-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESxVhZ+pqPFcWi/ZVfWTRR2t/8qu/wQNi2bHMyyJzNqemr+KSwsNQSrNBlVD3OLr 5XMpRKu98bEHS9+42cqgLg== 0000950123-98-007602.txt : 19980817 0000950123-98-007602.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950123-98-007602 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIME HOSPITALITY CORP CENTRAL INDEX KEY: 0000080293 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 222640625 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06869 FILM NUMBER: 98688650 BUSINESS ADDRESS: STREET 1: 700 RTE 46 E CITY: FAIRFIELD STATE: NJ ZIP: 07004 BUSINESS PHONE: 9738821010 MAIL ADDRESS: STREET 1: 700 RTE 46 EAST CITY: FAIRFIELD STATE: NJ ZIP: 07004 FORMER COMPANY: FORMER CONFORMED NAME: PRIME MOTOR INNS INC DATE OF NAME CHANGE: 19920609 FORMER COMPANY: FORMER CONFORMED NAME: PRIME EQUITIES INC DATE OF NAME CHANGE: 19731120 10-Q 1 FORM 10-Q RE: PRIME HOSPITALITY CORP 1 FORM 10-Q SECURITIES EXCHANGE COMMISSION Washington, D.C. 20549 (MARK ONE) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ___________ Commission File No. 1-6869 PRIME HOSPITALITY CORP. (Exact name of registrant as specified in its charter) Delaware 22-2640625 (State or other jurisdiction of (I.R.S. employer identification no.) incorporation or organization) 700 Route 46 East, Fairfield, New Jersey 07004 (Address of principal executive offices) (973) 882-1010 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes |X| No |_| The registrant had 52,749,962 shares of common stock outstanding, $.01 par value, as of August 11, 1998. 2 PRIME HOSPITALITY CORP. AND SUBSIDIARIES INDEX PAGE PART I. FINANCIAL INFORMATION NUMBER ------- Item 1. Financial Statements Consolidated Balance Sheets December 31, 1997 and June 30, 1998..................... 1 Consolidated Statements of Income Three and Six Months Ended June 30, 1997 and June 30, 1998....................................... 2 Consolidated Statements of Cash Flows Six Months Ended June 30, 1997 and June 30, 1998....................................... 3 Notes to Interim Consolidated Financial Statements......... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote to a Vote of Security Holders................................................. 18 Item 6. Exhibits and Reports on Form 8-K........................... 19 Signatures ................................................ 20 3 PRIME HOSPITALITY CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data)
December 31, June 30 1997 1998 =========== =========== (Unaudited) ASSETS Current assets: Cash and cash equivalents ............................ $ 5,013 $ 59,399 Marketable securities available for sale ............. 8,697 19,476 Accounts receivable, net of reserves ................. 16,318 22,011 Current portion of mortgages and notes receivable ................................... 2,271 2,142 Other current assets ................................. 28,780 16,864 ----------- ----------- Total current assets ........................... 61,079 119,892 Property, equipment and leasehold improvements, net of accumulated depreciation and amortization ..... 1,079,591 1,109,133 Mortgages and notes receivable, net of current portion ...................................... 19,698 13,496 Other assets ............................................. 36,298 40,119 ----------- ----------- TOTAL ASSETS ................................... $ 1,196,666 $ 1,282,640 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of debt .............................. $ 3,871 $ 3,197 Other current liabilities ............................ 76,921 81,983 ----------- ----------- Total current liabilities ...................... 80,792 85,180 Long-term debt, net of current portion ................... 554,500 474,021 Deferred income .......................................... 18,558 86,014 Other liabilities ........................................ 18,403 10,050 ----------- ----------- Total liabilities .............................. 672,253 655,265 ----------- ----------- Commitments and contingencies Stockholders' equity: Preferred stock, par value $.10 per share; 20,000,000 shares authorized; none issued .......... -- -- Common stock, par value $.01 per share; 75,000,000 shares authorized; 47,182,972 and 53,633,015 shares issued and outstanding at December 31, 1997 and June 30, 1998, respectively ....................................... 472 546 Capital in excess of par value ....................... 419,242 508,656 Unrealized loss on marketable securities, net of taxes -- (2,612) Retained earnings .................................... 105,737 139,600 Treasury stock (50,039 shares at December 31, 1997 and 1,048,939 shares at June 30, 1998) ............. (1,038) (18,815) ----------- ----------- Total stockholders' equity ..................... 524,413 627,375 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 1,196,666 $ 1,282,640 =========== ===========
See Accompanying Notes to Interim Consolidated Financial Statements -1- 4 PRIME HOSPITALITY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (In Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended June 30, June 30, 1997 1998 1997 1998 ========= ========= ========= ========= Revenues: Lodging ................................ $ 68,591 $ 100,394 $ 128,628 $ 186,995 Food and beverage ...................... 11,257 14,683 20,706 26,325 Management, franchise and other ........ 4,137 6,521 10,976 9,990 Interest on mortgages and notes receivable ..................... 1,574 1,349 3,303 2,924 --------- --------- --------- --------- Total revenues .................... 85,559 122,947 163,613 226,234 --------- --------- --------- --------- Costs and expenses: Direct hotel operating expenses: Lodging .............................. 16,182 24,122 31,306 44,623 Food and beverage .................... 7,691 10,446 15,656 19,886 Selling and general .................. 16,366 24,052 34,001 46,203 Occupancy and other operating .......... 5,935 13,425 11,728 26,013 General and administrative ............. 5,758 6,399 11,521 12,982 Depreciation and amortization .......... 8,035 19,862 15,724 30,762 --------- --------- --------- --------- Total costs and expenses .......... 59,967 98,306 119,936 180,469 --------- --------- --------- --------- Operating income ........................... 25,592 24,641 43,677 45,765 Investment income .......................... 1,618 725 2,231 1,987 Interest expense ........................... (7,926) (5,701) (12,641) (11,488) Other income ............................... 1,858 18,353 1,858 18,353 --------- --------- --------- --------- Income before income taxes and extraordinary items ................ 21,142 38,018 35,125 54,617 Provision for income taxes ................. 8,627 14,447 14,410 20,754 --------- --------- --------- --------- Income before extraordinary items .......... 12,515 23,571 20,715 33,863 Extraordinary items - Gains on discharges of indebtedness (net of income taxes) ..... 53 -- 75 -- --------- --------- --------- --------- Net income ................................. $ 12,568 $ 23,571 $ 20,790 $ 33,863 ========= ========= ========= ========= Earnings per common share: Basic: Income before extraordinary items ...... $ 0.27 $ 0.45 $ 0.45 $ 0.68 Extraordinary items .................... -- -- -- -- --------- --------- --------- --------- Net earnings ............................... $ 0.27 $ 0.45 $ 0.45 $ 0.68 ========= ========= ========= ========= Diluted: Income before extraordinary items ...... $ 0.24 $ 0.43 $ 0.41 $ 0.63 Extraordinary items .................... -- -- -- -- --------- --------- --------- --------- Net earnings ............................... $ 0.24 $ 0.43 $ 0.41 $ 0.63 ========= ========= ========= =========
See Accompanying Notes to Interim Consolidated Financial Statements -2- 5 PRIME HOSPITALITY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (In Thousands)
1997 1998 ========= ========= Cash flows from operating activities: Net income ....................................... $ 20,790 $ 33,863 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................. 15,724 30,762 Amortization of deferred financing costs ....... 1,335 1,567 Business interruption insurance revenue ........ (6,366) -- Utilization of net operating loss carryforwards ............................... 1,824 3,227 Gains on settlement of notes receivable ........ -- (18,353) Gains on discharges of indebtedness ............ (125) -- Gain on disposal of assets ..................... (1,858) -- Amortization of deferred gain .................. -- (4,329) Increase (decrease) from changes in other operating assets and liabilities: Accounts receivable ......................... (4,049) (5,693) Other current assets ........................ (2,842) 929 Other liabilities ........................... 10,178 2,426 --------- --------- Net cash provided by operating activities ................................. 34,611 44,399 --------- --------- Cash flows from investing activities: Net proceeds from mortgages and notes receivable ..................................... 509 24,605 Disbursements for mortgages and notes receivable ............................... (794) -- Proceeds from sales of property, equipment and leasehold improvements ..................... 6,453 211,236 Construction of new hotels ....................... (137,549) (196,413) Purchases of property, equipment and leasehold improvements ......................... (30,017) (21,058) Net proceeds from insurance settlement ........... -- 3,782 Decrease in restricted cash ...................... 2,772 (5,981) Purchase of marketable securities ................ -- (375) Proceeds from retirement of debt securities ...... 800 -- Other ............................................ (1,369) (3,654) --------- --------- Net cash (used in) provided by investing activities ................................. (159,195) 12,142 --------- --------- Cash flows from financing activities: Net proceeds from issuance of debt ............... 267,254 79,926 Payments of debt ................................. (109,037) (66,354) Purchase of treasury stock ....................... -- (17,777) Proceeds from the exercise of stock options and warrants ................................... 744 2,050 --------- --------- Net cash provided (used in) by financing activities ................................. 158,961 (2,155) --------- --------- Net increase in cash and cash equivalents ........ 34,377 54,386 Cash and cash equivalents at beginning of period . 47,473 5,013 --------- --------- Cash and cash equivalents at end of period ....... $ 81,850 $ 59,399 ========= =========
See Accompanying Notes to Interim Consolidated Financial Statements -3- 6 PRIME HOSPITALITY CORP. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation In the opinion of management, the accompanying interim unaudited consolidated financial statements of Prime Hospitality Corp. and subsidiaries (the "Company" or "Prime") contain all material adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of the Company as of June 30, 1998 and the results of its operations for the three and six months ended June 30, 1997 and 1998 and cash flows for the six months ended June 30, 1997 and 1998. The consolidated financial statements for the three and six months ended June 30, 1997 and 1998 were prepared on a consistent basis with the audited consolidated financial statements for the year ended December 31, 1997. Certain reclassifications have been made to the June 30, 1997 consolidated financial statements to conform them to the June 30, 1998 presentation. The consolidated results of operations for the three and six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the full year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Note 2 - Accounting Policies In April 1998, the Accounting Standards Executive Committee issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" (SOP 98-5) which is required to be adopted in 1999. At that time, the Company will be required to record a cumulative effect of a change in accounting principle to write off any unamortized pre-opening costs that remain on the balance sheet at the date of adoption. Additionally, on a prospective basis subsequent to the adoption of this new standard, all future pre-opening costs will be expensed as incurred. The Company believes that the adoption of SOP 98-5 will not have a material effect on its financial condition or the results of its operations. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) which is effective for fiscal years beginning after June 15, 1999. SFAS 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company has not yet quantified the impact of adopting SFAS 133 on its financial statements, however, the Company expects the impact to be immaterial due to its limited derivative activity. - 4 - 7 Note 3 - Merger On December 1, 1997, the Company merged with HomeGate Hospitality, Inc. ("HomeGate"), a provider of mid-price extended-stay hotels. The transaction was accounted for as a pooling of interests, which required that the historical consolidated statements of operations of the companies be restated on a combined basis without giving effect to operating synergies. Note 4 - Debt On April 17, 1998, the Company's $86.3 million 7% Convertible Notes due 2002 were converted into 7.2 million shares of common stock of the Company at a conversion price of $12 per share. The notes were transferred to stockholders' equity in April 1998. Note 5 - Sale/Leaseback Transactions In January 1998, the Company completed the sale/leaseback of eight full-service hotels to American General Hospitality, Inc. ("American General") for $138.4 million consisting of $114.4 million in cash, $10.2 million in assumed debt and $13.8 million in American General limited partnership operating units. The Company is operating the hotels under a lease agreement with American General which has a term of 10 years. The transaction generated a net gain of approximately $65.0 million which will be recognized as a reduction of rent expense over the life of the lease. The Company has also entered into an agreement to sell and lease back eleven additional full-service hotels to American General not later than March 31, 1999. In June 1998, the Company sold nine AmeriSuites hotels to Equity Inns, Inc. ("Equity Inns") for $97.0 million in cash. The sale is part of an ongoing strategic relationship between the Company and Equity Inns which contemplates the sale of approximately 20 hotels per year. The Company will continue to operate the hotels under a lease agreement between Equity Inns and a subsidiary of the Company for a ten-year term with certain renewal options. The transaction generated a net gain of $15.0 million, which will be recognized as a reduction of rent expense over the life of the lease. The Company will also generate franchise income streams under a ten-year franchise agreement. - 5 - 8 Note 6 - Earnings Per Common Share In 1997, the Company adopted SFAS No. 128, "Earnings per Share," (SFAS 128). Under SFAS 128, primary earnings per share has been replaced by basic earnings per share which excludes any dilutive effects of options, warrants and convertible securities. Fully diluted earnings per share is now called diluted earnings per share and includes a change in applying the treasury stock method. Earnings per share amounts for all prior periods have been restated to conform to the SFAS 128 requirements. Basic earnings per common share was computed based on the weighted average number of common shares outstanding during each period. The weighted average number of common shares used in computing basic earnings per share was 46.5 million and 52.6 million for the three months ended June 30, 1997 and 1998, respectively, and 46.5 million and 49.7 million for the six months ended June 30, 1997 and 1998, respectively. Diluted earnings per share reflects adjustments to basic earnings per share for the dilutive effect of stock options and warrants and the elimination of interest expense and the issuance of additional common shares from the assumed conversion of the 7% convertible subordinated notes. The weighted average number of common shares used in computing diluted earnings per share was 55.7 million and 55.2 million for the three months ended June 30, 1997 and 1998, respectively, and 55.6 million and 55.3 million for the six months ended June 30, 1997 and 1998, respectively. Note 7 - Interest Expense The Company capitalized $3.9 million and $6.6 million for the three months ended June 30, 1997 and 1998, respectively, and $7.7 million and $13.8 million for the six months ended June 30, 1997 and 1998, respectively, of interest related to borrowings used to finance hotel construction. Also included in interest expense is the amortization of deferred financing fees of $764,000 and $742,000 for the three months ended June 30, 1997 and 1998, respectively, and $1.4 million and $1.6 million for the six months ended June 30, 1997 and 1998, respectively. Note 8 - Treasury Stock In December 1997, the Company approved a program to purchase from time to time up to one million shares of its common stock at various prices. The Company completed this common stock purchase program over the six months ended June 30, 1998 at an average price of $17.78 per share. In July 1998, the Company announced that it has authorized the repurchase of an additional two million shares of stock at various prices from time to time. The Company is currently limited to the purchase of approximately 400,000 shares under the terms of its $200 million revolving credit - 6 - 9 facility ("Revolving Credit Facility"). The Company has requested a waiver of those restrictive covenants in order to fully implement its new repurchase program. Note 9 - Comprehensive Income In 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive Income," (SFAS 130). Under SFAS 130, the Company is required to report all changes in equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners in their capacity as owners. For the three and six months ended June 30, 1998, comprehensive income consisted of the following (in thousands):
Three Months Ended Six Months Ended June 30, 1997 June 30, 1998 June 30, 1997 June 30, 1998 ------------- ------------- ------------- ------------- Net income $ 12,568 $ 23,571 $ 20,790 $ 33,863 Unrealized loss on marketable securities; net of taxes -- (2,612) -- (2,612) -------- -------- -------- -------- Total $ 12,568 $ 20,959 $ 20,790 $ 31,251 ======== ======== ======== ========
Note 10- Depreciation and Amortization During the quarter, the Company established a $10 millions valuation reserve recorded as part of depreciation and amortization expense, related to the expected sale of seven non-prototype HomeGate hotels. In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," the Company has reduced the carrying value of the assets to reflect current market conditions. Note 11- Other Income Other income consists of property transactions and other assets sales and retirements. For the six months ended June 30, 1997, other income consisted of net gains on property transactions of $1.9 million. For the six months ended June 30, 1998 other income consisted of gains on the settlement of notes receivable of $18.4 million. - 7 - 10 PART I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. GENERAL The Company is an owner, manager and franchisor of hotels throughout the United States and the U.S. Virgin Islands. The Company operates three proprietary brands, AmeriSuites (all-suites), HomeGate Studios & Suites (extended-stay) and Wellesley Inns (limited service). Also within its portfolio are owned and/or managed hotels operated under franchise agreements with national hotel chains. As of July 31,1998, the Company owned 124 hotels (the "Owned Hotels"), operated 28 hotels under lease agreements with real estate investment trusts (the "Leased Hotels") and managed 10 hotels for third parties (the "Managed Hotels"). The Company has significant equity interests in the Owned Hotels and has economic interests limited to a percentage of revenue (generally between 2.5% to 5.0%) on the Leased Hotels and the Managed Hotels. The Company consolidates the results of operations of its Owned Hotels and Leased Hotels and records management fees (including incentive management fees) and interest income, where applicable, on the Managed Hotels. The Company's strategy is to develop proprietary brands in growing market segments. The Company's growth focuses on the new construction of AmeriSuites and HomeGate hotels which are being developed both directly by the Company and by franchisees. Through the development of its proprietary brands, the Company is transforming itself from an owner/operator into a franchisor and manager of quality brands. As a result, the Company is also reducing its dependence on investment in real estate which is more cyclical and capital intensive. On December 1, 1997, the Company completed its merger with Homegate Hospitality, Inc. ("HomeGate"), a provider of mid-price extended-stay hotels. The transaction was accounted for as a pooling of interests which required that the historical consolidated statements of operations of the companies be restated on a combined basis without giving effect to operating synergies. For the three and six months ended June 30, 1998, earnings from recurring operations increased by 61% and 47%, respectively, over the same periods in 1997. The earnings gains result from strong growth in revenue per available room ("REVPAR") and profit margins at comparable Owned Hotels, and significant new AmeriSuites unit growth. For the comparable Owned Hotels, REVPAR increased by 8.8% and 8.0% for the three and six month periods, respectively. The combination of strong REVPAR increases and effective expense controls resulted in increases in gross operating profits of 10.6% and 11.2% for the three and six month periods and improvements in gross operating margins from 49.5% to 50.5% for the three month period and from 47.0% to 48.5% for the six month period. The earnings growth was also favorably affected by the net addition of 66 hotels since January 1, 1997, primarily through the development of new AmeriSuites hotels. - 8 - 11 Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 32.3% to $44.5 million for the three months ended June 30, 1998 and by 28.8 % to $76.5 million for the six months ended June 30, 1998. Hotel EBITDA increased by 24.2% to $43.3 million for the three month period and by 25.9% to $78.6 million for the six month period. Hotel EBITDA represents EBITDA generated from the operations of Owned Hotels and excludes management fee income, interest income from mortgages and notes receivable, general and administrative expenses and other revenues and expenses which do not directly relate to the operations of Owned Hotels. The Company's hotels operate in four segments of the industry: the upscale all-suites segment, under the Company's proprietary AmeriSuites brand; the mid-price extended-stay segment under the Company's proprietary HomeGate Studios & Suites brand; the upscale full-service segment, under major national franchises; and the midprice limited-service segment, primarily under the Company's proprietary Wellesley Inns brand. The following table illustrates the Hotel EBITDA contribution from each segment (in thousands):
Three Months Ended June 30, Six Months Ended June 30, 1997 1998 1997 1998 ---- ---- ---- ---- Amount % of Total Amount % of Total Amount % of Total Amount % of Total ------- ---------- ------- ---------- ------- ---------- ------- ---------- All-suites .......... $14,286 41.3 $22,494 51.9% $22,964 36.8% $39,214 49.9% Full-service ........ 14,727 42.6 13,678 31.6% 26,779 42.9% 23,872 30.4% Limited-service ..... 5,236 15.1 5,033 11.6% 12,061 19.3% 11,945 15.2% Extended-Stay ....... 323 1.0 2,123 4.9% 603 1.0% 3,585 4.5% ------- ----- ------- ----- ------- ----- ------- ----- Total ..... $34,572 100.0% $43,328 100.0% $62,407 100.0% $78,616 100.0% ======= ===== ======= ===== ======= ===== ======= =====
Hotel EBITDA for the three and six months ended June 30, 1998 reflects the shifting mix in the Company's hotel portfolio toward its proprietary AmeriSuites brand. Based on the Company's development plans, Prime expects the relative contribution from its all-suites AmeriSuites hotels and extended-stay HomeGate hotels to increase in 1998 with the full-service hotels' percentage contribution declining. EBITDA and Hotel EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered as alternatives to net income as an indicator of the Company's operating performance or as alternatives to cash flows as a measure of liquidity. Certain statements in this Form 10-Q constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. - 9 - 12 Results of Operations For the Three and Six Months Ended June 30, 1998 Compared to the Three and Six Months Ended June 30, 1997 The following table presents the components of operating income, operating expense margins and other data for the Company and the Company's comparable Owned Hotels for the three and six months ended June 30, 1997 and 1998. The results of the seven hotels divested during 1997 and 1998 are not material to an understanding of the results of the Company's operations in such periods and, therefore, are not separately discussed.
Comparable Owned Total Hotels(2) Three Months Ended Three Months Ended June 30, June 30, 1997 1998 1997 1998 ---- ---- ---- ---- (In thousands, except ADR and REVPAR) Income Statement Data: Revenues: Lodging............................................ $ 68,591 $100,394 $48,488 $52,542 Food and beverage.................................. 11,257 14,683 6,823 7,443 Management, franchise and other.................... 4,137 6,521 Interest on mortgages and notes receivable 1,574 1,349 -------- -------- Total revenues............................. 85,559 122,947 -------- -------- Direct hotel operating expenses: Lodging............................................ 16,182 24,122 11,571 12,418 Food and beverage.................................. 7,691 10,446 4,924 5,546 Selling and general................................ 16,366 24,052 11,191 11,728 Occupancy and other operating........................ 5,935 13,425 General and administrative........................... 5,758 6,399 Depreciation and amortization........................ 8,035 19,862 -------- -------- Total costs and expenses................... 59,967 98,306 -------- -------- Operating income..................................... 25,592 24,641 Operating Expense Margins: Direct hotel operating expenses: Lodging, as a percentage of lodging revenue 23.6% 24.0% 23.9% 23.6% Food and beverage, as a percentage of food and beverage revenue................................ 68.3% 71.1% 72.2% 74.5% Selling and general, as a percentage of lodging and food and beverage revenue 20.5% 20.9% 20.2% 19.6% Occupancy and other operating, as a percentage of lodging and food and beverage revenue 7.4% 11.7% General and administrative, as a percentage of total revenue...................................... 6.7% 5.2% Other Data(1): Occupancy............................................ 72.4% 68.0% 74.7% 74.4% Average daily rate ("ADR")........................... $ 70.51 $ 78.51 $ 73.57 $ 80.32 Revenue per available room ("REVPAR")................ $ 51.04 $ 53.37 $ 54.95 $ 59.77 Gross operating profit............................... $39,609 $56,457 $27,625 $29,116
(1) For purposes of showing operating trends, the seven hotels divested in 1997 have been excluded from the other data section of the tables. (2) Comparable Owned Hotels refers to the 72 Owned Hotels which were open for the full period in both 1997 and 1998 excluding the Frenchman's Reef, which was impacted by hurricane damage. - 10 - 13
Comparable Owned Total Hotels(2) Six Months Ended Six Months Ended June 30, June 30, 1997 1998 1997 1998 ---- ---- ---- ---- (In thousands, except ADR and REVPAR) Income Statement Data: Revenues: Lodging............................................. $ 128,628 $186,995 $77,986 $83,865 Food and beverage................................... 20,706 26,325 10,577 11,584 Management, franchise and other..................... 10,976 9,990 Interest on mortgages and notes receivable.......... 3,303 2,924 -------- -------- Total revenues.............................. 163,613 226,234 -------- -------- Direct hotel operating expenses: Lodging............................................. 31,306 44,623 19,171 20,185 Food and beverage................................... 15,656 19,886 8,198 9,115 Selling and general................................. 34,001 46,203 19,528 19,830 Occupancy and other operating......................... 11,728 26,013 General and administrative............................ 11,521 12,982 Depreciation and amortization......................... 15,724 30,762 -------- -------- Total costs and expenses.................... 119,936 180,469 -------- -------- Operating income...................................... 43,677 45,765 Operating Expense Margins: Direct hotel operating expenses: Lodging, as a percentage of lodging revenue 24.3% 23.9% 24.6% 24.1% Food and beverage, as a percentage of food and beverage revenue................................. 75.6% 75.5% 77.5% 78.7% Selling and general, as a percentage of lodging and food and beverage revenue 22.8% 21.7% 22.0% 20.8% Occupancy and other operating, as a percentage of lodging and food and beverage revenue 7.9% 12.2% General and administrative, as a percentage of total revenue....................................... 7.0% 5.7% Other Data(1): Occupancy............................................. 66.2% 64.5% 69.7% 69.7% Average daily rate ("ADR")............................ $ 72.74 $ 80.39 $ 73.70 $ 79.54 Revenue per available room ("REVPAR")................. $ 48.15 $ 51.82 $ 51.34 $ 55.43 Gross operating profit................................ $68,371 $102,608 $41,666 $46,317
(1) For purposes of showing operating trends, the seven hotels divested in 1997 have been excluded from the other data section of the tables. (2) Comparable Owned Hotels refers to the 63 Owned Hotels which were open for the full period in both 1997 and 1998 excluding the Frenchman's Reef, which was impacted by hurricane damage. - 11 - 14 Lodging revenues, which include room revenues and other related revenues such as telephone and vending, increased by $31.8 and $58.4 million, or 46.4% and 45.4%, respectively, for the three and six months ended June 30, 1998, as compared to the same periods in 1997. Lodging revenues for the three months ended June 30, 1998 increased due to incremental revenues of $27.7 million from new hotels and higher revenues for comparable Owned Hotels, which increased by $4.1 million, or 8.4%. Lodging revenues for the six months ended June 30, 1997 increased due to incremental revenues of $54.5 million from new hotels and higher revenues for comparable Owned Hotels, which increased by $5.9 million or 7.5%. The reopening of the Frenchmen's Reef, which was closed for renovations from April 1997 to December 1997, accounted for increases of $4.5 million and $7.9 million respectively, for the three and six months ended June 30, 1998 as compared to the same periods in 1997. The following table sets forth hotel operating data for the comparable Owned Hotels for the three and six months ended June 30, 1998 as compared to the same periods in 1997, by product type:
Three Months Ended June 30, Six Months Ended June 30, 1997 1998 %Change 1997 1998 %Change ---- ---- ------- ---- ---- ------- AmeriSuites Occupancy 70.6% 74.0% 67.2% 69.5% ADR $76.73 $81.90 $74.88 $79.69 REVPAR $54.14 $60.57 11.9% $50.35 $55.37 10.0% Full-Service Occupancy 78.8% 77.9% 68.6% 68.7% ADR $90.79 $101.13 $89.16 $98.52 REVPAR $71.57 $78.77 10.1% $61.14 $67.71 10.8% Wellesley Inns Occupancy 77.1% 72.6% 73.3% 71.3% ADR $54.67 $59.09 $61.25 $64.87 REVPAR $42.13 $42.88 1.8% $44.89 $46.25 3.0% Total Occupancy 74.7% 74.4% 69.7% 69.7% ADR $73.57 $80.32 $73.70 $79.54 REVPAR $54.95 $59.77 8.8% $51.34 $55.43 8.0%
The Company achieved solid revenue growth in all of its industry segments. The REVPAR increases reflect the growing recognition of AmeriSuites as a - 12 - 15 leading brand in the fast-growing all-suites segment and favorable industry trends in the full service segment with concentration in the Northeast. The improvements in REVPAR at comparable Owned Hotels were generated by increases in ADR, which rose by 9.2% and 7.9%, for the three and six month periods. Occupancy was relatively stable at approximately 74% for the three month period and approximately 70% for the six month period. Food and beverage revenues increased by $3.4 million and $5.6 million, or 30.4% and 27.1%, respectively, for the three and six months ended June 30, 1998 as compared to the same periods in 1997 primarily attributable to increases of $2.8 million and $4.4 million, respectively, for the three and six month periods at the Frenchmen's Reef. Food and beverage revenues for comparable Owned Hotels increased by $620,000 and $1.0 million, or 9.1% and 9.5%, respectively, for the three and six months periods, due to increased banquet business. Management, franchise and other revenue consists primarily of base, incentive and other fees earned under management agreements, royalty fees earned under franchise agreements, business interruption insurance revenue related to hurricane damage at the Frenchman's Reef, and rental income. Management, franchise and other revenue increased by $2.4 million, or 57.6%, for the three months ended June 30, 1998 as compared to the same period in 1997 due to increased fees associated with the Managed Hotels, franchise royalty fees derived from the sale of hotels in December 1997 and increased business interruption insurance revenue. Management, franchise and other revenue decreased by $1.0 million, or 9.0%, for the six months ended June 30, 1998 as compared to the same period in 1997 primarily due to lower business interruption insurance revenue. Business interruption insurance revenue is based on the settlement in March 1998 of the Company's claim related to the damage at the Frenchmen's Reef caused by Hurricane Bertha in July 1996. The Company expects franchise revenues to increase as a result of several franchise initiatives implemented by the Company including the formation of a franchise sales team. The Company has also received the necessary statutory approvals to begin franchising AmeriSuites and expects to begin franchising HomeGates and Wellesley Inns by the end of August. Interest on mortgages and notes receivable primarily relate to mortgages secured by certain Managed Hotels. Interest on mortgages and notes receivable decreased by $225,000 and $379,000 or 14.3% and 11.5%, respectively, for the three and six months ended June 30, 1998 as compared to the same period in 1997 primarily due to conversions of notes receivable into operating hotel assets. Direct lodging expenses increased by $7.9 million and $13.3 million, or 49.1% and 42.5%, respectively, for the three and six months ended June 30, 1998 as compared to the same periods in 1997 due primarily to the addition of new hotels. Direct lodging expenses, as a percentage of lodging revenue were relatively even, increasing from 23.6% to 24.0% for the three month period and decreasing from 24.3% to 23.9% for the six month period. For comparable Owned Hotels, direct lodging expenses as a percentage of lodging revenues decreased from 23.9% to 23.6% for the three month period and from 24.6% to 24.1% for the six month period primarily due to ADR increases and lower corresponding increases in expenses. - 13 - 16 Direct food and beverage expenses for the three and six months ended June 30, 1998 increased by $2.8 million and $4.2 million, or 35.8% and 27.0% respectively, as compared to the same periods in 1997 primarily due to the Frenchman's Reef reopening. As a percentage of food and beverage revenues, direct food and beverage expenses increased from 68.3% to 71.1% for the three month period and decreased from 75.6% to 75.5% for the six month period. For comparable Owned Hotels, food and beverage expenses as a percentage of food and beverage revenues increased from 72.2% to 74.5% for the three month period and from 77.5% to 78.7% for the six month period. The increases were primarily due to the impact of the Frenchman's Reef. . Direct hotel selling and general expenses consist primarily of hotel expenses for Owned Hotels which are not specifically allocated to rooms or food and beverage activities, such as administration, selling and advertising, utilities, repairs and maintenance. Direct hotel selling and general expenses increased by $7.7 million and $12.2 million, or 47.0% and 35.9%, respectively, for the three and six months ended June 30, 1998 as compared to the same periods in 1997 due primarily to the addition of new hotels. As a percentage of hotel revenues (defined as lodging and food and beverage revenues), direct hotel selling and general expenses increased from 20.5% to 20.9% for the three month period due to increased expenses at the Frenchmen's Reef. For the six month period, direct hotel selling and general expenses as a percentage of hotel revenue decreased from 22.8% to 21.7%. For the comparable Owned Hotels, direct hotel selling and general as a percentage of hotel revenues decreased from 20.2% to 19.6% for the three month period and from 22.0% to 20.8% for the six month period. The decreases in the total and comparable expense margins were primarily due to ADR improvements, effective expense controls and decreases in weather-related costs. Occupancy and other operating expenses consist primarily of insurance, real estate and other taxes and rent expense. Occupancy and other operating expenses increased by $7.5 million and $14.3 million, or 126.2% and 121.8%, respectively, as compared to the same periods in 1997 due to the rent expense associated with the sale/leaseback of hotels to American General and Equity Inns and the addition of new hotels. Occupancy and other operating expenses as a percentage of hotel revenues increased from 7.4% to 11.7% for the three month period and from 7.9% to 12.2% for the six month period due to rent expense associated with the sale/leasebacks. Occupancy and other operating expenses are expected to continue to increase as the Company plans to sell and leaseback additional hotels. General and administrative expenses consist primarily of centralized management expenses such as operations management, sales and marketing, finance and hotel support services associated with operating both the Owned Hotels and Managed Hotels and general corporate expenses. General and administrative expenses increased by $641,000 and $1.5 million, or 11.1% and 12.7%, respectively, for the three and six months ended June 30, 1998 as compared to the same periods in 1997 due to increased advertising, personnel and training costs associated with opening the new AmeriSuites hotels. As a percentage of total revenues, general and administrative expenses decreased from 6.7% to 5.2% for the three month period and from 7.0% to 5.7% for the six month period due to increased operating leverage. - 14 - 17 Depreciation and amortization expense increased by $11.8 million and $15.0 million, or 147.2% and 95.6%, respectively, for the three and six months ended June 30, 1998 as compared to the same periods in 1997 due to the impact of new hotel properties and a valuation reserve of $10 million related to the intended disposition of seven non-prototype HomeGate hotels. Investment income decreased by $893,000 and $244,000, or 55.2% and 10.9%, respectively, for the three and six months ended June 30, 1998 as compared to the same periods in 1997 due to changes in the weighted average cash balances. Interest expense decreased by $2.2 million and $1.2 million, or 28.1% and 9.1%, respectively, for the three and six months ended June 30, 1998 as compared to the same periods in 1997 primarily due to a favorable interest rate environment and capitalized interest related to new hotels. The Company capitalized interest of $3.9 million and $6.6 million for the three months ended June 30, 1997 and 1998, and $7.7 million and $13.8 million for the six months ended June 30, 1997 and 1998. Other income consists of property transactions and other asset sales and retirements. For the six months ended June 30, 1997, other income consisted of net gains on property transactions of $1.9 million. For the six months ended June 30, 1998 other income consisted of gains on the settlement of notes receivable of $18.4 million. Liquidity and Capital Resources Prime's external growth focuses on the accelerated expansion of its proprietary AmeriSuites and HomeGate brands through new construction both directly by the Company and by franchisees. As of July 31, 1998, Prime had 74 AmeriSuites and 20 HomeGates in operation, (excluding seven hotels the Company intends to divest), with plans to have a total of 90 to 95 AmeriSuites and 30 to 35 HomeGates opened by the end of 1998. Prime believes that it has access to sufficient resources to implement its planned expansion of the AmeriSuites and HomeGate brands, including capital from the following sources: (i) borrowing availability under the Company's Revolving Credit Facility; (ii) proceeds from sales of properties including sale/ leaseback transactions and; (iii) internally generated cash flow. The Company may also from time to time seek additional debt or equity financing. At June 30, 1998, the Company had cash, cash equivalents and current marketable securities of $78.9 million. In addition, at June 30, 1998, the Company had $159.4 million available under the Revolving Credit Facility. The Company's major sources of cash for the six months end June 30, 1998 were net proceeds from the sale/leaseback of hotels of $210.3 million, borrowings under the Revolving Credit Facility of $57.5 million and cash flow from operations of $44.4 million. The Company's major uses of cash during the period were capital expenditures of $217.5 million relating primarily to the development of new hotels and debt repayments of $66.4 million. - 15 - 18 For the six months ended June 30, 1997 and 1998, cash flow from operations was positively impacted by the utilization of net operating loss carryforwards ("NOLs") and other tax basis differences of $1.8 million and $3.2 million, respectively. At June 30, 1998, the Company had federal NOLs relating primarily to its predecessor, Prime Motor Inns, Inc. ("PMI"), of approximately $75.1 million which are subject to annual utilization limitations and expire beginning in 2005 and continuing through 2007. Sources of Capital. The Company has undertaken a strategic initiative to dispose of significant hotel real estate and to invest the proceeds in the growth of its proprietary brands. As part of this initiative, Prime has entered into two strategic alliances with real estate investment trusts ("REITs"). In January 1998, the Company completed the sale/leaseback of eight full-service hotels to American General for $138.4 million, consisting of $114.4 million in cash, $10.2 million in assumed debt and $13.8 million in American General limited partnership operating units. Prime is operating the hotels under a lease agreement with American General which has a term of 10 years. The sale is the first phase of a transaction which also includes the sale and leaseback of nine additional full-service hotels to American General not later than March 31, 1999. In June 1998, the Company agreed to sell and lease back nine AmeriSuites to Equity Inns for $97.0 million in cash. The sale is part of an ongoing strategic relationship between the Company and Equity Inns, which contemplates the sale of approximately 20 AmeriSuites per year. The Company will continue to operate the hotels under a ten-year lease agreement and will also generate franchise income streams under a ten-year franchise agreement. During the quarter, the common stock prices of publicly traded REITs declined to an extent which may impact their ability to raise equity capital. In the event that the capital constraints cause REITs to reduce their hotel acquisitions, the Company intends to finance its development through the sale of properties to private sources including key franchisees or through the issuance of debt. The Company's business plan also calls for the reduction of AmeriSuites capital requirements by transferring certain corporate development sites to franchisees. The Company has a $200.0 million Revolving Credit Facility which bears interest at LIBOR plus 2%. The facility is available through 2001 and may be extended for an additional year. Borrowings under the facility are secured by certain of the Company's hotels with recourse to the Company. Additional properties may be added subject to the approval of the lenders. Availability under the facility is subject to a borrowing base test and certain other covenants. As of July 31, 1998, the Company had outstanding borrowings of $40.6 million under the facility and further availability of $159.4 million. Uses of Capital. The Company's capital spending is focused primarily on the development of its AmeriSuites and HomeGate hotel chains. For the six months ended June 30, 1998, the - 16 - 19 Company spent $108.7 million on new construction of AmeriSuites and $87.7 million on new construction of HomeGates. The Company expects to spend a total of approximately $500 million on development of new hotels in 1998 to be funded by borrowings under the Revolving Credit Facility, the sales of hotels and internally generated cash flow. On March 12, 1998, the Company settled its insurance claim for $16.4 million related to damage at the Frenchman's Reef caused by Hurricane Bertha in July 1996. The Company had previously received $2.5 million in 1997 and received the remaining amount, net of deductibles, in April 1998. For the six months ended June 30, 1998, the Company spent approximately $21.1 million on capital improvements at its Owned Hotels of which approximately $8.3 million related to the refurbishment of the Frenchman's Reef. In December 1997, the Company approved a program to purchase from time to time up to one million shares of its common stock at various prices. The Company completed this common stock purchase program over the six months ended June 30, 1998 at an average price of $17.78 per share. In July 1998, the Company also announced that it has authorized the repurchase of an additional two million shares of stock at various prices from time to time. The Company is currently limited to the purchase of approximately 400,000 shares under the terms of its $200 million Revolving Credit Facility. The Company has requested a waiver of these restrictive covenants in order to fully implement its new repurchase program. On April 17, 1998, the Company's $86.3 million 7% Convertible Notes due 2002 were converted into 7.2 million shares of common stock of the Company at a conversion price of $12 per share. In order to facilitate future tax-deferred exchanges of hotel properties, the Company from time to time enters into arrangements with an unaffiliated third party under Section 1031 of the Internal Revenue Code of 1986, as amended. As of June 30, 1998, the Company had advances of approximately $104.4 million to such third party which advances are classified as property, equipment and leasehold improvements. The Company has preliminarily reviewed its systems and equipment as it relates to year 2000 compliance. Based on this assessment, the Company believes that its systems will be year 2000 compliant no later than December 1999 and that the cost of compliance is not expected to be material to its cash flows, financial condition or results of operations. - 17 - 20 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting of stockholders on May 13, 1998 (the "Annual Meeting"). The Company's stockholders were asked to take the following actions at the meeting: (1) Elect two Class III Directors to serve until the 2001 annual meeting of stockholders or until their successors shall otherwise be elected (the "Board Proposal"); (2) Approve an amendment to the Company's 1995 Employee Stock Option Plan to (1) increase the number of shares of common stock that may be issued pursuant to the exercise of options to purchase common stock and (ii) increase the total number of shares of common stock with respect to which options may be granted to any one individual during any calendar year (the "Incentive Plan Proposal"); (3) Approve an amendment to the Company's 1995 Non-Employee Director Stock Option Plan to (i) allow for the discretionary grants of options and (ii) modify the termination and amendment provisions thereof (the "Stock Purchase Plan Proposal"); and (4) Ratify the Board of Directors' selection of Arthur Andersen LLP to serve as the Company's independent auditors for the fiscal year ending December 31,1998 (the "Auditors Proposal"). With respect to the Board Proposal, the two individuals nominated for director were both elected by the affirmative vote of a majority of shares of common stock present at the Annual Meeting. The nominees and the votes received by each are as follows: FOR WITHHELD --- ------- Howard M. Lorber 36,968,390 350,590 A. F. Petrocelli 36,833,581 485,399 The Incentive Plan Proposal, Stock Purchase Plan Proposal and Auditors Proposal were also approved by affirmative vote of a majority of shares of common stock present at the Annual Meeting. Each of the proposals received the following votes: FOR AGAINST ABSTENTIONS --- ------- ----------- Incentive Plan Proposal 35,948,506 1,276,982 93,492 Stock Purchase Plan Proposal 31,517,579 5,699,769 101,632 Auditors Proposal 37,287,737 14,168 17,075 - 18 - 21 Item 6. Exhibits and Reports on Form 8-K. (a) 10.1 Purchase and Sale Agreement between Prime Hospitality Corp., as seller, and Equity Inns Partnership, L.P., as purchaser, dated June 26, 1998. 11 Computation of Earnings Per Share 27 Financial Data Schedule - 19 - 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PRIME HOSPITALITY CORP. Date: August 12, 1998 By: /s/ David A. Simon ---------------------------- David A. Simon, President and Chief Executive Officer Date: August 12, 1998 By: /s/ John M. Elwood ---------------------------- John M. Elwood, Executive Vice President and Chief Financial Officer - 20 - EX-10.1 2 PURCHASE AND SALE AGREEMENT 1 Exhibit 10.1 PURCHASE AND SALE AGREEMENT BETWEEN PRIME HOSPITALITY CORP., as Seller, and EQUITY INNS PARTNERSHIP, L.P., as Purchaser April __, 1998 2 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS.........................................................1 1.1. Affiliate:.......................................................1 1.2. Agreement........................................................1 1.2A Alliance Agreement...............................................1 1.3. Allocable Purchase Price.........................................2 1.4. Assets...........................................................2 1.5. Business Day.....................................................2 1.6. Closing..........................................................2 1.7. Closing Date.....................................................2 1.8. Code.............................................................2 1.9. Contracts........................................................2 1.10. Counter-Offer...................................................2 1.11. Defective Property..............................................2 1.12. Deposit.........................................................2 1.13. Documents.......................................................2 1.14. Encumbrance.....................................................2 1.15. Escrow Agent....................................................2 1.16. Escrow Agreement................................................2 1.17. FF&E............................................................2 1.18. [Intentionally deleted.]........................................3 1.19. [Intentionally deleted.]........................................3 1.20. Hotel...........................................................3 1.21. Improvements....................................................3 1.22. Intangible Property.............................................3 1.23. Inventory.......................................................3 1.24. Lease...........................................................3 1.25. LP Agreement....................................................4 1.26. [Intentionally deleted.]........................................4 1.27. [Intentionally deleted.]........................................4 1.28. [Intentionally deleted.]........................................4 1.29. [Intentionally deleted.]........................................4 1.30. [Intentionally deleted.]........................................4 1.31. [Intentionally deleted.]........................................4 1.32. Permitted Encumbrances..........................................4 1.33. Properties......................................................4 1.34. Purchase Price..................................................4 1.35. Purchaser.......................................................4 1.36. Real Property...................................................4 1.37. Registration Rights Agreement...................................5 1.38. REIT............................................................5 (i) 3 1.39. Review Period...................................................5 1.40. Seller..........................................................5 1.41. Seller Group....................................................5 1.42. Seller's knowledge..............................................5 1.43. Surveys.........................................................5 1.44. Tenant..........................................................5 1.45. Title Commitments...............................................5 1.46. Title Company...................................................5 SECTION 2. PURCHASE AND SALE; DILIGENCE........................................5 2.1. Purchase and Sale................................................5 2.2. Deposit..........................................................5 2.3. Diligence Inspections............................................6 2.4. Casualty; Condemnation...........................................7 2.5. Title Matters....................................................7 2.6. Survey Matters..................................................8 2.7. [Intentionally Deleted.].........................................9 2.8. Allocations; Radius Restrictions.................................9 2.9. Outparcels.......................................................9 SECTION 3. CLOSING; PURCHASE PRICE............................................10 3.1. Closing.........................................................10 3.2. Purchase Price..................................................10 SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE......................10 4.1. Closing Documents...............................................10 4.2. Condition of Properties.........................................11 4.3. Title Policies..................................................12 4.4. Opinions of Counsel.............................................12 4.5. No PIP Requirement at Closing...................................12 4.6. Representations.................................................12 SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.........................12 5.1. Purchase Price..................................................12 5.2. Closing Documents...............................................12 5.3. Opinion of Counsel..............................................12 5.4. Representations.................................................13 5.5. Amendment to LP Agreement.......................................13 SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER...........................13 6.1. Status and Authority of Seller..................................13 6.2. Action of Seller................................................13 (ii) 4 6.3. No Violations of Agreements.....................................13 6.4. Litigation......................................................13 6.5. Existing Leases, Agreements, Etc................................13 6.6. Utilities, Etc..................................................14 6.7. Compliance With Law.............................................14 6.8. Taxes...........................................................14 6.9. Not A Foreign Person............................................14 6.10. Hazardous Substances...........................................14 6.11. Insurance......................................................15 6.12. Ownership......................................................15 SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER........................15 7.1. Status and Authority of Purchaser...............................15 7.2. Action of Purchaser.............................................16 7.3. No Violations of Agreements.....................................16 7.4. Litigation......................................................16 7.5. [Intentionally deleted.]........................................16 7.6. [Intentionally deleted.]........................................16 7.7. [Intentionally deleted.]........................................16 SECTION 8. COVENANTS OF SELLER AND PURCHASER..................................16 8.1. Covenants of Seller.............................................16 8.2. Covenants of Purchaser..........................................17 SECTION 9. CLOSING COSTS AND PRORATIONS.......................................17 9.1. Closing Costs...................................................17 9.2. Income and Expense Allocations..................................17 SECTION 10. DEFAULT...........................................................18 10.1. Default by Seller..............................................18 10.2. Default by Purchaser...........................................19 SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL..........................19 SECTION 12. MISCELLANEOUS.....................................................19 12.1. Agreement to Indemnify.........................................19 12.2. Brokerage Commissions..........................................20 12.3. Publicity......................................................20 12.4. Notices........................................................20 12.5. Waivers, Etc...................................................21 12.6. Assignment; Successors and Assigns.............................21 (iii) 5 12.7. Severability...................................................22 12.8. Counterparts, Etc..............................................22 12.9. Governing Law..................................................22 12.10. Performance on Business Days..................................23 12.11. Attorneys' Fees...............................................23 12.12. Section and Other Headings....................................23 12.13. No Oral Modifications.........................................23 Exhibit A - The Properties Exhibits B-1-10 - Legal Descriptions Exhibit C - Form of Lease Exhibit D - Exceptions to Seller Representations and Warranties Exhibit E - Schedule of Agreements (iv) 6 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT, dated as of April __, 1998, between PRIME HOSPITALITY CORP., a Delaware corporation ("Seller"), as seller, and EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership ("Purchaser"), as purchaser. WITNESSETH: WHEREAS, the Seller and the Purchaser entered into an alliance under the Purchase and Sale Agreement dated as of September 22, 1997, as amended and restated by Amended and Restated Purchase and Sale Agreement dated as of December 2, 1997 (the "Alliance Agreement"); and WHEREAS, Seller is the owner and holder of the Properties (as defined herein); and WHEREAS, Purchaser desires to purchase the Properties, as more fully set forth below; and WHEREAS, Seller is willing to sell the Properties to Purchaser, subject to and upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Agreement shall have the meanings set forth below or in the Section of this Agreement referred to below: 1.1. Affiliate: The term "Affiliate" of an entity shall mean (a) an The term "Affiliate" of an entity shall mean (a) an entity that, directly or indirectly, controls or is controlled by or is under common control with such entity, (b) any other entity that owns, beneficially, directly or indirectly, more than fifty percent (50%) of the outstanding capital stock, shares or equity interests of such entity, or (c) any officer, director, employee, partner or trustee of such entity or any person or entity controlling, controlled by or under common control with such entity (excluding trustees and entities serving in similar capacities who are not otherwise an Affiliate of such entities). 1.2. "Agreement" shall mean this Purchase and Sale Agreement, together with the Exhibits attached hereto or otherwise incorporated herein by reference, as it and they may be amended from time to time as herein provided. 1.2A "Alliance Agreement" shall have the meaning ascribed in the Recitals to this Agreement. 7 1.3. "Allocable Purchase Price" shall mean, with respect to any of the Properties, the applicable amount set forth on Exhibit A hereto, it being agreed that, prior to the expiration of the Review Period, Seller and Purchaser shall, on request of the other party, use good faith efforts to agree to a reasonable reallocation of such specified amounts. 1.4. "Assets" shall mean, with respect to any Hotel, collectively, all of the Real Property, the FF&E, the Contracts, the Documents, the Improvements and the Intangible Property owned by Seller in connection with or relating to such Hotel. 1.5. "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which banking institutions in the State of New York are authorized by law or executive action to close. 1.6. "Closing" shall have the meaning given such term in Section 3.1. 1.7. "Closing Date" shall have the meaning given such term in Section 3.1. 1.8. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the treasury regulations promulgated thereunder. 1.9. "Contracts" shall mean, with respect to any Property, all service contracts, equipment leases, booking agreements and other arrangements or agreements to which Seller is a party affecting the ownership, repair, maintenance, management, leasing or operation of such Property, to the extent Seller's interest therein is assignable or transferable. 1.10. "Counter-Offer" shall have the meaning given such term in Section 11.1. 1.11. "Defective Property" shall mean any Property which (i) has been condemned in whole or in part, or (ii) by reason of damage by fire, vandalism, acts of God or other casualty or cause, has suffered damage such that expenditures equal to or greater than $500,000 (as such cost is determined by an architect or engineer selected by Seller and reasonably satisfactory to Purchaser) shall be required in order to restore such Property into substantially the same condition as existing prior to such damage. 1.12. "Deposit" shall have the meaning given such term in Section 2.2. 1.13. "Documents" shall mean, with respect to any Property, all books, records and files relating to the leasing, maintenance, management or operation of such Property. 1.14. "Encumbrance" shall have the meaning given such term in Section 11.3. 1.15. "Escrow Agent" shall mean the Title Company. 1.16. "Escrow Agreement" shall mean the escrow agreement to be entered into among Purchaser, Seller and Escrow Agent simultaneously herewith. - 2 - 8 1.17. "FF&E " shall mean, with respect to any Property, all appliances, machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings and articles of tangible personal property of every kind and nature whatsoever owned by Seller and located in or at, or used exclusively in connection with the ownership, operation or maintenance of such Property. 1.18. [Intentionally deleted.] 1.19. [Intentionally deleted.] 1.20. "Hotel" shall mean each hotel located at the properties identified on Exhibit A, the legal descriptions of which are set forth on Exhibits B-1 through B-10. 1.21. "Improvements" shall mean, with respect to any Property, all buildings, fixtures, walls, fences, landscaping and other structures and improvements situated on, affixed or appurtenant to the Real Property with respect to such Property. 1.22. "Intangible Property" shall mean, with respect to any Property, all transferable or assignable permits, certificates of occupancy, operating permits, sign permits, development rights and approvals, certificates, licenses, warranties and guarantees, the Contracts, telephone exchange numbers identified with such Property held by Seller and all other transferable intangible property, miscellaneous rights, benefits and privileges of any kind or character with respect to such Property held by Seller, except (a) to the extent held by or transferred to the Tenant under the Lease and (b) for all trademarks, trade names, copyrights, patents or technical processes, including, without limitation, any "AmeriSuites" brand name, logos and designs, owned or used by Seller with respect to such Property. 1.23. "Inventory " shall mean all inventory located at the Hotels, including, without limitation, all mattresses, pillows, bed linens, towels, powder goods, soaps, cleaning supplies and such other supplies, together with any food inventory such as cereal, breakfast rolls, coffee, which shall be more particularly described in the schedule of Inventory approved by Purchaser and delivered at Closing by Seller, and which shall be at a minimum in amounts sufficient to comply with the requirements of the applicable franchise agreement. 1.24. "Lease" shall mean, collectively, all of the leases to be entered into between Purchaser, as landlord, and the Tenant, as tenant, with respect to each of the Properties, each substantially in the form attached as Exhibit C to the Alliance Agreement, with rent and other economic terms to be reasonably calculated for each Hotel by the Purchaser (which shall be based on a 2.5% "leakage" on stabilized gross revenues as under the Alliance Agreement), and written notice thereof issued to the Seller prior to expiration of the Review Period, together with a letter agreement confirming that the Hotels, together with the ten existing hotels leased by the Purchaser to the Tenant, collectively constitute a "Cross Default Pool" under the Leases, except that the form of lease shall be amended to provide that (a) all income from telecommunication leases shall be payable to the Purchaser, (b) the lessee shall have the option, in lieu of the requirement that the lessee maintain a minimum capitalization, to maintain with lessor a security deposit in the form of a letter of credit or cash, equal to or in excess of twenty percent of the aggregate estimated rent for the current lease year (as specified in the annual budget for such - 3 - 9 lease year) under all leases between lessor and its affiliates and lessee and its affiliates (any such letter of credit shall be in form and substance reasonably satisfactory to lessor and shall allow draws upon lessor certifying that either (a) the letter of credit is within 30 days of expiration or (b) the lessor has obtained a final judgment against lessee for damages in the amount of such draw), and (c) the performance standards shall not apply in years in which 50% of guest rooms are out of service each for a period in excess of 4 weeks solely as a result of (I) major renovations initiated by lessor or (ii) lessor failing to make capital expenditures which lessor agreed to make in accordance with a capital expenditure budget. 1.25. "LP Agreement" shall have the meaning given such term in Section 3.2. 1.26. [Intentionally deleted.] 1.27. [Intentionally deleted.] 1.28. [Intentionally deleted.] 1.29. [Intentionally deleted.] 1.30. [Intentionally deleted.] 1.31. [Intentionally deleted.] 1.32. "Permitted Encumbrances" shall mean, with respect to any Property, (a) liens for taxes, assessments and governmental charges with respect to such Property not yet due and payable or due and payable but not yet delinquent or as to which adequate reserves are provided therefor; (b) applicable zoning regulations and ordinances provided the same do not prohibit or impair in any material respect the use of such Property as a hotel as currently operated and constructed; (c) such other nonmonetary encumbrances as do not, in Purchaser's reasonable opinion, impair marketability and do not materially interfere with the use of such Property as a functioning hotel as currently operated and constructed; (d) such other nonmonetary encumbrances with respect to such Property which are not objected to by Purchaser in accordance with Sections 2.5 and 2.6; and (e) such exceptions or matters, as the case may be, otherwise accepted by Purchaser pursuant to Sections 2.5 and/or 2.6. 1.33. "Properties" shall mean all of the Assets relating to the properties identified on Exhibit A, the legal descriptions of which are set forth in Exhibits B-1 through B-10. 1.34. "Purchase Price" shall have the meaning given such term in Section 3.2. 1.35. "Purchaser" shall have the meaning given such term in the preamble to this Agreement. 1.36. "Real Property" shall mean the real property described in the applicable Exhibit B-1 through B-10, together with all easements, rights of way, privileges, licenses and appurtenances which Seller may now own with respect thereto. - 4 - 10 1.37. "Registration Rights Agreement" shall mean that certain Redemption and Registration Rights Agreement, substantially in the form of Exhibit F to the Alliance Agreement, to be entered into by Purchaser, the REIT, the general partner of Purchaser and Seller, as of the Closing Date. 1.38. "REIT" shall have the meaning given such term in Section 3.2. 1.39. "Review Period" shall mean the period commencing on the date of this Agreement and expiring at 5 p.m., Eastern Time, on May 29, 1998. 1.40. "Seller" shall have the meaning given such term in the preamble to this Agreement. 1.41. "Seller Group shall mean Seller and any Affiliate of Seller that is a parent or direct or indirect wholly-owned subsidiary of Seller. 1.42. "Seller's knowledge" shall mean the actual knowledge of Joseph Bernadino, Linda K. Rush, John M. Elwood, David Simon and Richard Szymanski. 1.43. "Surveys" shall have the meaning given such term in Section 2.5. 1.44. "Tenant" shall mean Caldwell Holding Corp. 1.45. "Title Commitments" shall have the meaning given such term in Section 2.5. 1.46. "Title Company" shall mean Chicago Title Insurance Company or such other title insurance company or companies as shall have been reasonably approved by Purchaser and Seller. SECTION 2. PURCHASE AND SALE; DILIGENCE. 2.1. Purchase and Sale. In consideration of the mutual covenants herein contained, Purchaser hereby agrees to purchase from Seller, and Seller hereby agrees to sell to Purchaser, all of Seller's right, title and interest in and to the Properties for the Purchase Price, subject to and in accordance with the terms and conditions of this Agreement. 2.2. Deposit. Purchaser shall deposit the sum of $4,700,000 (the "Deposit") with the Escrow Agent, which amount shall be payable as follows: (i) $250,000 within three Business Days after execution and delivery of this Agreement, and (ii) $4,450,000 within three Business Days after expiration of the Review Period. The Deposit shall be held in an interest-bearing account pursuant to the terms of the Escrow Agreement, which agreement shall be duly executed and delivered by the parties hereto simultaneously herewith. If this Agreement shall terminate with respect to all of the Properties pursuant to Section 2.3 or 10.1, the Deposit, together with all interest accrued thereon, shall be returned to Purchaser. If this Agreement shall terminate pursuant to Section 10.2, the Deposit, together with all interest accrued thereon, shall be paid to Seller. If the Closing shall occur, the Deposit shall be credited toward the Purchase Price, pursuant to Section 3.2, and the interest earned on the Deposit shall be paid to Purchaser. - 5 - 11 2.3. Diligence Inspections. (a) During the Review Period, Seller shall permit Purchaser and its representatives to inspect the Properties and the Improvements (including, without limitation, all roofs, electric, mechanical and structural elements, and HVAC systems therein), to perform due diligence, soil analysis and environmental investigations, to examine the books of account and records of Seller with respect to the Properties, including, without limitation, all leases and agreements affecting the Properties, and make copies thereof, at such reasonable times as Purchaser or its representatives may request by notice to Seller. Seller shall, in connection with Purchaser's due diligence, provide Purchaser with copies, to the extent available, of the form of franchise guidelines and franchise agreement for "AmeriSuites," which form of franchise agreement shall be substantially similar to (i) the form which Tenant shall enter into in connection with the Closing and (ii) (subject to any changes made by franchisor to such form on a non-discriminatory basis) the form to be employed with respect to any First Offer Hotels and Option Hotels. To the extent that, in connection with such investigation, Purchaser, its agents, representatives or contractors, damages or disturbs any of the Real Property or the Improvements located thereon, Purchaser shall return the same to substantially the same condition which existed immediately prior to such damage or disturbance. Neither Purchaser nor any of its agents, representatives or contractors shall have any right whatsoever to alter the condition of the Property or any portion thereof without the prior written consent of Seller. In no event shall any such inspection include any drilling into or under the surface of the Property, soil sampling, water sampling or similar activities commonly known as a "Phase II environmental study" without the prior written consent of Seller (but shall include such inspections customarily performed during a "Phase I environmental study"). In the event that the transactions contemplated by this Agreement are not closed and consummated for any reason, Purchaser shall, on request by Seller, deliver to Seller all tests, reports and inspections of the Property made and conducted by Purchaser or for its benefit or any other documents or information (including title commitments, UCC financing statement search reports, title documents, surveys, zoning reports, environmental audits, structural engineering reports, appraisals and the like), which Purchaser has received pursuant to this Agreement; provided, however, that Seller shall reimburse Purchaser's out-of-pocket expenses for any of the foregoing materials (other than materials delivered by Seller or its agents or representatives to Purchaser) which it requests that Purchaser so deliver. Purchaser shall indemnify, defend and hold harmless Seller from and against any and all expense, loss or damage which Seller may incur as a result of any act or omission of Purchaser or its representatives, agents or contractors in connection with such examinations and inspections, other than to the extent that any expense, loss or damage arises from any gross negligence or willful misconduct of Seller. The provisions of this Section 2.3 shall survive the termination of this Agreement and the Closing. (b) If Purchaser notifies Seller in writing that Purchaser elects to terminate this Agreement either prior to (i) 5 p.m. Eastern Daylight Savings Time, May 1, 1998 (for any reason or for no reason in the sole discretion of Purchaser), or (ii) the expiration of the Review Period as to all of the Hotels or, with respect to the Hotel located in Albuquerque, New Mexico only, 5 p.m., Eastern Daylight Savings Time, June 15, 1998 (for cause as a result of a reasonable objection or aggregate of objections relating to title, survey, zoning, compliance with law, environmental, engineering, the physical condition of any Property, capital leases or required capital repairs as to any Property), then this Agreement shall automatically terminate, the Deposit - 6 - 12 (and all interest thereon) shall be returned to Purchaser, and, upon return of the Deposit (and all interest thereon), Purchaser and Seller shall have no further rights, liabilities or obligations hereunder (except those that expressly survive a termination of this Agreement). 2.4. Casualty; Condemnation. (a) If, prior to the Closing, (i) any Property suffers a casualty or partial condemnation which would cause such Property to become a Defective Property and (ii) such Property is not, prior to the Closing, restored to a condition substantially the same as the condition thereof immediately prior to such casualty or condemnation, either Purchaser or Seller may, on notice to the other given prior to the Closing Date, terminate this Agreement with respect to such Defective Property, in which event Purchaser shall acquire all of the Properties other than such Defective Property, and the Purchase Price shall be reduced by the Allocable Purchase Price of such Defective Property. Promptly upon learning of the same, Seller covenants and agrees to provide Purchaser with prompt written notice of any casualty or condemnation affecting any Property. (b) If, prior to the Closing, any Property shall be condemned in its entirety, this Agreement shall automatically terminate with respect to such Defective Property, in which event Purchaser shall acquire all of the Properties other than such Defective Property, and the Purchase Price shall be reduced by the Allocable Purchase Price of such Defective Property. (c) If neither Purchaser nor Seller shall elect to terminate this Agreement with respect to a Defective Property pursuant to Paragraph (a) of this Section 2.4, Seller agrees (i) in the case of a casualty loss, to assign to Purchaser at Closing its rights to any insurance proceeds with respect to such loss, pay over to Purchaser any such proceeds already received and give Purchaser a credit against the Purchase Price in the amount of any deductible or uninsured loss, or (ii) in the case of a condemnation, to assign to Purchaser at Closing its rights to any compensation in connection with such condemnation and pay over to Purchaser any such compensation already received, and, in either such event, Purchaser shall acquire such Defective Property as provided herein. (d) If any Property shall suffer a casualty loss which shall not render the Property a Defective Property, Seller shall assign to Purchaser at Closing its rights to any insurance proceeds with respect to such loss, pay over to Purchaser any such proceeds already received and give Purchaser a credit against the Purchase Price in the amount of any deductible or uninsured loss, and Purchaser shall acquire such Property as provided herein. 2.5. Title Matters. Prior to the date of this Agreement, Purchaser has ordered from the Title Company and directed the Title Company promptly to deliver to Purchaser a preliminary title commitment, having an effective date after the date of this Agreement, for an ALTA (or such other form reasonably approved by Purchaser) owner's policy of title insurance with respect to each of the Properties, together with complete and legible copies of all instruments and documents referred to as exceptions to title (collectively, the "Title Commitments"). As soon as reasonably practicable, but in no event later than the expiration of the Review Period, Purchaser shall give Seller notice of any title exceptions (other than Permitted Encumbrances) which adversely affect the present use or operation of any Property in any material respect and as to which Purchaser reasonably objects. If, for any reason, Seller is - 7 - 13 unable or unwilling to take such actions as may be required to cause such exceptions to be removed from the Title Commitments (provided, however, that (i) if such exceptions to title consist of mortgages, deeds of trust, mechanics' liens, tax liens, other liens or charges which are capable of computation as a fixed sum, Seller shall pay and discharge such exceptions at or prior to Closing from the cash proceeds of sale, or otherwise, or, with respect to tax liens, contest such liens in accordance with the provisions of the Lease, and (ii) if such exceptions to title may be removed at a cost to Seller of not more than $25,000 in the aggregate with respect to any single Property, and such removal may be reasonably effectuated by Seller no later than the Closing Date, Seller shall cause such exceptions to be removed), Seller shall give Purchaser notice thereof; it being understood and agreed that, provided that Purchaser shall have timely given notice of such objection to title, the failure of Seller to give such notice as to its inability or unwillingness to cause the removal of any exceptions shall be deemed an election by Seller to remedy such matters. If Seller shall be unable or unwilling to remove any such title defects to which Purchaser has reasonably objected, Purchaser may elect (i) to terminate this Agreement with respect to the affected Property, in which event, the Purchase Price shall be reduced by the Allocable Purchase Price of the affected Properties and this Agreement shall be of no further force and effect with respect to the affected Properties or (ii) to consummate the transactions contemplated hereby, notwithstanding such title defect, without any abatement or reduction in the Purchase Price on account thereof. Purchaser shall make any such election by written notice to Seller given on or prior to the fifth Business Day after Seller's notice of its unwillingness or inability to cure such defect, and time shall be of the essence with respect to the giving of such notice by Purchaser. Failure of Purchaser to give such notice shall be deemed an election by Purchaser to proceed in accordance with clause (ii) above, and such exception shall be a Permitted Encumbrance. 2.6. Survey Matters. Purchaser shall, promptly upon the execution hereof, arrange for the preparation of a survey with respect to each of the Properties (the "Surveys") by a licensed surveyor in the jurisdiction in which each such Property is located, which (i) contains an accurate legal description of the applicable Property, (ii) shows the location, dimension and description (including applicable recording information) of all utilities, easements, encroachments and other physical matters affecting such Property, the number of striped parking spaces located thereon and all applicable building set-back lines, (iii) states whether the applicable Property is located within a 100-year flood plain and (iv) is certified to Purchaser and the Title Company and such other persons as shall have been requested by Purchaser or Seller. As soon as reasonably practicable, but in no event later than the expiration of the Review Period, Purchaser shall give Seller notice of any matters shown thereon (other than Permitted Encumbrances) which adversely affect any such Property in any material respect and as to which Purchaser reasonably objects. If, for any reason, Seller is unwilling or unable to take such actions as may be required to remedy the objectionable matters, Seller shall give Purchaser prompt notice thereof. If Seller shall be unwilling or unable to remove any such survey defect to which Purchaser has reasonably objected, Purchaser may elect (i) to terminate this Agreement with respect to the affected Property, in which event, the Purchase Price shall be reduced by the Allocable Purchase Price of the affected Properties and this Agreement shall terminate and be of no further force or effect with respect to the affected Properties or (ii) to consummate the - 8 - 14 transactions contemplated hereby, notwithstanding such defect, without any abatement or reduction in the Purchase Price on account thereof. Purchaser shall make any such election by written notice to Seller given on or prior to the fifth Business Day after Seller's notice of its inability to cure such defect and time shall be of the essence with respect to the giving of such notice by Purchaser. Failure of Purchaser to give such notice shall be deemed an election by Purchaser to proceed in accordance with clause (ii) above and such matter shall be a Permitted Encumbrance. 2.7. [Intentionally Deleted.] 2.8. Allocations; Radius Restrictions. Seller and Purchaser shall, during the Review Period, use good faith efforts to agree (i) to a reasonable allocation of the Purchase Price between the real property and personal property included in the Properties and (ii) to radius distances for non-compete restrictions with respect to each of the Properties, as set forth in Section 7.2(f) of the Lease. 2.9. Outparcels. (a) The Seller is in the process of subdividing (the "Subdivision") the land upon which each of the BWI (Baltimore), Maryland and the Augusta, Georgia Hotels is located into two parcels, one containing the applicable hotel and all related improvements, landscaped areas and appurtenances (the "Hotel Parcel") and the other an adjacent unimproved parcel of land (the "Outparcel"). In the event the Subdivision is completed prior to the Closing, the Seller shall convey the Hotel Parcel to the Purchaser in accordance with this Agreement and retain ownership of the Outparcel. In the event the Subdivision is not completed prior to Closing, the Seller shall convey to Purchaser both the Hotel Parcel and the Outparcel at Closing in accordance with this Agreement, but the Purchaser, upon completion of the Subdivision, shall convey (the "Reconveyance") the Subdivision Parcel to the Seller by quitclaim deed (or its equivalent). The Seller shall provide the Purchaser with (1) reasonable evidence that, upon the Subdivision and Reconveyance, the Hotel Parcel shall comply with all applicable zoning and subdivision laws and (2) any reasonable access, storm water detention and utility easements. The Purchaser shall reasonably cooperate with the Subdivision and the Reconveyance, but the Subdivision and Reconveyance are at the sole benefit of the Seller and the sole costs related thereto, including the cooperation of the Purchaser, shall be paid by Seller, and the Purchaser shall not be required to incur any expense or liability with respect thereto. (b) The deeds conveying the Hotels located in BWI (Baltimore), Maryland, Augusta, Georgia and Las Vegas, Nevada shall contain a restrictive covenant prohibiting the construction, operation or use of a hotel, motel or similar improvement or use on any adjacent Outparcel or property retained by Seller or its affiliate. The deed conveying the Hotel located in Las Vegas, Nevada shall contain (i) a reciprocal access and parking easement between the Hotel and the adjacent Seller retained outparcel in form and substance reasonably satisfactory to the Seller and the Purchaser, sufficient to comply with applicable zoning and special permit requirements and (ii) a covenant requiring any construction, operation or use of a restaurant on the 10,800 square feet site on the adjacent property retained by Seller or its affiliates first be consented to by the Purchaser, which consent shall not be unreasonably denied so long as such construction, operation and use does not adversely affect parking for such Hotel. - 9 - 15 SECTION 3. CLOSING; PURCHASE PRICE. 3.1. Closing. The purchase and sale of the Properties shall be consummated at a closing (the "Closing") to be held at the offices of Hunton & Williams, 200 Park Avenue, 43rd Floor, New York, New York 10166-0136, or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local time, on a date chosen by Purchaser with reasonable notice to Seller prior to June 30, 1998 (the "Closing Date"). 3.2. Purchase Price. (a) At the Closing, Purchaser shall pay to Seller for the Properties a purchase price (the "Purchase Price") in the amount of One Hundred One Million Three Hundred Sixteen Thousand Six Hundred Thirty-Three ($101,316,633) Dollars (subject to customary prorations and adjustments), except that Purchaser shall receive a credit against the Purchase Price in the amount of the Deposit. (a) [Intentionally deleted.] (b) The Purchase Price shall be payable by wire transfer of immediately available funds on the Closing Date to an account or accounts to be designated by Seller prior to the Closing, subject to the terms of paragraph (c) of this Section 3.2. (c) [Intentionally deleted.] (d) [Intentionally deleted.] (e) [Intentionally deleted.] (f) [Intentionally deleted.] SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE. The obligation of Purchaser to acquire the Properties on the Closing Date shall be subject to the satisfaction of the following conditions precedent on and as of the Closing Date, which Seller covenants to use commercially reasonable efforts to fulfill: 4.1. Closing Documents. Seller shall have delivered to Purchaser: (a) Good and sufficient special warranty deeds, with legal descriptions based on the deeds by which Seller received title to the Properties, and quitclaim deeds with legal descriptions based on the Surveys, if the Surveys indicate any differing legal descriptions, all in forms as shall be customary in the various jurisdictions in which the Properties are located, with respect to all of the Properties, in proper statutory form for recording, duly executed and acknowledged by Seller, conveying fee simple title to the applicable Properties, free from all liens and encumbrances other than the Permitted Encumbrances; (b) A bill of sale and assignment agreement, in form and substance reasonably satisfactory to Seller and Purchaser, duly executed and acknowledged by Seller, with respect to - 10 - 16 all of Seller's right, title and interest in, to and under the FF&E, the Documents and the Intangible Property with respect to the Properties; (c) A bill of sale and assignment agreement, in form and substance reasonably satisfactory to Seller, Purchaser and Tenant, duly executed and acknowledged by Seller, to Tenant, with respect to all of Seller's right, title and interest in, to and under the Inventory and the Contracts, with respect to the Properties; (d) Duly executed and acknowledged memoranda of lease, setting forth the material terms of each Lease, in form and substance reasonably satisfactory to Seller and Purchaser; (e) Duly executed transfer tax forms, as required by applicable law; (f) Duly executed environmental disclosure forms, as and to the extent required by applicable law; (g) To the extent the same are in Seller's possession, original, fully executed copies of all Contracts pertaining to the Properties; (h) A duly executed copy of the Lease and all other documents and sums required to be delivered by Seller and/or the Tenant pursuant thereto; (i) A duly executed copy of the franchise agreement between the Tenant and the franchisor with respect to each of the Properties; (j) A duly executed copy of the Registration Rights Agreement; (k) Certified copies of all charter documents, applicable corporate resolutions and certificates of incumbency with respect to Seller and the Tenant; (l) an affidavit of Seller in accordance with Section 1445 of the Code and such documentation as shall be required to comply with the reporting requirements of Section 1099-S of the Code; and (m) Such other conveyance documents, certificates, deeds, and other instruments as may be required by this Agreement or as Purchaser or the Title Company may reasonably require to effectuate the transactions contemplated hereunder. 4.2. Condition of Properties. (a) All of the Properties and all Improvements located thereon shall, except as otherwise provided in Section 2.3, be in substantially the same physical condition as on the date of this Agreement, ordinary wear and tear excepted; (b) No material default or event which with the giving of notice and/or lapse of time could constitute a material default shall have occurred and be continuing under any material agreement benefiting or affecting the Properties in any material respect; - 11 - 17 (c) No action shall be pending or threatened for the condemnation or taking by power of eminent domain of all or any material portion of the Properties which would render any Property a Defective Property; and (d) All material licenses, permits and other authorizations necessary for the current use, occupancy and operation of the Properties shall be in full force and effect in all material respects. 4.3. Title Policies. The Title Company shall be prepared, subject only to payment of the applicable premium, endorsement and related fees and delivery of all conveyance documents in recordable form, to issue title insurance policies to Purchaser, in accordance with Section 2.5, together with such affirmative coverages as Purchaser may reasonably require and shall have been determined by the Title Company as available prior to the expiration of the Review Period. 4.4. Opinions of Counsel. Purchaser shall have received a written opinion from counsel to Seller, in form and substance reasonably satisfactory to Purchaser and Seller's counsel, regarding the organization and authority of Seller and Tenant. 4.5. No PIP Requirement at Closing. There shall be no PIP requirement imposed by the franchisor in connection with the Closing. 4.6. Representations. All representations and warranties made herein by Seller shall be true and correct in all material respects. SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of Seller to convey the Properties on the Closing Date to Purchaser is subject to the satisfaction of the following conditions precedent on and as of the Closing Date, which Purchaser covenants to use commercially reasonable efforts to fulfill: 5.1. Purchase Price. Purchaser shall deliver to Seller the Purchase Price, pursuant to Section 3.1. 5.2. Closing Documents. Purchaser shall have delivered to Seller: (a) Duly executed and acknowledged counterparts of the documents described in Section 4.1 (including, without limitation, the Registration Rights Agreement executed by Purchaser, the REIT and the general partner of Purchaser), where applicable; (b) Certified copies of all charter documents, partnership agreements, applicable resolutions and certificates of incumbency with respect to Purchaser and its general partner; and (c) [Intentionally deleted.] 5.3. Opinion of Counsel. Seller shall have received a written opinion from counsel to Purchaser, in form and substance reasonably satisfactory to Seller and Purchaser's counsel, regarding the organization and authority of Purchaser and the REIT. - 12 - 18 5.4. Representations. All representations and warranties made herein by Purchaser shall be true and correct in all material respects. 5.5. Amendment to LP Agreement. Purchaser shall have caused Exhibit A of the LP Agreement to be amended so as to add Seller as a limited partner listed thereon. SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER. To induce Purchaser to enter into this Agreement, Seller represents and warrants to Purchaser as follows: 6.1. Status and Authority of Seller. Seller is a corporation duly organized, validly existing and in corporate good standing under the laws of its state of incorporation, and has all requisite power and authority under the laws of such state and its respective charter documents to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. Seller has duly qualified to transact business in each jurisdiction in which the nature of the business conducted by it requires such qualification, except where failure to do so could not reasonably be expected to have a material adverse effect. 6.2. Action of Seller. Seller has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and upon the execution and delivery of any document to be delivered by Seller or Tenant on or prior to the Closing Date, such document shall constitute the valid and binding obligation and agreement of Seller or Tenant, as the case may be, enforceable against Seller or Tenant in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors. 6.3. No Violations of Agreements. Neither the execution, delivery or performance of this Agreement by Seller or of the Lease by Tenant, nor compliance with the terms and provisions hereof or thereof, will result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any Property pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness or any other agreement or instrument by which Seller or Tenant is bound, except pursuant to the Lease or this Agreement. 6.4. Litigation. Neither Seller nor Tenant has received any written notice of and, to Seller's knowledge, no action or proceeding is pending or threatened and no investigation looking toward such an action or proceeding has begun, which (a) questions the validity of this Agreement or the Lease or any action taken or to be taken pursuant hereto, (b) will result in any material adverse change in the business, operation, affairs or condition of the Properties, taken as a whole, (c) will result in or subject the Properties to a material liability, or (d) involves condemnation or eminent domain proceedings against any part of the Properties, which would render such Property a Defective Property. 6.5. Existing Leases, Agreements, Etc. Other than any agreements provided to Purchaser prior to the execution of this Agreement and listed on the schedule attached hereto as - 13 - 19 Exhibit E, there are no other material agreements affecting the Properties which will be binding on Purchaser subsequent to the Closing Date, which Purchaser cannot terminate. 6.6. Utilities, Etc. To Seller's knowledge, all utilities and services necessary for the use and operation of the Properties (including, without limitation, road access, gas, water, electricity and telephone) are available thereto, are of sufficient capacity to meet adequately all needs and requirements necessary for the current use and operation of the Properties and for their respective intended purposes. To Seller's knowledge, no fact, condition or proceeding exists which would result in the termination or material impairment of the furnishing of such utilities to the Properties. 6.7. Compliance with Law. To Seller's knowledge, except as set forth on Exhibit D attached hereto, (i) the Properties and the current use and operation thereof do not violate any material federal, state, municipal and other governmental statutes, ordinances, by-laws, rules, regulations or any other legal requirements, including, without limitation, those relating to construction, occupancy, zoning, subdivision, land use, adequacy of parking, environmental protection, occupational health and safety and fire safety applicable thereto; and (ii) there are presently in effect all material licenses, permits and other authorizations necessary for the current use, occupancy and operation thereof (including liquor license, if required). Except as disclosed to Purchaser, Seller has not received written notice of any threatened request, application, proceeding, plan, study or effort which would materially adversely affect the current use or zoning of any of the Properties or which would materially adversely modify or realign any adjacent street or highway. 6.8. Taxes. To Seller's knowledge, other than the amounts disclosed by tax bills (copies of which have been delivered by Seller to Purchaser prior to the execution of this Agreement), no taxes or special assessments of any kind (special, bond or otherwise) are or have been levied with respect to any of the Properties, or any portion thereof, which are outstanding or unpaid, other than amounts not yet due and payable or, if due and payable, not yet delinquent. 6.9. Not A Foreign Person. Seller is not a "foreign person" within the meaning of Section 1445 of the Code. 6.10. Hazardous Substances. Except as set forth on Exhibit D attached hereto or as described in any environmental report delivered to Purchaser (including, without limitation, the environmental site assessments set forth on Exhibit D), to Seller's knowledge, Seller has not stored or disposed of (or engaged in the business of storing or disposing of) or has released or caused the release of any hazardous waste, contaminants, oil, radioactive or other material on any of the Properties, or any portion thereof, the removal of which is required or the maintenance of which is prohibited or penalized by any applicable Federal, state or local statutes, laws, ordinances, rules or regulations, and, to Seller's knowledge, except as set forth on Exhibit D attached hereto or as described in any environmental report delivered to Purchaser (including, without limitation, the environmental site assessments set forth on Exhibit D), the Properties are free from any such hazardous waste, contaminants, oil, radioactive and other materials, except any such materials maintained in the ordinary course of a hotel business in accordance with applicable law. - 14 - 20 6.11. Insurance. Seller has not received any written notice from any insurance carrier of defects or inadequacies in the Properties which, if uncorrected, would result in a termination of insurance coverage or a material increase in the premiums charged therefor. 6.12. Ownership. All Assets, Contracts, FF&E, Intangible Property and Real Property are owned by Seller and are assignable and transferable without the consent of any third party (or, if any such consent is required, such consent shall be obtained no later than the Closing), and there are no capital leases, except as set forth on Exhibit E. The representations and warranties made in this Agreement by Seller shall be deemed remade by Seller as of the Closing Date with the same force and effect as if made on, and as of, such date. Except as otherwise expressly provided in this Agreement or any documents to be delivered to Purchaser at the Closing, Seller disclaims the making of any representations or warranties, express or implied, regarding the Properties or matters affecting the Properties, whether made by Seller, on Seller's behalf or otherwise, including, without limitation, the physical condition of the Properties, title to or the boundaries of the Real Property, pest control matters, soil conditions, the presence, existence or absence of hazardous wastes, toxic substances or other environmental matters, compliance with building, health, safety, land use and zoning laws, regulations and orders, structural and other engineering characteristics, traffic patterns, market data, economic conditions or projections, and any other information pertaining to the Properties or the market and physical environments in which they are located. Without negating the covenants, representations and warranties of Seller under this Agreement, Purchaser acknowledges (i) that Purchaser has entered into this Agreement with the intention of making and relying upon its own investigation or that of third parties with respect to the physical, environmental, economic and legal condition of each Property and (ii) that Purchaser is not relying upon any statements, representations or warranties of any kind, other than those specifically set forth in this Agreement or in any document to be delivered to Purchaser at the Closing made by Seller. Without negating the covenants, representations and warranties of Seller under this Agreement, Purchaser further acknowledges that it has not received from or on behalf of Seller any accounting, tax, legal, architectural, engineering, property management or other advice with respect to this transaction and is relying solely upon the advice of third party accounting, tax, legal, architectural, engineering, property management and other advisors. Subject to the provisions of this Agreement, Purchaser shall purchase the Properties in their "as is" condition on the Closing Date. SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce Seller to enter into this Agreement, Purchaser represents and warrants to Seller as follows: 7.1. Status and Authority of Purchaser. Purchaser is a Tennessee limited partnership duly organized, validly existing and in trust good standing under the laws of the State of Tennessee, and, prior to the expiration of the Review Period, will have all requisite power and authority under the laws of such state and under its charter documents to enter into and perform - 15 - 21 its obligations under this Agreement and to consummate the transactions contemplated hereby. Purchaser has duly qualified and is in good standing as a foreign limited partnership in each jurisdiction in which the nature of the business conducted by it requires such qualification. 7.2. Action of Purchaser. Prior to the expiration of Review Period, Purchaser will take all necessary action to authorize the execution, delivery and performance of this Agreement and the Lease, and upon the execution and delivery of any document to be delivered by Purchaser on or prior to the Closing Date such document shall constitute the valid and binding obligation and agreement of Purchaser, enforceable against Purchaser in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors. 7.3. No Violations of Agreements. Neither the execution, delivery or performance of this Agreement nor the Lease by Purchaser, nor compliance with the terms and provisions hereof, will result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Purchaser pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness or any other agreement or instrument by which Purchaser is bound. 7.4. Litigation. No investigation, action or proceeding is pending and, to Purchaser's knowledge, no action or proceeding is threatened and no investigation looking toward such an action or proceeding has begun, which questions the validity of this Agreement or any action taken or to be taken pursuant hereto. 7.5. [Intentionally deleted.] 7.6. [Intentionally deleted.] 7.7. [Intentionally deleted.] The representations and warranties made in this Agreement by Purchaser shall be deemed remade by Purchaser as of the Closing Date with the same force and effect as if made on, and as of, such date. SECTION 8. COVENANTS OF SELLER AND PURCHASER. 8.1. Covenants of Seller. Seller hereby covenants with Purchaser between the date of this Agreement and the Closing Date as follows: (a). Upon learning of any material change in any condition with respect to any of the Properties or of any event or circumstance which makes any representation or warranty of Seller to Purchaser under this Agreement untrue or misleading in any material respect, promptly to notify Purchaser thereof (Purchaser agreeing, on learning of any such fact or condition, promptly to notify Seller thereof). - 16 - 22 (b) To continue or cause to continue to operate each of the Properties as an "AmeriSuites" hotel, in a good and businesslike fashion consistent with its past practices and to cause each of the Properties to be maintained in good working order and condition in a manner consistent with its past practice. (c) To provide to Purchaser, promptly upon reasonable request, such unaudited financial and other information and certifications of Seller with respect to the Properties as Purchaser may from time to time reasonably request in order to comply with any applicable securities laws and/or any rules, regulations or requirements of the Securities and Exchange Commission and, if required or requested, to permit Purchaser to incorporate by reference any information included in filings made by Seller with the Securities and Exchange Commission. (d) To deliver to Purchaser the items set forth in Section 4.1 and Section 4.4. 8.2. Covenants of Purchaser. Purchaser hereby covenants with Seller on and as of the Closing Date as follows: (a) To deliver to Seller the items set forth in Section 5.2. SECTION 9. CLOSING COSTS AND PRORATIONS. 9.1. Closing Costs. Each of the parties hereto shall pay its own expenses in connection with this Agreement and the transactions contemplated hereby, including, without limitation, any legal and accounting fees, the costs and expenses of preparing engineering and environment reports, market studies and appraisals, the cost of the Surveys, Title Commitments, zoning reports, UCC financing statement search reports, environmental audits, zoning reports, structural engineering reports, appraisals and the like, whether or not the transactions contemplated hereby are consummated (but subject, however, to the provisions of Section 2.3, with respect to items which Purchaser delivers to Seller at Seller's request). Seller and Purchaser shall each pay 50% of all state and local sales, transfer, excise, value-added or other similar taxes, and all recording and filing fees that may be imposed by reason of the sale, transfer, assignment, delivery and leasing (other than any tax imposed in connection with the recording of a memorandum of lease, which amounts shall be paid pursuant to the terms of the applicable Lease) of the Properties. 9.2. Income and Expense Allocations. All income and expenses with respect to the Property, and applicable to the period of time before and after Closing, determined in accordance with sound accounting principles consistently applied, shall be allocated between the Seller, the Purchaser and Tenant as set forth below. The Seller shall be entitled to all income and responsible for all expenses for the period of time up to but not including the date of Closing, and the Purchaser or Tenant, as applicable, shall be entitled to all income and responsible for all expenses for the period of time from, after and including the date of Closing, with the Purchaser entitled to income and responsible for expenses related to ownership and the Tenant entitled to income and responsible for expenses related to operations. Only adjustments between the Seller and the Purchaser (and not those between the Seller and the Tenant) (with such supporting documentation as the parties hereto may require being attached as exhibits to the - 17 - 23 settlement statements) and shall increase or decrease (as the case may be) the cash portion of the Purchase Price payable by the Purchaser. All other such adjustments shall be made outside the Closing Settlement Statements between the Purchaser, the Tenant, and the Seller and shall be payable by check or wire directly between such parties. Without limiting the generality of the foregoing, the following items of income and expense shall be allocated at Closing: (a) Real estate and personal property taxes (which shall be prorated between the Seller and the Purchaser). (b) Current and prepaid rents (not including rentals for individual guest hotel rooms), including, without limitation, prepaid room receipts, function receipts and other reservation receipts (all of which items shall be credited to the Tenant). (c) Amounts under the Operating Agreements to be assigned to and assumed by the Tenant (which shall be prorated between the Seller and the Tenant). (d) Utility charges (including but not limited to charges for water, sewer and electricity) (which shall be prorated between the Seller and the Tenant). (e) All prepaid reservations and contracts for rooms confirmed by the Seller prior to the Closing Date for dates after the Closing Date, all of which the Purchaser shall honor (all of which items shall be credited to the Tenant). The Tenant shall purchase the Tray Ledger from the Seller for the full actual value thereof, less a deduction for any amounts charged by credit card issuers or clearinghouses. Notwithstanding the foregoing, room revenues for the evening preceding Closing shall be divided equally between the Seller and the Tenant. Neither the Purchaser nor the Tenant shall be obligated to collect any accounts receivable or revenues accrued prior to the Closing Date for the Seller, but if the Purchaser or the Tenant collects same, such amounts will be promptly remitted to the Seller in the form received after application of the amount received to any amounts due to Purchaser or Tenant. If accurate allocations cannot be made at Closing because current bills are not obtainable (as, for example, in the case of utility bills or tax bills), the parties shall allocate such income or expenses at Closing on the best available information, subject to adjustment upon receipt of the final bill or other evidence of the applicable income or expense. Any income received or expense incurred by the Seller, the Purchaser or the Tenant with respect to the Property after the date of Closing shall be promptly allocated in the manner described herein and the parties shall promptly pay or reimburse any amount due. The Seller shall pay at Closing all special assessments and taxes applicable to the Property due and payable prior to Closing. SECTION 10. DEFAULT. 10.1. Default by Seller. If Seller shall have made any representation or warranty herein which shall be untrue or misleading in any material respect, or if Seller shall fail to perform any of the material covenants and agreements contained herein to be performed by Seller and such - 18 - 24 failure continues for a period of ten (10) days after notice thereof from Purchaser, Purchaser may, (i) sue for specific performance and damages, (ii) sue for damages without specific performance (with or without terminating this Agreement and receiving a refund of the Deposit, and all interest thereon) or (iii) exercise any other right or remedy at law or in equity; provided, however, that Purchaser shall in no event be entitled to monetary damages in excess of an amount equal to the amount of the Deposit. 10.2. Default by Purchaser. If Purchaser shall have made any representation or warranty herein which shall be untrue or misleading in any material respect, or if Purchaser shall fail to perform any of the covenants and agreements contained herein to be performed by it and such failure shall continue for a period of ten (10) days after notice thereof from Seller, Seller may, as its sole and exclusive remedy at law and in equity, terminate this Agreement. In the event that Seller shall so terminate this Agreement, the Deposit, together with all interest accrued thereon, shall be retained by Seller, as liquidated damages and not as a penalty, whereupon Purchaser shall, except as expressly provided herein, have no further monetary or nonmonetary obligations hereunder, other than with respect to obligations which expressly survive the termination hereof (which obligations shall not include the obligation to purchase the Properties hereunder). SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL. The Right of First Offer and Commitment to Sell contained in the Alliance Agreement are hereby ratified and confirmed, and remain in full force and effect. SECTION 12. MISCELLANEOUS. 12.1. Agreement to Indemnify. (a) Subject to any express provisions of this Agreement to the contrary, Seller shall indemnify and hold harmless Purchaser from and against any and all obligations, claims, losses, damages, liabilities, and expenses (including, without limitation, reasonable attorneys' and accountants' fees and disbursements) arising out of (x) any damage to property of others or injury to or death of any person or any claims for any debts or obligations occurring on or about or in connection with any Property or any portion thereof at any time or times prior to the Closing, (y) any liabilities for taxes due from Seller which shall have accrued prior to the Closing in connection with any Property and (z) any failure by Seller to comply with applicable "bulk sale" laws. (b) Whenever either party shall learn through the filing of a claim or the commencement of a proceeding or otherwise of the existence of any liability for which the other party is or may be responsible under this Agreement, the party learning of such liability shall notify the other party promptly and furnish such copies of documents (and make originals thereof available) and such other information as such party may have that may be used or useful in the defense of such claims and shall afford said other party full opportunity to defend the same in the name of such party and shall generally cooperate with said other party in the defense of any such claim. - 19 - 25 (c) The provisions of this Section 12.1 shall survive the Closing and the termination of this Agreement. 12.2. Brokerage Commissions. Each of the parties hereto represents to the other parties that it dealt with no broker, finder or like agent in connection with this Agreement or the transactions contemplated hereby. Seller shall be solely responsible for and shall indemnify and hold harmless Purchaser and its respective legal representatives, heirs, successors and assigns from and against any loss, liability or expense, including, reasonable attorneys' fees, arising out of any claim or claims for commissions or other compensation for bringing about this Agreement or the transactions contemplated hereby made by any broker, finder or like agent other than such loss, liability or expense resulting from Purchaser's breach of its representations made in this Section 12.2. The provisions of this Section 12.2 shall survive the Closing and any termination of this Agreement. 12.3. Publicity. The parties agree that no party shall, with respect to this Agreement and the transactions contemplated hereby, contact or conduct negotiations with public officials, make any public pronouncements, issue press releases or otherwise furnish information regarding this Agreement or the transactions contemplated to any third party without the consent of the other parties, which consent shall not be unreasonably withheld, delayed or conditioned, except to consultants, advisors, investors, lenders, underwriters and other parties reasonably necessary to consummate the transactions required hereby and as required by law or contractual obligations of such parties to third parties. No party, or its employees shall trade in the securities of any parent or affiliate of Seller or of Purchaser until a public announcement of the transactions contemplated by this Agreement has been made. No party shall record this Agreement or any notice thereof. 12.4. Notices. (a) Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either in hand, by telecopier with written acknowledgment of receipt, or by mail or Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, postpaid and registered or certified with return receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express or similar carrier). (b) All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice by telecopier, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Day or is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day. - 20 - 26 (c) All such notices shall be addressed, if to Seller to: Prime Hospitality Corp. 700 Route 46 East Fairfield, New Jersey 07707-2700 Attn: Mr. David Simon [Telecopier No. (201) 882-8577] and Prime Hospitality Corp. 700 Route 46 East Fairfield, New Jersey 07707-2700 Attn: General Counsel [Telecopier No. (201) 882-8577] if to Purchaser, to: Equity Inns Partnership, L.P. 4735 Spottswood, Suite 102 Memphis, Tennessee 38117 Attn: Mr. Phillip H. McNeill, Sr. [Telecopier No. (901) 761-1485] with a copy to: Hunton & Williams 1751 Pinnacle Drive, Suite 1700 McLean, VA 22102 Attn: Gerald R. Best, Esq. [Telecopier No. (703) 714-7410] (d) By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America. 12.5. Waivers, Etc. Any waiver of any term or condition of this Agreement, or of the breach of any covenant, representation or warranty contained herein, in any one instance, shall not operate as or be deemed to be or construed as a further or continuing waiver of any other breach of such term, condition, covenant, representation or warranty or any other term, condition, covenant, representation or warranty, nor shall any failure at any time or times to enforce or require performance of any provision hereof operate as a waiver of or affect in any - 21 - 27 manner such party's right at a later time to enforce or require performance of such provision or any other provision hereof. This Agreement may not be amended, nor shall any waiver, change, modification, consent or discharge be effected, except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, consent or discharge is sought. 12.6. Assignment; Successors and Assigns. This Agreement and all rights and obligations hereunder shall not be assignable by any party without the written consent of the other parties, except that, after the Closing, (i) Seller may assign its surviving rights, if any, under this Agreement to Tenant or an Affiliate of Seller, and (ii) Purchaser may assign its right to purchase a First Offer Hotel or an Option Hotel to one or more Affiliates of Purchaser, and Purchaser may assign its rights and obligations hereunder to an Affiliate of Purchaser, provided that Purchaser remain liable for its obligations hereunder. The provisions of this Agreement shall not merge with delivery of the deeds and shall survive Closing. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement is not intended and shall not be construed to create any rights in or to be enforceable in any part by any other persons. 12.7. Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case. 12.8. Counterparts, Etc. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof. 12.9. Governing Law. This Agreement shall be interpreted, construed, applied and enforced in accordance with the laws of the State of New York applicable to contracts between residents of the State of New York which are to be performed entirely within the State of New York, regardless of (i) where this Agreement is executed or delivered; or (ii) where any payment or other performance required by this Agreement is made or required to be made; or (iii) where any breach of any provision of this Agreement occurs, or any cause of action otherwise accrues; or (iv) where any action or other proceeding is instituted or pending; or (v) the nationality, - 22 - 28 citizenship, domicile, principal place of business, or jurisdiction of organization or domestication of any party; or (vi) whether the laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than the State of New York; or (vii) any combination of the foregoing. To the maximum extent permitted by applicable law, any action to enforce, arising out of, or relating in any way to, any of the provisions of this Agreement may be brought and prosecuted in such court or courts located in the State of New York as is provided by law; and the parties consent to the jurisdiction of said court or courts located in the State of New York and to service of process by registered mail, return receipt requested, or by any other manner provided by law. 12.10. Performance on Business Days. In the event the date on which performance or payment of any obligation of a party required hereunder is other than a Business Day, the time for payment or performance shall automatically be extended to the first Business Day following such date. 12.11. Attorneys' Fees. If any lawsuit or arbitration or other legal proceeding arises in connection with the interpretation or enforcement of this Agreement, the prevailing party therein shall be entitled to receive from the other party the prevailing party's costs and expenses, including reasonable attorneys' fees incurred in connection therewith, in preparation therefor and on appeal therefrom, which amounts shall be included in any judgment therein. 12.12. Section and Other Headings. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 12.13. No Oral Modifications. This Agreement may not be amended, nor shall any waiver, change, modification, consent or discharge be effected, except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, consent or discharge is sought. [REMAINDER OF THIS PAGE LEFT BLANK.] - 23 - 29 SIGNATURE PAGE PURCHASE AND SALE AGREEMENT SELLER: PRIME HOSPITALITY CORP. By:________________________________________________ Name:______________________________________________ Title: ____________________________________________ - 24 - 30 SIGNATURE PAGE PURCHASE AND SALE AGREEMENT PURCHASER: EQUITY INNS PARTNERSHIP, L.P. By: Equity Inns Trust, its general partner By:__________________________________________ Name:________________________________________ Title:_______________________________________ - 25 - 31 EXHIBIT A THE PROPERTIES Equity Inns Partnership, L.P. Purchase of Ten AmeriSuites Hotels from Prime Hospitality Corp. (Spring, 1998)
PROPERTY NUMBER OF ROOMS PRICE -------- --------------- ----- 1) Riverchase (Birmingham), Alabama 128 7,682,190 2) Kendall (Miami), Florida 67 10,549,690 3) Augusta, Georgia 111 4,320,220 4) Baton Rouge, Louisiana 128 10,881,060 5) BWI (Baltimore), Maryland 128 9,976,410 6) Mall of America (Minneapolis), Minnesota 128 9,586,660 7) Albuquerque, New Mexico 128 9,541,320 8) Las Vegas, Nevada 202 19,115,573 9) Cool Springs (Nashville), Tennessee 128 11,243,490 10) Wolfchase (Memphis), Tennessee 128 8,420,020 1276 $101,316,633 ==== ============
32 EXHIBIT B-1 Record Legal Description AmeriSuites Hotel Riverchase (Birmingham), Alabama The land is in the State of Alabama, County of Jefferson, and is described as follows: Parcel I: Lot 5, according to the Addition to Galleria Woods, as recorded in Map Book 31 page 3 in the Probate Office of Jefferson County, Alabama, Bessemer Division; being situated in Jefferson County, Alabama. Parcel II: The beneficial interest in and to the non-exclusive easement for pedestrian and vehicular ingress and egress as set out and described in paragraph 2, page 2, of the "Reciprocal Access Easement Agreement" by and between Brown Trout Investments, Ltd., and Harbert-Equitable Joint Venture, dated December 20, 1996 and recorded as Inst. #9663/1965 in the Probate Office. 33 EXHIBIT B-2 Record Legal Description AmeriSuites Hotel Kendall (Miami), Florida The East 1/2 of the East 1/2 of the NW 1/4 of the NW 1/4 of the NW 1/4 Less the North 393.00 feet, lying and being in Section 6, Township 55 South, Range 40 East, Dade County, Florida being more particularly described as follows: Commence at the Northwest corner of said Section 6; thence North 87(Degree)44'11" East along the North line of the NW 1/4 of said Section 6 for 501.52 feet; thence South 02(Degree)30'46" East along the West line of said East 1/2, East 1/2, NW 1/4 of NW 1/4 of NW 1/4 of Section 6 for 393.00 feet to the Point of Beginning of the hereinafter described parcel of land; thence continue South 02(Degree)30'46" East along the previously described course for 264.80 feet to the Southwest corner thereof; thence North 87(Degree)38'23" East along the South line of said East 1/2, East 1/2, NW 1/4, NW 1/4, NW 1/4 of Section 6 for 167.77 feet to the Southeast corner thereof; thence North 02(Degree)33'57" West along the East line of said East 1/2, East 1/2, NW 1/4, NW 1/4, NW 1/4, for 264.52 feet to a point on a line being 393.00 feet South of and parallel with said North line of the NW 1/4 of Section 6; thence South 87(Degree)44'11" West along said parallel line for 167.53 feet to the POINT OF BEGINNING; together with an Ingress and Egress Easement over and across a portion of the North 393.00 feet of the East 1/2 of the East 1/2 of the NW 1/4 of the NW 1/4 of the NW 1/4 less the North 55.00 feet for right-of-way on North Kendal Drive (NW 88th St.) (SR #94) of Section 6, Township 55 South, Range 40 East, Dade County, Florida, being more particularly described as follows: Commence at the Northwest corner of said Section 6; thence North 87(Degree)44'11" East along the North line of the NW 1/4 of said Section 6 for 501.52 feet; thence South 02(Degree)30'46" East along the West line of said East 1/2, East 1/2, NW 1/4, of the NW 1/4 of the NW 1/4 of Section 6 for 55.00 feet to a point on South right-of-way line of said North Kendal Drive (SW 88th St.) (SR #94); thence North 87(Degree)44'11" East along said South right-of-way line being South of and parallel to the said North line of the NW 1/4 of Section 6 for 17.43 feet to a point on a circular curve whose radius point bears South 41(Degree)40'57" West for 25.00 feet also being the Point of Beginning of the hereinafter described easement; thence Southeasterly and Southwesterly along said 25 foot radius curve leading to the right, through a central angle of 64(Degree)19'03" for an arc of 28.06 feet to a point of tangency; thence South 16(Degree)00'00" West for 40.99 feet to a Point of Curvature; thence Southerly along a 110.00 foot radius curve leading to the left through a central angle of 18(Degree)30'46" for an arc of 35.54 feet to a point of tangency; thence South 2(Degree)-30'-46" East along a line parallel to and 5.00 feet East of the West line of said East 1/2, East 1/2, NW 1/4, NW 1/4, NW 1/4 of Section 6 for 238.29 feet; thence North 87(Degree)44'11" East along a line 338.00 feet South of and parallel to the said South right-of-way line of North Kendal Drive (SW 88th St.) for 25.00 feet; thence North 02(Degree)30'46" West along a line parallel to and 30.00 feet East of the said West line of the East 1/2, East 1/2, NW 1/4, NW 1/4, NW 1/4 of Section 6 for 238.40 feet to a 34 point of curvature; thence Northeasterly along an 85.00 foot radius curve leading to the right through a central angle of 18(Degree)30'46" for an arc of 27.46 feet to a point of tangency; thence North 16(Degree)00'00" East for 65.74 feet to a point of curvature; thence Northeasterly along a 25.00 foot radius curve leading to the right through a central angle of 27(Degree)47'25" for an arc of 12.13 feet to a point on said South right-of-way line of North Kendal Drive (SW 88th St.); thence South 87(Degree)44'11" West along said South right-of-way line for 44.28 feet to the POINT OF BEGINNING. 35 EXHIBIT B-3 Record Legal Description AmeriSuites Hotel Augusta, Georgia Parcel One: All that tract or parcel of land, situate, lying and being in the 90th G.M. District of Richmond County, Georgia, fronting for a distance of 176.99 feet along Claussen Road and being more particularly described as follows: Beginning at the eastern right-of-way of Stevens Creek Road where it intersects with Claussen Road; thence along the right-of-way of Claussen Road in a northeasterly direction 1,846.00 feet to an iron pin being the point of beginning; thence North 47(Degree)48'45" West a distance of 269.31 feet to an iron pin; thence North 42(Degree)11'15" East a distance 74.50 feet to an iron pin; thence North 47(Degree)48'45" West a distance of 130.00 feet to a point; thence North 41(Degree)42'59" East a distance of 355.00 feet to a point; thence South 47(Degree)48'37" East a distance of 104.93 feet to a point; thence South 24(Degree)38'11" West a distance of 247.33 feet to a point; thence South 43(Degree)38'43" East a distance of 233.88 feet to a point on the said right-of-way of Claussen Road; thence along said right-of-way South 45(Degree)35'30" West a distance of 176.99 feet to the point of beginning. Parcel Two: All that lot or parcel of land, with all improvements thereon, situate, lying and being in Richmond County, Georgia, being 6.752 Acres fronting 30.0 feet on the western right-of-way of I-20 Frontage Road and being further described as follows: BEGINNING at an iron pin set on the western right-of-way of I-20 Frontage Road at a point which marks the southern boundary of property now or formerly of Dorothy Roesel Carpenter and the northern boundary of property of Glynn Land Company; thence North 43(Degree)38'58" West, a distance of 212.96 feet to a point; thence North 24(Degree)38'11" East a distance of 578.39 feet to a point; thence North 63(Degree)52'37" West a distance of 519.74 feet to an iron pin; then South 26(Degree)03'45" West a distance of 577.98 feet to an iron pin; then South 47(Degree)48'45" East a distance of 314.27 feet to a point; thence North 41(Degree)42'59" East a distance of 333.53 feet to a point; thence South 47(Degree)48'37" East a distance of 111.54 feet to a point; thence South 24(Degree)38'11" West a distance of 224.81 feet to a point; thence South 43(Degree)38'43" East a distance of 233.88 feet to a point on the western right-of-way of I-20 Frontage Road; thence northeasterly along said right-of-way a distance of 30.0 feet to the point of beginning. LESS AND EXCEPTING from Parcel Two, however, any portion of said property which is contained within the boundary of the property described as Parcel One hereof. Parcel Three: 36 ALL that lot or parcel of land, with any improvements thereon, situate, lying and being in the 1269th G.M. District of Richmond County, Georgia, containing 0.05 acres, as more particularly shown as "Parcel 'A'" on a plat dated April 4, 1984, prepared by George L. Godman, R.L.S. for James R. Childs, Jr. and Kathryn D. Childs and Decatur Federal Savings and Loan Association, which is recorded in the Office of the Clerk of Superior Court of Richmond County, Georgia, in Realty Reel 182, page 232. Reference is hereby made to said plat for a more complete and accurate description as to the metes, bounds and location of said property. 37 EXHIBIT B-4 Record Legal Description AmeriSuites Hotel Baton Rouge, Louisiana Parcel I: One (1) certain lot or parcel of ground, together with all the buildings and improvements thereon, and all of the rights, ways, privileges, servitudes, appurtenances and advantages thereunto belonging or in anywise appertaining, located in Section 57, Township 7 South, Range 1 East, being designated as TRACT "A-1A-2-1" on a map entitled "Survey Map of the Resubdivision of Tract 'A-1A' of the Original George Paulat Tract into Tracts "A-1A-1', 'A-1A-2', 'A-1A-3', 'A-1A-4', located in Section 57, T-7-S, R-1-E, G.L.D., East Baton Rouge Parish, Louisiana, for William B. Skillman et al", which map was revised to show the resubdivision of Tract 'A-1A-4' into Tracts 'A-1A-4A', 'A-1A-4B' and 'A-1A-4C', and revised to show the addition of a portion of Tract A-1A-2 to Tract A-1A-3, which revised map is recorded as Original 116, Bundle 9763, official records of East Baton Rouge Parish, Louisiana, the said Tract A-1A-2-1 containing 2.6187 acres and having such measurements and dimensions as shown on the above referenced map. Parcel II: A non-exclusive servitude for the purpose of ingress, egress, pedestrian and vehicular traffic and parking over and across that portion of the following described property designated as "Common Areas" in that act of Declaration of Servitudes, Covenants and Restrictions dated April 12, 1996, executed by Piccadilly Cafeterias, Inc., which is recorded as Original 855, Bundle 10679 of the official records of East Baton Rouge Parish, Louisiana: One (1) certain lot or parcel of ground, together with all the buildings and improvements thereon, and all of the rights, ways, privileges, servitudes, appurtenances and advantages thereunto belonging or in anywise appertaining, located in Section 57, Township 7 South, Range 1 East, being designated as TRACT "A-1A-3-1" on a map entitled "Survey Map of the Resubdivision of Tract 'A-1A' of the Original George Paulat Tract into Tracts "A-1A-1', 'A-1A-2', 'A-1A-3', 'A-1A-4', located in Section 57, T-7-S, R-1-E, G.L.D., East Baton Rouge Parish, Louisiana, for William B. Skillman et al", which map was revised to show the resubdivision of Tract 'A-1A-4' into Tracts 'A-1A-4A', 'A-1A-4B' and 'A-1A-4C', and revised to show the addition of a portion of Tract A-1A-2 to Tract A-1A-3, which revised map is recorded as Original 116, Bundle 9763, official records of East Baton Rouge Parish, Louisiana, the said Tract A-1A-3-1 having such measurements and dimensions as shown on the above referenced map. 38 EXHIBIT B-5 Record Legal Description AmeriSuites Hotel BWI (Baltimore), Maryland All that lot of ground situate in Anne Arundel County, State of Maryland and described as follows: BEING KNOWN AND DESIGNATED as Lot No. 5 as shown on plat entitled "Revised Plat of Resubdivision Plat of a Part of Plat 2 Section 2 & Plat 1 Section 1 Airport Square Technology Park", which plat is recorded among the Land Records of Anne Arundel County in Plat Book 100 folio 1 and being more particularly described as follows: BEGINNING for the same at a point on the northernmost outline of the 170.2857 acre tract shown on the Boundary Survey Plat of the Frank Bray Cromwell Property, dated January 24, 1973, and prepared by Matz, Childs & Associates, said point being located South 78 degrees 22 minutes 50 seconds East 47.99 feet from the northwest corner of said tract, running thence and binding on part of said outline (1) South 78 degrees 22 minutes 50 seconds East 550.38 feet to the west side of Aero Drive, thence binding thereon two courses: (2) South 11 degrees 37 minutes 10 seconds West 404.00 feet and (3) southwesterly by a curve to the right with a radius of 70.00 feet for a distance of 109.96 feet, the chord of said arc being South 56 degrees 37 minutes 10 seconds West 98.99 feet to the north side of International Drive, thence binding thereon four courses: (4) North 76 degrees 44 minutes 38 seconds West 175.07 feet (5) North 78 degrees 22 minutes 50 seconds West 163.13 feet (6) westerly by a curve to the right with a radius of 554.00 feet for a distance of 44.14 feet, the chord of said arc being North 76 degrees 05 minutes 53 seconds West 44.13 feet and (7) northwesterly by a curve to the right with a radius of 145.00 feet for a distance of 159.00 feet, the chord of said arc being North 42 degrees 24 minutes 03 seconds West 151.16 feet to the east side of Nursery Road, thence binding thereon at the distance of 75.00 feet from the centerline of Nursery Road as established by Greenhorne & O'Mara, Inc. two courses: (8) North 17 degrees 51 minutes 57 seconds East 79.38 feet and (9) northerly by a curve to the left with a radius of 2621.48 feet for a distance of 300.09 feet, the chord of said arc being North 14 degrees 35 minutes 11 seconds East 299.93 feet to the place of beginning. Containing 5.9595 acres of land, more or less. 39 Subject to revertible easements for supporting slopes along Aero Road, International Drive, and Nursery Road. BEING the same lot of ground which by Deed dated August 26, 1988 and recorded among the Land Records of Anne Arundel County in Liber 4684 folio 267 was granted and intended to be conveyed to American Motor Inns, Incorporated. BY Certificate of Merger dated October 8, 1992 and filed with the Maryland State Department of Assessments and Taxation (a copy of which is recorded among the Land Records of Anne Arundel County in Liber 5961 folio 820), American Motor Inns, Incorporated merged into and became known as Prime Hospitality Corp. BEING ALSO the same lot of ground which by Confirmatory Deed dated ________________, 1995 and recorded among the Land Records of Anne Arundel County in Liber __________ folio ___________, was granted and conveyed by Interchange Properties to Prime Hospitality Corp. 40 EXHIBIT B-6 Record Legal Description AmeriSuites Hotel Mall of Americas, Minneapolis, Minnesota Lot 1, Block 1, Viking Drive West 2nd Addition, according to the recorded plat thereof, and situate in Hennepin County, Minnesota, together with the appurtenant easement(s) contained in Document No. 5368640 and Document No. 6608210. 41 EXHIBIT B-7 Record Legal Description AmeriSuites Hotel Albuquerque, New Mexico All that parcel of land, together with all improvements thereon and appurtenances thereto, lying in the City of Albuquerque, County of Bernalillo, New Mexico, such parcel of land is more particularly described as follows: Tract lettered B-1 of LA MESA MEDICAL CENTER, Albuquerque, New Mexico as the same is shown and designated on the plat thereof filed in the Office of the County Clerk of Bernalillo County, New Mexico on July 15, 1996 in Map Book 96C, folio 314. 42 EXHIBIT B-8 Record Legal Description AmeriSuites Hotel Las Vegas, Nevada Situate in the County of Clark, State of Nevada, described as follows: That portion of the Southwest Quarter (SW 1/4) of Section 22, Township 21 South, Range 61 East, M.D.B. & M., described as follows: Parcel One (1) of the certain Parcel Map on file in File 89, Page 1, in the Office of the County Recorder of Clark County, Nevada and recorded May 19, 1997 in Book 970519 of Official Records as Document No. 01053. 43 EXHIBIT B-9 Record Legal Description AmeriSuites Hotel Cool Springs (Nashville), Tennessee The land situated in the County of Williamson, State of Tennessee, and is described as follows: Land in Williamson County, Tennessee, being Lot No. 353 on the Final Plat of Cool Springs East Subdivision, Section Ten, of record in Plat Book 23, page 127, Register's Office for Williamson County, Tennessee. Being the same property conveyed to Prime Hospitality Corp. by deed from Cool Springs Real Estate Associates, L.P. of record in Book 1456, page 68 in Register's Office for Williamson County, Tennessee. 44 EXHIBIT B-10 Record Legal Description AmeriSuites Hotel Wolfchase (Memphis), Tennessee Commencing at a point on the west line of Germantown Parkway (right-of-way varies) +2,073.01 feet south of the south line of U.S. Highway 64; thence S 43(Degree) 37' 35" W a distance of 258.12 feet to a point; thence S 08(Degree) 07' 05" W a distance of 257.51 feet to a point; thence S 27(Degree) 51' 03" W a distance of 147.39 feet to a point; thence S 49(Degree) 06' 37" W a distance of 325.61 feet to a point; thence S 48(Degree) 59' 58" W a distance of 9.56 feet to a point; thence S 58(Degree)13' 30" W a distance of 0.30 feet to a point; thence along a 653.11 foot radius curve to the left an arc distance of 449.74 feet (chord S 38(Degree) 29' 51" W, 440.91 feet) to a point; thence along a 582.50 foot radius curve to the left an arc distance of 248.13 feet (chord N 85(Degree)52' 23" W, 246.26 feet) to a point of compound curvature; thence along a 417.50 foot radius curve to the left an arc distance of 195.24 feet (chord S 68(Degree) 31' 35" W, 193.47 feet) to the POINT OF BEGINNING; thence continuing along a 417.50 foot radius curve to the left an arc distance of 123.63 feet (chord S 46(Degree) 38' 46" W, 123.18 feet) to a point; thence N 45(Degree) 19' 14" W a distance of 565.74 feet to a point; thence S 90(Degree) 00' 00" E a distance of 438.85 feet to a point; thence S 00(Degree) 00' 00" W a distance of 180.92 feet to a point of curvature; thence along a 168.00 foot radius curve to the left an arc distance of 95.00 feet (chord S 16(Degree) 11' 59" E, 93.74 feet) to a point of tangency; thence S 32(Degree) 23' 58" E a distance of 50.09 feet to the point of beginning Together with rights for access, ingress and egress in that Construction, Operation and Reciprocal Easement Agreement by and between Home Depot U.S.A., Inc., and Faison-Memphis Limited Partnership, for The Commons Shopping Center, being of record at Instrument No. FS 5933, in the Register's Office of Shelby County, Tennessee. Together with easement rights in and to that certain Reciprocal Access Easement by and between Volunteer '91 Limited Partnership, a Texas limited partnership, Kraft Food Ingredients Company, and St. Louis Investment Properties, Inc., a Missouri corporation, and Faison-Memphis Limited Partnership, a North Carolina limited partnership, recorded at Document No. FP 2012, in the Register's Office of Shelby County, Tennessee. Together with rights for access, ingress and egress across the L & G Development property as more particularly described in that certain Reciprocal Access Easement Agreement dated December 5, 1995, by and between L & G Development, LLC, Dayton Hudson Corporation, Anthony Giacosa, Charles Giacosa, and Faison Capital Development, Inc., recorded December 5, 1995, at Document No. FM 5344, and rerecorded on December 6, 1995, at Document No. FM 5852, both recordings in the Register's Office of Shelby County, Tennessee. 45 EXHIBIT C FORM OF LEASE Exhibit C to the Alliance Agreement is incorporated hereto as Exhibit C. 46 EXHIBIT D EXCEPTIONS TO SELLER REPRESENTATIONS AND WARRANTIES None 47 EXHIBIT E SCHEDULE OF AGREEMENTS RIVERCHASE (BIRMINGHAM) AMERISUITES OPERATING AGREEMENTS LODGENET ENTERTAINMENT CORPORATION - Lodgenet Guest Pay Agreement. Dated: 8/14/97. Term: 7 years LODGENET ENTERTAINMENT CORPORATION - PrimeStar Free to Guest Agreement. Dated: 8/14/97. Term: 7 years MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated: 5/13/97. Term: 39 months. OUTDOOR COMMUNICATIONS INC. - Painted Display Contract. Dated: 3/16/98. Term: 12 months. 48 KENDALL (MIAMI) AMERISUITES OPERATING AGREEMENTS MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated: 11/22/95. Term: 39 months. MOWREY ELEVATOR SERVICE, INC. - Full Maintenance Elevator Service Policy. Dated: 10/1/96. Term: 5 years. Cancelable upon 30 days written notice. ON COMMAND VIDEO CORPORATION - Video Service Agreement. Dated: 1/29/96. Term: 7 years. 49 AUGUSTA AMERISUITES OPERATING AGREEMENTS ON COMMAND VIDEO CORPORATION - Master System Agreement. Dated: 11/2/95. Term: 7 years. UNITED STATES ELEVATOR CORPORATION - Elevator Maintenance Agreement. Dated 12/20/90. Term: 5 years with automatic renewals. MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated: 3/29/96. Term: 39 months. LAMAR TRANSIT ADVERTISING - Shelter Contract. Dated: 10/1/97. Term: 12 months. FRIDEN NEOPOST - Purchase Order Lease of Postage Equipment. Dated: 12/21/95. Term: 39 months. 50 BATON ROUGE AMERISUITES OPERATING AGREEMENTS MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated 9/19/96. Term: 39 months. SCHINDLER ELEVATOR CORPORATION - Preventive Maintenance Agreement. Dated: 12/31/97. Term: 1 year with automatic 1 year renewals. WBRZ-TV CHANNEL 2 - License Agreement. Dated 11/1/97. Term: 2 years. 51 BWI (BALTIMORE) AMERISUITES OPERATING AGREEMENTS ON COMMAND VIDEO CORPORATION - Master System Agreement. Dated: 11/2/95. Term: 7 years with automatic renewals. ACKERLEY AIRPORT ADVERTISING - Outdoor sign agreement. Dated: 10/1/97. Term: 12 months. MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated: 4/3/96. Term: 39 months. 52 MALL OF AMERICA (EDEN PRAIRIE) (MINNEAPOLIS) AMERISUITES OPERATING AGREEMENTS MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated: 9/19/96. Term: 39 months. ON COMMAND VIDEO CORPORATION - Master System Agreement (Exhibit B). Dated: 12/29/95. Term: 7 years. 53 LAS VEGAS AMERISUITES OPERATING AGREEMENTS MITA COPYSTAR AMERICA - Lease of (2) copiers. Dated: 9/9/97. Term: 39 months. FRIDEN NEOPOST - Lease of Postage Equipment. Dated 2/18/98. Term: 39 months. LODGENET ENTERTAINMENT CORPORATION - Guest Pay Agreement. Dated: 8/6/97. Term: 7 years. 54 COOL SPRINGS (NASHVILLE) AMERISUITES OPERATING AGREEMENTS LODGENET ENTERTAINMENT CORPORATION - PrimeStar Free to Guests TV Service. Dated: 7/14/97. Term: 7 years. LODGENET ENTERTAINMENT CORPORATION - Guest Pay Agreement. Dated: 7/14/97. Term: 7 years. MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated: 3/6/97. Term: 39 months. PITNEY BOWES CREDIT CORPORATION - Quarterly Invoice for Lease of Postage Equipment. Commencement Date: 7/10/97. Term: 51 months. FRYE ADVERTISING SERVICES CO. - Advertising Display Contract. Dated: 2/1/98. Term: 12 months. 55 ALBUQUERQUE, NEW MEXICO AMERISUITES OPERATING AGREEMENTS [To be prepared by the Seller and approved by the Purchaser prior to the expiration of the Review Period.] 56 WOLFCHASE (MEMPHIS) AMERISUITES OPERATING AGREEMENTS SCHINDLER ELEVATOR CORPORATION - Preventive Maintenance Agreement. Dated: 1/7/98. Term: 1 year with 1 year automatic renewals. FRIDEN NEOPOST - Purchase Order - Rental of Postage Meter. Dated: 1/20/97. Term: Ongoing. TANNER-PECK OUTDOOR ADVERTISING - Painted Bulletin Order. Dated: 11/4/96. Term: 3 years. MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated: 9/17/96. Term: 39 months. ON COMMAND VIDEO CORPORATION - Master System Agreement (Exhibit B). Dated: 12/29/95. Term: 7 years. 57 AMENDMENT TO PURCHASE AND SALE AGREEMENT This Amendment to Purchase and Sale Agreement, dated as of May ___, 1998, between PRIME HOSPITALITY CORP., a Delaware corporation ("Seller"), and EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership ("Purchaser"), recites and provides as follows: RECITALS A. By Purchase and Sale Agreement dated as of April __, 1998 ( the "Original Agreement"), the Seller agreed to sell and the Purchaser agreed to purchase a portfolio of ten AmeriSuites Hotels (collectively, the "Hotels") and related property rights (collectively, the "Properties"), more particularly described in the Original Agreement. B. The Seller and the Purchaser desire to amend the Original Agreement on the terms and conditions set forth herein. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual provisions of this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. All of the capitalized terms used in this Amendment shall have the same meaning as set forth in the Existing Agreement unless otherwise defined in this Amendment. 2. Substitute Hotels. The original Agreement is hereby partially terminated as to this Hotel located in Primacy (Memphis), Tennessee (the "Terminated Hotel"). The Seller agrees to sell and the Purchaser agrees to purchase the AmeriSuites hotel located in _______________, as more particularly described in Exhibit B attached hereto (the "Substitute Hotel"), which shall be deemed a Hotel under the Original Agreement substituted in lieu of the Terminated Hotel. The Purchase Price is amended to $____________________, with the Allocable Purchase Price attributable to the Substitute Hotel equality $__________________, and with Exhibit A to the Original Agreement being deleted and Exhibit A attached hereto being substituted in lieu thereof. The list of Contracts applicable to the Substitute Hotel is attached hereto as Exhibit E. The purchase and sale of the Substitute Hotel shall be governed by the terms and conditions of the Original Agreement, provided, however, that the Review Period for the Substitute Property only shall expire on the date one day prior to the Closing Date. 3. Ratification. Except to the extent amended by this Amendment, the Seller and the Purchaser ratify and confirm the Existing Agreement, which remains in full force and effect. 4. Integration. This Amendment constitutes the entire agreement between the parties with respect to the modification of the Existing Agreement. There are no promises, agreements, conditions, undertakings, understandings, or covenants, oral or written, express or 1 58 implied, between the parties with respect to the modification of the Existing Agreement, or the transactions described in the Existing Agreement, other than as set forth in this Amendment. 5. Successors and Assigns. All the terms and conditions of this Amendment shall be binding upon, and inure to the benefit of, the parties hereto and their respective permitted heirs, successors and assigns. 6. Counterparts. To facilitate execution, this Amendment shall be executed in as many counterparts as may be required. 2 59 SIGNATURE PAGE AMENDMENT TO PURCHASE AND SALE AGREEMENT PRIME HOSPITALITY CORP. By: _______________________________ Name:______________________________ Title:_____________________________ 3 60 SIGNATURE PAGE AMENDMENT TO PURCHASE AND SALE AGREEMENT EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership By: Equity Inns Trust, a Maryland real estate investment trust, its general partner By: _______________________________ Name:______________________________ Title:_____________________________ 4 61 EQUITY INNS PARTNERSHIP, L.P. c/o EQUITY INNS, INC. Suite 102 4735 Spottswood Avenue Memphis, Tennessee 38117 May 27, 1998 BY FACSIMILE 973/882-1787 Prime Hospitality Corp. 700 Route 46 East Fairfield, New Jersey 07004 Attention: Joseph Bernadino, Esquire EQUITY INNS PARTNERSHIP, L.P./PRIME HOSPITALITY CORP. SALE-LEASEBACK OF TEN AMERISUITES HOTELS, SPRING, 1998 Gentlemen: This letter is with respect to the Agreement of Purchase and Sale dated as of April 30, 1998 (the "Agreement") between Prime Hospitality Corp., as seller, and the undersigned Equity Inns Partnership, L.P., as purchaser. This letter hereby amends the Agreement to provide that the "Review Period" (as defined in the Agreement) shall not expire until 5:00 p.m., eastern, on June 15, 1998. Very truly yours, EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership By: Equity Inns Trust, a Maryland real estate investment trust, general partner By:________________________________ Name:______________________________ Title:_____________________________ 62 Prime Hospitality Corp. August 13, 1998 Page 2 SEEN AND AGREED: PRIME HOSPITALITY CORP. By: ______________________________ Name:_____________________________ Title:______________________________ EX-11 3 COMPUTATION OF PER SHARE EARNINGS 1 (c) All such notices shall be addressed, if to Seller to: Prime Hospitality Corp. 700 Route 46 East Fairfield, New Jersey 07707-2700 Attn: Mr. David Simon [Telecopier No. (201) 882-8577] and Prime Hospitality Corp. 700 Route 46 East Fairfield, New Jersey 07707-2700 Attn: General Counsel [Telecopier No. (201) 882-8577] if to Purchaser, to: Equity Inns Partnership, L.P. 4735 Spottswood, Suite 102 Memphis, Tennessee 38117 Attn: Mr. Phillip H. McNeill, Sr. [Telecopier No. (901) 761-1485] with a copy to: Hunton & Williams 1751 Pinnacle Drive, Suite 1700 McLean, VA 22102 Attn: Gerald R. Best, Esq. [Telecopier No. (703) 714-7410] (d) By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America. 12.5. Waivers, Etc. Any waiver of any term or condition of this Agreement, or of the breach of any covenant, representation or warranty contained herein, in any one instance, shall not operate as or be deemed to be or construed as a further or continuing waiver of any other breach of such term, condition, covenant, representation or warranty or any other term, condition, covenant, representation or warranty, nor shall any failure at any time or times to enforce or require performance of any provision hereof operate as a waiver of or affect in any - 21 - EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 JUN-20-1998 59,399 19,476 22,011 415 0 119,892 1,187,758 78,625 1,282,640 85,180 474,021 546 0 0 626,829 1,282,640 226,234 226,234 0 180,469 0 0 11,488 54,617 20,754 33,863 0 0 0 33,863 .68 .63
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