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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 21, 1997
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Host Funding, Inc.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Maryland 1-14280 52-1907962
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(STATE OR OTHER JURISDICTION) (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
6116 N. Central Expressway, Suite 1313, Dallas, Texas 75206
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: 214-750-0760
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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Item 1. Change in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets
ACQUISITION OF HOTEL PROPERTIES
On October 21, 1997, the Company purchased from Findlay Equity Partners,
an Ohio general partnership, a Country Hearth Inn (the "Findlay Country
Hearth") located in Findlay, Ohio and from Auburn Equity Partners, an Ohio
general partnership, a Country Hearth Inn (the "Auburn Country Hearth")
located in Auburn, Indiana (collectively, the "Country Hearth Inns") for an
aggregate purchase price of $5,846,400. The Country Hearth Inns contain an
aggregate of approximately 150 rooms, which increases the Company's real
estate portfolio to twelve hotel properties containing approximately 922
rooms. The Company completed the purchase of the Country Hearth Inns by
forming two separate, special purpose limited partnerships with Buckhead
America Corporation, a publicly-traded hotel company ("Buckhead"), of which
the Company is the beneficial owner of approximately 83% of the limited
partnership interests and a 1% general partnership in each limited
partnership. Buckhead beneficially holds approximately 16% of the remaining
limited partnership interests in each of the limited partnerships. Each
limited partnership has leased its respective Country Hearth Inn to Buckhead
pursuant to a separate percentage lease agreement (collectively, the "Country
Hearth Leases"). Buckhead also manages the hotel properties and holds the
franchise for each of the Country Hearth Inns outside of the limited
partnerships (collectively, the "Country Hearth Franchise Agreements").
The Company paid the purchase price for the Findlay Country Hearth
through a combination of cash from BH-Findlay, LP, as the acquiring limited
partnership ("BH-Findlay"), in the amount of $100,000, the assumption by
BH-Findlay of the existing indebtedness on the property in the amount of
$1,680,788 (the "Findlay Assumed Debt"), the issuance to the seller of 53,879
shares of the Class A Common Stock of the Company having a fair market value
of approximately $500,000 and the execution and delivery to the seller by
BH-Findlay of a promissory note in the original principal amount of $651,112
(the "Findlay Seller Note").
The Company paid the purchase price for the Auburn Country Hearth through
a combination of cash from BH-Auburn, LP, as the acquiring limited
partnership ("BH-Auburn"), in the amount of $400,000, the assumption by
BH-Auburn of the existing indebtedness on the property in the amount of
$1,777,057 (the "Auburn Assumed Debt"), the issuance to the seller of 26,940
shares of the Class A Common Stock of the Company having a fair market value
of approximately $250,000 and the execution and delivery to the seller by
BH-Auburn of a promissory note in the original principal amount of $487,443
(the "Auburn Seller Note").
The mortgage notes (the "Mortgage Notes") evidencing the Findlay Assumed
Debt and the Auburn Assumed Debt are each dated July 31, 1996 and are
currently held of record by La Salle National Bank, as Trustee for the
registered holders of Asset Securitization Corporation, Series
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1996-D-3. The Mortgage Notes are payable over twenty years in equal monthly
installments of $17,405 (Findlay Assumed Debt) and $18,402 (Auburn Assumed
Debt). Each monthly installment includes interest at a fixed rate of 10.78%
per annum (the "Initial Interest Rate") during the first ten years, with an
increased interest rate during the second ten years equal to the greater of
the Initial Interest Rate plus two percent (2%) or the then existing treasury
bill rate plus two percent (2%). The outstanding principal balance and all
accrued, but unpaid interest on the Mortgage Notes is due and payable on
August 11, 2016.
Each of the Findlay Seller Note and the Auburn Seller Note bears
interest at the rate of the Wall Street Journal Prime Rate plus one percent
(1%). No payments are required under the Findlay Seller Note or the Auburn
Seller Note until April 1, 1998, on which date all outstanding principal and
accrued interest is due and payable. The Company pledged 51,660 shares of
the Class B Common Stock of the Company to secure payment of the Findlay
Seller Note and 38,340 shares of Class B Common Stock to secure payment of
the Auburn Seller Note. In addition, the Company executed and delivered to
each respective seller a corporate guaranty pursuant to which the Company
guarantees the performance of the obligations of BH-Findlay and BH-Auburn,
respectively, under the Findlay Seller Note and the Auburn Seller Note.
The shares of Class A Common Stock issued to the sellers as partial
payment of the purchase price for the Country Hearth Inns are restricted
securities under the Securities Act of 1933 and subject to the re-sale
provisions of Rule 144 promulgated under the Act. The Class A Common Stock
issued to the sellers also entitles the holder of the shares to certain
limited "piggy back" registration rights exercisable upon the filing by the
Company of a registration statement with the Securities and Exchange
Commission to sell securities of the Company.
COUNTRY HEARTH INN LEASES AND FRANCHISES
The Country Hearth Leases are substantially in the general form of
percentage lease typically utilized by the Company. The term of each of the
Country Hearth Leases is for a period of fifteen (15) years commencing
October 21, 1997 (the "Commencement Date"). The Country Hearth leases have
combined total annual base rentals of $559,000, plus percentage rentals
ranging from thirty percent (30%) to forty percent (40%) of year to date
revenues less varying break-even thresholds adjusted annually by defined
percentages for each hotel. Rentals due to BH-Findlay and BH-Auburn,
respectively, require only defined base rents from the Commencement Date of
the Country Hearth leases until December 31, 1997. The Country Hearth leases
generally require Buckhead to pay all operating expenses of the properties,
including maintenance and insurance, while BH-Findlay or BH-Auburn, as the
case may be, is responsible for the payment of property taxes. In addition,
each of BH-Findlay and BH-Auburn is required to fund on a monthly basis into
a capital expenditure reserve account an amount equal to 4% of gross room
revenues for the immediately preceding month. Funds in the capital
expenditure reserve account are to be used for capital expenditures which
generally must be approved by BH-Findlay or BH-Auburn, as lessor under the
Country Hearth Leases. The Country Hearth Franchise Agreements between
BH-Findlay and BH-Auburn, respectively, as franchisee, and Buckhead, as
franchisor, are typical of
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the hotel industry and substantially similar to the franchise agreements
relating to the Super 8 Hotels and Sleep Inn Hotels currently owned directly
or indirectly by the Company.
On a pro-forma basis if the Country Hearth Inns had been owned from
January 1, 1997, approximately $494,000 would have been incurred in combined
base rent through September 30, 1997.
PAYMENT OF ACQUISITION FEES
The Country Hearth Inns were acquired pursuant to the terms of that
certain Restated and Amended Post-Formation Acquisition Agreement dated as of
February 3, 1997 (the "Acquisition Agreement"), by and between the Company
and HMR Capital, LLC (f\k\a Host Acquisition Group, LLC) (the "Acquisition
Company"). Pursuant to the terms of the Acquisition Agreement, the
Acquisition Company is entitled to receive an acquisition fee of no less than
2% and up to 6% of the gross purchase price of the Country Hearth Inns. The
acquisition fee is payable in cash or at the option of the Company in the
Class A Common Stock of the Company. The Company and the Acquisition Company
have agreed that the acquisition fee earned by the Acquisition Company
relating to the Country Hearth Inns is 17,539 shares of the Class A Common
Stock of the Company valued at $10 per share. Of the 17,539 shares issued to
HMR Capital, each of Blacor, Inc. ("Blacor") and Donegal Partners, Ltd.
("Donegal") is entitled to receive 3,692 shares in partial redemption of the
membership units held by each entity in the Acquisition Company pursuant to
the terms of that certain Redemption Agreement among the parties dated
effective as of April 8, 1997. Each of Blacor and Donegal are affiliates of
Michael S. McNulty, President of the Company, based upon Mr. McNulty serving
as President of Blacor and General Partner of Donegal. The shares of Class A
Common Stock received by the Acquisition Company in payment of the
acquisition fee will be restricted securities under the Securities Act of
1933 and subject to the resale provisions of Rule 144 promulgated under the
Act. The last traded price of the stock of the Company on the American Stock
Exchange on October 31, 1997 was $9.375 per share.
ACQUISITION OF EQUIPMENT AND PHYSICAL PROPERTY
BH-Findlay and BH-Auburn also acquired certain equipment and physical
property from the sellers (collectively, the "Personal Property") used in
connection with the management and operation of the Country Hearth Inns.
Each of BH-Findlay and BH-Auburn leased the Personal Property to Buckhead
pursuant to the terms of the Country Heath Leases. Under the terms of the
Country Hearth Leases, Buckhead will continue to use the Personal Property in
the management and operation of the Country Hearth Inns in substantially the
same manner as the sellers.
Item 3. Bankruptcy or Receivership
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events
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Not Applicable.
Item 6. Resignations of Registrant's Directors
Not Applicable.
Item 7. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS OF ACQUIRED PROPERTIES
It is impracticable at this time to provide the financial statements
required by this Item. The required financial statements relating to the
Country Hearth Inns will be filed as soon as they are available.
(b) PRO FORMA FINANCIAL INFORMATION
It is impracticable at this time to provide the pro forma financial
information required by this Item. The required pro forma financial
information derived from the Country Hearth Inns will be filed as soon as
such information is available.
(c) EXHIBITS
EXHIBIT NUMBER DESCRIPTION
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2.1 Agreement of Sale and Purchase between Auburn Equity
Partners and Host Funding, Inc. dated May 1, 1997
(Country Hearth Inn, Auburn, Indiana) (incorporated by
reference to Exhibit 10.23 to Company's Quarterly
Report on Form 10-Q filed on May 14, 1997).
2.2 Amendment to Agreement of Sale and Purchase between
Auburn Equity Partners and Host Funding, Inc. dated
effective as of June 10, 1997 (Country Hearth Inn,
Auburn, Indiana) (incorporated by reference to Exhibit
10.4 to Company's Quarterly Report on Form 10-Q filed
on August 14, 1997).
2.3 Second Amendment to Agreement of Sale and Purchase
between Auburn Equity Partners and Host Funding, Inc.
dated effective as of July 28, 1997 (Country Hearth
Inn, Auburn, Indiana) (incorporated by reference to
Exhibit 10.5 to Company's Quarterly Report on Form 10-Q
filed on August 14, 1997).
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2.4 Third Amendment to Agreement of Sale and Purchase
between Auburn Equity Partners and Host Funding, Inc.
dated effective as of September 20, 1997 (Country
Hearth Inn, Auburn, Indiana).
2.5 Assignment of Agreement of Sale and Purchase dated
effective as of October 21, 1997 between Host
Funding, Inc., as Assignor, and BH-Auburn, LP, as
Assignee (Country Hearth Inn, Auburn, Indiana).
2.6 Agreement of Sale and Purchase between Findlay Equity
Partners and Host Funding, Inc. dated May 1, 1997
(Country Hearth Inn, Findlay, Ohio) (incorporated
by reference to Exhibit 10.24 to Company's Form 10-Q
filed on May 14, 1997).
2.7 Amendment to Agreement of Sale and Purchase between
Findlay Equity Partners and Host Funding, Inc. dated
effective as of June 19, 1997 (Country Hearth Inn,
Findlay, Ohio) (incorporated by reference to Exhibit
10.7 to Company's Quarterly Report on Form 10-Q filed
on August 14, 1997).
2.8 Second Amendment to Agreement of Sale and Purchase
between Findlay Equity Partners and Host Funding, Inc.
dated effective as of July 28, 1997 (Country Hearth
Inn, Findlay, Ohio) (incorporated by reference to
Exhibit 10.8 to Company's Quarterly Report on Form 10-Q
filed on August 14, 1997).
2.9 Third Amendment to Agreement of Sale and Purchase
between Findlay Equity Partners and Host Funding, Inc.
dated effective as of September 20, 1997 (Country
Hearth Inn, Findlay, Ohio).
2.10 Assignment of Agreement of Sale and Purchase dated
effective as of October 21, 1997 between Host
Funding, Inc., as Assignor, and BH-Findlay, LP, as
Assignee (Country Hearth Inn, Findlay, Ohio).
2.11 Lease Summary, Country Hearth Inn, Auburn, Indiana.
2.12 Lease Summary, Country Hearth Inn, Findlay, Ohio.
Item 8. Change in Fiscal Year
Not Applicable.
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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 hereunto duly authorized.
Dated: November 3, 1997 Host Funding, Inc.
/s/ Michael S. McNulty
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By: Michael S. McNulty, President and
Chief Executive Officer
/s/ Bona K. Allen
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By: Bona K. Allen, Chief Financial
Officer and Accounting Officer
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EXHIBIT INDEX
Exhibit Number Description
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2.1 Agreement of Sale and Purchase between Auburn Equity
Partners and Host Funding, Inc. dated May 1, 1997 (Country
Hearth Inn, Auburn, Indiana) (incorporated by reference to
Exhibit 10.23 to Company's Quarterly Report on Form 10-Q
filed on May 14, 1997).
2.2 Amendment to Agreement of Sale and Purchase between Auburn
Equity Partners and Host Funding, Inc. dated effective as of
June 10, 1997 (Country Hearth Inn, Auburn, Indiana)
(incorporated by reference to Exhibit 10.4 to Company's
Quarterly Report on Form 10-Q filed on August 14, 1997).
2.3 Second Amendment to Agreement of Sale and Purchase between
Auburn Equity Partners and Host Funding, Inc. dated
effective as of July 28, 1997 (Country Hearth Inn, Auburn,
Indiana) (incorporated by reference to Exhibit 10.5 to
Company's Quarterly Report on Form 10-Q filed on August 14,
1997).
2.4 Third Amendment to Agreement of Sale and Purchase between
Auburn Equity Partners and Host Funding, Inc. dated
effective as of September 20, 1997 (Country Hearth Inn,
Auburn, Indiana).
2.5 Assignment of Agreement of Sale and Purchase dated effective
as of October 21, 1997 between Host Funding, Inc., as
Assignor, and BH-Auburn, LP, as Assignee (Country Hearth
Inn, Auburn, Indiana).
2.6 Agreement of Sale and Purchase between Findlay Equity
Partners and Host Funding, Inc. dated May 1, 1997 (Country
Hearth Inn, Findlay, Ohio) (incorporated by reference to
Exhibit 10.24 to Company's Form 10-Q filed on May 14, 1997).
2.7 Amendment to Agreement of Sale and Purchase between Findlay
Equity Partners and Host Funding, Inc. dated effective as of
June 19, 1997 (Country Hearth Inn, Findlay, Ohio)
(incorporated by reference to Exhibit 10.7 to Company's
Quarterly Report on Form 10-Q filed on August 14, 1997).
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2.8 Second Amendment to Agreement of Sale and Purchase between
Findlay Equity Partners and Host Funding, Inc. dated
effective as of July 28, 1997 (Country Hearth Inn, Findlay,
Ohio) (incorporated by reference to Exhibit 10.8 to
Company's Quarterly Report on Form 10-Q filed on August 14,
1997).
2.9 Third Amendment to Agreement of Sale and Purchase between
Findlay Equity Partners and Host Funding, Inc. dated
effective as of September 20, 1997 (Country Hearth Inn,
Findlay, Ohio).
2.10 Assignment of Agreement of Sale and Purchase dated effective
as of October 21, 1997 between Host Funding, Inc., as
Assignor, and BH-Findlay, LP, as Assignee (Country Hearth
Inn, Findlay, Ohio).
2.11 Lease Summary, Country Hearth Inn, Auburn, Indiana.
2.12 Lease Summary, Country Hearth Inn, Findlay, Ohio.
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THIRD AMENDMENT TO AGREEMENT
OF SALE AND PURCHASE
THIS Third Amendment TO AGREEMENT OF SALE AND PURCHASE (this "Third
Amendment") is between AUBURN EQUITY PARTNERS, an Ohio general partnership
("Seller"), and HOST FUNDING, INC., a Maryland corporation or its permitted
assignee ("Purchaser"), and is dated effective as of September 20, 1997.
R E C I T A L S
A. Seller and Purchaser previously entered into that certain Agreement
of Sale and Purchase (the "Agreement") dated effective as of May 5, 1997, as
amended by that certain Amendment to Agreement of Sale and Purchase (the
"First Amendment") dated effective as of June 19, 1997, and as further
amended by that certain Second Amendment to Agreement of Sale and Purchase
(the "Second Amendment") dated effective as of July 28, 1997 (collectively,
as amended by the First Amendment and the Second Amendment, the "Agreement"),
and relating to the sale by Seller to Purchaser of real property located in
Auburn, Dekalb County, Indiana, and more particularly described in Exhibit
"A" attached hereto and incorporated herein by reference for all purposes
(the "Property").
B. Seller and Purchaser desire to further amend the Agreement 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. Notwithstanding anything contained in this Agreement to the
Contrary, Section 1.1 of the Agreement is hereby amended by the deletion
therefrom of the definition of "Host Funding Stock Fair Market Value" in its
entirety.
2. Notwithstanding anything contained in the Agreement to the contrary,
the Agreement is hereby amended by the deletion therefrom of Section 3.1 in
its entirety, and in substitution therefor, the following Section 3.1 added:
3.1 PURCHASE PRICE. The purchase price ("Purchase Price") for the
Property shall be TWO MILLION NINE HUNDRED FOURTEEN THOUSAND FIVE HUNDRED
AND NO/100 DOLLARS ($2,914,500.00). The Purchase Price shall be payable at
Closing as follows:
(a) Subject to adjustment pursuant to various applicable provisions
of this Agreement requiring adjustment of same, the sum of FOUR HUNDRED
THOUSAND AND NO/100 DOLLARS ($400,000.00) in cash or other immediately
available funds (the "Cash Portion of the Purchase Price");
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(b) Purchaser's assumption, with limited liability, and otherwise
pursuant to the terms and conditions set forth in Section 3.2 hereof, of a
loan (the "Nomura Loan") evidenced by that certain Promissory Note (the
"Nomura Note") in the original principal sum of $1,809,000.00, dated July
31, 1996, executed by Seller, payable to the order of Continental Wingate
Associates, Inc., and thereafter assigned to Nomura Asset Capital
Corporation (Nomura Asset Capital Corporation, or the current record holder
of the Nomura Loan, as applicable, is hereinafter referred to as "Nomura");
(c) Subject to the provisions of Section 7.4 hereof, Purchaser's
delivery or issuance to Seller of 26,940 shares of the Class A Common Stock
of Host Funding, Inc. (the "Host Funding Stock") having an approximate
aggregate value equal to TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($250,000.00). The Host Funding Stock will be deemed a "restricted
security" under the Securities Act in that such stock will be delivered or
issued to Seller in a transaction not involving a public offering. Seller
understands that the Host Funding Stock may not be resold without
compliance with the registration requirements of the Securities Act or in
other certain limited circumstances. In this connection, Seller
understands the resale limitations imposed by the Securities Act and is
familiar with SEC Rules 144 and 145, as presently in effect, and the
conditions which must be met in order for Rules 144 and 145 to be available
for resale of "restricted securities". Each certificate representing Host
Funding Stock will contain the appropriate legend relating to restrictions
on sale and transfer under the Securities Act and the Exchange Act.
Notwithstanding the foregoing, Purchaser agrees that Seller may distribute
the Host Funding Stock to Seller's partners and to Seller's Broker (and
Seller's Broker may distribute same to its participating brokers) without
requirement of legal opinion; provided, however, that (i) each recipient
thereof shall have executed and delivered to Seller and Purchaser an
Investment Letter Agreement with respect thereto and (ii) Purchaser shall
determine within its sole discretion that such transfer will not disqualify
Purchaser as a Real Estate Investment Trust under the Internal Revenue Code
of 1986, as amended; and
(d) Purchaser's execution and delivery to Seller of a promissory note
(the "Seller Finance Note") in the original principal amount equal to the
remainder of the Purchase Price (Purchase Price LESS Cash Portion of the
Purchase Price LESS the actual principal balance of the Nomura Note on the
Closing Date LESS the $250,000.00 in value of the Host Funding Stock EQUALS
the original principal amount of the Seller Finance Note). The Seller
Finance Note shall accrue interest commencing January 1, 1998, at the rate
equal to the Wall Street Journal Prime Rate plus one percent (1%);
provided, if not paid when due, the interest rate shall increase to the
Wall Street Journal Prime Rate plus ten percent (10%). The principal of
the Seller Finance Note, together with all accrued interest thereon, shall
be due and payable on April 1, 1998, such sums payable all in cash. The
Seller Finance Note will be secured by the pledge of 38,340 shares of the
Class B Common Stock of Host Funding, Inc. (the "Seller Finance Stock
Pledge"), and shall be guaranteed by Host Funding, Inc. (the "Host
Guaranty"). The Seller Finance Note, the Seller Finance Stock Pledge, and
the Host Guaranty shall be upon such other terms and conditions as Seller
and Purchaser may reasonably and mutually agree in writing prior to the
Closing.
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3. Notwithstanding anything contained in the Agreement to the contrary,
the Agreement is hereby amended by the deletion therefrom of Section 3.2(c)
in its entirety.
4. The Agreement is hereby amended by the deletion therefrom of the
amendments to same contained in Paragraph 1 of the Second Amendment, and, in
substitution therefor, the following added:
Notwithstanding anything contained in the Agreement to the
contrary, the Agreement is hereby amended by the deletion
therefrom of Section 6.1, except for the last two (2)
sentences thereof, and, the Deposit shall be immediately
delivered to Seller by the Title Company (and Purchaser
hereby authorizes the Title Company to do so) and shall
hereafter be considered non-refundable, unless, however, (a)
Seller hereafter defaults on any of its obligations or
breaches any of the representations and warranties of Seller
under the Agreement, or (b) Nomura does not on or before
October 15, 1997, through no fault of Purchaser, close the
assumption by Purchaser of the Nomura Loan. For the
purposes hereof, the phrase "through no fault of Purchaser"
contained in the immediately preceding sentence shall mean
Purchaser shall, on or before October 15, 1997, have
furnished to Nomura any and all applications, forms,
information and due diligence items and documentation
reasonably required of it by Nomura, and otherwise provided
to Nomura comments to any proposed assumption documents
submitted to it by Nomura for Purchaser's comments and
approvals. At the closing of the transaction contemplated
by the Agreement, the cash portion of the Deposit shall be
paid and applied against the Cash Portion of the Purchase
Price, and the stock portion of the Deposit shall be applied
and used as part of the Host Funding Stock (and with any
dividends paid to Seller on such stock portion of the
Deposit prior to said closing to be applied against the Cash
Portion of the Purchase Price).
5. Notwithstanding anything contained in the Agreement to the contrary,
Section 3.3(b) of the Agreement is hereby amended to provide that any
dividends paid to Seller on the stock portion of the Deposit prior to the
Closing of the transaction contemplated by the Agreement shall become part of
the Deposit.
6. Notwithstanding anything contained in the Agreement to the contrary,
Section 11.1 of the Agreement is hereby amended to provide that the
transaction contemplated by the Agreement will be closed no later than
October 15, 1997, unless otherwise approved in writing by Seller and
Purchaser.
7. Notwithstanding anything contained in the Agreement to the contrary,
Section 12.2 of the Agreement is hereby amended by the addition of the
following Purchaser deliveries:
(f) the Seller Finance Note;
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(g) the Seller Finance Stock Pledge; and
(h) the Host Guaranty.
8. Notwithstanding anything contained in this Amendment or in the
Agreement to the contrary, the Agreement is hereby amended by the deletion
therefrom of Section 19.3 in its entirety.
9. Except as expressly amended herein, the Agreement 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 Agreement. This Third Amendment shall be effective upon
execution by facsimile transmission by both parties.
SELLER:
AUBURN EQUITY PARTNERS, an Ohio general
partnership
By: Investment Resources, Inc., an Ohio
corporation, Managing Partner
By: /s/ VICTOR BAKER
----------------------------------------
Name: VICTOR BAKER
--------------------------------------
Title: PRESIDENT
-------------------------------------
PURCHASER:
HOST FUNDING, INC., a Maryland corporation
By: /s/ BONA K. ALLEN
---------------------------------------------
Bona K. Allen, Vice President
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ASSIGNMENT OF AGREEMENT OF SALE AND PURCHASE
STATE OF INDIANA )
) KNOW ALL MEN BY THESE PRESENTS
COUNTY OF DEKALB )
THIS ASSIGNMENT OF AGREEMENT OF SALE AND PURCHASE (this "Assignment"),
is entered into by and between HOST FUNDING, INC., a Maryland corporation
("Assignor"), and BH-AUBURN, L.P., an Indiana limited partnership
("Assignee").
W I T N E S S E T H:
Assignor has heretofore entered into that certain Agreement of Sale and
Purchase (as same may have been from time to time amended, the "Agreement"),
dated effective as of May 5, 1997, between Assignor, as purchaser, and Auburn
Equity Partners, an Ohio general partnership, as seller, covering property
situated in Auburn, Dekalb County, Indiana, and more particularly described
in the Agreement.
Assignee desires to purchase from Assignor, and Assignor desires to sell
and assign to Assignee, the Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
agreements and covenants herein set forth, together with the sum of Ten and
No/100 Dollars ($10.00) and other good and valuable consideration this day
paid and delivered by Assignee to Assignor, the receipt and sufficiency of
all of which by Assignor are hereby confessed and acknowledged, Assignor does
hereby ASSIGN, TRANSFER, SET OVER and DELIVER unto Assignee all of Assignor's
right, title and interest in and to the Agreement, and all of the rights,
benefits and privileges of the purchaser thereunder, but subject to all
terms, conditions, reservations and limitations set forth in the Agreement.
TO HAVE AND TO HOLD all and singular the Agreement unto Assignee, its
successors and assigns, and Assignor does hereby bind itself and its
successors and assigns, to WARRANT and FOREVER DEFEND all and singular the
Agreement unto Assignee, its successors and assigns, against every person
whomsoever lawfully claiming or attempting to claim same, or any part
thereof, by, through or under Assignor, but not otherwise.
It is specifically agreed that Assignor shall not be responsible to the
seller under the Agreement for the discharge and performance of any and all
duties and obligations to be performed and/or discharged by the purchaser
thereunder after the date hereof. By accepting this Assignment and by its
execution hereof, Assignee covenants and agrees to indemnify, save and hold
harmless Assignor from and against any and all loss, liability, claims or
causes or action existing in favor of
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or asserted by the seller under the Agreement arising out of or relating to
Assignee's failure to perform any of the obligations of the purchaser under
the Agreement after the date hereof.
Assignor covenants and warrants to Assignee that: (a) Assignor is the
lawful owner and holder of all of the right, title and interest of the
purchaser in and to the Agreement; (b) such right, title and interest is free
from all liens, security interests, and other encumbrances of all kinds; (c)
the Agreement is in full force and effect and to the best of Assignor's
actual knowledge, no default (nor any event which with notice or lapse of
time or both could cause a default) has occurred under the Agreement; and (d)
Assignor warrants such rights, title, and interests in and to the Agreement
to Assignee against all adverse claims.
All of the covenants, terms and conditions set forth herein shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns.
IN WITNESS WHEREOF, Assignee and Assignor have executed this Agreement
effective as of the 21st day of October, 1997.
ASSIGNOR
HOST FUNDING, INC.,
a Maryland corporation
By: /s/ BONA K. ALLEN
-------------------------------------------
Name: BONA K. ALLEN
-----------------------------------------
Title: VICE PRESIDENT
----------------------------------------
ASSIGNEE
BH-AUBURN, L.P.,
an Indiana limited partnership
By: Host Auburn GP, Inc.,
a Maryland corporation, General Partner
By: /s/ BONA K. ALLEN
-------------------------------------------
Name: BONA K. ALLEN
-----------------------------------------
Title: VICE PRESIDENT
----------------------------------------
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THIRD AMENDMENT TO AGREEMENT
OF SALE AND PURCHASE
THIS Third Amendment TO AGREEMENT OF SALE AND PURCHASE (this "Third
Amendment") is between FINDLAY EQUITY PARTNERS, an Ohio general partnership
("Seller"), and HOST FUNDING, INC., a Maryland corporation or its permitted
assignee ("Purchaser"), and is dated effective as of September 20, 1997.
R E C I T A L S
A. Seller and Purchaser previously entered into that certain Agreement of
Sale and Purchase (the "Agreement") dated effective as of May 5, 1997, as
amended by that certain Amendment to Agreement of Sale and Purchase (the "First
Amendment") dated effective as of June 19, 1997, and as further amended by that
certain Second Amendment to Agreement of Sale and Purchase (the "Second
Amendment") dated effective as of July 28, 1997 (collectively, as amended by the
First Amendment and the Second Amendment, the "Agreement"), and relating to the
sale by Seller to Purchaser of real property located in Liberty Township,
Hancock County, Ohio, and more particularly described in Exhibit "A" attached
hereto and incorporated herein by reference for all purposes (the "Property").
B. Seller and Purchaser desire to further amend the Agreement 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. Notwithstanding anything contained in the Agreement to the contrary,
Section 1.1 of the Agreement is hereby amended by the deletion therefrom of the
definition of "Host Funding Stock Fair Market Value" in its entirety.
2. Notwithstanding anything contained in the Agreement to the contrary,
the Agreement is hereby amended by the deletion therefrom of Section 3.1 in its
entirety, and in substitution therefor, the following Section 3.1 added:
3.1 PURCHASE PRICE. The purchase price ("Purchase Price") for the
Property shall be TWO MILLION NINE HUNDRED THIRTY-ONE THOUSAND NINE HUNDRED
AND NO/100 DOLLARS ($2,931,900.00). The Purchase Price shall be payable at
Closing as follows:
(a) Subject to adjustment pursuant to various applicable provisions
of this Agreement requiring adjustment of same, the sum of ONE HUNDRED
THOUSAND AND NO/100 DOLLARS ($100,000.00) in cash or other immediately
available funds (the "Cash Portion of the Purchase Price");
<PAGE>
(b) Purchaser's assumption, with limited liability, and otherwise
pursuant to the terms and conditions set forth in Section 3.2 hereof, of a
loan (the "Nomura Loan") evidenced by that certain Promissory Note (the
"Nomura Note") in the original principal sum of $1,711,000.00, dated July
31, 1996, executed by Seller, payable to the order of Continental Wingate
Associates, Inc., and thereafter assigned to Nomura Asset Capital
Corporation (Nomura Asset Capital Corporation, or the current record holder
of the Nomura Loan, as applicable, is hereinafter referred to as "Nomura");
(c) Subject to the provisions of Section 7.4 hereof, Purchaser's
delivery or issuance to Seller of 53,879 shares of the Class A Common Stock
of Host Funding, Inc. (the "Host Funding Stock") having an approximate
aggregate value equal to FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00). The Host Funding Stock will be deemed a "restricted
security" under the Securities Act in that such stock will be delivered or
issued to Seller in a transaction not involving a public offering. Seller
understands that the Host Funding Stock may not be resold without
compliance with the registration requirements of the Securities Act or in
other certain limited circumstances. In this connection, Seller
understands the resale limitations imposed by the Securities Act and is
familiar with SEC Rules 144 and 145, as presently in effect, and the
conditions which must be met in order for Rules 144 and 145 to be available
for resale of "restricted securities". Each certificate representing Host
Funding Stock will contain the appropriate legend relating to restrictions
on sale and transfer under the Securities Act and the Exchange Act.
Notwithstanding the foregoing, Purchaser agrees that Seller may distribute
the Host Funding Stock to Seller's partners and to Seller's Broker (and
Seller's Broker may distribute same to its participating brokers) without
requirement of legal opinion; provided, however, that (i) each recipient
thereof shall have executed and delivered to Seller and Purchaser an
Investment Letter Agreement with respect thereto and (ii) Purchaser shall
determine within its sole discretion that such transfer will not disqualify
Purchaser as a Real Estate Investment Trust under the Internal Revenue Code
of 1986, as amended; and
(d) Purchaser's execution and delivery to Seller of a promissory note
(the "Seller Finance Note") in the original principal amount equal to the
remainder of the Purchase Price (Purchase Price LESS Cash Portion of the
Purchase Price LESS the actual principal balance of the Nomura Note on the
Closing Date LESS the $500,000.00 in value of the Host Funding Stock EQUALS
the original principal amount of the Seller Finance Note). The Seller
Finance Note shall accrue interest commencing January 1, 1998, at the rate
equal to the Wall Street Journal Prime Rate plus one percent (1%);
provided, if not paid when due, the interest rate shall increase to the
Wall Street Journal Prime Rate plus ten percent (10%). The principal of
the Seller Finance Note, together with all accrued interest thereon, shall
be due and payable on April 1, 1998, such sums payable all in cash. The
Seller Finance Note will be secured by the pledge of 51,660 shares of the
Class B Common Stock of Host Funding, Inc. (the "Seller Finance Stock
Pledge"), and shall be guaranteed by Host Funding, Inc. (the "Host
Guaranty"). The Seller Finance Note, the Seller Finance Stock Pledge, and
the Host Guaranty shall be upon such other terms and conditions as Seller
and Purchaser may reasonably and mutually agree in writing prior to the
Closing.
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<PAGE>
3. Notwithstanding anything contained in the Agreement to the contrary,
the Agreement is hereby amended by the deletion therefrom of Section 3.2(c) in
its entirety.
4. The Agreement is hereby amended by the deletion therefrom of the
amendments to same contained in Paragraph 1 of the Second Amendment, and, in
substitution therefor, the following added:
Notwithstanding anything contained in the Agreement to the
contrary, the Agreement is hereby amended by the deletion
therefrom of Section 6.1, except for the last two (2)
sentences thereof, and, the Deposit shall be immediately
delivered to Seller by the Title Company (and Purchaser
hereby authorizes the Title Company to do so) and shall
hereafter be considered non-refundable, unless, however, (a)
Seller hereafter defaults on any of its obligations or
breaches any of the representations and warranties of Seller
under the Agreement, or (b) Nomura does not on or before
October 15, 1997, through no fault of Purchaser, close the
assumption by Purchaser of the Nomura Loan. For the
purposes hereof, the phrase "through no fault of Purchaser"
contained in the immediately preceding sentence shall mean
Purchaser shall, on or before October 15, 1997, have
furnished to Nomura any and all applications, forms,
information and due diligence items and documentation
reasonably required of it by Nomura, and otherwise provided
to Nomura comments to any proposed assumption documents
submitted to it by Nomura for Purchaser's comments and
approvals. At the closing of the transaction contemplated
by the Agreement, the Deposit will be applied to the Cash
Portion of the Purchase Price.
5. Notwithstanding anything contained in the Agreement to the contrary,
Section 11.1 of the Agreement is hereby amended to provide that the transaction
contemplated by the Agreement will be closed no later than October 15, 1997,
unless otherwise approved in writing by Seller and Purchaser.
6. Notwithstanding anything contained in the Agreement to the contrary,
Section 12.2 of the Agreement is hereby amended by the addition of the following
Purchaser deliveries:
(f) the Seller Finance Note;
(g) the Seller Finance Stock Pledge; and
(h) the Host Guaranty.
7. Notwithstanding anything contained in this Amendment or in the
Agreement to the contrary, the Agreement is hereby amended by the deletion
therefrom of Section 19.3 in its entirety.
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<PAGE>
8. Except as expressly amended herein, the Agreement 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 Agreement. This Third Amendment shall be effective upon execution by
facsimile transmission by both parties.
SELLER:
FINDLAY EQUITY PARTNERS, an Ohio general
partnership
By: Investment Resources, Inc., an Ohio
corporation, Managing Partner
By: /s/ VICTOR BAKER
------------------------------------
Name: VICTOR BAKER
---------------------------------
Title: PRESIDENT
--------------------------------
PURCHASER:
----------
HOST FUNDING, INC., a Maryland corporation
By: /s/ BONA K. ALLEN
------------------------------------
Bona K. Allen, Vice President
4
<PAGE>
ASSIGNMENT OF AGREEMENT OF SALE AND PURCHASE
STATE OF OHIO )
) KNOW ALL MEN BY THESE PRESENTS
COUNTY OF HANCOCK )
THIS ASSIGNMENT OF AGREEMENT OF SALE AND PURCHASE (this "Assignment"), is
entered into by and between HOST FUNDING, INC., a Maryland corporation
("Assignor"), and BH - FINDLAY, L.P., an Ohio limited partnership
("Assignee").
W I T N E S S E T H:
Assignor has heretofore entered into that certain Agreement of Sale and
Purchase (as same may have been from time to time amended, the "Agreement"),
dated effective as of May 5, 1997, between Assignor, as purchaser, and
Findlay Equity Partners, an Ohio general partnership, as seller, covering
property situated in Hancock County, Ohio, and more particularly described in
the Agreement.
Assignee desires to purchase from Assignor, and Assignor desires to sell
and assign to Assignee, the Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
agreements and covenants herein set forth, together with the sum of Ten and
No/100 Dollars ($10.00) and other good and valuable consideration this day
paid and delivered by Assignee to Assignor, the receipt and sufficiency of
all of which by Assignor are hereby confessed and acknowledged, Assignor does
hereby ASSIGN, TRANSFER, SET OVER and DELIVER unto Assignee all of Assignor's
right, title and interest in and to the Agreement, and all of the rights,
benefits and privileges of the purchaser thereunder, but subject to all
terms, conditions, reservations and limitations set forth in the Agreement.
TO HAVE AND TO HOLD all and singular the Agreement unto Assignee, its
successors and assigns, and Assignor does hereby bind itself and its
successors and assigns, to WARRANT and FOREVER DEFEND all and singular the
Agreement unto Assignee, its successors and assigns, against every person
whomsoever lawfully claiming or attempting to claim same, or any part
thereof, by, through or under Assignor, but not otherwise.
It is specifically agreed that Assignor shall not be responsible to the
seller under the Agreement for the discharge and performance of any and all
duties and obligations to be performed and/or discharged by the purchaser
thereunder after the date hereof. By accepting this Assignment and by its
execution hereof, Assignee covenants and agrees to indemnify, save and hold
harmless Assignor from and against any and all loss, liability, claims or
causes or action existing in favor of
1
<PAGE>
or asserted by the seller under the Agreement arising out of or relating to
Assignee's failure to perform any of the obligations of the purchaser under
the Agreement after the date hereof.
Assignor covenants and warrants to Assignee that: (a) Assignor is the
lawful owner and holder of all of the right, title and interest of the
purchaser in and to the Agreement; (b) such right, title and interest is free
from all liens, security interests, and other encumbrances of all kinds; (c)
the Agreement is in full force and effect and to the best of Assignor's
actual knowledge, no default (nor any event which with notice or lapse of
time or both could cause a default) has occurred under the Agreement; and (d)
Assignor warrants such rights, title, and interests in and to the Agreement
to Assignee against all adverse claims.
All of the covenants, terms and conditions set forth herein shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns.
IN WITNESS WHEREOF, Assignee and Assignor have executed this Agreement
effective as of the 21st day of October, 1997.
ASSIGNOR
HOST FUNDING, INC.,
a Maryland corporation
By: /s/ BONA K. ALLEN
-------------------------------------------
Name: BONA K. ALLEN
-----------------------------------------
Title: VICE PRESIDENT
----------------------------------------
ASSIGNEE
BH - FINDLAY, L.P.,
an Ohio limited partnership
By: Host Findlay GP, Inc.,
a Maryland corporation, General Partner
By: /s/ BONA K. ALLEN
-------------------------------------------
Name: BONA K. ALLEN
-----------------------------------------
Title: VICE PRESIDENT
----------------------------------------
2
<PAGE>
LEASE SUMMARY
COUNTRY HEARTH INN
AUBURN, INDIANA
The following is a summary of the material terms and conditions of that
certain Lease Agreement dated effective as of October 21, 1997, by and
between BH-AUBURN, L.P., as Lessor, and BUCKHEAD AMERICA CORPORATION, as
Lessee, relating to that certain real property commonly known as a Country
Hearth Inn located in Auburn, Indiana, including all equipment, machinery,
fixtures and other items of property incidental to the use of the real
property as a hotel (the "Leased Property").
LESSOR: BH-Auburn, L.P., an Indiana limited partnership.
LESSEE: Buckhead America Corporation, a Georgia
corporation.
TERM: Commencing October 21, 1997, and ending October
21, 2012, unless otherwise terminated in
accordance with the terms of the Lease Agreement.
RENT: Annual base rental of $271,000 payable monthly
which increases by $5,000 per year for fiscal
years 1998 and 1999, plus percentage rentals
commencing January 1, 1998, and payable quarterly
equal to the total of (a) thirty percent (30%) of
the first $260,000 of cumulative gross revenues
for the applicable fiscal year through the
calendar quarter for which the calculation is
being made in excess of $760,000 (the "Gross
Revenue First Break Point") and (b) forty percent
(40%) of all amounts of cumulative gross revenues
for the applicable fiscal year through the
calendar quarter for which the calculation is
being made in excess of $1,020,000 (the "Gross
Revenue Second Break Point"). Lessee in no event
is responsible for the payment of percentage
rental if there are no funds available after the
payment of or to satisfy the payment of base rent.
Commencing January 1, 1998, the Gross Revenue
First Break Point and the Gross Revenue Second
Break Point are subject to increase to an amount
equal to the product of the break point in effect
for the prior fiscal year times the CPI Factor
plus one percent (1%).
PAYMENT OF IMPOSITIONS: Lessee is responsible for the payment of all taxes
(including, without limitation, all personal,
property, sales and use taxes, gross receipts or
similar taxes, as the same relate to or are
imposed upon Lessee or its business conducted upon
the Leased Property), assessments, water, sewer or
other rents and charges, excise taxes, inspection,
authorization and similar fees and all other
governmental charges. Lessor is responsible for
the payment of all ad valorem taxes, personal
<PAGE>
property taxes imposed on furniture, fixtures and
equipment and taxes, assessments or similar
charges for the costs of public improvements,
excluding taxes on Lessee's personal property. In
addition, Lessee is responsible for maintaining
utility services to the Leased Property and paying
all charges for electricity, gas, oil, water,
sewer and other utilities used in the Leased
Property.
FRANCHISE FEES: Lessee is responsible for the payment of all
franchise fees due and owing in accordance with
the terms of the Franchise Agreement between BAC
Franchising, Inc., and Lessor.
INSURANCE: Lessee is responsible for payment of all costs and
expenses for providing and maintaining insurance
which is sufficient to furnish to Lessor and
Lessee reasonable and adequate protection in the
management and operation of the Leased Property.
Such insurance shall provide coverage for fire and
extended coverage, worker's compensation, general
liability and business interruption. All
insurance is required to be in the name of Lessor
and Lessee as the insureds and shall contain
riders and endorsements adequately protecting the
interests of Lessor and Lessee as they shall
appear. All insurance proceeds payable by reason
of any loss or damage to the Leased Property shall
be paid to Lessor and held in trust by Lessor to
be used for reconstruction or repair, as the case
may be, of any destruction to or damage of the
Leased Property.
ENVIRONMENTAL: Lessee is responsible for full compliance with all
environmental laws applicable to the Leased
Property and the operations thereon. Lessor
agrees to defend, indemnify and hold harmless
Lessee from and against any and all environmental
liabilities relating to the Leased Property
excluding any such liabilities caused by the acts
or failures to act of Lessee.
MAINTENANCE AND REPAIRS: Lessee is responsible for all maintenance and
repairs required on the Leased Property, whether
interior or exterior, ordinary or extraordinary,
foreseen or unforeseen, or arising by reason of a
condition existing prior to the commencement date
of the term of the lease, excluding, however,
structural elements of the Leased Property
(including the roof) and all underground
utilities, unless caused by the negligent acts or
willful misconduct of Lessee.
ASSIGNMENT: Lessee has the right to assign the lease or sublet
any portion of the Leased Property, without the
consent of Lessor, to an affiliate of Lessee;
provided, that (i) no event of default exists
under the lease on
2
<PAGE>
the part of Lessee, (ii) the assignment or
subletting does not materially diminish the
actual or potential percentage rent payable under
the lease; and (iii) the assignee or sublessee,
as the case may be, shall agree in writing to keep
and perform all of the terms of the lease required
on the part of Lessee to be kept and performed and
to otherwise be jointly and severally liable with
Lessee for the performance thereof. Except as set
forth above, Lessee may not assign the lease
without the prior consent of Lessor, which consent
can be withheld on a reasonable or unreasonable
basis by Lessor.
CAPITAL EXPENDITURES AND
RESERVES: Lessee is required to submit to Lessor for
Lessor's approval and inclusion in a capital
expenditure reserve account, a capital expenditure
budget for the next successive fiscal year during
the term of the lease. The purpose of the capital
expenditure reserve account is to keep the Leased
Property competitive with any hotel or hotels
similar in nature and type to the Leased Property
in the area of the hotel and to keep the Leased
Property in compliance with the applicable
provisions of the franchise agreement. The
capital expenditure budget includes, but is not
limited to, items such as expenditures required,
necessary and/or anticipated for the repair,
replacement or refurbishment of carpet, soft
goods, furniture, fixtures and equipment,
structural and mechanical items, alterations to
the Leased Property, reconstruction in the event
of damage or destruction of the Leased Property,
restoration pursuant to a condemnation or other
taking of the Leased Property, other required or
desired capital improvements of the Leased
Property, and such other items characterized as
capital expenditures under the Uniform System of
Accounts for Hotels. No monies may be expended
from the capital expenditure reserve account by
Lessee, without the prior written consent of
Lessor, unless such expenditures were previously
approved by lessor for inclusion in the capital
expenditure budget. Lessor is required to fund on
a monthly basis into the capital reserve account
an amount not to exceed four percent (4%) of gross
room revenues for the immediately preceding month.
HOTEL RENOVATIONS: Lessee is responsible for the performance, at the
sole cost and expense of Lessor, of certain
renovation work described in the lease. The
renovation work is scheduled to be completed
during the first three fiscal years of the lease
and includes such items as painting of rooms and
replacement of carpet, replacement of mattresses,
televisions, drapes, bedspreads and furniture, and
replacement of room cleaning items such as
housekeeping carts and vacuum cleaners. The
estimated
3
<PAGE>
cost of the renovation work pursuant to the
lease averages approximately $100,000 per year.
EVENTS OF DEFAULT: The lease contains default provisions typical of
hotel leases, including, but not limited to,
non-payment of rent, bankruptcy, dissolution or
liquidation of the Lessee, and default by Lessee
under the terms of the franchise agreement
relating to the Leased Property.
LESSEE'S RIGHT OF FIRST
REFUSAL: If Lessor receives a bona fide offer to purchase
the Leased Property, and Lessor desires to sell
the Leased Property pursuant to the terms of such
offer, Lessee shall have the option, within thirty
(30) days after receipt of written notice from
Lessor setting forth the terms of such offer, to
(i) purchase the Leased Property at the same price
and upon the same terms and conditions as those
set forth in the notice from Lessor, or (ii)
consent to the sale and the assignment of the
lease to the purchaser of the Leased Property.
SECURITY FOR LESSEE'S
PERFORMANCE: As security for the performance of Lessee's
covenants and obligations under the lease, Lessee
has assigned to Lessor forty-nine percent (49%) of
Lessee's membership interest in BacHost, LLC, a
Texas limited liability company ("BacHost").
BacHost is the beneficial owner of ninety-nine
percent (99%) of the limited partnership interests
of the Lessor.
4
<PAGE>
LEASE SUMMARY
COUNTRY HEARTH INN
FINDLAY, OHIO
The following is a summary of the material terms and conditions of that
certain Lease Agreement dated effective as of October 21, 1997, by and
between BH-FINDLAY, L.P., as Lessor, and BUCKHEAD AMERICA CORPORATION, as
Lessee, relating to that certain real property commonly known as a Country
Hearth Inn located in Findlay, Ohio, including all equipment, machinery,
fixtures and other items of property incidental to the use of the real
property as a hotel (the "Leased Property").
LESSOR: BH-Findlay, L.P., an Ohio limited partnership.
LESSEE: Buckhead America Corporation, a Georgia
corporation.
TERM: Commencing October 21, 1997, and ending October
21, 2012, unless otherwise terminated in
accordance with the terms of the Lease Agreement.
RENT: Annual base rental of $288,000 payable monthly
which increases by $5,000 per year for fiscal
years 1998 and 1999, plus percentage rentals
commencing January 1, 1998, and payable quarterly
equal to the total of (a) thirty percent (30%) of
the first $300,000 of cumulative gross revenues
for the applicable fiscal year through the
calendar quarter for which the calculation is
being made in excess of $740,000 (the "Gross
Revenue First Break Point") and (b) forty percent
(40%) of all amounts of cumulative gross revenues
for the applicable fiscal year through the
calendar quarter for which the calculation is
being made in excess of $1,040,000 (the "Gross
Revenue Second Break Point"). Lessee in no event
is responsible for the payment of percentage
rental if there are no funds available after the
payment of or to satisfy the payment of base rent.
Commencing January 1, 1998, the Gross Revenue
First Break Point and the Gross Revenue Second
Break Point are subject to increase to an amount
equal to the product of the break point in effect
for the prior fiscal year times the CPI Factor
plus one percent (1%).
PAYMENT OF IMPOSITIONS: Lessee is responsible for the payment of all taxes
(including, without limitation, all personal,
property, sales and use taxes, gross receipts or
similar taxes, as the same relate to or are
imposed upon Lessee or its business conducted upon
the Leased Property), assessments, water, sewer or
other rents and charges, excise taxes, inspection,
authorization and similar fees and all other
governmental charges. Lessor is responsible for
the payment of all ad valorem taxes, personal
<PAGE>
property taxes imposed on furniture, fixtures and
equipment and taxes, assessments or similar
charges for the costs of public improvements,
excluding taxes on Lessee's personal property. In
addition, Lessee is responsible for maintaining
utility services to the Leased Property and paying
all charges for electricity, gas, oil, water,
sewer and other utilities used in the Leased
Property.
FRANCHISE FEES: Lessee is responsible for the payment of all
franchise fees due and owing in accordance with
the terms of the Franchise Agreement between BAC
Franchising, Inc., and Lessor.
INSURANCE: Lessee is responsible for payment of all costs and
expenses for providing and maintaining insurance
which is sufficient to furnish to Lessor and
Lessee reasonable and adequate protection in the
management and operation of the Leased Property.
Such insurance shall provide coverage for fire and
extended coverage, worker's compensation, general
liability and business interruption. All
insurance is required to be in the name of Lessor
and Lessee as the insureds and shall contain
riders and endorsements adequately protecting the
interests of Lessor and Lessee as they shall
appear. All insurance proceeds payable by reason
of any loss or damage to the Leased Property shall
be paid to Lessor and held in trust by Lessor to
be used for reconstruction or repair, as the case
may be, of any destruction to or damage of the
Leased Property.
ENVIRONMENTAL: Lessee is responsible for full compliance with all
environmental laws applicable to the Leased
Property and the operations thereon. Lessor
agrees to defend, indemnify and hold harmless
Lessee from and against any and all environmental
liabilities relating to the Leased Property
excluding any such liabilities caused by the acts
or failures to act of Lessee.
MAINTENANCE AND REPAIRS: Lessee is responsible for all maintenance and
repairs required on the Leased Property, whether
interior or exterior, ordinary or extraordinary,
foreseen or unforeseen, or arising by reason of a
condition existing prior to the commencement date
of the term of the lease, excluding, however,
structural elements of the Leased Property
(including the roof) and all underground
utilities, unless caused by the negligent acts or
willful misconduct of Lessee.
ASSIGNMENT: Lessee has the right to assign the lease or sublet
any portion of the Leased Property, without the
consent of Lessor, to an affiliate of Lessee;
provided, that (i) no event of default exists
under the lease on
2
<PAGE>
the part of Lessee, (ii) the assignment or
subletting does not materially diminish the
actual or potential percentage rent payable
under the lease; and (iii) the assignee or
sublessee, as the case may be, shall agree in
writing to keep and perform all of the terms of
the lease required on the part of Lessee to be
kept and performed and to otherwise be jointly and
severally liable with Lessee for the performance
thereof. Except as set forth above, Lessee may
not assign the lease without the prior consent of
Lessor, which consent can be withheld on a
reasonable or unreasonable basis by Lessor.
CAPITAL EXPENDITURES AND
RESERVES: Lessee is required to submit to Lessor for
Lessor's approval and inclusion in a capital
expenditure reserve account, a capital expenditure
budget for the next successive fiscal year during
the term of the lease. The purpose of the capital
expenditure reserve account is to keep the Leased
Property competitive with any hotel or hotels
similar in nature and type to the Leased Property
in the area of the hotel and to keep the Leased
Property in compliance with the applicable
provisions of the franchise agreement. The
capital expenditure budget includes, but is not
limited to, items such as expenditures required,
necessary and/or anticipated for the repair,
replacement or refurbishment of carpet, soft
goods, furniture, fixtures and equipment,
structural and mechanical items, alterations to
the Leased Property, reconstruction in the event
of damage or destruction of the Leased Property,
restoration pursuant to a condemnation or other
taking of the Leased Property, other required or
desired capital improvements of the Leased
Property, and such other items characterized as
capital expenditures under the Uniform System of
Accounts for Hotels. No monies may be expended
from the capital expenditure reserve account by
Lessee, without the prior written consent of
Lessor, unless such expenditures were previously
approved by lessor for inclusion in the capital
expenditure budget. Lessor is required to fund on
a monthly basis into the capital reserve account
an amount not to exceed four percent (4%) of gross
room revenues for the immediately preceding month.
HOTEL RENOVATIONS: Lessee is responsible for the performance, at the
sole cost and expense of Lessor, of certain
renovation work described in the lease. The
renovation work is scheduled to be completed
during the first three fiscal years of the lease
and includes such items as painting of rooms and
replacement of carpet, replacement of mattresses,
televisions, drapes, bedspreads and furniture, and
replacement of room cleaning items such as
housekeeping carts and vacuum cleaners. The
estimated
3
<PAGE>
cost of the renovation work pursuant to the lease
averages approximately $70,000 per year.
EVENTS OF DEFAULT: The lease contains default provisions typical of
hotel leases, including, but not limited to,
non-payment of rent, bankruptcy, dissolution or
liquidation of the Lessee, and default by Lessee
under the terms of the franchise agreement
relating to the Leased Property.
LESSEE'S RIGHT OF FIRST
REFUSAL: If Lessor receives a bona fide offer to purchase
the Leased Property, and Lessor desires to sell
the Leased Property pursuant to the terms of such
offer, Lessee shall have the option, within thirty
(30) days after receipt of written notice from
Lessor setting forth the terms of such offer, to
(i) purchase the Leased Property at the same price
and upon the same terms and conditions as those
set forth in the notice from Lessor, or (ii)
consent to the sale and the assignment of the
lease to the purchaser of the Leased Property.
SECURITY FOR LESSEE'S
PERFORMANCE: As security for the performance of Lessee's
covenants and obligations under the lease, Lessee
has assigned to Lessor fifty-one percent (51%) of
Lessee's membership interest in BacHost, LLC, a
Texas limited liability company ("BacHost").
BacHost is the beneficial owner of ninety-nine
percent (99%) of the limited partnership interests
of the Lessor.
4
