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FIRST AMENDMENT TO MASTER AGREEMENT
THIS FIRST AMENDMENT TO MASTER AGREEMENT ("Agreement") is made as of
the 21st day of November 1996, among Doubletree Corporation, a Delaware
corporation ("Tree"), RFS, Inc., a Tennessee corporation (the "Lessee"), RFS
Hotel Investors, Inc., a Tennessee corporation ("RFSI"), RFS Partnership, L.P.,
a Tennessee limited partnership (the "Lessor"), RFS Leasing, Inc., a Tennessee
corporation and a wholly-owned subsidiary of the Lessee (the "Additional
Lessee"), RFS Financing Partnership, L.P., a Tennessee limited partnership (the
"Additional Lessor") and DTR RFS Lessee, Inc., a California corporation ("DTR
Lessee").
RECITALS
A. The Lessor and the Lessee are parties to that certain Consolidated
Lease Amendment dated as of February 27, 1996 (the "Existing Lease"), which
Existing Lease represents (as of the date hereof) forty-eight (48) separate
leases (the "Existing Leases").
B. The Lessor and DTR Lessee are parties to that certain Lease
Agreement dated as of May 30, 1996 (the "Existing DTR Lease").
C. The Lessor currently owns forty-eight (48) hotel properties
described in Exhibit A that are leased under the Existing Lease to the Lessee
and owns the hotel property described in Exhibit B (the "Del Mar Hotel") that is
leased under the Existing DTR Lease to DTR Lessee.
D. The Lessor is transferring to the Additional Lessor as of the date
hereof its fee interest in 15 of the hotel properties (the "Transfer Hotels"),
identified on Exhibit A and Exhibit B as Transfer Hotels, and in connection with
such transfer the Lessor desires to assign to the Additional Lessor all of its
rights under (1) the 14 leases represented by the Existing Lease
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relating to all of the Transfer Hotels other than the Del Mar Hotel (the "14
Existing Leases") and (2) the Existing DTR Lease relating to the Del Mar Hotel.
E. In connection with the transfer of the Transfer Hotels to the
Additional Lessor, at the request of the Lessor and the Additional Lessor, (1)
the Lessee has agreed to assign to the Additional Lessee all of its rights under
the 14 Existing Leases and (2) DTR Lessee has agreed to assign to the Additional
Lessee the Existing DTR Lease relating to the Del Mar Hotel.
F. The Additional Lessor and the Additional Lessee desire to amend
certain provisions of the 14 Existing Leases and the Existing DTR Lease.
G. The Lessor and the Lessee desire to amend certain provisions of the
Existing Lease relating to the 34 hotel properties (the "Remaining Hotels")
identified on Exhibit A as Remaining Hotels.
H. The parties hereto desire to amend the Master Agreement dated as of
February 1, 1996 (the "Original Master Agreement") among Tree, Seedling Merger
Subsidiary, Inc. (which was subsequently merged into the Lessee), the Lessee,
RFSI and the Lessor, to make certain amendments and other agreements with
respect to the foregoing and the Original Master Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Original Master Agreement.
Unless the context otherwise
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requires, (a) references to the singular shall include the plural and vice
versa, (b) references to gender shall include all genders, (c) references to
designated "Sections" or other subdivisions are references to the designated
Sections or other subdivisions of this Amendment or the Original Master
Agreement, as applicable, (d) all accounting terms not otherwise defined herein
shall have the meanings assigned to them in accordance with GAAP and, if
applicable, the Uniform System of Accounts (as defined in the Existing Lease)
and (e) the words "herein," "hereof," and "hereunder" and other words of similar
import refer to this Amendment or the Original Master Agreement, as applicable,
as a whole and not to any particular Section or other subdivision.
2. ASIGNMENT AND ASSUMPTION THE 14 EXISTING LEASES AND THE
EXISTING
a. By the Lessor and the Additional Lessor:
(i) The Lessor hereby (A) assigns to the Additional
Lessor all of its right, title and interest in and to the 14
Existing Leases and the Existing DTR Lease and (B) conveys,
transfers and assigns to the Additional Lessor all of its
interest in and to any fixtures, equipment and other personal
property used in connection with the Transfer Hotels.
(ii) The Additional Lessor hereby (A) accepts the
assignments, conveyances and transfers in paragraph (i) above
and (B) assumes all of the obligations of the Lessor under the
14 Existing Leases and the Existing DTR Lease accruing from
and after the date hereof.
(iii) The Lessor hereby agrees to hold the Additional
Lessor harmless from the obligations and liabilities of the
"Lessor" under the 14 Existing Leases
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and the Existing DTR Lease arising from or relating to events
or circumstances occurring prior to the date hereof. The
Additional Lessor hereby agrees to hold the Lessor harmless
from the obligations and liabilities of the "Lessor" under the
14 Existing Leases and the Existing DTR Lease arising from or
relating to events or circumstances occurring on or after the
date hereof.
b. By the Lessee, DTR Lessee and the Additional Lessee:
(i) The Lessee hereby (A) assigns to the Additional
Lessee all of its right, title and interest in and to the 14
Existing Leases and (B) conveys, transfers and assigns to the
Additional Lessee all of its interest in and to any fixtures,
equipment and other personal property used in connection with
the Transfer Hotels other than the Del Mar Hotel.
(ii) DTR Lessee hereby (A) assigns to the Additional
Lessee all of its right, title and interest in and to the
Existing DTR Lease and (B) conveys, transfers and assigns to
the Additional Lessee all of its interest in and to any
fixtures, equipment and other personal property used in
connection with the Del Mar Hotel.
(iii) The Additional Lessee hereby (A) accepts the
assignments, conveyances and transfers in paragraphs (i) and
(ii) above and (B) assumes all of the obligations of the
Lessee under the 14 Existing Leases and of DTR Lessee under
the Existing DTR Lease, in each case accruing from and after
the date hereof.
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(iv) Each of the Lessee and DTR Lessee hereby agrees
to hold the Additional Lessee harmless from the obligations
and liabilities of the "Lessee" under the 14 Existing Leases
and the Existing DTR Lease, respectively, arising from or
relating to events or circumstances occurring prior to the
date hereof. The Additional Lessee hereby agrees to hold
harmless the Lessee and the DTR Lessee from the obligations
and liabilities of the "Lessee" under the 14 Existing Leases
and the Existing DTR Lease, respectively, arising from or
relating to events or circumstances occurring on or after the
date hereof.
c. The Lessor agrees to look solely to the Lessee with respect
to the obligations of the "Lessee" under the 14 Existing Leases
accruing, or arising from or relating to events or circumstance
occurring, prior to the date hereof and solely to the DTR Lessee with
respect to the obligations of the "Lessee" under the Existing DTR Leas
accruing, or arising from or relating to events or circumstances
occurring, prior to the date hereof; and the Additional Lessor agrees
that it will have no rights or claims with respect thereto. The
Additional Lessor agrees to look solely to the Additional Lessee with
respect to the obligations of the "Lessee" under the 14 Existing Lease
and the Existing DTR Lease accruing, or arising from or relating to
events or circumstances occurring, from and after the date hereof; and
the Lessor agrees that it will have no rights or claims with respect
thereto.
d. The Lessee and the DTR Lessee agree to look solely to the
Lessor with respect to the obligations of the "Lessor" under the 14
Existing Leases and the Existing DTR Lease, respectively, accruing, or
arising from or relating to events or circumstances
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occurring, prior to the date hereof; and the Additional Lessee agrees
that it will have no rights or claims with respect thereto. The
Additional Lessee agrees to look solely to the Additional Lessor with
respect to the obligations of the "Lessor" under the 14 Existing Leases
and the Existing DTR Lease, respectively, accruing, or arising from or
relating to events or circumstances occurring, from and after the date
hereof; and the Lessee and the DTR Lessee each agrees that it will have
no rights or claims with respect thereto.
3. MODIFICATION AND AMENDMENT OF THE EXISTING LEASE AND THE
EXISTING DTR LEASE.
a. Contemporaneously with the execution of this Agreement, the
Additional Lessor and the Additional Lessee shall execute the Second
Consolidated Lease Amendment pursuant to which the 14 Existing Leases
and the Existing DTR Lease shall be restated and amended, effective as
of the date hereof.
b. Contemporaneously with the execution of this Agreement,
Agreement, the Lessor and the Lessee shall execute the Third
Consolidated Lease Amendment pursuant to which the 34 leases
represented by the Existing Lease relating to the Remaining Hotels
shall be restated and amended, effective as of the date hereof.
4. AMENDMENTS TO THE ORIGINAL MASTER AGREEMENT. The following
amendments to the Original Master Agreement shall be effective as of the date
hereof:
a. Section 1 of the Original Master Agreement shall be
amended hereby as follows:
(i) the definition of "Current Hotels" shall be
deleted in its entirety and the following substituted
therefor:
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CURRENT HOTELS - shall mean the hotels leased by the
Lessee from the Lessor as of the Closing Date, plus
the Del Mar Hotel. (ii) the definition of "Default by
the Lessee" shall
be deleted in its entirety and the following substituted therefor:
DEFAULT BY THE LESSEE - shall have the meaning set
forth in Section 15a.
(iii) the definition of "Percentage Lease" shall be
deleted in its entirety and the following substituted therefor:
PERCENTAGE LEASE - shall mean, (A) with respect to a
Current Hotel that is a Transfer Hotel, the
percentage lease with respect to such hotel
represented by the Second Consolidated Lease
Amendment between the Additional Lessor and the
Additional Lessee, (B) with respect to a Current
Hotel that is not a Transfer Hotel, the percentage
lease with respect to such hotel represented by the
Third Consolidated Lease Amendment between the Lessor
and the Lessee and (C) with respect to each
Additional Hotel, the percentage lease entered into
between the Lessor and the Lessee with respect to
such hotel.
(iv) the definition of "Percentage Rent" shall be
amended hereby by inserting the clause "or Additional
Lessee's" after the word "Lessee's."
b. Section 4(b) of the Original Master Agreement shall
be amended by inserting the following at the end of Section 4(b):
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Notwithstanding any provisions of this Section 4(b)
to the contrary, the Additional Lessor and the Additional
Lessee shall have the same rights and obligations as the
Lessor and the Lessee, respectively, under this Section 4(b),
provided, however, that such rights and obligations are and
shall remain subject to the terms of the Consolidated Lease
Estoppel, Subordination, Attornment and Non-Disturbance
Agreement dated as of November 21, 1996 (the "SND Agreement")
among the Additional Lessor, the Additional Lessee and LaSalle
National Bank for so long as the SND Agreement remains in
effect.
c. Section 5(a) of the Original Master Agreement shall
be deleted in its entirety and the following substituted therefor:
a. NET WORTH. At all times during the terms of
the Percentage Leases relating to the Remaining
Hotels and the Additional Hotels, Tree shall cause
the Lessee to maintain and the Lessee shall maintain,
a Net Worth in an amount at least equal to
$11,000,000. At all times during the terms of the
Percentage Leases relating to the Transfer Hotels,
Tree and the Lessee shall cause the Additional Lessee
to maintain and the Additional Lessee shall maintain,
a Net Worth in an amount at least equal to
$4,000,000. The Lessee shall at all times maintain
an adequate amount of Working Capital to operate the
Remaining Hotels and the Additional Hotels. The
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Additional Lessee shall at all times maintain an
adequate amount of Working Capital to operate the
Transfer Hotels.
d. Section 7(a) of the Original Master Agreement shall
be deleted in its entirety and the following substituted therefor:
a. Changes in Structure. Tree represents that as of
November 21, 1996, the Additional Lessee is a
wholly-owned subsidiary of the Lessee and the Lessee
is a wholly-owned subsidiary of Tree and Tree will
have the sole economic and voting interest in the
Lessee. Until the earlier to occur of (i) the
expiration of ten years following the Closing Date or
(ii) the date of redemption or conversion of the
Preferred Stock, without the prior written consent
following not less than 60 days prior written notice
to the Lessor or the Additional Lessor, as the case
may be, which consent shall not be unreasonably
withheld, Tree, the Lessee and the Additional Lessee
shall not permit any merger, sale of its stock or
sale, transfer or conveyance of all or substantially
all of the assets of the Lessee or the Additional
Lessee if, as a result thereof, the Lessee or the
Additional Lessee, or the surviving entity, would
cease to be controlled, directly or indirectly, by
Tree. After the date described in the preceding
sentence, any merger, sale of stock, transfer or
conveyance of all or substantially all of the assets
of the Lessee or the Additional Lessee which results
in the Lessee
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or the Additional Lessee ceasing to be controlled,
directly or indirectly, by Tree shall require the
prior written consent of the Lessor or the Additional
Lessor, as the case may be, which consent shall not
be unreasonably withheld and which shall be granted
by the Lessor or the Additional Lessor, as the case
may be, if the party proposed to acquire control of
the Lessee or the Additional Lessee or its assets
obtains the approval of the Franchisors to serve as
franchise licensee for the affected Hotels and, if
applicable, of liquor licensing authorities for the
affected Hotels, and either (x) has substantial
experience in the leasing and/or managing of hotels
of the type then owned by the Lessor or the
Additional Lessor, as the case may be, and in the
operation of hotels licensed by one or more of the
Franchisors, or (y) provides reasonable assurance to
the Lessor or the Additional Lessor, as the case may
be, that such party will maintain the senior
management organization of the Lessee or the
Additional Lessee, as the case may be, materially
intact, or (z) enters into management arrangements
for the operation of the affected Hotels under terms
satisfactory to the Lessor or the Additional Lessor,
as the case may be, during the remainder of the terms
of the Percentage Leases, by an entity that satisfies
either (x) or (y) above. Prior to any transaction
otherwise permissible under the preceding sentence,
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Tree, the Lessee or the Additional Lessee, as the
case may be, and the proposed transferee shall
acknowledge and agree in writing with the Lessor or
the Additional Lessor, as the case may be, with
respect to the restrictions on change in control set
forth herein and shall agree that no further transfer
of capital stock or assets may be made by such
transferee except pursuant to the provisions of this
Section.
e. Section 7(c) of the Original Master Lease Agreement
shall be amended hereby by inserting the clause "and the Additional
Lessee" after the word "Lessee."
f. Sections 8, 9 and 10 of the Original Master Agreement
shall be deleted in their entirety and the following substituted
therefor:
8. Financial Statements; Indemnification; Due
Diligence; Confidentiality.
a. Financial Disclosure. During the term
of any Percentage Lease, Tree, the Lessee and the
Additional Lessee agree:
(i) to make available to RFSI, the
Lessor and the Additional Lessor,
(A) not more than 30 days
following the end of the first three
calendar quarters of each year,
quarterly unaudited financial
statements, including balance sheet,
statement of operations, statement
of
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shareholders' equity, statement of
cash flows and schedules for each of
the Lessee and the Additional Lessee
for the most recently ended calendar
quarter and the comparable prior
year period prepared in conformity
with GAAP;
(B) not more than 60 days
after the end of each calendar year,
audited annual financial statements
and schedules for each of the Lessee
and the Additional Lessee for the
most recently ended calendar year
prepared in accordance with GAAP,
audited by a national accounting
firm reasonably acceptable to RFSI,
the Lessor and the Additional
Lessor;
(C) any historical
financial information necessary to
re-state historical financial
information to conform to the
presentation of each of the Lessee's
and the Additional Lessee's audited
and unaudited financial statements
at any future time; and
(D) on a timely basis, any
other information reasonably
requested by RFSI, the Lessor or the
Additional Lessor to permit RFSI,
the
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Lessor or the Additional Lessor to
meet their filing and reporting
requirements under the 1934 Act and
to file and have declared effective
registration statements under the
1933 Act, including providing
information necessary to complete
the "Management's Discussion and
Analysis of Financial Condition and
Results of Operations" section of
RFSI's 1934 Act reports and 1933 Act
registration statements as it may
relate to the Lessee, the Additional
Lessee or the Hotels.
(ii) to provide to RFSI, the Lessor
and the Additional Lessor operati
and financial reports described on Exhibit E
hereto.
(iii) that the Lessee and the
Additional Lessee shall bear the cost of
obtaining, preparing and providing all
information required to be furnished to the
Lessor, the Additional Lessor and RFSI under
this Section 8(a), including the cost and
related expenses of the annual audit of the
financial statements of the Lessee and the
Additional Lessee, except as provided in
Section 5 of the First Amendment to Master
Agreement.
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b. Indemnification. RFSI and the Lessor
agree, jointly and severally, to indemnify, defend (with
counsel acceptable to the Lessee), and hold harmless the
Lessee, the Additional Lessee and their respective officers,
directors and controlling persons from and against any losses,
claims, damages, expenses or liabilities (or actions in
respect thereof) to which the Lessee, the Additional Lessee
and their respective officers, directors or controlling
persons may become subject under the 1933 Act, the 1934 Act or
otherwise, insofar as such losses, claims, damages, expenses
or liabilities or actions in respect thereof arise out of or
are based upon the 1934 Act reports or 1933 Act registration
statements of RFSI or the Lessor, except to the extent any
such claims, liabilities, losses, damages, expenses, or
liabilities (or actions in respect thereof) result from any
untrue statement of a material fact or omission of any
material fact in the information provided by the Lessee or the
Additional Lessee to RFSI, the Lessor or the Additional Lessor
pursuant to subsections (i) and (ii) of this Section 8(a). The
Lessee and Tree agree, jointly and severally, to indemnify,
defend (with counsel acceptable to RFSI and the Lessor) and
hold harmless RFSI, the Lessor and the Additional Lessor, and
their respective officers, directors and controlling persons
from and against any losses, claims, damages, expenses or
liabilities (or actions in respect thereof) to which RFSI, the
Lessor or the Additional Lessor or their respective officers,
directors or controlling
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persons may become subject under the 1933 Act, the 1934 Act or
otherwise, insofar as such losses, claims, damages, expenses
or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of a material fact or
omissions of any material fact in any information furnished by
the Lessee or the Additional Lessee to RFSI, the Lessor or the
Additional Lessor pursuant to subsections (i)(A), (B) and (C)
of this Section 8(a).
c. DUE DILIGENCE. During the term of
any Percentage Lease, Tree, the Lessee and the
Additional Lessee agree:
(i) to permit the Lessor, the
Additional Lessor and RFSI, together with
their independent public accountants,
counsel, financial advisors, underwriters,
underwriters' counsel, rating agencies,
lenders and others having a legitimate
interest in the Lessee's, the Additional
Lessee's or the Hotels' financial condition
and results of operations, during regular
business hours, upon reasonable notice and
at the sole cost of the Lessor, the
Additional Lessor and RFSI (provided there
shall be no charge by the Lessee or the
Additional Lessee to the Lessor, the
Additional Lessor or RFSI for the time of
the Lessee's or the Additional Lessee's
officers or employees), to interview
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officers and employees of the Lessee or the
Additional Lessee and to have access to and
review:
(A) the general accounting
records of the Lessee or the
Additional Lessee or any Hotel for
purposes of performing an audit of
the Lessee or the Additional Lessee
or any Hotel in accordance with
generally accepted auditing
standards and to conduct reasonable
due diligence with respect to the
Lessee or the Additional Lessee and
their respective business activities
and the Hotels; and
(B) the Lessee's or the
Additional Lessee's corporate
records, minutebooks, contracts and
other documents, agreements or items
relating to the operation of the
Hotels and the Lessee's or the
Additional Lessee's financial
condition.
(ii) to cooperate promptly and fully with
the Lessor, the Additional Lessor and RFSI,
upon request and at the cost of Lessor and
the Additional Lessor (except with respect
to the cost of obtaining, preparing and
providing the information required to be
furnished to RFSI, the Lessor and the
Additional Lessor under Section 8(a) above
and any costs relating to the time of
employees or officers
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of the Lessee, the Additional Lessee or
Tree, other than as provided in Section 5 of
the First Amendment to Master Agreement), in
making available such information with
respect to the Lessee, the Additional Lessee
or the Hotels as may be required by any
regulatory agency, including the Commission
and the National Association of Securities
Dealers, Inc., the Nasdaq Stock Market or
any stock exchange on which RFSI's, the
Lessor's or the Additional Lessor's
securities may be registered, listed or
traded.
(iii) to use their best efforts to
cause the independent public accountants
preparing audits of the Lessee or the
Additional Lessee to provide RFSI, the
Lessor or the Additional Lessor, at the sole
cost of the Lessor, the Additional Lessor
and RFSI, with all consents of such
accountants required for RFSI's, the
Lessor's or the Additional Lessor's filings
under the 1933 Act or the 1934 Act or to
have RFSI's, the Lessor's or the Additional
Lessor's registration statements be declared
effective under the 1933 Act.
d. CONFIDENTIALITY. To the extent
Lessor, the Additional Lessor or RFSI on the one
hand, or the Lessee, the Additional Lessee or Tree on
the other, obtains information or
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becomes aware of material information concerning the
other that is not disclosed in a public announcement
or filing under the 1933 Act or the 1934 Act by Tree
or RFSI, each party agrees that it shall not
improperly disclose or unlawfully utilize such
information or otherwise act unlawfully with respect
thereto.
9. REIT REQUIREMENTS.
a. Tree, the Lessee and the Additional
Lessee understand that, in order for RFSI to qualify as a
REIT, the following requirements (the "REIT Requirements")
must be satisfied:
(i) The average of the adjusted tax
bases of the Lessor's or the Additional
Lessor's personal property that is leased to
the Lessee or the Additional Lessee under a
lease at the beginning and end of a calendar
year cannot exceed 15% of the average of the
aggregate adjusted tax bases of all of the
Lessor's or the Additional Lessor's property
that is leased to the Lessee or the
Additional Lessee under such lease at the
beginning and end of such calendar year.
(ii) Neither the Lessee nor the
Additional Lessee can sublet the property
that is leased to it by the Lessor or the
Additional Lessor, or enter into any similar
arrangement, on any basis such that the
rental or other
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amounts paid by the sublessee thereunder
would be based, in whole or in part, on
either (i) the net income or profits derived
by the business activities of the sublessee
or (ii) any other formula such that any
portion of the rent paid by the Lessee or
the Additional Lessee to the Lessor or the
Additional Lessor would fail to qualify as
"rents from real property" within the
meaning of Section 856(d) of the Code.
(iii) Neither the Lessee nor the
Additional Lessee can sublease the property
leased to it by the Lessor or the Additional
Lessor to, or enter into any similar
arrangement with, any person in which RFSI
owns, directly or indirectly, a 10% or more
interest, within the meaning of Section
856(d)(2)(B) of the Code.
(iv) RFSI cannot own, directly or
indirectly, a 10% or more interest in the
Lessee or the Additional Lessee, within the
meaning of Section 856(d)(2)(B) of the Code.
(v) No person can own, directly or
directly, capital stock of RFSI that exceeds
the "Limit" (as defined in RFSI's Charter,
as amended and restated).
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b. Tree, the Lessee and the Additional Lessee agree,
and agree to use reasonable efforts to cause their Affiliates,
to use their best efforts to permit the REIT Requirements to
be satisfied. Tree, the Lessee and the Additional Lessee
agree, and agree to use reasonable efforts to cause their
Affiliates, to cooperate in good faith with RFSI, the Lessor
and the Additional Lessor to ensure that the REIT Requirements
are satisfied, including but not limited to, providing RFSI
with information about the ownership of Tree, the Lessee, the
Additional Lessee and their Affiliates to the extent that such
information is reasonably available. Tree, the Lessee and the
Additional Lessee agree, and agree to use reasonable efforts
to cause their Affiliates, upon request by RFSI, and, where
appropriate, at RFSI's expense, to take reasonable action
necessary to ensure compliance with the REIT Requirements.
Immediately after becoming aware that the REIT Requirements
are not, or will not be, satisfied, Tree, the Lessee or the
Additional Lessee shall notify, or use reasonable efforts to
cause their Affiliates to notify, RFSI of such noncompliance.
10. TERMINATION OF REIT STATUS. Notwithstanding anything
herein or in any Percentage Lease to the contrary, in the event RFSI
terminates its status as a real estate investment trust for federal
income tax purposes, the Lessor and the Additional Lessor may elect to
terminate all then-existing Percentage Leases and terminate the Right
of First Refusal by providing the Lessee or the Additional
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Lessee, as the case may be, at least 30 days prior written notice, or
such longer notice as may be required by statute or regulation to
comply with the WARN Act or other similar or successor federal or state
laws, and by satisfying the following requirements:
(i) if such terminations occur prior to sale,
redemption or conversion of all of the Preferred Stock, RFSI
shall purchase from the Lessee within twenty (20) business
days after the date of such terminations, all of the
then-outstanding Preferred Stock then owned by the Lessee at a
price per share equal to the greater of (A) the Stated Value
plus all accrued and unpaid dividends at the date of such
redemption or (B) the product of (1) the weighted average of
the sales prices of RFSI's common stock for all transactions
reported on the Nasdaq Stock Market or principal exchange on
which RFSI's common stock is then traded during the ten (10)
business days preceding the second business day preceding the
date of purchase of the Preferred Stock or, if RFSI's common
stock is no longer traded on the Nasdaq Stock Market or a
recognized exchange, the fair market value thereof as mutually
agreed by RFSI and the Lessee, or if RFSI and the Lessee
cannot so agree, by appraisal by an independent third party
designated by RFSI and the Lessee or by their respective
designees multiplied by (2) the number of shares of Common
Stock into which a share of Preferred Stock then held by the
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Lessee would be convertible, if converted on the business day
preceding the date of the redemption; and
(ii) if such terminations occur prior to the
tenth (10th) anniversary of the Closing Date, the Lessor shall
pay to the Lessee an amount equal to $5,000,000, which amount
shall be reduced by $41,667 for each calendar month which has
expired during the ten (10) year period following the Closing
Date; and
(iii) the Lessor or the Additional Lessor
shall pay the Lessee or the Additional Lessee, as the case may
be, the fair market value of the Percentage Leases based on
the then-remaining terms of the Percentage Leases determined
in the manner set forth in Article XXXVIII of the Form
Percentage Lease. The Lessor and the Additional Lessor must
elect to terminate both the Right of First Refusal and all
then-existing Percentage Leases in exercising their rights
under this Section 10.
g. The first sentence of Section 14 of the Original Master
Agreement shall be deleted in its entirety and the following
substituted therefor:
From and after the date of the First Amendment to Master
Agreement, (i) an Event of Default (as defined in the
Percentage Leases) by the Additional Lessee under a Percentage
Lease with respect to a Transfer Hotel will continue to create
an Event of Default under the Percentage Leases with respect
to all other Transfer Hotels and (ii) an Event of Default by
the Lessee under a Percentage Lease with respect to
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a Remaining Hotel will continue to create an Event of Default
under the Percentage Leases with respect to all other
Remaining Hotels. From and after the date of the First
Amendment to Master Agreement, (i) a default or an Event of
Default under a Percentage Lease with respect to a Transfer
Hotel shall not constitute a default or an Event of Default
under a Percentage Lease with respect to any Remaining Hotel
and (ii) a default or an Event of Default with respect to a
Remaining Hotel shall not constitute a default or an Event of
Default under a Percentage Lease with respect to a Transfer
Hotel.
h. Section 15a of the Original Master Agreement shall be
deleted in its entirety and the following substituted therefor:
DEFAULT.
a. A "Default by the Lessee" shall exist under
this Agreement if any of the following occur:
(I) MINIMUM NET WORTH. During the term of
any Percentage Lease, (a) the Additional Lessee fails
to maintain a minimum Net Worth as set forth in
Section 5 and does not cure any deficiency within 30
days following written notice thereof from the
Additional Lessor or (b) the Lessee fails to maintain
a minimum Net Worth as set forth in Section 5 and
does not cure any deficiency within 30 days following
written notice thereof from the Lessor.
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(II) DEFAULT UNDER PERCENTAGE LEASES. An
Event of Default occurs under any of the Percentage
Leases.
(III) OTHER BREACHES. The Lessee or the Additional
Lessee fails to comply with any other
provision of this Agreement for a period of 30 days
after being notified by the Lessor or the Additional
Lessor in writing of the provisions of this Agreement
with which the Lessee or the Additional Lessee, as
the case may be, has failed to comply; provided that
if such default (other than a failure to pay any rent
under any Percentage Lease when due (after any
applicable cure period), which shall be subject to
the provisions set forth in the Percentage Leases,
and any failure to maintain the minimum Net Worth,
which shall be subject to the provisions of
subsection 15a(i) above) cannot with due diligence be
cured within a 30 day period, such period shall be
extended for such reasonable time as the Lessee or
the Additional Lessee, as the case may be, promptly
and with due diligence commences and continues the
cure thereof but in no event for a period of more
than 90 days following the date of notice from the
Lessor or the Additional Lessor, as the case may be.
i. Section 16 of the Original Master Agreement shall be
amended such that notices made to the Additional Lessee shall be made
in the same manner in which notices are required to be made to the
Lessee and notices made to the
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Additional Lessor shall be made in the same manner in which notices are
required to be made to the Lessor.
5. Certain Expenses Associated with the Additional Lessee.
a. The Additional Lessor and the Lessor jointly and severally
agree that they shall be responsible for the following costs and
expenses related to the organization and on-going maintenance of the
Additional Lessee.
(i) the costs and expenses of incorporating and
organizing the Additional Lessee in Tennessee and qualifying
the Additional Lessee to do business in each of the states in
which a Transfer Property is located, including all filing
fees, reasonable counsel fees and other fees with respect
thereto;
(ii) all costs and expenses incurred in connection
with transferring the 14 Existing Leases and the Existing DTR
Lease to the Additional Lessee, including (A) costs and
expenses incurred in connection with transferring the related
franchise licenses and any other licenses and permits from the
Lessee or DTR Lessee to the Additional Lessee, (B) the
preparation, negotiation and execution of the Second
Consolidated Lease Amendment and Third Consolidated Lease
Amendment, the First Amendment to Master Agreement, the
management agreements between the Additional Lessee and
affiliated managers, the Consolidated Lease Estoppel,
Subordination, Attornment and Non-Disturbance Agreement
relating to the Transfer Hotels and any other
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documents entered into by the Additional Lessee in connection
with the transfer of the Transfer Properties and (C)
reasonable fees and costs of counsel relating to the
foregoing;
(iii) the ongoing fees, annual business taxes and
similar amounts required to be paid to governmental
authorities by the Additional Lessee in order to maintain its
corporate existence and be qualified to do business and remain
in good standing in each of the states in which the Transfer
Properties are located (net of such amounts, if any, by which
Lessee's or DTR Lessee's obligations have been reduced as a
result of the assignment of the 14 Existing Leases and the DTR
Lease to the Additional Lessee, taking into account the fact
that the Lessee will be required to maintain its qualification
to do business in all of the states in which the Transfer
Hotels covered by the 14 Existing Leases are located because,
incident to the assignment of the 14 Existing Leases by the
Lessor to the Additional Lessor and by the Lessee to the
Additional Lessee, at the request of the Additional Lessor,
the Lessee has been engaged to manage such Hotels); and
(iv) The incremental cost with respect to the ongoing
administration and accounting of the Additional Lessee to the
extent such cost, together with the related costs of the
Lessee, exceed the costs that the Lessee and DTR Lessee would
otherwise have incurred (A) if the 14 Existing Leases and the
Existing DTR Lease had not been transferred to
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the Additional Lessee and the Additional Lessee had not been
formed, and
(B) if the Lessee had not been engaged to manage the Transfer
Hotels covered by the 14 Existing Leases.
(b) In the event the Lessee or the Additional Lessee pays any
of the costs or fees for which the Additional Lessor and the Lessor are
responsible pursuant to paragraph (a) above, the Lessor and/or the
Additional Lessor shall reimburse the Lessee or the Additional Lessee,
as applicable, for such costs or fees no later than 30 days following
receipt of satisfactory evidence that such amounts were paid.
(c) The Lessee and the Additional Lessee agree to cooperate
with the Additional Lessor in determining what amounts are payable by
the Lessor and the Additional Lessor to the Lessee or the Additional
Lessee pursuant to paragraph (a) above and agree that neither the
Lessor nor the Additional Lessor shall be responsible for any costs or
expenses with respect to the items listed in paragraph (a) above to the
extent the Lessee or DTR Lessee would otherwise have been responsible
for such costs and expenses (A) if the 14 Existing Leases and the
Existing DTR Lease had not been transferred to the Additional Lessee
and the Additional Lessee had not been formed, and (B) if the Lessee
had not been engaged to manage the Transfer Hotels covered by the 14
Existing Leases.
6. TRANSFER OF LICENSES AND PERMITS. The parties acknowledge that in
order to meet the timing requirements of the Lessor and the Additional Lessor
in connection with the transfer of the Transfer Hotels by the Lessor to the
Additional Lessor and, incident thereto, the transfer
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to the Additional Lessee of the interest of the Lessee and the DTR Lessee in the
14 Existing Leases and the Existing DTR Lease, respectively, there has not been
sufficient time in which to also effect the transfer of certain licenses and
other governmental authorizations (including, in the case of certain of the
Transfer Hotels, liquor licenses) with respect to the operation of the Transfer
Hotels from the Lessee and the DTR Lessee to the Additional Lessee and to obtain
all requisite governmental approvals with respect thereto (collectively, the
"Governmental Transfer Approvals"). Accordingly, the parties agree that (a)
notwithstanding anything to the contrary contained in the Second Consolidated
Lease Amendment (including, without limitation, Sections 8.1 and 8.2 thereof),
the absence of the Governmental Transfer Approvals until such time that such
Governmental Transfer Approvals initially are obtained shall not constitute a
default or an Event of Default under the Second Consolidated Lease Amendment or
a "Default by the Lessee" under the Original Master Agreement, as amended
hereby, except to the extent the Additional Lessee is in breach of its
obligations under paragraph (c) below which breach continues uncured beyond the
expiration of the notice and grace periods provided for in Section 16.1(d) of
the Second Consolidated Lease Amendment and in Section 15a of the Original
Master Agreement, as amended hereby; (b) the Lessor and the Additional Lessor
agree, jointly and severally, to indemnify, defend (with counsel reasonably
acceptable to the Additional Lessee), and hold harmless the Additional Lessee
and its officers, directors and controlling persons from and against any losses,
claims, damages, expenses or liabilities (or actions in respect thereof) to
which the Additional Lessee or its officers, directors or controlling persons
may become subject by reason of the absence of the Governmental Transfer
Approvals; and (c) at the expense of the Lessor and the Additional Lessor as set
forth in Section 5 above, the Additional Lessee shall
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promptly apply for and diligently seek the Governmental Transfer Approvals and
the Lessor, the Additional Lessor, the Lessee, the DTR Lessee and the Additional
Lessee shall cooperate with each other in order to expeditiously obtain the
Governmental Transfer Approvals.
7. RECORDING THE SND AGREEMENT. The parties acknowledge that the form
in which the SND Agreement has been executed was not appropriate to permit the
recording of the SND Agreement in all jurisdictions in which the Transfer Hotels
are located. Accordingly, contemporaneously with the execution of this
Amendment, counterparts of the SND Agreement are being recorded in some but not
all of the jurisdictions in which the Transfer Hotels are located. The Lessor
and the Additional Lessor agree that, promptly following the execution of this
Amendment, they will have counterparts of the SND Agreement re-executed by all
parties thereto in form sufficient to permit, and shall promptly thereafter
effect, the recording of the SND Agreement in each jurisdiction in which a
Transfer Hotel is located in which the SND Agreement has not previously been
recorded.
* * *
As amended hereby, the Original Master Agreement is ratified, confirmed
and approved.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RFS HOTEL INVESTORS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
RFS PARTNERSHIP, L.P.
By: RFS Hotel Investors,
Inc., general partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
RFS FINANCING PARTNERSHIP
By: RFS Financing Corporation,
general partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
DOUBLETREE CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
31
RFS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
DTR RFS LESSEE, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
RFS LEASING, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
32
EXHIBIT A
EXISTING LEASE
CURRENT HOTELS
Number
Franchise and City/ of Transfer Remaining
State Location Rooms Hotel? Hotel?
- - ------------------ ------- -------- --------
HAMPTON INN HOTELS
Denver, CO (Airport) 138 No Yes
Denver, CO (Lakewood) 148 Yes No
Ft. Lauderdale, FL 123 No Yes
Indianapolis, IN (Airport) 131 No Yes
Lansing, MI 108 No Yes
Warren, MI 124 No Yes
Bloomington, MN (Airport) 135 No Yes
Minnetonka, MN 127 No Yes
Hattiesburg, MS 116 Yes No
Lincoln, NE 111 No Yes
Omaha, NE (Westroads Mall) 129 Yes No
Oklahoma City, OK (Airport) 133 Yes No
Tulsa, OK 148 No Yes
Memphis, TN (Walnut Grove) 120 No Yes
Laredo, TX 120 No Yes
RESIDENCE INN HOTELS
Sacramento, CA (Cal Expo) 176 Yes No
Torrance, CA 247 No Yes
Wilmington, DE 120 No Yes
Orlando, FL 176 Yes No
Atlanta, GA (Perimeter-West) 128 No Yes
Ann Arbor, MI 72 Yes No
Kansas City, MO 96 No Yes
Fishkill, NY 136 No Yes
Charlotte, NC 80 Yes No
Providence, RI 96 Yes No
Ft. Worth, TX (River Plaza) 120 Yes No
Tyler, TX 128 No Yes
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Number
Franchise and City/ of Transfer Remaining
State Location Rooms Hotel? Hotel?
- - ------------------ ------- -------- ---------
HOLIDAY INN EXPRESS HOTELS
Arlington Heights, IL 125 No Yes
Downers Grove, IL 123 No Yes
Bloomington, MN 142 No Yes
Tupelo, MS 115 No Yes
Franklin, TN 120 No Yes
Austin, TX (I-35 Airport) 125 Yes No
Milwaukee, WI (Mayfair Mall) 122 No Yes
HOLIDAY INN HOTELS
Crystal Lake, IL 197 Yes No
Louisville, KY (So. West) 169 No Yes
Lafayette, LA (Central) 242 No Yes
Flint, MI (Gateway Center) 173 No Yes
Clayton, MO (Clayton Plaza) 253 No Yes
Columbia, SC (Coliseum) 175 No Yes
COMFORT INN HOTELS
Atlanta, GA (Conyers) 83 No Yes
Atlanta, GA (Marietta) 186 Yes No
Farmington Hills, MI 135 No Yes
Grand Rapids, MI 109 No Yes
Clemson, SC 122 No Yes
Ft. Mill, SC (Carowinds) 155 Yes No
HAWTHORNE SUITES HOTEL
Atlanta, GA (NW) 200 No Yes
EXECUTIVE INN HOTEL
Tupelo, MS 115 No Yes
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EXHIBIT B
EXISTING DTR LEASE
CURRENT HOTEL
Number
Franchise and City/ of Transfer Remaining
State Location Rooms Hotel? Hotel?
- - ------------------ ------- -------- ---------
DOUBLETREE HOTEL
Del Mar, CA 220 Yes No