EXHIBIT 2.2
CONTRIBUTION AGREEMENT
DATED AS OF MARCH 17, 1998
BY AND AMONG
PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P.,
PATRIOT AMERICAN HOSPITALITY OPERATING PARTNERSHIP, L.P.,
PATRIOT AMERICAN HOSPITALITY, INC.,
WYNDHAM INTERNATIONAL, INC.,
SF HOTEL COMPANY, L.P.
AND
THE PARTIES
IDENTIFIED ON EXHIBIT A HERETO
TABLE OF CONTENTS
Page
Section 1. Definitions.........................................................2
Section 2. Basic Transaction...................................................7
(a) Management Deposit; Contributed Interests...........................7
(b) Base Acquisition Consideration......................................7
(c) Reimbursement of Site Advances......................................8
(d) Development Payment................................................11
(e) Adjustment Consideration...........................................11
(f) Contingent Consideration...........................................12
(g) Post-Closing Fee Payments..........................................19
(h) Post-Closing Payment with respect to Leased Hotels.................20
(i) SFHC Partners' Representative......................................21
Section 3. Closing of the Transaction.........................................23
Section 4. Conditions to Obligation of Buyer..................................24
(a) Representations and Warranties.....................................24
(b) Performance of Covenants...........................................24
(c) Consents...........................................................24
(d) HSR Act............................................................24
(e) Absence of Litigation..............................................24
(f) Compliance with Applicable Laws....................................25
(g) SFHC Closing Deliveries............................................25
(h) No Material Adverse Change to SFHC.................................26
Section 5. Conditions to Obligation of SFHC and SFHC Partners.................26
(a) Representations and Warranties.....................................26
(b) Performance of Covenants...........................................26
(c) HSR Act............................................................26
(d) Absence of Litigation..............................................26
(e) Compliance with Applicable Laws....................................26
(f) Consents...........................................................27
(g) Buyer's Closing Deliveries.........................................27
(h) No Material Adverse Change to Buyer................................27
(i) Consummation of Xxxxxx Transactions................................27
Section 6. Representations and Warranties of SFHC.............................28
(a) Organization of SFHC and its Affiliates............................28
(b) Authorization of Transaction.......................................28
(c) Noncontravention; Consents.........................................29
(d) Capitalization of SFHC and its Affiliates..........................30
(e) Brokers' Fees......................................................30
(i)
Page
(f) Subsidiaries and Investments.......................................30
(g) Financial Statements...............................................31
(h) Events Subsequent to the Financial Statements......................31
(i) Legal Compliance...................................................33
(j) Leased Properties..................................................33
(k) Title..............................................................34
(l) Condition of Assets................................................34
(m) Tax Matters........................................................34
(n) Intellectual Property..............................................36
(o) Contracts and Commitments..........................................37
(p) Insurance; Banking Relations.......................................39
(q) Litigation; Proceedings............................................40
(r) Licenses...........................................................40
(s) Employees..........................................................40
(t) Employee Benefits..................................................41
(u) Environment, Health and Safety.....................................42
(v) Insider Interests..................................................43
(w) Designated Properties Formula......................................43
(x) Disclosure.........................................................43
Section 7. Representations and Warranties of Buyer............................43
(a) Organization of Buyer and Certain Affiliates.......................43
(b) Authorization of Transaction.......................................44
(c) Noncontravention...................................................44
(d) Status of the Partnership Agreement................................44
(e) No Litigation; Proceedings.........................................45
(f) Units..............................................................45
(g) SEC Reports........................................................45
(h) Partnership Admission Agreements...................................46
(i) Financial Statements...............................................46
(j) German Law Compliance..............................................47
Section 8. Pre-Closing Covenants..............................................47
(a) Affirmative Covenants of SFHC......................................47
(b) Negative Covenants of SFHC.........................................49
(c) Affirmative Covenants of Buyer.....................................51
(d) Negative Covenant of Buyer.........................................51
Section 9. Survival...........................................................52
(ii)
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Section 10. Additional Agreements..............................................52
(a) Mutual Assistance and Records......................................52
(b) Transaction Expenses...............................................52
(c) Certain Taxes......................................................53
(d) Further Assurances.................................................53
(e) Litigation Support.................................................53
(f) Confidentiality; Press Release.....................................54
(g) Board Representation...............................................54
(h) Employment Matters.................................................54
(i) Consulting Matters.................................................55
(j) Carried Interest Payments..........................................55
(k) Registration Rights................................................55
(l) Partnership Admission Agreements...................................55
(m) Exclusivity........................................................56
(n) Wichita Lease Agreement............................................56
(o) Compliance with German Law.........................................56
(p) Agreement to Hold Certain Assets ..................................56
(q) Hanover Expansion Payment..........................................58
(r) Notification of Proposed Sale......................................58
(s) Geographical Restriction on Competition............................58
(t) Tax Basis Letters..................................................58
Section 11. Termination; Effect of Termination.................................59
(a) Termination........................................................59
(b) Effect of Termination..............................................60
(c) Good Faith Discussions.............................................61
Section 12. Miscellaneous......................................................61
(a) No Third Party Beneficiaries.......................................61
(b) Entire Agreement...................................................61
(c) Successors and Assigns.............................................61
(d) Counterparts.......................................................62
(e) Severability.......................................................62
(f) Captions...........................................................62
(g) Notices............................................................62
(h) Governing Law; Venue...............................................64
(i) Attorneys' Fees....................................................64
(j) Amendments and Waivers.............................................64
(k) Knowledge of Persons Attributable to SFHC..........................64
(l) Knowledge of Persons Attributable to Buyer.........................65
(m) Obligations of Patriot REIT and Wyndham International, Inc.........65
(n) Construction.......................................................65
(iii)
SCHEDULES
SFHC Disclosure Schedule
Buyer Disclosure Schedule
EXHIBITS
Exhibit 1.1 - Contract Properties
Exhibit 1.2 - Reorganization Transactions
Exhibit 1.3 - Innkeepers Properties
Exhibits 2(b)(i)-1
and 2(b)(i)-2 - Partnership Admission Agreements
Exhibit 2(c)(i)(A) - Approved Properties
Exhibit 2(c)(i)(B) - Other Site Advance Properties
Exhibit 2(f)(i) - Designated Properties
Exhibit 2(f)(iii) - Hard Costs of Development Property
Exhibit 4(g)(ii) - Assignment and Assumption Agreement
Exhibit 10(h)(i)-1 - Term Sheet Relating to Employment Agreement -1
Exhibit 10(h)(i)-2 - Term Sheet Relating to Employment Agreement -2
Exhibit 10(i) - Consulting Agreement
Exhibit 10(j) - Carried Interest Payments Agreement
Exhibit 10(k)-1 - Form of Registration Rights Agreement -1 (OP Unit Version)
Exhibit 10(k)-2 - Form of Registration Rights Agreement -2 (Paired Shares Version)
Exhibit 10(n) - Term Sheet Relating to Wichita Lease Agreement
Exhibit 10(s)-1 - Summerfield Geographic Restrictions
Exhibit 10(s)-2 - Sierra Geographic Restrictions
(iv)
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into
as of March 17, 1998, by and among Patriot American Hospitality Partnership,
L.P., a Delaware limited partnership ("Buyer"), Patriot American Hospitality
Operating Partnership, L.P. (the "Operating Partnership"), Patriot American
Hospitality, Inc., a Delaware corporation ("Patriot REIT"), Wyndham
International, Inc., a Delaware corporation, SF Hotel Company, L.P., a Kansas
limited partnership ("SFHC"), and the individuals and other entities listed on
the signature pages hereto (collectively referred to as the "SFHC Partners" and
individually as a "SFHC Partner").
WHEREAS, the SFHC Partners will own, as of the Closing Date (as defined
below), of record and beneficially, all of the partnership interests of SFHC
(such partnership interests being referred to herein collectively as the
"Contributed Interests");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, each SFHC Partner desires to contribute to Buyer all of its
Contributed Interest held immediately prior to the Closing (as defined below);
WHEREAS, Buyer desires to accept such contribution from each SFHC
Partner and, among other things, issue thereto units of limited partnership
interest of Buyer ("Units") and pay thereto certain cash consideration described
herein, in consideration thereof;
WHEREAS, prior to or contemporaneously with the execution and delivery
of this Agreement, fifteen limited partnerships affiliated with SFHC have
executed and delivered to Buyer Purchase and Sale Agreements dated as of March
17, 1998 (the "Shimizu Partnership Hotel Sale Agreements") pursuant to which
they are to sell and transfer to Hospitality Properties Trust ("HPT") certain
real property assets which are to be leased by HPT to Summerfield HPT Lease
Company, L.P. (the transactions pursuant to which such real property assets are
to be leased by HPT to Summerfield HPT Lease Company, L.P. being referred to
herein as the "HPT Lease Transaction");
WHEREAS, prior to the execution and delivery of this Agreement, certain
limited partnerships affiliated with SFHC have executed and delivered to Buyer
the Xxxxxx Agreements (as defined below) pursuant to which they are to sell and
transfer to Buyer or to Buyer's assignee certain real property assets;
WHEREAS, prior to the Closing, SFHC will effect the Reorganization
Transactions and the Excluded Asset Distribution Transactions (each as defined
below); and
WHEREAS, simultaneous with the Closing, the SFHC Partners will enter
into the Partnership Admission Agreements (as defined below) with Buyer and the
Operating Partnership, respectively, in accordance with the terms hereof;
NOW, THEREFORE, in consideration of the mutual promises herein made,
and in consideration of the representations, warranties and covenants herein
contained, Buyer, SFHC and each SFHC Partner (each a "Party" and collectively,
the "Parties"), intending to be legally bound, agree as follows:
Section 1. Definitions. The following definitions shall be applied to
the capitalized terms used in this Agreement for all purposes, unless otherwise
clearly indicated to the contrary.
"Affiliate", with respect to Buyer or any other Patriot/Wyndham Entity
(as defined below), has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended and, with
respect to SFHC, means an entity controlled by SFHC.
"Applicable Laws" mean any applicable building, zoning, subdivision,
Environmental, Health and Safety Laws or other governmental laws, statutes,
ordinances, resolutions, rules, codes, regulations, orders or determinations of
any Government Entity.
"Assumed Liabilities" mean the liabilities being assumed by Summerfield
Associates, L.P. pursuant to the Assignment and Assumption Agreement.
"Business" means SFHC's hotel management business and brand names.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Contemplated Transactions" mean the Reorganization Transactions and
the transfer of the Contributed Interests by the SFHC Partners to Buyer at the
Closing.
"Contract Properties" mean collectively the parcels of real estate
described in Exhibit 1.1 hereto, together with any improvements thereon.
"Xxxxxx Agreements" mean (i) those certain Agreements of Purchase and
Sale of even date herewith, pursuant to which Denver South Summerfield
Associates, L.P., Hanover Summerfield Suites Associates, L.P., Hanover South
Summerfield Suites, L.P. and Waltham Summerfield Associates, L.P. are to sell
and transfer to Buyer or to Buyer's assignee certain real property assets (the
"Xxxxxx Partnership Hotel Sale Agreements"), and (ii) that certain letter
agreement of even date herewith relating to the transactions pursuant to which
the partnership interests in said limited partnership may be transferred to
SFHC.
"Development Agreements" mean with respect to the Contract Properties
and Development Properties (as defined below), the agreements entered into by
the respective owners thereof and Summerfield Suites Development Company, L.P.,
providing for the development of the sites thereof.
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"Employee Pension Benefit Plan" shall have the meaning set forth in
Section 3(2) of ERISA.
"Employee Welfare Benefit Plan" shall have the meaning set forth in
Section 3(l) of ERISA.
"Environmental, Health and Safety Laws" means all laws, rules and
regulations of Government Entities and other requirements having the force or
effect of law relating to or imposing liability or standards of conduct
concerning pollution or protection of the environment, public health and safety,
or employee health and safety, and all judgments, orders and decrees of
Government Entities having the force and effect of law issued or promulgated
thereunder, and all related common law theories, including the Comprehensive
Environmental Response, Compensations and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976 and the Occupational Safety and Health Act
of 1970, each as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means the assets being transferred from SFHC to
Summerfield Associates, L.P. pursuant to the Assignment and Assumption Agreement
(as defined below).
"Excluded Asset Distribution Transactions" mean (i) the transactions
described in the Assignment and Assumption Agreement and (ii) the distribution
by SFHC to the SFHC Partners of the limited partnership interests in Summerfield
Associates, L.P.
"FIRPTA Certificate" means an affidavit in the form prescribed by
Treasury Regulations Section 1.1445-2(b)(2)(iii)(B) that such Person is not a
foreign person.
"GAAP" means United States generally accepted accounting principles.
"Government Entity" means the United States of America or any other
nation, any state, county, municipal or other political subdivision thereof, or
any governmental or quasi-governmental agency, department, commission, board,
bureau, office, instrumentality or any entity exercising executive, legislative,
regulatory or administrative functions of government.
"Innkeepers Properties" means collectively all of the properties
described at Nos. 1 through 9 in Exhibit 1.3 attached hereto.
"Intellectual Property" means (i) all inventions (whether or not
patentable or reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, extensions, and reexaminations
thereof, (ii) all registered and unregistered trademarks, service marks, trade
dress, logos, trade names, Internet domain names and corporate names, including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith,
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(iii) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all trade secrets and
confidential business information, (v) all computer software, (vi) all other
proprietary rights, and (vii) all copies and tangible embodiments thereof.
"Interstate Acquisition" means the acquisition by Buyer or an Affiliate
of Buyer (by merger or otherwise) of Interstate Hotels Company.
"Interstate Acquisition Date" means the date on which the Interstate
Acquisition is consummated.
"Licenses" means all licenses, permits and approvals required by any
Government Entity, held by SFHC and in force on the Closing Date (immediately
after the completion of the Reorganization Transactions and the Excluded Asset
Distribution Transactions) with respect to the construction, ownership,
operation, leasing, maintenance, or use of the Innkeepers Properties or the
Contract Properties.
"Lien" means any security interest, pledge, bailment (in the nature of
a pledge or for purposes of security), mortgage, deed of trust, the grant of a
power to confess judgment, conditional sales and title retention agreement
(including any lease in the nature thereof), charge or encumbrance.
"Management Agreements" mean all management agreements in effect as of
the date of this Agreement to which Summerfield Suites Management Company, L.P.
is a party, pursuant to which Summerfield Suites Management Company, L.P.
manages hotels.
"Master Lease" means the Lease Master Agreement (undated) by and
between Innkeepers Summerfield General, L.P., Innkeepers Summerfield Mt. Laurel,
L.P. and Innkeepers Sunrise Tinton Falls, L.P. and Summerfield Suites Lease
Company, L.P.
"Material Adverse Effect on Buyer" means any effect that is materially
adverse to the financial condition or results of operations of Buyer and its
subsidiaries taken as a whole; provided, however, that (i) any adverse effect
arising from or relating to general business or economic conditions shall not be
deemed to constitute, and shall not be taken into account in determining whether
there has been, a "Material Adverse Effect on Buyer," (ii) any adverse effect
arising from or relating to conditions affecting the lodging or hospitality
industry generally shall not be deemed to constitute, and shall not be taken
into account in determining whether there has been, a "Material Adverse Effect
on Buyer," and (iii) any adverse effect arising from or relating to the
Reorganization Transactions, the Excluded Asset Distribution Transactions or the
taking of any action contemplated or permitted by this Agreement or any of the
other Transaction Documents shall not be deemed to constitute, and shall not be
taken into account in determining whether there has been, a "Material Adverse
Effect on Buyer."
4
"Material Adverse Effect on SFHC" means any effect that is materially
adverse to the financial condition or results of operations of the management
business, the development business, the leasing business and the hotel business
of SFHC and its Affiliates taken as a whole; provided, however, that (i) any
adverse effect arising from or relating to general business or economic
conditions shall not be deemed to constitute, and shall not be taken into
account in determining whether there has been, a "Material Adverse Effect on
SFHC," (ii) any adverse effect arising from or relating to conditions affecting
the lodging or hospitality industry generally shall not be deemed to constitute,
and shall not be taken into account in determining whether there has been, a
"Material Adverse Effect on SFHC," (iii) any adverse effect arising from or
relating to the announcement or pendency of any of the transactions contemplated
by this Agreement or any of the other Transaction Documents shall not be deemed
to constitute, and shall not be taken into account in determining whether there
has been, a "Material Adverse Effect on SFHC," and (iv) any adverse effect
arising from or relating to the Reorganization Transactions, the Excluded Asset
Distribution Transactions, the transactions contemplated by the Xxxxxx
Agreements and the Shimizu Partnership Hotel Sale Agreements, the HPT Lease
Transactions or the taking of any action contemplated or permitted by this
Agreement or any of the other Transaction Documents shall not be deemed to
constitute, and shall not be taken into account in determining whether there has
been, a "Material Adverse Effect on SFHC."
"Multiemployer Plan" shall have the meaning set forth in Section 3(37)
of ERISA.
"Occupancy Agreements" mean all leases, concession or occupancy
agreements, if any, binding upon SFHC and in effect as of the date of this
Agreement with respect to any hotel under which any commercial tenants (other
than hotel guests) or concessionaires occupy space in such hotel.
"Operating Agreements" means collectively all management, service,
supply and maintenance contracts, if any, binding upon SFHC as of the date of
this Agreement and in effect with respect to any real property (and
improvements) and all other contracts (other than the Development Agreements,
the Occupancy Agreements, and the Management Agreements) that are binding on
SFHC as of the date of this Agreement and that affect any real property (and
improvements) or are otherwise related to the construction, ownership,
operation, occupancy or maintenance of any hotel.
"Paired Shares" means the shares of common stock of Patriot REIT and
Wyndham International, Inc. that trade together on the New York Stock Exchange.
"Patriot/Wyndham Entity" means any of Patriot REIT, Wyndham
International, Inc., Buyer and the Operating Partnership (collectively, the
"Patriot/Wyndham Entities").
"Percentage Leases" mean the leases as more particularly defined in the
Master Lease.
"Permitted Lien" means any Lien (i) relating to or created, arising or
existing in connection with any Tax or other governmental charge or levy not yet
due or (ii) that does not
5
materially detract from the value, or does not materially interfere with the
present or continued use, of the asset or property to which it relates, or does
not otherwise materially impair the Business.
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a Government Entity.
"Prohibited Transaction" has the meaning set forth in Section 406 of
ERISA and Section 4975 of the Code.
"Purchase Agreements" mean the contracts, agreements, or letters of
intent pursuant to which SFHC or an Affiliate of SFHC is entitled to acquire the
Contract Properties.
"Reorganization Transactions" mean the transactions to be effected by
SFHC and its Affiliates prior to the Closing, substantially in accordance with
the terms set forth in Exhibit 1.2 hereto, for the purpose of causing the assets
and liabilities of Summerfield Suites Management Company, L.P., Summerfield
Suites Development Company, L.P., Summerfield Construction Company, L.C. and
Summerfield Suites Lease Company, L.P., to be transferred to SFHC.
"Specified Representations of Buyer" mean the representations and
warranties of Buyer contained in the first sentence of Section 7(c).
"Specified Representations of SFHC" mean the representations and
warranties of SFHC contained in Section 6(c)(i), Section 6(i), the third
sentence of Section 6(o) and Section 6(s)(i).
"Tangible Personal Property" means the items of tangible personal
property consisting of all furniture, fixtures, equipment, machinery and other
personal property of every kind and nature (but expressly excluding cash-on-hand
and xxxxx cash funds) owned by SFHC on the Closing Date (following the
completion of the Reorganization Transactions and the Excluded Asset
Distribution Transactions).
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, and including any
obligation to indemnify or otherwise assume or succeed to the Tax liability of
any other Person.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and
6
including any amendment thereof, in each case required to be filed with any
Government Entity.
The "Twenty-Day Average Stock Price" for any period of 20 consecutive
trading days shall be the average of the closing sales prices of Paired Shares
on the New York Stock Exchange (as reported in The Wall Street Journal) for such
20 consecutive trading days.
"Transaction Documents" means this Agreement and all other agreements,
instruments, certificates and other documents required to be entered into or
delivered pursuant to this Agreement by Buyer or an Affiliate on the one hand,
and SFHC or an Affiliate on the other hand, in connection with the transactions
contemplated to be consummated by any of the foregoing.
Section 2. Basic Transaction
(a) Management Deposit; Contributed Interests
(i) Management Deposit. Buyer has delivered to SFHC as
of the execution of this Agreement a demand promissory note that
matures on April 9, 1998 in the principal amount of $13 million (the
principal amount actually paid to SFHC pursuant to said promissory note
being referred to herein as the "Management Deposit"). Buyer's
obligations under said promissory note are secured by an irrevocable
standby letter of credit in favor of SFHC to be issued no later than
three days after the date hereof. All fees payable to the issuer of
such letter of credit for such letter of credit shall be paid by the
SFHC Partners at the time of issuance. The Management Deposit shall be
nonrefundable; provided, however, that: (A) if the Closing occurs, then
the amount of the Management Deposit (to the extent previously received
by SFHC in cash) shall be credited against the Cash Consideration
payable pursuant to Section 2(b)(i); and (B) the Management Deposit
shall (to the extent previously received by SFHC in cash) be returned
to Buyer under the specific circumstances set forth in the last
sentence of Section 11(b) but not under any other circumstances.
(ii) Contributed Interests. On and subject to the terms
and conditions of this Agreement, at the Closing (as defined below),
for the consideration specified in this Section 2, each SFHC Partner
agrees to contribute and deliver or cause to be delivered to Buyer, and
Buyer agrees to accept in exchange for the consideration set forth
herein, the Contributed Interest owned by such SFHC Partner as of the
Closing, free and clear of any and all Liens.
(b) Base Acquisition Consideration.
(i) The consideration to be delivered at the Closing by
Buyer to the SFHC Partners' Representative (as defined below) (as agent
for the SFHC Partners)
7
shall consist of: (A) 3,157,172 Units in the aggregate; (B) $100
million payable in immediately available funds (the "Cash
Consideration"); and (C) a promissory note in the principal amount of
$4.6 million (the "Promissory Note Consideration"). Simultaneously with
the Closing, each SFHC Partner and the respective general partners of
Buyer and the Operating Partnership will execute and deliver the
Partnership Admission Agreements in the forms of Exhibits 2(b)(i)-1 and
2(b)(i)-2 hereto (each, a "Partnership Admission Agreement"). Pursuant
to the Partnership Admission Agreement with the Operating Partnership,
the SFHC Partners' Representative will cause the Promissory Note
Consideration to be contributed to the Operating Partnership in
exchange for the delivery to the SFHC Partners' Representative (as
agent for the SFHC Partners) of a number of its units of limited
partnership interest in the Operating Partnership (each an "Operating
Unit") equal to the number of Units issued in accordance with clause
"(A)" of the first sentence of this Section 2(b)(i).
(ii) Notwithstanding anything to the contrary contained
in this Agreement, the SFHC Partners' Representative may (by notifying
Buyer not less than two business days prior to the Scheduled Closing
Time) elect to receive any number of Paired Shares (up to a maximum of
1,000,000 Paired Shares) at the Closing in lieu of receiving a like
number of Units and Operating Units pursuant to Section 2(b)(i). If the
SFHC Partners' Representative so elects, then Buyer shall cause the
designated number of Paired Shares to be issued and delivered to the
SFHC Partners' Representative at the Closing.
(c) Reimbursement of Site Advances.
(i) For purposes of this Section 2(c), the following
terms shall have the following respective meanings:
(A) "Approved Properties" shall mean the
properties identified on Exhibit 2(c)(i)(A).
(B) "Other Site Advance Properties" shall mean the
properties identified on Exhibit 2(c)(i)(B).
(C) The "Closing Date Site Advance Reimbursement
Amount" shall be equal to the amount determined by SFHC to represent
the aggregate dollar amount of all "Site Advances" of SFHC and its
Affiliates as of the close of business on the day immediately preceding
the Closing Date with respect to all of the Approved Properties (which
amount shall be set forth on a statement (the "Site Advance Statement")
to be delivered by SFHC to Buyer immediately prior to the Closing);
provided, however, that in no event shall the Closing Date Site Advance
Reimbursement Amount exceed the applicable amount set forth on Exhibit
2(c)(i)(C). The Closing Date Site Advance Reimbursement Amount shall be
determined by SFHC
8
in a manner consistent with the past accounting practices of SFHC and
shall not include any amounts which represent costs that may not be
capitalized under GAAP. The parties acknowledge that the aggregate
dollar amount of all "Site Advances" as of the day immediately
preceding the date of this Agreement of SFHC and its Affiliates for all
of the Approved Properties is $1,196,650.19. Buyer shall not be
permitted to dispute or object to SFHC's determination of the Closing
Date Site Advance Reimbursement Amount (as set forth on the Site
Advance Statement), except on the grounds that such determination was
not made in a manner consistent with the past accounting practices of
SFHC, in accordance with GAAP, or in accordance with the provisions of
this Section 2(c).
(D) The "Site Advance Reimbursement Amount" for
each Other Site Advance Property shall be equal to the amount mutually
agreed to by the Parties to represent the aggregate dollar amount of
all "Site Advances" of SFHC and its Affiliates as of the close of
business on the day immediately preceding the Closing Date with respect
to such Other Site Advance Property (which amount shall be set forth on
the Site Advance Statement); provided, however, that in no event shall
the Site Advance Reimbursement Amount exceed the sum of (i) $78,759.35
(the aggregate dollar amount of all "Site Advances" for Other Site
Advance Properties as of the day immediately preceding the date of this
Agreement as set forth on Exhibit 2(c)(i)(B) hereto) and (ii) any "Site
Advances" for Other Site Advance Properties incurred in accordance with
Section 8(b)(xiv) of this Agreement. The Site Advance Reimbursement
Amount for each Other Site Advance Property shall be determined in a
manner consistent with the past accounting practices of SFHC and shall
not include any amounts which represent costs that may not be
capitalized under GAAP.
(ii) At the Closing, Buyer shall pay to the SFHC
Partners' Representative (as agent for the SFHC Partners), in
immediately available funds (and in addition to the amounts payable
pursuant to Sections 2(b) and 2(d)), without any deduction or setoff of
any nature, an amount equal to the Closing Date Site Advance
Reimbursement Amount (as set forth on the Site Advance Statement).
(iii) In the event that (A) any Patriot/Wyndham Entity
or any Affiliate of any Patriot/Wyndham Entity or any other Person for
which any Patriot/Wyndham Entity or any Affiliate of any
Patriot/Wyndham Entity provides (or has agreed to provide) any
development or management services shall have acquired any Other Site
Advance Property (or any interest therein or any real property (or
portion thereof) on which any Other Site Advance Property is proposed
to be constructed) or (B) any Patriot/Wyndham Entity or any Affiliate
of any Patriot/Wyndham Entity notifies SFHC or any SFHC Partner that
any Patriot/Wyndham Entity or any Affiliate of any Patriot/Wyndham
Entity intends to acquire any Other Site Advance Property (or any
interest therein or any real property (or portion thereof) on which any
Other Site Advance Property is proposed to be constructed) or to act as
a developer or manager for any other Person who intends to acquire any
Other Site Advance Property (or any
9
interest therein or any real property (or portion thereof) on which any
Other Site Advance Property is proposed to be constructed), then on the
later of the Closing Date or two business days after the occurrence of
any of the events referred to in clause "(A") or clause "(B)" of this
sentence, Buyer shall promptly pay to the SFHC Partners' Representative
(as agent for the SFHC Partners), in immediately available funds (and
in addition to the amounts payable pursuant to Sections 2(b) and 2(d))
and without any deduction or setoff of any nature, an amount equal to
the Site Advance Reimbursement Amount (as set forth on the Site Advance
Statement) for such Other Site Advance Property.
(iv) If within 30 calendar days after the Closing, Buyer
objects to SFHC's determination of the Closing Date Site Advance
Reimbursement Amount (as set forth on the Site Advance Statement), then
Buyer shall deliver to the SFHC Partners' Representative a written
notice (the "Dispute Notice") describing in reasonable detail Buyer's
objections to such determination by SFHC, and setting forth the dollar
amount determined by Buyer to represent the Closing Date Site Advance
Reimbursement Amount. If a Dispute Notice describing in reasonable
detail Buyer's objections to SFHC's determination of the Closing Date
Site Advance Reimbursement Amount (as set forth on the Site Advance
Statement) is not delivered by Buyer to the SFHC Partners'
Representative within 30 calendar days after the Closing, then SFHC's
determination of the Closing Date Site Advance Reimbursement Amount (as
set forth on the Site Advance Statement) shall be conclusive and
binding upon Buyer.
(v) If Buyer delivers a Dispute Notice to the SFHC
Partners' Representative within 30 calendar days after the Closing and
Buyer and the SFHC Partners' Representative are unable to resolve the
dispute reflected in such Dispute Notice within 15 calendar days of
delivery of such notice, the dispute shall promptly be submitted by
Buyer and the SFHC Partners' Representative to a "big six" accounting
firm (other than the independent accountant for Buyer or SFHC as of the
Closing Date) mutually acceptable to Buyer and the SFHC Partners'
Representative (the "Accounting Firm"). The decision of the Accounting
Firm shall (absent manifest error) be binding on Buyer and the SFHC
Partners' Representative (it being understood that in no event shall
the Closing Date Site Advance Reimbursement Amount be less than the
amount set forth in the Dispute Notice or more than the amount set
forth in the Site Advance Statement). If the Accounting Firm determines
that SFHC's determination of the Closing Date Site Advance
Reimbursement Amount (as set forth on the Site Advance Statement) was
not made in a manner consistent with the past accounting practices of
SFHC, was not made in accordance with GAAP, was not made in accordance
with the provisions of Section 2(c), or that SFHC's determination of
the Closing Date Site Advance Reimbursement Amount (as set forth on the
Site Advance Statement) exceeds the actual dollar amount of "Site
Advances" for Approved Properties as of the close of business on the
day immediately preceding the Closing Date, then the SFHC Partners'
Representative shall promptly cause to be paid to Buyer the amount by
which the Closing Date Site Advance Reimbursement Amount (as set
10
forth on the Site Advance Statement) exceeds the actual dollar amount
of "Site Advances" for Approved Properties as of the close of business
on the day immediately preceding the Closing Date (as determined by the
Accounting Firm). All fees of and costs payable to the Accounting Firm
in connection with the determination referred to in this Section 2(c)
shall be borne by Buyer; provided, however, that if the Closing Date
Site Advance Reimbursement Amount as determined by SFHC exceeds by 0.5%
or more such amount as determined by the Accounting Firm, then such
fees and costs shall be borne by the SFHC Partners.
(d) Development Payment.
(i) Definitions.
(A) The "Cumulative Net Development Income" shall
be equal to $20,441 multiplied by the total number of days in the
period commencing on January 3, 1998 and ending on the Closing Date.
(B) The "Aggregate Development Amount" shall be
equal to the total dollar amount of the development fees actually
received by Summerfield Suites Development Company, L.P. under the
Development Agreements during the period commencing on January 3, 1998
and ending on the Closing Date.
(ii) If the Cumulative Net Development Income exceeds
the Aggregate Development Amount, then, on the Closing Date, Buyer
shall pay to the SFHC Partners' Representative (as agent for the SFHC
Partners), in immediately available funds (and in addition to the
amounts payable pursuant to Sections 2(b) and 2(c)), a dollar amount
equal to the amount by which the Cumulative Net Development Income
exceeds the Aggregate Development Amount. If the Aggregate Development
Amount exceeds the Cumulative Net Development Income, then the Cash
Consideration payable pursuant to Section 2(b) shall be reduced by a
dollar amount equal to the amount by which the Aggregate Development
Amount exceeds the Cumulative Net Development Income.
(e) Adjustment Consideration.
(i) If the Highest Average Stock Price (as defined
below) is less than $29.14, then, on or before January 4, 1999, Buyer
shall cause to be delivered to the SFHC Partners' Representative (as
agent for the SFHC Partners) consideration (in the form or forms
determined pursuant to Section 2(e)(ii)) in an amount equal to the
aggregate number of Units and Paired Shares delivered pursuant to
Section 2(b) multiplied by the lesser of (A) $1.50 or (B) the amount by
which $29.14 exceeds the Highest Average Stock Price. If the Highest
Average Stock Price is equal to or more than $29.14, then no
consideration shall be payable pursuant to this Section 2(e)(i).
11
(ii) Buyer may elect to deliver the consideration
payable pursuant to Section 2(e)(i): (A) in the form of cash; (B) in
the form of Units and Operating Units; or (C) in any combination of
cash and Units and Operating Units. On or before November 15, 1998,
Buyer will deliver to the SFHC Partners' Representative a written
notice of election setting forth the portion of the consideration
payable pursuant to Section 2(e)(i) that Buyer wishes to deliver to the
SFHC Partners in the form of cash and the portion of such consideration
that Buyer wishes to deliver to the SFHC Partners in the form of Units
and Operating Units, and Buyer shall cause such consideration to be
delivered to the SFHC Partners' Representative in accordance with such
notice of election. If Buyer fails to deliver such written notice of
election to the SFHC Partners' Representative on or before November 15,
1998, Buyer shall be deemed to have elected to pay all consideration
payable pursuant to Section 2(e)(i) in the form of cash. For purposes
of this Section 2(e), each Unit and Operating Unit, considered
together, shall be deemed to have a value equal to the Twenty-Day
Average Stock Price for the period of twenty consecutive trading days
ending on December 31, 1998.
(iii) For purposes of this Section 2(e), the "Highest
Average Stock Price" shall be the highest Twenty-Day Average Stock
Price for any period of twenty consecutive trading days commencing on
or after the Closing Date and ending on or before December 31, 1998.
(f) Contingent Consideration.
(i) Definitions.
(A) "Designated Properties" shall mean the
properties identified on Exhibit 2(f)(i) hereto; provided, however,
that SFHC, in its discretion (with the approval of Buyer, which may not
be unreasonably withheld), may modify Exhibit 2(f)(i) at any time or
times prior to the Closing to reflect the substitution of any property
or properties for any of the properties identified on Exhibit 2(f)(i).
(B) The "Opening Date" for a particular Designated
Property shall be the first day on which the hotel is open for
business.
(C) The "1998 Pro Forma Amount" for a particular
Designated Property shall be the amount calculated pursuant to the
formula set forth opposite the reference to such Designated Property on
Exhibit 2(f)(i) hereto (under the caption "Formula"), using the 1998
calendar year as the "Applicable Period." (If the Opening Date for a
particular Designated Property has not occurred on or before December
31, 1998, then the 1998 Pro Forma Amount for such Designated Property
shall be zero.)
(D) The "1999 Pro Forma Amount" for a particular
Designated Property shall be the amount calculated pursuant to the
formula set forth
12
opposite the reference to such Designated Property on Exhibit 2(f)(i)
hereto (under the caption "Formula"), using as the "Applicable Period"
the period commencing on the later of January 1, 1999 or the Opening
Date for such Designated Property and ending on December 31, 1999. (If
the Opening Date for a particular Designated Property has not occurred
on or before December 31, 1999, then the 1999 Pro Forma Amount for such
Designated Property shall be zero.)
(E) The "2000 Pro Forma Amount" for a particular
Designated Property shall be the amount calculated pursuant to the
formula set forth opposite the reference to such Designated Property on
Exhibit 2(f)(i) hereto (under the caption "Formula"), using as the
"Applicable Period" the period commencing on January 1, 2000 and ending
on the first anniversary of the Opening Date for such Designated
Property. (If the Opening Date for a particular Designated Property
occurs on or before December 31, 1998, then the 2000 Pro Forma Amount
for such Designated Property shall be zero.)
(F) The "1998 Shortfall Amount" shall be equal to
the amount (if any) by which $2,058,000 exceeds the total of the 1998
Pro Forma Amounts for all Designated Properties. (If the total of the
1998 Pro Forma Amounts for all Designated Properties is equal to or
exceeds $2,058,000, then the 1998 Shortfall Amount shall be zero.)
(G) The "1999 Open-Day Number" for a particular
Designated Property shall be equal to the number of days in the period
commencing on the later of January 1, 1999 or the Opening Date for such
Designated Property and ending on December 31, 1999.
(H) "Development Property" shall mean any
Designated Property as to which the Opening Date shall not have
occurred on or prior to the Closing Date.
(I) An "Early Vesting Event" shall be deemed to
have occurred with respect to a particular Designated Property:
(1) if any of the rights, obligations or
interests of the developer, manager, licensor or lessee under any
development agreement, management agreement, license agreement or lease
agreement or similar agreement relating to such Designated Property is
assigned, delegated or transferred (in whole or in part) to any Person
(other than an entity controlled directly or indirectly by Patriot REIT
or Wyndham International, Inc.); provided, however, that no Early
Vesting Event shall be deemed to have occurred under this clause if,
after such assignment, transfer or delegation, an entity controlled
directly or indirectly by Patriot REIT or Wyndham International, Inc.
retains substantially the same contractual rights and obligations under
such agreements to direct the management of the Designated Property
subject thereto)
13
and the development of such Designated Property is completed at the
direction of an entity controlled directly or indirectly by Patriot
REIT or Wyndham International, Inc.;
(2) if Buyer (or an entity controlled
directly or indirectly by Patriot REIT or Wyndham International, Inc.)
ceases to be the manager or developer of such Designated Property or
transfers or grants to any Person (other than a Person controlled
directly or indirectly by Patriot REIT or Wyndham International, Inc.)
any authority to develop, manage or operate such Designated Property;
provided, however, that no Early Vesting Event shall be deemed to have
occurred under this clause if an entity controlled directly or
indirectly by Patriot REIT or Wyndham International, Inc. retains
substantially the same contractual rights and obligations held by and
imposed upon Buyer or an entity controlled directly or indirectly by
Patriot REIT or Wyndham International, Inc. prior to such cessation,
transfer or grant to direct the management of such Designated Property
and the development of such Designated Property is completed at the
direction of an entity controlled directly or indirectly by Patriot
REIT or Wyndham International, Inc.;
(3) if Buyer or any Affiliate of Buyer fails
to comply in any material respect with any of the covenants contained
in Section 2(f)(iii); or
(4) if (x) such Designated Property is a
Development Property and (y) Buyer or any Affiliate of Buyer sells or
otherwise transfers such Designated Property (or any interest therein)
to any Person (other than an entity controlled directly or indirectly
by Patriot REIT or Wyndham International, Inc.) prior to the Opening
Date for such Designated Property; provided, however, that no Early
Vesting Event shall be deemed to have occurred under this clause if,
after such sale or transfer, an entity controlled directly or
indirectly by Patriot REIT or Wyndham International, Inc. retains
substantially the same contractual rights and obligations held by and
imposed upon Buyer or an entity controlled directly or indirectly by
Patriot REIT or Wyndham International, Inc. prior to such sale or
transfer to direct the management and (if applicable) the development
of such Development Property.
(J) "The Hurdle Amount" means the amount by which
$2,058,000 exceeds 20.2% of the total of the Stipulated Amounts for all
Designated Properties for which an Early Vesting Event or Early Vesting
Events shall have occurred prior to January 25, 2000.
(K) "The Stipulated Amount" for a particular
Designated Property shall be the amount set forth opposite the
reference to such Designated Property on Exhibit 2(f)(i) hereto (under
the caption "Stipulated Amount").
14
(ii) Payment of Contingent Consideration.
(A) On or before January 25, 1999, Buyer shall
deliver to the SFHC Partners' Representative a reasonably detailed
statement setting forth Buyer's determination of the 1998 Pro Forma
Amount for each Designated Property.
(B) On or before January 25, 2000, Buyer (1) shall
deliver to the SFHC Partners' Representative a reasonably detailed
statement setting forth Buyer's determination of the 1999 Pro Forma
Amount for each Designated Property and Buyer's calculation of the
aggregate amount of the consideration to be delivered pursuant to this
Section 2(f)(ii)(B) and (2) shall cause to be delivered to the SFHC
Partners' Representative (as agent for the SFHC Partners), without any
deduction or setoff of any nature, consideration (in the form or forms
determined pursuant to Section 2(f)(ii)(E)) in an amount equal to 8.5
times the amount, if any, by which (x) the total of the 1999 Pro Forma
Amounts for all Designated Properties exceeds (y) the sum of the Hurdle
Amount and the 1998 Shortfall Amount.
(C) On or before January 25, 2001, Buyer (1) shall
deliver to the SFHC Partners' Representative a reasonably detailed
statement setting forth Buyer's determination of the 2000 Pro Forma
Amount for each Designated Property and Buyer's calculation of the
aggregate amount of the consideration to be delivered pursuant to this
Section 2(f)(ii)(C) and (2) shall cause to be delivered to the SFHC
Partners' Representative (as agent for the SFHC Partners), without any
deduction or setoff of any nature, consideration (in the form or forms
determined pursuant to Section 2(f)(ii)(F)) in an amount equal to 8.5
times the total of the 2000 Pro Forma Amounts for all Designated
Properties.
(D) Notwithstanding anything to the contrary
contained in this Section 2(f) or elsewhere in this Agreement:
(1) if an Early Vesting Event occurs with
respect to a Designated Property on or before January 25, 2000, then
(w) the 1999 Pro Forma Amount for such Designated Property shall not be
included in the total of the 1999 Pro Forma Amounts for all Designated
Properties for purposes of Section 2(f)(ii)(B)(2)(x), (x) the 2000 Pro
Forma Amount for such Designated Property shall not be included in the
total of the 2000 Pro Forma Amounts for all Designated Properties for
purposes of Section 2(f)(ii)(C)(2), (y) on January 25, 2000, Buyer
shall cause to be delivered to the SFHC Partners' Representative (as
agent for the SFHC Partners), without any deduction or setoff of any
nature, consideration (in the form or forms determined pursuant to
Section 2(f)(ii)(E)) in an amount equal to 8.5 times the product of
(aa) 79.8% of the Stipulated Amount for such Designated Property, and
(bb) the fraction having a numerator equal to the 1999 Open-Day Number
for such Designated Property and having a denominator equal to 365, and
(z) on January 25, 2001, Buyer shall cause to be delivered to the SFHC
Partners' Representative (as agent for the SFHC Partners), without
15
any deduction or setoff of any nature, consideration (in the form or
forms determined pursuant to Section 2(f)(ii)(F)) in an amount equal to
the amount by which (aa) 8.5 times 79.8% of the Stipulated Amount for
such Designated Property, exceeds (bb) the amount of the consideration
delivered by Buyer to the SFHC Partners' Representative pursuant to
clause "(y)" of this clause "(1)"; and
(2) if an Early Vesting Event occurs with
respect to a Designated Property after January 25, 2000, then (x) the
2000 Pro Forma Amount for such Designated Property shall not be
included in the total of the 2000 Pro Forma Amounts for all Designated
Properties for purposes of Section 2(f)(ii)(C)(2), and (y) on January
25, 2001, Buyer shall cause to be delivered to the SFHC Partners'
Representative (as agent for the SFHC Partners), without any deduction
or setoff of any nature, consideration (in the form or forms determined
pursuant to Section 2(f)(ii)(F)) in an amount equal to the amount by
which (aa) 8.5 times the Stipulated Amount for such Designated
Property, exceeds (bb) the amount obtained by multiplying (I) the
amount previously paid by Buyer to the SFHC Partners' Representative
pursuant to Section 2(f)(ii)(B) by (II) a fraction whose numerator is
the 1999 Pro Forma Fee Amount for such Designated Property and whose
denominator is the 1999 Pro Forma Fee Amounts for all Designated
Properties.
(E) The SFHC Partners may elect to receive the
consideration payable pursuant to this Section 2(f)(ii): (1) in the
form of cash; (2) in the form of Units and Operating Units; or (3) in
any combination of cash and Units and Operating Units. On or before
December 15, 1999, the SFHC Partners' Representative will provide Buyer
with instructions setting forth the portion of the consideration
payable pursuant to Section 2(f)(ii)(B) (and, if applicable, Section
2(f)(ii)(D)(1)(x)) that the SFHC Partners wish to receive in the form
of cash and the portion of such consideration that the SFHC Partners
wish to receive in the form of Units and Operating Units, and Buyer
shall cause such consideration to be delivered to the SFHC Partners'
Representative in accordance with such instructions. For this purpose,
each Unit and Operating Unit, considered together, shall be deemed to
have a value equal to the Twenty-Day Average Stock Price for the period
of twenty consecutive trading days ending on the trading day
immediately preceding January 25, 2000.
(F) On or before December 15, 2000, the SFHC
Partners' Representative will provide Buyer with instructions setting
forth the portion of the consideration payable pursuant to Section
2(f)(ii)(C) (and, if applicable, Section 2(f)(ii)(D)(1)(y) and/or
Section 2(f)(ii)(D)(2)) that the SFHC Partners wish to receive in the
form of cash and the portion of such consideration that the SFHC
Partners wish to receive in the form of Units and Operating Units, and
Buyer shall cause such consideration to be delivered to the SFHC
Partners' Representative in accordance with such instructions. For this
purpose, each Unit and Operating Unit, considered together, shall be
deemed to have a value equal to the Twenty-Day Average Stock Price
16
for the period of twenty consecutive trading days ending on the trading
day immediately preceding January 25, 2001.
(iii) Covenants. From and after the Closing Date,
Buyer shall, and shall cause its Affiliates to:
(A) arrange or provide financing for one hundred
percent of the cost of the development of each of the seven Development
Properties identified on Exhibit 2(f)(i) hereto;
(B) consult with those executive officers of
Summerfield Hotel Corporation who become employees of Wyndham
International, Inc. or any Affiliate of a Patriot/Wyndham Entity on a
regular basis with respect to the development of the Development
Properties and the operation of the Designated Properties;
(C) act in good faith and use all commercially
reasonable efforts to complete the development of each Development
Property during or prior to the month specified opposite the reference
to such Development Property in the last column on Exhibit 2(f)(i)
hereto, and use all commercially reasonable efforts to perform
satisfactorily and in a timely manner all obligations to be performed
by Buyer or any Affiliate of Buyer under the Development Agreements,
including all obligations relating to (1) the obtaining of approvals,
consents, permits and licenses (from Government Entities and other
Persons), and (2) the construction of the improvements on Development
Properties;
(D) maintain the product design with respect to
the Development Properties in a manner which is intended to generate
revenue having sources and characteristics substantially similar to the
sources and characteristics of revenue generated by Summerfield hotel
properties on an historical basis;
(E) furnish to the SFHC Partners' Representative,
within 25 days after the end of each accounting period in 1998, 1999
and 2000, copies of the financial statements for each Designated
Property for such accounting period;
(F) upon reasonable advance notice and during
normal business hours, make available from time to time to the SFHC
Partners' Representative and his advisors and representatives such
information and documentation (including books, records, contracts,
audit workpapers and other documents and instruments), and such
personnel of Buyer and its Affiliates (including their internal and
independent accounting personnel), as the SFHC Partners' Representative
may request in good faith for purposes of allowing the SFHC Partners'
Representative to review the calculation of the consideration payable
pursuant to this Section 2(f) and for all other purposes reasonably
related to the matters described in this Section 2(f); and
17
(G) promptly furnish to the SFHC Partners'
Representative copies of all operating and financial reports relating
to the financial performance of the Designated Properties prepared for
management of Buyer or any of its Affiliates.
Notwithstanding anything to the contrary contained in Section 2(f)(iii)(B),
Buyer shall not be obligated to develop a particular Development Property
identified on Exhibit 2(f)(i) hereto if Buyer provides documentary evidence
reasonably satisfactory to the SFHC Partners' Representative demonstrating that
the total of the "Hard Costs" (as defined in Exhibit 2(f)(iii) hereto) that
would be incurred by Buyer in the development of a hotel that is reasonably
equivalent to the hotel specifically contemplated by the working drawings (if
any) existing as of the Closing Date for such Development Property (or, if no
such working drawings exist as of the Closing Date, the prototype plans and
specifications in existence as of the Closing Date applicable to such
Development Property) exceed, by more than 8%, the "Projected Hard Cost" of the
development of such Development Property as set forth on Exhibit 2(f)(iii).
(iv) Objections; Dispute Resolution.
(A) If within 60 calendar days after delivery of
any statement referred to in Section 2(f)(ii)(B) or Section
2(f)(ii)(C), the SFHC Partners' Representative objects to the Buyer's
determination of the dollar amount of the consideration required to be
delivered with such statement, then the SFHC Partners' Representative
shall deliver to Buyer a written notice (an "Objection Notice") setting
forth the dollar amount determined by the SFHC Partners' Representative
to represent the amount of such consideration.
(B) If Buyer and the SFHC Partners' Representative
are unable to resolve the dispute reflected in an Objection Notice, the
dispute shall promptly be submitted by Buyer and the SFHC Partners'
Representative to a "big six" accounting firm (other than the
independent accountant for Buyer or SFHC (as of the Closing Date))
mutually acceptable to Buyer and the SFHC Partners' Representative (the
"Independent Accountant"). The decision of the Independent Accountant
shall (absent manifest error) be binding on Buyer and the SFHC
Partners' Representative (it being understood that in no event shall
the dollar amount of the consideration determined to be payable be less
than the amount set forth in the applicable statement delivered by
Buyer to the SFHC Partners' Representative pursuant to Section
2(f)(ii)(B) or Section 2(f)(ii)(C), as the case may be). If the
Independent Accountant determines that the aggregate dollar amount of
the consideration that was required to have been delivered to the SFHC
Partners' Representative exceeds the dollar amount of the consideration
actually delivered, then Buyer shall promptly cause to be delivered to
the SFHC Partners' Representative (1) the additional cash and/or Units
and Operating Units that should have originally been delivered to the
SFHC Partners' Representative, plus (2) a cash amount representing
interest at the rate of eight percent (8%) per annum (for the period
from January 25, 2000 or 2001, as the case may be, through the date on
which the full amount of such additional consideration is delivered to
the SFHC
18
Partners' Representative) on the aggregate dollar amount of such
additional consideration (including the dollar amount of any component
of such additional consideration that is paid in the form of Units and
Operating Units).
(C) All fees of and costs payable to the
Independent Accountant in connection with the determination referred to
in this Section 2(f) shall be borne by Buyer; provided, however, that
if the Independent Accountant determines that additional consideration
represents less than one-half percent (0.5%) of the consideration set
forth in Buyer's statement under Section 2(f)(ii)(B) or (C), as the
case may be, is to be delivered to the SFHC Partners' Representative,
then the SFHC Partners' Representative shall bear the fees of and costs
payable to the Independent Accountant.
(g) Post-Closing Fee Payments
(i) Definitions.
(A) "Fee Payment" shall mean any payment of any
base management fee, incentive management fee, accounting fee, software
fee, services fee, license fee, franchise fee or other similar fee
under any management agreement, license agreement, franchise agreement
or other similar agreement to which SFHC, Summerfield Suites Management
Company, L.P. or any other Affiliate of SFHC was, is or becomes a
party.
(B) "Pre-Closing Accounting Period" shall mean any
28-day accounting period that shall have ended on or prior to the
Closing Date.
(C) "Straddling Accounting Period" shall mean any
28-day accounting period that shall have commenced on or prior to the
Closing Date and ends on or after the Closing Date.
(ii) If SFHC, Buyer, any other Patriot/Wyndham Entity or
any Affiliate of or successor to SFHC or any Patriot/Wyndham Entity
receives, at any time on or after the Closing Date, any Fee Payment
that relates to any Pre-Closing Accounting Period, then, within two
days after the receipt of such Fee Payment, Buyer shall cause to be
paid to the SFHC Partners' Representative (as agent for the SFHC
Partners) in immediately available funds, without any deduction or
setoff of any nature, an amount equal to the full amount of such Fee
Payment.
(iii) If SFHC, Buyer, any other Patriot/Wyndham Entity
or any Affiliate of or successor to SFHC or any Patriot/Wyndham Entity
receives, at any time on or after the Closing Date, any Fee Payment
that relates to any Straddling Accounting Period, then, within two days
after the receipt of such Fee Payment, Buyer shall cause to be paid to
the SFHC Partners' Representative (as agent for the SFHC Partners) in
19
immediately available funds, without any deduction or setoff of any
nature, an amount equal to the amount of such Fee Payment multiplied by
a fraction having a numerator equal to the number of days in the period
commencing on the first day of such Straddling Accounting Period and
ending on the Closing Date and having a denominator equal to 28.
(iv) If any Fee Payment relating to any Pre-Closing
Accounting Period or any Straddling Accounting Period was improperly
paid and is refunded, an appropriate payment shall be made to Buyer.
(h) Post-Closing Payment with respect to Leased Hotels.
(i) Within 60 days after the Closing Date, the SFHC
Partners' Representative shall cause to be delivered to Buyer the
following balance sheets (the "Leased Hotel Balance Sheets"): (A) a
consolidated balance sheet of Summerfield Suites Lease Company, L.P.
and Summerfield Hotel Leasing Company, L.P. as of the Closing Date
(immediately prior to the consummation of the Reorganization
Transactions), prepared in accordance with GAAP; and (B) a balance
sheet of Summerfield HPT Lease Company, L.P. as of the Closing Date
(immediately prior to the consummation of the Reorganization
Transactions), prepared in accordance with GAAP. The Leased Hotel
Balance Sheets shall be accompanied by a statement (the "Leased Hotel
Statement') setting forth the SFHC Partners' Representative's
calculation of the amount by which (A) the aggregate dollar amount of
the current assets reflected on the Leased Hotel Balance Sheets
(excluding the aggregate dollar amount of the F, F & E Reserve
reflected on such Leased Hotel Balance Sheets) exceeds (B) the
aggregate dollar amount of the current liabilities reflected on the
Leased Hotel Balance Sheets. (The amount by which (A) the aggregate
dollar amount of the current assets reflected on the Leased Hotel
Balance Sheets exceeds (B) the aggregate dollar amount of the current
liabilities reflected on the Leased Hotel Balance Sheets is referred to
herein as the "Net Leased Hotel Amount.")
(ii) Within five days after the delivery to Buyer of the
Leased Hotel Statement, Buyer shall cause to be paid to the SFHC
Partners' Representative (as agent for the SFHC Partners) in
immediately available funds, without any deduction or setoff of any
nature, an amount equal to the Net Leased Hotel Amount.
(iii) If within 30 calendar days after the delivery to
Buyer of the Leased Hotel Statement, Buyer objects to the SFHC
Partners' Representative's calculation of the Net Leased Hotel Amount
(as set forth on the Leased Hotel Statement), then Buyer shall deliver
to the SFHC Partners' Representative a written notice (a "Disagreement
Notice") describing in reasonable detail Buyer's objections to the SFHC
Partners' Representative's calculation of the Net Leased Hotel Amount,
and setting forth the dollar amount determined by Buyer to represent
the Net Leased Hotel Amount. If a Disagreement Notice describing in
reasonable detail Buyer's objections to
20
the SFHC Partners' Representative's calculation of the Net Leased Hotel
Amount (as set forth on the Leased Hotel Statement) is not delivered by
Buyer to the SFHC Partners' Representative within 30 calendar days
after the delivery to Buyer of the Leased Hotel Statement, then the
SFHC Partners' Representative's calculation of the Net Leased Hotel
Amount (as set forth on the Leased Hotel Statement) shall be conclusive
and binding upon Buyer.
(iv) If Buyer delivers a Disagreement Notice to the SFHC
Partners' Representative within 30 calendar days after the delivery to
Buyer of the Leased Hotel Statement and Buyer and the SFHC Partners'
Representative are unable to resolve the dispute reflected in such
Disagreement Notice, the dispute shall promptly be submitted by Buyer
and the SFHC Partners' Representative to a "big six" accounting firm
(other than the independent accountant for Buyer or SFHC (as of the
Closing Date)) mutually acceptable to Buyer and the SFHC Partners'
Representative (the "Third Party Accounting Firm"). The Third Party
Accounting Firm's calculation of the Net Leased Hotel Amount shall
(absent manifest error) be binding on Buyer and the SFHC Partners'
Representative (it being understood that in no event shall the Net
Leased Hotel Amount (as determined by the Third Party Accounting Firm)
be less than the amount set forth in the Disagreement Notice). All fees
of and costs payable to the Third Party Accounting Firm in connection
with the determination referred to in this Section 2(h) shall be borne
by Buyer; provided, however, that if the SFHC Partners'
Representative's determination of the Net Leased Hotel Amount (as set
forth on the Leased Hotel Statement) exceeds by 0.5% or more the Third
Party Accounting Firm's determination of the Net Leased Hotel Amount,
then the SFHC Partners shall bear the fees of and costs payable to the
Third Party Accounting Firm.
(i) SFHC Partners' Representative.
(i) In order to administer efficiently (A) the
implementation of this Agreement by the SFHC Partners, (B) the delivery
of the consideration to be delivered under this Agreement, (C) the
waiver of any condition to the obligations of the SFHC Partners to
consummate the Contemplated Transactions, and (D) the settlement of any
dispute with respect to this Agreement, the SFHC Partners hereby
designate Xxx X. Xxxxx as their representative (the "SFHC Partners'
Representative").
(ii) The SFHC Partners hereby authorize the SFHC
Partners' Representative (A) to take all action necessary in connection
with the implementation of this Agreement on behalf of the SFHC
Partners, the waiver of any condition to the obligations of the SFHC
Partners to consummate the Contemplated Transactions, or the settlement
of any dispute with respect to this Agreement, (B) to act as their
agent for the purpose of receiving, on their behalf, consideration
payable under this Agreement, (C) to give and receive all notices
required to be given under this Agreement and (D) to take any and all
additional action as is contemplated to be taken by or on behalf of the
21
SFHC Partners by the terms of this Agreement, including the execution
and delivery of documents required to transfer the Contributed
Interests to Buyer.
(iii) In the event that the SFHC Partners'
Representative dies, becomes legally incapacitated or resigns from such
position, Xxxx X. Xxxxx shall fill such vacancy and shall be deemed to
be the SFHC Partners' Representative for all purposes of this
Agreement; however, no change in the SFHC Partners' Representative
shall be effective until Buyer is given notice of it by the new SFHC
Partners' Representative and any of the SFHC Partners.
(iv) All decisions and actions by the SFHC Partners'
Representative shall be binding upon all of the SFHC Partners, and no
SFHC Partner shall have the right to object, dissent, protest or
otherwise contest the same.
(v) By their execution of this Agreement, the SFHC
Partners agree that:
(A) Buyer shall be able to rely conclusively on
the instructions and decisions of the SFHC Partners' Representative as
to any actions required or permitted to be taken by the SFHC Partners
or the SFHC Partners' Representative hereunder, and no party hereunder
shall have any cause of action against Buyer for any action taken by
Buyer in reliance upon the instructions or decisions of the SFHC
Partners' Representative;
(B) all actions, decisions and instructions of the
SFHC Partners' Representative shall be conclusive and binding upon all
of the SFHC Partners and no SFHC Partner shall have any cause of action
against the SFHC Partners' Representative for any action taken,
decision made or instruction given by the SFHC Partners' Representative
under this Agreement, except for fraud or willful breach of this
Agreement by the SFHC Partners' Representative;
(C) remedies available at law for any breach of
the provisions of this Section 2(i) are inadequate; therefore, Buyer
shall be entitled to temporary and permanent injunctive relief without
the necessity of proving damages if Buyer brings an action to enforce
the provisions of this Section 2(i); and
(D) the provisions of this Section 2(i) are
independent and severable, shall constitute an irrevocable power of
attorney, coupled with an interest and surviving death, granted by each
SFHC Partner to the SFHC Partners' Representative and shall be binding
upon the executors, heirs, legal representatives and successors of each
SFHC Partner.
22
(vi) All expenses incurred by the SFHC Partners'
Representative in connection with the performance of his duties or the
exercise of his authority under this Agreement shall be paid by the
SFHC Partners.
(j) Adjustments for Stock Splits, Etc. All dollar amounts set
forth in this Agreement (including in Sections 2(b), 2(e), 2(f) and 11(a)(iii))
and all calculations required to be made pursuant to this Agreement (including
in Sections 2(b), 2(e), 2(f) and 11(a)(iii)), shall be adjusted as appropriate
to reflect any stock split, reverse stock split, stock dividend, merger,
reorganization, recapitalization, extraordinary dividend (in connection with the
disposition of substantial properties or assets), extraordinary distribution (in
connection with the disposition of substantial properties or assets) or similar
transaction involving any Patriot/Wyndham Entity.
(k) Additional Unit and Operating Unit Issuances. In
connection with the issuance of any Units or Operating Units pursuant to this
Agreement, an Admission Agreement (or other similar agreement) will be executed
that contains provisions substantially the same as the provisions contained in
Section 3 of the Partnership Admission Agreement attached as Exhibit 2(b)(i)-1
hereto and Section 4 of the Partnership Admission Agreement attached as Exhibit
2(b)(i)-2 hereto.
Section 3. Closing of the Transaction.
(a) The closing of the transactions referred to in Sections
2(a)(ii), 2(b), 2(c) and 2(d) (the "Closing") shall occur at the offices of
Buyer at 10:00 a.m. local time on the later of (i) the date on which the
condition set forth in Section 4(d) is satisfied, or (ii) the earlier of (A) May
15, 1998, or (B) the date ten business days after the Interstate Acquisition
Date (the time and date, as of which the Closing is required to occur under this
Section 3(a), as such time and date may be extended in accordance with this
Section 3(a), being referred to as the "Scheduled Closing Time"); provided,
however, that: if (i) the Interstate Acquisition has not been consummated before
10:00 a.m. local time on May 15, 1998, (ii) Buyer demonstrates to SFHC before
10:00 a.m. local time on May 15, 1998 that the consummation of the transactions
referred to in Sections 2(a)(ii), 2(b), 2(c) and 2(d) on May 15, 1998 will cause
Buyer to fail to qualify as a real estate investment trust under the Code, and
(iii) Buyer pays to SFHC in immediately available funds the nonrefundable sum of
$3 million on or prior to 10:00 a.m. local time on May 15, 1998 (the "Extension
Payment"), then the Scheduled Closing Time shall be extended to 10:00 a.m. local
time on the earlier of July 1, 1998 or the date on which consummation of the
transactions referred to in Sections 2(a)(ii), 2(b), 2(c) and 2(d) will no
longer cause Buyer to fail to qualify as a real estate investment trust under
the Code.
(b) The Extension Payment shall be nonrefundable and shall not
be returned to Buyer, in whole or in part, regardless of whether or not the
Closing occurs. If the Extension Payment is made and the Closing takes place on
or prior to July 1, 1998, then an amount equal to the product of (A) $50,000,
and (B) the number of days from and including
23
the Closing Date through and including July 1, 1998 shall be credited against
the Cash Consideration payable pursuant to Section 2(b)(i).
Section 4. Conditions to Obligation of Buyer. The obligation of Buyer
to consummate the transactions referred to in Sections 2(a)(ii), 2(b), 2(c) and
2(d) is subject to satisfaction or waiver at or prior to the Scheduled Closing
Time of the following conditions:
(a) Representations and Warranties. Except as to such breaches
of SFHC's representations and warranties, individually or in the aggregate,
which would not reasonably be expected to have a Material Adverse Effect on SFHC
(disregarding for such purposes all materiality and knowledge qualifiers
contained in the Specified Representations of SFHC), each of the representations
and warranties of SFHC contained in this Agreement shall be true and correct as
of the Closing Date (or to the extent a representation or warranty is by its
terms made as of the date hereof or another date, then as of such date).
(b) Performance of Covenants. SFHC (and each SFHC Partner, as
applicable) shall have performed in all material respects all of the covenants
and agreements required to be performed by it under this Agreement on or prior
to the Closing Date.
(c) Consents. SFHC will have obtained, on terms and conditions
reasonably satisfactory to Buyer, (A) all consents, approvals, and releases by
any Government Entity that are required for the consummation of Contemplated
Transactions, except where the failure to obtain such consents, approvals or
releases does not have a Material Adverse Effect on SFHC or a Material Adverse
Effect on Buyer, (B) all consents, approvals, and releases by other third
parties that are required for the consummation of the Contemplated Transactions,
the Reorganization Transactions and the Excluded Asset Distribution Transactions
(not including the consent referred to in Section 8(a)(xv) of the SFHC
Disclosure Schedule), except where the failure to obtain such consents,
approvals or releases does not have a Material Adverse Effect on SFHC or a
Material Adverse Effect on Buyer (collectively, the "Consents"), and (C) all
consents, approvals, and releases by third party lessors with respect to any
lease to which SFHC is a party and to which Buyer shall succeed as lessee as a
result of the Contemplated Transactions, in each case which are necessary to
permit Buyer, as successor lessee, to enter into a sublease with respect to the
property subject thereto (not including the consent referred to in Section
8(a)(xv) of the SFHC Disclosure Schedule) except where the failure to obtain
such consents, approvals or releases does not have a Material Adverse Effect on
SFHC or a Material Adverse Effect on Buyer.
(d) HSR Act. The applicable waiting period under the HSR Act
(as defined below) shall have expired or been terminated.
(e) Absence of Litigation. No action or proceeding before any
court or Government Entity will be pending or overtly threatened in writing
against SFHC which is reasonably likely to result in a judgment, decree or order
that would have a Material Adverse Effect on SFHC or subjects SFHC to any order,
ruling or injunction of a court of competent
24
jurisdiction which prohibits consummation of the Contemplated Transactions. In
the event any such order, ruling or injunction shall have been issued, each
Party agrees to use its reasonable best efforts to have any such order, ruling
or injunction lifted, stayed or reversed.
(f) Compliance with Applicable Laws. No law shall have been
enacted since the date of this Agreement, and no permanent injunction, court
order or ruling shall have been entered since the date of this Agreement, which
(i) prohibits the consummation of the Contemplated Transactions, (ii) has or
would reasonably be expected to have a material adverse effect on the paired
share structure of Patriot REIT and Wyndham International, Inc. or (iii)
subjects the Contemplated Transactions to conditions that would result in a
Material Adverse Effect on SFHC or a Material Adverse Effect on Buyer.
(g) SFHC Closing Deliveries. On or prior to the Closing Date,
SFHC shall have delivered (or caused to be delivered) to Buyer each of the
following:
(i) a Certificate of SFHC, dated as of the Closing
Date, stating that the conditions specified in Section 4(a), 4(b),
4(c), 4(e) and 4(h) have been fully satisfied;
(ii) a duly authorized and executed Assignment and
Assumption Agreement substantially in the form of Exhibit 4(g)(ii)
hereto (the "Assignment and Assumption Agreement");
(iii) such instruments of sale, transfer, assignment,
conveyance and delivery, in form and substance reasonably satisfactory
to counsel for Buyer, as are required in order to transfer to Buyer
good and valid title to the Contributed Interests, free and clear of
all Liens;
(iv) copies of the Consents obtained by SFHC and any
filings related thereto;
(v) duly executed FIRPTA Certificates from SFHC and
from each SFHC Partner;
(vi) copies of the agreements described in Section 10
hereof contemplated to be delivered on or prior to the Closing Date,
including the Wichita Lease Agreement, the Consulting Agreement, the
Registration Rights Agreements, and the Partnership Admission
Agreements, executed by SFHC or the appropriate SFHC Partners (but not
including the Employment Agreements);
(vii) the Employment Agreement executed by B. Xxxxxxx
Xxxxx; and
(viii) such other documents relating to the
Contemplated Transactions as Buyer reasonably requests.
25
(h) No Material Adverse Change to SFHC. From the date of this
Agreement through the Closing Date, there shall not have occurred any changes
concerning SFHC or any Affiliate of SFHC that, when combined with all other
changes that have occurred concerning SFHC or any Affiliate of SFHC from the
date of this Agreement through the Closing Date, have had or are reasonably
likely to have a Material Adverse Effect on SFHC.
Buyer may waive any condition specified in this Section 4 if it
executes a writing so stating on or prior to the Closing Date.
Section 5. Conditions to Obligation of SFHC and SFHC Partners. The
obligation of SFHC and each of the SFHC Partners to consummate the transactions
referred to in Sections 2(a)(ii), 2(b), 2(c) and 2(d) is subject to satisfaction
or waiver at or prior to the Scheduled Closing Time of the following conditions:
(a) Representations and Warranties. Except as to such breaches
of Buyer's representations and warranties, individually or in the aggregate,
which would not reasonably be expected to have a Material Adverse Effect on
Buyer (disregarding for such purposes all materiality and knowledge qualifiers
contained in the Specified Representations of Buyer), each of the
representations and warranties of Buyer contained in this Agreement and in the
Partnership Admission Agreements shall be true and correct as of the Closing
Date (or to the extent a representation or warranty is by its terms made as of
the date hereof or another date, then as of such date).
(b) Performance of Covenants. Buyer shall have performed in
all material respects all of the covenants and agreements required to be
performed by it under this Agreement on or prior to the Closing Date.
(c) HSR Act. The applicable waiting period under the HSR Act
shall have expired or been terminated.
(d) Absence of Litigation. No action or proceeding before any
court or Government Entity will be pending or overtly threatened in writing
against Buyer which is reasonably like to result in a judgment, decree or order
that would have a Material Adverse Effect on Buyer, a material adverse effect on
the financial condition or results of operations of any other Patriot/Wyndham
Entity, or subjects Buyer or any other Patriot/Wyndham Entity to any order,
ruling or injunction of a court of competent jurisdiction which prohibits
consummation of the Contemplated Transactions. In the event any such order,
ruling or injunction shall have been issued, each Party agrees to use its
reasonable best efforts to have any such order, ruling or injunction lifted,
stayed or reversed.
(e) Compliance with Applicable Laws. No law shall have been
enacted since the date of this Agreement, and no permanent injunction, court
order or ruling shall have been entered since the date of this Agreement, which
(i) prohibits the consummation of the Contemplated Transactions, (ii) materially
changes the characterization or effect of the
26
Contemplated Transactions under applicable U.S. federal, state or local tax laws
and regulations with respect to the SFHC Partners, taken as a whole, or (iii)
subjects the Contemplated Transactions to conditions that would result in a
Material Adverse Effect on SFHC, a Material Adverse Effect on Buyer, or a
material adverse effect on the financial condition or results of operations of
any other Patriot/Wyndham Entity.
(f) Consents. Buyer will have obtained, on terms and
conditions reasonably satisfactory to SFHC, all Consents, except in each case
where the failure to obtain such Consent does not have a Material Adverse Effect
on SFHC or a Material Adverse Effect on Buyer.
(g) Buyer's Closing Deliveries. On or prior to the Closing
Date, Buyer shall have delivered (or cause to be delivered) to the SFHC
Partners' Representative each of the following:
(i) an Officer's Certificate of Buyer, dated as of
the Closing Date, stating that the conditions specified in Sections
5(a), 5(b), 5(d), 5(f) and 5(h) have been fully satisfied;
(ii) copies of the Consents obtained by Buyer and
any filings related thereto;
(iii) duly executed copies of the Assignment and
Assumption Agreement and the agreements described in Section 10 hereof
(to which Buyer or an Affiliate is a party) contemplated to be
delivered on or prior to the Closing Date, including without limitation
the Wichita Lease Agreement, the Employment Agreements, the Consulting
Agreement, the Registration Rights Agreement, the Partnership Admission
Agreements, and the Carried Interest Payments Agreement; and
(iv) such other documents relating to the
transactions contemplated by the Transaction Documents as SFHC
reasonably requests.
(h) No Material Adverse Change to Buyer. From the date of this
Agreement through the Closing Date, there shall not have occurred (i) any
changes concerning Buyer that, when combined with all other changes, have had or
could be reasonably likely to have a Material Adverse Effect on Buyer or (ii) a
material adverse effect on the financial condition or results of operations of
any other Patriot/Wyndham Entity.
(i) Consummation of Xxxxxx Transactions. The transactions
contemplated by at least two of the Xxxxxx Partnership Hotel Sale Agreements
shall have been consummated.
27
(j) German Registration. The representation and warranty
contained in Section 7(j) shall be true and correct in all material respects as
if made at the Scheduled Closing Time.
The SFHC Partners' Representative may waive any condition specified in
this Section 5 if he executes a writing so stating on or prior to the Closing
Date.
Section 6. Representations and Warranties of SFHC. As a material
inducement to Buyer to enter into and perform its obligations under this
Agreement, except as disclosed in the SFHC Disclosure Schedule, SFHC represents
and warrants to Buyer as follows:
(a) Organization of SFHC and its Affiliates. SFHC is a limited
partnership duly organized, validly existing and in good standing under the laws
of Kansas and is qualified to do business in every jurisdiction in which the
nature of its business or its ownership of property requires it to be qualified,
except where the failure to do so would not have a Material Adverse Effect on
SFHC. Section 6(a) of the SFHC Disclosure Schedule lists all of the
jurisdictions in which SFHC is qualified to do business as of the date hereof.
SFHC has full power and authority as a limited partnership to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted. The
copies of SFHC's Certificate of Limited Partnership as amended to date,
certified by the Kansas Secretary of State, and of SFHC's Partnership Agreement,
as amended to date, certified by SFHC's general partner, and heretofore
delivered to Buyer's counsel, are complete and correct, and no amendments
thereto are pending, except as herein contemplated by the Reorganization
Transactions. SFHC is not in violation of any term of its Certificate of Limited
Partnership or Partnership Agreement.
(b) Authorization of Transaction.
(i) SFHC and each SFHC Partner has full power and
authority (or, if such SFHC Partner is a natural person, is an adult
acting with full capacity) to execute and deliver the Transaction
Documents to which it is a party and to perform its obligations
thereunder. SFHC and each SFHC Partner has duly authorized the
execution and delivery of the Transaction Documents to which it is a
party and the consummation by SFHC (or such SFHC Partner) of the
Contemplated Transactions. No other proceedings on the part of SFHC or
any SFHC Partner are necessary to approve and authorize the execution
and delivery of the Transaction Documents by SFHC (and each SFHC
Partner, as applicable), or the consummation by SFHC (and each SFHC
Partner, as applicable) of the Contemplated Transactions. Each
Transaction Document to which SFHC (or any SFHC Partner) is a party
will, upon execution by SFHC (or such SFHC Partner, as applicable),
constitute the valid and legally binding obligation of SFHC (or such
SFHC Partner, as applicable), enforceable against SFHC (or such SFHC
Partner, as applicable) in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization or other similar laws
and to general principles of equity (whether considered in proceedings
at law or in equity).
28
(ii) As of the date of this Agreement and as of
immediately prior to the commencement of the Reorganization
Transactions to which it is a party, SFHC and each of the Restructuring
Affiliates listed on Exhibit 6(b)(i) hereto (each a "Restructuring
Affiliate") has (and will have, as applicable) full power and authority
to execute and deliver the agreements and other documents to which it
is a party necessary to effect the Reorganization Transactions in
accordance with the terms set forth in Exhibit 1.2 hereto (the
"Reorganization Documents") and to perform its obligations thereunder.
SFHC and each Restructuring Affiliate has duly authorized the execution
and delivery of the Reorganization Documents to which it is a party and
the consummation by SFHC (or such Restructuring Affiliate) of the
Reorganization Transactions to which it is a party. No other
proceedings on the part of SFHC or any Restructuring Affiliate are
necessary to approve and authorize the execution and delivery of the
Reorganization Documents by SFHC (and each Restructuring Affiliate, as
applicable), or the consummation by SFHC (and each Restructuring
Affiliate, as applicable) of the Reorganization Transactions to which
it is a party. Each Reorganization Document will, upon execution by
SFHC (and/or such Restructuring Affiliate, as applicable), constitute
the valid and legally binding obligation of SFHC (and/or such
Restructuring Affiliate, as applicable), enforceable against SFHC
(and/or such Restructuring Affiliate, as applicable) in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws and to general principles of
equity (whether considered in proceedings at law or in equity).
(c) Noncontravention; Consents.
(i) Assuming that the Consents are obtained, neither
the execution and the delivery by SFHC of the Transaction Documents to
which SFHC is a party, nor the consummation by SFHC of the Contemplated
Transactions, shall, except as explicitly required or permitted herein,
(A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any
Government Entity to which SFHC is subject or any provision of the
partnership agreement of SFHC, except where such violation does not
have a Material Adverse Effect on SFHC, (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
result in a premium, penalty or modification under, create in any party
the right to accelerate, terminate, modify, or cancel any agreement,
contract, lease, license, franchise, permit, indenture, mortgage,
instrument or other arrangement to which SFHC is a party or by which it
is bound, unless such effect does not have a Material Adverse Effect on
SFHC, or (C) result in the imposition of any Lien (other than a
Permitted Lien) upon any of the assets of SFHC unless such Lien does
not have a Material Adverse Effect on SFHC.
(ii) SFHC is not required to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of
any Government Entity or third party on or prior to the Closing Date in
order for it to enter into the Transaction Documents to which it is a
party and to consummate the Contemplated Transactions,
29
except (i) for the filing required under the HSR Act, and (ii) where
the failure to make or obtain such notice, filing, authorization,
consent or approval would not have a Material Adverse Effect on SFHC.
(d) Capitalization of SFHC and its Affiliates. On the Closing
Date, the SFHC Partners will hold all of the outstanding partnership interests
of SFHC free and clear of any Liens, and such interests will have been acquired
and will be held in accordance with the terms of SFHC's partnership agreement
and in compliance with applicable laws. Except as set forth in the limited
partnership agreement of SFHC, as of the Closing Date, there will be no
outstanding equity interests (including, without limitation, any interests
containing equity features), subscriptions, purchase rights, subscription
rights, conversion rights, exchange rights, options, warrants, preemptive
rights, rights of first refusal, rights of first offer, or other rights or other
arrangements or commitments outstanding obligating SFHC or any SFHC Partner to
issue, sell or otherwise cause to be outstanding any partnership interests in
SFHC, any security convertible into or exercisable or exchangeable for
partnership interests in SFHC, or any other direct equity participation in SFHC.
As of the Closing Date, (i) there will be no outstanding or authorized equity
appreciation, phantom interest, profit participation or similar rights with
respect to which SFHC has any obligation, and (ii) there will be no voting
trusts, proxies, or other similar agreements or understandings with respect to
the partnership interests in SFHC.
(e) Brokers' Fees. Except for fees that may be payable to
Xxxxxxxxxx Securities or its Affiliates in connection with the Contemplated
Transactions, SFHC has no liability or obligation to pay any fees or commissions
to any broker, finder, or similar agent with respect to the Contemplated
Transactions. Any fees payable to Xxxxxxxxxx Securities or its Affiliates in
connection with the consummation of the Contemplated Transactions that arise out
of an agreement between SFHC (or an Affiliate of SFHC) and Xxxxxxxxxx Securities
or an Affiliate of Xxxxxxxxxx Securities shall be the sole obligation of the
SFHC Partners, and such fees shall be satisfied by the SFHC Partners in
accordance with Section 10(b) hereof.
(f) Subsidiaries and Investments. As of the Closing Date
(following the Reorganization Transactions and the Excluded Asset Distribution
Transactions), SFHC will not own any subsidiaries or investments in any other
corporation or business organization except for those listed in Section 6(f) of
the SFHC Disclosure Schedule (collectively, the "Subsidiaries" or individually,
a "Subsidiary"). As of the Closing Date, each Subsidiary of SFHC will be duly
organized, validly existing and in good standing under the laws of the state of
its organization with full power and authority to own or lease its properties
and to conduct its business in the manner and in the places where such
properties are owned or leased or such business is then conducted. As of the
Closing Date, all of the outstanding shares of equity interests of each
Subsidiary will be owned beneficially and of record by SFHC free and clear of
any Liens (other than Permitted Liens) and said equity interests will be duly
and validly issued and outstanding, fully paid and non-assessable. As of the
Closing Date, none of the Subsidiaries will be in violation of any term of its
organization documents. As of the Closing Date, each Subsidiary will be duly
qualified to do business in each jurisdiction where such
30
qualification is required, except where the failure to be so qualified would not
have a Material Adverse Effect on SFHC. As of the Closing Date, there will be no
outstanding warrants, options or other rights to purchase or acquire any of the
equity interests of capital stock of any Subsidiary, or any outstanding
securities convertible into such equity interests or outstanding warrants,
options or other rights to acquire any such convertible securities.
(g) Financial Statements. Section 6(g) of the SFHC Disclosure
Schedule contains the following financial statements (collectively, the
"Financial Statements"):
(i) audited consolidated balance sheet of SFHC and
its consolidated subsidiaries as of January 3, 1997 and the audited
consolidated statements of operations and changes in partners' equity
of SFHC and its consolidated subsidiaries for the fiscal year then
ended; and
(ii) unaudited consolidated balance sheet of SFHC and
its consolidated subsidiaries as of January 2, 1998 (the "Base Balance
Sheet") and the unaudited consolidated statements of operations and
changes in partners' equity of SFHC and its consolidated subsidiaries
for the fiscal year then ended.
Except as disclosed therein or in the notes thereto, the Financial Statements
fairly present in all material respects the consolidated financial condition of
SFHC and its consolidated subsidiaries as of the dates thereof and consolidated
results of operations of SFHC and its consolidated subsidiaries for the periods
covered thereby and have been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, subject in the case of unaudited
financial statements to changes resulting from normal year-end adjustments and
to the absence of footnote disclosure.
(h) Events Subsequent to the Financial Statements. From
January 3, 1998 to the date of this Agreement, there has not been any event
which has resulted in a Material Adverse Effect on SFHC. From January 3, 1998 to
the date of this Agreement, SFHC has conducted its businesses in the ordinary
course of business, has incurred no liabilities outside the ordinary course of
business of a type required to be disclosed on a balance sheet under GAAP and
has not, other than as explicitly required or permitted by the terms of this
Agreement or as set forth in Section 6(h) of the SFHC Disclosure Schedule:
(i) sold, assigned, conveyed, transferred, canceled,
leased, licensed, or encumbered any tangible assets, Intellectual
Property or other intangible asset or right other than in the ordinary
course of business;
(ii) entered into any agreement, contract, lease or
license (or series of related agreements, contracts, leases and
licenses) other than in the ordinary course of business;
31
(iii) other than in the ordinary course of business,
accelerated, terminated, modified (except pursuant to Buyer's
instructions) or canceled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses)
involving more than $100,000 to which SFHC is a party or by which it is
bound;
(iv) sold, assigned, transferred, abandoned or
permitted to lapse any licenses or permits which, individually or in
the aggregate, are material to the Business, or any Intellectual
Property or other intangible assets other than in the ordinary course
of business;
(v) except as previously disclosed in the Financial
Statements or in the notes thereto, other than in the ordinary course
of business and other than with respect to the Excluded Assets and
Excluded Liabilities, made any loan or advance to, or guarantee for the
benefit of, or any investment in, any Person;
(vi) other than in the ordinary course of business
and other than with respect to the Excluded Assets and Excluded
Liabilities, made capital expenditures and commitments therefor in
excess of $100,000;
(vii) mortgaged or pledged any of its assets or
subjected any of them to any Lien (other than a Permitted Lien) or
created, incurred or assumed any debt for borrowed money in excess of
$100,000;
(viii) experienced any material damage, destruction,
or loss (whether or not covered by insurance) to any of its properties
or assets;
(ix) entered into any employment contract or
collective bargaining agreement, written or oral, not terminable at
will relating to management personnel or which, singly or in the
aggregate, represents a commitment by SFHC for wages or salary in
excess of $100,000 per year, or modified the terms of any such existing
contract or agreement other than with respect to increases in base
compensation;
(x) granted any increase in the base compensation of
any of its managers, officers or employees other than in the ordinary
course of business;
(xi) adopted, amended, or modified in any material
respect, any bonus plan, profit-sharing plan, incentive plan, severance
plan, Employee Pension Benefit Plan, Employee Welfare Benefit Plan or
other plan, contract or commitment for the benefit of any of its
managers, officers and employees;
(xii) other than (A) in the ordinary course of
business, (B) with respect to the Excluded Assets and Excluded
Liabilities, and (C) ordinary course employment and deferred
compensation and bonus arrangements entered into in accordance with
32
past custom and practice and which shall be paid prior to Closing,
entered into any transaction with any of its managers, officers,
employees or Affiliates;
(xiii) declared, set aside or paid any dividend or
other distribution in excess of $100,000 in the aggregate in respect of
any securities or other interests in SFHC; or issued, sold, delivered
or agreed to issue, sell or deliver or authorize the issuance, sale or
delivery of, or redeem or repurchase, any securities or other interests
in SFHC or any rights, warrants or options to acquire any securities or
other interests in SFHC;
(xiv) experienced any other occurrence, event,
incident, action, failure to act or transaction outside of the ordinary
course of business, or entered into any other material transaction,
whether or not in the ordinary course of business, that in either case
has resulted in Material Adverse Effect on SFHC; or
(xv) entered into any binding commitment to do any of
the foregoing.
(i) Legal Compliance. SFHC is in compliance with all
Applicable Laws, and no action, suit, proceeding, hearing or investigation is
pending (or, to the knowledge of SFHC, is being overtly threatened) against SFHC
before any court or Government Entity, alleging any failure to so comply, except
to the extent that the actual or alleged failure to comply has not had and will
not have a Material Adverse Effect on SFHC.
(j) Leased Properties. Section 6(j) of the SFHC Disclosure
Schedule lists all real property that is leased by SFHC from any other Person as
of the date of this Agreement in connection with the Business and the leases,
subleases and agreements by which such property is occupied. With respect to
each such parcel of leased real property listed in Section 6(j) of the SFHC
Disclosure Schedule: (i) the leases, subleases and agreements described in
Section 6(j) of the SFHC Disclosure Schedule constitute all of the leases,
subleases and agreements under which SFHC holds any interest in any real estate
used in connection with its Business as of the date of this Agreement; (ii) SFHC
has made available to Buyer or its counsel true, correct and complete copies of
all of the leases, subleases and agreements described in Section 6(j) of the
SFHC Disclosure Schedule; (iii) each such lease, sublease or agreement is legal,
valid, binding, and enforceable by SFHC, subject to the effect of bankruptcy,
insolvency, reorganization or other similar laws and to general principles of
equity (whether considered in proceedings at law or in equity); (iv) neither
SFHC nor, to the knowledge of SFHC, any other party to any such lease, sublease
or agreement is in breach or default thereof, and no event has occurred which,
with notice or the lapse of time, or both, would constitute such a breach or
default or permit termination, modification or acceleration thereof or
thereunder, except to the extent such breach, default, termination, modification
or acceleration would not have a Material Adverse Effect on SFHC; (v) to the
knowledge of SFHC, no party to any such lease, sublease or agreement has
repudiated any provision thereof; (vi) no such lease, sublease or agreement has
been modified in any respect, except to the extent disclosed in documents made
available to Buyer or its counsel; (vii) other than as contemplated by the
33
Reorganization Transactions, SFHC has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in any leasehold or
subleasehold (except in connection with the imposition of any Permitted Lien);
(viii) to the knowledge of SFHC, all buildings and improvements being leased to
SFHC are supplied with utilities and other services necessary for the operation
thereof (including gas, electricity, water, telephone, sanitary and storm sewers
and access to public roads); and (ix) there are no pending (or, to the knowledge
of SFHC, threatened) lawsuits, or other administrative actions against SFHC
relating to any parcel leased to SFHC or other matters affecting adversely the
current use, occupancy, or value of such parcel by or to SFHC.
(k) Title.
(i) SFHC owns good and valid title, free and clear of
all Liens (other than Permitted Liens and except for rights of
licensors and lessors of such assets which are subject to a license or
lease described in the SFHC Disclosure Schedule, or not required to be
described in the SFHC Disclosure Schedule), to all of the tangible
personal and intangible property and assets of such entity shown on the
Financial Statements or acquired thereafter, other than (A) property
and assets which have been disposed of in the ordinary course of
business, and (B) property and assets which have been transferred with
respect to the Reorganization Transactions and the Excluded Asset
Distribution Transactions.
(ii) SFHC shall, as of the Closing Date, be the
holder of the lessee's interest in the parcels of real estate
comprising the Innkeepers Properties, in each case, free and clear of
all Liens (other than Permitted Liens).
(l) Condition of Assets. All of the machinery, equipment and
other Tangible Personal Property and assets of SFHC are in good condition and
repair, except for ordinary wear and tear.
(m) Tax Matters.
(i) SFHC has filed or shall timely file all Tax
Returns which are required to be filed by SFHC through the Closing Date
and all such Tax Returns truly, completely and accurately, in all
material respects, set forth the amount of any Taxes payable for the
applicable period covered thereby.
(ii) All Taxes due and payable as of the Closing Date
by SFHC, whether or not shown by SFHC on a Tax Return, have been paid
or shall be paid by SFHC on or prior to the Closing Date; all Taxes
accrued prior to the date of the Base Balance Sheet but not then due
are shown on the Financial Statements and no Taxes payable by SFHC are
delinquent.
34
(iii) No deficiency for any amount of Tax has been
asserted by written notice by a taxing authority against SFHC with
respect to the operations of SFHC, except for deficiencies that have
been paid or settled or are otherwise no longer pending, and SFHC has
no knowledge that any such deficiency assessment or asserted Tax
liability is about to be made.
(iv) SFHC does not reasonably expect any taxing
authority to claim or assess any additional Taxes for any period from
and after the date of the Financial Statements through the Closing
Date.
(v) SFHC has not consented to extend the time beyond
the Closing in which any Tax may be assessed or collected by any Taxing
authority.
(vi) SFHC has no liability for Taxes of any other
Person under Treasury Regulations Section 1.1502-6 or any similar
provision of local, state or foreign Tax law.
(vii) SFHC is not a party to or bound by any Tax
allocation or Tax sharing agreement and SFHC has no contractual
obligation to indemnify any other Person with respect to Taxes.
(viii) SFHC is, and since its formation has been
validly classified as, a partnership for federal income tax purposes,
and no election has been made or will be made on or prior to the
Closing Date to treat SFHC as an association taxable as a corporation
for federal income tax purposes or for state tax purposes.
(ix) No written claim has ever been made by a taxing
authority in a jurisdiction where SFHC does not pay Tax or file Tax
Returns that SFHC is or may be subject to Taxes assessed by such
jurisdiction, except for claims that have been satisfied or settled or
are otherwise no longer pending.
(x) SFHC has no knowledge of, nor has it received any
written notice of, any special taxes or assessments including any
withholding taxes or "rollback" taxes relating to any of the real
properties listed in the SFHC Disclosure Schedule or any part thereof
or any planned public improvements that may result in a special tax or
assessment against the real properties listed in the SFHC Disclosure
Schedule or any of them.
(xi) SFHC has withheld and prior to Closing shall
have paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing by SFHC to any employee,
creditor, independent contractor or other third party.
35
(xii) Section 6(m) of the SFHC Disclosure Schedule
contains a list of states, territories and jurisdictions (whether
foreign or domestic) in which SFHC is required to file Tax Returns as
of the date hereof relating to the Business.
(xiii) The SFHC Partners will allocate any
consideration received from Buyer hereunder in the proportions
described in a statement to be delivered by the SFHC Partners'
Representative to Buyer at the Closing.
For purposes of this Section 6(m), all references to SFHC shall include all
entities, some or all of the assets of which, are acquired by SFHC pursuant to
the Reorganization Transactions, provided, however, that for purposes of Section
6(m)(viii), references to "SFHC" shall not include any such entities organized
as corporations under applicable state law.
(n) Intellectual Property.
(i) Section 6(n) of the SFHC Disclosure Schedule sets
forth a complete and correct list as of the date hereof of all:
(A) patented or registered Intellectual
Property and pending patent applications or other applications for
registrations of Intellectual Property owned or filed by or on behalf
of SFHC;
(B) trade names, Internet domain names and
material unregistered trademarks and service marks owned by SFHC; and
(C) licenses or similar agreements or
arrangements for the Intellectual Property to which SFHC is a party,
either as licensee or licensor, other than with respect to commercial
software products that are generally available to the public.
(ii) SFHC owns and possess all right, title and
interest in and to, or to the knowledge of SFHC has a valid and
enforceable license or other right to use, the Intellectual Property
used in the operation of the Business as currently conducted free and
clear of all Liens other than Permitted Liens. To the knowledge of
SFHC, no claim by any third party contesting the validity,
enforceability, use or ownership of any Intellectual Property used by
SFHC or its Affiliates in the operation of the Business as currently
conducted has been made and is currently outstanding or is being
overtly threatened, and there are no meritorious grounds for any such
claim that would be material. To the knowledge of SFHC, no loss or
expiration of any Intellectual Property used by SFHC or its Affiliates
in the operation of the Business as currently conducted is being
overtly threatened, is pending or is reasonably foreseeable. SFHC has
not received any written notice of, and SFHC has no knowledge of any
facts which indicate a likelihood of, any infringement or
misappropriation by any third party with respect to Intellectual
Property used by SFHC or its Affiliates in the operation of the
Business as currently conducted or any conflict of any third party's
Intellectual Property with any
36
such Intellectual Property used by SFHC or its Affiliates. To the
knowledge of SFHC, SFHC has not infringed, misappropriated or otherwise
conflicted with any Intellectual Property rights of any third parties
and no infringement, misappropriation or conflict by SFHC will occur as
a result of the operation by SFHC or its Affiliates of the Business as
currently conducted.
(iii) SFHC has taken all commercially reasonable
action to maintain and protect the Intellectual Property owned by SFHC
or its Affiliates or used by SFHC or its Affiliates in the operation of
the Business as currently conducted except where failure to do so will
not have a Material Adverse Effect on SFHC; the Intellectual Property
owned by SFHC or its Affiliates or used by SFHC or its Affiliates in
the operation of the Business as currently conducted will be owned or
available for use by Buyer on identical terms and conditions
immediately subsequent to the Closing.
(o) Contracts and Commitments. Section 6(o) of the SFHC
Disclosure Schedule lists all of the "Material Contracts." For purposes of this
Agreement, a "Material Contract" shall mean a material written or oral binding
executory contract to which SFHC is a party as of the date of this Agreement
that is in one of the categories specified in the following clauses of this
Section 6(o):
(i) (A) any contract for the employment of any
officer, individual employee or other person, (B) any consulting
contract with any natural person whose annual cash compensation exceeds
$100,000, (C) any contract with any labor union, (D) any severance
agreement involving payments by SFHC to any employee in excess of
$25,000 in any one case or in excess of $50,000 in the aggregate or (E)
any agreement relating to loans by SFHC or any Affiliate of SFHC to
officers, managers or Affiliates of SFHC, other than advances in the
ordinary course of business;
(ii) any agreement or indenture evidencing
indebtedness for borrowed money in excess of $25,000 or the mortgaging,
pledging or otherwise placing a Lien (other than a Permitted Lien) on
any asset or group of assets of SFHC;
(iii) any outstanding powers of attorney executed on
behalf of SFHC;
(iv) any guarantee of any obligation for borrowed
money in excess of $25,000;
(v) any agreement with respect to the lending or
investing of funds in excess of $25,000 to or in any other Person;
(vi) any management contract or other similar
arrangement relating to SFHC's management and operation of hotels in
excess of $25,000;
37
(vii) any partnership, joint venture or other similar
agreement or arrangement (except for agreements relating to entities
that will be dissolved as of or prior to the Closing pursuant to the
Reorganization Transactions);
(viii) any lease or agreement under which SFHC is
lessee of or holds or operates any property, real or personal, owned by
any other party and which requires payments by SFHC to such other party
of more than $20,000 per annum;
(ix) any lease or agreement under which SFHC is
lessor of or permits any third party to hold or operate any property,
real or personal, owned or controlled by it;
(x) any assignment, license, indemnification or other
agreement with respect to any form of Intellectual Property (other than
with respect to pre-packaged commercial software products that are
generally available to the public), or any franchise or marketing
representation agreement or arrangement;
(xi) any contract or group of related contracts with
the same party (excluding purchase orders and other purchasing
arrangements entered into in the ordinary course of business) for the
purchase or sale of products or services under which the undelivered
balance of such products and services has a selling price in excess of
$25,000;
(xii) any contract which limits SFHC's legal right to
use any Intellectual Property anywhere in the world, except as required
by applicable licenses, or which prohibits SFHC from freely engaging in
business anywhere in the world;
(xiii) any material agreement with any Government
Entity;
(xiv) any contract or group of related contracts with
the same party continuing over a period of more than six months from
the date hereof involving $25,000 individually or $100,000 in the
aggregate that is not terminable by SFHC on sixty (60) days or less
notice without penalty;
(xv) any contract relating to the marketing or sales
of SFHC's services involving $25,000 or $100,000 in the aggregate;
(xvi) the Development Agreements;
(xvii) the Master Lease and Percentage Leases;
(xviii) the Operating Agreements;
(xix) the Purchase Agreements;
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(xx) the Occupancy Agreements;
(xxi) the Management Agreements; and
(xxii) any other agreement material to the Business
or involving payments or receipts greater than $100,000 in any fiscal
year.
SFHC has performed all material obligations required to be performed by
it and is not in default under or in breach of nor in receipt of any written
claim (other than a claim which is no longer pending) of default or breach under
any agreement, lease, contract, commitment or other agreement to which it is a
party that has not been cured under the terms of any such agreement, except
where such nonperformance, default or breach would not have a Material Adverse
Effect on SFHC; and no event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach or event of
noncompliance under any such agreement (or would allow any other party to such
agreement to take any action) which would have a Material Adverse Effect on
SFHC. SFHC has no knowledge of any pending material breach or reasonably
foreseeable material breach by any other party of any material agreement to
which SFHC is a party relating to the Business. Upon consummation of the
Contemplated Transactions, subject to the receipt of any necessary approvals and
consents set forth in Section 6(o) of the SFHC Disclosure Schedule, each
Material Contract described in the SFHC Disclosure Schedule shall be in full
force and effect without penalty or other modification except as would not
reasonably be expected to have a Material Adverse Effect on SFHC or a Material
Adverse Effect on Buyer. Buyer has been supplied with a true and correct copy of
each of the Material Contracts which are referred to in Section 6(o) of the SFHC
Disclosure Schedule, together with all amendments, continuing waivers or other
modifications thereto and renewals and extensions thereof.
(p) Insurance; Banking Relations. Section 6(p) of the SFHC
Disclosure Schedule lists and briefly describes all of the insurance policies
maintained by SFHC as of the date hereof (the "Insurance Policies"). To the
knowledge of SFHC, all of such Insurance Policies are in full force and effect
and, subject to their terms, will remain in full force and effect following the
Closing without any further action or payment by Buyer (other than premiums
payable in the ordinary course) and SFHC is not in default with respect to its
obligations under any of such Insurance Policies and has not received any
written notification of cancellation of any of such Insurance Policies and has
no claim outstanding as of the date hereof which would reasonably be expected to
cause a material increase in its insurance rates. SFHC maintains insurance
coverage of a type and amount customary for organizations of similar size
engaged in similar lines of business. All of the accounts and agreements which
SFHC has with any banking institution as of the date hereof are described in
Section 6(p) of the SFHC Disclosure Schedule, indicating with respect to each of
such arrangements the type of arrangement maintained (such as checking account,
borrowing arrangements, safe deposit box, etc.) and the authorized signatories
or transaction agents in respect thereof.
39
(q) Litigation; Proceedings. There are no actions, suits,
proceedings (including grievance proceedings), hearings, orders or (to the
knowledge of SFHC) investigations pending or to the knowledge of SFHC being
overtly threatened in writing against or specifically affecting, SFHC or the
Business (or, to the knowledge of SFHC, pending or threatened against or
affecting any of the officers, managers or employees of SFHC with respect to the
Business), at law or in equity, before or by any Government Entity which would
reasonably be expected to have a Material Adverse Effect on SFHC or which would
have a Material Adverse Effect on SFHC's ability to consummate the Contemplated
Transactions. SFHC (i) is not specifically subject to any judgment, order or
decree of, or settlement or conciliation agreement subject to enforcement by,
any Government Entity which would reasonably be expected to have a Material
Adverse Effect on SFHC and (ii) is not engaged in any pending lawsuit to recover
moneys due it or for damages sustained by it in excess of $25,000 in amount.
(r) Licenses. As of the Closing Date, SFHC will own or possess
all necessary right, title and interest in and to all of the Licenses that are
necessary to conduct the Business as presently conducted by SFHC and its
Affiliates on the date hereof, including, without limitation, all Licenses
required under any federal, state or local law relating to public health and
safety, employee health and safety, pollution or protection of the environment,
other than those Licenses where the failure to obtain such Licenses would not
reasonably be expected to have a Material Adverse Effect on SFHC. As of the date
hereof, SFHC and its Affiliates are, and as of the Closing Date, SFHC will be,
in material compliance with the terms and conditions of such Licenses and
neither SFHC nor any Affiliate has received any written notices that it is in
violation of any of the terms or conditions of such Licenses, except for any
noncompliance or notice that has been remedied, satisfied or is no longer
pending or that would not have a Material Adverse Effect on SFHC. SFHC and its
Affiliates have taken and will take all necessary action to maintain such
Licenses, and no loss or expiration of any such License is (to the knowledge of
SFHC) being overtly threatened, pending or reasonably foreseeable other than
expiration in accordance with the terms thereof or such loss or expiration that
would not have a Material Adverse Effect on SFHC.
(s) Employees.
(i) SFHC is in compliance with all laws and
regulations relating to labor and employment including, without
limitation, provisions thereof relating to wages, hours, equal
opportunity, collective bargaining, immigration and the payment of
social security and other taxes, except where the failure to be in
compliance would not have a Material Adverse Effect on SFHC.
(ii) There is no charge or complaint pending or, to
the knowledge of SFHC, being overtly threatened before any Government
Entity against SFHC, or to the knowledge of SFHC against any of its
employees, officers or managers, alleging violation of any federal,
state or local statute, ordinance or regulation relating to any
employee's (or group of employees') employment or prospective
employment at SFHC,
40
except for any such charge or complaint that would not have a Material
Adverse Effect on SFHC; and, to the knowledge SFHC, no reasonable basis
for any such claim exists, nor will the Contemplated Transactions form
the basis of or result in any such charge or complaint.
(iii) Since January 1, 1997, SFHC has not experienced
any union organizing attempt, strikes, work stoppage or slow down, or
any other organized labor dispute, and no such action is currently
pending against SFHC or, to the knowledge of SFHC being overtly
threatened against SFHC.
(iv) As of the date hereof, SFHC is not a party to
any collective bargaining agreement or relationship with any labor
union.
(v) To the knowledge of SFHC, as of the date hereof
and except as contemplated by this Agreement, no executive officer or
general manager of SFHC or any subsidiary of SFHC has any plans to
terminate his, her or their employment with such entity.
(vi) No current or former employee of SFHC is
asserting any claim against SFHC or, to the knowledge of SFHC, is
overtly threatening to assert any claim against SFHC for overtime pay,
wages, salary or bonus or vacation time, excluding in each case current
payroll periods.
(vii) Neither SFHC nor to the knowledge of SFHC any
of its partners, officers or key employees is subject to any
noncompete, nonsolicitation or similar agreement adversely affecting in
any material respect, or in material conflict with, the Business or
his, her or its activities for the Business.
(viii) SFHC has not implemented any plant or
operating unit closing, or layoff of employees, that would implicate
the Worker Adjustment Retraining and Notification ("WARN") Act of 1988,
as amended, or any similar state or local law or regulation, and no
such layoffs will be implemented before Closing without advance
notification to Buyer.
(t) Employee Benefits. SFHC has no deferred or incentive
compensation plan, profit sharing plan, retirement plan, hospitalization plan,
Employee Pension Benefit Plans or Employee Welfare Benefit Plans. SFHC is not a
participating or contributing employer in any Multiemployer Plan with respect to
its employees nor has SFHC incurred any withdrawal liability with respect to any
Multiemployer Plan or any liability in connection with the termination or
reorganization of any Multiemployer Plan. SFHC has not incurred liability and no
fact or event exists that could reasonably be expected to give rise to any
liability to the PBGC or otherwise under Title IV of ERISA (including any
withdrawal liability) or under the Code with respect to any Employee Pension
Benefit Plan that SFHC or any member of its Controlled Group (within the meaning
of Code Section 414(b) and (c)) has ever maintained, or
41
to which any of them has ever contributed, or ever has been required to
contribute. Any such plans that SFHC has ever maintained or to which it has ever
contributed, have been administered in all material respects in accordance with
the terms and requirements of ERISA and the Code and all applicable laws. SFHC
is not directly or indirectly related to the Central States Southeast and
Southwest Areas Pension Fund within the meaning of Section 514(c)(9)(B)(iv) of
the Code. The assets of the Summerfield Employee Benefits Trust are as of the
date hereof as set forth on Section 6(t) of the SFHC Disclosure Schedule.
(u) Environment, Health and Safety. Except as set forth in the
environmental reports delivered to Buyer and listed in Section 6(u) of the SFHC
Disclosure Schedule:
(i) SFHC has obtained all permits, licenses, and
other authorizations which are required to have been obtained by SFHC
or its Affiliates for the ownership and operation of the Business as
currently conducted under all applicable Environmental, Health and
Safety Laws, except where the failure to obtain such permits, licenses
and other authorizations would not have a Material Adverse Effect on
SFHC;
(ii) neither SFHC nor any Affiliate has handled or
disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition,
or owned or operated the Business or any property or facility (and, to
the knowledge of SFHC, no such property or facility is contaminated
with hazardous materials, substances or waste) so as to give rise to
any liability or corrective or remedial obligation under any
Environmental, Health and Safety Laws, other than any liabilities or
corrective or remedial obligations that would not have a Material
Adverse Effect on SFHC;
(iii) SFHC and its Affiliates have complied with all
Environmental, Health and Safety Laws (except where the failure to be
in compliance would not have a Material Adverse Effect on SFHC) and no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice is to the knowledge of SFHC, pending or overtly
threatened against SFHC alleging any failure to so comply;
(iv) SFHC has not expressly assumed or undertaken any
liability of any other Person under any Environmental, Health and
Safety Laws;
(v) to the knowledge of SFHC, no underground storage
tanks, landfills or waste disposal areas, asbestos-containing
materials, or PCB-containing equipment or fluids have been or are
present on any real property listed on the SFHC Disclosure Schedule;
and
(vi) to SFHC's knowledge, the Contemplated
Transactions do not impose any obligations under any Environmental,
Health and Safety Laws for site
42
investigation or cleanup, or notification to any Government Entity or
third parties other than such obligations which, if not fulfilled,
would not reasonably be expected to impose a Material Adverse Effect on
SFHC.
(v) Insider Interests. No officer, partner or manager of SFHC
or any relative or Affiliate of any such Person has any agreement with SFHC
(whether as vendor, service provider, supplier or otherwise) or any interest in
any property (real, personal or mixed, tangible or intangible) used in or
pertaining to the Business, except solely as a partner or employee of SFHC or
such Affiliate, as the case may be.
(w) Designated Properties Formula. If the owner of a
particular Designated Property is a party to a management agreement, franchise
agreement and/or lease agreement as of the date hereof and if (through December
31, 2000) all of such agreements were to remain exactly the same as they
currently are (and all fees payable thereunder were to be calculated in exactly
the same manner as they are currently calculated), then the 1998 Pro Forma Fee
Amount, the 1999 Pro Forma Fee Amount, and the 2000 Pro Forma Fee Amount with
respect to such Designated Property would not exceed the aggregate dollar amount
of all management, lease, franchise, corporate and brand related fees for the
"Applicable Period" referred to in Section 2(f) that would be generated with
respect to such Designated Property under such management, franchise, and lease
agreements.
(x) Disclosure. As of the date hereof, the representations and
warranties and statements by SFHC contained in this Agreement and in the SFHC
Disclosure Schedule do not contain any untrue statement of a material fact, and,
when taken together, do not omit to state any material fact required to be
stated therein or necessary in order to make such representations, warranties or
statements not misleading in light of the circumstances under which they were
made.
Section 7. Representations and Warranties of Buyer. As a material
inducement to SFHC and the SFHC Partners to perform its obligations under this
Agreement, Buyer hereby represents and warrants to SFHC and the SFHC Partners as
follows:
(a) Organization of Buyer and Certain Affiliates. Each of
Buyer and Operating Partnership is a limited partnership duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and is
qualified to do business in all jurisdictions in which such qualification is
required, except where the failure to do so would not have a Material Adverse
Effect on Buyer or a material adverse effect on the business, results of
operations or financial condition of Operating Partnership, respectively. Each
of Patriot REIT and Wyndham International, Inc. is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation. Each of Patriot REIT and Wyndham International, Inc. is
duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so licensed or
43
qualified could not reasonably be expected to have a material adverse effect on
the business, results of operations or financial condition of Patriot REIT and
its subsidiaries, taken as a whole, or Wyndham International, Inc. and its
subsidiaries, taken as a whole, respectively.
(b) Authorization of Transaction. Each of the Patriot/Wyndham
Entities has full power and authority to enter into the Transaction Documents to
which it is a party and to perform all of its obligations thereunder. The
execution and delivery of the Transaction Documents to which each
Patriot/Wyndham Entity is a party and the performance by such Patriot/Wyndham
Entity of its obligations thereunder have been duly authorized by such action as
may be required, and no further action or approval is required in order to
consummate transactions contemplated by the Transaction Documents to which such
Patriot/Wyndham Entity is a party or to constitute each of such Transaction
Documents as a binding and enforceable obligation of such Patriot/Wyndham
Entity.
(c) Noncontravention. Neither the execution and the delivery
of the Transaction Documents, nor the consummation of the Contemplated
Transactions or the performance of any obligation under any of the Transaction
Documents shall, except as explicitly required or permitted herein (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Government Entity to which
any Patriot/Wyndham Entity is subject or any provision of its partnership
agreement, certificate of incorporation or by-laws or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which any Patriot/Wyndham Entity is a party or by which any
Patriot/Wyndham Entity is bound unless such effect does not have a Material
Adverse Effect on Buyer or a material adverse effect on the financial condition
or results of operations of such other Patriot/Wyndham Entity, as the case may
be. Except as set forth in Section 7(c) of the Buyer Disclosure Schedule to be
attached hereto, none of the Patriot/Wyndham Entities is required to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any Government Entity or third party in order to enter into the
Transaction Documents or to consummate the Contemplated Transactions or perform
any obligation under any of the Transaction Documents, except where the failure
to make or obtain such notice, filing, authorization, consent or approval would
not have a Material Adverse Effect on Buyer or a material adverse effect on the
financial condition or results of operations of such other Patriot/Wyndham
Entity, as the case may be.
(d) Status of the Partnership Agreement The partnership
agreement of each of Buyer and the Operating Partnership is in full force and
effect, a true, complete and correct copy thereof has been delivered to SFHC and
there are no dissolution, termination or liquidation proceedings pending or
contemplated with respect to Buyer or the Operating Partnership, respectively.
Each of Buyer and the Operating Partnership is, and has been since the date of
its formation, taxable as a "partnership" as defined in Section 7701(a) of the
Code and is, and has been since the date of its formation, not taxable as a
corporation by reason of not being a publicly traded partnership within the
meaning of Section 7704 of the Code.
44
(e) No Litigation; Proceedings. There are no pending or, to
Buyer's knowledge, overtly threatened investigations, actions, suits,
proceedings or claims against or affecting any Patriot/Wyndham Entity at law or
in equity or before or by any Government Entity which, if determined adversely,
would have a Material Adverse Effect on Buyer or a material adverse effect on
the financial condition or results of operations of such other Patriot/Wyndham
Entity, as the case may be, or adversely affect the ability of any
Patriot/Wyndham Entity to consummate the transactions contemplated by the
Transaction Documents to which it is a party.
(f) Units. As of the date of this Agreement, there are (i)
9,918,306 Units and 1,324,804 Series B Preferred Units outstanding, and (ii)
9,918,306 Operating Units, 931,972 Series A Preferred Operating Units, 1,324,804
Series B Preferred Operating Units, and 476,682 Series C Preferred Operating
Units outstanding. There are no restrictions on the transfer of the Units or
Operating Units other than those contained in this Agreement, the partnership
agreement of Buyer (or the Operating Partnership, as applicable) in each case as
amended from time to time or the Registration Rights Agreement and those arising
from federal and applicable state securities laws. Except as set forth in
Section 7(f) of the Buyer Disclosure Schedule attached hereto and except as
created by this Agreement, as of the date hereof, there are no outstanding
subscriptions, options, warrants, preemptive or other rights or other
arrangements or commitments obligating Buyer to issue any Units or obligating
the Operating Partnership to issue any Operating Units. If and when issued, the
shares of common stock, $.01 par value of Patriot REIT issuable upon redemption
(in accordance with the partnership agreement of Buyer) of the Units delivered
pursuant to this Agreement will be duly authorized, validly issued, fully paid
and non-assessable. If and when issued, the shares of common stock, $.01 par
value of Wyndham International, Inc. issuable upon redemption (in accordance
with the partnership agreement of the Operating Partnership) of the Operating
Units deliverable pursuant to this Agreement will be duly authorized, validly
issued, fully paid and non-assessable. At the Closing, upon receipt of the
Contributed Interests, Buyer will have issued the Units free and clear of all
Liens (other than any Liens in favor of the partners of Buyer pursuant to the
Partnership Agreement), and as of the Closing, each of the SFHC Partners will be
admitted as a limited partner of Buyer. The issuance of the Units to the SFHC
Partners at the Closing will not require any approval or consent of any
Government Entity except any such approval that shall have been obtained on or
prior to the Closing. At the Closing, upon receipt of the Promissory Note
Consideration, the Operating Partnership will have issued the Operating Units
free and clear of all Liens (other than Liens in favor of the partners of
Operating Partnership pursuant to the Operating Partnership Agreement), and as
of the Closing, each of the SFHC Partners will be admitted as a limited partner
of the Operating Partnership. The issuance of the Operating Units to the SFHC
Partners at the Closing will not require any approval or consent of any
Governmental Entity except any such approval that shall have been obtained on or
prior to the Closing.
(g) SEC Reports. Each of the reports and other documents
listed below filed with the Securities and Exchange Commission ("SEC") by the
corresponding entity with respect to the corresponding period (as such documents
have been amended prior to the date
45
hereof, collectively, the "PAH SEC Reports"), as of their respective dates,
complied in all material respects with the applicable requirements of the
federal securities laws. None of the PAH SEC Reports, as of their respective
dates, contained an untrue statement of material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except for such statements, if any, as have been modified or
superseded by subsequent filings prior to the date hereof. All reports and other
documents required to have been filed with the SEC since December 31, 1996 by
the entities identified below have been so filed on a timely basis, except where
the failure to make such filing does not have a material adverse effect on such
entity.
PAH SEC Reports
Entity Filing Period Reports
Patriot American 12/31/96 - 7/1/97 10-K, 10-Q, 8-K,
Hospitality, Inc., Proxy Statements
a Virginia corporation
Patriot American 7/1/97- date hereof 10-Q, 8-K,
Hospitality, Inc., Proxy Statements
a Delaware corporation
Patriot American 7/1/97 - date hereof 10-Q, 8-K,
Hospitality Operating Proxy Statements
Company (currently
named Wyndham
International, Inc.)
(h) Partnership Admission Agreements. The representations and
warranties contained in the Partnership Admission Agreements will be true and
correct in all material respects as of the Closing Date.
(i) Financial Statements. Each of the consolidated balance
sheets of each of Patriot REIT and Wyndham International, Inc. included in or
incorporated by reference into the PAH SEC Reports (including the related notes
and schedules) as of their respective dates, complied as to form in all material
respects with applicable accounting requirements and federal securities laws and
fairly presents the consolidated financial position of Patriot REIT and Wyndham
International, Inc. (and their respective consolidated subsidiaries),
respectively, and each of their respective consolidated statements of income,
retained earnings and cash flows included or incorporated by reference into the
PAH SEC Reports (including any related notes and schedules) as of their
respective dates, complied as to form in all material respects with applicable
accounting requirements and federal securities laws and fairly presents the
results of operations, retained earnings, or cash flows, as the case may be, of
Patriot REIT and
46
Wyndham International, Inc.(and their respective consolidated subsidiaries),
respectively, for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with GAAP applied on a
consistent basis during the respective period involved, except as may be noted
therein and except, in the case of unaudited statements, as permitted by Form
10-Q pursuant to Section 13 of the Securities Exchange Act of 1934, as amended).
Except (i) as reflected in such financial statements or in the notes thereto,
(ii) as contemplated hereunder, (iii) for liabilities incurred in connection
with this Agreement or the Contemplated Transactions, and (iv) for liabilities
and obligations incurred since September 30, 1997 in the ordinary course of
business consistent with past practice, neither Patriot REIT, Wyndham
International, Inc., nor any of their respective subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), including liabilities arising under any Environmental, Health and
Safety Laws, required by GAAP to be reflected in a consolidated balance sheet of
Patriot REIT and Wyndham International, Inc. and their respective consolidated
subsidiaries and which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of any Patriot/Wyndham Entity, or on its ability to
perform its respective obligations under this Agreement. Between September 30,
1997 and the date of this Agreement, there has not occurred any event which has
had or which would reasonably be expected to have a Material Adverse Effect on
Buyer or a material adverse effect on the financial condition or results of
operations of any other Patriot/Wyndham Entity.
(j) German Law Compliance. Each of the Patriot/Wyndham
Entities has complied or will comply as of the Closing Date in all material
respects with all registration requirements and any other requirements under all
applicable laws, rules and regulations of the Republic of Germany and any
applicable political subdivision thereof, and has taken or will take on or prior
to the Closing Date all other actions, necessary to ensure that any SFHC Partner
who is or who becomes a resident or citizen of the Republic of Germany may
lawfully hold the Units, Operating Units and Paired Shares without any material
penalty.
Section 8. Pre-Closing Covenants.
(a) Affirmative Covenants of SFHC. From and after the date of
this Agreement to the Closing Date, except as otherwise consented to in writing
by Buyer (which consent shall not be unreasonably withheld or delayed) or
otherwise contemplated by this Agreement (including the Exhibits hereto and the
SFHC Disclosure Schedule or any of the other Transaction Documents), SFHC shall:
(i) effect the Reorganization Transactions prior to
the Closing substantially in accordance with the terms set forth in
Exhibit 1.2 attached hereto and effect the Excluded Asset Distribution
Transactions;
(ii) conduct its operations according to the ordinary
course of business and use commercially reasonable efforts to (A)
preserve substantially intact its
47
business organization, (B) keep available the services of officers and
general managers, and (C) maintain satisfactory relationships with
suppliers, customers, franchisees and others having business
relationships with it;
(iii) promptly inform Buyer in writing upon learning
of any material inaccuracy in the representations and warranties
contained in Section 6 (which notification shall not be deemed to amend
any disclaimers made therein or cure any breach thereof) or of any
facts, circumstances or conditions of which SFHC or the SFHC Partners'
Representative becomes aware which are likely to result in the Buyer's
conditions to Closing not being satisfied by the Scheduled Closing
Time;
(iv) permit representatives and agents of Buyer to
have reasonable access (upon reasonable advance notice, during normal
business hours) to its books, records, property, facilities, customers,
suppliers, sales representatives, consultants, key employees and
independent accountants in connection with Buyer's due diligence
review; provided, however, that Buyer shall ensure that none of its
representatives or agents interferes with or otherwise disrupts the
business or operations of SFHC or violates any provision of the
Confidentiality Agreements (as defined below) while exercising the
rights provided in this Section 8(a)(iv);
(v) use commercially reasonable efforts to obtain the
Consents referred to in Section 4(c) hereof and to cause the other
conditions to the obligations of SFHC, each SFHC Partner and Buyer
hereunder to be satisfied;
(vi) use commercially reasonable efforts to maintain
the existence of and protect all material Intellectual Property used in
the Business;
(vii) use commercially reasonable efforts to comply
with all Applicable Laws in the operation of the Business (including,
without limitation, Environmental, Health and Safety Laws);
(viii) maintain its books, accounts and records in
accordance with past practice, and in accordance with GAAP, in each
case in all material respects and deliver to Buyer on or prior to the
Closing Date originals or copies of all of such books, accounts and
records and such other related workpapers or materials as Buyer may
reasonably request;
(ix) deliver to Buyer (A) prior to the Closing Date,
the audited Base Balance Sheet and the audited consolidated statements
of operations and changes in partners' equity of SFHC and its
consolidated subsidiaries for the fiscal year ended January 2, 1998,
and (B) within 20 calendar days after the end of each accounting period
after the date of this Agreement not covered by the Financial
Statements, interim financial statements of SFHC for such accounting
period prepared in accordance with GAAP (excluding notes) and presented
in a form consistent with past practices, in each
48
case in all material respects (it being understood that such interim
financial statements will not have footnotes and will be subject to
normal year end adjustments);
(x) except as otherwise contemplated herein, conduct
the cash management customs and practices of the Business (including,
without limitation, the collection of receivables and payment of
payables) in the ordinary course of business;
(xi) use commercially reasonable efforts to maintain
in full force and effect all of the Insurance Policies (or comparable
replacement policies reasonably satisfactory to Buyer);
(xii) subject to Section (8)(b)(xiv) use commercially
reasonable efforts to perform any outstanding binding obligations on
its part to be performed under the Development Agreements and the
Purchase Agreements including with respect thereto: the conduct of
SFHC's due diligence investigation; the completion of applications for
requisite consents, licenses, approvals and permits; the securing of
appropriate insurance; the discharge of fees, costs and expenses due
and payable thereunder; the observance of time restrictions contained
therein; and any other matter legally required to be performed by SFHC
and relating to the purchase of the relevant Contract Property or the
construction of a hotel thereon in compliance with such Development
Agreements and Purchase Agreements;
(xiii) wherever SFHC has a continuing entitlement to
conduct due diligence investigations under any of the Purchase
Agreements, (A) consult with and keep Buyer advised of all relevant
material matters arising in the course of its investigations, and (B)
provide Buyer with copies of relevant material documents and
information;
(xiv) use the amounts reflected as F, F & E Reserves
on the books and records of Summerfield HPT Lease Company, L.P. only
for the acquisition of furniture, fixtures and equipment and the cost
of repairs to and improvements on real property leased by Summerfield
HPT Lease Company, L.P.;
(xv) if requested by Buyer prior to the Closing, SFHC
shall cause to be sold to Patriot REIT 100% of the outstanding stock of
Summerfield Hotel Leasing Corporation; and
(xvi) use best efforts to obtain the consent referred
to on Section 8(a)(xv) of the SFHC Disclosure Schedule.
(b) Negative Covenants of SFHC. From and after the date of
this Agreement to the Closing Date, without the prior written consent of Buyer
(which consent shall not be unreasonably withheld or delayed), except in
connection with the Reorganization Transactions or the Excluded Asset
Distribution Transactions or as otherwise contemplated by
49
this Agreement (including the Exhibits hereto and the SFHC Disclosure Schedules)
or any of the other Transaction Documents, SFHC shall not:
(i) sell, assign, convey, transfer, cancel, lease,
license or encumber any tangible assets, Intellectual Property or other
intangible asset or right (except for assets and rights included in the
Excluded Assets and except in connection with any Permitted Lien) other
than in the ordinary course of business;
(ii) enter into any agreement, contract, lease or
license (or series of related agreements, contracts, leases or
licenses) other than in the ordinary course of business;
(iii) other than in the ordinary course of business,
accelerate, terminate, modify (except pursuant to Buyer's instructions)
or cancel any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) involving more than
$100,000 to which SFHC is a party or by which it is bound, except for
agreements, contracts, leases and licenses included in the Excluded
Assets;
(iv) sell, assign, transfer, abandon or permit to
lapse any licenses or permits held by SFHC or any Affiliate which,
individually or in the aggregate, are material to the Business or any
portion thereof;
(v) (A) mortgage or pledge any of its assets (other
than the Excluded Assets) or subject any of them to any Lien (other
than a Permitted Lien) or (B) create, incur or assume any debt for
borrowed money not currently outstanding (including obligations in
respect of capital leases);
(vi) enter into any employment contract or collective
bargaining agreement, written or oral, relating to management personnel
or which, singly or in the aggregate, represents a commitment by SFHC
for wages or salary in excess of $50,000 per year, or modify the terms
of any such existing contract or agreement other than with respect to
increases in base compensation based on annual performance evaluations
and consistent with industry practice;
(vii) grant any increase in the base compensation of
any of its managers, officers, or employees other than in the ordinary
course of business;
(viii) adopt, amend or modify in any material respect
any bonus plan, profit-sharing plan, incentive plan, severance plan,
Employee Pension Benefit Plan, Employee Welfare Benefit Plan or other
plan, contract or commitment for the benefit of any of its managers,
officers and employees;
(ix) enter into a binding commitment to do any of the
things enumerated in clauses (i) through (xiii);
50
(x) exercise SFHC's right of termination of any of
the Purchase Agreements or any other agreement pertaining to the
Contract Properties without Buyer's consent (such consent not to be
unreasonably withheld);
(xi) enter into any transaction other than in the
ordinary course of business;
(xii) declare or pay any dividends or make any other
distribution in respect of its partnership interests;
(xiii) issue, authorize or propose the issuance of,
or purchase, redeem or propose the purchase or redemption of, any of
its partnership interests or other equity interest in SFHC (or
interests in SFHC containing equity features) or securities convertible
into or exchangeable for, or rights, warrants or options (including
employee options) to acquire, any such interests or other convertible
securities (except that SFHC may issue partnership interests to the
SFHC Partners); and
(xiv) make any "site advance" with respect to any
Other Site Advance Property in excess of $5,000, or in excess of
$40,000 for all Other Site Advance Properties, except with Buyer's
approval; and
(xv) knowingly and intentionally take any action or
fail to take any action which action or omission would cause the
representations and warranties contained in Section 6 to cease to be
true and correct as of the Closing as though then made such that the
condition set forth in Section 4(a) would not be satisfied.
(c) Affirmative Covenants of Buyer. From and after the date of
this Agreement to the Closing Date, except as otherwise consented to in writing
by SFHC (which consent shall not be unreasonably withheld or delayed) or
otherwise specifically contemplated by this Agreement (including the Exhibits
and the Buyer Disclosure Schedule), Buyer shall:
(i) promptly inform SFHC in writing of any variances
from the representations and warranties contained in Section 7 (which
notification shall not be deemed to amend any disclaimers made therein
or cure any breach thereof) or of any facts, circumstances or
conditions which are likely to result in SFHC's conditions to Closing
not being satisfied by the Scheduled Closing Time; and
(ii) use commercially reasonable efforts to obtain
all consents referred to in Section 5(f) and to cause the other
conditions to the obligations of Buyer, SFHC and each SFHC Partner
hereunder to be satisfied.
(d) Negative Covenant of Buyer. Buyer shall not knowingly and
intentionally take any action or fail to take any action which action or
omission would cause the representations and warranties contained in Section 7
to cease to be true and correct as of
51
the Closing as though then made such that the condition set forth in Section
5(a) would not be satisfied.
Section 9. Survival. All representations, warranties, covenants and
agreements set forth in this Agreement and in any certificate delivered pursuant
to this Agreement shall terminate as of the Closing; provided, however, that any
covenant or agreement by a Party hereto which by its terms contemplates
performance after the Closing Date (including Sections 2(d), 2(e), 2(f), 2(g),
2(h), 2(i), 2(j), 2(k), 10(a), 10(b), 10(c), 10(d), 10(e), 10(g), 10(h), 10(o),
10(p), 10(q), 10(r), 10(s), 10(t), 11 and 12 hereof) shall survive the Closing
and be fully effective and enforceable until fully performed or otherwise no
longer applicable. Notwithstanding anything in this Section 9 to the contrary,
any Party may pursue any common law remedy it may have for fraud by another
Party (subject to applicable statutes of limitations and other applicable
limitations and defenses pursuant to applicable laws).
Section 10. Additional Agreements.
(a) Mutual Assistance and Records. The Parties agree that they
will (i) mutually cooperate in the expeditious filing of all notices, reports
and other filings with any Government Entity required to be submitted jointly by
Buyer and SFHC and (ii) provide reasonable cooperation to mutually assist one
another in connection with their respective obligations relating to the filing
of all notices, reports and other filings with any Government Entity required to
be submitted by another Party, in each case in connection with the execution and
delivery of this Agreement, the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby or thereby. The Parties
agree that, following the Closing, the SFHC Partners' Representative may retain
copies of any records of SFHC or any of SFHC's Affiliates, subject to the
provisions of Section 10(f). Buyer shall cause to be maintained all records of
SFHC and its Affiliates for the lesser of seven (7) years or the standard
retention policy of Buyer; provided, however, that prior to the seventh
anniversary of the Closing Date no such records shall be destroyed unless Buyer
provides the SFHC Partners' Representative with at least ninety (90) days prior
written notice. Upon receipt of notice of intended destruction, the SFHC
Partners' Representative shall have the option, at its sole cost and expense, to
take possession of the records set for destruction, in which case the SFHC
Partners' Representative shall assume all further cost of storage and
destruction of such records. The SFHC Partners' Representative shall be afforded
access to and the right to copy such records in the names of the Buyer during
normal business hours, at his expense.
(b) Transaction Expenses. Each Party shall pay all of its
expenses incurred in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement (whether consummated or not);
provided, however, that if the Closing occurs: (i) the SFHC Partners will pay
all costs incurred by them, whether at or subsequent to the Closing, in
connection with the transfer of the Contributed Interests to Buyer as
contemplated by this Agreement, including without limitation, as and when due
(1) all transfer taxes and charges, documentary, sales, use, stamp,
registration, conveyance, value added or other Taxes
52
and fees incurred by them arising out of the sale of the Contributed Interests
or otherwise incurred by them in connection with the Contemplated Transaction,
(2) all charges incurred by them for or in connection with the recording of any
document or instrument contemplated hereby applicable to such transfer, if any,
and (3) all costs of obtaining permits, waivers, registrations or Consents
required to be obtained hereby prior to the Closing with respect to SFHC or any
Subsidiary; (ii) no expenses of SFHC, any Subsidiary or any SFHC Partner
relating solely to the Contemplated Transactions, including without limitation
legal, accounting, financial advisory or other professional expenses of SFHC,
any Subsidiary or any SFHC Partner relating solely to the Contemplated
Transactions, shall be charged to or paid by SFHC, any Subsidiary or Buyer, and
(iii) notwithstanding the foregoing, to the extent that any payment is required
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act (the "HSR Act") in
connection with the transfer of the Contributed Interests by the SFHC Partners
to Buyer at the Closing contemplated herein, such fee shall be borne and paid
equally by the Buyer on the one hand and the SFHC Partners on the other. In
satisfaction of their obligations under Sections 10(b) and 10(c): (i) each SFHC
Partner shall deliver to the SFHC Partners' Representative such partner's share
of costs and expenses of the SFHC Partners payable hereunder; and (ii) the SFHC
Partners' Representative shall deliver payment of such costs and expenses to
Buyer; provided, however, that the SFHC Partners shall be jointly and severally
responsible for the payment of any costs and expenses payable by any of them
under Section 10(b) and Section 10(c).
(c) Certain Taxes. The SFHC Partners shall be responsible for
the satisfaction of any Taxes based on their income arising under any local,
state, or federal Tax law, rule, or regulation in respect of the transactions
contemplated by this Agreement. The SFHC Partners will, at their own expense,
file all necessary Tax Returns and other documentation in connection with the
income Taxes and Fees encompassed in this Section 10(c).
(d) Further Assurances. SFHC, the SFHC Partners'
Representative and each SFHC Partner shall execute and deliver such further
instruments of conveyance and transfer and take such additional action as Buyer
may reasonably request to effect, consummate, confirm or evidence the transfer
to Buyer of the Contributed Interests, and SFHC, the SFHC Partners'
Representative and each SFHC Partner shall execute such documents as may be
reasonably necessary to assist Buyer in preserving or perfecting its rights in
the Contributed Interests. Buyer shall execute and deliver such further
instruments and take such additional action as SFHC or the SFHC Partners'
Representative may reasonably request to effect, consummate, confirm or evidence
the transactions contemplated by this Agreement.
(e) Litigation Support. Except in the case of a dispute among
the parties hereto, in the event and for so long as any Party actively is
contesting or defending against any charge, complaint, action, suit,
proceedings, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated by this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving Buyer on the one hand
53
or SFHC or any SFHC Partner on the other hand, each other Party (or Parties)
will (upon reasonable advance notice and to the extent reasonable) cooperate
with such contesting or defending Party (or Parties) and its counsel in the
contest or defense, make available their personnel, inform such party of any
known facts giving rise to any defense or counterclaim and provide such
testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (or Parties).
(f) Confidentiality; Press Release. Buyer and SFHC have
executed a Letter of Intent dated December 8, 1997 (the "Letter of Intent"). The
Parties acknowledge that the confidentiality and public announcement provisions
contained in Sections 10 and 11 of the Letter of Intent shall continue in effect
and be considered a part of this Agreement as if fully set forth herein, and (i)
the SFHC Partners agree to be bound by the same terms of such provisions as
applicable to SFHC, and (ii) the Patriot/Wyndham Entities agree to be bound by
the same terms of such provisions as applicable to Buyer. In addition, the
Parties agree that the Patriot Confidentiality Agreement (as defined in the
Letter of Intent) and the Wyndham Confidentiality Agreement (as defined in the
Letter of Intent) (collectively the "Confidentiality Agreements") shall remain
in full force and effect.
(g) Board Representation. On or after the Closing Date, Buyer
will cause Wyndham International, Inc. to nominate Xxxx Xxxxxx as a member of
Wyndham International, Inc.'s Board of Directors in the class whose term expires
at the annual meeting of stockholders in 1998; provided, however, that in the
event that Xx. Xxxxxx is unable or otherwise fails to agree to stand for
election as such nominee as a director of Wyndham International, Inc., Buyer
shall have the right to designate another individual as such nominee in his
place.
(h) Employment Matters.
(i) Upon the Closing, either Wyndham Management
Corporation or Patriot REIT will enter into Employment Agreements
containing such terms as set forth in Exhibit 10(h)(i)-1 hereto with
each of the persons named on Schedule 10(h)(i)-1 of the SFHC Disclosure
Schedule and enter into Employment Agreements containing such terms as
set forth in Exhibit 10(h)(i)-2 hereto with each of the persons named
on Schedule 10(h)(i)-1 of the SFHC Disclosure Schedule.
(ii) At least ten (10) calendar days prior to the
Closing, Buyer shall cause an Affiliate of one of the Patriot/Wyndham
Entities to orally extend an offer of employment to each Person who is
employed by Summerfield Hotel Corporation ("SHC") as of the Closing,
and shall cause such entity to offer each such Person employment on
terms and conditions substantially similar to the terms and conditions
provided to employees of similar levels of responsibility and
authority, including such employee benefits as 401(k), health and
welfare and paid-time off benefits, which are substantially comparable
to the benefits available to employees of similar levels of
responsibility and authority (each employee of SHC who accepts an offer
of
54
employment so extended pursuant to any clause of this Section 10(h) is
referred to in this Agreement as a "Continuing Employee").
(iii) Buyer shall insure that each Continuing
Employee (A) shall receive full credit, under each applicable severance
plan and other benefit plan of such employee's employer or any
Patriot/Wyndham Entity in which such Continuing Employee is eligible to
participate, for his or her time of service to SHC and its Affiliates
and predecessors (including Residence Inn Corporation to the extent
such service has been credited by SHC and its Affiliates) and (B) shall
receive full credit, under the vacation, sick leave and paid-time off
policies of such employee's employer or any Patriot/Wyndham Entity
applicable to such Continuing Employee, for all accrued and unused
vacation, sick leave and paid-time off to which such Continuing
Employee is entitled as of the Closing Date. Buyer shall cause to be
waived any pre-existing condition limitations, waiting periods or
similar limitations under each such employee benefit plan and shall
provide each Continuing Employee with credit for any co-payments
previously made and any deductibles or maximums previously satisfied.
(iv) SFHC and each SFHC Partner agree and acknowledge
that in no event will Buyer assume any Employee Pension Benefit Plans
or Employee Welfare Benefit Plans maintained by SFHC, any SFHC Partner
or any SFHC Affiliate, other than the Summerfield Employee Benefits
Trust.
(v) if requested by the SFHC Partners' Representative
prior to the Closing, Buyer shall acquire or shall cause one of its
Affiliates to acquire, all of the outstanding stock of Summerfield
Hotel Corporation at the Closing.
(i) Consulting Matters. Upon the Closing, Wyndham
International, Inc. will enter into a Consulting Agreement with Xxxx Xxxxxx in
the form of Exhibit 10(i) hereto.
(j) Carried Interest Payments. Upon the Closing, Buyer will
enter into a Carried Interest Payments Agreement in the form of Exhibit 10(j)
hereto.
(k) Registration Rights. Upon the Closing, Patriot REIT and
Wyndham International, Inc. will enter into a Registration Rights Agreement with
the SFHC Partners in the form of Exhibit 10(k)-1 hereto and Patriot REIT and
Wyndham International, Inc. will enter into a Registration Rights Agreement with
certain of the SFHC Partners in the form of Exhibit 10(k)-2 hereto.
(l) Partnership Admission Agreements. Upon the Closing, Buyer,
the Operating Partnership and each SFHC Partner receiving Units and Operating
Units hereunder will enter into Partnership Admission Agreements in the forms of
Exhibits 2(b)(i)-1 and 2(b)(i)-2 hereto pursuant to which such SFHC Partner
shall be admitted as a partner of Buyer and of the Operating Partnership and
thereby be bound by the terms of its Partnership Agreement.
55
(m) Exclusivity. The Parties acknowledge that the
"Exclusivity" provisions of the Letter of Intent shall continue in effect and be
considered a part of this Agreement as if fully set forth herein; provided,
however, that the phrase "Outside Date" in such paragraphs shall be replaced by
the phrase "the earlier of the Scheduled Closing Time or the date of termination
of the Contribution Agreement dated as of March 17, 1998 among Patriot American
Hospitality Partnership, L.P., Patriot American Hospitality, Inc., Wyndham
International, Inc., SF Hotel Company, L.P. and certain other entities."
(n) Wichita Lease Agreement. Upon the Closing, Wyndham
International, Inc. and Summerfield Associates, L.P. will enter into a Lease
Agreement containing such terms as set forth in Exhibit 10(n) hereto.
(o) Compliance with German Law. For the period beginning on
the Closing Date and ending on the fifth anniversary thereof, the
Patriot/Wyndham Entities shall comply in all material respects with all
registration requirements and all other requirements under applicable laws,
rules and regulations of the Republic of Germany and any applicable political
subdivision thereof, and take all other actions, necessary to ensure that any
SFHC Partner who is or who becomes a resident or citizen of the Republic of
Germany may lawfully hold the Units, Operating Units and Paired Shares without
any material penalty.
(p) Agreement to Hold Certain Assets .
(i) Buyer agrees that it will not, and will cause its
Affiliates not to, (A) sell, assign, transfer or otherwise dispose of
any real property, leaseholds or tangible or intangible personal
property held by SFHC as of the Closing or to which Buyer or any of its
Affiliates becomes successor holder to SFHC as a result of the
Contemplated Transactions (the "Successor Properties and Successor
Leaseholds") or any interest in any such Successor Property or
Successor Leasehold or (B) enter into any other transaction that could
result in potential Tax liabilities to any SFHC Partner under the Code,
for a period from and including the Closing Date to and including the
fifth anniversary thereof; provided, however, that Buyer or any
Affiliate may make any such disposition during such period if such
disposition is structured as a tax-deferred like-kind exchange under
Section 1031 of the Code (which exchange will not include any cash
consideration to Buyer or its Affiliates in excess of customary costs
and expenses incurred by Buyer or its Affiliates in connection with
negotiating and closing the acquisition of replacement property
effecting such exchange) or that otherwise does not result in the
recognition of gain by or any potential Tax liability to any SFHC
Partner or any Successor Partner under the Code. For purposes of this
Agreement, (1) "Successor Partner" means a member of the family of or
lineal descendant to a SFHC Partner or any Affiliate of such SFHC
Partner, family member or lineal descendant to whom such SFHC Partner
sells, assigns, transfers or otherwise disposes of any Unit or
56
any Operating Unit (or any interest therein), and (2) "Prohibited
Transaction" means any sale, assignment, transfer or other disposition,
or the entering into of any other transaction, prohibited by the
preceding sentence of this Section 10(p)(i).
(ii) If Buyer breaches its obligations under clause
(i) of this Section 10(p), the Parties agree that the appropriate
measure of damages suffered by a particular SFHC Partner and any
Successor Partner shall equal (i) such SFHC Partner's (or Successor
Partner's) aggregate combined federal and state income tax liability
arising in connection with a Prohibited Transaction that is allocated
to such SFHC Partners under Section 704(c) of the Code or other
applicable U.S. Tax law minus (ii) the present value of such liability,
determined as if it were incurred on the fifth (5th) anniversary of the
Closing (The aggregate amount by which (A) a particular SFHC Partner's
or Successor Partner's combined federal and state income tax liability
arising in connection with any Prohibited Transaction, exceeds (B) the
present value of such liability, determined in accordance with this
Section 10(p)(ii), is referred to in this Section 10(p) as the "Tax
Reimbursement Amount"). The present value shall be determined using a
discount rate equal to the prime rate as reported in The Wall Street
Journal on the date of the consummation of the Prohibited Transaction
(the "Consummation Date").
(iii) Notwithstanding anything to the contrary
contained in this Section 10(p) or elsewhere in this Agreement: (A)
within three days after execution of a definitive agreement relating to
a Prohibited Transaction, Buyer shall cause a copy of said definitive
agreement to be delivered to the SFHC Partners' Representative, and (B)
on the Consummation Date relating to such Prohibited Transaction, Buyer
shall pay to each SFHC Partner and to each Successor Partner, in
immediately available funds and without any deduction or setoff of any
nature, an amount equal to such SFHC Partner's or Successor Partner's
good faith reasonable estimate of the Tax Reimbursement Amount
applicable to such SFHC Partner or Successor Partner with respect to
such Prohibited Transaction (as communicated by such SFHC Partner or
Successor Partner to Buyer).
(iv) Notwithstanding anything to the contrary
contained in this Section 10(p) or elsewhere in this Agreement: (A) if
at any time following the consummation of a Prohibited Transaction, any
SFHC Partner or any Successor Partner notifies Buyer that the actual
Tax Reimbursement Amount applicable to such SFHC Partner or Successor
Partner with respect to such Prohibited Transaction exceeds the
estimated amount actually paid by Buyer to such SFHC Partner or
Successor Partner pursuant to this Section 10(p) on the Consummation
Date relating to such Prohibited Transaction, then Buyer shall promptly
pay to such SFHC Partner or Successor Partner, in immediately available
funds and without any deduction or setoff of any nature, an amount
equal to the amount by which (1) such actual Tax Reimbursement Amount,
exceeds (2) such estimated amount, and (B) if at any time following the
entering into of any Prohibited Transaction, Buyer determines that the
estimated amount actually paid
57
by Buyer to a particular SFHC Partner or Successor Partner pursuant to
this Section 10(p) on the Consummation Date relating to such Prohibited
Transaction exceeds the actual Tax Reimbursement Amount applicable to
such SFHC Partner or Successor Partner with respect to such Prohibited
Transaction, then such SFHC Partner or Successor Partner shall pay to
Buyer an amount equal to the amount by which (1) such estimated amount,
exceeds (2) such actual Tax Reimbursement Amount.
(v) Buyer shall ensure that any payment made pursuant
to this Section 10(p) is treated as a distribution from Buyer to the
applicable SFHC Partner to whom such payment is made.
(q) Hanover Expansion Payment. In the event that, on or prior
to the fifth anniversary of the Closing Date, Buyer or any Affiliate of Buyer
shall have substantially completed construction pursuant to which additional
hotel rooms will be added to the number of hotel rooms certified for occupancy
as of the Closing Date with respect to the Hanover Property (currently 136
rooms), then Buyer shall give notice of such construction (a "Hanover Expansion
Notice") not less than 30 calendar days prior to the date on which the temporary
certificate of occupancy with respect to such additional rooms will be issued,
as reasonably determined by Buyer (the date of actual certificate issuance, the
"Occupancy Date") and shall pay to the SFHC Partners' Representative (as agent
for the SFHC Partners), without any deduction or setoff of any nature, on a date
not later than two business days after the Occupancy Date, in immediately
available funds, an amount equal to the $15,000 per additional hotel room or
suite, as appropriate.
(r) Notification of Proposed Sale. During the two-year period
commencing on the Closing Date, Buyer shall promptly deliver to the SFHC
Partners' Representative a written notice of any proposal made, and any
discussions held or to be held, with respect to a possible sale or other
disposition of all or a substantial portion of or a substantial direct or
indirect interest in the "Summerfield Suites" business (or any successor
business) or the "Sierra Suites" business (or any successor business).
(s) Geographical Restriction on Competition. During the period
commencing on the Closing Date and ending on the tenth anniversary of the
Closing Date: (i) none of the Patriot/Wyndham Entities shall cause or permit any
hotel bearing the "Summerfield Suites" name (or any successor name) to be
developed or operated in any of the areas described on Exhibit 10(s)-1 (without
the prior written consent of the SFHC Partners' Representative); and (ii) none
of the Patriot/Wyndham Entities shall cause or permit any hotel bearing the
"Sierra Suites" name (or any successor name) to be developed or operated in any
of the areas described on Exhibit 10(s)-2 (without the prior written consent of
the SFHC Partners' Representative).
(t) Tax Basis Letters. Each SFHC Partner agrees to provide
reasonable assistance to SFHC such that statements identifying such SFHC
Partner's tax basis (for U.S.
58
federal income tax purposes) in its Contributed Interest as of the Closing Date
can be prepared and delivered to Buyer within 60 days following the Closing
Date.
Section 11. Termination; Effect of Termination.
(a) Termination. This Agreement may be terminated prior to
the Closing as provided below:
(i) by mutual written consent of Buyer and SFHC;
(ii) by Buyer if there has been a material
misrepresentation or breach of warranty or covenant hereunder on the
part of SFHC such that the condition contained in Section 4(a) or 4(b)
would not be satisfied as of the Scheduled Closing Time, or by SFHC if
there has been a material misrepresentation or breach of warranty or
covenant hereunder on the part of Buyer such that the condition
contained in Section 5(a) or 5(b) would not be satisfied as of the
Scheduled Closing Time, in both cases only if such breach or
misrepresentation is not cured within 15 days of notice of such breach
or misrepresentation given by the non-misrepresenting and non-breaching
Party to the other Party (except no such notice or 15-day period shall
be required if such breach or misrepresentation is incurable in the
reasonable opinion of the non-misrepresenting and non-breaching party);
(iii) by SFHC at or at any time after the Scheduled
Closing Time if the Twenty-Day Average Stock Price for the period of
twenty consecutive trading days ending on the trading day immediately
preceding the date on which the Scheduled Closing Time occurs is below
$24.00;
(iv) by either Buyer or SFHC at or at any time after
the Scheduled Closing Time if, at the Scheduled Closing Time, any
material condition to such Party's obligations to consummate the
Contemplated Transactions (as set forth in Section 4 or 5, as
applicable) has not been satisfied or waived;
(v) by Buyer at the Scheduled Closing Time if Buyer
demonstrates to SFHC that the consummation of the transactions referred
to in Sections 2(a)(ii), 2(b), 2(c) and 2(d) at the Scheduled Closing
Time will cause Buyer to fail to qualify as a real estate investment
trust under the Code;
(vi) by either Buyer or SFHC if a court of competent
jurisdiction or other Government Entity shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other
final action, after the date of this Agreement, having the effect of
permanently restraining, enjoining or otherwise prohibiting the
consummation of the Contemplated Transactions;
59
(vii) by Buyer if the timely satisfaction of any
condition set forth in Section 4 has become impossible (other than as a
result of any failure on the part of Buyer to comply with or perform
any material covenant or obligation of Buyer set forth in this
Agreement);
(viii) by SFHC if the timely satisfaction of any
condition set forth in Section 5 has become impossible (other than as a
result of any failure on the part of SFHC to comply with or perform any
material covenant or obligation of SFHC set forth in this Agreement);
or
(ix) by SFHC if the Closing shall not have occurred
on or prior to the Scheduled Closing Time;
provided, however, that neither Buyer nor SFHC shall be entitled to terminate
this Agreement pursuant to this Section 11(a) if such Party's willful breach of
this Agreement has prevented the consummation of the Contemplated Transactions.
(b) Effect of Termination. Except as otherwise set forth in
this Section 11(b), in the event of the termination of this Agreement pursuant
to Section 11(a) above, this Agreement and the other Transaction Documents shall
thereafter become void and have no effect, and no Party shall have any liability
to any other Party hereto or its partners, managers, directors or officers in
respect thereof (and each Party is hereby unconditionally released from any such
liability); provided, however, that (i) the termination of this Agreement shall
not relieve any Party from any liability for any willful breaches of this
Agreement prior to the time of such termination; and (ii) Sections 10(b), 10(f),
11 and 12 of this Agreement and the obligations of the Parties under the
Confidentiality Agreement shall survive such a termination. If this Agreement is
validly terminated by SFHC pursuant to Section 11(a)(iii) or there is a
"Designated Termination by Buyer," or if (1) at 10:00 a.m. on April 9, 1998, any
condition set forth in Section 4(a), 4(b), 4(e) or 4(h) shall not have been
satisfied and shall not have been waived, or at the Scheduled Closing Time, the
condition set forth in Section 4(c) has not been satisfied and has not been
waived, and (2) this Agreement is validly terminated by Buyer pursuant to
Section 11(a)(ii) or Section 11(a)(iv), then, on or before the date two business
days after such valid termination of this Agreement, the Management Deposit
shall (to the extent previously received by SFHC in cash) be returned to Buyer.
For purposes of this Section 11(b), there shall be deemed to be a "Designated
Termination by Buyer" if (1) this Agreement is validly terminated by Buyer
pursuant to Section 11(a)(v) (on the grounds that the consummation of the
transactions referred to in Sections 2(a)(ii), 2(b), 2(c) and 2(d) at the
Scheduled Closing Time will cause Buyer to fail to qualify as a real estate
investment trust under the Code), (2) during the period from the date hereof
through the valid termination of this Agreement by Buyer pursuant to Section
11(a)(v), each of the Patriot/Wyndham Entities shall have provided reasonable
assistance to SFHC and its Affiliates for the purpose of assisting SFHC and its
Affiliates in obtaining the consent referred to in Section 8(a)(xv) of the SFHC
Disclosure Schedule and (3) the sole reason that the consummation of the
transactions referred to in Sections 2(a)(ii), 2(b), 2(c) and 2(d) at the
Scheduled Closing Time will cause
60
Buyer to fail to qualify as a real estate investment trust under the Code is the
failure of SFHC to obtain the consent referred to in Section 8(a)(xv) of the
SFHC Disclosure Schedule.
(c) Good Faith Discussions. If the definitive agreement
relating to the Interstate Acquisition is irrevocably terminated and this
Agreement is validly terminated pursuant to Section 11(a)(v), then, to the
extent reasonably requested by Buyer, a representative or representatives of
SFHC shall, during the 30-day period commencing on the date this Agreement is
terminated pursuant to Section 11(a)(v), conduct discussions in good faith with
representatives of Buyer for the purpose of considering the possibility of
restructuring the transactions contemplated by this Agreement in a manner that
would provide after-Tax benefits to the SFHC Partners that are at least as
substantial and favorable to each of the SFHC Partners as the after-Tax benefits
expected to be derived by them from the transactions contemplated by this
Agreement. Buyer acknowledges that: (i) neither SFHC nor any of the SFHC
Partners shall be under any obligation (during or after such 30-day period) to
pursue or enter into any restructured transaction with Buyer; (ii) SFHC and each
of the SFHC Partners shall be free to engage in negotiations with any other
Person or Persons during such 30-day period regarding the possible sale of all
or any portion of or interest in the business of SFHC and its Affiliates; and
(iii) SFHC and each of the SFHC Partners shall be free to enter into or
consummate any transaction with any other Person involving the sale of all or
any portion of or interest in the business of SFHC and its Affiliates after such
30-day period.
Section 12. Miscellaneous.
(a) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
or portions thereof referred to herein), the Transaction Documents, the letter
of even date herewith included within the Xxxxxx Agreements, the Confidentiality
Agreements, and the provisions of the Letter of Intent which are referred to in
Sections 10(f) and 10(m) of this Agreement constitute the entire agreement among
the Parties and supersede any prior understandings, agreements or
representations by or among the Parties, written or oral, that may have related
in any way to the subject hereof.
(c) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
executors, administrators, personal representatives, legal representatives,
heirs, successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of Buyer (for any assignment by SFHC or any SFHC Partner)
or of SFHC or the SFHC Partners' Representative (for any assignment by Buyer);
provided that (i) Buyer may (A) assign any or all of its rights and interests
hereunder to one or more of its Affiliates, to any lender providing financing
for the transactions contemplated hereby or to any Person acquiring all or
substantially all of Buyer's assets (however effected)
61
and (B) designate one or more of its Affiliates to perform its obligations
hereunder provided that, in any such case, Buyer remains bound by the terms of
this Agreement and (ii) the SFHC Partners and the SFHC Partners' Representative
may assign to any Person the right to receive all or any portion of the cash to
be paid pursuant to this Agreement and may, with the prior consent of Buyer
(which consent shall not be unreasonably withheld), assign to any Person the
right to receive all or any portion of the Units, Operating Units and/or Paired
Shares to be issued or delivered pursuant to this Agreement.
(d) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(e) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
(f) Captions. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given when delivered
personally or telecopied (with copy sent by mail within one day of transmission)
to the recipient or sent to the recipient by reputable express courier service
(charges prepaid), and addressed to the intended recipient as set forth below:
If to the SFHC:
c/o Summerfield Hotel Corporation
0000 X. 00xx Xxxxxx Xxxxx
Xxxxxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxx, General Counsel
62
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Xxxxx X Xxxxx, Esq.
If to the SFHC Partners' Representative:
Xxx X. Xxxxx, as representative
c/o Summerfield Hotel Corporation
0000 X. 00xx Xxxxxx Xxxxx
Xxxxxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Xxxxx X Xxxxx, Esq.
If to Buyer:
c/o Patriot American Hospitality, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, General Counsel
63
with a copy to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, P.C.
Xxxxxxx X. Xxxxxxx, Esq.
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means, but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(h) Governing Law; Venue. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware. In any action between or among any of the Parties, whether arising out
of this Agreement or otherwise: (a) each of the Parties irrevocably and
unconditionally consents and submits to the exclusive jurisdiction and venue of
the state and federal courts located in Dallas, Texas; and (b) if any such
action is commenced in a state court located in Dallas, Texas, then, subject to
applicable law, no Party shall object to the removal of such action to any
federal court located in the District Court closest to Dallas, Texas.
(i) Attorneys' Fees. Except as otherwise provided herein, in
any action at law or suit in equity to enforce this Agreement or the rights of
any of the Parties hereunder, the prevailing Party in such action or suit shall
be entitled to receive a reasonable sum for its attorneys' fees and all other
reasonable costs and expenses incurred in such action or suit.
(j) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer on the one hand and SFHC or the SFHC Partners' Representative on the other
hand. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be valid
unless the same shall be in writing and signed by such Party or shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(k) Knowledge of Persons Attributable to SFHC. Whenever any
statement herein is made "to the knowledge of SFHC" or words of similar intent
or effect, the SFHC's
64
knowledge shall be deemed to mean the knowledge of Xxxx X. Xxxxxx, B. Xxxxxxx
Xxxxx, Xxx X. Xxxxx, Xxxx X. Xxxxx and Xxxxxx X. Xxxxxxxxx, or any or them.
(l) Knowledge of Persons Attributable to Buyer. Whenever any
statement herein is made "to the Buyer's knowledge" or words of similar intent
or effect, the Buyer's knowledge shall be deemed to include the knowledge of
each of Xxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxxxx.
(m) Obligations of Patriot REIT and Wyndham International,
Inc. Patriot REIT and Wyndham International, Inc. shall ensure that Buyer duly
performs, satisfies and discharges on a timely basis each of the covenants,
obligations and liabilities of Buyer under this Agreement and the other
Transaction Documents; and Patriot REIT and Wyndham International, Inc. shall be
jointly and severally liable with Buyer for the due and timely performance and
satisfaction of each of said covenants, obligations and liabilities.
(n) Construction.
(i) For purposes of this Agreement, whenever the
context requires: the singular number shall include the plural, and
vice versa; the masculine gender shall include the feminine and neuter
genders; the feminine gender shall include the masculine and neuter
genders; and the neuter gender shall include masculine and feminine
genders.
(ii) The Parties agree that any rule of construction
to the effect that ambiguities are to be resolved against the drafting
party shall not be applied in the construction or interpretation of
this Agreement.
(iii) As used in this Agreement, the words "include"
and "including," and variations thereof, shall not be deemed to be
terms of limitation, but rather shall be deemed to be followed by the
words "without limitation."
(iv) Except as otherwise indicated, all references in
this Agreement to "Sections" and "Exhibits" are intended to refer to
Sections of this Agreement and Exhibits to this Agreement.
* * * *
65
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
PATRIOT AMERICAN
HOSPITALITY PARTNERSHIP, L.P.
By: PAH GP, Inc.
Its: General Partner
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer and
Chairman of the Board
SF HOTEL COMPANY, L.P.
By: Summerfield Hotel Corporation
Its: General Partner
By: /s/ B. Xxxxxxx Xxxxx
--------------------------------------
Name: B. Xxxxxxx Xxxxx
Title: President
As SFHC Partners' Representative:
/s/ Xxx X. Xxxxx
--------------------------------------
Xxx X. Xxxxx
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chairman and CEO
WYNDHAM INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chairman and CEO
PATRIOT AMERICAN HOSPITALITY
OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: Wyndham International, Inc.,
a Delaware corporation
Its: General Partner
/s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chairman and CEO
THE SFHC PARTNERS
SUMMERFIELD HOTEL CORPORATION
By: /s/ B. Xxxxxxx Xxxxx /s/ Xxxxxx X. Xxxxxxxx, III
-------------------------------- --------------------------------
Name: B. Xxxxxxx Xxxxx Name: Xxxxxx X. Xxxxxxxx, III
Title: President
AQUARINA DEVELOPMENTS, INC. XXXX X. XXXXXX REVOCABLE TRUST
By: /s/ X. Xxxxxxxxxxx By: /s/ Xxxx Xxxxxx
-------------------------------- --------------------------------
Name: Xxxxxx Xxxxxxxxxxx Name: Xxxx X. Xxxxxx
Title: President Title: Trustee
CONSOLIDATED EQUITIES TRUST
By: /s/ Xxx X. Xxxxx /s/ Xxxxxx X. Xxxxx, Xx.
-------------------------------- --------------------------------
Name: Xxx X. Xxxxx Name: Xxxxxx X. Xxxxx, Xx.
Title: Trustee
EFKA Vermogensverwaltungs GmbH
By: /s/ F. Krups /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------- --------------------------------
Name: Xxxxx Krups Name: Xxxxxx X. Xxxxxxxxx
Title: President
/s/ Xxxx X. Xxxxxxxxx B. XXXXXXX XXXXX REVOCABLE
-------------------------------- TRUST
Xxxx Xxxxxxxxx
By: /s/ B. Xxxxxxx Xxxxx
------------------------------
Name: B. Xxxxxxx Xxxxx
Title: Trustee
/s/ Xxx X. Xxxxxx
-----------------------------------
Name: Xxx X. Xxxxxx
/s/ Xxxx X. Xxxxx
-----------------------------------
Xxxx X. Xxxxx
XXXXXXXXXXX SUITES DEVELOPMENT
CORPORATION
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President and
General Counsel
SUMMERFIELD SUITES MANAGEMENT
CORPORATION
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President and
General Counsel
SUMMERFIELD SUITES LEASE
CORPORATION
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President and
General Counsel
SFHC LEASE CORPORATION
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President and
General Counsel
SUMMERFIELD SUITES INVESTMENT CORPORATION
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President and
General Counsel
