1
EXHIBIT 99.5
OWNER AGREEMENT
THIS OWNER AGREEMENT (this "Agreement") is entered into as of the 1st
day of January, 1998, by and among RED LION INNS OPERATING L.P., a Delaware
limited partnership ("Owner"), WESTBOY LLC, an Ohio limited liability company
("Lessee"), and RED LION HOTELS, INC., a Delaware corporation ("Manager").
W I T N E S S E T H:
WHEREAS, Lessee, as tenant, and Owner, as landlord, have entered into a
Lease Agreement as of the date hereof pursuant to which Owner has leased the
hotels listed on Schedule A (as amended from time to time to reflect sales,
dispositions and substitutions in accordance with this Agreement) (the "Hotels")
to Lessee (the "Lease Agreement");
WHEREAS, Manager has previous experience managing the Hotels and Lessee
has decided to hire Manager as of the date hereof to manage the hotels pursuant
to a management agreement (the "Management Agreement") and Lessee has been
informed by Manager that Lessee would be entitled to certain more favorable
management terms if Owner is willing to sign this Agreement;
WHEREAS, Owner has agreed to sign this Agreement because Owner believes
that the hiring of Manager by Lessee will help Lessee maximize the gross
revenues at the Hotels and therefore will help maximize the lease payments to be
received by Owner, as landlord, from Lessee under the Lease Agreement.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. Notices of Default or Termination. Manager shall deliver to Owner a
copy of any Notice of Default (capitalized terms not defined herein shall have
the meanings set forth in the Management Agreement) delivered to Lessee pursuant
to the Management Agreement concurrently with delivery to Lessee. By such
notice, Manager shall give Owner the opportunity to cure or cause to be cured
such default. Owner shall have the same cure periods provided to Lessee under
the Management Agreement, plus an additional sixty (60) days. Manager shall also
deliver to Owner a copy of any Notice of Termination delivered to Lessee
pursuant to the Management Agreement concurrently with delivery to Lessee, and
Owner shall have (i) the same additional sixty (60) day cure rights described
above with respect to such termination, and (ii) the right to cause the Hotels
to be leased to an Interim Tenant as set forth below. Further, if the Manager
terminates the Management Agreement pursuant to this Section 1, then the
provisions of Section 3 below shall apply.
2. Default under the Management Agreement. If Lessee defaults under the
Management Agreement, and Owner does not cause to be cured such
default
2
within the cure periods set forth herein, then Owner shall be required to and
shall immediately terminate the Lease Agreement. Owner's obligation to terminate
the Lease Agreement shall be absolute and shall not be affected or limited by
the commencement of voluntary or involuntary proceedings affecting Lessee
pursuant to the provisions of the federal Bankruptcy Act or similar creditor
protection laws or the fact that, under the local real estate law applicable to
any Hotel, termination of the Lease Agreement with respect to such Hotel is one
of several remedies available to Owner. Owner represents and warrants to Manager
that, under the local real estate law applicable to each Hotel, Owner has the
right, under applicable law and the Lease Agreement, to terminate the Lease
Agreement as required by this Section 2 with respect to such Hotel.
3. Termination of the Lease Agreement.
A. In the event the Lease Agreement or any substitute Lease Agreement
with an Approved Substitute Tenant terminates for any reason prior to the
expiration of the term of this Agreement, whether as a result of the expiration
of the term of the Lease Agreement (as it may be extended), the early
termination of the Lease Agreement on account of Owner's exercise of its
remedies thereunder, including pursuant to Section 2 hereof, or for any other
reason (the date of the termination of the Lease being referred to as the
"Termination Date"), Owner shall immediately cure any defaults of Owner that may
exist pursuant to Owner's obligations under the Lease Agreement and shall on the
Termination Date (i) take possession of the Hotels in compliance with the REIT
Rules (defined below) or (ii) immediately lease the Hotels to an interim tenant
("Interim Tenant") of Owner's choosing, and then (subject to the right of first
offer set forth in Paragraph C below) use its best efforts to as promptly as is
practicable lease the Hotels to an Approved Substitute Tenant for a term
identical to the remaining term of the current Lease Agreement (including the
extension provisions thereof). Any Interim Tenant shall be a Bankruptcy Remote
Entity (defined below). If the Interim Tenant defaults in any manner (including
by the commencement of voluntary or involuntary bankruptcy proceedings) and such
Interim Tenant does not cure such default upon receipt of written notice
thereof, Owner shall, within five (5) days of receipt of written notice thereof,
(i) cause such default to be cured or (ii) terminate the lease agreement with
the Interim Tenant and take possession of the Hotels in compliance with the REIT
Rules (defined below). If Owner directly assumes the obligations of the Lessee
under the Management Agreement, the Management Agreement shall be conformed to
reflect the fact that the Owner is the fee owner (or ground lessee) of the
Hotels rather than a tenant. In each case, the party in possession of the Hotels
(i.e., Owner, Interim Tenant, or Approved Substitute Tenant) shall as of the
Termination Date take assignment of and shall assume in writing on a prospective
basis all of the rights and obligations of Lessee under the Management
Agreement. Manager shall recognize such party as the substitute or successor to
Westboy LLC under the Management Agreement and shall satisfy all of its
obligations and duties as Manager under the Management Agreement in favor of
such party. Under no
-2-
3
circumstances shall Owner, Interim Tenant, or Approved Substitute Tenant be
required to cure any prior defaults of Lessee under the Management Agreement
which occurred prior to the applicable Termination Date. Any Interim Tenant or
Approved Substitute Tenant shall execute a counterpart of this Agreement, and
shall thereby agree to be bound by the provisions hereof applicable to the
Lessee. This Agreement shall continue in full force and effect, the term "Lease
Agreement" shall mean such new lease entered into with the Interim Tenant or
Approved Substitute Lessee, and the term "Management Agreement" shall mean the
Management Agreement as assumed by the Owner, Interim Tenant, or the Approved
Substitute Tenant, as the case may be, and the term "Lessee" shall mean the
"Interim Tenant" or the "Approved Substitute Tenant", as the case may be. For
the purposes of this Agreement, the REIT Rules shall mean the rules in Sections
856-860 of the Internal Revenue Code which would effectively disqualify Owner as
a Real Estate Investment Trust for federal income tax purposes if the Owner
continues in possession of the Hotels (currently for a period in excess of two
(2) years), subject to the Management Agreement but without Owner's having
entered into a lease with an Interim Tenant or Approved Substitute Tenant.
Notwithstanding any provision of this Agreement to the contrary, the Owner shall
have no obligation to continue in possession of the Hotels for a period which
would effectively disqualify Owner or any of Owner's direct or indirect Owners
as a REIT, and may at any time up to and including such expiration date lease
the Hotels to an Interim Tenant or Approved Substitute Tenant. However, if Owner
does not lease the Hotels to an Interim Tenant or Approved Substitute Tenant by
the time the Owner is no longer permitted to operate the Hotels without
violating the then applicable REIT Rules, Owner shall be in breach under this
Agreement and Manager shall be entitled to all remedies at law or in equity.
Lastly, if the Owner leases the Hotels to an Interim Tenant and such Interim
Tenant defaults (including the commencement of voluntary or involuntary
bankruptcy proceedings) and Owner does not (i) cause such default to be cured
within five (5) days or (ii) terminate the lease agreement with the Interim
Tenant and take possession of the Hotels in compliance with the REIT Rules,
Owner shall be in breach of this Agreement and Manager shall be entitled to all
remedies available at law or in equity.
B. An "Approved Substitute Tenant" shall mean an individual or entity
identified by Owner which in Owners and Manager's reasonable credit judgment is
(i) financially capable of fully satisfying the requirements of the Lease
Agreement and the Management Agreement (and satisfies the conditions of the next
sentence), (ii) is a Bankruptcy Remote Entity (defined below), and (iii)
provides Owner and Manager with all information which Manager may reasonably
request in order to make an appropriate evaluation of such tenant. Owner
acknowledges that trade secrets and other confidential information and materials
are, in the normal course of business, delivered by Manager to its hotel owners
and lessees, and Manager will, therefore, be under no obligation to approve a
substitute tenant which is engaged in the ownership or operation of hotels which
either directly compete with Manager or evidence lesser standards of operation
than the standards of Manager. The fact that a candidate substitute tenant is
then currently an owner or lessee of a hotel or hotels
-3-
4
operated by Manager or its affiliates or is otherwise operating a lodging
product bearing a trade name of Doubletree shall be evidence of acceptability
but, shall not, standing alone, be construed to mean that such candidate shall
be acceptable to Manager as an Approved Substitute Tenant. "Bankruptcy Remote
Entity" shall mean an entity whose organizational documents (i) allow Manager to
appoint a member of the Board of Directors, (ii) requires unanimous approval of
all members of the Board of Directors to file voluntary bankruptcy, (iii) state
that no Board member shall be guilty of breaching its fiduciary duties to owners
of the entity by virtue of voting to prevent the entity from voluntarily filing
bankruptcy, and (iv) state that the Board members shall not solicit creditors to
force the entity into bankruptcy. Owner and Lessee hereby represent that Westboy
LLC is a Bankruptcy Remote entity.
C. If Owner is willing to enter into a new lease of the Hotels with
an Approved Substitute Tenant (the "New Lessee"), then Owner shall, if a Lease
Agreement is terminated by Owner, prior to entering into any Lease Agreement
with any Approved Substitute Tenant, give Manager the opportunity to lease the
Hotels by giving Manager a written Request for Proposal. The Request for
Proposal shall set forth the model ("Model") for rental payments desired by
Owner.
Manager may, within ten (10) business days of its receipt of the
Request for Proposal, submit to Owner an offer ("Offer") to lease the Hotels
which is based upon the Model. If the Offer is acceptable to the Owner, then
Manager and Owner shall enter into a lease which shall be upon the terms set
forth in the Offer and otherwise upon the same terms set forth in the then
current Lease Agreement to the extent not inconsistent with the Offer.
If the Owner does not accept the Offer, then the Owner may solicit
other potential Acceptable Substitute Tenants, who will submit an offer ("New
Tenant's Offer") to lease the Hotels which is based upon the Model. If the Owner
receives a New Tenant's Offer which it is willing to accept, the Owner shall
promptly give Manager a copy of the New Tenant's Offer and the following shall
apply:
If the New Tenant's Offer is one hundred five percent (105%) or
more of the Offer, then the Owner may accept the New Tenant's Offer, subject to
the terms and provisions of this Agreement. If the New Tenant's Offer is less
than one hundred five percent (105%) of the Offer, then the Manager shall have
the right within ten (10) days to enter into a lease of the Hotels either, at
Manager's sole election, on the terms of the Offer or on the terms of the New
Tenant's Offer.
If the Owner desires to enter into a lease based upon a different
model ("Substitute Model"), then, prior to entering into any lease, the Owner
shall give Manager a new Request for Proposal based upon the Substitute Model,
and the Manager shall again have a right to submit an Offer to Lease the Hotels
based upon
-4-
5
the Substitute Model, pursuant to this provision, as if such Request for
Proposal were the initial Request for Proposal.
If the Manager does not thereafter within ten (10) days submit an
Offer in response to a Request for Proposal, then the Owner shall be free to
enter into a lease with an Acceptable Substitute Tenant subject to the
provisions of this Agreement, but without further restriction pursuant to this
provision, unless and until the Lease Agreement with such Acceptable Substitute
Tenant is terminated.
D. Reference is made to the fact that, prior to the date of this
Agreement, Manager managed the Hotels for the Owner pursuant to a Management
Agreement ("Prior Agreement") and that Owner may be acquired by an entity
controlled, directly or indirectly, by Boykin Lodging Company, an Ohio
corporation, pursuant to a Merger Agreement (the "Merger") dated December ___,
1997. Notwithstanding anything to the contrary herein contained, if the Merger
does not occur pursuant to the Merger Agreement and the Lease is thereafter
terminated, then, notwithstanding anything to the contrary contained in this
Agreement, (i) effective as of any such termination of the Lease, the Prior
Agreement shall be reinstated and shall be in full force and effect, and (ii)
upon reinstatement of the Prior Agreement, this Agreement shall thereafter be
void and without further force or effect.
4. Subordination. Manager agrees that this Agreement and the Management
Agreement shall be subject to and subordinate to any Approved Mortgage (as
defined on Exhibit A attached hereto). Owner covenants and agrees to comply with
its obligations set forth in Exhibit A.
5. Operation of the Hotels. The Hotels shall be operated under the
Doubletree brand name in accordance with the terms of the Management Agreement.
6. Provisions of Any Lease Agreement. Owner covenants with Manager that
it will not amend the Lease Agreement (or any substitute lease) in any manner
which materially adversely affects Manager's economic interest, without the
prior written approval of Manager, provided however, that Manager agrees that an
amendment revising the formulas of Base Rent and Percentage Rent (as defined in
the Lease Agreement) so that such formulas reflect the prevailing rents under
leases by REITs of similar properties, as agreed to by Owner and the lessee in
good faith, will not constitute a materially adverse effect on Manager's
economic interest. Owner further covenants with Manager that, unless Owner
obtains the prior written approval of Manager, all substitute leases shall be in
the same form as the Lease Agreement, except for such revisions as do not
materially adversely affect Manager's economic interest, provided, however, that
Manager agrees that a substitute lease which has different formulas of Base Rent
and Percentage Rent (as defined in the Lease) which reflect the prevailing rents
under leases by REITs of similar properties, as agreed to by
-5-
6
Owner and the lessee in good faith, will not constitute a materially adverse
effect on Manager's economic interest.
7. Surrender by the Lessee. Upon the occurrence of any event described
herein for the replacement of Lessee as occupant of any Hotel, Lessee shall
surrender its rights and interest in the Management Agreement to Manager and
peaceably turn over possession of the Hotels to Owner, an Interim Tenant, an
Approved Substitute Tenant, or Manager as Lessee.
8. Term. The term of this Agreement shall commence on January 1, 1998
and terminate on April 5, 2012. Manager shall have the right to extend the term
of this Agreement by not less than six months' prior written notice to Owner and
Lessee during the then current term for up to ten consecutive extended terms of
five (5) years each. An extension of the Management Agreement shall
automatically extend this Agreement.
9. Restriction on Certain Actions of Owner.
A. Owner shall not take any action that results in, or would be
reasonably likely to result in, Lessee commencing bankruptcy or insolvency
proceedings with respect to itself, and Owner agrees that it shall not
participate in the commencement of any involuntary bankruptcy proceeding or
similar insolvency proceeding.
B. Owner shall at all times comply with all loan agreements,
mortgages, indentures or other instruments under which there may be issued or by
which there may be secured any lien or other security interest with respect to
any of the Hotels.
C. If the Lessee is in material default under the Lease, Owner agrees
that it will not extend the term of the Lease without Manager's consent unless,
before or as part of such extension, such default is cured, or with respect to
monetary defaults, otherwise waived. The parties agree that, for purposes of
this Paragraph C, the commencement of any voluntary or involuntary bankruptcy
shall be deemed to be an incurable default by Lessee.
10. Destruction; Condemnation. Owner and Westboy agree to fully enforce
their respective rights and perform all of their obligations under Article VII
of the Management Agreement and Article XIV of the Lease Agreement.
11. Notices. Notices under this Agreement shall be delivered by U.S.
certified mail, return receipt requested as to certified mail, or by recognized
reliable overnight delivery service to the parties as follows:
-6-
7
If to Manager: Red Lion Hotels, Inc.
410 North 44th Street, Suite 700
Phoenix, Arizona 85008
Attn: Anupam Narayan
If to Lessee: Westboy LLC
Terminal Tower
50 Public Square, Suite 1500
Cleveland, Ohio 44113-2258
Attn: Ronald Cook
If to Owner: Red Lion Inns Operating L.P.
Terminal Tower
50 Public Square, Suite 1500
Cleveland, Ohio 44113-2258
Attn: Robert W. Boykin
With a copy to: West Doughboy LLC
Terminal Tower
50 Public Square, Suite 1500
Cleveland, Ohio 44113-2258
Attn: Andrew C. Alexander
and shall be effective three (3) business days after being deposited with the
U.S. Postal Service or other delivery service. Any party may change its address
for notices by giving notice as provided under this Section 11.
12. Litigation Costs. The prevailing party in any litigation under this
Agreement shall be entitled to recover from the other party(ies) its reasonable
attorney fees and costs incurred in connection with such dispute.
13. Memorandum. At Manager's request, Owner shall prepare, execute,
acknowledge and deliver to Manager, in recordable form, a brief document
referencing the existence of this Agreement, which Manager is hereby authorized
to record in the property records of each county in which a Hotel is located for
the purpose of putting subsequent transferees or prospective transferees on
notice concerning the existence of this Agreement.
14. Successors and Assigns. This Agreement shall run to the benefit of
and be binding upon the parties hereto and their respective permitted successors
and assigns.
15. Doubletree License Agreement; Joinder by Doubletree. Doubletree
Corporation ("Doubletree") represents and warrants to Westboy that a
-7-
8
License Agreement in the form of Exhibit ___ to the Management Agreement has
been executed and delivered by Doubletree and Manager and that the License
Agreement is in full force and effect. Doubletree and Manager each covenants
with Westboy that, while this Agreement is in effect (including extensions
hereof) with respect to any Hotel, they will not, without Owner's and Westboy's
consent (which may be withheld in Owner's or Westboy's sole discretion), (a)
amend or waive any provision of the License Agreement that would limit the
ability of Owner or Westboy to use the Hotel names listed on Exhibit A or the
names that may become substituted pursuant to the terms of this Agreement or the
Management Agreement, or (b) terminate the License Agreement.
16. Right of First Refusal on Sale of Hotels.
A. If at any time, or from time to time, during the term of this
Agreement, Owner receives and is willing to accept a bona fide offer from a
third party to purchase all or any portion of Owner's interest in one or more
Hotels, or if Owner offers to sell all or any portion of its interest in one or
more Hotels to any third party, in each case, other than an offer or sale
incidental to the exercise of any remedy by an Approved Mortgagee and other than
an offer or sale following Manager's delivery of a Notice of Termination with
respect to the affected Hotel or Hotels (any such offer to or from a third party
is herein called a "Third Party Offer"), Owner shall promptly transmit to
Manager its written offer to sell its interest in the Hotel or Hotels described
in the Third Party Offer to Manager upon the terms and conditions set forth in
the Third Party Offer, together with a true copy of such offer, and shall give
Manager thirty (30) days to accept such offer. If Manager accepts such offer by
written notice to Owner within such time, Owner and Manager shall duly perform
their obligations under such agreement. If Manager fails to accept such offer in
accordance with this paragraph, then Owner shall be free, within one hundred
eighty (180) days of Manager's failure to accept such offer, to sell its
interest in the Hotel or Hotels described in the Third Party Offer to such third
party upon the terms and conditions contained in such offer.
B. Upon, and as a condition to, any sale, assignment, conveyance or
other transfer of a Hotel or Hotels by Owner, Manager and the new Owner of the
Hotel or Hotels shall enter into a new Management Agreement on all of the terms
and conditions of this Agreement, except that (A) the Current Priority Amount
shall be equal to the Current Priority Amount hereunder multiplied by a
fraction, the numerator
-8-
9
of which is the Adjusted Gross Operating Profit for the immediately preceding
calendar year for the Hotel which has been sold and the denominator of which is
the Adjusted Gross Operating Profit of all of the Hotels managed under this
Agreement immediately before such sale for such period, and (B) the Operating
Profit Target under the new agreement shall be equal to the Operating Profit
Target existing under this Agreement immediately before the sale of the Hotel or
Hotels to be managed under the new agreement multiplied by a fraction, the
numerator of which is the Adjusted Gross Operating Profit for the immediately
preceding calendar year of the Hotel or Hotels sold and the denominator of which
is the Adjusted Gross Operating Profit of all of the Hotels managed under this
Agreement immediately before such sale for such period.
17. Sale of Hotels.
A. Subject to Manager's rights pursuant to Section 16 of this
Agreement, so long as no default attributable to Owner shall have occurred under
this Agreement and be continuing, and subject to Paragraph B of this Section 17,
Owner shall have the right, without Manager's approval, to assign, transfer or
convey all or any part of its right, title and interest in any Hotel or any
interest therein (which assignment must include (subject to the assignee's
option under Paragraph 16B of this Agreement and subject to Paragraph C below)
the Management Agreement (to the extent appropriate), and, if the assignee will
be taking subject to a lease, this Agreement (to the extent appropriate), and
all assets of Owner (and lessee of the Hotels, if applicable) related to the
operation of such Hotel(s), including, without limitation, all of the issued and
outstanding capital stock of any liquor license holding corporation).
B. Any assignment, transfer or conveyance under Paragraph A above
shall be subject to the following:
(i) the assignee must (A) assume and agree to be bound by all of
the terms and provisions of the Management Agreement or, at the assignee's
option, (B) agree to a management agreement in the same form as the Management
Agreement, or in substantially the same form to account for differences if the
new management agreement covers a single hotel or is an agreement with an
assignee who is the owner of the fee title in the Hotel in question rather than
a leasehold interest, except that (a) the Current Priority Amount for such Hotel
shall be the amount by which the Current Priority Amount existing immediately
before such Disposition exceeds the Current Priority Amount for the Hotels which
continue to be owned by Owner, and (b) the Operating Profit Target for such
Hotel shall be the amount by which the Operating Profit Target existing
immediately before such Disposition exceeds the Operating Profit Target for the
Hotels which continue to be owned by Owner;
(ii) the delivery to Manager of an executed counterpart of the
instrument of assignment and assumption of rights and obligations; and
(iii) the assignee shall be a United States national who is not
involved or reputed to be involved in organized crime, who does not have a
generally recognized reputation for unethical business dealings and is not a
competitor
-9-
10
of Manager and does not have any material ownership interest in a competitor of
Manager.
C. This Paragraph C shall apply only to the Hotels located in
Spokane, Yakima, and Bellevue, Washington, and Springfield, Oregon. In the event
that Owner desires to assign, transfer or convey an interest in any of the
Hotels located in Spokane, Yakima or Bellevue, Washington, or Springfield,
Oregon, such interest may be freely transferred, not subject to this Agreement
or any other agreement with Manager or Lessee, provided that there is offered to
be to substituted to Manager therefor (whether under this Agreement or another
management agreement with Manager), a full service hospitality property owned
(or otherwise controlled by Owner) and leased to a tenant of Owner that (i) on a
pro forma basis will provide Manager with the greater of (A) a base fee
equivalent to three percent (3%) of Gross Revenues and an incentive fee
equivalent to the incentive fee then received by Manager in similar hotels, and
(B) the sum of the Base Fee and the Incentive Fee (without any accrual or
limitation based on Cash Flow Available for Incentive Fee) for the prior full
Operating Year attributable to the transferred Hotel, (ii) meets then current
Doubletree standards, (iii) is to be operated as a Doubletree hotel or other
full-service Manager Affiliate brand, and (iv) was not operated as a Doubletree
hotel immediately prior to such substitution. In the event that such substitute
hotel is not opened and operated as a Doubletree hotel or other full-service
Manager Affiliate brand within one hundred eighty (180) days after the transfer
of the prior hotel, then Owner and Westboy (or any subsequent lessee) shall pay
monthly, on a joint and several basis, the cumulative amount set forth in clause
B of the preceding sentence. If by the one year anniversary of the termination
of such one hundred eighty (180) day period, such substitute hotel is not opened
and operated as a Doubletree hotel, Owner and Westboy (or any subsequent lessee)
shall pay to Manager on demand, on a joint and several basis, a cumulative
amount (the "Substitute Hotel Damages") equal to the present value (discounted
at the Prime Rate) of the difference between the remaining gross fees
(including, without limitation, Base Fees and Incentive Fees) expected to be
payable under the Management Agreement after such Disposition (assuming all
extension options are exercised), and the expected gross fees which would have
been payable to Manager under the Management Agreement (assuming all extension
options are exercised) had the Hotel not been subject to a Disposition;
provided, however, that in such event, the maximum amount in the aggregate
recoverable by the Manager from Owner and Westboy (or any other lessee) under
this Paragraph C and Section 9.2(c) of the Management Agreement shall not exceed
the Substitute Hotel Damages.
D. In the event that Owner shall assign, transfer or convey its
right, title and interest in any Hotel under Paragraphs A or B hereof, then
Owner shall not be liable for any obligation arising under this Agreement after
the date of such assignment, transfer or conveyance. In the event that Owner
shall assign, transfer or convey its right, title and interest in a Hotel
pursuant to Paragraph C hereof, then Owner shall not be liable for any
obligation under this Agreement with respect to the
-10-
11
Hotel which has been affected by such assignment, transfer or conveyance, after
the date of such assignment, transfer or conveyance, provided however, that
nothing herein shall relieve Owner of its obligations to Manager under Paragraph
C hereof.
E. Except as set forth in this Section 17, Owner shall have no right
to transfer, assign, or convey its interest in the Hotels.
18. Other Provisions. The statements set forth in the recitals are
incorporated herein as a substantive part of this Agreement. To the extent any
provision of this Agreement is inconsistent with any provision of the Lease
Agreement or the Management Agreement, the provisions of this Agreement shall
control. It is not intended by the parties that the Manager recover duplicative
damages from Lessee and Owner by instituting separate actions under the
Management Agreement and this Agreement, and the provisions of this Agreement
and the Management Agreement shall not be interpreted separately to allow for
duplicative recoveries.
[This space intentionally left blank]
-11-
12
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above mentioned.
RED LION INNS OPERATING L.P.,
a Delaware limited partnership
By: /s/ Anupam Narayan
--------------------------------------
Anupam Narayan
Title: VP/Treas/Sec
-----------------------------------
WESTBOY LLC,
an Ohio limited liability company
By: /s/ Ronald A. Cook
--------------------------------------
Title: President
-----------------------------------
By: /s/ John E. Boykin
--------------------------------------
Title:
-----------------------------------
RED LION HOTELS, INC.,
a Delaware corporation
By: /s/ Anupam Narayan
--------------------------------------
Anupam Narayan
Title: VP/Treas/Sec
-----------------------------------
JOINDER BY DOUBLETREE FOR PURPOSES
OF SECTIONS 5 AND 15 OF THIS
AGREEMENT:
DOUBLETREE CORPORATION,
a Delaware corporation
By: /s/ David L. Stivers
--------------------------------------
Title: Senior Vice President
-----------------------------------
-12-
13
SCHEDULE A
LIST OF HOTELS
Doubletree Hotel Bellevue Center
818-112th Avenue NE
Bellevue, Washington
Doubletree Hotel Riverside
29th & Chinden Blvd.
Boise, Idaho
Doubletree Hotel Colorado Springs - World Arena
1775 E. Cheyenne Mountain Blvd.
Colorado Springs, Colorado
Doubletree Hotel Omaha Downtown
1616 Dodge Street
Omaha, Nebraska
Doubletree Hotel Portland Downtown
310 SW Lincoln
Portland, Oregon
Doubletree Hotel Sacramento
2001 Point West Way
Sacramento, California
Doubletree Hotel Spokane Valley
I-90 at Sullivan Road
Spokane, Washington
Doubletree Hotel Eugene/Springfield
3280 Gateway Road
Springfield, Oregon
Doubletree Hotel Yakima Valley
1507 North First Street
Yakima, Washington
Doubletree Hotel Lloyd Center
1000 N.E. Multnomah
Portland, Oregon
-13-
14
EXHIBIT A
1. Limitation on Mortgages. Except as set forth in this Section 1, Owner
shall have no right to place any mortgage on the Hotels. Manager hereby consents
to and approves the Existing Indebtedness and the Existing Mortgages. Owner
shall have the right to grant to any subsequent lender lending funds to Owner, a
mortgage lien or encumbrance on all or any part of the Owner's right, title and
interest in and to the Hotels (collectively the "Collateral"); provided, however
that either (i) the aggregate principal amount of all loans secured by the
Collateral does not exceed, One Hundred Twenty Million and no/100 Dollars
($120,000,000.00) and the loans are not cross-defaulted or cross-collateralized
with any other obligation (the parties hereby agree that if any Hotel is sold by
Owner, such One Hundred Twenty Million and no/100 Dollars ($120,000,000.00)
limitation shall be reduced by the amount of the debt allocated to the Hotel
that is sold, and if a substitute Hotel is put in place, the amount allocated to
the sold Hotel shall be restored to the extent of the value of the substitute
Hotel relative to the value of the sold Hotel, as the value of the substitute
Hotel is determined by mutually agreeable appraisal or other mutually agreeable
method, (ii) such loan has been approved in writing by Manager, which consent
shall not be unreasonably withheld provided that (A) the loan-to-value ratio is
no greater than fifty-four percent (54%), (B) the Cash Flow Available For Debt
Service for the most recent Fiscal Year less the Incentive Amount (as defined in
the Lease) is at least two hundred percent (200%) of the scheduled debt service
for such new loan, (C) the new loan is otherwise on ordinary and normal terms
for the type of lender making such loan, and (D) the loan is not cross-defaulted
or cross- collateralized with any other obligation (and the parties hereby agree
that if any Hotel is sold by Lessor, the permissible principal amount of a loan
qualifying under this subsection (ii) shall be reduced by the amount of debt
allocated to the Hotel that is sold, and if a substitute Hotel is put in place,
the amount allocated to the sold Hotel shall be restored to the extent of the
value of the substitute Hotel relative to the value of the sold Hotel, as the
value of the substitute Hotel is determined by mutually agreeable appraisal or
other mutually agreeable method, or (iii) the loan is secured by a lien or
encumbrance ("Nondisturbance Mortgage") and the lender lending funds to Owner
executes a nondisturbance agreement ("Nondisturbance Agreement"), in form
reasonably acceptable to Manager, in favor of Manager (any mortgage, deed of
trust or other encumbrance securing a loan meeting the criteria set forth in
(i), (ii) or (iii) above is herein referred to as an "Approved Mortgage"). If
Owner has not delivered to Manager a commitment for the refinancing of the loan
secured by the Existing Mortgage or any loan secured by an Approved Mortgage
within sixty (60) days of the scheduled maturity of such loan, Manager shall
have the right, on behalf of Owner, to seek such a commitment and to place such
a loan, on arm's-length terms with an institutional lender regularly making real
property secured loans, in an amount equal to the then outstanding principal
balance of the existing loan together with reasonable closing costs, including
any commitment fee. Owner shall execute any and all documents reasonably
requested by Manager in connection with such placement of a new loan. Any
mortgage securing such a loan obtained by Manager on behalf of
-14-
15
Owner shall be an Approved Mortgage. Manager shall have no obligation to place
such a loan on behalf of Owner.
2. Subordination. Manager agrees that this Agreement shall be subject
and subordinate to any Approved Mortgage, and Manager acknowledges and agrees
that in the event of a foreclosure by an Approved Mortgagee under an Approved
Mortgage (other than a Nondisturbance Mortgage) or a deed in lieu of foreclosure
to an Approved Mortgagee under an Approved Mortgage (other than a Nondisturbance
Mortgage), such Approved Mortgage shall have the right to terminate this
Agreement with respect to any Hotel(s). Manager further agrees that any
Incentive Fees payable under the Management Agreement are subject and
subordinate to, at the option of Westboy or Owner, as the case may be, debt
service and rent payable under the Percentage Lease up to the Annual Debt
Service Priority Amount, as hereinafter defined. Initially, the Annual Debt
Service Priority Amount shall be Eleven Million Six Hundred Eight Thousand and
no/100 Dollars ($11,608,000.00). Manager agrees to execute in favor of an
Approved Mortgagee a subordination agreement with reasonable and customary terms
not inconsistent with this Agreement. The "Annual Debt Service Priority Amount"
either in connection with the placing of an Approved Mortgage on the Hotels or
in connection with unsecured debt borrowed by the fee owner of the Hotels, shall
be adjusted as follows:
a. If, in accordance with the provisions of Section 1 of this
Exhibit A, Owner places any Approved Mortgage on the Hotels, then the
Annual Debt Service Priority Amount shall be adjusted to equal fifty
percent (50%) of an amount equal to the Cash Flow Available for Debt
Service for the most recent full Operating Year at the time that the
Approved Mortgage was placed less the Incentive Fee (without any accrual
or limitation based upon Cash Flow Available for Incentive Fee). The
provisions of Section 3.2(e) of the Management Agreement shall apply to
any Approved Mortgage.
b. If there is no Approved Mortgage on the Hotels and if Owner
desires to increase the Annual Debt Service Priority Amount in
connection with an unsecured loan ("Unsecured Loan") entered into by
Owner, then Owner and Westboy may, by written notice given to Manager at
the time that such Unsecured Loan is entered into, adjust the Annual
Debt Service Priority Amount to equal to fifty percent (50%) of an
amount equal to the Cash Flow Available for Debt Service for the most
recent full Operating Year at the time the Unsecured Loan was procured
less the Incentive Fee (without any accrual or limitation based upon
Cash Flow Available for Incentive Fee), provided that, if Owner and
Westboy request an adjustment under this subsection: (i) an amount equal
to the proceeds of such Unsecured Loan, up to the Maximum Principal
Amount, shall, for the purposes of Section 3.2(e) of the Management
Agreement, be considered to be the proceeds of loan secured by an
Approved Mortgage, and (ii) simultaneously with the giving of such
notice Westboy
-15-
16
agrees to pay to Manager any accrued Incentive Fees and/or acknowledges
that an amount equal to the Net Proceeds of such Unsecured Loan have
been applied to Advanced Incentive Fee Payments, in accordance with said
Section 3.2(e).
c. The Maximum Principal Amount shall be the highest principal
amount for a loan which satisfies the following conditions: (i) the
loan-to-value ratio (i.e., the ratio of the Maximum Principal Amount to
the value of the Hotels) is no greater than fifty-four percent (54%),
(ii) Cash Flow Available for Debt Service for the most recent full
Operating Year less the Incentive Fee (without any accrual or limitation
based upon Cash Flow Available for Incentive Fee) is at least two
hundred percent (200%) of the Deemed Debt Service, and (iii) with
respect to an Unsecured Loan, such Unsecured Loan is otherwise on
ordinary and normal terms for the type of lender making the loan. The
Parties agree that the Cash Flow Available for Debt Service for the most
recent full Operating Year is Twenty-three Million Two Hundred Seventeen
Thousand and no/100 Dollars ($23,217,000.00).
-16-