1
EXHIBIT 10.20
FIRST AMENDMENT TO MASTER AGREEMENT
THIS FIRST AMENDMENT TO MASTER AGREEMENT ("Agreement") is made as of
the 21st day of November 1996, among Doubletree Corporation, a Delaware
corporation ("Tree"), RFS, Inc., a Tennessee corporation (the "Lessee"), RFS
Hotel Investors, Inc., a Tennessee corporation ("RFSI"), RFS Partnership, L.P.,
a Tennessee limited partnership (the "Lessor"), RFS Leasing, Inc., a Tennessee
corporation and a wholly-owned subsidiary of the Lessee (the "Additional
Lessee"), RFS Financing Partnership, L.P., a Tennessee limited partnership (the
'Additional Lessor") and DTR RFS Lessee, Inc., a California corporation ("DTR
Lessee").
RECITALS
A. The Lessor and the Lessee are parties to that certain Consolidated
Lease Amendment dated as of February 27, 1996 (the "Existing Lease"), which
Existing Lease represents (as of the date hereof) forty-eight (48) separate
leases (the "Existing Leases").
B. The Lessor and DTR Lessee are parties to that certain Lease
Agreement dated as of May 30, 1996 (the "Existing DTR Lease").
C. The Lessor currently owns forty-eight (48) hotel properties
described in Exhibit A that are leased under the Existing Lease to the Lessee
and owns the hotel property described in Exhibit B (the "Del Mar Hotel") that is
leased under the Existing DTR Lease to DTR Lessee.
D. The Lessor is transferring to the Additional Lessor as of the date
hereof its fee interest in 15 of the hotel properties (the "Transfer Hotels"),
identified on Exhibit A and Exhibit B as Transfer Hotels, and in connection with
such transfer the Lessor desires to assign to the Additional Lessor all of its
rights under (1) the 14 leases represented by the Existing Lease
2
relating to all of the Transfer Hotels other than the Del Mar Hotel (the "14
Existing Leases") and (2) the Existing DTR Lease relating to the Del Mar Hotel.
E. In connection with the transfer of the Transfer Hotels to the
Additional Lessor, at the request of the Lessor and the Additional Lessor, (1)
the Lessee has agreed to assign to the Additional Lessee all of its rights under
the 14 Existing Leases and (2) DTR Lessee has agreed to assign to the Additional
Lessee the Existing DTR Lease relating to the Del Mar Hotel.
F. The Additional Lessor and the Additional Lessee desire to amend
certain provisions of the 14 Existing Leases and the Existing DTR Lease.
G. The Lessor and the Lessee desire to amend certain provisions of the
Existing Lease relating to the 34 hotel properties (the "Remaining Hotels")
identified on Exhibit A as Remaining Hotels.
H. The parties hereto desire to amend the Master Agreement dated as of
February 1, 1996 (the "Original Master Agreement") among Tree, Seedling Merger
Subsidiary, Inc. (which was subsequently merged into the Lessee), the Lessee,
RFSI and the Lessor, to make certain amendments and other agreements with
respect to the foregoing and the Original Master Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Certain Definitions. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Original Master Agreement.
Unless the context otherwise
2
3
requires, (a) references to the singular shall include the plural and vice
versa, (b) references to gender shall include all genders, (c) references to
designated "Sections " or other subdivisions are references to the designated
Sections or other subdivisions of this Amendment or the Original Master
Agreement, as applicable, (d) all accounting terms not otherwise defined herein
shall have the meanings assigned to them in accordance with GAAP and, if
applicable, the Uniform System of Accounts (as defined in the Existing Lease)
and (e) the words 'herein," "hereof," and "hereunder" and other words of similar
import refer to this Amendment or the Original Master Agreement, as applicable,
as a whole and not to any particular Section or other subdivision.
2. Assignment and Assumption of the 14 Existing Leases and the Existing
DTR Lease.
a. By the Lessor and the Additional Lessor:
(i) The Lessor hereby (A) assigns to the Additional
Lessor all of its right, title and interest in and to the 14
Existing Leases and the Existing DTR Lease and (B) conveys,
transfers and assigns to the Additional Lessor all of its
interest in and to any fixtures, equipment and other personal
property used in connection with the Transfer Hotels.
(ii) The Additional Lessor hereby (A) accepts the
assignments, conveyances and transfers in paragraph (i) above
and (B) assumes all of the obligations of the Lessor under the
14 Existing Leases and the Existing DTR Lease accruing from
and after the date hereof.
(iii) The Lessor hereby agrees to hold the Additional
Lessor harmless from the obligations and liabilities of the
"Lessor" under the 14 Existing Leases
3
4
and the Existing DTR Lease arising from or relating to events or circumstances
occurring prior to the date hereof. The Additional Lessor hereby agrees to hold
the Lessor harmless from the obligations and liabilities of the "Lessor" under
the 14 Existing Leases and the Existing DTR Lease arising from or relating to
events or circumstances occurring on or after the date hereof.
b. By the Lessee, DTR Lessee and the Additional Lessee:
(i) The Lessee hereby (A) assigns to the Additional Lessee all
of its right, title and interest in and to the 14 Existing Leases and
(B) conveys, transfers and assigns to the Additional Lessee all of its
interest in and to any fixtures, equipment and other personal property
used in connection with the Transfer Hotels other than the Del Mar
Hotel.
(ii) DTR Lessee hereby (A) assigns to the Additional Lessee
all of its right, title and interest in and to the Existing DTR Lease
and (B) conveys, transfers and assigns to the Additional Lessee all of
its interest in and to any fixtures, equipment and other personal
property used in connection with the Del Mar Hotel.
(iii) The Additional Lessee hereby (A) accepts the
assignments, conveyances and transfers in paragraphs (i) and (ii) above
and (B) assumes all of the obligations of the Lessee under the 14
Existing Leases and of DTR Lessee under the Existing DTR Lease, in each
case accruing from and after the date hereof.
4
5
(iv) Each of the Lessee and DTR Lessee hereby agrees to hold
the Additional Lessee harmless from the obligations and liabilities of
the "Lessee" under the 14 Existing Leases and the Existing DTR Lease,
respectively, arising from or relating to events or circumstances
occurring prior to the date hereof. The Additional Lessee hereby agrees
to hold harmless the Lessee and the DTR Lessee from the obligations and
liabilities of the "Lessee" under the 14 Existing Leases and the
Existing DTR Lease, respectively, arising from or relating to events or
circumstances occurring on or after the date hereof.
c. The Lessor agrees to look solely to the Lessee with respect to the
obligations of the "Lessee" under the 14 Existing Leases accruing, or arising
from or relating to events or circumstances occurring, prior to the date hereof
and solely to the DTR Lessee with respect to the obligations of the "Lessee"
under the Existing DTR Lease accruing, or arising from or relating to events or
circumstances occurring, prior to the date hereof; and the Additional Lessor
agrees that it will have no rights or claims with respect thereto. The
Additional Lessor agrees to look solely to the Additional Lessee with respect to
the obligations of the "Lessee" under the 14 Existing Leases and the Existing
DTR Lease accruing, or arising from or relating to events or circumstances
occurring, from and after the date hereof; and the Lessor agrees that it will
have no rights or claims with respect thereto.
d. The Lessee and the DTR Lessee agree to look solely to the Lessor
with respect to the obligations of the "Lessor" under the 14 Existing Leases and
the Existing DTR Lease, respectively, accruing, or arising from or relating to
events or circumstances
5
6
occurring, prior to the date hereof; and the Additional Lessee agrees that it
will have no rights or claims with respect thereto. The Additional Lessee agrees
to look solely to the Additional Lessor with respect to the obligations of the
"Lessor" under the 14 Existing Leases and the Existing DTR Lease, respectively,
accruing, or arising from or relating to events or circumstances occurring, from
and after the date hereof; and the Lessee and the DTR Lessee each agrees that it
will have no rights or claims with respect thereto.
3. Modification and Amendment of the Existing Lease and the Existing
DTR Lease
a. Contemporaneously with the execution of this Agreement, the
Additional Lessor and the Additional Lessee shall execute the Second
Consolidated Lease Amendment pursuant to which the 14 Existing Leases
and the Existing DTR Lease shall be restated and amended, effective as
of the date hereof.
b. Contemporaneously with the execution of this Agreement, the
Lessor and the Lessee shall execute the Third Consolidated Lease
Amendment pursuant to which the 34 leases represented by the Existing
Lease relating to the Remaining Hotels shall be restated and amended,
effective as of the date hereof.
4. Amendments to the Original Master Agreement. The following
amendments to the Original Master Agreement shall be effective as of the date
hereof:
a. Section 1 of the Original Master Agreement shall be amended
hereby as follows:
(i) the definition of "Current Hotels" shall be
deleted in its entirety and the following substituted
therefor:
6
7
CURRENT HOTELS - shall mean the hotels leased by the Lessee from the
Lessor as of the Closing Date, plus the Del Mar Hotel.
(ii) the definition of "Default by the Lessee" shall be
deleted in its entirety and the following substituted therefor:
DEFAULT BY THE LESSEE - shall have the meaning set forth in
Section 15a.
(iii) the definition of "Percentage Lease" shall be deleted in
its entirety and the following substituted therefor:
PERCENTAGE LEASE - shall mean, (A) with respect to a Current
Hotel that is a Transfer Hotel, the percentage lease with
respect to such hotel represented by the Second Consolidated
Lease Amendment between the Additional Lessor and the
Additional Lessee, (B) with respect to a Current Hotel that is
not a Transfer Hotel, the percentage lease with respect to
such hotel represented by the Third Consolidated Lease
Amendment between the Lessor and the Lessee and (C) with
respect to each Additional Hotel, the percentage lease entered
into between the Lessor and the Lessee with respect to such
hotel.
(iv) the definition of "Percentage Rent" shall be amended
hereby by inserting the clause "or Additional Lessee's" after the word
"Lessee's."
b. Section 4(b) of the Original Master Agreement shall be amended by
inserting the following at the end of Section 4(b):
7
8
Notwithstanding any provisions of this Section 4(b) to the contrary,
the Additional Lessor and the Additional Lessee shall have the same rights and
obligations as the Lessor and the Lessee, respectively, under this Section 4(b),
provided, however, that such rights and obligations are and shall remain subject
to the terms of the Consolidated Lease Estoppel, Subordination, Attornment and
Non-Disturbance Agreement dated as of November 21, 1996 (the "SND Agreement")
among the Additional Lessor, the Additional Lessee and LaSalle National Bank for
so long as the SND Agreement remains in effect.
Section 5(a) of the Original Master Agreement shall be deleted in
its entirety and the following substituted therefor:
a. Net Worth. At all times during the terms of the Percentage
Leases relating to the Remaining Hotels and the Additional
Hotels, Tree shall cause the Lessee to maintain and the Lessee
shall maintain , a Net Worth in an amount at least equal to
$11,000,000. At all times during the terms of the Percentage
Leases relating to the Transfer Hotels, Tree and the Lessee
shall cause the Additional Lessee to maintain and the
Additional Lessee shall maintain, a Net Worth in an amount at
least equal to $4,000,000. The Lessee shall at all times
maintain an adequate amount of Working Capital to operate the
Remaining Hotels and the Additional Hotels. The
8
9
Additional Lessee shall at all times maintain an adequate
amount of Working Capital to operate the Transfer Hotels.
d. Section 7(a) of the Original Master Agreement shall be deleted in
its entirety and the following substituted therefor:
a. Changes in Structure. Tree represents that as of November
21, 1996, the Additional Lessee is a wholly-owned subsidiary
of the Lessee and the Lessee is a wholly-owned subsidiary of
Tree and Tree will have the sole economic and voting interest
in the Lessee. Until the earlier to occur of (i) the
expiration of ten years following the Closing Date or (ii) the
date of redemption or conversion of the Preferred Stock,
without the prior written consent following not less than 60
days prior written notice to the Lessor or the Additional
Lessor, as the case may be, which consent shall not be
unreasonably withheld, Tree, the Lessee and the Additional
Lessee shall not permit any merger, sale of its stock or sale,
transfer or conveyance of all or substantially all of the
assets of the Lessee or the Additional Lessee if, as a result
thereof, the Lessee or the Additional Lessee, or the surviving
entity, would cease to be controlled, directly or indirectly,
by Tree. After the date described in the preceding sentence,
any merger, sale of stock, transfer or conveyance of all or
substantially all of the assets of the Lessee or the
Additional Lessee which results in the Lessee
9
10
or the Additional Lessee ceasing to be controlled, directly or
indirectly, by Tree shall require the prior written consent of
the Lessor or the Additional Lessor, as the case may be, which
consent shall not be unreasonably withheld and which shall be
granted by the Lessor or the Additional Lessor, as the case
may be, if the party proposed to acquire control of the Lessee
or the Additional Lessee or its assets obtains the approval of
the Franchisors to serve as franchise licensee for the
affected Hotels and, if applicable, of liquor licensing
authorities for the affected Hotels, and either (x) has
substantial experience in the leasing and/or managing of
hotels of the type then owned by the Lessor or the Additional
Lessor, as the case may be, and in the operation of hotels
licensed by one or more of the Franchisors, or (y) provides
reasonable assurance to the Lessor or the Additional Lessor,
as the case may be, that such party will maintain the senior
management organization of the Lessee or the Additional
Lessee, as the case may be, materially intact, or (z) enters
into management arrangements for the operation of the affected
Hotels under terms satisfactory to the Lessor or the
Additional Lessor, as the case may be, during the remainder of
the terms of the Percentage Lease, by an entity that satisfies
either (x) or (y) above. Prior to any transaction otherwise
permissible under the preceding sentence,
10
11
Tree, the Lessee or the Additional Lessee, as the case may be,
and the proposed transferee shall acknowledge and agree in
writing with the Lessor or the Additional Lessor, as the case
may be, with respect to the restrictions on change in control
set forth herein and shall agree that no further transfer of
capital stock or assets may be made by such transferee except
pursuant to the provisions of this Section.
e. Section 7(c) of the Original Master Lease Agreement shall be amended
hereby by inserting the clause "and the Additional Lessee" after the word
"Lessee."
f. Sections 8, 9 and 10 of the Original Master Agreement shall be
deleted in their entirety and the following substituted therefor:
8. Financial Statements; Indemnification; Due Diligence;
Confidential.
a. Financial Disclosure. During the term of any
Percentage Lease, Tree, the Lessee and the Additional Lessee
agree:
(i) to make available to RFSI, the Lessor and the
Additional Lessor,
(A) not more than 30 days following the end
of the first three calendar quarters of each year,
quarterly unaudited financial statements, including
balance sheet, statement of operations, statement of
11
12
shareholders' equity, statement of cash flows and schedules for each of the
Lessee and the Additional Lessee for the most recently ended calendar quarter
and the comparable prior year period prepared in conformity with GAAP;
(B) not more than 60 days after the end of each calendar year, audited
annual financial statements and schedules for each of the Lessee and the
Additional Lessee for the most recently ended calendar year prepared in
accordance with GAAP, audited by a national accounting firm reasonably
acceptable to RFSI, the Lessor and the Additional Lessor;
(C) any historical financial information necessary to re-state
historical financial information to conform to the presentation of each of the
Lessee's and the Additional Lessee's audited and unaudited financial statements
at any future time; and
(D) on a timely basis, any other information reasonably requested by
RFSI, the Lessor or the Additional Lessor to permit RFSI, the
12
13
Lessor or the Additional Lessor to meet their filing and
reporting requirements under the 1934 Act and to file and have
declared effective registration statements under the 1933 Act,
including providing information necessary to complete the
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" section of RFSI's 1934 Act reports
and 1933 Act registration statements as it may relate to the
Lessee, the Additional Lessee or the Hotels.
(ii) to provide to RFSI, the Lessor and the Additional Lessor
operating and financial reports described on Exhibit E hereto.
(iii) that the Lessee and the Additional Lessee shall bear the
cost of obtaining, preparing and providing all information required to
be furnished to the Lessor, the Additional Lessor and RFSI under this
Section 8(a), including the cost and related expenses of the annual
audit of the financial statements of the Lessee and the Additional
Lessee, except as provided in Section 5 of the First Amendment to
Master Agreement.
13
14
b. Indemnification. RFSI and the Lessor agree, jointly and severally,
to indemnify, defend (with counsel acceptable to the Lessee), and hold harmless
the Lessee, the Additional Lessee and their respective officers, directors and
controlling persons from and against any losses, claims, damages, expenses or
liabilities (or actions in respect thereof) to which the Lessee, the Additional
Lessee and their respective officers, directors or controlling persons may
become subject under the 1933 Act, the 1934 Act or otherwise, insofar as such
losses, claims, damages, expenses or liabilities or actions in respect thereof
arise out of or are based upon the 1934 Act reports or 1933 Act registration
statements of RFSI or the Lessor, except to the extent any such claims,
liabilities, losses, damages, expenses, or liabilities (or actions in respect
thereof) result from any untrue statement of a material fact or omission of any
material fact in the information provided by the Lessee or the Additional Lessee
to RFSI, the Lessor or the Additional Lessor pursuant to subsections (i) and
(ii) of this Section 8(a). The Lessee and Tree agree, jointly and severally, to
indemnify, defend (with counsel acceptable to RFSI and the Lessor) and hold
harmless RFSI, the Lessor and the Additional Lessor, and their respective
officers, directors and controlling persons from and against any losses, claims,
damages, expenses or liabilities (or actions in respect thereof) to which RFSI,
the Lessor or the Additional Lessor or their respective officers, directors or
controlling
14
15
persons may become subject under the 1933 Act, the 1934 Act or otherwise,
insofar as such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of a
material fact or omissions of any material fact in any information furnished by
the Lessee or the Additional Lessee to RFSI, the Lessor or the Additional Lessor
pursuant to subsections (i)(A), (B) and (C) of this Section 8(a).
C. Due Diligence. During the term of any Percentage Lease,
Tree, the Lessee and the Additional Lessee agree:
(i) to permit the Lessor, the Additional Lessor and
RFSI, together with their independent public accountants,
counsel, financial advisors, underwriters, underwriters'
counsel, rating agencies, lenders and others having a
legitimate interest in the Lessee's, the Additional Lessee's
or the Hotels' financial condition and results of operations,
during regular business hours, upon reasonable notice and at
the sole cost of the Lessor, the Additional Lessor and RFSI
(provided there shall be no charge by the Lessee or the
Additional Lessee to the Lessor, the Additional Lessor or RFSI
for the time of the Lessee's or the Additional Lessee's
officers or employees), to interview
15
16
officers and employees of the Lessee or the Additional Lessee and to
have access to and review:
(A) the general accounting records of the Lessee or
the Additional Lessee or any Hotel for purposes of performing
an audit of the Lessee or the Additional Lessee or any Hotel
in accordance with generally accepted auditing standards and
to conduct reasonable due diligence with respect to the Lessee
or the Additional Lessee and their respective business
activities and the Hotels; and
(B) the Lessee's or the Additional Lessee's corporate
records, minutebooks, contracts and other documents,
agreements or items relating to the operation of the Hotels
and the Lessee's or the Additional Lessee's financial
condition.
(ii) to cooperate promptly and fully with the Lessor, the
Additional Lessor and RFSI, upon request and at the cost of Lessor and
the Additional Lessor (except with respect to the cost of obtaining,
preparing and providing the information required to be furnished to
RFSI, the Lessor and the Additional Lessor under Section 8(a) above and
any costs relating to the time of employees or officers
16
17
of the Lessee, the Additional Lessee or Tree, other than as
provided in Section 5 of the First Amendment to Master
Agreement), in making available such information with respect
to the Lessee, the Additional Lessee or the Hotels as may be
required by any regulatory agency, including the Commission
and the National Association of Securities Dealers, Inc., the
Nasdaq Stock Market or any stock exchange on which RFSI's, the
Lessor's or the Additional Lessor's securities may be
registered, listed or traded.
(iii) to use their best efforts to cause the
independent public accountants preparing audits of the Lessee
or the Additional Lessee to provide RFSI, the Lessor or the
Additional Lessor, at the sole cost of the Lessor, the
Additional Lessor and RFSI with all consents of such
accountants required for RFSI's, the Lessor's or the
Additional Lessor's filings under the 1933 Act or the 1934 Act
or to have RFSI's, the Lessor's or the Additional Lessor's
registration statements be declared effective under the 1933
Act.
d. Confidentiality. To the extent Lessor, the Additional Lessor or RFSI
on the one hand, or the Lessee, the Additional Lessee or Tree on the other,
obtains information or
17
18
becomes aware of material information concerning the other that is not
disclosed in a public announcement or filing under the 1933 Act or the
1934 Act by Tree or RFSI, each party agrees that it shall not
improperly disclose or unlawfully utilize such information or otherwise
act unlawfully with respect thereto.
9. REIT Requirements.
a. Tree, the Lessee and the Additional Lessee understand that, in order
for RFSI to qualify as a REIT, the following requirements (the "REIT
Requirements") must be satisfied:
(i) The average of the adjusted tax bases of the Lessor's or
the Additional Lessor's personal property that is leased to the Lessee
or the Additional Lessee under a lease at the beginning and end of a
calendar year cannot exceed 15% of the average of the aggregate
adjusted tax bases of all of the Lessor's or the Additional Lessor's
property that is leased to the Lessee or the Additional Lessee under
such lease at the beginning and end of such calendar year.
(ii) Neither the Lessee nor the Additional Lessee can sublet
the property that is leased to it by the Lessor or the Additional
Lessor, or enter into any similar arrangement, on any basis such that
the rental or other
18
19
amounts paid by the sublessee thereunder would be based, in whole or
in part, on either (i) the net income or profits derived by the
business activities of the sublessee or (ii) any other formula such
that any portion of the rent paid by the Lessee or the Additional
Lessee to the Lessor or the Additional Lessor would fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the
Code.
(iii) Neither the Lessee nor the Additional Lessee can
sublease the property leased to it by the Lessor or the Additional
Lessor to, or enter into any similar arrangement with, any person in
which RFSI owns, directly or indirectly, a 10% or more interest, within
the meaning of Section 856(d)(2)(B) of the Code.
(iv) RFSI cannot own, directly or indirectly, a 10% or more
interest in the Lessee or the Additional Lessee, within the meaning of
Section 856(d)(2)(B) of the Code.
(v) No person can own, directly or directly, capital stock of
RFSI that exceeds the "Limit" (as defined in RFSI's Charter, as amended
and restated).
19
20
b. Tree, the Lessee and the Additional Lessee agree, and agree
to use reasonable efforts to cause their Affiliates, to use their best
efforts to permit the REIT Requirements to be satisfied. Tree, the
Lessee and the Additional Lessee agree, and agree to use reasonable
efforts to cause their Affiliates, to cooperate in good faith with
RFSI, the Lessor and the Additional Lessor to ensure that the REIT
Requirements are satisfied, including but not limited to, providing
RFSI with information about the ownership of Tree, the Lessee, the
Additional Lessee and their Affiliates to the extent that such
information is reasonably available. Tree, the Lessee and the
Additional Lessee agree, and agree to use reasonable efforts to cause
their Affiliates, upon request by RFSI, and, where appropriate, at
RFSI's expense, to take reasonable action necessary to ensure
compliance with the REIT Requirements. Immediately after becoming aware
that the REIT Requirements are not, or will not be, satisfied, Tree,
the Lessee or the Additional Lessee shall notify, or use reasonable
efforts to cause their Affiliates to notify, RFSI of such
noncompliance.
10. Termination of REIT Status. Notwithstanding anything herein or in
any Percentage Lease to the contrary, in the event RFSI terminates its status as
a real estate investment trust for federal income tax purposes, the Lessor and
the Additional Lessor may elect to terminate all then-existing Percentage Leases
and terminate the Right of First Refusal by providing the Lessee or the
Additional
20
21
Lessee, as the case may be, at least 30 days prior written notice, or such
longer notice as may be required by statute or regulation to comply with the
WARN Act or other similar or successor federal or state laws, and by satisfying
the following requirements:
(i) if such terminations occur prior to sale, redemption or
conversion of all of the Preferred Stock, RFSI shall purchase from the
Lessee within twenty (20) business days after the date of such
terminations, all of the then-outstanding Preferred Stock then owned by
the Lessee at a price per share equal to the greater of (A) the Stated
Value plus all accrued and unpaid dividends at the date of such
redemption or (B) the product of (1) the weighted average of the sales
prices of RFSI's common stock for all transactions reported on the
Nasdaq Stock Market or principal exchange on which RFSI's common stock
is then traded during the ten (10) business days preceding the second
business day preceding the date of purchase of the Preferred Stock or,
if RFSI's common stock is no longer traded on the Nasdaq Stock Market
or a recognized exchange, the fair market value thereof as mutually
agreed by RFSI and the Lessee, or if RFSI and the Lessee cannot so
agree, by appraisal by an independent third party designated by RFSI
and the Lessee or by their respective designees multiplied by (2) the
number of shares of Common Stock into which a share of Preferred Stock
then held by the
21
22
Lessee would be convertible, if converted on the business day preceding
the date of the redemption; and
(ii) if such terminations occur prior to the tenth (10th)
anniversary of the Closing Date, the Lessor shall pay to the Lessee an
amount equal to $5,000,000, which amount shall be reduced by $41,667
for each calendar month which has expired during the ten (10) year
period following the Closing Date; and
(iii) the Lessor or the Additional Lessor shall pay the Lessee
or the Additional Lessee, as the case may be, the fair market value of
the Percentage Leases based on the then-remaining terms of the
Percentage Leases determined in the manner set forth in Article XXXVII
of the Form Percentage Lease. The Lessor and the Additional Lessor must
elect to terminate both the Right of First Refusal and all then-
existing Percentage Leases in exercising their rights under this
Section 10.
g. The first sentence of Section 14 of the Original Master Agreement
shall be deleted in its entirety and the following substituted therefor:
From and after the date of the First Amendment to Master
Agreement, (i) an Event of Default (as defined in the Percentage
Leases) by the Additional Lessee under a Percentage Lease with respect
to a Transfer Hotel will continue to create an Event of Default under
the Percentage Leases with respect to all other Transfer Hotels and
(ii) an Event of Default by the Lessee under a Percentage Lease with
respect to
22
23
a Remaining Hotel will continue to create an Event of Default under the
Percentage Leases with respect to all other Remaining Hotels. From and
after the date of the First Amendment to Master Agreement, (i) a
default or an Event of Default under a Percentage Lease with respect to
a Transfer Hotel shall not constitute a default or an Event of Default
under a Percentage Lease with respect to any Remaining Hotel and (ii) a
default or an Event of Default with respect to a Remaining Hotel shall
not constitute a default or an Event of Default under a Percentage
Lease with respect to a Transfer Hotel.
h. Section 15a of the Original Master Agreement shall be deleted in its
entirety and the following substituted therefor:
Default.
a. A "Default by the Lessee" shall exist under this Agreement
if any of the following occur:
(i) Minimum Net Worth. During the term of any
Percentage Lease, (a) the Additional Lessee fails to maintain
a minimum Net Worth as set forth in Section 5 and does not
cure any deficiency within 30 days following written notice
thereof from the Additional Lessor or (b) the Lessee fails to
maintain a minimum Net Worth as set forth in Section 5
and does not cure any deficiency within 30 days following
written notice thereof from the Lessor.
23
24
(ii) Default Under Percentage Leases. An Event of
Default occurs under any of the Percentage Leases.
(iii) Other Breaches. The Lessee or the Additional
Lessee fails to comply with any other provision of this
Agreement for a period of 30 days after being notified by the
Lessor or the Additional Lessor in writing of the provisions
of this Agreement with which the Lessee or the Additional
Lessee, as the case may be, has failed to comply; provided
that if such default (other than a failure to pay any rent
under any Percentage Lease when due (after any applicable cure
period), which shall be subject to the provisions set forth in
the Percentage Leases, and any failure to maintain the minimum
Net Worth, which shall be subject to the provisions of
subsection 15a(i) above) cannot with due diligence be cured
within a 30 day period, such period shall be extended for such
reasonable time as the Lessee or the Additional Lessee, as the
case may be, promptly and with due diligence commences and
continues the cure thereof but in no event for a period of
more than 90 days following the date of notice from the Lessor
or the Additional Lessor, as the case may be.
i. Section 16 of the Original Master Agreement shall
be amended such that notices made to the Additional
Lessee shall be made in the same manner in which
notices are required to be made to the Lessee and
notices made to the
24
25
Additional Lessor shall be made in the same manner in which notices are required
to be made to the Lessor.
5. Certain Expenses Associated with the Additional Lessee.
a. The Additional Lessor and the Lessor jointly and severally agree
that they shall be responsible for the following costs and expenses related to
the organization and on-going maintenance of the Additional Lessee.
(i) the costs and expenses of incorporating and organizing the
Additional Lessee in Tennessee and qualifying the Additional Lessee to
do business in each of the states in which a Transfer Property is
located, including all filing fees, reasonable counsel fees and other
fees with respect thereto;
(ii) all costs and expenses incurred in connection with
transferring the 14 Existing Leases and the Existing DTR Lease to the
Additional Lessee, including (A) costs and expenses incurred in
connection with transferring the related franchise licenses and any
other licenses and permits from the Lessee or DTR Lessee to the
Additional Lessee, (B) the preparation, negotiation and execution of
the Second Consolidated Lease Amendment and Third Consolidated Lease
Amendment, the First Amendment to Master Agreement, the management
agreements between the Additional Lessee and affiliated managers, the
Consolidated Lease Estoppel, Subordination, Attornment and
Non-Disturbance Agreement relating to the Transfer Hotels and any other
25
26
documents entered into by the Additional Lessee in connection with the transfer
of the Transfer Properties and (C) reasonable fees and costs of counsel relating
to the foregoing;
(iii) the ongoing fees, annual business taxes and similar amounts
required to be paid to governmental authorities by the Additional Lessee in
order to maintain its corporate existence and be qualified to do business and
remain in good standing in each of the states in which the Transfer Properties
are located (net of such amounts, if any, by which Lessee's or DTR Lessee's
obligations have been reduced as a result of the assignment of the 14 Existing
Leases and the DTR Lease to the Additional Lessee, taking into account the fact
that the Lessee will be required to maintain its qualification to do business in
all of the states in which the Transfer Hotels covered by the 14 Existing Leases
are located because, incident to the assignment of the 14 Existing Leases by the
Lessor to the Additional Lessor and by the Lessee to the Additional Lessee, at
the request of the Additional Lessor, the Lessee has been engaged to manage such
Hotels); and
(iv) The incremental cost with respect to the ongoing administration
and accounting of the Additional Lessee to the extent such cost, together with
the related costs of the Lessee, exceed the costs that the Lessee and DTR Lessee
would otherwise have incurred (A) if the 14 Existing Leases and the Existing DTR
Lease had not been transferred to
26
27
the Additional Lessee and the Additional Lessee had not been formed,
and (B) if the Lessee had not been engaged to manage the Transfer
Hotels covered by the 14 Existing Leases.
(b) In the event the Lessee or the Additional Lessee pays any
of the costs or fees for which the Additional Lessor and the Lessor are
responsible pursuant to paragraph (a) above, the Lessor and/or the
Additional Lessor shall reimburse the Lessee or the Additional Lessee,
as applicable, for such costs or fees no later than 30 days following
receipt of satisfactory evidence that such amounts were paid.
(c) The Lessee and the Additional Lessee agree to cooperate
with the Additional Lessor in determining what amounts are payable by
the Lessor and the Additional Lessor to the Lessee or the Additional
Lessee pursuant to paragraph (a) above and agree that neither the
Lessor nor the Additional Lessor shall be responsible for any costs or
expenses with respect to the items listed in paragraph (a) above to the
extent the Lessee or DTR Lessee would otherwise have been responsible
for such costs and expenses (A) if the 14 Existing Leases and the
Existing DTR Lease had not been transferred to the Additional Lessee
and the Additional Lessee had not been formed, and (B) if the Lessee
had not been engaged to manage the Transfer Hotels covered by the 14
Existing Leases.
6. Transfer of Licenses and Permits. The parties acknowledge that in
order to meet the timing requirements of the Lessor and the Additional Lessor in
connection with the transfer of the Transfer Hotels by the Lessor to the
Additional Lessor and, incident thereto, the transfer
27
28
to the Additional Lessee of the interest of the Lessee and the DTR Lessee in
the 14 Existing Leases and the Existing DTR Lease, respectively, there has not
been sufficient time in which to also effect the transfer of certain licenses
and other governmental authorizations (including, in the case of certain of the
Transfer Hotels, liquor licenses) with respect to the operation of the Transfer
Hotels from the Lessee and the DTR Lessee to the Additional Lessee and to obtain
all requisite governmental approvals with respect thereto (collectively, the
"Governmental Transfer Approvals"). Accordingly, the parties agree that (a)
notwithstanding anything to the contrary contained in the Second Consolidated
Lease Amendment (including, without limitation, Sections 8.1 and 8.2 thereof),
the absence of the Governmental Transfer Approvals until such time that such
Governmental Transfer Approvals initially are obtained shall not constitute a
default or an Event of Default under the Second Consolidated Lease Amendment or
a "Default by the Lessee" under the Original Master Agreement, as amended
hereby, except to the extent the Additional Lessee is in breach of its
obligations under paragraph (c) below which breach continues uncured beyond the
expiration of the notice and grace periods provided for in Section 16.1(d) of
the Second Consolidated Lease Amendment and in Section 15a of the Original
Master Agreement, as amended hereby; (b) the Lessor and the Additional Lessor
agree, jointly and severally, to indemnify, defend (with counsel reasonably
acceptable to the Additional Lessee), and hold harmless the Additional Lessee
and its officers, directors and controlling persons from and against any losses,
claims, damages, expenses or liabilities (or actions in respect thereof) to
which the Additional Lessee or its officers, directors or controlling persons
may become subject by reason of the absence of the Governmental Transfer
Approvals; and (c) at the expense of the Lessor and the Additional Lessor as set
forth in Section 5 above, the Additional Lessee shall
28
29
promptly apply for and diligently seek the Governmental Transfer Approvals and
the Lessor, the Additional Lessor, the Lessee, the DTR Lessee and the Additional
Lessee shall cooperate with each other in order to expeditiously obtain the
Governmental Transfer Approvals.
7. Recording the SND Agreement. The parties acknowledge that the form
in which the SND Agreement has been executed was not appropriate to permit the
recording of the SND Agreement in all jurisdictions in which the Transfer Hotels
are located. Accordingly, contemporaneously with the execution of this
Amendment, counterparts of the SND Agreement are being recorded in some but not
all of the jurisdictions in which the Transfer Hotels are located. The Lessor
and the Additional Lessor agree that, promptly following the execution of this
Amendment, they will have counterparts of the SND Agreement re-executed by all
parties thereto in form sufficient to permit, and shall promptly thereafter
effect, the recording of the SND Agreement in each jurisdiction in which a
Transfer Hotel is located in which the SND Agreement has not previously been
recorded.
* * *
As amended hereby, the Original Master Agreement is ratified, confirmed and
approved.
29
30
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RFS HOTEL INVESTORS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
------------------------
Title: CEO\Secretary\Treasurer
-----------------------
RFS PARTNERSHIP, L.P.
By: RFS Hotel Investors, Inc.,
general partner
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
------------------------
Title: CEO/Secretary/Treasurer
-----------------------
RFS FINANCING PARTNERSHIP
By: RFS Financing Corporation,
general partner
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
------------------------
Title: V.P.
-----------------------
DOUBLETREE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
------------------------
Title: SR. V.P.
-----------------------
31
RIFS, INC.
By: /s/ Xxxxx Xxxxxxx
--------------------------
Name: Xxxxx Xxxxxxx
------------------------
Title: Secretary
-----------------------
DTR RPS LESSEE, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------
Name: Xxxxx X. Xxxxx
------------------------
Title: V.P.
-----------------------
RFS LEASING, INC.
By: /s/ Xxxxx Xxxxxxx
--------------------------
Name: Xxxxx Xxxxxxx
------------------------
Title: Secretary
-----------------------
