AGREEMENT OF SALE AND PURCHASE
Between
LVM CORPORATION
And
HOST FUNDING, INC.
Dated: July ____, 0000
XXXX XXX - XXXXXXXXXXX, XXXXXXXX
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT OF SALE AND PURCHASE ("Agreement") is made as of this ___
day of July, 1997, by and between LVM CORPORATION, an Illinois corporation
("Seller") and HOST FUNDING, INC., a Maryland corporation or its permitted
assignee as provided herein (sometimes herein, "Purchaser").
R E C I T A L S
A. Seller is the fee owner of the real property approximately ________
acres in size and legally described in EXHIBIT A attached hereto and
incorporated herein by reference for all purposes, portions of which real
property has been improved with (i) ______ (__) hotel building(s) containing one
hundred one (101) guest rooms; (ii) parking areas; and (iii) certain other
improvements, and which is commonly known as the Days Inn located in
Bloomington, Illinois (sometimes collectively, the "Hotel"), and portions of
which real property has been ground leased to IHOP (sometimes, the "Ground Lease
Property").
B. Seller desires to sell, and Purchaser desires to purchase, the Hotel
and Ground Lease Property upon and subject to the terms and conditions
hereinafter set forth.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements, covenants and conditions herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser agree as follows:
ARTICLE 1
DEFINITIONS AND REFERENCES
1.1 Definitions. As used herein, the following terms shall have the
respective meanings indicated below:
Affiliate: Any person that, directly or indirectly, controls or is
controlled by or is under common control with such person, or any other person
that owns, beneficially, directly or indirectly, five percent or more of the
outstanding capital stock, shares or equity interests of such person, or any
officer, director, employee, partner or trustee of such person controlling,
controlled by or under common control with such person (excluding trustees and
persons serving in similar capacities who are not otherwise an Affiliate of such
person). The term "person" means and includes individuals, corporations, general
and limited partnerships, stock companies or associations, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, or other entities and governments and agencies and political
subdivisions thereof. For the purposes of this definition, "control" (including
the correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any person, shall mean the possession, directly
or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, through the ownership of voting securities, partnership interests or
other equity interests.
Agreement: This Agreement of Purchase and Sale, including the
exhibits attached hereto, which is incorporated herein by this reference for all
purposes.
Agreement Not to Compete: As defined in Section 17.1.
Assignment of Bookings, Hotel Contracts and Permits: As defined in
Section 12.1(c).
Assignment of Ground Lease: As defined in Section 12.1(d).
Xxxx of Sale: As defined in Section 12.1(b).
Bookings: Contracts for the use or occupancy of guest rooms of the
Hotel.
Cash Portion of the Purchase Price: As defined in Section 3.1(a).
Closing: As defined in Section 11.1.
Closing Date: As defined in Section 11.1.
Closing Inventory: The Closing Inventory required under the
provisions of Section 13.2.
Closing Report: The Closing Report required under the provisions of
Section 13.2.
Closing Statements: The Closing Statements to be executed by Seller
and Purchaser incident to the Closing of the transaction contemplated hereby.
Consumables: All engineering, maintenance, housekeeping and guest
supplies, including soap, cleaning materials and matches, stationery and
printing, and other supplies of all kinds, in each case whether partially used,
unused or held in reserve storage for future use or in connection with the
maintenance and operation of the Hotel, at normal operating levels customarily
maintained for the efficient economic operation of the Hotel as a "Days Inn"
hotel property, excluding, however, (i) the Supplies, and (ii) property owned by
guests or other persons furnishing services to the Hotel.
Continuing Obligations: All commitments, promotions and other
obligations to provide free or discounted guest rooms at the Hotel which have
not been satisfied in full as of the Closing Date and which are not included in
the Hotel Contracts.
Cure Notice: As defined in Section 4.3.
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Cut-off Time: 11:59 P.M. local time on the day immediately preceding
the Closing Date.
Days Inn Indemnification Agreement: As defined in Section 9.1(k).
Deposit: As defined in Section 3.2(a).
Due Diligence Period: As defined in Section 6.1.
Effective Date: The date upon which at least three (3) fully
executed counterparts of this Agreement, together with the Initial Deposit, are
delivered to the Title Company, as acknowledged by the Title Company in writing
in the space hereinafter provided in this Agreement.
Employee Costs: As defined in Section 15.1.
Employee Indemnification Agreement: As defined in Section 15.1.
Escrow: The escrow to be created for the purpose of facilitating the
Closing.
Escrow Instructions: The escrow instructions to be executed and
delivered by the parties hereto (or their respective attorneys) and the Title
Company for closing the transaction contemplated hereby.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Existing Franchise Agreement: The current franchise or license
agreement allowing the operation of the Hotel as a "Days Inn".
Existing Franchise Agreement Costs: The recurring costs and fees
paid to the franchisor or licensor on a monthly basis by Seller pursuant to the
Existing Franchise Agreement, including, without limitation, royalty fees,
system assessment fees, marketing fees, reservation fees and the like, excluding
however non-monthly and/or extraordinary fees and expenses so paid to franchisor
or licensor by Seller.
Final Deposit: As defined in Section 3.2(a).
Fixtures and Tangible Personal Property: All fixtures, furniture,
furnishings, fittings, equipment (including laundry equipment), cars, trucks,
machinery, apparatus, signage, appliances, draperies, carpeting and other
articles of personal property used or useable in connection with the use,
operation and maintenance of the Hotel at normal operating levels customarily
maintained for the effective economic operation of the Hotel as a "Days Inn"
hotel property, including, without limitation, architectural, engineering and
other plans (including "as built" plans) and drawings, the account and business
records relating to the operation of the Hotel, telephone numbers for the Hotel,
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service marks and trademarks relating to the Hotel, all software and data bases
(including the disks), ledgers, bank statements, keys and locks and safe
combinations, excluding, however: (i) the Consumables; (ii) the Supplies; (iii)
equipment and property leased pursuant to the Hotel Contracts; (iv) property
owned by guests or other persons furnishing services to the Hotel; (v) the
Improvements, (vi) property located at the Hotel and owned by Seller and/or its
Affiliates but not used or necessary for the normal operation of the Hotel, and
(vii) funds or cash equivalents in Hotel operating accounts or any cash, xxxxx
cash or currency physically located at the Hotel on the Closing Date.
General Warranty Deed: As defined in Section 12.1(a).
Ground Lease: The Ground Lease, dated ________________, 19__, as
from time to time amended, by and between Seller, as ground lessor, and IHOP, as
ground lessee, and concerning the Ground Lease Property.
Ground Lease Revenues. All revenues and charges payable in
connection with the Ground Lease.
Hazardous Materials: As defined in Section 7.2.
Host Funding Franchise Agreement: As defined in Section 9.1(c).
Host Funding Stock: As defined in Section 3.1(b).
Host Funding Stock Fair Market Value: The average for the prices of
a share of the Host Funding Stock as reported on the American Stock Exchange for
the fifteen (15) trading days ending with the third business day preceding the
Closing Date.
Hotel: As defined in Recital A to this Agreement.
Hotel Contracts: All service, maintenance, purchase order, lease and
other contracts and agreements, including equipment leases, and any amendments
thereto, with respect to the maintenance, operation, provisioning or equipping
of the Hotel and the ownership, operation, use and maintenance of the Property,
as well as written warranties and guaranties relating thereto, if any, including
those relating to heating and cooling equipment and/or mechanical equipment, but
excluding, however, (i) insurance policies, (ii) the Bookings, and (iii) any of
the foregoing which are not transferrable by Seller and/or Manager, or, which,
subject to the provisions of Section 5.2 hereof, are not assumed by Purchaser
(or Operator at the direction of Purchaser).
Hotel Revenues. All revenues or sales or income of any kind payable
to Seller and resulting from the ownership or operation of the Property and the
Hotel, as and when collected, including, without limitation to, revenue and
charges payable in connection with the rental of rooms and suites; food and
beverage sales; laundry (including coin operated equipment) and telephone
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revenues; vending machine revenues; and rental and other payments from licensees
and concessionaires occupying space or rendering services at the Hotel (after
deduction of all rebates and the reasonable expenses actually paid or incurred
in connection with the adjustments or collection thereof).
IHOP: International House of Pancakes.
IHOP Estoppel: As defined in Section 9.1(i).
Impositions: All general and special real estate, personal property
and other ad valorem taxes and assessments assessed or levied against or with
respect to the Property or the Ground Lease Property, or any part thereof or any
interest therein, and all sales, occupancy, room, license, permit and other
taxes, and all costs and expenses related thereto, incurred in connection with
the operation of the Hotel.
Improvements: The buildings, structures (surface and sub-surface),
improvements and other constructions and all component parts of those buildings,
structures, improvements and other constructions, including such fixtures as
shall constitute real property, located on the Real Property and constituting
the Hotel.
Initial Deposit: As defined in Section 3.2(a).
Investment Letter Agreement: The form of agreement attached hereto
as Exhibit C and incorporated herein by reference for all purposes.
Legal Requirements: All laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all governments and governmental
authorities having jurisdiction over the Property, the Ground Lease Property or
the Hotel (and the operation thereof).
Litigation Costs: As defined in Section 19.1(h).
Notices: As defined in Section 18.1.
Objections: As defined in Section 4.3.
Operator: As defined in Section 9.1(d).
Operating Lease: As defined in Section 9.1(d).
Permits: All licenses, permits, certificates of occupancy,
authorizations and approvals issued to Seller or Manager and used in or relating
to the ownership, occupancy or operation of the
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Property, the Ground Lease Property or the Hotel, excluding, however, (i) any of
the foregoing which are not transferable by Seller or Manager, and (ii) the
Existing Franchise Agreement.
Permitted Exceptions: As defined in Section 4.3.
Piggy-Back Registration: As defined in Section 19.2(a).
Property: The following items, collectively, as they relate to the
Hotel: (i) the Real Property; (ii) the Improvements, (iii) the Fixtures and
Tangible Personal Property; (iv) the Supplies; (v) the Consumables; (vi) subject
to any contrary provisions hereof, all transferable right, title and interest of
Seller or Manager in, to and under the Hotel Contracts and the Bookings; and
(vii) all transferable right, title and interest of Seller or Manager in, to and
under the Permits.
Purchase Price: As defined in Section 3.1.
Purchaser's Advisors: As defined in Section 16.1(d).
Purchaser Expenses: As described in Section 16.1(b).
Purchaser's Damages: As defined in Section 7.4.
Real Property: Title to the real property legally described on
Exhibit A attached hereto and upon which the Hotel and the Improvements are
located.
Receivables: The accounts receivable of the Hotel operation
(including, without limitation, credit card receivables) incurred in the
ordinary course of business in accordance with the Hotel's credit policies in
existence as of the Cut-off Time.
Securities Act: The Securities Act of 1933, as amended.
Seller Expenses: As described in Section 16.1(a).
Supplies: All linen, uniforms, materials or supplies whether in use
or held in reserve storage for future use, in connection with the operation of
the Hotel, at normal operating levels customarily maintained for the efficient
economic operation of the Hotel as a "Days Inn" hotel property, excluding,
however, (i) the Consumables, and (ii) property owned by guests or other persons
furnishing services to the Hotel.
Survey: As defined in Section 4.1.
Title Commitment: The commitment for title insurance issued in
accordance with Section 4.2.
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Title and Survey Report: As defined in Section 4.3.
Title and Survey Review Period: As defined in Section 4.3.
Title Company: Republic Title of Texas, Inc., as agent for First
American Title Insurance Company.
Title Documents: As defined in Section 4.2.
Title Policy: As defined in Section 12.1(d).
Violation: Any condition with respect to the Property which
constitutes a material violation of any Legal Requirements.
1.2 References and Interpretation. Except as otherwise specifically
indicated, all references herein to Section and Subsection numbers refer to
Sections and Subsections of this Agreement, and all references herein to an
exhibit refers to the exhibit attached hereto. The words "hereby", "herein",
"hereto", "hereunder", "hereinafter", and words of similar import refer to this
Agreement as a whole and not to any particular Section or Subsection hereof.
Captions used herein are for convenience only and shall not be used to construe
the meaning of any part of this Agreement. Whenever under the terms of this
Agreement the time for performance of a covenant or condition falls upon a
Saturday, Sunday or legal holiday, such time for performance shall be extended
to the next business day; otherwise, all references herein to "days" shall mean
calendar days.
ARTICLE 2
SALE AND PURCHASE
2.1 Sale and Purchase. Seller hereby agrees to sell to Purchaser,
and Purchaser hereby agrees to purchase from Seller, the Property and the Ground
Lease Property on the terms and subject to the conditions set forth in this
Agreement.
ARTICLE 3
PURCHASE PRICE
3.1 Purchase Price. The purchase price ("Purchase Price") for the
Property and the Ground Lease Property shall be THREE MILLION NINE HUNDRED
THOUSAND AND NO/100 DOLLARS ($3,900,000.00). The Purchase Price shall be payable
at Closing as follows:
(a) Subject to adjustment pursuant to various applicable provisions
of this Agreement requiring adjustment of same, the sum of THREE MILLION
SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS ($3,700,000.00) in cash or other
immediately available funds (the "Cash Portion of the Purchase Price");
and
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(b) Subject to the provisions of Section 7.4 hereof, Purchaser's
delivery or issuance to Seller of the number of shares of the Class A
Common Stock of Host Funding, Inc. (the "Host Funding Stock") having an
aggregate value equal to TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($200,000.00) determined by the Host Funding Stock Fair Market Value. The
Host Funding Stock will be deemed a "restricted security" under the
Securities Act in that such stock will be delivered or issued to Seller in
a transaction not involving a public offering. Seller understands that the
Host Funding Stock may not be resold without compliance with the
registration requirements of the Securities Act or in other certain
limited circumstances. In this connection, Seller understands the resale
limitations imposed by the Securities Act and is familiar with SEC Rules
144 and 145, as presently in effect, and the conditions which must be met
in order for Rules 144 and 145 to be available for resale of "restricted
securities". Each certificate representing Host Funding Stock will contain
the appropriate legend relating to restrictions on sale and transfer under
the Securities Act and the Exchange Act. Notwithstanding the foregoing,
Purchaser agrees that Seller may distribute the Host Funding Stock to
Seller's partners without requirement of legal opinion; provided, however,
that (i) each recipient thereof shall have executed and delivered to
Seller and Purchaser an Investment Letter Agreement with respect thereto
and (ii) Purchaser shall determine within its sole discretion that such
transfer will not disqualify Purchaser as a Real Estate Investment Trust
under the Internal Revenue Code of 1986, as amended.
3.2 Deposit.
(a) Within three (3) business days following the mutual execution of
this Agreement by Seller and Purchaser, Purchaser shall initially deposit
with the Title Company the sum of TEN THOUSAND AND NO/100 DOLLARS
($10,000.00) (the "Initial Deposit"), which Initial Deposit shall be
increased to ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) (the
"Final Deposit", and, together with the Initial Deposit, the "Deposit")
upon the expiration of the Due Diligence Period if Purchaser does not
elect to terminate this Agreement on or before the expiration of the Due
Diligence Period.
(b) In the event the Initial Deposit is not delivered within the
period provided in Section 3.2(a), then Seller shall have the right to
terminate this Agreement, whereupon this Agreement shall be null and void
and neither party shall have any further rights or obligations hereunder.
The Deposit (together with any interest earned thereon) shall be held and
invested in U.S. Government obligations, certificates of deposit, money
market funds or such other interest-bearing investment as Purchaser shall
determine, and all interest and other earnings thereon shall become a part
of the Deposit. The funds representing the Final Deposit shall also be
deposited in the joint order escrow and shall be governed thereby.
Purchaser shall be responsible to pay for any and all costs related to the
investment of the Deposit. At the Closing, the Deposit shall be paid and
applied against the Cash Portion of the Purchase Price.
3.3 Allocation of Purchase Price: The Purchase Price shall be apportioned
and allocated among the Property as follows:
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Real Property, the Ground
Lease Property and Improvements $3,660,000.00
Consumables, Fixtures and Tangible
Personal Property, Supplies and all
other items of Property other than
the Real Property, the Ground Lease
Property and the Improvements $ 240,000.00
The parties hereto make this allocation pursuant to the applicable sections of
the Internal Revenue Code of 1986, as amended, with the knowledge that it will
be used by both parties for income tax purposes. Each party shall use such
allocation in all reports and returns filed with all taxing authorities and
shall promptly notify the other party of any challenge or inquiry made of such
allocation by any taxing authority and, in that event, shall keep the other
party informed with respect to all developments relating to any such challenge
or inquiry.
ARTICLE 4
SURVEY, TITLE COMMITMENT AND TITLE DOCUMENTS
4.1 Survey. Purchaser shall, at the sole cost and expense of Purchaser and
within fifteen (15) days after the Effective Date, have prepared and delivered
to Purchaser a current ALTA survey (the "Survey") of the Real Property, the
Ground Lease Property and the Improvements, prepared by a surveyor reasonably
acceptable to Purchaser and the Title Company, in accordance with ALTA/ACSM
standards for ALTA surveys and otherwise meeting the requirements of and
containing a certification reasonably acceptable to the Title Company and
Purchaser. The Survey shall also be in a form sufficient to permit the Title
Company to delete and/or issue endorsements for survey- related exceptions.
4.2 Title Commitment and Title Documents. Seller shall, at Seller's cost
and expense and within fifteen (15) days after the Effective Date, have prepared
and delivered to Purchaser a current commitment (the "Title Commitment") for the
issuance of the Title Policy to Purchaser through the Title Company, together
with legible copies of all documents (the "Title Documents") constituting
exceptions to Seller's title as reflected in the Title Commitment.
4.3 Survey and Title Review Period. Purchaser shall have a period of ten
(10) days (the "Title and Survey Review Period") from its receipt of the last of
the Title Commitment, the Title Documents and the Survey (collectively, the
"Title and Survey Report") to object in writing to Seller as to any matters
therein to which Purchaser objects (the "Objections"). If Purchaser fails to so
object prior to the expiration of the Title and Survey Review Period, Purchaser
shall be deemed to have approved and accepted the Title and Survey Report, and
all matters set forth therein shall be deemed to be Permitted Exceptions (herein
so called). If Purchaser notifies Seller in writing of any Objections prior to
the expiration of the Title and Survey Review Period, Seller shall then have a
period of ten (10) days to cure the Objections, or to notify Purchaser in
writing of any Objections Seller cannot,
9
or elects not to, cure (the "Cure Notice"). Seller shall have no obligation to
cure any of the Objections; provided, however, Seller shall be obligated to cure
any Objections to any liens or other encumbrances granted by Seller after the
Effective Date. Upon Purchaser's receipt of the Cure Notice, Purchaser shall
have a period of five (5) days to either (i) terminate this Agreement, and be
entitled to the return of the Deposit with neither party hereto being thereafter
obligated to the other, except as to Purchaser's obligation to return to Seller
due diligence materials pursuant to Section 5.3 hereof, and except as to
Purchaser's indemnification liability set forth in Section 6.1 hereof, or (ii)
waive the Objections and proceed to the Closing with all uncured Objections
constituting Permitted Exceptions.
ARTICLE 5
DUE DILIGENCE MATERIALS; APPROVAL OF HOTEL
CONTRACTS; CERTAIN SELLER AND PURCHASER CONTINGENCIES
5.1 Due Diligence Deliveries. Within fifteen (15) days after the Effective
Date, Seller shall make available to Purchaser and its authorized
representatives, for review at the offices of Seller, or, at Purchaser's option,
deliver to Purchaser and its authorized representatives, at Purchaser's expense,
true, complete and legible copies of all information, books, records, contracts,
documents, and agreements as may reasonably be requested by Purchaser relating
to the Property and to the extent Seller is in possession or control of such
items, including, without limitation:
(a) the most recent environmental, engineering and appraisal reports
with respect to the Property and the Ground Lease Property;
(b) the Hotel Contracts;
(c) the Permits;
(d) all real property and personal property tax statements with
respect to the Property for the years 1994, 1995 and 1996;
(e) utility invoices relating to the Property from January 1, 1994
to the present;
(f) the casualty, extended coverage, and general liability insurance
policies relating to the Property and the Ground Lease Property, together
with a certification from Seller that no claims have been made thereunder,
except as otherwise disclosed to Purchaser by Seller;
(g) any financial statements prepared by or for Seller or Manager
regarding the Property, including monthly income and expense statements
for the Property from January 1, 1994 to the present, in the form
customarily used by Seller (and accompanying data), and such other
financial and operational data as Purchaser shall reasonably require for
the years 1994, 1995, 1996 and 1997;
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(h) a list of the amount and nature of the capital expenditures
incurred with respect to the Property during the twenty-four (24) months
preceding the Effective Date;
(i) the Ground Lease and all amendments thereto; and
(j) any financial statements prepared by or for Seller regarding the
Ground Lease Property, including monthly income and expense statements for
the Ground Lease Property from January 1, 1994 to the present, in the form
customarily used by Seller (and accompanying data).
5.2 Approval of Hotel Contracts. With respect to the Hotel Contracts,
Purchaser agrees to notify Seller in writing within thirty (30) days after the
Effective Date as to which of the Hotel Contracts (as are otherwise
transferrable) will be assigned to and assumed by Purchaser (and/or which of
such Hotel Contracts, at the direction of Purchaser, will be assigned to and
assumed by Operator), and which of the Hotel Contracts Purchaser requests that
Seller terminate on or before the Closing Date. In the event Seller is not
provided with such written notice, Purchaser shall be deemed to have elected to
terminate all such contracts. Within five (5) days after receipt of Purchaser's
notice, Seller shall advise Purchaser as to whether any Hotel Contracts
Purchaser has requested Seller to terminate cannot be terminated or can be
terminated only with payment of a fee or penalty, and:
(a) with respect to those Hotel Contracts which cannot be terminated,
Purchaser shall advise Seller within five (5) days of receipt of
Seller's notice, that Purchaser has either agreed to assume such
Hotel Contracts or has elected to terminate this Agreement and, in
the event of termination, the Initial Deposit shall be immediately
returned to Purchaser, and the parties hereto shall thereafter have
not have any further obligations one to the other hereunder, except
as to Purchaser's obligations to return to Seller due diligence
materials pursuant to Section 5.3 hereof, and except as to
Purchaser's indemnification liabilities set forth in Section 6.1
hereof;
(b) with respect to those Hotel Contracts which can be terminated, but
only with payment of a fee or penalty, Purchaser shall advise
Seller, within five (5) days of receipt of Seller's notice, that
Purchaser has either agreed to assume such Hotel Contracts, or to
pay the termination fee or penalty, or has elected to terminate this
Agreement, and, in the event of termination, the Initial Deposit
shall be immediately return to Purchaser, and the parties hereto
shall thereafter have not have any further obligations one to the
other hereunder, except as to Purchaser's obligations to return to
Seller due diligence materials pursuant to Section 5.3 hereof, and
except as to Purchaser's indemnification liabilities set forth in
Section 6.1 hereof.
On or before the Closing Date, Seller shall terminate all Hotel Contracts
related to the Hotel Contracts which Purchaser has elected to assume in the
manner provided herein, and shall at the Closing deliver evidence of such
termination pursuant to documentation reasonably acceptable to Purchaser. Seller
shall defend, indemnify and hold Purchaser harmless from any claims or damages
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arising from any terminated Hotel Contracts (unless pursuant to the terms of any
such Hotel Contract in question said Hotel Contract may not be terminated or
unless and to the extent Purchaser is obligated to pay a termination fee or
penalty in connection with the termination of such Hotel Contract as set forth
above).
5.3 Confidentiality. Notwithstanding anything to the contrary contained in
this Agreement, all information provided by Seller to Purchaser for Purchaser's
evaluation of the Property, including, but not limited to, all of the items
delivered or made available by Seller to Purchaser and its authorized
representatives pursuant to Section 5.1 above, is confidential, and Purchaser
agrees except as provided in Section 5.1 above and herein, not to reproduce,
disseminate, discuss, or in any way distribute or disclose to any third party
any information concerning the Property delivered by Seller to Purchaser and its
authorized representatives. Purchaser agrees to immediately return to Seller all
items previously delivered or made available to Purchaser and its authorized
representatives by Seller pursuant to Section 5.1 above upon the termination of
this Agreement for whatever reason. Notwithstanding the foregoing, Purchaser may
distribute or disclose such information to any potential lender of Purchaser,
and to Purchaser's agents, attorneys, representatives and independent
contractors engaged by Purchaser in connection with the tests, studies,
evaluations and inspections undertaken pursuant to Section 6.1 of this
Agreement. Seller agrees not to disclose the name of Purchaser to any third
party until after the expiration of the Due Diligence Period, except to Seller's
agents, attorneys, lenders, partners and other parties as necessary to
accomplish the transaction contemplated hereby.
ARTICLE 6
DUE DILIGENCE PERIOD
6.1 Investigations. Notwithstanding anything to the contrary contained
herein, and in consideration of $100 paid by Purchaser to Seller as independent
consideration for this Agreement, Purchaser shall have forty-five (45) days from
and after the Effective Date (if and as extended pursuant to the provisions
hereof, the "Due Diligence Period") within which to conduct any and all
engineering, environmental and economic feasibility studies of the Property and
the Ground Lease Property and the competitive market, which Purchaser may, in
its sole discretion, deem necessary to determine whether or not the Property and
the Ground Lease Property is suitable for Purchaser's intended use thereof.
Seller shall and shall cause Manager to exercise all reasonable efforts (without
any out-of-pocket expense to Seller or Manager) to cooperate fully with
Purchaser regarding any investigation Purchaser may wish to make of the
Property, the Ground Lease Property or the operations of the Hotel. Purchaser
agrees to exercise (and cause its authorized representatives to exercise) due
care and reasonable prudence in performing such investigations and shall perform
such investigations in a manner as shall not materially interfere with the
operation of the Hotel or with the operations of IHOP. If Purchaser notifies
Seller in writing on or before the expiration of the Due Diligence Period that
Purchaser does not desire to consummate the transaction contemplated by this
Agreement, for any reason whatsoever, this Agreement shall terminate, and the
Initial Deposit shall be immediately returned to Purchaser by the Title Company,
and the parties hereto shall thereafter have no further obligation one to the
other hereunder, except as to Purchaser's obligations to return to Seller due
diligence materials pursuant to Section 5.3 hereof, and except as to Purchaser's
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indemnification liabilities set forth in Section 6.1 hereof. If Purchaser fails
to so terminate this Agreement prior to the expiration of the Due Diligence
Period, Purchaser shall be deemed to have accepted the Property and shall
proceed to Closing pursuant to the terms and conditions hereof. Unless Purchaser
timely terminates this Agreement as provided in this Section 6.1, or pursuant to
Article 4 hereof, the Deposit shall, except as otherwise specifically set forth
in this Agreement, be non-refundable, and shall be applied as provided in this
Agreement, unless Seller is unable or unwilling to satisfy all conditions stated
in this Agreement to which Purchaser's obligations hereunder are subject, in
which case, the Deposit shall be refunded to Purchaser. Purchaser hereby
indemnifies, holds harmless, and agrees to defend Seller from and against any
loss, cost, or expense (including, without limitation, attorney fees) resulting
from any entry by Purchaser, or any employee, agent, principal of, or
independent contractor of, Purchaser, upon the Property in connection with any
tests or evaluations conducted by Purchaser during the Due Diligence Period, or
any lien asserted by any third party as a result thereof. This provision of the
immediately preceding sentence of this Section 6.1 shall survive the termination
of this Agreement or the Closing.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties of Seller. In addition to any other
representations specifically made by Seller to Purchaser in this Agreement, as
of the Effective Date, Seller represents and warrants to Purchaser that:
(a) Seller is a corporation duly formed and validly existing under
the laws of the State of Illinois;
(b) This Agreement and all other documents executed and delivered,
or to be executed and delivered, by Seller in connection with the
transaction contemplated hereby have been, or at the appropriate time will
be, duly executed and delivered and constitute or, upon such execution and
delivery will constitute, the legal, valid and binding obligations of
Seller enforceable in accordance with their respective terms, subject,
however, to general principles of equity and to the effect of any
bankruptcy, reorganization, moratorium, insolvency or other laws affecting
the rights of creditors generally, provided, that Purchaser acknowledges
that as of the Effective Date, Seller must still obtain various partner
and lender approvals to the transaction contemplated hereby and as herein
required;
(c) Seller has taken all action required to authorize its execution
of this Agreement and such other documents necessary for the consummation
of the transaction contemplated hereby;
(d) The authorization, execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated
hereby by Seller, will not, with or without the giving of notice or
passage of time or both, violate, conflict with or result in the breach of
any terms or provisions of or require any notice, filing registration or
further
13
consent, approval or authorization under (i) the articles of incorporation
or by-laws of Seller, (ii) any statutes, laws, rules or regulations of any
governmental body applicable to Seller or the Property, including, without
limitation, the Legal Requirements (iii) any judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental
authority binding upon Seller or the Property, or (iv) any instrument or
agreement to which Seller or the Property, is or may be bound;
(e) Other than transient guests of the Hotel or other than is set
forth herein or disclosed by Seller to Purchaser, there are no leases,
tenancies, occupants or other persons in or entitled to possession of the
Hotel or any portion thereof;
(f) Seller will at Closing have good and marketable fee simple title
to the Real Property, the Ground Lease Property and Improvements, which
will be subject to the Permitted Exceptions;
(g) Seller owns the Fixtures and Tangible Personal Property, the
Consumables and the Supplies free and clear of all liens, claims, charges,
security interests and encumbrances, other than such of said items as are
leased from third parties or liens which will be removed or "insured
around" at the Closing;
(h) No condemnation or other eminent domain proceedings have been
instituted for which Seller has notice thereof or, to best of Seller's
knowledge, no such proceedings are threatened against the Property or the
Ground Lease Property;
(i) To the best of Seller's knowledge, the present operation of the
Property and the Ground Lease Property is in substantial compliance with
all Legal Requirements and Seller has not received written notice nor does
Seller have knowledge of any Violations affecting the Property or the
Ground Lease Property;
(j) To the best of Seller's knowledge, the present occupation of the
Property and the Ground Lease Property is in substantial compliance with
all the Permits and, with respect to the Property, Seller has no knowledge
of any license or permit which is necessary for the continued operation of
the Hotel other than the Permits and the Existing Franchise Agreement;
(k) Seller has not received written notice, nor does Seller have
knowledge of any pending or threatened zoning change or variance which
would interfere in any material respect with the use, occupation or
operation of the Property as a hotel;
(l) All guest rooms at the Hotel are and will be equipped with
fixtures, furniture, furnishings and equipment, including, without
limitation, the Fixture and Tangible Personal Property, at least at the
levels for same reflected in the Consumables, Supplies and Fixtures and
Tangible Personal Property Inventory;
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(m) To the best of Seller's knowledge, all items furnished to Seller
pursuant to Section 5.1 of this Agreement are in all material respects,
accurate, complete, and true as of the date furnished; provided, Seller
has no reason to believe such items are not in all material respects
accurate, complete and true as of the date furnished;
(n) Seller has received no written notice of any threatened, and
there currently is no pending, litigation which involves or affects the
Property, or the Ground Lease Property, except to the extent covered by
insurance maintained by Seller or on behalf of Seller;
(o) Other than as set forth herein or disclosed to Purchaser by
Seller, or except as otherwise approved by Purchaser pursuant to Section
5.2 hereof, there are and will be no material agreements at the Closing
which Purchaser will be required to assume with respect to the operation
of the Hotel or the Property (unless otherwise agreed to in writing by
Purchaser). The term "material agreements" for the purposes of this
subsection shall mean any agreements requiring an annual expenditure by
Seller in excess of $10,000.00, or which are for a term in excess of one
(1) year;
(p) Seller has granted no rights of first refusal or options to
purchase the Property or the Ground Lease Property;
(q) The Existing Franchise Agreement is in full force and effect and
Seller is not in default thereunder;
(r) To the best of Seller's knowledge, and other than as set forth
in the environmental report attached hereto as EXHIBIT D and incorporated
herein by reference for all purposes, or as found or contained in normal
and customary materials and supplies used in connection with the operation
of the Hotel, there has been no presence, use, generation, release,
discharge, storage, disposal, or transportation of any Hazardous Materials
on, under, in, about, to, or from the Property (or any portion thereof) or
the Ground Lease Property (or any portion thereof), and, from the date
hereof through the Closing Date, it shall not cause or knowingly permit
the presence, use, generation, release, discharge, storage, disposal, or
transportation of any Hazardous Materials on, under, in, about, to, or
from the Property (or any portion thereof) or the Ground Lease Property
(or any portion thereof), except for those matters set forth in the
above-described environmental report and except as found or contained in
normal and customary materials and supplies used in connection with the
operation of the Hotel;
(s) All Impositions have been paid in a timely fashion and are
current;
(t) Seller is not aware of any material defects, latent or
otherwise, relating to the Improvements or the construction or
construction materials and/or components with regard thereto;
15
(u) The Improvements have been constructed in compliance with all
plans and specifications of record and/or approved by all applicable
governmental authorities; and
(v) The Ground Lease is in full force and effect and neither Seller
nor IHOP is in default of any of its obligations thereunder.
Notwithstanding anything contained in this Section 7.1 to the contrary, if
Seller hereafter determines that any of the foregoing representations or
warranties are incorrect or misleading in any material respect, Seller shall
immediately notify Purchaser of same and Purchaser shall within ten (10) days
after receipt of such notice either (i) terminate this Agreement, and be
entitled to a return of the Deposit with neither party hereto being thereafter
obligated one to the other hereunder, except as to Purchaser's obligations to
return to Seller due diligence materials pursuant to Section 5.3 hereof, and
except as to Purchaser's indemnification liabilities set forth in Section 6.1
hereof, or (ii) waive such matters and proceed to Closing. Additionally, for
purposes of this Section 7.1, the phrase "to the best of Seller's knowledge"
means the knowledge, after having made due investigation or inquiry, and of
Xxxxxx Xxxxx.
7.2 Except as otherwise set forth herein, Purchaser agrees to acquire the
Property "as is" and with all faults. Except as otherwise set forth herein,
Seller makes no representations or warranties with respect to the physical
characteristics of the Property, or the environmental condition as it relates to
hazardous materials (as hereinafter defined) if on the Property.
7.3 Definition of Hazardous Materials. As used in this Agreement, the term
"Hazardous Materials" means any hazardous or toxic substances, material or
wastes, including, but not limited to, those substances, materials, and wastes
listed in the United States Department of Transportation Hazardous Materials
Table (49 C.F.R. ss.172.101) or by the Environmental Protection Agency's
hazardous substances (40 C.R.R. Part 302) and amendments thereto, or such
substances, materials, constituents, and wastes which are currently regulated
under any applicable local, state, or federal law including, without limitation:
(i) petroleum, gasoline or other petroleum derivatives, or additives to gasoline
or other petroleum derivative; (ii) asbestos or asbestos-containing materials;
(iii) polychlorinated biphenyls; (iv) designated as a "hazardous substance"
pursuant to section 307 of the Clean Water Act (33 U.S.C. ss.1317); (v) defined
as "hazardous waste" pursuant to section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. ss.6903); (vi) defined as a "hazardous substance"
pursuant to section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 2 U.S.C. ss.9601 et seq. (42 U.S.C. ss.9601);
or (vii) any substance the nature, use, manufacture, or effect of which render
it subject to federal, state, or local regulation, investigation, removal, or
remediation as potentially hazardous or toxic, injurious to human health or
welfare, or injurious to the environment.
7.4 Representations and Warranties of Purchaser. As of the Effective Date,
Purchaser represents and warrants to Seller that:
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(a) Purchaser is a corporation duly formed and validly existing
under the laws of the State of Maryland;
(b) This Agreement and all other documents executed and delivered,
or to be executed and delivered, by Purchaser in connection with the
transaction contemplated hereby have been, or at the appropriate time will
be, duly executed and delivered and constitute or, upon such execution and
delivery will constitute, the legal, valid and binding obligations of
Purchaser enforceable in accordance with their respective terms and
provisions, subject, however, to general principles of equity and to the
effect of any bankruptcy, reorganization, moratorium, insolvency or other
laws affecting the rights of creditors generally;
(c) Purchaser has taken all action required to authorize its
execution of this Agreement and such other documents necessary for the
consummation of the transaction contemplated hereby; and
(d) The authorization, execution, delivery and performance of this
Agreement by Purchaser and the consummation of the transactions
contemplated hereby by Purchaser, will not, with or without the giving of
notice or passage of time or both, violate, conflict with or result in the
breach of any terms or provisions of or require any notice, filing
registration or further consent, approval or authorization under (i) the
certificate of incorporation or by-laws of Purchaser, (ii) any statutes,
laws, rules or regulations of any governmental body applicable to
Purchaser, (iii) any judgment, decree, writ, injunction, order or award of
any arbitrator, court or governmental authority binding upon Purchaser, or
(iv) any instrument or agreement to which Purchaser, is or may be bound;
(e) Purchaser has timely filed all forms, reports and documents with
the Securities and Exchange Commission ("SEC") required to be filed by
Purchaser (collectively, the "SEC Reports"), all of which complied, at the
time filed, in all material respects with all applicable requirements of
the Securities Act and the Exchange Act, as applicable, and the rules and
regulations promulgated thereunder. None of the SEC Reports, at the time
filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(f) The consolidated balance sheets and the related consolidated
statements of operations, consolidated cash flow and consolidated
shareholders' equity (including the notes thereto) of Purchaser and its
subsidiaries contained or incorporated by reference in the SEC Reports
comply in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect
thereto, and present fairly the consolidated financial position of
Purchaser and its subsidiaries as of their respective dates, and the
consolidated results of their operations and their cash flows for the
periods presented therein, in conformity with GAAP applied on a consistent
basis, (i) except as otherwise noted therein, (ii) subject in the case of
unaudited financial statements to normal year-end audit
17
adjustments, (iii) except that the unaudited financial statements do not
contain all of the footnote disclosures required by GAAP, and (iv) except
as otherwise permitted by Form-10Q, the Securities Act or the Exchange
Act; and
(g) The issuance of the shares of Host Funding Stock to Seller
hereunder is not subject to any preemptive rights, rights of first refusal
or other preferential rights that have not been waived, and such shares
when issued and delivered in accordance with the terms of this Agreement
will be validly issued, fully paid and non-assessable and will be free of
any liens or encumbrances whatsoever; provided, however, that such shares
shall be subject to restrictions upon transfer under applicable securities
laws. Except for (i) Xxx X. Xxxxxxxx and (ii) the holders of the Series A
Warrants and Series B Warrants of Purchaser, no holder of the common stock
of Purchaser has registration rights with respect thereto.
Notwithstanding anything contained in this Section 7.4 to the contrary, if
Purchaser hereafter determines that any of the foregoing representations or
warranties are incorrect or misleading in any material respect, Purchaser shall
immediately notify Seller of same and Seller shall within ten (10) days after
receipt of such notice either (i) terminate this Agreement, in which event
Purchaser shall be entitled to a return of the Deposit with neither party hereto
being thereafter obligated one to the other hereunder, except as to Purchaser's
obligation to return to Seller due diligence materials pursuant to Section 5.3
hereof, and except as to Purchaser's indemnification liabilities set forth in
Section 6.1 hereof, or (ii) waive such matters and proceed to Closing.
7.5 Duration of Representations and Warranties. Except as otherwise
expressly provided herein, all representations and warranties of Seller
contained in this Agreement and in any document or instrument delivered by
Seller in connection herewith shall survive the Closing for a period of one (1)
year following the Closing. Any claim or claims by Purchaser which, if
successful, would result in Purchaser's Damages (as hereinafter defined) arising
from the inaccuracy of a representation or a breach of warranty of Seller, shall
be effective and valid only if Purchaser notifies Seller of such claim or claims
on or before the date which is one (1) year following the Closing and commences
an action, suit or proceeding against Seller with respect to such claim or
claims not later than sixty (60) days after the end of such one (1) year period.
Notwithstanding anything contained in this Section 7.5 to the contrary,
Purchaser's Damages shall be limited as follows: (i) Seller shall have no
liability for any Purchaser's Damages unless and until Purchaser's Damages shall
exceed the sum of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) in the
aggregate, and (ii) Seller's liability with respect to Purchaser's Damages shall
in no event exceed the sum of TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($200,000.00) in the aggregate, it being understood that Seller shall be
released from all liability for any Purchaser's Damages which exceed said
amount. In order to secure Purchaser from an occurrence of any claim or claims
giving rise to Purchaser's Damages, ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) of the Host Funding Stock shall be held back in trust for
Purchaser by Seller for a period of one (1) year following the Closing, and the
Host Funding Stock shall be appropriately legended to reflect the agreements set
forth in this Section 7.5; provided, that in the event no claim or claims giving
rise to Purchaser's Damages occur within said one (1) year period, Seller shall
thereafter hold such Host Funding Stock free of any such
18
security obligations or responsibilities set forth in this Section 7.5.
"Purchaser's Damages," as used herein, shall mean all loss, liability, damage
and expense suffered or incurred by Purchaser following the Closing Date which
results from a misrepresentation or breach of warranty by Seller set forth in
this Agreement, or in any document or instrument delivered by Seller in
connection herewith, which is not waived in writing by Purchaser. For the
purposes of this Agreement, Purchaser's Damages shall be computed net of (i) any
insurance proceeds acknowledged by the insurer at the time of such computation
to be payable with respect thereto to Purchaser and (ii) any amounts recovered
by Purchaser from any third parties, which reduce the damages that would
otherwise be sustained; provided, however, that (x) in all cases the timing of
the receipt or realization of insurance proceeds or recoveries from third
parties shall be taken into account in determining the amount of reduction of
damages and (y) in the event Purchaser shall receive or realize insurance
proceeds or recoveries from third parties after such determination of damages
(which were not included in such determination), the amount thereof shall
promptly be remitted by Purchaser to Seller. All representations and warranties
contained in this Article 7, as modified by the provisions of the last
paragraphs of Sections 7.1 and 7.4 hereof, shall be deemed restated or updated
on and as of the Closing Date, but, except as set forth in this Section 7.5,
shall not survive the Closing.
ARTICLE 8
CONDITIONS TO SELLER'S OBLIGATIONS
8.1 Conditions. Seller's obligation to close hereunder shall, in addition
to any and all other applicable conditions set forth in this Agreement, be
subject to the satisfaction of each of the following conditions, any one or more
of which may be waived by Seller in writing:
(a) Purchaser's Compliance with Obligations. Purchaser shall have
complied in all material respects with all obligations and covenants
required by this Agreement to be complied with by Purchaser as of the
Closing Date.
(b) Truth of Purchaser's Representations and Warranties. Subject to
the last paragraph of Section 7.3 hereof, the representations and
warranties of Purchaser contained in Section 7.3 shall have been true in
all material respects when made, and shall be true in all material
respects on the Closing Date.
(c) Closing Inventory. Seller shall have received a Closing
Inventory reasonably acceptable to Seller.
(d) Closing Report. Seller shall have received a Closing Report
reasonably acceptable to Seller.
19
ARTICLE 9
CONDITIONS TO PURCHASER'S OBLIGATIONS
9.1 Conditions. Purchaser's obligations to close hereunder, in addition to
any and all other applicable conditions set forth in this Agreement, shall be
subject to the satisfaction of each of the following conditions, any one or more
of which may be waived by Purchaser in writing:
(a) Seller's Compliance with Obligations. Seller shall have complied
in all material respects with all obligations and covenants required by
this Agreement to be complied with by Seller as of the Closing Date.
(b) Truth of Seller's Representations and Warranties. Subject to the
last paragraph of Section 7.1 hereof, the representations and warranties
of Seller contained in Section 7.1 shall have been true in all material
respects when made, and shall be true in all material respects on the
Closing Date.
(c) Host Funding Franchise Agreement. Purchaser and BAC Franchising,
Inc. shall, on or before the Closing Date, have executed, at no cost or
expense (including, without limitation, application fees, initial fees,
affiliation fees or relicensing fees) to Seller, a franchise or license
agreement (the "Host Funding Franchise Agreement") for the operation of
the Hotel as a Country Hearth Inn, in form and substance acceptable to
Purchaser in its sole discretion.
(d) Operating Lease. Buckhead America Corporation or an Affiliate
thereof ("Operator") and Purchaser shall, on or before the expiration of
the Due Diligence Period, have executed an Operating Lease (the "Operating
Lease"), in form and substance acceptable to Purchaser in its sole
discretion, reflecting therein the agreement of Operator to lease and
operate the Hotel on behalf of Purchaser.
(e) Closing Inventory. Purchaser shall have received a Closing
Inventory reasonably acceptable to Purchaser.
(f) Closing Report. Purchaser shall have received a Closing Report
reasonably acceptable to Purchaser.
(g) Employee Indemnification Agreement. Purchaser shall have
received the Employee Indemnification Agreement in form and content
reasonably acceptable to Purchaser.
(h) Investment Letter Agreement. Purchaser shall have received an
Investment Letter Agreement from each recipient of Host Funding Stock on
the Closing Date.
20
(i) IHOP Estoppel. Purchaser shall have received an estoppel
certificate from IHOP in form and substance reasonably acceptable to
Purchaser.
(j) Audited Financial Statements. Purchaser shall have received
audited financial statements with regard to the operations of the Hotel
from any accounting firm reasonably acceptable to Seller and Purchaser,
and otherwise in form and substance acceptable to Purchaser in its sole
discretion (and Seller agrees to fully cooperate with regard to same).
(k) Existing Franchise Agreement. Prior to the expiration of the Due
Diligence Period, Purchaser shall have received written evidence that (i)
the Existing Franchise Agreement will be terminated at Closing, and (ii)
that Seller will incident thereto pay any and all fees or penalties, if
applicable, for early termination of the Existing Franchise Agreement.
Seller shall also at Closing receive an indemnification agreement (the
"Days Inn Indemnification Agreement") whereby Seller indemnifies Purchaser
from any damages, costs or expenses incurred by Purchaser incident to
Seller's failure to satisfy its obligations contained in this Section
9.1(k).
ARTICLE 10
CERTAIN COVENANTS AS TO ACTIONS
AND OPERATIONS PENDING CLOSING
10.1 Covenants. Seller hereby covenants to Purchaser and agrees as
follows:
(a) Prior to the Closing, Seller shall continue to maintain, operate
and manage (or shall cause Manager to maintain, operate and manage) the
Property, the Ground Lease Property (as applicable) and the Hotel in the
same manner that Seller and/or Manager have heretofore maintained and
operated the Property, the Ground Lease Property and the Hotel;
(b) Except as otherwise set forth herein, including, without
limitation, Section 13.4 hereof, Seller will use its best efforts to at
the Closing pay all expenses, accrued or otherwise, and of any type or
kind whatsoever, through the Closing Date with regard to the Property, the
Ground Lease Property and the Hotel;
(c) Prior to the Closing, Seller, or Manager on behalf of Seller,
shall (i) make all necessary repairs and replacements which are required
to maintain the Property and, if applicable, the Ground Lease Property, in
the same physical and operating condition (normal wear and tear excepted
and except for repairs or replacements resulting from fire, other
casualty, condemnation or a taking by eminent domain, as to which Article
14 shall apply), and (ii) maintain the Supplies, the Consumables and the
Fixtures and Tangible Personal Property in good condition and at least at
the levels for such items reflected in the Consumables, Supplies and
Fixtures and Tangible Personal Property Inventory.
21
(d) Prior to the Closing, neither Seller nor Manager shall, without
the prior written consent of Purchaser, enter into any Bookings at the
Hotel which are not substantially in accordance with Seller's past booking
practices at the Hotel in a single transaction;
(e) Prior to the Closing, Seller shall (and shall cause Manager to)
use all reasonable efforts to cooperate and assist Purchaser in obtaining
assignments of and/or the issuance of any new permits, licenses or
approvals necessary for the consummation of the transaction contemplated
hereby and the continuation after the Closing of the normal operation of
the Hotel in a manner consistent with its present use;
(f) Prior to the Closing, Seller shall use all reasonable efforts
(at no cost or expense to Seller) to cooperate and assist Purchaser in
obtaining the Host Funding Franchise Agreement;
(g) Prior to or at Closing, Seller will cancel or terminate the
Management Agreement, and any other consulting or similar type agreements
with regard to the Property or the Hotel; and
(h) Seller will not, during the pendency of this Agreement, place
any new encumbrances on the Property or modify the Existing Franchise
Agreement or modify or enter into any other or new documents material to
the operation of the Property as a "Days Inn", without the prior written
consent of Purchaser.
ARTICLE 11
CLOSING MATTERS
11.1 Closing. The closing of the transaction contemplated hereby (the
"Closing") shall take place at the office of the Title Company or in
___________________________ at the offices of Seller on the date (the "Closing
Date") that is no more than thirty (30) days following the expiration of the Due
Diligence Period.
11.2 Closing Escrow. The transaction contemplated hereby shall be closed
by means of an escrow, with the concurrent delivery of the documents of title,
transfer of interests, delivery of the Title Policy and payment, assumption
and/or delivery of the applicable components of the Purchase Price. Seller and
Purchaser shall each pay fifty percent (50%) of any charges of the Title Company
for such escrow closing. This Agreement shall not be merged into the Escrow
Instructions, but the Escrow Instructions shall be deemed auxiliary to this
Agreement, and, as between the parties hereto, the provisions of this Agreement
shall govern and control.
ARTICLE 12
CLOSING DELIVERIES; POSSESSION
22
12.1 Seller's Deliveries. At the Closing, Seller shall deliver, or cause
to be delivered, to Purchaser the following:
(a) The recordable general warranty deed (the "General Warranty
Deed") from Seller to Purchaser conveying the Real Property, Ground Lease
Property and the Improvements, subject only to the Permitted Exceptions;
(b) A Xxxx of Sale (the "Xxxx of Sale") transferring to Purchaser
all of Seller's right, title and interest in and to the Fixtures and
Tangible Personal Property, the Consumables and the Supplies;
(c) An assignment (the "Assignment of Bookings, Hotel Contracts and
Permits") conveying and transferring to Purchaser, and Purchaser's
assumption of, all of Seller's right, title and interest in, to and under
any and all the Bookings, the Hotel Contracts and the Permits (to the
extent transferrable and to the extent Purchaser agrees, at its option, to
assume all or portions of the Hotel Contracts pursuant to Section 5.2
hereof); provided, at Purchaser's direction, all or portions of the
Bookings, the Permits and the Hotel Contracts will be assigned to
Operator, provided further, if any of the Bookings, the Hotel Contracts or
the Permits are in the name of the Manager, Seller shall cause Manager to
make such assignments;
(d) An assignment (the "Assignment of Ground Lease") conveying and
transferring to Purchaser, and Purchaser's assumption of, all of Seller's
right, title and interest in, to and under the Ground Lease (and related
security deposits).
(e) An ALTA Owner's Title Insurance Policy (the "Title Policy"),
issued in favor of Purchaser by the Title Company, in the amount equal to
that portion of the Purchase Price allocable to the Real Property and the
Improvements, insuring Purchaser's fee simple title to the Real Property
and the Improvements, subject only to the Permitted Exceptions and
otherwise in conformity with the Title Commitment;
(f) A certification in a form to be provided or approved by
Purchaser, signed by Seller under penalties of perjury, containing the
following: (i) Seller's U.S. Taxpayer Identification Number; (ii) the
business address of Seller; and (iii) a statement that Seller is not a
foreign person within the meaning of Sections 1445 and 7701 of the IRC;
(g) A counterpart of the Closing Statement, executed by Seller;
(h) A copy of a letter addressed to and accepted by Manager
terminating the Management Agreement and, as applicable, letters
terminating any other consulting or similar type agreements with regard to
the Property and the Hotel as of the Closing Date;
23
(i) A list, certified by Manager, of all Continuing Obligations, the
Hotel Contracts and the Permits as of the Closing Date;
(j) A certificate executed by Seller (or Manager) and reflecting
therein that Seller has paid or caused to be paid, in a timely fashion,
all Impositions, and that same are current;
(k) The Agreement Not to Compete;
(l) All guest lists, ledgers, software and data bases, and other
documents, correspondence and memoranda and plans, engineering drawings
and specifications included (to the extent located at the Hotel, such
items shall not be physically delivered to Purchaser at the Closing unless
Purchaser otherwise requests same);
(m) An Investment Letter Agreement from each recipient of Host
Funding Stock on the Closing Date;
(n) The IHOP Estoppel;
(o) The Employee Indemnification Agreement.
(p) the Days Inn Indemnification Agreement; and
(q) Evidence of the termination of the Existing Franchise Agreement.
12.2 Purchaser's Deliveries. At the Closing, Purchaser shall deliver, or
cause to be delivered, to Seller the following:
(a) The Cash Portion of the Purchase Price;
(b) Subject to the provisions of Section 7.4 hereof, the Host
Funding Stock;
(c) An assumption of all obligations of Seller by Purchaser or
Operator (if so directed by Purchaser) arising from and after the Closing
Date under the items assigned to Purchaser or Operator (if so directed by
Purchaser) pursuant to Section 12.1(c) and 12.1(d) hereof; and
(d) A counterpart of the Closing Statements, executed by Purchaser.
12.3 Concurrent Transactions. All documents or other deliveries required
to be delivered by Purchaser or Seller at the Closing, and all transactions
required to be consummated concurrently with the Closing, shall be deemed to
have been delivered and to have been consummated simultaneously with all other
transactions and all other deliveries, and no delivery shall be deemed to have
been made, and no transaction shall be deemed to have been consummated, until
all deliveries
24
required to be made by Purchaser and Seller shall have been made, and all
transactions contemplated hereby shall have been consummated, except to the
extent that such delivery or transaction may be waived by the party to be
benefited thereby.
12.4 Further Assurances. Seller and Purchaser will, at the Closing, or at
any time or from time to time thereafter, upon request of either party, execute
such additional instruments, documents or certificates as either party, or the
Title Company deems reasonably necessary, including, without limitation, State,
County, or local transfer declarations, in order to convey, assign and transfer
the Property and the Ground Lease Property to Purchaser and otherwise to carry
out the purposes and intent of this Agreement.
12.5 Possession. Possession of the Property shall be delivered to
Purchaser at the Closing, subject to the Permitted Exceptions.
ARTICLE 13
ADJUSTMENTS AND PRORATIONS;
CLOSING INVENTORY; CLOSING REPORT
13.1 Adjustments and Prorations. In addition to the Purchase Price payable
pursuant to Article 3 of this Agreement and the increases, decreases and
adjustments to the Cash Portion of the Purchase Price provided for elsewhere in
this Agreement, Purchaser and Seller shall, on an accrual basis, also make the
adjustments thereto provided for in this Article 13, which (except as otherwise
expressly provided) are to be apportioned with respect to the Property and the
Ground Lease Property as of the Cut-off Time (such that the period preceding the
Closing Date shall be for the account of Seller and the period from and after
the Closing Date shall be for the account of Purchaser) and, to the extent
possible, settled at Closing:
(a) Hotel Revenues and Receivables. All Hotel Revenues and the
Receivables shall be prorated as of the Cut-off Time; provided, however,
that Hotel Revenues and the Receivables with respect to Hotel Revenues
arising from the letting of Hotel guest rooms for the night immediately
preceding the Closing Date shall be shared equally by Seller and
Purchaser. Purchaser shall not be obligated to pay Seller for any of the
Receivables. Following the Closing, Seller shall have the right to collect
the Receivables. Purchaser shall have no obligation to pursue collection
of the Receivables, but, if Purchaser should receive any payment on
account of any of the Receivables at any time following the Closing,
Purchaser shall promptly remit such payment to Seller. If Seller should
receive any payment on account of any Hotel Revenue relating to periods of
time after the Closing, Seller shall promptly remit such payment to
Purchaser. Purchaser will, subject to the provisions of Section 13.1(b)
below, honor, for its account, the terms and rates of all the Bookings
entered into by Seller or Manager prior to the Closing Date, but confirmed
for periods of time after the Closing Date. Any down payments on such
confirmed Bookings and other advance payments made with respect to
Bookings for dates on or after the Closing Date will be credited to
Purchaser at the Closing.
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(b) Ground Lease Revenues. All Ground Lease Revenues shall be
prorated as of the Cut-Off Time.
(c) Continuing Obligations. Purchaser shall receive a credit in an
amount equal to the projected cost to be incurred by Purchaser in
fulfilling the Continuing Obligations.
(d) Impositions. All Impositions shall be prorated as of the Cut-off
Time. If the amount of any such item is not ascertainable on the Closing
Date, the credit therefor shall be based on the most recent available
bills or statements; provided, that with respect to real property ad
valorem taxes, if such amount is not ascertainable on the Closing Date,
the parties will reasonably estimate the amount of same based on their
examination of available millage rates and exemptions as such items relate
to the portion of the Purchase Price allocable to the Real Property and
the Improvements; provided further, such amount shall after the Closing be
adjusted upon receipt of the actual bills or statements only in the event
Seller is due a credit adjustment with regard to same. Further, in the
case of real and personal property ad valorem taxes, Seller shall pay all
such taxes assessed by the respective jurisdictions for all fiscal periods
prior to the fiscal period in which the Closing occurs; such taxes
assessed for the fiscal period in which the Closing occurs shall be
prorated as of the Cut-off Time.
(e) Utility Contracts and Costs. All utility costs including,
without limitation, water, sewer charges and rents, telephone, steam,
electricity, gas, lighting and other utility services shall be prorated as
of the Cut-off Time on the basis of the most recently issued bills
therefor, with a subsequent adjustment of such utilities promptly after
the issuance of bills for the period which includes the Closing Date. At
the Closing (i) Seller shall (if transferrable) assign to Purchaser (or,
at Purchaser's option, to Operator) all deposits, if any, made by Seller
as security or otherwise under any public utility service contracts which
shall remain on deposit for the benefit of Purchaser (or, at Purchaser's
option, Operator) subsequent to the Closing and (ii) Seller shall receive
a credit in an amount equal to such deposits.
(f) Existing Franchise Agreement Costs. All Existing Franchise
Agreement Costs shall be prorated as of the Cut-off Time.
(g) Hotel Contracts. Any amounts prepaid or payable under any Hotel
Contracts shall be prorated as of the Cut-off Time, provided any Hotel
Contract Purchaser elects not to assume shall be terminated by Seller as
of the Closing Date and Seller will be responsible for the payment of any
sums due under such Hotel Contracts through such termination date and the
Closing Date.
(h) Expenses. All prepaid expenses, outstanding due bills and other
accounts payable relating to the operation of the Hotel (excluding those
relating to the Hotel Contracts) and expenses related to the Ground Lease,
as applicable, shall be prorated as of the Cut-off Time, it being
understood that all such expenses, bills and accounts payable relating to
purchases of goods and services delivered or provided prior to the Closing
Date
26
shall be payable by Seller and all such expenses, bills and accounts
payable relating to purchases of goods and services delivered or provided
on or after the Closing Date shall be payable by Purchaser; provided such
expenses, bills and accounts payable have been incurred in accordance with
the requirements of Section 10.1(a) hereof.
13.2 Supplies; Consumables; Fixtures and Tangible Personal Property;
Closing Inventory; Closing Report. Manager, under the supervision of the
respective agents of Seller and Purchaser, shall, prior to the Closing and at
times so as to not unreasonably interfere with Hotel operations (i) conduct an
inventory of the Supplies, the Consumables, and the Fixtures and Tangible
Personal Property located at the Hotel as of the Cut-off Time (the "Closing
Inventory"), and (ii) conduct such other inventories, examinations and audits of
the Hotel and the Property, and the books and records of the Hotel and the
Property, as necessary to prepare a report reflecting the adjustments and
prorations to be made and calculated pursuant to this Article 13, including any
adjustments contemplated by this Section 13.2 (the "Closing Report"). In the
event the Closing Inventory shall reflect that the Supplies, the Consumables
and/or the Fixtures and Tangible Personal Property are at levels which are less
than the levels for any of such items as reflected on the Consumables, Supplies
and Fixtures and Tangible Personal Property Inventory, Purchaser shall be
entitled to a credit equal to the cost which would be incurred by Purchaser to
cause the Supplies, the Consumables, and/or the Fixtures and Tangible Personal
Property, as applicable, to be increased to levels for same as reflected
Consumables, Supplies and Fixtures and Tangible Personal Property Inventory
(determined based on the then cost of the item or items in question charged in
the ordinary course of business of the Hotel). In the event the Closing
Inventory shall reflect that the Supplies, the Consumables and/or the Fixtures
and Tangible Personal Property, as applicable, are at levels above those
reflected for any of such items in the Consumables, Supplies and Fixtures and
Tangible Personal Property Inventory, as applicable, Seller shall be entitled to
a credit equal to the cost of those items which are at levels above those
reflected in the Consumables, Supplies and Fixtures and Tangible Personal
Property Inventory (determined based on the then cost of the item or items in
question charged in the ordinary course of business of the Hotel). Except as
expressly provided in this Section 13.2 with respect to the Supplies, the
Consumables, or the Fixtures and Tangible Personal Property, the parties
acknowledge and agree that there will be no other adjustments or prorations made
with respect to the Supplies, the Consumables or the Fixtures and Tangible
Personal Property.
13.3 Management Agreement. There shall be no adjustment for management
fees and reimbursements (if any) due Manager under the Management Agreement
through the Closing Date; provided, that any such fees and reimbursements shall
be the sole responsibility of Seller, and Seller hereby indemnifies and holds
Purchaser safe and harmless from the payment of same.
13.4 Post-Closing Adjustments and Payment of Certain Expenses. Within the
thirty (30) day period following the Closing, Seller and Purchaser, or their
respective agents, shall reasonably determine if any of the adjustments or
prorations made pursuant to this Article 13 were in error, or, as applicable,
require further adjustment or proration. In the event any adjustments or
prorations made pursuant to this Article 13 are found to be erroneous, or, by
the terms hereof, require further adjustment or proration, such errors or
post-Closing adjustments or prorations shall be corrected or
27
further adjusted and prorated as soon as practicable after the Closing, and if
at all possible, within thirty (30) days after the Closing. Further, and within
such thirty (30) day period following the Closing, Seller shall pay all
expenses, accrued or otherwise, and of any type or kind whatsoever, prior to the
Cut-off Time with regard to the Property and the Hotel and which were not
susceptible of payment at the Closing pursuant to the provisions of Section
10.1(b) hereof. The provisions of this Article 13 shall survive the Closing.
ARTICLE 14
CASUALTIES AND TAKINGS
14.1 Casualties. In the event that, subsequent to the Effective Date and
prior to the Closing, any portion of the Property shall be damaged or destroyed
by fire or other casualty in excess of FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00), Purchaser may, at its option, either (a) terminate this Agreement
by written notice thereof to Seller within ten (10) days after Seller notifies
Purchaser of the casualty, at which xxxx Xxxxxx shall direct the Title Company
to promptly return the Deposit to Purchaser, with neither party hereto being
thereafter obligated to the other, except as to Purchaser's obligation to return
to Seller due diligence materials pursuant to Section 5.4 hereof, and except for
Purchaser's indemnification liabilities set forth in Sections 6.1 and 19.1(d)
hereof, or (b) proceed to the Closing, in which event Seller shall, at
Purchaser's option, deliver to Purchaser at the Closing any insurance proceeds
received by Seller attributable to the Property from such casualty or allow
Purchaser at the Closing a credit against the Purchase Price in the amount of
such agreed upon insurance proceeds. In the event that such damage is an amount
less than FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00), Purchaser shall
proceed to the Closing, provided that Purchaser may, at its option, (i) pay the
full balance of the Purchase Price, in which event Purchaser shall be entitled
to any insurance proceeds received attributable to the Property from such
casualty or (ii) reduce the Purchase Price in an amount equal to the fair market
value of the cost to repair the damages (as mutually agreed upon by Seller and
Purchaser), in which event Seller shall be entitled to any insurance proceeds
attributable to the Property from such casualty.
14.2 Takings. In the event of the institution of any proceeding for the
taking or condemnation of a substantial portion of the Property prior to the
Closing, Purchaser may, at its option, either (a) terminate this Agreement by
written notice thereof to Seller within ten (10) days after Seller notifies
Purchaser of the proceedings for condemnation or taking, at which xxxx Xxxxxx
shall direct the Title Company to promptly return the Deposit to Purchaser, with
neither party hereto being thereafter obligated to the other, except as to
Purchaser's obligation to return to Seller due diligence materials pursuant to
Section 5.4 hereof, and except for Purchaser's indemnification liabilities set
forth in Sections 6.1 and 19.1(d) hereof, or (b) proceed to the Closing, in
which event Seller shall assign and/or deliver to Purchaser at Closing any
claims with regard to same and any proceeds received by Seller attributable to
the Property from such condemnation or eminent domain proceeding. As used in
this Section 14.2, the taking of a "substantial portion" of the Property shall
mean (i) a taking in excess of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) of
the
28
fair market value of the Property or (ii) a taking which materially affects the
value of the Property as used for the operation of the Hotel.
ARTICLE 15
EMPLOYEE MATTERS
15.1 Employees. Seller acknowledges and agrees that any employees and
personnel associated with the operation of the Property or the Hotel are, and
unless otherwise terminated, will remain the employees of Seller after the
Closing, and shall not be and shall not be deemed to be the employees or
personnel of Purchaser. Seller further acknowledges and agrees that from and
after the Closing, Purchaser shall not be liable or responsible for any costs,
expenses, salaries, employee benefit or incentive plans (including, without
limitation, "ERISA" plans), employment agreements, exit payments (including,
without limitation, final payroll or accrued vacation time) or the like payable,
accruing or otherwise due to any such employees or personnel of Seller
(collectively, the "Employee Costs"). Seller agrees to at the Closing deliver to
Seller and Purchaser an indemnification agreement (the "Employee Indemnification
Agreement") indemnifying Seller and Purchaser as to the Employee Costs, and
otherwise in form and substance reasonably acceptable to Purchaser.
ARTICLE 16
REMEDIES ON DEFAULT
16.1 Seller Default. If this Agreement is terminated by Purchaser pursuant
to any one or more Sections hereof which entitle Purchaser to terminate this
Agreement, Purchaser shall be entitled to the return of the Deposit (including
the interest earned thereon). If the sale contracted for herein is not
consummated due to a failure on the part of Seller in the performance of any of
its obligations hereunder ("Seller Default"), then Purchaser shall either (i)
terminate this Agreement and accept the return of the Deposit or (ii) xxx for
specific performance, as its sole and exclusive remedies, Purchaser hereby
waiving the right to bring a suit for damages, and waives all other remedies at
law or in equity.
16.2 Purchaser Default. If the sale contracted for herein is not
consummated due to Purchaser's failure to perform any of its obligations
hereunder ("Purchaser Default") other than a Seller Default, then the Deposit
shall be paid to Seller by the Title Company as liquidated damages for such
Purchaser Default as Seller's sole and exclusive remedy; provided , that
notwithstanding anything contained herein to the contrary, the payment of the
Deposit to Seller shall not relieve Purchaser from (i) its indemnification
obligations pursuant to Sections 6.1 and 19.(d) hereof, or (ii) its obligation
to return to Seller due diligence materials as set forth in Section 5.4 hereof.
The parties agree that the amount of liquidated damages described in the
preceding sentences, as applicable, is a reasonable sum considering all of the
circumstances existing as of the date hereof, including the relationship of such
sum to the amount of harm to Seller that reasonably could be anticipated,
Seller's anticipated use of the proceeds of sale and the fact that actual
damages would be impossible to determine.
29
PURCHASER AND SELLER AGREE THAT BASED UPON THE CIRCUMSTANCES NOW EXISTING,
KNOWN AND UNKNOWN, IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO ESTABLISH
SELLER'S DAMAGE BY REASON OF PURCHASER'S DEFAULT, EXCEPT AS OTHERWISE SET FORTH
IN THE IMMEDIATELY PRECEDING PARAGRAPH OF THIS SECTION 16.2. SELLER AND
PURCHASER ACKNOWLEDGE AND AGREE THAT THE APPLICABLE FOREGOING AMOUNT OF
LIQUIDATED DAMAGES IS REASONABLE AS LIQUIDATED DAMAGES AND SHALL BE SELLER'S
SOLE AND EXCLUSIVE REMEDY IN LIEU OF ANY OTHER RELIEF, RIGHT OR REMEDY, AT LAW
OR IN EQUITY, TO WHICH SELLER MIGHT OTHERWISE BE ENTITLED BY REASON OF
PURCHASER'S DEFAULT, EXCEPT AS OTHERWISE SET FORTH IN THE IMMEDIATELY PRECEDING
PARAGRAPH OF THIS SECTION 16.2, SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE
READ AND UNDERSTAND THE PROVISIONS OF THIS SECTION 16.2 AND BY THEIR INITIALS
IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
Seller's Initials:__________ Purchaser's Initials:__________
ARTICLE 17
AGREEMENT NOT TO COMPETE
17.1 Agreement. Seller and Purchaser shall at Closing enter into an
Agreement Not to Compete (the "Agreement Not to Compete") providing that Seller
may not manage, operate or own an interest in any hotel or motel property within
a five (5) mile radius of any portions of the Property for a period of five (5)
years after Closing. The Agreement Not to Compete will be in form and substance
mutually agreed to by Seller and Purchaser prior to the expiration of the Due
Diligence Period.
ARTICLE 18
NOTICES
18.1 Notices. All notices, demands, or other communications of any type
(herein collectively referred to as "Notices") given by Seller to Purchaser or
by Purchaser to Seller, whether required by this Agreement or in any way related
to the transaction contracted for herein, shall be void and of no effect unless
given in accordance with the provisions of this Section 18.1. All Notices shall
be in writing and delivered to the person to whom the notice is directed, either
(a) by telephonic facsimile communication, (b) by Federal Express or other
guaranteed overnight delivery service, or (c) by United States Mail, as a
registered or certified item, return receipt requested. Any of the Notices may
be delivered by the parties hereto or by their respective attorneys. Any notice
delivered by telephonic facsimile communication or Federal Express or other
guaranteed overnight delivery service shall be deemed effective one (1) day
after being transmitted to the applicable telephone facsimile numbers set forth
below, if such Notices are sent by telephonic facsimile communication, or when
delivered to the addresses set forth below if sent by Federal Express or other
guaranteed overnight delivery service. Notices delivered by registered or
certified mail shall be deemed effective
30
three (3) days after being deposited in a post office or other depository under
the care or custody of the United States Postal Service, enclosed in a wrapper
with proper postage affixed, with return receipt requested addressed to the
party to be so notified as follows:
If intended for Seller, to: LVM Corporation
------------------------------
------------------------------
------------------------------
Attn:
-------------------------
With a copy to:
------------------------------
------------------------------
------------------------------
Attn:
-------------------------
If intended for Purchaser to: Host Funding, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx XxXxxxx, President
With a copy to: Xxxxx X. Xxxxxx, Esq.
Xxxxx X. Xxxxxx, P.C.
000 XxXxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
ARTICLE 19
ADDITIONAL COVENANTS; PIGGY-BACK
REGISTRATION RIGHTS
19.1 Additional Covenants. In addition, the parties agree as follows:
(a) Seller Expenses. Seller shall be responsible for the payment of
(i) the title insurance premium with regard to the Title Policy (to be
calculated upon that portion of the Purchase Price allocable to the Real
Property, the Ground Lease Property and the Improvements), (ii)
documentary and/or transfer taxes, and mortgage and/or deed of trust
related taxes and charges, provided that any transfer taxes shall be
calculated on that portion of the Purchase Price allocated to the Real
Estate, the Ground Lease Property and the Improvements, unless otherwise
required by any applicable Legal Requirement, (iii) fifty percent (50%) of
all escrow fees, and (iv) the registration expenses of the holders of the
Host Funding Stock as set forth in Section 19.2(d) hereof. Additionally,
the fees and expenses of Seller's designated representatives, accountants
and attorneys shall be borne by Seller.
31
(b) Purchaser Expenses. Purchaser shall be responsible for the
payment of (i) the cost of the Survey, (ii) the cost of any environmental
studies undertaken by Purchaser, (iii) all costs and expenses related to
Purchaser's due diligence inspections and investigations pursuant hereto,
(vi) all costs, expenses and fees relating to the obtaining by Purchaser
of the Host Funding Franchise Agreement, (v) the cost of the audited
financial statements prepared pursuant to Section 9.1 (j) hereof, and (vi)
fifty percent (50%) of all escrow fees. Additionally, the fees and
expenses of Purchaser's designated representatives, accountants and
attorneys shall be borne by Purchaser.
(c) Miscellaneous Expenses. All costs and expenses not otherwise
required to be paid by Seller or Purchaser pursuant to the terms hereof
shall be borne by Seller and Purchaser in the manner in which such costs
and expenses are customarily allocated between the parties at the closing
of a real estate hotel or motel property in the Bloomington, Illinois
area.
(d) Brokerage. Seller hereby represents and warrants to Purchaser
that Seller has not dealt with any broker or finder with respect to the
transaction contemplated hereby, other than Purchaser's Advisors.
Purchaser hereby represents and warrants to Seller that Purchaser has not
dealt with any broker or finder with respect to the transaction
contemplated hereby, other than HMR Capital, LLC ("Purchaser's Advisors").
Purchaser agrees to pay any and all brokerage commissions to which
Purchaser's Broker shall be entitled in connection with this transaction
and agrees to indemnify Seller for any claim for brokerage commission or
finder's fee in connection with this transaction asserted by Purchaser's
Advisors. Seller and Purchaser each represent and warrant to the other
that it has not authorized any broker, agent or finder to act on its
behalf (other than as set forth in this Section 19.1(d)), nor does it have
any knowledge of any other broker, agent or finder purporting to act on
its behalf in respect of this transaction, and Seller and Purchaser each
hereby covenant and agree to indemnify, defend and hold harmless the other
from and against any cost, expense, claim, liability or damage (including,
without limitation, reasonable attorneys' fees and court costs) resulting
from any breach of the representation and warranty contained herein.
(e) Books and Records. The transfer of the Property contemplated
hereby includes all books and records of Seller pertaining to the business
of the Property, the Ground Lease Property and the Hotel, and same should
be delivered to Purchaser at Closing; provided, Purchaser agrees to
maintain and preserve all books and records, files and correspondence
pertaining to the business of the Property, the Ground Lease Property and
the Hotel, and not to destroy or dispose of the same, for at least five
(5) years following the Closing Date. Purchaser agrees to provide Seller
and its representatives access to such books, records, files and
correspondence at all reasonable times upon at least five (5) days prior
written notice. Additionally, Seller agrees to cooperate and assist
Purchaser incident to any audit of the books and records required of
Purchaser for periods of time prior to the Closing, including, without
limitation, becoming the "engaging party" (at no cost or expense to
Seller) if necessary to facilitate any such audits.
32
(f) Publicity. All notice to third parties and all other publicity
concerning the transactions contemplated hereby shall be jointly planned
and coordinated by and between Purchaser and Seller. Neither of the
parties shall act unilaterally in this regard without the prior written
approval of the other; however, such approval shall not be unreasonably
withheld or delayed.
(g) Assignment. Except for an assignment of this Agreement by
Purchaser to an Affiliate of Purchaser, neither Seller nor Purchaser shall
have the right to assign its interest in this Agreement without the prior
written consent of the other party, which consent may be given or withheld
in the sole discretion of the party whose consent is requested; provided,
however, the party assigning its interest in this Agreement shall remain
liable for any and all of its obligations hereunder.
(h) Litigation Costs. In the event of any action or proceeding at
law or in equity between Seller and Purchaser to enforce any provision of
this Agreement or to protect or establish any right or remedy of either
party hereunder, the unsuccessful party to such litigation shall pay to
the prevailing party all costs and expenses, including reasonable
attorneys' fees incurred therein by such prevailing party (collectively,
"Litigation Costs"), and if such prevailing party shall recover judgment
in any such action or proceeding, such Litigation Costs shall be included
in and as a part of such judgment.
(i) Integration/Choice of Law. This Agreement (including all
exhibits hereto) contains the entire agreement between the parties with
respect to the subject matter hereof, supersedes all prior understandings,
including, without limitation, that certain letter of intent, dated June
13, 1997, with respect thereto, and may not be amended, supplemented or
terminated, nor shall any obligation hereunder or condition hereof be
deemed waived, except by a written instrument to such effect signed by the
party to be charged or as otherwise expressly provided in this Agreement.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois.
(j) Execution. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original but all of which,
taken together, shall constitute but one and the same instrument. This
Agreement may be executed and delivered by facsimile transmission of
signature pages, following which executed original counterparts shall be
exchanged in the ordinary course of business.
(k) Importance of Time. Time is of the essence of this Agreement.
(l) Rule 144. Purchaser covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Securities and Exchange
Commission (the "Commission") thereunder, and it will take such other
action as any holder of Host Funding Stock may reasonably request, all to
the extent required from time to time to enable such holder to sell Host
Funding Stock without
33
registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as may be
amended from time to time, or (ii) any similar rule or regulation
hereunder adopted by the Commission.
(m) Time for Acceptance. This Agreement is being presented to Seller
and constitutes an offer by Purchaser to purchase the Property from Seller
upon the terms and conditions stated herein, which offer must be accepted
by Seller's execution of at least three (3) counterparts hereof and
returning all three originals to Purchaser on or before July __, 1997. If
Purchaser fails to deliver the three (3) counterpart originals of this
Agreement to Seller, by the above date, this Agreement shall be of no
force or effect and neither party shall have any obligation one to the
other.
19.2 Piggy-Back Registration Rights
(a) If Purchaser proposes to file a registration statement under the
Securities Act with respect to an offering by Purchaser for its own
account or for the account of any other person of any class of equity
security, including any security convertible into or exchangeable for any
equity security (other than a registration statement on Form S-8 (or any
successor form) or filed in connection with an exchange offer or an
offering of securities solely to Purchaser's existing stockholders), then
Purchaser shall in each case give written notice of such proposed filing
to the holders of the Host Funding Stock at least twenty (20) days before
the anticipated filing date, and such notice shall offer such holders the
opportunity to register such number of shares of Host Funding Stock as
each such holder may request (a "PiggyBack Registration"). Purchaser shall
use reasonable diligence to cause the managing underwriter or underwriters
of a proposed underwritten offering to permit the holders of Host Funding
Stock requested to be included in the registration for such offering to
include such securities in such offering on the same terms and conditions
as any similar securities of Purchaser included therein. Notwithstanding
the foregoing, if the managing underwriter or underwriters of such
offering delivers a written opinion to the holders of Host Funding Stock
that the total amount of securities which they or Purchaser and any other
persons intend to include in such offering is sufficiently large to
materially and adversely affect the success of such offering, then the
amount of Host Funding Stock to be offered for the accounts of holders of
Host Funding Stock shall be reduced, in the sole opinion of the managing
underwriter, to a total amount of securities to be included in such
offering to the amount recommended by such managing underwriter; provided,
that the reduction imposed upon holders of Host Funding Stock will not be
greater, on a fractional basis, than the reduction imposed upon other
persons whose piggy-back registration rights are pari passu with those
granted hereby with respect to the amount of securities requested for
inclusion in such registration.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Purchaser shall not be required to include Host Funding Stock
in any registration statement if the proposed registration is (i) a
registration of a stock option or other employee incentive
34
compensation plan or of securities issued or issuable pursuant to any such
plan, (ii) a registration of securities issued or issuable pursuant to a
stockholder reinvestment plan or other similar plan, (iii) a registration
of securities issued in exchange for any securities or any assets of, or
in connection with a merger or consolidation with, an unaffiliated
company, or (iv) a registration of securities pursuant to a "rights" or
other similar plan designed to protect Purchaser's stockholders from a
coercive or other attempt to take control of Purchaser.
(c) Purchaser may withdraw any registration statement and abandon
any proposed offering initiated by Purchaser without the consent of any
holder of Host Funding Stock, notwithstanding the request of any such
holder to participate therein in accordance with this Section 19.2, if
Purchaser determines, in good faith in its sole discretion, that such
action is in the best interests of Purchaser and its stockholders (for
this purpose, the interest of the holders of Host Funding Stock shall not
be considered).
(d) With respect to any Piggy-Back Registration requested by the
holders with respect to Host Funding Stock, Purchaser shall bear all
registration expenses except for the following registration expenses (and
the following registration expenses shall be borne pro rata by the holders
of Host Funding Stock registered thereby): (i) Commission and securities
exchange registration and filing fees, (ii) fees and expenses of
compliance with securities or blue sky laws (including fees and
disbursements of counsel in connection with blue sky qualifications of
such shares), (iii) rating agency fees, (iv) printing expenses, (v)
messenger and delivery expenses, (vi) fees and expenses incurred in
connection with the listing of such shares to be registered on each
securities exchange in which similar securities issued by Purchaser are
then listed, (vii) underwriting fees, discounts and commissions, and
(viii) any out-of-pocket expenses of the holders of such shares including
any travel costs and counsel fees; provided, however, that the foregoing
registration expenses to be paid by such holders shall be deemed to
include, on an item-by-item basis (an "item" being any of the numbered
expenses above), only that certain portion of the total registration
expenses of such PiggyBack Registration relating to such item that is
determined by multiplying (x) the total registration expenses of such
Piggy-Back Registration relating to such item by (y) a fraction the
numerator of which is the total proceeds realized by the holders of the
Host Funding Stock as a result of the offering relating to such Piggy-Back
Registration and the denominator of which is the total proceeds realized
by all selling stockholders (including such holders of Host Funding Stock)
and Purchaser in such offering.
(e) In connection with any registration statement in which a holder
of Host Funding Stock is participating, each such holder will furnish to
Purchaser in writing such information with respect to the name and address
of such holder and the amount of Host Funding Stock held by such holder
and such other information as Purchaser shall reasonably request for use
in connection with any such registration statement or prospectus, and
agrees to indemnify, to the extent permitted by law, Purchaser, its
directors and officers, and each person who controls Purchaser (within the
meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue statement of a material
fact or any omission of a material fact
35
required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the
statements therein not misleading, to the extent, but only to the extent,
that such untrue statement or omission is based upon any information with
respect to such holder so furnished in writing by such holder specifically
for inclusion in any prospectus or registration statement.
(f) No holder of Host Funding Stock may participate in any
Piggy-Back Registration unless such holder (a) agrees to sell the Host
Funding Stock on the terms of and on the basis provided in any
underwriting arrangements approved by the persons entitled to approve such
arrangements (which shall be Purchaser in the case of an offering of
securities by Purchaser), and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such
underwriting arrangements.
(g) The provisions of this Section 19.2 shall apply, to the full
extent set forth herein, with respect to the Host Funding Stock, to any
and all shares of equity capital of Purchaser or any successor or assign
of Purchaser (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of the Host Funding Stock, in each case as the amounts of
such securities outstanding are approximately adjusted for any equity
dividends, splits, reverse splits, combinations, recapitalizations, and
the like occurring after the date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed or cause this
Agreement to be executed, all as of the day and year first above written.
SELLER:
LVM CORPORATION, an Illinois corporation
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
PURCHASER:
HOST FUNDING, INC., a Maryland corporation
By:
---------------------------------------
Xxxxxxx XxXxxxx, President
36
This Agreement and the Initial Deposit have been received by the Title
Company this _____ day of ______________, 1997, which shall be the Effective
Date.
REPUBLIC TITLE OF TEXAS, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address: 000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn.: Xxxxxxx X. Xxxxxx
37
