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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) February 23, 1999
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HOMESTEAD VILLAGE INCORPORATED
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(Exact Name of Registrant as Specified in its Charter)
Maryland
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(State or Other Jurisdiction of Incorporation)
1-12269 74-2770966
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(Commission File Number) (I.R.S. Employer Identification No.)
2100 RiverEdge Parkway, Atlanta, Georgia 30328
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(Address of Principal Executive Offices) (Zip Code)
(770) 303-2200
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(Registrant's Telephone Number, Including Area Code)
Not applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On February 23, 1999 Homestead Village Incorporated ("Homestead") closed
on its previously announced agreement to sell 18 Homestead Village(R) hotels to
Hospitality Properties Trust for approximately $145 million. All of the hotels
will continue to be operated by Homestead under a long-term triple net lease
through at least December 2015. Two consecutive fifteen year renewal options are
exercisable on an all-or-none basis beginning in 2016. Minimum rent payable
under the lease agreement is approximately $15.96 million annually. The lease
provides for additional rent equal to a percentage of gross revenue increases at
these hotels beginning in July 2000. The hotels contain a total of 2,399 rooms
and are located in Virginia (6), Florida (6), Georgia (2), Maryland (2) and
North Carolina (2).
The foregoing summary is qualified in its entirety by reference to the
Agreement of Merger by and among Homestead Village Limited Partnership, and
certain of its affiliates, and HPT HSD Properties Trust, incorporated herein by
reference as Exhibit 2.1, to the Agreement to Lease by and between HPT HSD
Properties Trust and Homestead dated as of February 4, 1999, incorporated herein
by reference to Exhibit 99.1, to the Lease Agreement by and between HPT HSD
Properties Trust and HVI (2) Incorporated dated as of February 23, 1999,
incorporated herein by reference to Exhibit 99.2, to the Guaranty Agreement by
Homestead for the benefit of HPT HSD Properties Trust and Hospitality Properties
Trust dated as of February 23, 1999, incorporated herein by reference to Exhibit
99.3.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Financial statements of the acquired business have not been
provided, as Homestead is effectively reacquiring its own assets in
the above described simultaneous sale and leaseback of the above
described properties. The involved properties remain capitalized on
the balance sheet of Homestead, and Homestead will continue to
operate the involved properties in the ordinary course of business.
(b) Pro Forma Financial Information.
Pro forma financial statements reflecting the above described
transactions have not been provided as Homestead is effectively
reacquiring its own assets in the above described simultaneous sale
and leaseback of the above described properties. The involved
properties remain capitalized on the balance sheet of Homestead, and
Homestead will continue to operate the involved properties in the
ordinary course of business.
(c) Exhibits.
2.1 Agreement of Merger by and among Homestead Village Limited
Partnership, and certain of its affiliates and HPT HSD
Properties Trust dated as of February 4, 1999.
99.1 Agreement to Lease by and between HPT HSD Properties Trust
and Homestead Village Incorporated dated as of February 4,
1999.
99.2 Lease Agreement by and between HPT HSD Properties Trust, as
Landlord, and HVI (2) Incorporated, as Tenant, dated as of
February 23, 1999.
99.3 Guaranty Agreement by Homestead Village Incorporated for the
benefit of HPT HSD Properties Trust and Hospitality
Properties Trust dated as of February 23, 1999.
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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 hereunto duly authorized.
HOMESTEAD VILLAGE INCORPORATED
Dated: March 9, 1999 By: /s/ Jeffrey A. Klopf
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Jeffrey A. Klopf
Senior Vice President and Secretary
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EXHIBIT 2.1
AGREEMENT OF MERGER
by and among
HOMESTEAD VILLAGE LIMITED PARTNERSHIP,
and certain of its affiliates,
and
HPT HSD PROPERTIES TRUST
___________________________
February 4, 1999
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AGREEMENT OF MERGER
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THIS AGREEMENT OF MERGER is made as of the 4th day of February, 1999, by
and among (i) HOMESTEAD VILLAGE LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Partnership"), (ii) HOMESTEAD VILLAGE INCORPORATED, a Maryland
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corporation ("HSD"), (iii) HVI INCORPORATED, a Delaware corporation ("HVI"),
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(iv) ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Atlantic Partnership"), (v) ATLANTIC HOMESTEAD VILLAGE (1)
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INCORPORATED, a Maryland corporation ("Atlantic Corp" and, together with the
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Partnership, HSD, HVI and the Atlantic Partnership, jointly and severally, the
"HSD Parties"), and (vi) HPT HSD PROPERTIES TRUST, a Maryland real estate
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investment trust (the "Company").
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W I T N E S S E T H:
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WHEREAS, the Partnership is the owner of all the Properties (all
capitalized terms used and not otherwise defined herein having the meanings
ascribed to such terms in Section 1); and
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WHEREAS, the Company desires to acquire the Properties by merging the
Partnership into the Company, subject to and upon the terms and conditions set
forth below; and
WHEREAS, the HSD Parties wish to transfer all of the Properties to the
Company by merging the Partnership into the Company, subject to and upon the
terms and conditions set forth below; and
WHEREAS, HVI and the Atlantic Partnership are the holders of one hundred
percent (100%) of the interests in the Partnership; and
WHEREAS, Atlantic Corp is the sole general partner of Atlantic Partnership;
and
WHEREAS, HSD owns, directly or indirectly, all of the outstanding capital
stock of and all other interests in HVI, the Atlantic Partnership and Atlantic
Corp and the transactions contemplated by this Agreement are of direct and
material benefit to HSD;
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, the HSD Parties and the Company
hereby agree as follows:
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SECTION 1. DEFINITIONS
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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 "Agreement" shall mean this Agreement of Merger, together with
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Schedules A through G attached hereto, as it and they may be amended from time
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to time as herein provided.
1.2 "Agreement to Lease" shall mean that certain Agreement to Lease, dated
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as of the date hereof, by and between the Company and HSD, as it may be amended,
restated, supplemented or otherwise modified from time to time.
1.3 "Allocable Purchase Price" shall mean, with respect to any Property,
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the applicable amount set forth on Schedule A to this Agreement.
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1.4 "Assets" shall mean, with respect to any Hotel, collectively, all of
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the Real Property, the FF&E, the Documents, the Improvements, the Intangible
Property and the Tenant Leases owned by the Partnership in connection with or
relating to such Hotel and excluding any Excluded Assets.
1.5 "Atlantic Corp" shall have the meaning given such term in the first
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paragraph of this Agreement.
1.6 "Atlantic Partnership" shall have the meaning given such term in the
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first paragraph of this Agreement.
1.7 "Balance Sheet" shall have the meaning given such term in Section
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7.14(a).
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1.8 "Business Day" shall mean any day other than a Saturday, Sunday or any
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other day on which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive action to close.
1.9 "Closing" shall have the meaning given such term in Section 4.1(a).
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1.10 "Closing Date" shall have the meaning given such term in Section
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4.1(a).
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1.11 "Code" shall mean the Internal Revenue Code of 1986, as amended.
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1.12 "Company" shall have the meaning given such term in the first
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paragraph of this Agreement.
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1.13 "Company Benefit Arrangement" shall mean any benefit arrangement
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maintained by the Partnership or any of its ERISA Affiliates (or maintained by
any such Person within the preceding 6 years), covering any employees, former
employees, directors or former directors of the Partnership or any of its ERISA
Affiliates, or the beneficiaries of any of them.
1.14 "Company Employee Benefit Plan" shall mean any Employee Benefit Plan
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that is sponsored or contributed to by the Partnership of any of its ERISA
Affiliates (or that has been maintained by any such Person within the preceding
6 years) covering the employees or former employees of the Partnership or any of
its ERISA Affiliates.
1.15 "Contracts" shall mean, with respect to any Property, all hotel
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licensing agreements and other service contracts, equipment leases, booking
agreements and other arrangements or agreements to which the Partnership is a
party affecting the ownership, repair, maintenance, management, leasing or
operation of such Property, to the extent the Partnership's interest therein is
assignable or transferable, except to the extent transferred to the Tenant or
terminated prior to the Closing.
1.16 "Defective Property" shall have the meaning given such term in
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Section 3.2(a).
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1.17 "Delaware Law" shall mean Sections 17-101 et. seq. of Title 6 of the
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Delaware Code Annotated.
1.18 "Documents" shall mean, with respect to any Property, all books,
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records and files of the Partnership relating to the leasing, maintenance,
management or operation of such Property.
1.19 "Employee Benefit Plan" shall mean any employee benefit plan, as
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defined in Section 3(3) of ERISA.
1.20 "ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended.
1.21 "ERISA Affiliate" shall mean a Person and/or such Person's
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Subsidiaries or any trade or business (whether or not incorporated) which is
under common control with such Person or such Person's Subsidiaries or which is
treated as a single employer with such Person or any Subsidiary of such Person
under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of
ERISA.
1.22 "Excluded Assets" shall mean the items described in Exhibit F,
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attached hereto and made a part hereof.
1.23 "Excluded Properties" shall mean, collectively, all of the properties
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identified on Schedule C and any Property
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designated an "Excluded Property" pursuant to the applicable provisions of this
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Agreement.
1.24 "FF&E" shall mean, with respect to any Property, all appliances,
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machinery, devices, fixtures, appurtenances, equipment, signs, furniture,
furnishings and articles of tangible personal property of every kind and nature
whatsoever (other than motor vehicles) owned by the Partnership and located in
or at, or used in connection with the ownership, operation or maintenance of
such Property.
1.25 "Financial Statements" shall have the meaning given such term in
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Section 7.14(a).
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1.26 "GAAP" shall mean generally accepted accounting principles as in
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effect on the date of the applicable financial statements.
1.27 "Hotel" shall mean each hotel located at the properties identified on
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Schedule A, the legal descriptions of which are set forth on Schedules B-1
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through B-18.
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1.28 "HSD" shall have the meaning given such term in the first paragraph
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of this Agreement.
1.29 "HSD Parties" shall have the meaning given such term in the first
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paragraph of this Agreement.
1.30 "HVI" shall have the meaning given such term in the first paragraph
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of this Agreement.
1.31 "Improvements" shall mean, with respect to any Property, all
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buildings, fixtures, signs, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property with
respect to such Property.
1.32 "Intangible Property" shall mean, with respect to any Property, all
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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 the Partnership and all other transferable intangible
property, miscellaneous rights, benefits and privileges of any kind or character
with respect to such Property held by the Partnership.
1.33 "IRS" shall mean the United States Internal Revenue Service.
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1.34 "Lease" shall mean the lease to be entered into between the Company,
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as landlord, and the Tenant, as tenant, with respect to the Properties pursuant
to the Agreement to Lease.
1.35 "Maryland Law" shall mean Sections 8-101 et seq. of Title 8 of the
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Corporations and Associations Article of the Annotated Code of Maryland.
1.36 "Merger" shall mean the merger of the Partnership into the Company as
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provided in Section 2.1.
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1.37 "Operating Statements" shall have the meaning given such term in
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Section 7.14(b).
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1.38 "Partnership" shall have the meaning given such term in the first
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paragraph of this Agreement.
1.39 "Permitted Encumbrances" shall mean, with respect to any Property,
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(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; (b)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect use of such Property as an extended stay hotel
as currently operated and constructed; (c) such other nonmonetary encumbrances
as do not, in the Company's reasonable opinion, impair marketability and do not
materially interfere with the use of such Property as a fully functioning
extended stay hotel as currently operated and constructed; (d) UCC Financing
Statements which would be permitted pursuant to the terms of Section 21.9 of the
Lease; and (e) such other nonmonetary encumbrances with respect to such Property
which are not objected to by the Company in accordance with Sections 3.4 and
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3.5.
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1.40 "Person" shall mean the meaning given such term in the Lease.
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1.41 "Properties" shall mean, collectively, all of the Assets relating to
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the properties identified on Schedule A, the legal descriptions of which are set
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forth in Schedules B-1--B-18.
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1.42 "Purchase Price" shall have the meaning given such term in Section
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4.2.
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1.43 "Real Property" shall mean, with respect to any Property, the real
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property described in the applicable Schedule B-1 through B-18, together with
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all easements, rights of way, privileges, licenses and appurtenances which the
HSD Parties may own with respect thereto.
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1.44 "Review Period" shall mean the period commencing on the date of this
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Agreement and expiring on the first to occur of February 19, 1999 and the
Closing Date.
1.45 "Security Deposit" shall mean an amount equal to Fifteen Million Nine
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Hundred Sixty Thousand Dollars ($15,960,000).
1.46 "Subsidiary" shall have the meaning given such term in the Lease.
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1.47 "Surveys" shall have the meaning given such term in Section 3.4.
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1.48 "Tax Returns" shall have the meaning given such term in Section
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7.16(a).
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1.49 "Taxes" shall have the meaning given such term in Section 7.16(a).
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1.50 "Tenant" shall have the meaning given such term in the Lease.
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1.51 "Tenant Leases" shall mean, with respect to any Property, all leases,
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rental agreements or other agreements (other than agreements for letting of
rooms or other facilities to hotel guests) (including all amendments or
modifications thereto) which entitle any person to have rights with respect to
the use or occupancy of any portion of such Property.
1.52 "Title Commitments" shall have the meaning given such term in Section
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3.3.
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1.53 "Title Company" shall mean Chicago Title Insurance Company, or such
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other title insurance company as shall have been selected by the Company and
approved by the HSD Parties, which approval shall not be unreasonably withheld,
delayed or conditioned.
1.54 "To the Knowledge of the HSD Parties" shall mean to the actual
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knowledge of David C. Dressler, Jr., Michael D. Cryan and Laura Hamilton, after
reasonable inquiry and/or investigation.
1.55 "Year 2000 Issue" shall mean any significant risk that computer
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hardware or software and other mechanical systems used in the operation of the
Properties and/or the business or operations of the HSD Parties will not, in the
case of dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case or dates or time periods occurring prior to
January 1, 2000.
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SECTION 2. MERGER.
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2.1 Merger. Subject to the terms and conditions of this Agreement, on
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the Closing Date, the Partnership shall be merged with and into the Company in
accordance with the provisions of and with the effect provided under Delaware
Law and Maryland Law. The separate existence of the Partnership shall thereupon
cease and the Company shall be the surviving entity of the Merger and shall
continue to be governed by Maryland Law. The Merger shall be consummated
pursuant to the terms of this Agreement.
2.2 Declaration of Trust of the Survivor. The Declaration of Trust of the
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Company in effect immediately prior to the Merger shall be the Declaration of
Trust of the Company following the Merger, until amended in accordance with
Maryland Law.
2.3 Bylaws. The Bylaws of the Company in effect immediately prior to the
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Merger shall be the Bylaws of the Company following the Merger, until amended in
accordance with Maryland Law.
2.4 Trustees and Officers. The trustees and officers of the Company
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immediately prior to the Merger shall be the trustees and officers of the
Company following the Merger.
2.5 Interests in the Company and the Partnership.
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(a) Each share of beneficial interest of the Company issued and
outstanding at the time of the Merger shall remain outstanding from and after
the Merger in accordance with its current terms.
(b) Each interest in the Partnership issued and outstanding immediately
prior to the Merger shall, as of the time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to receive such holder's allocable share of the Purchase Price. As a
result of the Merger, and without any action on the part of the holder thereof,
at the time of the Merger, all interests in the Partnership shall be cancelled
and retired and shall cease to exist and each holder of and interest in the
Partnership shall thereafter cease to have any rights with respect thereto
except the right to receive, without interest, such holder's allocable share of
the Purchase Price.
SECTION 3. DILIGENCE.
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3.1 Diligence Inspections. For the Review Period and, thereafter, until
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Closing, the HSD Parties shall permit the Company and its representatives to
inspect the Properties and the Improvements (including, without limitation, all
roofs, electric,
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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 the HSD Parties with respect to the Properties and the
Partnership, and make copies thereof, at such reasonable times as the Company or
its representatives may request by notice to the HSD Parties (which notice may
be oral). To the extent that, in connection with such investigations, the
Company, its agents, representatives or contractors, damages or disturbs any of
the Real Property, the Improvements or FF&E located thereon, the Company shall
return the same to substantially the same condition which existed immediately
prior to such damage or disturbance. Neither the Company nor any of its agents,
representatives or contractors shall have any right whatsoever to alter the
condition of any Property, or portion thereof, without the prior written consent
of the HSD Parties, which consent shall not be unreasonably withheld, delayed or
conditioned. In no event shall any such inspection include any drilling into or
under the surface of any Property, soil sampling, water sampling or similar
activities commonly known as a "Phase II environmental study" without the prior
written consent of the HSD Parties, which consent shall not be unreasonably
withheld, delayed or conditioned. In the event that the transactions
contemplated by this Agreement are not closed and consummated for any reason,
the Company shall, upon the HSD Parties' request, deliver to the HSD Parties all
tests, reports and inspections of the Properties made and conducted by the
Company or for its benefit or any other documents or information the Company has
received pursuant to this Agreement. The Company shall indemnify, defend and
hold harmless the HSD Parties from and against any and all expense, loss or
damage which the HSD Parties may incur as a result of any act or omission of the
Company 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 negligence or misconduct of the HSD Parties. The
provisions of this Section 3.1 shall survive the termination of this Agreement
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and the Closing.
3.2 Defective Properties. (a) In the event that (i) the Company
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reasonably determines that a Property has structural, environmental or other
structural defects or conditions such that (x) expenditures equal to or greater
than three percent (3%) of the Allocable Purchase Price of such Property are
required in order to bring such Property into a reasonably satisfactory
condition in accordance with prevailing standards for like hotels or (y) the
calculation with respect to such Property of net operating income varies (as
determined on a full year rolling basis) by three percent (3%) or more of that
set forth in the financial data provided by the HSD Parties to the Company prior
to the date hereof (any such Property being hereinafter referred to as a
"Defective Property"), and (ii) the Company gives written notice thereof to the
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HSD Parties no later than the expiration of
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the Review Period (time being of the essence with respect to the giving of such
notice), identifying the Defective Property or Defective Properties and the
specific defects with respect thereto, such Property shall, subject to paragraph
(c) below, be deemed an Excluded Property.
(b) If, prior to the Closing, (i) any Property suffers a casualty or
condemnation which would cause such Property to become a Defective Property,
(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, and (iii) the Company provides written notice thereof
to the HSD Parties no later than the Closing Date, time being of the essence,
such Property shall, subject to paragraph (c) below, be deemed an Excluded
Property. Promptly upon learning of the same, the HSD Parties covenant and
agree to provide the Company with prompt written notice of any casualty or
condemnation affecting any Property.
(c) If the Company timely identifies any Defective Property and the
Company and the HSD Parties shall, acting reasonably and in good faith, be
unable or unwilling to agree that (x) the HSD Parties shall, at their sole cost,
remedy the applicable defect prior to the Closing (in which event the HSD
Parties shall have the right to adjourn the Closing Date for up to thirty (30)
days for such purpose), (y) the Company shall, notwithstanding such defect,
acquire the Defective Property subject to a reduction in the Allocable Purchase
Price of the Defective Property sufficient to compensate the Company for such
defect or (z) on the substitution of another property owned by the HSD Parties
for such Defective Property, the Company may, at any time prior to the Closing,
designate such Property as an Excluded Property and the Purchase Price shall be
reduced by the Allocable Purchase Price of such Property.
3.3 Title Matters. Prior to execution of this Agreement, the HSD Parties
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have ordered from the Title Company and directed the Title Company promptly to
deliver to the Company a preliminary title commitment, for an ALTA extended
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").
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Prior to the expiration of the Review Period, the Company shall give the
HSD Parties notice of any title exceptions (other than Permitted Encumbrances)
which adversely affect any Property and as to which the Company reasonably
objects. If, for any reason, the HSD Parties are unable or unwilling to take
such actions as may be required to cause such exceptions to be removed from the
Title Commitments, the HSD Parties shall give the Company notice thereof; it
being understood and agreed that the
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failure of the HSD Parties to give such notice within ten (10) Business Days
after the Company's notice of objection shall be deemed an election by the HSD
Parties not to remedy such matters. If the HSD Parties shall be unable or
unwilling to remove any title defects to which the Company has reasonably
objected, the Company may elect (i) to designate such Property an Excluded
Property, in which event, the Purchase Price shall be reduced by the Allocable
Purchase Price of the affected Property or (ii) to consummate the transactions
contemplated hereby, notwithstanding such title defect, without any abatement or
reduction in the Purchase Price on account thereof. The Company shall make any
such election by written notice to the HSD Parties given on or prior to the
fifth Business Day after the HSD Parties' notice of their unwillingness or
inability to cure such defect. Failure of the Company to give such notice shall
be deemed an election by the Company to proceed in accordance with clause (ii)
above and such exception shall be deemed a Permitted Encumbrance.
3.4 Survey Matters. Prior to execution of this Agreement, the HSD Parties
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have arranged for the preparation of an ALTA survey with respect to each of the
Properties (collectively, the "Surveys") by a licensed surveyor in the
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jurisdiction in which each such Property is located, which (i) contains an
accurate legal description of the applicable Property, (ii) shows the exact
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) includes a certification in
the form set forth in Schedule D, or such other form as may be acceptable to the
----------
Company, addressed to the Company, the Title Company and any other persons
requested by the Company or designated by the HSD Parties.
Prior to the expiration of the Review Period, the Company shall give the
HSD Parties notice of any matters shown thereon (other than Permitted
Encumbrances) which adversely affect any such Property in any material respect
and as to which the Company reasonably objects. If, for any reason, the HSD
Parties are unwilling or unable to take such actions as may be required to
remedy the objectionable matters, the HSD Parties shall give the Company prompt
notice thereof; it being understood and agreed that the failure of the HSD
Parties to give such notice within ten (10) Business Days after the Company's
notice of objection shall be deemed an election by the HSD Parties not to remedy
such matters. If the HSD Parties shall be unwilling or unable to remove any
survey defect to which the Company has reasonably objected, the Company may
elect (i) to designate such Property an Excluded Property, in which event, the
Purchase Price shall be reduced by the Allocable Purchase Price of the affected
Property or (ii) to consummate the transactions contemplated hereby,
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notwithstanding such defect, without any abatement or reduction in the Purchase
Price on account thereof. The Company shall make any such election by written
notice to the HSD Parties given on or prior to the fifth Business Day after the
HSD Parties' notice of their inability to cure such defect and time shall be of
the essence with respect to the giving of such notice. Failure of the Company
to give such notice shall be deemed an election by the Company to proceed in
accordance with clause (ii) above and such matter shall be deemed a Permitted
Encumbrance.
3.5 Termination of Agreement. In the event that more than three (3)
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Properties shall be designated Defective Properties and Excluded Properties
pursuant to Section 3.2(c), either the HSD Parties or the Company shall have the
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right to terminate this Agreement by the giving of written notice thereof to the
other on or prior to the Closing Date, whereupon, no party shall have any
further rights or obligations under this Agreement except those which expressly
survive such termination.
SECTION 4. CLOSING.
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4.1 Closing.
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(a) The closing of the Merger (the "Closing") shall be held at the
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offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts, or at such other location as the HSD Parties and the Company may
agree, at 10:00 a.m. local time, on a date (the "Closing Date") which is the
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later to occur of (i) February 23, 1999 and (ii) the date as of which all
conditions precedent to the Closing herein set forth have either been satisfied
or waived by the party in whose favor such conditions run. In the event that the
Closing shall not have occurred on or before March 31, 1999, either party shall
have the right, provided such party is not in default under this Agreement, by
the giving of written notice thereof to the other, to terminate this Agreement.
(b) If all of the conditions to the Merger set forth in this Agreement
shall have been fulfilled or waived and this Agreement shall not have been
terminated, on the Closing Date, the Parties shall (i) execute and deliver to
the Secretary of State of the State of Delaware a Certificate of Merger in
accordance with Delaware Law and (ii) execute and deliver to the State
Department of Assessments and Taxation of Maryland Articles of Merger in
accordance with Maryland Law. The Merger shall become effective upon the later
of the acceptance for record by the State Department of Assessments and Taxation
of Maryland of Articles of Merger and the acceptance for filing of the
Certificate of Merger by the Secretary of State of the State of Delaware.
<PAGE>
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4.2 Purchase Price. (a) At the Closing, the Company shall pay to the
--------------
HSD Parties a purchase price (the "Purchase Price") in the amount of One Hundred
--------------
Forty-Five Million Dollars ($145,000,000), less the amount of the Security
Deposit, which amount shall be held and paid in accordance with the applicable
provisions of the Lease, except that there shall be added to or deducted from
the Purchase Price such amounts as may be required pursuant to Section 10.
----------
(b) The Purchase Price shall be payable at the Closing by wire transfer of
immediately available funds on the Closing Date to an account or accounts to be
designated by the HSD Parties prior to the Closing.
(c) The Purchaser shall pay the Purchase Price as instructed by the HSD
Parties and shall have no obligation to determine the adequacy of any portion
thereof received by any HSD Party.
SECTION 5. CONDITIONS TO COMPANY'S OBLIGATION TO CLOSE.
--------- -------------------------------------------
The obligation of the Company to effect the Merger on the Closing Date
shall be subject to the satisfaction of the following conditions precedent on
and as of the Closing Date:
5.1 Closing Documents. The HSD Parties shall have delivered to the
-----------------
Company:
(a) A Certificate of Merger and Articles of Merger, in form and substance
as required by Delaware Law and Maryland Law and otherwise reasonably
satisfactory to the Company and the HSD Parties, duly executed and acknowledged;
(b) A copy of the Agreement of Limited Partnership of the Partnership
certified as true, correct and complete by the HSD Parties;
(c) A copy of the Certificate of Limited Partnership of the Partnership
certified by the Secretary of State of the State of Delaware;
(d) A Certificate of Legal Existence for the Partnership issued by the
Secretary of State of the State of Delaware and by the Secretary of State of
each state in which the Properties are located;
(e) A duly executed copy of the Lease, all of the Incidental Documents (as
such term is defined in the Lease) including, without limitation, an
Indemnification Agreement in the form attached hereto as Schedule E, and all
----------
other documents
<PAGE>
-13-
and sums required to be delivered by the HSD Parties and/or the Tenant pursuant
to the Agreement to Lease;
(f) Certified copies of all charter documents, applicable resolutions and
certificates of incumbency and legal existence certificates with respect to the
HSD Parties and the Tenant;
(g) A letter of instruction to the Company and the Title Company addressing
the allocation of the Purchase Price among the HSD Parties;
(h) An escrow agreement, in form and substance reasonably satisfactory to
the Company and the HSD Parties, providing for the escrow of One Million Five
Hundred Thousand Dollars ($1,500,000) by the HSD Parties until the earlier of
resolution of the litigation described in Schedule G or the Company is satisfied
----------
that the Partnership has no liability for such matters; and
(i) Such other conveyance documents, certificates, deeds, affidavits and
other instruments as the Company or the Title Company may reasonably require to
effectuate the transactions contemplated by this Agreement.
5.2 Condition of Properties, Etc.
-----------------------------
(a) All the Improvements located on the Real Property shall, except as
otherwise provided in Section 3.2, 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 respect;
(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;
(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;
(e) There shall have been no material adverse change in the business,
affairs or operations of the HSD Parties or the Properties from that reflected
in the Financial Statements and Operating Statements; and
(f) All of the representations and warranties of the HSD Parties set forth
in Section 7 shall be true and correct in all material respects as of the
---------
Closing Date.
<PAGE>
-14-
5.3 Title Policies. The Title Company shall be prepared, subject only to
--------------
payment of the applicable premium and endorsement fees and delivery of all
conveyance documents in recordable form, to issue to the Company title insurance
policies, or endorsements to the Partnership's existing title policies, in form
and substance reasonably satisfactory to the Company in accordance with Section
-------
3.3, together with such affirmative coverages as the Company may reasonably
- ---
require and shall have been determined by the Title Company as available prior
to the expiration of the Review Period.
5.4 Opinions of Counsel. (a) The Company shall have received a written
-------------------
opinion from counsel to the HSD Parties, which counsel shall be reasonably
acceptable to the Company, in form and substance reasonably satisfactory to the
Company, regarding the organization and authority of the HSD Parties and the
Tenant, the enforceability of this Agreement, the Certificate of Merger and
Articles of Merger, the Lease and the Incidental Documents (as defined in the
Lease), the bankruptcy remote nature of the Tenant and such other matters with
respect to the transactions contemplated by this Agreement, the Agreement to
Lease and the Lease as the Company may reasonably require.
(b) The Company shall have received a zoning diligence memorandum from
local counsel to the Partnership, in form and substance reasonably satisfactory
to the Company, regarding the compliance of the Properties with respect to
zoning or, in lieu thereof, 3.1 zoning endorsements to the title policies to be
issued or endorsed at the Closing.
5.5 Reliance Letters. The Company shall have received letters addressed
----------------
to the Company, in form and substance reasonably satisfactory to the Company,
permitting the Company to rely on the environmental reports, engineering reports
and appraisals previously provided to the Company by the HSD Parties, each such
letter to be signed and delivered by the preparer of such reports.
5.6 Excluded Properties. The HSD Parties shall have provided evidence
-------------------
satisfactory to the Company regarding (a) the conveyance from the Partnership to
another Person of the Excluded Properties, (b) the absence of any liabilities in
the Partnership and (c) the absence of any assets in the Partnership other than
the Properties, including, without limitation, the Excluded Assets.
SECTION 6. CONDITIONS TO PARTNERSHIP'S OBLIGATION TO CLOSE.
--------- -----------------------------------------------
The obligation of the Partnership to effect the Merger on the Closing Date
is subject to the satisfaction of the following conditions precedent on and as
of the Closing Date:
6.1 Purchase Price. The Company shall deliver to the HSD Parties the
--------------
Purchase Price payable hereunder, by wire transfer of
<PAGE>
-15-
immediately available Federal funds, adjusted as herein provided, less the
amount of the Security Deposit.
6.2 Closing Documents. The Company shall have delivered to the HSD
-----------------
Parties:
(a) Duly executed and acknowledged counterparts of the documents described
in Section 5.1, where applicable; and
-----------
(b) Certified copies of all charter documents, applicable resolutions and
certificates of incumbency with respect to the Company.
6.3 Opinion of Counsel. The HSD Parties shall have received a written
------------------
opinion from Sullivan & Worcester LLP, counsel to the Company, in form and
substance reasonably satisfactory to the HSD Parties, regarding the organization
and authority of the Company, the enforceability of this Agreement and the Lease
and such other matters with respect to the transactions contemplated by this
Agreement as the HSD Parties may reasonably require.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF HSD PARTIES.
--------- ---------------------------------------------
To induce the Company to enter into this Agreement, the HSD Parties
represent and warrant to the Company as follows:
7.1 Status and Authority of the HSD Parties. Each of the HSD Parties is
---------------------------------------
duly organized, validly existing and in corporate good standing under the laws
of its state of formation, 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. Each of the HSD Parties 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.
7.2 Action of the HSD Parties. Each of the HSD Parties 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 any of the HSD Parties on or prior to the Closing Date, such document shall
constitute the valid and binding obligation and agreement of such HSD Party,
enforceable against such HSD Party 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 by any of the HSD
<PAGE>
-16-
Parties, 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 the Partnership pursuant to the terms of any indenture,
mortgage, deed of trust, note, evidence of indebtedness or any other agreement
or instrument by which any of the HSD Parties or the Partnership is bound.
7.4 Litigation. None of the HSD Parties has received written notice of
----------
and, to the knowledge of the HSD Parties, 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 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 any of the Properties or any of
the HSD Parties, (c) except as disclosed in Schedule G, will result in or
----------
subject the Properties or any of the HSD Parties to a material liability, or (d)
involves condemnation or eminent domain proceedings against any material part of
the Properties.
7.5 Existing Leases, Agreements, Etc. Other than the laundry leases,
---------------------------------
there are no material agreements affecting the Properties or the Partnership
which will be binding on the Company subsequent to the Closing Date.
7.6 Disclosure. To the knowledge of the HSD Parties, there is no fact or
----------
condition which materially and adversely affects the business or condition of
the Properties, the Partnership or any of the HSD Parties which has not been set
forth in this Agreement, the 1997 10-K, the three 1998 10-Qs, the November 1998
earnings release and the draft February 1999 earnings release of HSD or in the
other documents, certificates or statements furnished to the Company in
connection with the transactions contemplated hereby.
7.7 Utilities, Etc. To the knowledge of the HSD Parties, 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 and are of sufficient capacity to meet adequately all needs
and requirements necessary for the current use and operation of the Properties.
To the knowledge of the HSD Parties, no fact, condition or proceeding exists
which would result in the termination or material impairment of the furnishing
of such utilities to the Properties.
7.8 Compliance With Law. To the knowledge of the HSD Parties, except as
-------------------
disclosed to the Company in writing not less than ten (10) Business Days prior
to the expiration of the Review Period, including in any engineering report, (i)
the Properties and the current use and operation thereof do not violate in any
material respect any federal, state, municipal and other
<PAGE>
-17-
governmental statutes, ordinances, by-laws, rules, regulations or any other
legal requirements, including, without limitation, those relating to
construction, occupancy, zoning, 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. Except as
disclosed to the Company in writing not less than ten (10) Business Days prior
to the expiration of the Review Period, none of the HSD Parties has received
written notice of any threatened request, application, proceeding, plan, study
or effort which would materially adversely affect the present use or zoning of
any of the Properties or which would modify or realign any adjacent street or
highway in a material and adverse way.
7.9 Real Estate Taxes. To the knowledge of the HSD Parties, other than
-----------------
the amounts disclosed by tax bills, 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.
7.10 Hazardous Substances. Except as disclosed to the Company or as
--------------------
described in any environmental report delivered to the Company prior to the
expiration of the Review Period, to the knowledge of the HSD Parties, none of
the HSD Parties nor any tenant or other occupant or user of any of the
Properties, or any portion thereof, has 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 the knowledge
of the HSD Parties, except as disclosed to the Company or as described in any
environmental report delivered to the Company prior to the expiration of the
Review Period, the Properties are free from any such hazardous waste,
contaminants, oil, radioactive and other materials, except any such materials
maintained in accordance with applicable law.
7.11 Ownership Matters. The HSD Parties are the sole, direct and
-----------------
indirect, owners of all the general and limited partner interests in the
Partnership. The transactions contemplated by this Agreement are of direct
material benefit to all of the HSD Parties.
7.12 Assets. On the Closing Date, the sole assets of the Partnership will
------
be the Properties (other than any Property designated an Excluded Property
pursuant to the applicable provisions of this Agreement). As of the Closing
Date, the
<PAGE>
-18-
Partnership will have no outstanding, unsatisfied or executory obligations or
liabilities other than the Excluded Assets.
7.13 Employees. The Partnership has no employees, is not a party to any
---------
employment agreements and has no former employees.
7.14 Financial Statements.
--------------------
(a) The HSD Parties have heretofore furnished to the Company copies of
the audited consolidated financial statements of HSD set forth in its Annual
Report on Form 10-K (the "10-K") for the fiscal year ended December 31, 1997,
----
the unaudited consolidated financial statements of HSD and its Subsidiaries set
forth in its Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998 and a balance sheet for the Partnership as of December 31,
1998 (the "Balance Sheet" and, together with the 10-K and 10Q, collectively, the
-------------
"Financial Statements"). The Financial Statements, including in each case the
--------------------
notes thereto, have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, except as otherwise
noted therein, are true, accurate and complete in all material respects, do not
contain any untrue statement of a material fact or omit to state a material fact
required by GAAP to be stated therein or necessary in order to make the
statements contained therein not misleading, and fairly present the results of
operations of the HSD Parties on the bases therein stated, as of the respective
dates thereof, and for the respective periods covered thereby subject, in the
case of unaudited financial statements, to normal year-end audit adjustments and
accruals.
(b) The HSD Parties have heretofore furnished to the Company copies of
the unaudited operating statements for each of the Properties for the year ended
December 31, 1998 (collectively, the "Operating Statements"). The Operating
--------------------
Statements, including in each case the notes thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and, except as otherwise noted therein, are true, accurate and
complete in all material respects, do not contain any untrue statement of a
material fact or omit to state a material fact required by GAAP to be stated
therein or necessary in order to make the statements contained therein not
misleading, and fairly present the results of operations of the Properties on
the bases therein stated, as of the respective dates thereof, and for the
respective periods covered thereby subject, in the case of unaudited financial
statements, to normal year-end audit adjustments and accruals.
7.15 Pension and Benefit Plans. The Partnership has never established or
-------------------------
maintained, nor is it obligated to make contributions to or under or otherwise
participate in, any Company Employee Benefit Plan or Company Benefit
Arrangement. The Partnership has no liability with respect to any Company
Employee
<PAGE>
-19-
Benefit Plan or Company Benefit Arrangement that may have been established at
any time by any ERISA Affiliate.
7.16 Tax Matters.
-----------
(a) The Partnership has filed when due (including extensions) with local,
foreign and other governmental agencies all tax returns, estimates, information
and reports ("Tax Returns") required to be filed by the Partnership with respect
-----------
to all federal, state, local or foreign taxes, levies, imposts, duties, licenses
and registration fees, and similar charges, including, without limitation,
income taxes, unemployment and social security withholding taxes, sales and use
taxes, real estate transfer taxes, and interest, penalties, and additions to tax
with respect thereto ("Taxes"). Except where any failure to do so would not
-----
have a material adverse effect on the financial condition of the Partnership,
the Partnership has paid when due and payable all Taxes or, to the extent of
Taxes not yet due and payable, the Partnership has made required estimated
payments of or accrued or otherwise adequately reserved in accordance with GAAP
for the payment of all Taxes. All such filed Tax Returns are correct and
complete in all material respects. The Partnership has not received written
notice from any governmental agency in a jurisdiction in which it does not file
a Tax Return stating that it is or may be subject to taxation by that
jurisdiction. The Partnership is not a party to or bound by any agreement
providing for the allocation or sharing of Taxes. Any and all Taxes in respect
of periods commencing on or prior to the Closing Date and ending after such date
shall be apportioned in the manner prescribed by Section 10.
----------
(b) No Taxes have been assessed or asserted in writing in respect of any
Tax Returns filed by the Partnership or claimed to be due by any taxing
authority or otherwise that are not accrued or adequately reserved for in
accordance with GAAP. No Tax Return of the Partnership has been or, to the
Partnership's knowledge, is currently being examined or audited by the IRS or
other taxing authority (whether foreign or domestic). The Partnership has not
executed or filed with the IRS or any other taxing authority (whether foreign or
domestic) any agreement, waiver, or other document extending, or having the
effect of extending, the period for assessment or collection of any Taxes, which
extension or waiver is still in effect. The Partnership has delivered to the
Company correct and complete copies of all examination reports, statements of
deficiencies and similar documents prepared by the IRS or any other taxing
authority with respect to the Partnership that have been received by the
Partnership. All final adjustments made by the IRS with respect to any Tax
Return of the Partnership have been reported to the relevant state, local, or
foreign taxing authorities to the extent required by law, except where the
failure to do so would not have a material adverse affect on the financial
condition of the Partnership. No requests for ruling or
<PAGE>
-20-
determination letters or any similar documents filed by the Partnership with
respect to the Partnership are pending with any taxing authority. The
Partnership has no liability to any Person, with respect to Taxes paid, owed or
to be paid for periods of time during which the Partnership or any predecessor
of the Partnership was a member of a consolidated group.
(c) The Partnership has not filed a consent pursuant to Section 341(f) of
the Code, or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned directly or indirectly by it. No property of the
Partnership is property that is or will be required to be treated as (A) being
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (B) "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code, or (C) subject to a lease under
Section 7701(h) of the Code. The Partnership does not have a permanent
establishment in any foreign country and does not operate or conduct a business
through any branch in any foreign country. The Partnership has not agreed to
and the Partnership is not required to make any adjustment pursuant to Section
481(a) of the Code or any similar provision of state, local or foreign law by
reason of a change in the accounting method initiated by either the Partnership
or its general partner, and neither the Partnership nor its general partner has
any knowledge that the IRS or other governmental authority has proposed any such
adjustment or change in accounting method. The Partnership has not executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law.
(d) The Partnership has at all times been classified as a partnership
under the Code, and not as a publicly traded partnership treated as a
corporation under Section 7704 of the Code; the Partnership has at all times
been similarly classified under any similar provisions of state, local or
foreign law.
(e) Except for Taxes to be apportioned under Section 10.1 or other Taxes
------------
reserved for in accordance with GAAP under Section 7.16(a), the performance of
---------------
the transactions contemplated by this Agreement will not (either alone or upon
the occurrence of any additional or subsequent event, or upon the lapse or
passage of time, or both) result in the Partnership being subject to additional
Taxes.
(f) The performance of the transactions contemplated by this Agreement
will not (either alone or upon the occurrence of any additional or subsequent
event, or upon the lapse of passage of time, or both) result in any payment that
would constitute an
<PAGE>
-21-
"excess parachute payment" within the meaning of Section 280G of the Code.
(g) Copies of all Tax Returns required to be filed by the Partnership
(including any predecessors) for any prior period during which the Partnership
(or any predecessor) was in existence, together with all schedules and
attachments thereto, have been delivered to the Company.
(h) Each owner of any interest in the Partnership is a United States
person for purposes of Sections 1445(f)(3), 1446(e), and 7701(a)(30) of the
Code.
7.17 Insurance.
---------
(a) The Partnership maintains and has at all times since its inception
maintained commercially reasonable insurance providing coverage against, among
other matters, property damage and other casualty loss, personal injury,
workers' compensation claims (if required), general liability, and other similar
risks and matters incident to the conduct of the business of the Partnership and
similarly situated businesses and in a manner and in an amount that is
consistent with industry practice. The Partnership regularly accrues, and the
financial statements of the Partnership reflect the accrual of, adequate
reserves against loss contingencies, in accordance with GAAP, arising from known
and incurred claims against the Partnership. Based on the past claims
experience of the Partnership, such insurance together with such reserves is
reasonably likely to cover adequately any loss contingencies and, to the
Partnership's knowledge, all policies of such insurance, are binding and
effective upon the issuers (each of whom is reputable and creditworthy) in
accordance with their respective terms.
(b) The Partnership has not received 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.
7.18 Year 2000. The HSD Parties have reviewed their business and
---------
operations with a view to assessing whether any of their respective businesses
or operations will be vulnerable to a Year 2000 Issue and, based on such review,
to the knowledge of the HSD Parties, there will be no Year 2000 Issue with
respect to the Properties or any of the HSD Parties' respective businesses or
operations.
The representations and warranties made in this Agreement by the HSD
Parties shall be continuing and shall be deemed remade by the HSD Parties as of
the Closing Date with the same force and effect as if made on, and as of, such
date; provided, however, that, the HSD Parties shall have the right, from time
-------- -------
to time prior to the Closing Date, to modify the representations and warranties
<PAGE>
-22-
as a result of changes in condition of the Properties by notice to the Company
and, in such event, the Company shall have the rights provided in Section 3.2
-----------
and 5.2(f). The HSD Parties' liability with respect to all representations and
- ----------
warranties made in this Agreement by the HSD Parties with respect to Sections
--------
7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.17 and 7.18 shall survive the Closing for a
- --------------------------------------------
period of one (1) year, after which the HSD Parties shall have no liability with
respect thereto other than as to any matters for which claims have been asserted
prior to the expiration of such one (1) year period. The representations and
warranties made in this Agreement by the HSD Parties with respect to Sections
--------
7.1, 7.2, 7.3, 7.4, 7.11, 7.12, 7.13, 7.14, 7.15 and 7.16 shall survive
- ---------------------------------------------------------
indefinitely. In no event shall the aggregate liability of the HSD Parties for
breach of representations and warranties exceed the Purchase Price.
Except as otherwise expressly provided in this Agreement or any documents
to be delivered to the Company at the Closing, the HSD Parties disclaim the
making of any representations or warranties, express or implied, regarding the
Properties or matters affecting the Properties, whether made by the HSD Parties,
on the HSD Parties' 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. The Company acknowledges (i) that the Company 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 the
Company 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 the Company at the Closing made by the HSD Parties.
The Company further acknowledges that it has not received from or on behalf of
the HSD Parties 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.
<PAGE>
-23-
SECTION 8. REPRESENTATIONS AND WARRANTIES OF COMPANY.
--------- -----------------------------------------
To induce the HSD Parties to enter in this Agreement, the Company
represents and warrants to the HSD Parties as follows:
8.1 Status and Authority of the Company. The Company is a Maryland real
-----------------------------------
estate investment trust duly organized, validly existing and in trust good
standing under the laws of the State of Maryland, and has all requisite power
and authority under the laws of such state and under its charter documents to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The Company has duly qualified and is in
good standing as a trust or unincorporated business association in each
jurisdiction in which the nature of the business conducted by it requires such
qualification, except where the failure to do so could not reasonably be
expected to have a material adverse effect.
8.2 Action of the Company. The Company 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 the Company on or
prior to the Closing Date such document shall constitute the valid and binding
obligation and agreement of the Company, enforceable against the Company 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.
8.3 No Violations of Agreements. Neither the execution, delivery or
---------------------------
performance of this Agreement by the Company, 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 the
Company pursuant to the terms of any indenture, mortgage, deed of trust, note,
evidence of indebtedness or any other agreement or instrument by which the
Company is bound.
8.4 Litigation. No investigation, action or proceeding is pending and,
----------
to the Company'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.
8.5 Financing. The Company has the financial capacity to consummate the
---------
transactions contemplated hereby without obtaining financing specific to this
transaction.
The representations and warranties made in this Agreement by the Company
shall be continuing and shall be deemed remade by the Company as of the Closing
Date with the same force and effect as if
<PAGE>
-24-
made on, and as of, such date. The Company's liability with respect to the
representations and warranties made in Section 8.1 and 8.2 shall survive the
-------------------
Closing indefinitely. The Company's liability with respect to all other
representations and warranties made in this Agreement by the Company shall
survive the Closing for a period of one (1) year, after which the Company shall
have no liability with respect thereto other than as to any matters for which
claims have been asserted prior to the expiration of such one (1) year period.
SECTION 9. COVENANTS OF THE HSD PARTIES.
--------- ----------------------------
The HSD Parties hereby covenant with the Company between the date of this
Agreement and the Closing Date as follows:
9.1 Compliance with Laws, Etc. To comply or to cause compliance, in all
--------------------------
material respects, with (i) all applicable laws, regulations and other
requirements from time to time of every governmental body having jurisdiction of
the Partnership, the Properties or the use or occupancy of the Improvements
located on the Real Property and (ii) all terms, covenants and conditions of all
instruments of record and other agreements affecting the Partnership or the
Properties.
9.2 Approval of Agreements. Except as otherwise authorized by this
----------------------
Agreement or in the ordinary course of business, not to enter into, modify,
amend or terminate any agreement with respect to the Properties or the
Partnership which would encumber or be binding upon such Properties from and
after the Closing Date without in each instance obtaining the prior written
consent of the Company, which consent shall not be unreasonably withheld,
delayed or conditioned.
9.3 Notice of Material Changes or Untrue Representations. Upon learning
----------------------------------------------------
of any material change in any condition with respect to any of the Partnership
or the Properties or of any event or circumstance which makes any representation
or warranty of the HSD Parties to the Company under this Agreement untrue or
misleading in any material respect, promptly to notify the Company thereof (the
Company agreeing, on learning of any such fact or condition, promptly to notify
the HSD Parties thereof).
9.4 Operation of Properties. To continue to operate each of the
-----------------------
Properties as a Homestead Village hotel, in a good and businesslike fashion
consistent with their past practices and to cause each of the Properties to be
maintained in good working order and condition in a manner consistent with their
past practice.
9.5 Financial Information. To provide to the Company, promptly upon
---------------------
written request, at the HSD Parties' sole cost and expense, such audited and
unaudited financial and other information
<PAGE>
-25-
and certifications of the HSD Parties with respect to the HSD Parties, the
Properties, the Partnership and the Interests, as the Company may from time to
time reasonably request and, if required or requested, to permit the Company to
incorporate by reference any information included in filings made by HSD with
the Securities and Exchange Commission. The provisions of this Section 9.5 shall
-----------
survive the Closing.
SECTION 10. APPORTIONMENTS.
---------- --------------
10.1 Real Property Apportionments. Representatives of the Company and the
----------------------------
HSD Parties shall perform any and all of the adjustments and apportionments
which are appropriate and usual for a transaction of this nature and taking into
account the simultaneous execution of the Lease. The adjustments hereunder
shall be calculated or paid in an amount based upon a fair and reasonable
estimated accounting performed and agreed to by representatives of the HSD
Parties and the Company at or prior to the Closing. Subsequent final
adjustments and payments shall be made in cash or other immediately available
funds as soon as practicable after the Closing Date and in any event within
ninety (90) days after such Closing Date, based upon an agreed accounting
performed by representatives of the HSD Parties and the Company. In the event
the parties have not agreed with respect to the adjustments required to be made
pursuant to this Section 10.1 within such ninety-day period, upon application by
------------
either party, Arthur Andersen LLP or other certified public accountants
reasonably acceptable to the Company and the HSD Parties shall determine any
such adjustments which have not theretofore been agreed to between the HSD
Parties and the Company. The charges of such accountant shall be borne by the
HSD Parties.
10.2 Closing Costs. The HSD Parties shall pay all costs and expenses
-------------
associated with the transactions contemplated hereby, including, without
limitation, recording costs, title insurance premiums, the costs and expenses of
preparing engineering and environmental reports, market studies and appraisals
and attorneys fees and expenses and transfer taxes (whether imposed before or
after Closing), except that the Company shall pay the fees and expenses of
Sullivan & Worcester LLP.
10.3 Tax Returns and Other Reports. The parties hereto agree that the
-----------------------------
Merger is being effected as a convenient mechanism to sell the Partnership's
assets to the Company and then liquidate the interests of HVI and the Atlantic
Partnership in the Partnership and, accordingly, the parties shall treat the
Merger for all income Tax purposes as a sale by the Partnership of its assets
followed by a complete liquidation of HVI's and Atlantic Partnership's interests
in the Partnership. The parties shall cooperate with one another in the
preparation of all Tax Returns, questionnaires, applications or other documents
required to be filed. The parties shall make
<PAGE>
-26-
available to one another such records as may be required for the defense of any
audit, examination or litigation of any Tax Return. The parties shall cooperate
with one another to allocate as necessary under Section 1060 of the Code all the
consideration under this Agreement provided by the Company in conformity with
the past practice of the Company and its affiliates, provided that such
allocations are reasonably acceptable to the HSD Parties. The HSD Parties shall,
at their sole cost and expense, prepare and file all Tax Returns and other
reports, filings, and amendments to be filed in respect of the Partnership or
delivered to the Partnership's partners on or after the Closing Date, and pay
any Taxes due with such report, filing, or amendment; provided, however, that,
-------- -------
the Company, at its request, shall be provided the opportunity to review and
comment upon any such report, filing, or amendment at least ten (10) Business
Days prior to its filing or delivery. If the Company or any of its affiliates
receives a Tax refund attributable to a Tax Return of the Partnership filed by
any of the HSD Parties, the Company shall remit such Tax refund to HSD.
The obligations of the parties under this Section 10 shall survive the
----------
Closing.
SECTION 11. DEFAULT.
---------- -------
11.1 Default by the HSD Parties. If the HSD Parties shall have made any
--------------------------
representation or warranty herein which shall be untrue or misleading in any
material respect, or if the HSD Parties shall fail to perform any of the
material covenants and agreements contained herein to be performed by the HSD
Parties and such failure continues for a period of ten (10) days after notice
thereof from the Company or if HSD shall default in its obligations under the
Agreement to Lease and such default shall continue beyond the expiration of any
applicable cure period, the Company may terminate this Agreement and/or the
Company may pursue any and all remedies available to it at law or in equity,
including, but not limited to, a suit for specific performance or other
equitable relief, but in no event shall the Company seek to recover
consequential, punitive or exemplary damages.
11.2 Default by the Company. If the Company shall have made any
----------------------
representation or warranty herein which shall be untrue or misleading in any
material respect, or if the Company 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 the HSD Parties
or if HPT shall default in its obligations under the Agreement to Lease and such
default shall continue beyond the expiration of any applicable cure period, the
HSD Parties may, as its sole and exclusive remedy at law and in equity,
terminate this Agreement. In the event that the HSD Parties shall so terminate
this Agreement, the Company shall thereupon pay to the HSD Parties, as
liquidated damages and not as
<PAGE>
-27-
a penalty, the sum of One Million Dollars ($1,000,000), whereupon, the Company
shall have no further obligations hereunder, except for any obligations which,
expressly by their terms, survive such termination.
SECTION 12. MISCELLANEOUS.
---------- -------------
12.1 Agreement to Indemnify. The HSD Parties shall indemnify and hold
----------------------
harmless the Company as set forth on the Indemnification Agreement attached
hereto as Schedule E.
----------
12.2 Brokerage Commissions. Each of the parties hereto represents to the
---------------------
other parties that, except for Merrill Lynch, it dealt with no broker, finder or
like agent in connection with this Agreement or the transactions contemplated
hereby. The HSD Parties shall be solely responsible for payment of any fees or
other sums due Merrill Lynch. The HSD parties, on the one hand, and the
Company, on the other, shall indemnify and hold harmless the other 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 Merrill
Lynch or any other broker, finder or like agent other than such loss, liability
or expense arising from any breach of its representation 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 as required by law or unless such action is taken based on
advice of counsel given in good faith. No party, or its employees shall trade in
the securities of the HSD Parties or of the Company, or any parent or affiliate
of the HSD Parties or of the Company, until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall
record this Agreement or any notice thereof, except as required by law or unless
such action is taken based on advice of counsel given in good faith.
As to any negotiations with public officials, public pronouncements, press
releases or furnishing of information which a party is advised by counsel is
required by law, the Company, on the one hand, and the HSD Parties, on the
other, shall, to the extent reasonably practicable, consult with the other
before commencing such action and provide the other with the opportunity to
review
<PAGE>
-28-
and comment upon any press release or public statement. The parties agree that
the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form agreed to by the parties as
of the execution of this Agreement.
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.
(c) All such notices shall be addressed,
if to the HSD Parties c/o:
Homestead Village Incorporated
2100 River Edge Parkway, Fl. 9
Atlanta, GA 30328
Attn: Ms. Laura L. Hamilton
[Telecopier No. (770) 859-1670]
with a copy to:
Homestead Village Incorporated
125 Lincoln Avenue
Santa Fe, NM 87501
Attn: Jeffrey A. Klopf, Esq.
[Telecopier No. (505) 998-8920]
and to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Attn; Thomas S. Reif, Esq.
[Telecopier No. (312) 701-7711]
<PAGE>
-29-
If to the Company, to:
Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
(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 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 the Company may assign this
Agreement to any entity affiliated with the Company. 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
<PAGE>
-30-
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 Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts, 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, 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 Commonwealth of Massachusetts; or
(vii) any combination of the foregoing; provided, however, that Delaware Law and
-------- -------
Maryland Law shall govern the Merger.
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
Commonwealth of Massachusetts as is provided by law; and the parties consent to
the jurisdiction of said court or courts located in The Commonwealth of
Massachusetts
<PAGE>
-31-
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 Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING THE
------------------------
COMPANY, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
-----------
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HPT HSD PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS
DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE
COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
12.14 Further Assurances. On and after the Closing Date, the parties
------------------
hereto shall execute and deliver such other documents, releases, assignments and
other instruments as may be reasonably required by any party to effectuate
completely the transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as a sealed instrument as of the date first above written.
HSD PARTIES:
HOMESTEAD VILLAGE INCORPORATED
By: /s/ Michael Cy
------------------------------
Its (Vice) President
<PAGE>
-32-
HVI INCORPORATED
By: /s/ Michael Cy
_______________________________
Its (Vice) President
HOMESTEAD VILLAGE LIMITED PARTNERSHIP
By: HVI Incorporated, its general partner
By: /s/ Michael Cy
__________________________
Its (Vice) President
ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP
By: Atlantic Homestead Village (1)
Incorporated, its general
partner
By: /s/ Michael Cy
_____________________________
Its (Vice) President
ATLANTIC HOMESTEAD VILLAGE (1)
INCORPORATED
By: /s/ Michael Cy
_____________________________
Its (Vice) President
COMPANY:
HPT HSD PROPERTIES TRUST
By: /s/ John Murray
_____________________________
Its (Vice) President
The undersigned hereby guarantees the obligations of HPT HSD Properties
Trust under this Agreement.
HOSPITALITY PROPERTIES TRUST
By: /s/ John Murray
_____________________________
Its (Vice) President
<PAGE>
Exhibit 99.1
AGREEMENT TO LEASE
------------------
THIS AGREEMENT TO LEASE (this "Agreement") is entered into as of the 4th
---------
day of February, 1999, by and between HPT HSD PROPERTIES TRUST, a Maryland real
estate investment trust ("HPT"), and HOMESTEAD VILLAGE INCORPORATED, a Maryland
---
corporation ("HSD").
---
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to an Agreement of Merger, dated as of the date hereof
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Merger Agreement"), by and among HPT and HSD and certain of
----------------
its wholly owned subsidiaries, HPT is planning to acquire those certain
properties, as more particularly described in the Merger Agreement; and
WHEREAS, subject to and upon the terms and conditions set forth in this
Agreement, pursuant to a Lease Agreement in the form attached hereto as Exhibit
-------
A (the "Lease"), HPT has agreed to lease to HVI (2) Incorporated, a Delaware
- - -----
corporation and a wholly owned subsidiary of HSD ("Tenant"), and HSD has agreed
------
to cause Tenant to lease from HPT, all of the Properties (this and other
capitalized terms used and not otherwise defined herein having the meanings
ascribed to such terms in the Merger Agreement and/or the Lease);
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Agreement to Lease. Subject to and upon the terms and conditions
------------------
hereinafter set forth, on the Closing Date, HPT and Tenant shall each execute
and deliver the Lease and such date shall be the Commencement Date under the
Lease.
2. Representations of Tenant, Etc. As an inducement to HPT to enter into
-------------------------------
the Lease, HSD shall cause Tenant to represent and warrant to HPT (and, by
execution of the Lease, Tenant shall be deemed to have represented), as of the
Closing Date, that:
(a) Status and Authority of Tenant, Etc. Tenant is a corporation duly
------------------------------------
organized and validly existing under the laws of its state of incorporation and
has all requisite power and authority (corporate and other) under the laws of
such state and its respective charter documents to own its property and assets,
<PAGE>
to enter into and perform its obligations under the Lease and to transact the
business in which it is engaged or presently proposes to engage. Tenant is duly
qualified in each jurisdiction in which the nature of the business conducted or
to be conducted by it requires such qualification, except where failure to do so
could not reasonably be expected to have a material adverse effect.
(b) Corporate Action of Tenant, Etc. Tenant has taken all necessary action
--------------------------------
(corporate or other) under its charter documents to authorize the execution,
delivery and performance of the Lease, and the Lease constitutes the valid and
binding obligation and agreement of Tenant enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization or similar
laws of general application affecting the rights and remedies of creditors.
(c) No Violations of Other Agreements, Etc. Neither the execution and
---------------------------------------
delivery of the Lease by Tenant, nor compliance with the terms and provisions
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 or assets of Tenant pursuant to
the terms of any indenture, mortgage, deed of trust, note, evidence of
indebtedness, agreement or other instrument to which Tenant may be a party or by
which it or its property is bound, or violate any provisions of laws, or any
applicable order, writ, injunction, judgment or decree of any court, or any
order or other public regulation of any governmental commission, bureau or
administrative agency.
(d) Judgments; Litigation. There are no judgments presently outstanding
---------------------
and unsatisfied against Tenant or any of its properties, and none of Tenant or
any of its properties are involved in any material litigation at law or in
equity, or any proceeding before any court, or by or before any governmental or
administrative agency, which litigation or proceeding could materially and
adversely affect Tenant, and no such material litigation or proceeding is, to
the knowledge of Tenant, threatened against Tenant, and no investigation looking
toward such a proceeding has begun or is contemplated.
(e) Disclosure. To the knowledge of Tenant, neither this Agreement nor any
----------
other document, certificate or statement furnished to HPT by or on behalf of
Tenant in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading. To
the knowledge of Tenant, there is no fact or condition which materially and
adversely affects the business, operations, affairs, properties or condition of
Tenant which has not been set forth in this Agreement or in the other documents,
2
<PAGE>
certificates or statements furnished to HPT in connection with the transactions
contemplated hereby.
Tenant's liability with respect to the representations and warranties set
forth in this Agreement shall survive the Commencement Date.
3. Representations of HPT. As an inducement to the Tenant to enter into
----------------------
the Lease, HPT shall (and, by execution of the Lease, HPT shall be deemed to
have represented) represent to Tenant, as of the Closing Date, that:
(a) Status and Authority of HPT. HPT is a Maryland real estate investment
---------------------------
trust duly organized, validly existing and in trust good standing under the laws
of the State of Maryland, and has all requisite power and authority under the
laws of such state and under its charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. HPT has duly qualified and is in good standing as a trust or
unincorporated business association 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.
(b) Action of HPT. HPT has taken all necessary action to authorize the
-------------
execution, delivery and performance of the Lease, and the Lease constitutes the
valid and binding obligation and agreement of HPT, enforceable against HPT 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.
(c) No Violations of Agreements. Neither the execution, delivery or
---------------------------
performance of the Lease by HPT, 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 or assets of HPT
pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence
of indebtedness or any other agreement or instrument by which HPT or its
property is bound, or violate any provisions of laws, or any applicable order,
writ, injunction, judgment or decree of any court, or any order or other public
regulation of any governmental commission, bureau or administrative agency.
(d) Judgments; Litigation. There are no judgments presently outstanding
---------------------
and unsatisfied against HPT or any of its properties, and neither HPT nor any of
its properties are involved in any material litigation at law or in equity, or
any proceeding before any court, or by or before any governmental or
3
<PAGE>
administrative agency, which litigation or proceeding could materially and
adversely affect HPT, and no such material litigation or proceeding is, to the
knowledge of HPT, threatened against HPT, and no investigation looking toward
such a proceeding has begun or is contemplated.
HPT's liability with respect to the representations and warranties set
forth in this Agreement shall survive the Commencement Date.
4. Additional Tenant Obligations. On or before the Commencement Date,
-----------------------------
HSD shall cause each of the following to be delivered to HPT (the obligation of
HPT to enter into the Lease being subject to such delivery):
(a) A security agreement with respect to all tangible personal property
owned by Tenant and used in connection with the operation of the Properties,
such security agreement to create a first lien and security interest in such
property and to be otherwise in the form attached hereto as Exhibit B;
---------
(b) Such financing statements as HPT may reasonably require to perfect the
interests and liens granted pursuant to the security agreement described in
paragraph (a) above;
(c) An assignment and security agreement with respect to the FF&E Reserve,
such assignment and security agreement to create a first lien in the FF&E
Reserve and to be otherwise in the form attached hereto as Exhibit C;
---------
(d) A stock pledge agreement with respect to all of the issued and
outstanding stock of Tenant, together with a stock power in blank, such stock
pledge and security agreement to create a first lien and security interest in
such shares and to be in the form attached hereto as Exhibit D;
---------
(e) A guaranty agreement with respect to Tenant's obligations under the
Lease in the form attached hereto as Exhibit E;
---------
(f) A trademark and license agreement in the form attached hereto as
Exhibit F and a management agreement in the form attached hereto as Exhibit G,
- --------- ---------
HPT hereby approving such agreements; and
(g) the Security Deposit.
5. Condition Precedent. The obligations of the parties hereunder shall
-------------------
be subject to the consummation of the transactions contemplated by the Merger
Agreement.
4
<PAGE>
6. Notices. All notices required or desired to be given hereunder shall
-------
be given in the manner provided in Section 12.4 of the Merger Agreement.
7. Assignment. HSD shall not assign or transfer, directly or indirectly,
----------
its rights under this Agreement without the prior written consent of HPT, which
consent may be given or withheld by HPT in HPT's sole discretion. HPT shall not
assign or transfer, directly or indirectly, its rights under this Agreement
other than to an affiliate of HPT without the prior written consent of HSD,
which consent may be given or withheld by Tenant in HSD's sole discretion.
8. Default.
-------
(a) Default by HSD. If HSD shall fail to perform any of the covenants and
--------------
agreements contained herein to be performed by HSD and such failure continues
for a period of ten (10) days after notice thereof from HPT, HPT may terminate
this Agreement and/or may exercise all rights and remedies set forth in Section
-------
11.1 of the Merger Agreement. A default by the HSD Parties under the Merger
- ----
Agreement shall be deemed a default by HSD under this Agreement.
(b) Default by HPT. If HPT 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 HSD, HSD may
terminate this Agreement and/or may exercise any and all rights and remedies set
forth in Section 11.2 of the Merger Agreement. A default by the Purchaser under
------------
the Merger Agreement shall be deemed a default by HPT under this Agreement.
9. Miscellaneous.
-------------
(a) Expenses. Tenant shall pay its and HPT's expenses incident to the
--------
negotiation, preparation and carrying out of this Agreement, except that HPT
shall pay the fees and expenses of Sullivan & Worcester LLP. Tenant shall also
pay the cost of all recording fees, transfer fees and other like costs and
expenses incident to this Agreement.
(b) 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
party, which consent shall not be unreasonably withheld, delayed or conditioned,
except as required by law or unless such action is taken based on advice of
counsel given in good faith. No party or its employees shall trade in the
securities of HPT or
5
<PAGE>
HSD until a public announcement of the transactions
contemplated by this Agreement has been made.
(c) 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.
10. Applicable Law, Etc. This Agreement shall be interpreted, construed,
--------------------
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts, 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, 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 Commonwealth of Massachusetts; 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
Commonwealth of Massachusetts as is provided by law; and the parties consent to
the jurisdiction of said court or courts located in The Commonwealth of
Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
11. Modification of Agreement. No modification or waiver of any provision
-------------------------
of this Agreement, nor any consent to any departure by any party therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the other, and such modification, waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice to or
demand on any party in any case shall entitle such party to any other or further
notice or demand in the same, similar or other circumstances.
12. Waiver of Rights. Neither any failure nor any delay on the part of
----------------
any party in exercising any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise or the exercise of any right,
power or privilege.
6
<PAGE>
13. Severability. In case any one or more of the provisions contained in
------------
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and this
Agreement shall thereupon be reformed and construed and enforced to the maximum
extent permitted by laws.
14. Entire Contract. This Agreement, including all annexes and exhibits
---------------
hereto, constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and thereof and shall supersede and take the place
of any other instruments purporting to be an agreement of the parties hereto
relating to the transactions contemplated hereby, including, without limitation,
any letter of intent or commitment letter.
15. Counterparts; Headings. This Agreement may be executed in two or more
----------------------
counterparts, each of which shall constitute an original, but which, when taken
together, shall constitute but one instrument and shall become effective as of
the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
16. Binding Effect. All the terms and provisions of this Agreement shall
--------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
17. Nonliability of Trustees, Etc. THE DECLARATION OF TRUST ESTABLISHING
------------------------------
HPT, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
-----------
IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HPT HSD PROPERTIES TRUST" REFERS TO THE
TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HPT
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, HPT. ALL PERSONS DEALING WITH HPT, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF HPT FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, HPT and HSD have executed this Agreement under seal as
of the date above first written.
HPT HSD PROPERTIES TRUST
By: /s/ John Murray
___________________________________
Its (Vice) President
7
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
By: /s/ Michael Cy
____________________________________
Its (Vice) President
<PAGE>
EXHIBIT 99.2
LEASE AGREEMENT
Dated as of February 23, 1999,
by and between
HPT HSD PROPERTIES TRUST,
as Landlord,
and
HVI (2) INCORPORATED,
as Tenant
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT is entered into as of February 23, 1999, by and
between HPT HSD PROPERTIES TRUST, a Maryland real estate investment trust, as
landlord ("Landlord"), and HVI (2) INCORPORATED, a Delaware corporation, as
--------
tenant ("Tenant").
------
W I T N E S S E T H :
------------- - - -
WHEREAS, Landlord owns the Leased Property (this and other capitalized
terms used and not otherwise defined herein having the meanings ascribed to such
terms in Article 1);
---------
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and Tenant
wishes to lease the Leased Property from Landlord, all subject to and upon the
terms and conditions herein 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, Landlord and Tenant hereby agree
as follows:
ARTICLE 1
----------
DEFINITIONS
-----------
For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, (i) the terms defined in this Article
shall have the meanings assigned to them in this Article and include the plural
as well as the singular, (ii) all accounting terms not otherwise defined herein
shall have the meanings assigned to them in accordance with GAAP, (iii) all
references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.1 "Accounting Period" shall mean each accounting period of Tenant, the
-----------------
first two such periods in any Fiscal Quarter consisting of 4 weeks and the last
such period in any Fiscal Quarter consisting of 5 weeks.
1.2 "Additional Charges" shall have the meaning given such term in Section
------------------ -------
3.1.3.
- -----
1.3 "Additional Rent" shall have the meaning given such term in Section
--------------- -------
3.1.2(a).
- --------
<PAGE>
-2-
1.4 "Affiliated Person" shall mean, with respect to any Person, (a) in
-----------------
the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited liability
company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b), (d) any
other Person who is an officer, director, trustee or employee of, or partner in
or member of, such Person or any Person referred to in the preceding clauses
(a), (b) and (c), and (e) any other Person who is a member of the Immediate
Family of such Person or of any Person referred to in the preceding clauses (a)
through (d).
1.5 "Agreement" shall mean this Lease Agreement, including Exhibits A-1
--------- ------------
through A-18, B and C hereto, as it and they may be amended from time to time as
- ---------------------
herein provided.
1.6 "Applicable Laws" shall mean all applicable laws, statutes,
---------------
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health or
the Environment, including, without limitation, all valid and lawful
requirements of courts and other Government Agencies pertaining to reporting,
licensing, permitting, investigation, remediation and removal of underground
improvements (including, without limitation, treatment or storage tanks, or
water, gas or oil wells), or emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pesticides, petroleum or
petroleum products, pollutants, contaminants or hazardous or toxic substances,
materials or wastes whether solid, liquid or gaseous in nature, into the
Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.
1.7 "Applicable Percentage" shall mean (a) four percent (4%) with respect
---------------------
to any Hotel open for business to the public for a period of less than twelve
(12) Accounting Periods; and (b) five percent (5%) with respect to any Hotel
open for business to the public for a period of twelve (12) or more Accounting
Periods.
1.8 "Award" shall mean, with respect to any Property, all compensation,
-----
sums or other value awarded, paid or received by virtue of a total or partial
Condemnation of such Property (after deduction of all reasonable legal fees and
other reasonable costs and expenses, including, without limitation, expert
witness fees, incurred by Landlord, in connection with obtaining any such
award).
<PAGE>
-3-
1.9 "Base Total Hotel Sales" shall mean, with respect to each Property,
----------------------
Total Hotel Sales for such Property for the Base Year in the event that the Base
Year consists of 52 weeks or, in the event the Base Year consists of 53 weeks,
(x) Total Hotel Sales for such Property for the Base Year, (y) divided by 53 and
then (z) multiplied by 52; provided, however, that, in the event that, with
-------- -------
respect to any Lease Year, or portion thereof, for any reason (including,
without limitation, a casualty or Condemnation) there shall be a reduction of
five percent (5%) or more in the number of rooms at any Hotel or a reduction in
the services provided at any Hotel from the number of rooms or the services
provided during the Base Year, in determining Additional Rent payable with
respect to such Lease Year, Base Total Hotel Sales shall be reduced as follows:
(a) in the event of the termination of this Lease with respect to any Property
pursuant to Article 10, 11 or 12, all Total Hotel Sales attributable to such
--------------------
Property during the Base Year shall be subtracted from Base Total Hotel Sales,
appropriately prorated in the year of such termination based on time elapsed if
such termination occurs on a date other than the first day of any Fiscal Year;
(b) in the event of a complete closing of a Hotel, all Total Hotel Sales
attributable to such Hotel during the Base Year shall be subtracted from Base
Total Hotel Sales throughout the period of such closing; (c) in the event of a
partial closing of a Hotel affecting five percent (5%) or more of the guest
rooms in such Hotel, Total Hotel Sales attributable to guest room occupancy or
guest room services at such Hotel during the Base Year shall be ratably
allocated among all guest rooms in service at such Hotel during the Base Year
and all such Total Hotel Sales attributable to rooms no longer in service shall
be subtracted from Base Total Hotel Sales throughout the period of such closing;
and (d) in the event of any other change in circumstances affecting any Hotel,
Base Total Hotel Sales shall be equitably adjusted in such manner as Landlord
and Tenant shall reasonably determine.
1.10 "Base Year" shall mean the twelve (12) Accounting Periods commencing
---------
June 27, 1999 and ending June 24, 2000.
1.11 "Business Day" shall mean any day other than Saturday, Sunday, or any
------------
other day on which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive action to close.
1.12 "Capital Addition" shall mean, with respect to any Property, any
----------------
renovation, repair or improvement to such Property (or portion thereof), the
cost of which constitutes a Capital Expenditure.
1.13 "Capital Expenditure" shall mean any expenditure treated as capital
-------------------
in nature in accordance with GAAP.
1.14 "Claim" shall have the meaning given such term in Article 8.
----- ---------
<PAGE>
-4-
1.15 "Code" shall mean the Internal Revenue Code of 1986 and, to the exte
----
nt applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.16 "Commencement Date" shall mean the date of this Agreement.
-----------------
1.17 "Condemnation" shall mean, with respect to any Property, (a) the
------------
exercise of any governmental power with respect to such Property, whether by
legal proceedings or otherwise, by a Condemnor of its power of condemnation, (b)
a voluntary sale or transfer of such Property by Landlord to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending, or (c) a taking or voluntary conveyance of all or part of such
Property, or any interest therein, or right accruing thereto or use thereof, as
the result or in settlement of any condemnation or other eminent domain
proceeding affecting such Property, whether or not the same shall have actually
been commenced.
1.18 "Condemnor" shall mean any public or quasi-public Person, having the
---------
power of Condemnation.
1.19 "Consolidated Financials" shall mean, for any Fiscal Year or other
-----------------------
accounting period of HSD, annual audited and quarterly unaudited financial
statements of HSD prepared on a consolidated basis, including HSD's consolidated
balance sheet and the related statements of income and cash flows, all in
reasonable detail, and setting forth in comparative form the corresponding
figures for the corresponding period in the preceding Fiscal Year, and prepared
in accordance with GAAP throughout the periods reflected.
1.20 "Date of Taking" shall mean, with respect to any Property, the date
--------------
the Condemnor has the right to possession of such Property, or any portion
thereof, in connection with a Condemnation.
1.21 "Default" shall mean any event or condition which with the giving of
-------
notice and/or lapse of time would ripen into an Event of Default.
1.22 "Disbursement Rate" shall mean an annual rate of interest, as of the
-----------------
date of determination, equal to the greater of (i) the Interest Rate and (ii)
the per annum rate for fifteen (15) year U.S. Treasury Obligations as published
in The Wall Street Journal plus four hundred fifty (450) basis points.
-----------------------
1.23 "Distribution" shall mean (a) any declaration or payment of any
------------
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, (b) any purchase,
redemption, retirement or other acquisition of any shares of any class of
capital stock of a corporation, (c) any other distribution on or in respect of
<PAGE>
-5-
any shares of any class of capital stock of a corporation or (d) any return of
capital to shareholders.
1.24 "Easement Agreement" shall mean any conditions, covenants and
------------------
restrictions, easements, declarations, licenses and other agreements which are
Permitted Encumbrances and such other agreements as may be granted in accordance
with Section 19.1.
------------
1.25 "Encumbrance" shall have the meaning given such term in Section 20.1.
----------- ------------
1.26 "Entity" shall mean any corporation, general or limited partnership,
------
limited liability company or partnership, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, cooperative, any government or agency, authority or political subdivision
thereof or any other entity.
1.27 "Environment" shall mean soil, surface waters, ground waters, land,
-----------
stream, sediments, surface or subsurface strata and ambient air.
1.28 "Environmental Obligation" shall have the meaning given such term in
------------------------
Section 4.3.1.
- -------------
1.29 "Environmental Notice" shall have the meaning given such term in
--------------------
Section 4.3.1.
- -------------
1.30 "Event of Default" shall have the meaning given such term in Section
---------------- -------
12.1.
- ----
1.31 "Excess Total Hotel Sales" shall mean, with respect to any Property,
------------------------
with respect to any Lease Year, or portion thereof, the amount of Total Hotel
Sales for such Property for such Lease Year, or portion thereof, in excess of
Base Total Hotel Sales for such Property for the equivalent period.
1.32 "Extended Terms" shall have the meaning given such term in Section
-------------- -------
2.4.
1.33 "FF&E Estimate" shall have the meaning given such term in Section
------------- -------
5.1.2(c).
- --------
1.34 "FF&E Pledge" shall mean the FF&E Reserve Assignment and Security
-----------
Agreement, dated as of the date hereof, made by Tenant for the benefit of
Landlord.
1.35 "FF&E Reserve" shall have the meaning given such term in Section
------------ -------
5.1.2(a).
- --------
1.36 "Financial Officer's Certificate" shall mean, as to any Person, a
-------------------------------
certificate of the chief executive officer, chief financial officer or chief
accounting officer (or such officers' authorized designee) of such Person, duly
authorized, accompanying the financial statements required to be delivered by
such Person pursuant to Section 17.2, in which such officer shall
------------
<PAGE>
-6-
certify (a)that such statements have been properly prepared in accordance with
GAAP and are true, correct and complete in all material respects and fairly
present the consolidated financial condition of such Person at and as of the
dates thereof and the results of its and their operations for the periods
covered thereby, and (b), in the event that the certifying party is an officer
of Tenant and the certificate is being given in such capacity, certify that no
Event of Default has occurred and is continuing hereunder.
1.37 "Fiscal Year" shall mean the calendar year.
-----------
1.38 "Fixed Term" shall have the meaning given such term in Section 2.3.
---------- -----------
1.39 "Fixtures" shall have the meaning given such term in Section 2.1(d).
-------- --------------
1.40 "GAAP" shall mean generally accepted accounting principles
----
consistently applied.
1.41 "Government Agencies" shall mean any court, agency, authority, board
-------------------
(including, without limitation, environmental protection, planning and zoning),
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or any State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or any Hotel operated thereon.
1.42 "Guaranty" shall mean the Guaranty Agreement, dated the date hereof,
--------
made by HSD for the benefit of Landlord and Hospitality Properties Trust.
1.43 "Hazardous Substances" shall mean any substance:
--------------------
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste", "hazardous
material" or "hazardous substance" or "pollutant" or "contaminant" under
any present or future federal, state or local statute, regulation, rule or
ordinance or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. et seq.) and the Resource Conservation and Recovery Act (42 U.S.C.
-- ---
section 6901 et seq.) and the regulations promulgated thereunder; or
-- ---
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any governmental authority, agency, department,
commission, board, agency or
<PAGE>
-7-
instrumentality of the United States, any state of the United States,
or any political subdivision thereof; or
(d) the presence of which on the Leased Property, or any portion
thereof, causes or materially threatens to cause an unlawful nuisance upon
the Leased Property, or any portion thereof, or to adjacent properties or
poses or materially threatens to pose a hazard to the Leased Property, or
any portion thereof, or to the health or safety of persons on or about the
Leased Property, or any portion thereof; or
(e) without limitation, which contains gasoline, diesel fuel or other
petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated biphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or may
hereafter be subject to regulation pursuant to the Material Waste Tracking
Act of 1988.
1.44 "Hotel" shall mean, with respect to any Property described on Exhibit
----- -------
A-1 through A-18, the extended stay hotel being operated on such Property.
- ----------------
1.45 "Hotel Mortgage" shall mean any Encumbrance placed upon the Leased
--------------
Property in accordance with Article 20.
----------
1.46 "Hotel Mortgagee" shall mean the holder of any Hotel Mortgage.
---------------
1.47 "HPT HSD" shall mean HPT HSD Properties Trust, a Maryland real estate
-------
investment trust.
1.48 "HSD" shall mean Homestead Village Incorporated, a Maryland
---
corporation, its successors and assigns.
1.49 "Immediate Family" shall mean, with respect to any individual, such
----------------
individual's spouse, parents, brothers, sisters, children (natural or adopted),
stepchildren, grandchildren, grandparents, parents-in-law, brothers-in-law,
sisters-in-law, nephews and nieces.
1.50 "Impositions" shall mean collectively, all taxes (including, without
-----------
limitation, all taxes imposed under the laws of any State, as such laws may be
amended from time to time, and all ad valorem, sales and use, or similar taxes
as the same relate to or are imposed upon
<PAGE>
-8-
Landlord, Tenant or the business conducted upon the Leased Property),
assessments (including, without limitation, all assessments for public
improvements or benefit, whether or not commenced or completed prior to the date
hereof), water, sewer or other rents and charges, excises, tax levies, fees
(including, without limitation, license, permit, inspection, authorization and
similar fees), and all other governmental charges, in each case whether general
or special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Leased Property or the business conducted thereon by
Tenant (including all interest and penalties thereon due to any failure in
payment by Tenant), which at any time prior to, during or in respect of the Term
hereof may be assessed or imposed on or in respect of or be a lien upon (a)
Landlord's interest in the Leased Property, (b) the Leased Property or any part
thereof or any rent therefrom or any estate, right, title or interest therein,
or (c) any occupancy, operation, use or possession of, or sales from, or
activity conducted on, or in connection with the Leased Property or the leasing
or use of the Leased Property or any part thereof by Tenant; provided, however,
-------- -------
that nothing contained herein shall be construed to require Tenant to pay and
the term "Impositions" shall not include (i) any tax based on net income imposed
on Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer fee or
other tax imposed with respect to the sale, exchange or other disposition by
Landlord of the Leased Property or any portion thereof or the proceeds thereof,
(iv) any single business, transaction privilege, doing business, franchise, net
worth, capital stock or similar taxes as the same relate to or are imposed upon
Landlord other than solely as a result of the operation of any Property as a
Hotel, (v) any interest or penalties imposed on Landlord as a result of the
failure of Landlord to file any return or report timely and in the form
prescribed by law or to pay any tax or imposition, except to the extent such
failure is a result of a breach by Tenant of its obligations pursuant to Section
-------
3.1.3, (vi) any impositions imposed on Landlord that are a result of Landlord
- -----
not being considered a "United States person" as defined in Section 7701(a)(30)
of the Code, (vii) any impositions that are enacted or adopted by their express
terms as a substitute for any tax that would not have been payable by Tenant
pursuant to the terms of this Agreement or (viii) any impositions imposed as a
result of a breach of covenant or representation by Landlord in any agreement
governing Landlord's conduct or operation or as a result of the negligence or
willful misconduct of Landlord.
1.51 "Incidental Documents" shall mean the Guaranty, the Security
--------------------
Agreement, the Stock Pledge Agreement, the FF&E Pledge and the Indemnity.
1.52 "Indebtedness" shall mean all obligations, contingent or otherwise,
------------
which in accordance with GAAP should be reflected on the obligor's balance sheet
as liabilities.
1.53 "Indemnity" shall mean the Indemnity Agreement, dated the date
--------- hereof, made by HSD and certain of its Affiliated Persons
for the benefit of Landlord.
1.54 "Insurance Requirements" shall mean all terms of any insurance policy
----------------------
required by this Agreement and all requirements of the issuer of any such policy
and all orders, rules and
<PAGE>
-9-
regulations and any other requirements of the National Board of Fire
Underwriters (or any other body exercising similar functions) binding upon
Landlord, Tenant or the Leased Property.
1.55 "Interest Rate" shall mean eleven percent (11%) per annum.
-------------
1.56 "Land" shall have the meaning given such term in Section 2.1(a).
---- --------------
1.57 "Landlord" shall have the meaning given such term in the preambles to
--------
this Agreement and shall also include its permitted successors and assigns,
including, without limitation, HPT HSD.
1.58 "Landlord Liens" shall mean liens on or against the Leased Property
--------------
or any payment of Rent (a) which result from any act of, or any claim against,
Landlord or any owner of a direct or indirect interest in the Leased Property,
or which result from any violation by Landlord of any terms of this Agreement or
the Merger Agreement, or (b) which result from liens in favor of any taxing
authority by reason of any tax owed by Landlord or any fee owner of a direct or
indirect interest in the Leased Property; provided, however, that "Landlord
-------- ------- --------
Lien" shall not include any lien resulting from any tax for which Tenant is
obligated to pay or indemnify Landlord against until such time as Tenant shall
have already paid to or on behalf of Landlord the tax or the required indemnity
with respect to the same.
1.59 "Lease Year" shall mean any Fiscal Year or portion thereof,
----------
commencing with the 1999 Fiscal Year, during the Term.
1.60 "Leased Improvements" shall have the meaning given such term in
-------------------
Section 2.1(b).
- --------------
1.61 "Leased Intangible Property" shall mean all hotel licensing
--------------------------
agreements and other service contracts, equipment leases, booking agreements and
other arrangements or agreements affecting the ownership, repair, maintenance,
management, leasing or operation of the Leased Property to which Landlord is a
party; all books, records and files relating to the leasing, maintenance,
management or operation of the Leased Property belonging to Landlord; all
transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, rights to deposits, trade names, service marks,
telephone exchange numbers identified with the Leased Property, and all other
transferable intangible property, miscellaneous rights, benefits and privileges
of any kind or character belonging to Landlord with respect to the Leased
Property.
1.62 "Leased Personal Property" shall have the meaning given such term in
------------------------
Section 2.1(e).
- --------------
1.63 "Leased Property" shall have the meaning given such term in Section
--------------- -------
2.1.
- ---
<PAGE>
-10-
1.64 "Legal Requirements" shall mean all federal, state, county, municipal
------------------
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Property or the
maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate any Property for its Permitted Use, and (b) all covenants, agreements,
restrictions and encumbrances contained in any instruments at any time in force
affecting any Property, including those which may (i) require material repairs,
modifications or alterations in or to any Property or (ii) in any way materially
and adversely affect the use and enjoyment thereof, but excluding any
requirements arising as a result of Landlord's status as a real estate
investment trust.
1.65 "Lien" shall mean any mortgage, security interest, pledge, collateral
----
assignment, or other encumbrance, lien or charge of any kind, or any transfer of
property or assets for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors.
1.66 "Management Agreement" shall mean any management agreement entered
--------------------
into by Tenant with respect to all or any portion of the Leased Property,
together with all amendments, modifications and supplements thereto.
1.67 "Manager" shall mean any manager under a Management Agreement.
-------
1.68 "Merger Agreement" shall mean the Agreement of Merger, dated as of
----------------
February 4, 1999, by and between Landlord and HSD and certain of its
Subsidiaries, as it may be amended, restated, supplemented or otherwise modified
from time to time.
1.69 "Minimum Rent" shall mean an amount equal to One Million Three
------------
Hundred Thirty Thousand Dollars ($1,330,000) per calendar month.
1.70 "Net Worth" shall mean the excess of total assets over total
---------
liabilities, total assets and total liabilities each to be determined in
accordance with GAAP.
1.71 "Notice" shall mean a notice given in accordance with Section 22.10.
------ -------------
1.72 "Officer's Certificate" shall mean a certificate signed by an officer
---------------------
or other duly authorized individual of the certifying Entity duly authorized by
the board of directors or other governing body of the certifying Entity.
1.73 "Overdue Rate" shall mean, on any date, a per annum rate of interest
------------ --- -----
equal to the lesser of fifteen percent (15%) and the maximum rate then permitted
under applicable law.
<PAGE>
-11-
1.74 "Parent" shall mean, with respect to any Person, any Person which
------
owns directly, or indirectly through one or more Subsidiaries or Affiliated
Persons, twenty percent (20%) or more of the voting or beneficial interest in,
or otherwise has the right or power (whether by contract, through ownership of
securities or otherwise) to control, such Person.
1.75 "Permitted Encumbrances" shall mean, with respect to any Property,
----------------------
all rights, restrictions, and easements of record set forth on Schedule B to the
applicable owner's title insurance policy issued to, or insuring, Landlord in
connection with the transactions contemplated by the Merger Agreement with
respect to such Property, and such other encumbrances as may be consented to in
writing by Landlord from time to time.
1.76 "Permitted Liens" shall mean any Liens granted in accordance with
---------------
Section 21.9(a).
- ---------------
1.77 "Permitted Use" shall mean, with respect to any Property, any use of
-------------
such Property permitted pursuant to Section 4.1.1.
-------------
1.78 "Person" shall mean any individual or Entity, and the heirs,
------
executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits.
1.79 "Property" shall have the meaning given such term in Section 2.1.
-------- -----------
1.80 "Records" shall have the meaning given such term in Section 7.2.
------- -----------
1.81 "Rent" shall mean, collectively, the Minimum Rent, Additional Rent
----
and Additional Charges.
1.82 "Security Deposit" shall mean a cash amount equal to Fifteen Million
----------------
Nine Hundred Sixty Thousand Dollars ($15,960,000).
1.83 "SEC" shall mean the Securities and Exchange Commission.
---
1.84 "Security Agreement" shall mean the Security Agreement, dated as of
------------------
the date hereof, made by Tenant for the benefit of Landlord, as it may be
amended, restated, supplemented or otherwise modified from time to time.
1.85 "State" shall mean, with respect to any Property, the state,
-----
commonwealth or district in which the such Property is located.
<PAGE>
-12-
1.86 "Stock Pledge Agreement" shall mean the Stock Pledge, dated as of the
----------------------
date hereof, made by HSD to Landlord with respect to the stock of Tenant, as it
may be amended, restated, supplemented or otherwise modified from time to time.
1.87 "Subordinated Creditor" shall mean any creditor of Tenant which is a
---------------------
party to a Subordination Agreement in favor of Landlord.
1.88 "Subordination Agreement" shall mean any agreement (and any
-----------------------
amendments thereto) executed by a Subordinated Creditor pursuant to which the
payment and performance of Tenant's obligations to such Subordinated Creditor
are subordinated to the payment and performance of Tenant's obligations to
Landlord under this Agreement.
1.89 "Subsidiary" shall mean, with respect to any Person, any Entity (a)
----------
in which such Person owns directly, or indirectly through one or more
Subsidiaries, twenty percent (20%) or more of the voting or beneficial interest
or (b) which such Person otherwise has the right or power to control (whether by
contract, through ownership of securities or otherwise).
1.90 "Successor Landlord" shall have the meaning given such term in
------------------
Section 20.2.
- ------------
1.91 "Tenant" shall have the meaning given such term in the preambles to
------
this Agreement and shall also include its permitted successors and assigns.
1.92 "Tenant's Personal Property" shall mean all motor vehicles and
--------------------------
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other tangible personal property of
Tenant, if any, acquired by Tenant on and after the date hereof and located at
the Leased Property or used in Tenant's business at the Leased Property and all
modifications, replacements, alterations and additions to such personal property
installed at the expense of Tenant, other than any items included within the
definition of Fixtures or Leased Personal Property.
1.93 "Term" shall mean, collectively, the Fixed Term and the Extended
----
Terms, to the extent properly exercised pursuant to the provisions of Section
-------
2.4, unless sooner terminated pursuant to the provisions of this Agreement.
- ---
1.94 "Total Hotel Sales" shall mean, with respect to each Property, for
-----------------
each Fiscal Year during the Term, all revenues and receipts of every kind
derived by Tenant from operating such Property and parts thereof, including, but
not limited to: income (from both cash and credit transactions), after
deductions for bad debts, and discounts, from rental of rooms, stores, offices,
meeting, exhibit or sales space of every kind; license, lease and concession
fees and rentals (not including gross receipts of licensees, lessees and
concessionaires); income from vending machines; health club membership fees;
food and beverage sales; wholesale and retail sales of merchandise (other than
proceeds from the sale of furnishings, fixture and equipment no longer
<PAGE>
-13-
necessary to the operation of any Hotel, which shall be deposited in the FF&E
Reserve);service charges, to the extent not distributed to the employees at any
Hotel as gratuities; and proceeds, if any, from business interruption or other
loss of income insurance; provided, however, that Total Hotel Sales shall
-------- -------
not include the following: gratuities to or collected on behalf of Hotel
employees; federal, state or municipal excise, sales, use, occupancy or similar
taxes collected directly from patrons or guests or included as part of the sales
price of any goods or services; insurance proceeds (other than proceeds from
business interruption or other loss of income insurance); Award proceeds (other
than for a temporary Condemnation); any proceeds from any sale of such Property
or from the refinancing of any debt encumbering such Property; proceeds from the
disposition of furnishings, fixture and equipment no longer necessary for the
operation of any Hotel; interest which accrues on amounts deposited in the FF&E
Reserve; and any security deposits and other advance deposits, until and unless
the same are forfeited to Tenant or applied for the purpose for which they were
collected; and interest income from any bank account or investment of Tenant.
1.95 "Uniform System of Accounts" shall mean A Uniform System of Accounts
-------------------------- ----------------------------
for Hotels, Eighth Revised Edition, 1986, as published by the Hotel Association
- ----------
of New York City, as the same may be further revised from time to time.
1.96 "Unsuitable for Its Permitted Use" shall mean, with respect to any
--------------------------------
such Hotel, a state or condition of such Hotel such that (a) following any
damage or destruction involving a Hotel, such Hotel cannot be operated in the
good faith judgment of Landlord and Tenant on a commercially practicable basis
for its Permitted Use and it cannot reasonably be expected to be restored to
substantially the same condition as existed immediately before such damage or
destruction, and as otherwise required by Section 10.2.4, within eighteen (18)
--------------
months following such damage or destruction or such shorter period of time as to
which business interruption insurance is available to cover Rent and other costs
related to the applicable Property following such damage or destruction, or (b)
as the result of a partial taking by Condemnation, such Hotel cannot be
operated, in the good faith judgment of Landlord and Tenant, on a commercially
practicable basis for its Permitted Use.
1.97 "Work" shall have the meaning given such term in Section 10.2.4.
---- --------------
ARTICLE 2
----------
LEASED PROPERTY AND TERM
------------------------
2.1 Leased Property. Subject to and upon the terms and conditions
---------------
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following (each
of items (a) through (g) below which, as of the
<PAGE>
-14-
Commencement Date, relates to any single Hotel, a "Property" and, collectively,
--------
the "Leased Property"):
---------------
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibit A-1 through A-18, attached hereto and
------------------------
made a part hereof (the "Land");
----
(b) all buildings, structures and other improvements of every kind
including, but not limited to, alleyways and connecting tunnels, sidewalks,
signs, utility pipes, conduits and lines (on-site and off-site), parking
areas and roadways appurtenant to such buildings and structures presently
situated upon the Land (collectively, the "Leased Improvements");
-------------------
(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of property,
now or hereafter permanently affixed to or incorporated into the Leased
Improvements, including, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which, to the
maximum extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Tenant's Personal Property (collectively,
the "Fixtures");
--------
(e) all machinery, equipment, furniture, furnishings, moveable walls
or partitions or trade fixtures or other personal property of any kind or
description used or useful in Tenant's business on or in the Leased
Improvements, and located on or in the Leased Improvements, and all
modifications, replacements, alterations and additions to such personal
property, except items, if any, included within the category of Fixtures,
but specifically excluding all items included within the category of
Tenant's Personal Property, but excluding any personal property owned by a
Hotel guest or the Manager (collectively, the "Leased Personal Property");
------------------------
(f) all of the Leased Intangible Property; and
(g) any and all leases of space in the Leased Improvements.
2.2 Condition of Leased Property. Tenant acknowledges receipt and
----------------------------
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is"
<PAGE>
-15-
condition, subject to the rights of parties in possession, the existing state of
title, including all covenants, conditions, restrictions, reservations, mineral
leases, easements and other matters of record or that are visible or apparent on
the Leased Property, all applicable Legal Requirements, the lien of any
financing instruments, mortgages and deeds of trust existing prior to the
Commencement Date or permitted by the terms of this Agreement, and such other
matters which would be disclosed by an inspection of the Leased Property and the
record title thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT
HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE
CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT THERETO AND
TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION
OF THE LEASED PROPERTY. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS
FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT. To the
maximum extent permitted by law, however, Landlord hereby assigns to Tenant all
of Landlord's rights to proceed against any predecessor in title for breaches of
warranties or representations or for latent defects in the Leased Property.
Landlord shall fully cooperate with Tenant in the prosecution of any such
claims, in Landlord's or Tenant's name, all at Tenant's sole cost and expense.
Tenant shall indemnify, defend, and hold harmless Landlord from and against any
loss, cost, damage or liability (including reasonable attorneys' fees) incurred
by Landlord in connection with such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the "Fixed Term")
---------- ----------
shall commence on the Commencement Date and shall expire December 31, 2015.
2.4 Extended Term. Provided that no Event of Default shall have occurred
-------------
and be continuing, Tenant shall have the right to extend the Term for two (2)
consecutive renewal terms of fifteen (15) years each (collectively, the
"Extended Terms"), by giving Landlord Notice thereof not later than twenty-four
- ---------------
(24) full Accounting Periods prior to the scheduled expiration of the then
current Term of this Agreement (Fixed or Extended, as the case may be) (and time
shall be of the essence with respect to the giving of such Notice).
Each Extended Term shall commence on the day succeeding the expiration of
the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Terms. If Tenant shall fail to give Notice
within the time period set forth above that it elects to extend the Term in
accordance with this Section 2.4, this Agreement shall automatically terminate
-----------
at the end of the
<PAGE>
-16-
Term then in effect and Tenant shall have no further option to extend the Term
of this Agreement (and time shall be of the essence with respect to the giving
of such Notice). Otherwise, the extension of this Agreement shall be
automatically effected without the execution of any additional documents; it
being understood and agreed, however, that Tenant and Landlord shall execute
such documents and agreements as either party shall reasonably require to
evidence the same.
ARTICLE 3
----------
RENT
----
3.1 Rent. Tenant shall pay, in lawful money of the United States of
----
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Minimum Rent and Additional Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion. Rent for any partial calendar month or Accounting Period
shall be prorated on a per diem basis.
3.1.1 Minimum Rent.
------------
(a) Payments. Minimum Rent shall be paid in advance on the first
--------
Business Day of each calendar month; provided, however, that the first
-------- -------
payment of Minimum Rent shall be payable on the Commencement Date (and, if
applicable, such payment shall be prorated as provided in the last sentence
of the first paragraph of Section 3.1).
-----------
(b) Adjustments of Minimum Rent Following Disbursements Under Sections
------------------------------------------------------------------
5.1.3(b), 10.2.3 and 11.2. Effective on the date of each disbursement to
-------------------------
pay for the cost of any repairs, maintenance, renovations or replacements
pursuant to Sections 5.1.3(b), 10.2.3 or 11.2, the annual Minimum Rent
---------------------------------
shall be increased by a per annum amount equal to the Disbursement Rate
--- -----
times the amount so disbursed. If any such disbursement is made during any
month on a day other than the first Business Day of a calendar month,
Tenant shall pay to Landlord on the first Business Day of the immediately
following Accounting Period (in addition to the amount of Minimum Rent
payable with respect to such Accounting Period, as adjusted pursuant to
this paragraph (b)) the amount by which Minimum Rent for the preceding
Accounting Period, as adjusted for such disbursement on a per diem basis,
exceeded the amount of Minimum Rent paid by Tenant for such preceding
Accounting Period.
<PAGE>
-17-
(c) Adjustments of Minimum Rent Following Partial Lease Termination.
---------------------------------------------------------------
If this Lease shall terminate with respect to any Property but less than
all of the Leased Property, Minimum Rent shall be reduced by the affected
Property's allocable share of Minimum Rent as set forth in Exhibit C.
---------
3.1.2 Additional Rent.
---------------
(a) Amount. Tenant shall pay additional rent ("Additional Rent") with
------ ---------------
respect to each Property with respect to each Lease Year beginning with
July 1, 2000, in an amount, not less than zero, equal to ten percent (10%)
of Excess Total Hotel Sales for such Property.
(b) Accounting Period Installments. Installments of Additional Rent
------------------------------
for each Lease Year or portion thereof shall be calculated and paid with
respect to each Accounting Period in arrears on the first Business Day of
the second succeeding Accounting Period, based on Total Hotel Sales for the
same Accounting Period and year to date in the Base Year, together with an
Officer's Certificate setting forth the calculation of Additional Rent due
and payable for such Accounting Period.
(c) Reconciliation of Additional Rent. On or before April 30, 2001,
---------------------------------
Tenant shall deliver to Landlord an Officer's Certificate setting forth
Total Hotel Sales for each Property for the Base Year, together with an
audit thereof by Arthur Andersen LLP or another firm of independent
certified public accountants proposed by Tenant and approved by Landlord
(which approval shall not be unreasonably withheld, delayed or
conditioned). On or before April 30, of each year, also commencing April
30, 2001, Tenant shall deliver to Landlord an Officer's Certificate setting
forth the Total Hotel Sales for each Property for the preceding Lease Year
and the Additional Rent payable with respect to such Property for such
Lease Year, together with an audit thereof, by Arthur Andersen LLP or
another firm of independent certified public accountants proposed by Tenant
and approved by Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned).
If the annual Additional Rent for such preceding Lease Year as shown in the
Officer's Certificate exceeds the amount previously paid with respect thereto by
Tenant, Tenant shall pay such excess to Landlord at such time as the Officer's
Certificate is delivered, together with interest at the Interest Rate, which
interest shall accrue from the close of such preceding Lease Year until the
earlier of the date paid and the date that such certificate is required to be
delivered and, thereafter, such interest shall accrue at the Overdue Rate, until
the amount of such difference shall be paid or otherwise discharged. If the
annual Additional Rent for such preceding Lease Year as shown in the Officer's
Certificate is less than the amount previously paid with respect thereto by
Tenant, provided that no Event of Default shall have occurred and be continuing,
Landlord shall grant Tenant a credit against the Rent next coming due in the
<PAGE>
-18-
amount of the difference, together with interest accrued thereon at the rate of
interest paid by State Street Bank and Trust Company, or a successor
institution, on savings accounts. If such credit cannot be made because the
Term has expired prior to application in full thereof, provided no Event of
Default has occurred and is continuing, Landlord shall pay the unapplied balance
of such credit to Tenant.
It is expressly understood and agreed that, with respect to that portion of
the Term commencing July 1, 2000 and expiring December 31, 2000, Additional Rent
shall be payable to the extent that Total Hotel Sales for such period exceed
Base Total Hotel Sales for the equivalent period of the Base Year.
(d) Confirmation of Additional Rent. Tenant shall utilize, or cause
-------------------------------
to be utilized, an accounting system for the Leased Property in accordance
with its usual and customary practices and in accordance with GAAP, which
will accurately record all Total Hotel Sales and Tenant shall retain, for
at least three (3) years after the expiration of each Lease Year,
reasonably adequate records conforming to such accounting system showing
all Total Hotel Sales for such Lease Year.
Any proprietary information obtained by Landlord with respect to Tenant
pursuant to the provisions of this Agreement shall be treated as confidential,
except that such information may be used, subject to appropriate confidentiality
safeguards, in any litigation between the parties and except further that
Landlord may disclose such information to its prospective lenders, provided that
Landlord shall direct and obtain the agreement of such lenders to maintain such
information as confidential. The obligations of Tenant and Landlord contained
in this Section 3.1.2 shall survive the expiration or earlier termination of
-------------
this Agreement.
3.1.3 Additional Charges. In addition to the Minimum Rent and
------------------
Additional Rent payable hereunder, Tenant shall pay to the appropriate parties
and discharge as and when due and payable the following (collectively,
"Additional Charges"):
- -------------------
(a) Impositions. Subject to Article 8 relating to permitted contests,
----------- ---------
Tenant shall pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost (other than any opportunity cost as a result of a
failure to take advantage of any discount for early payment) may be added
for non-payment, such payments to be made directly to the taxing
authorities where feasible, and shall promptly, upon written request,
furnish to Landlord copies of official receipts or other reasonably
satisfactory proof evidencing such payments. If any such Imposition may,
at the option of the taxpayer, lawfully be paid in installments (whether or
not interest shall accrue on the unpaid balance of such Imposition), Tenant
may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Imposition) in installments and, in such event,
shall pay such installments during the Term as the same become due and
before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to
<PAGE>
-19-
the extent required or permitted by Applicable Law, prepare and file all
tax returns and pay all taxes due in respect of Landlord's net income,
gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock, and
Tenant, at its expense, shall, to the extent required or permitted by
Applicable Laws and regulations, prepare and file all other tax returns and
reports in respect of any Imposition as may be required by Government
Agencies. Provided no Event of Default shall have occurred and be
continuing, if any refund shall be due from any taxing authority in respect
of any Imposition paid by Tenant, the same shall be paid over to or
retained by Tenant. Landlord and Tenant shall, upon written request of the
other, provide such data as is maintained by the party to whom the request
is made with respect to the Leased Property as may be necessary to prepare
any required returns and reports. In the event Government Agencies classify
any property covered by this Agreement as personal property, Tenant shall
file all personal property tax returns in such jurisdictions where it may
legally so file. Each party shall, to the extent it possesses the same,
provide the other, upon written request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns for property covered by this Agreement, Landlord shall provide
Tenant with copies of assessment notices in sufficient time for Tenant to
file a protest. All Impositions assessed against such personal property
shall be (irrespective of whether Landlord or Tenant shall file the
relevant return) paid by Tenant not later than the last date on which the
same may be made without interest or penalty, subject to the provisions of
Article 8.
---------
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge; provided,
--------
however, that Landlord's failure to give any such notice shall in no way
-------
diminish Tenant's obligation hereunder to pay such Impositions.
(b) Utility Charges. Tenant shall pay or cause to be paid all charges
---------------
for electricity, power, gas, oil, water and other utilities used in
connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to be paid all
------------------
premiums for the insurance coverage required to be maintained pursuant to
Article 9.
---------
(d) Other Charges. Tenant shall pay or cause to be paid all other
-------------
amounts, liabilities and obligations, including, without limitation, all
amounts payable under any equipment leases and all agreements to indemnify
Landlord under Sections 4.3.2 and 9.7.
----------------------
(e) Reimbursement for Additional Charges. If Tenant pays or causes to
------------------------------------
be paid property taxes or similar or other Additional Charges attributable
to periods after the end of the Term, whether upon expiration or sooner
termination of this Agreement (other
<PAGE>
-20-
than termination by reason of an Event of Default), Tenant may, within a
reasonable time after the end of the Term, provide Notice to Landlord of
its estimate of such amounts. Landlord shall promptly reimburse Tenant for
all payments of such taxes and other similar Additional Charges that are
attributable to any period after the Term of this Agreement.
3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent,
--------------------------
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, on demand, as Additional Charges,
a late charge (to the extent permitted by law) computed at the Overdue Rate on
the amount of such installment, from the due date of such installment to the
date of payment thereof. To the extent that Tenant pays any Additional Charges
directly to Landlord or any Hotel Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due. If any payments due
from Landlord to Tenant shall not be paid within ten (10) days after its due
date, Landlord shall pay to Tenant, on demand, a late charge (to the extent
permitted by law) computed at the Overdue Rate on the amount of such installment
from the due date of such installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional Charges when
due, Tenant shall promptly pay and discharge, as Additional Charges, every fine,
penalty, interest and cost which is added for non-payment or late payment of
such items. Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Agreement or by statute or otherwise
in the case of non-payment of the Additional Charges as in the case of non-
payment of the Minimum Rent and Additional Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that this
---------
Agreement shall yield to Landlord the full amount of the installments or amounts
of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including those provisions for
adjustment or abatement of such Rent.
3.4 No Termination, Abatement, Etc. Except as otherwise specifically
-------------------------------
provided in this Agreement, each of Landlord and Tenant, to the maximum extent
permitted by law, shall remain bound by this Agreement in accordance with its
terms and shall not take any action without the consent of the other to modify,
surrender or terminate this Agreement. In addition, except as otherwise
expressly provided in this Agreement, Tenant shall not seek, or be entitled to,
any abatement, deduction, deferment or reduction of the Rent, or set-off against
the Rent, nor shall the respective obligations of Landlord and Tenant be
otherwise affected by reason of (a) any damage to or destruction of the Leased
Property or any portion thereof from whatever cause or any Condemnation, (b) the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title (other than actions of
Landlord constituting a breach of
<PAGE>
-21-
Section 22.8; (c) any claim which Tenant may have against Landlord by reason of
any default (other than a monetary default) or breach of any warranty by
Landlord under this Agreement or any other agreement between Landlord and
Tenant, or to which Landlord and Tenant are parties; (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Landlord or any assignee or transferee
of Landlord; or (e) for any other cause whether similar or dissimilar to any of
the foregoing (other than a monetary default by Landlord); provided, however,
-------- -------
that the foregoing shall not apply or be construed to restrict Tenant's rights
in the event of any act or omission by Landlord constituting negligence or
willful misconduct. Except as otherwise specifically provided in this Agreement,
Tenant hereby waives all rights arising from any occurrence whatsoever, which
may now or hereafter be conferred upon it by law (a) to modify, surrender or
terminate this Agreement or quit or surrender the Leased Property or any portion
thereof, or (b) which would entitle Tenant to any abatement, reduction,
suspension or deferment of the Rent or other sums payable or other obligations
to be performed by Tenant hereunder. The obligations of Tenant hereunder shall
be separate and independent covenants and agreements, and the Rent and all other
sums payable by Tenant hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the
express provisions of this Agreement. In any instance where, after the
occurrence of an Event of Default, Landlord retains funds which, but for the
occurrence of such Event of Default, would be payable to Tenant, Landlord shall
refund such funds to Tenant to the extent the amount thereof exceeds the amount
necessary to compensate Landlord for any cost, loss or damage incurred in
connection with such Event of Default.
3.5 Security Deposit. Pursuant to the Merger Agreement, Landlord is
----------------
holding the Security Deposit as security for the faithful observance and
performance by Tenant of all the terms, covenants and conditions of this
Agreement by Tenant to be observed and performed. The Security Deposit shall
not be mortgaged, assigned, transferred or otherwise encumbered by Tenant or any
of its Affiliated Persons without the prior written consent of Landlord and any
such act on the part of Tenant or any of its Affiliated Persons without first
having obtained Landlord's consent shall be without force and effect and shall
not be binding upon Landlord.
If an Event of Default shall occur and be continuing, Landlord may, at its
option and without prejudice to any other remedy which Landlord may have on
account thereof, appropriate and apply the entire Security Deposit or so much
thereof as may be necessary to compensate Landlord toward the payment of Rent or
other sums or loss or damage sustained by Landlord due to such breach on the
part of Tenant and, upon final discharge of all outstanding obligations, any
unapplied balance of the Security Deposit shall be paid to Tenant or its
Affiliated Persons. It is understood and agreed that the Security Deposit are
not to be considered as prepaid rent, nor shall damages be limited to the amount
of the Security Deposit. Provided no Event of Default shall have occurred and
be continuing, any unapplied balance of the Security Deposit shall be paid to
Tenant or its Affiliated Persons at the end of the Term or, in the event of any
early termination of this Agreement with respect to any Property, such portion
thereof as is allocable
<PAGE>
-22-
to such Property (as reasonably determined by Landlord) upon such termination
(the amount allocable to each Property on the Commencement Date being the amount
set forth on Exhibit C with respect to such Property multiplied by 12). Landlord
---------
shall have no obligation to pay interest on the Security Deposit and shall have
the right to commingle the same with Landlord's other funds. If Landlord conveys
Landlord's interest under this Agreement, subject to the terms of Section 22.7,
------------
the Security Deposit, or any part thereof not previously applied, shall be
turned over by Landlord to Landlord's grantee, and, if so turned over, Tenant
shall look solely to such grantee for proper application of the Security Deposit
in accordance with the terms of this Section 3.5 and the return thereof in
-----------
accordance herewith. The holder of a mortgage on the Leased Property shall not
be responsible to Tenant for the return or application of the Security Deposit,
if it succeeds to the position of Landlord hereunder, unless the Security
Deposit shall have been received in hand by such holder.
In the event of bankruptcy or other creditor-debtor proceedings against
Tenant, the Security Deposit shall be deemed to be applied first to the payment
of Rent and other charges due Landlord for all periods prior to the filing of
such proceedings.
ARTICLE 4
----------
USE OF THE LEASED PROPERTY
--------------------------
4.1 Permitted Use.
-------------
4.1.1 Permitted Use. (a) Tenant shall, at all times during the
-------------
Term, subject to temporary periods for the repair of damage caused by casualty
or Condemnation, continuously use and operate each Property as an extended stay
hotel and any uses incidental thereto. Tenant shall not use or permit to be used
any Property or any portion thereof for any other use without the prior written
consent of Landlord, which approval shall not be unreasonably withheld, delayed
or conditioned. Tenant shall not change the brand of the Hotels without
Landlord's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned (and which consent is hereby granted with
respect to the name "Homestead Guest Studios"), it being agreed that, on the
Commencement Date, the Hotels shall be operated under the "Homestead Village"
brand. No use shall be made or permitted to be made of any Property and no acts
shall be done thereon which will cause the cancellation of any insurance policy
covering such Property or any part thereof (unless another adequate policy is
available), nor shall Tenant sell or otherwise provide or permit to be kept,
used or sold in or about any Property any article which may be prohibited by law
or by the standard form of fire insurance policies, or any other insurance
policies required to be carried hereunder, or fire underwriter's regulations.
Tenant shall, at its sole cost, comply with all Insurance Requirements.
<PAGE>
-23-
(b) In the event that, in the reasonable determination of Tenant, it
shall no longer be economically practical to operate the Leased Property as an
extended stay hotel, Tenant shall give Landlord Notice thereof, which Notice
shall set forth in reasonable detail the reasons therefor. Thereafter, Landlord
and Tenant shall negotiate in good faith to agree on an alternative use for the
Property or a replacement property therefor (in which event the affected
Property shall be transferred to Tenant or Tenant's designee), appropriate
adjustments to the Additional Rent and other related matters; provided, however,
-------- -------
in no such event shall the Minimum Rent be reduced or abated.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
-------------------
diligence and exercise reasonable efforts to obtain and maintain all approvals
necessary to use and operate, for its Permitted Use, each Property and the Hotel
located thereon under applicable law.
4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or permit
----------------
the use of the Leased Property or Tenant's Personal Property, if any, for any
unlawful purpose. Tenant shall not, and shall direct the Manager not to, commit
or suffer to be committed any waste on any Property, or in any Hotel, nor shall
Tenant cause or permit any unlawful nuisance thereon or therein. Tenant shall
not, and shall direct the Manager not to, suffer nor permit the Leased Property,
or any portion thereof, to be used in such a manner as (i) may materially and
adversely impair Landlord's title thereto or to any portion thereof, or (ii) may
reasonably allow a claim or claims for adverse usage or adverse possession by
the public, as such, or of implied dedication of the Leased Property or any
portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the
--------------------------------------------------
provisions of Article 8 and Section 5.1.3(b), Tenant, at its sole expense, shall
------------------------------
(i) comply with all material Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration and restoration
of the Leased Property and with the terms and conditions of any sublease
affecting the Leased Property, (ii) perform all obligations of the landlord
under any sublease affecting the Leased Property and (iii) procure, maintain and
comply with all material licenses, and other authorizations and agreements
required for any use of the Leased Property and Tenant's Personal Property, if
any, then being made, and for the proper erection, installation, operation and
maintenance of the Leased Property or any part thereof.
4.3 Environmental Matters.
---------------------
4.3.1 Restriction on Use, Etc. During the Term and any other
------------------------
time that Tenant shall be in possession of the Leased Property, Tenant shall not
store, spill upon, dispose of or transfer to or from the Leased Property any
Hazardous Substance, except in compliance with all Applicable Laws. During the
Term and any other time that Tenant shall be in possession of the Leased
Property, Tenant shall maintain (and shall direct the Manager to maintain) the
Leased Property at all times free of any Hazardous Substance (except in
compliance with all Applicable Laws). Tenant shall promptly: (a) upon receipt of
notice or knowledge and shall direct the
<PAGE>
-24-
Manager upon receipt of notice or knowledge promptly to, notify Landlord in
writing of any material change in the nature or extent of Hazardous Substances
at the Leased Property, (b) transmit to Landlord a copy of any report which is
required to be filed with respect to the Leased Property pursuant to SARA Title
III or any other Applicable Law, (c) transmit to Landlord copies of any
citations, orders, notices or other governmental communications received by
Tenant or its agents or representatives with respect thereto (collectively,
"Environmental Notice"), which Environmental Notice requires a written response
--------------------
or any action to be taken and/or if such Environmental Notice gives notice of
and/or presents a material risk of any material violation of any Applicable Law
and/or presents a material risk of any material cost, expense, loss or damage
(an "Environmental Obligation"), (d), subject to the provision s of Article 8,
------------------------
observe and comply with all Applicable Laws relating to the use, maintenance and
disposal of Hazardous Substances and all orders or directives from any official,
court or agency of competent jurisdiction relating to the use or maintenance or
requiring the removal, treatment, containment or other disposition thereof, and
(e) subject to the provisions of Article 8, pay or otherwise dispose of any
---------
fine, charge or Imposition related thereto.
If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Applicable Laws) are
discovered on the Leased Property, subject to Tenant's right to contest the same
in accordance with Article 8, Tenant shall take all actions and incur any and
---------
all expenses, as are required by any Government Agency and by Applicable Law,
(i) to clean up and remove from and about the Leased Property all Hazardous
Substances thereon, (ii) to contain and prevent any further release or threat of
release of Hazardous Substances on or about the Leased Property and (iii) to use
good faith efforts to eliminate any further release or threat of release of
Hazardous Substances on or about the Leased Property.
4.3.2 Indemnification of Landlord. Tenant shall protect,
---------------------------
indemnify and hold harmless Landlord and each Hotel Mortgagee, their trustees,
officers, agents, employees and beneficiaries, and any of their respective
successors or assigns with respect to this Agreement (collectively, the
"Indemnitees" and, individually, an "Indemnitee") for, from and against any and
----------- ----------
all debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
Indemnitee resulting from, either directly or indirectly, the presence during
the Term (or any other time Tenant shall be in possession of the Leased
Property) in, upon or under the soil or ground water of the Leased Property or
any properties surrounding the Leased Property of any Hazardous Substances in
violation of any Applicable Law or otherwise, provided that any of the foregoing
arises by reason of any failure by Tenant or any Person claiming by, through or
under Tenant to perform or comply with any of the terms of this Section 4.3,
-----------
except to the extent the same arise from the acts or omissions of Landlord or
any other Indemnitee or during any period that Landlord or a Person designated
by Landlord (other than Tenant) is in possession of the Leased Property.
Tenant's duty herein includes, but is not limited to, costs associated with
personal injury or property damage claims as
<PAGE>
-25-
a result of the presence prior to the expiration or sooner termination of the
Term and the surrender of the Leased Property to Landlord in accordance with the
terms of this Agreement of Hazardous Substances in, upon or under the soil or
ground water of the Leased Property in violation of any Applicable Law. Upon
Notice from Landlord and any other of the Indemnitees, Tenant shall undertake
the defense, at Tenant's sole cost and expense, of any indemnification duties
set forth herein, in which event, Tenant shall not be liable for payment of any
duplicative attorneys' fees incurred by any Indemnitee.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge, any
cost, expense, loss or damage (including, without limitation, reasonable
attorneys' fees) reasonably incurred by Landlord and arising from a failure of
Tenant to observe and perform the requirements of this Section 4.3, which
-----------
amounts shall bear interest from the date ten (10) Business Days after written
demand therefor is given to Tenant until paid by Tenant to Landlord at the
Overdue Rate.
4.3.3 Survival. The provisions of this Section 4.3 shall survive
-------- -----------
the expiration or sooner termination of this Agreement.
ARTICLE 5
---------
MAINTENANCE AND REPAIRS
-----------------------
5.1 Maintenance and Repair.
----------------------
5.1.1 Tenant's General Obligations. Tenant shall, at its sole
----------------------------
cost and expense (except as expressly provided in Section 5.1.3(b)), keep the
----------------
Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto (and Tenant's Personal Property) in good order and repair, reasonable
wear and tear excepted (whether or not the need for such repairs occurs as a
result of Tenant's use, any prior use, the elements or the age of the Leased
Property or Tenant's Personal Property or any portion thereof), and shall
promptly make all necessary and appropriate repairs and replacements thereto of
every kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the commencement of the Term (concealed
or otherwise). All repairs shall be made in a good, workmanlike manner,
consistent with industry standards for like hotels in like locales, in
accordance with all applicable federal, state and local statutes, ordinances,
codes, rules and regulations relating to any such work. Tenant shall not take or
omit to take any action, the taking or omission of which would materially and
adversely impair the value or the usefulness of the Leased Property or any
material part thereof for its Permitted Use. Tenant's obligations under this
Section 5.1.1 shall be limited in the event of any casualty or Condemnation as
- -------------
set forth in Sections 10.2 and 11.2 and also as set forth in Section 5.1.3(b)
---------------------- ----------------
and Tenant's obligations with respect to Hazardous Substances are as set forth
in Section 4.3.
-----------
<PAGE>
-26-
5.1.2 FF&E Reserve.
------------
(a) Upon execution of this Agreement, Tenant has established a
reserve account (the "FF&E Reserve") in a bank designated by Tenant and
------------
approved by Landlord. The purpose of the FF&E Reserve is to cover the cost
of:
(i) Replacements and renewals to any Hotel's furnishings, fixtures,
equipment and signage (other than replacement of signage during
the first five (5) years of the Term resulting from the change in
the operating names for the Hotels, which shall be paid for by
Tenant);
(ii) Certain routine repairs and maintenance to any Hotel building
which are normally capitalized under GAAP such as exterior and
interior repainting, resurfacing building walls, floors, roofs and
parking areas, and replacing folding walls and the like; and
(iii) Major repairs, alterations, improvements, renewals or replacements
to any Hotel's buildings' structure, roof, or exterior facade, or
to its mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems.
Tenant agrees that it will, from time to time, execute such
reasonable documentation as may be requested by Landlord and any Hotel
Mortgagee to assist Landlord and such Hotel Mortgagee in establishing or
perfecting the Hotel Mortgagee's security interest in Landlord's residual
interest in the funds which are in the FF&E Reserve; provided, however,
-------- -------
that no such documentation shall contain any amendment to or modification
of any of the provisions of this Agreement. It is acknowledged and agreed
that, during the Term, funds in the FF&E Reserve are the property of
Tenant.
(b) Throughout the Term, Tenant shall transfer (on the first
Business Day of the second succeeding Accounting Period) into the FF&E
Reserve an amount equal to the greater of (x) the Applicable Percentage of
Total Hotel Sales for such Accounting Period and (y) One Hundred Twenty-
Five Thousand Dollars ($125,000). Together with the documentation provided
to Landlord pursuant to Section 3.1.2(c), Tenant shall deliver to Landlord
----------------
an Officer's Certificate setting forth the total amount of deposits made to
and expenditures from the FF&E Reserve for the preceding Fiscal Year,
together with a reconciliation of such expenditures with the applicable
FF&E Estimate.
(c) With respect to each Lease Year, Tenant shall prepare an
estimate (the "FF&E Estimate") of FF&E Reserve expenditures necessary
-------------
during the ensuing Fiscal Year, and shall submit such FF&E Estimate to
Landlord, on or before December 1 of the
<PAGE>
-27-
preceding Lease Year, for its review and approval, which approval shall not
be unreasonably withheld, delayed or conditioned. In the event that
Landlord shall fail to respond within twenty (20) Business Days after
receipt of the FF&E Estimate, such FF&E Estimate shall be deemed approved
by Landlord. If Landlord shall disapprove such FF&E Estimate, Tenant shall
operate the Leased Property based on the FF&E Estimate for the preceding
year until approval thereof. The parties shall endeavor, in good faith, to
agree on any disputed items as promptly as possible. All expenditures from
the FF&E Reserve shall be (as to both the amount of each such expenditure
and the timing thereof) both reasonable and necessary, given the objective
that the Hotels will be maintained and operated to a standard comparable to
competitive hotels. All amounts from the FF&E Reserve shall be paid to
Persons who are not Affiliated Persons of Tenant without mark-up or
allocated internal costs by Tenant or its Affiliated Persons except that
Tenant may use Affiliated Persons to provide goods and services if Landlord
has granted its prior written approval thereof or the cost is the lesser of
(x) the lowest of two competitive bids therefor submitted by non-Affiliated
Persons of Tenant and (y) fair market.
(d) Tenant shall, consistent with the FF&E Estimate approved by
Landlord, from time to time make expenditures from the FF&E Reserve as it
deems necessary provided that Tenant shall not materially deviate from the
FF&E Estimate approved by Landlord without the prior approval of Landlord,
which approval shall not be unreasonably withheld, delayed or conditioned,
except in the case of emergency where immediate action is necessary to
prevent imminent harm to person or property.
(e) Upon the expiration or sooner termination of this Agreement,
funds in the FF&E Reserve and all property purchased with funds from the
FF&E Reserve during the Term shall be paid, granted and assigned to
Landlord as Additional Charges.
5.1.3 Landlord's Obligations.
----------------------
(a) Except as otherwise expressly provided in this Agreement,
Landlord shall not, under any circumstances, be required to build or
rebuild any improvement on the Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, or to maintain the Leased
Property in any way. Except as otherwise expressly provided in this
Agreement, Tenant hereby waives, to the maximum extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law in
effect on the date hereof or hereafter enacted. Landlord shall have the
right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter existing.
<PAGE>
-28-
(b) If, at any time, funds in the FF&E Reserve shall be
insufficient for necessary and permitted expenditures thereof or, pursuant
to the terms of this Agreement, Tenant is required to make any expenditures
in connection with any repair, maintenance or renovation with respect to
the Leased Property and the amount of such disbursements or expenditures
exceeds the amount on deposit in the FF&E Reserve or such repair,
maintenance or renovation is not a permitted expenditure from the FF&E
Reserve as described in Section 5.1.2(a)(i), (ii) and (iii), Tenant may, at
-----------------------------------
its election, give Landlord Notice thereof, which Notice shall set forth,
in reasonable detail, the nature of the required repair, renovation or
replacement, the estimated cost thereof and such other information with
respect thereto as Landlord may reasonably require. Provided that no Event
of Default shall have occurred and be continuing and Tenant shall otherwise
comply with the applicable provisions of Article 6, Landlord shall, within
---------
ten (10) Business Days after such Notice, subject to and in accordance with
the applicable provisions of Article 6, disburse such required funds to
---------
Tenant (or, if Tenant shall so elect, directly to any other Person
performing the required work) and, upon such disbursement, the Minimum Rent
shall be adjusted as provided in Section 3.1.1(b); provided, however, that,
---------------- -------- -------
in the event that Landlord shall elect not to disburse any funds pursuant
to this Section 5.1.3(b), Tenant's sole recourse shall be to elect not to
----------------
make the applicable repair, maintenance or renovation, and such failure
shall not be deemed a Default or Event of Default. Tenant shall include a
good faith projection of funds required pursuant to this Section 5.1.3(b)
----------------
in the FF&E Estimate.
5.1.4 Nonresponsibility of Landlord, Etc. All materialmen,
-----------------------------------
contractors, artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property, or any part thereof, are hereby
charged with notice that liens on the Leased Property or on Landlord's interest
therein are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished by Tenant or for any
other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed in any way
as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under any mechanic's lien law of any State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.
5.2 Tenant's Personal Property. Tenant shall provide and maintain
--------------------------
throughout the Term all such Tenant's Personal Property as shall be necessary in
order to operate in compliance
<PAGE>
-29-
with applicable material Legal Requirements and Insurance Requirements and
otherwise in accordance with customary practice in the industry for the
Permitted Use, and all of such Tenant's Personal Property may, upon the
expiration or earlier termination of this Agreement, be purchased by Landlord
pursuant to Article 15. If, from and after the Commencement Date, Tenant
----------
acquires an interest in any item of tangible personal property (other than motor
vehicles) on, or in connection with, the Leased Property which belongs to anyone
other than Tenant, Tenant shall require the agreements permitting such use to
provide that Landlord or its designee may assume Tenant's rights and obligations
under such agreement upon the termination of this Agreement and the assumption
of management or operation of the Hotel by Landlord or its designee.
5.3 Yield Up. Upon the expiration or sooner termination of this
--------
Agreement, Tenant shall vacate and surrender the Leased Property to Landlord in
substantially the same condition in which the Leased Property was in on the
Commencement Date, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Agreement, reasonable wear and
tear excepted (and casualty damage and Condemnation, in the event that this
Agreement is terminated following a casualty or Condemnation in accordance with
Article 10 or Article 11 excepted), and except for repairs Tenant elects not to
- ---------- ----------
make pursuant to Section 5.1.3(b).
----------------
In addition, upon the expiration or earlier termination of this Agreement,
Tenant shall, at Landlord's sole cost and expense, use its good faith efforts to
transfer to and cooperate with Landlord or Landlord's nominee in connection with
the processing of all applications for licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental Entities which may be necessary for the use
and operation of the Hotel as then operated, but excluding (a) contracts with
Affiliated Persons, (b) insurance contracts which are not limited in scope to
the Leased Property, (c) utility deposits, if any, and (d) any "800" reservation
telephone numbers. If requested by Landlord, Tenant will direct the Manager to
continue, or if there is no Manager, Tenant shall continue to manage one or more
of the Hotels after the expiration of the Term and for up to one (1) year, on
such reasonable terms (which shall include a market rate management fee,
customary royalty for non-exclusive license to use the trademarks then being
used at the Leased Property and an agreement to reimburse the Manager or Tenant,
as the case may be, for its reasonable out-of-pocket costs and expenses, and
reasonable administrative costs), as Landlord shall reasonably request.
5.4 Management Agreement. Tenant shall not, without Landlord's prior
--------------------
written consent (which consent shall not be unreasonably withheld, delayed or
conditioned), enter into, or amend or modify the provisions of any Management
Agreement. Any Management Agreement shall be subordinate to this Agreement and
shall provide, inter alia, that all amounts due from Tenant to the Manager shall
----- ----
be subordinate to all amounts due from Tenant to Landlord (provided that, as
long as no Event of Default has occurred and is continuing, Tenant may pay all
amounts due to a Manager pursuant to a Management Agreement) and for
<PAGE>
-30-
termination thereof, at Landlord's option, upon the termination of this
Agreement. Tenant shall not take any action, grant any consent or permit any
action under any Management Agreement which might have a material adverse effect
on Landlord, without the prior written consent of Landlord, which consent shall
not be unreasonably withheld, delayed or conditioned.
ARTICLE 6
---------
IMPROVEMENTS, ETC.
------------------
6.1 Improvements to the Leased Property. Tenant shall not make, construct
-----------------------------------
or install any Capital Additions (other than Capital Additions of the type
described in Section 5.1.2(a)(ii) or 5.1.2(a)(iii) and approved pursuant to
-------------------- -------------
Section 5.1.2(c)) without, in each instance, obtaining Landlord's prior written
- ----------------
consent, which consent shall not be unreasonably withheld, delayed or
conditioned provided that (a) construction or installation of the same would not
adversely affect or violate any material Legal Requirement or Insurance
Requirement applicable to the Leased Property and (b) Landlord shall have
received an Officer's Certificate certifying as to the satisfaction of the
conditions set out in clause (a) above; provided, however, that, no such consent
-------- -------
shall be required in the event immediate action is required to prevent imminent
harm to person or property. Prior to commencing construction of any Capital
Addition, Tenant shall submit to Landlord, in writing, a proposal setting forth,
in reasonable detail, any such proposed improvement and shall provide to
Landlord such plans and specifications, and such permits, licenses, contracts
and such other information concerning the same as Landlord may reasonably
request. Landlord shall have twenty (20) Business Days to review all materials
submitted to Landlord in connection with any such proposal. Failure of Landlord
to respond to Tenant's proposal within such 20 Business Day period shall be
deemed approval thereof. Without limiting the generality of the foregoing, such
proposal shall indicate the approximate projected cost of constructing such
proposed improvement and the use or uses to which it will be put. No Capital
Addition shall be made which would tie in or connect any Leased Improvements
with any other improvements on property adjacent to the Leased Property (and not
part of the Land) including, without limitation, tie-ins of buildings or other
structures or utilities. Except as permitted herein, Tenant shall not finance
the cost of any construction of such improvement by the granting of a lien on or
security interest in the Leased Property or such improvement, or Tenant's
interest therein, without the prior written consent of Landlord, which consent
may be withheld by Landlord in Landlord's sole discretion. Any such
improvements shall, upon the expiration or sooner termination of this Agreement,
remain or pass to and become the property of Landlord, free and clear of all
encumbrances other than Permitted Encumbrances.
6.2 Salvage. All materials which are scrapped or removed in connection
-------
with the making of either Capital Additions or non-Capital Additions or repairs
required by Article 5 shall be or become the property of the party that paid for
---------
such work.
<PAGE>
-31-
ARTICLE 7
---------
LIENS
-----
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
----- ---------
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the Leased Property or Tenant's leasehold interest therein or any
attachment, levy, claim or encumbrance in respect of the Rent, other than (a)
Permitted Encumbrances, (b) restrictions, liens and other encumbrances which are
consented to in writing by Landlord, (c) liens for those taxes of Landlord which
Tenant is not required to pay hereunder, (d) subleases permitted by Article 16,
----------
(e) liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are not yet due and payable, or (ii) are
being contested in accordance with Article 8, (f) liens of mechanics, laborers,
---------
materialmen, suppliers or vendors incurred in the ordinary course of business
that are not yet due and payable or are for sums that are being contested in
accordance with Article 8, (g) any Hotel Mortgages or other liens which are the
---------
responsibility of Landlord pursuant to the provisions of Article 20 and (h)
----------
Landlord Liens and any other voluntary liens created by Landlord.
7.2 Landlord's Lien. In addition to any statutory landlord's lien and in
---------------
order to secure payment of the Rent and all other sums payable hereunder by
Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant's breach of this Agreement, Tenant hereby grants unto
Landlord, to the maximum extent permitted by Applicable Law, a security interest
in and an express contractual lien upon Tenant's Personal Property (except motor
vehicles and liquor licenses and permits), and Tenant's interest in all ledger
sheets, files, records, documents and instruments (including, without
limitation, computer programs, tapes and related electronic data processing)
relating to the operation of the Hotels (the "Records") and all proceeds
-------
therefrom, subject to any Permitted Encumbrances; and such Tenant's Personal
Property shall not be removed from the Leased Property at any time when an Event
of Default has occurred and is continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in Tenant's Personal Property and the proceeds thereof in accordance
with the provisions of the applicable laws of the State. During the continuance
of an Event of Default, Tenant hereby grants Landlord an irrevocable limited
power of attorney, coupled with an interest, to execute all such financing
statements in Tenant's name, place and stead. The security interest herein
granted is in addition to any statutory lien for the Rent.
<PAGE>
-32-
ARTICLE 8
----------
PERMITTED CONTESTS
------------------
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "Claims") as
------
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to pay any
Claims as finally determined, (b) such contest shall not cause Landlord or
Tenant to be in default under any mortgage or deed of trust encumbering the
Leased Property (Landlord agreeing that any such mortgage or deed of trust shall
permit Tenant to exercise the rights granted pursuant to this Article 8) or any
---------
interest therein or result in or reasonably be expected to result in a lien
attaching to the Leased Property (unless Tenant shall provide Landlord with a
bond or other assurance reasonably acceptable to Landlord with respect to any
such lien), (c) no part of the Leased Property nor any Rent therefrom shall be
in any immediate danger of sale, forfeiture, attachment or loss, and (d) Tenant
shall indemnify and hold harmless Landlord from and against any cost, claim,
damage, penalty or reasonable expense, including reasonable attorneys' fees,
incurred by Landlord in connection therewith or as a result thereof. Landlord
agrees to join in any such proceedings if required legally to prosecute such
contest, provided that Landlord shall not thereby be subjected to any liability
therefor (including, without limitation, for the payment of any costs or
expenses in connection therewith) unless Tenant agrees by agreement in form and
substance reasonably satisfactory to Landlord, to assume and indemnify Landlord
with respect to the same. Tenant shall be entitled to any refund of any Claims
and such charges and penalties or interest thereon which have been paid by
Tenant or paid by Landlord to the extent that Landlord has been fully reimbursed
by Tenant. If Tenant shall fail (x) to pay or cause to be paid any Claims when
finally determined, (y) to provide reasonable security therefor or (z) to
prosecute or cause to be prosecuted any such contest diligently and in good
faith, Landlord may, upon reasonable notice to Tenant (which notice shall not be
required if Landlord shall reasonably determine that the same is not
practicable), pay such charges, together with interest and penalties due with
respect thereto, and Tenant shall reimburse Landlord therefor, upon demand, as
Additional Charges.
ARTICLE 9
----------
INSURANCE AND INDEMNIFICATION
-----------------------------
9.1 General Insurance Requirements. Tenant shall, at all times during the
------------------------------
Term and at any other time Tenant shall be in possession of the Leased Property,
keep the Leased Property
<PAGE>
-33-
and all property located therein or thereon, insured against the risks and in
the amounts as follows and shall maintain, with respect to each Property, the
following insurance:
(a) "All-risk" property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief, earthquake,
explosion of steam boilers, pressure vessels or other similar apparatus,
now or hereafter installed in the Hotel located at such Property, with the
usual extended coverage endorsements, in an amount equal to one hundred
percent (100%) of the then full Replacement Cost thereof (as defined in
Section 9.2);
-----------
(b) Business interruption insurance covering risk of loss during
the lesser of the first twelve (12) months of reconstruction or the actual
reconstruction period necessitated by the occurrence of any of the hazards
described in subparagraph (a) above, in such amounts as may be customary
for comparable properties in the area and in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer;
(c) Comprehensive general liability insurance, including bodily
injury and property damage in a form reasonably satisfactory to Landlord
(and including, without limitation, broad form contractual liability,
independent contractor's hazard and completed operations coverage) in an
amount not less than One Million Dollars ($1,000,000) per occurrence, Two
Million Dollars ($2,000,000) in the aggregate and umbrella coverage of all
such claims in an amount not less than Fifty Million Dollars ($50,000,000);
(d) Flood (if such Property is located in whole or in part within
an area identified as an area having special flood hazards and in which
flood insurance has been made available under the National Flood Insurance
Act of 1968, as amended, or the Flood Disaster Protection Act of 1973, as
amended (or any successor acts thereto)) in such amounts as may be
customary for comparable properties in the area;
(e) Worker's compensation insurance coverage if required by
applicable law for all persons employed by Tenant on such Property with
statutory limits and otherwise with limits of and provisions in accordance
with the requirements of applicable local, State and federal law, and
employer's liability insurance as is customarily carried by similar
employers; and
(f) Such additional insurance as may be reasonably required, from
time to time, by Landlord or any Hotel Mortgagee and which is customarily
carried by comparable lodging properties in the area.
9.2 Replacement Cost. "Replacement Cost" as used herein, shall mean the
---------------- ----------------
actual replacement cost of the property requiring replacement from time to time,
including an increased
<PAGE>
-34-
cost of construction endorsement, less exclusions provided in the standard form
of fire insurance policy. In the event either party believes that the then full
Replacement Cost has increased or decreased at any time during the Term, such
party, at its own cost, shall have the right to have such full Replacement Cost
redetermined by an independent accredited appraiser approved by the other, which
approval shall not be unreasonably withheld or delayed. The party desiring to
have the full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such appraiser, give Notice thereof to the other. The
determination of such appraiser shall be final and binding on the parties hereto
until any subsequent determination under this Section 9.2, and Tenant shall
-----------
forthwith conform the amount of the insurance carried to the amount so
determined by the appraiser.
9.3 Waiver of Subrogation. Landlord and Tenant agree that (insofar as and
---------------------
to the extent that such agreement may be effective without invalidating or
making it impossible to secure insurance coverage from responsible insurance
companies doing business in any State) with respect to any property loss which
is covered by insurance then being carried by Landlord or Tenant, respectively,
the party carrying such insurance and suffering said loss releases the other of
and from any and all claims with respect to such loss; and they further agree
that their respective insurance companies shall have no right of subrogation
against the other on account thereof, even though extra premium may result
therefrom. In the event that any extra premium is payable by Tenant as a result
of this provision, Landlord shall not be liable for reimbursement to Tenant for
such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and endorsements
-----------------------
required pursuant to this Article 9 shall be fully paid for, nonassessable and
---------
be issued by insurance carriers authorized to do business in the State, having a
general policy holder's rating of no less than B++ in Best's latest rating
guide. All such policies described in Sections 9.1(a) through (d) shall include
---------------------------
no deductible in excess of Two Hundred Fifty Thousand Dollars ($250,000) (with
the exception of insurance described in Section 9.1(a) providing coverage for
--------------
windstorm which may have a deductible not exceeding five percent (5%) of the
policy amount for such insurance or such lesser amount as may be usual and
customary in the insurance industry for like properties) and, with the exception
of the insurance described in Sections 9.1(e), shall name Landlord and any Hotel
---------------
Mortgagee as additional insureds, as their interests may appear. All loss
adjustments shall be payable as provided in Article 10, except that losses under
----------
Sections 9.1(c) and (e) shall be payable directly to the party entitled thereto.
- -----------------------
Tenant shall cause all insurance premiums to be paid and shall deliver policies
or certificates thereof to Landlord prior to their effective date (and, with
respect to any renewal policy, prior to the expiration of the existing policy).
All such policies shall provide Landlord (and any Hotel Mortgagee if required by
the same) thirty (30) days prior written notice of any material change or
cancellation of such policy. In the event Tenant shall fail to effect such
insurance as herein required, to pay the premiums therefor or to deliver such
policies or certificates to Landlord or any Hotel Mortgagee at the times
required, Landlord shall have the right, upon Notice to Tenant, but not the
obligation, to acquire such insurance and pay the premiums therefor, which
amounts shall be payable to Landlord, upon
<PAGE>
-35-
demand, as Additional Charges, together with interest accrued thereon at the
Overdue Rate from the date such payment is made until (but excluding) the date
repaid.
9.5 Blanket Policy. Notwithstanding anything to the contrary contained in
--------------
this Article 9, Tenant's obligation to maintain the insurance herein required
---------
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant, provided, that (a) the coverage
thereby afforded will not be reduced or diminished from that which would exist
under a separate policy meeting all other requirements of this Agreement, and
(b) the requirements of this Article 9 are otherwise satisfied. Without
---------
limiting the foregoing, the amounts of insurance that are required to be
maintained pursuant to Section 9.1 shall be on a Hotel by Hotel basis, and shall
-----------
not be subject to an aggregate limit, except for flood, earthquake and umbrella
coverages.
9.6 No Separate Insurance. Tenant shall not take out separate insurance,
---------------------
concurrent in form or contributing in the event of loss with that required by
this Article 9, or increase the amount of any existing insurance by securing an
---------
additional policy or additional policies, unless all parties having an insurable
interest in the subject matter of such insurance, including Landlord and all
Hotel Mortgagees, are included therein as additional insureds and the loss is
payable under such insurance in the same manner as losses are payable under this
Agreement. In the event Tenant shall take out any such separate insurance or
increase any of the amounts of the then existing insurance, Tenant shall give
Landlord prompt Notice thereof.
9.7 Indemnification of Landlord. Notwithstanding the existence of any
---------------------------
insurance provided for herein and without regard to the policy limits of any
such insurance, Tenant shall protect, indemnify and hold harmless Landlord for,
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of: (a) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Property or adjoining sidewalks or rights of
way, (b) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Tenant or anyone claiming under Tenant of
the Leased Property or Tenant's Personal Property or any litigation, proceeding
or claim by governmental entities or other third parties to which Landlord is
made a party or participant relating to the Leased Property or Tenant's Personal
Property or such use, misuse, non-use, condition, management, maintenance, or
repair thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any Impositions
that are the obligations of Tenant to pay pursuant to the applicable provisions
of this Agreement, and (d) any failure on the part of Tenant or anyone claiming
under Tenant to perform or comply with any of the terms of this Agreement.
Tenant, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against Landlord (and shall not be
responsible for any duplicative attorneys' fees incurred by Landlord) or may
compromise or otherwise dispose of the same, with Landlord's prior written
consent (which consent may not be
<PAGE>
-36-
unreasonably withheld, delayed or conditioned). The obligations of Tenant under
this Section 9.7 are in addition to the obligations set forth in Section 4.3 and
----------- -----------
shall survive the termination of this Agreement.
ARTICLE 10
----------
CASUALTY
--------
10.1 Insurance Proceeds. Except as provided in the last clause of this
------------------
sentence, all proceeds payable by reason of any loss or damage to any Property,
or any portion thereof, and insured under any policy of insurance required by
Article 9 (other than the proceeds of any business interruption insurance) shall
- ---------
be paid directly to Landlord (subject to the provisions of Section 10.2) and all
------------
loss adjustments with respect to losses payable to Landlord shall require the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, delayed or conditioned; provided, however, that, so long as no Event
-------- -------
of Default shall have occurred and be continuing, all such proceeds less than or
equal to Two Hundred Fifty Thousand Dollars ($250,000) shall be paid directly to
Tenant and such losses may be adjusted without Landlord's consent. If Tenant is
required to reconstruct or repair any Property as provided herein, such proceeds
shall be paid out by Landlord from time to time for the reasonable costs of
reconstruction or repair of such Property necessitated by such damage or
destruction, subject to and in accordance with the provisions of Section 10.2.4.
--------------
Provided no Default or Event of Default has occurred and is continuing, any
excess proceeds of insurance remaining after the completion of the restoration
shall be paid to Tenant. In the event that the provisions of Section 10.2.1 are
--------------
applicable, the insurance proceeds shall be retained by the party entitled
thereto pursuant to Section 10.2.1.
--------------
10.2 Damage or Destruction.
---------------------
10.2.1 Damage or Destruction of Leased Property.
----------------------------------------
If, during the Term, any Property shall be totally or partially destroyed and
the Hotel located thereon is thereby rendered Unsuitable for Its Permitted Use,
Tenant may, by the giving of Notice thereof to Landlord, within ninety (90) days
after the date of casualty, terminate this Agreement with respect to such
Property, in which event, Landlord shall be entitled to retain the insurance
proceeds payable on account of such damage, except that Landlord shall pay to
Tenant any net proceeds in excess of the replacement cost of such Property
reasonably allocable to the value of Tenant's leasehold, Tenant's Personal
Property and Capital Additions paid for by Tenant.
10.2.2 Partial Damage or Destruction. If, during the Term, any
-----------------------------
Property shall be totally or partially destroyed but the Hotel is not rendered
Unsuitable for Its Permitted Use,
<PAGE>
-37-
Tenant shall promptly restore such Hotel as provided in Section 10.2.4 unless
--------------
this Agreement is terminated as to such Hotel as provided in Section 10.2.3.
--------------
10.2.3 Insufficient Insurance Proceeds. If this Agreement is not
-------------------------------
otherwise terminated pursuant to this Article 10 and the cost of the repair or
----------
restoration of the applicable Property exceeds the amount of insurance proceeds
received by Landlord and Tenant pursuant to Section 9(a), (c), (d) or, if
-----------------------------
applicable, (f), Tenant shall give Landlord Notice thereof which notice shall
- ---------------
set forth in reasonable detail the nature of such deficiency and whether Tenant
shall pay and assume the amount of such deficiency (Tenant having no obligation
to do so (unless such deficiency results from Tenant's failure to maintain
insurance as required by this Agreement), except that, if Tenant shall elect to
make such funds available, the same shall become an irrevocable obligation of
Tenant pursuant to this Agreement). In the event Tenant shall elect not to pay
and assume the amount of such deficiency, Landlord shall have the right (but not
the obligation), exercisable at Landlord's sole election by Notice to Tenant,
given within sixty (60) days after Tenant's notice of the deficiency, to elect
to make available for application to the cost of repair or restoration the
amount of such deficiency; provided, however, in such event, upon any
-------- -------
disbursement by Landlord thereof, the Minimum Rent shall be adjusted as provided
in Section 3.1.1(b). In the event that neither Landlord nor Tenant shall elect
----------------
to make such deficiency available for restoration, either Landlord or Tenant may
terminate this Agreement with respect to the affected Property by Notice to the
other, whereupon, this Agreement shall terminate and insurance proceeds shall be
distributed as provided in Section 10.2.1. It is expressly understood and
--------------
agreed, however, that, notwithstanding anything in this Agreement to the
contrary, Tenant shall be strictly liable and solely responsible for the amount
of any deductible and shall, upon any insurable loss, pay over the amount of
such deductible to Landlord at the time and in the manner herein provided for
payment of the applicable proceeds to Landlord.
10.2.4 Disbursement of Proceeds. In the event Tenant is required
------------------------
to restore any Property pursuant to Section 10.2 and this Agreement is not
------------
terminated as to such Property pursuant to this Article 10, Tenant shall
----------
commence promptly and continue diligently to perform the repair and restoration
of such Property (hereinafter called the "Work"), so as to restore such Property
----
in material compliance with all Legal Requirements and so that such Property
shall be, to the extent practicable, substantially equivalent in value and
general utility to its general utility and value immediately prior to such
damage or destruction. Subject to the terms hereof, Landlord shall advance the
insurance proceeds and any additional amounts payable by Landlord pursuant to
Section 10.2.3 or otherwise deposited with Landlord to Tenant regularly during
- --------------
the repair and restoration period so as to permit payment for the cost of any
such restoration and repair. Any such advances shall be made not more than
monthly within ten (10) Business Days after Tenant submits to Landlord a written
requisition and substantiation therefor on AIA Forms G702 and G703 (or on such
other form or forms as may be reasonably acceptable to Landlord). Landlord may,
at its option, condition advancement of such insurance proceeds and other
amounts on (i) the absence of any Event of Default, (ii) its approval of plans
and specifications
<PAGE>
-38-
of an architect satisfactory to Landlord (which approval shall not be
unreasonably withheld, delayed or conditioned), (iii) general contractors'
estimates, (iv) architect's certificates, (v) unconditional lien waivers of
general contractors, if available, (vi) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required, (vii), if
Tenant has elected to advance deficiency funds pursuant to Section 10.2.3,
--------------
Tenant depositing the amount thereof with Landlord and (viii) such other
certificates as Landlord may, from time to time, reasonably require.
Landlord's obligation to disburse insurance proceeds under this Article 10
----------
during the last two (2) years of the Term (including any renewals thereof) shall
be subject to the release of such proceeds by any Hotel Mortgagee to Landlord.
If any Hotel Mortgagee shall be unwilling to disburse insurance proceeds in
accordance with the terms of this Agreement, Tenant shall have the right, by the
giving of Notice thereof to Landlord within ten (10) Business Days after Tenant
learns of such unwillingness, to treat such Property as rendered Unsuitable for
its Permitted Use for purposes of Section 10.2.1.
--------------
10.3 Damage Near End of Term. Notwithstanding any provisions of Section
----------------------- -------
10.1 or 10.2 to the contrary, if damage to or destruction of any Property occurs
- ------------
during the last year of the Term (including any Extended Terms) and if such
damage or destruction cannot reasonably be expected to be fully repaired and
restored prior to the date that is one hundred eighty (180) days prior to the
end of the Term, the provisions of Section 10.2.1 shall apply as if such
--------------
Property had been totally or partially destroyed and the Hotel thereon rendered
Unsuitable for its Permitted Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of any
-----------------
loss of or damage to any of Tenant's Personal Property shall be paid to Tenant
and, to the extent necessary to repair or replace Tenant's Personal Property in
accordance with Section 10.5, Tenant shall hold such proceeds in trust to pay
------------
the cost of repairing or replacing damaged Tenant's Personal Property.
10.5 Restoration of Tenant's Property. If Tenant is required to restore
--------------------------------
any Property as hereinabove provided and this Agreement is not terminated as to
such Property pursuant to the terms of Article 10, Tenant shall either (a)
----------
restore all alterations and improvements made by Tenant and Tenant's Personal
Property, or (b) replace such alterations and improvements and Tenant's Personal
Property with improvements or items of the same or better quality and utility in
the operation of such Property. If Tenant is not required to restore and does
not, in fact, restore, Tenant shall pay over to Landlord the amount, if any, of
insurance proceeds received by Tenant with respect to any of Tenant's Personal
Property which was purchased with funds from the FF&E Reserve.
10.6 No Abatement of Rent. Except as expressly provided herein, this
--------------------
Agreement shall remain in full force and effect and Tenant's obligation to make
all payments of Rent and to pay
<PAGE>
-39-
all other charges as and when required under this Agreement shall remain
unabated during the Term notwithstanding any damage involving the Leased
Property (provided that Landlord shall credit against such payments any amounts
paid to Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
----------
be considered an express agreement governing any cause of damage or destruction
to the Leased Property and, to the maximum extent permitted by law, no local or
State statute, laws, rules, regulation or ordinance in effect during the Term
which provide for such a contingency shall have any application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of termination
------
which may arise by reason of any damage or destruction of the Leased Property,
or any portion thereof.
ARTICLE 11
----------
CONDEMNATION
------------
11.1 Total Condemnation, Etc. If either (i) the whole
------------------------
of any Property shall be taken by Condemnation or (ii) a Condemnation of less
than the whole of any Property renders any Property Unsuitable for Its Permitted
Use, this Agreement shall terminate with respect to such Property, Tenant and
Landlord shall seek the Award for their interests in the applicable Property as
provided in Section 11.6 and, as the effective date of taking, the Minimum Rent
------------
payable hereunder shall be reduced by such Property's allocable share thereof as
set forth in Exhibit C.
---------
11.2 Partial Condemnation. In the event of a Condemnation of less than
--------------------
the whole of any Property such that such Property is still suitable for its
Permitted Use, Tenant shall commence promptly and continue diligently to restore
the untaken portion of the applicable Leased Improvements so that such Leased
Improvements shall constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as such Leased Improvements existing immediately prior to such Condemnation, in
material compliance with all Legal Requirements, subject to and unless this
Agreement is terminated pursuant to the provisions of this Section 11.2. If the
------------
cost of the repair or restoration of the affected Property exceeds the amount of
the Award, Tenant shall give Landlord Notice thereof which notice shall set
forth in reasonable detail the nature of such deficiency and whether Tenant
shall pay and assume the amount of such deficiency (Tenant having no obligation
to do so, except that if Tenant shall elect to make such funds available, the
same shall become an irrevocable obligation of Tenant pursuant to this
Agreement). In the event Tenant shall elect not to pay and assume the amount of
such deficiency, Landlord shall have the right (but not the obligation),
exercisable at Landlord's sole election by Notice to Tenant given within sixty
(60) days after Tenant's Notice of the deficiency, to elect to make available
for application to the cost of repair or restoration the amount of such
deficiency; provided, however,
-------- -------
<PAGE>
-40-
in such event, upon any disbursement by Landlord thereof, the Minimum Rent shall
be adjusted as provided in Section 3.1.1(b). In the event that neither Landlord
----------------
nor Tenant shall elect to make such deficiency available for restoration, either
Landlord or Tenant may terminate this Agreement with respect to the affected
Property and the entire Award shall be allocated as set forth in Section 11.6.
------------
Subject to the terms hereof, Landlord shall contribute to the cost of
restoration that part of the Award necessary to complete such repair or
restoration, together with severance and other damages awarded for the taken
Leased Improvements and any other amounts deposited with or payable by Landlord,
to Tenant regularly during the restoration period so as to permit payment for
the cost of such repair or restoration. Landlord may, at its option, condition
advancement of such Award and other amounts on (i) the absence of any Event of
Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld,
delayed or conditioned), (iii) general contractors' estimates, (iv) architect's
certificates, (v) unconditional lien waivers of general contractors, if
available, (vi) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required, (vii), if Tenant has elected to
advance deficiency funds pursuant to the preceding paragraph, Tenant depositing
the amount thereof with Landlord and (viii) such other certificates as Landlord
may, from time to time, reasonably require. Landlord's obligation under this
Section 11.2 to disburse the Award and such other amounts shall be subject to
- ------------
(x) the collection thereof by Landlord and (y) during the last two (2) years of
the Term (including any exercised renewals thereof), the release of such Award
by the applicable Hotel Mortgagee. If any Hotel Mortgagee shall be unwilling to
disburse Award proceeds in accordance with the terms of this Agreement, Tenant
shall have the right, by the giving of Notice thereof to Landlord within ten
(10) Business Days after Tenant learns of such unwillingness, to treat such
Property as rendered Unsuitable for its Permitted Use for purposes of Section
-------
11.1.
- ----
11.3 Abatement of Rent. Other than as specifically provided in this
-----------------
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property, or any portion
thereof. The provisions of this Article 11 shall be considered an express
----------
agreement governing any Condemnation involving the Leased Property and, to the
maximum extent permitted by law, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such a
contingency shall have any application in such case.
11.4 Temporary Condemnation. In the event of any temporary Condemnation
----------------------
of any Property or Tenant's interest therein, this Agreement shall continue in
full force and effect and Tenant shall continue to pay, in the manner and on the
terms herein specified, the full amount of the Rent. Tenant shall continue to
perform and observe all of the other terms and conditions of this Agreement on
the part of the Tenant to be performed and observed. Provided no Event of
Default has occurred and is continuing, the entire amount of any Award made for
such
<PAGE>
-41-
temporary Condemnation allocable to the Term, whether paid by way of damages,
rent or otherwise, shall be paid to Tenant. Tenant shall, promptly upon the
termination of any such period of temporary Condemnation, at its sole cost and
expense, restore the Leased Property to the condition that existed immediately
prior to such Condemnation, in material compliance with all applicable Legal
Requirements, unless such period of temporary Condemnation shall extend beyond
the expiration of the Term, in which event Tenant shall not be required to make
such restoration.
11.5 Condemnation Near End of Term. Notwithstanding any provisions of
-----------------------------
Sections 11.2 or 11.3 to the contrary, if Condemnation of any Property occurs
- ---------------------
during the last year of the Term (including any Extended Terms) and if
restoration cannot reasonably be expected to be completed prior to the date that
is one hundred eighty (180) days prior to the end of the Term, the provisions of
Section 11.1 shall apply as if such Property had been totally or partially taken
- ------------
and the Hotel thereon rendered Unsuitable for its Permitted Use.
11.6 Allocation of Award. Except as provided in Section 11.4 and the
------------------- ------------
second sentence of this Section 11.6, the total Award shall be solely the
------------
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property
(other than any such property purchased with the FF&E Reserve), the taking of
Capital Additions paid for by Tenant and Tenant's removal and relocation
expenses shall be the sole property of and payable to Tenant. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
----------
DEFAULTS AND REMEDIES
---------------------
12.1 Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an "Event of Default" hereunder:
----------------
(a) should Tenant fail to make any payment of the Rent or any
other sum (including, but not limited to, funding of the FF&E Reserve)
payable hereunder when due; or
(b) should Tenant fail to maintain the insurance coverages
required under Article 9 and such failure shall continue for ten (10)
---------
Business Days after Notice thereof (except that no Notice shall be required
if any such insurance coverages shall have lapsed); or
<PAGE>
-42-
(c) should Tenant default in the due observance or performance of
any of the terms, covenants or agreements contained herein to be performed
or observed by it (other than as specified in clauses (a) and (b) above)
and such default shall continue for a period of thirty (30) days after
Notice thereof from Landlord to Tenant; provided, however, that if such
-------- -------
default is susceptible of cure but such cure cannot be accomplished with
due diligence within such period of time and if, in addition, Tenant
commences to cure or cause to be cured such default within thirty (30) days
after Notice thereof from Landlord and thereafter prosecutes the curing of
such default with all due diligence, such period of time shall be extended
to such period of time (not to exceed an additional one (1) year in the
aggregate) as may be necessary to cure such default with all due diligence;
or
(d) should any obligation of Tenant in excess of Three Hundred
Fifty Thousand Dollars ($350,000) in respect of any Indebtedness for money
borrowed or for any material property or services, or any guaranty relating
thereto, be declared to be or become due and payable prior to the stated
maturity thereof, or should there occur and be continuing with respect to
any such Indebtedness any event of default under any instrument or
agreement evidencing or securing the same, the effect of which is to permit
the holder or holders of such instrument or agreement or a trustee, agent
or other representative on behalf of such holder or holders, to cause such
any such obligations to become due prior to its stated maturity; or
(e) should an event of default by HSD or Tenant or any Affiliated
Person as to HSD or Tenant occur and be continuing beyond the expiration of
any applicable cure period under any of the Incidental Documents or by the
HSD Parties (as defined therein) under the Merger Agreement; or
(f) should any material representation or warranty made by Tenant
or the HSD Parties (as defined in the Merger Agreement) under or in
connection with this Agreement or any Incidental Document or, for the
period expiring on the first anniversary of the Commencement Date, the
Merger Agreement, or in any document, certificate or agreement delivered in
connection herewith or therewith, prove to have been false or misleading in
any material respect on the date when made or deemed made and the same
shall continue for five (5) Business Days after Notice thereof from
Landlord; or
(g) should Tenant generally not be paying its debts as they become
due or should Tenant make a general assignment for the benefit of
creditors; or
(h) should any petition be filed by or against Tenant under the
Federal bankruptcy laws, or should any other proceeding be instituted by or
against Tenant seeking to adjudicate Tenant a bankrupt or insolvent, or
seeking liquidation, reorganization, arrangement, adjustment or composition
of Tenant's debts under any law
<PAGE>
-43-
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or for
any substantial part of the property of Tenant and such proceeding is not
dismissed within one hundred eighty (180) days after institution thereof;
or
(i) should Tenant cause or institute any proceeding for its
dissolution or termination; or
(j) should the estate or interest of Tenant in the Leased Property
or any part thereof be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of (x) two hundred
seventy (270) days after commencement thereof, unless the amount in dispute
is less than $350,000, in which case Tenant shall give notice to Landlord
of the dispute but Tenant may defend in any suitable way, and (y) two
hundred seventy (270) days after receipt by Tenant of Notice thereof from
Landlord (unless Tenant shall be contesting such lien or attachment in good
faith in accordance with Article 8); or
---------
(k) should Tenant at any time cease to be a wholly owned, direct
or indirect, Subsidiary of HSD; or
(l) should Tenant amend any material provision in its charter
and/or organizational documents including, without limitation, the
provisions which result in Tenant being classified as a bankruptcy remote
entity, without Landlord's prior written consent;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement with respect to any or all of the
Leased Property by giving Notice thereof to Tenant and upon the expiration of
the time, if any, fixed in such Notice, this Agreement shall terminate with
respect to all or the designated portion of the Leased Property and all rights
of Tenant under this Agreement with respect thereto shall cease. Landlord shall
have and may exercise all rights and remedies available at law and in equity to
Landlord as a result of Tenant's breach of this Agreement.
Upon the occurrence of an Event of Default, Landlord may, in addition to
any other remedies provided herein, enter upon the Leased Property or any
portion thereof and take possession of any and all of Tenant's Personal
Property, if any, and the Records, without liability for trespass or conversion
(Tenant hereby waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or any portion of
Tenant's Personal Property, if any, unless otherwise prohibited by law. Unless
otherwise provided by law and without intending to
<PAGE>
-44-
exclude any other manner of giving Tenant reasonable notice, the requirement of
reasonable Notice shall be met if such Notice is given at least ten (10) days
before the date of sale. The proceeds from any such disposition, less all
expenses incurred in connection with the taking of possession, holding and
selling of such property (including, reasonable attorneys' fees) shall be
applied as a credit against the indebtedness which is secured by the security
interest granted in Section 7.2. Any surplus shall be paid to Tenant or as
-----------
otherwise required by law and Tenant shall pay any deficiency to Landlord, as
Additional Charges, upon demand.
12.2 Remedies. None of (a) the termination of this Agreement pursuant to
--------
Section 12.1, (b) the repossession of the Leased Property or any portion
- ------------
thereof, (c) the failure of Landlord to re-let the Leased Property or any
portion thereof, nor (d) the reletting of all or any of portion of the Leased
Property, shall relieve Tenant of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or re-letting. In the
event of any such termination, Tenant shall forthwith pay to Landlord all Rent
due and payable with respect to the Leased Property through and including the
date of such termination. Thereafter, Tenant, until the end of what would have
been the Term of this Agreement in the absence of such termination (assuming no
unexercised extension options are exercised), and whether or not the Leased
Property or any portion thereof shall have been re-let, shall be liable to
Landlord for, and shall pay to Landlord, as current damages, the Rent
(Additional Rent to be reasonably calculated by Landlord based on historical
Total Hotel Sales) and other charges which would be payable hereunder for the
remainder of the Term had such termination not occurred, less the net proceeds,
if any, of any re-letting of the Leased Property, after deducting all reasonable
expenses in connection with such reletting, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
advertising, expenses of employees, alteration costs and expenses of preparation
for such reletting. Tenant shall pay such current damages to Landlord monthly
on the days on which the Minimum Rent would have been payable hereunder if this
Agreement had not been so terminated with respect to such of the Leased
Property.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord an
amount equal to the present value (discounted at the interest rate on U.S.
Treasury Obligations having a maturity closest in time to the scheduled
expiration of the Term) of the excess, if any, of the Rent and other charges
which would be payable hereunder from the date of such termination (assuming
that, for the purposes of this paragraph, annual payments by Tenant on account
of Impositions and Additional Rent would be the same as payments required for
the immediately preceding twelve calendar months, or if less than twelve
calendar months have expired since the Commencement Date, the payments required
for such lesser period projected to an annual amount) for what would be the then
unexpired term of this Agreement if the same remained in effect, over the fair
market rental for the same period. Nothing contained in this Agreement shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in
<PAGE>
-45-
which, the damages are to be proved, whether or not the amount be greater than,
equal to, or less than the amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and dispossession by
summary proceedings or otherwise, Landlord may (a) relet the Leased Property or
any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to relet the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property or any portion
thereof as Landlord, in its sole and absolute discretion, considers advisable
and necessary for the purpose of reletting the Leased Property; and the making
of such alterations, repairs and decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. Subject to the last
sentence of this paragraph and as long as Landlord uses reasonable efforts to
mitigate its damages as provided in such sentence, Landlord shall in no event be
liable in any way whatsoever for any failure to relet all or any portion of the
Leased Property, or, in the event that the Leased Property is relet, for failure
to collect the rent under such reletting. To the maximum extent permitted by
law, Tenant hereby expressly waives any and all rights of redemption granted
under any present or future laws in the event of Tenant being evicted or
dispossessed, or in the event of Landlord obtaining possession of the Leased
Property, by reason of the occurrence and continuation of an Event of Default
hereunder. Landlord covenants and agrees, in the event of any termination of
this Agreement or Tenant's right to possession as a result of an Event of
Default, to use reasonable efforts to mitigate its damages.
12.3 Tenant's Waiver. IF THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION
--------------- -------
12.1 OR 12.2, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A
- ------------
TRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET
FORTH IN THIS ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE
----------
EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds. Any payments received by Landlord under any of
--------------------
the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's current and past
due obligations under this Agreement in such order as Landlord may determine or
as may be prescribed by the laws of the State. Any balance shall be paid to
Tenant.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of Default
-----------------------------------------
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or releasing
any obligation of Tenant and without waiving or
<PAGE>
-46-
releasing any Event of Default, may (but shall not be obligated to), at any time
thereafter, make such payment or perform such act for the account and at the
expense of Tenant, and may, to the maximum extent permitted by law, enter upon
the Leased Property or any portion thereof for such purpose and take all such
action thereon as, in Landlord's sole and absolute discretion, may be necessary
or appropriate therefor. No such entry shall be deemed an eviction of Tenant.
All reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) incurred by Landlord in connection therewith, together with, if
not paid within five (5) Business Days after written demand therefor, interest
thereon (to the extent permitted by law) at the Overdue Rate from the date such
sums are paid by Landlord until repaid, shall be paid by Tenant to Landlord, on
demand.
ARTICLE 13
----------
HOLDING OVER
------------
Any holding over by Tenant after the expiration or sooner termination of
this Agreement shall be treated as a daily tenancy at sufferance at a rate equal
to one hundred fifty percent (150%) of the Minimum Rent and other charges herein
provided (prorated on a daily basis). Tenant shall also pay to Landlord all
damages (direct or indirect) sustained by reason of any such holding over.
Otherwise, such holding over shall be on the terms and conditions set forth in
this Agreement, to the extent applicable. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Agreement.
ARTICLE 14
----------
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
-----------------------------------------------
14.1 Landlord Notice Obligation. Notwithstanding anything to the contrary
--------------------------
contained herein, Landlord shall give prompt Notice to Tenant of any matters
affecting the Leased Property of which Landlord receives written notice or
actual knowledge and, to the extent Tenant otherwise has no notice or actual
knowledge thereof, Landlord shall be liable for any liabilities arising from the
failure to deliver such Notice to Tenant.
14.2 Landlord's Default. If Landlord shall default in the performance or
------------------
observance of any of its covenants or obligations set forth in this Agreement or
any obligation of Landlord, if any, under any agreement affecting the Leased
Property, the performance of which is not Tenant's obligation pursuant to this
Agreement, and any such default shall continue for a period of five (5) Business
Days after Notice thereof with respect to monetary defaults and twenty (20)
Business Days after Notice thereof with respect to non-monetary defaults from
Tenant to
<PAGE>
-47-
Landlord and any applicable Hotel Mortgagee, or such additional period as may be
reasonably required to correct the same, provided Landlord is proceeding with
due diligence to correct the same (not to exceed an additional one (1) year in
the aggregate), Tenant may declare the occurrence of a "Landlord Default" by a
----------------
second Notice to Landlord and to such Hotel Mortgagee. Thereafter, Tenant may
forthwith cure the same and, subject to the provisions of the following
paragraph, invoice Landlord for costs and expenses (including reasonable
attorneys' fees and court costs) incurred by Tenant in curing the same, together
with interest thereon (to the extent permitted by law) from the date Landlord
receives Tenant's invoice until paid, at the Overdue Rate, and/or offset such
amounts against Additional Rent due and payable hereunder. Tenant shall have no
right to terminate this Agreement for any default by Landlord hereunder and no
right, for any such default, to offset or counterclaim against any Rent or other
charges due hereunder, except with respect to Additional Rent as set forth in
the preceding sentence.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof; provided, however, that in the event of any such adverse determination,
-------- -------
Landlord shall pay to Tenant interest on any disputed funds at the Interest
Rate, from the date demand for such funds was made by Tenant until the date of
final adverse determination and, thereafter, at the Overdue Rate until paid. If
Tenant and Landlord shall fail, in good faith, to resolve any such dispute
within ten (10) days after Landlord's Notice of dispute, either may submit the
matter for resolution to a court of competent jurisdiction.
ARTICLE 15
----------
PURCHASE RIGHTS
---------------
15.1 Landlord's Right to Acquire Tenant's Property. Landlord shall have
---------------------------------------------
the option to purchase Tenant's Personal Property, at the expiration or
termination of this Agreement, for an amount equal to the then fair market
value thereof (as determined by agreement of the parties or, in the absence of
such agreement, appraisal), subject to, and with appropriate price adjustments
for, all equipment leases, conditional sale contracts, UCC-1 financing
statements and other encumbrances to which such Personal Property is subject
(except that any such property purchased with the FF&E Reserve shall be
transferred to Landlord as provided in Section 5.1.2(e)). Upon the expiration or
----------------
sooner termination of this Agreement, Tenant shall use its reasonable efforts to
transfer and assign to Landlord or its designee, or assist Landlord or its
designee in obtaining, any contracts, licenses, and certificates required for
the then operation of the Leased Property .
<PAGE>
-48-
15.2 Restriction on Transfer of Leased Property. During the Term,
------------------------------------------
Landlord shall not transfer the Leased Property to any Person which is engaged
in the business of operating or franchising (as distinguished from owning) a
branded hotel chain having one thousand (1,000) or more guest rooms in
competition with Tenant or its Affiliated Persons. For purposes of this Section
-------
15.2, a Person shall not be deemed to be in the business of operating hotels in
- ----
competition with Tenant or its Affiliated Persons solely by virtue of (x) the
ownership of such hotels, either directly or indirectly through Subsidiaries,
Affiliated Persons and Entities, or (y) holding a mortgage or mortgages secured
by one or more hotels. Otherwise, subject to the provisions of Section 15.3,
------------
Landlord may transfer all or any portion of the Leased Property to any Person
without the consent of Tenant.
15.3 Transfer of Less Than All Leased Property. In the event that
-----------------------------------------
Landlord proposes to transfer less than half of the Properties comprising the
Leased Property to a Person (other than in connection with (x) a financing,
including, without limitation, a sale-leaseback financing, (y) a transfer of a
portfolio of properties (including half or more of the Properties or any one or
more Properties with other properties owned by Landlord or its Affiliated
Persons) by Landlord and its Affiliated Persons to such Person or (z) any
transfer by foreclosure or deed in lieu thereof), Landlord shall give Tenant
Notice thereof, which Notice shall set forth the proposed terms of sale. Tenant
shall have the right, by Notice given within ten (10) Business Days after
Landlord's Notice (and time shall be of the essence with respect to the giving
of such Notice), to buy all, but not less than all of the Properties designated
in Landlord's Notice on the terms and conditions set forth therein. Failure of
Tenant to respond shall be deemed an election by Tenant not to purchase. If
Tenant shall not elect to purchase or if Tenant shall elect to purchase but
shall fail to consummate such purchase in accordance with the terms of
Landlord's Notice, Landlord shall thereafter be free to sell the Properties
identified in Landlord's Notice to such Person or Persons (other than a
competitor of Tenant or its Affiliated Persons as set forth in Section 15.2) on
------------
terms substantially similar to those set forth in Landlord's Notice, as
reasonably determined by Landlord. The provisions of this Section 15.3 shall not
------------
apply to any sale of half or more of the Properties comprising the Leased
Property. If Landlord shall transfer its interest in less than all of the
Properties comprising the Leased Property, (i) a portion of the then current
balance in the Reserve shall be allocated to the Properties so transferred, as
reasonably determined by Tenant based on Tenant's reasonable and good faith
estimate as to such Property's projected requirements for Reserve fundings
relative to the projected requirements for Reserve fundings for the other Leased
Property, and (ii) this Agreement shall be appropriately amended, as reasonably
determined by Landlord and Tenant.
<PAGE>
-49-
ARTICLE 16
-----------
SUBLETTING AND ASSIGNMENT
-------------------------
16.1 Subletting and Assignment. Except as provided in Section 16.3,
------------------------- ------------
Tenant shall not, without Landlord's prior written consent (which consent may be
given or withheld in Landlord's sole and absolute discretion), assign, mortgage,
pledge, hypothecate, encumber or otherwise transfer this Agreement or sublease
(which term shall be deemed to include the granting of concessions, licenses and
the like but shall not be deemed to include the lodging of hotel guests
consistent with the Permitted Use), all or any part of the Leased Property or
suffer or permit this Agreement or the leasehold estate created hereby or any
other rights arising under this Agreement to be assigned, transferred,
mortgaged, pledged, hypothecated or encumbered, in whole or in part, whether
voluntarily, involuntarily or by operation of law, or permit the use or
operation of the Leased Property by anyone other than Tenant, or the Leased
Property to be offered or advertised for assignment or subletting. For purposes
of this Section 16.1, an assignment of this Agreement shall be deemed to include
------------
any direct or indirect transfer of any interest in Tenant such that Tenant shall
cease to be a wholly owned direct or indirect Subsidiary of HSD or any
transaction pursuant to which Tenant or HSD is merged or consolidated with
another Entity or pursuant to which all or substantially all of Tenant's or
HSD's assets are transferred to any other Entity or any change in control of
Tenant or HSD, as if any such change in control or transaction were an
assignment of this Agreement; provided, however, that, Landlord's consent with
-------- -------
respect to any transaction involving HSD (and not Tenant) shall not require
Landlord's consent if (i) no Event of Default has occurred and is continuing,
(ii) HSD or its successor entity, following consummation of the applicable
transaction, has a Net Worth in excess of Two Hundred Fifty Million Dollars
($250,000,000), (iii) any successor assumes HSD's obligations under the Guaranty
by written agreement in form and substance reasonably satisfactory to Landlord,
and (iv) Tenant and HSD give Landlord twenty (20) days prior Notice to such
transaction together with such evidence regarding the satisfaction of conditions
set forth in the foregoing clauses as Landlord may reasonably require.
If this Agreement is assigned or if the Leased Property or any part thereof
are sublet (or occupied by anybody other than Tenant and its respective
employees or hotel guests) Landlord may collect the rents from such assignee,
subtenant or occupant, as the case may be, and apply the net amount collected to
the Rent herein reserved, but no such collection shall be deemed a waiver of the
provisions set forth in the first paragraph of this Section 16.1, the acceptance
------------
by Landlord of such assignee, subtenant or occupant, as the case may be, as a
tenant, or a release of Tenant from the future performance by Tenant of its
covenants, agreements or obligations contained in this Agreement.
No subletting or assignment shall in any way impair the continuing primary
liability of Tenant hereunder (unless Landlord and Tenant expressly otherwise
agree that Tenant shall be released from all obligations hereunder), and no
consent to any subletting or assignment in a
<PAGE>
-50-
particular instance shall be deemed to be a waiver of the prohibition set forth
in this Section 16.1. No assignment, subletting or occupancy shall affect any
Permitted Use. Any subletting, assignment or other transfer of Tenant's interest
under this Agreement in contravention of this Section 16.1 shall be voidable at
Landlord's option. ------------
16.2 Required Sublease Provisions. Any sublease (which term shall not
----------------------------
include hotel guest occupancy or occupancy by Tenant and its employees) of all
or any portion of the Leased Property entered into on or after the date hereof
shall provide (a) that it is subject and subordinate to this Agreement and to
the matters to which this Agreement is or shall be subject or subordinate; (b)
that in the event of termination of this Agreement or reentry or dispossession
of Tenant by Landlord under this Agreement, Landlord may, at its option,
terminate such sublease or take over all of the right, title and interest of
Tenant, as sublessor under such sublease, and such subtenant shall, at
Landlord's option, attorn to Landlord pursuant to the then executory provisions
of such sublease, except that neither Landlord nor any Hotel Mortgagee, as
holder of a mortgage or as Landlord under this Agreement, if such mortgagee
succeeds to that position, shall (i) be liable for any act or omission of Tenant
under such sublease, (ii) be subject to any credit, counterclaim, offset or
defense which theretofore accrued to such subtenant against Tenant, (iii) be
bound by any previous modification of such sublease not consented to in writing
by Landlord or by any previous prepayment of more than one (1) month's rent,
(iv) be bound by any covenant of Tenant to undertake or complete any
construction of the Leased Property or any portion thereof, (v) be required to
account for any Security Deposit of the subtenant other than any Security
Deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant
unless actually delivered to Landlord by Tenant, or (viii) be required to remove
any Person occupying any portion of the Leased Property; and (c), in the event
that such subtenant receives a written Notice from Landlord or any Hotel
Mortgagee stating that an Event of Default has occurred and is continuing, such
subtenant shall thereafter be obligated to pay all rentals accruing under such
sublease directly to the party giving such Notice or as such party may direct.
All rentals received from such subtenant by Landlord or the Hotel Mortgagee, as
the case may be, shall be credited against the amounts owing by Tenant under
this Agreement and such sublease shall provide that the subtenant thereunder
shall, at the request of Landlord, execute a suitable instrument in confirmation
of such agreement to attorn. An original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such subtenant or
assignee, as the case may be, in form and substance reasonably satisfactory to
Landlord, shall be delivered promptly to Landlord and (a) in the case of an
assignment, the assignee shall assume in writing and agree to keep and perform
all of the terms of this Agreement on the part of Tenant to be kept and
performed and shall be, and become, jointly and severally liable with Tenant for
the performance thereof and (b) in case of either an assignment or subletting,
Tenant shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the
<PAGE>
-51-
performance and observance of all of the covenants and conditions to be
performed by Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of the
------------
provisions set forth in the first paragraph of Section 16.1.
------------
16.3 Permitted Sublease. Notwithstanding the foregoing, including,
------------------
without limitation, Section 16.2, but subject to the provisions of Section 16.4
------------ ------------
and any other express conditions or limitations set forth herein, Tenant may, in
each instance after Notice to Landlord, sublease space at any Property for
newsstand, car rental agency, business services office, gift shop, parking
garage, health club, restaurant, bar or commissary purposes or other concessions
in furtherance of the Permitted Use, so long as such subleases do not demise, in
the aggregate, in excess of two thousand (2,000) square feet per Property, will
not violate or affect any Legal Requirement or Insurance Requirement, and Tenant
shall provide such additional insurance coverage applicable to the activities to
be conducted in such subleased space as Landlord and any Hotel Mortgagee may
reasonably require.
16.4 Sublease Limitation. For so long as Landlord or any Affiliated
-------------------
Person as to Landlord shall seek to qualify as a real estate investment trust,
anything contained in this Agreement to the contrary notwithstanding, Tenant
shall not sublet or enter into any other agreement for the Leased Property on
any basis such that the rental or other amounts to be paid by any Person
thereunder would be based, in whole or in part, on the income or profits derived
by the business activities of such sublessee, any other formula such that any
portion of such sublease rental or fees would fail to qualify as "rents from
real property" within the meaning of Section 856(d) of the Code, or any similar
or successor provision thereto or would otherwise disqualify Landlord for
treatment as a real estate investment trust.
ARTICLE 17
----------
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
----------------------------------------------
17.1 Estoppel Certificates. At any time and from time to time, upon not
---------------------
less than ten (10) Business Days prior Notice by either party, the party
receiving such Notice shall furnish to the other an Officer's Certificate
certifying that this Agreement is unmodified and in full force and effect (or
that this Agreement is in full force and effect as modified and setting forth
the modifications), the date to which the Rent has been paid, that no Default or
an Event of Default has occurred and is continuing or, if a Default or an Event
of Default shall exist, specifying in reasonable detail the nature thereof, and
the steps being taken to remedy the same, and such additional information as the
requesting party may reasonably request. Any such certificate furnished
pursuant to this Section 17.1 may be relied upon by the requesting party, its
------------
lenders
<PAGE>
-52-
and any prospective purchaser or mortgagee of the Leased Property or the
leasehold estate created hereby.
17.2 Financial Statements. Tenant shall furnish or cause HSD to furnish,
--------------------
as applicable, the following statements to Landlord:
(a) within forty-five (45) days after each of the first three
fiscal quarters of any Fiscal Year, the most recent Consolidated Financials
and financials of Tenant comparable in scope to the Consolidated Financials
(except that footnotes need only be provided with the annual financials),
accompanied by the Financial Officer's Certificate;
(b) within ninety (90) days after the end of each Fiscal Year, the
most recent Consolidated Financials and financials of Tenant comparable in
scope to the Consolidated Financials (except that footnotes need only be
provided with the annual financials) for such year, certified by an
independent certified public accountant reasonably satisfactory to Landlord
and accompanied by a Financial Officer's Certificate;
(c) within forty-five (45) days after the end of each month, an
unaudited operating statement and statement of capital expenditures
prepared on a Hotel by Hotel basis and a combined basis, and, as soon as
possible but no later than thirty (30) days after the end of each month,
occupancy percentages, average rate and Revenue Per Available Room, in each
case, accompanied by a Financial Officer's Certificate;
(d) at any time and from time to time upon not less than twenty
(20) days Notice from Landlord or such additional period as may be
reasonable under the circumstances, any Consolidated Financials, Tenant
financials or any other audited or unaudited financial reporting
information required to be filed by Landlord with any securities and
exchange commission, the SEC or any successor agency, or any other
governmental authority, or required pursuant to any order issued by any
court, governmental authority or arbitrator in any litigation to which
Landlord is a party, for purposes of compliance therewith; and
(e) promptly, upon Notice from Landlord, such other information
concerning the business, financial condition and affairs of Tenant and HSD
as Landlord reasonably may request from time to time.
Landlord will, except as disclosed in any SEC filing or other public
statements, maintain such statements and information therein as confidential.
Landlord may at any time, and from time to time, provide any Hotel Mortgagee
with copies of any of the foregoing statements, subject to Landlord obtaining
the agreement of such Hotel Mortgagee to maintain such statements and the
information therein as confidential.
<PAGE>
-53-
ARTICLE 18
----------
LANDLORD'S RIGHT TO INSPECT
---------------------------
Tenant shall permit Landlord and its authorized representatives to inspect
the Leased Property during usual business hours upon not less than forty-eight
(48) hours' notice and to make such repairs as Landlord is permitted or required
to make pursuant to the terms of this Agreement, provided that any inspection or
repair by Landlord or its representatives will not unreasonably interfere with
Tenant's use and operation of the Leased Property and further provided that in
the event of an emergency, as determined by Landlord in its reasonable
discretion, prior Notice shall not be necessary.
ARTICLE 19
-----------
EASEMENTS
---------
19.1 Grant of Easements. Provided no Event of Default has occurred and is
------------------
continuing, Landlord will join in granting and, if necessary, modifying or
abandoning, and will use commercially reasonable efforts to obtain the
cooperation and execution of required subordination clauses by any Hotel
Mortgagee of, such rights-of-way, easements and other interests as may be
reasonably requested by Tenant for ingress and egress, and electric, telephone,
gas, water, sewer and other utilities so long as:
(a) the instrument creating, modifying or abandoning any such
easement, right-of-way or other interest is satisfactory to and approved by
Landlord (which approval shall not be unreasonably withheld, delayed or
conditioned); and
(b) Landlord receives an Officer's Certificate from Tenant stating
(i) that such grant, modification or abandonment is not detrimental to the
proper conduct of business on such Property, (ii) the consideration, if
any, being paid for such grant, modification or abandonment (which
consideration shall be paid by Tenant), (iii) that such grant, modification
or abandonment does not impair the use or value of such Property for the
Permitted Use, and (iv) that, for as long as this Agreement shall be in
effect, Tenant will perform all obligations, if any, of Landlord under any
such instrument.
19.2 Exercise of Rights by Tenant. So long as no Event of Default has
----------------------------
occurred and is continuing, Tenant shall have the right to exercise all rights
of Landlord under the Easement Agreements and, in connection therewith, Landlord
shall execute and promptly return to Tenant such documents as Tenant shall
reasonably request. Tenant shall perform all obligations of Landlord under the
Easement Agreements.
<PAGE>
-54-
19.3 Permitted Encumbrances. Any agreements entered into in accordance
----------------------
with Section 19.1 shall be deemed a Permitted Encumbrance.
------------
ARTICLE 20
----------
HOTEL MORTGAGES
---------------
20.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord
------------------------
may, subject to the terms and conditions set forth in this Section 20.1, from
------------
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
-----------
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Notwithstanding anything
to the contrary set forth in Section 20.2, any such Encumbrance shall include
------------
the right to prepay (whether or not subject to a prepayment penalty) and shall
provide (subject to Section 20.2) that it is subject to the rights of Tenant
------------
under this Agreement.
20.2 Subordination of Lease. Subject to Section 20.1 and this Section
---------------------- ------------ -------
20.2, this Agreement and any and all rights of Tenant hereunder, are and shall
be subject and subordinate to any ground or master lease, and all renewals,
extensions, modifications and replacements thereof, and to all mortgages and
deeds of trust, which may now or hereafter affect the Leased Property or any
improvements thereon and/or any of such leases, whether or not such mortgages or
deeds of trust shall also cover other lands and/or buildings and/or leases, to
each and every advance made or hereafter to be made under such mortgages and
deeds of trust, and to all renewals, modifications, replacements and extensions
of such leases and such mortgages and deeds of trust and all consolidations of
such mortgages and deeds of trust. This section shall be conditioned on
Tenant's receipt of a nondisturbance and attornment agreement from each Superior
Mortgagee (as defined below), consistent with the provisions of this Section
-------
20.2 and the provisions of Articles 10 and 11 of this Agreement and otherwise in
- ---- ------------------
form and substance reasonably satisfactory to Tenant. In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any deed of trust or any of their
respective successors in interest may reasonably request to evidence such
subordination. Any lease to which this Agreement is, at the time referred to,
subject and subordinate is herein called "Superior Lease" and the lessor of a
--------------
Superior Lease or its successor in interest at the time referred to is herein
called "Superior Landlord".
-----------------
If any Superior Landlord or Hotel Mortgagee or the nominee or designee of
any Superior Landlord or Hotel Mortgagee shall succeed to the rights of Landlord
under this Agreement (any such person, "Successor Landlord"), whether through
------------------
possession or foreclosure action or delivery of a new lease or deed, or
otherwise, such Successor Landlord shall recognize Tenant's rights under this
Agreement as herein provided and Tenant shall attorn to and recognize the
<PAGE>
-55-
Successor Landlord as Tenant's landlord under this Agreement and Tenant shall
promptly execute and deliver any instrument that such Successor Landlord may
reasonably request to evidence such attornment (provided that such instrument
does not alter the terms of this Agreement), whereupon, this Agreement shall
continue in full force and effect as a direct lease between the Successor
Landlord and Tenant upon all of the terms, conditions and covenants as are set
forth in this Agreement, except that the Successor Landlord (unless formerly the
landlord under this Agreement or its nominee or designee) shall not be (a)
liable in any way to Tenant for any act or omission, neglect or default on the
part of any prior Landlord under this Agreement, (b) responsible for any monies
owing by or on deposit with any prior Landlord to the credit of Tenant (except
to the extent actually paid or delivered to the Successor Landlord), (c) subject
to any counterclaim or setoff which theretofore accrued to Tenant against any
prior Landlord, (d) bound by any modification of this Agreement subsequent to
such Superior Lease or Mortgage, or by any previous prepayment of Rent for more
than one (1) month in advance of the date due hereunder, which was not approved
in writing by the Superior Landlord or the Superior Mortgagee thereto, (e)
liable to Tenant beyond the Successor Landlord's interest in the Leased Property
and the rents, income, receipts, revenues, issues and profits issuing from the
Leased Property, (f) responsible for the performance of any work to be done by
the Landlord under this Agreement to render the Leased Property ready for
occupancy by Tenant, or (g) required to remove any Person occupying the Leased
Property or any part thereof, except if such person claims by, through or under
the Successor Landlord. Tenant agrees at any time and from time to time to
execute a suitable instrument in confirmation of Tenant's agreement to attorn,
as aforesaid and Landlord agrees to provide Tenant with an instrument of
nondisturbance and attornment from each such Superior Mortgagee and Superior
Landlord in form and substance reasonably satisfactory to Tenant. Nothing
contained in this Section 20.2 shall relieve Landlord from any liability to
------------
Tenant under this Agreement following the exercise of remedies by a Superior
Mortgagee.
20.3 Notice to Mortgagee and Superior Landlord. Subsequent to the receipt
-----------------------------------------
by Tenant of Notice from Landlord as to the identity of any Hotel Mortgagee or
Superior Landlord under a lease with Landlord, as ground lessee, which includes
the Leased Property as part of the demised premises and which complies with
Section 20.1 and 20.2 (which Notice shall be accompanied by a copy of the
- ---------------------
applicable mortgage or lease), no Notice from Tenant to Landlord as to a default
by Landlord under this Agreement shall be effective with respect to a Hotel
Mortgagee or Superior Landlord unless and until a copy of the same is given to
such Hotel Mortgagee or Superior Landlord at the address set forth in the above
described Notice, and the curing of any of Landlord's defaults within the
applicable notice and cure periods set forth in Section 14.2 by such Hotel
------------
Mortgagee or Superior Landlord shall be treated as performance by Landlord.
<PAGE>
-56-
ARTICLE 21
----------
ADDITIONAL COVENANTS OF TENANT
------------------------------
21.1 Prompt Payment of Indebtedness. Tenant shall (a) pay or cause to be
------------------------------
paid when due all payments of principal of and premium and interest on Tenant's
Indebtedness for money borrowed and shall not permit or suffer any such
Indebtedness to become or remain in default beyond any applicable grace or cure
period, (b) pay or cause to be paid when due all lawful claims for labor and
rents with respect to the Leased Property, (c) pay or cause to be paid when due
all trade payables and (d) pay or cause to be paid when due all other of
Tenant's Indebtedness upon which it is or becomes obligated, except, in each
case, other than that referred to in clause (a), to the extent payment is being
contested in good faith by appropriate proceedings in accordance with Article 8
---------
and if Tenant shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP, if appropriate, or unless and until
foreclosure, distraint sale or other similar proceedings shall have been
commenced.
21.2 Conduct of Business. Tenant shall not engage in any business other
-------------------
than the leasing and operation of the Leased Property (including any incidental
or ancillary business relating thereto) and shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect and in
good standing its corporate existence and its rights and licenses necessary to
conduct such business.
21.3 Maintenance of Accounts and Records. Tenant shall keep true records
-----------------------------------
and books of account of Tenant in which full, true and correct entries will be
made of dealings and transactions in relation to the business and affairs of
Tenant in accordance with GAAP. Tenant shall apply accounting principles in the
preparation of the financial statements of Tenant which, in the judgment of and
the opinion of its independent public accountants, are in accordance with GAAP,
where applicable, except for changes approved by such independent public
accountants. Tenant shall provide to Landlord either in a footnote to the
financial statements delivered under Section 17.2 which relate to the period in
------------
which such change occurs, or in separate schedules to such financial statements,
information sufficient to show the effect of any such changes on such financial
statements.
21.4 Notice of Litigation, Etc. Tenant shall give prompt Notice to
--------------------------
Landlord of any litigation or any administrative proceeding to which it may
hereafter become a party of which Tenant has notice or actual knowledge which
involves a potential liability equal to or greater than Three Hundred Fifty
Thousand Dollars ($350,000) or which may otherwise result in any material
adverse change in the business, operations, property, prospects, results of
operation or condition, financial or other, of Tenant. Forthwith upon Tenant
obtaining knowledge of any Default, Event of Default or any default or event of
default under any agreement relating to Indebtedness for money borrowed in an
aggregate amount exceeding, at any one time, Three Hundred Fifty Thousand
Dollars ($350,000), or any event or condition that would be required to
<PAGE>
-57-
be disclosed in a current report filed by Tenant on Form 8-K or in Part II of a
quarterly report on Form 10-Q if Tenant were required to file such reports under
the Securities Exchange Act of 1934, as amended, Tenant shall furnish Notice
thereof to Landlord specifying the nature and period of existence thereof and
what action Tenant has taken or is taking or proposes to take with respect
thereto.
21.5 Indebtedness of Tenant. Tenant shall not create, incur, assume or
----------------------
guarantee, or permit to exist, or become or remain liable directly or indirectly
upon, any Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for Impositions, to the extent that
payment thereof shall not at the time be required to be made in accordance
with the provisions of Article 8;
---------
(c) Indebtedness of Tenant in respect of judgments or awards (i)
which have been in force for less than the applicable appeal period and in
respect of which execution thereof shall have been stayed pending such
appeal or review, or (ii) which are fully covered by insurance payable to
Tenant, or (iii) which are for an amount not in excess of $350,000 in the
aggregate at any one time outstanding and (x) which have been in force for
not longer than the applicable appeal period, so long as execution is not
levied thereunder or (y) in respect of which an appeal or proceedings for
review shall at the time be prosecuted in good faith in accordance with the
provisions of Article 8, and in respect of which execution thereof shall
---------
have been stayed pending such appeal or review;
(d) unsecured borrowings of Tenant from its Affiliated Persons
which are by their terms expressly subordinate pursuant to a Subordination
Agreement to the payment and performance of Tenant's obligations under this
Agreement; or
(e) Indebtedness for purchase money financing in accordance with
Section 21.9(a) and other operating liabilities incurred in the ordinary
---------------
course of Tenant's business.
21.6 Financial Condition of Tenant. Tenant shall at all times maintain
-----------------------------
Net Worth (except as provided in the last clause of this sentence) in an amount
at least equal to the aggregate of one year's Minimum Rent payable pursuant to
this Agreement; it being expressly understood and agreed that the right to
receive the Security Deposit, if assigned to Tenant, may for such purpose be
counted as equity at the full amount thereof.
21.7 Distributions, Payments to Affiliated Persons, Etc. Tenant shall not
---------------------------------------------------
declare, order, pay or make, directly or indirectly, any Distributions or any
payment to any Affiliated
<PAGE>
-58-
Person of Tenant (including payments in the ordinary course of business and
payments pursuant to Management Agreements with any such Affiliated Person) or
set apart any sum or property therefor, or agree to do so, if, at the time of
such proposed action, or immediately after giving effect thereto, any Event of
Default shall have occurred and be continuing. Otherwise, as long as no Event of
Default shall have occurred and be continuing, Tenant may make Distributions and
payments to Affiliated Persons (other than from the FF&E Reserve which shall be
governed by Section 5.1.2) without restriction.
-------------
21.8 Prohibited Transactions. Tenant shall not permit to exist or enter
-----------------------
into any agreement or arrangement whereby it engages in a transaction of any
kind with any Affiliated Person as to Tenant, except on terms and conditions
which are commercially reasonable.
21.9 Liens and Encumbrances. Except as permitted by Section 7.1 and
---------------------- -----------
Section 21.5, Tenant shall not create or incur or suffer to be created or
- ------------
incurred or to exist any Lien on this Agreement or any of Tenant's assets,
properties, rights or income, or any of its interest therein, now or at any time
hereafter owned, other than:
(a) Security interests securing the purchase price of equipment or
personal property whether acquired before or after the Commencement Date;
provided, however, that (i) such Lien shall at all times be confined solely
-------- -------
to the asset in question and (ii) the aggregate principal amount of
Indebtedness secured by any such Lien shall not exceed the cost of
acquisition or construction of the property subject thereto;
(b) Permitted Encumbrances; and
(c) As permitted pursuant to Section 21.5.
------------
21.10 Merger; Sale of Assets; Etc. Tenant shall not (i) sell, lease (as
---------------------------
lessor or sublessor), transfer or otherwise dispose of, or abandon, all or any
material portion of its assets (including capital stock) or business to any
Person, (ii) merge into or with or consolidate with any other Entity, or (iii)
sell, lease (as lessor or sublessor), transfer or otherwise dispose of, or
abandon, any personal property or fixtures or any real property; provided,
--------
however, that, notwithstanding the provisions of clause (iii) preceding, Tenant
- -------
may dispose of equipment or fixtures which have become inadequate, obsolete,
worn-out, unsuitable, undesirable or unnecessary, provided substitute equipment
or fixtures having equal or greater value and utility (but not necessarily
having the same function) have been provided.
21.11 Amendment to Documents. At such time as Landlord may reasonably
----------------------
request in order to facilitate any financing by Landlord, Tenant shall (a) make
such amendments to its organizational documents as Landlord may reasonably
require, including, without limitation, the addition of an independent director,
(b) reimburse Landlord, one time only, for the reasonable cost of appraisals of
each of the Properties, such appraisals to be in form and substance and
<PAGE>
-59-
prepared by an appraiser reasonably satisfactory to Landlord, and (c) cooperate
with Landlord to cause to be delivered to Landlord, in form and substance
reasonably satisfactory to Landlord, an opinion of counsel on the bankruptcy
remote nature of Tenant.
ARTICLE 22
----------
MISCELLANEOUS
-------------
22.1 Limitation on Payment of Rent. All agreements between Landlord and
-----------------------------
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under applicable law, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
---- -----
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
22.2 No Waiver. No failure by Landlord or Tenant to insist upon the
---------
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law, each
-------------------
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
or Tenant of any or all of such other rights, powers and remedies.
22.4 Severability. Any clause, sentence, paragraph, section or provision
------------
of this Agreement held by a court of competent jurisdiction to be invalid,
illegal or ineffective shall not impair, invalidate or nullify the remainder of
this Agreement, but rather the effect thereof shall be confined to the clause,
sentence, paragraph, section or provision so held to be invalid, illegal
<PAGE>
-60-
or ineffective, and this Agreement shall be construed as if such invalid,
illegal or ineffective provisions had never been contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of this Agreement
-----------------------
or of the Leased Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
22.6 No Merger of Title. It is expressly acknowledged and agreed that it
------------------
is the intent of the parties that there shall be no merger of this Agreement or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
22.7 Conveyance by Landlord. If Landlord or any successor owner of all or
----------------------
any portion of the Leased Property shall convey all or any portion of the Leased
Property in accordance with the terms hereof other than as security for a debt,
and the grantee or transferee of such of the Leased Property shall expressly
assume all obligations of Landlord hereunder arising or accruing from and after
the date of such conveyance or transfer, Landlord or such successor owner, as
the case may be, shall thereupon be released from all future liabilities and
obligations of Landlord under this Agreement with respect to such of the Leased
Property arising or accruing from and after the date of such conveyance or other
transfer and all such future liabilities and obligations shall thereupon be
binding upon the new owner.
22.8 Quiet Enjoyment. Tenant shall peaceably and quietly have, hold and
---------------
enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be created
----------
by Landlord hereunder provided that the holder of such Encumbrance has, to the
extent appropriate, executed a nondisturbance agreement pursuant to Section 20.2
------------
or a subordination agreement in form and substance reasonably acceptable to
Tenant, (b) all Permitted Encumbrances, (c) liens as to obligations of Landlord
that are either not yet due or which are being contested in good faith and by
proper proceedings, provided the same do not materially interfere with Tenant's
ability to operate the Hotels and (d) liens that have been consented to in
writing by Tenant. Except as otherwise provided in this Agreement, no failure
by Landlord to comply with the foregoing covenant shall give Tenant any right to
cancel or terminate this Agreement or abate, reduce or make a deduction from or
offset against the Rent or any other sum payable under this Agreement, or to
fail to perform any other obligation of Tenant hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
-------------------
Agreement. However, Landlord and Tenant shall promptly, upon the request of the
other, enter
<PAGE>
-61-
into a short form memorandum of this Agreement, in form suitable for recording
under the laws of the State in which reference to this Agreement, and all
options contained herein, shall be made. Tenant shall pay all costs and expenses
of recording such memorandum.
22.10 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.
(c) All such notices shall be addressed,
if to Landlord:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
<PAGE>
-62-
if to Tenant c/o:
Homestead Village Incorporated
2100 River Edge Parkway, Fl. 9
Atlanta, GA 30328
Attn: Ms. Laura L. Hamilton
[Telecopier No. (770) 859-1670]
with a copy to:
Homestead Village Incorporated
125 Lincoln Avenue
Santa Fe, NM 87501
Attn: Jeffrey A. Klopf, Esq.
[Telecopier No. (505) 998-8920]
and to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Attn; Thomas S. Reif, Esq.
[Telecopier No. (312) 701-7711]
(d) By notice given as herein provided, the parties hereto and
their respective successor 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.
22.11 Trade Area Restriction. Except for the hotels listed on
----------------------
Exhibit B-1, neither Tenant, HSD nor any of their Affiliated Persons shall own,
build, franchise, manage or operate any hotel of the same brand as the Hotels
within the designated areas on Exhibit B-2, at any time during the Term.
-----------
22.12 Construction. Anything contained in this Agreement to the contrary
------------
notwithstanding, all claims against, and liabilities of, Tenant or Landlord
arising prior to any date of termination or expiration of this Agreement with
respect to the Leased Property shall survive such termination or expiration. In
no event shall Landlord be liable for any consequential damages suffered by
Tenant as the result of a breach of this Agreement by Landlord. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated except by an instrument in writing signed by the party to be charged.
All the terms
<PAGE>
-63-
and provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Each term or
provision of this Agreement to be performed by Tenant shall be construed as an
independent covenant and condition. Time is of the essence with respect to the
provisions of this Agreement. Except as otherwise set forth in this Agreement,
any obligations of Tenant (including without limitation, any monetary, repair
and indemnification obligations) and Landlord shall survive the expiration or
sooner termination of this Agreement.
22.13 Counterparts; Headings. This Agreement may be executed in two or
----------------------
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
22.14 Applicable Law, Etc. This Agreement shall be interpreted,
--------------------
construed, applied and enforced in accordance with the laws of The Commonwealth
of Massachusetts applicable to contracts between residents of Massachusetts
which are to be performed entirely within Massachusetts, 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, 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 Massachusetts; or (vii) any combination of
the foregoing. Notwithstanding the foregoing, the laws of the State shall apply
to the perfection and priority of liens upon and the disposition of any
Property.
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
Commonwealth of Massachusetts as is provided by law; and the parties consent to
the jurisdiction of said court or courts located in Massachusetts and to service
of process by registered mail, return receipt requested, or by any other manner
provided by law.
22.15 Right to Make Agreement. Each party warrants, with respect to
-----------------------
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law,
or any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken.
<PAGE>
-64-
Each party covenants that it has and will continue to have throughout the term
of this Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.
22.16 Nonrecourse. Nothing contained in this Agreement shall be construed
-----------
to impose any liabilities or obligations on Landlord's or Tenant's partners,
shareholders, officers, directors, agents or employees (or any partners,
shareholders, officers, directors, agents or employees of any of the foregoing)
for the performance of the obligations of Landlord or Tenant hereunder.
22.17 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.
22.18 Disclosure of Information.
-------------------------
(a) The parties hereto agree that the matters set forth in this Agreement
and any revenue, expense, net profit, rate and occupancy information provided on
a hotel by hotel basis are strictly confidential and each party will make every
effort to ensure that the information is not disclosed to any Person that is not
an Affiliated Person as to any party (including the press) without the prior
written consent of the other party, except as may be required by law and as may
be reasonably necessary to obtain licenses, permits and other public approvals
necessary for the refurbishment or operation of the Hotels, in connection with a
Landlord financing or a sale of the Leased Property.
(b) The names "Homestead", "Homestead Village", and "Homestead Guest
Studios" (each of the foregoing names, together with any combination thereof,
collectively, the "Trade Names") when used along or in connection with another
-----------
word or words, and the Homestead trademarks, service marks, other trade names,
symbols, logos and designs shall in all events remain the exclusive property of
HSD or its Affiliated Persons, and nothing contained in this Agreement shall
confer on Landlord the right to
use any of the Trade Names, or the Homestead trademarks, service marks, other
trade names, symbols, logos or designs other than in strict accordance with the
terms of this Agreement.
(c) Any computer software (including upgrades and replacements) at the
Hotels owned by Tenant or any of its Affiliated Persons, or the licensor of any
of them is proprietary to Tenant or any of its Affiliated Persons, or the
licensor of any of them and shall in all events remain the exclusive property of
Tenant or any of its Affiliated Persons or the licensor of any of them, as the
case may be, and nothing contained in this Agreement shall confer on Landlord
the right to use any of such software. Tenant shall have the right to remove
from the Hotel without compensation to Landlord any computer software (including
upgrades and replacements),
<PAGE>
-65-
including, without limitation, the system software, owned by Tenant or any of
its Affiliated Persons or the licensor of any of them. Further, upon termination
of this Agreement, Tenant shall be entitled to remove from the Hotels without
compensation to Landlord any computer equipment utilized as part of a
centralized reservation system or owned by a party other than Landlord.
22.19 Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING HPT
------------------------
HSD, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
-----------
IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HPT HSD PROPERTIES TRUST" REFERS TO THE
TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HPT
HSD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, HPT HSD. ALL PERSONS DEALING WITH HPT HSD, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HPT HSD FOR THE PAYMENT OF ANY SUM OR
THE PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date above first written.
LANDLORD:
HPT HSD PROPERTIES TRUST
By: /s/ John Murray
___________________________
Its (Vice) President
TENANT:
HVI (2) INCORPORATED
By: /s/ Linda Hamilton
___________________________
Its (Vice) President
<PAGE>
-66-
Homestead Village Incorporated hereby acknowledges and agrees to be bound by the
provisions of Section 22.11 of the foregoing Lease Agreement.
-------------
HOMESTEAD VILLAGE INCORPORATED
By: /s/ Linda Hamilton
_____________________________
Its (Vice) President
Date: February 23, 1999
<PAGE>
EXHIBIT 99.3
GUARANTY AGREEMENT
------------------
THIS GUARANTY AGREEMENT (this "Agreement") is made and given as of this
---------
23rd day of February, 1999, by HOMESTEAD VILLAGE INCORPORATED, a Maryland
corporation (the "Guarantor"), for the benefit of HPT HSD PROPERTIES TRUST and
---------
HOSPITALITY PROPERTIES TRUST, each a Maryland real estate investment trust
(collectively, together with their successors and assigns, "HPT").
---
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Lease Agreement, dated as of the date hereof (the
"Lease"), HPT HSD Properties Trust has agreed to lease to HVI (2) Incorporated,
- ------
a Delaware corporation (the "Tenant"), certain real property, the related
------
improvements and personal property, comprising eighteen (18) Homestead Village
Hotels, as more particularly described in the Lease; and
WHEREAS, it is a condition precedent to HPT HSD Properties Trust entering
into the Lease that the Guarantor guarantee all of the payment and performance
obligations of the Tenant with respect to the Lease; and
WHEREAS, the transactions contemplated by the Lease are of direct material
benefit to the Guarantor;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the mutual receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Terms. Capitalized terms used and not otherwise defined in
-------------
this Agreement shall have the meanings ascribed to such terms in the Lease. The
Lease and the Incidental Documents are herein collectively referred to as the
"Transaction Documents."
- ----------------------
2. Guaranteed Obligations. For purposes of this Agreement, the term
----------------------
"Guaranteed Obligations" shall mean the payment and performance of each and
- -----------------------
every obligation of the Tenant to HPT under the Transaction Documents, whether
now existing or hereafter arising, and including, without limitation, the
payment of the full amount of the Rent payable under the Lease.
<PAGE>
-2-
3. Representations and Covenants. The Guarantor represents, warrants,
-----------------------------
covenants and agrees that:
3.1 Performance of Covenants and Agreements. During the term of this
---------------------------------------
Agreement, the Guarantor will cause the Tenant duly and punctually to perform
all of the covenants and agreements set forth in the Transaction Documents.
3.2 Validity of Agreement. The Guarantor has duly and validly
---------------------
executed and delivered this Agreement; this Agreement constitutes the legal,
valid and binding obligation of the Guarantor, enforceable against the Guarantor
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; and the execution,
delivery and performance of this Agreement have been duly authorized by all
requisite action of the Guarantor and such execution, delivery and performance
by the Guarantor will not 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 of the property or assets
of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of
trust, note, other evidence of indebtedness, agreement or other instrument to
which the Guarantor is a party or by which the Guarantor or any property or
assets of the Guarantor is bound, or violate any provision of law applicable to
the Guarantor, or any order, writ, injunction, judgement or decree of any court
applicable to the Guarantor or any order or other public regulation of any
governmental commission, bureau or administrative agency applicable to the
Guarantor.
3.3 Payment of Expenses. The Guarantor agrees, as principal obligor
-------------------
and not as Guarantor only, to pay to HPT forthwith, upon demand, in immediately
available Federal funds, all costs and expenses (including court costs and
reasonable legal expenses) incurred or expended by HPT in connection with the
enforcement of this Agreement and, if any such amounts are not paid within five
(5) Business Days after written demand therefor, the Guarantor shall also pay
interest on such amounts recoverable under this Agreement from the time the date
of demand until payment at the Interest Rate.
3.4 Reports. The Guarantor shall promptly provide to HPT each of the
-------
financial reports, certificates and other documents required of the Guarantor
under the Transaction Documents.
<PAGE>
-3-
3.5 Legal Existence. During the term of this Agreement, the
---------------
Guarantor shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence; provided, however, that, the
-------- ------- ----
Guarantor shall be permitted to merge or consolidate with another Person subject
to and upon the conditions set forth in Section 16.1 of the Lease.
3.6 Net Worth. The Guarantor shall, at all times during the Term of
---------
this Agreement, maintain a Net Worth in excess of Two Hundred Fifty Million
Dollars ($250,000,000). If, at or as of the end of any Accounting Period during
the Term, the Guarantor's Net Worth shall be less than Two Hundred Fifty Million
Dollars ($250,000,000), the Guarantor shall, within five (5) Business Days after
the end of such Accounting Period, deliver to HPT either (a) cash in the amount
of (x) one year's Minimum Rent plus (y) any disbursements made by HPT with
respect to the Leased Property subsequent to the Commencement Date or (b) an
Approved Letter (as defined below), which cash deposit or Approved Letter, as
the case may be, shall secure the obligations of the Guarantor under this
Agreement. The Guarantor shall, within five (5) Business Days after HPT's
request therefor, provide HPT with such information and certifications as HPT
may from time to time reasonably require to determine the Net Worth of the
Guarantor.
4. Guarantee. The Guarantor hereby unconditionally guarantees that the
---------
Guaranteed Obligations which are monetary obligations which become due and
payable during the term of this Agreement shall be paid in full when due and
payable, whether upon demand, at the stated or accelerated maturity thereof or
upon any mandatory or voluntary prepayment pursuant to any Transaction Document,
or otherwise, and that the Guaranteed Obligations which are performance
obligations which are required to be performed during the term of this Agreement
shall be fully performed at the times and in the manner such performance is
required by the Transaction Documents. With respect to the Guaranteed
Obligations which are monetary obligations, this guarantee is a guarantee of
payment and not of collectibility and is absolute and in no way conditional or
contingent. In case any part of the Guaranteed Obligations shall not have been
paid when due and payable or performed at the time performance is required, the
Guarantor shall, within five (5) days after receipt of notice from HPT, pay or
cause to be paid to HPT the amount thereof as is then due and payable and unpaid
(including interest and other charges, if any, due thereon through the date of
payment in accordance with the applicable provisions of the Transaction
Documents, other than amounts constituting interest on interest)
<PAGE>
-4-
or perform or cause to be performed such obligations in accordance with the
Transaction Documents.
5. Unenforceability of Guaranteed Obligations, Etc. If the Tenant is for
------------------------------------------------
any reason under no legal obligation to discharge any of the Guaranteed
Obligations, or if any other moneys included in the Guaranteed Obligations have
become unrecoverable from the Tenant by operation of law or for any other
reason, including, without limitation, the invalidity or irregularity in whole
or in part of any Guaranteed Obligation or of any Transaction Document or any
limitation on the liability of the Tenant thereunder or any limitation on the
method or terms of payment thereunder which may now or hereafter be caused or
imposed in any manner whatsoever, the guarantees contained in this Agreement
shall nevertheless remain in full force and effect in accordance with the terms
set forth herein and shall be binding upon the Guarantor to the same extent as
if the Guarantor at all times had been the principal obligor on all such
Guaranteed Obligations.
6. Additional Guarantees. This Agreement shall be in addition to any
---------------------
other guarantee or other security for the Guaranteed Obligations and it shall
not be prejudiced or rendered unenforceable by the invalidity of any such other
guarantee or security or by any waiver, amendment, release or modification
thereof.
7. Consents and Waivers, Etc. The Guarantor hereby acknowledges receipt
--------------------------
of correct and complete copies of each of the Transaction Documents and consents
to all of the terms and provisions thereof, as the same may be from time to time
hereafter amended or changed in accordance therewith, and waives, to the extent
the Guarantor lawfully may do so, (a) presentment, demand for payment, and
protest of nonpayment, of any of the Guaranteed Obligations, (b) notice of
acceptance of this Agreement and of diligence, presentment, demand and protest,
(c) notice of any default hereunder and any default, breach or nonperformance or
Event of Default under any of the Guaranteed Obligations or the Transaction
Documents, (d) notice of the terms, time and place of any private or public sale
of collateral held as security for the Guaranteed Obligations, (e) demand for
performance or observance of, and any enforcement of any provision of, or any
pursuit or exhaustion of rights or remedies against the Tenant or any other
guarantor of the Guaranteed Obligations, under or pursuant to the Transaction
Documents, or any agreement directly or indirectly relating thereto and any
requirements of diligence or promptness on the part of the holders of the
Guaranteed Obligations in connection therewith, and (f) any and all demands and
notices of every kind and
<PAGE>
-5-
description with respect to the foregoing or which may be required to be given
by any statute or rule of law.
8. No Impairment, Etc. The obligations, covenants, agreements and duties
-------------------
of the Guarantor under this Agreement shall not be affected or impaired by any
assignment or transfer in whole or in part of any of the Guaranteed Obligations
without notice to the Guarantor, or any waiver by HPT or any holder of any of
the Guaranteed Obligations or by the holders of all of the Guaranteed
Obligations of the performance or observance by the Tenant or any other
guarantor of any of the agreements, covenants, terms or conditions contained in
the Guaranteed Obligations or the Transaction Documents or any indulgence in or
the extension of the time for payment by the Tenant or any other guarantor of
any amounts payable under or in connection with the Guaranteed Obligations or
the Transaction Documents or any other instrument or agreement relating to the
Guaranteed Obligations or of the time for performance by the Tenant or any other
guarantor of any other obligations under or arising out of any of the foregoing
or the extension or renewal thereof, or the modification or amendment (whether
material or otherwise) of any duty, agreement or obligation of the Tenant or any
other guarantor set forth in any of the foregoing, or the voluntary or
involuntary sale or other disposition of all or substantially all the assets of
the Tenant or any other guarantor or insolvency, bankruptcy, or other similar
proceedings affecting the Tenant or any other guarantor or any assets of the
Tenant or any such other guarantor, or the release or discharge of the Tenant or
any such other guarantor from the performance or observance of any agreement,
covenant, term or condition contained in any of the foregoing without the
consent of the holders of the Guaranteed Obligations by operation of law.
9. Reimbursement, Subrogation, Etc. The Guarantor hereby covenants and
--------------------------------
agrees that, as long as no Event of Default has occurred and is continuing under
the Transaction Documents, the Guarantor will not enforce or otherwise exercise
any rights of reimbursement, subrogation, contribution or other similar rights
against the Tenant or any other person with respect to the Guaranteed
Obligations prior to the payment in full of all amounts then due and owing but
unpaid with respect to the Lease, and until the Guaranteed Obligations have been
satisfied in full, the Guarantor shall not have any right of subrogation, and
the Guarantor waives any defense it may have based upon any election of remedies
by HPT which destroys the Guarantor's subrogation rights or the Guarantor's
rights to proceed against the Tenant for reimbursement, including, without
limitation, any loss of rights the Guarantor may suffer by reason of any rights,
powers or remedies of the Tenant in connection with any anti-deficiency
<PAGE>
-6-
laws or any other laws limiting, qualifying or discharging the indebtedness to
HPT. Until all obligations of the Tenant pursuant to the Transaction Documents
shall have been paid and satisfied in full, the Guarantor waives any right to
enforce any remedy which HPT now has or may in the future have against the
Tenant, any other guarantor or any other person and any benefit of, or any right
to participate in, any security whatsoever now or in the future held by HPT.
10. Defeasance. This Agreement shall terminate at such time as the
----------
Guaranteed Obligations have been paid and performed in full and all other
obligations of the Guarantor to HPT under this Agreement have been satisfied in
full, at which time, any unapplied balance of any cash collateral or Approved
Letter shall be returned to the Guarantor; provided, however, if at any time,
-------- -------
all or any part of any payment applied on account of the Guaranteed Obligations
is or must be rescinded or returned for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of the Tenant),
this Agreement, to the extent such payment is or must be rescinded or returned,
shall be deemed to have continued in existence notwithstanding any such
termination.
11. Limited Recourse. Provided that (a) no Default shall have occurred
----------------
and be continuing under the Lease, (b) Cash Flow (as defined below) for a period
of three full consecutive calendar years equals or exceeds One Hundred Fifty
Percent (150%) of annual Minimum Rent with respect to each calendar year
included in such period, (c) HPT shall receive a schedule evidencing the
foregoing, in form and substance reasonably satisfactory to HPT audited by
Arthur Andersen LLP or such other certified public accountants as are approved
by HPT (such approval not to be unreasonably withheld, delayed or conditioned),
and (d) the Guarantor shall deliver to HPT either (i) cash in the amount of (x)
one year's Minimum Rent plus (y) any disbursements made by HPT with respect to
the Leased Property subsequent to the Commencement Date or (ii) an Approved
Letter (as defined below), the Guarantor's liability hereunder and HPT's
recourse under this Agreement shall, thereafter, be limited to the amount of
such cash deposit or the face amount of such Approved Letter, as the case may
be.
HPT shall be permitted to draw upon any such Approved Letter or cash
collateral upon the occurrence of an Event of Default. Provided no Default has
occurred and is continuing, if the Guarantor deposits cash with HPT pursuant to
the foregoing provisions of this Section 11, HPT shall credit against payments
----------
of Minimum Rent, on the first day of each month, in arrears, simple interest
thereon at the Interest Rate. HPT shall have no
<PAGE>
-7-
obligation to keep any such cash collateral in a segregated account and may
commingle the same with its own funds.
As used herein, "Cash Flow" shall mean the net income (or loss) of Tenant
---------
in connection with the operation of the Hotels before income taxes, calculated
in accordance with GAAP, plus (a) all extraordinary expense items, (b)
----
depreciation and amortization, (c) interest expense on Indebtedness permitted
under the Lease, (d) base management fees, incentive management fees, trade name
fees, franchise fees, royalty fees and central marketing fees paid to the
Manager to the extent subordinate to payment of rent pursuant to the Lease from
and after the occurrence of an Event of Default minus (e) required contributions
-----
to the FF&E Reserve equal to five percent (5%) of Total Hotel Sales and (f) all
extraordinary income items.
As used herein, "Approved Letter" shall mean an unconditional and
---------------
irrevocable sight draft letter of credit issued by a bank having an office with
bank tellers in either Boston, Massachusetts or New York, New York, the senior
unsecured long term debt of which is rated not less than "A" by Moody's
Investor's Service, Inc. and Standard & Poors Rating Services, in the stated
amount of the sum of (x) one year's Minimum Rent plus (y) any disbursements made
by HPT with respect to the Leased Property subsequent to the Commencement Date,
and otherwise in form and substance satisfactory to HPT. Each Approved Letter
shall permit HPT to draw the full amount available thereunder upon presentation
only of a sight draft accompanied by a certificate of an authorized
representative of HPT stating that HPT is entitled to draw on such letter under
the Guaranty Agreement. Any Approved Letter shall expire not earlier than one
year after the date of issuance (or renewal) thereof and shall additionally
permit HPT to draw upon the full amount available thereunder upon presentation
only of a sight draft during and through the period thirty (30) days prior to
the stated expiration date thereof. The Guarantor shall renew or replace each
Approved Letter which expires prior to the ninetieth day following the end of
the Term not later than 30 days prior to the stated expiration date thereof. If
requested by HPT, the Guarantor shall cause an Approved Letter to be issued in
the name of any Hotel Mortgagee.
12. 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
<PAGE>
-8-
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.
(c) All such notices shall be addressed,
if to HPT to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to the Guarantor to:
Homestead Village Incorporated
2100 River Edge Parkway, Fl. 9
Atlanta, GA 30328
Attn: Ms. Laura L. Hamilton
[Telecopier No. (770) 859-1670]
with a copy to:
Homestead Village Incorporated
125 Lincoln Avenue
Santa Fe, NM 87501
Attn: Jeffrey A. Klopf, Esq.
[Telecopier No. (505) 998-8920]
<PAGE>
-9-
and to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Attn; Thomas S. Reif, Esq.
[Telecopier No. (312) 701-7711]
(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.
13. Successors and Assigns. Whenever in this Agreement, any of the
----------------------
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, including without limitation the holders,
from time to time, of the Guaranteed Obligations; and all representations,
warranties, covenants and agreements by or on behalf of the Guarantor which are
contained in this Agreement shall inure to the benefit of HPT's successors and
assigns, including without limitation said holders, whether so expressed or not.
14. Applicable Law. Except as to matters regarding the internal affairs
--------------
of HPT and issues of or limitations on any personal liability of the
shareholders and trustees of HPT for obligations of HPT, as to which the laws of
the State of Maryland shall govern, this Agreement and any other instruments
executed and delivered to evidence, complete or perfect the transactions
contemplated hereby shall be interpreted, construed, applied and enforced in
accordance with the laws of The Commonwealth of Massachusetts applicable to
contracts between residents of Massachusetts which are to be performed entirely
within Massachusetts, regardless of (i) where any such instrument is executed or
delivered; or (ii) where any payment or other performance required by any such
instrument is made or required to be made; or (iii) where any breach of any
provision of any such instrument occurs, or any cause of action otherwise
accrues; or (iv) where any action or other proceeding is instituted or pending;
or (v) the nationality, 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 Massachusetts; or (vii) any combination of the foregoing.
<PAGE>
-10-
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
Commonwealth of Massachusetts as may be provided by law; and the parties consent
to the jurisdiction of said court or courts located in Massachusetts and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
15. Modification of Agreement. No modification or waiver of any provision
-------------------------
of this Agreement, nor any consent to any departure by the Guarantor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by HPT, and such modification, waiver or consent shall be effective only in the
specific instances and for the purpose for which given. No notice to or demand
on the Guarantor in any case shall entitle the Guarantor to any other or further
notice or demand in the same, similar or other circumstances.
16. Waiver of Rights by HPT. Neither any failure nor any delay on HPT's
-----------------------
part in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege.
17. Severability. In case any one or more of the provisions contained in
------------
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, but this Agreement
shall be reformed and construed and enforced to the maximum extent permitted by
applicable law.
18. Entire Contract. This Agreement constitutes the entire agreement
---------------
between 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.
19. Headings; Counterparts. Headings in this Agreement are for purposes
----------------------
of reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument,
and in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.
<PAGE>
-11-
20. Remedies Cumulative. No remedy herein conferred upon HPT is intended
-------------------
to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
<PAGE>
-12-
WITNESS the execution hereof under seal as of the date above first written.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ Laura Hamilton
___________________________
Its (Vice) President
ACKNOWLEDGED AND AGREED:
HPT HSD PROPERTIES TRUST
By: /s/ John Murray
_________________________
Its (Vice) President
HOSPITALITY PROPERTIES TRUST
/s/ John Murray
By:_________________________
Its (Vice) President
