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EXHIBIT 10.5
OPTION TO PURCHASE ADDITIONAL HOTELS
THIS OPTION TO PURCHASE ADDITIONAL HOTELS ("Option"), dated as of the
Date of this Option defined hereinafter, is made and granted by Promus Hotels,
Inc., a Delaware corporation ("Seller") to and for the benefit of WINN Limited
Partnership, a North Carolina limited partnership, with offices at 2209
Century Drive, Suite 300, Raleigh, North Carolina 27622 ("Purchaser");
WITNESSETH THAT:
WHEREAS, Purchaser and Seller entered into that certain Memorandum of
Understanding dated as of March 15, 1996 providing for, among other provisions,
an option for the benefit of Purchaser to purchase certain Homewood Suites
hotels which may be approved for development by Seller (collectively "the
Additional Hotels" and individually "an Additional Hotel"); and
WHEREAS, such Memorandum of Understanding also provided for the
purchase and sale by Seller to Purchaser of three hotels defined therein as the
Development Hotels and Purchaser and Seller have entered into that certain
Agreement of Purchase and Sale dated of even date herewith with respect to such
Development Hotels, a copy of which is attached hereto as Exhibit A and
incorporated herein by this reference ("the Agreement"); and
WHEREAS, the Development Hotels are defined and referred to in the
Agreement collectively as "the Hotels" and individually as "a Hotel" and such
definitions shall have the same meanings when used herein as defined in the
Agreement; and
WHEREAS, Purchaser and Seller have also entered into that certain
Agreement of Purchase and Sale dated of even date herewith with respect to that
certain existing Homewood Suites hotel located on Bay Area Boulevard, Houston,
Texas, which is referred to in such Memorandum of Understanding as the
Developed Hotel ("the Developed Hotel"); and
WHEREAS, the purpose of this Option is to set forth the terms and
provisions agreed to by and between Purchaser and Seller relative to the
Additional Hotels;
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:
1. Option Period. The period of this Option shall be and include
each of the four consecutive twelve month periods
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beginning April 1, 1996 and expiring on March 31, 2000 (the "Option Period").
During the Option Period, Seller agrees to present Purchaser with the
opportunity to review with a view toward purchasing approximately forty percent
(40%) of the Additional Hotels, which shall be in addition to and exclusive of
the Hotels and the Developed Hotel. Seller does hereby grant Purchaser a
first and prior right and option to purchase up to (a) with respect to the
first twelve month period in the Option Period, up to three (3) Additional
Hotels, not to exceed approximately forty percent (40%) of the Additional
Hotels; and (b) with respect to each subsequent twelve month period in the
Option Period, the lesser of (i) three (3) Additional Hotels, not to exceed
approximately forty percent (40%) of the Additional Hotels or, (ii) if Seller
granted Purchaser options to acquire at least three (3) Additional Hotels in
the previous twelve month period, a number of Additional Hotels equal to the
number of Additional Hotels on which Purchaser was granted an option to
purchase in such previous twelve month period and for which Purchaser executed
purchase agreements in the form and content of the Agreement, modified and
amended as expressly set forth hereinafter. It is expressly understood and
acknowledged by Purchaser that there are no assurances that Seller will approve
Additional Hotels in the Option Period; provided, however, if Seller does
approve any Additional Hotels during the Option Period, this Option shall
pertain and apply to such Additional Hotels in the numbers and for the time
periods expressly set forth hereinbefore. Seller, at its option, may offer
Purchaser the option to purchase more than three (3) Additional Hotels in any
twelve month period of the Option Period.
2. Notice to Purchaser. Seller shall deliver written notice to
Purchase for each of the Additional Hotels, which notice shall be delivered in
accordance with the provisions relative to notice set forth in Article X of the
Agreement (each, "an Additional Hotel Offer"). Each Additional Hotel Offer
shall include a market study, financial projections, development costs data and
any other relevant information (including, but not limited to, title
information, boundary surveys, environmental reports and soils reports, to the
extent same are in existence and available to Seller) Seller considered in
making its decision to approve the development of such Additional Hotel.
3. Exercise of Option. Within the latter of (i) thirty (30) days
after receipt of an Additional Hotel Offer or (ii) seven (7) days after
approval of the Additional Hotel subject to such Additional Hotel Offer by
Seller's capital committee, Purchaser may exercise its right to purchase and
acquire such Additional Hotel on the terms set forth in such Additional Hotel
Offer by delivering to Seller an executed copy of a purchase agreement in the
form and content of the Agreement, with modifications and amendments thereto as
expressly set forth
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hereinafter, and failing to do so, Purchaser shall waive its rights hereunder
to purchase and acquire such Additional Hotel. The purchase agreement for each
Additional Hotel for which Purchaser exercises its option to purchase set forth
herein, shall be in the same form and content as the Agreement with amendments
thereto as follows:
(a) The purchase price for an Additional Hotel shall be an amount
equal to Seller's budgeted development cost for such Additional Hotel
(including a development fee in an amount equal to four percent (4.0%)
of the budgeted costs for such Additional Hotel less the development
fee and less amounts for contingencies consistent with those included
in the budgeted costs of the Hotels) ("the Purchase Price");
(b) The estimated date for the issuance of a certificate of occupancy
and the opening of such Additional Hotel shall be utilized for
purposes of Article III, Paragraph C of the purchase agreement for
such Additional Hotel;
(c) In the event Seller's actual development and building costs for an
Additional Hotel are less than the Purchase Price computed in
accordance with (a) above, the Purchase Price for such Additional
Hotel shall be reduced by one hundred percent (100%) of such cost
savings, which shall be in lieu of and replace the last sentence of
the first paragraph of Article II of the Agreement;
(d) Purchaser shall not have a Feasibility Period for any of the
Additional Hotels beyond the Feasibility Period defined in the
Agreement, which expires on June 1, 1996; and
(e) Such other modification or amendment as is necessary to make such
purchase agreement applicable to such Additional Hotel rather than the
Hotels, such as the legal description for such Additional Hotel and
the number of rooms/suites which will be included in such Additional
Hotel.
Unless expressly modified or amended hereinbefore, all of the other
terms and provisions of the Agreement shall be set forth and utilized in the
purchase agreement contemplated herein with respect to each of the Additional
Hotels.
4. Development by Purchaser. Purchaser and its affiliates agree
to use their best efforts to spend at least One Hundred Million Dollars
($100,000,000.00) to develop hotels, including any Additional Hotels purchased
by Purchaser hereunder, with franchises offered by Seller in the eight (8) year
period after the Date of this Option. This obligation is subject to the
presence of acceptable market conditions, the availability of capital to
Purchaser, the availability of acceptable sites and
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such other conditions and criteria as Purchaser, in its sole discretion, deems
relevant to the making of a prudent investment in hotel properties.
5. Arbitration. In the event of a dispute, controversy or
difference arising under this Option, 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, by an arbitrator or arbitrators appointed
pursuant to such rules, and the determination and ruling of such arbitrator or
arbitrators shall be final, binding and conclusive on Purchaser and Seller.
6. Status and Effect of Option. Seller warrants and represents
that there are and will be no other options or rights to purchase the forty
percent (40%) of the Additional Hotels subject hereto which are prior or
superior to this Option. This Option shall be binding upon and shall inure to
the parties hereto, their respective heirs, successors, legal representatives
and assigns. This Option sets forth the entire agreement between the parties
hereto with respect to the Additional Hotels and no other prior written or oral
statement or agreement or understanding shall be recognized or enforced. All
modifications or amendments to this Option shall be in writing and signed by
the parties. This Option is to be construed according to the laws of the State
of Tennessee. This Option 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. This Option shall not be recorded in the public
records of any county where the Additional Hotels are located.
7. Approval by Purchaser. Seller acknowledges that Purchaser is
a real estate investment trust and in accordance therewith, this Option as it
pertains to Purchaser, shall be conditioned upon Purchaser obtaining the
approval of this Option and the transactions contemplated herein from the board
of directors of the general partner of Purchaser, Winston Hotels, Inc., which
approval shall be obtained or denied on or before March 31, 1996. Upon receipt
of such approval, this Option shall constitute the valid, legal and binding
obligation of Purchaser in accordance with the terms and provisions expressly
set forth herein.
8. Authority of Seller. Seller represents and warrants that it
is authorized to enter into this Option and to consummate the transactions
contemplated herein with respect to the Additional Hotels and, the individuals
executing this Option on behalf of Seller are also duly authorized to execute
this Option and to bind Seller and Seller is and shall be bound in accordance
herewith. The execution and delivery of this Option by Seller
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does not require the consent of any person, agency or entity not a party to
this Option. The execution of this Option by Seller and the transactions
contemplated herein with respect to the Additional Hotels have been duly
authorized by proper corporate action, including the board of directors and
capital committee of Seller.
9. Date of this Option. As used herein, "the Date of this
Option" shall mean the date noted below as the date upon which this Option was
executed by the latter of Purchaser or Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Option as of
the Date of this Option.
Purchaser:
WINN Limited Partnership,
a North Carolina limited partnership
By: Winston Hotels, Inc.,
a North Carolina corporation
(Corporate Seal) By:________________________________
_________President
Attest:
____________________
_______Secretary
Date signed by Purchaser:
_________________________
Seller:
Promus Hotels, Inc.,
a Delaware corporation
(Corporate Seal) By:________________________________
________President
Attest:
____________________
_______Secretary
Date signed by Seller:
______________________
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STATE OF NORTH CAROLINA
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 official stamp or seal, this the ____ day of _____________,
1996.
My Commission Expires: _________ ______________________
Notary Public
(SEAL)
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 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 its corporate seal and attested by ______
as its ___________Secretary. Witness my hand and official stamp or seal, this
the ____ day of _____________, 1996.
My Commission Expires: _________ ______________________
Notary Public
(SEAL)
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