SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported) November 17, 1997
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WINSTON HOTELS, INC.
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(Exact name of registrant as specified in its charter)
North Carolina 0-23732 56-1624289
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
2209 Century Drive, Raleigh, North Carolina 27612
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(Address of principal executive offices) (Zip Code)
(919) 510-6010
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Registrant's telephone number, including area code
Page 2
Item 5. Other Events
Effective November 17, 1997 and November 24, 1997, Winston
Hotels, Inc. (the "Company") and WINN Limited Partnership (the
"Partnership"), of which the Company serves as sole general
partner, entered into agreements with CapStar Hotel Company
("CapStar") and certain of CapStar's affiliates providing for,
among other things:
(i) the amendment ("Lease Amendment") of all existing leases
("Existing Winston Leases") between the Partnership or the
Company, as applicable, and Winston Hospitality, Inc. ("Lessee"),
the lessee of 38 of the hotels owned at such date by the
Partnership or the Company, as applicable; and
(ii) the future lease ("New Leases") of eight of the
Company's hotels which are currently in various stages of
planning and development to CapStar Winston Company, L.L.C., a
subsidiary of CapStar ("CapStar Subsidiary" and, together with
CapStar Management Company, L.P., the "New Lessee").
In connection with these transactions, CapStar agreed to
guarantee the obligations of the New Lessee under the Existing
Winston Leases as modified by the Lease Amendment and possibly
under future leases. Also, the shareholders of the Lessee have
agreed to make certain investments in the Company.
Also effective November 17, 1997, the Company, the
Partnership and Wachovia Bank, N.A., as Administrative Agent,
amended the Credit Agreement dated October 29, 1997 (the "Credit
Agreement").
Each of the New Leases will be on the same terms as the
Existing Winston Leases as modified by the Lease Amendment. The
amended leases and related transactions and the amended credit
agreement are summarized below:
Sale of Assets of Lessee
Effective November 17, 1997, the Lessee, pursuant to an
Asset Contribution Agreement dated October 29, 1997 (the
"Contribution Agreement") by and among the Lessee, New Lessee,
CapStar, Robert W. Winston, III and John B. Harris, Jr.,
contributed certain of its assets, including 32 of the leases
between the Lessee and the Partnership or the Company, as
applicable, to the New Lessee in exchange for 674,236 partnership
units in the New Lessee, valued at approximately $24 million. CapStar
is the sole general partner of the New Lessee. The 674,236
partnership units of the New Lessee received by the Lessee in
exchange for the contribution of its assets to the New Lessee are
redeemable and exchangeable, on a one-for-one basis, for shares
of Common Stock of CapStar.
Page 3
Effective November 24, 1997, the Lessee, pursuant to an
Asset Purchase Agreement dated October 29, 1997 (the "Asset
Purchase Agreement") by and among the Lessee, New Lessee,
CapStar, Robert W. Winston, III and John B. Harris, Jr.,
transferred and assigned certain of its assets, including six of
the leases between the Lessee and the Partnership, to the New
Lessee in exchange for approximately $10 million in cash.
Robert W. Winston, III, the President and Chief Executive
Officer of the Company owns 90% of the common stock of the
Lessee.
Agreement to Lease Newly Developed and Planned Hotels
In a letter agreement dated November 17, 1997 (the "Letter
Agreement"), the Partnership agreed to lease in the future eight
hotels, which are currently in various stages of planning and
development, to CapStar Subsidiary pursuant to a form of lease
agreement substantially in the form of the Existing Winston
Leases as modified by the Lease Amendment.
The Letter Agreement is set forth in Exhibit 10.1 hereto.
Amended Hotel Leases
Effective November 17, 1997, 32 of the Existing Winston
Leases were amended by the Lease Amendment between the
Partnership, the Company and CapStar Subsidiary. Effective
November 24, 1997, six of the Existing Winston Leases were
amended by the Lease Amendment among the Partnership and CapStar
Subsidiary. Capitalized terms used but not defined herein shall
have the same meaning ascribed to such terms in the Leases as
modified by the Lease Amendment. The principal terms of the
Lease Amendment were as follows:
(i) the term of each Lease was extended to November 30, 2012;
(ii) the definition of "Gross Operating Profit" excludes the New
Lessee's central office overhead or general or administrative
expenses, but includes accounting services provided by the New
Lessee to the Property, in Gross Operating Expenses; (iii) the
New Lessee shall be required, not later than 45 days prior to the
commencement of a fiscal year, to submit to the Lessor for
approval, its operating budget and capital budget (which capital
budget shall not exceed five percent (5%) of the estimated room
revenues) with the Lessor having 30 days to approve each or
indicate any items the Lessor finds objectionable; (iv) the
Lessor shall select all design professionals and contractors for
capital projects exceeding $25,000; (v) the New Lessee shall pay
all franchise fees; (vi) the New Lessee and any affiliate of the
New Lessee controlled by CapStar shall not develop or build a
hotel, motel, inn or other lodging facility within five miles of
and in direct competition (with respect to level of service,
market segment and price point) with the Leased Property; (vii)
certain amendments were made to the casualty restoration and
condemnation provisions and the abatement procedures; (viii)
events of default shall include, among others, (a) failure to pay
Base Rent, Percentage Rent or Additional Charges within 15 days
after the same becomes due and payable, (b) failure to observe a
covenant or condition of the Lease and such failure is not cured
within 30 days unless it cannot with due diligence be cured
within 30 days, but in no event shall the cure period exceed 90
days, (c) the transfer of a controlling interest in
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the New Lessee, and (d) declaration of an event of default by the
franchisor under the Franchise Agreement with respect to the
Leased Property as a result of any actions or failure to act by
the New Lessee or any other person with whom the New Lessee
contracts for services; (ix) payment of fees by the New Lessee to
any affiliate of the New Lessee are prohibited unless such
payments are expressly set forth in the Annual Budget or
otherwise agreed to by the Lessor; (x) Lessor has the right to
approve in advance any manager or proposed manager of the Leased
Property which is not an affiliate of the New Lessee, as well as
any agreement relating to the management or operation of the
Leased Property; (xi) the respective obligations of the parties
relating to franchise agreements, capital expenditures and
reserves were amended; (xii) the Lessor has a right to terminate
the Lease if the Lessor enters into a contract to sell the
property and, the Lessor shall, at Lessor's election, pay the New
Lessee the net present value of the cash flow from the Lease or
offer to lease to the New Lessee a substitute hotel facility
comparable to the Leased Property; (xiii) Lessor agrees,
commencing January 1, 2012, to negotiate in good faith for an
extension of the lease term for a subsequent 15-year period;
(xiv) the parties shall arbitrate any disputes arising under the
Lease; (xv) the parties shall indemnify each other under certain
circumstances; and (xvi) Lessor's consent is not required for the
assignment of the Lease in connection with a change in control of
CapStar.
The Lease Amendments are set forth in Exhibits 10.2 and
10.3, respectively hereto.
CapStar Guaranty
In connection with the assumption of the Existing Winston
Leases and the execution of the Lease Amendment, CapStar executed
a limited guaranty agreement (the "Guaranty") guaranteeing the
prompt and full payment up to a maximum amount of $20 million of
rent and all other amounts payable to the Lessor under the 38
Existing Winston Leases as modified by the Lease Amendment and
possibly under future leases.
The Guaranty is set forth in Exhibit 10.4 hereto.
Investment Agreement
Also, as an inducement to the Company to consent to the
transactions contemplated by the Asset Purchase Agreement, Asset
Contribution Agreement and related documents, Mr. Winston and
John B. Harris, Jr., the other shareholder of the Lessee, entered
into an agreement (the "Investment Agreement") to use their best
efforts to purchase an aggregate of 400,000 shares of the
Company's Common Stock, par value $.01 per share, prior to the
second anniversary of the date of the Asset Purchase Agreement.
If such investment is not made prior to the second anniversary,
the Company has the right to require Messrs. Winston and Harris
to purchase the number of shares equal to the difference of
400,000 less the aggregate number of shares purchased by them
during such two-year period.
The Investment Agreement is set forth in Exhibit 10.5
hereto.
Page 5
Amended Credit Agreement
Effective November 17, 1997, the Credit Agreement was
amended to substitute CapStar as the lessee referred to in the
Credit Agreement and also provided that Line Availability Amounts
shall be determined exclusively on the basis of Cash Flow Amount.
Certain amendments were also made to the events of default and
cure provisions. Capitalized terms used but not defined in this
discussion of the Credit Agreement shall have the meaning
ascribed to such terms in the Credit Agreement.
The amendment to the Credit Agreement is set forth in
Exhibit 10.6 hereto.
Item 7. Financial Statements and Exhibits
(c) Exhibits
10.1 Letter Agreement dated November 17, 1997 between WINN
Limited Partnership and CapStar Winston Company, L.L.C.
10.2 First Amendment to Lease dated November 17, 1997
between WINN Limited Partnership and CapStar Winston Company,
L.L.C.
10.3 First Amendment to Lease dated November 24, 1997
between WINN Limited Partnership and CapStar Winston Company,
L.L.C.
10.4 Guaranty dated November 17, 1997 between CapStar Hotel
Company, WINN Limited Partnership and Winston Hotels, Inc.
10.5 Investment Agreement dated November 17, 1997 between
Winston Hotels, Inc., Robert W. Winston, III and John B. Harris,
Jr.
10.6 First Amendment to Credit Agreement dated November 17,
1997 between Winston Hotels, Inc., WINN Limited Partnership,
Wachovia Bank, N.A., Branch Banking and Trust Company,
NationsBank, N.A., and SouthTrust Bank, N.A.
Page 6
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
WINSTON HOTELS, INC.
(Registrant)
December 10, 1997 By: /s/ Brent V. West
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Brent V. West
Vice President and Controller
EXHIBIT INDEX
Exhibit Number and Description
10.1 Letter Agreement dated November 17, 1997 between WINN
Limited Partnership and CapStar Winston Company, L.L.C.
10.2 First Amendment to Lease dated November 17, 1997
between WINN Limited Partnership and CapStar Winston Company,
L.L.C.
10.3 First Amendment to Lease dated November 24, 1997
between WINN Limited Partnership and CapStar Winston Company,
L.L.C.
10.4 Guaranty dated November 17, 1997 between CapStar Hotel
Company, WINN Limited Partnership and Winston Hotels, Inc.
10.5 Investment Agreement dated November 17, 1997 between
Winston Hotels, Inc., Robert W. Winston, III and John B. Harris,
Jr.
10.6 First Amendment to Credit Agreement dated November 17,
1997 between Winston Hotels, Inc., WINN Limited Partnership,
Wachovia Bank, N.A., Branch Banking and Trust Company,
NationsBank, N.A., and SouthTrust Bank, N.A.
EXHIBIT 10.1
WINN LIMITED PARTNERSHIP
2209 Century Drive, Suite 300
Raleigh, North Carolina 27612
November 17, 1997
CapStar Management Company, L.P.
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
Attention: Mr. Paul W. Whetsell
CapStar Winston Company, L.L.C.
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
Attention: Mr. Paul W. Whetsell
Re: Additional Hotel Lease Agreements and
Agreement Relating to Planned Hotels
Gentlemen:
In connection with the Agreement dated as of the 29th day of
October, 1997, by and among CapStar Management Company, L.P.
("CapStar"), CapStar Hotel Company ("CapStar Corp."), Winston
Hospitality, Inc. ("Winston") and Robert W. Winston, III and John
B. Harris, Jr., (collectively, the "Shareholders"), this letter
sets forth the terms upon which WINN Limited Partnership (the
"Partnership"), Winston Hotels, Inc. (the "REIT") and CapStar
Winston Company, L.L.C. (the "Subsidiary") agree to enter into
hotel leases pursuant to which Subsidiary shall lease from the
Partnership certain hotels currently under construction and an
agreement to enter into hotel leases with respect to the leasing
of hotels planned for development, provided that neither the REIT
nor the Partnership has given notice of any event of default
which remains in effect under any of the existing hotel leases
between the Subsidiary and the REIT or the Partnership.
1. Additional Hotel Lease Agreements. The Partnership
agrees to lease to the Subsidiary the following three (3) hotel
properties: (i) Richmond, Virginia, Homewood Suites Hotel (123
rooms); (ii) Alpharetta, Georgia, Homewood Suites Hotel (112
rooms); and (iii) Raleigh, North Carolina, Homewood Suites Hotel
(136 rooms) (the "Additional Hotels"). The Additional Hotels
will be leased pursuant to a form of lease agreement
substantially in the form of the existing leases between the
Partnership and Winston modified by a Master Lease Amendment in
the form attached hereto as Appendix 1 with the economic terms of
such leases structured to
CapStar Management Company, L.P.
CapStar Winston Company, L.L.C.
November 17, 1997
Page 2
generate the desired FFO yield to the REIT and a lessee gross
operating profit (defined as total revenue less all lease
payments due the Partnership and all property operating costs
except property taxes, except fire and casualty insurance, and
except furniture, fixtures and equipment reserve) for the
Subsidiary as lessee of not less than (i) 2.9% of gross room
revenue for the Richmond, Virginia, Homewood Suites Hotel;
(ii) 5.1% of the gross room revenue of the Alpharetta, Georgia,
Homewood Suites Hotel; and (iii) 4.8% of the gross room revenue
for the Raleigh, North Carolina, Homewood Suites Hotel, based
upon the REIT's operating projections for the respective
Additional Hotels for the first year of operations as previously
provided to CapStar, a copy of which is attached hereto as
Appendix 2.
2. Agreement Relating to Planned Hotels. The Partnership
agrees to lease the following five hotel properties to the
Subsidiary: (i) Lake Mary, Florida, Homewood Suites Hotel (112
rooms); (ii) Durham, North Carolina, Homewood Suites Hotel (96
rooms); (iii) Winston-Salem, North Carolina, Marriott Courtyard
(122 rooms); (iv) the proposed Ponte Vedra, Florida, Hampton Inn
(estimated 120 rooms); and (v) the proposed Chapel Hill, North
Carolina, Hilton Garden Inn (estimated 150 rooms) (the "Planned
Hotels"). The Planned Hotels will be leased pursuant to a form
of lease which is substantially the same as the existing lease
between the Partnership and Winston modified by a Master Lease
Amendment attached hereto as Appendix 1. The agreement to lease
the Ponte Vedra, Florida, Hampton Inn and the Chapel Hill, North
Carolina, Hilton Garden Inn is subject to the development of such
hotels being undertaken and completed.
The lease payments for the Planned Hotels would be
established in terms of revenue break points and rent percentages
to leave the Subsidiary as lessee with a lessee gross operating
profit (defined as total revenue less all lease payments due the
Partnership and all property operating costs, except property
taxes, except fire and casualty insurance, and except furniture,
fixtures and equipment reserve) of approximately 4.0% of total
revenues and the REIT with its desired FFO yield, all of which
will be based upon the pro-forma operating budget as agreed upon
by the REIT and CapStar coupled with the REIT's estimated costs
of the respective development projects. If CapStar and the REIT
cannot agree as to the rent structure then prior to entering into
a lease for one or more of the Planned Hotels with a third party,
the REIT will give notice of the third party lease terms to
CapStar. CapStar will have a right of first refusal for five
days after receipt of such notice to accept such terms and enter
into such lease.
3. This letter agreement shall be construed and enforced
in accordance with and governed by the laws of the State of North
Carolina.
CapStar Management Company, L.P.
CapStar Winston Company, L.L.C.
November 17, 1997
Page 3
Please indicate your acceptance to the terms of this letter
agreement by signing and returning the enclosed duplicate copy to
WINN Limited Partnership, marked to the attention of Mr. Robert
W. Winston, III.
Very truly yours,
WINN LIMITED PARTNERSHIP
By: WINSTON HOTELS, INC.,
General Partner
By: /s/ Robert W. Winston, III
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Name: Robert W. Winston, III
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Title: President
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ACCEPTED AND AGREED
CAPSTAR MANAGEMENT COMPANY, L.P.
By: CAPSTAR HOTEL COMPANY
as General Partner of CapStar Management Company, L.P.
By: /s/ William Driscall
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Name: William Driscall
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Title: Vice President
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CAPSTAR WINSTON COMPANY, L.L.C.,
a Delaware limited liability company
By: CAPSTAR MANAGEMENT COMPANY, L.P.
as Managing Member of CapStar Winston Company, L.L.C.
By: CAPSTAR HOTEL COMPANY
as General Partner of CapStar Management Company, L.P.
By: /s/ William Driscall
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Name: William Driscall
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Title: Vice President
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EXHIBIT 10.2
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (this "First Amendment to
Lease"), made as of the 17th day of November, 1997, by and
between WINN LIMITED PARTNERSHIP, a North Carolina limited
partnership (hereinafter called "Lessor"), and CAPSTAR WINSTON
COMPANY, L.L.C., a Delaware limited liability company (hereinafter
called "Lessee"), provides as follows:
W I T N E S S E T H:
WHEREAS, pursuant to that certain Asset Contribution Agreement
dated as of October 29, 1997 (the "Contribution Agreement") by and
among WINSTON HOSPITALITY, INC. ("Winston"), ROBERT W. WINSTON, III
and JOHN B. HARRIS ("Winston Shareholders"), CAPSTAR MANAGEMENT
COMPANY, L.P., a Delaware limited partnership ("CapStar") and
CAPSTAR HOTEL COMPANY, a Delaware corporation ("CapStar Corp."),
Winston has assigned to CapStar and CapStar has assigned to Lessee
all of its right, title and interest in 32 separate lease
agreements listed on Exhibit A attached hereto and incorporated
herein by this reference (individually, "Existing Lease" and
collectively, "Existing Leases");
WHEREAS, Lessee is an indirect subsidiary of CapStar Corp.
and, as such, is experienced in the management and operations of
facilities substantially similar to the hotel properties leased
pursuant to the Existing Leases; and
WHEREAS, Lessor (in consideration of the foregoing recital)
has consented to the assignment of the Existing Leases from Winston
to CapStar and from CapStar to Lessee, and Lessor and Lessee have
agreed to amend the Existing Leases in accordance with the terms of
this First Amendment to Lease.
NOW, THEREFORE, in consideration of the payment of rent and
the mutual agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, Lessor and Lessee hereby amend the Existing Leases as
follows:
1. The definition of "Base Rate" is hereby modified by inserting
"prime" before "rate" on the first line thereof and by
deleting "as such bank's base rate" from the second line
thereof.
2. Section 1.2 is hereby modified by substituting "[November 30,
2012]" in lieu of "tenth anniversary of the last day of the
month in which the Commencement Date occurs" in the second and
third lines thereof.
3. The definition of "Gross Operating Profit" is hereby amended
by adding the following to the end of the definition:
No part of Lessee's central office overhead or
general or administrative expense (as opposed
to that of the Facility) shall be deemed to be
a part of Gross Operating Expenses, as herein
provided; provided that accounting services
provided to the Leased Property but performed
at Lessee's central office shall be included in
Gross Operating Expenses.
Page 2
4. Section 3.2 is hereby modified by adding the term "and
franchise reports" after the term "excise tax returns" on the
twelfth line thereof.
5.Sections 3.6 and 3.7 are hereby deleted and the following is
substituted in lieu thereof:
3.6 Annual Budget. Not later than forty-five
(45) days prior to the commencement of each
Fiscal Year, Lessee shall submit the following
Budgets to Lessor:
(a) An operating budget ("Operating
Budget") prepared in accordance with this
Section 3.6(a), in substantially the form
attached hereto as Exhibit E. The Operating
Budget shall be prepared in good faith and
otherwise in accordance with the Uniform System
to the extent applicable and shall show by
month and quarter and for the full Fiscal Year
in the degree of detail specified by the
Uniform System, the following:
(i) Lessee's reasonable estimate of
Gross Revenues (including room rates and
Room Revenues, food, beverage and other
revenues as applicable), Gross Operating
Expenses, and Gross Operating Profits for
the forthcoming Fiscal Year itemized on
schedules on a quarterly basis as approved
by Lessor and Lessee, as same may be
revised or replaced from time to time by
Lessee and approved by Lessor, together
with the assumptions, in narrative form,
forming the basis of such schedules.
(ii) A reasonable estimate of the
amounts to be dedicated to routine, non-
capital repair and maintenance; and
(iii) A cash flow projection.
(iv) Lessee's reasonable estimate of
Percentage Rent by quarter for the Fiscal
Year, and
(v) A narrative description of the
program for advertising and marketing the
Facility for the forthcoming Fiscal Year
containing a detailed budget itemization
of the proposed advertising expenditures
by category and the assumptions, in
narrative form, forming the basis of such
budget itemizations.
(b) A capital budget ("Capital Budget")
in substantially the form of Exhibit F hereto
(which shall not exceed five percent (5%) of
the estimated Room Revenues except to the
extent otherwise required in Article XXXIX),
containing a description in reasonable
Page 3
detail of the proposed Capital Improvements
and an estimate of all amounts Lessor will be
requested to provide for Capital Improvements
to the Facility or any of its components for
the Fiscal Year. The Capital Budget shall be
prepared in accordance with the Uniform System
to the extent applicable.
3.7 Approval of Capital Budget. Within thirty
(30) days following submission of the Capital
Budget to Lessor, Lessor shall give Lessee
written notice either (a) that Lessor approves
the Capital Budget or (b) indicating with
reasonable specificity the respects in which
Lessor objects to the Capital Budget. In the
latter event, Lessor and Lessee shall act
promptly, reasonably and in good faith to seek
to resolve Lessor's objections. In the event
Lessor fails to deliver the notice set forth in
this section, within the required time period,
the Capital Budget shall be deemed approved.
Lessee, in its sole discretion, may designate
proposed capital projects as "mandatory"
projects in an aggregate amount not in excess
of twenty-five percent (25%) of the Capital
Budget, which mandatory projects shall not be
subject to Lessor's approval. In the event
that Lessor and Lessee fail to reach agreement
with respect to the Capital Budget within
thirty (30) days after receipt of Lessor's
written notice, Lessee and Lessor shall refer
any disputed Capital Budget matter to
arbitration using procedures set forth in
Article XL hereto and each party shall endeavor
to cause such arbitration to be completed as
quickly as possible, but in any event not later
than six (6) months following referral to
arbitration. While any arbitration is pending,
Lessee shall continue to operate the Facility
in accordance with the terms of this Lease,
including without limitation, making all
Capital Expenditures for approved portions of
the Capital Budget and mandatory projects to
the extent such mandatory projects are included
in the Capital Budget. Lessor shall be
obligated to make all Capital Expenditures
which are required pursuant to a Capital Budget
which has been approved or deemed approved in
accordance with the procedures set forth above.
3.8 Approval of Annual Budget. Within thirty
(30) days following submission of the Annual
Budget to Lessor, Lessor shall give Lessee
written notice either (a) that Lessor approves
the Annual Budget or (b) indicating with
reasonable specificity the respects in which
Lessor objects to the Annual Budget. In the
latter event, Lessor and Lessee shall act
promptly, reasonably and in good faith to seek
to resolve Lessor's objections. In the event
that Lessor and Lessee fail to reach agreement
with respect to the Annual Budget within thirty
(30) days after receipt of Lessor's written
notice, Lessee and Lessor shall refer any
disputed Annual Budget matter to arbitration
using procedures set forth in Article XL hereto
and each party shall endeavor to cause such
arbitration to be completed as
Page 4
quickly as possible, but in any event not later
than six (6) months following referral to
arbitration.
3.9 Capital Projects.
(a) The selection of all design
professionals and contractors for material
capital projects (i.e., in excess of $25,000)
shall be made by Lessor in its reasonable
discretion, after consultation with Lessee.
(b) Lessor may require that all contracts
in connection with capital projects be subject
to competitive bidding procedures reasonably
acceptable to Lessor. Lessor shall also have
the right to review and approve all material
contract bids (i.e., in excess of $25,000)
whether competitively bid or not. Lessor may
also retain, at its sole cost and expense, an
inspecting architect or engineer to monitor
costs, time, quality and performance for all
capital projects.
3.10 Books and Records. Lessee shall keep full
and adequate books of account and other records
reflecting the results of operation of the
Facility on an accrual basis, all in accordance
with the Uniform System and generally accepted
accounting principles to the extent applicable
and the obligations of Lessee under this Lease.
The books of account and all other records
relating to or reflecting the operation of the
Facility shall be kept either at the Facility
or at Lessee's offices in Raleigh, North
Carolina and shall be available to Lessor and
its representatives and its auditors or
accountants, at all reasonable times for
examination, audit, inspection, and
transcription. All of such books and records
pertaining to the Facility including, without
limitation, books of account, guest records and
front office records, at all times shall be the
property of Lessor and shall not be removed
from the Facility or Lessee's offices without
Lessor approval.
6.Article IV is hereby amended by adding the following as Section
4.6:
4.6 Franchise Fees. Lessee will pay or cause
to be paid in a timely manner all franchise
fees due and owing in accordance with the terms
and conditions of the Franchise Agreement.
7. The last sentence of Section 5.2 is hereby deleted and the
following is substituted in lieu thereof:
If Lessor and Lessee are unable to agree upon
the amount of such abatement within 30 days
after such partial Taking, the matter may be
submitted by either party to arbitration
pursuant to the arbitration procedures set
forth in Article XL.
8. The sentence prior to the final sentence of Section 6.2 is
hereby deleted and the following is substituted in lieu
thereof:
Page 5
Upon the expiration or earlier termination of
the Term, Lessor or its designee shall retain
ownership of "par stock" (as such term is
generally used within the hotel industry) of
Inventory and shall have the option to purchase
all Inventory on hand at the Leased Property at
the time of such expiration or termination in
excess of par stock for a sale price equal to
the fair market value of such Inventory.
9. Section 7.2(f) is hereby deleted and the following is
substituted in lieu thereof:
(f) Lessee agrees to deliver to Lessor
upon request by Lessor from time to time a list
of hotels and motels (and locations) owned or
managed by Lessee and its Affiliates.
(g) During the Term, neither Lessee nor
any Affiliate of Lessee that is "controlled" by
CapStar (i.e., CapStar owns, directly or
indirectly, fifty percent (50%) or more of the
ownership interests in such entity or has the
ability to direct management of such entity)
("Controlled Affiliate") shall build or develop
a hotel, motel, inn or other lodging facility
within five (5) miles of, and in direct
competition with, the Leased Property, (i.e.,
such lodging facility is substantially similar
to the Leased Property with respect to level of
services provided, market segment and price
point). In the event that Lessee or a
Controlled Affiliate acquires, owns, operates
or manages a hotel, motel, inn or other lodging
facility within five (5) miles of the Leased
Property, Lessee agrees that, during the Term,
neither it nor its Controlled Affiliate will
solicit on a targeted basis any executive or
managerial employees or material customer
accounts of the Leased Property.
10. Article XIV is hereby deleted and the following is
substituted in lieu thereof:
14.1 Insurance Proceeds. Subject to the
provisions of Section 14.5, all proceeds
payable by reason of any loss or damage to the
Leased Property, or any portion thereof, and
insured under any policy of insurance required
by Article XIII of this Lease shall be paid to
Lessor and shall be made available, in
accordance with this Article, for
reconstruction or repair, as the case may be,
of any damage to or destruction of the Leased
Property, or any portion thereof, and, if
applicable, shall be paid out by Lessor from
time to time for the reasonable costs of such
reconstruction or repair upon satisfaction of
reasonable terms and conditions specified by
Lessor.
14.2 Reconstruction in the Event of Damage or
Destruction Covered by Insurance.
(a) If the Leased Property is totally or
partially destroyed by a risk covered by the
insurance described in Article XIII and the
Page 6
Facility thereby is rendered Unsuitable for its
Primary Intended Use, Lessor may, at Lessor's
option to be exercised within ninety (90) days
after the date of such occurrence, restore the
Facility to substantially the same condition as
existed immediately before the damage or
destruction and otherwise in accordance with
the terms of the Lease.
(b) If the Leased Property is partially
destroyed by a risk covered by the insurance
described in Article XIII, but the Facility is
not thereby rendered Unsuitable for its Primary
Intended Use, Lessor shall promptly restore the
Facility to substantially the same condition as
existed immediately before the damage or
destruction and otherwise in accordance with
the terms of the Lease to the extent of
insurance proceeds received by Lessor.
14.3 Lessee's Property. All insurance proceeds
payable by reason of any loss of or damage to
any of Lessee's Personal Property shall be paid
to Lessee; provided, however, no such payments
shall diminish or reduce the insurance payments
otherwise payable to or for the benefit of
Lessor hereunder.
14.4 Abatement of Rent. Any damage or
destruction due to casualty notwithstanding,
this Lease shall remain in full force and
effect and Lessee's obligation to make rental
payments and to pay all other charges required
by this Lease shall remain unabated during the
first six months of any period required for the
applicable repair and restoration. Thereafter,
Base Rent shall be equitably abated.
14.5 Damage Near End of Term. If damage to or
destruction of the Facility rendering it
Unsuitable for its Primary Intended Use occurs
during the last 24 months of the Term, then
Lessor shall have the right to terminate this
Lease by giving written notice to Lessee within
30 days after the date of damage or
destruction, whereupon all accrued Rent shall
be paid immediately, and this Lease shall
automatically terminate five days after the
date of such notice.
14.6 Waiver. Lessee hereby waives any statutory
rights of termination that may arise by reason
of any damage or destruction of the Facility
that Lessor is obligated to restore or may
restore under any of the provisions of this
Lease.
11. Section 15.3 is hereby modified by deleting "subject to the
provisions of Section 15.7," from the second line thereof and
by deleting the last sentence thereof.
12. Section 15.5 is hereby modified by substituting "Lessor" in
lieu of "Lessee" in the fourth line thereof and by deleting
the last sentence thereof.
Page 7
13. Section 15.6 is hereby modified by substituting "Lessor" in
lieu of "Lessee" in both instances where it appears on the
thirteenth line thereof by deleting the parenthetical phrase
"(subject to Lessor's contributions as set forth below)" where
it appears on the fifteenth line, and by deleting the last
sentence thereof.
14. Article 15 is hereby modified by deleting Section 15.7
therefrom.
15. Section 16.1 is hereby deleted and the following is
substituted in lieu thereof:
16.1 Events of Default. If any one or more of
the following events (individually, an "Event
of Default") occurs:
(a) if an Event of Default occurs under
any other lease between Lessor and Lessee any
Controlled Affiliate; or
(b) if Lessee fails to make payment of
the Base Rent, Percentage Rent or Additional
Charges within fifteen (15) days after the same
becomes due and payable; or
(c) if Lessee fails to observe or perform
any other term, covenant or condition of this
Lease and such failure is not cured by Lessee
within a period of thirty (30) days after
receipt by such party of Notice thereof from
Lessor, unless such failure cannot with due
diligence be cured within a period of thirty
(30) days, in which case it shall not be deemed
an Event of Default if Lessee proceeds promptly
and with due diligence to cure the failure and
diligently completes the curing thereof
provided, however, in no event shall such cure
period extend beyond 90 days after such Notice
(provided that no Event of Default shall be
deemed to have occurred pursuant to this
subsection (c) to the extent that Lessee's
failure to observe or perform any term,
covenant or condition of this Lease is caused
by Lessor's failure to fulfill its obligations
under this Lease); or
(d) if there occurs a transfer of a
controlling interest in Lessee (50% or more of
the ownership interests in Lessee) without the
prior consent of Lessor, which may be withheld
in Lessor's sole discretion, subject to
Section 23.1 as modified hereby; or
(e) if Lessee shall file a petition in
bankruptcy or reorganization for an arrangement
pursuant to any federal or state bankruptcy law
or any similar federal or state law, or shall
be adjudicated a bankrupt or shall make an
assignment for the benefit of creditors or
shall admit in writing its inability to pay its
debts generally as they become due, or if a
petition or answer proposing the adjudication
of Lessee as a bankrupt or its reorganization
pursuant to any federal or state bankruptcy law
or any similar federal or state law shall be
filed in any court and Lessee shall be
Page 8
adjudicated a bankrupt and such adjudication
shall not be vacated or set aside or stayed
within sixty (60) days after the entry of an
order in respect thereof, or if a receiver of
the Lessee of the whole or substantially all of
the assets of the Lessee shall be appointed in
any proceedings brought by the Lessee or if any
such receiver, trustee or liquidator shall be
appointed in any proceeding brought against
Lessee shall not be vacated or set aside or
stayed within sixty (60) days after such
appointment; or
(f) if Lessee is liquidated or dissolved,
or begins proceedings toward such liquidation
or dissolution, or, if Lessee in any manner,
permits the sale or divestiture of
substantially all of its assets; or
(g) if the estate or interest of Lessee
in the Leased Property or any part thereof is
voluntarily or involuntarily transferred,
assigned, conveyed, levied upon or attached in
any proceeding (unless Lessee is contesting
such lien or attachment in good faith in
accordance with this Lease); or
(h) if, except as a result of damage,
destruction or a partial or complete
Condemnation, Lessee voluntarily ceases
operations on the Leased Property for a period
in excess of thirty (30) days; or
(i) if an event of default has been
declared by the franchisor under the Franchise
Agreement with respect to the Facility on the
Leased Property as a result of any action or
failure to act by the Lessee or any other
person with whom Lessee contracts for
management services at the Facility, other than
a failure to complete improvements required by
the franchisor because Lessor has not provided
funds for such improvements to the extent
required pursuant to this Lease; or
(j) the occurrence of an Event of Default
under the Guarantee of Lease executed by
CapStar Corp. in favor of Lessor with respect
to Lessee's obligations under this Lease.
Then, and in any such event, Lessor may
exercise one or more remedies available to it
herein or at law or in equity, including but
not limited to its right to terminate this
Lease giving Lessee not less than ten (10)
days' notice of such termination.
If litigation is commenced with respect to
any alleged default under this Lease, the
prevailing party in such litigation shall
receive, in addition to its damages incurred,
such sum as the court shall
Page 9
determine as its reasonable attorneys' fees,
and all costs and expenses incurred in connection
therewith.
16. Section 19.6 is hereby deleted and the following is
substituted in lieu thereof:
19.6 Payments to Affiliates of Lessee.
Notwithstanding anything to the contrary
contained in this Lease, Lessee shall make no
payments to Affiliates unless expressly set
forth in the Annual Budget (which may provide
for payment of management fees to an Affiliate
of Lessee) or otherwise expressly agreed to in
writing by Lessor, in either case, after full
written disclosure (including information
regarding competitive pricing) by Lessee to
Lessor of the affiliation and any other related
information requested by Lessor.
19.7 Management Agreement. Lessor shall have
the right in its sole and absolute discretion
to approve or disapprove in advance any manager
or proposed manager (a "Manager") of the
Facility which is not an Affiliate of Lessee,
as well as any agreement relating to the
management or operation of the Facility (a
"Management Agreement") by a Manager which is
not an Affiliate of Lessee and Lessee will
provide Lessor with an executed copy of any
Management Agreement so approved by Lessor.
Any Management Agreement (whether with a
Manager which is an Affiliate or is not an
Affiliate of Lessee) must provide that (i) upon
termination of this Lease or termination of
Lessor's or Lessee's right to possession of the
Leased Property for any reason, the Management
Agreement may be terminated by Lessor without
liability for any payment due or to become due
to the Manager thereunder; (ii) any management
fees shall be subordinated to payments of Rent
to Lessor hereunder; and (iii) in the event
Lessee is in default, the Manager shall, at the
election of Lessor and provided the Manager
continues to be paid, continue to perform under
the terms of the Management Agreement for a
period not to exceed ninety (90) days. No fees
or other amounts payable by Lessee to any
Manager shall excuse Lessee from its
obligations to pay Rent and other amounts
payable by Lessee to Lessor hereunder. No
Management Agreement may be amended or modified
in any manner which materially affects the
subordination of the management fees without
the prior written consent of Lessor.
17. Article XXII is hereby amended by adding the
following paragraphs thereto:
Add immediately following the first paragraph:
Without limiting the generality of the
foregoing paragraph, Lessee shall indemnify,
save harmless and defend Lessor Indemnified
Parties (including, but not limited to, any
Lessor Indemnified Party that is a guarantor of
the Franchise Agreement pursuant to which the
Leased Property is currently operated)
("Current Franchise Agreement") from and
against all liabilities,
Page 10
obligations, claims, damages, penalties, causes
of action, costs and expenses (including, but
not limited to, transfer fees and termination
fees) imposed upon or incurred by or asserted
against Lessor Indemnified Parties under or with
respect to the Current Franchise Agreement which
arises as a result of (a) any default by Lessee
under the terms of this Lease; or (b) any default
by Lessee under the Current Franchise Agreement.
Add immediately following the second paragraph:
Without limiting the generality of the
foregoing paragraph, Lessor shall indemnify,
save harmless and defend Lessee Indemnified
Parties (including, but not limited to, any
Lessee Indemnified Party that is a guarantor of
the Current Franchise Agreement) from and
against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and
expenses (including, but not limited to,
transfer fees and termination fees) imposed
upon or incurred by or asserted against Lessee
Indemnified Parties under or with respect to
the Current Franchise Agreement which arises as
a result of (a) any default by Lessor under the
terms of this Lease; (b) the sale by Lessor of
the Leased Property or any interest of Lessor
in the Leased Property; or (c) any act or
omission of any person that acquires the Leased
Property or any interest of Lesser in the
Leased Property.
18. Section 23.1 is hereby modified by adding the following to the
end of Section 23.1:
Notwithstanding the foregoing, Lessor's prior
consent is not required for assignments of this
Lease in connection with a "change of control"
transaction involving CapStar or CapStar Corp.
(i.e., a merger, consolidation, sale or
exchange of greater than 50% of the stock or
other equity interest in either entity or a
sale of all or substantially all of the assets
of either entity.
19. Article XXIV is hereby modified by (i) substituting "an
accounting firm acceptable to Lessor in its reasonable
discretion" in lieu of "the same certified independent
accounting firm that prepares the returns for Lessor or such
other accounting firm as may be approved by Lessor" on the
third through fifth line of subsection (b) thereof and (ii)
deleting subsection (d) thereof.
20. Article XXXII is hereby amended by inserting "1010 Wisconsin
Avenue, N.W., Washington, D.C. 20007, Attention: Chief
Executive Officer, with a copy to William Diamond, Esq.,
DeCampo, Diamond & Ash, 805 Third Avenue, New York, New York
10022" as Lessee's address for purposes of notices.
21. Articles XXXVIII, XXXIX and XL are hereby deleted and the
following is substituted in lieu thereof:
Page 11
ARTICLE XXXVIII
Compliance with Franchise Agreement. Lessee
shall comply in every respect with the
provisions of the Franchise Agreement so as to
avoid any default thereunder during the term of
this Agreement, except to the extent such
compliance is an obligation of Lessor pursuant
to the terms of this Lease. Lessee shall not
terminate, extend, modify or enter into any
Franchise Agreement without in each instance
first obtaining Lessor's prior written consent.
Lessor and Lessee agree to cooperate fully with
each other in the event it becomes necessary to
obtain a Franchise Agreement extension or
modification or a new franchise for the Leased
Property. If the Franchise Agreement expires
prior to the expiration of the Lease Term,
Lessee, with the prior approval of Lessor,
shall use its good faith efforts to obtain a
new franchise license for the Leased Property,
together with a comfort letter in favor of
Lessor in form acceptable to Lessor.
ARTICLE XXXIX
Capital Expenditures and Reserves. Lessor
agrees to establish a reserve account together
with all interest earned thereon for each
Facility (the "Capital Expenditure Reserve
Account") to fund Capital Expenditures in an
amount equal to five percent (5%) of annual
Room Revenues from each Facility (or such
greater amount necessary to fund capital
improvements required to comply with applicable
Legal Requirements or any requirements imposed
by the franchisor in accordance with the
Franchise Agreement or necessary to maintain
the safety or structural soundness of the
Leased Property), net of amounts actually
expended for Capital Expenditures for such
Facility during any Fiscal Year. Any funds
escrowed pursuant to a Franchise Agreement or
Mortgage and designated for Capital
Expenditures shall be deemed to be part of the
Capital Expenditure Reserve Account for the
applicable Leased Property. Any funds escrowed
pursuant to a Mortgage may be pledged as
security for such Mortgage, which pledge may
provide that, in the event of a default by
Lessor under the Mortgage, the escrowed funds
may be applied to the balance of the loan
secured by the Mortgage; provided, however,
that in the event the holder of the Mortgage
exercises such remedy, Lessor shall be
obligated immediately to deposit into the
Capital Expenditure Reserve Account any amount
which may then be necessary to bring the funds
in such account (together with any funds
remaining in any other accounts of Lessor
dedicated for such purpose) up to the aggregate
level required by this Article XXXIX . Lessor
shall make such proceeds available for Capital
Expenditures on the same terms and conditions
set forth in such Mortgage provided the same
are comparable to the terms of this Lease. The
Capital Expenditure Reserve Account for each
Facility may be commingled by Lessor with
similar accounts of Lessor with respect to
other hotel properties leased by Lessor to
Lessee. The Capital Expenditures disbursed for
a
Page 12
particular Facility shall be made pursuant to
a Capital Budget and such expenditures may be
more or less than the five percent (5%) of
annual Room Revenues reserved by Lessor for
such Facility in the Capital Expenditure
Reserve Account. Upon request by Lessee not
more frequently than twice a year, Lessor shall
provide Lessee a written report stating the
amounts held in such Capital Expenditure
Reserve Account with respect to each Leased
Property and amounts disbursed out of said
account with respect to each Leased Property
during the prior Fiscal Year. Upon written
request by Lessee to Lessor stating the
specific use to be made and the reasonable
approval thereof by Lessor, the funds in the
Capital Expenditure Reserve Account shall be
made available by Lessor for use by Lessee for
Capital Expenditures in connection with the
Primary Intended Use; provided, however, that
no amounts made available under this Article
shall be used to purchase property (other than
"real property" within the meaning of Treasury
Regulations Section 1.856-3(d)), to the extent
that doing so would cause the Lessor to
recognize income other than "rents from real
property" as defined in Section 856(d) of the
Code. All amounts in the Capital Expenditure
Reserve Account are the property of Lessor.
Lessee shall have no interest in the Capital
Expenditure Reserve Account other than with
respect to the funding of amounts in a Capital
Budget approved by Lessor.
ARTICLE XL
Arbitration. Except as otherwise expressly
provided, in the event a dispute should arise
concerning the interpretation or application of
any of the provisions of this Lease, the
parties agree that the dispute shall be
submitted to arbitration of the American
Arbitration Association under its then
prevailing rules, except as modified by this
Article XL. The Arbitration Tribunal shall be
formed of three (3) Arbitrators each of which
shall have at least five (5) years' experience
in hotel operation, management or ownership,
one (1) to be appointed by each of Lessor and
Lessee and the third (3rd) to be appointed by
the American Arbitration Association. The
arbitration shall take place in the county in
which the Leased Property is located and shall
be conducted in the English language. The
arbitration award shall be final and binding
upon the parties hereto and subject to no
appeal, and shall deal with the question of
costs of arbitration and all matters related
thereto. Judgment upon the award rendered may
be entered into any court having jurisdiction,
or applications may be made to such court for
an order of enforcement. Any arbitration under
this Article XL shall be submitted within three
(3) months following the notice which triggers
the arbitration, and shall be concluded within
one (1) year thereafter. In the event either
of the foregoing deadlines are missed, either
party may proceed to commence a court
proceeding to resolve the dispute.
Page 13
ARTICLE XLI
Sale and Termination of Lease. In the event
Lessor enters into a contract to sell its
interest in the Leased Property, Lessor may
terminate the Lease by giving thirty (30) days
prior Notice to Lessee, and then, as of the
closing of such sale, the Lease shall terminate
and be of no further force and effect except as
to any obligations existing as of such date
that survive termination of the Lease, and all
Rent shall be adjusted as of such date. As
compensation for the early termination of
Lessee's leasehold estate hereunder, Lessor
shall, at Lessor's election either (a) pay to
Lessee an amount equal to the Net Present Value
(as hereinafter defined), as of the closing of
the sale, of the cash flow to Lessee from the
operations of the Leased Property being sold
(after payment of all Rent hereunder) (the
"Termination Payment") or (b) within sixty (60)
days after termination of the Lease pursuant to
this Article offer to lease to the Lessee one
or more substitute hotel facilities comparable
to the Leased Property (i.e., comparable market
and substantially similar class, quality and
condition of property) pursuant to one or more
leases ("Substitute Leases") that would create
for Lessee leasehold estates that have an
aggregate Fair Market Value of no less than the
Fair Market Value of the then remaining term of
the Lease with respect to the Leased Property.
If Lessor elects and complies with the option
described in (b) above, regardless of whether
Lessee enters into any of the Substitute
Leases, Lessor shall have no further
obligations to Lessee with respect to
compensation for the early termination of this
Lease. In the event Lessor elects the option
to provide one or more Substitute Leases and
Lessor and Lessee are unable to agree within
three (3) months upon the Fair Market Value of
the then remaining term of this Lease or one or
more Substitute Leases, such value(s) shall be
determined by appraisal using the appraisal
procedure set forth in Article XL. The "Net
Present Value" of the cash flow to Lessee from
the operations of the Leased Property shall be
determined by aggregating the "Projected Annual
Discounted Cash Flows" for each fiscal year or
portion thereof remaining in the Lease Term.
To determine Projected Annual Discounted Cash
Flow for each fiscal year or portion thereof,
the "Projected EBITDA" for each such year shall
be discounted to the date the Termination
Payment is made at a discount rate equal to ten
percent (10%). "Projected EBITDA" for the
fiscal year in which the termination occurs
shall be the average annual "EBITDA" for the
three (3) Fiscal Years prior to the date of
termination (or, if three fiscal years have not
elapsed between the date of this First
Page 14
Amendment to Lease and the date of termination,
the average annual EBITDA for such shorter
period). The Projected EBITDA for each
subsequent year shall be increased at a
compound rate equal to the average annual
percentage increase in the CPI for the three
(3) Fiscal Years prior to the date of
termination (or, if three fiscal years have not
elapsed between the date of this First
Amendment to Lease and the date of termination,
the average annual percentage increase for such
shorter period). "EBITDA" shall mean net
earnings before interest, taxes, depreciation
and amortization.
ARTICLE XLII
Extension. Commencing on January 1, 2012,
Lessor agrees to negotiate in good faith for an
extension of the Term for a subsequent fifteen
(15) year period, the terms of which shall be
based on the fair market value of the leasehold
interest based on then prevailing rental rates
for similar properties owned by Real Estate
Investment Trusts and leased to unaffiliated
third parties; provided, however, that nothing
in this Article shall be deemed to obligate
Lessor to lease the Leased Property to Lessee
beyond the Term or seek any appraisal to
determine the fair market value of such
leasehold interest.
ARTICLE XLIII
Lessee Information for SEC Filings. To the
extent generally accepted accounting principles
or the rules and regulations of the Securities
and Exchange Commission ("SEC") require
financial or other information regarding the
Lessee to be included in any filings of Winston
Hotels, Inc. with the SEC, the Lessee hereby
agrees to provide to the Lessor and Winston
Hotels, Inc. such information promptly upon
request and to use its best efforts to respond
to any comments of the SEC or any other
governmental or regulatory body with respect
thereto. The information provided by Lessee
for inclusion in any SEC filing of Winston
Hotels, Inc. shall not contain any false or
misleading statement of a material fact or omit
to state any material fact necessary in order
to make the statements made, in light of the
circumstances under which they were made, not
misleading. Lessor shall pay for all third
party accounting costs incurred by Lessee in
complying with the requirements of this Article
for the calendar year 1997; thereafter, Lessor
and Lessee shall split any such third party
accounting costs.
All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Existing
Lease. Except as expressly amended and modified hereby, the
Existing Lease shall otherwise remain in full force and effect, the
parties hereto hereby ratifying and confirming the same. To the
extent of any inconsistency between the Existing Lease and this
First Amendment to Lease, the terms of this First Amendment to
Lease shall control.
Page 15
IN WITNESS WHEREOF, the parties have executed this First
Amendment to Lease by their duly authorized officers as of the date
first above written.
LESSOR
Signed and acknowledged WINN LIMITED PARTNERSHIP, a
in the presence of: North Carolina limited partnership
/s/ Lynda Davis By: WINSTON HOTELS, INC.
- --------------------------------- as General Partner of WINN
Printed Name: Lynda Davis Limited Partnership
By: /s/ Robert W. Winston, III
----------------------------
/s/ Brenda G. Burns Name: Robert W. Winston, III
- --------------------------------- -----------------------
Printed Name: Brenda G. Burns Title:President
----------------------
LESSEE
Signed and acknowledged CAPSTAR WINSTON COMPANY, L.L.C.,
in the presence of: a Delaware limited liability company
/s/ Patricia E. Russell By:CAPSTAR MANAGEMENT COMPANY, L.P.
- --------------------------------- as Managing Member of CapStar Winston
Printed Name: Patricia E. Russell Company, L.L.C.
/s/ Kara Amato By: CAPSTAR HOTEL COMPANY
- --------------------------------- as General Partner of CapStar
Printed Name: Kara Amato Management
By: /s/ William Driscall
----------------------------
Name: William Driscall
-----------------------
Title: Vice President
----------------------
EXHIBIT 10.3
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (this "First Amendment to
Lease"), made as of the 24th day of November, 1997, by and between
WINN LIMITED PARTNERSHIP, a North Carolina limited partnership and
WINSTON HOTELS, INC., a North Carolina corporation (hereinafter
called "Lessor"), and CAPSTAR WINSTON COMPANY, L.L.C., a Delaware
limited liability company (hereinafter called "Lessee"), provides
as follows:
W I T N E S S E T H:
WHEREAS, pursuant to that certain Asset Purchase Agreement
dated as of October 29, 1997 (the "Purchase Agreement") by and
among WINSTON HOSPITALITY, INC. ("Winston"), ROBERT W. WINSTON, III
and JOHN B. HARRIS ("Winston Shareholders"), CAPSTAR MANAGEMENT
COMPANY, L.P., a Delaware limited partnership ("CapStar") and
CAPSTAR HOTEL COMPANY, a Delaware corporation ("CapStar Corp."),
Winston has assigned to CapStar and CapStar has assigned to Lessee
all of its right, title and interest in 6 separate lease agreements
listed on Exhibit A attached hereto and incorporated herein by this
reference (individually, "Existing Lease" and collectively,
"Existing Leases");
WHEREAS, Lessee is an indirect subsidiary of CapStar Corp.
and, as such, is experienced in the management and operations of
facilities substantially similar to the hotel properties leased
pursuant to the Existing Leases; and
WHEREAS, Lessor (in consideration of the foregoing recital)
has consented to the assignment of the Existing Leases from Winston
to CapStar and from CapStar to Lessee, and Lessor and Lessee have
agreed to amend the Existing Leases in accordance with the terms of
this First Amendment to Lease.
NOW, THEREFORE, in consideration of the payment of rent and
the mutual agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, Lessor and Lessee hereby amend the Existing Leases as
follows:
1. The definition of "Base Rate" is hereby modified by inserting
"prime" before "rate" on the first line thereof and by
deleting "as such bank's base rate" from the second line
thereof.
2. Section 1.2 is hereby modified by substituting "[November 30,
2012]" in lieu of "tenth anniversary of the last day of the
month in which the Commencement Date occurs" in the second and
third lines thereof.
3. The definition of "Gross Operating Profit" is hereby amended
by adding the following to the end of the definition:
No part of Lessee's central office overhead or
general or administrative expense (as opposed
to that of the Facility) shall be deemed to be
a part of Gross Operating Expenses, as herein
provided; provided that accounting services
provided to the Leased Property but performed
at Lessee's central office shall be included in
Gross Operating Expenses.
Page 2
4. Section 3.2 is hereby modified by adding the term "and
franchise reports" after the term "excise tax returns" on the
twelfth line thereof.
5. Sections 3.6 and 3.7 are hereby deleted and the following is
substituted in lieu thereof:
3.6 Annual Budget. Not later than forty-five
(45) days prior to the commencement of each
Fiscal Year, Lessee shall submit the following
Budgets to Lessor:
(a) An operating budget ("Operating
Budget") prepared in accordance with this
Section 3.6(a), in substantially the form
attached hereto as Exhibit E. The Operating
Budget shall be prepared in good faith and
otherwise in accordance with the Uniform System
to the extent applicable and shall show by
month and quarter and for the full Fiscal Year
in the degree of detail specified by the
Uniform System, the following:
(i) Lessee's reasonable estimate of
Gross Revenues (including room rates and
Room Revenues, food, beverage and other
revenues as applicable), Gross Operating
Expenses, and Gross Operating Profits for
the forthcoming Fiscal Year itemized on
schedules on a quarterly basis as approved
by Lessor and Lessee, as same may be
revised or replaced from time to time by
Lessee and approved by Lessor, together
with the assumptions, in narrative form,
forming the basis of such schedules.
(ii) A reasonable estimate of the
amounts to be dedicated to routine, non-
capital repair and maintenance; and
(iii) A cash flow projection.
(iv) Lessee's reasonable estimate of
Percentage Rent by quarter for the Fiscal
Year, and
(v) A narrative description of the
program for advertising and marketing the
Facility for the forthcoming Fiscal Year
containing a detailed budget itemization
of the proposed advertising expenditures
by category and the assumptions, in
narrative form, forming the basis of such
budget itemizations.
(b) A capital budget ("Capital Budget")
in substantially the form of Exhibit F hereto
(which shall not exceed five percent (5%) of
the estimated Room Revenues except to the
extent otherwise required in Article XXXIX),
containing a description in reasonable
Page 3
detail of the proposed Capital Improvements and
an estimate of all amounts Lessor will be
requested to provide for Capital Improvements
to the Facility or any of its components for
the Fiscal Year. The Capital Budget shall be
prepared in accordance with the Uniform System
to the extent applicable.
3.7 Approval of Capital Budget. Within thirty
(30) days following submission of the Capital
Budget to Lessor, Lessor shall give Lessee
written notice either (a) that Lessor approves
the Capital Budget or (b) indicating with
reasonable specificity the respects in which
Lessor objects to the Capital Budget. In the
latter event, Lessor and Lessee shall act
promptly, reasonably and in good faith to seek
to resolve Lessor's objections. In the event
Lessor fails to deliver the notice set forth in
this section, within the required time period,
the Capital Budget shall be deemed approved.
Lessee, in its sole discretion, may designate
proposed capital projects as "mandatory"
projects in an aggregate amount not in excess
of twenty-five percent (25%) of the Capital
Budget, which mandatory projects shall not be
subject to Lessor's approval. In the event
that Lessor and Lessee fail to reach agreement
with respect to the Capital Budget within
thirty (30) days after receipt of Lessor's
written notice, Lessee and Lessor shall refer
any disputed Capital Budget matter to
arbitration using procedures set forth in
Article XL hereto and each party shall endeavor
to cause such arbitration to be completed as
quickly as possible, but in any event not later
than six (6) months following referral to
arbitration. While any arbitration is pending,
Lessee shall continue to operate the Facility
in accordance with the terms of this Lease,
including without limitation, making all
Capital Expenditures for approved portions of
the Capital Budget and mandatory projects to
the extent such mandatory projects are included
in the Capital Budget. Lessor shall be
obligated to make all Capital Expenditures
which are required pursuant to a Capital Budget
which has been approved or deemed approved in
accordance with the procedures set forth above.
3.8 Approval of Annual Budget. Within thirty
(30) days following submission of the Annual
Budget to Lessor, Lessor shall give Lessee
written notice either (a) that Lessor approves
the Annual Budget or (b) indicating with
reasonable specificity the respects in which
Lessor objects to the Annual Budget. In the
latter event, Lessor and Lessee shall act
promptly, reasonably and in good faith to seek
to resolve Lessor's objections. In the event
that Lessor and Lessee fail to reach agreement
with respect to the Annual Budget within thirty
(30) days after receipt of Lessor's written
notice, Lessee and Lessor shall refer any
disputed Annual Budget matter to arbitration
using procedures set forth in Article XL hereto
and each party shall endeavor to cause such
arbitration to be completed as
Page 4
quickly as possible, but in any event not later
than six (6) months following referral to
arbitration.
3.9 Capital Projects.
(a) The selection of all design
professionals and contractors for material
capital projects (i.e., in excess of $25,000)
shall be made by Lessor in its reasonable
discretion, after consultation with Lessee.
(b) Lessor may require that all contracts
in connection with capital projects be subject
to competitive bidding procedures reasonably
acceptable to Lessor. Lessor shall also have
the right to review and approve all material
contract bids (i.e., in excess of $25,000)
whether competitively bid or not. Lessor may
also retain, at its sole cost and expense, an
inspecting architect or engineer to monitor
costs, time, quality and performance for all
capital projects.
3.10 Books and Records. Lessee shall keep full
and adequate books of account and other records
reflecting the results of operation of the
Facility on an accrual basis, all in accordance
with the Uniform System and generally accepted
accounting principles to the extent applicable
and the obligations of Lessee under this Lease.
The books of account and all other records
relating to or reflecting the operation of the
Facility shall be kept either at the Facility
or at Lessee's offices in Raleigh, North
Carolina and shall be available to Lessor and
its representatives and its auditors or
accountants, at all reasonable times for
examination, audit, inspection, and
transcription. All of such books and records
pertaining to the Facility including, without
limitation, books of account, guest records and
front office records, at all times shall be the
property of Lessor and shall not be removed
from the Facility or Lessee's offices without
Lessor approval.
6. Article IV is hereby amended by adding the following as
Section 4.6:
4.6 Franchise Fees. Lessee will pay or cause
to be paid in a timely manner all franchise
fees due and owing in accordance with the terms
and conditions of the Franchise Agreement.
7. The last sentence of Section 5.2 is hereby deleted and the
following is substituted in lieu thereof:
If Lessor and Lessee are unable to agree upon
the amount of such abatement within 30 days
after such partial Taking, the matter may be
submitted by either party to arbitration
pursuant to the arbitration procedures set
forth in Article XL.
8. The sentence prior to the final sentence of Section 6.2 is
hereby deleted and the following is substituted in lieu
thereof:
Page 5
Upon the expiration or earlier termination of
the Term, Lessor or its designee shall retain
ownership of "par stock" (as such term is
generally used within the hotel industry) of
Inventory and shall have the option to purchase
all Inventory on hand at the Leased Property at
the time of such expiration or termination in
excess of par stock for a sale price equal to
the fair market value of such Inventory.
9. Section 7.2(f) is hereby deleted and the following is
substituted in lieu thereof:
(f) Lessee agrees to deliver to Lessor
upon request by Lessor from time to time a list
of hotels and motels (and locations) owned or
managed by Lessee and its Affiliates.
(g) During the Term, neither Lessee nor
any Affiliate of Lessee that is "controlled" by
CapStar (i.e., CapStar owns, directly or
indirectly, fifty percent (50%) or more of the
ownership interests in such entity or has the
ability to direct management of such entity)
("Controlled Affiliate") shall build or develop
a hotel, motel, inn or other lodging facility
within five (5) miles of, and in direct
competition with, the Leased Property, (i.e.,
such lodging facility is substantially similar
to the Leased Property with respect to level of
services provided, market segment and price
point). In the event that Lessee or a
Controlled Affiliate acquires, owns, operates
or manages a hotel, motel, inn or other lodging
facility within five (5) miles of the Leased
Property, Lessee agrees that, during the Term,
neither it nor its Controlled Affiliate will
solicit on a targeted basis any executive or
managerial employees or material customer
accounts of the Leased Property.
10. Article XIV is hereby deleted and the following is
substituted in lieu thereof:
14.1 Insurance Proceeds. Subject to the
provisions of Section 14.5, all proceeds
payable by reason of any loss or damage to the
Leased Property, or any portion thereof, and
insured under any policy of insurance required
by Article XIII of this Lease shall be paid to
Lessor and shall be made available, in
accordance with this Article, for
reconstruction or repair, as the case may be,
of any damage to or destruction of the Leased
Property, or any portion thereof, and, if
applicable, shall be paid out by Lessor from
time to time for the reasonable costs of such
reconstruction or repair upon satisfaction of
reasonable terms and conditions specified by
Lessor.
14.2 Reconstruction in the Event of Damage or
Destruction Covered by Insurance.
(a) If the Leased Property is totally or
partially destroyed by a risk covered by the
insurance described in Article XIII and the
Page 6
Facility thereby is rendered Unsuitable for its
Primary Intended Use, Lessor may, at Lessor's
option to be exercised within ninety (90) days
after the date of such occurrence, restore the
Facility to substantially the same condition as
existed immediately before the damage or
destruction and otherwise in accordance with
the terms of the Lease.
(b) If the Leased Property is partially
destroyed by a risk covered by the insurance
described in Article XIII, but the Facility is
not thereby rendered Unsuitable for its Primary
Intended Use, Lessor shall promptly restore the
Facility to substantially the same condition as
existed immediately before the damage or
destruction and otherwise in accordance with
the terms of the Lease to the extent of
insurance proceeds received by Lessor.
14.3 Lessee's Property. All insurance proceeds
payable by reason of any loss of or damage to
any of Lessee's Personal Property shall be paid
to Lessee; provided, however, no such payments
shall diminish or reduce the insurance payments
otherwise payable to or for the benefit of
Lessor hereunder.
14.4 Abatement of Rent. Any damage or
destruction due to casualty notwithstanding,
this Lease shall remain in full force and
effect and Lessee's obligation to make rental
payments and to pay all other charges required
by this Lease shall remain unabated during the
first six months of any period required for the
applicable repair and restoration. Thereafter,
Base Rent shall be equitably abated.
14.5 Damage Near End of Term. If damage to or
destruction of the Facility rendering it
Unsuitable for its Primary Intended Use occurs
during the last 24 months of the Term, then
Lessor shall have the right to terminate this
Lease by giving written notice to Lessee within
30 days after the date of damage or
destruction, whereupon all accrued Rent shall
be paid immediately, and this Lease shall
automatically terminate five days after the
date of such notice.
14.6 Waiver. Lessee hereby waives any statutory
rights of termination that may arise by reason
of any damage or destruction of the Facility
that Lessor is obligated to restore or may
restore under any of the provisions of this
Lease.
11. Section 15.3 is hereby modified by deleting "subject to the
provisions of Section 15.7," from the second line thereof and
by deleting the last sentence thereof.
12. Section 15.5 is hereby modified by substituting "Lessor" in
lieu of "Lessee" in the fourth line thereof and by deleting
the last sentence thereof.
Page 7
13. Section 15.6 is hereby modified by substituting "Lessor" in
lieu of "Lessee" in both instances where it appears on the
thirteenth line thereof by deleting the parenthetical phrase
"(subject to Lessor's contributions as set forth below)" where
it appears on the fifteenth line, and by deleting the last
sentence thereof.
14. Article 15 is hereby modified by deleting Section 15.7
therefrom.
15. Section 16.1 is hereby deleted and the following is
substituted in lieu thereof:
16.1 Events of Default. If any one or more of
the following events (individually, an "Event
of Default") occurs:
(a) if an Event of Default occurs under
any other lease between Lessor and Lessee any
Controlled Affiliate; or
(b) if Lessee fails to make payment of
the Base Rent, Percentage Rent or Additional
Charges within fifteen (15) days after the same
becomes due and payable; or
(c) if Lessee fails to observe or perform
any other term, covenant or condition of this
Lease and such failure is not cured by Lessee
within a period of thirty (30) days after
receipt by such party of Notice thereof from
Lessor, unless such failure cannot with due
diligence be cured within a period of thirty
(30) days, in which case it shall not be deemed
an Event of Default if Lessee proceeds promptly
and with due diligence to cure the failure and
diligently completes the curing thereof
provided, however, in no event shall such cure
period extend beyond 90 days after such Notice
(provided that no Event of Default shall be
deemed to have occurred pursuant to this
subsection (c) to the extent that Lessee's
failure to observe or perform any term,
covenant or condition of this Lease is caused
by Lessor's failure to fulfill its obligations
under this Lease); or
(d) if there occurs a transfer of a
controlling interest in Lessee (50% or more of
the ownership interests in Lessee) without the
prior consent of Lessor, which may be withheld
in Lessor's sole discretion, subject to
Section 23.1 as modified hereby; or
(e) if Lessee shall file a petition in
bankruptcy or reorganization for an arrangement
pursuant to any federal or state bankruptcy law
or any similar federal or state law, or shall
be adjudicated a bankrupt or shall make an
assignment for the benefit of creditors or
shall admit in writing its inability to pay its
debts generally as they become due, or if a
petition or answer proposing the adjudication
of Lessee as a bankrupt or its reorganization
pursuant to any federal or state bankruptcy law
or any similar federal or state law shall be
filed in any court and Lessee shall be
Page 8
adjudicated a bankrupt and such adjudication
shall not be vacated or set aside or stayed
within sixty (60) days after the entry of an
order in respect thereof, or if a receiver of
the Lessee of the whole or substantially all of
the assets of the Lessee shall be appointed in
any proceedings brought by the Lessee or if any
such receiver, trustee or liquidator shall be
appointed in any proceeding brought against
Lessee shall not be vacated or set aside or
stayed within sixty (60) days after such
appointment; or
(f) if Lessee is liquidated or dissolved,
or begins proceedings toward such liquidation
or dissolution, or, if Lessee in any manner,
permits the sale or divestiture of
substantially all of its assets; or
(g) if the estate or interest of Lessee
in the Leased Property or any part thereof is
voluntarily or involuntarily transferred,
assigned, conveyed, levied upon or attached in
any proceeding (unless Lessee is contesting
such lien or attachment in good faith in
accordance with this Lease); or
(h) if, except as a result of damage,
destruction or a partial or complete
Condemnation, Lessee voluntarily ceases
operations on the Leased Property for a period
in excess of thirty (30) days; or
(i) if an event of default has been
declared by the franchisor under the Franchise
Agreement with respect to the Facility on the
Leased Property as a result of any action or
failure to act by the Lessee or any other
person with whom Lessee contracts for
management services at the Facility, other than
a failure to complete improvements required by
the franchisor because Lessor has not provided
funds for such improvements to the extent
required pursuant to this Lease; or
(j) the occurrence of an Event of Default
under the Guarantee of Lease executed by
CapStar Corp. in favor of Lessor with respect
to Lessee's obligations under this Lease.
Then, and in any such event, Lessor may
exercise one or more remedies available to it
herein or at law or in equity, including but
not limited to its right to terminate this
Lease giving Lessee not less than ten (10)
days' notice of such termination.
If litigation is commenced with respect to
any alleged default under this Lease, the
prevailing party in such litigation shall
receive, in addition to its damages incurred,
such sum as the court shall
Page 9
determine as its reasonable attorneys' fees, and
all costs and expenses incurred in connection
therewith.
16. Section 19.6 is hereby deleted and the following is
substituted in lieu thereof:
19.6 Payments to Affiliates of Lessee.
Notwithstanding anything to the contrary
contained in this Lease, Lessee shall make no
payments to Affiliates unless expressly set
forth in the Annual Budget (which may provide
for payment of management fees to an Affiliate
of Lessee) or otherwise expressly agreed to in
writing by Lessor, in either case, after full
written disclosure (including information
regarding competitive pricing) by Lessee to
Lessor of the affiliation and any other related
information requested by Lessor.
19.7 Management Agreement. Lessor shall have
the right in its sole and absolute discretion
to approve or disapprove in advance any manager
or proposed manager (a "Manager") of the
Facility which is not an Affiliate of Lessee,
as well as any agreement relating to the
management or operation of the Facility (a
"Management Agreement") by a Manager which is
not an Affiliate of Lessee and Lessee will
provide Lessor with an executed copy of any
Management Agreement so approved by Lessor.
Any Management Agreement (whether with a
Manager which is an Affiliate or is not an
Affiliate of Lessee) must provide that (i) upon
termination of this Lease or termination of
Lessor's or Lessee's right to possession of the
Leased Property for any reason, the Management
Agreement may be terminated by Lessor without
liability for any payment due or to become due
to the Manager thereunder; (ii) any management
fees shall be subordinated to payments of Rent
to Lessor hereunder; and (iii) in the event
Lessee is in default, the Manager shall, at the
election of Lessor and provided the Manager
continues to be paid, continue to perform under
the terms of the Management Agreement for a
period not to exceed ninety (90) days. No fees
or other amounts payable by Lessee to any
Manager shall excuse Lessee from its
obligations to pay Rent and other amounts
payable by Lessee to Lessor hereunder. No
Management Agreement may be amended or modified
in any manner which materially affects the
subordination of the management fees without
the prior written consent of Lessor.
17. Article XXII is hereby amended by adding the
following paragraphs thereto:
Add immediately following the first paragraph:
Without limiting the generality of the
foregoing paragraph, Lessee shall indemnify,
save harmless and defend Lessor Indemnified
Parties (including, but not limited to, any
Lessor Indemnified Party that is a guarantor of
the Franchise Agreement pursuant to which the
Leased Property is currently operated)
("Current Franchise Agreement") from and
against all liabilities,
Page 10
obligations, claims, damages, penalties, causes
of action, costs and expenses (including, but not
limited to, transfer fees and termination fees)
imposed upon or incurred by or asserted against Lessor
Indemnified Parties under or with respect to
the Current Franchise Agreement which arises as
a result of (a) any default by Lessee under the
terms of this Lease; or (b) any default by
Lessee under the Current Franchise Agreement.
Add immediately following the second paragraph:
Without limiting the generality of the
foregoing paragraph, Lessor shall indemnify,
save harmless and defend Lessee Indemnified
Parties (including, but not limited to, any
Lessee Indemnified Party that is a guarantor of
the Current Franchise Agreement) from and
against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and
expenses (including, but not limited to,
transfer fees and termination fees) imposed
upon or incurred by or asserted against Lessee
Indemnified Parties under or with respect to
the Current Franchise Agreement which arises as
a result of (a) any default by Lessor under the
terms of this Lease; (b) the sale by Lessor of
the Leased Property or any interest of Lessor
in the Leased Property; or (c) any act or
omission of any person that acquires the Leased
Property or any interest of Lesser in the
Leased Property.
18. Section 23.1 is hereby modified by adding the following to the
end of Section 23.1:
Notwithstanding the foregoing, Lessor's prior
consent is not required for assignments of this
Lease in connection with a "change of control"
transaction involving CapStar or CapStar Corp.
(i.e., a merger, consolidation, sale or
exchange of greater than 50% of the stock or
other equity interest in either entity or a
sale of all or substantially all of the assets
of either entity.
19. Article XXIV is hereby modified by (i) substituting "an
accounting firm acceptable to Lessor in its reasonable
discretion" in lieu of "the same certified independent
accounting firm that prepares the returns for Lessor or such
other accounting firm as may be approved by Lessor" on the
third through fifth line of subsection (b) thereof and (ii)
deleting subsection (d) thereof.
20. Article XXXII is hereby amended by inserting "1010 Wisconsin
Avenue, N.W., Washington, D.C. 20007, Attention: Chief
Executive Officer, with a copy to William Diamond, Esq.,
DeCampo, Diamond & Ash, 805 Third Avenue, New York, New York
10022" as Lessee's address for purposes of notices.
21. Articles XXXVIII, XXXIX and XL are hereby deleted and the
following is substituted in lieu thereof:
Page 11
ARTICLE XXXVIII
Compliance with Franchise Agreement. Lessee
shall comply in every respect with the
provisions of the Franchise Agreement so as to
avoid any default thereunder during the term of
this Agreement, except to the extent such
compliance is an obligation of Lessor pursuant
to the terms of this Lease. Lessee shall not
terminate, extend, modify or enter into any
Franchise Agreement without in each instance
first obtaining Lessor's prior written consent.
Lessor and Lessee agree to cooperate fully with
each other in the event it becomes necessary to
obtain a Franchise Agreement extension or
modification or a new franchise for the Leased
Property. If the Franchise Agreement expires
prior to the expiration of the Lease Term,
Lessee, with the prior approval of Lessor,
shall use its good faith efforts to obtain a
new franchise license for the Leased Property,
together with a comfort letter in favor of
Lessor in form acceptable to Lessor.
ARTICLE XXXIX
Capital Expenditures and Reserves. Lessor
agrees to establish a reserve account together
with all interest earned thereon for each
Facility (the "Capital Expenditure Reserve
Account") to fund Capital Expenditures in an
amount equal to five percent (5%) of annual
Room Revenues from each Facility (or such
greater amount necessary to fund capital
improvements required to comply with applicable
Legal Requirements or any requirements imposed
by the franchisor in accordance with the
Franchise Agreement or necessary to maintain
the safety or structural soundness of the
Leased Property), net of amounts actually
expended for Capital Expenditures for such
Facility during any Fiscal Year. Any funds
escrowed pursuant to a Franchise Agreement or
Mortgage and designated for Capital
Expenditures shall be deemed to be part of the
Capital Expenditure Reserve Account for the
applicable Leased Property. Any funds escrowed
pursuant to a Mortgage may be pledged as
security for such Mortgage, which pledge may
provide that, in the event of a default by
Lessor under the Mortgage, the escrowed funds
may be applied to the balance of the loan
secured by the Mortgage; provided, however,
that in the event the holder of the Mortgage
exercises such remedy, Lessor shall be
obligated immediately to deposit into the
Capital Expenditure Reserve Account any amount
which may then be necessary to bring the funds
in such account (together with any funds
remaining in any other accounts of Lessor
dedicated for such purpose) up to the aggregate
level required by this Article XXXIX . Lessor
shall make such proceeds available for Capital
Expenditures on the same terms and conditions
set forth in such Mortgage provided the same
are comparable to the terms of this Lease. The
Capital Expenditure Reserve Account for each
Facility may be commingled by Lessor with
similar accounts of Lessor with respect to
other hotel properties leased by Lessor to
Lessee. The Capital Expenditures disbursed for
a
Page 12
particular Facility shall be made pursuant to
a Capital Budget and such expenditures may be
more or less than the five percent (5%) of
annual Room Revenues reserved by Lessor for
such Facility in the Capital Expenditure
Reserve Account. Upon request by Lessee not
more frequently than twice a year, Lessor shall
provide Lessee a written report stating the
amounts held in such Capital Expenditure
Reserve Account with respect to each Leased
Property and amounts disbursed out of said
account with respect to each Leased Property
during the prior Fiscal Year. Upon written
request by Lessee to Lessor stating the
specific use to be made and the reasonable
approval thereof by Lessor, the funds in the
Capital Expenditure Reserve Account shall be
made available by Lessor for use by Lessee for
Capital Expenditures in connection with the
Primary Intended Use; provided, however, that
no amounts made available under this Article
shall be used to purchase property (other than
"real property" within the meaning of Treasury
Regulations Section 1.856-3(d)), to the extent
that doing so would cause the Lessor to
recognize income other than "rents from real
property" as defined in Section 856(d) of the
Code. All amounts in the Capital Expenditure
Reserve Account are the property of Lessor.
Lessee shall have no interest in the Capital
Expenditure Reserve Account other than with
respect to the funding of amounts in a Capital
Budget approved by Lessor.
ARTICLE XL
Arbitration. Except as otherwise expressly
provided, in the event a dispute should arise
concerning the interpretation or application of
any of the provisions of this Lease, the
parties agree that the dispute shall be
submitted to arbitration of the American
Arbitration Association under its then
prevailing rules, except as modified by this
Article XL. The Arbitration Tribunal shall be
formed of three (3) Arbitrators each of which
shall have at least five (5) years' experience
in hotel operation, management or ownership,
one (1) to be appointed by each of Lessor and
Lessee and the third (3rd) to be appointed by
the American Arbitration Association. The
arbitration shall take place in the county in
which the Leased Property is located and shall
be conducted in the English language. The
arbitration award shall be final and binding
upon the parties hereto and subject to no
appeal, and shall deal with the question of
costs of arbitration and all matters related
thereto. Judgment upon the award rendered may
be entered into any court having jurisdiction,
or applications may be made to such court for
an order of enforcement. Any arbitration under
this Article XL shall be submitted within three
(3) months following the notice which triggers
the arbitration, and shall be concluded within
one (1) year thereafter. In the event either
of the foregoing deadlines are missed, either
party may proceed to commence a court
proceeding to resolve the dispute.
Page 13
ARTICLE XLI
Sale and Termination of Lease. In the event
Lessor enters into a contract to sell its
interest in the Leased Property, Lessor may
terminate the Lease by giving thirty (30) days
prior Notice to Lessee, and then, as of the
closing of such sale, the Lease shall terminate
and be of no further force and effect except as
to any obligations existing as of such date
that survive termination of the Lease, and all
Rent shall be adjusted as of such date. As
compensation for the early termination of
Lessee's leasehold estate hereunder, Lessor
shall, at Lessor's election either (a) pay to
Lessee an amount equal to the Net Present Value
(as hereinafter defined), as of the closing of
the sale, of the cash flow to Lessee from the
operations of the Leased Property being sold
(after payment of all Rent hereunder) (the
"Termination Payment") or (b) within sixty (60)
days after termination of the Lease pursuant to
this Article offer to lease to the Lessee one
or more substitute hotel facilities comparable
to the Leased Property (i.e., comparable market
and substantially similar class, quality and
condition of property) pursuant to one or more
leases ("Substitute Leases") that would create
for Lessee leasehold estates that have an
aggregate Fair Market Value of no less than the
Fair Market Value of the then remaining term of
the Lease with respect to the Leased Property.
If Lessor elects and complies with the option
described in (b) above, regardless of whether
Lessee enters into any of the Substitute
Leases, Lessor shall have no further
obligations to Lessee with respect to
compensation for the early termination of this
Lease. In the event Lessor elects the option
to provide one or more Substitute Leases and
Lessor and Lessee are unable to agree within
three (3) months upon the Fair Market Value of
the then remaining term of this Lease or one or
more Substitute Leases, such value(s) shall be
determined by appraisal using the appraisal
procedure set forth in Article XL. The "Net
Present Value" of the cash flow to Lessee from
the operations of the Leased Property shall be
determined by aggregating the "Projected Annual
Discounted Cash Flows" for each fiscal year or
portion thereof remaining in the Lease Term.
To determine Projected Annual Discounted Cash
Flow for each fiscal year or portion thereof,
the "Projected EBITDA" for each such year shall
be discounted to the date the Termination
Payment is made at a discount rate equal to ten
percent (10%). "Projected EBITDA" for the
fiscal year in which the termination occurs
shall be the average annual "EBITDA" for the
three (3) Fiscal Years prior to the date of
termination (or, if three fiscal years have not
elapsed between the date of this First
Amendment to Lease and the date of termination,
the average annual EBITDA for such shorter
period). The Projected EBITDA for each
subsequent year shall be increased at a
compound rate equal to the average annual
percentage increase in the CPI for the three
(3) Fiscal Years prior to the date of
termination (or, if three fiscal years have not
elapsed between the date of this First
Page 14
Amendment to Lease and the date of termination,
the average annual percentage increase for such
shorter period). "EBITDA" shall mean net
earnings before interest, taxes, depreciation
and amortization.
ARTICLE XLII
Extension. Commencing on January 1, 2012,
Lessor agrees to negotiate in good faith for an
extension of the Term for a subsequent fifteen
(15) year period, the terms of which shall be
based on the fair market value of the leasehold
interest based on then prevailing rental rates
for similar properties owned by Real Estate
Investment Trusts and leased to unaffiliated
third parties; provided, however, that nothing
in this Article shall be deemed to obligate
Lessor to lease the Leased Property to Lessee
beyond the Term or seek any appraisal to
determine the fair market value of such
leasehold interest.
ARTICLE XLIII
Lessee Information for SEC Filings. To the
extent generally accepted accounting principles
or the rules and regulations of the Securities
and Exchange Commission ("SEC") require
financial or other information regarding the
Lessee to be included in any filings of Winston
Hotels, Inc. with the SEC, the Lessee hereby
agrees to provide to the Lessor and Winston
Hotels, Inc. such information promptly upon
request and to use its best efforts to respond
to any comments of the SEC or any other
governmental or regulatory body with respect
thereto. The information provided by Lessee
for inclusion in any SEC filing of Winston
Hotels, Inc. shall not contain any false or
misleading statement of a material fact or omit
to state any material fact necessary in order
to make the statements made, in light of the
circumstances under which they were made, not
misleading. Lessor shall pay for all third
party accounting costs incurred by Lessee in
complying with the requirements of this Article
for the calendar year 1997; thereafter, Lessor
and Lessee shall split any such third party
accounting costs.
All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Existing
Lease. Except as expressly amended and modified hereby, the
Existing Lease shall otherwise remain in full force and effect, the
parties hereto hereby ratifying and
confirming the same. To the extent of any inconsistency between
the Existing Lease and this First Amendment to Lease, the terms of
this First Amendment to Lease shall control.
Page 14
IN WITNESS WHEREOF, the parties have executed this First
Amendment to Lease by their duly authorized officers as of the date
first above written.
LESSOR
Signed and acknowledged WINN LIMITED PARTNERSHIP, a
in the presence of: North Carolina limited partnership
By: /s/ Robert W. Winston, III
/s/ Brenda G. Burns -------------------------------
- ------------------- Name: Robert W. Winston, III
Printed Name: Brenda G. Burns
/s/ Lynda G. Davis
- -------------------
Printed Name: Lynda G. Davis
Signed and acknowledged WINSTON HOTELS, INC., a
in the presence of: North Carolina corporation
By: /s/ Robert W. Winston, III
/s/ Brenda G. Burns --------------------------------
- ------------------- Name: Robert W. Winston, III
Printed Name: Brenda G. Burns
/s/ Lynda G. Davis
- -------------------
Printed Name: Lynda G. Davis
LESSEE
Signed and acknowledged CAPSTAR WINSTON COMPANY, L.L.C.,
in the presence of: a Delaware limited liability company
By: /s/ William Driscall
/s/ Kara Amato ---------------------------------
- ------------------ Name: William Driscall
Printed Name: Kara Amato
/s/ Shirley M. Tolbert
- ----------------------
Printed Name: Shirley M. Tolbert
EXHIBIT 10.4
GUARANTY OF LEASES
THIS GUARANTY, dated as of November 17, 1997, by
CAPSTAR HOTEL COMPANY, a Delaware corporation (the
"Guarantor"), for the benefit of WINN LIMITED PARTNERSHIP, a
North Carolina limited partnership, and WINSTON HOTELS, INC.
(collectively, the "Lessor"), recites and provides:
RECITALS
Simultaneously with the execution hereof, the Lessor
and CapStar Winston Company, L.L.C., a Delaware limited
liability company (the "Lessee"), have executed a certain
First Amendment to Lease of even date herewith and
contemplate subsequently executing a separate First
Amendment to Lease in connection with a certain Asset
Purchase Agreement dated as of October 29, 1997 by and among
the Guarantor, CapStar Management Company, L.P., a Delaware
limited partnership, Winston Hospitality, Inc., a North
Carolina corporation, Robert W. Winston, III and John B.
Harris (which amendments, together with the underlying
leases, are hereinafter referred to collectively as the
"Leases") for the lease of various parcels of land, together
with all appurtenances thereto, improvements thereon and
intangible and tangible personal property, and more
particularly described in the Leases (the "Leased
Premises"). It is also contemplated that Lessor and Lessee
may enter into additional hotel leases in the future
("Future Leases"). To the extent the Guarantor confirms in
writing that the obligations under any Future Leases are
guaranteed hereby, the terms "Leases" and "Leased Property"
shall also include, respectively, such Future Leases and the
various parcels of land, together with all appurtenances
thereto, improvements thereon and intangible and tangible
personal property more particularly described in such Future
Leases.
The Lessee is an indirect subsidiary of the Guarantor.
As a condition to executing the Leases, the Lessor has
required the Guarantor to guarantee the prompt and full
payment of rent and all other amounts payable to the Lessor
under the Leases, and the prompt and complete performance of
all covenants contained in the Leases on the Lessee's part
to be performed, subject to the limitations set forth
herein. Because of the substantial economic benefits
accruing to the Guarantor by virtue of the Lessor leasing
the Leased Premises to the Lessee, the Guarantor desires to
guarantee such payment and performance, all on the following
terms and conditions.
GUARANTY
NOW, THEREFORE, for and in consideration of the
premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby
Page 2
acknowledged, the Guarantor hereby represents, warrants and
agrees as follows, intending to be legally bound:
ARTICLE 1
REPRESENTATIONS
AND WARRANTIES OF THE GUARANTOR
Section 1.1. The Guarantor makes the following
representations and warranties, upon each of which the
Lessor, its successors and assigns are entitled to rely and
have relied:
Section 1.2. No Conflicts; Defaults. The execution
and delivery of this Guaranty and the performance by the
Guarantor of its obligations hereunder and the consummation
of the transactions contemplated herein are within the
corporate powers of the Guarantor and will not conflict with
or constitute a breach of the Guarantor's certificate of
incorporation or by-laws. Except for consents and approvals
obtained by Guarantor, true, correct and complete copies of
which have been delivered by the Guarantor to the Lessor
prior to the execution and delivery of this Guaranty,
neither the execution, acknowledgment and delivery of, nor
the performance of its obligations under, this Guaranty,
will conflict with or violate, or constitute a default or
require any consent or waiver under, any material provision
of any mortgage, deed of trust, evidence of indebtedness,
order, decree or agreement to which the Guarantor is a party
or by which it or any substantial part of its property is
bound.
Section 1.3. Enforceability. This Guaranty is a
legal, valid and binding instrument enforceable against the
Guarantor in accordance with its terms, as the same may be
limited by applicable bankruptcy, insolvency, reorganization
and similar laws of general application relating to or
affecting creditors' rights generally and general remedies
of equity.
Section 1.4. Representations and Warranties. The
Guarantor has made its own independent investigation of the
financial condition and affairs of the Lessee and has
reviewed the Leases, including the rent terms thereof, prior
to entering into this Guaranty and will continue to make its
appraisal of the creditworthiness of the Lessee, and in
entering into this Guaranty Guarantor has not relied upon
any representation of the Lessor as to the financial
condition, operation or creditworthiness of the Lessee or
with respect to any other matter. The Guarantor agrees that
the Lessor shall have no duty or responsibility now or
hereafter to make any investigation or appraisal of the
Lessee on behalf of the Guarantor or to provide the
Guarantor with any credit or other information which may
come to the Lessor's attention.
Section 1.5. Litigation; Violations of Law. There
are no actions, suits or proceedings of a material nature
pending or threatened in writing against or affecting the
Guarantor which would have a material adverse effect if
adversely decided, and no event has occurred (including,
without limitation, the execution, acknowledgment and
Page 3
delivery of this Guaranty and the consummation of the
transactions contemplated hereby) which will violate, be in
conflict with, result in the breach of or constitute (with
or without notice or the passage of time, or both) a default
under any judicial decision, statute, ruling, direction,
rule, regulation, permit, certificate or ordinance of any
governmental authority in any way applicable to the
Guarantor which would have a material adverse effect on
Guarantor. The Guarantor is not in default with respect to
any judgment, order, writ, injunction, decree or demand of
any court, arbitrator, administrative agency or other
governmental or quasi-governmental authority which would
have a material adverse effect on Guarantor.
Section 1.6. Information. All information filed by
the Guarantor with the Securities and Exchange Commission is
true and complete in all material respects and fully and
accurately presents the financial condition of the Guarantor
as of the dates thereof; such information does not omit any
statement of material fact that would make such information
misleading; and no material adverse change has occurred in
the financial condition reflected therein or the Guarantor's
business since the dates thereof or the most recent filing.
Section 1.7. Insolvency Matters. No bankruptcy,
reorganization, arrangement, readjustment of debt,
insolvency or other proceeding has been commenced or
threatened in writing by or against the Guarantor or
consented to or acquiesced in by the Guarantor, and no
material judgment has been entered against the Guarantor
which has not been satisfied or otherwise discharged.
Section 1.8. Organization. The Guarantor is a
corporation duly organized, validly existing and subsisting
under the laws of the State of Delaware and has the power to
enter into this Guaranty and to perform its obligations
hereunder and by proper corporate action has duly authorized
the execution and delivery of this Guaranty and the
performance of its obligations hereunder.
Section 1.9. Taxes. All material tax returns and
reports required by law to be filed by the Guarantor have
been duly filed, and no taxes, assessments, contributions,
fees or other governmental charges upon it or any of its
assets or income which are due and payable thereon are
delinquent, except to the extent such taxes, assessments,
contributions, fees or charges are being contested in good
faith and by proper proceedings and against which
appropriate reserves are being maintained or where failure
to pay would not have a material adverse effect.
Section 1.10. Cross Default. The Guarantor
acknowledges and agrees that a default under the Leases with
respect to one of the Leased Premises shall constitute a
default under the Leases with respect to all of the Leased
Premises, and the Leases may be cross defaulted with other
leases guaranteed by the Guarantor.
Page 4
ARTICLE 2
COVENANTS OF THE GUARANTOR
Section 2.1. Definitions.
(a) The term "Obligations" shall mean all obligations,
agreements, covenants, conditions and liabilities of the
Lessee set forth in the Leases and shall include all amounts
due and to become due from the Lessee to the Lessor under
the Leases, whether such amounts are direct or indirect,
fixed or contingent, or liquidated or unliquidated
obligations of the Lessee including, without limitation,
base rent, percentage rent, additional charges,
indemnification payments, damages, interest, service,
finance and other charges, the Lessor's fees, impositions
required to be paid by the Lessee, and other sums, charges,
costs of collection, attorneys' fees and expenses, other
expenses of the Lessor due it under the Leases and amounts
advanced by the Lessor to discharge obligations of the
Lessee, whether such amounts are from time to time reduced,
thereafter increased or entirely extinguished and thereafter
reincurred.
(a) (b) The term "Lessee," as
used herein, shall mean any successor in interest, assignee,
or transferee of Lessee's interest under the Leases.
Section 2.2. Guaranty of Payment and Performance.
The Guarantor hereby unconditionally and absolutely
guarantees to the Lessor the prompt and full payment of and
the prompt and complete performance of all Obligations of
the Lessee to the Lessor, under and in accordance with the
terms and conditions hereof.
Section 2.3. Notwithstanding the aggregate amount of
the Obligations at any time or from time to time payable by
the Lessor to Lessee, and notwithstanding any other
provision in this Guaranty to the contrary, the liability of
the Guarantor to Lessor hereunder shall not exceed the
principal sum of Twenty Million Dollars ($20,000,000) in the
aggregate less amounts paid by the Guarantor hereunder in
respect of such principal sum; provided that whenever, at
any time, or from time to time, Guarantor shall make any
payment to Lessor on account of its liability hereunder, it
will notify Lessor in writing that such payment is made
under this Guaranty for such purpose. The Guarantor agrees
that the Obligations may at any time and from time to time
exceed the amount of the liability of the Guarantor
hereunder without impairing this Guaranty or affecting the
rights and remedies of Lessor hereunder. No payment or
payments made by any Person or received or collected by
Lessor by virtue of any action or proceeding or any set-off
or appropriation or application, at any time or from time to
time, in reduction of or in payment of the Obligations shall
be deemed to modify, reduce, release or otherwise affect the
liability of the Guarantor hereunder which shall,
notwithstanding any such payment or payments, remain liable
for the amount of the Obligations until the Obligations are
paid and performed in full (but subject to the limitations
provided in this paragraph).
Page 5
Section 2.4. Nature of Guaranty. This is a guaranty
of payment and not merely of collection. The undersigned
waives any rights of the undersigned pursuant to North
Carolina General Statute Section 26-7 or any similar or
subsequent law.
Section 2.5. Enforcement of Guaranty in First
Instance. The Lessor may collect the amount of the
Obligations, or any part thereof, from the Guarantor without
first exercising its rights against the Lessee, any other
guarantor or any collateral that the Lessor may hold or have
access to, and the Guarantor hereby waives any right to
require the Lessor to attempt, by bringing any action or
proceeding against Lessee or otherwise, to collect the
amount of the Obligations or any part thereof from the
Lessee or any other guarantor or to attempt to realize upon
any collateral that the Lessor may hold or have access to
before enforcing the obligations of the Guarantor hereunder.
Section 2.6. Lessor's Election to Perform
Obligations. After a default by the Lessee in the
performance of one or more of the Obligations and the
expiration of any notice and cure period expressly provided
for in the Leases, the Lessor, at its option, may elect to
perform or cause to be performed any or all of the
Obligations without first exercising its rights against the
Lessee, any other guarantor or any collateral that the
Lessor may hold or have access to, and the Guarantor hereby
waives any right to require the Lessor to attempt, by
bringing any action or proceeding against Lessee or
otherwise, to collect the amount of the Obligations or any
part thereof from the Lessee or any other guarantor or to
attempt to realize upon any collateral that the Lessor may
hold or have access to before performing or causing the
performance of any of the Obligations or enforcing the
obligations of the Guarantor hereunder.
Section 2.7. No Subrogation or Contribution. Until
all of the Obligations have been paid in full and have been
duly and punctually performed, the Guarantor shall not be
subrogated to any right of the Lessor against the Lessee,
any other guarantor or any collateral, and any moneys,
property or other consideration received, after a default by
the Lessee under the Leases, by the Guarantor from the
Lessee prior to payment and performance in full of the
Obligations by the Lessee shall be held in trust for the
Lessor and shall be paid or transferred to the Lessor upon
demand therefor. The Guarantor agrees that it will not
assert any right of contribution against any other guarantor
of the Obligations, whether the obligations of such other
guarantor are evidenced by this Guaranty or other agreement,
until such time as all of the Obligations have been paid and
performed in full to the Lessor.
Section 2.8. Waiver of Defenses.
(a) The Guarantor hereby: (i) waives notice of
acceptance of this Guaranty; (ii) waives presentment,
demand, notice of dishonor, protest and notice of protest;
(iii) agrees that the Obligations or any part thereof may be
renewed, extended, accelerated, modified, compromised or
delegated and that any collateral or other security held for
the payment and performance of the Obligations may be
released,
Page 6
exchanged, sold, applied or otherwise dealt with by the
Lessor without notice to the Guarantor and without thereby
releasing the Guarantor from any obligation under this
Guaranty; (iv) waives notice of the financial condition
or other status of the Lessee and any other party obligated
for the payment or performance of the Obligations; and
(v) waives the benefit of the homestead exemption as to its
obligations set forth herein. This Guaranty is intended to
be a full and complete guaranty and indemnity to the Lessor
to the extent of and for any Obligations and to be valid and
enforceable without other or further notice to the
Guarantor. The liability of the Guarantor is absolute and
unconditional and is not conditioned or contingent upon any
other party signing this Guaranty or the obtaining of any
security upon any of the Obligations or the obtaining of the
guaranty of any other party upon any of the Obligations or
any other matter.
(b) The Guarantor further acknowledges that this
Guaranty and the Guarantor's obligations under this Guaranty
are and shall at all times be valid and enforceable
irrespective of (i) any assignment of sublease of the Leases
or (ii) the filing of a petition or the commencement of a
case with respect to the Lessee or the Guarantor under Title
11 of the United States Code, as now constituted or
hereafter amended (the "Bankruptcy Code"), or under any
other applicable Federal or state bankruptcy, insolvency or
similar law, or any modification, impairment, abatement,
reduction, release, limitation, restructure, reinstatement
or cure, in whole or in part, of the Obligations pursuant to
an order by a bankruptcy court or other court of competent
jurisdiction in any action, case or proceeding brought under
the Bankruptcy Code or under any other applicable Federal or
state bankruptcy, insolvency or similar law (including, but
not limited to any stay imposed pursuant to section 362 of
the Bankruptcy Code), it being expressly acknowledged and
agreed by the Guarantor that if any such modification,
impairment, abatement, reduction, release, limitation,
restructure, reinstatement or cure, in whole or part, is so
ordered in any such action, case or proceeding, the
Guarantor's obligations under this Guaranty will
nevertheless continue to be determined as if such order had
not been issued (i.e., as if the Lessee were still obligated
to pay, perform and observe the Obligations strictly in
accordance with the terms, covenants and provisions of the
Leases as in existence prior to the issuance of any such
order).
(c) The Guarantor absolutely, unconditionally and
irrevocably waives any and all right to assert any setoff,
counterclaim or crossclaim of any nature whatsoever with
respect to this Guaranty or the obligations of the Lessee or
any other person or party relating to this Guaranty or the
obligations of the Guarantor hereunder or otherwise with
respect to the Leases in any action, case or proceeding
brought by the Lessor to enforce the obligations of the
Guarantor under this Guaranty (provided, however, that the
foregoing provisions of this sentence shall not be deemed a
waiver of the right of the Guarantor to assert any
compulsory counterclaim in any such action, case or
proceeding brought by the Lessor in any state court if such
counterclaim is compelled under local law or rule or
procedure, or in a court of the United States, nor shall the
foregoing provisions of this sentence be deemed a waiver of
the right of the
Page 7
Guarantor to assert any claim which would otherwise constitute
a defense, setoff, counterclaim or crossclaim of any nature
whatsoever against the Lessor in any separate action, case or
proceeding brought by the Guarantor against the Lessor).
(d) The Guarantor acknowledges that no oral or
other agreements, understandings, representations or
warranties exist with respect to this Guaranty or with
respect to the obligations of the Guarantor under this
Guaranty, except those specifically set forth in this
Guaranty, and that this Guaranty sets forth the entire
agreement and understanding of the Guarantor and the Lessor.
Section 2.9. Releases. The Lessor shall have the
right to waive its rights against and to release any
guarantor or other person or entity that is liable for
payment or performance of the Obligations without affecting
(a) the enforceability of this Guaranty against the
Guarantor or (b) any other right or remedy that the Lessor
may have against the Guarantor.
Section 2.10. Costs and Expenses. The Guarantor
hereby agrees to pay to the Lessor all costs and expenses,
including court costs and reasonable attorneys' fees and
expenses, incurred by the Lessor in seeking to enforce, any
of the obligations of the Guarantor hereunder; provided,
however, that in the event of any litigation commenced by
Lessor which proceeds to a judicial conclusion, Lessor shall
only be entitled to recovery of attorney's fees in the event
the Lessor is the prevailing party in such litigation.
Section 2.11. Bankruptcy. In the event that any part
of the Obligations is collected by the Lessor and because of
bankruptcy or other laws relating to debtors' relief such
payment is set aside as a voidable preference or fraudulent
conveyance or the Lessor is otherwise required to repay all
or any portion of the amount so collected to the Lessee or
to any trustee, receiver or otherwise, then this Guaranty
shall continue in full force and effect with regard to such
sums or, if previously terminated, shall be reinstated
without further act or instrument and shall thereafter
remain in full force and effect, as though such payment had
not been made or such termination had not occurred (as the
case may be), and the amount or amounts so repaid shall
become part of the Obligations and shall be guaranteed
hereby. In the event an action, case or proceeding is filed
or commenced under the Bankruptcy Code or under any other
applicable Federal or state bankruptcy, insolvency or
similar law in regard to the Lessee or an action, case or
proceeding is otherwise commenced for the benefit of the
creditors of the Lessee, this Guaranty shall at all times
thereafter remain effective in regard to any payments or
other transfers of assets to the Lessor received from or on
behalf of the Lessee under or in respect of the Obligations
which are held voidable on the grounds of preference,
fraudulent conveyance or otherwise, whether or not the
Obligations have been paid in full or any of the Obligations
have been discharged or released.
Section 2.12. Application of Proceeds. All payments,
whether voluntary or involuntary, received from the Lessee
or on account of the Obligations from any other
Page 8
source, including income from and amounts realized on
security and appropriated bank balances, may be applied by
the Lessor toward the payment of the Obligations and in such
order of application as the Lessor may from time to time elect.
Section 2.13. Required Notifications. The Guarantor
will promptly inform the Lessor in writing upon the
commencement of any proceedings by or against the Guarantor
under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or
hereafter in effect or of any proceeding in which a
receiver, liquidator, trustee or other similar official is
sought to be appointed for the Guarantor or any of its
assets.
Section 2.14. Survivability. The obligations of the
Guarantor contained herein shall survive the expiration or
earlier termination of the Leases until payment in full and
complete performance of all of the Obligations which survive
the termination of the Leases. Further, no expiration or
termination of the Leases, by operation of law or otherwise,
and no re-entry, repossession or removal pursuant to the
Leases or otherwise, and no re-letting of the premises under
the Leases shall relieve the Guarantor of its liabilities
and obligations which arise during the term of the Leases,
all of which shall survive such expiration, termination, re-
entry, repossession, removal or re-letting. The obligations
of the Guarantor contained herein shall survive any
assignment of the Leases or sublease of the Leased Premises
and any changes in control of the Lessee or Lessor.
Section 2.15. Existence, etc. So long as any
Obligations are outstanding, the Guarantor: (a) shall
maintain its corporate existence and shall not dissolve; (b)
shall not sell all or substantially all of its assets unless
it shall receive reasonably equivalent value therefor; and
(c) shall not merge with or into another corporation or
entity unless such surviving corporation or entity is
obligated to perform the obligations of the Guarantor
hereunder, and if requested assumes such obligations in a
writing reasonably satisfactory to Lessor.
ARTICLE 3
EVENTS OF DEFAULT; REMEDIES
Section 3.1. Events of Default. Any of the following
occurrences or acts shall constitute an "Event of Default"
under this Guaranty:
(a) If the Guarantor shall fail to pay any sum,
as and when required to be paid hereunder following any
applicable grace period.
(b) If any representation or warranty made by the
Guarantor contained in this Guaranty or any officer's
certificate, notice, certificate, demand or request
Page 9
delivered hereunder or in connection herewith shall be false
or misleading in any material respect as of the date made or
deemed to have been made.
(c) If the Guarantor fails to perform or observe
in any material respect any covenant, term or condition
contained in this Guaranty (other than a failure described
in subparagraphs 3.1(a) or (b) above or an Event of Default
described below) and such failure continues for more than 30
days after the Guarantor's receipt of notice thereof from
the Lessor.
(d) If the Guarantor shall file a petition in
bankruptcy or for reorganization or for an arrangement
pursuant to any federal or state law, or shall be
adjudicated a bankrupt or become insolvent or shall make a
general assignment for the benefit of creditors or shall
admit in writing its inability to pay its debts generally as
they become due, or if a petition proposing the adjudication
of the Guarantor as a bankrupt or its reorganization
pursuant to any federal or state bankruptcy law or any
similar federal or state law shall be filed in any court and
the Guarantor shall consent to or acquiesce in the filing
thereof or such petition shall not be discharged within 60
days after the filing thereof.
(e) If a receiver, trustee or liquidator of the
Guarantor, or of all or substantially all of the assets of
the Guarantor, shall be appointed in any proceeding brought
by the Guarantor, or if any such receiver, trustee or
liquidator shall be appointed in any proceeding brought
against the Guarantor and shall not be discharged within 60
days after such appointment, or if the Guarantor shall
consent to or acquiesce in such appointment.
Section 3.2. Remedies. Upon the occurrence of an
Event of Default, the Lessor shall have all the rights and
remedies available at law or in equity for purposes of
enforcing its rights under this Guaranty.
ARTICLE 4
MISCELLANEOUS PROVISIONS
Section 4.1. Governing Law. This Guaranty, the
rights of the Lessor and the obligations of the Guarantor
shall be governed by and construed in accordance with the
laws of the State of North Carolina (excluding, however,
those dealing with conflicts of law) except to the extent
that such laws are preempted by United States federal law,
in which case such federal law shall govern.
Section 4.2. Successors and Assigns. The
representations, warranties, covenants and conditions set
forth herein shall be binding upon the administrators,
Page 10
representatives and permitted successors and assigns of the
Guarantor and shall inure to the benefit of the Lessor, its
successors and assigns.
Section 4.3. Notices. All notices, requests, demands
and other communications with respect hereto shall be in
writing and shall be delivered by hand or sent prepaid by
Federal Express (or a comparable overnight delivery service)
at the following addresses:
If to the Lessor, to:
WINN Limited Partnership
2209 Century Boulevard
Suite 310
Raleigh, North Carolina 27612
Attention: __________________
If to the Guarantor, to:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
Attention: Chief Executive Officer
with a copy to:
DeCampo, Diamond & Ash
805 Third Avenue
Sixth Floor
New York, New York 10022
Attention: William H. Diamond, Esq.
Any notice, request, demand or other communication delivered
or sent in the manner aforesaid shall be deemed given or
made, as the case may be, upon the earlier of the date it is
actually received or (a) on the business day after the day
on which it is delivered by hand, (b) on the business day
after the day on which it is properly delivered to Federal
Express (or a comparable overnight delivery service) or (c)
on the third business day after the day on which it is
deposited in the United States mail. Any addressee may
change its address by notifying the other addressees of the
new address in any manner permitted by this Section.
Section 4.4. Captions; Gender; Number. The captions
hereof are for convenience of reference only and shall
neither limit nor enlarge the provisions hereof.
Page 11
All pronouns used herein, whether used in the masculine,
feminine or neuter gender, shall include all other genders.
The singular shall include the plural and vice versa unless
the context requires otherwise.
Section 4.5. Severability. If any provision of this
Guaranty, or the application thereof to any person or
circumstance, shall to any extent be invalid or
unenforceable, the remainder of the provisions hereof, or
the application thereof to other persons or circumstances,
shall not be affected thereby, and each provision hereof
shall be valid and enforceable to the fullest extent
permitted by law.
Section 4.6. Amendments. No provision of this
Guaranty may be amended, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against whom enforcement of the amendment, waiver,
discharge or termination is sought. No subsequent guaranty
by the Guarantor or any other person with respect to the
Obligations shall be deemed in lieu of or to supersede this
Guaranty, but such guaranty shall be construed as an
additional or supplementary guaranty unless otherwise
expressly provided for in such subsequent guaranty.
Furthermore, this Guaranty shall be construed to be an
additional or supplementary guaranty to any guaranty
previously executed by the Guarantor or any other guarantor
of the Obligations and shall not terminate any prior
guaranty unless such termination is expressly provided for
herein.
Section 4.7. Service of Process. The Guarantor
hereby agrees that any suit, action or proceeding arising
out of or relating to this Guaranty may be instituted in the
United States District Court for the Eastern District of
North Carolina, at the option of the Lessor; and the
Guarantor hereby waives any objection which it may have to
the laying of the venue of any such suit, action or
proceeding and irrevocably submits to the jurisdiction of
either such court in any such suit, action or proceeding.
Section 4.8. Joint and Several Obligations. Subject
to Section 2.2 hereof, the obligations guaranteed hereunder,
the obligations of the Guarantor hereunder shall be joint
and several with respect to (a) the Lessee, and (b) each and
any other guarantor or obligor of the Lessee's obligations
under the Leases which guarantor or obligor is an affiliate
of the Guarantor, and the Lessor may demand and exercise its
rights and remedies hereunder and/or thereunder against any
such guarantors or obligors separately, or all or any of
them together, at Lessor's option.
Section 4.9. Third Party Beneficiary. Winston
Hotels, Inc., a North Carolina corporation and parent
company of the general partner of the Lessor, shall be
deemed a third party beneficiary of this Guaranty and shall
have the right to enforce the terms of this Guaranty to the
same extent as the Lessor.
Page 12
Section 4.10. Counterparts. This Guaranty may be
executed in several counterparts, each of which shall be an
original and all of which together shall constitute one and
the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Page 13
IN WITNESS WHEREOF, the Guarantor has executed this
Guaranty as of the date first above written.
CAPSTAR HOTEL COMPANY,
a Delaware corporation
[CORPORATE SEAL] By: /s/ WILLIAM DRISCOLL
---------------------------
Name: William Driscoll
Attest: /s/ Title: Vice President
- --------------------------
Assistant Secretary
EXHIBIT 10.5
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of the 17th day of
November, 1997 by and among WINSTON HOTELS, INC., a North
Carolina corporation (the "REIT") and Robert W. Winston, III and
John B. Harris, Jr. (collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders are the holders of all of the
issued and outstanding capital stock of Winston Hospitality,
Inc., a North Carolina corporation ("Winston Hospitality");
WHEREAS, Winston Hospitality, the Shareholders, CapStar
Management Company, L.P., a Delaware limited partnership
("CapStar") and CapStar Hotel Company, a Delaware corporation,
have entered into an Asset Contribution Agreement and an Asset
Purchase Agreement (the "Asset Purchase Agreement"), each dated
as of October 29, 1997 (collectively, the "Acquisition
Agreements"), which collectively provide for the acquisition of
all of Winston Hospitality's right, title and interest in and to
all of Winston Hospitality's assets, business and properties
other than certain excluded assets as set forth in the
Acquisition Agreements;
WHEREAS, in order to induce the REIT to consent to the
transactions contemplated by the Acquisition Agreements and
execute the lease amendments and related documents contemplated
in connection therewith, the Shareholders and the REIT desire
that a portion of the consideration to be paid pursuant to the
Acquisition Agreements be used to fund the purchase of additional
shares of the common stock, $.01 par value per share, of the REIT
("Shares");
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Best Efforts Investment. The Shareholders shall use their
best efforts to purchase an aggregate of 400,000 Shares (the
"Investment Amount") between the date hereof and the second
anniversary of the date hereof. The Shareholders may purchase
such Shares either (i) in the open market (subject to compliance
with Rule 10b-5 and Rule 10b-18 under the Securities Exchange Act
of 1934, as amended, and other applicable law and regulations) or
(ii) with the approval of the Board of Directors of the REIT,
directly from the REIT on terms and conditions set by the Board
of Directors.
2. Put Option. In the event that the Shareholders shall not
have purchased an aggregate number of Shares equal to the
Investment Amount between the date hereof and the second
anniversary of the date hereof, inclusive, the REIT shall have
the option to sell (the "Option"), and the Shareholders shall
have the obligation to purchase, the number of Shares equal to
the difference of (i) the Investment Amount, less (ii) the
aggregate number of Shares purchased by
Page 2
Shareholders between the date hereof and the second anniversary of
the date hereof, inclusive, at a per Share purchase price equal to
the average of the closing sales prices of the Shares on the
principal trading market thereof for the five trading days
immediately preceding the REIT's exercise of the Option, or, in the
absence of an established trading market for the Shares, the fair
market value of the Shares as reasonably determined by the Board of
Directors. The Option shall expire on the earlier of the third
anniversary of the date hereof or the termination of this Agreement.
The option may be exercised, in whole or in part, by
delivery of written notice to the Shareholders. The purchase
price for Shares to be sold upon exercise of the Option shall be
paid in cash at a closing on the twentieth day following such
notice at the REIT's principal place of business or such other
time and place as may be agreed. Each Shareholder shall be
severally, but not jointly, obligated to purchase a pro rata
portion of the Shares to be sold upon exercise of the Option
based on each Shareholder's relative ownership of Winston
Hospitality as of the date hereof unless otherwise agreed in
writing. Each Shareholder agrees to provide such information,
representations and certifications as the REIT may reasonably
request in connection with establishing the availability of an
exemption from the registration requirements of the Securities
Act of 1933, as amended, in connection with the sale of the
Shares.
3. Adjustments. In the event that the Asset Purchase Agreement
is terminated without consummation of the transactions
contemplated thereby, the Investment Amount shall be reduced from
400,000 Shares to 282,353 Shares. All references to any number
of Shares shall be adjusted as appropriate to reflect stock
splits, stock dividends, combinations, reclassifications or
similar capital transactions.
4. Representations. Each Shareholder has the absolute and
unrestricted right, power, authority and capacity to execute and
deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the legal, valid and binding
obligation of each Shareholder enforceable against such
Shareholder in accordance with its terms.
5. Termination. This Agreement and the Option shall
immediately terminate in the event (a) the REIT enters into any
agreement with a person that involves the transfer of ownership
of the REIT or of more than fifty percent (50%) of the REIT's
total assets or earnings power on a consolidated basis, as
reported in the REIT's consolidated financial statements filed
with the Securities and Exchange Commission (including an
agreement for the acquisition of the REIT by merger,
consolidation, or statutory share exchange - regardless of
whether the REIT is intended to be the surviving or resulting
entity after the merger, consolidation, or statutory share
exchange - or for the sale of substantially all of the REIT's
assets to that person), (b) any person is or becomes an Acquiring
Person, or (c) the Continuing Directors cease for any reason to
constitute a majority of the Board. For purposes of the
preceding sentence, "Continuing Director" means any member of the
Board, while a member of the Board and (a) who was a member of
the Board as of the date hereof or (b) whose subsequent
nomination for election or election to the Board was recommended
or approved by a majority of the Continuing Directors. Acquiring
Person means that (a) a Person, considered alone or together with
all affiliates and associates of that person, becomes directly or
indirectly the beneficial owner of securities representing at
least twenty percent (20%) of the REIT's outstanding securities
entitled to vote
Page 3
generally in the election of the Board, or (b) a person enters into
an agreement that would result in that person satisfying the
conditions in clause (a).
6. Notice. Any notice, communication, request, reply or
advice (collectively, "Notice") provided for or permitted by this
Agreement to be made or accepted by either party must be in
writing. Notice shall be given or served by personal delivery,
by delivery by nationally-recognized overnight courier, or by
facsimile transmission. Notice by personal delivery shall be
effective on the business day delivered. Notice by overnight
courier shall be effective one business day after deposit with
the courier service. Notice given by facsimile transmission
shall be effective on the business date delivered. For the
purposes of Notice, the addresses of the Shareholders shall be as
set forth on the signature page hereto and the address of the
REIT shall be:
Winston Hotels, Inc.
2209 Century Drive, Suite 300
Raleigh, NC 27612
Fax No.: (919) 510-6832
Attn: Robert W. Winston, III
The parties shall have the right from time to time to change
their respective addresses for notice by at least five days'
written notice to the other party.
7. Miscellaneous. This Agreement and the rights and
obligations hereunder may not be assigned. The terms of this
Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina without effect to the
conflict of laws principles thereof. This Agreement embodies the
entire agreement of the parties on the subject matter hereof. No
amendment or modification of this Agreement shall be binding
unless made in writing and signed by the REIT and the Shareholder
to be charged. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all
of which, taken together, shall constitute a single agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
Page 4
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the day and year first above written.
WINSTON HOTELS, INC.
By: /s/ ROBERT W. WINSTON, III
-------------------------------
Name: Robert W. Winston, III
Title: President
/s/ ROBERT W. WINSTON, III
----------------------------------
Robert W. Winston, III
Address: 2209 Century Drive,
Suite 300
Raleigh, NC 27612
Fax: 919-510-6832
/s/ JOHN B. HARRIS, JR.
-----------------------------------
John B. Harris, Jr.
Address: 2209 Century Drive,
Suite 400
Raleigh, NC 27612
Fax: 919-782-5189
EXHIBIT 10.6
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"),
made as of the 17th day of November, 1997, among WINSTON
HOTELS, INC., a North Carolina corporation (the "Company"), WINN
LIMITED PARTNERSHIP, a North Carolina limited partnership (the
"Partnership"), WACHOVIA BANK, N.A., formerly known as Wachovia
Bank of Georgia, N.A., as Administrative Agent (the
"Administrative Agent"), and the Banks listed on the signature
pages hereof, as Lenders (the "Banks").
WITNESSETH
WHEREAS, the Company, the Partnership, the Banks, the
Collateral Agent and the Administrative Agent are parties to that
certain Credit Agreement, dated as of October 29, 1996,
(as heretofore amended or modified, the "Credit Agreement")
(capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Credit
Agreement), pursuant to which, inter alia, the Banks have agreed
to make loans to the Company and the Partnership on the terms and
conditions set forth therein;
WHEREAS, pursuant to a certain Letter, dated as of October
19, 1997, executed by the Banks and the Agents and acknowledged
and agreed to by the Company and the Partnership (the "Consent
Letter"), the Banks consented to the Company's and Partnership's
consent to Winston Hospitality, Inc.'s entering into the
Transaction Documents (as therein defined);
WHEREAS, the Consent Letter contemplated the entry by the
Company and the Partnership into an agreement in a form
satisfactory to the Agents, the Banks, the Company and the
Partnership amending the provisions of the Credit Agreement so as
to permit the Transaction (as defined in the Consent Letter), and
the Company and the Partnership desire to enter into this
Amendment;
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency
whereof are hereby acknowledged, the parties hereby agree that
the Credit Agreement is hereby amended as follows:
A. AMENDMENTS
1. Section 1.01 of the Credit Agreement is hereby amended
by replacing the definition of "Lessee" with the following:
"Lessee" means CapStar Management Company, L.P., a
Delaware Limited Partnership, its successors and
assigns, or any other party operating a Hotel pursuant
to a Lease.
Page 2
2. The Line Availability Amount (that is, the amount
available to the Borrower under the Credit Agreement) has been
previously determined on the basis of the lesser of the "Loan to
Value Amount" and the "Cash Flow Amount." In connection with the
substitution of CapStar Management Company L.P. as Lessee, the
Banks have agreed that the Line Availability Amount shall be
determined exclusively on the basis of the Cash Flow Amount, and
that the Loan to Value Amount shall no longer be utilized to
determine the Line Availability Amount.
Accordingly, each and every reference to the Loan to Value
Amount in the Credit Agreement is deleted. The foregoing
deletions include the reference to "Loan to Value Amount" in the
definitions in Section 1.01 and also include references to "Loan
to Value Amount" in Section 2.01(b) and Section 3.02(a) of the
Credit Agreement.
3. Section 6.01 of the Credit Agreement is amended by
deleting the present text of clause (l) and substituting in lieu
therefor the following:
(l) The Lessee shall replace the Franchisor of a Hotel
without the prior written consent of the Banks.
4. Section 6.01 of the Credit Agreement is hereby amended
by deleting "thirty days" in clause (m) and substituting in lieu
therefor "sixty days."
5. Section 6.01 of the Credit Agreement is amended by
adding the following as new clause (n) thereto:
(n) A Franchisor declares an event of default under
its Franchise Agreement or exercises default remedies
upon the occurrence of a default by the Lessee under
the Franchise Agreement, which, in the judgment of the
Banks, might adversely affect the operation of the
applicable Hotel.
B. CONDITIONS PRECEDENT
The effectiveness of this Amendment is conditioned upon the
following conditions having been satisfied:
(1) the Subordination Agreements described in Exhibit
A attached hereto and incorporated herein by reference shall
have been terminated.
(2) the Banks and CapStar shall have executed and
delivered the Subordination Nondisturbance and Attornment
Agreement in favor of CapStar Management, L.P. ("CapStar")
in the form of Exhibit B attached hereto and incorporated
herein by reference.
Page 3
(3) The Collateral Agent shall have received the
following, each dated as of the Closing Date (unless
otherwise noted), in form and substance satisfactory to the
Banks in sufficient copies for each Bank:
(a) A duly executed original of this Amendment;
(b) A copy of the Transaction Documents, together
with all exhibits and schedules thereto certified as
true and correct by an officer of the Company on its
own behalf and as general partner of the Partnership
and evidence that the Transaction Documents are in full
force and effect and have not been amended, modified or
supplemented and that all conditions precedent to the
Transaction Documents have been fully satisfied or
waived; and
(4) all corporate and other proceedings taken or to be
taken in connection with the transactions contemplated
hereby and all other documents incident thereto or delivered
in connection therewith shall be satisfactory in form and
substance to each Bank.
C. REAFFIRMATION OF CONSENT
Notwithstanding any other provision in the Credit Agreement,
the Banks hereby consent to
(1) the consent by the Company and the Partnership, to
the execution and delivery of the Transaction Documents by
Winston Hospitality, Inc.; provided, however, that nothing
in this clause shall be construed as consent by the Banks to
any other matter arising or action taken by the Company or
the Partnership which is not expressly addressed in this
Amendment.
(2) the Amendments to the Leases described on Exhibit
C attached hereto and incorporated herein by reference.
D. MISCELLANEOUS
1. Nothing in this Agreement shall be construed to
constitute a novation of the indebtedness evidenced by the Credit
Agreement or any other indebtedness arising under the Loan
Documents related thereto, or to release, satisfy, discharge or
otherwise affect or impair in any manner whatsoever (i) the
validity or enforceability of the indebtedness evidenced by the
Credit Agreement; (ii) the charges, liens, pledges, security
interests, assignments and conveyances affected by the Loan
Documents or any other agreement securing the indebtedness
evidenced by the Credit Agreement, or the priority thereof; (iii)
the liability of the Company and the Partnership under the Credit
Agreement and all other Loan Documents or any other person that
may now or hereafter be liable under the Credit Agreement and the
other Loan Documents or any agreement securing the same; and (iv)
any other security or instrument now or hereafter held by the
Collateral Agent or the
Page 4
Banks as security for or as evidence of any of the indebtedness
evidenced by the Credit Agreement. Without limiting the
foregoing, the Agents and the Banks hereby reserve any and all
legal rights and remedies available to them at law, in equity,
under the Credit Agreement and all other Loan Documents.
2. The Company and the Partnership shall pay all
reasonable costs, expenses, taxes and fees incurred by the
Administrative Agent, the Collateral Agent, and the Banks in
connection with the negotiation, preparation, execution and
delivery of this Amendment, and all other documents and
certificates executed in connection herewith, including, without
limitation, the disbursements and reasonable professional fees
actually incurred of counsel to the Agents. To the extent that
any such fees and expenses are subject to value added taxes, such
taxes will be paid by the Company and the Partnership.
3. The Company and the Partnership agree to protect,
indemnify and save harmless the Administrative Agent, the
Collateral Agent and each Bank, and all directors, officers,
employees and agents of the Agent, the Collateral Agent and each
Bank, from and against any and all (i) claims, demands and causes
of action of any nature whatsoever brought by any person or
entity not a party to this Amendment and arising from or related
or incident to this Amendment or any other Loan Document, (ii)
costs and expenses incident to the defense of such claims,
demands and causes of action, including, without limitation,
attorneys' fees, and (iii) liabilities, judgments, settlements,
penalties and assessments arising from such claims, demands and
causes of action, provided such claims, costs and liabilities are
not the result of the gross negligence or willful misconduct of
such Administrative Agent, such Collateral Agent or such Bank.
The indemnity contained in this Section shall survive the
termination of the Credit Agreement, as amended hereby.
4. Except as expressly set forth herein, this Amendment
shall be deemed not to waive or modify any provision of the
Credit Agreement, and all terms of the Credit Agreement, as
amended hereby, shall be and shall remain in full force and
effect and shall constitute legal, valid, binding and enforceable
obligations of the Company and the Partnership to the
Administrative Agent and the Collateral Agent and the Banks. All
references to the Credit Agreement shall hereinafter be
references to the Credit Agreement as amended by this Amendment.
5. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA AND ALL
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
6. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same document.
7. This Amendment shall be binding on, and shall inure to
the benefit of, the successors and assigns of the parties hereto.
Page 5
8. In the event that any part of this Agreement shall be
found to be illegal or in violation of public policy, or for any
reason unenforceable at law, such finding shall not invalidate
any other part thereof.
9. TIME IS OF THE ESSENCE UNDER THIS AGREEMENT.
10. The parties agree that their signatures by telecopy or
facsimile shall be effective and binding upon them as though
executed in ink on paper but that the parties shall exchange
original ink signatures promptly following any such delivery by
telecopy or facsimile.
Page 10
IN WITNESS WHEREOF, the Company, the Partnership, the Banks,
the Administrative Agent and the Collateral Agent have caused
this Amendment to be executed under seal by their duly authorized
officers the day and year first above written.
WACHOVIA BANK, N.A.,
as Collateral Agent and Bank
By: /s/ Robert Gillis
--------------------------
Vice President
WACHOVIA BANK, N.A.,
as Administrative Agent
By: /s/ Robert Gillis
--------------------------
Vice President
BRANCH BANKING AND TRUST COMPANY,
as Bank
By: /s/ Richard E. Fowler
--------------------------
Senior Vice President
NATIONSBANK, N.A.,
as Bank
By: /s/ Jeffrey B. Hoyle
-------------------------
Senior Vice President
SIGNATURE PAGE TO FIRST AMENDMENT TO THE CREDIT AGREEMENT
Page 7
SOUTHTRUST BANK, N.A.,
as Lender
By: /s/ John Pierce
-------------------------
Vice President
WINSTON HOTELS, INC.
[CORPORATE SEAL}
ATTEST:
/s/ Brenda G. Burns By: /s/ Robert W. Winston, III
- -------------------- ----------------------------
Assistant Secretary President
WINN LIMITED PARTNERSHIP, a North
Carolina limited partnership
By: WINSTON HOTELS, INC., General Partner
[CORPORATE SEAL]
ATTEST:
/s/ Brenda G. Burns By: /s/ Robert W. Winston, III
- -------------------- ---------------------------
Assistant Secretary Vice President
SIGNATURE PAGE TO FIRST AMENDMENT TO THE CREDIT AGREEMENT
