SECOND AMENDMENT TO AGREEMENT OF MERGER
THIS SECOND AMENDMENT TO AGREEMENT OF MERGER ("Second Amendment") is
made and entered into as of the 17th day of September, 1997 by and between
Xxxxxxxx Inns, Limited Liability Company, a Delaware limited liability company
("Seller"), Xxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, and Xxxxxxxx Inn Advisors, Limited
Liability Company, a Delaware limited liability company, the sole members of
Seller (collectively "Members") and BLM-RH, Inc., a Delaware corporation
("Purchaser"), the sole shareholder of which is Buckhead America Corporation, a
Delaware corporation ("Parent corporation").
WITNESSETH:
WHEREAS, the above referenced parties entered into that certain
Agreement of Merger dated as of March 11, 1997, as amended by that
certain First Amendment to Agreement of Merger dated May 23, 1997
(collectively, the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as set forth
hereinbelow.
NOW THEREFORE, in consideration of the above premises, the mutual
promises and covenants contained herein, Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
1. The following new sentence shall be added to Section 1.7 of the
Agreement. At the Closing, Preferred Stock will be issued to Members in
accordance with Exhibit M.
2. Section 3.2 of the Agreement shall be amended to read as follows:
"3.2 Employees of Seller. Seller's affiliated management
company currently employs three individuals who perform services for Seller's
Motels ("Management Company Employees"). All other employees who currently
operate and perform services for the Motels are employees of Seller ("Seller's
Employees"). On the Closing Date, Seller shall not terminate the employment of
any of Seller's Employees and thus, as a result of the Merger, Seller's
Employees shall become employees of Purchaser. The employment of the Management
Company Employees shall continue as follows: one of the Management Company
Employees, Xxxxxx Xxxxxxx, will continue with Purchaser as of the Closing Date.
The other two Management Company Employees, Xxxx Xxxxxx ("Klibbe") and Xxxxx
Xxxxx Xxxxx ("Xxxxx"), will continue to be employed by the affiliated management
company until the Certificate of Occupancy is issued on the Harrodsburg Motel.
Thereafter, the employment of Klibbe and Xxxxx shall be terminated by the
affiliated management company. Purchaser shall have no obligation to continue
the employment of either Klibbe or Xxxxx. Seller shall, to the extent
applicable, comply with the Federal Worker Adjustment and Retraining
Notification Act ("WARN ACT"). Payment of all costs and expenses associated with
accrued but unpaid salary, accrued but unpaid vacation, pension and welfare
benefits, Consolidated Omnibus Budge Reconciliation Act of 1985, as amended
("COBRA") benefits, employee fringe benefits, employee termination payments or
any other employee benefits due such employees through the Closing Date shall be
the sole responsibility and obligation of Seller or its affiliated management
company. The provisions of this Section 3.2 shall survive the Closing."
474283.1
3. Sections 4.1, 4.2, 4.3, and 4.4 of the Agreement are hereby deleted
in their entirety and the following inserted in lieu thereof:
"4. Purchase Price.
4.1 Price and Terms of Payment. The Merger consideration shall
be Ten Million Four Hundred Fifty Thousand and No/100 Dollars ($10,450,000.00)
less the $335,000 Capital Improvement Funding (as defined in Section 4.4,
below), being Ten Million One Hundred Fifteen Thousand and No/100 Dollars
($10,115,000.00), hereinafter referred to as the "Purchase Price," minus the
amount of Financing (as defined in Section 4.2 below), adjusted for prorations
and minus the amount of any Liabilities (as defined in Section 16.2 below)
assumed or otherwise financed or refinanced by Purchaser or taken into account
in the proration pursuant to Section 14.14 hereof. The Purchase Price shall be
paid by Purchaser to the Members at Closing as follows:
4.2 Financing. "Financing" means the existing financing
encumbering or incurred with respect to the Properties which at the Closing
shall be approximately Seven Million One Hundred Fifteen Thousand and No/100
Dollars ($7,115,000.00). The loans which constitute the Financing are set forth
on Exhibit C, attached hereto and incorporated by reference herein. Purchaser
will assume two of the existing loans which are part of the Financing and
acquire the Harrodsburg Motel subject to the existing construction loan (and
Seller shall be responsible for any default occasioned thereby) all as indicated
on Exhibit C. The balance of the loans not so designated on Exhibit C shall be
paid off, assumed, or otherwise refinanced by Purchaser (with Seller and its
Members, explicitly or by operation of law, as the case may be, being released
from any liability with respect to said loans). As to the Harrodsburg loan,
Seller shall cooperate with Purchaser in obtaining new financing for Purchaser
provided that neither Seller nor its Members incur any liability or guarantee
any obligation with respect to such new loan, other than as provided in Section
4.4 regarding the Harrodsburg Motel.
4.3 Stock of Purchaser. The Purchase price shall be paid by
delivery to the Members at Closing of One Hundred and No/100 Dollars ($100.00)
original issuance price ("Original Issuance price"), ten percent (10%) class "A"
nonvoting cumulative preferred stock of Parent Corporation (the "Preferred
Stock"), with the number of shares to be delivered at Closing to be determined
by subtracting the aggregate principal balance of the Financing from Ten Million
One Hundred Fifteen Thousand and No/100 Dollars ($10,115,000.00), as adjusted
for prorations and minus the amount of any Liabilities not assumed by Purchaser
or taken into account in the proration pursuant to Section 14.14 hereof (the
"Stock Portion of the Purchase Price") and thereafter dividing the Stock Portion
of the Purchase Price by the Original Issuance price per share of said Preferred
Stock. In no event shall Parent Corporation and/or Purchaser issue in excess of
30,000 shares, or $3,000,000.00 in value of Preferred Stock.
All, but not less than all, of the Preferred Stock will
be convertible by the Parent Corporation into common stock of the Parent
Corporation at one hundred ten percent (110%) of the Original Issuance Price
(the "Conversion Price") at any time after the date which is seven (7) years
from the Closing Date upon thirty (30) days' written notice to the Members. At
any time during the six (6) month period beginning on the ninetieth (90th) day
following the date on which the Preferred Stock is converted by the Parent
Corporation to common stock of the Parent Corporation (the "Converted Common
Stock"), the Members may put the Converted Common Stock to the Parent
Corporation at a price equal to the Conversion Price, provided (i) the Members
have provided Parent Corporation with thirty (30) days' written notice (the
"Notice Period") of their intent to put the Converted Common Stock to the Parent
Corporation, and (ii) if requested by Parent Corporation, the Members make a
good faith
474283.1
effort to sell the number of shares of Converted Common Stock designated by the
Parent Corporation on the open market during the Notice Period.
In the event that the Members are successful in selling
any portion of the Converted Common Stock on the open market during the Notice
Period, the Parent Corporation shall pay to the Members the difference, if any,
by which the Conversion Price exceeds the price for which the Converted Common
Stock was sold on the open market during the Notice Period; payment to be made
at the time that the Parent Corporation closes the purchase of the balance of
the Converted Common Stock put to the Parent Corporation by the Members.
4.4 Harrodsburg Motel. Notwithstanding anything contained
herein to the contrary, Purchaser, Seller and the Members agree that until such
time as the Motel which is currently under construction in Harrodsburg, Kentucky
(the "Harrodsburg Motel") is completed, has received a certificate of occupancy
and is ready to open, a portion of the Purchase Price equal to approximately Six
Hundred Thousand and No/100 Dollars ($600,000.00) of the Preferred Stock, (the
exact amount shall be the difference between the maximum principal balance of
the partially disbursed loan encumbering the Harrodsburg, Kentucky Property and
One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00), which
is the portion of the Purchase Price allocable thereto) shall be placed in
escrow with the Title Company. The Members shall be responsible for completing
the development of the Harrodsburg Motel at their sole cost and expense. At such
time as construction of the Harrodsburg Motel is completed to a standard equal
to or better than and containing all building elements, fixtures, furnishings
and equipment as that used or incorporated in the Bowling Green, Kentucky
Xxxxxxxx Inn (the "Development Standard"), a certificate of occupancy is issued
and the Harrodsburg Motel is ready to open for business, the Preferred Stock
held in escrow shall be delivered to the Members and the Seller and its Members
shall be released from any obligation regarding the portion of the Financing
described in Section 4.2 above attributable to the Harrodsburg Motel in an
amount equal to approximately Six Hundred and Fifty Thousand and No/100 Dollars
($650,000.00). Purchaser's failure to secure such release for Seller and its
Members from such Loan at such time shall constitute a post-closing breach of
this Agreement, subject to, however, a 30 day cure period for Purchaser after
written notice of default is received by Purchaser from Members. On or before
the Date of Closing the Members and Purchaser shall enter into a development
agreement (the form of which is attached hereto as Exhibit "D", the "Development
Agreement") pursuant to which one of its Members, Xxx Xxxxxxxx, shall complete
the development of the Harrodsburg Motel. Any cost incurred by Purchaser due to
Seller or its Members' failure to achieve the Development Standard at the
Harrodsburg, Kentucky Xxxxxxxx Inn or their failure to comply with this
Agreement or the Development Agreement shall be offset pro rata against dividend
payments due to Members issued with respect to the Preferred Stock they hold.
Currently, the Financing allocable to the Harrodsburg
Motel is $650,000.00 and at the Closing shall not exceed $650,000.00. The Seller
has experienced cost overruns on the construction of the Harrodsburg Property.
Purchaser has previously advanced $100,000.00 directly to Seller's Harrodsburg
Construction Clearing Account at National City Bank in Bowling Green, Kentucky
("Clearing Account") which funds were used by Seller to make construction
disbursements. At Closing Purchaser agrees to disburse an additional $235,000 to
Clearing Account with a cover letter to the National City Bank authorizing Xxx
Xxxxxxxx pursuant to the Development Agreement to disburse said amounts to pay
third parties who have provided services and/or materials for the construction
of the Harrodsburg Motel. After payment of all amounts owed with respect to the
construction of the Harrodsburg Motel from the Clearing Account have been made
and such payments have been confirmed in writing by Purchaser, Xxx Xxxxxxxx is
authorized to disburse any funds remaining in the Clearing
474283.1
Account from the $235,000.00 to be transferred to such Clearing Account by
Purchaser at Closing to Xxxxxxxx.
The $100,000 previously disbursed to the Clearing
Account by Purchaser pursuant to a letter from Purchaser and Purchaser's counsel
dated May 30, 1997 and the $235,000 to be disbursed by Purchaser to the Clearing
Account at Closing shall be referred to as the "Capital Improvement Funding" and
all parties agree to treat said Capital Improvement Funding as capital
improvement advances by Purchaser to the Harrodsburg Motel."
4. Section 8.30 is hereby added to the Agreement, immediately after the
existing Section 8.29 as follows:
"8.30 Title: Transacting Business. Marketable fee simple title
to the Real Property for each of the Properties and marketable title to the
balance of the assets comprising the Property are held solely by Seller (with
the exception of two (2) of the motels, title for which are held by one or more
Members but shall be conveyed to Seller prior to the Closing Date) and said
title is held free and clear of all liens or encumbrances other than those
obligations set forth in Exhibit "C", attached hereto. After the payoffs or
assumptions of the loans comprising the Financing (other than the Harrodsburg
loan) disclosed on Exhibit "C" attached hereto, there will be Uniform Commercial
Code Financing Statements secured by assets of the Seller other than the
Properties and no other lenders to whom a security interest has been granted.
Seller is qualified to do business in every jurisdiction where it is required to
do so."
5. Section 8.31 is hereby added to the Agreement, immediately after
Section 8.30 (as set forth above) as follows:
"8.31. Personal Property Warranty. In connection with the
Blanket Xxxx of Sale and Assignment which Seller shall deliver to Purchaser at
Closing pursuant to the provisions of this Agreement, Seller does hereby warrant
and represent that it owns full right, title and interest in and to all such
items of conveyed property ("Conveyed Property"). For purposes of this Section
8.31, Conveyed Property shall mean all items assigned and conveyed in the
Blanket Xxxx of Sale and Assignment except insofar as otherwise disclosed in
this Agreement including any Exhibits attached hereto. Seller further agrees to
defend and hold Purchaser harmless from any and all claims, assertions, and
causes of action whereby a third party claims any right, title and interest in
or to such Conveyed Property, in derogation of the Purchaser's ownership.
Further, Seller and its Members agree to indemnify Purchaser from any and all
costs, expenses, liabilities and claims by third parties in derogation of and
inconsistent with Purchaser's total right to use and hold said property."
6. Section 9 is hereby amended by providing that the Due Diligence
Period shall be as provided pursuant to the terms of a letter agreement dated
September 12, 1997 between counsel for the parties. The Closing Date shall occur
on or before September 22, 1997, and the Apportionment Date for such closing
shall be 12:01 a.m., September 1, 1997.
7. The first sentence of Section 13.3 of the Agreement is hereby
deleted in its entirety and the following inserted in lieu thereof:
"Seller, the Members and Purchaser represent and warrant to each
other that the only broker or finder in connection with the transaction
contemplated by this Agreement is Donegal Partners Ltd. ("Finder"), who acted as
a Finder in this transaction. Upon Closing, Purchaser agrees to pay a
474283.1
commission to Finder of One Hundred Thousand and No/100 Dollars ($100,000.00)
(the "Commission"). The Commission shall be paid by Purchaser to Finder at
Closing as follows: Sixty-Five Thousand and No/100 Dollars ($65,000.00) in cash
and Thirty-Five Thousand and No/100 Dollars ($35,000.00) in a promissory note at
eight percent (8%) simple interest due in a one-time payment of principal and
accrued interest on March 31, 1998."
8. Section 13.4(a) of the Agreement is hereby deleted in its entirety.
9. Section 13.4(b) shall be amended to read as follows:
"(b) Blanket Xxxx of Sale and Assignment. A properly executed
Blanket Xxxx of Sale and Assignment that transfers and assigns the Personal
Property, Plans and Studies, Warranties, Contracts, Licenses, Inventory, Books
and Records, and Intangibles to Purchaser. The Blanket Xxxx of Sale and
Assignment shall convey the aforesaid items being sold to Purchaser, as well as
a complete list of all the obligations of Seller relative to the Properties
which Purchaser has agreed to assume. If any of the Personal Property includes
vehicles, Seller shall deliver a Certificate of Title for each vehicle assigned
to Purchaser in accordance with the law of the state where the vehicles are
registered."
10. Section 13.6 is hereby added to the Agreement, immediately after
the existing Section 13.5 as follows:
"13.6 Tax Free Reorganization. Following the closing of the Merger
without Seller's prior written consent, Purchaser and Seller agree not to take
any act or take any position from a Federal or state tax standpoint which is
inconsistent with the characterization of the Merger as a tax-free
reorganization pursuant to Code Section 368(a)(1)(A). Specifically, Purchaser
and Seller agree that as a result of the "A" reorganization characterization,
the tax basis of the Seller's assets will not be stepped up for Federal and
state tax purposes."
11. The words "the Purchase Price or" in the third line of Section 14
of the Agreement are hereby deleted therefrom. In addition, the Apportionment
Date shall mean August 31, 1997.
12. Defined terms set forth herein shall have the meaning ascribed to
them in the Agreement. Except as set forth above, the Agreement shall remain
unmodified and in full force and effect. This Second Amendment may be executed
in more than one counterpart, each of which shall be deemed an original, and all
of which together shall constitute one and the same instrument.
474283.1
13. Exhibits A through M described below are attached hereto.
EXHIBIT DESCRIPTION
"A" LEGAL DESCRIPTIONS (A1 - A8)
"B" LEASES
"C" LIST OF LOANS ON PROPERTIES
"D" DEVELOPMENT AGREEMENT RELATING TO COMPLETION OF
HARRODSBURG MOTEL
"E" EXCEPTIONS (BUSINESS DEBTS OWED BY SELLER)
"F" EXCEPTIONS (CHANGES TO BUSINESS)
"G" LIST OF ALL INSURANCE POLICIES
"H" LIST OF ALL EMPLOYEE BENEFIT PLANS
"I" CONTRACTS, INCLUDING EMPLOYEE CONTRACTS
"J" LIST OF ALL TERMINATION AGREEMENTS; 15 MOST HIGHLY
COMPENSATED EMPLOYEES
"K" LIST OF COLLECTIVE BARGAINING/UNION CONTRACTS
"L" DISCLOSURE STATEMENT
"M" SCHEDULE OF PREFERRED STOCK TO BE ISSUED TO XXXXXXXX
INNS LLC MEMBERS
14. The Disclosure Schedule ("Exhibit L") alters and amends the
Seller's representations and warranties set forth in Section 8 hereof.
15. Section 19 is hereby added to the Agreement immediately after the
existing Section 18 as follows:
"19." Representations and Warranties of Purchaser and Parent
Corporation.
19.1 Organization and Related Matters. Purchaser and Parent
Corporation are corporations duly organized, validly existing and in good
standing under the laws of Delaware.
Purchaser and Parent Corporation have all necessary corporate power and
authority to carry on their respective businesses as they are now being
conducted. Purchaser and Parent Corporation have the necessary corporate power
and authority to execute, deliver and perform this Agreement and any related
agreements to which they are parties.
19.2 Authorization. The execution, delivery and performance of
this Agreement and any related agreements by Purchaser and Parent Corporation
has been duly and validly authorized by the respective Board of Directors of
Purchaser and Parent Corporation and by all other necessary corporate
474283.1
action on the part of Purchaser and Parent Corporation. This Agreement
constitutes the legal, valid and binding obligation of Purchaser and Parent
Corporation, enforceable against Purchaser and Parent Corporation in accordance
with its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally."
474283.1
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment under seal as of date herein above set forth.
SELLER
/s/ Xxxxx Xxxxxxx XXXXXXXX INNS, LIMITED LIABILITY COMPANY, a
Witness Delaware limited liability company
BY: XXXXXXXX INN ADVISORS, LIMITED LIABILITY
COMPANY, a Delaware limited liability company
Its Manager
By: /s/ Xxxxx Xxxxx Xxxxx
Xxxxx Xxxxx Xxxxx
Its Managing Member
MEMBERS
______________________ /s/ Xxx Xxxxxxxx
Witness Xxx Xxxxxxxx
______________________ /s/ Xxxxxxx Xxxxxxxx
Witness Xxxxxxx Xxxxxxxx
______________________ XXXXXXXX INN ADVISORS, LIMITED LIABILITY
Witness COMPANY, a Delaware limited liability company
/s/ Xxxxx Xxxxx Xxxxx
Xxxxx Xxxxx Xxxxx
Its Managing Member
[Signatures continue on next page]
474283.1
PURCHASER
___________________________ BLM-RH, INC., A DELAWARE CORPORATION
Attest
By: /s/ Xxxxxxx X. Xxxxxxx
Its: President
PARENT CORPORATION
___________________________ BUCKHEAD AMERICA CORPORATION, a Delaware
Attest corporation
By: /s/ Xxxxxxx X. Xxxxxxx
Its: President
FINDER
DONEGAL PARTNERS, LTD.
By:____________________________________________
Its:_______________________________________
474283.1
LIST OF SCHEDULES AND/OR EXHIBITS
Exhibit A Legal Descriptions (A1-A8)
Exhibit B Leases
Exhibit C List of Loans on Properties
Exhibit D Development Agreement Relating To Completion Of Harrodsburg Motel
Exhibit E Exceptions (Business Debts Owed By Seller)
Exhibit F Exceptions (Changes to Business)
Exhibit G List Of All Insurance Policies
Exhibit H List Of All Employee Benefit Plans
Exhibit I Contracts, Including Employee Contracts
Exhibit J List Of All Termination Agreements; 15 Most Highly
Compensated Employees
Exhibit K List Of Collective Bargaining/Union Contracts
Exhibit L Disclosure Statement
Exhibit M Schedule of Preferred Stock To Be Issued To Xxxxxxxx Inns LLC
Members
474283.1
