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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 1996 Commission file number 1-14280
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
HOST FUNDING, INC.
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(Exact name of Registrant as specified in its charter)
Maryland 52-1907962
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7825 Fay Avenue, Suite 250, La Jolla, CA 92037
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (619) 456-6070
------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
The number of outstanding shares of the Registrant's Class A Common Stock was
1,192,049, Class B Common Stock 140,000, and Class C Common Stock 140,000 as
of June 30, 1996.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Number Page
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PART I
1. Financial Statements 1
2. Managements Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II
1. Legal Proceedings 13
2. Changes in Securities 13
3. Defaults Upon Senior Securities 13
4. Submission of Matters to a Vote of Security Holders 13
5. Other Information 13
6. Exhibits and Reports on Form 8-K 13
</TABLE>
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PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying unaudited financial statements of Host Funding, Inc., a
Maryland corporation (the "Registrant"), have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions for Form 10-Q. Accordingly, these statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management of the Registrant, all adjustments necessary for a fair
presentation have been included. The financial statements presented herein
have been prepared in accordance with the accounting policies described in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995
and should be read in accordance therewith. The results of operations for the
six month period ended June 30, 1996 are not necessarily indicative of the
results to be expected for the full year.
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HOST FUNDING, INC.
FINANCIAL STATEMENTS
(UNAUDITED)
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
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HOST FUNDING, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
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June 30, December 31,
1996 1995
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<S> <C> <C>
ASSETS
LAND, PROPERTY AND EQUIPMENT - AT COST:
Building and improvements $ 3,639,761 $ 1,813,261
Furnishings and equipment 566,930 285,929
Less accumulated depreciation (186,167) (103,663)
----------- -----------
4,020,524 1,995,527
Land 1,344,786 642,287
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Land, property and equipment - net 5,365,310 2,637,814
CASH 470,181 500
RENT RECEIVABLE - CROSSROADS 136,673 --
DUE FROM RELATED PARTIES 34,256 35,234
LONG-TERM ADVANCES TO CROSSROADS 150,000 --
OTHER ASSETS 31,314 21,146
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TOTAL $ 6,187,734 $ 2,694,694
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES:
LONG-TERM DEBT $ 996,160 $ 4,155,321
NOTES PAYABLE -- 75,244
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 71,641 40,963
ACCOUNTS PAYABLE - STOCK ISSUANCE COSTS 17,478 325,000
DEFERRED INCOME TAXES -- 163,000
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Total liabilities 1,085,279 4,759,528
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Class A Common stock, $.01 par value; authorized
50,000,000 shares; issued and outstanding 1,192,049 shares 11,920 1
Class B Common stock, $.01 par value; authorized
4,000,000 shares; issued and outstanding 140,000 shares 1,400 --
Class C Common stock, $.01 par value; authorized
4,000,000 shares; issued and outstanding 140,000 shares 1,400 --
Additional Paid in Capital 7,160,811 --
Retained Earnings (Accumulated Deficit) 22,391 (259,160)
Less: Related party note receivable (1,805,675) (1,805,675)
Less: Unearned directors' compensation (289,792) --
----------- -----------
Total shareholders' equity (deficit) 5,102,455 (2,064,834)
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TOTAL $ 6,187,734 $ 2,694,694
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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HOST FUNDING, INC
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
REVENUES:
Lease revenue - related party $ -- $ 284,394 $ 200,512 $ 284,394
Lease revenue - Crossroads 281,472 -- 281,472 --
Interest income - related parties 60,282 54,170 105,177 54,170
F,F & E reserve income - related party 77,941 -- 77,941 --
---------- ---------- ---------- ----------
Total revenue 419,695 338,564 665,102 338,564
---------- ---------- ---------- ----------
EXPENSES:
Interest expense 58,195 104,148 160,826 104,148
Depreciation and amortization 61,269 37,033 97,206 37,033
Administrative expenses - related party 44,000 180,000 224,000 180,000
Administrative expenses - other 73,155 -- 73,155 --
Advisory fees - related party 6,083 -- 6,083 --
Property taxes 23,438 -- 40,016 --
Amortization of unearned directors' compensation 10,208 -- 10,208 --
---------- ---------- ---------- ----------
Total expenses 276,348 321,181 611,494 321,181
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 143,347 17,383 53,608 17,383
PROVISION FOR INCOME TAXES -- 4,345 -- 4,345
---------- ---------- ---------- ----------
NET INCOME $ 143,347 $ 13,038 $ 53,608 $ 13,038
========== ========== ========== ==========
NET INCOME PER SHARE $ 0.11 $ 0.02 $ 0.05 $ 0.02
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,289,571 690,000 988,129 690,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
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HOST FUNDING, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
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<TABLE>
<CAPTION>
Retained
Class A Class B Class C Additional Earnings
Common Common Common Paid in (Accumulated
Stock Stock Stock Capital Deficit)
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<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 $ 1 $ -- $ -- $ -- $ (259,160)
COMMON STOCK ISSUED IN STOCK OFFERING 5,000 -- -- 4,495,000 --
COMMON STOCK ISSUED PURSUANT TO
MISSION BAY ACQUISITION AGREEMENT 2,520 -- -- 2,517,970 --
COMMON STOCK ISSUED TO PARTNERS
OF AAG 4,099 1,400 1,400 (6,899) --
COMMON STOCK ISSUED TO INDEPENDENT
DIRECTORS 300 -- -- 299,700 --
RECLASS OF STOCK ISSUANCE COSTS
AGAINST ADDITIONAL PAID IN CAPITAL -- -- -- (64,943) 64,943
INCREASE IN STOCK ISSUANCE COSTS -- -- -- (80,017) --
AMORTIZATION OF UNEARNED DIRECTORS
COMPENSATION -- -- -- -- --
ELIMINATION OF DEFERRED INCOME
TAXES FROM CONVERSION TO REIT -- -- -- -- 163,000
NET INCOME -- -- -- -- 53,608
----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1996 $ 11,920 $ 1,400 $ 1,400 $ 7,160,811 $ 22,391
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Related Unearned Total
Party Note Directors' Shareholders'
Receivable Compensation Equity (Deficit)
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<S> <C> <C> <C>
BALANCE, December 31, 1995 $(1,805,675) $ -- $(2,064,834)
COMMON STOCK ISSUED IN STOCK OFFERING -- -- 4,500,000
COMMON STOCK ISSUED PURSUANT TO
MISSION BAY ACQUISITION AGREEMENT -- -- 2,520,490
COMMON STOCK ISSUED TO PARTNERS
OF AAG -- -- 0
COMMON STOCK ISSUED TO INDEPENDENT
DIRECTORS -- (300,000) 0
RECLASS OF STOCK ISSUANCE COSTS
AGAINST ADDITIONAL PAID IN CAPITAL -- -- 0
INCREASE IN STOCK ISSUANCE COSTS -- -- (80,017)
AMORTIZATION OF UNEARNED DIRECTORS
COMPENSATION -- 10,208 10,208
ELIMINATION OF DEFERRED INCOME
TAXES FROM CONVERSION TO REIT -- -- 163,000
NET INCOME -- -- 53,608
----------- ----------- -----------
BALANCE, June 30, 1996 $(1,805,675) $ (289,792) $ 5,102,455
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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HOST FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
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1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 53,608 $ 13,038
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 97,206 37,033
Amortization of unearned directors' compensation 10,208 --
Changes in operating assets and liabilities
Rent receivable - Crossroads (136,673) --
Due from related party 978 (79,914)
Accounts payable and accrued expenses 30,678 44,052
Income taxes payable -- 4,345
----------------------------
Net cash provided by operating activities 56,005 18,554
----------------------------
INVESTING ACTIVITIES:
Acquisition of land, property and equipment from
Mission Bay (289,510) --
Long-term advances to Crossroads (150,000) --
Other assets (24,870) --
----------------------------
Net cash used in investing activities (464,380) 0
----------------------------
FINANCING ACTIVITIES:
Proceeds from common stock issued in Stock Offering 4,500,000 --
Payments on long-term debt and notes payable (3,234,405) --
Stock issuance costs (387,539) --
----------------------------
Net cash provided by financing activities 878,056 0
----------------------------
NET CHANGE IN CASH 469,681 18,554
CASH AT BEGINNING OF PERIOD 500 0
----------------------------
CASH AT END OF PERIOD $ 470,181 $ 18,554
============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for interest $ 195,925 $ 60,096
============================
Cash paid during the period for income taxes $ 0 $ 0
============================
</TABLE>
(Continued)
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HOST FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
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1996 1995
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<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (Continued)
Non-cash investing activities:
Contribution of net assets and liabilities for common stock
and accumulated deficit
Land, property and equipment $ $ 2,741,477
Loan commitment fees 28,582
Related party note receivable 1,805,675
Long-term debt (4,215,676)
Common Stock (1)
----------------------------
0 360,057
----------------------------
Less: Liabilities and accumulated deficit resulting from
the contribution of net assets and liabilities
Accounts payable stock issuance costs (500,000)
Reduction in accounts payable stock issuance costs 75,000
Deferred income taxes (166,000)
Accumulated deficit 305,943
Reduction in stock issuance costs (75,000)
----------------------------
0 (360,057)
----------------------------
Net non-cash investing activity $ 0 $ 0
============================
Common stock issued pursuant to Mission Bay
Acquisition Agreement
Land, property and equipment $(2,520,490) $ --
Class A common stock 2,520 --
Additional paid in capital 2,517,970 --
----------------------------
Net non-cash investing activity $ 0 $ 0
============================
Common stock issued to partners of AAG
Class A common stock $ 4,099 $ --
Class B common stock 1,400 --
Class C common stock 1,400 --
Additional paid in capital (6,899) --
----------------------------
Net non-cash investing activity $ 0 $ 0
============================
Common stock issued to independent directors
Class A common stock $ 300 $ --
Additional paid in capital 299,700 --
Unearned directors' compensation (300,000) --
----------------------------
Net non-cash investing activity $ 0 $ 0
============================
Reclass of deferred income taxes and stock issuance
costs due to Stock Offering
Deferred income taxes $ (163,000) $ --
Additional paid in capital (64,943) --
Retained earnings 227,943 --
----------------------------
Net non-cash investing activity $ 0 $ 0
============================
</TABLE>
(Concluded)
See accompanying notes to financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RECENT DEVELOPMENTS:
On April 22, 1996, Host Funding, Inc. (the "Company" or "Host Funding") raised
additional capital via an initial public offering of common stock (the "Stock
Offering"). The Stock Offering issued 500,000 common shares and raised net
cash proceeds totaling $4,500,000. Host Funding used the capital raised from
the Stock Offering to pay down long-term debt, to pay expenses of the
formation of Host Funding, to satisfy dissenter's rights for fractional share
settlements relating to the Mission Bay acquisition (described below) and for
working capital purposes.
Further, on April 22, 1996, Host Funding acquired the assets of Mission Bay
Super 8, Ltd., a California limited partnership ("Mission Bay"), the owner of
a 117 room Super 8 Motel (the "Acquisition Hotel") located in San Diego,
California, pursuant to an asset acquisition agreement (the "Mission Bay
Acquisition Agreement").
The Mission Bay Acquisition Agreement exchanged 252,049 shares of common stock
in Host Funding at a stated value of $10.00 per share plus a cash reserve of
approximately $290,000 for dissenters rights and fractional share settlements.
The acquisition price was based upon an appraisal of Mission Bay prepared for
limited and general partnership interests in a final liquidating distribution
by Mission Bay.
In addition, upon completion of the Stock Offering, Host Funding issued
additional Class A, B and C common stock to All American Group, Ltd., a
Delaware Limited Partnership ("AAG"), in exchange for the 100 initial shares
of Host Funding held by AAG based upon appraised values of Host Funding's
assets net of liabilities prior to the Stock Offering. The common shares
issued upon completion of the Stock Offering include 410,000 Class A, 140,000
Class B and 140,000 Class C shares, which number of shares was determined
based upon the net appraised value of assets net of liabilities of $6,900,000
or $10.00 per share. The Class B and C shares include certain restrictions as
to the future payment of dividends and are convertible to Class A common
shares at certain times and under certain circumstances as defined in the
charter.
Finally, upon consummation of the Stock Offering, Host Funding sold to each
independent director then in office 10,000 shares of Class A common stock at a
price per share equal to $10 per share. Reference should be made to Note 3,
Shareholders Equity, of the Notes to Financial Statements for a further
description of the terms and conditions of the sale.
Effective with the completion of the Stock Offering, Host Funding was listed
on the American Stock Exchange.
On April 1, 1996, the leases entered into on January 1, 1995 by and between
the Company and Inn Fund, LLC, a Delaware limited liability company ("Inn
Fund\Old Lessee") relating to the Initial Hotels (the "Initial Leases") were
terminated and the Initial Hotels were leased to Crossroads
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Hospitality Tenant Company, LLC, a Delaware limited liability company
("Crossroads"). Effective April 22, 1996, the Acquisition Hotel was also
leased to Crossroads. The leases with respect to the five (5) leased hotels
(the "Hotels") are referred to collectively as the "Percentage Leases."
References to the "Initial Hotels" refer to the Super 8 hotels owned by the
Company which are located in Miner, Missouri; Poplar Bluff, Missouri; Rock
Falls, Illinois; and Somerset, Kentucky, respectively.
The Company has entered into two contracts to purchase four limited service
hotels with approximately 310 rooms located in the Southeastern United States.
The acquisition cost will be approximately $13,500,000 which the Company
proposes to finance through an acquisition facility. The contracts are
contingent upon the Company obtaining an acquisition facility on terms
acceptable to the Company and certain other closing conditions. Crossroads is
expected to lease the properties under similar economic terms as the
Percentage Leases.
Host Funding has entered into a Post-Formation Acquisition Agreement (the
"Post-Formation Acquisition Agreement") with Host Acquisition Group, a
Delaware limited liability company (the "Acquisition Company"), effective on
the close of the Stock Offering. Reference should be made to Note 5,
Contingencies, of the Notes to Financial Statements for a description of the
terms of the Post-Formation Acquisition Agreement with the Acquisition
Company.
The Company announced its first quarterly cash dividend of $0.2275 per share
to stockholders of record August 1st, payable August 15th, 1996.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 and 1995
The Company did not acquire any assets until April 1, 1995. In addition, the
Acquisition Hotel (Mission Bay) was not acquired by the Company until April
22, 1996. Therefore, comparisons of results of operations to the corresponding
period of the previous year cannot be made.
Occupancy and average room rates of 73% and $36.01 for the four Initial Hotels
for the six months ended June 30, 1996 and occupancy and average room rates of
65% and $43.03 for the Acquisition Hotel (Mission Bay) from April 22 to June
30, 1996 resulted in sales of $1,380,280, which generated lease revenues of
$200,512 due from Inn Fund\Old Lessee and $281,472 due from Crossroads for the
six months ended June 30, 1996.
Interest income from the Related Party Note, as described in Note 4 of the
Notes to Financial Statements, totaled $105,177 for the six months ended June
30, 1996, which interest rate was at 10% until April 22, 1996, at which time
it changed to 12% pursuant to the terms of the note.
Based upon an accounting of Furniture, Fixtures and Equipment reserve
expenditures made by Inn Fund\Old Lessee under the Initial Leases to April 22,
1996, Inn Fund\Old Lessee owes $77,941 to Host Funding, which has been
included in revenue. This amount has been offset against an
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approximately equal net amount owed by Host Funding to affiliates of Guy E.
Hatfield, an affiliate of the Company, through April 22, 1996.
Interest expense incurred on the debt outstanding on the four Initial Hotels
for the six months ended June 30, 1996 totaled $160,824. In April 1996,
long-term debt and notes payable for three of the Initial Hotels were paid off
from proceeds from the Stock Offering in the amount of $3,190,000.
Depreciation expense is calculated based upon the original historical cost of
the Initial Hotels and the acquisition value of the Acquisition Hotel (Mission
Bay) over their estimated useful lives, which totaled $97,206 for the six
months ended June 30, 1996.
Administrative expenses - related party totaling $60,000 per month, including
$44,000 for April 1996, were due under the Related Party Consulting Agreement
to AAG. The Related Party Consulting Agreement, as described in Note 4 of the
Notes to Financial Statements, was terminated upon consummation of the Stock
Offering on April 22, 1996. These fees are non-recurring.
Administrative expenditures - other for the six months ended June 30, 1996
include the 1995 audit fees of approximately $21,000, regular legal and
accounting fees, which amounts are greater than will be expected in future
quarters due to start-up costs, totaling approximately $31,000, stock transfer
fees totaling approximately $10,000, and other administrative expenses
totaling approximately $11,000. Of these expenditures, approximately $35,000
are non-recurring administrative expenses on an annualized basis.
Advisory fees - related party are due under an Advisory Agreement with Host
Funding Advisors, Inc., a Delaware corporation (the "Advisor") entered into
upon the close of the Stock Offering. In consideration for such services, Host
Funding will compensate the Advisor in the amount of $30,000 per year.
Effective January 1, 1996, the Company became responsible for property taxes
under the Percentage Leases. Property tax expense is based upon local taxing
authorities' assessment of the values of the Initial Hotels and Acquisition
Hotel (Mission Bay) times the statutory rates in effect in the respective tax
districts, which totaled $40,016 for the six months ended June 30, 1996.
Amortization of unearned directors' compensation has been calculated based
upon the terms of the independent directors notes as described in Note 3,
Shareholder Equity, of the Notes to Financial Statements.
Net income per share and weighted average shares outstanding have been
calculated based upon the daily average of the number of shares outstanding
upon completion of the Stock Offering, the Mission Bay acquisition and those
shares issued to the independent directors added to the AAG shares outstanding
upon completion of the Stock Offering, which shares of AAG are considered to
have been outstanding from date of formation of Host Funding.
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LIQUIDITY AND CAPITAL RESOURCES
Since the Company has consummated the Stock Offering, the Company has paid off
approximately $3,190,000 of debt with approximately $996,000 debt remaining on
the Rock Falls Super 8 hotel. The Company intends to refinance and/or pay down
the mortgage on the Rock Falls Super 8 as part of the proposed acquisition
facility to acquire the four hotels. Since there are no committed sources of
external liquidity available to the Company, the Company will rely on its
internal cash flow to meet its liquidity needs. The company's principal source
of cash to meet its cash requirements, including distributions to
Shareholders, is its share of the Company's cash flow from the Percentage
Leases and interest income from the Related Party Note. Although, the
obligations of Crossroads, as lessee, under the Percentage Leases are
guaranteed in part by Crossroads Hospitality Company, LLC, a Delaware limited
liability company ("Crossroads Parent"), a subsidiary of Interstate Hotels and
parent company of Crossroads, the ability of Crossroads to make lease payments
under the Percentage Leases, and therefore the Company's liquidity, including
its ability to make distributions to shareholders, is dependent on the ability
of Crossroads to generate sufficient cash flow from the Hotels.
The Company expended $387,539 of Stock Issuance Costs in the second quarter of
calendar year 1996 upon completion of the Stock Offering and acquisition of
Mission Bay. Included on the balance sheet in Accounts Payable-Stock Issuance
Costs are an additional $17,478. Prior to the completion of the Stock Offering
and Mission Bay acquisition, the Company had expended $100,000. Therefore, the
total Stock Issuance Costs to complete the Stock Offering and Mission Bay
acquisition are expected to total approximately $505,000, or approximately
$80,000 more than originally contemplated.
Other than the debt service and/or refinancing costs on the Rock Falls Super
8, the commitment by the Company to fund any shortfall of actual capital
expenses through the date of the Stock Offering added to the $125 per room,
per quarter, replacement fund as compared to budgeted capital expenditures of
approximately $285,000 for calendar year 1996, and the Internal Revenue
Service tax requirements to make distributions to shareholders to maintain the
Company's REIT status, the Company is not aware of any demands, commitments,
events or uncertainties that will result or are likely to result in a change
in the company's liquidity.
The Company intends to make additional investments in hotel properties and may
incur indebtedness to make such investments or to meet distribution
requirements imposed on a REIT under the Code to the extent that working
capital and cash flow from the Company's investments are insufficient to make
such distributions. The Company will invest in additional hotel properties
only as suitable opportunities arise, and the Company will not undertake
investments unless adequate sources of financing are available. Based upon
REIT distribution requirements, the Company expects that future investments in
hotel properties will be financed, in whole or in part, with common stock,
proceeds from additional issuances of common stock, or from the issuance of
other debt or equity securities. The Company in the future may seek to obtain
a line of credit or a permanent credit facility, negotiate additional credit
facilities, or issue corporate debt instruments, all in compliance with its
charter restrictions. Any debt incurred or issued by the Company may be
secured or unsecured, long-term
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<PAGE> 14
or short-term, charge a fixed or variable interest rate and may be subject to
such other terms as the Board of Directors of the Company deems prudent.
INFLATION
Operators of hotels, in general, possess the ability to adjust room rates
quickly. Competitive pressures may, however, limit the ability of the lessee
to raise room rates in the face of inflation.
SEASONALITY
The Hotels' operations historically have been seasonal in nature, reflecting
higher occupancy rates during the second and third quarters. This seasonality
can be expected to cause fluctuations in the Company's quarterly lease revenue
to the extent that it receives Percentage Rent. It is presently anticipated
that the Company's cash flow from operation of the Hotels is sufficient to
enable it to make distributions at the estimated initial rate. To the extent
that cash flow from operations is insufficient during any quarter, due to
temporary or seasonal fluctuations in lease revenue, the Company expects to
utilize other cash on hand or borrowings to make such distributions. No
assurance can be given, however, that the company will make distributions in
the future at the initially estimated rate, or at all.
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PART II-OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
10.1 Contract of Purchase and Sale dated effective as of May 24, 1996
by and between Capital Circle Hotel Company, as Seller, and Host
Funding, Inc., as Purchaser.
10.2 Amendment to Contract of Purchase and Sale dated effective as
of July 3, 1996 by and between Capital Circle Hotel Company, as
Seller, and Host Funding, Inc., as Purchaser.
10.3 Contract of Purchase and Sale dated effective as of May 24, 1996
by and between Ocean Springs Hotel Company, as Seller, and Host
Funding, Inc., as Purchaser.
</TABLE>
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<TABLE>
<S> <C>
10.4 Amendment to Contract of Purchase and Sale dated effective
as of July 3, 1996 by and between Ocean Springs Hotel Company,
as Seller, and Host Funding, Inc., as Purchaser.
10.5 Form of Stock Purchase Agreement with Form of Secured Promissory
Note and Form of Stock Pledge Agreement attached as Exhibits dated
effective as of April 22, 1996 by and between Host Funding, Inc. and
Don W. Cockroft (identical Agreements were also executed by William
Birdsall and Charles Dunn effective as of April 22, 1996).
10.6 Form of Amendment to Stock Purchase Agreement dated effective
June 12, 1996 by and between Host Funding, Inc. and Don W.
Cockroft (identical Agreements were also executed by William
Birdsall and Charles Dunn effective as of June 12, 1996).
10.7 First Amendment to Advisory Agreement dated effective as of June
12, 1996 by and between Host Funding, Inc. and Host Funding
Advisors, Inc.
10.8 First Amendment to Post-Formation Acquisition Agreement dated
effective June 12, 1996 by and between Host Funding, Inc. and
Host Acquisition Group, LLC.
10.9 Second Amendment to Stock Pledge Agreement dated effective
April 23,1996 by and between All American Group, Inc. et. al. and
Host Funding, Inc.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
The Registrant filed reports on Form 8-K on April 24, 1996 and May 7, 1996,
respectively, as previously disclosed in the Registrant's Form 10-Q for the
quarter ended March 31, 1996 on file with the Securities and Exchange
Commission. The Registrant did not file any financial statements in connection
with these Form 8-K filings.
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<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized and in the capacity as the Registrant's
Chief Financial and Accounting Officer.
Dated: August 14, 1996 HOST FUNDING, INC.
/s/ MICHAEL S. MCNULTY
-----------------------------------------
By: Michael S. McNulty
Its: President
Chief Executive Officer
Chief Financial and Accounting
Officer
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<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.1 Contract of Purchase and Sale dated effective as of May 24, 1996
by and between Capital Circle Hotel Company, as Seller, and Host
Funding, Inc., as Purchaser.
10.2 Amendment to Contract of Purchase and Sale dated effective as
of July 3, 1996 by and between Capital Circle Hotel Company, as
Seller, and Host Funding, Inc., as Purchaser.
10.3 Contract of Purchase and Sale dated effective as of May 24, 1996
by and between Ocean Springs Hotel Company, as Seller, and Host
Funding, Inc., as Purchaser.
10.4 Amendment to Contract of Purchase and Sale dated effective
as of July 3, 1996 by and between Ocean Springs Hotel Company,
as Seller, and Host Funding, Inc., as Purchaser.
10.5 Form of Stock Purchase Agreement with Form of Secured Promissory
Note and Form of Stock Pledge Agreement attached as Exhibits dated
effective as of April 22, 1996 by and between Host Funding, Inc. and
Don W. Cockroft (identical Agreements were also executed by William
Birdsall and Charles Dunn effective as of April 22, 1996).
10.6 Form of Amendment to Stock Purchase Agreement dated effective
June 12, 1996 by and between Host Funding, Inc. and Don W.
Cockroft (identical Agreements were also executed by William
Birdsall and Charles Dunn effective as of June 12, 1996).
10.7 First Amendment to Advisory Agreement dated effective as of June
12, 1996 by and between Host Funding, Inc. and Host Funding
Advisors, Inc.
10.8 First Amendment to Post-Formation Acquisition Agreement dated
effective June 12, 1996 by and between Host Funding, Inc. and
Host Acquisition Group, LLC.
10.9 Second Amendment to Stock Pledge Agreement dated effective
April 23,1996 by and between All American Group, Inc. et. al. and
Host Funding, Inc.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
CONTRACT OF PURCHASE AND SALE
THIS CONTRACT OF PURCHASE AND SALE (this "Contract") is by and between
CAPITAL CIRCLE HOTEL COMPANY, a corporation organized under the laws of the
State of Florida ("Seller"), and HOST FUNDING, INC., a corporation organized
under the laws of the State of Maryland ("Purchaser").
ARTICLE 1
Sale and Purchase
SECTION 1.1 Subject to the terms and provisions hereof, Seller agrees
to sell to Purchaser, and Purchaser agrees to purchase from Seller, the
following:
(a) All of those three (3) certain parcels of real property
owned by Seller and described on EXHIBIT A attached hereto and made a
part hereof (the "Real Property"), together with all right, title and
interest of Seller in and to any and all roads, easements, streets and
ways bounding the Real Property, and rights of ingress and egress
thereto;
(b) All Improvements (the "Improvements") owned by Seller and
situated upon the Real Property, including, but not limited to, those
certain buildings, structures, fixtures and other improvements of
every kind and nature presently situated on, in or under or hereafter
erected, or installed or used in, on or about the Real Property, and
constituting those three (3) certain "Sleep Inn" *(sometimes herein
collectively called the "Sleep Inns" and individually, a "Sleep Inn")
hotel facilities located in Tallahassee, Florida, Destin, Florida, and
Sarasota, Florida, respectively;
(c) All Personal Property (herein so called), if any, owned
by Seller and situated on the Real Property, including, without
limitation, all furnishings, fixtures, equipment (including laundry
equipment), inventory, supplies and linens used in the normal
operations of the Improvements as "Sleep Inns", and otherwise
necessary for the continued operation of the Improvements as "Sleep
Inns" consistent with past practice in its usual manner; and
(d) Subject to the provisions hereof, all contracts or
agreements, such as maintenance, service, or utility contracts, all
warranties, guaranties, indemnities, claims, licenses, permits, leases
or similar documents, including without limitation, franchise and/or
licensing agreements, and all other intangible property associated
with the Property (collectively, the "Intangible Property").
SECTION 1.2 The Real Property, the Improvements, the Personal
Property and the Intangible Property are hereinafter sometimes collectively
referred to as the "Property."
ARTICLE 2
Consideration for Conveyance
SECTION 2.1 The Purchase Price (the "Purchase Price") for the
Property to be paid by Purchaser to Seller at Closing shall be an amount equal
to Nine Million Seven Hundred Thirty Thousand and No/100 Dollars
($9,730,000.00). The Purchase Price shall be payable in cash or other
immediately available funds at Closing.
ARTICLE 3
Earnest Money
SECTION 3.1 Upon execution of this Contract, Purchaser will deliver
to the Title Company its check in the amount of Fourteen Thousand Eight Hundred
and No/100 Dollars ($14,800.00), which funds shall constitute the initial
earnest money (the "Initial Earnest Money") hereunder. Unless Purchaser has
terminated this Contract on or before the expiration of the Due Diligence
Period, Purchaser will, on or before the expiration of the Due Diligence
Period, deliver to the Title Company its check in the amount of Fifty-Nine
Thousand Two Hundred and No/100 Dollars ($59,200.00), which funds shall
constitute the
* "Sleep Inn" is the registered trademark and/or sales mark of Choice Hotels,
Inc.
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<PAGE> 2
additional earnest money (the "Additional Earnest Money") (the aggregate of the
Initial Earnest Money and the Additional Earnest Money herein sometimes
collectively referred to as the "Earnest Money"). Upon delivery by Seller to
the Title Company of the Additional Earnest Money, the Earnest Money will
become non-refundable, except as otherwise specifically set forth in this
Contract. The Title Company shall hold the Earnest Money in an
interest-bearing account reasonably satisfactory to Seller and Purchaser. All
interest which accrues on the Earnest Money shall constitute a portion of the
Earnest Money and shall be disbursed with the Earnest Money as provided
elsewhere herein.
ARTICLE 4
Survey, Title Policy and Environmental Reports
SECTION 4.1 Within ten (10) days after the Effective Date, Seller
shall deliver to Purchaser the most recent surveys (collectively, the "
Original Survey") of the Real Property and the Improvements within Seller's
Possession.
SECTION 4.2 Within ten (10) days after the Effective Date, Seller
shall deliver to Purchaser the most recent title policy or title policies
(collectively, the "Original Title Policy") with respect to the Property within
Seller's possession, together with legible copies of all documents (the
"Original Title Documents") constituting exceptions to Seller's title as
reflected in the Original Title Policy, including legible copies of the current
plat, if any, filed in the map or plat records.
SECTION 4.3 Within ten (10) days after the Effective Date, Seller
shall deliver to Purchaser the most recent environmental report or reports
(collectively, the "Original Environmental Report") with respect to the
Property within Seller's possession.
SECTION 4.4 Purchaser shall have a period of ten (10) days (the
"Original Title, Survey and Environmental Review Period") from its receipt of
the last of the Original Survey, the Original Title Policy, the Original Title
Documents and the Original Environmental Report, to review the Original Survey,
the Original Title Policy, the Original Title Documents and the Original
Environmental Report (collectively, the "Original Title, Survey and
Environmental Report") and to object in writing to Seller as to any matters
therein to which Purchaser objects (the "Original Objections"). If Purchaser
fails to so object prior to the expiration of the Original Title, Survey, and
Environmental Review Period, Purchaser shall, subject to the provisions of
Section 4.5 hereof, be deemed to have approved and accepted the Original Title,
Survey, and Environmental Report, and all matters set forth on Schedule B of
the Original Title Policy shall be deemed Permitted Exceptions (the "Permitted
Exceptions"), and Purchaser shall accept title to the Property subject to such
Permitted Exceptions. If Purchaser notifies Seller in writing of any Original
Objections prior to the expiration of the Original Title, Survey and
Environmental Review Period, Seller shall then have a period of ten (10) days
to cure the Original Objections, or to notify Purchaser in writing of any
Original Objections Seller cannot, or elects not to, cure (the "Original Cure
Notice"). Seller shall have no obligation to cure any of the Original
Objections; provided, however, Seller shall be obligated to cure any Original
Objections to any liens or other encumbrances granted by Seller after the
Effective Date. Upon Purchaser's receipt of the Original Cure Notice,
Purchaser shall have a period of five (5) days to either (i) terminate this
Contract, and be entitled to the return of the Initial Earnest Money, with
neither party hereto being obligated to the other except as to Purchaser's
liability pursuant to Section 6.1 hereof, or (ii) waive the Original Objections
and proceed to Closing with all uncured Original Objections constituting
Permitted Exceptions.
SECTION 4.5 Notwithstanding anything contained in Section 4.4 hereof
to the contrary, if Purchaser does not terminate this Contract on or before the
expiration of the Due Diligence Period (but after Purchaser has delivered the
Additional Earnest Money to the Title Company):
(a) Seller shall, at is sole cost and expense and within ten
(10) days following the expiration of the Due Diligence Period, have prepared
and delivered to Purchaser current surveys (one for each of the Sleep Inns)
(collectively, the "Current Survey") of the Real Property and the Improvements,
prepared by a surveyor reasonably acceptable to Purchaser and the Title Company
and otherwise meeting the requirements of and containing a certification
reasonably acceptable to the Title Company and Purchaser. The Current Survey
shall also be in a form sufficient to permit the Title Company to delete the
standard survey exception, except as to shortages in area;
(b) Seller shall, at Seller's sole cost and expense and within
ten (10) days following the expiration of the Due Diligence Period, have
prepared and delivered to Purchaser current commitments (one for each of the
Sleep Inns) (collectively, the "Current Title Commitment") for the issuance of
an Owner's Policy or Policies of Title Insurance to Purchaser through the First
American Title national closing offices located at Republic Title of Texas,
Inc., 300 Crescent Court, Suite 100, Dallas, Texas 75201, Attention: William A.
Kramer (the "Title Company") and, from a title insurance underwriter acceptable
to Purchaser, together with legible copies of all
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<PAGE> 3
documents (the "Current Title Documents") constituting exceptions to Seller's
title as reflected in the Current Title Commitment, including legible copies of
the current plat, if any, filed in the map or plat records;
(c) Purchaser shall, at Purchaser's sole cost and expense
and within ten (10) days following the expiration of the Due Diligence Period,
have prepared and delivered to Purchaser a current environmental report or
reports (collectively, the "Current Environmental Report") with respect to the
Property; and
(d) Purchaser shall have a period of five (5) days (the
"Current Title, Survey and Environmental Review Period") from its receipt of
the last of the Current Title Commitment, the Current Title Documents, the
Current Survey and the Current Environmental Report to review the Current Title
Commitment, the Current Title Documents, the Current Survey and the Current
Environmental Report (collectively, the "Current Title, Survey and
Environmental Report") and to object in writing to Seller as to any matters
therein to which Purchaser objects (the "Current Objections"); provided,
however, that any Current Objections must be based upon matters which are
variances or differences between the Original Title Policy, the Original Title
Documents, the Original Survey and/or the Original Environmental Report, and
the Current Title Report, the Current Title Documents, the Current Survey
and/or the Current Environmental Report and which are otherwise material in
nature in Purchaser's reasonable judgment. If Purchaser fails to so object
prior to the expiration of the Current Title, Survey, and Environmental Review
Period, Purchaser shall be deemed to have approved and accepted the Current
Title, Survey and Environmental Report, and all matters set forth therein shall
be deemed Permitted Exceptions. If Purchaser notifies Seller in writing of any
Current Objections prior to the expiration of the Current Title, Survey and
Environmental Review Period, Seller shall then have a period of ten (10) days
to cure the Current Objections, or to notify Purchaser in writing of any
Current Objections Seller cannot, or elects not to, cure (the "Current Cure
Notice"). Seller shall have no obligation to cure any of the Current
Objections; provided, however, Seller shall be obligated to cure any Current
Objections to any liens or other encumbrances granted by Seller after the
Effective Date. Upon Purchaser's receipt of the Current Cure Notice, Purchaser
shall have a period of five (5) days to either (I) terminate this Contract, and
be entitled to the return of the Earnest Money with neither party hereto being
obligated to the other except as to Purchaser's liability pursuant to Section
6.1 hereof, or (ii) waive the Current Objections and proceed to Closing with
all uncured Current Objections constituting Permitted Exceptions.
SECTION 4.6 At Closing, Seller shall furnish Purchaser, (the cost and
expense for same, including any additional premium for the survey exception
deletion, to be split equally between Seller and Purchaser) with Owner's
Policies of Title Insurance (one for each of the Sleep Inns) (collectively, the
"Title Policy") issued through the Title Company on the standard form in use in
the State of Florida, from a title insurance underwriter otherwise reasonably
acceptable to Purchaser, insuring good and marketable title to the Property in
Purchaser, subject only to the Permitted Exceptions and the standard printed
exceptions, except:
(a) The exception relating to restrictions against the
Property shall be endorsed by the Title Company to read "none of
record", except for such restrictions as may be included in the
Permitted Exceptions;
(b) The exception relating to discrepancies, conflicts or
shortages in area or boundary lines, or any encroachment or any
overlapping of improvements which a survey or surveys might show shall
be modified, at Purchaser's option, but at Seller's expense, to delete
such exceptions, except as to shortages in area; and
(c) The exception relating to ad valorem taxes shall except
only to taxes owing for the current and subsequent years not yet due
and payable.
ARTICLE 5
Additional Items to be Furnished
to Purchaser by Seller
SECTION 5.1 Within ten (10) days after the Effective Date, Seller
shall make available to Purchaser and its authorized representatives, for
review at the offices of Seller, or deliver to Purchaser and its authorized
representatives true, complete and legible copies of the following items, data
and/or information to the extent Seller is in possession or control of such
items:
(a) maintenance, service or utility contracts,
warranties, guarantees, licenses, permits (including franchise or
license agreements relating to the operation of the Sleep Inns),
plans, drawings, engineering reports, specifications, site plans, and
certificates of occupancy, relating to the Property or the operation
of the Sleep Inns;
(b) All of the real estate and personal property tax
statements with respect to the Property for the years 1994 and 1995;
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(c) Utility invoices relating to the Property from January 1,
1994 to the present, to the extent available;
(d) The casualty, extended coverage, and general liability
insurance policies relating to the Property, together with a
certification from Seller that no claims have been made thereunder;
except as otherwise disclosed to Purchaser by Seller;
(e) Any financial statements prepared by or for Seller
regarding the Property and/or the Sleep Inns, including monthly income
and expense statements for the Property and/or the Sleep Inns from
January 1, 1994, to the present, in the form customarily used by
Seller (and accompanying data), and such other financial and
operational data as Purchaser shall reasonably require for the years
1994, 1995, and 1996.
(f) A list of the amount and nature of the capital
expenditures incurred with respect to the Property and/or the Sleep
Inns during the preceding twenty-four (24) months;
(g) The most recent franchise inspection reports prepared by
the franchisor or licensor and with respect to the Property and/or the
Sleep Inns;
(h) An inventory of the Personal Property, if any; and
(i) Any leases and other documents relating to existing
telephone, computer and other support services.
Purchaser and its authorized representatives may, at their sole cost
and expense, make copies of any of the foregoing items, data and/or information
made available to them at the offices of Seller and remove same from the
offices of Seller for further review and evaluation.
SECTION 5.2 Notwithstanding anything to the contrary contained in
this Contract, all information provided by Seller to Purchaser for Purchaser's
evaluation of the Property, including, but not limited to, all of the items
delivered or made available by Seller to Purchaser and it authorized
representatives pursuant to Section 5.1 above, is confidential, and Purchaser
agrees except as provided in Section 5.1 above and herein, not to reproduce,
disseminate, discuss, or in any way distribute or disclose to any third party
any information concerning the Property delivered by Seller to Purchaser and
its authorized representatives. Purchaser agrees to immediately return to
Seller all items previously delivered or made available to Purchaser and its
authorized representatives by Seller pursuant to Section 5.1 above upon the
termination of this Contract for whatever reason. Purchaser recognizes the
sensitive nature of dealing with on-site employees and personnel and, in this
regard agrees not to disclose the existence of this Contract, or the contents
or nature thereof, to any employees or personnel of Seller on-site at each of
the Sleep Inns during its inspections of the Property undertaken pursuant to
Section 6.1 hereof; provided if Seller can prove, in a court of competent
jurisdiction, that through the negligence or willful misconduct of Purchaser
and/or its authorized representatives, the existence of this Contract, or the
contents or nature thereof, was disclosed to any such employees or personnel at
any of the Sleep Inns individual sites, Purchaser shall be liable for and shall
pay to Seller liquidated damages in an amount equal to $5,000.00 (for each of
the Sleep Inn individual sites that Seller so proves such disclosure occurred
and in the manner herein above described) through forfeiture of that portion of
the Escrow Money equal to such $5,000.00 liquidated damages. Notwithstanding
the foregoing, Purchaser may distribute or disclose such information to any
potential lender of Purchaser, and to Purchaser's agents, attorneys,
representatives and independent contractors engaged by Purchaser in connection
with the tests, studies, evaluations and inspections undertaken pursuant to
Section 6.1 of this Contract. Seller agrees not to disclose the name of
Purchaser to any third party until after the expiration of the Due Diligence
Period.
ARTICLE 6
Due Diligence Period
SECTION 6.1 Notwithstanding anything to the contrary contained
herein, and in consideration of $100 paid by Purchaser to Seller as independent
consideration for this Contract, Purchaser shall have forty-five (45) days from
and after the Effective Date (the "Due Diligence Period") within which to
conduct any and all engineering and economic feasibility studies of the
Property (including the Sleep Inns and their operations) and the competitive
market, which Purchaser may, in its sole discretion, deem necessary to
determine whether or not the Property is suitable for Purchaser's intended use
thereof. If Purchaser notifies Seller in writing on or before the expiration
of the Due Diligence Period that Purchaser does not desire to consummate the
transaction contemplated by this Contract, for any reason whatsoever, this
Contract shall terminate, and the Initial Earnest Money shall be immediately
returned to Purchaser by the Title Company, and the parties hereto shall have
no further obligations one to the other hereunder. If Purchaser fails to so
terminate this Contract prior to the
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<PAGE> 5
expiration of the Due Diligence Period, Purchaser shall be deemed to have
accepted the Property and shall proceed to Closing pursuant to the terms and
conditions hereof. Unless Purchaser timely terminates this Contract as
provided in this Section 6.1, or pursuant to Article 4 hereof, the Earnest
Money shall, except as otherwise specifically set forth in this Contract, be
non-refundable, and shall be applied as provided in this Contract, unless
Seller is unable or unwilling to satisfy all conditions stated in this Contract
to which Purchaser's obligations hereunder are subject, in which case, the
Earnest Money shall be refunded to Purchaser. Purchaser hereby indemnifies,
holds harmless, and agrees to defend Seller from and against any loss, cost, or
expense resulting from any entry by Purchaser, or any employee, agent,
principal of, or independent contractor with, Purchaser, upon the Property in
connection with any tests or evaluations conducted by Purchaser during the Due
Diligence Period, or any lien asserted by any third party as a result thereof.
This provision shall survive the termination of this Contract and Closing.
ARTICLE 7
Damage or Destruction Prior to Closing
SECTION 7.1 In the event the Improvements should be damaged by any
casualty event prior to Closing, and if the cost of repairing such damage, as
estimated by a contractor retained by Purchaser, is (a) less than $50,000.00,
then at Closing, Seller shall pay to Purchaser all insurance proceeds payable
for such damage, together with an amount in cash equal to the deductible
required to be paid by the applicable insurance policies, and this Contract
shall be closed without Seller's repairing such damage; or (b) more than
$50,000.00, then Purchaser may elect to terminate this Contract upon written
notice to Seller on or before ten (10) days after Seller has given written
notice to Purchaser of the fact that damage has occurred to the Property; but
if Purchaser does not timely elect to terminate this Contract, Seller shall
pay to Purchaser, at Closing, all insurance proceeds payable for such damage,
together with an amount in cash equal to the deductible required to be paid by
the applicable insurance policies, and this Contract shall be closed without
Seller's repairing such damage. If Purchaser elects to terminate this Contract
in accordance with this Section 7.1, then (a) the terms and conditions hereof
shall be null and void, (b) the Initial Earnest Money or the Earnest Money, as
applicable, shall be disbursed by the Title Company to Purchaser, and (c)
neither Purchaser nor Seller shall have any further liability or obligation
pursuant to the terms and conditions hereof other than Purchaser's liability
pursuant to Section 6.1 hereof.
SECTION 7.2 In the event all or any portion of the Real Property
should be the subject of the actual filing, or any written threat, of any
condemnation or other eminent domain proceeding prior to Closing, then
Purchaser, within ten (10) days after being notified in writing by Seller of
such eminent domain proceeding or threatened proceeding, and being furnished
with copies of all material documents relating thereto, shall either (a)
terminate this Contract, whereupon the Initial Earnest Money or the Earnest
Money, as applicable, shall be returned to Purchaser and the parties hereto
shall have no further obligations one to the other hereunder, other than
Purchaser's liability pursuant to Section 6.1 hereof, or (b) elect to close the
transaction contemplated by this Contract, in which event any and all damages
payable as a result of such eminent domain proceedings shall be paid to
Purchaser.
ARTICLE 8
Representations and Warranties of Seller; Agreements Regarding
Environmental Liability and Structures
SECTION 8.1 As of the Effective Date hereof, Seller represents and
warrants to Purchaser that:
(a) Seller has good and marketable fee simple title to the
Real Property, which will be subject to the Permitted Exceptions;
(b) No condemnation or other eminent domain proceedings have
been instituted or, to Seller's current actual knowledge, threatened
against the Property;
(c) To the best of Seller's knowledge, (i) all laws,
ordinances, rules and regulations of any government, or any agency,
body or subdivision thereof, relating to the Property, have been
complied with, (ii) the present operation of the Property is in
compliance with all such ordinances, rules and regulations, and (iii)
the present occupation of the Property is in accordance with
certificates of occupancy and other permits and licenses issued or
required by appropriate governmental authorities;
(d) Seller is not a foreign person within the meaning of
Sections 1445 and 7701 of the Internal Revenue Code of 1954 ("IRC");
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<PAGE> 6
(e) All items furnished to Seller in accordance with Article
5 of this Contract are, in all material respects, accurate, complete,
and true as of the date furnished and will be as of the Closing Date;
(f) Seller has received no written notice of any threatened,
and there currently is no pending, litigation which involves or
affects the Property, except to the extent covered by insurance
maintained by Seller or on behalf of Seller;
(g) Other than as set forth herein or disclosed to Purchaser
by Seller, there are and will be no material agreements at Closing
which Purchaser will be required to assume with respect to the
operation of the Property. The term "material agreements" for the
purposes of this Section 9.1(g) shall mean any agreements requiring
annual expenditure by Seller in excess of $10,000.00, or which are for
a term in excess of one (1) year;
(h) Seller represents and warrants to the best of its
knowledge, and covenants and agrees, that there has been no presence,
use, generation, release, discharge, storage, disposal, or
transportation of any Hazardous Materials on, under, in, about, to, or
from the Property (or any portion thereof), and, from the date hereof
through the Closing Date, it shall not cause or permit the presence,
use, generation, release, discharge, storage, disposal, or
transportation of any Hazardous Materials on, under, in, about, to, or
from the Property (or any portion thereof);
(i) Seller has granted no rights of first refusal or
options to purchase the Property; and
(j) The franchise and/or licensing agreements with
respect to the Sleep Inns are in full force and effect and Seller is
not in default thereunder;
(k) Any leases referred to in Section 5.1 (i) hereof are
in full force and effect and Seller is not in default thereunder; and
(l) There are no liabilities with respect to Property,
the Sleep Inns or the operations thereof, except as set forth in the
Original Title Policy, or the Current Title Commitment, or otherwise
disclosed pursuant to the provisions of Article 5 hereof.
SECTION 8.2 As used in this Contract, the term "Hazardous Materials"
means any hazardous or toxic substances, materials or wastes, including, but
not limited to, those substances, materials, and wastes listed in the United
States Department of Transportation Hazardous Materials Table (49 C.F.R.
Section 172.101) or by the Environmental Protection Agency s hazardous
substances (40 C.F.R. Part 302) and amendments thereto, or such substances,
materials, constituents, and wastes which are currently regulated under any
applicable local, state, or federal law including, without limitation: (i)
petroleum, gasoline or other petroleum derivatives, or additives to gasoline or
other petroleum derivatives; (ii) asbestos or asbestos-containing materials;
(iii) polychlorinated biphenyls; (iv) designated as a "hazardous substance"
pursuant to section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq.
(33 U.S.C. Section 1321) or listed pursuant to section 307 of the Clean Water
Act (33 U.S.C. Section 1317); (v) defined as a "hazardous waste" pursuant to
section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq. (42 U.S.C. Section 6903)' (vi) defined as a "hazardous substance"
pursuant to section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 2 U.S.C. Section 9601 et seq. (42 U.S.C.
Section 9601); or (vii) any substance the nature, use, manufacture, or effect
of which render it subject to federal, state, or local regulation,
investigation, removal, or remediation as potentially hazardous or toxic,
injurious to human health or welfare, or injurious to the environment.
SECTION 8.3 Seller agrees to reasonably cooperate with
Purchaser and its agents and contractors in connection with Purchaser's
inspection of the Property for the existence of any Hazardous Substances.
ARTICLE 9
Covenants, Conditions and Agreements of Seller and Purchaser
SECTION 9.1 Seller hereby agrees to, and Purchaser's obligation to
close the transaction herein contemplated is conditioned upon, the following:
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<PAGE> 7
(a) Prior to Closing, Seller shall continue to maintain,
operate and manage the Property and the Sleep Inns in the same manner
that Seller has heretofore maintained and operated the Property;
(b) Seller will pay all expenses, accrued or otherwise, and
of any type or kind whatsoever, through the Closing Date with regard
to the Property and/or the Sleep Inns;
(c) At Purchaser's option and on or prior to Closing, Seller
will obtain the resignations of all persons who are employees and
personnel associated with the operation of the Sleep Inns; and, on or
prior to Closing, Seller will pay any and all costs, expenses and exit
payments due with regard to such persons, including final payroll,
accrued vacation time and the like;
(d) Prior to Closing and subject to Section 9.1(e) below,
Seller will have furnished to Purchaser such consents, assignments,
estoppel certificates, transfers or the like, necessary to consummate
the transaction contemplated hereby, and as requested by Purchaser,
including, without limitation, those requested by Purchaser in
connection with any of the leases referred to in Section 5.1(i)
hereof.
(e) Prior to Closing, Seller will have used its best efforts
to furnish to Purchaser such consents assignments, estoppel
certificates, transfers and the like necessary from existing
franchisors or licensors in order for Purchaser to continue to operate
the Property as Sleep Inns (For such purposes, Seller hereby
authorizes Purchaser, but only after Seller has first notified Choice
Hotels, Inc. of the existence of this Contract, to during the Due
Diligence Period contact Choice Hotels, Inc. directly in order for
Purchaser to determine whether such necessary consents and assignments
will be given by Choice Hotels, Inc. Any such consents or assignments
must be without additional cost or penalty to Seller and otherwise in
form and substance acceptable to both Seller and Purchaser);
(f) Prior to or at Closing, Seller will cancel or terminate
any and all management, consulting or similar type agreements with
regard to the Sleep Inns;
(g) Seller will not, during the pending of this Contract,
place any new encumbrances on the Property or modify any franchise or
licensing agreements or other documents material to the operation of
the Property as Sleep Inns, without prior written consent of
Purchaser; and
(h) At Purchaser's option and prior to or at Closing, Seller
will terminate or cancel any service contracts or similar types of
Intangible Property contracts or rights.
SECTION 9.2 The representations and warranties contained in Section
9.1 hereof shall be true and correct on the Closing Date, and shall survive
Closing. The obligation of Purchaser to close this transaction is expressly
conditioned upon said representations and warranties being true and correct on
the Closing Date.
ARTICLE 10
Closing
SECTION 10.1 The consummation of the purchase and sale of the Property
in accordance with this Contract ("Closing") hereunder shall be on or before
August 1, 1996 (the "Closing Date"), at the California offices of Purchaser,
7825 Fay Avenue, Suite 250, LaJolla, California 92037, or on such other date,
or at such other place, as the parties may mutually agree.
SECTION 10.2 At Closing, and as a condition to Purchaser's obligations
hereunder, Seller shall deliver or cause to be delivered to Purchaser each of
the following items:
(a) A warranty deed or deeds, in a form reasonably
acceptable to Purchaser, duly executed and acknowledged by Seller, and
in form for recording, conveying good, marketable fee simple title in
the Real Property to Purchaser, subject only to the Permitted
Exceptions;
(b) A bill of sale or bills of sale duly executed and
acknowledged by Seller, conveying to Purchaser the Personal Property,
if any, with covenants of warranty, subject only to the Permitted
Exceptions;
(c) An assignment and assumption, or assignments and
assumptions, duly executed and acknowledged by Seller and Purchaser,
assigning all of Seller's rights under any service contracts, leases
and other Intangible Property contracts or rights affecting the
Property, and evidencing Purchaser's assumption of any service
contracts and other Intangible Property contracts or rights that
Purchaser, in its sole discretion, elects to assume;
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<PAGE> 8
(d) An assignment and assumption, in a form reasonably
acceptable to Purchaser, duly executed by Seller and Purchaser,
assigning all of Seller's rights under any and all franchise and/or
license agreements necessary to operate the Property as Sleep Inns,
and evidencing Purchaser's assumption of same (provided Seller and
Purchaser have obtained the approval of Choice Hotels, Inc. in form
and substance acceptable to both Seller and Purchaser); and any other
consents, assignments, terminations, cancellations, resignations,
estoppel certificates (or other evidence thereto), required pursuant
to Section 9.1 hereof; and
(e) The Title Policy in the form specified in Section 4.6
hereof;
(f) A current certificate or certificates from the Secretary
of the State of Florida or from the Title Company, or other private
company in the business of conducting UCC lien searches, reflecting no
financing statements (UCC-l's) or other filings pursuant to the
Florida Uniform Commerce Code;
(g) Such evidence or documents as may be reasonably required
by Purchaser or the Title Company evidencing the status and capacity
of Seller and the authority of the person or persons who are executing
the various documents on behalf of Seller in connection with the sale
of the Property;
(h) All keys to all locks on the Property; copies of all
operating records pertaining to the Property; all Intangible Property
in the possession of Seller; and any and all other books, records,
documents, contracts, and data in the possession of Seller and
pertaining to the Property, the Sleep Inns and/or the operation
thereof;
(i) A certification in a form to be provided or approved by
Purchaser, signed by Seller under penalties of perjury, containing the
following: (I) Seller's U.S. Taxpayer Identification Number; (ii) The
business address of Seller; and (iii) a statement that Seller is not a
foreign person within the meaning of Sections 1445 and 7701 of the
IRC;
(j) The Agreement Not to Compete.
SECTION 10.3 At Closing, Purchaser shall deliver to Seller each of the
following items:
(a) The Purchase Price required by and in the manner
specified in Section 2.1 hereof;
(b) The agreements described in Sections 10.2(c), (d) and
(j); and
(c) Such evidence or documents as may reasonably be required
by Seller or the Title Company evidencing the status and capacity of
Purchaser and the authority of the person or persons who are executing
the various documents on behalf of Purchaser in connection with the
acquisition of the Property.
SECTION 10.4 At Closing, the following items shall be adjusted or
prorated between Seller and Purchaser:
(a) Ad valorem taxes for the Property for the current
calendar year shall be prorated to the Closing Date, and Seller shall
pay to Purchaser in cash at Closing, or apply the same as an
adjustment in the closing statement, Seller's pro rata portion of such
taxes. Seller's pro rata portion of such taxes shall be based upon
taxes actually assessed for the current calendar year. If, for any
reason, ad valorem taxes for the current calendar year have not been
assessed on the Property, such proration shall be estimated based upon
the tax rates in effect for the current year and the assessed value of
the Property and the Improvements for the preceding year, and if the
current tax rates are not yet known, then such proration shall be
based upon ad valorem taxes for the immediately preceding calendar
year, and adjusted when exact amounts are available.
(b) All other income and ordinary operating expenses for or
pertaining to the Property, including, but not limited to, public
utility charges, maintenance, service charges, and all other normal
operating charges of the Property shall be prorated at Closing
effective as of the Closing Date.
(c) In the event any adjustments pursuant to this Section
10.4 are, subsequent to Closing, found to be erroneous, then either
party hereto who is entitled to additional monies shall invoice the
other party for such additional amounts as may be owing, and such
amount shall be paid within ten (10) days from receipt of the invoice.
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<PAGE> 9
SECTION 10.5 Possession of the Property shall be delivered to
Purchaser by Seller at Closing, subject only to such rights of others as have
been expressly disclosed herein.
SECTION 10.6 All costs and expenses not otherwise required to be paid
by a particular party hereto as set forth herein shall be borne by Seller and
Purchaser in the manner in which such costs and expenses are customarily
allocated between the parties at closings of real property similar to those
portions of the Property in the Tallahassee, Florida, Destin, Florida, and
Sarasota, Florida areas, respectively; provided, however, that Purchaser shall
pay any recording costs and any mortgage and/or deed of trust related taxes and
costs; Seller, Purchaser and Walter Broadfoot of Mid-South Hotel Brokers shall
equally share in the payment of all transfer, intangible, or other similar
taxes incident to the transfer of the Property to Purchaser; and provided
further, Seller and Purchaser shall, subject to the provisions of Section 14.7
hereof, pay their own respective legal fees.
ARTICLE 11
Real Estate Commission
SECTION 11.1 Seller agrees to pay a real estate commission to
Mid-South Hotel Brokers (the "Broker"), if, and only if, the transaction herein
contemplated proceeds to Closing. Seller hereby indemnifies, holds Purchaser
harmless and agrees to defend Purchaser from any claim, demand, loss, cost,
expense or damage arising from any claim for a real estate commission by any
party claiming through or under Seller other than the Broker, all such
commissions being payable by Seller. Purchaser hereby indemnifies, holds
Seller harmless and agrees to defend Seller from any claim, demand, loss, cost,
expense or damage arising from any claim for a real estate commission by any
party claiming through or under Purchaser.
ARTICLE 12
Remedies on Default
SECTION 12.1 If this Contract is terminated by Purchaser pursuant to
any one or more Sections hereof which entitle Purchaser to terminate this
Contract, Purchaser shall be entitled to the return of the Earnest Money
(including the interest earned thereon). If the sale contracted for herein is
not consummated due to a failure on the part of Seller in the performance of
any of its obligations hereunder ("Seller Default"), then Purchaser shall
either (i) terminate this Contract and accept the return of the Earnest Money
together with any interest thereon, or (ii) sue for specific performance, as
its sole and exclusive remedies, Purchaser hereby waiving the right to bring a
suit for damages, and waives all other remedies at law or in equity.
SECTION 12.2 If the sale contracted for herein is not consummated due
to Purchaser's failure to perform any of its obligations hereunder ("Purchaser
Default") other than a Seller Default, then the Earnest Money, together with
all interest thereon, shall be paid to Seller by the Title Company as
liquidated damages for such Purchaser Default as Seller's sole and exclusive
remedy. Such amount is agreed upon by and between Seller and Purchaser as
liquidated damages, due to the difficulty and inconvenience of ascertaining and
measuring actual damages, and the uncertainty thereof; and no other damages,
rights or remedies shall in any case be collectible, enforceable or available
to Seller other than in this Article 12, but Seller shall accept said cash
payment as Seller's total damages, relief and remedy.
ARTICLE 13
Agreement Not to Compete
SECTION 13.1 Seller and Purchaser shall at Closing enter into an
Agreement Not to Compete (the "Agreement Not to Compete") providing that Seller
may not manage, operate or own an interest in any hotel or motel property
within a five (5) mile radius of any portions of the Property for a period of
five (5) years after Closing. The Agreement Not to Compete will be in form and
substance mutually agreed to by Seller and Purchaser prior to the expiration of
the Due Diligence Period.
ARTICLE 14
Miscellaneous
SECTION 14.1 All notices, demands, or other communications of any type
(herein collectively referred to as "Notices") given by Seller to Purchaser or
by Purchaser to Seller, whether required by this Contract or in any way related
to the transaction contracted for herein, shall be void and of no effect unless
given in accordance with the provisions of this Section 14.1. All Notices
shall be in writing and delivered to the person to whom the notice is directed,
either (a) by telephonic facsimile communication, (b) by Federal Express or
other guaranteed overnight delivery service, or (c) by United States Mail, as a
registered or certified item, return receipt requested. Any of the Notices may
be delivered by the parties hereto or by their respective attorneys. Any
notice delivered
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<PAGE> 10
by telephonic facsimile communication or Federal Express or other guaranteed
overnight delivery service shall be deemed effective one (1) day after being
transmitted to the applicable telephone facsimile numbers set forth below, if
such Notices are sent by telephonic facsimile communication, or when delivered
to the addresses set forth below if sent by Federal Express or other guaranteed
overnight delivery service. Notices delivered by registered or certified mail
shall be deemed effective three (3) days after being deposited in a post office
or other depository under the care or custody of the United States Postal
Service, enclosed in a wrapper with proper postage affixed, with return receipt
requested addressed, if to Purchaser, as follows:
Host Funding, Inc.
14800 Quorum Drive
Suite 510
Dallas, Texas 75240
Attention: Michael S. McNulty, President
Telecopy No. 214-991-5446
With copy to:
James M. Duncan
Duncan & Carper
703 McKinney Avenue, Suite 303
Dallas, Texas 75202
Telecopy No. 214-880-0015
and addressed, if to Seller, as follows:
Capital Circle Hotel Company
226 Tippah Street North
Grand Junction, Tennessee 38039
Attention: Charles Bland, President
Telecopy No. (901) 764-6051
With copy to:
Thomas H. Minor, Esq.
124 East Market Street
Somerville, Tennessee
Fax No. (901) 465-4465
Either party hereto may change the address for notice specified above by giving
the other party ten (10) days advance written notice of such change of address.
SECTION 14.2 This Contract may not be assigned by Purchaser without
Seller's prior written consent. This Contract may not be assigned by Seller
without Purchaser's prior written consent, such consent not to be unreasonably
withheld or delayed. Any such permitted assignment will be effective only upon
assignee's written assumption of all of assignor's obligations and duties
hereunder.
SECTION 14.3 This Contract shall be construed and interpreted in
accordance with the laws of the State of Florida and the obligations of the
parties hereto are and shall be performable in the county or counties wherein
portions of the Property are located. Where required for proper
interpretation, words in the singular shall include the plural; the masculine
gender shall include the neuter and the feminine, and vice versa. The terms
"heirs, executors, administrators and assigns" shall include "successors, legal
representatives and assigns".
SECTION 14.4 This Contract may not be modified or amended, except by
an agreement in writing signed by Seller and Purchaser. The parties may waive
any of the conditions contained herein or any of the obligations of the other
party hereunder, but any such waiver shall be effective only if in writing and
signed by the party waiving such conditions or obligations.
SECTION 14.5 Each person executing this Contract warrants and
represents that he is fully authorized to do so.
SECTION 14.6 Time is of the essence of this Contract.
SECTION 14.7 In the event it becomes necessary for either party hereto
to file a suit to enforce this Contract or any provisions contained herein, the
party prevailing in such action shall be entitled to recover, in addition to
all other remedies or damages, reasonable attorneys' fees incurred in such
suit.
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<PAGE> 11
SECTION 14.8 The descriptive headings of the several Articles,
Sections and Paragraphs contained in this Contract are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
SECTION 14.9 This Contract, including the Exhibits hereto, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings of
the parties in connection therewith. No representation, warranty, covenant,
agreement or condition not expressed in this Contract shall be binding upon the
parties hereto or shall affect or be effective to interpret, change or restrict
the provisions of this Contract; provided, however, that all certifications,
representations and warranties of Seller contained in the statements and
schedules to be furnished pursuant to Article 5 hereof shall become a part of
the Contract as though set forth herein.
SECTION 14.10 Numerous counterparts of this Contract may have been
executed by the parties hereto. Each such executed counterpart shall have the
full force and effect of an original executed instrument.
SECTION 14.11 The obligations of Seller and Purchaser to close this
Contract are expressly conditioned upon the simultaneous closing of that
certain Contract of Purchase and Sale of even date herewith between Ocean
Springs Hotel Company and Purchaser and pertaining to the sale by Ocean Springs
Hotel Company to Purchaser of a "Sleep Inn" hotel property located in Ocean
Springs, Mississippi.
SECTION 14.12 For purposes of this Contract, the term "Effective
Date" shall mean and be defined herein as the date on which at least three (3)
fully executed counterparts hereof, together with the Earnest Money, are
delivered to the Title Company, as acknowledged by the Title Company in writing
in the space hereinafter provided in this Contract.
SECTION 14.13 This Contract is being presented to Seller and
constitutes an offer by Purchaser to purchase the Property from Seller upon the
terms and conditions stated herein, which offer must be accepted by Seller's
execution of at least three (3) counterparts hereof and returning all three
originals to Purchaser on or before Friday, May 24, 1996. If Purchaser fails
to deliver the three (3) counterpart originals of this Contract to Seller, by
the above date, this Contract shall be of no force or effect and neither party
shall have any obligation one to the other.
EXECUTED on this the 21 day of May, 1996, by Purchaser.
PURCHASER:
HOST FUNDING, INC., a Maryland corporation
By: /s/ MICHAEL MCNULTY
---------------------------------------
Michael McNulty, President
EXECUTED on this the 22 day of May, 1996, by Seller.
SELLER:
CAPITAL CIRCLE HOTEL COMPANY, a
Florida corporation
By: /s/ CHARLES BLAND
---------------------------------------
Charles Bland, President
The Contract has been received by the Title Company this the 24th day
of May, 1996, which shall be the Effective Date.
First American Title
By: /s/ WILLIAM A. KRAMER
---------------------------------------
Name: WILLIAM A. KRAMER
-------------------------------------
Title: VICE-PRESIDENT
------------------------------------
Address: c/o Republic Title of Texas, Inc.
300 Crescent Court
Suite 100
Dallas, Texas 75201
Attention: William A. Kramer
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<PAGE> 12
EXHIBITS:
Exhibit A --- Legal Description
-12-
<PAGE> 13
TALLAHASSEE LEGAL
EXHIBIT A 13-92-0075
LOT 1
Commence at a concrete monument marking the Southeast corner of Lot 16 of the
Third Division of the Plantation of the Florida Pecan Endowment Company as per
supplementary map recorded in Plat Book 1, Page 4, of the Public Records of
Leon County, Florida, and run thence North 01 degrees 08 minutes 34 seconds
West 336.07 feet, thence South 89 degrees 54 minutes 07 seconds West 192.39
feet to a point on a cul-de-sac, said point being on a curve concave
Northwesterly, thence run Southwesterly and Northwesterly along said curve with
a radius of 30.0 feet, through a central angle of 138 degrees 11 minutes 23
seconds for an arc length of 72.36 feet, thence run South 89 degrees 54 minutes
07 seconds West along the Southerly boundary of a 40 foot roadway, a distance
of 7.49 feet, thence leaving said Southerly boundary run South 00 degrees 01
minutes 38 seconds East 315.75 feet, thence North 89 degrees 57 minutes 36
seconds East 258.56 feet to the POINT OF BEGINNING, lying and being situate in
Section 19, Township 1 North, Range 1 West.
<PAGE> 14
SARASOTA LEGAL
LEGAL DESCRIPTION
MOTEL PARCEL
That part of the North 1/2 of the Northwest 1/4 of the Southeast 1/4 of Section
1, Township 34 South, Range 17 East, Sarasota County, Florida described as
follows:
COMMENCE at the Northeast corner of said Northwest 1/4 of the Southeast 1/4 of
Section 1; thence S 00 degrees 02' 03" E along the East line of said Northwest
1/4 of the Southeast 1/4 for 40.00 feet to an intersection with the Southerly
right-of-way line of DeSoto Road (said right-of-way line being parallel with
and 40.00 feet Southerly of the North line of said Northwest 1/4 of the
Southeast 1/4); thence WEST (N 90 degrees 00' 00" W) along said right-of-way
line for 165.00 feet; thence S 00 degrees 02' 03" E parallel with the East line
of said Northwest 1/4 of the Southeast 1/4 of said Section 1 for 210.00 feet;
thence EAST 125.00 feet to an intersection with the Westerly right-of-way line
of Royal Palm Avenue (a 40-foot wide right-of-way); thence S 00 degrees 02' 03"
E along the Westerly right-of-way line of Royal Palm Avenue for 110.00 feet;
thence S 90 degrees 00' 00" W 268.50 feet; thence S 00 degrees 02' 03" E for
92.82 feet to the POINT OF BEGINNING of the herein described parcel of land;
thence continue S 00 degrees 02' 03" E parallel with the East line of said
Northwest 1/4 of the Southeast 1/4 of said Section 1 for 211.70 feet to an
intersection with the South line of the North 1/2 of the Northwest 1/4 of the
Southeast 1/4 of Section 1; thence S 89 degrees 40' 56" W along the said South
line of the North 1/2 of the Northwest 1/4 of the Southeast 1/4 of Section 1
for 411.54 feet; thence N 00 degrees 02' 03" W for 211.70 feet; thence N 89
degrees 40' 56" E for 411.54 feet to the POINT OF BEGINNING.
Said parcel of land contain 2.00 acres, more or less.
<PAGE> 15
DESTIN LEGAL
EXHIBIT "A"
LEGAL DESCRIPTION: NORTH PORTION OF PARCEL NO. 5
A parcel of land lying in section 28, township 2 south, range 21 west, Walton
County, Florida, being more particularly described as follows:
Commence at a found general land office monument marking the southwest corner
of the southeast quarter (SE 1/4 of the aforesaid section 28, township 2 south,
range 21 west, Walton County, Florida; thence go north 02 degrees 11' 03" east
along the west line of said southeast quarter (SE 1/4), a distance of 439.90
feet to the POINT OF BEGINNING; thence continue north 02 degrees 11' 03" east,
a distance of 370.00 feet to the southerly line of a 100 foot Gulf Power
right-of-way thence go south 87 degrees 27' 15" east along the aforesaid line,
a distance of 208.60 feet; thence go north 59 degrees 18' 45" east, a distance
of 4.28 feet; thence go south 56 degrees 40' 23" east, a distance of 379.52
feet; thence go south 33 degrees 19' 37" west, a distance of 200.00 feet;
thence go north 88 degrees 17' 09" west, a distance of 433.59 feet to the point
of beginning.
Said parcel contains 3.6045 acres.
LEGAL DESCRIPTION: 40' ACCESS EASEMENT "A"
A parcel of land lying in section 28, township 2 south, range 21 west, Walton
County, Florida, being more particularly described as follows:
Commence at a found general land office monument marking the southwest corner
of the southeast quarter (SE 1/4) of the aforesaid section 28, township 2
south, range 21 west, Walton County, Florida; thence go north 02 degrees 11'
03" east along the west line of said southeast quarter (SE 1/4), a distance of
1190.33 feet to a point of the southerly right-of-way line of State Road 30
(U.S. Hwy. 98, 225' R/W); thence go south 56 degrees 40' 23" east along said
southerly right-of-way line, a distance of 482.62 feet to a point on the
southeasterly line of a 100 foot wide Gulf Power Company right-of-way easement,
said point also being the Point of Beginning; thence continue south 56 degrees
40' 23" east along said southerly right-of-way line of State Road 30, a
distance of 44.50 feet; thence go south 59 degrees 18' 45" west, a distance of
239.18 feet; thence go north 56 degrees 40' 23" west, a distance of 44.50 feet
to a point on the aforesaid southeasterly line of a 100 foot wide Gulf Power
Company right-of-way easement; thence go north 59 degrees 18' 45" east along
said southeasterly line, a distance of 239.18 feet to the point of beginning.
Said parcel of land contains 0.2196 acres.
<PAGE> 1
EXHIBIT 10.2
AMENDMENT TO CONTRACT OF PURCHASE AND SALE
THIS AMENDMENT TO CONTRACT OF PURCHASE AND SALE (this
"Amendment") is by and between CAPITAL CIRCLE HOTEL COMPANY, a Florida
corporation ("Seller"), and HOST FUNDING, INC., a Maryland corporation
("Purchaser"), and is dated effective as of July 3, 1996.
R E C I T A L S
A. Seller and Purchaser have previously entered into
that certain Contract of Purchase and Sale dated effective as of May 24, 1996
(the "Contract"), relating to the purchase and sale of three (3) parcels of
improved real property located in Tallahassee, Florida, Sarasota, Florida and
Destin, Florida, respectively, and more particularly described therein.
B. Seller and Purchaser desire to amend the Contract in
certain respects as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller and Purchaser hereby agree
as follows:
1. The first two (2) sentences of Section 6.1 of the Contract are
amended in their entirety to read as follows:
Notwithstanding anything to the contrary contained herein, and in
consideration of $100 paid by Purchaser to Seller as independent
consideration for this Contract, Purchaser shall have until July 22,
1996 (the "Due Diligence Period") within which to conduct any and all
engineering and economic feasibility studies of the Property
(including the Sleep Inn and its operation) and the competitive
market, which Purchaser may, in its sole discretion, deem necessary to
determine whether or not the Property is suitable for Purchaser's
intended use thereof. If Purchaser notifies Seller in writing on or
before the expiration of the Due Diligence Period that Purchaser does
not desire to consummate the transaction contemplated by this
Contract, for any reason whatsoever, this Contract shall terminate,
and one-half (1/2) of the Initial Earnest Money shall be forfeited by
Purchaser and delivered to Seller by the Title Company and the
remaining one-half (1/2) of the Initial Earnest Money shall be
immediately returned to Purchaser by the Title Company, and the
parties hereto shall have no further obligations one to the other
hereunder.
2. Section 10.1 of the Contract is amended in its entirety to
read as follows:
The consummation of the purchase and sale of the Property in
accordance with this Contract ("Closing") hereunder shall be on or
before August 19, 1996 (the "Closing Date"), at the California offices
of Purchaser, 7825 Fay Avenue, Suite 250, LaJolla, California 92037,
or on such other date, or at such other place, as the parties may
mutually agree.
<PAGE> 2
3. The Contract is hereby amended by the addition thereto of the
following provision as Section 14.14:
Seller acknowledges that Purchaser is seeking to obtain financing from
Nomura Asset Capital Corporation to facilitate the Closing, and,
incident thereto, agrees to cooperate with and/or assist Purchaser in
furnishing to said lender any and all reports or other information
with regard to the Property or the operations thereof as such lender
may request.
4. Except as expressly amended herein, the Contract remains
unchanged, and the valid and binding obligation of Seller and Purchaser.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Contract. This Amendment shall be effective upon
execution by facsimile transmission by both parties.
SELLER:
CAPITAL CIRCLE HOTEL COMPANY,
a Florida corporation
By: /s/ CHARLES BLAND
-------------------------------------
Charles Bland, President
PURCHASER:
HOST FUNDING, INC.,
a Maryland corporation
By: /s/ MICHAEL MCNULTY
-------------------------------------
Michael McNulty, President
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<PAGE> 1
EXHIBIT 10.3
CONTRACT OF PURCHASE AND SALE
THIS CONTRACT OF PURCHASE AND SALE (this "Contract") is by and between
OCEAN SPRINGS HOTEL COMPANY, a corporation organized under the laws of the
State of Mississippi ("Seller"), and HOST FUNDING, INC., a corporation
organized under the laws of the State of Maryland ("Purchaser").
ARTICLE 1
Sale and Purchase
SECTION 1.1 Subject to the terms and provisions hereof, Seller agrees
to sell to Purchaser, and Purchaser agrees to purchase from Seller, the
following:
(a) All of the real property owned by Seller and described on
EXHIBIT A attached hereto and made a part hereof (the "Real
Property"), together with all right, title and interest of Seller in
and to any and all roads, easements, streets and ways bounding the
Real Property, and rights of ingress and egress thereto;
(b) All Improvements (the "Improvements") owned by Seller and
situated upon the Real Property, including, but not limited to, those
certain buildings, structures, fixtures and other improvements of
every kind and nature presently situated on, in or under or hereafter
erected, or installed or used in, on or about the Real Property, and
constituting the "Sleep Inn" *(sometimes herein called the "Sleep Inn"
or a "Sleep Inn") hotel facility located in Ocean Springs,
Mississippi;
(c) All Personal Property (herein so called), if any, owned
by Seller and situated on the Real Property, including, without
limitation, all furnishings, fixtures, equipment (including laundry
equipment), inventory, supplies and linens used in the normal
operations of the Improvements as a "Sleep Inn", and otherwise
necessary for the continued operation of the Improvements as a "Sleep
Inn" consistent with past practice in its usual manner; and
(d) Subject to the provisions hereof, all contracts or
agreements, such as maintenance, service, or utility contracts, all
warranties, guaranties, indemnities, claims, licenses, permits,
leases, or similar documents, including without limitation, franchise
and/or licensing agreements, and all other intangible property
associated with the Property (collectively, the "Intangible
Property").
SECTION 1.2 The Real Property, the Improvements, the Personal
Property and the Intangible Property are hereinafter sometimes collectively
referred to as the "Property."
ARTICLE 2
Consideration for Conveyance
SECTION 2.1 The Purchase Price (the "Purchase Price") for the
Property to be paid by Purchaser to Seller at Closing shall be an amount equal
to Three Million Five Hundred Fifty-Five Thousand and No/100 Dollars
($3,555,000.00). The Purchase Price shall be payable in cash or other
immediately available funds at Closing.
ARTICLE 3
Earnest Money
SECTION 3.1 Upon execution of this Contract, Purchaser will deliver
to the Title Company its check in the amount of Five Thousand Two Hundred and
No/100 Dollars ($5,200.00), which funds shall constitute the initial earnest
money (the "Initial Earnest Money") hereunder. Unless Purchaser has terminated
this Contract on or before the expiration of the Due Diligence Period,
Purchaser will, on or before the expiration of the Due Diligence Period,
deliver to the Title Company its check in the amount of Twenty Thousand Eight
Hundred and No/100 Dollars ($20,800.00), which funds shall constitute the
additional earnest money (the "Additional Earnest Money") (the aggregate of the
Initial Earnest Money and the Additional Earnest Money herein sometimes
collectively referred to as the "Earnest Money").
* "Sleep Inn" is the registered trademark and/or sales mark of Choice Hotels,
Inc.
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Upon delivery by Seller to the Title Company of the Additional Earnest Money,
the Earnest Money will become non-refundable, except as otherwise specifically
set forth in this Contract. The Title Company shall hold the Earnest Money in
an interest-bearing account reasonably satisfactory to Seller and Purchaser.
All interest which accrues on the Earnest Money shall constitute a portion of
the Earnest Money and shall be disbursed with the Earnest Money as provided
elsewhere herein.
ARTICLE 4
Survey, Title Policy and Environmental Reports
SECTION 4.1 Within ten (10) days after the Effective Date, Seller
shall deliver to Purchaser the most recent survey (the " Original Survey") of
the Real Property and the Improvements within Seller's Possession.
SECTION 4.2 Within ten (10) days after the Effective Date, Seller
shall deliver to Purchaser the most recent title policy (the "Original Title
Policy") with respect to the Property within Seller's possession, together with
legible copies of all documents (the "Original Title Documents") constituting
exceptions to Seller's title as reflected in the Original Title Policy,
including legible copies of the current plat, if any, filed in the map or plat
records.
SECTION 4.3 Within ten (10) days after the Effective Date, Seller
shall deliver to Purchaser the most recent environmental report or reports (the
"Original Environmental Report") with respect to the Property within Seller's
possession.
SECTION 4.4 Purchaser shall have a period of ten (10) days (the
"Original Title, Survey and Environmental Review Period") from its receipt of
the last of the Original Survey, the Original Title Policy, the Original Title
Documents and the Original Environmental Report, to review the Original Survey,
the Original Title Policy, the Original Title Documents and the Original
Environmental Report (collectively, the "Original Title, Survey and
Environmental Report") and to object in writing to Seller as to any matters
therein to which Purchaser objects (the "Original Objections"). If Purchaser
fails to so object prior to the expiration of the Original Title, Survey, and
Environmental Review Period, Purchaser shall, subject to the provisions of
Section 4.5 hereof, be deemed to have approved and accepted the Original Title,
Survey, and Environmental Report, and all matters set forth on Schedule B of
the Original Title Policy shall be deemed Permitted Exceptions (the "Permitted
Exceptions"), and Purchaser shall accept title to the Property subject to such
Permitted Exceptions. If Purchaser notifies Seller in writing of any Original
Objections prior to the expiration of the Original Title, Survey and
Environmental Review Period, Seller shall then have a period of ten (10) days
to cure the Original Objections, or to notify Purchaser in writing of any
Original Objections Seller cannot, or elects not to, cure (the "Original Cure
Notice"). Seller shall have no obligation to cure any of the Original
Objections; provided, however, Seller shall be obligated to cure any Original
Objections to any liens or other encumbrances granted by Seller after the
Effective Date. Upon Purchaser's receipt of the Original Cure Notice,
Purchaser shall have a period of five (5) days to either (i) terminate this
Contract, and be entitled to the return of the Initial Earnest Money, with
neither party hereto being obligated to the other except as to Purchaser's
liability pursuant to Section 6.1 hereof, or (ii) waive the Original Objections
and proceed to Closing with all uncured Original Objections constituting
Permitted Exceptions.
SECTION 4.5 Notwithstanding anything contained in Section 4.4 hereof
to the contrary, if Purchaser does not terminate this Contract on or before the
expiration of the Due Diligence Period (but after Purchaser has delivered the
Additional Earnest Money to the Title Company):
(a) Seller shall, at is sole cost and expense and within
ten (10) days following the expiration of the Due Diligence Period, have
prepared and delivered to Purchaser a current survey (the "Current Survey") of
the Real Property and the Improvements, prepared by Surveyor reasonably
acceptable to Purchaser and the Title Company and otherwise meeting the
requirements of and containing a certification reasonably acceptable to the
Title Company and Purchaser. The Current Survey shall also be in a form
sufficient to permit the Title Company to delete the standard survey exception,
except as to shortages in area;
(b) Seller shall, at Seller's sole cost and expense and
within ten (10) days following the expiration of the Due Diligence Period, have
prepared and delivered to Purchaser a current commitment (the "Current Title
Commitment") for the issuance of an Owner's Policy of Title Insurance to
Purchaser through the First American Title national closing offices located at
Republic Title of Texas, Inc., 300 Crescent Court, Suite 100, Dallas, Texas
75201, Attention: William A. Kramer (the "Title Company") and, from a title
insurance underwriter acceptable to Purchaser, together with legible copies of
all documents (the "Current Title Documents") constituting exceptions to
Seller's title as reflected in the Current Title Commitment, including legible
copies of the current plat, if any, filed in the map or plat records;
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(c) Purchaser shall, at Purchaser's sole cost and expense
and within ten (10) days following the expiration of the Due Diligence Period,
have prepared and delivered to Purchaser a current environmental report (the
"Current Environmental Report") with respect to the Property; and
(d) Purchaser shall have a period of five (5) days (the
"Current Title, Survey and Environmental Review Period") from its receipt of
the last of the Current Title Commitment, the Current Title Documents, the
Current Survey and the Current Environmental Report to review the Current Title
Commitment, the Current Title Documents, the Current Survey and the Current
Environmental Report (collectively, the "Current Title, Survey and
Environmental Report") and to object in writing to Seller as to any matters
therein to which Purchaser objects (the "Current Objections"); provided,
however, that any Current Objections must be based upon matters which are
variances or differences between the Original Title Policy, the Original Title
Documents, the Original Survey and/or the Original Environmental Report, and
the Current Title Report, the Current Title Documents, the Current Survey
and/or the Current Environmental Report and which are otherwise material in
nature in Purchaser's reasonable judgment. If Purchaser fails to so object
prior to the expiration of the Current Title, Survey, and Environmental Review
Period, Purchaser shall be deemed to have approved and accepted the Current
Title, Survey and Environmental Report, and all matters set forth therein shall
be deemed Permitted Exceptions. If Purchaser notifies Seller in writing of any
Current Objections prior to the expiration of the Current Title, Survey and
Environmental Review Period, Seller shall then have a period of ten (10) days
to cure the Current Objections, or to notify Purchaser in writing of any
Current Objections Seller cannot, or elects not to, cure (the "Current Cure
Notice"). Seller shall have no obligation to cure any of the Current
Objections; provided, however, Seller shall be obligated to cure any Current
Objections to any liens or other encumbrances granted by Seller after the
Effective Date. Upon Purchaser's receipt of the Current Cure Notice, Purchaser
shall have a period of five (5) days to either (i) terminate this Contract, and
be entitled to the return of the Earnest Money with neither party hereto being
obligated to the other except as to Purchaser's liability pursuant to Section
6.1 hereof, or (ii) waive the Current Objections and proceed to Closing with
all uncured Current Objections constituting Permitted Exceptions.
SECTION 4.6 At Closing, Seller shall furnish Purchaser (the cost and
expense for same, including any additional premium for the survey exception
deletion, to be split equally between Seller and Purchaser) with an Owner's
Policy of Title Insurance (the "Title Policy") issued through the Title Company
on the standard form in use in the State of Mississippi, from a title insurance
underwriter otherwise reasonably acceptable to Purchaser, insuring good and
marketable title to the Property in Purchaser, subject only to the Permitted
Exceptions and the standard printed exceptions, except:
(a) The exception relating to restrictions against the
Property shall be endorsed by the Title Company to read "none of
record", except for such restrictions as may be included in the
Permitted Exceptions;
(b) The exception relating to discrepancies, conflicts or
shortages in area or boundary lines, or any encroachment or any
overlapping of improvements which a survey might show shall be
modified, at Purchaser's option, but at Seller's expense, to delete
such exceptions, except as to shortages in area; and
(c) The exception relating to ad valorem taxes shall
except only to taxes owing for the current and subsequent years not
yet due and payable.
ARTICLE 5
Additional Items to be Furnished
to Purchaser by Seller
SECTION 5.1 Within ten (10) days after the Effective Date, Seller
shall make available to Purchaser and its authorized representatives, for
review at the offices of Seller, or deliver to Purchaser and its authorized
representatives true, complete and legible copies of, the following items,
data and/or information to the extent Seller is in possession or control of
such items:
(a) maintenance, service or utility contracts,
warranties, guarantees, licenses, permits (including franchise or
license agreements relating to the operation of the Sleep Inn), plans,
drawings, engineering reports, specifications, site plans, and
certificates of occupancy, relating to the Property or the operation
of the Sleep Inn;
(b) All of the real estate and personal property tax
statements with respect to the Property for the years 1994 and 1995;
(c) Utility invoices relating to the Property from
January 1, 1994 to the present, to the extent available;
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(d) The casualty, extended coverage, and general
liability insurance policies relating to the Property, together with a
certification from Seller that no claims have been made thereunder
except as otherwise disclosed to Purchaser by Seller;
(e) Any financial statements prepared by or for Seller
regarding the Property and/or the Sleep Inn, including monthly income
and expense statements for the Property and/or the Sleep Inn from
January 1, 1994, to the present, in the form customarily used by
Seller (and accompanying data), and such other financial and
operational data as Purchaser shall reasonably require for the years
1994, 1995, and 1996.
(f) A list of the amount and nature of the capital
expenditures incurred with respect to the Property and/or the Sleep
Inn during the preceding twenty-four (24) months;
(g) The most recent franchise inspection reports prepared
by the franchisor or licensor and with respect to the Property and/or
the Sleep Inn;
(h) An inventory of the Personal Property, if any;
(i) Any leases and other documents relating to existing
telephone, computer and other support services with respect to the
Property and/or the Sleep Inn; and
(j) Any ground or similar type leases with respect to or
associated with the Property and/or the Sleep Inn.
Purchaser and its authorized representatives may, at their sole cost
and expense, make copies of any of the foregoing items, data and/or information
made available to them at the offices of Seller and remove same from the
offices of Seller for further review and evaluation.
SECTION 5.2 Notwithstanding anything to the contrary contained in
this Contract, all information provided by Seller to Purchaser for Purchaser's
evaluation of the Property, including, but not limited to, all of the items
delivered or made available by Seller to Purchaser and it authorized
representatives pursuant to Section 5.1 above, is confidential, and Purchaser
agrees except as provided in Section 5.1 above and herein, not to reproduce,
disseminate, discuss, or in any way distribute or disclose to any third party
any information concerning the Property delivered by Seller to Purchaser and
its authorized representatives. Purchaser agrees to immediately return to
Seller all items previously delivered or made available to Purchaser and its
authorized representatives by Seller pursuant to Section 5.1 above upon the
termination of this Contract for whatever reason. Purchaser recognizes the
sensitive nature of dealing with on-site employees and personnel and, in this
regard agrees not to disclose the existence of this Contract, or the contents
or nature thereof, to any employees or personnel of Seller on-site at the
Property during its inspections of the Property undertaken pursuant to Section
6.1 hereof; provided, if Seller can conclusively prove, in a court of
competent jurisdiction, that through the gross negligence or willful misconduct
of Purchaser and/or its authorized representatives, the existence of this
Contract, or the contents or nature thereof, was disclosed to any such
employees or personnel, Purchaser shall be liable for and shall pay to Seller
liquidated damages in an amount equal to $5,000.00 through forfeiture of that
portion of the Escrow Money equal to such $5,000.00 liquidated damages.
Notwithstanding the foregoing, Purchaser may distribute or disclose such
information to any potential lender of Purchaser, and to Purchaser's agents,
attorneys, representatives and independent contractors engaged by Purchaser in
connection with the tests, studies, evaluations and inspections undertaken
pursuant to Section 6.1 of this Contract. Seller agrees not to disclose the
name of Purchaser to any third party until after the expiration of the Due
Diligence Period.
ARTICLE 6
Due Diligence Period
SECTION 6.1 Notwithstanding anything to the contrary contained
herein, and in consideration of $100 paid by Purchaser to Seller as independent
consideration for this Contract, Purchaser shall have forty-five (45) days from
and after the Effective Date (the "Due Diligence Period") within which to
conduct any and all engineering and economic feasibility studies of the
Property (including the Sleep Inn and its operation) and the competitive
market, which Purchaser may, in its sole discretion, deem necessary to
determine whether or not the Property is suitable for Purchaser's intended use
thereof. If Purchaser notifies Seller in writing on or before the expiration
of the Due Diligence Period that Purchaser does not desire to consummate the
transaction contemplated by this Contract, for any reason whatsoever, this
Contract shall terminate, and the Initial Earnest Money shall be immediately
returned to Purchaser by the Title Company, and the parties hereto shall have
no further obligations one to the other hereunder. If Purchaser fails to so
terminate this Contract prior to the expiration of the Due Diligence Period,
Purchaser shall be deemed to have accepted the Property and shall proceed to
Closing pursuant to the terms and conditions hereof. Unless Purchaser timely
terminates this
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Contract as provided in this Section 6.1, or pursuant to Article 4 hereof, the
Earnest Money shall, except as otherwise specifically set forth in this
Contract, be non-refundable, and shall be applied as provided in this Contract,
unless Seller is unable or unwilling to satisfy all conditions stated in this
Contract to which Purchaser's obligations hereunder are subject, in which case,
the Earnest Money shall be refunded to Purchaser. Purchaser hereby
indemnifies, holds harmless, and agrees to defend Seller from and against any
loss, cost, or expense resulting from any entry by Purchaser, or any employee,
agent, principal of, or independent contractor with, Purchaser, upon the
Property in connection with any tests or evaluations conducted by Purchaser
during the Due Diligence Period, or any lien asserted by any third party as a
result thereof. This provision shall survive the termination of this Contract
and Closing.
ARTICLE 7
Damage or Destruction Prior to Closing
SECTION 7.1 In the event the Improvements should be damaged by any
casualty event prior to Closing, and if the cost of repairing such damage, as
estimated by a contractor retained by Purchaser, is (a) less than $50,000.00,
then at Closing, Seller shall pay to Purchaser all insurance proceeds payable
for such damage, together with an amount in cash equal to the deductible
required to be paid by the applicable insurance policies, and this Contract
shall be closed without Seller's repairing such damage; or (b) more than
$50,000.00, then Purchaser may elect to terminate this Contract upon written
notice to Seller on or before ten (10) days after Seller has given written
notice to Purchaser of the fact that damage has occurred to the Property; but
if Purchaser does not timely elect to terminate this Contract, Seller shall
pay to Purchaser, at Closing, all insurance proceeds payable for such damage,
together with an amount in cash equal to the deductible required to be paid by
the applicable insurance policies, and this Contract shall be closed without
Seller's repairing such damage. If Purchaser elects to terminate this Contract
in accordance with this Section 7.1, then (a) the terms and conditions hereof
shall be null and void, (b) the Initial Earnest Money or the Earnest Money, as
applicable, shall be disbursed by the Title Company to Purchaser, and (c)
neither Purchaser nor Seller shall have any further liability or obligation
pursuant to the terms and conditions hereof other than Purchaser's liability
pursuant to Section 6.1 hereof.
SECTION 7.2 In the event all or any portion of the Real Property
should be the subject of the actual filing, or any written threat, of any
condemnation or other eminent domain proceeding prior to Closing, then
Purchaser, within ten (10) days after being notified in writing by Seller of
such eminent domain proceeding or threatened proceeding, and being furnished
with copies of all material documents relating thereto, shall either (a)
terminate this Contract, whereupon the Initial Earnest Money or the Earnest
Money, as applicable, shall be returned to Purchaser and the parties hereto
shall have no further obligations one to the other hereunder, other than
Purchaser's liability pursuant to Section 6.1 hereof, or (b) elect to close the
transaction contemplated by this Contract, in which event any and all damages
payable as a result of such eminent domain proceedings shall be paid to
Purchaser.
ARTICLE 8
Representations and Warranties of Seller; Agreements Regarding
Environmental Liability and Structures
SECTION 8.1 As of the Effective Date hereof, Seller represents and
warrants to Purchaser that:
(a) Seller has good and marketable fee simple title to the
Real Property, which will be subject to the Permitted Exceptions;
(b) No condemnation or other eminent domain proceedings have
been instituted or, to Seller's current actual knowledge, threatened
against the Property;
(c) To the best of Seller's knowledge, (i) all laws,
ordinances, rules and regulations of any government, or any agency,
body or subdivision thereof, relating to the Property, have been
complied with, (ii) the present operation of the Property is in
compliance with all such ordinances, rules and regulations, and (iii)
the present occupation of the Property is in accordance with
certificates of occupancy and other permits and licenses issued or
required by appropriate governmental authorities;
(d) Seller is not a foreign person within the meaning of
Sections 1445 and 7701 of the Internal Revenue Code of 1954 ("IRC");
(e) All items furnished to Seller in accordance with Article
5 of this Contract are, in all material respects, accurate, complete,
and true as of the date furnished and will be as of the Closing Date;
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(f) Seller has received no written notice of any threatened,
and there currently is no pending, litigation which involves or
affects the Property, except to the extent covered by insurance
maintained by Seller or on behalf of Seller;
(g) Other than as set forth herein, or disclosed to Purchaser
by Seller, there are and will be no material agreements at Closing
which Purchaser will be required to assume with respect to the
operation of the Property. The term "material agreements" for the
purposes of this Section 9.1(g) shall mean any agreements requiring
annual expenditure by Seller in excess of $10,000.00, or which are for
a term in excess of one (1) year;
(h) Seller represents and warrants to the best of its
knowledge, and covenants and agrees, that there has been no presence,
use, generation, release, discharge, storage, disposal, or
transportation of any Hazardous Materials on, under, in, about, to, or
from the Property (or any portion thereof), and, from the date hereof
through the Closing Date, it shall not cause or permit the presence,
use, generation, release, discharge, storage, disposal, or
transportation of any Hazardous Materials on, under, in, about, to, or
from the Property (or any portion thereof);
(i) Seller has granted no rights of first refusal or
options to purchase the Property;
(j) The franchise and/or licensing agreements with respect
to the Sleep Inn are in full force and effect and Seller is not in
default thereunder;
(k) Any leases referred to in Sections 5.1 (i) and (j)
hereof are in full force and effect and Seller is not in default
thereunder; and
(l) There are no liabilities with respect to Property, the
Sleep Inn or the operations thereof, except as set forth in the
Original Title Policy, or the Current Title Commitment, or otherwise
disclosed pursuant to the provisions of Article 5 hereof.
SECTION 8.2 As used in this Contract, the term "Hazardous Materials"
means any hazardous or toxic substances, materials or wastes, including, but
not limited to, those substances, materials, and wastes listed in the United
States Department of Transportation Hazardous Materials Table (49 C.F.R.
Section 172.101) or by the Environmental Protection Agency s hazardous
substances (40 C.F.R. Part 302) and amendments thereto, or such substances,
materials, constituents, and wastes which are currently regulated under any
applicable local, state, or federal law including, without limitation: (i)
petroleum, gasoline or other petroleum derivatives, or additives to gasoline or
other petroleum derivatives; (ii) asbestos or asbestos-containing materials;
(iii) polychlorinated biphenyls; (iv) designated as a "hazardous substance"
pursuant to section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq.
(33 U.S.C. Section 1321) or listed pursuant to section 307 of the Clean Water
Act (33 U.S.C. Section 1317); (v) defined as a "hazardous waste" pursuant to
section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq. (42 U.S.C. Section 6903)' (vi) defined as a "hazardous substance"
pursuant to section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 2 U.S.C. Section 9601 et seq. (42 U.S.C.
Section 9601); or (vii) any substance the nature, use, manufacture, or effect
of which render it subject to federal, state, or local regulation,
investigation, removal, or remediation as potentially hazardous or toxic,
injurious to human health or welfare, or injurious to the environment.
SECTION 8.3 Seller agrees to reasonably cooperate with
Purchaser and its agents and contractors in connection with Purchaser's
inspection of the Property for the existence of any Hazardous Substances.
ARTICLE 9
Covenants, Conditions and Agreements of Seller and Purchaser
SECTION 9.1 Seller hereby agrees to, and Purchaser's obligation to
close the transaction herein contemplated is conditioned upon, the following:
(a) Prior to Closing, Seller shall continue to maintain,
operate and manage the Property and the Sleep Inn in the same manner
that Seller has heretofore maintained and operated the Property;
(b) Seller will pay all expenses, accrued or otherwise, and
of any type or kind whatsoever, through the Closing Date with regard
to the Property and/or the Sleep Inn;
(c) At Purchaser's option and on or prior to Closing, Seller
will obtain the resignations of all persons who are employees and
personnel associated with the operation of the Sleep Inn; and, on or
prior to Closing, Seller will pay any and all costs, expenses and exit
payments due with regard to such persons, including final payroll,
accrued vacation time and the like;
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(d) Prior to Closing and subject to Section 9.1(e) below,
Seller will have furnished to Purchaser such consents, assignments,
estoppel certificates, transfers or the like, necessary to consummate
the transaction contemplated hereby and as requested by Purchaser,
including without limitation, those requested by Purchaser in
connection with any of the leases referred to in Sections 5.1(i) and
(j) hereof;
(e) Prior to Closing, Seller will have used its best
efforts to furnish to Purchaser such consents, assignments, estoppel
certificates, transfers and the like necessary from existing
franchisors or licensors in order for Purchaser to continue to operate
the Property as a Sleep Inn (For such purposes, Seller hereby
authorizes Purchaser, but only after Seller has first notified Choice
Hotels, Inc. of the existence of this Contract, to during the Due
Diligence Period contact Choice Hotels, Inc. directly, in order for
Purchaser to determine whether such necessary consents, and
assignments will be given by Choice Hotels, Inc. Any such consents or
assignments must be without additional cost or penalty to Seller and
otherwise in form and substance acceptable to both Seller and
Purchaser);
(f) Prior to or at Closing, Seller will cancel or terminate
any and all management, consulting or similar type agreements with
regard to the Sleep Inn;
(g) Seller will not, during the pending of this Contract,
place any new encumbrances on the Property or modify any franchise or
licensing agreements or other documents material to the operation of
the Property as a Sleep Inn, without prior written consent of
Purchaser; and
(h) At Purchaser's option and prior to or at Closing, Seller
will terminate or cancel any service contracts or similar types of
Intangible Property contracts or rights.
SECTION 9.2 The representations and warranties contained in Section
9.1 hereof shall be true and correct on the Closing Date, and shall survive
Closing. The obligation of Purchaser to close this transaction is expressly
conditioned upon said representations and warranties being true and correct on
the Closing Date.
ARTICLE 10
Closing
SECTION 10.1 The consummation of the purchase and sale of the Property
in accordance with this Contract ("Closing") hereunder shall be on or before
August 1, 1996 (the "Closing Date"), at the California offices of Purchaser,
7825 Fay Avenue, Suite 250, LaJolla, California 92037, or on such other date,
or at such other place, as the parties may mutually agree.
SECTION 10.2 At Closing, and as a condition to Purchaser's obligations
hereunder, Seller shall deliver or cause to be delivered to Purchaser each of
the following items:
(a) A special warranty deed, in a form reasonably acceptable
to Purchaser, duly executed and acknowledged by Seller, and in form
for recording, conveying good, marketable fee simple title in the Real
Property to Purchaser, subject only to the Permitted Exceptions;
(b) A bill of sale duly executed and acknowledged by Seller,
conveying to Purchaser the Personal Property, if any, with covenants
of special warranty, subject only to the Permitted Exceptions;
(c) An assignment and assumption, duly executed and
acknowledged by Seller and Purchaser, assigning all of Seller's rights
under any service contracts, leases (other than the lease described in
Section 10.2(d) below) and other Intangible Property contracts or
rights affecting the Property, and evidencing Purchaser's assumption
of any service contracts and other Intangible Property contracts or
rights that Purchaser, in its sole discretion, elects to assume;
(d) An assignment and assumption, duly executed and
acknowledged by Seller and Purchaser, assigning all of Seller's rights
under the lease or leases referred to in Section 5.1(j) hereof, and
evidencing Purchaser's assumption of same;
(e) An assignment and assumption, in a form reasonably
acceptable to Purchaser, duly executed by Seller and Purchaser,
assigning all of Seller's rights under any and all franchise and/or
license agreements necessary to operate the Property as a Sleep Inn,
and evidencing Purchaser's assumption of same (provided Seller and
Purchaser have obtained the approval of Choice Hotels, Inc. in form
and substance acceptable to both Seller and Purchaser); and any other
consents, assignments, terminations, cancellations, resignations,
estoppel certificates (or other evidence thereto), required pursuant
to Section 9.1 hereof;
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(f) The Title Policy in the form specified in Section 4.6
hereof;
(g) A current certificate from the Secretary of the State of
Mississippi or from the Title Company, or other private company in the
business of conducting UCC lien searches, reflecting no financing
statements (UCC-l's) or other filings pursuant to the Mississippi
Uniform Commerce Code;
(h) Such evidence or documents as may be reasonably required
by Purchaser or the Title Company evidencing the status and capacity
of Seller and the authority of the person or persons who are executing
the various documents on behalf of Seller in connection with the sale
of the Property;
(i) All keys to all locks on the Property; copies of all
operating records pertaining to the Property; all Intangible Property
in the possession of Seller; and any and all other books, records,
documents, contracts, and data in the possession of Seller and
pertaining to the Property, the Sleep Inn and/or the operation
thereof;
(j) A certification in a form to be provided or approved by
Purchaser, signed by Seller under penalties of perjury, containing the
following: (i) Seller's U.S. Taxpayer Identification Number; (ii) The
business address of Seller; and (iii) a statement that Seller is not a
foreign person within the meaning of Sections 1445 and 7701 of the
IRC;
(k) The Agreement Not to Compete.
SECTION 10.3 At Closing, Purchaser shall deliver to Seller each of the
following items:
(a) The Purchase Price required by and in the manner
specified in Section 2.1 hereof;
(b) The agreements described in Sections 10.2(c), (d), (e)
and (k) hereof and
(c) Such evidence or documents as may reasonably be required
by Seller or the Title Company evidencing the status and capacity of
Purchaser and the authority of the person or persons who are executing
the various documents on behalf of Purchaser in connection with the
acquisition of the Property.
SECTION 10.4 At Closing, the following items shall be adjusted or
prorated between Seller and Purchaser:
(a) Ad valorem taxes for the Property for the current
calendar year shall be prorated to the Closing Date, and Seller shall
pay to Purchaser in cash at Closing, or apply the same as an
adjustment in the closing statement, Seller's pro rata portion of such
taxes. Seller's pro rata portion of such taxes shall be based upon
taxes actually assessed for the current calendar year. If, for any
reason, ad valorem taxes for the current calendar year have not been
assessed on the Property, such proration shall be estimated based upon
the tax rates in effect for the current year and the assessed value of
the Property and the Improvements for the preceding year, and if the
current tax rates are not yet known, then such proration shall be
based upon ad valorem taxes for the immediately preceding calendar
year, and adjusted when exact amounts are available.
(b) All other income and ordinary operating expenses for or
pertaining to the Property, including, but not limited to, public
utility charges, maintenance, service charges, and all other normal
operating charges of the Property shall be prorated at Closing
effective as of the Closing Date; and
(c) In the event any adjustments pursuant to this Section
10.4 are, subsequent to Closing, found to be erroneous, then either
party hereto who is entitled to additional monies shall invoice the
other party for such additional amounts as may be owing, and such
amount shall be paid within ten (10) days from receipt of the invoice.
SECTION 10.5 Possession of the Property shall be delivered to
Purchaser by Seller at Closing, subject only to such rights of others as have
been expressly disclosed herein.
SECTION 10.6 All costs and expenses not otherwise required to be paid
by a particular party hereto as set forth herein shall be borne by Seller and
Purchaser in the manner in which such costs and expenses are customarily
allocated between the parties at closings of real property similar to the
Property in the Ocean Springs, Mississippi area; provided, however, that
Purchaser shall pay any recording costs and any mortgage and/or deed of trust
related taxes and costs; Seller, Purchaser, and Walter Broadfoot of Mid-South
Hotel Brokers shall equally share in the payment of all transfer, or other
similar taxes and costs incident to the
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<PAGE> 9
transfer of the Property to Purchaser; and provided further, Seller and
Purchaser shall, subject to the provisions of Section 14.7 hereof, pay their
own respective legal fees.
ARTICLE 11
Real Estate Commission
SECTION 11.1 Seller agrees to pay a real estate commission to
Mid-South Hotel Brokers (the "Broker"), if, and only if, the transaction herein
contemplated proceeds to Closing. Seller hereby indemnifies, holds Purchaser
harmless and agrees to defend Purchaser from any claim, demand, loss, cost,
expense or damage arising from any claim for a real estate commission by any
party claiming through or under Seller other than the Broker, all such
commissions being payable by Seller. Purchaser hereby indemnifies, holds
Seller harmless and agrees to defend Seller from any claim, demand, loss, cost,
expense or damage arising from any claim for a real estate commission by any
party claiming through or under Purchaser.
ARTICLE 12
Remedies on Default
SECTION 12.1 If this Contract is terminated by Purchaser pursuant to
any one or more Sections hereof which entitle Purchaser to terminate this
Contract, Purchaser shall be entitled to the return of the Earnest Money
(including the interest earned thereon). If the sale contracted for herein is
not consummated due to a failure on the part of Seller in the performance of
any of its obligations hereunder ("Seller Default"), then Purchaser shall
either (i) terminate this Contract and accept the return of the Earnest Money
together with any interest thereon, or (ii) sue for specific performance, as
its sole and exclusive remedies, Purchaser hereby waiving the right to bring a
suit for damages, and waives all other remedies at law or in equity.
SECTION 12.2 If the sale contracted for herein is not consummated due
to Purchaser's failure to perform any of its obligations hereunder ("Purchaser
Default") other than a Seller Default, then the Earnest Money, together with
all interest thereon, shall be paid to Seller by the Title Company as
liquidated damages for such Purchaser Default as Seller's sole and exclusive
remedy. Such amount is agreed upon by and between Seller and Purchaser as
liquidated damages, due to the difficulty and inconvenience of ascertaining and
measuring actual damages, and the uncertainty thereof; and no other damages,
rights or remedies shall in any case be collectible, enforceable or available
to Seller other than in this Article 12, but Seller shall accept said cash
payment as Seller's total damages, relief and remedy.
ARTICLE 13
Agreement Not to Compete
SECTION 13.1 Seller and Purchaser shall at Closing enter into an
Agreement Not to Compete (the "Agreement Not to Compete") providing that Seller
may not manage, operate or own an interest in any hotel or motel property
within a five (5) mile radius of the Property for a period of five (5) years
after Closing. The Agreement Not to Compete will be in form and substance
mutually agreeable to Seller and Purchaser prior to the expiration of the Due
Diligence Period.
ARTICLE 14
Miscellaneous
SECTION 14.1 All notices, demands, or other communications of any type
(herein collectively referred to as "Notices") given by Seller to Purchaser or
by Purchaser to Seller, whether required by this Contract or in any way related
to the transaction contracted for herein, shall be void and of no effect unless
given in accordance with the provisions of this Section 14.1. All Notices
shall be in writing and delivered to the person to whom the notice is directed,
either (a) by telephonic facsimile communication, (b) by Federal Express or
other guaranteed overnight delivery service, or (c) by United States Mail, as a
registered or certified item, return receipt requested. Any of the Notices may
be delivered by the parties hereto or by their respective attorneys. Any
notice delivered by telephonic facsimile communication or Federal Express or
other guaranteed overnight delivery service shall be deemed effective one (1)
day after being transmitted to the applicable telephone facsimile numbers set
forth below, if such Notices are sent by telephonic facsimile communication, or
when delivered to the addresses set forth below if sent by Federal Express or
other guaranteed overnight delivery service. Notices delivered by registered
or certified mail shall be deemed effective three (3) days after being
deposited in a post office or other depository under the care or custody of the
United States Postal Service, enclosed in a wrapper with proper postage
affixed, with return receipt requested addressed, if to Purchaser, as follows:
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<PAGE> 10
Host Funding, Inc.
14800 Quorum Drive, Suite 510
Dallas, Texas 75240
Attention: Michael S. McNulty, President
Telecopy No. 214-991-5446
With copy to:
James M. Duncan
Duncan & Carper
703 McKinney Avenue, Suite 303
Dallas, Texas 75202
Telecopy No. 214-880-0015
and addressed, if to Seller, as follows:
Ocean Springs Hotel Company
226 Tippah Street North
Grand Junction, Tennessee 38039
Attention: Charles Bland, President
Telecopy No. (901) 764-6051
With copy to:
Thomas H. Minor, Esq.
124 East Market Street
Somerville, Tennessee 38068
Fax No. (901) 465-4465
Either party hereto may change the address for notice specified above by giving
the other party ten (10) days advance written notice of such change of address.
SECTION 14.2 This Contract may not be assigned by Purchaser without
Seller's prior written consent. This Contract may not be assigned by Seller
without Purchaser's prior written consent, such consent not to be unreasonably
withheld or delayed. Any such permitted assignment will be effective only upon
assignee's written assumption of all of assignor's obligations and duties
hereunder.
SECTION 14.3 This Contract shall be construed and interpreted in
accordance with the laws of the State of Mississippi and the obligations of the
parties hereto are and shall be performable in the county wherein the Property
is located. Where required for proper interpretation, words in the singular
shall include the plural; the masculine gender shall include the neuter and the
feminine, and vice versa. The terms "heirs, executors, administrators and
assigns" shall include "successors, legal representatives and assigns".
SECTION 14.4 This Contract may not be modified or amended, except by
an agreement in writing signed by Seller and Purchaser. The parties may waive
any of the conditions contained herein or any of the obligations of the other
party hereunder, but any such waiver shall be effective only if in writing and
signed by the party waiving such conditions or obligations.
SECTION 14.5 Each person executing this Contract warrants and
represents that he is fully authorized to do so.
SECTION 14.6 Time is of the essence of this Contract.
SECTION 14.7 In the event it becomes necessary for either party hereto
to file a suit to enforce this Contract or any provisions contained herein, the
party prevailing in such action shall be entitled to recover, in addition to
all other remedies or damages, reasonable attorneys' fees incurred in such
suit.
SECTION 14.8 The descriptive headings of the several Articles,
Sections and Paragraphs contained in this Contract are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
SECTION 14.9 This Contract, including the Exhibits hereto, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings of
the parties in connection therewith. No representation, warranty, covenant,
agreement or condition not expressed in this Contract shall be binding upon the
parties hereto or shall affect or be effective to interpret, change or restrict
the provisions of this Contract; provided, however, that all certifications,
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<PAGE> 11
representations and warranties of Seller contained in the statements and
schedules to be furnished pursuant to Article 5 hereof shall become a part of
the Contract as though set forth herein.
SECTION 14.10 Numerous counterparts of this Contract may have been
executed by the parties hereto. Each such executed counterpart shall have the
full force and effect of an original executed instrument.
SECTION 14.11 The obligations of Seller and Purchaser to close this
Contract are expressly conditioned upon the simultaneous closing of that
certain Contract of Purchase and Sale of even date herewith between Capital
Circle Hotel Company and Purchaser and pertaining to the sale by Capital Circle
Hotel Company to Purchaser of "Sleep Inn" hotel properties located in
Tallahassee, Florida, Destin, Florida and Sarasota, Florida, respectively.
SECTION 14.12 For purposes of this Contract, the term "Effective
Date" shall mean and be defined herein as the date on which at least three (3)
fully executed counterpart hereof, together with the Earnest Money, are
delivered to the Title Company, as acknowledged by the Title Company in writing
in the space hereinafter provided in this Contract.
SECTION 14.13 This Contract is being presented to Seller and
constitutes an offer by Purchaser to purchase the Property from Seller upon the
terms and conditions stated herein, which offer must be accepted by Seller's
execution of at least three (3) counterparts hereof and returning all three
originals to Purchaser on or before Friday, May 24, 1996. If Purchaser fails
to deliver the three (3) counterpart originals of this Contract to Seller, by
the above date, this Contract shall be of no force or effect and neither party
shall have any obligation one to the other.
EXECUTED on this the 21 day of May, 1996, by Purchaser.
PURCHASER:
HOST FUNDING, INC., a Maryland corporation
By: /s/ MICHAEL MCNULTY
-----------------------------------------
Michael McNulty, President
EXECUTED on this the 22 day of May, 1996, by Seller.
SELLER:
OCEAN SPRINGS HOTEL COMPANY, a Mississippi
corporation
By: /s/ CHARLES BLAND
-----------------------------------------
Charles Bland, President
The Contract has been received by the Title Company this the 24th day
of May, 1996, which shall be the Effective Date.
First American Title
By: /s/ WILLIAM A. KRAMER
-----------------------------------------
Name: WILLIAM A. KRAMER
---------------------------------------
Title: VICE-PRESIDENT
--------------------------------------
Address: c/o Republic Title of Texas, Inc.
300 Crescent Court
Suite 100
Dallas, Texas 75201
Attention: William A. Kramer
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<PAGE> 12
EXHIBITS:
Exhibit A --- Legal Description
-12-
<PAGE> 13
LEGAL DESCRIPTION FOR PARCEL "A"
A PARCEL OF LAND SITUATED IN ROSE FARM NEW ORCHARDS IN THE SOUTHEAST 1/4 OF
SECTION 12, TOWNSHIP 7 SOUTH, RANGE 9 WEST, JACKSON COUNTY, MISSISSIPPI, AND
BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT AN IRON PIPE FOUND AT A FENCE CORNER AT THE POINT OF
INTERSECTION OF THE EAST MARGIN OF TUCKER ROAD WITH THE SOUTH LINE OF LOT 18,
ROSE FARM NEW ORCHARDS; THENCE ALONG A CURVE OF SAID EAST MARGIN OF TUCKER ROAD
TO THE LEFT, HAVING A RADIUS OF 1135.12' AND AN ARC LENGTH OF 130.40', TO THE
POINT OF BEGINNING, BEING NORTH 15 DEGREES, 26' 17" WEST 130.33'; THENCE FURTHER
ALONG A CURVE OF SAID EAST MARGIN TO THE LEFT, HAVING A RADIUS OF 1135.12' AND
AN ARC LENGTH OF 316.24', TO AN IRON PIPE FOUND BEING NORTH 26 DEGREES, 42' 34"
WEST 315.22', AND LYING ON THE SOUTH LINE OF SECTION "B", ROSE FARM NEW
ORCHARDS; THENCE ALONG SAID SOUTH LINE OF SECTION "B", NORTH 89 DEGREES, 35' 38"
EAST 506.56'; THENCE SOUTH 00 DEGREES, 24' 22" EAST 282.58'; THENCE SOUTH 89
DEGREES, 35' 38" WEST 366.88' TO THE POINT OF BEGINNING, CONTAINING 2.780 ACRES.
<PAGE> 1
EXHIBIT 10.4
AMENDMENT TO CONTRACT OF PURCHASE AND SALE
THIS AMENDMENT TO CONTRACT OF PURCHASE AND SALE (this
"Amendment") is by and between OCEAN SPRINGS HOTEL COMPANY, a Mississippi
corporation ("Seller"), and HOST FUNDING, INC., a Maryland corporation
("Purchaser"), and is dated effective as of July 3, 1996.
R E C I T A L S
A. Seller and Purchaser have previously entered into
that certain Contract of Purchase and Sale dated effective as of May 24, 1996
(the "Contract"), relating to the purchase and sale of improved real property
located in Ocean Springs, Mississippi and more particularly described therein.
B. Seller and Purchaser desire to amend the Contract in
certain respects as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller and Purchaser hereby agree
as follows:
1. The first two (2) sentences of Section 6.1 of the Contract are
amended in their entirety to read as follows:
Notwithstanding anything to the contrary contained herein, and in
consideration of $100 paid by Purchaser to Seller as independent
consideration for this Contract, Purchaser shall have until July 22,
1996 (the "Due Diligence Period") within which to conduct any and all
engineering and economic feasibility studies of the Property
(including the Sleep Inn and its operation) and the competitive
market, which Purchaser may, in its sole discretion, deem necessary to
determine whether or not the Property is suitable for Purchaser's
intended use thereof. If Purchaser notifies Seller in writing on or
before the expiration of the Due Diligence Period that Purchaser does
not desire to consummate the transaction contemplated by this
Contract, for any reason whatsoever, this Contract shall terminate,
and one-half (1/2) of the Initial Earnest Money shall be forfeited by
Purchaser and delivered to Seller by the Title Company and the
remaining one-half (1/2) of the Initial Earnest Money shall be
immediately returned to Purchaser by the Title Company, and the
parties hereto shall have no further obligations one to the other
hereunder.
2. Section 10.1 of the Contract is amended in its entirety to
read as follows:
The consummation of the purchase and sale of the Property in
accordance with this Contract ("Closing") hereunder shall be on or
before August 19, 1996 (the "Closing Date"), at the California offices
of Purchaser, 7825 Fay Avenue, Suite 250, LaJolla, California 92037,
or on such other date, or at such other place, as the parties may
mutually agree.
<PAGE> 2
3. The Contract is hereby amended by the addition thereto of the
following provision as Section 14.14:
Seller acknowledges that Purchaser is seeking to obtain financing from
Nomura Asset Capital Corporation to facilitate the Closing, and,
incident thereto, agrees to cooperate with and/or assist Purchaser in
furnishing to said lender any and all reports or other information
with regard to the Property or the operations thereof as such lender
may request.
4. Except as expressly amended herein, the Contract remains
unchanged, and the valid and binding obligation of Seller and Purchaser.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Contract. This Amendment shall be effective upon
execution by facsimile transmission by both parties.
SELLER:
OCEAN SPRINGS HOTEL COMPANY,
a Mississippi corporation
By: /s/ CHARLES BLAND
-------------------------------------
Charles Bland, President
PURCHASER:
HOST FUNDING, INC.,
a Maryland corporation
By: /s/ MICHAEL MCNULTY
-------------------------------------
Michael McNulty, President
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<PAGE> 1
EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into and is
effective as of this 22nd day of April, 1996, by and between Host Funding,
Inc., a corporation duly organized and existing under the laws of the state of
Maryland, ("Seller"), and Don W. Cockroft, an individual residing in Memphis,
TN, ("Buyer"), with reference to the following facts:
A. Seller is currently holding Class A Common Stock in its
Treasury of which ten thousand (10,000) shares are being held in reserve for
purchase by the Buyer.
B. Buyer is an Independent Director of Seller and desires to
purchase ten thousand (10,000) shares of Class A Common Stock from Seller (the
"Shares") in consideration of payment to Seller of $10.00 per share, or One
Hundred Thousand Dollars ($100,000), upon the terms and conditions herein set
forth.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Purchase of Shares. Buyer agrees to purchase from Seller, and
Seller hereby agrees to sell and transfer to Buyer, the Shares, together with
all right, title and interest thereto, free and clear of all liens, security
interests, charges, encumbrances and any other rights in favor of third parties
whatsoever. The total purchase price for the Shares shall be a $100,000
promissory note (the "Note"). The Note shall be secured by a pledge of the
10,000 Shares which pledge shall be executed by Buyer in favor of Seller. As
payment for the transfer of the Shares by Seller to Buyer, Buyer shall deliver
at the closing (i) an executed promissory note in favor of Seller in the
principal amount of $100,000.00, which will be in the form of Exhibit A
attached hereto (the "Note"), and (ii) an executed Stock Pledge Agreement (the
"Pledge Agreement") in the form of Exhibit B attached
<PAGE> 2
hereto. The purchase of the Shares is contingent upon the consummation of the
Formation Transactions as defined in the Host Funding, Inc. Form S-11
Registration Statement as filed with the SEC on May 26, 1995.
2. The Note. The Promissory Note shall be a non-recourse, five
year note bearing interest, payable quarterly, at a fixed rate equal to 7% per
annum. Principal payments on the note will be 2% per year. Furthermore,
Seller hereby agrees to forgive the Note (i) in increments of 18% of the
principal amount per annum for each year that the Buyer remains a director of
the Seller, and (ii) upon the death, disability, or resignation of the Buyer as
director (except for voluntary resignation or failure to serve).
3. Closing Date. The purchase of the Shares shall close on April
22, 1996 ("Closing Date"), at 3:00 p.m.(Pacific Time) at the offices of Host
Funding, Inc. At the closing, Buyer shall deliver to Seller the fully executed
Note, and the fully executed Pledge Agreement all against Seller's delivery of
a fully executed share certificate number ____ evidencing ownership of the
Shares.
4. Future Stock Purchase Rights. Buyer is hereby granted the
right to acquire additional stock of the Seller, together with the two other
Independent Directors, in the aggregate 0.5% of subsequent issuances of the
Seller's common stock at the offering price of such shares with the
consideration for such shares payable by a 100% non-recourse note, with
principal payments of 2% per year and 18% of the principal forgiven each year
the maker remains a director of the Seller. In any event, such aggregate 0.5%
of subsequent issuances of the Seller's common stock shall not exceed 50,000
shares of the Seller's common stock. This Stock Purchase Right is exercisable
only so long as Buyer is, at the time of exercise of such right and has been
since the execution of this Agreement, an Independent Director of the Seller.
5. Seller's Representations and Warranties. Seller hereby
represents and warrants to Buyer as follows:
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<PAGE> 3
5.1 Seller is the registered, legal and beneficial owner
of the Shares with good and marketable title thereto, free and clear from all
liens, security interests, charges, encumbrances and any other rights in favor
of third parties whatsoever.
5.2 No person or other entity whatsoever has any
agreement, option, right or privilege to purchase from Seller any of the
Shares.
5.3 This Agreement constitutes a legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms.
6. Buyer's Representations and Warranties. Buyer hereby
represents and warrants to Seller as follows:
6.1 Buyer has full power and authority to enter into this
Agreement and to purchase the Shares and the execution and implementation of
this Agreement is in conformity with Section 500 of the California Corporations
Code.
6.2 This Agreement constitutes a legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms.
7. General.
7.1 The parties hereby confirm and ratify the matters
contained and referred to in the preamble to this Agreement and agree that the
same are expressly incorporated into this Agreement.
7.2 This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings and negotiations, whether
oral or written, and there are no other general or specific
-3-
<PAGE> 4
warranties, representations or other agreements except as herein specifically
set forth.
7.3 Whenever the singular, plural, masculine, feminine or
neuter is used throughout this Agreement the same shall be construed as meaning
the singular, plural, masculine, feminine or neuter wherever the fact or
context so requires.
7.4 All of the covenants, warranties and representations
contained in this Agreement shall survive the closing and completion of this
transaction and shall not merge on the closing of the transaction, but shall
continue to be in full force and effect for the benefit of Buyer and Seller.
7.5 The parties hereto covenant and agree to do such
things and execute such further documents, agreements, instruments or
assurances as may reasonably be required by any other party hereto from time to
time in order to carry out the terms of this Agreement in accordance with their
true intent.
7.6 This Agreement shall be governed by and construed in
accordance with the laws of the State of California. The parties hereto submit
to the jurisdiction of the Courts of the State of California in and for the
County of San Diego in connection with any dispute under this Agreement.
7.7 Time shall be of the essence of this Agreement.
7.8 This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, executors, administrators,
successors and assigns.
7.9 This Agreement may be signed or executed in separate
counterparts and the signing or execution of each counterpart shall have the
same effect as the signing or execution of a single original document.
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<PAGE> 5
7.10 Representations and warranties of the parties hereto
shall survive the closing of the transaction contemplated herein.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first hereinabove written.
"SELLER" HOST FUNDING, INC.
By: /s/ Michael McNulty
-------------------------------------
Michael McNulty, President
"BUYER" *
----------------------------------------
* This form of Stock Purchase Agreement was signed by each of
Don W. Cockroft, William Birdsall and Charles Dunn on April 22, 1996.
-5-
<PAGE> 6
SECURED PROMISSORY NOTE
EXHIBIT A
$100,000.00
San Diego, California
April 22, 1996
FOR VALUE RECEIVED, the undersigned obligor (the "Obligor") hereby
promises to pay, in lawful money of the United States of America, to the order
of Host Funding, Inc., a Maryland corporation, or any of its successors and
assigns (the "Holder") at San Diego, California, the principal sum of One
Hundred Thousand Dollars ($100,000.00).
Interest due under this Promissory Note (the "Note") shall be payable
in quarterly installments commencing on the 15th day of June, 1996, and
continuing quarterly until the maturity of this Note including interest on the
unpaid principal at the rate of seven (7%) percent per annum, and shall all be
due and payable on the fifth (5th) anniversary of the date of the Note.
Two percent (2%) of the original principal sum (or $2,000.00) shall be
due and payable each year on the anniversary of the date of the Note. In
addition, the Holder has agreed to forgive the principal on this Note (i) in
increments of 18% of the original principal amount per annum (or $18,000.00)
for each year that the Obligor remains a Director of the Holder, and (ii) upon
the death, disability, or resignation of the Director (except for a voluntary
resignation or failure to serve).
If this Note is not paid within five (5) business days after the
Maturity Date, interest shall accrue on the principal balance of this Note at
the Default Rate (as defined below) from the date of this Note to the date the
principal amount of this Note, plus accrued interest, is paid in full.
Any interest payable under this Note shall be computed on the basis of
a 360-day year for the actual number of days occurring in the period for which
such interest is payable.
Obligor's obligations under this Note are secured by 10,000 shares of
Class A Common Stock in the Holder which the Obligor has pledged to the Holder
pursuant to a pledge agreement entered into by and between the Obligor and the
Holder on April 22, 1996 (the "Pledge Agreement").
<PAGE> 7
A default under this Note shall entitle Holder to exercise its rights under the
Pledge Agreement or other instrument securing Obligor's obligations under this
Note.
In the event of the occurrence of any default in the performance or
observance of any covenant, agreement or condition contained in this Note, or
other instrument securing Obligor's obligations under this Note, Holder may, in
its sole discretion and without further notice to Obligor (notice of election
being expressly waived by Obligor), declare the entire unpaid principal balance
immediately due and payable in full.
If Obligor fails to pay any installment of this Note within five (5)
business days after the due date, a late charge shall be immediately due and
payable. Obligor recognizes that default in making payments herein agreed to
be paid when due will result in Holder incurring additional expense in
servicing the loan represented by the Note, in loss to the Holder of the use of
the money due and in frustration to Holder in meeting its financial
commitments to third parties. Obligor agrees that, if for any reason Obligor
fails to pay the amounts due under this Note when due, Holder shall be entitled
to damages for the detriment caused thereby.
Accordingly, Obligor agrees to pay, as liquidated damages, a sum equal
to one-tenth percent (0.1%) of the unpaid principal balance of this Note if
payment of said sum is not made within five (5) business days of the Maturity
Date. The parties agree that the foregoing late charge represents a reasonable
sum considering all of the circumstances existing on the date of this Note and
represents a fair and reasonable estimate of the costs that Holder will incur
by reason of late payment. The parties further agree that proof of actual
damages would be costly or inconvenient. Acceptance of any late charge shall
not constitute a waiver of the default with respect to the overdue amount, and
shall not prevent Holder from exercising any of the other rights and remedies
available to Holder.
This Note may be prepaid at any time, in whole or in part, without
penalty and without notice. Partial prepayments of principal shall not
postpone or delay the date of any subsequent payments of principal or change
the amount of such payments.
<PAGE> 8
If this Note is not paid when due, whether at maturity or by
acceleration, Obligor promises to pay all costs and expenses of collection,
including without limitation reasonable attorneys' fees and foreclosure fees.
No single or partial exercise of any power under this Note shall
preclude other or further exercise thereof or the exercise of any other power.
Holder shall at all times have the right to proceed against any portion of the
security held for this Note in such order and in such manner as Holder may deem
fit, without waiving any rights with respect to any other security. No delay
or omission on the part of the Holder in exercising any right hereunder shall
operate as a waiver of such right or of any other right under this Note. The
release of any party liable under this Note shall not operate to release any
other party so liable.
This Note has been executed and delivered in the State of California
and is to be governed and construed according to the laws of that state.
IN WITNESS WHEREOF, Obligor has caused this Secured Promissory Note to
be executed as of the day and year first above written.
"OBLIGOR" "HOLDER"
HOST FUNDING, INC.
a Maryland corporation
* **
- ------------------------------------- ----------------------------------------
By: Michael S. McNulty
Its: President
* This form of Secured Promissory Note was signed by each of Don W.Cockroft,
William Birdsall, and Charles Dunn as Obligors on April 22, 1996.
** This form of Secured Promissory Note was signed by Michael McNulty on
April 22, 1996.
<PAGE> 9
STOCK PLEDGE AGREEMENT
EXHIBIT B
This agreement entered into as of April 22, 1996, between Don W.
Cockcroft ("Pledgor" and sometimes referred to as the "Obligor"), and Host
Funding, Inc., a Maryland corporation, ("Pledgee").
1. UNDERLYING FACTS/RECITALS.
1.1 Pursuant to the terms of a Stock Purchase
Agreement executed by Pledgor and Pledgee concurrently with this agreement (the
"Stock Purchase Agreement"), Pledgor has agreed to purchase from Pledgee 10,000
shares ("Shares") of the issued and outstanding Class A voting common stock of
Host Funding, Inc., a Maryland corporation (the "Company").
1.2 As payment for the purchase price of such
Shares, the Obligor has agreed to execute and deliver to Pledgee a promissory
note ("Note") dated the same date as this agreement, in the principal sum of
$100,000.
1.3 In consideration of Pledgee's execution of the
Stock Purchase Agreement and acceptance of the Note, Pledgor has agreed to
secure the Note by a pledge of the Shares. Pledgee is willing to secure the
Note by a pledge of the Shares. Pledgee is willing to accept the Note as
payment for the Shares, if payment of the Note is secured by Pledgor's pledge
of the Shares.
2. PLEDGE OF SHARES. Pledgor hereby grants to Pledgee a security
interest in the Shares, together with all additional shares issued to Pledgor
by reason of a stock split or stock dividend, which additional shares are
related to the Shares. Any additional shares deposited by Pledgor with the
Pledgeholder named below for the benefit of Pledgee shall be immediately
subject to this agreement and shall be included in the word "Shares" for all
purposes of this agreement with the same force and effect as the original
Shares pledged by Pledgor.
1
<PAGE> 10
3. DEBTS AND OBLIGATIONS. The security interest in the Shares
granted pursuant to this agreement shall secure Pledgor's full and prompt
performance of all terms and payment of all sums required under the Note.
4. PLEDGEHOLDER, DELIVERY OF SHARE CERTIFICATES.
4.1 Pledgor and Pledgee hereby designate Hotel Mortgage
Resources, Inc., a Delaware corporation, to act as the pledgeholder
("Pledgeholder") of the Shares during the term of this agreement. Except as
provided above, Pledgeholder may be changed only upon the mutual consent of the
parties. Concurrently with the execution of the Note and this agreement,
Pledgor shall deliver to Pledgeholder a certificate registered in the name of
Pledgor with a separate stock assignment form endorsed in blank and undated
evidencing the Shares to be held by Pledgeholder in accordance with the terms
of this agreement. Pledgor agrees to deposit with Pledgeholder in the same
manner all additional share certificates evidencing additional Shares which may
from time to time be issued by Company to Pledgor during the term of this
agreement.
4.2 Pledgeholder is not the agent of Pledgee or Pledgor and
is not responsible for knowing or interpreting any provision of the Note or
this agreement. Pledgeholder shall perform its duties and obligations under
this agreement only upon receipt of written instructions of either Pledgee or
Pledgor, as the case may be, or their authorized agents or representatives.
Copies of all instructions delivered to Pledgeholder shall concurrently be
delivered to the noninstructing party at its address set forth below.
4.3 In the event Pledgeholder receives conflicting
instructions or demands or an objection to any one set of instructions,
Pledgeholder shall immediately notify the parties of such conflict or objection
and shall take no action of any nature whatsoever so long as such conflict or
objection continues. In so doing, Pledgeholder shall not be or become liable
for any damages to the parties for Pledgeholder's failure to comply with
conflicting demands or instructions. Pledgeholder shall continue to refrain
from taking any action until all differences have been resolved by the mutual
2
<PAGE> 11
agreement of the parties, a copy of which shall be delivered to Pledgeholder,
or until the rights of the parties have been finally adjudicated in a court of
proper jurisdiction. In the event the parties are unable to resolve such
differences within a reasonable period of time, Pledgeholder, at its sole
discretion and at the expense of the parties, shall have the right, but not the
obligation, to file a suit in interpleader or for a declaratory judgment for
the purpose of having the respective rights of the parties adjudicated in
respect to this agreement and Shares held by Pledgeholder. The parties jointly
and severally agree to pay all costs, expenses and reasonable attorneys' fees
incurred by Pledgeholder in connection with the resolution of such differences,
and in any resulting interpleader proceeding; provided, however, the prevailing
party in any such action shall have the right to reimbursement from the other
party for all costs and expenses including attorneys' fees paid by such
prevailing party to the Pledgeholder pursuant to this agreement.
4.4 The parties shall jointly and severally indemnify, defend
and hold the Pledgeholder harmless from and against any and all claims, losses
and liabilities, including attorneys' fees, arising out of or in connection
with serving as Pledgeholder, provided, however, that Pledgeholder shall not be
indemnified for bad faith or intentional misconduct.
5. DIVIDEND AND VOTING RIGHTS. The parties agree so long as there is
no default in payment of the Note or a default under this agreement, the
dividend and voting rights for the Shares shall be as follows:
a. All cash or property dividends paid with respect to the
Shares shall be paid to Pledgor;
b. The Shares shall be held of record by Pledgor.
6. DEFAULT. The occurrence of any one of the following events shall
constitute an event of default under this agreement:
3
<PAGE> 12
6.1 Pledgor's failure to pay any indebtedness secured hereby
in accordance with its terms, and such failure continues for a period of more
than thirty (30) days after written notice by Secured Party to Debtor.
6.2 A court of competent jurisdiction enters a decree or
order for relief in favor of Pledgor in any involuntary case under applicable
bankruptcy, insolvency or similar law, state or federal, now or hereinafter in
effect or a decree or order appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of Pledgor or for any
substantial part of the assets or property of Pledgor, or ordering the
winding-up or liquidation of the affairs of Pledgor, and such decree or order
remains unstayed and in effect for a period of sixty (60) consecutive days, or
Pledgor commences a voluntary case under any applicable bankruptcy, insolvency,
or similar law, state or federal, now or hereafter in effect, or consents to
the entry of an order for relief in any involuntary case under any such law, or
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian sequestrator (or similar official) of Pledgor or
for any substantial part of the assets or property of Pledgor, or shall make
any general assignment for the benefit of creditors, or shall fail generally to
pay its or his debts in the ordinary course or as they become due, or shall
take any action in furtherance of any of the foregoing;
6.3 Pledgor's failure to perform or cause to be performed any
term or covenant of this agreement to be performed by Pledgor, or to discharge
or cause to be discharged any liability to Pledgee; or
6.4 The occurrence or any event of default by Pledgor under
the Note.
7. REMEDIES. Upon the occurrence of any event of default, Pledgee
may exercise any and all rights and remedies available to Pledgee under the
California Commercial Code or other applicable laws, except as limited in this
paragraph or the terms of the Note, including without limitation the right to:
7.1 Accelerate the maturity of any indebtedness secured by
this agreement and any
4
<PAGE> 13
other obligations of Pledgor to Pledgee, regardless of the terms of any
promissory note or instrument evidencing the same; or
7.2 Either in person or by agent with or without bringing any
action or proceeding, or by a receiver to be appointed by a court, take
possession of all or part of the Shares.
Any notice of sale, disposition of other intended action by Pledgee
sent to Pledgor at least five (5) days prior to such action shall constitute
reasonable notice to Pledgor. Pledgor expressly waives all rights to
possession of the Shares after an event of default which has not been cured
within the time allowed by Pledgee, and all claims for injuries suffered as a
result of any damage or loss caused by entry or repossession. Pledgee and
Pledgor agree that Pledgee's sole remedy with respect to a default by Pledgor
under this agreement shall be retention of the Shares in full satisfaction of
the indebtedness and performance secured by this agreement and that Pledgee
shall not have any rights against Pledgor for any deficiency remaining after
sale or other disposition or repossession of the Shares.
8. TERMINATION. This agreement shall terminate when all obligations
of Pledgor under the terms of the Note have been performed in full and Pledgor
is not otherwise in breach or default under the Note or this agreement.
Immediately upon termination of this agreement, Pledgeholder shall deliver, or
cause to be delivered to Pledgor any share certificates evidencing any Shares
held by Pledgeholder for the benefit of Pledgee pursuant to the terms of this
agreement.
9. MISCELLANEOUS.
9.1 Attorney's Fees. If either party commences or is made a
party to any litigation, arbitration, mediation or other judicial or
administrative proceeding ("proceeding") for interpleader or to enforce,
interpret or obtain a declaration of rights under this agreement, the
prevailing party in such proceedings shall be entitled to recover from the
other party all attorneys' fees, costs (whether otherwise taxable or
recoverable) and expenses incurred in connection with such proceeding or any
appeal or enforcement of any judgment obtained in any such proceeding,
including, without
5
<PAGE> 14
limitation, fees incurred in connection with post-judgment motions, contempt
proceedings, garnishment, levy, debtor and third party examinations, discovery
and bankruptcy litigation. Any judgment or order entered in any proceeding
shall contain a specific provision providing for the recovery of attorneys'
fees and costs incurred in enforcing such judgment or order. This attorneys'
fees provision is intended to be severable from the other provisions of this
agreement, shall survive any judgment or order entered in any proceeding and
shall not be deemed merged into any such judgment or order.
9.2 Notices. All notices, requests, demands and other
communications under this agreement shall be in writing and shall be deemed
duly given (i) on the date of delivery if personally delivered, (ii) one
business day after delivery by overnight courier, telegram or facsimile, or
(iii) three business days after mailing if mailed by first- class mail, postage
prepaid, to the parties at their addresses set forth below, or such other
address designated from time to time in writing by such party to all other
parties.
9.3 Amendment and Waiver. This agreement may be amended only
by a written agreement signed by all parties to this agreement. Waiver of any
provision of this agreement shall not be deemed or constitute a waiver of any
other provision, nor shall such waiver constitute a continuing waiver.
9.4 Successors and Assigns. This agreement shall be binding
upon and inure to the benefit of the parties and their respective heirs,
beneficiaries, legal representatives, successors and assigns.
9.5 Counterparts. This agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument.
9.6 Governing Law and Severability. This agreement shall be
governed by and construed under the laws of the State of California. If any
provision of this agreement is invalid or
6
<PAGE> 15
contravenes California law, such provision shall be deemed not to be a part of
this agreement and shall not affect the validity or enforceability of the
remaining provisions.
9.7 Entire Agreement. This agreement represents the entire
agreement between the parties with respect to the subject matter set forth
above, and supersedes all previous oral and written agreements, communications,
representations or commitments.
9.8 Further Assurances. The parties covenant and agree that
they will execute such other and further instruments and documents as are or
may become necessary or convenient to effectuate and carry out this agreement.
9.9 Time. Time is of the essence under this agreement.
9.10 Construction. This agreement has been negotiated at
arms length and each party has been represented by legal counsel. Accordingly,
any rule of law (including without limitation California Civil code Section
1654) or legal decision that would require interpretation of any ambiguities in
this agreement against the party drafting it is not applicable and is waived.
The provisions of this agreement shall be interpreted in a reasonable manner to
effect the intent of the parties and the purpose of this agreement.
7
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the date first hereinabove written.
PLEDGOR:
*
---------------------------------
Address:
PLEDGEE:
HOST FUNDING, INC.
a Maryland corporation
By: **
------------------------------
MICHAEL S. MCNULTY, President
Address: 7825 Fay Avenue, Suite 250
La Jolla, CA 92037
PLEDGEHOLDER:
HOTEL MORTGAGE RESOURCES, INC.
a Delaware corporation
By: **
------------------------------
IAN GARDNER-SMITH, Chief Executive Officer
Address: 7825 Fay Avenue, Suite 250
La Jolla, CA 92037
* This form of Stock Pledge Agreement was signed by each of Don W.
Cockroft, William Birdsall, and Charles Dunn as Pledgors on April 22, 1996.
** This form of Stock Pledge Agreement was signed by Michael McNulty
and Ian Gardner-Smith on April 22, 1996.
8
<PAGE> 1
EXHIBIT 10.6
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT ("Amendment") is entered into and is effective on this
12th day of June, 1996, by and between Host Funding, Inc., a corporation duly
organized and existing under the laws of the state of Maryland, ("Company"),
and Don Cockroft, an individual residing in Memphis, TN, ("Buyer"), regarding
the Stock Purchase Agreement entered into between the Company and Buyer on
April 22, 1996, with reference to the following facts:
A. On April 22, 1996, Buyer and the Company executed a Stock
Purchase Agreement ("Agreement") whereby Buyer agreed to buy 10,000 shares of
Class A Common Stock from the Company in consideration of payment to the
Company of $10.00 per share, or One Hundred Thousand Dollars ($100,000), upon
the terms and conditions set forth in the Stock Purchase Agreement.
B. Pursuant to Paragraph 4 of the Stock Purchase Agreement, the
Buyer was granted the right to acquire an additional 16,666 shares of stock of
the Company upon subsequent issuances of the Company's common stock.
C. The Company now wishes to amend the Agreement to specify that
the 16,666 shares of stock which can be purchased by Buyer are to be prorated
over five years on certain new terms and conditions.
D. The purpose of this Amendment is to amend the Agreement.
NOW THEREFORE, in consideration of the mutual covenants, promises and
conditions contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree that the Agreement shall be amended by the replacement of Paragraph 4 in
its entirety with the following new Paragraph 4:
"4. Future Stock Purchase Rights. Buyer is hereby granted the
right to acquire additional stock of the Company in the aggregate of
16,666 over the next five calendar years, with a maximum purchase of
3,333 shares per calendar year commencing in 1996 provided that in the
calendar year of Buyer's purchase there is a subsequent acquisition by
the Company of real estate assets (including mortgages ) with an
initial valuation of $100,000,000. If the subsequent acquisition
price or value in any calendar year beginning in 1996 is less than
$100,000,000, then the number of shares which the Buyer may purchase
in that calendar year will be equal to the percentage of the actual
dollar value of assets acquired during that calendar year divided by
$100,000,000, with such percentage then multiplied by 3,333 shares.
This Stock Purchase Right is only exercisable during the last ten days
of every calendar year and only up to the extent then earned. The
purchase price of such shares in each such calendar year shall be the
average closing price of the stock for the sixty (60) days prior to
the exercise of this Stock Purchase Right and such consideration shall
be payable by a five year 7% interest, 100% non-recourse note, with
principal payments of 2% per year and 18% of the principal forgiven
each year the maker remains a director of the Company.
<PAGE> 2
Subject to the provisions set forth below, this Stock Purchase Right
is exercisable only so long as Buyer is, at the time of exercise of
such right and has been since the execution of this Agreement, an
Independent Director of the Company.
If Buyer is unable to serve as a Director because of a physical or
mental disability, or is not re-elected as a Director prior to
December 31, 2000, (the "Buyer's Nonservice") then the principal
balance, if any, of the Buyer's $100,000 note for the original 10,000
shares of Class A common stock (as well as any principal balances then
due on his acquisitions of up to 3,333 Class A common shares per year
pursuant to this Amendment) shall be canceled effective on Buyer's
Nonservice. In addition, after said Buyer's Nonservice Buyer shall
continue to be able to participate in the right to receive up to the
3,333 shares annually pursuant to this Amendment through December 31,
2000 as though such Buyer were continuing to serve as a Director
through December 31, 2000."
In all other respects the terms and conditions of the Agreement shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first hereinabove written.
"COMPANY" HOST FUNDING, INC.
By: /s/Michael McNulty
--------------------------------------
Michael McNulty, President
"BUYER" *
-----------------------------------------
* This form of Amendment to Stock Pledge Agreement was signed by
each of Don W. Cockroft, William Birdsall and Charles Dunn on June 12, 1996.
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO ADVISORY AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") is entered into and is
effective on this 12th day of June, 1996, by and between Host Funding, Inc., a
Maryland corporation (the "Company"), and Host Funding Advisors, Inc., a
Delaware corporation (the "Advisor"), recites and provides as follows:
RECITALS
The purpose of this Amendment is to amend the Advisory Agreement.
The parties desire to adjust the fee payment schedule by this
Amendment so that the Company is obligated to pay the Advisor on a quarterly
basis rather than on an annual basis.
The Advisor shall no longer be responsible at the end of each month to
assure that the Company meets certain maximum debt requirements.
The parties desire to update certain matters contained in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree that the Advisory Agreement shall be amended in the following manner:
<PAGE> 2
1. Subsection (v) of paragraph seven (7) shall be deleted so that
the new paragraph seven (7) reads as follows:
7. Investment Undertakings. The Advisor shall use its
best efforts to assure that (i) the title to any Property is insured by
appropriate policies of title insurance; (ii) any Property forming
part of the Company's investments is duly insured, by appropriate
insurance policies, against loss or damage by fire, with extended
coverage, and against such other insurable hazards and risks as is
customary and appropriate in the circumstances; (iii) the policies
from time to time specified by the Board with regard to the protection
of the Company's investments are carried out; and (iv) proper Board
approval is received for all of the Company's investments. Any and
all fees and costs incurred by the Advisor in performing such
functions whether payable to its Affiliates or independent persons,
shall be borne solely by the Company.
2. Paragraph 11.3 shall be revised so that the new paragraph 11.3
reads as follows:
11.3. Payment of Fee. The Company shall pay the Advisor the
fee under Section 11.2 of this Agreement on a quarterly basis.
However, during the first three years of the Agreement, if, for any
such quarter, the dividends per share of the Class A Common Stock of
the Company are equal to an amount less than $0.2275, the Company
shall only be obligated to pay the Advisor fifty percent (50%) of the
fee at the end of such quarter and the remaining unpaid fifty percent
(50%) shall become due and payable at the end of such fiscal year.
During the fourth year of the Agreement and all years thereafter, if
for any such quarter, the dividends per share of the Class A Common
Stock of the Company are equal to an amount less than $0.2275, then
the Company shall pay the Advisor fifty percent (50%) of the fee in
cash and fifty percent (50%) of the fee in stock of the Company;
otherwise, the Company shall pay the entire amount of the fee to the
<PAGE> 3
Advisor in cash. In addition, in no event shall the Company
pay the Advisor a fee in cash if as a result of making such payment
(or any part thereof) the Company would have insufficient cash to make
a distribution of 95% of its taxable income to its shareholders. At
the end of each fiscal year of this Agreement, the Company shall pay
the Advisor any and all accrued fees which, in previous quarters, the
Company failed to pay due to the limitations specified above and/or
for any other reason.
3. Paragraph twenty-three (23) shall be revised to state the
current addresses for the Company and the Advisor such that Paragraph
twenty-three (23) shall read as follows:
23. Notices. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing unless
some other method of giving such notice, report or other communication
is accepted by the party to whom it is given, and shall be given by
being delivered to the addresses set forth herein:
To the Board and
to the Company: Host Funding, Inc.
c/o Michael S. McNulty
14800 Quorum Drive, Suite 510
Dallas, TX 75240
To the Advisor: Ian Gardner-Smith
Host Funding Advisors, Inc.
1025 Prospect Ave., Suite 350
La Jolla, CA 92037
Either party may at any time give notice in writing to the
other party of a change in its address for the purposes of this
Section.
3
<PAGE> 4
4. Exhibit A shall be revised to read as follows:
EXHIBIT A
Existing Hotel Ownership interests
Super 8 hotel located in Miner, Missouri
Super 8 hotel located in Poplar Bluff, Missouri
Super 8 hotel located in Rock Falls, Illinois
Super 8 hotel located in Somerset, Kentucky
Super 8 hotel located in San Diego, California
IN WITNESS WHEREOF, the parties hereto have executed this Amendment by
their duly authorized officers as of the day and year first written above.
HOST FUNDING, INC.,
a Maryland corporation
/s/Michael S. McNulty
----------------------------------------
By: Michael S. McNulty
Its: President
HOST FUNDING ADVISORS, INC.,
a Delaware corporation
/s/Michael S. McNulty
----------------------------------------
By: Michael S. McNulty
Its: President
4
<PAGE> 1
EXHIBIT 10.8
FIRST AMENDMENT TO POST-FORMATION ACQUISITION AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") is entered into and is
effective on this 12th day of June, 1996, by and between Host Funding, Inc., a
Maryland corporation (the "Company"), and Host Acquisition Group, LLC, a
Delaware limited liability company (the "Acquisition Advisor"), recites and
provides as follows:
RECITALS
The purpose of this Amendment is to amend the Post-Formation
Acquisition Agreement (the "Agreement").
The parties desire to adjust the term of the agreement by this
Amendment so that the Agreement shall terminate on the earlier of the (i) fifth
anniversary date of the Agreement, or (ii) when the net fees earned by the
Acquisition Manager shall equal or exceed $9 million.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree that the Post-Formation Acquisition Agreement shall be amended in the
following manner:
1. Subsection (ii) of paragraph sixteen (16) shall be revised so
that the new paragraph sixteen (16) reads as follows:
<PAGE> 2
16. Term of Agreement. The term of this Agreement shall
begin on the date first above specified and shall terminate on the
earlier of the (i) fifth annual anniversary date of this Agreement, or
(ii) when the net fees earned by Acquisition Manager shall equal or
exceed $9 million. Notwithstanding the foregoing, the REIT may cancel
this Agreement by giving sixty (60) days written notice of such
cancellation to the Acquisition Manager provided that such proposed
cancellation date is within six (6) months of the effective date of
this Agreement.
3. Paragraph seventeen (17) shall be revised to state the current
addresses for the Company and the Acquisition Manager such that Paragraph
seventeen (17) shall read as follows:
17. Notices. All notices given pursuant to this
Agreement shall be in writing. All notices shall be deemed to have
been properly given or served (i) on the date of delivery if delivered
personally or by courier, (ii) three days following the date of
deposit if mailed by registered or certified mail within the United
States, postage prepaid, (iii) the next business day following deposit
with an overnight air courier service which guarantees next day
delivery, or (iv) when sent by facsimile or telex. Notices shall be
sent to the parties to this Agreement at the addresses set forth
herein (or to such person or persons at such address or addresses as a
party may specify by notice pursuant to this Section 17):
2
<PAGE> 3
To the Board and
to the Company: Host Funding, Inc.
c/o Michael S. McNulty
14800 Quorum Drive, Suite 510
Dallas, TX 75240
To the Acquisition
Manager: Ian Gardner-Smith
Host Acquisition Group, LLC
1025 Prospect Ave., Suite 350
La Jolla, CA 92037
IN WITNESS WHEREOF, the parties hereto have executed this Amendment by
their duly authorized officers as of the day and year first written above.
HOST FUNDING, INC.,
a Maryland corporation
/s/Michael S. McNulty
----------------------------------------
By: Michael S. McNulty
Its: President
HOST ACQUISITION GROUP, LLC,
a Delaware limited liability company
/s/Ian Gardner-Smith
----------------------------------------
By: Ian Gardner-Smith
Its: President
3
<PAGE> 1
EXHIBIT 10.9
SECOND AMENDMENT TO PLEDGE AGREEMENT
THIS SECOND AMENDMENT ("Second Amendment") is entered into and is
effective on this 23rd day of April, 1996, by and between All American Group,
Inc., a Delaware corporation, Dorothy Hatfield, Guy E. Hatfield, Julia Hatfield
King, Scott Jeffrey Hatfield (collectively referred to as "Pledgor" and
sometimes individually referred to as the "Obligors"), and Host Funding, Inc.,
a Maryland corporation, ("Pledgee") regarding the Note entered into between the
Obligor and Host Funding on April 1, 1995, with reference to the following
facts:
A. On March 31, 1995, Obligor executed the Note in the amount of
$1,805,675, payable to the order of AAG, which Note was subsequently assigned
to Host Funding on April 1, 1995 by AAG in exchange for the Received Shares.
B. Pursuant to the Financing Agreement, effective March 31, 1995,
Obligor caused four (4) Mortgages on the Qualified Real Property to be conveyed
as collateral for the obligations contained in the Financing Agreement and the
Note.
C. The purpose of this Amendment is to amend the Pledge Agreement
in accordance with this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree that the Pledge Agreement shall be amended by the addition of the
following new paragraph 1.4:
<PAGE> 2
1.4 As of the date of this Second Amendment, the term "Shares"
shall no longer mean the 26.2 Fractional Shares as defined above, but rather
shall mean 60,000 shares of Class A Common Stock, 90,000 shares of Class B
Common Stock, and 130,000 shares of Class C Common Stock of Host Funding.
PLEDGOR:
THE ALL AMERICAN GROUP, INC.
a Delaware corporation
By: /s/Guy E. Hatfield
--------------------------------------------
GUY E. HATFIELD, Its President
/s/ Dorothy Hatfield
-----------------------------------------------
DOROTHY HATFIELD
/s/ Guy E. Hatfield
-----------------------------------------------
GUY E. HATFIELD
/s/Julia Hatfield King
-----------------------------------------------
JULIA HATFIELD KING
/s/Scott Jeffrey Hatfield
-----------------------------------------------
SCOTT JEFFREY HATFIELD
Address: P.O. Box 891540
Temecula, CA 92589-1540
PLEDGEE:
HOST FUNDING, INC.
a Maryland corporation
By: /s/Michael S. McNulty
-------------------------------------------
MICHAEL S. MCNULTY, Its President
Address: 8235 Douglas Avenue, Suite 1300
Dallas, TX 75225
<PAGE> 3
PLEDGEHOLDER:
HOTEL MORTGAGE RESOURCES, INC.
a Delaware corporation
By: /s/ Ian Gardner-Smith
-------------------------------------------
IAN GARDNER-SMITH, Chief Executive Officer
Address: 7825 Fay Avenue, Suite 250
La Jolla, CA 92037
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 470,181
<SECURITIES> 0
<RECEIVABLES> 170,929
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 641,110
<PP&E> 5,551,477
<DEPRECIATION> 186,167
<TOTAL-ASSETS> 6,187,734
<CURRENT-LIABILITIES> 89,119
<BONDS> 996,160
<COMMON> 14,720
0
0
<OTHER-SE> 5,087,735
<TOTAL-LIABILITY-AND-EQUITY> 6,187,734
<SALES> 0
<TOTAL-REVENUES> 665,102
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 450,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160,826
<INCOME-PRETAX> 53,608
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,608
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
