EXHIBIT 10.4
CHATEAU DISTRIBUTION AGREEMENT
BY AND AMONG
JQH ACQUISITION LLC,
JQH MERGER CORPORATION,
ATRIUM HOTELS, LLC,
JOHN Q. HAMMONS HOTELS, L.P.,
JOHN Q. HAMMONS HOTELS TWO, L.P.,
JOHN Q. HAMMONS, AS TRUSTEE OF THE REVOCABLE TRUST OF JOHN Q. HAMMONS,
DATED DECEMBER 28, 1989, AS AMENDED AND RESTATED
AND
CHATEAU LAKE, LLC
Dated as of ______________, 2005
CHATEAU DISTRIBUTION AGREEMENT
THIS CHATEAU DISTRIBUTION AGREEMENT ("Agreement") is made as of
___________, 2005, by and among JQH Acquisition LLC, a Delaware limited
liability company ("Parent"), JQH Merger Corporation, a Delaware corporation
("Merger Sub"), Atrium GP, LLC, a Delaware limited liability company ("Atrium"),
John Q. Hammons Hotels, L.P., a Delaware limited partnership ("JQH LP"), John Q.
Hammons Hotels Two, L.P., a Delaware limited partnership ("Hotels Two"), John Q.
Hammons, as Trustee of the Revocable Trust of John Q. Hammons, dated December
28, 1989, as amended and restated ("JQH Trust"), and Chateau Lake, LLC, a
Missouri limited liability company ("Chateau Lake").
WHEREAS, in connection with the Amended and Restated Transaction
Agreement, dated as of June 14, 2005, by and among John Q. Hammons ("JQH"), JQH
Trust, Hammons, Inc., a Missouri corporation, JD Holdings, LLC ("JDH") and
Parent, the parties hereto desire that Hotels Two, the sole member of Chateau
Lake, convey to JQH Trust all of the limited liability company interests in
Chateau Lake held by Hotels Two, constituting 100% of the membership interests
in Chateau Lake (the "LLC Interests"), in exchange for the cancellation of
certain limited partnership interests in JQH LP held by JQH Trust;
WHEREAS, the LLC Interests shall be transferred as soon as practicable
after the effective date of the proposed merger (the "Proposed Merger") of
Merger Sub and John Q. Hammons Hotels, Inc., a Delaware corporation ("JQH,
Inc.");
WHEREAS, Hotels Two and Chateau Lake are subject to that certain
Indenture, dated as of May 21, 2002, among JQH LP, John Q. Hammons Hotels
Finance Corporation III, a Missouri corporation, and Wachovia Bank, National
Association (the "Trustee"), governing the outstanding mortgage bonds of JQH LP
(the "Indenture"); and
WHEREAS, Chateau Lake is the owner of that certain leasehold in real
property known as Chateau on the Lake Resort and Convention Center, located at
415 North State Highway 265, Branson, Taney County, Missouri (the "Property"),
encumbered by that certain loan from Bear Stearns Commercial Mortgage Inc., a
New York corporation ("Lender"), to Chateau Lake (the "Loan"), secured by, among
other things, that certain Amended and Restated Leasehold Deed of Trust,
Security Agreement and Fixture Filing dated January 6, 2005, granted by Chateau
Lake and JQH for the benefit of the Lender (the "Security Instrument") and
evidenced by that certain Promissory Note in the original principal amount of
$31,000,000, dated as of January 7, 2005, made by Chateau Lake to the order of
Lender (the "Note").
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration given and received by each party,
receipt of which is hereby acknowledged, the parties hereto agree as follows.
ARTICLE I
THE CHATEAU LAKE TRANSFER
1.1 Transfer. Subject to the terms and conditions of this Agreement, at
the Closing (as defined below), Parent shall cause Hotels Two to transfer the
LLC Interests to JQH Trust.
1.2 Consideration. In consideration for (a) the transfer of the LLC
Interests to JQH Trust and (b) the distribution of certain assets and related
liabilities by JQH, Inc. and JQH LP to JQH Hotels Management, LLC, a Delaware
limited liability company ("JQHHM"), as set forth in that certain Management
Assets and Obligations Distribution Agreement, dated as of the date hereof,
among Parent, JQH, Inc., JQH LP and JQHHM, limited partnership interests of JQH
LP owned by JQH Trust will be transferred by JQH Trust to JQH LP and canceled in
an amount equal to the total number of limited partnership interests of JQH LP
owned by JQH Trust multiplied by a fraction, the numerator of which is 20 and
the denominator of which is 348 (the "Canceled LP Interests").
1.3 Closing. The transfer provided for in this Agreement (the "Closing")
will take place at the offices of Kaye Scholer LLP, 425 Park Avenue, New York,
New York 10022, immediately following the satisfaction or waiver of each of the
conditions set forth in Article II hereof, or at such other time and place as
may be agreed to by the parties hereto. Such time and date are referred to in
this Agreement as the "Closing Date."
1.4 Closing Obligations. At the Closing (a) Hotels Two shall execute and
deliver to JQH Trust a membership interest assignment pursuant to which Hotels
Two shall assign the LLC Interests to JQH Trust, (b) JQH Trust shall execute and
deliver to JQH LP a partnership interest assignment pursuant to which JQH Trust
shall transfer to JQH LP the Canceled LP Interests for cancellation, (c) JQH LP
shall cancel the Canceled LP Interests, which shall cease to be issued and
outstanding and (d) JQH Trust shall assume Chateau Lake's existing debt
obligations.
ARTICLE II
CONDITIONS TO CLOSING
2.1 General Conditions. The obligations of the parties to effect the
Closing shall be subject to the following conditions unless waived in writing by
the parties:
(a) The Proposed Merger shall have been consummated.
(b) Since June 14, 2005, there must not have been commenced, or
threatened specifically in writing from a source all parties to this
Agreement reasonably deem credible, any action or legal proceeding by an
unaffiliated third party (i) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions
contemplated by this Agreement, or (ii) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of
the transactions contemplated by this Agreement.
2.2 Conditions Precedent to Obligation of Parent, Merger Sub, Hotels Two
and Chateau Lake. Parent's, Merger Sub's, Hotels Two's and Chateau Lake's
obligation to consummate the transactions contemplated by this Agreement is
subject to the satisfaction on or prior to the Closing Date of each condition
precedent listed below, any of which may be waived by Parent, Merger Sub, Hotels
Two and Chateau Lake:
(a) All of JQH Trust's representations and warranties in this
Agreement must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
(b) All of the covenants and obligations that JQH Trust is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing must have been duly performed and complied with in all material
respects.
2.3 Conditions Precedent to Obligation of JQH Trust. JQH Trust's
obligation to consummate the transactions contemplated by this Agreement is
subject to the satisfaction on or prior to the Closing Date of each condition
precedent listed below, any of which may be waived by JQH Trust:
(a) All of Parent's and Merger Sub's representations and warranties
in this Agreement must have been accurate in all material respects as of
the date of this Agreement and must be accurate in all material respects
as of the Closing Date as if made on the Closing Date.
(b) All of the covenants and obligations that Parent, Merger Sub,
Hotels Two, JQH LP and Chateau Lake are required to perform or to comply
with pursuant to this Agreement at or prior to the Closing must have been
duly performed and complied with in all material respects.
ARTICLE III
COVENANTS
3.1 Delivery of Officers' Certificate and Appraisal Report. On or prior to
the Closing Date, JQH LP shall deliver, and Parent and Merger Sub shall cause
JQH LP to deliver, to the Trustee an officers' certificate in accordance with
the terms and conditions of the Indenture stating that the transactions
contemplated by this Agreement are permitted under the terms of the Indenture
and setting forth the basis upon which the fair market value of the LLC
Interests was computed, which shall be primarily based upon the Appraisal Report
of HVS International dated December 7, 2004 to be submitted to the Trustee with
such officers' certificate.
3.2 Alternative Transfer Option. In the event the transactions
contemplated by this Agreement cannot be effectuated as described herein, the
parties hereto agree to pursue any other commercially reasonable alternative
course of action to transfer the LLC Interests to JQH Trust that may be
permitted under the Indenture, the Security Instrument, the Loan, the
organizational documents of the relevant parties and any other document
requiring consent or restricting the transfer of the LLC Interests.
3.3 Commercially Reasonable Efforts. Each of the parties hereto shall use
their respective commercially reasonable efforts to take or cause to be taken
all appropriate action, do or cause to be done all things necessary, proper or
advisable, and execute and deliver such documents and other papers, as may be
required to satisfy the conditions to Closing set forth in Article II hereof
prior to the effective date of the Proposed Merger and otherwise carry out the
provisions of this Agreement and consummate and make effective the transactions
contemplated by this Agreement, when possible in a manner intended to mitigate
the income tax liabilities of the parties.
3.4 Sub-Lease of the Property. In the event that the transactions
contemplated by this Agreement have not been consummated within three (3) months
from the effective date of the Proposed Merger, at the election of JQH Trust, in
its sole and absolute discretion, the parties hereto agree that the Ground Lease
Agreement by and between JQH Trust and Chateau Lake, dated February 27, 1996, as
amended (the "Ground Lease") shall be subleased to a JQH Trust affiliate (the
"Sublease") under a triple net lease with no additional rent payable until the
termination of the Indenture and/or the conditions to Closing set forth in
Article II are satisfied, at which time the transactions contemplated hereby
shall be consummated; provided, that any such Sublease does not violate the
Indenture, the Loan, the Security Instrument or any other material contract to
which any of Chateau Lake, JQH LP or Hotels Two is a party or by which any of
them or any of their respective assets are bound. The terms and conditions of
any such Sublease shall be structured to transfer the economic and legal
incidents of owning the LLC Interests to JQH Trust; provided, that (a) the
Sublease shall permit Chateau Lake to (i) directly make all required payments of
principal and interest on the Loan and to pay its other debt service
obligations, and (ii) reserve up to 5% of its gross revenue as a general capital
reserve, and (b) JQH Trust shall reimburse Chateau Lake for all of its
out-of-pocket costs and expenses (excluding those costs and expenses set forth
in Sections 3.6 and 6.2) incurred in connection with the Ground Lease and the
Property.
3.5 Net Working Capital Adjustment.
(a) Net Working Capital Schedule. As soon as practicable but in no
event later than 30 days after the Closing Date, JQH Trust shall prepare
and deliver to Parent an unaudited balance sheet (the "Closing Balance
Sheet") of Chateau Lake as of the close of business on the Closing Date.
The Closing Balance Sheet shall be prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") and consistent with
Chateau Lake's past practices. Simultaneously with the delivery of the
Closing Balance Sheet, JQH Trust shall also prepare and deliver to Parent
a schedule (the "Net Working Capital Schedule") setting forth JQH Trust's
calculation of Net Working Capital (as defined below) as of the Closing
Date derived from the Closing Balance Sheet, together with related
supporting schedules, calculations and documentation. As used herein, "Net
Working Capital" means the excess of (i) all of the Current Assets (as
defined below) of Chateau Lake, over (ii) all of the Current Liabilities
(as defined below) of Chateau Lake. As used herein "Current Assets" means
(i) all of the current assets of Chateau Lake, which shall include the
assets that would be classified as current assets under GAAP, and (ii) the
amount of the FF&E Reserve set forth on the Closing Balance Sheet. As used
herein, "Current Liabilities" means all of the current liabilities of
Chateau Lake, which shall include the liabilities that would be classified
as current liabilities under GAAP, but excluding the current portion of
long-term debt.
(b) Dispute. Within 30 days following receipt by Parent of the Net
Working Capital Schedule, Parent shall deliver written notice (the "Notice
of Disagreement") to JQH Trust of any dispute Parent has with respect to
the preparation or content of the Net Working Capital Schedule. The Notice
of Disagreement must describe in reasonable detail the items contained in
the Net Working Capital Schedule that Parent disputes and the basis for
any such disputes. If Parent does not notify JQH Trust of a dispute with
respect to the Net Working Capital Schedule within such 30-day period,
such Net Working Capital Schedule will be final, conclusive and binding on
the parties. In the event a Notice of Disagreement is delivered to JQH
Trust, Parent and JQH Trust shall negotiate in good faith to resolve such
dispute. If Parent and JQH Trust, notwithstanding such good faith effort,
fail to resolve such dispute within 14 days after Parent delivers a Notice
of Disagreement, then Parent and JQH Trust jointly shall engage a "Big
Four" accounting firm (the "Accountants") to resolve such dispute. Parent
and JQH Trust shall use reasonable efforts to cause the Accountants to
render a written decision resolving the matters submitted to the
Accountants within 30 days of the making of such submission. Parent and
JQH Trust shall share equally the fees and expenses of the Accountants.
All determinations made by the Accountants will be final, conclusive and
binding on the parties. Any final, conclusive and binding resolution of
the Net Working Capital set forth on the Net Working Capital Schedule made
pursuant to this Section 3.5(b) is referred to herein as the "Final Net
Working Capital."
(c) Payment. Within 10 days of the determination of the Final Net
Working Capital, (i) if the Final Net Working Capital is less than $0
("Target Net Working Capital"), then Parent shall pay to JQH Trust an
amount in cash equal to the excess of the Target Net Working Capital over
the Final Net Working Capital, and (ii) if the Final Net Working Capital
is greater than the Target Net Working Capital, then JQH Trust shall pay
to Parent an amount in cash equal to the excess of the Final Working
Capital over the Target Net Working Capital.
3.6 Expenses. Parent and JQH Trust shall share equally the amount of all
closing costs and expenses associated with the transactions contemplated by this
Agreement, including, without limitation, all (a) sales, use, transfer and
documentary taxes, (b) recording and filing fees, (c) mortgage transfer or
assumption fees, (d) title policy costs and (e) title insurance costs.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JQH TRUST
JQH Trust hereby represents and warrants as follows:
4.1 Organization and Authority. JQH Trust is validly existing under the
laws of JQH Trust's jurisdiction of creation, and the trustee executing this
Agreement on behalf of JQH Trust has all requisite trust power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly authorized by all
necessary trust action of JQH Trust, and this Agreement constitutes a valid and
legally binding obligation of JQH Trust, enforceable against JQH Trust in
accordance with its terms.
4.2 No Material Violation. The execution and delivery by JQH Trust of this
Agreement and the other agreements contemplated by this Agreement to be entered
into by JQH Trust at Closing do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and thereof
will not (a) conflict with, or result in any material violation of or default
(or an event which, with notice or lapse of time or both, would constitute a
default) under (i) any provision of the organizational documents of JQH Trust,
or (ii) any order or law applicable to JQH Trust or the property or assets of
JQH Trust or (b) give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any lien, mortgage, pledge,
security interest, claim or other type of charge or encumbrance of any kind
("Lien") upon any of the properties of JQH Trust under, any material contract to
which JQH Trust is a party or by which it or any assets of it may be bound. No
consent or approval is required to be obtained or made by or with respect to JQH
Trust in connection with the consummation of the transactions contemplated
hereby, other than the consent of the Lender that may be required under the
Security Instrument and the Note. Immediately prior to the effective time of the
Merger, the transactions contemplated by this Agreement will not result in a
violation of or default (or an event which, with notice or lapse of time or
both, would constitute a default) under the Indenture.
4.3 Title. JQH Trust is the record owner of 14,597,706 limited partnership
interests in JQH LP and the beneficial owner of all of the limited partnership
interests in JQH LP to be canceled pursuant to the terms of this Agreement.
Hammons, Inc. is the record owner of 1,446,194 limited partnership interests in
JQH LP. The Canceled LP Interests will be free and clear of all Liens as of the
Closing.
4.4 Restricted Payments. JQH LP has not, and as of the effective date of
the Proposed Merger will not have, made any Restricted Payments (as defined in
the Indenture) in reliance on Section 4.07(b)(5) of the Indenture.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub hereby jointly and severally represents and
warrants as follows:
5.1 Organization and Authority. Parent is a limited liability company duly
organized and validly existing in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has all requisite
limited liability company or corporate (as the case may be) power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly authorized by all
necessary limited liability company or corporate, as the case may be, action of
Parent and Merger Sub, and this Agreement constitutes a valid and legally
binding obligation of each of Parent and Merger Sub, enforceable against Parent
and Merger Sub in accordance with its terms.
ARTICLE VI
GENERAL PROVISIONS
6.1 Amendment; Termination. This Agreement may only be amended or
terminated by written consent of all the parties hereto.
6.2 Expenses. Except as set forth in Sections 3.4 and 3.6, all fees,
commissions and other expenses incurred by the parties in connection with the
negotiation of this Agreement and in preparing to consummate the transactions
contemplated hereby, including the fees and expenses of their respective counsel
and other advisors, will be borne by the party incurring such fee, commission or
expense.
6.3 Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original and all of which
together will be considered one and the same agreement.
6.4 Governing Law. This Agreement will be governed by the laws of the
State of Delaware, without regard to conflicts of laws principles.
6.5 Notices. Any notices or other communications required or permitted
under this Agreement must be given in writing and shall be deemed to have been
duly given if delivered (i) by hand (including by reputable overnight courier),
(ii) by mail (certified mail, return receipt requested) or (iii) by telecopy
facsimile transmission (receipt of which is confirmed):
If to JQH Trust:
John Q. Hammons
300 John Q. Hammons Parkway,
Suite 900
Springfield, Missouri 65806
Telephone: (417) 873-3595
Facsimile: (417) 873-3511
with a copy to (which shall not constitute notice):
Blackwell Sanders Peper Martin LLP
4801 Main Street, Suite 1000
Kansas City, Missouri 64112
Attn: Gary D. Gilson, Esq. and
David C. Agee, Esq.
Telephone: (816) 983-8000
Facsimile: (816) 983-8080
If to Parent, Merger Sub, Atrium, JQH LP, Hotels Two or Chateau
Lake:
JQH Acquisition LLC
Carnegie Hall Tower
152 West 57th Street, 56th Floor
New York, New York 10019
Attn: Jonathan D. Eilian
Telephone: (212) 884-8827
Facsimile: (212) 884-8753
with a copy to (which shall not constitute notice):
Kaye Scholer LLC
Three First National Plaza
41st Floor
70 West Madison Street
Chicago, Illinois 60602-4231
Attn: Gary R. Silverman, Esq.
Telephone: (312) 583-2530
Facsimile: (312) 583-2330
Any party may change the person or address for service upon it or delivery of
notices or other communications to it under this Agreement by delivering notice
of such change to the other party in accordance with this Section 6.5.
6.6 Titles and Headings. Titles and headings to Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
6.7 Assignment and Modification. No party hereto may assign their rights
or obligations hereunder without the prior written consent of the other parties.
This Agreement may be amended, modified or supplemented only by a written
instrument executed by each of the parties hereto. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, permitted assigns, legal representatives, heirs and legatees.
6.8 Waiver. The waiver by any party hereto of a breach of any provision of
this Agreement will not operate or be construed as a waiver of any subsequent
breach, whether or not similar.
6.9 Severability. This Agreement will be deemed severable and the
invalidity or unenforceability of any term or provision hereof will not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof.
6.10 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER
VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATION IN THIS SECTION 6.10.
6.11 Jurisdiction; Service of Process. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
shall be brought against any of the parties only in the Courts of the State of
Delaware or, if it has or can acquire jurisdiction, in the United States
District Court for the District of Delaware, and each of the parties consents to
the exclusive jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement, or caused this Agreement to be duly executed and delivered on their
behalf, as of the date first above written.
JOHN Q. HAMMONS, AS TRUSTEE OF THE
REVOCABLE TRUST OF JOHN Q. HAMMONS,
DATED DECEMBER 28, 1989, AS AMENDED
AND RESTATED
By:___________________________________
Name: John Q. Hammons
Title: Trustee
JOHN Q. HAMMONS HOTELS, L.P., a
Delaware limited partnership
By: JOHN Q. HAMMONS HOTELS,
INC., a Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
JOHN Q. HAMMONS HOTELS TWO, L.P., a
Delaware limited partnership
By: JOHN Q. HAMMONS HOTELS, L.P., a
Delaware limited partnership
By: JOHN Q. HAMMONS
HOTELS, INC., a Delaware
corporation
By:___________________________________
Name:_________________________________
Title:________________________________
JQH ACQUISITION LLC, a Delaware
limited liability company
By:___________________________________
Name:_________________________________
Title:________________________________
JQH MERGER CORPORATION, a Delaware
corporation
By:___________________________________
Name:_________________________________
Title:________________________________
ATRIUM HOTELS, LLC, a Delaware limited
liability company
By:___________________________________
Name:_________________________________
Title:________________________________
\
CHATEAU LAKE, LLC, a Missouri limited
liability company
By: JOHN Q. HAMMONS HOTELS
TWO, L.P., a Delaware limited
partnership
By: JOHN Q. HAMMONS
HOTELS, L.P., a Delaware
limited partnership
By: JOHN Q. HAMMONS HOTELS,
INC., a Delaware
corporation
By:___________________________________
Name:_________________________________
Title:________________________________