1
EXHIBIT 10.3
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the
Date of this Agreement defined hereinafter, between WINN Limited Partnership, a
North Carolina limited partnership, or its assigns, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser") and
Promus Hotels, Inc., a Delaware corporation ("Seller").
NOW, THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby mutually acknowledged, and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PROPERTY AND BUSINESS
On the terms and subject to all of the conditions set forth in this
Agreement, the Purchaser agrees to purchase and the Seller agrees to sell, for
the purchase price set forth herein, all of the following property
(collectively the "Premises"):
(a) the real estate described as Tract 1 (Richmond, Virginia),
Tract 2 (BWI, Baltimore, Maryland) and Tract 3 (Dallas-Market Center, Texas) on
Schedule 1 attached hereto and made a part hereof by this reference, together
with all tenements, appurtenances, easements, agreements, development rights,
air rights, rights-of-way, strips, gores, rights in adjacent avenues, streets
and alleys, rights and uses appurtenant thereto (collectively the "Real
Property");
(b) all improvements now or hereafter located on the Real Property,
including but not limited to that certain 123 room/suite Homewood Suites hotel
to be constructed by Seller on Tract 1, that certain 147 room/suite Homewood
Suites hotel to be constructed by Seller on Tract 2 and that certain 137
room/suite Homewood Suites hotel to be constructed by Seller on Tract 3 and all
fixtures which are affixed to the Real Property or Improvements (the
"Improvements");
(c) all furniture, fixtures (not part of the Real Property and
Improvements or affixed thereto), equipment, machinery, furnishings, carpets,
drapes, blinds or mini-blinds, service and maintenance equipment, linens (not
less than two and one-half (2 1/2) turns of linens shall be included), tools,
signs, landscaping equipment, supplies, pool equipment, television systems,
intercom equipment and systems, and replacement parts (the "Equipment");
(d) moneys advanced for future reservations ("Prepaid Items");
(e) all contracts, agreements, licenses, contract rights, rights
to use and other similar rights used in connection with the
2
Real Property and Improvements entered into by Seller in accordance with
Article XIV, Paragraph C hereof, specifically excluding trademarks and service
marks owned by Seller (the "Contracts");
(f) all leases and rights to use the Improvements or all or any
part thereof in third parties entered into by Seller in accordance with Article
XIV, Paragraph C hereof (the "Leases");
(g) all transferable permits, licenses, government licenses,
certificates of occupancy and approvals necessary to operate the Real Property,
Improvements, Equipment, Contracts, Leases, Intangible Rights and the other
property and rights transferred under this Agreement (the "Permits");
(h) all inventory, supplies and other materials used in connection
with the Real Property and Improvements and the hotel business operated thereon
(excluding gift shop items owned by third parties) (the "Inventory");
(i) all plans, specifications and "as-built" drawings and surveys
relating to the Real Property and Improvements in the possession of Seller or
to which Seller has access, all books and records relating to the operation or
management of the Real Property and Improvements and all warranties and
guaranties in favor of or delivered to Seller pertaining to the Premises; and
(j) all intangible property, guest ledgers, customer and mailing
lists, catalogues and brochures, telephone numbers and similar property used in
connection with the operation of the Real Property, Improvements and the
businesses known as the Homewood Suites hotel located on Tract 1, Tract 2 and
Tract 3 on Schedule 1 (collectively the "Hotels" and individually a "Hotel"),
and any telephone numbers assigned thereto (the "Intangible Rights").
Notwithstanding the foregoing, Purchaser shall not be entitled to the foregoing
information in connection with Seller's national accounts.
II. TERMS OF PURCHASE AND SALE
The purchase price for the Premises shall be as follows: (i) the
portion of the Premises pertaining to the Hotel to be constructed on Tract 1 on
Schedule 1 - $8,571,969.00; (ii) the portion of the Premises pertaining to the
Hotel to be constructed on Tract 2 on Schedule 1 - $11,917,000.00; and, (iii)
the portion of the Premises pertaining to the Hotel to be constructed on Tract
3 on Schedule 1 - $11,602,314.00, each adjusted as provided in Article IX
hereof, (the "Purchase Price"). If Seller's actual development and building
costs for a Hotel, which shall not include fees paid to Seller or its
affiliates, exceed the portion of the Purchase Price allocable to such Hotel,
less fees included therein which are
2
3
payable to Seller or its affiliates, Seller shall so notify Purchaser, and for
a period of 30 days after the latter of (i) the delivery of such notice, (ii)
the issuance of the certificate of occupancy for such Hotel, or (iii) the first
day that such Hotel is open for business, Purchaser shall have an option, but
not the obligation, to buy such Hotel for a purchase price equal to (i) the
Purchase Price plus (ii) the actual development, building and interest costs in
excess of the Purchase Price incurred by Seller in the development and building
of such Hotel ("the Option Price"). The excess costs may include only (A)
costs actually paid to third parties which are not affiliated with Seller or
any of its affiliates or (B) expenses of a category normally incurred by Seller
(i.e., salaries) that have been actually incurred by Seller and were
attributable directly to such Hotel, which attribution shall be documented in
reasonable detail to Purchaser and shall not include any management,
development or similar fees paid to Seller or any of its affiliates. If
Seller's actual development and building costs for a Hotel, which shall not
include fees paid to Seller or its affiliates, are less than the Purchase
Price, less fees included therein which are payable to Seller or its
affiliates, the Purchase Price shall be reduced by an amount equal to 100% of
cost savings in excess of 4% of the Purchase Price. The Purchase Price or
Option Price, as applicable, shall be payable by Purchaser to Seller as
follows:
A. The sum of One Hundred Fifty Thousand and N0/100 Dollars
($150,000.00) (the "Deposit") for each Hotel within five (5) days after the
receipt by Purchaser of notice from Seller that Seller has obtained a building
permit for the construction of such Hotel by check subject to collection,
payable to The Title Company of North Carolina, Inc., as agent for First
American Title Insurance Company, as Escrow Agent (the "Escrow Agent"). The
Escrow Agent shall maintain the Deposit in an interest bearing account subject
to the provisions of Article XIII. The Escrow Agent shall not disburse the
Deposit except in accordance with the terms of this Agreement. Upon the
satisfaction of all of the conditions contained in this Agreement, on the
Closing Date (as hereinafter defined) for a Hotel, the Deposit for such Hotel
shall be paid to Seller and reduce the portion of the Purchase Price or Option
Price, as applicable, for such Hotel payable at Closing pursuant to Article II,
Paragraph B hereof. In the event that this transaction is not consummated for
any reason, the Deposit for such Hotel shall be paid as provided in Article
XIII of this Agreement. Purchaser shall be entitled to payment of or a credit
for any interest earned on the Deposit unless the Deposit is forfeited in which
event interest shall be paid to Seller.
B. The balance of the Purchase Price or Option Price, as applicable,
for such Hotel, plus or minus any closing adjustments, by certified or bank
funds or by wire transfer on the Closing Date
3
4
(as hereinafter defined) for such Hotel to an account designated in writing by
Seller to Purchaser at least five (5) days prior to Closing.
C. Upon the Closing of a Hotel, the Seller shall deliver to the
Purchaser the portion of the Premises pertaining to such Hotel, including, but
not limited to, the Real Property, Improvements, Equipment and Inventory
pertaining to such Hotel, free and clear of all liens and encumbrances of
whatever type or description other than the Permitted Exceptions as defined in
Article IV, Paragraph A hereof. In accordance with the foregoing, the
outstanding balance of all secured indebtedness encumbering the portion of the
Premises pertaining to such Hotel, including, but not limited to, the portion
of the Real Property, Improvements, Equipment and Inventory pertaining to such
Hotel, shall be paid in full at or prior to Closing by Seller.
III. FEASIBILITY PERIOD; OTHER REQUIREMENTS AND CONTINGENCIES
A. This Agreement is contingent upon Purchaser's approval of the
Premises, including but not limited to, approval of the Inspection Items (as
hereinafter defined). The Inspection Items have been submitted to Purchaser on
or prior to the Date of this Agreement, or as specifically provided herein, are
available to Purchaser for inspection at the Improvements. Purchaser shall
have the period of time from the Date of this Agreement until and through June
3, 1996 to review the Inspection Items and to otherwise inspect the Premises
and its or their condition (such period is hereinafter referred to as the
"Feasibility Period"). On or prior to the expiration of the Feasibility
Period, the Purchaser shall notify the Seller whether or not the Purchaser
elects to purchase the Premises, which election shall be made in the sole,
absolute and unreviewable discretion of the Purchaser. If Purchaser notifies
Seller that it elects not to proceed with this transaction, on or prior to the
expiration of the Feasibility Period, then this Agreement shall terminate and
shall be null, void and without further force or effect, any Deposit (together
with all interest) made as of such time shall be promptly refunded to Purchaser
by Escrow Agent and neither party shall have any further liability to the
other, except for the indemnity by Purchaser set forth in Article III,
Paragraph E, which shall survive such termination of this Agreement. The
Inspection Items shall remain the property of Seller until Clsoing, after which
Purchaser shall be entitled to retain the Inspection Items, however, in the
event Purchaser terminates this Agreement pursuant to the provisions set forth
in this Agreement, Purchaser shall destroy all copies of the Inspection Items
in Purchaser's possession and return all originals thereof to Seller. Further,
prior to Closing, Purchaser shall be prohibited from sharing any information in
the Inspection Items with any third party other than Purchaser's Lender,
Purchaser's accountants, attorneys or other professionals employed or retained
by Purchaser to assist Purchaser in Purchaser's review and analysis of the
Inspection Items;
4
5
provided, however, nothing herein shall prevent or restrict Purchaser relative
to any disclosures which Purchaser may be required to make pursuant to any
rules and regulations of the Securities and exchange Commission applicable to
Purchaser. The conditions enumerated in this Article III are for Purchaser's
benefit only and the non-occurrence of a state of facts sufficient to satisfy
any of such conditions may not be used or pleaded by Seller as a defense to the
enforceability of this Agreement.
For purposes of this Agreement, the term "Inspection Items" shall
mean:
(a) the marketing studies and financial projections prepared by or
on behalf of Seller with respect to the Hotels; and,
(b) to the extent available, plans and specifications relating to
the Hotels; and,
(c) when received by Seller, all engineer's reports, appraisals,
environmental reports, surveys or other reviews, evaluations
or studies of or with respect to the Premises.
B. Purchaser and Seller acknowledge that Seller has not yet
commenced the construction of any of the Hotels. In that regard, Seller
hereby agrees that Purchaser shall have certain rights and approvals pertaining
to the construction of the Hotels as follows: (i) the right to approve the
plans and specifications relating to each Hotel prior to the commencement of
the construction thereof; (ii) the right to approve all change orders which (a)
are, either alone or together with other change orders, reasonably expected to
result in an additional development or construction costs or savings of more
than $25,000.00 for a Hotel or, (b) except if the change is required to secure
the fundamental integrity of the structure or systems at the Hotel, would or
could diminish the value or operation efficiency of the Hotel; (iii) the right
to approve Seller's contractors and architects with respect to each Hotel,
which approval shall not be unreasonably withheld; and, (iv) Seller shall
provide Purchaser with monthly progress reports for each Hotel, including such
detail as Purchaser reasonably requires to confirm Seller's actual development
and building costs for each Hotel.
C. Purchaser and Seller acknowledge that the estimated date for the
issuance of a certificate of occupancy and the opening for each of the Hotels
is as follows: (i) the Hotel to be constructed on Tract 1 on Schedule 1 -
April, 1997; (ii) the Hotel to be constructed on Tract 2 on Schedule 1 -
October, 1997 __________; and, (iii) the Hotel to be constructed on Tract 3 on
Schedule 1 - August, 1997______. Notwithstanding anything contained in this
Agreement to the contrary, in the event the foregoing events have not occurred
within 120 days after the date set forth above for a Hotel, then Purchaser
shall not be required to purchase such Hotel, but shall have the option,
exercisable within 30 days after
5
6
the latter of (i) the issuance of the certificate of the occupancy for such
Hotel or (ii) the first day that such Hotel is open for business, to purchase
such Hotel for the Purchase Price or Option Price, as applicable, and on the
terms set forth in this Agreement.
D. Purchaser and Seller have entered into that certain Stock
Purchase Agreement dated April __, 1996 ("the Stock Purchase Agreement") and
in accordance therewith, on the Closing Date defined hereinafter for a Hotel,
Seller shall purchase common stock directly from Winston Hotels, Inc., the
general partner of Purchaser, in an aggregate amount equal to $12,500
multiplied by the number of guest rooms/suites in such Hotel. The number of
shares of such common stock to be received by Seller upon the Closing defined
hereinafter of such Hotel shall be determined as set forth in the Stock
Purchase Agreement. The purchase of such common stock shall be upon the terms
and conditions expressly set forth in the Stock Purchase Agreement relative
thereto.
E. Simultaneous with Closing of a Hotel defined hereinafter,
Purchaser shall enter into a percentage lease ("the Percentage Lease") with
Winston Hospitality, Inc., a North Carolina corporation ("the Lessee"),
relative to such Hotel, in substantially the form of lease executed to date by
and between Purchaser and the Lessee with respect to Purchaser's currently
owned hotels and with economic terms which, on a proforma basis, using Seller's
budget for such Hotel, will produce a gross operating profit to Lessee for such
Hotel equal to at least five percent (5.0%) of the gross revenues of such
Hotel; provided, however, it is expressly acknowledged and understood by
Purchaser that Seller's budget is prepared on a proforma basis and Seller makes
no warranty with respect thereto. Simultaneous with the execution of the
Percentage Lease, the Lessee and Seller shall execute a management agreement
("the Management Agreement") pursuant to which Seller shall manage such Hotel.
The form of Management Agreement agreed to between the Lessee and Seller to be
executed at Closing of a Hotel is attached hereto as Schedule 2 and
incorporated herein by this reference. As used herein, "gross operating
profit" shall mean the gross revenues of such Hotel for a period (gross
revenues shall mean gross revenues net of customary adjustments including (i)
interest, (ii) excise, room and sales and use taxes, (iii) insurance and
condemnation proceeds, (iv) commissions, (v) refunds and (vi) vendor payments
and splits (i.e., from video rentals, vending machines, laundry, etc.), less
all operating expenses borne by the Lessee (which does not include real
property taxes and casualty insurance premiums, which are paid by Purchaser),
and less any amounts payable by the Lessee for the period under the Percentage
Lease.
F. Simultaneous with Closing of a Hotel defined hereinafter,
Seller shall cause a Homewood Suites franchise agreement ("the Franchise
Agreement") to be executed for such Hotel and a Homewood Suites franchise
license to be issued to the Lessee for such Hotel for a term at least equal to
the greater of (i) twenty (20) years or
6
7
(ii) the term of the Percentage Lease, each to be in the form then being
executed and issued for Homewood Suites hotels as of the Closing Date of such
Hotel, including the then current rate and fee schedules. Seller shall approve
the Lessee as an operator of such Hotel in the Franchise Agreement.
G. Seller acknowledges that Purchaser is a real estate investment
trust and in accordance therewith, Purchaser's obligation to close this
transaction shall be conditioned upon Purchaser obtaining the approval of this
Agreement and the transaction contemplated herein from the board of directors
of the general partner of Purchaser, which approval shall be obtained or denied
on or before March 31, 1996.
Seller and Purchaser shall cooperate and take all actions reasonably
necessary, in a diligent and expeditious manner, to effectuate the inspections,
transfers and other reviews required by this Article III during the Feasibility
Period and during the course of construction of each of the Hotels. The
Purchaser and its representatives and agents shall have the right from time to
time up to Closing, on reasonable notice to Seller and accompanied by a
representative of Seller, to visit the sites of each of the Hotels and to meet
with Seller's contractors, architects and vendors to review the progress and
status of the development and construction processes and for due diligence
purposes, in order to inspect the Premises, including but not limited to,
taking soil samples and test borings, and conducting environmental studies,
physical surveys, engineering studies and other such inspections and reviews
that the Purchaser shall deem reasonably necessary to determine the condition
and financial status of the Premises. Purchaser shall conduct all of the
foregoing in such a manner so as not to disturb guests at the Hotel or disrupt
the construction or operations thereof and shall immediately restore any damage
or disturbance to the Premises caused by any of the foregoing to the condition
in which same existed immediately prior to such damage or disturbance.
Purchaser does hereby covenant and agree to indemnify, defend and hold Seller
harmless from and against any and all loss, damage and liability which may
arise as a result of Purchaser and Purchaser's agents and employees taking
advantage of the foregoing access to the Premises prior to Closing of a Hotel.
The indemnity by Purchaser set forth herein shall survive Closing of a Hotel
and any termination of this Agreement.
IV. TITLE; TITLE POLICY; SURVEY
A. Within ten (10) days after receipt thereof by Seller, Seller shall
furnish to Purchaser a copy of Seller's owner's title insurance policy issued
to Seller relative to the portion of the Real Property upon which a Hotel is to
be constructed. Within sixty (60) days after receipt of a copy of Seller's
owner's title insurance policy for the portion of the Real Property upon which
a
7
8
Hotel is to be constructed, Purchaser shall procure, at Purchaser's cost, a
preliminary title report and title insurance binder (the "Title Commitment")
from First American Title Insurance Company (the "Title Company") pursuant to
which the Title Company shall commit to issue a current A.L.T.A. Form B owner's
fee simple title insurance policy (or its equivalent issued in the state where
the subject Hotel is located) or other policy of title insurance as shall be
reasonably satisfactory to Purchaser and to any lender of Purchaser (the
"Lender") in the amount of the Purchase Price for such Hotel (the "Title
Policy") insuring that the Purchaser shall receive at closing, good, marketable
and indefeasible fee simple title to such portion of the Real Property, free
and clear of ALL liens, exceptions, encumbrances or defects other than the
matters expressly approved in writing by Purchaser as permitted exceptions to
title as set forth hereinafter (the "Permitted Exceptions").
Prior to the expiration of such sixty (60) day period, the Purchaser
shall notify (the "Title Notice") the Seller as to which of the liens, defects,
encumbrances or exceptions set forth in the Title Commitment are objectionable
to Purchaser ("the Title Defects") and which of such matters are acceptable to
Purchaser as the Permitted Exceptions. Within ten (10) days after receipt by
Seller of the Title Notice, the Seller shall use reasonable best efforts to
attempt to cure the Title Defects to the reasonable satisfaction of the
Purchaser; provided, however, Seller shall not be obligated to expend any of
Seller's funds to cure any Title Defects, except Title Defects in the form of
money judgments, mortgages and statutory liens which Seller shall be obligated
to remove of record at or prior to Closing. In the event the Seller is unable
to cure the Title Defects to the reasonable satisfaction of the Purchaser
(except for those Title Defects that Seller is obligated to remove of record in
accordance with the immediately preceding sentence) within such ten (10) day
period or the Purchaser does not agree to waive such Title Defects, then this
Agreement shall terminate and shall be null, void and without further force or
effect, the portion of the Deposit allocated to such Hotel (together with all
interest) shall be returned to Purchaser and neither party shall have any
further liability to the other with respect to such Hotel. Seller represents
that to the best of Seller's knowledge, there are no and will be no liens or
other secured indebtedness encumbering any portion of the Premises.
B. When available, Seller shall deliver a copy of Seller's as
built survey of the Real Property and the Improvements currently located
thereon ("the As-Built Survey"), prepared by a surveyor duly licensed under the
laws of the state in which the portion of the Real Property is located,
reasonably acceptable to the Purchaser and the Lender in accordance with ALTA
or such other standards as shall be reasonably satisfactory to Purchaser. The
As-Built Survey shall be in form and substance satisfactory to the Purchaser,
the Title Company and the Lender. Purchaser shall, at Purchaser's election,
8
9
cause the As-Built Survey to be updated, obtain a new survey or, if acceptable
to the Title Company and Lender, obtain a certification from Seller that there
have been no improvements, structures or other changes subsequent to the date
of the As-Built Survey which would be revealed by a more current survey
thereof, whereby the elected method shall be certified to the Purchaser, Title
Company and Lender (the form of certification to be reasonably satisfactory to
the Title Company, Purchaser and Lender) ("the Current Survey"). The Current
Survey shall show, among other things, that all buildings are within lot and
building lines, the location of such lines, the dimensions and total area of
the Real Property and Improvements, the location and number of parking spaces,
ingress and egress to adjoining streets, all benefiting and burdening
easements, improvements, appurtenances, rights of way and utilities whether
above or below ground, all encroachments from or into the Premises, all
structures and improvements on the Real Property and all easements, rights of
way and other restrictions of record properly identified with recording
information and certifying that the Premises are not within a flood plain or
other flood hazard area. The Current Survey shall be made in accordance with
the Minimum Standard Detail Requirements for Land Title Surveys adopted by the
American Land Title Association (or its equivalent in the state where the Hotel
is located). The Current Survey and certification shall be sufficient to
remove the survey exception from the Title Policy without indemnity by
Purchaser. Within fifteen (15) days after the delivery of the As-Built Survey
for a Hotel to Purchaser, the Purchaser shall notify the Seller of any
objections of Purchaser or Lender to the As-Built Survey ("Survey Defects").
Survey Defects shall be deemed to be Title Defects for purposes of this
Agreement and Seller shall cure such Survey Defects according to the same
procedure as for Title Defects.
C. The Purchaser and Seller shall each be responsible for the
payment of its own transaction costs, including counsel fees. Purchaser shall
be responsible for the costs incurred with the physical inspection and any
survey of the Real Property and Improvements which Purchaser causes to be
conducted and prepared, including any environmental and engineering studies
other than those delivered by Seller to Purchaser in accordance with Article
III, Paragraph A hereof and this Article IV. At Closing, Purchaser shall pay
all premiums for the Title Policy. Any and all transfer taxes, real estate
excise taxes and sales taxes payable in connection with the transfer of the
Premises, or any portion thereof, and the Personalty (as hereinafter defined)
shall be paid by Seller. Unless otherwise stated in this Agreement, the
Purchaser and Seller shall pay all costs in connection with the Closing of this
transaction as are customary in the locale where the subject Hotel is located.
V. CLOSING
A. The closing of each Hotel shall occur within thirty (30) days
after the latter to occur of (i) the issuance of the
9
10
certificate of occupancy and all other licenses and permits required to operate
such Hotel as it is intended to be operated, or (ii) the first day that such
Hotel is open for business, and shall be deemed to occur at the offices of
Brown & Bunch, 4900 Falls of Neuse Road, Suite 210, Raleigh, North Carolina
27609, without the requirement that Purchaser and Seller be physically present
thereat, or such other date or place as shall be mutually acceptable to
Purchaser and Seller (the "Closing Date"). The closing of each Hotel
contemplated by this Agreement shall be deemed effective as of 12:01 a.m. on
the Closing Date ("Closing"). If the date of Closing falls on a Saturday,
Sunday or banking holiday, the Closing shall take place on the next business
day thereafter.
B. At the Closing of each Hotel, the Seller shall deliver to
Purchaser and perform the following with respect to each Hotel:
1. A Special Warranty Deed conveying good, marketable, insurable
and indefeasible fee simple title to the Real Property free and clear of all
defects, exceptions, liens or encumbrances, except for the Permitted
Exceptions.
2. Seller shall pay and discharge any special assessment which on or
before the date of Closing, (a) has been levied, imposed, or confirmed against
the Premises, (b) affects or is a lien upon the Premises or (c) although not
yet a lien upon the Premises, is attributable to improvements which benefit or
will benefit the Premises. If any of the foregoing assessments are for
improvements which have been fully constructed as of Closing and may be paid in
installments, all installments shall be deemed payable as of the day prior to
the Closing and shall be discharged of record by Seller. If any of the
foregoing assessments are for improvements which have not been fully
constructed as of Closing and may be paid in installments, Seller shall be
responsible for and shall pay all such installments due through the Closing
Date and Purchaser shall be responsible for the payment of all such
installments accruing subsequent to the Closing Date. If, at the Closing, any
amount which Seller is required to pay with respect to the foregoing has not
been determined, Seller agrees to pay such amount as can be reasonably
estimated at the Closing and the final amount shall be adjusted within fifteen
(15) days after Purchaser gives Seller notice that same has been determined.
This provision shall survive the Closing of such Hotel and delivery of the
deed.
3. A Bill of Sale conveying the Equipment, Inventory, Real Property
not conveyed by other instruments provided for herein, and other personal
property and intangible property included in the Premises ("Personalty"), free
and clear of any lien or encumbrance, other than the Permitted Exceptions, and
containing a general warranty of title to the Equipment, Inventory and
Personalty and an inventory of all Equipment, Inventory and Personalty.
10
11
4. An assignment of Seller's interest in and to all Permits,
Contracts, Leases, Intangible Rights, Prepaid items and other items of the
Premises, free and clear of any lien or encumbrance, together with written
evidence reasonably satisfactory to Purchaser of any required third party
consent to such assignment. Seller shall deliver to Purchaser all original
Contracts and Leases; the Permits, including the certificates of occupancy for
the Premises and evidence that the Premises are legally constructed and
properly zoned in accordance with all applicable laws; all warranties and
guarantees (and assignments thereof to Purchaser) issued in connection with the
initial construction of the Real Property and Improvements; any Personalty, and
any repairs or additions thereto; moneys advanced for future registrations;
guest registration records; keys; transferrable permits, approvals and licenses
issued by all appropriate governmental authorities and fire underwriting
organizations with respect to the construction and use of the Premises or any
part thereof; and any existing copies of architectural plans and
specifications, blueprints and building plans which may be in Seller's
possession.
5. At Purchaser's option, an assignment of all fire and extended
coverage insurance policies, liability policies and loss of rental policies,
affecting any of the Premises to the extent assignable (if assigned, premiums
to be prorated at Closing).
6. Tax certificates or other evidence of payment from all
appropriate taxing authorities certifying the payment of all real and personal
property taxes up to the current tax year.
7. A certificate of Seller dated as of the Closing that Seller is
not a foreign person or corporation within the meaning of Sections 1445 and
7701 of the Internal Revenue Code of 1986 (the "IRC").
8. A bring down certificate dated as of the Closing certifying
the truth and accuracy of each representation and warranty set forth in Article
XII as of the Closing Date.
9. An affidavit of title reasonably satisfactory to the Title
Company enabling the Title Company to issue the Title Policy without exception
for mechanic's or materialman's or any other statutory liens, or for the
rights of parties in possession other than temporary hotel patrons.
10. Seller shall purchase the common stock of Winston Hotels, Inc.
in accordance with the Stock Purchase Agreement and as set forth in Article
III, Paragraph D.
11. The Management Agreement in accordance with Article III,
Paragraph E.
11
12
12. Seller shall execute and deliver the Franchise Agreement and
issue and deliver a Homewood Suites franchise license in accordance with
Article III, Paragraph F.
C. At the Closing of each Hotel, the Purchaser shall deliver to the
Seller the following:
1. Subject to Article IX, the balance of the Purchase Price or
Option Price, as applicable, for such Hotel.
2. Proof of authority for Purchaser to complete the
transaction reasonably satisfactory to Seller.
3. The Lessee shall execute and deliver the Management
Agreement and the Franchise Agreement.
VI. DELIVERY OF POSSESSION
Seller shall deliver actual and exclusive possession of the portion of
the Premises relative to the subject Hotel to Purchaser on the Closing Date,
subject to the rights of temporary guests and patrons of such Hotel.
Seller hereby grants to Purchaser the right to enter the Premises at
any reasonable time after the date hereof for the purpose of inspecting,
testing and examining the Premises, which purpose is more particularly provided
in Article III hereof.
VII. DAMAGE TO PROPERTY
Seller shall give Purchaser immediate notice of any fire or other
casualty or of any pending or threatened condemnation occurring to all or any
portion of the Premises between the date hereof and the Closing. If prior to
the Closing, there shall occur:
(i) damage to the portion of the Premises relative to a Hotel caused
by fire or other casualty, which would cost $100,000.00 or more to repair or
replace; or
(ii) the taking or condemnation of all or any portion of the Premises
relative to a Hotel (including any parking areas) as would materially interfere
with the use thereof, as determined by Purchaser; then, if any of the events
set forth in (i) or (ii) above occurs, Purchaser, at its option, may terminate
this Agreement as to the affected Hotel by written notice given to Seller
within fifteen (15) days after Purchaser has received the notice referred to
above or at the Closing, whichever is earlier. If Purchaser does not
12
13
elect to terminate this Agreement relative to the affected Hotel, the Closing
of the affected Hotel shall take place as provided herein without an abatement
of the Purchase Price or Option Price, as applicable, and there shall be
assigned to the Purchaser at Closing of the affected Hotel, all interest of the
Seller in and to any insurance proceeds or condemnation awards which may be
payable to Seller on account of such occurrence.
If, prior to the Closing, there shall occur:
(x) damage to the portion of the Premises relative to a Hotel
caused by fire or other casualty which would cost less than
$100,000.00 to repair or replace; or
(y) the taking or condemnation of all or any portion of the
Premises relative to a Hotel which is not material to the use
thereof, as determined by Purchaser;
then, if any of the events set forth in (x) or (y) above occurs, Purchaser
shall have no right to terminate this Agreement (solely as a result of the
occurrence of such events), and Seller shall, at its sole expense, with respect
to subparagraph (x), restore or replace the damaged Premises to its original
condition and, if necessary, Closing shall be extended so as to give Seller
sufficient time to accomplished same; and, with respect to subparagraph (y),
there shall be assigned to Purchaser at the Closing of the affected Hotel all
interest of Seller in and to any condemnation awards which may be payable to
Seller on account of any such occurrence.
VIII. REMEDIES
A. If the transaction contemplated by this Agreement relative to the
Closing of a Hotel is not consummated solely by reason of Purchaser's failure
to perform its obligations under this Agreement relative to such Hotel, then
Seller, as its sole and exclusive remedy, shall be entitled to retain the
portion of the Deposit allocated to such Hotel as full liquidated damages in
complete and total accord and satisfaction, the parties hereby acknowledging
and agreeing to the difficulty of ascertaining Seller's actual damages in such
circumstances. Seller and Purchaser agree that it is impossible to accurately
assess the Seller's damages in the event of the Purchaser's default and that
the Deposit for such Hotel constitutes Seller's and Purchaser's best estimate
of such damages.
B. If the Closing of a Hotel is not consummated by reason of:
(i) cancellation by Purchaser as permitted by the terms
of this Agreement, including but not limited to,
cancellation by Purchaser at any time on or prior to
13
14
the termination of the Feasibility Period;
(ii) the inability of Purchaser to obtain any approval or
consent required pursuant to or otherwise satisfy any
condition or contingency set forth in Article III
hereof within the period of time expressly provided
therefor;
(iii) the occurrence of any of the events described in
Article VII; or
(iv) Title Defects and Survey Defects which are not cured
as provided in this Agreement (except for those Title
Defects which Seller is obligated to cure),
then Purchaser shall be entitled to a return of the Deposit (together with all
interest thereon) for such Hotel and this Agreement shall be null and void and
all parties relieved from any further liability hereunder as it pertains to
such Hotel (except the liability of Purchaser pursuant to the indemnity by
Purchaser set forth in Article III, Paragraph E, which indemnity shall survive
any such termination of this Agreement), unless Purchaser elects to waive any
of the items or occurrences set forth in this Article VIII, Paragraph B. The
items enumerated in this Article VIII, Paragraph B are for Purchaser's benefit
only and the non-occurrence of a state of facts sufficient to satisfy any of
such items may not be used or pleaded by Seller as a defense to the
enforceability of this Agreement.
C. If the transaction relative to the Closing of a Hotel is not
consummated because of a default on the part of Seller or if Seller fails to
close a Hotel in breach of its obligation to do so, then Purchaser, at its
option, may
(i) seek specific performance of this Agreement; or
(ii) receive a return of the portion of the Deposit
allocated to such Hotel (together with all interest
thereon), whereupon Seller shall be released of all
liability arising under this Agreement for such
Hotel.
D. In the event of a dispute, controversy or difference arising
under this Agreement, such dispute, controversy or difference shall be finally
and exclusively settled by arbitration. The arbitration shall be conducted in
a mutually agreed upon location in accordance with the rules of the American
Arbitration Association, before an arbitrator or arbitrators appointed pursuant
to such rules, and the determination and ruling of such arbitrator or
14
15
arbitrators shall be final, binding and conclusive on Purchaser, Seller and
Lessee.
IX. PRORATIONS
The matters and prorations set forth hereinafter shall apply and
pertain to each Hotel as expressly set forth hereinafter. All income
(excluding cash on hand and accounts receivable for the period prior to the day
preceding the Closing Date, which shall be and remain the property of Seller),
current operating expenses, accounts payable, real estate taxes, other taxes
and assessments, all utilities, water and sewer charges, licenses or permit
fees relating to the operation of the Premises, real estate and personal
property ad valorem taxes, prepayments made under the Contracts and Leases (to
be assumed by Purchaser pursuant to Article III hereof) and insurance premiums
(if applicable), shall be adjusted and prorated as of the Closing. All
maintenance and service agreements (whether or not service is continued by
Purchaser) and utility charges shall be determined as of Closing and paid by
Seller or appropriate adjustments made if Purchaser at its option accepts an
assignment of any such agreement. If such charges and expenses are unavailable
on the Closing Date, a re-adjustment of such charges and expenses shall be made
within thirty (30) days after the Closing. The parties agree to cooperate in
good faith in effecting such a final reconciliation and each party shall
promptly pay (or reimburse the other party for) any expense item that is
chargeable to the former party and shall promptly remit any income item to the
other party if entitled thereto. Seller shall use reasonable efforts to
arrange for the rendition of final bills by the utility companies involved as
of the Closing Date.
Guest room revenues of the Premises, whether in cash or in accounts receivable,
arising from occupancy for the night beginning on the day preceding the Closing
Date and ending on the Closing Date shall be credited one-half to Purchaser and
one-half to Seller. Seller shall collect all income and other sums payable by
tenants or guests (or otherwise) for such time period and the responsibility
for the payment of all expenses on account of services and supplies furnished
to and for the benefit of the Premises for such time period shall be debited
one-half to Purchaser and one-half to Seller. Purchaser shall be credited with
any deposits from tenants or guests of the Premises which are refundable to
such tenants or guests. Seller shall remit to Purchaser at closing all prepaid
income items. In addition, at Closing, Seller shall deliver to Purchaser a
schedule of all unpaid accounts receivable and other income items as of
Closing. All such accounts receivable and other income items collected by or
for Purchaser after Closing shall be promptly remitted to the order of Seller;
provided, however, payments received by Purchaser following the Closing with
respect to receivables shall be deemed to be in payment of receivables of
Purchaser unless the payment received specifically identifies that it is in
payment of a receivable attributed to Seller or there is no
15
16
receivable due to Purchaser with respect to such payment. Seller and Purchaser
agree to attempt to reconcile and prorate the accounts receivable within sixty
(60) days after Closing. Except for sums actually received by Purchaser
pursuant to the immediately preceding sentence, Purchaser shall assume no
obligation to collect or enforce the payment of any amounts that may be due to
Seller, except that Purchaser shall render reasonable assistance, at no expense
to Purchaser, to Seller after Closing in the event Seller proceeds against any
third party to collect any accounts receivable or other income items due
Seller. Nothing contained in this Article shall be deemed to prohibit
Purchaser and Seller from entering into an agreed settlement in writing of all
prorations at or following Closing.
In the event any adjustments pursuant to this Article are, subsequent
to Closing, found to be erroneous, then either party hereto is entitled to
additional monies and shall invoice the other party for such additional amounts
as may be owing, and such amount shall be paid promptly by the other party upon
receipt of the invoice. Such invoice shall be accompanied by reasonable
substantiating evidence.
Purchaser shall have no obligation with respect to Seller's on-site
employees whatsoever, which employees shall be compensated by Seller and
Seller shall have the right to retain and employ such employees at Seller's
election in order to perform pursuant to the Management Agreement.
The provisions of this Article IX shall survive Closing of each Hotel
and the delivery of the Deed.
X. NOTICES
Any notice to be given by either party to this Agreement shall be in
writing and shall be either delivered personally or by certified or registered
U.S. Mail, postage prepaid, or by overnight courier delivery service with
charges to the sender, or by telecopier or facsimile, with follow-up by means
of one of the other notice methods set forth herein, with its notice complete
upon receipt of the telecopy or facsimile, as follows:
To Seller: Promus Hotels, Inc.
785 Crossover Lane
Suite 141
Memphis, Tennessee 38117
Attention: Thomas Keltner, Senior Vice
President, Development
Facsimile number: (901) 374-5051
16
17
With Copy to: Ronald Halpern, Esquire
Promus Hotels, Inc.
Deputy General Counsel, Vice President
785 Crossover Lane
Suite 141
Memphis, Tennessee 38117
Facsimile number: (901) 374-5050
To Purchaser: WINN Limited Partnership
2209 Century Drive, Suite 300
Raleigh, North Carolina 27622
Attention: Robert W. Winston, III
Facsimile number: (919) 571-7330
With copies to: William W. Bunch, III, Esquire
Brown & Bunch
4900 Falls of Neuse Road,
Suite 210 (street zip code 27609)
Post Office Box 19409
Raleigh, North Carolina 27619-9409
Facsimile number: (919) 878-8062
Any notice, demand or other communication shall be deemed given and effective
as of the date of delivery in person, by transmission or by receipt set forth
on the verification of delivery or return receipt. The inability to deliver
because of changed facsimile number and/or address of which no notice was
given, or rejection or other refusal to accept any notice demand or other
communication, shall be deemed to be receipt of the notice, demand or other
communication as of the date of such attempt to transmit, deliver or rejection
or refusal to accept. Any party may change addresses for notices by delivering
written notice of such change in accordance with this Article X.
XI. INDEMNITY
A. Purchaser and Seller warrant and represent each to the other
that neither of them has employed a real estate broker in this transaction and
neither of them has any knowledge of any party with a claim for any real estate
commission, brokerage fee or finder's fee. Seller shall indemnify and hold the
Purchaser harmless from and against any claim for any real estate commission,
brokerage fee or finder's fee made by any person, firm or corporation, claiming
by, through or under the Seller. Purchaser shall indemnify and hold the Seller
harmless from and against any claim for any real estate commission, brokerage
fee or finder's fee made BY any person, firm or corporation, claiming by,
through or under the Purchaser. This warranty and representation shall
survive the Closing of each Hotel
17
18
and the parties shall indemnify each other from any liability, cost or loss
arising out of a breach of said warranty and representation, including
consequential damages.
B. The Seller shall indemnify and hold the Purchaser harmless
from and against any and all liabilities, claims, demands, costs and expenses
of any kind or nature, including but not limited to, reasonable attorney's
fees, arising out of or incurred for each Hotel in connection with (i) any
breach of the representations and warranties of Seller set forth in this
Agreement, (ii) the ownership, use, maintenance or operation of the Premises on
or prior to the Closing or the transfer of the Premises to the Purchaser
(including the payment of all taxes),or (iii) compliance or failure to comply
with the notice provisions relating to bulk sales laws applicable to the
transfer of all or any part of the Premises. Purchaser shall indemnify and
hold Seller harmless from and against any and all liabilities, claims, demands,
costs and expenses of any kind or nature, including reasonable attorney's fees,
arising after the date of Closing of each Hotel and which arise out of the
ownership or operation of the relevant portion of the Premises by the Purchaser
following the Closing of each respective Hotel. Such indemnities shall survive
Closing of each Hotel and delivery of the deed.
C. If Purchaser or Seller propose to make any claim for
indemnification under any Article or Paragraph of this Agreement (the
"Indemnitee"), the Indemnitee shall deliver to the other party (the
"Indemnitor") a certificate signed by the Indemnitee which certificate shall
(i) state that a loss has occurred and (ii) specify in reasonable detail each
individual item of loss or other claim including the amount thereof and the
date such loss was incurred. The Indemnitor shall have the right in its
discretion and at its expense to participate in and control (a) the defense or
settlement of any claim, suit, action or proceeding (including appeals) in
respect of such item (or items) by any person other than a party hereto, (b)
any and all negotiations with respect thereto, and (c) the assertion of any
claim against any insurer with respect thereto, and the Indemnitee shall not
settle any such claim, suit, action or proceeding or agree to extend any
applicable statute of limitation without the prior written approval of the
Indemnitor. The rights of participation, control and approval granted to the
Indemnitor shall be subject as a condition precedent to the Indemnitor's
acknowledging to the Indemnitee, in writing, the obligation of the Indemnitor
to indemnify the Indemnitee in respect of such third party's claim, suit,
action or proceeding giving rise to such item. Upon satisfaction of such
condition precedent, the Indemnitee shall provide the Indemnitor with all
reasonably available information, assistance and authority to enable the
Indemnitor to effect such defense or settlement and upon the Indemnitor's
payment of any amounts due in respect of such claim, suit, action or
proceeding, the Indemnitee shall, to the extent of such payment, assign or
cause to be assigned to the Indemnitor the
18
19
claims of the Indemnitee, if any, against such third parties in respect of
which such payment is made. If the Indemnitor is not so willing to acknowledge
such obligation, the parties shall jointly consult and proceed as to any such
third party claim, suit, action or proceeding.
XII. PURCHASER'S AND SELLER'S REPRESENTATIONS AND WARRANTIES.
The Seller represents and warrants to the Purchaser that:
A. Seller is a Delaware corporation duly organized, and
existing and in good standing under the laws of the state of its incorporation
and authorized to do business in the State in which the Premises are located.
B. Seller is authorized to enter into this Agreement and
to consummate the transaction contemplated hereby, and the individuals
executing this Agreement on behalf of Seller are also duly authorized to
execute this Agreement and to bind Seller to consummate such transaction,
subject to the effect of any bankruptcy, reorganization, moratorium, insolvency
or other laws affecting the rights of creditors generally. The execution and
delivery of this Agreement and the conveyance of the Premises by Seller,
pursuant to this Agreement, do not require the consent of any person, agency or
entity not a party to this Agreement. The execution of this Agreement by
Seller and the transaction contemplated herein have been duly authorized by
proper corporate action, including the board of directors and capital committee
of Seller.
C. There are no pending or, to the knowledge of Seller,
threatened, condemnation or similar proceedings affecting the Premises, or any
portion thereof. Seller has not received any written notice that any such
proceeding is contemplated, and no part of the Premises has been destroyed or
damaged by any casualty.
D. To the best of Seller's knowledge, the maintenance,
operation, use or occupancy of the Premises as hotels does not and will not
violate any building, health, zoning, environmental, fire or similar law,
ordinance, regulation or restrictive covenant. To the best of Seller's
knowledge, the Premises do not and will not violate any federal, state, county,
or municipal laws, ordinances, orders, regulations or requirements nor has
Seller received any notice of such a violation.
E. There are no options to purchase, rights of first
refusal or other similar agreements with respect to the Premises which give
anyone the right to purchase the Premises or any part thereof. There are no
contracts or agreements which affect or cover the Premises, except for the
Contracts and the Permitted Exceptions. There are no and will be no unpaid
bills or claims in connection with the construction, repair or replacement of
the Premises. There
19
20
are no and will be no agreements allowing for any reduction, concession or
abatement of room rates.
F. The Seller has duly filed and will duly file in a
timely manner all federal, state, county and local income, franchise, excise,
withholding, sales, occupancy, payroll, property (real, personal and
intangible), and any other tax returns and reports required to have been filed
or to be filed, and has paid and will pay all taxes, interest, penalties and
all assessments that have or will become due. The Seller has paid or will make
adequate provision for the payment of, all taxes with respect to the conduct of
its business upon the Premises through the Closing. Neither the Seller nor its
agents have been advised or notified of any tax deficiency, assessment or
penalty with respect to the Seller, nor does the Seller know of any basis for
any additional claim or assessment for taxes, interest or penalties. No liens
for taxes, federal, state or local, have been filed against the Seller or its
assets.
G. Certificates of Occupancy for all buildings and other
improvements will be duly issued such that the buildings and improvements may
be legally occupied as a hotel/motel. The Real Property is zoned properly for
the uses contemplated herein to be made thereof.
H. Except as may be set forth in the Title Commitment,
the Seller will own and will have good and marketable title to all of its
assets and properties which constitute the Premises free and clear of any
security interest, mortgage, pledge, lien, conditional sale or other
encumbrance or charge. The Premises to be purchased is all of the property of
every kind and nature necessary for the operation of the Hotels in the ordinary
course.
J. To the best of Seller's knowledge, the Premises are
and will be in compliance with and have not violated and will not violate any
statute, law, ordinance, rule, regulation, order and directive (including,
without limitation, all labor and environmental control and antipollution laws,
ordinances, rules, regulations or directives) of any and all Governmental
Agencies pertaining to the use or occupancy of the Premises.
To the best of Seller's knowledge, the Seller has not received any notice of
and the Seller and the Premises have not been charged with, are not under
investigation or threatened investigation for failure to comply with and are in
compliance with, any and all statutes, laws, ordinances, rules, regulations,
orders and directives of any and all Governmental Agency or Agencies pertaining
to the use, generation, dumping, releasing, burying or disposing of or emitting
of any particles, materials, substances, or emissions that are now or have
heretofore been determined by any and all Governmental Agency or Agencies to be
of a hazardous, toxic,
20
21
pollutive, or ecologically or environmentally damaging nature, including but
not limited to asbestos ("Hazardous Materials"). Seller has not previously
disposed of any Hazardous Materials at the Premises.
For purposes of this Agreement, the term "Hazardous Materials" shall include,
but not be limited to, those materials or substances now or heretofore defined
as "hazardous substances," "hazardous materials," "hazardous waste," "toxic
substances," or other similar designations under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C., Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C., Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C., Section 1801, et seq. and other laws, whether or not of a similar
nature, applicable to the Premises and adopted by, enacted in or applicable to
the State of Texas.
For purposes of this Agreement, the term "Governmental Agency or Agencies"
means, whether of the United States of America, of any state or territory
thereof or of any foreign jurisdiction, any government, political subdivision,
court, agency, or other entity, body, organization or group exercising any
executive, legislative, judicial, regulatory or administrative function of
government.
To the best of Seller's knowledge, the Real Property has never appeared on any
federal or state registry of active or inactive hazardous waste disposal sites.
Seller has never received any notice of claim from a Governmental Agency
concerning the alleged release or threatened release of Hazardous Materials at
the Real Property. To the best of Seller's knowledge and without inquiry, no
hazardous waste sites exist within a one mile radius of the Real Property.
J. To the best of Seller's knowledge, there are no and will be no
employment or union agreements in effect and no employee has received or will
receive a commitment from the Seller or Seller's manager for continued
employment at the Premises after Closing.
K. Seller has no knowledge of and has received no notice of any
causes of action, actions, or proceedings of whatever type or description which
have been instituted or threatened or are pending relating to the Premises or
any interest therein.
L. Seller shall cause the Hotels to be constructed in
substantial conformity with the plans and specifications approved by Purchaser
pursuant to Article III, Paragraph B hereof for each Hotel and in accordance
with the terms and provisions of this Agreement. Seller agrees to pay to
complete the items on any "punch list" which is reasonably prepared by the
architect for each Hotel after
21
22
consultation with Seller and submitted at or prior to the Closing of a Hotel,
regardless of whether such items are completed before or after Closing of a
Hotel.
M. To the best of Seller's knowledge, no representation or
warranty made by the Seller, nor, to the best of Seller's actual knowledge, in
any statement or document furnished or to be furnished to the Purchaser
hereunder, or in connection with the transaction contemplated hereby, contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained therein not
misleading. The Seller has disclosed herein to the Buyer all facts or
developments of any kind known to Seller which are material to the assets,
prospects, financial condition and business of the Seller as it pertains to the
Hotels, and is solely responsible for the accuracy and completeness of the
contents thereof and all other statements and documents submitted in connection
with this Agreement and the transactions contemplated hereby.
The Purchaser represents and warrants to the Seller that:
A. Purchaser is a limited partnership duly organized, and
existing and in good standing under the laws of the state of its formation and
will be authorized to do business in the states in which the Premises are
located prior to Closing of the portion of the Premises located therein.
B. Purchaser has the right, power and authority to execute this
Agreement and, upon receipt of the approval from the board of directors of the
general partner of Purchaser, will have the right, power and authority to
purchase the Premises from Seller in accordance with the terms and conditions
hereof, and to execute, deliver and perform its obligations under this
Agreement and all other instruments, conveyances, executed or to be executed
and delivered, by Purchaser in connection with the transactions contemplated
herein. This Agreement and all other documents executed and delivered, or to
be executed and delivered, by Purchaser in connection with the transactions
contemplated herein have been or at the appropriate time will be, duly executed
and delivered and constitute or, upon such execution and delivery, will
constitute the valid, legal and binding obligations of Purchaser, enforceable
in accordance with their respective terms and provisions, subject, however, to
receipt of the foregoing approval from the board of directors of the general
partner of Purchaser, to the effect of any bankruptcy, reorganization,
moratorium, insolvency, or other laws affecting the rights of creditors
generally. Purchaser has taken all action, corporate or otherwise, required to
authorize its execution and delivery of this Agreement. There are no claims,
defenses, personal or otherwise, or offsets whatsoever to the validity or
enforceability with respect to this Agreement or any other documents executed
and delivered, or to be
22
23
executed and delivered, by Purchaser in connection with the transactions
contemplated herein, nor is there any basis for any such claim, defense, or
offset known to Purchaser. With the execution of the foregoing required
approval from the board of directors of the general partner of Purchaser, there
is no consent or approval of any person, firm, corporation, court, trustee,
judge or governmental authority required to be obtained by Purchaser in order
for Purchaser to enter into this Agreement or any such other document or to
perform fully all of Purchaser's obligations under this Agreement or under any
such other document except those that have been obtained and are in full force
and effect.
C. Neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated herein will conflict with, or
result in a breach of, the terms, conditions or provisions of, or constitute a
default under, any agreement or instrument to which Purchaser is a party.
Purchaser, in Purchaser's sole and absolute discretion, may waive any
condition to close or breach of any representation or warranty provided for
herein or any Title or Survey Defect, and in such event, this transaction shall
be consummated as if such condition, representation, warranty or defect was
satisfied. All of the representations and warranties contained in this
Agreement shall survive the Closing of each Hotel. The representations and
warranties set forth above shall be true, correct and accurate on the date
hereof and as of the date of Closing of each Hotel.
XIII. ESCROW
The Escrow Agent shall acknowledge receipt of the Deposit for each Hotel
and agrees to hold the Deposit for each Hotel in escrow until the Closing of
such Hotel or sooner termination of this Agreement and shall pay over and apply
the proceeds thereof in accordance with the terms of this Agreement. If, for
any reason, the Closing of a Hotel does not occur and either party makes a
written demand upon the Escrow Agent for payment of the Deposit for such Hotel,
the Escrow Agent shall give written notice to the other party of such demand.
If the Escrow Agent does not receive a written objection from the other party
to the proposed payment within ten (10) business days after the giving of such
notice, the Escrow Agent is hereby authorized to make such payment. If the
Escrow Agent does receive such written objection within such ten (10) day
period, or if for any reason the Escrow Agent in good faith shall elect not to
make such payment, the Escrow Agent shall continue to hold the Deposit for such
Hotel until otherwise directed by written instructions from the parties to this
Agreement or until a determination and ruling is made by the arbitrator or
arbitrators appointed in accordance with Article VIII, Paragraph D hereof
disposing of such Deposit for such Hotel.
23
24
The Escrow Agent shall be liable as a depository only and its duties
hereunder are limited to the safekeeping of the Deposit for each Hotel and the
delivery of same in accordance with the terms of this Agreement. The Escrow
Agent shall not be liable for any act or omission done in good faith, or for
any claim, demand, loss or damage made or suffered by any party to this
Agreement, except such as may arise through or be caused by the Escrow Agent's
willful misconduct or negligence.
XIV. COVENANTS
A. Upon the completion of the construction of a Hotel and up to
and including the Closing of such Hotel, the Seller (i) shall observe normal
and prudent maintenance and management of such Hotel, (ii) shall maintain
supplies and payroll at the necessary and customary level, and (iii) shall
operate the Hotel in the ordinary course of business.
B. All taxes levied against the Premises which were or shall be
due and payable prior to the Closing have been or shall be paid in full by the
Seller on or prior to the Closing.
C. All Contracts and Leases shall be current and not in default
as of the Closing. Seller shall not enter into Contracts or Leases except in
the ordinary course of business, and provided that any such Contract or Lease
shall either provide that it may be cancelled on not more than 30 days notice
by Seller at no penalty or cost or, Purchaser shall consent to such Contract or
Lease in writing prior to Seller's execution thereof.
D. Seller shall maintain fire and casualty insurance on the
Premises up to and including the Closing in amounts reasonably necessary to
adequately insure the Premises.
E. Prior to the Closing of each Hotel, representatives of Seller
and Purchaser shall meet at such Hotel and prepare a schedule of the Equipment,
which schedule shall be attached hereto and made a part hereof at such time.
XV. BINDING EFFECT; MISCELLANEOUS
A. This Agreement shall be binding upon and shall inure to the
parties hereto, their respective heirs, successors, legal representatives and
assigns. This Agreement sets forth the entire Agreement between the parties
hereto and no other prior written or oral statement or agreement or
understanding shall be recognized or enforced. All modifications or amendments
shall be in writing and signed by the parties. This Agreement is to be
construed according to the laws of the State of Tennessee. This Agreement may
be executed in two or more counterparts all of which shall constitute one and
the same instrument. The singular shall include the plural and vice versa.
24
25
B. Provided Purchaser does not terminate this Agreement prior to
the expiration of the Feasibility Period, after the expiration of the
Feasibility Period, the Purchaser may assign this Agreement to a corporation,
partnership or other entity in which Purchaser or its wholly owned subsidiaries
own at least a majority interest.
C. Purchaser acknowledges that the portions of the Real Property
described on Schedule 1 as Tract 2 and Tract 3 are not currently owned by
Seller, but under contracts by Seller to purchase such Tract 2 and Tract 3. In
the event Seller shall fail to acquire Tract 2 and/or Tract 3, the Hotel or
Hotels contemplated herein to be constructed by Seller on such Tract or Tracts
shall be deleted from this Agreement and Seller shall be thereby released from
all liability and responsibility under this Agreement for such Hotel or Hotels.
D. In the event any period of time provided for in this Agreement
expires on a Saturday, Sunday or banking holiday, such period of time shall be
automatically extended to and through the next business day thereafter.
E. As used herein, "the Date of this Agreement" shall mean the date
noted below as the date upon which this Agreement was executed by the latter of
the Purchaser or the Seller.
F. This Agreement shall not be recorded in the public records of any
county where the Premises are located.
25
26
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Date of this Agreement.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation,
General Partner
(Corporate Seal) By:___________________________
_______ President
Attest:
___________________
______Secretary
Date signed by Purchaser:
___________________________
26
27
Seller:
Promus Hotels, Inc.,
a Delaware corporation
(Corporate Seal)
By:___________________________________
___________President
Attest:
___________________
_____Secretary
Date signed by Seller:
_____________________
27
28
Escrow Agent:
The Title Company of North Carolina, Inc.
as agent for First American Title Insurance
Company
By:____________________________________
Title:_________________________________
Winston Hospitality, Inc., as the Lessee defined hereinbefore, joins
in the execution of this Agreement for the sole purpose of acknowledging and
agreeing to the provisions of Article III, Paragraph C relative to the
Percentage Lease and the Management Agreement.
Winston Hospitality, Inc.,
a North Carolina corporation
(Corporate Seal) By:_______________________________
______________President
Attest:
___________________
_____Secretary
28
29
STATE OF __________________
COUNTY OF _________________
I, a Notary Public of the County and State aforesaid, certify that
__________________________, personally came before me this day and acknowledged
that _he is ______________ Secretary of Winston Hotels, Inc., a North Carolina
corporation, General Partner of WINN Limited Partnership, a North Carolina
limited partnership, and that by authority duly given and as the act of the
corporation, as such General Partner, the foregoing instrument was signed in
its name by its ______ President, sealed with its corporate seal and attested
by ___________________ as its ________ Secretary.
Witness my hand and seal, this the _____ day of _____________, 199__.
My commission expires:_____ _____________________________
Notary Public
(SEAL)
STATE OF _______________
COUNTY OF ______________
I, a Notary Public of the County and State aforesaid, certify that
__________________________________________ personally appeared before me this
day and acknowledged that _he is ________ Secretary of Promus Hotels, Inc., a
Delaware corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ___
President, sealed with the corporate seal and attested by _____ as its _____
Secretary.
Witness my hand and seal, this the ____ day of _____________, 199__.
My commission expires:_____ ______________________________
Notary Public
(SEAL)
29
30
STATE OF _________
COUNTY OF ________
I, a Notary Public of the County and State aforesaid, certify that
___________________________ personally appeared before me this day and
acknowledged that _he is ____ Secretary of Winston Hospitality, Inc., a North
Carolina corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its ____
President, sealed with the corporate seal and attested by ____ as its ____
Secretary.
Witness my hand and seal, this the ___ day of _______________, 1996.
My commission expires:_____ __________________________
Notary Public
30
31
Schedule 1
Tract 1 - Richmond, Virginia
Tract 2 - BWI, Baltimore, Maryland
Tract 3 - Dallas- Market Center, Texas
31
32
Schedule 2
Management Agreement
Winston Hospitality, Inc.
Promus Hotels, Inc.
WINN Ltd. Partnership
32
33
MANAGEMENT AGREEMENT
DATED AS OF _______ __, 199_
BY AND AMONG
WINSTON HOSPITALITY, INC.
PROMUS HOTELS, INC.
WINN LIMITED PARTNERSHIP
34
TABLE OF CONTENTS
ARTICLE 1. THE HOTEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. The Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
[SECTION 2.01. OPENING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1]
Section 2.02. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3. MANAGER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.01. Manager's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4. LESSEE'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.01. Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5. MANAGEMENT FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.01. Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6. CLAIMS AND LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.01. Claims and Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.02. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 7. CLOSURE, EMERGENCIES AND DELAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.01. Events of Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.02. Emergencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8. CONDEMNATION AND CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.01. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.02. Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 9. DEFAULT AND TERMINATIONS RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.01. Manager Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.02. Lessee Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.03. Termination Upon Event of Default; Other
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9.04. Termination for Failure to Achieve
Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 9.05. Manager's Early Termination Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.06. Right to Terminate Upon Sale or
Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-2-
35
Section 9.07. Employment Solicitation Restriction Upon
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 10. APPLICABLE LAW AND ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.01. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.02. Arbitration of Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.1. Matters to be Submitted to
Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.2. The Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subsection 10.02.3. Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.03. Performance During Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.01. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.02. Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.03. Manager's Contractual Authority in the
Performance of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.04. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.05. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.07. Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.08. Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.09. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.10. Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.11. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.13. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.14. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.15. Travel and Out-of-Pocket Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.16. Set off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.17. Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.18. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.19. Survival of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.20. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.21. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.22. Periods of Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.23. Preparation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.24. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.25. Attorney's Fees and Other Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.26. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-3-
36
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement"), made and entered into as of
this _____ day of March 1996 ("Effective Date"), between Winston Hospitality,
Inc., a North Carolina corporation ("Lessee"), whose address is 2209 Century
Drive, Suite ___, Raleigh, North Carolina 27612, and Promus Hotels, Inc., a
Delaware corporation ("Manager"), whose address is 755 Crossover Lane, Memphis,
TN 38117, recites and provides as follows:
RECITALS
WHEREAS, WINN Limited Partnership, a North Carolina limited
partnership ("Owner"), whose address is 2209 Century Drive, Suite 300, Raleigh,
North Carolina 27612, and which is a third party beneficiary as described
herein, has acquired the Hotel (as defined below) and leases the Hotel to
Lessee; and
WHEREAS, Lessee desires to engage Manager, and Manager desires to be
engaged, to manage the Hotel on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
THE HOTEL
The subject matter of this Agreement is the management of the "Hotel,"
as defined in the Commitment Agreement to issue a Homewood Suites License
Agreement and the Homewood Suites License Agreement attached hereto as Exhibit
"A" (hereinafter collectively referred to as the "License Agreement"), by
Manager. The License Agreement shall exclusively govern Lessee's right to use
the Homewood Suites "System" (as defined in the License Agreement) in the
operation of the Hotel. Lessee hereby expressly acknowledges that it shall not
derive any rights in or to the use of the "Homewood Suites" name or the
Homewood Suites System from this Agreement.
ARTICLE 2.
TERM
[SECTION 2.01. OPENING DATE. MANAGER SHALL OPEN THE HOTEL TO THE
PUBLIC AND COMMENCE DOING BUSINESS AS A HOMEWOOD SUITES
-4-
37
HOTEL ON THE DATE ALL THE CONDITIONS PRECEDENT IN THIS AGREEMENT AND THE
LICENSE AGREEMENT TO THE OPENING OF THE HOTEL AS A HOMEWOOD SUITES HOTEL HAVE
BEEN SATISFIED ("OPENING DATE"), WHICH DATE SHALL BE CONFIRMED IN AN ADDENDUM
TO THIS AGREEMENT.]
SECTION 2.02. TERM. The term shall commence on the Effective Date
and, subject to the terms contained herein, continue for the term of years from
the [OPENING DATE SET FORTH ON EXHIBIT "B"/EFFECTIVE DATE] ("Term").
ARTICLE 3.
MANAGER'S OBLIGATIONS
SECTION 3.01. MANAGER'S OBLIGATIONS. Manager shall, on behalf of
Lessee and at Lessee's expense, direct the operation of the Hotel pursuant to
the terms of this Agreement and meet the standards imposed under the License
Agreement. Manager shall be exclusively responsible for directing the
day-to-day activities of the Hotel and establishing all policies and procedures
relating to the management and operation of the Hotel. Except as specifically
otherwise provided, all cost(s) and expense(s) incurred by Manager in
association with the performance of the obligations hereinafter set forth shall
be [PRE-OPENING EXPENSES IF INCURRED PRIOR TO THE OPENING DATE AND] operating
costs [IF INCURRED AFTER THE OPENING DATE] and shall accordingly be paid from
the [PRE-OPENING BANK(S) ACCOUNT AS HEREINAFTER DEFINED IN SECTION 3.01(i) OR
THE] Bank Account(s) as hereinafter defined in Section 3.01(iv) below.
Manager, during the Term, shall have the following obligations:
[(i) PRE-OPENING. SIX (6) MONTHS PRIOR TO THE SCHEDULED OPENING
DATE, MANAGER SHALL COMMENCE IMPLEMENTATION OF A
PRE-OPENING PROGRAM WHICH SHALL INCLUDE ALL ACTIVITIES
NECESSARY TO FINANCIALLY AND OPERATIONALLY PREPARE THE
HOTEL FOR OPENING. TO IMPLEMENT THE PRE-OPENING PROGRAM,
MANAGER SHALL PREPARE A COMPREHENSIVE PRE-OPENING BUDGET
WHICH SHALL BE SUBMITTED TO LESSEE FOR LESSEE'S APPROVAL
NINETY (90) DAYS AFTER THE EFFECTIVE DATE ("PRE-OPENING
BUDGET"). ALL COSTS AND EXPENSES OF THE PRE-OPENING
PROGRAM SHALL BE PAID FROM A SPECIAL BANK ACCOUNT(S) OPENED
BY MANAGER IN THE NAME OF LESSEE UPON WHICH ONLY MANAGER'S
DESIGNEES SHALL BE AUTHORIZED TO DRAW ("PRE-OPENING BANK
ACCOUNT(S)"). AFTER ALL PRE-OPENING EXPENSES HAVE BEEN
PAID, THE BALANCE IN THE PRE-OPENING BANK ACCOUNT(S) SHALL
BE RETURNED TO LESSEE AND THE PRE-OPENING BANK ACCOUNT(S)
CLOSED.]
(ii) Personnel. Manager shall be the sole judge of the fitness
and qualification of all personnel working at the Hotel
("Hotel Personnel") and shall have the sole and absolute
right to hire, supervise, order,
-5-
38
instruct, discharge and determine the compensation,
benefits and terms of employment of all Hotel Personnel.
All Hotel Personnel shall be employees of Manager. Manager
shall also have the right to use employees of Manager,
Manager's parent and subsidiary and affiliated companies,
not located at the Hotel to provide services to the Hotel
("Off-Site Personnel"). The expenses of Off-Site Personnel
shall be prorated based on the actual amount of time spent
on Hotel matters compared to total time worked. Lessee
reserves the right to require all employees to be on-site
personnel. All expenses, costs (including, but not limited
to, salaries, benefits and severance pay), liabilities and
claims which are related to Hotel Personnel and Off-Site
Personnel shall be [PRE-OPENING EXPENSES OR] operating
expenses [AS APPROPRIATE].
Manager shall provide Lessee an opportunity to interview
each proposed general manager for the Hotel prior to the
appointment of said individual to the position of Hotel
general manager. Manager shall solicit and obtain the
Lessee's recommendation on said individual prior to making
a final decision on the appointment of such individual to
the position of Hotel general manager.
(iii) Hotel Policies. Manager shall determine the terms of guest
admittance to the Hotel, establish room rates, and use of
rooms for commercial purposes.
(iv) Bank Accounts. Manager shall open and operate the Hotel's
bank accounts. All sums received from the operation of the
Hotel and all items paid by Manager arising by virtue of
Manager's operation of the Hotel shall pass through
interest bearing bank account(s) established by Manager in
Lessee's name at such banks as Manager and Lessee shall
mutually agree ("Bank Account(s)"); Lessee's designees and
Manager's designees shall be authorized to operate and draw
from the Bank Account(s). Each fiscal month Manager, on
behalf of Lessee, shall disburse funds from the Bank
Account(s) in the order of priority and to the extent
available in accordance with the priority schedule set
forth on Exhibit "B". Interest earned on amounts in the
Bank Accounts shall be for the account of the Lessee.
(v) Operating Budgets. Manager [SHALL, NOT LESS THAN SIXTY
(60) DAYS PRIOR TO THE SCHEDULED OPENING DATE, SUBMIT/HAS,
PRIOR TO THE EFFECTIVE DATE, SUBMITTED] to Lessee and
Owner, for their approval, a proposed
-6-
39
operating budget for the ensuing full or partial fiscal
year, as the case may be (an "Operating Budget" and in the
case of the first such Operating Budget, the "Initial
Operating Budget"). Thereafter, Manager shall, not less
than sixty (60) days prior to the commencement of each full
fiscal year, submit to Lessee and Owner, for their
approval, a proposed monthly Operating Budget for the
ensuing full or partial fiscal year, as the case may be.
Manager shall include with the monthly Operating Budgets
shall include reasonable detail on all material assumptions
on which such Operating budgets are based. Lessee may
object to the Operating Budget and, after soliciting
Manager's opinion and input regarding the disputed item(s)
and considering such opinions and input in good faith,
Lessee shall resolve such disputes in its sole discretion.
Manager shall revise the Operating Budget from time to
time, as necessary, to reflect any unpredicted significant
changes, variables or events or to include significant,
additional, unanticipated items of income or expense.
Manager shall be permitted to reallocate part or all of the
amount budgeted with respect to any line item to another
line item and to make such other modifications to the
Operating Budget as Manager deems reasonably necessary.
Lessee and Owner acknowledge that the Operating Budget is
intended only to be a reasonable estimate of the Hotel's
income and expenses for the ensuing fiscal year. Manager
shall not be deemed to have made any guarantee, warranty or
representation whatsoever in connection with the Operating
Budget;
(vi) Operating Statement. Manager shall prepare and furnish
Lessee and Owner with a detailed operating statement
setting forth the results of the Hotel's operations for
each fiscal month. Manager shall use its best efforts to
provide such reports within ten (10) days after the end of
each fiscal month, and shall provide such reports in no
event later than fifteen (15) days after the end of each
fiscal month. Within fourty-five (45) days after the end
of each fiscal year, Manager shall furnish Lessee and Owner
with a detailed operating statement setting forth the
results of the Hotel's operations for the fiscal year.
Operating statements shall include a comparison of actual
results for the relevant period with the budgeted amounts
for such period as set forth in the applicable Operating
Budget;
-7-
40
(vii) Capital Budgets and Statement. Manager shall, not less
than sixty (60) days prior to the commencement of each
fiscal year, submit to Lessee and Owner a recommended
"Capital Budget" for the ensuing full or partial fiscal
year, as the case may be, for furniture, fixtures and
equipment, ordinary Hotel capital replacement items as
shall be required to operate the Hotel in accordance with
the standards referred to in the License Agreement and
non-routine items. Before Manager expends any funds on
capital items and other non-routine items or commences or
commissions work on such items, Manager agrees to obtain
the specific approval of the Lessee of the time and manner
in which (i) such funds will be spent and (ii) such items
will be completed. Manager acknowledges that the Lessee
shall have the right, exercisable in its sole discretion,
to control, direct and supervise all work on and
expenditures for all capital items and other non-routine
items. If Lessee exercises the right described in the
previous sentence, Lessee shall solicit and consider
Manager's opinions on the nature, manner and timing of such
work and periodically apprise Manager of the progress of
such work and any material changes in the scope, manner or
timing of such work. Manager shall prepare and furnish
Lessee and Owner, on or before the twenty-fifth (25th) day
of the fiscal month immediately following the close of a
fiscal month, with a detailed status report and accounting
of all expenditures on non-routine and capital items that
the Lessee has not elected to control, direct and
supervise. Such accountings shall include a comparison of
actual expenditures on such items for such period with the
budgeted amounts for such period as set forth in the
applicable Capital Budget.
(viii) General Maintenance Non-Capital Replacements. Manager
shall supervise the maintenance, repair and replacement of
non-Capital Replacements.
(ix) Operating Equipment. Manager shall select and purchase all
operating equipment for the Hotel such as linens, utensils,
uniforms and other similar items.
(x) Operating Supplies. Manager shall select and purchase all
operating supplies for the Hotel such as food, beverages,
fuel, soap, cleansing items, stationery and other
consumable items.
(xi) Accounting Standards. Manager shall maintain the books and
records reflecting the operations of the
-8-
41
Hotel and in conformity with generally accepted accounting
practices consistently applied and shall adopt and follow
the fiscal accounting periods utilized by Manager in its
normal course of business. The Hotel-level generated
accounting records reflecting detailed day-to-day
transactions of the Hotel's operations, shall be kept by
Manager at the Hotel or at the Manager's regional offices
or corporate headquarters, or at such other location as
Manager shall reasonably determine.
(xii) Audits. Lessee and Owner shall have the right to have
their employees and independent accounting firms examine,
audit, and copy the books and records of the Hotel at any
reasonable time upon forty- eight (48) hours notice to
Manager;
(xiii) Marketing and Advertising. Manager shall advertise and
promote the Hotel in coordination with the sales and
marketing programs of Manager and other Homewood Suites
hotels. Manager may participate in sales and promotional
campaigns and activities involving complimentary rooms.
Manager, in marketing and advertising the Hotel, shall have
the right to use marketing and advertising services of
employees of Manager and its parent and affiliated
companies not located at the Hotel. Manager may charge the
Hotel for personnel and other costs and expenses incurred
in providing such services; provided that (i) Manager's
allocation of such costs and expenses among hotels,
including the Hotel, shall be pro rata among all hotels
owned or managed by Manager and (ii) the annual allocation
of such costs and expenses to the Hotel shall not exceed
$10,000. Such costs and expenses shall be reflected in the
budgets and operating statements required to be prepared
and submitted by Manager under this Management Agreement.
Other than as specifically provided for in this Section
3.01(xiii), without specific, advance approval by Lessee,
such services shall be without cost other than the charges
otherwise incurred by Lessee for marketing and related
services under the License Agreement.
(xiv) Permits and Licenses. Manager shall assist Owner and
Lessee in obtaining the various permits and licenses
required to operate the Hotel in accordance with the terms
of this Agreement and the License Agreement.
(xv) Meetings. The Hotel's general manager shall meet with
Lessee's and Owner's Representative (as hereinafter defined
in Section 4.01(viii)) monthly to
-9-
42
review and discuss the previous and future month's
operating statement, cash flow, budget, capital
expenditures, important personnel matters and the general
concerns of Lessee, Owner and Manager ("Monthly Meeting").
Also, a representative of Manager's corporate staff shall
meet with the Representative quarterly to review and
discuss the previous and future quarter's operating
statement, cash flow, budget, capital expenditures,
important personnel matters and the general concerns of
Lessee, Owner and Manager ("Quarterly Meeting").
In addition to the Monthly and Quarterly Meetings, once
each year, in connection with the Manager's preparation of
the Operating and Capital Budgets for the upcoming year,
the Hotel's general manager and one or more representatives
of Manager's corporate staff shall meet with Lessee's and
Owner's Representative to review and discuss (i) the
operating performance of the Hotel, (ii) the anticipated
operating performance for the upcoming year, (iii) the
marketing and advertising history and plans for the Hotel,
(iv) the repair and maintenance history and plans for the
Hotel, (v) the need for, scope and timing of capital and
other non-routine projects and (vi) such other matters
regarding the Hotel or its operation as any of the
attendees deem appropriate ("Annual Meeting").
Monthly Meetings shall be held telephonically unless either
party requests that a Monthly Meeting be held in person to
discuss material deviations from budget or other material
matters identified in advance of the meeting. Except to
the extent otherwise mutually agreed upon by Lessee, Owner
and Manager, all Monthly Meetings held in person, Quarterly
Meetings and Annual Meetings shall be held at the Hotel;
(xvi) Insurance. Manager shall procure and maintain throughout
the Term the insurance coverages set forth on Exhibit "D;"
(xvii) Chain Services. Lessee and Manager contemplate that
certain services (collectively, "Chain Services"), such as
advertising, training and computer payroll, can be provided
for the Hotel better, more efficiently and more
economically on a central, regional or group basis rather
than on an individual basis. Manager may provide Chain
Services to the
-10-
43
Hotel, and in such event the Hotel's fair and equitable
share of the cost thereof shall constitute an operating
expense, so long as (i) the Manager or its affiliates are
not obligated to provide such services under the License
Agreement, (ii) the cost of the Chain Services shall be
allocated on a fair and equitable basis among the Hotel and
the other hotels benefitting therefrom; (iii) the basis for
such allocation shall be explained by Manager in each
Operating Budget; (iv) the costs of the Chain Services
shall be fair and reasonable and shall not exceed the costs
that would be charged by an unaffiliated third party and
(v) both the cost of the Chain Services and the allocation
of a share of that cost to the Hotel and other hotels
benefitting therefrom shall be subject to audit by Lessee
pursuant to the terms of Section 4.01(ix) of this
Agreement.
(xviii) G&A Expenses. Except to the extent permitted by Section
3.01(xiii), no part of Manager's central office overhead or
general or administrative expenses including the cost of
travel by Manager's corporate or regional officers or for
travel related to any other hotel operated by Manager or
its Affiliates shall be (i) deemed to be an operating
expense or (ii) reimbursed under Section 11.14 or any other
provision hereof.
(xix) Competitive Bidding. All contracts for repairs, capital
improvements, foods and services exceeding $10,000 shall be
awarded on the basis of competitive bidding. In its
operation of the Hotel under this Agreement, Manager may
purchase goods, supplies and services from itself or any
affiliated or subsidiary companies or individuals so long
as the prices and terms thereof are competitive with, and
are not less favorable than, prices and terms which could
be obtained from independent parties.
(xx) Labor Relations. All employees working at the Hotel are
and will be employees of the Manager, and are not and will
not be employees of the Lessee, the Owner or any of their
affiliates. None of such employees shall be offered,
receive or be eligible to receive any benefits offered to
or received by Lessee's employees. Prior to entering into
any collective bargaining agreement concerning any
employees of the Hotel, Manager will so inform Lessee, but
Lessee shall have not right of approval or disapproval, and
Manager shall have complete discretion and authority to
negotiate, enter into and perform such agreements.
-11-
44
To the extent applicable, Manager: (a) represents that it
is an equal opportunity employer as described in Section
202 of Executive Order 11246 dated September 24, 1965, as
amended, and as such agrees to comply with the provisions
of Paragraphs 1 through 7 of Section 202 of said Executive
Order during the performance of this Operating Agreement,
(b) agrees to comply with the affirmative action
requirements of Part 60.741 of Title 41, Code of Federal
Regulations, with respect to handicapped workers during the
performance of this Operating Agreement, (c) agrees to
comply with the affirmative action requirements of Part
60.250 of Title 41, Code of Federal Regulations, with
respect to Disabled Veterans and Veterans of the Vietnam
Era during the performance of this Operating Agreement, and
(d) shall submit to Lessee in the form approved by the
Director of the Office of Federal Contract Compliance, U.S.
Department of Labor, a certification that Manager does not
and will not maintain any facilities that provide for their
employees in a segregated manner, or permit their employees
to perform their services at any location under its
control, where segregated facilities are maintained, and
that Manager will obtain a similar certification from its
contractors. By so agreeing, neither party intends to
imply that the aforementioned Executive Orders and federal
regulations are applicable to Manager.
(xxi) Capital Leases. Notwithstanding anything herein to the
contrary, all obligations and payments required under any
lease characterized as a capital obligation under generally
accepted accounting principles shall be owed and paid by
the Owner or Lessee, and not Manager, and such obligations
and payments shall not be an operating or capital expense
charged to the Hotel for purposes of this Agreement.
ARTICLE 4.
LESSEE'S OBLIGATIONS
SECTION 4.01. LESSEE'S OBLIGATIONS. During the Term, Lessee shall
have the obligations set forth below:
(i) License Agreement. Lessee shall comply with all of the
terms and conditions of the License Agreement (specifically
including, but not limited to, Licensee's obligation to pay
the fees, charges and contributions set forth in paragraph
3.C. of the License Agreement) and keep the License
Agreement in full force and effect from the Effective Date
through
-12-
45
the remainder of the Term. Nothing in this Agreement shall
be interpreted in a manner which would relieve Lessee of
any of its obligations under the License Agreement;
(ii) Licenses and Permits. Lessee shall obtain and maintain,
with Manager's assistance and cooperation, all governmental
permissions, licenses and permits necessary to enable
Manager to operate the Hotel in accordance with the terms
of this agreement and the License Agreement;
[(iii) PRE-OPENING FUNDS. TWO (2) DAYS PRIOR TO THE COMMENCEMENT
OF THE PRE-OPENING PROGRAM DESCRIBED IN SECTION 3.01(i),
LESSEE SHALL MAKE AN INITIAL DEPOSIT OF THE SUM SPECIFIED
ON EXHIBIT "B" IN THE PRE-OPENING BANK ACCOUNT(S).
THEREAFTER, LESSEE SHALL DEPOSIT SUCH FUNDS IN THE
PRE-OPENING BANK ACCOUNT(S) AS ARE SET FORTH IN THE FUNDING
SCHEDULE ATTACHED TO THE PRE-OPENING BUDGET;]
(iv) Operating Funds. Lessee shall provide all funds necessary
to enable Manager to arrange and operate the Hotel in
accordance with the terms of this Agreement and the License
Agreement. Lessee and Manager will agree on the amount of
funds to be delivered by Lessee to Manager for deposit into
the Bank Account(s) on the [OPENING DATE/EFFECTIVE DATE],
and thereafter will agree from time to time on the minimum
amount of funds to be maintained in the Bank Account, for
working capital for the Hotel's operations (as agreed by
the parties, the "Minimum Balance"). Lessee agrees, upon
Manager's written request, to immediately furnish Manager
with sufficient funds to make up any deficiency in the
agreed upon Minimum Balance;
(v) Capital Funds. Lessee or Owner shall, consistent with the
Operating Budget, expend such amounts for renovation
programs, furnishings, equipment and ordinary Hotel capital
replacement items as are required from time to time to (a)
maintain the Hotel in good order and repair; (b) comply
with the standards referred to in the License Agreement;
and (c) comply with governmental regulations and orders.
Lessee and Owner shall cooperate with Manager in
establishing appropriate procedures and timetables for
Lessee or Owner to undertake capital replacement projects.
Lessee shall have the right, but not the obligation,
exercisable in its sole discretion, to control, direct and
supervise all work on and expenditures for all capital
items and other non-
-13-
46
routine items. If Lessee exercises the right described in
the previous sentence, Lessee shall solicit and consider
Manager's opinions on the nature, manner and timing of such
work and periodically apprise Manager of the progress of
such work and any material changes in the scope, manner or
timing of such work;
(vi) Payments to Manager. Lessee shall promptly pay to Manager
all amounts due Manager under this Agreement.
(vii) Representative. Lessee and Owner shall appoint a
representative to represent them in all matters relating to
this Agreement and/or the Hotel ("Representative"). The
initial Representative shall be the individual named on
Exhibit "B." Manager shall have the right to deal solely
with the Representative on all such matters. Manager may
rely upon statements and representations of the
Representative as being from and binding upon Lessee and
Owner. Lessee and Owner may change the Representative, or
appoint separate representatives, from time to time by
providing written notice to Manager in the manner provided
for herein. The Representative shall attend all Monthly
Meetings and Quarterly Meetings; and
(viii) Quiet and Peaceable Operation. Lessee shall ensure that
Manager is able to peaceably and quietly operate the Hotel
in accordance with the terms of this Agreement, free from
molestation, eviction and disturbance by Lessee or by any
other person or persons claiming by, through or under
Lessee. Lessee shall undertake and prosecute all
reasonable and appropriate actions, judicial or otherwise,
required to assure such quiet and peaceable operations by
Manager.
(ix) Amendments to Percentage Lease. Lessee will not execute
any amendments to the economic terms of the Percentage
Lease which, on a pro forma basis using Promus' Initial
Operating Budget (as defined in Section 3.01(v)), would
result in the Hotel producing Lessee GOP (as defined in
Exhibit C) equal to less than 5% of the budgeted gross
revenues of the Hotel set forth in the Initial Operating
Budget.
-14-
47
ARTICLE 5.
MANAGEMENT FEE
SECTION 5.01. MANAGEMENT FEE. Manager is authorized by Lessee to pay
itself from the Bank Account(s) the Management Fees calculated and payable in
the manner set forth on Exhibit "C."
ARTICLE 6.
CLAIMS AND LIABILITY
SECTION 6.01. CLAIMS AND LIABILITY. Lessee and Owner, for themselves
and on behalf of their affiliates, agree for the benefit of Manager, and
Manager, for itself and on behalf of its affiliates, agrees for the benefit of
Lessee and Owner, to look only to the appropriate insurance coverages in effect
pursuant to this Agreement in the event any demand, claim, action, damage,
loss, liability or expense occurs as a result of injury to person or damage to
property regardless of whether any such demand, claim, action, damage, loss,
liability or expense is caused or contributed to, by or results from the
negligence of Lessee or Manager or their subsidiaries, affiliates, employees,
directors, officers, agents or independent contractors and regardless whether
the injury to person or damage to property occurs in and about the Hotel or
elsewhere as a result of the performance of this Agreement. Nevertheless, in
the event the insurance proceeds are insufficient or there is no insurance
coverage to satisfy the demand, claim, action, loss, liability or expense and
the same did not arise out of the negligence or willful misconduct of Manager,
Lessee agrees, at its expense, to indemnify and hold Manager and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability. If such claim or
liability arises out of the gross negligence or willful misconduct of Manager
then Manager agrees at its expense to indemnify and hold Lessee and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability.
SECTION 6.02. SURVIVAL. The provisions of this Article 6 shall
survive any cancellation, termination or expiration of this Agreement and shall
remain in full force and effect until such time as the applicable statute of
limitations shall extinguish all demands, claims, actions, damages, losses,
liabilities or expenses which are the subject of the provisions of this Article
6.
-15-
48
ARTICLE 7.
CLOSURE, EMERGENCIES AND DELAYS
SECTION 7.01. EVENTS OF FORCE MAJEURE. If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease
operation of the Hotel in order to protect the Hotel and/or the health, safety
and welfare of the guests and/or employees of the Hotel for reasons beyond the
reasonable control of Manager, such as, but not limited to, acts of war,
insurrection, civil strife and commotion, labor unrest, governmental
regulations and orders, shortage or lack of adequate supplies or lack of
skilled or unskilled employees, contagious illness, catastrophic events or acts
of God ("Force Majeure"), then in such event or similar events Manager may
close and cease operation of all or any part of the Hotel, reopening and
commencing operation when Manager deems that such may be done without jeopardy
to the Hotel, its guests and employees.
Manager and Lessee agree, except as otherwise provided herein, that
the time within which either party is required to perform an obligation and
Manager's right to manage the Hotel under this Agreement shall be extended for
a period of time equivalent to the period of delay caused by an event of Force
Majeure.
SECTION 7.02. EMERGENCIES. If a condition of an emergency nature
should exist which requires that immediate repairs be made for the preservation
and protection of the Hotel, its guests or employees, or to assure the
continued operation of the Hotel, Manager is authorized to take all actions and
to make all expenditures necessary to repair and correct such condition,
regardless of whether provisions have been made in the applicable budget for
such emergency expenditures. Expenditures made by Manager in connection with
an emergency shall be paid, in Manager's sole discretion, out of the Bank
Account(s). Lessee shall immediately replenish such funds paid from the Bank
Account(s).
ARTICLE 8.
CONDEMNATION AND CASUALTY
SECTION 8.01. CONDEMNATION. If the Hotel is taken in any eminent
domain, expropriation, condemnation, compulsory acquisition or similar
proceeding by a competent authority, this Agreement shall automatically
terminate as of the date of taking or condemnation. Any compensation for the
taking or condemnation of the physical facility comprising the Hotel shall be
paid to Lessee. Manager, however, with the full cooperation of Lessee, shall
have the right to file a claim with the appropriate
-16-
49
authorities for the loss of Management Fee income for the remainder of the Term
and any extension thereof because of the condemnation or taking, so long as
such claim can be filed in a separate proceeding and does not adversely affect
the payment to Lessee. If only a portion of the Hotel is so taken and the
taking does not make it unreasonable or imprudent, in Manager's and Lessee's
opinion, to operate the remainder as a hotel of the type immediately preceding
such taking, this Agreement shall not terminate. Any compensation shall be
used, however, in whole or in part, to render the Hotel a complete and
satisfactory architectural unit as a hotel of the same type and class as it was
immediately preceding such taking or condemnation. The foregoing provisions
are subject to the rights of any first mortgagee with respect to the Hotel.
SECTION 8.02. CASUALTY. In the event of a fire or other casualty,
Lessee shall comply with the terms of the License Agreement and this Agreement
shall remain in full force and effect so long as the License Agreement remains
in full force and effect, except that the Management Fee shall be abated until
any damage to the Hotel is repaired and the Hotel is open for business.
ARTICLE 9.
DEFAULT AND TERMINATIONS RIGHTS
SECTION 9.01. MANAGER DEFAULTS. Each of the following shall
constitute an Event of Default by Manager:
(i) If sufficient funds are available, and assuming that all
funds are expended in accordance with the terms of this
Agreement, the failure of Manager to pay to Lessee an
amount sufficient to fund the Lessee's obligations under
the Percentage Lease with respect to a month within ten
(10) days after the end of the month. If such a sum of
money is not paid on the date same becomes due and payable
under this Agreement, such sum shall bear interest from the
date due until actually paid at a rate equal to the lesser
of twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an operating expense under
this Agreement.
(ii) If sufficient funds are available, and assuming that all
funds are expended in accordance with the terms of this
Agreement, the failure of Manager to pay any other sum of
money to Lessee provided for herein when the same is
payable, if such failure is not cured within thirty (30)
days after written notice specifying such failure is given
by Lessee to
-17-
50
Manager. If any sum of money is not paid within ten (10)
days following the date same becomes due and payable under
this Agreement, such sum shall bear interest from the date
due until actually paid at a rate equal to the lesser of
twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an operating expense under
this Agreement.
(iii) An assignment by Manager in violation of the provisions of
Section 11.05 hereof.
(iv) If Manager shall fail to keep, observe or perform any other
material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Manager, or
if Manager shall fail to obtain or maintain any required
Permits that Manager is required or permitted by law to
obtain or maintain, and such failure shall continue for a
period of thirty (30) days, provided that if such failure
is incapable of cure within such thirty (30) day period and
if Manager shall promptly, diligently and continuously
pursue the cure thereof, then Manager shall have a period
of ninety (90) days after notice thereof by Lessee to
Manager within which to effectuate the cure. If, at end of
such ninety (90) day period the cure has not been
effectuated notwithstanding Manager's diligent and
continuous attempts to cure, then at the request of
Manager, Lessee shall extend the cure period for up to an
additional thirty (30) days, if in Lessee's reasonable
opinion, the default is capable of cure within such
additional period as Lessee may permit and the extension
will not have a materially negative effect on the financial
performance of the Hotel.
(v) If because of any act or omission on the part of Manager,
and without the fault of Lessee, the License Agreement or
any other material license critical to the operation of the
Hotel is at any time suspended, terminated or revoked, and
such suspension, termination or revocation shall continue
unstayed and in effect for a period of more than ninety
(90) consecutive days in the Hotel shall otherwise be
suspended for a period of more than ninety (90) consecutive
days; in the event of any such suspension, termination or
revocation, Manager shall immediately proceed to use
Manager's best efforts to cause the prompt reinstatement of
such Agreement, license or right. If, at the end of such
ninety (90) day period the cure has not been effectuated
-18-
51
notwithstanding Manager's diligent and continuous attempts
to cure, then at the request of Manager, Lessee shall
extend the cure period for up to an additional thirty (30)
days, if in Lessee's reasonable opinion, the default is
capable of cure within such additional period as Lessee may
permit and the extension will not have a materially
negative affect on the financial performance of the Hotel.
(vi) If Manager shall fail to maintain and operate the Hotel in
accordance with the standards required under Section 3.01
and such failure shall not be due to a refusal on the part
of Owner and Lessee to approve the Operating Budget
submitted by Manager under Section 3.01(v), or Lessee's
failure to provide funds requested pursuant to the
provision of Section 4.01(vii) and shall continue for a
period of thirty (30) days after written notice by Lessee
to Manager specifying the matters or conditions which
constitute the basis for such Event of Default, provided
that if such failure is incapable of cure within such
thirty (30) day period and if Manager shall promptly,
diligently and continuously pursue the cure thereof, then
Manager shall have a period of ninety (90) days after
notice thereof by Lessee to Manager within which to
effectuate the cure. If, at the end of such ninety (90)
day period the cure has not been effectuated
notwithstanding Manager's diligent and continuous attempts
to cure, then at the request of Manager, Lessee shall
extend the cure period for up to an additional thirty (30)
days, if in Lessee's reasonable opinion, the default is
capable of cure within such additional period as Lessee may
permit and the extension will not have a materially
negative affect on the financial performance of the Hotel.
(vii) If Manager shall apply for or consent to the appointment of
a receiver, trustee or liquidator of Manager or of all of a
substantial part of its assets, admit in writing its
inability to pay its debts as they come due, make a general
assignment for the benefit of creditors, take advantage of
any insolvency law, or file an answer admitting the
material allegations of a petition filed against Manager in
any bankruptcy, reorganization or judgment or decree shall
be entered by any court of competition jurisdiction, on the
application of a creditor, adjudicating Manager bankrupt or
insolvent or approving a petition seeking reorganization of
Manager or appointing a receiver, trustee or liquidator of
Manager or of all of its assets or a
-19-
52
decree shall continue unstayed and in effect for any period
of 90 consecutive days.
(viii) The filing of a voluntary petition in bankruptcy or
insolvency or a petition for liquidation or reorganization
under any bankruptcy law by Manager, or Manager shall
consent to, acquiesce in, or fail timely to controvert, an
involuntary petition in bankruptcy, insolvency or an
involuntary petition for liquidation or reorganization
filed against it.
(ix) The filing against Manager of a petition seeking
adjudication of Manager as insolvent or seeking liquidation
or reorganization or appointment of a receiver, trustee or
liquidator of all or a substantial part of Manager's
assets, if such petition is not dismissed within 90 days.
(x) Failure of Manager (but excluding such a failure which
results from the default by Lessee in paying amounts
payable hereunder by Lessee) to maintain at all times
throughout the term hereof all of the insurance required to
be maintained by Manager hereunder, if such failure is not
cured within 30 days after written notice specifying such
failure is given by Lessee to Manager.
(xi) If there shall occur an Event of Default or Termination
under the Percentage Lease due to Manager default
hereunder.
(xii) If there shall occur a default under the License Agreement
which may, if uncured, permit licensor to terminate the
License Agreement and such default shall continue beyond
applicable grace periods, if any.
(xiii) The occurrence of an event or transaction after which the
Manager is no longer owned or controlled by the franchisor
under the License Agreement.
SECTION 9.02. LESSEE DEFAULTS. Each of the following shall constitute
an Event of Default by Lessee:
(i) The failure of Lessee to pay or furnish to Manager any
money Lessee is required to pay or furnish to Manager in
accordance with the terms hereof on the date the same is
payable, if such failure is not cured within 30 days after
written notice specifying such failure is given by Manager
to Lessee. If any sum of money is not paid within ten (10)
days following the date same becomes due and payable under
-20-
53
this Agreement, such sum shall bear interest from the date
due until actually paid at a rate equal to the lesser or
twelve percent (12%) per annum or the highest annual
interest rate permitted by law, provided that any interest
so payable shall not constitute an Operating Expense under
this Agreement.
(ii) If Lessee shall apply for or consent to the appointment of
a receiver, trustee or liquidator of Lessee of all or a
substantial part of its assets, or admit in written its
inability to pay its debts as they come due, make a general
assignment for the benefit of creditors, take advantage of
any insolvency law, or file an answer admitting the
material allegations of a petition filed against Lessee in
any bankruptcy, reorganization or insolvency proceeding, or
if an order, judgment or decree shall be entered by any
court of competent jurisdiction, on the application of a
creditor, adjudicating Lessee a bankrupt or insolvent or
approving a petition seeking reorganization of Lessee or
appointing a receiver, trustee or liquidator of Lessee or
of all or a substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect
for any period of sixty (60) consecutive days.
(iii) The filing of a voluntary petition in bankruptcy or
insolvency or a petition for liquidation or reorganization
under any bankruptcy law by Lessee, or Lessee shall consent
to, acquiesce in, or fail timely to controvert, an
involuntary petition in bankruptcy, insolvency or an
involuntary petition for liquidation or reorganization
filed against it.
(iv) The filing against Lessee of a petition seeking
adjudication of Lessee as insolvent or seeking liquidation
or reorganization or appointment of a receiver, trustee or
liquidator of all or a substantial part of Lessee's assets,
if such petition is not dismissed within 90 days.
(v) Failure of Lessee or Owner to maintain at all times
throughout the term hereof all of the insurance required to
be maintained by Lessee under Section 4.01(iii), if such
failure is not cured within 30 days after written notice
specifying such failure is given by Manager to Lessee.
(vi) The failure of Lessee to perform, keep or fulfill any of
the other covenants, undertakings, obligations or
conditions set forth in this Agreement, or the
-21-
54
failure of Lessee to approve expenditures or to authorize
procedures necessary to maintain the standards of the Hotel
in accordance with the License Agreement, if such failure
is not cured within 60 days after written notice specifying
such failure is given by Manager to Lessee, provided,
however, that if such failure is incapable of cure within
said 60 day period, and Lessee proceeds during such 60 day
period, and Lessee proceeds during such 60 day period to
commence to cure with all due diligence such failure until
the same is cured, then no Event of Default shall be in
existence under this Paragraph.
SECTION 9.03. TERMINATION UPON EVENT OF DEFAULT; OTHER REMEDIES. Upon
the occurrence of an Event of Default, the non-defaulting party may: (i)
terminate this Agreement, effective thirty (30) days after the giving of
written notice of termination to the defaulting party, provided that
termination may be effective immediately in the case of willful misconduct,
criminal conduct or misappropriation of funds; and (ii) pursue any and all
other remedies available to the non-defaulting party at law or in equity.
SECTION 9.04. TERMINATION FOR FAILURE TO ACHIEVE FINANCIAL RESULTS.
(a) Notwithstanding anything to the contrary in this Agreement,
Lessee shall have the right to terminate the Agreement in accordance
with this Section 9.04 in the event that at the end of any of the
consecutive twelve months periods (each, a "Test Period") beginning
with [APRIL] 1997, the GOP (as defined in Exhibit C) for the Hotel
for the Test Period was less than 5% of the gross revenues for the
Hotel (the "Minimum Margin") for such period, provided that:
(i) The default will be cured if at the end of the six
month period immediately subsequent to the Test Period in
which the GOP was less than the Minimum Margin (a "Cure
Period"), the GOP for the twelve month period then ended is
at least equal to the Minimum Margin.
(ii) If such a default is not cured at the end of a Cure
Period, Manager may cure such default, by making a cash
payment to the Lessee, within 21 days after the end of the
period (a "Shortfall Payment"), equal to the difference
between (i) the GOP for (A) the Test Period and (B) the
Cure Period and (ii) the Minimum Margin for such periods.
-22-
55
(iii) If Manager cures such a default by making a
Shortfall Payment, the Management Agreement may be
terminated, at the Lessee's option, if the GOP is less than
the Minimum Margin for either (A) the Test Period ending 6
months after the end of the Cure Period or (B) any
subsequent Test Period, unless, within 15 days after the
end of that Test Period, Manager makes a second Shortfall
Payment equal to the difference between (i) the GOP for
that Test Period and (ii) the Minimum Margin for such
periods.
(iv) Manager may make only two Shortfall Payments and
shall have only one Cure Period.
(v) Without in any way limiting or affecting the Lessee's
right to terminate this Agreement on the terms and upon the
occurrences described above, Lessee will consider in
determining whether to exercise such rights, market
conditions, unforseen occurrences and any other relevant
facts which may have affected the performance of the Hotel.
The provisions of this Section 9.04(a) shall not apply to
the Hotel in any Test Period in which the operation of the
Hotel, or the use of the Hotel's facilities, are
significantly disrupted by casualty loss, strike, eminent
domain, or events of Force Majeure that are beyond the
reasonable control of Manager.
(b) If Lessee elects to terminate this Agreement under Section
9.04, such right may be exercised provided that (i) notice of
termination shall be given within sixty (60) days after the receipt by
Lessee of the annual accounting for such fiscal period; and (ii) the
notice shall specify a termination date no sooner than ninety (90)
days after the giving of such notice.
SECTION 9.05. MANAGER'S EARLY TERMINATION RIGHT. Manager, at its
option, may terminate this Agreement upon sixty (60) days written notice to
Lessee.
SECTION 9.06. RIGHT TO TERMINATE UPON SALE OR FORECLOSURE.
(a) Upon any sale by Owner of the Hotel, Lessee shall have the
right to terminate this Agreement ; provided, however, that the Lessee shall
provide to Manager within 120 days of such sale either (i) a cash amount equal
to 50% of the fair market value (as determined under the Percentage Lease) of
the Lessee's then-remaining leasehold estate in the Hotel as of the closing
date of the sale (the "Cash Amount") or (ii) written notice of its offer to
have Manager manage a substitute hotel facility (a "Substitute Hotel") under a
comparable Management Agreement; provided further, however, that if the Lessee
provides Manager
-23-
56
with an offer to manage a Substitute Hotel and Manager rejects the offer within
15 days, Lessee shall deliver the Cash Amount to Manager within 10 days of such
rejection.
(b) Lessee shall also have the right to terminate this
Agreement upon a foreclosure by, the taking of possession by or a transfer in
lieu of foreclosure to a holder of a lien on the Hotel, without penalty to the
Lessee. The rights of the Lessee hereunder may be assigned to any first
mortgagee of the Hotel and exercised by such assignee.
SECTION 9.07. EMPLOYMENT SOLICITATION RESTRICTION UPON TERMINATION.
Lessee and its affiliates and subsidiaries and their successors hereby agree
not to solicit the employment of the Hotel general manager or assistant general
manager at any time during the term of this Agreement without Manager's prior
written approval. Furthermore, Lessee and its affiliates and subsidiaries and
successors agree not to employ the Hotel's general manager or assistant general
manager for a period of twelve (12) months after the termination or expiration
of this Agreement, without Manager's prior written approval.
ARTICLE 10.
APPLICABLE LAW AND ARBITRATION
SECTION 10.01. APPLICABLE LAW. The interpretation, validity and
performance of this Agreement shall be governed by the procedural and
substantive laws of the state where the Hotel is located and any and all
disputes, except those specifically referred to below, shall be brought and
maintained within that state. If any judicial authority holds or declares that
the law or another jurisdiction is applicable, this Agreement shall remain
enforceable under the laws of that jurisdiction.
SECTION 10.02. ARBITRATION OF FINANCIAL MATTERS.
SUBSECTION 10.02.1. MATTERS TO BE SUBMITTED TO ARBITRATION. In the
case of a dispute with respect to any of the following matters, either party
may submit such matter to arbitration which shall be conducted by the
Accountants (as hereinafter defined in Subsection 10.02.2);
(a) computation of the Management Fees;
(b) reimbursements due to Manager under the
provisions of Section 11.15;
(c) any adjustment in the Minimum Balance under
the provisions of Section 4.01(v); and
(d) any adjustment in dollar amounts of insurance
coverages required to be
maintained.
-24-
57
All disputes concerning the above matters shall be submitted to the
Accountants. The decision of the Accountants with respect to any matters
submitted to them under this Subsection 10.02.1 shall be binding on both
parties hereto.
SUBSECTION 10.02.2. THE ACCOUNTANTS. The "Accountants"
shall be one of three (3) firms of certified public accountants of recognized
national standing in the hotel industry. Until otherwise agreed to by the
parties, the three (3) firms shall be Arthur Andersen & Co., Coopers and
Lybrand, and Pannell Kerr Forster, notwithstanding any existing relationships
which may exist between Lessee and such accounting firms or Manager and such
accounting firms. The party desiring to submit any matter to arbitration under
Subsection 10.02.1 shall do so by written notice to the other party, which
notice shall set forth the items to be arbitrated and such party's choice of
one of the three (3) accounting firms. The party receiving such notice shall
within fifteen (15) days after receipt of such notice either approve such
choice, or designate one of the remaining two (2) firms by written notice back
to the first party, and the first party shall within fifteen (15) days after
receipt of such notice either approve such choice or disapprove the same. If
both parties shall have approved one of the three (3) firms under the preceding
sentence, then such firm shall be the "Accountants" for the purposes of
arbitrating the dispute; if the parties are unable to agree on an accounting
firm, then the third firm, which was not designated by either party, shall be
the "Accountants" for such purpose. The Accountants shall be required to
render a decision in accordance with the procedures described in Subsection
10.02.3 within fifteen (15) days after being notified of their selection. The
fees and expenses of the Accountants will be paid by the non-prevailing party.
SUBSECTION 10.02.3. PROCEDURES. In all arbitration proceedings
submitted to the Accountants, the Accountants shall be required to agree upon
and approve the substantive position advocated by Lessee or Manager with
respect to each disputed item. Any decision rendered by the Accountants that
does not reflect the position advocated by Lessee or Manager shall be beyond
the scope of authority granted to the Accountants and, consequently, may be
overturned by either party. All proceedings by the Accountants shall be
conducted in accordance with the Uniform Arbitration Act, except to the extent
the provisions of such act are modified by this Agreement or the mutual
agreement of the parties. Unless otherwise agreed, all arbitration proceedings
shall be conducted at the Hotel.
SECTION 10.03. PERFORMANCE DURING DISPUTES. It is mutually agreed
that during any kind of controversy, claim, disagreement or dispute, including
a dispute as to the validity of this Agreement, Manager shall remain in
possession of the Hotel as
-25-
58
Manager; and Lessee and Manager shall continue their performance of the
provisions of this Agreement and its exhibits, but unless otherwise agreed by
the parties all funds shall be held in a separate escrow account pending the
resolution of such dispute. Either party shall be entitled to injunctive
relief from a civil court or other competent authority to maintain possession
in the event of a threatened eviction during any dispute, controversy, claim or
disagreement arising out of this Agreement.
ARTICLE 11.
GENERAL PROVISIONS
SECTION 11.01. AUTHORIZATION. Lessee and Manager represent and
warrant to each other that their respective corporations have full power and
authority to execute this Agreement and to be bound by and perform the terms
hereof. On request, each party shall furnish the other evidence of such
authority.
SECTION 11.02. RELATIONSHIP. Manager and Lessee shall not be
construed as joint venturers or partners of each other by reason of this
Agreement and neither shall have the power to bind or obligate the other except
as set forth in this Agreement.
SECTION 11.03. MANAGER'S CONTRACTUAL AUTHORITY IN THE PERFORMANCE OF
THIS AGREEMENT. Manager is authorized to make, enter into and perform in the
name of and for the account of Lessee any contracts deemed necessary by Manager
to perform its obligations under this Agreement.
SECTION 11.04. FURTHER ACTIONS. Lessee and Manager agree to execute
all contracts, agreements and documents and to take all actions necessary to
comply with the provisions of this Agreement and the intent hereof.
SECTION 11.05. SUCCESSORS AND ASSIGNS. Subject to Section 9.01(vii),
the acquisition of Manager or its parent company by a third party shall not
constitute an assignment of this Agreement by Manager and this Agreement shall
remain in full force and effect between Lessee and Manager. Except as herein
provided, Manager shall not assign any of its obligations hereunder without the
prior written consent of Lessee, which shall not be unreasonably withheld or
delayed. Lessee shall be deemed to have consented to such an assignment of
this Agreement if Lessee has not notified Manager in writing to the contrary
within fifteen (15) business days after Lessee has received Manager's request
for Lessee's consent to an assignment. Manager shall have the right to pledge
or assign its right to receive the Management Fees hereunder without the prior
written consent of Lessee. In the event of any such pledge or assignment,
Lessee shall have no right of set off, counterclaim or defense of payment
against assignee. Lessee's sole remedy for breach of Manager's
-26-
59
obligations under this agreement shall be suit for damages or specific
performance against Manager.
Lessee shall have the right to assign this Agreement to (i) the person
or entity which has obtained title to the Hotel and a Homewood Suites
Commitment Agreement or License Agreement for the Hotel or (ii) any mortgagee
in connection with any mortgage placed on the Hotel. Except as hereinabove
provided, Lessee shall not have the right to assign this Agreement.
SECTION 11.06. NOTICES. All notices or other communications provided
for in this Agreement shall be in writing and shall be either hand delivered,
delivered by certified mail, postage prepaid, return receipt requested,
delivered by an overnight delivery service, or delivered by facsimile machine
(with an executed original sent the same day by an overnight delivery service),
addressed as set forth on Exhibit "B." Notices shall be deemed delivered on
the date that is four (4) calendar days after the notice is deposited in the
U.S. mail (not counting the mailing date) if sent by certified mail, or, if
hand delivered, on the date the hand delivery is made, or if delivered by
facsimile machine, on the date the transmission is made. If given by an
overnight delivery service, the notice shall be deemed delivered on the next
business day following the date that the notice is deposited with the overnight
delivery service. The addresses given above may be changed by any party by
notice given in the manner provided herein.
SECTION 11.07. DOCUMENTS. Lessee shall furnish Manager copies of all
leases, title documents, property tax receipts and bills, insurance statements,
all financing documents (including notes and mortgages) relating to the Hotel
and such other non-confidential documents pertaining to the Hotel as Manager
shall reasonably request.
SECTION 11.08. DEFENSE. Manager shall defend and/or settle any claim
or legal action brought against Manager or Lessee, individually, jointly or
severally in connection with the operation of the Hotel. Manager shall, with
the consent of Lessee, retain and supervise legal counsel, accountants and such
other professionals, consultants and specialists as Manager deems appropriate
to defend and/or settle any such claim or cause of action, with the consent of
Lessee. All liabilities, costs, and expenses, including attorneys' fees and
disbursements, incurred in defending and/or settling any such claim or legal
action which are not covered by insurance and which were not caused by the
gross negligence or willful misconduct of Manager, its officers, directors,
employees, or agents shall be paid by Lessee.
SECTION 11.09. WAIVERS. No failure or delay by Manager or Lessee to
insist upon the strict performance of any covenant, agreement, term or
condition of this Agreement, or to exercise
-27-
60
any right or remedy consequent upon the breach thereof, shall constitute a
waiver of any such breach or any subsequent breach of such covenant, agreement,
term or condition. No covenant, agreement, term, or condition of this
Agreement and no breach thereof shall be waived, altered or modified except by
written instrument. No waiver of any breach shall affect or alter this
Agreement, but each and every covenant, agreement, term and condition of this
Agreement shall continue in full force and effect with respect to any other
then existing or subsequent breach thereof.
SECTION 11.10. CHANGES. Any change to or modification of this
Agreement including, without limitation, any change in the application of this
Agreement to the Hotel, must be evidenced by a written document signed by both
parties hereto.
SECTION 11.11. CAPTIONS. The captions for each Article and Section
are intended for convenience only.
SECTION 11.12. SEVERABILITY. If any of the terms and provisions
hereof shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any of the other terms or provisions hereof.
If, however, any material part of a party's rights under this Agreement shall
be declared invalid or unenforceable (specifically including Manager's right to
receive its Management Fees), the party whose rights have been declared invalid
or unenforceable shall have the option to terminate this Agreement upon thirty
(30) days written notice to the other party, without liability on the part of
the terminating party.
SECTION 11.13. INTEREST. Any amount payable to Manager or Lessee by
the other which has not been paid when due shall accrue interest at the lesser
of: (a) the highest legal limit in the state in which the Hotel is located or
(b) two percentage points (2%) over the published base rate of interest charged
by Citibank, N.A., New York, New York, to borrowers on ninety (90) day
unsecured commercial loans, as the same may be changed from time to time.
SECTION 11.14. REIMBURSEMENT. The performance by Manager of its
responsibilities under this Agreement are conditioned upon Lessee providing
sufficient funds consistent with the Operating Budget to Manager on a timely
basis to enable Manager to perform its obligations hereunder. Nevertheless,
Manager shall be entitled, at its option, to advance funds or contribute
property, on behalf of the Lessee, to satisfy obligations of Lessee in
connection with the Hotel and this Agreement. Manager shall keep appropriate
records to document all reimbursable expenses paid by Manager, which records
shall be made available for inspection by Lessee or its agents upon request.
Lessee agrees to reimburse Manager with interest upon demand for money paid or
property contributed by Manager to satisfy obligations of Lessee in
-28-
61
connection with the Hotel and this Agreement. Interest shall be calculated at
the rate set forth in Section 11.13 from the date Lessee was obligated to remit
the funds or contribute the property for the satisfaction of such obligation to
the date reimbursement is made.
SECTION 11.15. TRAVEL AND OUT-OF-POCKET EXPENSES. Manager shall be
reimbursed for all travel and out-of-pocket expenses of Manager's employees
reasonably incurred in the performance of this Agreement, but not to exceed
amounts included therefor in the Operating Budget. Manager shall have sole
discretion, which shall not be unreasonably exercised, to determine the
necessity for such travel or other expenses.
-29-
62
SECTION 11.16. THIRD PARTY BENEFICIARY. This Agreement is
exclusively for the benefit of the parties hereto and it may not be enforced by
any party other than the parties to this Agreement and shall not give rise to
liability to any third party other than the authorized successors and assigns
of the parties hereto, specifically including any mortgagee to which the rights
of the Lessee have been assigned.
SECTION 11.17. BROKERAGE. Manager and Lessee represent and warrant
to each other that neither has sought the services of a broker, finder or agent
in this transaction, and neither has employed, nor authorized, any other person
to act in such capacity. Manager and Lessee each hereby agrees to indemnify
and hold the other harmless from and against any and all claims, loss,
liability, damage or expenses (including reasonable attorneys' fees) suffered
or incurred by the other party as a result of a claim brought by a person or
entity engaged or claiming to be engaged as a finder, broker or agent by the
indemnifying party.
SECTION 11.18. SURVIVAL OF COVENANTS. Any covenant, term or
provision of this Agreement which, in order to be effective, must survive the
termination of this Agreement, shall survive any such termination.
SECTION 11.19. ESTOPPEL CERTIFICATE. Manager and Lessee agree to
furnish to the other party, from time to time upon request, an estoppel
certificate in such reasonable form as the requesting party may request stating
whether there have been any defaults under this Agreement known to the party
furnishing the estoppel certificate and such other information relating to the
Hotel as may be reasonably requested.
SECTION 11.20. OTHER AGREEMENTS. Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall
be deemed to modify any other agreement between Lessee and Manager with respect
to the Hotel or any other property.
SECTION 11.21. PERIODS OF TIME. Whenever any determination is to be
made or action is to be taken on a date specified in this Agreement, if such
date shall fall on a Saturday, Sunday or legal holiday under the laws of the
state in which the Hotel is located, then in such event said date shall be
extended to the next day is not a Saturday, Sunday or legal holiday.
SECTION 11.22. PREPARATION OF AGREEMENT. This Agreement shall not be
construed more strongly against either party regardless of who is responsible
for its preparation.
-30-
63
SECTION 11.23. EXHIBITS. All exhibits attached hereto are
incorporated herein by reference and made a part hereof as if fully rewritten
or reproduced herein.
SECTION 11.24. ATTORNEY'S FEES AND OTHER COSTS. The parties to this
Agreement shall bear their own attorneys' fees in relation to negotiating and
drafting this Agreement. Should Lessee or Manager engage in litigation to
enforce their respective rights pursuant to this Agreement, the prevailing
party shall have the right to indemnity by the non- prevailing party for an
amount equal to the prevailing party's reasonable attorneys' fees, court costs
and expenses arising therefrom.
SECTION 11.25. COUNTERPARTS. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an original.
SECTION 11.27. CAPITALIZED TERMS. Capitalized terms used but not
defined herein shall be as defined in the Exhibits hereto, which shall be
incorporated by reference herein and deemed a part hereof as if fully set forth
herein.
[Signature Page to Follow]
-31-
64
The parties have respectively caused this Agreement to be executed as
of the respective dates shown below.
LESSEE:
------
WINSTON HOSPITALITY, INC.
By: /s/
- - ---------------------------- ------------------------------------------
Witness John B. Harris, Jr.
Its: President
MANAGER:
-------
PROMUS HOTELS, INC.
By:
- - -------------------------- ------------------------------------------
Witness
Its:
-----------------------------------------
OWNER:
-----
WINN LIMITED PARTNERSHIP, which is a signatory
hereto only to evidence its agreement to the
obligations set forth in Sections 4.01(iii)
and (v) and as a third party beneficiary to
Sections 3.01(v) - (vii), (xii), (xiv) -
(xvi), (xx), 9.06 and Exhibit D
By: Winston Hotels, Inc., its general partner
By: /s/
- - --------------------------- -------------------------------------------
Witness Robert W. Winston, III
Its: President
-32-
65
EXHIBIT "A"
LICENSE AGREEMENT
66
EXHIBIT "B"
DEAL SPECIFIC TERMS
DEFINITIONS: The following terms which are used but not defined in the
Agreement or otherwise in the exhibits shall have the respective meanings
specified below:
"Purchase Agreement" shall mean the purchase agreement dated
______________ between Owner and Promus.
"Percentage Lease" shall mean the percentage lease agreement dated
___________, 1996 between Lessee and Owner relating to the Hotel,
which is attached hereto as Exhibit B-1.
TERM: The term of this Management Agreement shall equal the term of the
Percentage Lease.
[INITIAL DEPOSIT IN PRE-OPENING BANK ACCOUNT(S):]
INITIAL MINIMUM BALANCE FOR THE BANK ACCOUNT(S):
INITIAL REPRESENTATIVE:
DISBURSEMENT PRIORITY SCHEDULE:
Each fiscal month Manager, on behalf of Lessee, shall disburse funds
from the Bank Account(s) in the following order of priority and to the extent
available:
(a) the Management Fee to the extent not subordinated to
payments required under the Percentage Lease;
(b) all fees, assessments and charges due and payable under the
Commitment Agreement and License Agreement when issued;
(c) all reimbursable expenses due Manager;
(d) all other Hotel operating costs, as such costs and expenses
are defined under the accounting practices of Manager in
conformity with generally accepted accounting practices
consistently applied, specifically including, but not
limited to, (i) the cost of operating equipment and
operating supplies, wages, salaries and employee fringe
benefits, advertising and promotional expenses, the cost of
B-1
67
personnel training programs, utility and energy costs,
operating licenses and permits, grounds and landscaping
maintenance costs and equipment rentals approved by Manager
as an operating cost; (ii) all expenditures made for
maintenance and repairs to keep the Hotel in good condition
and repair, specifically excluding expenditures for Capital
Replacements; (iii) premiums and charges on the insurance
coverages specified in Exhibit "D" incurred after the
[OPENING DATE/EFFECTIVE DATE]; and (iv) any lease payments
(other than payments under the Percentage Lease). There
shall be excluded from the operating costs of the Hotel the
following, which shall be ownership costs of the Hotel:
(i) depreciation of the Hotel, furnishings, fixtures and
equipment; (ii) rental pursuant to a ground lease, if any,
or any other lease payments; (iii) debt service (interest
and principal) on any mortgage(s) encumbering the Hotel;
(iv) property taxes and assessments; [(V) AMORTIZATION OF
PRE-OPENING EXPENSES;] (vi) expenditures for Capital
Replacements; (vii) audit, legal and other professional or
special fees; (viii) equipment rentals approved by Manager
as an ownership cost; (ix) administrative and general
expenses and disbursements of Lessee, including
compensation of employees of Lessee; (x) Federal, State and
local Franchise and Income Taxes; (xi) amortization of bond
discounts and mortgage expenses; and (xii) such other costs
or expenses which are normally treated as ownership costs
under the accounting practices of Manager in conformity
with generally accepted accounting practices consistently
applied;
(e) Amounts payable or accrued under the Percentage
Lease; and
(f) the balance of the Management Fee.
After the disbursements set forth above, any excess funds remaining in
the Bank Account(s) over the Minimum Balance shall be distributed to Lessee.
If after making the disbursements set forth above, there shall be a deficiency
in the Minimum Balance, Lessee shall immediately provide such funds as may be
required to maintain the Minimum Balance in the Bank Account(s).
NOTICES: LESSEE: MANAGER:
Winston Hospitality, Promus Hotels, Inc.
Inc. 755 Crossover Lane
2209 Century Drive Memphis, TN 38117
Suite __ Fax: 901/374-5050
B-2
68
Fax: (919) 571-7330 Attn: Corporate Secretary
Attn: President
OWNER:
WINN Limited Partnership
c/o Winston Hotels, Inc.
2209 Century Drive
Suite 300
Fax: (919) 571-7330
Attn: President
B-3
69
EXHIBIT "C"
MANAGEMENT FEES
The "Management Fee" shall mean and refer to a fee equal to the
greater of (i) 1% of the Adjusted Gross Revenues (as hereinafter defined) from
the Hotel or (ii) (A) 50% of the Lessee's "Gross Operating Profit" ("GOP") for
the Hotel plus, (B) if the Lessee's GOP exceeds 5% of the gross revenues of the
Hotel, (x) 100% of such excess up to an amount equal to 1% of the gross
revenues of the Hotel and (y) 50% of such excess thereafter. The Lessee's GOP
means the Gross Revenues of the Hotel for a period, less all operating expenses
borne by the Lessee (which does not include real property taxes and casualty
insurance premiums, which are paid by Owner or Winston Hotels, Inc., a North
Carolina corporation and the general partner of Owner ("WHI"), and less any
amounts payable by the Lessee for the period under the Percentage Lease. The
Management Fee will be payable monthly, in arrears, within 30 days after the
end of the month.
If WHI, Owner and their affiliates have not spent at least
$50 million to develop hotels with franchises offered by Manager in the four
year period ending April __, 2000 (the "Development Period"), the Management
Fee for the Hotel shall adjust upward, beginning on that date but not
retroactively for any previous period, by substituting "60%" for "50%" in the
fee calculation described above. The amount spent shall include amounts
budgeted to be spent completing hotels on which development has commenced in
the Development Period. The Management fee for the Hotel payable for any
period in excess of 1% of the Adjusted Gross Revenues of the Hotel for the
period shall be subordinated to the payment of rent for such period under the
Percentage Lease.
The term "Gross Revenues" shall be defined as all revenues and income
of any nature derived directly or indirectly from the Hotel or from the use or
operation thereof, whether on or off the site, including total room sales, food
and beverage sales, if any, laundry, telephone, telegraph and telex revenues,
other income, rental or other payments from lessees, sublessees, licensees and
concessionaires (but not the gross receipts of such lessees, sublessees,
licensees or concessionaires) and the proceeds of business interruption, use,
occupancy or similar insurance.
The term "Adjusted Gross Revenues" shall be defined as Gross Revenues
less the following revenues actually received by the Hotel and included in
Gross Revenues: (i) any gratuities or service charges added to a customer's
bill; (ii) any credits or refunds made to customers, guests or patrons; (iii)
any sums and credits received by Lessee for lost or damaged merchandise; (iv)
C-1
70
any sales taxes, excise taxes, gross receipt taxes, admission taxes,
entertainment taxes, tourist taxes or charges; (v) any proceeds from the sale
or other disposition of the Hotel, furnishings and equipment or other capital
assets; (vi) any fire and extended coverage insurance proceeds; (vii) any
condemnation awards; (viii) any proceeds of financing or refinancing of the
Hotel; (ix) commissions, (x) refunds, (xi) vendor payments and splits, and
(xii) any interest on the Bank Account(s).
C-2
71
EXHIBIT "D"
INSURANCE
In accordance with Section 3.01(xvi), Manager shall, on behalf of
Lessee and at Lessee's expense, procure the insurance coverages hereinafter set
forth and ensure that they are in full force and effect at the time the Term
commences and that they remain in full force and effect throughout the Term of
this Agreement. All cost(s) and expense(s) incurred by Manager in procuring
the following insurance coverages shall be [PRE-OPENING EXPENSES IF INCURRED
PRIOR TO THE OPENING DATE AND] operating costs [IF INCURRED AFTER THE OPENING
DATE] and shall be paid from [THE PRE-OPENING BANK ACCOUNT(S) AND] the Bank
Account(s) [RESPECTIVELY]:
Coverages: Amounts Of Insurance:
- - --------- --------------------
Comprehensive General Liability $10,000,000
------------------------------- per location
Including -
Premises - Operations
Products/Completed Operations
Contractual
Personal Injury
Liquor Liability/Dram Shop
(if applicable)
Elevators and Escalators
Automobile Liability $10,000,000
--------------------
Owned Vehicles
Non-Owned Vehicles
Uninsured Motorist where
Required by Statute
Automobile Physical Damage (Optional)
--------------------------
Comprehensive (To Value
Collision if insured)
Workers' Compensation Statutory
---------------------
Employer's Liability $1,000,000
--------------------
Fidelity (Employee Dishonesty) As required
--------
Money and Securities As required
--------------------
D-1
72
Protective Liability $5,000,000
--------------------
All risks from construction
and renovation projects costing
more than $250,000 occurring
after the Effective Date
Builders Risk Completed value of the Hotel
-------------
All risk for term of Hotel
construction and renovation
Subsequent to the Effective Date.
Business Interruption
Blanket Coverage for the perils insured against under Real and
Personal Property in this Exhibit "D." This coverage shall
specifically cover Manager's loss of Management Fees. The business
interruption insurance shall be for a twelve (12) month indemnity
period. Calculated yearly based on estimated Hotel revenues.
All insurance coverages provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to
do business in the state in which the Hotel is located; and (ii) that are of
good reputation and of sound and adequate financial responsibility, having a
Bests Rating of B+ VI or better, or a comparable rating if Bests ceases to
publish its ratings or materially changes its rating standards or procedures.
Manager shall deliver to Owner and Lessee duly executed certificates
of insurance with respect to all of the policies of insurance procured,
including existing, additional and renewal policies.
Each policy of insurance maintained in accordance with this Exhibit
"D," to the extent obtainable, shall specify that such policies shall not be
canceled or materially changed without at least thirty (30) days prior written
notice to Owner, Lessee and Manager.
Except as otherwise provided in the Agreement, Manager and Lessee each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
of
D-2
73
whether any such claim or demand may arise because of the fault or negligence
of the other party or its subsidiaries, affiliates, officers, employees,
directors, agents or independent contractors. Each policy of insurance
maintained in accordance with this Exhibit "D" shall insure against the
negligent acts of a party hereto and shall contain a specific waiver of
subrogation reflecting the above.
All policies of insurance provided for under this Exhibit "D" shall be
carried in the name of the Manager. Lessee's interests, Owner's interests, and
the interests of any other applicable party will be included in the coverage by
an additional insured endorsement.
All such policies of insurance shall be written on an "occurrence"
basis to the extent obtainable in the insurance market.
Either Manager or Lessee, by notice to the other, shall have the right
to require that the minimum amount of insurance to be maintained with respect
to the Hotel under this Exhibit "D" be increased to make such insurance
comparable with prudent industry standards and to reflect increases in
liability exposures, taking into account the size and location of the Hotel.
[LESSEE AND OWNER HEREBY AUTHORIZE MANAGER TO UTILIZE THE SERVICES OF
AND/OR PLACE THE INSURANCE SET FORTH IN THIS EXHIBIT "D" WITH (I) ANY
SUBSIDIARY OR AFFILIATED COMPANY OF PROMUS HOTEL CORPORATION OR ITS SUCCESSOR
CORPORATION IN THE INSURANCE BUSINESS AS MANAGER DEEMS APPROPRIATE, OR (II) A
THIRD PARTY INSURANCE CARRIER MEETING THE SPECIFICATIONS SET FORTH ABOVE.]
D-3
74
RI-RE\t:\pjm\winston\manage.10
May 10, 1996
D-4