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EXHIBIT 10(cc)
Formation Agreement among the Registrant, MARA, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, HCI, InnSuites Hotels, L.L.C.,
▇▇▇▇▇ ▇. ▇▇▇▇▇, Tucson Hospitality Properties, Ltd.,
Yuma Hospitality Properties, Ltd., Baseline Hospitality
Properties, Ltd., Northern Phoenix Investment Limited
Partnership, Ontario Hospitality Properties Limited
Partnership, ▇▇▇▇▇▇ Hotels Corporation and Buenaventura
Properties, Inc.
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FORMATION AGREEMENT
This Formation Agreement is made and entered into this 15th
day of December, 1996, by and among Realty ReFund Trust, an unincorporated Ohio
real estate investment trust having an address at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ ("RRF"); Mid-America ReaFund Advisors, Inc., an Ohio corporation
having an address at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ("MARA");
InnSuites Hotels, L.L.C., an Arizona limited liability company having an address
at Suite 105, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("ISH");
Hospitality Corporation International, an Arizona corporation having an address
at Suite 105, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("HCI"); ▇▇▇▇ ▇.
▇▇▇▇▇▇, a shareholder of RRF and MARA having an address in care of RRF
("▇▇▇▇▇▇"); ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a shareholder of MARA having an address in care of
RRF ("Berick"); ▇▇▇▇▇ ▇▇▇▇▇, the President of the managing member of ISH and the
President of HCI having an address in care of HCI ("▇▇▇▇▇"); and the seven
limited partnerships or corporations, as the case may be, listed on Schedule I
hereto (each, a "Hotel Company" and, collectively, the "Hotel Companies"). All
seven of the Hotel Companies are controlled by HCI and/or ▇▇▇▇▇ or an affiliate,
and each has an address in care of HCI. RRF, MARA, ▇▇▇▇▇▇ and Berick sometimes
are referred to herein collectively as the "RRF Parties"; ▇▇▇▇▇, ISH, HCI and
the Hotel Companies sometimes are referred to herein collectively as the "ISH
Parties".
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R E C I T A L S:
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A. RRF was organized in 1971 and has qualified as a "real
estate investment trust" ("REIT") for federal income tax purposes since its
organization. RRF's shares of beneficial interest, without par value ("RRF
Shares"), currently are listed for trading on the New York Stock Exchange
("NYSE") under the symbol "RRF".
B. The Hotel Companies own and/or manage a total of seven
all-suite hotel properties, comprising 1,037 hotel studio and two-room suites,
in Tucson, Phoenix, Scottsdale, Tempe, Flagstaff and Yuma, Arizona and in
Ontario, California (the "Hotels").
C. HCI wishes to provide, among other things, for the terms of
the transfer of its and its affiliates' ownership interests in the Hotel
Companies to RRF Operating Limited Partnership, a to-be-formed Delaware limited
partnership (the "Operating Partnership"), in which certain of the equity owners
of the Hotel Companies will be the initial limited partners and RRF will be the
general partner.
▇. ▇▇▇▇▇ wishes to provide for the terms of his acquisition of
all of the outstanding capital stock of MARA and the acquisition by him or an
affiliate of 200,000 presently issued and outstanding RRF Shares, and for his
designees to assume majority control of RRF's Board of Trustees.
E. The parties hereto desire that the transactions
contemplated herein regarding the organization of the Operating
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Partnership and the restructuring of the ownership and control of the Hotel
Companies, RRF and MARA (such transactions, collectively, the "Formation") be
implemented through the timely execution and closing of the transactions
contemplated by this Agreement and of the agreements contemplated hereby (this
Agreement and all other agreements and instruments contemplated hereby which are
required to be executed at or prior to the closing of the Formation pursuant to
this Agreement (such date, the "Closing Date") hereinafter are referred to
collectively as the "Transaction Agreements"). Accordingly, the parties hereto
wish to enter into this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
agreements contained herein, and for other good, valuable and binding
consideration, the receipt and sufficiency of which hereby are acknowledged, and
subject to the terms hereof, the parties hereto, intending legally to be bound,
hereby agree as follows:
Section 1. TRANSACTION AGREEMENTS.
Subject to the fulfillment or waiver of the conditions
specified in Section 7, below, and pursuant to and in accordance with the
Transaction Agreements, at or prior to the Closing Date:
(a) OPERATING PARTNERSHIP AGREEMENT. RRF, HCI and each equity
owner of each Hotel Company which is a limited partnership (each, a
"Partnership Hotel Company") who elects to participate in the Private
Placement (as hereinafter defined)(each, a Participating Equity Owner")
shall execute and enter into an Agreement of Limited Partnership of the
Operating Partnership (the "Operating Partnership Agreement"). The
Operating Partnership Agreement will provide, inter alia, for the
contribution by HCI and each
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Participating Equity Owner of its respective ownership interests in
each Partnership Hotel Company to the Operating Partnership, and for
HCI to make certain representations and warranties to RRF including,
without limitation, as to the material accuracy of all information
furnished to RRF in respect of the Hotel Companies and the Hotels and
as to customary real estate matters. The Operating Partnership
Agreement will specify that the ownership interests of HCI and the
Participating Equity Owners in the Partnership Hotel Companies will be
transferred to the Operating Partnership; that the aggregate ownership
interests of HCI and the Participating Equity Owners in the Operating
Partnership will equal the "ISH Ownership Percentage" (as defined
below); and that the aggregate ownership interest of RRF in the
Operating Partnership will equal the "RRF Ownership Percentage" (as
defined below). The Operating Partnership will issue to RRF, as general
partner, and to the Participating Equity Owners, in the aggregate, as
initial limited partners, such number of general or limited partnership
units, as the case may be, as shall equal the OP RRF Contribution or
the OP Hotel Contribution (each as defined below), respectively,
DIVIDED BY five (5). Each Participating Equity Owner will receive his
ratable proportion of such aggregate number of limited partnership
units. The Operating Partnership Agreement further will provide that
the limited partnership units in the Operating Partnership shall be
convertible into RRF Shares, on a one-for-one basis. Notwithstanding
the foregoing, however, no such conversion will be permitted for a
specific limited partner if RRF determines that such conversion would
be likely to cause RRF no longer to qualify as a REIT. RRF will
contribute to the Operating Partnership, in exchange for its general
partnership interest therein, an amount of its cash and/or other
property in such proportion to its total assets as the Agreed Equity
Value of the Hotels contributed to the Operating Partnership bears to
the ISH Portfolio Value (such proportion, the "Partnership Hotel
Percentage"). An example of the foregoing calculation is set forth on
Schedule III attached hereto.
For purposes of this Agreement, the term "ISH Ownership Percentage"
shall mean the fraction, expressed as a percentage, that is the product
of (i) the "ISH Portfolio Value", which for purposes of this Agreement
shall be the aggregate Agreed Equity Value (as hereinafter defined) of
all seven of the Hotels, DIVIDED BY (ii) the sum of (x) the ISH
Portfolio Value PLUS (y) $5,102,930 [i.e., $5.00 per RRF Share
multiplied by 1,020,586 outstanding RRF Shares](the "RRF Agreed
Value").
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For purposes of this Agreement, the term "RRF Ownership Percentage"
shall mean the fraction, expressed as a percentage, that is the product
of (i) the RRF Agreed Value, DIVIDED BY (ii) the sum of (x) the ISH
Portfolio Value PLUS (y) the RRF Agreed Value.
For purposes of this Agreement, the term "Operating Partnership Value"
shall mean the sum of (x) the aggregate Agreed Equity Value of the
Hotels contributed to the Operating Partnership by the Partnership
Hotel Companies (the "OP Hotel Contribution"), PLUS (y) the product of
the RRF Agreed Value MULTIPLIED BY the Partnership Hotel Percentage
(the "OP RRF Contribution").
For purposes of this Agreement, the term "Agreed Equity Value" shall
mean the appraised value of the Hotels, less outstanding debt to be
assumed.
(b) ACQUISITION OF CORPORATE HOTEL COMPANIES. Each of the two
Hotel Companies which is a corporation (a "Corporate Hotel Company")
shall enter into either an Agreement of Merger (a "Merger Agreement")
and/or a Purchase and Sale Agreement (a "Hotel Purchase Agreement")
with RRF. It is contemplated that the Corporate Hotel Company that owns
the Flagstaff, Arizona Hotel will receive RRF Shares as the
consideration for transfer of that Hotel to RRF, pursuant to either a
Merger Agreement or a Hotel Purchase Agreement, based upon the Agreed
Equity Value of that Hotel and that the Corporate Hotel Company that
owns the Scottsdale, Arizona Hotel will receive a combination of RRF
Shares and cash, in the form of a promissory note or notes of RRF in a
principal amount of up to $4.4 million, bearing interest and otherwise
payable in a manner similar to the terms of the promissory note
referenced in Section 1(f) of this Agreement, as the consideration for
the transfer of that Hotel to RRF pursuant to either a Merger Agreement
or a Hotel Purchase Agreement. The Corporate Hotel Company that owns
the Flagstaff, Arizona Hotel will receive such number of RRF Shares as
shall equal the Agreed Equity Value of such Hotel DIVIDED BY five (5);
the Corporate Hotel Company that owns the Scottsdale, Arizona Hotel
will receive such number of RRF Shares as shall equal the Agreed Equity
Value of such Hotel, MINUS the principal amount of the promissory note
referred to in the preceding sentence, DIVIDED BY five (5).
(c) PURCHASE OF MARA CAPITAL STOCK. ▇▇▇▇▇, or an affiliated
nominee, will enter into a Stock Purchase Agreement (the "MARA Purchase
Agreement") with ▇▇▇▇▇▇ and Berick providing for the purchase by ▇▇▇▇▇
(or such affiliated nominee) of all of the outstanding capital stock of
MARA (the "MARA Shares"), free and clear of all liens and
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encumbrances, for a purchase price equal to $750,000, of which $300,000
will be payable in cash on the Closing Date, with the balance payable
in two equal annual installments of $225,000 each, together with
interest on the unpaid amount at 7% per annum, compounded annually and
computed on the basis of a 365-day year. Interest shall be payable
annually, together with the payment of principal then due, on each of
the first two anniversaries of the Closing Date. The obligations of
▇▇▇▇▇ (or such affiliated nominee) to ▇▇▇▇▇▇ and ▇▇▇▇▇▇ under the MARA
Purchase Agreement will be secured by a pledge of the MARA Shares, and
the MARA Purchase Agreement will provide for the acceleration of all
unpaid amounts thereunder upon any sale, transfer, assignment or pledge
of all or substantially all of the capital stock and/or assets of MARA
to an unaffiliated third party prior to the payment in full of all
amounts owing thereunder to ▇▇▇▇▇▇ and Berick.
(d) PURCHASE OF OUTSTANDING RRF SHARES. ISH, or an affiliated
nominee, will enter into a Share Purchase Agreement (the "RRF Purchase
Agreement") with ▇▇▇▇▇▇ providing for the purchase by ISH (or such
affiliated nominee) of 200,000 presently issued and outstanding RRF
Shares held as of the date hereof by ▇▇▇▇▇▇ and/or certain other
holders of RRF Shares designated by ▇▇▇▇▇▇, free and clear of all liens
and encumbrances, for an aggregate purchase price equal to $1,000,000,
which will be payable in cash on the Closing Date.
(e) ISSUANCE OF RRF SHARES. Concurrently with the Formation,
RRF, at ▇▇▇▇▇'▇ option, will issue to parties designated by ▇▇▇▇▇,
pursuant to an Exchange Agreement between RRF and such parties (the
"Exchange Agreement"), 200,000 presently authorized but unissued RRF
Shares in exchange for $1,000,000 of equity interests in the Hotel
Companies which otherwise would be transferred pursuant to the
Operating Partnership Agreement, the Merger Agreement or the Hotel
Purchase Agreement.
(f) ▇▇▇▇▇ OPTION. At his option, ▇▇▇▇▇ may elect to receive,
in lieu of up to $4,400,000 of consideration otherwise to be received
by him in exchange for his equity interests in the Hotel Companies in
the form of RRF Shares or limited partnership interests in the
Operating Partnership, a payment from the Operating Partnership or RRF
in the form of a promissory note or notes in an aggregate principal
amount not to exceed $4,400,000 of the Operating Partnership or RRF, as
the case may be, bearing interest on the principal amount thereof at
the rate of 7% per annum, compounded annually and computed on the basis
of a 365-day
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year, payable in thirty-six (36) equal monthly installments
of principal and interest.
(g) MARA AND THE OPERATING PARTNERSHIP. Concurrently with the
Formation, RRF's Board of Trustees, acting pursuant to Section 3.4 of
RRF's First Amended and Restated Declaration of Trust, will request,
and MARA will so agree, that MARA enter into an advisory arrangement
with the Operating Partnership that will provide MARA with the same
level of advisory compensation in respect of assets of the Operating
Partnership as MARA currently receives in respect of assets of RRF
pursuant to its Advisory Agreement with RRF.
(h) RELATED ISH ENTITIES. Upon the consummation of the
Formation, ▇▇▇▇▇, ISH and/or HCI will make available to MARA such
additional personnel as shall be necessary to enable MARA to provide
appropriate asset management and advisory services to RRF and the
Operating Partnership. ▇▇▇▇▇ shall cause his affiliate, InnSuites
Innternational Hotels, Inc. ("ISIH"), a to-be-formed Arizona or Nevada
corporation, to enter into substantially identical standard percentage
leases of each Hotel from the Operating Partnership (or RRF, in the
case of the corporate-owned Hotels). The terms of such leases
(including, without limitation, rent, lease term, and provisions for
termination by the Operating Partnership or RRF, as the case may be,)
will be reasonably satisfactory in form and substance to RRF. In
addition, ▇▇▇▇▇ will cause his affiliates to transfer rights and
resources to ISIH to enable it to provide property management services
and trademark and licensing services, subject to terms and conditions
reasonably satisfactory to RRF in form and substance.
(i) TERMINATION OF ▇▇▇▇▇▇ AND ▇▇▇▇▇▇ EMPLOYMENT AGREEMENTS. At
the Closing Date, ▇▇▇▇▇▇ and Berick each will execute such documents as
reasonably requested by ▇▇▇▇▇ in order to effect the termination of
their respective Employment Agreements with RRF, without any cost or
liability to RRF.
Section 2. MANAGEMENT OF RRF. RRF, as of the Closing Date,
shall secure the resignations from its Board of Trustees of each of the current
Trustees other than ▇▇▇▇ ▇. ▇▇▇▇▇▇, who will appoint ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to fill the vacancies thus created, which
parties will
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expand the size of the Board by one and will appoint M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to the
vacancy thus created. ▇▇▇▇ ▇. ▇▇▇▇▇▇ agrees to continue to serve on RRF's Board
of Trustees until the date of RRF's 1997 Annual Meeting of Shareholders and
agrees to resign at that time unless requested to remain a Trustee, which
request he may accept or decline at his sole option. ▇▇▇▇▇, ISH and HCI agree
that they will, or will cause their designees to the Board of Trustees of RRF
and the Board of Directors of MARA, as the case may be, to, enter into
agreements with each of the trustees, officers and directors of RRF and MARA
serving as of the date hereof (each such person, an "Indemnified Person")
whereby RRF and MARA each agree to continue to indemnify each Indemnified Person
to the maximum extent permitted by applicable law from and against any
liability, cost or expense arising out of any act or omission on the part of
such Indemnified Person taken (or alleged to have been taken) at any time in his
or her capacity as a trustee, officer and/or director of RRF and/or MARA, as the
case may be.
Section 3. RRF SHAREHOLDER APPROVAL. RRF shall prepare and,
following completion of the Private Placement (as hereinafter defined), submit
to its shareholders, as promptly as may be practicable, proxy materials
soliciting the approval of such shareholders for the transactions comprising the
Formation. The parties hereto acknowledge that RRF will be required to submit
such proxy materials to the Securities and Exchange Commission and the NYSE for
their respective comment and approval
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prior to the distribution of such materials to its shareholders. ▇▇▇▇▇, ISH,
HCI, the Hotel Companies and their respective affiliates, attorneys, accountants
and other advisors each shall cooperate fully in the preparation of said proxy
materials and shall furnish such assistance as RRF reasonably may request in
connection therewith.
RRF shall use all reasonable efforts to obtain SEC and NYSE
clearance of the Proxy Statement and, to the extent required, approval of the
transactions comprising the Formation. Each of ISH and HCI shall furnish all
information concerning it and the Hotel Companies and the holders of equity
interests therein, and RRF shall furnish all information concerning it and the
holders of its shares, as may be required by the Securities Exchange Act of
1934, as amended (the "Exchange Act") or the regulations promulgated thereunder,
or as the other may reasonably request in connection with such actions. As
promptly as practicable after clearance of the Proxy Statement, RRF shall mail
the proxy statement to its shareholders. The Proxy Statement shall include the
recommendation of RRF's Board of Trustees in favor of shareholder approval of
the transactions comprising the Formation.
RRF shall, promptly after the date of this Agreement, take all
action necessary to convene a meeting of RRF's shareholders to act on approval
of the transactions comprising the Formation, and shall consult with ISH and HCI
in connection therewith. RRF shall use its reasonable best efforts to solicit
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from its shareholders proxies in favor of the approval of the transactions
comprising the Formation and to secure the vote or consent of shareholders
required to approve the transactions comprising the Formation. Such solicitation
shall not be commenced by RRF until such time as the Private Placement (as
defined below) shall have been completed, with the closing thereof being subject
only to the consummation of the other transactions contemplated by this
Agreement.
RRF shall, promptly after the date of this Agreement, take all
action necessary to obtain the listing on NYSE of a number of additional shares
of RRF equal to or in excess of the maximum number of RRF shares issuable upon
conversion of partnership interests in the Operating Partnership as contemplated
by Section 1(a) above and in connection with the transactions contemplated by
Sections 1(b) and (e) above and shall consult with HCI and ISH in connection
therewith.
Section 4. APPROVALS OF THE HOTEL COMPANIES.
HCI shall, promptly after the date of this Agreement, prepare
and submit to each equity holder in the Hotel Companies a private placement
memorandum (the "PPM") pursuant to which such equity holders will be offered the
opportunity to exchange their equity interests in the respective Hotel Companies
for partnership interests in the Operating Partnership which shall be
convertible into RRF shares as contemplated by Section 1(a) above and as
provided in the Operating Partnership Agreement (such offer, the "Private
Placement"). The PPM shall also solicit the
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consent of such equity holders to the transactions comprising the Formation to
the extent such consent may be required by the organizational documents of the
respective Hotel Companies. The terms of the Private Placement shall provide,
among other things, that the equity owners in the Hotel Companies shall have the
right to accept the Private Placement, accept cash in an amount determined as
provided in the PPM as an alternative to accepting the Private Placement, or
decline to accept the Private Placement or cash; provided, however, that the PPM
will provide that the Private Placement shall not be concluded unless HCI and
ISH, in consultation with counsel, determine to their satisfaction that the
Private Placement will be effected in compliance with the requirements of Rule
506 under the Securities Act of 1933, as amended (the "Securities Act"),
including, without limitation, the limitation on the number of purchasers set
forth in Rule 506(b)(2). The PPM shall include the recommendation of the general
partners or managing members of each Hotel Company in favor of the exchange and
the Private Placement shall be completed, subject only to the consummation of
the other transactions contemplated by this Agreement.
Each of ISH and HCI shall furnish all information concerning
it and the Hotel Companies and the holders of equity interests therein, and RRF
shall furnish all information concerning it and the holders of its shares for
inclusion in the PPM, as may be required to be included in the PPM by the
Securities Act or the regulations promulgated thereunder, or as
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the other may reasonably request in connection with such actions. RRF, MARA and
their respective affiliates, attorneys, accountants and advisors each shall
cooperate fully in the preparation of said consent materials and furnish such
assistance as HCI reasonably may request in connection therewith.
Section 5. REPRESENTATIONS AND WARRANTIES.
(a) ORGANIZATION AND GOOD STANDING. RRF, MARA, HCI,
ISH, and each Hotel Company each represents and warrants to each of the other
parties hereto that it has been duly organized and is validly existing in good
standing under the laws of its respective jurisdiction of organization. RRF
represents to each of the ISH Parties that: to its best knowledge, it has
maintained continuous qualification as an REIT within the meaning of Sections
856 through 860 of the Internal Revenue Code of 1986, as amended; such
qualification will not be jeopardized by the consummation of the Formation; and
there is not pending, nor to its knowledge is there threatened, any action or
proceeding to effect the delisting of the RRF Shares from the NYSE.
(b) AUTHORITY. Each party hereto represents and warrants to
each of the other parties hereto that, subject only to the receipt of the
approvals described in Sections 3 and 4, above, as applicable, such party has
the power and authority to execute, deliver and perform this Agreement and the
Transaction Agreements to be executed by such party and to consummate the
transactions contemplated hereby and thereby; that this Agreement has been (or,
upon the receipt of such approvals, will be) duly
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and validly executed and delivered on such party's behalf; that each of such
Transaction Agreements to be executed by such party, when executed and
delivered, will be duly authorized, executed and delivered on its behalf; and
that this Agreement is, and when executed and delivered by such party each of
the Transaction Agreements will be, upon the due execution and delivery thereof
by each of the other parties thereto, the legal, valid and binding obligation of
such party, enforceable against such party in accordance with the respective
terms thereof, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement thereof or relating to creditors' rights generally.
(c) CONSENTS. Each party hereto represents and warrants to
each of the other parties hereto that, except as set forth in Sections 3 and 4,
above, as applicable, no consent, approval, permit or order of, nor filing with,
any individual, partnership, corporation, trust or other entity, government
agency or political subdivision, is required in connection with: (i) the
execution, delivery and performance of this Agreement or the Transaction
Agreements by such party or (ii) the consummation by such party of the
transactions contemplated hereby or thereby (including, without limitation, any
required consent of the spouse of any natural person who is a party hereto and
is subject to the community property laws of any jurisdiction), other than any
such consent, approval, permit or order obtained, or filing
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made, prior to the Closing Date in a form reasonably satisfactory to the other
parties hereto. RRF represents and warrants to each of the ISH Parties that the
transactions contemplated hereby will not result in the triggering of any
"poison pill" or similar shareholder rights plan in respect of its securities.
MARA and RRF represent and warrant to each of the ISH Parties that MARA is not
currently in default in its obligations to RRF under the Advisory Agreement
between MARA and RRF, as in effect on the date hereof, that such Advisory
Agreement is enforceable in accordance with its terms, and that the sale of the
MARA Shares pursuant to the MARA Purchase Agreement will transfer to the
purchaser(s) thereof all of the rights which currently inure to the benefit of
▇▇▇▇▇▇ and Berick, as the sole shareholders of MARA, in respect of such Advisory
Agreement.
(d) NO VIOLATION. Each party hereto represents and warrants to
each of the other parties hereto that, upon receipt of the approvals
contemplated by Sections 3 and 4, above, and the approvals from mortgage lenders
(the "Lender Approvals") which have a right to approve the transactions
contemplated hereby, as referred to in Section 6(g), below, none of the
execution, delivery and performance by such party of this Agreement or the
execution, delivery or performance by such party of the Transaction Agreements
to be executed by such party, nor the consummation by such party of the
transactions contemplated hereby or thereby, will violate any provision of the
organizational documents of such party or violate or be in
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conflict with, or constitute a default (or an event or condition which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or acceleration of, or result in the creation or imposition of
any lien or encumbrance under, any agreement, note, mortgage or other instrument
to which such party is a party or by which such party may be bound or subject,
or violate any statutes, orders, rules and regulations promulgated by any
governmental body, or violate any court order or decree binding upon such party.
(e) BROKERS'/FINDERS' FEES. Each party hereto represents and
warrants to each of the other parties hereto that it has not employed a broker
or finder in connection with any transactions contemplated by the Formation
other than, in the case of RRF and MARA: Brown, Gibbons, Lang & Company, L.P.;
and in the case of ▇▇▇▇▇, ISH, HCI and the Hotel Companies: JDI Realty, LLC and
▇▇▇▇ Investment Advisers. Each party ("First Party") agrees to indemnify and
hold harmless any other party hereto from and against any claim asserted against
any such other party for a brokerage, agent's, finder's or originator's
commission or other similar compensation in respect of the transaction
contemplated by this Agreement by any person purporting to act on behalf of
First Party.
(f) OWNERSHIP OF MARA SHARES AND RRF SHARES. Each of ▇▇▇▇▇▇
and ▇▇▇▇▇▇, severally and not jointly, represents and warrants to each of the
ISH Parties that he is the lawful owner of fifty (50) MARA Shares, each such
person's shareholdings
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comprising 50% of the outstanding capital stock of MARA, and that he has good
and marketable title to such MARA Shares, free and clear of any liens,
encumbrances, equities, restrictions and claims of every kind and nature
whatsoever, and that he has full right, power and authority to transfer such
interests as contemplated by the MARA Purchase Agreement. ▇▇▇▇▇▇ represents and
warrants to each of the ISH Parties that he is the lawful owner as of the date
hereof of approximately 164,000 of the 200,000 RRF shares to be sold to ▇▇▇▇▇
pursuant to Section 1(d), above, and that he and each other seller of any of
such RRF Shares has good and marketable title to the RRF Shares to be sold by
such person pursuant to the RRF Purchase Agreement, in each case free and clear
of any liens, encumbrances, equities, restrictions and claims of every kind and
nature whatsoever, and that he and each other seller of any of such RRF Shares
has full right, power and authority to transfer such RRF Shares as contemplated
by the RRF Purchase Agreement.
(g) OWNERSHIP OF THE HOTEL COMPANIES. HCI represents and
warrants to each of the RRF Parties that the ownership of the Hotel Companies as
of the date hereof is as set forth on Schedule I hereto, and that, subject to
the approvals set forth in Section 4, above, and any required Lender Approvals,
the persons or entities indicated thereon have good and marketable title to such
equity interests, free and clear of any liens, encumbrances, equities,
restrictions and claims of every kind and nature whatsoever, and that such
owners have full right, power and
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authority to transfer such interests as contemplated by the Operating
Partnership Agreement, the Merger Agreement and/or the Exchange Agreement, as
the case may be.
(h) INVESTMENT INTENT. Each of ▇▇▇▇▇, ISH, and HCI, severally
and not jointly, represents and warrants to each of the RRF Parties and to RRF
for the benefit of the Operating Partnership, that it is acquiring its
respective RRF Shares, MARA Shares and/or limited partnership interests in the
Operating Partnership for its own account for purposes of investment and not
with a view to effecting a public distribution thereof, subject to its
respective rights under the Operating Partnership Agreement to sell or otherwise
transfer such limited partnership interests pursuant to an exemption from
registration under applicable securities laws.
(i) EXECUTION ON BEHALF OF THE HOTEL COMPANIES. Each Hotel
Company represents and warrants to each of the RRF Parties that the general
partners (or managing members) or officers, as the case may be) of such Hotel
Company executing this Agreement will have full power and will have been duly
authorized, as of the Closing Date, in accordance with the organizational
documents of such Hotel Company, to execute on behalf of such Hotel Company the
Transaction Agreements and all other documents and instruments necessary to
effect the intention of the parties hereto to carry out the Formation.
(j) OWNERSHIP OF ASSETS OF RRF. RRF hereby represents and
warrants to each of the ISH Parties that it is the lawful
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owner of each and every asset to be transferred to the Operating Partnership as
contemplated by Section 1(a), above, and has and will have good and marketable
title to such assets, free and clear of any liens, encumbrances, equities,
restrictions and claims of every kind and nature whatsoever, except as set forth
on Schedule II hereto, and that it has and will have full right, power and
authority to transfer such interests as contemplated by the Formation, subject
to the receipt of the shareholder approval specified in Section 3, above.
(k) INSURANCE. RRF hereby represents and warrants to each ISH
Party, and ISH, HCI and each Hotel Company jointly and severally represent to
each RRF Party, that the real property owned by them, respectively, as of the
date hereof is and as of the Closing Date will be fully insured against casualty
loss and that the entity owning the real property in question is the owner and
primary beneficiary of such policies of insurance.
(l) FINANCIAL INFORMATION. Each ISH Party, jointly and
severally, represents to each RRF Party that the financial information furnished
or to be furnished to any RRF Party by or on behalf of any ISH Party is true and
correct in all material respects as of the date thereof and that there has been
no, and as of the Closing Date there will not have been any, material adverse
change in the financial condition or results of operations of any ISH Party or
any Hotel since the dates of any of such financial information which previously
has not been disclosed to the RRF Parties.
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(m) NYSE LISTING. RRF represents to HCI and ISH that the RRF
shares are listed on NYSE and that RRF has received no notice from NYSE
terminating or proposing to terminate or otherwise limit the trading of RRF
shares on NYSE and has no notice that any such termination or limitation is
pending or threatened.
The representations and warranties set forth in this Section 5
shall be deemed to be repeated on and as of the Closing Date.
Section 6. COVENANTS AND OTHER AGREEMENTS.
(a) FURTHER ASSURANCES; ADDITIONAL DOCUMENTATION. From time to
time upon request, and without the granting of further consideration, each of
the parties hereto agrees to execute, deliver and acknowledge any and all such
further instruments and do such further acts as any other party hereto
reasonably may require to evidence or effectuate more fully the transactions
contemplated by this Agreement, the Transaction Agreements and the Formation.
The parties hereto acknowledge and agree that this Agreement sets forth the
documentary framework and the principal terms of the understandings of the
parties in respect of the Formation, that it would be impracticable for this
Agreement to set forth all of the terms to be contained in the Transaction
Agreements, and that each party hereto will negotiate in good faith such terms
of the Transaction Agreements as are not expressly set forth herein.
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(b) THE FORMATION. The parties hereto agree that the sequence
of events constituting the Formation shall be effected as substantially
concurrently as possible on the earliest date as may be practicable following
the receipt of the approvals specified in Sections 3 and 4, above, but not prior
to January 2, 1997.
(c) NOTICE OF SALE. The parties hereto agree to cooperate to
cause the Operating Partnership to prepare a notice of sale of securities on
Securities and Exchange Commission Form D in respect of the distribution of
limited partnership interests in the Operating Partnership to the
partners/members of the Partnership Hotel Companies, and to file such notice as
soon as possible after the Closing Date, but in no event later than 15 days
thereafter.
(d) CONDUCT OF BUSINESS. Each party hereto covenants and
agrees to each of the other parties hereto that, between the date hereof and the
Closing Date, its respective business will continue to be operated in the
regular and ordinary course thereof commensurate with relevant industry
standards, and in connection therewith each such party shall not, without the
prior consent of the other parties hereto:
(i) Sell or transfer any assets other than in the regular
and ordinary course of business or encumber any assets,
whether or not in the regular and ordinary course of
business; provided, however, it is expressly agreed
that RRF shall be entitled to (A) continue to declare
and pay regular dividends of not more than ten cents
per share to its shareholders in accordance with its
past practice in the sole discretion of its Board of
Trustees, and that any such dividend declaration and
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payment shall have no effect on the interest of RRF in the
Operating Partnership set forth in Section 1(a), above, and
(B) consummate a sale of its Chicago office property on such
terms as it may agree to in its sole discretion but at a gross
cash purchase price of not less than $6.0 million, and that
ISH may (C) refinance the existing indebtedness encumbering
the Phoenix Hotel with a new first mortgage loan of not more
than $4.9 million, bearing interest at the rate of 8.5% and
maturing in not more than fifteen (15) years and encumber the
Scottsdale Hotel with up to an additional $4.5 million of
mortgage debt and (D) admit InnSuites Innternational Inns &
Resorts, Inc., an Arizona corporation, as a general partner of
each Hotel Company of which it is not currently a general
partner.
(ii) Terminate or cause or permit the termination of, any contract,
lease or other agreement which in any case either individually
or in the aggregate has a materially adverse effect on the
assets, operations or prospects of such covenanting party.
(iii) Agree to do any of the things specified in (i) or (ii),
above.
Each ISH Party represents and warrants to each RRF Party that the Hotels are
being operated in a manner commensurate with relevant industry standards and
there have not been any changes in basic operating procedures. Between the date
hereof and the Closing Date, each party hereto shall use its respective best
efforts to keep the services of its respective present employees and preserve
their respective present relations with suppliers and other vendors.
(e) RRF INFORMATION IN PROXY STATEMENT AND PPM. None of the
information to be supplied by RRF or any of its accountants, counsel or other
authorized representatives for inclusion in the Proxy Statement or the PPM will,
at the time of the mailing of the Proxy Statement or the PPM, as the case may
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be, and any amendments or supplements thereto, contain any untrue statement of a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, or, at the time of the shareholders' meeting or the conclusion of
the Private Placement, as the case may be, omit to state any material fact
necessary to correct any statement that has become false or misleading, it being
understood and agreed that no representation or warranty is made by RRF with
respect to any information supplied by ISH or HCI or their accountants, counsel
or other authorized representatives. If at any time prior to the Closing Date
any event with respect to RRF shall occur which is or should be described in an
amendment of or supplement to the Proxy Statement or the PPM, such event shall
be so described and the presentation in such amendment or supplement will not
contain any statement which, at the time and in light of the circumstances under
which it is made, is false or misleading in any material respect or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not false or misleading. The Proxy Statement will comply as to form in all
material respects with all applicable laws, including the provisions of the
Exchange Act and the rules and regulations promulgated thereunder.
(f) HCI/ISH INFORMATION IN PROXY STATEMENT AND PPM. None of
the information to be supplied by HCI or ISH or any of
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their accountants, counsel or other authorized representatives for inclusion in
the Proxy Statement or the PPM will, at the time of the mailing of the Proxy
Statement or the PPM, as the case may be, and any amendments or supplements
thereto, contain any untrue statement of a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or, at the time of the
shareholders' meeting or the conclusion of the Private Placement, as the case
may be, omit to state any material fact necessary to correct any statement that
has become false or misleading, it being understood and agreed that no
representation or warranty is made by HCI or ISH with respect to any information
supplied by RRF or its accountants, counsel or other authorized representatives.
If at any time prior to the Closing Date any event with respect to HCI, ISH, or
the Hotel Companies shall occur which is or should be described in an amendment
of or supplement to the Proxy Statement or the PPM, such event shall be so
described and the presentation in such amendment or supplement will not contain
any statement which, at the time and in light of the circumstances under which
it is made, is false or misleading in any material respect or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading. The PPM will comply as to form in all material respects
with all applicable laws,
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including the provisions of the Securities Act and the rules and regulations
promulgated thereunder.
(g) LENDER APPROVALS. The ISH Parties will use their best
efforts to obtain the Lender Approvals as promptly as practicable and, in any
event, prior to the mailing by RRF to its shareholders of the Proxy Statement.
Section 7. CONDITIONS PRECEDENT AND TERMINATION.
(a) CONDITIONS PRECEDENT. The obligations of each of the
parties hereto to consummate the transactions contemplated hereunder are subject
to the satisfaction or waiver of the following conditions at or prior to the
Closing Date:
(i) each of the Transaction Agreements shall be duly executed
and acknowledged by all of the parties thereto;
(ii) any further instruments and acts properly requested
pursuant hereto shall have been executed and delivered or done, as the
case may be;
(iii) the approvals required by Sections 3 and 4, above, shall
have been obtained;
(iv) the representations and warranties contained in Section 5
hereof shall be true and correct in all material respects on the date
hereof and on the Closing Date with the same effect as though such
representations and warranties had been made or given on the Closing
Date;
(v) all of the parties to all of the Transaction Agreements
shall have performed all of their obligations under the Transaction
Agreements to be performed at or prior to the closing of the Formation;
(vi) the following legal opinions and memorandum shall have
been delivered by and to the parties specified below, and such legal
opinions and memorandum shall be reasonably satisfactory in form and
substance to the respective addressees thereof:
(A) counsel for RRF and MARA shall have delivered
its opinion to the ISH Parties in respect of the
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matters relating to RRF and MARA set forth in Sections
5(a), (b), (c) and (d), above;
(B) counsel for the ISH Parties shall have delivered
its opinion to RRF and MARA in respect of the matters set
forth in Sections 5(a), (b), (c), (d) and (i), above, and to
the effect that the Private Placement constitutes a
transaction exempt from the registration requirements of (1)
the Securities Act and (2) all applicable state securities
laws; and
(C) counsel for the Hotel Companies shall have
delivered to RRF and the Operating Partnership a blue- sky
memorandum indicating the basis for compliance with or
exemption from all applicable state securities laws in respect
of the distribution by the Partnership Hotel Companies of
their respective limited partnership interests in the
Operating Partnership to their partners/members;
(vii) the RRF Shares, including the additional RRF Shares
contemplated to be listed by Section 3, above, or otherwise in
connection with the transactions contemplated by this Agreement, shall
be listed on the NYSE and no proceedings shall be pending or, to RRF's
knowledge, threatened, in respect of any delisting or suspension of
listing thereof;
(viii) there shall not be pending an injunction or order or
decree of a court of competent jurisdiction restraining or prohibiting
the consummation of the Formation; and
(ix) no more than thirty-five (35) Participating Equity Owners
shall be persons who do not constitute "accredited investors" as such
term is defined in Securities Act Rule 501.
(b) TERMINATION.
(i) This Agreement shall automatically terminate on March 31,
1997 if the Closing Date shall not have occurred on or before such date, unless
otherwise extended by mutual written agreement of each and every party hereto.
This Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing Date by any party by
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the delivery of written notice of termination to each other party hereto,
subject to the expense reimbursement provisions of Section 8(h), below.
(ii) In the event of the termination of this Agreement, this
Agreement forthwith shall become void and of no further force and effect and
there shall be no liability hereunder or thereunder on the part of any party
hereto or any of its affiliates, directors, officers, partners or shareholders,
provided, however, that nothing herein shall relieve any party from liability
for any breach hereof or thereof or from such party's obligations in respect of
reimbursement of expenses set forth in Section 8(h), below.
Section 8. MISCELLANEOUS.
(a) WAIVER. Any failure of any of the parties hereto to comply
with any obligation, covenant, agreement or condition herein may be waived by
the parties entitled to the benefit thereof only by a written instrument signed
by each such party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement or condition shall not operate as a waiver of or estoppel in respect
of any subsequent or other failure.
(b) GOVERNING LAW. THIS FORMATION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO REGARDLESS
OF THE LAWS THAT WOULD OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS
OF LAWS. The parties hereto consent to personal jurisdiction in the Court of
Common
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Pleas for Cuyahoga County, Ohio, or the United States District Court for the
Northern District of Ohio, in connection with any claim, allegation, cause of
action or legal proceeding relating in any way to this Agreement. The parties
hereto agree, to the fullest extent permitted by law, to venue in such court, to
waive any claim that such court is an inconvenient forum and to accept service
of process in any such claim, action or proceeding in the manner set forth in
Section 8(f) (in addition to any other means of service permitted by law).
(c) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, and
delivered by means of facsimile transmission or otherwise, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute but one and the same agreement.
(d) ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations herein
shall be assigned or delegated by any party hereto without the prior written
consent of the other parties hereto.
(e) AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
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(f) NOTICES. All notices and other communications hereunder
must be in writing and will be deemed to have been duly given when personally
delivered or on the date of receipt or refusal indicated on the return receipt
if mailed (registered or certified mail, postage prepaid, return receipt
requested) or sent by express courier service to the addresses set forth in the
preamble hereto, with a copy, in the case of notices to any of the ISH Parties,
to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, and, in the case of notices to any of the
RRF Parties, to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., Berick, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ Co., L.P.A.,
1350 ▇▇▇▇▇ Center, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
(g) SEVERABILITY. If any provision of this Agreement shall be
held to be illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
(h) EXPENSES. RRF shall bear the costs and expenses incurred
by the RRF Parties (except as set forth in the following sentence) in connection
with this Agreement, the Transaction Agreements and the transactions
contemplated hereby and thereby,
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including but not limited to the reasonable fees and expenses of their counsel.
MARA and ▇▇▇▇▇▇ shall bear the costs and expenses, including but not limited to
the reasonable fees and expenses of their counsel, incurred in connection with
the MARA Purchase Agreement and the RRF Purchase Agreement, respectively. The
ISH Parties shall bear their own costs and expenses incurred in connection with
this Agreement, the Transaction Agreements and the transactions contemplated
hereby and thereby, including but not limited to the reasonable fees and
expenses of their respective counsel. Notwithstanding the foregoing, (i) if
subsequent to the execution hereof, the Formation is not consummated because of
any determination not to proceed with the Formation or other action or omission
by or on behalf of any ISH Party, including a failure of any representation or
warranty made herein by or on behalf of any ISH Party to be true and correct as
of the date hereof or as of the Closing Date (any of the foregoing, an "ISH
Termination") by or on behalf of any ISH Party, then and in such event ISH shall
be obligated to reimburse the RRF Parties for respective costs and expenses
incurred in connection herewith, up to an aggregate maximum of:
(A) $25,000, if such ISH Termination occurs
subsequent to the date which is thirty (30) days
after the date this Agreement is executed by each
party hereto but prior to the occurrence of any of
the events set forth in subclauses (B) through (D)
of this clause (i);
(B) $75,000, if such ISH Termination occurs
subsequent to the initial submission of the proxy
materials referred to in Section 3,
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above, to a financial printer but prior to the
occurrence of any of the events set forth in
subclauses (C) or (D) of this clause (i);
(C) $100,000, if such ISH Termination occurs
subsequent to the initial distribution of the proxy
materials referred to in Section 3, above, to RRF's
shareholders but prior to the occurrence of the
event set forth in subclause (D) of this clause (i);
and
(D) $250,000, if such ISH Termination occurs
subsequent to the receipt by RRF of the approval
required by Section 3, above;
or (ii) if subsequent to the execution hereof, the Formation is not consummated
because of any determination not to proceed with the Formation or other action
or omission by or on behalf of any RRF Party, including a failure of any
representation or warranty made herein by or on behalf of any RRF Party to be
true and correct as of the date hereof or as of the Closing Date (any of the
foregoing, an "RRF Termination") (other than the failure to obtain the
shareholder approval required by Section 3, above, which failure shall not
create the following obligations on the part of RRF), then and in such event RRF
shall be obligated to reimburse the ISH Parties for their respective costs and
expenses incurred in connection herewith, up to an aggregate maximum of:
(A) $25,000, if such RRF Termination occurs
subsequent to the date which is thirty (30) days
after the date this Agreement is executed by each
party hereto but prior to the occurrence of any of
the events set forth in subclauses (B) through (D)
of this clause (ii);
(B) $75,000, if such RRF Termination occurs
subsequent to the initial submission of the proxy
materials referred to in Section 3, above, to a
financial printer but prior to
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the occurrence of any of the events set forth in
subclauses (C) or (D) of this clause (ii);
(C) $100,000, if such RRF Termination occurs
subsequent to the initial distribution of the proxy
materials referred to in Section 3, above, to RRF's
shareholders but prior to the occurrence of the
event set forth in subclause (D) of this clause
(ii);
(D) $250,000, if such RRF Termination occurs
subsequent to the receipt by RRF of the approval
required by Section 3, above.
In addition to the foregoing, should the Formation not be consummated because
the RRF Parties have elected to enter into a transaction substantially similar
to the Formation or otherwise effectuate a sale or change in control of RRF with
any third party prior to March 31, 1997 (an "Outside Transaction"), RRF shall
pay to the ISH Parties an additional aggregate sum of $500,000. RRF agrees that
it will not so elect to enter into an Outside Transaction unless its Board of
Trustees determines, in the exercise of its independent business judgment and
discretion, that it has a fiduciary duty to the holders of the RRF Shares to
enter into such Outside Transaction rather than proceed with the Formation.
Notwithstanding anything herein to the contrary, (x) the
foregoing expense reimbursement obligations of the ISH Parties shall not be
applicable in the event that the ISH Parties determine not to consummate the
Formation as a result of the failure of the RRF Parties to satisfy the
conditions set forth in Sections 7(a)(iii), (vi) or (viii) relating to RRF or in
Section 7(a)(vii) if the RRF Parties have satisfied the remaining
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conditions set forth in Section 7(a) to be satisfied by them; and (y) the
foregoing expense reimbursement obligations of the RRF Parties shall not be
applicable in the event that the RRF Parties determine not to consummate the
Formation as a result of the failure of the ISH Parties to satisfy the
conditions set forth in Sections 7(a)(iii), (vi) or (viii) relating to the ISH
Parties if the ISH Parties have satisfied the remaining conditions set forth in
Section 7(a) to be satisfied by them.
(i) NO SOLICITATION. Each of the RRF Parties agrees that it
will not, after the date hereof and prior to the date of termination of this
Agreement, seek, directly or through agents, representatives or affiliates, or
permit any of its officers or directors to seek (whether in their capacity as
officers or directors or in their individual capacities) or otherwise solicit or
encourage the initiation of inquiries or proposals from any person or persons
(other than the ISH Parties or any of them) to purchase all or a substantial
portion of the assets of any of the RRF Parties or all or a substantial portion
of the capital stock or other securities of any of the RRF Parties or any of
their respective affiliates, or for any of the RRF Parties or any of their
respective affiliates to purchase in one or more related transactions the
capital stock or other securities or assets of persons (other than the ISH
Parties or any of them) whereby any of the RRF Parties would issue (or commit to
issue) shares of its capital stock or other securities or to effect a
consolidation or merger or other business combination or recapitalization (other
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than the transactions comprising the Formation)(an "Acquisition Proposal"). The
RRF Parties shall immediately cease and cause to be terminated all existing
discussions and negotiations, if any, with any parties conducted heretofore with
respect to any Acquisition Proposal (other than the ISH Parties or any of them).
Nothing contained in this Section 8(i) shall prevent the Board of Trustees of
RRF from considering, negotiating, approving and recommending to shareholders of
RRF a bona fide Acquisition Proposal not solicited, directly or indirectly, in
violation of this Agreement, provided the Board of Trustees determines in good
faith that it is required to do so in order to discharge properly its fiduciary
duties.
RRF shall immediately notify the ISH Parties after receipt of
any Acquisition Proposal (whether written or oral), or any modification of or
amendment to any Acquisition Proposal, or any request for any nonpublic
information relating to the RRF parties or any of them in connection with any
Acquisition Proposal or for access to the properties, books or records of the
RRF Parties or any of them by any person or entity that informs the Board of
Trustees or management of RRF or of any of the RRF Parties that it is
considering making or has made an Acquisition Proposal. Such notice to the ISH
Parties shall be made orally and in writing and shall indicate whether RRF is
providing or intends to provide the person making the Acquisition Proposal with
access to information concerning the RRF Parties or any of them, the identity of
the person making the Acquisition Proposal
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and the terms and conditions of the transaction contemplated by the Acquisition
Proposal. Notwithstanding the foregoing, RRF shall not be obligated to inform
the ISH Parties of any unsolicited inquiry received by it in respect of an
Acquisition Proposal if such inquiry is preliminary in nature and RRF responds
to such inquiry by advising the inquiring party that RRF is in exclusive
negotiations regarding the transaction contemplated by this Agreement.
(j) PUBLICITY. The RRF Parties, on the one hand, and the ISH
Parties, on the other hand, agree that neither will make any public statement or
issue any press release disclosing the existence of this Agreement or the terms
hereof without the prior consent of the other, which consent shall not be
unreasonably withheld or delayed.
(k) TRUST DISCLAIMER; PERSONAL LIABILITY. As provided in the
First Amended and Restated Declaration of Trust establishing RRF, dated June 11,
1971, no trustee, officer, shareholder, employee or agent of RRF shall be held
to any personal liability, jointly or severally, for any obligation of, or claim
against, RRF. All persons dealing with RRF in any way shall look only to the
assets of RRF for the payment of any sum or the performance of any obligation.
▇▇▇▇▇ and any other officers of any of the ISH Parties executing this Agreement
shall not be held personally liable solely for having so executed this Agreement
in a representative capacity and all persons dealing with the ISH Parties shall
only look to the assets of the ISH
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Parties for the payment of any sum or the performance of any obligation by the
ISH Parties. It is further agreed that the respective personal liability of
▇▇▇▇▇, ▇▇▇▇▇▇ or ▇▇▇▇▇▇ for any breach of any representation, warranty or
covenant made by such person in his individual capacity shall be limited to, and
recourse shall be had solely against, (x) in the case of ▇▇▇▇▇, the assets of
HCI, and (y) in the case of either ▇▇▇▇▇▇ or ▇▇▇▇▇▇, the assets of MARA; it
being understood that none of the aforesaid persons shall have any personal
liability in respect of any such breach made by an entity for which such person
has signed in a representative capacity.
IN WITNESS WHEREOF, the undersigned have executed this Agreement this
15th day of December, 1996.
REALTY REFUND TRUST INNSUITES HOTELS L.L.C
Innternational Suites Corp.
Managing Member
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- -----------------------------
Its: Chairman Its: President
MID-AMERICA REAFUND ADVISORS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- -----------------------------
Its: Chairman ▇▇▇▇▇ ▇. ▇▇▇▇▇
HOSPITALITY CORPORATION INTERNATIONAL
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------- -----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(signatures continued on following page)
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(signatures continued from previous page)
TUCSON HOSPITALITY PROPERTIES, YUMA HOSPITALITY PROPERTIES,
LTD., an Arizona limited LTD., an Arizona limited
partnership partnership
By: Hospitality Corporation By: Hospitality Corporation
International, its general International, its
partner general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------- -------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
BASELINE HOSPITALITY PROPERTIES, NORTHERN PHOENIX INVESTMENT
LTD., an Arizona limited LIMITED PARTNERSHIP, an
partnership Arizona limited partnership
By: Hospitality Corporation By: Hospitality Corporation
International, its general International, its
partner general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------- -------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
ONTARIO HOSPITALITY PROPERTIES, ▇▇▇▇▇▇ HOTELS CORPORATION
LIMITED PARTNERSHIP, an Arizona
limited partnership
By: InnSuites Innternational By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Inns & Resorts, Inc., its ------------------------
general partner ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ BUENAVENTURA PROPERTIES, INC.
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
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SCHEDULE I
NAME OF ENTITY TYPE OF ENTITY LOCATION OF HOTEL JURISDICTION OF ORGANIZATION
-------------- -------------- ----------------- ----------------------------
Tucson Hospitality Limited Partnership Tucson, AZ Arizona
Properties, Ltd.
Yuma Hospitality Limited Partnership Yuma, AZ Arizona
Properties, Ltd.
Baseline Hospitality Limited Partnership Tempe, AZ Arizona
Properties, Ltd.
Northern Phoenix Limited Partnership Phoenix, AZ Arizona
Investment Limited
Partnership
Ontario Hospitality Limited Partnership Ontario, CA Arizona
Properties Limited
Partnership
▇▇▇▇▇▇ Hotels Corporation Flagstaff, AZ Arizona
Corporation
Buenaventura Corporation Scottsdale, AZ Arizona
Properties, Inc.
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SCHEDULE II
1. Carbide and Carbon Building (Chicago):
a. Listing Agreement, dated September 27, 1996, between
RRF and CB Commercial. This agreement terminates on
December 31, 1996, unless renewed.
2. Riverview Tower (Toledo):
a. First Mortgage, dated May 1, 1967, securing a loan in the
original principal amount of $12,000,000, in favor of New York
Life Insurance Company. Such loan is in default.
▇. ▇▇▇▇▇ County Common Pleas Court has appointed a
receiver for the building effective November 1, 1996.
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SCHEDULE III
REALTY REFUND TRUST/INNSUITE HOTELS
DEFINED TERMS
($ in thousands)
Calculation
Defined Term Calculation Result
---------------------- ---------------- ----------------
34,740
ISH Ownership Percentage --------------
34,740 + 5,103 87.19%
5,103
RRF Ownership Percentage --------------
34,740 + 5,103 12.81%
RRF Agreed Value 1,020,586*5 $5,103
OP Hotel Contribution N/A $31,405
OP RRF Contribution 5,103*90.40% $4,613
31,405
Partnership Hotel Percentage ------------ 90.40%
34,740
ISH Portfolio Value N/A $34,740
Note: The above calculations are based on the summary of appraised values and
approximate mortgage balances supplied by JDI Realty.
41
REALTY REFUND TRUST/INNSUITE HOTELS
Sample Share of OP Unit Calculations
With Partners'
Approximate Total RRF Operating Operating
Appraised Mortgage Agreed Shares of Partnership Partnership
Value Balance Equity Value OP Units % Units % Units %
Tempe $10,715,000 $2,800,000 $7,915,000 1,583,000 20% 712,350 45% 870,650 55%
Tucson 8,715,000 0 8,715,000 1,743,000 22% 610,000 35% 1,132,950 65%
Flagstaff 3,325,000 990,000 2,335,000 467,000 6%
Yuma 9,000,000 4,000,000 5,000,000 1,000,000 13% 400,000 40% 600,000 60%
Phoenix 7,900,000 3,100,000 4,800,000 960,000 12% 921,600 96% 38,400 4%
Scottsdale 7,225,000 6,225,000 1,000,000 200,000 3%
Ontario 8,775,000 3,800,000 4,975,000 995,000 12% 666,650 67% 328,350 33%
------------------------------------------------------------------------------------------------------------
Total ISH $55,655,000 $20,915,000 34,740,000 6,948,000 87% 3,310,650 2,970,350
============================
Realty ReFund Trust 5,102,930 1,020,586 13%
-------------------------------------
$39,842,930 7,968,586 100%
=====================================
With RRF
Shares %
Tempe
Tucson
Flagstaff 467,000 100%
Yuma
Phoenix
Scottsdale 200,000 100%
Ontario
-----------------------------
Total ISH 667,000
Note: The above calculations are based on the summary of appraised values and approximate
mortgage balances for the seven "Accountable Properties" supplied by JDI Realty.