - $100,000.00 minimum
(c) Comprehensive General Liability
(i) $2,000,000.00 Bodily Injury each occurrence and aggregate
$100,000.00 Property Damage
(ii) $5,000,000.00 Combined Single Limit
(d) Employee Dishonesty - $20,000.00
(e) Business Auto Policy - "Non-owned Autos Only"
Higher amounts may be required if the work to be performed is sufficiently
hazardous. The Manager shall obtain and keep on file a Certificate of
Insurance which shows that the subcontractor is so insured.
ARTICLE 5. COMPENSATION
5.1 Management Fee. In consideration of Manager's performance
hereunder, WHI shall pay to the Manager the management fees described below.
WHI shall pay Manger an amount (the "Minimum Management Fee") equal to two
percent (2%) of the Gross Hotel Revenues for the applicable month. The Minimum
Management Fee shall be payable monthly in arrears, on or before the 20th day
of the next succeeding month, based upon the monthly information for the month
prior to payment that Manager shall submit to WHI pursuant to Sections 1.1(a)
and (b) of this Agreement. In addition thereto, WHI shall pay to Manager an
amount (the "Quarterly Management Fee") equal to the excess, if
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any, of (i) fifty percent (50%) of the excess of (a) (1) the Gross Hotel
Revenues for the applicable quarter less (2) the payment by Manager pursuant to
Section 3.6 of this Agreement of costs and of expense of operating and managing
the Hotel incurred or due in such quarter, over (b) all lease payments WHI is
required to make during such quarter under the terms of the Percentage Lease,
over (ii) an amount equal to the sum of the Minimum Management Fees applicable
to the three months in such quarter. The Quarterly Management Fee shall be
payable each fiscal quarter in arrears, on or before the 2Oth day of the month
succeeding the last month of the applicable quarter, based upon the quarterly
information that Manager shall submit to WHI pursuant to Section 1.1(a) of this
Agreement.
ARTICLE 6. INDEMNIFICATION
6.1 Indemnification by Manager. Manager shall indemnify, defend
and hold WHI, its officers, directors, employees, shareholders, agents, and
affiliates harmless from any and all claims, demands, causes of action,
damages, fines, penalties, liabilities, costs and expenses, including
attorney's fees and court costs, sustained or incurred by or asserted against
WHI only if arising directly from Manager's gross negligence.
6.2 Indemnification by WHI. WHI shall indemnify, defend and hold
Manager, its officers, director, employees, shareholders, agents and affiliates
harmless from any and all claims, demands, causes of action, losses, damages,
fines, penalties, liabilities, costs and expenses, including attorney's fees,
and court costs sustained or incurred by or asserted against Manager its
officers, director, employees, shareholders, agents and affiliates in
performing their duties under this Agreement, including but not limited to
claims against Manager its officers, director, employees, shareholders, agents
and affiliates arising from any alleged interference with the torts, contracts,
business, or any cause of action whatever of WHI, or any other Hotel manager,
contractor or employee previously obtained by WHI.
WHI acknowledges and agrees that Manager shall be managing the Hotel
as the exclusive authorized agent of WHI and shall take actions, transact
business with third parties and execute contracts and other documents as the
authorized agent of WHI and, as such, Manager may be subject to claims from
such third parties. Accordingly, WHI shall indemnify Manager, its officers,
director, employees, shareholders, agents and affiliates (collectively,
"Indemnities") against and hold each of the Indemnities harmless from any and
all claims, charges, suits, losses, judgments or expenses (including reasonable
attorneys' fees) incurred by or asserted against any of the Indemnitees
resulting from or arising out of the activities of Manager in relation to the
Hotel or the performance by Manager of any other Management Services hereunder.
The indemnification in this Article, Section 6.2, and as it relates to this
entire Agreement, applies to any causes of action and indemnifies Manager for
all negligent acts, including gross negligence.
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ARTICLE 7. MISCELLANEOUS
7.1 Notices. All notices, demands, consents and reports and other
notices provided for in this Agreement shall be in writing and shall be given
by telecopy, confirmed by mail, Express Mail, return receipt requested, with
postage prepaid, or delivered by a recognized overnight delivery service, which
service obtains a signature on delivery.
MANAGER: Impac Hotel Group, Inc.
3399 Peachtree Road, N.E.
Suite 1220 - Lenox Building
Atlanta, Georgia 30326
Attn: Robert M. Flanders
With a copy to: David D. Robinson, Esq.
Reece & Lang, P.S.C.
3399 Peachtree Road, N.E. - Suite 2000
Atlanta, Georgia 30326
OWNER: Winston Hospitality, Inc.
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attn: Jack B. Harris, Jr.
Any party may designate another addressee (or different address) for
notices hereunder by notice give pursuant to this Section. A notice sent in
compliance with the provisions of this Section shall be deemed given on the
business day next following the day on which the notice is sent.
7.2 Consent and Approvals. WHI's consent or approval may be given
only by representatives of WHI from time to time designated in writing by WHI.
7.3 Amendments. Except as otherwise herein provided, any and all
amendments, additions or deletions to this Agreement shall be null and void
unless approved by the parties in writing.
7.4 Headings. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
7.5 Complete Agreement. This Agreement supersedes and takes the
place of any and all previous management agreements entered into between the
parties hereto relating to the Property covered by this Agreement.
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7.6 Governing Law. This Agreement shall be governed, construed
and interpreted by the laws of the State of Georgia.
7.7 Assignment by Manager. Except as specifically permitted
below, Manager shall not assign any or all of its right, title and interest
under this Agreement without the prior written consent of WHI:
(a) Manager shall have the right to assign all its right, title
and interest under this Agreement to a subsidiary company, provided that (i)
Manager shall at all times own at least 51% of each class of capital stock of
said subsidiary, (ii) such subsidiary shall assume in writing all Manager's
obligations hereunder, and (iii) such assignment and assumption shall not
relieve the assignor of any such obligations.
(b) Manager shall have the right to assign this Agreement to any
successor or assignee of Manager which may result from any merger,
consolidation or reorganization of or with Manager, or to any corporation which
acquires all or substantially all of the business and assets of Manager,
provided that such successor or assignee assumes in writing all obligations of
Manager hereunder, and WHI, its successors or assignees have given its prior
written consent to such assignment. If such consent is not provided this
Agreement shall be deemed terminated and of no further force or effect.
7.8 Termination, Upon Termination of Lease: In the event the
Percentage Lease is terminated, this Agreement shall immediately terminate and
be of no further force or effect to either party hereto.
7.9 Executed Percentage Lease: WHI represents and warrants to
Manager that the material terms of the Percentage Lease shall not vary
substantively from those contained in the form of Percentage Lease attached
hereto as Exhibit A. WHI and the Manager agree that upon execution of the
Percentage Lease, a true copy thereof shall be substituted for the form of
Percentage Lease as Exhibit A hereto.
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<PAGE> 14
IN WITNESS WHEREOF the parties hereto have executed this Agreement
under seal as of the date of year first written above:
OWNER:
WINSTON HOSPITALITY, INC.
By: ______________________________
Name: Jack B. Harris, Jr.
Its: President
MANAGER:
IMPAC HOTEL GROUP, INC.
By: ______________________________
Name: Robert S. Cole
Its: President
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<PAGE> 1
EXHIBIT 10.8
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the
Date of this Agreement defined hereinafter, between WINN Limited Partnership, a
North Carolina limited partnership, or its assigns, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser") and Cary
Suites, Inc., a North Carolina corporation ("Seller").
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PROPERTY AND BUSINESS
On the terms and subject to all of the conditions set forth in this
Agreement, the Purchaser agrees to purchase and the Seller agrees to sell, for
the Purchase Price defined herein, all of the following property (collectively,
the "Premises"):
(a) the real estate described on Schedule 1 attached hereto and
made a part hereof by this reference, containing 9.082 acres of land, together
with all tenements, appurtenances, easements, agreements, development rights,
air rights, rights-of-way, strips, gores, rights in adjacent avenues, streets
and alleys, rights and uses appurtenant thereto, specifically including all of
the easements, right, title and interest of Seller set forth in that certain
Easement Agreement recorded in Book 5387, Page 833, Wake County Registry,
together with and subject to that certain Road Maintenance Agreement recorded
in Book 5387, Page 856, Wake County Registry (collectively the "Real
Property");
(b) all improvements now or hereafter located on the Real Property,
including but not limited to that certain 120 suite Homewood Suites located on
MacAlyson Court, Cary, North Carolina, and all fixtures which are affixed to
the Real Property or Improvements (the "Improvements");
(c) all furniture, fixtures (not part of the Real Property and
Improvements or affixed thereto), equipment, machinery, furnishings, carpets,
drapes, blinds or mini-blinds, service and maintenance equipment, linens (not
less than two and one-half (2 1/2) turns of linens shall be included), tools,
signs, landscaping equipment, supplies, pool equipment, telephone systems,
television systems, intercom equipment and systems, and replacement parts (the
"Equipment");
<PAGE> 2
(d) moneys advanced for future reservations ("Prepaid Items");
(e) all contracts, agreements, licenses, contract rights, rights
to use and other similar rights used in connection with the Real Property and
Improvements and set forth on Schedule 2 attached hereto and made a part hereof
by this reference and which the Purchaser elects to purchase and assume (the
"Contracts");
(f) all leases and rights to use the Improvements, Equipment or
all or any part thereof in third parties as more particularly identified on
Schedule 3 attached hereto and made a part hereof by this reference and which
the Purchaser elects to purchase and assume (the "Leases");
(g) all permits, licenses, government licenses, certificates of
occupancy and approvals necessary to operate the Real Property, Improvements,
Equipment, Contracts, Leases, Intangible Rights and the other property and
rights transferred under this Agreement (the "Permits");
(h) all of the right, title and interest of Seller, as landlord
therein, under and pursuant to that certain lease with Siemens Medical Systems,
Inc. dated October 21, 1992, evidenced of record by memorandum of lease
recorded in Book 5387, Page 900, Wake County Registry, as amended by amendment
dated February 7, 1994, and the guaranty thereof by Siemens Corporation
pursuant to lease guaranty agreement dated October 21, 1992, copies of which
are attached hereto as Schedule 4 and incorporated herein by this reference
(the "Siemens Lease and Guaranty").
(i) all inventory, supplies and other materials used in connection
with the Real Property and Improvements and the hotel business operated thereon
(the "Inventory");
(j) all plans, specifications and "as-built" drawings and surveys
relating to the Real Property and Improvements, all books and records relating
to the operation or management of the Real Property and Improvements and all
warranties and guaranties of Seller pertaining to the Premises; and
(k) all intangible property, guest ledgers, customer and mailing
lists, catalogues and brochures, telephone numbers and similar property used in
connection with the operation of the Real Property, Improvements and the
business known as the Homewood Suites located on MacAlyson Court, Cary, North
Carolina (the "Hotel"), and any telephone numbers assigned thereto (the
"Intangible Rights").
II. TERMS OF PURCHASE AND SALE
The purchase price for the Premises shall be Fourteen Million Three
Hundred Thousand and N0/100 Dollars ($14,300,000.00), adjusted
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as provided in Article IX hereof ("the Purchase Price"), payable by Purchaser
to Seller as follows:
A. By assumption of the outstanding balance as of the Closing Date
of that certain indebtedness evidenced by that certain promissory note in the
original principal amount of $6,800,000.00 payable to the order of Wachovia
Bank of North Carolina, N.A., dated October 9, 1992, secured by the lien of a
deed of trust encumbering the Real Property and Improvements recorded in Book
5387, Page 862, Wake County Registry, as modified by modification and extension
agreement dated April 1, 1994, recorded in Book 6148, Page 121, Wake County
Registry, together with increases thereto of up to $781,000.00 (which amount
shall be reduced by the amount of the equity investment financed by Hotel II,
Inc. and RWW, Inc. relative to the Marriott Courtyard (defined below) and the
Duluth Hampton Inn (defined below) in accordance with Article II, Paragraph A
of the purchase agreements for such hotels between Purchaser and the current
owners thereof). Seller shall be responsible for all payments due under such
indebtedness up to the Closing Date, including all interest accrued thereon.
In addition, by assumption of the outstanding balances as of the Closing Date
of those certain indebtednesses identified as follows: (i) that certain
promissory note dated October 29, 1992 from Seller to the order of Hugh D.
Little in the original principal amount of $150,000.00; and, (2) that certain
promissory note dated October 29, 1992 from Seller to the order of Kenneth R.
Crockett in the original principal amount of $50,000.00.
B. With respect to the remainder of the Purchase Price (i)
after assumption by Purchaser of the indebtedness set forth in Paragraph A
above and (ii) plus or minus any closing adjustments determined in accordance
with this Agreement ("the Purchase Price Balance"), Seller shall accept in full
payment thereof units of limited partnership interest in Purchaser (the
"Units"). The number of Units issued shall be the Purchase Price Balance
divided by the average closing price of the stock of Purchaser's general
partner, Winston Hotels, Inc., a North Carolina corporation ("the Company"), on
the Nasdaq Stock Market for the ten (10) days of trading immediately preceding
the Closing Date ("the Initial Value"). The Premises are being acquired by
Purchaser in conjunction with other hotel properties. Such other hotel
properties include, among others, that certain Marriott Courtyard located in
Wilmington, North Carolina, currently owned by Hotel II, Inc. ("the Marriott
Courtyard"), and that certain Hampton Inn & Suites hotel located in Duluth,
Georgia, currently owned by RWW, Inc. ("the Duluth Hampton Inn"). Seller and
the current owners of the Marriott Courtyard and the Duluth Hampton Inn are
affiliated entities and shall be hereinafter collectively referred to as "the
Affiliated Sellers", and the Premises, the Marriott Courtyard and the Duluth
Hampton Inn shall be hereinafter collectively referred to as the "Affiliated
Hotels". Purchaser and Winston Hospitality, Inc., a North Carolina
corporation, shall, upon the closing of each of the Affiliated
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Hotels, enter into a percentage lease agreement (a "Percentage Lease") with
respect to each of the Affiliated Hotels.
The purchase agreements with the Affiliated Sellers of the Marriott
Courtyard and the Duluth Hampton Inn provide that a portion of the purchase
prices to be paid for those hotels (collectively with the Purchase Price, "the
Pooled Purchase Price") shall be paid in Units (collectively with the Units
issued hereunder, "the Pooled Units". The Affiliated Sellers have agreed to,
and Seller does hereby agree to, guaranty Purchaser an "average initial twelve
month yield" from the Affiliated Hotels of 13.0%. In the event the average
initial twelve month yield to Purchaser from the Affiliated Hotels is less than
13.0%, the Pooled Purchase Price shall be reduced as necessary to increase the
average initial twelve month yield from the Affiliated Hotels to 13.0% (the
"Adjustment Amount"). The Adjustment Amount shall be settled by returning to
Purchaser Pooled Units with a value, based on the Initial Value, equal to the
Adjustment Amount, plus any distributions previously paid on the returned
Pooled Units. For purposes of this Paragraph B, "average initial twelve month
yield" from the Affiliated Hotels shall mean (i) the Percentage Lease revenues
paid to or accrued by Purchaser with respect to each of the Marriott Courtyard
and the Duluth Hampton Inn, for the respective twelve (12) month periods after
their acquisition by the Purchaser, (ii) plus the Percentage Lease revenues
that would have been paid to or accrued by Purchaser with respect to the
Premises if the provision of the proposed Percentage Lease for the Premises
setting forth the rent formula to be effective beginning in 1998 was in effect
throughout the twelve month period after Closing (notwithstanding tha such rent
provisions will not be in effect in 1996 and 1997) (iii) less property taxes
and casualty insurance costs attributable to each Affiliated Hotel for the
respective twelve (12) month period at its closing date and (iv) divided by the
sum of (a) the Pooled Purchase Price and (b) all capital expenditures incurred
by Purchaser for the Premises during the twelve (12) month period after
Closing, all as verified by the Purchaser's independent auditors. The Pooled
Units shall be delivered by Purchaser to The Title Insurance Company of North
Carolina, Inc., as agent for First American Title Insurance Company ("Escrow
Agent"). Escrow Agent shall hold the Pooled Units and all distributions
relative thereto in escrow until such time as the aggregate average yield to
Purchaser for the Measurement Period is determined as aforesaid, at which time
Escrow Agent shall deliver the Pooled Units and all distributions relative
thereto in accordance with written instructions from Purchaser's independent
auditors. In the event the Pooled Units are reduced as provided hereinbefore,
the remaining Pooled Units delivered by Escrow Agent to the Affiliated Sellers
shall be apportioned between the Affiliated Sellers as mutually agreed among
the Affiliated Sellers.
C. Notwithstanding anything contained in this Agreement to the
contrary, exclusive of and in addition to the Purchase Price, at Closing
Purchaser shall accept and assume the outstanding
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balances under those certain equipment leases identified as follows: (i) lease
with Telerent Leasing Corporation for television equipment evidenced by
financing statements in File Number 94-167, Wake County Registry, and in File
Number 1066684, Office of the North Carolina Secretary of State; and, (ii)
lease with Phoenix Leasing Incorporated for computer equipment evidenced by
financing statements in File Number 94-1279, Wake County Registry and in File
Number 1077801, Office of the North Carolina Secretary of State.
D. Upon the Closing, the Seller shall deliver to the Purchaser the
Premises, including but not limited to the Real Property, Improvements,
Equipment and Inventory, free and clear of all liens and encumbrances of
whatever type or description other than the Permitted Exceptions as defined in
Article IV, Paragraph A hereof and the indebtednesses to be assumed by
Purchaser pursuant to Paragraphs A and C of this Article II.
III. PURCHASER'S CONTINGENCIES
A. Purchaser's obligation to close this transaction shall be
conditioned on the Purchaser being allowed to assume, on or before the Closing
Date, the existing Homewood Suites franchise license agreement for the Hotel
currently issued to Seller or at the option of Purchaser, receipt of an
acceptable Homewood Suites franchise license agreement for the Hotel with a
term of not less than ten (10) years.
B. Purchaser's obligation to close this transaction shall be
conditioned on Purchaser having received, effective as of the Closing Date, all
necessary governmental approvals and licenses for operation of the Premises as
a hotel, provided that Purchaser has made good faith and timely applications
for such approvals and licenses and has provided the applicable governmental
authorities with all required information reasonably necessary for such
authority to grant such approval or license.
C. Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close this
transaction shall be conditioned upon Purchaser obtaining the approval of this
Agreement and the transaction contemplated herein from the board of directors
of the general partner of Purchaser, which approval shall be obtained or denied
within thirty (30) days from and after the Date of this Agreement.
The Purchaser and its representatives and agents shall be provided
with access to the Premises at all reasonable times, in order to inspect the
Premises, including but not limited to, taking
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soil samples and test borings, and conducting environmental studies,
engineering studies and other such inspections and reviews that the Purchaser
shall deem reasonably necessary to determine the condition and financial status
of the Premises. Purchaser shall and does hereby agree to indemnify and hold
Seller harmless from and against any and all liability, damage, cost and
expense resulting from the exercise of the foregoing access and rights to the
Premises by Purchaser and its representatives and agents.
IV. TITLE; TITLE POLICY; SURVEY
A. On the date of this Agreement Seller shall furnish to Purchaser
copies of Sellers' existing owner's title insurance policies insuring the title
of Seller in and to the Real Property ("the Existing Title Policy").
Thereafter, Purchaser, at Purchaser's expense, shall obtain through update,
tacking or other means as may be necessary, a title insurance commitment from
First American Title Insurance Company or such other title insurance company as
may be acceptable to Purchaser in Purchaser's sole and absolute discretion (the
"Title Company") pursuant to which the Title Company shall commit (collectively
the "Title Commitment") to issue a current A.L.T.A. Form B owner's fee simple
title insurance policy or other policy of title insurance as shall be
reasonably satisfactory to Purchaser and to any lender of Purchaser (the
"Lender") in the amount of the Purchase Price (the "Title Policy") insuring
that the Purchaser shall receive at closing, good, marketable and indefeasible
fee simple title to the Real Property, free and clear of all liens, exceptions,
encumbrances or defects other than the matters expressly approved in writing by
Purchaser as permitted exceptions to title as set forth hereinafter (the
"Permitted Exceptions"). Seller shall furnish to Purchaser copies of all
liens, exceptions, encumbrances or defects set forth in the Existing Title
Policy at the same time as the Existing Title Policy are so furnished to
Purchaser.
Within thirty (30) days from and after the Date of this Agreement, the
Purchaser shall notify (the "Title Notice") the Seller as to which of the
liens, defects, encumbrances or exceptions set forth in the Title Commitments
are objectionable to Purchaser ("the Title Defects") and which of such matters
are acceptable to Purchaser as the Permitted Exceptions. Within ten (10) days
after receipt by Seller of the Title Notice, the Seller shall cure the Title
Defects to the reasonable satisfaction of the Purchaser. In the event the
Seller is unable to cure the Title Defects to the reasonable satisfaction of
the Purchaser (except for those Title Defects that can be cured with the
payment of money and will be satisfied of record by Seller at or prior to
Closing) within such ten (10) day period or the Purchaser does not agree to
waive such Title Defects, then this Agreement shall terminate and shall be
null, void and without further force or effect, and neither party shall have
any further liability to the other. Notwithstanding the
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foregoing, the Seller shall be obligated to remove and be responsible for
removing all Title Defects capable of being removed or discharged by payment of
money, including but not limited to, money judgments and mechanic's liens, but
excluding these deeds to secure debt which Purchaser shall assume pursuant to
Article II, Paragraph A.
B. On the date of this Agreement Seller shall furnish to
Purchaser a copy of Seller's existing as built survey of the Real Property and
the Improvements currently located thereon ("the Existing Survey"), prepared by
a surveyor duly licensed under the laws of the State of North Carolina,
reasonably acceptable to the Purchaser and the Lender in accordance with ALTA
or such other standards as shall be reasonably satisfactory to Purchaser. The
Existing Survey shall be in form and substance satisfactory to the Purchaser,
the Title Company and the Lender. Within thirty (30) days from and after the
Date of this Agreement, Purchaser shall, at Purchaser's election, cause the
Existing Survey to be updated, obtain a new survey or, if acceptable to the
Title Company and Lender, obtain a certification from Seller that there have
been no improvements, structures or other changes subsequent to the date of the
Existing Survey which would be revealed by a more current survey thereof,
whereby the elected method shall be certified to the Purchaser, Title Company
and Lender (the form of certification to be satisfactory to the Title Company,
Purchaser and Lender) ("the Current Survey"). The Current Survey shall show,
among other things, that all buildings are within lot and building lines, the
location of such lines, the dimensions and total area of the Real Property and
Improvements, the location and number of parking spaces, ingress and egress to
adjoining streets, all benefiting and burdening easements, improvements,
appurtenances, rights of way and utilities whether above or below ground, all
encroachments from or into the Premises, all structures and improvements on the
Real Property and all easements, rights-of-way and other restrictions of record
properly identified with recording information and certifying that the Premises
are not within a flood plain or other flood hazard area. The Current Survey
shall be made in accordance with the Minimum Standard Detail Requirements for
Land Title Surveys adopted by the American Land Title Association. The Current
Survey and certification shall be sufficient to remove the survey exception
from the Title Policy without indemnity by Purchaser or additional premium.
Within thirty (30) days from and after the Date of this Agreement, the
Purchaser shall notify the Seller of any objections of Purchaser or Lender to
the Current Survey ("Survey Defects"). Survey Defects shall be deemed to be
Title Defects for purposes of this Agreement and Seller shall cure such Survey
Defects according to the same procedure as for Title Defects.
C. On the date of this Agreement Seller shall deliver to
Purchaser copies of all existing environmental reports and studies of which
Seller has knowledge which have been previously prepared and compiled with
respect to the Premises.
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D. The Purchaser and Seller shall each be responsible for the
payment of its own transaction costs, including counsel fees. Purchaser shall
be responsible for the costs incurred with any physical inspection of the Real
Property and Improvements, including any environmental and engineering studies.
At Closing, Purchaser shall pay all premiums for the Title Policy. The
Purchaser shall pay for the Title Commitment and the Current Survey. Any and
all transfer taxes, real estate excise taxes and sales taxes payable in
connection with the transfer of the Premises, or any portion thereof, and the
Personalty (as hereinafter defined) shall be paid by Seller. Unless otherwise
stated in this Agreement, the Purchaser and Seller shall pay all costs in
connection with the Closing of this transaction as are customary in Cary, North
Carolina.
V. CLOSING
A. The closing of this transaction shall occur within fifteen
(15) days following the conclusion of a successful secondary public offering of
Winston Hotels, Inc.'s common stock ("the Closing Date"). The closing shall
occur at the offices of Brown & Bunch, 4900 Falls of Neuse Road, Suite 210,
Raleigh, North Carolina 27609. The exact Closing Date shall be determined at
the election of Purchaser upon at least ten (10) days prior notice to Seller.
The closing of the transaction contemplated by this Agreement shall be deemed
effective as of 12:01 a.m. on the Closing Date ("Closing"). If the date of
Closing falls on a Saturday, Sunday or banking holiday, the Closing shall take
place on the next business day thereafter.
B. At the Closing, the Seller, shall deliver to Purchaser and
perform the following:
1. A General Warranty Deed for the Real Property conveying good,
marketable, insurable and indefeasible fee simple title to the Real Property
free and clear of all defects, exceptions, liens or encumbrances, except for
the Permitted Exceptions and the indebtedness to be assumed by Purchaser
pursuant to Article II, Paragraph A.
2. Seller shall pay and discharge any special assessment which on or
before the date of Closing, (a) has been levied, imposed, or confirmed against
the Premises, (b) affects or is a lien upon the Premises or (c) although not
yet a lien upon the Premises, is attributable to improvements which benefit or
will benefit the Premises or the property in the vicinity of the Premises for
which improvement work has been commenced. If any of the foregoing assessments
may be paid in installments, all installments shall be deemed payable as of the
day prior to the Closing, and shall be discharged of record by Seller. If, at
the Closing, any amount which Seller is required to pay with respect to the
foregoing has not been determined, Seller agrees to pay such amount as can be
reasonably estimated at the Closing and the final amount shall be
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adjusted within ten (10) days after Purchaser gives Seller notice that same has
been determined. This provision shall survive the Closing and delivery of the
Deeds.
3. A Bill of Sale conveying the Equipment, Inventory, Real Property not
conveyed by other instruments provided for herein, and other personal property
and intangible property included in the Premises ("Personalty"), free and clear
of any lien or encumbrance, other than the Permitted Exceptions, and containing
a general warranty of title to the Equipment, Inventory and Personalty and an
inventory of all Equipment, Inventory and Personalty.
4. An assignment of Seller's interest in and to all Permits,
Contracts to be assumed by Purchaser, Leases to be assumed by Purchaser,
Intangible Rights, Prepaid Items, the Siemens Lease and Guaranty and other
items of the Premises, free and clear of any lien or encumbrance, together with
written evidence satisfactory to Purchaser of any required third party consent
to such assignment. Seller shall deliver to Purchaser all original Contracts
and Leases which Purchaser has elected to purchase; the originals of the
Siemens Lease and Guaranty, the Permits, including the certificates of
occupancy for the Premises, evidence that the Premises are legally constructed
and properly zoned in accordance with all applicable laws; all warranties and
guarantees (and assignments thereof to Purchaser) issued in connection with the
initial construction of the Real Property and Improvements; any Personalty, and
any repairs or additions thereto; cash bank; moneys advanced for future
registrations; guest registration records; keys; permits, approvals and
licenses issued by all appropriate governmental authorities and fire
underwriting organizations with respect to the construction and use of the
Premises or any part thereof; and any existing copies of architectural plans
and specifications, blueprints and building plans which may be in Seller's
possession.
5. At Purchaser's option, an assignment of all fire and extended coverage
insurance policies, liability policies and loss of rental policies, affecting
any of the Premises to the extent assignable (if assigned, premiums to be
adjusted at Closing).
6. Tax certificates or other evidence of payment from all appropriate
taxing authorities certifying the payment of all real and personal property
taxes through the current tax year.
7. A certificate of Seller dated as of the Closing that Seller is not a
foreign person or corporation within the meaning of Sections 1445 and 7701 of
the Internal Revenue Code (the "IRC").
8. A bring down certificate dated as of the Closing certifying the truth
and accuracy of each representation and warranty set forth in Article XII as of
the Closing Date.
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9. An affidavit of title reasonably satisfactory to the Title Company
enabling the Title Company to issue the Title Policy without exception for
mechanic's or materialman's or other statutory liens or for the rights of
parties in possession other than temporary hotel patrons.
C. At the Closing, the Purchaser shall deliver to the Seller the
following:
1. Proof of authority for Purchaser to complete the transaction
reasonably satisfactory to Seller.
2. Evidence of the assumption of the indebtedness set forth in Article
II, Paragraph A.
VI. DELIVERY OF POSSESSION
Seller shall deliver actual and exclusive possession of the Premises to
Purchaser on the Closing Date.
Seller hereby grants to Purchaser the right to enter the Premises at any
reasonable time after the date hereof for the purpose of inspecting, testing
and examining the Premises.
VII. DAMAGE TO PROPERTY
Seller shall give Purchaser immediate notice of any fire or other
casualty or of any pending or threatened condemnation occurring to all or any
portion of the Premises between the date hereof and the Closing. If prior to
the Closing, there shall occur:
(i) damage to the Hotel caused by fire or other casualty, which would
cost $100,000.00 or more to repair or replace; or
(ii) the taking or condemnation of all or any portion the Hotel
(including any parking areas) as would materially interfere with the use
thereof, as determined by Purchaser; then, if any of the events set forth in
(i) or (ii) above occurs, Purchaser, at its option, may terminate this
Agreement by written notice given to Seller within fifteen (15) days after
Purchaser has received the notice referred to above or at the Closing,
whichever is earlier. If Purchaser does not elect to terminate this Agreement,
the Closing shall take place as provided herein without an abatement of the
Purchase Price and there shall be assigned to the Purchaser at Closing, all
interest of the Seller in and to any insurance proceeds or condemnation awards
which may be payable to Seller on account of such occurrence.
If, prior to the Closing, there shall occur:
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(x) damage to the Hotel caused by fire or other casualty which
would cost less than $100,000.00 to repair or replace; or
(y) the taking or condemnation of all or any portion of the Hotel
which is not material to the use thereof, as determined by
Purchaser;
then, if any of the events set forth in (x) or (y) above occurs, Purchaser
shall have no right to terminate this Agreement (solely as a result of the
occurrence of such events), and Seller shall, at its sole expense, with respect
to subparagraph (x), restore or replace the damaged Premises to its original
condition; and, with respect to subparagraph (y), there shall be assigned to
Purchaser at Closing all interest of Seller in and to any insurance proceeds or
condemnation awards which may be payable to Seller on account of any such
occurrence.
VIII. REMEDIES
A. If this transaction is not consummated by reason of:
(i) the inability of Purchaser to obtain any approval or
consent required pursuant to or otherwise satisfy any
condition or contingency set forth in Article III
hereof;
(ii) the occurrence of any of the events described in
Article VII;
(iii) Title Defects and Survey Defects which are not cured
as provided in this Agreement (except for those Title
Defects or Survey Defects which Seller is obligated
to cure); or
(iv) cancellation by Purchaser pursuant to any other
applicable provisions of this Agreement,
then this Agreement shall be null and void and all parties relieved from any
further liability hereunder, unless Purchaser elects to waive any of the items
or occurrences set forth in this Article VIII, Paragraph B. The items
enumerated in this Article VIII, Paragraph B are for Purchaser's benefit only
and the non-occurrence of a state of facts sufficient to satisfy any of such
items may not be used or pleaded by Seller as a defense to the enforceability
of this Agreement.
C. If this transaction is not consummated because of a default on
the part of Seller or if Seller fails to close this transaction in breach of
its obligation to do so, then Purchaser may seek specific performance of this
Agreement.
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<PAGE> 12
IX. PRORATIONS
All income (including cash on hand and accounts receivable), current
operating expenses, accounts payable, real estate taxes, other taxes and
assessments, all utilities, water and sewer charges, licenses or permit fees
relating to the operation of the Premises, real estate and personal property ad
valorem taxes, prepayments made under the Contracts and insurance premiums (if
applicable), shall be adjusted and prorated as of the Closing. All franchise
fees, maintenance and service agreements (whether or not service is continued
by Purchaser) and utility charges shall be determined as of Closing and paid by
Seller or appropriate adjustments made if Purchaser at its option accepts an
assignment of any such agreement. If such charges and expenses are unavailable
on the Closing Date, a re-adjustment of such charges and expenses shall be made
within thirty (30) days after the Closing. The parties agree to cooperate in
good faith in effecting such a final reconciliation and each party shall
promptly pay (or reimburse the other party for) any expense item that is
chargeable to the former party and shall promptly remit any income item to the
other party if entitled thereto. Seller shall use reasonable efforts to
arrange for the rendition of final bills by the utility companies involved as
of the Closing Date.
Guest room revenues of the Premises, whether in cash or in accounts receivable,
arising from occupancy for the night beginning on the day preceding the Closing
Date and ending on the Closing Date shall be credited one-half to Purchaser and
one-half to Seller. Seller shall collect all income and other sums payable by
tenants or guests (or otherwise) and shall be responsible for the payment of
all expenses on account of services and supplies furnished to and for the
benefit of the Premises through and including the Closing. Purchaser shall be
credited with any deposits from tenants or guests of the Premises which are
refundable to such tenants or guests. Seller shall remit to Purchaser at
closing all prepaid income items. The accounts receivable of Seller shall
remain the property of Seller and Purchaser assumes no obligation to collect or
enforce the payment of any amounts that may be due to Seller. Nothing
contained in this Article shall be deemed to prohibit Purchaser and Seller from
entering into an agreed settlement in writing of all prorations at or following
Closing.
In the event any adjustments pursuant to this Article are, subsequent
to Closing, found to be erroneous, then either party hereto is entitled to
additional monies and shall invoice the other party for such additional amounts
as may be owing, and such amount shall be paid promptly by the other party upon
receipt of the invoice. Such invoice shall be accompanied by reasonable
substantiating evidence.
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Purchaser shall have no obligation with respect to Seller's on site
employees involved in the management and daily operation of the Hotel
whatsoever, all of whom shall be compensated and terminated by Seller as of
Closing, though Purchaser reserves the right to employ any such employees.
The provisions of this Article IX shall survive the Closing and
delivery of the Deeds.
X. NOTICES
Any notice to be given by either party to this Agreement shall be in
writing and shall be either delivered personally or by certified or registered
U.S. Mail, postage prepaid, or by overnight courier delivery service with
charges to the sender, as follows:
To Seller: Cary Suites, Inc.
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
To Purchaser: WINN Limited Partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
With copies to: William W. Bunch, III, Esquire
Brown & Bunch
4900 Falls of Neuse Road,
Suite 210 (street zip code 27609)
Post Office Box 19409
Raleigh, North Carolina 27619-9409
Notice shall be deemed given if properly addressed and delivered as set forth
herein two (2) days following deposit in the U.S. Mail, one (1) day following
deposit with any generally recognized overnight delivery service and on
personal hand delivery to a person authorized to receive such delivery, on the
day of such hand delivery. Any party may change addresses for notices by
delivering written notice of such change in accordance with this Article X.
XI. INDEMNITY
A. Purchaser and Seller warrant and represent each to the other
that they or it has not employed or utilized the services of a real estate
agent or broker in the transaction contemplated by this Agreement. Seller
shall indemnify and hold the Purchaser harmless from and against any claim for
any real estate commission,
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<PAGE> 14
brokerage fee or finder's fee made by any person, firm or corporation, claiming
by, through or under the Seller. Purchaser shall indemnify and hold the Seller
harmless from and against any claim for any real estate commission, brokerage
fee or finder's fee made BY any person, firm or corporation, claiming by,
through or under the Purchaser. This warranty and representation shall survive
the Closing and the parties shall indemnify each other from any liability, cost
or loss arising out of a breach of said warranty and representation, including
consequential damages.
B. The Seller shall indemnify and hold the Purchaser harmless
from and against any and all liabilities, claims, demands, costs and expenses
of any kind or nature, including but not limited to, reasonable attorney's
fees, arising out of or incurred in connection with (i) any breach of the
representations and warranties of Seller set forth in this Agreement, (ii) the
ownership, use, maintenance or operation of the Premises on or prior to the
Closing or the transfer of the Premises to the Purchaser (including the payment
of all taxes),or (iii) compliance or failure to comply with the notice
provisions relating to bulk sales laws applicable to the transfer of all or any
part of the Premises. Purchaser shall indemnify and hold Seller harmless from
and against any and all liabilities, claims, demands, costs and expenses of any
kind or nature, including reasonable attorney's fees, arising after the date of
Closing and which arise out of the ownership or operation of the Premises by
the Purchaser following the Closing. Such indemnities shall survive Closing
and delivery of the Deeds.
C. If Purchaser or Seller propose to make any claim for
indemnification under any Article or Paragraph of this Agreement (the
"Indemnitee"), the Indemnitee shall deliver to the other party (the
"Indemnitor") a certificate signed by the Indemnitee which certificate shall
(i) state that a loss has occurred and (ii) specify in reasonable detail each
individual item of loss or other claim including the amount thereof and the
date such loss was incurred. The Indemnitor shall have the right in its
discretion and at its expense to participate in and control (a) the defense or
settlement of any claim, suit, action or proceeding (including appeals) in
respect of such item (or items) by any person other than a party hereto, (b)
any and all negotiations with respect thereto, and (c) the assertion of any
claim against any insurer with respect thereto, and the Indemnitee shall not
settle any such claim, suit, action or proceeding or agree to extend any
applicable statute of limitation without the prior written approval of the
Indemnitor. The rights of participation, control and approval granted to the
Indemnitor shall be subject as a condition precedent to the Indemnitor's
acknowledging to the Indemnitee, in writing, the obligation of the Indemnitor
to indemnify the Indemnitee in respect of such third party's claim, suit,
action or proceeding giving rise to such item. Upon satisfaction of such
condition precedent, the Indemnitee shall provide the Indemnitor with all
reasonably available information, assistance and authority to enable the
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<PAGE> 15
Indemnitor to effect such defense or settlement and upon the Indemnitor's
payment of any amounts due in respect of such claim, suit, action or
proceeding, the Indemnitee shall, to the extent of such payment, assign or
cause to be assigned to the Indemnitor the claims of the Indemnitee, if any,
against such third parties in respect of which such payment is made. If the
Indemnitor is not so willing to acknowledge such obligation, the parties shall
jointly consult and proceed as to any such third party claim, suit, action or
proceeding.
XII. SELLER'S REPRESENTATIONS AND WARRANTIES
The Seller represents and warrants to the Purchaser that:
A. Seller is a corporation, duly organized, and existing and in
good standing under the laws of the State of North Carolina.
B. Seller is authorized to enter into this Agreement and to
consummate the transaction contemplated hereby, and the individuals executing
this Agreement on behalf of Seller are also duly authorized to execute this
Agreement and to bind Seller to consummate such transaction. The execution and
delivery of this Agreement and the conveyance of the Premises by Seller,
pursuant to this Agreement, do not require the consent of any person, agency or
entity not a party to this Agreement. The execution of this Agreement by
Seller and the transaction contemplated herein have been duly authorized by
proper corporate action, including the board of directors of Seller.
C. There are no pending or, to the knowledge of Seller,
threatened, condemnation or similar proceedings affecting the Premises, or any
portion thereof. Seller has not received any written notice that any such
proceeding is contemplated, and no part of the Premises has been destroyed or
damaged by any casualty.
D. To the best of Seller's knowledge, the maintenance, operation,
use or occupancy of the Premises as a hotel does not violate any building,
health, zoning, environmental, fire or similar law, ordinance, regulation or
restrictive covenant. To the best of Seller's knowledge, the Premises do not
violate any federal, state, county, or municipal laws, ordinances, orders,
regulations or requirements nor has Seller received any notice of such a
violation.
E. There are no options to purchase, rights of first refusal or
other similar agreements with respect to the Premises which give anyone the
right to purchase the Premises or any part thereof. There are no contracts or
agreements which affect or cover the Premises, except for the Contracts,
Permits, Leases and the Siemens Lease and Guaranty. There are no unpaid bills
or claims in connection with the construction repair or replacement of the
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<PAGE> 16
Premises. There are no agreements allowing for any reduction, concession or
abatement of room rates.
F. Certificates of Occupancy for all buildings and other
improvements will be duly issued, and the buildings and improvements legally
occupied as a hotel prior to Closing. The Real Property is zoned properly for
the use thereof as a hotel.
G. Except as set forth in the Title Commitment, the Seller owns
and has good and marketable title to all of its assets and properties free and
clear of any security interest, mortgage, pledge, lien, conditional sale or
other encumbrance or charge, except the deeds to secure debt to be assumed by
Purchaser as set forth in Article II, Paragraph A. All of the Premises owned
or leased by Seller is, and at the time of Closing will be, in good condition
and in good working order. The Premises to be purchased is all of the property
of every kind and nature necessary for the operation of the Seller's business
in the ordinary course.
H. To the best of Seller's knowledge, the Premises are in
compliance with and have not violated any statute, law, ordinance, rule,
regulation, order and directive (including, without limitation, all labor and
environmental control and antipollution laws, ordinances, rules, regulations or
directives) of any and all Governmental Agencies pertaining to the use or
occupancy of the Premises.
The Seller has not received any notice of and the Seller and the Premises have
not been charged with, are not under investigation or threatened investigation
for failure to comply with and are in compliance with, any and all statutes,
laws, ordinances, rules, regulations, orders and directives of any and all
Governmental Agency or Agencies pertaining to the use, generation, dumping,
releasing, burying or disposing of or emitting of any particles, materials,
substances, or emissions that are now or have heretofore been determined by any
and all Governmental Agency or Agencies to be of a hazardous, toxic, pollutive,
or ecologically or environmentally damaging nature, including but not limited
to asbestos ("Hazardous Materials"). Seller has not previously disposed of any
Hazardous Materials at the Premises.
For purposes of this Agreement, the term "Hazardous Materials" shall include,
but not be limited to, those materials or substances now or heretofore defined
as "hazardous substances," "hazardous materials," "hazardous waste," "toxic
substances," or other similar designations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C., Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C., Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C., Section 1801, et seq. and other laws, whether or not of a similar
nature, applicable to the Premises and adopted by, enacted in or
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applicable to the State in which the Premises are located.
For purposes of this Agreement, the term "Governmental Agency or Agencies"
means, whether of the United States of America, of any state or territory
thereof or of any foreign jurisdiction, any government, political subdivision,
court, agency, or other entity, body, organization or group exercising any
executive, legislative, judicial, regulatory or administrative function of
government.
To the best of Seller's knowledge, the Real Property has never appeared on any
federal or state registry of active or inactive hazardous waste disposal sites.
Seller has never received any notice of claim from a Governmental Agency
concerning the alleged release or threatened release of Hazardous Materials at
the Real Property. To the best of Seller's knowledge, no hazardous waste sites
exist within a one mile radius of the Real Property.
I. Seller has no knowledge of and has received no notice of any
causes of action, actions, or proceedings of whatever type or description which
have been instituted or threatened or are pending relating to the Premises or
any interest therein.
J. To the best of Seller's knowledge and belief, no
representation or warranty made by the Seller, nor in any statement or document
furnished or to be furnished to the Purchaser hereunder, or in connection with
the transaction contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
Purchaser, in Purchaser's sole and absolute discretion, may
waive any condition to close or breach of any representation or warranty
provided for herein or any Title or Survey Defect, and in such event, this
transaction shall be consummated as if such condition, representation, warranty
or defect was satisfied. All of the representations and warranties contained
in this Agreement shall survive the Closing. The representations and
warranties set forth above shall be true, correct and accurate on the date
hereof and as of the date of Closing.
XIII. ESCROW.
Upon receipt thereof, the Escrow Agent shall acknowledge receipt of
the Pooled Units and agrees to hold the Pooled Units in accordance with Article
III, Paragraph B of this Agreement and shall deliver the Pooled Units in
accordance with written instructions from Purchaser's accountants. The Escrow
Agent shall be entitled to rely on such written instructions without inquiry or
investigation.
The Escrow Agent shall be liable as a depository only and its duties
hereunder are limited to the safekeeping of the Pooled Units
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<PAGE> 18
and the delivery of same in accordance with the terms of this Agreement. The
Escrow Agent shall not be liable for any act or omission done in good faith, or
for any claim, demand, loss or damage made or suffered by any party to this
Agreement, except such as may arise through or be caused by the Escrow Agent's
willful misconduct or negligence.
XIV. COVENANTS
A. Following the date of this Agreement and to and including the
Closing, the Seller (i) shall continue normal and prudent maintenance and
management of the Premises, (ii) shall maintain supplies and payroll at an
appropriate level, and (iii) shall operate the Hotel in the ordinary course of
business.
B. All taxes levied against the Premises which were or shall be
due and payable prior to the Closing have been or shall be paid in full by the
Seller on or prior to the Closing.
C. All Contracts and Leases shall be current and not in default
as of the Closing. Seller shall not enter into new Contracts or Leases except
in the ordinary course of business, and provided that any such new Contract or
Lease shall either provide that it may be cancelled on not more than 30 days
notice by Seller at no penalty or cost or, Purchaser shall consent to such
Contract or Lease in writing.
D. Seller shall maintain fire and casualty insurance on the
Premises up to and including the Closing in amounts reasonably satisfactory to
Purchaser.
XV. SECURITIES MATTERS. Purchaser and Seller acknowledge, agree,
represent and warrant each to the other, that the Units to be issued pursuant
to this Agreement will be received and accepted as follows:
A. Each of such persons to whom the Units will be transferred (a) if
an individual, either (i) has an individual net worth, or a joint net
worth with his/her spouse, at the time of purchase in excess of
$1,000,000.00; or (ii) has an individual gross income in excess of
$200,000.00 for the two most recent years or joint income with that
person's spouse in excess of $300,000.00 in each of those same years
and reasonably expects to reach the same income level in the current
year, or (b) if a corporation, partnership or trust, is otherwise an
"accredited investor" as that term is defined in Regulation D
promulgated by the Securities and Exchange Commission; and Seller
shall have written corroboration of such matters as to each party who
will receive Units as a result of the transaction provided for herein,
as of the time they receive Units;
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<PAGE> 19
B. The Units are being acquired subject to the terms and conditions
described in the Partnership Agreement of Purchaser, a copy of which
has been obtained by or otherwise provided to such persons;
C. Except in connection with a redemption of the Units, the Units are
being and shall be received and held by such persons for their own
account for investment purposes only, and not with a view to any
offering or distribution thereof, and such persons have no present
intention of selling or otherwise disposing of the Units;
D. The Units have been obtained by such persons without the service
of any broker, dealer, investment banker or finder, and there is no
obligation to pay a commission, fee, bonus or remuneration of any type
to any broker, dealer, investment banker, or finder;
E. Such persons have been given access to all registration
statements, proxy materials, financial statements and filings with the
Securities and Exchange Commission relating to the shares of Winston
Hotels, Inc. and the business of the Purchaser, and such materials are
understood by Seller and such persons without the benefit of an
investment adviser, lawyer, accountant or other professional;
F. Such persons have been afforded the opportunity to ask questions
of and receive answers from Winston Hotels, Inc., the Purchaser and
their representatives concerning matters relating to the
capitalization, management, financial condition, operations and
prospects, financial and otherwise, of the Purchaser and Winston
Hotels, Inc., and no verbal information has been furnished to such
persons in connection with this transaction which is in any way
inconsistent with or at variance from the written information so
provided;
G. The Units are not registered under the Securities Act of 1933, as
amended, and the owners thereof may be required to bear the economic
risk of ownership of the Units for an indefinite period of time; and,
consequently, the Units cannot be sold unless the offer and sale
thereof is subsequently registered under the Securities Act of 1933
and the "blue sky" law of each state in which any of the Units are
offered for sale, unless an exemption from registration is available;
H. Purchaser will distribute or transfer the Units only to persons
who make the same representations and warranties as are set forth in
this Article XV; and,
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I. Seller understands that the Units have not been and will not be
registered under state or federal securities laws. Upon the conclusion
of the escrow of the Units set forth hereinbefore, Seller shall be
entitled to redeem the Units for an equal number of shares of common
stock, par value $.01 per share, in Purchaser's general partner,
Winston Hotels, Inc., a North Carolina corporation ("Shares").
Seller further understands that neither the Units nor Shares may be
sold or transferred except according to the terms of this Agreement,
the partnership agreement of Purchaser and pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
or pursuant to an exemption from registration. Notwithstanding the
foregoing, Seller hereby requests and Purchaser hereby agrees, that it
shall cause the registration of Shares issuable hereunder upon
redemption of Units on at least sixty (60) days notice after the
conclusion of the escrow thereof provided in Article II, Paragraph B
of this Agreement. Purchaser shall use its best efforts to file and
obtain the necessary regulatory approvals for a registration statement
under which Seller can sell the Shares. Seller shall cooperate with
Purchaser, at no expense to Seller, with respect to obtaining the
necessary regulatory approvals for a registration, all of which shall
be at the expense of Purchaser.
J. The terms and provisions of this Article XV shall survive the
Closing and the delivery of the deed for the Premises.
XVI. BINDING EFFECT; MISCELLANEOUS
A. This Agreement shall be binding upon and shall inure to the
parties hereto, their respective heirs, successors, legal representatives and
assigns. This Agreement sets forth the entire Agreement between the parties
hereto and no other prior written or oral statement or agreement or
understanding shall be recognized or enforced. All modifications or amendments
shall be in writing and signed by the parties. This Agreement is to be
construed according to the laws of the State of North Carolina. This Agreement
may be executed in two or more counterparts all of which shall constitute one
and the same instrument. The singular shall include the plural and vice versa.
B. The Purchaser may assign this Agreement to a corporation,
partnership or other entity.
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<PAGE> 21
C. As used herein, "the Date of this Agreement" shall mean the date
noted below as the date upon which this Agreement was executed by the latter of
Purchaser or Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation,
General Partner
(Corporate Seal) By:___________________________
_______ President
Attest:
___________________
______Secretary
Date signed by Purchaser:
_________________________
Seller:
Cary Suites, Inc.,
a North Carolina corporation
(Corporate Seal) By:___________________________________
____________President
Attest:
_______________________
______Secretary
Date signed by Seller:
_______________________
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<PAGE> 22
The undersigned agrees to serve as Escrow Agent pursuant to this
Agreement and upon receipt thereof, to hold the Units in accordance with the
terms and provisions of this Agreement.
Escrow Agent:
The Title Company of North Carolina,
Inc. as agent for First American Title
Insurance Company
By:____________________________________
Title:_________________________________
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<PAGE> 23
STATE OF __________________
COUNTY OF _________________
I, a Notary Public of the County and State aforesaid, certify that
__________________________, personally came before me this day and acknowledged
that _he is ___________________ Secretary of Winston Hotels, Inc., a North
Carolina corporation, General Partner of WINN Limited Partnership, a North
Carolina limited partnership, and that by authority duly given and as the act
of the corporation, as such General Partner, the foregoing instrument was
signed in its name by its ______ President, sealed with its corporate seal and
attested by ___________________ as its ________ Secretary.
Witness my hand and seal, this the _____ day of _____________, 199__.
My commission expires:_____ _____________________________
Notary Public
(SEAL)
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
_________________________________ personally came before me this day and
acknowledged that _he is __________ Secretary of Cary Suites, Inc., a North
Carolina corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its President,
sealed with its corporate seal and attested by ___ as its _____ Secretary.
Witness my hand and seal, this the ____ day of _____________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
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<PAGE> 1
EXHIBIT 10.9
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the
Date of this Agreement defined hereinafter, between WINN Limited Partnership, a
North Carolina limited partnership, or its assigns, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser") and RWW,
Inc., a North Carolina corporation ("Seller").
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PROPERTY AND BUSINESS
On the terms and subject to all of the conditions set forth in this
Agreement, the Purchaser agrees to purchase and the Seller agrees to sell, for
the Purchase Price defined herein, all of the following property (collectively,
the "Premises"):
(a) the real estate described on Schedule 1 attached hereto and
made a part hereof by this reference, containing 2.4893 acres of land, together
with all tenements, appurtenances, easements, agreements, development rights,
air rights, rights-of-way, strips, gores, rights in adjacent avenues, streets
and alleys, rights and uses appurtenant thereto, specifically including and
subject to all of the easements, covenants, obligations, benefits, rights,
title and interest of Seller set forth in that certain Reciprocal Easement
Agreement recorded in Book 10383, Page 315, Gwinnett County Records
(collectively the "Real Property");
(b) all improvements now or hereafter located on the Real Property,
including but not limited to that certain Hampton Inn & Suites hotel containing
104 rooms and 32 suites located on Pineland Road, Duluth, Georgia, and all
fixtures which are affixed to the Real Property or Improvements (the
"Improvements");
(c) all furniture, fixtures (not part of the Real Property and
Improvements or affixed thereto), equipment, machinery, furnishings, carpets,
drapes, blinds or mini-blinds, service and maintenance equipment, linens (not
less than two and one-half (2 1/2) turns of linens shall be included), tools,
signs, landscaping equipment, supplies, pool equipment, telephone systems,
television systems, intercom equipment and systems, and replacement parts (the
"Equipment");
<PAGE> 2
(d) moneys advanced for future reservations ("Prepaid Items");
(e) all contracts, agreements, licenses, contract rights, rights
to use and other similar rights used in connection with the Real Property and
Improvements and set forth on Schedule 2 attached hereto and made a part hereof
by this reference and which the Purchaser elects to purchase and assume (the
"Contracts");
(f) all leases and rights to use the Improvements, Equipment or
all or any part thereof in third parties as more particularly identified on
Schedule 3 attached hereto and made a part hereof by this reference and which
the Purchaser elects to purchase and assume (the "Leases");
(g) all permits, licenses, government licenses, certificates of
occupancy and approvals necessary to operate the Real Property, Improvements,
Equipment, Contracts, Leases, Intangible Rights and the other property and
rights transferred under this Agreement (the "Permits");
(h) all inventory, supplies and other materials used in connection
with the Real Property and Improvements and the hotel business operated thereon
(the "Inventory");
(i) all plans, specifications and "as-built" drawings and surveys
relating to the Real Property and Improvements, all books and records relating
to the operation or management of the Real Property and Improvements and all
warranties and guaranties of Seller pertaining to the Premises; and
(j) all intangible property, guest ledgers, customer and mailing
lists, catalogues and brochures, telephone numbers and similar property used in
connection with the operation of the Real Property, Improvements and the
business known as the Hampton Inn & Suites hotel located on Pineland Road,
Duluth, Georgia (the "Hotel"), and any telephone numbers assigned thereto (the
"Intangible Rights").
II. TERMS OF PURCHASE AND SALE
The purchase price for the Premises shall be Eight Million Three
Hundred Thousand and N0/100 Dollars ($8,300,000.00), adjusted as provided in
Article IX hereof ("the Purchase Price"), payable by Purchaser to Seller as
follows:
A. By assumption of the outstanding balance as of the Closing Date
of that certain indebtedness evidenced by that certain promissory note in the
original principal amount of $6,000,000.00 payable to the order of Branch
Banking and Trust Company dated April 20, 1995, secured by the lien of a deed
to secure debt encumbering the Real Property and Improvements recorded in Book
11242, Page 90, Gwinnett County Records, together with any increases thereto
which
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such lender or another lender may make in order to finance additional costs of
construction of the Hotel and the equity investment therein of Seller (which
equity investment is $475,000.00), but in no event shall the amount of the
indebtedness so assumed exceed the Purchase Price. Seller shall be
responsible for all payments due under such indebtedness up to the Closing
Date, including all interest accrued thereon.
B. With respect to the remainder of the Purchase Price (i)
after assumption by Purchaser of the indebtedness set forth in Paragraph A
above and (ii) plus or minus any closing adjustments determined in accordance
with this Agreement ("the Purchase Price Balance"), Seller shall accept in full
payment thereof units of limited partnership interest in Purchaser (the
"Units"). The number of Units issued shall be the Purchase Price Balance
divided by the average closing price of the stock of Purchaser's general
partner, Winston Hotels, Inc., a North Carolina corporation (the "Company"), on
the Nasdaq Stock Market for the ten (10) days of trading immediately preceding
the Closing Date ("the Initial Value"). The Premises are being acquired by
Purchaser in conjunction with other hotel properties. Such other hotel
properties include, among others, that certain Homewood Suites hotel located in
Cary, North Carolina, currently owned by Cary Suites, Inc ("the Cary
Homewood"), and that certain Marriott Courtyard located in Wilmington, North
Carolina, currently owned by Hotel II, Inc. ("the Marriott Courtyard"). Seller
and the current owners of the Cary Homewood and the Marriott Courtyard are
affiliated entities and shall be hereinafter collectively referred to as "the
Affiliated Sellers", and the Premises, the Cary Homewood and the Marriott
Courtyard shall be hereinafter collectively referred to as the "Affiliated
Hotels". Purchaser and Winston Hospitality, Inc., a North Carolina
corporation, shall, upon the closing of each of the Affiliated Hotels, enter
into a percentage lease agreement (a "Percentage Lease") with respect to each
of the Affiliated Hotels.
The purchase agreements with the Affiliated Sellers of the Cary
Homewood and the Marriott Courtyard also provide that a portion of the purchase
prices to be paid for those hotels (collectively with the Purchase Price, "the
Pooled Purchase Price") shall be paid in Units (collectively with the Units
issued hereunder, "the Pooled Units"). The Affiliated Sellers have agreed to,
and Seller does hereby agree to, guaranty Purchaser an " average initial twelve
month yield" from the Affiliated Hotels of 13.0%. In the event the average
initial twelve month yield to Purchaser from the Affiliated Hotels is less than
13.0%, the Pooled Purchase Price shall be reduced as necessary to increase the
average initial twelve month yield from the Affiliated Hotels to 13.0% (the
"Adjustment Amount"). The Adjustment Amount shall be settled by returning to
Purchaser Pooled Units with a value, based on the Initial Value, equal to the
Adjustment Amount, plus any distributions previously paid on the returned
Pooled Units. For purposes of this Paragraph B, the "average initial twelve
month yield" from the Affiliated Hotels
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shall mean (i) the Percentage Lease revenues paid to or accrued by Purchaser
with respect to each of the Marriott Courtyard and the Premises for the
respective twelve (12) month periods after their acquisition by Purchaser, (ii)
plus the Percentage Lease revenues that would have been paid to or accrued by
Purchaser with respect to the Cary Homewood if the provision of the proposed
Percentage Lease for the Cary Homewood setting forth the rent formula to be
effective beginning in 1998 was in effect throughout the twelve month period
after its acquisition by Purchaser (notwithstanding that such rent provisions
will not be in effect in 1996 and 1997), (iii) less property taxes and casualty
insurance costs attributable to each Affiliated Hotel for the respective twelve
(12) month period after its closing date and (iv) divided by the sum of (a) the
Pooled Purchase Price and (b) all capital expenditures incurred by Purchaser
for the Cary Homewood during the twelve (12) month period after its acquisition
by Purchaser, all as verified by the Purchaser's independent auditors. The
Pooled Units shall be delivered by Purchaser to The Title Company of North
Carolina, Inc., as agent for First American Title Insurance Company ("Escrow
Agent"). Escrow Agent shall hold the Pooled Units and all distributions
relative thereto in escrow until such time as the aggregate average yield to
Purchaser for the Measurement Period is determined as aforesaid, at which time
Escrow Agent shall deliver the Pooled Units and all distributions relative
thereto in accordance with written instructions from Purchaser's independent
auditors. In the event the Pooled Units are reduced as provided hereinbefore,
the remaining Pooled Units delivered by Escrow Agent to the Affiliated Sellers
shall be apportioned between the Affiliated Sellers as mutually agreed among
the Affiliated Sellers.
C. Upon the Closing, the Seller shall deliver to the
Purchaser the Premises, including but not limited to the Real Property,
Improvements, Equipment and Inventory, free and clear of all liens and
encumbrances of whatever type or description other than the Permitted
Exceptions as defined in Article IV, Paragraph A hereof and the indebtedness to
be assumed by Purchaser pursuant to Paragraph A of this Article II.
III. PURCHASER'S CONTINGENCIES
A. Purchaser's obligation to close this transaction shall be
conditioned on the Purchaser's receipt, on or before the Closing Date, of an
acceptable Hampton Inn & Suites franchise license agreement for the Hotel with
a term of not less than ten (10) years.
B. Purchaser's obligation to close this transaction shall be
conditioned on Purchaser having received, effective as of the Closing Date, all
necessary governmental approvals and licenses for operation of the Premises as
a hotel, provided that Purchaser has made good faith and timely applications
for such approvals and licenses and has provided the applicable governmental
authorities with all required information reasonably necessary for such
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authority to grant such approval or license.
C. Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close this
transaction shall be conditioned upon Purchaser obtaining the approval of this
Agreement and the transaction contemplated herein from the board of directors
of the general partner of Purchaser, which approval shall be obtained or denied
within thirty (30) days from and after the Date of this Agreement.
The Purchaser and its representatives and agents shall be provided
with access to the Premises at all reasonable times, in order to inspect the
Premises, including but not limited to, taking soil samples and test borings,
and conducting environmental studies, engineering studies and other such
inspections and reviews that the Purchaser shall deem reasonably necessary to
determine the condition and financial status of the Premises. Purchaser shall
and does hereby agree to indemnify and hold Seller harmless from and against
any and all liability, damage, cost and expense resulting from the exercise of
the foregoing access and rights to the Premises by Purchaser and its
representatives and agents.
IV. TITLE; TITLE POLICY; SURVEY
A. On the date of this Agreement Seller shall furnish to Purchaser
copies of Sellers' existing owner's title insurance policies insuring the title
of Seller in and to the Real Property ("the Existing Title Policy").
Thereafter, Purchaser, at Purchaser's expense, shall obtain through update,
tacking or other means as may be necessary, a title insurance commitment from
First American Title Insurance Company or such other title insurance company as
may be acceptable to Purchaser in Purchaser's sole and absolute discretion (the
"Title Company") pursuant to which the Title Company shall commit (collectively
the "Title Commitment") to issue a current A.L.T.A. Form B owner's fee simple
title insurance policy or other policy of title insurance as shall be
reasonably satisfactory to Purchaser and to any lender of Purchaser (the
"Lender") in the amount of the Purchase Price (the "Title Policy") insuring
that the Purchaser shall receive at closing, good, marketable and indefeasible
fee simple title to the Real Property, free and clear of all liens, exceptions,
encumbrances or defects other than the matters expressly approved in writing by
Purchaser as permitted exceptions to title as set forth hereinafter (the
"Permitted Exceptions"). Seller shall furnish to Purchaser copies of all
liens, exceptions, encumbrances or defects set forth in the Existing Title
Policy at the same time as the Existing Title Policy are so furnished to
Purchaser.
Within thirty (30) days from and after the Date of this Agreement, the
Purchaser shall notify (the "Title Notice") the
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Seller as to which of the liens, defects, encumbrances or exceptions set forth
in the Title Commitments are objectionable to Purchaser ("the Title Defects")
and which of such matters are acceptable to Purchaser as the Permitted
Exceptions. Within ten (10) days after receipt by Seller of the Title Notice,
the Seller shall cure the Title Defects to the reasonable satisfaction of the
Purchaser. In the event the Seller is unable to cure the Title Defects to the
reasonable satisfaction of the Purchaser (except for those Title Defects that
can be cured with the payment of money and will be satisfied of record by
Seller at or prior to Closing) within such ten (10) day period or the
Purchaser does not agree to waive such Title Defects, then this Agreement shall
terminate and shall be null, void and without further force or effect, and
neither party shall have any further liability to the other. Notwithstanding
the foregoing, the Seller shall be obligated to remove and be responsible for
removing all Title Defects capable of being removed or discharged by payment of
money, including but not limited to, money judgments and mechanic's liens, but
excluding these deeds to secure debt which Purchaser shall assume pursuant to
Article II, Paragraph A.
B. On the date of this Agreement Seller shall furnish to
Purchaser a copy of Seller's existing as built survey of the Real Property and
the Improvements currently located thereon ("the Existing Survey"), prepared by
a surveyor duly licensed under the laws of the State of Georgia, reasonably
acceptable to the Purchaser and the Lender in accordance with ALTA or such
other standards as shall be reasonably satisfactory to Purchaser. The Existing
Survey shall be in form and substance satisfactory to the Purchaser, the Title
Company and the Lender. Within thirty (30) days from and after the Date of
this Agreement, Purchaser shall, at Purchaser's election, cause the Existing
Survey to be updated, obtain a new survey or, if acceptable to the Title
Company and Lender, obtain a certification from Seller that there have been no
improvements, structures or other changes subsequent to the date of the
Existing Survey which would be revealed by a more current survey thereof,
whereby the elected method shall be certified to the Purchaser, Title Company
and Lender (the form of certification to be satisfactory to the Title Company,
Purchaser and Lender) ("the Current Survey"). The Current Survey shall show,
among other things, that all buildings are within lot and building lines, the
location of such lines, the dimensions and total area of the Real Property and
Improvements, the location and number of parking spaces, ingress and egress to
adjoining streets, all benefiting and burdening easements, improvements,
appurtenances, rights of way and utilities whether above or below ground, all
encroachments from or into the Premises, all structures and improvements on the
Real Property and all easements, rights-of-way and other restrictions of record
properly identified with recording information and certifying that the Premises
are not within a flood plain or other flood hazard area. The Current Survey
shall be made in accordance with the Minimum Standard Detail Requirements for
Land Title Surveys adopted
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by the American Land Title Association. The Current Survey and certification
shall be sufficient to remove the survey exception from the Title Policy
without indemnity by Purchaser or additional premium. Within thirty (30) days
from and after the Date of this Agreement, the Purchaser shall notify the
Seller of any objections of Seller or Lender to the Current Survey ("Survey
Defects"). Survey Defects shall be deemed to be Title Defects for purposes of
this Agreement and Seller shall cure such Survey Defects according to the same
procedure as for Title Defects.
C. On the date of this Agreement Seller shall deliver to
Purchaser copies of all existing environmental reports and studies of which
Seller has knowledge which have been previously prepared and compiled with
respect to the Premises.
D. The Purchaser and Seller shall each be responsible for the
payment of its own transaction costs, including counsel fees. Purchaser shall
be responsible for the costs incurred with any physical inspection of the Real
Property and Improvements, including any environmental and engineering studies.
At Closing, Purchaser shall pay all premiums for the Title Policy. The
Purchaser shall pay for the Title Commitment and the Current Survey. Any and
all transfer taxes, real estate excise taxes and sales taxes payable in
connection with the transfer of the Premises, or any portion thereof, and the
Personalty (as hereinafter defined) shall be paid by Seller. Unless otherwise
stated in this Agreement, the Purchaser and Seller shall pay all costs in
connection with the Closing of this transaction as are customary in Duluth,
Georgia.
V. CLOSING
A. The closing of this transaction shall occur within fifteen
(15) days following the latter to occur of (i) the conclusion of a successful
secondary public offering of Winston Hotels, Inc.'s common stock, or (ii) the
receipt of a certificate of occupancy and all permits and approvals necessary
for the operation of the Hotel ("the Closing Date"). The closing shall occur
at the offices of Brown & Bunch, 4900 Falls of Neuse Road, Suite 210, Raleigh,
North Carolina 27609. The exact Closing Date shall be determined at the
election of Purchaser upon at least ten (10) days prior notice to Seller. The
closing of the transaction contemplated by this Agreement shall be deemed
effective as of 12:01 a.m. on the Closing Date ("Closing"). If the date of
Closing falls on a Saturday, Sunday or banking holiday, the Closing shall take
place on the next business day thereafter.
B. At the Closing, the Seller, shall deliver to Purchaser and
perform the following:
1. A General Warranty Deed for the Real Property conveying good,
marketable, insurable and indefeasible fee simple title to the Real Property
free and clear of all defects, exceptions, liens or
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encumbrances, except for the Permitted Exceptions and the
indebtedness to be assumed by Purchaser pursuant to Article II, Paragraph A.
2. Seller shall pay and discharge any special assessment which on
or before the date of Closing, (a) has been levied, imposed, or confirmed
against the Premises, (b) affects or is a lien upon the Premises or (c)
although not yet a lien upon the Premises, is attributable to improvements
which benefit or will benefit the Premises or the property in the vicinity of
the Premises for which improvement work has been commenced. If any of the
foregoing assessments may be paid in installments, all installments shall be
deemed payable as of the day prior to the Closing, and shall be discharged of
record by Seller. If, at the Closing, any amount which Seller is required to
pay with respect to the foregoing has not been determined, Seller agrees to pay
such amount as can be reasonably estimated at the Closing and the final amount
shall be adjusted within ten (10) days after Purchaser gives Seller notice that
same has been determined. This provision shall survive the Closing and
delivery of the Deeds.
3. A Bill of Sale conveying the Equipment, Inventory, Real
Property not conveyed by other instruments provided for herein, and other
personal property and intangible property included in the Premises
("Personalty"), free and clear of any lien or encumbrance, other than the
Permitted Exceptions, and containing a general warranty of title to the
Equipment, Inventory and Personalty and an inventory of all Equipment,
Inventory and Personalty.
4. An assignment of Seller's interest in and to all Permits,
Contracts to be assumed by Purchaser, Leases to be assumed by Purchaser,
Intangible Rights, Prepaid Items and other items of the Premises, free and
clear of any lien or encumbrance, together with written evidence satisfactory
to Purchaser of any required third party consent to such assignment. Seller
shall deliver to Purchaser all original Contracts and Leases which Purchaser
has elected to purchase; the Permits, including the certificates of occupancy
for the Premises, evidence that the Premises are legally constructed and
properly zoned in accordance with all applicable laws; all warranties and
guarantees (and assignments thereof to Purchaser) issued in connection with the
initial construction of the Real Property and Improvements; any Personalty, and
any repairs or additions thereto; cash bank; moneys advanced for future
registrations; guest registration records; keys; permits, approvals and
licenses issued by all appropriate governmental authorities and fire
underwriting organizations with respect to the construction and use of the
Premises or any part thereof; and any existing copies of architectural plans
and specifications, blueprints and building plans which may be in Seller's
possession.
5. At Purchaser's option, an assignment of all fire and extended
coverage insurance policies, liability policies and loss of
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rental policies, affecting any of the Premises to the extent assignable (if
assigned, premiums to be adjusted at Closing).
6. Tax certificates or other evidence of payment from all
appropriate taxing authorities certifying the payment of all real and personal
property taxes through the current tax year.
7. A certificate of Seller dated as of the Closing that Seller is
not a foreign person or corporation within the meaning of Sections 1445 and
7701 of the Internal Revenue Code (the "IRC").
8. A bring down certificate dated as of the Closing certifying
the truth and accuracy of each representation and warranty set forth in Article
XII as of the Closing Date.
9. An affidavit of title reasonably satisfactory to the Title
Company enabling the Title Company to issue the Title Policy without exception
for mechanic's or materialman's or other statutory liens or for the rights of
parties in possession other than temporary hotel patrons.
C. At the Closing, the Purchaser shall deliver to the Seller the
following:
1. Proof of authority for Purchaser to complete the transaction
reasonably satisfactory to Seller.
2. Evidence of the assumption of the indebtedness set forth in
Article II, Paragraph A.
VI. DELIVERY OF POSSESSION
Seller shall deliver actual and exclusive possession of the Premises
to Purchaser on the Closing Date.
Seller hereby grants to Purchaser the right to enter the Premises at
any reasonable time after the date hereof for the purpose of inspecting,
testing and examining the Premises.
VII. DAMAGE TO PROPERTY
Seller shall give Purchaser immediate notice of any fire or other
casualty or of any pending or threatened condemnation occurring to all or any
portion of the Premises between the date hereof and the Closing. If prior to
the Closing, there shall occur:
(i) damage to the Hotel caused by fire or other casualty, which
would cost $100,000.00 or more to repair or replace; or
(ii) the taking or condemnation of all or any portion the Hotel
(including any parking areas) as would materially interfere
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with the use thereof, as determined by Purchaser; then, if any of the events
set forth in (i) or (ii) above occurs, Purchaser, at its option, may terminate
this Agreement by written notice given to Seller within fifteen (15) days
after Purchaser has received the notice referred to above or at the Closing,
whichever is earlier. If Purchaser does not elect to terminate this Agreement,
the Closing shall take place as provided herein without an abatement of the
Purchase Price and there shall be assigned to the Purchaser at Closing, all
interest of the Seller in and to any insurance proceeds or condemnation awards
which may be payable to Seller on account of such occurrence.
If, prior to the Closing, there shall occur:
(x) damage to the Hotel caused by fire or other casualty which
would cost less than $100,000.00 to repair or replace; or
(y) the taking or condemnation of all or any portion of the Hotel
which is not material to the use thereof, as determined by
Purchaser;
then, if any of the events set forth in (x) or (y) above occurs, Purchaser
shall have no right to terminate this Agreement (solely as a result of the
occurrence of such events), and Seller shall, at its sole expense, with respect
to subparagraph (x), restore or replace the damaged Premises to its original
condition; and, with respect to subparagraph (y), there shall be assigned to
Purchaser at Closing all interest of Seller in and to any insurance proceeds or
condemnation awards which may be payable to Seller on account of any such
occurrence.
VIII. REMEDIES
A. If this transaction is not consummated by reason of:
(i) the inability of Purchaser to obtain any approval or
consent required pursuant to or otherwise satisfy any
condition or contingency set forth in Article III
hereof;
(ii) the occurrence of any of the events described in
Article VII;
(iii) Title Defects and Survey Defects which are not cured
as provided in this Agreement (except for those Title
Defects or Survey Defects which Seller is obligated
to cure); or
(iv) cancellation by Purchaser pursuant to any other
applicable provisions of this Agreement,
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then this Agreement shall be null and void and all parties relieved from any
further liability hereunder, unless Purchaser elects to waive any of the items
or occurrences set forth in this Article VIII, Paragraph B. The items
enumerated in this Article VIII, Paragraph B are for Purchaser's benefit only
and the non-occurrence of a state of facts sufficient to satisfy any of such
items may not be used or pleaded by Seller as a defense to the enforceability
of this Agreement.
C. If this transaction is not consummated because of a default on
the part of Seller or if Seller fails to close this transaction in breach of
its obligation to do so, then Purchaser may seek specific performance of this
Agreement.
IX. PRORATIONS
All income (including cash on hand and accounts receivable), current
operating expenses, accounts payable, real estate taxes, other taxes and
assessments, all utilities, water and sewer charges, licenses or permit fees
relating to the operation of the Premises, real estate and personal property ad
valorem taxes, prepayments made under the Contracts and insurance premiums (if
applicable), shall be adjusted and prorated as of the Closing. All franchise
fees, maintenance and service agreements (whether or not service is continued
by Purchaser) and utility charges shall be determined as of Closing and paid by
Seller or appropriate adjustments made if Purchaser at its option accepts an
assignment of any such agreement. If such charges and expenses are unavailable
on the Closing Date, a re-adjustment of such charges and expenses shall be made
within thirty (30) days after the Closing. The parties agree to cooperate in
good faith in effecting such a final reconciliation and each party shall
promptly pay (or reimburse the other party for) any expense item that is
chargeable to the former party and shall promptly remit any income item to the
other party if entitled thereto. Seller shall use reasonable efforts to
arrange for the rendition of final bills by the utility companies involved as
of the Closing Date.
Guest room revenues of the Premises, whether in cash or in accounts receivable,
arising from occupancy for the night beginning on the day preceding the Closing
Date and ending on the Closing Date shall be credited one-half to Purchaser and
one-half to Seller. Seller shall collect all income and other sums payable by
tenants or guests (or otherwise) and shall be responsible for the payment of
all expenses on account of services and supplies furnished to and for the
benefit of the Premises through and including the Closing. Purchaser shall be
credited with any deposits from tenants or guests of the Premises which are
refundable to such tenants or guests. Seller shall remit to Purchaser at
closing all prepaid income items. The accounts receivable of Seller shall
remain the property of
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Seller and Purchaser assumes no obligation to collect or enforce the payment of
any amounts that may be due to Seller. Nothing contained in this Article shall
be deemed to prohibit Purchaser and Seller from entering into an agreed
settlement in writing of all prorations at or following Closing.
In the event any adjustments pursuant to this Article are, subsequent
to Closing, found to be erroneous, then either party hereto is entitled to
additional monies and shall invoice the other party for such additional amounts
as may be owing, and such amount shall be paid promptly by the other party upon
receipt of the invoice. Such invoice shall be accompanied by reasonable
substantiating evidence.
Purchaser shall have no obligation with respect to Seller's on site
employees involved in the management and daily operation of the Hotel
whatsoever, all of whom shall be compensated and terminated by Seller as of
Closing, though Purchaser reserves the right to employ any such employees.
The provisions of this Article IX shall survive the Closing and
delivery of the Deeds.
X. NOTICES
Any notice to be given by either party to this Agreement shall be in
writing and shall be either delivered personally or by certified or registered
U.S. Mail, postage prepaid, or by overnight courier delivery service with
charges to the sender, as follows:
To Seller: RWW, Inc.
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
To Purchaser: WINN Limited Partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
With copies to: William W. Bunch, III, Esquire
Brown & Bunch
4900 Falls of Neuse Road,
Suite 210 (street zip code 27609)
Post Office Box 19409
Raleigh, North Carolina 27619-9409
Notice shall be deemed given if properly addressed and delivered as set forth
herein two (2) days following deposit in the U.S. Mail, one (1) day following
deposit with any generally recognized
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overnight delivery service and on personal hand delivery to a person authorized
to receive such delivery, on the day of such hand delivery. Any party may
change addresses for notices by delivering written notice of such change in
accordance with this Article X.
XI. INDEMNITY
A. Purchaser and Seller warrant and represent each to the other
that they or it has not employed or utilized the services of a real estate
agent or broker in the transaction contemplated by this Agreement. Seller
shall indemnify and hold the Purchaser harmless from and against any claim for
any real estate commission, brokerage fee or finder's fee made by any person,
firm or corporation, claiming by, through or under the Seller. Purchaser shall
indemnify and hold the Seller harmless from and against any claim for any real
estate commission, brokerage fee or finder's fee made BY any person, firm or
corporation, claiming by, through or under the Purchaser. This warranty and
representation shall survive the Closing and the parties shall indemnify each
other from any liability, cost or loss arising out of a breach of said warranty
and representation, including consequential damages.
B. The Seller shall indemnify and hold the Purchaser harmless
from and against any and all liabilities, claims, demands, costs and expenses
of any kind or nature, including but not limited to, reasonable attorney's
fees, arising out of or incurred in connection with (i) any breach of the
representations and warranties of Seller set forth in this Agreement, (ii) the
ownership, use, maintenance or operation of the Premises on or prior to the
Closing or the transfer of the Premises to the Purchaser (including the payment
of all taxes),or (iii) compliance or failure to comply with the notice
provisions relating to bulk sales laws applicable to the transfer of all or any
part of the Premises. Purchaser shall indemnify and hold Seller harmless from
and against any and all liabilities, claims, demands, costs and expenses of any
kind or nature, including reasonable attorney's fees, arising after the date of
Closing and which arise out of the ownership or operation of the Premises by
the Purchaser following the Closing. Such indemnities shall survive Closing
and delivery of the Deeds.
C. If Purchaser or Seller propose to make any claim for
indemnification under any Article or Paragraph of this Agreement (the
"Indemnitee"), the Indemnitee shall deliver to the other party (the
"Indemnitor") a certificate signed by the Indemnitee which certificate shall
(i) state that a loss has occurred and (ii) specify in reasonable detail each
individual item of loss or other claim including the amount thereof and the
date such loss was incurred. The Indemnitor shall have the right in its
discretion and at its expense to participate in and control (a) the defense or
settlement of any claim, suit, action or proceeding (including appeals) in
respect of such item (or items) by any person other than a party hereto, (b)
any and all negotiations with respect thereto,
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and (c) the assertion of any claim against any insurer with respect thereto,
and the Indemnitee shall not settle any such claim, suit, action or proceeding
or agree to extend any applicable statute of limitation without the prior
written approval of the Indemnitor. The rights of participation, control and
approval granted to the Indemnitor shall be subject as a condition precedent to
the Indemnitor's acknowledging to the Indemnitee, in writing, the obligation of
the Indemnitor to indemnify the Indemnitee in respect of such third party's
claim, suit, action or proceeding giving rise to such item. Upon satisfaction
of such condition precedent, the Indemnitee shall provide the Indemnitor with
all reasonably available information, assistance and authority to enable the
Indemnitor to effect such defense or settlement and upon the Indemnitor's
payment of any amounts due in respect of such claim, suit, action or
proceeding, the Indemnitee shall, to the extent of such payment, assign or
cause to be assigned to the Indemnitor the claims of the Indemnitee, if any,
against such third parties in respect of which such payment is made. If the
Indemnitor is not so willing to acknowledge such obligation, the parties shall
jointly consult and proceed as to any such third party claim, suit, action or
proceeding.
XII. SELLER'S REPRESENTATIONS AND WARRANTIES
The Seller represents and warrants to the Purchaser that:
A. Seller is a corporation, duly organized, and existing and in
good standing under the laws of the State of North Carolina and authorized to
do business in the State of Georgia.
B. Seller is authorized to enter into this Agreement and to
consummate the transaction contemplated hereby, and the individuals executing
this Agreement on behalf of Seller are also duly authorized to execute this
Agreement and to bind Seller to consummate such transaction. The execution and
delivery of this Agreement and the conveyance of the Premises by Seller,
pursuant to this Agreement, do not require the consent of any person, agency or
entity not a party to this Agreement. The execution of this Agreement by
Seller and the transaction contemplated herein have been duly authorized by
proper corporate action, including the board of directors of Seller.
C. There are no pending or, to the knowledge of Seller,
threatened, condemnation or similar proceedings affecting the Premises, or any
portion thereof. Seller has not received any written notice that any such
proceeding is contemplated, and no part of the Premises has been destroyed or
damaged by any casualty.
D. As of the Date of this Agreement, Seller has not completed the
construction of the Improvements and opened the Hotel for business. It shall
be the responsibility of Seller to complete
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such construction in accordance with the plans and specifications therefor
previously submitted to and approved by Purchaser and to obtain all permits,
certificates and approvals necessary for the operation of the Hotel prior to
Closing. To the best of Seller's knowledge, the maintenance, operation, use or
occupancy of the Premises as a hotel does not and will not violate any
building, health, zoning, environmental, fire or similar law, ordinance,
regulation or restrictive covenant. To the best of Seller's knowledge, the
Premises do not and will not violate any federal, state, county, or municipal
laws, ordinances, orders, regulations or requirements nor has Seller received
any notice of such a violation.
E. There are no options to purchase, rights of first refusal or
other similar agreements with respect to the Premises which give anyone the
right to purchase the Premises or any part thereof. There are no contracts or
agreements which affect or cover the Premises, except for the Contracts,
Permits, Leases and the Siemens Lease and Guaranty. There are no unpaid bills
or claims in connection with the construction repair or replacement of the
Premises. There are no agreements allowing for any reduction, concession or
abatement of room rates.
F. Certificates of Occupancy for all buildings and other
improvements will be duly issued, and the buildings and improvements legally
occupied as a hotel prior to Closing. The Real Property is zoned properly for
the use thereof as a hotel.
G. Except as set forth in the Title Commitment, the Seller owns
and has good and marketable title to all of its assets and properties free and
clear of any security interest, mortgage, pledge, lien, conditional sale or
other encumbrance or charge, except the deeds to secure debt to be assumed by
Purchaser as set forth in Article II, Paragraph A. All of the Premises owned
or leased by Seller is, and at the time of Closing will be, in good condition
and in good working order. The Premises to be purchased is all of the property
of every kind and nature necessary for the operation of the Seller's business
in the ordinary course.
H. To the best of Seller's knowledge, the Premises are in
compliance with and have not violated any statute, law, ordinance, rule,
regulation, order and directive (including, without limitation, all labor and
environmental control and antipollution laws, ordinances, rules, regulations or
directives) of any and all Governmental Agencies pertaining to the use or
occupancy of the Premises.
The Seller has not received any notice of and the Seller and the Premises have
not been charged with, are not under investigation or threatened investigation
for failure to comply with and are in compliance with, any and all statutes,
laws, ordinances, rules, regulations, orders and directives of any and all
Governmental
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<PAGE> 16
Agency or Agencies pertaining to the use, generation, dumping, releasing,
burying or disposing of or emitting of any particles, materials, substances, or
emissions that are now or have heretofore been determined by any and all
Governmental Agency or Agencies to be of a hazardous, toxic, pollutive, or
ecologically or environmentally damaging nature, including but not limited to
asbestos ("Hazardous Materials"). Seller has not previously disposed of any
Hazardous Materials at the Premises.
For purposes of this Agreement, the term "Hazardous Materials" shall include,
but not be limited to, those materials or substances now or heretofore defined
as "hazardous substances," "hazardous materials," "hazardous waste," "toxic
substances," or other similar designations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C., Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C., Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C., Section 1801, et seq. and other laws, whether or not of a similar
nature, applicable to the Premises and adopted by, enacted in or applicable to
the State in which the Premises are located.
For purposes of this Agreement, the term "Governmental Agency or Agencies"
means, whether of the United States of America, of any state or territory
thereof or of any foreign jurisdiction, any government, political subdivision,
court, agency, or other entity, body, organization or group exercising any
executive, legislative, judicial, regulatory or administrative function of
government.
To the best of Seller's knowledge, the Real Property has never appeared on any
federal or state registry of active or inactive hazardous waste disposal sites.
Seller has never received any notice of claim from a Governmental Agency
concerning the alleged release or threatened release of Hazardous Materials at
the Real Property. To the best of Seller's knowledge, no hazardous waste sites
exist within a one mile radius of the Real Property.
I. Seller has no knowledge of and has received no notice of any
causes of action, actions, or proceedings of whatever type or description which
have been instituted or threatened or are pending relating to the Premises or
any interest therein.
J. To the best of Seller's knowledge and belief, no
representation or warranty made by the Seller, nor in any statement or document
furnished or to be furnished to the Purchaser hereunder, or in connection with
the transaction contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
Purchaser, in Purchaser's sole and absolute discretion, may waive
any condition to close or breach of any representation or warranty provided
for herein or any Title or Survey Defect, and in
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<PAGE> 17
such event, this transaction shall be consummated as if such condition,
representation, warranty or defect was satisfied. All of the representations
and warranties contained in this Agreement shall survive the Closing. The
representations and warranties set forth above shall be true, correct and
accurate on the date hereof and as of the date of Closing.
XIII. ESCROW.
Upon receipt thereof, the Escrow Agent shall acknowledge receipt of
the Pooled Units and agrees to hold the Pooled Units in accordance with Article
III, Paragraph B of this Agreement and shall deliver the Pooled Units in
accordance with written instructions from Purchaser's accountants. The Escrow
Agent shall be entitled to rely on such written instructions without inquiry or
investigation.
The Escrow Agent shall be liable as a depository only and its duties
hereunder are limited to the safekeeping of the Pooled Units and the delivery
of same in accordance with the terms of this Agreement. The Escrow Agent shall
not be liable for any act or omission done in good faith, or for any claim,
demand, loss or damage made or suffered by any party to this Agreement, except
such as may arise through or be caused by the Escrow Agent's willful misconduct
or negligence.
XIV. COVENANTS
A. Following the date of this Agreement and to and including the
Closing, the Seller (i) shall continue normal and prudent maintenance and
management of the Premises, (ii) shall maintain supplies and payroll at an
appropriate level, and (iii) shall operate the Hotel in the ordinary course of
business.
B. All taxes levied against the Premises which were or shall be
due and payable prior to the Closing have been or shall be paid in full by the
Seller on or prior to the Closing.
C. All Contracts and Leases shall be current and not in default
as of the Closing. Seller shall not enter into new Contracts or Leases except
in the ordinary course of business, and provided that any such new Contract or
Lease shall either provide that it may be cancelled on not more than 30 days
notice by Seller at no penalty or cost or, Purchaser shall consent to such
Contract or Lease in writing.
D. Seller shall maintain fire and casualty insurance on the
Premises up to and including the Closing in amounts reasonably satisfactory to
Purchaser.
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<PAGE> 18
XV. SECURITIES MATTERS. Purchaser and Seller acknowledge, agree,
represent and warrant each to the other, that the Units to be issued pursuant
to this Agreement will be received and accepted as follows:
A. Each of such persons to whom the Units will be transferred (a) if
an individual, either (i) has an individual net worth, or a joint net
worth with his/her spouse, at the time of purchase in excess of
$1,000,000.00; or (ii) has an individual gross income in excess of
$200,000.00 for the two most recent years or joint income with that
person's spouse in excess of $300,000.00 in cash in each of those same
years, and reasonably expects to reach the same income level in the
current year, or (b) if a corporation, partnership or trust, is
otherwise an "accredited investor" as that term is defined in
Regulation D promulgated by the Securities and Exchange Commission;
and Seller shall have written corroboration of such matters as to each
party who will receive Units as a result of the transaction provided
for herein, as of the time they receive Units;
B. The Units are being acquired subject to the terms and conditions
described in the Partnership Agreement of Purchaser, a copy of which
has been obtained by or otherwise provided to such persons;
C. Except in connection with a redemption of the Units, the Units are
being and shall be received and held by such persons for their own
account for investment purposes only, and not with a view to any
offering or distribution thereof, and such persons have no present
intention of selling or otherwise disposing of the Units;
D. The Units have been obtained by such persons without the service
of any broker, dealer, investment banker or finder, and there is no
obligation to pay a commission, fee, bonus or remuneration of any type
to any broker, dealer, investment banker, or finder;
E. Such persons have been given access to all registration
statements, proxy materials, financial statements and filings with the
Securities and Exchange Commission relating to the shares of Winston
Hotels, Inc. and the business of the Purchaser, and such materials are
understood by Seller and such persons without the benefit of an
investment adviser, lawyer, accountant or other professional;
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<PAGE> 19
F. Such persons have been afforded the opportunity to ask questions
of and receive answers from Winston Hotels, Inc., the Purchaser and
their representatives concerning matters relating to the
capitalization, management, financial condition, operations and
prospects, financial and otherwise, of the Purchaser and Winston
Hotels, Inc., and no verbal information has been furnished to such
persons in connection with this transaction which is in any way
inconsistent with or at variance from the written information so
provided;
G. The Units are not registered under the Securities Act of 1933, as
amended, and the owners thereof may be required to bear the economic
risk of ownership of the Units for an indefinite period of time; and,
consequently, the Units cannot be sold unless the offer and sale
thereof is subsequently registered under the Securities Act of 1933
and the "blue sky" law of each state in which any of the Units are
offered for sale, unless an exemption from registration is available;
H. Purchaser will distribute or transfer the Units only to persons
who make the same representations and warranties as are set forth in
this Article XV; and,
I. Seller understands that the Units have not been and will not be
registered under state or federal securities laws. Upon the
conclusion of the escrow of the Units set forth hereinbefore. Seller
shall be entitled to redeem the Units for an equal number of shares of
common stock, par value $.01 per share, in Purchaser's general
partner, Winston Hotels, Inc., a North Carolina corporation
("Shares"). Seller further understands that neither the Units nor
Shares may be sold or transferred except according to the terms of
this Agreement, the partnership agreement of Purchaser and pursuant to
an effective registration statement under the Securities Act of 1933,
as amended, or pursuant to an exemption from registration.
Notwithstanding the foregoing, Seller hereby requests and Purchaser
hereby agrees, that it shall cause the registration of Shares issuable
hereunder upon redemption of Units on at least sixty (60) days notice
after the conclusion of the escrow provided in Article II, Paragraph B
of this Agreement. Purchaser shall use its best efforts to file and
obtain the necessary regulatory approvals for a registration statement
under which Seller can sell the Shares. Seller shall cooperate with
Purchaser, at no expense to Seller, with respect to obtaining the
necessary regulatory approvals for a registration, all of which shall
be at the expense of Purchaser.
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<PAGE> 20
J. The terms and provisions of this Article XV shall survive the
Closing and the delivery of the deed for the Premises.
XVI. BINDING EFFECT; MISCELLANEOUS
A. This Agreement shall be binding upon and shall inure to the
parties hereto, their respective heirs, successors, legal representatives and
assigns. This Agreement sets forth the entire Agreement between the parties
hereto and no other prior written or oral statement or agreement or
understanding shall be recognized or enforced. All modifications or amendments
shall be in writing and signed by the parties. This Agreement is to be
construed according to the laws of the State of North Carolina. This Agreement
may be executed in two or more counterparts all of which shall constitute one
and the same instrument. The singular shall include the plural and vice versa.
B. The Purchaser may assign this Agreement to a corporation,
partnership or other entity.
C. As used herein, "the Date of this Agreement" shall mean the date
noted below as the date upon which this Agreement was executed by the latter of
Purchaser or Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation,
General Partner
(Corporate Seal) By:___________________________
_______ President
Attest:
_________________
______Secretary
Date signed by Purchaser:
________________________
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<PAGE> 21
Seller:
RWW, Inc.,
a North Carolina corporation
(Corporate Seal) By:___________________________________
____________President
Attest:
_______________________
______Secretary
Date signed by Seller:
_______________________
The undersigned agrees to serve as Escrow Agent pursuant to this
Agreement and upon receipt thereof, to hold the Units in accordance with the
terms and provisions of this Agreement.
Escrow Agent:
The Title Insurance Company of
North Carolina, Inc., as agent for
First American Title Insurance Company
By:____________________________________
Title:_________________________________
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<PAGE> 22
STATE OF __________________
COUNTY OF _________________
I, a Notary Public of the County and State aforesaid, certify that
__________________________, personally came before me this day and acknowledged
that _he is ___________________ Secretary of Winston Hotels, Inc., a North
Carolina corporation, General Partner of WINN Limited Partnership, a North
Carolina limited partnership, and that by authority duly given and as the act
of the corporation, as such General Partner, the foregoing instrument was
signed in its name by its ______ President, sealed with its corporate seal and
attested by ___________________ as its ________ Secretary.
Witness my hand and seal, this the _____ day of _____________, 199__.
My commission expires:_____ _____________________________
Notary Public
(SEAL)
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
_________________________________ personally came before me this day and
acknowledged that _he is __________ Secretary of RWW, Inc., a North Carolina
corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its President,
sealed with its corporate seal and attested by ___ as its _____ Secretary.
Witness my hand and seal, this the ____ day of _____________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
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<PAGE> 1
EXHIBIT 10.10
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the
Date of this Agreement defined hereinafter, between WINN Limited Partnership, a
North Carolina limited partnership, or its assigns, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser") and WJS
Associates - Perimeter II, Inc., a North Carolina corporation ("Seller").
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PROPERTY AND BUSINESS
On the terms and subject to all of the conditions set forth in this
Agreement, the Purchaser agrees to purchase and the Seller agrees to sell, for
the Purchase Price defined herein, all of the following property (collectively,
the "Premises"):
(a) the real estate described on Schedule 1 attached hereto and
made a part hereof by this reference, containing 1.7369 acres of land, together
with all tenements, appurtenances, easements, agreements, development rights,
air rights, rights-of-way, strips, gores, rights in adjacent avenues, streets
and alleys, rights and uses appurtenant thereto, specifically including all of
the easements, right, title and interest of Seller set forth in that certain
Easement Agreement recorded in Book 18408, Page 173, Fulton County Records
(collectively the "Real Property");
(b) all improvements now or hereafter located on the Real Property,
including but not limited to that certain 131 room Hampton Inn located on
Hammond Drive, Atlanta, Georgia, and all fixtures which are affixed to the Real
Property or Improvements (the "Improvements");
(c) all furniture, fixtures (not part of the Real Property and
Improvements or affixed thereto), equipment, machinery, furnishings, carpets,
drapes, blinds or mini-blinds, service and maintenance equipment, linens (not
less than two and one-half (2 1/2) turns of linens shall be included), tools,
signs, landscaping equipment, supplies, pool equipment, telephone systems,
television systems, intercom equipment and systems, and replacement parts (the
"Equipment");
(d) moneys advanced for future reservations ("Prepaid Items");
(e) all contracts, agreements, licenses, contract rights, rights
to use and other similar rights used in connection with the Real Property and
Improvements and set forth on Schedule 2 attached
<PAGE> 2
hereto and made a part hereof by this reference and which the Purchaser elects
to purchase and assume (the "Contracts");
(f) all leases and rights to use the Improvements, Equipment or
all or any part thereof in third parties as more particularly identified on
Schedule 3 attached hereto and made a part hereof by this reference and which
the Purchaser elects to purchase and assume (the "Leases");
(g) all permits, licenses, government licenses, certificates of
occupancy and approvals necessary to operate the Real Property, Improvements,
Equipment, Contracts, Leases, Intangible Rights and the other property and
rights transferred under this Agreement (the "Permits");
(h) all inventory, supplies and other materials used in connection
with the Real Property and Improvements and the hotel business operated thereon
(the "Inventory");
(i) all plans, specifications and "as-built" drawings and surveys
relating to the Real Property and Improvements, all books and records relating
to the operation or management of the Real Property and Improvements and all
warranties and guaranties of Seller pertaining to the Premises; and
(j) all intangible property, guest ledgers, customer and mailing
lists, catalogues and brochures, telephone numbers and similar property used in
connection with the operation of the Real Property, Improvements and the
business known as the Hampton Inn located on Hammond Drive, Atlanta, Georgia
(the "Hotel"), and any telephone numbers assigned thereto (the "Intangible
Rights").
II. TERMS OF PURCHASE AND SALE
The purchase price for the Premises (the "Purchase Price") shall be
and consist of the items set forth in this Article II. The Purchase Price for
the Premises shall be determined and paid as follows:
A. By assumption of the outstanding balances as of the Closing Date
of those certain indebtednesses evidenced and described as follows: (1)
promissory note in the original principal amount of $4,875,000.00 payable to
the order of Branch Banking and Trust Company, dated June 28, 1994, secured by
the lien of a deed to secure debt encumbering the Real Property and
Improvements recorded in Book 18408, Page 286, Fulton County Records; (2)
promissory note in the original principal amount of $725,000.00 payable to the
order of Branch Banking and Trust Company, dated April 12, 1995, secured by the
lien of a deed to secure debt encumbering the Real Property and Improvements
recorded in Book 19445, Page 104, Fulton County Records and, (3) all other
indebtedness, secured or unsecured, incurred by Seller with respect to the
construction of the Hotel.
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<PAGE> 3
Seller shall determine and verify the aggregate outstanding amount of such
indebtednesses as soon as reasonably possible upon the completion of the
construction of the Hotel and payment of all costs and expenses associated
therewith. Seller shall be responsible for all payments due under such
indebtednesses up to the Closing Date, including all interest accrued thereon.
B. Seller shall accept limited partnership units in Purchaser
having an aggregate value of One Million Two Hundred Thirty Thousand and N0/100
Dollars ($1,230,000.00) ("Units"). The number of Units issued shall be
determined and based upon the average closing price of the stock of Purchaser's
general partner, Winston Hotels, Inc., a North Carolina corporation, on the
NASDAQ market for the ten (10) days of trading immediately preceding the
Closing Date.
C. Upon the Closing, the Seller shall deliver to the Purchaser the
Premises, including but not limited to the Real Property, Improvements,
Equipment and Inventory, free and clear of all liens and encumbrances of
whatever type or description other than the Permitted Exceptions as defined in
Article IV, Paragraph A hereof and the indebtednesses to be assumed by
Purchaser pursuant to Paragraph A of this Article II.
III. PURCHASER'S CONTINGENCIES
A. Purchaser's obligation to close this transaction shall be
conditioned on the Purchaser's receipt, on or before the Closing Date, of an
acceptable Hampton Inn franchise license agreement for the Hotel with a term of
not less than ten (10) years.
B. Purchaser's obligation to close this transaction shall be
conditioned on Purchaser having received, effective as of the Closing Date, all
necessary governmental approvals and licenses for operation of the Premises as
a hotel, provided that Purchaser has made good faith and timely applications
for such approvals and licenses and has provided the applicable governmental
authorities with all required information reasonably necessary for such
authority to grant such approval or license.
C. Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close this
transaction shall be conditioned upon Purchaser obtaining the approval of this
Agreement and the transaction contemplated herein from the board of directors
of the general partner of Purchaser, which approval shall be obtained or denied
within seventy five (75) days from and after the Date of this Agreement.
The Purchaser and its representatives and agents shall be provided
with access to the Premises at all reasonable times, in order to inspect the
Premises, including but not limited to, taking
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<PAGE> 4
soil samples and test borings, and conducting environmental studies,
engineering studies and other such inspections and reviews that the Purchaser
shall deem reasonably necessary to determine the condition and financial status
of the Premises. Purchaser shall and does hereby agree to indemnify and hold
Seller harmless from and against any and all liability, damage, cost and
expense resulting from the exercise of the foregoing access and rights to the
Premises by Purchaser and its representatives and agents.
IV. TITLE; TITLE POLICY; SURVEY
A. On the date of this Agreement Seller shall furnish to Purchaser
copies of Sellers' existing owner's title insurance policies insuring the title
of Seller in and to the Real Property ("the Existing Title Policy").
Thereafter, Purchaser, at Purchaser's expense, shall obtain through update,
tacking or other means as may be necessary, a title insurance commitment from
First American Title Insurance Company or such other title insurance company as
may be acceptable to Purchaser in Purchaser's sole and absolute discretion (the
"Title Company") pursuant to which the Title Company shall commit (collectively
the "Title Commitment") to issue a current A.L.T.A. Form B owner's fee simple
title insurance policy or other policy of title insurance as shall be
reasonably satisfactory to Purchaser and to any lender of Purchaser (the
"Lender") in the amount of the Purchase Price (the "Title Policy") insuring
that the Purchaser shall receive at closing, good, marketable and indefeasible
fee simple title to the Real Property, free and clear of all liens, exceptions,
encumbrances or defects other than the matters expressly approved in writing by
Purchaser as permitted exceptions to title as set forth hereinafter (the
"Permitted Exceptions"). Seller shall furnish to Purchaser copies of all
liens, exceptions, encumbrances or defects set forth in the Existing Title
Policy at the same time as the Existing Title Policy are so furnished to
Purchaser.
Within seventy five (75) days from and after the Date of this
Agreement, the Purchaser shall notify (the "Title Notice") the Seller as to
which of the liens, defects, encumbrances or exceptions set forth in the Title
Commitments are objectionable to Purchaser ("the Title Defects") and which of
such matters are acceptable to Purchaser as the Permitted Exceptions. Within
ten (10) days after receipt by Seller of the Title Notice, the Seller shall
cure the Title Defects to the reasonable satisfaction of the Purchaser. In the
event the Seller is unable to cure the Title Defects to the reasonable
satisfaction of the Purchaser (except for those Title Defects that can be cured
with the payment of money and will be satisfied of record by Seller at or prior
to Closing) within such ten (10) day period or the Purchaser does not agree to
waive such Title Defects, then this Agreement shall terminate and shall be
null, void and without further force or effect, and neither party shall have
any further liability to the other. Notwithstanding the
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<PAGE> 5
foregoing, the Seller shall be obligated to remove and be responsible for
removing all Title Defects capable of being removed or discharged by payment of
money, including but not limited to, money judgments and mechanic's liens, but
excluding these deeds to secure debt which Purchaser shall assume pursuant to
Article II, Paragraph A.
B. On the date of this Agreement Seller shall furnish to
Purchaser a copy of Seller's existing as built survey of the Real Property and
the Improvements currently located thereon ("the Existing Survey"), prepared by
a surveyor duly licensed under the laws of the State of Georgia, reasonably
acceptable to the Purchaser and the Lender in accordance with ALTA or such
other standards as shall be reasonably satisfactory to Purchaser. The Existing
Survey shall be in form and substance satisfactory to the Purchaser, the Title
Company and the Lender. Within seventy five (75) days from and after the Date
of this Agreement, Purchaser shall, at Purchaser's election, cause the Existing
Survey to be updated, obtain a new survey or, if acceptable to the Title
Company and Lender, obtain a certification from Seller that there have been no
improvements, structures or other changes subsequent to the date of the
Existing Survey which would be revealed by a more current survey thereof,
whereby the elected method shall be certified to the Purchaser, Title Company
and Lender (the form of certification to be satisfactory to the Title Company,
Purchaser and Lender) ("the Current Survey"). The Current Survey shall show,
among other things, that all buildings are within lot and building lines, the
location of such lines, the dimensions and total area of the Real Property and
Improvements, the location and number of parking spaces, ingress and egress to
adjoining streets, all benefiting and burdening easements, improvements,
appurtenances, rights of way and utilities whether above or below ground, all
encroachments from or into the Premises, all structures and improvements on the
Real Property and all easements, rights-of-way and other restrictions of record
properly identified with recording information and certifying that the Premises
are not within a flood plain or other flood hazard area. The Current Survey
shall be made in accordance with the Minimum Standard Detail Requirements for
Land Title Surveys adopted by the American Land Title Association. The Current
Survey and certification shall be sufficient to remove the survey exception
from the Title Policy without indemnity by Purchaser or additional premium.
Within seventy five (75) days from and after the Date of this Agreement, the
Purchaser shall notify the Seller of any objections of Seller or Lender to the
Current Survey ("Survey Defects"). Survey Defects shall be deemed to be Title
Defects for purposes of this Agreement and Seller shall cure such Survey
Defects according to the same procedure as for Title Defects.
C. On the date of this Agreement Seller shall deliver to
Purchaser copies of all existing environmental reports and studies of which
Seller has knowledge which have been previously prepared and compiled with
respect to the Premises.
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<PAGE> 6
D. The Purchaser and Seller shall each be responsible for the
payment of its own transaction costs, including counsel fees. Purchaser shall
be responsible for the costs incurred with any physical inspection of the Real
Property and Improvements, including any environmental and engineering studies.
At Closing, Purchaser shall pay all premiums for the Title Policy. The
Purchaser shall pay for the Title Commitment and the Current Survey. Any and
all transfer taxes, real estate excise taxes and sales taxes payable in
connection with the transfer of the Premises, or any portion thereof, and the
Personalty (as hereinafter defined) shall be paid by Seller. Unless otherwise
stated in this Agreement, the Purchaser and Seller shall pay all costs in
connection with the Closing of this transaction as are customary in Atlanta,
Georgia.
V. CLOSING
A. The closing of this transaction shall occur within fifteen
(15) days following the conclusion of a successful secondary public offering of
Winston Hotels, Inc.'s common stock or such earlier time as may be elected by
Purchaser ("the Closing Date"). The occurrence of such secondary public
offering shall not be a requirement for closing under this Agreement. The
closing shall occur at the offices of Brown & Bunch, 4900 Falls of Neuse Road,
Suite 210, Raleigh, North Carolina 27609. The exact Closing Date shall be
determined at the election of Purchaser upon at least ten (10) days prior
notice to Seller. The closing of the transaction contemplated by this
Agreement shall be deemed effective as of 12:01 a.m. on the Closing Date
("Closing"). If the date of Closing falls on a Saturday, Sunday or banking
holiday, the Closing shall take place on the next business day thereafter.
B. At the Closing, the Seller, shall deliver to Purchaser and
perform the following:
1. A General Warranty Deed for the Real Property conveying good,
marketable, insurable and indefeasible fee simple title to the Real Property
free and clear of all defects, exceptions, liens or encumbrances, except for
the Permitted Exceptions and the indebtednesses to be assumed by Purchaser
pursuant to Article II, Paragraph A.
2. Seller shall pay and discharge any special assessment which on or
before the date of Closing, (a) has been levied, imposed, or confirmed against
the Premises, (b) affects or is a lien upon the Premises or (c) although not
yet a lien upon the Premises, is attributable to improvements which benefit or
will benefit the Premises or the property in the vicinity of the Premises for
which improvement work has been commenced. If any of the foregoing assessments
may be paid in installments, all installments shall be deemed payable as of the
day prior to the Closing, and shall be discharged of record by Seller. If, at
the Closing, any amount which Seller is required to pay with respect to the
foregoing has
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not been determined, Seller agrees to pay such amount as can be reasonably
estimated at the Closing and the final amount shall be adjusted within ten (10)
days after Purchaser gives Seller notice that same has been determined. This
provision shall survive the Closing and delivery of the Deeds.
3. A Bill of Sale conveying the Equipment, Inventory, Real Property not
conveyed by other instruments provided for herein, and other personal property
and intangible property included in the Premises ("Personalty"), free and clear
of any lien or encumbrance, other than the Permitted Exceptions, and containing
a general warranty of title to the Equipment, Inventory and Personalty and an
inventory of all Equipment, Inventory and Personalty.
4. An assignment of Seller's interest in and to all Permits,
Contracts to be assumed by Purchaser, Leases to be assumed by Purchaser,
Intangible Rights, Prepaid items and other items of the Premises, free and
clear of any lien or encumbrance, together with written evidence satisfactory
to Purchaser of any required third party consent to such assignment. Seller
shall deliver to Purchaser all original Contracts and Leases which Purchaser
has elected to purchase; the Permits, including the certificates of occupancy
for the Premises, evidence that the Premises are legally constructed and
properly zoned in accordance with all applicable laws; all warranties and
guarantees (and assignments thereof to Purchaser) issued in connection with the
initial construction of the Real Property and Improvements; any Personalty, and
any repairs or additions thereto; cash bank; moneys advanced for future
registrations; guest registration records; keys; permits, approvals and
licenses issued by all appropriate governmental authorities and fire
underwriting organizations with respect to the construction and use of the
Premises or any part thereof; and any existing copies of architectural plans
and specifications, blueprints and building plans which may be in Seller's
possession.
5. At Purchaser's option, an assignment of all fire and extended coverage
insurance policies, liability policies and loss of rental policies, affecting
any of the Premises to the extent assignable (if assigned, premiums to be
adjusted at Closing).
6. Tax certificates or other evidence of payment from all appropriate
taxing authorities certifying the payment of all real and personal property
taxes through the current tax year.
7. A certificate of Seller dated as of the Closing that Seller is not a
foreign person or corporation within the meaning of Sections 1445 and 7701 of
the Internal Revenue Code (the "IRC").
8. A bring down certificate dated as of the Closing certifying the truth
and accuracy of each representation and warranty set forth in Article XII as of
the Closing Date.
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9. An affidavit of title reasonably satisfactory to the Title
Company enabling the Title Company to issue the Title Policy without exception
for mechanic's or materialman's or other statutory liens or for the rights of
parties in possession other than temporary hotel patrons.
C. At the Closing, the Purchaser shall deliver to the Seller the
following:
1. Proof of authority for Purchaser to complete the transaction
reasonably satisfactory to Seller.
2. The Units.
3. Evidence of the assumption of the indebtednesses set forth in
Article II, Paragraph A.
VI. DELIVERY OF POSSESSION
Seller shall deliver actual and exclusive possession of the Premises
to Purchaser on the Closing Date.
Seller hereby grants to Purchaser the right to enter the Premises at
any reasonable time after the date hereof for the purpose of inspecting,
testing and examining the Premises.
VII. DAMAGE TO PROPERTY
Seller shall give Purchaser immediate notice of any fire or other
casualty or of any pending or threatened condemnation occurring to all or any
portion of the Premises between the date hereof and the Closing. If prior to
the Closing, there shall occur:
(i) damage to the Hotel caused by fire or other
casualty, which would cost $100,000.00 or more to repair or replace; or
(ii) the taking or condemnation of all or any portion the
Hotel (including any parking areas) as would materially interfere with the use
thereof, as determined by Purchaser; then, if any of the events set forth in
(i) or (ii) above occurs, Purchaser, at its option, may terminate this
Agreement by written notice given to Seller within fifteen (15) days after
Purchaser has received the notice referred to above or at the Closing,
whichever is earlier. If Purchaser does not elect to terminate this Agreement,
the Closing shall take place as provided herein without an abatement of the
Purchase Price and there shall be assigned to the Purchaser at Closing, all
interest of the Seller in and to any insurance proceeds or condemnation awards
which may be payable to Seller on account of such occurrence.
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If, prior to the Closing, there shall occur:
(x) damage to the Hotel caused by fire or other casualty which
would cost less than $100,000.00 to repair or replace; or
(y) the taking or condemnation of all or any portion of the Hotel
which is not material to the use thereof, as determined by
Purchaser;
then, if any of the events set forth in (x) or (y) above occurs, Purchaser
shall have no right to terminate this Agreement (solely as a result of the
occurrence of such events), and Seller shall, at its sole expense, with respect
to subparagraph (x), restore or replace the damaged Premises to its original
condition; and, with respect to subparagraph (y), there shall be assigned to
Purchaser at Closing all interest of Seller in and to any insurance proceeds or
condemnation awards which may be payable to Seller on account of any such
occurrence.
VIII. REMEDIES
A. If this transaction is not consummated by reason of:
(i) the inability of Purchaser to obtain any approval or
consent required pursuant to or otherwise satisfy any
condition or contingency set forth in Article III
hereof;
(ii) the occurrence of any of the events described in
Article VII;
(iii) Title Defects and Survey Defects which are not cured
as provided in this Agreement (except for those Title
Defects or Survey Defects which Seller is obligated
to cure); or
(iv) cancellation by Purchaser pursuant to any other
applicable provisions of this Agreement,
then this Agreement shall be null and void and all parties relieved from any
further liability hereunder, unless Purchaser elects to waive any of the items
or occurrences set forth in this Article VIII, Paragraph B. The items
enumerated in this Article VIII, Paragraph B are for Purchaser's benefit only
and the non-occurrence of a state of facts sufficient to satisfy any of such
items may not be used or pleaded by Seller as a defense to the enforceability
of this Agreement.
C. If this transaction is not consummated because of a default on
the part of Seller or if Seller fails to close this
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transaction in breach of its obligation to do so, then Purchaser may seek
specific performance of this Agreement.
IX. PRORATIONS
All income (including cash on hand and accounts receivable), current
operating expenses, accounts payable, real estate taxes, other taxes and
assessments, all utilities, water and sewer charges, licenses or permit fees
relating to the operation of the Premises, real estate and personal property ad
valorem taxes, prepayments made under the Contracts and insurance premiums (if
applicable), shall be adjusted and prorated as of the Closing. All franchise
fees, maintenance and service agreements (whether or not service is continued
by Purchaser) and utility charges shall be determined as of Closing and paid by
Seller or appropriate adjustments made if Purchaser at its option accepts an
assignment of any such agreement. If such charges and expenses are unavailable
on the Closing Date, a re-adjustment of such charges and expenses shall be made
within thirty (30) days after the Closing. The parties agree to cooperate in
good faith in effecting such a final reconciliation and each party shall
promptly pay (or reimburse the other party for) any expense item that is
chargeable to the former party and shall promptly remit any income item to the
other party if entitled thereto. Seller shall use reasonable efforts to
arrange for the rendition of final bills by the utility companies involved as
of the Closing Date.
Guest room revenues of the Premises, whether in cash or in accounts receivable,
arising from occupancy for the night beginning on the day preceding the Closing
Date and ending on the Closing Date shall be credited one-half to Purchaser and
one-half to Seller. Seller shall collect all income and other sums payable by
tenants or guests (or otherwise) and shall be responsible for the payment of
all expenses on account of services and supplies furnished to and for the
benefit of the Premises through and including the Closing. Purchaser shall be
credited with any deposits from tenants or guests of the Premises which are
refundable to such tenants or guests. Seller shall remit to Purchaser at
closing all prepaid income items. Nothing contained in this Article shall be
deemed to prohibit Purchaser and Seller from entering into an agreed settlement
in writing of all prorations at or following Closing.
In the event any adjustments pursuant to this Article are, subsequent
to Closing, found to be erroneous, then either party hereto is entitled to
additional monies and shall invoice the other party for such additional amounts
as may be owing, and such amount shall be paid promptly by the other party upon
receipt of the invoice. Such invoice shall be accompanied by reasonable
substantiating evidence.
Purchaser shall have no obligation with respect to Seller's on site
employees involved in the management and daily operation of the
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Hotel whatsoever, all of whom shall be compensated and terminated by Seller as
of Closing, though Purchaser reserves the right to employ any such employees.
The provisions of this Article IX shall survive the Closing and
delivery of the Deeds.
X. NOTICES
Any notice to be given by either party to this Agreement shall be in
writing and shall be either delivered personally or by certified or registered
U.S. Mail, postage prepaid, or by overnight courier delivery service with
charges to the sender, as follows:
To Seller: WJS Associates - Perimeter II, Inc.
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Charles M. Winston, Sr.
To Purchaser: WINN Limited Partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
With copies to: William W. Bunch, III, Esquire
Brown & Bunch
4900 Falls of Neuse Road,
Suite 210 (street zip code 27609)
Post Office Box 19409
Raleigh, North Carolina 27619-9409
Notice shall be deemed given if properly addressed and delivered as set forth
herein two (2) days following deposit in the U.S. Mail, one (1) day following
deposit with any generally recognized overnight delivery service and on
personal hand delivery to a person authorized to receive such delivery, on the
day of such hand delivery. Any party may change addresses for notices by
delivering written notice of such change in accordance with this Article X.
XI. INDEMNITY
A. Purchaser and Seller warrant and represent each to the other
that they or it has not employed or utilized the services of a real estate
agent or broker in the transaction contemplated by this Agreement. Seller
shall indemnify and hold the Purchaser harmless from and against any claim for
any real estate commission, brokerage fee or finder's fee made by any person,
firm or corporation, claiming by, through or under the Seller. Purchaser shall
indemnify and hold the Seller harmless from and against any claim for any real
estate commission, brokerage fee or finder's fee made BY any person, firm or
corporation, claiming by, through or
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under the Purchaser. This warranty and representation shall survive the
Closing and the parties shall indemnify each other from any liability, cost or
loss arising out of a breach of said warranty and representation, including
consequential damages.
B. The Seller shall indemnify and hold the Purchaser harmless
from and against any and all liabilities, claims, demands, costs and expenses
of any kind or nature, including but not limited to, reasonable attorney's
fees, arising out of or incurred in connection with (i) any breach of the
representations and warranties of Seller set forth in this Agreement, (ii) the
ownership, use, maintenance or operation of the Premises on or prior to the
Closing or the transfer of the Premises to the Purchaser (including the payment
of all taxes),or (iii) compliance or failure to comply with the notice
provisions relating to bulk sales laws applicable to the transfer of all or any
part of the Premises. Purchaser shall indemnify and hold Seller harmless from
and against any and all liabilities, claims, demands, costs and expenses of any
kind or nature, including reasonable attorney's fees, arising after the date of
Closing and which arise out of the ownership or operation of the Premises by
the Purchaser following the Closing. Such indemnities shall survive Closing
and delivery of the Deeds.
C. If Purchaser or Seller propose to make any claim for
indemnification under any Article or Paragraph of this Agreement (the
"Indemnitee"), the Indemnitee shall deliver to the other party (the
"Indemnitor") a certificate signed by the Indemnitee which certificate shall
(i) state that a loss has occurred and (ii) specify in reasonable detail each
individual item of loss or other claim including the amount thereof and the
date such loss was incurred. The Indemnitor shall have the right in its
discretion and at its expense to participate in and control (a) the defense or
settlement of any claim, suit, action or proceeding (including appeals) in
respect of such item (or items) by any person other than a party hereto, (b)
any and all negotiations with respect thereto, and (c) the assertion of any
claim against any insurer with respect thereto, and the Indemnitee shall not
settle any such claim, suit, action or proceeding or agree to extend any
applicable statute of limitation without the prior written approval of the
Indemnitor. The rights of participation, control and approval granted to the
Indemnitor shall be subject as a condition precedent to the Indemnitor's
acknowledging to the Indemnitee, in writing, the obligation of the Indemnitor
to indemnify the Indemnitee in respect of such third party's claim, suit,
action or proceeding giving rise to such item. Upon satisfaction of such
condition precedent, the Indemnitee shall provide the Indemnitor with all
reasonably available information, assistance and authority to enable the
Indemnitor to effect such defense or settlement and upon the Indemnitor's
payment of any amounts due in respect of such claim, suit, action or
proceeding, the Indemnitee shall, to the extent of such payment, assign or
cause to be assigned to the Indemnitor the claims of the Indemnitee, if any,
against such third parties in
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respect of which such payment is made. If the Indemnitor is not so willing to
acknowledge such obligation, the parties shall jointly consult and proceed as
to any such third party claim, suit, action or proceeding.
XII. SELLER'S REPRESENTATIONS AND WARRANTIES
The Seller represents and warrants to the Purchaser that:
A. Seller is a corporation, duly organized, and existing and in
good standing under the laws of the State of North Carolina and authorized to
do business in the State of Georgia.
B. Seller is authorized to enter into this Agreement and to
consummate the transaction contemplated hereby, and the individuals executing
this Agreement on behalf of Seller are also duly authorized to execute this
Agreement and to bind Seller to consummate such transaction. The execution and
delivery of this Agreement and the conveyance of the Premises by Seller,
pursuant to this Agreement, do not require the consent of any person, agency or
entity not a party to this Agreement. The execution of this Agreement by
Seller and the transaction contemplated herein have been duly authorized by
proper corporate action, including the board of directors of Seller.
C. There are no pending or, to the knowledge of Seller,
threatened, condemnation or similar proceedings affecting the Premises, or any
portion thereof. Seller has not received any written notice that any such
proceeding is contemplated, and no part of the Premises has been destroyed or
damaged by any casualty.
D. As of the Date of this Agreement, Seller has not completed the
construction of the Improvements and opened the Hotel for business. It shall
be the responsibility of Seller to complete such construction and obtain all
permits and approvals necessary for the operation of the Hotel prior to
Closing. To the best of Seller's knowledge, the maintenance, operation, use or
occupancy of the Premises as a hotel does not and will not violate any
building, health, zoning, environmental, fire or similar law, ordinance,
regulation or restrictive covenant. To the best of Seller's knowledge, the
Premises do not and will not violate any federal, state, county, or municipal
laws, ordinances, orders, regulations or requirements nor has Seller received
any notice of such a violation.
E. There are no options to purchase, rights of first refusal or
other similar agreements with respect to the Premises which give anyone the
right to purchase the Premises or any part thereof. There are no contracts or
agreements which affect or cover
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the Premises, except for the Contracts, Permits and Leases. There are no
unpaid bills or claims in connection with the construction repair or
replacement of the Premises. There are no agreements allowing for any
reduction, concession or abatement of room rates.
F. Certificates of Occupancy for all buildings and other
improvements will be duly issued, and the buildings and improvements legally
occupied as a hotel prior to Closing. The Real Property is zoned properly for
the use thereof as a hotel.
G. Except as set forth in the Title Commitment, the Seller owns
and has good and marketable title to all of its assets and properties free and
clear of any security interest, mortgage, pledge, lien, conditional sale or
other encumbrance or charge, except the deeds to secure debt to be assumed by
Purchaser as set forth in Article II, Paragraph A. All of the Premises owned
or leased by Seller is, and at the time of Closing will be, in good condition
and in good working order. The Premises to be purchased is all of the property
of every kind and nature necessary for the operation of the Seller's business
in the ordinary course.
H. To the best of Seller's knowledge, the Premises are in
compliance with and have not violated any statute, law, ordinance, rule,
regulation, order and directive (including, without limitation, all labor and
environmental control and antipollution laws, ordinances, rules, regulations or
directives) of any and all Governmental Agencies pertaining to the use or
occupancy of the Premises.
The Seller has not received any notice of and the Seller and the Premises have
not been charged with, are not under investigation or threatened investigation
for failure to comply with and are in compliance with, any and all statutes,
laws, ordinances, rules, regulations, orders and directives of any and all
Governmental Agency or Agencies pertaining to the use, generation, dumping,
releasing, burying or disposing of or emitting of any particles, materials,
substances, or emissions that are now or have heretofore been determined by any
and all Governmental Agency or Agencies to be of a hazardous, toxic, pollutive,
or ecologically or environmentally damaging nature, including but not limited
to asbestos ("Hazardous Materials"). Seller has not previously disposed of any
Hazardous Materials at the Premises.
For purposes of this Agreement, the term "Hazardous Materials" shall include,
but not be limited to, those materials or substances now or heretofore defined
as "hazardous substances," "hazardous materials," "hazardous waste," "toxic
substances," or other similar designations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C., Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C., Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C.,
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Section 1801, et seq. and other laws, whether or not of a similar nature,
applicable to the Premises and adopted by, enacted in or applicable to the
respective States in which the Premises are located.
For purposes of this Agreement, the term "Governmental Agency or Agencies"
means, whether of the United States of America, of any state or territory
thereof or of any foreign jurisdiction, any government, political subdivision,
court, agency, or other entity, body, organization or group exercising any
executive, legislative, judicial, regulatory or administrative function of
government.
To the best of Seller's knowledge, the Real Property has never appeared on any
federal or state registry of active or inactive hazardous waste disposal sites.
Seller has never received any notice of claim from a Governmental Agency
concerning the alleged release or threatened release of Hazardous Materials at
the Real Property. To the best of Seller's knowledge, no hazardous waste sites
exist within a one mile radius of the Real Property.
I. Seller has no knowledge of and has received no notice of any
causes of action, actions, or proceedings of whatever type or description which
have been instituted or threatened or are pending relating to the Premises or
any interest therein.
J. To the best of Seller's knowledge and belief, no
representation or warranty made by the Seller, nor in any statement or document
furnished or to be furnished to the Purchaser hereunder, or in connection with
the transaction contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
Purchaser, in Purchaser's sole and absolute discretion, may
waive any condition to close or breach of any representation or warranty
provided for herein or any Title or Survey Defect, and in such event, this
transaction shall be consummated as if such condition, representation, warranty
or defect was satisfied. All of the representations and warranties contained
in this Agreement shall survive the Closing. The representations and
warranties set forth above shall be true, correct and accurate on the date
hereof and as of the date of Closing.
XIV. COVENANTS
A. Upon completion of the construction of the Hotel and the
opening thereof for business, the Seller (i) shall commence and continue normal
and prudent maintenance and management of the Premises, (ii) shall commence and
maintain supplies and payroll at an appropriate level, and (iii) shall operate
the Hotel in the ordinary course of business.
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B. All taxes levied against the Premises which were or shall be
due and payable prior to the Closing have been or shall be paid in full by the
Seller on or prior to the Closing.
C. All Contracts and Leases shall be current and not in default
as of the Closing. Seller shall not enter into new Contracts or Leases except
in the ordinary course of business, and provided that any such new Contract or
Lease shall either provide that it may be cancelled on not more than 30 days
notice by Seller at no penalty or cost or, Purchaser shall consent to such
Contract or Lease in writing.
D. Seller shall maintain fire and casualty insurance on the
Premises up to and including the Closing in amounts reasonably satisfactory to
Purchaser.
XV. SECURITIES MATTERS. Purchaser and Seller acknowledge, agree,
represent and warrant each to the other, that the Units to be issued pursuant
to this Agreement will be received and accepted as follows:
A. Each of such persons to whom the Units will be transferred (a) if
an individual, either (i) has an individual net worth, or a joint net
worth with his/her spouse, at the time of purchase in excess of
$1,000,000.00; or (ii) has an individual gross income (jointly with
his/her spouse) in excess of $200,000.00 for the two most recent years
and reasonably expects an income in the current year in excess of
$300,000.00, or (b) if a corporation, partnership or trust, is
otherwise an "accredited investor" as that term is defined in
Regulation D promulgated by the Securities and Exchange Commission;
and Seller shall have written corroboration of such matters as to each
party who will receive Units as a result of the transaction provided
for herein, as of the time they receive Units;
B. The Units are being acquired subject to the terms and conditions
described in the Partnership Agreement of Purchaser, a copy of which
has been obtained by or otherwise provided to such persons;
C. Except in connection with a redemption of the Units, the Units are
being and shall be received and held by such persons for their own
account for investment purposes only, and not with a view to any
offering or distribution thereof, and such persons have no present
intention of selling or otherwise disposing of the Units;
D. The Units have been obtained by such persons without the service
of any broker, dealer, investment banker or finder, and there is no
obligation to pay a commission,
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fee, bonus or remuneration of any type to any broker, dealer,
investment banker, or finder;
E. Such persons have been given access to all registration
statements, proxy materials, financial statements and filings with the
Securities and Exchange Commission relating to the shares of Winston
Hotels, Inc. and the business of the Purchaser, and such materials are
understood by Seller and such persons without the benefit of an
investment adviser, lawyer, accountant or other professional;
F. Such persons have been afforded the opportunity to ask questions
of and receive answers from Winston Hotels, Inc., the Purchaser and
their representatives concerning matters relating to the
capitalization, management, financial condition, operations and
prospects, financial and otherwise, of the Purchaser and Winston
Hotels, Inc., and no verbal information has been furnished to such
persons in connection with this transaction which is in any way
inconsistent with or at variance from the written information so
provided;
G. The Units are not registered under the Securities Act of 1933, as
amended, and the owners thereof may be required to bear the economic
risk of ownership of the Units for an indefinite period of time; and,
consequently, the Units cannot be sold unless the offer and sale
thereof is subsequently registered under the Securities Act of 1933
and the "blue sky" law of each state in which any of the Units are
offered for sale, unless an exemption from registration is available;
H. Purchaser will distribute or transfer the Units only to persons
who make the same representations and warranties as are set forth in
this Article XV; and,
I. Seller understands that the Units have not been and will not be
registered under state or federal securities laws. Seller shall be
entitled to convert the Units into an equal number of shares of common
stock, par value $.01 per share, in Purchaser's general partner,
Winston Hotels, Inc., a North Carolina corporation ("Shares"), at a
conversion price based on the then current trading price of the common
stock of Winston Hotels, Inc. at the time of such conversion or cash
as set forth in the partnership agreement of Purchaser. Seller
further understands that neither the Units nor Shares may be sold or
transferred except according to the terms of this Agreement, the
partnership agreement of Purchaser and pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
or pursuant to an exemption from
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registration. Notwithstanding the foregoing, Seller hereby requests
and Purchaser hereby agrees, that it shall cause the registration of
Shares issuable hereunder upon redemption of Units on at least sixty
(60) days notice. Purchaser shall use its best efforts to file and
obtain the necessary regulatory approvals for a registration statement
under which Seller can sell the Shares. Seller shall cooperate with
Purchaser, at no expense to Seller, with respect to obtaining the
necessary regulatory approvals for a registration, all of which shall
be at the expense of Purchaser.
XVI. BINDING EFFECT; MISCELLANEOUS
A. This Agreement shall be binding upon and shall inure to the
parties hereto, their respective heirs, successors, legal representatives and
assigns. This Agreement sets forth the entire Agreement between the parties
hereto and no other prior written or oral statement or agreement or
understanding shall be recognized or enforced. All modifications or amendments
shall be in writing and signed by the parties. This Agreement is to be
construed according to the laws of the State of North Carolina. This Agreement
may be executed in two or more counterparts all of which shall constitute one
and the same instrument. The singular shall include the plural and vice versa.
B. The Purchaser may assign this Agreement to a corporation,
partnership or other entity.
C. Notwithstanding anything contained in this Agreement to the
contrary, it is expressly understood and agreed as follows: (i) the
shareholders of Seller shall have no personal liability whatsoever as a result
of this Agreement and any of the covenants, representations, warranties or
agreements contained herein; and, (ii) regardless of the prorations, deductions
or other adjustments provided for herein, the consideration to the Seller as a
result of this Agreement and the transaction contemplated herein shall be the
assumption of the indebtednesses set forth in Article II, Paragraph A and the
issuance to Seller of limited partnership units in Purchaser having an
aggregate value of One Million Two Hundred Thirty Thousand and N0/100 Dollars
($1,230,000.00).
D. As used herein, "the Date of this Agreement" shall mean the date
noted below as the date upon which this Agreement was executed by the latter of
Purchaser or Seller.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation,
General Partner
(Corporate Seal) By:___________________________
_______ President
Attest:
_________________
______Secretary
Date signed by Purchaser:
________________________
Seller:
WJS Associates - Perimeter II, Inc.,
a North Carolina corporation
(Corporate Seal) By:___________________________________
____________President
Attest:
_______________________
______Secretary
Date signed by Seller:
_______________________
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STATE OF __________________
COUNTY OF _________________
I, a Notary Public of the County and State aforesaid, certify that
__________________________, personally came before me this day and acknowledged
that _he is ___________________ Secretary of Winston Hotels, Inc., a North
Carolina corporation, General Partner of WINN Limited Partnership, a North
Carolina limited partnership, and that by authority duly given and as the act
of the corporation, as such General Partner, the foregoing instrument was
signed in its name by its ______ President, sealed with its corporate seal and
attested by ___________________ as its ________ Secretary.
Witness my hand and seal, this the _____ day of _____________, 199__.
My commission expires:_____ _____________________________
Notary Public
(SEAL)
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
_________________________________ personally came before me this day and
acknowledged that _he is __________ Secretary of WJS Associates - Perimeter II,
Inc., a North Carolina corporation, and that by authority duly given and as the
act of the corporation, the foregoing instrument was signed in its name by its
President, sealed with its corporate seal and attested by ___ as its _____
Secretary.
Witness my hand and seal, this the ____ day of _____________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
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EXHIBIT 10.11
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the
Date of this Agreement defined hereinafter, between WINN Limited Partnership, a
North Carolina limited partnership, or its assigns, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser") and
Hotel II, Incorporated, a North Carolina corporation ("Seller").
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PROPERTY AND BUSINESS
On the terms and subject to all of the conditions set forth in this
Agreement, the Purchaser agrees to purchase and the Seller agrees to sell, for
the Purchase Price defined herein, all of the following property (collectively,
the "Premises"):
(a) the real estate described on Schedule 1 attached hereto and
made a part hereof by this reference, containing 3.51 acres of land, together
with all tenements, appurtenances, easements, agreements, development rights,
air rights, rights-of-way, strips, gores, rights in adjacent avenues, streets
and alleys, rights and uses appurtenant thereto (collectively the "Real
Property");
(b) all improvements now or hereafter located on the Real Property,
including but not limited to that certain 128 room Marriott Courtyard located
on Van Campen Boulevard, Wilmington, North Carolina, and all fixtures which are
affixed to the Real Property or Improvements (the "Improvements");
(c) all furniture, fixtures (not part of the Real Property and
Improvements or affixed thereto), equipment, machinery, furnishings, carpets,
drapes, blinds or mini-blinds, service and maintenance equipment, linens (not
less than two and one-half (2 1/2) turns of linens shall be included), tools,
signs, landscaping equipment, supplies, pool equipment, telephone systems,
television systems, intercom equipment and systems, and replacement parts (the
"Equipment");
(d) moneys advanced for future reservations ("Prepaid Items");
(e) all contracts, agreements, licenses, contract rights, rights
to use and other similar rights used in connection with the Real Property and
Improvements and set forth on Schedule 2 attached hereto and made a part hereof
by this reference and which the Purchaser elects to purchase and assume (the
"Contracts");
<PAGE> 2
(f) all leases and rights to use the Improvements, Equipment or
all or any part thereof in third parties as more particularly identified on
Schedule 3 attached hereto and made a part hereof by this reference and which
the Purchaser elects to purchase and assume (the "Leases");
(g) all permits, licenses, government licenses, certificates of
occupancy and approvals necessary to operate the Real Property, Improvements,
Equipment, Contracts, Leases, Intangible Rights and the other property and
rights transferred under this Agreement (the "Permits");
(h) all inventory, supplies and other materials used in connection
with the Real Property and Improvements and the hotel business operated thereon
(the "Inventory");
(i) all plans, specifications and "as-built" drawings and surveys
relating to the Real Property and Improvements, all books and records relating
to the operation or management of the Real Property and Improvements and all
warranties and guaranties of Seller pertaining to the Premises; and
(j) all intangible property, guest ledgers, customer and mailing
lists, catalogues and brochures, telephone numbers and similar property used in
connection with the operation of the Real Property, Improvements and the
business known as the Marriott Courtyard located on Van Campen Boulevard,
Wilmington, North Carolina (the "Hotel"), and any telephone numbers assigned
thereto (the "Intangible Rights").
II. TERMS OF PURCHASE AND SALE
The purchase price for the Premises shall be Seven Million Five
Hundred Thousand and N0/100 Dollars ($7,500,000.00), adjusted as provided in
Article IX hereof ("the Purchase Price"), payable by Purchaser to Seller as
follows:
A. By assumption of the outstanding balance as of the Closing Date
of that certain indebtedness evidenced by that certain promissory note in the
original principal amount of $5,760,000.00 payable to the order of United
Carolina Bank dated March 30, 1995, secured by the lien of a deed of trust
encumbering the Real Property and Improvements recorded in Book 1867, Page 793,
New Hanover County Registry, together with any increases thereto which such
lender or another lender may make in order to finance additional costs of
construction of the Hotel and the equity investment therein of Seller (which
equity investment is $306,000.00), but in no event shall the amount of the
indebtedness so assumed exceed the Purchase Price. Seller shall be responsible
for all payments due under such indebtedness up to the Closing Date, including
all interest accrued thereon.
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B. With respect to the remainder of the Purchase Price (i)
after assumption by Purchaser of the indebtedness set forth in Paragraph A
above and (ii) plus or minus any closing adjustments determined in accordance
with this Agreement ("the Purchase Price Balance"), Seller shall accept in full
payment thereof units of limited partnership interest in Purchaser (the
"Units"). The number of Units issued shall be the Purchase Price Balance
divided by the average closing price of the stock of Purchaser's general
partner, Winston Hotels, Inc., a North Carolina corporation (the "Company"), on
the Nasdaq Stock Market for the ten (10) days of trading immediately preceding
the Closing Date ("the Initial Value"). The Premises are being acquired by
Purchaser in conjunction with other hotel properties. Such other hotel
properties include, among others, that certain Homewood Suites hotel located in
Cary, North Carolina, currently owned by Cary Suites, Inc ("the Cary
Homewood"), and that certain Hampton Inn & Suites hotel located in Duluth,
Georgia, currently owned by RWW, Inc. ("the Duluth Hampton Inn"). Seller and
the current owners of the Cary Homewood and the Duluth Hampton Inn are
affiliated entities and shall be hereinafter collectively referred to as "the
Affiliated Sellers", and the Premises, the Cary Homewood and the Duluth Hampton
Inn shall be hereinafter collectively referred to as the "Affiliated Hotels".
Purchser and Winston Hospitality, Inc., a North Carolina corporation, shall,
upon the closing of each of the Affiliated Hotels, enter into a percentage
lease agreement (a "Percentage Lease") with respect to each of the Affiliated
Hotels.
The purchase agreements with the Affiliated Sellers of the Cary
Homewood and the Duluth Hampton Inn provide that a portion of the purchase
prices to be paid for those hotels (collectively with the Purchase Price, "the
Pooled Purchase Price") shall be paid in Units (collectively with the Units
issued hereunder, "the Pooled Units"). The Affiliated Sellers have agreed to,
and Seller does hereby agree to, guaranty Purchaser an "average initial twelve
month yield" from the Affiliated Hotels of 13.0%. In the event the average
initial twelve month yield to Purchaser from the Affiliated Hotels is less than
13.0%, the Pooled Purchase Price shall be reduced as necessary to increase the
average initial twelve month yield from the Affiliated Hotels to 13.0% (the
"Adjustment Amount"). The Adjustment Amount shall be settled by returning to
Purchaser Pooled Units with a value, based on the Initial Value, equal to the
Adjustment Amount, plus any distributions previously paid on the returned
Pooled Units. For purposes of this Paragraph B, the "average initial twelve
month yield" from the Affiliated Hotels shall mean (i) the Percentage Lease
revenues paid to or accrued by Purchaser with respect to each of the Premises
and the Duluth Hampton Inn for the respective twelve (12) month periods after
their acquisition by Purchaser, (ii) plus the Percentage Lease revenues that
would have been paid to or accrued by Purchaser with respect to the Cary
Homewood if the provision of the proposed Percentage Lease for the Cary
Homewood setting forth the rent formula to be effective beginning in 1998 was
in effect throughout the twelve month period
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after its acquisition by Purchaser (notwithstanding that such rent provisions
will not be in effect in 1996 and 1997), (iii) less property taxes and casualty
insurance costs attributable to each Affiliated Hotel for the respective twelve
(12) month period after its closing date and (iv) divided by the sum of (a) the
Pooled Purchase Price and (b) all capital expenditures incurred by Purchaser
for the Cary Homewood during the twelve (12) month period after its acquisition
by Purchaser, all as verified by the Purchaser's independent auditors. The
Pooled Units shall be delivered by Purchaser to The Title Company of North
Carolina, Inc., as agent for First American Title Insurance Company ("Escrow
Agent"). Escrow Agent shall hold the Pooled Units and all distributions
relative thereto in escrow until such time as the aggregate average yield to
Purchaser for the Measurement Period is determined as aforesaid, at which time
Escrow Agent shall deliver the Pooled Units and all distributions relative
thereto in accordance with written instructions from Purchaser's independent
auditors. In the event the Pooled Units are reduced as provided hereinbefore,
the remaining Pooled Units delivered by Escrow Agent to the Affiliated Sellers
shall be apportioned between the Affiliated Sellers as mutually agreed among
the Affiliated Sellers.
C. Upon the Closing, the Seller shall deliver to the
Purchaser the Premises, including but not limited to the Real Property,
Improvements, Equipment and Inventory, free and clear of all liens and
encumbrances of whatever type or description other than the Permitted
Exceptions as defined in Article IV, Paragraph A hereof and the indebtedness to
be assumed by Purchaser pursuant to Paragraph A of this Article II.
III. PURCHASER'S CONTINGENCIES
A. Purchaser's obligation to close this transaction shall be
conditioned on the Purchaser's receipt, on or before the Closing Date, of an
acceptable Marriott Courtyard franchise license agreement for the Hotel with a
term of not less than ten (10) years.
B. Purchaser's obligation to close this transaction shall be
conditioned on Purchaser having received, effective as of the Closing Date, all
necessary governmental approvals and licenses for operation of the Premises as
a hotel, provided that Purchaser has made good faith and timely applications
for such approvals and licenses and has provided the applicable governmental
authorities with all required information reasonably necessary for such
authority to grant such approval or license.
C. Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close this
transaction shall be conditioned upon Purchaser obtaining the approval of this
Agreement and the transaction contemplated herein from the board of directors
of the general
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partner of Purchaser, which approval shall be obtained or denied within thirty
(30) days from and after the Date of this Agreement.
The Purchaser and its representatives and agents shall be provided
with access to the Premises at all reasonable times, in order to inspect the
Premises, including but not limited to, taking soil samples and test borings,
and conducting environmental studies, engineering studies and other such
inspections and reviews that the Purchaser shall deem reasonably necessary to
determine the condition and financial status of the Premises. Purchaser shall
and does
hereby agree to indemnify and hold Seller harmless from and against any and all
liability, damage, cost and expense resulting from the exercise of the
foregoing access and rights to the Premises by Purchaser and its
representatives and agents.
IV. TITLE; TITLE POLICY; SURVEY
A. On the date of this Agreement Seller shall furnish to
Purchaser copies of Sellers' existing owner's title insurance policies insuring
the title of Seller in and to the Real Property ("the Existing Title Policy").
Thereafter, Purchaser, at Purchaser's expense, shall obtain through update,
tacking or other means as may be necessary, a title insurance commitment from
First American Title Insurance Company or such other title insurance company as
may be acceptable to Purchaser in Purchaser's sole and absolute discretion (the
"Title Company") pursuant to which the Title Company shall commit (collectively
the "Title Commitment") to issue a current A.L.T.A. Form B owner's fee simple
title insurance policy or other policy of title insurance as shall be
reasonably satisfactory to Purchaser and to any lender of Purchaser (the
"Lender") in the amount of the Purchase Price (the "Title Policy") insuring
that the Purchaser shall receive at closing, good, marketable and indefeasible
fee simple title to the Real Property, free and clear of all liens, exceptions,
encumbrances or defects other than the matters expressly approved in writing by
Purchaser as permitted exceptions to title as set forth hereinafter (the
"Permitted Exceptions"). Seller shall furnish to Purchaser copies of all
liens, exceptions, encumbrances or defects set forth in the Existing Title
Policy at the same time as the Existing Title Policy are so furnished to
Purchaser.
Within thirty (30) days from and after the Date of this Agreement, the
Purchaser shall notify (the "Title Notice") the Seller as to which of the
liens, defects, encumbrances or exceptions set forth in the Title Commitments
are objectionable to Purchaser ("the Title Defects") and which of such matters
are acceptable to Purchaser as the Permitted Exceptions. Within ten (10) days
after receipt by Seller of the Title Notice, the Seller shall cure the
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<PAGE> 6
Title Defects to the reasonable satisfaction of the Purchaser. In the event
the Seller is unable to cure the Title Defects to the reasonable satisfaction
of the Purchaser (except for those Title Defects that can be cured with the
payment of money and will be satisfied of record by Seller at or prior to
Closing) within such ten (10) day period or the Purchaser does not agree to
waive such Title Defects, then this Agreement shall terminate and shall be
null, void and without further force or effect, and neither party shall have
any further liability to the other. Notwithstanding the foregoing, the Seller
shall be obligated to remove and be responsible for removing all Title Defects
capable of being removed or discharged by payment of money, including but not
limited to, money judgments and mechanic's liens, but excluding these deeds to
secure debt which Purchaser shall assume pursuant to Article II, Paragraph A.
B. On the date of this Agreement Seller shall furnish to
Purchaser a copy of Seller's existing as built survey of the Real Property and
the Improvements currently located thereon ("the Existing Survey"), prepared by
a surveyor duly licensed under the laws of the State of North Carolina,
reasonably acceptable to the Purchaser and the Lender in accordance with ALTA
or such other standards as shall be reasonably satisfactory to Purchaser. The
Existing Survey shall be in form and substance satisfactory to the Purchaser,
the Title Company and the Lender. Within thirty (30) days from and after the
Date of this Agreement, Purchaser shall, at Purchaser's election, cause the
Existing Survey to be updated, obtain a new survey or, if acceptable to the
Title Company and Lender, obtain a certification from Seller that there have
been no improvements, structures or other changes subsequent to the date of the
Existing Survey which would be revealed by a more current survey thereof,
whereby the elected method shall be certified to the Purchaser, Title Company
and Lender (the form of certification to be satisfactory to the Title Company,
Purchaser and Lender) ("the Current Survey"). The Current Survey shall show,
among other things, that all buildings are within lot and building lines, the
location of such lines, the dimensions and total area of the Real Property and
Improvements, the location and number of parking spaces, ingress and egress to
adjoining streets, all benefiting and burdening easements, improvements,
appurtenances, rights of way and utilities whether above or below ground, all
encroachments from or into the Premises, all structures and improvements on the
Real Property and all easements, rights-of-way and other restrictions of record
properly identified with recording information and certifying that the Premises
are not within a flood plain or other flood hazard area. The Current Survey
shall be made in accordance with the Minimum Standard Detail Requirements for
Land Title Surveys adopted by the American Land Title Association. The Current
Survey and certification shall be sufficient to remove the survey exception
from the Title Policy without indemnity by Purchaser or additional premium.
Within thirty (30) days from and after the Date of this Agreement, the
Purchaser shall notify the Seller of any objections
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of Seller or Lender to the Current Survey ("Survey Defects"). Survey Defects
shall be deemed to be Title Defects for purposes of this Agreement and Seller
shall cure such Survey Defects according to the same procedure as for Title
Defects.
C. On the date of this Agreement Seller shall deliver to
Purchaser copies of all existing environmental reports and studies of which
Seller has knowledge which have been previously prepared and compiled with
respect to the Premises.
D. The Purchaser and Seller shall each be responsible for the
payment of its own transaction costs, including counsel fees. Purchaser shall
be responsible for the costs incurred with any physical inspection of the Real
Property and Improvements, including any environmental and engineering studies.
At Closing, Purchaser shall pay all premiums for the Title Policy. The
Purchaser shall pay for the Title Commitment and the Current Survey. Any and
all transfer taxes, real estate excise taxes and sales taxes payable in
connection with the transfer of the Premises, or any portion thereof, and the
Personalty (as hereinafter defined) shall be paid by Seller. Unless otherwise
stated in this Agreement, the Purchaser and Seller shall pay all costs in
connection with the Closing of this transaction as are customary in Wilmington,
North Carolina.
V. CLOSING
A. The closing of this transaction shall occur within fifteen
(15) days following the latter to occur of: (i) the conclusion of a successful
secondary public offering of Winston Hotels, Inc.'s common stock, or (ii) the
receipt of a certificate of occupancy and all permits and approvals necessary
for the operation of the Hotel ("the Closing Date"). The closing shall occur
at the offices of Brown & Bunch, 4900 Falls of Neuse Road, Suite 210, Raleigh,
North Carolina 27609. The exact Closing Date shall be determined at the
election of Purchaser upon at least ten (10) days prior notice to Seller. The
closing of the transaction contemplated by this Agreement shall be deemed
effective as of 12:01 a.m. on the Closing Date ("Closing"). If the date of
Closing falls on a Saturday, Sunday or banking holiday, the Closing shall take
place on the next business day thereafter.
B. At the Closing, the Seller, shall deliver to Purchaser and
perform the following:
1. A General Warranty Deed for the Real Property conveying good,
marketable, insurable and indefeasible fee simple title to the Real Property
free and clear of all defects, exceptions, liens or encumbrances, except for
the Permitted Exceptions and the indebtedness to be assumed by Purchaser
pursuant to Article II, Paragraph A.
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2. Seller shall pay and discharge any special assessment which on
or before the date of Closing, (a) has been levied, imposed, or confirmed
against the Premises, (b) affects or is a lien upon the Premises or (c)
although not yet a lien upon the Premises, is attributable to improvements
which benefit or will benefit the Premises or the property in the vicinity of
the Premises for which improvement work has been commenced. If any of the
foregoing assessments may be paid in installments, all installments shall be
deemed payable as of the day prior to the Closing, and shall be discharged of
record by Seller. If, at the Closing, any amount which Seller is required to
pay with respect to the foregoing has not been determined, Seller agrees to pay
such amount as can be reasonably estimated at the Closing and the final amount
shall be adjusted within ten (10) days after Purchaser gives Seller notice that
same has been determined. This provision shall survive the Closing and
delivery of the Deeds.
3. A Bill of Sale conveying the Equipment, Inventory, Real
Property not conveyed by other instruments provided for herein, and other
personal property and intangible property included in the Premises
("Personalty"), free and clear of any lien or encumbrance, other than the
Permitted Exceptions, and containing a general warranty of title to the
Equipment, Inventory and Personalty and an inventory of all Equipment,
Inventory and Personalty.
4. An assignment of Seller's interest in and to all Permits,
Contracts to be assumed by Purchaser, Leases to be assumed by Purchaser,
Intangible Rights, Prepaid Items, and other items of the Premises, free and
clear of any lien or encumbrance, together with written evidence satisfactory
to Purchaser of any required third party consent to such assignment. Seller
shall deliver to Purchaser all original Contracts and Leases which Purchaser
has elected to purchase; the Permits, including the certificates of occupancy
for the Premises, evidence that the Premises are legally constructed and
properly zoned in accordance with all applicable laws; all warranties and
guarantees (and assignments thereof to Purchaser) issued in connection with the
initial construction of the Real Property and Improvements; any Personalty, and
any repairs or additions thereto; cash bank; moneys advanced for future
registrations; guest registration records; keys; permits, approvals and
licenses issued by all appropriate governmental authorities and fire
underwriting organizations with respect to the construction and use of the
Premises or any part thereof; and any existing copies of architectural plans
and specifications, blueprints and building plans which may be in Seller's
possession.
5. At Purchaser's option, an assignment of all fire and extended
coverage insurance policies, liability policies and loss of rental policies,
affecting any of the Premises to the extent assignable (if assigned, premiums
to be adjusted at Closing).
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6. Tax certificates or other evidence of payment from all
appropriate taxing authorities certifying the payment of all real and personal
property taxes through the current tax year.
7. A certificate of Seller dated as of the Closing that Seller is
not a foreign person or corporation within the meaning of Sections 1445 and
7701 of the Internal Revenue Code (the "IRC").
8. A bring down certificate dated as of the Closing certifying
the truth and accuracy of each representation and warranty set forth in Article
XII as of the Closing Date.
9. An affidavit of title reasonably satisfactory to the Title
Company enabling the Title Company to issue the Title Policy without exception
for mechanic's or materialman's or other statutory liens or for the rights of
parties in possession other than temporary hotel patrons.
C. At the Closing, the Purchaser shall deliver to the Seller the
following:
1. Proof of authority for Purchaser to complete the transaction
reasonably satisfactory to Seller.
2. Evidence of the assumption of the indebtedness set forth in
Article II, Paragraph A.
VI. DELIVERY OF POSSESSION
Seller shall deliver actual and exclusive possession of the Premises
to Purchaser on the Closing Date.
Seller hereby grants to Purchaser the right to enter the Premises at
any reasonable time after the date hereof for the purpose of inspecting,
testing and examining the Premises.
VII. DAMAGE TO PROPERTY
Seller shall give Purchaser immediate notice of any fire or other
casualty or of any pending or threatened condemnation occurring to all or any
portion of the Premises between the date hereof and the Closing. If prior to
the Closing, there shall occur:
(i) damage to the Hotel caused by fire or other
casualty, which would cost $100,000.00 or more to repair or replace; or
(ii) the taking or condemnation of all or any portion the
Hotel (including any parking areas) as would materially interfere with the use
thereof, as determined by Purchaser; then, if any of the events set forth in
(i) or (ii) above occurs, Purchaser, at its option, may terminate this
Agreement by written notice given to Seller within fifteen (15) days after
Purchaser has received the
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notice referred to above or at the Closing, whichever is earlier. If Purchaser
does not elect to terminate this Agreement, the Closing shall take place as
provided herein without an abatement of the Purchase Price and there shall be
assigned to the Purchaser at Closing, all interest of the Seller in and to any
insurance proceeds or condemnation awards which may be payable to Seller on
account of such occurrence.
If, prior to the Closing, there shall occur:
(x) damage to the Hotel caused by fire or other casualty which
would cost less than $100,000.00 to repair or replace; or
(y) the taking or condemnation of all or any portion of the Hotel
which is not material to the use thereof, as determined by
Purchaser;
then, if any of the events set forth in (x) or (y) above occurs, Purchaser
shall have no right to terminate this Agreement (solely as a result of the
occurrence of such events), and Seller shall, at its sole expense, with respect
to subparagraph (x), restore or replace the damaged Premises to its original
condition; and, with respect to subparagraph (y), there shall be assigned to
Purchaser at Closing all interest of Seller in and to any insurance proceeds or
condemnation awards which may be payable to Seller on account of any such
occurrence.
VIII. REMEDIES
A. If this transaction is not consummated by reason of:
(i) the inability of Purchaser to obtain any approval or
consent required pursuant to or otherwise satisfy any
condition or contingency set forth in Article III
hereof;
(ii) the occurrence of any of the events described in
Article VII;
(iii) Title Defects and Survey Defects which are not cured
as provided in this Agreement (except for those Title
Defects or Survey Defects which Seller is obligated
to cure); or
(iv) cancellation by Purchaser pursuant to any other
applicable provisions of this Agreement,
then this Agreement shall be null and void and all parties relieved from any
further liability hereunder, unless Purchaser elects to waive any of the items
or occurrences set forth in this Article
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VIII, Paragraph B. The items enumerated in this Article VIII, Paragraph B are
for Purchaser's benefit only and the non- occurrence of a state of facts
sufficient to satisfy any of such items may not be used or pleaded by Seller as
a defense to the enforceability of this Agreement.
C. If this transaction is not consummated because of a default on
the part of Seller or if Seller fails to close this transaction in breach of
its obligation to do so, then Purchaser may seek specific performance of this
Agreement.
IX. PRORATIONS
All income (including cash on hand and accounts receivable), current
operating expenses, accounts payable, real estate taxes, other taxes and
assessments, all utilities, water and sewer charges, licenses or permit fees
relating to the operation of the Premises, real estate and personal property ad
valorem taxes, prepayments made under the Contracts and insurance premiums (if
applicable), shall be adjusted and prorated as of the Closing. All franchise
fees, maintenance and service agreements (whether or not service is continued
by Purchaser) and utility charges shall be determined as of Closing and paid by
Seller or appropriate adjustments made if Purchaser at its option accepts an
assignment of any such agreement. If such charges and expenses are unavailable
on the Closing Date, a re-adjustment of such charges and expenses shall be made
within thirty (30) days after the Closing. The parties agree to cooperate in
good faith in effecting such a final reconciliation and each party shall
promptly pay (or reimburse the other party for) any expense item that is
chargeable to the former party and shall promptly remit any income item to the
other party if entitled thereto. Seller shall use reasonable efforts to
arrange for the rendition of final bills by the utility companies involved as
of the Closing Date.
Guest room revenues of the Premises, whether in cash or in accounts receivable,
arising from occupancy for the night beginning on the day preceding the Closing
Date and ending on the Closing Date shall be credited one-half to Purchaser and
one-half to Seller. Seller shall collect all income and other sums payable by
tenants or guests (or otherwise) and shall be responsible for the payment of
all expenses on account of services and supplies furnished to and for the
benefit of the Premises through and including the Closing. Purchaser shall be
credited with any deposits from tenants or guests of the Premises which are
refundable to such tenants or guests. Seller shall remit to Purchaser at
closing all prepaid income items. The accounts receivable of Seller shall
remain the property of Seller and Purchaser assumes no obligation to collect or
enforce the payment of any amounts that may be due to Seller. Nothing
contained in this Article shall be deemed to prohibit Purchaser and Seller
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from entering into an agreed settlement in writing of all prorations at or
following Closing.
In the event any adjustments pursuant to this Article are, subsequent
to Closing, found to be erroneous, then either party hereto is entitled to
additional monies and shall invoice the other party for such additional amounts
as may be owing, and such amount shall be paid promptly by the other party upon
receipt of the invoice. Such invoice shall be accompanied by reasonable
substantiating evidence.
Purchaser shall have no obligation with respect to Seller's on site
employees involved in the management and daily operation of the Hotel
whatsoever, all of whom shall be compensated and terminated by Seller as of
Closing, though Purchaser reserves the right to employ any such employees.
The provisions of this Article IX shall survive the Closing and
delivery of the Deeds.
X. NOTICES
Any notice to be given by either party to this Agreement shall be in
writing and shall be either delivered personally or by certified or registered
U.S. Mail, postage prepaid, or by overnight courier delivery service with
charges to the sender, as follows:
To Seller: Hotel II, Incorporated
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
To Purchaser: WINN Limited Partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
With copies to: William W. Bunch, III, Esquire
Brown & Bunch
4900 Falls of Neuse Road,
Suite 210 (street zip code 27609)
Post Office Box 19409
Raleigh, North Carolina 27619-9409
Notice shall be deemed given if properly addressed and delivered as set forth
herein two (2) days following deposit in the U.S. Mail, one (1) day following
deposit with any generally recognized overnight delivery service and on
personal hand delivery to a person authorized to receive such delivery, on the
day of such hand
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delivery. Any party may change addresses for notices by delivering written
notice of such change in accordance with this Article X.
XI. INDEMNITY
A. Purchaser and Seller warrant and represent each to the other
that they or it has not employed or utilized the services of a real estate
agent or broker in the transaction contemplated by this Agreement. Seller
shall indemnify and hold the Purchaser harmless from and against any claim for
any real estate commission, brokerage fee or finder's fee made by any person,
firm or corporation, claiming by, through or under the Seller. Purchaser shall
indemnify and hold the Seller harmless from and against any claim for any real
estate commission, brokerage fee or finder's fee made BY any person, firm or
corporation, claiming by, through or under the Purchaser. This warranty and
representation shall survive the Closing and the parties shall indemnify each
other from any liability, cost or loss arising out of a breach of said warranty
and representation, including consequential damages.
B. The Seller shall indemnify and hold the Purchaser harmless
from and against any and all liabilities, claims, demands, costs and expenses
of any kind or nature, including but not limited to, reasonable attorney's
fees, arising out of or incurred in connection with (i) any breach of the
representations and warranties of Seller set forth in this Agreement, (ii) the
ownership, use, maintenance or operation of the Premises on or prior to the
Closing or the transfer of the Premises to the Purchaser (including the payment
of all taxes),or (iii) compliance or failure to comply with the notice
provisions relating to bulk sales laws applicable to the transfer of all or any
part of the Premises. Purchaser shall indemnify and hold Seller harmless from
and against any and all liabilities, claims, demands, costs and expenses of any
kind or nature, including reasonable attorney's fees, arising after the date of
Closing and which arise out of the ownership or operation of the Premises by
the Purchaser following the Closing. Such indemnities shall survive Closing
and delivery of the Deeds.
C. If Purchaser or Seller propose to make any claim for
indemnification under any Article or Paragraph of this Agreement (the
"Indemnitee"), the Indemnitee shall deliver to the other party (the
"Indemnitor") a certificate signed by the Indemnitee which certificate shall
(i) state that a loss has occurred and (ii) specify in reasonable detail each
individual item of loss or other claim including the amount thereof and the
date such loss was incurred. The Indemnitor shall have the right in its
discretion and at its expense to participate in and control (a) the defense or
settlement of any claim, suit, action or proceeding (including appeals) in
respect of such item (or items) by any person other than a party hereto, (b)
any and all negotiations with respect thereto, and (c) the assertion of any
claim against any insurer with respect
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<PAGE> 14
thereto, and the Indemnitee shall not settle any such claim, suit, action or
proceeding or agree to extend any applicable statute of limitation without the
prior written approval of the Indemnitor. The rights of participation, control
and approval granted to the Indemnitor shall be subject as a condition
precedent to the Indemnitor's acknowledging to the Indemnitee, in writing, the
obligation of the Indemnitor to indemnify the Indemnitee in respect of such
third party's claim, suit, action or proceeding giving rise to such item. Upon
satisfaction of such condition precedent, the Indemnitee shall provide the
Indemnitor with all reasonably available information, assistance and authority
to enable the Indemnitor to effect such defense or settlement and upon the
Indemnitor's payment of any amounts due in respect of such claim, suit, action
or proceeding, the Indemnitee shall, to the extent of such payment, assign or
cause to be assigned to the Indemnitor the claims of the Indemnitee, if any,
against such third parties in respect of which such payment is made. If the
Indemnitor is not so willing to acknowledge such obligation, the parties shall
jointly consult and proceed as to any such third party claim, suit, action or
proceeding.
XII. SELLER'S REPRESENTATIONS AND WARRANTIES
The Seller represents and warrants to the Purchaser that:
A. Seller is a corporation, duly organized, and existing and in
good standing under the laws of the State of North Carolina.
B. Seller is authorized to enter into this Agreement and to
consummate the transaction contemplated hereby, and the individuals executing
this Agreement on behalf of Seller are also duly authorized to execute this
Agreement and to bind Seller to consummate such transaction. The execution and
delivery of this Agreement and the conveyance of the Premises by Seller,
pursuant to this Agreement, do not require the consent of any person, agency or
entity not a party to this Agreement. The execution of this Agreement by
Seller and the transaction contemplated herein have been duly authorized by
proper corporate action, including the board of directors of Seller.
C. There are no pending or, to the knowledge of Seller,
threatened, condemnation or similar proceedings affecting the Premises, or any
portion thereof. Seller has not received any written notice that any such
proceeding is contemplated, and no part of the Premises has been destroyed or
damaged by any casualty.
D. As of the Date of this Agreement, Seller has not completed the
construction of the Improvements and opened the Hotel for business. It shall
be the responsibility of Seller to complete such construction in accordance
with the plans and specifications therefor previously submitted to and approved
by Purchaser and to
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<PAGE> 15
obtain all permits, certificates and approvals necessary for the operation of
the Hotel prior to Closing. To the best of Seller's knowledge, the
maintenance, operation, use or occupancy of the Premises as a hotel does not
and will not violate any building, health, zoning, environmental, fire or
similar law, ordinance, regulation or restrictive covenant. To the best of
Seller's knowledge, the Premises do not violate and will not any federal,
state, county, or municipal laws, ordinances, orders, regulations or
requirements nor has Seller received any notice of such a violation.
E. There are no options to purchase, rights of first refusal or
other similar agreements with respect to the Premises which give anyone the
right to purchase the Premises or any part thereof. There are no contracts or
agreements which affect or cover the Premises, except for the Contracts,
Permits, Leases and the Siemens Lease and Guaranty. There are no unpaid bills
or claims in connection with the construction repair or replacement of the
Premises. There are no agreements allowing for any reduction, concession or
abatement of room rates.
F. Certificates of Occupancy for all buildings and other
improvements will be duly issued, and the buildings and improvements legally
occupied as a hotel prior to Closing. The Real Property is zoned properly for
the use thereof as a hotel.
G. Except as set forth in the Title Commitment, the Seller owns
and has good and marketable title to all of its assets and properties free and
clear of any security interest, mortgage, pledge, lien, conditional sale or
other encumbrance or charge, except the deeds to secure debt to be assumed by
Purchaser as set forth in Article II, Paragraph A. All of the Premises owned
or leased by Seller is, and at the time of Closing will be, in good condition
and in good working order. The Premises to be purchased is all of the property
of every kind and nature necessary for the operation of the Seller's business
in the ordinary course.
H. To the best of Seller's knowledge, the Premises are in
compliance with and have not violated any statute, law, ordinance, rule,
regulation, order and directive (including, without limitation, all labor and
environmental control and antipollution laws, ordinances, rules, regulations or
directives) of any and all Governmental Agencies pertaining to the use or
occupancy of the Premises.
The Seller has not received any notice of and the Seller and the Premises have
not been charged with, are not under investigation or threatened investigation
for failure to comply with and are in compliance with, any and all statutes,
laws, ordinances, rules, regulations, orders and directives of any and all
Governmental Agency or Agencies pertaining to the use, generation, dumping,
releasing, burying or disposing of or emitting of any particles,
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<PAGE> 16
materials, substances, or emissions that are now or have heretofore been
determined by any and all Governmental Agency or Agencies to be of a hazardous,
toxic, pollutive, or ecologically or environmentally damaging nature, including
but not limited to asbestos ("Hazardous Materials"). Seller has not previously
disposed of any Hazardous Materials at the Premises.
For purposes of this Agreement, the term "Hazardous Materials" shall include,
but not be limited to, those materials or substances now or heretofore defined
as "hazardous substances," "hazardous materials," "hazardous waste," "toxic
substances," or other similar designations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C., Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C., Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C., Section 1801, et seq. and other laws, whether or not of a similar
nature, applicable to the Premises and adopted by, enacted in or applicable to
the State in which the Premises are located.
For purposes of this Agreement, the term "Governmental Agency or Agencies"
means, whether of the United States of America, of any state or territory
thereof or of any foreign jurisdiction, any government, political subdivision,
court, agency, or other entity, body, organization or group exercising any
executive, legislative, judicial, regulatory or administrative function of
government.
To the best of Seller's knowledge, the Real Property has never appeared on any
federal or state registry of active or inactive hazardous waste disposal sites.
Seller has never received any notice of claim from a Governmental Agency
concerning the alleged release or threatened release of Hazardous Materials at
the Real Property. To the best of Seller's knowledge, no hazardous waste sites
exist within a one mile radius of the Real Property.
I. Seller has no knowledge of and has received no notice of any
causes of action, actions, or proceedings of whatever type or description which
have been instituted or threatened or are pending relating to the Premises or
any interest therein.
J. To the best of Seller's knowledge and belief, no
representation or warranty made by the Seller, nor in any statement or document
furnished or to be furnished to the Purchaser hereunder, or in connection with
the transaction contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
Purchaser, in Purchaser's sole and absolute discretion, may waive any
condition to close or breach of any representation or warranty provided for
herein or any Title or Survey Defect, and in such event, this transaction shall
be consummated as if such condition, representation, warranty or defect was
satisfied. All of
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<PAGE> 17
the representations and warranties contained in this Agreement shall survive
the Closing. The representations and warranties set forth above shall be true,
correct and accurate on the date hereof and as of the date of Closing.
XIII. ESCROW.
Upon receipt thereof, the Escrow Agent shall acknowledge receipt of
the Pooled Units and agrees to hold the Pooled Units in accordance with Article
III, Paragraph B of this Agreement and shall deliver the Pooled Units in
accordance with written instructions from Purchaser's accountants. The Escrow
Agent shall be entitled to rely on such written instructions without inquiry or
investigation.
The Escrow Agent shall be liable as a depository only and its duties
hereunder are limited to the safekeeping of the Pooled Units and the delivery
of same in accordance with the terms of this Agreement. The Escrow Agent shall
not be liable for any act or omission done in good faith, or for any claim,
demand, loss or damage made or suffered by any party to this Agreement, except
such as may arise through or be caused by the Escrow Agent's willful misconduct
or negligence.
XIV. COVENANTS
A. Following the date of this Agreement and to and including the
Closing, the Seller (i) shall continue normal and prudent maintenance and
management of the Premises, (ii) shall maintain supplies and payroll at an
appropriate level, and (iii) shall operate the Hotel in the ordinary course of
business.
B. All taxes levied against the Premises which were or shall be
due and payable prior to the Closing have been or shall be paid in full by the
Seller on or prior to the Closing.
C. All Contracts and Leases shall be current and not in default
as of the Closing. Seller shall not enter into new Contracts or Leases except
in the ordinary course of business, and provided that any such new Contract or
Lease shall either provide that it may be cancelled on not more than 30 days
notice by Seller at no penalty or cost or, Purchaser shall consent to such
Contract or Lease in writing.
D. Seller shall maintain fire and casualty insurance on the
Premises up to and including the Closing in amounts reasonably satisfactory to
Purchaser.
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<PAGE> 18
XV. SECURITIES MATTERS. Purchaser and Seller acknowledge, agree,
represent and warrant each to the other, that the Units to be issued pursuant
to this Agreement will be received and accepted as follows:
A. Each of such persons to whom the Units will be transferred (a) if
an individual, either (i) has an individual net worth, or a joint net
worth with his/her spouse, at the time of purchase in excess of
$1,000,000.00; or (ii) has an individual gross income in excess of
$200,000.00 for the two most recent years or joint income with that
person's spouse in excess of $300,000.00 in cash of those same years,
and reasonably expects to reach the same income level in the current
year, or (b) if a corporation, partnership or trust, is otherwise an
"accredited investor" as that term is defined in Regulation D
promulgated by the Securities and Exchange Commission; and Seller
shall have written corroboration of such matters as to each party who
will receive Units as a result of the transaction provided for herein,
as of the time they receive Units;
B. The Units are being acquired subject to the terms and conditions
described in the Partnership Agreement of Purchaser, a copy of which
has been obtained by or otherwise provided to such persons;
C. Except in connection with a redemption of the Units, the Units are
being and shall be received and held by such persons for their own
account for investment purposes only, and not with a view to any
offering or distribution thereof, and such persons have no present
intention of selling or otherwise disposing of the Units;
D. The Units have been obtained by such persons without the service
of any broker, dealer, investment banker or finder, and there is no
obligation to pay a commission, fee, bonus or remuneration of any type
to any broker, dealer, investment banker, or finder;
E. Such persons have been given access to all registration
statements, proxy materials, financial statements and filings with the
Securities and Exchange Commission relating to the shares of Winston
Hotels, Inc. and the business of the Purchaser, and such materials are
understood by Seller and such persons without the benefit of an
investment adviser, lawyer, accountant or other professional;
F. Such persons have been afforded the opportunity to ask questions
of and receive answers from Winston Hotels,
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<PAGE> 19
Inc., the Purchaser and their representatives concerning matters
relating to the capitalization, management, financial condition,
operations and prospects, financial and otherwise, of the Purchaser
and Winston Hotels, Inc., and no verbal information has been furnished
to such persons in connection with this transaction which is in any
way inconsistent with or at variance from the written information so
provided;
G. The Units are not registered under the Securities Act of 1933, as
amended, and the owners thereof may be required to bear the economic
risk of ownership of the Units for an indefinite period of time; and,
consequently, the Units cannot be sold unless the offer and sale
thereof is subsequently registered under the Securities Act of 1933
and the "blue sky" law of each state in which any of the Units are
offered for sale, unless an exemption from registration is available;
H. Purchaser will distribute or transfer the Units only to persons
who make the same representations and warranties as are set forth in
this Article XV; and,
I. Seller understands that the Units have not been and will not be
registered under state or federal securities laws. Upon the
conclusion of the escrow of the Units set forth hereinbefore, Seller
shall be entitled to redeem the Units for an equal number of shares of
common stock, par value $.01 per share, in Purchaser's general
partner, Winston Hotels, Inc., a North Carolina corporation
("Shares"). Seller further understands that neither the Units nor
Shares may be sold or transferred except according to the terms of
this Agreement, the partnership agreement of Purchaser and pursuant to
an effective registration statement under the Securities Act of 1933,
as amended, or pursuant to an exemption from registration.
Notwithstanding the foregoing, Seller hereby requests and Purchaser
hereby agrees, that it shall cause the registration of Shares issuable
hereunder upon redemption of Units on at least sixty (60) days notice
after the conclusion of the escrow thereof provided in Article II,
Paragraph B of this Agreement. Purchaser shall use its best efforts to
file and obtain the necessary regulatory approvals for a registration
statement under which Seller can sell the Shares. Seller shall
cooperate with Purchaser, at no expense to Seller, with respect to
obtaining the necessary regulatory approvals for a registration, all
of which shall be at the expense of Purchaser.
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<PAGE> 20
J. The terms and provisions of this Article XV shall survive the
Closing and the delivery of the deed for the Premises.
XVI. BINDING EFFECT; MISCELLANEOUS
A. This Agreement shall be binding upon and shall inure to the
parties hereto, their respective heirs, successors, legal representatives and
assigns. This Agreement sets forth the entire Agreement between the parties
hereto and no other prior written or oral statement or agreement or
understanding shall be recognized or enforced. All modifications or amendments
shall be in writing and signed by the parties. This Agreement is to be
construed according to the laws of the State of North Carolina. This Agreement
may be executed in two or more counterparts all of which shall constitute one
and the same instrument. The singular shall include the plural and vice versa.
B. The Purchaser may assign this Agreement to a corporation,
partnership or other entity.
C. As used herein, "the Date of this Agreement" shall mean the
date noted below as the date upon which this Agreement was executed by the
latter of Purchaser or Seller.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation,
General Partner
(Corporate Seal) By:___________________________
_______ President
Attest:
_________________
______Secretary
Date signed by Purchaser:
- - ------------------------
Seller:
Hotel II, Incorporated,
a North Carolina corporation
(Corporate Seal) By:___________________________________
____________President
Attest:
_______________________
______Secretary
Date signed by Seller:
_______________________
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<PAGE> 22
The undersigned agrees to serve as Escrow Agent pursuant to this
Agreement and upon receipt thereof, to hold the Units in accordance with the
terms and provisions of this Agreement.
Escrow Agent:
The Title Company of North Carolina,
Inc., as agent for First American Title
Insurance Company
By:____________________________________
Title:_________________________________
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<PAGE> 23
STATE OF __________________
COUNTY OF _________________
I, a Notary Public of the County and State aforesaid, certify that
__________________________, personally came before me this day and acknowledged
that _he is ___________________ Secretary of Winston Hotels, Inc., a North
Carolina corporation, General Partner of WINN Limited Partnership, a North
Carolina limited partnership, and that by authority duly given and as the act
of the corporation, as such General Partner, the foregoing instrument was
signed in its name by its ______ President, sealed with its corporate seal and
attested by ___________________ as its ________ Secretary.
Witness my hand and seal, this the _____ day of _____________, 199__.
My commission expires:_____ _____________________________
Notary Public
(SEAL)
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
_________________________________ personally came before me this day and
acknowledged that _he is __________ Secretary of Hotel II, Incorporated, a
North Carolina corporation, and that by authority duly given and as the act of
the corporation, the foregoing instrument was signed in its name by its
President, sealed with its corporate seal and attested by ___ as its _____
Secretary.
Witness my hand and seal, this the ____ day of _____________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
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<PAGE> 1
EXHIBIT 10.12
COMMONWEALTH OF VIRGINIA
COUNTY OF ______________
SALES CONTRACT
THIS SALES CONTRACT ("Contract") is made as of the Date of this
Contract (as defined in the last paragraph below) among the following parties:
Purchaser: WINN Limited Partnership,
a North Carolina limited partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
Seller: ___________________________________
___________________________________
___________________________________
Escrow Agent: The Title Company of North Carolina, Inc.
Post Office Box 2718
Raleigh, North Carolina 27602
Attention: F. Alton Russell, Esquire
W I T N E S S E T H T H A T:
WHEREAS, Seller is the owner of the Property (as hereinafter defined);
and
WHEREAS, Seller desires to sell the Property and Purchaser desires to
purchase the Property from Seller;
NOW, THEREFORE, in consideration of the agreements contained herein,
the Earnest Money, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
<PAGE> 2
1. Property. Seller agrees to sell, and Purchaser agrees to
purchase from Seller, the land described on Exhibit A, together with all
rights, specifically including, but not limited to, timber rights, members, and
appurtenances thereto and together with all improvements and fixtures located
thereon (the "Property"). The Property contains approximately 2.18 acres,
with the exact acreage thereof to be determined in accordance with the survey
to be provided by Purchaser in accordance with paragraph 20 hereof.
Additionally, Seller agrees to provide Purchaser with copies of all studies,
reports and plans, if any, which Seller has compiled relative to the
development of the Property and assign all rights in any of the foregoing to
Purchaser as set forth in paragraph 20.
2. Earnest Money. Purchaser shall deliver to Escrow Agent the
sum of Twenty Five Thousand and N0/100 Dollars ($25,000.00) as the earnest
money, to be delivered to Escrow Agent on the Date of this Contract. Such sum,
together with all interest earned thereon is hereinafter referred to as the
"Earnest Money". The Escrow Agent is hereby authorized and directed to invest
such sum in interest bearing obligations of a bank in the state in which the
Property is located. The Earnest Money shall be retained or refunded, as the
case may be, in accordance with the terms of this Contract and shall be applied
as a credit against the Purchase Price at Closing.
3. Purchase Price. The purchase price (the "Purchase Price") of
the Property shall be Four Hundred Ninety Five
2
<PAGE> 3
Thousand and N0/100 Dollars ($495,000.00) payable in cash at Closing. The
Purchase Price is based on the Property being properly zoned so as to permit
and allow Purchaser's intended use of the Property set forth in paragraph 20.
4. Costs and Prorations.
4.1 Purchaser shall pay the Commonwealth of Virginia property
transfer tax applicable to this transaction. Purchaser shall pay the cost of
recording the general warranty deed. Each party shall pay its own attorney's
fees. Seller shall pay the costs of the title insurance commitment and survey
which Seller shall provide pursuant to paragraph 20. Purchaser shall pay the
premium for the title insurance policy which may be issued to Purchaser
pursuant to the title insurance commitment provided by Seller.
4.2 Ad valorem taxes assessed against the Property for
the year in which Closing occurs shall be prorated as of the date of Closing.
If the proration is not based on the actual tax bill for the year in which
Closing occurs, the parties agree to adjust the proration when the actual tax
bill is available.
5. Title. Seller shall convey good, marketable, fee simple and
insurable title to the Property to Purchaser by general warranty deed. The
title may be subject to current and future ad valorem property taxes, general
utility easements serving the Property only and zoning, municipal land use
rules, regulations, ordinances and statutes which do not prohibit or impair in
any way Purchaser's intended use of the Property as set
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<PAGE> 4
forth in paragraph 21. The Property shall not be subject to any (i) deed of
trust, mortgage, security agreement, judgment, prepaid assessments for
improvements, lien or claim of lien, or any other title exception or defect
that is monetary in nature, Seller hereby agrees to pay and satisfy of record
any such title defects or exceptions prior to or at Closing at Seller's
expense, or (ii) any leases, rental agreements or other rights of occupancy of
any kind, whether written or oral. As to any other title exceptions or defects
not covered by the preceding two sentences, including, but not limited to
easements or restrictions, Purchaser shall have until the expiration of the
Feasibility Period to review the title insurance commitment to be provided by
Seller and the title exceptions listed therein and to notify Seller in writing
of any objections which Purchaser may have. If Purchaser fails to give any
notice to Seller by such date, Purchaser shall be deemed to have waived this
right to object to any other title exceptions or defects. If Purchaser does
give Seller notice of objection to any other title exceptions or defects,
Seller shall then have the right, but not the obligation, for a period of ten
(10) days after receipt of such notice within which to cure or satisfy such
objection ("cure period"). If the objection is not so satisfied by Seller,
then Purchaser shall have the right to terminate this Contract, in which case
the Earnest Money shall be returned to Purchaser and neither party shall have
any further rights, obligations or duties under this Contract. If Seller does
so cure or satisfy
4
<PAGE> 5
the obligation, then this Contract shall continue in effect. Purchaser shall
have the right at any time to waive any objections that it may have made and
thereby to preserve this Contract in effect. Seller agrees not to further
encumber in any way Seller's title to the Property after the Date of this
Contract.
6. Closing. Purchaser has entered into a contract to purchase
that certain Holiday Inn Express containing 80 rooms located in Abdington,
Virginia ("the Hotel"), which is located upon certain real property which
adjoins the Property. Subject to paragraphs 21 and 26, the closing or
settlement ("Closing") of the transaction contemplated hereby shall be held in
the area in which the Property is located during regular business hours and
shall occur concurrent with the closing of the Hotel.
7. Real Estate Commission. Purchaser and Seller do hereby
represent each to the other that they know of no realtor, agent or other party
involved in this transaction who is entitled to, or has a claim for, a real
estate commission or fee and neither Seller or Purchaser has employed any such
party. Seller and Purchaser covenant and agree to indemnify and forever hold
each other harmless against any loss, liability, costs, claims, demands,
damages, actions, causes of action, and suits arising out of or in any manner
related to the alleged employment or use by Seller or Purchaser, as the case
may be, of any real estate broker or agent.
5
<PAGE> 6
8. Inspection. Purchaser and Purchaser's agents, employees and
independent contractors shall have the right and privilege to enter upon the
Property prior to Closing to inspect the Property and to conduct soil borings
and other geological, environmental, engineering, or landscaping tests or
studies, all at Purchaser's sole cost and expense. The right shall be
exercised after notice to Seller, and Seller or Seller's designated
representative or agent shall have the right to be present. Purchaser agrees
to refill and repair any holes created while conducting soil borings and to
minimize disturbance or damage which may be caused. Purchaser hereby covenants
and agrees to indemnify and hold Seller harmless from any and all loss,
liability, costs, claims, demands, damages, actions, causes of actions, and
suits arising out of or in any manner related to the exercise by Purchaser of
Purchaser's rights under this paragraph.
9. Eminent Domain. If, after the Date of this Contract and prior
to Closing, Seller receives notice of the commencement or threatened
commencement of eminent domain or other like proceedings against the Property
or any portion thereof, Seller shall immediately notify Purchaser in writing,
and Purchaser shall elect within ten (10) days from and after such notice, by
written notice to Seller, either: (i) to terminate this Contract, in which
event the Earnest Money shall be returned to Purchaser and this Contract shall
be null and void and of no further force and effect; or (ii) to close the
transaction contemplated hereby
6
<PAGE> 7
in accordance with its terms but subject to such proceedings, in which event
the Purchase Price shall not be reduced, and Seller shall assign to Purchaser,
Seller's rights in any condemnation award or proceeds relative to the Property.
If Purchaser does not make such election within the aforesaid time period,
Purchaser shall be deemed to have elected to close the transaction contemplated
hereby in accordance with clause (ii) above.
10. Notice. Each notice required or permitted to be given
hereunder must comply with the requirements of this paragraph. Each such
notice shall be sent by personal hand delivery, by depositing it with a
nationally recognized overnight courier service or by depositing it with the
United States Postal Service or any official successor thereto, certified or
registered mail, return receipt requested, with adequate postage prepaid,
addressed to the appropriate party (and marked to a particular individual's
attention) as hereinbefore provided. Each such notice shall be effective upon
being so hand delivered or deposited, but the time period in which a response
to any such notice must be given or any action taken with respect thereto shall
commence to run from the date of delivery if by personal hand delivery or
overnight courier service or the date of receipt of the notice by the addressee
thereof if mailed as set forth above, as evidenced by the return receipt.
Rejection or other refusal by the addressee to accept delivery or the inability
to deliver because of a changed address of which no notice was given
7
<PAGE> 8
shall be deemed to be the receipt of the notice sent. In the event that
registered or certified mail service is not being provided by the United States
Postal Service or any official successor thereto at the time in question, each
notice may then be served by personal service or sent by regular mail to the
address as hereinbefore provided. The addresses of the parties shall be those
set forth on the first page of this Contract. With respect to any notices to
be given to Purchaser hereunder, a copy shall also be delivered as follows:
William W. Bunch, III
Brown & Bunch
4900 Falls of Neuse Road, Suite 210
Raleigh, North Carolina 27609
With respect to any notices to be given to Seller hereunder, a copy
shall also be delivered as follows:
___________________________
___________________________
___________________________
Any party shall have the right from time to time to change the address
to which notices to it shall be sent and to specify up to two additional
addresses to which copies of notices to it
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<PAGE> 9
shall be sent by giving to the other party at least fifteen (15) days prior
notice of the changed address or additional addresses.
11. Documents. At or prior to Closing, each party shall deliver
to the other party appropriate evidence to establish the authority of such
party to enter into and close the transaction contemplated hereby. Seller
shall also deliver to Purchaser at Closing Seller's general warranty deed
containing a legal description of the Property drafted in accordance with the
survey of the Property to be provided by Seller in accordance with paragraph 21
hereof and an affidavit of title with respect to the Property in form
reasonably satisfactory to Purchaser's title insurer to issue title insurance
without exception for mechanic's or materialmen's or other statutory liens or
for the rights of parties in possession. Seller shall also deliver an
affidavit in order to meet the requirements of Internal Revenue Code Section
1445 (non-foreign affidavit) and shall provide such information as is necessary
and required for the closing attorney to comply with the reporting requirements
of Internal Revenue Code Section 1099. The parties shall also deliver at
Closing any other documents reasonably necessary to complete and evidence the
transaction contemplated hereby.
12. Remedies. In the event that this transaction fails to close
by reason of Purchaser's failure to perform its obligations under this
Contract, the Earnest Money shall be retained by Seller as full liquidated
damages in complete and total accord and satisfaction, the parties hereby
acknowledging and agreeing
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<PAGE> 10
to the difficulty of ascertaining Seller's actual damages in such
circumstances. In the event that Seller fails or refuses to convey the
Property in accordance with the terms of this Contract or otherwise perform its
obligations hereunder after all conditions precedent to Seller's obligations to
close have been met, then Purchaser shall have the right to a return of the
Earnest Money or to seek all rights and remedies available at law or in equity,
including the right to seek specific performance of Seller's obligations under
this Contract, including the conveyance of the Property in accordance with the
terms of this Contract, together with the costs and expenses incurred by
Purchaser in specifically enforcing this Contract, including reasonable
attorney's fees actually incurred by Purchaser.
13. Entire Agreement. This Contract constitutes the entire
agreement of the parties and may not be amended except by written instrument
executed by Purchaser and Seller. Escrow Agent need not be a party to
amendments to this Contract, but such amendments shall not affect or impair his
rights or duties hereunder.
14. Headings. The paragraph headings are inserted for convenience
only and are in no way intended to interpret, define, or limit the scope of
content of this Contract or any provision hereof.
15. Possession. Seller shall deliver actual possession of the
Property at Closing.
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<PAGE> 11
16. Surviving Clauses. The provisions of this Contract relating
to tax prorations after Closing, Purchaser's indemnification with respect to
its entering upon the Property prior to Closing, Seller's and Purchaser's
indemnification concerning real estate commissions or brokerage fees, shall
survive any Closing pursuant to this transaction or any termination of this
Contract by either party as a matter of right hereunder or in breach of this
Contract, notwithstanding any other provisions in this Contract to the
contrary. Except as set forth in the preceding sentence or as otherwise
expressly set forth herein, all other provisions of this Contract shall not
survive the Closing of this transaction or any termination hereof by either
party as a matter of right.
17. Applicable Law. This Contract shall be construed, interpreted
and enforced in accordance with the laws and decisions of the Commonwealth of
Virginia.
18. Successors and Assigns. This Contract shall be binding upon
and inure to the benefit of Seller, Purchaser and Escrow Agent, and their
respective successors and assigns, if any. The Purchaser's rights under this
Contract are assignable provided such assignee shall expressly assume and agree
to all of the terms and obligations of Purchaser set forth in this Contract or
any written amendment hereto.
19. Exhibits. The exhibits referred to in and attached to this
Contract are incorporated herein by this reference.
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<PAGE> 12
20. Feasibility Study. The Purchaser's obligations under this
Contract are subject to and conditional upon Purchaser's satisfaction with
respect to the following:
20.1 The overall economic feasibility of Purchaser's intended
use of the Property (which is the development, construction
and operation of a free standing hotel/motel upon the Property
containing at least 80 rooms).
In order to assist Purchaser in determining the foregoing, Seller
shall provide certain items to Purchaser for inspection as follows:
(a) within ten (10) days after the Date of this Agreement, copies of
any existing engineer's reports, environmental reports, surveys or other
reviews, evaluations or studies of or with respect to the Property;
(b) within ten (10) days after the Date of this Agreement, copies of
any leases, contracts and permits pertaining in any way to the Property and the
ownership and operation thereof;
(c) within twenty (20) days after the Date of this Agreement, a title
insurance commitment relative to the Property issued by First American Title
Insurance Company and copies of all exceptions from coverage shown thereon;
and,
(d) within twenty (20) days after the Date of this Agreement, a survey
prepared by a duly licensed surveyor dated subsequent to the date hereof and
sufficient to obtain title
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<PAGE> 13
insurance coverage for matters of survey in accordance with the matters
disclosed thereon.
Purchaser shall have sixty (60) days from and after the Date of this
Contract (the "Feasibility Period") by which to make such investigations and
studies with respect to the foregoing as Purchaser deems appropriate and to
give notice to Seller if any of the foregoing are not satisfactory to the
Purchaser, in Purchaser's sole discretion. If Purchaser fails to give any
notice prior to the end of the Feasibility Period, then such conditions shall
be deemed to have been waived by Purchaser and this Contract shall remain in
full force and effect. If Purchaser does give notice of such objections, then
this Contract shall be thereby terminated, with Seller having the right to
retain $100.00 of the Earnest Money (such amount in effect constituting option
money for said time period), with the remainder of the Earnest Money being
returned to Purchaser and the parties having no further rights, obligations or
duties under this Contract. The conditions enumerated above are for
Purchaser's benefit only, and the non-occurrence of a state of facts sufficient
to satisfy any of the conditions above may not be used or pleaded by Seller as
a defense to the enforceability of this Contract.
21. Escrow Agent. In performing any of its duties hereunder, the
Escrow Agent shall not incur any liability to anyone for any damages, losses or
expenses, except for willful default or breach of trust, and he shall
accordingly not incur
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<PAGE> 14
any such liability with respect (i) to any action taken or omitted in good
faith upon advice of his counsel or (ii) to any action taken or omitted in
reliance upon any instrument, including any written notice or instruction
provided for in this Contract, not only as to its due execution and the
validity and effectiveness of its provisions but also as to the truth and
accuracy of any information contained therein, which the Escrow Agent shall in
good faith believe to be genuine, to have been signed or presented by a proper
person or persons and to conform with the provisions of this Contract. The
Escrow Agent is hereby specifically authorized to refuse to act except upon the
written consent of both parties, or lawful order issued by a court or competent
jurisdiction. The parties hereby agree to indemnify and hold harmless the
Escrow Agent against any and all losses, claims, damages, liabilities and
expenses, including reasonable costs of investigation and counsel fees and
disbursements, which may be imposed upon the Escrow Agent or incurred by the
Escrow Agent in connection with its acceptance or the performance of its duties
hereunder, including any litigation arising from this Contract or involving the
subject matter hereof. In the event of a dispute between any of the parties
hereto sufficient in the discretion of the Escrow Agent to justify his doing
so, the Escrow Agent shall be entitled to tender into the registry or custody
of any court of competent jurisdiction all money or property in his hands under
this Contract, together with such legal pleadings as he deems appropriate, and
thereupon be
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<PAGE> 15
discharged from all further duties and liabilities under this Contract. Any
such legal action may be brought in such court as the Escrow Agent shall
determine to have jurisdiction thereof. The parties shall bear all costs and
expenses of any such legal proceedings.
22. Conditions Precedent to Purchaser's Obligation to Close. In
order for Purchaser to implement its intended use and development of the
Property, it is necessary that certain assurances and agreements be received by
Purchaser and the conditions specifically set forth herein be satisfied in
accordance with the terms and provisions set forth herein prior to Closing.
Therefore, Purchaser's obligations under this Contract are expressly
conditioned upon Purchaser's satisfaction with respect to the matters set forth
hereinafter:
(1) The acquisition and closing of the Hotel by Purchaser; and
(2) Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close
this transaction shall be conditioned upon Purchaser obtaining the
approval of this Contract and the transaction contemplated herein from
the board of directors of the general partner of Purchaser, Winston
Hotels, Inc.
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<PAGE> 16
The failure to satisfy either of the foregoing conditions, shall give
Purchaser the right to terminate this Contract, with Seller having the right to
retain $100.00 of the Earnest Money (such amount in effect constituting option
money for said time period), with the remainder of the Earnest Money being
returned to Purchaser and the parties having no further rights, obligations or
duties under this Contract. The conditions enumerated above are for
Purchaser's benefit only and the non-occurrence of a state of facts sufficient
to satisfy any of the conditions above may not be used or pleaded by Seller as
a defense to the enforceability of this Contract. In the event Purchaser shall
waive an unsatisfied condition and preserve this Contract in effect, Closing
shall occur in accordance with paragraph 6.
23. Offer, Acceptance and Contract. This document shall
constitute an offer by Purchaser. If this offer is accepted by Seller, it
shall become a binding Contract between them when signed by Purchaser which
signing by Purchaser shall occur on the date of receipt of two (2) signed
originals from Seller. The validity of this Contract between Purchaser and
Seller shall not be affected by whether or not the Escrow Agent has signed this
Contract or any amendments hereto. As used herein, the phrase "Date of this
Contract" shall mean the date on which the Contract is executed by both
Purchaser and Seller.
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<PAGE> 17
IN WITNESS WHEREOF, Seller, Purchaser and Escrow Agent set their hands
and seals hereto as of the date and year indicated next to their signatures.
PURCHASER:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation
and sole general partner
(Corporate Seal) By:__________________________________
President
Attest:
________________________________
_______________________Secretary
Date Signed by Purchaser:
_______________________________, 1996
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<PAGE> 18
STATE OF NORTH CAROLINA
COUNTY OF WAKE
I, a Notary Public of the County and State aforesaid, certify that
__________________________________________________, personally came before me
this day and acknowledged that __he is ______________ Secretary of Winston
Hotels, Inc., a North Carolina corporation, as sole general partner of WINN
Limited Partnership, a North Carolina limited partnership, and that by
authority duly given and as the act of the corporation as such general partner,
the foregoing instrument was signed in its name by its ____________ President,
sealed with its corporate seal and attested by ___________________ as its
___________Secretary. Witness my hand and official stamp or seal, this the
____ day of _____________, 1996.
My Commission Expires: _________ ______________________________
Notary Public
(SEAL)
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<PAGE> 19
SELLER:
____________________________(SEAL)
Date signed by Seller:
__________________________, 1996
STATE OF ___________________
COUNTY OF __________________
I, a Notary Public of the County and State aforesaid, certify that
Joseph Holiday personally appeared before me this day and acknowledged the
execution of the foregoing instrument. Witness my hand and official stamp or
seal this ____ day of ___________ , 1996.
My Commission Expires: ________ _______________________________
Notary Public
(SEAL)
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<PAGE> 20
Agreed to for purposes of serving as Escrow Agent hereunder and I
hereby acknowledge receipt of the Earnest Money for the purposes set forth
herein.
The Title Company of North Carolina,
Inc.
By:___________________________________
F. Alton Russell, President
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<PAGE> 1
EXHIBIT 10.13
COMMONWEALTH OF KENTUCKY
COUNTY OF ______________
SALES CONTRACT
THIS SALES CONTRACT ("Contract") is made as of the Date of this
Contract (as defined in the last paragraph below) among the following parties:
Purchaser: WINN Limited Partnership,
a North Carolina limited partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
Seller: Russell Parman and wife, Ruby Parman
410 Whitley Road
London, Kentucky 40741
Escrow Agent: The Title Company of North Carolina, Inc.
Post Office Box 2718
Raleigh, North Carolina 27602
Attention: F. Alton Russell, Esquire
W I T N E S S E T H T H A T:
WHEREAS, Seller is the owner of the Property (as hereinafter defined); and
WHEREAS, Seller desires to sell the Property and Purchaser desires to
purchase the Property from Seller;
NOW, THEREFORE, in consideration of the agreements contained herein,
the Earnest Money, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
<PAGE> 2
1. Property. Seller agrees to sell, and Purchaser agrees to
purchase from Seller, the land described on Exhibit A, together with all
rights, specifically including, but not limited to, timber rights, members, and
appurtenances thereto and together with all improvements and fixtures located
thereon (the "Property"). The Property contains approximately one (1) acre,
with the exact acreage thereof to be determined in accordance with the survey
to be provided by Purchaser in accordance with paragraph 20 hereof.
Additionally, Seller agrees to provide Purchaser with copies of all studies,
reports and plans, if any, which Seller has compiled relative to the
development of the Property and assign all rights in any of the foregoing to
Purchaser as set forth in paragraph 20.
2. Earnest Money. Purchaser shall deliver to Escrow Agent the
sum of Twenty Five Thousand and N0/100 Dollars ($25,000.00) as the earnest
money, to be delivered to Escrow Agent within five (5) days after the Date of
this Contract. Such sum, together with all interest earned thereon is
hereinafter referred to as the "Earnest Money". The Escrow Agent is hereby
authorized and directed to invest such sum in interest bearing obligations of a
bank in the state in which the Property is located. The Earnest Money shall be
retained or refunded, as the case may be, in accordance with the terms of this
Contract and shall be applied as a credit against the Purchase Price at
Closing.
3. Purchase Price. The purchase price (the "Purchase Price") of
the Property shall be One Hundred Fifty Thousand and
2
<PAGE> 3
N0/100 Dollars ($150,000.00) payable in cash at Closing. The Purchase Price is
based on the Property being properly zoned so as to permit and allow
Purchaser's intended use of the Property set forth in paragraph 20.
4. Costs and Prorations.
4.1 Purchaser shall pay the Commonwealth of Kentucky property
transfer tax applicable to this transaction. Purchaser shall pay the cost of
recording the general warranty deed. Each party shall pay its own attorney's
fees. Seller shall pay the costs of the title insurance commitment and survey
which Seller shall provide pursuant to paragraph 20. Purchaser shall pay the
premium for the title insurance policy which may be issued to Purchaser
pursuant to the title insurance commitment provided by Seller.
4.2 Ad valorem taxes assessed against the Property for
the year in which Closing occurs shall be prorated as of the date of Closing.
If the proration is not based on the actual tax bill for the year in which
Closing occurs, the parties agree to adjust the proration when the actual tax
bill is available.
5. Title. Seller shall convey good, marketable, fee simple and
insurable title to the Property to Purchaser by general warranty deed. The
title may be subject to current and future ad valorem property taxes, general
utility easements serving the Property only and zoning, municipal land use
rules, regulations, ordinances and statutes which do not prohibit or impair in
any way Purchaser's intended use of the Property as set
3
<PAGE> 4
forth in paragraph 20. The Property shall not be subject to any (i) deed of
trust, mortgage, security agreement, judgment, prepaid assessments for
improvements, lien or claim of lien, or any other title exception or defect
that is monetary in nature, Seller hereby agrees to pay and satisfy of record
any such title defects or exceptions prior to or at Closing at Seller's
expense, or (ii) any leases, rental agreements or other rights of occupancy of
any kind, whether written or oral. As to any other title exceptions or defects
not covered by the preceding two sentences, including, but not limited to
easements or restrictions, Purchaser shall have until the expiration of the
Feasibility Period to review the title insurance commitment to be provided by
Seller and the title exceptions listed therein and to notify Seller in writing
of any objections which Purchaser may have. If Purchaser fails to give any
notice to Seller by such date, Purchaser shall be deemed to have waived this
right to object to any other title exceptions or defects. If Purchaser does
give Seller notice of objection to any other title exceptions or defects,
Seller shall then have the right, but not the obligation, for a period of ten
(10) days after receipt of such notice within which to cure or satisfy such
objection ("cure period"). If the objection is not so satisfied by Seller,
then Purchaser shall have the right to terminate this Contract, in which case
the Earnest Money shall be returned to Purchaser and neither party shall have
any further rights, obligations or duties under this Contract. If Seller does
so cure or satisfy
4
<PAGE> 5
the obligation, then this Contract shall continue in effect. Purchaser shall
have the right at any time to waive any objections that it may have made and
thereby to preserve this Contract in effect. Seller agrees not to further
encumber in any way Seller's title to the Property after the Date of this
Contract.
6. Closing. Purchaser has entered into a contract to purchase
that certain Comfort Suites hotel containing 62 rooms located in London,
Kentucky ("the Hotel"), which is located upon certain real property which
adjoins the Property. Subject to paragraphs 20 and 22, the closing or
settlement ("Closing") of the transaction contemplated hereby shall be held in
the area in which the Property is located during regular business hours and
shall occur concurrent with the closing of the Hotel.
7. Real Estate Commission. Purchaser and Seller do hereby
represent each to the other that they know of no realtor, agent or other party
involved in this transaction who is entitled to, or has a claim for, a real
estate commission or fee and neither Seller or Purchaser has employed any such
party. Seller and Purchaser covenant and agree to indemnify and forever hold
each other harmless against any loss, liability, costs, claims, demands,
damages, actions, causes of action, and suits arising out of or in any manner
related to the alleged employment or use by Seller or Purchaser, as the case
may be, of any real estate broker or agent.
5
<PAGE> 6
8. Inspection. Purchaser and Purchaser's agents, employees and
independent contractors shall have the right and privilege to enter upon the
Property prior to Closing to inspect the Property and to conduct soil borings
and other geological, environmental, engineering, or landscaping tests or
studies, all at Purchaser's sole cost and expense. The right shall be
exercised after notice to Seller, and Seller or Seller's designated
representative or agent shall have the right to be present. Purchaser agrees
to refill and repair any holes created while conducting soil borings and to
minimize disturbance or damage which may be caused. Purchaser hereby covenants
and agrees to indemnify and hold Seller harmless from any and all loss,
liability, costs, claims, demands, damages, actions, causes of actions, and
suits arising out of or in any manner related to the exercise by Purchaser of
Purchaser's rights under this paragraph.
9. Eminent Domain. If, after the Date of this Contract and prior
to Closing, Seller receives notice of the commencement or threatened
commencement of eminent domain or other like proceedings against the Property
or any portion thereof, Seller shall immediately notify Purchaser in writing,
and Purchaser shall elect within ten (10) days from and after such notice, by
written notice to Seller, either: (i) to terminate this Contract, in which
event the Earnest Money shall be returned to Purchaser and this Contract shall
be null and void and of no further force and effect; or (ii) to close the
transaction contemplated hereby
6
<PAGE> 7
in accordance with its terms but subject to such proceedings, in which event
the Purchase Price shall not be reduced, and Seller shall assign to Purchaser,
Seller's rights in any condemnation award or proceeds relative to the Property.
If Purchaser does not make such election within the aforesaid time period,
Purchaser shall be deemed to have elected to close the transaction contemplated
hereby in accordance with clause (ii) above.
10. Notice. Each notice required or permitted to be given
hereunder must comply with the requirements of this paragraph. Each such
notice shall be sent by personal hand delivery, by depositing it with a
nationally recognized overnight courier service or by depositing it with the
United States Postal Service or any official successor thereto, certified or
registered mail, return receipt requested, with adequate postage prepaid,
addressed to the appropriate party (and marked to a particular individual's
attention) as hereinbefore provided. Each such notice shall be effective upon
being so hand delivered or deposited, but the time period in which a response
to any such notice must be given or any action taken with respect thereto shall
commence to run from the date of delivery if by personal hand delivery or
overnight courier service or the date of receipt of the notice by the addressee
thereof if mailed as set forth above, as evidenced by the return receipt.
Rejection or other refusal by the addressee to accept delivery or the inability
to deliver because of a changed address of which no notice was given
7
<PAGE> 8
shall be deemed to be the receipt of the notice sent. In the event that
registered or certified mail service is not being provided by the United States
Postal Service or any official successor thereto at the time in question, each
notice may then be served by personal service or sent by regular mail to the
address as hereinbefore provided. The addresses of the parties shall be those
set forth on the first page of this Contract. With respect to any notices to
be given to Purchaser hereunder, a copy shall also be delivered as follows:
William W. Bunch, III
Brown & Bunch
4900 Falls of Neuse Road, Suite 210
Raleigh, North Carolina 27609
With respect to any notices to be given to Seller hereunder, a copy
shall also be delivered as follows:
___________________________
___________________________
___________________________
Any party shall have the right from time to time to change the address
to which notices to it shall be sent and to specify up to two additional
addresses to which copies of notices to it
8
<PAGE> 9
shall be sent by giving to the other party at least fifteen (15) days prior
notice of the changed address or additional addresses.
11. Documents. At or prior to Closing, each party shall deliver
to the other party appropriate evidence to establish the authority of such
party to enter into and close the transaction contemplated hereby. Seller
shall also deliver to Purchaser at Closing Seller's general warranty deed
containing a legal description of the Property drafted in accordance with the
survey of the Property to be provided by Seller in accordance with paragraph 21
hereof and an affidavit of title with respect to the Property in form
reasonably satisfactory to Purchaser's title insurer to issue title insurance
without exception for mechanic's or materialmen's or other statutory liens or
for the rights of parties in possession. Seller shall also deliver an
affidavit in order to meet the requirements of Internal Revenue Code Section
1445 (non-foreign affidavit) and shall provide such information as is necessary
and required for the closing attorney to comply with the reporting requirements
of Internal Revenue Code Section 1099. The parties shall also deliver at
Closing any other documents reasonably necessary to complete and evidence the
transaction contemplated hereby.
12. Remedies. In the event that this transaction fails to close
by reason of Purchaser's failure to perform its obligations under this
Contract, the Earnest Money shall be retained by Seller as full liquidated
damages in complete and total accord and satisfaction, the parties hereby
acknowledging and agreeing
9
<PAGE> 10
to the difficulty of ascertaining Seller's actual damages in such
circumstances. In the event that Seller fails or refuses to convey the
Property in accordance with the terms of this Contract or otherwise perform its
obligations hereunder after all conditions precedent to Seller's obligations to
close have been met, then Purchaser shall have the right to a return of the
Earnest Money or to seek all rights and remedies available at law or in equity,
including the right to seek specific performance of Seller's obligations under
this Contract, including the conveyance of the Property in accordance with the
terms of this Contract, together with the costs and expenses incurred by
Purchaser in specifically enforcing this Contract, including reasonable
attorney's fees actually incurred by Purchaser.
13. Entire Agreement. This Contract constitutes the entire
agreement of the parties and may not be amended except by written instrument
executed by Purchaser and Seller. Escrow Agent need not be a party to
amendments to this Contract, but such amendments shall not affect or impair his
rights or duties hereunder.
14. Headings. The paragraph headings are inserted for convenience
only and are in no way intended to interpret, define, or limit the scope of
content of this Contract or any provision hereof.
15. Possession. Seller shall deliver actual possession of the
Property at Closing.
10
<PAGE> 11
16. Surviving Clauses. The provisions of this Contract relating
to tax prorations after Closing, Purchaser's indemnification with respect to
its entering upon the Property prior to Closing, Seller's and Purchaser's
indemnification concerning real estate commissions or brokerage fees, shall
survive any Closing pursuant to this transaction or any termination of this
Contract by either party as a matter of right hereunder or in breach of this
Contract, notwithstanding any other provisions in this Contract to the
contrary. Except as set forth in the preceding sentence or as otherwise
expressly set forth herein, all other provisions of this Contract shall not
survive the Closing of this transaction or any termination hereof by either
party as a matter of right.
17. Applicable Law. This Contract shall be construed, interpreted
and enforced in accordance with the laws and decisions of the Commonwealth of
Kentucky.
18. Successors and Assigns. This Contract shall be binding upon
and inure to the benefit of Seller, Purchaser and Escrow Agent, and their
respective successors and assigns, if any. The Purchaser's rights under this
Contract are assignable provided such assignee shall expressly assume and agree
to all of the terms and obligations of Purchaser set forth in this Contract or
any written amendment hereto.
19. Exhibits. The exhibits referred to in and attached to this
Contract are incorporated herein by this reference.
11
<PAGE> 12
20. Feasibility Study. The Purchaser's obligations under this
Contract are subject to and conditional upon Purchaser's satisfaction with
respect to the following:
20.1 The overall economic feasibility of Purchaser's intended
use of the Property (which, at Purchaser's election, is the
development, construction and operation of a free standing
hotel/motel upon the Property containing at least 60 rooms or
an expansion of the Hotel by at least 60 rooms).
In order to assist Purchaser in determining the foregoing, Seller
shall provide certain items to Purchaser for inspection as follows:
(a) within ten (10) days after the Date of this Agreement, copies of
any existing engineer's reports, environmental reports, surveys or other
reviews, evaluations or studies of or with respect to the Property;
(b) within ten (10) days after the Date of this Agreement, copies of
any leases, contracts and permits pertaining in any way to the Property and the
ownership and operation thereof;
(c) within twenty (20) days after the Date of this Agreement, a title
insurance commitment relative to the Property issued by First American Title
Insurance Company and copies of all exceptions from coverage shown thereon;
and,
(d) within twenty (20) days after the Date of this Agreement, a survey
prepared by a duly licensed surveyor dated subsequent to the date hereof and
sufficient to obtain title
12
<PAGE> 13
insurance coverage for matters of survey in accordance with the matters
disclosed thereon.
Purchaser shall have sixty (60) days from and after the Date of this
Contract (the "Feasibility Period") by which to make such investigations and
studies with respect to the foregoing as Purchaser deems appropriate and to
give notice to Seller if any of the foregoing are not satisfactory to the
Purchaser, in Purchaser's sole discretion. If Purchaser fails to give any
notice prior to the end of the Feasibility Period, then such conditions shall
be deemed to have been waived by Purchaser and this Contract shall remain in
full force and effect. If Purchaser does give notice of such objections, then
this Contract shall be thereby terminated, with Seller having the right to
retain $100.00 of the Earnest Money (such amount in effect constituting option
money for said time period), with the remainder of the Earnest Money being
returned to Purchaser and the parties having no further rights, obligations or
duties under this Contract. The conditions enumerated above are for
Purchaser's benefit only, and the non-occurrence of a state of facts sufficient
to satisfy any of the conditions above may not be used or pleaded by Seller as
a defense to the enforceability of this Contract.
21. Escrow Agent. In performing any of its duties hereunder, the
Escrow Agent shall not incur any liability to anyone for any damages, losses or
expenses, except for willful default or breach of trust, and he shall
accordingly not incur
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<PAGE> 14
any such liability with respect (i) to any action taken or omitted in good
faith upon advice of his counsel or (ii) to any action taken or omitted in
reliance upon any instrument, including any written notice or instruction
provided for in this Contract, not only as to its due execution and the
validity and effectiveness of its provisions but also as to the truth and
accuracy of any information contained therein, which the Escrow Agent shall in
good faith believe to be genuine, to have been signed or presented by a proper
person or persons and to conform with the provisions of this Contract. The
Escrow Agent is hereby specifically authorized to refuse to act except upon the
written consent of both parties, or lawful order issued by a court or competent
jurisdiction. The parties hereby agree to indemnify and hold harmless the
Escrow Agent against any and all losses, claims, damages, liabilities and
expenses, including reasonable costs of investigation and counsel fees and
disbursements, which may be imposed upon the Escrow Agent or incurred by the
Escrow Agent in connection with its acceptance or the performance of its duties
hereunder, including any litigation arising from this Contract or involving the
subject matter hereof. In the event of a dispute between any of the parties
hereto sufficient in the discretion of the Escrow Agent to justify his doing
so, the Escrow Agent shall be entitled to tender into the registry or custody
of any court of competent jurisdiction all money or property in his hands under
this Contract, together with such legal pleadings as he deems appropriate, and
thereupon be
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<PAGE> 15
discharged from all further duties and liabilities under this Contract. Any
such legal action may be brought in such court as the Escrow Agent shall
determine to have jurisdiction thereof. The parties shall bear all costs and
expenses of any such legal proceedings.
22. Conditions Precedent to Purchaser's Obligation to Close. In
order for Purchaser to implement its intended use and development of the
Property, it is necessary that certain assurances and agreements be received by
Purchaser and the conditions specifically set forth herein be satisfied in
accordance with the terms and provisions set forth herein prior to Closing.
Therefore, Purchaser's obligations under this Contract are expressly
conditioned upon Purchaser's satisfaction with respect to the matters set forth
hereinafter:
(1) The acquisition and closing of the Hotel by Purchaser; and
(2) Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close
this transaction shall be conditioned upon Purchaser obtaining the
approval of this Contract and the transaction contemplated herein from
the board of directors of the general partner of Purchaser, Winston
Hotels, Inc.
15
<PAGE> 16
The failure to satisfy either of the foregoing conditions, shall give
Purchaser the right to terminate this Contract, with Seller having the right to
retain $100.00 of the Earnest Money (such amount in effect constituting option
money for said time period), with the remainder of the Earnest Money being
returned to Purchaser and the parties having no further rights, obligations or
duties under this Contract. The conditions enumerated above are for
Purchaser's benefit only and the non-occurrence of a state of facts sufficient
to satisfy any of the conditions above may not be used or pleaded by Seller as
a defense to the enforceability of this Contract. In the event Purchaser shall
waive an unsatisfied condition and preserve this Contract in effect, Closing
shall occur in accordance with paragraph 6.
23. Offer, Acceptance and Contract. This document shall
constitute an offer by Purchaser. If this offer is accepted by Seller, it
shall become a binding Contract between them when signed by Purchaser which
signing by Purchaser shall occur on the date of receipt of two (2) signed
originals from Seller. The validity of this Contract between Purchaser and
Seller shall not be affected by whether or not the Escrow Agent has signed this
Contract or any amendments hereto. As used herein, the phrase "Date of this
Contract" shall mean the date on which the Contract is executed by both
Purchaser and Seller.
16
<PAGE> 17
IN WITNESS WHEREOF, Seller, Purchaser and Escrow Agent set their hands
and seals hereto as of the date and year indicated next to their signatures.
PURCHASER:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation
and sole general partner
(Corporate Seal) By:__________________________________
President
Attest:
______________________________
_____________________Secretary
Date Signed by Purchaser:
_______________________________, 1996
17
<PAGE> 18
STATE OF NORTH CAROLINA
COUNTY OF WAKE
I, a Notary Public of the County and Commonwealth aforesaid, certify
that __________________________________________________, personally came before
me this day and acknowledged that __he is ______________ Secretary of Winston
Hotels, Inc., a North Carolina corporation, as sole general partner of WINN
Limited Partnership, a North Carolina limited partnership, and that by
authority duly given and as the act of the corporation as such general partner,
the foregoing instrument was signed in its name by its _______ President,
sealed with its corporate seal and attested by ___________________ as its
___________Secretary. Witness my hand and official stamp or seal, this the
____ day of _____________, 1996.
My Commission Expires: _________ __________________________________
Notary Public
(SEAL)
18
<PAGE> 19
SELLER:
____________________________(SEAL)
Russell Parman
____________________________(SEAL)
Ruby Parman
Date signed by Seller:
__________________________, 1996
COMMONWEALTH OF KENTUCKY
COUNTY OF _______________
I, a Notary Public of the County and Commonwealth aforesaid, certify
that Russell Parman and Ruby Parman personally appeared before me this day and
acknowledged the execution of the foregoing instrument. Witness my hand and
official stamp or seal this ____ day of ___________ , 1996.
My Commission Expires: ________ _________________________________
Notary Public
(SEAL)
19
<PAGE> 20
Agreed to for purposes of serving as Escrow Agent hereunder and I
hereby acknowledge receipt of the Earnest Money for the purposes set forth
herein.
The Title Company of North Carolina,
Inc.
By:___________________________________
F. Alton Russell, President
20
<PAGE> 1
EXHIBIT 10.15
April 24, 1996
Winston Hotels, Inc.
WINN Limited Partnership
c/o Mr. Robert W. Winston, III
2209 Century Drive
Raleigh, NC 27612
Re: Amended and Restated $125,000,000 Secured Line of Credit
Dear Ladies/Gentlemen:
This letter constitutes the commitment of Wachovia Bank of North
Carolina, N.A. ("Wachovia"), Branch Banking & Trust Company ("BB&T"),
SouthTrust Bank of Alabama, N.A. ("SouthTrust"), and NationsBank, N.A.
("NationsBank") (Wachovia, BB&T, SouthTrust, and NationsBank being collectively
referred to as the "Banks") to make a line of credit available (the "Line"), on
a pro rata basis as set out below under Paragraph II.1, to the borrower
described below (the "Borrower") under the following terms and conditions. As
between Wachovia and the Borrower, this commitment, upon consummation of the
transaction herein referenced (the "Closing"), amends and restates in its
entirety the prior commitment of Wachovia dated April 13, 1995, to make a
$50,000,000 Line of Credit available to the Borrower (the "Prior Commitment").
Upon the Closing, this commitment (the "Commitment") shall amend and restate in
its entirety the Prior Commitment.
I. GENERAL PROVISIONS
1. Borrower: Winston Hotels, Inc., a North Carolina corporation (the
"Company"), and WINN Limited Partnership, a North Carolina limited partnership
(the "Partnership"). The Company and the Partnership shall be jointly and
severally liable for all obligations of the "Borrower."
2. Maximum Line Amount; Line Availability Amount:
A. Generally. $125,000,000.00 (the "Maximum Line Amount"). The
amount of credit available to be drawn upon from time to time under this Line,
including credit used and credit unused, and subject to the Line Availability
Amount limitations set out below, is hereinafter referred to as the "Line
Availability Amount."
B. Line Availability Amount. The amount of credit available to
be drawn upon from time to time shall at no time, however, exceed that amount
which is the lesser of the "Loan to Value Amount" [as hereinafter defined in
Paragraph I.2.B(1) below] and the "Cash Flow Amount" [as hereinafter defined in
Paragraph I.2.B(2) below]. During the one-year period following the date of
<PAGE> 2
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 2
Closing and any remaining period of the fiscal quarter in which such one-year
anniversary occurs (the "Interim Borrowing Base Credit Period"), such amount
shall be increased by adding the Interim Borrowing Base Credit (as hereinafter
defined) to such lesser amount.
(1) Loan to Value Amount. The "Loan to Value Amount" shall be
determined as follows:
a. Net Operating Income (as hereinafter defined) of all
the Primary Hotels (as defined in Paragraph I.10.C)
shall be divided by the capitalization rate of 13%.
b. The resulting number from a. above shall be
multiplied by 45%.
c. The resulting number from b. above is the "Loan to
Value Amount."
NOI / .13 = Value x .45 = Loan to Value Amount
"Net Operating Income" shall mean (i) all income derived by
the Lessee (hereinafter defined) from the operation of all the
applicable hotels (specifically including all room, food,
beverage and other revenues but specifically excluding all
sums collected on behalf of taxing authorities and required to
be forwarded to such taxing authorities) less (ii) "Deductions
from Income" for such hotels.
"Deductions from Income" for the applicable hotels shall be
limited to the following: (i) all operating expenses in fact
incurred in the operation of such hotels, specifically
including franchise fees, insurance premiums, real estate
taxes and personal property taxes but specifically excluding
lease payments paid pursuant to the Lease for such hotel; (ii)
management fees in an amount equal to 4% of gross room
revenues for each such hotel, even though management fees may
not be in fact paid or payable and even though management fees
may be greater or less than that in fact incurred for such
hotel; (iii) capital expenditures incurred in connection with
each such hotel (which, for purposes of such calculation shall
be an amount equal to 4% of gross room revenues, even though
such amount of capital expenditures may be greater or less
than that in fact incurred for such hotel).
(2) Cash Flow Amount. The Cash Flow Amount shall be determined by
multiplying the Cash Available for Distribution (hereinafter
defined) for the Primary Hotels by 4.0.
Cash Available for Distribution with respect to any hotel or
group of hotels shall be determined as follows:
<PAGE> 3
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 3
From Total Lease Revenues (Base Rent plus Percentage
Rent) derived by the Borrower from the Lessee with
respect to such hotel or hotels, subtract the
required Room Reserves (hereinafter defined) for such
hotel or hotels, property taxes and casualty
insurance premiums for such hotel or hotels and
actual "general and administrative" expenses for the
Borrower (prorated among all the hotels owned by the
Borrower in a manner satisfactory to the Banks),
defined in accordance with generally accepted
accounting principles, consistently applied.
(3) Calculation of Loan to Value Amount and Cash Flow Amount.
Both the Loan to Value Amount and the Cash Flow Amount shall
be calculated from time to time in accordance with the
following procedure:
a. The Borrower shall provide to the Banks, together
with the quarterly financial statements required by
Paragraph II.19 of this Commitment, a financial
statement with respect to the operations of the
Primary Hotels during the preceding twelve calendar
months ending as of the last day of such preceding
fiscal quarter. If a Primary Hotel has not been
operated as a hotel for twelve calendar months, such
lesser period during which the Borrower or such other
operator has operated the Primary Hotel shall be
included in the calculation of the Loan to Value
Amount and the Cash Flow Amount. Such calculations
shall be made on a pro forma basis for operations by
a prior owner as if such operations were subject to a
lease having terms and conditions as those set out in
the Lease in fact entered into by the Borrower and
approved by the Banks for such Primary Hotel. During
the Interim Borrowing Base Credit Period, the Recent
Acquisition Hotels identified in Paragraph I.2.B(5)
below shall be excluded from the Primary Hotels for
purposes of calculating the Loan to Value Amount and
the Cash Flow Amount. The Delayed Acquisition Hotels
shall be excluded from such calculations until all
conditions for inclusion of such hotels as Primary
Hotels (such as, but not limited to, the recordation
of a Deed of Trust securing the Line, the issuance of
a title policy, the satisfaction of all documentation
matters required to be satisfied for Initial Hotels)
have been satisfied. Such financial statements shall
be delivered no later than 55 days after the end of
the preceding fiscal quarter. Such financial
statement shall be in form and detail satisfactory to
the Banks with respect to each Primary Hotel
individually and with respect to all Primary Hotels
in the aggregate.
<PAGE> 4
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 4
b. Simultaneously with the submission of the financial
statements required in a., the Borrower shall provide
a certification, signed by the chief financial
officer of the Borrower, providing its calculation of
the Loan to Value Amount and the Cash Flow Amount,
such certification to be in a form satisfactory to
the Banks (the "Borrowing Base Certificate").
c. The Banks shall be entitled to review such
information and to request such additional
information as they deem necessary to verify and
assess such calculations. Within twenty-five (25)
days of receipt of the certified Borrowing Base
Certificate, the Banks shall notify the Borrower (i)
whether they have accepted the Borrower's Borrowing
Base Certificate determinations, and (ii) if not, the
Banks' computation of the Loan to Value Amount and
the Cash Flow Amounts. The Banks' determination of
the Loan to Value Amount and the Cash Flow Amount
shall be conclusive, absent manifest error.
d. Such Loan to Value Amount and Cash Flow Amount shall
be effective as of the first day of the next fiscal
quarter commencing after such determination. [For
example, for the fiscal quarter ending March 31, the
Borrower would supply financial statements and the
Borrowing Base Certificate on or before May 25; the
Banks would review and respond to the Borrowing Base
Certificate (and establish the Loan to Value Amount
and Cash Flow Amount) on or before June 20, with such
computations to be effective on July 1, the first day
of the next fiscal quarter.]
e. Prior to the time that a Primary Hotel is released or
added, the Borrower shall supply a new Borrowing Base
Certificate. In the case of a reduction in the Line
Availability Amount, such reduction shall be
effective immediately subject to review and
adjustment by the Banks as described in c. above. In
the case of an increase in the Line Availability
Amount, such an increase shall be effective only
following review and approval of the Borrowing Base
Certificate by the Banks as set out above.
(4) Required Paydown Due to a Reduction in the Line Availability
Amount. If, upon a reduction in the Line Availability
Amount as a result of a reduction in the Loan to Value Amount
or the Cash Flow Amount, the outstanding principal balance of
the Note exceeds the permitted Line Availability Amount
available as of the first day of the next fiscal quarter, then
on or before such date the Borrower shall pay down the
principal balance to that amount available under the new Line
Availability Amount. No prepayment premium shall be due and
payable in connection with such paydown,
<PAGE> 5
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 5
regardless of which interest rate option or options
have been selected by the Borrower. In addition, the Borrower
at any time (but subject to the limitations for approval set
out in Paragraph I.10.C entitled Primary Hotels) may request
the Banks to add one or more hotels to the list of Primary
Hotels. If, after reviewing the information to which they are
entitled to review in connection with their determination of
Primary Hotels, the Banks consent to such addition or
additions, the Borrower shall provide a replacement Borrowing
Base Certificate that includes such additional Primary Hotels.
The recomputed Line Availability Amount shall be effective as
of the date on which the Banks establish the recomputed Line
Availability Amount.
(5) Interim Inclusion of Credit for Four Hotels. During the
Interim Borrowing Base Credit Period, the Borrower shall be
entitled to receive the following credit (the "Interim
Borrowing Base Credit") to the Line Availability Amount for
the following four hotels (which are collectively referred to
as the "Recent Acquisition Hotels"):
<TABLE>
<CAPTION>
Hotel Credit
----- ------
<S> <C> <C>
a. Marriott - Wilmington $2,550,000.00
b. Gwinette $2,822,000.00
c. Perimeter* $2,788,000.00
d. Homewood Suites Houston $2,351,000.00
</TABLE>
(The Interim Borrowing Base Credit for the Perimeter Hotel,
noted with an asterisk in the chart provided above, is subject
to adjustment once the purchase price for that hotel is
finally determined. The credit shall be calculated by
multiplying the purchase price for the hotel by .34.) Such
Interim Borrowing Base Credit shall be effective throughout
the Interim Borrowing Base Credit Period, subject to the
following limitations and conditions. If one or more of such
hotels have not yet been acquired (i.e., the Delayed
Acquisition Hotels) or are no longer subject to a Deed of
Trust securing the Line (i.e., as a result of a release), no
credit shall be given for such hotel. During the Interim
Borrowing Base Credit Period, these hotels shall be excluded
from the calculations of the Loan to Value Amount and the Cash
Flow Amount. During the Interim Borrowing Base Credit Period,
however, the amount of Interim Borrowing Base Credit for each
of these hotels shall be added to the Line Availability
Amount, provided such hotel continues to serve as a Primary
Hotel. Following the Interim Borrowing Base Credit Period,
the Interim Borrowing Base Credit shall no longer be
applicable, and these hotels shall be included in the
calculations of the Loan to Value Amount and the Cash Flow
Amount. The Interim Borrowing Base Credit Period expires
approximately one year from the date of
<PAGE> 6
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 6
closing of the Line, even though the Delayed Acquisition
Hotels have not been owned by the Borrower for a full year. If
the Interim Borrowing Base Credit Period would otherwise expire
during a fiscal quarter, the Interim Borrowing Base Credit
Period shall nevertheless be extended automatically to the end
of such fiscal quarter.
3. Sub-Line Restrictions:
A. Working Capital Sub-Line. The Line shall include a sub-line
(the "Working Capital Sub-Line") amount of up to seventeen percent (17%) of the
Line Availability Amount, as such Line Availability Amount is determined from
time to time (the "Working Capital Line Amount"), the proceeds of which may be
utilized for the four uses set out below. The Borrower may utilize funds
otherwise available in the Working Capital Sub-Line for any other use permitted
under Paragraph II.15A (Line Use Restrictions) if such funds are not being
utilized for such four purposes, but such borrowings shall not be deemed to be
drawings under the Working Capital Sub-Line.
(1) Working Capital: The Working Capital Sub-Line may be
used to fund those costs and expenses associated with
the normal day-to-day operations of the Borrower's
business of owning multiple hotel properties located
in multiple states.
(2) Dividends: The Borrower intends to make dividend
payments on a quarterly basis. The Borrower may draw
under the Working Capital Sub-Line to make its
dividend payments.
(3) Capital Expenditures: The Borrower may utilize the
Working Capital Sub-Line to pay for "Capital
Expenditures," as that term is defined in accordance
with generally accepted accounting principles,
subject to the limitations herein set out.
As used herein, Capital Expenditures shall not
include "Renovations" and also shall not include
capital expenditures incurred in the construction and
development of new hotels. "Renovations" are the
renovation and equipping of a hotel so as to bring
the hotel up to the quality, standard and condition
the Borrower deems appropriate and which are
typically capitalized on the Borrower's balance
sheet. The cost of ongoing renovations typically
required in the year-to-year operation of a hotel
(such as replacement and repair of furniture,
fixtures and equipment, replacement of carpeting,
etc.) shall not constitute Renovations.
<PAGE> 7
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 7
(4) Swing Sub-Line Payout. The Borrower may utilize the
Working Capital Sub-Line to pay off the Swing
Sub-Line.
At any one time, no more than the Working Capital Line Amount may be
outstanding under the Working Capital Sub-Line for cumulative payments
associated with the four uses identified above. DURING EACH TWELVE (12)-MONTH
PERIOD OF THE LINE, THE WORKING CAPITAL SUB-LINE MUST BE FULLY PAID OUT TO A
ZERO BALANCE FOR 30 CONSECUTIVE CALENDAR DAYS UTILIZING THE BORROWER'S
INTERNALLY GENERATED CASH FLOW OR PROCEEDS FROM EQUITY OFFERINGS (THE "REQUIRED
CLEAN-UP"). The first twelve-month period shall commence on the first day
funds are originally drawn under the Working Capital Sub-Line. Each subsequent
twelve-month period shall commence on the first day funds are readvanced under
the Working Capital Sub-Line following the Required Clean-Up. The Borrower's
failure to comply with the Required Clean-Up shall constitute an event of
default under the loan documents.
For each draw made under the Working Capital Sub-Line or the Swing Sub-Line,
the Borrower shall identify the amount associated with each of the four
allowable categories.
B. Development/Construction Sub-Line. The Line shall also
include a development/construction sub-line (the "Development Sub-Line") amount
of up to fifty percent (50%) of the Line Availability Amount, as such Line
Availability Amount shall be determined from time to time, the proceeds of
which may be utilized for the following two uses. The Borrower may utilize
funds otherwise available in the Development Sub-Line for any other use
permitted under Paragraph II.15A (Line Use Restrictions) if such funds are not
being utilized for such two purposes, but such borrowings shall not be deemed
to be drawings under the Development Sub-Line.
1. Acquisition of real estate and construction costs
incurred by the Borrower in constructing any hotel (a
"Construction Hotel").
2. Acquisition of any land and improvements constructed
by a third party and not operated as a hotel for a
continuous 12 month period prior to such acquisition
by the Borrower (a "Development Hotel").
A hotel may be a Primary Hotel (if accepted as a Primary Hotel
by the Banks) even though it is still considered a Development Hotel
or a Construction Hotel.
For each draw made under the Development Sub-Line, the
Borrower shall identify the amount associated with each of the two
allowable categories and shall identify the name and address of the
hotel for such drawing is being made.
<PAGE> 8
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 8
If such drawing is made for the acquisition of undeveloped
real estate for anticipated construction of a hotel in the future,
then in addition, the Borrower shall specify the amount of such draw
utilized for such purpose. The Borrower shall not be entitled to have
more than $5,000,000 outstanding at any one time for such purpose
where "Hotel Development" is not in process on such site within
eighteen months following the acquisition by the Borrower of such
site. "Hotel Development" means active, continuous and diligent
undertaking of the construction of a hotel on such site. Any amount
allocated towards such calculation of the maximum limitation hereof
shall be deducted therefrom once and so long as the Borrower actively
undertakes Hotel Development for such site.
Amounts borrowed for expenditures relating to a Construction
Hotel or a Development Hotel shall continue to be allocated under the
Development Sub-Line until all amounts for such hotel have been
deducted from the Development Sub-Line as set out below. The
computation of the amount to be deducted from the Development Sub-Line
for a hotel for which the Development Sub-Line is still being
allocated shall be calculated as follows: During any period that Line
proceeds remain allocated for a Construction Hotel or a Development
Hotel, the Borrower shall supply the Banks with a
"Development/Construction Sub-Line Sheet" at the same time the
Borrowing Base Certificate is provided. Such Development/Construction
Sub-Line Sheet shall provide information concerning the Net Operating
Income [as defined in Paragraph I.2.b.(1)] derived during the
preceding fiscal quarter from each Construction Hotel and Development
Hotel on a hotel-by-hotel basis. Such Net Operating Income for each
of such hotels shall be divided by the capitalization rate of 13%,
rounded to the nearest one thousand dollar. For each such hotel, the
resulting amount less any amount deducted in the prior quarters (but
never a negative number) shall be deducted from the Development
Sub-Line allocated to such hotel as of the beginning of the next
fiscal quarter and shall again be available for draws under the
Development Sub-Line, subject to the requirements of the Line
generally and such Development Sub-Line in particular. An example of
such computation is provided in Exhibit B attached hereto and
incorporated by reference.
C. Swing Sub-Line. Up to $5,000,000 of the $50,000,000 available
from Wachovia shall be available to the Borrower as a "Swing Sub-Line," which
may be used for any of the purposes for which the Working Capital Sub-Line may
be utilized. Borrowings under the Swing Sub-Line may only be pursuant to
Option C (Base Rate Option) or Option D (7-Day LIBOR Option). At the election
of Wachovia, each Bank shall purchase a participating interest in such Swing
Sub-Line loans in an amount equal to its ratable share of such Swing Sub-Line
loans.
4. Term: The term of this Line shall expire on June 1, 1998. The
Borrower may request one-year annual extensions of the term no sooner than 45
days and no later than 30 days prior to June 1, 1997, June 1, 1998, or the end
of any granted extension year. The Banks may, in their sole
<PAGE> 9
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 9
discretion, determine whether to grant such an extension and shall be entitled
to receive whatever information the Banks deem necessary for the consideration
of such request. In particular (without limiting the foregoing), any extension
is subject to the Banks' prior review and written approval of the Borrower's
financial condition. In order for the Banks to complete their financial review
and as a condition for any extension of term, Borrower must have delivered to
the Banks the financial information required herein to be supplied on a
quarterly and/or annual basis. Upon request by the Borrower and approval by
the Banks of each annual extension, Borrower shall pay to the Banks a Line
Extension Fee in accordance with the Paragraph I.8., entitled Line Extension
Fee.
5. Loan Interest Rate Options:
The Borrower shall have the option, as of the end of any Interest
Period (hereinafter defined) to choose among the following interest rate
options; provided, however, if no choice is made by the Borrower, the Borrower
shall be deemed to have chosen the Base Rate Option (as hereinafter defined).
"Interest Period," for purposes hereof, shall be each successive 30-day period
(if Option A is selected), each successive 90-day period (if Option B is
selected), each successive 7-day period (if Option D is selected) or each
successive one-day period (if Option C is selected) in each case commencing on
the date following the expiration of the preceding Interest Period. The
Borrower may have no more than an aggregate of eight borrowings outstanding
under Option A, Option B, or Option D at any one time. Each borrowing (other
than a Swing Sub-Line borrowing) under Option A, Option B, Option C or Option D
must be in a principal amount equal to or in excess of $1,000,000 provided any
amount in excess of $1,000,000 is in any incremental multiple of $100,000.00.
Each borrowing under the Swing Sub-Line must be in a principal amount equal to
or in excess of $100,000, provided any amount in excess of $100,000 is in any
incremental multiple of $50,000.00.
Provisions Applicable to Only Options A, B and D Described Below. "Adjusted
London Interbank Offered Rate" applicable to any Interest Period, as selected
from time to time by the Borrower, means a rate per annum equal to the quotient
obtained by dividing (i) the applicable London Interbank Offered ("LIBO") Rate
for such Interest Period by (ii) 1.00 minus the Eurodollar Reserve Percentage.
"LIBO Rate" means for an Interest Period the rate per annum at which United
States dollars of amounts equal to or comparable to the principal amount of the
borrowing for which such LIBO Rate has been selected are offered for a term
comparable to the Interest Period in the London interbank market, which rate
appears on the display designated as Page "3750" of the Telerate Service in the
case of the 30-day LIBOR Option or 90-day LIBOR Option and "Page 3875" of the
Telerate Service in the case of the 7-day LIBOR Option or, in the case of any
LIBOR Option, such other page as may replace such page of that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying the London Interbank Offered Rates
for
<PAGE> 10
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 10
United States dollar deposits (the "Telerate Service") determined as of
11:00 a.m. London time, as that rate is set three (3) Eurodollar business days
(i.e., any day on which dealings in United States dollar deposits are carried
out in the London interbank market except Saturday, Sunday, or other day on
which commercial banks in North Carolina are authorized by law to close) prior
to the first day of the Interest Period provided that (i) if more than one such
offered rate appears on the applicable Telerate Service, the LIBO Rate will be
the arithmetic average of such offered rates; (ii) if no such offered rates
appear on such page or if there is no such service nominated by the British
Bankers' Association, the LIBO Rate for such Interest Period will be the
arithmetic average of rates (rounded upward, if necessary, to the next higher
1/100 of 1%) quoted by not less than two (2) major banks in the United States,
selected by the Agent at approximately 10:00 a.m., New York City time, two (2)
Eurodollar business days prior to the first day of such Interest Period, for
deposits in United States dollars offered in the London Interbank market in
amounts comparable to the principal amount of the borrowing for which such LIBO
Rate has been selected and for a term comparable to the Interest Period.
"Eurodollar Reserve Percentage" means for any day that percentage (expressed as
a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement for a member bank of the Federal Reserve System in
respect of "Eurocurrency liabilities". The Eurodollar Reserve Percentage shall
be adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
If, as a result of any Regulatory Change (as defined below):
(a) The basis of taxation of the payments to any of the Banks of the
principal of, or interest on, such LIBO Rate loan, as applicable
(other than taxes imposed on the overall net income of such Bank or of
any of its lending offices) is changed; or
(b) Any reserve, special deposit or similar requirements (other than any
change by way of imposition or increase in the Eurodollar Reserve
Percentage) relating to such loan is imposed or modified;
and as a result thereof, the cost to any Bank of making, maintaining, or
funding such loan is increased (the "Increased Cost"), then the Borrower shall
pay to such Bank such additional amount or amounts as will compensate the Bank
for the Increased Cost, subject to the conditions set forth below. Each Bank
will notify the Borrower of the nature and effective date of the applicable
Regulatory Change and calculation of the Increased Cost resulting therefrom as
soon as is reasonably possible. The effective date of such Regulatory Change
will not be applied retroactively but will be applied at the beginning of the
applicable Interest Period.
<PAGE> 11
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 11
"Regulatory Change" shall mean the adoption or making after the date of this
Commitment of any laws or regulations (or a written interpretation or ruling as
to the effect or application of such laws or regulations having the force of
law) by any federal, state, or foreign government or governmental agency having
authority over the administration thereof, which are applicable to any LIBO
Rate loans made pursuant to this Commitment.
If at any time the Banks determine in good faith that the effective LIBO Rate
for any loan is unascertainable, or that the making or continuance of such loan
at the LIBO Rate would be unlawful, the Banks shall not be required to make or
continue such loan at such Rate. In such event, such loan shall be made or
continued, as applicable, at the Base Rate Option (as defined below).
Option A: 30-Day LIBOR Option. A rate per annum equal to the 30-day
"Adjusted London Interbank Offered Rate" plus 1.75%.
Option B: 90-Day LIBOR Option. A rate per annum equal to the 90-day
"Adjusted London Interbank Offered Rate" plus 1.75%.
Option C: Base Rate Option: The rate per annum equal to the higher as
of such day of (i) the Prime Rate, or (ii) one-half of one percent above the
"Federal Funds Rate" for such day. For purposes of determining the Base Rate
for any day, changes in the Prime Rate shall be effective on the date of each
such change.
As used herein, "Prime Rate" refers to that interest rate denominated
by Wachovia Bank of Georgia, N.A., as its "Prime Rate" and set by Wachovia Bank
of Georgia, N.A., from time to time as an interest rate basis for borrowings,
changes in the Prime Rate to be effective on the date of each such change.
Wachovia Bank of Georgia, N.A., lends at rates above and below the Prime Rate,
which is but one of several interest rate bases used by Wachovia Bank of
Georgia, N.A. As used herein, "Federal Funds Rate" means, for any day, the
rate per annum (rounded, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if such rate is not
so published for any day, the Federal Funds Rate for such day shall be the
average rate charged to Wachovia Bank of Georgia, N.A., on such day on such
transactions determined by Wachovia Bank of Georgia, N.A.
Option D: 7-Day LIBOR Option (Working Capital Sub-Line and Swing
Sub-Line Only) . For the Working Capital Sub-
Line and Swing Sub-Line only, the Borrower may select a 7-day LIBOR
<PAGE> 12
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 12
Option, which is a rate per annum equal to the 7-day "Adjusted London Interbank
Offered Rate" plus 1.75%.
6. Non-Refundable Commitment Fee: A non-refundable commitment fee of
$375,000.00 shall be due and payable to the Agent, for the pro rata benefit of
the Banks, in full at the time of the Closing, but there shall be deducted
therefrom a credit of $62,500 representing a portion of the commitment fee paid
in connection with the Prior Commitment. In the event that the Closing does
not occur, no portion of the commitment fee shall be due and payable.
7. Unused Line Fee: Beginning on July 10, 1996, and on the 10th day of
each October, January, April and July thereafter, a fee of 1/16 of one percent
(.0625%) per quarter of the average unused portion of the Maximum Line Amount
for the preceding quarter shall be due and payable to the Agent, for the pro
rata benefit of the Banks. For example, if the Maximum Line Amount is
$125,000,000 but the Line Availability Amount is $100,000,000, and the average
used portion of the Maximum Line Amount is $50,000,000, the Unused Line Fee
shall be calculated on the Maximum Line Amount of $125,000,000, less the
average used portion of the Maximum Line Amount of $50,000,000, and would be
$75,000,000 x .0625% = $46,875.00. In the case of any period not constituting
a full fiscal quarter (specifically including both the initial and final fiscal
quarters within which the Line is available), the amount of the Unused Line Fee
shall be prorated and shall be payable only for the period in which the Line
was available.
8. Line Extension Fee: Upon the request by the Borrower that the Line be
further extended in accordance with the terms and conditions contained in
Paragraph I.4 entitled Term, within 10 days of the Banks' written approval of
such request, the Borrower shall pay to the Agent, for the pro rata benefit of
the Banks, a non-refundable Line extension fee of 1/10 of one percent (.100%)
of the Maximum Line Amount for the first extension and thereafter 1/8 of one
percent (.125%) of the Maximum Line Amount, irrespective of any limitations
concerning the Line Availability Amount then applicable. This extension fee
shall be due and payable with each annual extension requested by the Borrower
and approved by the Banks.
9. Loan Purpose: Proceeds of the Line shall be utilized in accordance
with the terms and conditions contained in Paragraph II.15.A (Line Use
Restrictions) and Paragraph I.3 (Sub-Line Restrictions) of this Commitment.
10. Security/Collateral:
A. Initial Hotels (the "Initial Hotels"): At the time of the
Closing, the Banks shall have received a first lien on twenty-six of the
twenty-eight hotels described in Exhibit A attached hereto and incorporated by
reference (the "Initial Hotels"). Two of the hotels identified in Exhibit A
have not yet been completed (and thus have not been acquired by the Borrower)
but are under contract
<PAGE> 13
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 13
for such acquisition by the Borrower (the "Delayed Acquisition Hotels"). Those
hotels are, however, to be subject to such a first-priority lien in favor of
the Banks upon acquisition. These hotels are to be approved by the Banks as
Primary Hotels at the Closing, subject to such acquisition, along with the
other Initial Hotels. Until such acquisition and the satisfaction of all
requirements specified herein for Initial Hotels, (e.g., title policy, recorded
Deed of Trust) for a Delayed Acquisition Hotel(s), the Borrowing Base
Certificate shall exclude such Delayed Acquisition Hotel. It shall not
constitute an event of default under the Loan Agreement if one or more of the
Delayed Acquisition Hotels are not acquired.
With respect to all the Initial Hotels, the Banks shall be
entitled to require submission of whatever supplemental or new information or
data as they may deem appropriate, and shall have the right to review and
approve such additional information, as well as the information tendered in
connection with the previous closings, even though some of such items have been
previously approved by Wachovia in connection with such closings.
B. Subsequent Hotels: Subsequent to the Closing, Borrower may
utilize the Line proceeds to purchase in the name of the Borrower additional
hotel properties subject to those terms and conditions contained in Paragraph
II.15.A (Line Use Restrictions). All such hotels (with the exclusion of hotels
listed on Exhibit A that have become Primary Hotels), all hotels now or
hereafter acquired with equity proceeds or cash flow of the Borrower, all
existing hotels that are not Primary Hotels and any other hotel now or
hereafter acquired by the Borrower in its own name (specifically excluding any
hotel acquired by a partnership or joint venture in which the Borrower or any
subsidiary is a partner or joint venturer) are hereinafter referred to as
"Subsequent Hotels."
The Borrower shall be entitled to draw down on the Line at the
time of acquisition of the Subsequent Hotel, without contemporaneously granting
a first lien to the Banks on such Subsequent Hotel and without providing to the
Banks any information with respect to such Subsequent Hotels. If the Borrower
elects to submit such Subsequent Hotel for consideration as a Primary Hotel,
however, the Borrower shall provide to the Banks the information and
documentation (e.g., survey, title commitment, environmental report,
appraisals, etc.), in form and scope meeting the requirements for Initial
Hotels as herein specified, for each such Subsequent Hotel at the time of such
request by the Borrower.
If the Banks agree that such Subsequent Hotel is to be
considered a Primary Hotel, the Borrower shall cause a Deed of Trust (as
hereinafter defined) to be recorded with respect to such Subsequent Hotel and
shall thereafter promptly provide such other related documentation (for
example, the title policy) that can be obtained only after recordation of the
Deed of Trust.
<PAGE> 14
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 14
The real property for Initial Hotels and all other Primary
Hotels (hereinafter defined) (the "Land") and the above-described buildings and
improvements for such Hotels (collectively the "Improvements") are hereinafter
referred to as the "Primary Hotel Properties." The Land and Improvements for
the Subsequent Hotels are hereinafter referred to as the "Subsequent Hotel
Properties." The Primary Hotel Properties are also sometimes hereinafter
collectively referred to as the "Properties." Such definition of "Properties"
does not include any Subsequent Hotel upon which the Banks do not receive a
lien.
C. Primary Hotels. The release provisions and the Banks' right
to review and approve certain matters provided herein differentiate between
those hotels that are "Primary Hotels" and other hotels. "Primary Hotels" are
(i) all Initial Hotels, and (ii) any Subsequent Hotel the Banks in their
discretion deem acceptable as a Primary Hotel. The Banks shall not consider
any hotel as a potential Primary Hotel unless the Banks can be given a
first-priority lien on such hotel, and the Banks shall have sole and absolute
discretion in determining whether to accept the offered hotel as a "Primary
Hotel." In that regard, the Banks can take into consideration their
determination of the appraised value of the hotel, its geographic location, the
Rents (as hereinafter defined) generated by such hotel, its cash flow, the
management company for such hotel, the management contract with the management
company for operation of the hotel, and any other factors the Banks deem
pertinent, in their sole discretion. Prior to determining whether to accept a
hotel as a Primary Hotel, the Banks (i) shall require all underwriting
documentation for each such hotel received in connection with an Initial Hotel
(appraisal, environmental, title policy, etc.), (ii) shall have the right to
review and approve the lessee, the Rent schedule, and lease associated with
such hotel, and (iii) shall have a right of review/approval over all other
matters for which it has review/approval for an Initial Hotel. The Borrower is
not obligated to offer any Subsequent Hotel tothe Banks for consideration as a
Primary Hotel. If the Borrower has requested that the Banks accept a
Subsequent Hotel as a Primary Hotel and has submitted all documentation
required hereby for such consideration, the Banks shall within 45 days of their
receipt of such request and information inform the Borrower whether they will
accept such hotel as a Primary Hotel. COVENANTS PROVIDED FOR HEREIN WITH
RESPECT TO THE INITIAL HOTELS SHALL BE AUTOMATICALLY APPLICABLE TO ANY
SUBSEQUENT HOTEL THAT BECOMES A PRIMARY HOTEL.
11. Repayment Terms: Interest only, at the interest rate[s] set forth
herein, as selected by the Borrower from time to time as hereinabove described
(subject to the Working Capital Sub-Line clean-up provision and other
provisions contained herein), shall be due and payable in arrears at the end
of each Interest Period with respect to principal outstanding for which
Interest Rate Option A, B or D is chosen. Interest shall be payable in arrears
on the first day of each month with respect to principal outstanding for which
Interest Rate Option C is chosen. All outstanding principal and accrued
interest shall be due and payable in full on June 1, 1998, subject to the
annual extension provision contained herein.
<PAGE> 15
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 15
12. Prepayment Privilege: Borrower shall have the right to prepay the
principal and accrued interest in full or in part at anytime without a
prepayment premium. Notwithstanding any contrary provision contained herein,
at anytime any portion of the Line bears interest based on the London Interbank
Offered Rate, that portion of the Line may not be prepaid until maturity of the
then current Interest Period.
13. Line of Credit Administration: The Line will be administered by
Wachovia Bank of Georgia, N.A., as agent acting on behalf of the Banks (the
"Agent"). Each Bank shall retain the Note made payable to such Bank. The
Agent shall have possession of the other original loan documents and shall be
responsible for monthly billing of interest and fees and for certain additional
administrative functions. The Borrower shall submit disbursement requests to
the Agent not less than forty-eight hours prior to the requested disbursement
date (but at least two Eurodollar business days in the case of LIBOR-based
borrowings) specifying: (1) the amount requested; (2) whether or not any funds
will be used for purposes subject to the Sub-Lines described herein and any
other information required hereby to be provided in connection with such
Sub-Line or borrowing; and (3) any other information that the Banks or the
Agent may reasonably request.
II. REQUIRED LOAN DOCUMENTATION AND INFORMATION
Prior to the Closing and the disbursement of any funds thereunder, the
Banks shall require, in form and content satisfactory to the Banks and their
counsel, the following:
1. Note: The Line shall be evidenced by four promissory notes of the
Borrower (the "Notes"), in the amounts set out below for the Banks identified
below:
<TABLE>
<S> <C>
Wachovia $50,000,000.00
BB&T $35,000,000.00
SouthTrust $20,000,000.00
NationsBank $20,000,000.00
</TABLE>
Each Note shall provide that after the Note becomes due, whether by
acceleration or otherwise, the Note shall bear interest at the rate per annum
equal to 150% of the Prime Rate, in lieu of interest at the LIBOR and/or Base
Rate- based interest rate[s] hereinabove provided.
2. Deed of Trust: The Notes shall be initially secured by first lien
deeds of trust (or mortgages or deeds to secure debt, as the case may be) on
the Initial Hotels (all of which are collectively referred to as the "Initial
Hotel Deed of Trust") and all appurtenances thereto. Immediately upon
acquisition of each Delayed Acquisition Hotel, such Delayed Acquisition Hotel
shall also be subject to all collateral documentation herein referenced
(including Deeds of Trust). When the Banks have
<PAGE> 16
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 16
determined that all such documentation has been provided as to such Delayed
Acquisition Hotel, it shall confirm such fact to the Borrower. The description
of the Properties contained in or attached to the Initial Hotel Deed of Trust
shall conform to the description in the title policies referred to below. The
Initial Hotel Deed of Trust and any deed of trust, mortgage, or deed to secure
debt given with respect to any subsequent Primary Hotel (each being hereinafter
referred to as a "Subsequent Hotel Deed of Trust") (the Initial Hotel Deed of
Trust and each Subsequent Hotel Deed of Trust being collectively referred to
as a "Deed of Trust") shall contain a due-on-sale and due-on-encumbrance
clause, an indemnification against liability or loss resulting from hazardous
or toxic wastes, a waiver of any right of appraisement, dower, curtesy and
homestead rights, but shall not contain any limitation on the transfer of stock
of the Company or transfer of the general or limited partnership interest in the
Partnership. The Deed of Trust shall provide, however, that the Company shall
be the sole general partner of the Partnership.
3. Title Insurance: Standard ALTA mortgagee title insurance commitments
(to be issued to and reviewed and approved by the Banks prior to the Closing)
and policies in the amount of the Line issued by a company licensed to do
business in the states in which the Properties are located and acceptable to
the Banks, committing to insure and insuring, respectively, the Banks' first
lien position and all appurtenances thereto. The commitments shall commit to
insure and the policies shall affirmatively insure reasonable means of ingress
and egress to and from the Properties (which means of ingress and egress must
include, without limitation, ingress and egress to the Properties from the
addresses listed under Paragraph I.10 entitled Security/Collateral; and must
otherwise be satisfactory to the Banks). The policies shall contain no matters
objectionable to the Banks, including, without limitation, exceptions with
respect to mechanics' and materialmen's liens, prior years' taxes, matters of
survey, deed restrictions, prior encumbrances of any nature, restrictive
covenants, setback lines, etc. The Banks must be provided with copies of all
exceptions noted in the commitments and policies prior to the Closing. The
policies shall be issued at or after the Closing in accordance with the
commitments and shall contain a revolving credit endorsement in form and
substance satisfactory to the Banks.
4. Survey: Current plats of survey of the Land prepared, certified and
sealed by registered land surveyors, unless the Banks agree to accept a prior
as-built survey otherwise meeting the Banks' criteria. The surveys shall
show, among other things, all boundaries of the Land with a metes and bounds
description (courses and distances indicated), the course and distance to and
names of the nearest intersecting public streets or roads, the dimensions and
location of any and all setback lines, building lines and sidelines, all
existing buildings or improvements, and all streets, roads, rights-of-way,
easements, encroachments, or similar matters affecting the Properties. The
surveys shall include a certification as to the location of the Properties
within any special flood, mudslide or erosion hazard area ("flood hazard
area"). If the Land or any part thereof with respect to the Initial Hotels is
located within a flood hazard area, then, notwithstanding any contrary
provision of this Commitment, this Commitment may be terminated by the Banks at
their sole option.
<PAGE> 17
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 17
5. Room Reserves: In accordance with the Leases (as defined in Paragraph
II.20 hereof) between the Borrower and Winston Hospitality, Inc. (the
"Lessee"), the Borrower is obligated to set aside 5% of the gross room revenues
(excluding other revenue) (7% in the case of a "full service hotel") as a room
reserve to be made available to the Lessee for Capital Expenditures (such room
reserves being herein referred to as the "Room Reserves"). The Borrower may or
may not choose to establish a separate account in which the Room Reserves shall
be held.
At least once each calendar year at the time the Line documents
require annual financial statements for the Borrower to be provided to the
Banks, the Borrower shall provide to the Banks a written accounting of all
sums required to be set aside or spent under the Leases and all sums required
to be paid to the Lessee under the Leases. Failure to spend or set aside such
sums or to pay such sums to the Lessee shall be a default under the Line
documents.
6. Hazard Insurance: Hazard insurance policies which must include fire,
vandalism and malicious mischief coverage, in amounts sufficient to avoid
co-insurance liability and equal to the total replacement value of the
Improvements with extended coverage endorsements covering all Improvements
located on the Land.
The Banks shall also require:
Rent loss or rental value insurance in amounts and with coverages (not
less than twelve months) satisfactory to the Banks and in compliance with the
Leases.
All such policies (1) must be issued by a company or companies
approved by the Banks and licensed to transact business in the states in which
such Properties are located; (2) must contain standard mortgagee clauses
designating the Agent, at an address to be specified by the Agent, as mortgagee
and as loss payee; and (3) must contain provisions providing for written notice
to the Banks at least 30 days prior to any cancellation, termination or
modification thereof or of any coverage therein.
7. Flood Insurance: A flood insurance policy for each of the Properties
located in a flood hazard area. The flood insurance policy shall be in an
amount satisfactory to the Banks and shall conform to the last paragraph of
Paragraph II.6 above. An independent flood insurance determination shall be
made by the Banks or their representatives or agents, the costs of which shall
be paid for by the Borrower. The cost of the independent flood insurance
determination is $17.00 per property, which amount is due and payable in full
by the Borrower upon acceptance of this Commitment. If after the Closing the
Properties are remapped and later determined to be located in a flood hazard
area, the Borrower shall be required to obtain and maintain a flood insurance
policy in accordance with the provisions of this paragraph.
<PAGE> 18
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 18
8. Liability Insurance: Evidence of liability insurance in form and in
an amount satisfactory to the Banks and in compliance with the Leases issued by
a company or companies approved by the Banks. The Banks shall not be named on
the liability policies.
9. Appraisal: The Banks shall select an appraiser or appraisers to
prepare appraisals of the Initial Hotels. The cost of the appraisals shall be
paid by the Borrower, and the Borrower shall remit to the Banks the estimated
cost of the appraisals prior to the appraisals being ordered by the Banks. If
the actual cost of the appraisals is less than the amount remitted by the
Borrower, the difference shall be returned (without interest) to the Borrower
by the Banks. If the actual cost of the appraisals is greater than the amount
remitted by the Borrower, the Borrower shall pay such difference to the Banks
prior to the Closing. If the Borrower requests the Banks to consider a hotel
to be a Primary Hotel, the foregoing appraisal requirements shall be
applicable to such hotel.
Notwithstanding the foregoing, the Banks have agreed that no
additional appraisals for Initial Hotels 1 - 20 listed on Exhibit A shall be
required, unless the Banks determine that new appraisals are required by
applicable law.
10. Assignment of Leases, Rents and Profits: The Line shall be further
secured by an Assignment of Leases, Rents and Profits on the Properties.
11. Security Agreement and UCC Financing Statements: A Security Agreement
and Uniform Commercial Code Financing Statements, properly filed, providing the
Banks with a valid first lien on all furnishings, fixtures, equipment, and
other items and types of personal property now owned or hereafter acquired by
the Borrower and located upon the Properties and used or useable in the
construction, operation and maintenance of the Improvements.
12. Director's Resolution; Certificate of Incumbency; Good Standing
Certificate: (1) a Director's Resolution authorizing the Line or the guarantee
thereof, as the case may be, and the execution of the Line or guaranty
documents by the appropriate officers of the Company, (2) a certificate of
incumbency evidencing the appropriate officers of the Company and specimen
signatures of such officers, and (3) good standing certificates from the state
of its incorporation and from the states in which the Properties are located.
13. Partnership Agreement: A certified true copy of the Partnership
Agreement (with all amendments thereto) of the Partnership, and certified true
copies of its Certificate of Limited Partnership and its Agreement of Limited
Partnership (with all amendments thereto), together with evidence that (a) the
partners executing the loan documents or the guarantee thereof, as the case may
be, have appropriate authority to bind the Partnership and (b) the Partnership
is in good standing in the state wherein it was formed and in the states
wherein the Properties are located.
<PAGE> 19
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 19
14. Disbursements: Individual draws made under the Line (with the
exception of the Swing Line described above, which is subject to other
limitations hereinabove specified) shall be limited to amounts of $1,000,000 or
more, and in increments of $100,000 for borrowings in excess of $1,000,000.
Disbursements shall be subject to a mutually acceptable draw request procedure.
For each draw, Borrower agrees to provide the Banks with satisfactory written
documentation supporting the purpose and amount being requested.
15. Revolving Loan Agreement: The Banks shall require a Revolving Loan
Agreement (the "Loan Agreement") whose terms and conditions must be fully
satisfactory to the Banks. The terms, conditions, covenants, warranties and
representations shall include but not be limited to the following:
A. Line Use Restrictions
(i) Line proceeds for the purchase of Subsequent Hotels
shall be limited to properties located in the following states: North
Carolina, South Carolina, Virginia, West Virginia, Maryland, Georgia,
Florida, Tennessee, Mississippi, Alabama, Ohio, Kentucky, Louisiana,
Texas and the District of Columbia. Notwithstanding the preceding
sentence, proceeds from the Line may be used to purchase Subsequent
Hotels located outside of these states without the Banks' prior
written approval so long as the cumulative amount outstanding under
the Line used to purchase, renovate or equip properties outside of the
states listed above does not exceed fifty percent (50%) of the Line
Availability Amount, as such Line Availability Amount shall be
determined from time to time. Should the Borrower desire to exceed
this amount, the Banks' prior written approval shall be required, and
such approval may be withheld by the Banks in their sole discretion.
(ii) Proceeds may not be used to fund debt service
(principal; interest; principal and interest) on any other debt other
than debt service due under this Line. The foregoing, however, shall
not preclude the Borrower from paying such debt service with funds
other than Line proceeds.
(iii) Other than those uses allowed under the Working
Capital Sub-Line, the Development Sub-Line, and the Swing Sub-Line,
proceeds may be used solely to purchase fee simple title to Subsequent
Hotels or leasehold interests in Subsequent Hotels (subject to the
limitations set out in the following sentence) in the name of the
Borrower along with furniture, fixtures and equipment ancillary to the
proper operation and management of such Subsequent Hotels.
Notwithstanding the foregoing, the Borrower may use Line proceeds to
acquire leasehold estates on which Subsequent Hotels are located,
provided: (x) the amount outstanding for such purposes does not at any
one time exceed $10,000,000, (y) the Banks have reviewed and approved
the ground leases for such hotel sites, and (z) the ground
<PAGE> 20
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 20
lessor agrees in such ground lease to subordinate its fee simple
interest to the lien of any deed of trust subsequently encumbering the
leased property in favor of the Banks. Should the Borrower desire to
exceed this amount, the Banks' prior written approval shall be
required, and such approval may be withheld by the Banks in their
sole discretion.
(iv) Under the Working Capital Sub-Line, a maximum of the
Working Capital Line Limitation Amount may be outstanding at any one
time associated with the funding of working capital, Capital
Expenditures, dividends and/or swing line payouts, all as described in
the Paragraph I.3 entitled Working Capital Sub-Line.
(v) Proceeds may be used for Renovations, as defined
herein, associated with the refurbishment and/or renovation of a
Subsequent Hotel or a Primary Hotel subject to the limitations on the
use of the Working Capital Sub-Line for any Renovations.
(vi) The Borrower may not use Line proceeds for the
acquisition or renovation of a hotel if that hotel is to remain
subject to pre-existing secured indebtedness. Notwithstanding the
foregoing, the Borrower may utilize the Line for such purposes so long
as the aggregate amount outstanding under the Line used to purchase
such hotels and to effect Renovations of such hotels with pre-existing
secured indebtedness does not exceed $10,000,000.
(vii) Proceeds may not be used for the pre-development,
development or construction of hotel properties without the Banks'
prior written approval, except to the extent of the Development
Sub-Line.
B. Non-Financial Loan Covenants
(i) The Borrower must maintain its status as a Real Estate
Investment Trust (REIT) at all times.
(ii) The Borrower's Articles of Incorporation, Bylaws and
Charter Documents must be satisfactory to the Banks and shall not be
materially modified during the term or any approved extension. The
Borrower shall not change its fiscal year (and fiscal quarters)
without the prior written consent of the Banks.
(iii) The Borrower shall not make any significant or
material modifications or amendments to the Leases for the Primary
Hotels.
<PAGE> 21
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 21
C. Financial Loan Covenants
(i) The Borrower may incur additional debt other than this
Line and may incur normal trade debt, in each case subject to the
limitations contained in subparagraph (iii) below and compliance with
the financial covenant ratios contained in subparagraphs (viii) and
(ix) below. Such additional debt, however, may not be secured by a
lien on the Primary Hotels. Unless the Banks consent in writing to
such additional debt being so secured (which consent may be granted or
withheld by the Banks, in their sole discretion), any additional debt
may not be secured by a lien on any of the Subsequent Hotels.
Each Subsequent Hotel shall be subject to a negative
pledge/non-encumbrance covenant precluding the Borrower from
encumbering each Subsequent Hotel at any time unless the Banks agree
in writing that such Subsequent Hotel shall not be subject to such a
restriction. The Banks may elect to withhold such agreement in their
sole discretion without specifying any reason for the withholding of
such consent. The Borrower may request the Banks to release any
Subsequent Hotel from this restriction, but the Banks shall be
entitled to grant or withhold its consent to such a release, in their
sole discretion. Violation of the negative pledge covenant shall be a
default under the Loan Agreement.
(ii) The Public Offering and a private placement with
Promus Hotels, Inc., both being presently undertaken by the Borrower,
must provide the Borrower with proceeds, net of closing and
transaction expenses, of at least $45,000,000.
(iii) Consolidated indebtedness of the Borrower, excluding
normal trade debt, shall not exceed 45% of the Borrower's aggregate
investment in hotel properties, at Borrower's cost, as defined in the
Company's existing charter documents.
(iv) The Banks must approve the Base Rent and Percentage
Rent Schedule (attached hereto as Exhibit C for the Initial Hotels)
under the Leases for the Primary Hotels. The Borrower shall not
adjust the Base Rent and Percentage Rent Schedule as to the Primary
Hotels without the Banks' prior written consent.
(v) During the term of the Line, Borrower agrees to
provide quarterly non-audited and annual audited financial statements
for the Borrower within 45 days of each quarter end and 90 days of
each fiscal year end, together with 10-K and 10-Q reports and any
other typical shareholder correspondence.
(vi) All net proceeds generated from any and all subsequent
stock issuances must be used to reduce and/or pay out the Line as the
proceeds will allow, except where the proceeds of such sale are used to
acquire additional properties or where common stock is
<PAGE> 22
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 22
issued in exchange for total equity/ownership interest in a Subsequent
Hotel(s) or an entity owning a Subsequent Hotel(s).
(vii) Borrower shall make available to Lessee on
all of its Hotels, on an annual basis, Room Reserves of at least 5% of
gross room revenues (excluding other revenue) ("full service hotels,"
however, being subject to a 7% reserve) for each lease year.
(viii) Total Funded Debt (as hereinafter defined) of the
Borrower and its subsidiaries divided by "Cash Available for
Distribution" shall be no greater than 5.00 tested quarterly on a
rolling twelve calendar month basis. Cash Available for Distribution,
as used herein, has the same meaning as used in calculating the Cash
Flow Amount, but for purposes of such calculation shall include all
hotels now or hereafter owned by the Borrower from time to time
(Primary and Subsequent Hotels). For purposes hereof, "Total Funded
Debt," as used herein, means the sum of the following: (i) all
indebtedness and any other direct liability for third party debt
(including liability as a general partner for partnership debt) for
borrowed money, (ii) all capital leases, and (iii) all guarantees of
indebtedness of third parties, specifically including guarantees of
subsidiary indebtedness, but specifically excluding contingent
liability arising under franchise agreements. Total Funded Debt,
however, shall exclude normal trade debt.
(ix) Borrower shall maintain at all times a minimum
Tangible Net Worth of at least $70,000,000, which amount shall be
increased by not less than eighty-five percent of the net proceeds of
any future offerings of the Company's capital stock, including the
offering described in (ii) above. In the event that any subsequent
Public Offering is oversubscribed, this minimum Tangible Net Worth
requirement shall be increased by an amount equal to 85% of the net
proceeds of such oversubscription.
(x) The Loan Agreement shall also contain a provision in
form and substance satisfactory to the Banks precluding the Borrower
and any subsidiaries or related corporate or partnership entities from
incurring contingent liabilities other than contingent liability
associated with franchise agreements. The foregoing shall not
preclude the Borrower from incurring direct or contingent liabilities
in connection with any partnership or joint venture with Buckhead
Strategic Corp. II, a Delaware corporation, or its assigns, but such
direct or contingent liabilities of the Borrower and its subsidiaries
shall be included within the Total Funded Debt calculation in (viii)
above.
(xi) Such other covenants, warranties and representations
that are customary to transactions of this type as may be required by
the Banks prior to closing.
<PAGE> 23
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 23
D. Agency Provisions in the Loan Agreement. The Loan Agreement will
contain customary provisions addressing, among other things, the following: (1)
the Agent's duties and responsibilities under the Loan Agreement; (2) the
Agent's reliance upon certifications, notices and other communications believed
by it to be genuine and correct; (3) disclaiming any responsibility or
liability for any punitive, exemplary or consequential damages; (4) confirming
that each Bank has independently and without reliance on the Agent, conducted
such Bank's own credit analysis of the transaction; and (5) the procedures
under which the Agent may resign.
The Loan Agreement will also contain standard provisions to indemnify
the Agent and the Banks against and compensate them for all losses,
liabilities, claims, damages or expenses relating to their loans, the
Borrower's use of loan proceeds, including excise and withholding taxes, or the
payment of any loan bearing interest based upon the "Adjusted London Interbank
Offered Rate" on any day other than the last day of the Interest Period
applicable thereto (except to the extent explicitly provided herein to the
contrary) or any failure to borrow a loan bearing interest based upon the
"Adjusted London Interbank Offered Rate" on the date of the borrowing specified
therefor, including without limitation, reasonable attorneys fees and
settlement costs and other reasonable and related expenses (except such as
result from the indemnities' gross negligence or willful misconduct).
Any agency provisions of the Loan Agreement shall be consistent with
the terms of this Commitment, but the Borrower acknowledges that the
consummation of and agreement among the Banks upon the agency provisions of the
Loan Agreement is a condition precedent to the consummation of the Line
described herein. The agency provisions of the Loan Agreement are for the
benefit of the Banks alone, and the Banks alone shall negotiate such agency
provisions (specifically including which required bank approvals require
unanimous consent and which bank approvals require only lesser percentage
approvals by the Banks). In lieu of including some or all of such agency
provisions within the Loan Agreement, the Banks may elect, in their sole
discretion, to have such agency provisions and intercreditor provisions in a
separate agreement to which the Borrower is not a party.
16. Legal Opinion: A legal opinion from an attorney acceptable to the
Banks to the effect that (a) the loan documents have been duly authorized,
executed and delivered, are valid and enforceable according to their terms
under all applicable laws and regulations and are not in violation of
applicable usury laws, (b) the Line and the execution of the several documents
required in connection therewith have been authorized by all necessary
corporate and partnership action, and the person or persons executing said
documents on behalf of such entities are authorized to do so, (c) the financing
statements together with the Deeds of Trust and/or Security Agreements
constitute a valid and prior first lien on the personal property therein
described, (d) if the Borrower or any general partner of the Borrower is a
corporation, such corporation is a corporation duly formed, validly existing
and in good standing under the laws of the state of its formation and, in the
case of the Borrower and any general partner of the Borrower, if not formed
under the laws of the states in which the Properties are located, is qualified
to transact business and is in good standing in such states, (e) if the
Borrower, any general partner of the Borrower or any guarantor is a
partnership, such partnership is a partnership duly formed, validly existing
and in good standing under the laws of the state of its formation and, in the
case of
<PAGE> 24
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 24
the Borrower and any general partner of the Borrower, if not formed under the
laws of the states in which the Properties are located, has taken all steps
necessary to qualify in and is in good standing in such states, and (f) to the
knowledge of such counsel, no litigation is pending or threatened which, if
adversely determined, would have a material adverse effect on the Borrower.
The Banks may also require a satisfactory legal opinion to the effect that each
Bank, by virtue of encumbering the Initial Hotel Property or the Subsequent
Hotel Property, as the case may be, is not required in order to avail itself of
the remedies in the loan documents or otherwise to qualify to transact business
initially in the state in which the Property is located (if such Bank is not
conducting business in such state). The Banks also reserve the right to
require such other opinion(s) as the Banks or their counsel may reasonably
request.
17. Zoning: Written evidence that the Properties and their intended uses
are in compliance with all applicable zoning ordinances and land use laws and
regulations without regard to any conditional or non-conforming use permit.
Such evidence may consist of a certification from the appropriate governmental
authority(ies), a legal opinion from an attorney satisfactory to the Banks, or
a zoning endorsement to the title insurance policies referred to in Paragraph
II.3 above.
18. Environmental Protection: Evidence that the Properties comply with
all applicable laws and regulations pertaining to the protection and
preservation of the environment and that none of the Improvements contain
asbestos containing material or any other material subject to regulation by
local, state or federal environmental authorities. In the case of Holiday
Select (Dallas, Texas) and Comfort Inn (Greenville, South Carolina), both of
which are known to have improvements containing asbestos, the Borrower shall
develop and implement an operations and maintenance plan acceptable to the
Banks for observing and maintaining the Improvements in such a manner so as to
reduce risks resulting from such asbestos and shall provide information from
time to time as requested by the Banks regarding compliance (including, if
requested by the Banks, testing and further analysis of compliance). Such
evidence shall include (without limitation) an inspection report by an
environmental engineer satisfactory to the Banks, who shall conduct soil and
chemical testing, addressing the probability of toxic or hazardous wastes on,
at or adjacent to the Land (in soil or water), taking into consideration the
history of the Land, including an identification of all owners for at least the
most recent forty (40) years, and its uses, adjacent land uses and the result
of a site inspection by such engineer, and certifying that there are no
hazardous or toxic wastes on or at the Land. In addition, if fill dirt is at
any time to be brought to the Land from another tract of land, the Banks shall
require similar evidence regarding such other tract prior to such fill dirt
being placed on the Land. If any such evidence discloses the existence or
probable existence of any toxic or
<PAGE> 25
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 25
hazardous wastes of any quantity on or at the Land, the Banks reserve the
right, in their sole discretion, to void this commitment.
19. Financial Statements: The Closing is subject to receipt by the Banks
of current satisfactory financial statements on the Borrower. The Line
documents shall provide that financial statements on the Borrower be submitted
to the Banks during the life of the Line as follows:
In the case of a corporation or partnership, annual financial
statements within 90 days after each fiscal year-end of such corporation and
partnership and quarterly financial statements within 45 days after the end of
each fiscal quarter of such corporation and partnership.
In addition, the Line documents shall require submission of financial
statements on the Lessee, as provided in Paragraph II.20 below.
20. Tenant Leases: As used herein, the term "Lease" refers to any lease
of the real property and improvements thereon, whether of a Primary Hotel or a
Subsequent Hotel. All Leases affecting the Primary Hotels between the Borrower
and the Lessee must be satisfactory to the Banks in all respects. No Lease on
a Primary Hotel may be assigned or sublet by the Lessee without the Banks'
prior written approval. The Borrower agrees to submit true copies of all
Leases and modifications and extensions of such Leases affecting the Primary
Hotels and Subsequent Hotels. The Banks reserve the right to determine whether
the Lease for a Primary Hotel is subordinate to the lien of the Deed of Trust.
Any subordination agreement shall entitle the Banks to terminate such Lease
upon the occurrence of an event of default under the Line documents.
The Borrower also agrees to deliver to the Banks annual and quarterly
financial statements on the Lessee within 90 days after Lessee's fiscal
year-end or within 45 days after the Lessee's fiscal quarter, as the case may
be. Lessee must acknowledge that if there are any discrepancies between the
terms of the Line documents and the Leases, the terms of the Line documents
shall govern such discrepancy during the term of the Line.
21. Hotel/Motel Management: The Banks have approved Winston Hospitality,
Inc., as the lessee of the Initial Hotels (the "Lessee"). The Banks have also
approved the following entities as the franchisors of the Initial Hotels:
Promus Hotels, Inc., Holiday Inns Franchising, Inc., Marriott International,
Inc., and Choice International Hotels, Inc. Robert W. Winston, III and/or
John B. Harris, Jr. shall at all times maintain a majority ownership interest
and voting control of the Lessee unless the Banks consent in advance and in
writing to such a change in ownership interest and voting control of the Lessee
(such consent to be within the sole discretion of the Banks). The agreements
pursuant to which the Lessee operates the Primary Hotels as a franchise (the
"Franchise Agreements") must be satisfactory to the Banks and shall be
collaterally assigned to the Banks, if the Franchise Agreement does not
prohibit such collateral assignment. If the Franchise Agreement
<PAGE> 26
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 26
prohibits such assignment, the Borrower shall provide to the Banks a "comfort
letter" executed by such franchisor and providing (a) permission for the Banks
to preserve the franchise following default by the Borrower in the Line
documents and (b) the agreement by the franchisor to give the Banks notice of
any default under the agreements between the franchisor and the Lessee and a
reasonable opportunity to cure such default. The provisions of the "comfort
letter" must be satisfactory to the Banks, which shall not unreasonably
withhold its approval of such comfort letter. The Line documents shall provide
that a "default" (default, as used in this sentence, being one either (i)
declared by the franchisor under the franchise agreement, or (ii) resulting in
the exercise of remedies by the franchisor upon the occurrence of a default by
the Lessee under such franchise agreement) by the Lessee in any of the
Franchise Agreements which, in the judgment of the Banks might adversely affect
the operation of the Primary Hotels, shall constitute a default in the Line.
Such franchisor of the Primary Hotels may not be replaced by the Lessee without
the Banks' prior written consent.
The Banks have approved Interstate Management & Investment Corporation
("Interstate Management"), Promus Hotels, Inc. ("Promus"), Winston Hospitality,
Inc., and Impac Hotel Group, Inc. (as the management company for Holiday Inn -
Select in Dallas, Texas, but only for a one-year period following Closing) as
the management companies for the Initial Hotels. Any management agreement
entered into for the management of any Subsequent Hotel, however, is subject to
the prior review and approval of the Banks. Such management agreements for
Primary Hotels other than those managed by Promus shall be subordinate to the
Deeds of Trust in favor of the Banks. Such subordination with respect to
Primary Hotels other than those managed by Promus or Interstate Management
shall entitle the Banks to terminate the management agreement upon the
occurrence of an event of default under the Line documents. In the case of
Promus and Interstate Management, the management agreement shall provide that
the management agreement is terminable by the Lessee (or its assigns) upon
foreclosure, deed in lieu of foreclosure, or the taking of possession of the
hotel in connection with remedial measures undertaken by the Banks. Any rights
of the Lessee under the management agreement shall be collaterally assigned to
the Banks. The Banks have reviewed and approved the form of the Promus
management agreement.
22. Licenses and Permits: To the extent obtainable on or prior to the
Line closing, the Banks shall be furnished copies of all licenses, permits and
approvals from any governmental authorities having jurisdiction over the
construction and/or operation of the Initial Hotels.
23. Itemized List of Chattels: If requested by the Banks, the Borrower
shall furnish the Banks a detailed list of chattels utilized for the operation
and or maintenance of the Initial Hotels. The Borrower shall execute and
deliver Security Agreements and UCC Financing Statements reflecting the Banks'
security interest therein.
<PAGE> 27
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 27
24. Release Provisions: If the Borrower seeks to obtain the release of a
Primary Hotel, the Borrower shall provide to the Banks a replacement Borrowing
Base Certificate reflecting the deletion of such hotel from the calculations of
the Loan to Value Amount and the Cash Flow Amount, as previously described in
Paragraph I.2.B.(3)(e). The Banks shall not release such hotel until they have
reviewed and approved such Borrowing Base Certificate. The Borrower may obtain
a release of any Primary Hotel or Primary Hotels, provided (x) such Primary
Hotel is being sold by the Borrower to a third party that is unrelated to the
Borrower, (y) provided there is no existing default in the Line documents, and
also (z) provided one of the following conditions is satisfied:
(i) Substitute Hotel. The Borrower may offer to substitute
another hotel or hotels to serve as a "Primary Hotel" (a
"Substitute Hotel"), in which case the replacement Borrowing
Base Certificate shall reflect the inclusion of such hotel in
the calculations of the Line Availability Amount, and the
Borrower shall provide the documentation necessary for the
Banks to consider such hotel as a Primary Hotel.
(ii) Alternative Collateral. The Borrower may offer alternative
collateral for release of a Primary Hotel. The Banks shall
have full discretion over whether such alternative collateral
is satisfactory.
(iii) Line Availability Amount Reduction. The Borrower shall be
entitled to a release of any Primary Hotel upon a reduction in
the Line Availability Amount as reflected in the revised
Borrowing Base Certificate submitted by the Borrower following
confirmation by the Banks of the new Line Availability Amount.
Should the Line amount then outstanding exceed the Line
Availability Amount as evidenced by the approved replacement
Borrowing Base Certificate, the Borrower shall also reduce the
outstanding principal balance by such excess on or before the
release of such Hotel. The reduction in the Line Availability
Amount shall be effective upon the release of such hotel.
25. Allocation of Principal Payments: At the time of any paydown
of outstanding principal under the Line (a "Principal Paydown"), the
Borrower shall provide to the Banks an allocation of such Principal
Paydown among the various categories or sub-lines for which principal
amounts are outstanding. Such allocation shall be pursuant to a
standard form approved by the Banks and outlining amounts previously
outstanding, amounts applied, and reduced amounts following such
paydown. The Banks shall be entitled to review and confirm such
allocation, and in the event of a dispute as to such amounts and such
calculation, the Banks' determination shall be conclusive.
Such allocation of Principal Paydowns shall be subject to the
following conditions:
<PAGE> 28
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 28
1. Certain categories and sublimits are not mutually exclusive.
For example, a Development Hotel located in Montana is to be
included in both the Development Sub-Line calculation
[Paragraph I.3.B.] and the Geographical Proximity Limitation
[Paragraph II.15A(i)]. To the extent that a draw has been so
"double counted" under such sub-lines or categories, a
Principal Paydown with respect to such a draw shall be
likewise "double counted."
2. Any Principal Paydown allocation made by the Borrower as to
hotels shall be made on a hotel-by-hotel basis, and, to the
extent possible, the Borrower shall be required to allocate a
Principal Paydown to all draws for one hotel before making an
allocation for draws for another hotel. The Borrower cannot
allow more than one hotel to have partial outstanding draws
allocated to it. The Borrower may elect to allocate all or
any portion of a Principal Paydown to the Working Capital
Sub-Line or the Swing Sub- Line, and is not required to repay
such a sub-line in its entirety with a Principal Paydown prior
to allocating the balance of a Principal Paydown to a hotel.
Where, for example, $10 million has been drawn down and is still
outstanding with respect to the Montana Development Hotel mentioned above, but
only $5 million of the Development Sub-Line is then allocated to such hotel
(pursuant to a reduction in the Development Sub-Line for such hotel based on
Net Operating Income of such hotel), if the Borrower elects to allocate a
portion of a $11 million Principal Paydown to such hotel, the Borrower could
(i) allocate $10 million of the Principal Paydown to such hotel and allocate
the residue to another hotel or purpose (e.g., Swing- Line or Working Capital
Sub-Line) or (ii) allocate the bulk of such Principal Paydown to another
purpose (e.g., Swing- Line or Working Capital Sub-Line) and apply the residue
to the Montana hotel, provided no other hotel had drawings partially repaid.
26. Additional Items: Such other matters and items as the Banks or their
counsel may reasonably request.
III. OTHER CONDITIONS
1. Costs: The Line herein referenced shall be closed without
cost to the Banks, and all expenses incurred in connection
with the origination of the Line (including, without
limitation, the Banks' counsel's fees) are to be paid by the
Borrower. Such expenses shall be paid by the Borrower whether
or not the Line closes.
2. Modification and Refinance Fees: Any modification or
refinance of the Line may be conditioned by the Banks on the
payment by the Borrower of a nonrefundable fee, which shall be
in addition to any other fee paid by the Borrower to the Banks
in
<PAGE> 29
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 29
connection with the Line. Nothing in this paragraph shall
obligate the Banks to modify or refinance the Line, and the
Banks reserve the right to require the Line to be repaid
strictly in accordance with the terms and conditions contained
in the Notes.
3. Subordination Agreement: The Banks, at their option, may
require the Lessee (or any subsequent lessee) of the
Properties pursuant to leases hereafter executed to enter into
and execute, along with the Banks, a Subordination Agreement
satisfactory to the Banks.
4. Participation: The Banks shall have the right, at their sole
discretion, at any time or from time to time, to invite
participants to participate in the Line and the Borrower
agrees to execute any documents reasonably requested by the
Banks in connection with any such participation. The Banks
may disclose to any participants or prospective participants
any information or other data or material in the Banks'
possession relating to the Borrower, the Line, the Properties
or the Improvements without the further consent of, or notice
to, the Borrower.
5. Form of Tenant Lease. The standard form of lease to be used
by the Borrower for Subsequent Hotels shall be submitted to
the Banks for approval prior to closing. Each Lease of the
Primary Hotels is subject to the Banks' prior review and
approval.
6. Cross Default. Any default by the Borrower in any note, deed
of trust or other document evidencing, documenting or securing
a loan from any of the Banks to the Borrower shall, at the
option of the Banks, constitute a default by the Borrower in
any other note, deed of trust or document (including, without
limitation, the Notes and Deed of Trust) evidencing,
documenting or securing the Line.
7. ADA Certification: A certification or other evidence
satisfactory to the Banks shall be submitted to the
Banks that shows the Properties comply with the
Americans with Disabilities Act of 1990.
9. General Conditions:
a. The Borrower understands and agrees that this
Commitment is issued directly to the Borrower and cannot be assigned
without the prior written consent of the Banks. The Commitment is for
the sole and exclusive benefit of the Borrower, and no third party is
intended to be benefited in any respect hereby. If, prior to the
origination of the Line, there is any material adverse change in the
condition (financial, business or otherwise) of the Borrower or if,
prior to closing, Winston Hotels, Inc. ceases to be the sole general
partner of the Partnership, the Banks shall have the right to
terminate their obligations hereunder.
<PAGE> 30
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 30
b. If the Borrower (and if either is a partnership, any
partner thereof) at or before the closing of the Line should file a
petition in bankruptcy under any of the provisions of the bankruptcy
laws, or if a petition in bankruptcy should be filed against any one
of them, or if any of them should make an assignment for the benefit
of creditors, or otherwise become insolvent, or if any of them should
become deceased or become mentally incapacitated, this Commitment may
be cancelled at the option of the Banks.
c. The Borrower by accepting this Commitment represents
and warrants to the Banks that except as disclosed to the Banks in
writing on or prior to the date hereof, there are no actions, claims,
suits or proceedings pending, or to the Borrower's knowledge,
threatened or reasonably anticipated against or affecting the Borrower
at law or in equity or before or by any governmental authority and
there is no possibility of any judgment, liability or award which may
reasonably be expected to result in any material and adverse change in
the Borrower's condition (financial, business or otherwise).
d. All the provisions incorporated in this Commitment
shall survive the loan closing and each Deed of Trust shall contain
the following provision:
"All the terms and conditions of the commitment upon
which the loan hereby secured was predicated are
incorporated herein by this reference and made a part
hereof and should Grantor default with respect to any
term or provision thereof, such default shall
constitute a default hereunder and under the Note
hereby secured. To the extent that any provision in
the Loan Agreement conflicts with any provision
of the commitment, the terms of the Loan Agreement
shall prevail. To the extent, however, that any
provision in any of the other Line documents conflicts
with any provision of the commitment, the terms of the
commitment shall prevail."
e. The Borrower understands that the Banks are relying
upon the statements and representations made to the Banks and upon
such additional data as may be supplied to the Banks for the purpose
of evaluating the line request. If any of such information is found
to be inaccurate or to have been misrepresented in any material
respect, this Commitment may be cancelled at the option of the Banks.
f. The Borrower certifies that all information provided
to the Banks by the Borrower is true and complete in all respects to
the best of the Borrower's knowledge and that the same was given to
induce the Banks to make a line of credit available as herein
requested.
<PAGE> 31
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 31
g. If this commitment is being signed by less than all
parties (i.e. Borrower, partners of the Borrower), the undersigned
hereby certifies and warrants to the Banks that the undersigned has
been duly authorized to execute and deliver this Commitment for and on
behalf of, and as agent for, any such party whose signature does not
appear below.
h. If this Commitment is acceptable, please so indicate
by signing in the space provided on the enclosed copy of this letter
and return same to us not later than May 10, 1996. If not so
accepted, or if the modification to the Line pursuant to this
Commitment is not closed by July 31, 1996, the Banks may on the
occurrence of either event void this Commitment at their sole option.
Very truly yours,
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: ________________________________
Jeffrey P. Castleberry
Senior Vice President
<PAGE> 32
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 32
BRANCH BANKING & TRUST COMPANY
By: ________________________________
Richard E. Fowler
Senior Vice President
SOUTHTRUST BANK OF ALABAMA
By: ________________________________
John D. Pierce
Group Vice President
NATIONSBANK, N.A.
By: ________________________________
Jack M. Wiser
Vice President
<PAGE> 33
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 33
ACCEPTED THIS THE _____ DAY OF APRIL, 1996.
WINN LIMITED PARTNERSHIP,
a North Carolina limited partnership (SEAL)
By: WINSTON
HOTELS, INC.
its General Partner
Attest:
By:
- - ------------------------- ---------------------------
Secretary President
- - ------
[CORPORATE SEAL]
WINSTON HOTELS, INC.
Attest:
By:
- - -------------------------------- --------------------------
Secretary President
- - --------------
[CORPORATE SEAL]
<PAGE> 34
EXHIBIT A
<TABLE>
<CAPTION>
Address City County State Rooms/Suites Franchise Owner
------- ---- ------ ----- ------------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
1. 201 Asheville Ave. Cary Wake NC 130 Hampton Inn Company
2. 1816 Hillandale Rd. Durham Durham NC 136 Hampton Inn Partnership
3. 1675 US Hwy-1 So. Pines Moore NC 126 Hampton Inn Partnership
4. 474 Western Blvd. Jacksonville Onslow NC 120 Hampton Inn Partnership
5. Hwy. 105-208 Linville Rd. Boone Watauga NC 95 Hampton Inn Partnership
6. 8419 US Hwy-29 North Charlotte Mecklenburg NC 125 Hampton Inn Partnership
7. 5107 Market Street Wilmington New Hanover NC 118 Hampton Inn Partnership
8. 151 South College Rd. Wilmington New Hanover NC 146 Comfort Inn Partnership
9. 1533 Southlake Parkway Atlanta Clayton GA 124 Hampton Inn Partnership
10. 112 Tourist Drive Brunswick Glynn GA 127 Hampton Inn Partnership
11. One Airport Road Hilton Head Beaufort SC 125 Hampton Inn Partnership
12. 12610 Chestnut Hill Rd Chester Chesterfield VA 66 Hampton Inn Partnership
13. 2100 West Hundred St Chester Chesterfield VA 123 Comfort Inn Partnership (1)
14. 1922 Skibbo Road Fayetteville Cumberland NC 176 Comfort Inn Partnership
15. 3508 Mount Moriah Rd Durham/Chapel Hill Durham NC 138 Comfort Inn Partnership (2)
16. US Hwy. 1 North Raleigh Wake NC 149 Comfort Inn Partnership
17. 6209 Glenwood Avenue Raleigh Wake NC 141 Hampton Inn Partnership
18. 144 Bee Street Charleston Charleston SC 128 Comfort Inn Partnership
19. 5225 North Atco Lane Charleston Charleston SC 168 Quality Suites Partnership
20. 629 Frontage Rd Augusta Richmond GA 123 Comfort Inn Partnership
21. 11350 LBJ Freeway Garland Dallas TX 244 Holiday Inn Select Partnership
22. 940 East Main Street Abingdon Washington VA 80 Holiday Inn Express Partnership
23. 4154 Preferred Place Duncansville Dallas TX 119 Hampton Inn Partnership
24. 769 Hammond Drive Atlanta Fulton GA 133 Hampton Inn Partnership
25. NE Corner of Pineland Drive Duluth Gwinnett GA 134 Hampton Inn & Suites Partnership
and Crestwood Parkway
26. 151 Van Campen Drive Wilmington New Hanover NC 128 Marriott Courtyard Partnership
27. 100 MacAlyson Court Cary Wake NC 140 Homewood Suites Partnership
28. 401 Bay Area Boulevard Clear Lake Collin TX 92 Homewood Suites Partnership
3554
</TABLE>
(1) Includes adjacent restaurant building.
(2) This hotel located at 3508 Mount Moriah Road in Durham has
approximately 3.941 acres of excess land believed to be
unnecessary for the operation of the hotel. Subject to the
satisfaction of the Banks' requirements for release of
property, the Banks agree to release such land without payment
of a release fee (other than for an administrative fee not
exceeding $2,000 and reimbursement of the Banks' actual
out-of-pocket expenses).
Hotels 25 (Duluth) and 26 (Wilmington) are the Two Delayed Acquisition
Hotels.
<PAGE> 35
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 35
EXHIBIT B
1ST QUARTER
Calculation and Amount of Deduction
<TABLE>
<S> <C> <C>
Development Hotel #1 $250,000 NOI / .13 = $1,923,000.00
Construction Hotel #1 $100,000 NOI / .13 = $ 769,000.00
Development Hotel #2 $200,000 NOI / .13 = $1,538,000.00
2D QUARTER (INCLUDES 1ST QUARTER)
Calculation
-----------
Development Hotel #1 $200,000 / .13 = $1,538,000.00
Construction Hotel #1 $250,000 / .13 = $1,923,000.00
Development Hotel #2 $500,000 / .13 = $3,846,000.00
Deductions in Second Quarter
----------------------------
Development Hotel #1 $1,538,000 - 1,923,000 = $ -0-
Construction Hotel #1 $1,923,000 - 769,000 = $1,154,000.00
Development Hotel #2 $3,846,000 - 1,538,000 = $2,308,000.00
-------------
</TABLE>
<PAGE> 36
EXHIBIT C
The following table sets forth certain unaudited information with respect
to the Hotels and the applicable Percentage Leases (dollar amounts are in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
---------------------------------------
ANNUAL PERCENTAGE PRO FORMA
RENT FORMULA(1) -----------------------------------
--------------------------- (IN THOUSANDS)
NUMBER REVENUE LESSEE
OF BASE BREAK FIRST SECOND ROOM LEASE NET INCOME/
ROOMS RENT POINT TIER TIER REVENUE PAYMENTS(2) LOSS(3)
------ ------- ------- ----- ------ ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT HOTELS(4)
Hampton Inn:
Durham, NC........................... 136 $ 428 $1,628 33.6 % 65.0% $2,594 $ 1,175 $ 236
Raleigh, NC.......................... 141 472 1,900 40.0 65.0 2,287 1,011 82
Charlotte, NC........................ 125 324 1,323 31.8 65.0 2,286 1,047 246
Atlanta, GA.......................... 124 404 1,450 31.0 66.0 2,205 948 228
Cary, NC............................. 130 400 1,374 30.6 69.0 2,175 973 249
Wilmington, NC....................... 118 497 1,496 34.1 64.0 2,126 912 244
Brunswick, GA........................ 127 358 1,348 28.7 66.0 2,033 839 152
Southern Pines, NC................... 126 360 1,476 34.2 66.0 1,955 820 195
Jacksonville, NC..................... 120 367 1,425 33.6 69.0 1,831 759 198
Hilton Head, SC...................... 125 298 1,375 26.0 66.0 1,737 596 80
Boone, NC............................ 95 249 1,150 29.0 66.0 1,557 602 108
Chester (Richmond), VA............... 66 189 950 37.5 64.0 1,259 554 84
Comfort Inn:
Durham/Chapel Hill, NC............... 138 579 1,975 42.5 67.0 2,518 1,203 152
Fayetteville, NC..................... 176 623 1,975 43.0 69.0 2,432 1,164 138
Wilmington, NC....................... 146 493 1,578 33.1 66.0 2,322 1,013 152
Chester (Richmond), VA............... 123 497 1,775 43.0 62.0 2,210 1,059 98
Charleston, SC....................... 128 441 1,825 41.8 66.0 2,190 1,003 85
Raleigh, NC.......................... 149 322 1,527 34.0 62.0(5) 1,908 755 195
Augusta, GA.......................... 123 294 1,100 27.0 66.0 1,418 507 65
Clearwater/St. Petersburg, FL........ 120 277 1,275 28.5 65.0 1,382 433 34
Quality Suites:
Charleston, SC....................... 168 864 2,900 39.3 68.0 3,706 1,687 195
----- ------- ------ ------- -------
Subtotal for Current Hotels.......... 2,704 8,736 44,131 19,060 3,216
----- ------- ------ ------- -------
ACQUISITION HOTELS
Hampton Inn:
Perimeter (Atlanta), GA.............. 131 $ 574 1,700 42.0 % 70.0 -- 574(6) (574)(7)
Duncanville, TX...................... 119 221 1,250 33.0 70.0 1,370 497 (26)
Comfort Inn:
Greenville, SC....................... 191 309 1,600 (8) 25.0 66.0 1,989 656 165
Homewood Suites:
Cary, NC............................. 140 1,015 1,500 (9) 53.0 75.0 3,164 2,043(6) 117
Clear Lake (Houston), TX............. 92 472 1,677 35.0 70.0 320 472 (377)(7)
Hampton Inn & Suites:
Duluth (Atlanta), GA................. 136 581 1,825 42.3 70.0 -- 581(6) (581)(7)
Comfort Suites:
London, KY........................... 62 165 775 37.5 70.0 1,050 483 80
Holiday Inn Select:
Garland (Dallas), TX................. 244 1,036 3,600 40.0 67.0 6,352 (11) 2,084(12) (146)
Holiday Inn Express:
Abingdon, VA......................... 80 187 900 37.5 70.0 1,181 535 131
Courtyard by Marriott:
Wilmington, NC....................... 128 525 1,325 42.3 70.0 -- 525(6) (525)(7)
----- ------- ------ ------ -------
Subtotal for Acquisition Hotels....... 1,323 5,085 15,426 8,450 (1,736)
Lessee interest income not allocated
to the Hotels above.................. 85
Lessee general and administrative
expenses not allocated to the Hotels
above................................ (1,776)
----- ------- ------- ------- -------
Consolidated total for Hotels......... 4,027 $13,901 $59,674 $27,510 $ (211)
===== ======= ======== ======= =======
</TABLE>
(1) All Percentage Rent formulas included in the Percentage Leases are based on
room revenue from the related Hotels. See "Business and Properties -- The
Percentage Leases" and "Risk Factors -- Risk that Pending Acquisitions Will
Not Close".
(2) Represents lease payments from the Lessee to the Partnership or the
Company, as applicable, calculated on a pro forma basis by applying the
rent provisions in the Percentage Leases, and for the Acquisition Hotels
the rent provisions in the proposed Percentage Leases, to the historical
room revenue of the Hotels for the year ended December 31, 1995. Under the
terms of the related
<PAGE> 1
EXHIBIT 10.16
May 7, 1996
Winston Hotels, Inc.
WINN Limited Partnership
c/o Mr. Robert W. Winston, III
2209 Century Drive
Raleigh, NC 27612
Re: $17,000,000 Unsecured Line of Credit
Dear Ladies/Gentlemen:
This letter constitutes the commitment (the "Commitment") of Wachovia
Bank of North Carolina, N.A. ("Wachovia") and Branch Banking & Trust Company
("BB&T") (Wachovia and BB&T being collectively referred to as the "Banks") to
make an unsecured line of credit available (the "Line"), on a pro rata basis as
set out below under Paragraph II.1, to the borrower described below (the
"Borrower") under the following terms and conditions.
I. GENERAL PROVISIONS
1. Borrower: Winston Hotels, Inc., a North Carolina corporation (the
"Company"), and WINN Limited Partnership, a North Carolina limited partnership
(the "Partnership"). The Company and the Partnership shall be jointly and
severally liable for all obligations of the "Borrower."
2. Maximum Line Amount: $17,000,000.00 (the "Maximum Line Amount"). As
used herein, the term "loan" shall include any line of credit, advance,
drawing, debit, liability, and any other obligation of the Borrower to the
Banks arising out of this commitment.
3. Term: The term of this Line shall expire on July 31, 1996.
4. Loan Interest Rate: A rate per annum (computed on the basis of a
360-day year for the actual number of days in each Interest Period) equal to
the "Adjusted London Interbank Offered Rate" plus 1.75%. Adjusted London
Interbank Offered Rate applicable to any Interest Period, which for purposes
hereof shall be each successive 30-day period from the date of the Note, means
a rate per annum equal to the quotient obtained by dividing (i) the applicable
London Interbank Offered ("LIBO") Rate for such Interest Period by (ii) 1.00
minus the Eurodollar Reserve Percentage.
"LIBO Rate" means for an Interest Period the rate per annum at which United
States dollars of amounts equal to or comparable to the principal amount of the
borrowing for which such LIBO Rate has been selected are offered for a term
comparable to the Interest Period in the London interbank
<PAGE> 2
Winston Hotels, Inc.
WINN Limited Partnership
May 7, 1996
Page 2
market, which rate appears on the display designated as Page "3750" of the
Telerate Service or such other page as may replace Page "3750" of that service
or or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying the London Interbank Offered
Rates for United States dollar deposits (the "3750 Telerate Service")
determined as of 11:00 a.m. London time, as that rate is set three (3)
Eurodollar business days (i.e., any day on which dealings in United States
dollar deposits are carried out in the London interbank market except Saturday,
Sunday, or other day on which commercial banks in North Carolina are authorized
by law to close) prior to the first day of the Interest Period provided that
(i) if more than one such offered rate appears on the applicable Telerate
Service, the LIBO Rate will be the arithmetic average of such offered rates;
(ii) if no such offered rates appear on such page or if there is no such
service nominated by the British Bankers' Association, the LIBO Rate for such
Interest Period will be the arithmetic average of rates (rounded upward, if
necessary, to the next higher 1/100 of 1%) quoted by not less than two (2)
major banks in the United States, selected by Wachovia at approximately 10:00
a.m., New York City time, two (2) Eurodollar business days prior to the first
day of such Interest Period, for deposits in United States dollars offered in
the London Interbank market in amounts comparable to the principal amount of
the borrowing for which such LIBO Rate has been selected and for a term
comparable to the Interest Period.
"Eurodollar Reserve Percentage" means for any day that percentage (expressed as
a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement for a member bank of the Federal Reserve System in
respect of "Eurocurrency liabilities". The Eurodollar Reserve Percentage shall
be adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
If, as a result of any Regulatory Change (as defined below):
a. The basis of taxation of the payments to any of the Banks of
the principal of, or interest on, such LIBO Rate loan, as
applicable (other than taxes imposed on the overall net income
of such Bank or of any of its lending offices) is changed; or
b. Any reserve, special deposit or similar requirements (other
than any change by way of imposition or increase in the
Eurodollar Reserve Percentage) relating to such loan is
imposed or modified;
<PAGE> 3
Winston Hotels, Inc.
WINN Limited Partnership
May 7, 1996
Page 3
and as a result thereof, the cost to any Bank of making, maintaining, or
funding such loan is increased (the "Increased Cost"), then the Borrower shall
pay to such Bank such additional amount or amounts as will compensate the Bank
for the Increased Cost, subject to the conditions set forth below. Each Bank
will notify the Borrower of the nature and effective date of the applicable
Regulatory Change and calculation of the Increased Cost resulting therefrom as
soon as is reasonably possible. The effective date of such Regulatory Change
will not be applied retroactively but will be applied at the beginning of the
applicable Interest Period.
"Regulatory Change" shall mean the adoption or making after the date of this
Commitment of any laws or regulations (or a written interpretation or ruling as
to the effect or application of such laws or regulations having the force of
law) by any federal, state, or foreign government or governmental agency having
authority over the administration thereof, which are applicable to any LIBO
Rate loans made pursuant to this Commitment.
If at any time the Banks determine in good faith that the effective LIBO Rate
for any loan is unascertainable, or that the making or continuance of such loan
at the LIBO Rate would be unlawful, the Banks shall not be required to make or
continue such loan at such Rate. In such event, such loan shall be made or
continued, as applicable, at the following rate: Prime Rate plus zero percent.
5. Unused Line Fee: Beginning on the date of the Note, a fee of 1/8 of
one percent (.125%) of the average unused portion of the Maximum Line Amount
for the term of the Note shall be due and payable to Wachovia, for the pro rata
benefit of the Banks, within ten (10) days after the Maturity Date (as
hereinafter defined).
6. Loan Purpose: Proceeds of the Line shall be utilized: (a) for the
purchase of hotel properties and land described in Exhibit A attached hereto
and made a part hereof (the "New Hotels"); and (b) for general working capital
purposes.
7. Repayment Terms: Interest only, at the interest rate set forth
herein, shall be due and payable in arrears at the end of each Interest Period
with respect to principal from time to time outstanding. All outstanding
principal and accrued interest shall be due and payable in full on July 31,
1996, unless payment has been accelerated by the Bank pursuant to the terms
hereof (the "Maturity Date").
8. Prepayment Privilege: Borrower shall have the right to prepay the
principal and accrued interest in full or in part at anytime without a
prepayment premium. Notwithstanding any contrary provision contained herein,
at anytime any portion of the Line bears interest based on the London Interbank
Offered Rate, that portion of the Line may not be prepaid until maturity of the
then current Interest Period.
<PAGE> 4
Winston Hotels, Inc.
WINN Limited Partnership
May 7, 1996
Page 4
9. Line of Credit Administration: Each Bank shall retain the Note made
payable to such Bank. Each Bank shall be responsible for monthly billing of
interest under its Note. The Borrower shall submit disbursement requests to
Wachovia not less than forty-eight hours prior to the requested disbursement
date (but at least two Eurodollar business days in the case of LIBO-based
borrowings), with the exception of the first disbursement request, specifying:
(1) the amount requested; and (2) any other information that the Banks may
reasonably request.
II. REQUIRED LOAN DOCUMENTATION AND INFORMATION
Prior to the Closing and the disbursement of any funds thereunder, the
Banks shall require, in form and content satisfactory to the Banks and their
counsel, the following:
1. Note: The Line shall be evidenced by two promissory notes of the
Borrower (the "Notes"), in the amounts set out below for the Banks identified
below:
<TABLE>
<S> <C>
Wachovia $10,000,000.00
BB&T $ 7,000,000.00
</TABLE>
Each Note shall provide that after the Note becomes due, whether by
acceleration or otherwise, the Note shall bear interest at the rate per annum
equal to 150% of the Prime Rate, in lieu of interest at the LIBO interest rate
hereinabove provided.
2. Director's Resolution; Certificate of Incumbency; Good Standing
Certificate Partnership Documents: (1) a Director's Resolution authorizing the
Line, and the execution of the Line documents by the appropriate officers of
the Company, (2) a certificate of incumbency evidencing the appropriate
officers of the Company and specimen signatures of such officers, and (3) a
good standing certificate from the state of its incorporation. In addition, in
the case of the Partnership, the Borrower shall also provide a certified true
copy of the Partnership Agreement (with all amendments thereto) of the
Partnership, and certified true copies of its Certificate of Limited
Partnership and its Agreement of Limited Partnership (with all amendments
thereto), together with evidence that (a) the partners executing the loan
documents or the guarantee thereof, as the case may be, have appropriate
authority to bind the Partnership and (b) the Partnership is in good standing
in the state wherein it was formed.
3. Disbursements: Individual draws made under the Line shall be limited
to amounts of $1,000,000 or more, and in increments of $100,000 for borrowings
in excess of $1,000,000. Disbursements shall be subject to a mutually
acceptable draw request procedure. For each draw, Borrower agrees to provide
the Banks with satisfactory written documentation supporting the purpose and
amount being requested.
R#COMMIT2.WPD
<PAGE> 5
Winston Hotels, Inc.
WINN Limited Partnership
May 7, 1996
Page 5
4. Negative Covenant. Until payment in full of the Line and interest
thereon, the Borrower covenants that it will not, without the prior written
consent of the Banks:
- Sell, lease, convey, or otherwise dispose of any of the New
Hotels; or
- Incur or permit to exist any encumbrance (including capital
leases), security interest, pledge, or lien against any of the
New Hotels.
5. Affirmative Covenants. The Borrower covenants and agrees that in the
event the $125,000,000 line of credit contemplated in that certain commitment
letter between the Banks, SouthTrust Bank of Alabama, N.A. ("SouthTrust"), and
NationsBank, N.A. ("NationsBank"), dated April 24, 1996 (the "$125,000,000
Commitment Letter"), does not close on or before July 31, 1996, or if the
Borrower withdraws its pending Public Offering, or if for any reason such
pending Public Offering is withdrawn, or does not occur by July 31, 1996, then
in such event the Borrower agrees to:
- Secure this Line with the New Hotels and provide to the Banks
all the various types of documentation required in the
$125,000,000 Commitment Letter with respect to the New Hotels;
and
- Enter into a cross default/cross collateralization agreement
with Wachovia cross defaulting and cross collateralizing this
Line with the $50,000,000 Note evidencing the line of credit
between Wachovia and the Borrower, dated May 15, 1995 (the
"$50,000,000 Line").
6. Additional Items: Such other matters and items as the Banks or their
counsel may reasonably request.
III. OTHER CONDITIONS
1. Costs; Cross Default.
a. Costs: The Line herein referenced shall be closed without
cost to the Banks, and all expenses incurred in connection
with the origination of the Line (including, without
limitation, the Banks' counsel's fees) are to be paid by the
Borrower. Such expenses shall be paid by the Borrower whether
or not the Line closes.
b. Modification and Refinance Fees: Any modification or
refinance of the Line may be conditioned by the Banks on the
payment by the Borrower of a nonrefundable fee, which shall be
in addition to any other fee paid by the Borrower to the Banks
in
<PAGE> 6
Winston Hotels, Inc.
WINN Limited Partnership
May 7, 1996
Page 6
connection with the Line. Nothing in this paragraph shall
obligate the Banks to modify or refinance the Line, and the
Banks reserve the right to require the Line to be repaid
strictly in accordance with the terms and conditions contained
in the Notes.
c. Cross Default. Any default by the Borrower under its note,
deed of trust or other document evidencing, documenting or
securing the $50,000,000 Line shall, at the option of the
Banks, constitute a default by the Borrower in the Notes, or
any other document evidencing, documenting or securing this
Line. Any default by the Borrower in the Notes or any other
document evidencing, documenting, or securing this Line shall,
at the option of Wachovia, constitute a default by the
Borrower in the $50,000,000 Line.
2. General Conditions:
a. The Borrower understands and agrees that this Commitment is
issued directly to the Borrower and cannot be assigned without
the prior written consent of the Banks. The Commitment is for
the sole and exclusive benefit of the Borrower, and no third
party is intended to be benefited in any respect hereby. If,
prior to the origination of the Line, there is any material
adverse change in the condition (financial, business or
otherwise) of the Borrower or if, prior to closing, Winston
Hotels, Inc. ceases to be the sole general partner of the
Partnership, the Banks shall have the right to terminate their
obligations hereunder.
b. If the Borrower (and if either is a partnership, any partner
thereof) at or before the closing of the Line should file a
petition in bankruptcy under any of the provisions of the
bankruptcy laws, or if a petition in bankruptcy should be
filed against any one of them, or if any of them should make
an assignment for the benefit of creditors, or otherwise
become insolvent, or if any of them should become deceased or
become mentally incapacitated, this Commitment may be
cancelled at the option of the Banks.
c. The Borrower by accepting this Commitment represents and
warrants to the Banks that except as disclosed to the Banks in
writing on or prior to the date hereof, there are no actions,
claims, suits or proceedings pending, or to the Borrower's
knowledge, threatened or reasonably anticipated against or
affecting the Borrower at law or in equity or before or by any
governmental authority and there is no possibility of any
judgment, liability or award which may reasonably be expected
to result in any material and adverse change in the Borrower's
condition (financial, business or otherwise).
<PAGE> 7
Winston Hotels, Inc.
WINN Limited Partnership
May 7, 1996
Page 7
d. The Borrower understands that the Banks are relying upon the
statements and representations made to the Banks and upon such
additional data as may be supplied to the Banks for the
purpose of evaluating the Line request. If any of such
information is found to be inaccurate or to have been
misrepresented in any material respect, this Commitment may be
cancelled at the option of the Banks.
e. The Borrower certifies that all information provided to the
Banks by the Borrower is true and complete in all respects to
the best of the Borrower's knowledge and that the same was
given to induce the Banks to make a line of credit available
as herein requested.
f. If this commitment is being signed by less than all parties
(i.e. Borrower, partners of the Borrower), the undersigned
hereby certifies and warrants to the Banks that the
undersigned has been duly authorized to execute and deliver
this Commitment for and on behalf of, and as agent for, any
such party whose signature does not appear below.
g. If this Commitment is acceptable, please so indicate by
signing in the space provided on the enclosed copy of this
letter and return same to us not later than May 10, 1996. If
not so accepted, or if the Line is not closed by May 17, 1996,
the Banks may on the occurrence of either event void this
Commitment at their sole option.
Very truly yours,
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: /s/
---------------------------------------------
Jeffrey P. Castleberry
Senior Vice President
BRANCH BANKING & TRUST COMPANY
By: /s/
---------------------------------------------
Richard E. Fowler
Senior Vice President
<PAGE> 8
Winston Hotels, Inc.
WINN Limited Partnership
May 7, 1996
Page 8
ACCEPTED THIS THE _____ DAY OF MAY, 1996.
<TABLE>
<S> <C>
WINN LIMITED PARTNERSHIP,
a North Carolina limited partnership (SEAL)
By: WINSTON HOTELS, INC.
its General Partner
Attest:
By:
- - ---------------------------------- ------------------------------------------------
President
Secretary
- - --------------
[CORPORATE SEAL]
WINSTON HOTELS, INC.
Attest:
By:
- - --------------------------------- -------------------------------------------------
President
Secretary
- - --------------
[CORPORATE SEAL]
</TABLE>
<PAGE> 9
EXHIBIT A
NEW HOTELS
<TABLE>
<CAPTION>
Address City County State Rooms/Suites Franchise
------- ---- ------ ----- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
1. 940 East Main Street Abingdon Washington VA 80 Holiday Inn Express
2. 4154 Preferred Place Duncansville Dallas TX 119 Hampton Inn
3. 11350 LBJ Freeway Garland City Dallas TX 244 Holiday Inn Select
4. 540 North Pleasantburg Drive Greenville Greenville SC 191 Comfort Inn
5. 1918 West Highway 192 London [not provided] KY 62 Comfort Suites
6. East Main Street Abingdon Washington VA 1.0ac. Vacant Land
7. 1918 West Highway 192 London [not provided] KY 2.2ac. Vacant Land
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 220
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 124,283
<DEPRECIATION> 6,200
<TOTAL-ASSETS> 123,973
<CURRENT-LIABILITIES> 0
<BONDS> 34,500
0
0
<COMMON> 99
<OTHER-SE> 88,281
<TOTAL-LIABILITY-AND-EQUITY> 123,973
<SALES> 0
<TOTAL-REVENUES> 4,556
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 674
<INCOME-PRETAX> 1,860
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,860
<EPS-PRIMARY> .19
<EPS-DILUTED> 0
</TABLE>
