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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): December 24, 1997
CANDLEWOOD HOTEL COMPANY, INC.
(Exact name of Registrant as specified in charter)
DELAWARE 0-12708 48-1188025
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
LAKEPOINT OFFICE PARK, 9342 EAST CENTRAL 67206
WICHITA, KANSAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (316) 631-1300
None
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 24, 1997, Candlewood Hotel Company, Inc. and certain
of its subsidiaries (collectively the "Company") sold five (5) Candlewood(R)
Hotels (the "Hotels") to HPT CW Properties Trust ("HPTCW"), a subsidiary of
Hospitality Properties Trust (together with its subsidiaries, "HPT") as part of
a sale-leaseback arrangement. The sales were made pursuant to a Purchase and
Sale Agreement and an Agreement to Lease between the Company and HPT, both dated
as of November 19, 1997 (collectively the "Transaction Documents"). Pursuant to
the Transaction Documents, the Company will sell a total of 15 Hotels, including
the five Hotels which were transferred on December 24, 1997, to HPTCW for an
aggregate purchase price of $100 million. The Hotels will be transferred in
multiple closings, as individual hotels are completed. The transfers of all
15 Hotels are expected to be completed in the first quarter of 1998. Pursuant to
the Transaction Documents, at the time each Hotel is transferred to HPTCW, the
Hotel concurrently will be leased back to Candlewood Leasing No. 1, Inc., a
wholly-owned subsidiary of the Company pursuant to the terms of a Lease
Agreement dated as of December 24, 1997.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information:
It is impracticable for the Registrant to provide the required
pro forma financial information at the time of this filing. The Registrant will
file such pro forma financial information by amendment no later than 60 days
after the date this report is filed, as permitted under Item 7 of Form 8-K.
(c) Exhibits
Exhibit Number Description of Document
- -------------- -----------------------
10.1 Purchase and Sale Agreement, dated as of November 19, 1997,
by and among the Company and certain of its affiliates, as
sellers, and HPT, as purchaser.
10.2 Agreement to Lease, dated as of November 19, 1997, by and
between the Company and HPT.
10.3 Lease Agreement, dated as of December 24, 1997, by and
between HPTCW, as landlord, and Candlewood Leasing No. 1,
Inc., as tenant.
10.4 Guaranty Agreement, dated as of December 24, 1997, by
the Company for the benefit of HPTCW and HPT.
10.5 Stock Pledge Agreement, dated as of December 24, 1997, by
the Company for the benefit of HPTCW.
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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.
Dated: January 7, 1998 CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ WARREN D. FIX
--------------------------------
Name: Warren D. Fix
Title: Chief Financial Officer
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Exhibit 10.1
PURCHASE AND SALE AGREEMENT
by and among
CANDLEWOOD HOTEL COMPANY, INC. AND CERTAIN OF ITS AFFILIATES,
as Sellers,
and
HOSPITALITY PROPERTIES TRUST,
as Purchaser
---------------------------
November 19, 1997
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SECTION 1. DEFINITIONS.......................................................................1
1.1. "Agreement".....................................................................1
1.2. "Agreement to Lease"............................................................1
1.3. "Allocable Purchase Price"......................................................1
1.4. "Assets"........................................................................2
1.5. "Business Day"..................................................................2
1.6. "Candlewood"....................................................................2
1.7. "Candlewood Parties"............................................................2
1.8. "Closing".......................................................................2
1.9. "Closing Date"..................................................................2
1.10. "Contracts"....................................................................2
1.11. "Defective Property"...........................................................2
1.12. "Documents"....................................................................2
1.13. "FF&E".........................................................................2
1.14."Guaranty"......................................................................2
1.15. "Guaranty Retained Funds"......................................................2
1.16. "Hotel"........................................................................2
1.17. "Improvements".................................................................2
1.18. "Intangible Property"..........................................................3
1.19. "Lease"........................................................................3
1.20. "Opening Date".................................................................3
1.21. "Permitted Encumbrances".......................................................3
1.22. "Plans and Specifications".....................................................3
1.23. "Properties"...................................................................3
1.24. "Purchase Price"...............................................................3
1.25. "Purchaser"....................................................................3
1.26. "Real Property"................................................................3
1.27. "Retained Funds"...............................................................3
1.28. "Review Period"................................................................4
1.29. "Sellers"......................................................................4
1.30. "Substantial Completion".......................................................4
1.31. "Surveys"......................................................................4
1.32. "Tenant".......................................................................4
1.33. "Tenant Leases"................................................................4
1.34. "Title Commitments"............................................................4
1.35. "Title Company"................................................................4
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 2. PURCHASE AND SALE; DILIGENCE......................................................4
2.1. Purchase and Sale...............................................................4
2.2. Diligence Inspections...........................................................4
2.3. Defective Properties............................................................5
2.4. Title Matters...................................................................6
2.5. Survey Matters..................................................................6
SECTION 3. PURCHASE AND SALE.................................................................7
3.1. Closing.........................................................................7
3.2. Purchase Price..................................................................7
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.....................................8
4.1. Closing Documents...............................................................8
4.2. Condition of Properties.........................................................9
4.3. Title Policies and Surveys......................................................9
4.4. Opinions of Counsel.............................................................9
SECTION 5. CONDITIONS TO CANDLEWOOD PARTIES' OBLIGATION TO CLOSE............................10
5.1. Purchase Price.................................................................10
5.2. Closing Documents..............................................................10
5.3. Opinion of Counsel.............................................................10
SECTION 6. REPRESENTATIONS AND WARRANTIES OF CANDLEWOOD PARTIES.............................10
6.1. Status and Authority of the Candlewood Parties.................................10
6.2. Action of the Candlewood Parties...............................................11
6.3. No Violations of Agreements....................................................11
6.4. Litigation.....................................................................11
6.5. Existing Leases, Agreements, Etc...............................................11
6.6. Disclosure.....................................................................11
6.7. Utilities, Etc.................................................................11
6.8. Compliance With Law............................................................11
6.9. Taxes..........................................................................12
6.10. Not A Foreign Person..........................................................12
6.11. Hazardous Substances..........................................................12
6.12. Insurance.....................................................................12
6.13. Ownership of Sellers..........................................................12
6.14. Substantial Completion........................................................12
6.15. Condition of Properties.......................................................12
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................13
7.1. Status and Authority of the Purchaser..........................................13
7.2. Action of the Purchaser........................................................14
7.3. No Violations of Agreements....................................................14
7.4. Litigation.....................................................................14
SECTION 8. COVENANTS OF THE CANDLEWOOD PARTIES..............................................14
8.1. Compliance with Laws, Etc......................................................14
8.2. Approval of Agreements.........................................................14
8.3. Notice of Material Changes or Untrue Representations...........................15
8.4. Substantial Completion.........................................................15
8.5. Financial Information..........................................................15
SECTION 9. APPORTIONMENTS...................................................................15
9.1. Real Property Apportionments...................................................15
9.2. Closing Costs..................................................................16
SECTION 10. DEFAULT.........................................................................16
10.1. Default by the Candlewood Parties.............................................16
10.2. Default by the Purchaser......................................................16
SECTION 11. MISCELLANEOUS...................................................................16
11.1. Agreement to Indemnify........................................................16
11.2. Brokerage Commissions.........................................................17
11.3. Publicity.....................................................................17
11.4. Notices.......................................................................18
11.5. Waivers, Etc..................................................................19
11.6. Assignment; Successors and Assigns............................................19
11.7. Severability..................................................................20
11.8. Counterparts, Etc.............................................................20
11.9. Governing Law.................................................................20
11.10. Performance on Business Days.................................................20
11.11. Attorneys' Fees..............................................................20
11.12. Section and Other Headings...................................................21
11.13. Nonliability of Trustees.....................................................21
</TABLE>
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of the 19th day of November,
1997, by and among (i) CANDLEWOOD HOTEL COMPANY, INC. ("Candlewood"), a Delaware
corporation, (ii) the fifteen entities listed as "sellers" on the signature
pages of this Agreement (each, individually, a "Seller" and collectively, the
"Sellers") and HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment
trust ("Purchaser").
WITNESSETH:
WHEREAS, the Sellers are the owners of all the Properties (all
capitalized terms used and not otherwise defined herein having the meanings
ascribed to such terms in Section 1); and
WHEREAS, the Purchaser desires to purchase the Properties, as more fully
set forth below; and
WHEREAS, the Sellers are willing to sell all of the Properties to the
Purchaser, subject to and upon the terms and conditions hereinafter set forth;
and
WHEREAS, Candlewood owns, directly or indirectly, all of the outstanding
capital stock of the Sellers and the transactions contemplated by this Agreement
are of direct and material benefit to Candlewood;
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 Candlewood Parties and
the Purchaser hereby agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1."AGREEMENT" shall mean this Purchase and Sale Agreement, together
with Schedules A through G attached hereto, as it and they may be amended from
time to time as herein provided.
1.2."AGREEMENT TO LEASE" shall mean that certain Agreement to Lease,
dated as of the date hereof, by and between the Purchaser and Candlewood, as it
may be amended, restated, supplemented or otherwise modified from time to time.
1.3."ALLOCABLE PURCHASE PRICE" shall mean, with respect to each
Property, the amount set forth in Schedule A opposite the name of such Property,
it being understood and agreed that the aggregate amount of the Allocable
Purchase Prices of the Properties shall be One Hundred Million Dollars
($100,000,000).
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1.4."ASSETS" shall mean, with respect to any Hotel, collectively, all of
the Real Property, the FF&E, the Contracts, the Documents, the Improvements, the
Intangible Property and the Tenant Leases owned by any of the Sellers in
connection with or relating to such Hotel.
1.5."BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of New York are authorized by law or executive action to close.
1.6."CANDLEWOOD" shall have the meaning given such term in the first
paragraph of this Agreement.
1.7."CANDLEWOOD PARTIES" shall mean, collectively, Candlewood and the
Sellers.
1.8."CLOSING" shall have the meaning given such term in Section 3.1.
1.9."CLOSING DATE" shall have the meaning given such term in Section
3.1.
1.10."CONTRACTS" shall mean, with respect to any Property, all hotel
licensing agreements and other service contracts, equipment leases, booking
agreements and other arrangements or agreements to which any of the Sellers is a
party affecting the ownership, repair, maintenance, management, leasing or
operation of such Property, to the extent the Sellers' interest therein is
assignable or transferable.
1.11."DEFECTIVE PROPERTY" shall have the meaning given such term in
Section 2.3(a).
1.12."DOCUMENTS" shall mean, with respect to any Property, all books,
records and files relating to the leasing, maintenance, management or operation
of such Property.
1.13."FF&E" shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
(other than motor vehicles) owned by any of the Sellers and located in or at, or
used in connection with the ownership, operation or maintenance of such
Property.
1.14."GUARANTY" shall mean the guaranty to be executed pursuant to the
Agreement to Lease.
1.15."GUARANTY RETAINED FUNDS" shall mean an amount equal to Five
Million Dollars ($5,000,000).
1.16."HOTEL" shall mean each hotel located at the properties identified
on Schedule A, the legal descriptions of which are set forth on Schedules B-1
through B-15.
1.17."IMPROVEMENTS" shall mean, with respect to any Property, all
buildings, fixtures, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property with
respect to such Property.
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1.18."INTANGIBLE PROPERTY" shall mean, with respect to any Property, all
transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, the Contracts, telephone exchange numbers identified
with such Property held by any of the Sellers and all other transferable
intangible property, miscellaneous rights, benefits and privileges of any kind
or character with respect to such Property held by any of the Sellers.
1.19."LEASE" shall mean the lease to be entered into between the
Purchaser or its subsidiary, as landlord, and the Tenant, as tenant, with
respect to the Properties pursuant to the Agreement to Lease, as amended,
modified or supplemented from time to time.
1.20."OPENING DATE" shall mean, with respect to any Property, the date
as of which all Improvements located at such Property, including, without
limitation, all guest rooms and/or suites, shall be open for business to the
public as a Candlewood hotel, in accordance with applicable brand standards.
1.21."PERMITTED ENCUMBRANCES" shall mean, with respect to any Property,
(a) liens for taxes, assessments and governmental charges with respect to such
Property not yet due and payable or due and payable but not yet delinquent; (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 Purchaser's reasonable opinion, impair marketability and do
not materially interfere with the use of such Property as a fully functioning
Candlewood hotel; (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
Purchaser in accordance with Sections 2.4 and 2.5.
1.22."PLANS AND SPECIFICATIONS" shall mean, with respect to each
Property, the plans and specifications identified on Schedule G with respect to
such Property.
1.23."PROPERTIES" shall mean, collectively, all of the Assets relating
to the properties identified on Schedule A, the legal descriptions of which are
set forth in Schedules B-1,B-15.
1.24."PURCHASE PRICE" shall mean the sum of the Allocable Purchase
Prices, but in no event more than One Hundred Million Dollars ($100,000,000).
1.25."PURCHASER" shall have the meaning given such term in the first
paragraph of this Agreement.
1.26."REAL PROPERTY" shall mean, with respect to any Property, the real
property described in the applicable Schedule B-1 through B-15, together with
all easements, rights of way, privileges, licenses and appurtenances which the
Sellers may own with respect thereto.
1.27."RETAINED FUNDS" shall mean, with respect to each Property, an
amount equal to ten percent (10%) of the Allocable Purchase Price of such
Property.
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1.28."REVIEW PERIOD" shall mean the period commencing on the date of
this Agreement and expiring on the first to occur of the date thirty (30) days
after the date of this Agreement and the Closing Date.
1.29."SELLERS" shall have the meaning given such term in the first
paragraph of this Agreement.
1.30."SUBSTANTIAL COMPLETION" shall mean, with respect to any Property,
physical completion of the Improvements on such Property, including, without
limitation, physical completion of a hotel of the brand and consisting of the
number of rooms set forth on Schedule A, consistent with the Plans and
Specifications therefor (other than so-called "punch-list" items as do not
individually or in the aggregate impair use of such Property for its intended
use), free of all liens and encumbrances (other than Permitted Encumbrances)
such that the Opening Date shall have occurred and the Improvements may be used
for their intended use.
1.31."SURVEYS" shall have the meaning given such term in Section 2.5.
1.32."TENANT" shall have the meaning given such term in the Agreement to
Lease.
1.33."TENANT LEASES" shall mean, with respect to any Property, all
leases, 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.
1.34."TITLE COMMITMENTS" shall have the meaning given such term in
Section 2.4.
1.35."TITLE COMPANY" shall mean Stewart Title Company, or such other
title insurance company as shall have been selected by the Purchaser and
approved by the Sellers, which approval shall not be unreasonably withheld,
delayed or conditioned.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1.PURCHASE AND SALE. In consideration of the mutual covenants herein
contained, the Purchaser hereby agrees to purchase from the Sellers and
Candlewood hereby agrees to cause the Sellers to sell and the Sellers hereby
agree to sell to the Purchaser, all of the Sellers' right, title and interest in
and to the Properties for the Purchase Price, subject to and in accordance with
the terms and conditions of this Agreement.
2.2.DILIGENCE INSPECTIONS. For the Review Period and, thereafter, until
Closing, the Sellers shall permit the Purchaser and its representatives to
inspect the Properties and the Improvements (including, without limitation, all
roofs, electric, mechanical and structural elements, and HVAC systems therein),
to perform due diligence, soil analysis and environmental investigations, to
examine the books of account and records of the Sellers with respect to the
Properties, including, without limitation, all leases and agreements affecting
the Properties, and make copies thereof, at such reasonable times as the
Purchaser or its representatives may request by notice to the Sellers (which
notice may be oral). To the extent that, in connection with such
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investigations, the Purchaser, its agents, representatives or contractors,
damages or disturbs any of the Real Property, the Improvements or FF&E located
thereon, the Purchaser shall, at its expense, return the same to substantially
the same condition which existed immediately prior to such damage or
disturbance. Neither the Purchaser 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 Sellers,
which consent shall not be unreasonably withheld, delayed or conditioned. The
Purchaser shall indemnify, defend and hold harmless the Sellers from and against
any and all expense, loss or damage which the Sellers may incur as a result of
any act or omission of the Purchaser or its representatives, agents or
contractors in connection with such examinations and inspections, other than to
the extent that any expense, loss or damage arises from any negligence or
misconduct of the Sellers. The provisions of this Section 2.2 shall survive the
termination of this Agreement and the Closing.
2.3.DEFECTIVE PROPERTIES. (a) In the event that (i) the Purchaser
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, as the case may be, for like
hotels, or (y), with respect to Properties as to which the Opening Date has
already occurred, the calculation with respect to such Property of net operating
income varies by three percent (3%) or more of that set forth in the financial
data provided by the Candlewood Parties to the Purchaser prior to the date
hereof (any such Property being hereinafter referred to as a "Defective
Property"), and (ii) the Purchaser gives written notice thereof to the
Candlewood Parties no later than the expiration of 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, the Candlewood Parties shall, subject to paragraph (c) below, be
required to permit the Purchaser to acquire all of the Properties other than
such Defective Property or Defective Properties.
(b) If, prior to the applicable Closing, (i) any Property suffers
a casualty or condemnation which would cause such Property or Properties 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 Purchaser
provides written notice of same to the Candlewood Parties no later than the
applicable Closing Date, time being of the essence, the Candlewood Parties
shall, subject to paragraph (c) below, be required to permit the Purchaser to
acquire all of the Properties other than such Defective Property or Properties.
Promptly upon learning of the same, the Candlewood Parties covenant and agree to
provide the Purchaser with prompt written notice of any casualty or condemnation
affecting any Property.
(c) If the Purchaser timely identifies any Defective Property and
the Purchaser and the Candlewood Parties shall, acting reasonably and in good
faith be unable or unwilling to agree that (x) the Candlewood Parties shall, at
their sole cost, remedy the applicable defect prior to the applicable Closing
(in which event the Candlewood Parties shall have the right to adjourn the
applicable Closing Date for up to ninety (90) days for such purpose), (y) the
Purchaser shall, notwithstanding such defect, acquire the Defective Property
subject to a reduction in the
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Allocable Purchase Price of the Defective Property sufficient to compensate the
Purchaser for such defect (in which event the applicable Seller shall retain all
available insurance or condemnation proceeds) or (z) on the substitution of
another property owned by the Candlewood Parties for such Defective Property,
this Agreement shall, at the Purchaser's option, terminate with respect to such
Defective Property and the Purchase Price shall be reduced by the Allocable
Purchase Price of such Defective Property.
2.4.TITLE MATTERS. Promptly upon execution of this Agreement, the
Candlewood Parties shall order from the Title Company and direct the Title
Company promptly to deliver to the Purchaser 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").
Within ten (10) Business Days after receipt of the Title Commitments,
the Purchaser shall give the Candlewood Parties notice of any title exceptions
(other than Permitted Encumbrances) which adversely affect any Property in any
material respect and as to which the Purchaser reasonably objects. If, for any
reason, the Candlewood 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 Candlewood Parties shall give the Purchaser notice thereof; it
being understood and agreed that the failure of the Candlewood Parties to give
such notice within ten (10) Business Days after the Purchaser's notice of
objection shall be deemed an election by the Candlewood Parties not to remedy
such matters. If the Candlewood Parties shall be unable or unwilling to remove
any title defects to which the Purchaser has reasonably objected, the Purchaser
may elect (i) to terminate this Agreement with respect to the affected Property,
in which event, the Purchase Price shall be reduced by the Allocable Purchase
Price of the affected Properties and this Agreement shall be of no further force
and effect with respect to the affected Properties or (ii) to consummate the
transactions contemplated hereby, notwithstanding such title defect, without any
abatement or reduction in the Purchase Price on account thereof. The Purchaser
shall make any such election by written notice to the Candlewood Parties given
on or prior to the fifth Business Day after the Candlewood Parties' notice of
their unwillingness or inability to cure such defect. Failure of the Purchaser
to give such notice shall be deemed an election by the Purchaser to proceed in
accordance with clause (ii) above and such exception shall be deemed a Permitted
Encumbrance.
2.5.SURVEY MATTERS. Upon execution of this Agreement, the Candlewood
Parties shall arrange for the preparation of an ALTA survey with respect to each
of the Properties (the "Surveys") by a licensed surveyor in the jurisdiction in
which each such Property is located, which (i) contains an accurate legal
description of the applicable Property, (ii) shows the 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 C, or such other form as may be acceptable to the Purchaser, addressed
to the Purchaser, the Title Company and any other persons requested by the
Purchaser or designated by the Candlewood Parties.
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Within ten (10) Business Days after receipt of the Surveys, the
Purchaser shall give the Candlewood 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 Purchaser reasonably objects. If, for
any reason, the Candlewood Parties are unwilling or unable to take such actions
as may be required to remedy the objectionable matters, the Candlewood Parties
shall give the Purchaser prompt notice thereof; it being understood and agreed
that the failure of the Candlewood Parties to give such notice within ten (10)
Business Days after the Purchaser's notice of objection shall be deemed an
election by the Candlewood Parties not to remedy such matters. If the Candlewood
Parties shall be unwilling or unable to remove any survey defect to which the
Purchaser has reasonably objected, the Purchaser may elect (i) to terminate this
Agreement with respect to the affected Property, in which event, the Purchase
Price shall be reduced by the Allocable Purchase Price of the affected
Properties and this Agreement shall terminate and be of no further force or
effect with respect to the affected Properties or (ii) to consummate the
transactions contemplated hereby, notwithstanding such defect, without any
abatement or reduction in the Purchase Price on account thereof. The Purchaser
shall make any such election by written notice to the Candlewood Parties given
on or prior to the fifth Business Day after the Candlewood 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 Purchaser to give such
notice shall be deemed an election by the Purchaser to proceed in accordance
with clause (ii) above and such matter shall be deemed a Permitted Encumbrance.
SECTION 3. PURCHASE AND SALE.
3.1.CLOSING. The purchase and sale of the Properties shall be
consummated at one or more closings (each, a "Closing") to be held at the
offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts, or at such other location as the Sellers and the Purchaser may
agree, at 10:00 a.m. local time, the Closing with respect to any Property to
occur on a date (each, a "Closing Date") designated in writing by the Sellers,
which date shall not be less than ten (10) Business Days nor more than thirty
(30) Business Days after notice from the Sellers to the Purchaser that
Substantial Completion and the Opening Date have occurred with respect to such
Property (and which notice shall identify the proposed Closing Date) or, if
later, the date as of which all conditions precedent to the Closing herein set
forth with respect to the applicable Property have either been satisfied or
waived by the party in whose favor such conditions run. In the event that
Closings with respect to all of the Properties shall not have occurred on or
before March 31, 1998, provided that no action for specific performance shall
have been commenced by the Purchaser to enforce this Agreement, any party shall,
provided such party shall not be in default hereunder, have the right, by the
giving of written notice, to terminate this Agreement with respect to all of the
Properties as to which a Closing has not yet occurred as of the date of
termination.
3.2.PURCHASE PRICE. The Allocable Purchase Prices shall be payable as
follows:
(a) At each Closing, the Allocable Purchase Price of each
Property being purchased, less the amount of the Retained Funds with respect
thereto and, in the case of the first closing only, less the amount of the
Guaranty Retained Funds, shall be payable by wire transfer of
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immediately available funds on the applicable Closing Date to an account or
accounts to be designated by the Sellers prior to such Closing;
(b) Except as otherwise provided in the Lease, the Retained Funds
with respect to each Property shall be payable by wire transfer of immediately
available funds upon the expiration or sooner termination of the Lease, in
accordance with the terms of the Lease, to an account or accounts to be
designated by the Sellers prior to such date; and
(c) Except as otherwise provided in the Guaranty, the Guaranty
Retained Funds shall be payable by wire transfer of immediately available funds
in accordance with the terms of the Guaranty, to an account or accounts to be
designed by Candlewood prior to such date.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of the Purchaser to acquire each of the Properties on the
applicable Closing Date shall be subject to the satisfaction of the following
conditions precedent on and as of such Closing Date:
4.1.CLOSING DOCUMENTS. The applicable Candlewood Parties shall have
delivered to the Purchaser with respect to the applicable Property:
(a) A good and sufficient warranty deed with covenants against
grantor's acts, or its local equivalent, in proper statutory form for recording,
duly executed and acknowledged by the Sellers, conveying good and marketable
title to the applicable Fee Properties, free from all liens and encumbrances
other than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and
substance reasonably satisfactory to the Sellers and the Purchaser, duly
executed and acknowledged by the Sellers, with respect to all of the Sellers'
right, title and interest in, to and under the FF&E, the Contracts, the
Documents, the Intangible Property and the Tenant Leases with respect to the
Properties and the Sellers' rights under all builder's warranties with respect
to the applicable Property;
(c) A copy of the final duly issued certificate of occupancy for
each of the applicable Properties;
(d) A Sellers' closing certificate in the form attached hereto as
Schedule D;
(e) An architect's certificate in the form attached hereto as
Schedule E;
(f) An engineer's certificate in the form attached hereto as
Schedule F;
(g) A duly executed copy of the Lease, or applicable amendment
thereto, all of the Incidental Documents (as such term is defined in the Lease)
and all other documents and sums required to be delivered by the Candlewood
Parties and/or the Tenant pursuant to the Agreement to Lease;
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(h) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to the
applicable Candlewood Parties and the Tenant; and
(i) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as the Purchaser or the Title Company may
reasonably require to effectuate the transactions contemplated by this
Agreement.
4.2.CONDITION OF PROPERTIES.
(a) 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
applicable Properties in any respect;
(b) 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
applicable Properties which would render any Property a Defective Property;
(c) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the applicable
Properties shall be in full force and effect;
(d) The Purchaser shall have received an engineer's report, in
form and substance reasonably satisfactory to the Purchaser, confirming that
Substantial Completion has occurred; and
(e) No Default or Event of Default (as defined therein) shall
have occurred and be continuing under the Lease.
4.3.TITLE POLICIES AND SURVEYS. (a) 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 title
insurance policies to the Purchaser with respect to the applicable Properties,
in form and substance reasonably satisfactory to the Purchaser in accordance
with Section 2.4, together with such affirmative coverages as the Purchaser may
reasonably require and shall have been determined by the Title Company as
available prior to the expiration of the Review Period.
(b) The Purchaser shall have received an as-built survey with
respect to the applicable Properties, such survey to be consistent with the
requirements of Section 2.5.
4.4.OPINIONS OF COUNSEL. (a) The Purchaser shall have received a written
opinion from counsel to the Candlewood Parties, which counsel shall be
reasonably acceptable to the Purchaser, in form and substance reasonably
satisfactory to the Purchaser, regarding the organization and authority of the
Candlewood Parties and the Tenant, the enforceability of this Agreement, the
Lease or amendment thereto, as the case may be, and the Incidental Documents (as
defined in the Lease) and such other matters with respect to the transactions
contemplated by this Agreement as the Purchaser may reasonably require.
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(b) The Purchaser shall have received a zoning diligence
memorandum from local counsel to the Purchaser, in form and substance reasonably
satisfactory to the Purchaser, regarding the compliance of the Properties with
respect to zoning, licensing and such other matters as the Purchaser may
reasonably require.
SECTION 5. CONDITIONS TO CANDLEWOOD PARTIES' OBLIGATION TO CLOSE.
The obligation of the Candlewood Parties to convey the Properties on the
applicable Closing Date to the Purchaser is subject to the satisfaction of the
following conditions precedent on and as of such Closing Date:
5.1.PURCHASE PRICE. The Purchaser shall deliver to the Candlewood
Parties the Allocable Purchase Prices of the applicable Properties as provided
in Section 3.2.
5.2.CLOSING DOCUMENTS. The Purchaser shall have delivered to the
Sellers:
(a) Duly executed and acknowledged counterparts of the documents
described in Section 4.1, where applicable; and
(b) Certified copies of all charter documents, applicable
resolutions and certificates of incumbency with respect to the Purchaser.
5.3.OPINION OF COUNSEL. The Candlewood Parties shall have received a
written opinion from Sullivan & Worcester LLP, counsel to the Purchaser, in form
and substance reasonably satisfactory to the Candlewood Parties, regarding the
organization and authority of the Purchaser and such other matters with respect
to the transactions contemplated by this Agreement as the Candlewood Parties may
reasonably require.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF CANDLEWOOD PARTIES.
To induce the Purchaser to enter into this Agreement, each of
Candlewood, with respect to all Properties, and, each Seller, with respect to
its Property, represent and warrant to the Purchaser as follows:
6.1.STATUS AND AUTHORITY OF THE CANDLEWOOD PARTIES. It is a corporation
or limited liability company duly organized, validly existing and in good
standing under the laws of its state of incorporation or 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. It 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.
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6.2.ACTION OF THE CANDLEWOOD PARTIES. It 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 it on or prior to
the Closing Date, such document shall constitute its valid and binding
obligation and agreement, enforceable against such Candlewood 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.
6.3.NO VIOLATIONS OF AGREEMENTS. Neither the execution, delivery or
performance of this Agreement, 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 its Property pursuant to the terms of any
indenture, mortgage, deed of trust, note, evidence of indebtedness or any other
agreement or instrument by which it is bound.
6.4.LITIGATION. It has received no written notice of and, to its
knowledge, no action or proceeding is pending or threatened and no investigation
looking toward such an action or proceeding has begun, which (a) questions the
validity of this Agreement or 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 its Property, (c) will result in or subject its Property
to a material liability, or (d) involves condemnation or eminent domain
proceedings against any material part of its Property.
6.5.EXISTING LEASES, AGREEMENTS, ETC. Other than any agreements provided
to the Purchaser not less than ten (10) days prior to the expiration of the
Review Period, there are no other material agreements affecting its Property
which will be binding on the Purchaser subsequent to the Closing Date which the
Purchaser cannot terminate on thirty (30) days notice without payment of premium
or penalty.
6.6.DISCLOSURE. To its knowledge, there is no fact or condition which
materially and adversely affects the business or condition of its Property which
has not been set forth in this Agreement or in the other documents, certificates
or statements furnished to the Purchaser in connection with the transactions
contemplated hereby.
6.7.UTILITIES, ETC. To its knowledge, all utilities and services
necessary for the use and operation of its Property (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 its Property. To its
knowledge, no fact, condition or proceeding exists which would result in the
termination or material impairment of the furnishing of such utilities to its
Property.
6.8.COMPLIANCE WITH LAW. To its knowledge, except as disclosed to the
Purchaser in writing not less than ten (10) days' prior to the expiration of the
Review Period, including in any engineering report, (a) its Property and the
current use and operation thereof do not violate any material federal, state,
municipal and other governmental statutes, ordinances, by-laws, rules,
regulations or any other legal requirements, including, without limitation,
those relating to
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construction, occupancy, zoning, adequacy of parking, environmental protection,
occupational health and safety and fire safety applicable thereto; and (b) at
the time of the applicable Closing there will be in effect all material
licenses, permits and other authorizations necessary for the current use,
occupancy and operation thereof. Except as disclosed to the Purchaser in writing
not less than ten (10) days' prior to the expiration of the Review Period, none
of the Candlewood 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 its Property or which would modify or
realign any adjacent street or highway in a material and adverse way.
6.9.TAXES. To its knowledge, 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 its Property, or any portion thereof,
which are outstanding or unpaid, other than amounts not yet due and payable or,
if due and payable, not yet delinquent.
6.10.NOT A FOREIGN PERSON. It is not a "foreign person" within the
meaning of Section 1445 of the United States Internal Revenue Code of 1986, as
amended, and the treasury regulations promulgated thereunder.
6.11.HAZARDOUS SUBSTANCES. Except as disclosed to the Purchaser or as
described in any environmental report delivered to the Purchaser prior to the
expiration of the Review Period, to its knowledge, neither it nor any tenant or
other occupant or user of any of its Property, 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 its Property, 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 each of the Candlewood Party's knowledge, except
as disclosed to the Purchaser or as described in any environmental report
delivered to the Purchaser prior to the expiration of the Review Period, its
Property is free from any such hazardous waste, contaminants, oil, radioactive
and other materials, except any such materials maintained in accordance with
applicable law.
6.12.INSURANCE. It has not received written notice from any insurance
carrier of defects or inadequacies in its Property which, if uncorrected, would
result in a termination of insurance coverage or a material increase in the
premiums charged therefor.
6.13.OWNERSHIP OF SELLERS. Candlewood is the sole owner, directly or
indirectly, of all of the issued and outstanding beneficial interests in the
Sellers and the transactions contemplated by this Agreement are of direct
material benefit to Candlewood.
6.14.SUBSTANTIAL COMPLETION. As of the date hereof, Candlewood
reasonably anticipates that Substantial Completion of all of the Properties will
occur on or before March 31, 1998.
6.15.CONDITION OF PROPERTIES. To its knowledge, its Property is, or on
the applicable Closing Date will be, in good working order and repair,
mechanically and structurally sound, free from material defects in materials and
workmanship.
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The representations and warranties made in this Agreement by the
Candlewood Parties are made as of the date hereof and shall be deemed remade by
the Candlewood Parties as of the applicable Closing Date for the Property or
Properties then being conveyed by the Sellers, with the same force and effect as
if made on, and as of, such date; provided, however, that, the Candlewood
Parties shall have the right, from time to time prior to the applicable Closing
Date, with respect to any Property as to which a Closing has not yet occurred,
to modify the representations and warranties by notice to the Purchaser and, in
such event, the Purchaser shall have the rights provided in Section 2.3. All
representations and warranties made in this Agreement by the Candlewood Parties
shall survive the applicable Closing for a period of one year thereafter.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to the Purchaser at the Closing, the Candlewood
Parties disclaim the making of any representations or warranties, express or
implied, regarding the Properties or matters affecting the Properties, whether
made by the Candlewood Parties, on the Candlewood 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 Purchaser
acknowledges (i) that the Purchaser has entered into this Agreement with the
intention of making and relying upon its own investigation or that of third
parties with respect to the physical, environmental, economic and legal
condition of each Property and (ii) that the Purchaser is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
the Purchaser at any Closing, made by the Candlewood Parties or anyone acting on
the Candlewood Parties' behalf. The Purchaser further acknowledges that it has
not received from or on behalf of the Candlewood 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. Subject to the provisions of this Agreement, the Purchaser shall
purchase the Properties in their "as is" condition on each Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce the Candlewood Parties to enter in this Agreement, the
Purchaser represents and warrants to the Candlewood Parties as follows:
7.1.STATUS AND AUTHORITY OF THE PURCHASER. The Purchaser 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 Purchaser has duly qualified and is in
good standing as a trust or unincorporated business association in each
jurisdiction in which the
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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.
7.2.ACTION OF THE PURCHASER. The Purchaser 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
Purchaser on or prior to the Closing Date such document shall constitute the
valid and binding obligation and agreement of the Purchaser, enforceable against
the Purchaser in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors.
7.3.NO VIOLATIONS OF AGREEMENTS. Neither the execution, delivery or
performance of this Agreement by the Purchaser, nor compliance with the terms
and provisions hereof, will result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of the
Purchaser pursuant to the terms of any indenture, mortgage, deed of trust, note,
evidence of indebtedness or any other agreement or instrument by which the
Purchaser is bound.
7.4.LITIGATION. No investigation, action or proceeding is pending and,
to the Purchaser's knowledge, no action or proceeding is threatened and no
investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
The representations and warranties made in this Agreement by the
Purchaser shall be continuing and shall be deemed remade by the Purchaser as of
the applicable Closing Date with the same force and effect as if made on, and as
of, such date. The Purchaser's liability with respect to all representations and
warranties made in this Agreement by the Purchaser shall survive the applicable
Closing for a period of one (1) year thereafter.
SECTION 8. COVENANTS OF THE CANDLEWOOD PARTIES.
Candlewood, with respect to all Properties, and each Seller, with
respect to its Property, hereby covenant with the Purchaser between the date of
this Agreement and the Closing Date as follows:
8.1.COMPLIANCE WITH LAWS, ETC. To comply or to cause compliance with in
all material respects with (i) all applicable laws, regulations and other
requirements from time to time of every governmental body having jurisdiction of
its Property 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 its Property.
8.2.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 other agreement with respect to its Property which would
encumber or be binding upon its Property from and after the applicable Closing
Date without in each instance obtaining the prior written
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consent of the Purchaser, which consent shall not be unreasonably withheld,
delayed or conditioned.
8.3.NOTICE OF MATERIAL CHANGES OR UNTRUE REPRESENTATIONS. Upon learning
of any material change in any condition with respect to its Property or of any
event or circumstance which makes any representation or warranty of the
Candlewood Parties to the Purchaser under this Agreement untrue or misleading in
any material respect, promptly to notify the Purchaser thereof (the Purchaser
agreeing, on learning of any such fact or condition, promptly to notify the
Candlewood Parties thereof).
8.4.SUBSTANTIAL COMPLETION. From the date of this Agreement to the
Closing Date for any Property, to use reasonable efforts to cause Substantial
Completion of such Property to occur as soon as reasonably practicable after the
date hereof, subject to any events of force majeure.
8.5.FINANCIAL INFORMATION. To provide to the Purchaser, promptly upon
request at the Candlewood Parties' sole cost and expense, such audited and
unaudited financial and other information and certifications of the Candlewood
Parties with respect to the Candlewood Parties and the Properties as the
Purchaser may from time to time reasonably request in order to comply with any
applicable securities laws and/or any rules, regulations or requirements of the
Securities and Exchange Commission and, if required or requested, to permit the
Purchaser to incorporate by reference any information included in filings made
by Candlewood with the Securities and Exchange Commission. Notwithstanding the
foregoing, the Candlewood Parties shall not be required to provide, pursuant to
this Agreement, audited financial information with respect to individual
Properties, unless the Purchaser shall pay for the cost thereof.
SECTION 9. APPORTIONMENTS.
9.1.REAL PROPERTY APPORTIONMENTS. Representatives of the Purchaser and
the Candlewood 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 Candlewood Parties and the Purchaser 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 Candlewood Parties and the Purchaser. In the
event the parties have not agreed with respect to the adjustments required to be
made pursuant to this Section 9.1 within such ninety-day period, upon
application by either party, Ernst & Young, LLP or other certified public
accountants reasonably acceptable to the Purchaser and the Candlewood Parties
shall determine any such adjustments which have not theretofore been agreed to
between the Candlewood Parties and the Purchaser. The charges of such accountant
shall be borne by the Candlewood Parties.
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9.2.CLOSING COSTS. The Candlewood 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 the reasonable costs and expenses of legal counsel retained by
the Purchaser.
The obligations of the parties under this Section 9 shall survive the
Closing.
SECTION 10. DEFAULT.
10.1.DEFAULT BY THE CANDLEWOOD PARTIES. If the Candlewood Parties shall
have made any representation or warranty herein which shall be untrue or
misleading in any material respect, or if the Candlewood Parties shall fail to
perform any of the material covenants and agreements contained herein to be
performed by the Candlewood Parties and such failure continues for a period of
ten (10) days after notice thereof from the Purchaser or if the Tenant shall
default in its obligations under the Agreement to Lease and such default shall
continue beyond the expiration of any applicable cure period, the Purchaser may
terminate this Agreement and/or the Purchaser 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.
10.2.DEFAULT BY THE PURCHASER. If the Purchaser shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or if the Purchaser shall fail to perform any of the covenants
and agreements contained herein to be performed by it and such failure shall
continue for a period of ten (10) days after notice thereof from the Candlewood
Parties or if the Purchaser shall default in its obligations under the Agreement
to Lease and such default shall continue beyond the expiration of any applicable
cure period, the Candlewood Parties may, as its sole and exclusive remedy at law
and in equity, terminate this Agreement. In the event that the Candlewood
Parties shall so terminate this Agreement, the Purchaser shall thereupon pay to
the Candlewood Parties, as liquidated damages and not as a penalty, the sum of
Two Hundred Fifty Thousand Dollars ($250,000) plus all expenses incurred by the
Candlewood Parties in connection with the transactions contemplated hereby,
whereupon, the Purchaser shall have no further monetary or, except as expressly
provided herein, nonmonetary obligations hereunder.
SECTION 11. MISCELLANEOUS.
11.1.AGREEMENT TO INDEMNIFY. (a) Subject to any express provisions of
this Agreement to the contrary, (i) the Candlewood Parties shall indemnify and
hold harmless the Purchaser from and against any and all obligations, claims,
losses, damages, liabilities, and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and disbursements) arising out of
(x) events, contractual obligations, acts or omissions of the Candlewood Parties
that occurred in connection with the ownership or operation of any Property
prior to the Closing or (y) any damage to property of others or injury to or
death of any person or any claims for any debts or obligations occurring on or
about or in connection with any Property
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or any portion thereof at any time or times prior to the Closing, and (ii) the
Purchaser shall indemnify and hold harmless the Candlewood Parties from and
against any and all obligations, claims, losses, damages, liabilities and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees and disbursements) arising out of (x) events, contractual obligations, acts
or omissions of Purchaser that occur in connection with the ownership or
operation of any Property on or after the Closing, or (y) any damage to property
of others or injury to or death of any person or any claims for any debts or
obligations occurring on or about any Property or any portion thereof at any
time or times after the Closing.
(b) Whenever it is provided in this Agreement that an obligation
of the Candlewood Parties will be assumed by the Purchaser on or after the
Closing, the Purchaser shall be deemed to have also agreed to indemnify and hold
harmless the Candlewood Parties and their respective successors and assigns from
and against all claims, losses, damages, liabilities, costs, and expenses
(including, without limitation, reasonable attorneys' and accountants' fees and
expenses) arising from any failure of the Purchaser to perform the obligation so
assumed on or after the Closing.
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
(d) The provisions of this Section 11.1 shall survive the Closing
and the termination of this Agreement.
11.2.BROKERAGE COMMISSIONS. Each of the parties hereto represents to the
other parties that, except Donaldson, Lufkin & Jenrette, it dealt with no
broker, finder or like agent in connection with this Agreement or the
transactions contemplated hereby. The Candlewood Parties shall be solely
responsible for and shall indemnify and hold harmless the Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
any loss, liability or expense, including, reasonable attorneys' fees, arising
out of any claim or claims for commissions or other compensation for bringing
about this Agreement or the transactions contemplated hereby made by Donaldson,
Lufkin & Jenrette or any other broker, finder or like agent other than such
loss, liability or expense arising from the Purchaser's breach of its
representation made in this Section 11.2. The provisions of this Section 11.2
shall survive the Closing and any termination of this Agreement.
11.3.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
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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 any
parent or affiliate of the Sellers or of the Purchaser until a public
announcement of the transactions contemplated by this Agreement has been made.
No party shall record this Agreement or any notice thereof, except as required
by law or unless such action is taken based on advice of counsel given in good
faith.
11.4.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 Candlewood Parties to:
Candlewood Hotel Company, Inc.
Lakepoint Office Park
9342 East Central
Wichita, Kansas 67206
Attn: Mr. Jack P. DeBoer
[Telecopier No. (316) 631-1333]
with a copy to:
Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attn: Jon D. Demorest, Esq.
[Telecopier No. (619) 696-7419]
18
<PAGE> 23
If to the Purchaser, to:
Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
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.
11.5.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.
11.6.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 (x) Purchaser may assign this
Agreement to any entity wholly owned, directly or indirectly, by the Purchaser
(provided, however, that, in the event this Agreement shall be assigned to any
entity wholly owned, directly or indirectly, by the Purchaser, Hospitality
Properties Trust shall remain liable for the obligation of the "Purchaser"
hereunder) and (y) after the Closing, the Sellers may assign its surviving
rights, if any, under this Agreement to the Tenant. 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.
19
<PAGE> 24
11.7.SEVERABILITY. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
11.8.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.
11.9.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.
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.
11.10.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.
11.11.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
20
<PAGE> 25
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.
11.12.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.
11.13.NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
THE PURCHASER, 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 "HOSPITALITY 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 PURCHASER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE PURCHASER. ALL PERSONS
DEALING WITH THE PURCHASER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE
PURCHASER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
21
<PAGE> 26
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
CANDLEWOOD PARTIES:
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ WARREN D. FIX
--------------------------------
Its: Executive Vice President
CANDLEWOOD WICHITA NORTHEAST, LLC
CANDLEWOOD ENGLEWOOD, LLC
CANDLEWOOD JEFFERSONTOWN, LLC
CANDLEWOOD BLUE ASH, LLC
CANDLEWOOD BIRMINGHAM, LLC
CANDLEWOOD LOS ANGELES, CA-LAKE
FOREST, LLC
CANDLEWOOD OMAHA, LLC
CANDLEWOOD PHOENIX METRO, AZ, LLC
CANDLEWOOD NORTH TEMPLE, LLC
CANDLEWOOD HORSHAM, PA, LLC
CANDLEWOOD FT. UNION, UT, LLC
CANDLEWOOD SOUTHFIELD, LLC
CANDLEWOOD HAMPTON, LLC
CANDLEWOOD WICHITA AIRPORT, LLC
CANDLEWOOD HOUSTON, TX-TOWN &
COUNTRY, LLC
BY: CANDLEWOOD HOTEL COMPANY, INC., MANAGER
By: /s/ WARREN D. FIX
--------------------------------
Warren D. Fix
Executive Vice President
PURCHASER:
HOSPITALITY PROPERTIES TRUST
By: /s/ JOHN G. MURRAY
---------------------------------------
Its: President and Chief Operating Officer
22
<PAGE> 1
Exhibit 10.2
AGREEMENT TO LEASE
THIS AGREEMENT TO LEASE (this "Agreement") is entered into as of
the 19th day of November, 1997, by and between HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust ("HPT"), and CANDLEWOOD HOTEL COMPANY,
INC., a Delaware corporation ("Candlewood").
W I T N E S S E T H:
WHEREAS, pursuant to a Purchase and Sale Agreement, dated as of
the date hereof (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Purchase Agreement"), by and among HPT and
Candlewood and certain of its wholly owned subsidiaries, HPT, either directly or
through a wholly owned subsidiary (such entity, "Landlord"), is planning to
acquire certain properties, as more particularly described in the Purchase
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 or cause Landlord to lease to a
wholly owned subsidiary of Candlewood, ("Tenant"), and Candlewood has agreed to
cause Tenant to lease from Landlord, all of the Properties (this and other
capitalized terms used and not otherwise defined herein having the meanings
ascribed to such terms in the Purchase 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. CERTAIN DEFINITIONS. Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to such terms in the Purchase
Agreement and/or the Lease.
2. AGREEMENT TO LEASE. Subject to and upon the terms and
conditions hereinafter set forth, on the initial Closing Date, Landlord and
Tenant shall each execute and deliver the Lease with respect to the Properties
acquired on such date and such date shall be the Commencement Date under the
Lease. On each Closing Date thereafter, Landlord and Tenant shall each execute
and deliver an amendment to the Lease with respect to the Properties acquired on
such date in the form attached hereto as Exhibit B (each an "Amendment").
3. MINIMUM RENT. The Minimum Rent payable under the Lease, as
amended by any Amendments, shall be, with respect to each Property, the amount
set forth in Exhibit C.
<PAGE> 2
4. REPRESENTATIONS OF TENANT, ETC. As an inducement to Landlord
to enter into the Lease and any Amendments, Candlewood shall cause Tenant to
represent and warrant to Landlord, as of each Closing Date, that:
(1) 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, to enter into and perform its obligations under the Lease,
and any Amendments thereto, 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.
(2) 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, as amended by any
Amendments, and the Lease, as so amended, 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.
(3) NO VIOLATIONS OF OTHER AGREEMENTS, ETC. Neither the
execution and delivery of the Lease, as amended by any Amendments, 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.
(4) 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, to
the knowledge of Tenant, no investigation looking toward such a proceeding has
begun or is contemplated.
(5) 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, certificates or statements furnished to HPT in connection with
the transactions contemplated hereby.
2
<PAGE> 3
Tenant's liability with respect to the representations and
warranties set forth in this Agreement shall survive the Commencement Date.
5. REPRESENTATIONS OF LANDLORD. As an inducement to the Tenant to
enter into the Lease and any Amendments, HPT shall cause Landlord to represent
to Tenant, as of each Closing Date, that:
(1) STATUS AND AUTHORITY OF LANDLORD. Landlord 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. Landlord 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.
(2) ACTION OF LANDLORD. Landlord has taken all necessary
action to authorize the execution, delivery and performance of the Lease, as
amended by any Amendments, and the Lease, as so amended, constitutes the valid
and binding obligation and agreement of Landlord, enforceable against Landlord
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.
(3) NO VIOLATIONS OF AGREEMENTS. Neither the execution,
delivery or performance of the Lease, as amended by any Amendments, by Landlord,
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 Landlord pursuant to the terms of any
indenture, mortgage, deed of trust, note, evidence of indebtedness or any other
agreement or instrument by which Landlord 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.
(4) JUDGMENTS; LITIGATION. There are no judgments
presently outstanding and unsatisfied against Landlord or any of its properties,
and neither Landlord 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 administrative agency, which litigation or proceeding
could materially and adversely affect Landlord, and no such material litigation
or proceeding is, to the knowledge of Landlord, threatened against Landlord,
and, to the knowledge of Landlord, no investigation looking toward such a
proceeding has begun or is contemplated.
Landlord's liability with respect to the representations and
warranties set forth in this Agreement shall survive the Commencement Date.
3
<PAGE> 4
6. ADDITIONAL TENANT OBLIGATIONS. On or before the Commencement
Date, Candlewood shall cause each of the following to be delivered to HPT (the
obligation of Landlord to enter into the Lease and any Amendments being subject
to such delivery):
(1) A security agreement with respect to all tangible
personal property owned by Tenant and used in connection with the operation of
the Properties leased on such date, 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 D;
(2) Such financing statements as Landlord may reasonably
require to perfect the interests and liens granted pursuant to the security
agreement described in paragraph (a) above;
(3) 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
E;
(4) 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 F; and
(5) A guaranty agreement with respect to Tenant's
obligations under the Lease, as amended by the Amendments, in the form attached
hereto as Exhibit G.
7. CONDITION PRECEDENT. The obligations of the parties hereunder
with respect to each Property shall be subject to the consummation of the
transactions contemplated by the Purchase Agreement with respect to such
Property.
8. NOTICES. All notices required or desired to be given hereunder
shall be given in the manner provided in Section 11.4 of the Purchase Agreement.
9. ASSIGNMENT. Candlewood 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 a wholly owned subsidiary of HPT without the prior
written consent of Candlewood, which consent may be given or withheld by
Candlewood in Candlewood's sole discretion.
10. DEFAULT.
(1) DEFAULT BY CANDLEWOOD. If Candlewood shall fail to
perform any of the covenants and agreements contained herein to be performed by
Candlewood and such failure continues for a period of ten (10) days after notice
thereof from HPT, HPT may terminate this Agreement and/or pursue any and all
remedies available to HPT at law or in equity, including, but not limited to, a
suit for specific performance or other equitable relief. A default by the
4
<PAGE> 5
Candlewood Parties under the Purchase Agreement shall be deemed a default by
Candlewood 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
Candlewood, Candlewood may terminate this Agreement and/or pursue any and all
remedies available to Candlewood at law or in equity, including, but not limited
to, a suit for specific performance or other equitable relief. A default by the
Purchaser under the Purchase Agreement shall be deemed a default by HPT under
this Agreement.
11. EXPENSES. Tenant shall pay its and HPT's expenses incident to
the negotiation, preparation and carrying out of this Agreement, including,
without limitation, all reasonable fees and expenses of HPT's counsel. Tenant
shall also pay the cost of all recording fees, transfer fees and other like
costs and expenses incident to this Agreement.
12. 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 Candlewood until a public announcement of the
transactions contemplated by this Agreement has been made.
13. 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.
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 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
5
<PAGE> 6
Commonwealth of 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 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.
16. 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.
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 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.
18. 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.
19. 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.
20. 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.
21. 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 "HOSPITALITY 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
6
<PAGE> 7
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 Candlewood have executed this
Agreement under seal as of the date above first written.
HOSPITALITY PROPERTIES TRUST
By: /s/ JOHN G. MURRAY
-----------------------------------
Its: President
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ WARREN D. FIX
-----------------------------------
Its: Executive Vice President
7
<PAGE> 1
EXHIBIT 10.3
LEASE AGREEMENT
Dated as of December 24, 1997
by and between
HPT CW PROPERTIES TRUST,
AS LANDLORD,
AND
CANDLEWOOD LEASING NO. 1, INC.,
AS TENANT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1. DEFINITIONS.......................................................1
1.1. "Accounting Period".............................................1
1.2. "Additional Charges"............................................1
1.3. "Additional Rent"...............................................1
1.4. "Affiliated Person".............................................1
1.5. "Agreement".....................................................2
1.6. "Applicable Laws"...............................................2
1.7. "Applicable Percentage".........................................2
1.8. "Award".........................................................2
1.9. "Base Total Hotel Sales"........................................2
1.10. "Base Year".....................................................3
1.11. "Business Day"..................................................3
1.12. "Candlewood"....................................................3
1.13. "Capital Addition"..............................................3
1.14. "Capital Expenditure"...........................................3
1.15. "Claim".........................................................3
1.16. "Code"..........................................................3
1.17. "Commencement Date".............................................3
1.18. "Condemnation"..................................................3
1.19. "Condemnor".....................................................4
1.20. "Consolidated Financials".......................................4
1.21. "Date of Taking"................................................4
1.22. "Default".......................................................4
1.23. "Designated Areas"..............................................4
1.24. "Disbursement Rate".............................................4
1.25. "Distribution"..................................................4
1.26. "Easement Agreement"............................................4
1.27. "Encumbrance"...................................................4
1.28. "Entity"........................................................4
1.29. "Environment"...................................................4
1.30. "Environmental Obligation"......................................5
1.31. "Environmental Notice"..........................................5
1.32. "Event of Default"..............................................5
1.33. "Excess Total Hotel Sales"......................................5
1.34. "Extended Terms"................................................5
1.35. "FF&E Estimate".................................................5
1.36. "FF&E Pledge"...................................................5
1.37. "FF&E Reserve"..................................................5
1.38. "Financial Officer's Certificate"...............................5
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
1.39. "Fiscal Year"...................................................5
1.40. "Fixed Term"....................................................5
1.41. "Fixtures"......................................................5
1.42. "GAAP"..........................................................5
1.43. "Government Agencies"...........................................5
1.44. "Guaranty"......................................................6
1.45. "Hazardous Substances"..........................................6
1.46. "Hotel".........................................................6
1.47. "Hotel Mortgage"................................................6
1.48. "Hotel Mortgagee"...............................................6
1.49. "Immediate Family"..............................................7
1.50. "Impositions"...................................................7
1.51. "Incidental Documents"..........................................7
1.52. "Indebtedness"..................................................7
1.53. "Insurance Requirements"........................................7
1.54. "Interest Rate".................................................8
1.55. "Land"..........................................................8
1.56. "Landlord"......................................................8
1.57. "Landlord Default"..............................................8
1.58. "Landlord Liens"................................................8
1.59. "Lease Year"....................................................8
1.60. "Leased Improvements"...........................................8
1.61. "Leased Intangible Property"....................................8
1.62. "Leased Personal Property"......................................8
1.63. "Leased Property"...............................................8
1.64. "Legal Requirements"............................................8
1.65. "Lien"..........................................................9
1.66. "Management Agreement"..........................................9
1.67. "Manager".......................................................9
1.68. "Minimum Rent"..................................................9
1.69. "Net Worth".....................................................9
1.70. "Notice"........................................................9
1.71. "Officer's Certificate".........................................9
1.72. "Opening Date"..................................................9
1.73. "Overdue Rate"..................................................9
1.74. "Parent"........................................................9
1.75. "Permitted Encumbrances"........................................9
1.76. "Permitted Liens"..............................................10
1.77. "Permitted Use"................................................10
1.78. "Person".......................................................10
1.79. "Property".....................................................10
1.80. "Purchase Documents"...........................................10
1.81. "Records"......................................................10
1.82. "Rent".........................................................10
1.83. "Retained Funds"...............................................10
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
1.84. "SEC"..........................................................10
1.85. "Security Agreement"...........................................10
1.86. "State"........................................................10
1.87. "Stock Pledge Agreement".......................................10
1.88. "Subordinated Creditor"........................................10
1.89. "Subordination Agreement"......................................10
1.90. "Subsidiary"...................................................11
1.91. "Successor Landlord"...........................................11
1.92. "Tenant".......................................................11
1.93. "Tenant's Personal Property"...................................11
1.94. "Term".........................................................11
1.95. "Total Hotel Sales"............................................11
1.96. "Uniform System of Accounts"...................................12
1.97. "Unsuitable for Its Permitted Use".............................12
1.98. "Work".........................................................12
ARTICLE 2. LEASED PROPERTY AND TERM.........................................12
2.1. Leased Property................................................12
2.2. Condition of Leased Property...................................13
2.3. Fixed Term.....................................................14
2.4. Extended Term..................................................14
ARTICLE 3. RENT.............................................................14
3.1. Rent...........................................................14
3.2. Late Payment of Rent, Etc......................................18
3.3. Net Lease......................................................18
3.4. No Termination, Abatement, Etc.................................19
3.5. Retained Funds.................................................19
ARTICLE 4. USE OF THE LEASED PROPERTY.......................................20
4.1. Permitted Use..................................................20
4.2. Compliance with Legal/Insurance Requirements, Etc..............21
4.3. Environmental Matters..........................................21
ARTICLE 5. MAINTENANCE AND REPAIRS..........................................23
5.1. Maintenance and Repair.........................................23
5.2. Tenant's Personal Property.....................................26
5.3. Yield Up.......................................................26
5.4. Management Agreement...........................................27
ARTICLE 6. IMPROVEMENTS, ETC................................................27
6.1. Improvements to the Leased Property............................27
6.2. Salvage........................................................28
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE 7. LIENS............................................................28
7.1. Liens..........................................................28
7.2. Landlord's Lien................................................28
ARTICLE 8. PERMITTED CONTESTS...............................................29
ARTICLE 9. INSURANCE AND INDEMNIFICATION....................................29
9.1. General Insurance Requirements.................................29
9.2. Replacement Cost...............................................30
9.3. Waiver of Subrogation..........................................31
9.4. Form Satisfactory, Etc.........................................31
9.5. Blanket Policy.................................................31
9.6. No Separate Insurance..........................................31
9.7. Indemnification of Landlord....................................32
ARTICLE 10. CASUALTY........................................................32
10.1. Insurance Proceeds.............................................32
10.2. Damage or Destruction..........................................33
10.3. Damage Near End of Term........................................34
10.4. Tenant's Property..............................................34
10.5. Restoration of Tenant's Property...............................35
10.6. No Abatement of Rent...........................................35
10.7. Waiver.........................................................35
ARTICLE 11. CONDEMNATION....................................................35
11.1. Total Condemnation, Etc........................................35
11.2. Partial Condemnation...........................................35
11.3. Abatement of Rent..............................................36
11.4. Temporary Condemnation.........................................36
11.5. Condemnation Near End of Term..................................37
11.6. Allocation of Award............................................37
ARTICLE 12. DEFAULTS AND REMEDIES...........................................37
12.1. Events of Default..............................................37
12.2. Remedies.......................................................39
12.3. Tenant's Waiver................................................41
12.4. Application of Funds...........................................41
12.5. Landlord's Right to Cure Tenant's Default......................41
ARTICLE 13. HOLDING OVER....................................................41
ARTICLE 14. LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT.................42
14.1. Landlord Notice Obligation.....................................42
14.2. Landlord's Default.............................................42
</TABLE>
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<TABLE>
<CAPTION>
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14.3. Indemnification of Tenant.....................................42
ARTICLE 15. PURCHASE RIGHTS.................................................43
ARTICLE 16. SUBLETTING AND ASSIGNMENT.......................................43
16.1. Subletting and Assignment.....................................43
16.2. Required Sublease Provisions..................................44
16.3. Permitted Sublease............................................45
16.4. Sublease Limitation...........................................45
ARTICLE 17. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS..................45
17.1. Estoppel Certificates.........................................45
17.2. Financial Statements..........................................46
ARTICLE 18. LANDLORD'S RIGHT TO INSPECT.....................................47
ARTICLE 19. EASEMENTS.......................................................47
19.1. Grant of Easements............................................47
19.2. Exercise of Rights by Tenant..................................47
19.3. Permitted Encumbrances........................................47
ARTICLE 20. HOTEL MORTGAGES.................................................48
20.1. Landlord May Grant Liens......................................48
20.2. Subordination of Lease........................................48
20.3. Notice to Mortgagee and Superior Landlord.....................49
ARTICLE 21. ADDITIONAL COVENANTS OF TENANT..................................49
21.1. Prompt Payment of Indebtedness................................49
21.2. Conduct of Business...........................................50
21.3. Maintenance of Accounts and Records...........................50
21.4. Notice of Litigation, Etc.....................................50
21.5. Indebtedness of Tenant........................................50
21.6. Financial Condition of Tenant.................................51
21.7. Distributions, Payments to Affiliated Persons, Etc............51
21.8. Prohibited Transactions.......................................51
21.9. Liens and Encumbrances........................................51
21.10. Merger; Sale of Assets; Etc...................................52
ARTICLE 22. MISCELLANEOUS...................................................52
22.1. Limitation on Payment of Rent.................................52
22.2. No Waiver.....................................................52
22.3. Remedies Cumulative...........................................53
22.4. Severability..................................................53
22.5. Acceptance of Surrender.......................................53
22.6. No Merger of Title............................................53
</TABLE>
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<TABLE>
<CAPTION>
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22.7. Conveyance by Landlord.......................................53
22.8. Quiet Enjoyment..............................................53
22.9. Memorandum of Lease..........................................54
22.10. Notices......................................................54
22.11. Trade Area Restriction.......................................55
22.12. Construction.................................................55
22.13. Counterparts; Headings.......................................56
22.14. Applicable Law, Etc..........................................56
22.15. Right to Make Agreement......................................56
22.16. Attorneys' Fees..............................................56
22.17. Nonrecourse..................................................57
22.18. Nonliability of Trustees.....................................57
</TABLE>
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<PAGE> 8
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this 24th day of December,
1997, by and between HPT CW PROPERTIES TRUST, a Maryland real estate investment
trust, as landlord ("Landlord"), and CANDLEWOOD LEASING NO. 1, INC., a Delaware
corporation, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Leased Property (this and
other capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1) described in Exhibit A-1 through
A- ; and
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 calendar month.
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).
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
<PAGE> 9
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,
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) three percent (3%) with
respect to the 1997 and 1998 Fiscal Years; (b) four percent (4%) with respect to
the 1999 Fiscal Year; and (c) five percent (5%) with respect to each Fiscal Year
thereafter during the Term.
1.8. "AWARD" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Leased 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).
1.9. "BASE TOTAL HOTEL SALES" shall mean, with respect to any Property,
Total Hotel Sales at such Property for the Base Year; 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 change in the services provided at any Hotel (including, without
limitation, if applicable, the closing of restaurants or the discontinuation of
food or beverage services) 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 with respect to the affected Property
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
2
<PAGE> 10
prorated 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; (d) in the event of a closing of a restaurant, all Total Hotel
Sales attributable to such restaurant during the Base Year shall be subtracted
from Base Total Hotel Sales throughout the period of such closing; and (e) 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 agree.
1.10. "BASE YEAR" shall mean, with respect to any Property, the period
commencing on the first anniversary of the first full day of the first full
calendar month following the Opening Date of the Hotel located at such Property
and expiring on the day preceding the second anniversary of such Opening Date.
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
or the State of New York are authorized by law or executive action to close.
1.12. "CANDLEWOOD" shall mean Candlewood Hotel Company, Inc., a Delaware
corporation, its successors and assigns.
1.13. "CAPITAL ADDITION" shall mean any renovation, repair or
improvement to the Leased Property (or portion thereof), the cost of which
constitutes a Capital Expenditure.
1.14. "CAPITAL EXPENDITURE" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.15. "CLAIM" shall have the meaning given such term in Article 8.
1.16. "CODE" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.17. "COMMENCEMENT DATE" shall mean the date of this Agreement.
1.18. "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
3
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any condemnation or other eminent domain proceeding affecting such Property,
whether or not the same shall have actually been commenced.
1.19. "CONDEMNOR" shall mean any public or quasi-public Person, having
the power of Condemnation.
1.20. "CONSOLIDATED FINANCIALS" shall mean, for any Fiscal Year or other
accounting period of Candlewood, annual audited and quarterly unaudited
financial statements of Candlewood prepared on a consolidated basis, including
Candlewood'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.
1.21. "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.
1.22. "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.
1.23. "DESIGNATED AREAS" shall have the meaning given such term in
Section 22.11.
1.24. "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 three hundred fifty (350) basis
points.
1.25. "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
any shares of any class of capital stock of a corporation or (d) any return of
capital to shareholders.
1.26. "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.
1.27. "ENCUMBRANCE" shall have the meaning given such term in Section
20.1.
1.28. "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.
1.29. "ENVIRONMENT" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
4
<PAGE> 12
1.30. "ENVIRONMENTAL OBLIGATION" shall have the meaning given such term
in Section 4.3.1.
1.31. "ENVIRONMENTAL NOTICE" shall have the meaning given such term in
Section 4.3.1.
1.32. "EVENT OF DEFAULT" shall have the meaning given such term in
Section 12.1.
1.33. "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
during the Base Year.
1.34. "EXTENDED TERMS" shall have the meaning given such term in Section
2.4.
1.35. "FF&E ESTIMATE" shall have the meaning given such term in Section
5.1.2(c).
1.36. "FF&E PLEDGE" shall mean the Assignment and Security Agreement,
dated as of the date hereof, made by Tenant for the benefit of Landlord.
1.37. "FF&E RESERVE" shall have the meaning given such term in Section
5.1.2(a).
1.38. "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 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.
1.39. "FISCAL YEAR" shall mean the calendar year.
1.40. "FIXED TERM" shall have the meaning given such term in Section
2.3.
1.41. "FIXTURES" shall have the meaning given such term in Section
2.1(d).
1.42. "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.43. "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.
5
<PAGE> 13
1.44. "GUARANTY" shall mean the Guaranty Agreement, dated the date
hereof, made by Candlewood for the benefit of Landlord and Hospitality
Properties Trust.
1.45. "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 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.
1.46. "HOTEL" shall mean, with respect to any Property, the hotel being
operated on such Property.
1.47. "HOTEL MORTGAGE" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article 20.
1.48. "HOTEL MORTGAGEE" shall mean the holder of any Hotel Mortgage.
6
<PAGE> 14
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 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 (but excluding any mortgage or similar tax
payable in connection with a Hotel Mortgage) or other tax imposed with respect
to the sale, exchange or other disposition by Landlord of the Leased Property or
the proceeds thereof, (iv) any single business, gross receipts tax, transaction
privilege, rent or similar taxes as the same relate to or are imposed upon
Landlord, (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 and the FF&E Pledge.
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. "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
7
<PAGE> 15
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.
1.54. "INTEREST RATE" shall mean ten percent (10%) per annum.
1.55. "LAND" shall have the meaning given such term in Section 2.1(a).
1.56. "LANDLORD" shall have the meaning given such term in the preambles
to this Agreement and shall also include its permitted successors and assigns.
1.57. "LANDLORD DEFAULT" shall have the meaning given such term in
Section 14.2.
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 Purchase Documents, 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 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 other than liquor licenses.
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.
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
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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. "MINIMUM RENT" shall mean an amount equal to Two Hundred
Ninety-Nine Thousand Five Hundred Two Dollars ($299,502) per Accounting Period.
1.69. "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.
1.70. "NOTICE" shall mean a notice given in accordance with Section
22.10.
1.71. "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.
1.72. "OPENING DATE" shall have the meaning given such term in the
Purchase Documents.
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.
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, fifty percent (50%) 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 or leasehold title insurance policy issued to Landlord in
connection with the transactions contemplated by the Purchase Documents with
respect to such Property, plus any other
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encumbrances as may be "Permitted Encumbrances" under the Purchase Documents or
as may have been consented to in writing by Landlord and Tenant 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. "PURCHASE DOCUMENTS" shall mean, collectively, the Purchase and
Sale Agreement, dated as of November 19, 1997, by and among Hospitality
Properties Trust, Candlewood and certain of Candlewood's Subsidiaries and the
Agreement to Lease, dated as of November 19, 1997, by and among Hospitality
Properties Trust and Candlewood, as they may be amended, restated, supplemented
or otherwise modified from time to time.
1.81. "RECORDS" shall have the meaning given such term in Section 7.2.
1.82. "RENT" shall mean, collectively, the Minimum Rent, Additional Rent
and Additional Charges.
1.83. "RETAINED FUNDS" shall mean a cash amount equal to Three Million
Five Hundred Ninety-Four Thousand, Twenty-Nine Dollars ($3,594,029).
1.84. "SEC" shall mean the Securities and Exchange Commission.
1.85. "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.
1.86. "STATE" shall mean, with respect to any Property, the state,
commonwealth or district in which the such Property is located.
1.87. "STOCK PLEDGE AGREEMENT" shall mean the Stock Pledge Agreement,
dated as of the date hereof, made by Candlewood to Landlord with respect to the
stock of Tenant, as it may be amended, restated, supplemented or otherwise
modified from time to time.
1.88. "SUBORDINATED CREDITOR" shall mean any creditor of Tenant which is
a party to a Subordination Agreement in favor of Landlord.
1.89. "SUBORDINATION AGREEMENT" shall mean any agreement (and any
amendments thereto) executed by a Subordinated Creditor pursuant to which the
payment and performance of
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Tenant's obligations to such Subordinated Creditor are subordinated to the
payment and performance of Tenant's obligations to Landlord under this
Agreement.
1.90. "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).
1.91. "SUCCESSOR LANDLORD" shall have the meaning given such term in
Section 20.2.
1.92. "TENANT" shall have the meaning given such term in the preambles
to this Agreement and shall also include its permitted successors and assigns.
1.93. "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.
1.94. "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.
1.95. "TOTAL HOTEL SALES" shall mean, with respect to any 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 for prompt or cash payments and refunds,
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 necessary to the operation of the Hotel located
thereon, which shall be deposited in the FF&E Reserve); service charges, to the
extent not distributed to the employees at the Hotel located thereon 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 the Hotel located thereon; interest which accrues on amounts
deposited in the FF&E Reserve; and any security deposits and other
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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.
1.96. "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.
1.97. "UNSUITABLE FOR ITS PERMITTED USE" shall mean, with respect to
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 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 twelve (12)
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 Tenant, on a commercially practicable
basis for its Permitted Use.
1.98. "WORK" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2.
LEASED PROPERTY AND TERM
2.1. LEASED PROPERTY. Upon and subject to 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 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- , 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, 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,
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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, computers 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
(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" 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.
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2.3. FIXED TERM. The initial term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and shall expire December 31, 2011.
2.4. EXTENDED TERM. Provided that no Event of Default shall have
occurred and be continuing, the Term shall be automatically extended for three
(3) consecutive renewal terms of fifteen (15) years each (collectively, the
"Extended Terms"), unless Tenant shall give Landlord Notice, not later than
eighteen (18) months prior to the scheduled expiration of the then current Term
of this Agreement (Fixed or Extended, as the case may be), that Tenant elects
not so to extend the term of this Agreement.
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 give Notice that it elects
not to extend the Term in accordance with this Section 2.4, this Agreement shall
automatically terminate at the end of the Term then in effect and Tenant shall
have no further option to extend the Term of this Agreement. 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 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 Accounting Period; 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
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disbursement is made during any month on a day other than the first
Business Day of an Accounting Period, 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.
(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 Lease Year subsequent to the Base Year, in an
amount, not less than zero, equal to ten percent (10%) of Excess Total
Hotel Sales with respect to each 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 each Accounting Period, based on Total Hotel Sales for the
preceding 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 of
the calendar year immediately following the Base Year for any Property,
Tenant shall deliver to Landlord an Officer's Certificate setting forth
Total Hotel Sales for such Property for the Base Year, together with an
audit thereof by Ernst & Young, 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 thereafter, Tenant
shall deliver to Landlord an Officer's Certificate setting forth the
Total Hotel Sales for such Property for the preceding Lease Year and the
Additional Rent payable with respect to such Lease Year with respect to
such Property, together with an audit thereof, by Ernst & Young, 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 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
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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 amount of such
difference, together with interest at the Interest Rate, which interest
shall accrue from the date of payment by Tenant until the date such
credit is applied or paid, as the case may be. 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, together with
interest at the Interest Rate, which interest shall accrue from the date
of payment by Tenant until the date of payment by Landlord.
(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. Landlord, at
its own expense, except as provided hereinbelow, shall have the right,
exercisable by Notice to Tenant within one (1) year after receipt of the
applicable Officer's Certificate, by its accountants or representatives,
to audit the information set forth in the Officer's Certificate referred
to in subparagraph (c) above and, in connection with such audits, to
examine Tenant's books and records with respect thereto (including
supporting data and sales and excise tax returns). If any such audit
discloses a deficiency in the payment of Additional Rent and, either
Tenant agrees with the result of such audit or the matter is otherwise
compromised with Landlord, Tenant shall forthwith pay to Landlord the
amount of the deficiency, as finally agreed or determined, together with
interest at the Interest Rate, from the date such payment should have
been made to the date of payment thereof. If such deficiency, as agreed
upon or compromised as aforesaid, is more than five percent (5%) of
Additional Rent paid by Tenant for such Lease Year and, as a result,
Landlord did not receive at least ninety-five percent (95%) of the
Additional Rent payable with respect to such Lease Year, Tenant shall
pay the reasonable cost of such audit and examination. If any such audit
discloses that Tenant paid more Additional Rent for any Lease Year than
was due hereunder, and either Landlord agrees with the result of such
audit or the matter is otherwise determined, provided no Event of
Default has occurred and is continuing, Landlord shall grant Tenant a
credit equal to the amount of such overpayment against the Rent next
coming due in the amount of such difference, as finally agreed or
determined, together with interest at the Interest Rate, which interest
shall accrue from the time of payment by Tenant until the date such
credit is applied or paid, as the case may be. If such a credit cannot
be made because the Term has expired before the credit can be applied in
full, provided no Event of Default has occurred and is continuing,
Landlord shall pay the unapplied balance of such credit to Tenant,
together with interest at the Interest Rate, which interest shall accrue
from the date of payment by Tenant until the date of payment from
Landlord.
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
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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
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 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 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 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
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Landlord's failure to give any such notice shall in no way diminish
Tenant's obligation hereunder to pay such Impositions, unless such
failure continues for more than ninety (90) days after the date Landlord
learned of such Imposition.
(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,
ground rents, if any, and 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 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
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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; (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. RETAINED FUNDS. Pursuant to the Purchase Documents, Landlord is
holding the Retained Funds as security for the faithful observance and
performance by Tenant of all the terms, covenants and conditions of this Lease
by Tenant to be observed and performed. The Retained Funds 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
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and apply the entire Retained Funds 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. It is understood
and agreed that the Retained Funds are not to be considered as prepaid rent, nor
shall damages be limited to the amount of the Retained Funds. Provided no Event
of Default shall have occurred and be continuing, any unapplied balance of the
Retained Funds 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 Lease with respect to
any Property, such portion thereof as is allocable to such Property (as
reasonably determined by Landlord) upon such termination. Landlord shall have no
obligation to pay interest on the Retained Funds and shall have the right to
commingle the same with Landlord's other funds. If Landlord conveys Landlord's
interest under this Lease, the Retained Funds, 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 Retained Funds 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 Retained Funds, if it succeeds to the position of Landlord
hereunder, unless the Retained Funds shall have been received in hand by such
holder.
In the event of bankruptcy or other creditor-debtor proceedings against
Tenant, the Retained Funds 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, it being agreed that, on the Commencement
Date, the Hotels shall be operated under the "Candlewood Hotel" 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.
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(b) In the event that, in the reasonable determination of Tenant,
it shall no longer be economically practical to operate any Property as a
Candlewood 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'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 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
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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 provisions 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, 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 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.
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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.
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 and equipment;
(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
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(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 (within ten (10)
Business Days after the end of each Accounting Period during the Term)
into the FF&E Reserve an amount equal to the Applicable Percentage of
Total Hotel Sales for such Accounting Period. 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 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 thirty (30) days after receipt of the FF&E Estimate, such FF&E
Estimate shall be deemed approved by Landlord. 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.
(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.
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(f) Notwithstanding anything to the contrary set forth in this
Agreement, no portion of the FF&E Reserve may be used for "punch-list"
or other initial construction items, the cost of which shall be the sole
responsibility of Tenant and its Affiliated Persons.
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.
(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, except as otherwise provided in Section 5.1.2(f), 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
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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 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
shall, upon the expiration or earlier termination of this Agreement, become the
property of Landlord. 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. 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
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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 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 thirty (30) 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 30-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
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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.
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.
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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 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
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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 Ten Million Dollars ($10,000,000) per occurrence,
Twenty Million Dollars ($20,000,000) 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 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.
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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 A 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 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
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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 the following,
except to the extent caused by Landlord's negligence on willful misconduct or a
Landlord Default: (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 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 Five Hundred Thousand Dollars ($500,000) shall be paid directly to
Tenant and such losses may be adjusted without Landlord's consent. If
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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, 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, 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.
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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 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) conditional 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 automatic 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. Tenant's
obligation to restore the applicable Property pursuant to this Article 10 shall
be subject to the release of available insurance proceeds by the applicable
Hotel Mortgagee to Landlord or directly to Tenant.
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 two (2) years of the Term (including any automatic Extended
Terms) and if such damage or destruction cannot reasonably be expected to be
fully repaired and restored prior to the date that is twelve (12) months 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.
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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 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
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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, 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) conditional 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. Tenant's obligation to restore the Leased Property shall be subject to the
release of the Award by the applicable Hotel Mortgagee to Landlord or directly
to Tenant.
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
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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 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 two (2) years of the Term (including any automatic Extended
Terms) and if restoration cannot reasonably be expected to be completed prior to
the date that is twelve (12) months 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
(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
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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 ninety
(90) days in the aggregate) as may be necessary to cure such default
with all due diligence; or
(d) should any obligation of Tenant 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 Candlewood or Tenant or any
Affiliated Person as to Candlewood or Tenant occur and be continuing
beyond the expiration of any applicable cure period under any of the
Incidental Documents or by the Candlewood Parties (as defined therein)
under the Purchase Documents; or
(f) should any material representation or warranty made by Tenant
or the Candlewood Parties (as defined in the Purchase Documents) under
or in connection with this Agreement or any Incidental Document or the
Purchase Documents, 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 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
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(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) ninety (90) days after commencement thereof, unless the
amount in dispute is less than $250,000, 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 Candlewood;
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 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, 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
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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) 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 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 as a result of an Event of Default, to use reasonable efforts to
mitigate its damages.
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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 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 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 two (2) times 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.
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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 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, 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; provided, however, that, from and after the bankruptcy of
Landlord, Tenant may offset such amounts against Minimum Rent and/or Additional
Rent 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, 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.
14.3. INDEMNIFICATION OF TENANT. Notwithstanding the existence of any
insurance provided for herein and without regard to the policy limits of any
such insurance, Landlord shall protect, indemnify and hold harmless Tenant 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
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incurred by or asserted against Tenant by reason of the following, except to the
extent caused by Tenant's negligence, willful misconduct or Default: (a) any
Impositions that are the obligations of Landlord to pay pursuant to the
applicable provisions of this Agreement, and (b) any failure on the part of
Landlord or anyone claiming under Landlord to perform or comply with any of the
terms of this Agreement. Landlord, at its expense, shall contest, resist and
defend any such claim, action or proceeding asserted or instituted against
Tenant (and shall not be responsible for any duplicative attorneys' fees
incurred by Tenant) or may compromise or otherwise dispose of the same, with
Tenant's prior written consent (which consent may not be unreasonably withheld,
delayed or conditioned). The obligations of Landlord under this Section 14.3
shall survive termination of this Agreement.
ARTICLE 15.
PURCHASE RIGHTS
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 net market value thereof (current replacement cost 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.
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; provided,
however, that an assignment to a wholly owned subsidiary (direct or indirect) of
Candlewood shall be permitted without the consent of, but upon Notice to,
Landlord. 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
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wholly owned direct or indirect subsidiary of Candlewood or any transaction
pursuant to which Tenant or Candlewood is merged or consolidated with another
Entity or pursuant to which all or substantially all of Tenant's or Candlewood's
assets are transferred to any other Entity, as if such change in control or
transaction were an assignment of this Agreement, unless such Entity is a wholly
owned Subsidiary (direct or indirect) of Candlewood.
If this Agreement is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant and their
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 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 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 Retained
Funds of the subtenant other than any Retained Funds 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
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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 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 or, in
the case of a restaurant or bar, four thousand (4,000) 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 the Leased Property on any basis such that the rental to be
paid by any sublessee thereunder would be based, in whole or in part, on the net
income or profits derived by the business activities of such sublessee, any
other formula such that any portion of such sublease rental 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, but not
more than a reasonable amount of times per year, 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
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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 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 Candlewood
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, 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 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, including
occupancy percentages and average rate, 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; provided,
however, that, except as to calculations pertaining to Total Hotel
Sales, Tenant shall not be required to provide audited financials with
respect to individual Hotels unless Landlord shall agree to pay for the
cost thereof; and
(e) promptly, upon Notice from Landlord, such other information
concerning the business, financial condition and affairs of Tenant and
Candlewood as Landlord reasonably may request from time to time.
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.
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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 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.
19.3. PERMITTED ENCUMBRANCES. Any agreements entered into in accordance
with Section 19.1 shall be deemed a Permitted Encumbrance.
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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 self-operative and no
further instrument of subordination shall be required provided that Tenant has
received a nondisturbance and attornment agreement from each Superior Mortgagee
(as defined below), consistent with the provisions of this Section 20.2 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" and any mortgage or deed of trust to which
this Agreement is, at the time referred to, subject and subordinate is herein
called "Superior Mortgage" and the holder, trustee or beneficiary of a Superior
Mortgage is herein called "Superior Mortgagee".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior 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 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
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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.
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
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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 Two Hundred Fifty
Thousand Dollars ($250,000) 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, Two Hundred Fifty Thousand Dollars
($250,000), or any event or condition that would be required to 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;
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(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
$250,000 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 Retained Funds, if assigned to Tenant, may for such purpose be
counted as equity at the full amount thereof and that accrued and unpaid
subordinated amounts due from Tenant to its Affiliated Persons may be included
in Net Worth.
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 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,
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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. Without Landlord's prior written
consent (which consent may be given or withheld in Landlord's sole discretion),
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, unless such Person is a wholly owned
Subsidiary, direct or indirect, of Candlewood (in which event Tenant shall give
Landlord prior Notice thereof), (ii) merge into or with or consolidate with any
other Entity, unless such Entity is a wholly owned Subsidiary, direct or
indirect, of Candlewood (in which event Tenant shall give Landlord prior Notice
thereof), 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.
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.
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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
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 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; provided, however, that Landlord
shall not be released from liability with respect to the Retained Funds unless
such successor shall have a Net Worth equal to or greater than ten (10) times
the unapplied balance of the Retained Funds. If such successor shall not satisfy
the aforesaid Net Worth requirement, Landlord shall, in a guaranty in form and
substance reasonably satisfactory to Tenant, guaranty payment of the Retained
Funds in accordance with this Agreement and the Purchase Documents.
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
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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 (except as expressly provided in Section 14.2), 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 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 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
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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 Tenant to:
Candlewood Leasing No. 1, Inc.
Lakepoint Office Park
9342 East Central
Wichita, Kansas 67206
Attn: Mr. Jack P. DeBoer
[Telecopier No. (316) 631-1333]
with a copy to:
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attn: Jon D. Demarest, Esq.
[Telecopier No. (619) 696-7419]
(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. Neither Tenant, Candlewood nor any of
their Affiliated Persons shall own, build, franchise, manage or operate a hotel
of the same brand as the Hotels within the designated areas on Exhibit B (the
"Designated Areas"), 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 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
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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. 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. 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.
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22.17. NONRECOURSE. Nothing contained in this Agreement shall be
construed to impose any liabilities or obligations on Tenant's shareholders,
officers, directors, agents or employees (or any shareholders, officers,
directors, agents or employees of any of the foregoing) for the performance of
the obligations of Landlord or Tenant hereunder.
22.18. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, 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 CW 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 LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
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IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date above first written.
LANDLORD:
HPT CW PROPERTIES TRUST
By: /s/ JOHN G. MURRAY
------------------------------
Its: President
TENANT:
CANDLEWOOD LEASING NO. 1, INC.
By: /s/ PAMELA CLOUD
------------------------------
Its: Assistant Secretary
Candlewood Hotel Company, Inc. hereby acknowledges and agrees to be bound by the
provisions of Section 22.11 of the foregoing Lease Agreement.
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ PAMELA CLOUD
------------------------------
Its: Assistant Secretary
Date: December 24, 1997
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Exhibit 10.4
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Agreement") is made and given as of this
24th day of December, 1997, by CANDLEWOOD HOTEL COMPANY, INC., a Delaware
corporation (the "Guarantor"), for the benefit of HP CW PROPERTIES TRUST, a
Maryland real estate investment trust (the "Landlord"), and HOSPITALITY
PROPERTIES TRUST, a Maryland real estate investment trust and the sole
stockholder of Landlord (together with the Landlord and their respective
successors and assigns, "HPT").
W I T N E S S E T H :
WHEREAS, pursuant to an Agreement to Lease, dated November 19, 1997 (the
"Agreement to Lease"), the Landlord and Candlewood Leasing No. 1, Inc., a
Delaware corporation (the "Tenant"), are, on the date hereof, entering into a
Lease Agreement (the "Initial Lease") with respect to certain real property, the
related improvements and personal property, as more particularly described
therein; and
WHEREAS, the Agreement to Lease contemplates that the Initial Lease will
be amended to add to the premises demised thereunder certain additional
Candlewood hotels described in the Purchase Agreement and Agreement to Lease
pursuant to certain amendments to be entered into pursuant to the Agreement to
Lease (collectively, the "Amendments" and the Initial Lease, as amended by the
Amendments, the "Lease"); and
WHEREAS, it is a condition precedent to the Landlord's 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. Subject to the
limitations set forth in Section 20, during the term of this Agreement, the
Guarantor will cause the Tenant duly and punctually to perform all of the
covenants and agreements of Tenant 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, together with interest on amounts
recoverable under this Agreement from the time such amounts become due 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.
3.5. LEGAL EXISTENCE. The Guarantor shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence.
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
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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) 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 debtor 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, except as expressly provided in Section 4, (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
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
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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 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 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. (a) Unless sooner terminated pursuant to paragraph (b)
below, 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; 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.
(b) Provided that (x) no (i) monetary Default, (ii) Default as to
which Notice thereof has been given to Tenant or (iii) Event of Default shall
have occurred and be continuing under the Lease, (y) Cash Flow (as defined
below) on a cumulative basis for a period of twelve
4
<PAGE> 5
(12) full consecutive Accounting Periods equals or exceeds Minimum Rent by fifty
percent (50%) with respect to such period, and (z) HPT shall receive a schedule
evidencing the foregoing, in form and substance reasonably satisfactory to HPT
prepared by a, so-called, "Big-Six" accounting firm or such other certified
public accountants as are approved by HPT (such approval not to be unreasonably
withheld, delayed or conditioned), this Agreement shall terminate ten (10)
Business Days after delivery to HPT of the financial statements described in
clause (z) preceding, and HPT shall, within ten (10) Business Days after the
written request of the Guarantor, confirm such termination by executing a
release of the Guarantor from all obligations and liabilities arising under this
Agreement subsequent to the release date and returning any unapplied balance of
the Guaranty Retained Funds (as hereinafter defined) to the Guarantor, together
with any accrued and unpaid interest thereon.
As used herein, "CASH FLOW" shall mean the net income before federal and
state income tax (or loss) of the Tenant in connection with the operation of the
Hotels, calculated in accordance with GAAP for the applicable period, as
illustrated in Exhibit A attached hereto, adjusted by adding back (a) all
extraordinary expense items, (b) depreciation and amortization, (c) interest
expense on Indebtedness permitted under the Lease, (d) Minimum Rent and
Additional Rent, (e) 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, and further adjusted by
deducting (f) required contributions to the FF&E Reserve and (g) all
extraordinary income items.
11. SECURITY FOR GUARANTY. As security for the obligations of the
Guarantor hereunder, HPT has retained from the aggregate purchase prices of the
Properties pursuant to the Purchase Agreement, the sum of Five Million Dollars
($5,000,000) (the "Guaranty Retained Funds"). HPT shall have no obligation to
hold the Guaranty Retained Funds in a segregated account and may commingle the
same with its general funds. Provided that no Event of Default shall have
occurred and be continuing, HPT shall credit the Guarantor or its assigns with
interest on any unapplied balance of the Guaranty Retained Funds at a rate of
11.11% per annum. Such interest shall be credited in arrears and pro rated with
respect to any partial month. Provided that (x) no (i) monetary Default, (ii)
Default as to which Notice thereof has been given to Tenant or (iii) Event of
Default shall have occurred and be continuing under the Lease, (y) Cash Flow on
a cumulative basis for a period of twelve (12) full consecutive Accounting
Periods equals or exceeds Minimum Rent by forty percent (40%) with respect to
such period, and (z) HPT shall receive a schedule evidencing the foregoing, in
form and substance reasonably satisfactory to HPT prepared by certified public
accountants approved by HPT (such approval not to be unreasonably withheld,
delayed or conditioned), HPT shall, within ten (10) Business Days after the
written request of the Guarantor, pay any unapplied balance of the Guaranty
Retained Funds, together with any accrued and unpaid interest with respect
thereto, to the Guarantor. At the written request of the Guarantor, HPT shall
credit accrued interest on the Guaranty Retained Funds against the monthly
Minimum Rent.
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
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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 HPT to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
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:
Candlewood Hotel Company, Inc.
Lakepoint Office Park
9342 East Central
Witchita, Kansas 67206
Attn: Mr. Jack P. DeBoer
[Telecopier No. (316) 631-1333]
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with a copy to:
Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attn: Jon D. Demorest, Esq.
[Telecopier No. (619) 696-7419]
(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, such holders, whether so expressed or
not; provided, however, that, if HPT shall transfer the Guaranty Retained Funds
to a person having a Net Worth less than ten (10) times the unapplied balance
thereof, HPT shall guaranty repayment thereof and payment of any accrued
interest thereon to the Guarantor in accordance with the terms of this Agreement
pursuant to a guaranty in form and substance reasonably satisfactory to the
Guarantor.
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.
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
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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.
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.
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WITNESS the execution hereof under seal as of the date above first
written.
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ PAMELA CLOUD
-------------------------
Its: Assistant Secretary
ACKNOWLEDGED AND AGREED:
HP CW PROPERTIES TRUST
By: /s/ JOHN G. MURRAY
------------------------------
Its: President
HOSPITALITY PROPERTIES TRUST
By: /s/ JOHN G. MURRAY
-----------------------------
Its: President
9
<PAGE> 1
Exhibit 10.5
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made and given as of
this 24th day of December, 1997, by CANDLEWOOD HOTEL COMPANY, INC., a Delaware
corporation (the "Pledgor"), for the benefit of HP CW Properties Trust, a
Maryland real estate investment trust (together with its successors and assigns,
the "Secured Party").
W I T N E S S E T H:
WHEREAS, pursuant to a Lease Agreement, dated as of December 24, 1997
(as amended from time to time, the "Lease"), the Secured Party leased to
Candlewood Leasing No. 1, Inc., a Delaware corporation (the "Tenant"), and the
Tenant leased from the Secured Party certain premises as more particularly
described in and subject to and upon the terms and conditions set forth in the
Lease; and
WHEREAS, the Pledgor owns all of the outstanding shares of capital stock
of the Tenant and shall derive direct substantial benefit from the transactions
contemplated by the Lease;
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:
SECTION 1. CERTAIN TERMS. Capitalized terms used and not otherwise
defined in this Agreement shall have the meanings ascribed to such terms in the
Lease.
SECTION 2. PLEDGE. The Pledgor hereby pledges to the Secured Party the
shares of capital stock of the Tenant (the "Pledged Stock") listed in Exhibit A
attached hereto (the Pledged Stock and any additional securities or collateral
pledged hereunder, collectively, the "Pledged Collateral"), and the Pledgor
hereby grants to the Secured Party a security interest in all of the Pledged
Collateral as security for the due and punctual payment and performance of the
Secured Obligations (as hereinafter defined).
SECTION 3. SECURED OBLIGATIONS. For purposes of this Agreement, the term
"Secured Obligations" shall mean the payment and performance of each and every
obligation of the Tenant to the Secured Party, under the Lease, whether now
existing or hereafter arising, and including, without limitation, payment of the
Rent.
SECTION 4. REPRESENTATIONS OF THE PLEDGOR. The Pledgor covenants that
the Pledged Stock is duly and validly pledged to the Secured Party in accordance
with law and the Pledgor shall warrant and defend the Secured Party's right,
title and security interest in and to the Pledged Stock against the claims and
demands of all persons whomsoever. The Pledgor represents and warrants to the
Secured Party that the Pledgor has good title to all the Pledged Stock, free and
clear of all claims, mortgages, pledges, liens, security interests and other
encumbrances of every nature whatsoever; that the Pledged Stock is not subject
to any restriction on transfer contained in the charter documents or by-laws of
the Tenant or in any agreement or instrument to which the Tenant or the Pledgor
are a party or by which the Tenant or the Pledgor is bound which would
<PAGE> 2
prohibit or restrict the pledge of the Pledged Stock hereunder or the
disposition thereof upon default hereunder; that all of the Pledged Stock has
been duly and validly issued and is fully paid and nonassessable; and that the
Pledged Stock constitutes all of the presently issued and outstanding shares of
the capital stock of the Tenant. The Pledgor covenants and agrees that if any
additional shares of the capital stock of the Tenant are acquired by the Pledgor
after the date hereof the same shall constitute a part of the Pledged Collateral
and shall be pledged with the Secured Party as provided in Section 2 upon such
acquisition.
Section 5. COVENANTS OF THE PLEDGOR. The Pledgor hereby covenants and
agrees that it shall not sell, convey or otherwise dispose of any of the Pledged
Collateral nor create, incur or permit to exist any pledge, mortgage, lien,
charge, encumbrance or any security interest whatsoever with respect to any of
the Pledged Collateral or the proceeds thereof, other than the liens on and
security interests in the Pledged Collateral created hereby. The Pledgor further
covenants and agrees that it shall not consent to or approve the issuance of any
additional shares of the capital stock of the Tenant.
SECTION 6. DISTRIBUTIONS, ETC. Upon the dissolution, winding up,
liquidation or reorganization of the Tenant, whether in bankruptcy, insolvency
or receivership proceedings or upon an assignment for the benefit of creditors
or any other marshalling of the assets and liabilities of the Tenant, if any sum
shall be paid or any property shall be distributed upon or with respect to any
of the Pledged Collateral, such sum shall be paid over to the Secured Party, to
be held as collateral security for the Secured Obligations. If any stock
dividend shall be declared on any of the Pledged Collateral, or any share of
stock or fraction thereof shall be issued pursuant to any stock split involving
any of the Pledged Collateral, or any distribution of capital (excluding cash
dividends) shall be made on any of the Pledged Collateral, or any property shall
be distributed upon or with respect to the Pledged Collateral pursuant to
recapitalization or reclassification of the capital of the Tenant, the shares or
other property so distributed shall be delivered to the Secured Party to be held
as collateral security for the Secured Obligations.
SECTION 7. EVENT OF DEFAULT. For purposes of this Agreement, the term
"Event of Default" shall mean (a) the occurrence of an Event of Default under
the Lease; (b) the failure of the Pledgor to comply with any of its covenants or
obligations under this Agreement and the continuation thereof for a period of
thirty 30 days after written notice thereof; 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 the Pledgor commences to
cure or cause to be cured such default within thirty (30) days after written
notice thereof from the Secured Party 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 ninety (90) days in the
aggregate) as may be necessary to cure such default with all due diligence; or
(c) any representation or warranty contained herein or made by the Pledgor in
connection herewith shall prove to have been false or misleading in any material
respect when made.
SECTION 8. REMEDIES. a. Upon the occurrence of an Event of Default, the
Secured Party may cause all or any of the Pledged Collateral to be transferred
into its name or into the name of its nominee or nominees, subject to the
provisions of the Uniform Commercial Code or other applicable law.
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b. Upon the occurrence and during the continuance of an Event of
Default, the Secured Party shall be entitled to exercise the voting power with
respect to the Pledged Collateral, to receive and retain, as collateral security
for the Secured Obligations, any and all dividends or other distributions at any
time and from time to time declared or made upon any of the Pledged Collateral,
and to exercise any and all such rights of payment, conversion, exchange,
subscription or any other rights, privileges or options pertaining to the
Pledged Collateral as if it were the absolute owner thereof, including, without
limitation, all such rights under any shareholders agreement, and further
including, without limitation, the right to exchange, at its discretion, any and
all of the Pledged Collateral upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the Tenant, upon the exercise of any
such right, privilege or option pertaining to the Pledged Collateral, and in
connection therewith, to deposit and deliver any and all of the Pledged
Collateral with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Secured Party may
determine.
c. Upon the occurrence and during the continuance of an Event of
Default, the Secured Party shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code or other applicable law and
shall have the right to sell, resell, assign and deliver all or any of the
Pledged Collateral in one or more parcels at any exchange or broker's board or
at public or private sale. The Secured Party shall give the Pledgor at least ten
(10) days' prior written notice of the time and place of any public sale thereof
or of the time after which any private sale or any other intended disposition
thereof is to be made. Any such notice shall be deemed to meet any requirement
hereunder or under any applicable law (including the Uniform Commercial Code)
that reasonable notification be given of the time and place of such sale or
other disposition. Such notice may be given without any demand of performance or
other demand, all such demands being hereby expressly waived by the Pledgor to
the extent permitted by applicable law. All such sales shall be at such
commercially reasonable price or prices as the Secured Party shall deem best and
either for cash or on credit or for future delivery (without assuming any
responsibility for credit risk). At any such sale or sales, the Secured Party
may purchase any or all of the Pledged Collateral to be sold thereat upon such
terms as the Secured Party may deem best. Upon any such sale or sales, the
Pledged Collateral so purchased shall be held by the purchaser absolutely free
from any claims or rights of any kind or nature of the Pledgor, including any
equity of redemption and any similar rights, all such equity of redemption and
any similar rights being hereby expressly waived and released by the Pledgor to
the extent permitted by applicable law. In the event any consent, approval or
authorization of any governmental agency will be necessary to effectuate any
such sale or sales, the Pledgor shall execute, and hereby agrees to cause the
Tenant to execute, all such applications or other instruments as may be
required. The proceeds of any such sale or sales, together with any other
additional collateral security at the time received and held hereunder, shall be
received and applied: first, to the payment of all costs and expenses of such
sale, including attorneys' fees; and second, to the payment of the Secured
Obligations in such order of priority as the Secured Party shall determine; and
any surplus thereafter remaining shall be paid to the Pledgor or to whomever may
be legally entitled thereto (including, if applicable, any subordinated creditor
of the Pledgor).
The Pledgor recognizes that the Secured Party may be unable to effect a
public sale of all or a part of the Pledged Collateral by reason of certain
prohibitions contained in the Securities Act
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of 1933, and may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire such Pledged Collateral for their own accounts, for investment and
not with a view to the distribution or resale thereof. The Pledgor agrees that
private sales so made may be at prices and upon other terms less favorable to
the seller than if such Pledged Collateral were sold at public sales, and that
the Secured Party shall have no obligation to delay sale of any such Pledged
Collateral for the period of time necessary to permit such Pledged Collateral to
be registered for public sale under the Securities Act of 1933. The Pledgor
agrees that private sales made under the foregoing circumstances may be deemed
to have been made in a commercially reasonable manner. Nothing herein shall be
deemed to require the Pledgor to effect a registration of the Pledged Collateral
under the Securities Act of 1933.
d. Upon the occurrence and during the continuance of any Event of
Default, the Secured Party, in its discretion, may demand, sue for and/or
collect any money or property at any time due, payable or receivable, to which
it may be entitled hereunder, on account of or in exchange for any of the
Pledged Collateral. Upon the occurrence and during the continuance of any Event
of Default, the Secured Party shall further have the right, for and in the name,
place and stead of the Pledgor, to execute endorsements, assignments, or other
instruments of conveyance or transfer with respect to all or any of the Pledged
Collateral.
e. The Secured Party shall not be obligated to do any of the acts
hereinabove authorized and in the event that the Secured Party elects to do any
such act, the Secured Party shall not be responsible to the Pledgor, other than
for gross negligence or willful misconduct.
SECTION 9. RIGHTS OF SECURED PARTY. No course of dealing between the
Pledgor and the Secured Party nor any failure to exercise, nor any delay in
exercising, on the part of the Secured Party, any right, power or privilege
hereunder or under any of the Secured Obligations, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights and remedies
herein provided and provided under any of the Secured Obligations are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law, including, without limitation, the rights and remedies of a secured party
under the Uniform Commercial Code.
SECTION 10. ASSIGNMENT, ETC. No waiver by the Secured Party or by any
other holder of Secured Obligations of any default shall be effective unless in
writing nor operate as a waiver of any other default or of the same default on a
future occasion. In the event of a sale or assignment by the Secured Party of
its interest under the Lease, the Secured Party may assign or transfer its
rights and interest under this Agreement in whole or in part to the purchaser or
assignee of such interest, whereupon such purchaser or purchasers shall become
vested with all of the powers and rights given to the Secured Party hereunder,
and the Secured Party shall thereafter be forever released and fully discharged
from any liability or responsibility thereafter arising hereunder with respect
to the rights and interests so assigned.
SECTION 11. DUTY OF SECURED PARTY. Beyond the exercise of reasonable
care to assure the safe custody of the Pledged Collateral while held hereunder,
the Secured Party shall have no
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duty or liability to collect any sums due in respect thereof or to protect or
preserve rights pertaining thereto, and shall be relieved of all responsibility
for the Pledged Collateral upon surrendering the same to the Pledgor.
SECTION 12. WAIVERS, ETC. To the extent permitted by applicable law, the
Pledgor, on its own behalf and on behalf of its successors and assigns, hereby
waives presentment, demand, payment, notice of dishonor, protest and, except as
otherwise provided herein, all other demands and notices in connection with this
Agreement or the enforcement of the rights of the Secured Party hereunder or in
connection with any Secured Obligations. The Secured Party may release,
supersede, exchange or modify any collateral security it may from time to time
hold and release, surrender or modify the liability of any third party without
giving notice hereunder to the Pledgor. The Secured Party shall be under no duty
to exhaust its rights against any such collateral security or any such third
party before realizing on the Pledged Collateral. Such modifications, changes,
renewals, releases or other actions shall in no way affect the Pledgor'
obligations hereunder.
The Pledgor further waives any right it may have under the Constitution
of The Commonwealth of Massachusetts (or under the constitution of any other
state in which the any of the Pledged Collateral may be located), or under the
Constitution of the United States of America, to notice (except for notice
specifically required hereby) or to a judicial hearing prior to the exercise of
any right or remedy provided by this Agreement to the Secured Party, and waives
its rights, if any, to set aside or invalidate any sale duly consummated in
accordance with the foregoing provisions hereof on the grounds (if such be the
case) that the sale was consummated without a prior judicial hearing. THE
PLEDGOR'S WAIVERS UNDER THIS SECTION 12 HAVE BEEN MADE VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY AND AFTER THE Pledgor HAS BEEN APPRISED AND
COUNSELED BY ITS ATTORNEYS AS TO THE NATURE THEREOF AND ITS POSSIBLE ALTERNATIVE
RIGHTS.
SECTION 13. FURTHER ASSURANCES AS TO COLLATERAL; ATTORNEY-IN-FACT. From
time to time hereafter, the Pledgor shall execute and deliver, or will cause to
be executed and delivered, such additional instruments, certificates or
documents (including without limitation financing statements, renewal
statements, collateral assignments and other security documents), and shall take
all such actions, as the Secured Party may reasonably request, for the purposes
of implementing or effectuating the provisions of this Agreement or of more
fully perfecting or renewing the Secured Party's rights with respect to the
Pledged Collateral (or with respect to any additions thereto or replacements or
proceeds thereof or with respect to any other property or assets hereafter
acquired by the Pledgor which may be deemed to be a part of the Pledged
Collateral) pursuant hereto and thereto. The Secured Party is hereby appointed
the attorney-in-fact, with full power of substitution, of the Pledgor for the
purpose of carrying out the provisions of this Agreement and taking any action,
including, without limitation, executing, delivering and filing applications,
certificates, instruments and other documents and papers with governmental
authorities, and executing any instruments, including without limitation,
assignments, conveyances and transfers which are required to be taken or
executed by the Pledgor under this Agreement, on its behalf and in its name
which appointment is coupled with an interest, is irrevocable and durable and
shall survive the subsequent dissolution, disability or incapacity of the
Pledgor; provided, however, that the Secured Party shall not be entitled to take
any action required of the Pledgor under this Agreement unless the Secured Party
has made written demand
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on the Pledgor to take such action and the Pledgor, having been afforded a
reasonable time to take such action, fails to do so.
SECTION 14. 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 Secured Party to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
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 Pledgor to:
Candlewood Hotel Company, Inc.
Lakepoint Office Park
9342 East Central
Wichita, Kansas 67206
Attn: Mr. Jack P. DeBoer
[Telecopier No. (316) 631-1333]
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with a copy to:
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attn: Jon D. Demarest, Esq.
[Telecopier No. (619) 696-7419]
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 or to such other address as the party to whom such
notice is directed may have designated in writing to the other parties hereto.
SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, and the term "Secured Party" shall be deemed to include any other
holder or holders of any of the Secured Obligations. Where the context so
permits or requires, terms defined herein in the singular number shall include
the plural, and in the plural number, the singular. This Agreement may be
executed in any number of counterparts and by the different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original and all of which shall together constitute one and the same agreement.
SECTION 16. REINSTATEMENT. This Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time any amount
received by the Secured Party in respect of the Pledged Collateral is rescinded
or must otherwise be restored or returned by the Secured Party upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or upon the appointment of any intervenor or conservator of, or trustee
or similar official for the Pledgor or any substantial part of its or property,
or otherwise, all as though such payments had not been made.
SECTION 17. RESTRICTIONS ON TRANSFER. To the extent that any
restrictions imposed by any shareholders agreement, the Articles of
Incorporation or charter of the Tenant or any other document or instrument would
in any way affect or impair the pledge of the Pledged Collateral hereunder or
the exercise by the Secured Party of any right granted hereunder including,
without limitation, the right of the Secured Party to dispose of the Pledged
Collateral upon the occurrence of any Event of Default, the Pledgor hereby
waives such restrictions, and hereby agree that they will take any action which
the Secured Party may reasonably request in order that the Secured Party may
obtain and enjoy the full rights and benefits granted to the Secured Party by
this Agreement free of any such restrictions.
SECTION 18. APPLICABLE LAW. This Agreement and any other instruments
executed and delivered to evidence, complete or perfect the transactions
contemplated hereby and thereby shall be interpreted, construed, applied and
enforced in accordance with the laws of The
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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 The Commonwealth of
Massachusetts; or (vii) any combination of the foregoing. Notwithstanding the
foregoing, the laws of the jurisdiction where any of the Pledged Collateral is
situated or otherwise has a situs will apply to the perfection, disposition and
realization upon such Pledged Collateral.
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 The Commonwealth
of Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
SECTION 19. 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.
SECTION 20. 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.
SECTION 21. 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.
SECTION 22. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST
ESTABLISHING THE SECURED PARTY, 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 CW
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 SECURED PARTY SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF OR CLAIM
AGAINST, THE SECURED PARTY. ALL PERSONS DEALING WITH THE
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SECURED PARTY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE SECURED PARTY
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
WITNESS the execution hereof under seal as of the date above first
written.
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ PAMELA CLOUD
--------------------------------
Its: Assistant Secretary
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