Nevada-Las Vegas-Travelodge Purchase Agreement - Grand Casinos Nevada I Inc. and Metroflag BP LLC
PURCHASE AGREEMENT BY AND AMONG GRAND CASINOS NEVADA I, INC., A MINNESOTA CORPORATION as Seller and Metroflag BP, LLC, a Nevada limited liability company as Buyer Effective Date: December 28, 2001 1 <PAGE> PURCHASE AGREEMENT THIS PURCHASE AGREEMENT ("AGREEMENT") is entered into this 28th day of December, 2001, by and between GRAND CASINOS NEVADA I, a Minnesota corporation ("GCN") (hereafter referred to as "GCN" or "SELLER") and METROFLAG BP, LLC, a Nevada limited liability company ("BUYER"). RECITALS: 1. Seller is the tenant under that certain Lease Agreement originally by and between Brooks Family Trust and Nevada Brooks Cook, as Landlord, and Cloobeck Enterprises, a California corporation ("CLOOBECK") and GCN, as Tenant, dated June 17, 1996 (the "BROOKS LEASE"), covering the real property located in Las Vegas, Nevada which is improved with a motel operating under the name of "Travelodge" and which real property is legally described on EXHIBIT A attached hereto (the "TRAVELODGE PARCEL"). 2. Buyer desires to purchase the Seller's interest in the Travelodge Parcel, including Seller's leasehold interest under the Brooks Lease, Seller's option to purchase the Travelodge Parcel as provided in the Brooks Lease (collectively, the "TRAVELODGE PROPERTY"), and any personal property owned by Seller and physically located on the Travelodge Property ("PERSONAL PROPERTY") all in accordance with the terms and conditions hereinafter set forth. the travelodge property and any personal property pertaining thereto and any appurtenant rights to the foregoing shall collectively be hereafter referred to as the "PROPERTY." 3. Seller is willing to grant and extend to Buyer such purchase right. 4. Seller is also the fee owner of real property located in Las Vegas, Nevada, which is improved with an underground parking structure and a retail shopping center known as the "Polo Plaza" and which real property is legally described on EXHIBIT B attached hereto (the "POLO PROPERTY"). 5. Simultaneously herewith, Metroflag Polo, LLC, a Nevada limited liability company ("METROFLAG POLO") and Seller have entered into that certain Purchase Agreement (the "POLO PURCHASE AGREEMENT") whereby Metroflag Polo has agreed to purchase and Seller has agreed to sell to Metroflag Polo the Polo Property. NOW, THEREFORE, in consideration of the agreements hereinafter provided and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by Buyer and Seller, Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller the Property in its "As-Is, Where-Is, with All Faults" condition (except as otherwise specifically provided or represented in this Agreement) as more particularly set forth in this Agreement. 2 <PAGE> SECTION I PURCHASE PRICE; REDEVELOPMENT/CONSTRUCTION LOAN AND DEFICIT NOTE (a) It is hereby agreed that the purchase price for the Property shall be Eight Million and 00/100 Dollars ($8,000,000.00) (the "PURCHASE PRICE"). THE PURCHASE PRICE SHALL BE PAID BY BUYER TO SELLER AS FOLLOWS: (i) $500,000.00 cash (the "DOWN PAYMENT"), subject to prorations, payable by Buyer at Closing (as hereinafter defined). (ii) Buyer shall execute and deliver to Seller at the Closing (i) a promissory note in the original principal amount of $7,500,000.00 (the "NOTE") substantially in the form of EXHIBIT C attached hereto payable to the order of Seller in such amount, and (ii) a first priority Deed of Trust (the "DEED OF TRUST") on the Property securing the Note, substantially in the form of EXHIBIT D attached hereto. The Note shall provide that the principal balance thereunder shall not accrue interest. The entire outstanding principal balance under the Note shall become due and payable on June 28, 2004 (the "MATURITY DATE"). (iii) Upon either, the satisfaction of all the Post-Closing Conditions (as hereinafter defined), or Buyer's waiver of any unsatisfied Post-Closing Conditions, Buyer shall pay to Seller $500,000.00 (the "SECOND PAYMENT") and the Down Payment and the Second Payment shall become non-refundable. The Second Payment shall be deemed to be a partial prepayment of the Note and shall reduce the outstanding principal balance of the Note accordingly. (b) Buyer contemplates obtaining financing of up to $4,000,000.00 (the "REDEVELOPMENT/CONSTRUCTION LOAN") for certain redevelopment and construction on the Property (the "LIMITED IMPROVEMENTS") which financing would be secured by a deed of trust on the Property. Provided that (i) Buyer can reasonably demonstrate to Seller that the Limited Improvements and the leasing of the Property at prevailing market rates can reasonably be expected to enhance the value of the Property by not less than an amount equal to one hundred and fifty percent (150%) of the principal amount of the Redevelopment/Construction Loan, (ii) Buyer provides Seller with assurances reasonably acceptable to Seller of the cost of construction and that any construction financed by the Redevelopment/Construction Loan shall be completed, (iii) the Redevelopment/Construction Loan is assumable by Seller, and (iv) the Limited Improvements are bonded and on a guaranteed maximum general contract, Seller agrees to subordinate the Deed of Trust to any deed of trust securing a Redevelopment/Construction Loan and shall execute and deliver to any lending institution providing such Redevelopment/Construction Loan any and all reasonable and customary subordination agreements and other agreements required in connection therewith. <PAGE> (c) During the term of the Note, Seller acknowledges and agrees that Seller shall advance to Buyer on a monthly basis an amount equal to one-half (1/2) of the monthly cash operating deficit from the operation of the Property for the prior calendar month; provided, however, that Seller shall not be obligated to advance more than $3,000,000.00 in the aggregate for such cash operating deficits. Buyer shall be obligated to repay any such amounts advanced to Buyer pursuant to the form of Deficit Note attached hereto as EXHIBIT I (the "DEFICIT NOTE"). SECTION II BUYER'S PUT RIGHT (a) In the event that: (i) (A) one or more of the representations and warranties set forth in Section III is breached, (B) Buyer notifies Seller thereof within the Post Closing Conditions Period, and (C) the aggregate reasonably foreseeable damages which Buyer could incur resulting therefrom could be expected to exceed $250,000.00 (either singly or in the aggregate for all such breaches), and (D) Seller fails to cure such breaches by the expiration of the Post-Closing Conditions Period; or (ii) Seller does not satisfy all of the Post-Closing Conditions set forth in Section V hereof by the expiration of the Post-Closing Conditions Period, then, at Buyer's option, Seller shall be obligated to repurchase the Property from Buyer (the "REPURCHASE") on the terms and conditions set forth below. Buyer shall provide written notice to Seller of its election to either require the Seller to consummate the Repurchase (the "REPURCHASE NOTICE") within five (5) business days after the expiration of the Post-Closing Conditions Period. The closing of such repurchase shall occur not later than fifteen (15) days after the date that the Repurchase Notice is delivered to Seller. (b) In the event Seller is required to repurchase the Property as described above, (i) Buyer shall convey the Property to Seller by the same form of assignment of the Brooks Lease in its "AS-IS" - "WHERE-IS" condition subject to all matters affecting title thereto present on the Closing Date and any additional matters which may have arisen after the Closing Date (subject to Buyer's Post-Closing Covenants as defined below), (ii) the purchase price for such repurchase shall be $500,000.00 payable in cash (by certified check or wire transfer of immediately available funds), (iii) Seller shall assume any Redevelopment and Construction Loan, (iv) the Note and Deficit Note shall be cancelled and Buyer shall no longer have any liability to Seller thereunder, (v) Seller shall assume the general contract and any other agreements or contracts entered into by Buyer in related to the planning, design and construction of the Limited Improvements, including, without limitation, any contracts with any architects, engineers, consultants, contractors, suppliers and materialmen and, subject to Buyer's Post-Closing Covenants, any leases entered into by Buyer affecting the Property (the "POST-CLOSING AGREEMENTS"), (vi) Seller shall have the option (but not the obligation) to assume all of Buyer's obligations under any contracts, agreements and obligations entered into by Buyer after the Closing Date other than the Post-Closing Agreements, (vii) subject to Buyer's Post-Closing Covenants, Buyer shall assign to Seller at the Closing of the Repurchase all of Buyer's right, title and interest to any plans, drawings, sketches, renderings and other work product of any architects, engineers, contractors or consultants engaged by Buyer after the Closing hereunder, and (viii) Seller shall indemnify Buyer from any and all claims, damages or liabilities <PAGE> whatsoever in connection with any Post-Closing Agreements which accrue on and after the date of the Repurchase and Buyer shall indemnify Seller from any and all claims, damages or liabilities whatsoever in connection with any Post-Closing Agreements which accrue prior to the date of the Repurchase. (c) Buyer contemplates commencing pre-development activities, including, without limitation, planning, pre-leasing, surveying, demolition and construction on the Property (the "PRE-DEVELOPMENT ACTIVITIES") before the expiration of the Post-Closing Conditions Period. Buyer covenants to Seller that Buyer shall (i) not execute any leases affecting the Property unless such leases contain a provision allowing the landlord to terminate the lease upon ninety (90) days notice to the tenant, and (ii) not enter into any contracts or agreements with a term in excess of one (1) year affecting the Property other than the Post-Closing Agreements. The foregoing covenants in (i) and (ii) are collectively refereed to as "BUYER'S POST-CLOSING COVENANTS". SECTION III EXISTING LEASES Seller hereby represents and warrants to Purchaser that attached to this Agreement as composite EXHIBIT E is a complete and correct list of all written leases (other than the Brooks Lease) and subleases (and all amendments thereto, if applicable), tenancies or other occupancy arrangements affecting the Travelodge Property (collectively, the "Leases"), setting forth the name of the tenant, the space affected, the rent, the term (including any options to renew), the security deposit, if any, and any special concessions, prepaid rent, options to purchase or rights of first refusal. Seller represents and warrants to Purchaser that: a. No other parties have any rights of occupancy or possession of the Property or any portions thereof except as set forth in EXHIBIT E attached hereto and no tenant of any portion of the Property has any option to purchase the Property or any portion thereof, nor any rights of first refusal with respect to same (other than rights of Seller under the Brooks Lease). b. Seller has not received security deposits under any of the Leases except the security deposits listed in EXHIBIT E, and Seller has not accepted payment of any rent under any of the Leases for more than one (1) month in advance. c. There are no modifications, understandings or agreements with respect to the Leases except as set forth in the Leases. d. All of the Leases are in good standing and without default on the part of Seller as of the date hereof. Seller has not delivered any notice of default to any of the tenants under the Leases and except as described in EXHIBIT E, Seller is not aware of any tenant defaults thereunder. This representation shall survive the Closing. e. There are no rental commissions due with respect to any of the Leases nor for <PAGE> the renewal of same. f. Except for the Leases and the contracts and agreements listed on EXHIBIT F attached hereto, to the best of Seller's knowledge, Seller has not entered into (and the Property is not subject to) any contracts, arrangements, licenses, concessions, easements, or other agreements, including, without limitation, service arrangements and employment agreements, either recorded or unrecorded, written or oral, affecting the Property, or any portion thereof or the use thereof. Seller represents that it has provided Buyer with true, complete and correct copies of all contracts and agreements listed in EXHIBIT F. SECTION IV TITLE EVIDENCE Buyer has received and reviewed a title insurance commitment prepared by Lawyers Title of Nevada, Inc. (the "Title Company") and that certain preliminary survey dated June 23, 2000, prepared by G. C. Wallace, Inc. (the "Survey") and has determined that the matters set forth in EXHIBIT G attached hereto are not acceptable to Buyer (the "Unacceptable Exceptions"). Any additional matters shown on any endorsement to the Commitment or an updated Survey arising prior to the Closing Date which, in Buyer's exclusive (but reasonable) discretion, adversely affect Buyer's ability to own, use and develop the Property in any material respect shall be deemed to be Unacceptable Exceptions. Seller has elected to satisfy or remove to Buyer's reasonable satisfaction (and that of Title Company) all Unacceptable Exceptions so that such matters may be eliminated as exceptions to the Commitment. Seller shall use its reasonable best efforts to satisfy, remove by payment, bonding, or otherwise all of the Unacceptable Exceptions, including bringing suit, if necessary, to cure any such Unacceptable Exceptions. SECTION V POST-CLOSING CONDITIONS Buyer and Seller acknowledge that the conditions set forth below in this Section were expected to be satisfied prior to the Closing but because of Buyer and Seller's desire to close the transaction contemplated hereby on the Closing Date, Buyer and Seller have agreed that such conditions are to be satisfied as set forth in this Section. Consequently, Seller acknowledges and agrees that Seller shall be obligated to complete or satisfy the following conditions (collectively, the "POST CLOSING CONDITIONS") within one hundred eighty (180) days after the Closing Date (the "POST CLOSING CONDITIONS Period"): (a) the form of Amended and Restated Grant of Reciprocal Easements and Declaration of Covenants, Conditions and Restrictions (the "AMENDED REA") attached hereto as EXHIBIT H which form has been approved by Buyer and Seller (or substantially the same form <PAGE> thereof with only such changes as may be acceptable to Buyer in its discretion) shall have been approved by all necessary parties (including, without limitation, the legal approval by any condominium or time share associations pertaining to the Towers Parcel (as defined in the Amended REA) in full compliance with their respective constituent and governing documents (the "ASSOCIATIONS")), and all conditions precedent therein shall have been satisfied, executed by all parties thereto (including all holders of deeds of trust or mortgages, to the extent legally required, consented to by the fee owner of the Travelodge Property and the signature by the Brooks Fee Owners of the Consent and Joinder of Brooks Fee Owners attached thereto), and filed for record, which will have the effect of amending and restating the 1996 REA and the 1998 REA (as those terms are defined in the Amended REA), superceding the 1996 REA and the 1998 REA in all respects and any easement affecting the Property as reasonably required by Buyer; and (b) Seller shall satisfy and/or remove all Unacceptable Exceptions. SECTION VI CLOSING CONDITIONS Buyer and Seller acknowledge and agree that the closing of the transaction contemplated under the Polo Purchase Agreement shall occur simultaneously with the Closing hereunder. SECTION VII "AS-IS", "WHERE-IS" CONDITION Buyer acknowledges that it is purchasing the Property in its "as is", "where is", with all faults condition (except as specifically provided for or represented herein) relying otherwise solely on its own existing knowledge and inspection of the Property. Except as set forth herein, Seller makes no representations or warranties as to any matters affecting the Property or as to the quality and quantity of the Property, including, without limitation, to the condition of any improvements thereto. SECTION VIII CLOSING The closing of Buyer's purchase of the Property (the "CLOSING") shall occur simultaneously with the execution of this Agreement by the parties hereto and such date shall be referred to herein as the "CLOSING DATE". The Closing shall take place in the office of Seller's counsel in Las Vegas, Nevada on or before Closing Date. Possession of the Property shall be deemed to have been given by Seller to Buyer coincident with the Closing. The following procedure shall govern the Closing: <PAGE> (a) At the Closing, Seller shall deliver to Title Company an appropriate form of Assignment and Assumption of Lease Agreement and Landlord Consent assigning the Brooks Lease (the "ASSIGNMENT") BY SELLER AND THE CURRENT OWNERS OF THE LANDLORD'S INTEREST UNDER THE BROOKS LEASE TO BUYER, WHICH ASSIGNMENT WILL NOT BE RECORDED AND A MEMORANDUM OF SAID ASSIGNMENT (THE "MEMORANDUM") WHICH SHALL BE IN RECORDABLE FORM AND SHALL CONVEY GOOD AND MARKETABLE RECORD TITLE TO THE SELLER'S INTEREST IN THE TRAVELODGE PARCEL (USING THE LEGAL DESCRIPTION SET FORTH ON THE COMMITMENT) TO BUYER, SUBJECT ONLY TO CURRENT REAL ESTATE TAXES AND ANY ENCUMBRANCES WHICH ARE NOT UNACCEPTABLE EXCEPTIONS. (b) On the Closing Date Seller shall deliver the following: (i) the Assignment and the Memorandum properly executed and acknowledged along with a standard form Seller's Affidavit if required by the County Recorder; (ii) current real estate tax statements; (iii) properly executed assignments of Seller's interest in and to the Leases and any other documents necessary to transfer Seller's interest in such Leases to Buyer; (iv) a Quit Claim Bill of Sale to Personal Property; (v) a FIRPTA Affidavit; (vi) properly executed form of Post-Closing Agreement attached hereto as EXHIBIT J (the "POST CLOSING AGREEMENT"); (vii) such funds as may be required by Seller to pay Closing costs or charges properly allocable to Seller; and (viii) notices to tenants of the Travelodge Property directing future rentals to be paid to Buyer. (c) On the Closing Date, Buyer shall deliver the following: (i) the balance of the cash due at Closing; (ii) properly executed Assignment (as same pertains to the assumption by Seller of the obligations of tenant thereunder); (iii) the Note, Deficit Note, the Deed of Trust and the Indemnity Deed of Trust attached hereto as EXHIBIT K (the "INDEMNITY DEED OF <PAGE> TRUST"), all properly executed and, with respect to the Deed of Trust and Indemnity Deed of Trust, in recordable form, along with all applicable fees, taxes and recording fees necessary to record the Deed of Trust and the Indemnity Deed of Trust; (iv) the Option Agreement (and a memorandum thereof, if necessary) in the form attached hereto as EXHIBIT L (the "OPTION AGREEMENT") (v) properly executed Post-Closing Agreement; and (vi) such funds as may be required to pay Closing costs or charges properly allocable to Buyer, including but not limited to the cost of the Buyer's title insurance policy. Seller shall pay all installments of real estate taxes and installments of special assessments due and payable in calendar year 2001 and prior years. Buyer shall pay all installments of real estate taxes and installments of special assessments due and payable in calendar year 2002 and thereafter. Insurance and rents with respect to the Property will be pro-rated at the Closing as of December 31, 2001. All other charges normal and customary in similar transactions shall be paid by the appropriate party who so customarily pays such charges. All rents collected by Buyer after Closing shall be deposited in Buyer's cash account and applied first to current rents due Buyer, second to delinquent rents due Buyer, and third to delinquent rents due Seller. With respect to any delinquent rents due Seller, Buyer shall make reasonable efforts to collect the same after Closing in the usual course of operation of the Property and such collections (less Buyer's costs of collection, including attorneys' fees and costs, and reasonable management and administrative fees) shall be remitted to Seller promptly after receipt by Buyer. At Closing, Seller shall also give Buyer a credit against the Purchase Price, or shall transfer and deliver to Purchaser a sum equal to the aggregate of any security deposits shown on EXHIBIT E, and, if applicable interest, if any, earned thereon to the Date of Closing and any advance rents paid on behalf of any tenant, which advance rents shall be prorated to the Date of Closing. SECTION IX EXPENSE OF ENFORCEMENT If either party brings an action at law or in equity to enforce or interpret this Agreement, the prevailing party in such action shall be entitled to recover reasonable attorneys' fees and court costs in addition to any other remedy granted. <PAGE> SECTION X NOTICE All notices, demands and requests required or permitted to be given under this Agreement must be in writing and shall be deemed to have been properly given or served either by personal delivery or by depositing the same in the United States mail, addressed to Seller or to Buyer, as the case may be, prepaid and registered or certified mail, return receipt requested, at the following addresses: TO SELLER: Grand Casinos Nevada I, Inc. 130 Cheshire Lane Minnetonka, Minnesota 55305 Attn: Chief Financial Officer WITH COPY TO: Maslon Edelman Borman & Brand, LLP 3300 Wells Fargo Center 90 South Seventh Street Minneapolis, Minnesota 55402 Attention: Neil I. Sell, Esq. TO BUYER: Metroplex, LLC 6430 Schirlls Avenue Las Vegas, Nevada 89118 Attention: Brett Torino and Flag Luxury Properties, LLC 1370 Avenue of the Americas, 29th Floor New York, NY 10019 Attention: Paul C. Kanavos WITH COPY TO: Greenberg Traurig, P.A. 1221 Brickell Avenue Miami, FL 33131 Attention: Juan P. Loumiet, Esq. and Gordon & Silver, Ltd. 3960 Howard Hughes Parkway, 9th Floor Las Vegas, Nevada 89109 Attention: Stephen B. Yoken, Esq. <PAGE> Rejection or refusal to accept or the inability to deliver any notice hereunder because of a changed address of which no notice was given shall be deemed to be receipt of the notice, demand or request. Any party shall have the right from time to time and at any time upon at least ten (10) days' written notice thereof, to change their respective addresses, and each shall have the right to specify as its address any other address within the United States of America. SECTION XI MERGER/BINDING AGREEMENT; SURVIVAL All previous negotiations and understandings between Seller and Buyer or their respective agents and employees with respect to the purchase of the Property hereunder are merged in this Agreement, which alone fully and completely express the parties' rights, duties and obligations with respect to such purchase. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal representatives. The parties hereto agree that all covenants, representations warranties and any other obligations shall survive the Closing hereunder. SECTION XII GOVERNING LAW This Agreement shall be deemed to be a contract made under the laws of the State of Nevada and for all purposes shall be governed and construed in accordance with the laws of said State. SECTION XIII DAMAGES Notwithstanding any other provision hereof to the contrary, Buyer hereby waives any claim against Seller, including, but not limited to, any claim for damages, for breach by Seller of any covenant, agreement, warranty or representation made hereunder, it being understood that the only remedy afforded Buyer for any such breach shall be the right afforded Buyer under Section II hereof to require Seller to consummate the Repurchase. Seller shall, however, continue to be liable hereunder to Buyer for third party claims that have been the subject of the indemnity provision of Sections II(b)(viii). SECTION XIV CONFIDENTIALITY <PAGE> Neither party hereto will make any public disclosure or publicity release pertaining to the existence of this Agreement or the subject matter contained herein without the consent of the other party. [The remainder of this page has been intentionally left blank.] <PAGE> IN WITNESS WHEREOF, the parties hereto have executed this Agreement intending to be bound by the provisions herein contained. SELLER: GRAND CASINOS OF NEVADA I, INC. a Minnesota corporation By: --------------------------------- Its: --------------------------------- BUYER: METROFLAG BP, LLC, a Nevada limited liability company By: Metro Two, LLC, a Nevada limited liability company, its member By: --------------------------- Brett Torino, Manager <PAGE> EXHIBIT A Legal description of Travelodge Property EXHIBIT B Legal description of Polo Property EXHIBIT C Note EXHIBIT D Deed of Trust on the Travelodge Property EXHIBIT E List of Leases EXHIBIT F Contracts and Agreements EXHIBIT G Unacceptable Exceptions EXHIBIT H Amended REA EXHIBIT I Deficit Note EXHIBIT J Post-Closing Agreement EXHIBIT K Indemnity Deed of Trust EXHIBIT L Option Agreement <PAGE> EXHIBIT E LIST OF LEASES 1. 2. 3. 4.