EXHIBIT 10.54
TERMINATION AGREEMENT
among
RFS, INC., a Tennessee corporation
RFS LEASING, INC., a Tennessee corporation
DTR RFS LESSEE, INC., an Arizona corporation
RFS PARTNERSHIP, L.P., a Tennessee limited partnership
RFS FINANCING PARTNERSHIP, L.P., a Tennessee limited partnership
PLANO INN, L.P., a Texas limited partnership
RFS SPE 1 1998 LLC, a Virginia limited liability company
RFS SPE 2 1998 LLC, a Virginia limited liability company
RIDGE LAKE GENERAL PARTNER, INC., a Tennessee corporation
RFS HOTEL INVESTORS, INC., a Tennessee corporation
DOUBLETREE CORPORATION, a Delaware corporation
and
HILTON HOTELS CORPORATION, a Delaware corporation
dated as of January 26, 2000
TERMINATION AGREEMENT
TERMINATION AGREEMENT dated as of January 26, 2000, among RFS, Inc., a
Tennessee corporation ("RFS"); RFS Leasing, Inc., a Tennessee corporation
("RFSL"); DTR RFS Lessee, Inc., an Arizona corporation ("DTR"); RFS
Partnership, L.P., a Tennessee limited partnership ("RFSOP"); RFS Financing
Partnership, L.P., a Tennessee limited partnership ("RFSFP"); Plano Inn,
L.P. (formerly known as Plano Hampton Inn, L.P.), a Texas limited
partnership ("Plano"); RFS SPE 1 1998 LLC, a Virginia limited liability
company ("RFS SPE 1"); RFS SPE 2 1998 LLC, a Virginia limited liability
company ("RFS SPE 2"); Ridge Lake General Partner, Inc., a Tennessee
corporation ("Ridge Lake"); RFS Hotel Investors, Inc., a Tennessee
corporation (the "REIT"); Doubletree Corporation, a Delaware corporation;
and Hilton Hotels Corporation, a Delaware corporation ("Hilton").
W I T N E S S E T H:
WHEREAS, the Lessees and the Lessors (each as defined below) have
entered into lease agreements with respect to the hotel properties
described in EXHIBIT 1(a) hereto (as such agreements may have been amended
or modified, each a "Lease Agreement" and collectively, the "Lease
Agreements"); and
WHEREAS, the Owners and the Manager (each as defined below) have
entered into management agreements with respect to the hotel properties
described in EXHIBIT 1(b) hereto (as such agreements may have been amended
or modified, each an "Owner Management Agreement" and collectively, the
"Owner Management Agreements"); and
WHEREAS, certain parties hereto have entered into the agreements
described in EXHIBIT 1(c) hereto (as such agreements may have been amended
or modified, the "Ancillary Agreements"); and
WHEREAS, the parties desire to provide for the termination of the
Lease Agreements, the Ancillary Agreements and the Owner Management
Agreements effective as of the Termination Date (as defined below) subject
to the terms and conditions described herein; and
WHEREAS, the parties desire to set forth other agreements and
covenants as set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the parties do hereby agree as follows:
SECTION 1. DEFINITIONS.
(a) CERTAIN DEFINITIONS. For purposes of this Termination Agreement the
following words and phrases shall have the meanings set forth below:
"AFFILIATE MANAGEMENT AGREEMENTS" shall mean (i) the Consolidated
Management Agreement dated November 21, 1996, between RFS and RFSL, (ii)
the Management Agreement dated November 21, 1996, between RFSL and DT
Management, Inc. (Doubletree Hotel, Del
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Mar, CA), and (iii) any and all other management agreements among the
Lessee Parties with respect to Leased Hotels owned by the REIT Parties.
"AGGREGATE LEASE TERMINATION PAYMENT" shall mean Fifty-Nine Million
Five Hundred Thirty-Three Thousand Five Hundred Fifty Dollars
($59,533,550.00).
"AGGREGATE MANAGEMENT TERMINATION PAYMENT" shall mean the amount
determined pursuant to Section 3(d) hereof.
"AGREEMENTS" shall mean this Termination Agreement, the Escrow
Agreement and the Registration Rights Agreement.
"COMMON STOCK" shall mean the REIT's common stock, par value $.01 per
share.
"CONTRACTS" shall mean, with respect to any Leased Hotel, all
contracts to which a Lessee is a party or is otherwise obligated relating
to the operation of such Leased Hotel other than (i) any Lease Agreement,
Franchise Agreement, Third Party Management Agreement or License and (ii)
any such contracts with or between a Lessee and an affiliate of any of the
Lessee Parties, including, without limitation, the Affiliate Management
Agreements.
"CURRENT MARKET VALUE" shall mean, with respect to a share of Common
Stock, an amount determined by (A) multiplying the closing price per share
of Common Stock for each of the twenty (20) consecutive trading days ending
on the fifth (5th) business day prior to the Purchase Date, as reported on
the NYSE or the principal securities exchange on which the Common Stock is
then traded by the number of shares of Common Stock traded on such date,
(B) adding the products so obtained and (C) dividing the sum thereof by the
total number of shares of Common Stock traded during the 20-day period.
"DOUBLETREE/RFS MERGER" shall mean the merger consummated pursuant to
the Agreement and Plan of Merger described on EXHIBIT 1(c) hereto.
"EXCLUDED ASSETS" shall mean, except as otherwise provided in
EXHIBIT 3(b)(i) hereto, with respect to any Leased Hotel, (a) all cash and
cash equivalents on hand at such Leased Hotel as of the Termination Date,
(b) all accounts receivable of such Leased Hotel as of the Termination
Date, (c) all insurance policies under which the Lessee is insured and
rights of the Lessee thereunder, and (d) all warranties, claims and causes
of action of the Lessee relating to the period prior to the Termination
Date.
"EXCLUDED MATERIAL CONTRACT" shall mean (i) any Material Contract in
existence as of the date of this Termination Agreement which is not
disclosed on EXHIBIT 22 hereto, and (ii) any Material Contract executed
after the date of this Termination Agreement without the prior written
consent of the REIT Parties.
"FRANCHISE AGREEMENT" shall mean, with respect to any Leased Hotel,
the hotel franchise agreement under which such Leased Hotel is operated.
"HILTON FRANCHISE AGREEMENT" shall mean a hotel franchise agreement
with a subsidiary of Hilton, as franchisor, for the Leased Hotels or
Managed Hotels which currently operate as a Hampton Inn, Homewood Suites,
or Doubletree hotel.
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"LEASED HOTEL" shall mean each hotel described in EXHIBIT 1(a)
hereto other than (i) those hotels whose leases have been previously
terminated as described on EXHIBIT 1(a) hereto, or (ii) if the context
requires, a hotel with respect to which an Interim Lease Termination has
occurred prior to the Termination Date pursuant to Section 6 hereof.
"LESSEES" shall mean RFS, RFSL, DTR and any affiliate of Hilton that
becomes a lessee for a hotel owned by a Lessor prior to the Termination
Date (each a "Lessee").
"LESSEE PARTIES" shall mean Hilton, Doubletree, the Lessees and the
Manager, collectively.
"LESSORS" shall mean RFSOP, RFSFP, Plano, RFS SPE 1, RFS SPE 2
and any affiliate of the REIT that becomes an owner of a hotel leased to a
Lessee prior to the Termination Date (each a "Lessor").
"LICENSES" shall mean, with respect to any Leased Hotel or any Managed
Hotel, all licenses, operating permits and other governmental
authorizations that may be necessary for the operation of such Leased Hotel
or Managed Hotel.
"MANAGED HOTEL" shall mean each hotel described in EXHIBIT 1(b)
hereto, other than a hotel with respect to which an Interim Management
Termination has occurred prior to the Termination Date.
"MANAGER" shall mean RFS, Inc., in its capacity as manager of the
Managed Hotels pursuant to the Owner Management Agreements.
"MATERIAL CONTRACT" shall mean any Contract applicable to one or more
Leased Hotels which (i) requires annual payments by any Lessee or an
affiliate of a Lessee of $25,000 or more or (ii) requires the delivery of
more than 20 room nights per month in exchange for services.
"NYSE" shall mean the New York Stock Exchange.
"OWNERS" shall mean the owners of the Managed Hotels described in
EXHIBIT 1(b) hereto.
"PREFERRED STOCK" shall mean the 973,684 outstanding shares of the
REIT's Series A preferred stock, par value $.01 per share currently owned
by RFS.
"REIT PARTIES" shall mean the REIT, the Owners and the Lessors
collectively.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement of even date herewith by and between the REIT and RFS.
"STANDSTILL AGREEMENT" shall mean the agreement to be executed by
Marriott, Hilton, RFS and RFSL in the form attached hereto as EXHIBIT 1(e)
with such modifications as shall be approved by the REIT.
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"SUBORDINATION AGREEMENT" shall mean that certain Consolidated Lease
Estoppel, Subordination, Attornment and Non-Disturbance Agreement dated as
of November 21, 1996 by and among LaSalle National Bank, RFSL and RFSFP,
and any amendments thereto.
"SUCCESSOR LESSEE" shall mean any entity designated by the REIT as the
successor to a Lessee as the lessee or operator of a Leased Hotel or as a
successor to the Manager as a lessee or operator of a Managed Hotel and/or
any management company engaged by the REIT Parties or a Successor Lessee to
operate a Leased Hotel.
"THIRD PARTY FRANCHISE AGREEMENT" shall mean a hotel franchise
agreement which is not a Hilton Franchise Agreement.
"THIRD PARTY MANAGEMENT AGREEMENTS" shall mean the management
agreements described in EXHIBIT 1(d) hereto.
"TIER II RFS EMPLOYEE" shall mean an RFS Employee who is in Tier II of
RFS' organizational structure as shown in EXHIBIT 22 hereto.
"UNITS" shall mean units of limited partnership interests in RFSOP.
(b) OTHER DEFINITIONS. For purposes of this Termination Agreement, the
following words and phrases shall have the meanings set forth in the
respective sections hereof or exhibits hereto set forth below:
Ancillary Agreements Recitals
Bill of Sale 4(c)(iii)
Consolidated Lease Amendment Exhibit 1(a)
DTR Preamble
ERISA 8(d)
Escrow 5
Escrow Agent 5
Escrow Agreement 5
Exchange Act 9(b)
Existing Shelf Registration Statement 9(b)
FF&E 11(a)
Hilton Preamble
Hilton Indemnitees 21(c)
Individual Lease Termination Payment 3(a)
Individual Management Termination Payment 3(a)
Interim Lease Termination 6
Interim Management Termination 3(d)
Interim Lease Termination Payment 6
Landlord 10
Lease Agreements Recitals
Liabilities 21(b)
Marriott 2(c)
New Shelf Registration Statement 9(b)
Office Lease 10
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Owner Management Agreements Recitals
Partnership Interests 12
Plano Preamble
Purchase Date 9(a)
Purchase Price 9(a)
Required PIPs 13
REIT Preamble
REIT Indemnitees 21(b)
RFS Preamble
RFS Employees 7(a)
RFS SPE 1 Preamble
RFS SPE 2 Preamble
RFSFP Preamble
RFSL Preamble
RFSL Hotels 2(a)
RFSOP Preamble
RFSOP Partnership Agreement 9(c)
Ridge Lake Preamble
Second Consolidated Lease Amendment Exhibit 1(a)
Securities Act 9(b)
SEC 9(b)
Severance Payments 7(b)
St. Louis Agreement 8(d)
St. Louis Hotel 8(d)
St. Louis Plan 8(d)
Submanaged Hotels 2(a)
Termination Date 4(a)
Third Consolidated Lease Amendment Exhibit 1(a)
Section 2. TERMINATION OF LEASE AGREEMENTS AND RELATED MATTERS.
(a) TERMINATION OF LEASE AGREEMENTS AND ANCILLARY AGREEMENTS. Subject to the
terms and conditions set forth herein, the Lessors and the Lessees hereby
agree that the Lease Agreements and Ancillary Agreements shall terminate as
of the Termination Date. Notwithstanding anything herein to the contrary,
(i) the REIT may elect, in the notice delivered to Hilton in accordance
with Section 4(a) hereof, or at least ten (10) days prior to the
Termination Date upon written notice to Hilton, (A) to purchase from Hilton
or one of its subsidiaries all of the outstanding capital stock of RFSL
and, in the event the REIT so elects, on the Termination Date, Hilton or
such subsidiary shall sell, assign and convey to the REIT or its designee,
all of the capital stock of RFSL, free and clear of any liens, claims,
encumbrances and charges of any kind in exchange for an aggregate payment
of Thirteen Million Four Hundred Sixty-Eight Thousand Dollars ($13,468,000)
and/or (B) to have one or more of the Lease Agreements (as they relate to
the Leased Hotels which are subject to Third Party Management Agreements
(the "Submanaged Hotels")) assigned to the applicable Lessor or Successor
Lessee and the applicable Lessees shall assign and convey to the applicable
Lessors or Successor Lessees all of such Lessees' right, title and interest
in and to the applicable Lease Agreements (as they relate to such
Submanaged Hotel) and the Leased Property (as defined in the applicable
Lease Agreement but exclusive of Excluded Assets) related to such
Submanaged Hotels in exchange for an aggregate payment
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equal to the sum of the Interim Lease Termination Payments applicable
thereto, and (ii) the Aggregate Lease Termination Payment otherwise payable
on the Termination Date shall be reduced by the amounts paid pursuant to
clauses (A) and/or (B) above; PROVIDED, HOWEVER, that if Hilton has
notified the REIT within thirty (30) days after the date hereof that a
purchase of the capital stock of RFSL will cause Hilton to incur income tax
liabilities it would not otherwise incur as a result of the termination of
the Lease Agreements for the RFSL Hotels, the REIT shall not be entitled to
the election described in clause (i)(A) above unless the REIT delivers to
Hilton on the Termination Date an indemnity agreement in form satisfactory
to Hilton covering such increased income tax liabilities. Hilton's
notification to the REIT shall set forth a description of the computation
of the income tax liability and the amount of the income tax liability. In
the event the REIT or its designee purchases the capital stock of RFSL
pursuant to clause (i)(A) above, the Lease Agreements for the Leased Hotels
described in Section II of EXHIBIT 1(a) hereto (the "RFSL Hotels") shall
not be terminated pursuant hereto and the provisions of Sections 2(b),
2(d)(ii), 4(c)(ii), 4(d)(iv), 4(e)(i), 8(a) and 8(b) hereof shall not apply
to the RFSL Hotels. In the event the REIT or its designee takes an
assignment of the Lease Agreements as they relate to one or more Submanaged
Hotels pursuant to clause (i)(B) above, such Lease Agreements shall not be
terminated as to such Submanaged Hotels pursuant hereto and the provisions
of Sections 4(c)(ii), 4(d)(iv) and 4(e)(i) hereof shall not apply to such
Submanaged Hotels.
(b) SURRENDER OF LEASED PROPERTY. Subject to the terms and conditions set forth
herein, upon the Termination Date, each Lessee shall remise, release,
surrender and quitclaim unto the Lessor for the respective Leased Hotels,
and such Lessor shall accept and assume, all right, title and interest of
such Lessee in and to the Leased Property (as defined in the applicable
Lease Agreement) relating to such Leased Hotel; PROVIDED, HOWEVER, that the
Leased Property relating to any Leased Hotel shall not include Excluded
Assets relating to such Leased Hotel.
(c) FRANCHISE AGREEMENTS. Subject to the terms and conditions set forth herein,
and to the extent necessary with respect to the RFSL Hotels if the REIT or
its designee purchases the capital stock of RFSL, (i) the Lessee for each
Leased Hotel currently operating under a Hilton Franchise Agreement shall
cause the applicable franchisor to grant a replacement Hilton Franchise
Agreement of the same brand for the balance of the existing term in favor
of the applicable Lessor or Successor Lessee, as specified by such Lessor
(by written notice delivered to such Lessee on or prior to the Termination
Date), in the same form and on the same economic terms as the existing
Hilton Franchise Agreements and effective as of the Termination Date, and
(ii) the Lessee for each Leased Hotel operating under a Third Party
Franchise Agreement shall exercise its good faith reasonable commercial
efforts to assist the applicable Lessor or Successor Lessee in obtaining a
replacement Third Party Franchise Agreement (or commitment therefor) of the
same brand for the balance of the existing term in favor of such Lessor or
such Successor Lessee on terms then applicable for the issuance of such
replacement Third Party Franchise Agreements (or commitments therefor) and
effective as of the Termination Date. None of the Lessor Parties or any
Successor Lessee shall be required to pay any change in ownership fee or
other fee in connection with the issuance of a replacement Hilton Franchise
Agreement. The Lessee Parties shall exercise their good faith reasonable
commercial efforts to obtain an agreement from Marriott International, Inc.
("Marriott") to the effect that Marriott will not require payment of any
re-licensing fee or any similar fee or increase the franchise, marketing or
reservation fees over the amounts contemplated by the Standstill Agreement
for the Leased Hotels operating under a franchise license from Marriott as
a result of the transactions contemplated by this
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Termination Agreement. The REIT Parties acknowledge that Marriott's
execution of the Standstill Agreement will satisfy the obligation of the
Lessee Parties in the preceding sentence.
(d) MANAGEMENT AGREEMENTS RELATED TO LEASED HOTELS. Subject to the terms and
conditions set forth herein, (i) the Affiliate Management Agreements shall
terminate as of the Termination Date, and (ii) the applicable Lessor or
Successor Lessee for each Leased Hotel operating under a Third Party
Management Agreement shall accept and assume all liabilities under such
Third Party Management Agreement effective as of the Termination Date and
the Lessee Parties (exclusive of RFSL if the stock of RFSL is transferred
to the REIT or its designee on the Termination Date pursuant to Section
2(a) hereof) shall be released of all liabilities under such Third Party
Management Agreement from and after the Termination Date.
(e) CONTRACTS. Subject to the terms and conditions set forth herein, and to the
extent necessary with respect to the RFSL Hotels if the REIT or its
designee purchases the capital stock of RFSL, the Lessees shall use their
good faith reasonable commercial efforts to assign and transfer to the
Lessor for such Leased Hotel, or the applicable Successor Lessee, all
Contracts with respect to such Leased Hotel effective as of the Termination
Date, and such Lessor or Successor Lessee shall assume such assigned and
transferred Contracts; PROVIDED, HOWEVER, that if (i) any such Contract is
not permitted to be assigned or (ii) such Lessor or Successor Lessee elects
(by written notice delivered to the Lessees no less than thirty (30) days
prior to the Termination Date) not to accept and assume any such Contract,
the Lessees shall use their good faith reasonable commercial efforts to
terminate such Contract as of (or as soon as practicable after) the
Termination Date.
(f) OWNER MANAGEMENT AGREEMENTS. Subject to the terms and conditions set forth
herein, unless earlier terminated in accordance with its terms, each Owner
Management Agreement shall terminate as of the Termination Date, and
Manager shall assign and deliver to the applicable Owner or its designee,
and the assignee shall assume, all leases, concession agreements and
commercial or other agreements in effect with respect to the Managed Hotels
previously entered into by Manager pursuant to its authority under the
Owner Management Agreements and which are then in Manager's, rather than
the applicable Owner's, name.
Section 3. PAYMENTS.
(a) TERMINATION PAYMENTS. As consideration for the termination of the Lease
Agreements, the Owner Management Agreements and the Ancillary Agreements,
on the Termination Date, the REIT Parties shall deliver to the Lessee
Parties (i) the Aggregate Lease Termination Payment as adjusted if required
pursuant to Sections 2(a) and 6 hereof, if applicable, and (ii) the
Aggregate Management Termination Payment, both as further adjusted as
provided in subsection (b) below and net of the principal amount of the
Escrow which shall be disbursed by the Escrow Agent to the Lessee Parties
in accordance with the terms of the Escrow Agreement. The Aggregate Lease
Termination Payment and Aggregate Management Termination Payment (as so
adjusted) shall be paid by wire transfer in immediately available funds to
such bank account(s) as the Lessee Parties shall specify (by written notice
delivered to the REIT Parties not less than three (3) business days prior
to the Termination Date). The Aggregate Lease Termination Payment shall be
allocated to the Lease Agreements for the applicable Leased Hotels as
described in EXHIBIT 1(a) hereto and the Aggregate Management Termination
Payment shall be allocated to the applicable Owner Management Agreements as
described in EXHIBIT 1(b) hereto (as so allocated
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to a Leased Hotel, an "Individual Lease Termination Payment", and as so
allocated to an Owner Management Agreement an "Individual Management
Termination Payment").
(b) OPERATIONAL SETTLEMENT.
(i) All of the items described on EXHIBIT 3(b)(i) hereto shall be
allocated and prorated as of the Termination Date with respect to the
Leased Hotels in the manner described in said EXHIBIT 3(b)(i), and
appropriate credits shall be given to the Lessors and Lessees as
adjustments to the Aggregate Lease Termination Payment and the
appropriate Individual Lease Termination Payment. In the event that an
amount for any such item cannot be accurately determined as of the
Termination Date, the Lessors and the Lessees shall provide a good
faith estimate of such amount, which shall be adjusted as promptly as
practicable after the Termination Date; and
(ii) Funds or any other assets from each Managed Hotel remaining in
Manager's possession or control as of the Termination Date which are
the property of the applicable Owner shall be remitted to or on behalf
of such Owner in the manner set forth in the applicable Owner
Management Agreement.
(c) ADDITIONAL PAYMENTS.
(i) On the Termination Date, the REIT Parties shall pay or cause to be
paid to the appropriate Lessee Parties (A) the payments specified in
Section 11 hereof, and (B) such costs and expenses as shall have been
incurred by the Lessee Parties on or before the Termination Date and
for which the REIT Parties are responsible or liable under the terms
of Sections 7(b) or 21(a) hereof. Such payments shall be made by wire
transfer in immediately available funds to such bank account(s) as
such Lessee Parties shall specify (by written notice delivered to the
REIT Parties not less than three (3) business days prior to the
Termination Date).
(ii) On the Termination Date, the Lessee Parties shall pay or cause to be
paid all such costs and expenses as shall have been incurred on or
before the Termination Date and for which the Lessee Parties are
responsible or liable under the terms of Section 21(a) hereof.
(d) DETERMINATION OF AGGREGATE MANAGEMENT TERMINATION. The Aggregate Management
Termination Payment shall be One Hundred Fifteen Thousand Dollars
($115,000); PROVIDED, HOWEVER, that if one or more of the Owner Management
Agreements is terminated in accordance with its terms prior to the
Termination Date (an "Interim Management Termination") and the applicable
Individual Management Termination Payment has been made to Manager, the
Aggregate Management Termination Payment shall be reduced by the amount of
the Individual Management Termination Payments so paid.
Section 4. THE CLOSING.
(a) NOTICE. On or before November 30, 2000, the REIT will notify Hilton, in
writing, that either (i) the REIT Parties do not intend to terminate the
Lease Agreements, the Owner Management Agreements, and the Ancillary
Agreements pursuant to the terms of this Termination Agreement, or (ii) the
REIT Parties intend to terminate the Lease Agreements, the Owner Management
Agreements and the Ancillary Agreements pursuant to the terms of this
Termination Agreement
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effective as of a date, designated by the REIT in the notice, not more than
sixty (60) days and not less than thirty (30) days following the date of
the notice (such designated date being herein referred to as the
"Termination Date").
(b) CLOSING. The closing of the transactions contemplated by this Agreement
shall take place on the Termination Date at the offices of the REIT or at
such other place or such other date as the parties shall mutually agree.
(c) CLOSING DELIVERIES BY THE LESSEE PARTIES. On the Termination Date (or, with
respect to subparagraph (xiv) below, on the Purchase Date if different from
the Termination Date), the Lessee Parties shall execute and deliver or
cause to be executed and delivered the following to the REIT Parties or the
applicable Successor Lessees:
(i) counterpart to a closing statement;
(ii) counterpart to a Memorandum of Lease Termination for each Leased Hotel
containing provisions substantially equivalent to those set forth in
EXHIBIT 4(c)(ii) hereto;
(iii) to the extent necessary with respect to the RFSL Hotels if the REIT
or its designee purchases the capital stock of RFSL, a Bill of Sale
with respect to the food and beverage inventory at each Leased Hotel
and the FF&E and other assets described in Section 11 hereof
substantially in the form of EXHIBIT 4(c)(iii) hereto (the "Bill of
Sale"), together with a list of all FF&E as of the Termination Date
and the book values thereof as of the last day of the month
immediately preceding the Termination Date;
(iv) counterpart to a replacement Hilton Franchise Agreement for each
Leased Hotel currently operating under a Hilton Franchise Agreement in
favor of the applicable Lessor or the applicable Successor Lessee and
otherwise in accordance with Section 2(c)(i) hereof;
(v) counterpart to an Assignment of Contracts and Assumption Agreement for
each Leased Hotel substantially in the form of EXHIBIT 4(c)(v) hereto
covering all Contracts to be assigned and assumed as of the
Termination Date in accordance with Section 2(e) hereof;
(vi) counterpart to an Assignment of Office Lease and Assumption Agreement
substantially in the form of EXHIBIT 4(c)(vi) hereto covering the
Office Lease if it is to be assigned and assumed as of the Termination
Date in accordance with Section 10 hereof;
(vii) the documentation necessary to effect the agreement with respect to
Leased Hotels operating under a Third Party Management Agreement set
forth in Section 2(d) hereof;
(viii) legal opinion of counsel to the Lessee Parties reasonably acceptable
to the REIT Parties with respect to the matters set forth on
EXHIBIT 4(c)(viii) hereto;
(ix) a certificate of the Lessee Parties that the representations and
warranties contained in Sections 22 and 24(b) hereof (after giving
effect to any permitted updating of EXHIBIT 22 hereto pursuant to
Section 22(b) hereof) are true and correct in all material respects as
of the Termination Date;
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(x) a certificate of the Lessee Parties as to non-foreign status pursuant
to Section 1445 of the Internal Revenue Code;
(xi) evidence reasonably acceptable to the REIT Parties that the Affiliate
Management Agreements have been terminated;
(xii) counterpart to a Non-Compete Termination Agreement substantially in
the form of EXHIBIT 4(c)(xii) hereto;
(xiii) a release by Hilton, Doubletree and RFS of all non-competition,
confidentiality and similar restrictive covenant obligations of each
RFS Employee hired by the REIT Parties or a Successor Lessee pursuant
to Section 7(d) hereof;
(xiv) the certificate representing the Preferred Stock duly endorsed for
transfer; and
(xv) the documentation with respect to the Managed Hotels described in
Section 2(f) hereof.
(xvi) certificates representing the capital stock of RFSL if such capital
stock is to be transferred pursuant to Section 2(a) hereof; and
(xvii) counterpart to an Assignment of Lease Agreement and Assumption
Agreement substantially in the form of EXHIBIT 4(c)(xvii) hereto for
each Submanaged Hotel with respect to which the REIT has elected to
take a lease assignment pursuant to Section 2(a) hereof.
(d) CLOSING DELIVERIES BY THE REIT PARTIES. On the Termination Date (and/or in
the case of subparagraphs (ix), (xi) and (xiii) below, on the Purchase Date
if different from the Termination Date), the REIT Parties shall execute and
deliver or cause to be executed and delivered the following to the Lessee
Parties:
(i) all payments required to be made by the REIT Parties on the
Termination Date as set forth in Section 3 hereof;
(ii) the full principal amount of the Escrow;
(iii) counterpart to a closing statement;
(iv) counterpart to a Memorandum of Lease Termination for each Leased Hotel
containing provisions substantially equivalent to those set forth in
EXHIBIT 4(c)(ii) hereto;
(v) counterpart to a replacement Hilton Franchise Agreement for each
Leased Hotel currently operating as a Hampton Inn, Homewood Suites or
Doubletree Hotel in favor of the applicable Lessor or the applicable
Successor Lessee and otherwise in accordance with Section 2(c)(i)
hereof;
(vi) counterpart to an Assignment of Contracts and Assumption Agreement for
each Leased Hotel substantially in the form of EXHIBIT 4(c)(v) hereto
covering all Contracts to be assigned and assumed as of the
Termination Date in accordance with Section 2(e) hereof;
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(vii) counterpart to an Assignment of Office Lease and Assumption Agreement
substantially in the form of EXHIBIT 4(c)(vi) hereto covering the
Office Lease if it is to be assigned and assumed as of the Termination
Date in accordance with Section 10 hereof;
(viii) the documentation necessary to effect the agreement with respect to
Leased Hotels operating under a Third Party Management Agreement set
forth in Section 2(d) hereof;
(ix) legal opinion of counsel to the REIT Parties reasonably acceptable to
the Lessee Parties with respect to the matters set forth on EXHIBIT
4(d)(ix) hereto;
(x) a certificate of the REIT Parties that the representations and
warranties contained in Section 24(a) hereof are true and correct in
all material respects as of the Termination Date;
(xi) evidence reasonably acceptable to the Lessee Parties that the REIT has
complied with all of the terms of the Registration Rights Agreement to
be complied with on or before the Termination Date or the Purchase
Date;
(xii) counterparts to a Non-Compete Termination Agreement substantially in
the form of EXHIBIT 4(c)(xii) hereto;
(xiii) the payments required pursuant to Section 9 hereof;
(xiv) the documentation with respect to the Managed Hotels described in
Section 2(f) hereof; and
(xv) counterpart to an Assignment of Lease Agreement and Assumption
Agreement substantially in the form of EXHIBIT 4(c)(xvii) hereto for
each Submanaged Hotel with respect to which the REIT has elected to
take a lease assignment pursuant to Section 2(a) hereof.
(e) EFFECT OF TERMINATION.
(i) Effective on the Termination Date, each Lease Agreement (including,
without limitation, any lease agreement which was amended or restated
thereby, the leasehold interest thereunder, and any rights to review,
options, or rights of first offer or first refusal, if any, created
thereby) and each Ancillary Agreement shall terminate and shall be
null and void and have no further force and effect, except for the
obligation of each Lessee to pay all Rent (as defined in the
respective Lease Agreements) with respect to Leased Hotels accrued and
unpaid through the Termination Date. The Lessees shall pay Rent under
the Lease Agreements accrued through the Termination Date as and when
the same becomes due. This Agreement (including, without limitation,
the provisions of this Section 4(e) and Section 21) shall override and
nullify any provision of any Lease Agreement or Ancillary Agreement
providing for the survival of any provisions set forth therein.
(ii) Effective on the Termination Date, each Affiliate Management Agreement
and each Owner Management Agreement then in effect shall terminate and
shall be null and void and have no further force and effect, except
for (i) the obligation of each Owner to pay all accrued and unpaid
management fees and other amounts owing to Manager under the
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Owner Management Agreements through the Termination Date and (ii) and
obligations and liabilities which, under the terms of each Owner
Management Agreement, survive any termination of the same.
Section 5. ESCROW.
Upon notice from the REIT to Hilton in accordance with Section
4(a)(ii) hereof, the parties hereto will execute and deliver an Escrow
Agreement with Lawyers Title Insurance Corporation, Chicago Office (the
"Escrow Agent") in the form of EXHIBIT 5 hereto (the "Escrow Agreement")
pursuant to which the Lessors will deposit Two Million Dollars
($2,000,000.00) in cash (the "Escrow") with the Escrow Agent, which will be
held and disbursed by the Escrow Agent in accordance with the terms of the
Escrow Agreement. A notice pursuant to said Section 4(a)(ii) hereof shall
have no effect and shall not be deemed given until the Lessors deposit the
Escrow in accordance with this Section 5. If the Lessees become entitled to
the Escrow pursuant to the terms of this Agreement and the Escrow
Agreement, payment of the Escrow to the Lessees in accordance with the
terms of the Escrow Agreement shall constitute the sole remedy of the
Lessee Parties hereunder for failure of the REIT Parties to close the
transactions described in Section 2 hereof, it being the intention and
agreement of the parties that the Escrow constitute liquidated damages for
such failure determined in advance by the parties as a reasonable forecast
of damage likely to occur in light of the fact that actual damage would be
difficult to ascertain. The Escrow shall not constitute liquidated damages
for any breach by the REIT Parties of their obligations under Sections 9 or
12 hereof.
Section 6. INTERIM LEASE TERMINATIONS.
From and after the date hereof, a Lessor may terminate a Lease
Agreement with respect to a Leased Hotel upon sale of the Leased Hotel as
set forth in the Lease Agreement for such Leased Hotel prior to the
Termination Date (an "Interim Lease Termination"). The termination payment
to be paid in connection with any such Interim Lease Termination (the
"Interim Lease Termination Payment") shall be the Individual Lease
Termination Payment for the applicable Leased Hotel as set forth on EXHIBIT
1(a) hereto. If an Interim Lease Termination occurs prior to the
Termination Date, the applicable Interim Lease Termination Payment shall be
paid on the earlier to occur of (i) the Termination Date and (ii) the date
which is one hundred twenty (120) days after the date of such Interim Lease
Termination. All Interim Lease Termination Payments pursuant to this
Section 6 shall be made by wire transfer in immediately available funds to
such bank account(s) as the Lessee Parties shall specify (by written notice
delivered to the REIT Parties not less than three (3) business days prior
to the required payment date).
Section 7. EMPLOYEE MATTERS.
(a) EMPLOYEE TRANSITION. As soon as practicable prior to the Termination Date
and after consultation with Hilton, the REIT shall use its good faith
reasonable commercial efforts to cause the Successor Lessees to fill their
hiring needs, if any, first from the corporate headquarters and regional
office employees of the Lessees described on EXHIBIT 22 hereto (as updated
pursuant to Section 22(b) hereof) (the "RFS Employees") on the terms set
forth herein. Any offer of employment by a Successor Lessee to an RFS
Employee shall be (i) contingent upon the closing of the transactions
contemplated hereby, (ii) for a position with a title substantially
equivalent to
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that described on EXHIBIT 22 hereto (as updated pursuant to Section 22(b)
hereof) and with authorities and responsibilities substantially equivalent
to those existing on the Termination Date with respect to such RFS
Employee, (iii) at the annual base salary described on EXHIBIT 22 hereto
(as updated pursuant to Section 22(b) hereof) with respect to such RFS
Employee, (iv) with employee benefits (including, without limitation,
retirement, insurance and other welfare benefits) substantially similar to
those described on EXHIBIT 7(a) hereto with respect to such RFS Employee,
(v) with credit for all actual and credited service by such RFS Employee
with the Lessees as described on EXHIBIT 22 hereto (as updated pursuant to
Section 22(b) hereof) for purposes of (A) eligibility and vesting under all
employment benefit plans (including, without limitation, retirement,
insurance and other welfare plans) of the applicable Successor Lessee, and
(B) to the extent not duplicative, benefit accruals under any severance or
vacation pay plans of the applicable Successor Lessee, (vi) with credit for
all unused vacation, sick, personal or other similar days earned or accrued
with the Lessees by such RFS Employee as described on EXHIBIT 22 hereto (as
updated pursuant to Section 22(b) hereof) and (vii) in the case of a Tier
II RFS Employee, contingent upon the receipt by the Lessee Parties of a
complete release and discharge of all obligations of the Lessee Parties
under any applicable severance agreement acceptable in form and substance
to the Lessee Parties and the REIT Parties.
(b) SEVERANCE. If (i) the REIT Parties or a Successor Lessee do not offer to
hire an RFS Employee following the Termination Date on the terms specified
in Section 7(a) hereof, and (ii) such RFS Employee is owed and paid
severance and/or accrued vacation by any Lessee Party pursuant to the
severance pay plan described in EXHIBIT 7(b) hereto, the severance
agreements described in EXHIBIT 7(b) hereto (as the same may be modified in
accordance with the terms of Section 7(e)(i) hereof) or the severance
agreement described in Section 7(e)(ii) hereof, including any and all
payments required by applicable state law and made by such Lessee Party in
respect of unused vacation, sick, personal or other similar days which are
earned or accrued by RFS Employees as of the Termination Date
(collectively, the "Severance Payments"), then RFSOP shall reimburse such
Lessee Party for such Severance Payments within two (2) business days after
receiving written notice of such payment from such Lessee Party.
(c) NOTICE. Hilton shall notify the REIT of any claim for Severance Payments
promptly upon receiving notice of such claim and in any event at least ten
(10) days prior to the payment of such claim.
(d) RESTRICTIVE COVENANTS. Effective as of the Termination Date, Hilton shall
execute, or cause the appropriate subsidiary of Hilton to execute, a
release of all non-competition, confidentiality and similar restrictive
covenant obligations of each RFS Employee hired by a Successor Lessee in
form and substance reasonably acceptable to the REIT; PROVIDED, HOWEVER,
that such release shall not be required to effectuate a release of any
obligations with respect to confidential information pertaining to
operations of Hilton or any of its subsidiaries other than the Lessees.
(e) EXTENSION OF CERTAIN SEVERANCE BENEFITS. RFS shall have the right (but not
the obligation) to (i) extend the term of the severance agreements for the
RFS Employees identified on Exhibit 7(b) hereof through January 31, 2001
and (ii) provide to Mr. Mark Kucera the same severance benefits as are
currently provided to Messrs. Kidney, Williams and West as described in
EXHIBIT 7(b) hereto and for a term extending through January 31, 2001.
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Section 8. TRANSITION OF HOTEL MANAGEMENT.
(a) FRANCHISE AGREEMENTS; SUBORDINATION AGREEMENT. The REIT Parties shall
exercise their good faith reasonable commercial efforts to obtain from each
franchisor of a Leased Hotel operating under a Third Party Franchise
Agreement a release of the applicable Lessee from all liabilities arising
under such Third Party Franchise Agreement or any other related agreement
from and after the Termination Date, and the Lessee Parties and the REIT
Parties shall execute and deliver all documents reasonably required by
third party franchisors in connection therewith (other than indemnity
agreements). The REIT Parties shall further exercise their good faith
reasonable commercial efforts to obtain a release of RFSL from all
liabilities arising under the Subordination Agreement from and after the
Termination Date.
(b) LICENSES. The Lessee Parties shall exercise good faith reasonable
commercial efforts (i) to assist the REIT Parties in obtaining replacement
Licenses, and (ii) unless instructed otherwise by the REIT Parties, to
terminate all Licenses as of the Termination Date. If a Successor Lessee or
an Owner, as applicable, is not able to obtain replacement Licenses for one
or more of the Leased Hotels or Managed Hotels effective as of (or as soon
as practicable after) the Termination Date, the REIT Parties shall so
notify the Lessee Parties in writing at least twenty (20) days prior to the
Termination Date, and on the Termination Date, such Successor Lessee or
Owner, as applicable, and the Lessee Parties shall execute a temporary
operating agreement, in form and substance mutually acceptable to the REIT
Parties and the Lessee Parties, to allow the uninterrupted operation of
such Leased Hotels and Managed Hotels for a reasonable period of time after
the Termination Date pending receipt of the replacement Licenses.
(c) BOOKS AND RECORDS. All books and records (including, but not limited to,
accounting and financial records) for the Leased Hotels and the Managed
Hotels kept by the Lessee Parties, and all personnel files regarding RFS
Employees hired by any Successor Lessee, shall be delivered to the REIT
promptly after the Termination Date; PROVIDED, HOWEVER, that such books and
records shall thereafter be available to the Lessee Parties at all
reasonable times for inspection, audit, examination and transcription for a
period of seven (7) years, and the Lessee Parties may retain copies or
computer records thereof.
(d) ST. LOUIS PLAN. It is the intent of the parties to satisfy the provisions
of Section 4204 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), with respect to the obligations of Holiday Inn St.
Louis/Clayton Plaza (the "St. Louis Hotel") under the St. Louis Hotel and
Restaurant Employees Pension Trust Fund (the "St. Louis Plan"). Therefore,
the parties agree as follows:
(i) Notwithstanding the provisions of Section 2(e) hereof, the REIT shall
cause the Successor Lessee with respect to the St. Louis Hotel to
accept an assignment of, and assume all obligations under, that
certain agreement between the Hotel Employees Restaurant Employees
Local 74, AFL-CIO and the St. Louis Hotel effective December 15, 1997
(the "St. Louis Agreement"). Without limitation of the foregoing, from
and after the Termination Date, the REIT shall cause such Successor
Lessee to continue making contributions to the St. Louis Plan in
accordance with the terms of the St. Louis Agreement for substantially
the same number of contribution base units for which the St. Louis
Hotel had an obligation to contribute to the St. Louis Plan on the
Termination Date;
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(ii) Unless exempt under Pension Benefit Guaranty Corporation Regulations
Section 4204.11, or Section 4204.21, the REIT shall cause the
Successor Lessee with respect to the St. Louis Hotel to post a bond or
hold in escrow in favor of the St. Louis Plan for a period of five (5)
plan years commencing with the first plan year beginning after the
Termination Date in an amount and form that satisfies the requirements
of Section 4204(a)(1)(B) of ERISA;
(iii) In the event that the Successor Lessee with respect to the St. Louis
Hotel withdraws in a complete or partial withdrawal under Section 4201
of ERISA from the St. Louis Plan with respect to the St. Louis Hotel
during the first five (5) plan years beginning after the Termination
Date, and such Successor Lessee fails to make any withdrawal liability
payments when due, without limitation of the provisions of Section
21(c)(viii) hereof, RFS and Hilton shall be secondarily liable for any
withdrawal liability that the St. Louis Hotel would have had to the
St. Louis Plan but for the provisions of this Section 8(d) and Section
4204 of ERISA; and
(iv) RFS agrees to use its good faith reasonable commercial efforts to
obtain and deliver to the REIT on or before February 28, 2000, an
actuarial valuation for the St. Louis Plan as of the most recent
practicable date.
Section 9. REIT CAPITAL STOCK.
(a) PREFERRED STOCK PURCHASE. On the earlier to occur of (i) the tenth
(10th) day after receipt by Hilton of a notice from the REIT pursuant
to Section 4(a) hereof evidencing the intention to terminate the Lease
Agreements, the Owner Management Agreements and the Ancillary
Agreements pursuant to the terms hereof or (ii) November 30, 2000, RFS
shall have the one time right to deliver a purchase notice to RFSOP
stating that RFS elects to require RFSOP to purchase all (but not less
than all) of the 973,684 shares of Preferred Stock owned by RFS in
accordance with the terms of this Section 9. In the event RFS delivers
to RFSOP a purchase notice pursuant to the preceding sentence, RFSOP
will purchase the Preferred Stock from RFS in accordance with the
terms of this Section 9; PROVIDED, HOWEVER, that the REIT shall have
the right, but not the obligation, to assume RFSOP's obligation to
purchase the Preferred Stock from RFS on the terms set forth in this
Section 9(a) or to designate a different transferee for the Preferred
Stock; and PROVIDED, FURTHER, that any such assumption by the REIT or
designation by RFSOP shall not otherwise release or waive any
obligation of RFSOP under this Section 9(a). The aggregate purchase
price for the Preferred Stock (the "Purchase Price") shall be the
greater of (A) either (i) Thirteen Million Seven Hundred Fifty
Thousand Dollars ($13,750,000.00), in the event the REIT has not
elected to terminate the Lease Agreements, the Owner Management
Agreements and the Ancillary Agreements in accordance with this
Termination Agreement, or (ii) Thirteen Million Dollars
($13,000,000.00) in the event the REIT has elected to terminate the
Lease Agreements, the Owner Management Agreements and the Ancillary
Agreements in accordance with this Termination Agreement, in either
case plus any accrued and unpaid dividends thereon through the
Purchase Date (defined below) or (B) the amount determined by
multiplying the Current Market Value by the number of shares of Common
Stock into which the Preferred Stock would then be convertible under
the terms of the REIT's Amended and Restated Charter notwithstanding
the fact that pursuant to the terms of the REIT's Amended and Restated
Charter, the Preferred Stock is not then convertible. The purchase and
sale of the Preferred Stock pursuant to this Section 9(a) shall occur
on the earlier of (i) the Termination Date, or (ii) January
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31, 2001 (either such date, the "Purchase Date"). If, as of the Purchase
Date (i) the Common Stock is listed for trading on the NYSE or any other
principal securities exchange and (ii) the New Shelf Registration Statement
(defined below) is effective under the Securities Act (covering the number
of shares of Common Stock to be issued), the REIT or RFSOP may elect, in
its sole discretion, to pay all or part of the Purchase Price in the form
of shares of Common Stock, in which event a share of Common Stock shall be
valued at its Current Market Value. The REIT or RFSOP shall notify RFS on
the business day prior to the Purchase Date whether it will pay any part
of the Purchase Price in the form of Common Stock. In the event RFS does
not elect to require RFSOP to acquire the Preferred Stock at the time and
in the manner described in the first sentence of this Section 9(a) its
right to elect to require such purchase shall be forfeited and null and
void and of no further force and effect.
(b) SHELF REGISTRATION STATEMENT. In accordance with the terms of the
Registration Rights Agreement, the REIT shall prepare and file with the
Securities and Exchange Commission (the "SEC"), as expeditiously as
reasonably possible and at the REIT's sole cost and expense, one or more
shelf Registration Statements on Form S-3 (collectively, the "New Shelf
Registration Statement") pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), covering the resale by RFS of not
less than 973,684 shares of Common Stock issuable to RFS in accordance with
Section 9(a) hereof. In addition, the REIT, at its sole cost and expense,
agrees to maintain the effectiveness of Registration Statement No.
333-28849 (the "Existing Shelf Registration Statement") covering the resale
by RFS of the shares of Common Stock issuable to RFS upon the redemption of
its Units. The REIT agrees to maintain the effectiveness of the New Shelf
Registration Statement and the Existing Shelf Registration Statement,
respectively, or any successor registration statement under the Securities
Act which covers shares of Common Stock issuable to RFS to the same extent
as the New Shelf Registration Statement and the Existing Shelf Registration
Statement, until the earlier to occur of (i) the date on which RFS can sell
all of the shares of Common Stock covered by such Registration Statement
freely without restriction pursuant to Rule 144(k) under the Securities Act
or any successor provision, (ii) the date on which RFS has sold all of the
shares of Common Stock covered by such Registration Statement, or (iii),
with respect to the New Shelf Registration Statement, until the day
following the Purchase Date, if the REIT or RFSOP do not issue any shares
of Common Stock to RFS in connection with the purchase of the Preferred
Stock pursuant to Section 9(a) hereof. The REIT shall file all required
reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") on or prior to the due date therefor.
(c) REDEMPTION OF UNITS. The REIT shall cause to be maintained in effect the
provisions of the Fourth Amended and Restated Agreement of Limited
Partnership of RFSOP dated January 3, 1997 (the "RFSOP Partnership
Agreement") allowing RFS to tender its Units to RFSOP for redemption, with
the redemption price being payable in cash or shares of Common Stock at the
option of the REIT.
(d) SURRENDER OF CERTIFICATES. On or prior to the Purchase Date, RFS shall
deliver to the REIT or RFSOP, as applicable, certificates representing the
Preferred Stock, duly endorsed for transfer, free and clear of any liens,
claims, encumbrances or charges of any kind.
(e) LIMITATIONS ON RESALES. Hilton and RFS agree that, in the event RFS
receives shares of Common Stock pursuant to Section 9(a) hereof, RFS will
not sell such shares of Common Stock on any trading day in an amount which
exceeds 20% of the average daily trading volume for the
16
Common Stock for the 30-trading-day period preceding the date of the sale.
The REIT Parties agree to work in good faith to assist RFS in the orderly
liquidation of any shares of Common Stock delivered pursuant to Section
9(a) hereof.
Section 10. OFFICE LEASE.
The REIT and RFS shall use their respective good faith reasonable
commercial efforts to effect either (a) the assignment to any REIT Party or
Successor Lessee as of the Termination Date of the Lease Agreement dated
December 1, 1994 by and between the predecessor in interest to Boyle
Investment Company, a Tennessee corporation (the "Landlord") and RFS, as
amended by the First Modification of Lease Agreement by and between
Landlord and RFS dated September ___, 1999 (the "Office Lease"), the
assumption of the Office Lease by such REIT Party or Successor Lessee, and
the release of RFS from all liabilities arising under or from the Office
Lease from and after the Termination Date, or (b) the termination of the
Office Lease as of the Termination Date and execution of a new lease for
the space demised under the Office Lease on substantially the same terms as
the Office Lease and for the remaining term thereof. Any such assignment of
the Office Lease shall be subject to the subleases described on EXHIBIT 22
hereto.
Section 11. FURNITURE AND EQUIPMENT.
(a) FF&E. On the Termination Date, the REIT shall cause a REIT Party or
Successor Lessee to purchase from RFS all corporate office furniture and
equipment then owned by RFS (the "FF&E") at the book value thereof as of
the Termination Date. EXHIBIT 11(a) hereof sets forth all FF&E as of
December 31, 1999, and the book values thereof as of such date. The Lessees
shall cause the FF&E to be transferred to the REIT Party or Successor
Lessee free and clear of all liens, claims, encumbrances and charges of any
kind pursuant to the Bill of Sale. Except as set forth in Section 11(b)
below, the REIT Parties and Successor Lessees shall have no obligation to
purchase from RFS any furniture, fixture or equipment, other than that
described in EXHIBIT 11(a) hereto, unless the REIT agrees in writing prior
to the Termination Date to make such purchase.
(b) CORPORATE OFFICE CAPITAL EXPENDITURES. On the Termination Date, the REIT
shall cause a REIT Party or Successor Lessee to reimburse RFS for the
actual costs of the capital expenditures made or irrevocably committed by
or on behalf of the Lessees with respect to their corporate office and
related systems during the period from and including the date hereof
through and including the Termination Date; PROVIDED, HOWEVER, that the
REIT shall have no obligation to cause any REIT Party or Successor Lessee
to reimburse RFS for (i) any such capital expenditure in excess of $25,000
unless the REIT has given its prior written consent to such capital
expenditure, or (ii) the amount by which the aggregate of any such capital
expenditures of less than $25,000 made without the REIT'S prior written
consent exceeds $100,000. All assets represented by such capital
expenditures for which RFS is reimbursed shall be conveyed to a REIT Party
or Successor Lessee on the Termination Date pursuant to the Bill of Sale.
Section 12. PARTNERSHIP INTERESTS.
The REIT and RFS shall use their respective good faith reasonable
commercial efforts to effect, as soon as practicable after the date hereof,
and pursuant to an Assignment of Partnership Interests and Assumption
Agreement substantially in the form of EXHIBIT 12, hereto
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(a) the assignment to the REIT or its designee of all of the right, title,
and interest of RFS in Highland Plaza Partners, L.P., Devonshire
Associates, L.P., SF Partners, L. P., DDP Partners, L.P., and Shelby
Distribution Partners, L.P., each a Tennessee limited partnership
(collectively, the "Partnership Interests"), (b) the assumption of the
Partnership Interests and all liabilities related thereto by the REIT or
its designee, and (c) the release of RFS from all liabilities related to
the Partnership Interests. Such assignment of Partnership Interests (i)
shall be free and clear of any liens, claims, encumbrances and charges of
any kind on or against the Partnership Interests that have been created by
RFS since the effective date of the Doubletree/RFS Merger, except as
provided in the applicable partnership agreements, and (ii) shall be in
exchange for a cash payment to RFS of $160,000. In the event the
Partnership Interests have not been assigned to the REIT or its designee on
or before the earlier of the Termination Date and January 31, 2001, RFS
shall assign to the REIT or its designee the economic benefits of the
Partnership Interests (to the extent permitted by the applicable
partnership agreements and related agreements) and effective on such date
receive the indemnification of the REIT Parties with respect to Liabilities
suffered or incurred with respect to the Partnership Interests set forth in
Section 21(c)(vi) hereof.
Section 13. PRODUCT IMPROVEMENT PLANS.
As soon as practicable, but in no event later than March 31, 2000,
Hilton will notify the Lessors of any product improvement plans which will
be required at any of the Leased Hotels which will be operated pursuant to
a Hilton Franchise Agreement as a result of the transactions contemplated
by this Termination Agreement (the "Required PIPs") and the capital
improvements comprising such Required PIPs. The Lessee Parties agree that
no Lessor or Successor Lessee shall be required, as a result of the
transactions contemplated by this Agreement, to undertake a product
improvement plan or capital expenditures which are not consistent with
those generally required of licensees pursuant to standard Hilton Franchise
Agreements.
Section 14. FINANCIAL INFORMATION.
(a) FINANCIAL DISCLOSURE. The Lessee Parties agree to (i) provide such
financial information with respect to the Lessees and the Manager and the
Leased Hotels and Managed Hotels as may be reasonably requested by the REIT
Parties and their respective permitted successors and assigns, and (ii)
exercise their good faith reasonable commercial efforts to obtain from
their independent public accountants such consents, "comfort letters" and
similar documents relating to the financial information described in clause
(i) above as may reasonably be requested by the REIT Parties and their
respective permitted successors and assigns for compliance with their
respective SEC disclosure obligations.
(b) COSTS AND EXPENSES. The REIT Parties shall pay all reasonable costs and
expenses arising from the compliance by the Lessee Parties with the
provisions of Section 14(a) hereof, including, without limitation, all
salary and wage expenses attributable to time spent by employees of Hilton
or any of its subsidiaries in complying with such provisions. Hilton shall
provide the REIT Parties with satisfactory evidence of such costs and
expenses.
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Section 15. CONDITIONS TO CLOSING.
(a) CONDITIONS PRECEDENT TO CLOSING BY THE REIT PARTIES. The obligations of any
of the REIT Parties under Sections 2, 3, 4, 7, 10, 11, 18(g) and 18(h) of
this Termination Agreement are subject to the satisfaction or waiver of the
following conditions on or before the Termination Date:
(i) PERFORMANCE OF COVENANTS. The Lessee Parties shall have performed,
satisfied and complied in all material respects with all covenants and
agreements required by this Termination Agreement to be performed,
satisfied or complied with by the Lessee Parties on or before the
Termination Date;
(ii) ACTIONS, SUITS, PROCEEDINGS. No action, suit or proceeding by any
governmental authority or other third party seeking to prevent or
enjoin the transactions contemplated by this Termination Agreement
shall have been instituted or threatened on or before the Termination
Date; and
(iii) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Lessee Parties in Sections 22 and 24(b) hereof (after giving
effect to any permitted updating of EXHIBIT 22 hereto pursuant to
Section 22(b) hereof) shall continue to be true and correct in all
material respects as of the Termination Date.
(b) CONDITIONS PRECEDENT TO CLOSING BY THE LESSEE PARTIES. The obligations of
any of the Lessee Parties under Sections 2, 3, 4, and 11 of this
Termination Agreement are subject to the satisfaction or waiver of the
following conditions on or before the Termination Date:
(i) PERFORMANCE OF COVENANTS. The REIT Parties shall have (i) performed,
satisfied and complied in all material respects with all covenants and
agreements required by this Termination Agreement to be performed,
satisfied or complied with by any of the REIT Parties on or before the
Termination Date and (ii) obtained the consents described as Items 3
and 4 on EXHIBIT 24(a)(ii) hereto;
(ii) ACTIONS, SUITS, PROCEEDINGS. No action, suit or proceeding by any
governmental authority or other third party seeking to prevent or
enjoin the transactions contemplated by this Termination Agreement
shall have been instituted or threatened on or before the Termination
Date; and
(iii) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the REIT Parties in Section 24(a) hereof shall continue to be true and
correct in all material respects as of the Termination Date.
Section 16. TERMINATION.
(a) TERMINATION DUE TO OTHER CIRCUMSTANCES. This Termination Agreement may be
terminated at any time on or prior to January 31, 2001:
(i) by mutual written agreement of all parties hereto;
(ii) by (A) the REIT pursuant to a notice delivered pursuant to Section
4(a)(i) hereof, or (B) by Hilton if (1) the REIT has not notified
Hilton in writing on or before November
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30, 2000 that the REIT Parties intend to terminate the Lease
Agreements, the Owner Management Agreements and the Ancillary
Agreements pursuant to the terms of this Termination Agreement or (2)
the Lessors have not executed the Escrow Agreement and deposited the
Escrow pursuant to Section 5 hereof on or before November 30, 2000;
PROVIDED HOWEVER, that in either such event the provisions of Sections
9, 12 and 18(g) hereof shall survive such termination.
(iii) by any party hereto if the Termination Date shall not have occurred
on or before January 31, 2001; PROVIDED, HOWEVER, that this provision
shall not be available to the Lessee Parties if the REIT Parties have
the right to terminate this Termination Agreement under clause (iv)
below, and this provision shall not be available to the REIT Parties
if the Lessee Parties have the right to terminate this Termination
Agreement under clause (v) below;
(iv) by the REIT Parties if there is (A) a breach of any material covenant
or material agreement to be complied with or performed by the Lessee
Parties pursuant to the terms of this Termination Agreement and such
breach has not been cured by the Termination Date or (B) a failure of
any condition set forth in Section 15(a) hereof to be satisfied on or
prior to the Termination Date; or
(v) by the Lessee Parties if there is (A) a breach of any material
covenant or material agreement to be complied with or performed by the
REIT Parties pursuant to the terms of this Termination Agreement and
such breach has not been cured by the Termination Date, or (B) a
failure of any condition set forth in Section 15(b) hereof to be
satisfied on or prior to the Termination Date.
(b) EFFECT OF TERMINATION. The termination of this Termination Agreement
pursuant to Section 16(a) above shall not affect the right of any party to
bring any action for breach of this Termination Agreement, and the
obligations of the parties under Sections 9, 12, 18(g) and 21 of this
Termination Agreement shall survive any such termination. Each of the
Lessee Parties (other than RFSL) shall be jointly and severally liable for
any breach of this Termination Agreement by any of the Lessee Parties, and
each of the REIT Parties shall be jointly and severally liable for any
breach of this Termination Agreement by any of the REIT Parties.
Section 17. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY.
(a) PUBLIC ANNOUNCEMENTS. None of the REIT Parties shall issue or make, or
permit any Successor Lessee to issue or make, any reports, statements or
releases to the public or generally to its employees, customers, suppliers
or other persons with respect to this Termination Agreement or the
transactions contemplated hereby without giving Hilton twenty-four (24)
hours (occurring during a business day) to comment on such report,
statement or release. None of the Lessee Parties shall issue or make any
reports, statements or releases to the public or generally to its
employees, customers, suppliers or other persons with respect to this
Termination Agreement or the transactions contemplated hereby without
giving the REIT twenty-four (24) hours (occurring during a business day) to
comment on such report, statement or release. If any Lessee Party is unable
to obtain the comments of the REIT, or any REIT Party or Successor Lessee
is unable to obtain the comments of Hilton, on any such report, statement
or release after such time, then
20
such party may make or issue such report, statement or release and promptly
furnish the REIT or Hilton, as applicable, with a copy thereof.
(b) CONFIDENTIALITY. Each party hereto shall keep confidential, and shall cause
its directors, officers, employees, agents, representatives and advisors to
keep confidential, any information from time to time received by it from
any other party regarding such other party or its business affairs;
PROVIDED, HOWEVER, that nothing herein shall restrict the disclosure of any
such information to the extent required by statute, rule, regulation or
judicial process, or the disclosure of any such information which is
generally available to the public.
Section 18. FURTHER COVENANTS AND AGREEMENTS.
(a) EMPLOYEE MATTERS. The REIT shall have no obligation under Section 7(b)
hereof with respect to any increase in Severance Payments resulting from
any of the following actions taken by any Lessee Party prior to the
Termination Date without the prior written consent of the REIT: (i) except
as provided in Section 7(e) hereof, the increase of severance benefits or
the extension of the term of any severance plan or individual severance
agreement with respect to the RFS Employees described in EXHIBIT 7(b)
hereto, (ii) the promotion of any RFS Employee to a level which entitles
such RFS Employee to greater severance benefits, (iii) the increase in the
compensation of any RFS Employee, except in the ordinary course of
business, or (iv) the release of any RFS Employee from any non-compete
provisions or other restrictive covenants applicable to such RFS Employee,
except as required by Section 7(d) hereof.
(b) AFFAIRS OF RFS. RFS hereby agrees to maintain its legal existence and to
use good faith reasonable commercial efforts to (i) maintain its current
management structure at its corporate headquarters and regional offices and
(ii) retain the RFS Employees for the period prior to the Termination Date,
subject to such changes as may occur in the ordinary course of business. It
is the intention of the parties that prior to the Termination Date the
Leased Hotels and the Managed Hotels continue to be managed in a manner
consistent with current operations, and to the extent possible, by the same
individuals who currently manage the Leased Hotels and the Managed Hotels.
After the Termination Date, no Lessee Party shall make, or permit any of
its subsidiaries to make, offers of employment to any RFS Employee or any
manager of a Leased Hotel or Managed Hotel prior to the date which is six
(6) months after the Termination Date.
(c) THE RFS NAME. No later than fifteen (15) business days after the
Termination Date, the Lessee Parties shall take all necessary steps to
change their respective corporate names so as to no longer contain the
designation RFS. The Lessee Parties hereby agree not to utilize the trade
name or mark of RFS (or any logo or other mark containing the designation
RFS) in connection with any of their businesses from and after the
Termination Date except as may be reasonably necessary to wind up the
affairs of the Lessees.
(d) FINAL RENT PAYMENT AND MANAGEMENT FEES. The Lessees shall pay all accrued
and unpaid Percentage Rent and Additional Charges (as such terms are
defined in the applicable Lease Agreements) and the Owners shall pay all
management fees and other amounts due and owing pursuant to the Owner
Management Agreements through the Termination Date on or before the date
which is fifteen (15) days after the Termination Date.
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(e) ST. LOUIS PLAN. The Lessee Parties shall provide any information or give
notice, or use good faith commercially reasonable efforts to cause the
trustee of the St. Louis Plan to provide any information or give notice,
reasonably requested by the REIT Parties or the applicable Successor Lessee
in connection with their application of the Pension Benefit Guaranty
Corporation Regulations exemptions referred to in Section 8(d)(ii) hereof.
(f) RFSL. In the event the REIT or its designee purchases the capital stock of
RFSL pursuant to Section 2(a) hereof, the assets and liabilities of RFSL
shall be prorated and settled as of the Termination Date in the same manner
as if the Lease Agreements applicable to the RFSL Hotels were being
terminated in accordance with the provisions of this Agreement, it being
the intention of the parties that at the Termination Date RFSL will have no
more assets or liabilities than would the applicable Lessor or a Successor
Lessee had the Lease Agreements for the RFSL Hotels been terminated in
accordance with the provisions of this Termination Agreement and
liabilities settled or indemnified in accordance with Sections 3(b), 4(e),
18(d) and 21 hereof. The parties acknowledge and agree that, in the event
the REIT or its designee elects to purchase the capital stock of RFSL
pursuant to Section 2(a) hereof, all assets of RFSL other than the Lease
Agreements and the Leased Property (as such term is defined in the Lease
Agreements but exclusive of Excluded Assets) will be transferred by RFSL to
Hilton or its designee in advance of such purchase.
(g) STANDSTILL AGREEMENT. The REIT Parties hereby (i) consent to the execution
by the Lessees of the "New Amendments" described in the Standstill
Agreement, (ii) agree to execute the owner agreement amendments and new
owner agreements described in the Standstill Agreement and (iii) agree to
evidence their agreement set forth in this Section 18(g) to Marriott, if
requested, in a form satisfactory to the REIT Parties.
(h) NON-INTERFERENCE. The parties hereby acknowledge and agree that, prior to
the Termination Date, except as expressly set forth herein or in the Lease
Agreements or the Ancillary Agreements, the REIT Parties shall have no
rights hereunder with respect to the operations or business of the Lessees.
Section 19. [INTENTIONALLY LEFT BLANK].
Section 20. FURTHER ASSURANCES.
Each party hereby agrees to cooperate in good faith with the other
parties and to execute and deliver such other agreements, documents or
instruments as may be necessary or desirable in connection with the
transactions contemplated by this Termination Agreement (including the
termination of the Lease Agreements, the Owner Management Agreements and
the Ancillary Agreements and execution and delivery of memoranda of lease
termination that comply with applicable local law) or in effecting the
transfer of the operational control of the Leased Hotels and the Managed
Hotels resulting therefrom. Each party hereby further agrees to use its
good faith reasonable commercial efforts to obtain consents and waivers
from third parties, including franchisors, suppliers, vendors, employees,
lessors, lessees, lenders, trustees, rating agencies and other third
parties necessary to effect the transactions contemplated by this
Termination Agreement, including, without limitation, all requisite
consents and waivers
22
identified on EXHIBIT 24(a)(ii) hereto and EXHIBIT 24(b)(ii) hereto. If any
affiliate of a REIT Party becomes a lessor for a Leased Hotel prior to the
Termination Date, the REIT shall cause such affiliate to become a party to
and be bound by this Termination Agreement as if it were an original party
hereto. If any affiliate of a Lessee Party becomes a lessee for a Leased
Hotel prior to the Termination Date, Hilton shall cause such affiliate to
become a party to and be bound by this Termination Agreement as if it were
an original party hereto.
Section 21. COSTS AND EXPENSES; INDEMNITIES.
(a) COSTS AND EXPENSES.
(i) COSTS AND EXPENSES PAYABLE BY THE LESSEE PARTIES. The Lessee Parties
shall pay all fees, costs and expenses associated with (A) the
termination of the Affiliate Management Agreements in accordance with
Section 2(d)(i) hereof, including, without limitation, termination
fees, liquidated damages and other payments owing to the managers
thereunder, and (B) obtaining the consents, waivers and other actions
described on EXHIBIT 24(b)(ii) hereto.
(ii) COSTS AND EXPENSES PAYABLE BY THE REIT PARTIES. Except as otherwise
set forth herein and in the Standstill Agreement, the REIT Parties
shall pay all fees, costs and expenses associated with (A) the
replacement of the Third Party Franchise Agreements applicable to the
Leased Hotels in accordance with Section 2(c) hereof, including,
without limitation, new license application fees, change of ownership
fees, liquidated damages and other payments owing to the franchisors
thereunder, whether as a result of the termination of the applicable
Lease Agreement, Third Party Franchise Agreement or any other related
agreement, the change of ownership of the franchise, the execution of
a replacement Third Party Franchise Agreement with the applicable
Lessor or Successor Lessee, or otherwise, (B) the replacement and
termination of the Licenses applicable to the Leased Hotels and the
Managed Hotels in accordance with Section 8(b) hereof, (C) the
assignment or termination of the Contracts applicable to the Leased
Hotels (other than Excluded Material Contracts) in accordance with
Section 2(e) hereof, (D) the termination and replacement or the
assignment of the Office Lease in accordance with Section 10 hereof
and any subleases thereof, (E) the assignment of the Partnership
Interests, (F) the acceptance and assumption of the Third Party
Management Agreements and the release of the Lessee Parties with
respect to the same, all in accordance with Section 2(d) hereof, and
(G) obtaining the consents, waivers and other actions described on
EXHIBIT 24(a)(ii) hereto; PROVIDED, HOWEVER, that the REIT Parties
shall not be responsible for (x) amounts owing by the Lessees or any
of their affiliates under the Franchise Agreements, Third Party
Management Agreements, Contracts, Licenses or the Office Lease for the
period prior to the Termination Date, or (y) any fees, costs or
expenses described in this subsection (ii) (exclusive of clause (E)
above) that are incurred by any Lessee Party prior to the date that is
thirty (30) days in advance of the Termination Date.
(iii) OTHER COSTS AND EXPENSES. Except as otherwise provided herein, each
of the parties shall pay all costs and expenses incurred or to be
incurred by it in negotiating and preparing this Termination Agreement
and the other documents and instruments contemplated herein and in
performing their respective obligations hereunder and thereunder.
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(b) INDEMNITY BY THE LESSEE PARTIES. The Lessee Parties (other than RFSL)
agree, jointly and severally, to indemnify, defend and hold harmless the
REIT Parties and their respective affiliates, officers, directors,
shareholders, employees and agents and each Successor Lessee (collectively,
the "REIT Indemnitees") from and against any and all claims, demands,
obligations, losses, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, costs and
expenses, and any and all actions, suits and proceedings in respect thereof
(collectively, "Liabilities"), suffered or incurred by any REIT Indemnitee
as a result of (i) the termination of, or failure to terminate, the
Affiliate Management Agreements for the Leased Hotels, (ii) the breach of
any covenant of the Lessee Parties set forth herein or in any document or
instrument delivered in connection herewith, (iii) the failure of any
representation and warranty made by the Lessee Parties in Sections 22 or
24(b) hereof or pursuant to Section 4(c)(ix) hereof to be true and correct
in all material respects, (iv) the operation of the Leased Hotels by the
Lessee Parties prior to the Termination Date, including, without
limitation, claims or causes of action relating in any way to any employees
of RFS based upon events occurring prior to the Termination Date, including
but not limited to any alleged or actual unfair labor practices, employment
discrimination charges and lawsuits, violations of collective bargaining
contracts or trust agreements, any failure to make contributions to the St.
Louis Plan contrary to the requirements of Section 515 of ERISA, and any
other claims regarding employment, severance, safety, compensation,
benefits or other matters, (v) any untrue statement of a material fact or
omission of any material fact included in written information provided by
any Lessee Party to any of the REIT Parties or their respective permitted
successors and assigns or any Successor Lessee expressly for inclusion in
any Exchange Act report or Securities Act registration statement, or (vi)
in the event the REIT or its designee elects to purchase the capital stock
of RFSL pursuant to Section 2(a) hereof, liabilities of RFSL arising prior
to the Termination Date but not from the operation of the Leased Hotels.
The Lessee Parties shall pay any and all amounts owing under this indemnity
within two (2) business days after demand by the applicable REIT Indemnitee
together with reasonable supporting documentation therefor. This indemnity
shall survive the Termination Date for a period of three (3) years plus,
with respect only to any claim for indemnification made hereunder before
the expiration of such three (3)-year period, any period during which such
claim is pending and unresolved hereunder. Payment of a Liability by a REIT
Indemnitee shall not be a condition precedent to the obligations of the
Lessee Parties under this indemnity. The limitation on the indemnification
obligation set forth in clause (vi) above shall not in any way limit the
indemnification obligation set forth in clause (iv) above.
(c) INDEMNITY BY THE REIT PARTIES. The REIT Parties agree, jointly and
severally, to indemnify, defend and hold harmless the Lessee Parties and
their respective affiliates, officers, directors, shareholders, employees
and agents (collectively, the "Hilton Indemnitees") from and against any
and all Liabilities suffered or incurred by any Hilton Indemnitee as a
result of (i) the breach of any covenant of any REIT Party or Successor
Lessee or any other designee of the REIT Parties set forth herein or in any
document or instrument delivered in connection herewith, including, without
limitation, the breach of any obligation under a Contract, Third Party
Franchise Agreement, Third Party Management Agreement or License assumed by
any REIT Party or Successor Lessee occurring after the Termination Date,
(ii) the failure of any representation and warranty made by the REIT
Parties in Section 24(a) hereof or pursuant to Section 4(d)(x) hereof to be
true and correct in all material respects, (iii) the operation of the
Leased Hotels by the Lessors or any Successor Lessee after the Termination
Date, including, without limitation, (A) costs of complying with all
product improvement plans and satisfying
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other requirements for the issuance or continuance of a replacement
Franchise Agreement and (B) claims or causes of action relating in any way
to any employee based upon events occurring after the Termination Date,
including but not limited to any alleged or actual unfair labor practices,
employment discrimination charges and lawsuits, violations of collective
bargaining contracts or trust agreements, any failure to make contributions
to the St. Louis Plan contrary to the requirements of Section 515 of ERISA
or Section 8(d)(i) hereof, and any other claims regarding employment,
severance, safety, compensation, benefits or other matters, (iv) the
continuation beyond the Termination Date of any Contract (other than an
Excluded Material Contract), License or Franchise Agreement which is not
assumed by a REIT Party or Successor Lessee, (v) the continuation beyond
the Termination Date of any obligations of the Lessee Parties under the
Subordination Agreements, (vi) the Partnership Interests (exclusive of
Liabilities arising with respect thereto from the gross negligence or
willful misconduct of RFS after the effective date of the Doubletree/RFS
Merger), (vii) any withdrawal liability incurred as a result of the
transactions contemplated hereby with respect to the St. Louis Plan, (viii)
any information with respect to the Lessee Parties set forth in any reports
of any of the REIT Parties or their respective permitted successors and
assigns or any Successor Lessee under the Exchange Act or any registration
statement under the Securities Act, except, to the extent that any
Liabilities in respect thereof result from any untrue statement of a
material fact or omission of any material fact included in written
information provided by any Lessee Party to such REIT Party, permitted
successor or assign or Successor Lessee expressly for inclusion in any such
Exchange Act report or Securities Act registration statement, and (ix) any
transfer taxes incurred as a result of any lease assignment with respect to
Submanaged Hotels pursuant to Section 2(a) hereof or as a result of the
transfer of the stock of RFSL pursuant to Section 2(a) hereof. The REIT
Parties shall pay any and all amounts owing under this indemnity within two
(2) business days after demand by the applicable Hilton Indemnitee together
with reasonable supporting documentation therefor. This indemnity shall
survive the Termination Date for a period of three (3) years plus, with
respect only to any claim for indemnification made hereunder before the
expiration of such three (3)-year period, any period during which such
claim is pending and unresolved hereunder; PROVIDED, HOWEVER, that (i) the
indemnity obligation described in clause (vii) above shall survive the
Termination Date for a period of six (6)-years plus, with respect only to
any claim for such indemnification made hereunder before the expiration of
such six (6) year period, any period during which such claim is pending and
unresolved hereunder, and (ii) the indemnity obligations described in
clause (vi) above with respect to the Partnership Interests and all
liabilities related thereto shall survive the Termination Date for the
applicable statute of limitations period. Payment of a Liability by a
Hilton Indemnitee shall not be a condition precedent to the obligations of
the REIT Parties under this indemnity.
(d) DEFENSE OF CLAIMS. If a claim for Liabilities is to be made by a party
entitled to indemnification under this Section 21, the party entitled to
such indemnification shall give written notice to the indemnifying party as
soon as practicable after the party entitled to indemnification becomes
aware of any fact, condition or event which may give rise to Liabilities
for which indemnification may be sought under this Section 21. If any
action, suit or proceeding alleging a claim for Liabilities is filed
against any party entitled to the benefit of indemnity hereunder, written
notice thereof shall be given to the indemnifying party as promptly as
practicable. After such notice, the indemnifying party shall be entitled,
if it so elects, (i) to take control of the defense and investigation of
such action, suit or proceeding, (ii) to employ and engage attorneys and
experts of its own choice to handle and defend the same, and (iii) with the
indemnified party's consent, to settle such action, suit or proceeding, all
at the indemnifying party's sole risk and expense,
25
provided, in each instance, that the indemnifying party and its counsel
shall proceed with diligence and in good faith with respect thereto;
PROVIDED, HOWEVER, that any such settlement shall include, among other
things, an absolute and unconditional release of the indemnified party from
all Liabilities. The indemnified party shall cooperate in all reasonable
respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such action, suit or proceeding and any
appeal arising therefrom; PROVIDED, HOWEVER, that the indemnified party
may, at its own cost, participate in the investigation, trial and defense
of such action, suit or proceeding and any appeal arising therefrom. This
Section 21(d) shall have no application to the reimbursement obligation of
the RFSOP set forth in Section 7(b) hereof.
(e) APPLICABILITY OF INDEMNITY PROVISIONS. Except with respect to the indemnity
provided by the Lessee Parties (other than RFSL) pursuant to Section
21(b)(v) hereof and the indemnity provided by the REIT Parties pursuant to
Section 21(c)(vi) and Section 21(c)(viii) hereof, the provisions of
subsections (b), (c) and (d) of this Section 21 shall not become applicable
until the consummation of the transactions contemplated by Section 2 hereof
on the Termination Date. The indemnity provided by the REIT Parties
pursuant to Section 21(c)(vi) shall not become applicable until the
earliest of (i) the consummation of the transactions contemplated by
Section 12 hereof, (ii) the consummation of the transactions contemplated
by Section 2 hereof on the Termination Date and (iii) January 31, 2001.
Section 22. DISCLOSURE.
(a) REPRESENTATIONS AND WARRANTIES. The Lessee Parties hereby make the
following representations and warranties:
(i) LITIGATION. To the actual knowledge of Lawrence A. Russell, Jr.,
Section (a) of EXHIBIT 22 hereto (to be completed by RFS within ten
(10) days after the date hereof) will set forth a true and correct
list of all pending and threatened actions, suits and proceedings
against the Lessees as of the date hereof.
(ii) MATERIAL CONTRACTS. To the actual knowledge of Lawrence A. Russell,
Jr., Section (b) of EXHIBIT 22 hereto sets forth a true and correct
list of all Material Contracts as of the date hereof.
(iii) EMPLOYEE MATTERS. Section (c) of EXHIBIT 22 hereto sets forth a true
and correct statement of the current information with respect to the
RFS Employees set forth therein.
(iv) SUBLEASES. Section (d) of EXHIBIT 22 hereto sets forth a true and
correct list of all subleases executed by any of the Lessee Parties
with respect to the space demised under the Office Lease.
(v) MANAGEMENT AGREEMENTS. EXHIBIT 1(d) hereto sets forth all of the Third
Party Management Agreements with respect to the Leased Hotels.
(vi) RFS LEASING, INC. RFSL is duly incorporated, validly existing and in
good standing under the laws of the State of Tennessee and is in good
standing in each state in which it leases a hotel property from RFSFP.
Other than its obligations pursuant to the Lease Agreements, Franchise
Agreements, Licenses, Third Party Management Agreements, Affiliate
Management Agreements, and Contracts relating to the RFSL Hotels, the
26
Standstill Agreement, this Termination Agreement, the Escrow
Agreement, the Subordination Agreement and the Ancillary Agreements,
RFSL has no material contractual obligations of any kind, and RFSL has
no business operations of any kind which are unrelated to the RFSL
Hotels. Hilton (either directly or indirectly) owns all of the
outstanding capital stock of RFSL free and clear of any liens, claims,
encumbrances and charges of any kind.
(vii) REPLACEMENT HILTON FRANCHISE AGREEMENTS. Hilton, or a wholly owned
subsidiary of Hilton, has full legal right and authority to grant to
the REIT Parties or a Successor Lessee a replacement Hilton Franchise
Agreement for the same franchise brand for each Leased Hotel currently
operating under a Hilton Franchise Agreement.
(b) UPDATING OF DISCLOSURES. The Lessee Parties shall promptly update any of
the information set forth in EXHIBIT 22 hereto to include developments
after the date hereof by delivering written notice of such new developments
to the REIT Parties.
Section 23. COUNTERPARTS.
This Termination Agreement may be executed in multiple counterparts,
each of which shall be deemed an original.
Section 24. AUTHORIZATION; NO CONSENTS.
(a) THE REIT PARTIES. The REIT Parties hereby represent and warrant to the
Lessee Parties as follows:
(i) The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated therein by each of the
REIT Parties have been duly authorized by all necessary corporate or
partnership action, as the case may be. Each Agreement constitutes a
valid and binding agreement of each of the REIT Parties, enforceable
in accordance with its terms.
(ii) Except as set forth on EXHIBIT 24(a)(ii) and EXHIBIT 24(b)(ii) hereto,
and except for required consents to the assignment, replacement and/or
termination of the Franchise Agreements (and related agreements), the
Licenses, the Contracts, the Third Party Management Agreements, the
Office Lease and the Partnership Interests, no consents, waivers or
other actions by any third party are required in connection with the
execution, delivery and performance of any Agreement by any of the
REIT Parties.
(b) THE LESSEE PARTIES. The Lessee Parties hereby represent and warrant to the
REIT Parties as follows:
(i) The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated therein by each of the
Lessee Parties (including, without limitation, the execution and
delivery of the agreement described in Section 4(c)(xii) hereof) have
been duly authorized by all necessary corporate or partnership action,
as the case may be. Each Agreement constitutes a valid and binding
agreement of each of the Lessee Parties, enforceable in accordance
with its terms.
27
(ii) Except as set forth on EXHIBIT 24(a)(ii) and EXHIBIT 24(b)(ii) hereto
and except for required consents to the assignment, replacement and/or
termination of the Franchise Agreements (and related agreements), the
Licenses, the Contracts, the Third Party Management Agreements, the
Office Lease and the Partnership Interests, no consents, waivers or
other actions by any third party are required in connection with the
execution, delivery and performance of any Agreement by any of the
Lessee Parties.
Section 25. NOTICES.
Any notice required or permitted to be given under this Termination
Agreement shall be in writing and shall be sent by facsimile transmission
(confirmed by any of the following methods: overnight delivery (with proof
of delivery), courier service (with proof of delivery), hand delivery, or
certified or registered mail (return receipt requested and first class
postage prepaid)) and addressed as follows:
If to any Lessee Party:
c/o Hilton Hotels Corporation
755 Crossover Lane
Memphis, TN 38117-4900
Attention: Rick Schultz and Kevin Kern
Facsimile: (901) 374-5521
with a copy to:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: Kevin Luebbers
Facsimile: (310) 205-4611
with a copy (which shall not constitute notice) to:
Latham & Watkins
5800 Sears Tower
Chicago, IL 60606
Attention: Linda S. Schurman
Facsimile: (312) 993-9767
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If to any REIT Party:
c/o RFS Hotel Investors, Inc.
850 Ridge Lake Boulevard
Suite 220
Memphis, TN 38120
Attention: Robert M. Solmson, Chairman of the Board
Facsimile: (901) 818-5260
with a copy (which shall not constitute notice) to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, VA 23219
Attention: David C. Wright
Facsimile: (804) 788-8218
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date the notice
is received or receipt is rejected.
Section 26. SUCCESSORS AND ASSIGNS.
This Termination Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, that no party may make any assignment of this Termination
Agreement or any rights or obligations hereunder without the prior written
consent of the other parties. Notwithstanding the foregoing, RFS shall have
the right to assign its rights under Section 9 hereof to Hilton or any
subsidiary of Hilton which is a successive holder of any Preferred Stock,
Common Stock or Units; PROVIDED, HOWEVER, that RFS shall notify the REIT in
writing of any such assignment prior to the filing of the New Shelf
Registration Statement.
Section 27. ENTIRE AGREEMENT; AMENDMENTS.
The Agreements and the exhibits and schedules thereto constitute the
entire agreement among the parties thereto with respect to the subject
matters thereof and supersede all prior agreements and understandings among
the parties with respect to the matters set forth therein, including, without
limitation, any termination or survival provisions in the Lease Agreements.
No addition to or amendment or modification of any provision of this
Termination Agreement shall be binding upon any party hereto unless made in
writing and signed by each party hereto.
Section 28. HEADINGS.
Headings of the sections of this Termination Agreement are for the
convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
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Section 29. INCORPORATION.
The exhibits hereto are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.
Section 30. ENFORCEMENT OF AGREEMENT.
The parties agree that irreparable damage will occur in the event that
any of the provisions of this Termination Agreement is not performed in
accordance with the specific terms hereof or are otherwise breached. It is
accordingly agreed that, except as otherwise provided in Section 5 hereof, in
addition to any other remedy to which the parties are entitled at law or in
equity, the parties shall be entitled to injunctive relief to prevent
breaches of this Termination Agreement and to enforce specifically the terms
and provisions hereof in any court in the State of Tennessee.
Section 31. GOVERNING LAW.
This Termination Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee without regard to its
rules of conflicts of laws.
Section 32. SEVERABILITY.
Any term or provision of this Termination Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Termination Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Termination Agreement in any other
jurisdiction. If any provision of this Termination Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
Section 33. ATTORNEYS FEES.
If any party brings an action against another party to enforce any
condition or covenant of this Termination Agreement or any other Agreement,
the prevailing party in such action shall be entitled to recover its court
costs, attorneys' fees and expenses in the judgment rendered through such
action.
Section 34. TIME OF THE ESSENCE.
Time is of the essence of this Termination Agreement.
Section 35. RISK OF LOSS.
In the event of a casualty or condemnation affecting any Leased Hotel,
no party shall have the right to terminate any Agreement and the applicable
Lessee shall hold and assign to the applicable Lessor or Successor Lessee any
and all proceeds of insurance or any condemnation award relating to such
casualty or condemnation in such Lessee's possession as of the Termination
Date.
30
Section 36. SURVIVAL.
Except as limited by Section 21 hereof, all agreements and obligations
of the parties to this Termination Agreement shall survive the Termination
Date.
Section 37. CONSENTS.
Whenever the consent or approval of a party is required under this
Termination Agreement, such consent shall not be unreasonably withheld or
delayed.
Section 38. GOOD FAITH REASONABLE COMMERCIAL EFFORTS.
Whenever a party is obligated under this Termination Agreement to use
its good faith reasonable commercial efforts, such obligation shall not
require such party to expend funds or incur liability not contemplated by
this Termination Agreement.
[SIGNATURE PAGES FOLLOW]
31
IN WITNESS WHEREOF, each party has caused this Termination Agreement to be
duly executed on its behalf as of the day and year first above written.
RFS, INC.
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
RIDGE LAKE GENERAL PARTNER, INC.
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
RFS LEASING, INC.
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
DTR RFS LESSEE, INC.
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
RFS PARTNERSHIP, L.P.
By: RFS Hotel Investors, Inc., general partner
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
S-1
RFS FINANCING PARTNERSHIP, L.P.
By: RFS Financing, Inc., general partner
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
PLANO INN, L.P.
By: RFS Partnership, L.P., general partner
By: RFS Hotel Investors, Inc., general
partner
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
RFS HOTEL INVESTORS, INC.
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
RFS SPE 1 1998 LLC, A VIRGINIA LIMITED LIABILITY
COMPANY
By: RFS MM 1 1998 CORPORATION, a Virginia
corporation, its managing partner
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
RFS SPE 2 1998 LLC
By: RFS MM 2 1998 CORPORATION, a Virginia
corporation, its managing partner
By: /s/ Randall Churchey
--------------------------------
S-2
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
DOUBLETREE CORPORATION
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
HILTON HOTELS CORPORATION
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
S-3