CONTINGENT PURCHASE PRICE PARTICIPATION AGREEMENT
Agreement as of the ____ day of ________, 200_ by and among MPH Investments
of Mississippi, Inc., a Mississippi corporation ("Vicksburg Buyer"), AP
Properties of Mississippi, Inc., a Mississippi corporation ("Vicksburg Seller"),
MPH Investments of Illinois, Inc. ("Freeport Buyer") and Freeport IL 899, L.L.C.
("Freeport Seller").
RECITALS
A. Vicksburg Seller is a wholly-owned subsidiary of Arlington Hospitality,
Inc. ("AHI") and the owner of a leasehold estate and the improvements thereon
comprising the AmeriHost Inn - Vicksburg, Mississippi, an 89 room hotel (the
"Vicksburg Hotel"), which, together with all tangible and intangible property
related thereto, and all improvements and betterments hereafter made to the
Vicksburg Hotel through the earlier to occur of (i) the fifth anniversary of the
date of this Agreement (the "Outside Date") and (ii) the date of sale (the
"Vicksburg Sale Date") of all or substantially all of the foregoing by Vicksburg
Buyer to an unaffiliated third party ("New Vicksburg Buyer"), is hereinafter
collectively referred to as the "Vicksburg Property."
B. Freeport Seller is a wholly-owned subsidiary of AHI and the owner of a
64 room AmeriHost Inn hotel and all underlying land in Freeport, Illinois (the
"Freeport Hotel"), which, together with all tangible and intangible property
related thereto, and all improvements and betterments hereafter made to the
Freeport Hotel through the earlier to occur of (i) the Outside Date and (ii) the
date of sale ("Freeport Sale Date") of all or substantially all of the foregoing
by Freeport Buyer to an unaffiliated third party ("New Freeport Buyer"), is
hereinafter collectively referred to as the "Freeport Property." The Vicksburg
Property and Freeport Property are hereinafter sometimes collectively referred
to as the "Properties" and individually referred to as a "Property."
C. Vicksburg Buyer and Vicksburg Seller will be closing upon a certain
purchase agreement for the sale of the Vicksburg Hotel (the "Vicksburg Purchase
Contract") for a purchase price of the first mortgage debt secured by the
Vicksburg Hotel on the closing date plus $468,850 (the "Vicksburg Buyer's
Purchase Price") and the parties are desirous of providing for the Vicksburg
Seller's contingent right to participate in some of the future appreciation of
the Vicksburg Hotel as hereinafter provided.
D. Freeport Buyer and Freeport Seller will be closing upon a certain
purchase contract for the sale of the Freeport Hotel for a purchase price equal
to the first mortgage debt secured by the Freeport Hotel plus $132,237
("Freeport Purchase Contract") and the parties are desirous of providing for the
Freeport Seller's contingent right to participate in value of the Freeport Hotel
above $1,300,000, as hereinafter provided. The participation proceeds payable to
the Vicksburg Seller and the Freeport Seller per this Agreement are sometimes
hereinafter referred to as "Participation Proceeds."
E. AHI has entered into an Omnibus Agreement with Michael P. Holtz, the
controlling shareholder of each of the Vicksburg Buyer and the Freeport Buyer,
which
contemplates the transactions set forth in these Recitals, as well as the
termination and settlement of his employment relationship with AHI effective as
of closing of the property purchases.
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Recitals; Effective Date. The recitals set forth above are incorporated
by reference herein and made a part hereof as if fully rewritten. This Agreement
shall be effective on the date of closings of the Vicksburg Property Contract
and Freeport Purchase Contract, and shall survive the closings of said
contracts.
2. Vicksburg Property. In the event of a sale of the Vicksburg Property to
a New Vicksburg Buyer on or before the Outside Date, Vicksburg Buyer agrees to
pay to Vicksburg Seller on the date of the closing of the sale of the Vicksburg
Property to the New Vicksburg Buyer, as additional purchase price for the sale
of the Vicksburg Hotel under the Vicksburg Purchase Contract, the amount, if
any, equal to the sum of: (i) fourteen percent (14%) of the Net Proceeds from
the sale of the Vicksburg Property in excess of $3,500,000, capped in all events
at $140,000 (i.e., fourteen percent (14%) of the first $1,000,000 in Net
Proceeds in excess of $3,500,000); plus (ii) twenty percent (20%) of all Net
Proceeds from the sale of the Vicksburg Property in excess of $4,630,729.
In the event that the Vicksburg Property has not been sold by the Outside
Date, then the Vicksburg Buyer and Vicksburg Seller shall endeavor to mutually
agree upon the value the Vicksburg Property as of the Outside Date, or failing
to mutually agree, they shall have the Vicksburg Property appraised as of the
Outside Date pursuant to the appraisal process set forth in Section 4(b) below
(the agreed on or appraised value as adjusted for capital improvements to the
subject Property as noted below being the "Vicksburg Outside Date Value"). No
later than forty-five (45) days following the date of determination of the
Vicksburg Outside Date Value, the Vicksburg Buyer shall pay to the Vicksburg
Seller the amount, if any, equal to the sum of: (i) fourteen percent (14%) of
the Vicksburg Outside Date Value in excess of $3,500,000, capped in all events
at $140,000; plus (ii) twenty percent (20%) of the Vicksburg Outside Date Value
in excess of $4,630,729.
The terms of this Section 2 shall be superseded by the terms of Section 5
if applicable.
3. Freeport Hotel. In the event of a sale of the Freeport Property to a New
Freeport Buyer on or before the Outside Date, Freeport Buyer agrees to pay to
Freeport Seller on the date of the closing of the sale of the Freeport Property
to the New Freeport Buyer, as additional purchase price for the sale of the
Freeport Hotel under the Freeport Purchase Contract the amount, if any, equal to
twenty percent (20%) of all Net Proceeds from the sale of the Freeport Property
in excess of $1,300,000.
In the event that the Freeport Property has not been sold by the Outside
Date, then the Freeport Buyer and Freeport Seller shall endeavor to mutually
agree upon the value the Freeport Property as of the Outside Date, or failing to
mutually agree, they shall have the Freeport Property appraised as of the
Outside Date pursuant to the appraisal process set forth in Section 4(b) below
(the agreed on or appraised value as adjusted for capital improvements to the
subject
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Property as noted below being the "Freeport Outside Date Value"). No later than
ten (10) days following the date of determination of the Freeport Outside Date
Value, the Freeport Buyer shall pay to the Freeport Seller the amount, if any,
equal to twenty percent (20%) of the Vicksburg Outside Date Value in excess of
$1,300,000.
Notwithstanding anything to the contrary contained herein, to the extent
that the Freeport Property is sold prior to the Vicksburg Property and the
Freeport Net Proceeds of sale of the Freeport Property to the Freeport Buyer
from the New Freeport Buyer, after satisfaction of all mortgage debt secured by
the Property are insufficient to pay the contingent purchase price payments
called for in this Section 3 in full, then the deficiency if any shall accrue
without interest and be payable by the Vicksburg Buyer upon the earlier of the
sale of the Vicksburg Property or the Outside Date, in addition to the other
monies, if any, otherwise owing from the Vicksburg Buyer to the Vicksburg Seller
per Section 2 hereof.
The terms of this Section 3 shall be superseded by the terms of Section 5
below, if applicable.
4. Computation Guidelines.
(a) Net Proceeds. For purposes of computing "Net Proceeds" from the
sale of a Property, there shall be: (i) added to the sales price the amount
of direct or indirect compensation or fees paid or payable to the seller of
the Property and/or any affiliate or designee of such seller, including but
not limited to consulting fees, asset management fees, commissions, non
competition covenant fees, etc. (collectively, "Affiliate Fees"); provided
however, to the extent an Affiliate Fee is already included as a portion of
the sales price of the Property (e.g., if three percent (3%) commission is
payable by the seller of the Property to an affiliate of the Seller), then
such Affiliate Fee shall not be added to the sales price of the Property
for purposes of this Section 4(a)(i); and (ii) subtracted from the sales
price the sum of the following: (A) all actual third party closing costs
paid by the seller in connection with the sale of the Property; plus (B)
all third party commissions paid in connection with the sale of the
Property; plus (C) all capital expenditures incurred by the seller of the
Property following the date of this Agreement through the date of sale (but
in no event later than the fifth anniversary of the date hereof), as
reduced to the extent of accumulated depreciation for those capital
expenditures made over two years prior to the date of sale, all as computed
in accordance with GAAP.
(b) Appraised Value. In order to determine the fair market value of a
Property as of the Outside Date, the Property in question shall be
appraised as of the Outside Date by an appraiser mutually agreeable to the
parties, or should they fail to agree upon an appraiser within ninety (90)
days following the Outside Date, then by an appraiser selected by Cushman &
Wakefield, Inc. (which may be Cushman & Wakefield, Inc.) For purposes of
the contingent purchase price payments called for above, the appraised
value shall be reduced as to each Property by the amount of the sum of: (i)
capital expenditures made by the relevant owner during the two years
preceding the Outside Date; plus (ii) the amount of capital expenditures
made by the relevant owner during the first 3 years following the date
hereof, as reduced by the accumulated depreciation with respect to
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such expenditures from the date placed in service through the Outside Date,
as computed in accordance with GAAP.
5. Early Payment. Notwithstanding anything to the contrary contained
herein, Vicksburg Buyer and Freeport Buyer shall have the right to prepay in
their entirety all contingent purchase price amounts that would otherwise be due
and owing with respect to the Properties per Section 2 and Section 3 above by
tender of the cumulative sum of $340,000 (subject to dollar-for-dollar credit to
the extent of prior payments pursuant to Section 6) to the Vicksburg Seller and
to the Freeport Seller or their assigns, to be allocated among them as they deem
proper (the "Early Contingent Sum Payment") at any time prior to the Vicksburg
Sale Date (the date of such payment being the "Early Payment Date"); provided
that such Early Contingent Sum Payment is made prior to the Outside Date in one
lump sum (subject to the right to credit for Participation Proceeds payments
previously paid per the operation of Section 6 below), and provided further; if
a Property is under contract for sale on or before ninety (90) days following
the Early Payment Date and is sold pursuant to such contract or an extension or
modification thereof or a new contract with the buyer named therein or its
affiliates entered into within ninety (90) days following termination of the old
contract, then a new computation shall be made to determine: (i) the amount of
Participation Proceeds that would have been paid with respect to such Property
had the sale occurred on the Early Payment Date, plus (ii) the amount of
Participation Proceeds that would have been paid with respect to the other
Property based on the adjusted appraised value as of the Early Payment Date (as
computed in accordance with Section 4(b) above, except in lieu of using the
Outside Date, the Property will be valued as of the Early Payment Date, and the
reduction for capital expenditures shall be for the sum of all capital
expenditures made by the relevant owner during the two (2) years preceding the
Early Payment Date, plus the amount of the relevant owner's capital expenditures
as reduced by accumulated depreciation for the Property preceding the two (2)
year period), provided that if such other Property is also sold pursuant to a
contract of sale entered into on or before ninety (90) days following the Early
Payment Date, then the Net Proceeds from such sale (as adjusted per Section 4(a)
above) shall be used in lieu of appraised value; to the extent that the sum of
the amounts computed per subparagraphs (i) and (ii) immediately above exceed
$340,000 (such amount being the "Excess") then no later than the date of the
computation of said sum, the Freeport Buyer and Vicksburg Buyer jointly and
severally agree to pay the Excess as among the Vicksburg Seller and Freeport
Seller or their assigns) as they or their designee shall designate, or barring
any designation, the Excess shall be split equally among them.
6. Refinancing. In the event that prior to the Outside Date a Property
owner refinances one of the Properties, then the net proceeds from such
refinancing (the "Refinancing Net Proceeds") shall be applied toward an initial
payment against the Participation Proceeds called for in Section 2 and Section 3
hereof as if they had constituted Net Proceeds from sale of the Property. Upon a
subsequent refinancing of the Property prior to the Outside Date or upon a sale
of the Property or valuation of the Property effective as of the Outside Date,
any payments made to the Vicksburg Seller or Freeport Seller or their assigns
per operation of the immediately preceding sentence shall be credited against
the Participation Proceeds otherwise payable hereunder; however, in no event
shall the Vicksburg Buyer or Freeport Buyer be entitled to a return of any such
Refinancing Net Proceeds previously made. For purposes hereof, the term
Refinancing Net Proceeds shall mean the proceeds available to a Property owner
upon refinancing of its Property, after payment of the following: (i) payoff of
debt secured by the
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Property in question; and (ii) payment of all nonaffiliated third-party costs
and expenses incurred in connection with effecting the refinancing, including
but not limited to appraisal fees, mortgage recording costs and legal fees.
7. Notices. Any notices given or required to be given hereunder shall
be by hand delivery, by overnight courier or by telecopy confirmed by answerback
received. Notices shall be deemed given on the date sent for hand delivery and
telecopy, and the day after the date sent for overnight courier. All notices
shall be sent to the following addresses, or such other addresses as the party
may direct by written notice:
IF TO SELLER: WITH A COPY TO:
Arlington Hospitality, Inc. Shefsky & Froelich Ltd.
2355 South Arlington Heights Road--Suite 400 444 North Michigan Avenue--Suite 2500
Arlington Heights, IL 60005 Chicago, IL 60611
Attention: James Dale, Chief Financial Officer Attention: Mitchell D. Goldsmith, Esq.
Telephone: 847-228-5400 Telephone: 312-836-4006
Facsimile: 847-228-5409 Facsimile: 312-527-3194
IF TO BUYER: WITH A COPY TO:
Michael P. Holtz Piper Rudnick
490 East Route 22 203 North LaSalle Street--Suite 1800
North Barrington, IL 60010 Chicago, IL 60601
Telephone: 847-277-0068 Attention: David Glickstein, Esq.
E-Mail: mpholtz@aol.com Telephone: 312-368-4000
Facsimile: 312-236-7516
IF TO ESCROW AGENT:
First American Title Insurance Company
30 N. LaSalle Street
Chicago, Illinois 60602
Attention: Greg Chaparro, Esq.
Freeport Buyer agrees to notify AHI and Freeport Seller, and Vicksburg Buyer
agrees to notify AHI and Vicksburg Seller as soon as the applicable Property
owner begins the sales or refinancing process for its Property and further
agrees to keep them notified periodically of its progress and the terms and
conditions of such efforts from time to time.
8. Section Headings. The section headings used herein are inserted solely
for the convenience of reference and shall not affect the construction or
interpretation of this Agreement.
9. Entire Contract; Survival. This Agreement constitutes the entire sale
and purchase contract between the parties hereto and there are no other
understandings, oral or written, relating to the subject matter hereof. This
Agreement may not be changed, modified or amended, in whole or in part, except
in writing, signed by all parties. The obligations of the parties hereunder
shall survive any sale of the Freeport Property by the Freeport Buyer and any
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sale of the Vicksburg Property by the Vicksburg Buyer or any subsequent sales of
such Properties.
10. Invalid Provisions. If any one or more the provisions of this
Agreement, or the applicability or any such provision to a specific situation,
shall be held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Agreement
and all other applications of any such provision shall not be affected thereby.
11. Construction. The words "include" or "including" shall be construed as
incorporating, also "but not limited to" or "without limitation." The word "day"
means a calendar day, unless otherwise specified. The words "herein," "hereof,"
"hereunder" and other similar compounds of the words "here" when used in this
Agreement shall refer to the entire Agreement and not to any particular
provision or section. If the last day of any time period stated herein shall
fall on a Saturday, Sunday or legal holiday, then the duration of such time
period shall be extended so that it shall end on the next succeeding day which
is not a Saturday, Sunday or legal holiday. Whenever used in this Agreement, the
singular shall include the plural, the plural the singular, and the use of any
gender shall be applicable to all genders. Marginal notes are inserted for
convenience only and shall not form part of the text of this Agreement. No
inference in favor or against either party shall be drawn based upon which party
or which party's counsel served as principal draftsman of this Agreement.
12. Enforcement. Should a party breach any of its obligations under this
Agreement, then any of the non-breaching parties may bring an action to compel
performance and/or payment of the breached obligation, and the prevailing party
in such action shall be entitled to reimbursement of all costs, expenses and
legal fees incurred in connection with such action. Any contingent purchase
price payments called for hereunder and not paid when due shall bear interest at
the lesser of the maximum legally permitted rate or twelve percent (12%) per
annum, compounded semi annually.
13. Binding Effect. This Agreement and the terms and conditions hereof
shall extend to and be binding upon the parties hereto and their successors and
assigns; provided, that each of Freeport Seller and Vicksburg Seller may assign
their rights and obligations under this Agreement (with written notice to
Vicksburg Buyer and Freeport Buyer) to Arlington Hospitality, Inc. or such other
entity as either of them designates pursuant to an assignment and assumption
agreement executed by the assignor and assignee.
14. Counterparts and Copies. This Agreement may be executed in several
counterparts, all of which, when taken together, shall be deemed to be one
original. Each fully executed copy also shall be deemed to be an original.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with substantive laws of the State of Illinois. Any dispute with
respect to the subject matter hereof shall be litigated in Cook County,
Illinois, to which jurisdiction and venue all parties consent. All parties
hereto waive their right to trial by jury with respect to any dispute among them
regarding this Agreement or the subject matter hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BUYERS: SELLERS:
MPH INVESTMENTS OF MISSISSIPPI, INC. AP PROPERTIES OF MISSISSIPPI, INC.
By: By:
--------------------------------- ---------------------------------
Michael P. Holtz, President James B. Dale, Secretary
MPH INVESTMENTS OF ILLINOIS, INC. FREEPORT ILLINOIS 899, L.L.C.
By: ARLINGTON INNS OF AMERICA, INC.,
By: its Manager
---------------------------------
Michael P. Holtz, President
By:
----------------------------
James B. Dale, Secretary
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