HOST MARRIOTT CORPORATION INTERSTATE HOTELS CORPORATION
March 18, 1997
VIA FACSIMILE NO. (212) 315-3602
Manhattan Beach Hotel Partners, L.P.
c/o Eastdil Realty Company, L.L.C.
40 West 57th Street
New York, New York 10019
ATTN: Lawrence B. Wolfe
Managing Director
RE: Radisson Plaza Hotel, Manhattan Beach, California
Dear Larry:
This letter (the "Letter") will serve to set forth the basic terms and
conditions upon which a joint venture of Host Marriott Corporation and
Interstate Hotels Corporation ("Purchaser") is interested in purchasing the
Radisson Plaza Hotel located in Manhattan Beach, California (the "Hotel").
Purchaser is interested in purchasing from the owner of the Hotel, Manhattan
Beach Hotel Properties, L.P. ("Seller"), all of Seller's right, title, and
interest in and to the Hotel and adjacent golf course, the leasehold interest
in the land related thereto, and the improvements thereon (the "Real
Property"), together with all of Seller's right, title, and interest in and to
any and all furnishing, fixtures, and equipment (in amounts and at levels
consistent with past practices and whether in current use or stored for future
use), books, records, work papers, and other historical tax, accounting, and
other information, plans and specifications, permits and licenses, contract
and reservation rights, leases and agreements, vehicles and parking, and
intangible and appurtenant rights pertaining to the Real Property (collectively,
the "Personal Property," and together with the Real Property, the "Primary
Property").
The terms and conditions of our offer to purchase are as follows:
1. Purchase Price. The Purchase Price for the Primary property shall be
Thirty-Eight Million Two Hundred Fifty Thousand Dollars ($38,250,000.00). In
addition, at the Closing (as such term is hereinafter defined) Purchaser shall
purchase the following from Seller: (I) all unopened and unspoiled food and
beverage inventory, liquor, supplies held for resale, and merchandise held for
resale (collectively, the "Inventory"), at their original cost; and (ii) all
accounts receivable at the Hotel which are aged as of the Closing not more than
ninety (90) days, on a dollarfor-dollar basis (the "Current Receivables"), and
Seller shall retain, and Purchaser shall use its best efforts to collect on
behalf of Seller, all other accounts receivable at the Hotel (the "Non-Current
Receivables"). The total purchase price for the inventory and the Current
Receivables is hereinafter referred to as the "Property." The Purchase Price
and the Inventory and Receivables Price shall be payable at Closing. Purchaser
and Seller shall meet ninety (90) calendar days thereafter to review the status
of accounts receivable at the Hotel, and to make cash adjustments for Current
Receivables that Purchaser was unable to collect using its good faith
commercially reasonably efforts, and for Non- Current Receivables that
Purchaser was able to collect on Seller's behalf.
2. Accounts Payable: Liabilities. Purchaser will assume and be responsible
for all accounts payable incurred prior to the date of Closing, and Purchaser
will receive a credit against the Purchase Price for the actual amount of all
such accounts payable. Except as specifically assumed by Purchaser herein,
Seller will be responsible for all other liabilities incurred prior to the date
of Closing. Purchaser will also be responsible for all accounts payable and all
other liabilities incurred on or after the date of Closing. Purchaser will
assume all leases, licenses, and other agreements at the Closing.
3. Purchase Contract. Promptly after the date Purchaser receives a fully
executed copy of this Letter (such date being the "Acceptance Date"), Purchaser
and Seller shall endeavor to negotiate in good faith and execute a formal,
definitive contract of sale (the "Contract") in form and substance agreeable to
Purchaser and Seller and their respective counsel, evidencing the transaction
described in this Letter. The parties shall endeavor to execute the contract on
or before the expiration of the Due Diligence Period (as such term is
hereinafter defined).
4. Earnest Money Deposit. Simultaneously with the parties' execution of the
Contract, Purchaser will place the sum of One Million Five Hundred Thousand
Dollars ($1,500,000) as an earnest money deposit (the "Deposit") in escrow
with a First American Title Insurance Company office in the State of
California (the "Escrow Agent"). The Deposit will be in the form of cash and
shall be invested by the Escrow Agent in an interest-bearing account
reasonably acceptable to Purchaser and Seller. At Closing, the Deposit (and
all interest accrued thereon) will be credited against the Purchase Price.
UPON A PURCHASER DEFAULT AFTER THE CONTRACT HAS BEEN FULLY EXECUTED, SELLER'S
SOLE AND EXCLUSIVE REMEDY SHALL BE TO TERMINATE THE CONTRACT AND RETAIN THE
DEPOSIT (AND ALL INTEREST ACCRUED THEREON) AS LIQUIDATED DAMAGES.
5. Due Diligence Period. For a period (the "Due Diligence Period") expiring
thirty (30) days after the Acceptance Date, Purchaser and its consultants shall
have access to and shall review the Property, at Purchaser's sole cost and
expense. Such review shall be conducted at times reasonably acceptable to
Seller and in a non-intrusive manner, so as not to disturb or interfere with
the Property, its tenants, occupants, or guests. On or before the date which
is five (5) business days after the Acceptance Date, Seller shall either: (I)
deliver to Purchaser a copy of all leases, licenses, permits, agreements,
surveys, and environmental, zoning, and structural reports or assessments
pertaining to the property in Seller's possession or control; or (ii) notify
Purchaser in writing that Seller has no such items. In addition, promptly after
the Acceptance Date, Seller shall provide copies of all operational and other
information reasonably requested by Purchaser (including, but not limited to,
certificate(s) of occupancy and liquor license(s) and employee information).
Purchaser shall indemnify, defend, and hold Seller harmless from and against
any and all claims, loss, cost, liability, damage or expense claimed against or
incurred by Seller and arising form or with respect to Purchaser's or its
consultants due diligence activities at the Property.
6. Conditions to Closing. Conditions to Closing shall include:
A. Title and Survey. Purchaser shall be responsible for obtaining a
current ALTA "as built" survey of the Real Property (the "Survey") from a
licensed surveyor, and a current leasehold preliminary title report for
the Real Property without any exception for Seller's authority to sell
without consent of its limited partners, together with all documents
referenced therein (the "Title") from the Escrow Agent (i.e. First
American Title Insurance Company). Promptly upon receipt of the Survey
and the Title, but in any event prior to expiration of the Due Diligence
Period, Purchaser shall notify Seller in writing of any Title or Survey
matters to which Purchaser objects. Seller shall have a period of ten
(10) business days after receipt of any objections in which to notify
Purchaser that Seller will attempt to remedy any or all of the matters to
which Purchaser has objected. Unless Seller has so notified Purchaser
that Seller will attempt to remedy all such objections, Purchaser shall
have five (5) business days in which it shall either: (I) terminate the
Contract in writing and receive a return of the Deposit; or (ii) be deemed
to accept Title and the survey subject to the noted objections, other than
those which Seller has expressly agreed in writing to remedy. The Due
Diligence Period shall be extended only with respect to Title and Survey
matters during the ten (10) business day period objections are reviewed by
Seller and during the five (5) business day period Purchaser reviews
Seller's responses to such objections. It shall be a further condition to
Closing that no material casualty or condemnation has occurred.
B. Structural and Environmental Review. As soon as possible following
the Acceptance Date, Seller shall provide Purchaser with a true and
complete copy of a current phase 1 environmental assessment of the Real
Property prepared by CET Environmental Services, Inc. During the Due
Diligence Period, Purchaser shall also be permitted to obtain and to
approve, at its sole cost and expense, its own environmental assessment,
structural engineering , and zoning reports or assessments. If
Purchaser's environmental consultant recommends testing beyond a phase 1
environmental assessment, Seller will grant Purchaser a thirty (30) day
extension to the Due Diligence Period only with respect to environmental
matters, and if Purchaser does not purchase the Property, then upon
Seller's written request therefor, Purchaser shall provide Seller with
true and complete copies of all environmental assessments performed by
Purchaser or its consultants at the Property.
C. Operational Review. Prior to the end of the Due Diligence Period,
Purchaser shall review the necessity for and validity of all government or
other third party consents or approvals, including, but not limited to,
transfer of (or receipt of new) liquor license(s), ground lease(s), and the
certificate(s) of occupancy.
D. Existing Management and Franchise Agreement. Purchaser shall assume the
current management agreement with a subsidiary of Interstate Hotels Corporation
and the current franchise agreement with Radisson Hotels International, Inc.,
effective at Closing, at no cost or liability to Seller, and Purchaser shall
pay any management or franchise assumption fees and costs. Purchaser (in its
capacity as such) shall have no liability under the current management
agreement or the current franchise agreement for matters which arose or accrued
prior to the Closing date. Seller shall have no liability for any termination
or severance costs of any current employees at the Hotel or of any employees
employed as of the Closing date if such termination or severance was a result
of the transfer of the property to Purchaser and/or the later termination of
the management agreement.
E. Other Approvals. On or before the Closing date, Purchaser, with Seller's
cooperation, shall obtain any required third party approvals, estoppels, or
consents, including but not limited to the consent and approval of the City of
Manhattan Beach as ground lessor. Seller does not intend to solicit the consent
of its limited partners to the transaction proposed herein.
7. Condition of the Property. Purchaser will purchase the Property in its
"AS-IS, WHERE-IS" condition without any representations or warranties, except
that Seller will represent that: (i) it is a limited partnership, qualified to
do business in California; (ii) the execution of the Contract and the
transactions contemplated therein are duly authorized by Seller; (iii) to
Seller's knowledge, it is not in default of any contracts relating to the
property; (iv) to Seller's knowledge, it has received no written notices of
violations of laws or ordinances relating to the property; (v) to Seller's
knowledge, there are no pending or threatened legal proceedings or claims
affecting the property or Seller's interest in the Property that are not, in
Seller's reasonable opinion, covered by insurance; and (vi) to Seller's
knowledge, there is no construction at the Real Property which would give rise
to a mechanics lien. As used herein, the term "Seller's knowledge" shall
mean the actual knowledge of Jeffrey C. Carter, the president of the general
partner of Seller. Seller's representations shall remain effective only for
six (6) months after the date of Closing, and Seller shall have no liability
for any breach of said representations unless the actual, cumulative damages
suffered by Purchaser on account thereof exceeds One Hundred Thousand Dollars
($100,000.00).
8. Closing Date. The closing of the purchase of the Property (the "Closing")
shall occur on a date mutually agreeable to Purchaser and Seller, which date
shall not be later than ten (10) business days after the expiration of the Due
Diligence Period, unless the date of Closing is extended pursuant to this
Letter or the Contract.
9. Closing Costs. The parties shall share equally any escrow fees, standard
coverage (CLTA) title insurance costs, survey costs, and recording fees. Each
party shall pay its own attorneys' and accountants' fees and expenses.
Purchaser shall pay the cost of any extended (ALTA) title coverage and any
title endorsements, city and county transfer taxes, bulk and other sales and
use taxes, any management or franchise assumption or termination fees and
costs, and the City of Manhattan Beach ground lease transfer fee and costs.
10. Brokerage Commissions. The parties have not dealt with any broker other
than Eastdil Realty Company, L.L.C. (the "Broker"). Seller shall pay the
Broker's fees pursuant to separate agreement. Each party agrees to indemnify
the other for any other brokerage commissions, finders or similar fees due, or
alleged to be due, to any other broker, finder, or other party claiming through
the indemnifying party.
11. Confidentiality/Exclusivity. The terms and provisions of this Letter
shall remain confidential and shall not be disclosed to any third party other
than: (i) the partners of Seller; (ii) as may be required by law or regulation
or to comply with the filing requirements of any applicable legislation or
rule; or (iii) any counsel, consultant, or agent assisting Purchaser with its
purchase of the Property or Seller with its sale of the Property. If Purchaser
does not proceed with the purchase of the Property, Purchaser shall return to
Seller all materials and information furnished to it by Seller or Seller's
agents in connection with its review of the Property. Seller shall, and shall
direct its agents, not to solicit, offer, or accept an offer for the purchase
of the Property from any other parties until the earlier to occur of the
termination of this Letter or the Contract; provided, however, that Seller and
Seller's agents shall be permitted to continue a dialogue with other current
bidders until a Contract is executed by both parties hereto.
12. Termination.
If Purchaser and Seller are unable to agree on the terms and conditions of the
Contract, and execute and deliver the same, on or prior to end of the Initial
Due Diligence period (i.e., thirty (30) days after the Acceptance Date), then
this Letter shall automatically terminate and neither party shall have any
further rights, duties, or obligations hereunder, except for such duties and
obligations that expressly survive the termination of this Letter.
13. No Assignment. Purchaser agrees not to assign any right, title, or
interest under this Letter or the Contract without Seller's prior written
consent, except such consent shall not be necessary to assign to a preapproved
assignee, or to a wholly owned subsidiary of Purchaser with Purchaser remaining
liable for such subsidiary's performance hereunder. Seller agrees not to assign
any right, title, or interest under this Letter or the Contract without
Purchaser's prior written consent.
This Letter constitutes only a general statement of the terms of the
proposed transaction. Except with respect to Purchaser's indemnification
obligations set forth in Section 4, Purchaser's and Seller's indemnification
obligations set forth in Section 10, Purchaser's and Seller's obligations to
maintain confidentiality and exclusivity as set forth in Section 11, and
Purchaser's and Seller's obligations to negotiate in good faith as set forth
in Paragraph 3, neither Buyer nor Seller intend to be legally bound to the
other or to create any legal or equitable obligations to the other by their
execution of this Letter and, except as provided in this sentence, neither
party shall have any rights against or obligations to the other in connection
with the transaction described above until such time as the Contract has been
executed and delivered by both parties.
If the terms of this Letter are acceptable to you, please execute and
return to me an executed copy of this Letter by 5:00 p.m. E.S.T. on March 21,
1997.
Very truly yours,
PURCHASER: HOST MARRIOTT CORPORATION
By: _________________________
Name:_________________________
Title:_________________________
INTERSTATE HOTELS CORPORATION
By: _________________________
Name:__________________________
Title: ________________________
ACCEPTED AND AGREED TO this _____ day of March, 1997
SELLER:
MANHATTAN BEACH HOTEL PARTNERS, L.P.
a Delaware limited partnership
By: Manhattan Beach Commercial Properties III Inc.,
a Delaware corporation
Its: General Partner
By: _________________________________
Name: _________________________________
Title: _________________________________