UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission file number 1-14045
LASALLE HOTEL PROPERTIES
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-4219376
------------------------- ---------------------------------
(State or other jurisdic- (IRS Employer Identification No.)
tion of incorporation or
organization)
1401 Eye Street, NW, Suite 900, Washington, D.C. 20005
- ------------------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 202/222-2600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of common shares of beneficial interest of each class
outstanding as of the latest practicable date.
Outstanding at
Class August 12, 1998
----- ---------------
Common Stock ($0.01 par value) 15,224,580
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . .
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . .
Item 3. Quantitative and Qualitative Disclosures about
Market Risk. . . . . . . . . . . . . . . . . . . .
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . .
Item 2. Changes in Securities and Use of Proceeds. . . . .
Item 3. Defaults Upon Senior Securities. . . . . . . . . .
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . .
Item 5. Other Matters. . . . . . . . . . . . . . . . . . .
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . .
<PAGE>
LA SALLE HOTEL PROPERTIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
(Unaudited)
June 30,
1998
----------
ASSETS
------
Investment in hotel properties, net . . . . . . . . $ 472,771
Investment in affiliated lessee . . . . . . . . . . 51
Cash and cash equivalents . . . . . . . . . . . . . 1,915
Restricted cash reserves. . . . . . . . . . . . . . 8,109
Rent receivable from lessees:
Affiliated lessee . . . . . . . . . . . . . . . . 3,178
Other lessees . . . . . . . . . . . . . . . . . . 3,434
Notes receivable. . . . . . . . . . . . . . . . . . 4,951
Deferred financing costs, net . . . . . . . . . . . 1,599
Prepaid expenses and other assets . . . . . . . . . 3,450
----------
Total assets. . . . . . . . . . . . . . . $ 499,458
==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
--------------------
Borrowings under credit facility. . . . . . . . . . $ 162,900
Bonds payable, net. . . . . . . . . . . . . . . . . 43,456
Due to LaSalle. . . . . . . . . . . . . . . . . . . 2,420
Accounts payable and accrued expenses . . . . . . . 4,919
Minority interest in Operating Partnership. . . . . 52,535
Minority interest in other partnerships . . . . . . 10
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Preferred shares of beneficial interest,
$.01 par value, 20,000,000 shares
authorized, no shares issued and
outstanding at June 30, 1998. . . . . . . . . . --
Common shares of beneficial interest,
$.01 par value, 100,000,000 shares
authorized 15,224,580 shares
issued and outstanding at
June 30, 1998 . . . . . . . . . . . . . . . . . 152
Additional paid-in capital. . . . . . . . . . . . 228,261
Retained earnings . . . . . . . . . . . . . . . . 4,805
----------
Total shareholders' equity. . . . . . . . 233,218
----------
Total liabilities and
shareholders' equity. . . . . . . . . . $ 499,458
==========
See accompanying notes to consolidated financial statements
<PAGE>
LA SALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD APRIL 29, 1998 (INCEPTION) THROUGH JUNE 30, 1998
(Dollars in thousands, except per share data)
(Unaudited)
For the Period
from April 29,
1998 (inception)
through
June 30, 1998
----------------
Revenues:
Participating lease revenue:
Affiliated lessee . . . . . . . . . . . . . . . $ 5,011
Other lessees . . . . . . . . . . . . . . . . . 6,596
Interest income:
Affiliated lessee . . . . . . . . . . . . . . . 12
Other lessees . . . . . . . . . . . . . . . . . 34
Equity in income of affiliated lessee . . . . . . 13
Other income. . . . . . . . . . . . . . . . . . . 61
----------
Total revenues. . . . . . . . . . . . . . . 11,727
----------
Expenses:
Depreciation. . . . . . . . . . . . . . . . . . . 2,431
Real estate, personal property taxes
and insurance . . . . . . . . . . . . . . . . . 1,196
Ground rent . . . . . . . . . . . . . . . . . . . 262
General and administrative. . . . . . . . . . . . 126
Interest. . . . . . . . . . . . . . . . . . . . . 1,289
Amortization of deferred financing costs. . . . . 106
Advisory fee. . . . . . . . . . . . . . . . . . . 507
----------
Total expenses. . . . . . . . . . . . . . . 5,917
----------
Income before minority interest . . . . . . . . . . 5,810
Minority interest in Operating Partnership. . . . . 1,005
----------
Net income applicable to common shareholders. . . . $ 4,805
==========
Net income applicable to common shareholders
per weighted average common share
outstanding - basic and diluted . . . . . . . . . $ 0.32
==========
Weighted average number of common shares
outstanding - basic and diluted . . . . . . . . . 15,165,673
==========
See accompanying notes to consolidated financial statements
<PAGE>
LA SALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD APRIL 29, 1998 (INCEPTION) THROUGH JUNE 30, 1998
(Dollars in thousands, except per share data)
(Unaudited)
For the Period
from April 29,
1998 (inception)
through
June 30, 1998
-----------------
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . $ 4,805
Adjustments to reconcile net income to net cash
flow provided by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . 2,431
Amortization of deferred financing fees . . . . 106
Bond premium amortization . . . . . . . . . . . (24)
Minority interest in Operating Partnership. . . 1,005
Equity in income of Affiliated Lessee . . . . . (13)
Changes in assets and liabilities:
Rent receivable from lessees. . . . . . . . . . (6,612)
Prepaid expenses and other assets . . . . . . . (2,742)
Due to LaSalle. . . . . . . . . . . . . . . . . 2,420
Accounts payable and accrued expenses . . . . . 304
----------
Net cash flow provided by
operating activities. . . . . . . . . . 1,680
----------
Cash flows from investing activities:
Acquisitions of hotel properties. . . . . . . . . (384,353)
Improvements and additions to hotel properties. . (379)
Funding of notes receivable . . . . . . . . . . . (4,951)
Funding of restricted cash reserves . . . . . . . (8,488)
Proceeds from restricted cash reserves. . . . . . 379
Proceeds from minority interest in other
partnerships. . . . . . . . . . . . . . . . . . 10
----------
Net cash flow used in
investing activities. . . . . . . . . . (397,782)
----------
Cash flows from financing activities:
Borrowings under credit facility. . . . . . . . . 162,900
Payment of deferred financing costs . . . . . . . (1,702)
Proceeds from issuance of common shares . . . . . 257,601
Offering costs paid . . . . . . . . . . . . . . . (20,782)
----------
Net cash flow provided by
financing activities. . . . . . . . . . 398,017
----------
Net change in cash and cash equivalents . . . . . . 1,915
Cash and cash equivalents at beginning of period. . --
----------
Cash and cash equivalents at end of period. . . . . $ 1,915
==========
See accompanying notes to consolidated financial statements
<PAGE>
LA SALLE HOTEL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD APRIL 29, 1998 (INCEPTION) THROUGH JUNE 30, 1998
(Dollars in thousands, expect per share data)
(Unaudited)
1. ORGANIZATION AND INITIAL PUBLIC OFFERING
LaSalle Hotel Properties (the Company) was organized in the state of
Maryland on January 15, 1998. The Company is a real estate investment
trust (REIT) as defined in the Internal Revenue Code. The Company was
formed to own hotel properties and to continue and expand the hotel
investment activities of LaSalle Partners Incorporated and certain of its
affiliates (collectively LaSalle). On April 23, 1998, the Company's
Registration Statement on Form S-11 was declared effective. The Company
had no operations prior to April 29, 1998. On April 29, 1998, the Company
completed an initial public offering of 14,200,000 common shares of
beneficial interest (the Initial Offering). The offering price of all
shares sold was $18 per common share, resulting in gross proceeds of
$255,600 and net proceeds (less the underwriters' discount and offering
expenses) of approximately $ 234,268. The Company contributed all of the
net proceeds of the Initial Offering to LaSalle Hotel Operating
Partnership, L.P., a limited partnership (the Operating Partnership), in
exchange for an approximate 82.6% general partnership interest in the
Operating Partnership. The Operating Partnership used the net proceeds
from the Company, the issuance of additional common shares of the Company
and the issuance of limited partnership interests, representing
approximately 17.4% of the Operating Partnership, to acquire ten upscale
and luxury full service hotels (the Initial Hotels).
As of June 30, 1998, the Company owned interests in 12 hotels with an
aggregate of 4,120 suites/rooms (the Hotels) located in nine states. The
Company owns 100% equity interests in 11 of the hotels and a 95% interest
in a partnership which owns one hotel. All of the Hotels are leased under
participating leases (Participating Leases) which provide for rent based on
hotel revenues and are managed by independent hotel operators (Hotel
Operators). Eight of the Hotels are leased to unaffiliated lessees
(affiliates of whom also operate these hotels) and four of the Hotels are
leased to LaSalle Hotel Lessee, Inc. (the Affiliated Lessee).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim financial statements and related notes have
been prepared in accordance with the financial information and accounting
policies described in the Company's Registration Statement on Form S-11
(333-45647) filed with the Securities and Exchange Commission. Readers of
this quarterly report should refer to that financial information, as
certain footnote disclosures, which would substantially duplicate those
contained in the Registration Statement, have been omitted from this
report.
In the opinion of management, all adjustments consist of normal
recurring adjustments necessary to present fairly the financial position of
the Company as of June 30, 1998 and the results of its operations and its
cash flows for the period from April 29, 1998 (inception) through June 30,
1998.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company, the Operating Partnership and its consolidated subsidiaries. All
significant intercompany balances and transactions have been eliminated.
<PAGE>
USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of certain
assets and liabilities and disclosure of contingent assets and liabilities
at the balance sheet date and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INVESTMENT IN HOTEL PROPERTIES
Hotel properties are stated at cost and are depreciated using the
straight-line method over estimated useful lives ranging from 22-30 years
for buildings and improvements and 2-5 years for furniture, fixtures and
equipment.
The Company periodically reviews the carrying value of each Hotel to
determine if circumstances exist indicating an impairment in the carrying
value of the investment in the hotel or that depreciation periods should be
modified. If facts or circumstances support the possibility of impairment,
the Company will prepare a projection of the undiscounted future cash
flows, without interest charges, of the specific hotel and determine if the
investment in such hotel is recoverable based on the undiscounted future
cash flows. If impairment is indicated, an adjustment will be made to the
carrying value of the hotel based on discounted future cash flows. The
Company does not believe that there are any factors or circumstances
indicating impairment of any of its investment in Hotels.
INVESTMENT IN AFFILIATED LESSEE
The Company owns a 9% interest in the Affiliated Lessee in which the
Company together with LaSalle and LPI Charities, a charitable corporation
organized under the laws of the state of Illinois, make all material
decisions concerning the business affairs and operations. Accordingly, the
Company does not control the Affiliated Lessee and carries its investment
at cost, plus its equity in net earnings, less distributions received since
the date of inception.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less
when purchased are considered to be cash equivalents.
DEFERRED FINANCING FEES
Deferred financing fees are recorded at cost and are amortized over
the three-year term of the related credit facility. Accumulated
amortization at June 30, 1998 was $ 103.
DISTRIBUTIONS
The Company intends to pay regular quarterly distributions to its
shareholders as directed by the Board of Trustees. The Company's ability
to pay distributions will be dependent on the receipt of distributions from
the Operating Partnership.
REVENUE RECOGNITION
The Company recognizes lease revenue on an accrual basis pursuant to
the terms of the respective Participating Leases. Participating rent is
recognized based on quarterly thresholds, pursuant to the lease agreements,
to the extent that the tenants have exceeded their minimum thresholds (see
Note 7).
<PAGE>
MINORITY INTEREST
Minority interest in the Operating Partnership represents the limited
partners' proportionate share of the equity in the Operating Partnership.
Income is allocated to minority interest based on the weighted average
percentage ownership throughout the year.
Minority interest in the Subsidiary Partnership (as defined in Note 3)
represents the limited partner's proportionate share of the equity in the
Subsidiary Partnership. Income is allocated to minority interest based on
the limited partner's percentage ownership throughout the period, subject
to minimum returns to the Operating Partnership, as defined in the
partnership agreement.
INCOME TAXES
The Company intends to qualify as a REIT under the Internal Revenue
Code (the Code), and will therefore not be subject to corporate income
taxes. Accordingly, no provision for income taxes has been included in the
accompanying consolidated financial statements.
EARNINGS PER SHARE
The Company's basic and diluted earnings per share for the period from
April 29, 1998 (inception) through June 30, 1998 is $0.32.
Basic and diluted earnings per share are based on the weighted average
number of common shares outstanding during the period. There was no
adjustment to either the weighted average shares outstanding or the
reported amounts of income in computing diluted earnings per share because
the unexercised stock options were anti-dilutive. The weighted average
number of shares used in determining basic and diluted earnings per share
was 15,165,673 for the period from April 29, 1998 (inception) through June
30, 1998.
The outstanding limited partners' units in the Operating Partnership
have been excluded from the diluted earnings per share calculation as there
would be no effect on the amounts since the minority interests' share of
income would also be added back to net income.
3. ACQUISITION OF HOTEL PROPERTIES
The Initial Hotels were previously owned by various limited and
general partnerships (the Existing Partnerships). In conjunction with the
Initial Offering and the related formation transactions, the Initial
Hotels, except for Radission Hotel South and Plaza Tower (previously owned
by LRP Bloomington Limited Partnership), were purchased by the Company from
their Existing Partnerships and were accounted for as purchase
transactions. LRP Bloomington Limited Partnership, the Existing
Partnership that retained the largest number and percentages of voting
rights of the Company after the formation transactions, was designated as
the predecessor for accounting purposes. Therefore, the Company maintained
carry-over basis for the accounting of the purchase of the Radisson Hotel
South and Plaza Tower.
In June 1998, the Company acquired an interest in the San Diego
Princess Resort (the San Diego Property) through a subsidiary partnership,
LHO Mission Bay Hotel, L.P. (the Subsidiary Partnership). The Subsidiary
Partnership is a limited partnership of which the Operating Partnership
holds an approximate 95.1% general partnership interest. The 462-room San
Diego Property was renamed the San Diego Paradise Point Resort.
The San Diego Property was acquired for an aggregate purchase price of
$73 million funded with proceeds from a borrowing under the Company's 1998
Credit Facility and from the proceeds of the sale of 112,458 common shares
of beneficial interest to the limited partner of the Subsidiary Partnership
who will also operate the San Diego Property pursuant to the terms of a
participating lease.
<PAGE>
Also in June 1998, the Company acquired a 100% interest in the 270-
room Harborside Hyatt Conference Center & Hotel in Boston (the Boston
Property) through an indirect subsidiary, LHO Harborside Hotel, L.L.C. (the
Subsidiary LLC). The Subsidiary LLC is a limited liability company, of
which the Operating Partnership is the sole member.
The Boston Property was acquired for an aggregate purchase price of
$73.5 million, including the $40 million of existing tax exempt industrial
revenue bonds to which the Boston Property remains subject. The remainder
of the purchase price was funded with proceeds from a borrowing under the
Company's 1998 Credit Facility. Hyatt Hotels Corporation will continue to
operate the Boston Property under an existing management agreement.
4. INVESTMENT IN HOTEL PROPERTIES
Investment in hotel properties as of June 30, 1998 consists of the
following:
Land . . . . . . . . . . . . . . . . . . $ 50,815
Buildings and improvements . . . . . . . 387,322
Furniture, fixtures and equipment. . . . 37,065
--------
475,202
Accumulated depreciation . . . . . . . . 2,431
--------
$472,771
========
The Hotels are located in California (3), Texas, Nebraska, Minnesota,
Louisiana, Florida (2), New Jersey, New York and Massachusetts.
5. LONG-TERM DEBT
CREDIT FACILITY
In April 1998, the Company obtained a three-year commitment for a $200
million senior unsecured revolving credit facility (the 1998 Credit
Facility) to be used for acquisitions, capital improvements, working
capital and general corporate purposes. Borrowings under the 1998 Credit
Facility bear interest at floating rates equal to LIBOR plus an applicable
margin or an "Adjusted Base Rate" plus an applicable margin, at the
election of the Company. At June 30, 1998 the interest rate was
approximately 7.07% for LIBOR borrowings. The Company did not have any
Adjusted Base Rate borrowings outstanding at June 30, 1998. Additionally,
the Company is required to pay an unused commitment fee which is variable,
determined from a ratings based pricing matrix, currently set at 20 basis
points. The Company has incurred an unused commitment fee of approximately
$36 for the period from April 29, 1998 (inception) through June 30, 1998.
The 1998 Credit Facility matures on April 30, 2001 and contains certain
financial covenants relating to debt service coverage, market value net
worth and total funded indebtedness. As of June 30, 1998, the Company had
outstanding borrowings against the 1998 Credit Facility of $162,900.
BONDS PAYABLE
On June 24, 1998 the Company, through the Subsidiary LLC, acquired the
Boston Property subject to $40,000 principal amount of special project
revenue bonds (Massport Bonds) previously issued under the loan and trust
agreement with the Massachusetts Port Authority (Massport), as amended
(Massport Bond Agreement). In conjunction with the Massport Bonds, the
Company recorded a premium of $3,480. The Massport Bonds are
collateralized by the leasehold improvements and bear interest at 10% per
annum through the date of maturity, March 1, 2026. Interest payments are
due semiannually on March 1 and September 1. Interest expense, net of the
premium amortization, for the period June 24, 1998 through June 30, 1998
totaled $54. The Massport Bonds shall be redeemed in part commencing March
1, 2001 and annually until March 1, 2026, at which time the remaining
<PAGE>
principal and any accrued interest thereon is due in full. The Company has
the option to prepay the Massport Bonds in full beginning March 1, 2001
subject to a prepayment penalty which varies depending on the date of
prepayment.
Under the terms of the Massport Bond Agreement, certain cash reserves
are required to be held in trust for payments of interest, credit
enhancement fees and ground rent. As of June 30, 1998, these reserves
totaled $5,370 and are included in Restricted Cash Reserves.
In addition, the Massport Bond Agreement was supplemented by a credit
enhancement agreement (the Massport Credit Enhancement Agreement).
Pursuant to the Massport Credit Enhancement Agreement, certain funds have
been set aside by Massport to provide additional deficit funding if the
amounts held in trust by the Company are not sufficient to cover the debt
service requirements on the outstanding Massport Bonds. In consideration
for the Massport Credit Enhancement Agreement, the Company is required to
pay an annual enhancement fee of $150, payable March 1 and September 1.
6. SHAREHOLDERS' EQUITY
COMMON SHARES OF BENEFICIAL INTEREST
In connection with the purchase of the San Diego Property (see
Note 3), the sole limited partner in the Subsidiary Partnership (which is
an affiliate of the hotel operator) acquired 112,458 common shares of
beneficial interest from the Company for a purchase price of $2 million.
The purchase and sale of the common shares was a condition to the selection
of the affiliate of the limited partner as operator of the San Diego
Property, and the common shares have been pledged to the Operating
Partnership to secure the limited partner's obligations under the
Participating Lease.
As of June 30, 1998 the Company has reserved 757,000 common shares for
future issuance under the 1998 Share Option and Incentive Plan, a total of
1,280,569 common shares for future issuance pursuant to rights issued in
connection with the Initial Offering, the acquisition of the Initial Hotels
and the formation of the Company, and 3,181,723 common shares for issuance
upon the conversion of the limited partners' interests in Operating
Partnership units.
OPERATING PARTNERSHIP UNITS
The outstanding units of limited partnership interest in the Operating
Partnership (Units) are redeemable at the option of the holder for a like
number of common shares of the Company or, at the option of the Company,
for the cash equivalent thereof.
7. PARTICIPATING LEASES
The Participating Leases have noncancelable remaining terms ranging
from six to 11 years, subject to earlier termination on the occurrence of
certain contingencies, as defined. The rent due under each Participating
Lease is the greater of base rent, as defined, or participating rent.
Participating rent applicable to room and other hotel revenues varies by
lease and is calculated by multiplying fixed percentages by the total
amounts of such revenues over specified threshold amounts. Both the base
rent and the participating rent thresholds used in computing percentage
rents applicable to room and other hotel revenues, including food and
beverage revenues, are subject to annual adjustments based on increases in
the United States Consumer Price Index (CPI) published by the Bureau of
Labor Statistics of the United States of America Department of Labor, U.S.
City Average, Urban Wage Earners and Clerical Workers. Participating rents
applicable to food and beverage revenues are calculated by multiplying
fixed percentages by the total amounts of such revenues. Participating
Lease revenue for the period from April 29, 1998 (inception) through June
30, 1998 was $11,607, of which approximately $4,350 was in excess of base
rent.
<PAGE>
Future minimum rentals (without reflecting future CPI increases) to be
received by the Company pursuant to the Participating Leases for the
remainder of 1998 and for each of the years in the period 1999 to 2003 and
in total thereafter as follows:
Remainder of 1998. . . . . . . . . $ 23,475
1999 . . . . . . . . . . . . . . . 48,393
2000 . . . . . . . . . . . . . . . 48,224
2001 . . . . . . . . . . . . . . . 48,224
2002 . . . . . . . . . . . . . . . 48,224
2003 . . . . . . . . . . . . . . . 48,272
Thereafter . . . . . . . . . . . . 214,383
8. ADVISORY AGREEMENT
Upon completion of the Initial Offering, the Company entered into an
advisory agreement (the Advisory Agreement) with LaSalle Hotel Advisors,
Inc. (the Advisor), a wholly owned subsidiary of LaSalle, to provide
acquisition, investment management, advisory and administrative services
for the Company. The initial term of the Advisory Agreement extends
through December 31, 1999, subject to successive, automatic one year
renewals unless terminated according to the terms of the Advisory
Agreement. The Company may terminate the Advisory Agreement without
termination fees or penalties upon notice given at least 180 days prior to
the end of the then current term of the Advisory Agreement.
The Advisory Agreement provides for payment of a base fee, payable
quarterly, starting at 5% of the first $100 million of net operating income
(NOI) (as defined). The percentage of NOI used to calculate the base fee
is reduced by .2% for every incremental $125 million of NOI above $100
million until $600 million, at which point any excess NOI above $600
million is subject to a base fee of 4%.
In addition, the Advisory Agreement provides for payment of an annual
incentive fee to be paid by the Company in arrears. The annual incentive
fee is equal to 25% of the product of (i) the amount by which the funds
from operations (FFO) per common share/Unit (as defined) for the calendar
year then ended (the Measurement Year) exceeds a growth rate of 7% per
annum of the FFO per common share/Unit for the prior calendar year and (ii)
the common shares/Units outstanding for the Measurement Year. For partial
years, the incentive fee shall be calculated on a pro rata basis for only
that portion of the year that the Advisory Agreement was in effect.
Payment of the incentive fee will be in common shares or Units at the
option of the Advisor.
9. SHARE OPTION AND INCENTIVE PLAN
In April 1998, the Board of Trustees adopted and the then current
shareholder approved the 1998 Share Option and Incentive Plan (the 1998
SIP) which is currently administered by the Compensation Committee of the
Board of Trustees. The Advisor and its employees and the Hotel Operators
and their employees generally are eligible to participate in the 1998 SIP.
Independent Trustees continuing in office after an annual meeting of
shareholders of the Company receive automatic annual grants of options to
purchase 1,000 common shares at a per share exercise price equal to the
fair market value of a common share on the date of the meeting.
The 1998 SIP authorizes, among other things, (i) the grant of share
options that qualify as incentive options under the Code, (ii) the grant of
share options that do not so qualify, (iii) the grant of share options in
lieu of cash Trustees' fees, (iv) grants of common shares in lieu of cash
compensation and (v) the making of loans to acquire common shares in lieu
of compensation. The exercise price of share options will be determined by
the Compensation Committee, but may not be less than 100% of the fair
market value of the common shares on the date of grant. As of June 30,
1998, the Company has authorized 757,000 shares for issuance under the 1998
SIP, of which 711,000 shares are available for future grants.
<PAGE>
10. AFFILIATED LESSEE
A significant portion of the Company's participating lease revenue is
derived from the Participating Leases with the Affiliated Lessee. Certain
condensed financial information, related to the Affiliated Lessee's
financial statements, is as follows:
June 30, 1998
-----------------
Balance Sheet Information:
Cash and cash equivalents . . . . . . . . . . . . $ 3,675
Total assets. . . . . . . . . . . . . . . . . . . 10,876
Due to LaSalle Hotel Properties . . . . . . . . . 3,178
Notes payable to LaSalle Hotel Properties . . . . 1,500
Shareholders' equity. . . . . . . . . . . . . . . 566
Total liabilities and shareholders' equity. . . . 10,876
For the Period from
April 29, 1998
(inception) through
June 30, 1998
-------------------
Statement of Operations Information:
Total revenues. . . . . . . . . . . . . . . . . . $17,003
Participating lease expense . . . . . . . . . . . 5,011
Net income. . . . . . . . . . . . . . . . . . . . 141
11. SUPPLEMENTAL CASH FLOW DISCLOSURE
For the Period from
April 29, 1998
(inception) through
June 30, 1998
-------------------
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . $ 1,160
Accrued offering costs. . . . . . . . . . . . . . 550
In conjunction with the hotel acquisitions, the
Company assumed the following assets and
liabilities:
Purchase of real estate . . . . . . . . . . . . . $474,823
Adjustment required to reflect predecessor's
basis . . . . . . . . . . . . . . . . . . . . . 33,012
Liabilities, net of other assets. . . . . . . . . (3,316)
Bonds payable . . . . . . . . . . . . . . . . . . (43,480)
Issuance of shares/units. . . . . . . . . . . . . (76,686)
--------
Investment in hotel properties. . . . . . . . . . $384,353
========
12. COMMITMENTS AND CONTINGENCIES
Three of the Hotels are subject to ground leases under noncancelable
operating leases with terms ranging out to May 2081. Total lease expense
for the period April 29, 1998 (inception) through June 30, 1998 was $262.
Future minimum lease payments are as follows:
Remainder of 1998 . . . . . . . . . $ 882
1999. . . . . . . . . . . . . . . . 1,763
2000. . . . . . . . . . . . . . . . 1,763
2001. . . . . . . . . . . . . . . . 1,763
2002. . . . . . . . . . . . . . . . 1,763
2003. . . . . . . . . . . . . . . . 1,763
Thereafter. . . . . . . . . . . . . 79,103
-------
$88,800
=======
<PAGE>
The Company is obligated to make funds available to the Hotels for
capital expenditures (the Reserve Funds), as determined in accordance with
the Participating Leases. The Reserve Funds have not been recorded on the
books and records of the Company as such amounts will be capitalized as
incurred. The amounts obligated under the Reserve Funds are subject to
increases ranging from 4.0% to 5.5% of the individual Hotel's total
revenues. The total amount obligated by the Company under the Reserve
Funds is approximately $12.1 million at June 30, 1998, of which $2.8
million is available in restricted cash reserves for future capital
expenditures. Purchase orders totaling approximately $ 4.4 million have
been issued for renovations at two of the Hotels. The Company has
committed to both projects and anticipates making similar arrangements with
the existing Hotels or any future hotels that it may acquire.
The nature of the operations of the Hotels expose them to the risk of
claims and litigation in the normal course of their business. Although the
outcome of these matters cannot be determined, management does not expect
that the ultimate resolution of these matters to have a material adverse
effect on the financial position, operations or liquidity of the Hotels.
On behalf of the Company, the Advisor is currently exploring the
purchase of additional full service hotel properties located primarily in
convention, resort, urban and major business markets. From time to time,
the Company may enter into purchase contracts for the acquisition of hotel
properties. The consummation of each acquisition will be subject to
satisfactory completion of due diligence.
13. RELATED PARTY TRANSACTIONS
At June 30, 1998, the Company had a payable to LaSalle of $2,420,
primarily for the reimbursement of Initial Offering costs and subsequent
acquisition costs incurred on behalf of the Company.
14. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information set forth below is presented as if
(i) the Initial Offering and the related formation transactions and (ii)
the acquisitions of the hotels discussed in Note 3 had been consummated and
leased as of January 1, 1997. The pro forma financial information is not
necessarily indicative of what actual results of operations of the Company
would have been assuming the Initial Offering and the related formation
transactions and the acquisitions had been consummated as of January 1,
1997, nor does it purport to represent the results of operations for future
periods.
For the
Six Months Ended
June 30,
----------------------
1998 1997
---------- ----------
Total revenues. . . . . . . . . . . . . . . $ 36,825 32,087
---------- ----------
Depreciation. . . . . . . . . . . . . . . . 10,026 10,026
Real estate and personal property taxes
and insurance . . . . . . . . . . . . . . 3,733 3,608
General and administrative. . . . . . . . . 345 345
Interest expense. . . . . . . . . . . . . . 7,558 7,943
Amortization of deferred financing costs. . 303 300
Advisory fees . . . . . . . . . . . . . . . 1,873 1,605
Ground rent . . . . . . . . . . . . . . . . 1,531 1,381
---------- ----------
Income before minority interest . . . . . . 11,456 6,879
Minority interest . . . . . . . . . . . . . 1,980 1,189
---------- ----------
Net income applicable to
common shareholders . . . . . . . . . . . $ 9,476 5,690
========== ==========
<PAGE>
Net income applicable to common
shareholders per share -
basic and diluted . . . . . . . . . . . . $ 0.62 0.37
========== ==========
Weighted average number of common
shares outstanding -
basic and diluted . . . . . . . . . . . . 15,224,580 15,224,580
========== ==========
For the
Year Ended
December 31,
1997
------------
Total revenues. . . . . . . . . . . . . . . $ 70,736
----------
Depreciation. . . . . . . . . . . . . . . . 20,219
Real estate and personal property taxes
and insurance . . . . . . . . . . . . . . 7,302
General and administrative. . . . . . . . . 689
Interest expense. . . . . . . . . . . . . . 15,887
Amortization of deferred financing costs. . 601
Advisory fees . . . . . . . . . . . . . . . 3,612
Ground rent . . . . . . . . . . . . . . . . 2,550
----------
Income before minority interest . . . . . . 19,876
Minority interest . . . . . . . . . . . . . 3,436
----------
Net income applicable to
common shareholders . . . . . . . . . . . $ 16,440
==========
Net income applicable to common
shareholders per share -
basic and diluted . . . . . . . . . . . . $ 1.08
==========
Weighted average number of common
shares outstanding - basic and diluted. . 15,224,580
==========
15. PREDECESSOR INFORMATION
Pursuant to SEC regulations which require the presentation of
predecessor financial information for corresponding periods of the
preceding year, the following information represents condensed balance
sheet information as of December 31, 1997 and condensed statements of
operations and cash flows information of LRP Bloomington Limited
Partnership for the three and six month ended June 30, 1997 and for the
period from January 1, 1998 through April 28, 1998, which is considered to
be the predecessor of the Company.
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
BALANCE SHEET
(Unaudited, Dollar Amounts in Thousands)
December 31,
1997
------------
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . $ 1,744
Guest and trade receivables, less allowance for
doubtful accounts of $34 . . . . . . . . . . . . . 976
Inventories . . . . . . . . . . . . . . . . . . . . 288
Prepaid expenses and other current assets . . . . . 439
--------
Total current assets . . . . . . . . . . . . . . 3,447
--------
Investment in hotel, at cost. . . . . . . . . . . . 35,539
Less: accumulated depreciation . . . . . . . . . . (6,074)
--------
Net investment in hotel property . . . . . . . . 29,465
--------
Deferred charges, net of accumulated amortization
of $142. . . . . . . . . . . . . . . . . . . . . . 199
Restricted cash reserves. . . . . . . . . . . . . . 490
--------
Total Assets. . . . . . . . . . . . . . . . . . $ 33,601
========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . $ 497
Accrued expenses and other liabilities. . . . . . . 1,169
Current installments of long-term debt. . . . . . . 863
--------
Total current liabilities . . . . . . . . . . . 2,529
--------
Long-term debt, excluding current installments. . . 23,667
--------
Commitments and contingencies
Total Liabilities 26,196
--------
Partners' capital . . . . . . . . . . . . . . . . . 7,405
--------
Total Liabilities and Equity . . . . . . . . . . $ 33,601
========
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
STATEMENT OF OPERATIONS
(Unaudited, Dollar Amounts in Thousands)
For the period from
January 1, 1998
through
April 28, 1998
--------------------
REVENUES
Rooms . . . . . . . . . . . . . . . . . . . . $ 4,285
Food & beverage . . . . . . . . . . . . . . . 3,459
Telephone . . . . . . . . . . . . . . . . . . 124
Other . . . . . . . . . . . . . . . . . . . . 537
-------
Total Revenue. . . . . . . . . . . . . . 8,405
-------
EXPENSES
Departmental expenses:
Rooms . . . . . . . . . . . . . . . . . . . 1,096
Food & beverage . . . . . . . . . . . . . . 2,379
Telephone . . . . . . . . . . . . . . . . . 88
Other operating departments . . . . . . . . 307
General & administrative. . . . . . . . . . 571
Sales and marketing . . . . . . . . . . . . 435
Real estate and personal property taxes . . 405
Property operations and management. . . . . 400
Management fees . . . . . . . . . . . . . . 336
Energy. . . . . . . . . . . . . . . . . . . 292
Insurance . . . . . . . . . . . . . . . . . 71
Other fixed expenses. . . . . . . . . . . . 73
Interest expense. . . . . . . . . . . . . . 833
Depreciation and amortization . . . . . . . 1,196
Advisory fees . . . . . . . . . . . . . . . 53
-------
Total Expenses . . . . . . . . . . . . . 8,535
-------
Net Loss. . . . . . . . . . . . . . . . . . . $ (130)
=======
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
STATEMENTS OF OPERATIONS
(Unaudited, Dollar Amounts in Thousands)
For the Three For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1997
-------------- -------------
REVENUES
Rooms . . . . . . . . . . . . . . . $ 3,579 $ 6,326
Food & beverage . . . . . . . . . . 2,478 4,872
Telephone . . . . . . . . . . . . . 132 225
Other . . . . . . . . . . . . . . . 389 720
------- -------
Total Revenue. . . . . . . . . 6,578 12,143
------- -------
EXPENSES
Departmental expenses:
Rooms . . . . . . . . . . . . . . 863 1,602
Food & beverage . . . . . . . . . 1,712 3,410
Telephone . . . . . . . . . . . . 77 141
Other operating departments . . . 237 451
General & administrative. . . . . 413 791
Sales and marketing . . . . . . . 301 582
Real estate and personal property
taxes. . . . . . . . . . . . . . 342 640
Property operations and management 279 565
Management fees . . . . . . . . . 264 486
Energy. . . . . . . . . . . . . . 174 379
Insurance . . . . . . . . . . . . 109 219
Other fixed expenses. . . . . . . 98 123
Interest expense. . . . . . . . . 624 1,226
Depreciation and amortization . . 782 1,531
Advisory fees . . . . . . . . . . 40 80
------- -------
Total Expenses . . . . . . . . 6,315 12,226
------- -------
Net Earnings (Loss) . . . . . . . . $ 263 $ (83)
======= =======
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
STATEMENT OF CASH FLOWS
(Unaudited, Dollar Amounts in Thousands)
For the period from
January 1, 1998
through
April 28, 1998
--------------------
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . $ (130)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization. . . . . . . 1,196
Changes in assets and liabilities:
Guest and trade receivables, net . . . . (284)
Inventories. . . . . . . . . . . . . . . 8
Prepaid expenses and other current assets (367)
Accounts payable . . . . . . . . . . . . (133)
Accrued expenses and other liabilities . 515
-------
Net cash provided by operating
activities. . . . . . . . . . . . . 805
-------
Cash flows from investing activities:
Proceeds from restricted cash reserves. . . 148
Capital improvement expenditures. . . . . . (611)
-------
Net cash used in investing activities. (463)
-------
Cash flows from financing activities:
Principal payments on long-term debt. . . . (145)
-------
Net cash used in financing activities. (145)
-------
Increase in cash and cash equivalents . . . . 197
Cash and cash equivalents, beginning of
period. . . . . . . . . . . . . . . . . . 1,744
-------
Cash and cash equivalents, end of period. . $ 1,941
=======
Cash paid for interest. . . . . . . . . . . . $ 833
=======
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
STATEMENT OF CASH FLOWS
(Unaudited, Dollar Amounts in Thousands)
For the Six
Months Ended
June 30, 1997
---------------
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . $ (83)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization. . . . . . . . 1,531
Changes in assets and liabilities:
Guest and trade receivables, net . . . . . (176)
Inventories. . . . . . . . . . . . . . . . 6
Prepaid expenses and other current assets. 271
Accounts payable . . . . . . . . . . . . . 58
Accrued expenses and other liabilities . . 188
-------
Net cash provided by operating
activities. . . . . . . . . . . . . . 1,795
-------
Cash flows from investing activities:
Proceeds from restricted cash reserves. . . . 290
Capital improvement expenditures. . . . . . . (821)
-------
Net cash used in investing activities. . (531)
-------
Cash flows from financing activities:
Distributions . . . . . . . . . . . . . . . . (366)
Principal payments on long-term debt. . . . . (375)
-------
Net cash used in financing activities. . (741)
-------
Increase in cash and cash equivalents . . . . . 523
Cash and cash equivalents, beginning of
period. . . . . . . . . . . . . . . . . . . 346
-------
Cash and cash equivalents, end of period. . . $ 869
=======
Cash paid for interest. . . . . . . . . . . . . $ 1,226
=======
<PAGE>
16. SUBSEQUENT EVENTS
In July 1998, the Company declared a second quarter distribution
(prorata for the part of the quarter beginning April 29, 1998) of $0.26 per
share on its common shares of beneficial interest which is payable August
14, 1998 to shareholders of record as of the close of business on August 4,
1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL BACKGROUND
LaSalle Hotel Properties (the Company) had no operations prior to
April 29, 1998. On April 29, 1998, the Company completed an initial public
offering of 14,200,000 common shares of beneficial interest (the Initial
Offering). The offering price of all shares sold was $18 per common share,
resulting in gross proceeds of $255,600 and net proceeds (less the
underwriters' discount and offering expenses) of approximately $ 234,268.
The Company contributed all of the net proceeds of the Initial Offering to
LaSalle Hotel Operating Partnership, L.P., a limited partnership, (the
Operating Partnership) in exchange for an approximate 82.6% general
partnership interest in the Operating Partnership. The Operating
Partnership used the net proceeds from the Company, the issuance of
additional common shares of the Company and the issuance of limited
partnership interests, representing approximately 17.4% of the Operating
Partnership, to acquire ten upscale and luxury full service hotels (the
Initial Hotels).
As of June 30, 1998, the Company owned interests in 12 hotels with an
aggregate of 4,120 suites/rooms (the Hotels) located in nine states. The
Company owns 100% equity interests in 11 of the hotels and a 95% interest
in a partnership which owns one hotel. All of the Hotels are leased under
participating leases (Participating Leases) which provide for rent based on
hotel revenues and are managed by independent hotel operators (Hotel
Operators). Eight of the Hotels are leased to unaffiliated lessees
(affiliates of whom also operate these hotels) and four of the Hotels are
leased to LaSalle Hotel Lessee, Inc. (the Affiliated Lessee).
The following discusses: (i) the Company's actual results of
operations for the period from April 29, 1998 (inception) through June 30,
1998, and (ii) the Company's pro forma results of operations for the six
months ended June 30, 1998 and 1997. This discussion should be read in
conjunction with the financial statements and notes thereto appearing
elsewhere in this form 10-Q. The Company has not included a discussion of
LRP Bloomington Limited Partnership (the Predecessor) as its financial
information would not be deemed comparable to the Company. However, the
Predecessor's financial information has been included in the notes to the
financial statements.
The pro forma financial information of the Company is presented as if
(i) the Initial Offering and the related formation transactions and (ii)
the acquisitions of the hotels discussed in Note 3 to the financial
statements had been consummated as of January 1, 1997. The pro forma
financial information is not necessarily indicative of what actual results
of operations of the Company would have been assuming the Initial Offering
and the related formation transactions and the acquisitions had been
consummated and leased as of January 1, 1997, nor does it purport to
represent the results of operations for future periods.
RESULTS OF OPERATIONS
ACTUAL RESULTS FOR THE PERIOD APRIL 29, 1998 (INCEPTION) THROUGH JUNE
30, 1998
The Company earned approximately $11.6 million in participating lease
revenue from the Affiliated Lessee and the other lessees. The Company's
expenses before minority interest, consisting principally of depreciation,
property taxes, insurance, advisory fees, general and administrative
expenses and interest expense was approximately $5.9 million. Minority
interest in the Operating Partnership was approximately $1.0 million
representing the weighted average minority interest percentage for the
period April 29, 1998 (inception of operations) through June 30, 1998. Net
income applicable to common shareholders was approximately $4.8 million or
41.0% of total revenues for the period.
<PAGE>
PRO FORMA RESULTS OF OPERATIONS FOR THE COMPANY FOR THE SIX MONTHS
ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
For the six months ended June 30, 1998, the Company's pro forma total
revenues would have been $36.8 million, representing a $4.7 million, or
14.8%, increase over pro forma total revenues for the six months ended
June 30, 1997 of $32.1 million. The increase for 1998 over 1997 consisting
almost entirely of Participating Lease revenues, is attributable to an 8.7%
increase in RevPAR for the 12 Hotels owned by the Company at June 30, 1998.
Pro forma expenses before minority interest, consisting principally of
depreciation, property taxes, insurance, advisory fees, general and
administrative expenses and interest expense would have been $25.4 million
for 1998, representing a $0.2 million, or .06% increase over 1997 expenses
of $25.2 million. This increase is principally attributable to property
taxes, insurance, ground rent and advisory fees. Property taxes and
insurance would have increased from $3.6 million in 1997 to $3.7 million in
1998, or 3.5%, primarily because of inflation and the reassessment of
certain Initial Hotels acquired in 1997.
Pro forma depreciation, general and administrative expenses and
interest expense would have remained relatively unchanged.
Pro forma net income of the Company would have been $9.5 million and
$5.7 million for the six months ended June 30, 1998 and 1997, respectively.
As a percentage of total revenues, net income would have been 25.7% and
17.7% in the first quarter of 1998 and 1997, respectively.
FUNDS FROM OPERATIONS (FFO)
The Company believes that FFO is helpful to investors as a measure of
the performance of an equity REIT because, along with cash flow from
operating activities, financing activities and investing activities, it
provides investors with an indication of the ability of the Company to
incur and service debt, to make capital expenditures and to fund other cash
needs. The White Paper on FFO approved by the Board of Governors of the
National Association of Real Estate Investment Trusts ("NAREIT") in March
1995 defines FFO as net income (loss) (computed in accordance with GAAP),
excluding gains (or losses) from debt restructuring and sales of
properties, plus real estate related depreciation and amortization and
after comparable adjustments for the Company's portion of these items
related to unconsolidated entities and joint ventures. The Company
computes FFO in accordance with standards established by NAREIT which may
not be comparable to FFO reported by other REITs that do not define the
term in accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently than the Company. FFO does not
represent cash generated from operating activities determined by GAAP and
should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial
performance or to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including
its ability to make cash distributions. FFO may include funds that may not
be available for management's discretionary use due to functional
requirements to conserve funds for capital expenditures and property
acquisitions, and other commitments and uncertainties. The following is a
reconciliation between net income and FFO for the period from April 29,
1998 (inception) through June 30, 1998 and pro forma net income and pro
forma FFO for the six months ended June 30, 1998 and 1997, respectively (in
thousands):
<PAGE>
For the period from
April 29, 1998
(inception) through
June 30, 1998
-------------------
Net income applicable to common shareholders. $ 4,805
Depreciation. . . . . . . . . . . . . . . . . 2,431
Minority interest . . . . . . . . . . . . . . 1,005
-----------
FFO . . . . . . . . . . . . . . . . . . . . . $ 8,241
===========
FFO per common share and unit . . . . . . . . $ 0.45
===========
Weighted average common shares and units
outstanding . . . . . . . . . . . . . . . . 18,347,396
===========
Six Months Ended
June 30,
------------------------
1998 1997
---------- ----------
Pro forma net income applicable
to common shareholders. . . . $ 9,476 $ 5,690
Pro forma depreciation. . . . . 10,026 10,026
Pro forma minority interest . . 1,980 1,189
---------- ----------
Pro forma FFO . . . . . . . . . $ 21,482 16,905
========== ==========
Pro forma FFO per common share
and unit. . . . . . . . . . . $ 1.17 0.92
========== ==========
Pro forma weighted average
common shares and units
outstanding . . . . . . . . . 18,406,303 18,406,303
========== ==========
Pro forma FFO for the six months ended June 30, 1998 would have
increased $4.6 million, or 27.1%, to $21.5 million compared to $16.9
million in the six months ended June 30, 1997. The increase in pro forma
FFO in 1998 is primarily attributable to the increase in participating
lease revenues.
THE HOTELS
The following tables set forth historical comparative information with
respect to occupancy, average daily rate (ADR) and room revenue per
available room (RevPAR) for the ten Initial Hotels, the two Acquired Hotels
and the Total Hotel Portfolio, regardless of ownership, for the six month
periods ended June 30, 1998 and 1997. This information is useful in
understanding the underlying changes in the pro forma participating lease
revenue for the Company during the pro forma periods presented.
<PAGE>
Six Months Ended
June 30,
-------------------
1998 1997 Variance
------- ------- --------
THE INITIAL HOTELS
- ------------------
Occupancy . . . . . . . . . . 73.6% 73.5% 0.1%
ADR . . . . . . . . . . . . . $121.00 $112.45 7.6%
RevPAR. . . . . . . . . . . . $ 89.07 $ 82.69 7.7%
THE ACQUIRED HOTELS
- -------------------
Occupancy . . . . . . . . . . 72.5% 74.4% (2.6%)
ADR . . . . . . . . . . . . . $167.83 $146.11 14.9%
RevPAR. . . . . . . . . . . . $121.64 $108.75 11.9%
THE TOTAL HOTEL PORTFOLIO
- -------------------------
Occupancy . . . . . . . . . . 73.4% 73.7% (0.4%)
ADR . . . . . . . . . . . . . $129.43 $118.64 9.1%
RevPAR. . . . . . . . . . . . $ 95.00 $ 87.44 8.7%
The Total Hotel Portfolio experienced an increase in RevPAR of $7.56,
or 8.7%, for the six months ended June 30, 1998 compared to the same period
in 1997. This increase was led by significant RevPAR percentage increases
at Le Meridien Dallas, Le Meridien New Orleans, the LaGuardia Airport
Marriott and the San Diego Paradise Point Resort of 15.5%, 10.6%, 11.2% and
13.5%, respectively. This increased RevPAR is a result of increases in
rates for upscale and luxury full service hotel rooms due to continued
favorable economic conditions throughout the United States, the favorable
operating fundamentals of the Company's hotels and the markets in which
they operate, the geographic diversification of the hotels and the quality
of the Operators of the hotels.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash to meet its cash requirements,
including distributions to shareholders, is its share of the Operating
Partnership's cash flow from the Participating Leases. Except for the
security deposits required under the Participating Leases, the Lessees'
obligations under the Participating Leases are unsecured and the Lessees'
abilities to make rent payments to the Operating Partnership, and the
Company's liquidity, including its ability to make distributions to
shareholders, will be dependent on the Lessees' abilities to generate
sufficient cash flow from the operations of the Hotels.
In April 1998, the Company entered into a $200 million senior
unsecured revolving credit facility (the 1998 Credit Facility) to be used
for acquisitions, capital improvements, working capital and general
corporate purposes. Borrowings under the 1998 Credit Facility bear
interest at floating rates equal to LIBOR plus an applicable margin or an
"Adjusted Base Rate" plus an applicable margin, at the election of the
Company. At June 30, 1998 the interest rate was approximately 7.07% for
LIBOR borrowings. The Company did not have any Adjusted Base Rate
borrowings outstanding at June 30, 1998. Additionally, the Company is
required to pay an unused commitment fee which is variable, determined from
a ratings or leverage based pricing matrix, currently set at 20 basis
points. The Company incurred an unused commitment fee of approximately $36
for the period from April 29, 1998 (inception) through June 30, 1998. The
1998 Credit Facility matures on April 30, 2001 and contains certain
financial covenants relating to debt service coverage, market value net
worth and total funded indebtedness.
On June 24, 1998 the Company, through the Subsidiary LLC, acquired the
Boston Property subject to $40,000 principal amount of special project
revenue bonds (Massport Bonds) previously issued under the loan and trust
agreement with the Massachusetts Port Authority (Massport), as amended
(Massport Bond Agreement). In conjunction with the Massport Bonds, the
<PAGE>
Company recorded a premium of $3,480. The Massport Bonds are
collateralized by the leasehold improvements and bear interest at 10% per
annum through the date of maturity, March 1, 2026. Interest payments are
due semiannually on March 1 and September 1. Interest expense, net of the
premium amortization, for the period June 24, 1998 through June 30, 1998
totaled $54. The Massport Bonds shall be redeemed in part commencing March
1, 2001 and annually until March 1, 2026, at which time the remaining
principal and any accrued interest thereon is due in full. The Company has
the option to prepay the Massport Bonds in full beginning March 1, 2001
subject to a prepayment penalty which varies depending on the date of
prepayment.
On June 30, 1998, the Company had $1,915 of cash and cash equivalents
and had utilized $162.9 million outstanding under its 1998 Credit Facility.
Net cash provided by operating activities was approximately $1.7
million for the period from April 29, 1998 (inception) through June 30,
1998 primarily due to the collections of Participating Lease revenues prior
to June 30, 1998.
Net cash used in investing activities was approximately $397.8 million
for the period from April 29, 1998 (inception) through June 30, 1998
primarily due to the acquisition of the Initial Hotels, the San Diego
Property and the Boston Property.
Net cash provided by financing activities was approximately $398.0
million for the period from April 29, 1998 (inception) through June 30,
1998 primarily attributable to the net proceeds received from the IPO and
the borrowings under the 1998 Credit Facility.
During the period from April 29, 1998 (inception) through June 30,
1998, the Company granted 46,000 stock options from the 1998 SIP. These
stock options vest over various periods ranging from zero to three years.
The stock options have strike prices ranging from $16.00 to $18.00 per
share and have expiration dates ranging from seven to ten years from date
of grant.
In connection with the purchase of the San Diego Property, the sole
limited partner in the Subsidiary Partnership (which is an affiliate of the
hotel operator) acquired 112,458 common shares of beneficial interest from
the Company for a purchase price of $2 million. The purchase and sale of
the common shares was a condition to the selection of the affiliate of the
limited partner as operator of the San Diego Property, and the common
shares have been pledged to the Operating Partnership to secure the limited
partner's obligations under the Participating Lease.
The Company is obligated to make funds available to the Hotels for
capital expenditures (the Reserve Funds), as determined in accordance with
the Participating Leases. The Reserve Funds have not been recorded on the
books and records of the Company as such amounts will be capitalized as
incurred. The amounts obligated under the Reserve Funds are subject to
increases ranging from 4.0% to 5.5% of the individual Hotel's total
revenues. The total amount obligated by the Company under the Reserve
Funds is approximately $12.1 million at June 30, 1998, of which $2.8
million is available in restricted cash reserves for future capital
expenditures. Purchase orders totaling approximately $4.4 million have
been issued for renovations at two of the Hotels. The Company has
committed to both projects and anticipates making similar arrangements with
the existing Hotels or any future hotels that it may acquire.
The Board of Trustees has modified the Company's debt policy to a
basis which better reflects the underlying value of the Company's
properties. It is the Company's policy to incur debt only if upon such
incurrence the Company's total funded indebtedness would not exceed 50% of
"Aggregate Asset Value." For purposes of this policy, Aggregate Asset Value
is defined as the sum of (a) for all the Company's properties owned for
more than four quarters ("Seasoned Properties"), the EBITDA (reduced by the
aggregate FF&E reserves for the relevant period in respect of the Seasoned
<PAGE>
Properties) of the Seasoned Properties for the proceeding four quarters
times 10, and (b) for all Properties owned for less than four quarters
("New Properties"), the investment amount (which shall include the purchase
price, including assumed indebtedness, and all acquisition costs) of the
New Properties and 95% of all the capital expenditures with respect to the
New Properties. The Company's previous policy was based upon market
capitalization, which can fluctuate from time to time and which is not
necessarily an accurate measure of the value of the Company's properties.
The new basis for the Company's debt policy is expected to provide a more
consistent measure of the value of the Company's properties.
The Company has considered its short-term (one year or less) liquidity
needs and the adequacy of its estimated cash flow from operations and other
expected liquidity sources to meet these needs. The Company believes that
its principal short-term liquidity needs are to fund normal recurring
expenses, debt service requirements and the minimum distribution required
to maintain the Company's REIT qualification under the Code. The Company
anticipates that these needs will be met with cash flows provided by
operating activities. The Company has also considered capital improvements
and property acquisitions as short-term needs that will be funded either
under the 1998 Credit Facility, other indebtedness, or the issuance of
additional equity securities. The Company is currently in discussions with
the lenders under the 1998 Credit Facility for an increase in the amount
available under that facility.
The Company expects to meet long-term (greater than one year)
liquidity requirements such as property acquisitions, scheduled debt
maturities, major renovations, expansions and other nonrecurring capital
improvements through long-term secured and unsecured indebtedness and the
issuance of additional equity securities. The Company will acquire or
develop additional hotel properties only as suitable opportunities arise,
and the Company will not undertake acquisition or development of properties
unless stringent acquisition criteria have been achieved.
INFLATION
The Company's revenues will come from the Participating Leases, which
will result in changes in the Company's revenues based on changes in the
underlying Hotels' revenues. Therefore, the Company will be relying
entirely on the performance of the Hotels and the lessees' abilities to
increase revenues to keep pace with inflation. Operators of hotels can
change room rates quickly, but competitive pressures may limit the Lessees'
and their Operators abilities to raise rates faster than inflation or even
at the same rate. The average annual growth rate in ADR for the Initial
Hotels for the three years ended December 31, 1997 was approximately 4.9%,
which was higher than the rate of inflation as measured by the Consumer
Price Index for such period. However, according to industry statistics,
industry-wide annual increases in ADR failed to keep pace with inflation
from 1987 to 1992.
The Company's variable expenses are subject to inflation. These
variable expenses (real estate and personal property taxes, property and
casualty insurance and ground rent) are expected to grow with the general
rate of inflation.
SEASONALITY
The Hotels' operations historically have been seasonal. Eight of the
Hotels maintain higher occupancy rates during the second and third
quarters. The Marriott Seaview Resort generates a large portion of its
revenue from golf related business and, as a result, revenues fluctuate
according to the season and the weather. Holiday Inn Beachside Resort,
Radisson Hotel Tampa at Sabal Park and Le Meridien New Orleans experience
their highest occupancies in the first quarter. This seasonality pattern
can be expected to cause fluctuations in the Company's quarterly lease
revenue under the Participating Leases.
<PAGE>
YEAR 2000 COMPLIANCE
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the year 2000 from the
year 1900 (commonly known as the "Year 2000 Problem"). Like other
organizations, the Company could be adversely affected if the computer
systems used by it or service providers do not properly address this
problem prior to January 1, 2000. Currently, the Company does not
anticipate that the transition to the 21st century will have any material
impact on its performance. In addition, the Company has begun a process to
obtain assurances from the Lessees, Operators and other service providers
that they are taking all necessary steps to ensure that their computer
systems will accurately reflect the year 2000, and the Company will
continue to monitor the situation. At this time, however, no assurance can
be given that the Company's other service providers have anticipated every
step necessary to avoid any adverse effects on the Company attributable to
the Year 2000 Problem.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Neither the Company nor the Operating Partnership is currently
involved in any litigation the ultimate resolution of which, in the opinion
of the Company, is expected to have a material adverse effect on the
financial position, operations or liquidity of the Company and the
Operating Partnership.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On January 15, 1998, the Company was capitalized with the issuance of
100 common shares of beneficial interest, par value $.01 per share ("Common
Shares") to LaSalle Partners Incorporated for an aggregate purchase price
of $1,000. The issuance of such Common Shares was effected in reliance on
an exemption from registration under Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act").
Also in January 1998, the Operating Partnership was capitalized with
the issuance of a limited partnership interest to Jon E. Bortz, as initial
limited partner, for an aggregate purchase price of $100. The issuance of
such limited partnership interest was effected in reliance on an exemption
from registration under Section 4(2) of the Securities Act.
In connection with the closing of the Initial Offering, pursuant to
the terms of Contribution Agreements entered into by owners of interests in
the Initial Hotels, Units and, in certain circumstances, Common Shares were
issued to owners of interests in the Initial Hotels (other than the
LaGuardia Airport Marriott). The issuance of such Units and Common Shares
was effected in reliance on an exemption from registration under Section
4(2) of the Securities Act.
On April 23, 1998, the Company's Registration Statement on Form S-11
(333-45647) relating to 16,330,000 of the Company's Common Shares,
including 2,130,000 Common Shares subject to an over-allotment option
granted to the underwriters by the Company, was declared effective by the
Securities and Exchange Commission. The offering of 14,200,000 (not
including the 2,130,000 Common Shares subject to the over-allotment option,
which option was not exercised and has expired) Common Shares at $18.00 per
share ($255.6 million in aggregate) was completed on April 29, 1998. The
managing underwriters for the offering were Prudential Securities
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, Legg
Mason Wood Walker, Incorporated, Morgan Stanley & Co. Incorporated,
NationsBanc Montgomery Securities LLC and Raymond James & Associates, Inc.
Total underwriting discounts and commissions paid by the Company were $16.0
million, and financial advisory fees paid to one of the underwriters were
$2.0 million. The Company estimates the other costs and expenses incurred
in connection with the Initial Offering, including those incurred in
connection with the formation of the Company, to be approximately $3.3
million. In connection with the Formation Transactions described in the
Company's Registration Statement (No. 333-45647), the Company contributed
the net proceeds of $234.3 million from the initial public offering to the
Operating Partnership, and the Operating Partnership borrowed $61.4 million
under the its Line of Credit. The Operating Partnership used the net
proceeds of the offering and the initial borrowings under the Line of
Credit as follows:
<PAGE>
. $195.3 million (including repayment fees aggregating
approximately $3.3 million) was used to repay certain mortgage and other
indebtedness related to the Initial Hotels and held by third-parties;
. $45.9 million was used to acquire the ownership interests
in the Initial Hotels (excluding the LaGuardia Airport Marriott) from third
parties;
. $45.1 million was used to acquire the LaGuardia Airport
Marriott;
. $3.0 million in Working Capital Loans were advanced to the
lessees and operators of the Company's Hotels; and
. $1.7 million was used for fees and expenses involved in
obtaining the Line of Credit.
. $4.7 million was used for working capital.
No offering expenses were paid, and none of the net proceeds of the
offering were paid, directly or indirectly, to directors or officers of the
Company, persons owning ten percent or more of the Common Shares or
affiliates of the Company, except that the Company reimbursed LaSalle
Partners Incorporated for certain expenses which it had paid on behalf of
the Company prior to the Initial Offering.
In connection with the purchase of the San Diego Property, WestGroup,
an affiliate of Noble House, acquired 112,458 Common Shares from the
Company at a per share price of $17.78438. The purchase by WestGroup was a
condition to the selection of Noble House as operator of the San Diego
Property, and the Common Shares have been pledged to the Operating
Partnership to secure Noble House's obligations under the Participating
Lease. Such sale was made in reliance on an exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Immediately prior to the Company's initial public offering, all of the
Common Shares of the Company were owned by LaSalle Partners Incorporated.
Pursuant to written consents of the stockholder dated as of April 22, 1998,
(i) the Company's 1998 Share Option and Incentive Plan was approved, (ii)
the Company's Articles of Amendment and Restatement of Declaration of Trust
were approved and (iii) the following persons were elected Trustees of the
Company: Stuart L. Scott (Class III Trustee), Jon E. Bortz (Class I
Trustee), Darryl Hartley-Leonard (Class II Trustee - elected effective
April 29, 1998), George F. Little, II (Class III Trustee - elected
effective April 29, 1998), Donald S. Perkins (Class III Trustee - elected
effective April 29, 1998), Shimon Topor (Class II Trustee - elected
effective April 29, 1998) and Donald A. Washburn (Class I Trustee - elected
effective April 29, 1998). These persons are all of the Trustees of the
Company, and Messrs. Scott and Bortz served as Trustees prior to, and
continued as Trustees following, this election.
ITEM 5. OTHER MATTERS.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995: Certain statements in this filing and elsewhere (such as in
other filings by the Company with the Securities and Exchange Commission,
press releases, presentations and communications by the Company or its
management and written and oral statements) constitute "forward-looking
<PAGE>
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance, achievements, plans and objectives of the Company to be
materially different from any future results, performance, achievements,
plans and objectives expressed or implied by such forward-looking
statements. Such factors are discussed in the Company's Registration
Statement (No. 333-45647), under "Risk Factors" and elsewhere, and in other
reports filed by the Company with the Securities and Exchange Commission
and include, among other things, the following: (i) dependence upon rental
payments from lessees of the Company's Hotels for all of the Company's
income, (ii) dependence upon the ability of the lessees and operators to
manage the Company's Hotels, (iii) the possibility that the Company may be
required to fund distributions to shareholders from working capital or
borrowings or reduce such distributions, (iv) the lack of appraisals for
the Hotels contributed to the Company in connection with the formation of
the Company and the possibility that the price paid for the interests in
those Hotels may have exceeded their market value, (v) the potential for
conflicts of interest between the Company and (a) the Advisor and its
affiliates and (b) certain Trustees and officers of the Company who are
also officers, directors and stockholders of the Advisor and its
affiliates, (vi) competition for guests, increases in operating costs due
to inflation and other factors, dependence on business, commercial and
leisure travelers, seasonality of business, potential loss of franchise or
brand licenses, the possible need for expenditures in excess of those
budgeted for capital improvements and replacement of furniture, fixtures
and equipment and other risks that may affect the hotel industry generally
or the Company's Hotels specifically, (vii) the Company's lack of an
operating history and employees and its dependence on the Advisor for its
management and administration, (viii) the use of debt financing, (ix) the
potential unavailability of adequate financing to fund acquisitions and
development activities, (x) the dependence of the Company's performance and
value on real estate industry conditions and the condition of the economy
in general, (xi) taxation of the Company as a corporation if it fails to
qualify as a REIT and the taxation of the Operating Partnership as a
corporation if it were deemed not to be a partnership for income tax
purposes, (xii) provisions of the Company's organizational documents,
including restrictions on ownership of more than 9.8% of the outstanding
Common Shares, which may make a change in control of the Company more
difficult to achieve and (xiii) the effect of market interest rates on the
price of the Company's Common Shares. The Company expressly disclaims any
obligation or undertaking to update or revise any forward-looking
statements to reflect any change in events or circumstances or in the
Company's expectations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. A list of exhibits is set forth in the Exhibit
Index which immediately precedes the exhibits and which is incorporated by
reference herein.
(b) Reports of Form 8-K. A report on Form 8-K dated June 1,
1998 was filed June 15, 1998, relating to the Company's acquisition of the
San Diego Paradise Point Resort. The financial statements and pro forma
information were in the process of being prepared, and therefore, not
provided in the Form 8-K. The Company intends to file the required
financial statements and information under cover of Form 8-K/A.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
LASALLE HOTEL PROPERTIES
Dated: August 14, 1998 BY:/S/ JON E. BORTZ
------------------------------
Jon E. Bortz
President and
Chief Executive Officer
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Articles of Amendment and Restatement of
Declaration of Trust of the Registrant
3.2 Bylaws of the Registrant
4.1 Common Share Purchase Right dated April 29,
1998 (LaSalle Partners)
4.2 Common Share Purchase Right dated April 29,
1998 (Steinhardt)
4.3 Common Share Purchase Right dated April 29,
1998 (Cargill)
10.1 Amended and Restated Agreement of Limited
Partnership of the Operating Partnership dated as of April 29, 1998
10.2 Advisory Agreement, dated as of April 23,
1998, by and between the Registrant and LaSalle Hotel Advisors, Inc.
10.3 Registration Rights Agreement, dated as of
April 29, 1998, with respect to Common Shares which may be Issued upon
Exchange of Operating Partnership Units (LaSalle Partners)
10.4 Registration Rights Agreement, dated as of
April 29, 1998, with respect to Common Shares which may be Issued upon
Exchange of Operating Partnership Units (Steinhardt)
10.5 Registration Rights Agreement, dated as of
April 29, 1998, with respect to Common Shares which may be Issued upon
Exchange of Operating Partnership Units (Cargill)
10.6 Registration Rights Agreement, dated as of
April 29, 1998, with respect to Common Share Purchase Rights (LaSalle
Partners)
10.7 Registration Rights Agreement, dated as of
April 29, 1998, with respect to Common Share Purchase Rights (Steinhardt)
10.8 Registration Rights Agreement, dated as of
April 29, 1998, with respect to Common Share Purchase Rights (Cargill)
10.9 Senior Unsecured Credit Agreement, dated as
of April 23, 1998, among the Operating Partnership, Societe Generale,
Southwest Agency, as Co-Arranger, Administrative Agent, and Documentation
Agent, Bank of Montreal, Chicago Branch, as Co-Arranger and Syndication
Agent, and the Banks.
10.10 Lease Agreement, dated as of June 24, 1998,
by and between LHO Harborside Hotel, L.L.C. as Landlord, and LaSalle Hotel
Lessee, Inc. as Tenant.
<PAGE>
10.11 Loan and Trust Agreement, dated as of
December 15, 1990, as amended and restated as of June 27, 1991, among the
Massachusetts Port Authority, Logan Harborside Associates II Limited
Partnership, and Shawmut Bank, N.A., as trustee.
10.12 Credit Enhancement Agreement, dated as of
June 27, 1991, among the Massachusetts Port Authority, Logan Harborside
Associates II Limited Partnership and Shawmut Bank, N.A.
10.13 Management Agreement, dated as of February 1,
1990, by and between Logan Harborside Associates II Limited Partnership and
Hyatt Corporation, and the First Amendment thereto dated as of June 27,
1991.
10.14 Leasehold Mortgage and Security Agreement,
dated as of December 15, 1990, between Logan Harborside Associates II
Limited Partnership and Shawmut Bank, N.A., and the First Amendment thereto
dated as of June 27, 1991.
21.1 List of subsidiaries
27.1 Financial Data Schedule
<PAGE>
EXHIBIT 21.1
- -------------
LIST OF SUBSIDIARIES
1. LaSalle Hotel Operating Partnership, L.P., a Delaware limited
partnership
2. LHO Mission Bay Hotel, L.P., a California limited partnership
3. LHO Harborside Hotel, L.L.C., a Delaware limited liability company
<PAGE>
EXHIBIT 3.1
- -----------
LASALLE HOTEL PROPERTIES
FORM OF ARTICLES OF AMENDMENT AND RESTATEMENT OF
DECLARATION OF TRUST
FIRST: LaSalle Hotel Properties, a Maryland real estate
investment trust (the "Trust") under Title 8 of the Corporations and
Associations Article of the Annotated Code of Maryland ("Title 8"), desires
to amend and restate its Declaration of Trust as currently in effect (as so
amended and restated, and as the same may be amended hereafter, the
"Declaration of Trust").
SECOND: The following provisions are all the provisions of this
Declaration of Trust currently in effect and as hereinafter amended:
ARTICLE I.
FORMATION
The Trust is a real estate investment trust within the meaning
of Title 8. The Trust shall not be deemed to be a general partnership,
limited partnership, joint venture, joint stock company or, except as
provided in Section 13.4 hereof, a corporation (but nothing herein shall
preclude the Trust from being treated for tax purposes as an association
under the Internal Revenue Code of 1986, as amended (the "Code")).
ARTICLE II.
NAME
The name of the Trust is: LaSalle Hotel Properties.
So far as may be practicable, the business of the Trust shall
be conducted and transacted under that name, which name (and the word
"Trust" wherever used in this Declaration of Trust, except where the
context otherwise requires) shall refer to the Trustees (as hereinafter
defined) collectively but not individually or personally and shall not
refer to the Shareholders (as hereinafter defined) or to any officers,
employees or agents of the Trust or of such Trustees.
Under circumstances in which the Board of Trustees of the Trust
(the "Board of Trustees" or "Board") determines that the use of the name of
the Trust is not practicable, the Trust may use any other designation or
name for the Trust.
ARTICLE III.
PURPOSES AND POWERS
Section 3.1.Purposes. The purposes for which the Trust is formed are
to invest in and to acquire, hold, finance, manage, administer, control and
dispose of property, including, without limitation or obligation, engaging
in business as a real estate investment trust under the Code.
Section 3.2.Powers. The Trust shall have all of the powers granted to
real estate investment trusts pursuant to Title 8 or any successor statute
and shall have all other and further powers set forth in this Declaration
of Trust which are not inconsistent with law and are appropriate to promote
and attain the purposes set forth in this Declaration of Trust.
Section 3.3.Investment Policy. The fundamental investment policy of
the Trust is to make investments in such a manner as to comply with the
provisions of the Code applicable to real estate investment trusts
<PAGE>
and with the requirements of Title 8, with respect to the composition of
the Trust's investments and the derivation of its income. Subject to
Section 5.2(u) hereof, the Trustees will use their best efforts to carry
out this fundamental investment policy and to conduct the affairs of the
Trust in such a manner as to continue to qualify the Trust for the tax
treatment provided for real estate investment trusts in the Code; provided,
however, no Trustee, officer, employee or agent of the Trust shall be
liable for any act or omission resulting in the loss of tax benefits under
the Code, except to the extent provided in Section 9.2 hereof. The Trustees
may change from time to time by resolution or in the bylaws of the Trust
(the "Bylaws"), such investment policies as they determine to be in the
best interests of the Trust, including prohibitions or restrictions upon
certain types of investments.
ARTICLE IV.
RESIDENT AGENT
The name of the resident agent of the Trust in the State of
Maryland is The Corporation Trust Incorporated, 300 East Lombard Street,
Suite 1400, Baltimore, Maryland 21202. Said resident agent is a Maryland
corporation. The Trust may have such offices or places of business within
or outside the State of Maryland as the Board of Trustees may from time to
time determine.
ARTICLE V
BOARD OF TRUSTEES
Section 5.1. Powers. Subject to any express limitations
contained in this Declaration of Trust or in the Bylaws, (a) the business
and affairs of the Trust shall be managed under the direction of the Board
of Trustees and (b) the Board shall have full, exclusive and absolute
power, control and authority over any and all property of the Trust. The
Board may take any action as in its sole judgment and discretion is
necessary or appropriate to conduct the business and affairs of the Trust.
This Declaration of Trust shall be construed with a presumption in favor of
the grant of power and authority to the Board. Any construction of this
Declaration of Trust or determination made in good faith by the Board
concerning its powers and authority hereunder shall be conclusive. The
enumeration and definition of particular powers of the Trustees included in
this Declaration of Trust or in the Bylaws shall in no way be limited or
restricted by reference to or inference from the terms of this or any other
provision of this Declaration of Trust or the Bylaws or construed or deemed
by inference or otherwise in any manner to exclude or limit the powers
conferred upon the Board or the Trustees under the general laws of the
State of Maryland as now or hereafter in force or any other applicable
laws.
Section 5.2.Specific Powers and Authority. Subject only to the
express limitations herein, and in addition to all other powers and
authority conferred by this Declaration of Trust or by law, the Trustees,
without any vote, action or consent by the Shareholders, shall have and may
exercise, at any time or times, in the name of the Trust or on its behalf
the following powers and authorities:
(a) Investments. Subject to Section 9.4 hereof, to invest in,
purchase or otherwise acquire and to hold real, personal or mixed, tangible
or intangible, property of any kind wherever located, or rights or
interests therein or in connection therewith, all without regard to whether
such property, interests or rights are authorized by law for the investment
of funds held by trustees or other fiduciaries, or whether obligations the
Trust acquires have a term greater or lesser than the term of office of the
Trustees or the possible termination of the Trust, for such consideration
as the Trustees may deem proper (including cash, property of any kind or
securities of the Trust); provided, however, that the Trustees shall take
such actions as they deem necessary and desirable to comply with any
requirements of Title 8 relating to the types of assets held by the Trust.
<PAGE>
(b) Sale, Disposition and Use of Property. Subject to
Sections 3.3 and 9.4 and Article XI hereof: (i) to sell, rent, lease, hire,
exchange, release, partition, assign, mortgage, grant security interests
in, encumber, negotiate, dedicate, grant easements in and options with
respect to, convey, transfer (including transfers to entities wholly or
partially owned by the Trust or the Trustees) or otherwise dispose of any
or all of the property of the Trust by deeds (including deeds in lieu of
foreclosure with or without consideration), trust deeds, assignments, bills
of sale, transfers, leases, mortgages, financing statements, security
agreements and other instruments for any of such purposes executed and
delivered for and on behalf of the Trust or the Trustees by one or more of
the Trustees or by a duly authorized officer, employee, agent or nominee of
the Trust, on such terms as they deem appropriate; (ii) to give consents
and make contracts relating to the property of the Trust and its use or
other property or matters; (iii) to develop, improve, manage, use, alter or
otherwise deal with the property of the Trust; and (iv) to rent, lease or
hire from others property of any kind; provided, however, that the Trust
may not use or apply land for any purposes not permitted by applicable law.
(c) Financings. To borrow or in any other manner raise money
for the purposes and on the terms they determine, and to evidence the same
by issuance of securities of the Trust, which may have such provisions as
the Trustees determine; to reacquire such securities of the Trust; to enter
into other contracts or obligations on behalf of the Trust; to guarantee,
indemnify or act as surety with respect to payment or performance of
obligations of any person; to mortgage, pledge, assign, grant security
interests in or otherwise encumber the property of the Trust to secure any
such securities of the Trust, contracts or obligations (including
guarantees, indemnifications and suretyships); and to renew, modify,
release, compromise, extend, consolidate or cancel, in whole or in part,
any obligation to or of the Trust or participate in any reorganization of
obligors to the Trust.
(d) Loans. Subject to the provisions of Section 9.4 hereof,
to lend money or other property of the Trust on such terms, for such
purposes and to such persons as they may determine.
(e) Issuance of Securities. Subject to the provisions of
Article VI hereof: (i) to create and authorize and direct the issuance (on
either a pro rata or a non-pro rata basis) by the Trust, in Shares (as
hereinafter defined), units or amounts of one or more types, series or
classes, of securities of the Trust, which may have such voting rights,
dividend or interest rates, preferences, subordinations, conversion or
redemption prices or rights, maturity dates, distribution, exchange, or
liquidation rights or other rights as the Trustees may determine, without
vote of or other action by the Shareholders, to such persons for such
consideration, at such time or times and in such manner and on such terms
as the Trustees determine; (ii) to list or to designate for listing or
quotation any of the securities of the Trust on any national securities
exchange or automated inter-dealer quotation system; and (iii) to purchase
or otherwise acquire, hold, cancel, reissue, sell and transfer any
securities of the Trust.
(f) Expenses and Taxes. To pay any charges, expenses or
liabilities necessary or desirable, in the sole discretion of the Trustees,
for carrying out the purposes of this Declaration of Trust and conducting
the business of the Trust, including compensation or fees to Trustees,
officers, employees and agents of the Trust, and to persons contracting
with the Trust, and any taxes, levies, charges and assessments of any kind
imposed upon or chargeable against the Trust, the property of the Trust or
the Trustees in connection therewith; and to prepare and file any tax
returns, reports or other documents and take any other appropriate action
relating to the payment of any such charges, expenses or liabilities.
(g) Collection and Enforcement. To collect, sue for and
receive money or other property due to the Trust; to consent to extensions
of the time for payment, or to the renewal, of any securities or
obligations; to engage or to intervene in, prosecute, defend, compound,
<PAGE>
enforce, compromise, release, abandon or adjust any actions, suits,
proceedings, disputes, claims, demands, security interests or things
relating to the Trust, the property of the Trust or the Trust's affairs; to
exercise any rights and enter into any agreements and take any other action
necessary or desirable in connection with the foregoing.
(h) Deposits. To deposit funds or securities constituting
part of the property of the Trust in banks, trust companies, savings and
loan associations, financial institutions and other depositories, whether
or not such deposits will draw interest, subject to withdrawal on such
terms and in such manner as the Trustees determine.
(i) Allocation; Accounts. To determine whether moneys, profits
or other assets of the Trust shall be charged or credited to, or allocated
between, income and capital, including whether or not to amortize any
premium or discount and to determine in what manner any expenses or
disbursements are to be borne as between income and capital (regardless of
how such items would normally or otherwise be charged to or allocated
between income and capital without such determination); to treat any
dividend or other distribution on any investment as, or apportion it
between, income and capital; in their discretion to provide reserves for
depreciation, amortization, obsolescence or other purposes in respect of
any property of the Trust in such amounts and by such methods as they
determine; to determine what constitutes net earnings, profits or surplus;
to determine the method or form in which the accounts and records of the
Trust shall be maintained; and to allocate to the Shareholders' equity
account less than all of the consideration paid for Shares and to allocate
the balance to paid-in capital or capital surplus.
(j) Valuation of Property. To determine the value of all or
any part of the property of the Trust and of any services, securities,
property or other consideration to be furnished to or acquired by the
Trust, and to revalue all or any part of the property of the Trust, all in
accordance with such appraisals or other information as are reasonable, in
their sole judgment.
(k) Ownership and Voting Powers. To exercise all of the
rights, powers, options and privileges pertaining to the ownership of any
mortgages, securities, real estate and other property of the Trust to the
same extent that an individual owner might, including, without limitation,
to vote or give any consent, request or notice or waive any notice, either
in person or by proxy or power of attorney, which proxies and powers of
attorney may be for any general or special meetings or action, and may
include the exercise of discretionary powers.
(l) Officers; Delegation of Powers. To elect, appoint or
employ such officers for the Trust and such committees of the Board of
Trustees with such powers and duties as the Trustees may determine or the
Bylaws provide; to engage, employ or contract with and pay compensation to
any person (including, subject to Section 9.4 hereof, any Trustee and any
person who is an affiliate of any Trustee) as agent, representative,
advisor, member of an advisory board, employee or independent contractor
(including advisers, consultants, transfer agents, registrars,
underwriters, accountants, attorneys-at-law, real estate agents, property
and other managers, appraisers, brokers, architects, engineers,
construction managers, general contractors or otherwise) in one or more
capacities, to perform such services on such terms as the Trustees may
determine; and to delegate to one or more Trustees, officers or other
persons engaged or employed as aforesaid, or to committees of Trustees, the
performance of acts or other things (including granting of consents), the
making of decisions and the execution of such deeds, contracts or other
instruments, in the name of the Trust or the Trustees, or as their
attorneys or otherwise, as the Trustees may determine.
(m) Associations. Subject to Section 9.4 hereof, to cause the
Trust to enter into joint ventures, general or limited partnerships,
participation or agency arrangements or any other lawful combinations,
relationships or associations of any kind.
<PAGE>
(n) Reorganization; Merger, Consolidation or Sale of Trust
Property. Subject to Article XI hereof: (i) to cause to be organized or
assist in organizing any person under the laws of any jurisdiction to
acquire all or any part of the property of the Trust, carry on any business
in which the Trust shall have an interest or otherwise exercise the powers
the Trustees deem necessary, useful or desirable to carry on the business
of the Trust or to carry out the provisions of this Declaration of Trust;
(ii) to merge or consolidate the Trust with any person; (iii) to sell,
rent, lease, hire, convey, negotiate, assign, exchange or transfer all or
any part of the property of the Trust to or with any person in exchange for
securities of such person or otherwise; and (iv) to lend money to,
subscribe for and purchase the securities of, and enter into any contracts
with, any person in which the Trust holds, or is about to acquire,
securities or any other interests.
(o) Insurance. To purchase and pay for out of property of the
Trust insurance policies insuring the Trust and the property of the Trust
against any and all risks, and insuring the Shareholders, Trustees,
officers, employees and agents of the Trust individually against all claims
and liabilities of every nature arising by reason of holding or having held
any such status, office or position or by reason of any action alleged to
have been taken or omitted (including those alleged to constitute
misconduct, gross negligence, reckless disregard of duty or bad faith) by
any such person in such capacity, whether or not the Trust would have the
power to indemnify such person against such claim or liability.
(p) Executive Compensation, Pension and Other Plans. To adopt
and implement executive compensation, pension, profit sharing, share
option, share bonus, share purchase, share appreciation rights, restricted
share, savings, thrift, retirement, incentive or benefit plans, trusts or
provisions, applicable to any or all Trustees, officers, employees or
agents of the Trust, or to other persons who have benefited the Trust, all
on such terms and for such purposes as the Trustees may determine.
(q) Distributions. To declare and pay dividends or other
distributions to Shareholders, subject to the provisions of Section 6.5
hereof.
(r) Indemnification. In addition to the indemnification
provided for in Section 9.3 hereof, to indemnify any person, including any
independent contractor, with whom the Trust has dealings.
(s) Charitable Contributions. To make donations for the
public welfare or for community, charitable, religious, educational,
scientific, civic or similar purposes, regardless of any direct benefit to
the Trust.
(t) Advisory Services. To engage or terminate any advisor to
perform or assist in the performance of any of the activities of the Trust.
(u) Discontinue Operations; Bankruptcy. To discontinue the
operations of the Trust (subject to Section 12.2 hereof); to petition or
apply for relief under any provision of federal or state bankruptcy,
insolvency or reorganization laws or similar laws for the relief of
debtors; to permit any property of the Trust to be foreclosed upon without
raising any legal or equitable defenses that may be available to the Trust
or the Trustees or otherwise defending or responding to such foreclosure;
to confess judgment against the Trust; or to take such other action with
respect to indebtedness or other obligations of the Trustees, in such
capacity, the property of the Trust or the Trust as the Trustees in their
discretion may determine.
(v) Termination of Status. To terminate the status of the
Trust as a real estate investment trust under the Code; provided, however,
that the Board of Trustees shall take no action to terminate the Trust's
status as a real estate investment trust under the Code until such time as
(i) the Board of Trustees adopts a resolution recommending that the Trust
terminate its status as a real estate investment trust under the Code, (ii)
<PAGE>
the Board of Trustees presents the resolution at an annual or special
meeting of the Shareholders and (iii) such resolution is approved by the
holders of a majority of the issued and outstanding Common Shares (as
hereinafter defined).
(w) Fiscal Year. Subject to the Code, to adopt, and from time
to time change, a fiscal year for the Trust.
(x) Seal. To adopt and use a seal, but the use of a seal shall
not be required for the execution of instruments or obligations of the
Trust.
(y) Bylaws. To adopt, implement and from time to time alter,
amend or repeal Bylaws relating to the business and organization of the
Trust which are not inconsistent with the provisions of this Declaration of
Trust.
(z) Accounts and Books. To determine from time to time
whether and to what extent, and at what times and places, and under what
conditions and regulations, the accounts and books of the Trust, or any of
them, shall be open to the inspection of Shareholders.
(aa) Voting Trust. To participate in, and accept securities
issued under or subject to, any voting trust.
(ab) Proxies. To solicit proxies of the Shareholders at the
expense of the Trust.
(bb) Ownership Limits. To determine that it is no longer in
the best interests of the Trust to attempt to, or continue to, qualify as a
real estate investment trust under the Code or that compliance with any
restriction or limitations on ownership and transfers of Shares set forth
in Article VII hereof is no longer required for the Trust to qualify as a
real estate investment trust under the Code.
(cc) Further Powers. To do all other acts and things and
execute and deliver all instruments incident to the foregoing powers, and
to exercise all powers which they deem necessary, useful or desirable to
carry on the business of the Trust or to carry out the provisions of this
Declaration of Trust, even if such powers are not specifically provided
hereby.
Section 5.3. Determination of Best Interest of Trust. In
determining what is in the best interest of the Trust, a Trustee shall
consider the interests of the Shareholders of the Trust and, in his sole
and absolute discretion, may consider (a) the interests of the Trust's
employees, suppliers, creditors and customers, (b) the economy of the
nation, (c) community and societal interests and (d) the long-term as well
as short-term interests of the Trust and its Shareholders, including the
possibility that these interests may be best served by the continued
independence of the Trust.
Section 5.4.Number and Classification. The number of Trustees (the
"Trustees") shall initially be two (2), which number (i) shall
automatically be increased to seven (7) effective immediately following the
closing of the Trust's initial public offering and (ii) may be thereafter
increased or decreased from time to time in accordance with the Bylaws of
the Trust; provided, however, that, effective immediately following the
closing of the Trust's initial public offering, the total number of
Trustees shall not be fewer than three (3) and not more than nine (9).
Notwithstanding the foregoing, if for any reason any or all of the Trustees
cease to be Trustees, such event shall not terminate the Trust or affect
this Declaration of Trust or the powers of any remaining Trustees. The
names and addresses of the initial two (2) Trustees are:
<PAGE>
Name Address
Stuart L. Scott 200 East Randolph Drive
Chicago, Illinois 60601
Jon E. Bortz 220 East 42nd Street
New York, New York 10017
Effective immediately following the closing of the Trust's
initial public offering, the number of Trustees shall automatically be
increased to seven (7), whereupon the Trustees, including the initial
Trustees, shall be divided into three classes as nearly equal in number as
possible and initially consisting of two, two and three members,
respectively, with the term of office of one class expiring each year. One
class of Trustees, consisting initially of two member, shall hold office
initially for a term expiring at the annual meeting of Shareholders in
1999; another class, consisting initially of two members, shall hold office
initially for a term expiring at the annual meeting of Shareholders in
2000; and the third class, consisting initially of three members, shall
hold office initially for a term expiring at the annual meeting of
Shareholders in 2001. The Board of Trustees, by resolution, shall designate
the Trustees who will serve in each class.
The Trustees may fill any vacancy, whether resulting from an
increase in the number of Trustees or otherwise, on the Board of Trustees.
Beginning with the annual meeting of Shareholders in 1999 and at each
succeeding annual meeting of Shareholders, the successor or successors to
the class of Trustees whose term expires at such meeting shall be elected
to hold office for a term expiring at the third succeeding annual meeting
of Shareholders. Trustees shall hold office until their successors are duly
elected and qualify. Election of Trustees by Shareholders shall require the
vote and be in accordance with the procedures set forth in the Bylaws.
It shall not be necessary to list in this Declaration of Trust
the names and addresses of any Trustees hereafter elected.
Section 5.5.Resignation, Removal or Death. Any Trustee may resign by
written notice to the Board, effective upon execution and delivery to the
Trust of such written notice or upon any future date specified in the
notice. Subject to the rights of holders of one or more classes or series
of Preferred Shares, as hereinafter defined, to elect one or more Trustees,
a Trustee may be removed at any time, only with cause, at a meeting of the
Shareholders, by the affirmative vote of the holders of a majority of the
Shares then outstanding and entitled to vote for the election of Trustees.
Upon the resignation or removal of any Trustee, or his otherwise ceasing to
be a Trustee, he shall automatically cease to have any right, title or
interest in and to the property of the Trust and shall execute and deliver
such documents as the remaining Trustees require for the conveyance of any
property of the Trust held in his name, and shall account to the remaining
Trustees as they require for all property which he holds as Trustee. Upon
the incapacity or death of any Trustee, his legal representative shall
perform the acts described in the foregoing sentence.
Section 5.6. Title to Property of the Trust. Legal title to all
property of the Trust shall be vested in the Trustees, but they may cause
legal title to any property of the Trust to be held by or in the name of
any Trustee, or the Trust, or any other person as nominee. The right, title
and interest of the Trustees in and to the property of the Trust shall
automatically vest in successor and additional Trustees upon their
qualification and acceptance of election or appointment as Trustees, and
they shall thereupon have all the rights and obligations of Trustees,
whether or not conveyancing documents have been executed and delivered
pursuant to Section 5.5 hereof or otherwise. Written evidence of the
qualification and acceptance of election or appointment of successor and
additional Trustees may be filed with the records of the Trust and in such
other offices, agencies or places as the Trustees may deem necessary or
desirable.
<PAGE>
ARTICLE VI.
SHARES OF BENEFICIAL INTEREST
Section 6.1. Authorized Shares. The Trust shall have the
authority to issue a total of 120 million shares of beneficial interest
("Shares"), of which 100 million shall be common shares of beneficial
interest, $.01 par value per share ("Common Shares"), and 20 million shall
be preferred shares of beneficial interest, $.01 par value per share
("Preferred Shares"). The Board of Trustees, with the approval of the
holders of record of outstanding Shares (the "Shareholders") by a majority
of the votes entitled to be cast at a meeting of Shareholders duly called
and at which a quorum is present, may amend this Declaration of Trust from
time to time to increase or decrease the aggregate number of Shares or the
number of Shares of any class that the Trust has authority to issue.
Section 6.2. Common Shares. Subject to the provisions of Article
VII, each Common Share shall entitle the holder thereof to one vote on each
matter upon which holders of Common Shares are entitled to vote, and all
Common Shares shall have equal dividend, distribution, liquidation and
other rights, and shall have no preference, cumulative, preemptive,
appraisal, conversion or exchange rights.
Section 6.3. Preferred Shares. The Board of Trustees may
classify any unissued Preferred Shares, and may reclassify any previously
classified but unissued Preferred Shares of any series from time to time,
in one or more series of Preferred Shares. Prior to issuance of classified
or reclassified Preferred Shares of any series, the Board of Trustees by
resolution shall (a) designate that series to distinguish it from all other
series of Preferred Shares; (b) specify the number of Preferred Shares to
be included in the series; (c) set, subject to the provisions of Article
VII and subject to the express terms of any series of Preferred Shares
outstanding at the time, the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms and conditions of redemption for
each series; and (d) cause the Trust to file Articles Supplementary with
the State Department of Assessments and Taxation of Maryland (the "SDAT").
Any of the terms of any series of Preferred Shares set pursuant to clause
(c) of this Section 6.3 may be made dependent upon facts ascertainable
outside this Declaration of Trust (including, without limitation, the
occurrence of any event or a determination or action by the Trust or any
other person or body) and may vary among holders thereof, provided that the
manner in which such facts or variations shall operate upon the terms of
such series of Shares is clearly and expressly set forth in the Articles
Supplementary filed with the SDAT.
Section 6.4 . Authorization by Board of Share Issuance. The Board
of Trustees may authorize the issuance from time to time of Shares of any
class or series, whether now or hereafter authorized, or securities or
rights convertible into Shares of any class or series, whether now or
hereafter authorized, for such consideration (whether in cash, property,
past or future services, obligation for future payment or otherwise) as the
Board of Trustees may deem advisable (or without consideration in the case
of a Share split or Share dividend), subject to such restrictions or
limitations, if any, as may be set forth in this Declaration of Trust or
the Bylaws.
Section 6.5. Dividends and Distributions. The Board of Trustees
may from time to time authorize, declare and pay to Shareholders such
dividends or distributions, in cash, property or other assets of the Trust
or in securities of the Trust or from any other source as the Board of
Trustees in its discretion shall determine. The Board of Trustees shall
endeavor to declare and pay such dividends and distributions as shall be
necessary for the Trust to qualify as a real estate investment trust under
the Code; provided, however, that Shareholders shall have no right to any
dividend or distribution unless and until authorized and declared by the
Board. The exercise of the powers and rights of the Board of Trustees
<PAGE>
pursuant to this Section 6.5 shall be subject to the provisions of any
class or series of Shares at the time outstanding. The receipt by any
person in whose name any Shares are registered on the records of the Trust
or by his duly authorized agent shall be a sufficient discharge for all
dividends or distributions payable or deliverable in respect of such Shares
and from all liability to see to the application thereof. Unless the status
of the Trust as a real estate investment trust under the Code has been
terminated pursuant to Section 5.2(u) hereof, no determination shall be
made by the Board of Trustees nor shall any transaction be entered into by
the Trust which would cause any Shares or other beneficial interest in the
Trust not to constitute "transferable shares" or "transferable certificates
of beneficial interest" under Section 856(a)(2) of the Code or which would
cause any distribution to constitute a preferential dividend as described
in Section 562(c) of the Code.
Section 6.6. General Nature of Shares. All Shares shall be
personal property entitling the Shareholders only to those rights provided
in this Declaration of Trust. The Shareholders shall have no interest in
the property of the Trust and shall have no right to compel any partition,
division, dividend or distribution of the Trust or of the property of the
Trust. The death of a Shareholder shall not terminate the Trust or give his
legal representative any rights against other Shareholders, the Trustees or
the property of the Trust, except the right, exercised in accordance with
applicable provisions of the Bylaws, to receive a new certificate for
Shares in exchange for the certificate held by the deceased Shareholder.
The Trust is entitled to treat as Shareholders only those persons in whose
names Shares are registered as holders of Shares on the beneficial interest
ledger of the Trust.
Section 6.7. Fractional Shares. The Trust may, without the
consent or approval of any Shareholders, issue fractional Shares, eliminate
a fraction of a Share by rounding up or down to a full Share, arrange for
the disposition of a fraction of a Share by the person entitled to it, or
pay cash for the fair value of a fraction of a Share.
Section 6.8. Declaration and Bylaws. All Shareholders are
subject to the provisions of this Declaration of Trust and the Bylaws.
ARTICLE VII.
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1. Definitions. For the purpose of this Article VII,
the following terms shall have the following meanings:
Beneficial Ownership. The term "Beneficial Ownership" shall
mean ownership of Shares by a Person, whether the interest in Shares is
held directly or indirectly (including by a nominee), and shall include
interests that would be treated as owned through the application of Section
544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms
"Beneficial Owner," "Beneficially Own," "Beneficially Owns," "Beneficially
Owning" and "Beneficially Owned" shall have the correlative meanings.
Benefit Plan Investor. The term "Benefit Plan Investor" shall
have the meaning provided in 29 C.F.R. ss. 2510.3-101(f)(2), or any
successor regulation thereto.
Business Day. The term "Business Day" shall mean any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day
on which banking institutions in New York, New York are authorized or
required by law, regulation or executive order to close.
Charitable Beneficiary. The term "Charitable Beneficiary"
shall mean one or more beneficiaries of the Charitable Trust as determined
pursuant to Section 7.3.7, provided that each such organization must be
described in Sections 501(c)(3), 170(b)(1)(A) (other than clause (vii) or
(viii) thereof) and 170(c)(2) of the Code.
<PAGE>
Charitable Trust. The term "Charitable Trust" shall mean any
trust provided for in Section 7.2.1(b)(i) and Section 7.3.1.
Charitable Trustee. The term "Charitable Trustee" shall mean
the Person unaffiliated with the Trust and a Prohibited Owner, that is
appointed by the Trust to serve as trustee of the Charitable Trust.
Closing Price. The "Closing Price" on any date shall mean the
last sale price for such Shares, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, for such Shares, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the NYSE or, if such Shares are not listed or
admitted to trading on the NYSE, as reported on the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which such Shares are listed or
admitted to trading or, if such Shares are not listed or admitted to
trading on any national securities exchange, the last quoted price, or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASDAQ Stock Market or, if such
system is no longer in use, the principal other automated inter-dealer
quotation system that may then be in use or, if such Shares are not quoted
by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in such Shares
selected by the Board of Trustees or, in the event that no trading price is
available for such Shares, the fair market value of Shares, as determined
in good faith by the Board of Trustees.
Constructive Ownership. The term "Constructive Ownership"
shall mean ownership of Shares by a Person, whether the interest in Shares
is held directly or indirectly (including by a nominee), and shall include
interests that would be treated as owned through the application of Section
318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Own," "Constructively Owns,"
"Constructively Owning" and "Constructively Owned" shall have the
correlative meanings.
Effective Date. The term "Effective Date" shall mean the date
of the closing of the initial public offering of Common Shares.
ERISA Investor. The term "ERISA Investor" shall mean any
holder of Shares that is (i) an employee benefit plan subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
(ii) a plan as defined in Section 4975(e) of the Code (any such employee
benefit plan or plan described in clause (i) or this clause (ii) being
referred to herein as a "Plan"), (iii) a trust which was established
pursuant to a Plan, or a nominee for such trust or Plan, or (iv) an entity
whose underlying assets include assets of a Plan by reason of such Plan's
investment in such entity.
Initial Date. The term "Initial Date" shall mean January 15,
1998.
Initial Shareholder. The term Initial Shareholder shall mean
LaSalle Partners Incorporated.
Market Price. The term "Market Price" on any date shall mean,
with respect to any class or series of outstanding Shares, the Closing
Price for such Shares on such date.
NYSE. The term "NYSE" shall mean the New York Stock Exchange,
Inc.
Ownership Limit. The term "Ownership Limit" shall mean (i)
with respect to the Common Shares, 9.8% (in value or number of Shares,
whichever is more restrictive) of the outstanding Common Shares of the
Trust; and (ii) with respect to any class or series of Preferred Shares,
9.8% (in value or number of Shares, whichever is more restrictive) of the
<PAGE>
outstanding Shares of such class or series of Preferred Shares of the
Trust.
Person. The term "Person" shall mean an individual,
corporation, partnership, estate, trust (including a trust qualified under
Sections 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private foundation
within the meaning of Section 509(a) of the Code, joint stock company or
other entity and also includes a group as that term is used for purposes of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
Prohibited Owner. The term "Prohibited Owner" shall mean, with respect to
any purported Transfer, any Person who, but for the provisions of Section
7.2.1, would Beneficially Own or Constructively Own Shares, and if
appropriate in the context, shall also mean any Person who would have been
the record owner of Shares that the Prohibited Owner would have so owned.
PUBLICLY OFFERED SECURITIES. The term "Publicly Offered
Securities" shall have the meaning provided in 29 C.F.R. ss.
2510.3-101(b)(2), or any successor regulation thereto.
REIT. The term "REIT" shall mean a real estate investment
trust within the meaning of Section 856 of the Code.
Restriction Termination Date. The term "Restriction
Termination Date" shall mean the first day after the Initial Date on which
the Board of Trustees determines that it is no longer in the best interests
of the Trust to attempt to, or continue to, qualify as a REIT or that
compliance with the restrictions and limitations on Beneficial Ownership,
Constructive Ownership and Transfers of Shares set forth herein is no
longer required in order for the Trust to qualify as a REIT.
Transfer. The term "Transfer" shall mean any issuance, sale,
transfer, gift, assignment, devise or other disposition, as well as any
other event that causes any Person to acquire Beneficial Ownership or
Constructive Ownership, or any agreement to take any such actions or cause
any such events, of Shares or the right to vote or receive dividends on
Shares, including (a) a change in the capital structure of the Trust, (b) a
change in the relationship between two or more Persons which causes a
change in ownership of Shares by application of Section 544 of the Code, as
modified by Section 856(h), (c) the granting or exercise of any option or
warrant (or any disposition of any option or warrant), pledge, security
interest, or similar right to acquire Shares, (d) any disposition of any
securities or rights convertible into or exchangeable for Shares or any
interest in Shares or any exercise of any such conversion or exchange right
and (e) Transfers of interests in other entities that result in changes in
Beneficial Ownership or Constructive Ownership of Shares; in each case,
whether voluntary or involuntary, whether owned of record, Constructively
Owned or Beneficially Owned and whether by operation of law or otherwise.
(For purposes of this Article VII, the right of a limited partner in
LaSalle Hotel Operating Partnership, L.P., a Delaware limited partnership,
to require the partnership to redeem such limited partner's units of
partnership interest pursuant to Section 8.6 of the Agreement of Limited
Partnership of LaSalle Hotel Operating Partnership, L.P. shall not be
considered to be an option or similar right to acquire Shares of the
Trust.) The terms "Transferring" and "Transferred" shall have the
correlative meanings.
Section 7.2. Restrictions on Ownership and Transfer of Shares.
Ownership Limitations. From the Initial Date and prior to the Restriction
Termination Date:
(a) Basic Restrictions.
(i) (1) No Person, other than the Initial
Shareholder, shall Beneficially Own or Constructively Own Shares in excess
of the Ownership Limit and (2) the Initial Shareholder shall not
Beneficially Own or Constructively Own Shares in excess of the Ownership
Limit on any date after the Effective Date.
<PAGE>
(ii) No Person shall Beneficially Own or Constructively
Own Shares to the extent that (1) such Beneficial Ownership of Shares would
result in the Trust being "closely held" within the meaning of Section
856(h) of the Code (without regard to whether the ownership interest is
held during the last half of a taxable year) or (2) such Beneficial
Ownership or Constructive Ownership of Shares would result in the Trust
otherwise failing to qualify as a REIT (including, but not limited to,
ownership that would result in the Trust actually owning or Constructively
Owning an interest in a tenant that is described in Section 856(d)(2)(B) of
the Code if the income derived by the Trust from such tenant would cause
the Trust to fail to satisfy any of the gross income requirements of
Section 856(c) of the Code).
(iii) No Person shall Transfer any Shares if, as a result
of the Transfer, the Shares would be Beneficially Owned by less than 100
Persons (determined without reference to the rules of attribution under
Section 544 of the Code). Notwithstanding any other provisions contained
herein (but subject to Section 7.5), any Transfer of Shares (whether or not
such Transfer is the result of a transaction entered into through the
facilities of the NYSE or any other national securities exchange or
automated inter-dealer quotation system) that, if effective, would result
in Shares being Beneficially Owned by less than 100 Persons (determined
under the principles of Section 856(a)(5) of the Code) shall be void ab
initio, and the intended transferee shall acquire no rights in such Shares.
(b) Transfer in Trust. If any Transfer of Shares (whether or
not such Transfer is the result of a transaction entered into through the
facilities of the NYSE or any other national securities exchange or
automated inter-dealer quotation system) occurs which, if effective, would
result in any Person Beneficially Owning or Constructively Owning Shares in
violation of Section 7.2.1(a)(i) or (ii), then:
(i) that number of Shares the Beneficial Ownership
or Constructive Ownership of which otherwise would cause such Person to
violate Section 7.2.1(a)(i) or (ii) (rounded to the nearest whole share)
shall be automatically transferred to a Charitable Trust for the benefit of
a Charitable Beneficiary, as described in Section 7.3, effective as of the
close of business on the Business Day prior to the date of such Transfer,
and such Person shall acquire no rights in such Shares; or
(ii) subject to Section 7.5, if the transfer to
the Charitable Trust described in clause (i) of this sentence would not be
effective for any reason to prevent the violation of Section 7.2.1(a)(i) or
(ii), then the Transfer of that number of Shares that otherwise would cause
any Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab initio,
and the intended transferee shall acquire no rights in such Shares.
Section 7.2.2 REMEDIES FOR BREACH. Subject to Section 7.5, if the
Board of Trustees or any duly authorized committee thereof shall at any
time determine in good faith that a Transfer or other event has taken place
that results in a violation of Section 7.2.1 or that a Person intends to
acquire or has attempted to acquire Beneficial Ownership or Constructive
Ownership of any Shares in violation of Section 7.2.1 (whether or not such
violation is intended), the Board of Trustees or a committee thereof shall
take such action as it deems advisable to refuse to give effect to or to
prevent such Transfer or other event, including, without limitation,
causing the Trust to redeem Shares, refusing to give effect to such
Transfer on the books of the Trust or instituting proceedings to enjoin
such Transfer or other event; provided, however, that any Transfer or
attempted Transfer or other event in violation of Section 7.2.1 shall
automatically result in the transfer to the Charitable Trust described
above, and, where applicable, such Transfer (or other event) shall be void
ab initio as provided above irrespective of any action (or non-action) by
the Board of Trustees or a committee thereof.
<PAGE>
Section 7.2.3 NOTICE OF RESTRICTED TRANSFER. Any Person who
acquires or attempts or intends to acquire Beneficial Ownership or
Constructive Ownership of Shares that will or may violate Section 7.2.1(a),
or any Person who would have owned Shares that resulted in a transfer to
the Charitable Trust pursuant to the provisions of Section 7.2.1(b), shall
immediately give written notice to the Trust of such event, or in the case
of such a proposed or attempted transaction, give at least 15 days prior
written notice, and shall provide to the Trust such other information as
the Trust may request in order to determine the effect, if any, of such
acquisition or ownership on the Trust's status as a REIT.
Section 7.2.4 OWNERS REQUIRED TO PROVIDE INFORMATION. From the
Initial Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (or such lower
percentage as required by the Code or the regulations promulgated
thereunder) of the outstanding Shares, within 30 days after the end of each
taxable year, shall give written notice to the Trust stating the name and
address of such owner, the number of Shares Beneficially Owned and a
description of the manner in which such Shares are held; provided that a
Shareholder of record who holds outstanding Shares as nominee for another
Person, which other Person is required to include in gross income the
dividends received on such Shares (an "Actual Owner"), shall give written
notice to the Trust stating the name and address of such Actual Owner and
the number of Shares of such Actual Owner with respect to which the
Shareholder of record is nominee. Each owner shall provide to the Trust
such additional information as the Trust may request in order to determine
the effect, if any, of such Beneficial Ownership on the Trust's status as a
REIT and to ensure compliance with the Ownership Limit.
(b) each Person who is a Beneficial Owner or Constructive
Owner of Shares and each Person (including the Shareholders of record) who
is holding Shares for a Beneficial Owner or Constructive Owner shall
provide to the Trust such information as the Trust may request, in good
faith, in order to determine the Trust's status as a REIT and to comply
with requirements of any taxing authority or governmental authority or to
determine such compliance.
Section 7.2.5 REMEDIES NOT LIMITED. Subject to Section 5.2(u) and
Section 7.5, nothing contained in this Section 7.2 shall limit the
authority of the Board of Trustees to take such other action as it deems
necessary or advisable to protect the Trust and the interests of its
Shareholders in preserving the Trust's status as a REIT.
Section 7.2.6 AMBIGUITY. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3 or
any definition contained in Section 7.1, the Board of Trustees shall have
the power to determine the application of the provisions of this Section
7.2 or Section 7.3 with respect to any situation based on the facts known
to it. If this Section 7.2 or Section 7.3 requires an action by the Board
of Trustees and this Declaration of Trust fails to provide specific
guidance with respect to such action, the Board of Trustees shall have the
power to determine the action to be taken so long as such action is not
contrary to the provisions of this Section 7.2 or Sections 7.1 or 7.3.
Section 7.2.7 EXCEPTIONS.
(a) The Board, in its sole and absolute discretion, may grant
to any Person who makes a request therefor an exception to the Ownership
Limit or the Excluded Holder Limit with respect to the ownership of any
series or class of Preferred Shares, subject to the following conditions
and limitations: (A) the Board shall have determined that (x) assuming such
Person would Beneficially Own or Constructively Own the maximum amount of
Common Shares and Preferred Shares permitted as a result of the exception
to be granted and (y) assuming that all other Persons who would be treated
as "individuals" for purposes of Section 542(a)(2) of the Code (determined
taking into account Section 856(h)(3)(A) of the Code) would Beneficially
Own or Constructively Own the maximum amount of Common Shares and Preferred
<PAGE>
Shares permitted under this Article VII (taking into account any exception,
waiver, or exemption granted under this Section 7.2.7 to (or with respect
to) such Persons), the Trust would not be "closely held" within the meaning
of Section 856(h) of the Code (assuming that the ownership of Shares is
determined during the second half of a taxable year) and would not
otherwise fail to qualify as a REIT; and (B) such Person provides to the
Board such representations and undertakings, if any, as the Board may, in
its sole and absolute discretion, determine to be necessary in order for it
to make the determination that the conditions set forth in clause (A) above
of this Section 7.2.7(a) have been or will continue to be satisfied
(including, without limitation, an agreement as to a reduced Ownership
Limit, for such Person with respect to the Beneficial Ownership or
Constructive Ownership of one or more other classes of Shares not subject
to the exception), and such Person agrees that any violation of such
representations and undertakings or any attempted violation thereof will
result in the application of the remedies set forth in Section 7.2 with
respect to Shares held in excess of the Ownership Limit (as may be
applicable) with respect to such Person (determined without regard to the
exception granted such Person under this subparagraph (a)). If a member of
the Board requests that the Board grant an exception pursuant to this
subparagraph (a) with respect to such member or with respect to any other
Person if such Board member would be considered to be the Beneficial Owner
or Constructive Owner of Shares owned by such Person, such member of the
Board shall not participate in the decision of the Board as to whether to
grant any such exception.
(b) In addition to exceptions permitted under subparagraph
(a) above, the Board in its sole and absolute discretion, may grant to any
Person who makes a request therefor an exception from the Ownership Limit
if: (i) such Person submits to the Board information satisfactory to the
Board, in its reasonable discretion, demonstrating that such Person is not
an individual for purposes of Section 542(a)(2) of the Code (determined
taking into account Section 856(h)(3)(A) of the Code) and (ii) such Person
provides to the Board such representations and undertakings, if any, as the
Board may, in its reasonable discretion, require to ensure that the
conditions in clause (i) hereof is satisfied and will continue to be
satisfied throughout the period during which such Person owns Shares in
excess of the Ownership Limit pursuant to any exception thereto granted
under this subparagraph (b), and such Person agrees that any violation of
such representations and undertakings or any attempted violation thereof
will result in the application of the remedies set forth in Section 7.2
with respect to Shares held in excess of the Ownership Limit with respect
to such Person (determined without regard to the exception granted such
Person under this subparagraph (b)).
(c) Prior to granting any exception or exemption pursuant to
subparagraph (a) or (b), the Board must receive a ruling from the Internal
Revenue Service or advice of counsel, in either case in form and substance
satisfactory to the Board, in its sole and absolute discretion, as it may
deem necessary or advisable in order to determine or ensure the Trust's
status as a REIT.
(d) Subject to Section 7.2.1(a)(ii), an underwriter that
participates in a public offering or a private placement of Shares (or
securities convertible into or exchangeable for Shares) may Beneficially
Own or Constructively Own Shares (or securities convertible into or
exchangeable for Shares) in excess of the Ownership Limit, but only to the
extent necessary to facilitate such public offering or private placement;
and, provided, that the ownership of Shares by such underwriter would not
result in the Trust being "closely held" within the meaning of Section
856(h) of the Code, or otherwise result in the Trust's failing to qualify
as a REIT.
Section 7.2.8 INCREASE IN OWNERSHIP LIMIT. The Board of Trustees
may from time to time increase the Ownership Limit, subject to the
limitations provided in this Section 7.2.8.
<PAGE>
(a) The Ownership Limit may not be increased if, after giving
effect to such increase, five Persons who are considered individuals
pursuant to Section 542 of the Code, as modified by Section 856(h)(3) of
the Code, could Beneficially Own, in the aggregate, more than 49.5% of the
value of the outstanding Shares.
(b) Prior to the modification of the Ownership Limit pursuant
to this Section 7.2.8, the Board may require such opinions of counsel,
affidavits, undertakings or agreements as it may deem necessary or
advisable in order to determine or ensure the Trust's status as a REIT if
the modification in the Ownership Limit were to be made.
Section 7.2.9 LEGEND. Each certificate for Shares shall bear
substantially the following legend:
The Shares represented by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and Transfer for the
purpose of the Trust's maintenance of its status as a real estate
investment trust (a "REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"). Subject to certain further restrictions and except
as expressly provided in the Trust's Declaration of Trust, (i) no Person
may Beneficially Own or Constructively Own Common Shares of the Trust in
excess of 9.8 percent (in value or number of Shares) of the outstanding
Common Shares of the Trust; (ii) with respect to any class or series of
Preferred Shares, no Person may Beneficially Own or Constructively Own more
than 9.8 percent (in value or number of Shares) of the outstanding Shares
of such class or series of Preferred Shares of the Trust; (iii) no Person
may Beneficially Own or Constructively Own Shares that would result in the
Trust being "closely held" under Section 856(h) of the Code or otherwise
cause the Trust to fail to qualify as a REIT; and (iv) no Person may
Transfer Shares if such Transfer would result in Shares of the Trust being
owned by fewer than 100 Persons. Any Person who Beneficially Owns or
Constructively Owns or attempts to Beneficially Own or Constructively Own
Shares which cause or will cause a Person to Beneficially Own or
Constructively Own Shares in excess or in violation of the above
limitations must immediately notify the Trust. If any of the restrictions
on transfer or ownership are violated, the Shares represented hereby will
be automatically transferred to a Charitable Trustee of a Charitable Trust
for the benefit of one or more Charitable Beneficiaries. In addition, upon
the occurrence of certain events, attempted Transfers in violation of the
restrictions described above may be void ab initio. A Person who attempts
to Beneficially Own or Constructively Own Shares in violation of the
ownership limitations described above shall have no claim, cause of action,
or any recourse whatsoever against a transferor of such Shares. Unless
otherwise defined herein, all capitalized terms in this legend have the
meanings defined in the Trust's Declaration of Trust, as the same may be
amended from time to time, a copy of which, including the restrictions on
transfer and ownership, will be furnished to each holder of Shares of the
Trust on request and without charge.
Instead of the foregoing legend, the certificate may state that the
Trust will furnish a full statement about certain restrictions on
transferability to a Shareholder on request and without charge.
Section 7.3. Transfer of Shares in Trust.
Section 7.3.1 OWNERSHIP IN TRUST. Upon any purported Transfer or
other event described in Section 7.2.1(b) that would result in a transfer
of Shares to a Charitable Trust, such Shares shall be deemed to have been
transferred to the Charitable Trustee as trustee of a Charitable Trust for
the exclusive benefit of one or more Charitable Beneficiaries. Such
transfer to the Charitable Trustee shall be deemed to be effective as of
the close of business on the Business Day prior to the purported Transfer
or other event that results in the transfer to the Charitable Trust
pursuant to Section 7.2.1(b). The Charitable Trustee shall be appointed by
the Trust and shall be a Person unaffiliated with the Trust and any
Prohibited Owner. Each Charitable Beneficiary shall be designated by the
Trust as provided in Section 7.3.7.
<PAGE>
Section 7.3.2 STATUS OF SHARES HELD BY THE CHARITABLE TRUSTEE.
Shares held by the Charitable Trustee shall be issued and outstanding
Shares of the Company. The Prohibited Owner shall have no rights in the
Shares held by the Charitable Trustee. The Prohibited Owner shall not
benefit economically from ownership of any Shares held in trust by the
Charitable Trustee, shall have no rights to dividends or other
distributions and shall not possess any rights to vote or other rights
attributable to the Shares held in the Charitable Trust. The Prohibited
Owner shall have no claim, cause of action, or any other recourse
whatsoever against the purported transferor of such Shares.
Section 7.3.3 DIVIDEND AND VOTING RIGHTS. The Charitable Trustee
shall have all voting rights and rights to dividends or other distributions
with respect to Shares held in the Charitable Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any
dividend or other distribution paid prior to the discovery by the Trust
that Shares have been transferred to the Charitable Trustee shall be paid
by the recipient thereof with respect to such Shares to the Charitable
Trustee upon demand and any dividend or other distribution authorized but
unpaid shall be paid when due to the Charitable Trustee. Any dividends or
distributions so paid over to the Charitable Trustee shall be held in trust
for the Charitable Beneficiary. The Prohibited Owner shall have no voting
rights with respect to Shares held in the Charitable Trust and, subject to
Maryland law, effective as of the date that Shares have been transferred to
the Charitable Trustee, the Charitable Trustee shall have the authority (at
the Charitable Trustee's sole discretion) (i) to rescind as void any vote
cast by a Prohibited Owner prior to the discovery by the Trust that Shares
have been transferred to the Charitable Trustee and (ii) to recast such
vote in accordance with the desires of the Charitable Trustee acting for
the benefit of the Charitable Beneficiary; provided, however, that if the
Trust has already taken irreversible action, then the Charitable Trustee
shall not have the power to rescind and recast such vote. Notwithstanding
the provisions of this Article VII, until the Trust has received
notification that Shares have been transferred into a Charitable Trust, the
Trust shall be entitled to rely on its share transfer and other Shareholder
records for purposes of preparing lists of Shareholders entitled to vote at
meetings, determining the validity and authority of proxies and otherwise
conducting votes of Shareholders.
Section 7.3.4 RIGHTS UPON LIQUIDATION. Upon any voluntary or
involuntary liquidation, dissolution or winding up of or any distribution
of the assets of the Trust, the Charitable Trustee shall be entitled to
receive, ratably with each other holder of Shares of the class or series of
Shares that is held in the Charitable Trust, that portion of the assets of
the Trust available for distribution to the holders of such class or series
(determined based upon the ratio that the number of Shares or such class or
series of Shares held by the Charitable Trustee bears to the total number
of Shares of such class or series of Shares then outstanding). The
Charitable Trustee shall distribute any such assets received in respect of
the Shares held in the Charitable Trust in any liquidation, dissolution or
winding up of, or distribution of the assets of the Trust, in accordance
with Section 7.3.5.
Section 7.3.5 SALE OF SHARES BY CHARITABLE TRUSTEE. Within 20
days of receiving notice from the Trust that Shares have been transferred
to the Charitable Trust, the Charitable Trustee of the Charitable Trust
shall sell the Shares held in the Charitable Trust to a person, designated
by the Charitable Trustee, whose ownership of the Shares will not violate
the ownership limitations set forth in Section 7.2.1(a). Upon such sale,
the interest of the Charitable Beneficiary in the Shares sold shall
terminate and the Charitable Trustee shall distribute the net proceeds of
the sale to the Prohibited Owner and to the Charitable Beneficiary as
provided in this Section 7.3.5. The Prohibited Owner shall receive the
lesser of (1) the price paid by the Prohibited Owner for the Shares or, if
the Prohibited Owner did not give value for the Shares in connection with
the event causing the Shares to be held in the Charitable Trust (e.g., in
the case of a gift, devise or other such transaction), the Market Price of
<PAGE>
the Shares on the day of the event causing the Shares to be held in the
Charitable Trust and (2) the price per share received by the Charitable
Trustee from the sale or other disposition of the Shares held in the
Charitable Trust. Any net sales proceeds in excess of the amount payable to
the Prohibited Owner shall be immediately paid to the Charitable
Beneficiary. If, prior to the discovery by the Trust that Shares have been
transferred to the Charitable Trustee, such Shares are sold by a Prohibited
Owner, then (i) such Shares shall be deemed to have been sold on behalf of
the Charitable Trust and (ii) to the extent that the Prohibited Owner
received an amount for such Shares that exceeds the amount that such
Prohibited Owner was entitled to receive pursuant to this Section 7.3.5,
such excess shall be paid to the Charitable Trustee upon demand.
Section 7.3.6 PURCHASE RIGHT IN SHARES TRANSFERRED TO THE
CHARITABLE TRUSTEE. Shares transferred to the Charitable Trustee shall be
deemed to have been offered for sale to the Trust, or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that resulted in such transfer to the Charitable Trust (or, in
the case of a devise or gift, the Market Price at the time of such devise
or gift) and (ii) the Market Price on the date the Trust, or its designee,
accepts such offer. The Trust shall have the right to accept such offer
until the Charitable Trustee has sold the Shares held in the Charitable
Trust pursuant to Section 7.3.5. Upon such a sale to the Trust, the
interest of the Charitable Beneficiary in the Shares sold shall terminate
and the Charitable Trustee shall distribute the net proceeds of the sale to
the Prohibited Owner.
Section 7.3.7 DESIGNATION OF CHARITABLE BENEFICIARIES. By written
notice to the Charitable Trustee, the Trust shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in
the Charitable Trust such that (i) Shares held in the Charitable Trust
would not violate the restrictions set forth in Section 7.2.1(a) in the
hands of such Charitable Beneficiary and (ii) each such organization must
be described in Sections 501(c)(3), 170(b)(1)(A) or 170(c)(2) of the Code.
Section 7.4.Restrictions on Ownership and Transfer of Shares by
Benefit Plans.
Section 7.4.1 OWNERSHIP LIMITATIONS. Notwithstanding any other
provisions herein, if and to the extent that any Shares do not constitute
Publicly Offered Securities, then Benefit Plan Investors may not, on any
date, hold, individually or in the aggregate, 25 percent or more of the
value of such class of Shares. For purposes of determining whether Benefit
Plan Investors hold, individually or in the aggregate, 25 percent or more
of the value of such class of Shares, the value of Shares of such class
held by any Trustee or officer of the Trust, or any other Person who has
discretionary authority or control with respect to the assets of the Trust,
or any Person who provides investment advice for a fee to the Trust in
connection with its assets, shall be disregarded.
Section 7.4.2 REMEDIES FOR VIOLATIONS BY BENEFIT PLAN INVESTORS.
If the Board of Trustees or any duly authorized committee thereof shall at
any time determine in good faith that (i) a Transfer or other event has
taken place that results in a violation of Section 7.4.1 or will otherwise
result in the underlying assets and property of the Trust becoming assets
of any ERISA Investor or (ii) that a Person intends to acquire or has
attempted to acquire or hold Shares in a manner that will result in a
violation of Section 7.4.1 or will otherwise result in the underlying
assets and property of the Trust becoming assets of any ERISA Investor, the
Board of Trustees or a committee thereof shall take such action as it deems
advisable to mitigate, prevent or cure the consequences that might result
to the Trust from such Transfer or other event, including without
limitation, refusing to give effect to or preventing such Transfer or event
through redemption of such Shares or refusal to give effect to the Transfer
or event on the books of the Trust, or instituting proceedings to enjoin
such Transfer or other event.
<PAGE>
Section 7.4.3 INFORMATION ON BENEFIT PLAN STATUS. Any Person who
acquires or attempts or intends to acquire or hold Shares shall provide to
the Trust such information as the Trust may request in order to determine
whether such acquisition or holding has or will result in a violation of
Section 7.4.1 or otherwise result in the underlying assets and property of
the Trust becoming assets of any ERISA Investor, including the name and
address of any Person for whom a nominee holds Shares and whether the
underlying assets of such Person include assets of any Benefit Plan
Investor.
Section 7.5. NYSE TRANSACTIONS. Nothing in this Article VII
shall preclude the settlement of any transaction entered into through the
facilities of the NYSE or any other national securities exchange or
automated inter-dealer quotation system; provided, that the fact that the
settlement of any transaction takes place shall not negate the effect of
any other provision of this Article VII and any transferee in such a
transaction shall be subject to all of the provisions and limitations set
forth in this Article VII.
Section 7.6. ENFORCEMENT. The Trust is authorized specifically
to seek equitable relief, including injunctive relief, to enforce the
provisions of this Article VII.
Section 7.7. NON-WAIVER. No delay or failure on the part of the
Trust or the Board of Trustees in exercising any right hereunder shall
operate as a waiver of any right of the Trust or the Board of Trustees, as
the case may be, except to the extent specifically waived in writing.
ARTICLE VIII.
SHAREHOLDERS
Section 8.1. MEETINGS. There shall be an annual meeting of the
Shareholders, to be held on proper notice at such time (after the delivery
of the annual report as provided in the Bylaws) and convenient location as
shall be determined by or in the manner prescribed in the Bylaws, for the
election of the Trustees, if required, and for the transaction of any other
business within the powers of the Trust. Except as otherwise provided in
this Declaration of Trust, special meetings of Shareholders may be called
in the manner provided in the Bylaws. If there are no Trustees, the
officers of the Trust shall promptly call a special meeting of the
Shareholders entitled to vote for the election of successor Trustees. Any
meeting may be adjourned and reconvened as the Trustees determine or as
provided in the Bylaws.
Section 8.2.VOTING RIGHTS. Subject to the provisions of any class or
series of Shares then outstanding, the Shareholders shall be entitled to
vote only on the following matters: (a) election of Trustees as provided in
Section 5.4 and the removal of Trustees as provided in Section 5.5; (b)
amendment of this Declaration of Trust as provided in Article X; (c)
termination of the Trust as provided in Section 12.2; (d) reorganization,
merger or consolidation of the Trust, or the sale or disposition of
substantially all of the property of the Trust, as provided in Article XI;
(e) such other matters with respect to which the Board of Trustees has
adopted a resolution declaring that a proposed action is advisable and
directing that the matter be submitted to the Shareholders for approval or
ratification (including, without limitation, a resolution recommending the
termination of the Trust's status as a real estate investment trust under
the Code pursuant to Section 5.2(u) hereof); and (f) such other matters as
may be properly brought before a meeting by a Shareholder pursuant to the
Bylaws. Except with respect to the foregoing matters, no action taken by
the Shareholders at any meeting shall in any way bind the Board of
Trustees.
Section 8.3. PREEMPTIVE AND APPRAISAL RIGHTS. Except as may be
provided by the Board of Trustees in setting the terms of classified or
reclassified Preferred Shares pursuant to Section 6.3, no holder of Shares
shall, as such holder, (a) have any preemptive right to purchase or
subscribe for any additional Shares of the Trust or any other security of
<PAGE>
the Trust which it may issue or sell or (b) except as expressly required by
Title 8, have any right to require the Trust to pay him the fair value of
his Shares in an appraisal or similar proceeding.
Section 8.4. EXTRAORDINARY ACTIONS. Except as otherwise
specifically provided in this Declaration of Trust (including without
limitation, in those provisions relating to election and removal of
Trustees and changes in the number of authorized Shares), notwithstanding
any provision of law permitting or requiring any action to be taken or
authorized by the affirmative vote of the holders of a greater number of
votes, any such action shall be effective and valid if taken or authorized
by the affirmative vote of not less than sixty-six and two-thirds percent
(66 2/3%) of all the votes entitled to be cast on the matter.
Section 8.5. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Subject
to Title 8 and any other applicable provisions of law, the Bylaws may
provide that any action required or permitted to be taken at a meeting of
the Shareholders may be taken without a meeting by the written consent of
all Shareholders entitled to vote on such matter; provided, that all
Shareholders entitled to notice of any such meeting but not entitled to
vote on such matter shall have made a written waiver of any right to
dissent to such action taken without a meeting.
ARTICLE IX.
LIABILITY LIMITATION, INDEMNIFICATION AND
TRANSACTIONS WITH THE TRUST
Section 9.1. LIMITATION OF SHAREHOLDERS' LIABILITY. No
Shareholder shall be liable for any debt, claim, demand, judgment or
obligation of any kind of, against or with respect to the Trust by reason
of his being a Shareholder, nor shall any Shareholders be subject to any
personal liability whatsoever, in tort, contract or otherwise, to any
person in connection with the property or the affairs of the Trust by
reason of his being a Shareholder.
Section 9.2. LIMITATION OF TRUSTEE AND OFFICER LIABILITY. To the
maximum extent that Maryland law in effect from time to time permits
limitation of the liability of trustees and officers of a real estate
investment trust, no Trustee or officer of the Trust shall be liable to the
Trust or to any Shareholders for money damages. Neither the amendment nor
repeal of this Section 9.2, nor the adoption or amendment of any other
provision of this Declaration of Trust inconsistent with this Section 9.2,
shall apply to or affect in any respect the applicability of the preceding
sentence with respect to any act or failure to act which occurred prior to
such amendment, repeal or adoption. In the absence of any Maryland statute
limiting the liability of trustees and officers of a Maryland real estate
investment trust for money damages in a suit by or on behalf of the Trust
or by any Shareholders, no Trustee or officer of the Trust shall be liable
to the Trust or to any Shareholders for money damages except to the extent
that (a) the Trustee or officer actually received an improper benefit or
profit in money, property or services, for the amount of the benefit or
profit in money, property or services actually received, or (b) a judgment
or other final adjudication adverse to the Trustee or officer is entered in
a proceeding based on a finding in the proceeding that the Trustee's or
officer's action or failure to act was material to the cause of action
adjudicated in the proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty.
Section 9.3. INDEMNIFICATION. The Trust shall have the power, to
the maximum extent permitted by Maryland law in effect from time to time,
to obligate itself to indemnify, and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to, (a) any
individual who is a present or former Shareholder, Trustee or officer of
the Trust or (b) any individual who, while a Trustee of the Trust and at
the request of the Trust, serves or has served as a director, officer,
partner, trustee, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise from
<PAGE>
and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or
former Shareholder, Trustee or officer of the Trust. The Trust shall have
the power, with the approval of its Board of Trustees, to provide such
indemnification and advancement of expenses to a person who served a
predecessor of the Trust in any of the capacities described in (a) or (b)
above and to any employee or agent of the Trust or a predecessor of the
Trust.
Section 9.4. TRANSACTIONS BETWEEN THE TRUST AND ITS TRUSTEES,
OFFICERS, EMPLOYEES AND AGENTS. Subject to any express restrictions in this
Declaration of Trust or adopted by the Trustees in the Bylaws or by
resolution, the Trust may enter into any contract or transaction of any
kind with any person, including any Trustee, officer, employee or agent of
the Trust or any person affiliated with a Trustee, officer, employee or
agent of the Trust, whether or not any of them has a financial interest in
such transaction.
Section 9.5. EXPRESS EXCULPATORY CLAUSES IN INSTRUMENTS. The
Board of Trustees shall cause to be inserted in every written agreement,
undertaking or obligation made or issued on behalf of the Trust, an
appropriate provision to the effect that neither the Shareholders nor the
Trustees, officers, employees or agents of the Trust shall be liable under
any written instrument creating an obligation of the Trust, and all persons
shall look solely to the property of the Trust for the payment of any claim
under or for the performance of that instrument. The omission of the
foregoing exculpatory language from any instrument shall not affect the
validity or enforceability of such instrument and shall not render any
Shareholder, Trustee, officer, employee or agent liable thereunder to any
third party nor shall the Trustees or any officer, employee or agent of the
Trust be liable to anyone for such omission.
ARTICLE X.
AMENDMENTS
Section 10.1. GENERAL. The Trust reserves the right from time to
time to make any amendment to this Declaration of Trust, now or hereafter
authorized by law, including any amendment altering the terms or contract
rights, as expressly set forth in this Declaration of Trust, of any Shares.
All rights and powers conferred by this Declaration of Trust on
Shareholders, Trustees and officers are granted subject to this
reservation. Articles of Amendment to this Declaration of Trust (a) shall
be signed and acknowledged by at least a majority of the Trustees, or an
officer duly authorized by at least a majority of the Trustees, (b) shall
be filed for record as provided in Section 13.5 and (c) shall become
effective as of the later of the time the SDAT accepts the Articles of
Amendment for record or the time established in the Articles of Amendment,
not to exceed 30 days after the Articles of Amendment are accepted for
record. All references to this Declaration of Trust shall include all
amendments thereto.
Section 10.2. BY TRUSTEES. The Trustees may amend this
Declaration of Trust from time to time, in the manner provided by Title 8,
without any action by the Shareholders, to qualify as a real estate
investment trust under the Code or under Title 8.
Section 10.3. BY SHAREHOLDERS. Except as otherwise provided in
this Declaration of Trust, any amendment to this Declaration of Trust shall
be valid only if proposed in a resolution adopted by the Board of Trustees,
which resolution shall set forth the proposed amendment and declare that it
is advisable, and approved at an annual or special meeting of Shareholders
by the affirmative vote of not less than two-thirds of all the votes
entitled to be cast on the matter.
<PAGE>
ARTICLE XI.
REORGANIZATION; MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY
Section 11.1. REORGANIZATION. Subject to the provisions of any
class or series of Shares at the time outstanding, the Trustees shall have
the power (i) to cause the organization of a corporation, association,
trust or other organization to take over the property of the Trust and
carry on the affairs of the Trust, or (ii) merge the Trust into, or sell,
convey and transfer the property of the Trust to, any such corporation,
association, trust or organization in exchange for securities thereof or
beneficial interests therein, and the assumption by the transferee of the
liabilities of the Trust, and upon the occurrence of (i) or (ii) above
terminate the Trust and deliver such securities or beneficial interests
ratably among the Shareholders according to the respective rights of the
class or series of Shares held by them; provided, however, that any such
action shall have been approved, at a meeting of the Shareholders called
for that purpose, by the affirmative vote of the holders of not less than
two-thirds of the Shares then outstanding and entitled to vote thereon.
Section 11.2. MERGER, CONSOLIDATION OR SALE OF PROPERTY OF THE
TRUST. Subject to the provisions of any class or series of Shares at the
time outstanding, the Trustees shall have the power to (a) merge into
another entity, (b) consolidate the Trust with one or more other entities
into a new entity or (c) sell, lease, exchange or otherwise transfer or
dispose of all or substantially all of the property of the Trust. Any such
action must be approved by the Board of Trustees and, after notice to all
Shareholders entitled to vote on the matter, by the affirmative vote of not
less than two-thirds of all the votes entitled to be cast on the matter.
ARTICLE XII.
DURATION AND TERMINATION OF TRUST
Section 12.1. DURATION. The Trust shall continue perpetually
unless terminated pursuant to Section 12.2 or pursuant to any applicable
provision of Title 8.
Section 12.2. TERMINATION.
(a) Subject to the provisions of any class or series of
Shares at the time outstanding, the Trust may be terminated at any meeting
of Shareholders, by the affirmative vote of two-thirds of all the votes
entitled to be cast on the matter. Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose of winding
up its affairs.
(i) The Trustees shall proceed to wind up the affairs
of the Trust and all of the powers of the Trustees under this Declaration
of Trust shall continue, including the powers to fulfill or discharge the
Trust's contracts, collect its assets, sell, convey, assign, exchange,
transfer or otherwise dispose of all or any part of the remaining property
of the Trust to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities and do all
other acts appropriate to liquidate its business.
(ii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases, indemnities
and agreements as they deem necessary for their protection, the Trustees
may distribute the remaining property of the Trust among the Shareholders
so that after payment in full or the setting apart for payment of such
preferential amounts, if any, to which the holders of any Shares at the
time outstanding shall be entitled, the remaining property of the Trust
shall, subject to any participating or similar rights of Shares at the time
outstanding, be distributed ratably among the holders of Common Shares at
the time outstanding.
<PAGE>
(b) After termination of the Trust, the liquidation of its
business and the distribution to the Shareholders as herein provided, a
majority of the Trustees shall execute and file with the Trust's records a
document certifying that the Trust has been duly terminated, and the
Trustees shall be discharged from all liabilities and duties hereunder, and
the rights and interests of all Shareholders shall cease.
ARTICLE XIII.
MISCELLANEOUS
Section 13.1. GOVERNING LAW. This Declaration of Trust is
executed by the undersigned Trustees and delivered in the State of Maryland
with reference to the laws thereof, and the rights of all parties and the
validity, construction and effect of every provision hereof shall be
subject to and construed according to the laws of the State of Maryland
without regard to conflicts of laws provisions thereof.
Section 13.2. RELIANCE BY THIRD PARTIES. Any certificate shall be
final and conclusive as to any person dealing with the Trust if executed by
the Secretary or an Assistant Secretary of the Trust or a Trustee, and if
certifying to: (a) the number or identity of Trustees, officers of the
Trust or Shareholders; (b) the due authorization of the execution of any
document; (c) the action or vote taken, and the existence of a quorum, at a
meeting of the Board of Trustees or Shareholders; (d) a copy of this
Declaration of Trust or of the Bylaws as a true and complete copy as then
in force; (e) an amendment to this Declaration of Trust; (f) the
termination of the Trust; or (g) the existence of any fact or relating to
the affairs of the Trust. No purchaser, lender, transfer agent or other
person shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trust on its behalf or by any
officer, employee or agent of the Trust.
Section 13.3. SEVERABILITY.
(a) The provisions of this Declaration of Trust are
severable, and if the Board of Trustees shall determine, with the advice of
counsel, that any one or more of such provisions (the "Conflicting
Provisions") are in conflict with the Code, Title 8 or other applicable
federal or state laws, the Conflicting Provisions, to the extent of the
conflict, shall be deemed never to have constituted a part of this
Declaration of Trust, even without any amendment of this Declaration of
Trust pursuant to Article X and without affecting or impairing any of the
remaining provisions of this Declaration of Trust or rendering invalid or
improper any action taken or omitted prior to such determination. No
Trustee shall be liable for making or failing to make such a determination.
(b) If any provision of this Declaration of Trust shall be
held invalid or unenforceable in any jurisdiction, such holding shall apply
only to the extent of any such invalidity or unenforceability and shall not
in any manner affect, impair or render invalid or unenforceable such
provision in any other jurisdiction or any other provision of this
Declaration of Trust in any jurisdiction.
Section 13.4. CONSTRUCTION. In this Declaration of Trust, unless
the context otherwise requires, words used in the singular or in the plural
include both the plural and singular and words denoting any gender include
all genders. The title and headings of different parts are inserted for
convenience and shall not affect the meaning, construction or effect of
this Declaration of Trust. In defining or interpreting the powers and
duties of the Trust and its Trustees and officers, reference may be made by
the Trustees or officers, to the extent appropriate and not inconsistent
with the Code or Title 8, to Titles 1 through 3 of the Corporations and
Associations Article of the Annotated Code of Maryland.
<PAGE>
Section 13.5. RECORDATION. This Declaration of Trust and any
Articles of Amendment hereto shall be filed for record with the SDAT and
may also be filed or recorded in such other places as the Trustees deem
appropriate, but failure to file for record this Declaration of Trust or
any Articles of Amendment hereto in any office other than in the State of
Maryland shall not affect or impair the validity or effectiveness of this
Declaration of Trust or any amendment hereto. A restated Declaration of
Trust shall, upon filing, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of the original
Declaration of Trust and the various Articles of Amendment thereto.
THIRD: The amendment to and restatement of the Declaration of Trust of the
Trust as hereinabove set forth has been duly approved and advised by the
Board of Trustees by majority vote thereof and approved by the sole
shareholder of the Trust as required by law.
FOURTH: The current address of the principal office of the Trust is 220
East 42nd Street, New York, New York 10017.
FIFTH: The name and address of the Trust's current resident agent is as
set forth in Article IV of the foregoing amendment and restatement of the
Declaration of Trust of the Trust.
SIXTH: The number of trustees of the Trust and the names of those
currently in office are as set forth in Article V of the foregoing
amendment and restatement of the Declaration of Trust of the Trust.
IN WITNESS WHEREOF, these Articles of Amendment and Restatement of
Declaration of Trust have been signed on this 24th day of April, 1998 by
all of the Trustees of the Trust, each of whom acknowledges, that this
document is his free act and deed, and that to the best of his knowledge,
information, and belief, the matters and facts set forth herein are true in
all material respects and that the statement is made under the penalties
for perjury.
_________/S/STUART L. SCOTT
Stuart L. Scott
_________/S/JON E. BORTZ
Jon E. Bortz
EXHIBIT 3.2
- -----------
LASALLE HOTEL PROPERTIES
BYLAWS
LaSalle Hotel Properties, a real estate investment trust
organized under the laws of the State of Maryland (the "Trust") having the
Corporation Trust Incorporated as its resident agent located at 300 East
Lombard Street, Baltimore, Maryland 21202, hereby adopts the following as
the Bylaws (as the same may be amended from time to time, the "Bylaws") of
the Trust:
ARTICLE I.
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of LaSalle Hotel
Properties (the "Trust") shall be located at such place or places as the
Trustees may designate.
Section 2. ADDITIONAL OFFICES. The Trust may have additional
offices at such places as the Trustee may from time to time determine or
the business of the Trust may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All meetings of shareholders shall be held at the
principal office of the Trust or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. The Trust shall hold its first annual
meeting of shareholders in May 1999. Thereafter, an annual meeting of the
shareholders for the election of Trustees and the transaction of any
business within the powers of the Trust shall be held during the month of
May of each year, after the delivery of the annual report referred to in
Section 12 of this Article II, at a convenient location and on proper
notice, on a date and at the time set by the Trustees, beginning with the
year 2000. Failure to hold an annual meeting does not invalidate the
Trusts existence or affect any otherwise valid acts of the Trust.
Section 3. SPECIAL MEETINGS. The Chairman of the Board or the
President or one-third of the Trustees may call special meetings of the
shareholders. Special meetings of shareholders shall also be called by the
Secretary upon the written request of the holders of shares entitled to
cast not less than a majority of all the votes entitled to be cast at such
meeting. Such request shall state the purpose of such meeting and the
matters proposed to be acted on at such meeting. Within ten (10) days of
the receipt of such a request, the Secretary shall inform such shareholders
of the reasonably estimated cost of preparing a mailing notice of the
meeting (including all proxy materials that may be required in connection
therewith) and, upon payment by such shareholders to the Trust of such
costs, the Secretary shall, within thirty (30) days of such payment, or
such longer period as may be necessitated by compliance with any applicable
statutory or regulatory requirements, give notice to each shareholder
entitled to notice of the meeting.
Unless requested by shareholders entitled to cast a majority of
all the votes entitled to be cast at such meeting, a special meeting need
not be called to consider any matter which is substantially the same as a
matter voted on at any meeting of the shareholders held during the
preceding twelve months.
Section 4. NOTICE. Not less than ten nor more than 90 days before
each meeting of shareholders, the Secretary shall give to each shareholder
entitled to vote at such meeting and to each shareholder not entitled to
<PAGE>
vote who is entitled to notice of the meeting written or printed notice
stating the time and place of the meeting and, in the case of a special
meeting or as otherwise may be required by any statute, the purpose for
which the meeting is called, either by mail or by presenting it to such
shareholder personally or by leaving it at his residence or usual place of
business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the shareholder at his
post office address as it appears on the records of the Trust, with postage
thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Trust may be
transacted at an annual meeting of shareholders without being specifically
designated in the notice, except such business as is required by any
statute to be stated in such notice. No business shall be transacted at a
special meeting of shareholders except as specifically designated in the
notice.
Section 6. ORGANIZATION. At every meeting of the shareholders, the
Chairman of the Board, if there be one, shall conduct the meeting or, in
the case of vacancy in office or absence of the Chairman of the Board, one
of the following officers present shall conduct the meeting in the order
stated: the Vice Chairman of the Board, if there be one, the Chief
Executive Officer, if there be one, the President, the Vice Presidents in
their order of rank and seniority, or a Chairman chosen by the shareholders
entitled to cast a majority of the votes which all shareholders present in
person or by proxy are entitled to cast, shall act as Chairman, and the
Secretary, or, in his absence, an Assistant Secretary, or in the absence of
both the Secretary and Assistant Secretaries, a person appointed by the
Chairman shall act as Secretary.
Section 7. QUORUM. At any meeting of shareholders, the presence in
person or by proxy of shareholders entitled to cast a majority of all the
votes entitled to be cast at such meeting shall constitute a quorum; but
this section shall not affect any requirement under any statute or the
declaration of trust ("Declaration of Trust") for the vote necessary for
the adoption of any measure. If, however, such quorum shall not be present
at any meeting of the shareholders, the shareholders entitled to vote at
such meeting, present in person or by proxy, shall have the power to
adjourn the meeting from time to time to a date not more than 120 days
after the original record date without notice other than announcement at
the meeting. At such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the
meeting as originally notified.
Section 8. VOTING. Subject to the rights of the holders of any
series of Preferred Shares (as defined in the Declaration of Trust) to
elect additional Trustees under specified circumstances, a plurality of all
the votes cast at a meeting of shareholders duly called and at which a
quorum is present shall be sufficient to elect a Trustee. Each share may
be voted for as many individuals as there are Trustees to be elected and
for whose election the share is entitled to be voted. A majority of the
votes cast at a meeting of shareholders duly called and at which a quorum
is present shall be sufficient to approve any other matter which may
properly come before the meeting, unless more than a majority of the votes
cast is required herein or by statute or by the Declaration of Trust.
Unless otherwise provided in the Declaration of Trust, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders.
Section 9. PROXIES. A shareholder may cast the votes entitled to be
cast by the shares owned of record by him either in person or by proxy
executed in writing by the shareholder or by his duly authorized attorney
in fact. Such proxy shall be filed with the Secretary of the Trust before
or at the time of the meeting. No proxy shall be valid after eleven months
from the date of its execution, unless otherwise provided in the proxy.
<PAGE>
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Trust
registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee hereof, as the case may be, or a
proxy appointed by any of the foregoing individuals, unless some other
person who has been appointed to vote such shares pursuant to a bylaw or a
resolution of the governing board of such corporation or other entity or
agreement of the partners of the partnership presents a certified copy of
such bylaw, resolution or agreement, in which case such person may vote
such shares. Any trustee or other fiduciary may vote shares registered in
his name as such fiduciary, either in person or by proxy.
Shares of the Trust directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may
be voted and shall be counted in determining the total number of
outstanding shares at any given time.
The Trustees may adopt by resolution a procedure by which a
shareholder may certify in writing to the Trust that any shares registered
in the name of the shareholder are held for the account of a specified
person other than the shareholder. The resolution shall set forth the
class of shareholders who may make the certification, the purpose for which
the certification may be made, the form of certification and the
information to be contained in it; if the certification is with respect to
a record date or closing of the share transfer books, the time after the
record date or closing of the share transfer books within which the
certification must be received by the Trust; and any other provisions with
respect to the procedure which the Trustees consider necessary or
desirable. On receipt of such certification, the person specified in the
certification shall be regarded as, for the purposes set forth in the
certification, the shareholder of record of the specified shares in place
of the shareholder who makes the certification.
Notwithstanding any other provision contained herein or in the
Declaration of Trust or these Bylaws, Title 3, Subtitle 7 of the
Corporations and Associations Article of the Annotated Code of Maryland (or
any successor statute) shall not apply to any acquisition by any person of
shares of beneficial interest of the Trust. This section may be repealed,
in whole or in part, at any time, whether before or after an acquisition of
control shares and, upon such repeal, may, to the extent provided by any
successor bylaw, apply to any prior or subsequent control share
acquisition.
Section 11. INSPECTORS. At any meeting of shareholders, the chairman
of the meeting may appoint one or more persons as inspectors for such
meeting. Such inspectors shall ascertain and report the number of shares
represented at the meeting based upon their determination of the validity
and effect of proxies, count all votes, report the results and perform such
other acts as are proper to conduct the election and voting with
impartiality and fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by
him or by a majority of them if there is more than one inspector acting at
such meeting. If there is more than one inspector, the report of a
majority shall be the report of the inspectors. The report of the
inspector or inspectors on the number of shares represented at the meeting
and the results of the voting shall be prima facie evidence thereof.
Section 12. REPORTS TO SHAREHOLDERS. The Trustees shall submit to
the shareholders at or before the annual meeting of shareholders a report
of the business and operations of the Trust during the prior fiscal year,
containing a balance sheet and a statement of income and surplus of the
Trust, accompanied by the certification of an independent certified public
accountant, and such further information as the Trustees may determine is
required pursuant to any law or regulation to which the Trust is subject.
Within the earlier of 20 days after the annual meeting of shareholders or
<PAGE>
120 days after the end of the fiscal year of the Trust, the Trustees shall
place the annual report on file at the principal office of the Trust and
with any governmental agencies as may be required by law and as the
Trustees may deem appropriate.
Section 13. NOMINATIONS AND PROPOSALS BY SHAREHOLDERS.
(a) Annual Meetings of Shareholders. (1) Nominations
ofpersons for election to the Board of Trustees and the proposal of
business to be considered by the shareholders may be made at an annual
meeting of the shareholders (i) pursuant to the Trust's notice of meeting,
(ii) by or at the direction of the Trustees or (iii) by any shareholder of
the Trust who was a shareholder of record both at the time of giving of
notice provided for in this Section 13(a) and at the time of the annual
meeting, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 13(a).
(2) For nominations or other business to be properly
brought before an annual meeting by a shareholder pursuant to clause (iii)
of paragraph (a) (1) of this Section 13, the shareholder must have given
timely notice thereof in writing to the Secretary of the Trust and such
other business must otherwise be a proper matter for action by
shareholders. To be timely, a shareholder's notice shall be delivered to
the Secretary at the principal executive offices of the Trust not later
than the close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date
of the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from such anniversary date or if the Trust has not previously
held an annual meeting, notice by the shareholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to
such annual meeting and not later than the close of business on the later
of 60th day prior to such annual meeting or the tenth day following the day
on which public announcement of the date of such meeting is first made by
the Trust. In no event shall the public announcement of a postponement or
adjournment of an annual meeting to a later date or time commence a new
time period for the giving of a shareholder's notice as described above.
Such shareholder's notice shall set forth as to each person whom the
shareholder proposes to nominate for election or reelection as a Trustee
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of Trustees in an election contest,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named int he proxy statement as a
nominee and to serving as a Trustee if elected); (ii) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and of the beneficial owner,
if any, on whose behalf the proposal is made; and (iii) as to the
shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
shareholder, as they appear on the Trust's books, and of such beneficial
owner and (y) the number of each class of shares of the Trust which are
owned beneficially and of record by such shareholder and such beneficial
owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this Section 13 to the contrary, in the event that the
number of Trustees to be elected to the Board of Trustees is increased and
there is no public announcement by the Trust naming all of the nominees for
Trustee or specifying the size of the increased Board of Trustees at least
70 days prior to the first anniversary of the preceding year's annual
meeting, a shareholder's notice required by this Section 13(a) shall also
be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Trust not later than
the close of business on the tenth day following the day on which such
public announcement is first made by the Trust.
<PAGE>
(b) Special Meetings of the Shareholders. Only such business
shall be conducted at a special meeting of shareholders as shall have been
brought before the meeting pursuant to the Trust's notice of meeting.
Nominations of persons for election to the Board of Trustees may be made at
a special meeting of shareholders at which Trustees are to be elected (i)
pursuant to the Trust's notice of meeting (ii) by or at the direction ofthe
Board of Trustees or (iii) provided that the Board of Trustees
hasdetermined that Trustees shall be elected at such special meeting, by
any shareholder of the Trust who was a shareholder of record both at the
time of giving of notice provided for in this Section 13(b) and at the time
of the special meeting, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section 13(b). In
addition to the foregoing requirements, for nominations or other business
to be properly brought before a special meeting by a shareholder, such
shareholder's notice containing the information required by paragraph (a)
(2) of this Section 13 must be delivered to the Secretary at the principal
executive offices of the Trust not earlier than the close of business on
the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the
tenth day following the day on which public announcement is first made of
the date of the special meeting. In no event shall the public announcement
of a postponement or adjournment of a special meeting to a later date or
time commence a new time period for the giving of a shareholder's notice as
described above.
(c) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 13 shall be
eligible to serve as Trustees and only such business shall be conducted at
a meeting of shareholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 13. The chairman
of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was
made or proposed, as the case may be, in accordance with the procedures set
forth in this Section 13 and, if any proposed nomination or business is not
in compliance with this Section 13, to declare that such nomination or
proposal shall be disregarded.
(2) For purposes of this Section 13, "public
announcement" shall mean disclosure in a press release reported by the Dow
Jones News Service, Associate Press or comparable news service or in a
document publicly filed by the Trust with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 13, a shareholder shall also comply with all applicable
requirements of state law and of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in this
Section 13. Nothing in this Section 13 shall be deemed to affect any
rights of shareholders to request inclusion of proposals in, nor any of the
rights of the Trust to omit a proposal from, the Trust's proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
Section 14. INFORMAL ACTION BY SHAREHOLDERS. Subject to the rights
of the holders of any series of Preferred Shares to elect additional
Trustees under specified circumstances and notwithstanding the provisions
of Section 13 of this Article II, any action required or permitted to be
taken at a meeting of shareholders may be taken without a meeting if a
consent in writing, setting forth such action, is signed by all
shareholders entitled to vote on such matters; provided, that all
shareholders entitled to notice of any such meeting but not entitled to
vote on such matter shall have made a written waiver of any right to
dissent to such action taken without a meeting.
Section 15. VOTING BY BALLOT. Voting on any question or in any
election at a meeting of shareholders may be viva voce unless the presiding
officer shall order or any shareholder present at such meeting in person or
by proxy shall demand that voting be by ballot.
<PAGE>
ARTICLE III.
TRUSTEES
Section 1. GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER.
The business and affairs of the Trust shall be managed under the direction
of its Board of Trustees. A Trustee shall be an individual atleast 21
years of age who is not under legal disability. In case of failure to
elect Trustees at an annual meeting of the shareholders, the Trustees
holding over shall continue to direct the management of the business and
affairs of the Trust until their successors are elected and qualify.
Section 2. NUMBER. At any regular meeting or at any special meeting
called for that purpose, a majority of the entire Board of Trustees may
establish, increase or decrease the number of Trustees, subject to any
limitations on the number of Trustees set forth in the Declaration of
Trust.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Trustees shall be held immediately after and at the same place as the
annual meeting of shareholders, no notice other than this Bylaw being
necessary. The Trustees may provide, by resolution, the time and place,
either within or without the State of Maryland, for the holding of regular
meetings of the Trustees without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Trustees may
be called by or at the request of the Chairman of the Board, the Chief
Executive Officer or the President or by a majority of the Trustees then in
office. The person or persons authorized to call special meetings of the
Trustees may fix any place, either within or without the State of Maryland,
as the place for holding any special meeting of the Trustees called by
them.
Section 5. NOTICE. Notice of any special meeting shall be given by
written notice delivered personally, telegraphed, facsimile-transmitted or
mailed to each Trustee at his business or residence address. Personally
delivered or telegraphed notices shall be given at least two days prior to
the meeting. Notice by mail shall be given at least five days prior to the
meeting. Telephone or facsimile-transmission notice shall be given at
least 24 hours prior to the meeting. If mailed, such notice shall be
deemed to be given when deposited in the United States mail properly
addressed, with postage thereon prepaid. If given by telegram, such notice
shall be deemed to be given when the telegram is delivered to the telegraph
company. Telephone notice shall be deemed given when the Trustee is
personally given such notice in a telephone call to which he is a party.
Facsimile-transmission notice shall be deemed given upon completion of the
transmission of the message to the number given to the Trust by the Trustee
and receipt of a completed answer-back indicating receipt. Neither the
business to be transacted at, nor the purpose of, any annual, regular or
special meeting of the Trustees need be stated in the notice, unless
specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the Trustees shall constitute a
quorum for convening any meeting of the Trustees, provided that, if less
than a majority of such Trustees are present at said meeting, a majority of
the Trustees present may adjourn the meeting from time to time without
further notice, and provided further that if, pursuant to the Declaration
of Trust or these Bylaws, the vote of a majority of a particular group of
Trustees is required for action, a quorum must also include a majority of
such group.
The Trustees present at a meeting which has been duly called
and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Trustees to leave less than a
quorum.
<PAGE>
Section 7. VOTING. The action of the majority of the Trustees
present at a meeting at which a quorum is present when such meeting is
convened shall be the action of the Trustees, unless the concurrence of a
greater proportion is required for such action by applicable statute, the
Declaration of Trust or these Bylaws.
Section 8. TELEPHONE MEETINGS. Trustees may participate in a
meeting by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each otherat
the same time. Participation in a meeting by these means shall constitute
presence in person at the meeting.
Section 9. INFORMAL ACTION BY TRUSTEES. Any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting, if a consent in writing to such action is signed by each Trustee
and such written consent is filed with the minutes of proceedings of the
Trustees.
Section 10. VACANCIES. If for any reason any or all of the Trustees
cease to be Trustees, such event shall not terminate the Trust or affect
these Bylaws or the powers of the remaining Trustees hereunder (even if
fewer than two Trustees remain). Any vacancy (including a vacancy created
by an increase in the number of Trustees) shall be filled, at any regular
meeting or at any special meeting called for that purpose, by a majority of
the Trustees. Any individual so elected as Trustee shall hold office until
the next annual meeting of Shareholders and until his successor is elected
and qualifies.
Section 11. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Trustees
may from time to time appoint a Chairman of the Board and a Vice Chairman
of the Board. The Chairman of the Board shall preside over the meetings of
the Trustees and of the shareholders at which he shall be present and shall
in general oversee all the business and affairs of the Trust. In the
absence of the Chairman of the Board, the Vice Chairman of the Board shall
preside at such meetings at which he shall be present. The Chairman and
the Vice Chairman of the Board may execute any deed, mortgage, bond,
contract or other instrument, except in cases where the execution thereof
shall be expressly delegated by the Trustees or by these Bylaws to an
officer or some other agent of the Trust or shall be required by law to be
otherwise executed. The Chairman of the Board and the Vice Chairman of the
Board shall perform such other duties as may be assigned to him or them by
the Trustees.
Section 12. COMPENSATION. Trustees shall not receive any stated
salary for their services as Trustees but, by resolution of the Trustees,
may receive fixed sums per year or per meeting or per visit to real
property owned or to be acquired by the Trust and for any service or
activity they perform or engage in as Trustees. Such fixed sums may be
paid either in cash or in shares of the Trust. Trustees may be reimbursed
for expenses of attendance, if any, at each annual, regular or special
meeting of the Trustees or of any committee thereof; and for their
expenses, if any, in connection with each property visit and any other
service or activity performed or engaged in as Trustees; but nothing herein
contained shall be construed to preclude any Trustees from serving the
Trust in any other capacity and receiving compensation therefor.
Section 13. REMOVAL OF TRUSTEES. The shareholders may at any time,
remove any Trustee in the manner provided in the Declaration of Trust.
Subject to the rights of the holders of any series of Preferred Shares to
elect additional Trustees resulting from the removal of one or more
Trustees or under other specified circumstances, the shareholders may elect
a successor to fill a vacancy on the Board of Trustees which results from
the removal of a Trustee.
Section 14. LOSS OF DEPOSITS. No Trustee shall be liable for any
loss which may occur by reason of the failure of the bank, trust company,
savings and loan association, or other institution with whom moneys or
shares have been deposited.
<PAGE>
Section 15. SURETY BONDS. Unless required by law, no Trustee shall
be obligated to give any bond or surety or other security for the
performance of any of his duties.
Section 16. RELIANCE. Each Trustee, officer, employee and agent of
the Trust shall, in the performance of his duties with respect to the
Trust, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel or upon reports made to the Trust
by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Trustees or
officers of the Trust, regardless of whether such counsel or expert may
also be a Trustee.
Section 17. INTERESTED TRUSTEE TRANSACTIONS. Section 2-419 of the
Maryland General Corporation Law (the "MGCL") shall be available for and
apply to any contract or other transaction between the Trust and any of its
Trustees or between the Trust and any other trust, corporation, firm or
other entity in which any of its Trustees is a trustee or director or has a
material financial interest.
Section 18. CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. The Trustees shall have no responsibility to devote their full
time to the affairs of the Trust. Any Trustee or officer, employee or
agent of the Trust (other than a full-time officer, employee or agent of
the Trust), in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar or in addition to those
of or relating to the Trust.
ARTICLE IV.
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATION. The Trustees may
appoint from among its members an Executive Committee, an Audit Committee
and a Compensation Committee, each composed of at least two Trustees, and
other committees, each composed of one or more Trustees, to serve at the
pleasure of the Trustees; provided, that the membership of the Compensation
Committee shall consist of a majority of Independent Trustees and the
membership of the Audit Committee shall consist only of Independent
Trustees so long as they continue in office. An individual shall be deemed
to be an "Independent Trustee" hereunder if such individual is not an
affiliate of the Trust and is not an employee of the Trust.
Section 2. POWERS. The Trustees may delegate to committees
appointed under Section 1 of this Article IV any of the powers of the
Trustees, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in
the same manner as notice for special meetings of the Board of Trustees.
One-third, but not less than two (except for one-member committees), of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business
at such meeting, and the act of a majority present shall be the act of such
committee. The Board of Trustees may designate a chairman of any
committee, and such chairman or any two members of any committee (except
for one-member committees) may fix the time and place of its meetings
unless the Board shall otherwise provide. In the absence or
disqualification of any member of any such committee, the members thereof
present at any meeting and not disqualified from voting, whether or not
they constitute a quorum, may unanimously appoint another Trustee to act at
the meeting in the place of such absent or disqualified members.
Each Committee shall keep minutes of its proceedings and shall
report the same to the Board of Trustees at the next succeeding meeting,
and any action by the committee shall be subject to revision and alteration
by the Board of Trustees, provided that no rights of third persons shall be
affected by any such revision or alteration.
<PAGE>
Section 4. TELEPHONE MEETINGS. Members of a committee of the
Trustees may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the
meeting can hear each other at the same time. Participation in a meeting
by these means shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Trustees maybe
taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board
of Trustees shall have the power at any time to change the membership of
any committee, to fill all vacancies, to designate alternate members to
replace any absent or disqualified member or to dissolve any such
committee.
Section 7. EMERGENCY. In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the affairs
and business of the Trust by its Trustees and officers as contemplated by
the Declaration of Trust and these Bylaws, any two or more available
members of the then incumbent Executive Committee shall constitute a quorum
of that Committee for the full conduct and management of the affairs and
business of the Trust in accordance with the provisions of this Article IV.
In the event of the unavailability, at such time, of a minimum of two
members of the then incumbent Executive Committee, the available Trustees
shall elect an Executive Committee composed of any two members of the Board
of Trustees, whether or not they be officers of the Trust, which two
members shall constitute the Executive Committee for the full conduct and
management of the affairs of the Trust in accordance with the foregoing
provisions of this Section 7. This Section 7 shall be subject to
implementation by resolution of the Board of Trustees passed from time to
time for that purpose, and any provisions of the Bylaws (other than this
Section 7) and any resolutions which are contrary to the provisions of this
Section 7 or to the provisions of any such implementing resolutions shall
be suspended until it shall be determined by any interim Executive
Committee acting under this Section 7 that it shall be to the advantage of
the Trust to resume the conduct and management of its affairs and business
under all the other provisions of these Bylaws.
ARTICLE V.
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Trust shall
include a President, a Secretary and a Treasurer and may include a Chief
Executive Officer, a Chief Operating Officer, a Chief Financial Officer, a
Chief Legal Counsel, one or more Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers. In addition, the
Trustees may from time to time appoint such other officers with such powers
and duties as they shall deem necessary or desirable. The officers of the
Trust shall be elected annually by the Trustees at the first meeting of the
Trustees held after each annual meeting of shareholders. If the election
of officers shall not be held at such meeting, such election shall be held
as soon thereafter as may be convenient. Each officer shall hold office
until his successor is elected and qualifies or until his death,
resignation or removal in the manner hereinafter provided. Any two or more
offices except President and Vice President may be held by the same person.
In their discretion, the Trustees may leave unfilled any office except that
of President and Secretary. Election of an officer or agent shall not of
itself create contract rights between the Trust and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Trust may be removed at any time by the Trustees if in their judgment the
best interests of the Trust would be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so
removed. Any officer of the Trust may resign at any time by giving written
<PAGE>
notice of his resignation to the Trustees, the Chairman of the Board, the
President or the Secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time when it shall
become effective is not specified therein, immediately upon its receipt.
The acceptance of a resignation shall not be necessary to make it effective
unless otherwise stated in the resignation. Such resignation shall be
without prejudice to the contract rights, if any, of the Trust.
Section 3. VACANCIES. A vacancy in any office may be filledby the
Trustee for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Trustees may designate a
Chief Executive Officer from among the elected officers. The Chief
Executive Officer shall have responsibility for implementation of the
policies of the Trust, as determined by the Trustees, and for the
administration of the business affairs of the Trust. In the absence of
both the Chairman and Vice Chairman of the Board, the Chief Executive
Officer shall preside over the meetings of the Trustees and of the
shareholders at which he shall be present.
Section 5. PRESIDENT. In the absence of the Chairman, the Vice
Chairman of the Board and the Chief Executive Officer, the President shall
preside over the meetings of the Trustees and of the shareholders at which
he shall be present. In the absence of a designation of a Chief Executive
Officer by the Trustees, the President shall be the Chief Executive Officer
and shall be ex officio a member of all committees that may, from time to
time, be constituted by the Trustees. The President may execute any deed,
mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Trustees or by these
Bylaws to some other officer or agent of the Trust or shall be required by
law to be otherwise executed; and in general shall perform all duties
incident to the office of President and such other duties as may be
prescribed by the Chief Executive Officer or the Trustees from time to
time.
Section 6. CHIEF OPERATING OFFICER. The Trustees may designate a
Chief Operating Officer from among the elected officers. Said officer will
have the responsibilities and duties as set forth by the Chief Executive
Officer, the President or the Trustees.
Section 7. VICE PRESIDENTS. In the absence of the President or in
the event of a vacancy in such office, the Vice President (or in the event
there be more than one Vice President, the Vice Presidents in the order
designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall perform the duties
of the President and when so acting shall have all the powers of and be
subject to all the restrictions upon the President; and shall perform such
other duties as from time to time may be assigned to him or her by the
Chief Executive Officer, the President or the Trustees. The Trustees may
designate one or more Vice Presidents as Executive Vice President, Senior
Vice President or as Vice President for particular areas of responsibility.
Section 8. TREASURER. The Treasurer shall have the custody of the
funds and securities of the Trust and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Trust and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Trust in such depositories as may be designated by the Trustees.
The Treasurer shall disburse the funds of the Trust as may be
ordered by the Trustees, taking proper vouchers for such disbursements, and
shall render to the Chief Executive Officer, the President and the
Trustees, at the regular meetings of the Trustees or whenever they may
require it, an account of all his or her transactions as Treasurer and of
the financial condition of the Trust.
<PAGE>
If required by the Trustees, the Treasurer shall give the Trust
a bond in such sum and with such surety or sureties as shall be
satisfactory to the Trustees for the faithful performance of the duties of
his or her office and for the restoration of the Trust, in case of his or
her death, resignation, retirement or removal from office, of all books,
papers, vouchers, moneys and other property of whatever kind in his or her
possession or under his or her control belonging to the Trust.
Section 9. CHIEF FINANCIAL OFFICER. The Trustees may designate a
Chief Financial Officer from among the elected officers. Said officer will
have the responsibilities and duties as set forth by the Chief Executive
Officer, the President or the Trustees.
Section 10. CHIEF LEGAL COUNSEL. The Trustees may designate a Chief
Legal Counsel from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Chief Executive Officer,
the President or the Trustees.
Section 11. SECRETARY. The Secretary shall (a) keep the minutes of
the proceedings of the shareholders, the Trustees and committees of the
Trustees in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the Trust records and of the seal
of the Trust; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder;
(e) have general charge of the share transfer books of the Trust; and (f)
in general perform such other duties as from time to time may be assigned
to him by the Chief Executive Officer, the President or the Trustees.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform
such duties as shall be assigned to them by the Secretary or Treasurer,
respectively, or by the Chief Executive Officer, the President or the
Trustees. The Assistant Treasurers shall, if required by the Trustees,
give bonds for the faithful performance of their duties in such sums and
with such surety or sureties as shall be satisfactory to the Trustees.
Section 13. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Trustees and no officer
shall be prevented from receiving such salary or other compensation by
reason of the fact that he or she is also a Trustee.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Trustees may authorize any officer or
agent to enter into any contract or to execute and deliver any instrument
in the name of and on behalf of the Trust and such authority may be general
or confined to specific instances. Any agreement, deed, mortgage, lease or
other document executed by one or more of the Trustees or by an authorized
person shall be valid and binding upon the Trustees and upon the Trust when
authorized or ratified by action of the Trustees.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued
in the name of the Trust shall be signed by such officer or agent of the
Trust in such manner as shall from time to time be determined by the
Trustees.
Section 3. DEPOSITS. All funds of the Trust not otherwise employed
shall be deposited from time to time to the credit of the Trust in such
banks, trust companies or other depositories as the Trustees may designate.
<PAGE>
ARTICLE VII.
SHARES
Section 1. CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of beneficial interest held by him in the Trust. Each
certificate shall be signed by the Chief Executive Officer, the President
or a Vice President and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and may be sealed with
the seal, if any, of the Trust. The signatures may be either manual or
facsimile. Certificates shall be consecutively numbered; and if the Trust
shall, from time to time, issue several classes of shares, each class may
have its own number series. A certificate is valid and may be issued
whether or not an officer who signed it is still an officer when it is
issued. Each certificate representing shares which are restricted as to
their transferability or voting powers, which are preferred or limited as
to their dividends or as to their allocable portion of the assets upon
liquidation or which are redeemable at the option of the Trust, shall have
a statement of such restriction, limitation, preference or redemption
provision, or a summary thereof, plainly stated on the certificate. In
lieu of such statement or summary, the Trust may set forth upon the face or
back of the certificate a statement that the Trust will furnish to any
shareholder, upon request and without charge, a full statement of such
information.
Section 2. TRANSFERS. Certificates shall be treated as negotiable
and title thereto and to the shares they represent shall be transferred by
delivery thereof to the same extent as those of a Maryland stock
corporation. Upon surrender to the Trust or the transfer agent of the
Trust of a share certificate duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the Trust
shall issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
The Trust shall be entitled to treat the holder of record of
any share or shares as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Maryland.
Notwithstanding the foregoing, transfers of shares of
beneficial interest of the Trust will be subject in all respects to the
Declaration of Trust and all of the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Trustees may direct a new certificate to be issued in place of any
certificate previously issued by the Trust alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the
person claiming the certificate to be lost, stolen or destroyed. When
authorizing the issuance of a new certificate, an officer designated by the
Trustees may, in his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or the owner's legal representative to advertise the same in
such manner as he shall require or to give bond, with sufficient surety, to
the Trust to indemnify it against any loss or claim which may arise as a
result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Trustees may set, in advance, a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of
shareholders or determining shareholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of shareholders for any other proper purpose. Such date, in
any case, shall not be prior to the close of business on the day the record
date is fixed and shall be not more than 90 days and, in the case of a
meeting of shareholders not less than ten days, before the date on which
<PAGE>
the meeting or particular action requiring such determination of
shareholders of record is to be held or taken.
In lieu of fixing a record date, the Trustees may provide that
the share transfer books shall be closed for a stated period but not longer
than 20 days. If the share transfer books are closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days before the
date of such meeting.
If no record date is fixed and the share transfer books are not
closed for the determination of shareholders, (a) the record date for the
determination of shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the day on which the
notice of meeting is mailed or the 30th day before the meeting, whichever
is the closer date to the meeting; and (b) the record date for the
determination of shareholders entitled to receive payment of a dividend or
an allotment of any other rights shall be the close of business on the day
on which the resolution of the Trustees, declaring the dividend or
allotment of rights, is adopted.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except when (i) the
determination has been made through the closing of the transfer books and
the stated period of closing has expired or (ii) the meeting is adjourned
to a date more than 120 days after the record date fixed for the original
meeting, in either of which case a new record date shall be determined as
set forth herein.
Section 5. SHARE LEDGER. The Trust shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
shareholder and the number of shares of each class held by such
shareholder.
Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS. The Trustees may
issue fractional shares or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any
other provision of the Declaration of Trust or these Bylaws, the Trustees
may issue units consisting of different securities of the Trust. Any
security issued in a unit shall have the same characteristics as any
identical securities issued by the Trust, except that the Trustees may
provide that for a specified period securities of the Trust issued in such
unit may be transferred on the books of the Trust only in such unit.
ARTICLE VIII.
FISCAL YEAR
The Trustees shall have the power, from time to time, to fix
the fiscal year of the Trust by a duly adopted resolution.
ARTICLE IX.
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon
the shares of beneficial interest of the Trust may be authorized and
declared by the Trustees, subject to the provisions of law and the
Declaration of Trust. Dividends and other distributions may be paid in
cash, property or shares of the Trust, subject to the provisions of law and
the Declaration of Trust.
<PAGE>
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any funds of the Trust
available for dividends or other distributions such sum or sums as the
Trustees may from time to time, in their absolute discretion, think proper
as a reserve fund for contingencies, for equalizing dividends or other
distributions, for repairing or maintaining any property of the Trust or
for such other purpose as the Trustees shall determine to be in the best
interest of the Trust, and the Trustees may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X.
PROHIBITED INVESTMENTS AND ACTIVITIES;
INVESTMENT POLICIES
Notwithstanding anything to the contrary in the Declaration of
Trust, the Trust shall not enter into any transaction referred to in (i),
(ii) or (iii) below which it does not believe is in the best interests of
the Trust, and will not, without the approval of a majority of the
disinterested Trustees (other than in connection with the initial public
offering of shares by the Trust or pursuant to agreements entered into in
connection with such offering), (i) acquire from or sell to any Trustee,
officer or employee of the Trust, any corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in which a
Trustee, officer or employee of the Trust owns more than a one percent
interest or any affiliate of any of the foregoing, any of the assets or
other property of the Trust, (ii) make any loan to or borrow from any of
the foregoing persons or (iii) engage in any other transaction with any of
the foregoing persons. Each such transaction will be in all respects on
such terms as are, at the time of the transaction and under the
circumstances then prevailing, fair and reasonable to the Trust. Subject
to the foregoing and the provisions of the Declaration of Trust, the Board
of Trustees may from time to time adopt, amend, revise or terminate any
policy or policies with respect to investments by the Trust as it shall
deem appropriate in its sole discretion.
ARTICLE XI.
SEAL
Section 1. SEAL. The Trustees may authorize the adoption of a seal
by the Trust. The seal shall have inscribed thereon the name of the Trust
and the year of its formation. The Trustees may authorize one or more
duplicate seals and provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the Trust is permitted or
required to affix its seal to a document, it shall be sufficient to meet
the requirements of any law, rule or regulation relating to a seal to place
the word "(SEAL)" adjacent to the signature of the person authorized to
execute the document on behalf of the Trust.
ARTICLE XII.
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from
time to time, the Trust shall indemnify (a) any Trustee, officer or
shareholder or any former Trustee, officer or shareholder (including among
the foregoing, for all purposes of this Article XII and without limitation,
any individual who, while a Trustee, officer or shareholder and at the
express request of the Trust, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other
enterprise as a director, officer, shareholder, partner or trustee of such
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) who has been successful, on the merits or otherwise, in
the defense of a proceeding to which he was made a party by reason of
service in such capacity, against reasonable expenses incurred by him in
connection with the proceeding, (b) any Trustee or officer or any former
<PAGE>
Trustee or officer against any claim or liability to which he may become
subject by reason of such status unless it is established that (i) his act
or omission was material to the matter giving rise to the proceeding and
was committed in bad faith or was the result of active and deliberate
dishonesty, (ii) he actually received an improper personal benefit in
money, property or services or (iii) in the case of a criminal proceeding,
he had reasonable cause to believe that his act or omission was unlawful
and (c) each shareholder or former shareholder against any claim or
liability to which he may become subject by reason of such status. In
addition, the Trust shall, without requiring a preliminary determination of
the ultimate entitlement to indemnification, pay or reimburse, in advance
of final disposition of a proceeding, reasonable expenses incurred by a
Trustee, officer or shareholder or former Trustee, officer or shareholder
made a party to a proceeding by reason of such status, provided that, in
the case of a Trustee or officer, the Trust shall have received (i) a
written affirmation by the Trustee or officer of his good faith belief that
he has met the applicable standard of conduct necessary for indemnification
by the Trust as authorized by these Bylaws and (ii) a written undertaking
by or on his behalf to repay the amount paid or reimbursed by the Trust if
it shall ultimately be determined that the applicable standard of conduct
was not met. The Trust may, with the approval of its Trustees, provide
such indemnification or payment or reimbursement of expenses to any
Trustee, officer or shareholder or any former Trustee, officer or
shareholder who served a predecessor of the Trust and to any employee or
agent of the Trust or a predecessor of the Trust. Neither the amendment
nor appeal of this Article, nor the adoption or amendment of any other
provision of the Declaration of Trust or these Bylaws inconsistent with
this Article, shall apply to or affect in any respect the applicability of
this Article with respect to any act or failure to act which occurred prior
to such amendment, repeal or adoption.
Any indemnification or payment or reimbursement of the expenses
permitted by these Bylaws shall be furnished in accordance with the
procedures provided for indemnification or payment or reimbursement of
expenses, as the case may be, under Section 2-418 of the MGCL for directors
of Maryland corporations. The Trust may provide to Trustees, officers and
shareholders such other and further indemnification or payment or
reimbursement of expenses, as the case may be, to the fullest extent
permitted by the MGCL, as in effect from time to time, for directors of
Maryland corporations.
ARTICLE XIII.
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the
Declaration of Trust or Bylaws or pursuant to applicable law, a waiver
thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be
transacted at nor the purpose of any meeting need be set forth in the
waiver of notice, unless specifically required by statute. The attendance
of any person at any meeting shall constitute a waiver of notice of such
meeting, except where such person attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
ARTICLE XIV.
AMENDMENT OF BYLAWS
The Trustees shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
<PAGE>
ARTICLE XV.
MISCELLANEOUS
All references to the Declaration of Trust shall include any
amendments thereto. In these Bylaws, unless the context otherwise
requires, words used in the singular or in the plural include both the
plural and singular and words denoting any gender include all genders.
* * * *
EXHIBIT 4.1
- -----------
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND CANNOT BE SOLD OR
TRANSFERRED UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS AN EXEMPTION
UNDER SUCH ACT OR LAWS IS AVAILABLE.
LASALLE HOTEL PROPERTIES
Common Share Purchase Right
LaSalle Hotel Properties (the "Company"), a Maryland real estate
investment trust, hereby certifies that, for value received, LaSalle Hotel
Advisors, Inc., or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company Common Shares of the Company equal to
457,346 fully paid and non-assessable common shares of beneficial interest,
par value $.01 per share, of the Company (the "Common Shares"), at a
purchase price, subject to the provisions of Paragraph 3 hereof, of $18.00
per Common Share (the "Purchase Price") at any time and from time to time
after one year from the date of issuance and prior to April 29, 2008 or, at
the option of the Company, the Company shall cause LaSalle Hotel Operating
Partnership, L.P. (the "Partnership") to issue units of limited partnership
(the "Units") on a one Common Share for one Unit basis). The number and
character of such shares are subject to adjustment as provided below, and
the term "Common Share" or "Unit" shall mean, unless the context otherwise
requires, the shares of beneficial interest, limited partnership interests,
stock or other securities or property at the time deliverable upon the
exercise of this Right.
1. EXERCISE OF RIGHT. The purchase rights evidenced by this Right
shall be exercised by the holder hereof ("Holder") surrendering this Right,
with the form of subscription at the end hereof duly executed by such
Holder, to the Company at its office in New York, New York (or such other
office as may be designated by the Company from time to time), accompanied
by payment of the Purchase Price (as provided below). This Right may be
exercised for less than the full number of Common Shares or Units at the
time called for hereby, in which case the number of Common Shares or Units
receivable upon the exercise of this Right as a whole, and the sum payable
upon the exercise of this Right as a whole, shall be proportionately
reduced. Upon any such partial exercise, the Company at its expense will
forthwith issue to the Holder hereof a new Right or Rights of like tenor
calling for the number of Common Shares or Units as to which rights have
not been exercised, such Right or Rights to be issued in the name of the
Holder hereof or his nominee.
The Purchase Price may be paid, at the election of the Holder of this
Right: in cash (by readily available funds wire transfer) or by certified
or bank cashier's check.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Right and payment of the Purchase
Price, and in any event within five (5) business days thereafter, the
Company, at its expense, will cause to be issued in the name of and
delivered to the Holder hereof a certificate or certificates for the number
of fully paid and non-assessable Common Shares, Units (if certificated) or
other securities or property to which such Holder shall be entitled upon
such exercise, plus, in lieu of any fractional share or unit interest to
which such Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full Common Share or
Unit or other securities to which such Holder shall be so entitled.
3. ADJUSTMENT FOR ISSUE OR SALE OF COMMON SHARES AT LESS THAN
PURCHASE PRICE. In case, at any time or from time to time after the date
of issuance of this Right ("Issuance Date"), the Company shall issue Common
Shares (other than (i) securities outstanding on the date hereof, (ii)
awards made pursuant to any company stock option plan awarded to officers,
the Company's Board of Trustees, employees or advisors to the Company, or
(iii) awards made pursuant to any incentive compensation plan or
<PAGE>
arrangement approved by the Company's Board of Trustees or by the
Compensation Committee of the Company's Board of Trustees, (such
securities, collectively, the "Subject Securities")) for a consideration
per share less than the Current Market Price (as defined below) per share
(the Current Market Price being the "Trigger Price") (or, if a Pro Forma
Adjusted Trigger Price shall be in effect as provided below in this
Paragraph 3, then less than such Pro Forma Adjusted Trigger Price per
share), then and in each such case the Holder of this Right, upon the
exercise hereof as provided in Paragraph 1 hereof, shall be entitled to
receive, in lieu of Common Shares or Units theretofore receivable upon the
exercise of this Right, a number of Common Shares or Units determined by
(a) dividing the Trigger Price by a Pro Forma Adjusted Trigger Price per
share to be computed as provided below in this Paragraph 3, and (b)
multiplying the resulting quotient by the number of Common Shares or Units
called for on the face of this Right. A Pro Forma Adjusted Trigger Price
per share shall be the price computed (to the nearest cent, a fraction of
half cent or more being considered a full cent):
by dividing (i) the sum of (x) the result obtained
by multiplying the number of Common Shares of the Company outstanding
immediately prior to such issue or sale by the Trigger Price (or, if a
prior Pro Forma Adjusted Trigger Price shall be in effect, by such Price),
and (y) the consideration, if any, received by the Company upon such issue
or sale, by (ii) the number of Common Shares of the Company outstanding
immediately after such issue or sale.
For the purposes hereof, the Current Market Price per Common Share on
any date shall be deemed to be the average of the daily closing prices for
the 10 consecutive Business Days before the day in question. The closing
price for each day shall be the last reported sales price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the
New York Stock Exchange or, if such Common Shares are not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which such Common Shares are listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange,
on the National Association of Securities Dealers Automated Quotations
National Market System or, if such Common Shares are not listed or admitted
to trading on any national securities exchange or quoted on such National
Market System, the average of the closing bid and asked prices in the over-
the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for the purpose. In the event
that no such market trading exists, the current market price of such Common
Shares will be determined by three independent nationally recognized
investment banking firms selected by the Company in such manner as the
Board of Trustees or an authorized committee thereof deems appropriate.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which the principal national securities exchange on
which the Common Shares are listed or the NASDAQ National Market System, if
the shares are quoted thereon or neither is applicable, the New York Stock
Exchange, is closed for trading. If any other securities of the Company
valued with reference to this Paragraph 3, their Current Market Value shall
be determined in a manner consist with the foregoing provisions of this
paragraph.
For the purpose of this Paragraph 3:
3.1. STOCK SPLITS, DIVIDENDS, ETC., IN COMMON SHARES OR CONVERTIBLE
SECURITIES. In case the Company splits its Common Shares or shall declare
any dividend, or make any other distribution, upon any beneficial interest
or other securities of the Company of any class payable in Common Shares,
or in any beneficial interest or other securities directly or indirectly
convertible into or exchangeable for Common Shares (any such beneficial
interest or other securities being hereinafter called "Convertible
Securities"), such split, declaration or distribution shall be deemed to be
an issue or sale (as of the record date for such split, dividend or other
<PAGE>
distribution), without consideration, of such Common Shares or such
Convertible Securities, as the case may be.
3.2. ISSUANCE OR SALE OF CONVERTIBLE SECURITIES. In case the
Company shall issue or sell any Convertible Securities other than the
Subject Securities, there shall be determined the price per share for which
Common Shares are issuable upon the conversion or exchange thereof, such
determination to be made by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (b) the maximum number of Common Shares of the Company
issuable upon the conversion or exchange of all such Convertible
Securities.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such price) as of the date of such issue or sale, then
such issue or sale shall be deemed to be an issue or sale for cash (as of
the date of issue or sale of such Convertible Securities) of such maximum
number of Common Shares at the price per share so determined, provided
that, if such Convertible Securities shall by their terms provide for an
increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company, or in the rate of
exchange, upon the conversion or exchange thereof, the Pro Forma Adjusted
Trigger Price per share shall, forthwith upon any such increase becoming
effective, be readjusted to reflect the same, and provided, further, that
upon the expiration of such rights of conversion or exchange of such
Convertible Securities, if any thereof shall not have been exercised, the
Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted
and thereafter be the price which it would have been had an adjustment been
made on the basis that the only Common Shares so issued or sold were those
issued or sold upon the conversion or exchange of such Convertible
Securities, and that they were issued or sold for the consideration
actually received by the Company upon such conversion or exchange, plus the
consideration, if any, actually received by the Company for the issue or
sale of all such Convertible Securities which shall have been converted or
exchanged.
3.3. GRANT OF RIGHTS OR OPTIONS FOR COMMON SHARES. In case the
Company shall grant any rights or options to subscribe for, purchase or
otherwise acquire Common Shares of any class other than the Subject
Securities, there shall be determined the price per share for which Common
Shares are issuable upon the exercise of such rights or options, such
determination to be made by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options, by (b) the maximum number of Common Shares issuable upon
the exercise of such rights or options.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such price) as of the date of such issue or sale, then
the granting of such rights or options shall be deemed to be an issue or
sale for cash (as of the date of the granting of such rights or options) of
such maximum number of Common Shares at the price per share so determined,
provided that, if such rights or options shall by their terms provide for
an increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company upon the exercise
thereof, the Pro Forma Adjusted Trigger Price per share shall, forthwith
upon any such increase becoming effective, be readjusted to reflect the
same, and provided, further, that upon the expiration of such rights or
options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made on the basis that the only Common Shares so issued or sold were those
issued or sold upon the exercise of such rights or options and that they
<PAGE>
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised.
3.4. GRANT OF RIGHTS OR OPTIONS FOR CONVERTIBLE SECURITIES. In case
the Company shall grant any rights or options to subscribe for, purchase or
otherwise acquire Convertible Securities other than the Subject Securities,
such Convertible Securities shall be deemed, for the purposes of
subparagraph 3.2. above, to have been issued or sold for the total amount
received or receivable by the Company as consideration for the granting of
such rights or options plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options, provided that, upon the expiration of such rights or
options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made upon the basis that the only Convertible Securities so issued or sold
were those issued or sold upon the exercise of such rights or options and
that they were issued or sold for the consideration actually received by
the Company upon such exercise, plus the consideration, if any, actually
received by the Company for the granting of all such rights or options,
whether or not exercised.
3.5. DILUTION IN CASE OF OTHER BENEFICIAL INTERESTS OR SECURITIES.
In case any shares of beneficial interest or other securities, other than
Common Shares of the Company, shall at any time be receivable upon the
exercise of this Right, and in case any additional shares of such
beneficial interest or any additional such securities (or any beneficial
interest or other securities convertible into or exchangeable for any such
beneficial interest or securities) shall be issued or sold for a
consideration per share such as to dilute the purchase rights evidenced by
this Right, then and in each such case the Pro Forma Adjusted Trigger Price
per share shall forthwith be adjusted, substantially in the manner provided
for above in this Paragraph 3, so as to protect the Holder of this Right
against the effect of such dilution.
3.6. EXPENSES, ETC., DEDUCTED. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Share or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor, after deducting
any expenses incurred and any underwriting or similar commissions,
compensation or concessions paid or allowed by the Company in connection
with such issue or sale.
3.7. DETERMINATION OF CONSIDERATION. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Shares or Convertible Securities shall be
issued or sold for a consideration other than cash (or a consideration
which includes cash and other assets) then, for the purpose of this
Paragraph 3, the Board of Trustees of the Company shall promptly determine
the fair value of such consideration, and such Common Shares, Convertible
Securities, rights or options shall be deemed to have been issued or sold
on the date of such determination in good faith. Such value shall not be
more than the amount at which such consideration is recorded in the books
of the Company for accounting purposes except in the case of an acquisition
accounted for on a pooling of interest basis. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Shares or Convertible Securities shall be
issued or sold together with other stock or securities or other assets of
the Company for a consideration which covers both, the Board of Trustees of
the Company shall promptly determine in good faith what part of the
consideration so received is to be deemed to be the consideration for the
issue or sale of such Common Shares or Convertible Securities or such
rights or options.
<PAGE>
The Company covenants and agrees that, should any determination
of fair value of consideration or of allocation of consideration be made by
the Board of Trustees of the Company, pursuant to this subparagraph 3.7, it
will, not less than seven (7) days after any and each such determination,
deliver to the Holder of this Right a certificate signed by the President
or a Vice President and the Treasurer or an Assistant Treasurer of the
Company reciting such value as thus determined and setting forth the nature
of the transaction for which such determination was required to be made,
the nature of any consideration, other than cash, for which Common Shares,
Convertible Securities, rights or options have been or are to be issued,
the basis for its valuation, the number of Common Shares which have been or
are to be issued, and a description of any Convertible Securities, rights
or options which have been or are to be issued, including their number,
amount and terms.
3.8. RECORD DATE DEEMED ISSUE DATE. In case the Company shall take
a record of the Holders of shares of any class for the purpose of entitling
them (a) to receive a dividend or a distribution payable in Common Shares
or in Convertible Securities, or (b) to subscribe for, purchase or
otherwise acquire Common Shares or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the Common
Shares issued or sold or deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution, or
the date of the granting of such rights of subscription, purchase or other
acquisition, as the case may be.
3.9. SHARES CONSIDERED OUTSTANDING. The number of Common Shares
outstanding at any given time shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of Common Shares, but shall
exclude shares in the treasury of the Company.
3.10. DURATION OF PRO FORMA ADJUSTED TRIGGER PRICE. Following each
computation or readjustment of a Pro Forma Adjusted Trigger Price as
provided in this Paragraph 3, the newly computed or adjusted Pro Forma
Adjusted Trigger Price shall remain in effect until a further computation
or readjustment thereof is required by this Paragraph 3.
4. ADJUSTMENT FOR DIVIDENDS IN OTHER SHARES OF BENEFICIAL
INTEREST, PROPERTY, ETC.; RECLASSIFICATIONS, ETC. In case at any time or
from time to time after the Issuance Date the holders of the Common Shares
of the Company of any class (or any other shares of beneficial interest or
other securities at the time receivable upon the exercise of this Right)
shall have received, or, on or after the record date fixed for the
determination of eligible shareholders, shall have become entitled to
receive:
(a) other or additional shares or other securities or
property (other than cash) by way of dividend;
(b) any cash paid or payable out of capital or paid-in
surplus or surplus created as a result of a revaluation of property by way
of dividend; or
(c) other or additional (or less) shares or other securities
or property (including cash) by way of stock-split, spin-off, split-off,
split-up, reclassification, combination of shares or similar corporate
rearrangement;
(other than additional Common Shares issued to holders of Common Shares as
a stock dividend or stock-split, adjustments in respect of which shall be
covered by the provisions of Paragraph 3 hereof), then in each case the
Holder of this Right, upon the exercise hereof as provided in Paragraph 1
hereof, shall be entitled to receive, in lieu of, or in addition to, as the
case may be, the shares theretofore receivable upon the exercise of this
Right, the amount of shares or other securities or property (including cash
in the cases referred to in clauses (b) and (c) above) which such Holder
would hold on the date of such exercise if, on the Issuance Date, he had
been the holder of record of the number of Common Shares of the Company
called for on the face of this Right and had thereafter, during the period
from the Issuance Date to and including the date of such exercise, retained
<PAGE>
such shares and/or all other or additional (or less) stock or other
securities or property (including cash in the cases referred to in clauses
(b) and (c) above) receivable by him as aforesaid during such period,
giving effect to all adjustments called for during such period by
Paragraphs 3 and 5 hereof.
5. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case of any reorganization of the Company (or any other trust, corporation,
or other entity the shares or other securities of which are at the time
deliverable on the exercise of this Right) after the date hereof, or in
case, after such date, the Company (or any such other trust, corporation or
other entity) shall consolidate with or merge into another trust,
corporation, or other entity or convey all or substantially all its assets
to another trust, corporation or other entity, then and in each such case
the Holder of this Right, upon the exercise hereof as provided in
Paragraph 1 hereof, at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive the shares or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had
exercised this Right immediately prior thereto, all subject to further
adjustments as provided in Paragraphs 3 and 4 hereof; in each such case,
the terms of this Right shall be applicable to the shares or other
securities or property receivable upon the exercise of this Right after
such consummation.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment
of its declaration of trust or through reorganization, consolidation,
merger, dissolution, sale of assets or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Right, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder hereof against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company will not increase the par value of any Common Shares
receivable upon the exercise of this Right above the amount payable
therefor upon such exercise, and at all times will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable stock upon or interest in the
Partnership upon the exercise of this Right.
7. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of an
adjustment in the number of Common Shares, Units or other shares,
securities or property receivable on the exercise of this Right, at the
request of the Holder of this Right the Company at its expense shall
promptly cause independent public accountants of recognized standing,
selected by the Company, to compute such adjustment in accordance with the
terms of this Right and prepare a certificate setting forth such adjustment
and showing in detail the facts upon which such adjustment is based,
including a statement of (a) the consideration received or to be received
by the Company for any additional shares issued or sold or deemed to have
been issued or sold, (b) the number of Common Shares outstanding or deemed
to be outstanding and (c) the Pro Forma Adjusted Trigger Price. The
Company will forthwith mail a copy of each such certificate to the Holder
of this Right.
8. NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the Holders of its
Common Shares and cause the Partnership to do the same with repeat to the
Units (or other shares or securities at the time deliverable upon the
exercise of this Right) for the purpose of entitling or enabling them to
receive any dividend (other than a cash or stock dividend at the same rate
as the rate of the last cash or stock dividend theretofore paid) or other
distribution, or to exercise any preemptive right pursuant to the Company's
declaration of trust, or to receive any right to subscribe for or purchase
any shares of any class or any other securities, or to receive any other
right; or
<PAGE>
(b) of any capital reorganization of the Company or the
Partnership any reclassification of the beneficial interests or capital
stock of the Company or the Partnership any consolidation or merger of the
Company or the Partnership with or into another trust, corporation, or
other entity or any conveyance of all or substantially all of the assets of
the Company to another trust, corporation or other entity; or
(c) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company or the Partnership;
then, and in each such case, the Company will mail or cause to be mailed to
the Holder of this Right a notice specifying, as the case may be, (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place, and the times, if
any is to be fixed, as of which the holders of record of Common Shares or
Units (or such other shares or securities at the time deliverable upon the
exercise of this Right) shall be entitled to exchange their Common Shares
or Units of any class (or such other shares or securities) for
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up or (iii) the amount and character of the shares
or other securities proposed to be issued or granted, the date of such
proposed issuance or grant and the persons or class of persons to whom such
shares or other securities are to be offered, issued or granted. Such
notice shall be mailed at least thirty (30) days prior to the date therein
specified.
9. RESERVATION OF SHARES, ETC., ISSUABLE ON EXERCISE OF RIGHTS.
The Company will at all times reserve and keep available, solely for
issuance and delivery upon the exercise of this Right and other similar
Rights, such Common Shares and other shares, securities and property as
from time to time shall be issuable upon the exercise of this Right and all
other similar Rights at the time outstanding.
10. REPLACEMENT OF RIGHT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Right and (in the case of loss, theft or destruction) upon delivery
of an indemnity agreement in an amount reasonably satisfactory to it, or
(in the case of mutilation) upon surrender and cancellation thereof, the
Company will issue, in lieu thereof, a new Right of like tenor.
11. REMEDIES. The Company stipulates that the remedies at law of
the Holder of this Right in the event of any default by the Company in its
performance of or compliance with any of the terms of this Right are not
and will not be adequate, and that the same may be specifically enforced.
12. NEGOTIABILITY, ETC. This Right is issued upon the following
terms, to all of which each taker or owner hereof consents and agrees:
(a) Title to this Right may be transferred by endorsement (by
the Holder hereof executing the form of assignment at the end hereof
including guaranty of signature) and delivery in the same manner as in the
case of a negotiable instrument transferable by endorsement and delivery.
(b) Any person in possession of this Right properly endorsed
is authorized to represent himself as absolute owner hereof and is granted
power to transfer absolute title hereto by endorsement and delivery hereof
to a bona fide purchaser hereof for value; each prior taker or owner waives
and renounces all of his equities or rights in this Right in favor of every
such bona fide purchaser, and every such bona fide purchaser shall acquire
title hereto and to all rights represented hereby.
<PAGE>
(c) Until this Right is transferred on the books of the
Company, the Company may treat the registered Holder of this Right as the
absolute owner hereof for all purposes without being affected by any notice
to the contrary.
13. SUBDIVISION OF RIGHTS. This Right (as well as any new Rights
issued pursuant to the provisions of this paragraph) is exchangeable, upon
the surrender hereof by the Holder hereof, at the principal office of the
Company for any number of new Rights of like tenor and date representing in
the aggregate the right to subscribe for and purchase the number of Common
Shares of the Company or, at the option of the Company, Units of the
Partnership which may be subscribed for and purchased hereunder.
14. REGISTRATION RIGHTS. The Holders of Rights shall have the
registration rights contained in the agreement attached as Exhibit A.
15. MAILING OF NOTICES, ETC. All notices, requests, claims,
demands, waivers and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered by hand, when
delivered by courier, three days after being deposited in the mail
(registered or certified mail, postage prepaid, return receipt requested),
or when received by facsimile transmission upon receipt of a confirmed
transmission report, as follows:
If to the Company: LaSalle Hotel Properties
220 East 42nd Street
New York, New York 10017
Tel: (212) 661-6161
Fax: (212) 687-8170
Attention: President
and if to the Holder of this Right to the address furnished to the Company
in writing by the last Holder of this Right who shall have furnished an
address to the Company in writing. Either the Company or the Holder of
this Right, by notice given to the other parties hereto in accordance with
this Section 15, may change the address or facsimile transmission number to
which such notice or other communications are to be sent to such party.
16. HEADINGS, ETC. The headings in this Right are for purposes of
reference only, and shall not limit or otherwise affect the meaning hereof.
17. CHANGE, WAIVER, ETC. Neither this Right nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
18. GOVERNING LAW. This Right shall be construed and enforced in
accordance with the laws of the State of New York.
LASALLE HOTEL PROPERTIES
By: /s/ JON E. BORTZ
_______________________________
Jon E. Bortz, President
Dated: April 29, 1998
Attest:
/s/ MICHAEL D. BARNELLO
________________________
<PAGE>
[To be signed only upon exercise of Right]
To LASALLE HOTEL PROPERTIES:
The undersigned, the Holder of the within Right, hereby irrevocably
elects to exercise the purchase right represented by such Right for, and to
purchase thereunder, _______________ Common Shares of LaSalle Hotel
Properties and herewith makes payment of $____________ therefor, and
requests that the certificates for such shares be issued in the name of,
and be delivered to, _______________, whose address is _______________. I
understand that the Company, at its sole option, may issue Units of LaSalle
Hotel Operating Partnership, L.P. in lieu of Common Shares on the basis of
one Unit for one Common Share.
Dated:
___________________________
(Signature must conform in all
respects to name of Holder as specified on the face of the Right)
Address:
<PAGE>
NET ISSUE ELECTION NOTICE
To: ______________________________ Date: ___________________
The undersigned hereby elects under Paragraph 1 to surrender the
right to purchase _____________ Common Shares pursuant to this Right. The
certificate(s) for the shares issuable upon such net issue election shall
be issued in the name of the undersigned or as otherwise indicated below.
_________________________________________
Signature
_________________________________________
Name for Registration
_________________________________________
Mailing Address
<PAGE>
[To be signed only upon transfer of Right]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto __________________ the right represented by the within Right
to purchase the _______________ Common Shares of LASALLE HOTEL PROPERTIES
to which the within Right relates or, at the option of LaSalle Hotel
Properties, [ ] Units of LaSalle Hotel Operating Limited
Partnership, L.P., and appoints _____________ attorney to transfer said
right on the books of ___________________ with full power of substitution
in the premises.
Dated:
______________________________
(Signature must conform in all
respects to name of Holder as specified on the face of the Right)
Address:
In the presence of
_________________________________
EXHIBIT 4.2
___________
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND CANNOT BE SOLD OR
TRANSFERRED UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS AN EXEMPTION
UNDER SUCH ACT OR LAWS IS AVAILABLE.
LASALLE HOTEL PROPERTIES
Common Share Purchase Right
LaSalle Hotel Properties (the "Company"), a Maryland real estate
investment trust, hereby certifies that, for value received, MS Asset
Management, Inc., or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company Common Shares of the Company equal to
662,237 fully paid and non-assessable common shares of beneficial interest,
par value $.01 per share, of the Company (the "Common Shares"), at a
purchase price, subject to the provisions of Paragraph 3 hereof, of $18.00
per share (the "Purchase Price") at any time and from time to time after
one year from the date of issuance and prior to April 29, 2008. The number
and character of such shares are subject to adjustment as provided below,
and the term "Common Share" shall mean, unless the context otherwise
requires, the shares of beneficial interest, stock or other securities or
property at the time deliverable upon the exercise of this Right.
1. EXERCISE OF RIGHT. The purchase rights evidenced by this Right
shall be exercised by the holder hereof ("Holder") surrendering this Right,
with the form of subscription at the end hereof duly executed by such
Holder, to the Company at its office in New York, New York (or such other
office as may be designated by the Company from time to time), accompanied
by payment of the Purchase Price (as provided below). This Right may be
exercised for less than the full number of Common Shares at the time called
for hereby, in which case the number of shares receivable upon the exercise
of this Right as a whole, and the sum payable upon the exercise of this
Right as a whole, shall be proportionately reduced. Upon any such partial
exercise, the Company at its expense will forthwith issue to the Holder
hereof a new Right or Rights of like tenor calling for the number of Common
Shares as to which rights have not been exercised, such Right or Rights to
be issued in the name of the Holder hereof or his nominee.
The Purchase Price may be paid, at the election of the Holder of this
Right: (i) in cash (by readily available funds wire transfer) or by
certified or bank cashier's check; (ii) through the delivery to the Company
of other securities, including other Rights in addition to those then being
exercised, to be credited in full against the Purchase Price in an amount
equal to the Current Market Value thereof, as determined in accordance with
Paragraph 3 hereof; (iii) if exercised in connection with any registered
public offering of the Company's Common Shares, by payment arrangements
calling for the delivery to the Company from proceeds of the sale of the
Common Shares to be sold by the Holder in such public offering of an amount
equal to the Purchase Prices for the Common Shares for which this Right is
then being exercised; or (iv) by any combination of the foregoing. The
Board of Trustees shall respond promptly in writing to an inquiry by the
Holder as to the fair market value of any securities the Holder may wish to
deliver to the Company pursuant to clause (ii) above.
The Holder may elect to receive, without the payment by the Holder of
any other Purchase Price or additional consideration, Common Shares equal
to the value of this Right or any portion hereof by the surrender of this
Right (or such portion of this Right being so exercised) together with the
Net Issue Election Notice annexed hereto duly executed, at the office of
the Company. Thereupon, the Company shall issue to the Holder such number
of fully paid and nonassessable Common Shares as is computed using the
following formula:
X = Y (A-B)
------
A
<PAGE>
where X= the number of Common Shares to be issued to the Holder
Y= the number of Common Shares covered by this Right in
respect of which the net issue election is made
A= the Current Market Value of one Common Share as
determined in accordance with Paragraph 3 hereof
B= the Purchase Price in effect under this Right at the time
the net issue election is made
The Board of Trustees shall respond promptly in writing to an inquiry by
the Holder as to the Current Market Value of a Common Share.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Right and payment of the Purchase
Price, and in any event within five (5) business days thereafter, the
Company, at its expense, will cause to be issued in the name of and
delivered to the Holder hereof a certificate or certificates for the number
of fully paid and non-assessable Common Shares or other securities or
property to which such Holder shall be entitled upon such exercise, plus,
in lieu of any fractional share interest to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full Common Share or other securities to which
such Holder shall be so entitled.
3. ADJUSTMENT FOR ISSUE OR SALE OF COMMON SHARES AT LESS THAN
PURCHASE PRICE. In case, at any time or from time to time after the date
of issuance of this Right ("Issuance Date"), the Company shall issue Common
Shares (other than (i) securities outstanding on the date hereof, (ii)
awards made pursuant to any company stock option plan awarded to officers,
the Company's Board of Trustees, employees or advisors to the Company, or
(iii) awards made pursuant to any incentive compensation plan or
arrangement approved by the Company's Board of Trustees or by the
Compensation Committee of the Company's Board of Trustees, (such
securities, collectively, the "Subject Securities")) for a consideration
per share less than the Current Market Price (as defined below) per share
(the Current Market Price being the "Trigger Price") (or, if a Pro Forma
Adjusted Trigger Price shall be in effect as provided below in this
Paragraph 3, then less than such Pro Forma Adjusted Trigger Price per
share), then and in each such case the Holder of this Right, upon the
exercise hereof as provided in Paragraph 1 hereof, shall be entitled to
receive, in lieu of Common Shares theretofore receivable upon the exercise
of this Right, a number of Common Shares determined by (a) dividing the
Trigger Price by a Pro Forma Adjusted Trigger Price per share to be
computed as provided below in this Paragraph 3, and (b) multiplying the
resulting quotient by the number of Common Shares called for on the face of
this Right. A Pro Forma Adjusted Trigger Price per share shall be the
price computed (to the nearest cent, a fraction of half cent or more being
considered a full cent):
by dividing (i) the sum of (x) the result obtained
by multiplying the number of Common Shares of the Company outstanding
immediately prior to such issue or sale by the Trigger Price (or, if a
prior Pro Forma Adjusted Trigger Price shall be in effect, by such Price),
and (y) the consideration, if any, received by the Company upon such issue
or sale, by (ii) the number of Common Shares of the Company outstanding
immediately after such issue or sale.
For the purposes hereof, the Current Market Price per Common Share on
any date shall be deemed to be the average of the daily closing prices for
the 10 consecutive Business Days before the day in question. The closing
price for each day shall be the last reported sales price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the
New York Stock Exchange or, if such Common Shares are not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which such Common Shares are listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange,
on the National Association of Securities Dealers Automated Quotations
<PAGE>
National Market System or, if such Common Shares are not listed or admitted
to trading on any national securities exchange or quoted on such National
Market System, the average of the closing bid and asked prices in the over-
the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for the purpose. In the event
that no such market trading exists, the current market price of such Common
Shares will be determined by three independent nationally recognized
investment banking firms selected by the Company in such manner as the
Board of Trustees or an authorized committee thereof deems appropriate.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which the principal national securities exchange on
which the Common Shares are listed or the NASDAQ National Market System, if
the shares are quoted thereon, or if neither is applicable, the New York
Stock Exchange, is closed for trading. If any other securities of the
Company are valued with reference to this Paragraph 3, their Current Market
Value shall be determined in a manner consistent with the foregoing
provisions of this paragraph.
For the purpose of this Paragraph 3:
3.1. STOCK SPLITS, DIVIDENDS, ETC., IN COMMON SHARES OR CONVERTIBLE
SECURITIES. In case the Company splits its Common Shares or shall declare
any dividend, or make any other distribution, upon any beneficial interest
or other securities of the Company of any class payable in Common Shares,
or in any beneficial interest or other securities directly or indirectly
convertible into or exchangeable for Common Shares (any such beneficial
interest or other securities being hereinafter called "Convertible
Securities"), such split, declaration or distribution shall be deemed to be
an issue or sale (as of the record date for such split, dividend or other
distribution), without consideration, of such Common Shares or such
Convertible Securities, as the case may be.
3.2. ISSUANCE OR SALE OF CONVERTIBLE SECURITIES. In case the
Company shall issue or sell any Convertible Securities other than the
Subject Securities, there shall be determined the price per share for which
Common Shares are issuable upon the conversion or exchange thereof, such
determination to be made by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (b) the maximum number of Common Shares of the Company
issuable upon the conversion or exchange of all such Convertible
Securities.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such price) as of the date of such issue or sale, then
such issue or sale shall be deemed to be an issue or sale for cash (as of
the date of issue or sale of such Convertible Securities) of such maximum
number of Common Shares at the price per share so determined, provided
that, if such Convertible Securities shall by their terms provide for an
increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company, or in the rate of
exchange, upon the conversion or exchange thereof, the Pro Forma Adjusted
Trigger Price per share shall, forthwith upon any such increase becoming
effective, be readjusted to reflect the same, and provided, further, that
upon the expiration of such rights of conversion or exchange of such
Convertible Securities, if any thereof shall not have been exercised, the
Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted
and thereafter be the price which it would have been had an adjustment been
made on the basis that the only Common Shares so issued or sold were those
issued or sold upon the conversion or exchange of such Convertible
Securities, and that they were issued or sold for the consideration
actually received by the Company upon such conversion or exchange, plus the
consideration, if any, actually received by the Company for the issue or
sale of all such Convertible Securities which shall have been converted or
exchanged.
<PAGE>
3.3. GRANT OF RIGHTS OR OPTIONS FOR COMMON SHARES. In case the
Company shall grant any rights or options to subscribe for, purchase or
otherwise acquire Common Shares of any class other than the Subject
Securities, there shall be determined the price per share for which Common
Shares are issuable upon the exercise of such rights or options, such
determination to be made by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options, by (b) the maximum number of Common Shares issuable upon
the exercise of such rights or options.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such price) as of the date of such issue or sale, then
the granting of such rights or options shall be deemed to be an issue or
sale for cash (as of the date of the granting of such rights or options) of
such maximum number of Common Shares at the price per share so determined,
provided that, if such rights or options shall by their terms provide for
an increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company upon the exercise
thereof, the Pro Forma Adjusted Trigger Price per share shall, forthwith
upon any such increase becoming effective, be readjusted to reflect the
same, and provided, further, that upon the expiration of such rights or
options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made on the basis that the only Common Shares so issued or sold were those
issued or sold upon the exercise of such rights or options and that they
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised.
3.4. GRANT OF RIGHTS OR OPTIONS FOR CONVERTIBLE SECURITIES. In case
the Company shall grant any rights or options to subscribe for, purchase or
otherwise acquire Convertible Securities other than the Subject Securities,
such Convertible Securities shall be deemed, for the purposes of
subparagraph 3.2. above, to have been issued or sold for the total amount
received or receivable by the Company as consideration for the granting of
such rights or options plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options, provided that, upon the expiration of such rights or
options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made upon the basis that the only Convertible Securities so issued or sold
were those issued or sold upon the exercise of such rights or options and
that they were issued or sold for the consideration actually received by
the Company upon such exercise, plus the consideration, if any, actually
received by the Company for the granting of all such rights or options,
whether or not exercised.
3.5. DILUTION IN CASE OF OTHER BENEFICIAL INTERESTS OR SECURITIES.
In case any shares of beneficial interest or other securities, other than
Common Shares of the Company, shall at any time be receivable upon the
exercise of this Right, and in case any additional shares of such
beneficial interest or any additional such securities (or any beneficial
interest or other securities convertible into or exchangeable for any such
beneficial interest or securities) shall be issued or sold for a
consideration per share such as to dilute the purchase rights evidenced by
this Right, then and in each such case the Pro Forma Adjusted Trigger Price
per share shall forthwith be adjusted, substantially in the manner provided
for above in this Paragraph 3, so as to protect the Holder of this Right
against the effect of such dilution.
<PAGE>
3.6. EXPENSES, ETC., DEDUCTED. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Share or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor, after deducting
any expenses incurred and any underwriting or similar commissions,
compensation or concessions paid or allowed by the Company in connection
with such issue or sale.
3.7. DETERMINATION OF CONSIDERATION. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Shares or Convertible Securities shall be
issued or sold for a consideration other than cash (or a consideration
which includes cash and other assets) then, for the purpose of this
Paragraph 3, the Board of Trustees of the Company shall promptly determine
the fair value of such consideration, and such Common Shares, Convertible
Securities, rights or options shall be deemed to have been issued or sold
on the date of such determination in good faith. Such value shall not be
more than the amount at which such consideration is recorded in the books
of the Company for accounting purposes except in the case of an acquisition
accounted for on a pooling of interest basis. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Shares or Convertible Securities shall be
issued or sold together with other stock or securities or other assets of
the Company for a consideration which covers both, the Board of Trustees of
the Company shall promptly determine in good faith what part of the
consideration so received is to be deemed to be the consideration for the
issue or sale of such Common Shares or Convertible Securities or such
rights or options.
The Company covenants and agrees that, should any determination
of fair value of consideration or of allocation of consideration be made by
the Board of Trustees of the Company, pursuant to this subparagraph 3.7, it
will, not less than seven (7) days after any and each such determination,
deliver to the Holder of this Right a certificate signed by the President
or a Vice President and the Treasurer or an Assistant Treasurer of the
Company reciting such value as thus determined and setting forth the nature
of the transaction for which such determination was required to be made,
the nature of any consideration, other than cash, for which Common Shares,
Convertible Securities, rights or options have been or are to be issued,
the basis for its valuation, the number of Common Shares which have been or
are to be issued, and a description of any Convertible Securities, rights
or options which have been or are to be issued, including their number,
amount and terms.
3.8. RECORD DATE DEEMED ISSUE DATE. In case the Company shall take
a record of the Holders of shares of any class for the purpose of entitling
them (a) to receive a dividend or a distribution payable in Common Shares
or in Convertible Securities, or (b) to subscribe for, purchase or
otherwise acquire Common Shares or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the Common
Shares issued or sold or deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution, or
the date of the granting of such rights of subscription, purchase or other
acquisition, as the case may be.
3.9. SHARES CONSIDERED OUTSTANDING. The number of Common Shares
outstanding at any given time shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of Common Shares, but shall
exclude shares in the treasury of the Company.
3.10. duration of pro forma adjusted trigger price. Following each
computation or readjustment of a Pro Forma Adjusted Trigger Price as
provided in this Paragraph 3, the newly computed or adjusted Pro Forma
Adjusted Trigger Price shall remain in effect until a further computation
or readjustment thereof is required by this Paragraph 3.
<PAGE>
4. ADJUSTMENT FOR DIVIDENDS IN OTHER SHARES OF BENEFICIAL INTEREST
, PROPERTY, ETC.; RECLASSIFICATIONS, ETC. In case at any time or from time
to time after the Issuance Date the holders of the Common Shares of the
Company of any class (or any other shares of beneficial interest or other
securities at the time receivable upon the exercise of this Right) shall
have received, or, on or after the record date fixed for the determination
of eligible shareholders, shall have become entitled to receive:
(a) other or additional shares or other securities or
property (other than cash) by way of dividend;
(b) any cash paid or payable out of capital or paid-in
surplus or surplus created as a result of a revaluation of property by way
of dividend; or
(c) other or additional (or less) shares or other securities
or property (including cash) by way of stock-split, spin-off, split-off,
split-up, reclassification, combination of shares or similar corporate
rearrangement;
(other than additional Common Shares issued to holders of Common Shares as
a stock dividend or stock-split, adjustments in respect of which shall be
covered by the provisions of Paragraph 3 hereof), then in each case the
Holder of this Right, upon the exercise hereof as provided in Paragraph 1
hereof, shall be entitled to receive, in lieu of, or in addition to, as the
case may be, the shares theretofore receivable upon the exercise of this
Right, the amount of shares or other securities or property (including cash
in the cases referred to in clauses (b) and (c) above) which such Holder
would hold on the date of such exercise if, on the Issuance Date, he had
been the holder of record of the number of Common Shares of the Company
called for on the face of this Right and had thereafter, during the period
from the Issuance Date to and including the date of such exercise, retained
such shares and/or all other or additional (or less) stock or other
securities or property (including cash in the cases referred to in clauses
(b) and (c) above) receivable by him as aforesaid during such period,
giving effect to all adjustments called for during such period by
Paragraphs 3 and 5 hereof.
5. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case of any reorganization of the Company (or any other trust, corporation,
or other entity the shares or other securities of which are at the time
deliverable on the exercise of this Right) after the date hereof, or in
case, after such date, the Company (or any such other trust, corporation or
other entity) shall consolidate with or merge into another trust,
corporation, or other entity or convey all or substantially all its assets
to another trust, corporation or other entity, then and in each such case
the Holder of this Right, upon the exercise hereof as provided in
Paragraph 1 hereof, at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive the shares or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had
exercised this Right immediately prior thereto, all subject to further
adjustments as provided in Paragraphs 3 and 4 hereof; in each such case,
the terms of this Right shall be applicable to the shares or other
securities or property receivable upon the exercise of this Right after
such consummation.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment
of its declaration of trust or through reorganization, consolidation,
merger, dissolution, sale of assets or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Right, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder hereof against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company will not increase the par value of any Common Shares
receivable upon the exercise of this Right above the amount payable
therefor upon such exercise, and at all times will take all such action as
<PAGE>
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable stock upon the exercise of this
Right.
7. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of an
adjustment in the number of Common Shares or other shares, securities or
property receivable on the exercise of this Right, at the request of the
Holder of this Right the Company at its expense shall promptly cause
independent public accountants of recognized standing, selected by the
Company, to compute such adjustment in accordance with the terms of this
Right and prepare a certificate setting forth such adjustment and showing
in detail the facts upon which such adjustment is based, including a
statement of (a) the consideration received or to be received by the
Company for any additional shares issued or sold or deemed to have been
issued or sold, (b) the number of Common Shares outstanding or deemed to be
outstanding and (c) the Pro Forma Adjusted Trigger Price. The Company will
forthwith mail a copy of each such certificate to the Holder of this Right.
8. NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the Holders of its
Common Shares (or other shares or securities at the time deliverable upon
the exercise of this Right) for the purpose of entitling or enabling them
to receive any dividend (other than a cash or stock dividend at the same
rate as the rate of the last cash or stock dividend theretofore paid) or
other distribution, or to exercise any preemptive right pursuant to the
Company's declaration of trust, or to receive any right to subscribe for or
purchase any shares of any class or any other securities, or to receive any
other right; or
(b) of any capital reorganization of the Company, any
reclassification of the beneficial interests or capital stock of the
Company, any consolidation or merger of the Company with or into another
trust, corporation, or other entity or any conveyance of all or
substantially all of the assets of the Company to another trust,
corporation or other entity; or
(c) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, and in each such case, the Company will mail or cause to be mailed to
the Holder of this Right a notice specifying, as the case may be, (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place, and the times, if
any is to be fixed, as of which the holders of record of Common Shares (or
such other shares or securities at the time deliverable upon the exercise
of this Right) shall be entitled to exchange their Common Shares of any
class (or such other shares or securities) for reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up
or (iii) the amount and character of the shares or other securities
proposed to be issued or granted, the date of such proposed issuance or
grant and the persons or class of persons to whom such shares or other
securities are to be offered, issued or granted. Such notice shall be
mailed at least thirty (30) days prior to the date therein specified.
9. RESERVATION OF SHARES, ETC., ISSUABLE ON EXERCISE OF RIGHTS.
The Company will at all times reserve and keep available, solely for
issuance and delivery upon the exercise of this Right and other similar
Rights, such Common Shares and other shares, securities and property as
from time to time shall be issuable upon the exercise of this Right and all
other similar Rights at the time outstanding.
<PAGE>
10. REPLACEMENT OF RIGHT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Right and (in the case of loss, theft or destruction) upon delivery
of an indemnity agreement in an amount reasonably satisfactory to it, or
(in the case of mutilation) upon surrender and cancellation thereof, the
Company will issue, in lieu thereof, a new Right of like tenor.
11. REMEDIES. The Company stipulates that the remedies at law of
the Holder of this Right in the event of any default by the Company in its
performance of or compliance with any of the terms of this Right are not
and will not be adequate, and that the same may be specifically enforced.
12. NEGOTIABILITY, ETC. This Right is issued upon the following
terms, to all of which each taker or owner hereof consents and agrees:
(a) Title to this Right may be transferred by endorsement (by
the Holder hereof executing the form of assignment at the end hereof
including guaranty of signature) and delivery in the same manner as in the
case of a negotiable instrument transferable by endorsement and delivery.
(b) Any person in possession of this Right properly endorsed
is authorized to represent himself as absolute owner hereof and is granted
power to transfer absolute title hereto by endorsement and delivery hereof
to a bona fide purchaser hereof for value; each prior taker or owner waives
and renounces all of his equities or rights in this Right in favor of every
such bona fide purchaser, and every such bona fide purchaser shall acquire
title hereto and to all rights represented hereby.
(c) Until this Right is transferred on the books of the
Company, the Company may treat the registered Holder of this Right as the
absolute owner hereof for all purposes without being affected by any notice
to the contrary.
13. SUBDIVISION OF RIGHTS. This Right (as well as any new Rights
issued pursuant to the provisions of this paragraph) is exchangeable, upon
the surrender hereof by the Holder hereof, at the principal office of the
Company for any number of new Rights of like tenor and date representing in
the aggregate the right to subscribe for and purchase the number of Common
Shares of the Company which may be subscribed for and purchased hereunder.
14. REGISTRATION RIGHTS. The Holders of Rights shall have the
registration rights contained in the agreement attached as Exhibit A.
15. MAILING OF NOTICES, ETC. All notices, requests, claims,
demands, waivers and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered by hand, when
delivered by courier, three days after being deposited in the mail
(registered or certified mail, postage prepaid, return receipt requested),
or when received by facsimile transmission upon receipt of a confirmed
transmission report, as follows:
If to the Company: LaSalle Hotel Properties
220 East 42nd Street
New York, New York 10017
Tel: (212) 661-6161
Fax: (212) 687-8170
Attention: President
and if to the Holder of this Right to the address furnished to the Company
in writing by the last Holder of this Right who shall have furnished an
address to the Company in writing. Either the Company or the Holder of
this Right, by notice given to the other parties hereto in accordance with
this Section 15, may change the address or facsimile transmission number to
which such notice or other communications are to be sent to such party.
<PAGE>
16. HEADINGS, ETC. The headings in this Right are for purposes of
reference only, and shall not limit or otherwise affect the meaning hereof.
17. CHANGE, WAIVER, ETC. Neither this Right nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
18. GOVERNING LAW. This Right shall be construed and enforced in
accordance with the laws of the State of New York.
LASALLE HOTEL PROPERTIES
By: /s/ JON E. BORTZ
_____________________________
Jon E. Bortz
President
Dated: April 29, 1998
Attest:
/s/ MICHAEL D. BARNELLO
<PAGE>
[To be signed only upon exercise of Right]
To LASALLE HOTEL PROPERTIES:
The undersigned, the Holder of the within Right, hereby irrevocably
elects to exercise the purchase right represented by such Right for, and to
purchase thereunder, ________________ Common Shares of ___________________
and herewith makes payment of $_____________ therefor, and requests that
the certificates for such shares be issued in the name of, and be delivered
to, __________________, whose address is ____________________.
Dated:
________________________________
(Signature must conform in all
respects to name of Holder as specified on the face of the Right)
Address:
<PAGE>
NET ISSUE ELECTION NOTICE
To: ______________________________ Date: ___________________
The undersigned hereby elects under Paragraph 1 to surrender the
right to purchase _____________ Common Shares pursuant to this Right. The
certificate(s) for the shares issuable upon such net issue election shall
be issued in the name of the undersigned or as otherwise indicated below.
_________________________________________
Signature
_________________________________________
Name for Registration
_________________________________________
Mailing Address
<PAGE>
TRANSFER OF RIGHT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers the
number of rights set forth next to the names in the attached Schedule A the
right represented by the within Right to purchase the 662,237 Common Shares
of LASALLE HOTEL PROPERTIES to which the within Right relates, and appoints
John E. Bortz or Michael D. Barnello attorney to transfer said right on the
books of LaSalle Hotel Properties with full power of substitution in the
premises.
Dated: April 29, 1998
MS Asset Management, Inc.
By: _________________________-
Name:
Title:
(Signature must conform in all
respects to name of Holder as specified on the face of the Right)
Address:
In the presence of
___________________________
EXHIBIT 4.3
- -----------
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND CANNOT BE SOLD OR
TRANSFERRED UNLESS AND UNTIL THEY ARE SO REGISTERED OR UNLESS AN EXEMPTION
UNDER SUCH ACT OR LAWS IS AVAILABLE.
LASALLE HOTEL PROPERTIES
Common Share Purchase Right
LaSalle Hotel Properties (the "Company"), a Maryland real estate
investment trust, hereby certifies that, for value received, Crosstown
Asset Corp. I., or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company Common Shares of the Company equal to
160,986 fully paid and non-assessable common shares of beneficial interest,
par value $.01 per share, of the Company (the "Common Shares"), at a
purchase price, subject to the provisions of Paragraph 3 hereof, of $18.00
per share (the "Purchase Price") at any time and from time to time after
one year from the date of issuance and prior to April 29, 2008. The number
and character of such shares are subject to adjustment as provided below,
and the term "Common Share" shall mean, unless the context otherwise
requires, the shares of beneficial interest, stock or other securities or
property at the time deliverable upon the exercise of this Right.
1. EXERCISE OF RIGHT. The purchase rights evidenced by this Right
shall be exercised by the holder hereof ("Holder") surrendering this Right,
with the form of subscription at the end hereof duly executed by such
Holder, to the Company at its office in New York, New York (or such other
office as may be designated by the Company from time to time), accompanied
by payment of the Purchase Price (as provided below). This Right may be
exercised for less than the full number of Common Shares at the time called
for hereby, in which case the number of shares receivable upon the exercise
of this Right as a whole, and the sum payable upon the exercise of this
Right as a whole, shall be proportionately reduced. Upon any such partial
exercise, the Company at its expense will forthwith issue to the Holder
hereof a new Right or Rights of like tenor calling for the number of Common
Shares as to which rights have not been exercised, such Right or Rights to
be issued in the name of the Holder hereof or his nominee.
The Purchase Price may be paid, at the election of the Holder of this
Right: (i) in cash (by readily available funds wire transfer) or by
certified or bank cashier's check; (ii) through the delivery to the Company
of other securities, including other Rights in addition to those then being
exercised, to be credited in full against the Purchase Price in an amount
equal to the Current Market Value thereof, as determined in accordance with
Paragraph 3 hereof; (iii) if exercised in connection with any registered
public offering of the Company's Common Shares, by payment arrangements
calling for the delivery to the Company from proceeds of the sale of the
Common Shares to be sold by the Holder in such public offering of an amount
equal to the Purchase Prices for the Common Shares for which this Right is
then being exercised; or (iv) by any combination of the foregoing. The
Board of Trustees shall respond promptly in writing to an inquiry by the
Holder as to the fair market value of any securities the Holder may wish to
deliver to the Company pursuant to clause (ii) above.
The Holder may elect to receive, without the payment by the Holder of
any other Purchase Price or additional consideration, Common Shares equal
to the value of this Right or any portion hereof by the surrender of this
Right (or such portion of this Right being so exercised) together with the
Net Issue Election Notice annexed hereto duly executed, at the office of
the Company. Thereupon, the Company shall issue to the Holder such number
of fully paid and nonassessable Common Shares as is computed using the
following formula:
X = Y (A-B)
_______
A
<PAGE>
where X= the number of Common Shares to be issued to the Holder
Y= the number of Common Shares covered by this Right in
respect of which the net issue election is made
A= the Current Market Value of one Common Share as
determined in accordance with Paragraph 3 hereof
B= the Purchase Price in effect under this Right at the time
the net issue election is made
The Board of Trustees shall respond promptly in writing to an inquiry by
the Holder as to the Current Market Value of a Common Share.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Right and payment of the Purchase
Price, and in any event within five (5) business days thereafter, the
Company, at its expense, will cause to be issued in the name of and
delivered to the Holder hereof a certificate or certificates for the number
of fully paid and non-assessable Common Shares or other securities or
property to which such Holder shall be entitled upon such exercise, plus,
in lieu of any fractional share interest to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full Common Share or other securities to which
such Holder shall be so entitled.
3. ADJUSTMENT FOR ISSUE OR SALE OF COMMON SHARES AT LESS THAN
PURCHASE PRICE. In case, at any time or from time to time after the date
of issuance of this Right ("Issuance Date"), the Company shall issue Common
Shares (other than (i) securities outstanding on the date hereof, (ii)
awards made pursuant to any company stock option plan awarded to officers,
the Company's Board of Trustees, employees or advisors to the Company, or
(iii) awards made pursuant to any incentive compensation plan or
arrangement approved by the Company's Board of Trustees or by the
Compensation Committee of the Company's Board of Trustees, (such
securities, collectively, the "Subject Securities")) for a consideration
per share less than the Current Market Price (as defined below) per share
(the Current Market Price being the "Trigger Price") (or, if a Pro Forma
Adjusted Trigger Price shall be in effect as provided below in this
Paragraph 3, then less than such Pro Forma Adjusted Trigger Price per
share), then and in each such case the Holder of this Right, upon the
exercise hereof as provided in Paragraph 1 hereof, shall be entitled to
receive, in lieu of Common Shares theretofore receivable upon the exercise
of this Right, a number of Common Shares determined by (a) dividing the
Trigger Price by a Pro Forma Adjusted Trigger Price per share to be
computed as provided below in this Paragraph 3, and (b) multiplying the
resulting quotient by the number of Common Shares called for on the face of
this Right. A Pro Forma Adjusted Trigger Price per share shall be the
price computed (to the nearest cent, a fraction of half cent or more being
considered a full cent):
by dividing (i) the sum of (x) the result obtained
by multiplying the number of Common Shares of the Company outstanding
immediately prior to such issue or sale by the Trigger Price (or, if a
prior Pro Forma Adjusted Trigger Price shall be in effect, by such Price),
and (y) the consideration, if any, received by the Company upon such issue
or sale, by (ii) the number of Common Shares of the Company outstanding
immediately after such issue or sale.
For the purposes hereof, the Current Market Price per Common Share on
any date shall be deemed to be the average of the daily closing prices for
the 10 consecutive Business Days before the day in question. The closing
price for each day shall be the last reported sales price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the
New York Stock Exchange or, if such Common Shares are not listed or
admitted to trading on such Exchange, on the principal national securities
<PAGE>
exchange on which such Common Shares are listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange,
on the National Association of Securities Dealers Automated Quotations
National Market System or, if such Common Shares are not listed or admitted
to trading on any national securities exchange or quoted on such National
Market System, the average of the closing bid and asked prices in the over-
the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for the purpose. In the event
that no such market trading exists, the current market price of such Common
Shares will be determined by three independent nationally recognized
investment banking firms selected by the Company in such manner as the
Board of Trustees or an authorized committee thereof deems appropriate.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which the principal national securities exchange on
which the Common Shares are listed or the NASDAQ National Market System, if
the shares are quoted thereon, or if neither is applicable, the New York
Stock Exchange, is closed for trading. If any other securities of the
Company are valued with reference to this Paragraph 3, their Current Market
Value shall be determined in a manner consistent with the foregoing
provisions of this paragraph.
For the purpose of this Paragraph 3:
3.1. STOCK SPLITS, DIVIDENDS, ETC., IN COMMON SHARES OR CONVERTIBLE
SECURITIES. In case the Company splits its Common Shares or shall declare
any dividend, or make any other distribution, upon any beneficial interest
or other securities of the Company of any class payable in Common Shares,
or in any beneficial interest or other securities directly or indirectly
convertible into or exchangeable for Common Shares (any such beneficial
interest or other securities being hereinafter called "Convertible
Securities"), such split, declaration or distribution shall be deemed to be
an issue or sale (as of the record date for such split, dividend or other
distribution), without consideration, of such Common Shares or such
Convertible Securities, as the case may be.
3.2. ISSUANCE OR SALE OF CONVERTIBLE SECURITIES. In case the
Company shall issue or sell any Convertible Securities other than the
Subject Securities, there shall be determined the price per share for which
Common Shares are issuable upon the conversion or exchange thereof, such
determination to be made by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (b) the maximum number of Common Shares of the Company
issuable upon the conversion or exchange of all such Convertible
Securities.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such price) as of the date of such issue or sale, then
such issue or sale shall be deemed to be an issue or sale for cash (as of
the date of issue or sale of such Convertible Securities) of such maximum
number of Common Shares at the price per share so determined, provided
that, if such Convertible Securities shall by their terms provide for an
increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company, or in the rate of
exchange, upon the conversion or exchange thereof, the Pro Forma Adjusted
Trigger Price per share shall, forthwith upon any such increase becoming
effective, be readjusted to reflect the same, and provided, further, that
upon the expiration of such rights of conversion or exchange of such
Convertible Securities, if any thereof shall not have been exercised, the
Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted
and thereafter be the price which it would have been had an adjustment been
made on the basis that the only Common Shares so issued or sold were those
issued or sold upon the conversion or exchange of such Convertible
Securities, and that they were issued or sold for the consideration
actually received by the Company upon such conversion or exchange, plus the
<PAGE>
consideration, if any, actually received by the Company for the issue or
sale of all such Convertible Securities which shall have been converted or
exchanged.
3.3. GRANT OF RIGHTS OR OPTIONS FOR COMMON SHARES. In case the
Company shall grant any rights or options to subscribe for, purchase or
otherwise acquire Common Shares of any class other than the Subject
Securities, there shall be determined the price per share for which Common
Shares are issuable upon the exercise of such rights or options, such
determination to be made by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options, by (b) the maximum number of Common Shares issuable upon
the exercise of such rights or options.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such price) as of the date of such issue or sale, then
the granting of such rights or options shall be deemed to be an issue or
sale for cash (as of the date of the granting of such rights or options) of
such maximum number of Common Shares at the price per share so determined,
provided that, if such rights or options shall by their terms provide for
an increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company upon the exercise
thereof, the Pro Forma Adjusted Trigger Price per share shall, forthwith
upon any such increase becoming effective, be readjusted to reflect the
same, and provided, further, that upon the expiration of such rights or
options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made on the basis that the only Common Shares so issued or sold were those
issued or sold upon the exercise of such rights or options and that they
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised.
3.4. GRANT OF RIGHTS OR OPTIONS FOR CONVERTIBLE SECURITIES. In case
the Company shall grant any rights or options to subscribe for, purchase or
otherwise acquire Convertible Securities other than the Subject Securities,
such Convertible Securities shall be deemed, for the purposes of
subparagraph 3.2. above, to have been issued or sold for the total amount
received or receivable by the Company as consideration for the granting of
such rights or options plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options, provided that, upon the expiration of such rights or
options, if any thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made upon the basis that the only Convertible Securities so issued or sold
were those issued or sold upon the exercise of such rights or options and
that they were issued or sold for the consideration actually received by
the Company upon such exercise, plus the consideration, if any, actually
received by the Company for the granting of all such rights or options,
whether or not exercised.
3.5. DILUTION IN CASE OF OTHER BENEFICIAL INTERESTS OR SECURITIES.
In case any shares of beneficial interest or other securities, other than
Common Shares of the Company, shall at any time be receivable upon the
exercise of this Right, and in case any additional shares of such
beneficial interest or any additional such securities (or any beneficial
interest or other securities convertible into or exchangeable for any such
beneficial interest or securities) shall be issued or sold for a
consideration per share such as to dilute the purchase rights evidenced by
this Right, then and in each such case the Pro Forma Adjusted Trigger Price
per share shall forthwith be adjusted, substantially in the manner provided
for above in this Paragraph 3, so as to protect the Holder of this Right
against the effect of such dilution.
<PAGE>
3.6. EXPENSES, ETC., DEDUCTED. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Share or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor, after deducting
any expenses incurred and any underwriting or similar commissions,
compensation or concessions paid or allowed by the Company in connection
with such issue or sale.
3.7. DETERMINATION OF CONSIDERATION. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Shares or Convertible Securities shall be
issued or sold for a consideration other than cash (or a consideration
which includes cash and other assets) then, for the purpose of this
Paragraph 3, the Board of Trustees of the Company shall promptly determine
the fair value of such consideration, and such Common Shares, Convertible
Securities, rights or options shall be deemed to have been issued or sold
on the date of such determination in good faith. Such value shall not be
more than the amount at which such consideration is recorded in the books
of the Company for accounting purposes except in the case of an acquisition
accounted for on a pooling of interest basis. In case any Common Shares or
Convertible Securities or any rights or options to subscribe for, purchase
or otherwise acquire any Common Shares or Convertible Securities shall be
issued or sold together with other stock or securities or other assets of
the Company for a consideration which covers both, the Board of Trustees of
the Company shall promptly determine in good faith what part of the
consideration so received is to be deemed to be the consideration for the
issue or sale of such Common Shares or Convertible Securities or such
rights or options.
The Company covenants and agrees that, should any determination
of fair value of consideration or of allocation of consideration be made by
the Board of Trustees of the Company, pursuant to this subparagraph 3.7, it
will, not less than seven (7) days after any and each such determination,
deliver to the Holder of this Right a certificate signed by the President
or a Vice President and the Treasurer or an Assistant Treasurer of the
Company reciting such value as thus determined and setting forth the nature
of the transaction for which such determination was required to be made,
the nature of any consideration, other than cash, for which Common Shares,
Convertible Securities, rights or options have been or are to be issued,
the basis for its valuation, the number of Common Shares which have been or
are to be issued, and a description of any Convertible Securities, rights
or options which have been or are to be issued, including their number,
amount and terms.
3.8. RECORD DATE DEEMED ISSUE DATE. In case the Company shall take
a record of the Holders of shares of any class for the purpose of entitling
them (a) to receive a dividend or a distribution payable in Common Shares
or in Convertible Securities, or (b) to subscribe for, purchase or
otherwise acquire Common Shares or Convertible Securities, then such record
date shall be deemed to be the date of the issue or sale of the Common
Shares issued or sold or deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution, or
the date of the granting of such rights of subscription, purchase or other
acquisition, as the case may be.
3.9. SHARES CONSIDERED OUTSTANDING. The number of Common Shares
outstanding at any given time shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of Common Shares, but shall
exclude shares in the treasury of the Company.
3.10. DURATION OF PRO FORMA ADJUSTED TRIGGER PRICE. Following each
computation or readjustment of a Pro Forma Adjusted Trigger Price as
provided in this Paragraph 3, the newly computed or adjusted Pro Forma
Adjusted Trigger Price shall remain in effect until a further computation
or readjustment thereof is required by this Paragraph 3.
<PAGE>
4. ADJUSTMENT FOR DIVIDENDS IN OTHER SHARES OF BENEFICIAL
INTEREST, PROPERTY, ETC.; RECLASSIFICATIONS, ETC. In case at any time or
from time to time after the Issuance Date the holders of the Common Shares
of the Company of any class (or any other shares of beneficial interest or
other securities at the time receivable upon the exercise of this Right)
shall have received, or, on or after the record date fixed for the
determination of eligible shareholders, shall have become entitled to
receive:
(a) other or additional shares or other securities or
property (other than cash) by way of dividend;
(b) any cash paid or payable out of capital or paid-in
surplus or surplus created as a result of a revaluation of property by way
of dividend; or
(c) other or additional (or less) shares or other securities
or property (including cash) by way of stock-split, spin-off, split-off,
split-up, reclassification, combination of shares or similar corporate
rearrangement;
(other than additional Common Shares issued to holders of Common Shares as
a stock dividend or stock-split, adjustments in respect of which shall be
covered by the provisions of Paragraph 3 hereof), then in each case the
Holder of this Right, upon the exercise hereof as provided in Paragraph 1
hereof, shall be entitled to receive, in lieu of, or in addition to, as the
case may be, the shares theretofore receivable upon the exercise of this
Right, the amount of shares or other securities or property (including cash
in the cases referred to in clauses (b) and (c) above) which such Holder
would hold on the date of such exercise if, on the Issuance Date, he had
been the holder of record of the number of Common Shares of the Company
called for on the face of this Right and had thereafter, during the period
from the Issuance Date to and including the date of such exercise, retained
such shares and/or all other or additional (or less) stock or other
securities or property (including cash in the cases referred to in clauses
(b) and (c) above) receivable by him as aforesaid during such period,
giving effect to all adjustments called for during such period by
Paragraphs 3 and 5 hereof.
5. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case of any reorganization of the Company (or any other trust, corporation,
or other entity the shares or other securities of which are at the time
deliverable on the exercise of this Right) after the date hereof, or in
case, after such date, the Company (or any such other trust, corporation or
other entity) shall consolidate with or merge into another trust,
corporation, or other entity or convey all or substantially all its assets
to another trust, corporation or other entity, then and in each such case
the Holder of this Right, upon the exercise hereof as provided in
Paragraph 1 hereof, at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive the shares or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had
exercised this Right immediately prior thereto, all subject to further
adjustments as provided in Paragraphs 3 and 4 hereof; in each such case,
the terms of this Right shall be applicable to the shares or other
securities or property receivable upon the exercise of this Right after
such consummation.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment
of its declaration of trust or through reorganization, consolidation,
merger, dissolution, sale of assets or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Right, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder hereof against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company will not increase the par value of any Common Shares
<PAGE>
receivable upon the exercise of this Right above the amount payable
therefor upon such exercise, and at all times will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable stock upon the exercise of this
Right.
7. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of an
adjustment in the number of Common Shares or other shares, securities or
property receivable on the exercise of this Right, at the request of the
Holder of this Right the Company at its expense shall promptly cause
independent public accountants of recognized standing, selected by the
Company, to compute such adjustment in accordance with the terms of this
Right and prepare a certificate setting forth such adjustment and showing
in detail the facts upon which such adjustment is based, including a
statement of (a) the consideration received or to be received by the
Company for any additional shares issued or sold or deemed to have been
issued or sold, (b) the number of Common Shares outstanding or deemed to be
outstanding and (c) the Pro Forma Adjusted Trigger Price. The Company will
forthwith mail a copy of each such certificate to the Holder of this Right.
8. NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the Holders of its
Common Shares (or other shares or securities at the time deliverable upon
the exercise of this Right) for the purpose of entitling or enabling them
to receive any dividend (other than a cash or stock dividend at the same
rate as the rate of the last cash or stock dividend theretofore paid) or
other distribution, or to exercise any preemptive right pursuant to the
Company's declaration of trust, or to receive any right to subscribe for or
purchase any shares of any class or any other securities, or to receive any
other right; or
(b) of any capital reorganization of the Company, any
reclassification of the beneficial interests or capital stock of the
Company, any consolidation or merger of the Company with or into another
trust, corporation, or other entity or any conveyance of all or
substantially all of the assets of the Company to another trust,
corporation or other entity; or
(c) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, and in each such case, the Company will mail or cause to be mailed to
the Holder of this Right a notice specifying, as the case may be, (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place, and the times, if
any is to be fixed, as of which the holders of record of Common Shares (or
such other shares or securities at the time deliverable upon the exercise
of this Right) shall be entitled to exchange their Common Shares of any
class (or such other shares or securities) for reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up
or (iii) the amount and character of the shares or other securities
proposed to be issued or granted, the date of such proposed issuance or
grant and the persons or class of persons to whom such shares or other
securities are to be offered, issued or granted. Such notice shall be
mailed at least thirty (30) days prior to the date therein specified.
9. RESERVATION OF SHARES, ETC., ISSUABLE ON EXERCISE OF RIGHTS.
The Company will at all times reserve and keep available, solely for
issuance and delivery upon the exercise of this Right and other similar
Rights, such Common Shares and other shares, securities and property as
from time to time shall be issuable upon the exercise of this Right and all
other similar Rights at the time outstanding.
<PAGE>
10. REPLACEMENT OF RIGHT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Right and (in the case of loss, theft or destruction) upon delivery
of an indemnity agreement in an amount reasonably satisfactory to it, or
(in the case of mutilation) upon surrender and cancellation thereof, the
Company will issue, in lieu thereof, a new Right of like tenor.
11. REMEDIES. The Company stipulates that the remedies at law of
the Holder of this Right in the event of any default by the Company in its
performance of or compliance with any of the terms of this Right are not
and will not be adequate, and that the same may be specifically enforced.
12. NEGOTIABILITY, ETC. This Right is issued upon the following
terms, to all of which each taker or owner hereof consents and agrees:
(a) Title to this Right may be transferred by endorsement (by
the Holder hereof executing the form of assignment at the end hereof
including guaranty of signature) and delivery in the same manner as in the
case of a negotiable instrument transferable by endorsement and delivery.
(b) Any person in possession of this Right properly endorsed
is authorized to represent himself as absolute owner hereof and is granted
power to transfer absolute title hereto by endorsement and delivery hereof
to a bona fide purchaser hereof for value; each prior taker or owner waives
and renounces all of his equities or rights in this Right in favor of every
such bona fide purchaser, and every such bona fide purchaser shall acquire
title hereto and to all rights represented hereby.
(c) Until this Right is transferred on the books of the
Company, the Company may treat the registered Holder of this Right as the
absolute owner hereof for all purposes without being affected by any notice
to the contrary.
13. SUBDIVISION OF RIGHTS. This Right (as well as any new Rights
issued pursuant to the provisions of this paragraph) is exchangeable, upon
the surrender hereof by the Holder hereof, at the principal office of the
Company for any number of new Rights of like tenor and date representing in
the aggregate the right to subscribe for and purchase the number of Common
Shares of the Company which may be subscribed for and purchased hereunder.
14. REGISTRATION RIGHTS. The Holders of Rights shall have the
registration rights contained in the agreement attached as Exhibit A.
15. MAILING OF NOTICES, ETC. All notices, requests, claims,
demands, waivers and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered by hand, when
delivered by courier, three days after being deposited in the mail
(registered or certified mail, postage prepaid, return receipt requested),
or when received by facsimile transmission upon receipt of a confirmed
transmission report, as follows:
If to the Company: LaSalle Hotel Properties
220 East 42nd Street
New York, New York 10017
Tel: (212) 661-6161
Fax: (212) 687-8170
Attention: President
and if to the Holder of this Right to the address furnished to the Company
in writing by the last Holder of this Right who shall have furnished an
address to the Company in writing. Either the Company or the Holder of
this Right, by notice given to the other parties hereto in accordance with
this Section 15, may change the address or facsimile transmission number to
which such notice or other communications are to be sent to such party.
<PAGE>
16. HEADINGS, ETC. The headings in this Right are for purposes of
reference only, and shall not limit or otherwise affect the meaning hereof.
17. CHANGE, WAIVER, ETC. Neither this Right nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
18. GOVERNING LAW. This Right shall be construed and enforced in
accordance with the laws of the State of New York.
LASALLE HOTEL PROPERTIES
By: /s/ JON E. BORTZ
___________________________________
Jon E. Bortz
President
Dated: April 29, 1998
Attest:
/s/ MICHAEL D. BARNELLO
_____________________________
<PAGE>
[To be signed only upon exercise of Right]
To LASALLE HOTEL PROPERTIES:
The undersigned, the Holder of the within Right, hereby irrevocably
elects to exercise the purchase right represented by such Right for, and to
purchase thereunder, _________________Common Shares of ___________________
and herewith makes payment of $______________therefor, and requests that
the certificates for such shares be issued in the name of, and be delivered
to, _______________, whose address is ________________.
Dated:
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Right)
Address:
<PAGE>
NET ISSUE ELECTION NOTICE
To: ______________________________ Date: ___________________
The undersigned hereby elects under Paragraph 1 to surrender the
right to purchase _____________ Common Shares pursuant to this Right. The
certificate(s) for the shares issuable upon such net issue election shall
be issued in the name of the undersigned or as otherwise indicated below.
_________________________________________
Signature
_________________________________________
Name for Registration
_________________________________________
Mailing Address
<PAGE>
[To be signed only upon transfer of Right]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the rights represented by the within Right to
purchase the Common Shares of LASALLE HOTEL PROPERTIES to which
the within Right relates, and appoints attorney to transfer said
right on the books of with full power of substitution in the
premises.
Dated: April 29, 1998
________________________________:
(Signature must conform in all respects
to name of Holder as specified on the face of the Right)
Address:
In the presence of
_________________________
EXHIBIT 10.1
_____________
--------------------------------
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
-------------------------------
Dated as of April 29, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINED TERMS
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 ORGANIZATION . . . . . . . . . . . . . . . . . . . . . 19
Section 2.2 NAME . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE. . . . . 19
Section 2.4 TERM . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
PURPOSE
Section 3.1 PURPOSE AND BUSINESS . . . . . . . . . . . . . . . . . 20
Section 3.2 POWERS . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS
Section 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS. . . . . . . . . 21
Section 4.2 ISSUANCES OF PARTNERSHIP INTERESTS . . . . . . . . . . 21
Section 4.3 NO PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . 23
Section 4.4 OTHER CONTRIBUTION PROVISIONS. . . . . . . . . . . . . 23
Section 4.5 NO INTEREST ON CAPITAL . . . . . . . . . . . . . . . . 23
ARTICLE V
DISTRIBUTIONS
Section 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS. . . 23
Section 5.2 AMOUNTS WITHHELD . . . . . . . . . . . . . . . . . . . 26
Section 5.3 DISTRIBUTIONS UPON LIQUIDATION . . . . . . . . . . . . 26
Section 5.4 REVISIONS TO REFLECT ISSUANCE OF PARTNERSHIP
INTERESTS. . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI
ALLOCATIONS
Section 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES . . . . . . . 27
Section 6.2 REVISIONS TO ALLOCATIONS TO REFLECT ISSUANCE OF
PARTNERSHIP INTERESTS . . . . . . . . . . . . . 28
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.2 CERTIFICATE OF LIMITED PARTNERSHIP . . . . . . . . . . 33
Section 7.3 TITLE TO PARTNERSHIP ASSETS. . . . . . . . . . . . . . 33
Section 7.4 REIMBURSEMENT OF THE GENERAL PARTNER . . . . . . . . . 34
Section 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER; RELATIONSHIP
OF SHARES TO PARTNERSHIP UNITS; FUNDING DEBT. . 35
Section 7.6 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . 37
Section 7.7 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 38
Section 7.8 LIABILITY OF THE GENERAL PARTNER . . . . . . . . . . . 40
Section 7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER . . . . . 40
Section 7.10 RELIANCE BY THIRD PARTIES . . . . . . . . . . . . . . 42
Section 7.11 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY . . . . . 43
Section 7.12 LOANS BY THIRD PARTIES. . . . . . . . . . . . . . . . 43
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . 43
Section 8.2 MANAGEMENT OF BUSINESS . . . . . . . . . . . . . . . . 44
Section 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS . . . . . . . . 44
Section 8.4 RETURN OF CAPITAL. . . . . . . . . . . . . . . . . . . 44
Section 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP 45
Section 8.6 REDEMPTION RIGHT . . . . . . . . . . . . . . . . . . . 46
<PAGE>
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 RECORDS AND ACCOUNTING . . . . . . . . . . . . . . . . 49
Section 9.2 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . 49
Section 9.3 REPORTS. . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE X
TAX MATTERS
Section 10.1 PREPARATION OF TAX RETURNS. . . . . . . . . . . . . . 50
Section 10.2 TAX ELECTIONS . . . . . . . . . . . . . . . . . . . . 50
Section 10.3 TAX MATTERS PARTNER . . . . . . . . . . . . . . . . . 50
Section 10.4 ORGANIZATIONAL EXPENSES . . . . . . . . . . . . . . . 51
Section 10.5 WITHHOLDING . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XI
TRANSFERS AND WITHDRAWALS
Section 11.1 TRANSFER. . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.2 TRANSFERS OF PARTNERSHIP INTERESTS OF GENERAL
PARTNER. . . . . . . . . . . . . . . . . . . 53
Section 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER. . . . . . . . . 54
Section 11.4 SUBSTITUTED LIMITED PARTNERS. . . . . . . . . . . . . 56
Section 11.5 ASSIGNEES . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.6 GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . 57
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 ADMISSION OF A SUCCESSOR GENERAL PARTNER. . . . . . . 59
Section 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS. . . . . . . 59
Section 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED
PARTNERSHIP. . . . . . . . . . . . . . . . . 60
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
Section 13.1 DISSOLUTION . . . . . . . . . . . . . . . . . . . . . 60
Section 13.2 WINDING UP. . . . . . . . . . . . . . . . . . . . . . 61
Section 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. . 62
Section 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION. . . . . . . . 63
Section 13.5 RIGHTS OF LIMITED PARTNERS. . . . . . . . . . . . . . 63
Section 13.6 NOTICE OF DISSOLUTION . . . . . . . . . . . . . . . . 63
Section 13.7 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP. . 64
Section 13.8 REASONABLE TIME FOR WINDING UP. . . . . . . . . . . . 64
Section 13.9 WAIVER OF PARTITION . . . . . . . . . . . . . . . . . 64
Section 13.10 LIABILITY OF LIQUIDATOR. . . . . . . . . . . . . . . 64
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . 64
Section 14.2 MEETINGS OF THE PARTNERS. . . . . . . . . . . . . . . 66
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 ADDRESSES AND NOTICE. . . . . . . . . . . . . . . . . 67
Section 15.2 TITLES AND CAPTIONS . . . . . . . . . . . . . . . . . 67
Section 15.3 PRONOUNS AND PLURALS. . . . . . . . . . . . . . . . . 67
Section 15.4 FURTHER ACTION. . . . . . . . . . . . . . . . . . . . 67
Section 15.5 BINDING EFFECT. . . . . . . . . . . . . . . . . . . . 67
Section 15.6 CREDITORS . . . . . . . . . . . . . . . . . . . . . . 68
Section 15.7 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . 68
Section 15.8 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . 68
Section 15.9 APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . 68
Section 15.10 INVALIDITY OF PROVISIONS . . . . . . . . . . . . . . 68
Section 15.11 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . 68
Section 15.12 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . 70
Section 15.13 NO RIGHTS AS SHAREHOLDERS. . . . . . . . . . . . . . 70
Section 15.14 LIMITATION TO PRESERVE REIT STATUS . . . . . . . . . 70
<PAGE>
EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
EXHIBIT C
SPECIAL ALLOCATION RULES
EXHIBIT D
NOTICE OF REDEMPTION
EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of April 29, 1998, is entered into by and among LaSalle Hotel Properties, a
Maryland real estate investment trust, as the General Partner, and the
Persons whose names are set forth on Exhibit A hereto as Limited Partners,
together with any other Persons who become Partners in the Partnership as
provided herein.
WHEREAS, the Partnership was formed as a limited partnership on
January 13, 1998 under the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby
agree to amend and restated this agreement as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
it may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is
shown as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership Year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations
Sections 1.704-l(b)(2) (ii)(d)(4), 1.704-l(b) (2)(ii)(d)(5) and
1.704-l(b)(2)(ii) (d) (6). The foregoing definition of Adjusted Capital
Account is intended to comply with the provisions of Regulations Section
1.704-l(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital
Account as of the end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of which
has been adjusted pursuant to Exhibit B.
"Adjustment Date" has the meaning set forth in Section 4.2.B.
"Advisor" means LaSalle Hotel Advisors, Inc., a Maryland corporation,
as Advisor to the General Partner pursuant to the Advisory Agreement.
"Advisory Agreement" means the Agreement dated April 23, 1998 between
the Advisor and the General Partner.
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control
with such Person, (ii) any Person owning or controlling ten percent (10%)
or more of the outstanding voting interests of such Person, (iii) any
Person of which such Person owns or controls ten percent (10%) or more of
the voting interests or (iv) any officer, director, general partner or
<PAGE>
trustee of such Person or any Person referred to in clauses (i), (ii), and
(iii) above. For purposes of this definition, "control," when used with
respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreed Value" means (i) in the case of any Contributed Property
contributed to the Partnership as part of or in connection with the
Consolidation, the amount set forth on Exhibit E as the Agreed Value of
such Property; (ii) in the case of any other Contributed Property, the
704(c) Value of such property as of the time of its contribution to the
Partnership, reduced by any liabilities either assumed by the Partnership
upon such contribution or to which such property is subject when
contributed; and (iii) in the case of any property distributed to a Partner
by the Partnership, the Partnership's Carrying Value of such property at
the time such property is distributed, reduced by any indebtedness either
assumed by such Partner upon such distribution or to which such property is
subject at the time of distribution as determined under Section 752 of the
Code and the regulations thereunder.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have
been transferred in a manner permitted under this Agreement, but who has
not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made:
(a) all cash revenues and funds received by the Partnership from
whatever source (excluding the proceeds of any Capital Contribution) plus
the amount of any reduction (including, without limitation, a reduction
resulting because the General Partner determines such amounts are no longer
necessary) in reserves of the Partnership, which reserves are referred to
in clause (b)(iv) below;
(b) less the sum of the following (except to the extent made with
the proceeds of any Capital Contribution):
(i) all interest, principal and other debt payments made
during such period by the Partnership,
(ii) all cash expenditures (including capital expenditures)
made by the Partnership during such period,
(iii) investments in any entity (including loans made
thereto) to the extent that such investments are permitted under this
Agreement and are not otherwise described in clauses (b)(i) or (ii), and
(iv) the amount of any increase in reserves established during
such period which the General Partner determines is necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any
disbursements made or reserves established, after commencement of the
dissolution and liquidation of the partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will
<PAGE>
be reflected by the difference between such Partner's Capital Account
balance as maintained pursuant to Exhibit B and the hypothetical balance of
such Partner's Capital Account computed as if it had been maintained
strictly in accordance with federal income tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required
by law to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Agreed Value of Contributed Property which such
Partner contributes or is deemed to contribute to the Partnership pursuant
to Section 4.1 or 4.2.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or
Adjusted Property, as the case may be, charged to the Partners' Capital
Accounts and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of
the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Exhibit B, and to reflect
changes, additions (including capital improvements thereto) or other
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash equal to the Value on the
Valuation Date of the Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating
to the Partnership filed in the office of the Delaware Secretary of State,
as amended from time to time in accordance with the terms hereof and the
Act.
"Class A" has the meaning set forth in Section 5.1.C.
"Class A Share" has the meaning set forth in Section 5.1.C.
"Class A Unit" means any Partnership Unit that is not specifically
designated by the General Partner as being of another specified class of
Partnership Units.
"Class B" has the meaning set forth in Section 5.1.C.
"Class B Share" has the meaning set forth in Section 5.1.C.
"Class B Unit" means a Partnership Unit that is specifically
designated by the General Partner as being a Class B Unit.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision
of future law.
"Consent" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2.
"Consent of the Outside Limited Partners" means the Consent of
Limited Partners (excluding for this purpose any Limited Partnership
Interests held by the General Partner, or any other Person of which the
General Partner owns or controls more than fifty percent (50%) of the
voting interests and any Person directly or indirectly owning or
controlling more than fifty percent (50%) of the outstanding voting
interests of the General Partner) holding Percentage Interests that are
<PAGE>
greater than fifty percent (50%) of the aggregate Percentage Interest of
all Limited Partners who are not excluded for the purposes hereof.
"Consolidation" means (i) the transactions whereby the Partnership
will acquire interests in certain hotel properties owned by the Target
Entities by way of merger or exchange of a Target Entity's interest for
Operating Partnership Units.
"Contributed Property" means each property or other asset contributed
to the Partnership, in such form as may be permitted by the Act, but
excluding cash contributed or deemed contributed to the Partnership. Once
the Carrying Value of a Contributed Property is adjusted pursuant to
Exhibit B, such property shall no longer constitute a Contributed Property
for purposes of Exhibit B, but shall be deemed an Adjusted Property for
such purposes.
"Conversion Factor" means 1.0; provided that, if the General Partner
(i) declares or pays a dividend on its outstanding Shares in Shares or
makes a distribution to all holders of its outstanding Shares in Shares,
(ii) subdivides its outstanding Shares or (iii) combines its outstanding
Shares into a smaller number of Shares, the Conversion Factor shall be
adjusted by multiplying the Conversion Factor by a fraction, the numerator
of which shall be the number of Shares issued and outstanding on the record
date for such dividend, distribution, subdivision or combination (assuming
for such purposes that such dividend, distribution, subdivision or
combination has occurred as of such time) and the denominator of which
shall be the actual number of Shares (determined without the above
assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination; and provided further that if an
entity shall cease to be the General Partner (the "Predecessor General
Partner") and another entity shall become the General Partner (the
"Successor General Partner"), the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, the numerator of which is
the Value of one Share of the Predecessor General Partner, determined as of
the date when the Successor General Partner becomes the general partner of
the Partnership, and the denominator of which is the Value of one Share of
the Successor General Partner, determined as of that same date. (For
purposes of the second proviso in the preceding sentence, if any
shareholders of the Predecessor General Partner will receive consideration
in connection with the transaction in which the Successor General Partner
becomes the General Partner, the numerator in the fraction described above
for determining the adjustment to the Conversion Factor (that is, the Value
of one Share of the Predecessor General Partner) shall be the sum of the
greatest amount of cash and the fair market value (as determined in good
faith by the General Partner) of any securities and other consideration
that the holder of one Share in the Predecessor General Partner could have
received in such transaction (determined without regard to any provisions
governing fractional shares).) Any adjustment to the Conversion Factor
shall become effective immediately after the effective date of the event
retroactive to the record date, if any, for the event giving rise thereto,
it being intended that (x) adjustments to the Conversion Factor are to be
made to avoid unintended dilution or anti-dilution as a result of
transactions in which Shares are issued, redeemed or exchanged without a
corresponding issuance, redemption or exchange of Partnership Units and (y)
if a Specified Redemption Date shall fall between the record date and the
effective date of any event of the type described above, that the
Conversion Factor applicable to such redemption shall be adjusted to take
into account such event.
"Convertible Funding Debt" has the meaning set forth in Section
7.5.F.
"Debt" means, as to any Person, as of any date of determination, (i)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, (ii) all amounts owed by such
Person to banks or other Persons in respect of reimbursement obligations
under letters of credit, surety bonds and other similar instruments
guaranteeing payment or other performance of obligations by such Person,
<PAGE>
(iii) all indebtedness for borrowed money or for the deferred purchase
price of property or services secured by any lien on any property owned by
such Person, to the extent attributable to such Person's interest in such
property, even though such Person has not assumed or become liable for the
payment thereof, and (iv) obligations of such Person incurred in connection
with entering into a lease which, in accordance with generally accepted
accounting principles, should be capitalized.
"Declaration of Trust" means the Declaration of Trust of LaSalle
Hotel Properties filed in the State of Maryland on January 15, 1998, as
amended or restated from time to time.
"Deemed Partnership Interest Value" means, as of any date with
respect to any class of Partnership Interests, the Deemed Value of the
Partnership Interest of such class multiplied by the applicable Partner's
Percentage Interest of such class.
"Deemed Value of the Partnership Interest" means, as of any date with
respect to any class of Partnership Interests, (a) if the common shares of
beneficial interest (or other comparable equity interests) of the General
Partner are Publicly Traded (i) the total number of shares of beneficial
interest (or other comparable equity interest) of the General Partner
corresponding to such class of Partnership Interest (as provided for in
Section 4.2.B) issued and outstanding as of the close of business on such
date (excluding any treasury shares) multiplied by the Value of a share of
such beneficial interest (or other comparable equity interest) on such date
divided by (ii) the Percentage Interest of the General Partner in such
class of Partnership Interests on such date, and (b) otherwise, the
aggregate Value of such class of Partnership Interests determined as set
forth in the fourth and fifth sentences of the definition of Value.
"Depreciation" means, for each fiscal year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if
the Carrying Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such
beginning Carrying Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year bears to such
beginning adjusted tax basis; provided, however, that if the federal income
tax depreciation, amortization, or other cost recovery deduction for such
year is zero, Depreciation shall be determined with reference to such
beginning Carrying Value using any reasonable method selected by the
General Partner.
"Distribution Period" has the meaning set forth in Section 5.1.C.
"Effective Date" means the date of the closing of the Consolidation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plan" means an "employee benefit plan" as that term is defined
in 29 U.S.C. Section 1002(3), and which is not exempt from regulation
under ERISA by virtue of 29 U.S.C. Section 1003(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Funding Debt" means the incurrence of any Debt by or on behalf of
the General Partner Entity for the purpose of providing funds to the
Partnership.
"General Partner" means LaSalle Hotel Properties or its successor as
general partner.
"General Partnership Interest" means a Partnership Interest held by a
General Partner that is a general partnership interest. A General
Partnership Interest may be expressed as a number of Partnership Units.
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"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such
natural Person's spouse, parents, descendants, nephews, nieces, brothers,
and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating such Partner incompetent to manage his or her
Person or estate, (ii) as to any corporation which is a Partner, the filing
of a certificate of dissolution, or its equivalent, for the corporation or
the revocation of its charter, (iii) as to any partnership or limited
liability company which is a Partner, the dissolution and commencement of
winding up of the partnership or limited liability company, (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the
estate's entire interest in the Partnership, (v) as to any trustee of a
trust which is a Partner, the termination of the trust (but not the
substitution of a new trustee) or (vi) as to any Partner, the bankruptcy of
such Partner. For purposes of this definition, bankruptcy of a Partner
shall be deemed to have occurred when (a) the Partner commences a voluntary
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect, (b)
the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar
law now or hereafter in effect has been entered against the Partner, (c)
the Partner executes and delivers a general assignment for the benefit of
the Partner's creditors, (d) the Partner files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the Partner in any proceeding of the nature described in
clause (b) above, (e) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all
or any substantial part of the Partner's properties, (f) any proceeding
seeking liquidation, reorganization or other relief under any bankruptcy,
insolvency or other similar law now or hereafter in effect has not been
dismissed within one hundred twenty (120) days after the commencement
thereof, (g) the appointment without the Partner's consent or acquiescence
of a trustee, receiver of liquidator has not been vacated or stayed within
ninety (90) days of such appointment or (h) an appointment referred to in
clause (g) is not vacated within ninety (90) days after the expiration of
any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of its status as (A) the General Partner, (B) a Limited Partner, or
(C) a trustee, director or officer of the Partnership, or the General
Partner and (ii) such other Persons (including Affiliates of the General
Partner, a Limited Partner or the Partnership) as the General Partner may
designate from time to time (whether before or after the event giving rise
to potential liability), in its sole and absolute discretion.
"Limited Partner" means the General Partner, in its capacity as a
Limited Partner in the Partnership, or any Person named as a Limited
Partner in Exhibit A, as such Exhibit may be amended from time to time, or
any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a
Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled
as provided in this Agreement, together with all obligations of such Person
to comply with the terms and provisions of this Agreement. A Limited
Partnership Interest may be expressed as a number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.A.
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"Net Income" means, for any taxable period, the excess, if any, of
the Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The
items included in the calculation of Net Income shall be determined in
accordance with Exhibit B. If an item of income, gain, loss or deduction
that has been included in the initial computation of Net Income is
subjected to the special allocation rules in Exhibit C, Net Income or the
resulting Net Loss, whichever the case may be, shall be recomputed without
regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance
with Exhibit B. If an item of income, gain, loss or deduction that has
been included in the initial computation of Net Loss is subjected to the
special allocation rules in Exhibit C, Net Loss or the resulting Net
Income, whichever the case may be, shall be recomputed without regard to
such item.
"New Securities" means (i) any rights, options, warrants or
convertible or exchangeable securities having the right to subscribe for or
purchase shares of beneficial interest (or other comparable equity
interest) of the General Partner, excluding grants under any Share Option
Plan, or (ii) any Debt issued by the General Partner that provides any of
the rights described in clause (i).
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or
negative pledge securing a Nonrecourse Liability, the amount of any taxable
gain that would be allocated to the Partners pursuant to Section 2.B of
Exhibit C if such properties were disposed of in a taxable transaction in
full satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-l(a)(2).
"Notice of Redemption" means a Notice of Redemption substantially in
the form of Exhibit D.
"Partner" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result
if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership
Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act upon
the terms and conditions set forth in this Agreement, or any successor to
such limited partnership.
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"Partnership Interest" means a Limited Partnership Interest or the
General Partnership Interest and includes any and all benefits to which the
holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the
terms and provisions of this Agreement. A Partnership Interest may be
expressed as a number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well
as any net increase or decrease in Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by the
General Partner either (i) for the distribution of Available Cash pursuant
to Section 5.1 hereof, which record date shall be the same as the record
date established by the General Partner for a distribution to its
shareholders of some or all of its portion of such distribution, or (ii) if
applicable, for determining the Partners entitled to vote on or consent to
any proposed action for which the consent or approval of the Partners is
sought pursuant to Section 14.2 hereof.
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and
4.2, and includes Class A Units, Class B Units and any other classes or
series of Partnership Units established after the date hereof. The number
of Partnership Units outstanding and the Percentage Interests in the
Partnership represented by such Partnership Units are set forth in Exhibit
A, as such Exhibit may be amended from time to time.
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"Percentage Interest" means, as to a Partner holding a class of
Partnership Interests, its interest in such class, determined by dividing
the Partnership Units of such class owned by such Partner by the total
number of Partnership Units of such class then outstanding as specified in
Exhibit A, as such exhibit may be amended from time to time, multiplied by
the aggregate Percentage Interest allocable to such class of Partnership
Interests. If the Partnership shall at any time have outstanding more than
one class of Partnership Interests, the Percentage Interest attributable to
each class of Partnership Interests shall be determined as set forth in
Section 4.2.B.
"Person" means a natural person, partnership (whether general or
limited), trust, estate, association, corporation, limited liability
company, unincorporated organization, custodian, nominee or any other
individual or entity in its own or any representative capacity.
"Predecessor Entity" has the meaning set forth in the definition of
"Conversion Factor" herein.
"Publicly Traded" means listed or admitted to trading on the New York
Stock Exchange, the American Stock Exchange or another national securities
exchange or designated for quotation on the NASDAQ National Market, or any
successor to any of the foregoing.
"Qualified REIT Subsidiary" means any Subsidiary of the General
Partner that is a "qualified REIT subsidiary" within the meaning of Section
856(i) of the Code.
"Qualified Transferee" means an "Accredited Investor" as defined in
Rule 501 promulgated under the Securities Act.
<PAGE>
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or
Section 743 of the Code) upon the disposition of any property or asset of
the Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6.A.
"Redemption Amount" means either the Cash Amount or the Shares
Amount, as determined by the General Partner, in its sole and absolute
discretion, provided that if the Shares are not Publicly Traded at the time
a Redeeming Partner exercises its Redemption Right, the Redemption Amount
shall be paid only in the form of the Cash Amount unless the Redeeming
Partner, in its sole and absolute discretion, consents to payment of the
Redemption Amount in the form of the Shares Amount. A Redeeming Partner
shall have no right, without the General Partner's consent, in its sole and
absolute discretion, to receive the Redemption Amount in the form of the
Shares Amount.
"Redemption Right" has the meaning set forth in Section 8.6.A.
"Regulation" or "Regulations" means the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the
Code.
"REIT Requirements" has the meaning set forth in Section 5.1.A.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of
Contributed Property or Adjusted Property, to the extent such item of gain
or loss is not allocated pursuant to Section 2.B.l(a) or 2.B.2(a) of
Exhibit C to eliminate Book-Tax Disparities.
"Safe Harbor" has the meaning set forth in Section 11.6.F.
"Securities Act" means the Securities Act of 1933, as amended.
"704(c) Value" of any Contributed Property means the fair market
value of such property at the time of contribution as determined by the
General Partner using such reasonable method of valuation as they may
adopt, provided, however, subject to Exhibit B, the General Partner shall,
in their sole and absolute discretion, use such method as they deem
reasonable and appropriate to allocate the aggregate of the 704(c) Value of
Contributed Properties in a single or integrated transaction among each
separate property on a basis proportional to its fair market values. The
704(c) Values of the Contributed Properties contributed to the Partnership
as part of or in connection with the Consolidation are set forth on Exhibit
E.
"Share" means a share of beneficial interest (or other comparable
equity interest) of the General Partner. Shares may be issued in one or
more classes or series in accordance with the terms of the Declaration of
Trust (or, if the General Partner is not the General Partner, the
organizational documents of the General Partner). If there is more than
one class or series of Shares, the term "Shares" shall, as the context
requires, be deemed to refer to the class or series of Shares that
correspond to the class or series of Partnership Interests for which the
reference to Shares is made. When used with reference to Class A Units,
the term "Shares" refers to common shares of beneficial interest (or other
comparable equity interest) of the General Partner.
<PAGE>
"Shares Amount" means a number of Shares equal to the product of the
number of Partnership Units offered for redemption by a Redeeming Partner
times the Conversion Factor, provided that, if the General Partner issues
to all holders of Shares rights, options, warrants or convertible or
exchangeable securities entitling such holders to subscribe for or purchase
Shares or any other securities or property (collectively, the "rights"),
then the Shares Amount shall also include such rights that a holder of that
number of Shares would be entitled to receive.
"Share Option Plan" means any equity incentive plan of the General
Partner, the Partnership and/or any Affiliate of the Partnership.
"Specified Redemption Date" means the tenth Business Day after
receipt by the General Partner of a Notice of Redemption; provided that, if
the Shares are not Publicly Traded, the Specified Redemption Date means the
thirtieth Business Day after receipt by the General Partner of a Notice of
Redemption.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, trust, partnership or joint venture, or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Successor Entity" has the meaning set forth in the definition of
"Conversion Factor" herein.
"Target Entities" shall mean the limited partnership, corporations,
limited liability companies listed on Exhibit A.
"Terminating Capital Transaction" means any sale or other disposition
of all or substantially all of the assets of the Partnership for cash in a
single or a related series of transactions (including by way of merger)
that, taken together, result in the sale or other disposition of all or
substantially all of the assets of the Partnership for cash.
"Termination Transaction" has the meaning set forth in Section
11.2.B.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit B) as of such
date, over (ii) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Exhibit B) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the
Carrying Value of such property (prior to any adjustment to be made
pursuant to Exhibit B) as of such date, over (ii) the fair market value of
such property (as determined under Exhibit B) as of such date.
"Valuation Date" means the date of receipt by the General Partner of
a Notice of Redemption or, if such date is not a Business Day, the first
Business Day thereafter.
"Value" means, with respect to any outstanding Shares of the General
Partner that are Publicly Traded, the average of the daily market price for
the ten consecutive trading days immediately preceding the date with
respect to which value must be determined. The market price for each such
trading day shall be the closing price, regular way, on such day, or if no
such sale takes place on such day, the average of the closing bid and asked
prices on such day. If the outstanding Shares of the General Partner are
Publicly Traded and the Shares Amount includes rights that a holder of
Shares would be entitled to receive, then the Value of such rights shall be
determined by the General Partner acting in good faith on the basis of such
<PAGE>
quotations and other information as it considers, in its reasonable
judgment, appropriate. If the Shares of the General Partner are not
Publicly Traded, the Value of the Shares Amount per Partnership Unit
offered for redemption (which will be the Cash Amount per Partnership Unit
offered for redemption payable pursuant to Section 8.6.A) means the amount
that a holder of one Partnership Unit would receive if each of the assets
of the Partnership were to be sold for its fair market value on the
Specified Redemption Date, the Partnership were to pay all of its
outstanding liabilities, and the remaining proceeds were to be distributed
to the Partners in accordance with the terms of this Agreement. Such Value
shall be determined by the General Partner, acting in good faith and based
upon a commercially reasonable estimate of the amount that would be
realized by the Partnership if each asset of the Partnership (and each
asset of each partnership, limited liability company, trust, joint venture
or other entity in which the Partnership owns a direct or indirect
interest) were sold to an unrelated purchaser in an arms' length
transaction where neither the purchaser nor the seller were under economic
compulsion to enter into the transaction (without regard to any discount in
value as a result of the Partnership's minority interest in any property or
any illiquidity of the Partnership's interest in any property). In
connection with determining the Deemed Value of the Partnership Interest
for purposes of determining the number of additional Partnership Units
issuable upon a Capital Contribution funded by an underwritten public
offering or an arm's length private placement of shares of beneficial
interest (or other comparable equity interest) of the General Partner, the
Value of such shares shall be the public offering or arm's length private
placement price per share of such class of beneficial interest (or other
comparable equity interest) sold.
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 ORGANIZATION
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth in this
Agreement. Except as expressly provided herein to the contrary, the rights
and obligations of the Partners and the administration and termination of
the Partnership shall be governed by the Act. The Partnership Interest of
each Partner shall be personal property for all purposes.
Section 2.2 NAME
The name of the Partnership is LaSalle Hotel Operating Partnership,
L.P. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of any of
the General Partner or any Affiliate thereof. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included
in the Partnership's name where necessary for the purposes of complying
with the laws of any jurisdiction that so requires. The General Partner in
their sole and absolute discretion may change the name of the Partnership
at any time and from time to time and shall notify the Limited Partners of
such change in the next regular communication to the Limited Partners.
Section 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE
The address of the registered office of the Partnership in the State
of Delaware shall be located at Corporation Trust Center, 1209 Orange
Street, Wilmington, County of New Castle, Delaware 19801, and the
registered agent for service of process on the Partnership in the State of
Delaware at such registered office shall be The Corporation Trust Company.
The principal office of the Partnership shall be 220 East 42nd Street, New
York, New York 10017, or such other place as the General Partner may from
time to time designate by notice to the Limited Partners. The Partnership
may maintain offices at such other place or places within or outside the
State of Delaware as the General Partner deems advisable.
<PAGE>
Section 2.4 TERM
The term of the Partnership shall commence on January __, 1998 and
shall continue until December 31, 2098, unless it is dissolved sooner
pursuant to the provisions of Article XIII or as otherwise provided by law.
ARTICLE III
PURPOSE
Section 3.1 PURPOSE AND BUSINESS
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted
by a limited partnership organized pursuant to the Act; provided, however,
that such permit the General Partner at all times to be classified as a
REIT, unless the General Partner ceases to qualify or is not qualified as a
REIT for any reason or reasons not related to the business conducted by the
Partnership, (ii) to enter into any corporation, partnership, joint
venture, trust, limited liability company or other similar arrangement to
engage in any of the foregoing or the ownership of interests in any entity
engaged, directly or indirectly, in any of the foregoing and (iii) to do
anything necessary or incidental to the foregoing. In connection with the
foregoing, the Partners acknowledge that the status of the General Partner
as a REIT inures to the benefit of all the Partners and not solely to the
General Partner or its Affiliates.
Section 3.2 POWERS
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for
the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Partnership, including,
without limitation, full power and authority, directly or through its
ownership interest in other entities, to enter into, perform and carry out
contracts of any kind, borrow money and issue evidences of indebtedness,
whether or not secured by mortgage, deed of trust, pledge or other lien,
acquire, own, manage, improve and develop real property, and lease, sell,
transfer and dispose of real property, provided, however, that the
Partnership shall not take, or refrain from taking, any action which, in
the judgment of the General Partner, in its sole and absolute discretion,
(i) could adversely affect the ability of the General Partner to continue
to qualify as a REIT, (ii) could subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the Code or (iii)
could violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner or its securities, unless such
action (or inaction) shall have been specifically consented to by the
General Partner in writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
Section 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS
At the time of the execution of this Agreement, the Partners shall
make or shall have made the Capital Contributions as set forth in Exhibit
A. The Partners shall own Partnership Units in the amounts set forth in
Exhibit A and shall have a Percentage Interest in the Partnership as set
forth in Exhibit A, which Percentage Interest shall be adjusted in Exhibit
A from time to time by the General Partner to the extent necessary to
reflect accurately redemptions, Capital Contributions, the issuance of
additional Partnership Units or similar events having an effect on a
Partner's Percentage Interest. To the extent the Partnership is acquiring
any property by the merger of any other Person into the Partnership,
Persons who receive Partnership Interests in exchange for their interests
in the Person merging into the Partnership shall become Partners and shall
<PAGE>
be deemed to have made Capital Contributions as provided in the applicable
merger agreement and as set forth in Exhibit A. A number of Partnership
Units held by the General Partner equal to one percent (1%) of all
outstanding Partnership Units (as of the closing date of the Consolidation)
shall be deemed to be the General Partner Partnership Units and shall be
the General Partnership Interest of such General Partner. All other
Partnership Units held by the General Partner shall be deemed to be Limited
Partnership Interests and shall be held by the General Partner in their
capacity as Limited Partners in the Partnership. Except as provided in
Sections 7.5 and 10.5 hereof, the Partners shall have no obligation to make
any additional Capital Contributions or provide any additional funding to
the Partnership (whether in the form of loans, repayments of loans or
otherwise). No Partner shall have any obligation to restore any deficit
that may exist in its Capital Account, either upon a liquidation of the
Partnership or otherwise.
Section 4.2 ISSUANCES OF PARTNERSHIP INTERESTS
A. General. The General Partner is hereby authorized to cause the
Partnership from time to time to issue to Partners (including the General
Partner and its Affiliates) or other Persons (including, without
limitation, in connection with the contribution of property to the
Partnership) Partnership Units or other Partnership Interests in one or
more classes, or in one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other
special rights, powers and duties, including rights, powers and duties
senior to Limited Partnership Interests, all as shall be determined,
subject to applicable Delaware law, by the General Partner in its sole and
absolute discretion, including, without limitation, (i) the allocations of
items of Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests, (ii) the right of each such class
or series of Partnership Interests to share in Partnership distributions
and (iii) the rights of each such class or series of Partnership Interests
upon dissolution and liquidation of the Partnership, provided that, no such
Partnership Units or other Partnership Interests shall be issued to the
General Partner unless either (a) the Partnership Interests are issued in
connection with the grant, award or issuance of Shares or other equity
interests in the General Partner having designations, preferences and other
rights such that the economic interests attributable to such Shares or
other equity interests are substantially similar to the designations,
preferences and other rights (except voting rights) of the Partnership
Interests issued to the General Partner in accordance with this Section
4.2.A or (b) the additional Partnership Interests are issued to all
Partners holding Partnership Interests in the same class (if more than one
class is outstanding) in proportion to their respective Percentage
Interests in such class. If the Partnership issues Partnership Interests
pursuant to this Section 4.2.A, the General Partner shall make such
revisions to this Agreement (including but not limited to the revisions
described in Section 5.4, Section 6.2 and Section 8.6) as it deems
necessary to reflect the issuance of such Partnership Interests.
B. Percentage Interest Adjustments in the Case of Capital
Contributions for Partnership Units. Upon the acceptance of additional
Capital Contributions in exchange for Partnership Units and if the
Partnership shall have outstanding more than one class of Partnership
Interests, the Percentage Interest related thereto shall be equal to a
fraction, the numerator of which is equal to the amount of cash, if any,
plus the Agreed Value of Contributed Property, if any, contributed with
respect to such additional Partnership Units and the denominator of which
is equal to the sum of (i) the Deemed Value of the Partnership Interests
for all outstanding classes (computed as of the Business Day immediately
preceding the date on which the additional Capital Contributions are made
(an "Adjustment Date")) plus (ii) the aggregate amount of additional
Capital Contributions contributed to the Partnership on such Adjustment
Date in respect of such additional Partnership Units. The Percentage
Interest of each other Partner holding Partnership Interests not making a
full pro rata Capital Contribution shall be adjusted to a fraction the
<PAGE>
numerator of which is equal to the sum of (i) the Deemed Partnership
Interest Value of such Limited Partner (computed as of the Business Day
immediately preceding the Adjustment Date) plus (ii) the amount of
additional Capital Contributions (such amount being equal to the amount of
cash, if any, plus the Agreed Value of Contributed Property, if any, so
contributed), if any, made by such Partner to the Partnership in respect of
such Partnership Interest as of such Adjustment Date and the denominator of
which is equal to the sum of (i) the Deemed Value of the Partnership
Interests of all outstanding classes (computed as of the Business Day
immediately preceding such Adjustment Date) plus (ii) the aggregate amount
of the additional Capital Contributions contributed to the Partnership on
such Adjustment Date in respect of such additional Partnership Interests.
For purposes of calculating a Partner's Percentage Interest pursuant to
this Section 4.2.B, cash Capital Contributions by the General Partner will
be deemed to equal the cash contributed by such General Partner plus (a) in
the case of cash contributions funded by an offering of any equity
interests in or other securities of the General Partner, the offering costs
attributable to the cash contributed to the Partnership, and (b) in the
case of Partnership Units issued pursuant to Section 7.5.E, an amount equal
to the difference between the Value of the Shares sold pursuant to any
Share Option Plan and the net proceeds of such sale.
C. Classes of Partnership Units. From and after the Effective
Date, subject to Section 4.2.A above, the Partnership shall have two
classes of Partnership Units entitled "Class A Units" and "Class B Units."
Either Class A Units or Class B Units, at the election of the General
Partner, in its sole and absolute discretion, may be issued to newly
admitted Partners in exchange for the contribution by such Partners of
cash, real estate partnership interests, stock, notes or other assets or
consideration; provided, that all Partnership Units issued to Partners in
connection with the Consolidation shall be Class A Units; and, provided
further, that any Partnership Unit that is not specifically designated by
the General Partner as being of a particular class shall be deemed to be a
Class A Unit. Each Class B Unit shall be converted automatically into a
Class A Unit on the day immediately following the Partnership Record Date
for the Distribution Period (as defined in Section 5.1.C) in which such
Class B Unit was issued, without the requirement for any action by either
the Partnership or the Partner holding the Class B Unit.
Section 4.3 NO PREEMPTIVE RIGHTS
Except to the extent expressly granted by the Partnership pursuant to
another agreement, no Person shall have any preemptive, preferential or
other similar right with respect to (i) additional Capital Contributions or
loans to the Partnership or (ii) issuance or sale of any Partnership Units
or other Partnership Interests.
Section 4.4 OTHER CONTRIBUTION PROVISIONS
If any Partner is admitted to the Partnership and is given a Capital
Account in exchange for services rendered to the Partnership, such
transaction shall be treated by the Partnership and the affected Partner as
if the Partnership had compensated such Partner in cash, and the Partner
had contributed such cash to the capital of the Partnership.
Section 4.5 NO INTEREST ON CAPITAL
No Partner shall be entitled to interest on its Capital Contributions
or its Capital Account.
ARTICLE V
DISTRIBUTIONS
Section 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS
A. General. The General Partner shall distribute at least quarterly
an amount equal to one hundred percent (100%) of Available Cash generated
<PAGE>
by the Partnership during such quarter or shorter period to the Partners
who are Partners on the Partnership Record Date with respect to such
quarter or shorter period as provided in Sections 5.1.B, 5.1.C and 5.1.D.
Notwithstanding anything to the contrary contained herein, in no event may
a Partner receive a distribution of Available Cash with respect to a
Partnership Unit for a quarter or shorter period if such Partner is
entitled to receive a distribution with respect to a Share for which such
Partnership Unit has been redeemed or exchanged. Unless otherwise
expressly provided for herein or in an agreement at the time a new class of
Partnership Interests is created in accordance with Article IV hereof, no
Partnership Interest shall be entitled to a distribution in preference to
any other Partnership Interest. The General Partner shall make such
reasonable efforts, as determined by them in their sole and absolute
discretion and consistent with the qualification of the General Partner as
a REIT, to distribute Available Cash (a) to Limited Partners so as to
preclude any such distribution or portion thereof from being treated as
part of a sale of property of the Partnership by a Limited Partner under
Section 707 of the Code or the Regulations thereunder; provided that, the
General Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of any distribution to a
Limited Partner being so treated, and (b) to the General Partner in an
amount sufficient to enable the General Partner to pay shareholder
dividends that will (1) satisfy the requirements for qualification as a
REIT under the Code and the Regulations (the "REIT Requirements") of, and
(2) avoid any federal income or excise tax liability for, the General
Partner.
B. Method. (i) Each holder of Partnership Interests that is
entitled to any preference in distribution shall be entitled to a
distribution in accordance with the rights of any such class of Partnership
Interests (and, within such class, pro rata in proportion to the respective
Percentage Interests on such Partnership Record Date); and
(ii) To the extent there is Available Cash remaining after the
payment of any preference in distribution in accordance with the foregoing
clause (i), with respect to Partnership Interests that are not entitled to
any preference in distribution, pro rata to each such class in accordance
with the terms of such class (and, within each such class, pro rata in
proportion to the respective Percentage Interests on such Partnership
Record Date).
C. Distributions When Class B Units Are Outstanding. If for any
quarter or shorter period with respect to which a distribution is to be
made (a "Distribution Period") Class B Units are outstanding on the
Partnership Record Date for such Distribution Period, the General Partner
shall allocate the Available Cash with respect to such Distribution Period
available for distribution with respect to the Class A Units and Class B
Units collectively between the Partners who are holders of Class A Units
("Class A") and the Partners who are holders of Class B Units ("Class B")
as follows:
(1) Class A shall receive that portion of
the Available Cash (the "Class A Share") determined by multiplying the
amount of Available Cash by the following fraction:
A x Y
_______________
(A x Y)+(B x X)
(2) Class B shall receive that portion of the
Available Cash (the "Class B Share") determined by multiplying the amount
of Available Cash by the following fraction:
B x X
_______________
(A x Y)+(B x X)
<PAGE>
(3) For purposes of the foregoing formulas
(i) "A" equals the number of Class A Units outstanding on the Partnership
Record Date for such Distribution Period; (ii) "B" equals the number of
Class B Units outstanding on the Partnership Record Date for such
Distribution Period; (iii) "Y" equals the number of days in the
Distribution Period; and (iv) "X" equals the number of days in the
Distribution Period for which the Class B Units were issued and
outstanding.
The Class A Share shall be distributed among Partners holding Class A
Units on the Partnership Record Date for the Distribution Period in
accordance with the number of Class A Units held by each Partner on such
Partnership Record Date; provided that in no event may a Partner receive a
distribution of Available Cash with respect to a Class A Unit if a Partner
is entitled to receive a distribution out of such Available Cash with
respect to a Share for which such Class A Unit has been redeemed or
exchanged. The Class B Shares shall be distributed among the Partners
holding Class B Units on the Partnership Record Date for the Distribution
Period in accordance with the number of Class B Units held by each Partner
on such Partnership Record Date. In no event shall any Class B Units be
entitled to receive any distribution of Available Cash for any Distribution
Period ending prior to the date on which such Class B Units are issued.
D. Distributions When Class B Units Have Been Issued on Different
Dates. If Class B Units which have been issued on different dates are
outstanding on the Partnership Record Date for any Distribution Period,
then the Class B Units issued on each particular date shall be treated as a
separate series of Partnership Units for purposes of making the allocation
of Available Cash for such Distribution Period among the holders of
Partnership Units (and the formula for making such allocation, and the
definitions of variables used therein, shall be modified accordingly).
Thus, for example, if two series of Class B Units are outstanding on the
Partnership Record Date for any Distribution Period, the allocation formula
for each series, "Series B1" and "Series B2" would be as follows:
(1) Series B1 shall receive that portion of
the Available Cash determined by multiplying the amount of Available Cash
by the following fractions:
B1 x X1
___________________________
(A x Y)+(B1 x X1)+(B2 x X2)
(2) Series B2 shall receive that portion of
the Available Cash determined by multiplying the amount of Available Cash
by the following fractions:
B2 x X2
___________________________
(A x Y)+(B1 x X1)+(B2 x X2)
(3) For purposes of the foregoing formulas
the definitions set forth in Section 5.1.C.3 remain the same except that
(i) "B1" equals the number of Partnership Units in Series B1 outstanding on
the Partnership Record Date for such Distribution Period; (ii) "B2" equals
the number of Partnership Units in Series B2 outstanding on the Partnership
Record Date for such Distribution Period; (iii) "X1" equals the number of
days in the Distribution Period for which the Partnership Units in Series
B1 were issued and outstanding, and (iv) "X2" equals the number of days in
the Distribution Period for which the Partnership Units in Series B2 were
issued and outstanding.
E. Minimum Distributions if Shares Not Publicly Traded. In
addition (and without regard to the amount of Available Cash), if the
Shares of the General Partner are not Publicly Traded, the General Partner
shall make cash distributions with respect to the Class A Units at least
<PAGE>
annually for each taxable year of the Partnership beginning prior to the
fifteenth (15th) anniversary of the Effective Date in an aggregate amount
with respect to each such taxable year at least equal to 95% of the
Partnership's taxable income for such year allocable to the Class A Units,
with such distributions to be made not later than 60 days after the end of
such year.
Section 5.2 AMOUNTS WITHHELD
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 with respect to any allocation,
payment or distribution to the General Partner, the Limited Partners or
Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners or Assignees pursuant to Section 5.1 for all purposes
under this Agreement.
Section 5.3 DISTRIBUTIONS UPON LIQUIDATION
Proceeds from a Terminating Capital Transaction shall be distributed
to the Partners, in accordance with Section 13.2.
Section 5.4 REVISIONS TO REFLECT ISSUANCE OF PARTNERSHIP
INTERESTS
If the Partnership issues Partnership Interests to the General
Partner or any Additional Limited Partner pursuant to Article IV hereof,
the General Partner shall make such revisions to this Article V and Exhibit
A as it deems necessary to reflect the issuance of such additional
Partnership Interests without the requirements for any other consents or
approvals.
ARTICLE VI
ALLOCATIONS
Section 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners among themselves, the Partnership's items of
income, gain, loss and deduction (computed in accordance with Exhibit B)
shall be allocated among the Partners in each taxable year (or portion
thereof) as provided herein below.
A. Net Income. After giving effect to the special allocations set
forth in Section 1 of Exhibit C, Net Income shall be allocated (i) first,
to the General Partner to the extent that Net Losses previously allocated
to the General Partner pursuant to the last sentence of Section 6.1.B
exceed Net Income previously allocated to the General Partner pursuant to
this clause (i) of Section 6.1.A, (ii) second, to the holders of any
Partnership Interests that are entitled to any preference in distribution
in accordance with the rights of any such class of Partnership Interests
until each such Partnership Interest has been allocated, on a cumulative
basis pursuant to this clause (ii), Net Income equal to the amount of
distributions received which are attributable to the preference of such
class of Partnership Interests (and, within such class, pro rata in
proportion to the respective Percentage Interests as of the last day of the
period for which such allocation is being made) and (iii) third, with
respect to Partnership Interests that are not entitled to any preference in
the allocation of Net Income, pro rata to each such class in accordance
with the terms of such class (and, within such class, pro rata in
proportion to the respective Percentage Interests as of the last day of the
period for which such allocation is being made).
B. Net Losses. After giving effect to the special allocations set
forth in Section 1 of Exhibit C, Net Losses shall be allocated (i) first,
to the holders of any Partnership Interests that are entitled to any
preference in distribution in accordance with the rights of any such class
of Partnership Interests to the extent that any prior allocations of Net
<PAGE>
Income to such class of Partnership Interests pursuant to Section 6.1.A(ii)
exceed, on a cumulative basis, distributions with respect to such
Partnership Interests pursuant to clause (i) of Section 5.1.B (and, within
such class, pro rata in proportion to the respective Percentage Interests
as of the last day of the period for which such allocation is being made)
and (ii) second, with respect to classes of Partnership Interests that are
not entitled to any preference in distribution, pro rata to each such class
in accordance with the terms of such class (and, within such class, pro
rata in proportion to the respective Percentage Interests as of the last
day of the period for which such allocation is being made); provided that
Net Losses shall not be allocated to any Limited Partner pursuant to this
Section 6.1.B to the extent that such allocation would cause such Limited
Partner to have an Adjusted Capital Account Deficit (or increase any
existing Adjusted Capital Account Deficit) at the end of such taxable year
(or portion thereof). All Net Losses in excess of the limitations set
forth in this Section 6.1 B shall be allocated to the General Partner.
C. Allocation of Nonrecourse Debt. For purposes of Regulation
Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum
Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
D. Recapture Income. Any gain allocated to the Partners upon the
sale or other taxable disposition of any Partnership asset shall, to the
extent possible after taking into account other required allocations of
gain pursuant to Exhibit C, be characterized as Recapture Income in the
same proportions and to the same extent as such Partners have been
allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
Section 6.2 REVISIONS TO ALLOCATIONS TO REFLECT ISSUANCE OF
PARTNERSHIP INTERESTS
If the Partnership issues Partnership Interests to the General
Partner or any Additional Limited Partner pursuant to Article IV hereof,
the General Partner shall make such revisions to this Article VI and
Exhibit A as it deems necessary to reflect the terms of the issuance of
such Partnership Interests, including making preferential allocations to
classes of Partnership Interests that are entitled thereto. Such revisions
shall not require the consent or approval of any other Partner.
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 MANAGEMENT
A. Powers of General Partner. Except as otherwise expressly
provided in this Agreement, all management powers over the business and
affairs of the Partnership are and shall be exclusively vested in the
General Partner, and no Limited Partner shall have any right to participate
in or exercise control or management power over the business and affairs of
the Partnership. The General Partner may not be removed by the Limited
Partners with or without cause. In addition to the powers now or hereafter
granted a general partner of a limited partnership under applicable law or
which are granted to the General Partner under any other provision of this
Agreement, the General Partner, subject to Section 7.11, shall have full
power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth
in Section 3.2 and to effectuate the purposes set forth in Section 3.1,
including, without limitation:
<PAGE>
(1) the making of any expenditures, the lending
or borrowing of money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make distributions
to its Partners in such amounts as are required under Section 5.1.E or will
permit the General Partner (so long as the General Partner qualifies as
REIT) to avoid the payment of any federal income tax (including, for this
purpose, any excise tax pursuant to Section 4981 of the Code) and to make
distributions to its shareholders sufficient to permit the General Partner
to maintain REIT status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of same by mortgage, deed
of trust or other lien or encumbrance on the Partnership's assets) and the
incurring of any obligations the General Partner deems necessary for the
conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all of the assets of the
Partnership (including the exercise or grant of any conversion, option,
privilege or subscription right or other right available in connection with
any assets at any time held by the Partnership) or the merger or other
combination of the Partnership with or into another entity on such terms as
the General Partner deems proper;
(4) the use of the assets of the Partnership
(including, without limitation, cash on hand) for any purpose consistent
with the terms of this Agreement and on any terms it sees fit, including,
without limitation, the financing of the conduct of the operations of the
General Partner, the Partnership or any of the Partnership's Subsidiaries,
the lending of funds to other Persons (including, without limitation, the
General Partner, its Subsidiaries and the Partnership's Subsidiaries) and
the repayment of obligations of the Partnership and its Subsidiaries and
any other Person in which the Partnership has an equity investment and the
making of capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping,
repair, alteration, demolition or improvement of any real property or
improvements owned by the Partnership or any Subsidiary of the Partnership
or any Person in which the Partnership has made a direct or indirect equity
investment;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers under this
Agreement, including contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and other agents
and the payment of their expenses and compensation out of the Partnership's
assets;
(7) the mortgage, pledge, encumbrance or hypothecation
of any assets of the Partnership, and the use of the assets of the
Partnership (including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement and on any terms it sees fit,
including, without limitation, the financing of the conduct or the
operations of the General Partner or the Partnership, the lending of funds
to other Persons (including, without limitation, any Subsidiaries of the
Partnership) and the repayment of obligations of the Partnership, any of
its Subsidiaries and any other Person in which it has an equity investment;
<PAGE>
(8) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(9) the holding, managing, investing and reinvesting of
cash and other assets of the Partnership;
(10) the collection and receipt of revenues and income
of the Partnership;
(11) the selection, designation of powers, authority and
duties and the dismissal of employees of the Partnership (including,
without limitation, employees having titles such as "president," "vice
president," "secretary" and "treasurer") and agents, outside attorneys,
accountants, consultants and contractors of the Partnership and the
determination of their compensation and other terms of employment or
hiring;
(12) the maintenance of such insurance for the benefit
of the Partnership and the Partners as it deems necessary or appropriate;
(13) the formation of, or acquisition of an interest
(including non-voting interests in entities controlled by Affiliates of the
Partnership or third parties) in, and the contribution of property to, any
further limited or general partnerships, joint ventures, limited liability
companies or other relationships that it deems desirable (including,
without limitation, the acquisition of interests in, and the contributions
of funds or property to, or making of loans to, its Subsidiaries and any
other Person in which it has an equity investment from time to time, or the
incurrence of indebtedness on behalf of such Persons or the guarantee of
the obligations of such Persons); provided that, as long as the General
Partner has determined to continue to qualify as a REIT, the Partnership
may not engage in any such formation, acquisition or contribution that
would cause the General Partner to fail to qualify as a REIT;
(14) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution or
abandonment of any claim, cause of action, liability, debt or damages due
or owing to or from the Partnership, the commencement or defense of suits,
legal proceedings, administrative proceedings, arbitrations or other forms
of dispute resolution, the representation of the Partnership in all suits
or legal proceedings, administrative proceedings, arbitrations or other
forms of dispute resolution, the incurring of legal expense and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(15) the determination of the fair market value of any
Partnership property distributed in kind, using such reasonable method of
valuation as the General Partner may adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any assets or
investment held by the Partnership;
(17) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership
has a direct or indirect interest, individually or jointly with any such
Subsidiary or other Person;
(18) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any Person in which the
Partnership does not have any interest pursuant to contractual or other
arrangements with such Person;
<PAGE>
(19) the making, executing and delivering of any and all
deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust,
security agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or other legal instruments or agreements in
writing necessary or appropriate in the judgment of the General Partner for
the accomplishment of any of the powers of the General Partner enumerated
in this Agreement; and
(20) the distribution of cash to acquire Partnership
Units held by a Limited Partner in connection with a Limited Partner's
exercise of its Redemption Right under Section 8.6; and
(21) the amendment and restatement of Exhibit A to
reflect accurately at all times the Capital Contributions and Percentage
Interests of the Partners as the same are adjusted from time to time to the
extent necessary to reflect redemptions, Capital Contributions, the
issuance of Partnership Units, the admission of any Additional Limited
Partner or any Substituted Limited Partner or otherwise, which amendment
and restatement, notwithstanding anything in this Agreement to the
contrary, shall not be deemed an amendment of this Agreement, as long as
the matter or event being reflected in Exhibit A otherwise is authorized by
this Agreement.
B. No Approval by Limited Partners. Except as provided in Section
7.11, each of the Limited Partners and the other General Partner agrees
that the General Partner is authorized to execute, deliver and perform the
above-mentioned agreements and transactions on behalf of the Partnership
without any further act, approval or vote of the Partners, notwithstanding
any other provision of this Agreement, the Act or any applicable law, rule
or regulation, to the full extent permitted under the Act or other
applicable law. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under
this Agreement shall not constitute a breach by the General Partner of any
duty that the General Partner may owe the Partnership or the Limited
Partners or any other Persons under this Agreement or of any duty stated or
implied by law or equity.
C. Insurance. At all times from and after the date hereof, the
General Partner may cause the Partnership to obtain and maintain (i)
casualty, liability and other insurance on the properties of the
Partnership and (ii) liability insurance for the Indemnities hereunder and
(iii) such other insurance as the General Partner, in its sole and absolute
discretion, determines to be necessary.
D. Working Capital and Other Reserves. At all times from and
after the date hereof, the General Partner may cause the Partnership to
establish and maintain working capital reserves in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time, including upon liquidation of the Partnership
under Section 13.
E. No Obligations to Consider Tax Consequences of Limited
Partners. In exercising their authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner (including the General Partner) of any action
taken (or not taken) by any of them. The General Partner and the
Partnership shall not have liability to a Limited Partner for monetary
damages or otherwise for losses sustained, liabilities incurred or benefits
not derived by such Limited Partner in connection with such decisions,
provided that the General Partner have acted in good faith and pursuant to
their authority under this Agreement.
Section 7.2 CERTIFICATE OF LIMITED PARTNERSHIP
The General Partner have previously filed the Certificate of Limited
Partnership with the Secretary of State of Delaware. To the extent that
such action is determined by the General Partner to be reasonable and
necessary or appropriate, the General Partner shall file amendments to and
<PAGE>
restatements of the Certificate of Limited Partnership and do all the
things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the
laws of the State of Delaware and each other state, the District of
Columbia or other jurisdiction in which the Partnership may elect to do
business or own property. Subject to the terms of Section 8.5.A(4), the
General Partner shall not be required, before or after filing, to deliver
or mail a copy of the Certificate of Limited Partnership or any amendment
thereto to any Limited Partner. The General Partner shall use all
reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, the District of
Columbia or other jurisdiction in which the Partnership may elect to do
business or own property.
Section 7.3 TITLE TO PARTNERSHIP ASSETS
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partners, individually or collectively,
shall have any ownership interest in such Partnership assets or any portion
thereof. Title to any or all of the Partnership assets may be held in the
name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General
Partner. The General Partner hereby declare and warrant that any
Partnership assets for which legal title is held in the name of the General
Partner or any nominee or Affiliate of the General Partner shall be held by
that General Partner for the use and benefit of the Partnership in
accordance with the provisions of this Agreement. All Partnership assets
shall be recorded as the property of the Partnership in its books and
records, irrespective of the name in which legal title to such Partnership
assets is held.
Section 7.4 REIMBURSEMENT OF THE GENERAL PARTNER
A. No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions, payments and allocations to which it may be
entitled), the General Partner shall not be compensated for their services
as general partners of the Partnership.
B. Responsibility for Partnership Expenses. The Partnership shall
be responsible for and shall pay all expenses relating to the Partnership's
organization, the ownership of its assets and its operations. The General
Partner shall be reimbursed on a monthly basis, or such other basis as the
General Partner may determine in its sole and absolute discretion, for all
expenses it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership (including, without limitation, expenses
related to the operations of the General Partner and to the management and
administration of any Subsidiaries of the General Partner or the
Partnership or Affiliates of the Partnership, such as auditing expenses and
filing fees and expenses incurred on behalf of the foregoing by the Advisor
on behalf of the General Partner pursuant to the terms of the Advisory
Agreement); provided that, the amount of any such reimbursement shall be
reduced by (i) any interest earned by the General Partner with respect to
bank accounts or other instruments or accounts held by it on behalf of the
Partnership as permitted in Section 7.5.A (which interest is considered to
belong to the Partnership and shall be paid over to the Partnership to the
extent not applied to reimburse the General Partner for expenses
hereunder); and (ii) any amount derived by the General Partner from any
investments permitted in Section 7.5.A. The General Partner shall
determine in good faith the amount of expenses incurred by it related to
the ownership and operation of, or for the benefit of, the Partnership. If
certain expenses are incurred for the benefit of the Partnership and other
entities (including the General Partner), such expenses will be allocated
to the Partnership and such other entities in such a manner as the General
<PAGE>
Partner in its sole and absolute discretion deems fair and reasonable.
Such reimbursements shall be in addition to any reimbursement to the
General Partner pursuant to Section 10.3.C and as a result of
indemnification pursuant to Section 7.7. All payments and reimbursements
hereunder shall be characterized for federal income tax purposes as
expenses of the Partnership incurred on its behalf, and not as expenses of
the General Partner.
C. Partnership Interest Issuance Expenses. The General Partner
shall also be reimbursed for all expenses it incurs relating to any
issuance of Partnership Interests, Shares, Debt of the Partnership or the
General Partner or rights, options, warrants or convertible or exchangeable
securities pursuant to Article IV (including, without limitation, all
costs, expenses, damages and other payments resulting from or arising in
connection with litigation related to any of the foregoing), all of which
expenses are considered by the Partners to constitute expenses of, and for
the benefit of, the Partnership.
D. Purchases of Shares by the General Partner. If the General
Partner exercises its rights under the Declaration of Trust to purchase
Shares or otherwise elects to purchase from its shareholders Shares in
connection with a share repurchase or similar program or for the purpose of
delivering such Shares to satisfy an obligation under any dividend
reinvestment or equity purchase program adopted by the General Partner, any
employee equity purchase plan adopted by the General Partner or any similar
obligation or arrangement undertaken by the General Partner in the future,
the purchase price paid by the General Partner for those Shares and any
other expenses incurred by the General Partner in connection with such
purchase shall be considered expenses of the Partnership and shall be
reimbursable to the General Partner, subject to the conditions that: (i) if
those Shares subsequently are to be sold by the General Partner, the
General Partner shall pay to the Partnership any proceeds received by the
General Partner for those Shares (provided that a transfer of Shares for
Partnership Units pursuant to Section 8.6 would not be considered a sale
for such purposes); and (ii) if such Shares are not retransferred by the
General Partner within thirty (30) days after the purchase thereof, the
General Partner shall cause the Partnership to cancel a number of
Partnership Units (rounded to the nearest whole Partnership Unit) held by
the General Partner equal to the product attained by multiplying the number
of those Shares by a fraction, the numerator of which is one and the
denominator of which is the Conversion Factor.
E. Reimbursement not a Distribution. If and to the extent any
reimbursement made pursuant to this Section 7.4 is determined for federal
income tax purposes not to constitute a payment of expenses of the
Partnership, the amount so determined shall constitute a guaranteed payment
with respect to capital within the meaning of Section 707(c) of the Code,
shall be treated consistently therewith by the Partnership and all Partners
and shall not be treated as a distribution for purposes of computing the
Partners' Capital Accounts.
Section 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER;
RELATIONSHIP OF SHARES TO PARTNERSHIP UNITS; FUNDING DEBT
A. General. Without the Consent of the Outside Limited Partners,
the General Partner shall not, directly or indirectly, enter into or
conduct any business other than in connection with the ownership,
acquisition and disposition of Partnership Interests as the General Partner
or Limited Partner and the management of the business of the Partnership
and such activities as are incidental thereto. Without the Consent of the
Outside Limited Partners, the assets of the General Partner shall be
limited to Partnership Interests and permitted debt obligations of the
Partnership (as contemplated by Section 7.5.F), so that Shares and
Partnership Units are completely fungible except as otherwise specifically
provided herein, provided, that the General Partner shall be permitted to
hold such bank accounts or similar instruments or accounts in its name as
it deems necessary to carry out its responsibilities and purposes as
contemplated under this Agreement and its organizational documents
<PAGE>
(provided that accounts held on behalf of the Partnership to permit the
General Partner to carry out its responsibilities under this Agreement
shall be considered to belong to the Partnership and the interest earned
thereon shall, subject to Section 7.4.B, be applied for the benefit of the
Partnership); and, provided further, that the General Partner shall be
permitted to acquire, directly or through a Qualified REIT Subsidiary or
limited liability company, up to a one percent (1%) interest in any
partnership or limited liability company at least ninety-nine percent (99%)
of the equity of which is owned, directly or indirectly, by the
Partnership. The General Partner and any of its Affiliates may acquire
Limited Partnership Interests and shall be entitled to exercise all rights
of a Limited Partner relating to such Limited Partnership Interests.
B. Repurchase of Shares. If the General Partner exercises its
rights under the Declaration of Trust to purchase Shares or otherwise
elects to purchase from its shareholders Shares in connection with a share
repurchase or similar program or for the purpose of delivering such shares
to satisfy an obligation under any dividend reinvestment or share purchase
program adopted by the General Partner, any employee share purchase plan
adopted by the General Partner or any similar obligation or arrangement
undertaken by the General Partner in the future, then the General Partner
shall cause the Partnership to purchase from the General Partner that
number of Partnership Units of the appropriate class equal to the product
obtained by multiplying the number of Shares purchased by the General
Partner times a fraction, the numerator of which is one and the denominator
of which is the Conversion Factor, on the same terms and for the same
aggregate price that the General Partner purchased such Shares.
C. Forfeiture of Shares. If the Partnership or the General
Partner acquires Shares as a result of the forfeiture of such Shares under
a restricted or similar share plan, then the General Partner shall cause
the Partnership to cancel that number of Partnership Units equal to the
number of Shares so acquired, and, if the Partnership acquired such Shares,
it shall transfer such Shares to the General Partner for cancellation.
D. Issuances of Shares. After the Effective Date, the General
Partner shall not grant, award, or issue any additional Shares (other than
Shares issued pursuant to Section 8.6 hereof or pursuant to a dividend or
distribution (including any share split) of Shares to all of its
shareholders), other equity securities of the General Partner, New
Securities or Convertible Funding Debt unless (i) the General Partner shall
cause, pursuant to Section 4.2.A hereof, the Partnership to issue to the
General Partner Partnership Interests or rights, options, warrants or
convertible or exchangeable securities of the Partnership having
designations, preferences and other rights, all such that the economic
interests are substantially the same as those of such additional Shares,
other equity securities, New Securities or Convertible Funding Debt, as the
case may be, and (ii) the General Partner transfers to the Partnership, as
an additional Capital Contribution, the proceeds from the grant, award, or
issuance of such additional Shares, other equity securities, New Securities
or Convertible Funding Debt, as the case may be, or from the exercise of
rights contained in such additional Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be. Without
limiting the foregoing, the General Partner is expressly authorized to
issue additional Shares, other equity securities, New Securities or
Convertible Funding Debt, as the case may be, for less than fair market
value, and the General Partner is expressly authorized, pursuant to Section
4.2.A hereof, to cause the Partnership to issue to the General Partner
corresponding Partnership Interests, as long as (a) the General Partner
concludes in good faith that such issuance is in the interests of the
General Partner and the Partnership (for example, and not by way of
limitation, the issuance of Shares and corresponding Partnership Units
pursuant to a share purchase plan providing for purchases of Shares, either
by employees or shareholders, at a discount from fair market value or
pursuant to employee share options that have an exercise price that is less
than the fair market value of the Shares, either at the time of issuance or
at the time of exercise) and (b) the General Partner transfers all proceeds
from any such issuance or exercise to the Partnership as an additional
Capital Contribution.
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E. Share Option Plan. If at any time or from time to time, the
General Partner sells Shares pursuant to any Share Option Plan, the General
Partner shall transfer the net proceeds of the sale of such Shares to the
Partnership as an additional Capital Contribution in exchange for an amount
of additional Partnership Units equal to the number of Shares so sold
divided by the Conversion Factor.
F. Funding Debt. The General Partner may incur a Funding Debt,
including, without limitation, a Funding Debt that is convertible into
Shares or otherwise constitutes a class of New Securities ("Convertible
Funding Debt"), subject to the condition that the General Partner lend to
the Partnership the net proceeds of such Funding Debt; provided, that
Convertible Funding Debt shall be issued pursuant to Section 7.5.D above;
and, provided further, that the General Partner shall not be obligated to
lend the net proceeds of any Funding Debt to the Partnership in a manner
that would be inconsistent with the General Partner's ability to remain
qualified as a REIT. If the General Partner enters into any Funding Debt,
the loan to the Partnership shall be on comparable terms and conditions,
including interest rate, repayment schedule and costs and expenses, as are
applicable with respect to or incurred in connection with such Funding
Debt.
Section 7.6 TRANSACTIONS WITH AFFILIATES
A. Transactions with Certain Affiliates. Except as expressly
permitted by this Agreement, the Partnership shall not, directly or
indirectly, sell, transfer or convey any property to, or purchase any
property from, or borrow funds from, or lend funds to, any Partner or any
Affiliate of the Partnership that is not also a Subsidiary of the
Partnership, except pursuant to transactions that are on terms that are
fair and reasonable and no less favorable to the Partnership than would be
obtained from an unaffiliated third party.
B. Conflict Avoidance. The General Partner is expressly
authorized to enter into, in the name and on behalf of the Partnership, a
right of first opportunity arrangement and other conflict avoidance
agreements with various Affiliates of the Partnership and General Partner
on such terms as the General Partner, in its sole and absolute discretion,
believes is advisable.
C. Benefit Plans Sponsored by the Partnership. The General
Partner in its sole and absolute discretion and without the approval of the
Limited Partners, may propose and adopt on behalf of the Partnership
employee benefit plans funded by the Partnership for the benefit of
employees of the General Partner, the Partnership, Subsidiaries of the
Partnership, the Advisor or any Affiliate of any of them.
Section 7.7 INDEMNIFICATION
A. General. The Partnership shall indemnify each Indemnitee to
the fullest extent provided by the Act from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including,
without limitation, attorneys fees and other legal fees and expenses),
judgments, fines, settlements and other amounts arising from or in
connection with any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, incurred by the
Indemnitee and relating to the Partnership or the General Partner or the
operation of, or the ownership of property by, any of them as set forth in
this Agreement in which any such Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise, unless it is
established by a final determination of a court of competent jurisdiction
that: (i) the act or omission of the Indemnitee was material to the matter
giving rise to the proceeding and either was committed in bad faith or was
the result of active and deliberate dishonesty, (ii) the Indemnitee
actually received an improper personal benefit in money, property or
services or (iii) in the case of any criminal proceeding, the Indemnitee
had reasonable cause to believe that the act or omission was unlawful.
Without limitation, the foregoing indemnity shall extend to any liability
<PAGE>
of any Indemnitee, pursuant to a loan guarantee, contractual obligation for
any indebtedness or other obligation or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter
into one or more indemnity agreements consistent with the provisions of
this Section 7.7 in favor of any Indemnitee having or potentially having
liability for any such indebtedness. The termination of any proceeding by
judgment, order or settlement does not create a presumption that the
Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.7.A. The termination of any proceeding by conviction or upon a
plea of nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption that the
Indemnitee acted in a manner contrary to that specified in this Section
7.7.A with respect to the subject matter of such proceeding. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, and any insurance proceeds from the liability
policy covering the General Partner and any Indemnitee, and neither the
General Partner nor any Limited Partner shall have any obligation to
contribute to the capital of the Partnership or otherwise provide funds to
enable the Partnership to fund its obligations under this Section 7.7.
B. Advancement of Expenses. Reasonable expenses expected to be
incurred by an Indemnitee shall be paid or reimbursed by the Partnership in
advance of the final disposition of any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative made
or threatened against an Indemnitee upon receipt by the Partnership of (i)
a written affirmation by the Indemnitee of the Indemnitee's good faith
belief that the standard of conduct necessary for indemnification by the
Partnership as authorized in this Section 7.7.A has been met and (ii) a
written undertaking by or on behalf of the Indemnitee to repay the amount
if it shall ultimately be determined that the standard of conduct has not
been met.
C. No Limitation of Rights. The indemnification provided by this
Section 7.7 shall be in addition to any other rights to which an Indemnitee
or any other Person may be entitled under any agreement, pursuant to any
vote of the Partners, as a matter of law or otherwise, and shall continue
as to an Indemnitee who has ceased to serve in such capacity unless
otherwise provided in a written agreement pursuant to which such Indemnitee
is indemnified.
D. Insurance. The Partnership may purchase and maintain insurance
on behalf of the Indemnities and such other Persons as the General Partner
shall determine against any liability that may be asserted against or
expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have
the power to indemnify such Person against such liability under the
provisions of this Agreement.
E. Benefit Plan Fiduciary. For purposes of this Section 7.7, (i)
excise taxes assessed on an Indemnitee, of for which the Indemnitee is
otherwise found liable, with respect to an ERISA Plan pursuant to
applicable law shall constitute fines within the meaning of this Section
7.7 and (iii) actions taken or omitted by the Indemnitee with respect to an
ERISA Plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participants and beneficiaries
of such ERISA Plan shall be deemed to be for a purpose which is not opposed
to the best interests of the Partnership.
F. No Personal Liability for Limited Partners. In no event may an
Indemnitee subject any of the Partners to personal liability by reason of
the indemnification provisions set forth in this Agreement.
<PAGE>
G. Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.7 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the
terms of this Agreement.
H. Benefit. The provisions of this Section 7.7 are for the
benefit of the Indemnities, their employees, officers, directors, trustees,
heirs, successors, assigns and administrators and shall not be deemed to
create any rights for the benefit of any other Persons. Any amendment,
modification or repeal of this Section 7.7, or any provision hereof, shall
be prospective only and shall not in any way affect the limitation on the
Partnership's liability to any Indemnitee under this Section 7.7 as in
effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or related to matters occurring, in whole or
in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
I. Indemnification Payments Not Distributions. If and to the
extent any payments to the General Partner pursuant to this Section 7.7
constitute gross income to the General Partner (as opposed to the repayment
of advances made on behalf of the Partnership), such amounts shall
constitute guaranteed payments within the meaning of Section 707(c) of the
Code, shall be treated consistently therewith by the Partnership and all
Partners, and shall not be treated as distributions for purposes of
computing the Partners' Capital Accounts.
J. Exception to Indemnification. Notwithstanding anything to the
contrary in this Agreement, the General Partner shall not be entitled to
indemnification hereunder for any loss, claim, damage, liability or expense
for which such General Partner is obligated to indemnify the Partnership
under any other agreement between such General Partner and the Partnership.
Section 7.8 LIABILITY OF THE GENERAL PARTNER
A. GENERAL. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN
THIS AGREEMENT, NO GENERAL PARTNER SHALL BE LIABLE FOR MONETARY DAMAGES TO
THE PARTNERSHIP, ANY PARTNERS OR ANY Assignees for losses sustained,
liabilities incurred or benefits not derived as a result of errors in
judgment or mistakes of fact or law or of any act or omission unless that
General Partner acted in bad faith and the act or omission was material to
the matter giving rise to the loss, liability or benefit not derived.
B. No Obligation to Consider Separate Interests of Limited
Partners or Shareholders. The Limited Partners expressly acknowledge that
the General Partner is acting on behalf of the Partnership, that the
General Partner is under no obligation to consider the separate interests
of the Limited Partners (including, without limitation, the tax
consequences to Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions, and that the
General Partner shall not be liable for monetary damages for losses
sustained, liabilities incurred or benefits not derived by Limited Partners
in connection with such decisions, provided that the General Partner has
acted in good faith.
C. Actions of Agents. Subject to its obligations and duties as
General Partner set forth in Section 7.1.A, the General Partner may
exercise any of the powers granted to it by this Agreement and perform any
of the duties imposed upon them hereunder either directly or by or through
their agents. The General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent appointed by the
General Partner in good faith.
D. Effect of Amendment. Notwithstanding any other provision
contained herein, any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the
Partnership and the Limited Partners under this Section 7.8 as in effect
<PAGE>
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
Section 7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER
A. Reliance on Documents. The General Partner may rely and shall
be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture or other paper or document believed by it
in good faith to be genuine and to have been signed or presented by the
proper party or parties.
B. Reliance on Advisors. The General Partner may consult with
legal counsel, accountants, appraisers, management consultants, investment
bankers and other consultants and advisers selected by them, and any act
taken or omitted to be taken in reliance upon the opinion of such Persons
as to matters which the General Partner reasonably believes to be within
such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with
such opinion.
C. Action Through Agents. The General Partner shall have the
right, in respect of any of its powers or obligations hereunder, to act
through any of its duly authorized officers and a duly appointed attorney
or attorneys-in-fact. Each such attorney shall, to the extent provided by
the General Partner in the power of attorney, have full power and authority
to do and perform all and every act and duty which is permitted or required
to be done by the General Partner hereunder.
D. Actions to Maintain REIT Status or Avoid Taxation of the
General Partner. Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or
any decision of the General Partner to refrain from acting on behalf of the
Partnership undertaken in the good faith belief that such action or
omission is necessary or advisable in order (i) to protect the ability of
the General Partner to continue to qualify as a REIT or (ii) to allow the
General Partner to avoid incurring any liability for taxes under Section
857 or 4981 of the Code, is expressly authorized under this Agreement and
is deemed approved by all of the Limited Partners.
E. Actions to Maintain REOC Status. If and so long as the
Partnership Interests of "benefit plan investors" is "significant" (as such
terms, or terms succeeding thereto with the same objective, are used in 29
C.F.R. Section 2510.3-101(f) (such regulation or successor regulation being
known as the "Plan Assets Regulation")), or if the General Partner receives
written notice from another General Partner requesting that the affairs of
the Partnership be conducted in compliance with the exception for a real
estate operating company ("REOC") as provided in the Plan Assets
Regulation, then the General Partner shall use its best efforts to conduct
the affairs of the Partnership as a REOC and so that the assets of the
Partnership will not be "plan assets" (as such term is defined in the Plan
Assets Regulations) of any ERISA Partner.
(i) If the General Partner, pursuant to this Section 7.9.E,
intends to conduct the affairs of the Partnership as a REOC, the General
Partner shall promptly deliver to each ERISA Partner and to any requesting
General Partner an opinion of counsel reasonably acceptable to each such
ERISA Partner or requesting General Partner with respect to the "initial
valuation date" and each "annual valuation period" (as those terms, or
terms succeeding thereto with the same objective, are defined in the Plan
Assets Regulation). Such opinion of counsel shall state, (A) as to the
opinion respecting the "initial valuation date," that the Partnership shall
qualify or be qualified as a REOC for the period beginning on such "initial
valuation date" and ending on the last day of the first "annual
<PAGE>
valuation period," and (B) as to each annual opinion respecting each
"annual valuation period," that the Partnership shall qualify or be
qualified as a REOC for the 12-month period following the last day of such
"annual valuation period." Each opinion referred to in the prior two
sentences may rely upon, among other things, a certificate of the General
Partner as to the exercise of management rights with respect to one or more
investments during the appropriate period and as to a description of such
investments, and such counsel opinion also shall state whether the
Partnership has included in a certification to opinion counsel a statement
to the effect that on such "initial valuation date" or during such "annual
valuation period" at least 50 percent of Partnership assets (other than
short-term investments pending long-term commitment or distribution to
investors), valued at cost, were invested in real estate investments as
described in the Plan Assets Regulation.
(ii) If the opinion described in this subsection is not
provided in the affirmative, or if any ERISA Partner or a requesting
General Partner shall obtain and deliver to the General Partner an opinion
of counsel to such ERISA Partner or requesting General Partner (which
opinion shall be reasonably satisfactory to the General Partner) that there
is a reasonable probability that either (A) the Partnership was or will not
be a REOC for any period in which either participation by benefit plan
investors in the Partnership is significant or a requesting General Partner
is an investor, or (B) the assets of the Partnership were or will be "plan
assets" of ERISA Plan investors, then the General Partner is hereby
authorized and empowered to take such actions as it deems necessary and
appropriate to mitigate, prevent, or cure such adverse consequences
resulting to the ERISA Plan investors or requesting General Partner,
including modifying the manner in which the Partnership conducts its
business, or requiring each ERISA Partner (on a pro rata basis unless
otherwise consented to by all ERISA Partners) to transfer all or a portion
of its interest at a price not less than the fair value of such interest or
portion thereof. Such calculation of fair value of an interest or of any
Partnership asset shall be made by the General Partner.
Section 7.10 RELIANCE BY THIRD PARTIES
Notwithstanding anything to the contrary in this Agreement, any
Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority, without consent or approval
of any other Partner or Person, to encumber, sell or otherwise use in any
manner any and all assets of the Partnership, to enter into any contracts
on behalf of the Partnership and to take any and all actions on behalf of
the Partnership, and such Person shall be entitled to deal with the General
Partner as if the General Partner were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby
waives any and all defenses or other remedies which may be available
against such Person to contest, negate or disaffirm any action of the
General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated
to ascertain that the terms of this Agreement have been complied with or to
inquire into the necessity or expedience of any act or action of the
General Partner or its representatives. Each and every certificate,
document or other instrument executed on behalf of the Partnership by the
General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that
(i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership, and
(iii) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
<PAGE>
Section 7.11 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY
A. Consent Required. The General Partner may not take any action
in contravention of an express prohibition or limitation of this Agreement
without the written Consent of (i) all Partners adversely affected or (ii)
such lower percentage of the Limited Partnership Interests as may be
specifically provided for under a provision of this Agreement or the Act.
B. Sale of All Assets of the Partnership. Except as provided in
Article XIII, the General Partner may not, directly or indirectly, cause
the Partnership to sell, exchange, transfer or otherwise dispose of all or
substantially all of the Partnership's assets in a single transaction or
series of related transactions (including by way of merger (including a
triangular merger), consolidation or other combination with any other
Persons) (i) if such merger, sale or other transaction is in connection
with a Termination Transaction permitted under Section 11.2.B hereof,
without the Consent of the Partners holding at least a majority of the then
outstanding Partnership Units (including any Partnership Units held by the
General Partner), or (ii) otherwise, without the Consent of the Outside
Limited Partners.
Section 7.12 LOANS BY THIRD PARTIES
The Partnership may incur Debt, or enter into similar credit,
guarantee, financing or refinancing arrangements for any purpose
(including, without limitation, in connection with any acquisition of
property) with any Person that is not the General Partner upon such terms
as the General Partner determines appropriate; provided that, the
Partnership shall not incur any Debt that is recourse to the General
Partner, except to the extent otherwise agreed to by such General Partner
in its sole discretion.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 LIMITATION OF LIABILITY
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5, or
under the Act.
Section 8.2 MANAGEMENT OF BUSINESS
No Limited Partner or Assignee (other than the General Partner or the
Advisor, any of their Affiliates or any officer, director, employee,
partner, agent or trustee of the General Partner or the Advisor, the
Partnership or any of their Affiliates, in their capacity as such) shall
take part in the operation, management or control (within the meaning of
the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise
bind the Partnership. The transaction of any such business by the General
Partner or the Advisor, any of its Affiliates or any officer, director,
employee, partner, agent or trustee of the General Partner or the Advisor,
the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of
the Limited Partners or Assignees under this Agreement.
Section 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS
Subject to Section 7.5 hereof, and subject to any agreements entered
into pursuant to Section 7.6.C hereof and to any other agreements entered
into by a Limited Partner or its Affiliates with the Partnership or a
Subsidiary, any Limited Partner (other than the General Partner) and any
officer, director, employee, agent, trustee, Affiliate or shareholder of
any Limited Partner shall be entitled to and may have business interests
and engage in business activities in addition to those relating to the
<PAGE>
Partnership, including business interests and activities in direct or
indirect competition with the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee. None of the Limited Partners
(other than the General Partner) nor any other Person shall have any rights
by virtue of this Agreement or the partnership relationship established
hereby in any business ventures of any other Person (other than the General
Partner to the extent expressly provided herein), and such Person shall
have no obligation pursuant to this Agreement to offer any interest in any
such business ventures to the Partnership, any Limited Partner or any such
other Person, even if such opportunity is of a character which, if
presented to the Partnership, any Limited Partner or such other Person,
could be taken by such Person.
Section 8.4 RETURN OF CAPITAL
Except pursuant to the right of redemption set forth in Section 8.6,
no Limited Partner shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent of distributions made pursuant
to this Agreement or upon termination of the Partnership as provided
herein. No Limited Partner or Assignee shall have priority over any other
Limited Partner or Assignee either as to the return of Capital
Contributions (except as permitted by Section 4.2.A) or, except to the
extent provided by Exhibit C or as permitted by Sections 4.2.A, 5.1.B(i),
6.1.A(ii) and 6.1.B(i), or otherwise expressly provided in this Agreement,
as to profits, losses, distributions or credits.
Section 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE
PARTNERSHIP
A. General. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.D, each
Limited Partner shall have the right, for a purpose reasonably related to
such Limited Partner's interest as a limited partner in the Partnership,
upon written demand with a statement of the purpose of such demand and at
such Limited Partner's own expense:
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by the General
Partner pursuant to the Exchange Act;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate of
Limited Partnership and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this Agreement, the
Certificate of Limited Partnership and all amendments thereto have been
executed; and
(5) to obtain true and full information regarding the amount
of cash and a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to contribute
in the future, and the date on which each became a Partner.
B. Notice of Conversion Factor. The Partnership shall notify each
Limited Partner upon request of the then current Conversion Factor and any
changes that have been made thereto.
C. Notice of Extraordinary Transaction of the General Partner.
The General Partner shall not make any extraordinary distributions of cash
or property to its shareholders or effect a merger (including, without
limitation, a triangular merger), a sale of all or substantially all of its
<PAGE>
assets or any other similar extraordinary transaction without notifying the
Limited Partners of its intention to make such distribution or effect such
merger, sale or other extraordinary transaction at least twenty (20)
Business Days prior to the record date to determine shareholders eligible
to receive such distribution or to vote upon the approval of such merger,
sale or other extraordinary transaction (or, if no such record date is
applicable, at least twenty (20) business days before consummation of such
merger, sale or other extraordinary transaction). This provision for such
notice shall not be deemed (i) to permit any transaction that otherwise is
prohibited by this Agreement or requires a Consent of the Partners or (ii)
to require a Consent of the Limited Partners to a transaction that does not
otherwise require Consent under this Agreement. Each Limited Partner
agrees, as a condition to the receipt of the notice pursuant hereto, to
keep confidential the information set forth therein until such time as the
General Partner has made public disclosure thereof and to use such
information during such period of confidentiality solely for purposes of
determining whether to exercise the Redemption Right; provided, however,
that a Limited Partner may disclose such information to its attorney,
accountant and/or financial advisor for purposes of obtaining advice with
respect to such exercise so long as such attorney, accountant and/or
financial advisor agrees to receive and hold such information subject to
this confidentiality requirement.
D. Confidentiality. Notwithstanding any other provision of this
Section 8.5, the General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner determine in its
sole and absolute discretion to be reasonable, any information that (i) the
General Partner reasonably believes to be in the nature of trade secrets or
other information the disclosure of which the General Partner in good faith
believes is not in the best interests of the Partnership or could damage
the Partnership or its business or (ii) the Partnership is required by law
or by agreements with unaffiliated third parties to keep confidential.
Section 8.6 REDEMPTION RIGHT
A. General. (i) Subject to Section 8.6.C, at any time on or after
the first anniversary date of the issuance of a Partnership Unit to a
Limited Partner pursuant to Article IV hereof (which one-year period shall
commence upon the issuance of such Partnership Unit regardless of whether
such Partnership Unit is designated upon issuance as a Class A Unit, a
Class B Unit or otherwise and shall include the period of time from the
date such Partnership Unit is issued to such Limited Partner as other than
a Class A Unit until the date such Partnership Unit is converted
automatically to a Class A Unit pursuant to Section 4.2.C hereof), or on or
after such date prior to the expiration of such one-year period as the
General Partner, in its sole and absolute discretion, designates with
respect to any or all Class A Units then outstanding, the holder of a
Partnership Unit (if other than the General Partner or any Subsidiary of
the General Partner) shall have the right (the "Redemption Right") to
require the Partnership to redeem such Partnership Unit, with such
redemption to occur on the Specified Redemption Date and at a redemption
price equal to and in the form of the Cash Amount to be paid by the
Partnership. Any such Redemption Right shall be exercised pursuant to a
Notice of Redemption delivered to the Partnership (with a copy to the
General Partner) by the Limited Partner who is exercising the Redemption
Right (the "Redeeming Partner"). A Limited Partner may exercise the
Redemption Right from time to time, without limitation as to frequency,
with respect to part or all of the Units that is owns, as selected by the
Limited Partner, provided that a Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Partnership Units
unless such Redeeming Partner then holds less than one thousand (1,000)
Partnership Units, in which event the Redeeming Partner must exercise the
Redemption Right for all of the Partnership Units held by such Redeeming
Partner.
<PAGE>
(ii) The Redeeming Partner shall have no right with respect to
any Partnership Units so redeemed to receive any distributions paid after
the Specified Redemption Date with respect to such Partnership Units.
(iii) The Assignee of any Limited Partner may exercise
the rights of such Limited Partner pursuant to this Section 8.6, and such
Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such Limited
Partner's Assignee. In connection with any exercise of such rights by such
Assignee on behalf of such Limited Partner, the Cash Amount shall be paid
by the Partnership directly to such Assignee and not to such Limited
Partner.
(iv) If the General Partner provides notice to the Limited
Partners, pursuant to Section 8.5.C hereof, the Redemption Right shall be
exercisable, without regard to whether the Partnership Units have been
outstanding for any specified period, during the period commencing on the
date on which the General Partner provides such notice and ending on the
record date to determine shareholders eligible to receive such distribution
or to vote upon the approval of such merger, sale or other extraordinary
transaction (or, if no such record date is applicable, at least twenty (20)
business days before the consummation of such merger, sale or other
extraordinary transaction). If this subparagraph (iv) applies, the
Specified Redemption Date is the date on which the Partnership and the
General Partner receive notice of exercise of the Redemption Right, rather
than ten (10) Business Days after receipt of the notice of redemption.
B. General Partner Assumption of Right. (i) If a Limited Partner
has delivered a Notice of Redemption, the General Partner may, in its sole
and absolute discretion (subject to the limitations on ownership and
transfer of Shares set forth in the Declaration of Trust), elect to assume
directly and satisfy a Redemption Right by paying to the Redeeming Partner
either the Cash Amount or the Shares Amount, as the General Partner
determines in its sole and absolute discretion (provided that payment of
the Redemption Amount in the form of Shares shall be in Shares registered
for resale under Section 12 of the Exchange Act and listed for trading on
the exchange or national market on which the Shares are Publicly Traded,
and provided further that, if the Shares are not Publicly Traded at the
time a Redeeming Partner exercises its Redemption Right, the Redemption
Amount shall be paid only in the form of the Cash Amount unless the
Redeeming Partner, in its sole and absolute discretion, consents to payment
of the Redemption Amount in the form of the Shares Amount), on the
Specified Redemption Date, whereupon the General Partner shall acquire the
Partnership Units offered for redemption by the Redeeming Partner and shall
be treated for all purposes of this Agreement as the owner of such
Partnership Units. Unless the General Partner, in its sole and absolute
discretion, shall exercise its right to assume directly and satisfy the
Redemption Right, the General Partner shall not have any obligation to the
Redeeming Partner or to the Partnership with respect to the Redeeming
Partner's exercise of the Redemption Right. If the General Partner shall
exercise its right to satisfy the Redemption Right in the manner described
in the first sentence of this Section 8.6B and shall fully perform its
obligations in connection therewith, the Partnership shall have no right or
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of the Redemption Right, and each of the
Redeeming Partner, the Partnership and the General Partner shall, for
federal income tax purposes, treat the transaction between the General
Partner and the Redeeming Partner as a sale of the Redeeming Partner's
Partnership Units to the General Partner. Nothing contained in this
Section 8.6.B shall imply any right of the General Partner to require any
Limited Partner to exercise the Redemption Right afforded to such Limited
Partner pursuant to Section 8.6.A.
<PAGE>
(v) If the General Partner determines to pay the Redeeming
Partner the Redemption Amount in the form of Shares, the total number of
Shares to be paid to the Redeeming Partner in exchange for the Redeeming
Partner's Partnership Units shall be the applicable Shares Amount. If this
amount is not a whole number of Shares, the Redeeming Partner shall be paid
(i) that number of Shares which equals the nearest whole number less than
such amount plus (ii) an amount of cash which the General Partner
determines, in its reasonable discretion, to represent the fair value of
the remaining fractional Share which would otherwise be payable to the
Redeeming Partner.
(vi) Each Redeeming Partner agrees to execute such documents
as the General Partner may reasonably require in connection with the
issuance of Shares upon exercise of the Redemption Right.
C. Exceptions to Exercise of Redemption Right. Notwithstanding
the provisions of Sections 8.6.A and 8.6.B, a Partner shall not be entitled
to exercise the Redemption Right pursuant to Section 8.6.A if (but only as
long as) the delivery of Shares to such Partner on the Specified Redemption
Date (i) would be prohibited under the Declaration of Trust or (ii) would
be prohibited under applicable federal or state securities laws or
regulations (in each case regardless of whether the General Partner would
in fact assume and satisfy the Redemption Right).
D. No Liens on Partnership Units Delivered for Redemption. Each
Limited Partner covenants and agrees with the General Partner that all
Partnership Units delivered for redemption shall be delivered to the
Partnership or the General Partner, as the case may be, free and clear of
all liens, and, notwithstanding anything contained herein to the contrary,
neither the General Partner nor the Partnership shall be under any
obligation to acquire Partnership Units which are or may be subject to any
liens. Each Limited Partner further agrees that, if any state or local
property transfer tax is payable as a result of the transfer of its
Partnership Units to the Partnership or the General Partner, such Limited
Partner shall assume and pay such transfer tax.
E. Additional Partnership Interests. If the Partnership issues
Partnership Interests to any Additional Limited Partner pursuant to Article
IV, the General Partner shall make such revisions to this Section 8.6 as it
determines are necessary to reflect the issuance of such Partnership
Interests (including setting forth any restrictions on the exercise of the
Redemption Right with respect to such Partnership Interests).
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 RECORDS AND ACCOUNTING
The General Partner shall keep or cause to be kept at the principal
office of the Partnership appropriate books and records with respect to the
Partnership's business, including, without limitation, all books and
records necessary to provide to the Limited Partners any information, lists
and copies of documents required to be provided pursuant to Section 9.3.
Any records maintained by or on behalf of the Partnership in the regular
course of its business may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, micrographics or any other information storage
device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books
of the Partnership shall be maintained, for financial and tax reporting
purposes, on an accrual basis in accordance with generally accepted
accounting principles.
Section 9.2 FISCAL YEAR
The fiscal year of the Partnership shall be the calendar year.
<PAGE>
Section 9.3 REPORTS
A. Annual Reports. As soon as practicable, but in no event later
than the date on which the General Partner mails its annual report to its
shareholders, the General Partner shall cause to be mailed to each Limited
Partner an annual report, as of the close of the most recently ended
Partnership Year, containing financial statements of the Partnership, or of
the General Partner if such statements are prepared solely on a
consolidated basis with the Partnership, for such Partnership Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent
public accountants selected by the General Partner.
B. Quarterly Reports. If and to the extent that the General
Partner mails quarterly reports to its shareholders, as soon as
practicable, but in no event later than the date on such reports are
mailed, the General Partner shall cause to be mailed to each Limited
Partner a report containing unaudited financial statements, as of the last
day of such calendar quarter, of the Partnership, or of the General Partner
if such statements are prepared solely on a consolidated basis with the
Partnership, and such other information as may be required by applicable
law or regulation, or as the General Partner determines to be appropriate.
ARTICLE X
TAX MATTERS
Section 10.1 PREPARATION OF TAX RETURNS
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and
other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within ninety
(90) days of the close of each taxable year, the tax information reasonably
required by Limited Partners for federal and state income tax reporting
purposes.
Section 10.2 TAX ELECTIONS
Except as otherwise provided herein, the General Partner shall, in
its sole and absolute discretion, determine whether to make any available
election pursuant to the code, provided, however, that the General Partner
shall make the election under Section 754 of the Code in accordance with
applicable regulations thereunder. The General Partner shall have the
right to seek to revoke any such election (including, without limitation,
the election under Section 754 of the Code) upon the General Partner's
determination in their sole and absolute discretion that such revocation is
in the best interests of the Partners.
Section 10.3 TAX MATTERS PARTNER
A. General. The General Partner shall be the "tax matters
partner" of the Partnership for federal income tax purposes. Pursuant to
Section 6223(c)(3) of the Code, upon receipt of notice from the IRS of the
beginning of an administrative proceeding with respect to the Partnership,
the tax matters partner shall furnish the IRS with the name, address, tax
payer identification number and profit interest of each of the Limited
Partners and any Assignees, provided, however, that such information is
provided to the Partnership by the Limited Partners.
B. Powers. The tax matters partner is authorized, but not
required:
(1) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner for income
tax purposes (such administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters partner may
expressly state that such agreement shall bind all Partners, except that
such settlement agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files a statement
with the IRS providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such Partner or
(ii) who is a "notice partner" (as defined in Section 6231(a)(8) of the
Code) or a member of a "notice group" (as defined in Section 6223(b)(2) of
the Code);
(2) if a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final adjustment") is mailed to the tax
matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States Claims Court or
the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner
for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with
the IRS at any time and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition or complaint) for judicial
review with respect to such request;
(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to any item required to
be taken into account by a Partner for tax purposes, or an item affected by
such item; and
(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of
the tax matters partner and the provisions relating to indemnification of
<PAGE>
the General Partner set forth in Section 7.7 shall be fully applicable to
the tax matters partner in its capacity as such.
C. Reimbursement. The tax matters partner shall receive no
compensation for its services. All third party costs and expenses incurred
by the tax matters partner in performing its duties as such (including
legal and accounting fees and expenses) shall be borne by the Partnership.
Nothing herein shall be construed to restrict the Partnership from engaging
an accounting firm and/or law firm to assist the tax matters partner in
discharging its duties hereunder, so long as the compensation paid by the
Partnership for such services is reasonable.
Section 10.4 ORGANIZATIONAL EXPENSES
The Partnership shall elect to deduct expenses, if any, incurred by
it in organizing the Partnership ratably over a sixty (60) month period as
provided in Section 709 of the Code.
Section 10.5 WITHHOLDING
Each Limited Partner hereby authorizes the Partnership to withhold
from or pay on behalf of or with respect to such Limited Partner any amount
of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect
to any amount distributable or allocable to such Limited Partner pursuant
to this Agreement, including, without limitation, any taxes required to be
withheld or paid by the Partnership pursuant to Section 1441, 1442, 1445,
or 1446 of the Code. Any amount paid on behalf of or with respect to a
Limited Partner shall constitute a loan by the Partnership to such Limited
Partner, which loan shall be repaid by such Limited Partner within fifteen
(15) days after notice from the General Partner that such payment must be
made unless (i) the Partnership withholds such payment from a distribution
which would otherwise be made to the Limited Partner or (ii) the General
Partner determines, in its sole and absolute discretion, that such payment
may be satisfied out of the available funds of the Partnership which would,
but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as
having been distributed to such Limited Partner. Each Limited Partner
hereby unconditionally and irrevocably grants to the Partnership a security
interest in such Limited Partner's Partnership Interest to secure such
Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. If a Limited Partner fails to
pay any amounts owed to the Partnership pursuant to this Section 10.5 when
due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to
such defaulting Limited Partner and shall succeed to all rights and
remedies of the Partnership as against such defaulting Limited Partner
(including, without limitation, the right to receive distributions). Any
amounts payable by a Limited Partner hereunder shall bear interest at the
base rate on corporate loans at large United States money center commercial
banks, as published from time to time in the Wall Street Journal, plus four
(4) percentage points (but not higher than the maximum lawful rate under
the laws of the State of Illinois) from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. Each
Limited Partner shall take such actions as the Partnership or the General
Partner shall request to perfect or enforce the security interest created
hereunder.
ARTICLE XI
TRANSFERS AND WITHDRAWALS
Section 11.1 TRANSFER
A. Definition. The term "transfer," when used in this Article XI
with respect to a Partnership Interest or a Partnership Unit, shall be
deemed to refer to a transaction by which the General Partner purports to
<PAGE>
assign all or any part of its General Partnership Interest to another
Person or by which a Limited Partner purports to assign all or any part of
its Limited Partnership Interest to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or
any other disposition by law or otherwise. The term "transfer" when used
in this Article XI does not include any redemption or repurchase of
Partnership Units by the Partnership from a Partner or acquisition of
Partnership Units from a Limited Partner by the General Partner pursuant to
Section 8.6 or otherwise. No part of the interest of a Limited Partner
shall be subject to the claims of any creditor, any spouse for alimony or
support, or to legal process, and may not be voluntarily or involuntarily
alienated or encumbered except as may be specifically provided for in this
Agreement.
B. General. No Partnership Interest shall be transferred, in
whole or in part, except in accordance with the terms and conditions set
forth in this Article XI. Any transfer or purported transfer of a
Partnership Interest not made in accordance with this Article XI shall be
null and void.
Section 11.2 TRANSFERS OF PARTNERSHIP INTERESTS OF GENERAL
PARTNER
A. Except for transfers of Partnership Units to the Partnership as
provided in Section 7.5 or Section 8.6, the General Partner may not
transfer any of its Partnership Interest (including both its General
Partnership Interest and its Limited Partnership Interest) except in
connection with a transaction described in Section 11.2.B or as otherwise
expressly permitted under this Agreement, nor shall the General Partner
withdraw as the General Partner except in connection with a transaction
described in Section 11.2.B. The General Partner may not transfer any of
its Partnership Interests or withdraw as the General Partner except (i) in
connection with a transaction described in Section 11.2.B, (ii) as set
forth in Section 8.3 or Section 8.6 or (iii) as otherwise set forth in this
Agreement.
B. The General Partner shall not engage in any merger (including a
triangular merger), consolidation or other combination with or into another
person, sale of all or substantially all of its assets or any
reclassification, recapitalization or change of outstanding Shares (other
than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination as described in the definition of
"Conversion Factor") ("Termination Transaction"), unless the Termination
Transaction has been approved by the Consent of the Partners holding at
least a majority of the then outstanding Partnership Units (including any
Partnership Units held by the General Partner) and in connection with which
all Limited Partners either will receive, or will have the right to elect
to receive, for each Partnership Unit an amount of cash, securities, or
other property equal to the product of the Conversion Factor multiplied by
the greatest amount of cash, securities or other property paid to a holder
of Shares corresponding to such Partnership Unit in consideration of one
such Share at any time during the period from and after the date on which
the Termination Transaction is consummated; provided that, if, in
connection with the Termination Transaction, a purchase, tender or exchange
offer shall have been made to and accepted by the holders of more than
fifty percent (50%) of the outstanding Shares, each holder of Partnership
Units shall receive, or shall have the right to elect to receive without
any right of Consent set forth above in this subsection B, the greatest
amount of cash, securities, or other property which such holder would have
received had it exercised the Redemption Right and received Shares in
exchange for its Partnership Units immediately prior to the expiration of
such purchase, tender or exchange offer and had thereupon accepted such
purchase, tender or exchange offer.
<PAGE>
Section 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER
A. General. Subject to the provisions of Sections 11.3.C, 11.3.D,
11.3.E, 11.4 and 11.6, a Limited Partner (other than the General Partner)
may transfer with or without the consent of the General Partner, all or any
portion of its Partnership Interest, or any of such Limited Partner's
rights as a Limited Partner, provided that prior written notice of such
proposed transfer is delivered to the General Partner. Notwithstanding the
foregoing, any Limited Partner may, at any time, without the consent of the
General Partner, (i) transfer all or any portion of its Partnership
Interest to the General Partner, (ii) transfer all or any portion of its
Partnership Interest to an Affiliate, another original Limited Partner or
to an Immediate Family member, subject to the provisions of Section 11.6,
(iii) transfer all or any portion of its Partnership Interest to a trust
for the benefit of a charitable beneficiary or to a charitable foundation,
subject to the provisions of Section 11.6, and (iv) subject to the
provisions of Section 11.6, pledge (a "Pledge") all or any portion of its
Partnership Interest to a lending institution, which is not an Affiliate of
such Limited Partner, as collateral or security for a bona fide loan or
other extension of credit, and transfer such pledged Partnership Interest
to such lending institution in connection with the exercise of remedies
under such loan or extension or credit. Each Limited Partner or Assignee
(resulting from a transfer made pursuant to clauses (i) - (iv) of the
proviso of the preceding sentence) shall have the right to transfer all or
any portion of its Partnership Interest, subject to the provisions of
Section 11.6 and the satisfaction of each of the following conditions (in
addition to the right of each such Limited Partner or Assignee to continue
to make any such transfer permitted by clauses (i) - (iv) of such proviso
without satisfying either of the following conditions):
(a) GENERAL PARTNER RIGHT OF FIRST REFUSAL. The transferring
Partner shall give written notice of the proposed transfer to the General
Partner, which notice shall state (i) the identity of the proposed
transferee, and (ii) the amount and type of consideration proposed to be
received for the transferred Partnership Units. The General Partner shall
have ten (10) days upon which to give the transferring Partner notice of
its election to acquire the Partnership Units on the proposed terms. If it
so elects, it shall purchase the Partnership Units on such terms within ten
(10) days after giving notice of such election. If it does not so elect,
the transferring Partner may transfer such Partnership Units to a third
party, on economic terms no more favorable to the transferee than the
proposed terms, subject to the other condition of this Section 11.3.
(b) QUALIFIED TRANSFEREE. Any transfer of a Partnership Interest
shall be made only to Qualified Transferees.
It is a condition to any transfer otherwise permitted hereunder
(excluding Pledges of a Partnership Interest, but including any transfer of
the pledged Partnership Interest, whether to the secured party or
otherwise, pursuant to the secured party's exercise of its remedies under
such Pledge or the related loan or extension of credit) that the transferee
assumes by operation of law or express agreement all of the obligations of
the transferor Limited Partner under this Agreement with respect to such
transferred Partnership Interest and no such transfer (other than pursuant
to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor Partner of
its obligations under this Agreement without the approval of the General
Partner, in its reasonable discretion. Notwithstanding the foregoing, any
transferee of any transferred Partnership Interest shall be subject to any
and all ownership limitations contained in the Declaration of Trust. Any
transferee, whether or not admitted as a Substituted Limited Partner, shall
take subject to the obligations of the transferor hereunder. Unless
admitted as a Substitute Limited Partner, no transferee, whether by a
voluntary transfer, by operation of law or otherwise, shall have rights
hereunder, other than the rights of an Assignee as provided in Section
11.5.
<PAGE>
B. Incapacitated Limited Partners. If a Limited Partner is
subject to Incapacity, the executor, administrator, trustee, committee,
guardian, conservator or receiver of such Limited Partner's estate shall
have all the rights of a Limited Partner, but not more rights than those
enjoyed by other Limited Partners for the purpose of settling or managing
the estate and such power as the Incapacitated Limited Partner possessed to
transfer all or any part of its interest in the Partnership. The
Incapacity of a Limited Partner, in and of itself, shall not dissolve or
terminate the Partnership.
C. No Transfers Violating Securities Laws. The General Partner
may prohibit any transfer of Partnership Units by a Limited Partner unless
it receives a written opinion of legal counsel (which opinion and counsel
shall be reasonably satisfactory to the Partnership) to such Limited
Partner that such transfer would not require filing of a registration
statement under the Securities Act or would not otherwise violate any
federal, or state securities laws or regulations applicable to the
Partnership or the Partnership Unit or, at the option of the Partnership,
an opinion of legal counsel to the Partnership to the same effect.
D. No Transfers Affecting Tax Status of Partnership. No transfer
of Partnership Units by a Limited Partner (including a redemption or
exchange pursuant to Section 8.6) may be made to any Person if (i) in the
opinion of legal counsel for the Partnership, it would result in the
Partnership being treated as an association taxable as a corporation for
federal income tax purposes or would result in a termination of the
Partnership for federal income tax purposes (except as a result of the
redemption or exchange for Shares of all Partnership Units held by all
Limited Partners other than the General Partner or any Subsidiary of either
the General Partner or pursuant to a transaction expressly permitted under
Section 7.11.B or Section 11.2), (ii) in the opinion of legal counsel for
the Partnership, it would adversely affect the ability of the General
Partner to continue to qualify as a REIT or would subject the General
Partner to any additional taxes under Section 857 or Section 4981 of the
Code or (iii) such transfer is effectuated through an "established
securities market" or a "secondary market (or the substantial equivalent
thereof)" within the meaning of Section 7704 of the Code.
E. No Transfers to Holders of Nonrecourse Liabilities. No Pledge
or transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability unless (i) the General Partner is
provided notice thereof and (ii) the lender enters into an arrangement with
the Partnership and the General Partner to exchange or redeem for the
Redemption Amount any Partnership Units in which a security interest is
held simultaneously with the time at which such lender would be deemed to
be a partner in the Partnership for purposes of allocating liabilities to
such lender under Section 752 of the Code.
Section 11.4 SUBSTITUTED LIMITED PARTNERS
A. Consent of General Partner. No Limited Partner shall have the
right to substitute a transferee as a Limited Partner in its place. The
General Partner shall, however, have the right to consent to the admission
of a transferee of the interest of a Limited Partner pursuant to this
Section 11.4 as a Substituted Limited Partner, which consent may be, given
or withheld by the General Partner in its sole and absolute discretion.
The General Partner's failure or refusal to permit a transferee of any such
interests to become a Substituted Limited Partner shall not give rise to
any cause of action against the Partnership or any Partner. The General
Partner hereby grants its consent to the admission as a Substituted Limited
Partner to any bona fide financial institution that loans money or
otherwise extends credit to a holder of Units and thereafter becomes the
owner of such Units pursuant to the exercise by such financial institution
of its rights under a Pledge of such Units granted in connection with such
loan or extension of credit.
<PAGE>
B. Rights of Substituted Limited Partner. A transferee who has
been admitted as a Substituted Limited Partner in accordance with this
Article XI shall have all the rights and powers and be subject to all the
restrictions and liabilities of a Limited Partner under this Agreement.
The admission of any transferee as a Substituted Limited Partner shall be
conditioned upon the transferee executing and delivering to the Partnership
an acceptance of all the terms and conditions of this Agreement (including,
without limitation, the provisions of Section 15.11) and such other
documents or instruments as may be required to effect the admission.
C. Amendment of Exhibit A. Upon the admission of a Substituted
Limited Partner, the General Partner shall amend Exhibit A to reflect the
name, address, Capital Account, number of Partnership Units, and Percentage
Interest of such Substituted Limited Partner and to eliminate or adjust, if
necessary, the name, address, Capital Account and Percentage Interest and
interest of the predecessor of such Substituted Limited Partner.
Section 11.5 ASSIGNEES
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as
a Substituted Limited Partner, as described in Section 11.4, such
transferee shall be considered an Assignee for purposes of this Agreement.
An Assignee shall be entitled to all the rights of an assignee of a limited
partnership interest under the Act, including the right to receive
distributions from the Partnership and the share of Net Income, Net Losses,
gain, loss and Recapture Income attributable to the Partnership Units
assigned to such transferee, and shall have the rights granted to the
Limited Partners under Section 8.6, but shall not be deemed to be a holder
of Partnership Units for any other purpose under this Agreement, and shall
not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to
have been voted on such matter in the same proportion as all other
Partnership Units held by Limited Partners are voted). If any such
transferee desires to make a further assignment of any such Partnership
Units, such transferee shall be subject to all the provisions of this
Article XI to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of Partnership Units.
Section 11.6 GENERAL PROVISIONS
A. Withdrawal of Limited Partner. No Limited Partner may withdraw
from the Partnership other than as a result of a permitted transfer of all
of such Limited Partner's Partnership Units in accordance with this Article
XI or pursuant to redemption of all of its Partnership Units under Section
8.6.
B. Termination of Status as Limited Partner. Any Limited Partner
who shall transfer all of its Partnership Units in a transfer permitted
pursuant to this Article XI or pursuant to redemption of all of its
Partnership Units under Section 8.6 shall cease to be a Limited Partner.
C. Timing of Transfers. Transfers pursuant to this Article XI may
only be made upon three business days prior notice, unless the General
Partner otherwise agrees.
D. Allocations. If any Partnership Interest is transferred during
any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article XI or redeemed or transferred pursuant to
Section 8.6, Net Income, Net Losses, each item thereof and all other items
attributable to such interest for such fiscal year shall be divided and
allocated between the transferor Partner and the transferee Partner by
taking into account their varying interests during the fiscal year in
accordance with Section 706(d) of the Code, using the interim closing of
the books method (unless the General Partner, in its sole and absolute
discretion, elects to adopt a daily, weekly, or a monthly proration period,
<PAGE>
in which event Net Income, Net Losses, each item thereof and all other
items attributable to such interest for such fiscal year shall be prorated
based upon the applicable method selected by the General Partner). Solely
for purposes of making such allocations, each of such items for the
calendar month in which the transfer or redemption occurs shall be
allocated to the Person who is a Partner as of midnight on the last day of
said month. All distributions of Available Cash attributable to any
Partnership Unit with respect to which the Partnership Record Date is
before the date of such transfer, assignment or redemption shall be made to
the transferor Partner or the Redeeming Partner, as the case may be, and,
in the case of a transfer or assignment other than a redemption, all
distributions of Available Cash thereafter attributable to such Partnership
Unit shall be made to the transferee Partner.
E. Additional Restrictions. In addition to any other restrictions
on transfer herein contained, including without limitation the provisions
of this Article XI, in no event may any transfer or assignment of a
Partnership Interest by any Partner (including pursuant to Section 8.6) be
made without the express consent of the General Partner, in its sole and
absolute discretion, (i) to any person or entity who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of
applicable law, (iii) of any component portion of a Partnership Interest,
such as the Capital Account, or rights to distributions, separate and apart
from all other components of a Partnership Interest; (iv) if in the opinion
of legal counsel to the Partnership such transfer would cause a termination
of the Partnership for federal or state income tax purposes (except as a
result of the redemption or exchange for Shares of all Partnership Units
held by all Limited Partners or pursuant to a transaction expressly
permitted under Section 7.11.B or Section 11.2); (v) if in the opinion of
counsel to the Partnership, such transfer would cause the Partnership to
cease to be classified as a partnership for federal income tax purposes
(except as a result of the redemption or exchange for Shares of all
Partnership Units held by all Limited Partners or pursuant to a transaction
expressly permitted under Section 7.11.B or Section 11.2)7 (vi) if such
transfer would cause the Partnership Interests of "benefit plan investors"
to become "significant," as those terms are used in Section 7.9.E., or
would cause the Partnership to become, with respect to any employee benefit
plan subject to Title I of ERISA, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(c) of the Code); (vii) if such transfer would, in the opinion of
counsel to the Partnership, cause any portion of the assets of the
Partnership to constitute assets of any employee benefit plan pursuant to
Department of Labor Regulations Section 2510.1-101t (viii) if such transfer
requires the registration of such Partnership Interest pursuant to any
applicable federal or state securities laws; (ix) if such transfer is
effectuated through an "established securities market" or a "secondary
market" (or the substantial equivalent thereof) within the meaning of
Section 7704 of the Code or such transfer causes the Partnership to become
a "publicly traded partnership," as such term is defined in Section
469(k)(2) or Section 7704(b) of the Code (provided that this clause (ix)
shall not be the basis for limiting or restricting in any manner the
exercise of the Redemption Right under Section 8.6 unless, and only to the
extent that, outside tax counsel provides to the General Partner an opinion
to the effect that, in the absence of such limitation or restriction, there
is a significant risk that the Partnership will be treated as a "publicly
traded partnership" and, by reason thereof, taxable as a corporation); (x)
if such transfer subjects the Partnership to regulation under the
Investment Company Act of 1940, the Investment Advisors Act of 1940 or
ERISA, each as amended; (xi) such transfer could adversely affect the
ability of the General Partner to remain qualified as a REIT; or (xii) if
in the opinion of legal counsel for the transferring Partner (which opinion
and counsel shall be reasonably satisfactory to the Partnership) or legal
counsel for the Partnership, such transfer would adversely affect the
ability of the General Partner to continue to qualify as a REIT or subject
the General Partner to any additional taxes under Section 857 or section
4981 of the Code.
<PAGE>
F. Avoidance of "Publicly Traded Partnership" Status. The General
Partner shall monitor the transfers of interests in the Partnership to
determine (i) if such interests are being traded on an "established
securities market" or a "secondary market (or the substantial equivalent
thereof) n within the meaning of Section 7704 of the Code and (ii) whether
additional transfers of interests would result in the Partnership being
unable to qualify for at least one of the "safe harbors" set forth in
Regulations Section 1.7704-1 (or such other guidance subsequently published
by the IRS setting forth safe harbors under which interests will not be
treated as "readily tradable on a secondary market (or the substantial
equivalent thereof) n within the meaning of Section 7704 of the Code) (the
"Safe Harbors"). The General Partner shall take all steps reasonably
necessary or appropriate to prevent any trading of interests or any
recognition by the Partnership of transfers made on such markets and,
except as otherwise provided herein, to insure that at least one of the
Safe Harbors is met, provided, however, that the foregoing shall not
authorize the General Partner to limit or restrict in any manner the right
of any holder of a Partnership Unit to exercise the Redemption Right in
accordance with the terms of Section 8.6 unless, and only to the extent
that, outside tax counsel provides to the General Partner an opinion to the
effect that, in the absence of such limitation or restriction, there is a
significant risk that the Partnership will be treated as a "publicly traded
partnership" and, by reason thereof, taxable as a corporation.
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 ADMISSION OF A SUCCESSOR GENERAL PARTNER
A successor to all of the General Partner's General Partnership
Interest pursuant to Section 11.2 who is proposed to be admitted as a
successor General Partner shall be admitted to the Partnership as the
General Partner, effective upon such transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each
case, the admission shall be subject to such successor General Partner
executing and delivering to the Partnership an acceptance of all of the
terms and conditions of this Agreement and such other documents or
instruments as may be required to effect the admission.
Section 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS
A. General. No Person shall be admitted as an Additional Limited
Partner without the consent of the General Partner, which consent shall be
given or withheld in the General Partner's sole and absolute discretion. A
Person who makes a Capital Contribution to the Partnership in accordance
with this Agreement, including without limitation, under Section 4.1, or
who exercises an option to receive Partnership Units shall be admitted to
the Partnership as an Additional Limited Partner only with the consent of
the General Partner and only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all
of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 15.11 and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner to effect such Person's admission as an Additional Limited
Partner. The admission of any Person as an Additional Limited Partner
shall become effective on the date upon which the name of such Person is
recorded on the books and records of the Partnership, following the consent
of the General Partner to such admission.
B. Allocations to Additional Limited Partners. If any Additional
Limited Partner is admitted to the Partnership on any day other than the
first day of a Partnership Year, then Net Income, Net Losses, each item
thereof and all other items allocable among Partners and Assignees for such
Partnership Year shall be allocated among such Additional Limited Partner
and all other Partners and Assignees by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of
<PAGE>
the Code, using the interim closing of the books method (unless the General
Partner, in its sole and absolute discretion, elects to adopt a daily,
weekly or monthly proration method, in which event Net Income, Net Losses,
and each item thereof would be prorated based upon the applicable period
selected by the General Partner). Solely for purposes of making such
allocations, each of such items for the calendar month in which an
admission of any Additional Limited Partner occurs shall be allocated among
all the Partners and Assignees including such Additional Limited Partner.
All distributions of Available Cash with respect to which the Partnership
Record Date is before the date of such admission shall be made solely to
Partners and Assignees other than the Additional Limited Partner, and all
distributions of Available Cash thereafter shall be made to all the
Partners and Assignees including such Additional Limited Partner.
Section 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED
PARTNERSHIP
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to
amend the records of the Partnership and, if necessary, to prepare as soon
as practical an amendment of this Agreement (including an amendment of
Exhibit A) and, if required by law, shall prepare and file an amendment to
the Certificate of Limited Partnership and may for this purpose exercise
the power of attorney granted pursuant to Section 15.11 hereof.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
Section 13.1 DISSOLUTION
The Partnership shall not be dissolved by the admission of
Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The
Partnership shall dissolve, and its affairs shall be wound up, upon the
first to occur of any of the following ("Liquidating Events"):
(i) the expiration of its term as provided in Section 2.4
hereof;
(ii) an event of withdrawal of the General Partner, as defined
in the Act (other than an event of bankruptcy), unless (1) there is at
least one other General Partner, in which case the remaining General
Partner shall continue the business of the Partnership, or (2) within
ninety (90) days after the withdrawal a "majority in interest" (as defined
below) of the remaining Partners Consent in writing to continue the
business of the Partnership and to the appointment, effective as of the
date of withdrawal, of a substitute General Partner;
(iii) through December 31, 2048, an election to dissolve
the Partnership made by the General Partner with the consent of Limited
Partners who hold ninety percent (90%) of the outstanding Units held by
Limited Partners (including Units held by the General Partner);
(iv) an election to dissolve the Partnership made by the
General Partner, in its sole and absolute discretion after December 31,
2046;
(v) entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and
properties of the Partnership for cash or for marketable securities; or
<PAGE>
(vii) a final and non-appealable judgment is entered by a
court of competent jurisdiction ruling that the General Partner is bankrupt
or insolvent, or a final and non-appealable order for relief is entered by
a court with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect, unless prior to or at the time of the entry of such
order or judgment a "majority in interest" (as defined below) of the
remaining Partners Consent in writing to continue the business of the
Partnership and to the appointment, effective as of a date prior to the
date of such order or judgment, of a substitute General Partner.
As used herein, a "majority in interest" shall refer to Partners
(excluding the General Partner) who hold more than fifty percent (50%) of
the outstanding Percentage Interests not held by the General Partner.
Section 13.2 WINDING UP
A. General. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors and Partners. No Partner shall take any action
that is inconsistent with, or not necessary to or appropriate for, the
winding up of the Partnership's business and affairs. The General Partner
(or, if there is no remaining General Partner, any Person elected by a
majority in interest of the Limited Partners (the "Liquidator") shall be
responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities
and property and the Partnership property shall be liquidated as promptly
as is consistent with obtaining the fair value thereof, and the proceeds
therefrom (which may, to the extent determined by the General Partner,
include equity or other securities of the General Partner or any other
entity) shall be applied and distributed in the following orders:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the Limited Partners; and
(4) The balance, if any, to the Partners in accordance with
their Capital Accounts, after giving effect to all contributions,
distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for
any services performed pursuant to this Article XIII.
B. Deferred Liquidation. Notwithstanding the provisions of
Section 13.2.A which require liquidation of the assets of the Partnership,
but subject to the order of priorities set forth therein, if prior to or
upon dissolution of the Partnership the Liquidator determines that an
immediate sale of part or all of the Partnership's assets would be
impractical or would cause undue loss to the Partners, the Liquidator may,
in its sole and absolute discretion, defer for a reasonable time the
liquidation of any assets except those necessary to satisfy liabilities of
the Partnership (including to those Partners as creditors) or distribute to
the Partners, in lieu of cash, as tenants in common and in accordance with
the provisions of Section 13.2.A, undivided interests in such Partnership
assets as the Liquidator deems not suitable for liquidation. Any such
distributions in kind shall be made only if, in the good faith judgment of
the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator deems
<PAGE>
reasonable and equitable and to any agreements governing the operation of
such properties at such time. The Liquidator shall determine the fair
market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
Section 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS
Subject to Section 13.4, if the Partnership is "liquidated" within
the meaning of Regulations Section 1.704-l(b)(2)(ii)(g), distributions
shall be made under this Article XIII to the General Partner and Limited
Partners who have positive Capital Accounts in compliance with Regulations
Section 1.704-l(b)(2)(ii)(b)(2). If any Partner has a deficit balance in
its Capital Account (after giving effect to all contributions,
distributions and allocations for all taxable years, including the year
during which such liquidation occurs), such Partner shall have no
obligation to make any contribution to the capital of the Partnership with
respect to such deficit, and such deficit shall not be considered a debt
owed to the Partnership or to any other Person for any purpose whatsoever.
In the discretion of the General Partner, a pro rata portion of the
distributions that would otherwise be made to the General Partner and
Limited Partners pursuant to this Article XIII may be: (A) distributed to a
trust established for the benefit of the General Partner and Limited
Partners for the purposes of liquidating Partnership assets, collecting
amounts owed to the Partnership and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner
arising out of or in connection with the Partnership (in which case the
assets of any such trust shall be distributed to the General Partner and
Limited Partners from time to time, in the reasonable discretion of the
General Partner, in the same proportions as the amount distributed to such
trust by the Partnership would otherwise have been distributed to the
General Partner and Limited Partners pursuant to this Agreement); or (B)
withheld to provide a reasonable reserve for Partnership liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Partnership, provided that such
withheld amounts shall be distributed to the General Partner and Limited
Partners as soon as practicable.
Section 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION
Notwithstanding any other provision of this Article XIII, if the
Partnership is deemed liquidated within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g) but no Liquidating Event has occurred, the
Partnership's property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged and the Partnership's affairs
shall not be wound up. Instead, for federal income tax purposes and for
purposes of maintaining Capital Accounts pursuant to Exhibit B, the
Partnership shall be deemed to have distributed its assets in kind to the
General Partner and Limited Partners, who shall be deemed to have assumed
and taken such assets subject to all Partnership liabilities, all in
accordance with their respective Capital Accounts. Immediately thereafter,
the General Partner and Limited Partners shall be deemed to have
recontributed the Partnership assets in kind to the Partnership, which
shall be deemed to have assumed and taken such assets subject to all such
liabilities.
Section 13.5 RIGHTS OF LIMITED PARTNERS
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of its
Capital Contributions and shall have no right or power to demand or receive
property other than cash from the Partnership. Except as otherwise
expressly provided in this Agreement, no Limited Partner shall have
priority over any other Limited Partner as to the return of its Capital
Contributions, distributions, or allocations.
<PAGE>
Section 13.6 NOTICE OF DISSOLUTION
If a Liquidating Event occurs or an event occurs that would, but for
provisions of an election or objection by one or more Partners pursuant to
Section 13.1, result in a dissolution of the Partnership, the General
Partner shall, within thirty (30) days thereafter, provide written notice
thereof to each of the Partners and to all other parties with whom the
Partnership regularly conducts business (as determined in the discretion of
the General Partner).
Section 13.7 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2, the Partnership shall be terminated
and the Certificate of Limited Partnership and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than
the State of Delaware shall be canceled and such other actions as may be
necessary to terminate the Partnership shall be taken.
Section 13.8 REASONABLE TIME FOR WINDING UP
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2, to minimize any losses otherwise attendant upon
such winding-up, and the provisions of this Agreement shall remain in
effect among the Partners during the period of liquidation.
Section 13.9 WAIVER OF PARTITION
Each Partner hereby waives any right to partition of the Partnership
property.
Section 13.10 LIABILITY OF LIQUIDATOR
The Liquidator shall be indemnified and held harmless by the
Partnership in the same manner and to the same degree as an Indemnitee may
be indemnified pursuant to Section 7.7.
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 AMENDMENTS
A. General. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partners holding twenty-five percent
(25%) or more of the Partnership Interests. Following such proposal
(except an amendment pursuant to Section 14.1.B), the General Partner shall
submit any proposed amendment to the Limited Partners. The General Partner
shall seek the written vote of the Partners on the proposed amendment or
shall call a meeting to vote thereon and to transact any other business
that it may deem appropriate. For purposes of obtaining a written vote,
the General Partner may require a response within a reasonable specified
time, but not less than fifteen (15) days, and failure to respond in such
time period shall constitute a vote which is consistent with the General
Partner's recommendation with respect to the proposal. Except as provided
in Section 14.1.B, 14.1.C or 14.1.D, a proposed amendment shall be adopted
and be effective as an amendment hereto if it is approved by the General
Partner and it receives the Consent of Partners holding a majority of the
Percentage Interests of the Limited Partners (including Limited Partnership
Interests held by the General Partner).
B. Amendments Not Requiring Limited Partner Approval.
Notwithstanding Section 14.1.A or 14.1.C, the General Partner shall have
the power, without the consent of the Limited Partners, to amend this
Agreement as may be required to facilitate or implement any of the
following purposes:
<PAGE>
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any Affiliate
of the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement (which may be
effected through the replacement of Exhibit A with an amended Exhibit A);
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership Interests issued
pursuant to Article IV;
(4) to reflect a change that does not adversely affect the
Limited Partners in any material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent with law or with
other provisions of this Agreement, or make other changes with respect to
matters arising under this Agreement that will not be inconsistent with law or
with the provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or regulation of a federal,
state or local agency or contained in federal, state or local law.
The General Partner shall notify the Limited Partners when any action
under this Section 14.1.B is taken in the next regular communication to the
Limited Partners.
C. Amendments Requiring Limited Partner Approval (Excluding General
Partner). Notwithstanding Section 14.1.A, without the Consent of the Outside
Limited Partners, the General Partner shall not amend Section 4.2.A, Section
5.1.E, Section 7.1.A (second sentence only), Section 7.5, Section 7.6, Section
7.8, Section 7.11.B, Section 11.2, Section 13.1 (other than Section 13.1(iii)
which can be amended only with a Consent of 90% of the Partnership Units
(including Partnership Units held by the General Partner), the last sentence
of Section 11.4 (provided that no such amendment shall in any event adversely
affect the rights of any lender who made a loan or who extended credit and
received in connection therewith a Pledge of Units prior to the date such
amendment is adopted unless, and only to the extent such lender consents
thereto, this Section 14.1.C or Section 14.2.
D. Other Amendments Requiring Certain Limited Partner Approval.
Notwithstanding anything in this Section 14.1 to the contrary, this Agreement
shall not be amended with respect to any Partner adversely affected without
the Consent of such Partner adversely affected if such amendment would (i)
convert a Limited Partner's interest in the Partnership into a general
partner's interest, (ii) modify the limited liability of a Limited Partner,
(iii) amend Section 7.11.A, (iv) amend Article V or Article VI (except as
permitted pursuant to Sections 4.2, 5.1.E, 5.4, 6.2 and 14.1(B)(3)), (v) amend
Section 8.6 or any defined terms set forth in Article I that relate to the
Redemption Right (except as permitted in Section 8.6.E), or (vi) amend this
Section 14.1.D. Moreover, this Agreement may be amended by the General
Partner to provide that certain Limited Partners have the obligation, upon
liquidation of their interests in the Partnership (within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g)), to restore to the Partnership the
amounts of their negative Capital Account balances, if any, for the benefit of
creditors of the Partnership or Partners with positive Capital Account
balances or both, together with any necessary corresponding amendments
(including corresponding amendments to Sections 6.1.A, 6.1.B and Exhibit C),
with the consent of only such Limited Partners and of any other Limited
Partners already subject to such a restoration obligation whose restoration
obligation may be affected by such amendment. This Section 14.1.D does not
require unanimous consent of all Partners adversely affected unless the
amendment is to be effective against all Partners adversely affected.
<PAGE>
Section 14.2 MEETINGS OF THE PARTNERS
A. General. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a
written request by Limited Partners holding twenty-five percent (25%) or more
of the Partnership Interests. The call shall state the nature of the business
to be transacted. Notice of any such meeting shall be given to all Partners
not less than seven (7) days nor more than thirty (30) days prior to the date
of such meeting. Partners may vote in person or by proxy at such meeting.
Whenever the vote or Consent of Partners is permitted or required under this
Agreement, such vote or Consent may be given at a meeting of Partners or may
be given in accordance with the procedure prescribed in Section 14.1.A.
Except as otherwise expressly provided in this Agreement, the Consent of
holders of a majority of the Percentage Interests held by Limited Partners
(including Limited Partnership Interests held by the General Partner) shall
control.
B. Actions Without a Meeting. Any action required or permitted to be
taken at a meeting of the Partners may be taken without a meeting if a written
consent setting forth the action so taken is signed by a majority of the
Percentage Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such consent may be in one instrument or in
several instruments, and shall have the same force and effect as a vote of a
majority of the Percentage Interests of the Partners (or such other percentage
as is expressly required by this Agreement). Such consent shall be filed with
the General Partner. An action so taken shall be deemed to have been taken at
a meeting held on the effective date so certified.
C. Proxy. Each Limited Partner may authorize any Person or Persons
to act for him by proxy on all matters in which a Limited Partner is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited Partner
or its attorney-in-fact. No proxy shall be valid after the expiration of
eleven (11) months from the date thereof unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the Limited Partner
executing it, such revocation to be effective upon the Partnership's receipt
of written notice thereof.
D. Conduct of Meeting. Each meeting of Partners shall be conducted
by the General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner
or such other Person deem appropriate.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted to be given
or made to a Partner or Assignee under this Agreement shall be in writing and
shall be deemed given or made when delivered in person or when sent by first
class United States mail or by other means of written communication to the
Partner or Assignee at the address set forth in Exhibit A or such other
address as the Partners shall notify the General Partner in writing.
Section 15.2 TITLES AND CAPTIONS
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no
way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles",
"Sections" and "Exhibits" are to Articles, Sections and Exhibits of this
Agreement.
<PAGE>
Section 15.3 PRONOUNS AND PLURALS
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
Section 15.4 FURTHER ACTION
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 CREDITORS
Other than as expressly set forth herein with regard to any Indemnitee,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.
Section 15.7 WAIVER
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
Section 15.8 COUNTERPARTS
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart. Each party shall become bound by this Agreement
immediately upon affixing its signature hereto.
Section 15.9 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
Section 15.10 INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.11 POWER OF ATTORNEY
A. General. Each Limited Partner and each Assignee who accepts
Partnership Units (or any rights, benefits or privileges associated therewith)
is deemed to irrevocably constitute and appoint the General Partner, any
Liquidator and authorized officers and attorneys-in-fact of each, and each of
those acting singly, in each case with full power of substitution, as its true
and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the Certificate
of Limited Partnership and all amendments or restatements thereof) that the
General Partner or any Liquidator deems appropriate or necessary to form,
qualify or continue the
<PAGE>
existence or qualification of the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and in all other jurisdictions in which
the Partnership may conduct business or own property, (b) all instruments that
the General Partner or any Liquidator deem appropriate or necessary to reflect
any amendment, change, modification or restatement of this Agreement in
accordance with its terms, (c) all conveyances and other instruments or
documents that the General Partner or any Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement, including, without limitation, a
certificate of cancellation, (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant to, or other
events described in, Article XI, XII or XIII hereof or the Capital
Contribution of any Partner and (e) all certificates, documents and other
instruments relating to the determination of the rights, preferences and
privileges of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments appropriate
or necessary, in the sole and absolute discretion of the General Partner or
any Liquidator, to make, evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or given by the Partners
hereunder or is consistent with the terms of this Agreement or appropriate or
necessary, in the sole discretion of the General Partner or any Liquidator, to
effectuate the terms or intent of this Agreement.
Nothing contained in this Section 15.11 shall be construed as
authorizing the General Partner or any Liquidator to amend this Agreement
except in accordance with Article XIV hereof or as may be otherwise expressly
provided for in this Agreement.
B. Irrevocable Nature. The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an interest, in
recognition of the fact that each of the Partners will be relying upon the
power of the General Partner or any Liquidator to act as contemplated by this
Agreement in any filing or other action by it on behalf of the Partnership,
and it shall survive and not be affected by the subsequent Incapacity of any
Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Units and shall extend to such
Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be
bound by any representation made by the General Partner or any Liquidator,
acting in good faith pursuant to such power of attorney, and each such Limited
Partner or Assignee hereby waives any and all defenses which may be available
to contest, negate or disaffirm the action of the General Partner or any
Liquidator, taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within fifteen (15) days after receipt of the General Partner's or
Liquidator's request therefor, such further designation, powers of attorney
and other instruments as the General Partner or the Liquidator, as the case
may be, deems necessary to effectuate this Agreement and the purposes of the
Partnership.
Section 15.12 ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any prior
written oral understandings or agreements among them with respect thereto.
Section 15.13 NO RIGHTS AS SHAREHOLDERS
Nothing contained in this Agreement shall be construed as conferring
upon the holders of the Partnership Units any rights whatsoever as partners or
shareholders of any of the General Partner, including, without limitation, any
<PAGE>
right to receive dividends or other distributions made to shareholders of the
General Partner or partners of the other General Partner or to vote or to
consent or receive notice as (i) shareholders in respect to any meeting of
shareholders for the election of trustees of the General Partner or partners
of the other General Partner or any other matter or (ii) partners in respect
to any meeting of partners of the other General Partner or any other matter.
Section 15.14 LIMITATION TO PRESERVE REIT STATUS
To the extent that any amount paid or credited to the General Partner or
any of their officers, directors, trustees, employees or agents pursuant to
Section 7.4 or Section 7.7 would constitute gross income to the General
Partner for purposes of Section 856(c)(2) or 856(c)(3) of the Code (a "General
Partner Payment") then, notwithstanding any other provision of this Agreement,
the amount of such General Partner Payment for any fiscal year shall not
exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.20% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in
subsections (A) though (H) of Section 856(c)(2) of the Code over (b) the
amount of gross income (within the meaning of Section 856(c)(2) of the Code)
derived by the General Partner from sources other than those described in
subsections (A) through (H) of Section 856(c)(2) of the Code (but not
including the amount of any General Partner Payments); or
(ii) an amount equal to the excess, if any of (a) 25% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in
subsections (A) through (I) of Section 856(c)(3) of the Code over (b) the
amount of gross income (within the meaning of Section 856(c)(3) of the Code)
derived by the General Partner from sources other than those described in
subsections (A) through (I) of Section 856(c)(3) of the Code (but not
including the amount of any General Partner Payments); provided, however, that
General Partner Payments in excess of the amounts set forth in subparagraphs
(i) and (ii) above may be made if the General Partner, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts would not adversely affect the General Partner's ability to qualify as
a REIT. To the extent General Partner Payments may not be made in a year due
to the foregoing limitations, such General Partner Payments shall carry over
and be treated as arising in the following year, provided, however, that such
amounts shall not carry over for more than five years, and if not paid within
such five year period, shall expire, provided further, that (i) as General
Partner Payments are made, such payments shall be applied first to carry over
amounts outstanding, if any, and (ii) with respect to carry over amounts for
more than one Partnership Year, such payments shall be applied to the earliest
Partnership Year first.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
General Partner:
LaSalle Hotel Properties
By: /s/ JON E. BORTZ
Name: Jon E. Bortz
Title: President
LIMITED PARTNERS:
** By: LaSalle Hotel Properties, as
Attorney-in-Fact for the Limited Partners
By: /s/ JON E. BORTZ
Name: Jon E. Bortz
Title: President
___**__ LaSalle Plaza Park Limited Partnership
___**__ LaSalle Seaview L.P.
___**__ LaSalle LRP Bloomington Limited Partnership
___**__ LaSalle LRP Dallas Hotel Limited Partnership
___**__ LaSalle LRP New Orleans Hotel Limited
Partnership
___**__ LaSalle LRP Key West Hotel Investors Limited
Partnership
___**__ LaSalle Le Montrose Limited Partnership
___**__ LaSalle Sabal Plaza Limited Partnership
___**__ LaSalle Omaha Hotel Investors Limited
Partnership
___**__ SRP Seaview, L.P.
___**__ RAD Bloom, L.P.
___**__ Dallas Mer Hotel, L.P.
___**__ New Orleans Hospitality, L.P.
___**__ Key West Property, L.P.
___**__ NEB Hotel, L.P.
___**__ Crosstown Asset Corp. I
___**__ Outrigger Lodging Services
___**__ Radisson Group, Inc,
___**__ Beachside Hospitality, Inc.
EXHIBIT 10.2
- ------------
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT ("Agreement"), dated as of April 23, 1998, by
and between LASALLE HOTEL PROPERTIES, a Maryland real estate investment
trust (the "Company"), and LASALLE HOTEL ADVISORS, INC., a Maryland
corporation (the "Advisor").
WHEREAS, the Company through its interest in LaSalle Hotel Operating
Partnership, L.P. (the "Operating Partnership") is in the business of
acquiring, developing, managing, owning and disposing of hotels (the
"Hotels") and leasing the Hotels to qualified lessees (the "Lessees")
pursuant to participating leases (the "Leases") (for purposes hereof unless
the context otherwise requires, the term "Company" shall include the
Company and the Operating Partnership); and
WHEREAS, the Company intends to qualify as a Real Estate Investment
Trust (a "REIT") under the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the Company desires to retain the services of the Advisor
with respect to the acquisition, leasing, investment management, financing,
ownership and disposition of the Hotels, and to provide certain services to
the Company in connection with such Hotels and Leases on the terms set
forth herein and consistent with the Company's initial and continued
qualification and operation in accordance with all requirements applicable
to a REIT; and
WHEREAS, the Advisor is willing to provide such services to the
Company on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. APPOINTMENT OF ADVISOR. The Company hereby retains the Advisor
on the terms hereinafter set forth, and the Advisor hereby accepts such
appointment.
2. DUTIES OF ADVISOR. The Advisor shall perform the following
activities consistent with the Company's stated policy of maximizing
current returns to shareholders through increases in cash available for
distribution and to increase long term total returns to shareholders
through appreciation in the value of its common shares, subject to the
direction and supervision of the Company's Board of Trustees:
(i) identify, negotiate, review and analyze a continuing and
suitable investment program of Hotel acquisitions and developments,
consistent with the investment policies and objectives of the Company and
consistent with the Company's Declaration of Trust;
(ii) cause the Company to perform its responsibilities and
enforce its rights under the Leases so as to increase lease income and
enhance the Hotels' values;
(iii) identify Hotels for sale consistent with the Company's
investment objectives and prevailing economic conditions and retain
investment banks, brokers or other intermediaries to market for sale such
Hotels;
<PAGE>
(iv) advise the Company in connection with its financing
strategy including assisting the Company in the negotiation of any
borrowings which the Company may seek to incur;
(v) maintain or cause to be maintained, on behalf of the
Company, such books and records of account concerning the Company, the
Operating Partnership and the Hotels as are necessary for the proper
management and control of the assets of the Company, in accordance with
generally accepted accounting practices;
(vi) take all actions necessary to enable the Company to
comply with and abide by in all material respects all applicable laws and
regulations;
(vii) administer the day-to-day operations and perform all
necessary and reasonable administrative and "back office" functions with
respect to the Company, the Operating Partnership, the Hotels and the
Leases, including, but not limited to, collecting rents, paying debts,
depositing funds and investing funds in a manner consistent with the
Company's policies;
(viii) assist the Company in preparing reports to, and meeting
materials for, the Company and its shareholders;
(ix) prepare and deliver to the Company quarterly financial
statements within forty-five (45) days of the end of each fiscal quarter,
year end financial statements within ninety (90) days of the end of the
Company's fiscal year and such schedules, reports summaries and other
information regarding the Company's portfolio as may be requested by the
Company from time to time;
(x) oversee investment due diligence and provide research and
economic and statistical data to support the Company's investment program
and strategies;
(xi) retain and oversee third parties hired to conduct and
provide services to the Company such as development management, project
management, design, construction, investment banking services, property
disposition brokerage services, legal, independent accounting and auditing
services (including, without limitation, such reports and returns as may be
required by any governmental authority in connection with the ordinary
conduct of the Company's business, such as the Securities and Exchange
Commission and the Internal Revenue Service, and any state and local
securities commissions and taxing authorities) and providing tax reviews
and advice, feasibility studies or appraisals, engineering, or
environmental property inspections and consulting services. Such services
may be provided by Affiliates of the Advisor (as defined below) provided
such Affiliates charge the Company no more than the fair market value for
such services and such services are approved by a majority of the Company's
Board of Trustees, including, a majority of the Independent Trustees; it
being understood that certain Affiliates of the Advisor will provide
certain "back office" services such as accounting, human resources, and
review of external consultant reports, as part of the services to be
performed by the Advisor, without additional charge to the Company. For
purposes of this Agreement, "Independent Trustee" shall mean a trustee who,
on the date at issue, is currently serving on the Board of Trustees and is
"independent" as determined by application of the rules and regulations of
the New York Stock Exchange. For purposes of this Agreement, "Affiliate"
means any company or other entity owned or controlled, directly or
indirectly, by LaSalle Partners Incorporated;
<PAGE>
(xii) manage the Company's short-term investments, including
the acquisition and sale of money market instruments in accordance with the
Company's policies; and
(xiii) take such other actions and render such other services
as may reasonably be requested by the Company consistent with the purpose
of this Agreement.
3. ADVISOR'S RESOURCES. The Advisor shall, at its expense, maintain
such office space, facilities, equipment and personnel trained and
experienced in the business of acquisitions, financing, investment
management and hotel leasing sufficient to enable the Advisor to fulfill
its obligations under this Agreement and shall provide, at its expense,
administrative personnel as necessary to provide the services herein. The
Advisor shall utilize its Affiliates or unrelated third parties as
necessary to supplement such resources performing the services required by
this Agreement.
4. PAYMENT OF EXPENSES. Except as set forth below, in consideration
of the compensation provided under paragraph 5, the Advisor shall bear all
expenses attributable to the management services to be provided by the
Advisor to the Company hereunder including providing the resources required
by paragraph 3 above, without separate reimbursement from the Company. The
Advisor, however, shall be reimbursed by the Company for any amounts the
Advisor expends to pay fees and expenses of third parties providing
services to the Company set forth in paragraph 2(xi) above (including
Affiliates providing services in accordance with 2(xi) above), all other
costs and expenses of third parties relating to the Company's operations,
including costs and expenses of acquiring, owning, protecting, insuring,
maintaining and disposing of the Company's investments, cost and expenses
connected with dividends, interest or other distributions, transfer agents
and registrar fees, costs and expenses associated with investor relations,
costs and expenses associated with the continuous reporting and other
requirements of governmental bodies or agencies, including dissemination of
materials to shareholders, or such other costs and expenses as approved by
a majority of the Company's Board of Trustees, including a majority of the
Company's Independent Trustees.
5. COMPENSATION.
(a) The Company shall pay to the Advisor in cash a base fee (the
"Base Fee"), at the following percentages of annual Net Operating Income as
defined below ("NOI"):
INCREMENTAL NOI OF COMPANY BASE FEE %
From up to but excluding
0 $100,000,000 5.0%
$100,000,000 $225,000,000 An additional 4.8% on
such increment
$225,000,000 $350,000,000 An additional 4.6% on
such increment
$350,000,000 $475,000,000 An additional 4.4% on
such increment
$475,000,000 $600,000,000 An additional 4.2% on
such increment
$600,000,000 and any excess An additional 4.0% on
such increment
For purposes of this Agreement, NOI for any period shall mean total
revenues (excluding gains or losses from the sale of Company assets, or any
refinancings thereof) applicable to such period, less the operating
expenses applicable to such period (excluding advisory fees payable
hereunder to the Advisor, and excluding amounts attributable to
depreciation and amortization, or reserves for bad debts or other similar
non-cash items or reserves) after adjustment for unconsolidated
partnerships and joint ventures and before adjustment for minority interest
in the Operating Partnership.
<PAGE>
The Base Fee shall be payable quarterly on an estimated basis, in
arrears within 45 days of the end of each fiscal quarter. Within ten days
after the Company has received its audited financial statements for the
prior year, the Company shall make a final determination of the Base Fee
for such prior year, and the Operating Partnership hall pay any deficiency
or deduct any over-payment made to the Advisor for such year from the next
payment or payments due to the Advisor pursuant to this Agreement.
(b)(i) For the calendar year ending December 31, 1998, the Operating
Partnership shall pay the Advisor in arrears an incentive fee (the "1998
Incentive Fee") in an amount equal to 25% of the product of (A) the amount
by which the "FFO per Share Amount" (as defined below), calculated on a pro
forma basis as if the IPO had occurred on January 1, 1998, exceeds a growth
rate of 7% per annum of the FFO per Share Amount for the calendar year
ended December 31, 1997, calculated on a pro forma basis as if the IPO had
occurred on January 1, 1997 and (B) the Shares Outstanding (as defined
below) for the calendar year ending December 31, 1998. The 1998 Incentive
Fee calculation shall be pro rated based upon the number of days remaining
in calendar 1998 from the date of the IPO.
(ii) For the calendar year ending December 31, 1999, the Operating
Partnership hall pay the Advisor in arrears an incentive fee (the "1999
Incentive Fee") in an amount equal to 25% of the product of (A) the amount
by which the FFO per Share Amount, for calendar year 1999 exceeds a growth
rate of 7% per annum by the FFO per Share Amount for the calendar year
ended December 31, 1998, calculated on a pro forma basis as if the IPO had
occurred on January 1, 1998 and (B) the Shares Outstanding for the calendar
year ending December 31, 1999.
(iii) Thereafter, the Operating Partnership shall pay to the Advisor
annually in arrears an incentive fee (the "Incentive Fee") in an amount
equal to 25% of the product of (A) the amount by which the FFO per Share
Amount for the calendar year then ended (the "Measurement Year") exceeds a
growth rate of 7% per annum of the FFO per Share Amount for the prior
calendar year and (B) the Shares Outstanding for the Measurement Year. The
Incentive Fee shall be deemed to have been earned as of the end of the
Management Year and shall be paid as set forth below upon determination of
the FFO per share for the Management Year. For fees payable for any year
in which fees are not payable for the entire calendar year, the fees shall
be calculated as if this Agreement had been in effect for the entire year,
but shall be pro rated and payable for only that portion of the year this
Agreement was in effect.
For purposes of this Agreement, "Funds from Operations" shall mean
the Company's net income (loss) (computed in accordance with generally
accepted accounting principles ("GAAP")), excluding gains (or losses) from
debt restructuring and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures will be calculated to reflect Funds from
Operations on the same basis.
"FFO per Share Amount" means an amount equal to the Funds from
Operations divided by the Shares Outstanding.
"Shares Outstanding" means, for purposes of calculating the FFO per
Share Amount, the weighted average number of shares of beneficial interests
of the Company (the "Shares") outstanding (as determined by GAAP),
including any beneficial interests in the Operating Partnership (the
"Units"), for the period such calculation is made; provided, however, that
appropriate equitable adjustments shall be made when calculating the FFO
per Share Amount in the event of any extraordinary transactions such as
stock splits, stock dividends, etc.
<PAGE>
Payment of the Incentive Fee shall be made by the Operating
Partnership, at the option of the Advisor, in Shares or Units (with one
Unit convertible into one Share) unless and to the extent, receipt of
Shares would adversely affect the Company's status as a REIT, in which such
event the Advisor shall receive Units. The number of Shares or Units shall
be the nearest whole number of Shares or Units, as the case may be,
obtained by dividing the Incentive Fee by the average closing price of the
Shares on the New York Stock Exchange (or such other exchange or national
market system on which the Shares are then traded) for the Measurement
Year. Any such Shares or Units shall not be transferable, other than to
Affiliates of the Advisor, except by operation of law for a period of one
year from the date of issuance.
(c) Notwithstanding anything herein to the contrary, for the year
ending December 31, 1998 the sum of the Base Fee and the 1998 Incentive Fee
shall not exceed 6% of the Company's pro forma NOI for the calendar year
1998 with such calculation pro rated as if the calendar year 1998 began on
the date of the IPO.
(d) The Company shall purchase Officers and Trustees (or Directors)
insurance in reasonably acceptable and customary levels for the Officers
and Trustees of the Company and Officers and Directors of the Advisor.
Such policy shall constitute primary coverage for the individuals covered
thereby for their activities relating to the Company and the Advisor.
(e) Nothing in this Agreement shall preclude or restrict the
Company from the direct acquisition of Hotels or the negotiation and
execution of Leases without the assistance of the Advisor.
6. REIT STATUS. Notwithstanding anything in this Agreement to the
contrary, the Advisor shall not take any action which would (a) adversely
affect the status of the Company as a REIT, (b) subject the Company to
regulation under the Investment Company Act of 1940, as amended or (c)
violate any law, rule, regulation or policy of any governmental body or
agency having jurisdiction over the Company or otherwise prohibited by the
Company's Declaration of Trust, its Bylaws or resolutions of the Board of
Trustees all as in effect from time to time. In the event the Company
authorizes or directs the Advisor to take any actions which, in the
judgment of the Advisor would violate any of the foregoing, the Advisor
shall so advise the Company in writing specifying the basis for its
position and shall take no further action with respect to such matters
unless and until it receives clarification and instructions from the Board
of Trustees.
7. LIMITATION OF LIABILITY AND INDEMNIFICATION OF ADVISOR.
7.1 LIMITATION ON LIABILITY.
The Advisor shall have no responsibility other than to render the
services and take the actions described herein in good faith and with the
exercise of due care and shall not be responsible for any action of the
Board of Trustees in following or declining to follow any advice or
recommendation of the Advisor. The Advisor, except by reason of its own
gross negligence, bad faith or willful misconduct, shall not be liable for
any action taken, omitted or suffered to be taken by it in good faith and
believed by it to be authorized or within its discretion or rights or
powers conferred upon it by this Agreement or in reliance upon the written
opinion of counsel of recognized expertise.
7.2 INDEMNIFICATION.
(a) The Company shall reimburse, indemnify and hold harmless the
Advisor and its partners, directors, officers, stockholders, agents and
employees and each other person or entity, if any, controlling the Advisor
(an "Indemnified Party"), to the full extent lawful, from and against any
and all losses, claims, damages or liabilities of any nature whatsoever
with respect to or arising from any acts or omission of the Advisor
<PAGE>
(including ordinary negligence) in its capacity as such, except with
respect to losses, claims, damages or liabilities with respect to or
arising out of the Advisor's gross negligence, bad faith or willful
misconduct.
Notwithstanding the indemnification provisions in Section 7.2(a)
above, indemnification will not be allowed for any liability imposed by
judgment, and costs associated therewith, including attorneys' fees,
arising from or out of a violation of state or federal securities laws
associated with the offer and sale of Company shares. Indemnification will
be allowed for settlements and related expenses of lawsuits alleging
securities law violations, and for expenses incurred in successfully
defending such lawsuits, provided that a court either (i) approves the
settlement and finds that indemnification of the settlement and related
costs should be made; or (ii) approves indemnification of litigation costs
if a successful defense is made. If indemnification is unavailable as a
result of this Section 7.2(a), the Company shall contribute to the
aggregate losses, claims, damages or liabilities to which the Advisor or
its partners, officers, directors, agents, employees or controlling persons
may be subject in such amount as is appropriate to reflect the relative
benefits received by each of the Company and the party seeking contribution
on the one hand and the relative faults of the Company and party seeking
contribution on the other, as well as any other relevant equitable
considerations.
(b) Promptly after receipt by an Indemnified Party of notice of the
commencement of any action, such Indemnified Party shall, if a claim in
respect thereof is to be made against the Company, notify the Company in
writing of the commencement thereof; but the omission to so notify the
Company shall not relieve it from any liability that it may have to any
Indemnified Party pursuant to this Section 7.2. In case any such action
shall be brought against an Indemnified Party and it shall notify the
Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it shall wish, to assume the
defense thereof, with counsel satisfactory to such Indemnified Party and,
after notice from the Company to such Indemnified Party of its election to
assume the defense thereof, the Company shall not be liable to such
Indemnified Party under Section 7.2(a) hereof for any legal expenses of
other counsel or any of the expenses, in each case subsequently incurred by
such Indemnified Party, unless (i) the Company and the Indemnified Party
shall have mutually agreed to the retention of such counsel or, (ii) the
named parties to any such proceeding (including any impleaded parties)
include both the Company and Indemnified Party and representation of both
parties by the same counsel would be inappropriate in the reasonable
opinion of the Indemnified Party, due to actual or potential differing
interests between them.
The obligations of the Company under this Section 7.2 shall be in
addition to any liability which the Company otherwise may have.
8. BOOKS AND RECORDS. All books and records compiled by the Advisor
in the course of discharging its responsibilities under this Agreement
shall be the property of the Company and shall be delivered by the Advisor
to the Company immediately upon any termination of this Agreement and
regardless of the grounds for such termination (including, but not limited
to, a breach by the Company of this Agreement); provided, however, that the
Advisor shall have reasonable access to such books and records to the
extent reasonably necessary in connection with the conduct of its services
hereunder. The Advisor shall not maintain or assert any lien against or
upon any of the books and records and all such books and records concerning
the Hotels and/or the Leases. If requested by the Company, the Advisor
shall maintain records including, but not limited to (a) pro-rated costs
(including salaries, commissions, bonuses and benefits) of personnel
employed by the Advisor and who are involved in the acquisition, and
administrative process related to the acquisitions of Hotels which are
identified by the Advisor and acquired by the Company during the term of
this Agreement (the "Acquisition Process"); (b) all costs of fees, taxes
and assessments applicable to the Acquisition Process; (c) travel, lodging
<PAGE>
and entertainment expenses related to the Acquisition Process and (d) other
general and administrative expenses, including expenses for administrative
personnel relating to the Acquisition Process;
9. TERM AND TERMINATION.
(a) This Agreement shall become effective upon the successful
completion of the Company's IPO and shall continue through December 31,
1999 and shall be automatically extended for successive one year terms
thereafter without further action by either the Company or the Advisor
unless earlier terminated, as provided herein. This Agreement shall be
automatically renewed for additional one (1) year terms unless either party
gives written notice to the other party of termination 180 days prior to
the expiration of the then current term.
(b) The Company also may, at any time, terminate this Agreement:
(i) immediately upon providing written notice to the Advisor
if the Advisor is determined by unanimous vote of all Independent Trustees
of the Company, taken after at least fourteen (14) days prior written
notice to the Advisor of such vote, to have committed an act of actual
fraud, willful malfeasance, or gross negligence relating to its duties and
responsibilities under this Agreement or a material breach by the Advisor
of its obligations under this Agreement which is not remedied in a
reasonable period of time after receipt of written notice from the
Independent Trustees specifying such breach;
(ii) upon written notice effective immediately, given not
earlier than thirty (30) days after the Advisor shall (A) authorize or
agree to the commencement of a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency, receivership or other similar law
now or hereafter in effect or the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, (B) make a general assignment for the benefit of its
creditors, or (C) have an involuntary or other proceeding commenced against
it seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now or
thereafter in effect, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period exceeding sixty (60) days.
(c) Upon any termination of this Agreement by the Company, the
Advisor shall, upon the Company's request, cooperate with and assist the
Company in finding a new entity to act as advisor to the Company and in
assisting the Company with the transition process.
10. NOTICES. Any notices, instructions or other communications
required or contemplated by this Agreement shall be deemed to have been
properly given and to be effective upon delivery if delivered in person or
sent by telecopier or upon receipt if sent by courier service.
All such communications to the Company shall be addressed as follows:
LaSalle Hotel Properties
220 East 42nd Street, Suite 2700
New York, New York 10017
Attention: President
Telecopier: (212) 687-8170
<PAGE>
With a copy to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048
Attention: Michael F. Taylor
Telecopier: (212) 839-5599
All such communications to the Advisor shall be addressed as follows:
LaSalle Hotel Advisors, Inc.
220 East 42nd Street, Suite 2700
New York, New York 10017
Attention: President
Telecopier: (212) 687-8170
With copies to:
Hagan & Associates
200 East Randolph Drive, Suite 4322
Chicago, Illinois 60601
Attention: R.K. Hagan
Telecopier: (312) 228-0982
and;
LaSalle Partners Incorporated
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Chief Financial Officer
Telecopier: (312) 228-0980
Either party hereto may designate a different address by written
notice to the other party delivered in accordance with this Section 11.
11. DELEGATION OF RESPONSIBILITIES. Notwithstanding anything
contained herein to the contrary, the Advisor may delegate any and all of
its responsibilities and obligations under this Agreement to its
Affiliates. Any delegation of responsibilities by the Advisor shall not be
inconsistent with any express instructions of the Board of Trustees; shall
not cause the Company to incur any financial responsibility to the delegee
except to the extent specifically permitted under Paragraph 4 and shall not
relieve the Advisor of its obligations to the Company with respect to the
responsibilities delegated and with respect to which delegated
responsibilities the Advisor shall remain liable to the Company.
12. NONCOMPETE AGREEMENT. The Advisor and its Affiliates shall not
invest directly or indirectly or on behalf of others in any hotel
properties in the United States (the "Competitive Hotels"), other than
through the Company except for the excluded properties set forth in Exhibit
A hereto and except for hotels constituting part of a mixed-use property
where less than 40% of the property's NOI is attributable to the hotel.
Notwithstanding the foregoing, no Affiliate shall be restricted from
acquiring interests directly or indirectly, in Competitive Hotels or
providing asset management services with respect to Competitive Hotels to
the extent that such Affiliate (i) is a Registered Investment Advisor under
<PAGE>
the Investment Advisors Act of 1940 and makes such acquisition or gives
such advice in the ordinary course of management activities for securities
investments, (ii) acquires a company or other entity which owns or provides
asset management services with respect to Competitive Hotels, provided (a)
it is not a material activity of such company or entity, (b) such company
or entity does not engage in activities relating to additional Competitive
Hotels, after such acquisition, and (c) the Advisor maintains a "Chinese
wall" between employees of the Advisor and those of such company or entity
with respect to such activities, or (iii) invests in debt or debt
securities, including debt or debt securities which have equity components,
to the extent the intention of such Affiliate at the time such investment
was made was not to exercise its rights to directly hold such equity or
(iv) is engaged in financing, disposition, consulting, development
management or facility related (e.g., accounting or engineering) services
with respect to Competitive Hotels. For purposes of this Agreement,
"material" shall mean twenty percent (20%) of the company's activities.
13. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ADVISOR. The
Advisor represents and warrants to, and covenants and agrees with, the
Company as follows:
(a) The Advisor, taking into account its own personnel and
the personnel available to it through its Affiliates, has access to
personnel trained and experienced in the business of acquisitions, leasing
of hotels asset management, financing, and the ownership and dispositions
of hotels, and such other areas as may be necessary and sufficient to
enable the Advisor to perform its obligations under this Agreement.
(b) The Advisor shall comply with all laws, rules,
regulations and ordinances applicable to the performance of its obligations
under this Agreement.
(c) Neither the Advisor nor any of its Affiliates is party to
or otherwise bound by or, during the term of this Agreement (including any
extension thereof), will become party to or otherwise bound by, any
agreement that would restrict or prevent (i) except as set forth on Exhibit
A attached hereto, the Advisor from performing any obligation contemplated
by this Agreement or (ii) the Company from operating its business as
proposed to be conducted, including, without limitation, acquiring any
Hotel in any geographic market in the United States or any foreign country.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to the conflict of laws principals thereof.
15. ENTIRE AGREEMENT. This Agreement reflects the entire
understanding of the parties hereto with respect to the subject matter
hereof and supersedes and replaces all agreements between the Company and
the Advisor with respect to the subject matter hereof.
16. RELATIONSHIP OF PARTIES. The parties intend that the Advisor
shall act as an independent contractor in performing services for the
Company hereunder. Nothing contained herein is intended to, or shall be
construed to, constitute the Advisor as a partner, joint venturer or agent
of the Company.
<PAGE>
17. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties to this Agreement and their
respective successors and permitted assigns, and no other person or entity
shall acquire or have any right under, or by virtue of, this Agreement.
The Company shall be entitled to assign this Agreement to any successor to
all or substantially all of its assets, rights and/or obligations; the
Advisor shall have the right to assign this Agreement to any Affiliate (as
such term is defined in Section 12.)
18. AMENDMENT, MODIFICATIONS AND WAIVER. This Agreement hereto
shall not be altered or otherwise amended in any respect, except pursuant
to an instrument in writing signed by the parties hereto. The waiver by a
party of a breach of any provisions of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
LASALLE HOTEL PROPERTIES
By: /s/ JON E. BORTZ
______________________________
Name: Jon E. Bortz
Title: President
LASALLE HOTEL
OPERATING PARTNERSHIP, L.P.
By: LASALLE HOTEL PROPERTIES
its general partner
By: /s/ JON E. BORTZ
______________________________
Name: Jon E. Bortz
Title: President
LASALLE HOTEL ADVISORS, INC.
By: /s/ JON E. BORTZ
______________________________
Name: Jon E.Bortz
Title: President
EXHIBIT 10.3
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of April 29, 1998 by and between LaSalle Hotel
Properties, a Maryland real estate investment trust (the "Company"), and
the holders of Units listed on SCHEDULE A hereto and each of the permitted
assignees thereof (individually, a "Holder").
WHEREAS, on the date hereof, the Holders are receiving units of
limited partnership interest ("Units") in LaSalle Hotel Operating
Partnership, L.P. (the "Partnership");
WHEREAS, in connection therewith, the Company has agreed to
grant to Holders the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, hereby agree as follows:
SECTION 1. REGISTRATION RIGHTS
If Holder receives common shares of beneficial interests
("Common Shares") of the Company upon redemption of Units (the "Redemption
Shares") pursuant to the terms of the agreement of limited partnership of
the Partnership, as amended (the "Partnership Agreement"), the Company
shall register the Redemption Shares for sale by the Holder, subject to the
terms and conditions set forth herein (the "Registration Rights").
1.1 DEMAND REGISTRATION RIGHTS.
1.1(a) REGISTRATION PROCEDURE. Subject to Sections
1.1(c) and 1.2 hereof, if Holder desires to exercise its Registration
Rights with respect to the Redemption Shares, Holder shall deliver to the
Company a written notice (a "Registration Notice") informing the Company of
such exercise and specifying the number of shares to be registered for
resale by Holder (such shares being referred to herein as the "Registrable
Securities"). Such notice may be given at any time on or after the date a
notice of redemption is delivered by Holder to the Partnership pursuant to
the Partnership Agreement, but must be given at least ten (10) business
days prior to the consummation of the sale of Registrable Securities. Upon
receipt of the Registration Notice, the Company, if it has not already
caused the Registrable Securities to be included as part of an existing
effective shelf registration statement and related prospectus (the "Shelf
Registration Statement") that the Company then has on file with the
Securities and Exchange Commission and which is available for use by Holder
in connection with the offer and sale of Registrable Securities (in which
event the Company shall be deemed to have satisfied its registration
obligation under this Section 1.1), will cause to be filed with the
Securities and Exchange Commission (the "SEC") as soon as reasonably
practicable (but no later than 30 days) after receiving the Registration
Notice a new registration statement and related prospectus pursuant to Rule
415 (or any successor provision) under the Securities Act of 1933, as
amended (the "Act") (a "New Registration Statement"), that complies as to
form in all material respects with applicable SEC rules providing for the
offer and sale by Holder of the Registrable Securities, and agrees (subject
to Section 1.2 hereof) to use its best efforts to cause such New
Registration Statement to be declared effective by the SEC as soon as
practicable. (As used herein, "Registration Statement" and "Prospectus"
refer to the Shelf Registration Statement and related prospectus (including
any preliminary prospectus and any supplement of any prospectus filed
pursuant to Rule 424 or Rule 430A) or the New Registration Statement and
related prospectus (including any preliminary prospectus and any supplement
of any prospectus filed pursuant to Rule 424 or Rule 430A), whichever is
<PAGE>
utilized by the Company to satisfy Holder's Registration Rights pursuant to
this Section 1, including in each case any documents incorporated therein
by reference). Holder agrees to provide in a timely manner information
regarding the proposed distribution by Holder of the Registrable Securities
and such other information reasonably requested by the Company in
connection with the preparation of and for inclusion in the Registration
Statement. The Company agrees (subject to Section 1.2 hereof) to use its
best efforts to keep the Registration Statement effective (including the
preparation and filing of any amendments and supplements necessary for that
purpose) until the earlier of (i) the date on which Holder consummates the
sale of all of the Registrable Securities registered under the Registration
Statement, or (ii) the date on which all of the Registrable Securities are
eligible for sale by Holder pursuant to Rule 144(k) (or any successor
provision) or in a single transaction pursuant to Rule 144(e) (or any
successor provision) under the Securities Act of 1933, as amended (the
"Act") provided that Rule 144 is then available for offers and sales of the
Registrable Securities by Holder. The Company agrees to provide to Holder
a reasonable number of copies of the final Prospectus and any amendments or
supplements thereto.
1.1(b) OFFERS AND SALES. All offers and sales by Holder
under the Registration Statement referred to in this Section 1.1 shall be
completed within the period during which the Registration Statement is
required to remain effective pursuant to Section 1.1(a), and upon
expiration of such period Holder will not offer or sell any Registrable
Securities under the Registration Statement. If directed by the Company,
Holder will return all undistributed copies of the Prospectus in its
possession upon the expiration of such period.
1.1(c) LIMITATIONS ON REGISTRATION RIGHTS. Each
exercise of a Registration Right shall be with respect to a minimum of the
lesser of (i) Fifty Thousand (50,000) Common Shares or (ii) the total
number of Redemption Shares held by Holder at such time plus the number of
Redemption Shares that may be issued upon redemption of Units then held by
Holder. The right of Holder to deliver a Registration Notice commences
upon the date a Holder is permitted to redeem Units pursuant to the
Partnership Agreement. The right of Holder to deliver a Registration
Notice shall expire on the date on which all of the Redemption Shares held
by Holder or issuable upon redemption of Units held by Holder are eligible
for sale pursuant to Rule 144(k) (or any successor provision). The
Registration Rights granted pursuant to this Section 1.1 may not be
exercised in connection with any underwritten public offering by the
Company or by Holder without the prior written consent of the Company.
1.2 SUSPENSION OF OFFERING. Upon receipt of notice from the
Company, either before or after a Holder has delivered a Registration
Notice, that a negotiation or consummation of a transaction by the Company
or its subsidiaries is pending or an event has occurred, which negotiation,
consummation or event would require additional disclosure by the Company in
the Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the nondisclosure
of which in the Registration Statement would, in the reasonable opinion of
counsel to the Company, cause the Registration Statement to fail to comply
with applicable disclosure requirements (a "Materiality Notice"), Holder
agrees that it will immediately discontinue offers and sales of the
Registrable Securities under the Registration Statement until Holder
receives copies of a supplemented or amended Prospectus that corrects the
misstatement(s) or omission(s) referred to above; provided, that the
Company may require the Holder to suspend such offers and sales for such
reason for no more than sixty (60) days after delivery of the Materiality
Notice at any one time (the "Suspension Period"). If so directed by the
Company, Holder will deliver to the Company all copies of the Prospectus
covering the Registrable Securities current at the time of receipt of such
notice. The Company shall take all actions necessary (including the
preparation of any amendment to the Registration Statement or supplement to
the Prospectus such that immediately following the earlier of (i) the
public disclosure of the information giving rise to such Materiality Notice
or (ii) the end of the Suspension Period, the Registration Statement is
available for offers and sales of the Registrable Securities.
<PAGE>
1.3 EXPENSES. The Company shall pay all expenses incident to
the performance by it of its registration obligations under this Section 1,
including (i) all stock exchange, SEC and state securities registration,
listing and filing fees, (ii) all expenses incurred in connection with the
preparation, printing and distributing of the Registration Statement and
Prospectus, and (iii) fees and disbursements of counsel for the Company and
of the independent public accountants of the Company. Holder shall be
responsible for the payment of any brokerage and sales commissions, fees
and disbursements of Holder's counsel, and any transfer taxes relating to
the sale or disposition of the Registrable Securities by Holder.
1.4 QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Registrable Securities by the time the
applicable Registration Statement is declared effective by the SEC under
all applicable state securities or "blue sky" laws of such jurisdictions as
Holder shall reasonably request in writing, to keep each such registration
or qualification effective during the period such Registration Statement is
required to be kept effective or during the period offers or sales are
being made by Holder after delivery of a Registration Notice to the
Company, whichever is shorter, and to do any and all other acts and things
which may be reasonably necessary or advisable to enable Holder to
consummate the disposition in each such jurisdiction of the Registrable
Securities owned by Holder; provided, however, that the Company shall not
be required to (x) qualify generally to do business in any jurisdiction or
to register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Section 1.1, (y) subject
itself to taxation in any such jurisdiction, or (z) submit to the general
service of process in any such jurisdiction.
2. INDEMNIFICATION; PARTNERSHIP
2.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as follows:
(a) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto) pursuant
to which the Registrable Securities were registered under the Act,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto), including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or any violation
by the Company of the Act, the Exchange Act or any state securities laws
applicable to the Company and relating to any action or inaction required
of the Company in connection with the registration or qualification of the
Registrable Securities.
(b) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is effected
with the written consent of the Company which shall not be unreasonably
withheld or delayed or otherwise in accordance with Section 2.3; and
<PAGE>
(c) against any and all expense whatsoever, as
incurred (including reasonable fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, in each case whether or not a party, or any
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (a) or (b) above;
provided, however, that the indemnity provided pursuant to this Section 2.1
does not apply to any Holder with respect to any loss, liability, claim,
damage or expense to the extent arising out of (i) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by such
Holder expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto), or
(ii) such Holder's failure to deliver an amended or supplemented Prospectus
if such loss, liability, claim, damage or expense would not have arisen had
such delivery occurred and the Company had previously provided to the
Holder such amended or supplemental Prospectus for use in connection with
the offer and sale of the Registrable Securities.
2.2 INDEMNIFICATION BY HOLDER. Holder (and each permitted
assignee of Holder, on a several basis) agrees to indemnify and hold
harmless the Company, and each of its directors and officers (including
each director and officer of the Company who signed a Registration
Statement), and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, as follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of Holder which shall not be unreasonably withheld or
delayed or otherwise in accordance with Section 2.3; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
<PAGE>
provided, however, that the indemnity provided pursuant to this Section 2.1
shall only apply with respect to any loss, liability, claim, damage or
expense to the extent arising out of (i) any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by Holder
expressly for use in the Registration Statement (or any amendment thereto)
or the Prospectus (or any amendment or supplement thereto), or (ii)
Holder's failure to deliver an amended or supplemental Prospectus if such
loss, liability, claim, damage or expense would not have arisen had such
delivery occurred and the Company had previously provided to the Holder
such amended or supplemented Prospectus for use in connection with the
offer and sale of the Registrable Securities. Notwithstanding the
provisions of this Section 2.2, Holder and any permitted assignee shall not
be required to indemnify the Company, its officers, directors or control
persons with respect to any aggregate amount in excess of the amount of the
total proceeds received by Holder or such permitted assignee, as the case
may be, from sales of the Registrable Securities of Holder giving rise to
such indemnification obligation, and no Holder shall be liable under this
Section 2.2 for any statements or omissions of any other Holder.
2.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. The indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify the indemnifying party (i)
shall not relieve it from any liability which it may have under the
indemnity agreement provided in Section 2.1 or 2.2 above, unless and to the
extent it did not otherwise learn of such action and the lack of notice by
the indemnified party results in the forfeiture by the indemnifying party
of substantial rights and defenses, and (ii) shall not, in any event,
relieve the indemnifying party from any obligations to the indemnified
party other than the indemnification obligation provided under Section 2.1
or 2.2 above. If the indemnifying party so elects within a reasonable time
after receipt of such notice, the indemnifying party may assume the defense
of such action or proceeding at such indemnifying party's own expense with
counsel chosen by the indemnifying party and approved by the indemnified
party, which approval shall not be unreasonably withheld; provided,
however, that the indemnifying party will not settle any such action or
proceeding without the written consent of the indemnified party which shall
not be unreasonably withheld or delayed unless, as a condition to such
settlement, the indemnifying party secures the unconditional release of the
indemnified party; and provided further, that if the indemnified party
reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel
or that, upon advice of counsel, there may be legal defenses available to
it which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to
assume such defense and the indemnified party shall be entitled to separate
counsel at the indemnifying party's expense. If the indemnifying party is
not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel
shall be entitled to conduct the indemnifying party's defense and counsel
for the indemnified party shall be entitled to conduct the defense of the
indemnified party, it being understood that both such counsel will
cooperate with each other to conduct the defense of such action or
proceeding as efficiently as possible. If the indemnifying party is not so
entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence
of this paragraph, the indemnifying party will pay the reasonable fees and
expenses of counsel for the indemnified party. In such event, however, the
indemnifying party will not be liable for any settlement effected without
the written consent of the indemnifying party which shall not be
unreasonably withheld or delayed. If an indemnifying party is entitled to
assume, and assumes, the defense of such action or proceeding in accordance
with this paragraph, the indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding.
<PAGE>
2.4 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this Section 2 is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms or is
otherwise unavailable to the indemnified party, the Company and Holder
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
the Company and Holder, (i) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and Holder on the other,
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault of but
also the relative benefits to the Company on the one hand and Holder on the
other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits to the
indemnifying party and indemnified party shall be determined by reference
to, among other things, the total proceeds received by the indemnifying
party and indemnified party in connection with the offering to which such
losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined
by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable
if contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.4, Holder
shall not be required to contribute any amount in excess of the amount of
the total proceeds received by Holder from sales of the Registrable
Securities, giving rise to such contribution obligation.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 2.4,
each person, if any, who controls Holder within the meaning of Section 15
of the Act shall have the same rights to contribution as Holder, and each
director of the Company, each officer of the Company who signed a
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
Section 3. RULE 144 COMPLIANCE
The Company covenants that it will use its best efforts to
timely file the reports required to be filed by the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended, so as
to enable each Holder to sell Registrable Securities pursuant to Rule 144
under the Securities Act. In connection with any sale, transfer or other
disposition by Holder of any Registrable Securities pursuant to Rule 144
under the Securities Act, the Company shall cooperate with Holder to
facilitate the timely preparation and delivery of certificates representing
<PAGE>
Registrable Securities to be sold and not bearing any Securities Act
legend, and enable certificates for such Registrable Securities to be for
such number of shares and registered in such names as Holder may reasonably
request at least ten (10) business days prior to any sale of Registrable
Securities hereunder.
Section 4. MISCELLANEOUS
4.1 INTEGRATION; AMENDMENT. This Agreement constitutes the
entire agreement among the parties hereto with respect to the matters set
forth herein and supersedes and renders of no force and effect all prior
oral or written agreements, commitments and understandings among the
parties with respect to the matters set forth herein. Except as otherwise
expressly provided in this Agreement, no amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Company and Holder.
4.2 WAIVERS. No waiver by a party hereto shall be effective
unless made in a written instrument duly executed by the party against whom
such waiver is sought to be enforced, and only to the extent set forth in
such instrument. Neither the waiver by any of the parties hereto of a
breach or a default under any of the provisions of this Agreement, nor the
failure of any of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any such
provisions, rights or privileges hereunder.
4.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and
the rights granted hereunder may not be assigned by Holder without the
written consent of the Company; provided, however, that Holder may assign
in part or in whole its rights and obligations hereunder, following at
least ten (10) days prior written notice to the Company, (i) to Holder's
direct or indirect partners or beneficiaries in connection with a
distribution of the Rights to its direct or indirect partners or
beneficiaries or to executives or employees, provided such proposed
assignees are then Accredited Investors as such term is defined in
Regulation D under the Securities Act, (ii) to a permitted transferee in
connection with a transfer of the Units in accordance with the terms of the
Partnership Agreement, and (iii) to a third party in connection with a
transfer of Units as security for or in satisfaction of obligations of any
partner of Holder, if in the case of (i), (ii) and (iii) above, such
persons or such third party agree in writing to be bound by all of the
provisions hereof. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of all of the parties
hereto.
4.4 BURDEN AND BENEFIT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, personal and legal representatives, successors and, subject to
Section 4.3 above, assigns.
<PAGE>
4.5 NOTICES. All notices called for under this Agreement
shall be in writing and shall be deemed given upon receipt if delivered
personally or by facsimile transmission and followed promptly by mail, or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth opposite their names in
Schedule A hereto, or to any other address or addressee as any party
entitled to receive notice under this Agreement shall designate, from time
to time, to others in the manner provided in this Section 4.5 for the
service of notices; provided, however, that notices of a change of address
shall be effective only upon receipt thereof. Any notice delivered to the
party hereto to whom it is addressed shall be deemed to have been given and
received on the day it was received; provided, however, that if such day is
not a business day then the notice shall be deemed to have been given and
received on the business day next following such day. Any notice sent by
facsimile transmission shall be deemed to have been given and received on
the business day next following the transmission.
4.6 SPECIFIC PERFORMANCE. The parties hereto acknowledge
that the obligations undertaken by them hereunder are unique and that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall
be entitled to (i) compel specific performance of the obligations,
covenants and agreements of any other party under this Agreement in
accordance with the terms and conditions of this Agreement and (ii) obtain
preliminary injunctive relief to secure specific performance and to prevent
a breach or contemplated breach of this Agreement in any court of the
United States or any State thereof having jurisdiction.
4.7 GOVERNING LAW. This Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating
thereto, shall be governed by and construed in accordance with the laws of
the State of New York, but not including the choice of law rules thereof.
4.8 HEADINGS. Section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any
way define or affect the meaning, construction or scope of any of the
provisions hereof.
4.9 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the person or entity may require.
4.10 EXECUTION IN COUNTERPARTS. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It
shall not be necessary that the signature of or on behalf of each party
appears on each counterpart, but it shall be sufficient that the signature
of or on behalf of each party appears on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It
shall not be necessary in any proof of this Agreement to produce or account
for more than a number of counterparts containing the respective signatures
of or on behalf of all of the Parties.
<PAGE>
4.11 SEVERABILITY. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the
limit of validity prescribed by law, then the obligation to be fulfilled
shall be reduced to the limit of such validity; and if any clause or
provision contained in this Agreement operates or would operate to
invalidate this Agreement, in whole or in part, then such clause or
provision only shall be held ineffective, as though not herein contained,
and the remainder of this Agreement shall remain operative and in full
force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first
hereinabove set forth.
COMPANY:
LaSalle Hotel Properties
Address: By: /s/ MICHAEL D. BARNELLO
220 East 42nd Street Michael D. Barnello
New York, New York 10017 Senior Vice President
HOLDERS:
Radisson Group, Inc.
Address: By: /s/ MICHAEL D. BARNELLO
12755 State Highway 55 Michael D. Barnello
Minneapolis, Minnesota 55402 Attorney-in-fact
Outrigger Lodging Services
Address: By: /s/ MICHAEL D. BARNELLO
16000 Ventura Boulevard Michael D. Barnello
Encino, California 91436 Attorney-in-fact
Beachside Hospitality, Inc.
Address: By: /s/ MICHAEL D. BARNELLO
c/o Durbin Companies, Inc. Michael D. Barnello
1420 Beverly Road Attorney-in-fact
McLean, Virginia 22101
LaSalle Plaza Park Limited Partnership
Address: By: /s/ MICHAEL D. BARNELLO
220 East 42nd Street Michael D. Barnello
New York, New York 10017 Attorney-in-fact
LaSalle LRP Bloomington Limited Partnership
Address: /s/ MICHAEL D. BARNELLO
220 East 42nd Street By: Michael D. Barnello
New York, New York 10017
LaSalle LRP Dallas Hotel Limited Partnership
Address: By: /s/ MICHAEL D. BARNELLO
220 East 42nd Street Michael D. Barnello
New York, New York 10017
<PAGE>
LaSalle LRP New Orleans Hotel Limited
Partnership
Address: /s/ MICHAEL D. BARNELLO
220 East 42nd Street By: Michael D. Barnello
New York, New York 10017
LaSalle LRP Key West Hotel Investors Limited
Partnership
Address: /s/ MICHAEL D. BARNELLO
220 East 42nd Street By: Michael D. Barnello
New York, New York 10017
LaSalle Le Montrose Limited Partnership
Address: /s/ MICHAEL D. BARNELLO
220 East 42nd Street By: Michael D. Barnello
New York, New York 1001
LaSalle Sabal Plaza Limited Partnership
Address: /s/ MICHAEL D. BARNELLO
220 East 42nd Street By: Michael D. Barnello
New York, New York 10017
LaSalle Omaha Hotel Investors Limited
Partnership
Address: /s/ MICHAEL D. BARNELLO
220 East 42nd Street By: Michael D. Barnello
New York, New York 10017
EXHIBIT 10.4
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of April 29, 1998 by and between LaSalle Hotel
Properties, a Maryland real estate investment trust (the "Company"), and
the holders of Units listed on SCHEDULE A hereto and each of the permitted
assignees thereof (individually, a "Holder").
WHEREAS, on the date hereof, the Holders are receiving units of
limited partnership interest ("Units") in LaSalle Hotel Operating
Partnership, L.P. (the "Partnership");
WHEREAS, in connection therewith, the Company has agreed to
grant to Holders the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, hereby agree as follows:
SECTION 1. REGISTRATION RIGHTS
If Holder receives common shares of beneficial interests
("Common Shares") of the Company upon redemption of Units (the "Redemption
Shares") pursuant to the terms of the agreement of limited partnership of
the Partnership, as amended (the "Partnership Agreement"), the Company
shall register the Redemption Shares for sale by the Holder, subject to the
terms and conditions set forth herein (the "Registration Rights").
1.1 DEMAND REGISTRATION RIGHTS.
1.1(a) REGISTRATION PROCEDURE. Subject to Sections
1.1(c) and 1.2 hereof, if Holder desires to exercise its Registration
Rights with respect to the Redemption Shares, Holder shall deliver to the
Company a written notice (a "Registration Notice") informing the Company of
such exercise and specifying the number of shares to be registered for
resale by Holder (such shares being referred to herein as the "Registrable
Securities"). Such notice may be given at any time on or after the date a
notice of redemption is delivered by Holder to the Partnership pursuant to
the Partnership Agreement, but must be given at least ten (10) business
days prior to the consummation of the sale of Registrable Securities. Upon
receipt of the Registration Notice, the Company, if it has not already
caused the Registrable Securities to be included as part of an existing
effective shelf registration statement and related prospectus (the "Shelf
Registration Statement") that the Company then has on file with the
Securities and Exchange Commission and which is available for use by Holder
in connection with the offer and sale of Registrable Securities (in which
event the Company shall be deemed to have satisfied its registration
obligation under this Section 1.1), will cause to be filed with the
Securities and Exchange Commission (the "SEC") as soon as reasonably
practicable (but no later than 30 days) after receiving the Registration
Notice a new registration statement and related prospectus pursuant to Rule
415 (or any successor provision) under the Securities Act of 1933, as
amended (the "Act") (a "New Registration Statement"), that complies as to
form in all material respects with applicable SEC rules providing for the
offer and sale by Holder of the Registrable Securities, and agrees (subject
to Section 1.2 hereof) to use its best efforts to cause such New
Registration Statement to be declared effective by the SEC as soon as
practicable. (As used herein, "Registration Statement" and "Prospectus"
refer to the Shelf Registration Statement and related prospectus (including
any preliminary prospectus and any supplement of any prospectus filed
pursuant to Rule 424 or Rule 430A) or the New Registration Statement and
related prospectus (including any preliminary prospectus and any supplement
of any prospectus filed pursuant to Rule 424 or Rule 430A), whichever is
utilized by the Company to satisfy Holder's Registration Rights pursuant to
<PAGE>
this Section 1, including in each case any documents incorporated therein
by reference). Holder agrees to provide in a timely manner information
regarding the proposed distribution by Holder of the Registrable Securities
and such other information reasonably requested by the Company in
connection with the preparation of and for inclusion in the Registration
Statement. The Company agrees (subject to Section 1.2 hereof) to use its
best efforts to keep the Registration Statement effective (including the
preparation and filing of any amendments and supplements necessary for that
purpose) until the earlier of (i) the date on which Holder consummates the
sale of all of the Registrable Securities registered under the Registration
Statement, or (ii) the date on which all of the Registrable Securities are
eligible for sale by Holder pursuant to Rule 144(k) (or any successor
provision) or in a single transaction pursuant to Rule 144(e) (or any
successor provision) under the Securities Act of 1933, as amended (the
"Act") provided that Rule 144 is then available for offers and sales of the
Registrable Securities by Holder. The Company agrees to provide to Holder
a reasonable number of copies of the final Prospectus and any amendments or
supplements thereto.
1.1(b) OFFERS AND SALES. All offers and sales by Holder
under the Registration Statement referred to in this Section 1.1 shall be
completed within the period during which the Registration Statement is
required to remain effective pursuant to Section 1.1(a), and upon
expiration of such period Holder will not offer or sell any Registrable
Securities under the Registration Statement. If directed by the Company,
Holder will return all undistributed copies of the Prospectus in its
possession upon the expiration of such period.
1.1(c) LIMITATIONS ON REGISTRATION RIGHTS. Each
exercise of a Registration Right shall be with respect to a minimum of the
lesser of (i) Fifty Thousand (50,000) Common Shares or (ii) the total
number of Redemption Shares held by Holder at such time plus the number of
Redemption Shares that may be issued upon redemption of Units then held by
Holder. The right of Holder to deliver a Registration Notice commences
upon the date a Holder is permitted to redeem Units pursuant to the
Partnership Agreement. The right of Holder to deliver a Registration
Notice shall expire on the date on which all of the Redemption Shares held
by Holder or issuable upon redemption of Units held by Holder are eligible
for sale pursuant to Rule 144(k) (or any successor provision). The
Registration Rights granted pursuant to this Section 1.1 may not be
exercised in connection with any underwritten public offering by the
Company or by Holder without the prior written consent of the Company.
1.2 SUSPENSION OF OFFERING. Upon receipt of notice from the
Company, either before or after a Holder has delivered a Registration
Notice, that a negotiation or consummation of a transaction by the Company
or its subsidiaries is pending or an event has occurred, which negotiation,
consummation or event would require additional disclosure by the Company in
the Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the nondisclosure
of which in the Registration Statement would, in the reasonable opinion of
counsel to the Company, cause the Registration Statement to fail to comply
with applicable disclosure requirements (a "Materiality Notice"), Holder
agrees that it will immediately discontinue offers and sales of the
Registrable Securities under the Registration Statement until Holder
receives copies of a supplemented or amended Prospectus that corrects the
misstatement(s) or omission(s) referred to above; provided, that the
Company may require the Holder to suspend such offers and sales for such
reason for no more than sixty (60) days after delivery of the Materiality
Notice at any one time (the "Suspension Period"). If so directed by the
Company, Holder will deliver to the Company all copies of the Prospectus
covering the Registrable Securities current at the time of receipt of such
notice. The Company shall take all actions necessary (including the
preparation of any amendment to the Registration Statement or supplement to
the Prospectus such that immediately following the earlier of (i) the
public disclosure of the information giving rise to such Materiality Notice
or (ii) the end of the Suspension Period, the Registration Statement is
available for offers and sales of the Registrable Securities.
<PAGE>
1.3 EXPENSES. The Company shall pay all expenses incident to
the performance by it of its registration obligations under this Section 1,
including (i) all stock exchange, SEC and state securities registration,
listing and filing fees, (ii) all expenses incurred in connection with the
preparation, printing and distributing of the Registration Statement and
Prospectus, and (iii) fees and disbursements of counsel for the Company and
of the independent public accountants of the Company. Holder shall be
responsible for the payment of any brokerage and sales commissions, fees
and disbursements of Holder's counsel, and any transfer taxes relating to
the sale or disposition of the Registrable Securities by Holder.
1.4 QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Registrable Securities by the time the
applicable Registration Statement is declared effective by the SEC under
all applicable state securities or "blue sky" laws of such jurisdictions as
Holder shall reasonably request in writing, to keep each such registration
or qualification effective during the period such Registration Statement is
required to be kept effective or during the period offers or sales are
being made by Holder after delivery of a Registration Notice to the
Company, whichever is shorter, and to do any and all other acts and things
which may be reasonably necessary or advisable to enable Holder to
consummate the disposition in each such jurisdiction of the Registrable
Securities owned by Holder; provided, however, that the Company shall not
be required to (x) qualify generally to do business in any jurisdiction or
to register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Section 1.1, (y) subject
itself to taxation in any such jurisdiction, or (z) submit to the general
service of process in any such jurisdiction.
2. INDEMNIFICATION; PARTNERSHIP
2.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading or any violation by the Company
of the Act, the Exchange Act or any state securities laws applicable to the
Company and relating to any action or inaction required of the Company in
connection with the registration or qualification of the Registrable
Securities.
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company which shall not be unreasonably withheld
or delayed or otherwise in accordance with Section 2.3; and
<PAGE>
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 2.1
does not apply to any Holder with respect to any loss, liability, claim,
damage or expense to the extent arising out of (i) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by such
Holder expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto), or
(ii) such Holder's failure to deliver an amended or supplemented Prospectus
if such loss, liability, claim, damage or expense would not have arisen had
such delivery occurred and the Company had previously provided to the
Holder such amended or supplemental Prospectus for use in connection with
the offer and sale of the Registrable Securities.
2.2 INDEMNIFICATION BY HOLDER. Holder (and each permitted
assignee of Holder, on a several basis) agrees to indemnify and hold
harmless the Company, and each of its directors and officers (including
each director and officer of the Company who signed a Registration
Statement), and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, as follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of Holder which shall not be unreasonably withheld or
delayed or otherwise in accordance with Section 2.3; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
<PAGE>
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 2.1
shall only apply with respect to any loss, liability, claim, damage or
expense to the extent arising out of (i) any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by Holder
expressly for use in the Registration Statement (or any amendment thereto)
or the Prospectus (or any amendment or supplement thereto), or (ii)
Holder's failure to deliver an amended or supplemental Prospectus if such
loss, liability, claim, damage or expense would not have arisen had such
delivery occurred and the Company had previously provided to the Holder
such amended or supplemented Prospectus for use in connection with the
offer and sale of the Registrable Securities. Notwithstanding the
provisions of this Section 2.2, Holder and any permitted assignee shall not
be required to indemnify the Company, its officers, directors or control
persons with respect to any aggregate amount in excess of the amount of the
total proceeds received by Holder or such permitted assignee, as the case
may be, from sales of the Registrable Securities of Holder giving rise to
such indemnification obligation, and no Holder shall be liable under this
Section 2.2 for any statements or omissions of any other Holder.
2.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. The indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify the indemnifying party (i)
shall not relieve it from any liability which it may have under the
indemnity agreement provided in Section 2.1 or 2.2 above, unless and to the
extent it did not otherwise learn of such action and the lack of notice by
the indemnified party results in the forfeiture by the indemnifying party
of substantial rights and defenses, and (ii) shall not, in any event,
relieve the indemnifying party from any obligations to the indemnified
party other than the indemnification obligation provided under Section 2.1
or 2.2 above. If the indemnifying party so elects within a reasonable time
after receipt of such notice, the indemnifying party may assume the defense
of such action or proceeding at such indemnifying party's own expense with
counsel chosen by the indemnifying party and approved by the indemnified
party, which approval shall not be unreasonably withheld; provided,
however, that the indemnifying party will not settle any such action or
proceeding without the written consent of the indemnified party which shall
not be unreasonably withheld or delayed unless, as a condition to such
settlement, the indemnifying party secures the unconditional release of the
indemnified party; and provided further, that if the indemnified party
reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel
or that, upon advice of counsel, there may be legal defenses available to
it which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to
assume such defense and the indemnified party shall be entitled to separate
counsel at the indemnifying party's expense. If the indemnifying party is
not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel
shall be entitled to conduct the indemnifying party's defense and counsel
for the indemnified party shall be entitled to conduct the defense of the
indemnified party, it being understood that both such counsel will
cooperate with each other to conduct the defense of such action or
proceeding as efficiently as possible. If the indemnifying party is not so
entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence
of this paragraph, the indemnifying party will pay the reasonable fees and
expenses of counsel for the indemnified party. In such event, however, the
indemnifying party will not be liable for any settlement effected without
the written consent of the indemnifying party which shall not be
unreasonably withheld or delayed. If an indemnifying party is entitled to
assume, and assumes, the defense of such action or proceeding in accordance
<PAGE>
with this paragraph, the indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding.
2.4 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this Section 2 is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms or is
otherwise unavailable to the indemnified party, the Company and Holder
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
the Company and Holder, (i) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and Holder on the other,
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault of but
also the relative benefits to the Company on the one hand and Holder on the
other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits to the
indemnifying party and indemnified party shall be determined by reference
to, among other things, the total proceeds received by the indemnifying
party and indemnified party in connection with the offering to which such
losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined
by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable
if contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.4, Holder
shall not be required to contribute any amount in excess of the amount of
the total proceeds received by Holder from sales of the Registrable
Securities, giving rise to such contribution obligation.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 2.4,
each person, if any, who controls Holder within the meaning of Section 15
of the Act shall have the same rights to contribution as Holder, and each
director of the Company, each officer of the Company who signed a
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
SECTION 3. RULE 144 COMPLIANCE
The Company covenants that it will use its best efforts to
timely file the reports required to be filed by the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended, so as
to enable each Holder to sell Registrable Securities pursuant to Rule 144
under the Securities Act. In connection with any sale, transfer or other
disposition by Holder of any Registrable Securities pursuant to Rule 144
under the Securities Act, the Company shall cooperate with Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act
legend, and enable certificates for such Registrable Securities to be for
such number of shares and registered in such names as Holder may reasonably
request at least ten (10) business days prior to any sale of Registrable
Securities hereunder.
<PAGE>
SECTION 4. MISCELLANEOUS
4.1 INTEGRATION; AMENDMENT. This Agreement constitutes the
entire agreement among the parties hereto with respect to the matters set
forth herein and supersedes and renders of no force and effect all prior
oral or written agreements, commitments and understandings among the
parties with respect to the matters set forth herein. Except as otherwise
expressly provided in this Agreement, no amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Company and Holder.
4.2 WAIVERS. No waiver by a party hereto shall be effective
unless made in a written instrument duly executed by the party against whom
such waiver is sought to be enforced, and only to the extent set forth in
such instrument. Neither the waiver by any of the parties hereto of a
breach or a default under any of the provisions of this Agreement, nor the
failure of any of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any such
provisions, rights or privileges hereunder.
4.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and
the rights granted hereunder may not be assigned by Holder without the
written consent of the Company; provided, however, that Holder may assign
in part or in whole its rights and obligations hereunder, following at
least ten (10) days prior written notice to the Company, (i) to Holder's
direct or indirect partners or beneficiaries in connection with a
distribution of the Rights to its direct or indirect partners or
beneficiaries or to executives or employees, provided such proposed
assignees are then Accredited Investors as such term is defined in
Regulation D under the Securities Act, (ii) to a permitted transferee in
connection with a transfer of the Units in accordance with the terms of the
Partnership Agreement, and (iii) to a third party in connection with a
transfer of Units as security for or in satisfaction of obligations of any
partner of Holder, if in the case of (i), (ii) and (iii) above, such
persons or such third party agree in writing to be bound by all of the
provisions hereof. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of all of the parties
hereto.
4.4 BURDEN AND BENEFIT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, personal and legal representatives, successors and, subject to
Section 4.3 above, assigns.
4.5 NOTICES. All notices called for under this Agreement
shall be in writing and shall be deemed given upon receipt if delivered
personally or by facsimile transmission and followed promptly by mail, or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth opposite their names in
Schedule A hereto, or to any other address or addressee as any party
entitled to receive notice under this Agreement shall designate, from time
to time, to others in the manner provided in this Section 4.5 for the
service of notices; provided, however, that notices of a change of address
shall be effective only upon receipt thereof. Any notice delivered to the
party hereto to whom it is addressed shall be deemed to have been given and
received on the day it was received; provided, however, that if such day is
not a business day then the notice shall be deemed to have been given and
received on the business day next following such day. Any notice sent by
facsimile transmission shall be deemed to have been given and received on
the business day next following the transmission.
4.6 SPECIFIC PERFORMANCE. The parties hereto acknowledge
that the obligations undertaken by them hereunder are unique and that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall
<PAGE>
be entitled to (i) compel specific performance of the obligations,
covenants and agreements of any other party under this Agreement in
accordance with the terms and conditions of this Agreement and (ii) obtain
preliminary injunctive relief to secure specific performance and to prevent
a breach or contemplated breach of this Agreement in any court of the
United States or any State thereof having jurisdiction.
4.7 GOVERNING LAW. This Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating
thereto, shall be governed by and construed in accordance with the laws of
the State of New York, but not including the choice of law rules thereof.
4.8 HEADINGS. Section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any
way define or affect the meaning, construction or scope of any of the
provisions hereof.
4.9 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the person or entity may require.
4.10 EXECUTION IN COUNTERPARTS. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It
shall not be necessary that the signature of or on behalf of each party
appears on each counterpart, but it shall be sufficient that the signature
of or on behalf of each party appears on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It
shall not be necessary in any proof of this Agreement to produce or account
for more than a number of counterparts containing the respective signatures
of or on behalf of all of the Parties.
4.11 SEVERABILITY. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the
limit of validity prescribed by law, then the obligation to be fulfilled
shall be reduced to the limit of such validity; and if any clause or
provision contained in this Agreement operates or would operate to
invalidate this Agreement, in whole or in part, then such clause or
provision only shall be held ineffective, as though not herein contained,
and the remainder of this Agreement shall remain operative and in full
force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first
hereinabove set forth.
COMPANY:
LaSalle Hotel Properties
Address: By: /s/ JON E. BORTZ
220 East 42nd Street Jon E. Bortz
New York, New York 10017 President
HOLDERS:
SRP Seaview, L.P.
By: SRA Investment Property GP II, Inc.
its general partner
Address:
650 Madison Avenue /s/ EDWARD KIRTMAN
New York, New York 10022 Edward Kirtman
<PAGE>
RAD Bloom, L.P.
By: SRA GP, LLC,
its general partner
Address:
650 Madison Avenue /s/ EDWARD KIRTMAN
New York, New York 10022 Edward Kirtman
Dallas Mer Hotel, L.P.
By: SRA Investment Property GP II, Inc.
its general partner
Address:
650 Madison Avenue /s/ EDWARD KIRTMAN
New York, New York 10022 Edward Kirtman
New Orleans Hospitality, L.P.
By: SRA Investment Property GP II, Inc.
its general partner
Address:
650 Madison Avenue /s/ EDWARD KIRTMAN
New York, New York 10022 Edward Kirtman
Key West Property, L.P.
By: SRA Investment Property GP II, Inc.
its general partner
Address:
650 Madison Avenue /s/ EDWARD KIRTMAN
New York, New York 10022 Edward Kirtman
NEB Hotel, L.P.
By: SRA Investment Property GP II, Inc.
its general partner
Address:
650 Madison Avenue /s/ EDWARD KIRTMAN
New York, New York 10022 Edward Kirtman
EXHIBIT 10.5
- ------------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of April 29, 1998 by and between LaSalle Hotel
Properties, a Maryland real estate investment trust (the "Company"), and
the holders of Units listed on SCHEDULE A hereto and each of the permitted
assignees thereof (individually, a "Holder").
WHEREAS, on the date hereof, the Holders are receiving units of
limited partnership interest ("Units") in LaSalle Hotel Operating
Partnership, L.P. (the "Partnership");
WHEREAS, in connection therewith, the Company has agreed to
grant to Holders the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, hereby agree as follows:
SECTION 1. REGISTRATION RIGHTS
If Holder receives common shares of beneficial interests
("Common Shares") of the Company upon redemption of Units (the "Redemption
Shares") pursuant to the terms of the agreement of limited partnership of
the Partnership, as amended (the "Partnership Agreement"), the Company
shall register the Redemption Shares for sale by the Holder, subject to the
terms and conditions set forth herein (the "Registration Rights").
1.1 DEMAND REGISTRATION RIGHTS.
1.1(a) REGISTRATION PROCEDURE. Subject to Sections
1.1(c) and 1.2 hereof, if Holder desires to exercise its Registration
Rights with respect to the Redemption Shares, Holder shall deliver to the
Company a written notice (a "Registration Notice") informing the Company of
such exercise and specifying the number of shares to be registered for
resale by Holder (such shares being referred to herein as the "Registrable
Securities"). Such notice may be given at any time on or after the date a
notice of redemption is delivered by Holder to the Partnership pursuant to
the Partnership Agreement, but must be given at least ten (10) business
days prior to the consummation of the sale of Registrable Securities. Upon
receipt of the Registration Notice, the Company, if it has not already
caused the Registrable Securities to be included as part of an existing
effective shelf registration statement and related prospectus (the "Shelf
Registration Statement") that the Company then has on file with the
Securities and Exchange Commission and which is available for use by Holder
in connection with the offer and sale of Registrable Securities (in which
event the Company shall be deemed to have satisfied its registration
obligation under this Section 1.1), will cause to be filed with the
Securities and Exchange Commission (the "SEC") as soon as reasonably
practicable (but no later than 30 days) after receiving the Registration
Notice a new registration statement and related prospectus pursuant to Rule
415 (or any successor provision) under the Securities Act of 1933, as
amended (the "Act") (a "New Registration Statement"), that complies as to
form in all material respects with applicable SEC rules providing for the
offer and sale by Holder of the Registrable Securities, and agrees (subject
to Section 1.2 hereof) to use its best efforts to cause such New
Registration Statement to be declared effective by the SEC as soon as
practicable. (As used herein, "Registration Statement" and "Prospectus"
refer to the Shelf Registration Statement and related prospectus (including
any preliminary prospectus and any supplement of any prospectus filed
pursuant to Rule 424 or Rule 430A) or the New Registration Statement and
related prospectus (including any preliminary prospectus and any supplement
of any prospectus filed pursuant to Rule 424 or Rule 430A), whichever is
utilized by the Company to satisfy Holder"s Registration Rights pursuant to
<PAGE>
this Section 1, including in each case any documents incorporated therein
by reference). Holder agrees to provide in a timely manner information
regarding the proposed distribution by Holder of the Registrable Securities
and such other information reasonably requested by the Company in
connection with the preparation of and for inclusion in the Registration
Statement. The Company agrees (subject to Section 1.2 hereof) to use its
best efforts to keep the Registration Statement effective (including the
preparation and filing of any amendments and supplements necessary for that
purpose) until the earlier of (i) the date on which Holder consummates the
sale of all of the Registrable Securities registered under the Registration
Statement, or (ii) the date on which all of the Registrable Securities are
eligible for sale by Holder pursuant to Rule 144(k) (or any successor
provision) or in a single transaction pursuant to Rule 144(e) (or any
successor provision) under the Securities Act of 1933, as amended (the
"Act") provided that Rule 144 is then available for offers and sales of the
Registrable Securities by Holder. The Company agrees to provide to Holder
a reasonable number of copies of the final Prospectus and any amendments or
supplements thereto.
1.1(b) OFFERS AND SALES. All offers and sales by Holder
under the Registration Statement referred to in this Section 1.1 shall be
completed within the period during which the Registration Statement is
required to remain effective pursuant to Section 1.1(a), and upon
expiration of such period Holder will not offer or sell any Registrable
Securities under the Registration Statement. If directed by the Company,
Holder will return all undistributed copies of the Prospectus in its
possession upon the expiration of such period.
1.1(c) LIMITATIONS ON REGISTRATION RIGHTS. Each
exercise of a Registration Right shall be with respect to a minimum of the
lesser of (i) Fifty Thousand (50,000) Common Shares or (ii) the total
number of Redemption Shares held by Holder at such time plus the number of
Redemption Shares that may be issued upon redemption of Units then held by
Holder. The right of Holder to deliver a Registration Notice commences
upon the date a Holder is permitted to redeem Units pursuant to the
Partnership Agreement. The right of Holder to deliver a Registration
Notice shall expire on the date on which all of the Redemption Shares held
by Holder or issuable upon redemption of Units held by Holder are eligible
for sale pursuant to Rule 144(k) (or any successor provision). The
Registration Rights granted pursuant to this Section 1.1 may not be
exercised in connection with any underwritten public offering by the
Company or by Holder without the prior written consent of the Company.
1.2 SUSPENSION OF OFFERING. Upon receipt of notice from the
Company, either before or after a Holder has delivered a Registration
Notice, that a negotiation or consummation of a transaction by the Company
or its subsidiaries is pending or an event has occurred, which negotiation,
consummation or event would require additional disclosure by the Company in
the Registration Statement of material information which the Company has a
BONA FIDE business purpose for keeping confidential and the nondisclosure
of which in the Registration Statement would, in the reasonable opinion of
counsel to the Company, cause the Registration Statement to fail to comply
with applicable disclosure requirements (a "Materiality Notice"), Holder
agrees that it will immediately discontinue offers and sales of the
Registrable Securities under the Registration Statement until Holder
receives copies of a supplemented or amended Prospectus that corrects the
misstatement(s) or omission(s) referred to above; PROVIDED, that the
Company may require the Holder to suspend such offers and sales for such
reason for no more than sixty (60) days after delivery of the Materiality
Notice at any one time (the "Suspension Period"). If so directed by the
Company, Holder will deliver to the Company all copies of the Prospectus
covering the Registrable Securities current at the time of receipt of such
notice. The Company shall take all actions necessary (including the
preparation of any amendment to the Registration Statement or supplement to
the Prospectus such that immediately following the earlier of (i) the
public disclosure of the information giving rise to such Materiality Notice
or (ii) the end of the Suspension Period, the Registration Statement is
available for offers and sales of the Registrable Securities.
<PAGE>
1.3 EXPENSES. The Company shall pay all expenses incident to
the performance by it of its registration obligations under this Section 1,
including (i) all stock exchange, SEC and state securities registration,
listing and filing fees, (ii) all expenses incurred in connection with the
preparation, printing and distributing of the Registration Statement and
Prospectus, and (iii) fees and disbursements of counsel for the Company and
of the independent public accountants of the Company. Holder shall be
responsible for the payment of any brokerage and sales commissions, fees
and disbursements of Holder's counsel, and any transfer taxes relating to
the sale or disposition of the Registrable Securities by Holder.
1.4 QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Registrable Securities by the time the
applicable Registration Statement is declared effective by the SEC under
all applicable state securities or "blue sky" laws of such jurisdictions as
Holder shall reasonably request in writing, to keep each such registration
or qualification effective during the period such Registration Statement is
required to be kept effective or during the period offers or sales are
being made by Holder after delivery of a Registration Notice to the
Company, whichever is shorter, and to do any and all other acts and things
which may be reasonably necessary or advisable to enable Holder to
consummate the disposition in each such jurisdiction of the Registrable
Securities owned by Holder; PROVIDED, HOWEVER, that the Company shall not
be required to (x) qualify generally to do business in any jurisdiction or
to register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Section 1.1, (y) subject
itself to taxation in any such jurisdiction, or (z) submit to the general
service of process in any such jurisdiction.
2. INDEMNIFICATION; PARTNERSHIP
2.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading or any violation by the Company
of the Act, the Exchange Act or any state securities laws applicable to the
Company and relating to any action or inaction required of the Company in
connection with the registration or qualification of the Registrable
Securities.
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company which shall not be unreasonably withheld
or delayed or otherwise in accordance with Section 2.3; and
<PAGE>
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 2.1
does not apply to any Holder with respect to any loss, liability, claim,
damage or expense to the extent arising out of (i) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by such
Holder expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto), or
(ii) such Holder's failure to deliver an amended or supplemented Prospectus
if such loss, liability, claim, damage or expense would not have arisen had
such delivery occurred and the Company had previously provided to the
Holder such amended or supplemental Prospectus for use in connection with
the offer and sale of the Registrable Securities.
2.2 INDEMNIFICATION BY HOLDER. Holder (and each permitted
assignee of Holder, on a several basis) agrees to indemnify and hold
harmless the Company, and each of its directors and officers (including
each director and officer of the Company who signed a Registration
Statement), and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, as follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of Holder which shall not be unreasonably withheld or
delayed or otherwise in accordance with Section 2.3; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
<PAGE>
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 2.1
shall only apply with respect to any loss, liability, claim, damage or
expense to the extent arising out of (i) any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by Holder
expressly for use in the Registration Statement (or any amendment thereto)
or the Prospectus (or any amendment or supplement thereto), or (ii)
Holder's failure to deliver an amended or supplemental Prospectus if such
loss, liability, claim, damage or expense would not have arisen had such
delivery occurred and the Company had previously provided to the Holder
such amended or supplemented Prospectus for use in connection with the
offer and sale of the Registrable Securities. Notwithstanding the
provisions of this Section 2.2, Holder and any permitted assignee shall not
be required to indemnify the Company, its officers, directors or control
persons with respect to any aggregate amount in excess of the amount of the
total proceeds received by Holder or such permitted assignee, as the case
may be, from sales of the Registrable Securities of Holder giving rise to
such indemnification obligation, and no Holder shall be liable under this
Section 2.2 for any statements or omissions of any other Holder.
2.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. The indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify the indemnifying party (i)
shall not relieve it from any liability which it may have under the
indemnity agreement provided in Section 2.1 or 2.2 above, unless and to the
extent it did not otherwise learn of such action and the lack of notice by
the indemnified party results in the forfeiture by the indemnifying party
of substantial rights and defenses, and (ii) shall not, in any event,
relieve the indemnifying party from any obligations to the indemnified
party other than the indemnification obligation provided under Section 2.1
or 2.2 above. If the indemnifying party so elects within a reasonable time
after receipt of such notice, the indemnifying party may assume the defense
of such action or proceeding at such indemnifying party's own expense with
counsel chosen by the indemnifying party and approved by the indemnified
party, which approval shall not be unreasonably withheld; PROVIDED,
HOWEVER, that the indemnifying party will not settle any such action or
proceeding without the written consent of the indemnified party which shall
not be unreasonably withheld or delayed unless, as a condition to such
settlement, the indemnifying party secures the unconditional release of the
indemnified party; and PROVIDED FURTHER, that if the indemnified party
reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel
or that, upon advice of counsel, there may be legal defenses available to
it which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to
assume such defense and the indemnified party shall be entitled to separate
counsel at the indemnifying party's expense. If the indemnifying party is
not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel
shall be entitled to conduct the indemnifying party's defense and counsel
for the indemnified party shall be entitled to conduct the defense of the
indemnified party, it being understood that both such counsel will
cooperate with each other to conduct the defense of such action or
proceeding as efficiently as possible. If the indemnifying party is not so
entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence
of this paragraph, the indemnifying party will pay the reasonable fees and
expenses of counsel for the indemnified party. In such event, however, the
indemnifying party will not be liable for any settlement effected without
the written consent of the indemnifying party which shall not be
unreasonably withheld or delayed. If an indemnifying party is entitled to
assume, and assumes, the defense of such action or proceeding in accordance
with this paragraph, the indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding.
<PAGE>
2.4 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this Section 2 is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms or is
otherwise unavailable to the indemnified party, the Company and Holder
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
the Company and Holder, (i) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and Holder on the other,
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault of but
also the relative benefits to the Company on the one hand and Holder on the
other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits to the
indemnifying party and indemnified party shall be determined by reference
to, among other things, the total proceeds received by the indemnifying
party and indemnified party in connection with the offering to which such
losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined
by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable
if contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.4, Holder
shall not be required to contribute any amount in excess of the amount of
the total proceeds received by Holder from sales of the Registrable
Securities, giving rise to such contribution obligation.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 2.4,
each person, if any, who controls Holder within the meaning of Section 15
of the Act shall have the same rights to contribution as Holder, and each
director of the Company, each officer of the Company who signed a
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
SECTION 3. RULE 144 COMPLIANCE
The Company covenants that it will use its best efforts to
timely file the reports required to be filed by the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended, so as
to enable each Holder to sell Registrable Securities pursuant to Rule 144
under the Securities Act. In connection with any sale, transfer or other
disposition by Holder of any Registrable Securities pursuant to Rule 144
under the Securities Act, the Company shall cooperate with Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act
legend, and enable certificates for such Registrable Securities to be for
such number of shares and registered in such names as Holder may reasonably
request at least ten (10) business days prior to any sale of Registrable
Securities hereunder.
<PAGE>
SECTION 4. MISCELLANEOUS
4.1 INTEGRATION; AMENDMENT. This Agreement constitutes the
entire agreement among the parties hereto with respect to the matters set
forth herein and supersedes and renders of no force and effect all prior
oral or written agreements, commitments and understandings among the
parties with respect to the matters set forth herein. Except as otherwise
expressly provided in this Agreement, no amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Company and Holder.
4.2 WAIVERS. No waiver by a party hereto shall be effective
unless made in a written instrument duly executed by the party against whom
such waiver is sought to be enforced, and only to the extent set forth in
such instrument. Neither the waiver by any of the parties hereto of a
breach or a default under any of the provisions of this Agreement, nor the
failure of any of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any such
provisions, rights or privileges hereunder.
4.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and
the rights granted hereunder may not be assigned by Holder without the
written consent of the Company; provided, however, that Holder may assign
in part or in whole its rights and obligations hereunder, following at
least ten (10) days prior written notice to the Company, (i) to Holder's
direct or indirect partners or beneficiaries in connection with a
distribution of the Rights to its direct or indirect partners or
beneficiaries or to executives or employees, provided such proposed
assignees are then Accredited Investors as such term is defined in
Regulation D under the Securities Act, (ii) to a permitted transferee in
connection with a transfer of the Units in accordance with the terms of the
Partnership Agreement, and (iii) to a third party in connection with a
transfer of Units as security for or in satisfaction of obligations of any
partner of Holder, if in the case of (i), (ii) and (iii) above, such
persons or such third party agree in writing to be bound by all of the
provisions hereof. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of all of the parties
hereto.
4.4 BURDEN AND BENEFIT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, personal and legal representatives, successors and, subject to
Section 4.3 above, assigns.
4.5 NOTICES. All notices called for under this Agreement
shall be in writing and shall be deemed given upon receipt if delivered
personally or by facsimile transmission and followed promptly by mail, or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth opposite their names in
Schedule A hereto, or to any other address or addressee as any party
entitled to receive notice under this Agreement shall designate, from time
to time, to others in the manner provided in this Section 4.5 for the
service of notices; provided, however, that notices of a change of address
shall be effective only upon receipt thereof. Any notice delivered to the
party hereto to whom it is addressed shall be deemed to have been given and
received on the day it was received; provided, however, that if such day is
not a business day then the notice shall be deemed to have been given and
received on the business day next following such day. Any notice sent by
facsimile transmission shall be deemed to have been given and received on
the business day next following the transmission.
4.6 SPECIFIC PERFORMANCE. The parties hereto acknowledge
that the obligations undertaken by them hereunder are unique and that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall
<PAGE>
be entitled to (i) compel specific performance of the obligations,
covenants and agreements of any other party under this Agreement in
accordance with the terms and conditions of this Agreement and (ii) obtain
preliminary injunctive relief to secure specific performance and to prevent
a breach or contemplated breach of this Agreement in any court of the
United States or any State thereof having jurisdiction.
4.7 GOVERNING LAW. This Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating
thereto, shall be governed by and construed in accordance with the laws of
the State of New York, but not including the choice of law rules thereof.
4.8 HEADINGS. Section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any
way define or affect the meaning, construction or scope of any of the
provisions hereof.
4.9 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the person or entity may require.
4.10 EXECUTION IN COUNTERPARTS. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It
shall not be necessary that the signature of or on behalf of each party
appears on each counterpart, but it shall be sufficient that the signature
of or on behalf of each party appears on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It
shall not be necessary in any proof of this Agreement to produce or account
for more than a number of counterparts containing the respective signatures
of or on behalf of all of the Parties.
4.11 SEVERABILITY. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the
limit of validity prescribed by law, then the obligation to be fulfilled
shall be reduced to the limit of such validity; and if any clause or
provision contained in this Agreement operates or would operate to
invalidate this Agreement, in whole or in part, then such clause or
provision only shall be held ineffective, as though not herein contained,
and the remainder of this Agreement shall remain operative and in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first
hereinabove set forth.
COMPANY:
Address: LaSalle Hotel Properties
220 East 42nd Street
New York, New York 10017 By: /s/ JON E. BORTZ
Jon E. Bortz
President
HOLDERS:
Address: Crosstown Asset Corp. I
c/o Cargill Financial Services
Corporation /s/ TIMOTHY S. CLARK
6000 Clearwater Drive By: Timothy S. Clark
Minnetonka, Minnesota 55343
EXHIBIT 10.6
_____________
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of April 29, 1998 by and between LaSalle Hotel
Properties, a Maryland real estate investment trust (the "Company"), and
the holders of Rights listed on SCHEDULE A hereto and each of the permitted
assignees thereof (individually, a "Holder").
WHEREAS, on the date hereof, the Holders are receiving rights
("Rights") to purchase common shares of beneficial interest, par value $.01
per share ("Common Shares") of the Company;
WHEREAS, in connection therewith, the Company has agreed to
grant to Holders the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, hereby agree as follows:
SECTION 1. REGISTRATION RIGHTS
If Holder receives Common Shares upon exercise of the Rights
pursuant to the terms thereof, the Company shall register the Common Shares
for sale by the Holder, subject to the terms and conditions set forth
herein (the "Registration Rights").
1.1 DEMAND REGISTRATION RIGHTS.
1.1(a) REGISTRATION PROCEDURE. Subject to Sections
1.1(c) and 1.2 hereof, if Holder desires to exercise its Registration
Rights with respect to the Common Shares underlying the Rights, Holder
shall deliver to the Company a written notice (a "Registration Notice")
informing the Company of such exercise and specifying the number of shares
to be registered for resale by Holder (such shares being referred to herein
as the "Registrable Securities"). Such notice may be given at least ten
(10) business days prior to the consummation of the sale of Registrable
Securities. Upon receipt of the Registration Notice, the Company, if it
has not already caused the Registrable Securities to be included as part of
an existing effective shelf registration statement and related prospectus
(the "Shelf Registration Statement") that the Company then has on file with
the Securities and Exchange Commission and which is available for use by
Holder in connection with the offer and sale of Registrable Securities (in
which event the Company shall be deemed to have satisfied its registration
obligation under this Section 1.1), will cause to be filed with the
Securities and Exchange Commission (the "SEC") as soon as reasonably
practicable (but not later than 30 days) after receiving the Registration
Notice a new registration statement and related prospectus pursuant to Rule
415 (or any successor provision) under the Securities Act of 1933, as
amended (the "Act") (a "New Registration Statement"), that complies as to
form in all material respects with applicable SEC rules providing for the
offer and sale by Holder of the Registrable Securities, and agrees (subject
to Section 1.2 hereof) to use its best efforts to cause such New
Registration Statement to be declared effective by the SEC as soon as
practicable. (As used herein, "Registration Statement" and "Prospectus"
refer to the Shelf Registration Statement and related prospectus (including
any preliminary prospectus and any supplement of any prospectus filed
pursuant to Rule 424 or Rule 430A) or the New Registration Statement and
related prospectus (including any preliminary prospectus and any supplement
of any prospectus filed pursuant to Rule 424 or Rule 430A), whichever is
utilized by the Company to satisfy Holder's Registration Rights pursuant to
this Section 1, including in each case any documents incorporated therein
by reference). Holder agrees to provide in a timely manner information
regarding the proposed distribution by Holder of the Registrable Securities
and such other information reasonably requested by the Company in
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connection with the preparation of and for inclusion in the Registration
Statement. The Company agrees (subject to Section 1.2 hereof) to use its
best efforts to keep the Registration Statement effective (including the
preparation and filing of any amendments and supplements necessary for that
purpose) until the earlier of (i) the date on which Holder consummates the
sale of all of the Registrable Securities registered under the Registration
Statement, or (ii) the date on which all of the Registrable Securities are
eligible for sale by Holder pursuant to Rule 144(k) (or any successor
provision) or in a single transaction pursuant to Rule 144(e) (or any
successor provision) under the Securities Act of 1933, as amended (the
"Act") provided that Rule 144 is then available for offers and sales of the
Registrable Securities by Holder. The Company agrees to provide to Holder
a reasonable number of copies of the final Prospectus and any amendments or
supplements thereto.
1.1(b) OFFERS AND SALES. All offers and sales by Holder
under the Registration Statement referred to in this Section 1.1 shall be
completed within the period during which the Registration Statement is
required to remain effective pursuant to Section 1.1(a), and upon
expiration of such period Holder will not offer or sell any Registrable
Securities under the Registration Statement. If directed by the Company,
Holder will return all undistributed copies of the Prospectus in its
possession upon the expiration of such period.
1.1(c) LIMITATIONS ON REGISTRATION RIGHTS. Each
exercise of a Registration Right shall be with respect to a minimum of the
lesser of (i) Fifty Thousand (50,000) Common Shares or (ii) the total
number of Common Shares that may be issued upon exercise of the Rights
held by Holder. The rights of Holder to deliver a Registration Notice
commences upon the date a Holder is permitted to exercise the Rights
pursuant to their terms. The right of Holder to deliver a Registration
Notice shall expire on the date on which all of the Rights then held by
Holder or issuable upon exercise of the Rights held by Holder are eligible
for sale pursuant to Rule 144(k) (or any successor provision). The
Registration Rights granted pursuant to this Section 1.1 may not be
exercised in connection with any underwritten public offering by the
Company or by Holder without the prior written consent of the Company.
1.2 SUSPENSION OF OFFERING. Upon receipt of notice from the
Company, either before or after a Holder has delivered a Registration
Notice, that a negotiation or consummation of a transaction by the Company
or its subsidiaries is pending or an event has occurred, which negotiation,
consummation or event would require additional disclosure by the Company in
the Registration Statement of material information which the Company has a
BONA FIDE business purpose for keeping confidential and the nondisclosure
of which in the Registration Statement would, in the reasonable opinion of
counsel to the Company, cause the Registration Statement to fail to comply
with applicable disclosure requirements (a "Materiality Notice"), Holder
agrees that it will immediately discontinue offers and sales of the
Registrable Securities under the Registration Statement until Holder
receives copies of a supplemented or amended Prospectus that corrects the
misstatement(s) or omission(s) referred to above; PROVIDED, that the
Company may require the Holder to suspend such offers and sales for such
reason for no more than sixty (60) days after delivery of the Materiality
Notice at any one time (the "Suspension Period"). If so directed by the
Company, Holder will deliver to the Company all copies of the Prospectus
covering the Registrable Securities current at the time of receipt of such
notice. The Company shall take all actions necessary (including the
preparation of any amendment to the Registration Statement or supplement to
the Prospectus such that immediately following the earlier of (i) the
public disclosure of the information giving rise to such Materiality Notice
or (ii) the end of the Suspension Period, the Registration Statement is
available for offers and sales of the Registrable Securities.
1.3 EXPENSES. The Company shall pay all expenses incident to
the performance by it of its registration obligations under this Section 1,
including (i) all stock exchange, SEC and state securities registration,
listing and filing fees, (ii) all expenses incurred in connection with the
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preparation, printing and distributing of the Registration Statement and
Prospectus, and (iii) fees and disbursements of counsel for the Company and
of the independent public accountants of the Company. Holder shall be
responsible for the payment of any brokerage and sales commissions, fees
and disbursements of Holder's counsel, and any transfer taxes relating to
the sale or disposition of the Registrable Securities by Holder.
1.4 QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Registrable Securities by the time the
applicable Registration Statement is declared effective by the SEC under
all applicable state securities or "blue sky" laws of such jurisdictions as
Holder shall reasonably request in writing, to keep each such registration
or qualification effective during the period such Registration Statement is
required to be kept effective or during the period offers or sales are
being made by Holder after delivery of a Registration Notice to the
Company, whichever is shorter, and to do any and all other acts and things
which may be reasonably necessary or advisable to enable Holder to
consummate the disposition in each such jurisdiction of the Registrable
Securities owned by Holder; PROVIDED, HOWEVER, that the Company shall not
be required to (x) qualify generally to do business in any jurisdiction or
to register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Section 1.1, (y) subject
itself to taxation in any such jurisdiction, or (z) submit to the general
service of process in any such jurisdiction.
INDEMNIFICATION
2.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading or any violation by the Company
of the Act, the Exchange Act or any state securities laws applicable to the
Company and relating to any action or inaction required of the Company in
connection with the registration or qualification of the Registrable
Securities.
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company which shall not be unreasonably withheld
or delayed or otherwise in accordance with Section 2.3; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a
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party, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above; PROVIDED, HOWEVER, that the indemnity provided pursuant to this
Section 2.1 does not apply to any Holder with respect to any loss,
liability, claim, damage or expense to the extent arising out of (i) any
untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to
the Company by such Holder expressly for use in the Registration Statement
(or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto), or (ii) such Holder's failure to deliver an amended or
supplemented Prospectus if such loss, liability, claim, damage or expense
would not have arisen had such delivery occurred and the Company had
previously provided to the Holder such amended or supplemental Prospectus
for use in connection with the offer and sale of the Registrable
Securities.
2.2 INDEMNIFICATION BY HOLDER. Holder (and each permitted
assignee of Holder, on a several basis) agrees to indemnify and hold
harmless the Company, and each of its trustees and officers (including each
trustee and officer of the Company who signed a Registration Statement),
and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, as
follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of Holder which shall not be unreasonably withheld or
delayed or otherwise in accordance with Section 2.3; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 2.1
shall only apply with respect to any loss, liability, claim, damage or
expense to the extent arising out of (i) any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by Holder
expressly for use in the Registration Statement (or any amendment thereto)
or the Prospectus (or any amendment or supplement thereto), or (ii)
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Holder's failure to deliver an amended or supplemental Prospectus if such
loss, liability, claim, damage or expense would not have arisen had such
delivery occurred and the Company had previously provided to the Holder
such amended or supplemented Prospectus for use in connection with the
offer and sale of the Registrable Securities. Notwithstanding the
provisions of this Section 2.2, Holder and any permitted assignee shall not
be required to indemnify the Company, its officers, trustees or control
persons with respect to any aggregate amount in excess of the amount of the
total proceeds received by Holder or such permitted assignee, as the case
may be, from sales of the Registrable Securities of Holder giving rise to
such indemnification obligation, and no Holder shall be liable under this
Section 2.2 for any statements or omissions of any other Holder.
2.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. The indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify the indemnifying party (i)
shall not relieve it from any liability which it may have under the
indemnity agreement provided in Section 2.1 or 2.2 above, unless and to the
extent it did not otherwise learn of such action and the lack of notice by
the indemnified party results in the forfeiture by the indemnifying party
of substantial rights and defenses, and (ii) shall not, in any event,
relieve the indemnifying party from any obligations to the indemnified
party other than the indemnification obligation provided under Section 2.1
or 2.2 above. If the indemnifying party so elects within a reasonable time
after receipt of such notice, the indemnifying party may assume the defense
of such action or proceeding at such indemnifying party's own expense with
counsel chosen by the indemnifying party and approved by the indemnified
party, which approval shall not be unreasonably withheld; PROVIDED,
HOWEVER, that the indemnifying party will not settle any such action or
proceeding without the written consent of the indemnified party which shall
not be unreasonably withheld or delayed unless, as a condition to such
settlement, the indemnifying party secures the unconditional release of the
indemnified party; and PROVIDED FURTHER, that if the indemnified party
reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel
or that, upon advice of counsel, there may be legal defenses available to
it which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to
assume such defense and the indemnified party shall be entitled to separate
counsel at the indemnifying party's expense. If the indemnifying party is
not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel
shall be entitled to conduct the indemnifying party's defense and counsel
for the indemnified party shall be entitled to conduct the defense of the
indemnified party, it being understood that both such counsel will
cooperate with each other to conduct the defense of such action or
proceeding as efficiently as possible. If the indemnifying party is not so
entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence
of this paragraph, the indemnifying party will pay the reasonable fees and
expenses of counsel for the indemnified party. In such event, however, the
indemnifying party will not be liable for any settlement effected without
the written consent of the indemnifying party which shall not be
unreasonably withheld or delayed. If an indemnifying party is entitled to
assume, and assumes, the defense of such action or proceeding in accordance
with this paragraph, the indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding.
2.4 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this Section 2 is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms or is
otherwise unavailable to the indemnified party, the Company and Holder
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
the Company and Holder, (i) in such proportion as is appropriate to reflect
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the relative fault of the Company on the one hand and Holder on the other,
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault of but
also the relative benefits to the Company on the one hand and Holder on the
other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits to the
indemnifying party and indemnified party shall be determined by reference
to, among other things, the total proceeds received by the indemnifying
party and indemnified party in connection with the offering to which such
losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined
by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable
if contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.4, Holder
shall not be required to contribute any amount in excess of the amount of
the total proceeds received by Holder from sales of the Registrable
Securities, giving rise to such contribution obligation.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 2.4,
each person, if any, who controls Holder within the meaning of Section 15
of the Act shall have the same rights to contribution as Holder, and each
trustee of the Company, each officer of the Company who signed a
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
SECTION 3. RULE 144 COMPLIANCE
The Company covenants that it will use its best efforts to
timely file the reports required to be filed by the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended, so as
to enable each Holder to sell Registrable Securities pursuant to Rule 144
under the Securities Act. In connection with any sale, transfer or other
disposition by Holder of any Registrable Securities pursuant to Rule 144
under the Securities Act, the Company shall cooperate with Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act
legend, and enable certificates for such Registrable Securities to be for
such number of shares and registered in such names as Holder may reasonably
request at least ten (10) business days prior to any sale of Registrable
Securities hereunder.
SECTION 4. MISCELLANEOUS
4.1 INTEGRATION; AMENDMENT. This Agreement constitutes the
entire agreement among the parties hereto with respect to the matters set
forth herein and supersedes and renders of no force and effect all prior
oral or written agreements, commitments and understandings among the
parties with respect to the matters set forth herein. Except as otherwise
expressly provided in this Agreement, no amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Company and Holder.
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4.2 WAIVERS. No waiver by a party hereto shall be effective
unless made in a written instrument duly executed by the party against whom
such waiver is sought to be enforced, and only to the extent set forth in
such instrument. Neither the waiver by any of the parties hereto of a
breach or a default under any of the provisions of this Agreement, nor the
failure of any of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any such
provisions, rights or privileges hereunder.
4.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and
the rights granted hereunder may not be assigned by Holder without the
written consent of the Company; PROVIDED, HOWEVER, that Holder may assign
in part or in whole its rights and obligations hereunder, following at
least ten (10) days prior written notice to the Company, (i) to Holder's
direct or indirect partners or beneficiaries in connection with a
distribution of the Rights to its direct or indirect partners or
beneficiaries or to executives or employees, provided such proposed
assignees are then Accredited Investors as such term is defined in
Regulation D under the Securities Act, (ii) to a permitted transferee in
connection with a transfer of the Rights in accordance with the terms of
the Rights, and (iii) to a third party in connection with a transfer of
Rights as security for or in satisfaction of obligations of any partner of
Holder, if in the case of (i), (ii) and (iii) above, such persons or such
third party agree in writing to be bound by all of the provisions hereof.
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of all of the parties hereto.
4.4 Burden and Benefit. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, personal and legal representatives, successors and, subject to
Section 4.3 above, assigns.
4.5 NOTICES. All notices called for under this Agreement
shall be in writing and shall be deemed given upon receipt if delivered
personally or by facsimile transmission and followed promptly by mail, or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth opposite their names in
SCHEDULE A hereto, or to any other address or addressee as any party
entitled to receive notice under this Agreement shall designate, from time
to time, to others in the manner provided in this Section 4.5 for the
service of notices; PROVIDED, HOWEVER, that notices of a change of address
shall be effective only upon receipt thereof. Any notice delivered to the
party hereto to whom it is addressed shall be deemed to have been given and
received on the day it was received; PROVIDED, HOWEVER, that if such day is
not a business day then the notice shall be deemed to have been given and
received on the business day next following such day. Any notice sent by
facsimile transmission shall be deemed to have been given and received on
the business day next following the transmission.
4.6 SPECIFIC PERFORMANCE. The parties hereto acknowledge
that the obligations undertaken by them hereunder are unique and that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall
be entitled to (i) compel specific performance of the obligations,
covenants and agreements of any other party under this Agreement in
accordance with the terms and conditions of this Agreement and (ii) obtain
preliminary injunctive relief to secure specific performance and to prevent
a breach or contemplated breach of this Agreement in any court of the
United States or any State thereof having jurisdiction.
4.7 GOVERNING LAW. This Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating
thereto, shall be governed by and construed in accordance with the laws of
the State of New York, but not including the choice of law rules thereof.
<PAGE>
4.8 HEADINGS. Section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any
way define or affect the meaning, construction or scope of any of the
provisions hereof.
4.9 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the person or entity may require.
4.10 EXECUTION IN COUNTERPARTS. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It
shall not be necessary that the signature of or on behalf of each party
appears on each counterpart, but it shall be sufficient that the signature
of or on behalf of each party appears on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It
shall not be necessary in any proof of this Agreement to produce or account
for more than a number of counterparts containing the respective signatures
of or on behalf of all of the Parties.
4.11 SEVERABILITY. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the
limit of validity prescribed by law, then the obligation to be fulfilled
shall be reduced to the limit of such validity; and if any clause or
provision contained in this Agreement operates or would operate to
invalidate this Agreement, in whole or in part, then such clause or
provision only shall be held ineffective, as though not herein contained,
and the remainder of this Agreement shall remain operative and in full
force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first
hereinabove set forth.
COMPANY:
Address:
220 East 42nd Street
New York, New York 10017 LaSalle Hotel Properties
By: /s/ MICHAEL D. BARNELLO
Michael D. Barnello
Senior Vice President
HOLDERS:
LaSalle Hotel Advisors, Inc.
Address:
220 East 42nd Street By: /s/ MICHAEL D. BARNELLO
New York, New York 10017 Michael D. Barnello
EXHIBIT 10.7
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of April 29, 1998 by and between LaSalle Hotel
Properties, a Maryland real estate investment trust (the "Company"), and
the holders of Rights listed on SCHEDULE A hereto and each of the permitted
assignees thereof (individually, a "Holder").
WHEREAS, on the date hereof, the Holders are receiving rights
("Rights") to purchase common shares of beneficial interest, par value $.01
per share ("Common Shares") of the Company;
WHEREAS, in connection therewith, the Company has agreed to
grant to Holders the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, hereby agree as follows:
SECTION 1. REGISTRATION RIGHTS
If Holder receives Common Shares upon exercise of the Rights
pursuant to the terms thereof, the Company shall register the Common Shares
for sale by the Holder, subject to the terms and conditions set forth
herein (the "Registration Rights").
1.1 DEMAND REGISTRATION RIGHTS.
1.1(a) REGISTRATION PROCEDURE. Subject to Sections
1.1(c) and 1.2 hereof, if Holder desires to exercise its Registration
Rights with respect to the Common Shares underlying the Rights, Holder
shall deliver to the Company a written notice (a "Registration Notice")
informing the Company of such exercise and specifying the number of shares
to be registered for resale by Holder (such shares being referred to herein
as the "Registrable Securities"). Such notice may be given at least ten
(10) business days prior to the consummation of the sale of Registrable
Securities. Upon receipt of the Registration Notice, the Company, if it
has not already caused the Registrable Securities to be included as part of
an existing effective shelf registration statement and related prospectus
(the "Shelf Registration Statement") that the Company then has on file with
the Securities and Exchange Commission and which is available for use by
Holder in connection with the offer and sale of Registrable Securities (in
which event the Company shall be deemed to have satisfied its registration
obligation under this Section 1.1), will cause to be filed with the
Securities and Exchange Commission (the "SEC") as soon as reasonably
practicable (but not later than 30 days) after receiving the Registration
Notice a new registration statement and related prospectus pursuant to Rule
415 (or any successor provision) under the Securities Act of 1933, as
amended (the "Act") (a "New Registration Statement"), that complies as to
form in all material respects with applicable SEC rules providing for the
offer and sale by Holder of the Registrable Securities, and agrees (subject
to Section 1.2 hereof) to use its best efforts to cause such New
Registration Statement to be declared effective by the SEC as soon as
practicable. (As used herein, "Registration Statement" and "Prospectus"
refer to the Shelf Registration Statement and related prospectus (including
any preliminary prospectus and any supplement of any prospectus filed
pursuant to Rule 424 or Rule 430A) or the New Registration Statement and
related prospectus (including any preliminary prospectus and any supplement
of any prospectus filed pursuant to Rule 424 or Rule 430A), whichever is
utilized by the Company to satisfy Holder's Registration Rights pursuant to
this Section 1, including in each case any documents incorporated therein
by reference). Holder agrees to provide in a timely manner information
regarding the proposed distribution by Holder of the Registrable Securities
<PAGE>
and such other information reasonably requested by the Company in
connection with the preparation of and for inclusion in the Registration
Statement. The Company agrees (subject to Section 1.2 hereof) to use its
best efforts to keep the Registration Statement effective (including the
preparation and filing of any amendments and supplements necessary for that
purpose) until the earlier of (i) the date on which Holder consummates the
sale of all of the Registrable Securities registered under the Registration
Statement, or (ii) the date on which all of the Registrable Securities are
eligible for sale by Holder pursuant to Rule 144(k) (or any successor
provision) or in a single transaction pursuant to Rule 144(e) (or any
successor provision) under the Securities Act of 1933, as amended (the
"Act") provided that Rule 144 is then available for offers and sales of the
Registrable Securities by Holder. The Company agrees to provide to Holder
a reasonable number of copies of the final Prospectus and any amendments or
supplements thereto.
1.1(b) OFFERS AND SALES. All offers and sales by Holder
under the Registration Statement referred to in this Section 1.1 shall be
completed within the period during which the Registration Statement is
required to remain effective pursuant to Section 1.1(a), and upon
expiration of such period Holder will not offer or sell any Registrable
Securities under the Registration Statement. If directed by the Company,
Holder will return all undistributed copies of the Prospectus in its
possession upon the expiration of such period.
1.1(c) LIMITATIONS ON REGISTRATION RIGHTS. Each
exercise of a Registration Right shall be with respect to a minimum of the
lesser of (i) Fifty Thousand (50,000) Common Shares or (ii) the total
number of Common Shares that may be issued upon exercise of the Rights
held by Holder. The rights of Holder to deliver a Registration Notice
commences upon the date a Holder is permitted to exercise the Rights
pursuant to their terms. The right of Holder to deliver a Registration
Notice shall expire on the date on which all of the Rights then held by
Holder or issuable upon exercise of the Rights held by Holder are eligible
for sale pursuant to Rule 144(k) (or any successor provision). The
Registration Rights granted pursuant to this Section 1.1 may not be
exercised in connection with any underwritten public offering by the
Company or by Holder without the prior written consent of the Company.
1.2 SUSPENSION OF OFFERING. Upon receipt of notice from the
Company, either before or after a Holder has delivered a Registration
Notice, that a negotiation or consummation of a transaction by the Company
or its subsidiaries is pending or an event has occurred, which negotiation,
consummation or event would require additional disclosure by the Company in
the Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the nondisclosure
of which in the Registration Statement would, in the reasonable opinion of
counsel to the Company, cause the Registration Statement to fail to comply
with applicable disclosure requirements (a "Materiality Notice"), Holder
agrees that it will immediately discontinue offers and sales of the
Registrable Securities under the Registration Statement until Holder
receives copies of a supplemented or amended Prospectus that corrects the
misstatement(s) or omission(s) referred to above; provided, that the
Company may require the Holder to suspend such offers and sales for such
reason for no more than sixty (60) days after delivery of the Materiality
Notice at any one time (the "Suspension Period"). If so directed by the
Company, Holder will deliver to the Company all copies of the Prospectus
covering the Registrable Securities current at the time of receipt of such
notice. The Company shall take all actions necessary (including the
preparation of any amendment to the Registration Statement or supplement to
the Prospectus such that immediately following the earlier of (i) the
public disclosure of the information giving rise to such Materiality Notice
or (ii) the end of the Suspension Period, the Registration Statement is
available for offers and sales of the Registrable Securities.
<PAGE>
1.3 EXPENSES. The Company shall pay all expenses incident to
the performance by it of its registration obligations under this Section 1,
including (i) all stock exchange, SEC and state securities registration,
listing and filing fees, (ii) all expenses incurred in connection with the
preparation, printing and distributing of the Registration Statement and
Prospectus, and (iii) fees and disbursements of counsel for the Company and
of the independent public accountants of the Company. Holder shall be
responsible for the payment of any brokerage and sales commissions, fees
and disbursements of Holder's counsel, and any transfer taxes relating to
the sale or disposition of the Registrable Securities by Holder.
1.4 QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Registrable Securities by the time the
applicable Registration Statement is declared effective by the SEC under
all applicable state securities or "blue sky" laws of such jurisdictions as
Holder shall reasonably request in writing, to keep each such registration
or qualification effective during the period such Registration Statement is
required to be kept effective or during the period offers or sales are
being made by Holder after delivery of a Registration Notice to the
Company, whichever is shorter, and to do any and all other acts and things
which may be reasonably necessary or advisable to enable Holder to
consummate the disposition in each such jurisdiction of the Registrable
Securities owned by Holder; provided, however, that the Company shall not
be required to (x) qualify generally to do business in any jurisdiction or
to register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Section 1.1, (y) subject
itself to taxation in any such jurisdiction, or (z) submit to the general
service of process in any such jurisdiction.
2. INDEMNIFICATION
2.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading or any violation by the Company
of the Act, the Exchange Act or any state securities laws applicable to the
Company and relating to any action or inaction required of the Company in
connection with the registration or qualification of the Registrable
Securities.
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company which shall not be unreasonably withheld
or delayed or otherwise in accordance with Section 2.3; and
<PAGE>
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 2.1
does not apply to any Holder with respect to any loss, liability, claim,
damage or expense to the extent arising out of (i) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by such
Holder expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto), or
(ii) such Holder's failure to deliver an amended or supplemented Prospectus
if such loss, liability, claim, damage or expense would not have arisen had
such delivery occurred and the Company had previously provided to the
Holder such amended or supplemental Prospectus for use in connection with
the offer and sale of the Registrable Securities.
2.2 INDEMNIFICATION BY HOLDER. Holder (and each permitted
assignee of Holder, on a several basis) agrees to indemnify and hold
harmless the Company, and each of its trustees and officers (including each
trustee and officer of the Company who signed a Registration Statement),
and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, as
follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of Holder which shall not be unreasonably withheld or
delayed or otherwise in accordance with Section 2.3; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
<PAGE>
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 2.1
shall only apply with respect to any loss, liability, claim, damage or
expense to the extent arising out of (i) any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by Holder
expressly for use in the Registration Statement (or any amendment thereto)
or the Prospectus (or any amendment or supplement thereto), or (ii)
Holder's failure to deliver an amended or supplemental Prospectus if such
loss, liability, claim, damage or expense would not have arisen had such
delivery occurred and the Company had previously provided to the Holder
such amended or supplemented Prospectus for use in connection with the
offer and sale of the Registrable Securities. Notwithstanding the
provisions of this Section 2.2, Holder and any permitted assignee shall not
be required to indemnify the Company, its officers, trustees or control
persons with respect to any aggregate amount in excess of the amount of the
total proceeds received by Holder or such permitted assignee, as the case
may be, from sales of the Registrable Securities of Holder giving rise to
such indemnification obligation, and no Holder shall be liable under this
Section 2.2 for any statements or omissions of any other Holder.
2.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. The indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify the indemnifying party (i)
shall not relieve it from any liability which it may have under the
indemnity agreement provided in Section 2.1 or 2.2 above, unless and to the
extent it did not otherwise learn of such action and the lack of notice by
the indemnified party results in the forfeiture by the indemnifying party
of substantial rights and defenses, and (ii) shall not, in any event,
relieve the indemnifying party from any obligations to the indemnified
party other than the indemnification obligation provided under Section 2.1
or 2.2 above. If the indemnifying party so elects within a reasonable time
after receipt of such notice, the indemnifying party may assume the defense
of such action or proceeding at such indemnifying party's own expense with
counsel chosen by the indemnifying party and approved by the indemnified
party, which approval shall not be unreasonably withheld; provided,
however, that the indemnifying party will not settle any such action or
proceeding without the written consent of the indemnified party which shall
not be unreasonably withheld or delayed unless, as a condition to such
settlement, the indemnifying party secures the unconditional release of the
indemnified party; and provided further, that if the indemnified party
reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel
or that, upon advice of counsel, there may be legal defenses available to
it which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to
assume such defense and the indemnified party shall be entitled to separate
counsel at the indemnifying party's expense. If the indemnifying party is
not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel
shall be entitled to conduct the indemnifying party's defense and counsel
for the indemnified party shall be entitled to conduct the defense of the
indemnified party, it being understood that both such counsel will
cooperate with each other to conduct the defense of such action or
proceeding as efficiently as possible. If the indemnifying party is not so
entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence
of this paragraph, the indemnifying party will pay the reasonable fees and
expenses of counsel for the indemnified party. In such event, however, the
indemnifying party will not be liable for any settlement effected without
the written consent of the indemnifying party which shall not be
unreasonably withheld or delayed. If an indemnifying party is entitled to
assume, and assumes, the defense of such action or proceeding in accordance
with this paragraph, the indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding.
<PAGE>
2.4 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this Section 2 is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms or is
otherwise unavailable to the indemnified party, the Company and Holder
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
the Company and Holder, (i) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and Holder on the other,
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault of but
also the relative benefits to the Company on the one hand and Holder on the
other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits to the
indemnifying party and indemnified party shall be determined by reference
to, among other things, the total proceeds received by the indemnifying
party and indemnified party in connection with the offering to which such
losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined
by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable
if contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.4, Holder
shall not be required to contribute any amount in excess of the amount of
the total proceeds received by Holder from sales of the Registrable
Securities, giving rise to such contribution obligation.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 2.4,
each person, if any, who controls Holder within the meaning of Section 15
of the Act shall have the same rights to contribution as Holder, and each
trustee of the Company, each officer of the Company who signed a
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
SECTION 3. RULE 144 COMPLIANCE
The Company covenants that it will use its best efforts to timely
file the reports required to be filed by the Company under the Securities
Act and the Securities Exchange Act of 1934, as amended, so as to enable
each Holder to sell Registrable Securities pursuant to Rule 144 under the
Securities Act. In connection with any sale, transfer or other disposition
by Holder of any Registrable Securities pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with Holder to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any Securities Act legend, and enable
certificates for such Registrable Securities to be for such number of
shares and registered in such names as Holder may reasonably request at
least ten (10) business days prior to any sale of Registrable Securities
hereunder.
<PAGE>
SECTION 4. MISCELLANEOUS
4.1 INTEGRATION; AMENDMENT. This Agreement constitutes the
entire agreement among the parties hereto with respect to the matters set
forth herein and supersedes and renders of no force and effect all prior
oral or written agreements, commitments and understandings among the
parties with respect to the matters set forth herein. Except as otherwise
expressly provided in this Agreement, no amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Company and Holder.
4.2 WAIVERS. No waiver by a party hereto shall be effective
unless made in a written instrument duly executed by the party against whom
such waiver is sought to be enforced, and only to the extent set forth in
such instrument. Neither the waiver by any of the parties hereto of a
breach or a default under any of the provisions of this Agreement, nor the
failure of any of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any such
provisions, rights or privileges hereunder.
4.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and
the rights granted hereunder may not be assigned by Holder without the
written consent of the Company; provided, however, that Holder may assign
in part or in whole its rights and obligations hereunder, following at
least ten (10) days prior written notice to the Company, (i) to Holder's
direct or indirect partners or beneficiaries in connection with a
distribution of the Rights to its direct or indirect partners or
beneficiaries or to executives or employees, provided such proposed
assignees are then Accredited Investors as such term is defined in
Regulation D under the Securities Act, (ii) to a permitted transferee in
connection with a transfer of the Rights in accordance with the terms of
the Rights, and (iii) to a third party in connection with a transfer of
Rights as security for or in satisfaction of obligations of any partner of
Holder, if in the case of (i), (ii) and (iii) above, such persons or such
third party agree in writing to be bound by all of the provisions hereof.
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of all of the parties hereto.
4.4 BURDEN AND BENEFIT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, personal and legal representatives, successors and, subject to
Section 4.3 above, assigns.
4.5 NOTICES. All notices called for under this Agreement
shall be in writing and shall be deemed given upon receipt if delivered
personally or by facsimile transmission and followed promptly by mail, or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth opposite their names in
Schedule A hereto, or to any other address or addressee as any party
entitled to receive notice under this Agreement shall designate, from time
to time, to others in the manner provided in this Section 4.5 for the
service of notices; provided, however, that notices of a change of address
shall be effective only upon receipt thereof. Any notice delivered to the
party hereto to whom it is addressed shall be deemed to have been given and
received on the day it was received; provided, however, that if such day is
not a business day then the notice shall be deemed to have been given and
received on the business day next following such day. Any notice sent by
facsimile transmission shall be deemed to have been given and received on
the business day next following the transmission.
4.6 SPECIFIC PERFORMANCE. The parties hereto acknowledge
that the obligations undertaken by them hereunder are unique and that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall
<PAGE>
be entitled to (i) compel specific performance of the obligations,
covenants and agreements of any other party under this Agreement in
accordance with the terms and conditions of this Agreement and (ii) obtain
preliminary injunctive relief to secure specific performance and to prevent
a breach or contemplated breach of this Agreement in any court of the
United States or any State thereof having jurisdiction.
4.7 GOVERNING LAW. This Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating
thereto, shall be governed by and construed in accordance with the laws of
the State of New York, but not including the choice of law rules thereof.
4.8 HEADINGS. Section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any
way define or affect the meaning, construction or scope of any of the
provisions hereof.
4.9 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the person or entity may require.
4.10 EXECUTION IN COUNTERPARTS. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It
shall not be necessary that the signature of or on behalf of each party
appears on each counterpart, but it shall be sufficient that the signature
of or on behalf of each party appears on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It
shall not be necessary in any proof of this Agreement to produce or account
for more than a number of counterparts containing the respective signatures
of or on behalf of all of the Parties.
4.11 SEVERABILITY. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the
limit of validity prescribed by law, then the obligation to be fulfilled
shall be reduced to the limit of such validity; and if any clause or
provision contained in this Agreement operates or would operate to
invalidate this Agreement, in whole or in part, then such clause or
provision only shall be held ineffective, as though not herein contained,
and the remainder of this Agreement shall remain operative and in full
force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first
hereinabove set forth.
COMPANY:
LaSalle Hotel Properties
Address: By: /s/ MICHAEL D. BARNELLO
220 East 42nd Street Michael D. Barnello
New York, New York 10017 Senior Vice President
HOLDERS:
MS Asset Management, Inc.
Address:
650 Madison Avenue /s/ EDWARD KIRTMAN
New York, New York 10022 By: Edward Kirtman
EXHIBIT 10.8
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of April 29, 1998 by and between LaSalle Hotel
Properties, a Maryland real estate investment trust (the "Company"), and
the holders of Rights listed on SCHEDULE A hereto and each of the permitted
assignees thereof (individually, a "Holder").
WHEREAS, on the date hereof, the Holders are receiving rights
("Rights") to purchase common shares of beneficial interest, par value $.01
per share ("Common Shares") of the Company;
WHEREAS, in connection therewith, the Company has agreed to
grant to Holders the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, hereby agree as follows:
SECTION 1. REGISTRATION RIGHTS
If Holder receives Common Shares upon exercise of the Rights
pursuant to the terms thereof, the Company shall register the Common Shares
for sale by the Holder, subject to the terms and conditions set forth
herein (the "Registration Rights").
1.1 DEMAND REGISTRATION RIGHTS.
1.1(a) REGISTRATION PROCEDURE. Subject to Sections
1.1(c) and 1.2 hereof, if Holder desires to exercise its Registration
Rights with respect to the Common Shares underlying the Rights, Holder
shall deliver to the Company a written notice (a "Registration Notice")
informing the Company of such exercise and specifying the number of shares
to be registered for resale by Holder (such shares being referred to herein
as the "Registrable Securities"). Such notice may be given at any time on
or after the date which is ten (10) business days prior to the date a
notice of exercise is delivered by Holder to the Company pursuant to the
Right, but must be given at least ten (10) business days prior to the
consummation of the sale of Registrable Securities. Upon receipt of the
Registration Notice, the Company, if it has not already caused the
Registrable Securities to be included as part of an existing effective
shelf registration statement and related prospectus (the "Shelf
Registration Statement") that the Company then has on file with the
Securities and Exchange Commission and which is available for use by Holder
in connection with the offer and sale of Registrable Securities (in which
event the Company shall be deemed to have satisfied its registration
obligation under this Section 1.1), will cause to be filed with the
Securities and Exchange Commission (the "SEC") as soon as reasonably
practicable (but not later than 30 days) after receiving the Registration
Notice a new registration statement and related prospectus pursuant to Rule
415 (or any successor provision) under the Securities Act of 1933, as
amended (the "Act") (a "New Registration Statement"), that complies as to
form in all material respects with applicable SEC rules providing for the
offer and sale by Holder of the Registrable Securities, and agrees (subject
to Section 1.2 hereof) to use its best efforts to cause such New
Registration Statement to be declared effective by the SEC as soon as
practicable. (As used herein, "Registration Statement" and "Prospectus"
refer to the Shelf Registration Statement and related prospectus (including
any preliminary prospectus and any supplement of any prospectus filed
pursuant to Rule 424 or Rule 430A) or the New Registration Statement and
related prospectus (including any preliminary prospectus and any supplement
of any prospectus filed pursuant to Rule 424 or Rule 430A), whichever is
utilized by the Company to satisfy Holder's Registration Rights pursuant to
this Section 1, including in each case any documents incorporated therein
<PAGE>
by reference). Holder agrees to provide in a timely manner information
regarding the proposed distribution by Holder of the Registrable Securities
and such other information reasonably requested by the Company in
connection with the preparation of and for inclusion in the Registration
Statement. The Company agrees (subject to Section 1.2 hereof) to use its
best efforts to keep the Registration Statement effective (including the
preparation and filing of any amendments and supplements necessary for that
purpose) until the earlier of (i) the date on which Holder consummates the
sale of all of the Registrable Securities registered under the Registration
Statement, or (ii) the date on which all of the Registrable Securities are
eligible for sale by Holder pursuant to Rule 144(k) (or any successor
provision) or in a single transaction pursuant to Rule 144(e) (or any
successor provision) under the Securities Act of 1933, as amended (the
"Act") provided that Rule 144 is then available for offers and sales of the
Registrable Securities by Holder. The Company agrees to provide to Holder
a reasonable number of copies of the final Prospectus and any amendments or
supplements thereto.
1.1(b) OFFERS AND SALES. All offers and sales by Holder
under the Registration Statement referred to in this Section 1.1 shall be
completed within the period during which the Registration Statement is
required to remain effective pursuant to Section 1.1(a), and upon
expiration of such period Holder will not offer or sell any Registrable
Securities under the Registration Statement. If directed by the Company,
Holder will return all undistributed copies of the Prospectus in its
possession upon the expiration of such period.
1.1(c) LIMITATIONS ON REGISTRATION RIGHTS. Each
exercise of a Registration Right shall be with respect to a minimum of the
lesser of (i) Fifty Thousand (50,000) Common Shares or (ii) the total
number of Common Shares that may be issued upon exercise of the Rights
held by Holder. The rights of Holder to deliver a Registration Notice
commences upon the date a Holder is permitted to exercise the Rights
pursuant to their terms. The right of Holder to deliver a Registration
Notice shall expire on the date on which all of the Rights then held by
Holder or issuable upon exercise of the Rights held by Holder are eligible
for sale pursuant to Rule 144(k) (or any successor provision). The
Registration Rights granted pursuant to this Section 1.1 may not be
exercised in connection with any underwritten public offering by the
Company or by Holder without the prior written consent of the Company.
1.2 SUSPENSION OF OFFERING. Upon receipt of notice from the
Company, either before or after a Holder has delivered a Registration
Notice, that a negotiation or consummation of a transaction by the Company
or its subsidiaries is pending or an event has occurred, which negotiation,
consummation or event would require additional disclosure by the Company in
the Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the nondisclosure
of which in the Registration Statement would, in the reasonable opinion of
counsel to the Company, cause the Registration Statement to fail to comply
with applicable disclosure requirements (a "Materiality Notice"), Holder
agrees that it will immediately discontinue offers and sales of the
Registrable Securities under the Registration Statement until Holder
receives copies of a supplemented or amended Prospectus that corrects the
misstatement(s) or omission(s) referred to above; provided, that the
Company may require the Holder to suspend such offers and sales for such
reason for no more than sixty (60) days after delivery of the Materiality
Notice at any one time (the "Suspension Period"). If so directed by the
Company, Holder will deliver to the Company all copies of the Prospectus
covering the Registrable Securities current at the time of receipt of such
notice. The Company shall take all actions necessary (including the
preparation of any amendment to the Registration Statement or supplement to
the Prospectus such that immediately following the earlier of (i) the
public disclosure of the information giving rise to such Materiality Notice
or (ii) the end of the Suspension Period, the Registration Statement is
available for offers and sales of the Registrable Securities.
<PAGE>
1.3 EXPENSES. The Company shall pay all expenses incident to
the performance by it of its registration obligations under this Section 1,
including (i) all stock exchange, SEC and state securities registration,
listing and filing fees, (ii) all expenses incurred in connection with the
preparation, printing and distributing of the Registration Statement and
Prospectus, and (iii) fees and disbursements of counsel for the Company and
of the independent public accountants of the Company. Holder shall be
responsible for the payment of any brokerage and sales commissions, fees
and disbursements of Holder's counsel, and any transfer taxes relating to
the sale or disposition of the Registrable Securities by Holder.
1.4 QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Registrable Securities by the time the
applicable Registration Statement is declared effective by the SEC under
all applicable state securities or "blue sky" laws of such jurisdictions as
Holder shall reasonably request in writing, to keep each such registration
or qualification effective during the period such Registration Statement is
required to be kept effective or during the period offers or sales are
being made by Holder after delivery of a Registration Notice to the
Company, whichever is shorter, and to do any and all other acts and things
which may be reasonably necessary or advisable to enable Holder to
consummate the disposition in each such jurisdiction of the Registrable
Securities owned by Holder; provided, however, that the Company shall not
be required to (x) qualify generally to do business in any jurisdiction or
to register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Section 1.1, (y) subject
itself to taxation in any such jurisdiction, or (z) submit to the general
service of process in any such jurisdiction.
2. INDEMNIFICATION
2.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading or any violation by the Company
of the Act, the Exchange Act or any state securities laws applicable to the
Company and relating to any action or inaction required of the Company in
connection with the registration or qualification of the Registrable
Securities.
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company which shall not be unreasonably withheld
or delayed or otherwise in accordance with Section 2.3; and
<PAGE>
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
provided, however, that the indemnity provided pursuant to this Section 2.1
does not apply to any Holder with respect to any loss, liability, claim,
damage or expense to the extent arising out of (i) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by such
Holder expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto), or
(ii) such Holder's failure to deliver an amended or supplemented Prospectus
if such loss, liability, claim, damage or expense would not have arisen had
such delivery occurred and the Company had previously provided to the
Holder such amended or supplemental Prospectus for use in connection with
the offer and sale of the Registrable Securities.
2.2 INDEMNIFICATION BY HOLDER. Holder (and each permitted
assignee of Holder, on a several basis) agrees to indemnify and hold
harmless the Company, and each of its trustees and officers (including each
trustee and officer of the Company who signed a Registration Statement),
and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, as
follows:
(a) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
the Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of Holder which shall not be unreasonably withheld or
delayed or otherwise in accordance with Section 2.3; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (a) or (b) above;
<PAGE>
provided, however, that the indemnity provided pursuant to this Section 2.1
shall only apply with respect to any loss, liability, claim, damage or
expense to the extent arising out of (i) any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by Holder
expressly for use in the Registration Statement (or any amendment thereto)
or the Prospectus (or any amendment or supplement thereto), or (ii)
Holder's failure to deliver an amended or supplemental Prospectus if such
loss, liability, claim, damage or expense would not have arisen had such
delivery occurred and the Company had previously provided to the Holder
such amended or supplemented Prospectus for use in connection with the
offer and sale of the Registrable Securities. Notwithstanding the
provisions of this Section 2.2, Holder and any permitted assignee shall not
be required to indemnify the Company, its officers, trustees or control
persons with respect to any aggregate amount in excess of the amount of the
total proceeds received by Holder or such permitted assignee, as the case
may be, from sales of the Registrable Securities of Holder giving rise to
such indemnification obligation, and no Holder shall be liable under this
Section 2.2 for any statements or omissions of any other Holder.
2.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. The indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify the indemnifying party (i)
shall not relieve it from any liability which it may have under the
indemnity agreement provided in Section 2.1 or 2.2 above, unless and to the
extent it did not otherwise learn of such action and the lack of notice by
the indemnified party results in the forfeiture by the indemnifying party
of substantial rights and defenses, and (ii) shall not, in any event,
relieve the indemnifying party from any obligations to the indemnified
party other than the indemnification obligation provided under Section 2.1
or 2.2 above. If the indemnifying party so elects within a reasonable time
after receipt of such notice, the indemnifying party may assume the defense
of such action or proceeding at such indemnifying party's own expense with
counsel chosen by the indemnifying party and approved by the indemnified
party, which approval shall not be unreasonably withheld; provided,
however, that the indemnifying party will not settle any such action or
proceeding without the written consent of the indemnified party which shall
not be unreasonably withheld or delayed unless, as a condition to such
settlement, the indemnifying party secures the unconditional release of the
indemnified party; and provided further, that if the indemnified party
reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel
or that, upon advice of counsel, there may be legal defenses available to
it which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to
assume such defense and the indemnified party shall be entitled to separate
counsel at the indemnifying party's expense. If the indemnifying party is
not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel
shall be entitled to conduct the indemnifying party's defense and counsel
for the indemnified party shall be entitled to conduct the defense of the
indemnified party, it being understood that both such counsel will
cooperate with each other to conduct the defense of such action or
proceeding as efficiently as possible. If the indemnifying party is not so
entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence
of this paragraph, the indemnifying party will pay the reasonable fees and
expenses of counsel for the indemnified party. In such event, however, the
indemnifying party will not be liable for any settlement effected without
the written consent of the indemnifying party which shall not be
unreasonably withheld or delayed. If an indemnifying party is entitled to
assume, and assumes, the defense of such action or proceeding in accordance
with this paragraph, the indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding.
<PAGE>
2.4 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this Section 2 is for any reason held to be unenforceable by the
indemnified party although applicable in accordance with its terms or is
otherwise unavailable to the indemnified party, the Company and Holder
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
the Company and Holder, (i) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and Holder on the other,
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault of but
also the relative benefits to the Company on the one hand and Holder on the
other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits to the
indemnifying party and indemnified party shall be determined by reference
to, among other things, the total proceeds received by the indemnifying
party and indemnified party in connection with the offering to which such
losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined
by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable
if contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.4, Holder
shall not be required to contribute any amount in excess of the amount of
the total proceeds received by Holder from sales of the Registrable
Securities, giving rise to such contribution obligation.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 2.4,
each person, if any, who controls Holder within the meaning of Section 15
of the Act shall have the same rights to contribution as Holder, and each
trustee of the Company, each officer of the Company who signed a
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
SECTION 3. RULE 144 COMPLIANCE
The Company covenants that it will use its best efforts to
timely file the reports required to be filed by the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended, so as
to enable each Holder to sell Registrable Securities pursuant to Rule 144
under the Securities Act. In connection with any sale, transfer or other
disposition by Holder of any Registrable Securities pursuant to Rule 144
under the Securities Act, the Company shall cooperate with Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act
legend, and enable certificates for such Registrable Securities to be for
such number of shares and registered in such names as Holder may reasonably
request at least ten (10) business days prior to any sale of Registrable
Securities hereunder.
<PAGE>
SECTION 4. MISCELLANEOUS
4.1 INTEGRATION; AMENDMENT. This Agreement constitutes the
entire agreement among the parties hereto with respect to the matters set
forth herein and supersedes and renders of no force and effect all prior
oral or written agreements, commitments and understandings among the
parties with respect to the matters set forth herein. Except as otherwise
expressly provided in this Agreement, no amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Company and Holder.
4.2 WAIVERS. No waiver by a party hereto shall be effective
unless made in a written instrument duly executed by the party against whom
such waiver is sought to be enforced, and only to the extent set forth in
such instrument. Neither the waiver by any of the parties hereto of a
breach or a default under any of the provisions of this Agreement, nor the
failure of any of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege
hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any such
provisions, rights or privileges hereunder.
4.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and
the rights granted hereunder may not be assigned by Holder without the
written consent of the Company; provided, however, that Holder may assign
in part or in whole its rights and obligations hereunder, following at
least ten (10) days prior written notice to the Company, (i) to Holder's
direct or indirect partners or beneficiaries in connection with a
distribution of the Rights to its direct or indirect partners or
beneficiaries or to executives or employees, provided such proposed
assignees are then Accredited Investors as such term is defined in
Regulation D under the Securities Act, (ii) to a permitted transferee in
connection with a transfer of the Rights in accordance with the terms of
the Rights, and (iii) to a third party in connection with a transfer of
Rights as security for or in satisfaction of obligations of any partner of
Holder, if in the case of (i), (ii) and (iii) above, such persons or such
third party agree in writing to be bound by all of the provisions hereof.
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of all of the parties hereto.
4.4 BURDEN AND BENEFIT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, personal and legal representatives, successors and, subject to
Section 4.3 above, assigns.
4.5 NOTICES. All notices called for under this Agreement
shall be in writing and shall be deemed given upon receipt if delivered
personally or by facsimile transmission and followed promptly by mail, or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth opposite their names in
Schedule A hereto, or to any other address or addressee as any party
entitled to receive notice under this Agreement shall designate, from time
to time, to others in the manner provided in this Section 4.5 for the
service of notices; provided, however, that notices of a change of address
shall be effective only upon receipt thereof. Any notice delivered to the
party hereto to whom it is addressed shall be deemed to have been given and
received on the day it was received; provided, however, that if such day is
not a business day then the notice shall be deemed to have been given and
received on the business day next following such day. Any notice sent by
facsimile transmission shall be deemed to have been given and received on
the business day next following the transmission.
4.6 SPECIFIC PERFORMANCE. The parties hereto acknowledge
that the obligations undertaken by them hereunder are unique and that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall
<PAGE>
be entitled to (i) compel specific performance of the obligations,
covenants and agreements of any other party under this Agreement in
accordance with the terms and conditions of this Agreement and (ii) obtain
preliminary injunctive relief to secure specific performance and to prevent
a breach or contemplated breach of this Agreement in any court of the
United States or any State thereof having jurisdiction.
4.7 GOVERNING LAW. This Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating
thereto, shall be governed by and construed in accordance with the laws of
the State of New York, but not including the choice of law rules thereof.
4.8 HEADINGS. Section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any
way define or affect the meaning, construction or scope of any of the
provisions hereof.
4.9 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the person or entity may require.
4.10 EXECUTION IN COUNTERPARTS. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It
shall not be necessary that the signature of or on behalf of each party
appears on each counterpart, but it shall be sufficient that the signature
of or on behalf of each party appears on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It
shall not be necessary in any proof of this Agreement to produce or account
for more than a number of counterparts containing the respective signatures
of or on behalf of all of the Parties.
4.11 SEVERABILITY. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the
limit of validity prescribed by law, then the obligation to be fulfilled
shall be reduced to the limit of such validity; and if any clause or
provision contained in this Agreement operates or would operate to
invalidate this Agreement, in whole or in part, then such clause or
provision only shall be held ineffective, as though not herein contained,
and the remainder of this Agreement shall remain operative and in full
force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first
hereinabove set forth.
COMPANY:
Address: LaSalle Hotel Properties
220 East 42nd Street
New York, New York 10017
By: /s/ JON E. BORTZ
Jon E. Bortz
President
HOLDERS:
Address: Crosstown Asset Corp.I
c/o Cargill Financial
Services Corporation /S/ TIMOTHY S. CLARK
6000 Clearwater Drive By: Timothy S. Clark
Minnetonka, Minnesota 55343
EXHIBIT 10.9
- ------------
U.S. $200,000,000
SENIOR UNSECURED CREDIT AGREEMENT
Dated as of April 23, 1998
Among
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
AS THE BORROWER,
SOCIETE GENERALE, SOUTHWEST AGENCY
AS CO-ARRANGER, ADMINISTRATIVE AGENT, AND DOCUMENTATION AGENT,
BANK OF MONTREAL, CHICAGO BRANCH
AS CO-ARRANGER AND SYNDICATION AGENT,
and
THE BANKS NAMED HEREIN
AS THE BANKS
<PAGE>
TABLE OF CONTENTS
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Page
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ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
Section A. CERTAIN DEFINED TERMS. . . . . . . . . . . . . . . 1
Section 1.2 COMPUTATION OF TIME PERIODS . . . . . . . . . 23
Section 1.3 ACCOUNTING TERMS; CHANGES IN GAAP . . . . . . 23
Section 1.4 TYPES OF ADVANCES . . . . . . . . . . . . . . 23
Section 1.5 MISCELLANEOUS . . . . . . . . . . . . . . . . 23
ARTICLE II
THE ADVANCES AND THE LETTERS OF CREDIT
Section 2.1 THE ADVANCES. . . . . . . . . . . . . . . . . 23
Section 2.2 METHOD OF BORROWING . . . . . . . . . . . . . 24
Section 2.3 FEES. . . . . . . . . . . . . . . . . . . . . 26
Section 2.4 REDUCTION OF THE COMMITMENTS. . . . . . . . . 27
Section 2.5 REPAYMENT OF ADVANCES . . . . . . . . . . . . 27
Section 2.6 INTEREST, LATE PAYMENT FEE. . . . . . . . . . 27
Section 2.7 PREPAYMENTS . . . . . . . . . . . . . . . . . 28
Section 2.8 BREAKAGE COSTS. . . . . . . . . . . . . . . . 29
Section 2.9 INCREASED COSTS . . . . . . . . . . . . . . . 30
Section 2.10 PAYMENTS AND COMPUTATIONS . . . . . . . . . . 31
Section 2.11 TAXES . . . . . . . . . . . . . . . . . . . . 33
Section 2.12 ILLEGALITY. . . . . . . . . . . . . . . . . . 34
Section 2.13 LETTERS OF CREDIT . . . . . . . . . . . . . . 35
Section 2.14 DETERMINATION OF BORROWING BASE . . . . . . . 37
Section 2.15 BANK REPLACEMENT. . . . . . . . . . . . . . . 38
Section 2.16 SHARING OF PAYMENTS, ETC. . . . . . . . . . . 38
ARTICLE III
CONDITIONS OF LENDING
Section 3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE . . . 39
Section 3.2 CONDITIONS PRECEDENT FOR EACH BORROWING
OR LETTER OF CREDIT . . . . . . . . . . . . . 41
Section 3.3 CONDITIONS PRECEDENT TO A HOTEL PROPERTY
QUALIFYING AS AN ELIGIBLE PROPERTY. . . . . . 41
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 EXISTENCE; QUALIFICATION; PARTNERS;
SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 4.2 PARTNERSHIP AND CORPORATE POWER . . . . . . . 46
Section 4.3 AUTHORIZATION AND APPROVALS . . . . . . . . . 46
Section 4.4 ENFORCEABLE OBLIGATIONS . . . . . . . . . . . 46
Section 4.5 PARENT COMMON STOCK . . . . . . . . . . . . . 46
Section 4.6 FINANCIAL STATEMENTS. . . . . . . . . . . . . 46
Section 4.7 TRUE AND COMPLETE DISCLOSURE. . . . . . . . . 47
Section 4.8 LITIGATION. . . . . . . . . . . . . . . . . . 47
Section 4.9 USE OF PROCEEDS . . . . . . . . . . . . . . . 47
Section 4.10 INVESTMENT COMPANY ACT. . . . . . . . . . . . 47
Section 4.11 TAXES . . . . . . . . . . . . . . . . . . . . 48
Section 4.12 PENSION PLANS . . . . . . . . . . . . . . . . 48
Section 4.13 CONDITION OF HOTEL PROPERTY; CASUALTIES;
CONDEMNATION. . . . . . . . . . . . . . . . . 49
Section 4.14 INSURANCE . . . . . . . . . . . . . . . . . . 49
Section 4.15 NO BURDENSOME RESTRICTIONS; NO DEFAULTS . . . 49
Section 4.16 ENVIRONMENTAL CONDITION . . . . . . . . . . . 49
Section 4.17 LEGAL REQUIREMENTS, ZONING, UTILITIES,
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.18 EXISTING INDEBTEDNESS . . . . . . . . . . . . 50
Section 4.19 TITLE; ENCUMBRANCES . . . . . . . . . . . . . 51
Section 4.20 LEASING ARRANGEMENTS. . . . . . . . . . . . . 51
Section 4.21 APPROVED FRANCHISE AGREEMENTS . . . . . . . . 51
Section 4.23 PUBLIC OFFERING . . . . . . . . . . . . . . . 52
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.1 COMPLIANCE WITH LAWS, ETC.. . . . . . . . . . 52
Section 5.2 PRESERVATION OF EXISTENCE, SEPARATENESS,
ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.3 PAYMENT OF TAXES, ETC.. . . . . . . . . . . . 53
Section 5.4 VISITATION RIGHTS; BANK MEETING . . . . . . . 54
Section 5.5 REPORTING REQUIREMENTS. . . . . . . . . . . . 54
Section 5.6 MAINTENANCE OF PROPERTY AND REQUIRED WORK . . 57
Section 5.7 INSURANCE.. . . . . . . . . . . . . . . . . . 58
Section 5.8 [Intentionally Deleted] . . . . . . . . . . . 58
Section 5.9 SUPPLEMENTAL GUARANTIES . . . . . . . . . . . 58
Section 5.10 LASALLE LEASING . . . . . . . . . . . . . . . 58
Section 5.11 USE OF PROCEEDS . . . . . . . . . . . . . . . 58
Section 5.12 YEAR 2000 COMPATIBILITY . . . . . . . . . . . 58
ARTICLE VI
NEGATIVE COVENANTS
Section 6.1 LIENS, ETC. . . . . . . . . . . . . . . . . . 59
Section 6.2 INDEBTEDNESS. . . . . . . . . . . . . . . . . 59
Section 6.3 AGREEMENTS RESTRICTING DISTRIBUTIONS
FROM SUBSIDIARIES . . . . . . . . . . . . . . 60
Section 6.4 RESTRICTED PAYMENTS . . . . . . . . . . . . . 60
Section 6.5 FUNDAMENTAL CHANGES; ASSET DISPOSITIONS . . . 61
Section 6.6 APPROVED PARTICIPATING LESSEE OWNERSHIP.. . . 61
Section 6.7 INVESTMENTS, LOANS, FUTURE PROPERTIES . . . . 61
Section 6.8 AFFILIATE TRANSACTIONS. . . . . . . . . . . . 62
Section 6.9 SALE AND LEASEBACK. . . . . . . . . . . . . . 62
Section 6.10 SALE OR DISCOUNT OF RECEIVABLES . . . . . . . 62
Section 6.11 NO FURTHER NEGATIVE PLEDGES . . . . . . . . . 63
Section 6.12 APPROVED FRANCHISE AGREEMENTS . . . . . . . . 63
Section 6.13 MATERIAL DOCUMENTS. . . . . . . . . . . . . . 63
Section 6.14 LIMITATIONS ON DEVELOPMENT, CONSTRUCTION,
RENOVATION AND PURCHASE OF HOTEL PROPERTIES.. 63
ARTICLE VII
FINANCIAL COVENANTS
Section 7.1 FIXED CHARGE COVERAGE RATIO.. . . . . . . . . 64
Section 7.2 INTEREST COVERAGE RATIO.. . . . . . . . . . . 64
Section 7.3 UNSECURED INTEREST COVERAGE RATIO.. . . . . . 64
Section 7.4 MAINTENANCE OF NET WORTH. . . . . . . . . . . 64
Section 7.5 LIMITATIONS ON TOTAL LIABILITIES. . . . . . . 64
Section 7.6 LIMITATIONS ON SECURED RECOURSE
INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.7 LIMITATIONS ON SECURED INDEBTEDNESS.. . . . . 65
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.1 EVENTS OF DEFAULT . . . . . . . . . . . . . . 65
Section 8.2 OPTIONAL ACCELERATION OF MATURITY . . . . . . 69
Section 8.3 AUTOMATIC ACCELERATION OF MATURITY. . . . . . 69
Section 8.4 CASH COLLATERAL ACCOUNT . . . . . . . . . . . 69
Section 8.5 NON-EXCLUSIVITY OF REMEDIES . . . . . . . . . 70
Section 8.6 RIGHT OF SET-OFF. . . . . . . . . . . . . . . 70
<PAGE>
ARTICLE IX
AGENCY AND ISSUING BANK PROVISIONS
Section 9.1 AUTHORIZATION AND ACTION. . . . . . . . . . . 71
Section 9.2 AGENTS' RELIANCE, ETC.. . . . . . . . . . . . 71
Section 9.3 EACH AGENT AND ITS AFFILIATES . . . . . . . . 71
Section 9.4 BANK CREDIT DECISION. . . . . . . . . . . . . 72
Section 9.5 INDEMNIFICATION . . . . . . . . . . . . . . . 72
Section 9.6 SUCCESSOR AGENT AND ISSUING BANKS . . . . . . 72
Section 9.7 CO-ARRANGER AND DOCUMENTATION AGENT . . . . . 73
ARTICLE X
MISCELLANEOUS
Section 10.1 AMENDMENTS, ETC.. . . . . . . . . . . . . . . 73
Section 10.2 NOTICES, ETC. . . . . . . . . . . . . . . . . 74
Section 10.3 NO WAIVER; REMEDIES . . . . . . . . . . . . . 75
Section 10.4 COSTS AND EXPENSES. . . . . . . . . . . . . . 75
Section 10.5 BINDING EFFECT. . . . . . . . . . . . . . . . 75
Section 10.6 BANK ASSIGNMENTS AND PARTICIPATIONS . . . . . 75
Section 10.7 INDEMNIFICATION . . . . . . . . . . . . . . . 78
Section 10.8 EXECUTION IN COUNTERPARTS . . . . . . . . . . 78
Section 10.9 SURVIVAL OF REPRESENTATIONS,
INDEMNIFICATIONS, ETC . . . . . . . . . . . . 78
Section 10.10 SEVERABILITY. . . . . . . . . . . . . . . . . 78
Section 10.11 ENTIRE AGREEMENT. . . . . . . . . . . . . . . 79
Section 10.12 USURY NOT INTENDED. . . . . . . . . . . . . . 79
Section 10.13 GOVERNING LAW. . . . . . . . . . . . . . . . 79
Section 10.14 CONSENT TO JURISDICTION; SERVICE OF PROCESS;
JURY TRIAL. . . . . . . . . . . . . . . . . . 80
Section 10.15 KNOWLEDGE OF BORROWER . . . . . . . . . . . . 81
Section 10.16 BANKS NOT IN CONTROL. . . . . . . . . . . . . 81
Section 10.17 HEADINGS DESCRIPTIVE. . . . . . . . . . . . . 81
Section 10.18 TIME IS OF THE ESSENCE. . . . . . . . . . . . 81
SECTION 10.20 SCOPE OF INDEMNITIES. . . . . . . . . . . . . 81
Section 10.21 CONFIDENTIALITY . . . . . . . . . . . . . . . 81
<PAGE>
EXHIBITS:
Exhibit A - Form of Note
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Compliance Certificate
Exhibit E - Form of Environmental Indemnity
Exhibit F - Form of Guaranty
Exhibit G - Form of Notice of Borrowing
Exhibit H - Form of Notice of Conversion or Continuation
Exhibit I - Form of Property Adjustment Report
<PAGE>
SCHEDULES:
Schedule 1.01(a) - Commitments
Schedule 1.01(b) - Initial Properties, Initial Investment Amount and
Initial Hotel Value
Schedule 1.01(c) - Approved Franchisors and Managers
Schedule 1.01(d) - Approved Participating Leases
Schedule 1.01(e) - Engineer Report Scope of Services
Schedule 1.01(f) - Approved Engineers
Schedule 1.01(g) - Environmental Report Scope of Services
Schedule 1.01(h) - Approved Environmental Consultants
Schedule 1.01(i) - Guarantors
Schedule 1.01(j) - Qualified Ground Leases
Schedule 1.01(k) - Approved Participating Lessee
Schedule 3.03 - Conditions Precedent
Schedule 4.01 - Subsidiaries
Schedule 4.08 - Litigation
Schedule 4.17 - Legal Requirements; Zoning; Utilities; Access
Schedule 4.18 - Existing Indebtedness
Schedule 4.21 - Approved Franchise Agreements
Schedule 4.22 - Approved Management Agreements
Schedule 5.06 - Required Work
Schedule 5.07 - Insurance
Schedule 10.02 - Notice Information
<PAGE>
SENIOR UNSECURED CREDIT AGREEMENT
SENIOR UNSECURED CREDIT AGREEMENT, dated as of April 23, 1998, is
among LASALLE HOTEL OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership, as the Borrower, SOCIETE GENERALE, SOUTHWEST AGENCY, as Co-
Arranger, Administrative Agent, and Documentation Agent, BANK OF MONTREAL,
CHICAGO BRANCH, as Co-Arranger and Syndication Agent, and the Banks.
The parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
Section A. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (unless otherwise
indicated, such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"ACCESSION AGREEMENT" means an Accession Agreement in the form
attached respectively to the Guaranty and Environmental Indemnity as Annex
1 thereto, which agreement causes the Person executing and delivering the
same to the Administrative Agent to become a party to the Guaranty and
Environmental Indemnity.
"ACQUISITION AGREEMENTS" means for any Hotel Property the agreements
entered into in connection with the acquisition of such Hotel Property.
"ADJUSTED BASE RATE" means, for any day, the fluctuating rate per
annum of interest equal to the greater of (a) the Prime Rate in effect on
such day and (b) the Federal Funds Rate in effect on such day plus 1/2%.
"ADJUSTED EBITDA" means, for any Person or Hotel Property, as
applicable, for any period, the EBITDA of such Person or Hotel Property, as
applicable, for such period LESS the aggregate FF&E Reserves for such
period in respect of, as applicable, each Hotel Property owned by such
Person or its Subsidiaries (whether located on land owned by or land leased
to such owner of the Hotel Property) or such Hotel Property.
"ADJUSTED NET WORTH" means, for the Parent as of any date, the sum of
(a) the Parent's Net Worth on such date PLUS (B) THE MINORITY INTEREST
REFLECTED IN THE PARENT'S BALANCE SHEET ON SUCH DATE DETERMINED IN
ACCORDANCE WITH GAAP.
"ADJUSTMENT EVENT" has the meaning set forth in Section 2.14(b).
"ADMINISTRATIVE AGENT" means Societe Generale, Southwest Agency, in
its capacity as Administrative Agent for the Banks pursuant to Article IX
and any successor Administrative Agent appointed pursuant to Section 9.06.
"ADVISOR" means LaSalle Hotel Advisors, Inc.
"ADVISORY AGREEMENT" means that certain Advisory Agreement dated
April __, 1998, between the Parent and the Advisor, as such agreement may
be amended in accordance with the terms of this Agreement.
<PAGE>
"ADVANCE" means an Advance by a Bank to the Borrower, any such
Advance being either a Base Rate Advance or a LIBOR Advance.
"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such Person or any Subsidiary of such
Person. The term "control" (including the terms "controlled by" or "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of a Control Percentage, by contract or
otherwise.
"AGENT" means either the Administrative Agent or the Syndication
Agent and "AGENTS" means both such agents.
"AGREEMENT" has the meaning given such term in the initial paragraph
of this agreement.
"ALLOCATION PERCENTAGE" means, for any Person, with respect to a
Person's Joint Venture Subsidiary, the percentage ownership interest of
such Person in such Joint Venture Subsidiary.
"APPLICABLE LENDING OFFICE" means, with respect to each Bank, such
Bank's Domestic Lending Office in the case of a Base Rate Advance and such
Bank's LIBOR Lending Office in the case of a LIBOR Advance.
"APPLICABLE MARGIN" means, (a) with respect to each Type of Advance
at any date, the applicable percentage per annum set forth below based upon
the Status then in effect under the column for such Type of Advance, (b)
with respect to the letter of credit fee payable under Section 2.03(b) at
any date, the applicable percentage per annum set forth below under the
column "Letters of Credit & LIBOR Advances," based upon the Status then in
effect, and (c) with respect to the commitment fee payable under Section
2.03(a) at any date, the applicable percentage per annum set forth below
under the column "Unused Commitment Fee," based upon the Status then in
effect.
Letters of
Credit
Base Rate & LIBOR Commitment
Advances Advances Fee
---------- ----------- ----------
LEVEL I
STATUS 0% 1.00%. 125%
LEVEL II
STATUS 0% 1.125% .15%
LEVEL III
STATUS 0% 1.25% .15%
LEVEL IV
STATUS 0% 1.375% .20%
LEVEL V
STATUS 0% 1.40% .20%
LEVEL VI
STATUS 0% 1.50% .20%
LEVEL VII
STATUS .125% 1.625% .25%
LEVEL VIII
STATUS .25% 1.75% .25%
<PAGE>
"APPROVED FRANCHISE AGREEMENTS" means those certain Agreements listed
on Schedule 4.21 attached hereto and any future franchise or license
agreement for an Eligible Property with an Approved Franchisor which is in
a form substantially similar to a previously executed Approved Franchise
Agreement or otherwise in a form approved by the Administrative Agent in
writing which approval shall not be unreasonably withheld or delayed.
"APPROVED FRANCHISOR" means those certain brands listed on Schedule
1.01(c) attached hereto for those certain franchisors listed as "Approved
Franchisors" on Schedule 1.01(c) attached hereto, or any other reputable,
nationally known, third party franchisor or licensor of a Hotel Property
approved by the Administrative Agent in writing which approval shall not be
unreasonably withheld or delayed.
"APPROVED MANAGEMENT AGREEMENTS" means those certain management
agreements listed on Schedule 4.22 attached hereto and any future
management agreement for an Eligible Property in substantially the same
form or as otherwise approved by the Administrative Agent in writing which
approval shall not be unreasonably withheld or delayed.
"APPROVED MANAGER" means those certain managers listed as "Approved
Managers" on Schedule 1.01(c) attached hereto, or any other reputable,
nationally known, third party manager of a Hotel Property approved by the
Administrative Agent in writing which approval shall not be unreasonably
withheld or delayed.
"APPROVED OTHER COUNTRY" means each of the following countries:
Canada, Mexico, United Kingdom, France, Germany, Spain, Belgium, The
Netherlands, Luxembourg, Italy, Portugal, Austria, Switzerland, Norway,
Sweden, Denmark, U. S. Virgin Islands, Bahamas, and Puerto Rico.
"APPROVED PARTICIPATING LEASES" means those certain Approved
Participating Leases listed on Schedule 1.01(d) attached hereto and any
future participating lease for an Eligible Property approved by the
Administrative Agent in writing (which approval shall not be unreasonably
withheld if such participating lease permits the lessor under such
participating lease to terminate such lease upon the lessee's failure to
achieve reasonable revenue targets for the applicable Hotel Property).
"APPROVED PARTICIPATING LESSEE" means LaSalle Leasing, each of the
other Persons listed on Schedule 1.01(k) attached hereto, and any future
participating lessee for a Hotel Property which is approved by the
Administrative Agent in writing and for which neither the Borrower, nor the
Parent own directly or indirectly ten percent (10%) or more of the
beneficial ownership interest in such Person; provided, however, that any
lessee (a) in which the Advisor has a Control Percentage in ownership
interest or (b) that is an Approved Franchisor, an Approved Manager or
either of their Affiliates shall automatically be deemed an Approved
Participating Lessee.
"ASSET DISPOSITION" means any sale, lease of substantially all of a
Hotel Property (in which the Borrower or a Guarantor is lessor but
exclusive of the Approved Participating Leases), conveyance, exchange,
transfer, or assignment of any Property by the Borrower or a Guarantor to a
Person other than the Borrower or a Guarantor.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Bank and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of the attached Exhibit B.
<PAGE>
"ASSOCIATES" means, for any individual, the Associates (as such term
is defined in Rule 12b-2 promulgated under the Exchange Act) of such
individual.
"BANKS" means the lenders listed on the signature pages of this
Agreement and each Eligible Assignee that shall become a party to this
Agreement pursuant to Section 10.06.
"BASE RATE ADVANCE" means an Advance which bears interest as provided
in Section 2.06(a).
"BORROWER" means LaSalle Hotel Operating Partnership, L.P., a
Delaware limited partnership.
"BORROWING" means a borrowing consisting of simultaneous Advances of
the same Type made by each Bank pursuant to Section 2.01 or Converted by
each Bank to Advances of a different Type pursuant to Section 2.02(b).
"BORROWING BASE" means, at any date of its determination, an amount
equal to (a) 50% of the sum of the Hotel Values for all Eligible Properties
on such date MINUS (b) the Unsecured Indebtedness (except for the
Obligations) of the Parent and its Subsidiaries outstanding on such date.
"BORROWING BASE CERTIFICATE" means a certificate of the Borrower in
substantially the form of the attached Exhibit C, certified by a
Responsible Officer of Borrower to be true, correct and accurate in all
material respects.
"BORROWING BASE DETERMINATION DATE" means any date the Borrowing Base
is determined in accordance with Section 2.14.
"BORROWING BASE REQUIREMENTS" means collectively that (a) both the
Investment Amount and total guest rooms for the Eligible Properties which
are located outside the United States in the aggregate shall not exceed 15%
of the Investment Amount and total guest rooms, as applicable, for all
Eligible Properties and shall only be in an Approved Other Country; (b)
both the Investment Amount and total guest rooms for the Eligible
Properties which are located in any one state in the aggregate shall not
exceed 20% (except for New York, Florida, Texas and California which shall
not exceed 30% for each such state) of the Investment Amount and total
guest rooms, as applicable, for all Eligible Properties; (c) both the
Investment Amount and total guest rooms for the Eligible Properties which
are limited service hotels in the aggregate shall not exceed 10% of the
Investment Amount and total guest rooms, as applicable, for all Eligible
Properties; (d) both the Investment Amount and total guest rooms for the
Eligible Properties which are not operated under any franchise or license
agreement in the aggregate shall not exceed (i) prior to June 30, 1999, 30%
and (ii) thereafter, 20% of the Investment Amount and total guest rooms, as
applicable, for all Eligible Properties; (e) no Hotel Property or other
Property shall cause the Parent to forfeit the Parent's tax status as a
REIT; (f) both the Investment Amount and total guest rooms for Eligible
Properties which are subject to a ground lease (excluding the LeMeridien
Hotel in New Orleans, Louisiana; the golf course lease for the Marriott
Seaview Resort in Atlantic City, New Jersey; the parking lot lease for the
Radisson South Hotel in Bloomington, Minnesota; and the Princess Hotel in
San Diego, California, if acquired by the Borrower or its Subsidiary) in
the aggregate shall not exceed 20% of the Investment Amount and total guest
rooms, as applicable, for all Eligible Properties; (g) the total guest
rooms for Eligible Properties which are out of service at any one time in
the aggregate shall not exceed 15% of the total guest rooms for all
Eligible Properties; (h) no more than 20% of the Borrowing Base may be
comprised of Renovating Properties; (i) no more than 20% of the Borrowing
Base may be comprised of Hotel Properties owned or leased by Joint Venture
Subsidiaries and (j) no more than 20% of the Borrowing Base may be
comprised of any one Eligible Property.
<PAGE>
"BUSINESS DAY" means a day of the year on which banks are not
required or authorized to close in New York City, Chicago, Illinois or
Dallas, Texas and, if the applicable Business Day relates to any LIBOR
Advances, any day other than a Saturday or Sunday or a day on which banking
institutions are generally authorized or obligated by law or executive
order to close in the City of London, England.
"CALCULATED VALUE" means for any Hotel Property the product of (a)
the lesser of (i) the Adjusted EBITDA for such Seasoned Property for the
preceding Rolling Period or (ii) the actual rental payments received by the
Parent or its Subsidiary under the participating lease for such Hotel
Property during such Rolling Period TIMES (b) ten (10).
"CAPITAL EXPENDITURE" means any payment made directly or indirectly
for the purpose of acquiring or constructing fixed assets, Real Property or
equipment which in accordance with GAAP would be capitalized in the fixed
asset accounts of such Person making such expenditure, including, without
limitation, amounts paid or payable for such purpose under any conditional
sale or other title retention agreement or under any Capital Lease, but
excluding repairs of Property in the normal and ordinary course of
business.
"CAPITALIZATION EVENT" means any sale or issuance by the Parent or
any of its Subsidiaries of equity securities except for the issuance of the
Borrower's operating partnership units in exchange for a direct or indirect
ownership interest in a Person that owns a Hotel Property.
"CAPITAL LEASE" means, for any Person, any lease of any Property
(whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is or should be accounted for as a capital lease on
the balance sheet of that Person.
"CAPITALIZED LEASE OBLIGATIONS" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its
Subsidiaries under Capitalized Leases, as determined on a consolidated
basis in conformity with GAAP.
"CASH COLLATERAL ACCOUNT" means a special cash collateral account
containing cash deposited pursuant to the terms of this Agreement to be
maintained at Societe Generale, New York Branch's office in accordance with
Section 8.04.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, state and local
analogs, and all rules and regulations and requirements thereunder in each
case as now or hereafter in effect.
"CLOSING DATE" means April 29, 1998.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"COMMITMENT" means, with respect to any Bank, the amount set opposite
such Bank's name on Schedule 1.01(a) as its Commitment, or if such Bank has
entered into any Assignment and Acceptance, the amount set forth for such
Bank as its Commitment in the Register maintained by the Administrative
Agent pursuant to Section 10.06(c), as such amount may be reduced pursuant
to Section 2.04.
"COMPLIANCE CERTIFICATE" means a certificate of the Borrower in
substantially the form of the attached Exhibit D.
<PAGE>
"CONDITIONS TO ASSET DISPOSITION" shall for any Asset Disposition
include all of the following requirements: (a) no Default has occurred and
is continuing or would occur upon the consummation of such Asset
Disposition, as certified by the Borrower; (b) the Borrower shall have
delivered to the Administrative Agent a Property Adjustment Report in
connection with such Asset Disposition; and (c) if required pursuant to the
provisions of Section 2.07(c)(i), the Borrower makes a prepayment of the
Advances in an amount of not less than the amount of Advances that would
need to be repaid, if any, to cure a Borrowing Base deficiency under
Section 2.07(c)(i).
"CONSOLIDATED" refers to the consolidation of the accounts of the
Borrower with the Borrower's Subsidiaries and the Parent with the Parent's
Subsidiaries, as applicable, in accordance with GAAP.
"CONTROL PERCENTAGE" means, with respect to any Person, the
percentage of the outstanding capital stock of such Person having ordinary
voting power which gives the direct or indirect holder of such stock the
power to elect a majority of the Board of Directors of such Person.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades (whether or not incorporated) under common
control which, together with the Parent and the Borrower, are treated as a
single employer under Section 414 of the Code.
"CONVERT", "CONVERSION", and "CONVERTED" each refers to a conversion
of Advances of one Type into Advances of another Type pursuant to
Section 2.02(b).
"CREDIT DOCUMENTS" means this Agreement, the Notes, the Guaranties,
the Environmental Indemnities, the Fee Letter, and each other agreement,
instrument or document executed by the Borrower or any of its Subsidiaries
at any time in connection with this Agreement.
"DEFAULT" means (a) an Event of Default or (b) any event or condition
which with notice or lapse of time or both would, unless cured or waived,
become an Event of Default.
"DEVELOPMENT PROPERTY" means either (a) a new Hotel Property under
construction including the conversion of a non-Hotel Property into a Hotel
Property or (b) an existing Hotel Property which is undergoing an expansion
pursuant to which the total guest rooms for such Hotel Property will be
increased by 50% or more.
"DOLLAR EQUIVALENT" means the equivalent in another currency of an
amount in U.S. Dollars to be determined by reference to the rate of
exchange quoted by the Administrative Agent, at 12:00 Noon (Dallas, Texas
time) on the date of determination, for the spot purchase in the foreign
exchange market of such amount of Dollars with such other currency.
"DOLLARS" and "$" means lawful money of the United States of America.
"DOMESTIC LENDING OFFICE" means, with respect to any Bank, the office
of such Bank specified as its "Domestic Lending Office" opposite its name
on Schedule 10.02 or such other office of such Bank as such Bank may from
time to time specify to the Borrower and the Administrative Agent.
"EBITDA" means for any Person or Hotel Property, as applicable, for
any period for which such amount is being determined, an amount equal to
(a) the Net Income for such Person or Hotel Property, as applicable, for
such period PLUS (b) to the extent deducted in determining Net Income,
Interest Expense, income taxes, depreciation, amortization, and other non-
cash items for such period, as determined in accordance with GAAP.
<PAGE>
"EFFECTIVE DATE" means the date all of the conditions precedent set
forth in Section 3.01 have been satisfied.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank (or other financial
institution acceptable to the Administrative Agent and the Borrower)
organized under the laws of the United States, or any State thereof, and
having primary capital of not less than $250,000,000 and approved by the
Administrative Agent and the Issuing Bank, which approvals will not be
unreasonably withheld, (b) a commercial bank (or other financial
institution acceptable to the Administrative Agent and the Borrower)
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development and having primary
capital (or its equivalent) of not less than $250,000,000 (or its Dollar
Equivalent) and approved by the Administrative Agent and the Issuing Bank,
which approvals will not be unreasonably withheld, (c) a Bank, and (d) an
Affiliate of the respective assigning Bank, without approval of any Person
but otherwise meeting the eligibility requirements of (a) or (b) above.
"ELIGIBLE PROPERTY" means, as of any Borrowing Base Determination
Date, any Hotel Property which is owned or leased by the Borrower or any
Guarantor on such date and was so owned or leased on the date of the most
recent Borrowing Base Certificate delivered to the Banks, and which
satisfies the conditions to qualifying as an Eligible Property set forth in
Section 3.03 on such Borrowing Base Determination Date.
"ENGINEERING REPORT" means with respect to any Hotel Property, an
engineering report in accordance with the scope of services attached hereto
as Schedule 1.01 (e) reasonably satisfactory to the Administrative Agent
prepared for the Banks by a Person set forth on Schedule 1.01(f) or
otherwise satisfactory to the Administrative Agent covering the physical
condition of the Hotel Property, including without limitation the
structural, electrical, plumbing, mechanical and other essential components
of the Hotel Property.
"ENVIRONMENT" or "ENVIRONMENTAL" shall have the meanings set forth in
42 U.S.C. Section 9601(8), as amended.
"ENVIRONMENTAL CLAIM" means any third party (including governmental
agencies and employees) action, lawsuit, claim, demand, regulatory action
or proceeding, order, decree, consent agreement or notice of potential or
actual responsibility or violation (including claims or proceedings under
the Occupational Safety and Health Acts or similar laws or requirements
relating to health or safety of employees) which seeks to impose liability
under any Environmental Law.
"ENVIRONMENTAL INDEMNITY" means one or more environmental indemnity
agreements dated of even date herewith in substantially the form of the
attached Exhibit E executed or to be executed by the Borrower, the Parent
and all Subsidiaries of the Borrower (excluding the Permitted Other
Subsidiaries), and any future environmental indemnities executed in
connection with any Hotel Property, as any of such environmental
indemnities may be amended hereafter in accordance with the terms of such
agreements.
"ENVIRONMENTAL LAW" means all Legal Requirements arising from,
relating to, or in connection with the Environment, health, or safety,
including without limitation CERCLA, relating to (a) pollution,
contamination, injury, destruction, loss, protection, cleanup, reclamation
or restoration of the air, surface water, groundwater, land surface or
subsurface strata, or other natural resources; (b) solid, gaseous or liquid
waste generation, treatment, processing, recycling, reclamation, cleanup,
storage, disposal or transportation; (c) exposure to pollutants,
contaminants, hazardous, medical, infectious, or toxic substances,
materials or wastes; (d) the safety or health of employees; or (e) the
manufacture, processing, handling, transportation, distribution in
commerce, use, storage or disposal of hazardous, medical, infectious, or
toxic substances, materials or wastes.
<PAGE>
"ENVIRONMENTAL PERMIT" means any permit, license, order, approval or
other authorization under Environmental Law.
"ENVIRONMENTAL REPORT" means with respect to any Hotel Property, an
environmental report in accordance with the scope of services attached
hereto as Schedule 1.01 (g) reasonably satisfactory to the Administrative
Agent prepared for the Banks by a Person set forth on Schedule 1.01(h) or
otherwise satisfactory to the Administrative Agent certifying to the
Administrative Agent and the Banks that the Hotel Property and the soil and
the groundwater thereunder do not contain Hazardous Substances except for
Permitted Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect
from time to time.
"EXCHANGE ACT" has the meaning set forth in Section 2.04.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.01.
"EXPIRATION DATE" means, with respect to any Letter of Credit, the
date on which such Letter of Credit will expire or terminate in accordance
with its terms.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for any such day on such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any of its successors.
"FEE LETTER" means the letter agreement dated as of March 13, 1998
among the Borrower, the Parent, the Syndication Agent, and the
Administrative Agent, as amended.
"FF&E" means furniture, fixtures and equipment.
"FF&E RESERVE" means, for any Person or any Hotel Property for any
period, a reserve equal to the greater of (a) four percent (4%) of gross
revenues from any Hotel Property owned by such Person or from such Hotel
Property, as applicable, for such period and (b) the actual reserves for
Capital Expenditures and FF&E expenditures pursuant to the Participating
Leases for such Hotel Properties owned by such Person or from such Hotel
Property, as applicable, for such period.
"FISCAL QUARTER" means each of the three-month periods ending on
March 31, June 30, September 30 and December 31.
"FISCAL YEAR" means the twelve-month period ending on December 31.
<PAGE>
"FIXED CHARGES" means, for any Person for the period for which such
amount is being determined, the amount (without duplication) of all
mandatory principal payments scheduled to be made (excluding optional
prepayments and scheduled principal payments in respect of any such
Indebtedness which is payable in a single installment at final maturity),
Interest Expense during such period, all payments scheduled to be made in
respect of Capital Leases of such Person during such period, and all
preferred stock dividends paid during such period.
"FIXED CHARGE COVERAGE RATIO" means, as of the end of any Rolling
Period, a ratio of (a) the Parent's Adjusted EBITDA for such Rolling Period
to (b) the Parent's Fixed Charges for such Rolling Period.
"FREE CASH FLOW" means, for any Person for any period, the Funds From
Operations for such period PLUS any amortization not included in the
calculation of Funds From Operations LESS (a) the aggregate FF&E Reserves
for such Person and its Subsidiaries for such period, and (b) the aggregate
amount of scheduled principal payments on the Total Liabilities of such
Person (excluding optional prepayments and scheduled principal payments in
respect of any such Indebtedness which is payable in a single installment
at final maturity) required to be made during such period.
"FUND," "TRUST FUND," or "SUPERFUND" means the Hazardous Substance
Response Trust Fund, established pursuant to 42 U.S.C. Section 9631 (1988)
and the Post-closure Liability Trust Fund, established pursuant to 42
U.S.C. Section 9641 (1988), which statutory provisions have been amended or
repealed by the Superfund Amendments and Reauthorization Act of 1986, and
the "Fund," "Trust Fund," or "Superfund" that are now maintained pursuant
to 42 U.S.C. Section 9507.
"FUNDING DEADLINE" means May 14, 1998.
"FUNDS FROM OPERATIONS" means, for any Person for any period for
which such amount is being determined, an amount equal to such Person's Net
Income for such period excluding gains (losses) from debt restructuring and
sales of property (including furniture and equipment), plus depreciation
and amortization of Real Property and after adjustments for unconsolidated
partnerships and joint ventures.
"FUTURE PROPERTY" means any Hotel Property except for the Initial
Properties which the Borrower or any Subsidiary of the Borrower acquires.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time, applied on a basis consistent with the
requirements of Section 1.03.
"GOVERNMENTAL AUTHORITY" means any foreign governmental authority,
the United States of America, any state of the United States of America and
any subdivision of any of the foregoing, and any agency, department,
commission, board, authority or instrumentality, bureau or court having
jurisdiction over any Bank, the Parent, the Borrower, any Subsidiaries of
the Borrower or the Parent, an participating lessee, a manager or any of
their respective Properties.
"GOVERNMENTAL PROCEEDINGS" means any action or proceedings by or
before any Governmental Authority, including, without limitation, the
promulgation, enactment or entry of any Legal Requirement.
"GUARANTOR" means Parent and each Subsidiary of the Borrower (except
the Permitted Other Subsidiaries). The Guarantors on the Effective Date
are identified on Schedule 1.01(i).
<PAGE>
"GUARANTY" means one or more Guaranty and Contribution Agreements in
substantially the form of the attached Exhibit F executed by the Parent,
the Borrower and all of the Subsidiaries of the Borrower (excluding the
Permitted Other Subsidiaries), evidencing the joint and several guaranty by
the signatories thereto of the obligations of Borrower in respect of the
Credit Documents, and any future guaranty and contribution agreement
executed to secure Advances except for Supplemental Guaranties, as any of
such agreements may be amended hereafter in accordance with the terms of
such agreements.
"HAZARDOUS SUBSTANCE" means the substances identified as such
pursuant to CERCLA and those regulated under any other Environmental Law,
including without limitation pollutants, contaminants, petroleum, petroleum
products, radio nuclides, radioactive materials, and medical and infectious
waste.
"HAZARDOUS WASTE" means the substances regulated as such pursuant to
any Environmental Law.
"HOTEL PROPERTY" for any hotel means the Real Property and the
Personal Property for such hotel, and the property referred to in Section
10.13.
"HOTEL VALUE" means, with respect to any Hotel Property, at any date,
the value thereof to be calculated as follows:
1. For a Seasoned Property, the Calculated Value for such
Seasoned Property; and
2. For a New Property, the Investment Amount in such New
Property.
The initial Hotel Value for the Initial Properties is set forth on Schedule
1.01(b) attached hereto.
"IMPROVEMENTS" for any hotel means all buildings, structures,
fixtures, tenant improvements and other improvements of every kind and
description now or hereafter located in or on or attached to the Land for
such hotel; and all additions and betterments thereto and all renewals,
substitutions and replacements thereof.
"INDEBTEDNESS" means (without duplication), at any time and with
respect to any Person, (a) indebtedness of such Person for borrowed money
(whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services purchased (other than
amounts constituting trade payables, accruals or bank drafts arising in the
ordinary course of business); (b) indebtedness of others in the amount
which such Person has directly or indirectly assumed or guaranteed or
otherwise provided credit support therefor or for which such Person is
liable as a partner of such Person; (c) indebtedness of others in the
amount secured by a Lien on assets of such Person, whether or not such
Person shall have assumed such indebtedness; (d) obligations of such Person
in respect of letters of credit, acceptance facilities, or drafts or
similar instruments issued or accepted by banks and other financial
institutions for the account of such Person (other than trade payables or
bank drafts arising in the ordinary course); (e) obligations of such Person
under Capital Leases; and (f) obligations under interest rate swap
agreements, interest rate cap agreements, interest rate collar agreements
or other similar agreements or arrangements designed to protect against
fluctuations in interest rates.
"INITIAL PROPERTIES" means collectively the Hotel Properties listed
on Schedule 1.01(b), and "INITIAL PROPERTY" means any of such Hotel
Properties.
<PAGE>
"INTEREST COVERAGE RATIO" means, as of the end of any Rolling Period,
a ratio of (a) Parent's Adjusted EBITDA for such Rolling Period to (b) the
Parent's Interest Expense for such Rolling Period.
"INTEREST EXPENSE" means, for any Person for any period for which
such amount is being determined, the total interest expense (including that
properly attributable to Capital Leases in accordance with GAAP) and all
charges incurred with respect to letters of credit determined on a
consolidated basis in conformity with GAAP, PLUS capitalized interest of
such Person and its Subsidiaries.
"INTEREST PERIOD" means, for each LIBOR Advance comprising part of
the same Borrowing, the period commencing on the date of such Advance or
the date of the Conversion of any Base Rate Advance into such an Advance
and ending on the last day of the period selected by the Borrower pursuant
to the provisions below and Section 2.02 and, thereafter, each subsequent
period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the Borrower
pursuant to the provisions below and Section 2.02. The duration of each
such Interest Period shall be one, two, or three months, in each case as
the Borrower may select, upon notice received by the Administrative Agent
not later than 12:00 Noon (Dallas, Texas time) on the third Business Day
prior to the first day of such Interest Period, PROVIDED, HOWEVER, that:
(a) Interest Periods for Advances of the same Borrowing shall be of
the same duration;
(b) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
PROVIDED that if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
(c) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month in which it would have ended if
there were a numerically corresponding day in such calendar month; and
(d) each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires; and
(e) no Interest Period with respect to any portion of any Advance
shall extend beyond the Maturity Date.
"INTEREST RATE AGREEMENTS" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect the Borrower, the
Parent or any of their respective Subsidiaries against fluctuations in
interest rates.
"INVESTMENT" means, with respect to any Person, (a) any loan or
advance to any other Person, (b) the ownership, purchase or other
acquisition of, any Stock, Stock Equivalents, other equity interest,
obligations or other securities of, (i) any other Person, (ii) or all or
substantially all of the assets of any other Person, or (iii) all or
substantially all of the assets constituting the business of a division,
branch or other unit operation of any other Person, or (c) any joint
venture or partnership with, or any capital contribution to, or other
investment in, any other Person or any real property.
<PAGE>
"INVESTMENT AMOUNT" means (a) for any Hotel Property the sum of (i)
for any Initial Property, the amount set forth for such Initial Property on
Schedule 1.01(b) attached hereto, and for any other Hotel Property, the
aggregate purchase price paid by the Borrower or its Subsidiary for such
other Hotel Property (giving effect to any securities used to purchase a
Hotel Property at the fair market value of the securities at the time of
purchase based upon the price at which such securities could be exchanged
into the Parent's common stock assuming such exchange occurred on the date
of acquiring the Hotel Property), and (ii) 95% of (A) the actual cost of
any Capital Expenditures or FF&E expenditures for such Hotel Property made
by the Borrower or its Subsidiaries during any period minus (B) the FF&E
Reserve for such Hotel Property for such period; PROVIDED THAT WITH RESPECT
TO THE INVESTMENT AMOUNT FOR A HOTEL PROPERTY OWNED OR LEASED BY A JOINT
VENTURE SUBSIDIARY, THE INVESTMENT AMOUNT FOR SUCH HOTEL PROPERTY SHALL BE
DEEMED TO BE THE ALLOCATION PERCENTAGE OF THE INVESTMENT AMOUNT FOR SUCH
HOTEL, AND (B) FOR ANY OTHER INVESTMENT THE AGGREGATE PURCHASE PRICE PAID
BY THE BORROWER OR ITS SUBSIDIARY FOR SUCH OTHER INVESTMENT (GIVING EFFECT
TO ANY SECURITIES USED TO PURCHASE SUCH INVESTMENT AT THE FAIR MARKET VALUE
OF THE SECURITIES AT THE TIME OF PURCHASE BASED UPON THE PRICE AT WHICH
SUCH SECURITIES COULD BE EXCHANGED INTO THE PARENT'S COMMON STOCK ASSUMING
SUCH EXCHANGE OCCURRED ON THE DATE OF ACQUIRING SUCH INVESTMENT).
"ISSUING BANK" means Societe Generale, Southwest Agency; any Bank
approved by the Administrative Agent and the Borrower as an "Issuing Bank";
or any Bank acting as a successor issuing bank pursuant to Section 9.06,
and "ISSUING BANKS" means, collectively, all of such Banks.
"JOINT VENTURE SUBSIDIARY" of a Person means any Subsidiary of such
Person which is controlled and managed by such Person, except for a Wholly-
Owned Subsidiary.
"LAND" for any hotel means the real property upon which the hotel is
located, together with all rights, title and interests appurtenant to such
real property, including without limitation all rights, title and interests
to (a) all strips and gores within or adjoining such property, (b) the
streets, roads, sidewalks, alleys, and ways adjacent thereto, (c) all of
the tenements, hereditaments, easements, reciprocal easement agreements,
rights-of-way and other rights, privileges and appurtenances thereunto
belonging or in any way pertaining thereto, (d) all reversions and
remainders, (e) all air space rights, and all water, sewer and wastewater
rights, (e) all mineral, oil, gas, hydrocarbon substances and other rights
to produce or share in the production of anything related to such property,
and (f) all other appurtenances appurtenant to such property, including
without limitation, any now or hereafter belonging or in anywise
appertaining thereto.
"LASALLE LEASING" means LaSalle Hotel Lessee, Inc..
"LASALLE PARTNERS" means LaSalle Partners Incorporated.
"LEGAL REQUIREMENT" means any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or official interpretation
of any of the foregoing) of, and the terms of any license or permit issued
by, any Governmental Authority.
"LETTER OF CREDIT" means, individually, any letter of credit issued
by the Issuing Bank in accordance with the provisions of Section 2.13 of
this Agreement, and "LETTERS OF CREDIT" means all such letters of credit
collectively.
"LETTER OF CREDIT DOCUMENTS" means, with respect to any Letter of
Credit, such Letter of Credit and any reimbursement or other agreements,
documents, and instruments entered into in connection with or relating to
such Letter of Credit.
<PAGE>
"LETTER OF CREDIT EXPOSURE" means, at any time, the sum of (a) the
aggregate undrawn maximum face amount of each Letter of Credit and (b) the
aggregate unpaid amount of all Letter of Credit Obligations at such time.
"LETTER OF CREDIT OBLIGATIONS" means all obligations of the Borrower
arising in respect of the Letter of Credit Documents, including without
limitation the aggregate drawn amounts of Letters of Credit which have not
been reimbursed by the Borrower or converted into an Adjusted Base Rate
Advance pursuant to the provisions of Section 2.13(c).
"LEVERAGE RATIO" means the percentage obtained by dividing (a) the
Parent's Total Liabilities by (b) the Parent Aggregate Asset Value.
"LIBOR" means, for the Interest Period for each LIBOR Advance
comprising part of the same Borrowing, an interest rate per annum (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum) equal to (A)
the rate per annum at which deposits in Dollars are offered by the
Administrative Agent to leading banks and accepted by leading banks in the
London interbank eurodollar market at approximately 12:00 Noon (London
time) three Business Days before the first day of such Interest Period, in
an amount substantially equal to the Administrative Agent's LIBOR Advance
comprising part of such Borrowing and for a period equal to such Interest
Period divided by (B) one minus the LIBOR Reserve Requirement. It is
agreed that for purposes of this definition, LIBOR Advances made hereunder
shall be deemed to constitute Eurocurrency Liabilities as defined in
Regulation D and to be subject to the reserve requirements of Regulation D.
"LIBOR ADVANCE" means any Advance which bears interest as provided in
Section 2.06(b).
"LIBOR LENDING OFFICE" means, with respect to any Bank, the office of
such Bank specified as its "LIBOR Lending Office" opposite its name on
Schedule 10.02 (or, if no such office is specified, its Domestic Lending
Office) or such other office of such Bank as such Bank may from time to
time specify to the Borrower and the Administrative Agent.
"LIBOR RESERVE REQUIREMENT" shall mean, on any day, that percentage
(expressed as a decimal fraction) which is in effect on such date, as
provided by the Federal Reserve System for determining the maximum reserve
requirements generally applicable to financial institutions regulated by
the Federal Reserve Board comparable in size and type to the Administrative
Agent (including, without limitation, basic, supplemental, marginal and
emergency reserves) under Regulation D with respect to "Eurocurrency
liabilities" as currently defined as Regulation D, or under any similar or
successor regulation with respect to Eurocurrency liabilities or
Eurocurrency funding (or other category of liabilities which includes
deposits by reference to which the interest rate on a LIBOR Advance is
determined or any category or extensions of credit which includes loans by
a non-United States office of the Administrative Agent to United States
residents). Each determination by the Administrative Agent of the LIBOR
Reserve Requirement, shall, in the absence of manifest error, be conclusive
and binding upon the Borrower.
"LIEN" means any mortgage, lien, pledge, charge, deed of trust,
security interest, encumbrance or other type of preferential arrangement to
secure or provide for the payment of any obligation of any Person, whether
arising by contract, operation of law or otherwise (including, without
limitation, the interest of a vendor or lessor under any conditional sale
agreement, Capital Lease or other title retention agreement).
<PAGE>
"LIQUID INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States;
(b) (i) negotiable or nonnegotiable certificates of deposit, time
deposits, or other similar banking arrangements maturing within 180 days
from the date of acquisition thereof ("bank debt securities"), issued by
(A) any Bank or (B) any other bank or trust company which has a combined
capital surplus and undivided profit of not less than $250,000,000 or the
Dollar Equivalent thereof, if at the time of deposit or purchase, such bank
debt securities are rated not less than "A" (or the then equivalent) by the
rating service of S&P or of Moody's, and (ii) commercial paper issued by
(A) any Bank or (B) any other Person if at the time of purchase such
commercial paper is rated not less than "A-2" (or the then equivalent) by
the rating service of S&P or not less than "P-2" (or the then equivalent)
by the rating service of Moody's, or upon the discontinuance of both of
such services, such other nationally recognized rating service or services,
as the case may be, as shall be selected by the Borrower with the consent
of the Administrative Agent;
(c) repurchase agreements relating to investments described in
clauses (a) and (b) above with a market value at least equal to the
consideration paid in connection therewith, with any Person who regularly
engages in the business of entering into repurchase agreements and has a
combined capital surplus and undivided profit of not less than $250,000,000
or the Dollar Equivalent thereof, if at the time of entering into such
agreement the debt securities of such Person are rated not less than "A"
(or the then equivalent) by the rating service of S&P or of Moody's; and
(d) such other instruments (within the meaning of New York's
Uniform Commercial Code) as the Borrower may request and the Administrative
Agent may approve in writing, which approval will not be unreasonably
withheld.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change in the
business, financial condition, or results of operations of the Borrower,
the Parent or any Guarantor, in each case since the date of the most recent
financial statements of the Borrower or the Parent delivered to the Banks
or, if no such financial statements have yet been delivered, the
Registration Statement.
"MATURITY DATE" means April 30, 2001.
"MAXIMUM RATE" means the maximum nonusurious interest rate under
applicable law.
"MINIMUM TANGIBLE NET WORTH" means, with respect to the Parent, at
any time, the sum of (a) the greater of (i) $240,000,000 and (ii) the sum
of (A) 70% of the aggregate net proceeds received by the Parent or any of
its Subsidiaries from the Public Offering and (B) 75% of the value of any
partnership interests in Borrower issued in connection with or prior to the
Public Offering, PLUS (B) 75% OF THE AGGREGATE NET PROCEEDS RECEIVED BY THE
PARENT OR ANY OF ITS SUBSIDIARIES AFTER THE PUBLIC OFFERING IN CONNECTION
WITH ANY OFFERING OF STOCK OR STOCK EQUIVALENTS OF THE PARENT OR ITS
SUBSIDIARIES TAKEN AS A WHOLE, PLUS (C) 75% OF THE VALUE OF ANY PARTNERSHIP
INTERESTS IN BORROWER ISSUED AFTER THE PUBLIC OFFERING FOR THE ACQUISITION
OF A HOTEL PROPERTY OR ANY INTEREST IN A HOTEL PROPERTY PERMITTED
HEREUNDER.
"MOODY'S" means Moody's Investor Service Inc.
<PAGE>
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Parent, the Borrower or any member
of a Controlled Group is making or accruing an obligation to make
contributions.
"NET CASH PROCEEDS" means (a) the aggregate cash proceeds (including,
without limitation, insurance proceeds) received by the Parent, the
Borrower or any of their respective Subsidiaries (as applicable) in
connection with any Asset Disposition or Capitalization Event, MINUS (b)
the reasonable expenses of such Person in connection with such Asset
Disposition or such Capitalization Event.
"NET INCOME" means, for any Person or Hotel Property for any period
for which such amount is being determined, the net income of such Person
(on a consolidated basis) or Hotel Property, as applicable, after taxes, as
determined in accordance with GAAP, excluding, however, extraordinary
items, including but not limited to (i) any net gain or loss during such
period arising from the sale, exchange, or other disposition of capital
assets (such term to include all fixed assets and all securities) other
than in the ordinary course of business and (ii) any write-up or write-down
of assets; provided that with respect to net income received from a joint
venture subsidiary or for a hotel property owned by a joint venture
subsidiary, such person or hotel property shall only be deemed to have
received the allocation percentage of such net income, and PROVIDED FURTHER
that to the extent that the net income for any hotel property does not
include a reasonable allocation of administrative, accounting or other
overhead of the person or persons who directly or indirectly own or lease
such hotel property which directly pertains to the operation of hotel
properties, then such allocation amount shall be deemed subtracted from
such net income for purposes of the financial tests and other definitions
contained in this agreement which utilize hotel property net income.
"NET WORTH" means, for any Person, stockholders equity of such Person
determined in accordance with GAAP.
"NEW PROPERTY" means, as at any date, any Hotel Property (including a
Renovating Property) that is not a Seasoned Property.
"NOTE" means a promissory note of the Borrower payable to the order
of any Bank, in substantially the form of the attached Exhibit A,
evidencing indebtedness of the Borrower to such Bank resulting from
Advances owing to such Bank, and "NOTES" means all of such promissory
notes.
"NOTICE OF BORROWING" means a notice of borrowing in the form of the
attached Exhibit G signed by a Responsible Officer of the Borrower.
"NOTICE OF CONVERSION OR CONTINUATION" means a notice of conversion
or continuation in the form of the attached Exhibit H signed by a
Responsible Officer of the Borrower.
"OBLIGATIONS" means all Advances, Letter of Credit Obligations, and
other amounts payable by the Borrower to the Administrative Agent or the
Banks under the Credit Documents.
"PARENT" means LaSalle Hotel Properties, a Maryland trust.
"PARENT AGGREGATE ASSET VALUE" means the sum of (a) the aggregate
Hotel Value of the Parent Hotel Properties which meet the Parent Hotel
Property Requirements, (b) the Parent's and the Parent's Subsidiaries'
Liquid Investments, and (c) the aggregate sum of the products obtained by
multiplying the Hotel Value for each Hotel Property owned by an
Unconsolidated Entity by the Parent's Unconsolidated Entity Percentage for
such Unconsolidated Entity.
"PARENT COMMON STOCK" means the common shares of beneficial interest
of Parent, par value $.01 per share.
<PAGE>
"PARENT HOTEL PROPERTIES" means all Hotel Properties owned or leased
by the Parent or one of the Parent's Subsidiaries, including without
limitation Eligible Properties.
"PARENT HOTEL PROPERTY REQUIREMENTS" means (a) that all Parent Hotel
Properties are full service or limited service hotels primarily located in
a resort, convention or urban market in either the United States of America
or in an Approved Other Country and (b) that all Parent Hotel Properties
would not, if all were deemed Eligible Properties, cause a material
variation to the Borrowing Base Requirements.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED ASSIGNMENT" means such sales, assignments or pledges of
such legal and beneficial interests in the Parent or the Borrower by
LaSalle Partners or any of its Associates which for LaSalle Partners or its
Associates either (a) does not result in a decrease in LaSalle Partners' or
LaSalle Partners' Associates' ownership interests below 50% of the
ownership interests in the Borrower and the Parent's common stock
represented by the sum of (i) the interests that are owned upon
consummation of the Public Offering by LaSalle Partners or LaSalle
Partners' Associates and which is not subject to forfeiture on the date of
this Agreement and (ii) for which LaSalle Partners or LaSalle Partners'
Associates have options to acquire as of the date of this Agreement
(excluding the Parent's common stock that LaSalle Partners receives
directly or indirectly as a fee to the Advisor under the Advisory
Agreement) or (b) involves the exchange of ownership interests in the
Borrower for the Parent's Common Stock.
"PERMITTED ENCUMBRANCES" means the Liens permitted to exist pursuant
to Section 6.01.
"PERMITTED HAZARDOUS SUBSTANCES" means (a) Hazardous Substances,
petroleum and petroleum products which are (i) used in the ordinary course
of business and in typical quantities for a hotel and (ii) generated, used
and disposed of in accordance with all Legal Requirements and good hotel
industry practice and (b) non-friable asbestos to the extent (i) that no
applicable Legal Requirements require removal of such asbestos from the
Hotel Property and (ii) such asbestos is encapsulated in accordance with
all applicable Legal Requirements and such reasonable operations and
maintenance program as may be required by the Administrative Agent.
"PERMITTED HOTEL SALE" means the Asset Disposition of all, but not a
portion, of (a) a Hotel Property or (b) the ownership interest in a
Subsidiary of the Borrower which owns a Hotel Property, in either case for
which the Conditions to Asset Disposition are satisfied or will be
satisfied within the time periods required under this Agreement.
"PERMITTED NON-ELIGIBLE PROPERTY" means any Hotel Property (a) which
either (i) does NOTE satisfy the conditions to qualifying as an Eligible
Property set forth in Section 3.03, (ii) has not been submitted to the
Banks as a potential Eligible Property or (iii) has been removed as an
Eligible Property by the Borrower; (b) which is owned by a Permitted Other
Subsidiary; (c) which neither is subject to any Environmental Claim, nor
contains any Hazardous Substance which could reasonably be expected to
cause a Material Adverse Change as evidenced by an Environmental Report
delivered to the Administrative Agent at least 10 days prior to the
acquisition of such Hotel Property by Borrower or one of Borrower's
Subsidiaries; and (d) which, with all other Parent Hotel Properties, will
not cause a violation of the Parent Hotel Property Requirements.
<PAGE>
"PERMITTED OTHER SUBSIDIARIES" means a Wholly-Owned Subsidiary or a
Joint Venture Subsidiary of the Borrower which (a) does not own and has
never owned any Eligible Property, (b) is a newly-formed, single-purpose
Person and (c) if such Person has any Hotel Property pledged to secure any
Secured Non-Recourse Indebtedness or Secured Recourse Indebtedness, then
such Person shall not own any Hotel Properties other than those that secure
such Indebtedness.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
limited liability company, joint venture or other entity, or a government
or any political subdivision or agency thereof or any trustee, receiver,
custodian or similar official.
"PERSONAL PROPERTY" for any Hotel Property means all FF&E, inventory
and other personal property of every kind, whether now existing or
hereafter acquired, tangible and intangible, now or hereafter located on or
about the Land, and used or to be used in the future in connection with the
operation of such Hotel Property.
"PLAN" means an employee benefit plan (other than a Multiemployer
Plan) maintained for employees of the Parent, the Borrower or any member of
a Controlled Group and covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code.
"PRELIMINARY PROPERTY PLAN" means for any Hotel Property, the
preliminary financial projections of the Capital Expenditures and the
expenditures for FF&E for such Hotel Property in connection with a
renovation or expansion (but not maintenance) of such Hotel Property, as
such projections may be amended by the Borrower from time to time.
"PRIME RATE" means a fluctuating interest rate per annum as shall be
in effect from time to time equal to the rate of interest publicly
announced by the Administrative Agent as its prime commercial lending rate
(which may not be the lowest rate offered to its customers), whether or not
the Borrower has notice thereof.
"PROPERTY" of any Person means any property or assets (whether real,
personal, or mixed, tangible or intangible) of such Person.
"PROPERTY ADJUSTMENT REPORT" means a certificate of the Borrower in
substantially the form of the attached Exhibit I.
"PROPERTY INFORMATION" for any Hotel Property means the information
and documentation for such Hotel Property listed in Sections 3.03(f),
3.03(g), 3.03(j)(i)-(iii) and (v) and a commitment for a title policy for
such Hotel Property, together with a legible copy of all documents referred
to in such commitment.
"PROPERTY OWNER" for any Initial Property or Future Property, means
the Person who owns fee or leasehold title interest (as applicable) in, and
to such Property.
"PRO RATA SHARE" means, at any time with respect to any Bank, either
(a) the ratio (expressed as a percentage) of such Bank's Commitment at such
time to the aggregate Commitments at such time or (b) if the Commitments
have been terminated, the ratio (expressed as a percentage) of such Bank's
aggregate outstanding Advances and participation interest in the Letter of
Credit Exposure at such time to the aggregate outstanding Advances and
Letter of Credit Exposure of all the Banks at such time.
"PUBLIC OFFERING" means the initial public offering of approximately
14,200,000 shares of Parent Common Stock pursuant to the Registration
Statement.
<PAGE>
"PUBLIC OFFERING DOCUMENTS" means the collective reference to the
Registration Statement and each certificate, opinion, agreement, instrument
or other document delivered by Parent or any underwriter pursuant thereto.
"QUALIFIED GROUND LEASE" means each of the ground leases or subground
leases set forth on Schedule 1.01(j) hereto and for a Future Property means
any ground lease (a) which is a direct ground lease granted by the fee
owner of real property, (b) which may be transferred and/or assigned
without the consent of the lessor (or as to which the lease expressly
provides that (i) such lease may be transferred and/or assigned with the
consent of the lessor and (ii) such consent shall not be unreasonably
withheld or delayed) or subject to certain reasonable pre-defined
requirements, (c) which has a remaining term (including any renewal terms
exercisable at the sole option of the lessee) of at least twenty (20)
years, (d) under which no material default has occurred and is continuing,
(e) with respect to which a Lien may be granted without the consent of the
lessor, (f) which contains lender protection provisions acceptable to the
Agents, including, without limitation, provisions to the effect that (i)
the lessor shall notify any holder of a Lien in such lease of the
occurrence of any default by the lessee under such lease and shall afford
such holder the option to cure such default, and (ii) in the event that
such lease is terminated, such holder shall have the option to enter into a
new lease having terms substantially identical to those contained in the
terminated lease and (g) which is otherwise acceptable in form and
substance to the Agents.
"REAL PROPERTY" for any hotel means the Land and the Improvements for
such hotel, including without limitation, parking and other ancillary
functions necessary for the operation of such hotel.
"REGISTER" has the meaning set forth in paragraph (c) of
Section 10.06.
"REGISTRATION STATEMENT" means the Parent's S-11 filed with the
Securities and Exchange Commission on February 5, 1998 under Registration
No. 333-4567.
"REIT" means a real estate investment trust under Sections 856-860 of
the Code.
"RELEASE" shall have the meaning set forth in CERCLA or under any
other Environmental Law.
"RENOVATING PROPERTY" means a Hotel Property (a) that has been owned
for four or more, but less than six, consecutive full Fiscal Quarters by
the Parent or by a Person that has been a Subsidiary of the Parent during
such entire period and (b) with respect to which renovation, consisting of
alterations, remodeling and other similar work having an aggregate cost
exceeding ten percent (10%) of the Investment Amount in such Hotel
Property, was commenced within 180 days of such acquisition and was
completed, or is reasonably expected to be completed, within eighteen (18)
months of such acquisition.
"REPORTABLE EVENT" means any of the events set forth in Section
4043(b) of ERISA.
"REQUIRED LENDERS" means, at any time, Banks holding at least 51% of
the then aggregate unpaid principal amount of the Notes and the Letter of
Credit Exposure of the Banks at such time, or, if no such principal amount
of the Notes and Letter of Credit Exposure is then outstanding, Banks
having at least 51% of the aggregate amount of the Commitments at such
time.
<PAGE>
"REQUIRED WORK" means for any Initial Property, the work described on
Schedule 5.06 attached hereto as may be modified by agreement between the
Borrower and the Administrative Agent, and for any Future Property which
the Borrower requests be an Eligible Property, the work agreed upon by the
Borrower and the Administrative Agent, if any, as the Required Work for
such Future Property.
"RESPONSE" shall have the meaning set forth in CERCLA or under any
other Environmental Law.
"RESPONSIBLE OFFICER" means the Chief Executive Officer, President,
Executive Vice President, Chief Operating Officer, or Chief Financial
Officer of any Person.
"RESTRICTED PAYMENT" means (a) any direct or indirect payment,
prepayment, redemption, purchase, or deposit of funds or Property for the
payment (including any sinking fund or defeasance), prepayment, redemption
or purchase of Indebtedness not permitted by this Agreement, and (b) the
making by any Person of any dividends or other distributions (in cash,
property, or otherwise) on, or payment for the purchase, redemption or
other acquisition of, any shares of any capital stock, any limited
liability company interests or any partnership interests of such Person,
other than dividends or distributions payable in such Person's stock,
limited liability company interests or any partnership interests.
"ROLLING PERIOD" means, as of any date, the four Fiscal Quarters
ending immediately preceding such date.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-
Hill, Inc., or any successor thereof.
"SEASONED PROPERTY" means, as at any date, a Hotel Property
(excluding any Renovating Property) that has been owned for four (4) or
more Fiscal Quarters, by the Parent or by a Person that has been a
Subsidiary of the Parent during such entire period.
"SECURED NON-RECOURSE INDEBTEDNESS" of any Person means all
Indebtedness of such Person with respect to which recourse for payment is
limited to specific assets encumbered by a Lien securing such Indebtedness;
PROVIDED, HOWEVER, THAT PERSONAL RECOURSE OF A HOLDER OF INDEBTEDNESS
AGAINST ANY OBLIGOR WITH RESPECT THERETO FOR FRAUD, MISREPRESENTATION,
MISAPPLICATION OF CASH, NON-PAYMENT OF REAL ESTATE TAXES OR GROUND LEASE
RENT, WASTE AND OTHER CIRCUMSTANCES CUSTOMARILY EXCLUDED FROM NON-RECOURSE
PROVISIONS IN NON-RECOURSE FINANCING OF REAL ESTATE SHALL NOT, BY ITSELF,
PREVENT ANY INDEBTEDNESS FROM BEING CHARACTERIZED AS SECURED NON-RECOURSE
INDEBTEDNESS, PROVIDED FURTHER THAT IF A PERSONAL RECOURSE CLAIM IS MADE IN
CONNECTION THEREWITH, SUCH CLAIM SHALL NOT CONSTITUTE SECURED NON-RECOURSE
INDEBTEDNESS FOR THE PURPOSES OF THIS AGREEMENT.
"SECURED RECOURSE INDEBTEDNESS" of any Person means any Total
Liabilities (excluding any Secured Non-Resource Indebtedness) of such
Person for which the obligations thereunder are secured by a Lien on any
assets of such Person or its Subsidiaries.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
"STATUS" means the existence of Level I Status, Level II Status,
Level III Status, Level IV Status, Level V Status, Level VI Status, Level
VII Status, or Level VIII Status, as the case may be. As used in this
definition:
"LEVEL I STATUS" exists at any date if, at such date, the
Parent has a long-term senior unsecured actual or implied debt rating of A-
or better by S&P and A3 or better by Moody's;
"LEVEL II STATUS" exists at any date if, at such date, the
Parent has a long-term senior unsecured actual or implied debt rating of
BBB+ by S&P and Baal by Moody's;
"LEVEL III STATUS" exists at any date if, at such date, the
Parent has a long-term senior unsecured actual or implied debt rating of
BBB by S&P and Baa2 by Moody's;
"LEVEL IV STATUS" exists at any date if, at such date, the
Parent has a long-term senior unsecured actual or implied debt rating of
BBB- by S&P and Baa3 by Moody's;
"LEVEL V STATUS" exists at any date if, at such date, (a) none
of Level I Status through Level IV Status exist and (b) the Leverage Ratio
is less than or equal to 25%;
"LEVEL VI STATUS" exists at any date if, at such date, (a) none
of Level I Status through Level IV Status exist and (b) the Leverage Ratio
is greater than 25% but less than or equal to 35%;
"LEVEL VII STATUS" exists at any date if, at such date, (a)
none of Level I Status through Level IV Status exist and (b) the Leverage
Ratio is greater than 35% but less than or equal to 45%; and
"LEVEL VIII STATUS" exists at any date if, at such date, (a)
none of Level I Status through Level IV Status exist and (b) the Leverage
Ratio is greater than 45% but less than or equal to 50%.
PROVIDED THAT (I) IF S&P AND/OR MOODY'S SHALL CEASE TO ISSUE RATINGS OF
DEBT SECURITIES OF REITS GENERALLY OR (AFTER ISSUING RATINGS WITH RESPECT
TO THE PARENT) SHALL CEASE TO ISSUE RATINGS WITH RESPECT TO THE PARENT,
THEN THE ADMINISTRATIVE AGENT AND THE BORROWER SHALL NEGOTIATE IN GOOD
FAITH TO AGREE UPON A SUBSTITUTE RATING AGENCY OR AGENCIES (AND TO
CORRELATE THE SYSTEM OF RATINGS OF EACH SUBSTITUTE RATING AGENCY WITH THAT
OF THE RATING AGENCY FOR WHICH IT IS SUBSTITUTING) AND (A) UNTIL SUCH
SUBSTITUTE RATING AGENCY OR AGENCIES ARE AGREED UPON, STATUS SHALL BE
DETERMINED ON THE BASIS OF THE RATING ASSIGNED BY THE OTHER RATING AGENCY
(OR, IF BOTH S&P AND MOODY'S SHALL HAVE SO CEASED TO ISSUE SUCH RATINGS, ON
THE BASIS OF THE STATUS IN EFFECT IMMEDIATELY PRIOR THERETO) AND (B) AFTER
SUCH SUBSTITUTE RATING AGENCY OR AGENCIES ARE AGREED UPON, STATUS SHALL BE
DETERMINED ON THE BASIS OF THE RATING ASSIGNED BY THE OTHER RATING AGENCY
AND SUCH SUBSTITUTE RATING AGENCY OR THE TWO SUBSTITUTE RATING AGENCIES, AS
THE CASE MAY BE; (II) IF THE LONG-TERM SENIOR UNSECURED ACTUAL OR IMPLIED
DEBT RATINGS OF THE PARENT BY S&P AND MOODY'S ARE NOT EQUIVALENT, THE
HIGHER RATING WILL APPLY FOR THE PURPOSES OF DETERMINING STATUS; AND (III)
IF THE LONG-TERM SENIOR UNSECURED ACTUAL OR IMPLIED DEBT RATINGS OF THE
PARENT BY S&P AND MOODY'S ARE TWO OR MORE LEVELS APART, THE RATING ONE
LEVEL BELOW THE HIGHER RATING WILL APPLY FOR THE PURPOSES OF DETERMINING
STATUS. STATUS SHALL BE DETERMINED AND CHANGED AS OF THE 45TH DAY
FOLLOWING ANY FISCAL QUARTER. NOTWITHSTANDING THE FOREGOING, UNTIL THE
45TH DAY FOLLOWING THE FISCAL QUARTER ENDING JUNE 30, 1998, THE STATUS IN
EFFECT UNDER THIS AGREEMENT SHALL BE LEVEL V STATUS.
<PAGE>
"STOCK" means shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how
designated) of or in a corporation or equivalent entity, whether voting or
non-voting, and includes, without limitation, common stock and preferred
stock.
"STOCK EQUIVALENTS" means all securities (other than Stock)
convertible into or exchangeable for Stock and all warrants, options or
other rights to purchase or subscribe for any stock, whether or not
presently convertible, exchangeable or exercisable.
"SUBSIDIARY" of a Person means any corporation, association,
partnership or other business entity of which more than 50% of the
outstanding shares of capital stock (or other equivalent interests) having
by the terms thereof ordinary voting power under ordinary circumstances to
elect a majority of the board of directors or Persons performing similar
functions (or, if there are no such directors or Persons, having general
voting power) of such entity (irrespective of whether at the time capital
stock (or other equivalent interests) of any other class or classes of such
entity shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned or controlled by
such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person.
"SUPPLEMENTAL GUARANTOR" means any partner of the Borrower except for
the Parent or the Guarantors that executes a Supplemental Guaranty.
"SUPPLEMENTAL GUARANTY" means any future assumption of liability in a
form reasonably acceptable to the Administrative Agent executed by a
Supplemental Guarantor to secure Advances, as such future supplemental
guaranties may be amended hereafter in accordance with their terms.
"SYNDICATION AGENT" means Bank of Montreal, Chicago Branch, in its
capacity as Syndication Agent for the Banks pursuant to Article IX and any
successor Syndication Agent appointed pursuant to Section 9.06.
"TERMINATION EVENT" means (a) the occurrence of a Reportable Event
with respect to a Plan, as described in Section 4043 of ERISA and the
regulations issued thereunder (other than a Reportable Event not subject to
the provision for 30-day notice to the PBGC under such regulations),
(b) the withdrawal of the Parent, the Borrower or any of a Controlled Group
from a Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, (c) the giving of a notice of
intent to terminate a Plan under Section 4041(c) of ERISA, (d) the
institution of proceedings to terminate a Plan by the PBGC, or (e) any
other event or condition which constitutes grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
"TOTAL LIABILITIES" of any Person means the sum of the following
(without duplication): (a) all Indebtedness of such Person and its
Subsidiaries determined on a Consolidated basis in conformity with GAAP,
PLUS (b) such Person's Unconsolidated Entity Percentage of Indebtedness
(including Secured Non-Recourse Indebtedness) of such Person's
Unconsolidated Entities, PLUS (c) to the extent not already included in the
calculation of either of the preceding clauses (a) or (b), the aggregate
amount of letters of credit for which such Person or any of its
Subsidiaries would have a direct or contingent obligation to reimburse the
issuers of such letters of credit upon a drawing under such letters of
credit MINUS (d) to the extent included in the calculation of any of the
preceding clauses (a), (b) or (c), (i) trade payables and accruals incurred
in the ordinary course of business, (ii) the amount of any minority
interests and (iii) Capital Lease Obligations for a ground lease for any
Hotel Property for which the annual rental payments for such ground lease
do not exceed 30% of the Adjusted EBITDA for such Hotel Property.
<PAGE>
"TYPE" has the meaning set forth in Section 1.04.
"UNCONSOLIDATED ENTITY" means, with respect to any Person, at any
date, any other Person in whom such Person holds an Investment, which
Investment is accounted for in the financial statements of such Person on
an equity basis of accounting and whose financial results would not be
consolidated under GAAP with the financial results of such Person on the
consolidated financial statements of such Person, if such statements were
prepared as of such date.
"UNCONSOLIDATED ENTITY PERCENTAGE" means, for any Person, with
respect to a Person's Unconsolidated Entity, the percentage ownership
interest of such Person in such Unconsolidated Entity, PROVIDED THAT, in
the event that such Person is the general partner of such Unconsolidated
Entity, such Person's Unconsolidated Entity Percentage with respect to such
Unconsolidated Entity shall be 100% with respect to any Indebtedness for
which recourse may be made against any general partner of such
Unconsolidated Entity (provided that such Indebtedness shall not be deemed
to be recourse to such general partner solely because of certain customary
carveouts to non-recourse Indebtedness).
"UNENCUMBERED" means, with respect to any Hotel Property, at any date
of determination, the circumstance that such Hotel Property on such date:
(a) is not subject to any Liens (including restrictions on
transferability or assignability) of any kind (including any such Lien or
restriction imposed by (i) any agreement governing Indebtedness, and (ii)
the organizational documents of the Borrower or any of its Subsidiaries,
but excluding Permitted Encumbrances and, in the case of any Qualified
Ground Lease (to the extent permitted by the definition thereof),
restrictions on transferability or assignability in respect of such
Qualified Ground Lease);
(b) is not subject to any agreement (including (i) any
agreement governing Indebtedness, and (ii) if applicable, the
organizational documents of the Borrower or any of its Subsidiaries) which
prohibits or limits the ability of the Borrower or any of its Subsidiaries
to create, incur, assume or suffer to exist any Lien upon such Hotel
Property, other than Permitted Encumbrances (excluding any agreement or
organizational document which limits generally the amount of Indebtedness
which may be incurred by the Borrower or its Subsidiaries); and
(c) is not subject to any agreement (including any agreement
governing Indebtedness) which entitles any Person to the benefit of any
Lien (other than Permitted Encumbrances) on such Hotel Property, or would
entitle any Person to the benefit of any such Lien upon the occurrence of
any contingency (including, without limitation, pursuant to an "equal and
ratable" clause).
For the purposes of this Agreement, any Hotel Property owned by a
Subsidiary of the Borrower shall not be deemed to be Unencumbered unless
both (i) such Hotel Property and (ii) all Stock owned directly or
indirectly by Borrower in such Subsidiary is Unencumbered.
"UNSECURED INDEBTEDNESS" of any Person means the Total Liabilities of
such Person MINUS the sum of the Secured Recourse Indebtedness and Secured
Non-Recourse Indebtedness of such Person.
"UNSECURED INTEREST COVERAGE RATIO" means, as of the end of any
Rolling Period, a ratio of (a) the aggregate Adjusted EBITDA for all
Eligible Properties for such Rolling Period (excluding for any Eligible
Property the Adjusted EBITDA attributable to the period of time prior to a
Hotel Property qualifying as an Eligible Property) to (b) the portion of
Parent's Interest Expense attributable to Unsecured Indebtedness for such
Rolling Period.
<PAGE>
"WHOLLY-OWNED SUBSIDIARY" of a Person means any Subsidiary for which
such Person's ownership interest is 99% or more.
Section 1.2 COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding".
Section 1.3 ACCOUNTING TERMS; CHANGES IN GAAP.
(a) All accounting terms not specifically defined in this Agreement
shall be construed in accordance with GAAP applied on a consistent basis.
(b) Unless otherwise indicated, all financial statements of the
Borrower and the Parent, all calculations for compliance with covenants in
this Agreement, and all calculations of any amounts to be calculated under
the definitions in Section 1.01 shall be based upon the Consolidated
accounts of the Borrower, the Parent and their respective Subsidiaries (as
applicable) in accordance with GAAP.
(c) If any changes in accounting principles after December 31, 1997
required by GAAP or the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants or similar agencies
results in a change in the method of calculation of, or affects the results
of such calculation of, any of the financial covenants, standards or terms
found in this Agreement, then the parties shall enter into and diligently
pursue negotiations in order to amend such financial covenants, standards
or terms so as to equitably reflect such change, with the desired result
that the criteria for evaluating the financial condition of Borrower and
its Subsidiaries (determined on a Consolidated basis) shall be the same
after such change as if such change had not been made.
Section 1.4 TYPES OF ADVANCES. Advances are distinguished by "Type".
The "Type" of an Advance refers to the determination whether such Advance
is a LIBOR Advance or Base Rate Advance, each of which constitutes a Type.
Section 1.5 MISCELLANEOUS. Article, Section, Schedule and Exhibit
references are to Articles and Sections of and Schedules and Exhibits to
this Agreement, unless otherwise specified.
ARTICLE II
THE ADVANCES AND THE LETTERS OF CREDIT
Section 2.1 THE ADVANCES. Each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to make Advances to the
Borrower from time to time on any Business Day up to 30 days prior to the
Maturity Date in an aggregate amount not to exceed at any time outstanding
an amount equal to such Bank's Commitment LESS such Bank's Pro Rata Share
of the Letter of Credit Exposure at such time. The aggregate amount of all
outstanding Advances and Letter of Credit Exposure at any time may not
exceed either the lesser of (i) the aggregate Commitments at such time or
(ii) the Borrowing Base at such time. Within the limits of each Bank's
Commitment and the Borrowing Base limitation set forth above, the Borrower
may from time to time prepay pursuant to Section 2.07 and reborrow under
this Section 2.01.
<PAGE>
Section 2.2 METHOD OF BORROWING.
(a) NOTICE. Each Borrowing shall be made by telephone (promptly
confirmed in writing on the same day) pursuant to a Notice of Borrowing,
given not later than 12:00 Noon (Dallas, Texas time) (i) on the third
Business Day before the date of the proposed Borrowing, in the case of a
Borrowing consisting of LIBOR Advances, or (ii) on the Business Day before
the date of the proposed Borrowing, in the case of a Borrowing consisting
of Base Rate Advances, by the Borrower to the Administrative Agent, which
shall give each Bank prompt notice on the day of receipt of such timely
telephone call or Notice of Borrowing of such proposed Borrowing by
telecopier. Each Notice of Borrowing shall be in writing or by telecopier
specifying the requested (i) date of such Borrowing, (ii) Type of Advances
comprising such Borrowing, (iii) aggregate amount of such Borrowing, and
(iv) if such Borrowing is to be comprised of LIBOR Advances, the Interest
Period for each such Advance. In the case of a proposed Borrowing
comprised of LIBOR Advances, the Administrative Agent shall promptly notify
each Bank of the applicable interest rate under Section 2.06(b). Each Bank
shall, before 12:00 Noon (Dallas, Texas time) on the date of such
Borrowing, make available for the account of its Applicable Lending Office
to the Administrative Agent at its address referred to in Section 10.02, or
such other location as the Administrative Agent may specify by notice to
the Banks, in same day funds, such Bank's Pro Rata Share of such Borrowing.
Upon fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent will make such funds available to the Borrower at its
account with the Administrative Agent or to such other account as the
Borrower shall specify to the Administrative Agent in writing.
(b) CONVERSIONS AND CONTINUATIONS. In order to elect to Convert or
continue Advances comprising part of the same Borrowing under this Section,
the Borrower shall deliver an irrevocable Notice of Conversion or
Continuation to the Administrative Agent at the Administrative Agent's
office no later than 12:00 Noon (Dallas, Texas time) (i) on the date which
is at least three Business Days in advance of the proposed Conversion or
continuation date in the case of a Conversion to or a continuation of a
Borrowing comprised of LIBOR Advances and (ii) on the Business Day prior to
the proposed conversion date in the case of a Conversion to a Borrowing
comprised of Base Rate Advances. Each such Notice of Conversion or
Continuation shall be in writing or by telecopier, specifying (i) the
requested Conversion or continuation date (which shall be a Business Day),
(ii) the Borrowing amount and Type of the Advances to be Converted or
continued, (iii) whether a Conversion or continuation is requested, and if
a Conversion, into what Type of Advances, and (iv) in the case of a
Conversion to, or a continuation of, LIBOR Advances, the requested Interest
Period. Promptly after receipt of a Notice of Conversion or Continuation
under this paragraph, the Administrative Agent shall provide each Bank with
a copy thereof and, in the case of a Conversion to or a continuation of
LIBOR Advances, notify each Bank of the applicable interest rate under
Section 2.06(b). For purposes other than the conditions set forth in
Section 3.02, the portion of Advances comprising part of the same Borrowing
that are Converted to Advances of another Type shall constitute a new
Borrowing. If the Borrower shall fail to specify an Interest Period for a
LIBOR Advance including the continuation of a LIBOR Advance, the Borrower
shall be deemed to have selected a Base Rate Advance.
<PAGE>
(c) CERTAIN LIMITATIONS. Notwithstanding anything in
paragraphs (a) and (b) above:
(i) in the case of LIBOR Advances each Borrowing shall be in
an aggregate amount of not less than $2,000,000 or greater multiples of
$100,000;
(ii) except for Borrowings for the acquisition of Future
Properties by the Borrower or its Subsidiary, the Borrower may not request
Borrowings on more than three days in any calendar month.
(iii) at no time shall there be more than six Interest Periods
applicable to outstanding LIBOR Advances;
(iv) the Borrower may not select LIBOR Advances for any
Borrowing to be made, Converted or continued if a Default has occurred and
is continuing;
(v) if any Bank shall, at any time prior to the making of any
requested Borrowing comprised of LIBOR Advances, notify the Administrative
Agent that the introduction of or any change in or in the interpretation of
any law or regulation after the date hereof makes it unlawful, or that any
central bank or other governmental authority asserts that it is unlawful,
for such Bank or its LIBOR Lending Office to perform its obligations under
this Agreement to make LIBOR Advances or to fund or maintain LIBOR
Advances, then such Bank's Pro Rata Share of such Borrowing shall be made
as a Base Rate Advance, provided that such Base Rate Advance shall be
considered part of the same Borrowing and interest on such Base Rate
Advance shall be due and payable at the same time that interest on the
LIBOR Advances comprising the remainder of such Borrowing shall be due and
payable; and such Bank agrees to use commercially reasonable efforts
(consistent with its internal policies and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the
making of such designation would avoid the effect of this paragraph and
would not, in the reasonable judgment of such Bank, be otherwise materially
disadvantageous to such Bank;
(vi) if the Administrative Agent is unable to determine the
LIBOR for LIBOR Advances comprising any requested Borrowing, the right of
the Borrower to select LIBOR Advances for such Borrowing or for any
subsequent Borrowing shall be suspended until the Administrative Agent
shall notify the Borrower and the Banks that the circumstances causing such
suspension no longer exist, and each Advance comprising such Borrowing
shall be a Base Rate Advance;
(vii) if the Required Lenders shall, at least one Business Day
before the date of any requested Borrowing, notify the Administrative Agent
that the LIBOR for LIBOR Advances comprising such Borrowing will not
adequately reflect the cost to such Banks of making or funding their
respective LIBOR Advances, as the case may be, for such Borrowing, the
right of the Borrower to select LIBOR Advances for such Borrowing or for
any subsequent Borrowing shall be suspended until the Administrative Agent
shall notify the Borrower and the Banks that the circumstances causing such
suspension no longer exist, and each Advance comprising such Borrowing
shall be a Base Rate Advance; and
(viii) if the Borrower shall fail to select the duration
or continuation of any Interest Period for any LIBOR Advances in accordance
with the provisions contained in the definition of "Interest Period" in
Section 1.01 and paragraph (a) or (b) above, the Administrative Agent will
forthwith so notify the Borrower and the Banks and such Advances will be
made available to the Borrower on the date of such Borrowing as Base Rate
Advances or, if an existing Advance, Converted into Base Rate Advances.
<PAGE>
(d) NOTICES IRREVOCABLE. Each Notice of Borrowing and Notice of
Conversion or Continuation shall be irrevocable and binding on the
Borrower. In the case of any Borrowing which the related Notice of
Borrowing specifies is to be comprised of LIBOR Advances, the Borrower
shall indemnify each Bank against any loss, out-of-pocket cost or expense
incurred by such Bank as a result of any condition precedent for Borrowing
set forth in Article III not being satisfied for any reason, including,
without limitation, any loss, cost or expense actually incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by
such Bank to fund the Advance to be made by such Bank as part of such
Borrowing when such Advance, as a result of such failure, is not made on
such date.
(e) ADMINISTRATIVE AGENT RELIANCE. Unless the Administrative Agent
shall have received notice from a Bank before the date of any Borrowing
that such Bank will not make available to the Administrative Agent such
Bank's Pro Rata Share of the Borrowing, the Administrative Agent may assume
that such Bank has made its Pro Rata Share of such Borrowing available to
the Administrative Agent on the date of such Borrowing in accordance with
paragraph (a) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date
a corresponding amount. If and to the extent that such Bank shall not have
so made its Pro Rata Share of such Borrowing available to the
Administrative Agent, such Bank and the Borrower severally agree to
immediately repay to the Administrative Agent on demand such corresponding
amount, together with interest on such amount, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable on each such day to Advances comprising such
Borrowing and (ii) in the case of such Bank, the Federal Funds Rate for
each such day. If such Bank shall repay to the Administrative Agent such
corresponding amount and interest as provided above, such corresponding
amount so repaid shall constitute such Bank's Advance as part of such
Borrowing for purposes of this Agreement even though not made on the same
day as the other Advances comprising such Borrowing.
(f) BANK OBLIGATIONS SEVERAL. The failure of any Bank to make the
Advance to be made by it as part of any Borrowing shall not relieve any
other Bank of its obligation, if any, to make its Advance on the date of
such Borrowing. No Bank shall be responsible for the failure of any other
Bank to make the Advance to be made by such other Bank on the date of any
Borrowing.
(g) NOTES. The indebtedness of the Borrower to each Bank resulting
from Advances owing to such Bank shall be evidenced by the Note of the
Borrower payable to the order of such Bank in substantially the form of
Exhibit A.
Section 2.3 FEES.
(a) COMMITMENT FEES. For the period from the Effective Date to but
excluding the Maturity Date the Borrower agrees to pay to the
Administrative Agent for the account of each Bank a commitment fee on the
average daily amount by which such Bank's Commitment exceeds the sum of
such Bank's outstanding Advances and Pro Rata Share of the Letter of Credit
Exposure at a rate per annum equal to the Applicable Margin based upon a
360-day year. Such fees shall be due and payable quarterly in arrears (i)
on the date which is 30 days following the last Business Day of each March,
June, September and December and (ii) on the Maturity Date.
<PAGE>
(b) LETTER OF CREDIT FEES. The Borrower agrees to pay to the
Administrative Agent for the benefit of the Banks, fees in respect of all
Letters of Credit outstanding at a rate per annum equal to the Applicable
Margin calculated based upon a 360-day year and in respect of the maximum
amount available from time to time to be drawn under such outstanding
Letters of Credit, payable quarterly in arrears (i) on the date which is 30
days following the last Business Day of each March, June, September and
December and (ii) on the Maturity Date. In addition, the Borrower agrees
to pay to the Issuing Bank for its own account a fee on the average daily
amount of the aggregate undrawn maximum face amount of each Letter of
Credit issued by such Issuing Bank at a rate per annum equal to .125%, such
fees due and payable quarterly in arrears (i) on the date which is 30 days
following the last Business Day of each March, June, September and December
and (ii) on the Maturity Date.
(c) AGENTS' FEES. The Borrower agrees to pay to the Administrative
Agent and the Syndication Agent for their benefit the fees set forth in the
Fee Letter as and when the same are due and payable pursuant to the terms
of the Fee Letter.
Section 2.4 REDUCTION OF THE COMMITMENTS. The Borrower may, upon at
least three Business Days' prior notice to the Administrative Agent,
permanently terminate in whole or permanently reduce ratably in part the
Commitments of the Banks; PROVIDED, HOWEVER, that (i) each partial
reduction shall be in the aggregate amount of not less than $5,000,000 or
an integral multiple of $1,000,000 in excess thereof, (ii) no such
reduction shall result in a Borrowing Base deficiency as provided in
Section 2.07(c)(i), and (iii) no such reduction shall result in the total
aggregate Commitments of the Banks being less than $100,000,000.
Section 2.5 REPAYMENT OF ADVANCES. The Borrower shall repay the
outstanding principal amount of each Advance on the Maturity Date.
Section 2.6 INTEREST, LATE PAYMENT FEE. The Borrower shall pay
interest on the unpaid principal amount of each Advance made by each Bank
from the date of such Advance until such principal amount shall be paid in
full, at the following rates per annum:
(a) BASE RATE ADVANCES. If such Advance is a Base Rate Advance, a
rate per annum (computed on the actual number of days elapsed, including
the first day and excluding the last, based on a 365 day year) equal at all
times to the lesser of (i) the Adjusted Base Rate in effect from time to
time PLUS the Applicable Margin and (ii) the Maximum Rate, payable in
arrears on the first day of each calendar month, PROVIDED that during the
continuance of an Event of Default, Base Rate Advances shall bear interest
at a rate per annum equal at all times to the lesser of (i) the rate
required to be paid on such Advance immediately prior to the date on which
such amount becomes due PLUS two percent (2%) and (ii) the Maximum Rate.
(b) LIBOR ADVANCES. If such Advance is a LIBOR Advance, a rate per
annum (computed on the actual number of days elapsed, including the first
day and excluding the last, based on a 360 day year) equal at all times
during the Interest Period for such Advance to the lesser of (i) the LIBOR
for such Interest Period PLUS the Applicable Margin and (ii) the Maximum
Rate, payable in arrears on the last day of such Interest Period, and on
the date such LIBOR Advance shall be paid in full, and, with respect to
LIBOR Advances having an Interest Period in excess of one month, the first
day of each calendar month during such Interest Period; PROVIDED that
during the continuance of an Event of Default, LIBOR Advances shall bear
interest at a rate per annum equal at all times to the lesser of (i) the
rate required to be paid on such Advance immediately prior to the date on
which such amount became due PLUS two percent (2%) and (ii) the Maximum
Rate.
<PAGE>
(c) USURY RECAPTURE. In the event the rate of interest chargeable
under this Agreement or the Notes at any time is greater than the Maximum
Rate, the unpaid principal amount of the Notes shall bear interest at the
Maximum Rate until the total amount of interest paid or accrued on the
Notes equals the amount of interest which would have been paid or accrued
on the Notes if the stated rates of interest set forth in this Agreement
had at all times been in effect. In the event, upon payment in full of the
Notes, the total amount of interest paid or accrued under the terms of this
Agreement and the Notes is less than the total amount of interest which
would have been paid or accrued if the rates of interest set forth in this
Agreement had, at all times, been in effect, then the Borrower shall, to
the extent permitted by applicable law, pay the Administrative Agent for
the account of the Banks an amount equal to the difference between (i) the
lesser of (A) the amount of interest which would have been charged on the
Notes if the Maximum Rate had, at all times, been in effect and (B) the
amount of interest which would have accrued on the Notes if the rates of
interest set forth in this Agreement had at all times been in effect and
(ii) the amount of interest actually paid or accrued under this Agreement
on the Notes. In the event the Banks ever receive, collect or apply as
interest any sum in excess of the Maximum Rate, such excess amount shall,
to the extent permitted by law, be applied to the reduction of the
principal balance of the Notes, and if no such principal is then outstand-
ing, such excess or part thereof remaining shall be paid to the Borrower.
(d) OTHER AMOUNTS OVERDUE. If any amount payable under this
Agreement other than the Advances is not paid when due and payable,
including without limitation, accrued interest and fees, then such overdue
amount shall accrue interest hereon due and payable on demand at a rate per
annum equal to the Adjusted Base Rate PLUS two percent (2%), from the date
such amount became due until the date such amount is paid in full.
Section 2.7 PREPAYMENTS.
(a) RIGHT TO PREPAY. The Borrower shall have no right to prepay
any principal amount of any Advance except as provided in this Section
2.07.
(b) OPTIONAL PREPAYMENTS. The Borrower may elect to prepay any of
the Advances, after giving by 12:00 Noon (Dallas, Texas time) (i) in the
case of LIBOR Advances, at least three Business Days' prior written notice
or (ii) in case of Base Rate Advances, at least one Business Day's prior
written notice to the Administrative Agent stating the proposed date and
aggregate principal amount of such prepayment, and if applicable, the
relevant Interest Period for the Advances to be prepaid. If any such
notice is given, the Borrower shall prepay Advances comprising part of the
same Borrowing in whole or ratably in part in an aggregate principal amount
equal to the amount specified in such notice, and with respect to LIBOR
Advances shall also pay accrued interest to the date of such prepayment on
the principal amount prepaid and amounts, if any, required to be paid
pursuant to Section 2.08 as a result of such prepayment being made on such
date; PROVIDED, HOWEVER, that each partial prepayment shall be in an
aggregate principal amount not less than $1,000,000 and in integral
multiples of $100,000.
<PAGE>
(c) MANDATORY PREPAYMENTS.
(i) BORROWING BASE DEFICIENCY. On or prior to the fifth
(5th) Business Day following a Borrowing Base Determination Date occurring
under the provisions of Section 2.14, the Borrower shall be required to
prepay Advances in an aggregate amount equal to the excess of (A) the
aggregate amount of outstanding Advances and Letter of Credit Exposure on
such date over (B) the lesser of (1) the Borrowing Base, as determined on
such Borrowing Base Determination Date or (2) the aggregate Commitments at
such time (or, upon payment in full of all outstanding Advances, to deposit
into the Cash Collateral Account an amount equal to the amount of the
Letter of Credit Exposure which exceeds the Borrowing Base).
(ii) ACCRUED INTEREST. Each prepayment pursuant to this
Section 2.07(c) of a LIBOR Advance shall be accompanied by accrued interest
on the amount prepaid to the date of such prepayment and amounts, if any,
required to be paid pursuant to Section 2.08 as a result of such prepayment
being made on such date.
(d) RATABLE PAYMENTS. Each payment of any Advance pursuant to this
Section 2.07 or any other provision of this Agreement shall be made in a
manner such that all Advances comprising part of the same Borrowing are
paid in whole or ratably in part.
(e) EFFECT OF NOTICE. All notices given pursuant to this Section
2.07 shall be irrevocable and binding upon the Borrower.
Section 2.8 BREAKAGE COSTS. If (a) any payment of principal of any
LIBOR Advance is made other than on the last day of the Interest Period for
such Advance as a result of any payment pursuant to Section 2.07 or the
acceleration of the maturity of the Notes pursuant to Article VIII or
otherwise; (b) any Conversion of a LIBOR Advance is made other than on the
last day of the Interest Period for such Advance pursuant to Section 2.12
or otherwise; or (c) the Borrower fails to make a principal or interest
payment with respect to any LIBOR Advance on the date such payment is due
and payable, the Borrower shall, within 10 days of any written demand sent
by any Bank to the Borrower through the Administrative Agent, pay to the
Administrative Agent for the account of such Bank any amounts (without
duplication of any other amounts payable in respect of breakage costs)
required to compensate such Bank for any losses (other than lost profit),
out-of-pocket costs or expenses which it may reasonably incur as a result
of such payment or nonpayment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Bank to fund or maintain such
Advance.
<PAGE>
Section 2.9 INCREASED COSTS.
(a) LIBOR ADVANCES. If, due to either (i) the introduction of or
any change (other than any change by way of imposition or increase of
reserve requirements included in the calculation of the LIBOR) in or in the
interpretation of any law or regulation enacted, issued or promulgated
after the date of this Agreement or (ii) the compliance with any guideline
or request from any central bank or other Governmental Authority (whether
or not having the force of law) enacted, issued or promulgated after the
date of this Agreement, there shall be any increase in the cost to any Bank
of agreeing to make or making, funding or maintaining LIBOR Advances, then
the Borrower shall from time to time, within 10 days or written demand by
such Bank (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Bank additional amounts
(without duplication of any other amounts payable in respect of increased
costs) sufficient to compensate such Bank for such increased cost;
PROVIDED, HOWEVER, that, before making any such demand, each Bank agrees to
use commercially reasonable efforts (consistent with its internal policy
and legal and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such a designation would avoid the need
for, or reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate as to the amount of such increased cost and detailing
the calculation of such cost submitted to the Borrower and the
Administrative Agent by such Bank at the time such Bank demands payment
under this Section shall be conclusive and binding for all purposes, absent
manifest error.
(b) CAPITAL ADEQUACY. If any Bank or the Issuing Bank determines
in good faith that compliance with any law or regulation or any guideline
or request from any central bank or other Governmental Authority (whether
or not having the force of law) enacted, issued or promulgated after the
date of this Agreement affects or would affect the amount of capital
required or expected to be maintained by such Bank or the Issuing Bank and
that the amount of such capital is increased by or based upon the existence
of such Bank's commitment to lend or the Issuing Bank's commitment to issue
Letters of Credit or any Bank's commitment to risk participate in Letters
of Credit and other commitments of this type, then, upon 30 days prior
written notice by such Bank or the Issuing Bank (with a copy of any such
demand to the Administrative Agent), the Borrower shall immediately pay to
the Administrative Agent for the account of such Bank or to the Issuing
Bank, as the case may be, from time to time as specified by such Bank or
the Issuing Bank, additional amounts (without duplication of any other
amounts payable in respect of increased costs) sufficient to compensate
such Bank or the Issuing Bank, in light of such circumstances, (i) with
respect to such Bank, to the extent that such Bank reasonably determines
such increase in capital to be allocable to the existence of such Bank's
commitment to lend under this Agreement or its commitment to risk
participate in Letters of Credit and (ii) with respect to the Issuing Bank,
to the extent that such Issuing Bank reasonably determines such increase in
capital to be allocable to the issuance or maintenance of the Letters of
Credit. A certificate as to such amounts and detailing the calculation of
such amounts submitted to the Borrower and the Administrative Agent by such
Bank or the Issuing Bank shall be conclusive and binding for all purposes,
absent manifest error.
<PAGE>
(c) LETTERS OF CREDIT. If any change in any law or regulation or
in the interpretation thereof by any court or administrative or
Governmental Authority charged with the administration thereof enacted,
issued or promulgated after the date of this Agreement shall either
(i) impose, modify, or deem applicable any reserve, special deposit, or
similar requirement against letters of credit issued by, or assets held by,
or deposits in or for the account of, Issuing Bank or any Bank or
(ii) impose on Issuing Bank or any Bank any other condition regarding the
provisions of this Agreement relating to the Letters of Credit or any
Letter of Credit Obligations, and the result of any event referred to in
the preceding clause (i) or (ii) shall be to increase the cost to Issuing
Bank of issuing or maintaining any Letter of Credit, or increase the cost
to such Bank of its risk participation in any Letter of Credit (which
increase in cost shall be determined by Issuing Bank's or such Bank's
reasonable allocation of the aggregate of such cost increases resulting
from such event), then, within 10 days of written demand by Issuing Bank or
such Bank (with a copy sent to the Administrative Agent), as the case may
be, the Borrower shall pay to the Administrative Agent for the account of
Issuing Bank or Bank, as the case may be, from time to time as specified by
Issuing Bank or such Bank, additional amounts which shall be sufficient to
compensate such Issuing Bank or such Bank for such increased cost. Issuing
Bank and each Bank agrees to use commercially reasonable efforts
(consistent with internal policy and legal and regulatory restrictions) to
designate a different Applicable Lending Office for the booking of its
Letters of Credit or risk participations if the making of such designation
would avoid the effect of this paragraph and would not, in the reasonable
judgment of Issuing Bank or such Bank, be otherwise disadvantageous to
Issuing Bank or such Bank, as the case may be. A certificate as to such
increased cost incurred by Issuing Bank or such Bank, as the case may be,
as a result of any event mentioned in clause (i) or (ii) above, and
detailing the calculation of such increased costs submitted by Issuing Bank
or such Bank to the Borrower and the Administrative Agent, shall be
conclusive and binding for all purposes, absent manifest error.
Section 2.10 PAYMENTS AND COMPUTATIONS.
(a) PAYMENT PROCEDURES. Except if otherwise set forth herein, the
Borrower shall make each payment under this Agreement and under the Notes
not later than 12:00 Noon (Dallas, Texas time) on the day when due in
Dollars to the Administrative Agent at the location referred to in the
Notes (or such other location as the Administrative Agent shall designate
in writing to the Borrower) in same day funds. The Administrative Agent
will on the same day such payment is deemed received from the Borrower
cause to be distributed like funds relating to the payment of principal,
interest or fees ratably (other than amounts payable solely to the
Administrative Agent, the Issuing Banks, or a specific Bank pursuant to
Section 2.03(b), 2.03(c), 2.06(c), 2.08, 2.09, 2.11, 2.12, or 2.13(c) but
after taking into account payments effected pursuant to Section 10.04) to
the Banks in accordance with each Bank's Pro Rata Share for the account of
their respective Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Bank or Issuing Bank for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. If and to the extent that the
Administrative Agent shall not have so made payment to a Bank on the day
required under this Agreement, the Administrative Agent agrees to
immediately pay such Bank such payment, together with interest on such
amount, for each day from the date such amount was deemed received by the
Administrative Agent until the date such amount is paid to such Bank at the
Federal Funds Rate for each such day.
<PAGE>
(b) COMPUTATIONS. All computations of interest based on the
Adjusted Base Rate shall be made by the Administrative Agent on the basis
of a year of 365 days and all computations of fees and interest based on
the LIBOR and the Federal Funds Rate shall be made by the Administrative
Agent on the basis of a year of 360 days, in each case for the actual
number of days (including the first day, but excluding the last day)
occurring in the period for which such interest or fees are payable. Each
determination by the Administrative Agent of an interest rate shall be
conclusive and binding for all purposes, absent manifest error.
(c) NON-BUSINESS DAY PAYMENTS. Whenever any payment shall be
stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall
in such case be included in the computation of payment of interest or fees,
as the case may be; PROVIDED, however, that if such extension would cause
payment of interest on or principal of LIBOR Advances to be made in the
next following calendar month, such payment shall be made on the next
preceding Business Day.
(d) ADMINISTRATIVE AGENT RELIANCE. Unless the Administrative Agent
shall have received written notice from the Borrower prior to the date on
which any payment is due to the Banks that the Borrower will not make such
payment in full, the Administrative Agent may assume that the Borrower has
made such payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such date an amount equal to the amount then
due such Bank. If and to the extent the Borrower shall not have so made
such payment in full to the Administrative Agent, each Bank shall repay to
the Administrative Agent forthwith on demand such amount distributed to
such Bank, together with interest, for each day from the date such amount
is distributed to such Bank until the date such Bank repays such amount to
the Administrative Agent, at the Federal Funds Rate for each such day.
(e) APPLICATION OF PAYMENTS. Unless otherwise specified in Section
2.07 hereof, whenever any payment received by the Administrative Agent
under this Agreement is insufficient to pay in full all amounts then due
and payable under this Agreement and the Notes, such payment shall be
distributed and applied by the Administrative Agent and the Banks in the
following order: FIRST, to the payment of fees and expenses due and
payable to the Administrative Agent under and in connection with this
Agreement or any other Credit Document; SECOND, to the payment of all
expenses due and payable under Section 2.11(c), ratably among the Banks in
accordance with the aggregate amount of such payments owed to each such
Bank; THIRD, to the payment of fees due and payable to the Issuing Bank
pursuant to Section 2.03(b); FOURTH, to the payment of all other fees due
and payable under Section 2.03; and FIFTH, to the payment of the interest
accrued on and the principal amount of all of the Notes and the interest
accrued on and all Letter of Credit Obligations, regardless of whether any
such amount is then due and payable, ratably among the Banks in accordance
with the respective Pro Rata Share.
(f) REGISTER. The Administrative Agent shall record in the
Register the Commitment and the Advances from time to time of each Bank and
each repayment or prepayment in respect to the principal amount of such
Advances of each Bank. Any such recordation shall be conclusive and
binding on the Borrower and each Bank, absent manifest error; PROVIDED
HOWEVER, that failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's obligations hereunder in
respect of such Advances.
<PAGE>
Section 2.11 TAXES.
(a) NO DEDUCTION FOR CERTAIN TAXES. Any and all payments by the
Borrower shall be made, in accordance with Section 2.10, free and clear of
and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank, Issuing Bank, and the
Administrative Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Bank,
Issuing Bank, or the Administrative Agent (as the case may be) is organized
or any political subdivision of such jurisdiction or by the jurisdiction of
such Bank's Applicable Lending Office or any political subdivision of such
jurisdiction (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable to any Bank, Issuing Bank, or the
Administrative Agent, (i) the sum payable shall be increased as may be
necessary so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.11),
such Bank, Issuing Bank, or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made; PROVIDED, however, that if the Borrower's obligation
to deduct or withhold Taxes is caused solely by such Bank's, Issuing
Bank's, or the Administrative Agent's failure to provide the forms
described in paragraph (e) of this Section 2.11 and such Bank, Issuing
Bank, or the Administrative Agent could have provided such forms, no such
increase shall be required; (ii) the Borrower shall make such deductions;
and (iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable Legal
Requirements.
(b) OTHER TAXES. In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement, the Notes, or the other Credit Documents
(hereinafter referred to as "Other Taxes").
(c) INDEMNIFICATION. Subject to the proviso of Section 2.11(a),
the Borrower indemnifies each Bank, Issuing Bank, and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any Governmental Authority
on amounts payable under this Section 2.11) paid by such Bank, Issuing
Bank, or the Administrative Agent (as the case may be) and any liability
(including interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Each payment required to be made by the Borrower in respect of
this indemnification shall be made to the Administrative Agent for the
benefit of any party claiming such indemnification within 30 days from the
date the Borrower receives written demand detailing the calculation of such
amounts therefor from the Administrative Agent on behalf of itself as
Administrative Agent, Issuing Bank, or any such Bank. If any Bank, the
Administrative Agent, or Issuing Bank receives a refund in respect of any
Taxes or Other Taxes paid by the Borrower under this paragraph (c), such
Bank, the Administrative Agent, or Issuing Bank, as the case may be, shall
promptly pay to the Borrower the Borrower's share of such refund.
(d) EVIDENCE OF TAX PAYMENTS. The Borrower will pay prior to
delinquency all Taxes and Other Taxes payable in respect of any payment.
Within 30 days after the date of any payment of Taxes, the Borrower will
furnish to the Administrative Agent, at its address referred to in
Section 10.02, the original or a certified copy of a receipt evidencing
payment of such Taxes or Other Taxes.
<PAGE>
(e) FOREIGN BANK WITHHOLDING EXEMPTION. Each Bank and each Issuing
Bank that is not incorporated under the laws of the United States of
America or a state thereof agrees that it will deliver to the Borrower and
the Administrative Agent on the date of this Agreement or upon the
effectiveness of any Assignment and Acceptance (i) two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each case that
such Bank is entitled to receive payments under this Agreement and the
Notes payable to it, without deduction or withholding of any United States
federal income taxes, (ii) if applicable, an Internal Revenue Service
Form W-8 or W-9 or successor applicable form, as the case may be, to
establish an exemption from United States backup withholding tax, and
(iii) any other governmental forms which are necessary or required under an
applicable tax treaty or otherwise by law to eliminate any withholding tax,
which have been reasonably requested by the Borrower. Each Bank which
delivers to the Borrower and the Administrative Agent a Form 1001 or 4224
and Form W-8 or W-9 pursuant to the next preceding sentence further
undertakes to deliver to the Borrower and the Administrative Agent two
further copies of Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms, or other manner of certification, as the case may be, on
or before the date that any such form expires or becomes obsolete or after
the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower and the Administrative Agent,
and such extensions or renewals thereof as may reasonably be requested by
the Borrower and the Administrative Agent certifying in the case of a
Form 1001 or 4224 that such Bank is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes. If an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any
delivery required by the preceding sentence would otherwise be required
which renders all such forms inapplicable or which would prevent any Bank
from duly completing and delivering any such letter or form with respect to
it and such Bank advises the Borrower and the Administrative Agent that it
is not capable of receiving payments without any deduction or withholding
of United States federal income tax, and in the case of a Form W-8 or W-9,
establishing an exemption from United States backup withholding tax, such
Bank shall not be required to deliver such forms. The Borrower shall
withhold tax at the rate and in the manner required by the laws of the
United States with respect to payments made to a Bank failing to timely
provide the requisite Internal Revenue Service forms.
Section 2.12 ILLEGALITY. If any Bank shall notify the
Administrative Agent and the Borrower that the introduction of or any
change in or in the interpretation of any Legal Requirement makes it
unlawful, or that any central bank or other Governmental Authority asserts
that it is unlawful for such Bank or its LIBOR Lending Office to perform
its obligations under this Agreement to maintain any LIBOR Advances of such
Bank then outstanding hereunder, then, notwithstanding anything herein to
the contrary, the Borrower shall, if demanded by such Bank by notice to the
Borrower and the Administrative Agent no later than 12:00 Noon (Dallas,
Texas time), (a) if not prohibited by Legal Requirement to maintain such
LIBOR Advances for the duration of the Interest Period, on the last day of
the Interest Period for each outstanding LIBOR Advance of such Bank or
(b) if prohibited by Legal Requirement to maintain such LIBOR Advances for
the duration of the Interest Period, on the second Business Day following
its receipt of such notice from such Bank, Convert all LIBOR Advances of
such Bank then outstanding to Base Rate Advances, and pay accrued interest
on the principal amount Converted to the date of such Conversion and
amounts, if any, required to be paid pursuant to Section 2.08 as a result
of such Conversion being made on such date. Each Bank agrees to use
commercially reasonable efforts (consistent with its internal policies and
legal and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such designation would avoid the effect of
this paragraph and would not, in the reasonable judgment of such Bank, be
otherwise disadvantageous to such Bank.
<PAGE>
Section 2.1 LETTERS OF CREDIT.
(a) ISSUANCE. From time to time from the date of this Agreement
until three months before the Maturity Date, at the request of the
Borrower, the Issuing Bank shall, on any Business Day and on the terms and
conditions hereinafter set forth, issue, increase, decrease, amend, or
extend the expiration date of Letters of Credit for the account of the
Borrower (for its own benefit or for the benefit of any of its
Subsidiaries). No Letter of Credit will be issued, increased, or extended
(i) if such issuance, increase, or extension would cause the Letter of
Credit Exposure to exceed the lesser of (x) $25,000,000 or (y) an amount
equal to (A) the lesser of the Borrowing Base or the aggregate Commitments
LESS (B) the aggregate outstanding Advances and Letter of Credit Exposure
at such time; (ii) unless such Letter of Credit has an Expiration Date not
later than the earlier of (A) one year after the date of issuance thereof
and (B) one day prior to the Maturity Date; (iii) unless such Letter of
Credit is in form and substance acceptable to the respective Issuing Bank;
(iv) unless such Letter of Credit is a standby letter of credit not
supporting the repayment of indebtedness for borrowed money of any Person;
(v) unless the Borrower has delivered to the respective Issuing Bank the
completed and executed Letter of Credit Documents (other than the Letter of
Credit) on such Issuing Bank's standard form, which shall contain terms no
more restrictive than the terms of this Agreement; (vi) unless such Letter
of Credit is governed by the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication
No. 500 ("UCP") or any successor to the UCP; and (vii) unless no Default
has occurred and is continuing or would result from the issuance of such
Letter of Credit. If the terms of any of the Letter of Credit Documents
referred to in the foregoing clause (v) conflicts with the terms of this
Agreement, the terms of this Agreement shall control.
(b) PARTICIPATIONS. On the date of the issuance or increase of any
Letter of Credit on or after the Effective Date in accordance with
provisions of the preceding Section 2.13(a), each Issuing Bank shall be
deemed to have sold to each other Bank and each other Bank shall have been
deemed to have purchased from such Issuing Bank a participation in the
Letter of Credit Exposure related to the Letters of Credit issued by such
Issuing Bank equal to such Bank's Pro Rata Share at such date and such sale
and purchase shall otherwise be in accordance with the terms of this
Agreement. Each Issuing Bank shall promptly notify each such participant
Bank by telex, telephone, or telecopy of each Letter of Credit of such
Issuing Bank issued, increased or decreased, and the actual dollar amount
of such Bank's participation in such Letter of Credit. Each Bank's
obligation to purchase participating interests pursuant to this Section and
to reimburse the respective Issuing Bank for such Bank's Pro Rata Share of
any payment under a Letter of Credit by such Issuing Bank not reimbursed in
full by the Borrower shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any of the
circumstances described in paragraph (d) below, (ii) the occurrence and
continuance of a Default, (iii) an adverse change in the financial
condition of the Borrower or any Guarantor, or (iv) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing, except for any such circumstance, happening or event
constituting or arising from gross negligence or willful misconduct on the
part of such Issuing Bank.
<PAGE>
(c) REIMBURSEMENT. The Borrower shall pay promptly on demand to
each Issuing Bank in respect of each Letter of Credit issued by such
Issuing Bank an amount equal to any amount paid by such Issuing Bank under
or in respect of such Letter of Credit. In the event any Issuing Bank
makes a payment pursuant to a request for draw presented under a Letter of
Credit and such payment is not promptly reimbursed by the Borrower upon
demand, such Issuing Bank shall give notice of such payment to the
Administrative Agent and the Banks, and each Bank shall promptly reimburse
such Issuing Bank for such Bank's Pro Rata Share of such payment, and such
reimbursement shall be deemed for all purposes of this Agreement to
constitute a Base Rate Advance to the Borrower from such Bank. If such
reimbursement is not made by any Bank to any Issuing Bank on the same day
on which such Issuing Bank shall have made payment on any such draw, such
Bank shall pay interest thereon to such Issuing Bank for each such day from
the date such payment should have been made until the date repaid at a rate
per annum equal to the Federal Funds Rate for each such day. The Borrower
hereby unconditionally and irrevocably authorizes, empowers, and directs
the Administrative Agent and the Banks to record and otherwise treat each
payment under a Letter of Credit not immediately reimbursed by the Borrower
as a Borrowing comprised of Base Rate Advances to the Borrower.
(d) OBLIGATIONS UNCONDITIONAL. Except to the extent provided in
Section 2.13(e), the obligations of the Borrower under this Agreement in
respect of each Letter of Credit shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement
under all circumstances, notwithstanding the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit Documents;
(ii) any amendment or waiver of or any consent to departure
from any Letter of Credit Documents;
(iii) the existence of any claim, set-off, defense or other
right which the Borrower or any Bank or any other Person may have at any
time against any beneficiary or transferee of such Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee may be
acting), the respective Issuing Bank or any other Person or entity, whether
in connection with this Agreement, the transactions contemplated in this
Agreement or in any Letter of Credit Documents or any unrelated
transaction;
(iv) any statement or any other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect to the extent the respective Issuing Bank would not be liable
therefor pursuant to the following paragraph (e);
(v) payment by the respective Issuing Bank under such Letter
of Credit against presentation of a draft or certificate which does not
comply with the terms of such Letter of Credit; or
(vi) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
<PAGE>
(e) LIABILITY OF ISSUING BANKS. The Borrower assumes all risks of
the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. No Issuing Bank,
nor any other Bank, nor any of their respective officers or directors shall
be liable or responsible for:
(i) the use which may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith;
(ii) the validity, sufficiency or genuineness of documents, or
of any endorsement thereon, even if such documents should prove to be in
any or all respects invalid, insufficient, fraudulent or forged;
(iii) payment by such Issuing Bank against presentation of
documents which do not comply with the terms of a Letter of Credit,
including failure of any documents to bear any reference or adequate
reference to the relevant Letter of Credit; or
(iv) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit (including such Issuing Bank's
own negligence),
EXCEPT THAT THE BORROWER SHALL HAVE A CLAIM AGAINST SUCH ISSUING BANK, AND
SUCH ISSUING BANK SHALL BE LIABLE TO, AND SHALL PROMPTLY PAY TO, THE
BORROWER, TO THE EXTENT OF ANY DIRECT, AS OPPOSED TO CONSEQUENTIAL, DAMAGES
SUFFERED BY THE BORROWER WHICH THE BORROWER PROVES WERE CAUSED BY (A) SUCH
ISSUING BANK'S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE IN DETERMINING
WHETHER DOCUMENTS PRESENTED UNDER A LETTER OF CREDIT COMPLY WITH THE TERMS
OF SUCH LETTER OF CREDIT OR (B) SUCH ISSUING BANK'S GROSS NEGLIGENCE IN
FAILING TO MAKE LAWFUL PAYMENT UNDER ANY LETTER OF CREDIT AFTER THE
PRESENTATION TO IT OF A DRAFT AND CERTIFICATE STRICTLY COMPLYING WITH THE
TERMS AND CONDITIONS OF SUCH LETTER OF CREDIT. In furtherance and not in
limitation of the foregoing, any Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation.
Section 2.14 DETERMINATION OF BORROWING BASE. The Borrowing Base
shall be determined by the Administrative Agent, as follows:
(a) QUARTERLY. On the 45th day following each calendar quarter the
Administrative Agent shall determine the Borrowing Base upon receipt of a
Borrowing Base Certificate setting forth the components of the Borrowing
Base dated as of the last day of the immediately preceding calendar
quarter.
(b) PROPERTY ADJUSTMENTS. Following each addition or deletion of a
Hotel Property as an Eligible Property (an "ADJUSTMENT EVENT"), and the
Administrative Agent's receipt of a Property Adjustment Report with respect
thereto, the Administrative Agent shall adjust the Borrowing Base
accordingly.
(c) REDUCTION OF COMMITMENTS. Following each reduction of the
Commitments pursuant to the provisions of Section 2.04.
(d) NOTICE OF BORROWING BASE CHANGE. Promptly following any date
the Borrowing Base is redetermined in accordance with the preceding
paragraphs, the Administrative Agent shall give notice to the Banks and the
Borrower of the new Borrowing Base.
<PAGE>
Section 2.15 BANK REPLACEMENT.
(a) RIGHT TO REPLACE. The Borrower shall have the right to replace
each Bank affected by a condition under Section 2.02(c)(v), 2.09, 2.11, or
2.12 for more than 90 days (each such affected Bank, an "Affected Bank") in
accordance with the procedures in this Section 2.15 and provided that no
reduction of the total Commitments occurs as a result thereof.
(b) FIRST RIGHT OF REFUSAL; REPLACEMENT.
(i) Upon the occurrence of any condition permitting the
replacement of a Bank, the Administrative Agent in its sole discretion
shall have the right to reallocate the amount of the Commitments of the
Affected Banks, including without limitation to Persons which are not
already party to this Agreement but which qualify as Eligible Assignees,
which election shall be made by written notice within 30 days after the
date such condition occurs.
(ii) If the aggregate amount of the reallocated Commitments is
less than the Commitments of the Affected Banks, (A) the respective
Commitments of the Banks which have received such reallocated Commitments
shall be increased by the respective amounts of their proposed
reallocations, and (B) the Borrower shall have the right to add additional
Banks which are Eligible Assignees to this Agreement to replace such
Affected Banks, which additional Banks would have aggregate Commitments no
greater than those of the Affected Banks MINUS the amounts of the
Commitments already reallocated.
(c) PROCEDURE. Any assumptions of Commitments pursuant to this
Section 2.15 shall be (i) made by the purchasing Bank or Eligible Assignee
and the selling Bank entering into an Assignment and Assumption and by
following the procedures in Section 10.06 for adding a Bank. In connection
with the reallocation of the Commitments of any Bank pursuant to the
foregoing paragraph (b), each Bank with a reallocated Commitment shall
purchase from the Affected Banks at par such Bank's ratable share of the
outstanding Advances of the Affected Banks and assume such Bank's ratable
share of the Affected Banks' Letter of Credit Exposure.
Section 2.16 SHARING OF PAYMENTS, ETC. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right
of set-off or otherwise) on account of its Advances or its share of Letter
of Credit Obligations in excess of its Pro Rata Share of payments on
account of the Advances or Letter of Credit Obligations obtained by all the
Banks, such Bank shall notify the Administrative Agent and forthwith
purchase from the other Banks such participations in the Advances made by
them or Letter of Credit Obligations held by them as shall be necessary to
cause such purchasing Bank to share the excess payment ratably in
accordance with the requirements of this Agreement with each of them;
PROVIDED, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, such purchase from each
Bank shall be rescinded and such Bank shall repay to the purchasing Bank
the purchase price to the extent of such Bank's ratable share (according to
the proportion of (a) the amount of the participation sold by such Bank to
the purchasing Bank as a result of such excess payment to (b) the total
amount of such excess payment) of such recovery, together with an amount
equal to such Bank's ratable share (according to the proportion of (a) the
amount of such Bank's required repayment to the purchasing Bank to (b) the
total amount of all such required repayments to the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect
of the total amount so recovered. The Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.16
may, to the fullest extent permitted by Legal Requirement, unless and until
rescinded as provided above, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if
such Bank were the direct creditor of the Borrower in the amount of such
participation.
<PAGE>
ARTICLE III
CONDITIONS OF LENDING
Section 3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation
of each Bank to make its initial Advance as part of the initial Borrowing
and of the Issuing Bank to issue the initial Letter of Credit are subject
to the following conditions precedent being satisfied on or prior to the
Funding Deadline:
(a) DOCUMENTATION. The Administrative Agent shall have received
counterparts of this Agreement executed by the Borrower and the Banks, and
the following duly executed by all the parties thereto, in form and
substance satisfactory to the Administrative Agent, and, with respect to
this Agreement, all Guaranties and the Environmental Indemnity, in
sufficient copies for each Bank:
(i) the Notes, all Guaranties, and the Environmental
Indemnity;
(ii) a certificate from the Chief Executive Officer, President
or Chief Financial Officer of the Parent on behalf of the Borrower dated as
of the Effective Date stating that as of the Effective Date (A) all
representations and warranties of the Borrower set forth in this Agreement
and the Credit Documents are true and correct in all material respects;
(B) no Default has occurred and is continuing; (C) the conditions in this
Section 3.01 have been met or waived in writing; and (D) to the best of the
Borrower's knowledge there are no claims, defenses, counterclaims or
offsets by the Borrower against the Banks under the Credit Documents;
(iii) a certificate of the Secretary or an Assistant Secretary
of the Parent on behalf of the Borrower and each Guarantor dated as of the
date of this Agreement certifying as of the date of this Agreement (A) the
names and true signatures of officers or authorized representatives of the
general partner of the Borrower and such Guarantor authorized to sign the
Credit Documents to which such Person is a party as general partner of such
Person, (B) resolutions of the Board of Directors or the members of the
general partner of such Person with respect to the transactions herein
contemplated, (C) either (x) the copies of the organizational documents of
the general partner of such Person delivered to the Banks are still true
and correct and have not been amended or modified since such date or (y)
copies of any modification or amendment to the organizational documents of
the general partner of such Person made since such date, (D) a true and
correct copy of the partnership agreement for such Person, and (E) a true
and correct copy of all partnership authorizations necessary or desirable
in connection with the transactions herein contemplated;
(iv) a certificate of the Secretary or an Assistant Secretary
of the Parent dated as of the date of this Agreement certifying as of the
date of this Agreement (A) resolutions of the Board of Directors of such
Person with respect to the transactions herein contemplated, (B) the copies
of the charter and bylaws of the Parent and any modification or amendment
to the articles or certificate of incorporation or bylaws of the Parent
made since such date, (C) the issuance of the Parent Common Stock pursuant
to the Public Offering Documents, (D) that, after giving effect to the
Public Offering, the Parent owns 100% of the general partner interests and
at least 70% of the limited partnership interests in the Borrower, and (3)
the Parent has no first tier Subsidiaries other than the Borrower, and (E)
a copy of the Advisory Agreement;
<PAGE>
(v) (A) one or more favorable written opinions of Brown &
Wood L.L.P., special counsel for the Borrower, the Parent, and their
Subsidiaries, in a form reasonably acceptable to the Administrative Agent,
in each case dated as of the Closing Date and with such changes as the
Administrative Agent may approve, (B) a reliance letter from Brown & Wood
L.L.P., as counsel to the Parent, and each other counsel (other than
underwriters' counsel) delivering an opinion in connection with the Public
Offering, in each case addressed to the Administrative Agent and the Banks
and satisfactory in form and substance to the Administrative Agent stating
that the Administrative Agent and the Banks may rely on such opinions as if
they were original addressees thereof, and in each case attaching an
executed original thereof, and (C) such other legal opinions as the
Administrative Agent shall reasonably request, in each case dated as of the
Closing Date and with such changes as the Administrative Agent may approve;
(vi) a Notice of Borrowing delivered in accordance with
Section 2.02;
(vii) a Borrowing Base Certificate dated as of the Closing
Date, duly completed and executed by the Chief Financial Officer or
Treasurer of the Parent on behalf of the Borrower which reflects that the
aggregate Hotel Value of all Eligible Properties as of the Closing Date is
at least $250,000,000; and
(viii) such other documents, governmental certificates,
agreements, lien searches as either Agent may reasonably request.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV hereof, the Guaranties, and the
Environmental Indemnity shall be true and correct in all material respects.
(c) CERTAIN PAYMENTS. The Borrower shall have paid the fees
required to be paid as of the execution of this Credit Agreement pursuant
to the Fee Letter.
(d) PUBLIC OFFERING. The Administrative Agent shall have received
evidence satisfactory to it that (i) the Public Offering shall have been
consummated pursuant to the Public Offering Documents, (ii) the
Administrative Agent shall have received executed or conformed copies of
each of the Public Offering Documents and all amendments thereto, (iii)
each of the Public Offering Documents shall be in full force and effect,
(iv) the Parent shall have received not less than $220,000,000 in net
proceeds from the Public Offering (after deducting expenses and
underwriting discounts and commissions), (v) the Parent shall have
contributed such net proceeds to the Borrower as an equity contribution and
(vi) all other matters with respect to the Public Offering shall be
reasonably satisfactory to the Agents.
<PAGE>
Hotel Property Requirements are met.
(f) OTHER. The Administrative Agent shall have received such other
approvals, opinions or documents deemed necessary or desirable by any Bank,
the Syndication Agent or the Administrative Agent as such party may
reasonably request.
<PAGE>
If the conditions set forth in this Section 3.01 are not satisfied on or
prior to the Funding Deadline, the obligation of each Bank to make Advances
and the obligation of each Issuing Bank to issue, increase, or extend
Letters of Credit shall immediately and automatically be terminated and the
Notes, all interest on the Notes, all Letter of Credit Obligations, and all
other amounts payable under this Agreement shall immediately and
automatically become and be due and payable in full, without presentment,
demand, protest or any notice of any kind (including, without limitation,
any notice of intent to accelerate or notice of acceleration), all of which
are hereby expressly waived by the Borrower. However, Borrower shall pay
to the Agents all fees and expenses as set forth in Fee Letter.
Section 3.2 CONDITIONS PRECEDENT FOR EACH BORROWING OR LETTER OF
CREDIT. The obligation of each Bank to fund an Advance on the occasion of
each Borrowing (other than the Conversion or continuation of any existing
Borrowing) and of any Issuing Bank to issue or increase or extend any
Letter of Credit shall be subject to the further conditions precedent that
on the date of such Borrowing or the issuance or increase or extension of
such Letter of Credit:
(a) the following statements shall be true (and each of the giving
of the applicable Notice of Borrowing and the acceptance by the Borrower of
the proceeds of such Borrowing or the issuance or increase or extension of
such Letter of Credit shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing or the issuance or increase or
extension of such Letter of Credit such statements are true):
(i) the representations and warranties contained in
Article IV hereof, the Guaranties, and the Environmental Indemnity and are
correct in all material respects on and as of the date of such Borrowing or
the issuance or increase or extension of such Letter of Credit, before and
after giving effect to such Borrowing or to the issuance or increase or
extension of such Letter of Credit and to the application of the proceeds
from such Borrowing, as though made on and as of such date; and
(ii) no Default has occurred and is continuing or would result
from such Borrowing or from the application of the proceeds therefrom;
(b) the Borrower shall have executed and delivered to the
Administrative Agent a Borrowing Base Certificate dated not earlier than
the date 10 days prior to the anticipated date of such Borrowing and a
Notice of Borrowing delivered in accordance with Section 2.02; and
(c) the Administrative Agent shall have received such other
approvals, opinions or documents deemed necessary or desirable by any Bank
or the Administrative Agent as such party may reasonably request.
Section 3.3 CONDITIONS PRECEDENT TO A HOTEL PROPERTY QUALIFYING AS
AN ELIGIBLE PROPERTY. In order for an Initial Property or a Future
Property to qualify initially and thereafter to continue to qualify as an
Eligible Property, the following conditions precedent must be satisfied and
remain satisfied for that Property:
(a) TITLE. Such Hotel Property (i) is Unencumbered, (ii) free of
all material title defects, and (iii) either (A) owned (together with the
land on which it is located) in fee simple by the Borrower or its direct or
indirect Wholly-Owned Subsidiary or Joint Venture Subsidiary or (B) owned
by the Borrower or its direct or indirect Wholly-Owned Subsidiary or Joint
Venture Subsidiary and located on land leased to the Borrower or such
Subsidiary pursuant to a Qualified Ground Lease, all as evidenced by a copy
of the most recent ALTA Owner's Policy of Title Insurance (or commitment to
issue such a policy to the Borrower or its Subsidiary owning or to own such
Hotel Property) relating to such Hotel Property showing the identity of the
fee titleholder thereto and all matters of record as of its date.
<PAGE>
(b) GUARANTOR. In addition, if the Property Owner for such Hotel
Property is not the Borrower, the following:
(i) The Property Owner shall be either a Wholly-Owned
Subsidiary or a Joint Venture Subsidiary of the Borrower whose sole assets
are Eligible Properties, who is not liable for any Indebtedness other than
the Obligations, who complies in all material respects with all of the
covenants and requirements of Guarantors under the Credit Documents and who
has delivered to the Administrative Agent either (A) an original Guaranty
and Environmental Indemnity executed by such Subsidiary or (B) an Accession
Agreement executed by such Subsidiary; and
(ii) a written opinion of the Borrower's counsel or counsels
covering such matters relating to the Property Owner as the Administrative
Agent reasonably require.
(c) APPROVED PARTICIPATING LEASE. (i) Such Hotel Property is
leased to an Approved Participating Lessee pursuant to an Approved
Participating Lease, (ii) no material default by the Approved Participating
Lessee or the Property Owner under the Approved Participating Lease exists
beyond any applicable cured period (provided that for purposes of this
subsection (c) such cure period will be deemed to commence running when the
Borrower, the Parent or a Guarantor has knowledge of such default), (iii)
the Approved Participating Lease remains in full force and effect, and (iv)
no failure to achieve specified financial results under such Approved
Participating Lease has occurred which would allow the Property Owner for
such Hotel Property to terminate such Approved Participating Lease.
(d) APPROVED MANAGEMENT AGREEMENT. Except for those Hotel
Properties managed pursuant to an Approved Participating Lease for such
Hotel Property, (i) such Hotel Property is managed by an Approved Manager
pursuant to an Approved Management Agreement, (ii) no material default by
the owner under the Approved Management Agreement exists, and (iii) the
Approved Management Agreement remains in full force and effect;
(e) APPROVED FRANCHISE AGREEMENT. If at the time of acquisition of
a Hotel Property such Hotel Property is operated pursuant to a franchise or
license agreement, then (i) such Hotel Property must be subject to an
Approved Franchise Agreement with an Approved Franchisor, (ii) no material
default by the franchisee under the Approved Franchise Agreement exists,
and (iii) the Approved Franchise Agreement remains in full force and
effect.
(f) PROPERTY CONDITION. Such Hotel Property is free of all
material structural defects, as evidenced by an Engineering Report.
(g) ENVIRONMENTAL CONDITION. Such Hotel Property is (1) in
compliance, in all material respects, with all applicable Environmental
Laws, and (2) not subject to any material Environmental Claim, all as
evidenced by an Environmental Report.
(h) ROOMS IN OPERATION. Such Hotel Property is fully operating
with less than 20% of such Hotel Property's guest rooms out of service
(whether due to casualty loss or as a consequence of repairs, alterations
or additions or otherwise); provided, however, that during off-season
periods (which for such Hotel Property shall not exceed 4 months in any
calendar year) more than 20% of such Hotel Property's guest rooms may be
out of service in connection with a renovation of such Hotel Property if
such renovation does not cause such Hotel Property's occupancy percentage
levels during such periods to be 10 percentage points lower than such Hotel
Property's occupancy percentage levels during the same periods in the
previous calendar year.
<PAGE>
(i) TYPE AND LOCATION. Such Hotel Property is a full service or
limited service hotel located in either the United States of America or in
an Approved Other Country.
(j) DOCUMENTS AND INFORMATION. The Administrative Agent shall have
received each of the following executed by the Borrower, the Property Owner
or other appropriate person, in form and substance reasonably satisfactory
to the Administrative Agent:
(i) a copy of each of the following for such Hotel Property
certified as true and correct by the Borrower:
A. If the Hotel Property is subject to an Approved
Franchise Agreement, the Approved Franchise Agreement and any requirements
or conditions imposed by the Approved Franchisor at such time in connection
with the Approved Franchise Agreement, including without limitation any
requirements with respect to Capital Expenditures or expenditures for FF&E
for the Hotel Property;
B. If the Hotel Property is subject to an Approved
Management Agreement, the Approved Management Agreement;
C. the Approved Participating Lease;
D. If the Hotel Property is subject to a Qualified
Ground Lease, the Qualified Ground Lease; and
E. If the Property Owner is not the Borrower, the
Property Owner's articles of incorporation, by-laws, partnership
agreements, as applicable, and certificates of existence, good standing and
authority to do business from each appropriate state authority, and
partnership or corporate, as applicable, authorizations authorizing the
execution, delivery and performance of the Accession Agreement all
certified to be true and complete by a duly authorized officer of such
Property Owner;
(ii) if the Borrower has received a survey of the Real
Property, a copy of such survey;
(iii) (A) a description of such Hotel Property, such
description to include the age, location and number of rooms or suites of
such Hotel Property, and (B) to the extent available, statistics with
respect to the occupancy of the Hotel Property, operating statements, and
an analysis of the revenue per available room, in each case for the three
(3) prior Fiscal Years and the completed Fiscal Quarters of the current
Fiscal Year;
(iv) certificates and, to the extent within the Borrower's
control, policies of insurance evidencing that the Hotel Property is
covered by the insurance required pursuant to Section 5.07 hereof; and
(v) all other documents reasonably required by either Agent.
(k) ADVERSE PROPERTY SITUATION. Neither all nor any material
portion of the Hotel Property shall be the subject of any proceeding by a
governmental authority for the condemnation, seizure or appropriation
thereof, nor the subject of any negotiations for sale in lieu of
condemnation, seizure or appropriation.
<PAGE>
(l) QUALIFIED GROUND LEASES. In addition, if the Hotel Property is
subject to a Qualified Ground Lease, no default by the lessee under the
Qualified Ground Lease exists and the Qualified Ground Lease remains in
full force and effect.
(m) OTHER REQUIREMENTS. In addition, the following:
(i) As certified in writing by the Borrower to the
Administrative Agent and the Banks at least 10 Business Days prior to the
date the Borrower proposes such Hotel Property qualify as an Eligible
Property, the Hotel Property individually qualifies as an Eligible Property
and the addition of the Hotel Property as an Eligible Property shall not
(A) cause the Eligible Properties in the aggregate to violate the Borrowing
Base Requirements, (B) cause a Default, or (C) cause or result in the
Borrower or the Parent failing to comply with any of the financial
covenants contained herein; and
(ii) The Borrower shall have delivered to the Administrative
Agent and the Banks the Property Information for such Hotel Property 10
Business Days prior to the date the Borrower proposes such Hotel Property
qualify as an Eligible Property.
(n) OTHER ACTIONS. Borrower shall have executed and acknowledged
(or caused to be executed and acknowledged) and delivered to the
Administrative Agent, on behalf of the Banks, all documents, and taken all
actions reasonably required by the Administrative Agent from time to time
to confirm the rights created or now or hereafter intended to be created
under the Credit Documents, or otherwise to carry out the purposes of the
Credit Documents, and the transactions contemplated thereunder. The
Administrative Agent shall have received all other evidence and information
that they may reasonably require.
Upon 10 days prior written notice from the Borrower to the Administrative
Agent, the Borrower can designate that a Hotel Property be added (subject
to the other requirements for a Hotel Property qualifying as an Eligible
Property) or deleted as an Eligible Property. Such notice shall be
accompanied by a Property Adjustment Report with respect to such addition
or deletion and (a) with respect to an addition, the certificate required
under Section 3.03(o)(i) and (b) with respect to a deletion, Borrower's
certification in such detail as reasonably required by the Administrative
Agent that such deletion shall not (A) cause the Eligible Properties in the
aggregate to violate the Borrowing Base Requirements, (B) cause a Default,
or (C) cause or result in the Borrower or the Parent failing to comply with
any of the financial covenants contained herein.
Notwithstanding anything contained in this Agreement to the contrary, the
Required Lenders in their reasonable discretion may upon 30 days prior
written notice to the Borrower designate that a Hotel Property is no longer
an Eligible Property upon their determination that such Hotel Property does
not satisfy the requirements for qualifying as an Eligible Property;
PROVIDED that if during such 30 day period the Borrower can satisfy those
requirements deemed unsatisfied by the Required Lenders, such Hotel
Property shall remain an Eligible Property.
If no Default exists at such time, then in connection with any deletion of
a Hotel Property from qualifying as an Eligible Property, any Borrower's
Subsidiary which owned or leased such Hotel Property, but not any other
Eligible Property, shall be released from such Subsidiaries obligations
under the Guaranty.
Schedule 3.03 sets forth a list of conditions precedent to certain Initial
Properties qualifying as Eligible Properties which have not been satisfied
as of the Effective Date. Such outstanding conditions precedent shall not
prevent each such Hotel Property from being deemed an Eligible Property as
of and after the Effective Date; provided that for any such Hotel Property
the conditions precedent listed on Schedule 3.03 for such Hotel Property
are satisfied prior to the satisfaction date stated for such condition
precedent on Schedule 3.03.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
Section 4.1 EXISTENCE; QUALIFICATION; PARTNERS; SUBSIDIARIES.
(a) The Borrower is a limited partnership duly organized, validly
existing, and in good standing under the laws of Delaware and in good
standing and qualified to do business in each jurisdiction where its
ownership or lease of property or conduct of its business requires such
qualification, except where the failure to so qualify would not have a
Material Adverse Change.
(b) The Parent is a real estate investment trust duly organized,
validly existing, and in good standing under the laws of Maryland and in
good standing and qualified to do business in each jurisdiction where its
ownership or lease of property or conduct of its business requires such
qualification, except where the failure to so qualify would not have a
material adverse effect on the Parent. The Parent has no first tier
Subsidiaries except for the Borrower.
(c) The Parent is the Borrower's sole general partner with full
power and authority to bind the Borrower to the Credit Documents.
(d) Upon consummation of the Public Offering, the Parent will own a
1.0% general partner interest in and an approximately 81.6% limited
partnership interest in the Borrower.
(e) Each Subsidiary of the Borrower is a limited partnership,
general partnership or limited liability company duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
formation and in good standing and qualified to do business in each
jurisdiction where its ownership or lease of property or conduct of its
business requires such qualification, except where the failure to so
qualify would not have a material adverse effect on such Subsidiary. The
Borrower has no Subsidiaries on the date of this Agreement other than the
Subsidiaries listed on the attached Schedule 4.01, and Schedule 4.01 lists
the jurisdiction of formation and the address of the principal office of
each such Subsidiary existing on the date of this Agreement. As of the
date of this Agreement, the Borrower owns, directly or indirectly, at least
99% of the interests in each such Subsidiary.
(f) As of the date of this Agreement, to the knowledge of Borrower,
LaSalle Partners legally and beneficially own, directly or indirectly,
approximately 45.5% of the partnership interests in LaSalle Leasing.
(g) As of the date of this Agreement, neither the Borrower, nor the
Parent own directly or indirectly ten percent (10%) or more of the
beneficial ownership interest in any Approved Participating Lessee.
<PAGE>
Section 4.2 PARTNERSHIP AND CORPORATE POWER. The execution,
delivery, and performance by the Borrower, the Parent, and each Guarantor
of the Credit Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby (a) are within such Persons'
trust, partnership, limited liability company and corporate powers, as
applicable, (b) have been duly authorized by all necessary trust,
corporate, limited liability company and partnership action, as applicable,
(c) do not contravene (i) such Person's declaration of trust, certificate
or articles, as the case may be, of incorporation or by-laws, operating
agreement or partnership agreement, as applicable, or (ii) any law or any
contractual restriction binding on or affecting any such Person, the
contravention of which could reasonably be expected to cause a Material
Adverse Change, and (d) will not result in or require the creation or
imposition of any Lien prohibited by this Agreement. At the time of each
Borrowing, such Borrowing and the use of the proceeds of such Borrowing
will be within the Borrower's partnership powers, will have been duly
authorized by all necessary partnership action, (a) will not contravene
(i) the Borrower's partnership agreement or (ii) any law or any contractual
restriction binding on or affecting the Borrower, the contravention of
which could reasonably be expected to cause a Material Adverse Change, and
(b) will not result in or require the creation or imposition of any Lien
prohibited by this Agreement.
Section 4.3 AUTHORIZATION AND APPROVALS. No authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery and
performance by the Borrower, the Parent, or any Guarantor of the Credit
Documents to which it is a party or the consummation of the transactions
contemplated thereby. At the time of each Borrowing, no authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority will be required for such Borrowing or the use of
the proceeds of such Borrowing the absence of which could reasonably be
expected to cause a Material Adverse Change.
Section 4.4 ENFORCEABLE OBLIGATIONS. This Agreement, the Notes, and
the other Credit Documents to which the Borrower is a party have been duly
executed and delivered by the Borrower; each Guaranty and the other Credit
Documents to which each Guarantor and the Parent is a party have been duly
executed and delivered by such Guarantor and the Environmental Indemnity
has been duly executed and delivered by the parties thereto. Each Credit
Document is the legal, valid, and binding obligation of the Borrower, the
Parent, and each Guarantor which is a party to it enforceable against the
Borrower, the Parent, and each such Guarantor in accordance with its terms,
except as such enforceability may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium, or similar law affecting creditors'
rights generally and by general principles of equity (whether considered in
proceeding at law or in equity).
Section 4.5 PARENT COMMON STOCK. The entire authorized capital
stock of the Parent consists of 100,000,000 shares of Parent Common Stock
of which 15,112,122 shares of Parent Common Stock are duly and validly
issued and outstanding, fully paid and nonassessable as of the Effective
Date. The issuance and sale of such Parent Common Stock either (i) has
been registered under applicable federal and state securities laws or (ii)
was issued pursuant to an exemption therefrom. The Parent will meet the
requirements for taxation as a REIT under the Code beginning with the year
ended December 31, 1998.
Section 4.6 FINANCIAL STATEMENTS. The Consolidated balance sheet of
the Parent and its Subsidiaries, and the related Consolidated statements of
operations, shareholders' equity and cash flows, of the Parent and its
Subsidiaries contained in the most recent financial statements delivered to
the Banks, or, if no such financial statements have yet been delivered, the
<PAGE>
Registration Statement, fairly present the financial condition in all
material respects and reflects the Indebtedness of the Parent and its
Subsidiaries as of the Closing Date following consummation of the Public
Offering and the results of the operations of the Initial Properties for
the periods indicated, and such balance sheet and statements were prepared
in accordance with GAAP, subject to year-end adjustments. Since the date
of such statements, no Material Adverse Change has occurred.
Section 4.7 TRUE AND COMPLETE DISCLOSURE. No representation,
warranty, or other statement made by the Borrower (or on behalf of the
Borrower) in this Agreement or any other Credit Document contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements contained therein not misleading in light
of the circumstances in which they were made as of the date of this
Agreement. There is no fact known to the Borrower or the Parent on the
date of this Agreement that has not been disclosed to the Administrative
Agent which could reasonably be expected to cause a Material Adverse
Change. All projections, estimates, and pro forma financial information
furnished by the Borrower and the Parent or on behalf of the Borrower or
the Parent were prepared on the basis of assumptions, data, information,
tests, or conditions believed to be reasonable at the time such
projections, estimates, and pro forma financial information were furnished.
No representation, warranty or other statement made in the Registration
Statement contains any untrue statement of material fact or omits to state
any material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made as of the
date same were made. Borrower and/or Parent have made all filings required
by the Exchange Act.
Section 4.8 LITIGATION. Except as set forth in the attached
Schedule 4.08, as of the date of this Agreement there is no pending or, to
the best knowledge of the Borrower, threatened action or proceeding
affecting the Borrower, the Parent, any Approved Participating Lessee or
any of their respective Subsidiaries before any court, Governmental
Authority or arbitrator.
Section 4.9 USE OF PROCEEDS.
(a) ADVANCES. The proceeds of the Advances have been, and will be
used by the Borrower (i) to refinance existing Indebtedness secured by
Hotel Properties, (ii) to make investments permitted pursuant to the
provisions of Section 6.07, (iii) to finance the renovation, repair,
restoration and expansion of Hotel Properties, Capital Expenditures for and
expenditures for FF&E for any Hotel Properties in accordance with the
provisions of Section 5.06 and as permitted pursuant to the provisions of
Sections 6.07 and 6.14, (iv) for general corporate purposes of the Borrower
and its Subsidiaries, and (v) for costs incurred in connection with any
Capitalization Event done in compliance with this Agreement, including
without limitation the Public Offering.
(b) REGULATIONS. No proceeds of Advances will be used to purchase
or carry any margin stock in violation of Regulations G, T, U or X of the
Federal Reserve Board, as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof. The Borrower
is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of
the Federal Reserve Board).
Section 4.10 INVESTMENT COMPANY ACT. Neither the Borrower, the
Parent nor any of their respective Subsidiaries is an "investment company"
or a company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
<PAGE>
Section 4.11 TAXES. All federal, state, local and foreign tax
returns, reports and statements required to be filed (after giving effect
to any extension granted in the time for filing) by the Parent, the
Borrower, their respective Subsidiaries, or any member of a Controlled
Group have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to
be filed, and where the failure to file could reasonably be expected to
cause a Material Adverse Change, except where contested in good faith and
by appropriate proceedings; and all taxes and other impositions due and
payable (which are material in amount) have been timely paid prior to the
date on which any fine, penalty, interest, late charge or loss (which are
material in amount) may be added thereto for non-payment thereof except
where contested in good faith and by appropriate proceedings. As of the
date of this Agreement, neither the Parent, the Borrower nor any member of
a Controlled Group has given, or been requested to give, a waiver of the
statute of limitations relating to the payment of any federal, state, local
or foreign taxes or other impositions. None of the Property owned by the
Parent, the Borrower or any other member of a Controlled Group is Property
which the Parent, the Borrower or any member of a Controlled Group is
required to be treated as being owned by any other Person pursuant to the
provisions of Section 168(f)(8) of the Code. Proper and accurate amounts
have been withheld by the Borrower and all members of each Controlled Group
from their employees for all periods to comply in all material respects
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law. Timely payment of all
material sales and use taxes required by applicable law have been made by
the Parent, the Borrower and all other members of each Controlled Group,
the failure to timely pay of which could reasonably be expected to cause a
Material Adverse Change. The amounts shown on all tax returns to be due
and payable have been paid in full or adequate provision therefor is
included on the books of the appropriate member of the applicable
Controlled Group.
Section 4.12 PENSION PLANS. All Plans are in compliance in all
material respects with all applicable provisions of ERISA. No Termination
Event has occurred with respect to any Plan, and each Plan has complied
with and been administered in all material respects in accordance with
applicable provisions of ERISA and the Code. No "accumulated funding
deficiency" (as defined in Section 302 of ERISA) has occurred and there has
been no excise tax imposed under Section 4971 of the Code. No Reportable
Event has occurred with respect to any Multiemployer Plan, and each
Multiemployer Plan has complied with and been administered in all material
respects with applicable provisions of ERISA and the Code. Neither the
Parent, the Borrower, nor any member of a Controlled Group has had a
complete or partial withdrawal from any Multiemployer Plan for which there
is any material withdrawal liability. As of the most recent valuation date
applicable thereto, neither the Parent, the Borrower nor any member of a
Controlled Group has received notice that any Multiemployer Plan is
insolvent or in reorganization.
<PAGE>
Section 4.13 CONDITION OF HOTEL PROPERTY; CASUALTIES; CONDEMNATION.
Except as disclosed in an Engineering Report, each Initial Property and any
Future Property (a) is and will continue to be in good repair, working
order and condition, normal wear and tear excepted, (b) is free of
structural defects, (c) is not subject to material deferred maintenance and
(d) has and will have all building systems contained therein and all other
FF&E in good repair, working order and condition, normal wear and tear
excepted. The FF&E Reserve for each Hotel Property provides or will
provide adequate financial reserves for the payment of the maintenance of
the Hotel Properties, including replacement of FF&E, in accordance with
Section 5.06. None of the Properties of the Borrower or of any of its
Subsidiaries has been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by a Governmental
Authority, riot, activities of armed forces or acts of God or of any public
enemy. No condemnation or other like proceedings that has had, or could
reasonably be expected to result in, a Material Adverse Change, are pending
and served nor, to the knowledge of the Borrower, threatened against any
Property in any manner whatsoever. No casualty has occurred to any
Property that could reasonably be expected to have a Material Adverse
Change.
Section 4.14 INSURANCE. The Borrower and each of its Subsidiaries
carry the insurance required pursuant to the provisions of Section 5.07.
Section 4.15 NO BURDENSOME RESTRICTIONS; NO DEFAULTS.
(a) Except in connection with Indebtedness which is (i) either
permitted pursuant to the provisions of Section 6.02, or (ii) being repaid
with the proceeds of the initial Borrowing, neither the Parent, the
Borrower nor any of their respective Subsidiaries is a party to any
indenture, loan or credit agreement. Neither the Borrower, the Parent nor
any of their respective Subsidiaries is a party to any agreement or
instrument or subject to any charter or corporate restriction or provision
of applicable law or governmental regulation which could reasonably be
expected to cause a Material Adverse Change. Neither the Borrower, the
Parent nor any of their Subsidiaries is in default under or with respect to
(i) any contract, agreement, lease or other instrument which could
reasonably be expected to cause a Material Adverse Change or (ii) any
Qualified Ground Lease, Approved Participating Lease, Approved Franchise
Agreement or Approved Management Agreement. Neither the Borrower, the
Parent nor any of their Subsidiaries has received any notice of default -
under any material contract, agreement, lease or other instrument which is
continuing and which, if not cured, could reasonably be expected to cause a
Material Adverse Change.
(b) No Default has occurred and is continuing.
Section 4.16 ENVIRONMENTAL CONDITION.
(a) Except as disclosed in the Environmental Reports, to the
knowledge of the Borrower, the Borrower and its Subsidiaries (i) have
obtained all Environmental Permits material for the ownership and operation
of their respective Properties and the conduct of their respective
businesses; (ii) have been and are in material compliance with all terms
and conditions of such Environmental Permits and with all other
requirements of applicable Environmental Laws; (iii) have not received
notice of any violation or alleged violation of any Environmental Law or
Environmental Permit; and (iv) are not subject to any actual or contingent
Environmental Claim.
<PAGE>
(b) Except as set forth in the Environmental Reports, to the
knowledge of Borrower, none of the present or previously owned or operated
Property of the Borrower or of any of its present or former Subsidiaries,
wherever located, (i) has been placed on or proposed to be placed on the
National Priorities List, the Comprehensive Environmental Response
Compensation Liability Information System list, or their state or local
analogs, or have been otherwise investigated, designated, listed, or
identified as a potential site for removal, remediation, cleanup, closure,
restoration, reclamation, or other response activity under any
Environmental Laws which could reasonably be expected to cause a Material
Adverse Change; (ii) is subject to a Lien, arising under or in connection
with any Environmental Laws, that attaches to any revenues or to any
Property owned or operated by the Borrower or any of its Subsidiaries,
wherever located; (iii) has been the site of any Release, use or storage of
Hazardous Substances or Hazardous Wastes from present or past operations
except for Permitted Hazardous Substances, which Permitted Hazardous
Substances have not caused at the site or at any third-party site any
condition that has resulted in or could reasonably be expected to result in
the need for Response or (iv) none of the Improvements are constructed on
land designated by any Governmental Authority having land use jurisdiction
as wetlands.
Section 4.17 LEGAL REQUIREMENTS, ZONING, UTILITIES, ACCESS. Except
as set forth on Schedule 4.17 attached hereto, the use and operation of
each Hotel Property as a commercial hotel with related uses constitutes a
legal use under applicable zoning regulations (as the same may be modified
by special use permits or the granting of variances) and complies in all
material respects with all Legal Requirements, and does not violate in any
material respect any material approvals, material restrictions of record or
any material agreement affecting any Hotel Property (or any portion
thereof). The Borrower and its Subsidiaries possess all certificates of
public convenience, authorizations, permits, licenses, patents, patent
rights or licenses, trademarks, trademark rights, trade names rights and
copyrights (collectively "Permits") required by Governmental Authority to
own and operate the Hotel Properties, except for those Permits if not
obtained would not cause a Material Adverse Change. The Borrower and its
Subsidiaries own and operate their business in material compliance with all
applicable Legal Requirements. To the extent necessary for the full
utilization of each Hotel Property in accordance with its current use,
telephone services, gas, steam, electric power, storm sewers, sanitary
sewers and water facilities and all other utility services are available to
each Hotel Property, are adequate to serve each such Hotel Property, exist
at the boundaries of the Land and are not subject to any conditions, other
than normal charges to the utility supplier, which would limit the use of
such utilities. All streets and easements necessary for the occupancy and
operation of each Hotel Property are available to the boundaries of the
Land.
Section 4.18 EXISTING INDEBTEDNESS. Except for the Obligations, the
only Indebtedness of the Borrower, the Parent or any of their respective
Subsidiaries existing as of the Effective Date is the Secured Non-Recourse
Indebtedness, Secured Recourse Indebtedness and other Indebtedness set
forth on Schedule 4.18 attached hereto and certain other Indebtedness
incurred in the ordinary course of business not to exceed $50,000. No
"default" or "event of default", however defined, has occurred and is
continuing under any such Indebtedness (or with respect to the giving of
this representation after the date of this Agreement, as otherwise
disclosed to the Administrative Agent in writing after the date of this
Agreement and prior to the date such representation is deemed given).
<PAGE>
Section 4.19 TITLE; ENCUMBRANCES. With respect to the Initial
Properties, the Borrower or any Guarantor, as the case may be, has (i) good
and marketable fee simple title to the Real Property (other than for Real
Property subject to a ground lease, as to which it has a valid leasehold
interest) and (ii) good and marketable title to the Personal Property
(other than Personal Property for any Hotel Property for which the Property
Owner has a valid leasehold interest) free and clear of all Liens, and
there exists no Liens or other charges against such Property or leasehold
interest or any of the real or personal, tangible or intangible, Property
of the Borrower or any Guarantor (including without limitation statutory
and other Liens of mechanics, workers, contractors, subcontractors,
suppliers, taxing authorities and others; provided that certain Capital
Expenditures have been made to the Hotel Properties prior to the Effective
Date for which the payment is not past due), except (A) Permitted
Encumbrances and (B) the Personal Property (plus any replacements thereof)
owned by an Approved Participating Lessee.
Section 4.20 LEASING ARRANGEMENTS. The only material leases of Real
Property for which either the Borrower or a Guarantor is a lessee are the
Qualified Ground Leases. The Property Owner for a Real Property subject to
a Qualified Ground Lease is the lessee under such Qualified Ground Lease
and no consent is necessary to such Person being the lessee under such
Qualified Ground Lease which has not already been obtained. The Qualified
Ground Leases are in full force and effect and no defaults exist
thereunder. The only material leases burdening the Hotel Properties for
which the lessee is entitled to participate in the increased revenues of
the Hotel Properties are the Approved Participating Leases. The Approved
Participating Leases are in full force and effect and no defaults by the
Borrower or any Subsidiary exist thereunder.
Section 4.21 APPROVED FRANCHISE AGREEMENTS. The only hotel
franchise agreements burdening the Initial Properties (excluding the
Permitted Non-Eligible Properties) are the Approved Franchise Agreements.
The Approved Participating Lessee for a Hotel Property subject to an
Approved Franchise Agreement is the licensee under such Approved Franchise
Agreement and no consent is necessary to such Person being the licensee
under such Approved Franchise Agreement which has not already been
obtained. The Approved Franchise Agreements are in full force and effect
and to the knowledge of the Borrower no material defaults by an Approved
Participating Lessee exist thereunder. Schedule 4.21 sets forth, as of the
date of this Agreement, (a) which franchise agreements the Borrower expects
to terminate, (b) the expected date of such termination, (c) the expected
fees, if any, which will be owed to the franchisor being terminated in
connection with such termination and (d) the expected replacement Approved
Franchisor and the material terms of the expected replacement Approved
Franchise Agreement.
Section 4.22 APPROVED MANAGEMENT AGREEMENTS. The only management
agreements burdening the Initial Properties (excluding the Permitted Non-
Eligible Properties) are the Approved Management Agreements set forth on
Schedule 4.22 attached hereto. To the knowledge of the Borrower, the
Approved Participating Lessee for a Hotel Property subject to a Approved
Management Agreement is a party to such Approved Management Agreement and
no consent is necessary to such Person being the owner under such Approved
Management Agreement which has not already been obtained. To the knowledge
of the Borrower, the Approved Management Agreements are in full force and
effect and no material defaults by the Approved Participating Lessee exist
thereunder.
<PAGE>
Section 4.23 PUBLIC OFFERING. Upon consummation of the Public
Offering, (a) each of the Public Offering Documents shall be in full force
and effect, (b) the Parent shall have received not less than $220,000,000
in aggregate net proceeds from the Public Offering, (c) the Parent shall
have contributed such net proceeds to the Borrower as an equity
contribution, (d) the Parent shall qualify as a real estate investment
trust under Sections 856-860 of the Code, as amended, (e) LaSalle Partners
and their respective Associates will legally and beneficially own not less
than 7.5% of the legal or beneficial interest in the Parent and the
Borrower and (f) the Parent's or its Subsidiary's Investment in the
Personal Property for any Hotel Property shall not equal or exceed fifteen
percent (15%) of the Investment Amount for such Hotel Property.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note or any amount under any Credit Document shall
remain unpaid, any Letter of Credit shall remain outstanding, or any Bank
shall have any Commitment hereunder, unless the Administrative Agent shall
otherwise consent in writing (subject to the provisions of Section 10.01),
the Borrower agrees to comply with the following covenants.
Section 5.1 COMPLIANCE WITH LAWS, ETC. The Borrower will comply,
and cause each of its Subsidiaries to comply, in all material respects with
all Legal Requirements.
Section 5.2 PRESERVATION OF EXISTENCE, SEPARATENESS, ETC.
(a) The Borrower will (i) preserve and maintain, and cause each of
its Subsidiaries and the Parent to preserve and maintain, its partnership,
limited liability company, corporate or trust (as applicable) existence,
rights, franchises and privileges in the jurisdiction of its formation, and
(ii) qualify and remain qualified, and cause each such Subsidiary and the
Parent to qualify and remain qualified, as a foreign partnership, limited
liability company, corporation or trust, as applicable, in each
jurisdiction in which qualification is necessary or desirable in view of
its business and operations or the ownership of its properties, and, in
each case, where failure to qualify or preserve and maintain its rights and
franchises could reasonably be expected to cause a Material Adverse Change.
(b) (i) The Parent Common Stock shall at all times be duly listed
on the New York Stock Exchange, Inc. and (ii) the Parent shall timely file
all reports required to be filed by it with the New York Stock Exchange,
Inc. and the Securities and Exchange Commission.
(c) The Borrower shall cause the Permitted Other Subsidiaries which
have Indebtedness and own a Hotel Property to, (i) maintain financial
statements, payroll records, accounting records and other corporate records
and other documents separate from each other and any other Person, (ii)
maintain its own bank accounts in its own name, separate from each other
and any other Person, (iii) pay its own expenses and other liabilities from
its own assets and incur (or endeavor to incur) obligations to other
Persons based solely upon its own assets and creditworthiness and not upon
the creditworthiness of each other or any other Person, and (iv) file its
own tax returns or, if part of a consolidated group, join in the
consolidated tax return of such group as a separate member thereof. The
Borrower shall use reasonable efforts to correct any known misunderstanding
or misrepresentation regarding the independence of the Permitted Other
Subsidiaries from the Borrower and the Borrower's other Subsidiaries.
<PAGE>
(d) The Borrower shall, and shall cause the Permitted Other
Subsidiaries which have Indebtedness and own a Hotel Property to, take all
actions necessary to keep such Permitted Other Subsidiaries, separate from
the Borrower and the Borrower's other Subsidiaries, including, without
limitation, (i) the taking of action under the direction of the Board of
Directors, members or partners, as applicable, of such Permitted Other
Subsidiaries and, if so required by the Certificate of Incorporation or the
Bylaws, operating agreement or partnership agreement, as applicable, of
such Permitted Other Subsidiaries or by any Legal Requirement, the approval
or consent of the stockholders, members or partners, as applicable, of such
Permitted Other Subsidiaries, (ii) the preparation of corporate,
partnership or limited liability company minutes for or other appropriate
evidence of each significant transaction engaged in by such Permitted Other
Subsidiaries, (iii) the observance of separate approval procedures for the
adoption of resolutions by the Board of Directors or consents by the
partners, as applicable, of such Permitted Other Subsidiaries, on the one
hand, and of the Borrower and the Borrower's other Subsidiaries, on the
other hand, (iv) the holding of the annual stockholders meeting, if
applicable, of such Permitted Other Subsidiaries, which are corporations on
a date other than the date of the annual stockholders' meeting of the
Parent, and (v) preventing the cash, cash equivalents, credit card receipts
or other revenues of the Hotel Properties owned by such Permitted Other
Subsidiaries or any other assets of such Permitted Other Subsidiaries from
being commingled with the cash, cash equivalents, credit card receipts or
other revenues collected by the Borrower or the Borrower's other
Subsidiaries.
(e) The Borrower shall, and shall cause the Permitted Other
Subsidiaries to, manage the business of and conduct the administrative
activities of the Permitted Other Subsidiaries independently from the
business of the Borrower, any of the Borrower's other Subsidiaries and any
other Person. Any moneys earned by the Permitted Other Subsidiaries on
their assets or proceeds of the sale of any of their assets shall be
deposited in bank accounts separate from any of the assets of the Borrower,
any of the Borrower's other Subsidiaries and any other Person, and no
assets of the Permitted Other Subsidiaries shall become commingled with
assets of such Persons.
(f) The Borrower shall hold itself out, and shall continue to hold
itself out, to the public and to its creditors as a legal entity, separate
and distinct from all other entities, and shall continue to take all steps
reasonably necessary to avoid (i) misleading any other Person as to the
identity of the entity with which such Person is transacting business or
(ii) implying that the Borrower is, directly or indirectly, absolutely or
contingently, responsible for the Indebtedness or other obligations of the
Permitted Other Subsidiaries or any other Person.
Section 5.3 PAYMENT OF TAXES, ETC. The Borrower will pay and
discharge, and cause each of its Subsidiaries to pay and discharge, before
the same shall become delinquent (a) all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits or Property that are material in amount, prior to the date on which
penalties attach thereto and (b) all lawful claims that are material in
amount which, if unpaid, might by Legal Requirement become a Lien upon its
Property; PROVIDED, HOWEVER, that neither the Borrower nor any such
Subsidiary shall be required to pay or discharge any such tax, assessment,
charge, levy, or claim (a) which is being contested in good faith and by
appropriate proceedings, (b) with respect to which reserves in conformity
with GAAP have been provided, (c) such charge or claim does not constitute
and is not secured by any choate Lien on any portion of any Hotel Property
and no portion of any Hotel Property is in jeopardy of being sold,
forfeited or lost during or as a result of such contest, (d) neither the
Administrative Agent nor any Bank could become subject to any civil fine or
penalty or criminal fine or penalty, in each case as a result of non-
payment of such charge or claim and (e) such contest does not, and could
not reasonably be expected to, result in a Material Adverse Change.
<PAGE>
Section 5.4 VISITATION RIGHTS; BANK MEETING. At any reasonable time
and from time to time and so long as any visit or inspection will not
unreasonably interfere with the Borrower's or any of its Subsidiaries'
operations, upon reasonable notice and during normal business hours, the
Borrower will, and will cause its Subsidiaries and the Approved
Participating Lessees to, permit the Administrative Agent or any of its
agents or representatives thereof (at Borrower's expense) and any Bank or
any of its agents or representatives thereof (at such Bank's expense), to
examine and make copies of and abstracts from the records and books of
account of, and visit and inspect at its reasonable discretion the
properties of, the Borrower and any such Subsidiary, to discuss the
affairs, finances and accounts of the Borrower and any such Subsidiary with
any of their respective officers or directors. Without in any way limiting
the foregoing, the Borrower will, upon the request of either Agent,
participate in a meeting with the Administrative Agent and the Banks once
during each calendar year to be held at a location as may be agreed to by
the Borrower and the Administrative Agent at such time as may be agreed to
by the Borrower and the Administrative Agent; provided that the Borrower
shall not be obligated to reimburse the Banks for such Persons' travel
expenses in connection with such meeting.
Section 5.5 REPORTING REQUIREMENTS. The Borrower will furnish to
the Administrative Agent and furnish copies to each Bank:
(a) QUARTERLY FINANCIALS. Commencing with the Fiscal Quarter
ending June 30, 1998, as soon as available and in any event not later than
45 days after the end of each Fiscal Quarter of the Parent, the unaudited
Consolidated balance sheets of the Parent and its Subsidiaries as of the
end of such quarter and the related unaudited statements of income,
shareholders' equity and cash flows of the Parent and its Subsidiaries for
such Fiscal Quarter and the period commencing at the end of the previous
year and ending with the end of such Fiscal Quarter, and the corresponding
figures as at the end of, and for, the corresponding periods in the
preceding Fiscal Year, all duly certified with respect to such statements
(subject to year-end audit adjustments) by a Responsible Officer of the
Parent as having been prepared in accordance with GAAP, together with (i) a
Compliance Certificate duly executed by a Responsible Officer of the
Parent, (ii) a completed Borrowing Base Certificate duly executed by a
Responsible Officer of the Parent setting forth the components of the
Borrowing Base as of the last day of the immediately preceding Fiscal
Quarter, and (iii) a certificate in form similar to the Borrowing Base
Certificate duly executed by a Responsible Officer of the Parent setting
forth for those Hotel Properties owned or leased by the Parent or any of
its Subsidiaries except for the Eligible Properties the Adjusted EBITDA for
the Rolling Period just ended and Investment Amount, separately totaled for
those Hotel Properties which are unencumbered, those Hotel Properties which
secure Secured Recourse Indebtedness and those Hotel Properties which
secure Secured Non-Recourse Indebtedness. As soon as available and in any
event not later than 60 days after the end of each Fiscal Quarter of the
Parent, (i) written notice of any anticipated material variation to an
operating budget prepared pursuant to Section 5.05(e) and (ii) a report
certified by a Responsible Officer of the Parent setting forth for each of
the Hotel Properties owned or leased by the Parent or any of its
Subsidiaries for the Fiscal Quarter just ended the average daily rate, the
average occupancy, the RevPAR, the total gross revenues, the total
expenses, the Adjusted EBITDA and the payments made under the participating
leases for such Hotel Properties.
<PAGE>
(b) ANNUAL FINANCIALS. As soon as available and in any event not
later than 90 days after the end of each Fiscal Year of the Parent, a copy
of the Consolidated balance sheets of the Parent and its Subsidiaries as of
the end of such Fiscal Year and the related Consolidated statements of
income, shareholders' equity and cash flows of the Parent and its
Subsidiaries for such Fiscal Year, and the corresponding figures as at the
end of, and for, the preceding Fiscal Year, and certified by KPMG Peat
Marwick L.L.P. or other independent certified public accountants of
nationally recognized standing reasonably acceptable to the Administrative
Agent in an opinion, without qualification as to the scope, and including,
if requested by either Agent, any management letters delivered by such
accountants to the Parent in connection with such audit, together with (i)
a Compliance Certificate duly executed by a Responsible Officer of the
Parent, (ii) a completed Borrowing Base Certificate duly executed by a
Responsible Officer of the Parent setting forth the components of the
Borrowing Base as of the day of such financial statements and (iii) the
document required in clauses (iii) of the first sentence of the preceding
Section 5.05(a). As soon as available and in any event not later than 105
days after the end of each Fiscal Year of the Parent, the documents
required in the second sentence of the preceding Section 5.05(a).
(c) LASALLE LEASING FINANCIALS. As soon as available and in any
event not later than 60 days after the end of each Fiscal Quarter of
LaSalle Leasing, the unaudited Consolidated balance sheets of LaSalle
Leasing and its Subsidiaries as of the end of such quarter and the related
unaudited statements of income, shareholders' equity and cash flows of
LaSalle Leasing and its Subsidiaries for the period commencing at the end
of the previous year and ending with the end of such Fiscal Quarter, and
the corresponding figures as at the end of, and for, the corresponding
period in the preceding Fiscal Year, all duly certified with respect to
such statements (subject to year-end audit adjustments) by a Responsible
Officer of LaSalle Leasing as having been prepared in accordance with GAAP.
As soon as available and in any event not later than 120 days after the end
of each Fiscal Year of LaSalle Leasing, as applicable, (i) a copy of the
annual audit report for such year for LaSalle Leasing and its Subsidiaries,
if any, including therein audited Consolidated balance sheets of LaSalle
Leasing and its Consolidated Subsidiaries as of the end of such fiscal year
and the related Consolidated statements of income, shareholders' equity and
cash flows of LaSalle Leasing and its Subsidiaries for such fiscal year,
and the corresponding figures as at the end of, and for, the preceding
fiscal year, in each case certified by an independent certified public
accountant reasonably acceptable to the Administrative Agent and including,
if requested by either Agent, any management letters delivered by such
accountants to LaSalle Leasing in connection with such audit.
(d) ANNUAL BUDGETS. No later than 60 days after the start of each
Fiscal Year, the annual operating budget and Capital Expenditure and FF&E
expenditure budget for such Fiscal Year for each Hotel Property owned or
leased by the Parent or one of its Subsidiaries and such budgets on a
Consolidated basis for the Parent and its subsidiaries, all in reasonable
detail and duly certified by a Responsible Officer of the Parent as the
budgets presented or to be presented to the Parent's Board of Directors for
their review.
(e) SECURITIES LAW FILINGS. Promptly and in any event within 20
days after the sending or filing thereof, copies of all proxy material,
reports and other information which the Borrower, the Parent or any of
their respective Subsidiaries sends to or files with the United States
Securities and Exchange Commission or sends to all shareholders of the
Parent or partners of the Borrower.
<PAGE>
(f) DEFAULTS. As soon as possible and in any event within five
days after the occurrence of each Default known to a Responsible Officer of
the Borrower, the Parent or any of their respective Subsidiaries, a
statement of an authorized financial officer or Responsible Officer of the
Borrower setting forth the details of such Default and the actions which
the Borrower has taken and proposes to take with respect thereto.
(g) ERISA NOTICES. As soon as possible and in any event (i) within
30 days after the Parent, the Borrower or any of a Controlled Group knows
to know that any Termination Event described in clause (a) of the
definition of Termination Event with respect to any Plan has occurred, (ii)
within 10 days after the Parent, the Borrower or any of a Controlled Group
knows that any other Termination Event with respect to any Plan has
occurred, a statement of the Chief Financial Officer of the Parent
describing such Termination Event and the action, if any, which the Parent,
the Borrower or such member of such Controlled Group proposes to take with
respect thereto; (iii) within 10 days after receipt thereof by the Parent,
the Borrower or any of a Controlled Group from the PBGC, copies of each
notice received by the Parent, the Borrower or any such member of such
Controlled Group of the PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan; and (iv) within 10 days after
receipt thereof by the Parent, the Borrower or any member of a Controlled
Group from a Multiemployer Plan sponsor, a copy of each notice received by
the Parent, the Borrower or any member of such Controlled Group concerning
the imposition or amount of withdrawal liability pursuant to Section 4202
of ERISA.
(h) ENVIRONMENTAL NOTICES. Promptly upon receipt thereof by the
Parent, the Borrower or any of their Subsidiaries, a copy of any form of
notice, summons or citation received from the United States Environmental
Protection Agency, or any other Governmental Authority concerning
(i) violations or alleged violations of Environmental Laws, which seeks to
impose liability therefor, (ii) any action or omission on the part of the
Parent or Borrower or any of their present or former Subsidiaries in
connection with Hazardous Waste or Hazardous Substances which, based upon
information reasonably available to the Borrower, could reasonably be
expected to cause a Material Adverse Change or an Environmental Claim in
excess of $1,000,000, (iii) any notice of potential responsibility under
CERCLA, or (iv) concerning the filing of a Lien upon, against or in
connection with the Parent, Borrower, their present or former Subsidiaries,
or any of their leased or owned Property, wherever located.
(i) OTHER GOVERNMENTAL NOTICES OR ACTIONS. Promptly and in any
event within five Business Days after receipt thereof by the Borrower, the
Parent or any of their respective Subsidiaries, (i) a copy of any notice,
summons, citation, or proceeding seeking to adversely modify in any
material respect, revoke, or suspend any license, permit, or other
authorization from any Governmental Authority, which action could
reasonably be expected to cause a Material Adverse Change, and (ii) any
revocation or involuntary termination of any license, permit or other
authorization from any Governmental Authority, which revocation or
termination could reasonably be expected to cause a Material Adverse
Change.
(j) REPORTS AFFECTING THE BORROWING BASE. On or prior to the 5th
day following any Adjustment Event, a Property Adjustment Report with
respect to such Adjustment Event.
<PAGE>
(k) PRESS RELEASES. Promptly and in any event within 5 days after
the sending or releasing thereof, copies of all press releases or other
releases of information to the public by the Borrower, the Parent or any of
their respective Subsidiaries or releases of information to the Parent's
shareholders.
(l) OTHER NOTICES.
(i) Promptly, a copy of any notice of default or any other
material notice (including without limitation property condition reviews)
received by the Borrower or any Guarantor from any holder of any Approved
Franchisor, Approved Manager, or any ground lessor under a Qualified Ground
Lease, and
(ii) Promptly following any merger or dissolution of any
Subsidiary of the Borrower which is permitted hereunder or event which
would make any of the representations in Section 4.01-4.04 untrue, notice
thereof.
(m) MATERIAL LITIGATION. As soon as possible and in any event
within five days of any of the Borrower, the Parent or any of their
respective Subsidiaries having knowledge thereof, notice of any litigation,
claim or any other event which could reasonably be expected to cause a
Material Adverse Change.
(n) PRELIMINARY PROPERTY PLAN. Prior to making Capital
Expenditures or FF&E expenditures for the renovation or expansion of a
Hotel Property, the Preliminary Property Plan for such renovation or
expansion in sufficient detail as the Administrative Agent shall reasonably
request.
(o) OTHER INFORMATION. Such other information respecting the
business or Properties, or the condition or operations, financial or
otherwise, of the Borrower, the Parent or any of their respective
Subsidiaries, as any Agent may from time to time reasonably request.
Section 5.6 MAINTENANCE OF PROPERTY AND REQUIRED WORK. The Borrower
will, and will cause each of its Subsidiaries to, (a) maintain their owned,
leased, or operated Property in a manner consistent for hotel properties
and related property of the same quality and character and shall keep or
cause to be kept every part thereof and its other properties in good
condition and repair, reasonable wear and tear excepted, and make all
reasonably necessary repairs, renewals or replacements thereto as may be
reasonably necessary to conduct the business of the Borrower and its
Subsidiaries, (b) not remove, demolish or structurally alter, or permit or
suffer the removal, demolition or structural alteration of, any of the
Improvements except for the renovation or expansion of a Hotel Property (i)
for which the Borrower has delivered a Preliminary Property Plan to the
Administrative Agent and (ii) which complies with the limitations set forth
in this Agreement on the aggregate amount of renovations and expansions the
Borrower, the Parent and their Subsidiaries are permitted at any one time,
(c) not knowingly or willfully permit the commission of waste or other
injury, or the occurrence of pollution, contamination or any other
condition in, on or about any Hotel Property, (d) maintain and repair each
Hotel Property as required by any franchise agreement, license agreement,
management agreement or ground lease for such Hotel Property, (e) commence
the Required Work for any Hotel Property by a date which would allow a
reasonable period of time to complete such work on or prior to the deadline
set for such Required Work in Schedule 5.06 or otherwise agreed to by the
Borrower and the Administrative Agent, and (f) after any commencement of
any of work for any Hotel Property diligently perform such work (i) for the
<PAGE>
Required Work, by the required deadline and as described in the Engineering
Reports and/or the Environmental Reports referred to in Schedule 5.06 or as
otherwise described for any Future Property, (ii) in a good and workmanlike
manner and (iii) in compliance in all material respects with all Legal
Requirements. Except as may be required to maintain the Parent's status as
a REIT under the Code, any Capital Expenditures or expenditures or leases
for FF&E made for any Hotel Property shall be in the name of the Property
Owner for such Hotel Property.
Section 5.7 INSURANCE. The Borrower will maintain, and cause each of
its Subsidiaries to maintain, the insurance required pursuant to Schedule
5.07.
Section 5.8 [Intentionally Deleted].
Section 5.9 SUPPLEMENTAL GUARANTIES. The Borrower has requested and
the Administrative Agent has agreed that any partner of the Borrower except
the Parent or any other Guarantor may execute a Supplemental Guaranty.
However, the execution of or release of any Supplemental Guaranty shall not
be construed as a release or modification of any obligation of a Guarantor
under a Guaranty or Environmental Indemnity.
Section 5.10 LASALLE LEASING. Upon knowledge of a material default
by LaSalle Leasing under an Approved Participating Lease, the Borrower will
send, or will cause the Guarantor who is a party to such Approved
Participating Lease to send, a notice of such default to LaSalle Leasing as
provided in the document under which such default has occurred and provide
a copy of such notice to the Administrative Agent. For purposes of this
Section 5.10, a "material default" shall mean a monetary default and any
default, which if not cured, would be a default under any applicable
Approved Franchise Agreement and Approved Management Agreement allowing the
Person party to such agreement to terminate such agreement.
Section 5.11 USE OF PROCEEDS. The proceeds of the Advances have
been, and will be used by the Borrower for the purposes set forth in
Section 4.09(a).
Section 5.12 YEAR 2000 COMPATIBILITY. Take all action necessary to
assure that from and after January 1, 2000 the computer-based systems of
the Borrower are able to operate and effectively process data that includes
dates on and after January 1, 2000. At the request of the Administrative
Agent, the Borrower shall provide to the Administrative Agent assurance
acceptable to the Administrative Agent of the timely year 2000
compatibility of the Borrower.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note or any amount under any Credit Document shall
remain unpaid, any Letter of Credit shall remain outstanding, or any Bank
shall have any Commitment, the Borrower agrees, unless the Administrative
Agent shall otherwise consent in writing (subject to the provisions of
Section 10.01), to comply with the following covenants.
<PAGE>
Section 6.1 LIENS, ETC. The Borrower will not create, assume, incur
or suffer to exist, or permit any of its Subsidiaries (except for Permitted
Other Subsidiaries) to create, assume, incur, or suffer to exist, any Lien
on or in respect of any of its Property whether now owned or hereafter
acquired, or assign any right to receive income, except that the Borrower
and its Subsidiaries may create, incur, assume or suffer to exist Liens:
(a) securing the Obligations;
(b) for taxes, assessments or governmental charges or levies on
Property of the Borrower or any Guarantor to the extent not required to be
paid pursuant to Sections 5.03;
(c) Liens imposed by law (such as landlords', carriers', warehouse-
men's and mechanics' liens or otherwise arising from litigation) (a) which
are being contested in good faith and by appropriate proceedings, (b) with
respect to which reserves in conformity with GAAP have been provided, (c)
which have not resulted in any Hotel Property being in jeopardy of being
sold, forfeited or lost during or as a result of such contest, (d) neither
the Administrative Agent nor any Bank could become subject to any civil
fine or penalty or criminal fine or penalty, in each case as a result of
non-payment of such charge or claim and (e) such contest does not, and
could not reasonably be expected to, result in a Material Adverse Change;
(d) on leased personal property to secure solely the lease
obligations associated with such property; and
(e) Liens securing Secured Recourse Indebtedness and Secured Non-
Recourse Indebtedness permitted pursuant to the provisions of Section 6.02.
Section 6.2 INDEBTEDNESS. The Borrower, the Parent and their
respective Subsidiaries will not incur or permit to exist any Indebtedness
other than the Obligations and the following:
(a) Unsecured Indebtedness which is less than or equal to
$50,000,000;
(b) Secured Recourse Indebtedness and Secured Non-Recourse
Indebtedness incurred by Permitted Other Subsidiaries to the extent (i)
that the covenants contained in Article VII are complied with, (ii) the
Secured Recourse Indebtedness secured by a Hotel Property does not exceed
65% of the Hotel Value of such Hotel Property and all Secured Recourse
Indebtedness in the aggregate secured by Hotel Properties does not exceed
65% of the aggregate Hotel Value of such Hotel Properties, and (iii) the
Secured Non-Recourse Indebtedness secured by a Hotel Property does not
exceed 70% of the Hotel Value of such Hotel Property and all Secured Non-
Recourse Indebtedness in the aggregate secured by Hotel Properties does not
exceed 70% of the aggregate Hotel Value of such Hotel Properties;
(c) Indebtedness in the form of Interest Rate Agreements; provided
that (i) such agreements shall be unsecured, (ii) the dollar amount of
indebtedness subject to such agreements and the indebtedness subject to
Interest Rate Agreements in the aggregate shall not exceed the sum of the
amount of the Commitments and other Indebtedness permitted pursuant to this
Section 6.02 which bears interest at a variable rate, and (iii) the
agreements shall be at such interest rates and otherwise in form and
substance reasonably acceptable to the Agents;
<PAGE>
(d) Any of the following Indebtedness incurred by the Parent:
(i) guaranties in connection with the Indebtedness secured by
a Hotel Property of (A) if the Hotel Property is subject to a ground lease,
the payment of rent under such ground lease, (B) real estate taxes relating
to such Hotel Property, and (C) capital reserves required under such
Indebtedness;
(ii) indemnities for certain acts of malfeasance,
misappropriation and misconduct and an environmental indemnity for the
lender under Indebtedness permitted under to this Agreement;
(iii) indemnities for certain acts of malfeasance,
misappropriation and misconduct by the Permitted Other Subsidiaries and
environmental indemnities, all for the benefit of the lenders of other
Permitted Other Subsidiary Indebtedness in connection with such
Indebtedness; and
(iv) guaranties of the Approved Franchise Agreements; and
(e) extensions, renewals and refinancing of any of the Indebtedness
specified in paragraphs (a) - (d) above so long as the principal amount of
such Indebtedness is not thereby increased.
Section 6.3 AGREEMENTS RESTRICTING DISTRIBUTIONS FROM SUBSIDIARIES.
The Borrower will not, nor will it permit any of its Subsidiaries (other
than Permitted Other Subsidiaries) to, enter into any agreement (other than
a Credit Document) which limits distributions to or any advance by any of
the Borrower's Subsidiaries to the Borrower.
Section 6.4 RESTRICTED PAYMENTS. Neither the Parent, the Borrower,
nor any of their respective Subsidiaries, will make any Restricted Payment,
except that:
(a) provided no Default has occurred and is continuing or would
result therefrom, the Parent may in any Fiscal Quarter, based on the
immediately preceding Rolling Period, make cash payments to its
shareholders (including in connection with the repurchase of Stock or Stock
Equivalents) which with the previous such cash payments in the three
immediately preceding Fiscal Quarters are not in excess of the greater of
(i) the lesser of (A) for any Rolling Period ending on or before June 30,
1999, ninety-five percent (95%), and for any Rolling Period ending after
June 30, 1999, ninety percent (90%), of the Funds From Operations of the
Parent during such Rolling Period or (B) one hundred percent (100%) of Free
Cash Flow of the Parent during such Rolling Period and (ii) the greater of
(A) the amount required for the Parent to maintain its status as a REIT or
(B) the amount required to ensure that the Parent will avoid imposition of
an excise tax for failure to make certain minimum distributions on a
calendar year basis;
(b) provided no Default has occurred and is continuing or would
result therefrom, the Borrower shall be entitled to make cash distributions
to its partners, including the Parent;
(c) a Subsidiary of the Borrower may make a Restricted Payment to
the Borrower,
<PAGE>
(d) the limited partners of the Borrower shall be entitled to
exchange limited partnership interests in the Borrower for the Parent's
stock or redeem such interests for cash, as provided in the Borrower's
limited partnership agreement; and
(e) the Borrower shall be entitled to issue limited partnership
interests in the Borrower in exchange of ownership interests in
Subsidiaries and Unconsolidated Entities which own a Future Property to the
extent such Investment is permitted pursuant to the provisions of Section
6.07.
Section 6.5 FUNDAMENTAL CHANGES; ASSET DISPOSITIONS. Neither the
Parent, the Borrower, nor any of their respective Subsidiaries (other than
the Permitted Other Subsidiaries) will, (a) merge or consolidate with or
into any other Person, unless (i) a Guarantor is merged into the Borrower
or another Guarantor and the Borrower or such other Guarantor, as the case
may be, is the surviving Person or a Subsidiary (other than a Permitted
Other Subsidiary which has Indebtedness other than the Obligations) is
merged into any Subsidiary (other than a Permitted Other Subsidiary which
has Indebtedness other than the Obligations), and (ii) immediately after
giving effect to any such proposed transaction no Default would exist; (b)
sell, transfer, or otherwise dispose of all or any of the such Person's
material property except for a Permitted Hotel Sale, dispositions or
replacements of personal property in the ordinary course of business, or
Hotel Properties which are not Eligible Properties; (c) enter into a lease
(other than an Approved Participating Lease) of all or substantially all of
any Eligible Property with any Person without the consent of the
Administrative Agent; (d) sell or otherwise dispose of any material shares
of capital stock, membership interests or partnership interests of any
Subsidiary (except for a Permitted Other Subsidiary); (e) except for sales
of ownership interests permitted under this Agreement and the issuance of
limited partnership interests in the Borrower in exchange for ownership
interests in Subsidiaries and Unconsolidated Entities to the extent
permitted pursuant to the provisions of Section 6.04, materially alter the
corporate, capital or legal structure of any such Person (except for a
Permitted Other Subsidiary); (f) liquidate, wind-up or dissolve itself (or
suffer any liquidation or dissolution) provided that nothing herein shall
prohibit the Borrower from dissolving any Subsidiary which has no assets on
the date of dissolution or (g) materially alter the character of their
respective businesses from that conducted as of the date of this Agreement.
Section 6.6 APPROVED PARTICIPATING LESSEE OWNERSHIP. Neither the
Parent nor the Borrower shall, nor shall permit any of their respective
Subsidiaries to own directly or indirectly ten percent (10%) or more of the
beneficial ownership interest in any Approved Participating Lessee.
Section 6.7 INVESTMENTS, LOANS, FUTURE PROPERTIES. Neither the
Parent nor the Borrower shall, nor shall permit any of their respective
Subsidiaries to, acquire by purchase, or otherwise, all or substantially
all of the business, property or fixed assets of any Person or any Hotel
Property, make or permit to exist any loans, advances or capital
contributions to, or make any Investments in (including without limitation,
loans and advances to, and other Investments in, Subsidiaries), or purchase
or commit to purchase any evidences of Indebtedness of, stock or other
securities, partnership interests, member interests or other interests in
any Person, except the following (provided that after giving effect thereto
there shall exist no Default):
(a) the purchase of Liquid Investments with any Person which
qualifies as an Eligible Assignee;
(b) trade and customer accounts receivable which are for goods
furnished or services rendered in the ordinary course of business and are
payable in accordance with customary trade terms, and other assets owned in
the ordinary course of owning the Parent Hotel Properties;
<PAGE>
(c) a Future Property which qualifies as an Eligible Property or a
Permitted Non-Eligible Property and which does not have a Investment Amount
which exceeds 20% of the Parent Aggregate Asset Value; and
(d) Investments in (i) unimproved land which do not in the
aggregate have an Investment Amount which exceeds 5% of the Parent
Aggregate Asset Value; (ii) Development Properties which do not in the
aggregate have an Investment Amount which exceeds 15% of the Parent
Aggregate Asset Value, (iii) Unconsolidated Entities which are not
Guarantors which do not in the aggregate have an Investment Amount which
exceeds 20% of the Parent Aggregate Asset Value, and (iv) mortgages, deeds
of trust, deeds to secure debt or similar instruments that are a lien on
real property which are improved by fully operational hotels and secure
Indebtedness evidenced by a note or bond which do not in the aggregate have
an Investment Amount which exceeds 10% of the Parent Aggregate Asset Value;
provided that the aggregate Investment Amount for all Investments made
pursuant to this Section 6.07(d) shall not exceed 30% of the Parent
Aggregate Asset Value.
Notwithstanding the foregoing, neither the Borrower, nor the Parent, nor
their respective Subsidiaries shall acquire a Future Property or otherwise
make an Investment which would (a) cause the Eligible Properties in the
aggregate to violate the Borrowing Base Requirements, (b) cause the Parent
Hotel Properties in the aggregate to violate in any material way the Parent
Hotel Property Requirements without the Administrative Agent's written
consent, (c) cause a Default, (d) cause or result in the Borrower or the
Parent failing to comply with any of the financial covenants contained
herein, (e) cause the aggregate Investment Amount for (i) all Future
Properties located outside the United States and (ii) all Investments made
pursuant to Section 6.07(d) which are either located outside the United
States or in an Unconsolidated Entity which has at least 50% of its assets
located outside the United States to exceed 15% of the Parent Aggregate
Asset Value, (f) cause the Parent's or any Subsidiary's Investment in the
Personal Property for any Hotel Property to equal or exceed fifteen percent
(15%) of the Investment Amount for such Hotel Property.
Section 6.8 AFFILIATE TRANSACTIONS. Except for the Advisory
Agreement and payments allowed in accordance therewith, the Approved
Participating Leases, and as otherwise approved by a majority of the Board
of Trustees of the Parent including a majority of the independent trustees,
the Borrower will not, and will not permit any of its Subsidiaries to,
make, directly or indirectly (a) any transfer, sale, lease, assignment or
other disposal of any assets to any Affiliate of the Borrower which is not
a Guarantor or any purchase or acquisition of assets from any such
Affiliate; or (b) any arrangement or other transaction directly or
indirectly with or for the benefit of any such Affiliate (including without
limitation, guaranties and assumptions of obligations of an Affiliate),
other than in the ordinary course of business and at market rates.
Section 6.9 SALE AND LEASEBACK. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any arrangement with any
Person, whereby in contemporaneous transactions the Borrower or such
Subsidiary sells essentially all of its right, title and interest in a
material asset and the Borrower or such Subsidiary acquires or leases back
the right to use such property.
Section 6.10 SALE OR DISCOUNT OF RECEIVABLES. The Borrower will
not, and will not permit any of its Subsidiaries to, directly or
indirectly, sell with recourse, or discount or otherwise sell for less than
the face value thereof, any of its notes or accounts receivable.
<PAGE>
Section 6.11 NO FURTHER NEGATIVE PLEDGES. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into or suffer to
exist any agreement (other than this Agreement and the Credit Documents)
(a) prohibiting the creation or assumption of any Lien upon the Properties
of the Borrower or any of its Subsidiaries (except for the Permitted Other
Subsidiaries), whether now owned or hereafter acquired, or (b) requiring an
obligation to be secured if some other obligation is or becomes secured.
Section 6.12 APPROVED FRANCHISE AGREEMENTS. The Borrower will not,
nor will it permit any of its Subsidiaries (other than Permitted Other
Subsidiaries) or any Approved Participating Lessee (other than as a lessee
of a Permitted Non-Eligible Property) to enter into any termination,
material modification or amendment of any Approved Franchise Agreement
except in connection with the conversion of a Hotel Property from an
Approved Franchise Agreement with one Approved Franchisor to an Approved
Franchise Agreement with another Approved Franchisor.
Section 6.13 MATERIAL DOCUMENTS. The Borrower will not, nor will it
permit any of its Subsidiaries (other than Permitted Other Subsidiaries) or
any Approved Participating Lessee (other than as a lessee of a Permitted
Non-Eligible Property) to, enter into any termination, material
modification or material amendment any of the following documents without
the written consent of the Administrative Agent:
(a) Approved Management Agreement;
(b) Approved Participating Lease;
(c) Qualified Ground Lease; and
(d) Any other material agreement.
In addition, the Borrower will not permit the Parent to enter into any
termination, material modification or material amendment of the Advisory
Agreement without the written consent of the Agents; provided that the
Advisor Agreement may be terminated without the consent of the Agents if
within 90 days of such termination the Parent enters into an advisory
agreement with a Person acceptable to the Agents. Any termination,
modification or amendment prohibited under this Section 6.13 without the
aforementioned written consent shall, to the extent permitted by applicable
law, be void and of no force and effect.
(e) Section 6.14 LIMITATIONS ON DEVELOPMENT, CONSTRUCTION,
RENOVATION AND PURCHASE OF HOTEL PROPERTIES. Neither the Parent nor the
Borrower shall or shall permit any of their respective Subsidiaries to (a)
engage in the development, construction or expansion of any Hotel
Properties (except for Development Properties permitted by the provisions
of Section 6.07 or Renovating Properties) or (b) enter into any binding
agreements to purchase Hotel Properties or other assets; provided that the
Parent, the Borrower and their Subsidiaries may enter into binding
agreements to purchase Hotel Properties or other assets if at all times
such Person has available sources of capital equal to the portion of the
purchase price of such Hotel Properties or other assets which constitutes a
recourse obligation of the Parent, the Borrower or its Subsidiary, which
available sources of capital may include Advances to the extent that the
Borrower may borrow the same for the purposes required or other
Indebtedness permitted by the terms of this Agreement.
<PAGE>
ARTICLE VII
FINANCIAL COVENANTS
So long as any Note or any amount under any Credit Document shall
remain unpaid, any Letter of Credit shall remain outstanding, or any Bank
shall have any Commitment hereunder, unless the Administrative Agent shall
otherwise consent in writing (subject to the provisions of Section 10.01),
the Borrower agrees to comply and cause the Parent to comply with the
following covenants.
Section 7.1 FIXED CHARGE COVERAGE RATIO. The Parent shall maintain
at the end of each Rolling Period commencing with the Rolling Period ending
on June 30, 1998, a Fixed Charge Coverage Ratio of not less than 2.25 to
1.0.
Section 7.2 INTEREST COVERAGE RATIO. The Parent shall maintain at
the end of each Rolling Period (a) for the Rolling Periods ending on June
30, 1998 through March 31, 1999, an Interest Coverage Ratio of not less
than 2.4 to 1.0 and (b) for any Rolling Period thereafter, an Interest
Coverage Ratio of not less than 2.5 to 1.0.
Section 7.3 UNSECURED INTEREST COVERAGE RATIO. The Parent shall
maintain at the end of each Rolling Period (a) for the Rolling Periods
ending on June 30, 1998 through March 31, 1999, an Unsecured Interest
Coverage Ratio of not less than 2.4 to 1.0 and (b) for any Rolling Period
thereafter, an Unsecured Interest Coverage Ratio of not less than 2.5 to
1.0.
Section 7.4 MAINTENANCE OF NET WORTH. The Parent shall at all times
maintain an Adjusted Net Worth of not less than the Minimum Tangible Net
Worth.
Section 7.5 LIMITATIONS ON TOTAL LIABILITIES. The Parent shall not
on any date permit (a) the Leverage Ratio to be greater than 50% or (b) the
Total Liabilities (including, without limitation, the Obligations) of the
Parent to exceed the product of (i) the Parent's Adjusted EBITDA (on a
Consolidated basis) for the preceding Rolling Period MULTIPLIED BY (ii)
five (5);
PROVIDED THAT, in no event shall the Borrower or the Parent permit the
Total Liabilities of the Parent to exceed the amount permitted under the
Articles of Incorporation of the Parent; PROVIDED FURTHER that if any
Property of the Parent has been sold or conveyed by the Parent in such
period, the Adjusted EBITDA from such Property shall be excluded from the
calculation of Adjusted EBITDA for the Parent for such period; PROVIDED
FURTHER that if the Parent has acquired any Property in such period, the
Adjusted EBITDA from such Property during such entire period shall be
included in the calculation of Adjusted EBITDA for the Parent for such
period, adjusted to provide for a deemed management fee in lieu of the
actual management fee incurred for such Property before the date of
acquisition of such Property equal to the product of (a) gross revenues
from such Property for the period of time prior to acquisition TIMES (b)
the greater of (i) three percent (3%) and (ii) the base management fee
percentage contracted for such Property subsequent to the date of
acquisition; and PROVIDED FURTHER that if the Capital Lease Obligations of
a Capital Lease are excluded from the definition of "Total Liabilities",
the Parent's Adjusted EBITDA shall be reduced by the amount of the payments
made under such Capital Lease during such Rolling Period to the extent such
payments were not already included in the calculation of Adjusted EBITDA.
<PAGE>
Section 7.6 LIMITATIONS ON SECURED RECOURSE INDEBTEDNESS. The
Parent shall not on any date on a Consolidated basis permit the Secured
Recourse Indebtedness (excluding the Obligations) of the Parent, to exceed
15% of the Parent Aggregate Asset Value.
Section 7.7 LIMITATIONS ON SECURED INDEBTEDNESS. The Parent shall
not at any time on a Consolidated basis permit the sum of the Parent's
Secured Non-Recourse Indebtedness and Secured Recourse Indebtedness to
exceed thirty percent (30%) of the Parent Aggregate Asset Value.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.1 EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an "Event of Default" under any Credit
Document:
(a) PRINCIPAL OR LETTER OF CREDIT OBLIGATION PAYMENT. The Borrower
shall fail to pay any principal of any Note or any Letter of Credit
Obligation when the same becomes due and payable as set forth in this
Agreement;
(b) INTEREST OR OTHER OBLIGATION PAYMENT. The Borrower shall fail
to pay any interest on any Note or any fee or other amount payable
hereunder or under any other Credit Document when the same becomes due and
payable as set forth in this Agreement, provided however that the Borrower
will have a grace period of five days after the payments covered by this
Section 8.01(b) becomes due and payable for the first two defaults under
this Section 8.01(b) in every calendar year;
(c) REPRESENTATION AND WARRANTIES. Any representation or warranty
made or deemed to be made (i) by the Borrower in this Agreement or in any
other Credit Document, (ii) by the Borrower (or any of its officers) in
connection with this Agreement or any other Credit Document, or (iii) by
any Subsidiary in any Credit Document shall prove to have been incorrect in
any material respect when made or deemed to be made;
(d) COVENANT BREACHES. (i) The Borrower shall fail to perform or
observe any covenant contained in Sections 5.02(a)(i), (b)(i) or (f),
Article VI or Article VII of this Agreement or the Borrower shall fail to
perform or observe, or shall fail to cause any Guarantor to perform or
observe any covenant in any Credit Document beyond any notice and/or cure
period for such default expressly provided in such Credit Document or
(ii) the Borrower or any Guarantor shall fail to perform or observe any
term or covenant set forth in any Credit Document which is not covered by
clause (i) above or any other provision of this Section 8.01, in each case
if such failure shall remain unremedied for 30 days after the earlier of
the date written notice of such default shall have been given to the
Borrower or such Guarantor by the Administrative Agent or any Bank or the
date a Responsible Officer of the Borrower or any Guarantor has actual
knowledge of such default, unless such default in this clause (ii) cannot
be cured in such 30 day period and the Borrower is diligently proceeding to
cure, or caused to be cured, such default, in which event the cure period
shall be extended to 90 days;
<PAGE>
(e) CROSS-DEFAULTS.
(i) with respect to (A) any Secured Non-Recourse Indebtedness
which is outstanding in a principal amount of at least $10,000,000
individually or when aggregated with all such Secured Non-Recourse
Indebtedness of the Borrower, the Parent or any of their respective
Subsidiaries or (B) any other Indebtedness (but excluding Indebtedness
evidenced by the Notes) which is outstanding in a principal amount of at
least $5,000,000 individually or when aggregated with all such Indebtedness
of the Borrower, the Parent or any of their respective Subsidiaries, any of
the following:
(1) any such Indebtedness shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof,
(2) the Borrower, the Parent or any of their respective
Subsidiaries shall fail to pay any principal of or premium or interest of
any of such Indebtedness (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Indebtedness, or
(3) any other event shall occur or condition shall
exist under any agreement or instrument relating to such Indebtedness, and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
permit the holders of such Indebtedness to accelerate the maturity of such
Indebtedness;
(f) INSOLVENCY. The Borrower, the Parent, any of their respective
Subsidiaries, or the Approved Participating Lessee or Approved Manager for
Hotel Properties which comprise twenty-five percent (25%) or more of the
Borrowing Base shall generally not pay its debts as such debts become due,
or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower, the Parent, any
of their respective Subsidiaries, or the Approved Participating Lessee or
Approved Manager for Hotel Properties which comprise twenty-five percent
(25%) or more of the Borrowing Base seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its 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 or other similar official for it or for any substantial
part of its property and, in the case of any such proceeding instituted
against the Borrower, the Parent, any of their respective Subsidiaries, or
the Approved Participating Lessee or Approved Manager for Hotel Properties
which comprise twenty-five percent (25%) or more of the Borrowing Base,
either such proceeding shall remain undismissed for a period of 60 days or
any of the actions sought in such proceeding shall occur; or the Borrower,
the Parent, any of their respective Subsidiaries, or the Approved
Participating Lessee or Approved Manager for Hotel Properties which
comprise twenty-five percent (25%) or more of the Borrowing Base shall take
any corporate action to authorize any of the actions set forth above in
this paragraph (f);
<PAGE>
(g) JUDGMENTS. Any judgment or order for the payment of money in
excess of $10,000,000 (reduced for purposes of this paragraph for the
amount in respect of such judgment or order that a reputable insurer has
acknowledged being payable under any valid and enforceable insurance
policy) shall be rendered against the Borrower, the Parent or any of their
respective Subsidiaries which, within 60 days from the date such judgment
is entered, shall not have been discharged or execution thereof stayed
pending appeal;
(h) ERISA. (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan, (iii) a Reportable Event shall occur with respect to,
or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee
is likely to result in the termination of such Plan for purposes of
Title IV of ERISA, unless such Reportable Event, proceedings or appointment
are being contested by the Parent or the Borrower in good faith and by
appropriate proceedings, (iv) any Plan shall terminate for purposes of
Title IV of ERISA, (v) the Parent, the Borrower or any member of a
Controlled Group shall incur any liability in connection with a withdrawal
from a Multiemployer Plan or the insolvency (within the meaning of Section
4245 of ERISA) or reorganization (within the meaning of Section 4241 of
ERISA) of a Multiemployer Plan, unless such liability is being contested by
the Parent or the Borrower in good faith and by appropriate proceedings, or
(vi) any other event or condition shall occur or exist, with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Borrower or any Guarantor to any tax, penalty or other
liabilities in the aggregate exceeding $10,000,000;
(i) GUARANTY. Any Guaranty except a Supplemental Guaranty shall
for any reason cease to be valid and binding on any Guarantor or any
Guarantor shall so state in writing;
(j) ENVIRONMENTAL INDEMNITY. Any Environmental Indemnity shall for
any reason cease to be valid and binding on any Person party thereto or any
such Person shall so state in writing;
(k) APPROVED PARTICIPATING LESSEE. Either (i) a material default
by the Approved Participating Lessee shall occur under any Approved
Participating Lease related to Hotel Properties which comprise twenty-five
percent (25%) or more of the Borrowing Base which shall remain uncured
following any notice and cure period under such document, or (ii) with
respect to Hotel Properties which comprise twenty-five percent (25%) or
more of the Borrowing Base, the Approved Participating Lease for any Hotel
Property is terminated;
(l) APPROVED FRANCHISE AGREEMENT. With respect to any Hotel
Properties owned or leased by the Parent or any of its Subsidiaries (i) if
at the time of acquisition of any other Hotel Property such Hotel Property
is operated pursuant to a franchise or license agreement with a Person who
is not an Approved Franchisor, then on or prior to the first anniversary
such Hotel Property fails to be converted to an Approved Franchise
Agreement with an Approved Franchisor, and (ii) Approved Franchise
Agreements for Hotel Properties which comprise twenty-five percent (25%) or
more of the Borrowing Base shall be in default at the same time;
<PAGE>
(m) DEFAULT UNDER QUALIFIED GROUND LEASE. Qualified Ground Leases
for Hotel Properties which comprise twenty-five percent (25%) or more of
the Borrowing Base have in the aggregate either (i) been terminated because
of a default by the lessee under such Qualified Ground Lease or (ii) are
subject to a default by the lessee under such Qualified Ground Lease which
has not been cured or waived 10 days prior to the date the ground lessors
under such Qualified Ground Lease would have the right to terminate such
Qualified Ground Leases;
(n) MANAGER. The Approved Participating Lessees for Hotel
Properties which comprise twenty-five percent (25%) or more of the
Borrowing Base shall not have replaced the Approved Manager for such Hotel
Properties with a reputable, nationally known, third party manager
acceptable to the Administrative Agent within 120 days of the terminations
of the Approved Management Agreements for such Hotel Properties except in
connection with an Asset Disposition;
(o) PARENT'S REIT STATUS. There shall be a determination from the
applicable Governmental Authority from which no appeal can be taken that
the Parent's tax status as a REIT has been lost;
(p) PARENT COMMON STOCK. The parent at any time hereafter fails to
cause the Parent Common Stock to be duly listed on the New York Stock
Exchange, Inc.; or
(q) CHANGES IN OWNERSHIP AND CONTROL. Any of the following occur
without the written consent of the Administrative Agent: (a) the Parent
(i) amends the Borrower's partnership agreement in any material respect,
(ii) admits a new general partner to the Borrower, (iii) own less than 70%
of the partnership interests in and beneficial ownership of the Borrower,
or (iv) resigns as general partner of the Borrower; (b) unless the Advisory
Agreement has been terminated in accordance with the provisions of this
Agreement, LaSalle Partners or any of its Associates sells or assigns
either the legal or beneficial interest in the Parent or the Borrower
except (1) to their respective Associates and (2) in connection with a
Permitted Assignment; (c) unless the Advisory Agreement has been terminated
in accordance with the provisions of this Agreement, LaSalle Partners and
the Parent and their respective Associates legally and beneficially own
less than 55% of the legal or beneficial interest in LaSalle Leasing; (d)
LaSalle Partners or any of its Associates sells or assigns either the legal
or beneficial interest in the Advisor except to their respective
Associates; (e) the Parent shall cease to employ Jon E. Bortz as the
president and chief executive officer of the Parent and, within 180 days
following the termination of such employment of Mr. Bortz for any reason,
another person acceptable to the Required Lenders in their sole discretion
is not employed as the president and chief executive officer of the Parent;
(f) unless the Advisory Agreement has been terminated in accordance with
the provisions of this Agreement, the Advisor shall cease to employ Jon E.
Bortz as the chairman of the board and chief executive officer of the
Advisor and, within 180 days following the termination of such employment
of Mr. Bortz for any reason, another person acceptable to the Required
Lenders in their sole discretion is not employed as the chairman of the
board and chief executive officer of the Advisor; or (g) the Advisory
Agreement shall be modified, amended or terminated except as permitted by
the provisions of Section 6.13.
<PAGE>
Section 8.2 OPTIONAL ACCELERATION OF MATURITY. If any Event of
Default (other than an Event of Default pursuant to paragraph (f) of
Section 8.01 with respect to the Borrower or the Parent) shall have
occurred and be continuing, then, and in any such event,
(a) the Administrative Agent (i) shall at the request, or may with
the consent, of the Required Lenders, by notice to the Borrower, declare
the obligation of each Bank to make Advances and the obligation of each
Issuing Bank to issue, increase, or extend Letters of Credit to be
terminated, whereupon the same shall forthwith terminate, and (ii) shall at
the request, or may with the consent, of the Required Lenders, by notice to
the Borrower, declare the Notes, all interest thereon, the Letter of Credit
Obligations, and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest, all such
Letter of Credit Obligations and all such amounts shall become and be
forthwith due and payable in full, without presentment, demand, protest or
further notice of any kind (including, without limitation, any notice of
intent to accelerate or notice of acceleration), all of which are hereby
expressly waived by the Borrower,
(b) the Borrower shall, on demand of the Administrative Agent at
the request or with the consent of the Required Lenders, deposit into the
Cash Collateral Account an amount of cash equal to the Letter of Credit
Exposure as security for the Obligations to the extent the Letter of Credit
Obligations are not otherwise paid at such time, and
(c) the Administrative Agent shall at the request of, or may with
the consent of, the Required Lenders proceed to enforce its rights and
remedies under the Credit Documents for the ratable benefit of the Banks by
appropriate proceedings.
Section 8.3 AUTOMATIC ACCELERATION OF MATURITY. If any Event of
Default pursuant to paragraph (f) of Section 8.01 with respect to the
Borrower or the Parent shall occur,
(a) the obligation of each Bank to make Advances and the obligation
of each Issuing Bank to issue, increase, or extend Letters of Credit shall
immediately and automatically be terminated and the Notes, all interest on
the Notes, all Letter of Credit Obligations, and all other amounts payable
under this Agreement shall immediately and automatically become and be due
and payable in full, without presentment, demand, protest or any notice of
any kind (including, without limitation, any notice of intent to accelerate
or notice of acceleration), all of which are hereby expressly waived by the
Borrower and
(b) to the extent permitted by law or court order, the Borrower
shall deposit into the Cash Collateral Account an amount of cash equal to
the outstanding Letter of Credit Exposure as security for the Obligations
to the extent the Letter of Credit Obligations are not otherwise paid at
such time.
Section 8.4 CASH COLLATERAL ACCOUNT.
(a) PLEDGE. The Borrower hereby pledges, and grants to the
Administrative Agent for the benefit of the Banks, a security interest in
all funds held in the Cash Collateral Account maintained with Societe
Generale, New York Branch from time to time, but under the control of the
Administrative Agent, and all proceeds thereof, as security for the payment
of the Obligations, including without limitation all Letter of Credit
Obligations owing to any Issuing Bank or any other Bank due and to become
due from the Borrower to any Issuing Bank or any other Bank under this
Agreement in connection with the Letters of Credit and the Borrower agrees
to execute all cash management or cash collateral agreements and UCC-1
Financing Statements requested by the Administrative Agent as needed or
desirable for the Administrative Agent to have a perfected first lien
security interest in the Cash Collateral Account.
<PAGE>
(b) APPLICATION AGAINST LETTER OF CREDIT OBLIGATIONS. The
Administrative Agent may, at any time or from time to time apply funds then
held in the Cash Collateral Account to the payment of any Letter of Credit
Obligations owing to any Issuing Bank, in such order as the Administrative
Agent may elect, as shall have become or shall become due and payable by
the Borrower to any Issuing Bank under this Agreement in connection with
the Letters of Credit.
(c) DUTY OF CARE. The Administrative Agent shall cause Societe
Generale, New York Branch to exercise reasonable care in the custody and
preservation of any funds held in the Cash Collateral Account and Societe
Generale, New York Branch shall be deemed to have exercised such care if
such funds are accorded treatment substantially equivalent to that which
Societe Generale, New York Branch accords its own property, it being
understood that neither Societe Generale, New York Branch, nor the
Administrative Agent shall have any responsibility for taking any necessary
steps to preserve rights against any parties with respect to any such
funds.
Section 8.5 NON-EXCLUSIVITY OF REMEDIES. No remedy conferred upon
the Administrative Agent or the Banks is intended to be exclusive of any
other remedy, and each remedy shall be cumulative of all other remedies
existing by contract, at law, in equity, by statute or otherwise.
Section 8.6 RIGHT OF SET-OFF. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the granting of the
consent, if any, specified by Section 8.02 to authorize the Administrative
Agent to declare the Notes and any other amount payable hereunder due and
payable pursuant to the provisions of Section 8.02 or the automatic
acceleration of the Notes and all amounts payable under this Agreement
pursuant to Section 8.03, each Bank is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Bank to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement, the Note held by such Bank, and the other Credit Documents,
irrespective of whether or not such Bank shall have made any demand under
this Agreement, such Note, or such other Credit Documents, and although
such obligations may be unmatured. Each Bank agrees to promptly notify the
Borrower after any such set-off and application made by such Bank, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Bank under this Section are in
addition to any other rights and remedies (including, without limitation,
other rights of set-off) which such Bank may have.
<PAGE>
ARTICLE IX
AGENCY AND ISSUING BANK PROVISIONS
Section 9.1 AUTHORIZATION AND ACTION. Each Bank hereby appoints and
authorizes each Agent to take such action as Agent on its behalf and to
exercise such powers under this Agreement and the other Credit Documents as
are delegated to such Agent by the terms hereof and of the other Credit
Documents, together with such powers as are reasonably incidental thereto.
As to any matters not expressly provided for by this Agreement or any other
Credit Document (including, without limitation, enforcement or collection
of the Notes), the Agents shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting
(and shall be fully protected in so acting or refraining from acting) upon
the instructions of the Required Lenders, and such instructions shall be
binding upon all Banks and all holders of Notes; PROVIDED, however, that
neither Agent shall be required to take any action which exposes such Agent
to personal liability or which is contrary to this Agreement, any other
Credit Document, or applicable law. The functions of the Administrative
Agent are administerial in nature and in no event shall the Administrative
Agent have a fiduciary or trustee relation in respect of any Bank by reason
of this Agreement or any other Credit Document. Within 5 Business Days of
the Administrative Agent or a Bank receiving actual notice (without any
duty to investigate) of a Default, the Administrative Agent or such Bank,
as applicable, will provide written notice of such Default to the Banks.
Section 9.2 AGENTS' RELIANCE, ETC. Neither of the Agents nor any of
their respective directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken (including such Person's own
negligence) by it or them under or in connection with this Agreement or the
other Credit Documents, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing,
each Agent: (a) may treat the payee of any Note as the holder thereof
until such Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Administrative
Agent; (b) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Bank and shall not
be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement or the other
Credit Documents; (d) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or
conditions of this Agreement or any other Credit Document on the part of
the Parent, the Borrower or their Subsidiaries or to inspect the property
(including the books and records) of the Borrower or its Subsidiaries;
(e) shall not be responsible to any Bank for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Credit Document; and (f) shall incur no liability
under or in respect of this Agreement or any other Credit Document by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by telecopier, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
Section 9.3 EACH AGENT AND ITS AFFILIATES. With respect to its
Commitment, the Advances made by it and the Notes issued to it, each Agent
shall have the same rights and powers under this Agreement as any other
Bank and may exercise the same as though it were not an Agent. The term
"Bank" or "Banks" shall, unless otherwise expressly indicated, include each
Agent in its individual capacity. Each Agent and its Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, the Borrower or any of its
Subsidiaries, and any Person who may do business with or own securities of
the Borrower or any such Subsidiary, all as if such Agent were not an Agent
hereunder and without any duty to account therefor to the Banks.
<PAGE>
Section 9.4 BANK CREDIT DECISION. Each Bank acknowledges that it
has, independently and without reliance upon either Agent or any other Bank
and based on the financial statements and Registration Statement referred
to in Section 4.06 and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges that it will, independently
and without reliance upon either Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement.
Section 9.5 INDEMNIFICATION. The Banks severally agree to indemnify
each Agent and each Issuing Bank (to the extent not reimbursed by the
Borrower), according to their respective Pro Rata Shares from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against such
Agent or such Issuing Bank in any way relating to or arising out of this
Agreement or any action taken or omitted by such Agent or such Issuing Bank
under this Agreement or any other Credit Document (including such Agent's
or such Issuing Bank's own negligence), provided that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent's or such Issuing Bank's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank agrees
to reimburse each Agent promptly upon demand for its Pro Rata Share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by such
Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement or any other
Credit Document, to the extent that such Agent is not reimbursed for such
expenses by the Borrower.
Section 9.6 SUCCESSOR AGENT AND ISSUING BANKS. Either Agent or any
Issuing Bank may resign at any time by giving written notice thereof to the
Banks and the Borrower and may be removed at any time with cause by the
Required Lenders upon receipt of written notice from the Required Lenders
to such effect. In addition, the Administrative Agent may be removed at
any time by the Required Lenders upon receipt of written notice from the
Required Lenders to such effect if such Administrative Agent in its
capacity as a Bank holds a Commitment less than the lesser of (a)
$20,000,000 or (b) ten percent (10%) of the aggregate Commitments of all
Banks at such time. Upon receipt of notice of any such resignation or
removal, the Required Lenders shall have the right to appoint a successor
Agent or Issuing Bank acceptable to the Borrower. If no successor Agent or
Issuing Bank shall have been so appointed, and shall have accepted such
appointment, within 30 days after the retiring Agent's or Issuing Bank's
giving of notice of resignation or the Required Lenders' removal of the
retiring Agent or Issuing Bank, then the retiring Agent or Issuing Bank
may, on behalf of the Banks and the Borrower, appoint a successor Agent or
Issuing Bank acceptable to the Borrower, which shall be a commercial bank
meeting the financial requirements of an Eligible Assignee and, in the case
of an Issuing Bank, a Bank. Upon the acceptance of any appointment as
Agent or Issuing Bank by a successor Agent or Issuing Bank, such successor
Agent or Issuing Bank shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Agent or Issuing
Bank, and the retiring Agent or Issuing Bank shall be discharged from its
duties and obligations under this Agreement and the other Credit Documents,
except that the retiring Issuing Bank shall remain an Issuing Bank with
respect to any Letters of Credit issued by such Issuing Bank and
outstanding on the effective date of its resignation or removal and the
provisions affecting such Issuing Bank with respect to such Letters of
Credit shall inure to the benefit of the retiring Issuing Bank until the
termination of all such Letters of Credit. After any retiring Agent's or
Issuing Bank's resignation or removal hereunder as Agent or Issuing Bank,
the provisions of this Article IX shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was such Agent or
Issuing Bank under this Agreement and the other Credit Documents.
<PAGE>
Section 9.7 CO-ARRANGER AND DOCUMENTATION AGENT. Bank of Montreal,
Chicago Branch shall be named Co-Arranger under the Credit Documents, but
the Co-Arranger shall have no right or duty to act as agent on behalf of
the Banks in such capacity. Societe Generale, Southwest Agency shall be
named Co-Arranger and Documentation Agent under the Credit Documents, but
the Co-Arranger and the Documentation Agent shall have no right or duty to
act as agent on behalf of the Banks in such capacities.
ARTICLE X
MISCELLANEOUS
Section 10.1 AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, the Notes, or any other Credit Document, nor
consent to any departure by the Borrower or any Guarantor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
the Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given; PROVIDED, however, that no amendment shall increase the
Commitment of any Bank without the written consent of such Bank, and no
amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) increase the aggregate Commitments of
the Banks, (b) reduce the principal of, or interest on, the Notes or any
fees or other amounts payable hereunder or under any other Credit Document
or otherwise release the Borrower from any Obligations, (c) postpone any
date fixed for any payment of principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, (d) change the percentage of
the Commitments of the Banks which shall be required for the Banks or any
of them to take any action hereunder or under any other Credit Document,
(e) amend this Section 10.01, (f) amend the definition of "Required
Lenders", (g) amend the definition of "Borrowing Base" or "Hotel Value",
but not the definitions that are used in such definitions, or (h) release
the Parent from its obligations under the Guaranty; and PROVIDED, further,
that no amendment, waiver or consent shall, unless in writing and signed by
the Administrative Agent, Syndication Agent or any Issuing Bank in addition
to the Banks required above to take such action, affect the rights or
duties of the Administrative Agent, Syndication Agent or such Issuing Bank,
as the case may be, under this Agreement or any other Credit Document. In
addition, none of the following decisions shall be made without the written
consent of the Required Lenders:
(a) release any Guarantor except the Parent from its
obligations under any of the Guaranties, provided that the Administrative
Agent can (i) release any Supplemental Guarantor from its obligations under
any of the Supplemental Guaranties and (ii) if no Default then exists,
release any Subsidiary of the Borrower which no longer is a Property Owner
of an Eligible Property;
(b) release any Person from its obligations under any of the
Environmental Indemnities;
(c) any determination to make a Borrowing after the
occurrence and during the continuance of an Event of Default;
(d) increases the maximum duration of Interest Periods
permitted under this Agreement;
(e) any waiver or any amendment to the financial covenants
contained in Article VII of this Agreement or any definitions used therein;
<PAGE>
(f) any material waiver or modification of the covenants
contained in Article V or Article VI;
definition of "Borrowing Base";
(h) any amendment, supplement or modification to, or waiver
of, the provisions of Section 8.01 of this Agreement;
(i) any determination to send notice to the Borrower of, or
otherwise declare, an Event of Default pursuant to Section 8.01 of this
Agreement;
(j) any determination to accelerate the Obligations pursuant
to Section 8.02 of this Agreement;
(k) any exercise remedies under any Credit Document;
(l) any material decision regarding the operation,
maintenance, sale or other disposition of any Property after the
foreclosure upon such Property, provided that Administrative Agent shall be
able to take any action it determines necessary to preserve or maintain any
such Property and provided further that if the Required Lenders cannot
agree on the sale or disposition of such Property, the Administrative Agent
shall not sell or dispose of such Property, but shall continue to hold such
Property for the benefit of the Banks;
(m) any waiver for more than 45 days of, or any material
amendment to, the reporting requirements set forth in clauses (a)-(d) of
Section 5.05 of this Agreement;
(n) any material waiver of the conditions to a Hotel Property
qualifying as either an Eligible Property or a Permitted Non-Eligible
Property; and
(o) any other material waiver or modification of the Credit
Documents.
Any amendment to a covenant of the Parent or any of its Subsidiaries or
amendment to a definition shall require the Borrower's written consent.
Section 10.2 NOTICES, ETC. Except a specifically provided
herein, all notices and other communications shall be in writing (including
telecopy or telex) and mailed, telecopied, telexed, hand delivered or
delivered by a nationally recognized overnight courier, if to the Borrower,
at its address at 220 E. 42nd Street, New York, New York 10017, Attn: Mr.
Jon E. Bortz with a copy to Michael F. Taylor at Brown & Wood LLP, 57th
Floor, One World Trade Center, New York, New York 10048 (telephone: (212)
839-8602; telecopy (212) 839-5599) and a copy to Robert K. Hagan at Hagan &
Associates, Suite 4322, 200 East Randolph Drive, Chicago, Illinois 60601
(telephone: (312) 228-2050; telecopy (312) 228-0982); if to any Bank at its
Domestic Lending Office specified opposite its name on Schedule 10.02; if
to the Administrative Agent or to Societe Generale, Southwest Agency in its
capacity as an Issuing Bank, at its address at 4900 Trammell Crow Center,
2001 Ross Avenue, Dallas, Texas 75201, Attention: Carina Huynh, (telecopy:
(214) 979-2727; telephone: (214) 979-2774); if to Bank Of Montreal,
Chicago Branch, in its capacity as Syndication Agent, at its office at 115
South LaSalle, 12th Floor West, Chicago, Illinois 60603, Attention: Mr.
David A. Mazujian (telecopy (312) 750-4352; telephone (312) 750-4386); or,
as to each party, at such other address or teletransmission number as shall
<PAGE>
be designated by such party in a written notice to the other parties. All
such notices and communications shall, when mailed, telecopied, telexed or
hand delivered or delivered by overnight courier, be effective three days
after deposited in the mails, when telecopy transmission is completed, when
confirmed by telex answer-back or when delivered, respectively, except that
notices and communications to the Administrative Agent pursuant to
Article II or Article IX shall not be effective until received by the
Administrative Agent.
Section 10.3 NO WAIVER; REMEDIES. No failure on the part of any
Bank, any Agent, or any Issuing Bank to exercise, and no delay in
exercising, any right hereunder or under any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies provided in this Agreement and the other Credit
Documents are cumulative and not exclusive of any remedies provided by law.
Section 10.4 COSTS AND EXPENSES. The Borrower agrees to pay on
demand all out-of-pocket costs and expenses of the Administrative Agent in
connection with the preparation, execution, delivery, due diligence,
administration, modification and amendment of this Agreement, the Notes and
the other Credit Documents and syndication of the Obligations including,
without limitation, (a) the reasonable fees and out-of-pocket expenses of
Bracewell & Patterson, L.L.P., counsel for the Administrative Agent and the
Banks, and (b) to the extent not included in the foregoing, the costs of
any local counsel, travel expenses of the Administrative Agent and its
consultants and representatives, Engineering Reports, Environmental
Reports, mortgage and intangible taxes (if any), and any title or Uniform
Commercial Code search costs, any flood plain search costs, insurance
consultant costs and other costs usual and customary in connection with a
credit facility of this type. In addition, the Borrower agrees to pay on
demand all reasonable out-of-pocket costs and expenses, if any, of each
Agent, each Issuing Bank, and each Bank (including, without limitation,
reasonable counsel fees and expenses of each Agent, such Issuing Bank, and
each Bank) in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement and the
other Credit Documents.
Section 10.5 BINDING EFFECT. This Agreement shall become
effective when it shall have been executed by the Borrower and the
Administrative Agent, and when the Administrative Agent shall have, as to
each Bank, either received a counterpart hereof executed by such Bank or
been notified by such Bank that such Bank has executed it and thereafter
shall be binding upon and inure to the benefit of the Borrower, each Agent,
each Issuing Bank, and each Bank and their respective successors and
assigns, except that the Borrower shall not have the right to assign its
rights or delegate its duties under this Agreement or any interest in this
Agreement without the prior written consent of each Bank.
Section 10.6 BANK ASSIGNMENTS AND PARTICIPATIONS.
(a) ASSIGNMENTS. Any Bank may assign to one or more banks or other
entities all or any portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it, the Notes held by it, and the
participation interest in the Letter of Credit Obligations held by it);
PROVIDED, HOWEVER, that (i) each such assignment shall be of a constant,
and not a varying, percentage of all of such Bank's rights and obligations
under this Agreement and shall involve a ratable assignment of such Bank's
Commitment, such Bank's Advances and such Bank's participation in Letter of
<PAGE>
Credit Exposure, (ii) the amount of the resulting Commitment and Advances
of the assigning Bank (unless it is assigning all its Commitment) and the
assignee Bank pursuant to each such assignment (determined as of the date
of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $10,000,000 and shall be an integral multiple of
$1,000,000, (iii) each such assignment shall be to an Eligible Assignee,
(iv) the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with the Notes subject to such
assignment, (v) the Administrative Agent shall consent to such assignment,
which consent shall not be unreasonably withheld or delayed, and (vi) each
Eligible Assignee (other than the Eligible Assignee of either Agent or an
Eligible Assignee which is an Affiliate of the assigning Bank) shall pay to
the Administrative Agent a $2,500 administrative fee. Upon such execution,
delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be
at least three Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto for all purposes and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank
hereunder and (B) such Bank thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of such Bank's rights and obligations
under this Agreement, such Bank shall cease to be a party hereto).
Notwithstanding anything herein to the contrary, any Bank may assign, as
collateral or otherwise, any of its rights under the Credit Documents to
any Federal Reserve Bank.
(b) TERM OF ASSIGNMENTS. By executing and delivering an Assignment
and Acceptance, the Bank thereunder and the assignee thereunder confirm to
and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, such Bank
makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency of value of this Agreement or any
other instrument or document furnished pursuant hereto; (ii) such Bank
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or the Guarantors or the
performance or observance by the Borrower or the Guarantors of any of their
obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements and Registration Statement referred to in Sections 4.06 and
5.05, if applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will, independently
and without reliance upon either Agent, such Bank or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee appoints and authorizes each
Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to such Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vi) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Bank.
<PAGE>
(c) THE REGISTER. The Administrative Agent shall maintain at its
address referred to in Section 10.02 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the
recordation of the names and addresses of the Banks and the Commitments of,
and principal amount of the Advances owing to, each Bank from time to time
(the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, each
Agent, the Issuing Banks, and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower
or any Bank at any reasonable time and from time to time upon reasonable
prior notice.
(d) PROCEDURES. Upon its receipt of an Assignment and Acceptance
executed by a Bank and an Eligible Assignee, together with the Note subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of the
attached Exhibit B, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register, and (iii) give prompt
notice thereof to the Borrower. Within five Business Days after its
receipt of such notice, the Borrower, at its own expense, shall execute and
deliver to the Administrative Agent in exchange for the surrendered Note, a
new Note payable to the order of such Eligible Assignee in amount equal to,
respectively, the Commitment and the outstanding Advances assumed by it
pursuant to such Assignment and Acceptance, and if the assigning Bank has
retained any Commitment hereunder, a new Note payable to the order of such
Bank in an amount equal to, respectively, the Commitment and the
outstanding Advances retained by it hereunder. Such new Note shall be
dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the attached Exhibit A.
(e) PARTICIPATIONS. Each Bank may sell participations to one or
more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it, its participation
interest in the Letter of Credit Obligations, and the Notes held by it);
PROVIDED, HOWEVER, that (i) such Bank's obligations under this Agreement
(including, without limitation, its Commitment to the Borrower hereunder)
shall remain unchanged, (ii) such Bank shall remain solely responsible to
the other parties hereto for the performance of such obligations,
(iii) such Bank shall remain the holder of any such Note for all purposes
of this Agreement, (iv) the Borrower, each Agent, and the Issuing Banks and
the other Banks shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement,
and (v) such Bank shall not require the participant's consent to any matter
under this Agreement, except for change in the principal amount of any Note
in which the participant has an interest, reductions in fees or interest,
or extending the Maturity Date except as permitted in this Agreement. The
Borrower hereby agrees that participants shall have the same rights under
Sections 2.08, 2.09, and 2.11(c) hereof as the Bank to the extent of their
respective participations, PROVIDED that no participant shall be able to
collect in excess of amounts payable to the Bank selling to such
participant under such Sections in respect of the interest sold to such
participant or to collect any such amounts from the Borrower.
<PAGE>
(f) CONFIDENTIALITY. Each Bank may furnish any information
concerning the Borrower and its Subsidiaries in the possession of such Bank
from time to time to assignees and participants (including prospective
assignees and participants); PROVIDED that, prior to any such disclosure,
the assignee or participant or proposed assignee or participant shall agree
in writing to preserve the confidentiality of any confidential information
relating to the Borrower and its Subsidiaries received by it from or on
behalf of such Bank in accordance with Section 10.20. Such Bank shall
promptly deliver a signed copy of any such confidentiality agreement to the
Administrative Agent.
Section 10.7 INDEMNIFICATION. The Borrower shall indemnify each
Agent, the Banks (including any lender which was a Bank hereunder prior to
any full assignment of its Commitment), the Issuing Banks, and each
affiliate thereof and their respective directors, officers, employees and
agents from, and discharge, release, and hold each of them harmless
against, any and all losses, liabilities, claims or damages to which any of
them may become subject, insofar as such losses, liabilities, claims or
damages arise out of or result from (i) any actual or proposed use by the
Borrower or any Affiliate of the Borrower of the proceeds of any Advance,
(ii) any breach by the Borrower or any Guarantor of any provision of this
Agreement or any other Credit Document, (iii) any investigation, litigation
or other proceeding (including any threatened investigation or proceeding)
relating to the foregoing, or (iv) any Environmental Claim or requirement
of Environmental Laws concerning or relating to the present or
previously-owned or operated properties, or the operations or business, of
the Borrower or any of its Subsidiaries, and the Borrower shall reimburse
each Agent, each Issuing Bank, and each Bank, and each affiliate thereof
and their respective directors, officers, employees and agents, upon demand
for any reasonable out-of-pocket expenses (including legal fees) incurred
in connection with any such investigation, litigation or other proceeding;
and expressly including any such losses, liabilities, claims, damages, or
expense incurred by reason of the Person being indemnified's own
negligence, but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct
of the Person to be indemnified.
Section 10.8 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the
same agreement.
Section 10.9 SURVIVAL OF REPRESENTATIONS, INDEMNIFICATIONS, ETC.
All representations, warranties contained in this Agreement or made in
writing by or on behalf of the Borrower in connection herewith shall
survive the execution and delivery of this Agreement and the Credit
Documents, the making of the Advances and any investigation made by or on
behalf of the Banks, none of which investigations shall diminish any Bank's
right to rely on such representations and warranties. All obligations of
the Borrower provided for in Sections 2.08, 2.09, 2.11(c), 9.05 and 10.07
shall survive any termination of this Agreement and repayment in full of
the Obligations.
Section 10.10 SEVERABILITY. In case one or more provisions of this
Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions contained herein or
therein shall not be affected or impaired thereby.
<PAGE>
Section 10.11 ENTIRE AGREEMENT. This Agreement, the Notes and the
other Credit Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.
Section 10.12 USURY NOT INTENDED. It is the intent of the Borrower
and each Bank in the execution and performance of this Agreement and the
other Credit Documents to contract in strict compliance with applicable
usury laws, including conflicts of law concepts, governing the Advances of
each Bank including such applicable laws of the State of New York and the
United States of America from time to time in effect. In furtherance
thereof, the Banks and the Borrower stipulate and agree that none of the
terms and provisions contained in this Agreement or the other Credit
Documents shall ever be construed to create a contract to pay, as
consideration for the use, forbearance or detention of money, interest at a
rate in excess of the Maximum Rate and that for purposes hereof "interest"
shall include the aggregate of all charges which constitute interest under
such laws that are contracted for, charged or received under this
Agreement; and in the event that, notwithstanding the foregoing, under any
circumstances the aggregate amounts taken, reserved, charged, received or
paid on the Advances, include amounts which by applicable law are deemed
interest which would exceed the Maximum Rate, then such excess shall be
deemed to be a mistake and each Bank receiving same shall credit the same
on the principal of its Notes (or if such Notes shall have been paid in
full, refund said excess to the Borrower). In the event that the maturity
of the Notes is accelerated by reason of any election of the holder thereof
resulting from any Event of Default under this Agreement or otherwise, or
in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the
Maximum Rate and excess interest, if any, provided for in this Agreement or
otherwise shall be canceled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited on
the applicable Notes (or, if the applicable Notes shall have been paid in
full, refunded to the Borrower). In determining whether or not the
interest paid or payable under any specific contingencies exceeds the
Maximum Rate, the Borrower and the Lenders shall to the maximum extent
permitted under applicable law amortize, prorate, allocate and spread in
equal parts during the period of the full stated term of the Notes all
amounts considered to be interest under applicable law at any time
contracted for, charged, received or reserved in connection with the
Obligations. The provisions of this Section shall control over all other
provisions of this Agreement or the other Credit Documents which may be in
apparent conflict herewith.
Section 10.13 GOVERNING LAW. ANY DISPUTE BETWEEN THE BORROWER,
ANY AGENT, ANY BANK, OR ANY INDEMNITEE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED
IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION,
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD
TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW YORK.
<PAGE>
Section 10.14 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY
TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
OTHER CREDIT DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK, NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT
PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT ANY AGENT, ANY
BANK OR ANY INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER
OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1)
OBTAIN PERSONAL JURISDICTION OVER THE BORROWER OR (2) ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE BORROWER AGREES
THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING
BROUGHT BY SUCH PERSON TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
OF SUCH PERSON. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS SUBSECTION (B).
(C) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
WRITS, PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING BY THE
MAILING THEREOF BY ANY AGENT OR THE BANKS BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE BORROWER ADDRESSED AS PROVIDED HEREIN. NOTHING
HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY AGENT OR THE
BANKS TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM
IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE
PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. THE BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO REALIZE ON THE COLLATERAL ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY SPECIFIC
PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT
INJUNCTION, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT.
<PAGE>
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 10.14, WITH ITS COUNSEL.
Section 10.15 KNOWLEDGE OF BORROWER. For purposes of this
Agreement, "knowledge of the Borrower" means the actual knowledge of any of
the executive officers and all other Responsible Officers of the Parent.
Section 10.16 BANKS NOT IN CONTROL. None of the covenants or
other provisions contained in the Credit Documents shall or shall be deemed
to, give the Banks the rights or power to exercise control over the affairs
and/or management of the Borrower, any of its Subsidiaries or any
Guarantor, the power of the Banks being limited to the right to exercise
the remedies provided in the Credit Documents; provided, however, that if
any Bank becomes the owner of any stock, or other equity interest in, any
Person whether through foreclosure or otherwise, such Bank shall be
entitled (subject to requirements of law) to exercise such legal rights as
it may have by being owner of such stock, or other equity interest in, such
Person.
Section 10.17 HEADINGS DESCRIPTIVE. The headings of the several
Sections and paragraphs of the Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any
provision of this Agreement.
Section 10.18 TIME IS OF THE ESSENCE. Time is of the essence
under the Credit Documents.
10.19 SECTION 10.20 SCOPE OF INDEMNITIES. THE BORROWER ACKNOWLEDGES
AND AGREES THAT CERTAIN OF ITS OBLIGATIONS AND INDEMNITIES UNDER THIS
AGREEMENT INCLUDE ANY CLAIMS RESULTING FROM THE NEGLIGENCE OR ALLEGED
NEGLIGENCE OF THE ADMINISTRATIVE AGENT, THE BANKS, OR ANY OTHER PERSON
BEING INDEMNIFIED.
Section 10.21 CONFIDENTIALITY. Each Agent, Issuing Bank and each
Bank severally agrees that it will use its best efforts not to disclose
without the prior written consent of the Parent or the Borrower (other than
to an Affiliate or such Person's or their Affiliate's directors, officers,
employees, auditors, regulators or counsel) any information with respect to
the Parent or the Borrower which is furnished pursuant to this Agreement
except that each Agent, Issuing Bank and each Bank may disclose any such
information (a) which is or becomes generally available to the public other
than by a breach of this Section 10.20, (b) which is known by or becomes
known by such Person from another Person, (c) as may be required or
appropriate in any report, statement or testimony submitted to any
Governmental Authority (whether in the United States or elsewhere), (d) as
may be required or appropriate in response to any summons or subpoena or
any law, order, regulation or ruling applicable to such Agent, Issuing Bank
or Bank and (e) to any prospective participant or assignee in connection
with any contemplated transfer pursuant to Section 10.06 in accordance with
the provisions of Section 10.06(f).
<PAGE>
[SIGNATURE PAGE OF SENIOR UNSECURED CREDIT AGREEMENT]
EXECUTED as of the date first referenced above.
BORROWER:
LASALLE HOTEL OPERATING PARTNERSHIP,
L.P.
By: LaSalle Hotel Properties,
its general partner
By: /s/ MICHAEL D. BARNELLO
Name: Michael D. Barnello
Title: Chief Operating Officer
and Senior Vice President
of Acquisitions
<PAGE>
[SIGNATURE PAGE OF SENIOR UNSECURED CREDIT AGREEMENT]
SOCIETE GENERALE, SOUTHWEST AGENCY,
individually and as Co-Arranger, Administrative Agent, and Documentation
Agent
By: /s/ THOMAS K. DAY
Title: Vice President
<PAGE>
[SIGNATURE PAGE OF SENIOR UNSECURED CREDIT AGREEMENT]
BANK OF MONTREAL, CHICAGO BRANCH.,
individually and as Co-Arranger and Syndication Agent
By: /s/ THOMAS A. BATTERHAM
Title: Director
<PAGE>
[SIGNATURE PAGE OF SENIOR UNSECURED CREDIT AGREEMENT]
EXHIBIT 10.10
- -------------
LEASE AGREEMENT
DATED AS OF JUNE 24, 1998
BY AND BETWEEN
LHO HARBORSIDE HOTEL, L.L.C.
AS LANDLORD,
AND
LASALLE HOTEL LESSEE, INC.
AS TENANT
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this 24th day of June by
and between LHO HARBORSIDE HOTEL, L.L.C. as landlord ("LANDLORD"), and
LASALLE HOTEL LESSEE, INC. as tenant ("TENANT").
W I T N E S S E T H :
-------------------
WHEREAS, Landlord owns leasehold 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); 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 and the Uniform System of Accounts, (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, (iv) all cites to specific laws, rules,
statutes, regulations, ordinances or codes shall be cites to the applicable
laws, rules, statutes, regulations, ordinances or codes of the United
States of America, and (v) 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 "AAA" shall have the meaning given such term in SECTION 23.1.
1.2 "ACCOUNTING PERIOD" shall mean each calendar month.
1.3 "ADDITIONAL CHARGES" shall have the meaning given such term in
SECTION 3.1.3.
1.4 "ADVISORS" shall mean LaSalle Hotel Advisors.
1.5 "AFFILIATE" 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 or
Entity which is a Parent, a Subsidiary, or a Subsidiary of a Parent with
respect to such Person or company or to one or more of the Persons referred
to in the preceding clauses (a) and (b), (d) any other Person who is an
officer, director, trustee or employee of, or partner in, 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).
<PAGE>
1.6 "AGREEMENT" shall mean this Lease Agreement, including all
exhibits hereto, as it and they may be amended from time to time as herein
provided.
1.7 "ANNUAL BUDGET" shall have the meaning given such term in
SECTION 17.3.
1.8 "ANNUAL FOOD AND BEVERAGE SALES BREAK POINTS" shall have the
meaning given such term in SECTION 3.1.4.
1.9 "ANNUAL OTHER INCOME BREAK POINTS" shall have the meaning
given such term in SECTION 3.1.4.
1.10 "ANNUAL ROOM REVENUES BREAK POINTS" and "ANNUAL TELEPHONE
REVENUES BREAK POINTS" shall have the meanings given such terms in SECTION
3.1.4.
1.11 "APPLICABLE LAWS" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, international treaties,
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 (except those
requirements which, by definition, are solely the responsibility of
employers) 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 waste 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, material or wastes, whether solid, liquid or gaseous in nature.
1.12 "APPROVED FINANCIAL INSTITUTION" shall mean (a) any United
States of America commercial bank which is FDIC insured and has a
consolidated net worth, as of any pertinent date under the terms of this
Agreement, of not less than $250,000,000 (as adjusted by CPI) and is
otherwise reasonably satisfactory to Landlord or (b) any other substantial
United States of America financial institution that is satisfactory to
Landlord in its reasonable discretion.
1.13 "AWARD" shall mean all compensation, sums or other value
awarded, paid or received by virtue of a total or partial Condemnation 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).
1.14 "BASE SECURITY DEPOSIT" shall have the meaning given such term
in EXHIBIT F attached hereto.
<PAGE>
1.15 "BEVERAGE SALES" shall mean Gross Revenues from (a) the sale
of wine, beer, liquor or other alcoholic beverages, whether sold in a bar
or lounge, delivered to or available in a guest room, sold at meetings or
banquets or at any other location at the Hotel and (b) non-alcoholic
beverages sold in a bar or lounge. Such revenue shall include sales by
Tenant and its permitted subtenants, licensees and concessionaires if such
permitted subtenant, licensees or concessionaires are Affiliates of Tenant.
Such revenue shall be determined in a manner consistent with GAAP and the
Uniform System of Accounts and shall include (a) the fair market value of
goods or services which have been provided in exchange for beverages under
bartering or trade arrangements, (b) the fair market value of beverages
provided under frequent traveler programs, gift certificate programs or any
other similar programs, and (c) the fair market value of any other
allowances deducted from beverage revenues (items (a)-(c) being allocated
to the respective revenues categories in accordance with the Uniform System
of Accounts). Such revenue shall not include: (a) any gratuity or service
charge added to a customer's bill or statement in lieu of gratuity which is
paid directly to an employee; or (b) sales taxes or taxes of any other kind
imposed on the sale of alcoholic or other beverages; or (c) the value of
any beverages provided to employees of Landlord, Tenant, any franchisor
under the Franchise Agreement or any guest on a complimentary basis. All
credits, rebates, refunds and credit card chargebacks relating to Beverage
Sales shall be deducted from Beverage Sales.
1.16 "BUSINESS DAY" shall mean any day other than Saturday, Sunday,
or any other day on which banking institutions in the State of New York,
the State of Delaware, the State of Illinois, or the State are authorized
by law or executive order to close.
1.17 "CAPITAL BUDGET" shall have the meaning given such term in
SECTION 17.3.
1.18 "CAPITAL EXPENDITURE" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.19 "CAPITAL REPAIR" shall mean any renovation, replacement,
repair or improvement to the Leased Property (or portion thereof) the cost
of which constitutes a Capital Expenditure and any renovation, replacement,
repair or improvement set forth and approved in the Capital Budget.
1.20 "CASH" shall mean cash or other immediately available funds.
1.21 "CASH EQUIVALENTS" shall mean (a) any debt instrument with a
term of up to twelve (12) months that is issued by or backed by the full
faith and credit of the United States of America, (b) any certificate of
deposit with a term of up to twelve (12) months that is issued by an issuer
that, on the date of issuance and on each date of any renewal or reissuance
thereof, is an Approved Financial Institution, and which instrument and any
applicable assignment thereof is in form and substance reasonably
satisfactory to the Landlord and (c) any irrevocable, "clean" letter of
credit issued by an issuer that, on the date of issuance and on each date
of any renewal or reissuance thereof, is an Approved Financial Institution,
and which instrument is in form and substance reasonably satisfactory to
the Landlord.
<PAGE>
1.22 "CHANGE OF CONTROL" shall mean (a) the sale, conveyance,
assignment, encumbering, pledging, hypothecation, granting a security
interest in, granting of options with respect to, or other disposition of
(directly or indirectly, voluntarily or involuntarily, by operation of law
or otherwise, and whether or not for consideration) of any class of
partnership interests, stock or other equity interests in a Person (other
than among existing holders of interests in such Person on the Commencement
Date and/or family members of such holders and/or trusts for the benefit of
any of the foregoing) that, upon a transfer of any portion thereof, will
create in the transferee thereof, directly or indirectly, a majority of any
class of partnership interest, stock or other equity interests of such
Person, or (b) with respect to the REIT, should the Advisor no longer be
employed by the REIT.
1.23 "CHANGE IN OPERATIONS" shall have the meaning given such term
in SECTION 21.12.
1.24 "CLAIM" shall have the meaning given such term in SECTION 8.1.
1.25 "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.
1.26 "COMMENCEMENT DATE" shall mean the date of this Agreement.
1.27 "COMPETITIVE SET" shall mean a determination made by Landlord
and Tenant annually, at the time of preparation and approval of the Annual
Budget, of an appropriate reference group of hotels which are considered
competitive with the Leased Property and which Tenant and Landlord shall
agree shall constitute the Competitive Set for such Fiscal Year. If
Landlord or Tenant fail to agree upon the Competitive Set, the matter shall
be referred to arbitration as provided for in ARTICLE 23.
1.28 "CONDEMNATION" shall mean (a) the exercise with respect to the
Leased Property, whether by legal proceedings or otherwise, by a Condemnor
of any power of condemnation, (b) a voluntary sale or transfer of the
Leased Property by Landlord to a 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 the Leased Property,
or any interest therein, or right accruing thereto or use thereof, as the
result or in settlement of any Condemnation or other eminent domain
proceeding affecting the Leased Property, whether or not the same shall
have actually been commenced.
1.29 "CONDEMNOR" shall mean any public or quasi-public authority,
or private corporation or individual, having the power of Condemnation.
1.30 "CPI" shall mean the "Consumer Price Index" published by the
Bureau of Labor Statistics of the United States of America Department of
Labor, U.S. City Average, All Items for Urban Wage Earners and Clerical
Workers (1982-1984=100).
1.31 "CURRENT MARKET VALUE" shall mean, as of any pertinent date:
(a) as to Cash and Cash Equivalents, the face amount thereof; (b) as to co-
investments in hotels by Tenant and Landlord, the value of such co-
investment, based on the value placed on the corresponding investment by
Landlord or the REIT in the most recent version of its own financial
statements; and (c) as to Marketable Securities, the closing price of such
securities, as reported in THE WALL STREET JOURNAL for the trade date next
preceding such pertinent date.
1.32 "DATE OF TAKING" shall mean the date the Condemnor has the
right to possession of the Leased Property, or any portion thereof, in
connection with a Condemnation.
<PAGE>
1.33 "DEFAULT" shall mean any event or condition which with the
giving of notice and/or lapse of time may ripen into an Event of Default.
1.34 "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.
1.35 "DOLLARS" or "$" shall mean lawful money of the United States
of America which shall be legal tender for the payment of public and
private debts in the United States of America.
1.36 "EMERGENCY REPAIRS" shall have the meaning given such term in
SECTION 5.1.2(b).
1.37 "ENCUMBRANCE" shall have the meaning given such term in
SECTION 20.1.
1.38 "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
or political subdivision thereof or any other entity.
1.39 "ENVIRONMENT" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
1.40 "ENVIRONMENTAL OBLIGATION" shall have the meaning given such
term in SECTION 4.3.1.
1.41 "ENVIRONMENTAL NOTICE" shall have the meaning given such term
in SECTION 4.3.1.
1.42 "EVENT OF DEFAULT" shall have the meaning given such term in
SECTION 12.1.
1.43 "EXPIRATION DATE" shall mean the date set forth on EXHIBIT A
attached hereto.
1.44 "FF&E" shall mean all furniture, furnishings and equipment
(except equipment and fixtures attached to and forming a part of the Leased
Improvements) required for the operation of the Leased Improvements as a
hotel, including, without limitation, (a) office furnishings and equipment,
(b) specialized hotel equipment necessary for the operation of any portion
of the Leased Improvements as a hotel, including equipment for kitchens,
laundries, dry cleaning facilities, bars, restaurants, public rooms,
commercial and parking spaces, and recreational facilities, (c) all other
furnishings and equipment as necessary or desirable in the operation of the
Leased Property in accordance with the terms and conditions set forth in
this Agreement, and (d) all replacements, substitutions and additions of
and to all of the foregoing.
1.45 "FAIR MARKET VALUE" shall mean, as to a specific valuable
asset, the purchase price which a seller would be able to obtain for such
asset in an arms-length transaction with a buyer which is not an Affiliate
of the seller, and taking into consideration all factors which might
reasonably affect the sales price of the asset in question, including,
without limitation, if and as appropriate, the existence of a control block
or minority interest, the anticipated impact on current market prices of
immediate sale, the lack of a market for such asset, and the impact on
present value of factors such as length of time before any such sales may
become possible and the cost and complexity of any such sales.
<PAGE>
1.46 "FINANCIAL OFFICER'S CERTIFICATE" shall mean, as to any
Person, a certificate of the chief financial officer or chief accounting
officer (or such officer's 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 on behalf of such Person (a) that such statements have been
properly prepared in accordance with GAAP and the Uniform System of
Accounts and are true, correct and complete in all material respects and
fairly present the 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) certify that such officer has reviewed this
Agreement and has no knowledge of any Default or Event of Default
hereunder.
1.47 "FINANCIALS" shall mean, for any Fiscal Year or other
accounting period of Tenant, statements of operations, partners' capital
and cash flow (or, in the case of a corporation, statements of operations,
retained earnings and cash flow) for such period and for the period from
the beginning of the respective Fiscal Year to the end of such period and
the related balance sheet as of the end of such period, together with the
notes to any such yearly statement, all in such detail as may be required
by the SEC with respect to filings made by the REIT or Landlord or as may
be reasonably required by Landlord, and setting forth in comparative form
the corresponding figures for the corresponding period in the preceding
Fiscal Year, and prepared in accordance with GAAP and the Uniform System of
Accounts and audited annually (and quarterly if required by the SEC or if
reasonably required by Landlord) by a nationally recognized firm of
independent certified public accountants proposed by Tenant and approved by
Landlord, which approval shall not be unreasonably withheld or delayed.
Financials shall be prepared on the basis of a December 31 fiscal year of
Tenant.
1.48 "FISCAL YEAR" shall mean each calendar year.
1.49 "FIXED TERM" shall have the meaning given such term in SECTION
2.3.
1.50 "FIXTURES" shall have the meaning given such term in SECTION
2.l(d).
1.51 "FOOD SALES" shall mean (a) Gross Revenues from the sale of
food and non-alcoholic beverages that are prepared at the Hotel and sold or
delivered on or off the Hotel by Tenant whether for cash or for credit,
including in respect of guest rooms, banquet rooms, meeting rooms and other
similar rooms, and (b) Gross Revenues from the rental of banquet, meeting
and other similar rooms. Such revenue shall include sales by Tenant and
its permitted subtenants, licensees and concessionaires, but as to
subleases, licenses or similar arrangements for food and non-alcoholic
beverage sales which were entered into by Landlord or any prior owner of
the Leased Property with parties who are not Affiliates of Tenant and which
are existing as of the date of this Agreement, such revenue shall only
include rents received under such existing subleases, licenses or similar
arrangements. Such revenue shall be determined in a manner consistent with
GAAP and the Uniform System of Accounts and shall include (a) the fair
market value of goods or services which have been provided in exchange for
food under bartering or trade arrangements, (b) the fair market value of
food provided under frequent traveler programs, gift certificate programs
or any other similar programs, and (c) the fair market value of any other
allowances deducted from food revenues, (items (a)-(c) being allocated to
the respective revenues categories in accordance with the Uniform System of
Accounts). Such revenue shall not include: (a) vending machine sales; (b)
any gratuities or service charges added to a customer's bill or statement
in lieu of gratuity which is paid directly to an employee; (c) non-
alcoholic beverages sold from a bar or lounge; or (d) sales taxes or taxes
<PAGE>
of any other kind imposed on the sale of food or non-alcoholic beverages;
or (e) the value of food or non-alcoholic beverages provided to employees
of Landlord, Tenant, the franchisor under the Franchise Agreement or any
other guests on a complimentary basis. All credits, rebates, refunds and
credit card chargebacks relating to Food Sales shall be deducted from Food
Sales.
1.52 "FORCE MAJEURE EVENT" shall mean an interruption or diminution
of the operation of the Hotel resulting from, or caused by, general
strikes, wars (declared or undeclared), civil unrest, natural disasters
such as fires, storms, floods or earthquakes, or other material
extraordinary economic events not reasonably foreseeable by the parties
hereto as of the Commencement Date, and which such interruption causes a
delay in the performance of any material term hereunder.
1.53 "FRANCHISE AGREEMENT" shall mean any franchise agreement or
license agreement with a franchisor under which the Hotel is operated, but
shall not be deemed to include the Management Agreement.
1.54 "GAAP" shall mean generally accepted accounting principles of
the United States of America, consistently applied.
1.55 "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 country in which the Leased Property is
located or the 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 the Hotel
operated thereon.
1.56 "GROSS OPERATING EXPENSES" shall mean all salaries and
employee expense and payroll taxes (including salaries, wages, bonuses and
other compensation of all employees of the Hotel, and benefits including
life, medical and disability insurance and retirement benefits),
operational supplies, utilities, insurance to be provided by Tenant under
the terms of this Lease, governmental fees and assessments, food,
beverages, laundry service expense, the costs of Inventory, license fees,
advertising, marketing, reservation systems and any and all other operating
expenses as are reasonably necessary for the proper and efficient operation
of the Hotel incurred by Tenant in accordance with the provisions hereof
(excluding, however, (i) federal, state and municipal excise, sales and use
taxes collected directly from patrons and guests or as a part of the sales
price of any goods, services or displays, such as gross receipts,
admissions, cabaret or similar or equivalent taxes paid over to federal,
state or municipal governments, (ii) the cost of insurance to be provided
by Landlord under Article 9, (iii) expenditures by Landlord, and (iv)
payments on any Hotel Mortgage or other mortgage or security instrument on
the Hotel); all determined in accordance with GAAP. No part of Tenant's
central office overhead or general or administrative expenses (as opposed
to that of the Hotel) shall be deemed to be a part of Gross Operating
Expenses, as herein provided.
1.57 "GROSS REVENUES" shall mean all revenues, receipts, and income
of any kind derived directly or indirectly by Tenant from or in connection
with the Hotel (including rentals or other payments from their tenants,
lessees, licensees or concessionaires but not including their gross
receipts) whether on a cash basis or credit, paid or collected, determined
in accordance with GAAP and the Uniform System of Accounts, excluding,
however: (a) funds furnished by Landlord, (b) federal, state and municipal
excise, sales, and use taxes collected directly from patrons and guests or
as a part of the sales price of any goods, services or displays, such as
gross receipts, admissions, cabaret or similar or equivalent taxes and paid
<PAGE>
over to federal, state or municipal governments, (c) gratuities, (d)
proceeds of insurance and Awards, (e) proceeds from sales of furnishings,
fixtures and equipment which are permitted pursuant to the terms of this
Agreement, (f) all loan proceeds from financing or refinancings of the
Hotel or interests therein or components thereof, (g) interest earned on
funds deposited into the Reserve Fund and (h) judgments and awards, except
any portion thereof arising from normal business operations of the Hotel.
1.58 "GROUND LEASE" shall mean that certain Ground Lease between
Massachusetts Port Authority and Logan Harborside Associates II Limited
Partnership, dated as of September 15, 1990, as amended or assigned.
1.59 "GROUND LEASE PAYMENTS" shall mean any and all fees, costs and
expenses, including, without limitation, ground rent payable under the
Ground Lease.
1.60 "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, ordinance or international treaty or amendment 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.); 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 country in which the
Leased Property is located, any state of the country in which the Leased
Property is located, or any political subdivision thereof; or
(d) the presence of which on the Leased Property causes or
materially threatens to cause an unlawful nuisance upon the Leased Property
or to adjacent properties or poses or materially threatens to pose a hazard
to the Leased Property or to the health or safety of persons on or about
the Leased Property; 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, or any Applicable Laws promulgated by any
Government Agencies.
<PAGE>
1.61 "HOTEL" shall mean the hotel being operated on the Leased
Property.
1.62 "HOTEL MORTGAGE" shall mean any Encumbrance placed upon the
Leased Property in accordance with ARTICLE 20.
1.63 "HOTEL MORTGAGEE" shall mean the holder of any Hotel Mortgage.
1.64 "HOTEL STANDARD" shall mean both the operational standards
(for example, staffing, amenities offered to guests, advertising, etc.) and
the physical standards (for example, the quality, condition and utility of
the Fixtures and Leased Personal Property, etc.) such that the Hotel and
all of its facilities and activities are operated in the same manner as is
customary and usual in the operation of a first class hotel, and, in any
event, such that will provide such facilities and services at the Hotel as
are normally provided by operators of hotels of comparable class and
standing consistent with the Hotel's facilities.
1.65 "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.
1.66 "IMPOSITIONS" shall mean collectively, all taxes (including,
without limitation, all taxes imposed under the laws of the State, as such
laws may be amended from time to time, and all ad valorem, sales and use,
value added, single business, gross receipts, transaction privilege, rent
or similar taxes as the same relate to or are imposed upon Landlord, Tenant
or the business conducted upon the Leased Property), 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 (i) any real estate and ad valorem taxes or special
assessments with respect to the Leased Property, (ii) Ground Lease
Payments, (iii) any tax based on income imposed on Landlord, (iv) any
revenue tax of Landlord, (v) any transfer fee or other tax imposed with
respect to the sale, exchange or other disposition by Landlord of the
Leased Property or the proceeds thereof (other than in connection with the
sale, exchange or other disposition to, or in connection with a transaction
involving, Tenant), (vi) any single business, gross receipts tax (other
than a tax on any rent received by Landlord from Tenant unless such gross
receipts tax on such rent is in lieu of any other tax, assessment, levy or
charge otherwise excluded from this definition of Impositions), transaction
privilege, rent or similar taxes as the same relate to or are imposed upon
Landlord, except to the extent that any tax, assessment, tax levy or charge
which is in effect at any time during the Term hereof is totally or
partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (iii) or (iv) preceding is levied, assessed or imposed expressly in
lieu thereof, (vii) 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, (viii) any Impositions that are
enacted or adopted by their express terms as a substitute for any tax that
<PAGE>
would not have been payable by Tenant pursuant to the terms of this
Agreement or (ix) 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 gross negligence or
willful misconduct of Landlord.
1.67 "INCIDENTAL DOCUMENTS" shall mean all of the documents or
agreements entered into in connection with this Agreement.
1.68 "INDEBTEDNESS" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the
obligor's balance sheet as liabilities.
1.69 "INITIAL RESERVE FUND PAYMENT" shall mean the sum set forth on
EXHIBIT A attached hereto.
1.70 "INSURANCE REQUIREMENTS" shall mean all terms of any insurance
policy required by this Agreement, any Hotel Mortgage, or under any Ground
Lease and all requirements of the issuer of any such policy and all orders,
rules and 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.
1.71 "INSURED CASUALTY" shall have the meaning given such term in
SECTION 10.2.1.
1.72 "INTEREST RATE" shall mean on any date, a per annum rate of
interest equal to the lesser of (a) the rate of interest announced by
Citibank, N.A. from time to time in New York City as its "prime" or "base"
rate, as such "prime" or "base" rate may change from time to time plus two
percent (2%) per annum and (b) the maximum rate then permitted under
applicable law.
1.73 "INVENTORY" shall mean all food, beverages and other
consumable items used in the operation of a hotel, such as fuel, soap,
cleaning materials, matches, stationery, brochures, folios and all other
similar items, together with unused reserve stock (as opposed to in-use
operating supplies) of linens, towels, paper goods, china, glassware,
silverware and miscellaneous guest supplies including but not limited to
the items set forth in EXHIBIT C attached hereto, together with all
substitutions and replacements thereof.
1.74 "KEY EMPLOYEE" shall have the meaning given such term in
SECTION 22.17.
1.75 "LAND" shall have the meaning given such term in SECTION
2.1(a).
1.76 "LANDLORD" shall have the meaning given such term in the
preambles to this Agreement.
1.77 "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 (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.
<PAGE>
1.78 "LANDLORD OPERATING EXPENSES" shall mean, in each Fiscal Year
or portion thereof during the term hereof, all expenses for which Landlord
is responsible pursuant to the terms of this Agreement directly
attributable to the operation, repair and/or maintenance of the Leased
Property including, without limitation, property taxes, insurance premiums
and Capital Repairs.
1.79 "LEASE YEAR" shall mean any Fiscal Year or portion thereof,
commencing with the 1998 Fiscal Year, during the Term.
1.80 "LEASED IMPROVEMENTS" shall have the meaning given such term
in SECTION 2.1(b).
1.81 "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, telephone exchange numbers identified with the Leased
Property, and all other transferable intangible property, miscellaneous
rights, benefits and privileges of any kind or character belonging to
Landlord with respect to the Leased Property.
1.82 "LEASED PERSONAL PROPERTY" shall have the meaning given such
term in SECTION 2.1(e).
1.83 "LEASED PROPERTY" shall have the meaning given such term in
SECTION 2.1.
1.84 "LEGAL REQUIREMENTS" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting the
Leased Property or the maintenance, construction, alteration or operation
thereof, whether now or hereafter enacted or in existence, including,
without limitation, (a) all permits, licenses, authorizations, certificates
and regulations necessary to operate the Leased Property for its Permitted
Use, and (b) all covenants, agreements, restrictions and encumbrances
contained in any instruments at any time in force affecting the Leased
Property, including those which may (i) require material repairs,
modifications or alterations in or to the Leased 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 or Landlord's
Affiliates', as applicable, status as a real estate investment trust.
1.85 "LICENSES" shall have the meaning given such term in SECTION
22.15.
1.86 "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.
1.87 "MANAGEMENT AGREEMENT" shall mean the Management Agreement
between Tenant and the Manager with respect to the Leased Premises,
together with all amendments, modifications and supplements thereto.
1.88 "MANAGER" shall have the meaning set forth on EXHIBIT A.
<PAGE>
1.89 "MATERIAL FRANCHISE CHANGE" shall mean that the franchisor
under the Franchise Agreement, if any, or the name of the franchisor is
rebranded, repositioned, terminated, or otherwise subjected to a change in
ownership or control.
1.90 "MEASUREMENT DATE" shall have the meaning given such term in
SECTION 3.1.4.
1.91 "MINIMUM INVENTORY" shall have the meaning set forth on
EXHIBIT C.
1.92 "MINIMUM OPERATING STANDARDS" shall mean the standards of
operation of the Hotel by which Tenant shall operate the Hotel in
conformance with a commercially practicable manner and in conformance with
the Hotel Standard for first class hotels and in such a fashion that
Landlord's valuable interest in the Hotel shall not decrease through such
operations and such that the Hotel shall at no time be operated pursuant to
a lower standard (i.e., quality and reputation) than exists at the
Commencement Date.
1.93 "MINIMUM RENT" shall mean, with respect to each Accounting
Period, the sum set forth on EXHIBIT A attached hereto as increased (but in
no event decreased) by CPI pursuant to SECTION 3.1.4; provided, however,
that Minimum Rent shall be adjusted if, as a result of a partial
Condemnation or a casualty which, in each instance and in the reasonable
judgment of Landlord, after consultation with Tenant, makes it impossible
to restore a portion of the Leased Improvements, by a fraction (i) the
numerator of which is the number of rooms which cannot be restored, and
(ii) the denominator of which is the total number of hotel rooms located in
the Hotel prior to such casualty or partial Condemnation.
1.94 "MINIMUM WORKING CAPITAL" shall mean the sum set forth on
EXHIBIT D attached hereto.
1.95 "NET CASH FLOW" shall mean Gross Revenues MINUS (x) Rent, (y)
Gross Operating Expenses, and (z) income taxes on Tenant's income derived
from the operation of the Leased Property.
1.96 "NET OPERATING INCOME" shall mean in each Fiscal Year or
portion thereof during the term hereof, Rent less Landlord Operating
Expenses.
1.97 "NOTICE" shall mean a notice given in accordance with SECTION
22.10.
1.98 "OFFICER'S CERTIFICATE" shall mean a certificate signed by an
officer of the certifying Entity duly authorized by the president of the
certifying Entity.
1.99 "OPERATING BUDGET" shall have the meaning given such term in
SECTION 17.3.
1.100 "OP UNITS" shall mean limited partnership interests in
Landlord.
1.101 "OTHER INCOME" shall mean all revenue, receipts and income of
any kind, including, but not limited to, interest income, but excluding
interest, earnings, or distributions with respect to the Security Deposit,
the Reserve Fund, or contributions to working capital made by Tenant, of
any kind derived directly or indirectly from or in connection with the
Hotel and included in Gross Revenues other than Room Revenues, Food Sales,
Beverage Sales, and Telephone Revenues.
<PAGE>
1.102 "OVERDUE RATE" shall mean, on any date, a per annum rate of
interest equal to the lesser of the Interest Rate plus two percent (2%) per
annum and the maximum rate then permitted under applicable law.
1.103 "PARENT" shall mean, with respect to Tenant, any Person which
owns directly, or indirectly through one or more Subsidiaries or
Affiliates, five percent (5%) 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, Tenant.
1.104 "PARTICIPATING LEASES" shall mean any and all other leases
executed at any time prior to or during the Term between Tenant, or
Tenant's Parent or Affiliates, and Landlord with regard to the operation
and/or management of hotel properties owned by Landlord.
1.105 "PARTICIPATING RENT" shall have the meaning given such term in
SECTION 3.1.2(a).
1.106 "PAYMENT DATE" shall mean each March 15th and September 15th
of the calendar year.
1.106 "PERMITTED ENCUMBRANCES" shall mean all rights, restrictions,
and easements of record set forth on the applicable owner's or leasehold
title insurance policy issued to Landlord on the date hereof, plus any
other such encumbrances as may have been consented to in writing by
Landlord from time to time.
1.107 "PERMITTED LIENS" shall mean any Liens granted in accordance
with SECTION 21.8(a).
1.108 "PERMITTED TRANSFER" shall have the meaning given such term in
SECTION 22.22.
1.109 "PERMITTED USE" shall mean any use of the Leased Property
permitted pursuant to SECTION 4.1.1.
1.110 "PROHIBITED CASUALTY" shall have the meaning given such term
in SECTION 10.2.1.
1.111 "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.
1.112 "PERSONAL PROPERTY LIMITATION" shall have the meaning given
such term in SECTION 19.1.
1.113 "PROHIBITED TAKING" shall have the meaning given such term in
SECTION 11.1.
1.114 "PURCHASE" shall have the meaning given such term in SECTION
22.22.
1.115 "PURCHASE NOTICE" shall have the meaning given such term in
SECTION 22.22.
1.116 "RECORDS" shall have the meaning given such term in SECTION
7.2.
1.117 "REIT" shall mean LaSalle Hotel Properties.
1.118 "REIT SHARES" shall mean shares of common stock issued by the
REIT.
<PAGE>
1.119 "RENT" shall mean, collectively, the Minimum Rent,
Participating Rent and Additional Charges.
1.120 "REPLACEMENT COST" shall have the meaning given such term in
SECTION 9.2.
1.121 "REQUIRED PURCHASE" shall have the meaning given such term is
SECTION 22.22.
1.122 "RESERVE FUND" shall have the meaning set forth in SECTION
6.3.
1.123 "REVENUE COMPUTATION" shall have the meaning given such term
in EXHIBIT A.
1.124 "REVENUE PERFORMANCE SHORTFALL" shall have the meaning given
such term in SECTION 21.11.
1.125 "RevPAR" shall mean, with respect to a particular Hotel, the
room revenue per available room.
1.126 "RevPAR YIELD INDEX" shall mean the percentage amount obtained
by dividing the RevPAR of the Leased Property by the RevPAR of the Leased
Property's Competitive Set.
1.127 "ROOM REVENUES" shall mean Gross Revenues determined in a
manner consistent with GAAP and the Uniform System of Accounts, from the
rental of guest rooms whether to individuals, groups or transients, at the
Hotel, including, but not limited to (a) the fair market value of goods or
services which have been provided in exchange for rooms under bartering or
trade arrangements, (b) the fair market value of rooms provided under
frequent traveler programs, gift certificate programs or any other similar
programs, (c) the fair market value of any other allowances or commissions
deducted from room rates, including, but not limited to, discounts and
travel agent commissions (items (a)-(c) being allocated to the respective
revenues categories in accordance with the Uniform System of Accounts) and
(d) other Gross Revenues received from cancellation of room reservations,
retained deposits, and other income derived from reservation changes. Room
Revenues shall not include: (a) all sales taxes or any other taxes imposed
on the rental of such guest rooms, and (b) any fees collected for amenities
including, but not limited to, telephone, laundry, movies or concessions
and (c) the value of rooms provided to employees of Landlord, Tenant, the
franchisor under the Franchise Agreement or guests on a complimentary basis
("complementary rooms"); provided, however, to the extent the Complimentary
Rooms (but not including Complimentary Rooms provided pursuant to Section
22.16) exceed two (2%) percent of the aggregate room rentals for a Fiscal
Year, the fair market value of such excess shall not be excluded from Room
Revenues, and such amounts shall be added to Gross Revenues for the last
Accounting Period of the preceding Fiscal Year. All credits, rebates,
refunds and credit card chargebacks, except to the extent that such Room
Revenues were originally collected prior to the Commencement Date, shall be
deducted from Room Revenues.
1.128 "SEC" shall mean the United States of America Securities and
Exchange Commission or any successor agency.
1.129 "SALE NOTICE" shall have the meaning given such term in
SECTION 22.22.
1.130 "SECURITY DEPOSIT" shall have the meaning given such term in
SECTION 15.1.
<PAGE>
1.131 "SOLVENT" shall mean, as to any Person, that (a) the sum of
the assets of such Person, at a fair valuation, exceeds its liabilities,
including contingent liabilities, (b) such Person has sufficient capital
with which to conduct its business as presently conducted and as proposed
to be conducted and (c) such Person has not incurred debts, and does not
intend to incur debts, beyond its ability to pay such debts as they mature.
For purposes of this definition, "DEBT" means any liability on a claim, and
"CLAIM" means (a) a right to payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or
(b) a right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy
is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured. With respect to any such contingent
liabilities, such liabilities shall be computed in accordance with GAAP and
the Uniform System of Accounts at the amount which, in light of all the
facts and circumstances existing at the time, represents the amount which
can reasonably be expected to become an actual or matured liability.
1.132 "STATE" shall mean the state or district in which the Leased
Property is located.
1.133 "SUBORDINATED CREDITOR" shall mean any creditor of Tenant
which is a party to a Subordination Agreement in favor of Landlord.
1.134 "SUBORDINATION AGREEMENT" shall mean any agreement executed by
a Subordinated Creditor pursuant to which the payment and performance of
Tenant's obligations to such Subordinated Creditor are subordinated to the
payment and performance of Tenant's obligations to Landlord under this
Agreement.
1.135 "SUBSIDIARY" shall mean, with respect to any Person, any
Entity (a) in which such Person owns directly, or indirectly through one or
more Subsidiaries, fifty-one percent (51%) 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).
1.136 "SUCCESSOR LANDLORD" shall have the meaning given such term in
SECTION 20.2.
1.137 "SUPERIOR LANDLORD" shall have the meaning given such term in
SECTION 20.2.
1.138 "SUPERIOR LEASE" shall have the meaning given such term in
SECTION 20.2.
1.139 "SUPERIOR MORTGAGE" shall have the meaning given such term in
SECTION 20.2.
1.140 "SUPERIOR MORTGAGEE" shall have the meaning given such term in
SECTION 20.2.
1.141 "TAX LAW CHANGE" shall mean a change in the Code (including,
without limitation, a change in the Treasury regulations promulgated
thereunder) or in the judicial or administrative interpretations of the
Code, which in the opinion of Landlord's counsel will permit Landlord or an
Affiliate thereof to operate the Hotel as a hotel without adversely
affecting the REIT's qualification for taxation as a real estate investment
trust under the applicable provisions of the Code.
<PAGE>
1.142 "TELEPHONE REVENUES" shall mean all revenues, receipts and
income of any kind derived from the use of telephone facilities by guests
of the hotel, including, without limitation, revenues from local and long
distance calls, service charges and commissions received from pay stations.
1.143 "TENANT" shall have the meaning given such term in the
preambles to this Agreement.
1.144 "TENANT'S ASSETS" shall mean, when calculating Tenant's "net
worth" hereunder, the following items owned by Tenant free and clear of all
liens, encumbrances, security interests and restrictions, other than any
security interest granted to Landlord pursuant to the terms of this
Agreement, (a) working capital available for the day to day operations of
the Hotel; (b) investment grade marketable securities; (c) REIT Shares; (d)
OP Units; and (e) coinvestments made by the Tenant with the Landlord in
other hotel projects.
1.145 "TENANT'S PERSONAL PROPERTY" shall mean (a) all consumables
located at the Hotel and (b) all personal property of Tenant, if any, owned
by Tenant 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 acquired at the expense of Tenant,
other than any items included within the definition of Fixtures or Leased
Personal Property.
1.146 "TERM" shall mean the Fixed Term.
1.147 "THIRD PARTY" shall have the meaning given such term in
SECTION 22.22.
1.148 "THIRD PARTY NOTICE" shall have the meaning given such term in
SECTION 22.22.
1.149 "TRANSFEROR" shall have the meaning given such term in SECTION
22.22.
1.150 "UNIFORM SYSTEM OF ACCOUNTS" shall mean A UNIFORM SYSTEM OF
ACCOUNTS FOR HOTELS, Ninth Revised Edition, 1996, as published by the Hotel
Association of New York City, as same may be revised, amended or
supplemented.
1.151 "UNSUITABLE FOR ITS PERMITTED USE" shall mean a state or
condition of the Hotel such that (a) following any damage or destruction
involving the Hotel, the Hotel cannot be operated in the good faith
judgment of Tenant or the Manager 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 six (6)
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 Leased Property following such damage or
destruction, or (b) as the result of a partial taking by Condemnation, the
Hotel cannot be operated, in the good faith judgment of Tenant or the
Manager on a commercially practicable basis for its Permitted Use.
1.152 "WORK" shall have the meaning given such term in SECTION
10.2.2.
<PAGE>
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 to use all of the
following (collectively, the "LEASED PROPERTY"):
(a) those certain tracts, pieces and parcels of land, as
more particularly described in EXHIBIT E, 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 garages, 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, including any Ground Leases,
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or incorporated into the
Leased Improvements, including, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which, to the
maximum extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Tenant's Personal Property (collectively,
the "FIXTURES");
(e) all machinery, equipment, furniture, furnishings,
moveable walls or partitions, 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,
(including, but not limited to, computers, beds, bureaus, chiffonniers,
chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, bedspreads,
shower curtains, linens, towels, facecloths, bathmats, napkins,
tablecloths, chinaware, glassware, flatware, uniforms, carpeting, drapes,
draperies, curtains, shades, venetian blinds, screens, paintings, hangings,
pictures, divans, couches, luggage carts, luggage racks, stools, sofas,
pillows, blankets, foodcarts, cookware, dry cleaning facilities, dining
room wagons, keys or other entry systems, bars, bar fixtures, liquor and
other drink dispensers, icemakers, radios, television sets, video machines,
intercom and paging equipment, electric and electronic equipment, dictating
equipment, private telephone systems, communication equipment, medical
equipment, umbrellas and other shade equipment, barbecues, potted plants,
plants, laundry machines, tools, machinery, switchboards, vacuum cleaning
systems, floor brackets, electrical signs, bulbs, bells, cabinets, lockers,
shelving, spotlighting equipment, dishwashers, garbage disposals, washers
and dryers, boats, motor scooters, bicycles, vehicles, exercise machines,
sporting goods and other recreational equipment, other customary hotel
equipment and other tangible property of every kind and nature whatsoever)
and all modifications, replacements, alterations and additions to such
personal property, except items, if any, included within the category of
Fixtures together with any interests Landlord may have in leases with
respect to all of the foregoing (collectively, the "LEASED PERSONAL
PROPERTY");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space (including any security
deposits held by Tenant or the Manager pursuant thereto) in the Leased
Improvements to tenants thereof.
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, and subject to the rights of parties in
possession, the existing state of title, including all covenants,
conditions, restrictions, reservations, mineral leases, concessions,
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.
2.3 FIXED TERM. The term of this Agreement (the "FIXED TERM") shall
commence on the Commencement Date and shall expire on the Expiration Date.
ARTICLE 3
RENT
3.1 RENT. Tenant shall pay, in Dollars without offset, abatement,
demand or deduction (unless otherwise expressly provided in this
Agreement), Minimum Rent and Participating 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. Minimum Rent and Participating Rent
shall be adjusted (by amendment to this Agreement) upon (i) the expansion
of the number of rooms operated at the Hotel, (ii) the increase in area of
any meeting rooms or similar facilities located at the Hotel, (iii) a
material increase in the facilities available at the Hotel, (iv)
significant renovation of the Hotel to the extent same effectuates a
material repositioning of the Hotel, or (v) a Material Franchise Change.
<PAGE>
3.1.1 MINIMUM RENT. For each Accounting Period or portion
thereof elapsed prior to the last day of the Accounting Period immediately
preceding the month in which a Payment Date occurs, Tenant shall pay
Minimum Rent accrued but unpaid during such period in arrears prior to
11:00 a.m. New York time on the next succeeding Payment Date.
3.1.2 PARTICIPATING RENT.
(a) AMOUNT. On each Payment Date during the Term, Tenant
shall pay in arrears prior to 11:00 a.m. New York time on such Payment Date
additional rent ("PARTICIPATING RENT") accrued but unpaid with respect to
such prior Fiscal Quarters or portions thereof elapsed prior to such
Payment Date, pursuant to this Agreement, in an amount, not less than zero,
as set forth on EXHIBIT A. In calculating Participating Rent, Gross
Revenues attributable to hotel packages or certificates including, but not
limited to, frequent traveler programs, gift certificate programs, all
inclusive packages or certificates, or other similar programs or packages,
shall be allocated to the respective revenues categories in accordance with
the Uniform System of Accounts. The obligation to pay Participating Rent
shall survive the expiration or earlier termination of the Term, and a
final reconciliation, taking into account, among other relevant
adjustments, any adjustments which are accrued after such expiration or
termination date but which related to Participating Rent accrued prior to
such termination date, shall be made not later than sixty (60) days after
such expiration or termination date.
(b) OFFICERS CERTIFICATE. An Officer's Certificate, in
form and substance reasonably acceptable to Landlord, setting forth the
calculation of Participating Rent due and payable for the applicable Fiscal
Quarters shall be delivered to Landlord with each payment of Participating
Rent.
(c) RECONCILIATION OF PARTICIPATING RENT. On or before 70
days from the commencement of each year, commencing in 1999, Tenant shall
deliver to Landlord an Officer's Certificate, in form and substance
reasonably acceptable to Landlord, setting forth the Gross Revenues for the
Leased Property for such preceding Lease Year, together with an audit of
Tenant's revenues for the preceding Lease Year, conducted by a nationally
recognized firm of independent certified public accountants proposed by
Tenant and approved by Landlord, which approval shall not be unreasonably
withheld or delayed. In the event that Landlord and Tenant are unable to
agree on any aspect of the reconciliation of Participating Rent, such
matter shall be referred to arbitration as provided in ARTICLE 23. If the
annual Participating 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 date that such payment
was due 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 Participating Rent for such preceding Lease Year as shown in the
Officer's Certificate is less than the amount previously paid with respect
thereto by Tenant, provided that no Event of
<PAGE>
Default shall have occurred and be continuing, Landlord shall
grant Tenant a credit against Participating Rent next coming due in the
amount of such difference, plus interest at the Interest Rate. 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, within fifteen (15) Business Days of the date of
determination that such credit is due to Tenant, the unapplied balance of
such credit to Tenant, plus interest at the Interest Rate.
(d) CONFIRMATION OF PARTICIPATING 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 and the Uniform System of Accounts, which will
accurately record all Gross Revenues and revenue categories specified in
EXHIBIT A and Tenant shall retain, for at least seven (7) years after the
expiration of each Lease Year, or such longer period as may be required by
Applicable Laws, reasonably adequate records conforming to such accounting
system showing all Gross Revenues for such Lease Year. Landlord, at its
own expense except as provided hereinbelow, shall have the right,
exercisable by Notice to Tenant within three (3) years 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 and the Manager'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 Participating Rent, Tenant
shall forthwith pay to Landlord the amount of the deficiency, together with
interest at the Interest Rate, from the date such payment should have been
made to the date of payment thereof. If Landlord did not receive at least
ninety-five percent (95%) of the Participating 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
Participating Rent for any Lease Year than was due hereunder, provided no
Event of Default has occurred and is continuing, Landlord shall grant
Tenant a credit as provided in subparagraph (c) above. Any proprietary
information obtained by Landlord with respect to Tenant or the Manager
pursuant to the provisions of this Agreement shall be treated as
confidential, except that such information may be used, subject to
appropriate confidentiality safeguards, in any litigation between the
parties and except further that Landlord may disclose such information to
its prospective lenders, provided that Landlord shall direct and obtain the
agreement of such lenders to maintain such information as confidential.
The obligations of Tenant and Landlord contained in this SECTION 3.1.2
shall survive the expiration or earlier termination of this Agreement.
3.1.3 ADDITIONAL CHARGES. In addition to the Minimum Rent and
Participating Rent payable hereunder, Tenant shall pay to the appropriate
parties and discharge as and when due and payable the following
(collectively, "ADDITIONAL CHARGES"):
<PAGE>
(a) IMPOSITIONS. Subject to ARTICLE 8 relating to
permitted contests, Tenant shall pay, or cause to be paid, all Impositions
on Tenant's Leased Property 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 real estate taxes on the
Leased Property, and all taxes due in respect of Landlord's income, gross
receipts, sales and use, single business, transaction privilege, rent, ad
valorem, franchise taxes and taxes on its capital stock, and Tenant, at
Landlord's expense, shall, to the extent required or permitted by
Applicable Laws, cause Manager to prepare and file all tax returns and pay
all taxes due in respect of real estate and personal property taxes,
levies, assessments and similar charges on or relating to the Leased
Property, and Tenant, at Tenant's sole cost and 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.
Landlord shall give prompt Notice to Tenant of all Impositions payable by
Tenant hereunder of which Landlord at any time has knowledge; PROVIDED,
HOWEVER, that Landlord's failure to give any such notice shall in no way
diminish Tenant's obligation hereunder to pay such Impositions (except that
Landlord shall be responsible for any interest or penalties incurred as a
result of Landlord's failure promptly to forward the same).
<PAGE>
(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 and all amounts payable
under or with respect to the Management Agreement and all agreements to
indemnify Landlord under SECTIONS 4.3.2 AND 9.7.
(e) GROSS OPERATING EXPENSES. Tenant shall pay or cause
to be paid all Gross Operating Expenses in connection with the Leased
Property.
(f) 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 sixty (60) days 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
Additional Charges that are attributable to any period after the Term of
this Agreement.
(g) REIMBURSEMENT FOR GROUND LEASE PAYMENTS, HOTEL
MORTGAGE PAYMENTS, OR OTHER EXPENSES. If Tenant pays or causes to be paid
Ground Lease Payments, Hotel Mortgage Payments, Reserve Payments or other
expenses of Landlord to the extent such payment is required by any Hotel
Mortgage or Management Agreement, Landlord shall reimburse Tenant for such
payments simultaneously with the payment of Rent by Tenant.
If Tenant shall fail to pay any of the amounts payable under
paragraphs (a) through (e), above, Landlord may, upon ten (10) days notice
to Tenant (which notice may be oral), pay such charges, together with
interest and penalties due with respect thereto, and Tenant shall reimburse
Landlord therefor together with interest at the Interest Rate, upon demand,
as Additional Charges.
3.1.4 CPI ADJUSTMENTS. For each Lease Year during the Term
beginning with the Lease Year commencing January 2001 the Minimum Rent then
in effect, the Annual Room Revenues First Break Point, the Annual Room
Revenues Second Break Point (each as defined in EXHIBIT A and together, the
"ANNUAL ROOM REVENUES BREAK POINTS"), the Annual Food and Beverage Sales
First Break Point, the Annual Food and Beverage Sales Second Break Point,
(each as defined in EXHIBIT A and together, the "ANNUAL FOOD AND BEVERAGE
SALES BREAK POINTS"), the Annual Telephone Revenues First Break Point, the
Annual Telephone Revenues Second Break Point (each as defined in EXHIBIT A
and together, the "ANNUAL TELEPHONE REVENUES BREAK POINTS"), the Annual
Other Income First Break Point, the Annual Other Income Second Break Point
(each as defined in EXHIBIT A and together, the "ANNUAL OTHER INCOME BREAK
POINTS), THEN INCLUDED IN THE REVENUES COMPUTATION SHALL BE INCREASED AS
FOLLOWS:
(A) FOR THE LEASE YEAR COMMENCING JANUARY 1, 2001, AND FOR
EACH LEASE YEAR THEREAFTER DURING THE TERM, THE CPI IN EFFECT FOR THE MONTH
OF DECEMBER IMMEDIATELY PRECEDING THE NEW LEASE YEAR (THE "MEASUREMENT
DATE") shall be divided by the CPI in effect for the month of December in
the prior Fiscal Year;
<PAGE>
(b) The new Minimum Rent for the Lease Year commencing
January 2001 and for each Lease Year thereafter shall be the product of the
Minimum Rent in effect in the most recently ended Lease Year and the
quotient obtained under subparagraph (a) above;
(c) The new Annual Room Revenues Break Points in the
Revenues Computation for the Lease Year commencing January 2001 and for
each Lease Year thereafter shall be the product of the Annual Room Revenues
Break Points in effect in the most recently ended Lease Year and the
quotient obtained in subparagraph (a) above;
(d) The new Annual Food and Beverage Sales Break Points in
the Revenues Computation for the Lease Year commencing January 2001 and for
each Lease Year thereafter shall be the product of the Annual Food and
Beverage Sales Break Points in effect in the most recently ended Lease Year
and the quotient obtained in subparagraph (a) above;
(e) The new Annual Telephone Revenues Break Points in the
Revenues Computation for the Lease Year commencing January 2001 shall be
the product of the Annual Telephone Revenues Break Points in effect for the
most recently ended Lease Year and the quotient obtained in subparagraph
(a) above;
(f) The new Annual Other Income Break Points in the
Revenues Computation for the Lease Year commencing January 2001 and for
each Lease Year thereafter shall be the product of the Annual Other Income
Break Points in effect in the most recently ended Lease Year and the
quotient obtained in subparagraph (a) above.
Adjustments calculated as set forth above in the Minimum Rent, the
Annual Room Revenues Break Points, the Annual Food and Beverage Sales Break
Points, the Annual Telephone Revenues Break Points, and the Annual Other
Income Break Points, shall be effective on the first day of each Lease Year
to which such adjusted amounts apply. If Rent is paid prior to the
determination of the amount of any adjustment to Minimum Rent, the Annual
Room Revenues Break Points, the Annual Food and Beverage Sales Break
Points, the Annual Telephone Revenues Break Points, and the Annual Other
Income Break Points applicable for such period, whether because of a delay
in the publication of the CPI for the Measurement Date or because of any
other reason, payment adjustments for any shortfall in or overpayment of
Rent paid shall be made with the first Minimum Rent and Participating Rent
payments due after the amount of the adjustments are determined. If (1) a
significant change is made in the number or nature (or both) of items used
in determining the CPI, or (2) the CPI shall be discontinued for any
reason, the Bureau of Labor Statistics shall be requested to furnish a new
index comparable to the CPI, together with information which will make
possible a conversion to the new index in computing the adjusted Minimum
Rent, the Annual Room Revenues Break Points, the Annual Food and Beverage
Sales Break Points, the Annual Telephone Revenues Break Points, and the
Annual Other Income Break Points hereunder. If for any reason the Bureau
of Labor Statistics does not furnish such an index and such information,
the parties will instead mutually select, accept and use such other index
or comparable statistics on the cost of living in various cities that is
computed and published by an agency of the United States of America or a
responsible financial periodical of recognized authority. In no event
shall the Minimum Rent, the Annual Room Revenues Break Points, the Annual
Food and Beverage Sales Break Points, the Annual Telephone Revenue Break
Points, or the Annual Other Income Break Points be reduced as a result of
any changes in the CPI or changes to the calculation of CPI.
<PAGE>
3.2 LATE PAYMENT OF RENT, ETC. If any installment of Minimum Rent,
Participating 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 Interest 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, except as expressly provided in SECTION 3.1.3(a), Tenant shall
promptly pay and discharge, as Additional Charges, every fine, penalty,
interest and cost which may be 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 Participating Rent.
3.3 NET LEASE. Subject to the terms hereof, the Rent shall be
absolutely net to Landlord so that this Agreement shall yield to Landlord
the full amount of the installments or amounts of the Rent throughout the
Term, subject to any other provisions of this Agreement which expressly
provide otherwise, including those provisions for adjustment or abatement
of such Rent.
3.4 NO TERMINATION, ABATEMENT, ETC. Except as otherwise specifically
provided in this Agreement, each of Landlord and Tenant, to the maximum
extent permitted by law, shall remain bound by this Agreement in accordance
with its terms and shall not take any action without the consent of the
other to modify, surrender or terminate this Agreement. In addition,
except as otherwise expressly provided in this Agreement, Tenant shall not
seek, or be entitled to, any abatement, deduction, deferment or reduction
of the Rent, or set-off against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a)
any damage to or destruction of the Leased Property or any portion thereof
from whatever cause or any Condemnation; (b) 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; (c) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Landlord or any assignee or transferee of Landlord;
or (d) 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 gross
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, to (a) modify, surrender or terminate this Agreement or quit or
surrender the Leased Property or any portion thereof or (b) 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 each party 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
<PAGE>
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.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 PERMITTED USE.
4.1.1 PERMITTED USE. Tenant shall, at all times during the
term and at any other time that Tenant shall be in possession of the Leased
Property, continuously use and operate, and cause the Manager to use and
operate, the Leased Property as a commercial hotel which meets or exceeds
the Hotel Standard and any uses incidental thereto. Subject to SECTION
16.3, Tenant shall not use (and shall cause the Manager not to use) the
Leased Property or any portion thereof for any other use without the prior
written consent of Landlord which may be withheld or granted in Landlord's
sole and absolute discretion. No use shall be made or permitted to be made
of the Leased Property and no acts shall be done thereon which will cause
the cancellation of any insurance policy covering the Leased 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 the Leased 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 underwriters'
regulations. Tenant shall, at its sole cost, comply (or cause the Manager
to comply) with all Insurance Requirements for which Tenant is responsible
pursuant to ARTICLES 9 AND 10 hereof. Tenant shall not take or omit to
take (and Tenant shall cause the Manager not to take or omit to take) any
action, the taking or omission of which materially impairs the value or the
usefulness of the Leased Property or any part thereof for its Permitted Use
in accordance with the Franchise Agreement and the Hotel Standard.
4.1.2 NECESSARY APPROVALS. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain, and shall cause
the Manager to obtain and maintain, all approvals and Licenses necessary to
use and operate, for its Permitted Use, the Leased Property and the Hotel
located thereon under applicable law, and, if requested by Landlord, shall
obtain, in Tenant's name, any liquor licenses required for the use and
operation of the Hotel.
4.1.3 LAWFUL USE, ETC. Tenant shall not, and shall cause the
Manager not to, 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 cause the Manager not to, commit or suffer to be committed
any waste on the Leased Property, or in the Hotel, nor shall Tenant cause
or permit any unlawful nuisance thereon or therein. Except as expressly
provided in SECTION 8.1, Tenant shall not, and shall cause the Manager not
to, suffer nor permit the Leased Property, or any portion thereof, to be
used in such a manner as (a) might reasonably impair Landlord's title
thereto or to any portion thereof, or (b) 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.
<PAGE>
4.2 COMPLIANCE WITH LEGAL/INSURANCE REQUIREMENTS, ETC. Subject to the
provisions of ARTICLES 5, 6, 9 AND 10 hereof, Tenant, at its sole expense,
shall (or shall cause the Manager to) comply with 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 Ground Lease affecting the Leased Property, and
procure, maintain and comply with all appropriate 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 (and shall cause the Manager not to) 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 cause 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 cause 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 "Community Right to Know" report which
is required to be filed by Tenant or the Manager with respect to the Leased
Property pursuant to any Applicable Law, (c) transmit to Landlord copies of
any citations, orders, notices or other governmental communications
received by Tenant or the Manager or their respective 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) observe and comply (and cause
the Manager to 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) pay or otherwise dispose
of any fine, charge or Imposition related thereto, unless Tenant or the
Manager shall contest the same in good faith and by appropriate proceedings
and the right to use and the value of the Leased Property is not materially
and adversely affected thereby. 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 the exceptions set forth in clauses (i) and (ii) of SECTION
4.3.2 and subject to Tenant's and the Manager's right to contest any Claim
with respect to the same in accordance with ARTICLE 8, Tenant shall take
(and shall cause the Manager to take) all actions and incur any and all
expenses, as may be reasonably necessary and as may be required by any
Government Agency, (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.
<PAGE>
4.3.2 INDEMNIFICATION OF LANDLORD. Tenant shall protect,
indemnify and hold harmless Landlord, the REIT, Advisors, and each Hotel
Mortgagee, their trustees, officers, agents, employees and beneficiaries,
and any of their respective successors or assigns with respect to this
Agreement (collectively, the "INDEMNITEES" and, individually, an
"INDEMNITEE") for, from and against any and all debts, liens, claims,
causes of action, administrative orders or notices, costs, fines, penalties
or expenses (including, without limitation, reasonable attorney's fees and
expenses) imposed upon, incurred by or asserted against any Indemnitee
resulting from, either directly or indirectly, the presence during the Term
(or any other time Tenant shall be in possession of the Leased Property)
in, upon or under the soil or ground water of the Leased Property or any
properties surrounding the Leased Property of any Hazardous Substances in
violation of any Applicable Law or otherwise except to the extent the same
arise (i) from the gross negligence or willful misconduct of Landlord or
any other Indemnitee or (ii) the existence thereof on the Leased Property
prior to the Commencement Date. 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 (with counsel reasonably
acceptable to Landlord), at Tenant's sole cost and expense, of any
indemnification duties set forth herein. Tenant shall, upon demand, pay to
Landlord, as an Additional Charge, any cost, expense, loss or damage
(including, without limitation, reasonable attorneys' fees) incurred by
Landlord and arising from a failure of Tenant strictly to observe and
perform the requirements of this SECTION 4.3, which amounts shall bear
interest from the date ten (10) 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 OBLIGATIONS. Tenant shall, at its sole cost and
expense, or shall cause the Manager to, keep the Leased Property and all
private roadways, sidewalks and curbs appurtenant thereto (and Tenant's
Personal Property, if any) in good order and repair, subject to ordinary
wear and tear (whether or not the need for such repairs occurs as a result
of Tenant's or the Manager's use, any prior use, the elements or the age of
the Leased Property or Tenant's Personal Property, if any, or any portion
thereof), and shall promptly make (or cause the Manager to make) all
necessary and appropriate repairs and replacements thereto of every kind
and nature, whether interior or exterior, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition existing prior
to the commencement of the Term (concealed or otherwise); provided,
however, Tenant shall
<PAGE>
not be obligated to make Capital Expenditures with respect to the
Leased Property. All repairs shall be made in a good, workmanlike manner,
consistent with the Manager's and industry standards for like hotels in
like locales, in accordance with all Applicable Laws relating to any such
work. Tenant shall not take or omit to take (and shall cause the Manager
not to 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 part thereof for its Permitted Use in accordance
with the Franchise Agreement, the Hotel Standard, and the Ground Lease.
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
Tenant's obligations with respect to Hazardous Substances are as set forth
in SECTION 4.3.
5.1.2 LANDLORD'S OBLIGATIONS.
(a) Except as otherwise expressly provided in SECTIONS
5.1.2(B) AND 10.2.1, or as otherwise required under the Ground Lease,
Landlord shall not, under any circumstances, be required to build or
rebuild any improvement on the Leased Property, or to make any repairs
(except for structural repairs), replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether
ordinary or extraordinary, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, or to maintain the Leased
Property in any way. 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 Tenant is required to make any expenditure in
connection with any Capital Repair which is required as a result of a fire,
any other casualty or any other events, circumstances or conditions which
threaten the safety or physical well-being of the Hotel's guests or
employees or which involve the risk of material property damage or material
loss to the Hotel or which are required to prevent a material and
detrimental economic loss to the Hotel (collectively, "EMERGENCY REPAIRS")
and the amount of such expenditures exceeds the amount on deposit in the
Reserve Fund, Tenant may, at its election, give Landlord Notice thereof,
which Notice shall set forth, in reasonable detail, the nature of the
required Emergency Repair, 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 five (5) Business Days after such Notice, subject to
and in accordance with the applicable provisions of ARTICLE 6, disburse or,
if costs for Emergency Repairs have already been incurred by Tenant,
reimburse any funds necessary to complete Emergency Repairs which are in
excess of the amount on deposit in the Reserve Fund to Tenant (or, if
Tenant shall so elect, directly to the Manager or any other Person
performing the required work).
<PAGE>
5.1.3 NONRESPONSIBILITY OF LANDLORD, ETC. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting
with Tenant with respect to the Leased Property, or any part thereof, are
hereby charged with notice that liens on the Leased Property or on
Landlord's interest therein are expressly prohibited and that they must
look solely to Tenant to secure payment for any work done or material
furnished by Tenant, the Manager 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 in any way, it being expressly
understood that Landlord's estate shall not be subject to any such
liability.
5.2 TENANT'S PERSONAL PROPERTY. Subject to the terms of this
Agreement, 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 Legal Requirements and Insurance Requirements
and otherwise in accordance with customary practice in the industry for the
Permitted Use and all of such 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 on, or in connection with, the
Leased Property which belongs to any Person 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. Upon termination of
the Term, Tenant shall deliver all of Tenant's Personal Property free of
all liens and/or encumbrances to Landlord.
5.3 SURRENDER. Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate, surrender, and deliver to Landlord the
following: (i) the Leased Property, (ii) the Tenant's Personal Property,
(iii) the Leased Personal Property, (iv) the Minimum Inventory, and (v) the
Minimum Working Capital. Items (i) through (iv) shall be delivered in
substantially the same condition as such items were in on the Commencement
Date, subject to ordinary wear and tear and Capital Expenditures for which
Landlord is responsible, and except as repaired, rebuilt, restored, altered
or added to as permitted or required by the provisions of this Agreement
(and casualty and Condemnation, in the event that this Agreement is
terminated following a casualty or total Condemnation in accordance with
ARTICLE 10 or ARTICLE 11). 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. After the Expiration Date or the
earlier termination of this Agreement, Landlord agrees to honor all
reservations and bookings made by Tenant in accordance with the Hotel
Standard and reasonable commercial practice.
<PAGE>
5.4 MANAGEMENT AGREEMENT. Landlord shall have the right to approve
any replacement Manager or replacement Management Agreement, in its sole
and absolute discretion. Tenant shall, at its sole cost and expense,
perform all of the obligations of "Owner" under the Management Agreement.
Tenant or Manager shall be the employer with respect to any and all
employees located at the Leased Property. Tenant shall, at all times,
direct the Manager to perform all of the Manager's obligations under the
Management Agreement. Tenant shall not amend or modify the Management
Agreement without Landlord's prior written consent, which consent shall not
unreasonably be withheld, delayed or conditioned. Tenant shall not take
any action, grant any consent, or, except as provided in the Management
Agreement, permit any action under the Management Agreement without the
prior written consent of Landlord, which consent will not be unreasonably
withheld. Except as provided in the Management Agreement, Tenant shall
not, without the Landlord's written approval, which approval may be
withheld or granted in Landlord's sole and absolute discretion, agree to:
(i) any change in the Manager; (ii) any change in the Management Agreement;
(iii) terminate the Management Agreement; or (iv) permit the Manager to
assign the Management Agreement. If Landlord shall perform any obligations
of "Owner" under the Management Agreement (which Landlord may do subject to
SECTION 12.5), the cost of such performance shall be payable, upon demand,
by Tenant to Landlord with interest accruing from the date which is ten
(10) days after the demand date at the Overdue Rate and Landlord shall have
the same rights and remedies for failure to pay such costs on demand as for
Tenant's failure to pay Minimum Rent.
5.5 INTENTIONALLY DELETED.
5.6 MINIMUM INVENTORY. On the Commencement Date and thereafter
during the Term, Tenant shall, at its sole cost and expense, furnish and
maintain at the Leased Property all Inventory necessary or desirable for
the operation of the Leased Property in accordance with the provisions of
this Agreement, the Franchise Agreement, the Hotel Standard and reasonable
commercial practice. On the Commencement Date and at the commencement of
each calendar year, Tenant shall submit to Landlord a detailed list of all
Inventory. Tenant, at its sole cost and expense, shall repair, maintain
and replace the Inventory so that the greater of (x) the Minimum Inventory,
or (y) the remaining Inventory, is delivered to Landlord on the date of
expiration or the earlier termination of this Agreement.
<PAGE>
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 IMPROVEMENTS TO THE LEASED PROPERTY. Except as provided in the
Annual Budget, or unless otherwise provided in the Management Agreement,
Tenant shall not make, construct or install (and shall cause the Manager
not to construct or install) any Capital Repairs 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 Legal Requirement, Insurance Requirement, the Franchise
Agreement, or the Ground Lease applicable to the Leased Property; (b) such
Capital Repairs will not affect the structural integrity of the Leased
Improvements or adversely affect any of the mechanical or electrical
systems of the Leased Improvements; (c) such Capital Repairs are to be
completed prior to the expiration of the Term in a good and workmanlike
manner; (d) such Capital Repairs do not reduce the value of the Leased
Improvements; (e) no Event of Default has occurred and is existing; and (f)
Landlord shall have received an Officer's Certificate certifying as to the
satisfaction of the conditions set out in clauses (a) through (e) above;
PROVIDED, HOWEVER, that no such consent shall be required in the event an
Emergency Repair is required. No Capital Repair shall be made which would
tie in or connect any Leased Improvement 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 without Landlord's prior written consent, which consent may be
withheld or granted in Landlord's sole and absolute discretion. Tenant
shall not finance, and shall cause the Manager not to 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 and absolute
discretion. Any such improvements shall, upon the expiration or sooner
termination of this Agreement, remain or pass to and become the property of
Landlord, free and clear of all encumbrances other than Permitted
Encumbrances.
6.2 SALVAGE. Any sums received from the sale of any and all
materials or property, real or personal (collectively "SALVAGE"), shall be
deposited into the Reserve Fund.
6.3 RESERVE FUND. Tenant or Manager shall establish a reserve
account (the "Reserve Fund") in accordance with the terms of the Management
Agreement. Such funds shall be made available by Landlord for Capital
Expenditures set forth in the Annual Budget, Emergency Repairs, and to fund
the replacement or refurbishment of FF&E; provided, however, that Tenant
shall not use any sums in the Reserve Fund to purchase property (other than
"real property" within the meaning of Treasury Regulations Section 1.856
3(d)) to the extent that doing so would cause the Landlord to recognize
income other than "rents from real property" as defined in Section 856(d)
of the Code. All Capital Repairs shall be located on the Land and shall be
owned by Landlord subject to the provisions of this Agreement. Tenant may
not make any Capital Repair which will increase the gross square footage of
the Leased Improvements without the prior written consent of Landlord,
which consent may be withheld or granted in Landlord's sole and absolute
discretion. Upon the Expiration Date or earlier termination of this
Agreement, any funds remaining in the Reserve Fund shall remain the
property of Landlord.
<PAGE>
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, (h)
Landlord Liens and (i) sewer and public utility charges incurred in the
ordinary course of business, so long as (x) the same are not yet due and
payable, or (y) are being contested in accordance with ARTICLE 8.
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 a security interest in and an express
contractual lien upon Tenant's Personal Property, and 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 Leased Property (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 a Default or 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. Tenant hereby grants Landlord an
irrevocable limited power of attorney, coupled with an interest, to execute
all such financing statements in Tenant's name, place and stead. The
security interest herein granted is in addition to any statutory lien for
the Rent.
<PAGE>
ARTICLE 8
PERMITTED CONTESTS
8.1 PERMITTED CONTESTS. Subject to and in accordance with the
requirements of any Hotel Mortgage, 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, deed of trust, or Ground Lease,
encumbering the Leased Property or any interest therein or result in or
reasonably be expected to result in a lien attaching to the Leased
Property, (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, without
limitation, 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 may be oral), pay such charges, together with
interest and penalties due with respect thereto, and Tenant shall reimburse
Landlord therefor, upon demand, as Additional Charges.
<PAGE>
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 GENERAL INSURANCE REQUIREMENTS. (i) Tenant shall, or shall cause
Manager to, subject to Landlord's prior approval, not to be unreasonably
withheld, at Tenant's sole cost and expense, at all times during the Term
keep the Leased Property and all property located therein or thereon,
insured against the risks and in the amounts as follows and shall maintain
the following insurance on, or with respect to, the Leased Property:
(a) Commercial general liability insurance, including
bodily injury and property damage (on an occurrence basis and on a 1994 1SO
CGL form or on a form otherwise maintained by similarly situated tenants,
including, without limitation, liquor liability exposure, broad form
contractual liability, independent contractor's hazard and completed
operations coverage) in an amount not less than Fifty Million Dollars
($50,000,000.00) per occurrence which limit can be obtained through a
combination of primary and umbrella coverage;
(b) Worker's compensation insurance or other similar
insurance which may be required by Government Agencies or Legal
Requirements;
(c) Such additional insurance as may be reasonably
required, from time to time, by Landlord, any Hotel Mortgagee, or under the
Ground Lease, and which is customarily carried by comparable lodging
properties in the area;
(d) Innkeeper's legal liability insurance covering
property of guests while on the Leased Property for which Landlord is
legally responsible with a limit of not less than $1,000 in any one
occurrence or $25,000 annual aggregate; and
(e) Safe deposit box legal liability insurance covering
property of guests while in a safe deposit box on the Leased Property for
which Landlord is legally responsible with a limit of not less than $25,000
in any one occurrence.
(f) Comprehensive form vehicle liability insurance for
owned, non-owned, and hired vehicles used in connection with the operation
of the Leased Property, in the amount of $10,000,000.00.
<PAGE>
(ii) Tenant shall, or shall cause Manager to, at
Landlord's sole cost and expense, at all times during the Term keep the
Leased Property and all property located therein or thereon, insured
against the risks and in the amounts as follows and shall maintain the
following insurance:
(a) "All-risk" property insurance, including insurance
against loss or damage by fire, vandalism and malicious mischief, explosion
of steamboilers, earthquake and hurricane damage, pressure vessels or other
similar apparatus, now or hereafter installed in the Hotel located at the
Leased Property, with equivalent coverage as that provided by the usual
extended coverage endorsements, in an amount equal to one hundred (100%)
percent of the then full Replacement Cost thereof;
(b) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy or endorsement covering risk
of loss by reason of any hazard covered under the insurance required under
this Section 9.1 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 but in any event for not less than twelve
(12) months of Gross Revenues; and
(c) Flood (if the Leased Property is located in a
federally designated flood zone) and such other hazards and in such amounts
as may be customary for comparable 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.
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 the 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.
<PAGE>
9.4 FORM SATISFACTORY, ETC. All insurance policies and endorsements
required pursuant to this ARTICLE 9 shall be fully paid for, nonassessable
and, except for umbrella and flood coverage, be issued by insurance
carriers authorized to do business in the State, having a rating of no less
than A-:XI in Best's latest rating guide and otherwise satisfactory under
any Hotel Mortgage or Ground Lease. No policy described in SECTIONS
9.1(i)(a), (ii)(a)-(c) and (iii) shall include a deductible in excess of
Twenty Five Thousand Dollars ($25,000) (provided, however, that insurance
for earthquake and hurricane damage may include such reasonable deductibles
as are consistent with normal industry practice and which are otherwise
acceptable to Landlord) and, with the exception of the insurance described
in SECTION 9.1(i)(b), 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. Tenant shall cause all
insurance premiums to be paid and shall make available such policies and
deliver 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, but
not the obligation, subject to the provisions of SECTION 12.5, 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, Landlord's or 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
Landlord, Tenant or the Manager, as applicable, 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.
9.6 NO SEPARATE INSURANCE. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with
that required by this ARTICLE 9, or increase the amount of any insurance by
securing an additional policy or additional policies, if such separate
insurance would reduce the insurance protection afforded Landlord pursuant
to the terms of this ARTICLE 9. 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. Subject to the provision of SECTION
9.3, Notwithstanding the existence of any insurance provided for herein and
without regard to the policy limits of any such insurance, Tenant, or
Tenant's Parent or Affiliate pursuant to the Guaranty, shall protect,
indemnify and hold harmless Landlord, the REIT and Advisors, 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, the REIT or
Advisors, by reason of: (a) any accident, injury to or death of persons or
<PAGE>
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, the REIT or Advisors, 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, the REIT or Advisors, is made
a party; (c) any Impositions that are the obligations of Tenant to pay
pursuant to the applicable provisions of this Agreement; (d) the imposition
of any "dram act" or similar law relating to liability resulting from the
service of wine, beer, liquor or other alcoholic beverages; and (e) any
failure on the part of Tenant or anyone claiming under Tenant to perform or
comply with any of the terms of this Agreement or the Participating Leases
unless any such liability, obligation, claim, damage, penalty, cause of
action, cost or reasonable attorneys' fees were incurred as a result of
Landlord's, the REIT's or Advisors', gross negligence or willful
misconduct; provided, however, for so long as Landlord reasonably
determines that its interests are being sufficiently protected and defended
by the insurers, pursuant to the policies of insurance required to be
maintained by Tenant pursuant to this ARTICLE 9, Tenant shall not be
obligated to defend Landlord in any such action; provided, further,
however, if at any time Landlord reasonably determines that its interests
are not being sufficiently protected and defended, then Tenant shall
immediately comply with all of the obligations imposed pursuant to this
SECTION 9.7. Except as expressly provided herein, Tenant, at its expense,
shall contest, resist and defend any such claim, action or proceeding
asserted or instituted against Landlord, the REIT or Advisors, with counsel
reasonably acceptable to Landlord, the REIT or Advisors, or may compromise
or otherwise dispose of the same within the policy limits afforded by such
insurance, without Landlord's, the REIT's or Advisors', prior consent,
unless such compromise would have a material adverse effect on Landlord, or
would otherwise prejudice Landlord's rights thereunder. 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.
9.8 INCREASE IN LIMITS. If Landlord at any time reasonably deems the
limits of the personal injury or property damage under the commercial
public liability insurance then carried by Tenant to be insufficient,
Landlord and Tenant shall endeavor in good faith to agree on the proper and
reasonable limits for such insurance to be carried and such insurance shall
thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this SECTION 9.8. If the parties fail to
agree on such limits, the matter shall be referred to arbitration as
provided for in ARTICLE 23.
<PAGE>
ARTICLE 10
CASUALTY
10.1 INSURANCE PROCEEDS. Except as provided in the last clause of
this sentence and except as provided in SECTION 10.4, all proceeds payable
by reason of any loss or damage to the Leased Property, or any portion
thereof, and insured under any policy of insurance required by ARTICLE 9
shall be paid directly to Landlord. If Tenant is required to reconstruct
or repair the Leased Property as provided herein, such proceeds as are made
available by any Hotel Mortgagee shall be paid out by Landlord from time to
time for the costs of reconstruction or repair of the Leased Property
necessitated by such damage or destruction, subject to and in accordance
with the provisions of SECTION 10.2.2. 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. All salvage
resulting from any risk covered by insurance shall belong to Landlord,
provided any rights to the same have been waived by the insurer.
10.2 DAMAGE OR DESTRUCTION.
10.2.1 DAMAGE OR DESTRUCTION OF LEASED PROPERTY. In the event
(a) the Leased Property is damaged by fire, explosion or other casualty
insured under the fire and extended coverage insurance policy required
hereunder (an "INSURED CASUALTY") to the extent of twenty-five percent
(25%) or more of the insurable value thereof immediately preceding the
casualty, (b) the Leased Property is damaged by a casualty or occurrence
other than an Insured Casualty, (c) such damage occurs at anytime within
the last six (6) months of the Term, (d) the Leased Property or any portion
thereof is damaged by fire, explosion or other casualty and the Leased
Property cannot be repaired, rebuilt or restored to the same condition
under the terms of the Franchise Agreement, under any Legal Requirements or
other governmental order or under any other agreement to which the Leased
Property is subject or (e) a casualty occurs to a portion of the Hotel
which renders the Hotel Unsuitable for Its Permitted Use (a "PROHIBITED
CASUALTY"), then in such event Landlord or Tenant may terminate this
Agreement by giving written notice of termination to the other party within
thirty (30) days after the happening of the event causing the damage. In
the event the damage is not extensive enough to give rise to Landlord's
option to terminate this Agreement, a Prohibited Casualty has not occurred,
or Landlord does not elect to terminate this Agreement, Landlord, at
Landlord's sole cost and expense shall promptly repair and replace the
Leased Property to the condition existing immediately preceding such fire,
explosion or other casualty. During any period of reconstruction or repair
of the Leased Property, (i) Landlord shall make any business interruption
insurance proceeds available to Tenant to pay necessary operating expenses
and Rent with respect to the Leased Property, (ii) Tenant shall operate its
business in the Leased Property to the extent practicable, and (iii)
Minimum Rent payable under this Agreement by Tenant shall be abated during
the period of such repair and restoration to the extent the Leased Property
is not tenantable.
<PAGE>
10.2.2 DISBURSEMENT OF PROCEEDS. In the event Tenant undertakes
to restore the Leased Property after an Insured Casualty or, if this
Agreement has not been terminated, a Prohibited Casualty, Tenant shall (or
shall cause the Manager to) commence promptly and continue diligently to
perform the repair and restoration of the Leased Property (hereinafter
called the "WORK"), so as to restore the Leased Property in compliance with
all Legal Requirements and so that the Leased 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 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 containing such information and in such form as
may be reasonably required by Landlord. Landlord may, at its option,
condition advancement of said insurance proceeds and other amounts on (a)
the absence of any Event of Default, (b) its approval of plans and
specifications of an architect satisfactory to Landlord (which approval
shall not be unreasonably withheld or delayed), (c) general contractors'
estimates, (d) architect's certificates, (e) unconditional lien waivers of
general contractors, if available, (f) evidence of approval by all
governmental authorities and other regulatory bodies whose approval is
required and (g) such other certificates as Landlord may, from time to
time, reasonably require. Landlord's obligation to disburse insurance
proceeds under this ARTICLE 10 shall be subject to the release of such
proceeds by any Hotel Mortgagee to Landlord. Notwithstanding anything
contained in this Agreement, in the event that any Hotel Mortgagee does not
release insurance proceeds to Landlord, unless Landlord determines, in its
sole and absolute discretion, to make monies in the amount of such proceeds
available to Tenant for repair or restoration of the Leased Property,
Tenant shall have no obligation to repair or restore the Leased Property.
If a Hotel Mortgagee or Landlord releases only a portion of insurance
proceeds to Tenant and Landlord does not, in its sole and absolute
discretion, make any shortfall in the amount of insurance proceeds released
by a Hotel Mortgagee available to Tenant for repair or restoration of the
Leased Property, Tenant shall only be obligated to repair and restore the
Leased Property to the extent of moneys released by Hotel Mortgagee or
Landlord, plus any sums made available by Landlord for repairs and
restoration.
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 the
Leased Property occurs during the last twelve (12) months of the Term and
if such damage or destruction cannot reasonably be expected to be fully
repaired and restored prior to the date that is six (6) months prior to the
end of the Term, the provisions of SECTION 10.2.1 shall apply as if the
Leased Property had been totally or partially destroyed and the Hotel
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 to pay the cost of repairing or replacing damaged Tenant's
Personal Property.
<PAGE>
10.5 RESTORATION OF TENANT'S PROPERTY. If Tenant is required to
restore the Leased Property as hereinabove provided, Tenant shall either
(a) restore Tenant's Personal Property, if any, or (b) replace Tenant's
Personal Property, if any, with items of the same or better quality and
utility to the operation of the Leased Property.
10.6 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Leased Property.
10.7 CASUALTY -- CONFLICTING TERMS. Notwithstanding any provision
of this ARTICLE 10 to the contrary, if any Hotel Mortgage, Ground Lease, or
Management Agreement contains provisions which apply in the event of a
casualty and which are in conflict with the terms of this ARTICLE 10, then
such Hotel Mortgage, Ground Lease, or Management Agreement shall control to
the extent of such conflict.
ARTICLE 11
CONDEMNATION
11.1 TOTAL CONDEMNATION, ETC. In the event (a) the whole of the
Leased Property shall be taken or condemned for a public or quasi-public
use or purpose by a Condemnor or sold by Landlord in lieu thereof, (b) such
a portion of the Leased Property shall be taken, condemned or sold in lieu
thereof so that the balance cannot be used for the same purpose and with
substantially the same utility to Tenant as immediately prior to such
taking, or (c) the Leased Property or any portion thereof shall be taken or
condemned for a pubic or quasi-public use or purpose by a Condemnor or sold
by Landlord in lieu thereof and Landlord is unable to repair, rebuild or
restore the same under the terms of any agreement to which it is a party,
under the Franchise Agreement or under any Legal Requirements or other
governmental order to which Landlord or the Leased Property is subject (a
"PROHIBITED TAKING"), this Agreement shall terminate upon delivery of
possession to the Condemnor or its assignee, and any Award shall be paid to
and be the sole property of Landlord whether the Award shall be made as
compensation for diminution of the value of the leasehold estate or the fee
of the Land or otherwise, and Tenant hereby assigns to Landlord all of
Tenant's right, title and interest in and to any and all of the Award.
Tenant shall have no claim against Landlord by reason of such taking or
termination and shall not have any claim or right to any portion of the
Award to be paid to Landlord. Tenant shall continue to pay Rent and other
charges hereunder until the Agreement is terminated.
<PAGE>
11.2 PARTIAL TAKING. In the event (a) only a part of the Leased
Property is taken or condemned but the Leased Property or the part
remaining can still be used for the same purpose and with substantially the
same utility to Tenant as immediately prior to such taking, or (b) a
Prohibited Taking has not occurred, this Agreement shall not terminate and
Landlord, at Landlord's sole cost and expense, shall repair and restore the
remaining Leased Improvements provided the cost and expense of such repair
and restoration does not exceed the amount of the Award. If the cost of
such repair and restoration exceeds the amount of the Award, Landlord may
terminate this Agreement by giving written notice of termination to Tenant
within thirty (30) days of the delivery of possession to the Condemnor. If
Landlord is obligated to repair and restore the remaining Leased
Improvements as herein provided, there shall be no abatement or reduction
in any Rent or other charges payable by Tenant under this Agreement because
of such taking or condemnation; provided, however, Minimum Rent shall be
abated (i) during the period of such restoration, to the extent the Leased
Property is not tenantable, or (ii) following the completion of the
restoration, to the extent the Leased Improvements are not tenantable.
11.3 TENANT'S AWARD. Tenant shall have no right to claim and
recover from the Condemnor or from Landlord such compensation as may
otherwise be separately awarded to Tenant for any damage to Tenant's
business by reason of such condemnation and for any cost or loss incurred
by Tenant in removing or relocating Tenant's merchandise, fixtures and
furnishings to the extent same would decrease Landlord's Award.
11.4 CONDEMNATION -- CONFLICTING TERMS. Notwithstanding any
provision of this ARTICLE 11 to the contrary, if any Hotel Mortgage, Ground
Lease, or Management Agreement contains provisions which apply in the event
of a condemnation and which are in conflict with the Terms of this ARTICLE
11, then such Hotel Mortgage, Ground Lease, or Management Agreement shall
control to the extent of such conflict.
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 when due and such failure shall continue for a period of ten
(10) days after notice by Landlord; provided, however, that in the event
Landlord has given two (2) such notices in any one (1) Fiscal Year,
Landlord shall not be required to give any further notices and, thereafter,
an Event of Default shall then occur; or
<PAGE>
(b) should Tenant or the Manager fail to reimburse
Landlord for the costs of insurance maintained under ARTICLE 9, or should
Tenant or the Manager fail to maintain any insurance coverages required
under ARTICLE 9, and such failure shall continue for ten (10) 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 than as specified in clauses (a)
and (b) above and (d) through (s) below) 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 fifteen (15) 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 as may be
reasonably and commercially necessary to cure such default with all due
diligence; or
(d) should an event of default occur and be continuing
beyond the expiration of any applicable cure period under any of the
Incidental Documents; or
(e) should there occur a final unappealable determination
by a Government Agency of the revocation or limitation of any material
license, permit, certification or approval required for the lawful
operation of the Hotel in accordance with its Permitted Use or the loss or
material limitation of any material license, permit, certification or
approval under any other circumstances under which Tenant or the Manager is
required to cease its operation of the Hotel in accordance with its
Permitted Use at the time of such loss or limitation if such revocation or
limitation was a result of any act or failure to act by Manager or Tenant;
or
(f) should Tenant or Manager generally not be paying its
debts as they become due or should Tenant make a general assignment for the
benefit of creditors; or
<PAGE>
(g) should Tenant or Manager file a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or consent to the appointment of a custodian, receiver,
trustee or other similar office with respect to it or any substantial part
of its assets, or take corporate action for the purpose of any of the
foregoing; or if a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the Tenant
or Manager, a custodian, receiver, trustee or other similar officer with
respect to Tenant or Manager or any substantial part of its assets, or if
an order for relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of Tenant or Manager, or if any
petition for any such relief shall be filed against Tenant or Manager and
such petition shall not be dismissed within one hundred twenty (120) days;
or
(h) should Tenant or Manager cause or institute any
proceeding for its dissolution or termination; or
(i) should Tenant or Manager be, or cause Landlord to be,
in default under the Hotel Mortgage, the Ground Lease, or any mortgage or
deed of trust or other similar security document which is secured by
Tenant's leasehold interest hereunder or should the mortgagee or
beneficiary, as applicable, under any such leasehold mortgage or leasehold
deed of trust or other similar security document accelerate the
indebtedness secured thereby or commence a foreclosure action in connection
with said leasehold mortgage; provided, however, if (i) Tenant agrees in
writing to indemnify Landlord for any and all costs, expenses, and fees of
Landlord (including reasonable attorneys' fees) in connection with said
default, and (ii) Landlord's interest in the Leased Property will not be
materially adversely effected by any delay in the cure of such default,
then Tenant shall have thirty (30) days to cure any such default; or
(j) should the estate or interest of Tenant in the Leased
Property or any part thereof be levied upon or attached in any proceeding
and the same shall not be vacated or discharged within the later of (i) one
hundred twenty (120) days after commencement thereof, unless the amount in
dispute is less than $50,000.00, in which case Tenant shall give notice to
Landlord of the dispute but Tenant may defend in any suitable way, and (ii)
thirty (30) 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
<PAGE>
(k) should any default by Tenant as "Owner" under the
Management Agreement occur and be continuing beyond the expiration of any
applicable cure period under the Management Agreement; or
(l) should a Change of Control of Tenant occur other than
as provided in SECTIONS 22.22 or 5.4, respectively; or
(m) should Tenant or Manager be, or cause Landlord to be,
in default beyond applicable grace periods, if any, under any Franchise
Agreement relating to the Leased Property including any Termination of the
Franchise Agreement, if any, without Landlord's prior written consent; or
(n) should Tenant or Manager voluntarily cease operations
of the Leased Property for more than three (3) days other than by reason of
casualty, Condemnation or Force Majeure; or
(o) should the estate or interest of Tenant in this
Agreement voluntarily or involuntarily, be transferred, assigned, conveyed,
levied upon or attached; or
(p) should Tenant fail to observe or perform any other
term of any Participating Leases and the continuation of such failure for a
period of thirty (30) days after receipt by Tenant of notice from the
Landlord thereof, unless Tenant is diligently proceeding to cure, in which
case the cure period will be extended to one hundred eighty (180) days;
PROVIDED, HOWEVER, if such failure cannot be cured within the one hundred
eighty (180) day period and the Tenant continues to act, with diligence, to
correct such failure within said one hundred eighty (180) days, then Tenant
will be afforded up to an additional ninety (90) days to cure such failure;
or
(q) should an Event of Default occur under a Participating
Lease; or
(r) should Tenant or Manager be, or cause Landlord to be,
in default beyond applicable grace periods, if any, under any Ground Lease
affecting the Leased Property; or
<PAGE>
(s) Should Tenant fail to maintain the Security Deposit in
accordance with the procedures set forth in EXHIBIT F; or
(t) Should Tenant fail to comply with the Minimum
Operating Standards for a period of thirty (30) days after notice thereof;
provided, however, that in the event Landlord has given one (1) such notice
during the Term, Landlord shall not be required to give any further notice
and, thereafter, an Event of Default shall then occur; or
(u) Should there be a Change in Operation without
Landlord's prior written consent which such Change in Operation is not
corrected within thirty (30) days after Landlord's request therefor; or
(v) Should Tenant incur any Indebtedness except as
expressly provided in SECTION 21.4;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement by giving Notice thereof to
Tenant and upon the expiration of the time, if any, fixed in such Notice,
this Agreement shall terminate and all rights of Tenant under this
Agreement 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.
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 re-letting of all or any
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 and
other charges which would be payable hereunder for the remainder of the
Term had such termination not occurred, less the net proceeds, if any, of
any re-letting of the Leased Property, after deducting all reasonable
expenses in connection with such re-letting, including, without limitation,
all repossession costs, brokerage commissions, legal expenses, attorneys'
fees, advertising, expenses of employees, alteration costs and expenses of
preparation for such re-letting. 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. At any
time after such termination, 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
<PAGE>
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 SECTION 12.2, annual payments by Tenant on account of
Additional Charges and Participating Rent would be the same as payments
required for the immediately preceding twelve (12) calendar months, or if
less than twelve (12) calendar months have expired since the Commencement
Date, the payments required for such lesser period adjusted 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,
less any current damages already paid by Tenant. 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) re-let 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 re-let 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 re-letting 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. Landlord shall in no event be liable in any way whatsoever for
any failure to re-let all or any portion of the Leased Property, or, in the
event that the Leased Property is re-let, for failure to collect the rent
under such re-letting. 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. Additionally, upon the occurrence of an Event of
Default, Landlord may, in addition to any other remedies provided herein or
available at law or in equity, 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, without
limitation, 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. Notwithstanding anything herein contained
to the contrary, Tenant shall not be liable to Landlord for consequential,
punitive or exemplary damages.
<PAGE>
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.
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
13.1 HOLDING OVER. Any holding over by Tenant after the expiration
or sooner termination of this Agreement after thirty (30) days prior
written notice by Landlord shall be treated as a daily tenancy at
sufferance at a rate equal to one and one-half (1.5) times the Rent and
other charges herein provided (prorated on a daily basis). Tenant shall
also pay to Landlord all direct damages 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.
<PAGE>
ARTICLE 14
LIMITATION ON LIABILITY
14.1 LIMITATION OF LIABILITY. (a) Notwithstanding any provision
of this Agreement to the contrary, there shall be absolutely no personal
liability on the part of Landlord or the REIT or their Affiliates,
shareholders, directors, trustees, partners, advisors, agents, employees,
or their respective successors or assigns or any mortgagee in possession,
with respect to any of the terms, covenants, or conditions of this
Agreement with respect to any act, omission or negligence of Landlord.
Tenant shall look solely to Landlord's estate and property in the Leased
Property and the proceeds thereof for the satisfaction of Tenant's remedies
whether for the collection of any judgment or other judicial process
requiring the payment of money by Landlord in the event of any default by
Landlord hereunder or otherwise, and no other property or assets of
Landlord shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this
Agreement, the relationship of Landlord and Tenant or Tenant's use or
occupancy of the Leased Property.
(b) Notwithstanding any provision of this Agreement to the
contrary, there shall be absolutely no personal liability on the part of
Tenant's Parent or Affiliates with respect to any of the terms, covenants,
or conditions of this Agreement with respect to any act, omission or
negligence of Tenant. Landlord shall look solely to Tenant's property and
the proceeds thereof for the satisfaction of Landlord's remedies whether
for the collection of any judgment or other judicial process requiring the
payment of money by Tenant in the event of any default by Tenant hereunder
or otherwise
ARTICLE 15
SECURITY
15.1 SECURITY DEPOSIT.
(a) To secure the debt, liability and obligations of
Tenant to Landlord under this Agreement and the Participating Leases and
any amendments, modifications, extensions, renewals or replacements of this
Agreement and the Participating Leases (all of which liabilities and
obligations of Tenant being herein collectively referred to as the
"SECURITY OBLIGATIONS"),
<PAGE>
Tenant shall from and after the Commencement Date, and from
time to time as required herein, until such amounts representing the
Security Deposit (hereinafter defined) have been deposited with Landlord,
deposit with Landlord an amount equal to fifty percent (50%) of Net Cash
Flow which, at Tenant's election, may be utilized by Landlord to purchase,
on behalf of Tenant, REIT Shares, and shall pledge, hypothecate, assign,
transfer and grant to Landlord a continuing lien and perfected security
interest in and to such items and in such amounts and as further described
on EXHIBIT F attached hereto and hereby made a part hereof, and all
renewals, extensions and substitutions thereof, together with all rights in
connection with the foregoing, including, but not limited to, all
distributions, including cash, and other property, real or personal,
tangible or intangible, and all proceeds distributed on account of the
foregoing, and substitutions for and proceeds or products of any of the
foregoing (collectively, the "SECURITY DEPOSIT").
(b) Tenant agrees that Landlord may at any time, after the
occurrence of an Event of Default and without notice and demand to Tenant,
and at Landlord's sole cost except as otherwise expressly provided herein,
(i) notify the obligor on or issuer of any Security Deposit to make payment
to Landlord of any amounts due or distributed thereon, (ii) in Tenant's
name or Landlord's name enforce collection of any Security Deposit by suit
or otherwise, or surrender, release or exchange all or any part of it, or
compromise, extend or renew for any period any obligation evidenced by the
Security Deposit, (iii) receive all proceeds of the Security Deposit, and
(iv) hold any increase or profits received from the Security Deposit as
additional security for the Security Obligations, except that any money
received from the Security Deposit shall, at Landlord's option, be applied
in reduction of the Security Obligations, in such order of application as
Landlord may determine; provided, however, nothing contained herein shall
preclude Landlord from exercising all rights and remedies available at law
and in equity to Landlord as a result of Tenant's breach of this Agreement.
15.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. Tenant represents
and warrants to and covenants and agrees with Landlord that: (a) Tenant
will duly endorse each and every instrument constituting the Security
Deposit by signing on said instrument or by signing a separate document of
assignment or transfer, if required by Landlord; (b) Tenant shall not sell
or transfer or contract to sell or transfer the Security Deposit or any
portion thereof until same is seized by Landlord; (c) Tenant shall pay,
when due, all taxes and other governmental charges levied or assessed upon
or against any Security Deposit; (d) at any time, upon request by Landlord,
Tenant shall deliver to Landlord all notices, financial statements, reports
or other communications received by Tenant as an owner or holder of the
Security Deposit; (e) Tenant shall upon receipt deliver to Landlord in
pledge as Security Deposit all proceeds distributed on account of the
Security Deposit such as cash flow and sale proceeds; (f) Tenant is the
owner of the Security Deposit free and clear of all liens, encumbrances,
security interests and restrictions, except for any security interests
granted to Landlord pursuant to the terms of this Agreement; and (g) the
pledge of the Security Deposit herein by Tenant has been duly authorized by
all requisite actions of Tenant and is not in breach of any agreement of
Tenant. Tenant hereby agrees to execute any and all instruments required
by Landlord to establish, maintain and continue Landlord's perfected
security interest in the Security Deposit.
<PAGE>
15.3 POSSESSION AND MAINTENANCE OF SECURITY DEPOSIT. The Security
Deposit shall be at all times in the possession of Landlord. All cash, and
distributions of cash from REIT Shares, held in connection with the
Security Deposit shall be held in an interest bearing account. Landlord
shall take all necessary action as it deems appropriate to preserve,
protect, replenish and maintain the Security Deposit and the rights
represented and evidenced by the Security Deposit, and the costs and
expenses thereof shall be paid by Tenant; provided, however, Landlord shall
not have any liability for any loss to the Security Deposit not
attributable to Landlord's gross negligence, or intentional misconduct, and
no such loss shall relieve Tenant of its obligations under this Agreement.
Landlord shall, at the Termination of this Agreement, and after the
surrender of the Leased Property pursuant to the Terms of Article 5 hereof,
return the balance, if any, of the Security Deposit to Tenant.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 SUBLETTING AND ASSIGNMENT. Tenant shall not, except in the
ordinary course of hotel operations and as otherwise expressly provided
herein, 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), 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 any Person other than Tenant
and the Manager, on behalf of Tenant pursuant to the express terms of the
Management Agreement, or the Leased Property to be offered or advertised
for assignment or subletting. For purposes of this SECTION 16.1, an
assignment of this Agreement shall be deemed to include any transaction
pursuant to which Tenant is merged or consolidated with another Person or
pursuant to which all or substantially all of Tenant's assets are
transferred to any other Entity, as if such Change in Control or
transaction were an assignment of this Agreement; provided, however, Tenant
shall have the right to assign this Agreement to any successor or assignee
of Tenant which may result from any merger, consolidation or reorganization
or to another corporation or entity which acquires all or substantially all
of the business and assets of Tenant as long as Tenant remains liable
hereunder. 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.
<PAGE>
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 be consistent with any applicable terms and conditions of the
Management Agreement and shall provide: (a) that it is subject and
subordinate to this Agreement and to the matters to which this Agreement is
or shall be subject or subordinate; (b) that in the event of termination of
this Agreement or reentry or dispossession of Tenant by Landlord under this
Agreement, Landlord may, at its option, terminate such sublease or take
over all of the right, title and interest of Tenant, as sublessor under
such sublease, and such subtenant shall, at Landlord's option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except
that neither Landlord nor any Hotel Mortgagee, as holder of a mortgage or
as Landlord under this Agreement, if such mortgagee succeeds to that
position, shall (i) be liable for any act or omission of Tenant under such
sublease, (ii) be subject to any credit, counterclaim, offset or defense
which theretofore accrued to such subtenant against Tenant, (iii) be bound
by any previous modification of such sublease not consented to in writing
by Landlord or by any previous prepayment of more than one (1) month's
Rent, (iv) be bound by any covenant of Tenant to undertake or complete any
construction of the Leased Property or any portion thereof, (v) be required
to account for any security deposit of the subtenant other than any
security deposit actually delivered to Landlord by Tenant, (vi) be bound by
any obligation to make any payment to such subtenant or grant any credits,
except for services, repairs, maintenance and restoration provided for
under the sublease that are performed after the date of such attornment,
(vii) be responsible for any monies owing by Tenant to the credit of such
subtenant, or (viii) be required to remove any Person occupying any portion
of the Leased Property; and (c) in the event that such subtenant receives a
written Notice from Landlord or any Hotel Mortgagee stating that an Event
of Default has occurred and is continuing, such subtenant shall thereafter
be obligated to pay all rentals accruing under such sublease directly to
the party giving such Notice or as such party may direct for so long as
such Event of Default remains uncured. 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 SECTION 16.1.
16.3 SUBLEASE LIMITATION. For so long as the REIT 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 either (a) the
net income or profits derived by the business activities of such sublessee,
or (b) any other formula such that any portion of such sublease rental, if
it were paid as rent directly to the REIT, 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 nor shall Tenant sublease the
Leased Property to, or enter into any similar arrangement with, any Person
<PAGE>
in which the REIT owns, directly or indirectly, a 10% or more interest,
within the meaning of Section 856(d) of the Code or any similar or
successor provisions thereto; provided, however, after Landlord has
approved such sublease, the failure of Tenant to comply with this SECTION
16.3 shall not constitute an Event of Default with respect to such
sublease, as approved.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENT S
17.1 ESTOPPEL CERTIFICATES. At any time and from time to time, but
in no event more than four (4) times per Fiscal 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 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 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, where applicable. All records and books
of account of Tenant shall be maintained by Tenant for a period of not less
than seven (7) years after the termination of the Term. 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 and the Uniform System of
Accounts, 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 this 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. Tenant shall furnish the following
statements to Landlord:
(a) within thirty-five (35) days after each of the
first three quarters of any Fiscal Year, the most recent Financials,
accompanied by a Financial Officer's Certificate;
<PAGE>
(b) within ninety-five (95) days after the end of each
Fiscal Year, the most recent Financials for such year, certified by an
independent certified public accountant reasonably satisfactory to Landlord
and accompanied by a Financial Officer's Certificate;
(c) within thirty-five (35) days after the end of each
Accounting Period, an unaudited operating statement prepared for the Leased
Property, including occupancy percentages and average rate, accompanied by
a Financial Officer's Certificate and an Officer's Certificate prepared by
the Manager containing an explanation of the performance of the Leased
Property and containing (i) a schedule of profit and loss for such
Accounting Period, (ii) a Schedule of the Capital Expenditures for the year
to date together with a restatement of the Capital Expenditures for the
remainder of the Fiscal Year, (iii) a reforecast of the Budget for the
remainder of the Fiscal Year, including cash flow, and (iv) a balance
sheet, comparison of operations, variance report and anything else
reasonably requested by Landlord;
(d) promptly after the sending or filing thereof,
copies of all reports which Tenant or Manager sends to its security holders
generally, and copies of all periodic reports which Tenant or Manager files
with the SEC or any stock exchange on which its shares are listed or
traded;
(e) promptly after the delivery thereof to Tenant, a
copy of any management letter or written report prepared by the certified
public accountants with respect to the financial condition, operations,
business or prospects of Tenant;
(f) at any time and from time to time upon not less
than twenty (20) days Notice from Landlord, any Financials or any other
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, Government Agency or arbitrator in any litigation to which
Landlord is a party, for purposes of compliance therewith; and
(g) promptly, upon Notice from Landlord, such other
information concerning the business, financial condition and affairs of
Tenant as Landlord reasonably may request from time to time.
<PAGE>
Landlord may at any time, and from time to time, provide any Hotel
Mortgagee with copies of any of the foregoing statements. In addition,
Landlord shall have the right, from time to time at Landlord's sole cost
and expense, upon reasonable Notice, during Tenant's customary business
hours, to cause Tenant's books and records with respect to the Leased
Property to be audited by auditors selected by Landlord at the place where
such books and records are customarily kept.
17.3 ANNUAL BUDGET. Not later than thirty (30) days prior to the
commencement of each Lease Year, Tenant shall prepare and submit to
Landlord an operating budget (the "OPERATING BUDGET") and a capital budget
(the "CAPITAL BUDGET") prepared in accordance with the requirements of this
SECTION 17.3. The Operating Budget and the Capital Budget (together, the
"ANNUAL BUDGET") shall be prepared in accordance with GAAP and the Uniform
System of Accounts, to the extent applicable, and show by month and quarter
and for the year as a whole in the degree of detail specified by the
Uniform System of Accounts for monthly statements, and in accordance with
the detail level of monthly financial statements, the following:
(a) Tenant's reasonable estimate of Gross Revenues
(including room rates and Room Revenues, Food Sales, Telephone Revenues,
Beverage Sales, Parking Revenues, Other Income or Additional Charges) for
the forthcoming Lease Year itemized on schedules on a monthly and quarterly
basis as approved by Landlord and Tenant, together with the assumptions, in
narrative form, forming the basis of such schedules;
(b) A cash flow projection, by calendar month, quarter
and year;
(c) A marketing plan including a narrative description
of the program for advertising and marketing the Hotel for the forthcoming
Lease Year containing a detailed budget itemization of the proposed
advertising expenditure by category and the assumptions in narrative form,
forming the basis of such budget itemization;
(d) Tenant's reasonable estimate for each month of the
Lease Year of Participating Rent including Room Revenues, Food Sales,
Beverage Sales, Parking Revenues and Other Income;
(e) A schedule of all Capital Expenditures and Capital
Repairs planned for the forthcoming Lease Year;
<PAGE>
(f) An operating budget including line item detail of
all revenues and expenses for the forthcoming Lease Year;
(g) Tenant's proposal for the Competitive Set; and
(h) Any other schedules reasonably requested by
Landlord.
Landlord shall have thirty (30) days after the date on which it receives
the Annual Budget to provide comments thereon to Tenant.
17.4 GENERAL OPERATIONS. Tenant shall furnish to Landlord:
(a) Within thirty (30) days after receipt or
modification thereof, copies of all licenses authorizing Tenant and/or the
Manager to operate the Hotel for its Permitted Use; and
(b) Promptly after receipt or sending thereof, copies
of all material notices given or received by Tenant under the Management
Agreement.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
18.1 RIGHT TO INSPECT. Tenant shall permit, and shall cause the
Manager to permit, Landlord and its authorized representatives to inspect
the Leased Property during usual business hours upon reasonable notice and
to make such repairs as Landlord is permitted 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. Landlord shall not communicate directly
with any employees of Tenant or Manager, other than to Tenant's or
Manager's designated representative, without the consent of Tenant (which
consent shall not be unreasonably withheld, delayed or conditioned).
<PAGE>
ARTICLE 19
LIMITATIONS
19.1 PERSONAL PROPERTY LIMITATION. Anything contained in this
Agreement to the contrary notwithstanding, (i) the average of the adjusted
tax basis, for U.S. federal income tax purposes, of the items of Landlord's
personal property that are leased to the Tenant under this Agreement at the
beginning and at the end of any Lease Year shall not exceed 15% of the
average of the aggregate adjusted tax bases of the Leased Property at the
beginning and at the end of such Lease Year, and (ii) the value of the
items of Landlord's personal property that are leased to the Tenant under
this Agreement shall not at any time exceed 10% of the value of the Leased
Property (together, the "PERSONAL PROPERTY LIMITATION"). Landlord and
Tenant shall at all times cooperate in good faith and use their best
efforts to permit Landlord to comply with the Personal Property Limitation,
which compliance may include, by way of example only and not by way of
limitation or obligation, the purchase by Tenant at fair market value of
personal property in excess of the Personal Property Limitation. All such
compliance shall be effected in a manner which has no material net economic
detriment to Tenant and will not jeopardize the REIT's status as a real
estate investment trust under the applicable provisions of the Code. This
SECTION 19.1 is intended to ensure that all of the Rent qualifies as "rents
from real property," within the meaning of Section 856(d) of the Code, and
as rents described in Section 512(b)(3)(A) of the Code, or any similar or
successor provisions thereto, and shall be interpreted in a manner
consistent with such intent.
19.2 TENANT OWNERSHIP LIMITATION. Anything contained in this
Agreement to the contrary notwithstanding, Landlord shall not take, or
permit an Affiliate of Landlord to take, any action that would cause the
REIT to own, directly or indirectly, a 10% or more interest in the Tenant,
or in the assets or net profits of Tenant, within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
Anything contained in this Agreement to the contrary notwithstanding,
Tenant shall not take, or permit an Affiliate of Tenant to take, any action
that would cause the REIT to own directly or indirectly, a 10% or more
interest in the Tenant, or in the assets or net profits of Tenant, within
the meaning of Section 856(d) of the Code, or any similar or successor
provision thereto.
19.3 DIRECTOR, OFFICER AND EMPLOYEE LIMITATION. Anything contained
in this Agreement to the contrary notwithstanding, Landlord and Tenant
shall cooperate to ensure that (a) no directors, trustees, officers or
employees of Landlord, the REIT or any Affiliate of the REIT shall be
directors, officers or employees of, or own any ownership interest in,
Tenant or any Affiliate thereof (or any Person who furnishes or renders
services to the Tenant or manages or operates the Leased Property), and (b)
no directors, trustees, officers or employees of Tenant or any Affiliate
thereof (or of any Person who furnishes or renders services to the Tenant
or manages or operates the Leased Property) shall be directors, officers or
employees of Landlord, the REIT or any Affiliate of the REIT; provided,
however, Tenant shall not be in default under this Agreement if (i)
Landlord has not provided Tenant with the names of Landlord's, the REIT's
or any Affiliates' directors, trustees, officers or employees and (ii)
after notifying Tenant of any breach of this covenant, Tenant, within
thirty (30) days after Notice thereof, cures, or causes to be cured, such
breach.
<PAGE>
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.
Any such Encumbrance (other than a Hotel Mortgage, in which event the
provisions of SECTION 20.2 shall govern) shall be, and shall provide that
it is, subject and subordinate to the rights of Tenant under this
Agreement. Additionally, Tenant shall cooperate in all reasonable
respects, and as generally described in SECTION 22.15, with any transfer of
the Leased Property to a Hotel Mortgagee that succeeds to the interest of
Landlord in the Leased Property (including, without limitation, in
connection with the transfer of any franchise, license, lease, permit,
contract, agreement, or similar item to such Hotel Mortgagee or such Hotel
Mortgagee's designee necessary or appropriate to operate the Leased
Property). Landlord and Tenant shall cooperate in (a) including in this
Agreement by suitable amendment from time to time any provision which may
be reasonably requested by any proposed lender, or may otherwise be
reasonably necessary, to implement the provisions of this SECTION 20.1 and
(b) entering into any further agreement with or at the request of any Hotel
Mortgagee which may be reasonably requested or required by such Hotel
Mortgagee in furtherance or confirmation of the provisions of this SECTION
20.1; PROVIDED, HOWEVER, that any such amendment or agreement shall not in
any way affect the Term nor affect adversely in any material respect any
rights of Landlord or Tenant under this Agreement.
20.2 SUBORDINATION OF LEASE. Subject to SECTION 20.1 and this
SECTION 20.2, 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 20.2 shall be self operative and no further instrument of
subordination shall be required. 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". Tenant shall have no obligations under any Superior Lease or
<PAGE>
Superior Mortgage other than those expressly set forth in this SECTION
20.2. Subject to the provisions of this SECTION 20.2, 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 have the option either to
terminate this Agreement or to recognize Tenant's rights under this
Agreement as herein provided and, in such latter event, 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 are set forth in this Agreement, except
that the Successor Landlord (unless formerly the landlord under this
Agreement or its nominee, designee or Affiliate) 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, credited 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 Minimum Rent or Participating 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 with respect to any
insurance or Condemnation proceeds), 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, if Tenant has been
requested to attorn, Landlord agrees to provide Tenant with an instrument
of non-disturbance and attornment from each such Superior Mortgagee and
Superior Landlord in form and substance reasonably satisfactory to Tenant.
20.3 NOTICE TO MORTGAGEE AND GROUND LANDLORD. Subsequent to the
receipt by Tenant of Notice from Landlord as to the identity of any Hotel
Mortgagee or ground lessor under a lease with Landlord, as ground lessee,
which includes the Leased Property as part of the demised premises and
which complies with SECTIONS 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 the Leased Property shall be effective unless and
until a copy of the same is delivered in accordance with the terms of
SECTION 22.10 to such Hotel Mortgagee or ground lessor, unless not
otherwise required in the applicable mortgage or lease, at the address set
forth in the above described Notice, and the curing of any of Landlord's
defaults by such Hotel Mortgagee or ground lessor shall be treated as
performance by Landlord.
<PAGE>
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 on Tenant's Indebtedness 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, (c) pay or cause to be paid
when due all trade payables and (d) pay or cause to be paid when due all
other of Tenant's Indebtedness upon which it is or becomes obligated,
except, in each case, other than that referred to in clause (a), to the
extent payment is being contested in good faith by appropriate proceedings
in accordance with ARTICLE 8 and if Tenant shall have set aside on its
books adequate reserves with respect thereto in accordance with GAAP, if
appropriate, or unless and until foreclosure, distraint sale or other
similar proceedings shall have been commenced.
21.2 INTENTIONALLY OMITTED.
21.3 NOTICE OF LITIGATION, ETC. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which Tenant
may hereafter become a party of which Tenant has notice or actual knowledge
which involves a potential liability equal to or greater than Fifty
Thousand Dollars ($50,000.00) or which may otherwise result in any material
adverse change in the business, operations, property, results of operation
or financial condition of Tenant. Forthwith upon Tenant obtaining
knowledge of 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.
21.4 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;
<PAGE>
(b) Indebtedness of Tenant for Impositions, to the extent
that payment thereof shall not at the time be required to be made in
accordance with the provisions of ARTICLE 8;
(c) Indebtedness of Tenant in respect of judgments or
awards (i) which have been in force for less than the applicable appeal
period and in respect of which execution thereof shall have been stayed
pending such appeal or review, (ii) which are fully covered by insurance
payable to Tenant (subject to any deductibles permitted hereunder);
(d) Trade payables incurred in the ordinary course of
business.
21.5 FINANCIAL CONDITION OF TENANT. Tenant shall at all times be
Solvent.
21.6 LIMITATION ON DISTRIBUTIONS. Tenant covenants that until
Tenant's "net worth" exceeds the sum of (x) twenty-five percent (25%) of
the prior Fiscal Year's Rent under this Agreement and any other
Participating Leases PLUS (y) Minimum Working Capital it shall retain all
income it receives hereunder and shall not pay any fees to an Affiliate
outside the ordinary course of business or distribute any earnings to its
beneficial owners except (a) fifty percent (50%) of Net Cash Flow, (b) as
needed for income taxes payable either by Tenant, the shareholders of
Tenant, or Partners of Tenant with respect to the Leased Property (c) for
compensation for Hotel operating expenses, (d) management fees payable
under the Management Agreement, and (e) other payments from the Leased
Property. In no event shall any amounts be payable by or to Tenant under
the foregoing clauses (b) and (c) if such payment would violate Tenant's
covenant set forth in SECTION 21.15 or if, at the time of such proposed
action, or immediately after giving effect thereto, any Event of Default
shall exist.
21.7 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 Affiliate of Tenant without the prior written consent
of Landlord, which consent may be withheld or granted in Landlord's
reasonable discretion.
<PAGE>
21.8 LIENS AND ENCUMBRANCES. Except as permitted by SECTION 7.1,
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) Permitted Encumbrances; and
(b) As permitted pursuant to SECTION 21.4.
21.9 MERGER, SALE OF ASSETS, ETC. Except as otherwise provide
herein, Tenant shall not (a) 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, (b) merge into
or with or consolidate with any other Person, or (c) 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 (c) Tenant may dispose of
equipment or fixtures which have become inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary, provided substitute equipment or
fixtures having equal or greater value and utility (but not necessarily
having the same function) have been provided.
21.10 COMPLIANCE WITH FRANCHISE AGREEMENT. If requested by
Landlord, Tenant shall become the Franchisee under the Franchise Agreement,
if any. To the extent any of the provisions of the Franchise Agreement
impose a greater obligation on Landlord than the corresponding provisions
of this Agreement, then Tenant shall be obligated to comply with, and to
take all reasonable actions necessary to prevent breaches or defaults
under, the provisions of the Franchise Agreement. It is the intent of the
parties hereto that Tenant shall comply in every respect with the
provisions of the Franchise Agreement so as to avoid any default thereunder
during the term of this Agreement. Landlord shall not terminate or enter
into any modification of the Franchise Agreement without in each instance
first obtaining Tenant's written consent (which shall not be unreasonably
withheld or delayed). Tenant shall not terminate the Franchise Agreement
without Landlord's prior written consent which may be withheld or granted
in Landlord's sole discretion. Landlord and Tenant agree to cooperate
fully with each other in the event it becomes necessary to obtain a
franchise extension or modification or a new franchise for the Leased
Property, and in any transfer of the Franchise Agreement to Landlord or any
Affiliate thereof or any other successor to Tenant upon the termination of
this Agreement.
21.11 TERMINATION UPON REVENUE PERFORMANCE SHORTFALL, SALE, ETC.
(a) If (x) (i) with respect to any two (2) Fiscal Years during the Term,
Tenant shall fail to realize from the operation of the Hotel an amount
equal to at least ninety-five (95%) percent of the actual Gross Revenues
from the preceding Fiscal Year AND (ii) the RevPAR Yield Index of the
Leased Property as of the end of such Fiscal Year shall have declined by
more than five (5) percentage points from the Leased Property's RevPAR
Yield Index at the end of the prior Fiscal Year or (y) (i) with respect to
<PAGE>
any Fiscal Year during the term, Tenant shall fail to realize from the
operation of the Hotel an amount equal to at least ninety (90%) percent of
the actual Gross Revenues from the preceding Fiscal Year AND (ii) the
RevPAR Yield Index of the Leased Property as of the end of such Fiscal Year
shall have declined by more than five (5) percentage points from the Leased
Property's RevPAR Yield Index at the end of the prior Fiscal Year (each, a
"REVENUE PERFORMANCE SHORTFALL"), such failure shall constitute a Revenue
Performance Shortfall under this Lease; provided, however, if a Force
Majeure Event has occurred, then the time period for determining a Revenue
Performance Shortfall shall be extended for a period of time equal to the
time period for which the Force Majeure Event was in effect; provided,
further, however, if a material Condemnation or Insured Casualty has
occurred, then the time period for determining a Revenue Performance
Shortfall shall be extended for a period of one (1) year from the date of
substantial completion of any feasible restoration. Notwithstanding the
provisions hereof to the contrary, a Revenue Performance Shortfall shall
not occur if same is due primarily to Landlord's failure to comply with
SECTION 5.1.2. The existence of a Revenue Performance Shortfall for any
Fiscal Year shall be determined by Landlord on the basis of the Officer's
Certificate delivered by Tenant to Landlord on or before March 31 of the
subsequent Fiscal Year pursuant to the requirements of SECTION 3.1.2(b) and
shall be subject to confirmation pursuant to SECTION 3.1.2(d).
Notwithstanding anything to the contrary, however, Tenant shall have the
right to cure a Revenue Performance Shortfall with respect to any Fiscal
Year during the Term hereof by paying to Landlord, at the time of the
annual reconciliation of Participating Rent pursuant to SECTION 3.1.2(c),
the amount necessary during such Fiscal Year to ensure that Landlord
receives the same amount of Participating Rent as Landlord would have
received had there not been a Revenue Performance Shortfall. Landlord
shall have no obligation to repay any amount advanced by Tenant to cure a
Revenue Performance Shortfall. Nothing contained in this SECTION 21.11
shall be construed to alter or affect Tenant's obligation to pay Rent as
otherwise provided in this Agreement.
(b) Upon the occurrence of (i) a Revenue Performance
Shortfall (unless cured by Tenant within ten (10) days after Notice of
termination as provided in this subsection and unless caused by casualty,
Condemnation or any other cause beyond Tenant's control), (ii) the entering
into by Landlord of a bona-fide contract to sell the Leased Property to a
non-Affiliate (provided such sale actually occurs), (iii) a Tax Law Change
resulting in Landlord's determination to terminate this Agreement, (iv) a
Change of Control in Tenant (other than as provided in SECTION 22.22) or a
Change of Control of the Manager without Landlord's consent (which consent
will not be unreasonably withheld), or (v) a Material Franchise Change,
Landlord shall have the right, at Landlord's option, to terminate this
Agreement upon thirty (30) days' Notice to Tenant, in which event this
Agreement and the Management Agreement shall terminate and Tenant shall
immediately surrender the Leased Property to Landlord after the expiration
of such 30 day period, and, if Tenant fails to so surrender, Landlord shall
have the right, without notice, to enter upon and take possession of the
Leased Property and to expel or remove Tenant and its effects without being
liable for prosecution or any claim for damages therefor; and Tenant shall,
and hereby agrees to, indemnify Landlord for the total of (x) in the event
that Tenant does not promptly surrender the Leased Property, the reasonable
costs of recovering the Leased Property and all other losses, liabilities
and reasonable expenses incurred by Landlord in connection with Tenant's
failure to surrender; (y) the unpaid Rent earned as of the date
<PAGE>
of termination, plus interest at the Overdue Rate accruing
after the due date; and (z) all other sums of money then owing by Tenant to
Landlord. Landlord's election to terminate this Agreement as a result of a
Tax Law Change shall be deemed to be a determination to simultaneously
terminate all Participating Leases and to assume the obligations of Tenant
under the Management Agreement.
21.12 CHANGE IN OPERATIONS. (a) The following events shall
constitute changes in the operation of the Hotel ("CHANGE IN OPERATIONS")
for the purposes of this Agreement: (i) a change in the franchisor, if
any, or (ii) the conversion of a subtenant, licensee or concessionaire to
an operating department of the Hotel or vice-versa without Landlord's
consent, or (iii) Tenant's decision to delegate or eliminate the operation
of any food or beverage operations at the Hotel, or (iv) the repositioning
or expansion of the Hotel.
(b) If Tenant desires to implement a Change in Operations,
Landlord may accept or reject such change in its sole and absolute
discretion. If Landlord does not consent to the Change in Operations,
Tenant shall not be entitled to implement the proposed Change in Operations
and this Agreement shall remain in full force and effect.
(c) Notwithstanding anything to the contrary contained
herein, no adjustment of Rent pursuant to a Change in Operations shall be
implemented without the receipt by Landlord of an opinion from its tax
counsel, satisfactory to Landlord in form and substance, that such
adjustment will not adversely affect the REIT's ability to qualify as a
real estate investment trust under the applicable provisions of the Code.
21.13 USE OF THE LEASED PROPERTY. Tenant covenants and agrees that
from and after the Commencement Date, and except for reasonable periods of
time required for remodeling or restoration otherwise permitted hereunder,
or for a reasonable period of time, not to exceed 15 days, after the
cessation of a Force Majeure Event, it shall continuously and without
interruption use and occupy the entire Leased Property (and not less than
one hundred (100%) percent of the Leased Property) solely for the purpose
of the Permitted Use and for no other purpose. Tenant's business in and
throughout the Leased Property shall continuously be conducted under the
Tenant's, or Manager's, name, as the case may be.
<PAGE>
21.14 CONTINUING COVENANTS. Tenant, acknowledging that the Leased
Property has been developed and is being maintained as a hotel consistent
with and in a manner such as to preserve the Landlord's property interest
in the Leased Property, and as a further inducement to Landlord to enter
into this Agreement, covenants and agrees with Landlord to:
(a) not abandon the Leased Property;
(b) maintain the Leased Property (except for structural
repairs) and the abutting grounds, sidewalks, roads, parking and landscaped
areas in good repair, order and condition in accordance with the Minimum
Operating Standards, except for Capital Expenditures, except to the extent
same are funded by Landlord;
(c) promptly make all necessary or desirable repairs,
renewals, replacements and additions, in accordance with the Minimum
Operating Standards, to the Leased Property except for Capital
Expenditures, except to the extent same are funded by Landlord;
(d) not commit or suffer waste with respect to the Leased
Property;
(e) operate the Leased Property in accordance with the
Minimum Operating Standards, except for Capital Expenditures, except to the
extent same are funded by Landlord, so as not to diminish the value or
integrity of the Leased Property or the value of this Agreement;
(f) not make, suffer or permit any nuisance to exist on
the Leased Property;
(g) conduct its business in a manner consistent with the
purpose and character of the Leased Property and in accordance with the
standards for operating the type of business currently operated at the
Leased Property in a sufficient manner, consistent with the Minimum
Operating Standards, and so as to preserve the Landlord's property interest
in the Leased Property;
<PAGE>
(h) keep the Land and Improvements clean and attractive in
appearance at all times and to keep any refuse in proper containers in the
interior of the Leased Property out of sight until the same is removed;
(i) neither do nor suffer anything to be done or kept in
or about the Leased Property which contravenes Landlord's insurance
policies or increases the premiums therefor;
(j) adequately heat and cool the Leased Improvements;
(k) not enter into any new collective bargaining or
similar agreement without Landlord's reasonable consent, provided that such
limitation is not prohibited by applicable state or federal law;
(l) comply with the Franchise Agreement, if any, and not
amend or otherwise modify any provision thereof without Landlord's prior
written consent;
(m) except as provided in the Management Agreement, not
enter into a contract for goods or services (x) in an amount greater than
twenty-five thousand dollars ($25,000.00) or (y) for a period of more than
one (1) year without Landlord's prior written consent, not to be
unreasonably withheld; and
(n) except as provided in the Management Agreement not
enter into a lease for any items used in the operation of the Leased
Property (x) in an amount in excess of twenty-five thousand dollars
($25,000.00) or (y) for a period in excess of one (1) year without
Landlord's prior written consent, not to be unreasonably withheld.
21.15 NET WORTH. Tenant covenants that, from and after achieving
the Base Security Deposit, it shall at all times during the Term maintain a
"net worth" (the "REQUIRED MINIMUM NET WORTH") which, together with all
amounts then held in the Security Deposit Account, shall be equal to no
less than twenty-five (25%) percent of the prior Fiscal Year's Rent payable
under this Agreement and the Participating Leases; provided, however,
Tenant's Minimum Net Worth may be utilized to make payments of Rent and to
fund operational shortfalls under this Agreement and the Participating
Leases. For purposes hereof, "net worth" shall mean Tenant's tangible net
worth which shall be equal to the excess of Tenant's Assets over its
liabilities determined in accordance with GAAP; provided, however, that the
fair market value of Tenant's Assets and the full face amount of all
liabilities, including provision for income taxes on the appraised
increment, shall be utilized in such calculation. From and after achieving
<PAGE>
the Base Security Deposit, Tenant shall provide Landlord with an annual
written certification of its compliance with the foregoing requirement on
the first day of each subsequent Lease Year hereunder, provided, however,
that Landlord may, in addition, request not more than once during any Lease
Year that Tenant provide Landlord with a certification as of the date of
such request of its compliance with the foregoing requirement. Such
certifications must be reasonably satisfactory to Landlord as to matters
certified therein and shall be accompanied by such supporting financial
information as Landlord may reasonably request. Throughout the Term,
Tenant's Required Minimum Net Worth (x) shall be increased proportionately
after the execution of any additional Participating Lease in accordance
therewith and (y) shall be decreased with the termination of any
Participating Leases (unless such termination results from an Event of
Default thereunder).
21.16 OTHER ACTIVITIES. Tenant covenants, during the Term, that
Tenant will not engage in any business unrelated to the operation and
management of the Hotel or otherwise permitted under any Participating
Leases.
21.17 RESERVATION SYSTEM. Tenant shall not change, modify or
terminate the system for making reservations utilized at the Hotel without
the prior consent of Landlord which may be withheld or granted in
Landlord's sole discretion.
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.
<PAGE>
22.2 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power
or remedy consequent upon a breach thereof, and no acceptance of full or
partial payment of Rent during the continuance of any such breach, shall
constitute a waiver of any such breach or of any such term. To the maximum
extent permitted by law, no waiver of any breach shall affect or alter this
Agreement, which shall continue in full force and effect with respect to
any other then existing or subsequent breach.
22.3 REMEDIES CUMULATIVE. To the maximum extent permitted by law,
each legal, equitable or contractual right, power and remedy of Landlord or
Tenant, now or hereafter provided either in this Agreement or by statute or
otherwise, shall be cumulative and concurrent and shall be in addition to
every other right, power and remedy and the exercise or beginning of the
exercise by Landlord or Tenant (as applicable) of any one or more of such
rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Landlord 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,
provided Landlord has transferred the Security Deposit and any escrows held
hereunder, 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.
<PAGE>
22.8 QUIET ENJOYMENT. Provided that no Event of Default shall have
occurred and be continuing, Tenant shall peaceably and quietly have, hold
and enjoy the Leased Property for the Term, free of hindrance or
molestation by Landlord or any Person 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, (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 Hotel and (d) Liens that have been consented to in
writing by Tenant. Except as otherwise provided in this Agreement, no
failure by Landlord to comply with the foregoing covenant shall give Tenant
any right to cancel or terminate this Agreement or abate, reduce or make a
deduction from or offset against the Rent or any other sum payable under
this Agreement, or to fail to perform any other obligation of Tenant
hereunder.
22.9 MEMORANDUM OF LEASE. Neither Landlord nor Tenant shall record
this Agreement. However, Landlord and Tenant shall promptly, upon the
request of the other, enter 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 shall be made. The parties shall share equally
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 given 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 expedited 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.
<PAGE>
(c) All such notices shall be addressed,
if to Landlord to:
c/o LaSalle Hotel Advisors
1401 Eye Street, NW
Suite 900
Washington, DC 20005
Attention: Chief Operating Officer
Telecopier: (202) 222-2653
with a copy to:
LaSalle Partners
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Chief Financial Officer
and with a copy to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048
Attn: Lee S. Saltzman, Esq.
Telecopier No.: (212) 839-5599
if to Tenant to:
c/o LaSalle Hotel Advisers
1401 Eye Street, NW
Suite 900
Washington, DC 20005
Attn: Chief Operating Officer
Telecopier No.: (202) 222-2653
with a copy to:
Hagan & Associates
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Robert K. Hagan, Esq.
(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.
22.11 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 or Tenant be liable
for any consequential damages suffered by the other as the result of a
breach of this Agreement. Neither this Agreement nor any provision hereof
<PAGE>
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 exercise of any rights of Tenant and Landlord under this Agreement.
Except as otherwise set forth in this Agreement, any obligations of Tenant
(including without limitation, any monetary, repair and indemnification
obligations) and Landlord shall survive the expiration or sooner
termination of this Agreement.
22.12 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.
22.13 APPLICABLE LAW, ETC. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State
applicable to contracts between residents of the State which are to be
performed entirely within the State, regardless of: (a) where this
Agreement is executed or delivered; (b) where any payment or other
performance required by this Agreement is made or required to be made; (c)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; (d) where any action or other proceeding is
instituted or pending; (e) the nationality, citizenship, domicile,
principal place of business, or jurisdiction of organization or
domestication of any party; (f) whether the laws of the forum jurisdiction
otherwise would apply the law of a jurisdiction other than the State; or
(g) any combination of the foregoing.
22.14 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.
22.15 TRANSITION PROCEDURES. Upon the expiration or termination of
the Term of this Agreement, for whatever reason, Landlord and Tenant shall
do the following (and the provisions of this SECTION 22.15 shall survive
the expiration or termination of this Agreement until they have been fully
performed) and, in general, shall cooperate in good faith to effect an
orderly transition of the Hotel. Nothing contained herein shall limit
Landlord's rights and remedies under this Agreement if such termination
occurs as the result of an Event of Default.
(a) TRANSFER OF LICENSES. Upon the expiration or earlier
termination of the Term, Tenant shall use its reasonable efforts (i) to
transfer to Landlord or Landlord's nominee all licenses, operating permits
and other governmental authorizations and all contracts, including
contracts with Government Agencies that may be necessary for the operation
of the Hotel (collectively, "LICENSES") or (ii) if such transfer is
prohibited by law or Landlord otherwise elects, to cooperate
<PAGE>
with Landlord or Landlord's nominee in connection with the
processing by Landlord or Landlord's nominee of any applications for the
transfer of all Licenses; provided, in either case, that the costs and
expenses of any such transfer or the processing of any such application
shall be paid by Landlord or Landlord's nominee.
(b) LEASES AND CONCESSIONS. Tenant shall assign to
Landlord or Landlord's nominee simultaneously with the termination of this
Agreement, all leases and concession agreements in effect with respect to
the Hotel then in Tenant's or Manager's name.
(c) BOOKS AND RECORDS. To the extent that Landlord has
not already made or received copies thereof, all books and records
(including computer records) for the Hotel kept by Tenant pursuant to
SECTION 17.2 shall be promptly made available to Landlord or Landlord's
nominee for photocopying or other duplication.
(d) RECEIVABLES AND PAYABLES, ETC. Except with respect to
Minimum Working Capital, Tenant shall be entitled to retain all cash, bank
accounts and house banks, and to collect all Gross Revenues and accounts
receivable accrued through the termination date. Tenant shall be
responsible for the payment of Rent, all Gross Operating Expenses of the
Hotel and all other obligations of Tenant accrued under this Agreement as
of the termination date, and Landlord shall be responsible for all
operating expenses of the Hotel accruing after the termination date.
22.16 COMPLIMENTARY ROOMS. Tenant shall make available (to the
extent that same have not otherwise been committed) "deluxe" or "superior"
guest rooms and all related goods and services, including, without
limitation, food and beverages, telephones and facsimile services on a no-
cost complimentary basis to employees, advisors, consultants, trustees and
members of the board of directors of the REIT or the Landlord who are
visiting the Hotel in connection with the operations of the Leased Property
or doing business in the State related to the Leased Property, and as
reasonably necessary for the conduct of such business.
22.17 INTENTIONALLY DELETED.
22.18 INCORPORATION OF PRIOR AGREEMENTS. This Agreement and the
attached exhibits set forth all the agreements, terms, covenants and
conditions between Landlord and Tenant concerning the Leased Property and
there are no agreements, terms, covenants or conditions, oral or written,
between them other than those herein contained. No amendment, change or
addition to this Agreement shall be binding upon Landlord or Tenant unless
it is in writing and signed by each party.
22.19 ATTORNEY'S FEES. If either Landlord or Tenant retains an
attorney to enforce the terms of or determine rights under this Agreement,
the prevailing party shall be entitled to recover reasonable costs,
attorney's fees and expenses.
22.20 EARLY TERMINATION. (a) Upon the sale of the Leased Property
by Landlord to a third party who is not related to or affiliated with
Landlord (except as to any loan arrangement between Landlord, as lender,
and such third party, as borrower), Landlord may elect to terminate this
Agreement provided that Tenant is afforded no less than thirty (30) days
advance written notice from Landlord of such termination. Upon a Change of
Control of Landlord, Tenant may elect to terminate this Agreement provided
that Landlord is afforded no less than thirty (30) days advance written
notice from Tenant of such termination.
<PAGE>
(b) As compensation for the early termination of Tenant's
leasehold estate under this SECTION 22.20, Landlord shall pay to Tenant the
present value of a stream of monthly payments of Monthly Cash Flow for
fifty (50%) percent of the number of complete months remaining in the
unexpired Term as of the date of closing of the sale, discounted at a rate
of ten (10%) percent per annum. For the purposes of this Section, "MONTHLY
CASH FLOW" shall mean the average, for each of the twelve complete
Accounting Periods preceding the date of termination of this Agreement, of
the excess of the Gross Revenues over the sum of the Rent and Gross
Operating Expenses (including any and all expenses and fees payable under
the Management Agreement) attributable to such Accounting Period.
22.21 GOVERNING LAW. Submission to Jurisdiction. This Agreement is
or will be made and delivered in the State and shall be governed by and
construed and interpreted in accordance with the laws of the United States
of America and the State, without regard to principles of conflict of laws.
All judicial actions, suits or proceedings brought by or against Tenant
with respect to its rights, obligations, liabilities or any other matter
under or arising out of or in connection with this Agreement or any
transaction contemplated hereby or for recognition or enforcement of any
judgment rendered in any such proceedings shall be brought by Tenant, and
may be brought by Landlord, in any state court or federal court in the
State. By execution and delivery of this Agreement, Tenant accepts,
generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Agreement or any transaction
contemplated hereby from which no appeal has been taken or is available.
Tenant hereby irrevocably waives any objections, including without
limitation any objection to the laying of venue or based on the grounds of
FORUM NON CONVENIENS, which it may now or hereafter have to the bringing of
any such action or proceeding in any such jurisdiction. Nothing herein
shall affect the right of Landlord to bring any action, suit or proceeding
against Tenant in the court of any jurisdiction. Tenant acknowledges that
final judgment against it in any action suit or proceeding referred to in
this Section shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment, a certified or exemplified copy of
which shall be conclusive evidence of the same.
22.22 CHANGE OF CONTROL OF TENANT. If, during the Term, any Parent
or Affiliate (each a "TRANSFEROR") of Tenant has elected to transfer its
interest in Tenant to a third party which is not an Affiliate of Tenant
which, for the purposes of this Agreement shall only be permitted (i) in
conjunction with the sale of all, or substantially all, of Transferor's
hotel management businesses and (ii) with the consent of Landlord, not to
be unreasonably withheld, conditioned or delayed (a "PERMITTED TRANSFER"),
then such Permitted Transfer shall be made only upon the following terms
and conditions:
(a) Transferor shall give written notice of the proposed
Permitted Transfer to Landlord (the "SALE NOTICE");
(b) Landlord shall have thirty (30) days from the date of
receipt of the Sale Notice to provide Transferor with written notice (the
"PURCHASE NOTICE") of Landlord's intention to purchase, in Landlord's name
or in the name of Landlord's designee, Transferor's interest in Tenant at
the then Fair Market Value of such interest (the "PURCHASE");
<PAGE>
(c) If Landlord elects to make the Purchase, then any
parties holding remaining interests in Tenant (each a "THIRD PARTY") shall
have the right, but not the obligation, to require Landlord to purchase
(the "REQUIRED PURCHASE") such remaining interests in the Tenant at the
then Fair Market Value of such interests by delivering to Landlord, no
later than fifteen (15) days from Transferor's receipt of the Purchase
Notice, written notice (the "THIRD PARTY NOTICE") of such Third Party's
Required Purchase election;
(d) If any Third Party fails to exercise its Required
Purchase election as provided in subparagraph (c) above, then such Third
Party shall be deemed to have unconditionally consented to (i) the
admission of Landlord as a [limited][general] partner in Tenant and (ii)
the amendment of Tenant's partnership agreement to provide that said
remaining Third Party shall not transfer its interests in Tenant except as
provided for in this SECTION 22.22;
(e) The closing of the Purchase, and, if applicable, the
Required Purchase, shall occur within sixty (60) days from the later to
occur of (x) delivery of the Sale Notice or (y) delivery of the Third Party
Notice;
(f) If the parties fail to agree on the Fair Market Value
of the respective interests in Tenant, the matter shall be referred to
arbitration as provided for in ARTICLE 23; provided, however, unless and
until the Fair Market Value of the respective interests in Tenant have been
fully determined, Landlord shall have no obligation to complete the
Purchase or the Required Purchase.
22.23 Intentionally Deleted.
ARTICLE 23
ARBITRATION
23.1 ARBITRATION. In each case specified in this Agreement in
which it shall become necessary to resort to arbitration, such arbitration
shall be determined as provided in this SECTION 23.1. The party desiring
such arbitration shall give Notice to that effect to the other party and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by
the American Arbitration Association ("AAA") from among the members of its
panels who are qualified and who have experience in resolving matters of a
nature similar to the matter to be resolved by arbitration.
23.2 INTENTIONALLY OMITTED.
23.3 ARBITRATION PROCEDURES. In any arbitration commenced pursuant
to ARTICLE 23, a single arbitrator shall be designated and shall resolve
the dispute. The arbitrator's decision shall be binding on all parties and
shall not be subject to further review or appeal except as otherwise
allowed by applicable law. To the maximum extent practicable, the
arbitrator and the parties, and the AAA, if applicable, shall take any
action necessary to insure that the arbitration shall be concluded within
ninety (90) days of the filing of such dispute. The fees and expenses of
the arbitrator shall be shared equally by Landlord and Tenant. Unless
otherwise agreed in writing by the parties or selected by the arbitrator or
AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit
such evidence as each party deems appropriate to support its position and
the arbitrator shall have access to and the right to examine all books and
records of Tenant and Landlord regarding the Hotel during the arbitration.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument as of the date above first written.
LANDLORD:
LHO HARBORSIDE HOTEL, L.L.C.
By: LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
By: LASALLE HOTEL PROPERTIES,
its General Partner
By: /s/ TODD NOONAN
Name: Todd Noonan
Title: Vice President
TENANT:
LASALLE HOTEL LESSEE, INC
By: /s/ TODD NOONAN
Name: Todd Noonan
Title: Vice President and Treasurer
EXHIBIT 10.11
- -------------
LOAN AND TRUST AGREEMENT
among
MASSACHUSETTS PORT AUTHORITY
and
LOGAN HARBORSIDE ASSOCIATES II LIMITED PARTNERSHIP
and
SHAWMUT BANK, N.A., AS TRUSTEE
Dated as of December 15, 1990
as Amended and Restated as of June 27, 1991
$40,000,000
Massachusetts Port Authority
Special Project Revenue Bonds, Series 1990
(Harborside Hyatt Conference Center and Hotel Project)
<PAGE>
INDEX
Page
PART I: PLEDGE AND ASSIGNMENT; DEFINITIONS
Article 1 - Granting Clause of Borrower and Pledge
and Assignment of Issuer
Section 101. Granting Clause of Borrower. . . . . . . . . . . . . . 2
Section 102. Pledge and Assignment of Issuer. . . . . . . . . . . . 2
Section 103. Defeasance of Lien; Termination of
Borrower's Obligations on the Loan . . . . . . . . . . 3
Article 2 - Definitions
PART II: THE BONDS
Article 3 - The Bonds
Section 301. Issuance of Bonds, Dates, Maturities
and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 302. Reserved . . . . . . . . . . . . . . . . . . . . . . . 16
Section 303. Execution; Authentication. . . . . . . . . . . . . . . 16
Section 304. Interest on Bonds. . . . . . . . . . . . . . . . . . . 16
Section 305. Lost Bonds . . . . . . . . . . . . . . . . . . . . . . 17
Section 306. Exchange and Transfer of Bonds; Book
Entry System . . . . . . . . . . . . . . . . . . . . . 17
Section 307. Temporary Bonds. . . . . . . . . . . . . . . . . . . . 19
Article 4 - Redemption of Bonds Before Maturity
Section 401. Redemption of Bonds. . . . . . . . . . . . . . . . . . 20
Section 402. Selection of Bonds to be Redeemed . . . . . . . . . . 23
Section 403. Procedure for Redemption . . . . . . . . . . . . . . . 25
Article 5 - Source and Application of Funds
Section 501. Project Fund . . . . . . . . . . . . . . . . . . . . . 26
Section 502. Bond Fund. . . . . . . . . . . . . . . . . . . . . . . 29
Section 502A. Revenue Fund.. . . . . . . . . . . . . . . . . . . . . 30
Section 503. Debt Service Reserve Fund. . . . . . . . . . . . . . . 32
Section 504. Rebate Fund. . . . . . . . . . . . . . . . . . . . . . 34
Section 505. Construction and Operating Costs
Contingency Fund . . . . . . . . . . . . . . . . . . . 40
Section 505A. Equity Reserve Fund. . . . . . . . . . . . . . . . . . 41
Section 505B. Credit Enhancement Account . . . . . . . . . . . . . . 43
Section 505C. Credit Enhancement Reduction and
Termination. . . . . . . . . . . . . . . . . . . . . . 44
Section 505D. Supplemental Equity Fund . . . . . . . . . . . . . . . 44
Section 506. Investment of Moneys in Funds. . . . . . . . . . . . . 46
- i -
<PAGE>
Page
Section 507. Maximum Investments in Nonpurpose
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 508. Avoidance of Arbitrage . . . . . . . . . . . . . . . . 48
Section 509. Authorized Application of Funds;
Moneys to be Held in Trust . . . . . . . . . . . . . . 48
Section 510. Nonpresentment of Bonds. . . . . . . . . . . . . . . . 48
Section 511. Bonds Are Not General Obligations. . . . . . . . . . . 48
PART III: THE PROJECT
Article 6 - Completion of the Project
Section 601. Borrower's Obligations to Complete
Project, etc . . . . . . . . . . . . . . . . . . . . 49
Section 602. Completion Certificate . . . . . . . . . . . . . . . . 49
Article 7 - Operation of the Project
Section 701. Compliance with Authorization. . . . . . . . . . . . . 49
Section 702. Insurance Proceeds . . . . . . . . . . . . . . . . . . 49
Section 703. Eminent Domain Proceeds. . . . . . . . . . . . . . . . 50
PART IV: REPRESENTATIONS AND AGREEMENTS
OF ISSUER AND BORROWER
Article 8 - Representations and Agreements of Issuer
Section 801. Due Organization and Authorization
of Bonds . . . . . . . . . . . . . . . . . . . . . . . 51
Section 802. Payment of Bonds; Trustee's Rights
with Respect to the Loan; Cooperation with
Trustee. . . . . . . . . . . . . . . . . . . . . . . . 52
Section 803. Rights of Issuer as Ground Lessor
and Airport Operator; Relationship to
Ground Lease . . . . . . . . . . . . . . . . . . . . . 52
Article 9 - Representations of the Borrower
Section 901. Existence . . . . . . . . . . . . . . . . . . . . . . 53
Section 902. Valid Obligations. . . . . . . . . . . . . . . . . . . 53
Section 903. Legal Proceedings. . . . . . . . . . . . . . . . . . . 54
Section 904. Compliance with Law; Consents, etc.. . . . . . . . . . 54
Section 905. Tax Matters. . . . . . . . . . . . . . . . . . . . . . 54
Article 10 - Certain Agreements of Borrower
Section 1001. Loan Payments, Etc.. . . . . . . . . . . . . . . . . . 54
-ii-
<PAGE>
Page
Section 1002. Borrower to Maintain Its Legal
Existence. . . . . . . . . . . . . . . . . . . . . . . 59
Section 1003. Indemnification of Issuer and
Trustee. . . . . . . . . . . . . . . . . . . . . . . . 59
Section 1004. Additional Remedies of Bondholders. . . . . . . . . . 61
Section 1005. Financial Reports . . . . . . . . . . . . . . . . . . 61
PART V: EVENTS OF DEFAULT
Article 11 - Default Provisions and Remedies of
Trustee, Bondholders and Issuer
Section 1101. Events of Default; Defaults. . . . . . . . . . . . . . 63
Section 1102. Acceleration . . . . . . . . . . . . . . . . . . . . . 64
Section 1103. Other Remedies; Rights of
Bondholders. . . . . . . . . . . . . . . . . . . . . . 65
Section 1104. Right of Bondholders to Direct
Proceedings. . . . . . . . . . . . . . . . . . . . . . 65
Section 1105. Application of Moneys . . . . . . . . . . . . . . . . 65
Section 1106. Remedies Vested in Trustee. . . . . . . . . . . . . . 66
Section 1107. Rights and Remedies of Bondholders. . . . . . . . . . 66
Section 1108. Waivers of Events of Default. . . . . . . . . . . . . 67
Section 1109. Intervention by Trustee . . . . . . . . . . . . . . . 67
Section 1110. Remedies of Issuer on Event of
Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
PART IV: THE TRUSTEE
Article 12 - The Trustee
Section 1201. Acceptance of Trusts . . . . . . . . . . . . . . . . . 68
Section 1202. Fees and Expenses of Trustee . . . . . . . . . . . . . 69
Section 1203. Successor Trustee. . . . . . . . . . . . . . . . . . . 69
Section 1204. Resignation by Trustee; Removal. . . . . . . . . . . . 69
Section 1205. Appointment of Successor Trustee . . . . . . . . . . . 69
Section 1206. Dealing in Bonds . . . . . . . . . . . . . . . . . . . 70
Section 1207. Trustee as Bond Registrar; List of
Bondholders. . . . . . . . . . . . . . . . . . . . . . 70
Section 1208. Successor Trustee as Custodian of
Funds, Bond Registrar and Paying Agent . . . . . . . . 70
Section 1209. Adoption of Authentication . . . . . . . . . . . . . . 70
Section 1210. Designation and Succession of
Paying Agents. . . . . . . . . . . . . . . . . . . . . 71
Section 1211. Trust Estate May Be Vested in
Co-Trustee . . . . . . . . . . . . . . . . . . . . . . 71
- iii -
<PAGE>
Page
PART VII: SUPPLEMENTAL AGREEMENT AND
WAIVERS; MISCELLANEOUS
Article 13 - Supplemental Agreements and Waivers
Section 1301. Supplemental Agreements Not
Requiring Consent of Bondholders . . . . . . . . . . . 72
Section 1302. Supplemental Agreements Requiring
Consent of Bondholders . . . . . . . . . . . . . . . . 73
Section 1303. Opinion of Counsel . . . . . . . . . . . . . . . . . . 74
Section 1304. Modification by Unanimous Consent. . . . . . . . . . . 75
Article 14 - Miscellaneous
Section 1401. Consents, etc., of Bondholders . . . . . . . . . . . . 75
Section 1402. Limitation of Rights . . . . . . . . . . . . . . . . . 75
Section 1403. Severability . . . . . . . . . . . . . . . . . . . . . 75
Section 1404. Notices. . . . . . . . . . . . . . . . . . . . . . . . 75
Section 1405. Payments Due on Saturdays, Sundays
and Holidays . . . . . . . . . . . . . . . . . . . . . 76
Section 1406. Extent of Issuer Covenants; No
Personal Liability . . . . . . . . . . . . . . . . . . 76
Section 1407. Bonds Owned by Issuer or Borrower. . . . . . . . . . . 76
Section 1408. Captions; Index. . . . . . . . . . . . . . . . . . . . 76
Section 1409. Instruments of Further Assurance;
Recordings and Filing. . . . . . . . . . . . . . . . . 77
Section 1410. Exculpation of Related Persons of
Borrower . . . . . . . . . . . . . . . . . . . . . . . 77
Section 1411. Counterparts . . . . . . . . . . . . . . . . . . . . . 77
Section 1412. Governing Law; Sealed Instrument . . . . . . . . . . . 77
Section 1413. Agreements to Constitute Covenants . . . . . . . . . . 77
Section 1414. Confirmation of Original Agreement . . . . . . . . . . 77
Exhibit 301 Form of Bonds
- iv -
<PAGE>
AMENDED AND RESTATED
LOAN AND TRUST AGREEMENT
This AMENDED AND RESTATED LOAN AND TRUST AGREEMENT (as from time to
time in effect, the "Agreement") is entered into as of June 27, 1991 by the
Massachusetts Port Authority (the "Issuer"), a body politic and corporate
and a public instrumentality of The Commonwealth of Massachusetts (the
"Commonwealth") duly created by Chapter 465 of the Acts of 1956 of the
Commonwealth, as heretofore amended and supplemented (as so amended and
supplemented, the "Enabling Act"), Logan Harborside Associates II Limited
partnership, a Massachusetts limited partnership (the "Borrower"), and
Shawmut Bank, N.A., a national banking association, as trustee (with its
successors and, where the context may require, any separate Trustee or Co-
Trustee appointed by the Trustee pursuant to the provisions of this
Agreement, the "Trustee").
Terms defined in this Agreement are used as defined herein. Unless
otherwise indicated, references to Articles or Sections refer to this
Agreement.
RECITALS
Pursuant to a Loan and Trust Agreement dated as of December 15, 1990,
as amended (the "Original Agreement"), among the Issuer, the Borrower and
the Trustee, the Issuer duly issued $40,000,000 principal amount of special
project revenue bonds (the "Bonds", which term includes bonds issued in
replacement or exchange for Bonds and excludes Bonds for which the Trustee
is holding payment under Section 510 hereof). The proceeds of the Bonds
were loaned (the "Loan") by the Issuer to the Borrower to finance the
Project (as defined herein), subject to the provision that such proceeds
were required to be held in escrow until the Remarketing Date established
under Section 405 of the original Agreement. Effective as of the
Remarketing Date, viz. June 27, 1991, the original Agreement is amended and
restated to be this Agreement.
All things necessary to make the Bonds, when authenticated, the
binding, limited obligations of the Issuer and to create a valid lien and
pledge as herein provided have been accomplished; and the execution and
delivery of this Agreement and the issuance of the Bonds have been duly
authorized.
In consideration of the mutual agreements and representations
contained in this Agreement and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby agree,
covenant, grant, pledge, assign, represent and warrant as follows (it being
understood and
<PAGE>
agreed that the performance of the agreements of the Issuer herein
contained and any obligation it may incur for the payment of money shall
not constitute a general obligation of the Issuer or the Commonwealth or a
debt or a pledge of the faith and credit of the Issuer or the Commonwealth
or any political subdivision or municipality thereof but shall be payable
solely from the revenues and funds provided under this Agreement, the
Credit Enhancement Agreement and the Borrower Security Instruments):
PART I: PLEDGE AND ASSIGNMENT; DEFINITIONS
-------------------------------------------
Article 1 - Granting Clause of Borrower and Pledge and Assignment of Issuer
In order to secure the due payment of principal of, premium, if any,
and interest on the Bonds and the compliance by the Borrower and the Issuer
with their agreements contained in this Agreement:
Section 101. GRANTING CLAUSE OF BORROWER. For and in consideration of
the Loan made hereunder to the Borrower, the Borrower as debtor does by
these presents freely grant, pledge and assign to the Trustee, its
successors and assigns forever, for the benefit of the Bondholders and
hereby creates in the Trustee, its successors and assigns, as secured party
for the benefit of the Bondholders a security interest under the Uniform
Commercial Code to the maximum extent possible in all right, title and
interest of the Borrower in and to the Pledged Receipts upon the terms and
trusts herein set forth for the benefit, security and protection of all
present and future holders of all Bonds from time to time issued under and
secured by this Agreement.
Section 102. PLEDGE AND ASSIGNMENT OF ISSUER. In order to secure the
due payment of principal of, premium, if any, and interest on the Bonds and
compliance by the Issuer with its agreements contained in this Agreement
the Issuer hereby grants, pledges and assigns to the Trustee for the
benefit of the Bondholders all of its right, title and interest in and to
the Pledged Receipts and all of the Issuer's right, title and interest in
this Agreement, including enforcement rights and remedies but excepting
from such grant, pledge and assignment the right of the Issuer to any
payment or reimbursement pursuant to Section 1001D or Section 1003 and its
rights under the third sentence of Section 1110 and excepting any amounts
on deposit in the Rebate Fund; and provided that the Issuer shall retain an
independent right (but no obligation) to enforce against the Borrower
compliance with the provisions of Section 1004 hereof; and provided that
the pledge hereunder shall not transfer any rights or remedies under the
Ground Lease, the Credit Enhancement
-2-
<PAGE>
Agreement or any other statement or instrument other than this Agreement.
Section 103. DEFEASANCE OF LIEN; TERMINATION OF BORROWERS OBLIGATIONS
ON THE LOAN. When (i) the Issuer has paid or has been deemed to have paid,
within the meaning of this Section 103, to the holders of all of the Bonds
the principal and interest and premium, if any, due or to become due
thereon at the times and in the manner stipulated therein and herein and
(ii) all Additional Payments have been paid or provided for to the
satisfaction of the Issuer and the Trustee, the lien of this Agreement on
the Trust Estate shall terminate and the Borrower's obligations with
respect to the Loan shall terminate, except that, notwithstanding
termination of the lien hereof, the obligations of the Borrower to make all
payments required by Section 504 and of any other party hereto to take any
other action under Section 504 shall continue until all such obligations
have been paid in full. Upon the Borrower's written request, the Trustee
shall upon the termination of the lien hereof promptly execute and deliver
to the Borrower and the Issuer an appropriate discharge hereof except that,
subject to the provisions of this Agreement, the Trustee shall continue to
hold in trust amounts held pursuant to Section 510 for the payment of the
principal of, premium, if any, and interest on the Bonds and moneys held
for rebate to the United States of America under Section 148(f) of the
Code.
All the outstanding Bonds shall be deemed to have been paid within
the meaning of this Section 103 if the Trustee shall have paid to the
holders of such Bonds, or pursuant to Section 510 or 1105 shall be holding
in trust for and shall have irrevocably committed to the payment of the
Outstanding Bonds sufficient moneys for the payment of all principal of and
interest and premium, if any, on such Bonds to the date of maturity or
redemption, as the case may be; provided, that if any of such Bonds are
deemed to have been paid prior to the earlier of the redemption or the
maturity thereof, the Trustee shall have received an unqualified opinion of
Bond Counsel that such payment and the holding thereof by the Trustee shall
not in and of itself cause interest on the Bonds to be included in gross
income for federal income tax purposes; and provided, further, that if any
such Bonds are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been duly given or irrevocable provision satisfactory
to the Trustee shall have been duly made for the giving of such notice.
Any moneys held by the Trustee in the manner provided by the
provisions of this Section 103 shall be invested by the Trustee in the
manner provided by Section 506 (but only to the extent that such
investments are available) only in United States Obligations which do not
contain provisions permitting redemption
-3-
<PAGE>
at the option of the issuer, the maturities or redemption dates, without
premium, of which shall coincide as nearly as practicable with, but not be
later than, the time or times at which said moneys will be required for the
aforesaid purposes. The making of any such investments or the sale or other
liquidation thereof shall not be subject to the control of the Issuer or
the Borrower, and the Trustee shall have no responsibility for any losses
resulting from such investment. Any income or interest earned by, or
increment to, the investments held under this Section 103, to the extent
determined from time to time by the Trustee to be in excess of the amount
required to be held by it for the purposes of this Section 103, shall be
paid to the Borrower.
After all of the outstanding Bonds shall be deemed to have been paid
and all other amounts required to be paid under this Agreement shall have
been paid, then upon the termination of this Agreement (a) any amounts in
the Equity Reserve Fund shall be paid to the Credit Enhancer and (b) any
amounts in the Project Fund, the Bond Fund, the Revenue Fund, the Debt
Service Reserve Fund, the Supplemental Equity Fund and the Construction and
Operating Costs Contingency Fund, shall be paid to the Credit Enhancer to
the extent necessary to repay any unpaid Obligations as defined in the
Credit Enhancement Agreement, and thereafter the remainder, if any, shall
be paid to the Borrower.
Article 2 - Definitions
The following terms as used in this Agreement, the Bonds and any
certificate or document executed in connection therewith shall have the
following meanings (or are defined elsewhere in this Agreement as indicated
below) unless the context otherwise indicates:
"Account" means any of the Capitalized Interest Account, the Costs of
Remarketing Account or the Construction Account of the Project Fund.
"Additional Payments" means the amounts required to be paid by the
Borrower under Section 1001D.
"AEW Trust" means J. Grant Monahan, Charles R. Burd, II and Joseph
Azrack, not individually but as trustees under AEW #158 Trust.
"Annual Scheduled Redemption Obligation" -- See Section 1001B.
"Authorization" means, collectively, the letter dated May 16, 1986
from the Internal Revenue Service to Macomber
-4-
<PAGE>
Development Associates and Section 1317(5) (C) of the Tax Reform Act of
1986.
"Authorized Borrower Representative" means the person or each
alternate designated to act for the Borrower by written certificate
furnished to the Issuer and the Trustee, containing the specimen signature
of such person and signed on behalf of the Borrower by the Chairman or
President of the general partner or the Borrower.
"Bankruptcy" means the filing of a petition in bankruptcy (or the
commencement of a bankruptcy, a general assignment for the benefit of
creditors, a receivership or similar proceeding) by or against the Borrower
or by the Issuer under any applicable bankruptcy, insolvency,
reorganization or similar law now or hereafter in effect which, in the case
of a proceeding brought against the Borrower, is not dismissed within 90
days.
"Basic Agreement" means each of this Agreement, the Bonds, the
Contract of Purchase, the Remarketing Agreement, the Disbursement
Agreement, the Borrower Security Instruments and the Hyatt Subordination
Agreement.
"Beneficial Owner" -- See Section 306.
"Bond Counsel" means Ropes & Gray or any other attorney at law or a
firm of attorneys reasonably acceptable to the Trustee of nationally
recognized standing in matters pertaining to the validity of and the
tax-exempt nature or interest on bonds issued by states and their political
subdivisions, duly admitted to the practice of law before the highest court
of any state of the United States of America.
"Bond Fund" -- See Section 502.
"Bond Fund Balance" -- See Section 1001B.
"Bondholder" or "holder" means, as of any time, the registered owner
of any Bond as shown in the register kept by the Trustee as bond registrar.
"Bonds" -- See Recitals in this Agreement.
"Bond Year" means any one-year period ending on March 31.
"Borrower" -- See Recitals in this Agreement.
"Borrower Affiliate" shall mean (a) a "substantial user" of the
project or a "related person" to any such "substantial user", within the
meaning of such terms under Section 147(a) of the
-5-
<PAGE>
Code, or (b) any other Person purchasing Bonds with funds furnished by a
Borrower Affiliate.
"Borrower Security Instruments" means each of the Leasehold Mortgage,
the Collateral Assignment of Leases, Contracts, Licenses, Permits,
Agreements, Warranties and Approvals dated as of December 15, 1990 by the
Borrower in favor of the Trustee, the Collateral Assignment of Management
Agreement dated as of December 15, 1990 by the Borrower in favor of the
Trustee, the Collateral Assignment of Rents and Leases dated as of December
15, 1990 by the Borrower in favor of the Trustee and such additional or
supplemental mortgages, security agreements, conditional assignments,
subordination agreements, guarantees and similar instruments as the
Borrower or any other Person from time to time may enter into in favor of
the Trustee for the purpose of securing or supporting the obligations of
the Borrower under this Agreement and which shall be identified as
"Borrower Security Instruments" for the purpose of this Agreement by
written agreement of the Borrower and the Trustee, each as from time to
time in effect.
"Business Day" means any day other than a Saturday, Sunday or other
day on which the New York Stock Exchange is closed or on which banks are
authorized or required to be closed in any of the City of Boston,
Massachusetts, or any other municipality in which the principal offices of
the Trustee are located.
"Capitalized Interest Account" means the Capitalized Interest Account
of the Project Fund established under Section 501.
"Cash Flow Available for Debt Service" means for any period all
amounts remitted by Hyatt Corporation to the Borrower in respect of such
period pursuant to Section 4.3 of the Hyatt Management Agreement minus the
amount of Rent accruing during such period; provided, however, that if the
Hyatt Management Agreement expires or is terminated, "Cash Flow Available
for Debt Service" thereafter shall mean for any period an amount equal to
the Project's "Funds Available Before Other Obligations (Income)"
calculated as provided in the statement of "Projected Debt Service
Coverage" set forth at pages 15 and 16 of the Remarketing Official
Statement relating to the Bonds dated June 27, 1991 minus the amount of
incentive management fees, if any, accruing for such period.
"Closing Date" means the date of delivery of the Bonds to the
Underwriter against payment therefor.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended, and any regulations promulgated thereunder, including without
limitation any Treasury Regulations or
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Temporary or Proposed Regulations, as the same shall from time to time be
amended including (until modified, amended or superseded) Treasury
Regulations or Temporary or Proposed Regulations under the Internal Revenue
Code of 1954, as amended.
"Commonwealth" -- See first paragraph of this Agreement.
"Completion Certificate" -- See Section 602.
"Completion Date" shall mean the earlier to occur of (i) the date on
which the acquisition, construction, equipping and furnishing of the
Project are completed substantially in accordance with the Authorization
and the Plans and (ii) the date of abandonment of the Project.
"Construction Account" means the Construction Account of the Project
Fund established under Section 501.
"Construction and Operating Costs Contingency Fund" -- See Section
505.
"Construction Inspector" shall have the meaning provided therefor
under the Disbursement Agreement.
"Contract of Purchase" means the Contract of Purchase dated December
27, 1990 among the Issuer, the Borrower and the Underwriter, including the
Letter of Representation and Indemnification dated December 31, 1990 from
the Borrower to the Issuer and the Underwriter.
"Costs of Collection" means all attorneys' reasonable fees and out-
of-pocket expenses incurred by the Trustee and all costs and expenses
associated with travel on behalf of the Trustee, which costs and expenses
are directly or indirectly related to the Trustee's efforts to collect or
enforce the Bonds, this Agreement or the Borrower Security Instruments, or
any of the Trustee's rights, remedies, powers, privileges, or discretion
against or in respect of the Borrower thereunder (whether or not suit is
instituted in connection with any of the foregoing).
"Costs of Remarketing Account" means the Costs of Remarketing Account
of the Project Fund established under Section 501.
"Co-Trustee" means any Co-Trustee appointed by the Trustee pursuant
to the provisions of Section 1211.
"Credit Enhancement Account" means the account of that name
established under Section 4 of the Credit Enhancement Agreement.
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"Credit Enhancement Agreement" means the Credit Enhancement Agreement
dated as of June 27, 1991 among the Borrower, the Trustee and the Credit
Enhancer, as from time to time in effect.
"Credit Enhancement Fee" means the fee of $150,000 per annum provided
under Section 3.2 of the Credit Enhancement Agreement.
"Credit Enhancement Termination Date" means the first date on which
the principal balance of the Debt Service Reserve Fund (calculated as
provided in Section 506 hereof) shall be equal to or more than the
aggregate principal amount of the Bonds then outstanding.
"Credit Enhancer" means the Massachusetts Port Authority, not as the
Issuer hereunder but as the provider of credit enhancement under the Credit
Enhancement Agreement.
"Debt Service Coverage Ratio" means for any year the ratio calculated
by dividing the Cash Flow Available for Debt Service for such year by the
maximum amount of principal of and interest on the Bonds (initially
$4,420,000) payable during any twelve-month period commencing on March 2
and ending on (and including) March 1 in any year.
"Debt Service Reserve Fund" -- See Section 503.
"Default" means any Event of Default or any event or condition which,
with the passage of time or giving of notice or both, would constitute an
Event of Default.
"Determination of Taxability" -- See Section 401(c).
"Disbursement Agreement" means the Disbursement Agreement dated as of
December 15, 1990 between the Borrower and the Trustee, as amended as of
June 27, 1991 and as from time to time in effect.
"DTC" -- See Section 306.
"Enabling Act" -- See first paragraph of this Agreement.
"Equity Costs Certificate" shall have the meaning provided therefor
in the Credit Enhancement Agreement.
"Equity Reserve Fund" -- See Section 505A.
"Estimated Completion Date" means July 1, 1993.
"Event of Default" -- See Section 1101.
"Excess Earnings" -- See Section 504.
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"Final Computation Date" -- See Section 504.
"Fund" means any of the Project Fund, the Bond Fund, the Revenue
Fund, the Debt Service Reserve Fund, the Rebate Fund, the Construction and
Operating Costs Contingency Fund, the Equity Reserve Fund and the
Supplemental Equity Fund.
"Gross proceeds" -- See Section 504.
"Ground Lease" means the lease dated as of May 1, 1983 between the
Issuer, as ground lessor, and Massachusetts Technology Center Associates,
as ground lessee, as amended and restated by the Ground Lease for Phase C
of the Bird Island Flats Development dated as of September 15, 1990 between
the Issuer, as ground lessor, and the Borrower, as ground lessee, as
affected by the Landlord's Consent and Estoppel Certificate dated as of
December 15, 1990 by the Issuer, as ground lessor, for the benefit of the
Trustee and as amended by the Ground Lease Amendment dated as of June 27,
1991 between the Issuer, as ground lessor, and the Borrower, as ground
lessee, and as from time to time in effect.
"Hyatt Management Agreement" means the Management Agreement (Logan
Airport) dated as of February 1, 1990 (in the preamble thereof) between the
Borrower and Hyatt Corporation, as amended as of June 27, 1991 and as from
time to time in effect.
"Hyatt Subordination Agreement" means the Subordination, Non-
Disturbance and Attornment Agreement dated as of December 15, 1990 between
Hyatt Corporation and the Trustee, as from time to time in effect.
"Initial Interest Period" means the period commencing on and
including the Closing Date to but excluding the Remarketing Date.
"Initial Purchaser or Purchasers" means the Underwriter and any other
purchaser or purchasers of the Bonds named in the Contract of Purchase.
"Interest Payment Date" means (a) the Remarketing Date and (b) March
1 and September 1 of each year thereafter, commencing March 1, 1992.
"Investment Property" -- See Section 504.
"Issuer" -- See first paragraph of this Agreement.
"Leasehold Mortgage" means the Leasehold Mortgage and Security
Agreement dated as of December 15, 1990 by the Borrower in favor of the
Trustee, as from time to time in effect.
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"Loan" -- See Recitals in this Agreement.
"Majority of the Bondholders" means the holders of more than 50
percent of the aggregate principal amount of outstanding Bonds.
"Moody's" means Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, its
successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "Moody's" shall be deemed to refer to any other nationally
recognized securities rating agency designated by the Trustee, with the
approval of the Borrower, by notice to the Issuer.
"Nonpurpose Investments" -- See Section 504.
"Notice Address" means:
(a) As to the Borrower: Logan Harborside Associates II
Limited Partnership
c/o Macomber Development Associates
One Main Street
Cambridge, Massachusetts 02142
Attn: Managing Partner
(b) As to the Issuer: Massachusetts Port Authority
Ten Park Plaza
Boston, Massachusetts 02116
Attn: Chief Legal Counsel
(c) As to the Trustee: Shawmut Bank, N.A.
Corporate Trust Department
(31st Floor)
One Federal Street
Boston, Massachusetts 02211
Attn: Lee E. MacDonald, AVP
(d) As to the AEW Trust: AEW #158 Trust
c/o Aldrich, Eastman Waitch, Inc.
265 Franklin Street
Boston, MassachusettS 02110
or such other address or addresses as any such party shall designate
by notice actually received by the addressor.
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"Official Statement" means, collectively, the official Statement
relating to the Bonds dated December 27, 1990 and the Remarketing official
Statement relating to the Bonds dated June 27, 1991.
"Original Agreement" -- See Recitals in this Agreement.
"Outstanding Bonds" or "Bonds outstanding" means the amount of
principal of the Bonds which has not at the time been paid, exclusive of
(a) Bonds in lieu of which others have been authenticated under Section
305, (b) principal of any Bond which has become due (whether by maturity,
call for redemption or otherwise) and for which provision for payment as
required herein has been made, and (c) for purposes of any direction,
consent or waiver under this Agreement or under any other Basic Agreement,
Bonds deemed not to be outstanding pursuant to Section 1407.
"Paying Agent" means the Trustee or any other paying agent appointed
in accordance with Section 1210 hereof.
"Payment Date" means each Interest Payment Date, Principal Payment
Date or any other date on which any principal of, premium, if any, or
interest on any Bond is due and payable for any reason, including without
limitation upon any redemption of Bonds pursuant to Section 401.
"Person" means a corporation, association, partnership, joint
venture, trust, organization, business, individual or government or any
governmental agency or political subdivision thereof.
"Plans" shall have the meaning provided therefor under the Leasehold
Mortgage.
"Pledged Receipts" means the Loan and all payments and other revenues
received or receivable by the Issuer, or the Trustee for the account of the
Issuer, in respect of the Loan, including without limitation moneys,
investments and proceeds in the Project Fund, the Revenue Fund, the Bond
Fund, the Debt Service Reserve Fund, the Construction and Operating Costs
Contingency Fund, the Equity Reserve Fund and the Supplemental Equity Fund,
except for amounts in the Rebate Fund and payments to the Issuer under
subsections (i) and (ii) of Section 1001D or under Section 1003, and
subject to the provisions of Section 510 regarding moneys for the benefit
of the holders of particular Bonds.
"Principal Payment Date" means March 1 of each year in which
principal of the Bonds is due and payable.
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"Project" means the acquisition, construction, equipping and
furnishing of a 270-room conference center and hotel on approximately six
acres of land at Boston-Logan International Airport in Boston,
Massachusetts leased by the Borrower, as ground lessee, from the Issuer, as
ground lessor, under the Ground Lease.
"Project Fund" -- See Section 501.
"Qualified Investments" means (i) United States Obligations (ii)
certificates or receipts representing direct ownership of future interest
or principal payments on United States Obligations held by a custodian in
safekeeping on behalf of the holders of such certificates or receipts;
(iii) certificates of deposit or banker's acceptances or interest-bearing
deposits of the Trustee, banks affiliated with the Trustee and banks or
trust companies organized under the laws of the United States of America or
any state thereof, which have capital and surplus of at least $100,000,000
and a rating on their commercial paper of not less than prime-one or A-1 or
their equivalents by Moody's or S&P; (iv) variable rate demand obligations
commercial paper or finance company paper, including that of any affiliate
of the Trustee, in each case rated in the highest short-term category by
Moody's or S&P; (v) bonds, obligations or commercial paper of the District
of Columbia, any territory of the United States of America or any state of
the United States of America or of any political subdivision or other
instrumentality of the foregoing, the interest on which is excluded from
gross income for federal income tax purposes and which are rated in one of
the two highest categories (without regard to pluses or minuses) for such
securities by Moody's or S&P; (vi) shares of any open-end diversified
investment company registered under the Investment Company Act of 1940, as
amended, or any other so-called "money market fund" which, in either case,
maintains a constant net asset value per share in accordance with
regulations of the Securities and Exchange Commission, has aggregate net
assets of not less than $50,000,000 on the date of purchase, and to the
extent practicable and in accordance with its investment guidelines invests
85% of its assets in investments of the types described in clauses (i),
(ii), (iii) and (iv) above or unrated securities of the types described
above if such assets are of comparable quality, provided that the purchase
of any shares in any particular investment company shall be limited to an
aggregate amount owned at any time of not more than $2,000,000; (vii)
shares of any open-end diversified investment company registered under the
Investment Company Act of 1940, as amended, which maintains a constant net
asset value per share in accordance with regulations of the Securities and
Exchange Commission, has aggregate net assets of not less than $50,000,000
on the date of purchase, and either derives at least 35% of its gross
income from interest on or gains from the sale
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of investments of the types described in clause (v) above or unrated
securities of the types described in clause (v) if such assets are of
comparable quality or has at least 85% of the weighted average value of its
assets invested in investments of such types, provided that the purchase of
any shares in any particular investment company shall be limited to an
aggregate amount owned at any time of $2,000,000; (viii) Qualified
Repurchase Agreements with respect to securities described in clause (i) or
(ii) above or clause (xi) below; (ix) in the case of funds in an aggregate
amount of $100,000 or less, an interest-bearing account in a bank or trust
company described in clause (iii) above, the interest on which is payable
at least as often as quarterly and withdrawal from which is unrestricted as
to prior notice; (x) bonds, debentures, notes or other evidences of
indebtedness issued or guaranteed by any agency or instrumentality of the
United States now existing or hereafter created; (xi) bonds, debentures,
notes or other evidences of indebtedness issued by United States
corporations and mortgaged-back securities, which in each case are rated
not less than "Aa" or "AA" or their equivalent by Moody's or S&P; and (xii)
if required to keep the Bonds from becoming "arbitrage bonds" under Section
148 of the Code, obligations not deemed to be "investment property" under
Section 148 of the Code which are rated by either Moody's or S&P in either
of its two highest long term or short term credit rating categories
(without regard to pluses or minuses); provided as to all of the foregoing
(a) that such investment or deposit is not prohibited by federal or state
ranking laws applicable to the Trustee and (b) that such investment or
deposit would not result in an imputed receipt within the meaning of the
Temporary Regulations under Section 148 of the Code.
"Qualified Repurchase Agreement" with respect to any subject
securities means a repurchase agreement collateralized by such subject
securities with any registered broker/dealer or with any commercial bank,
provided that (a) a specific written repurchase agreement governs the
transaction; (b) the subject securities are held, free and clear of any
lien, by the Trustee or an independent third party acting solely as agent
for the Trustee and such third party is (i) a Federal Reserve Bank or (ii)
a bank which is a member of the Federal Deposit Insurance Corporation and
which has combined capital, surplus and undivided profits of not less than
$25,000,000, and the Trustee shall have received written confirmation from
such third party that it holds such subject securities, free and clear of
any lien, as agent for the Trustee; (c) the repurchase agreement has a term
of 30 days or less, or the Trustee will value the subject securities no
less frequently than monthly and will liquidate the collateral securities
if any deficiency in the required collateral percentage is not restored
within five Business Days of such valuation; and (d) the fair market value
of the subject
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securities in relation to the amount of the repurchase obligation,
including principal and interest, is equal to at least 102%.
"Rebate Fund" -- See Section 504.
"Rebate Payment Date" -- See Section 504.
"Record Date" means with respect to each Payment Date the close of
business on the fifteenth day of the month immediately preceding the month
in which such Payment Date occurs.
"Remarketing Agent" means Goldman, Sachs & Co.
"Remarketing Agreement" means the Remarketing Agreement dated June
27, 1991 among the Borrower, the Issuer and the Remarketing Agent,
including the Letter of Representation and Indemnification dated June 27,
1991 from the Borrower to the Issuer and the Remarketing Agent, each as
from time to time in effect.
"Remarketing Date" means June 27, 1991.
"Rent" means for any period all Base Rent, Contingent Rent,
Additional Contingent Rent and Parking Rent (each as defined in the Ground
Lease) accruing during such period.
"Required Debt Service Reserve Amount" means the least of (a) 10% of
the proceeds of the Bonds, (b) 100% of the maximum annual debt service on
the Outstanding Bonds, and (c) 125% of the average of the annual principal
and interest requirements on the outstanding Bonds.
"Revenue Fund" -- See Section 502A.
"Semiannual Interest Obligation" -- See Section 1001B.
"Shawmut Base Rate" means the per annum rate of interest from time to
time announced by Shawmut Bank, N.A. at its principal office in Boston,
Massachusetts as its Corporate Base Rate.
"S&P" means Standard & Poor's Corporation, a corporation organized
and existing under the laws of the State of New York, its successors and
assigns, and, if such corporation shall be dissolved or liquidated or shall
no longer perform the functions of a securities rating agency, "S&P" shall
be deemed to refer to any other nationally recognized securities rating
agency designated by the Trustee, with the approval of the Borrower, by
notice to the Issuer.
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"Supplemental Equity Fund" -- See Section 505D.
"Taking" -- See Section 703.
"Tax Statement" means, collectively, the Borrower's certificates
containing representations, warranties and covenants as to certain tax
matters dated the Closing Date and the Remarketing Date and signed by the
Borrower.
"Trust Estate" means the Pledged Receipts and other rights assigned
by the Issuer and the Borrower to the Trustee hereunder.
"Trustee" -- See first paragraph of this Agreement.
"Underwriter" means Goldman, Sachs & Co.
"Uniform Commercial Code" means Chapter 106 of the Massachusetts
General Laws, as amended.
"United States Obligations" means any bonds or obligations which as
to principal and interest constitute direct obligations of the united
States of America or the timely payment of principal of and interest on
which is guaranteed by the United States of America.
"Yield" -- See Section 504.
Any reference in this Agreement to the Borrower, the Issuer or the
Trustee shall include those which succeed to their functions, duties or
responsibilities pursuant to or by operation of law or who are lawfully
performing their functions. Any reference in this Agreement to any statute
or law or chapter or section thereof shall include all amendments,
supplements or successor provisions thereto.
PART II: THE BONDS
--------------------
Article 3 - The Bonds
Section 301. ISSUANCE OF BONDS, DATES. MATURITIES AND INTEREST. The
Bonds shall be designated "Massachusetts Port Authority Special Project
Revenue Bonds, Series 1990 (Harborside Hyatt Conference Center and Hotel
Project)"; shall be issued in the original aggregate principal amount of
$40,000,000; shall be substantially in the form set forth in Exhibit 301
attached hereto, with such variations, omissions and insertions as are
permitted or required hereby; and shall be dated December 31, 1990 if
authenticated prior to the first Interest Payment Date and otherwise shall
be dated as of the Interest Payment Date next preceding the date of their
authentication, except that if authenticated on an Interest Payment Date
they shall be dated as
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of such date of authentication; provided that if at the time of
authentication interest thereon is in default, they shall be dated as of
the date to which interest has been paid or if no interest has been paid,
they shall be dated as of December 31, 1990. Except to the extent otherwise
provided in Section 306 or made necessary as a result of a partial
redemption, the Bonds shall be issued in fully registered form without
coupons numbered from R-82 upwards in denominations of $100,000 or any
integral multiple thereof thereafter, and shall be registered in such names
as shall be requested by the Bondholders.
The Bonds shall be issued in a single series having a stated maturity
date of March 1, 2026. Interest on each Bond shall accrue from its dated
date, payable on each Interest Payment Date.
Section 302. RESERVED.
Section 303. EXECUTION; AUTHENTICATION. Bonds shall be executed on
behalf of the Issuer by the manual or facsimile official signature of the
Chairman, Vice Chairman or Executive Director of the Issuer. The official
seal (which may be facsimile) of the Issuer shall be impressed or imprinted
on all Bonds. In case any officer whose signature shall appear on the Bonds
shall cease to be such officer before the delivery of such Bonds, such
signature shall nevertheless be valid and sufficient for all purposes as if
he or she had remained in office until delivery and any Bonds may be signed
on behalf of the Issuer by such persons as, at the time of execution of
such Bond, shall be the proper officers of the Issuer, even though at the
date of such Bond or of the delivery of this Agreement such person was not
such officer.
No Bond shall be valid or obligatory until authenticated as provided
in Exhibit 301 by the Trustee. Such authentication shall be conclusive
evidence that such Bond has been authenticated and delivered hereunder. The
certificate of authentication on any Bond shall be deemed to have been
executed by the Trustee if manually signed by an authorized signatory of
the Trustee, but it shall not be necessary that the same individual sign
the certificate of authentication on all of the Bonds issued hereunder.
Section 304. INTEREST ON BONDS. The Bonds shall bear interest from
and including the date thereof until payment of the principal thereof shall
have been made or provided for in accordance with the provisions hereof,
whether at maturity, upon redemption or otherwise. The Bonds will bear
interest during the Initial Interest Period at the fixed rate of 6.5% per
annum to (but excluding) June 20, 1991 and at the fixed rate of 6.25% per
annum from (and including) June 20, 1991 to (but excluding) June
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27, 1991. From and after the Remarketing Date the Bonds will bear interest
at the fixed rate of 10% per annum. Interest on the Bonds in all cases will
be computed during the Initial Interest period on the basis of a 365-day
year and for actual days elapsed and thereafter on the basis of a 360-day
year consisting of twelve 30-day months. Interest will be payable as
provided in Exhibit 301.
Section 305. LOST BONDS. If any of the Bonds are lost, wrongfully
taken, mutilated, destroyed or improperly cancelled, the Issuer shall
authorize the issuance of new Bonds to replace them upon proof satisfactory
to the Issuer and the Trustee and (except in the case of mutilated or
improperly cancelled Bonds which are surrendered to the Trustee) upon
giving to the Issuer, the Trustee and the Borrower an indemnity bond in
such amount as the Issuer, the Trustee and the Borrower may require. Each
new Bond shall in all respects be identical with the mutilated, lost,
stolen, destroyed or improperly cancelled Bond. The Issuer and the Trustee
may impose reasonable charges in connection with the issuance of
replacement Bonds under this Section 305, which shall be for the account of
the Bondholders requesting the issuance of replacement Bonds.
Section 306. EXCHANGE AND TRANSFER OF BONDS; BOOK ENTRY SYSTEM. Upon
surrender of a Bond or Bonds at the corporate trust office of the Trustee,
as bond registrar, together with an assignment duly executed by the
Bondholder or his attorney or legal representative in such form and with
such guaranty of signature as shall be satisfactory to the Trustee, the
Bond or Bonds may be exchanged for fully registered Bonds of the same
maturity, aggregating in amount the then unpaid principal amount of the
Bond or Bonds surrendered, of authorized denominations.
As to any Bond, the Bondholder shall be deemed and regarded as the
absolute owner thereof for all purposes and none of the Issuer, the
Borrower or the Trustee shall be affected by any notice to the contrary.
At the option of the Bondholder, any Bond may be presented at the
corporate trust office of the Trustee for endorsement showing the balance
of principal due thereon and the date to which interest has been paid.
Any Bond may be transferred upon the books kept for the registration
and transfer of Bonds only upon surrender thereof to the Trustee, as bond
registrar, together with an assignment duly executed by the Bondholder or
his attorney or legal representative in such form and with such guaranty of
signature as shall be satisfactory to the Trustee; PROVIDED, that the
Trustee shall not be obliged to make any transfer of a Bond during the
period between a Record Date and the corresponding
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Interest Payment Date. Upon the transfer of any such Bond and on request of
the Trustee, the Issuer shall execute, and the Trustee shall authenticate
and deliver, a new Bond or Bonds, registered in the name of the transferee
or transferees, of the same maturity, aggregating in amount the then unpaid
principal amount of the Bond or Bonds surrendered, of authorized
denominations.
BY ACCEPTANCE OF ANY BOND, THE BONDHOLDER AGREES THAT IT WILL NOT
TRANSFER OR GRANT PARTICIPATIONS IN SUCH BOND IN DENOMINATIONS OF LESS THAN
$100,000.
In all cases in which Bonds shall be issued in exchange for or in
replacement of other Bonds, the Bonds to be issued shall be signed and
sealed on behalf of the Issuer, and authenticated by the Trustee as
provided in Section 303. The obligation of the Issuer and the rights of the
Bondholders with respect to such Bonds shall be the same as with respect to
the Bonds being exchanged or replaced. Such registrations of transfers or
exchanges of Bonds shall be without charge to the Bondholders, except that
any taxes or other governmental charges required to be paid with respect to
the same shall be paid by the Bondholder requesting such registration of
transfer or exchange as a condition precedent to the exercise of such
privilege. Any service charge made by the Trustee for any such
registration, transfer or exchange shall be paid by the Borrower.
Whenever any outstanding Bond shall be delivered to the Trustee for
cancellation pursuant to this Agreement, or for exchange or transfer
pursuant to this Section 306, such Bond shall be promptly cancelled and
destroyed by the Trustee and counterparts of a certificate of destruction
evidencing such destruction shall be retained by the Trustee and, if
requested by the Issuer or the Borrower, shall be furnished by the Trustee
to the Issuer or the Borrower, as the case may be.
The foregoing provisions of this Section 306 to the contrary
notwithstanding, following the Initial Interest Period the Bonds will be
issued on the Remarketing Date as one fully registered bond in the name of
Cede & Co., as nominee of The Depository Trust Company, New York, New York
("DTC"), and deposited in the custody of DTC. The actual purchasers of the
Bonds (the "Beneficial Owners") will not receive physical delivery of the
Bonds. Individual purchases of the Bonds may be made in book-entry form
only in principal amounts of $100,000 or any integral multiple thereof.
Principal and interest payments on the Bonds will be made to DTC or its
nominee as Bondholder.
DTC shall pay interest to the Beneficial Owners of record through its
participants as of the close of business on the Record Date. DTC shall pay
the redemption price of the Bonds called for redemption to the Beneficial
Owners of record through
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its participants as of the close of business 15 days prior to the date
fixed for redemption. The Trustee shall notify DTC, to the extent possible,
of any notice required to be given pursuant to this Agreement not less than
15 days prior to the date upon which such notice is required to be given.
Transfer of ownership interests in the Bonds shall be made by DTC and
its participants, acting as nominees of the Beneficial Owners, in
accordance with rules specified by DTC and its participants. There can be
no assurance that DTC, its participants or other nominees of the Beneficial
Owners will act in accordance with such rules or on a timely basis.
Bond certificates will be issued directly to owners of the Bonds
other than DTC, or its nominee, upon the occurrence of the following events
(subject, however, to operation of the two sentences following clause (c)
below):
(a) DTC determines not to continue to act as securities
depository for the Bonds; or
(b) the Borrower with the consent of the Issuer and the
Trustee has advised DTC of its determination that DTC is incapable of
discharging its duties; or
(c) the Borrower with the consent of the Issuer and the
Trustee has determined that it is in the best interest of the Bondholders
not to continue the book-entry system of transfer or that interests of the
beneficial owners of the Bonds might be adversely affected if the book-
entry system of transfer is continued.
Upon occurrence of the event described in (a) or (b) above the Borrower
shall attempt to locate another qualified securities depository. If the
Borrower fails to locate another qualified securities depository to replace
DTC, the Trustee shall authenticate and deliver Bonds in certificated form.
In the event the Borrower makes the determination noted in (b) or (c) above
(as to which the Borrower undertakes no obligation to make any
investigation to determine the occurrence of any events that would permit
the Borrower to make any such determination), and has made provisions to
notify the beneficial owners of the Bonds by mailing an appropriate notice
to DTC, the Borrower shall cause the Trustee to authenticate and deliver
Bonds in certificated form pursuant to Exhibit 301 of this Agreement to any
DTC participants making such a request. Principal of and interest on the
Bonds shall be payable as otherwise provided in this Article 3. The Bonds
will be transferable in accordance with this Section 306.
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Section 307. TEMPORARY BONDS. Pending the preparation of definitive
Bonds, the Issuer may execute, and upon its request in writing, the Trustee
shall authenticate and deliver one or more printed, lithographed
or-typewritten temporary Bonds (including temporary Bonds printed by offset
or photocopying). Temporary Bonds shall be issuable as registered Bonds
without coupons, of any authorized denomination, and substantially in the
form of definitive Bonds but with such omissions, insertions and variations
as may be appropriate for temporary Bonds, all as may be determined by the
Issuer. Temporary Bonds may contain such reference to any provisions of
this Agreement as may be appropriate. Every temporary Bond shall be
executed by the Issuer and be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with like effect, as
the definitive Bonds. As promptly as practicable the Issuer shall execute
and shall furnish definitive registered Bonds without coupons and thereupon
temporary Bonds may be surrendered in exchange therefor without charge at
the corporate trust office of the Trustee, and the Trustee shall
authenticate and deliver in exchange for such temporary Bonds a like
aggregate principal amount of definitive Bonds of authorized denominations.
Until so exchanged the temporary Bonds shall be entitled to the same
benefits under this Agreement as definitive Bonds.
Article 4 - Redemption of Bonds Before Maturity
Section 401. REDEMPTION OF BONDS. The Bonds shall be subject to
redemption prior to maturity as follows:
(a) OPTIONAL REDEMPTION. The Bonds shall be subject to redemption
prior to stated maturity on and after March 1, 2001 by the Issuer, at the
written direction of the Borrower upon not less than 35 days' notice to the
Trustee in whole on any date or in part on any Payment Date (but in the
case of a partial redemption prior to the Credit Enhancement Termination
Date only so long as the amount on deposit in the Equity Reserve Fund shall
equal or exceed the aggregate amount to be paid thereto under Section 3.2
of the Credit Enhancement Agreement without regard to any deferral or
limitation permitted thereunder) in the amount of $100,000 or any integral
multiple thereof, at the following redemption price (expressed as a
percentage of the principal amount of the Bonds, or portion thereof, to be
redeemed), plus accrued interest to the redemption date:
Redemption Period Redemption
(both dates inclusive) Price
---------------------- ----------
March 1, 2001 through February 28, 2002 102%
March 1, 2002 through February 28, 2003 101%
March 1, 2003 and thereafter 100%
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(b) EXTRAORDINARY OPTIONAL REDEMPTION. The Bonds may be redeemed in
whole but not in part by the Issuer at any time, at the written direction
of the Borrower upon not less than 35 days' notice to the Trustee, at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest thereon to the redemption date, without premium, under any of the
following conditions:
(i) The Project shall have been damaged or destroyed to such
extent that, in the reasonable judgment of the Borrower (A) the Project
cannot be reasonably restored within a period of six months from the date
of such damage or destruction, or (B) the Borrower is thereby prevented
from carrying on its normal operation of the Project for a period of six
months from the date of such damage or destruction; or
(ii) Title to, or the temporary use of all or a substantial
part of the Project shall have been taken or condemned by a competent
authority, which taking or condemnation results or is likely to result in
the Borrower being thereby prevented or likely to be prevented from
carrying on its normal operation of the Project for a period of six months;
or
(iii) As a result of changes in the Constitution of the United
States of America or of the Commonwealth or of legislative or
administrative action (whether state or federal) or by final decree or
judgment of any court or administrative body (whether state or federal),
the Bonds or this Agreement become void or unenforceable or impossible of
performance in accordance with the intent and purpose of the parties as
expressed therein or herein.
(c) MANDATORY REDEMPTION. The Bonds shall be subject to mandatory
redemption as provided in this Section 401(c):
(i) The Bonds shall be redeemed in part on any date from
moneys remaining in the Project Fund upon the completion of the Project, to
the extent required under Section 501C, at a redemption price equal to 100%
of the principal amount redeemed plus accrued interest thereon to the
redemption date, without premium.
(ii) The Bonds shall be redeemed in part on any date from
proceeds of casualty insurance or Takings deposited with the Bond Fund for
such purpose pursuant to SectiOns 502(e) and 702 or 703 at a redemption
price equal to 100% of the principal amount redeemed plus accrued interest
thereon to the redemption date, without premium.
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(iii) The Bonds shall be redeemed in part on March 1 in each
year, commencing March 1, 2001, at a redemption price equal to 100% of the
principal amount redeemed plus accrued interest thereon to the redemption
date, without premium, in the principal amount set forth below next to such
date:
DATE AMOUNT
---- ------
March 1, 2001 $ 400,000
March 1, 2002 400,000
March 1, 2003 400,000
March 1, 2004 500,000
March 1, 2005 500,000
March 1, 2006 600,000
March 1, 2007 600,000
March 1, 2008 700,000
March 1, 2009 800,000
March 1, 2010 900,000
March 1, 2011 1,000,000
March 1, 2012 1,000,000
March 1, 2013 1,100,000
March 1, 2014 1,300,000
March 1, 2015 1,400,000
March 1, 2016 1,500,000
March 1, 2017 1,700,000
March 1, 2018 1,900,000
March 1, 2019 2,000,000
March 1, 2020 2,200,000
March 1, 2021 2,500,000
March 1, 2022 2,700,000
March 1, 2023 3,000,000
March 1, 2024 3,300,000
March 1, 2025 3,600,000
leaving the principal amount of $4,000,000 due and payable on the
stated maturity date of March 1, 2026.
The requirements of clause (iii) of this Section 401(c) are
subject, however, to the provision that any partial redemption of Bonds
under Section 401(a) or under clause (i) or (ii) of this Section 401(c)
shall reduce the mandatory scheduled redemption requirements of clause
(iii) of this Section 401(c) as provided in this paragraph. In the event of
a partial redemption of Bonds under Section 401(a) or under clause (i) or
(ii) of this Section 401(c), the Trustee shall allocate the principal
amount redeemed among the scheduled redemptions provided in clause (iii) of
this Section 401(c) in a manner which, as nearly as practicable, will
maintain the average life to maturity of the Bonds. Such allocations shall
be made only in units of $100,000. Each such allocation by the Trustee
shall, in
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the absence of manifest error, be conclusive and binding upon the
Issuer, the Borrower, the Trustee and the Bondholders. The Trustee promptly
shall give notice of each such allocation by written statement setting
forth the revised schedule of mandatory redemptions under clause (iii) of
this Section 401(c) by mail to the Issuer, the Borrower and each
Bondholder.
(iv) In the event of the occurrence of a Determination of
Taxability, the Bonds shall be redeemed in whole on a date selected by the
Borrower not later than 180 days following such occurrence at a redemption
price equal to 102% of the outstanding principal amount thereof plus
accrued interest thereon to the redemption date. In the event of such
redemption, all funds held under this Agreement other than amounts on
deposit in the Rebate Fund and funds necessary to pay Additional Payments
shall be available to pay principal of and premium and interest on the
Bonds. As used herein, a "Determination of Taxability" shall be deemed to
occur if a final decree or judgment of any federal court or a final action
of the Internal Revenue Service determines that interest paid or payable on
any Bond is or was includable in the gross income of a Bondholder for
federal income tax purposes under the Code (other than a holder who is a
substantial user or related person within the meaning of Section 147(a) of
the Code) due to any action taken or omitted to be taken by the Borrower or
the Issuer. No such decree, judgment or action will be considered final for
this purpose, however, unless the Borrower or the Issuer has been given
notice, and, if it is so desired and is legally allowed, has been afforded
the opportunity to contest the same, either directly or in the name of any
Bondholder, and until conclusion of any appellate review, if sought. If the
Trustee receives written notice from any Bondholder stating that such
Bondholder has been notified in writing by the Internal Revenue Service
that it proposes to include the interest on such Bond in the gross income
of such holder for the reasons described herein or any other proceeding has
been instituted against such holder which may lead to a final decree,
judgment or action as described herein, then the Trustee shall promptly
give notice thereof to the Borrower, the Issuer and each Bondholder. Such
holder will afford the Borrower the opportunity to contest such claim or
proceeding, either directly or in the name of such holder, until conclusion
of any appellate review, if sought. The Trustee shall thereafter coordinate
any similar requests or notices it may have received from other Bondholders
and shall keep them informed of the progress of any administrative
proceedings or litigation.
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Section 402. SELECTION OF BONDS TO BE REDEEMED. A redemption of Bonds
shall be a redemption of the whole or of any part of the Bonds, provided,
that there shall be no partial redemption of less than $100,000. If less
than all the Bonds shall be called for redemption under any provision of
this Agreement permitting such partial redemption the particular Bonds to
be redeemed shall be selected by the Trustee, in such manner as the Trustee
in its discretion may deem fair and appropriate; provided, however (a) that
the portion of any Bond to be redeemed under any provision of this
Agreement shall be in the principal amount of $100,000 or any multiple
thereof, (b) that, in selecting Bonds for redemption, the Trustee shall
treat each Bond as representing that number of Bonds which is obtained by
dividing the principal amount of such Bond by $100,000 and (c) that, to the
extent practicable, the Trustee will not select any Bond for partial
redemption if the amount of such Bond remaining outstanding would be
reduced by such partial redemption to less than $100,000. If there shall be
called for redemption less than all of a Bond, the Issuer shall execute and
deliver and the Trustee shall authenticate, upon surrender of such Bond,
and at the expense of the Borrower and without charge to the owner thereof,
a replacement Bond in the principal amount of the unredeemed balance of the
Bond so surrendered.
At its option, to be exercised on or before the 60th day next
preceding any mandatory scheduled redemption date pursuant to Section
401(c) (iii), the Borrower may deliver to the Trustee for cancellation
Bonds in any aggregate principal amount which have been purchased by the
Borrower in the open market. Each Bond 50 delivered shall be credited by
the Trustee at 100% of the principal amount thereof against the mandatory
scheduled redemption requirement provided in Section 401(c) (iii) on such
mandatory redemption date and against the monthly Loan payments required to
be made with respect to such mandatory scheduled redemption requirement
under Section 1001B; and any excess of such amount shall be credited
against future mandatory scheduled redemption requirements and against the
corresponding portions of the monthly Loan payments in chronological order.
The Borrower, will, on or before the 60th day preceding each mandatory
scheduled redemption date, furnish the Trustee with a certificate, signed
by an Authorized Borrower Representative, stating the extent to which the
provisions of the first sentence of this paragraph are to be availed of
with respect to such mandatory redemption requirements for such mandatory
redemption date; unless such certificate is so timely furnished to the
Trustee, the mandatory redemption requirements provided for such date in
Section 401(c) (iii) and the corresponding portions of the monthly Loan
payments shall not be reduced under the provisions of this paragraph.
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Section 403. PROCEDURE FOR REDEMPTION.
(a) In the event any of the Bonds are called for redemption, the
Trustee shall give notice, in the name of the Issuer, of the redemption of
such Bonds, which notice shall (i) specify the Bonds to be redeemed, the
redemption date, the redemption price, and the place or places where
amounts due upon such redemption will be payable (which shall be the
corporate trust office of the Trustee) and, if less than all of the Bonds
are to be redeemed, the numbers of the Bonds, and the portions of the
Bonds, so to be redeemed, (ii) state any condition to such redemption, and
(iii) state that on the redemption date, and upon the satisfaction of any
such condition, the Bonds to be redeemed shall cease to-bear interest.
CUSIP number identification shall accompany all redemption notices. Such
notice may set forth any additional information relating to such
redemption. Such notice shall be given by registered or certified mail at
least 30 days (or, in the case of acceleration of the Bonds pursuant to
Section 1102, seven days) but not more than 60 days prior to the date fixed
for redemption to each Registered Owner of Bonds to be redeemed at its
address shown on the registration books kept by the TrUstee provided,
however, that failure to give such notice to any Bondholder or any defect
in such notice shall not affect the validity of the proceedings for the
redemption of any of the other Bonds.
Except at any time during which all of the Bonds are registered in
the name of Cede & Co., notice of such redemption also shall be sent by
registered mail, overnight delivery service or other similar means, postage
prepaid, to the municipal registered securities depositories named below
which are known to the Trustee to be holding Bonds and to at least two of
the national information services named below that disseminate securities
redemption notices, when possible, at least five days prior to the mailing
of notices required by the first paragraph above, but in any event at least
30 days (or, in the case of acceleration of the Bonds pursuant to Section
1102, seven days) and not more than 60 days prior to the redemption date;
provided that neither failure to receive such notice nor any defect in
any-notice so mailed shall affect the sufficiency of the proceedings for
the redemption of such Bonds.
Securities depositories include The Depository Trust Company, 711
Stewart Avenue, Garden City, New York 11530, Fax- (516) 227-4039 or 4190;
Midwest Securities Trust Company, Capital structures-Call Notification, 440
South LaSalle Street, Chicago, Illinois 60605, Fax-(312) 663-2343; Pacific
Securities Depository Trust Company, Pacific and Company, P.O. Box 7041,
San Francisco, California 94120, Fax-(415) 393-4123; Philadelphia
Depository Trust Company, Reorganization Division, 1900 Market Street,
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Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax-(215)
496-5058 or, in accordance with the then current guidelines of the
Securities and Exchange Commission, to such other addresses and/or such
other securities depositories or any such other depositories as the Issuer
may designate in writing to the Trustee.
Information services include Financial Information, Inc. "Daily
Called Bond Service", 30 Montgomery Street, 10th Floor, Jersey City, New
Jersey 07302, Attention: Editor; Kenny Information Services, "Called Bond
Service", 65 Broad Street, 19th Floor, New York, New York 10006-2504;
Moody's Investors Service "Municipal and Government", 99 Church Street, 8th
Floor, New York, New York 10007, Attention: Municipal News Reports;
Standard and Poor's Corporation "Called Bond Record", 25 Broadway, New
York, New York 10004; or, in accordance with then current guideline of the
Securities and Exchange Commission, to such other addresses and/or such
other services providing information with respect to called bonds, or any
other such services as the Issuer may designate in writing to the Trustee.
(b) Any Bonds and portions of Bonds which have been duly selected
for redemption and which are paid in accordance with Section 510 shall
cease to bear interest on the specified redemption date.
Article 5 - Source and Application of Funds
Section 501. PROJECT FUND. A Project Fund is hereby established by
the Issuer with the Trustee. Within the Project Fund there are hereby
established three separate accounts, viz., the Capitalized Interest
Account, the Costs of Remarketing Account and the Construction Account.
A. SOURCE AND DISBURSEMENTS. Not later than one day following the
Remarketing Date, the funds on deposit in the Escrow Account established
under the Original Agreement shall be applied as follows: (1) $38,333.33
(on the Remarketing Date) to pay interest on the Bonds to the existing
holders thereof, (2) $4,000,000 to be deposited into the Debt Service
Reserve, (3) $36,000,000 to be deposited into the Project Fund and (4) the
remainder to be deposited into the Rebate Fund. The $36,000,000 deposited
into the Project fund shall be allocated as follows: $8,044,444 to be
deposited in the Capitalized Interest Account, $800,000 to be deposited in
the Costs of Remarketing Account and the remainder to be deposited in the
Construction Account.
(a) DISBURSEMENTS FROM CAPITALIZED INTEREST ACCOUNT. Not
later than 12:00 noon, Eastern time, on the Business Day next preceding
each March 1 and September 1, commencing March 1, 1992 and ending on the
March 1 or September 1 next
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preceding the Estimated Completion Date, the Trustee shall withdraw
from the Capitalized Interest Account and deposit into the Bond Fund an
amount which, together with any funds then on deposit in- the Bond Fund,
shall be sufficient to pay all interest due on the Bonds on such March 1 or
September 1. Payment of such amount in full under this Section 501A shall
satisfy the obligation of the Borrower to make such payment under Section
1001A. Prior to the Completion Date, all investment earnings on the
Capitalized Interest Account shall be transferred when realized to the
Construction Account. In addition, in the event that the Borrower shall
give the Trustee written notice that the Borrower expects the acquisition,
construction, equipping and furnishing of the Project to be completed by a
date prior to the Estimated Completion Date, which notice shall specify the
new expected Completion Date and shall be accompanied by a certificate of
the Construction Inspector that it is reasonable to expect the Project to
be completed by such date, then the Trustee shall calculate the amount
required to be retained in the Capitalized Interest Account in order to
provide for the payment of interest on the Bonds through the new expected
Completion Date (taking into account earnings on investments of such
amount, to the extent that such investments actually have been made) and
shall transfer to the Construction Account an amount equal to the positive
difference, if any, between the amount then on deposit in the Capitalized
Interest Account and the amount required to be retained as provided above.
(b) DISBURSEMENTS FROM COSTS OF REMARKETING ACCOUNT. Not
later than one day following the Remarketing Date, the Trustee shall
transfer from the Costs of Remarketing Account to the Construction and
Operating Costs Contingency Fund the sum of up to $500,496.70, representing
reimbursement and recontribution to the Project of costs of issuance and
remarketing identified in the Equity Costs Certificate, and shall
distribute the remainder of the funds in the Costs of Remarketing Account
as instructed by the Borrower.
(c) DISBURSEMENTS FROM CONSTRUCTION ACCOUNT. Not later than
one day following the Remarketing Date, there shall be transferred from the
Construction Account to the Construction and Operating Costs Contingency
Fund the sum of up to $2,199,466.99, representing reimbursement and
recontribution to the Project of eligible project costs identified in the
Equity Costs Certificate. Disbursements from the Construction Account of
the Project Fund shall be applied for the payment or reimbursement of the
following costs:
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(i) Costs incurred directly or indirectly for or in
connection with the acquisition, construction, equipping or furnishing of
the Project, including preliminary planning and studies, architectural,
legal, engineering and supervisory services, other labor and services,
materials, acquisition and installation.
(ii) Any other incidental and necessary costs and expenses
relating to the acquisition, construction, equipping or furnishing of the
Project, including without limitation interest on the Bonds, if any,
accruing after the Estimated Completion Date and prior to the Completion
Date and not paid from the Capitalized Interest Account, but not including
"issuance costs" within the meaning of Section 147(g) (1) of the Code.
Such disbursements from the Construction Account shall be made only
as provided in and subject to the terms of the Disbursement Agreement.
Except as provided in the first sentence of this subsection (c), no funds
shall be disbursed from the Construction Account to pay or reimburse any
costs listed in the Equity Costs Certificate.
In addition, in the event that the Completion Date shall not have
occurred on or before the Estimated Completion Date, then on each date
thereafter occurring on or before the Completion Date on which a Loan
payment is due and payable under Section 1001A or 1001B, the Trustee
without need for requisition shall transfer from the Construction Account
to the Bond Fund such amount, if any, as shall be necessary to meet the
Loan payment required to be made on such date. Payment of any Loan payment
in full on any such date under this Section 501A shall satisfy the
obligation of the Borrower to make such payment under Section 1001B.
B. TRANSFER OF CAPITALIZED INTEREST ACCOUNT ON COMPLETION. On the
earlier of the Estimated Completion Date and the Completion Date, the
Trustee shall withdraw from the Capitalized Interest Account and deposit
into the Bond Fund an amount equal to the amount of interest on the Bonds
accrued through such date and unpaid, less any amount then on deposit in
the Bond Fund. Any amount remaining in the Capitalized Interest Account
shall be transferred to the Construction Account, and the Capitalized
Interest Account thereupon shall be closed.
C. TRANSFER OF CONSTRUCTION ACCOUNT ON COMPLETION. Except as
otherwise provided in the next-to-last sentence of this Section 501C, all
moneys in the Construction Account (including moneys earned thereon by
investment and amounts transferred from the Capitalized Interest Account
pursuant to Section 501B) remaining after the Completion Date shall
promptly at the written
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direction of an Authorized Borrower Representative be (i) paid into the
Bond Fund and applied promptly to redeem principal of the Bonds in
accordance with Section 401(c) (i) so as, to the extent possible, to
exhaust such amount, or (ii) paid into the Bond Fund and applied to pay
interest on the Bonds, or (iii) such combination of the foregoing as is
provided in such direction; provided that (a) before any funds are applied
pursuant to clause (ii) or (iii) of this Section 501C the Trustee shall
have received an opinion of Bond Counsel or a ruling of the Internal
Revenue Service that such payment will not adversely affect the exclusion
from gross income for federal income tax purposes of the interest paid on
the Bonds and (b) the Trustee shall give notice of any redemption of Bonds
pursuant to clause (i) or (iii) of this Section 501C to the Bondholders at
least 30 days prior to the redemption date and otherwise in accordance with
Section 403. However, amounts certified to the Trustee by the Authorized
Borrower Representative shall be retained in the Construction Account for
payment of costs referred to in Section 501A not yet due and payable. Any
such retained funds remaining after full payment of all such costs shall be
likewise applied as aforesaid.
D. BORROWER REQUIRED TO PAY COSTS IF PROJECT FUND INSUFFICIENT. If
the moneys in the Project Fund are not sufficient to pay in full the costs
to be paid therefrom, the Borrower agrees to complete the acquisition,
construction, equipping and furnishing of the Project and to pay all costs
therefor in excess of the moneys available in the Project Fund. The Issuer
makes no warranty, express or implied, that moneys paid into the Project
Fund or otherwise available to complete the Project will be sufficient to
pay all costs therefor.
Section 502. BOND FUND. A Bond Fund is hereby established by the
Issuer with the Trustee, and the Trustee is hereby appointed paying agent
for the Bonds. Moneys shall be deposited in the Bond Fund from time to time
and shall be applied solely as follows:
(a) [RESERVED]
(b) Upon completion of the Project or upon the occurrence of
other events specified in Section 501C, funds shall be transferred from the
Construction Account of the Project Fund to the Bond Fund and applied in
accordance with Section 501C.
(c) Loan payments by the Borrower pursuant to Sections 1001A
and 1001B, amounts transferred from the Reserve Fund pursuant to Section
502A, amounts transferred from the Capitalized Interest Account or
Construction Account of the Project Fund pursuant to Section 501A, amounts
transferred from the Debt Service Reserve Fund pursuant to
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Sections 503 (a), (b) and (c) , amounts transferred from the
Construction and Operating Costs Contingency Fund pursuant to Sections
505(a) and (b), amounts transferred from the Equity Reserve Fund pursuant
to Sections 505A(a) and (b), amounts transferred from the Supplemental
Equity Fund pursuant to Sections 505D(a), (b) and (d) and amounts
transferred from the Credit Enhancement Account pursuant to Sections
505B(b) and (c) shall be deposited into the Bond Fund and shall be applied
to pay principal of and interest on the Bonds as and when the same become
due.
(d) Sums for the redemption of Bonds as described in Section
401 shall be deposited into the Bond Fund. Such funds shall be applied to
make such redemptions.
(e) Proceeds from insurance or condemnation awards shall be
deposited in the Bond Fund to the extent provided in Section 702 or 703.
The Trustee shall apply the monies so deposited in the Bond Fund to redeem
the principal of the Bonds as provided in Section 403, without premium,
immediately upon the earliest practicable redemption date selected by the
Trustee for the redemption without further authorization from the Borrower
or the Issuer so as, to the extent possible, to exhaust such amount. Any
balance remaining after such application shall be applied to pay interest
on the Bonds.
(f) Sums received upon exercise of remedies by the Trustee or
the Issuer after an Event of Default (except sums received by the Issuer
pursuant to rights not assigned by the Issuer to the Trustee hereunder),
amounts transferred from the Revenue Fund as provided in the last sentence
of Section 502A, amounts transferred from the Debt Service Reserve Fund
pursuant to Section 503(d), amounts transferred from the Construction and
Operating Costs Contingency Fund pursuant to Section 505(c), amounts
transferred from the Equity Reserve Fund pursuant to Section 505A(c),
amounts transferred from the Supplemental Equity Fund pursuant to Section
505D(c) and amounts transferred from the Credit Enhancement Account
pursuant to Section 505B(d) shall be deposited in the Bond Fund. Such
monies shall be applied in accordance with the provisions of Section 1105.
Section 502A. REVENUE FUND. A Revenue Fund is hereby established by
the Issuer with the Trustee. All amounts remitted by Hyatt Corporation to
the Borrower pursuant to Section 4.3 of the Hyatt Management Agreement
shall be paid directly to the Trustee and deposited into the Revenue Fund.
The Borrower shall instruct Hyatt Corporation to make such payments
directly to the Trustee. In the event that the Hyatt Management Agreement
shall
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be terminated prior to the termination of this Agreement, the Borrower not
less frequently than monthly shall pay to the Trustee for deposit into the
Revenue Fund an amount equal to the sum of (i) the Funds Available Before
Other Obligations (Income) for such month calculated as provided in the
statement of "Projected Debt Service Coverage" set forth at pages 15 and 16
of the Remarketing Official Statement relating to the Bonds dated June 27,
1991 plus (ii) the amount of Rent accruing for such month. The Trustee
shall apply amounts in the Revenue Fund, not less often than monthly, as
follows:
(a) To pay Rent to the Issuer as lessor under the Ground
Lease, in such amounts as the Borrower from time to time shall notify the
Trustee in writing.
(b) To pay Loan payments required under Sections 1001A and
1001B.
(c) To pay Additional Payments required under Section 1001D.
(d) On or before the Credit Enhancement Termination Date, to
pay to the Trustee for deposit into the Equity Reserve Fund, or after the
Maximum Amount of Credit shall have been reduced to $500,000 to pay to the
Credit Enhancer directly,. the Credit Enhancement Fee under Section 3.2 of
the Credit Enhancement Agreement.
(e) To replenish the Debt Service Reserve Fund as provided in
Section 1001E.
(f) On or before the Credit Enhancement Termination Date, to
pay any amounts owing under Section 3.1 of the Credit Enhancement
Agreement.
(g) On or before the Credit Enhancement Termination Date, to
replenish the Equity Reserve Fund as provided in Section 1001F.
(h) On and after the Credit Enhancement Termination Date, to
pay any amounts due and payable but unpaid under Section 13(b) of the
Credit Enhancement Agreement.
(i) On or prior to the Credit Enhancement Termination Date,
in the event that the requirements for reducing the Maximum Amount of
Credit to $500,000 under Section 2.5(b) of the Credit Enhancement Agreement
shall have been met except for the condition that $500,000 shall be on
deposit in the Supplemental Equity Fund or in the event that the amount on
deposit therein subsequently shall have been reduced to less than $500,000
for any reason, to the
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supplemental Equity Fund to the extent necessary to increase the
amount on deposit therein to $500,000.
To the extent that as of-the close of business on the first Business Day in
March and September in any year, commencing on the first such date
following the Completion Date, there shall remain monies in the Revenue
Fund after satisfaction of all payments listed above through such date and
no Default shall exist hereunder (or, prior to the Credit Enhancement
Termination Date, under the Credit Enhancement Agreement) , then such
monies (excluding any portion thereof properly allocable to the accrued
portion of a future payment listed above) shall be distributed to the
Borrower. Payment by the Trustee under this Section 502A of an obligation
of the Borrower referred to above shall satisfy such obligation in the same
manner as if made by the Borrower directly. However, failure of the Trustee
to make any such payment shall not excuse the failure of the Borrower to
meet the obligation in question. Upon any acceleration under Section 1102,
the Trustee forthwith shall transfer all amounts in the Revenue Fund to the
Bond Fund to be applied as provided in Section 1105.
Section 503. DEBT SERVICE RESERVE FUND. A Debt Service Reserve Fund
is hereby established with the Trustee for the benefit of the Bondholders.
On the Remarketing Date an amount equal to the Required Debt Service
Reserve Amount shall be deposited in the Debt Service Reserve Fund; The
Trustee shall apply amounts held in the Debt Service Reserve Fund as
follows:
(a) The Trustee shall determine the value of the investments
and funds on deposit in the Debt Service Reserve Fund as of each March 31,
June 30, September 30 and December 31, commencing December 31, 1991, and on
such other dates as the Borrower shall request upon reasonable written
notice. Not later than 21 days following each such valuation, the Trustee
shall report to the Borrower the difference, if any, between (i) the value
of the investments and funds on deposit in the Debt Service Reserve Fund as
of such valuation date and (ii) the Required Debt Service Reserve Amount.
If such difference is positive, then on or before the applicable 21st day,
the Trustee shall withdraw an amount equal to such difference from the Debt
Service Reserve Fund and deposit the same, if the deposit is made on or
prior to the earlier of the Estimated Completion Date and the Completion
Date, into the Construction Account of the Project Fund or, if the deposit
is made after such date, into the Bond Fund. If such difference is
negative, the Borrower will replenish the Debt Service Reserve Fund as
provided in Section, 1001E.
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(b) In the event that as of the close of business on the
Business Day next preceding a Payment Date moneys held in the Bond Fund are
insufficient to pay the principal of and premium, if any, and interest on
the Bonds due and payable on such Payment Date, then immediately following
the opening of business on such Payment Date the Trustee shall transfer
from the Debt Service Reserve Fund to the Bond Fund an amount equal to the
lesser of (i) the amount of such insufficiency and (ii) the amount then on
deposit in the Debt Service Reserve Fund; provided that no such transfer
shall be made unless all of the Revenue Fund, the Construction and
Operating Costs Contingency Fund, the Equity Reserve Fund and the
Supplemental Equity Fund shall have been exhausted; and provided, further,
that no such transfer shall be made on or prior to the Completion Date
unless-the Project Fund shall have been exhausted.
(c) In the event that any Loan Payment required to be made
under Section 1001B shall not be made on the date due (whether directly by
the Borrower or pursuant to Section 501A or 502A), then on the next
succeeding Business Day the Trustee shall transfer from the Debt Service
Reserve Fund to the Bond Fund an amount equal to the lesser of (i) the
amount of such insufficiency and (ii) the amount then on deposit in the
Debt Service Reserve Fund; provided that no such transfer shall be made
unless all of the Revenue Fund; the Construction and Operating Costs
Contingency Fund, the Equity Reserve Fund and the Supplemental Equity Fund
shall have been exhausted; and provided, further, that no such transfer
shall be made on or prior to the Completion Date unless the Project Fund
shall have been exhausted.
(d) Upon any acceleration under Section 1102, the Trustee
forthwith shall transfer all amounts in the Debt Service Reserve Fund to
the Bond Fund to be applied as provided in Section 1105.
(e) In the event that the Borrower shall be unable to pay
from any other source amounts required to be deposited into the Rebate Fund
or paid to the United States of America under Section 504, then upon
written requisition therefor from the Borrower the Trustee shall transfer
from the Debt Service Reserve Fund to the Rebate Fund the amount required
to be deposited into the Rebate Fund or paid to the United States of
America under Section 504; provided, that no such transfer shall be made
unless no Default shall have occurred and be continuing (other than a
Default under Section 504) and unless the Trustee shall have been furnished
an opinion of Bond Counsel or a ruling of the Internal Revenue Service that
such application of funds in
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the Debt Service Reserve Fund would not adversely affect the
exclusion from gross income for federal tax purposes of the interest paid
on the Bonds.
(f) Upon receipt of written advice of Bond Counsel from time
to time stating that the principal amount of the Debt Service Reserve Fund
must be reduced in order to assure that the interest income on the Bonds
will not become subject to federal income taxation, stating that Bond
Counsel does not consider that any other means of protecting the tax-exempt
status of such interest income (such as restricting yield on amounts in the
Debt Service Reserve Fund, investing the same only in tax-exempt
obligations or other methods) is available and specifying the amount of the
reduction required, the Trustee promptly shall transfer to the Bond Fund
the amount so specified.
Section 504. REBATE FUND. The Borrower covenants that it shall take
all action necessary to comply with Section 148 of the Code, including the
payment when due of all amounts payable to the United States of America
thereunder, and shall refrain from taking any action contrary to Section
148 of the Code. For this purpose, a Rebate Fund has been established
pursuant to this Section 504, but to the extent any of the provisions of
this Section 504 are inconsistent with Section 148 of the Code, the
Borrower shall not be required to comply with such provisions but shall be
required to comply with Section 148 of the Code.
(a) ESTABLISHMENT. A Rebate Fund is hereby established with the
Trustee. Such Fund shall be for the sole benefit of the United States of
America and shall not be subject to the lien of this Agreement or to the
claim of any other Person, including without limitation the Bondholders and
the Issuer, and monies in such Fund shall not be commingled with moneys in
any other Fund or Account established under this Agreement. The Rebate Fund
is established for the purpose of compliance with Section 148(f) of the
Code. The Borrower and the Issuer agree that the requirements of this
Section 504 are subject to, and shall be interpreted in accordance with,
Section 148(f) of the Code.
(b) TRANSFERS TO REBATE FUND. Promptly following the close of each
Bond Year and also upon the final maturity date of the Bonds (the "Final
Computation Date"), the Trustee shall upon the direction of the Borrower as
prescribed in subsections (c) and (d) hereof:
(i) transfer to the Rebate Fund first, from the Project Fund,
and second, to the extent amounts in the project Fund are insufficient,
from the Bond Fund, and third, to the extent amounts in the Bond Fund are
insufficient, from (in order) the Construction and
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Operating Costs Contingency Fund, the Supplemental Equity Fund and
the Equity Reserve Fund, an amount (to the extent available) equal to the
Excess Earnings as determined by the Borrower under subsection (c) hereof
(less any amount already transferred to the Rebate Fund on account of such
period from the Escrow Account of the Project Fund pursuant to Section 405)
; and
(ii) pay to the United States of America, if then required by,
and otherwise in accordance with, the provisions of subsection (d) hereof,
such amounts from the Rebate Fund as the Borrower shall determine, or cause
to be determined, to be due. Any amounts due in excess of amounts in the
Rebate Fund shall be paid by the Borrower.
(c) CALCULATION OF EXCESS EARNINGS.
(i) Promptly upon the close of each month, and also promptly
after the Final Computation Date, or at such other times as may be
specified by the Borrower, the Trustee shall provide the Borrower with a
statement of earnings (for the period since the date of the immediately
preceding statement of earnings) on all Funds or accounts with respect to
the Bonds held in trust under this Agreement. The statement shall include
the purchase and sales prices of all Investment Property, the dates of each
investment transaction, information as to whether such transactions were
made at a discount or premium, and such other information known to the
Trustee as the Borrower shall reasonably require. Within 45 days after the
close of each Bond Year or after such Final Computation Date, as the case
may be, the Borrower shall thereupon determine or cause to be determined
the amount of Excess Earnings on all Gross Proceeds of the Bonds, whether
or not held hereunder invested in Investment Property as such terms are
used in Section 148 of the Code.
In general, "Excess Earnings" for any period of time means the
sum of (1) the excess of --
(A) the aggregate amount earned during such period of time on
all "Nonpurpose Investments" (including gains on the disposition of such
investments) in which "Gross Proceeds" of the issue are invested (other
than amounts attributable to an excess described in this subsection (c) (i)
(l)), over
(B) the amount that would have been earned during such period
of time if the "Yield" on such Nonpurpose Investments (other than amounts
attributable to an excess
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described in this subsection (c) (i) (1)) had been equal to the Yield
on the issue, plus
(2) any income during such period of time attributable to the excess
described in subsection (c) (i) (1) above, less (3) any amounts previously
rebated to the United States of America.
(ii) Except as may otherwise be provided by law, Excess
Earnings shall not include any earnings on obligations the interest on
which is excludable from federal gross income under Section 103 of the
Code. Further, Excess Earnings shall not include earnings on the Bond Fund
in any year in which (a) the Bond Fund constitutes a "bona fide debt
service fund" and (b) gross earnings on such fund are less than $100,000. A
"bona fide debt service fund" refers to any fund, or aggregation of funds
(except amounts funded or derived from original proceeds of the Bonds),
whether or not held by the Trustee, to be used primarily for the purpose of
achieving a proper matching of revenues and debt service on the Bonds
within each Bond Year, which funds are depleted to pay such debt service at
least once a year, except for a reasonable carryover (not to exceed the
greater of one year's earnings on such funds or one-twelfth of annual debt
service).
(iii)
(A) No later than 45 days after the close of each Bond Year
and after the Final Computation Date the Authorized Borrower Representative
shall provide a certificate to the Trustee that this subsection (c) has
been fully complied with and shall provide in support of such certification
a certificate of an independent certified public accountant or other
professional with experience in compliance with Section 148 of the Code as
to the accuracy of the Borrower's computations or such other evidence of
compliance as may be approved by the Trustee in advance or a certificate of
such accountant or other professional or an opinion of Bond Counsel that
there were no Excess Earnings required to be deposited into the Rebate
Fund.
(B) If, at the close of any Bond Year, the amount in the
Rebate Fund exceeds the amount that would be required to be paid to the
United States of America under subsection (d) below if the Bonds had been
paid in full, upon presentation by the Authorized Borrower Representative
of a certificate to that effect in a form satisfactory to the Trustee such
excess shall promptly be paid into the
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Project Fund or, if the Completion Certificate has been delivered, to
the Borrower.
(iv) The terms "Nonpurpose Investments", "Gross proceeds",
"Investment Property" and "Yield" shall have the meanings prescribed by
Section 148 of the Code and shall be applied in the manner prescribed in
such section.
(d) PAYMENT OF REBATE.
(i) On a date no later than 60 days after the close of last
day of the fifth Bond Year and each succeeding fifth Bond Year or at such
other times as the Borrower may specify with the concurrence of Bond
Counsel, or such other time as may be provided by law, the Trustee, at the
written direction of the Authorized Borrower Representative, shall pay to
the United States from amounts on deposit in the Rebate Fund at least the
amount required to be paid pursuant to the provisions of Section 148(f) of
the Code as calculated by or on behalf of the Borrower, provided that any
amount due in excess of amounts in the Rebate Fund shall be paid by the
Borrower. Within 60 days after the Final Computation Date, the Trustee, at
the written direction of the Authorized Borrower Representative, shall pay
to the United States of America from amounts on deposit in the Rebate Fund
100% of the entire amount then payable pursuant to this Section 148(f) of
the Code as calculated by or on behalf of the Borrower, provided that any
amount due in excess of amounts in the Rebate Fund shall be paid by the
Borrower. Unless otherwise provided by law, each payment shall be made to
the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255 or
any other address specified by the Internal Revenue Service, accompanied by
a copy of the applicable Form 8038-T and any additional materials that may
be required by law or regulation. Any officer of the Issuer is authorized
to execute a Form 8038-T for this purpose, but the preparation, accuracy
and completeness thereof are the sole responsibility of the Borrower.
(ii) No earlier than 60 days, or later than 35 days, before
each date on which a payment could become due under subsection (d) (i)
above (a "Rebate Payment Date"), the Trustee shall notify the Borrower at
its Notice Address by registered or certified mail, postage prepaid, or by
telegram, of its obligation to comply with the requirements of this
subsection (d).
(iii) Not later than 15 days prior to each Rebate Payment Date,
the Borrower shall deliver to the Trustee (A) a copy of the Form 8038-T
filed with respect to the Bonds,
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(B) a certificate of the Authorized Borrower Representative
summarizing the determination of the amount then required to be paid
pursuant to the subsection (d) (i) above and including the CUSIP number, if
any, for the Bond with the latest maturity for which there is a CUSIP
number, (C) a certificate of an independent certified public accountant as
to the accuracy of such determination or such other evidence of compliance
as may be approved by the Trustee in advance, and (D) if the amount then
held in the Rebate Fund is less than the amount so determined, an amount in
cash in funds available on such 15th day equal to the difference. Upon
receipt of such materials, the Trustee shall make the payment provided for
in subsection (d) (i) above. In the event that the Trustee shall not have
received all of such materials on or within five days following the date
specified in the first sentence of this subsection (d) (iii), it shall pay
over to the United States within the period prescribed in subsection (d)
(i) above all of the funds then held in the Rebate Fund and, if so provided
by the Borrower, the Form 8038-T.
(iv) In the event the Trustee fails to receive the materials
described in subsection (d) (iii) above, the Trustee will notify the
Borrower within five days at its Notice Address by registered or certified
mail, postage prepaid, or by telegram, of the following requirement: The
Borrower must provide to the Trustee within 90 days from the date of such
notice an unqualified opinion of Bond Counsel stating that no further
action by the Borrower or the Trustee 15 necessary for full compliance with
Section 148(f) of the Code or that the failure to comply was an "innocent
failure" as defined in the Code, such failure has been corrected and such
failure has not resulted and will not result in interest on the Bonds
becoming includable for federal tax purposes in the gross income of the
Bondholders. A copy of the notice and opinion referred to in the first
sentence of this subsection (d) (iv) shall also be sent by the Trustee
promptly by registered or certified mail, postage prepaid, or by telegram,
to each Bondholder at its address as it appears on the Bond registration
books.
(v) By agreeing to give the notices referred to in this
subsection (d) of this Section 504 and to make the payments referred to in
this Section 504, the Trustee assumes no responsibility whatsoever for
compliance by the Borrower with the requirements of Section 148(f) of the
Code. The Borrower and the Issuer each expressly agrees that
(notwithstanding any other provision of this Agreement) any failure of the
Trustee to give any such notice, for any reason whatsoever, shall not cause
the
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Trustee to be responsible for any failure of the Borrower to comply
with the requirements of said Section 148(f). The Trustee shall not be
responsible for making the calculations required to be made pursuant to
this Section 504, nor shall it have any responsibility to review the
correctness or accuracy of the calculations or for determining whether the
investment directions given by the Borrower comply with Section 148(f) of
the Code.
(e) CONCLUSIVE COMPLIANCE BY TRUSTEE. The Trustee shall be deemed
conclusively to have complied with the provisions of this Section if it
makes payments in accordance with the certifications and directions of the
Borrower provided in accordance with this Section 504. The Trustee shall
not be required to take any actions in connection with certifications from
the Borrower or in the absence of such certifications, except as required
by subsection (h) of this Section 504.
(f) RECORDS. The Borrower and Trustee, on behalf of the Issuer, and
the Issuer, shall keep such records as will enable them to fulfill their
respective responsibilities under this Section 504 and Section 148(f) of
the Code. For purposes of the computation required under this Section 504,
the Trustee shall make available to the Borrower and the Issuer during
normal business hours all information in the Trustee's control which is
necessary to such computations.
(g) THE ISSUER. The Issuer shall not take any action, or knowingly
omit to take any action within its control, which, if taken or omitted,
respectively, would violate its non-arbitrage certificate delivered upon
the initial issuance of the Bonds or any amendment thereof or supplement
thereto.
(h) ADDITIONAL DOCUMENTATION. Notwithstanding anything in this
Section 504 to the contrary, and in furtherance of the purposes of the last
sentence of Section 504(a), the Trustee, at the written direction of the
Borrower, will provide to the United States of America at such times and at
such places as the Borrower may direct such additional materials as the
Borrower may instruct the Trustee to deliver to the United States of
America; PROVIDED, HOWEVER, that the Trustee need take no action under this
subsection (h) unless the Borrower shall have delivered to the Trustee such
materials and the address or addresses to which such materials are to be
sent by the Trustee no later than 15 days prior to the date on which
delivery of such materials is to be received by the United States of
America.
(i) SECTION 504 SURVIVES DEFEASANCE OF AGREEMENT. This Section 504
as amended from time to time, shall survive the defeasance of this
Agreement with respect to the Bonds, and only upon (i) the retirement of
the Bonds or provision for the same
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pursuant to Section 103, (ii) the payment of all amounts due under Section
148 of the Code with respect to such Bonds, and (iii) presentation of a
certificate from the Borrower in a form satisfactory to the Trustee that
the provisions of Section 148 of the Code have been satisfied shall any
amounts remaining in the Rebate Fund be paid to the Borrower.
Section 505. CONSTRUCTION AND OPERATING COSTS CONTINGENCY FUND. There
is hereby established with the Trustee a Construction and operating Costs
Contingency Fund to be funded with moneys of the Borrower other than
proceeds of the issuance of the Bonds and to be held by the Trustee as part
of the Trust Estate. On the Remarketing Date, the Borrower shall deposit
with the Trustee for deposit into the Construction and Operating Costs
Contingency Fund the sum of $3,500,036.31 and not later than the day
following the Remarketing Date, as provided in Sections 501A(b) and (c),
the Trustee shall transfer from the Costs of Remarketing Account and the
Construction Account of the Project Fund for deposit into the Construction
and Operating Costs Contingency Fund the total sum of $2,699,963.69. In
addition, the Trustee is authorized and directed to accept from the
Borrower and deposit into the Construction and Operating Costs Contingency
Fund such additional amounts as the Borrower from time to time may transfer
to the Trustee for such purpose. The Trustee shall apply moneys held in the
Construction and operating Costs Contingency Fund as follows:
(a) In the event that any Loan payment required to be made
under Section 1001B shall not be made on the date due (whether directly by
the Borrower or pursuant to Section 501A or 502A), then on the next
succeeding Business Day the Trustee shall transfer from the Construction
and Operating Costs Contingency Fund to the Bond Fund an amount equal to
the lesser of (i) the amount of such insufficiency and (ii) the amount then
on deposit in the Construction and Operating Costs Contingency Fund;
provided that no such transfer shall be made unless the Revenue Fund shall
have been exhausted; and provided, further, that no such transfer shall be
made on or prior to the Completion Date unless the Project Fund shall have
been exhausted.
(b) In the event that as of 1:00 p.m. Eastern time on the
Business Day next preceding a Payment Date moneys held in the Bond Fund are
insufficient to pay the principal of and premium, if any, and interest on
the Bonds due and payable on such Payment Date, the Trustee shall transfer
from the Construction and Operating Costs Contingency Fund to the Bond Fund
an amount equal to the lesser of (i) the amount of such insufficiency and
(ii) the amount then on deposit in the Construction and Operating Costs
Contingency Fund; provided that no such transfer shall be made unless
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the Revenue Fund shall have been exhausted; and provided, further,
that no such transfer shall be made on or prior to the Completion Date
unless the Project Fund shall have been exhausted.
(c) Upon any acceleration under Section 1102, the Trustee
forthwith shall transfer all amounts in the Construction and Operating
Costs Contingency Fund to the Bond Fund to be applied as provided in
Section 1105.
(d) So long as no Default shall have occurred and be
continuing, the Trustee shall disburse funds in the Construction and
Operating Costs Contingency Fund to the Borrower for the purpose of paying
issuance costs in excess of those paid from the Costs of Remarketing
Account, for the purpose of paying costs of the acquisition, construction,
equipping and furnishing of the Project incurred prior to the Completion
Date or for the purpose of paying operating costs of the Project, all as
provided in and subject to the terms of the Disbursement Agreement;
provided, that no amount shall be disbursed from the construction and
Operating Costs Contingency Fund for any such purpose if the sum of (i) the
amount remaining in such Fund plus (ii) the aggregate amount theretofore
transferred from such Fund as provided in subsections (a) and (b) above
shall be less than $1,500,000 after giving effect to such disbursement,
except as otherwise agreed in writing by the Credit Enhancer in its sole
discretion.
The Borrower shall ensure that all amounts held in the Construction
and Operating Costs Contingency Fund shall be invested to produce a Yield
not higher than the Yield on the Bonds unless the Trustee is provided with
an opinion of Bond Counsel or a ruling of the Internal Revenue Service that
investment of such amounts without such restriction will not adversely
affect the exclusion from gross income for federal income tax purposes of
the interest paid on the Bonds. The Trustee shall furnish to the Issuer and
the Borrower a report as of March 31, June 30, September 30 and December 31
of each year detailing the receipts, disbursements and ending balance in
the Construction and Operating Costs Contingency Fund for the six-month
period ending on such date, such report to be delivered not later than 30
days following each such date.
Section 505A. EQUITY RESERVE FUND. There is hereby established with
the Trustee an Equity Reserve Fund to be held by the Trustee as part of the
Trust Estate. On the Remarketing Date, the Borrower shall pay to the
Trustee for deposit into the Equity Reserve Fund the sum of $300,000.
Thereafter, the Borrower shall pay to the Trustee for deposit into the
Equity Reserve Fund the amounts provided in Section 3.2 of the Credit
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Enhancement Agreement and in Section 1001F hereof. In addition, the Trustee
is authorized and directed to accept from the Borrower and deposit into the
Equity Reserve Fund such additional amounts as the Borrower from time to
time may transfer to the Trustee for such purpose. The Trustee shall apply
moneys held in the Equity Reserve Fund as follows:
(a) In the event that any Loan payment required to be made
under Section 1001B shall not be made on the date due (whether directly by
the Borrower or pursuant to Section 501A or 502A), then on the next
succeeding Business Day the Trustee shall transfer from the Equity Reserve
Fund an amount equal to the lesser of (i) the amount of such insufficiency
and (ii) the amount then on deposit in the Equity Reserve Fund; provided
that no such transfer shall be made unless the Revenue Fund, the
Construction and operating Costs Contingency Fund and the Supplemental
Equity Fund shall have been exhausted; and provided, further, that no such
transfer shall be made on or prior to the Completion Date unless the
Project Fund shall have been exhausted.
(b) In the event that as of 1:00 p.m. Eastern time on the
Business Day next preceding a Payment Date moneys held in the Bond Fund are
insufficient to pay the principal of and premium, if any, and interest on
the Bonds due and payable on such Payment Date, the Trustee shall transfer
from the Equity Reserve Fund to the Bond Fund an amount equal to the lesser
of (i) the amount of such insufficiency and (ii) the amount then on deposit
in the Equity Reserve Fund; provided that no such transfer shall be made
unless the Revenue Fund, the Construction and Operating Costs Contingency
Fund and the Supplemental Equity Fund shall have been exhausted; and
provided, further, that no such transfer shall be made on or prior to the
Completion Date unless the Project Fund shall have been exhausted.
(c) Upon any acceleration under Section 1102, the Trustee
forthwith shall transfer all amounts in the Equity Reserve Fund to be
applied as provided in Section 1105.
The Borrower shall ensure that all amounts held in the Equity Reserve
Fund shall be invested to produce a Yield not higher than the Yield on the
Bonds unless the Trustee is provided with an opinion of Bond Counsel or a
ruling of the Internal Revenue Service that investment of such amounts
without such restriction will not adversely affect the exclusion from gross
income for federal income tax purposes of the interest paid on the Bonds.
The Trustee shall furnish to the Issuer and the Borrower a report as of
March 31, June 30, September 30 and December 31 of each year detailing the
receipts, disbursements
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and ending balance in the Equity Reserve Fund for the six-month period
ending on such date, such report to be delivered not later than 21 days
following each such date.
Section 505B. CREDIT ENHANCEMENT ACCOUNT. Under Section 4 of the
Credit Enhancement Agreement, the Credit Enhancer has established a Credit
Enhancement Account with the Trustee to fund advances committed to be made
to pay debt service on the Bonds as provided in Section 2 of the Credit
Enhancement Agreement. The Credit Enhancement Account shall be administered
as provided in the Credit Enhancement Agreement. The Trustee shall apply
amounts held in the Credit Enhancement Account as follows:
(a) Investment earnings on the Credit Enhancement Account and
amounts equivalent to reductions in the Credit Enhancement Account shall be
paid to the Credit Enhancer as provided in Section 4 of the Credit
Enhancement Agreement free of any lien hereunder or thereunder.
(b) In the event that any Loan payment required to be made
under Section 1001B shall not be made on the date due (whether directly by
the Borrower or pursuant to section 501A or 502A), then on the next
succeeding Business Day the Trustee shall transfer from the Credit
Enhancement Account to the Bond Fund an amount equal to the least of (i)
the amount of such insufficiency, (ii) the Maximum Amount of Credit (as
defined in the Credit Enhancement Agreement) then in effect, and (iii) the
amount then on deposit in the Credit Enhancement Account; provided that no
such transfer shall be made unless all of the Revenue Fund, the
Construction and Operating Costs Contingency Fund, the Supplemental Equity
Fund, the Equity Reserve Fund and the Debt Service Reserve Fund shall have
been exhausted; and provided, further, that no such transfer shall be made
on or prior to the Completion Date unless the Project Fund shall have been
exhausted.
(c) In the event that as of 1:00 p.m. Eastern time on the
Business Day next preceding a Payment Date moneys held in the Bond Fund are
insufficient to pay the principal of - and premium, if any, and interest on
the Bonds due and payable on such Payment Date, the Trustee shall transfer
from the Credit Enhancement Account to the Bond Fund an amount equal to the
least of (i) the amount of such insufficiency, (ii) the Maximum Amount of
Credit (as defined in the Credit Enhancement Agreement) then in effect, and
(iii) the amount then on deposit in the Credit Enhancement Account;
provided that no such transfer shall be made unless all of the Revenue
Fund, the Construction and Operating Costs Contingency Fund, the
Supplemental Equity Fund, the Equity Reserve Fund and the Debt Service
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Reserve Fund shall have been exhausted; and provided, further, that
no such transfer shall be made on or prior to the Completion Date unless
the Project Fund shall have been exhausted.
(d) Upon any acceleration under Section 1102, the Trustee
forthwith shall transfer all amounts in the Credit Enhancement Account to
be applied as provided in Section 1105.
Each transfer for the Credit Enhancement Account pursuant to
subsection (b), (c) or (d) above shall constitute an advance to the
Borrower within the meaning of Sections 2 and 3 of the Credit Enhancement
Agreement.
Section 505C. CREDIT ENHANCEMENT REDUCTION AND TERMINATION.
(a) In the event that the Maximum Amount of Credit shall be
reduced to $500,000 as provided in Section 2.5(b) of the Credit Enhancement
Agreement, then on such date the lien of this Agreement upon the funds and
investments deposited to the account of the Construction and Operating
Costs Contingency Fund and the Equity Reserve Fund shall be terminated,
whereupon (i) all funds and investments in the Equity Reserve Fund shall be
transferred to the Credit Enhancer and (ii) the funds and investments in
the Construction and Operating Costs Contingency Fund shall be applied
first to the payment of all obligations of the Borrower owing to the Credit
Enhancer and the Trustee under the Credit Enhancement Agreement and the
remainder, if any, shall be paid to the Borrower.
(b) In addition, upon the occurrence of the Credit
Enhancement Termination Date, the lien of this Agreement and of the Credit
Enhancement Agreement upon the funds and investments deposited to the
account of the Construction and Operating Costs Contingency Fund and the
Equity Reserve Fund (if not previously terminated) and to the account of
the Supplemental Equity Fund and the Credit Enhancement Account shall be
terminated. Thereupon, (a) all funds and investments in the Credit
Enhancement Account shall be transferred to the Credit Enhancer, (b) all
funds and investments in the Equity Reserve Fund, if any, shall be applied
as provided in Section 3.2 of the Credit Enhancement Agreement and (c) the
funds and investments in the Construction and Operating Costs Contingency
Fund, if any, and in the Supplemental Equity Fund shall be applied first to
the payment of all obligations of the Borrower owing to the Credit Enhancer
and the Trustee under the
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Credit Enhancement Agreement and the remainder, if any, shall be paid
to the Borrower.
Section 505D. SUPPLEMENTAL EQUITY FUND. There is hereby established
with the Trustee a Supplemental Equity Fund to be held by the Trustee as
part of the Trust Estate. The Borrower shall pay to the Trustee for deposit
into the Supplemental Equity Fund the amounts provided in Section 6.5 of
the Credit Enhancement Agreement, and funds may be deposited therein as
provided in Section 502A(i) hereof. In addition, the Trustee is authorized
and directed to accept from the Borrower and deposit into the Supplemental
Equity Fund such additional amounts as the Borrower from time to time may
transfer to the Trustee for such purpose. The Trustee shall apply moneys
held in the Supplemental Equity Fund as follows:
(a) In the event that any Loan payment required to be made
under Section 1001B shall not be made on the date due (whether directly by
the Borrower or pursuant to Section 501A or 502A), then on the next
succeeding Business Day the Trustee shall transfer from the Supplemental
Equity Fund an amount equal to the lesser of (i) the amount of such
insufficiency and (ii) the amount then on deposit in the Supplemental
Equity Fund; provided that no such transfer shall be made unless the
Revenue Fund and the Construction and operating Costs Contingency Fund
shall have been exhausted; and provided, further, that no such transfer
shall be made on or prior to the Completion Date unless the Project Fund
shall been exhausted.
(b) In the event that as of 1:00 p.m. Eastern time on the
Business Day next preceding a Payment Date moneys held in the Bond Fund are
insufficient to pay the principal of and premium, if any, and interest on
the Bonds due and payable on such Payment Date, the Trustee shall transfer
from the Supplemental Equity Fund to the Bond Fund an amount equal to the
lesser of (i) the amount of such insufficiency and (ii) the amount then on
deposit in the Supplemental Equity Fund; provided that no such transfer
shall be made unless the Revenue Fund and the Construction and Operating
Costs Contingency Fund shall have been exhausted; and provided, further,
that no such transfer shall be made on or prior to the Completion Date
unless the Project Fund shall have been exhausted.
(c) Upon any acceleration under Section 1102, the Trustee
forthwith shall transfer all amounts in the Supplemental Equity Fund to be
applied as provided in Section 1105.
-45-
<PAGE>
(d) Commencing with the first such date following the
reduction of the Maximum Amount of Credit to $500,000 pursuant to Section
2.5(b) of the Credit Enhancement Agreement, the Trustee shall determine the
value of the investments and funds on deposit in the Supplemental Equity
Fund as of each March 31, June 30, September 30 and December 31. Not later
than 21 days following each such valuation, the Trustee shall report to the
Borrower the difference, if any, between (i) the value of the investments
and funds on deposit in the Supplemental Equity Fund as of such valuation
date and (ii) $500,000. If such difference is positive, then on or before
the applicable 21st day, the Trustee shall withdraw an amount equal to such
difference from the Supplemental Equity Fund and deposit the same into the
Bond Fund. If such difference is negative, the Borrower will replenish the
Supplemental Equity Fund not later than 180 days after the date of
withdrawal.
(e) Prior to the date on which the requirements for reducing
the Maximum Amount of Credit to $500,000 under Section 2.5(b) of the Credit
Enhancement Agreement shall have been met (excluding the condition that
$500,000 shall be on deposit in the Supplemental Equity Fund), funds on
deposit in the Supplemental Equity Fund may be used at the direction of the
Borrower to pay operating costs of the Project or Rent.
The Borrower shall ensure that all amounts held in the Supplemental
Equity Fund shall be invested to produce a Yield not higher than the Yield
on the Bonds unless the Trustee is provided with an opinion of Bond Counsel
or a ruling of the Internal Revenue Service that investment of such amounts
without such restriction will not adversely affect the exclusion from gross
income for federal income tax purposes of the interest paid on the Bonds.
The Trustee shall furnish to the Issuer and the Borrower a report as of
June 30 and December 31 of each year detailing the receipts, disbursements
and ending balance in the Supplemental Equity Fund for the six-month period
ending on such date, such report to be delivered not later than 21 days
following each such date.
Section 506. INVESTMENT OF MONEYS IN FUNDS. The Trustee shall
invest moneys in the Project Fund, the Bond Fund, the Revenue Fund, the
Debt Service Reserve Fund, the Construction and Operating Costs Contingency
Fund, the Equity Reserve Fund, the Supplemental Equity Fund and the Rebate
Fund in any Qualified Investments and shall sell or liquidate any such
investment, in each case upon the written direction of an Authorized
Borrower Representative, subject in each case to the restrictions on
investments set forth in this Section 506 and in other provisions
<PAGE>
of this Agreement. The Trustee shall have no responsibility for any losses
resulting from such investment or liquidations, nor shall the Trustee be
responsible if any payment is prohibited under Section 148 of the Code,
provided that the Trustee shall have complied with any investment
instructions delivered to it by Bond Counsel. Moneys in the Bond Fund and
the Debt Service reserve Fund shall be invested by the Trustee only in
United States Obligations and investments described in clause (ix) or (x)
of the definition of Qualified Investments and in Qualified Repurchase
Agreements with respect to United States Obligations or, in the case of the
Debt Service Reserve Fund, with respect to investments described in clause
(x) or (xi) of such definition, the maturities or redemption dates of all
of which shall coincide as nearly as practicable with, but not be later
than, the time or times at which said moneys will be required for the
purposes of this Agreement; and the investments in the Debt Service Reserve
Fund at no time shall have a weighted average life to maturity of more than
five years. Any investments pursuant to this Section 506 may be purchased
from the Trustee. The Trustee is authorized to sell or otherwise converted
into cash investments credited to any Fund or Account created under this
Agreement at the times and in the amounts necessary to meet payments when
due from such Fund or Account and shall include all proceeds from such
investments. No order of the Borrower shall restrict such authorization,
and the Trustee shall not be liable for any loss occurring from any such
sale or conversion to cash. Each Fund and Account shall include all
investments made from moneys credited to such Fund or Account and shall
include all proceeds from such investments. For purposes of this Agreement
(other than Section 507), such investments in the Debt Service Reserve Fund
shall be valued at amortized cost, and such investments in any other Fund
shall be valued at market value.
Section 507. MAXIMUM INVESTMENTS IN NONPURPOSE OBLIGATIONS. The
Borrower agrees, except as otherwise provided in Section 148(d) (3) of the
Code,
(i) at no time during any Bond Year shall the aggregate
amount of Gross Proceeds (within the meaning of Section 148(f) of the Code)
of the Bonds invested in Nonpurpose Investments (excluding, in accordance
with Section 148(d) (3) of the Code, Gross Proceeds invested during certain
temporary periods) with a Yield higher than the Yield on the Bonds exceed
150% of the debt service on the Bonds for such Bond Year, and
(ii) such aggregate amount of Gross Proceeds so invested
shall be promptly and appropriately reduced as the amount of outstanding
Bonds is reduced.
<PAGE>
The requirements of this Section 507 are subject to and shall be
interpreted in accordance with Section 148(d) (3) of the Code.
Section 508. AVOIDANCE OF ARBITRAGE. Each of the Issuer and the
Borrower agrees to restrict the use of Bond proceeds in such manner and to
such extent as necessary to assure that the Bonds will not constitute
arbitrage bonds under Section 148 of the Code. Any officer of the Issuer
(including its Chairman, Vice Chairman, Executive Director and Secretary-
Treasurer) having responsibility with respect to the issuance of the Bonds
is authorized and directed, alone or in conjunction with any other officer,
employee or consultant of the Issuer or the Borrower, to give inappropriate
certificate on behalf of the Issuer, for inclusion in the transcript of
proceedings for the Bonds, setting for the facts, estimates and
circumstances and reasonable expectations pertaining to Section 148 of the
Code.
Section 509. AUTHORIZED APPLICATION OF FUNDS; MONEYS TO BE HELD
IN TRUST. The Trustee is authorized to apply each Fund as provided in this
Agreement. All moneys deposited with the Trustee hereunder shall be held
by the Trustee in trust but need not be segregated from other funds except
as required by law or by this Agreement.
Section 510. NONPRESENTMENT OF BONDS. From and after any
Payment Date, if moneys sufficient to pay principal of, premium, if any,
and interest on any Bond then due have been deposited with the Trustee and
irrevocably committed thereto, all liability of the Issuer and the Borrower
for the payment of such amount shall forthwith cease in accordance with
Section 103. The Trustee shall hold such funds, without liability for
interest thereon, for the benefit of the registered owner of such Bond, who
shall thereafter be restricted exclusively to such funds for any claim with
respect to such amount. Unless otherwise required by law, any such funds
which remain unclaimed for three years after such due date shall be paid to
the Borrower without any interest thereon against written receipt therefor
executed on behalf of the Borrower, and neither the Issuer nor the Trustee
shall have any further responsibility with respect to such moneys.
Section 511. BONDS ARE NOT GENERAL OBLIGATIONS. The Bonds do
not now and shall never constitute a general obligation or debt or pledge
of the faith and credit of the Issuer, nor a debt or pledge of the faith
and credit of the Commonwealth or any political subdivision or municipality
thereof, and each covenant and undertaking by the Issuer herein, in the
Bonds and in any other Basic Agreement to make payments is not a general
obligation of the Issuer or a debt or a pledge of the faith and credit of
the Commonwealth or any political subdivision or municipality thereof. The
principal of and premium, if any, and
<PAGE>
interest on the Bonds is a limited obligation payable solely from the
revenues, Funds and Accounts specifically pledged hereunder and the Credit
Enhancement Account pledged under the Credit Enhancement Agreement.
Nothing herein shall be construed as requiring the Issuer to use any funds
or revenues from any source other than as described herein.
PART III: THE PROJECT
Article 6 - Completion of the Project
Section 601. BORROWER'S OBLIGATIONS TO COMPLETE PROJECT ETC.
The Borrower shall use its best efforts to cause the Project to be
completed as promptly as feasible and shall at its expense do or cause to
be done all things necessary or proper for such completion in material
compliance with applicable law and regulations. The Borrower shall make no
material changes in the Project as described in the Authorization.
Section 602. COMPLETION CERTIFICATE. Promptly following the
completion of the acquisition, construction, equipping and furnishing of
the Project the Borrower shall evidence such completion by furnishing to
the Trustee a Completion Certificate signed by the Authorized Borrower
Representative (i) stating that the Project has been completed
substantially in accordance with the Authorization and the Plans and all
costs then due and payable in connection therewith have been paid, and that
completion has been accomplished in such a manner as to conform with all
applicable zoning, planning, building, environmental and other regulations
of all governmental authorities having jurisdiction, as the same may be
amended by variance, except for such noncompliances which, singly or in the
aggregate, could not have a material adverse effect on the Project or its
operations, (ii) specifying the Completion Date, and (iii) stating that it
is given without prejudice to any rights against third parties which then
exist or may subsequentially come into being.
Article 7 - Operation of the Project
Section 701. COMPLIANCE WITH AUTHORIZATION. The Project is and
at all times while the Bonds are outstanding will be acquired, constructed,
equipped, furnished and operated substantially as described in the
Authorization, and the average maturity of the Bonds will not exceed 120%
of the average economic life of the Project.
Section 702. INSURANCE PROCEEDS. In the event of any casualty
causing damage to the Project there shall be no abatement or reduction in
the payments required to be made by the Borrower under this Agreement or
any other Basic Agreement.
<PAGE>
In the event of such a casualty, the Trustee agrees to act as
"Insurance Trustee" (as defined in Section 9.2 of the Ground Lease) and to
hold in a separate account and disburse insurance proceeds and other funds
provided for the repair, restoration or replacement of the damaged property
as provided in Section 9.2 of the Ground Lease and Paragraph 7 of the
Leasehold Mortgage, and the Borrower shall repair, restore or replace the
damaged property. Any insurance proceeds remaining after payment of all
costs of such repair, restoration or replacement shall, so long as no
Default under this Agreement, the Leasehold Mortgage or any other Basic
Agreement shall have occurred and be continuing, be paid to the Borrower,
subject,however, to any contrary requirements of the Leasehold Mortgage,
the Ground Lease or any instrument securing the obligations of the Borrower
under the Credit Enhancement Agreement. In the event that any portion the
insurance proceeds remaining after such repair, restoration or replacement
is required under Paragraph 7B(i) of the Leasehold Mortgage to be applied
to redeem Bonds, then such portion shall be deposited into the Bond Fund
and applied to redeem Bonds as provided in Sections 401(c) (ii) and 502(e).
Notwithstanding the foregoing, if on account of any casualty causing
damage to the Project the Ground Lease shall be terminated as provided
therein and as referred to in Paragraph 7B(ii) of the Leasehold Mortgage,
then the Borrower shall not be obligated to repair, restore or replace the
Project and all proceeds of insurance (after payment of any costs of
collection) shall be applied as follows: first, to the costs of removing
any remaining improvements and grading the leased premises in accordance
with Section 9.2 of the Ground Lease; second, any portion of the insurance
proceeds remaining shall be deposited into the Bond Fund and applied to
redeem Bonds as provided in Sections 401(c) (ii) and 502(e); and third the
balance of the insurance proceeds, if any, shall be applied in the
priorities specified in Paragraphs 7B(ii) (c) through (e) of the Leasehold
Mortgage.
Section 703. EMINENT DOMAIN PROCEEDS. Should the Project, or
any part thereof or interest therein, be taken or damaged by reason of any
public improvement or condemnation proceeding, or in any other similar
manner (a "Taking"), there shall be no abatement or reduction in the
payments required to be made by the Borrower under this Agreement or any
other Basic Agreement.
In the event of any such Taking, to the extent the Borrower is
required to repair, restore or replace the Project in accordance with the
Ground Lease and the Leasehold Mortgage, the proceeds of the Taking and any
additional funds provided shall be held in a separate account by the
Trustee and disbursed in the manner provided in Paragraphs 7B(i) and 13(b)
of the Leasehold Mortgage, and the Borrower shall repair, restore or
replace the
<PAGE>
Project. Any balance of the proceeds of such Taking remaining after
payment of all costs of such repair, restoration or replacement that are
distributable to the Issuer as ground lessor under Section 10.2 of the
Ground Lease shall be paid to the Issuer in its capacity as ground lessor.
the portion of such balance distributable to the Borrower under Section
10.2 of the Ground Lease shall be (i) paid to the Borrower if so provided
under Paragraph 13(b) of the Leasehold Mortgage and if no Default has
occurred and is continuing or (ii) otherwise, deposited into the Bond Fund
and applied to redeem Bonds as provided in Sections 401(c) (ii) and 502(e).
Notwithstanding the foregoing, if on account of any Taking the Ground
Lease shall be terminated as provided therein and as referred to in
Paragraph 13(a) or (c) of the Leasehold Mortgage, then the Borrower shall
not be obligated to restore the Project and the proceeds of the Taking
shall be applied as follows: first, to the costs of removing any
improvements and grading the leased premises to the extent provided in
Section 10.2 of the Ground Lease; second, any portion of such proceeds
remaining shall be deposited in the Bond Fund and applied to redeem Bonds
as provided in Sections 401(c) (i) and 502(e); and third, the balance of
the Taking proceeds, if any, shall be applied in the priorities specified
in Paragraphs 13(a) (ii) through (iv) of the Leasehold Mortgage.
PART IV: REPRESENTATIONS AND AGREEMENTS
OF ISSUER AND BORROWER
Article 8 - Representations and Agreements of Issuer
Section 801. DUE ORGANIZATION AND AUTHORIZATION OF BONDS. The
Issuer represents and warrants as follows:
(a) It is a body politic and corporate and a public
instrumentality of the Commonwealth validly existing under the Enabling
Act, with the power under and pursuant to the Enabling Act, to execute and
deliver the Remarketing Agreement and this Agreement, to perform its
obligations under each thereof and to issue and sell the Bonds pursuant
thereto.
(b) It has taken all necessary action and has complied
with all provisions of the Enabling Act, required to make this Agreement,
the Remarketing Agreement and the Bonds the valid obligations of the Issuer
which they purport to be; and, when executed and delivered by the parties
thereto, this Agreement and the Remarketing Agreement will constitute valid
and binding agreements of the Issuer and be enforceable in accordance with
their respective terms, except as enforceability may be subject to the
exercise of
<PAGE>
judicial discretion in accordance with general equitable principles and to
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws for the relief of debtors heretofore or hereafter enacted to the
extent that the same may be constitutionally applied.
(c) When delivered to and paid for by the purchasers
thereof in accordance with the terms of the Remarketing Agreement and this
Agreement, the Bonds will constitute valid and binding LIMITED obligation
of the Issuer enforceable in accordance with their terms, except as
enforceability may be subject to the exercise of judicial discretion in
accordance with general equitable principles and to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws for the relief of
debtors heretofore or hereafter enacted to the extent that the same may be
constitutionally applied, and will be entitled to the benefits of this
Agreement.
(d) The Issuer makes no representation or warranty that
interest on the Bonds is or will continue to be excludable from gross
income for federal or state income tax purposes.
Section 802. PAYMENT OF BONDS; TRUSTEE'S RIGHTS WITH RESPECT TO
THE LOAN; COOPERATION WITH TRUSTEE. The Issuer agrees that it will
promptly pay or cause to be paid the principal of, premium, if any, and
interest on all Bonds as herein provided. The Issuer agrees that the
Trustee may enforce all rights of the Issuer (except those rights not
assigned under this Agreement) and all obligations of the Borrower with
respect to the Loan for and on behalf of the Bondholders, whether or not
the Issuer is in default hereunder. The Issuer agrees that, except as
provided herein, it will not mortgage, encumber or alienate any part of the
Pledged Receipts. All agreements of the Issuer in this Section 802 and
elsewhere in this agreement and in the Remarketing Agreement and the Bonds
are subject to the limitation described in Section 511.
Section 803. RIGHTS OF ISSUER AS GROUND LESSOR AND AIRPORT
OPERATION; RELATIONSHIP TO GROUND LEASE. It is understood and agreed that
the Issuer's execution and delivery of this Agreement and issuance of the
Bonds and the terms and provisions of this Agreement, the Official
Statement and any preliminary version thereof and each other Basic
Agreement are without prejudice to and shall not derogate in any way from
any of the rights of the Issuer as ground lessor under the Ground Lease, as
operator of Boston-Logan International Airport or as Credit Enhancer under
the Credit Enhancement Agreement. Notwithstanding any provision thereof to
the contrary, the Issuer by executing this Agreement, the Official
Statement or any preliminary version thereof or any
<PAGE>
other Basic Agreement is under no obligation, express or implied, to
exercise or to refrain from exercising any right, remedy or responsibility
it may have now or hereafter under the Ground Lease, as operator of Boston-
Logan International Airport or as Credit Enhancer under he Credit
Enhancement Agreement, regardless of the effect of such exercise or non-
exercise upon the rights and interests of the Trustee and the Bondholders
under the Basic Agreements.
It is further understood and agreed that the provisions of this
Agreement and each other Basic Agreement are not intended in any manner to
modify any of the rights and obligations of the parties under the Ground
Lease, except that solely for the purpose of the Tax Statement and the
Disbursement Agreement the date by which the Borrower must complete the
acquisition, construction, equipping and furnishing of the Project shall be
the day preceding the third anniversary of the Closing Date rather than the
date for completion provided in Section 2.6 of the Ground Lease. In all
other respects in the event of any conflict between any provision of this
Agreement or any other Basic Agreement, on the other hand, and any
provision of the Ground Lease, on the other hand, the provision of the
Ground Lease shall be controlling.
Article 9 - Representations of the Borrower
The Borrower hereby represents and warrants to the Issuer and the
Trustee and, as to Section 905, covenants, as follows:
Section 901. EXISTENCE. It is a limited partnership validly
existing under the laws of the Commonwealth and has full power and
authority to execute, deliver and perform its obligations under this
Agreement, the Remarketing Agreement and all other Basic Agreements to
which it is a party.
Section 902. VALID OBLIGATIONS. It has taken all necessary
action and has complied with all provisions of federal, state and local
law, required to make this Agreement, the Contract of Purchase, the
Disbursement Agreement, the Remarketing Agreement and the Borrower Security
Instruments the valid obligations of the Borrower which they purport to be;
and, when executed and delivered by the general partner of the Borrower,
this Agreement, the Contract of Purchase, the Disbursement Agreement, the
Remarketing Agreement and the Borrower Security Instruments will constitute
valid and binding agreements of the Borrower and be enforceable in
accordance with their respective terms, except as enforceability may be
subject to the exercise of judicial discretion in accordance with general
equitable principles and to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of
<PAGE>
debtors heretofore or hereafter enacted to the extent that the same may be
constitutionally applied.
Section 903. LEGAL PROCEEDINGS. There is no action, suit,
proceeding or investigation at law or in equity before or by any court or
public board or body pending or, to the knowledge of the Borrower,
threatened against it, wherein an unfavorable decision, ruling or finding
would in any material respect adversely affect the business, assets or
condition (financial or otherwise) of the Borrower or the transactions
contemplated by the Basic Agreements to which the Borrower is a party, or
which in any way would adversely affect the validity of any of the Basic
Agreements to which the Borrower is a party.
Section 904. COMPLIANCE WITH LAW; CONSENTS, ETC. The Borrower
is not in violation in any material respect of any term or provision of any
mortgage, lease, agreement or other instrument which is material to its
business or assets, or of any judgement, decree, governmental order,
statute, rule or regulation by which it is bound or to which it or any of
its assets is subject. The execution and delivery by the Borrower of the
Basic Agreements to which it is a party will not violate or constitute a
default of any term or provision of any mortgage, lease, agreement or other
instrument, or of any judgment, decree, governmental order, statute, rule
or regulation by which the Borrower is bound or to which any of its assets
is subject. No approval by, authorization of, or filing with any federal,
state or municipal or other governmental commission, board or other
governmental authority is necessary in connection with the execution and
delivery by the Borrower of any of the Basic Agreements, except for
necessary approvals under the Code and the Enabling Act, each of which has
been, or by the time of delivery of the Bonds will have been, obtained.
Section 905. TAX MATTERS. The Borrower will comply fully with
its representations, warranties and covenants set forth and contained in
the Tax Statement.
Article 10 - Certain Agreements of Borrower
The Borrower agrees as follows:
Section 1001. LOAN PAYMENTS, ETC.
A. LOAN PAYMENTS BEFORE BOND PAYMENT DATES. The Borrower agrees to
pay by 12:00 noon, Eastern time, on the Business Day next preceding each
Payment Date, as a Loan payment to the Trustee for deposit into the Bond
Fund a sum in immediately available funds equal to all payments of
principal of and premium, if any, and interest on the Bonds due on such
Payment Date less amounts in immediately available funds already on
<PAGE>
deposit in the Bond Fund and available for such purpose. In any event the
Loan payments payable under this Section 1001A shall be sufficient to pay
the total principal of and premium, if any, and interest on the Bonds as
and when due. If at any time when said payments on the Bonds are due the
balance in the Bond Fund available for such purpose is insufficient to make
such payments, the Borrower will forthwith pay to the Trustee any such
deficiency. Subject to such obligation, the Borrower shall not be required
to make any Loan payment to the extent its application would result in an
excess in the Bond Fund over the amounts necessary to meet obligations then
due and payable from the Bond Fund plus, if applicable, any additional
amounts then required to be maintained in the Bond Fund.
B. MONTHLY LOAN PAYMENTS. In addition to the payments required by
Section 1001A, the Borrower shall pay to the Trustee for deposit into the
Bond Fund on each date specified below, commencing on the first date
specified below that is not less than 30 days following Estimated
Completion Date (or, if the Borrower shall have given notice of an
anticipated completion Date earlier than the Estimated Completion Date as
provided in Section 501A(a), on the first date specified below that is not
less than 30 days following such new anticipated Completion Date, the
amount specified below next to such date:
DATE AMOUNT
April 1 in each year The amount, if any, by which the sum of (a)
one-sixth of the amount due and payable on the next succeeding Interest
Payment Date in respect of interest on the Bonds (which amount is
hereinafter referred to as the "Semiannual Interest Obligation") plus (b)
one-twelfth of the amount, if any, due and payable on the next succeeding
September 1 in respect of the mandatory scheduled redemption requirements
imposed by Section 401(c) (iii) with respect to the Bonds (which amount is
hereinafter referred to as the "Annual Scheduled Redemption Obligation")
exceeds the amount then on deposit in the Bond Fund and available for the
next succeeding payments of principal of and interest on the Bonds (the
"Bond Fund Balance")
May 1 in each year The amount, if any, by which the
<PAGE>
sum of (a) one-third of the Semiannual
Interest Obligation plus (b) one-sixth of the Annual Scheduled Redemption
Obligation exceeds the Bond Fund Balance
June 1 in each year The amount, if any, by which the sum of (a)
one-half of the Semiannual Interest Obligation plus (b) one-quarter of the
Annual Scheduled Redemption Obligation exceeds the Bond Fund Balance
July 1 in each year The amount, if any, by which the sum of (a)
two-thirds of the Semiannual Interest Obligation plus (b) one-third of the
Annual Scheduled Redemption Obligation exceeds the Bond Fund Balance
August 1 in each year The amount, if any, by which the sum of (a)
five-sixth of the Semiannual Interest Obligation plus (b) five-twelfths of
the Annual Scheduled Redemption Obligation exceeds the Bond Fund Balance
September 1 in each year The amount, if any, by which one-half of the
Annual Scheduled Redemption Obligation exceeds the Bond Fund Balance (after
giving effect to any payment in respect of interest on the Bonds made on
such date)
October 1 in each year The amount, if any, by which the sum of (a)
one-sixth of the Semiannual Interest Obligation plus (b) seven-twelfths of
the Annual Scheduled Redemption Obligation exceeds the Bond Fund Balance
November 1 in each year The amount, if any, by which the sum of (a)
one-third of the Semiannual Interest Obligation plus (b) two-thirds of the
Annual Scheduled Redemption Obligation exceeds the Bond Fund Balance
December 1 in each year The amount, if any, by which the
<PAGE>
sum of (a) one-half of the Semiannual
Interest Obligation plus (b) three-quarters of the Annual Scheduled
Redemption Obligation exceeds the Bond Fund Balance
January 1 in each year The amount, if any, by which the sum of (a)
two-thirds of the Semiannual Interest Obligation plus (b) five-sixths of
the Annual Scheduled Redemption Obligation exceeds the Bond Fund Balance
February 1 in each year The amount, if any, by which the sum of (a)
five-sixths of the Semiannual Interest Obligation plus (b) eleven-twelfths
of the Annual Scheduled Redemption Obligation exceeds the Bond Fund Balance
Such payments shall be held in the Bond Fund and shall be applied to the
payment of the Bonds.
C. [Reserved].
D. ADDITIONAL PAYMENTS. The Borrower agrees to pay within 30 days
after written demand therefor (by the Issuer or the Trustee, as the case
may be) Additional Payments as follows:
(i) To the Trustee, its reasonable fees and expenses as
trustee, bond registrar and paying agent, including the reasonable fees and
expenses of its attorneys and agents, and any other amounts due to the
Trustee under this Agreement.
(ii) To the Issuer, as reimbursement for all reasonable costs
and expenses paid or incurred by the Issuer, including reasonable fees and
disbursements of counsel, and for all other liabilities incurred by the
Issuer, in satisfaction of any obligations of the Borrower not performed by
the Borrower as required hereunder or under another Basic Agreement.
(iii) To the Issuer, as reimbursement for or prepayment of all
costs, expenses and liabilities paid or incurred or to be paid or incurred
by the Issuer or any of its members, directors, officers, employees or
agents, including reasonable fees and disbursements of counsel, at the
request of the Borrower or as required by this Agreement, the Enabling Act,
the Contract of Purchase or the Remarketing Agreement, other than any
rebate payments
<PAGE>
due to the United States of America under Section 148(f) of the Code
on account of moneys and investments held by the Issuer for its own
account.
Any Additional Payment not paid within 30 days after written demand
therefore shall bear interest from such 30th day until the payment date at
the Shawmut Base Rate.
E. DEBT SERVICE RESERVE FUND. If the amount of moneys and
investments in the Debt Service Reserve Fund (measured as provided in
Section 506 hereof) shall be less than the Required Debt Service Reserve
Amount for any reason (including without limitation because of any transfer
authorized under Section 503(b), (c) or (e) hereof), then:
(a) Prior to the reduction of the Maximum Amount of Credit to
$500,000 pursuant to Section 2.5 of the Credit Enhancement Agreement, to
the extent that Cash Flow Available for Debt Service shall be available
therefore, the Borrower shall pay to the Trustee for deposit in the Debt
Service Reserve Fund an amount equal to the lesser of (i) the amount
available for such purpose and (ii) the amount, if any, by which the
Required Debt Service Reserve Amount exceeds the amount then on deposit in
the Debt Service Reserve Fund; and the Trustee shall deposit the same in
the Debt Service Reserve Fund.
(b) If the Maximum Amount of Credit shall have been reduced to
$500,000 pursuant to Section 2.5 of the Credit Enhancement Agreement, then
on the first day of each calendar month, commencing with the second
calendar month following the month in which the amount on deposit in the
Debt Service Reserve Fund shall have become less that the Required Debt
Service Reserve Amount, the Borrower shall pay to the Trustee for deposit
into the Debt Service Reserve Fund an amount equal to the lesser of (i) one
twenty-fourth of the amount so transferred from the Debt Service Reserve
Fund and (ii) the amount, if any, by which the Required Debt Service
Reserve Amount exceeds the amount then on deposit in the Debt Service
Reserve Fund; and the Trustee shall deposit the same in the Debt Service
Reserve Fund.
F. EQUITY RESERVE FUND. In the event that any moneys shall have
been withdrawn from the Equity Reserve Fund pursuant to Section 505A(a),
(b) or (c) hereof and the Credit Enhancement Termination Date shall not
have occurred, then to the extent that Cash Flow Available for Debt Service
shall be available therefore, the Borrower shall pay to the Trustee for
deposit in the Equity Reserve Fund an amount equal to the lesser of (i) the
amount available for such purpose and (ii) an amount equal to the
<PAGE>
aggregate amount theretofore withdrawn from the Equity Reserve Fund less
the aggregate amount theretofore repaid under this Section 1001F.
G. OBLIGATIONS UNCONDITIONAL. The Borrower's obligations to make
the payments required by this Agreement shall be absolute and unconditional
and shall not be subject to any right of recoupment or set-off. Until this
Agreement has terminated and ceased to have effect, the Borrower will not
(i) suspend or discontinue any payments required by this Agreement or (ii)
fail to fulfill its other agreements herein for any cause, including
without limitation failure fully to acquire and install the Project, or
damage to the Project, any failure of consideration or commercial
frustration of purpose, any change in federal or state or other laws or
administrative rulings or actions or any failure of the Issuer to fulfill
any agreement, duty, liability or obligation related to this Agreement.
Section 1002. BORROWER TO MAINTAIN ITS LEGAL EXISTENCE. The
Borrower will maintain its legal existence as a Massachusetts limited
partnership and will engage in no substantial business other than the
development, ownership and/or operation of the Project.
Section 1003. INDEMNIFICATION OF ISSUER AND TRUSTEE.
Notwithstanding its insurance agreements in any Basic Agreement or the
Remarketing Agreement, to the extent not prohibited by applicable law, the
Borrower shall indemnify and save harmless the Issuer (in its capacities as
issuer of the Bonds, issuer of the Official Statement and any preliminary
version thereof and party to this Agreement, the Contract of Purchase and
any other Basic Agreement) and the Trustee and their respective members,
directors, officers, employees and agents against and from any and all
liability and expenses arising from their participation in the transactions
contemplated hereby, including without limitation (a) any and all claims by
or on behalf of any Person arising out of (i) any condition of the Project,
or (ii) acquisition, installation, construction, reconstruction,
improvement, equipping, furnishing, use, occupancy, conduct of any work or
anything whatsoever done or omitted to be done in or about the Project, or
(iii) any accident, injury or damage whatsoever to any person occurring in
or about the Project, or (iv) any breach or default by the Borrower of any
of its obligations under the Basic Agreements or the Remarketing Agreement,
or (b) any act or omission of the Borrower or any of its agents,
contractors, servants, employees, or licensees, or (vi) the offering,
issuance, sale, remarketing or resale of the Bonds, or (vii) any action,
suit, claim or proceedings instituted or threatened in connection with the
transactions contemplated by this Agreement, (b) any and all losses, costs,
reasonable counsel fees, expenses or liabilities incurred in connection
with any
<PAGE>
such claim or any action or proceeding brought thereon and (c) any Costs of
Collection; provided, however, that the Borrower shall not be required to
indemnify any Person otherwise to be indemnified under this Section 1003
for any liabilities or expenses incurred by such Person to the extent
caused by or resulting from the willful misconduct or gross negligence of
such Person (limited, in the case of the Issuer and its members, directors,
officers, employees and agents to willful misconduct or gross negligence
committed in the capacities of the Issuer referred to above). In case any
action or proceedings is brought against the Issuer or the Trustee or any
such member, director, officer, employee or agent by reason of such claim,
the Borrower, upon notice from the affected party, shall resist or defend
such action or proceeding. Subject to the foregoing, the Issuer and the
Trustee shall cooperate and join with the Borrower at the expense of the
Borrower as may be required in connection with any action taken or defended
by the Borrower.
The Issuer and the Trustee and their respective members, directors,
officers, employees and agents shall be entitled to the advice of counsel
(who may also by counsel for the Borrower or any Bondholder) and shall be
wholly protected as to action taken or omitted to be taken in good faith in
reliance on such advice. They may rely conclusively on any communication
or other document furnished to them under the Basic Agreements or the
Remarketing Agreement and reasonably believed by them to be genuine. They
shall not be liable for any action (i) taken by them in good faith and
reasonably believed by them to be within the discretion or powers conferred
upon them, or (ii) in good faith not taken by them because reasonably
believed to be beyond the discretion or powers conferred upon them, or
(iii) taken by them pursuant to any direction or instruction by which they
are governed by the Basic Agreements or the Remarketing Agreement, or (iv)
omitted to be taken by them by reason of the lack of any direction or
instruction required hereby or by any of the other Basic Agreements or the
Remarketing Agreement for such action; nor shall they be responsible for
the consequences of any error or judgment reasonably made by them. The
Issuer and the Trustee shall in no event be liable for the application or
misapplication of funds, or for other acts or defaults, by an Person,
except their own members, directors, officers and employees and, as to the
Trustee, others specified in Section 1201(b). When any consent or other
action by them is called for by the Basic Agreements or the Remarketing
Agreement, they may defer such action pending receipt of such certificates,
opinions, documents or other supporting evidence as they may reasonably
required. They shall not be required to take any remedial action (other
than the giving of notice) unless indemnity reasonably satisfactory to them
is furnished for any expense or liability to be incurred thereby. They
shall be entitled to reimbursement for expenses reasonably incurred or
advances reasonably made, with
<PAGE>
interest at the Shawmut Base Rate, in the exercise of their rights or the
performance of their obligations hereunder, to the extent that they act
without previously obtaining indemnity. No permissive right or power to
act which they may have shall be construed as a requirement to act; and no
delay in the exercise of a right or power shall affect the subsequent
exercise of that right or power. The Issuer shall not be required to take
notice of any breach or default by the Borrower under any Basic Agreement
or the Remarketing Agreement, except when given notice thereof by the
Trustee, nor shall it be required to monitor the financial condition of the
Borrower or the physical condition of the Project. No recourse shall be
had by the Borrower, the Trustee or any Bondholder for any claim based on
any Basic Agreement or the Remarketing Agreement against any member,
director, officer, employee or agent of the Issuer alleging personal
liability on the part of such person unless such claim is based upon the
willful dishonesty of or intentional violation of law by such person.
Section 1004. ADDITIONAL REMEDIES OF BONDHOLDERS. In the event
that and so long as the total of the sums on deposit in the Debt Service
Reserve Fund and the Credit Enhancement Account shall be less than
$8,000,000 (minus the aggregate amount of any reduction in the Maximum
Amount of Credit effected under Section 2.5 of the Credit Enhancement
Agreement), then at the direction of a Majority of the Bondholders the
Trustee shall, if satisfactory indemnity shall have been provided to it,
succeed to and exercise, as a Majority of the Bondholders shall direct, any
or all of the rights of the Borrower as owner under the Hyatt Management
Agreement or as ground lessee under the Ground Lease, including, but not
limited to, all such rights as the Borrower may have under such agreements
to direct the manager, to discharge the manager, to appoint a new manager,
to make improvements to the Project, to sublease the Project and, subject
to the Leasehold Mortgage and the leasehold mortgage securing the Credit
Enhancer, to sell the interest of the Borrower in the Project. The Trustee
shall have the benefit of, but shall subject to, the terms and condition of
the Hyatt Management Agreement or the Ground Lease, as the case may be,
limiting the exercise of any such rights, but shall not be deemed to have
assumed any affirmative obligations thereunder.
Section 1005. FINANCIAL REPORTS. The Borrower shall provide to
the Trustee and each Beneficial Owner which holds an ownership interest of
not less than $1,000,000 principal amount of Bonds and which shall have
requested the same in writing complying with the terms of subsection (d)
hereof, the following financial reports:
(a) As soon as available and in any event not later than 60
days following the end of each of the first three
<PAGE>
fiscal quarters of each fiscal year of the Borrower, commencing with
the quarter ending September 30, 1991, a balance sheet of the Borrower as
of the last day in such fiscal quarter together with the statements of
income and cash flows of the Borrower for such quarter, prepared in
accordance with generally accepted accounting principles except for normal
year-end adjustments.
(b) As soon as available and in any event not later than 120
days following the end of the end of each fiscal year of the Borrower,
commencing with the year ending December 31, 1991, a balance sheet of the
Borrower as of the last day of such fiscal year together with the
statements of income and cash flow of the Borrower for such year
accompanied by the unqualified report of an independent certified public
accountant to the effect that such financial statements present fairly in
all material respects the financial condition and results of operations of
the Borrower in accordance with generally accepted accounting principles
consistently applied.
(c) Together with each financial report delivered under
subsection (b) above, (i) a certificate of the chief executive officer or
chief financial officer of the general partner of the Borrower to the
effect that no Default or Event of Default exists under this Agreement or
under the Credit Enhancement Agreement or, if such is not the case,
specifying the Default or Event of Default, the nature thereof and any
steps being taken by the Borrower to remedy the same and (ii), if the Debt
Service Coverage Ratio of the Borrower shall have equalled or exceeded 140%
for such year, a statement to such effect accompanied by calculations
thereof in detail reasonably satisfactory to the Trustee.
(d) Such other financial and statistical information
concerning the operation of the Project as such Beneficial Owner may
reasonably request. In addition, at the request of such Beneficial Owner,
the Borrower will make reasonably available an executive officer of its
general partner to discuss the condition and operation of the Project.
(e) Each request of a Beneficial Owner for financial reports
under this Section 1005 shall be in writing addressed to the Borrower with
a copy to the Trustee and shall state that such Beneficial Owner
acknowledges (and the Trustee hereby acknowledges) that such reports will
contain confidential information of the Borrower and agrees (and the
Trustee hereby agrees) not to disclose such information prior to the time
that it shall become public in another manner; provided, however, that this
agreement
<PAGE>
shall be subject to the obligation, if any, of the Trustee or such
Beneficial Owner under law or pursuant to subpoena or other process to make
information available to governmental agencies and examiners or to others;
and provided, further, that such Beneficial Owner may disclose such
information (i) confidentially to its financial advisers, managers,
accountants and attorneys, (ii) to prospective purchasers of at least
$1,000,000 of ownership interest in the Bonds which are financial
institutions and which shall have delivered in writing to the Trustee and
the Borrower a written acknowledgment and agreement in the form set forth
in this subsection (e) and (iii) to others with the prior written consent
of the Borrower.
PART V: EVENTS OF DEFAULT
Article 11 - Default Provisions and Remedies of Trustee, Bondholders
and Issuer.
Section 1101. EVENTS OF DEFAULT; DEFAULTS. The occurrence of any
of the following events shall constitute an "Event of Default" hereunder:
(a) Failure to pay interest on any Bond when due and payable.
(b) Failure to pay any principal of or premium on any Bond
when due and payable, whether at stated maturity or pursuant to any
redemption or purchase requirement under Section 401.
(c) Failure by the Borrower to make any payment under Section
1001A or 1001B when due and payable; provided that no Event of Default
under this subsection (c) shall occur if such nonpayment is covered by a
transfer of funds from the Project Fund under Section 501A or 501B, from
the Construction and Operating Costs Contingency Fund under Section 505(a)
or (b), from the Equity Reserve Fund under Section 505A, from the Debt
Service Reserve Fund under Section 503 or from the Credit Enhancement
Account under Section 505B.
(d) On or after the reduction of the Maximum Amount of Credit
to $500,000 pursuant to Section 2.5 of the Credit Enhancement Agreement,
failure by the Borrower to make any payment under Section 1001E(b) when due
and payable.
(e) Failure by the Borrower or the Issuer on or after the
Credit Enhancement Termination Date to observe or perform any other
covenant, condition or agreement on its part to be observed or performed in
this Agreement or the
<PAGE>
Bonds, for a period of 30 days after written notice of such failure
shall have been given to the borrower and the Issuer by the Trustee;
provided, however, that if such observance or performance requires work to
be done, actions to be taken or conditions to be remedied which by its or
their nature cannot reasonably be done, taken or remedied, as the case may
be, within such 30-day period, no Event of Default under this subsection
(e) shall be deemed to have occurred or to exist if and so long as the
Issuer or the Borrower, as the case may be, shall have commenced such work,
actions or remediation within such 30-day period and provided written
notice thereof to the Trustee and shall diligently and continuously
prosecute the same to completion.
(f) On or after the Credit Enhancement Termination Date, the
inaccuracy in any material respect when made of any representation or
warranty made in writing by the Borrower or on its behalf by an Authorized
Borrower Representation in or under any of the Basic Agreements in
connection with the transactions contemplated hereby.
(g) The occurrence or continuation of any Event of Default
under Section 14 of the Leasehold Mortgage on or after the Credit
Enhancement Termination Date.
(h) The occurrence of a Bankruptcy.
(i) Prior to the reduction of the Maximum Amount of Credit to
$500,000 pursuant to Section 2.5 of the Credit Enhancement Agreement, the
sum of the balance of moneys and investments (valued at the lesser of cost
and market value) in the Debt Service Reserve Fund and the Credit
Enhancement Account shall be less than $4,000,000.
The Borrower agrees to notify the Issuer and the Trustee promptly in
writing of the occurrence of any known Event of Default.
Within five days after knowledge of an Event of Default under
subsection (a), (b), (c), (d), (h) or (i) above, the Trustee shall give
written notice, by registered or certified mail, to the Issuer, the
Borrower, all of the Bondholders and the AEW Trust, and upon notice as
provided in Section 1201(d) shall give similar notice of any other Event of
Default.
Section 1102. ACCELERATION. Upon the occurrence of any Event of
Default the Trustee may, and shall upon the written request of a Majority
of the Bondholders declare all Bonds then outstanding to be due and payable
immediately, and, upon such declaration, all principal and interest accrued
thereon shall become immediately due and payable, and there shall be an
<PAGE>
automatic corresponding acceleration of the Borrower's indebtedness on the
Loan; provided, however, that if there shall have occurred any Event of
Default under subsection (h) of Section 1101, the principal of and premium,
if any, on all Bonds then outstanding and the interest accrued thereon and
all the Borrower's indebtedness on the Loan automatically shall become
immediately due and payable without any action by the Trustee. Interest
shall accrue on the Bonds and the Loan to the date of payment (even if
after the date of acceleration).
Section 1103. OTHER REMEDIES; RIGHTS OF BONDHOLDERS. Upon the
continuance of an Event of Default, if so requested by Majority of the
Bondholders, and if satisfactory indemnity has been furnished to it, the
Trustee shall exercise such of the rights and powers conferred by this
Agreement, the Leasehold Mortgage or any other Basic Agreement as the
Trustee, being advised by counsel, shall deem most effective to enforce and
protect the interests of the Bondholders.
No remedy under this Agreement is intended to be exclusive, and to
the extent permitted by law each remedy shall be cumulative and in addition
to any other remedy hereunder or now or hereafter existing.
No delay or omission to exercise any right or power shall impair such
right or power or constitute a waiver of any default of Event of default or
acquiescence therein; and each such right and power may be exercised as
often as deemed expedient.
No waiver by the Trustee or the Bondholders of any Default or Event
of Default shall extend to any subsequent Default or Event of Default.
Section 1104. RIGHT OF BONDHOLDERS TO DIRECT PROCEEDINGS.
Anything in this Agreement to the contrary notwithstanding, a Majority of
the Bondholders shall have the right at any time, by an instrument or
instruments in writing executed and delivered to the Trustee, to direct the
method and place of conducting all proceedings to be taken in connection
with the enforcement of the terms and conditions of this Agreement, the
Leasehold Mortgage or any other Basic Agreement or for the appointment of a
receiver or any other proceedings hereunder or thereunder; provided that
such direction shall be in accordance with applicable law and this
Agreement and, if applicable, the Leasehold Mortgage or such other Basic
Agreement, and provided that the Trustee shall be indemnified to its
satisfaction.
Section 1105. APPLICATION OF MONEYS. Upon the occurrence and
continuance of an Event of Default, there shall be deposited in the Bond
Fund all moneys and proceeds held or received by the trustee or any
receiver pursuant to this Agreement or any related document or the exercise
of any rights granted hereby or thereby,
<PAGE>
except amounts in the Rebate Fund, which shall be held and applied in
accordance with Section 504, and all moneys in the Bond Fund (except funds
for which provision has been made under Section 510) shall be applied after
first paying all Costs of Collection incurred by the Trustee or any
receiver (i) to the payment of any amounts due as Additional Payments under
section 1001D or amounts due under Section 1003, (ii) then to the payment
of interest, including interest on overdue principal, and, to the extent
not prohibited by applicable law, interest on overdue interest, then due on
the Bonds without regard to when such interest became due, (iii) then to
the payment of principal and premium, if any, then due on the Bonds,
without regard to when such principal or premium, if , any became due and
(iv) then to the payment of all obligations of the Borrower owing to the
Credit Enhancer and the Trustee under the Credit Enhancement Agreement; or
in such other order as may be determined by the Trustee with the written
consent of all of the Bondholders and, if the Issuer is affected thereby,
the written consent of the Issuer. Payments shall be made ratably,
according to the amounts due respectively for interest and principal and
premium, if any, among Bondholders entitled to receive the payment being
made.
Section 1106. REMEDIES VESTED IN TRUSTEE. All rights of action
(including the right to file proofs of claim) under this Agreement or under
any of the Bonds may be enforced by the Trustee without the possession of
any of the Bonds or their production in any proceeding; and any such
proceeding instituted by the Trustee shall be brought in its name, as
Trustee, without the necessity of joining as plaintiffs or defendants any
holders of the Bonds; and any recovery of the judgement shall be for the
benefit of the holders of the Bonds, subject, however, to the provisions of
this Agreement.
Section 1107. RIGHTS AND REMEDIES OF BONDHOLDERS. No Bondholder
shall have any right to institute any proceeding for the enforcement of
this Agreement or any right or remedy granted hereby unless (i) an Event of
Default is continuing, (ii) the Trustee is deemed to have notice or
knowledge thereof or has been notified as provided in Section 1201 (d),
(iii) a Majority of the Bondholders shall have made written request to the
Trustee and shall have afforded the Trustee reasonable opportunity to
exercise its powers or to institute such proceeding in its own name, and
have offered to the Trustee indemnity satisfactory to it, and (iv) the
Trustee shall have failed or refused to exercise its power or to institute
such proceeding. Such notice, request and offer of indemnity shall at the
option of the Trustee be conditions precedent to the execution of the
powers and trusts of this Agreement, and to any action for the enforcement
of this Agreement or of any right or remedy granted hereby; it being
understood and intended that the holders of the Bonds shall have no right
to affect or prejudice the lien of this Agreement by
<PAGE>
their action or to enforce any right hereunder except in the manner herein
provided and that proceedings shall be instituted and maintained in the
manner herein provided and for the benefit of the holders of all Bonds then
outstanding. Notwithstanding the foregoing, each Bondholder shall have a
right of action to enforce the payment of the principal of and premium, if
any, and interest on any Bond held by it at and after the maturity thereof,
from the sources and in the manner expressed in such Bond.
Section 1108. WAIVERS OF EVENTS OF DEFAULT. The Trustee shall
waive (in advance or otherwise) any Event of Default and its consequences
and rescind any declaration of maturity of principal upon the written
request of a Majority of the Bondholders and, with respect to any right of
the Issuer of the Trustee to payment or reimbursement pursuant to Section
1001D or 1003, the written consent of the Issuer or the Trustee (as the
case may be), but no such waiver (except as specifically provided therein)
or rescission shall extend to any subsequent or other Event of Default.
Section 1109. INTERVENTION BY TRUSTEE. In any judicial
proceeding which the Trustee believes has a substantial bearing on the
interests of the Bondholders, the Trustee may intervene on behalf of the
Bondholders.
Section 1110. REMEDIES OF ISSUER ON EVENT OF DEFAULT. Upon the
occurrence and continuance of an Event of default, the Issuer (i) shall, if
requested by the Trustee, confirm in writing any acceleration Loan
indebtedness, (ii) may, upon the request of the Trustee, take such action
in law or equity as may appear desirable to collect any past due or
accelerated Loan indebtedness or other payments hereunder or to enforce
compliance with any obligation or agreement of the Borrower in this
Agreement and (iii) shall have access to and may examine and make copies of
the books, accounts and other data and tax returns of the Borrower.
However, the Issuer shall not be required to take any action which in its
opinion might cause it to expend time or money or otherwise incur any
liability unless satisfactory indemnity has been furnished to it.
Notwithstanding any contrary provision in this Agreement or any other basic
Agreement, the issuer may enforce its rights under Section 1001D, 1003 or
1004 by any lawful available remedy; and nothing in this Agreement or any
other Basic Agreement shall restrict the exercise of rights by the Issuer
as ground lessor under the Ground Lease, as operator of Boston-Logan
International Airport or as Credit Enhancer.
<PAGE>
PART IV: THE TRUSTEE
Article 12 - The Trustee
Section 1201. ACCEPTANCE OF TRUSTS. The Trustee accepts the
trusts imposed upon it by this Agreement and agrees to perform such trusts,
but only upon the terms and conditions contained herein and in Section
1003.
(a) The Trustee, prior to the occurrence of an event of
Default and after the curing of all Events of Default which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement and the other Basic Agreements to
which it is a party, and no implied agreements or obligations shall be read
into this Agreement or any other Basic Agreement against the Trustee. In
case an Event of Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement and
the other Basic Agreements, and use the same degree of care and skill in
its exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) The Trustee, may execute any of its trusts or powers and
perform any of its duties through attorneys, agents, receivers or employees
but shall be answerable for their conduct in accordance with the above
standard, except that as to attorneys, agents and receivers the Trustee
shall be answerable only as to the selection of same in accordance with
said standards. The Trustee shall be entitled to advice of counsel
concerning all matters of trust duties hereunder, and may pay reasonable
compensation to all such attorneys, agents, receivers, employees and
counsel as may reasonably be employed.
(c) Any action taken by the Trustee pursuant to this
Agreement upon the request or authority or consent of any person who at the
time of making such request or giving such authority or consent is the
holder of any Bond shall be conclusive and binding upon all future holders
of such Bond.
(d) The Trustee shall not be required to take notice or be
deemed to have notice or knowledge of any Default hereunder, except
Defaults described in Section 1101 (a), (b), (c), (d) or (i), unless the
Trustee shall be notified in writing of such Default by the Borrower or the
Issuer or by the holders of at lease 25% in aggregate principal amount of
Bonds then outstanding. Until such notice is received,
<PAGE>
the Trustee may conclusively assume there is no such Default.
(e) The Trustee shall not be required to give any bond or
surety.
Section 1202. FEES AND EXPENSES OF TRUSTEE. The Borrower shall
pay the Trustee its normal and customary fees for its services rendered
hereunder during any period that no Event of default has occurred or is
continuing. The Borrower shall also reimburse the Trustee for all
advances, counsel fees and other out-of-pocket expenses reasonably made or
incurred by the Trustee in connection with its services hereunder and for
such reasonable fees as it may charge after an Event of Default has
occurred and is continuing.
Section 1203. SUCCESSOR TRUSTEE. Any corporation or association
into which the Trustee may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer all or substantially all
its trust business and assets, and any corporation or association resulting
from any such conversion, sale, merger, consolidation or transfer, IPSO
FACTO, shall be and become successor Trustee hereunder and vested with all
the trusts, power, discretion, immunities, privileges and all other matters
as was its predecessor, without the execution or filing of any instrument
or any further act on the part of the parties hereto, anything herein to
the contract notwithstanding; provided, however, that any such successor
Trustee shall be a trust company or bank in good standing having trust
powers and (unless otherwise permitted by the Enabling Act) authorized to
act as Trustee in Commonwealth.
Section 1204. RESIGNATION BY TRUSTEE; REMOVAL. The Trustee may
at any time resign from the trusts hereby created by giving 30 days'
written notice to the Issuer, to the Borrower and to each Bondholder, but
such resignation shall not take effect until the appointment of a successor
Trustee, acceptance by the successor Trustee of such trusts and recordation
of the assignment to such successor Trustee of the rights of the mortgagee,
secured party and assignee under the Borrower Security Instruments. The
Trustee may be removed at any time by an instrument or concurrent
instruments in writing delivered to the Trustee and to the Issuer and
signed by a Majority of Bondholders.
Section 1205. APPOINTMENT OF SUCCESSOR TRUSTEE. If the Trustee
hereunder shall resign or be removed, or be dissolved, or otherwise become
incapable of acting hereunder, or in case it shall be taken under the
control of any public officer or officers, or of a receiver appointed by a
court, a successor shall be appointed by the Borrower. If the Borrower
does not
<PAGE>
appoint a successor Trustee within 30 days of the Trustee providing notice
of its resignation, the Trustee may petition a court of competent
jurisdiction to appoint a successor Trustee. At any time within one year
after any such vacancy shall have occurred and provided a court has not
appointed a successor Trustee as provided above, a Majority of the
Bondholders may appoint a successor Trustee by an instrument or concurrent
instruments in writing signed by or on behalf of such holders, which
appointment shall supersede any Trustee theretofore appointed by the
Borrower. Each successor Trustee shall be a trust company or bank in good
standing having trust powers and having a reported capital, surplus and
undivided profits of not less than $100,000,000. Any such successor
Trustee shall become Trustee upon giving notice to the Borrower, the Issuer
and the Bondholders, if any, of its acceptance of the appointment, vested
with all the property, rights and powers of the Trustee hereunder, without
any further act of conveyance. Any predecessor Trustee shall execute,
deliver and record and file such instruments as the Trustee may reasonably
require to confirm or perfect any such succession.
Section 1206. DEALING IN BONDS. The Trustee and any of its
directors, officers, employees or agents may become the owners of any or
all of the Bonds secured hereby.
Section 1207. TRUSTEE AS BOND REGISTRAR; LIST OF BONDHOLDERS.
The Trustee is hereby designated as bond registrar for the Bonds and, as
such, will keep on file a list of names and addresses of the holders of all
Bonds; provided, however, that the Trustee shall be under no responsibility
with regard to the accuracy of the address of any Bondholder. At
reasonable times under reasonable regulations established by the Trustee,
such list may be inspected and copied by the Borrower or by owners (or a
designated representative thereof) of Bonds then outstanding, such
ownership and the authority of any such designated representative to be
evidenced to the satisfaction of the Trustee.
Section 1208. SUCCESSOR TRUSTEE AS CUSTODIAN OF FUNDS, BOND
REGISTRAR AND PAYING AGENT. In the event of a change in the office of
Trustee, the predecessor Trustee which has resigned or been removed shall
cease to be custodian of any funds it may hold pursuant to this Agreement,
and cease to be the bond registrar and paying agent for any of the Bonds,
and the successor trustee shall become such custodian, bond registrar and
paying agent.
Section 1209. ADOPTION OF AUTHENTICATION. In case any Bonds
shall have been authenticated but not delivered, any successor Trustee may
adopt the certificate of authentication of the predecessor Trustee and
deliver the Bonds as so authenticated.
<PAGE>
Section 1210. DESIGNATION AND SUCCESSION OF PAYING AGENTS. After
15 days' written notice to the Borrower and subject to the Borrower's
approval (which shall not unreasonably be withheld or delayed), the Trustee
may designate any other banks or trust companies as paying agent. Any bank
or trust company with or into which any paying agent other than the Trustee
may be merged or consolidated, or to which the assets and business of such
paying agent may be sold, shall be deemed the successor to such paying
agent for the purposes of this Agreement. If the position of such paying
agent shall become vacant for any reason, the Trustee shall, within 30 days
thereafter, appoint a bank or trust company located in the same state as
such paying agent to fill such vacancy, subject to the Borrower's approval
(which shall not unreasonably be withheld or delayed). The paying agents
shall enjoy the same protective provisions in the performance of their
duties hereunder as are specified in Section 1201 with respect to the
Trustee, insofar as such provisions may be applicable.
Section 1211. TRUST ESTATE MAY BE VESTED IN CO-TRUSTEE. It is
the purpose hereof that there shall be no violation of any law of any
jurisdiction denying or restricting the right of banking corporations or
associations to transact business as trustee in such jurisdiction. It is
recognized that in case of litigation hereunder, and in particular in case
of the occurrence of an Event of Default, it may be necessary that the
Trustee appoint an additional institution as a separate Trustee or Co-
Trustee. The following provisions of this Section 1211 are adapted to
these ends.
Upon the incapacity or lack of authority of the Trustee, by reason of
any present or future law of any jurisdiction, to exercise any of the
rights, powers and trusts herein granted to the Trustee, each and every
remedy, power, right, claim, demand, cause of action, immunity, estate,
title, interest and lien expressed herein or intended to be exercised by or
vested in or conveyed to the Trustee with respect thereto shall be
exercisable by and vest in a separate Trustee or Co-Trustee appointed by
the Trustee but only to the extent necessary to enable the separate Trustee
or Co-Trustee to exercise such rights, powers and trusts, and every
agreement and obligation necessary to the exercise thereof by such separate
Trustee or Co-Trustee shall run to and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the Issuer
be required by the separate Trustee or Co-Trustee so appointed by the
Trustee in order to more fully and certainly vest in and confirm to him or
it such properties, rights, powers, trusts, duties and obligations, any and
all such deeds, conveyances and instruments shall, on request, be executed,
acknowledged and delivered by the Issuer. In case any separate
<PAGE>
Trustee or Co-Trustee, or a successor to either, shall die, became
incapable of acting, resign or be removed, all the estates, properties,
rights, powers, trusts, duties and obligations of such separate Trustee or
Co-Trustee, so far as permitted by law, shall vest in and be exercised by
the Trustee until the appointment of a new Trustee or successor to such
separate Trustee or Co-Trustee. Any separate Trustee or Co-Trustee
appointed pursuant to this Section 1211 shall be a trust company or bank in
good standing having trust powers and having a reported capital, surplus
and individual profits of not less than $50,000,000.
Section 1212. TRUSTEE TO RETAIN INFORMATION. So long as any of
the Bonds shall be outstanding, the Trustee shall retain all certificates,
financial statements and other written information furnished to it by or on
behalf of the Borrower or any other Person under this Agreement and the
other Basic Agreements and shall make such documentation available for
review after reasonable notice during regular business hours at the
principal corporate trust office of the Trustee to any Bondholder and, so
long as the Bonds are held by the DTC or its nominee, to any beneficial
owner of Bonds presenting evidence of such ownership reasonably
satisfactory to the Trustee. The Trustee shall permit such reviewers to
take copies of all or any part of such documentation, subject to their
payment of such reasonable copying and handling charges as the Trustee may
impose.
Section 1213. QUARTERLY FUND REPORTS. Within 30 days following
the end of each calendar quarter, commencing September 30, 1991, the
Trustee shall furnish to Issuer, the Borrower and each Beneficial Owner of
not less than $1,000,000 principal amount of the Bonds which shall have
requested the same in writing a report setting forth the balance in each
Fund and Account and in the Credit Enhancement Account as of the last day
of such fiscal quarter.
PART VII: SUPPLEMENTAL AGREEMENT AND
WAIVERS; MISCELLANEOUS
Article 13 - Supplemental Agreements and Waivers
Section 1301. SUPPLEMENTAL AGREEMENTS NOT REQUIRING CONSENT OF
BONDHOLDERS. The parties to this Agreement or any other Basic Agreement
may without the consent of, or notice to, any of the Bondholders enter into
agreements supplemental to this Agreement or such other Basic Agreement and
financing statements or other instruments evidencing the existence of a
lien as shall not, in their opinion, be inconsistent with the terms and
provisions hereof or thereof for any one or more of the following purposes:
<PAGE>
(a) To cure any ambiguity, inconsistency of formal defect or
omission in this Agreement or such other Basic Agreement;
(b) To grant to or confer upon the Trustee for the benefit of
the Bondholders any additional rights, remedies, powers, or authority that
may lawfully be granted to or conferred upon the Bondholders or the
Trustee;
(c) To subject to the lien and pledge of this Agreement or
such other Basic Agreement additional revenues or collateral;
(d) To evidence any succession to the Issuer and the
assumption by such successor of the agreements of the Issuer contained in
this Agreement and the Bonds;
(e) To the extent required by law, to permit registration of
the Bonds under the federal Securities Act of 1933, as amended, the federal
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or any
applicable state securities law, and to permit qualification of this
Agreement under the Trust Indenture Act;
(f) To revise the provisions of Section 504 hereof or any
other provision of this Agreement or any related document or certificate
relating to rebate or arbitrage profits to the United States, provided the
Trustee shall have received an opinion of Bond Counsel that such revision
does not adversely affect the exclusion from gross income of interest on
the Bonds for federal income tax purposes; and
(g) To effect any other change herein or therein which, in
the judgement of the Trustee, is not to the prejudice of the holders of the
Bonds.
Section 1302. SUPPLEMENTAL AGREEMENTS REQUIRING CONSENT OF
BONDHOLDERS. In addition to supplemental agreements permitted by Section
1301, a Majority of the Bondholders shall have the right, from time to
time, to consent to and approve the execution to the parties to this
Agreement or any other Basic Agreement or other agreement or agreements
supplemental hereto or thereto for the purpose of modifying, altering,
amending, adding to or rescinding, in any particular, any of the terms or
provisions contained in this Agreement or such other Basic Agreement or in
any supplemental agreement; provided, however, that nothing in this Section
1302 shall permit (i) an extension of the stated maturity of the principal
of or the interest on any Bond without the consent of the holder of such
Bond; (ii) a reduction in the principal amount of any Bond, the rate of
interest thereon or the premium, if applicable, to be paid upon the
redemption thereof
<PAGE>
prior to maturity without the consent of the holder of such Bond; (iii) an
extension of the date for making any scheduled mandatory redemption under
Section 401(c) (iii) without the consent of all of the Bondholders; (iv)
the establishment of a privilege or priority of any Bond or Bonds over any
other Bond or Bonds without the consent of all the Bondholders; (v) a
reduction in the percentage of the aggregate principal amount of Bonds the
holders of which are required to consent to any such supplemental agreement
without the consent of the holders of all the Bonds at the time outstanding
which would be affected by the action to be taken; (vi) a release of
collateral granted under this Agreement or such other Basic Agreement
without the consent of all of the Bondholders, except as expressly provided
herein or therein; or (vii) a modification of the rights, duties or
immunities of the Issuer or the Trustee without the written consent of the
affected party; and provided, further, that no consent of Bondholders shall
be required as to any amendment of or waiver under any shall be required as
to any amendment of or waiver under any provision of the Credit Enhancement
Agreement for which consent of the Trustee is not required as provided in
Section 16 thereof.
If at an time the Issuer or the Borrower shall request the Trustee to
enter into any supplemental agreement pursuant to this Section 1302, the
Trustee shall, upon being satisfactorily indemnified with respect to
expenses, cause notice of the proposed execution to be made in the manner
required for redemption of principal of Bonds pursuant to Section 403;
provided, however, that failure to give such notice, or any defect therein,
shall not affect the validity of the proceedings.
Such notice shall briefly set forth the nature of the proposed
supplemental agreement and shall state that copies thereof are on file at
the corporate trust office of the Trustee for inspection by all
Bondholders. Except as otherwise provided in this Section 1302, if, within
60 days or such longer period (not to exceed two years) as shall be
prescribed by the Issuer following the final mailing of such notice, not
less than a Majority of the Bondholders at the time of the execution of any
such supplemental agreement shall have consented to and approved the
execution thereof, no holder of any Bond shall have any right to object to
any of the terms and provisions contained therein, or the operation
thereof, or in any manner to question the propriety of the execution
thereof, or to enjoin or restrain the Trustee, the Issuer or the Borrower
from executing the same or from taking any action pursuant to the
provisions thereof. Upon the execution of any such supplemental agreement
as in this Section permitted and provided, this Agreement or the applicable
Basic Agreement shall be and be deemed to be modified and amended in
accordance therewith.
Section 1303. OPINION OF COUNSEL. The Trustee shall be entitled
to receive, and shall be fully protected in relying
<PAGE>
upon, the opinion of any counsel approved by it, who may be counsel for the
Issuer, as conclusive evidence that a proposed supplemental agreement
complies with the provisions of this Agreement, and that it is proper for
the Trustee, under the provisions of this Article, to join in the execution
of such supplemental agreement.
Section 1304. MODIFICATION BY UNANIMOUS CONSENT. Notwithstanding
anything contained elsewhere in this Agreement, the rights and obligations
of the Borrower, the Issuer, the Trustee and the holders of the Bonds, and
the terms and provisions of the Bonds and this Agreement, any other Basic
Agreement or any supplemental agreement may be modified or altered in any
respect with consent of the Borrower, the Issuer, the Trustee and the
holders of all of the Bonds then outstanding.
Article 14 - Miscellaneous
Section 1401. CONSENTS, ETC., OF BONDHOLDERS. Any consent,
request, direction, approval, objection or other instrument required by
this Agreement to be executed by the Bondholders may be in any number of
concurrent writings of similar tenor and may be executed by such
Bondholders in person or by agent appointed in writing.
Section 1402. LIMITATION OF RIGHTS. With the exception of rights
herein expressly conferred, nothing expressed or implied in or inferred
from this Agreement or the Bonds shall give to any Person other than the
parties hereto and the holders of the Bonds any right or remedy with
respect to this Agreement. This Agreement and all of the covenants,
conditions and provisions hereof are for the sole and exclusive benefit of
the parties hereto and the holders of the Bonds as herein provided.
Section 1403. SEVERABILITY. In the event that any provision of
this Agreement shall be held to be invalid in any circumstance, such
invalidity shall not affect any other provision or circumstance.
Section 1404. NOTICES. All notices, certificates or other
communications hereunder shall be sufficiently given and, except (i) as
provided in Section 504 regarding certificates or other materials to be
provided to the Borrower or the Issuer or notices to be given by the
Trustee, and (ii) as provided in Section 1201(d), shall be deemed to be
delivered if in writing or in the form of a telex addressed to the
appropriate Notice Address and if either (a) actually delivered at said
address (evidenced in the case of a telex by receipt of the correct answer
back) or (b) in the case of a letter, three Business Days shall have
elapsed after the same shall have been deposited in the United States
<PAGE>
mails, first-class postage prepaid and registered or certified. A copy of
each notice, certificate or other communication given by any party hereto
shall also be given to each other party hereto in the manner provided for
in this Section 1404.
Section 1405. PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS.
In any case where a Payment Date is not a Business Day, then payment of
interest or principal and any premium due on such day need not be made by
the Trustee on such date but may be made on the next succeeding Business
day with the same force and effect as if made on the Payment Date.
Section 1406. EXTENT OF ISSUER COVENANTS; NO PERSONAL LIABILITY.
No covenant, stipulation, obligation or agreement of the Issuer contained
in this Agreement or any other Basic Agreement shall be deemed to be a
covenant, stipulation, obligation or agreement of any present or future
member, director, officer, employee or agent of the Issuer in his or her
individual capacity; and no such person (including any such person
executing the Bonds) shall be liable personally on the Bonds or be subject
to any personal liability by reason of their issuance.
Section 1407. BONDS OWNED BY ISSUER OR BORROWER. In determining
whether holders of the requisite aggregate principal amount of the Bonds
have concurred in any direction, consent or waiver under this Agreement or
any other Basic Agreement, Bonds which are owned by the Issuer, the
Borrower or any Borrower Affiliate (unless one or more of such Persons own
all of the Bonds which are then outstanding, determined without regard to
this Section 1407) shall be disregarded and deemed not to be outstanding
for the purpose of any such determination, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, consent or waiver, only Bonds which the Trustee knows are so
owned shall be so disregarded. Bonds so owned which have been pledged in
good faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to
such Bonds and that the pledgee is not the Issuer, the Borrower or any
Borrower Affiliate (unless one or more of such Persons own all of the Bonds
which are then outstanding, determined without regard to this Section
1407). In case of a dispute as to such right, any decision by the Trustee
taken in good faith upon the advice of counsel shall be full protection to
the Trustee in accordance with its standards of performance hereunder.
Section 1408. CAPTIONS; INDEX. The captions, headings and index
in this Agreement are for convenience only and in no way define or describe
the scope or content of any provision of this Agreement.
<PAGE>
Section 1409. INSTRUMENTS OF FURTHER ASSURANCE RECORDINGS AND
FILING. The Borrower will do, execute, acknowledge and deliver and cause
to be performed such supplemental indentures and such further acts,
instruments and transfers as the Trustee may reasonably require for the
better assuring, transferring, pledging, assigning and conferring unto the
Trustee the property and rights herein described and the income and revenue
pledged hereby.
The Borrower will cause this Agreement and any necessary financing
statements, and other instruments (and supplements and amendments to any of
the foregoing) to be recorded and filed as may be required by law in order
to preserve fully and protect the security of the holders of the Bonds and
the rights of the Trustee hereunder.
The Borrower shall cause to be filed any continuation statements or
instruments of a similar character serving a similar purpose which, in its
opinion, are required by law in order to preserve and protect the security
of the Bondholders and shall notify the Trustee of such filings.
Section 1410. EXCULPATION OF RELATED PERSONS OF BORROWER. No
partner of the Borrower, other than LHA-II, Inc. as sole general partner of
the Borrower, and no officer, employee or agent of the Borrower and no
stockholder, director, officer, employee or agent of any partner of the
Borrower, including for this purpose any stockholder, director, officer,
employee or agent of LHA-II, Inc., is personally liable for the Borrower's
obligations hereunder or under any other Basic Agreement.
Section 1411. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which
shall constitute but one and the same Agreement.
Section 1412. GOVERNING LAW; SEALED INSTRUMENT. The validity and
interpretation of this Agreement and the Bonds shall be governed by the
laws of the Commonwealth. It is intended that this Agreement shall have
the effect of a sealed instrument.
Section 1413. AGREEMENTS TO CONSTITUTE COVENANTS. Words of
agreement and promises shall also constitute covenants.
section 1414. CONFIRMATION OF ORIGINAL AGREEMENT. Except as
expressly amended and restated hereby, the Original Agreement is confirmed
in full force and effect.
<PAGE>
IN WITNESS WHEREOF, each of the Borrower, the Issuer and the Trustee
has caused this Agreement to be executed and delivered as a sealed
instrument in its name and behalf by its authorized officer, all as of the
date appearing on page 1.
(SEAL) MASSACHUSETTS PORT AUTHORITY
By /s/ GEORGE A. O'BRIEN
------------------------------------
Secretary-Treasurer
LOGAN HARBORSIDE ASSOCIATED II
LIMITED PARTNERSHIP
By LHA-II, Inc., its General Partner
By /s/ ANTHONY PANGARO
___________________________________
Its President
SHAWMUT BANK, N.A., AS TRUSTEE
By /s/ LEE McDONALD
___________________________________
Authorized Officer
<PAGE>
EXHIBIT 301
No. R-82
CUSIP: 575897AB9 $40,000,000
UNITED STATES OF AMERICA
THE COMMONWEALTH OF MASSACHUSETTS
MASSACHUSETTS PORT AUTHORITY
SPECIAL PROJECT REVENUE BOND, SERIES 1990
(HARBORSIDE HYATT CONFERENCE CENTER AND HOTEL PROJECT)
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: FORTY MILLION DOLLARS
MATURITY DATE: March 1, 2026
INTEREST RATE: 10%
BOND DATE: June 27, 1991
__________________________________________________________________________
THIS BOND DOES NOT CONSTITUTE A GENERAL DEBT OR LIABILITY, OR A PLEDGE OF
THE FAITH AND CREDIT, OF THE MASSACHUSETTS PORT AUTHORITY OR OF THE
COMMONWEALTH OF MASSACHUSETTS OR ANY POLITICAL SUBDIVISION OR MUNICIPALITY
THEREOF. THE PRINCIPAL OF AND PREMIUM, IF ANY, AND INTEREST ON THIS BOND
ARE PAYABLE SOLELY FROM THE REVENUES OF THE PROJECT REFERRED TO HEREIN AND
THE FUNDS AND ACCOUNTS SPECIFICALLY PLEDGED UNDER THE LOAN AND TRUST
AGREEMENT REFERRED TO HEREIN, FROM ADVANCES FROM THE CREDIT ENHANCEMENT
ACCOUNT PLEDGED UNDER THE CREDIT ENHANCEMENT AGREEMENT REFERRED TO HEREIN,
AND FROM THE SECURITY PLEDGED BY LOGAN HARBORSIDE ASSOCIATES II LIMITED
PARTNERSHIP UNDER THE BORROWER SECURITY INSTRUMENTS REFERRED TO HEREIN.
__________________________________________________________________________
1. PAYMENT PROVISIONS. The Massachusetts Port Authority (the
"Issuer"), a body politic and corporate and a public instrumentality of The
Commonwealth of Massachusetts (the "Commonwealth") duly created by Chapter
465 of the Acts of 1956 of the Commonwealth, as heretofore amended and
supplemented (as so amended and supplemented, the "Enabling Act"), for
value received, promises to pay to the Registered Owner of this Bond, or
registered assigns or legal representatives (but only from the limited
sources and in the manner herein described), the Principal Amount in the
Maturity Date unless redeemed prior thereto as hereinafter provided, and to
pay interest on the unpaid Principal Amount of this Bond outstanding from
time to
<PAGE>
time from the Bond Date at the Interest Rate set forth above, payable
semiannually on March 1 and September 1 of each year (each an "Interest
Payment Date"), commencing March 1, 1992.
The final payment of principal, premium, if any, and interest with
respect to this Bond shall be payable in immediately available funds at the
corporate trust office of the Trustee (hereinafter defined) upon surrender
of this Bond, and other payments shall be payable by check or draft mailed
by the Trustee to the Registered Owner at its address appearing on the bond
register kept by the Trustee as of the close of business on the Record
Date, which when used herein shall mean the fifteenth day of the month
immediately preceding the month in which an Interest Payment Date occurs;
provided, however, that if the holder of this Bond or group of which such
holder is a part holds Bonds aggregating $1,000,000 or more in outstanding
principal amount and gives written notice thereof to the Trustee
accompanied by sufficient wire transfer instructions, then payments of
principal, premium, if any, and interest with respect to this Bond (other
than the final payment referred to above) shall be payable by wire transfer
of immediately available funds. As used herein, "Business Day" means any
day other than a Saturday, Sunday or other day on which the New York Stock
Exchange is closed or on which banks are authorized or required to be
closed in the City of Boston, Massachusetts or any other municipality in
which the principal offices of the Trustee are located.
Principal and premium, if any, and interest are payable in lawful
money of the United States of America.
2. INTEREST. This bond shall bear interest from and including the
date hereof until payment of the principal hereof shall have been made or
provided for in accordance with the provisions hereof and of the Loan and
trust Agreement (hereinafter defined) whether at maturity, upon redemption
or otherwise. This Bond will bear interest at the Interest Rate computed
on the basis of a 360-day year, consisting of twelve 30-day months.
3. DESCRIPTION OF BOND ISSUE. This Bond is one of an issue of
$40,000,000 Massachusetts Port Authority Special Project Revenue Bond,
Series 1990 (Harborside Hyatt Conference Center and Hotel Project) (the
"Bonds") issued under a Loan and Trust Agreement dated as of December 15,
1990, as amended and restated as of June 27, 1991 (as in effect from time
to time, the "Loan and Trust Agreement") among the Issuer, Logan Harborside
Associates II Limited Partnership, a Massachusetts limited partnership
(with its successors, the "Borrower"), and Shawmut Bank, N.A., a national
banking association, as trustee (with its successors and, where the context
so requires, any separate Trustee or Co-Trustee appointed by the Trustee
pursuant to the provisions of the Loan and Trust Agreement, the "Trustee").
The
<PAGE>
proceeds of the Bonds will be loaned (the "Loan") by the Issuer to the
Borrower under the Loan and Trust Agreement to finance the Project (as
defined in the Loan and Trust Agreement). The Bonds are issued pursuant to
and in full compliance with the laws of the Commonwealth, including the
Enabling Act, and the issuance of the Bonds and the execution and delivery
of the Loan Trust Agreement have been duly authorized by the Issuer.
The Bonds are to be equally and ratably secured and entitled to the
protection given by the Loan and Trust Agreement and the Borrower Security
Instruments and certain other Basic Agreements (each as defined in the Loan
and Trust Agreement) entered into by the Borrower in favor of the Trustee.
In addition, the Massachusetts Port Authority, as credit enhancer and not
as issuer of the Bonds, has agreed to advance certain funds to pay debt
service on the Bonds from a Credit Enhancement Account established under a
Credit Enhancement Agreement date as of June 27, 1991 among the
Massachusetts Port Authority, as credit enhancer, the Borrower and the
Trustee. Reference is hereby made to such documents for a description of
the nature and the extent of the security for the Bonds, the rights, duties
and obligation and immunities of the Issuer, the Trustee and the Registered
Owners and the terms upon which the Bonds are or may be issued and secured.
4. EXCHANGE AND TRANSFER; BOOK-ENTRY SYSTEM. Upon surrender of
this Bond at the corporate trust office of the Trustee, as bond registrar,
together with an assignment duly executed by the Registered Owner or his
attorney or legal representative in such form and with such guaranty of
signature as shall be satisfactory to the Trustee, this Bond may be
exchanged for fully registered Bonds aggregating in amount the then unpaid
principal amount of the Bond so surrendered, in denominations of not less
than $100,000 or any integral multiple thereof.
This Bond may be transferred upon the books kept for the registration
and transfer of Bonds upon its surrender to the Trustee, as bond registrar,
together with and assignment duly executed by the Registered Owner or his
attorney or legal representative in such form and with such guaranty of
signature as shall be satisfactory to the Trustee.
BY ACCEPTANCE OF THIS BOND, THE BONDHOLDER AGREES THAT IT WILL NOT
TRANSFER OR GRANT PARTICIPATIONS IN SUCH BOND IN DENOMINATIONS OF LESS THAN
$100,000.
The foregoing provisions of this Section 4 to the contrary
notwithstanding, the Bonds will be issued initially as fully registered
bonds in the name of Cede & Co., as nominee of The Depository Trust
Company, New York, New York ("DTC"), as Registered Owner of the Bonds, and
deposited in the custody of DTC. One fully registered Bond will be
registered to Cede & Co.
<PAGE>
Beneficial owners of the Bonds will not receive physical delivery of the
Bonds. Individual purchases of the Bonds may be made in book-entry form
only in principal amounts of $100,000 or any integral multiple thereof.
Principal and interest payments on the Bonds will be made to DTC or its
nominee as registered owner of such Bonds.
DTC shall pay interest to the beneficial owners of record of the
Bonds through its participants as of the close of business on the Record
Date. DTC shall pay the redemption price of the Bonds called for
redemption to the beneficial owners of record of the Bonds through its
participants as of the close of business 15 days prior to the date fixed
for redemption.
Transfer of ownership interests in the Bonds shall be made by DTC and
its participants, acting as nominees of the beneficial owners of the Bonds,
in accordance with rules specified by DTC and its participants. There can
be no assurance that DTC, its participants or other nominees of the
beneficial owners of the Bonds will act in accordance with such rules or on
a timely basis.
Bond certificates will be issued directly to owners of the Bonds
other than DTC, or its nominee, upon the occurrence of certain events
specified in Section 306 of the Loan and Trust Agreement.
5. REDEMPTION OF BONDS. The Bonds are subject to redemption prior
to stated maturity as follows:
(a) OPTIONAL REDEMPTION. Bonds shall be subject to redemption on
and after March 1, 2001 by the Issuer, at the written direction of the
Borrower, in whole on any date or in part on any Interest Payment Date, in
the amount of $100,000 or any integral multiple thereof, at the following
redemption price (expressed as a percentage of the principal amount of the
Bonds, or portion thereof, to be redeemed), plus accrued interest to the
redemption date:
REDEMPTION PERIOD REDEMPTION
(BOTH DATES INCLUSIVE) PRICE
March 1, 2001 through February 28, 2002 102%
March 1, 2002 through February 28, 2003 101
March 1, 2003 and thereafter 100
(b) EXTRAORDINARY OPTIONAL REDEMPTION. The Bonds may be redeemed
in whole but not in part by the Issuer at any time, at the written
direction of the Borrower, at a redemption price equal to 100% of the
principal amount thereof plus accrued interest thereon to the redemption
date, without premium, upon the occurrence of any extraordinary event or
condition described in Section 401(b) of the Loan and Trust Agreement.
<PAGE>
(c) MANDATORY REDEMPTION. The Bonds shall be subject to mandatory
redemption in whole or in part (as specified below) at a redemption price
equal to 100% of the principal amount thereof plus accrued interest to the
redemption date, without premium, as follows:
(i) Mandatory redemption in part on any date from moneys
remaining in the Project Fund established under the Loan and Trust
Agreement upon the completion of the Project, as and to the extent provided
under Section 501C of the Loan and Trust Agreement.
(ii) Mandatory redemption in part on any date from proceeds of
casualty insurance and eminent domain awards, to the extent provided under
Section 702 or 703 of the Loan and Trust Agreement.
(iii) Mandatory scheduled redemptions in part on March 1 in
each year, commencing March 1, 2001, in the amounts provided in Section
401(c) (iii) of the Loan and Trust Agreement, as the same may be adjusted
from time to time on account of an optional or mandatory partial redemption
of Bonds as provided in the last paragraph of Section 401(c) of the Loan
and Trust Agreement.
(d) SELECTION OF BONDS TO BE REDEEMED; PROCEDURE OF REDEMPTION. A
redemption of Bonds shall be a redemption of the whole or of any part of
the Bonds, provided, that there shall be no partial redemption of less than
$100,000 in principal amount of Bonds. If less than all the Bonds shall be
called for redemption under any provision of the Loan and Trust Agreement
permitting such partial redemption of the particular Bonds to be redeemed
shall be selected by the Trustee, in such manner as the Trustee in its
discretion may deem fair and appropriate; PROVIDED, HOWEVER, (x) that the
portion of any Bond to be redeemed under any provision of the Loan and
Trust Agreement shall be in the principal amount of $100,000 or any
multiple thereof, (y) that, in selecting Bonds for redemption, the Trustee
shall treat each in selecting Bonds for redemption, the Trustee shall treat
each Bond as representing that number of Bonds which is obtained by
dividing the principal amount of such Bond by $100,000 and (z) that, to the
extent practicable, the Trustee will not select any Bond for partial
redemption if the amount of such Bond remaining outstanding would be
reduced by such partial redemption to less than $100,000. If there shall
be called for redemption less than all of a Bond, the Issuer shall execute
and deliver and the Trustee shall authenticate, upon surrender of such
Bond, and at the expense of the Borrower and without charge to the owner
thereof, for the unredeemed balance of the Bond so surrendered, Bonds of
like maturity.
<PAGE>
At its option, to be exercised on or before the 60th day next
preceding any mandatory scheduled redemption date referred to in subsection
(c) (iii) above, the Borrower may deliver to the Trustee for cancellation
Bonds in any aggregate principal amount which have been purchased by the
Borrower in the open market. Each Bond so delivered shall be credited by
the Trustee at 100% of the principal amount thereof against the mandatory
scheduled redemption requirement referred to in said subsection (c) (iii)
on such mandatory scheduled redemption date and against the monthly Loan
payments required to be made with respect to such mandatory scheduled
redemption requirement under Section 1001B of the Loan and Trust agreement,
and any excess of such amount shall be credited against future mandatory
scheduled redemption requirements and against the corresponding portions of
the monthly Loan payments in chronological order.
In the event any of the Bonds are called for redemption, the Trustee
shall give notice, in the name of the Issuer, of the redemption of such
Bonds, which notice shall (i) specify the Bonds to be redeemed, the
redemption date, the redemption price, and the place or places where
amounts due upon such redemption will be payable and, if less than all of
the Bonds are to be redeemed, the numbers of the Bonds, and the portions of
the Bonds, so to be redeemed, (ii) state any condition to such redemption,
and (iii) state that on the redemption date, and upon the satisfaction of
any such condition, the Bonds to be redeemed shall cease to bear interest.
CUSIP number identification shall accompany all redemption notices. Such
notice may set forth any additional information relating to such
redemption. Such notice shall be given by registered or certified mail at
least 30 days (or, in the case of acceleration of the Bonds pursuant to
Section 1102 of the Loan and Trust Agreement, seven days) but not more than
60 days prior to the date fixed for redemption to each Registered Owner of
Bonds to be redeemed at its address shown on the registration books kept by
the Trustee; PROVIDED, HOWEVER, that failure to give such notice to any
Registered Owner or any defect in such notice shall not affect the validity
of the proceedings for the redemption of any of the other Bonds. Except at
any time during which all of the Bonds are registered in the name of Cede &
Co., notice of such redemption also shall be sent by registered mail,
overnight delivery service or other similar means, postage prepaid, to
certain municipal registered Securities Depositories which are known to the
Trustee to be holding Bonds and to at least two of the national Information
Services that disseminate securities redemption notices, when possible, at
least five days prior to the mailing of notices required by the first
paragraph above, but in any event at least 30 days (or, in the case of
acceleration of the Bonds pursuant to Section 1102 of the Loan and Trust
Agreement, seven days) but not more than 60 days prior to the redemption
date; PROVIDED that neither failure to receive such notify nor any defect
in any
<PAGE>
notice so mailed shall affect the sufficiency of the proceedings for the
redemption of such Bonds.
Any Bonds and portions of Bonds which have been duly selected for
redemption and which are paid in accordance with Section 510 of the Loan
and Trust Agreement shall cease to bear interest on the specified
redemption date.
6. ACCELERATION. In certain events as provided in the Loan and
Trust Agreement, the principal of all the Bonds then outstanding under the
Loan and Trust Agreement may become or be declared due and payable before
their stated maturity, together with interest accrued thereon.
7. ADDITIONAL PROVISIONS. The Registered Owner shall have no
right to enforce the provisions of the Loan and Trust Agreement or to
institute or appear in proceedings with respect to the Loan and Trust
Agreement or its enforcement except as provided in the Loan and Trust
Agreement. Modifications or alterations of the Loan and Trust Agreement,
or of any supplements thereto, may be made only as provided to the Loan and
Trust Agreement.
Reference is hereby made to the Loan and Trust Agreement, the
Borrower Security Instruments and the other Basic Agreements, each of which
is on file and may be inspected during regular business hours at the
corporate trust office of the Trustee, for a description of the security
for the Bonds and for the provisions thereof with respect to the rights,
limitations of rights, duties, obligations and immunities of the Issuer,
the Borrower, the Trustee and the Registered Owner hereof. All capitalized
terms used herein and not herein defined are used with the meanings
specified for such terms in the Loan and Trust Agreement.
This Bond shall not constitute the personal obligation, either
jointly or severally, of any member, director, officer, employee or agent
of the Issuer.
This Bond shall not be valid or entitled to any security or benefit
under the Loan and Trust Agreement until the certificate of authentication
hereon shall have been signed by the Trustee.
IN WITNESS WHEREOF, Massachusetts Port Authority has caused this Bond
to be duly executed in its name, and its corporate seal to be hereunto
manually impressed or imprinted by facsimile and attested, by the manual or
facsimile signature of its Chairman, Vice Chairman or Executive Director.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, , the undersigned hereby
sells, assigns, and transfers unto
(please print or typewrite name and address including zip code of
transferee)
______________________________________________________________________
(please insert Social Security or other identifying number of assignee)
______________________________________________________________________
the within Bond and all rights thereunder and hereby irrevocably
constitutes and appoints
______________________________________________________________________
attorney to transfer the within Bond on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________________
______________________________________________
NOTICE: The signature to this assignment must correspond with the name
as it appears upon the face of the within Bond in every particular, without
alteration or enlargement or any change whatever.
Signature Guarantee:
_____________________________________
Bank, Trust Company or Brokerage Firm
By____________________________________
Authorized Signature
<PAGE>
(Seal or Facsimile) MASSACHUSETTS PORT AUTHORITY
By_____________________________
Executive Director
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the aforementioned
Loan and Trust Agreement.
SHAWMUT BANK, N.A., as Trustee
By_____________________________
Authorized Signature
<PAGE>
EXHIBIT 10.12
- -------------
CREDIT ENHANCEMENT AGREEMENT
among
MASSACHUSETTS PORT AUTHORITY
and
LOGAN HARBORSIDE ASSOCIATES II LIMITED PARTNERSHIP
and
SHAWMUT BANK, N.A., AS TRUSTEE
Dated as of June 27, 1991
$40,000,000
Massachusetts Port Authority
Special Project Revenue Bonds, Series 1990
(Harborside Hyatt Conference Center and Hotel Project)
<PAGE>
INDEX
PAGE
----
Section 1. Definitions . . . . . . . . . . . . . . . . . . 2
1.1. Master Lease. . . . . . . . . . . . . . . . . . 2
1.2. Obligations . . . . . . . . . . . . . . . . . . 2
1.3. Related Agreements. . . . . . . . . . . . . . . 3
1.4. Supplemental Mortgage . . . . . . . . . . . . . 3
Section 2. Agreement to Lend . . . . . . . . . . . . . . . 3
2.1. Maximum Amount of Credit. . . . . . . . . . . . 3
2.2. Method of Advances. . . . . . . . . . . . . . . 4
2.3. Evidence of Indebtedness. . . . . . . . . . . . 4
2.4. Reduction of Maximum Amount of Credit . . . . . 4
Section 3. Borrower Obligations. . . . . . . . . . . . . . 6
3.1. Interest; Repayment . . . . . . . . . . . . . . 6
3.2. Fees. . . . . . . . . . . . . . . . . . . . . . 7
3.3. Expenses; Indemnification . . . . . . . . . . . 8
3.4. Obligations Absolute. . . . . . . . . . . . . . 8
Section 4. Credit Enhancement Account. . . . . . . . . . . 9
4.1. Administration and Investment . . . . . . . . . 9
4.2. Reductions of Credit Enhancement Account. . . . 9
4.3. Uses of Credit Enhancement Account. . . . . . . 10
Section 5. Conditions. . . . . . . . . . . . . . . . . . . 10
5.1. Related Agreements. . . . . . . . . . . . . . . 10
5.2. Supplemental Mortgage . . . . . . . . . . . . . 10
5.3. Mortgage Documentation. . . . . . . . . . . . . 10
5.4. Phase A Option. . . . . . . . . . . . . . . . . 10
5.5. Construction Contract . . . . . . . . . . . . . 11
5.6. Certain Payments. . . . . . . . . . . . . . . . 11
5.7. Developer Costs . . . . . . . . . . . . . . . . 11
5.8. Cross Reference . . . . . . . . . . . . . . . . 11
5.9. Legal Opinions. . . . . . . . . . . . . . . . . 11
Section 6. Certain Covenants . . . . . . . . . . . . . . . 11
6.1. Hyatt FF&E Funds. . . . . . . . . . . . . . . . 12
6.2. Local Tax Payments. . . . . . . . . . . . . . . 12
6.3. Recording of Phase A Option . . . . . . . . . . 12
6.4. Additional Debt . . . . . . . . . . . . . . . . 13
6.5. Supplemental Equity Fund. . . . . . . . . . . . 13
<PAGE>
Section 7. Administration of Supplemental Mortgage . . . . 13
Section 8. Maintenance of Supplemental Mortgage. . . . . . 14
Section 9. Reversion of Phase B and Phase D. . . . . . . . 14
Section 10. Representations of Borrower . . . . . . . . . . 15
10.1. Existence . . . . . . . . . . . . . . . . . . . 15
10.2. Valid Obligations . . . . . . . . . . . . . . . 15
10.3. Legal Proceedings . . . . . . . . . . . . . . . 15
10.4. Compliance with Law; Consents, etc. . . . . . . 15
Section 11. Events of Default . . . . . . . . . . . . . . . 16
Section 12. Remedies. . . . . . . . . . . . . . . . . . . . 17
Section 13. Termination of Agreement. . . . . . . . . . . . 17
Section 14. Concerning the Trustee. . . . . . . . . . . . . 18
Section 15. Notices . . . . . . . . . . . . . . . . . . . . 18
Section 16. Amendments. . . . . . . . . . . . . . . . . . . 18
Section 17. Extend of Credit Enhancer Covenants;
No Personal Liability . . . . . . . . . . . . 18
Section 18. Exculpation of Related Persons of Borrower. . . 18
Section 19. Limitation of Rights. . . . . . . . . . . . . . 19
Section 20. Severability. . . . . . . . . . . . . . . . . . 19
Section 21. Counterparts. . . . . . . . . . . . . . . . . . 19
Section 22. Governing Law; Sealed Instrument. . . . . . . . 19
Section 23. Agreements to Constitute Covenants. . . . . . . 19
Section 24. Captions; Index . . . . . . . . . . . . . . . . 19
Section 25. Successors. . . . . . . . . . . . . . . . . . . 19
Exhibit 2.3 Form of Borrower Note
<PAGE>
CREDIT ENHANCEMENT AGREEMENT
This CREDIT ENHANCEMENT AGREEMENT (as from time to time in effect,
the "Agreement") is entered into as of June 27, 1991 by the Massachusetts
Port Authority (the "Credit Enhancer"), a body corporate and politic and a
public instrumentality of The Commonwealth of Massachusetts (the
"Commonwealth") duly created by Chapter 465 of the Acts of 1956 of the
Commonwealth, as heretofore amended and supplemented (the "Enabling Act"),
Logan Harborside Associates II Limited Partnership (the "Borrower"), a
Massachusetts limited partnership, and Shawmut Bank, N.A., a national
banking association, as trustee (the "Trustee") under the Loan and Trust
Agreement dated as of December 15, 1990, as amended and restated as of June
27, 1991 (as from time to time in effect, the "1990 Trust Agreement") among
the Credit Enhancer, as issuer of the Special Project Bonds defined below,
the Borrower and the Trustee.
RECITALS
Pursuant to the 1990 Trust Agreement on December 31, 1990 the Credit
Enhancer issued $40,000,000 of its special project revenue bonds (the
"Special Project Bonds"), the proceeds of which were to be lent to the
Borrower for the purpose of financing costs of constructing, equipping and
furnishing a 270-room conference and hotel (the "Project") to be erected on
property in the Bird Island Flats section of Boston-Logan International
Airport that is leased by the Borrower from the Credit Enhancer. The
Special Project Bonds do not and shall not constitute a debt or liability,
or a pledge of the faith and credit, of the Credit Enhancer or of the
Commonwealth or any political subdivision thereof. The principal of and
premium, if any, and interest on the Special Project Bonds are and shall be
payable solely from the revenues of the Project and other funds
specifically pledged for such purpose and not from any other revenues or
properties of the Credit Enhancer.
Because the Borrower had advised the Credit Enhancer that it had been
unable to market the Special Project Bonds but that it expected that it
would be able to find investors during the first few months of 1991, the
Special Project Bonds were issued with the understanding that the proceeds
would be held in escrow for the benefit of the Bondholders while the
Borrower and its placement agent pursued efforts to remarket the Special
Project Bonds. The escrow is currently scheduled to terminate on June 27,
1991. If the remarketing is not accomplished on or before June 27, 1991
the Special Project Bonds will have to be redeemed.
<PAGE>
The Borrower had advised the Credit Enhancer that the Special Project
Bonds cannot be remarketed without the support of an increased equity
investment or significant credit enhancement and that the Borrower and its
equity partners are unable or unwilling to provide such support from their
own resources. Consequently, the Borrower has requested that the Credit
Enhancer provide credit enhancement for the Special Project Bonds in the
form of a commitment to advance up to $10,000,000 if, when and as needed to
pay debt service on the Special Project Bonds. In consideration for such
support, the Borrower has offered the Credit Enhancer the credit
enhancement fees, security and terms of repayment more fully described
herein.
The Credit Enhancer has found and determined that the construction of
the Project is necessary and appropriate for the development of the Airport
Properties (as defined in the Enabling Act). The Credit Enhancer has
further found and determined, on the basis of the advice of its staff and
financial advisors, that the proposed credit enhancement is advisable,
absent additional equity provided by the Borrower, with respect to the
remarketing of the Special Project Bonds. The Credit Enhancer is satisfied
that the consideration and security for the proposed credit enhancement are
appropriate to the situation.
In consideration of the mutual agreements and representations
contained in this Agreement and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. DEFINITIONS. Terms defined in this Agreement are used as
defined herein. Terms defined in the 1990 Trust Agreement and not
otherwise defined in this Agreement are used as defined in the 1990 Trust
Agreement. Unless otherwise indicated, references to Sections are to
Sections of this Agreement.
1.1. MASTER LEASE. As used herein, the term "Master Lease"
means the lease dated as of May 1, 1983 between the Credit Enhancer, as
ground lessor, and Massachusetts Technology Center Associates, a
Massachusetts limited partnership ("MTCA"), as from time to time amended
and supplemented, the interest of the tenant under which has been assigned
to Logan Harborside Associates I Limited Partnership, a Massachusetts
limited partnership ("LHA I").
1.2. OBLIGATIONS. As used herein, the term "Obligations"
shall mean the obligation of the Borrower to repay advances made from the
Credit Enhancement Account hereunder, the interest therein, all fees,
reimbursement of expenses, indemnifications and other amounts payable by
the Borrower under this Agreement or any Related Agreement to or for the
benefit of the Credit Enhancer or the Trustee, all
<PAGE>
reimbursements of expenses, indemnifications and other amounts
payable under a Supplemental Mortgage or any other Related Agreement by LHA
I or any other grantor of a Supplemental Mortgage, and all reimbursement of
expenses, indemnifications and other amounts payable under the Phase A
Option or any other Related Agreement by MTCA.
1.3. RELATED AGREEMENTS. As used herein, the term "Related
Agreements" shall mean each of (a) the Borrower Note, (b) the Phase C
Second Mortgage, (c) each Supplemental Mortgage, (d) the Equity Escrow
Agreement, (e) the Phase A Option and (f) any other agreement or instrument
securing the Obligations, each as from time to time in effect.
1.4. SUPPLEMENTAL MORTGAGE. As used herein, the term
"Supplemental Mortgage" shall mean the leasehold mortgage and security
agreement on Phase B and Phase D referred to in Section 5.2 hereof and any
substitute, successor or replacement mortgage and security agreement
securing the Obligations delivered under Section 7 hereof.
Section 2. AGREEMENT TO LEND. The Credit Enhancer hereby agrees to
lend to the Borrower the principal sum at any one time outstanding of up to
the Maximum Amount of Credit then in effect solely for the purpose of
paying principal of and premium (in the case of the occurrence of a
Determination of Taxability) and interest on the Special Project Bonds in
the event that the Cash Flow Available for Debt Service of the Project
shall not be sufficient therefor and in the event that all of the
Construction and Operating Costs Contingency Fund, the Equity Reserve Fund,
the Supplemental Equity Fund and the Debt Service Reserve Fund established
under the 1990 Trust Agreement shall have been exhausted; and provided that
no such loan shall be made on or prior to the Completion Date unless the
Project Fund shall have been exhausted. The commitment of the Credit
Enhancer under this Section 2 to make such advances shall be irrevocable,
shall not be affected by the occurrence or continuation of any event or
condition constituting an Event of Default hereunder or under any Related
Agreement and shall not be subject to reduction or setoff on account of any
obligation owed by the Borrower or any other Person to the Credit Enhancer.
2.1. MAXIMUM AMOUNT OF CREDIT. As used herein, the "Maximum
Amount of Credit" shall mean initially $10,000,000 and thereafter shall
mean the amount to which the Maximum Amount of Credit shall have been
reduced as provided in Sections 2.4 and 2.5 hereof.
2.2. METHOD OF ADVANCES. Advances hereunder shall be effected
by the Trustee withdrawing the amount to be advanced, not earlier than one
Business Day preceding the
<PAGE>
applicable Payment Date, from the Credit Enhancement Account
established under Section 4 hereof and depositing the same to the credit of
the Bond Fund established under Section 502 of the 1990 Trust Agreement,
all as provided under Section 505B of the 1990 Trust Agreement.
2.3. EVIDENCE OF INDEBTEDNESS. The outstanding advances
hereunder and interest thereon shall be evidenced by a promissory note
substantially in the form of Exhibit 2.3 hereto (the "Borrower Note")
issued by the Borrower, as payor, in favor of the Credit Enhancer, as
payee. The Trustee shall maintain on its books a record of all advances
hereunder and of all amounts of interest paid and principal repaid under
Section 3 hereof. As of the last day of each calendar month, commencing
July 31, 1991, the Trustee shall furnish to each of the Credit Enhancer and
the borrower a statement in writing of the Trustee's calculation of the
outstanding principal amount, if any, of advances hereunder and accrued
interest thereon (including compounded interest as provided in Section 3.1
hereof). In the absence of demonstrable error, such calculation shall be
binding upon all of the parties hereto.
2.4. REDUCTION OF MAXIMUM AMOUNT OF CREDIT. The Maximum
Amount of Credit at no time shall exceed an amount equal to $10,000,000
less the value of payments made and investment earnings realized with
respect to the Equity Reserve Fund established under Section 505A of the
1990 Trust Agreement; PROVIDED, HOWEVER, that at no time shall the Maximum
Amount of Credit be reduced pursuant to this Section 2.4 to an amount less
than the lesser of (a) $4,000,000 and (b) the aggregate principal amount of
Special Project Bonds then outstanding. As of the last day of each
calendar month, commencing July 31, 1991, the Trustee shall calculate the
Maximum Amount of Credit and shall furnish each of the Credit Enhancer and
the Borrower a written statement of the same. In the absence of
demonstrable error, such calculation shall be binding upon all of the
parties hereto. No reduction of the Maximum Amount of Credit effected
hereunder shall be reversed, and the Maximum Amount of Credit shall not be
increased at any time.
2.5. ADDITIONAL REDUCTIONS OF MAXIMUM AMOUNT OF CREDIT. In
addition to reductions effected pursuant to Section 2.4, the Maximum Amount
of Credit also shall be subject to reduction to the extent that the Debt
Service Coverage Ratio shall equal or exceed 140% for certain periods, as
follows:
(a) In the event that the Project shall have achieved a
Debt Service Coverage Ratio equal to or in
<PAGE>
excess of 140% for each of four consecutive calendar years,
provided that the last day of such period shall not be earlier than
February 28, 2001, then as of the last day of such period, the Maximum
Amount of Credit shall be reduced by an amount equal to 25% of the Maximum
Amount of Credit as in effect on such date (the "Reduction Amount").
(b) In the event that the Project thereafter shall
achieve for any subsequent calendar year a Debt Service Coverage Ratio
equal to or in excess of 140%, then as of the last day of such year the
Maximum Amount of Credit shall be reduced by an amount equal to the lesser
of (i) an amount equal to the dollar amount of the reduction previously
effected under subsection (a) above and (ii) the entire Maximum Amount of
Credit then in effect minus $500,000; provided, however, that in the event
that the Debt Service Coverage Ratio for any calendar year following a
period or year for which a reduction in the Maximum Amount of Credit was
effected pursuant to subsection (a) above or this subsection (b) fails to
equal or exceed 1.40 to 1, then no further reduction in the Maximum Amount
of Credit shall be made under this Section 2.5 until the Debt Service
Coverage Ratio shall have been equal to or greater than 1.40 to 1 for each
of four consecutive calendar years; and PROVIDED, FURTHER, that it shall be
a condition of any reduction of the Maximum Amount of Credit to $500,000
under this Section 2.5(b) that there shall be on deposit in the
Supplemental Equity Fund under the 1990 Trust Agreement an amount of not
less than $500,000, and in the event that this condition is not met, such
reduction shall be delayed until the next day on which this condition is
met.
(c) In the event that for any reason the principal
balance of the Debt Service Reserve Fund (calculated as provided in Section
506 of the 1990 Trust Agreement) shall be less than the Required Debt
Service Reserve Amount on the day that any reduction of the Maximum Amount
of Credit under subsection (a) or (b) above is to be effected, then such
reduction shall be delayed until the next day on which such principal
balance shall equal or exceed the Required Debt Service Reserve Amount.
(d) In the event that the principal balance of the
Equity Reserve Fund shall be less than the total amount of credit
enhancement fees theretofore required to have been deposited therein
pursuant to Section 3.2 of this Agreement (without regard to any deferral
<PAGE>
permitted thereby) or there shall have been any draw from the
Equity Reserve Fund under Section 505A(a) or (b) that shall not have been
reimbursed on the day that any reduction of the Maximum Amount of Credit
under subsection (a) or (b) above is to be effected, the such reduction
shall be delayed until the next day on which such principal balance shall
equal or exceed such total amounts and/or such reimbursement shall have
been made.
(e) No reduction of the Maximum Amount of Credit
effected under this Section 2.5 shall be reversed, and the Maximum Amount
of Credit shall not be increased at any time.
(f) For the purpose of this Section 2.5, the
calculation of the Debt Service Coverage Ratio shall be certified by the
Borrower to the Trustee based on an audited financial statement for each
applicable calendar year and in such detail as may be reasonably required
by the Trustee.
Section 3. BORROWER OBLIGATIONS. In consideration of the Credit
Enhancer's commitment to make the advances provided for above, the borrower
agrees as follows:
3.1. INTEREST; REPAYMENT. All advances under Section 2 hereof
shall bear interest at the rate of 10% per annum calculated on the basis of
a year of 365 days and the number of days elapsed. If unpaid, accrued
interest shall be compounded and added to the principal amount due as of
the last day of each calendar month. Each advance, together with all
interest thereon, shall be paid in full not later than three years
following the date of such advance; PROVIDED, HOWEVER, that in the event of
acceleration of the maturity of the Special Project Bonds under Section
1102 of the 1990 Trust Agreement, all advances hereunder and interest
thereon shall be due and payable in full immediately. Until payment in
full of all outstanding advances and interest thereon, all Cash Flow
Available for Debt Service for each calendar month (excluding only $12,500
per month accrued for the purpose of paying the credit enhancement fee
provided in Section 3.2 hereof) remaining after payment of any amounts then
due and payable under Sections 1001A, 1001B, 1001D and 1001E of the 1990
Trust Agreement shall be applied to pay such advances and interest therein
not later than five days after receipt from Hyatt Corporation of each
payment under Section 4.3 of the Hyatt Management Agreement. All such
payments shall be applied first to the accrued interest, then to compounded
interest and then to amounts advanced. All payments of accrued
<PAGE>
interest and compounded interest shall be paid to the Trustee and
paid over by the Trustee to the Credit Enhancer. All repayments of amounts
advanced shall be paid to the Trustee for deposit into the Credit
Enhancement Account established under Section 4 hereof; and amounts so
deposited may be reborrowed under Section 2 hereof, subject to the terms
and conditions thereof.
3.2. FEES. The Borrower shall pay a credit enhancement fee
equal to $150,000 per annum payable as follows: (a) $300,000 shall be
payable at closing, and (b) $75,000 shall be due and payable on each March
1 and September 1, commencing September 1, 1993, until the date on which
the Maximum Amount of Credit is reduced to $500,000 pursuant to Section
2.5(b) hereof; provided, however, that to the extent that the Cash Flow
Available for Debt Service of the Project shall be insufficient to pay any
installment of the fee under clause (b) when due, then payment of such
installment may be deferred until the earlier of (i) the date sufficient
Cash Flow Available for Debt Service becomes available and (ii) the third
anniversary of the date on which such installment originally was due,
whereupon payment of such installment shall be made together with interest
thereon at the rate of 8% per annum, compounded semi-annually on March 1
and September 1. Such amounts shall be paid into the Equity Reserve Fund
established under Section 505A of the 1990 Trust Agreement and invested and
administered as therein provided. On the Credit Enhancement Termination
Date there shall be paid to the Credit Enhancer an amount equal to the
aggregate amount of all Credit Enhancement Fees required to have been paid
into the Equity Reserve Fund pursuant to this Section 3.2 (without regard
to any deferral permitted by the proviso to clause (b) above) plus interest
thereon from the date that each payment was required to have been made
(without regard to any deferral permitted by the proviso to clause (b)
above) at the rate of the greater of (i) the actual investment earnings
realized on such amounts and (ii) 8% per annum, compounded semi-annually on
each March 1 and September 1. Such amount shall be paid first from the
Equity Reserve Fund and then from other available funds of the Borrower.
It is agreed that the fee provided above shall not be distributed to the
Credit Enhancer until the occurrence of the earlier of the date on which
the Maximum Amount of Credit is reduced to $500,000 pursuant to Section
2.5(b) hereof or payment in full of the Special Project Bonds, and until
such time the right of the Credit Enhancer to receive such fee shall remain
subordinate to the rights of the holders of the Special Project Bonds as
provided in the 1990 Trust Agreement with respect to the uses of the Equity
Reserve Fund. From and after the date on which the Maximum Amount
<PAGE>
of Credit is reduced to $500,000 pursuant to Section 2.5(b) hereof
and until the Credit Enhancement Termination Date, the Borrower shall pay
to the Credit Enhancer a fee of $7,500.00 per annum, payable in semiannual
installments of $3,750.00 on each March 1 and September 1.
3.3. EXPENSES; INDEMNIFICATION. The Borrower will bear all
out-of-pocket expenses (including the reasonable fees and disbursements of
counsel and financial advisors) incurred by the Credit Enhancer and the
Trustee in connection with the preparation of this Agreement and the
related documents pertaining to the credit enhancement of the Special
Project Bonds, the transactions contemplated hereby and thereby and
operations (and enforcement of the rights of the Credit Enhancer and the
Trustee) hereunder or thereunder; PROVIDED, that the amount to be paid by
the Borrower to reimburse the Credit Enhancer for out-of-pocket expenses
incurred through the date hereof (including the fees and disbursements of
Ropes & Gray as Bond Counsel and as special counsel to the Credit Enhancer
in its capacity as issuer of the Special Project Bonds and the fees and
disbursements of financial advisors to the Credit Enhancer) shall not
exceed $335,000 (including the $85,000 paid in connection with the issuance
of the Special Project Bonds on December 31, 1990). In addition, the
Borrower shall indemnify and hold harmless the Credit Enhancer and the
Trustee, and their respective members, directors, officers, employees and
agents, and the liabilities of all such Persons shall be limited, as and to
the extent provided in Section 1003 of the 1990 Trust Agreement. The
covenants contained in this Section 3.3 shall survive the termination of
this Agreement.
3.4. OBLIGATIONS ABSOLUTE. The obligations of the Borrower
under this Section 3 to pay the Obligations shall be absolute,
unconditional and irrevocable. The Obligations shall be paid strictly in
accordance with the terms of this Agreement under all circumstances
whatsoever, including without limitation any error of the Trustee in the
application of funds under the 1990 Trust Agreement or in making or failing
to make an advance form the Credit Enhancement Account as provided in
Section 505B of the 1990 Trust Agreement.
Section 4. CREDIT ENHANCEMENT ACCOUNT. Reference is made to the
Trust Agreement dated as of August 1, 1978, as from time to time amended
and supplemented (as from time to time in effect, the "1978 Trust
Agreement"), between the Credit Enhancer and State Street Bank and Trust
Company. Pursuant to Section 503 of the 1978 Trust Agreement, the Credit
Enhancer has established in the Improvement and Extension Fund created
under said Section 503
<PAGE>
an account to be known as the "Credit Enhancement Account" and has funded
such account in the amount of $10,000,000. Pursuant to Section 518 of the
1978 Trust Agreement and subject to the terms and conditions of this
Agreement and the 1990 Trust Agreement, in order to provide security for
its obligation to make the advances committed under Section 2 hereof, the
Credit Enhancer hereby transfers, grants, pledges and assigns to the
Trustee for the benefit of the Bondholders and the Credit Enhancement
Account and the funds and investments credited thereto.
4.1. ADMINISTRATION AND INVESTMENT. The funds constituting
the Credit Enhancement Account shall be deposited in an account of that
name held by the Trustee and shall be invested at the direction of the
Credit Enhancer, confirmed in writing with notice to the Borrower, in
investments which constitute Investment Securities as defined in the 1978
Trust Agreement; PROVIDED, that amounts in the Credit Enhancement Account
shall be invested to produce a Yield not higher than the Yield on the
Special Project Bonds unless the Trustee is provided with an opinion of
Bond Counsel or a ruling of the Internal Revenue Service that investment of
such amounts without such restriction will not adversely affect the
exclusion from gross income for federal income tax purposes of the
interest paid on the Special Project Bonds. All investment earnings
realized on the Credit Enhancement Account shall be transferred upon
receipt to the Credit Enhancer free of any lien hereunder or under the
1990 Trust Agreement.
4.2. REDUCTIONS OF CREDIT ENHANCEMENT ACCOUNTS. The principal
balance of the Credit Enhancement Account (valued at the lesser of cost and
market value) at no time shall exceed the Maximum Amount of Credit. Before
the close of business on the Remarketing Date, the Trustee shall transfer
to the Credit Enhancer from the Credit Enhancement Account the sum of
$300,000, representing an amount equal to the amount required to be
deposited on that date by the Borrower into the Equity Reserve Fund.
Thereafter, in the event that as of the last day of any calendar month the
Maximum Amount of Credit shall exceed the principal balance of the Credit
Enhancement Account (valued at the lesser of cost and market value),
because of the realization of investment earnings on the Credit Enhancement
Account or any reduction of the Maximum Amount of Credit under Section 2.4
or 2.5 hereof, or for any other reason, then on such day or as soon
thereafter as feasible the Trustee shall transfer to the Credit Enhancer
from the Credit Enhancement Account an amount equal to such excess.
4.3. USES OF CREDIT ENHANCEMENT ACCOUNT. It is agreed that
the Credit Enhancement Account shall not be used to
<PAGE>
secure additional bonds, should any ever be issued with respect to
the Project, or any other indebtedness other than the Special Project Bonds
except with the written consent of the Holders of the Special Project
Bonds.
Section 5. CONDITIONS. The obligation of the Credit Enhancer under
this Agreement shall be conditioned upon the satisfaction in full on the
date hereof of each of the following conditions:
5.1. RELATED AGREEMENTS. The Borrower shall have executed and
delivered the amendment and restatement of the 1990 Trust Agreement,
amendments to the Ground Lease and the Master Lease, a second leasehold
mortgage and security agreement in favor of the Credit Enhancer on the
Project junior only to the Leasehold Mortgage (as from time to time in
effect, the "Phase C Second Mortgage") and an equity escrow agreement (as
from time to time in effect, the "Equity Escrow Agreement"), each in form
and substance satisfactory to the Credit Enhancer.
5.2. SUPPLEMENTAL MORTGAGE. LHA I shall have executed and
delivered a first priority leasehold mortgage and security agreement
securing the Obligations in favor of the Credit Enhancer on Phase B and
Phase D of the property subject to the Master Lease in form and substance
satisfactory to the Credit Enhancer and shall have executed and delivered
the Equity Escrow Agreement.
5.3. MORTGAGE DOCUMENTATION. The Phase C Second Mortgage and
the initial Supplemental Mortgage shall have been duly recorded in all
offices to perfect the lien thereof, and any necessary consents of third
parties relating thereto shall have been attained.
5.4. PHASE A OPTION. MTCA shall have executed and delivered
to the Credit Enhancer an option (the "Phase A Option") to purchase the
Option Premises (as defined therein) in form and substance satisfactory to
the Credit Enhancer.
5.5. CONSTRUCTION CONTRACT. The Borrower shall have entered
into a guaranteed maximum price construction contract with George B.H.
Macomber Company, Incorporated or other general contractor approved by the
Credit Enhancer and the Remarketing Agent and shall have obtained and
delivered to the Credit Enhancer and the Trustee payment and performance
bonds, in form and substance satisfactory to both the Credit Enhancer and
the Remarketing Agent, to the extent described under "THE PROJECT --
Construction" in the
<PAGE>
Remarketing Official Statement dated June 27, 1991 relating to the
Special Project Bonds.
5.6. CERTAIN PAYMENTS. The Borrower shall have made the
initial payment of $300,000 to the Equity Reserve Fund required under
Section 3.2 hereof, shall have deposited $3,500,036.31 to the credit of the
Construction and Operating Costs Contingency Fund and shall have paid or
reimbursed the Credit Enhancer for the reasonable fees and expenses of its
special counsel and financial advisors accrued through the date hereof (or
such earlier date as the Credit Enhancer may agree), subject to the
limitation set forth in the proviso to the first sentence of Section 3.3
hereof.
5.7. DEVELOPER COSTS. The Borrower shall have furnished to
the Credit Enhancer, the Remarketing Agent and the Trustee a certificate
(the "Equity Costs Certificate") in form and substance satisfactory to the
Credit Enhancer and the Remarketing Agent identifying not less than
$2,699,963.69 of eligible Project costs and costs of issuance and
remarketing incurred and paid by or on behalf of the Borrower prior to the
Remarketing Date.
5.8. CROSS REFERENCE. All conditions set forth in Sections 7
and 8 of the Remarketing Agreement shall have been satisfied.
5.9. LEGAL OPINIONS. The Credit Enhancer shall have received
the favorable legal opinions of special counsel to the Borrower, to LHA I
and to MTCA with respect to this Agreement and the Related Agreements
referred to in Section 5.1 and 5.2 above, each such opinion to be
reasonably satisfactory in form and substance to the Credit Enhancer and
its special counsel.
Section 6. CERTAIN COVENANTS. In addition to its covenants
contained in the Ground Lease, the 1990 Trust Agreement and the Related
Agreements, the Borrower covenants and agrees as follows:
6.1. HYATT FF&E FUND. So long as this Agreement remains in
effect, no monies in the "Fund for Replacement of and Additions to
Furnishings and Equipment" established pursuant to Section 5.4 of the Hyatt
Management Agreement shall be paid to the Borrower unless each of the
following conditions is met (or, in the case of subsection (b) below, shall
be met after giving effect to the simultaneous application of such funds by
the Borrower): (a) Hyatt Corporation or any successor manager approved by
the Credit Enhancer shall have consented to such payment; (b) the amount on
deposit in the Equity Reserve Fund shall equal or
<PAGE>
exceed the aggregate amount to be paid thereto under Section 3.2
hereof (without regard to any deferral or limitation permitted under
Section 3.2 hereof), together with all investment earnings thereon, the
amount on deposit in the Debt Reserve Fund shall equal or exceed the
Required Debt Service Reserve Amount and no advances or interest thereon
shall be outstanding and unpaid under the Credit Enhancement Agreement; (c)
at least five years shall have passed since the Completion Date; and (d) no
Event of Default hereunder shall have occurred and be continuing. In the
event that the Hyatt Management Agreement shall be terminated at a time
when any of the foregoing conditions shall not have been met, all moneys in
such fund shall be delivered to a successor manager approved by the Credit
Enhancer or shall be delivered to the Trustee to be held in escrow for use
in connection with the operation of the Project in a manner reasonably
satisfactory to the Credit Enhancer.
6.2. LOCAL TAX PAYMENTS. So long as this Agreement remains in
effect, the borrower shall not make any payments of real estate taxes or
other ad valorem taxes or payments in lieu thereof to the City of Boston,
except as required under the statutes of the Commonwealth or ordinances of
the City of Boston duly adopted in accordance with such statutes.
6.3. RECORDING OF PHASE A OPTION. Unless its recording is
prohibited under the Travelers' Mortgage (as defined in the Phase A
Option(, the Phase A Option shall be recorded in priority to all
encumbrances on the Option Premises excepting only the Travelers' Mortgage
(and/or any other Priority Mortgage, as defined in the Ground Lease (Phase
A) for Bird Island Flats Development dated as of May 26, 1983, as amended).
The Borrower shall use best efforts to obtain permission for the Phase A
Option to be recorded. In the event that such permission is not obtained,
then, so long as such condition persists, (a) the initial Supplemental
Mortgage on the leasehold on Phases B and D shall remain in effect and the
Borrower shall not be entitled to release of the initial Supplemental
Mortgage as provided in Section 7, and (b) if the Borrower, LHA I or any
affiliate of the Borrower or LHA I shall grant and/or suffer liens or other
encumbrances on the Option Premises which secure indebtedness for borrowed
money other than a Priority Mortgage (defined as provided above) or, unless
the Travelers' Mortgage has been or is in the process of being foreclosed,
suffers to exist any lien or other encumbrance on the Option Premises which
secures an obligation or indebtedness not for borrowed money and which
would interfere with the maintenance or exercise of the rights of the
Credit Enhancer under the Phase A Option (other than
<PAGE>
such a lien or encumbrance which the Borrower is contesting with due
diligence by appropriate legal proceedings and execution of which has not
been attempted or has been stayed), then the leasehold interest of LHA I in
Phases B and D immediately shall terminate, as more fully provided in the
Master Lease as amended as of the date hereof, and all right, title and
interest in and to Phases B and D automatically shall revert to the Credit
Enhancer without further compensation or consideration of any kind to the
Borrower, LHA I or any other Person and with no reduction in any amount
then or thereafter owing to the Credit Enhancer under Section 3 of this
Agreement.
6.4. ADDITIONAL DEBT. Without the prior written consent of
the Credit Enhancer, which may be given or withheld at the discretion of
the Credit Enhancer, the Borrower shall not issue "Parity Indebtedness" as
defined in the Leasehold Mortgage.
6.5. SUPPLEMENTAL EQUITY FUND. On each date on which the
Borrower shall have achieved a Debt Service Coverage Ratio for a period
sufficient to support a reduction of the Maximum Amount of Credit under
Section 2.5, the Borrower shall pay to the Trustee for deposit into the
Supplemental Equity Fund the amount of $125,000. In the event that the
requirements for reducing the Maximum Amount of Credit to $500,000 under
Section 2.5(b) shall have been met except for the condition that $500,000
be on deposit in the Supplemental Equity Fund, then no distribution of
moneys in the Revenue Fund shall be made to the Borrower until such
condition shall have been satisfied.
Section 7. ADMINISTRATION OF SUPPLEMENTAL MORTGAGE. At its option
exercisable on any date on or before December 26, 1995 on which there shall
exist no Event of Default under this Agreement and no event or condition
which, with the passage of time or the giving of notice or both, would
constitute an Event of Default, and subject to Section 6.3 hereof, the
Borrower may deliver to the Credit Enhancer as security for the Obligations
in substitution for the initial Supplemental Mortgage (a) a mortgage and
security interest on the Option Premises junior only to the Travelers'
Mortgage or other Priority Mortgage (defined as provided in Section 6.3) or
(b) other collateral satisfactory to the Credit Enhancer in its sole
judgment, but only so long as such other collateral shall have a current
appraised value (net of any prior secured debt) of not less than
$5,000,000. The documentation for such junior interest or other substitute
collateral shall be substantially in the form of the Phase C Second
Mortgage with such modifications as the Credit Enhancer may approve, and
shall be delivered together with the favorable opinion of the Borrower's
special counsel and other documentation
<PAGE>
reasonably satisfactory to the Credit Enhancer and its special counsel
(including in the case of real property collateral, title insurance in an
amount note to exceed the lesser of $5,000,000 and the Maximum Amount of
Credit then in effect). Upon the delivery of a substitute Supplemental
Mortgage under this Section 7, the initial Supplemental Mortgage shall be
released and discharged.
Section 8. MAINTENANCE OF SUPPLEMENTAL MORTGAGE. In the event that
the Credit Enhancer shall have been provided a substitute Supplemental
Mortgage as provided in Section 7, then in the event that such security
shall be terminated for any reason, including without limitation the sale
of or foreclosure upon the underlying property to or by any Person
(including without limitation the Credit Enhancer), the Borrower shall
within 30 days following such event deliver or cause to be delivered to the
Credit Enhancer (i) replacement or substitute collateral meeting the
requirements of clause (b) and the second sentence of Section 7, or, if
such delivery shall occur before December 27, 1995, (ii) a leasehold
mortgage on Phase B and Phase D in the form of the initial Supplemental
Mortgage delivered pursuant to Section 5.2 hereof and subject to no other
encumbrance.
Section 9. REVERSION OF PHASE B AND PHASE D. In the event that on
December 27, 1995 either or both of the Phase B or Phase D leasehold shall
be subject to a Supplemental Mortgage (whether pursuant to the initial
Supplemental Mortgage or a substitute Supplemental Mortgage delivered under
Section 8), then on December 27, 1995 the leasehold interest of LHA I in
Phase B and/or Phase D, as the case may be, shall terminate, as more fully
provided in the Master Lease as amended as of the date hereof, and all
right, title and interest in and to such property automatically shall
revert to the Credit Enhancer without further compensation or consideration
of any kind to the Borrower, LHA I or any other Person and with no
reduction in any amount then or thereafter owing to the Credit Enhancer or
the Trustee under Section 3 of this Agreement. The occurrence of such
reversion shall not constitute an Event of Default under this Agreement or
any Related Agreement and shall not give rise to any obligation on the part
of the Borrower to provide substitute collateral.
Section 10. REPRESENTATIONS OF BORROWER. The Borrower hereby
represents and warrants to the Credit Enhancer as follows:
10.1. EXISTENCE. It is a limited partnership validly existing
under the laws of the Commonwealth and has full power and authority to
execute, deliver and perform its obligations under this Agreement and the
Related Agreements to which the Borrower is a party.
<PAGE>
10.2. VALID OBLIGATIONS. It has taken all necessary action and has
complied with all provisions of federal, state and local law, required to
make this Agreement and the Related Agreements to which the Borrower is a
party the valid obligations of the Borrower which they purport to be; and,
when executed and delivered by the general partner of the Borrower, this
Agreement and such Related Agreements will constitute valid and binding
agreements of the Borrower and be enforceable in accordance with their
respective terms, except as enforceability may be subject to the exercise
of judicial discretion in accordance with general equitable principles and
to applicable bankruptcy, insolvency, reorganization, moratorium and other
laws for the relief of debtors heretofore or hereafter enacted to the
extent that the same may be constitutionally applied.
10.3. LEGAL PROCEEDINGS. There is no action, suit, proceedings or
investigation at law or in equity before or by any court or public board or
body pending or, to the knowledge of the Borrower, threatened against it,
wherein an unfavorable decision, ruling or finding would in any material
respect adversely affect the business, assets or condition (financial or
otherwise) of the Borrower or the transactions contemplated by this
Agreement and the Related Agreements, or which in any way would adversely
affect the validity of this Agreement or any of the Related Agreements.
10.4. COMPLIANCE WITH LAW; CONSENTS, ETC. The Borrower is not in
violation in any material respect of any term or provision of any mortgage,
lease, agreement or other instrument which is material to its business or
assets, or of any judgment, decree, governmental order, statute, rule or
regulation by which it is bound or to which it or any of its assets is
subject. The execution and delivery by the Borrower of this Agreement and
the Related Agreements to which the Borrower is a party will not violate or
constitute a default of any term or provision of any mortgage, lease,
agreement or other instrument, or of any judgment, decree, governmental
order, statute, rule or regulation by which the Borrower is bound or to
which any of its assets is subject. No approval by, authorization of, or
filing with any federal, state, or municipal or other governmental
commission, board or other governmental authority is necessary in
connection with the execution and delivery by the Borrower of this
Agreement or of any of such Related Agreements that are required to be
executed and delivered on the Remarketing Date.
Section 11. EVENTS OF DEFAULT. Each of the following shall
constitute an "Event of Default" for the purposes of this Agreement:
<PAGE>
(a) There shall occur any Event of Default within the meaning
of Section 1101 of the 1990 Trust Agreement; PROVIDED, HOWEVER, that for
the purpose of this Agreement any event or condition described in said
Section 1101 as being an "Event of Default" thereunder only on or after the
occurrence of the Credit Enhancement Termination Date shall constitute an
Event of Default hereunder regardless of whether the Credit Enhancement
Termination Date shall have occurred.
(b) There shall occur any event or condition which entitles
the Ground Lessor to terminate the Ground Lease as provided in Section 11.2
of the Ground Lease.
(c) The Borrower shall fail to make any payment required by
Section 3.1 of this Agreement or, subject to the proviso thereto, any
payment required by Section 3.2 of this Agreement.
(d) The Borrower shall fail to observe or perform any other
covenant, condition or agreement on its part to be performed under this
Agreement, which failure shall have continued for a period of 30 days after
written notice thereof shall have been given to the Borrower by the Credit
Enhancer or any other Person.
(e) The Borrower, LHA I, MTCA or any other grantor of a
Supplemental Mortgage shall fail to observe or perform any covenant,
condition or agreement on its part to be performed under any Related
Agreement then in effect, which failure shall have continued for the period
of grace, if any, provided under such Related Agreement.
(f) At any time the aggregate principal amount of advances
made under Section 2 hereof and not repaid shall equal or exceed
$4,000,000.
Section 12. REMEDIES. Upon the occurrence of any Event of Default
hereunder, the Credit Enhancer may do any one or more of the following:
(a) By written notice to the Borrower declare any and all
advances outstanding under Section 2 hereof to be accelerated, whereupon
such amounts shall be due and payable forthwith.
(b) By written notice too the Borrower require the Borrower
to deliver to the Credit Enhancer cash collateral equal to the unused
Maximum Amount of Credit, if any.
<PAGE>
(c) Exercise any remedies available under any Related
Agreement, including without limitation the remedy of ousting the Borrower
under the Phase C Second Mortgage.
(d) Exercise any other remedy available under any other
document delivered in connection herewith or in equity or at law.
No failure on the part of the Credit Enhancer to exercise, and no delay in
exercising, any right or remedy hereunder or under any Related Agreement or
other instrument shall operate as a waiver hereof or thereof. Nor shall
any single or partial exercise of any right or remedy hereunder or
thereunder preclude any other exercise thereof or the exercise of any other
right or remedy. The remedies provided in this Agreement and in the
Related Agreements are cumulative and not exclusive of any remedies
provided at equity or at law.
Section 13. TERMINATION OF AGREEMENT. On the Credit Enhancement
Termination Date the obligation of the Credit Enhancer to make advances
hereunder shall terminate. Thereupon,
(a) the pledge of the Credit Enhancement Account shall
terminate and be discharged and all amounts therein shall be delivered by
the Trustee to the Credit Enhancer free of the lien of this Agreement;
(b) all amounts then owing under Section 3 hereof shall be
paid, including without limitation all advances and interest thereon and
all credit enhancement fees and interest thereon; and
(c) after payment of such amounts and of all outstanding
Obligations, this Agreement and each Related Agreement shall terminate
(except to the extent expressly provided to the contrary in Section 3.3)
and any security for the Obligations then in effect shall be released and
discharged.
Section 14. CONCERNING THE TRUSTEE. The Trustee accepts the trusts
imposed upon it by this Agreement and agrees to perform the same, but only
upon the terms and conditions set forth in Article 12 of the 1990 Trust
Agreement, which is expressly incorporated herein by reference.
Section 15. NOTICES. All notices, certificates or other
communications hereunder shall be sufficiently given and shall be deemed to
be delivered if in writing or in the form of a telex addressed to the
appropriate Notice Address and if either (a) actually delivered at said
address (evidenced in the case of a telex by receipt of the correct answer
back) or (b) in the case
<PAGE>
of a letter, three Business Days shall have elapsed after the same shall
have been deposited in the United States mails, first-class postage prepaid
and registered or certified. A copy of each notice, certificate or other
communication given by any party hereto shall also be given to each other
party hereto in the manner provided for in this Section 15.
Section 16. AMENDMENTS. No amendment or waiver of any provision of
this Agreement shall be effective unless in writing and signed by the
parties hereto; PROVIDED, that consent and signature by the Trustee shall
not be required for any amendment or waiver of the terms of any provision
hereof other than the provisions of Sections 2, 4 and 14, of the last
sentence of Section 3.2 hereof and of this Section 16.
Section 17. EXTENT OF CREDIT ENHANCER COVENANTS; NO PERSONAL
LIABILITY. No covenant, stipulation, obligation or agreement of the Credit
Enhancer contained in this Agreement or any Related Agreement shall be
deemed to be a covenant, stipulation, obligation or agreement of any
present or future member, director, officer, employee or agent of the
Credit Enhancer in his or her individual capacity; and no such person shall
be liable personally hereunder or thereunder or be subject to any personal
liability by reason or execution, delivery, performance or non-performance
hereof or thereof.
Section 18. EXCULPATION OF RELATED PERSONS OF BORROWER. No partner
of the Borrower, other than LHA-II, Inc. as sole general partner of the
Borrower, and no officer, employee or agent of the Borrower and no
stockholder, director, officer, employee or agent of any partner of the
Borrower, including for this purpose any stockholder, director, officer,
employee or agent of LHA-II, Inc., is personally liable for the Borrower's
obligations hereunder or under any Related Agreement.
Section 19. LIMITATION OF RIGHTS. With the exception of rights
herein expressly conferred, nothing expressed or implied in or inferred
from this Agreement or any Related Agreement shall give to any Person other
than the parties hereto any right or remedy with respect to this Agreement.
This Agreement and all of the covenants, conditions and provisions hereof
are for the sole and exclusive benefit of the parties hereto as herein
provided.
Section 20. SEVERABILITY. In the event that any provision of this
Agreement shall be held to be invalid in any circumstance, such invalidity
shall not affect any other provision or circumstance.
Section 21. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same agreement.
<PAGE>
Section 22. GOVERNING LAW; SEALED INSTRUMENT. The validity and
interpretation of this Agreement shall be governed by the laws of the
Commonwealth. It is intended that this Agreement shall have the effect of
a sealed instrument.
Section 23. AGREEMENTS TO CONSTITUTE COVENANTS. Words of agreement
and promises shall also constitute covenants.
Section 24. CAPTIONS; INDEX. The captions, headings and index in
this Agreement are for convenience only and in no way define or describe
the scope or content of any provision of this Agreement.
Section 25. SUCCESSORS. This Agreement is a continuing obligation
and shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, including without limitation
any successor Trustee under the 1990 Trust Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the Borrower, the Credit Enhancer and the
Trustee has caused this Agreement to be executed and delivered as a sealed
instrument in its name and behalf by its authorized officer, all as of the
date appearing on page 1.
[ SEAL ] MASSACHUSETTS PORT AUTHORITY
By: /S/ GEORGE A. O'BRIEN
------------------------------
Its: Secretary-Treasurer
LOGAN HARBORSIDE ASSOCIATES II
LIMITED PARTNERSHIP
By: LHA-II, Inc.
Its General Partner
By: /s/ ANTHONY PANGARO
----------------------------
Anthony Pangaro
Its President
SHAWMUT BANK N.A., AS TRUSTEE
By: /S/ LEE MAC DONALD
----------------------------
Authorized Officer
<PAGE>
EXHIBIT 2.3
-----------
LOGAN HARBORSIDE ASSOCIATES II
LIMITED PARTNERSHIP NOTE
$10,000,000 [ Remarketing Date ]
FOR VALUE RECEIVED, the undersigned Logan Harborside Associates II
Limited Partnership, a Massachusetts limited partnership, (the "Borrower"),
promises to pay to the Massachusetts Port Authority (the "Authority"), or
its order, the sum of TEN MILLION DOLLARS ($10,000,000) or, if less, the
aggregate unpaid principal amount of advances made by the Authority
pursuant to the Credit Enhancement Agreement referred to below and promises
to pay interest at a rate of 10% per annum, computed on the basis of a 365-
day year and the number of days elapsed, on the principal amount of such
advances from time to time unpaid (including without limitation compounded
interest as provided in said Credit Enhancement Agreement) and on overdue
principal thereof and, to the extent not prohibited by applicable law, an
overdue installments of interest. The Borrower will pay such principal and
interest when and as provided in said Credit Enhancement Agreement.
All payments hereunder shall be made to Shawmut Bank, N.A., as
Trustee (the "Trustee"), at One Federal Street, Boston, Massachusetts
02110, Attention: Corporate Trust Department, or to such other address as
the Authority or the Trustee shall have notified the Borrower in the manner
provided in the notice provision of the Credit Enhancement Agreement.
All advances made by the Authority pursuant to the Credit Enhancement
Agreement referred to below and all amounts of principal repaid and
interest paid shall be recorded on the books of the Trustee.
This Note evidences borrowerings under and is entitled to the
security of, and is subject to the provisions of, a Credit Enhancement
Agreement dated as of June 27, 1991, as from time to time in effect (the
"Credit Enhancement Agreement"), among the Borrower, the Authority and the
Trustee.
In case an Event of Default (as defined in the Credit Enhancement
Agreement) shall occur, the entire principal of this Note may become or be
declared due and payable in the manner and with the effect provided in the
Credit Enhancement Agreement.
No partner of the Borrower, other than LHA-II, Inc. as sole general
partner of the Borrower, and no officer, employee or
2.3-1
<PAGE>
agent of the Borrower and no stockholder, director, officer, employee or
agent of any partner of the Borrower, including for this purpose any
stockholder, director, officer, employee or agent of LHA-II, Inc., is
personally liable for the Borrower's obligations under this Note.
This Note shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the undersigned maker and all
guarantors and endorsers, hereby waive presentment, demand, notice, protest
and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note, except as
specifically otherwise provided in the Credit Enhancement Agreement, and
assent to extensions of time of payment, or forbearance or other indulgence
without notice.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
under its corporate seal by the duly authorized officer of its general
partner as of the date first above written.
LOGAN HARBORSIDE ASSOCIATES II
LIMITED PARTNERSHIP
By: LHA II, Inc.,
its General Partner
By:
------------------------------
Its President
[ Seal ]
2.3-2
EXHIBIT 10.13
- -------------
MANAGEMENT AGREEMENT
(Logan Airport)
between
LOGAN HARBORSIDE ASSOCIATES II LIMITED PARTNERSHIP,
a Massachusetts limited partnership
and
HYATT CORPORATION,
a Delaware corporation
DATED: March 15, 1990
<PAGE>
LOGAN HARBORSIDE ASSOCIATES II LIMITED PARTNERSHIP
CERTIFICATE
-----------
Attached hereto is a true and correct copy of the Management
Agreement dated March 15, 1990, between Logan Harborside Associates II
Limited Partnership and Hyatt Corporation, as modified by a March 15, 1990
letter agreement.
The foregoing has not been amended or rescinded and is in full force
and effect as of the date hereof.
December 31, 1990 LOGAN HARBORSIDE ASSOCIATES II
LIMITED PARTNERSHIP
by LHA-II, INC.
Its General Partner
By: /s/ Anthony Pangaro
__________________________
ANTHONY PANGARO, PRESIDENT
<PAGE>
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. CONSTRUCTION, FURNISHING AND EQUIPPING,
PRE-OPENING AND OPENING OF HOTEL . . . . . . . . . . . . . 2
1.1 Construction. . . . . . . . . . . . . . . . . . . . 2
1.2 Furnishings and Equipment and Operating
Equipment . . . . . . . . . . . . . . . . . . . . . 2
1.3 "Hotel" and "First-class Hotel Standard" Defined. . 3
1.4 Plans and Specifications. . . . . . . . . . . . . . 4
1.5 Certain Hyatt Approvals . . . . . . . . . . . . . . 4
1.6 Technical Assistance Services Respecting
Improvements. . . . . . . . . . . . . . . . . . . . 5
1.7 Pre-opening Budget. . . . . . . . . . . . . . . . . 6
1.8 Constructions Commencement Date and Opening Date. . 8
1.9 Termination by Owner for Failure to Obtain
Financing Commitments . . . . . . . . . . . . . . . 10
1.10 Termination by Hyatt. . . . . . . . . . . . . . . . 10
1.11 Mutual Right of Termination . . . . . . . . . . . . 11
2. TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 13
3. USE AND OPERATION OF THE HOTEL . . . . . . . . . . . . . . 15
3.1 Use and Standard of Operation . . . . . . . . . . . 15
3.2 Leases and Concessions. . . . . . . . . . . . . . . 21
3.3 Bank Accounts . . . . . . . . . . . . . . . . . . . 21
3.4 Negation of Partnership or Joint Venture. . . . . . 22
3.5 Budgets . . . . . . . . . . . . . . . . . . . . . . 22
4. MANAGEMENT FEES AND REMITTANCES TO OWNER . . . . . . . . . 25
4.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . 25
4.2 Hyatt's Management Fee. . . . . . . . . . . . . . . 26
4.2.1 Annual Management Fee . . . . . . . . . . . . . . . 26
4.2.2 Time and Manner of Payment. . . . . . . . . . . . . 27
4.3 Remittances to Owner. . . . . . . . . . . . . . . . 29
4.4 Supplemental Payment. . . . . . . . . . . . . . . . 30
5. DETERMINATION OF AVAILABLE CASH FLOW
AND GROSS RECEIPTS. . . . . . . . . . . . . . . . . . . . 31
5.1 Books and Records . . . . . . . . . . . . . . . . . 31
5.2 "Available Cash Flow" Defined . . . . . . . . . . . 31
5.3 Definition of Gross Receipts. . . . . . . . . . . . 33
5.4 Fund for Replacement of and Additions to
Furnishings and Equipment . . . . . . . . . . . . . 34
<PAGE>
6. REPAIRS AND CHANGES; LEGAL REQUIREMENTS. . . . . . . . . . 36
6.1 Repairs and Maintenance . . . . . . . . . . . . . . 36
6.2 Compliance with Legal Requirements. . . . . . . . . 37
6.3 Alterations and Additions . . . . . . . . . . . . . 39
7. GENERAL COVENANTS OF HYATT AND OWNER . . . . . . . . . . . 40
7.1 Working Capital . . . . . . . . . . . . . . . . . . 40
7.2 Chain Services. . . . . . . . . . . . . . . . . . . 41
7.3 Right of Inspection and Review. . . . . . . . . . . 42
7.4 Financial Reports . . . . . . . . . . . . . . . . . 43
7.5 Owner's Covenants as to Title . . . . . . . . . . . 45
7.6 Payment of Taxes. . . . . . . . . . . . . . . . . . 46
8. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1 Insurance to be Maintained Prior to the
Commencement of Term. . . . . . . . . . . . . . . . 47
8.2 Insurance to be Maintained During Term. . . . . . . 48
8.3 Notice of Cancellation or Change. . . . . . . . . . 50
8.4 Evidence of Insurance Coverage. . . . . . . . . . . 50
8.5 Self-Insurance. . . . . . . . . . . . . . . . . . . 50
8.6 Waiver of Right of Subrogation. . . . . . . . . . . 51
9. INDEMNIFICATION OF OWNER . . . . . . . . . . . . . . . . . 51
10. DAMAGE TO AND DESTRUCTION OF HOTEL . . . . . . . . . . . . 53
10.1 Owner's Duty of Restoration . . . . . . . . . . . . 53
10.2 Owner's Election Not to Restore . . . . . . . . . . 53
11. INTEREST ON OVERDUE SUMS . . . . . . . . . . . . . . . . . 54
12. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . 55
13. TRADE NAME . . . . . . . . . . . . . . . . . . . . . . . . 56
14. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . 57
14.1 Assignment by Hyatt . . . . . . . . . . . . . . . . 57
14.2 Assignment by Owner . . . . . . . . . . . . . . . . 59
14.3 Binding on Successors . . . . . . . . . . . . . . . 60
15. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . 61
16. APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . 62
17. FURTHER INSTRUMENTS. . . . . . . . . . . . . . . . . . . . 62
<PAGE>
18. INDEMNIFICATION OF HYATT . . . . . . . . . . . . . . . . . 63
19. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . 64
20. PAYMENT OF AMOUNTS DUE TO HYATT. . . . . . . . . . . . . . 64
21. SURVIVAL AND CONTINUATION. . . . . . . . . . . . . . . . . 65
22. HYATT APPROVALS. . . . . . . . . . . . . . . . . . . . . . 65
23. SALE OF SECURITIES . . . . . . . . . . . . . . . . . . . . 66
24. CONFIDENTIALITY; COOPERATION . . . . . . . . . . . . . . . 67
25. LIMITED RIGHT OF OWNER TO TERMINATE. . . . . . . . . . . . 68
25.1 Certain Definitions . . . . . . . . . . . . . . . . 68
25.2 Termination Right . . . . . . . . . . . . . . . . . 70
25.3 Request for Determination . . . . . . . . . . . . . 71
25.4 Hyatt Cure Loans. . . . . . . . . . . . . . . . . . 73
26. RESTRICTIVE COVENANT . . . . . . . . . . . . . . . . . . . 77
27. FUTURE HOTEL EXPANSION . . . . . . . . . . . . . . . . . . 82
28. LIMITATION ON OWNER'S LIABILITY. . . . . . . . . . . . . . 83
<PAGE>
INDEX
Achieved Room Factor. . . . . . . . . . . . . . . . . . . . . . 68
Actual GOP. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Additional Insured Endorsement. . . . . . . . . . . . . . . . . 48
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Affiliated group. . . . . . . . . . . . . . . . . . . . . . . . 59
Allocable Chain Expense . . . . . . . . . . . . . . . . . . . . 42
Annual Management Fee . . . . . . . . . . . . . . . . . . . . . 27
Assignee affiliate. . . . . . . . . . . . . . . . . . . . . . . 58
Assumed GOP . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Assumed Gross Receipts. . . . . . . . . . . . . . . . . . . . . 69
Available Cash Flow . . . . . . . . . . . . . . . . . . . . . . 31
Budgetary limit . . . . . . . . . . . . . . . . . . . . . . . . 6
Building. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certified Financial Statement . . . . . . . . . . . . . . . . . 43
Chain Expense . . . . . . . . . . . . . . . . . . . . . . . . . 42
Chain Services. . . . . . . . . . . . . . . . . . . . . . . . . 41
COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Commencement of construction of the Building. . . . . . . . . . 8
Comparable Hotels . . . . . . . . . . . . . . . . . . . . . . . 69
Construction commencement date. . . . . . . . . . . . . . . . . 6, 9
Construction commencement notice. . . . . . . . . . . . . . . . 6, 8
Contesting Party. . . . . . . . . . . . . . . . . . . . . . . . 44
Controlling interest. . . . . . . . . . . . . . . . . . . . . . 58
Convention Hotel. . . . . . . . . . . . . . . . . . . . . . . . 78
CPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Cumulative Period . . . . . . . . . . . . . . . . . . . . . . . 26
Defaulting party. . . . . . . . . . . . . . . . . . . . . . . . 54
Environmental Condition . . . . . . . . . . . . . . . . . . . . 11
Environmental Report. . . . . . . . . . . . . . . . . . . . . . 11
Exclusive Area. . . . . . . . . . . . . . . . . . . . . . . . . 77
Existing Owner. . . . . . . . . . . . . . . . . . . . . . . . . 60
FFE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
First-class hotel standard. . . . . . . . . . . . . . . . . . . 3
Fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Force Majeure Causes. . . . . . . . . . . . . . . . . . . . . . 20
Fringe benefits . . . . . . . . . . . . . . . . . . . . . . . . 16
Furnishing and Equipment. . . . . . . . . . . . . . . . . . . . 2
GOP Deficiency. . . . . . . . . . . . . . . . . . . . . . . . . 70
Gross Operating Profit. . . . . . . . . . . . . . . . . . . . . 31
Gross Receipts. . . . . . . . . . . . . . . . . . . . . . . . . 33
Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Hyatt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Hyatt bid . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Information Source. . . . . . . . . . . . . . . . . . . . . . . 70
Legal Requirements. . . . . . . . . . . . . . . . . . . . . . . 37
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Marketing Plan. . . . . . . . . . . . . . . . . . . . . . . . . 22
MCP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
MDEP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
MEPPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Non-Contesting Party. . . . . . . . . . . . . . . . . . . . . . 44
Non-Defaulting Party. . . . . . . . . . . . . . . . . . . . . . 54
Opening Date. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Operating accounts. . . . . . . . . . . . . . . . . . . . . . . 21
Operating Equipment . . . . . . . . . . . . . . . . . . . . . . 3
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Owner's Remittance Amount . . . . . . . . . . . . . . . . . . . 29
Pre-opening expenses. . . . . . . . . . . . . . . . . . . . . . 6
Preopening period . . . . . . . . . . . . . . . . . . . . . . . 6
Prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Protected names . . . . . . . . . . . . . . . . . . . . . . . . 56
Renewal terms . . . . . . . . . . . . . . . . . . . . . . . . . 13
Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Restricted Area . . . . . . . . . . . . . . . . . . . . . . . . 77
Rosemont. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Site. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Sixth Edition . . . . . . . . . . . . . . . . . . . . . . . . . 31
Target Amount . . . . . . . . . . . . . . . . . . . . . . . . . 27
Target Room Factor. . . . . . . . . . . . . . . . . . . . . . . 70
Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Uniform System. . . . . . . . . . . . . . . . . . . . . . . . . 31
Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
MANAGEMENT AGREEMENT
THIS AGREEMENT is executed in several counterparts as of the 1st day
of February, 1990, by and between Logan Harborside Associates II Limited
Partnership (hereinafter called "Owner"), and HYATT CORPORATION, a Delaware
corporation (hereinafter called "Hyatt").
RECITALS
An affiliate of Owner is the ground lessee of that certain real
property (the "Site") located at the General Edward Laurence Logan
International Airport in East Boston, The Commonwealth of Massachusetts,
more particularly described in Exhibit A attached hereto and hereby made a
part hereof and has the right, which it intends to exercise, to assign to
Owner its rights and obligations under said ground lease relating to the
Site.
Owner desires to build, furnish and equip a first-class hotel upon
the Site and to have the same managed by Hyatt for the account of Owner.
Owner and Hyatt desire to enter into this Agreement respecting the
construction and furnishing of a first-class hotel on the Site and the
management thereof by Hyatt upon the terms and conditions hereinafter set
forth;
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. CONSTRUCTION, FURNISHING AND EQUIPPING, PRE-OPENING AND OPENING
OF HOTEL.
1.1 CONSTRUCTION
Owner shall, in accordance with plans, specifications, budgets and
financing approved by Hyatt (which approval shall not be unreasonably
withheld), and with reasonable diligence, cause such Hotel Improvements
(the "Improvements") to be constructed upon the Site as may be necessary to
meet a first-class hotel standard. The Improvements shall include a
building containing approximately 270 guest rooms (the "Building"), 270
parking space (which may be used by hotel guests and employees on a non-
exclusive basis) and appropriate landscaping.
1.2 FURNISHINGS AND EQUIPMENT AND OPERATING EQUIPMENT.
Owner shall, in accordance with plans, specifications, budgets and
financing to be approved by Hyatt (which approval shall not be unreasonably
withheld and is subject to the provisions of Section 1.5 hereof), cause to
be purchased and installed in or about the Building all of the following to
the extent necessary to meet a first-class hotel standard: (1) furniture
and furnishings; (2) hotel equipment (including office equipment and
property management equipment as necessary); (3) uniforms, tools and
utensils, and (4) china, glassware, linens, silverware and the like (all of
the foregoing being hereinafter referred to as "FFE," the items referred to
under (1) and (2) above being hereinafter collectively referred to as
"Furnishings and Equipment," and the
<PAGE>
items referred to under (3) and (4) above being hereinafter collectively
referred to as "Operating Equipment").
1.3 "HOTEL" AND "FIRST-CLASS HOTEL STANDARD" DEFINED.
The Site, the Improvements and the FFE are herein collectively
referred to as the "Hotel."
As respects Hyatt's approval rights as set forth in Section 1 of this
Agreement, a "first-class hotel standard" refers to the highest overall
standard of constructions, furnishing and equipping applicable to such
other hotels comparable in size to the Hotel and operated by Hyatt and
named below.
As respects operational standards, a "first-class hotel standard"
refers, at any given time, to the standard of operation of such other
hotels comparable in size to the Hotel and operated by Hyatt which then
represent the highest quality of hotels of such size in the Hyatt chain of
hotels. The first-class hotel standard includes, without limitation,
operations of the Hotel on a seven day a week, twenty-four hour a day
basis, with adequate staffing to provide first-class staffing, and food,
beverage, housekeeping, banquet, parking, bellmen and porter services;
provided that such standard of operation shall never be lower than the
standard of operation existing at the date hereof with respect to the
hotels named below, as long as such hotels are being operated by Hyatt.
For purposes of the "first-class hotel standard" as used in this
Section 1.3, the hotels known as the Hyatt Regency Westshore, Tampa,
Florida, Hyatt Regency Ravinia, Atlanta, Georgia, Hyatt Regency Greenwich,
Connecticut and the Hyatt hotel in
<PAGE>
Charlotte, North Carolina would be deemed comparable hotels; provided,
however, that with respect to the purchase and installation of FFE, the
Hyatt hotel in Charlotte, North Carolina shall be deemed the comparable
hotel.
1.4 PLANS AND SPECIFICATIONS.
Owner shall engage and retain, at no expense to Hyatt, such
architects, designers, specialists and contractors (each of whom shall be
approved in advance by Hyatt) as shall be necessary and appropriate in
connection with the planning and completion of the Improvements and in
connection with the design, selection, purchase and installation of the
FFE. Owner shall, with reasonable diligence, cause to be prepared with
respect to the Hotel full and adequate plans and specifications meeting a
first-class hotel standard and shall furnish copies of each thereof to
Hyatt for its advance approval. Approvals required by this Section 1.4
shall not be unreasonably withheld.
1.5 CERTAIN HYATT APPROVALS.
Hyatt acknowledges that it has approved RTKL Associates as architects
and engineers and Culpepper McAuliffe and Meaders as interior designer for
the Hotel. Furthermore, though Hyatt has not yet approved the plans and
specifications (dated April 17, 1989) proposed by Owner, it acknowledges
them to be generally consistent with the "first class hotel standard"
prescribed herein. Hyatt hereby waives its right to approve the FFE budget
for the Hotel; provided, however, that such waiver shall not affect Owner's
obligations under Section 1.2 hereof to satisfy the first-class
<PAGE>
hotel standard with respect to the purchase and installation of FFE.
1.6 TECHNICAL ASSISTANCE SERVICES RESPECTING IMPROVEMENTS.
Hyatt shall consult with Owner and its architect at such reasonable
times and places as Owner shall specify, to provide technical assistance in
connection with the planning and completion of the Improvements. Such
consultation shall include, but shall not be limited to, the matters set
forth in Annex 1 hereto. In consideration of such services, Owner shall
pay to Hyatt a fee of $235,000, payable as follows: Concurrently herewith,
Owner has paid Hyatt the sum of $60,000 the receipt whereof is hereby
acknowledged by Hyatt, and the balance of $175,000 shall be payable,
without interest, in ten (10) installments of $17,500 each, due on the
first day of each month commencing on the first day of the month next
succeeding the expiration of thirty (30) days from the date hereof with the
unpaid balance to be paid in full, in any event, on the date of the first
funding of the Hotel construction loan. Owner may, upon notice in writing
to Hyatt, extend payment of the installments required hereunder for up to
sixty (60) days if such extension is due to delays in construction, design
or commencement of construction; provided, however, such extension rights
may not be exercised more than twice.
In the event that this Agreement shall be terminated by Owner
pursuant to Section 1.8 hereof, Owner shall not be obligated to make
further payments under the first paragraph of this Section
<PAGE>
1.5 but shall continue to be responsible for amounts due and payable
through the termination date.
1.7 PRE-OPENING BUDGET
As soon as practicable after the receipt by Hyatt of the
"construction commencement notice" (as provided in Section 1.8(a)), setting
forth the estimated Opening Date for the Hotel, Hyatt shall submit to
Owner, for its approval, (which approval shall not be unreasonable
withheld) a budget setting forth the costs and expenses (the "pre-opening
expenses") to be incurred during the "pre-opening period" (as hereinafter
defined) for the staffing of the Hotel, for pre-opening promotion and
advertising, and for the organization of the Hotel's operations and
services. Subject to the provisions of this Section 1.7, such budget shall
not exceed the sum determined by multiplying $4,000 by the number of guest
rooms to be included in the Building, which sum, as the same may be revised
by time to time as set forth below, is herein referred to as the "budgetary
limit." the "pre-opening period" shall be the period commencing on the
"construction commencement date" referred to in Section 1.7(a) and ending
on the day preceding the Opening Date referred to in Section 1.7(b). Such
budget shall, among other things, include the estimated cost of Chain
services as defined in Section 7.2 (without taking into account, however,
the cost of the centralized reservation services for which Owner is not
responsible during the pre-opening period) properly allocable to the Hotel
for the pre-opening period. Hyatt shall not, without Owner's approval,
incur aggregate pre-opening expenses in excess of the budgetary
<PAGE>
limit. Subject to the foregoing restriction, Hyatt shall not be limited in
respect of the amounts to be incurred for the various categories of pre-
opening expenses as specified in such budget, except (i) that Hyatt shall
not enter into contracts, agreements or understandings involving a
commitment in excess of $100,000 without Owner's prior written approval and
(ii) that the total cost of Chain Services (without taking into account,
however, the cost of the centralized reservation services) shall not exceed
such amount as would properly be allocable to the Hotel if the same were in
operation during the pre-opening period.
Whenever it shall be reasonably apparent that the estimated Opening
Date theretofore specified is inappropriate, Owner shall promptly give
notice to Hyatt designating a revised estimated Opening Date. In any such
event, and whenever Hyatt reasonably anticipates that the budgetary limit
as then in effect is insufficient, Hyatt shall promptly submit to Owner for
its approval a revised budget (and revised budgetary limit) which shall, as
compared with the immediately preceding budgetary limit, reflect any
additional cost or expense.
The budgetary limits set forth above assume that the construction of
the Hotel shall commence no later than January 1, 1991 and that the Opening
Date shall not be later than September 1, 1992. Anything herein to the
contrary notwithstanding, in the event the Commencement of Construction or
the Opening Date shall be delayed for any reason beyond the dates set forth
in the preceding sentence, the budgetary limit shall be increased (but not
<PAGE>
decreased) by a percentage equal to the amount, if any, by which the
Consumer Price Index for United States City Averages for All Urban
Consumers, All Items published from time to time by the United States
Bureau of Labor Statistics ("CPI") exceeds the CPI in effect as of the end
of the month preceding the date hereof, and by the amount of any other cost
increases (not otherwise taken into account pursuant to the CPI adjustment)
directly attributable to the delay. If the CPI is discontinued or is
unavailable or is substantially revised, a comparable index agreeable to
Owner and Hyatt reflecting the changes in the cost of living or the
purchasing power of the consumer dollar, published by any governmental
agency or recognized authority shall be used in place thereof.
Subject to the foregoing, Hyatt shall have the right, in the name of
Owner, to enter into contracts for pre-opening expenses and Owner shall be
liable for the payment of obligations incurred in connection with such
contracts. In the alternative, Hyatt may, in its own name, incur and pay
pre-opening expenses within the budgetary limit, in which case Owner shall
reimburse Hyatt for pre-opening expenses so paid by Hyatt within thirty
(30) days after receipt by Owner of Hyatt's statement in respect thereof.
1.8 CONSTRUCTION COMMENCEMENT DATE AND OPENING DATE.
(a) Owner shall give Hyatt at least thirty (30) days' notice (the
"construction commencement notice") of the date when construction of the
Building will commence (as used in this Agreement, "commencement of
construction of the Building" shall
<PAGE>
mean the placing of foundations for the Building) and of the estimated
Opening Date. The date when construction of the Building shall actually
commence is herein referred to as the "construction commencement date."
(b) The "Opening Date" of the Hotel shall be the date specified by
Owner in a notice to Hyatt (given at least fifteen (15) days prior to the
Opening Date so specified), provided that the Opening Date shall not be
sooner than the day by which all of the following conditions shall have
been met: the Improvements shall have been substantially completed in
accordance with the plans and specifications theretofore approved by Hyatt
(except for inconsequential items), the applicable governmental authorities
shall have issued all certificates of occupancy and other required consents
and approvals (including a liquor license) with respect to the
Improvements, and the FFE conforming to the plans and specifications
theretofore approved by Hyatt shall (except for inconsequential items) have
been properly installed in the Building. Hyatt shall cooperate with Owner
in obtaining all required licenses and shall be responsible (at Owner's
expense) for obtaining all licenses which can be applied for by an
operator. The parties hereto agree to execute an Addendum to this
Agreement setting forth the Opening Date, and a counterpart of such
Addendum shall be attached to and become a part of each counterpart of this
Agreement. Within six (6) months from the Opening Date, Owner agrees to
provide to Hyatt a full set of "as-built" drawings of the
<PAGE>
Hotel, as well as one set of microfilm reproductions of those documents.
1.9 TERMINATION BY OWNER FOR FAILURE TO OBTAIN FINANCING
COMMITMENTS.
In the event that Owner shall in good faith determine that it cannot
obtain (i) after diligent efforts, including engagement of a mortgage or
investment banker, reasonable financing commitments in respect to the
Hotel, (ii) approval by the Federal Aviation Administration of its plans
and specifications for the Hotel, or (iii) necessary approvals by the
Massachusetts Port Authority ("MPA"), then Owner may, at any time prior to
the commencement of construction of the Building, terminate this Agreement
by giving notice to such effect to Hyatt. Notwithstanding the foregoing,
in the event that Hyatt shall have the right (through unexercised) pursuant
to Section 1.10 hereof to terminate this Agreement for failure by Owner to
timely commence construction, then Owner's right to terminate pursuant to
this Section 1.9 shall be delayed until the fourth anniversary of the date
hereof.
1.10 TERMINATION BY HYATT.
Hyatt shall have the right to terminate this Agreement in the event
that (i) it does not approve financing or that commencement of construction
of the Building shall not occur by the second anniversary date of this
Agreement, or (ii) completion of construction has not occurred by the
earlier of (A) thirty (30) months after the date of commencement of
construction (such period
<PAGE>
of time to be extended for an aggregate of not more than eighteen (18)
months in the event of delays caused by the occurrence of any event not
reasonably within the control of Owner, including acts of God, fire or
other casualty, orders of any governmental authority, strikes, lockouts,
war and insurrection) or (B) January 1, 1996. Such right shall be
exercisable by Hyatt giving Owner ninety (90) days' written notice of
termination, during which period Owner shall be entitled to cure the
failure, thereby avoiding a termination by Hyatt.
1.11 MUTUAL RIGHT OF TERMINATION
(a) Within six (6) months of the date hereof, Owner shall deliver
or cause to be delivered to Hyatt an environmental assessment of the Site
(the "Environmental Report") prepared by an independent firm having
expertise in such matters. The Environmental Report shall reflect an
investigation at least to a "Phase 1" standard (as such terms is used in
the Massachusetts Contingency Plan 310 CMR Section 40 et seq ("MCP")). If
the Environmental Report discloses the existence of "hazardous substances"
or "hazardous wastes" (as defined in Section 9 hereof) (an "Environmental
Condition"), then:
(i) Hyatt shall have the right to terminate this
Agreement (exercisable by written notice to Owner within ninety (90) days
of receipt of the Environmental Report), unless the Environmental Condition
is remedied or in the process of being remedied, as contemplated by
paragraph (b) below; and
<PAGE>
(ii) Owner shall have the right to terminate this
Agreement (exercisable by written notice to Hyatt within ninety (90) days
of receipt of the Environmental Report), if Owner has determined in good
faith not to proceed with the construction and development of the Hotel as
a result of the Environmental Condition.
(b) Promptly after receipt by Owner of the Environmental Report,
Owner shall, if such report discloses the existence of an Environmental
Condition, file such report with the Massachusetts Department of
Environmental Protection ("MDEP") seeking a waiver by the MDEP pursuant to
the provisions of the MCP (the "Waiver") based on a classification of the
site as a "non-priority disposal site" within the meaning of MCP. If Owner
obtains the Waiver within nine (9) months of the presentation of the
Environmental Report to Hyatt, then Owner shall be entitled to advise Hyatt
in writing of its intention to cure the Environmental Condition and proceed
to remediate the Environmental Condition in such manner as may be permitted
by the MCP and thereby extinguish Hyatt's right of termination under this
Section 1.11. If Owner shall be unable to obtain a Waiver within said nine
(9) month period, then Owner may extinguish Hyatt's right of termination
under this Section 1.11 only by advising Hyatt, in writing, of its
intention to cure the Environmental Condition and proposing an outline of a
plan of remediation for Hyatt's approval and the approval under MCP, not
later than ten (10) months from the date of presentation of the
Environmental Report to Hyatt, diligently pursuing MDEP's approval
<PAGE>
and thereafter remediation in accordance with such approved plan, and
completing such remediation pursuant to an approved plan. Owner shall,
whether the site is priority or non-priority, furnish Hyatt copies of
reports forwarded to MDEP pursuant to the provisions of MCP including those
required by the provisions of Section 40.537 of MCP.
The provisions of this Section 1.11 shall not affect Owner's
indemnification obligations for environmental matters under Section 9
hereof or Hyatt's or Owner's termination rights pursuant to Sections 1.9 or
1.10 hereof.
SECTION 2. TERM OF AGREEMENT.
(a) The original term of this Agreement shall commence on the
Opening Date provided in Section 1.7(b) and shall continue until July 1,
2013, unless this Agreement shall be sooner terminated as herein provided.
(b) Hyatt shall have the right (amounting to two (2) separate
renewal options) to extend such original term for two (2) successive
periods ("renewal terms"), the fist period consisting of ten (10) fiscal
years plus six months and ending on December 31, 2023 and the second period
consisting of ten (10) fiscal years and ending on december 31, 2033,
provided that, as to each renewal option, Hyatt shall give notice to Owner
of its election to extend such term at least eighteen (18) months prior to
the time when the term then in force would otherwise expire; that, at the
time when such notice is give, there shall not be an uncured event of
<PAGE>
default on the part of Hyatt hereunder; and that the term of this Agreement
shall have been extended for the prior renewal term, if any. In the event
that Owner's ground lessor, MPA, shall then be in possession of the Site
due to a termination or expiration of Owner's ground lease with MPA (the
"Ground Lease"), MPA shall have the right to accept or reject Hyatt's
exercise of its election to extent the term hereof.
(c) If Hyatt shall elect to extend the term hereof, Owner shall
have the right at any time during any renewal term to terminate this
Agreement by giving Hyatt sixty (60) days prior notice and paying Hyatt any
and all amount then due Hyatt hereunder, including without limitation,
Hyatt Cure Loans with interest thereon, plus a termination fee equal to the
Annual Management Fee for the immediately preceding fiscal year multiplied
by the product of (y) ten and (z) a fraction, the numerator of which is the
number of months remaining between the termination date and December 31,
2033 and the denominator of which is 246. Any termination of Owner
hereunder shall be effective on the later to occur of (i) thirty (30) days
after payment of all amounts to be paid to Hyatt and (ii) sixty (60) days
after notice by Owner to Hyatt of exercise of this termination right.
(d) As used herein, the "Term" shall mean the original term and any
renewal term or terms.
<PAGE>
SECTION 3. USE AND OPERATION OF THE HOTEL.
3.1 USE AND STANDARD OF OPERATION.
(a) Owner hereby grants to Hyatt the sole and exclusive right to
manage and operate the Hotel pursuant to the terms of this Agreement and
Hyatt agrees that, except to the extent excused as hereinafter provided,
Hyatt will, as the agent of Owner, operate the Hotel during the Term in
conformity with a first-class hotel standard and in a businesslike and
efficient manner; and Hyatt shall use the Hotel solely for the operation of
a hotel business conforming to a first-class hotel standard and for other
activities which are customary and usual in connection with such an
operation. Except as otherwise specifically limited under this Agreement,
Hyatt, as sole an exclusive agent of Owner, shall (subject to compliance
with the provision of Section 6.2 hereof) have absolute control and
discretion in the operation of the Hotel including, without limitation, the
right and power to negotiate and enter into such reasonable contracts
(including, without limitation, collective bargaining agreements or labor
contracts but subject to the provisions of sub-paragraph (c) below) in the
name and at the expense of Owner as may be reasonably necessary or
advisable in connection with the operation of the Hotel (subject, however,
to Owner's right to approve contracts with a corporation or a person or
persons controlling, controlled by, or under common control or affiliated
with Hyatt) and the right to determine the terms of admittance, charges for
rooms, charges for entertainment, food and beverages, labor policies
(including wage rates, the hiring and
<PAGE>
discharging of employees, and the installation of employee retirement or
other benefit plans), and all phases of promotion and publicity relating to
the Hotel.
Anything herein to the contrary notwithstanding, Owner agrees that
Hyatt may retain its affiliate, Rosemont Purchasing Company ("Rosemont"),
to act as a purchase agent for Owner in connection with acquiring
replacements of and additions to Operating Equipment, FFE, or otherwise.
Owner also agrees that Rosemont will be paid a fee for its services, which
fee will be no greater than that charged by Rosemont to unaffiliated third
parties for comparable services and no greater than the fees charged by
other third parties offering comparable goods and services, said standard
to be applied on an overall and not on an "item-by-item" basis. In
addition, Hyatt shall have the right to acquire promotional and other
Hyatt-logoed items from its affiliate, Merchandising Associates Limited
Partnership (d/b/a Red Sail Merchandising), which is a sole source supplier
of Hyatt-logoed promotional items, at prices which are no greater than
those charged to owners of other hotels to whom Red Sail supplies such
items.
All employees of the Hotel shall be the employees of Hyatt and Hyatt
may reimburse itself out of operating accounts for the total aggregate
compensation, including, without limitation, fringe benefits and annual
bonuses paid or payable to the employees so assigned or, as the case may
be, to all employees of the Hotel. The term "fringe benefits" shall,
without limitation, include the
<PAGE>
cost of pension or profit sharing plans, workers' compensation benefits,
group life and accident and health insurance or equivalent benefits and
similar benefits available to such employees by virtue of their employment
by Hyatt.
In the event and whenever Hyatt shall be subject to any tax,
irrespective of its designation (including a fee, charge or other
imposition for the issuance of a license, permit or the privilege to
conduct a business or occupation), imposed, levied or assessed by the
United States, the Commonwealth of Massachusetts, the County of Suffolk,
the City of Boston any subdivision or agency of the foregoing or any other
government body, which tax is measured, in whole or in part, by reference
to reimbursements to Hyatt for compensation, employment taxes or any fringe
benefits paid or payable to or in respect of employees of the Hotel, then,
and in any such event, Owner will indemnify and hold Hyatt harmless from
and against any and all liability for such tax or taxes to the extent so
measured. Any payments made by Owner in this connection shall be deducted
in computing Available Cash Flow (as defined in Section 5.2 hereof) here
under for any period. At Owner's request, Hyatt will resist, by
appropriate proceedings, any liability for any tax which is the subject of
the foregoing indemnification, in which case all costs and expenses
(including, without limitation, attorneys' fees) incurred by Hyatt in
resisting or defending itself against such liability shall be borne and
paid for by Owner.
(b) Prior to the assignment of any general manager to the Hotel,
Hyatt will arrange an appointment between the proposed
<PAGE>
general manager and Owner. Hyatt shall enable Owner to provide its
comments and considerations to Hyatt concerning same. In no event shall
Owner have the right to approve or disapprove the assignment of any general
manager of the Hotel. If, at any time during the term, Owner shall become
dissatisfied with the performance of the general manager, Owner shall have
the right to recommend the replacement of the general manager, and Hyatt
shall in good faith consider Owner's recommendation. Hyatt shall give
Owner reasonable notice of any Hyatt decision to replace or transfer any
general manager and shall in good fait consider Owner's recommendation
relating to any such decision, but Hyatt shall not be bound by Owner's
recommendation.
During the first two (2) years following the Opening Date of the
Hotel, Hyatt intends to leave the members of the Executive Committee
(meaning the persons holding the position of, regardless of title, General
Manager, Rooms Manager, Food & Beverage Manager, Controller, and Sales
Manager) intact in their positions at the Hotel. Hyatt shall endeavor not
to relocate any member of the Executive Committee during the first two
years following the Opening Date, but Hyatt shall not be in default
hereunder in the event Hyatt elects to relocate one or more members of the
Executive Committee prior to the expiration of such two year period.
Following the commencement of the Term, the expenses pertaining to
not more than (i) two (2) moves of members of the Hotel's Executive
Committee during the first two years following the Opening Date, (ii) five
(5) moves of members of the Hotel's
<PAGE>
Executive Committee during any period of two consecutive fiscal years after
the expiration of the period in (i) above, or (iii) two (2) moves of
members of the Hotel's Executive Committee during any three (3) month
period, shall be paid by the Hotel and be a deduction in the calculation of
Available Cash Flow. Notwithstanding the foregoing, the expenses of moves
of members of the Hotel's Executive Committee pertaining to or arising from
the replacement of any such members who shall have died, become disabled,
resigned from Hyatt or requested a transfer out of the Hotel or as to whom
Owner shall have recommended such transfer to Hyatt, shall not be counted
toward the above-stated limits on reimbursable moves.
(c) Hyatt shall have the right to negotiate with and recognize a
union as collective bargaining agent for its employees, subject, however,
to Owner's right to approve or reject any proposed agreement resulting from
such negotiations. Owner shall indemnify Hyatt from and against any
liability, cost, penalty, or other similar assessment (including back pay,
but not including loss of income, consequential damages or other similar
costs attributable to strikes, work stoppages or slow downs, or to actions
during such strikes, stoppages or slow downs) which results from Owner's
rejection of any such contract if such rejection is found by the National
Labor Relations Board to constitute bad faith bargaining. Any legal fees
or disbursements or other fees or costs incurred by Hyatt in connection
with any such proceedings brought by the union before the NLRB alleging bad
faith bargaining as a
<PAGE>
result of the rejection by Owner of any labor contract proposed by Hyatt
shall be paid by Owner.
(d) Notwithstanding anything in this Section 3.1 or elsewhere in
this Agreement contained, Hyatt shall be excused from its obligation to
operate the Hotel in conformity with a first-class hotel standard (i) to
the extent and whenever Hyatt shall be prevented from compliance with such
standard by "Force Majeure Causes," (ii) to the extent that its failure to
fulfill such obligation is caused by any breach by Owner of any provision
hereof, including, without limitation, a breach of Owner's obligations
under Section 7.1 and 5.4(c) hereof and (iii) to the extent and whenever
there is herein provided a limitation upon Hyatt's ability to expend funds
in respect of the Hotel (for example, the limitations contained in Section
5.4 hereof respecting monies available for the replacement of, and
additions to, Furnishings and Equipment), provided that the failure to
expend funds by reason of the operation of such limitation shall reasonably
prevent Hyatt from meeting such standard. For the purpose hereof, "Force
Majeure Causes" shall mean causes beyond the reasonable control of Hyatt,
including casualties, war, insurrection, strikes, lockouts and governmental
actions (but excluding causes which can be controlled by the expenditure of
money in accordance with good business practices).
It is expressly agreed and understood that each and every provision
contained in this Agreement pursuant to which Hyatt is excused from its
obligation to operate the Hotel in conformity with
<PAGE>
a first-class hotel standard shall operate without prejudice to any other
remedy (including, without limiting the generality of the foregoing, the
right to terminate this Agreement) which Hyatt shall have under the terms
of this Agreement.
3.2 LEASES AND CONCESSIONS.
(a) Hyatt shall not, without the approval of Owner, arrange leases
or concessions for any hotel operations, any restaurant or food service
operations or for any other commercial operation in or about the Hotel.
Any such lease or concession so approved shall be entered into in Owner's
name and shall be executed by Owner (or Hyatt, as agent).
(b) Hyatt shall, during the Term, use best efforts (at Owner's sole
expense) to perform, as agent for Owner, all of the obligations of Owner as
landlord or concessionaire under all present or future leases and
concessions made or granted with respect to the Hotel.
(c) Hyatt shall collect all rents and other sums falling due during
the Term under any present or future lease or concession, and shall deposit
the same in the operating accounts.
3.3 BANK ACCOUNTS.
There shall be deposited in a bank or banks designated by Owner and
in accounts established in Owner's name all monies advanced to the Hotel as
working capital by Owner, as provided in Section 7.1 hereof, and all monies
received by Hyatt from the operations of the Hotel ("operating accounts"),
and Hyatt shall pay out of the operating accounts, to the extent of the
funds from
<PAGE>
time to time therein, all costs and expenses incurred in connection with
the operation of the Hotel, all other items entering into the calculation
of Available Cash Flow hereunder and all other amounts required to perform
its obligations hereunder; provided, however, Hyatt shall not be
responsible for making payments in respect of Owner's Ground Lease or debt
service obligations. Checks or other documents of withdrawal drawn upon
the operating accounts shall be signed by representatives of Hyatt or Hotel
employees designated by Hyatt, as agent for Owner, which persons drawing on
such accounts shall be bonded or otherwise insured.
3.4 NEGATION OF PARTNERSHIP OR JOINT VENTURE.
Nothing in this Agreement contained shall constitute, or be construed
to be or to create, a partnership, joint venture or lease between Owner and
Hyatt with respect to the Hotel.
3.5 BUDGETS.
(a) Hyatt will provide the Owner before December 1 (or such earlier
date as they become available) of each year during the term (i) Hyatt's
proposed preliminary forecast for the succeeding fiscal year of hotel
operations, including estimates of revenues and operating expenses and the
assumptions underlying same, (ii) a proposed budget for major expenditures
for the succeeding fiscal year, including all capital and FF&E
expenditures, and (iii) Hyatt's proposed marketing plan, including the
related marketing budget ("Marketing Plan") for the succeeding calendar
year (collectively, the materials in (i), (ii) and (iii) shall be the
"Forecasts"). Thereafter, Hyatt shall meet with Owner to discuss
<PAGE>
the Forecasts and shall take into account Owner's views regarding the
Forecasts in an attempt to achieve a consensus on, and Owner's approval of,
the Forecasts. After Hyatt has made revisions to the Forecasts, if any,
following its meetings with Owner, Hyatt shall present to Owner Hyatt's
final Forecasts. However, except as set forth in the following sentence,
Hyatt shall not be obligated to obtain Owner's approval of the Forecasts.
The Marketing Plan shall be subject to Owner's approval, which shall not be
unreasonably withheld.
(b) Owner acknowledges that the Forecasts shall be prepared by
Hyatt for internal management purposes and are necessarily based upon
estimates of uncertain future events and conditions and that Hyatt shall
have no liability to Owner, and shall not be deemed in default under this
Agreement, if actual operating results vary to any extent from the
Forecasts. Nothing in this Section 3.5 is intended to limit or negate (i)
the authority conferred upon Hyatt elsewhere in this Agreement including,
without limitation, Section 3.1 or Section 5.4 hereof, (ii) the obligations
of Owner under Section 5.4(c) or Section 7.1 hereof, or (iii) any other
term or condition of this Agreement.
(c) The Marketing Plan shall be deemed approved if Owner fails to
object within twenty (20) business days of receipt thereof. Any such
objection shall be in writing and shall specifically state the nature of
Owner's objections. In the event that Owner does not approve the Marketing
Plan, pending resolution between Owner and Hyatt with respect thereto,
Hyatt shall undertake
<PAGE>
a marketing program based on the approved Marketing Plan, as implemented,
for the previous fiscal year. Owner's right to approve the Marketing Plan
is subject to Owner's obligation to approve a plan to enable Hyatt to
properly market a hotel operated in accordance with the first-class hotel
standard, and nothing herein shall permit Owner to disapprove any plan
necessary to market and operate the hotel in accordance with the first-
class hotel standard. Owner shall not have the right to approve any
portion of the Marketing Plan which relates to Chain Services, the "Gold
Passport" system or other similar services or arrangements offered on a
chain-wide basis. Furthermore, if Owner does not approve Hyatt's Marketing
Plan for any fiscal year, not later than ninety (90) days after the
commencement of such fiscal year Owner shall not be entitled to utilize
said fiscal year in order to exercise any termination rights which may be
otherwise available to Owner under Section 25 hereof.
(d) Notwithstanding the provisions of Section 5.4 hereof, Hyatt
shall not have the right to make expenditures from the Fund for Replacement
of and Additions to Furnishings and Equipment for any "Major Program" (as
hereinafter defined) without the prior consent of Owner. Owner shall not
unreasonably withhold its consent of, and will at all times consent to, any
such Major Program, such that the hotel will at all times be maintained in
accordance with the first class hotel standard. The following activities
shall constitute a "Major Program":
<PAGE>
(i) Any comprehensive plan or program for FF&E replacement,
rehabilitation, restoration or redecoration of any block of at least fifty
(50) guest rooms;
(ii) Any program for significant FF&E replacement,
rehabilitation, restoration or redecoration of Hotel public areas,
meeting/banquet/prefunction areas or any one or more of them;
(iii) Any major change in the concept or theme of any hotel
restaurant or lounge or of the Hotel kitchen or laundry; and
(iv) Any modification to a previously approved Major Program
as shell be proposed by Hyatt in accordance with the annual budgeting
process, as provided above.
Nothing in this Paragraph 3.5(d) shall be deemed to limit the right of
Hyatt to make expenditures of any nature which it reasonably deems
necessary or appropriate (i) to minimize risk of personal injury and
property damage, (ii) in case of casualty or other emergency, or (iii) to
comply with applicable Legal Requirements.
SECTION 4. MANAGEMENT FEES AND REMITTANCES TO OWNER.
4.1 FISCAL YEAR.
(a) A "fiscal year" hereunder shall mean a period of twelve (12)
consecutive months included in the Term and ending on December 31st, except
that the first fiscal year hereunder shall commence on the date the Hotel
commences hotel operations (which date may be prior to the Opening Date)
and end on December 31st of
<PAGE>
the calendar year in which the Opening Date falls; provided, however, that
if such period consists of less than eight (8) full calendar months, then
the first fiscal year for all purposes of this Agreement shall be deemed to
commence on January 1 of the immediately succeeding fiscal year. In the
event that there shall be an early termination of the Term on a date other
than December 31st or in the event the Term is not extended as provided in
Section 2(b) hereof, the last fiscal year hereunder shall end on such date
of termination and shall commence on the preceding January 1st.
(b) The "Cumulative Period" in respect of any month included in a
fiscal year shall mean the period commencing on the first day of such
fiscal year and ending on the last day of such calendar month.
The Gross Receipts for any Cumulative Period shall mean the sum of
the Gross Receipts (as defined in Section 5.3 hereof) for each calendar
month included in such Cumulative Period. The Available Cash Flow for any
Cumulative Period shall mean the sum of the amounts of Available Cash Flow
for each calendar month included in such Cumulative Period, such sum to be
determined after taking into account any deficit in Available Cash Flow for
any such calendar month.
4.2 HYATT'S MANAGEMENT FEE.
4.2.1 ANNUAL MANAGEMENT FEE.
For each fiscal year Hyatt shall receive, in respect of its
management services hereunder, an amount (the "Annual
<PAGE>
Management Fee") equal to the sum of the Basic Fee and Incentive Fee, as
provided in the ensuing clauses (a) and (b):
(a) For each fiscal year, Hyatt shall receive a Basic Fee
equal to three percent (3%) until the end of the first fiscal year, three
and one-half percent (3.5%) until the end of the second fiscal year, and
for each fiscal year thereafter, four percent (4%), of the Gross Receipts;
and
(b) For any fiscal year for which there is Available Cash
Flow in excess of $4,200,000 (the "Target Amount"), Hyatt shall receive, in
addition to the Basic Fee, an Incentive Fee equal to fifteen percent (15%)
of the amount by which Available Cash Flow exceeds the Target Amount.
4.2.2 TIME AND MANNER OF PAYMENT.
Except as provided hereafter, with respect to any fiscal year and
each calendar month included therein, the Basic Fee and the Incentive Fee
shall each be payable in tentative monthly installments of the respective
amounts hereinafter provided, which tentative monthly installments on
account of such Basic Fee and Incentive Fee for any such calendar month
shall be paid by Hyatt withdrawing the same from the operating accounts at
any time after Hyatt shall furnish to Owner the unaudited financial
statement for such calendar month, pursuant to Section 7.4 hereof.
With respect to each calendar month included in any fiscal year:
(a) The tentative monthly installment on account of the Basic Fee
shall equal four percent (4%) (or such other
<PAGE>
percentage as may be then applicable) of the Gross Receipts for the
Cumulative Period in respect of such calendar month, less the aggregate
amount of the tentative monthly installments having theretofore become
payable for such fiscal year on account of such Basic Fee; and
(b) The tentative monthly installment on account of the
Incentive Fee shall equal the applicable percentage of the excess of
Available Cash Flow over the Target Amount for the Cumulative Period in
respect of such calendar month, less the aggregate amount of the tentative
monthly installments having theretofore become payable for such fiscal year
on account of such Incentive Fee. Notwithstanding the foregoing, the
Incentive Fee shall only be paid on a monthly basis to the extent the
Forecasts submitted to Owner pursuant to Section 3.5 indicate that an
Incentive Fee is anticipated to be earned.
If, for any fiscal year, the aggregate amount of the tentative
monthly installments paid to Hyatt on account of the Basic Fee and
Incentive Fee shall be more or less than the Annual Management Fee payable
for such fiscal year based upon the final determination of Gross Receipts
and Available Cash Flow for such fiscal year as reflected in the Certified
Financial Statement for such fiscal year referred to in Section 7.4 hereof,
then, by way of year-end adjustment, within fifteen (15) days after the
delivery of such Certified Financial Statement to Owner, Hyatt shall pay
into the operating accounts the amount of any such overpayment or
<PAGE>
withdraw from the operating accounts the amount of any such underpayment.
4.3 REMITTANCE TO OWNER.
Contemporaneously with furnishing the monthly statement for each
calendar month pursuant to Section 7.4 hereof, Hyatt shall remit to Owner
out of the operating accounts an amount (the "Owner's Remittance Amount")
by which the total funds then in the operating accounts as of the date of
distribution exceed $300,000 (said amount to be adjusted on an annual basis
by increases in CPI from the date hereof). At such time Hyatt, if Owner
shall so request, shall also provide Owner with Hyatt's good faith estimate
of the approximate amount of the next monthly distribution of Owner's
Remittance Amount. Hyatt shall not be deemed to have made any
representation, warranty or covenant with respect to its estimate of the
amount of funds to be available for distribution to Owner, nor shall Hyatt
be liable to Owner (or deemed in breach hereunder) if the actual amount
available for distribution is materially more or less than the estimated
amount. In no event shall Hyatt be required to make a distribution of
Owner's Remittance Amount which would reduce the balance in the operating
accounts below $300,000 (as adjusted). However, if Hyatt shall determine
it is unable to distribute all amounts in excess of $300,000 (as adjusted)
on any distribution date, it may retain additional amounts if it shall
provide to Owner a written explanation, in reasonable detail, as to the
reasons for such lesser distribution and Owner shall approve such
retention, which
<PAGE>
approval shall not be unreasonably withhold. (Notwithstanding the
foregoing, during the initial twelve months of the Term, Hyatt shall be
obligated to distribute on a monthly basis all funds in the operating
accounts except those which Hyatt reasonably determines shall be required
to operate the Hotel in accordance with the terms and conditions of this
Agreement, and Owner's approval shall not be required if the amount of such
distribution is less than the amount of the excess over $300,000 of the
funds in the operating accounts.) Each remittance shall be paid to Owner
at Owner's address then in effect hereunder for receipt of notices
hereunder by Owner, or at such other place as Owner may, from time to time,
designate in a notice to Hyatt.
4.4 SUPPLEMENTAL PAYMENT.
In addition to the Owner's Remittance Amount to be paid by Hyatt
under Section 4.3, Hyatt shall deposit, in respect of each calendar month
during the Term as a supplemental payment to Owner, the amount specified in
Section 5.4(a) hereof in respect of such calendar month and payable under
Section 5.4 into the Fund for Replacements of and Additions to Furnishings
and Equipment referred to therein, such amount to be deposited by Hyatt
into such Fund for the account of Owner.
<PAGE>
SECTION 5. DETERMINATION OF AVAILABLE CASH FLOW AND GROSS RECEIPTS.
5.1 BOOKS AND RECORDS.
Hyatt shall keep full and adequate books of account and other records
reflecting the results of the operation of the Hotel. Such books and
records shall, at all times, be kept in all material respects, in
accordance with the then latest edition of the Uniform System of Accounts
for Hotels (the "Uniform System"), as adopted by the American Hotel
Association, except as otherwise specified in this Agreement.
5.2 "AVAILABLE CASH FLOW" DEFINED.
There is attached hereto as Exhibit B, and hereby made a part hereof,
a copy of page 12 of the Uniform System, Sixth Revised Edition (the "Sixed
Edition"), showing the items of income and expense which are taken into
account in determining "Gross Operating Profit."
The "Available Cash Flow" derived from the Hotel for any period shall
mean the Gross Operating Profit of the Hotel for such period, determined in
accordance with the Sixth Edition, without regard to any supplements or
amendments thereto heretofore or hereafter adopted, less deductions for the
following amounts (but only to the extent that such amounts are not
otherwise deducted under the Sixth Edition in computing Gross Operating
Profit):
(a) An amount equal to the costs incurred during such period
in replacing, or adding to, the Operating Equipment;
<PAGE>
(b) An amount equal to the aggregate deductions made under
Section 5.4(a) for such period;
(c) The Hotel's pro rata share of Allocable Chain Expense for
such period, in accordance with Section 7.2;
(d) The cost of insurance maintained in accordance with
Section 8.2 and properly allocable to such period;
(e) All real and personal property taxes referred to in
Section 7.6 and properly allocable to such period;
(f) All costs and expenses incurred during such period in
respect of items described in Section 6.1 and 6.2 hereof;
(g) The amount of rent and other amounts payable during such
period to MPA pursuant to the terms of the Ground Lease;
(h) The amount of Basic Fees payable during such period;
(i) The amount of leasing and rental costs with respect to
telephones, televisions, computers, cash register systems, mini-bars and
hotel vans (deducted solely for purposes of computation of Hyatt's
Incentive Fee and not for purposes of Section 25 hereof) which amounts
shall not be charged against the Fund established pursuant to Section 5.4;
provided, however, that any such amounts which would not otherwise be
deductible under the Uniform System and which exceed $37,500 per annum
shall not be so deducted unless they relate to mini-bars and hotel vans;
<PAGE>
(j) All other amounts deductible in respect of such period
under the terms of this Agreement.
Notwithstanding any of the foregoing, the actual cost of leasing or
renting or other similar charges incurred after the Opening Date for the
replacement of or addition to Furnishings and Equipment shall not (except
as expressly provided in sub-paragraph (i) above) be deductions in
determining Available Cash Flow. such payments or costs incurred after the
Opening Date shall be paid from the Fund for Replacement of and Additions
to Furnishings and Equipment or shall otherwise be paid by Owner, as agreed
upon between Hyatt and Owner. Furthermore, the expense attributable to any
item of revenue which is excluded in the calculation of Gross Receipts
shall not be deducted in the calculation of Available Cash Flow.
5.3 DEFINITION OF GROSS RECEIPTS.
"Gross Receipts" during any period shall mean all revenues and income
of any kind properly accrued during such period and derived, directly or
indirectly, from the Hotel during such period including, without
limitation, all revenues derived from the sale during such period of rooms
and food and beverages (without taking into account any costs incurred in
respect of such sales) and all rents or fees payable by subtenants and
concessionaires in respect of such period (but not the gross receipts of
subtenants or concessionaires) provided that the net proceeds (after
deduction of the expenses of adjustment and collection) of use and
occupancy or other similar insurance in respect of the Hotel shall be
<PAGE>
included only to the extent actually received during such period, as well
as all of the other items listed under "Departmental Profit (Loss)" on
Exhibit B hereto. There shall be excluded in determining Gross Receipts
for any period (i) any sales or other excise taxes required by law to be
collected from customers of the Hotel and remitted to the appropriate
taxing authorities, (ii) ninety percent (90%) of any parking revenues
collected by the Hotel or other revenues collected for payment to third
parties as may be mutually agreed, such as security services
reimbursements, or (iii) any interest earned on funds held in the operating
accounts when not required (a) for the operation of the Hotel or (b) to be
paid to Owner as Owner's Remittances.
5.4 FUND FOR REPLACEMENT OF AND ADDITIONS TO FURNISHINGS AND
EQUIPMENT.
(a) During each fiscal year Hyatt shall deposit, for each calendar
month included in such fiscal year, an amount equal to two percent (2%)
until the end of the second fiscal year, three percent (3%) until the end
of the fourth fiscal year, four percent (4%) until the end of the
fourteenth fiscal year, and five percent (5%) thereafter, of the Gross
Receipts for such calendar month into a fund to be entitled "Fund for
Replacement of and Additions to Furnishings and Equipment," which Fund
shall be maintained on deposit by Hyatt in trust for Owner in an interest-
bearing bank account. The monies in such Fund shall be the property of
Owner. Interest earned during any period from the amounts in such Fund
shall be excluded from the Gross Receipts for such period and in
<PAGE>
computing Available Cash Flow for such period and shall remain part of such
Fund. To the extent that Hyatt shall be required to pay any income taxes
on such interest as a fiduciary, the same shall be payable out of such
Fund. In addition to such payments into such Fund, all proceeds from the
sale of Furnishings and Equipment no longer needed for the operation of the
Hotel shall also be paid into such Fund. Hyatt shall be entitled to
withdraw from such Fund any amounts required to make contributions to the
cost of replacements of, and additions to, the Furnishings and Equipment
reasonably deemed by Hyatt to be necessary or desirable, and the items of
Furnishings and Equipment so replaced or added shall be and become,
forthwith upon acquisition and installation and without further act or
action, the property of Owner and part of the Hotel. All such replacements
and additions may be purchased by Hyatt at competitive prices from
Rosemont. Any amounts remaining in such Fund at the termination or
expiration of the Term shall be returned by Hyatt to Owner.
(b) Hyatt shall not, without the approval of Owner, expend any
monies for replacements of, or additions to, the Furnishings and Equipment
in excess of the amount then existing in the Fund and, notwithstanding
anything else to the contrary in this Agreement contained, Hyatt's
obligations with respect to additions to, or replacements of, Furnishings
and Equipment shall be excused to the extent that the amount in such Fund
is inadequate to meet such obligations.
<PAGE>
(c) Anything in this Agreement to the contrary notwithstanding,
Owner shall be obligated to make sufficient funds available to Hyatt so
that the Hotel can be maintained at all times during the Term in accordance
with the first-class hotel standard. In the event Owner makes funds
available to Hyatt pursuant to this sub-section (i.e., to the extent the
Fund is insufficient therefor) such sums ("Excess FFE Costs") shall be
deducted in the year paid in the calculation of Available Cash Flow for
purposes of determining the amount of Hyatt's Incentive Fee, but shall not
be deducted in the calculation of Available Cash Flow for purposes of
Section 25 hereof.
SECTION 6. REPAIRS AND CHANGES; LEGAL REQUIREMENTS.
6.1 REPAIRS AND MAINTENANCE.
Except to the extent prevented by causes beyond its reasonable
control (including Force Majeure Causes and the unavailability of funds
from Owner), Hyatt shall, throughout the Term, take good care of the Hotel
(other than such portions thereof as are leased to tenants who undertake a
duty of repair and maintenance) and maintain the same in good order and
condition and make all repairs thereto as may be necessary to maintain the
first-class hotel standard. Provided, however, that Hyatt's
responsibilities, as hereinabove stated in this Section, shall not include
any matters relating to the structural integrity of the Hotel, any matters
arising under any Environmental Laws (as defined in Section 9(b)), or other
matters relating to defects in design,
<PAGE>
materials or workmanship in the construction of the Improvements (other
than alterations or additions made by Hyatt pursuant to Section 6.3) which
shall be the responsibility of Owner throughout the term of this Agreement.
6.2 COMPLIANCE WITH LEGAL REQUIREMENTS.
Except as herein limited or excused by the provisions of Section
3.1(d) hereof, Hyatt shall, throughout the Term, comply with all applicable
requirements (the "Legal Requirements") of which Hyatt has knowledge under
all laws, ordinances, orders, rules and regulations of governmental
authorities having jurisdiction over the Hotel and Hyatt may, at its
option, defend any actions, suits or other proceedings alleging non-
compliance. Hyatt may, but only after approval by Owner (which approval
shall not be unreasonably withheld), contest, by appropriate legal
proceedings conducted in good faith, in the name of Hyatt or Owner, or
both, the validity or application of any Legal Requirements. If Owner
shall approve any such contest, Owner shall execute and deliver any
appropriate documents which may be necessary or proper to permit Hyatt to
prosecute such contest. Owner may, by notice to Hyatt, direct Hyatt to
contest, or Owner may contest directly, any Legal Requirements which Hyatt
may otherwise desire not to contest.
Hyatt agrees to comply with the provisions of the so-called "Hilton
Estoppel Certificate" dated June 16, 1988, as in effect as of the date
hereof, and of the Ground Lease, to the extent such agreements and
instruments relate to restrictions or conditions of operation of the Hotel,
and any expense of compliance
<PAGE>
shall be deemed an ordinary operating expense of the Hotel. This sentence
shall not create any direct right of enforcement against Hyatt (under any
third party beneficiary theory or otherwise) by any party to such
instrument or agreement. In the event Owner shall enter into a new ground
lease with the MPA with respect to the Site, Hyatt shall have the right to
approve any material changes in the obligations of Hyatt hereunder
contained in said ground lease (which approval shall not be unreasonably
withheld) and upon such approval, said instrument shall be deemed the
Ground Lease hereunder.
In connection with the operation of the Hotel, Hyatt shall exercise
best efforts to achieve a workforce consisting of not less than twenty
percent (20%) "Minority" employees (as hereinafter defined) in each job
category. For purposes of this Section "Minority" employee shall mean a
person with permanent residence in the United States who is Alaskan Native,
Asian (including the subcontinent of India), Black, Cape Verdean, North
American Indian, Pacific Island or Western Hemisphere Hispanic, as further
defined hereinafter.
CATEGORY DEFINITION
North American Indian or
Alaskan Native All persons having origins in any of
the original peoples of North American, and who maintained cultural
identification through tribal affiliations or community recognition.
Black All persons having origins in any of
the Black racial groups of Africa.
<PAGE>
Asian or Pacific Islander All persons having origins in any of
the original peoples of the Far East, Southeast Asia, the Indian
Subcontinent, or the Pacific Islands. This area includes, for example,
China, India, Japan, Korea, the Philippine Islands and Samoa.
Western Hemisphere
Hispanic All persons of Mexican, Puerto Rican,
Cuban, Central or South American origin.
Cape Verdean All persons having origins in the Cape
Verde Islands.
To the extent feasible and consistent with law, the Hotel's workforce
shall also be structured to recognize preference to residents of
communities impacted by the operation of the airport, to include East
Boston, Chelsea, and Winthrop, Massachusetts. In accordance with the
foregoing, Hyatt agrees to engage in the recruitment and training of
personnel in a manner determined by Hyatt to be appropriate to achieve the
best efforts goals of this paragraph.
6.3 ALTERATIONS AND ADDITIONS.
Except in order to comply with the Legal Requirements and except as
hereinafter provided, Hyatt shall make no alterations, additions or
improvements in or to the Improvements without the approval of Owner (which
approval may be arbitrarily withheld). Notwithstanding the preceding
sentence, (i) in the event any alterations, additions or improvements,
structural or non-structural, shall be required in order that the Building
be in compliance with applicable Legal Requirements, the same shall be
<PAGE>
the responsibility of Owner, and (ii) Hyatt shall have the right (without
obtaining the approval of Owner, except as set forth in Section 3.5(d)),
from time to time during the Term, to make voluntary alterations, additions
or improvements in or to the Improvements (which shall become part thereof
for the purposes of this Agreement) in order to improve the operation of
the Hotel, provided that the aggregate amount which may be incurred in
respect thereof during any fiscal year shall not exceed ten percent (10%)
of the aggregate amount deductible under Section 5.4 for each of the
calendar months included in such fiscal year.
SECTION 7. GENERAL COVENANTS OF HYATT AND OWNER.
7.1 WORKING CAPITAL.
Except as otherwise in this Agreement specifically provided, Owner
shall, at all times during the Term, cause sufficient working capital funds
to be on hand in the operating accounts to assure the timely payment of all
current liabilities of the Hotel (including Hyatt's fees and the
installments thereof payable under Section 4.2 hereof) and all other items
entering into the calculation of Available Cash Flow (except for those
items for which Hyatt is not responsible for making payment under Section
3.3 or otherwise), the uninterrupted and efficient operation of the Hotel
at all times during the Term in accordance with the first-class hotel
standard, and the performance by Hyatt of its other obligations hereunder.
To the extent that additional funds are required such funds shall be
provided by Owner within sixty (60)
<PAGE>
days after Hyatt has given Owner notice of such requirement. On the
commencement of the Term, Owner shall have adequate funds in the operating
accounts and there shall be on hand all necessary inventories of food,
beverages and operating supplies; further, Owner shall have met all
applicable Legal Requirements including, without limitation, the
procurement of all liquor and other licenses required to meet such Legal
Requirements.
7.2 CHAIN SERVICES.
Hyatt shall provide, or shall cause its affiliate to provide, in
connection with the operation and for the benefit of the Hotel, those group
benefits, services and facilities (hereinafter referred to collectively as
"Chain Services") generally made available by Hyatt from time to time
during the Term to hotels (which term, as used herein, does not include
Hyatt Lodges or any hotel not operated under a name which includes the word
"Hyatt") operated by Hyatt or its affiliates. Chain Services presently
consists of (i) convention, business and sales promotion services
(including the maintenance and staffing of Hyatt's home office sales force
and of regional sales offices in various parts of the United States and the
world), (ii) advertising, publicity and public relations services, (iii)
food and beverage, personnel and other operational departmental supervision
and control services, (iv) centralized reservations services currently
located in Omaha, Nebraska, and (v) the making available of qualified
personnel through the Hyatt employee training program. Neither Hyatt nor
any of its affiliates shall charge or receive any profit
<PAGE>
in respect of any such Chain Services. Hyatt shall, however, be entitled
to charge the operation of the Hotel and to be reimbursed for the Hotel's
pro rata share of "Allocable Chain Expense." "Chain Expense" for any
period shall include all costs incurred during such period by Hyatt or by
any of its affiliates in respect of Chain Services other than the costs of
food and beverage, personnel and other operational departmental supervision
and control services. "Allocable Chain Expense" for any period shall mean
all Chain Expense incurred during such period, reduced by any amounts which
Hyatt or any of its affiliates shall be entitled to be paid in respect of
Chain Services furnished during such period to hotels which are situated
outside of the United States (whether or not opened to the public) or which
are situated in the United States but are not opened to the public (for the
reason that they are under construction or are otherwise being prepared for
opening). The Hotel's pro rata share of Allocable Chain Expense for any
period shall bear the same ratio of the Allocable Chain Expense for such
period as the number of guest rooms in the Building bears to the average
number of guest rooms in all hotels in the United States opened to the
public and operated during such period by Hyatt or its affiliates.
7.3 RIGHT OF INSPECTION AND REVIEW
Owner and its duly authorized agents have the right to enter upon any
part of the Hotel at all reasonable times during the Term for any purpose,
including, without limitation, for the purpose of examining or inspecting
the Hotel or examining or making
<PAGE>
extracts form the books and records of the Hotel operation, or for any
other purpose which Owner, in its discretion, shall deem necessary or
advisable, but the same shall be done in a manner reasonably fashioned to
minimize interference and disruption of the Hotel's operations and to
permit the discharge by Hotel personnel of their normal duties.
7.4 FINANCIAL REPORTS.
Hyatt shall deliver to Owner, within thirty (30) days after the end
of each calendar month, an unaudited financial statement prepared from the
books of account maintained by Hyatt and containing (i) a statement of
current assets and current liabilities of the Hotel as of the end of such
calendar month, (ii) a profit and loss statement showing the results of
operation of the Hotel for such calendar month and for the Cumulative
Period in respect of such calendar month and (iii) a statement of the Gross
Receipts for such calendar month and such Cumulative Period. Within ninety
(90) days after the end of such fiscal year Hyatt shall deliver to Owner a
financial statement for such fiscal year (herein referred to as the
"Certified Financial Statement"), containing a statement of the current
assets and current liabilities of the Hotel as of the end of such fiscal
year, and a profit and loss statement showing the results of operation of
the Hotel (including store rentals) for such fiscal year, with an opinion
thereon after an audit by a duly licensed independent certified public
accounting firm retained by Hyatt and approved by Owner. (Owner hereby
gives approval to the firm of Laventhol &
<PAGE>
Horwath if such firm is properly licensed to make such audit and give such
opinion.) Such Certified Financial Statement shall set forth the Gross
Receipts, the Available Cash Flow and the Annual Management Fee (broken
down between the Basic Fee and the Incentive Fee) for such fiscal year.
The cost of such audit in respect of such Certified Financial Statement for
a fiscal year shall be charged as an expense of the operation of the Hotel
for the succeeding fiscal year. If the opinion of such independent
certified public accounting firm with respect to the matters set forth in
such Certified Financial Statement for a fiscal year shall be an
unqualified opinion, then such Certified Financial Statement shall be
conclusive upon the parties hereto with respect to such matters and shall
be deemed to be a final determination of the Gross Receipts, the Available
Cash Flow and the Annual Management Fee for such fiscal year, unless either
party (the "Contesting Party") shall deliver notice to the other party (the
"Non-Contesting Party") contesting such statement within a period of one
year from the date of delivery of the statement. Upon receipt of any such
notice the parties shall negotiate in good faith to resolve any such
objection. If such matter remains unresolved sixty (60) days after the
date of notice of objection the Contesting Party shall propose three
independent certified public accounting firms of nationally recognized
standing to resolve the matter and the Non-Contesting Party shall select
one of the three firms proposed, whose decision shall be binding on both
parties. Any fees charged by such accounting firm shall be paid by the
<PAGE>
Contesting Party, unless the matter shall result in a net change of more
than 5% from the amount of the Annual Management Fee as stated in the
financial statements delivered pursuant to this Section 7.4, in which case
the fees shall be paid by the Hotel and deducted in the computation of
Available Cash Flow.
7.5 OWNER'S COVENANTS AS TO TITLE.
Owner covenants that the interest of Hyatt under this Agreement shall
not be subject or subordinate to any ground or underlying leases,
mortgages, deeds of trust, security agreements or other encumbrances
affecting the Hotel except those which contain, or are subject to, a non-
disturbance agreement, so-called, to the effect that this Agreement shall
not be subject to forfeiture or termination except in accordance with the
provisions hereof, notwithstanding a default, termination, foreclosure or
exercise of a power of sale under such lease, mortgage, deed of trust,
security agreement or other encumbrance or any obligation secured thereby,
or to any other matters affecting title to the Hotel, except for non-
delinquent real and personal property taxes and such other matters or
encumbrances as may be shown as exceptions to title in that certain
commitment for title insurance dated April 3, 1989, issued by Ticor Title
Insurance, Policy No. 617963, and other matters not materially affecting
the operation of the Hotel by Hyatt. Owner further covenants that, so long
as Hyatt shall not be in default hereunder, Hyatt shall be entitled to
operate the Hotel for the Term, and Owner shall, at no expense to Hyatt,
undertake and prosecute all reasonable and appropriate
<PAGE>
actions, judicial or otherwise, required to assure such right of operation
to Hyatt.
Owner agrees that it shall, throughout the Term:
(a) Keep and maintain, or cause to be kept and maintained,
any leases covering real or personal property or other agreements necessary
to the ownership or control of the Hotel, or any part thereof, in full
force and effect and free from material default, and in this connection
Owner shall pay and discharge, or cause to be paid and discharged, any
ground rents or other rental payments or other charges payable by Owner in
respect of the Hotel;
(b) Maintain, or cause to be maintained, in good standing and
free from any material default, any and all mortgages affecting the Hotel
(but no additional rights against Owner are hereby created in favor of any
mortgagee under such mortgage); and
(c) Observe, or cause to be observed, and comply with, or
cause to be complied with, any and all other liens, encumbrances,
covenants, charges, burdens or restrictions pertaining to the Hotel or any
part thereof, none of which shall, however, materially and adversely affect
the operation of the Hotel by Hyatt.
7.6 PAYMENT OF TAXES.
During the Term, Owner shall, prior to delinquency, pay to the
appropriate municipal authorities all real and personal property taxes
assessed against the Hotel (or other payments in
<PAGE>
lieu thereof) to the extent that the same are properly allocable to the
Term. Such property taxes or payments for any period which includes the
Opening Date or the date on which the Term shall expire or otherwise
terminate shall be prorated and only the portion of such payments or
property taxes applicable to the Term shall be deductible under Section
5.2(e).
SECTION 8. INSURANCE
8.1 INSURANCE TO BE MAINTAINED PRIOR TO THE COMMENCEMENT OF TERM.
Owner shall, at all times prior to the Opening Date and at no cost to
Hyatt, procure and maintain with responsible and properly licensed
companies (i) public liability and indemnity and property insurance in
respect of the Hotel fully protecting both Owner and Hyatt against loss or
damage arising in connection with the construction, furnishing and
equipping of the Hotel and the pre-opening activities of Hyatt hereunder
and (ii) adequate insurance for the full insurable value of the Hotel
against all risk of direct physical damage, including but not limited to
fire and extended coverage, boiler and machinery, and builder's risk
insurance, and such other risks and perils for which insurance is
customarily provided for hotels of similar character during the period of
construction and completion. Prior to the Opening Date Hyatt shall
maintain workers' compensation insurance (at Owner's sole cost and expense,
which expense shall not be deemed included within the pre-opening budget).
All liability and indemnity
<PAGE>
policies evidencing such insurance shall name Hyatt as an additional
insured thereunder by means of the following endorsement:
"Additional Insured Endorsement:
Hyatt Corporation and all affiliated, associated, proprietary,
or subsidiary companies, partnerships, and trusts as they may now exist or
exist hereafter and any firm name, trade name, or style under which they
may operate: EXCEPT Hyatt Medical Enterprises, Inc., Hyatt Management
Corporation and HMC Management Corporation."
8.2 INSURANCE TO BE MAINTAINED DURING TERM.
Owner shall maintain, at all times during the Term, the following
insurance respecting the Hotel in amounts and with responsible and properly
licensed companies as approved by Hyatt (such amounts shall in no event be
less than the amounts required under any mortgage, deed of trust or
security agreement affecting the Hotel):
(a) Public liability insurance for injury to or death of
persons and damage to or loss of property, with endorsements including
coverage for those risks listed in Exhibit C attached hereto and hereby
made a part hereof;
(b) Insurance against all risk of direct physical loss,
including but not limited to, fire and extended coverage including business
interruption, boiler and machinery coverage including use and occupancy,
and such other risks and perils with respect to which insurance is
customarily carried by Hyatt for hotels of similar character; and
<PAGE>
(c) Such other insurance as Hyatt shall deem necessary for
protection against claims, liabilities and losses arising from the
operation of the Hotel.
Hyatt shall maintain, at all times during the Term (but at Owner's
sole cost and expense), workers' compensation insurance, including
employers' liability and a broad form "all states" endorsement or similar
insurance as may be required by law, and crime and fidelity insurance
against dishonest acts by employees and others, in amounts and with such
responsible and properly licensed companies as shall be determined by
Hyatt.
All policies evidencing the foregoing insurance shall name Owner as
the principal insured and shall name Hyatt, its directors, officers,
employees and agents and (if required by Owner) any mortgagee of the Hotel
as additional insureds thereunder.
Whenever Owner is about, or proposes, to purchase any insurance
policy or policies required under this Section 8.2, Owner shall invite a
bid from Hyatt (the "Hyatt bid") covering such policy or policies and
prepared by Hyatt's insurance broker or adviser. The Hyatt bid may be
based upon self-insurance (as described in Section 8.5) or providing all or
part of the insurance in question under a blanket policy insuring, in
addition to the Hotel, other hotels operated by Hyatt or its affiliates, in
which event the insurance premiums to be included in the Hyatt bid shall be
those properly allocable to the Hotel, as determined in good
<PAGE>
faith by the insurance carrier or carriers involved. Owner shall have no
obligation to accept the Hyatt bid.
8.3 NOTICE OF CANCELLATION OR CHANGE.
All insurance policies required to be carried hereunder shall, to the
extent obtainable, have attached thereto an endorsement that the same shall
not be cancelled or changed without at least thirty (30) days' prior
written notice to all named insureds and additional insureds.
8.4 EVIDENCE OF INSURANCE COVERAGE.
For the purpose of evidencing compliance with the provisions of this
Section 8, Owner shall from time to time furnish to Hyatt certified
duplicate policies of all insurance required to be maintained by Owner
pursuant to this Section 8.
8.5 SELF-INSURANCE.
Owner understands that Hyatt customarily and in the course of
managing the hotels in its chain, self-insures and assumes the risk of
certain losses and liabilities and places certain coverage with an
affiliated insurance carrier. Subject to the next succeeding paragraph,
Owner agrees that Hyatt may, in submitting the Hyatt bid, be a self-insurer
of all or any of the risks described in this Section 8, or may place
coverage with such affiliated carrier, so long as such self-insurance or
coverage is consistent in type and amount with Hyatt's self-insurance or
coverage practices at other hotels, and is satisfactory to Owner's mortgage
lender and any other party which is required, under the terms of any
agreement with Owner, to approve such coverage.
<PAGE>
In the event that Hyatt self-insures, it will carry insurance, in
customary amounts, above the self-insured deductibles protecting Owner and
Hyatt. Owner shall be named as an additional insured in said policies.
8.6 WAIVER OF RIGHT OF SUBROGATION.
Whether Owner or Hyatt shall provide the insurance required by this
Section 8, any such policies will provide that the insurer's right of
subrogation shall be waived in favor of the party not providing the
insurance.
SECTION 9. INDEMNIFICATION OF OWNER.
To the extent that Owner shall not be fully covered by insurance,
Hyatt will indemnify Owner and hold it harmless from any damages,
liability, cost, claim or expense, including attorneys' fees, arising out
of or in connection with the operation of the Hotel or Hyatt's operations
other than at the Hotel. The costs of such indemnity shall be borne as
follows:
(a) If the damage, liability, cost, claim or expense is
attributable to Hyatt's gross negligence, willful misconduct, willful
violation of any Legal Requirements or breach of this Agreement (other than
Hyatt's covenant to comply with the Legal Requirements), the cost of such
indemnification shall be borne solely by Hyatt and shall not be paid from
the operating accounts;
(b) If the damage, liability, cost, claim or expense is
attributable to any other reason or cause, the cost of such
<PAGE>
indemnification shall be paid by Hyatt out of the operating accounts
and may be charged against the Available Cash Flow.
Hyatt's obligations under this Section 9 shall not include any
losses, expenses or damages arising from any matters relating to the
structural integrity of the Hotel or other matters relating to defects in
design, materials or workmanship in the construction of the Hotel (other
than alterations or additions made by Hyatt pursuant to Section 6.3) or the
existence (prior to the Opening Date) of "hazardous substances" or
"hazardous wastes" as defined in Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42USC Section 9601, et seq., or
The Resource Conservation and Recovery Act, as amended, 42USC Section 6901
et seq., or similar state environmental laws or subsequent federal or state
legislation of a similar nature which may be enacted form time to time
("Environmental Laws"), all of the foregoing being Owner's sole respon-
sibility. Hyatt shall notify Owner of the existence of any violation of
Environmental Laws of which it has actual knowledge and shall, except in
the case of any emergency, not take any remedial action or incur any cost
or expense unless Owner shall after notice fail to commence and proceed
with reasonable diligence to remedy same. Nothing herein, however, shall
be deemed to impose or create an obligation on Hyatt's part to take any
such remedial action. Owner shall provide Hyatt with copies of any and all
reports received by Owner with respect to any such matters. Owner shall
fully indemnify Hyatt from and against any loss, cost, expense or
liability, including attorney's fees arising from any of the foregoing
matters in this grammatical paragraph, which expense of indemnification
shall not be deducted in computing Available Cash Flow. The provisions of
this Section 9 shall
<PAGE>
survive the expiration or earlier termination of this Management Agreement.
SECTION 10. DAMAGE TO AND DESTRUCTION OF HOTEL.
10.1 OWNER'S DUTY OF RESTORATION.
If the Hotel, or any portion thereof, shall be damaged or destroyed
at any time or times during the Term by fire or any other casualty Owner,
at no expense or risk to Hyatt, shall (provided the Owner's lenders or MPA,
as the case may be, allows the proceeds of insurance to be used for
restoration) using due diligence and dispatch, repair, rebuild or replace
the same (such repairing, rebuilding or replacing being herein called
"restoration") so that after such restoration the Hotel shall be
substantially the same as prior to such damage or destruction, and all
proceeds of insurance shall be made available to Owner for this purpose;
provided that Hyatt shall have the right to ensure that such proceeds of
insurance shall be applied to such restoration, subject to the rights of
any lender or MPA, its successors or assigns under the terms of any third
party mortgage loan of Owner or the Ground Lease (the relevant provisions
of which are attached hereto as Exhibit D).
10.2 OWNER'S ELECTION NOT TO RESTORE.
Anything in Section 10.1 to the contrary contained notwithstanding,
if in connection with any casualty, the cost of restoring the Hotel shall
equal to exceed (x) twenty-five percent (25%) of the replacement cost
thereof immediately prior to such casualty if such casualty shall be
covered by insurance or (y) ten percent (10%) of such replacement cost if
such casualty shall not be covered by insurance, or (ii) Owner elects to
terminate the
<PAGE>
Ground Lease pursuant to the provisions thereof with respect to casualty or
condemnation, then, and in either event, Owner shall have an election
exercisable by notice to Hyatt, given within ninety (90) days from the
occurrence of such casualty, not to restore the Hotel and to terminate this
Agreement; provided, however, if at any time after any termination pursuant
to this Section 10.2, Owner shall elect to rebuild or restore a first-class
hotel on the Site, it shall so notify Hyatt in writing, and Hyatt shall
have the right exercisable by written notice to Owner delivered at any time
within thirty (30) days following receipt of such notice (but shall not be
obligated) to elect to manage and operate the said hotel. In the event
Hyatt elects to exercise its right to manage or restore or rebuild any
hotel on the Site as provided in the proceeding sentence, then,
notwithstanding any previous termination of this Agreement, this Agreement,
and the rights and obligations of the parties hereto, shall continue in
full force and effect with respect to the restored or rebuilt hotel for all
the rest and remainder of the Term (computed from the opening date of the
rebuilt or restored hotel).
SECTION 11. INTEREST ON OVERDUE SUMS.
If either party (the "defaulting party") shall fail to pay, when due,
to the other party (the "non-defaulting party") any sum payable to the
latter hereunder, then the defaulting party shall, without notice to or
demand upon it, be liable to the non-defaulting party for the payment of
such sum together with interest
<PAGE>
thereon at the rate of (1) "Prime" plus 1% per annum or (ii) the maximum
rate of interest allowed by law, whichever shall be less, from the date
when such sum shall become due to the date of actual payment. For the
purposes hereof, "Prime" shall mean the rate per annum announced from time
to time by The First National Bank of Chicago as its prime or equivalent
rate of interest.
SECTION 12. EVENTS OF DEFAULT.
The following shall constitute events of default hereunder:
(1) The failure of either party (the "defaulting party") to
pay to the other party (the "non-defaulting party") any sum which may
become due hereunder within thirty (30) days after receipt by the
defaulting party of a notice from the non-defaulting party specifying such
failure; or
(2) The failure by either party (the "defaulting party") to
perform, keep or fulfill any of the terms, covenants, undertakings,
obligations or conditions set forth in this Agreement other than those
referred to in the foregoing paragraph (1), and the continuance of such
failure for a period of thirty (30) days after receipt by the defaulting
party of notice thereof from the other party hereto (the "non-defaulting
party") specifying such failure; or, in the event such failure is of a
nature that it cannot, with due diligence and in good faith, be cured
within thirty (30) days and such defaulting party fails to proceed promptly
and with due
<PAGE>
diligence and in good faith to cure the same and thereafter to
prosecute the curing of such failure with due diligence and in good faith
(it being intended that, in connection with a failure not susceptible of
being cured with diligence and in good faith within thirty (30) days, the
time of such defaulting party within which to cure the same shall be
extended for such period as may be necessary for the curing thereof with
due diligence and in good faith).
If an event of default shall occur, the non-defaulting party may give
to the defaulting party notice of intention to terminate the Term after the
expiration of a period of sixty (60) days from the date of such notice and,
upon the expiration of such period, the Term shall expire. Such
termination shall be without prejudice to any right to damages which the
non-defaulting party may have against the defaulting party under applicable
law.
SECTION 13. TRADE NAME.
During the Term that Hotel shall at all times be known and designated
as "Harborside - A Hyatt Conference Center and Hotel", except as may
otherwise be mutually agreed upon by Owner and Hyatt. Hyatt represents and
warrants to Owner that Hyatt has the legal right to use each of the names
"Hyatt" and "Regency" (herein called the "protected names") either alone or
in conjunction with another word or words. Owner acknowledges that each of
the protected names, when used either alone or in conjunction with any
other word or words, is the exclusive property
<PAGE>
of Hyatt. Furthermore, Owner agrees that no right or remedy of Owner for
any default of Hyatt hereunder, nor the delivery of possession of the Hotel
to Owner upon the expiration or sooner termination of the Term, nor any
provision of this Agreement, shall confer upon Owner, or any transferee,
assignee or successor of Owner, or any person, firm or corporation claiming
by or through Owner, the right to use either of the protected names, either
alone or in conjunction with any other word or words, in connection with
the use or operation of the Hotel or otherwise (except in accordance with
the express terms of this Agreement), and Owner hereby covenants and agrees
on its own behalf and on behalf of any such transferee, assignee or
successor, not to use any of the protected names, either alone or in
conjunction with any other word or words, in connection with the use or
operation of the Hotel, or otherwise. In the event of any breach of this
covenant by Owner, Hyatt shall be entitled to damages, to relief by
injunction, and to all other available legal rights or remedies, and this
provision shall be deemed to survive the expiration or sooner termination
of the Term.
SECTION 14. SUCCESSORS AND ASSIGNS.
14.1 ASSIGNMENT BY HYATT.
Hyatt shall have the right to assign its rights and obligations under
this Agreement, without the consent of Owner, to any affiliate or to any
assignee who also acquires all, or substantially all, of the assets of
Hyatt and assumes its
<PAGE>
obligations, including those hereunder. In such latter event, Hyatt's
liability hereunder shall terminate upon such assignment, but in the event
of such an assignment to an affiliate Hyatt shall continue to be liable
under this Agreement to the same extent as though such assignment had not
been made. Except as hereinabove provided, Hyatt shall not assign its
rights and obligations under this Agreement without the approval of Owner.
In the event that Hyatt shall assign its rights and obligations under this
Agreement to any affiliate (the "assignee affiliate"), as hereinbefore
provided, then the sale by Hyatt or by an affiliate of controlling interest
in such assignee shall constitute an assignment of Hyatt's interest
requiring Owner's approval, as provided in the immediately preceding
sentence, except for a sale which is part of a sale of all, or
substantially all, of the assets of Hyatt to an assignee who assumes its
obligations, including those hereunder (in which case, any contingent
liability of Hyatt hereunder shall terminate upon such sale). A
"controlling interest" in an affiliate refers to shares of capital stock
representing more than fifty percent (50%) of the voting power of such
affiliate.
It is understood and agreed that any approval given by Owner to any
assignment shall not be deemed a waiver of the covenant herein contained
against assignment in any subsequent case. Any assignee who succeeds to
the interest of Hyatt hereunder (or to the interest of any assignee of
Hyatt hereunder) shall be deemed to be Hyatt hereunder for all purposes.
The term "affiliate", as used herein, shall mean a corporation included in
<PAGE>
an "affiliated group" as that term is defined in Section 1504(a) of the
Internal Revenue Code as presently in effect and of which Hyatt, or its
direct or indirect parent corporation, is the common parent corporation.
14.2 ASSIGNMENT BY OWNER.
Owner shall have the right to sell, hypothecate or convey the Hotel
or any portion thereof, or to assign or pledge its interest in this
Agreement, without the prior approval of Hyatt; provided that such sale,
conveyance, hypothecation, pledge or assignment shall (i) be to a person or
entity which has the financial ability to perform the obligations of Owner
hereunder and enjoys a reputation for honesty and integrity in business
dealings and is generally held in high esteem in the business community,
and (ii) not be to any person or entity who is in the business of, or who
is controlled by or under common control with any person or entity who is
in the business of hotel management or is a franchisor of hotel management
and related services (not, for these purposes, including any person or
entity which engages solely in hotel ownership or investment). Any sale,
hypothecation, conveyance, pledge assignment not satisfying the aforesaid
criteria shall require Hyatt's approval unless the transaction includes the
pledge of this Agreement for collateral purposes to any mortgage lender
which has satisfied the requirements of Section 7.5 hereof or to MPA, its
successors or assigns, which assignment or pledges do not in either
instance require Hyatt approval. Any approved
<PAGE>
assignee shall expressly assume in writing the obligations of Owner
hereunder.
For the purposes of this Agreement, an assignment of this Agreement
shall be deemed to have occurred, if, within any twelve-month period, there
is a transfer of more than ten percent (10%) of the beneficial ownership of
Owner other than by bequests, devise or transfers under laws of intestacy.
Notwithstanding the foregoing, a transfer to any of the following persons
or entities shall not be deemed an assignment for purposes of this Section
14.2: (i) any current partner of Owner and any partner or shareholder in
such partner (the "Existing Owner") (as listed on Schedule A hereto); (ii)
an affiliate of any Existing Owner or any trust for the primary benefit of
such Existing Owner or members of the family of such Existing Owner; or
(iii) any transfer pursuant to certain agreements and any amendments,
modifications or extensions thereof with Macomber Properties Limited L.P.
for the benefit of certain trusts currently represented by Aldrich, Eastman
& Waltch, Inc. wherein the trusts have the right, under certain
circumstances, to become beneficial owners of a majority of limited
partnership interests in Owner and all of the stock of one of Owner's
general partners or to become a 50% partner of Macomber Properties Limited
L.P.
14.3 BINDING ON SUCCESSORS.
The terms, provisions, covenants, undertakings, agreements,
obligations and conditions of this Agreement shall be binding upon and
shall inure to the benefit of the successors in
<PAGE>
Interest and the assigns of the parties hereto with the same effect as if
mentioned in each instance where the party thereto is named or referred to.
SECTION 15. NOTICES.
All notices to be given hereunder shall be given in writing and shall
be deemed given when delivered by messenger or by the U.S. mails (and, if
mailed, shall be deemed received two (2) business days after the postmarked
date thereof), with postage prepaid, registered or certified, and, if
intended for Owner, delivered or addressed to:
Logan Harborside Associates II
Limited Partnership
c/o Macomber Development Associates
One Main Street
Cambridge, Massachusetts 10242
and
Bowditch & Dewey
311 Main Street
Worcester, Massachusetts 01608-1552
Attn: Jane V. Hawkes, Esq.
and if intended for Hyatt, delivered or addressed to:
Hyatt Corporation
Madison Plaza
200 West Madison Street
Chicago, Illinois 60606
Attention: General Counsel
Either party hereto may change the address for notices hereunder by such
party giving notice of such change to the other party hereto in the manner
hereinabove provided. If Hyatt is given the name and address of any
mortgagees, it will give copies of all
<PAGE>
notices given to Owner to such mortgagees, in the manner set forth in this
Section 16.
SECTION 16. APPROVALS.
If a party shall desire the approval of the other party hereto to any
matter, such party may give notice to such other party that it requests
such approval, specifying in such notice the matter as to which such
approval is requested and reasonable detail respecting such matter. If
such other party shall not respond negatively in writing (any disapproval
shall contain the reasons for such disapproval and the manner in which
approval may be obtained) to such notice within fourteen (14) days after
receipt thereof, such other party shall be deemed to have approved the
matter referred to in such notice.
SECTION 17. FURTHER INSTRUMENTS.
Each party hereto shall execute and deliver all such appropriate
supplemental agreements and other instruments (including estoppel
certificates) and take such other action as may be necessary to make this
Agreement fully and legally effective, binding and enforceable as between
the parties hereto and as against third parties, or as the other party may
reasonably request.
<PAGE>
SECTION 18. INDEMNIFICATION OF HYATT.
(a) During the Term and upon termination of this Agreement, whether
by lapse of time or otherwise, Owner shall indemnify and hold harmless
Hyatt and its directors, officers, employees and agents from and against
any and all liability, loss, damages, costs and expenses ("Liabilities")
arising out of, or incurred in connection with the management and operation
of the Hotel, except those caused by the gross negligence, willful
misconduct or willful violations of Legal Requirements by Hyatt or its
employees or agents occurring during the Term.
(b) With regard to Liabilities arising out of, or relating to, the
provisions of the Employee Retirement Income Security Act of 1974 and/or
the Multi-Employer Pension Plan Amendments Act of 1980 (MEPPA) or the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Owner shall
indemnify and hold harmless Hyatt and its directors, officers, employees
and agents from and against (i) any withdrawal liability (as described in
Section 4201 of MEPPA) incurred in connection with the discontinuance of
contributions to any Multi-Employer Pension Plan to which Hyatt may make
contributions on behalf of persons employed at the Hotel pursuant to the
provisions of an applicable collective bargaining agreement, but only to
the extent that such withdrawal liability is attributable to benefits
accrued by employees of Hyatt in respect to services performed on behalf of
the Hotel, (ii) any other Liabilities arising out of, or relating to, any
other funding provisions of said Statutes unless such Liabilities are due
to the
<PAGE>
gross negligence or willful misconduct of Hyatt, (iii) any costs, expenses,
liabilities or losses incurred by Hyatt in connection with compliance,
after the date of any expiration or termination of the Management Agreement
of obligations imposed under COBRA in respect of the Hotel, and (iv) any
fines, interest, excise taxes or penalties which may be assessed against
Hyatt in respect of the operation and administration of any employee
benefit plan to the extent attributable to such plans made available to
employees of the Hotel unless such fines, interest, exise taxes or
penalties are due to the gross negligence or willful misconduct of Hyatt.
SECTION 19. APPLICABLE LAW.
This Agreement shall be governed in all respects by the internal laws
of The Commonwealth of Massachusetts.
SECTION 20. PAYMENT OF AMOUNTS DUE TO HYATT.
If, pursuant to the terms of this Agreement, the Term and Hyatt's
management of the Hotel are terminated, Owner's obligations to pay to Hyatt
any other amounts due to Hyatt hereunder, shall survive such termination
and shall continue until all such amounts, with interest, are paid in full.
If such termination is the result of condemnation of, or a casualty to the
Hotel, these amounts due to Hyatt shall be paid out of any condemnation
award or insurance proceeds available to Owner after satisfaction of the
holder of any mortgage, except as may be otherwise required by the Ground
Lease.
<PAGE>
If the condemnation award or any insurance proceeds are insufficient,
Owner shall be obligated to pay all such amounts to Hyatt from other funds
of Owner.
SECTION 21. SURVIVAL AND CONTINUATION.
Notwithstanding the termination of the Term or Hyatt's management of
the Hotel in accordance with this Agreement, all terms, provisions and
obligations of either party contained herein, which in order to give them
effect and accomplish their intent and purpose need to survive such
termination (e.g., Sections 18 and 20) shall, by agreement between Owner
and Hyatt, survive and continue until they have been fully satisfied or
performed.
SECTION 22. HYATT APPROVALS.
Owner and Hyatt agree that in each instance in this Agreement or
elsewhere wherein Hyatt is required to give its approval of plans,
specifications, budgets and/or financing, no such approval shall imply or
be deemed to constitute an opinion by Hyatt, nor impose upon Hyatt any
responsibility for the design or construction of building elements,
including but not limited to structural integrity or life/safety
requirements or adequacy of budgets and/or financing or the compliance with
Environmental Laws. The scope of Hyatt's review and approval of plans and
specifications is limited solely to the adequacy and relationship of spaces
and esthetics of the Improvements for use as a hotel.
<PAGE>
All review and approvals by Hyatt under the terms of the Management
Agreement are for the sole and exclusive benefit of Hyatt and no other
person or party shall have the right to rely on any such reviews or
approvals by Hyatt. Hyatt shall have the absolute right, in its sole
discretion, to waive any such reviews or approvals as a condition to its
performance under the Management Agreement.
SECTION 23. SALE OF SECURITIES.
In the event Owner, or any person controlling Owner, shall, at any
time, sell or offer to sell any securities issued by Owner through the
medium of any prospectus or otherwise, it shall do so only in compliance
with all applicable federal and state securities laws, and shall clearly
disclose to all purchasers and offerees that (i) neither Hyatt nor any of
its officers, directors, agents or employees shall in any way be deemed an
issuer or underwriter of said securities, and that (ii) Hyatt and said
officers, directors, agents and employees have not assumed and shall not
have any liability arising out of or related to the sale or offer of said
securities, including, without limitation, any liability or responsibility
for any financial statements, projections or other financial information
contained in any prospectus or similar written or oral communication.
Hyatt shall have the right to approve any description of Hyatt, or any
description of this Agreement or of Owner's relationship with Hyatt
hereunder, which may be contained in any prospectus or other
<PAGE>
communication, and Owner agrees to furnish copies of all such materials to
Hyatt for such purpose not less than twenty (20) days prior to the delivery
thereof to any prospective purchaser. Owner agrees to indemnify, defend
and hold Hyatt, and its officers, directors, agents and employees, free and
harmless of and from any and all liabilities, costs, damages, claims or
expenses arising out of or related to the sale or offer of any securities
of Owner.
SECTION 24. CONFIDENTIALITY; COOPERATION.
All information regarding the Hotel not otherwise in the public
domain by publication or otherwise shall be received and maintained by
Hyatt in a confidential manner and shall not be disclosed to any third
party without the prior written consent of Owner. Owner agrees that it
will hold confidential all information relating to Hyatt and its operating
procedures and policies. Further, Owner agrees that it will not, without
the prior written consent of Hyatt, disclose any of the terms or provisions
of this Agreement, except pursuant to court order or to MPA, potential
lenders or equity investors with whom Owner is engaged in negotiations, or
to Owner's lawyers, accountants or other similar consultants or
professionals on an "as needed" basis. The foregoing obligations shall
survive the termination of the Term of this Agreement by expiration or
otherwise. Notwithstanding the foregoing, nothing contained herein shall
be deemed to prohibit Hyatt from disclosing any such information to
reputable statistical computation firms who agree not to disclose the
identity of the
<PAGE>
Hotel with respect to such confidential information or to other persons
when such disclosure is necessary in order to perform Hyatt's obligations
hereunder.
Upon any termination of the Term hereof by expiration or otherwise,
the parties shall cooperate with one another in good faith so as to promote
an orderly transition of the management and operations of the Hotel;
provided, however, that nothing contained herein shall be deemed to vest in
Owner any rights to continue to use the name "Hyatt" or any supplies
incorporating such name or other proprietary materials of Hyatt post-
termination.
SECTION 25. LIMITED RIGHT OF OWNER TO TERMINATE.
25.1 CERTAIN DEFINITIONS.
For proposes of this Section 25 (or any other Section of this
Agreement which makes reference to the definitions contained in this
Section 25), the following terms shall have the meanings indicated below:
"ACHIEVED ROOM FACTOR" shall mean the product of (i) the
average daily occupancy rate for the hotel in question by (ii) the average
daily room rate achieved by such hotel during the fiscal year in question,
as determined (with respect to the Hotel) by Hyatt's regular monthly
statements.
"ACTUAL GOP" shall mean the Gross Operating Profit for the
Hotel determined in accordance with the Sixth
<PAGE>
Edition as provided in 5.2 hereof for each fiscal year in question.
"ASSUMED GOP" shall mean the product of Assumed Gross Receipts
and the fraction whose numerator is Actual GOP and whose denominator is
Gross Receipts.
"ASSUMED GROSS RECEIPTS" shall mean the product of (i) Target
Room Factor, (ii) 365 (days in a year), (iii) number of rooms in the Hotel,
and (iv) the fraction whose numerator is Gross Receipts and whose
denominator is the Hotel's actual Room Revenue as shown on the Hotel's
certified financial statements.
"COMPARABLE HOTELS" shall mean the Airport Hilton (Logan
International Airport), the Ramada on Route 1, Boston, Massachusetts and
the Meridien in Boston or such other hotels as Owner and Hyatt shall
mutually designate during the Term as being comparable to the Hotel, it
being acknowledged by the parties that a hotel would be a "Comparable
Hotel" to the Hotel if it met the first-class hotel standard, was of a
comparable size as to number, size and quality of guest rooms and public
spaces and facilities and finishes and furnishings thereof, and was
operated by a manager in the business of operating first-class hotels;
provided, however, it is acknowledged that no hotel could be a Comparable
Hotel to the Hotel unless it were located in either the Restricted Area or
the Exclusive Area (as defined in Section 26), and was
<PAGE>
subject to the same general market conditions as is the Hotel and was
of approximately the same age as the Hotel. In determining which hotels
are most Comparable Hotels to the Hotel, such factors shall be taken in
account as shall be necessary to effectuate the intended purpose of the
foregoing provisions. In the event the parties shall be unable to mutually
agree as to the identity of the Comparable Hotels from time to time, such
dispute shall be resolved by the Information Source, taking into account
the foregoing factors.
"GOP DEFICIENCY" shall mean "Assumed GOP" less the Actual GOP
for each fiscal year in question.
"INFORMATION SOURCE" shall mean any one of Laventhol & Horwath,
Pannell Kerr & Forester, Kenneth Leventhal & Co., David Berins & Co., as
Owner shall choose (and upon choosing, Owner shall notify Hyatt) or any
other hotel consulting group or firm of that caliber which is mutually
acceptable to Hyatt and Owner.
"TARGET ROOM FACTOR" shall be 95% of the weighted average (by
number of rooms) of the Achieved Room Factor for each of the Comparable
Hotels.
25.2 TERMINATION RIGHT.
Owner will have the right to terminate this Agreement if for any two
(2) consecutive fiscal years, the first of which shall be not earlier than
the sixth (6th) fiscal year following the Opening Date, (i) the Achieved
Room Factor for the Hotel for each
<PAGE>
such two (2) consecutive fiscal years is less than the Target Room Factor
in each of those years, and (ii) Available Cash Flow (determined for
purposes of this Section 25 without deduction of (i) lease and rental
charges referred to in the last paragraph of Section 5.2 hereof of (ii)
Excess FF&E Costs) for each of such two (2) consecutive fiscal years shall
be less than the Target Amount. Any fiscal year in which Owner has failed
to approve Hyatt's Marketing Plan not later than ninety (90) days after
commencement of such fiscal year shall be deemed a year in which actual
Achieved Room Factor for the Hotel was equal to the Target Room Factor.
25.3 REQUEST FOR DETERMINATION.
Within ninety (90) days after the end of the seventh (7th) fiscal
year, and each fiscal year thereafter, Hyatt shall deliver to Owner
financial reports in accordance with Section 7 of this Agreement which will
be used as a basis for the application of this Section. Owner shall have a
forty-five (45) day period following the delivery of the financial
statements in which to request, by notice to Hyatt (the "Request Notice"),
a determination of the Achieved Room Factor and the Target Room Factor for
the Comparable Hotels if the Available Cash Flow (as stated in the
financial reports delivered pursuant to said Section 7) was less than the
Target Amount for the two (2) immediately preceding consecutive fiscal
years. If the Request Notice is not delivered within forty-five (45) days
such right to request a determination and to terminate shall expire until
the same conditions occur in two (2) consecutive fiscal years, the first of
which years may
<PAGE>
include such immediately preceding year for which the Request Notice was
not delivered. Any fiscal year in which the operation of the Hotel was
materially and adversely affected by one or more Force Majeure Causes (it
being conclusively deemed to be a material effect if more than 20% of the
Hotel is not usable for more than thirty (30) days as a result of one or
more Force Majeure Causes) shall for the purpose of this Section 25 be
deemed a year in which Available Cash Flow equalled the Target Amount.
After receipt of a Request Notice from Owner, Owner shall notify the
selected Information Source which shall then proceed to determine the
Achieved Room Factor and the Target Room Factor for the Comparable Hotels,
all in accordance with the provisions hereof and shall report the results
thereof to Owner and Hyatt simultaneously. All costs and expenses incurred
in connection with such determination shall be deemed a Hotel expense and
paid from the operating accounts. Absent fraud or manifest error, the
decision of the Information Source as to such matters shall be binding and
conclusive on Hyatt and Owner.
If Owner shall send a Request Notice on a timely basis, it shall,
upon receipt of the report from the Information Source, have the right, if
the conditions set forth above in the first grammatical paragraph of
subsection 25.2 shall have been satisfied, to give written notice (a
"Termination Notice") to Hyatt of its irrevocable intent to terminate this
Agreement upon not less than 60 days notice. If such Termination Notice is
not received by Hyatt within sixty (60) days after receipt of the report
from the
<PAGE>
Information Source, Owner's right to terminate the Agreement pursuant to
this Section shall lapse until the same conditions occur in two subsequent
consecutive fiscal years, the first of which years may include the
immediately preceding fiscal year for which the Termination Notice was not
so received.
25.4 HYATT CURE LOANS.
Following receipt of Owner's Termination Notice, Hyatt shall have the
right to "cure" such deficiency and extinguish Owner's right of termination
for such two (2) consecutive fiscal years by advancing to the Owner in the
form of a loan (on or before the sixtieth (60th) day following receipt of
the Termination Notice) an amount (the "Hyatt Cure Loan") equal to the GOP
Deficiency for either of the two (2) fiscal years in question. An example
of the calculation of GOP Deficiency is set forth in Schedule B hereto. If
Hyatt has so "cured" such deficiency, the year which has been cured shall,
for all purposes under this Section 25, be deemed a year in which Achieved
Room Factor for the Hotel was equal to the Target Room Factor.
Hyatt Cure Loans shall accrue interest on an annual compounded basis
equal to Prime and such interest and principal shall be payable (first as
to interest and then as to principal) out of a percentage (as determined in
the next sentence) of Owner's share of Available Cash Flow, in any fiscal
year in which Available Cash Flow exceeds the Target Amount, and, if not
sooner paid shall, at the option of Hyatt, become immediately due and
payable as provided in Section 25.5. The percentage of Owner's share of
<PAGE>
Available Cash Flow which shall be utilized for payment of Hyatt Cure Loans
(with interest) shall equal the percentage of the aggregate GOP Deficiency
for all fiscal years in question "cured" by Hyatt.
Hyatt's right to extinguish Owner's termination rights hereunder by
advancement of Hyatt Cure Loans shall be exercisable on only two (2)
occasions. Thereafter, Hyatt shall be entitled to extinguish Owner's
termination rights hereunder only by contributing to Owner the amount of
the GOP Deficiency for either of the two (2) consecutive fiscal years in
question. Hyatt shall have no right to repayment of any such contribution,
nor shall any such contribution entitle Hyatt to any equity interest in
Owner. However, any year as to which such contribution is made shall, for
all purposes under this Section 25, be deemed a year in which the Achieved
Room Factor for the Hotel was equal to the Target Room Factor.
25.5 IMMEDIATE PAYMENT OF ALL HYATT CURE LOANS.
The Hyatt Cure Loans, together with accrued interest thereon, and all
other amounts due to Hyatt hereunder shall, at the option of Hyatt, become
immediately due and payable in full upon the following:
(a) either (i) within one hundred twenty (120) days if Hyatt
is the terminating party or (ii) within sixty (60) days if Owner is the
terminating party, after notice of any impending termination or
cancellation of this Agreement (as distinguished from the expiration of the
Term hereof in the
<PAGE>
ordinary course in which case all such payments shall be due
immediately) upon exercise by a party of a right of termination herein
provided or otherwise, regardless of cause or reason; provided, however,
that payment thereof not less than thirty (30) days prior to the effective
date of termination shall be a condition precedent to any termination of
this Agreement by Owner;
(b) a default by Owner under any mortgage resulting in the
acceleration of the mortgage debt or the commencement of any proceedings by
mortgagee to foreclose upon the Hotel;
(c) a default under any ground lease affecting the Hotel
which results in the ground lessor's commencing any proceedings to
terminate the ground lease and take possession of the Hotel;
(d) upon any sale, transfer, assignment or conveyance by the
Owner (or other person specified below) of (i) any of its interest in the
Management Agreement (except for collateral assignments resulting from
mortgage financing of the Hotel approved by Hyatt under Section 1.9 hereof
and subsequent refinancings thereof from time to time approved by Hyatt,
subject to the provisions of Section 25.5(f) below), or a collateral
assignment to MPA, (ii) all or any part of the Hotel (excluding the sale of
items of FFE made in the normal course of adding to or replacing FFE) in
any manner whatsoever, voluntary or involuntary, to a third party, except
to a mortgage lender as set forth above, or (iii) the interest
<PAGE>
of any individual principal of Owner or the controlling interest in
the stock of any corporate principal of Owner (including any partner or
other entity comprising Owner), exclusive of transfers between the current
partners of Owner of any equity interest in Owner or transfers by bequests,
devise or transfers under laws of intestacy, or transfers which do not, in
the aggregate, (A) exceed 25% of the equity interests in Owner or (B)
result in a change of control of Owner (unless such transfers are between
the current partners of Owner and their immediate descendants or trusts for
the benefit of such persons or are otherwise not deemed to constitute an
"assignment" by reason of the provisions of the second grammatical
paragraph of Section 14.2 hereof;
(e) condemnation of or casualty to the Hotel involving losses
in excess of $250,000 which results in insurance or condemnation proceeds
being used for purposes other than repair or reconstruction of the Hotel or
to pay Hotel operating expenses and establish reasonable operating
reserves, and only to the extent of such excess proceeds; or
(f) a refinancing of the Hotel in which loan proceeds are
used for any purpose other than the payment of existing debt relating to
the Hotel or making improvements to the Hotel or replacing or upgrading FFE
in the Hotel, or to pay Hotel operating expenses and establish reasonable
operating reserves, and only to the extent of such excess proceeds.
<PAGE>
25.6 EFFECTIVE DATE OF TERMINATION.
If Owner terminates in accordance with the provisions of this Section
25, the Term of the Agreement and Hyatt's management of the Hotel shall
terminate after the later to occur of the following events:
(a) the expiration of sixty (60) days following Owner's
delivery of a Termination Notice if Hyatt has not exercised its cure rights
as provided above; or
(b) thirty (30) days following the payment in full to Hyatt
of all Hyatt Cure Loans, with accrued interest, and any and all other
amounts due Hyatt under the terms of this Agreement.
SECTION 26. RESTRICTIVE COVENANT.
For purposes of this Section 27, the following terms shall have the
following meaning:
"Exclusive Area" shall mean the areas of Boston known as East
Boston, Revere, Winthrop and Chelsea.
"Restricted Area" shall mean the area indicated in the map
attached hereto as Exhibit E, more specifically described as follows: the
Atlantic Ocean (Dorchester Bay) northerly across William J. Day Boulevard
to the western side of Summer Street, continuing along Summer Street south
to the eastern side of Dorchester Avenue across the railroad yard to the
southerly side of Kneeland Street, north on to the western side of Charles
Street to the
<PAGE>
Charles Road Dam Bridge and east along the Charles River to the New
Charles River Dam, then northerly along the county line between Suffolk and
Middlesex counties to the Mystic River, east along the south side of the
Mystic River to the Boston Harbor. The Restricted Area shall include
Charleston.
"Convention Hotel" shall mean any hotel bearing the "Hyatt" or
"Hyatt Regency" tradenames and (i) containing at least 450 guest room keys
or (ii) containing at least 400 guest room keys and as to which the
projected FFE cost per room (as determined based on guidelines set forth in
Hyatt's internally prepared differentiation and cost allocation documents
dated as of May 1, 1987) (or any subsequent guidelines made available prior
to the Opening Date and which were used in the construction of the Hotel)
is at least equal to the lesser of (A) $40,000, or (B) $27,000 increased
(but not decreased) by a percentage equal to the amount, if any, by which
the CPI as of the date of determination exceeds the CPI as of the end of
the month preceding the date hereof.
A "Hyatt (or Hyatt Regency) Suites Hotel" shall mean any hotel
which contains both the names "Hyatt" and "Suites" in its tradename, the
guest rooms of which are predominately suites, and which Hyatt markets as
an "all-suites" hotel.
<PAGE>
A "Park Hyatt Hotel" shall mean a hotel which (i) bears the
name "Park Hyatt" (or such other tradename as shall denote a level of
finish and quality superior to that of a hotel bearing the name "Hyatt" or
"Hyatt Regency"), and (ii) as to which the projected FFE Cost per room (as
determined based on guidelines set forth in Hyatt's most recent internally
prepared differentiation and cost allocation documents) is at least equal
to the lesser of (A) $49,000 or (B) $33,000 increased (but not decreased)
by a percentage equal to the amount, if any, by which the CPI as of the
date of determination exceeds the CPI as of the end of the month preceding
the date hereof.
(a) Neither Hyatt nor its affiliates will own, operate or
manage or license or permit to be licensed any hotel containing the
tradename "Hyatt" within the Exclusive Area during the Term hereof.
(b) During the periods set forth below in this subparagraph
(b), neither Hyatt nor its affiliates will license, own, operate or manage
any hotel containing the tradename "Hyatt" within the "Restricted Area",
except as follows:
(i) for the period commencing on the Opening Date and
ending on the seventh (7th) year following the Opening Date (but in no
event later than ten (10) years from the date hereof), neither Hyatt nor
its affiliates will license, own, operate or manage any hotel containing
<PAGE>
the tradename "Hyatt", except for one Convention Hotel, one
Park Hyatt Hotel, and one Hyatt (or Hyatt Regency) Suites Hotel;
(ii) for the period commencing immediately after the
expiration of the period described in (i) and continuing for six (6)
additional years Hyatt or its affiliates may own, operate or manage any
hotel permitted under (i) above and any other hotel to be operated or
managed under the tradename "Hyatt" (the "Other Hotel"), provided that,
with respect to such Other Hotel, immediately prior to the execution of the
management agreement pursuant to which Hyatt will operate or manage the
Other Hotel, Hyatt shall reasonably demonstrate that its management of such
hotel will not have a material adverse impact on the financial performance
of the Hotel; provided, further, that the absence of such material adverse
impact shall be conclusively demonstrated by a market study prepared by any
firm which would qualify as an Information Source which concludes that, for
the third year of operation following the projected opening of the Other
Hotel, either (i) (A) the projected occupancy rate of the Hotel shall not
be more than 3.75 percentage points lower than the occupancies, and (B) the
projected average daily rates of the Hotel shall not be more than 3.75%
lower than the average daily rates, or (ii) the projected Rooms Revenue for
the Hotel shall not be more then 7% lower
<PAGE>
than the Rooms Revenue, in each case as projected for the Hotel
should such Other Hotel not be managed by Hyatt, but instead by managed by
another qualified operator.
(c) The aforesaid restrictive covenants shall not limit the
right of Hyatt or any affiliate to (A) engage in the ownership or
management of a hotel, doing business under a name other than Hyatt, in
connection with Hyatt's (or any affiliate's) acquisition of an existing
hotel chain (including for these purposes, acquisitions of a group of hotel
management contracts) doing business in either the Exclusive Area or the
Restricted Area, (B) engage in the ownership, franchising or management of
all suite hotels under the name of Hawthorn Suites, or (C) plan, negotiate
or commence development or construction activities or enter into a
management agreement with respect to any other hotel, or any other similar
activities which occur prior to the opening date of such hotel, it being
acknowledged that the restrictive covenants of this Section 26 shall apply
solely to hotels open to the public.
Furthermore, except to the extent and during the periods
specifically set forth in this Section 26, neither the execution and
delivery of this Agreement, nor any of the provisions hereof, shall be
deemed to limit, restrict, impair or otherwise affect the right of Hyatt,
or any affiliate of Hyatt, to own, manage or operate, or agree to own,
manage or operate, any other real or personal property (or interests
therein), of any kind or nature whatsoever, wherever located.
<PAGE>
SECTION 27. FUTURE HOTEL EXPANSION.
In the event Owner shall determine after the Opening Date to build
additional improvements to the Hotel to expand the number of guest rooms,
such additional improvements and guest rooms ("Expansion Space") shall be
deemed included within the definition of the Hotel hereunder. Any such
expansion shall be effected in accordance with plans, specifications,
budgets and financing approved by Hyatt (which approval shall not be
unreasonably withheld), and shall be consistent with the first-class hotel
standard. Hyatt and Owner shall cooperate to assure the minimal risk and
disruption to Hotel operations during the construction of the Expansion
Space and shall also agree as to the terms and conditions of payment to
Hyatt of additional technical assistance service fees in connection with
consulting services rendered by Hyatt with respect to the Expansion Space.
For the period commencing with the date the Expansion Space is open
to the public ("Expansion Opening Date"), and for a period of three (3)
fiscal years thereafter, Hyatt's Basic Fee shall be reduced to 3.5% of
Gross Receipts. Furthermore, from and after the Expansion Opening Date the
Target Amount (as defined in Section 4.2.1(b) hereof) shall be increased by
an amount equal to the cost of construction of the Expansion Space (as
hereinafter determined) multiplied by the actual annual interest rate on
the first mortgage loan secured by the Expansion Space (such interest for
the purpose of this calculation to be no less than 10.5% and no greater
than 12.5%). For purposes hereof, the cost of
<PAGE>
construction of the Expansion Space shall be defined as hard construction
costs, fees for architects and other similar professionals, cost of
original FF&E, construction period interest and third party financing fees,
legal and accounting fees, pre-opening expenses and initial working
capital. A developer's fee not exceeding 4% of hard construction costs
shall be included in such costs and any other amounts paid to Owner or an
affiliate of Owner shall be excluded from such costs.
Notwithstanding the aforesaid adjustment to the Target Amount, in no
event shall the Annual Management Fee for any fiscal year following the
Expansion Opening Date be less than the greater of (i) the Annual
Management Fee paid to Hyatt during the fiscal year immediately preceding
the date of commencement of construction of the Expansion Space, or (ii)
the Annual Management Fee paid to Hyatt during the fiscal year immediately
preceding the Expansion Opening Date.
Any year during which Expansion Space is under construction and any
year during which the Basic Fee is subject to reduction as provided in this
Section 27, shall for all purposes under Section 25 hereof, be deemed a
year in which the Achieved Room Factor for the Hotel was equal to the
Target Room Factor.
SECTION 28. LIMITATION OF OWNER'S LIABILITY.
Hyatt shall look only to Owner, the Hotel, as the same may from time
to time be encumbered, and the revenues therefrom, including any funds on
deposit at any given time in the operating
<PAGE>
accounts, for the payment and performance and observance of any amount,
obligation, indemnity or provision to be paid, performed or observed under
this Agreement, or any covenant or undertaking of Owner hereunder. No
partner of Owner, if Owner is or shall at any time be a partnership, nor
any of their respective heirs, administrators, executors, personal
representatives, successors and assigns, shall have any personal liability
or other personal obligation with respect to any payment, performance or
observance of any amount, obligation or liability to be paid, performed or
observed under this Agreement, and Hyatt agrees not to seek or to obtain a
money judgement against Owner, or against any partner of Owner if Owner is
a partnership, or against any of their respective heirs, administrators,
executors, personal representatives, successors or assigns.
IN WITNESS WHEREOF, Owner and Hyatt have executed this Agreement as
of the day and year first above set forth.
HYATT CORPORATION,
a Delaware corporation
By: [ executed signature ]
------------------------------
LOGAN HARBORSIDE ASSOCIATES II
LIMITED PARTNERSHIP
By: LHA-II, Inc., General Partner
By: /s/ ANTHONY PANGARO
-------------------------
Anthony Pangaro,
Its President
<PAGE>
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
AGREEMENT made this 27th day of June, 1991 by and between Logan
Harborside Associates II Limited Partnership, ("Owner") a Massachusetts
limited partnership having an address c/o Macomber Development Associates,
One Main Street, Cambridge, Massachusetts 02142 and Hyatt Corporation,
("Hyatt") a Delaware corporation having an address of Two Madison Plaza,
200 West Madison Street, Chicago, IL 60606.
WHEREAS, the parties entered into a Management Agreement (the
"Agreement") dated as of March 15, 1990 pertaining to a proposed hotel
located at the General Edward Lawrence Logan International Airport in East
Boston, Massachusetts; and
WHEREAS, the parties wish to amend the Agreement to reflect changes
in the basic fee and term of the Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Section 2(a) of the Agreement shall be amended in its entirety to
read as follows:
"The Original Term of this Agreement shall commence on the Opening
Date provided in Section 1.7(d) and shall terminate on a date which is
thirty years after the date of the initial construction draw by Owner of
construction funds from a construction lender (or draw from the
construction fund established pursuant to the bond indenture in the event
the financing is from the proceeds of revenue bonds), unless this Agreement
shall be sooner terminated as herein provided."
2. Section 2(b) of the Agreement shall be amended by deleting the first
clause of the first sentence ending with "December 30, 2033" prior to the
PROVISO and inserting in its place the following:
"Hyatt shall have the right (amounting to two (2) separate renewal
options) to extend such original term for two (2) successive periods
("renewal terms"), each period consisting of ten fiscal years commencing on
the date after the termination of the initial term of the Agreement or the
prior renewal term, as the case may be,"
3. Section 2(c) shall be amended by deleting in Line 10 the phrase
"December 31, 2033 and the denominator of which is 246." and inserting in
place thereof "the end of the second renewal term and the denominator of
which is 240."
4. Section 4.2.1(a) of the Agreement shall be amended in its entirety to
read as follows:
<PAGE>
"For each of the following fiscal years Hyatt shall receive a Basic
Fee equal to the respective percentage of Gross Receipts: for the first
two fiscal years and any period prior thereto (see Section 4.1 for
definition of first fiscal year) three percent (3%); for the third fiscal
year three and one-quarter percent (3.25%); for the fourth and fifth fiscal
years, inclusive, three and one-half percent (3.5%); for the sixth fiscal
year three and three-quarters percent (3.75%); and for the seventh fiscal
year and each fiscal year thereafter four percent (4%)."
5. Section 4.2.2(a) shall be amended as follows: Delete the reference
to "four percent (4%) (or such other percentage as may then be applicable)"
in line 2 and in its place insert "three percent (3%) (or such other
percentage as may then be applicable as provided in section 4.2.1(a)
hereof)."
Except as specifically amended hereby, the Agreement is hereby
ratified and confirmed.
IN WITNESS WHEREOF, Owner and Hyatt have executed this agreement as
of the day and year first above set forth.
HYATT CORPORATION
BY: [ executed signature ]
------------------------------
LOGAN HARBORSIDE ASSOCIATES II
LIMITED PARTNERSHIP
BY: LHA-II, INC., General Partner
BY: /s/ ANTHONY PANGARO
-----------------------
Anthony Pangaro,
its President
The undersigned, Shawmut Bank, N.A., as Trustee ("Shawmut") and
Massachusetts Port Authority ("MassPort"), as parties respectively to a
certain Subordination, Non-disturbance and Attornment Agreement between
Owner, Hyatt, Shawmut and MassPort dated as of December 15, 1990 and a
Subordination, Non-disturbance and Attornment Agreement between MassPort
and Hyatt dated as of December 15, 1990 (collectively the "Agreements")
hereby consent to the within amendment and agree that on and after the
effective date of this amendment, each respective reference to the
<PAGE>
"Management Agreement" in each of the Agreements shall mean and be a
reference to the Management Agreement, as amended by this First Amendment
to Management Agreement. Each of the Agreements is and shall continue to
be in full force and effect and is hereby in all respects ratified and
confirmed.
SHAWMUT BANK, N.A., as Trustee
By: /S/ LEE MAC DONALD
----------------------------
Assistant Vice President
Massachusetts Port Authority
BY: /S/ GEORGE A. O'BRIEN
-----------------------------
Its Secretary-Treasurer
EXHIBIT 10.14
- -------------
LEASEHOLD MORTGAGE AND SECURITY AGREEMENT
between
LOGAN HARBORSIDE ASSOCIATES II LIMITED PARTNERSHIP,
as Mortgagor
and
SHAWMUT BANK, N.A., AS TRUSTEE,
as Mortgagee
Upon recording, please return to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: Gregory A. Sandomirsky, Esq.
<PAGE>
INDEX
PARAGRAPH PAGE
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 7
2. Warranty of Title . . . . . . . . . . . . . . . . . . . . . 13
3. Payment of Sums Secured . . . . . . . . . . . . . . . . . . 13
4. Performance of Agreements . . . . . . . . . . . . . . . . . 13
5. Construction of Project; Construction Inspector;
Phase C Garage. . . . . . . . . . . . . . . . . . . . . . . 14
6. Waste, Maintenance, Compliance, and Inspection. . . . . . . 15
7. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. Taxes and Other Charges . . . . . . . . . . . . . . . . . . 19
9. Escrow Funds. . . . . . . . . . . . . . . . . . . . . . . . 20
10. Security Agreement; Additional Security . . . . . . . . . . 21
11. Ground Lease; Subleases . . . . . . . . . . . . . . . . . . 21
12. Right to Remedy Defects . . . . . . . . . . . . . . . . . . 27
13. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . 28
14. Events of Default . . . . . . . . . . . . . . . . . . . . . 30
15. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 31
16. Assignment of Subleases and Rents after default . . . . . . 32
17. Counsel Fees. . . . . . . . . . . . . . . . . . . . . . . . 32
18. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
19. Cumulative Rights and Remedies. . . . . . . . . . . . . . . 33
20. Waiver of Defenses and Certain Notices. . . . . . . . . . . 33
21. Satisfaction of This Mortgage . . . . . . . . . . . . . . . 33
22. Books, Records and Accounts . . . . . . . . . . . . . . . . 33
23. Management Agreement. . . . . . . . . . . . . . . . . . . . 34
24. Transfers of the Project, etc . . . . . . . . . . . . . . . 34
25. Estoppel Affidavits . . . . . . . . . . . . . . . . . . . . 35
26. Invalid Provisions To Affect No Others. . . . . . . . . . . 35
27. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . 35
28. Further Assurances. . . . . . . . . . . . . . . . . . . . . 35
29. Notice to Mechanics and Materialmen . . . . . . . . . . . . 35
30. Recorded Instruments. . . . . . . . . . . . . . . . . . . . 36
31. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
32. Successors and Assigns. . . . . . . . . . . . . . . . . . . 36
33. Good Standing . . . . . . . . . . . . . . . . . . . . . . . 36
34. Right of Release. . . . . . . . . . . . . . . . . . . . . . 37
35. Interpretation. . . . . . . . . . . . . . . . . . . . . . . 37
36. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . 37
37. Parity Indebtedness . . . . . . . . . . . . . . . . . . . . 37
38. Subordinate Indebtedness. . . . . . . . . . . . . . . . . . 40
39. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 40
40. Hazardous Substances. . . . . . . . . . . . . . . . . . . . 40
41. No Personal Liability . . . . . . . . . . . . . . . . . . . 43
42. Joinder by Landlord . . . . . . . . . . . . . . . . . . . . 43
(i)
<PAGE>
MORTGAGE AND SECURITY AGREEMENT
THIS LEASEHOLD MORTGAGE AND SECURITY AGREEMENT (this "Mortgage") is
dated as of December 15, 1990, by LOGAN HARBORSIDE ASSOCIATES II LIMITED
PARTNERSHIP, a Massachusetts limited partnership having an address c/o
Macomber Development Associates, One Main Street, Cambridge, Massachusetts
02142 (the "Mortgagor"), in favor of SHAWMUT BANK, N.A., a national banking
association, with its principal office in Boston, Massachusetts, not
individually but in its capacity as Trustee (the "Mortgagee") under that
certain Loan and Trust Agreement (the "Loan Agreement") dated as of
December 15, 1990, among the Trustee, the Massachusetts Port Authority (the
"Authority"), and Mortgagor, in connection with the issuance of the
$40,000,000 Massachusetts Port Authority Special Project Revenue Bonds,
Series 1990 (Harborside Hyatt Conference Center and Hotel Project) (the
"Bonds").
Reference is made to the following facts:
A. The Authority, as landlord, and Massachusetts Technology Center
Associates (the "Developer"), as tenant, entered into a certain lease Dates
as of April 30, 1982, as amended (such lease, as amended, is hereinafter
referred to as the "Initial Lease"), with respect to the development of
approximately 19.126 acres of land located at the southwest corner of Logan
International Airport (the "Airport") in East boston, Massachusetts. A
Notice of Lease with respect to the Initial Lease is recorded with the
Suffolk County Registry of Deeds in Book 9995, Page 243, and filed with the
Suffolk County Registry District of the Land Court as Document No. 363450
and noted on Certificate of Title No. 297.
B. The Initial Lease was amended, restated and superseded in its
entirety by a certain Ground Lease dated as of May 1, 1983, between the
Authority and the Developer (such ground lease is hereinafter referred to
as the "Master Lease"). A Notice of Lease with respect to the Master Lease
is recorded with the Suffolk County Registry of Deeds in Book 10363, Page
276, and filed with the SUFFOLK COUNTY REGISTRY District of the Land Court
as Document No. 371701 and noted on Certificate of Title No. 207. The
Master Lease contemplated that the Authority would enter into separate
leases of portions of the entire Leased Premises demised (the "Original
Premises") under the Master Lease corresponding to the separate phases of
the Development (as such phases and Development are defined in the Master
Lease).
C. As contemplated by and pursuant to the Master Lease, the
Authority and the Developer entered into a separate lease dated as of May
2, 1983, for the so-called "Phase A" of the Development (the "Phase A
Lease"); a notice of the Phase A Lease
<PAGE>
is recorded with the Suffolk County Registry of Deeds in Book 10363, Page
284, and filed with the Suffolk County Registry District of the Land Court
as Document No. 370702 and noted on Certificate of Title No. 297.
D. By virtue of an Assignment of Lease dated April 20, 1989, the
developer assigned (with the Authority's consent) to Logan Harborside
Associates I Limited Partnership ("Logan Harborside I") all of the
Developer's right, title and interest under the Master Lease with respect
to all portions of the Original Premises, except for the portion thereof
previously covered by and subject to the separate Phase A Lease. A notice
of such assignment of lease was recorded with the Suffolk County Registry
of Deeds in Book 15531, Page 87, and filed with the Suffolk County Registry
District of the Land Court as Document No, 451256 and noted on Certificate
of Title No. 297.
E. The Master Lease was amended by and Amendment to Lease dated as
of September 15, 1990, between the authority and Logan Harborside I; on or
about December 26 or 27, 1990, a notice of such amendment is being recorded
with the Suffolk County Registry of Deeds and is being filed with the
Suffolk County Registry District of the Land Court for notation on
Certificate of Title No. 297. The Master Lease, as amended by such
amendment, is hereinafter referred to as the "Original Lease."
F. As contemplated by and pursuant to the Original Lease, the
Authority, as landlord, and Mortgagor, as tenant, entered into a certain
Ground Lease for Phase C of the Bird Island Flats Development dated as of
September 15, 1990, as affected by a Landlord's Consent and Estoppel
Certificate dated as of December 15, 1990 (as so affected, the "Phase C
Lease" or the "Ground Lease"), with respect to Premises (the "Leased
Premises") containing approximately six acres of land at the Airport,
together with the appurtenant right to use certain Off-Premises sites (the
"Off-Premises Parking Sites") for parking purposes in accordance with
certain conditions set forth in the Ground Leases. The Leased Premises and
the Off-Premises Parking Sites are more particularly described in the Phase
C Lease, and on or about December 26 or 27, 1990, a Notice of Lease with
respect thereto is being recorded with the Suffolk County Registry of Deeds
and is being filed with the Suffolk County Registry District of the Land
Court for notation on Certificate of Title No. 297; the Leased Premises and
the Off-Premises Parking Sites constitute portions of the Original
Premises. The Leased Premises and the Off-Premises Parking Sites are more
particularly described in the attached Exhibit A.
G. By virtue of an Assignment of Lease dated as of September 15,
1990, Logan Harborside I released and assigned to the Mortgagor all of
Logan Harborside I's right, title and interest under the Original Lease
with respect to the Leased
<PAGE>
Premises, consented to the use of portions of the Original Premises as Off-
Premises Parking Sites and subordinated its rights as tenant under the
Original Lease to the Mortgagor's rights in and to the Off-Premises Parking
Sites; on or about December 26 or 27, 1990, a notice of such assignment is
being recorded with the Suffolk County Registry of Deeds and is being filed
with the Suffolk County Registry District of the land Court for notation on
Certificate of Title No. 297.
H. The Phase C Lease amends and restates the Original Lease with
respect to the Leased Premises and the Off-Premises Parking Sites.
I. The Ground Lease provides that with respect to the Leased
Premises the Mortgagor and Mortgagee will be entitled to rely on the terms
of the Ground Lease notwithstanding any contrary or additional provisions
of the Original Lease; in that regard the Ground Lease shall be deemed to
be a separate lease with respect to the Leased Premises.
J. Pursuant to the Ground Lease, Mortgagor intends to build and
operate on the Leased Premises a 270-room conference center and hotel and
certain related facilities, including parking facilities, and to build and
operate from time to time at the Off-Premised Parking Site(s) certain
surface parking facilities (the "Project").
K. Pursuant to the Loan Agreement, the Authority, in its capacity
as issuer of the Bonds, is lending to Mortgagor the proceeds of the sale of
the Bonds (the "Loan") to finance the construction, equipping and
furnishing of the Project.
NOW THEREFORE, in consideration of the Loan and to secure the payment
of the same, all other sums provided for in the Loan Agreement or in this
Mortgage to be paid to Mortgagee, all other agreements and obligations of
Mortgagor contained in the Loan Agreement and this Mortgage, Mortgagor
hereby grants to Mortgagee, with MORTGAGE COVENANTS, all of Mortgagor's
right, title and interest in and to the leasehold estate described in
Exhibit A Attached hereto and made a part hereof (the "Leasehold Estate"),
together with all of Mortgagor's right, title and interest in and to the
following:
(i) any and all Improvements (as hereinafter defined);
(ii) the Off-Premises Parking Site(s);
(iii) all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to any land lying in the bed of any street, road
or avenue, open or proposed, in front of or adjoining the Leasehold Estate
and all easements
<PAGE>
and rights of way, public or private, now or hereinafter used in
connection with the Leasehold Estate;
(iv) all right, title and interest of Mortgagor, now owned or
hereafter acquire, in and to any and all sidewalks and alleys, and all
strips and gores of land, adjacent to or used in connection with the
Leasehold Estate;
(v) subject to the provisions of Paragraphs 7 and 13 of this
Mortgage, all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to any and all awards, damages, payments and
other compensation and any and all claims therefor and rights thereto which
may result from taking or injury by virtue of the exercise of the power of
eminent domain of or to, or any damage, injury or destruction in any manner
caused to the Premises (as hereinafter defined), or any part thereof, or
from any change of grade or location of any street abutting thereon, all of
which awards, damages, payments, compensation, claims and rights are hereby
assigned, transferred and set over to Mortgagee to the fullest extent that
Mortgagor may under the law so do; expressly excluded from the foregoing
awards, damages, payments, compensation, claims and rights assigned,
transferred and set over as aforesaid are the Excluded Damages (as
hereinafter defined). Mortgagee is hereby irrevocably appointed attorney-
in-fact coupled with an interest for Mortgagor to settle for, collect and
receive any such awards, damages, payments and compensation from the
authorities making the same, to appear in and prosecute any proceeding
therefor, and to give receipts and acquaintances therefor;
(vi) any and all fixtures, and all machinery, equipment,
chattels, goods and other articles of property, whether real estate or not,
now or hereafter attached to or situated in or upon, and used or useful in
the operation of, the Leasehold Estate or the Improvements thereon, or of
any business now or hereafter operated by the owner or any occupant of the
Leasehold Estate and/or the Improvements thereon, or any part of either or
both, or any part thereof, (except any personal property, furnishings or
furniture owned by any subtenant unrelated to Mortgagor occupying the
Leasehold Estate and/or the Improvements thereon, or any part of either or
both and used by such subtenant in the conduct of its business in the space
occupies by it, to the extent that the same does not become the property of
Mortgagor, as sublandlord, under the sublease with such subtenant or under
applicable law and any personal property, furnishings or furniture owned by
the Manager [as hereinafter defined]); expressly excluded from the
fixtures, machinery, equipment, and other property and property
<PAGE>
interests described in the foregoing clause (vi) is the Leased
Equipment;
(vii) all gas and electric fixtures, radiators, heaters,
engines and machinery, boilers, elevators and motors, bathtubs, sinks,
water closets, basins, pipes, faucets, air-conditioning equipment, plumbing
fixtures, heating fixtures, mirrors, mantels, refrigerating plant,
carpeting, furniture, ranges, refrigerators, ovens, dishwashers, laundry
equipment, cooking apparatus and appurtenances, all furniture, furnishings,
fixtures and equipment and all uniforms, food, utensils, tablesettings and
linen now or hereafter used in connection with the Project, and all
building material and equipment now or hereafter delivered to the Leasehold
Estate and/or the Improvements thereon, or any part of either or both and
intended to be installed therein; and all renewals or replacements thereof,
all additions thereto or articles in substitution thereof and all of the
estate, right, title and interest of Mortgagor in and to all property of
any nature whatsoever, now or hereafter situate on or in the Leasehold
Estate and/or the Improvements thereon, or any part of either or both or
intended to be used in connection with the operation thereof shall be
deemed to be fixtures and a part of the realty as between the parties
hereto and all persons claiming by, through or under them and shall be
deemed to be a portion of the security for the indebtedness herein
mentioned and secured by this Mortgage; expressly excluded from the
fixtures, machinery, equipment, and other property and property interests
described in the foregoing clause (vii) is the Leased Equipment;
(viii) all right, title and interest of Mortgagor in and to
all unearned premiums accrued, accruing or to accrue under any and all
insurance policies now or hereafter obtained by Mortgagor with respect to
the Premises (as hereinafter defined);
(ix) all rights, dividends and /or claims of any kind, nature
or description whatsoever (including, without limitation, damage, secured,
unsecured, lien, priority, or administration claims); together with the
right to take any action or file any papers or process in any court of
competent jurisdiction, which may in the opinion of Mortgagee be necessary
to preserve, protect, or enforce such rights or claims; including without
limitation the filing of any proof of claim in any insolvency proceeding
under any state, federal or other laws; including any rights, claims or
awards accruing to, or to be paid to, Mortgagor in its capacity as
sublandlord under any sublease affecting all or any portion of the
Leasehold Estate and/or the Improvements thereon. Mortgagee's lien and
interest in the foregoing.
<PAGE>
rights and claims is hereby deemed to be presently vested and
perfected as of the date hereof;
(x) all subleases, already in existence and to be created in
the future with respect to the Premises together with all income, rents,
revenues, receipts, royalties, issues, profits, proceeds and other benefits
from any and all of the Premises of any kind whatsoever (collectively the
"Rents and Profits");
(xi) all and singular the tenements, hereditaments and
appurtenances belonging to the Leasehold Estate or any part thereof, or the
Improvements thereon, hereby mortgaged or intended so to be, or in anywise
appertaining thereto (including but not limited to the Rents and Profits),
all streets, alleys, passages, ways, watercourses, licenses, easements, all
other rights, liberties and privileges of whatsoever kind or character, the
reversions and remainders, and all the estate, right, title, interest,
property, possession, claim and demand whatsoever, as well at law or in
equity, of Mortgagor, in and to all the foregoing or any or every part
thereof;
(xii) all goods, accounts, contract rights, and other rights to
the performance of obligations;
(xiii) all rights to the payment of money, including tax refund
claims, insurance proceeds and tort claims and all rights to proceeds of
any termination, including any partial termination, of employee benefit
plans;
(xiv) all chattel paper, documents and instruments; and
(xv) all general intangibles, patents, copyrights, trademarks,
trade names, together with all right, title and interest of the Mortgagor
in and to all patents and trademarks which the Mortgagor may hereinafter
acquire, the right to file and prosecute applications for patents and
trademarks and similar intellectual property anywhere in the world and the
good will of the business connected with the use of and symbolized by such
intellectual property, together with all assets which uniquely reflect the
good will of the business of the Mortgagor, including but not limited to,
the Mortgagor's trade names, customer lists, trade secrets, corporate and
other business records, license rights, advertising materials, operating
manuals, methods, processes, know-how, sales literature, drawings,
specifications, descriptions, inventions, name plates, catalogues,
copyrights, dealer contracts, supplier contracts, distribution agreements,
confidential information, consulting agreements, engineering contracts and
engineering drawings.
<PAGE>
The Leasehold Estate, Improvements, fixtures, machinery, equipment,
tenements, and other property interests described and enumerated in clauses
(i) through (xv) above, are hereinafter collectively referred to as the
"Premises".
Mortgagor covenants, warrants and agrees with Mortgagee as follows:
1. DEFINITIONS. As used in this Mortgage, unless the context
otherwise requires, the following terms shall have the following meanings:
"Architect" shall mean RTKL Associates, Inc. or such other licensed
architect reasonably designated by Mortgagor.
"Architect's Consent to Assignment" shall mean the Agreement With
Respect to and Assignment of Architect's Contract, to be entered into
between Mortgagor and the Architect for the benefit of Mortgagee, as
additional security for the Loan.
"Architect's Contract" shall mean the contract between Mortgagor and
the Architect dated as of March 29, 1990, with respect to design and
construction supervision services for the Project, as the same may from
time to time be amended, supplemented or otherwise modified.
"Assignment of Contracts" shall mean the Collateral Assignment of
Contracts, Licenses, Permits, Agreements, Warranties and Approvals, of even
date herewith, made by Mortgagor to Mortgagee, as additional security for
the Loan.
"Assignment of Management Agreement" shall mean the Collateral
Assignment of Management Agreement, of even date herewith, made by
Mortgagor to Mortgagee, as additional security for the Loan.
"Assignment of Rents" shall mean the Collateral Assignment of Rents
and Leases, of even date herewith, made by Mortgagor to Mortgagee, as
additional security for the Loan.
"Authority" shall mean the Massachusetts Port Authority.
"Basic Documents" shall mean, collectively, the Loan Agreement, the
Ground Lease, the Disbursement Agreement, this Mortgage and the Collateral
Assignments.
"Chapter 21E" shall mean the Massachusetts Hazardous Material Release
Prevention and Response Act of 1983, Massachusetts General Laws, Chapter
21E, as the same may from time-to-time be amended.
<PAGE>
"Closing" shall mean the closing at which this Mortgage and the other
Basic Documents are executed and the Bonds are issued and delivered by the
Authority, as issuer, and the proceeds of the sale of the Bonds are
deposited with Mortgagee in accordance with the terms of the Loan
Agreement.
"Collateral Assignments" shall mean, collectively, the Architect's
Consent to Assignment, the Assignment of Contracts, the Assignment of
Management Agreement, the Assignment of Rents, and the Contractor's Consent
to Assignment.
"Construction Inspection Agreement" shall mean the agreement to be
entered into between Mortgagor and the Construction Inspector with respect
to inspection of the construction of the Project on behalf of Mortgagee and
the performance of certain other work for Mortgagee in connection with the
construction of the Project.
"Construction Inspector" shall mean Whitney, Atwood and Norcross
Associates, Inc., or such other architect or engineer selected by Mortgagor
and reasonably acceptable to Mortgagee.
"Construction Contract" shall mean the guaranteed maximum price
contract to be entered into between Mortgagor and the General Contractor
with respect to the construction of the Project, as the same may form time
to time be amended, supplemented or otherwise modified.
"Construction Guaranty" shall mean the construction guaranty, if any,
provided for the benefit of Trustee.
"Disbursement Agreement" shall mean the Disbursement Agreement dated
as of December 15, 1990, between Mortgagor and the Trustee, as the same may
from time-to-time be amended, supplemented or otherwise modified.
"Event of Default" shall mean any event set forth in Paragraph 14
hereof.
"Excluded Damages" shall mean: (i) all right, title and interest of
Landlord pursuant to the Ground Lease in and to all awards, damages,
payments and other compensation and any claims therefor and rights thereto
on account of eminent domain, taking or casualty, except to the extent that
the Ground Lease and Paragraphs 7 and 13 hereof expressly provide that the
Mortgagee is entitled to certain priority rights to such awards, damages,
payments or other compensation in connection with a termination of the
Ground Lease; (ii) all right, title and interest of Mortgagor pursuant to
Section 10.4 of the Ground lease in and to any awards, damages, payments
and other compensation and claims therefor and rights thereto on account of
delays in the performance schedule due to the so-called Third Harbor
Tunnel,
<PAGE>
but only to the extent that any such delays under this clause (ii) do not
delay completion of construction of the Project beyond the Completion Date
established under the Disbursement Agreement or increase the cost of
construction of the Project above the Project Budget (as defined in the
Disbursement Agreement); and (iii) all right, title and interest of
Mortgagor in and to any awards, damages, payments and other compensation
and claims therefor, and rights thereto on account of any taking of
temporary or permanent easements, in connection with the so-called Third
Harbor Tunnel affecting any portion of the Leasehold Estate, but only to
the extent that any such easements do not materially affect the Project, do
not delay completion of construction of the Project beyond the Completion
Date established under the Disbursement Agreement, or increase the cost of
construction of the Project above the Project Budget (as defined in the
Disbursement Agreement; to the extent any such easements do materially
affect the Project, delay completion of construction or increase costs of
construction as aforesaid, Mortgagee shall have a security interest in, and
mortgage lien on, any awards, damages, payments and other compensation
therefor.
"General Contractor" shall mean George B. H. Macomber Company,
Incorporated or such other licensed contractor reasonably designated by
Mortgagor.
"Governmental Approvals" shall mean all approvals, certifications,
consents, licenses, permits, authorizations and other official action
required to be issues or taken by any Governmental Authorities for or with
respect to the construction and/or operation of the Project or the matter
with respect to which such term is used, including, without limitation, the
following:
(i) all applicable building, planning, subdivision.
environmental protection,and zoning by-laws, rules, regulations, permits
and approvals; and
(ii) all applicable federal, Massachusetts and local flood
hazard and wetlands laws, rules, regulations and approvals, including,
without limitation, the terms, and provisions of all so-called Orders of
Condition applicable to the construction and/or operation of the Project
and identified in the mortgagee's title insurance policy delivered to
Mortgagee as part of the Closing.
"Governmental Authorities" shall mean all federal, state, county and
municipal governments and all governmental and quasi-governmental agencies,
authorities, boards, commissions, bureaus, departments, authorities,
officials and officers thereof, now or hereafter having jurisdiction over
the
<PAGE>
construction and/or operation of the Project or the matter with respect to
which such term is used.
"Ground Lease" shall have the meaning specified in Recital Paragraph
B.
"Impositions" shall mean the taxes and other charges described in
Paragraph 8 hereof.
"Improvements" shall mean all improvements now or hereafter made to
or erected on the Premises as part of the Project or otherwise.
"Involuntary Rate" shall mean the rate of interest equal to the
lesser of (i) the per annum rate of interest from time to time announced by
Shawmut Bank, N.A. at its principal office in Boston, Massachusetts, as its
Corporate Base Rate or (ii) the highest interest rate per annum permitted
under the laws of the Commonwealth of Massachusetts.
"Landlord" shall mean the Authority in its capacity as landlord under
the Ground Lease and any successor in interest to the Authority as such
landlord.
"Laws and Other Governmental Requirements" shall mean all laws,
statutes, ordinances, orders, rules, regulations and requirements now in
effect or at any time hereafter enacted or issued by any Governmental
Authorities which are applicable to Mortgagor, the Project or the matter
with respect to which such terms are used.
"Leased Equipment" shall mean all equipment, furnishings, and other
personal property (such as, by way of example and not limitation,
computers, telephones, vans, flatware, and televisions) leased by Mortgagor
and/or the Manager in connection with the operation of the Project.
Mortgagor hereby agrees that any lease or similar agreement ("Equipment
Lease") with respect to Leased Equipment which is substantial and material
for the operation of the Project shall provide as follows: (i) the
Mortgagor's interest under the Equipment Lease shall be assignable to
Mortgagee as additional security for the Loan; and (ii) Mortgagee shall be
entitled to notice from the equipment lessor of any default by Mortgagor
under the Equipment Lease and shall be entitled to a reasonable period
within which to cure such default.
"Leasehold Estate" shall have the meaning specified in the recitals
of this Mortgage.
"Loan" shall mean the loan of the proceeds of the sale of the Bonds
made by the Authority to Mortgagor pursuant to the Loan Agreement.
<PAGE>
"Loan Agreement" shall have the meaning specified in the recitals of
this Mortgage, as the same may from time to time be amended, supplemented
or otherwise modified.
"Macomber Control" shall mean any rights and responsibilities
necessary for Macomber Development Associates, L.P., a delaware limited
partnership, and/or any one or more of its principals (who are George
Macomber, Byron Gilchrest and Anthony Pangaro) to maintain the controlling,
decision making responsibility for Mortgagor in the conduct of its
business, along with ownership (which may be direct or indirect through one
or more intermediaries) of at least 25% of the partnership interests in
Mortgagor.
"Manager" shall mean Hyatt Corporation or such other nationally
recognized operator of hotel and/or conference center facilities selected
by Mortgagor.
"Management Agreement" means the agreement between Mortgagor and
Manager dated March 15, 1990, on the cover sheet and dated as of
February 1, 1990, in the text as supplemented by a letter agreement with
respect to the FFE Budget process dated March 15, 1990, with respect to the
management and operation of the Project, as the same may from time to time
be amended, supplemented, otherwise modified or replaced.
"Permitted Encumbrances" shall mean those matters listed on the
mortgagee's title insurance policy delivered to Mortgagee at the Closing,
Subordinate Mortgages, Parity Mortgages, temporary surface or subsurface
easements granted to or taken by third parties that do not materially
affect the Project, utility easements and the like that do not unreasonably
interfere with the Project, and any other title exceptions or objections,
if any, as Mortgagee may approve in writing.
"Parity Indebtedness" and "Parity Mortgage" shall have the meanings
ascribed to them in Paragraph 37 of this Mortgage.
"Permitted AEW Transfer" shall mean any transfer of any interests in
the Mortgagor or any transfer of the Project or any transfer of the
Leasehold Estate to certain pension trusts represented by Aldrich, Eastman
and Waltch, Inc. as more particularly described in Section 7.1 of the
Ground Lease.
"Permitted Transfer" shall mean any transfer(s) of ownership
interests in Mortgagor or in any partnership or corporation holding any
legal or beneficial interest (whether directly or through one or more
intermediaries) in Mortgagor: (i) between or among George Macomber, Byron
Gilchrest and/or Anthony Pangaro; (ii) to any individual or individuals who
are "Members of the Family" of George Macomber, Byron Gilchrest or Anthony
Pangaro (for purposes of this provision, "Members of the Family" shall
<PAGE>
brothers, sisters, brothers-in-law, sisters-in-law, children-in-law and
grandchildren-in-law; any legally adopted child of an individual shall be
treated as a child of such individual by blood) or any trust for the
benefit of any such "Members of the Family"; and (iii) any transfer(s) to
other individuals or entities so long as following such other transfer(s)
under this clause (iii) Macomber Control of Mortgagor is retained.
"Plans" shall mean the Guaranteed Maximum Price Documents (as
described in the Ground Lease) prepared for construction of the Project,
and the plans and specifications that identify the fixtures, furnishings
and equipment for the Project, as the same may be amended or supplemented
in accordance with the Disbursement Agreement.
"Premises" shall have the meaning specified in the recitals of this
Mortgage.
"Project" shall have the meaning specified in Recital Paragraph D.
"Project Completion Date" shall mean the date by which the last of
the following shall have occurred: (i) the Architect shall have issued a
certificate of substantial completion for the Project; (ii) the
Construction Inspector shall have certified in writing that construction of
the Project has been substantially completed in accordance in all material
respects with the Plans; (iii) a certificate of occupancy (temporary or
permanent) covering the Project shall have been issued by the appropriate
Governmental Authorities; (iv) all other permits and licenses necessary for
the opening and operating of the Project as a conference center and hotel
shall have been issued by the appropriate Governmental Authorities; (v) all
of the conditions precedent to the "Opening Date," as defined in Section
1.8(b) of the Management Agreement shall have been satisfied; and (vi)
Mortgagor shall have delivered to Mortgagee the "Completion Certificate"
required under Section 602 of the Loan Agreement.
"Project Fund" shall have the meaning specified in the Loan
Agreement.
"Rents and Profits" shall mean all income, rents, revenues, receipts,
royalties, issues, profits, proceeds and other benefits from any and all of
the Premises of any kind whatsoever.
"Site" shall mean the parcel commonly known as Phase C on Harborside
Drive, East Boston, Massachusetts, more particularly described in Exhibit
A annexed hereto.
"Sublease" shall mean any sublease, license, concession or similar
occupancy agreement entered into between Mortgagor and any third party with
respect to all or any part of the Premises.
<PAGE>
"Subordinate Indebtedness" and "Subordinate Mortgage" shall have the
meanings ascribed to them in Paragraph 38 of this Mortgage.
"Subordination Agreement" shall mean the Subordination, Non-
Disturbance and Attornment Agreement of even date herewith between
Mortgagee and the Manager.
"Title Insurer" shall mean Ticor Title Insurance Company or such
other nationally recognized title insurance company reasonably satisfactory
to Mortgagee.
2. WARRANTY OF TITLE. Mortgagor warrants that it is lawfully seized
of the Premises, that it has good right and is lawfully authorized to sell,
convey or encumber the same and that the Premises are free and clear of all
liens and encumbrances except for the Permitted Encumbrances. Mortgagor
further covenants to warrant and forever defend all and singular the
Premises unto Mortgagee forever from and against Mortgagor and all persons
whomsoever lawfully claiming the same or any part thereof.
3. PAYMENT OF SUMS SECURED. Mortgagor shall pay to Mortgagee all
payments required by the Loan Agreement, reasonable charges fixed by
Mortgagee to satisfy and discharge this Mortgage of record, and all other
sums hereby secured.
4. PERFORMANCE OF AGREEMENTS. Mortgagor shall comply in all
material respects with all of Mortgagor's obligations under the Basic
Documents. Mortgagor is not in violation in any material respect of any
term or provision of any mortgage, lease, agreement or other instrument
which is material to its business or assets, or of any judgement, decree or
Laws and Other Governmental Requirements by which it is bound or to which
it or any of its assets is subject. The execution, delivery and
performance of and compliance by Mortgagor with the Basic Documents to
which it is a party will not violate or constitute a default of any term or
provision of any mortgage, lease, agreement or other instrument, or of any
judgement, decree, Governmental Approvals or Laws and Other Governmental
Requirements by which Mortgagor is bound or to which any of its assets is
subject, except that certain Governmental Approvals and similar approvals
or permits necessary for certain aspects of the construction and operation
of the Project have not yet been obtained as of the date hereof; Mortgagor
covenants that as of the date hereof, all permits for the construction and
operation of the Project that customarily are obtained or have been applied
for as of the closing of acquisition and construction financing have been
obtained or applied for; Mortgagor shall obtain such Governmental Approvals
and similar approvals or permits in due course and timely fashion and
hereby covenants to diligently pursue and obtain the same. Mortgagor is
unaware as of the date hereof of any reason why all
<PAGE>
Governmental Approvals and similar approvals necessary for the construction
and operation of the Project will not be obtained in timely fashion and in
due course.
5. CONSTRUCTION OF PROJECT; CONSTRUCTION INSPECTOR; PHASE C GARAGE.
From and after the Put Date (as defined in the Loan Agreement), Mortgagor
shall diligently and continuously construct the Project in all material
respects in accordance with the requirements of (a) the Plans, (b)
Governmental Authorities, (c) the Management Agreement, and (d) the Ground
Lease.
All materials used in the Project shall be new, of first-class
quality, and the workmanship shall be first-class in every way. Mortgagor
shall not permit the use in connection with construction of the Project of
any materials, fixtures or equipment (except for Leased Equipment) intended
to become part of the Project which are purchased upon conditional bill of
sale or to which Mortgagor does not immediately have absolute and
unencumbered title, and will cause to be paid punctually all sums becoming
due for labor, materials, fixtures, or equipment used or purchased in
connection with such construction.
At the request of Mortgagee, Mortgagor shall cause the Architect to
provide Mortgagee with reports relative to the status of construction of
the Project. Further, at any time during the construction of the Project,
Mortgagor shall, if requested by Mortgagee, comply with such reasonable
requirements as the Construction Inspector may suggest with respect to
construction of the Project. The fees, costs and expenses (including,
without limitation, travel expenses) of the Construction Inspector shall be
borne by Mortgagor, and such fees, costs and expenses shall be paid by
Mortgagor forthwith upon billing therefor. Mortgagee shall have no
liability to Mortgagor on account of (i) the services performed by the
Construction Inspector, (ii) any neglect or failure on the part of the
Construction Inspector properly to perform its services, or (iii) any
approval or disapproval by the Construction Inspector of work on the
Project.
Pursuant to Section 1.6.6 of the Ground Lease, Landlord has certain
rights to construct, at its expense, a garage (the "Phase C Garage" on the
portion of the Leasehold Estate identified in the Ground Lease as the
"Premises Parking Area"; or if Mortgagor constructs the Phase C Garage on
the Premises Parking Area for fewer that 270 cars, Landlord has certain
rights, at its expense, to expand the Phase C Garage to accommodate up to
540 cars (the "Phase C Expansion"). If Landlord elects to build the Phase
C Garage or the Phase C Expansion, the Ground Lease obligates Mortgagor to
release from the Leasehold Estate the Premises Parking Area (or portion
thereof) or the air rights needed for the Phase C Garage or Phase C
Expansion, as the case may be. Mortgagee hereby agrees that upon its
receipt of reasonably
<PAGE>
satisfactory evidence from both Mortgagor and Landlord that Landlord is
proceeding with the construction of the Phase C Garage or the Phase C
Expansion, as the case may be, in accordance with Section 1.6.6 of the
Ground Lease, Mortgagee shall release the Premises Parking Area (or portion
thereof) or such air rights, as the case may be, from the lien of this Mort
gage and shall do, execute acknowledge, deliver and record such instruments
as Landlord may reasonably request to confirm such release; the parties
hereby expressly agree that such release by Mortgagee of the Premises
Parking Area (or portion thereof) or such air rights, shall not require any
consent of the Bondholders (as defined in the Loan Agreement) under Section
1302 (vi) or any other provision of the Loan Agreement.
6. WASTE, MAINTENANCE, COMPLIANCE AND INSPECTION.
Mortgagor, at it sole cost and expense, shall take good care of the
Premises and will keep and maintain the same in good order, condition and
repair, reasonable wear and tear excepted; and make all necessary repairs
thereto, interior and exterior, structural and non-structural, ordinary and
extraordinary, and unforeseen and foreseen. Mortgagor shall abstain from
and not permit the commission of waste in or about the Premises; shall not
remove or demolish any Improvement at any time erected on the Leasehold
Estate without the prior written consent of Mortgagee; shall not remove,
sell or otherwise dispose of any fixture or personal property without the
prior written consent of Mortgagee unless the same shall have become
obsolete or no longer useful or the same shall be replaced or substituted
by fixtures or personal property of like character and equivalent value,
not subject to any encumbrance or security interest and such replacement or
substitution shall be encumbered by this Mortgage; upon completion of
construction of the Project, Mortgagor may, without Mortgagee's approval,
make any alteration or modification to the Project and Improvements
permitted under the Ground Lease and the Management Agreement, provided,
however, that if any such alteration or modification requires the prior
approval of Landlord and/or the Manager, Mortgagor shall have obtained such
approval(s); any other alterations or improvements to the Project and
Improvements shall require Mortgagee's prior written approval, which
approval shall not be unreasonably withheld; and Mortgagor shall comply in
all material respects with, and cause the Project and the operation thereof
to comply in all material respects with, all Governmental Approvals and
Laws and Other Governmental Requirements except for such noncompliance
which, singly or in the aggregate, would not have a material adverse effect
on the Project or its operations; provided however, that if Mortgagor,
without cost or expense or civil or criminal liability to Mortgagee, shall
in good faith, and by proper legal action, contest any such Laws and Other
Governmental Requirements, or the validity thereof, then Mortgagor shall
not be required to comply therewith so long as such contest operates to
prevent enforcement, and is maintained and prosecuted with
<PAGE>
diligence, and shall not have been terminated or have been discontinued
adversely to Mortgagor; if Mortgagee, however, determines in its reasonable
opinion that its security hereunder may be materially impaired by reason of
such contest, Mortgagee may require Mortgagor to furnish additional
security reasonably satisfactory to Mortgagee against any loss, injury or
damage that Mortgagee would incur by reason of such contest.
Mortgagor shall permit Mortgagee, the Construction Inspector, and
Mortgagee's other representatives at reasonable times to enter the Project
for the purpose of inspecting the progress of work and materials thereon
and to enable Mortgagee to determine that construction of the Project is
proceeding as required by the terms of this Mortgage. In addition, from
and after the Project Completion Date, Mortgagor shall permit Mortgagee and
its representatives at reasonable times to enter the Project for the
purpose of inspecting to ensure that the Project complies with the terms of
this Mortgage. Mortgagor shall, and shall cause the Architect and the
General Contractor to, cooperate with Mortgagee and the Construction
Inspector, keep Mortgagee and the Construction Inspector fully informed of
the progress of construction of the Project, furnish to Mortgagee and the
Construction Inspector copies of all notices, schedules, reports and daily
logs relating to the progress of construction of the Project reasonably
requested by Mortgagee or the Construction Inspector.
7. INSURANCE. Until the Project Completion Date shall have
occurred, Mortgagor shall cause to be maintained in force builder's risk
completed value (non-reporting) form insurance coverage, including "All
Risk" type coverage and coverage against the perils normally covered by a
special extended coverage endorsement, and explosion, collapse, cost of
demolition, increased cost of construction and the value of the undamaged
portion of the building (all in appropriate standard form for the
Commonwealth of Massachusetts), in an amount not less than Twenty-Five
Million Dollars ($25,000,000) and other endorsements affording protection
against such risks as Mortgagee may reasonably designate. From and after
the Project Completion Date, Mortgagor shall keep the Premises continuously
insured under an "All Risks" property insurance policy against loss by
fire, with extended coverage and against such other hazards as Mortgagee
may reasonably require in an amount equal to the greater of (a) one hundred
(100%) per cent of the full replacement cost of the Improvements on the
Leasehold Estate without deduction for depreciation or; (b) an amount
sufficient to prevent Mortgagee or Mortgagor from becoming a co-insurer
within the terms of the applicable policies. Mortgagor shall also maintain
(i) boiler and machinery insurance in the amount of One Million Dollars
($1,000,000); (ii) business income insurance in the amount of Four Million
Two Hundred Thousand Dollars ($4,200,000); (iii) worker's compensation
insurance, as required
<PAGE>
by applicable law; and (iv) comprehensive general liability insurance in
the amount of Six Million Dollars ($6,000,000). The policy or policies
for all such insurance shall contain replacement cost endorsements and
shall be maintained in full force and effect until such time as the
indebtedness hereby secured is fully repaid. All policies, and any
renewals thereof, including but not limited to policies not specifically
required by Mortgagee, shall be with an insurance company or companies, and
in form and substance satisfactory to Mortgagee, and shall be deposited,
premiums paid, with Mortgagee. All renewal policies shall be delivered, by
Mortgagor, premiums paid, to Mortgagee at least ten (10) days before the
expiration of the expiring policies. The insurance company shall agree in
the policy to provide Mortgagee with no less than thirty (30) days prior
written notice before any termination or cancellation becomes effective as
to Mortgagee. If Mortgagee becomes the owner of the Premises or any part
thereof by foreclosure or otherwise, such policies shall become the
absolute property of Mortgagee.
Mortgagor covenants and agrees that if, at any time during the term
of the Mortgage, including any extensions thereof, the area in which the
Leasehold Estate, or any part thereof, is located is designated a "flood
prone" area pursuant to the Flood Disaster Protection Act of 1973, or any
amendments, or supplements thereto, then, in that event, Mortgagor shall
obtain flood insurance in such total amount as Mortgagee may from time to
time require and shall otherwise comply with the National Flood Insurance
Program as set forth in said Flood Disaster Protection Act of 1973, as
amended from time to time. Mortgagor further covenants and agrees to fully
comply with the requirements of the National Flood Insurance Act of 1968
and the Flood Disaster Protection Act of 1973, as the same may be amended
from time to time, and any other law, order, rule, ordinance or regulation
concerning flood insurance, to the extent that the same apply to the
Premises, or any part thereof.
The loss, if any, shall be payable to Mortgagee according to the
terms of a standard mortgagee clause, not subject to contribution, or of
such other form of mortgagee or loss payment clause as shall be
satisfactory to Mortgagee. Mortgagee shall have the right, at its election
to adjust or compromise any loss claims under such insurance in excess of
$1,000,000; any loss claims of less than $1,000,000 may be adjusted or
compromised by Mortgagor. All casualty insurance proceeds shall be applied
as hereinafter set forth:
A. Mortgagor agrees to give immediate notice to the Mortgagee of any
fire, damage or other casualty to all or any part of the Premises. In case
of any fire, damage or other casualty involving a cost of repair of less
than one-tenth of one percent of the replacement cost of the Premises, all
proceeds of any hazard insurance shall be paid to Mortgagor, and Mortgagor
<PAGE>
shall forthwith repair or restore that part of the Premises damaged.
B. In case of any damage or destruction to the Project or any other
casualty involving a cost of repair of one-tenth of one percent or more of
the replacement cost of the Premises, all proceeds of any hazard insurance
shall be paid to and deposited with the Mortgagee as "Insurance Trustee"
(as defined in Section 9.2 of the Ground Lease), and Mortgagor shall
neither make nor omit to make any election it is entitled to make under the
Ground Lease without the approval of the Mortgagee, and the following
additional provisions shall apply:
(i) If Mortgagor (with Mortgagee's approval) does not elect
to terminate or has no right to terminate the Ground Lease, all proceeds so
deposited shall be applied to or toward the repair or restoration of that
part of the Premises damaged by the hazard with respect to which insurance
is paid; in such case, Mortgagee shall release such proceeds to the
Mortgagor in accordance with Section 9.2 of the Ground Lease or upon such
different or further reasonable conditions as Mortgagee may prescribe. Any
insurance proceeds remaining after payment of all costs of such repair or
restoration shall, so long as no Event of Default shall have occurred and
be continuing, be paid to Mortgagor; if an Event of Default has occurred
and is continuing at such time, any insurance proceeds so remaining shall
be applied by Mortgagee to redeem Bonds as provided in the Loan Agreement.
If Mortgagee determines that the proceeds are insufficient to pay for the
repair and restoration of the Premises, Mortgagor shall deposit with
Mortgagee sufficient additional funds as Mortgagee determines to be
reasonably necessary to complete such repairs when aggregated with such
insurance proceeds, for disbursement upon such conditions as Mortgagee may
prescribe.
(ii) If Mortgagor (with Mortgagee's approval) elects to
terminate the Ground Lease, or if the Ground Lease is terminated
involuntarily pursuant to its terms, all proceeds of any hazard insurance
shall be applied as follows:
a. FIRST, to the costs of removing any remaining
Improvements and grading the Leasehold Estate in accordance with Section
9.3 of the Ground Lease;
b. SECOND, to be applied by Mortgagee to redeem Bonds
as provided in the Loan Agreement;
c. THIRD, to the payment of all other amounts secured
by This Mortgage, as provided in the Loan Agreement;
<PAGE>
d. FOURTH, to Landlord in an amount equal to the sum
which Landlord is entitled to receive under Section 9.3 of the Ground
Lease, calculated as though no insurance proceeds were paid as provided in
the immediately preceding clauses SECOND and THIRD; and
e. FIFTH, balance, if any, to Mortgagor.
(iii) In the event insurance proceeds are released to Mortgagor
for the repair, restoration or replacement of the damaged property and such
proceeds are not sufficient to permit the complete repair, restoration or
replacement of the damaged Premises, Mortgagor shall nevertheless fully
repair, restore or replace the damaged Premises and shall supply any
deficiency in the insurance proceeds with its own funds.
C. Notwithstanding anything in this Paragraph 7 to the contrary,
if the insurer denies liability to Mortgagor, the Mortgagor shall not be
relieved of any obligation under this Paragraph 7 of this Mortgage, whether
or not the proceeds of insurance are applied to or toward the indebtedness
secured hereby.
D. If Mortgagor is entitled by the terms of Sections 9.3 or 9.4 of
the Ground Lease to elect either to restore the Improvements or terminate
the Ground Lease, Mortgagor hereby agrees that in any such circumstances
Mortgagee shall be entitled to elect, on behalf of Mortgagor and as
Mortgagor's attorney-in-fact, coupled with an interest, to terminate the
Ground Lease, unless Mortgagor provides Mortgagee with reasonably
satisfactory evidence that:
(i) sufficient funds (including insurance proceed and any
additional funds to be contributed by Mortgagor) are available to complete
any necessary repair or restoration of the Improvements; and
(ii) Mortgagor has funds of its own (or available to
Mortgagor) or has received commitments for and shall obtain financing
sufficient to pay off the then outstanding Bonds on the maturity date.
8. TAXES AND OTHER CHARGES. Mortgagor shall pay all real estate
taxes, water and sewer rents, excise levies, vault and other license or
permit fees, local taxes, transit taxes, levies and assessments, fines,
fire protection, police protection, and similar charges payable under the
Ground Lease, impositions, and other similar claims and liens assessed, or
which may be assessed, against the Premises or any part thereof, (all such
taxes, water and sewer rent charges, excise levies, vault and other license
or permit fees, local taxes, transit taxes, levies
<PAGE>
and assessments, fines, impositions and other similar claims and liens,
together with the utility charges described below being hereinafter
sometimes referred to as "Impositions", and any of the same being
hereinafter referred to as an "Imposition") without any deduction or
abatement, prior to the dates on which such Impositions commence to bear
interest or penalties, and shall, if requested in writing by Mortgagee, not
later that such dates produce to Mortgagee receipts for the payment thereof
in full, and shall pay every other tax, assessment, claim, fine, lien or
encumbrance which may at any time be or become a lien upon the Premises
prior to, or on a parity with, the lien of this Mortgage. If Mortgagor
shall in good faith, and by proper legal action, contest any such
Impositions or other taxes, assessments, claims, fines, liens,
encumbrances, or charges, or the validity thereof, then Mortgagor shall not
be required to pay the same, or to produce such receipts, during the
maintenance of said reserve and as long as such contest operates to prevent
enforcement or collection, and such contest is maintained and prosecuted
with diligence, and shall not have been terminated or discontinued
adversely to Mortgagor; notwithstanding the foregoing provision, Mortgagor
shall not have the right to contest any such Impositions or other taxes,
assessments, claims, fines, liens, encumbrances or charges, if any
Governmental Authority shall threaten to foreclose any lien affecting the
Premises that has arisen because of non-payment any such Impositions or
other taxes, assessments, claims, fines, liens, encumbrances or charges
(unless such threatened foreclosure shall be stayed by a court of competent
jurisdiction), or if in a Mortgagee's reasonable good faith judgment, such
contest would materially adversely threaten Mortgagee's security. In
addition to the foregoing, Mortgagor will pay cause to be paid when due and
will not suffer to remain outstanding, any charges for utilities and refuse
removal, whether public or private, with respect to the Premises.
9. ESCROW FUNDS. Without limiting the effect of Paragraphs 7 and
8 hereof, after an Event of Default has occurred and for so long as such
Event of Default remains uncured (or if more that three Events of Default
have occurred during any consecutive twelve-month period, then for the
twelve-month period following the last to occur of such Events of Default),
at the written election of Mortgagee, Mortgagor shall pay to Mortgagee
monthly at the time when the monthly Loan Payment is payable, an amount
equal to 1/12th of the annual premium for such fire and extended coverage
insurance, other hazard insurance and such annual real estate taxes, water
rents, sewer rents, special assessments, and any other tax, assessment,
claim, lien or encumbrance which may at any time be or become a lien upon
the Premises prior to, or on a parity with, the lien of this Mortgage to
enable Mortgagee to pay same at least thirty (30) days before they become
due, and on demand from time to time shall pay to Mortgagee additional sums
necessary to pay such premiums and other payments, all as estimated by
Mortgagee, the amounts so paid to be security for
<PAGE>
such premiums and other payments and to be used in payment thereof. The
amounts so paid shall be deposited in a separate interest-bearing account
with interest payable to Mortgagor. If, pursuant to any provision of the
Loan Agreement, The whole amount of the Loan becomes immediately due and
payable by acceleration or otherwise, Mortgagee shall have the right, at
its election, to apply any amounts so held under this Paragraph 9 against
all or any part of the indebtedness secured hereby or in payment of the
premiums or payments for which the amounts were deposited. Mortgagor will
furnish to Mortgagee tax and insurance bills in sufficient time to enable
Mortgagee (i) to pay such Impositions before interest and penalties accrue
thereon and (ii) to pay the insurance premiums before the policies lapse.
10. SECURITY AGREEMENT; ADDITIONAL SECURITY. This Mortgage creates
a security interest in all personal property included in the Premises, from
time to time, and constitutes a security agreement under the Massachusetts
Uniform Commercial Code. Mortgagor, at its expense, shall execute, file
and refile such financing statements or other security agreements as
Mortgagee shall require from time to time with respect to personal property
included in the Premises.
Nothing contained in this Paragraph 10 shall be construed, in any way
to include any personal property of any subtenant pursuant to any
subleases, or any personal property of the Manager, or any Leased Equipment
within Mortgagee's security interest, as discussed in this Paragraph 10,
except (i) by operation of law, or (ii) in the event of the abandonment of
such personal property by any subtenant or by Manager or any equipment
lessor.
If any portion of the Loan proceeds are to be used for payment of any
item of tangible personal property which, as of the date of such payment,
has not been delivered to the Premises, Mortgagor shall provide Mortgagee
with notice thereof as early as practicable prior to requesting
disbursement of any portion of Loan proceeds for payment for such item and,
upon the request of Mortgagee, Mortgagor, at its expense, shall make,
execute, deliver, file and record, or cause to be made, executed,
delivered, filed and recorded, any and all instruments, certificates and
other documents and shall take all such further action as may be necessary
or desirable in order to effectuate, complete, enlarge, confirm and/or
perfect the lien and security interest of Mortgagee in such item of
property hereunder.
11. GROUND LEASE; SUBLEASES.
A. With respect to the Ground Lease, Mortgagor covenants and
agrees as follows:
<PAGE>
(i) Mortgagor will pay all rent and other charges required
under the Ground Lease as and when the same are due and Mortgagor will
keep, observe and perform, or cause to be kept, observed and performed, all
of the other terms, covenants, provisions and agreements of the Ground
Lease on the part of the lessee thereunder to be kept, observed and
performed, and will not in any manner, cancel, terminate or surrender or
permit any cancellation, termination or surrender of the Ground Lease, in
whole or in part, or, without the written consent of Mortgagee, either
orally or in writing, modify, amend or permit any modification or amendment
of any of the terms thereof in any respect, and any attempt on the part of
Mortgagor to exercise any such right without such written consent of
Mortgagee shall not be binding on Mortgagee if Mortgagee succeeds to the
interest of the Landlord under the Ground Lease.
(ii) Mortgagor will do, or cause to be done, any things
necessary to preserve and keep unimpaired the right of Mortgagor as tenant
under the Ground Lease, and to prevent any substantial or material default
under the Ground Lease, or any termination, surrender, cancellation,
forfeiture or impairment thereof, and in the event of the failure of
Mortgagor to make any payment required to be made by Mortgagor pursuant to
the provisions of the Ground Lease or to keep, observe or perform, or cause
to be kept, observed or performed, any of the substantial or material
terms, covenants, provisions or agreements of the Ground Lease, Mortgagor
agrees that Mortgagee may (but shall not be obligated to) take any action
on behalf of Mortgagor, to make or cause to be kept, observed or performed
any such terms, covenants, provisions or agreements and to enter upon the
Premises and take all such action thereof as may be necessary therefor, to
the end that the rights of Mortgagor in and to the Leasehold Estate shall
be kept unimpaired and free from default, and all money so expended by
Mortgagee, with interest thereon at the Involuntary Rate shall be paid by
Mortgagor to Mortgagee promptly upon demand by Mortgagee and shall be added
to the indebtedness and secured by this Mortgage and Mortgagee shall have,
in addition to any other remedy of Mortgagee, the same rights and remedies
in the event of non-payment of any such sum by Mortgagor as in the case of
a default by Mortgagor in the payment of any sums due under the Loan
Agreement.
(iii) Mortgagor will use reasonable efforts to enforce the
obligations of the Landlord under the Ground Lease to the end that
Mortgagor and Mortgagee may enjoy all of the rights granted to them,
respectively under the Ground Lease, and will promptly notify Mortgagee in
writing of any substantial or material default by the Landlord or by
Mortgagor in the performance or observance of any of the
<PAGE>
terms, covenants and conditions on the part of the Landlord or
Mortgagor, as the case may be, to be performed or observed under the Ground
Lease and Mortgagor will promptly advise Mortgagee in writing of the
occurrences of any substantial or material default under the Ground Lease
and of the giving of any notice by the Landlord to Mortgagor of any default
by Mortgagor in performance or observance of any of the substantial or
material terms, covenants or conditions of the Ground Lease on the part of
Mortgagor to be performed or observed and will deliver to Mortgagee a true
copy of each notice.
(iv) If any action or proceeding shall be instituted to evict
Mortgagor or to recover possession of the Premises or for any other purpose
affecting the Ground Lease or this Mortgage, Mortgagor will, immediately
upon service thereof on or to Mortgagor, deliver to Mortgagee a true copy
of each petition, summons, complaint, notice or motion, order to show cause
and of all other provisions, pleadings, and papers, however designated,
served in any such action or proceeding.
(v) Mortgagor covenants and agrees that unless Mortgagee
shall otherwise expressly consent in writing, the fee title to the property
demised by the Ground Lease and the Leasehold Estate shall not merge but
shall always remain separate and distinct, notwithstanding the union of
said estates either in the Landlord, Mortgagor, or a third party by
purchase or otherwise; and in case Mortgagor acquires the fee title or any
other estate, title or interest in the Premises, this Mortgage shall attach
to and cover and be a lien upon the fee title or such other estate so
acquired, and such fee title or other estate shall, without further
assignment, mortgage or conveyance, become and be subject to the lien of
and covered by this Mortgage.
(vi) No release or forbearance of any of Mortgagor's
obligations under the Ground Lease, pursuant to the Ground Lease, or
otherwise, shall release Mortgagor from any of its obligations under this
Mortgage, including its obligation with respect to the payment of rent as
provided for in the Ground Lease and the performance of all of the terms,
provisions, covenants, conditions and agreements contained in the Ground
Lease, to be kept, performed and complied with by Mortgagor as tenant
therein.
(vii) The lien of this Mortgage shall attach to all of
Mortgagor's rights and remedies at any time arising under or pursuant to
Subsection 365(h) of the Bankruptcy Code, 11 U.S.C. Section 365(h),
including, without limitation, all of Mortgagor's rights to remain in
possession of the Premises.
<PAGE>
Mortgagor shall not, without Mortgagee's prior written consent, elect
to treat the Ground Lease as terminated under Subsection 365(h) (1) of the
Bankruptcy Code, 11 U.S.C. Section 365(h) (1). Any such election made
without Mortgagee's consent shall be void.
Mortgagor hereby unconditionally assigns, transfers and sets over to
Mortgagee all of Mortgagor's claims and rights to the payment of damages
arising from any rejection of the Ground Lease by Landlord or any other fee
owner of the Premises under the Bankruptcy Code. Mortgagee shall have the
right to proceed in its own name or in the name of Mortgagor in respect of
any claim, suit, action or proceeding relating to the rejection of the
Ground Lease, including, without limitation, the right to file and
prosecute, any proofs of claim, complaints, motions, applications, notices
and other documents, in any case in respect to the Landlord or any fee
owner under the Bankruptcy Code. Unless an Event of Default shall have
occurred and be continuing, Mortgagor shall be entitled to join with
Mortgagee in such proceedings, provided, however, that in doing so
Mortgagor shall take no actions which are adverse to the interests of
Mortgagee. This assignment constitutes a present, irrevocable and
unconditional assignment of the foregoing claims, rights and remedies, and
shall continue in effect until all of the obligations secured by this
Mortgage shall have been satisfied and discharged in full. Any amounts
received by Mortgagee as damages arising out of the rejection of the Ground
Lease as aforesaid shall be applied first to all costs and expenses of
Mortgagee (including, without limitation, reasonable attorneys' fees)
incurred in connection with the exercise of any of its rights or remedies
under this section.
If pursuant to Subsection 365(h) (2) of the Bankruptcy Code, 11
U.S.C. Section 365(h) (2), Mortgagor shall seek to offset against the rent
reserved in the Ground Lease the amount of any damages caused by the
nonperformance by the Landlord or any fee owner of their obligations under
the Ground Lease after the rejection by the Landlord or any fee owner of
the Ground Lease, under the Bankruptcy Code, Mortgagor shall, prior to
effecting such offset, notify Mortgagee of its intent to do so, setting
forth the amounts proposed to be so offset and the basis therefor.
Mortgagee shall have the right to object to all or any part of such offset
that, in the reasonable judgment of Mortgagee, would constitute a breach of
the Ground Lease, and in the event of such objection, Mortgagor shall not
effect any offset of the amounts so objected to by Mortgagee. Neither
Mortgagee's failure to object as aforesaid nor any objection relating to
such offset shall constitute an approval of any such offset by Mortgagee.
Mortgagor shall pay and protect Mortgagee,
<PAGE>
and indemnify and save Mortgagee harmless from and against, any and all
claims, demands, actions, suits, proceedings, damages, losses, costs and
expenses of every nature whatsoever (including, without limitation,
reasonable attorneys' fees) arising from or relating to any offset by
Mortgagor against the rent reserved in the Ground Lease.
If any action, proceeding, motion or notice shall be commenced or
filed in respect of the Landlord or any fee owner, the Premises or the
Ground Lease in connection with any case under the Bankruptcy Code,
Mortgagee shall have the option, exercisable by notice from Mortgagee to
Mortgagor, to conduct and control any such litigation with counsel of
Mortgagee's choice. Mortgagee may proceed in its own name or in the name
of Mortgagor in connection with any such litigation, and Mortgagor agrees
to execute any and all powers, authorizations, consents or other documents
required by Mortgagee in connection therewith. Mortgagor shall, upon
demand, pay to Mortgagee all costs and expenses (including reasonable
attorneys' fees) paid or incurred by Mortgagee in connection with the
prosecution or conduct of any such proceedings. Any such costs or expenses
not paid by Mortgagor as aforesaid shall be secured by the lien of this
Mortgage and shall be added to the indebtedness secured hereby. Unless an
Event of Default shall have occurred and be continuing, Mortgagor shall be
entitled to join with Mortgagee in such proceeding, provided, however, that
in doing so Mortgagor shall take no actions which are adverse to the
interests of Mortgagee. Mortgagor shall not commence any action, suit,
proceeding or case, or file any application or make any motion, in respect
of the Ground Lease in any such case under the Bankruptcy Code without the
prior written consent of Mortgagee, which consent shall not be unreasonably
withheld or delayed.
Mortgagor shall, after obtaining knowledge thereof, promptly notify
Mortgagee of any filing by or against the Landlord or other fee owner of a
petition under the Bankruptcy Code. Mortgagor shall promptly deliver to
Mortgagee, following receipt, copies of any and all notices, summonses,
pleadings, applications and other documents received by Mortgagor in
connection with any such petition and any proceedings relating thereto.
If there shall be filed by or against Mortgagor a petition under the
Bankruptcy Code and Mortgagor, as lessee under the Ground Lease, shall
determine to reject the Ground Lease pursuant to Section 365(a) of the
Bankruptcy Code, Mortgagor shall give Mortgagee not less than thirty (30)
days' prior notice of the date on which Mortgagor shall apply to the
Bankruptcy Court for authority to reject the Ground Lease. Mortgagee shall
have the right, but not the
<PAGE>
obligation, to serve upon Mortgagor within such thirty (30) day period a
notice stating that Mortgagee demands that Mortgagor assume and assign the
Ground Lease to Mortgagee pursuant to Section 365 of the Bankruptcy Code.
If Mortgagee shall serve upon Mortgagor the notice described in the
preceding sentence, Mortgagor shall not seek to reject the Ground Lease and
shall comply with the demand provided for in the preceding sentence.
B. Mortgagor will comply with and observe its obligations as
sublandlord under all Subleases. Mortgagor may, from time to time, without
the prior approval of Mortgagee, enter into Subleases related to the
operation of the Project as a first-class hotel and conference center;
Mortgagor may also cancel, surrender, or modify any such Subleases without
Mortgagor's approval. If Mortgagor wishes to enter into any Sublease that
is unrelated ("Unrelated Sublease") to the operation of the Project as
aforesaid, Mortgagor shall obtain Mortgagee's prior written consent
thereto, which consent shall not be unreasonably withheld. Any Unrelated
Sublease shall, as provided in the Ground Lease, provide that rental
adjustments shall be made no less frequently than once every ten years to
assure that rental shall be adjusted to at least 95% of the then market
rate. No Unrelated Sublease shall be canceled, surrendered, or modified in
any material way without the prior written consent of Mortgagee, which
consent shall not be unreasonably withheld. Prior to entering into any
Sublease, Mortgagor shall -- to the extent required under the Ground Lease
- -- obtain the approval of Landlord thereto. Mortgagor shall notify
Mortgagee immediately of any material or substantial default asserted by
any subtenant under any Sublease. If Mortgagee fails to cure such default
on its part, as sublandlord under any such Sublease, then Mortgagor
expressly authorizes Mortgagee, at its option, to cure such default in
order to prevent termination of any such Sublease by any such subtenant,
and the Subleases shall set forth the foregoing provisions. Mortgager upon
request, from time to time, but not more often than annually unless a
default shall have occurred under this Mortgage, will furnish to Mortgagee
in such reasonable detail as Mortgagee may request, certified by Mortgagor,
copies of all Subleases; and on demand, Mortgagor will furnish to Mortgagee
executed counterparts of any and all Subleases.
Mortgagor agrees that it has not as of the date hereof and will not,
without the written consent of Mortgagee, assign the rents, issues or
profits, or any part thereof, from the Premises, receive or collect rents
from any tenant, subtenant, undertenant, or other occupant of any part of
the Premises for a period of more than one (1) month in advance.
Mortgagor authorizes Mortgagee at its option to foreclose this
Mortgage subject to the right of any subtenants of the
<PAGE>
Premises and subject to the Manager's rights under the Subordination
Agreement, and the failure to make the Manager or any such subtenants
parties defendant to any such foreclosure proceeding and to foreclose their
rights will not be asserted by Mortgagor as a defense to any proceeding
instituted by Mortgagee to collect the indebtedness secured hereby or any
deficiency remaining unpaid after the foreclosure sale of the Premises, it
being expressly understood and agreed, however, that nothing herein
contained shall prevent Mortgagor from asserting in any proceeding
disputing the amount of the deficiency or the sufficiency of any bid at
such foreclosure sale, that any such subtenancies adversely affect the
value of the Premises.
At the sole option of Mortgagee, this Mortgage shall become subject
and subordinate, in whole or in part (but not with respect to priority
entitlement to any award in condemnation), to any and all Subleases upon
the execution by Mortgagee and recording thereof, at any time hereinafter,
in the office of the recording of such documents for the locality in which
the Premises are located, of a unilateral declaration to that effect.
All Subleases shall provide for the giving by the subtenant of
certificates with respect to the status of such Subleases. Mortgagor shall
exercise its right to request such certificates within thirty (30) days of
any demand therefor by Mortgagee.
12. RIGHT TO REMEDY DEFECTS. If Mortgagor fails to pay when due
any tax, claim, lien, or encumbrance which shall be or become prior to, or
on a parity with, the lien of this Mortgage, or to pay when due any
insurance premium as aforesaid, or to pay when due any rent or other
charges payable under the Ground Lease or to pay when due any utility or
refuse removal bill for services rendered to the Premises or to keep the
Premises in repair, as aforesaid, or commits or permits waste or fails to
perform or observe any term, agreement, provision, covenant or condition
under this Mortgage, and if any such failure continues for thirty (30) days
after notice thereof from Mortgagor, then Mortgagee, at its option (except
in emergencies [i.e., situations in which the failure of Mortgagor to have
made any such payment would immediately jeopardize or adversely affect
Mortgagee's security], in which cases Mortgagor may act immediately if
necessary and without prior written notice to Mortgagor, in any such case
Mortgagor shall endeavor to give Mortgagee prior notice (which may be oral)
and shall in any event subsequently give Mortgagor written notice), may pay
said claim, lien, encumbrance, tax, assessment or premium, with right of
subrogation thereunder, may make such repairs and take such steps as it
deems advisable to prevent or cure such waste, and may commence or appear
in any action or proceeding with respect to any of the foregoing and retain
counsel therein, and take such action therein as Mortgagee deems advisable.
Mortgagee is hereby empowered to enter and to authorize others to enter
upon the Premises or any part thereof
<PAGE>
for the purpose of performing or observing any such defaulted term,
agreement, provision, covenant or condition without thereby becoming liable
to Mortgagor or any person in possession under Mortgagor. For any of said
purposes, Mortgagee may advance such sums of money as it deems necessary.
Mortgagor will pay to Mortgagee, immediately and without demand, all sums
of money advanced by Mortgagee pursuant to this Paragraph 11 and until
paid, all such sums shall be added to the principal secured hereby and
shall bear interest at the Involuntary Rate from the date of payment, and
the same shall be secured by this Mortgage.
13. CONDEMNATION. If all, or any part of, the Premises is damaged
or taken through condemnation, temporarily or permanently, all proceeds to
which Mortgagor is entitled under the Ground Lease shall be applied as set
forth in this Paragraph 13. Mortgagee is hereby authorized, at its option,
to commence, appear in and prosecute, jointly with Mortgagor, any action or
proceeding relating to any such condemnation except for Excluded Damages,
and to settle or compromise any claim in connection therewith. Mortgagee
shall not settle or compromise any claim in connection with any damage or
taking through condemnation without the prior written consent of Mortgagor,
which consent shall not unreasonably be withheld. Mortgagor is entitled to
commence, appear in, and prosecute in its name, any action proceeding in
connection with the Excluded Damages, to settle or compromise any claim in
connection therewith, and to receive and retain any proceeds reserved on
account thereof. The proceeds or awards (other than Excluded Damages) from
any taking or eminent domain proceeding or claim shall be paid to Mortgagee
and applied as follows:
(a) In the event of a taking that results in a termination of
the Ground Lease pursuant to Section 10.1 of the Ground Lease, the proceeds
shall be applied as follows:
(i) FIRST, to be applied by Mortgagee to redeem Bonds
as provided in the Loan Agreement;
(ii) SECOND, to the payment of all other amounts secured
by the Mortgage as provided in the Loan Agreement;
(iii)THIRD, to Landlord an amount equal to the sum which
Landlord is entitled to receive under Section 10.1(b) of the Ground Lease,
calculated as though no payment of eminent domain proceeds were made as
provided in the immediately preceding clauses FIRST and SECOND; and
(iv) FOURTH, the balance, if any, to Mortgagor.
<PAGE>
If the amount of an initial award of damages in such case is
insufficient to pay the amount of the indebtedness secured by this Mortgage
in full costs, Mortgagee shall have the right as aforesaid to file an
appeal or such other legal proceedings as its legal counsel may advise to
be appropriate under the circumstances in the name of Mortgagor or of
Mortgagee (for which action Mortgagee or such counsel as it chooses is
hereby irrevocably appointed attorney in fact for Mortgagor) and to
prosecute same to final conclusion or otherwise dispose thereof, in which
event the expenses of the appeal or other appropriate legal proceedings,
including, but not limited to, counsel fees, shall be first paid out of the
proceeds, and no credit shall be given on account of the Mortgage debt
other than a credit for the amount, if any, whereby the final proceeds
exceed all such expenses.
(b) In the event of a taking of only a portion of the
Premises that constitutes a partial taking under Section 10.2 of the Ground
Lease and that does not result in a termination of the Ground Lease, the
proceeds shall be applied:
(i) FIRST to or toward the repair or restoration of the
Premises in accordance with Paragraph 7B. (i) of this Mortgage; and
(ii) SECOND, the balance, if any, shall be applied in
the priority provided in the preceding Paragraph 13 (a) (iii) and (iv).
(c) In the event of a taking of only a portion of the
Premises that nevertheless results in Mortgagor exercising its rights under
Section 10.2 of the Ground Lease to terminate the Ground Lease, the
proceeds shall be applied as follows:
(i) FIRST, to payment of the cost of removing any
remaining Improvements and grading the Leasehold Estate as provided in
Section 10.2 of the Ground Lease; and
(ii) SECOND, in the priority provided in the preceding
Paragraph 13 (a) (i), (ii), (iii) and (iv).
Nothing in this Paragraph 13 or elsewhere in this Mortgage shall limit
rights otherwise available at law or in equity to Mortgagee, including but
not limited to rights to intervene as a party to any condemnation
proceeding. In the case of any taking covered by the provisions of this
Paragraph, Mortgagee (to the extent that Mortgagee has not been reimbursed
therefor by Mortgagor) shall be entitled as a first priority to
reimbursement
<PAGE>
out of any award or awards for all reasonable costs, fees, reimbursements
to Mortgagee and expenses incurred in the determination and collection of
any such awards.
If Mortgagor is entitled by the terms of Section 10.2 of the Ground
Lease to elect either to restore the Improvements or terminate the Ground
Lease, Mortgagor hereby agrees that in any such circumstance Mortgagee
shall be entitled to elect, on behalf of Mortgagor and as Mortgagor's
attorney-in-fact, coupled with an interest, to terminate the Ground Lease,
unless Mortgagor provided Mortgagee with reasonably satisfactory evidence
that:
(i) sufficient funds (including taking proceeds and any
additional funds to be contributed by Mortgagor) are available to complete
any necessary repair or restoration of the Improvements; and
(ii) Mortgagor has funds of its own (or available to
Mortgagor) or has received commitments for and shall obtain financing
sufficient to pay off the then outstanding Bonds on the maturity date.
14. EVENTS OF DEFAULT. The following shall constitute an event or
events of default (singularly an "Event of Default" and collectively
"Events of Default") under this Mortgage:
A. The failure of Mortgagor to make any payment provided for under
the terms of this Mortgage within twenty (20) business days after receipt
of written notice of such failure from Mortgagee, unless a different grace
period with respect to any such payment is explicitly provided for in any
other Basic Document, in which case such different grace period shall
apply;
B. The failure of Mortgagor to perform or observe any term,
provision, covenant, condition or agreement in the Collateral Assignments
or in this Mortgage not involving the payment of money, which failure is
not cured within forty-five (45) days after written notice of such failure
from Mortgagee, except in the event such failure is of a nature that it
cannot reasonably be cured within such forty-five (45) day period, then
Mortgagor must promptly commence to cure such failure upon notice of same
and diligently pursue completion;
C. The existence of any Event of Default under the Loan Agreement;
D. The existence of any Event of Default under the Disbursement
Agreement;
E. The existence of any Event of Default under the Ground Lease;
or
<PAGE>
F. The existence of any Event of Default under the Construction
Guaranty.
15. REMEDIES. Upon the occurrence and continuation of any one or
more Events of Default, Mortgagee may, at it option, exercise any remedies
available under the Basic Documents and also forthwith undertake any one or
more of the following:
A. Foreclosure. Institute an action of mortgage foreclosure, or
take such other action as the law may allow, at law or in equity, for the
enforcement thereof and realization on the mortgage security or any other
security which is herein or elsewhere provided for, and proceed thereon to
final judgment and execution thereon for the entire unpaid indebtedness
under the Loan Agreement, with interest at the rate stipulated in the Loan
Agreement, together with all other sums secured by this Mortgage, all costs
of suit, interest at the Involuntary Rate on any judgment obtained by
Mortgagee from and after the date of any Sheriff's sale of the Premises
(which may be sold in one parcel or in such parcels, manner or order as
Mortgagee shall elect) until actual payment is made by the Sheriff of the
full amount due Mortgagee, and reasonable attorney's fees, without further
stay, any law, usage or custom to the contrary notwithstanding;
B. Entry. Enter into possession of the Premises, with or without
legal action; operate, manage or lease the same, collect all rents, issues
and profits therefrom and, after deducting all costs of collection and
administration expense, apply the net rents, issues and profits to the
payment of taxes, water and sewer rents, charges and claims, insurance
premiums and all other carrying charges (including but not limited to
agents' compensation and reasonable fees and costs of counsel and
receivers) and to the maintenance, repair and restoration of the Premises,
or on account and in reduction of the principal or interest hereby secured,
in such order and amounts as Mortgagee in Mortgagee's sole discretion may
elect;
C. Receivership. Have a receiver appointed to enter into
possession of and to operate the Premises, collect the rents, issues and
profits therefrom and apply the same as the court may direct. Mortgagee
shall be entitled to the appointment of a receiver without the necessity of
proving either the inadequacy of the security or the insolvency of
Mortgagor of any other person who may be legally or equitably liable to pay
moneys secured hereby and Mortgagor and each such person shall be deemed to
have waived such proof and to have consented to the appointment of such
receiver. Should Mortgagee or any receiver collect rents, issues or
profits from the Premises, to the extent that the moneys so collected may
be used for payment of the debt, nor can they be used to cure the default,
without the prior written consent of Mortgagee. Mortgagee shall be liable
to
<PAGE>
account only for rents, issues and profits actually received by Mortgagee.
D. Exercise the Statutory Power of Sale.
E. Exercise any other remedy available at law or in equity or
expressly provided elsewhere in this Mortgage.
16. ASSIGNMENT OF SUBLEASES AND RENTS AFTER DEFAULT. As further
security for payment of the indebtedness and performance of the
obligations, covenants and agreements secured hereby, Mortgagor hereby
assigns to Mortgagee all subleases already in existence and to be created
in the future, together with all Rents and Profits. This assignment,
however, shall be operative only in the event of the occurrence of an Event
of Default hereunder, or under the Loan Agreement of any other instrument
given as collateral security for the obligation secured hereby, remaining
uncured at the expiration of the grace period, if any, provided herein in
respect of such an Event of Default; and in any such case Mortgagor hereby
confers on Mortgagee the exclusive power, to be used or not in its sole
discretion, to act as agent, or to appoint a third person to act as agent
for Mortgagor, with power to take possession of, and collect the Rents and
Profits and apply such Rents and Profits, at the option of Mortgagee, to
the payments of the mortgage debt, taxes, costs of maintenance, repairs,
expenses incident to managing and other expenses, in such order of priority
as Mortgagee may in its sole discretion determine, and to turn any balance
remaining over to Mortgagor; but such collection of the Rents and Profits
shall not operate as an affirmance of the tenant or lease in the event
Mortgagor's title to the Premises should be acquired by Mortgagee.
Mortgagee shall be liable to account only for the Rents and Profits
actually received by Mortgagee. In exercising any of its powers contained
in this Paragraph 16, Mortgagee may also take possession of, and for these
purposes use, any and all personal property contained in or on the Premises
and used by Mortgagor in the operating, rental of leasing thereof or any
part thereof.
17. COUNSEL FEES. If Mortgagee becomes a party (by intervention or
otherwise) to any action or proceeding affecting, directly or indirectly,
Mortgagor, Mortgagee, the Premises or the title thereto or Mortgagee's
interest under this Mortgage, or employs an attorney to collect any of the
indebtedness or to enforce performance of the obligations, covenants and
agreements secured hereby, Mortgagor shall reimburse Mortgagee, forthwith
upon written notice and without further demand, for all reasonable costs,
charges and reasonable attorney's fees incurred by Mortgagee, in any such
case, whether or not suit be commenced, and, if not paid in full
immediately, the same shall be added to the principal sum secured hereby as
a further charge and lien upon the Premises and shall bear interest at the
Involuntary Rate.
<PAGE>
18. NOTICE. All notices, demands, requests and consents permitted
or required under this Mortgage, shall be in writing and shall be given or
served in the manner specified for the giving of notices set forth in the
Loan Agreement.
19. CUMULATIVE RIGHTS AND REMEDIES. The rights and remedies of
Mortgagee as provided in this Mortgage, or in the other Basic Documents
shall be cumulative and concurrent, and may be pursued singly, successively
or together at the sole discretion of Mortgagee, and may be exercised as
often as occasion therefor shall occur; and the failure to exercise any
such right or remedy shall in no event be construed as a waiver or release
of the same.
20. WAIVER OF DEFENSES AND CERTAIN NOTICES. Mortgagor hereby
waives and releases (a) all errors, defects, and imperfections in any
proceedings instituted by Mortgagee under this Mortgage, (b) all benefits
that might accrue to Mortgagor by virtue of any present or future laws
exempting the Premises, or any part of the proceeds arising from any sale
thereof, from attachment, levy or sale under execution, or providing for
any stay of execution, exemption from civil process, or extension of time
for payment, and (c) all notices not specifically required by the Loan
Agreement and this Mortgage, of Mortgagor's default or of Mortgagee's
exercise, or election to exercise, any option under this Mortgage.
Mortgagor agrees that time is of the essence in the performance of the
obligations of Mortgagor under this Mortgage.
21. SATISFACTION OF THIS MORTGAGE. Upon the termination of the
lien of the Loan Agreement in accordance with Section 10.3 thereof, then
and from thenceforth this Mortgage, and the estate hereby granted, shall
cease and become void.
22. BOOKS, RECORDS AND ACCOUNTS. Mortgagor will keep and maintain
or will cause to be kept and maintained proper and accurate books, records
and accounts reflecting all items of income and expense in connection with
the operation of the Premises or in connection with any services, equipment
or furnishings provided in connection with the operation of the Premises,
whether such income or expenses be realized by Mortgagor or by any other
person or entity whatsoever excepting any tenants unrelated to and
unaffiliated with Mortgagor, and who leased from Mortgagor portions of the
Premises for the purposes of occupying the same. Mortgagee shall have the
right from time to time at all times during normal business hours to
examine such books, records and accounts at the office of Mortgagor, or
other person or entity maintaining such books, records and accounts and to
make copies or extracts thereof as Mortgagee shall desire. Mortgagor shall
deliver or cause to be delivered to Mortgagee, within 180 days after the
end of each fiscal year, its annual report with respect to the Project,
containing a balance sheet as
<PAGE>
at the end of such fiscal year, a statement of income for such fiscal year,
and a statement of cash flow or of sources and uses of funds all in
reasonable detail and in accordance with generally accepted accounting
principles consistently applied; such statements shall be certified as to
accuracy by Mortgagor's chief financial officer and certified by an
independent certified accountant.
23. MANAGEMENT AGREEMENT. Mortgagor hereby represents to Mortgagee
that it is in full compliance with its obligations under the Management
Agreement, that the Manager has performed in all material respects its
obligations thereunder to the extent any such obligations have accrued as
of this date, that the Manager has asserted no claim of default thereunder
on the part of Mortgagor, and the Mortgagor is in compliance in all
material respects with Mortgagor's obligations to the extent such
obligations thereunder as of this date. To the best of Mortgagor's
knowledge, as of the date of this Mortgage, there are no events which, with
the passage of time, the giving of notice, or both, would constitute a
material default on the part of either Mortgagor or Manager under the
Management Agreement.
Mortgagor agrees to perform all the terms, covenants, provisions and
conditions required to be performed and observed by Mortgagor under the
Management Agreement, to the end that all things shall be done which are
necessary to keep unimpaired Mortgagor's rights under the Management
Agreement and otherwise to keep the Management Agreement in full force and
effect for its initial term.
Any exercise by Mortgagee of its rights and remedies available
hereunder on account of an Event of Default shall be subject to the rights
of the Manager under the Subordination Agreement.
24. TRANSFERS OF THE PROJECT, ETC. Prior to the Project Completion
Date, Mortgagor shall not, without the prior written consent of Mortgagee,
directly or indirectly, except for Permitted AEW Transfers, Permitted
Transfers, Parity Indebtedness and Subordinate Indebtedness: (i) convey,
transfer, assign, encumber, mortgage, pledge or sell the Project or the
Site, or any part thereof, or any interest therein; (ii) transfer, sell or
otherwise dispose of the Mortgagor's interest in the Project or the Site,
or any part thereof; (iii) pledge or encumber any interest in the
Mortgagor; or (iv) make any change in the partners of, or the partnership
interests in, Mortgagor from those on the date hereof. From and after the
Project Completion Date, Mortgagor may, without the approval of Mortgagee
but subject to any approvals required from Landlord under the Ground Lease
or Manager under the Management Agreement, convey, transfer, assign,
encumber, mortgage, pledge, or sell the Project, the Site or Leasehold
Estate, or any part
<PAGE>
thereof and any interest herein, may assign, transfer, pledge or encumber
any interest in Mortgagor, and may make any change in the partners of,
and/or partnership interests in, Mortgagor.
25. ESTOPPEL AFFIDAVITS. Each party, within ten (10) days after
written request from the other party, shall furnish a written statement of
the status of any matter reasonably pertaining to this Mortgage or the
Project.
26. INVALID PROVISIONS TO AFFECT NO OTHERS. In case any one or
more of the covenants, agreements, conditions, terms or provisions
contained in this Mortgage shall be invalid, illegal or unenforceable in
any respect, the validity of the remaining covenants, conditions,
agreements, terms or provisions contained herein shall be in no way
affected, prejudiced or disturbed thereby.
27. CAPTIONS. The captions herein are inserted only for
convenience of reference and in no way define, limit or describe the scope
or intent of this Mortgage or any particular paragraph or section hereof,
nor the proper construction hereof.
28. FURTHER ASSURANCES. At any time, and from time to time, upon
request by Mortgagee, Mortgagor will make, execute, acknowledge and deliver
or cause to be made, executed, acknowledged and delivered to Mortgagee any
and all other further instruments, mortgages, conveyances, deeds,
certificates, and other documents as may, in the opinion of Mortgagee be
necessary, or desirable in order to effectuate, complete, confirm, or
perfect or to continue and preserve the obligations of Mortgagor under any
of the Basic Documents and the lien of this Mortgage and any other
instrument given as collateral security therefor. Upon failure by
Mortgagor so to do. Mortgagee may make, execute and record any and all such
instruments, certificates and documents for and in the name of Mortgagor
and Mortgagor hereby irrevocably appoints Mortgagee the agent and attorney-
in-fact of Mortgagor so to do. Mortgagor agrees to pay all filing,
registration and recording fees and all federal state, county and municipal
stamp taxes or other duties, imposts, assessments and charges on all such
instruments, certificates and documents.
29. NOTICE TO MECHANICS AND MATERIALMEN. Nothing in this Mortgage
contained shall be deemed or construed in any way as constituting the
consent or request of Mortgagee, express or implied, by inference or
otherwise, to any contractor, subcontractor, laborer or materialman for the
performance of any labor or the furnishing of any materials for any
specific improvement, alteration to, or repair of, the Premises, or any
part thereof. Mortgagor will cause to be removed, all claims and demands
of mechanics, materialmen, laborers, and others which, if unpaid, might
result in, or permit the creation of, a lien on the Leasehold Estate and/or
the Premises, or any part thereof, or on
<PAGE>
the revenues, rents, issues, income and profits arising therefrom, and, in
general, will do, or cause to be done, everything necessary so that the
lien hereof shall be fully preserved, at the cost of Mortgagor, without
expense to Mortgagee.
30. RECORDED INSTRUMENTS. Mortgagor will comply in all material
respects with all of the terms, covenants and conditions of all instruments
of record affecting the Premises, non-compliance with which may materially
affect the security of this Mortgage, or which may impose any duty or
obligation upon Mortgagor or any tenant, subtenant or other occupant of the
Premises, or any part thereof, and Mortgagor shall do or cause to be done
all material things necessary to preserve intact and unimpaired any and all
easements, appurtenances and other interest and rights in favor of, or
constituting, any portion of the Premises. Mortgagor shall not initiate,
join in or consent to any change in any private restrictive covenant,
zoning ordinance, or other public or private restrictions limiting or
defining the uses which may be made of the Premises, or any part thereof.
31. USE. Mortgagor agrees that it shall at all times after the
Project Completion Date cause the Premises to be used, occupies, managed
and operated as a conference center and hotel in accordance with a "first-
class hotel standard" and otherwise in accordance in all material respects
with the Ground Lease; Mortgagor shall not be in default under this
Mortgage for any failure to comply with the immediately foregoing provision
when prevented from doing so by reason of fire, casualty, trucking,
strikes, labor troubles, conditions of supply and demand, or any similar or
dissimilar cause whatsoever beyond Mortgagor's reasonable control (but not
for failure to perform caused by Mortgagor's inability to pay or caused by
financial or market economic conditions generally). In no event shall
Mortgagor use or permit the use of the Premises or any part thereof for any
illegal or immoral purposes.
32. SUCCESSORS AND ASSIGNS. All of the grants, covenants, terms,
agreements, provisions and conditions herein shall run with the Leasehold
Estate and shall apply to, bind and inure to the benefit of, the successors
and assigns of Mortgagor and the successors and assigns of Mortgagee.
33. GOOD STANDING. Mortgagor represents and covenants that (i) it
is a limited partnership duly organized, existing and in good standing
under the laws of the Commonwealth of Massachusetts and (ii) it has the
power, authority and legal right to carry on the business now being
conducted by it and to engage in the transactions contemplated by this
Mortgage and the other Basic Documents.
<PAGE>
34. RIGHT OF RELEASE. Mortgagee may allow Mortgagor any
indulgences or forbearances, or extensions of any kind, respecting payment
of the indebtedness secured hereby, or may release portions of the Premises
without affecting the personal liability of any person, corporation or
other entity for the payment of such indebtedness, or the lien of this
Mortgage upon the remainder of the Premises for the full amount of the
indebtedness then remaining unpaid. In the event of the sale or transfer
by operation of law or otherwise, of all or any part of, or interest in,
the Premises described in this Mortgage, Mortgagee is hereby authorized and
empowered to deal with such vendee or transferee with reference to the
Premises and/or the debt secured hereby, or with reference to any of the
terms and/or conditions hereof, as fully and to the same extent as it might
deal with the original parties hereto and without in any way releasing or
discharging any of the liabilities or undertakings hereunder.
35. INTERPRETATION. The term Mortgagor as used in every instance
shall include Mortgagor's heirs, executors, administrators, successors,
legal representatives and assigns, either voluntary by act of the parties
or involuntary by operation of law and shall denote the singular and/or
plural, and the masculine and/or feminine and natural and/or artificial
persons, whenever and wherever the context so requires or admits. If more
than one party is named as Mortgagor, the obligation hereunder of each such
party shall be deemed to be joint and several. The term Mortgagee as used
in every instance shall include Mortgagee's successors, legal
representatives and assigns, including all subsequent assignees, either
voluntary by act of the parties, or involuntary by operation of law.
36. AMENDMENTS. This Mortgage cannot be changed, modified or
amended in any way except by an agreement in writing, signed by the party
against whom enforcement of the change, modification or amendment is
sought.
37. PARITY INDEBTEDNESS. Subject to the provisions of this
Paragraph 37, Mortgagor may from time to time incur additional indebtedness
with respect to the Project and secure such indebtedness with a mortgage
lien on the Premises on a parity with, and equal and coordinate in lien
with, the lien of this Mortgage. Any such indebtedness is referred to
herein as "Parity Indebtedness" and any mortgage securing Parity
Indebtedness is referred to herein as a "Parity Mortgage."
Parity Indebtedness may be incurred only for the purposes of (i)
completing construction of the Project, (ii) making improvements or
betterments to the Project or (iii) to redeem all or a portion of the
Bonds, subject, however to the following conditions:
<PAGE>
(i) Mortgagor shall be obligated equally and ratably to make
payments sufficient to pay all debt service on both the Bonds and the
Parity Indebtedness;
(ii) if Parity Indebtedness is incurred for the purpose of
refunding a portion of the Bonds, an independent certified public
accountant (or another independent consultant reasonably satisfactory to
Mortgagee) shall have provided a certificate stating that, based upon
reasonable assumptions, the sum of (A) the present value of the annual debt
service in each fiscal year with respect to the Bonds to be Outstanding (as
defined in the Loan Agreement) after incurrence of such Parity Indebtedness
and (B) the present value of the annual debt service on the Parity
Indebtedness in each such fiscal year will be less than what the aggregate
annual debt service on all of the Bonds Outstanding would be in each such
fiscal year during the remaining term of the portion of the Bonds to be
refunded if such Portion were not refunded;
(iii) if Parity Indebtedness is incurred for the purpose of
completing construction of the Project, the maximum original principal
amount of such Parity Indebtedness shall not exceed $4,000,000;
(iv) if Parity Indebtedness is incurred for the purpose of
making improvements or betterments to the Project, an independent certified
accountant (or another independent consultant reasonably satisfactory to
Mortgagee) shall have provided a certificate stating that the following
coverage tests shall be satisfied:
(A) for at least 12 consecutive months during the 24-
month period prior to the closing of the Parity Indebtedness
the net revenues of the Project were not less than 125 percent of the
aggregate annual debt service on both the Bonds and an previously issued
Parity Indebtedness then Outstanding; and
(B) based upon reasonable assumptions, the net revenues
of the Project for at least the 5-year period following the completion of
the improvements or betterments being financed by the Parity Indebtedness
shall be not less than 125 percent of the sum of (x) the aggregate annual
debt service on the Bonds to be Outstanding during such 5-year period and
(y) the aggregate annual debt service on the Parity Indebtedness to be
outstanding during such 5-year period.
Mortgagee will do, execute, acknowledge, deliver and record such
amendments to this Mortgage, intercreditor agreements or
<PAGE>
similar instruments as the holder of any Parity Indebtedness may reasonably
require for the purpose of assuring and confirming that the lien of such
holder's Parity Mortgage is equal in lien and on parity with the lien of
this Mortgage; the parties hereby expressly agree that the entering into of
any such intercreditor agreement shall not require any consent of the
Bondholders (as defined in the Loan Agreement) under Section 1302 or any
other provision of the Loan Agreement. Any intercreditor agreement so
entered into between Mortgagee and the holder of any Parity Indebtedness
(for purposes of this Paragraph 31, each of the Mortgagee and any such
holder of Parity Indebtedness shall be referred to as a "Creditor") shall
include provisions customarily found in intercreditor agreements between
creditors sharing a first mortgage lien, addressing, but not limited to,
the following matters:
(i) the liens of this Mortgage and the Parity Indebtedness
shall be of equal priority, PARI PASSU;
(ii) an Event of Default under this Mortgage shall constitute
an "Event of Default" under the Parity Indebtedness and vice versa;
(iii) if either Creditor declares that an Event of Default has
occurred, it shall consult with the other Creditor prior to the exercise of
any remedy;
(iv) each Creditor shall be entitled to notice from the other
Creditor of any default by Mortgagor under each other Creditor's financing
documents and shall be entitled to a reasonable period within which to cure
any such default;
(v) all amounts received by either Creditor upon the exercise
of any remedies by reason of an Event of Default by Mortgagor shall be
applied in the following order of priority: FIRST, to the reasonable costs
of enforcement and collection incurred by such creditor; SECOND, to the PRO
RATA payment, on a PARI PASSU basis, of the following amounts under the
Creditors' respective financing documents:
A. accrued and unpaid interest and premium, if any;
B. repayment of outstanding principal; and
C. payment of any other amounts then owing under each
financing documents;
<PAGE>
and THIRD to Mortgagor.
38. SUBORDINATE INDEBTEDNESS. Mortgagor may, in its sole
discretion and without the approval of Mortgagee, further encumber or
mortgage the Premises, or any part thereof, or any interest therein without
the prior written consent of Mortgagee. Any such indebtedness secured by a
mortgage on the Premises or any part thereof or interest therein is
referred to herein as "Subordinate Indebtedness" any mortgage or similar
security instrument securing Subordinate Indebtedness is referred to herein
as a "Subordinate Mortgage." A fully executed counterpart of each
Subordinate Mortgage shall be delivered to Mortgagee by Mortgagor within
ten (10) days after the execution and delivery thereof by Mortgagor. Each
Subordinate Mortgage shall contain an express covenant to the effect that
notwithstanding any other provision of such Subordinate Mortgage, it is in
all respects subject and subordinate to the lien and terms, provisions,
agreements, covenants and conditions of this Mortgage and that the holder
of such Subordinate Mortgage will upon demand confirm the subordination of
such Subordinate Mortgage to the lien and terms, covenants and conditions
of this Mortgage, as hereinafter extended, renewed, modified, replaced or
consolidated. In addition, the holder of each Subordinated Mortgage shall
agree with Mortgagee as follows:
(a) Mortgagee shall be entitled to notice from such holder of
any default by Mortgagor under the Subordinate Mortgage and shall be
entitled to a reasonable period within which to cure any such
default; and
(b) Such holder shall agree that it will not, without at
least thirty (30) days' prior written notice to Mortgagee, (i) make any
request or demand for, accelerate or bring any action with respect to, the
payment or performance of andy Subordinated Indebtedness, (ii) bring any
action to or otherwise enforce any judgment or lien against Mortgagor or
its assets, (iii) seize any property of Mortgagor, or (iv) institute, or
join in any petition for, any insolvency, bankruptcy, receivership or
similar proceeding against Mortgagor; except that any such notice of an
action pursuant to clause (iv) above shall be given 90 days prior thereto.
39. GOVERNING LAW. This Mortgage and the Loan Agreement secured
hereby are to be construed according to the laws of the Commonwealth of
Massachusetts.
40. HAZARDOUS SUBSTANCES. Mortgagor hereby represents and warrants
that neither Mortgagor nor any of its agents, contractors or employees has
released or discharged any "hazardous wastes" or "oil" from or onto the
Premises, and except for those hazardous wastes disclosed in the August
1990 report entitled "Phase I - Limited Site Investigation - Harborside
<PAGE>
Development - Phase C - East Boston, Massachusetts (File No. 117/19.11)
prepared by Goldberg-Zoino & Associates, Inc. (the "Environmental
Report"), Mortgagor is unaware of the existence on the Premises as of the
date hereof of any "hazardous wastes" or "oil." The Mortgagor further
represents and warrants and covenants and agrees that:
(a) Except to the extent disclosed in the Environmental
Report, to the best of its knowledge neither the Mortgagor nor any person
for whose conduct the Mortgagor is responsible ever:
(i) owned, occupied, or operated a site or vessel on
which any hazardous material or oil was or is stored (except if such
storage was or is in compliance with all laws, ordinances, and regulations
pertaining thereto) transported, or disposed of (the terms "hazardous
substances," "site," "vessel," "hazardous material," and "hazardous
wastes," respectively, being used in this Section with the meaning given
those terms in the Federal Comprehensive Environmental Response,
Compensation and liability Act of 1980, 42 U.S.C. Sec. 9601 as amended ET
SEQ., Massachusetts General Laws, Chapter 21C, and the regulations
promulgated thereunder, 310 C.M.R. Sec. 30.00 ET SEQ., as amended, and
Massachusetts General laws, Chapter 21E, as amended);
(ii) directly or indirectly transported, or arranged for
transport, of any hazardous material or oil (except if such transportation
was or is in compliance with all laws, ordinances and regulations
pertaining thereto);
(iii)caused or was legally responsible for any release,
or threat of release, of any hazardous material or oil;
(iv) received notification from any federal, state or
other governmental authority of: any potential, known, or threat of
release of any hazardous material or oil on or from the Premises or any
other site or vessel owned, occupied, or operated either by the Mortgagor
or any person for whose conduct the Mortgagor is responsible or whose
liability may result in a lien on the Premises; or the incurrence of any
expense or loss by such governmental authority, or by any other person, in
connection with the assessment, containment, or removal of any release, or
threat of release, of any hazardous material or oil from the Premises or
any such site or vessel.
<PAGE>
(b) To the best of its knowledge no hazardous material or oil
was ever, or is now, stored on (except in compliance with all laws,
ordinances, and regulations pertaining thereto and except to the extent
disclosed in the Environmental Report, transported, or disposed of on the
Premises.
(c) The Mortgagor shall:
(i) not store (except in compliance with all laws,
ordinances, and regulations pertaining thereto), or dispose of any
hazardous material or oil on the Premises, or on any other site or vessel
owned, occupied, or operated either by the Mortgagor, or by any person for
whose conduct the Mortgagor is responsible;
(ii) neither directly nor indirectly transport or
arrange for the transport of any hazardous material or oil (except in
compliance with all laws, ordinances, and regulation pertaining thereto);
and
(iii)provide the Mortgagee with written notice: (x) upon
the Mortgagor's obtaining knowledge of any potential or known release, or
threat of release, of any hazardous material or oil at or from the Premises
other than or in addition to the matters disclosed in the Environmental
Report, or any other site or vessel owned, occupied, or operated by the
Mortgagor or by any person for whose conduct the Mortgagor is responsible
or whose liability may result in a lien on the Premises; (y) upon the
Mortgagor's receipt of any notice to such effect from any federal, state,
or other governmental authority; and (z) upon the Mortgagor's obtaining
knowledge of any incurrence of any expense or loss by such governmental
authority in connection with the assessment, containment, or removal of any
hazardous material or oil for which expense or loss the Mortgagor may be
liable or for which expense a lien may be imposed on the Premises.
(d) The Mortgagor shall indemnify, defend, and hold the
Mortgagee harmless of and from any claim brought or threatened against the
Mortgagee by the Mortgagor, any guarantor or endorser of the obligations of
Mortgagor to Mortgagee under the Basic Documents, or any governmental
agency or authority or any other person (as well as from attorneys'
reasonable fees and expenses in connection therewith) on account of the
presence of hazardous material or oil on the Premises, or the failure by
the Mortgagor to comply with the terms and provisions hereof (each of which
may be defended, compromised, settled, or pursued by the
<PAGE>
Mortgagee with counsel of the Mortgagee's selection, but at the expense of
Mortgagor). The within indemnification shall survive satisfaction of the
Mortgagor's obligations under the Basic Documents or termination, release,
or discharge executed by the Mortgagee in favor of the Mortgagor.
(e) In the event that Mortgagor fails to comply with the
requirements of any applicable federal, state or other governmental law
with respect to the treatment, disposal or storage of hazardous waste on
the Premises, Mortgagee may at his election, but without obligation to do
so, take any and all actions that it deems necessary to cure said failure
of compliance and any and all amounts paid as a result thereof, together
with interest thereon at the Involuntary Rate from the date of payment,
shall be immediately due and payable by Mortgagor to Mortgagee, and until
paid shall be added to and become part of the principal debt secured hereby
and said amount may be collected as part of said principal debt in any suit
hereon or upon the Basic Documents; or Mortgagee, by the payment of any
assessment, claim or change, may, if it sees fit, be thereby subrogated to
the Commonwealth of Massachusetts, but such payment shall not be deemed to
relieve Mortgagor from any default hereunder or impair any right or remedy
with respect thereto.
41. NO PERSONAL LIABILITY. No partner of Mortgagor, other than
LHA-II, Inc. as sole general partner, and no officer, employee or agent of
Mortgagor, and no stockholder, director, officer, employee or agent of any
partner of Mortgagor, including for this purpose LHA-II, Inc. as sole
general partner of Mortgagor, shall be personally liable for Mortgagor's
obligations under this Mortgage, the Loan Agreement or the Other Basic
Documents.
42. JOINDER BY LANDLORD. Pursuant to the Ground Lease, and as
between the landlord and the tenant thereunder, the holder of the tenant's
interest under the Ground Lease owns, during the term of the Ground Lease,
the Improvements; Mortgagor, as tenant, shall own any Improvements until
the termination of Mortgagor's occupancy of the Project or the expiration
of the Lease Term, whichever occurs later; provided, however, that, without
limiting any of Mortgagor's rights to use and obligations to maintain the
entire Project and all Improvements, the Landlord, for purposes of M.G.L.
Chapter 143, Section 3A, is deemed to have retained title to an undivided
1/1000 interest in the Improvements (the "Landlord's Retained Interest").
For the purpose of confirming its agreement in the Ground Lease that
the Landlord's Retained Interests are fully subject and subordinate to the
lien of this Mortgage, the Landlord hereby covenants and agrees for the
benefit of Mortgagee as follows:
<PAGE>
(a) The Landlord hereby grants with Mortgage Covenants, to
Mortgagee, all of the Landlord's right, title and interest in and to the
Landlord's Retained Interest. Upon the breach of any conditions contained
in this Mortgage, including, without limitation, the existence of any Event
of Default, the holder of this Mortgage may exercise any and all of the
remedies set forth in this Mortgage, including, without limitation, the
Statutory Power of Sale, with respect to the Landlord's Retained Interest.
(b) For so long as this Mortgage remains undischarged of
record:
(i) The Landlord agrees that the Landlord shall not sell,
transfer, lease, assign, pledge, mortgage, encumber, grant a security
interest in, or otherwise dispose of the Landlord's Retained Interest or
any part thereof; and
(ii) The Landlord shall forbear from exercising any remedies
that it may have on account of any default by Mortgagor under the Ground
Lease in order to permit the Trustee to have a reasonable time to exercise
any of its remedies arising under this Mortgage on account of such default
by Mortgagor under the Ground Lease, including, if appropriate, the
foreclosure of the lien of this Mortgage on the Landlord's Retained
Interest.
By accepting and recording this Mortgage, the Mortgagee has acknowledged
and agreed that the Landlord shall have no personal liability whatsoever
for any of the indebtedness of Mortgagor under the Loan or otherwise
secured by this Mortgage.
This Mortgage is upon the STATUTORY CONDITION and upon the further
condition that all covenants and agreements of Mortgagor contained herein
and in the Loan Agreement shall be seasonably kept, observed, fully
performed and satisfied, for any breach of any of which conditions the
holder hereof shall have the STATUTORY POWER OF SALE.
<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as a
sealed instrument by its duly authorized representative as of the day and
year first above written.
LOGAN HARBORSIDE ASSOCIATES II
LIMITED PARTNERSHIP
By LHA-II, Inc.
Its General Partner
By /s/ Anthony Pangaro
----------------------------
Anthony Pangaro
Its President
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss: December 20, 1990
Then personally appeared the above-named Anthony Pangaro, known
to me to be the President of LHA-II, Inc., and acknowledged that he
executed the foregoing instrument on behalf of said corporation as general
partner of Logan Harborside Associates II Limited Partnership, as his free
act and deed, and that he was duly authorized to act on behalf of said
corporation as general partner, before me
/s/ Thomas G. Schnorr
-----------------------
Notary Public
My commission expires:
Stamp: Thomas G. Schnorr, Notary Public
My Commission Expires March 16, 1995
<PAGE>
JOINDER BY LANDLORD
The undersigned, as Landlord under the Ground Lease, joins in the
foregoing Mortgage for the sole purpose of subordinating the Landlord's
Retained Interest in the Improvements to the lien of the Mortgage as
provide in Paragraph 42.
MASSACHUSETTS PORT AUTHORITY
By /s/ Richard A. Giesser
----------------------
Its Chairman
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. December , 1990
Then personally appeared the above-named RICHARD A. GIESSER, known to
be to be the Chairman of the Massachusetts Port Authority, and acknowledged
that he executed the foregoing instrument on behalf of the Massachusetts
Port Authority as his free act and deed, and that he was duly authorized to
act on behalf of the Massachusetts Port Authority, before me
[ executed signature ]
______________________________________
Notary Public
My commission expires:
<PAGE>
6/25/91
FIRST AMENDMENT
to
LEASEHOLD MORTGAGE AND SECURITY AGREEMENT
between
LOGAN HARBORSIDE ASSOCIATES II LIMITED PARTNERSHIP,
as Mortgagor
and
SHAWMUT BANK, N.A., AS TRUSTEE,
as Mortgagee
Upon recording, please return to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: Gregory A. Sandomirsky, Esq.
<PAGE>
6/25/91
FIRST AMENDMENT TO
------------------
LEASEHOLD MORTGAGE AND SECURITY AGREEMENT
-----------------------------------------
THIS FIRST AMENDMENT TO LEASEHOLD MORTGAGE AND SECURITY AGREEMENT
(this "First Amendment") is dated as of June 27, 1991, by and between LOGAN
HARBORSIDE ASSOCIATES II LIMITED PARTNERSHIP, a Massachusetts limited
partnership having an address c/o Macomber Development Associates, One Main
Street, Cambridge, Massachusetts 02142 (the "Mortgagor"), SHAWMUT BANK,
N.A., a national banking association, with its principal office in Boston,
Massachusetts, not individually but in its capacity as Trustee (the
"Trustee" or the "Mortgagee") under that certain Loan and Trust Agreement
(the "Loan Agreement") dated as of December 15, 1990, as amended and
restated as of June 27, 1991, among the Trustee, the Massachusetts Port
Authority (the "Authority"), and Mortgagor, in connection with the issuance
of the $40,000,000 Massachusetts Port Authority Special Project Revenue
Bonds, Series 1990 (Harborside Hyatt Conference Center and Hotel Project)
(the "Bonds").
Reference is made to the following facts:
A. Pursuant to that certain Loan and Trust Agreement dated as of
December 15, 1990, among the Trustee, the Authority and Mortgagor, in
connection with the issuance of the Bonds the Authority, in its capacity as
issuer of the Bonds, loaned to Mortgagor the proceeds of the sale of the
Bonds (the "Loan") to finance the acquisition, construction, equipping,
furnishing and initial operation of the Project, subject to the condition
that such proceeds were to be held in escrow until June 27, 1991, upon
which date the Bonds were either subject to mandatory tender for redemption
or to be remarketed and purchased in lieu of such redemption. The
obligation of Mortgagor to repay the Loan is secured, among other
collateral, by a certain Leasehold Mortgage and Security Agreement between
Mortgagor, as mortgagor, and Trustee, as mortgagee, dated as of December
15, 1990, recorded with the Suffolk County Registry of Deeds at Book 16656,
Page 1, and filed with the Suffolk County Registry District of the Land
Court as Document No. 472084 and noted on Certificate of Title No. 297 (the
"Original Mortgage").
B. Since the date of execution and delivery of the Original
Mortgage, certain documents referenced therein have been modified in
connection with the remarketing of the Bonds. Accordingly, the parties
hereto are entering into this First Amendment for the purpose of updating
the definitions of certain defined terms used therein.
C. Capitalized terms used in this First Amendment and not
otherwise defined shall have the meanings ascribed to them in the Original
Mortgage.
NOW THEREFORE, in consideration of the foregoing recitals, and as a
material inducement for the trustee to enter the amended and restated Loan
Agreement, and for the Bondholders (as defined
<PAGE>
6/25/91
in the Loan Agreement) to purchase the remarketed Bonds, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree to amend the Original
Mortgage as follows:
1. NEW DEFINITIONS. As used in the Original Mortgage, the
following terms shall have the following new meanings, which new meanings
shall supersede those originally set forth in the Original Mortgage:
"Architect's Consent to Assignment" shall mean the Agreement With
Respect to and Assignment of Architect's Contract, dated as of June 27,
1991, between Mortgagor and the Architect for the benefit of Mortgagee, as
additional security for the Loan.
"Assignment of Contracts" shall mean the Collateral Assignment of
Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated
as of December 15, 1990, made by Mortgagor to Mortgagee, as additional
security for the Loan.
"Assignment of Management Agreement" shall mean the Collateral
Assignment of Management Agreement, dated as of December 15, 1990, made by
Mortgagor to Mortgagee, as additional security for the Loan.
"Assignment of Rents" shall mean the Collateral Assignment of Rents
and Leases, dated as of December 15, 1990, made by Mortgagor to Mortgagee,
as additional security for the Loan.
"Construction Inspection Agreement" shall mean the agreement dated as
of June 27, 1991, between Mortgagor and the Construction Inspector with
respect to inspection of the construction of the Project on behalf of
Mortgagee and the performance of certain other work for mortgagee in
connection with the construction of the Project.
"Disbursement Agreement" shall mean the Disbursement Agreement dated
as of December 15, 1990, as amended and restated as of June 27, 1991,
between Mortgagor and the Trustee, as the same may from time to time be
amended, supplemented or otherwise modified.
"Ground Lease" shall have the meaning specified in Recital Paragraph
F of the Original Mortgage, as amended by a certain First Amendment to
Ground Lease for Phase C of the Bird Island Flats Development dated as of
June 27, 1991, between Mortgagor and the Authority.
"Loan Agreement" shall mean the Loan and Trust Agreement dated as of
December 15, 1990, as amended and restated as of June 27, 1991, among
Mortgagor, the Mortgagee and the Authority, as such Loan and Trust
Agreement may from time to time be amended, supplemented or otherwise
modified.
"Management Agreement" means the agreement between Mortgagor and
Manager dated March 15, 1990, on the cover sheet and dated as
<PAGE>
6/25/91
of February 1, 1990, in the text as supplemented by a letter agreement with
respect to the FFE Budget process dated March 15, 1990, with respect to the
management and operation of the Project, as further amended by a First
Amendment to Management Agreement dated as of June 27, 1991, as such
Management Agreement may from time to time be amended, supplemented,
otherwise modified or replaced.
"Mortgage" shall mean the Original Mortgage, as amended by this First
Amendment.
2. Paragraph 37 ("Parity Indebtedness") of the Original Mortgage
is amended by deleting subparagraph (iv) thereof (appearing on page 38) and
substituting in place thereof the following new subparagraph (iv):
(iv) if Parity Indebtedness is incurred for the purpose of
making improvements or betterments to the Project, an independent certified
accountant (or another independent consultant reasonably satisfactory to
Mortgagee) shall have provided a certificate stating that the following
coverage tests shall be satisfied:
(A) for at least 12 consecutive months during the 24-
month period prior to the closing of the Parity Indebtedness
the net revenues of the Project were not less than 125 percent of the
aggregate maximum annual debt service on both the Bonds and any previously
issued Parity Indebtedness then Outstanding; and
(B) based upon reasonable assumptions, the net revenues
of the Project for at least the 5-year period following the completion of
the improvements or betterments being financed by the Parity Indebtedness
shall be not less than 125 percent of the sum of (x) the aggregate maximum
annual debt service on the Bonds to be Outstanding during such 5-year
period and (y) the aggregate maximum annual debt service on the Parity
Indebtedness to be outstanding during such 5-year period.
3. Pursuant to the First Amendment to Ground Lease for Phase C of
the Bird Island Flats Development dated as of June 27, 1991, the initial
location of the so-called Off-Premises Parking Site(s) has changed from the
location on Zone 2 shown on Schedule P to the Original Mortgage. Such new
initial location of the Off-Premises Parking Site(s) is now situated
partially on Zone 2 and partially on Zone 3R, as approximately shown on the
new Schedule P (6/27/91 Rev.) attached to this First Amendment.
4. Except as amended hereby, the Original Mortgage remains
unchanged and in full force and effect.
IN WITNESS WHEREOF, each of Mortgagor and Mortgagee have executed
this Mortgage as a sealed instrument by their duly
<PAGE>
6/25/91
authorized representative as of the day and year first above written.
Mortgagor: LOGAN HARBORSIDE ASSOCIATES II
LIMITED PARTNERSHIP
By: LHA-II, Inc.
Its General Partner
By: /s/ ANTHONY PANGARO
----------------------------
Anthony Pangaro
Its President
Mortgagee: SHAWMUT BANK, N.A., AS TRUSTEE
By: /S/ LEE MAC DONALD
----------------------------
Its Assistant Vice President
Hereunto duly authorized
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. June 27, 1991
Then personally appeared the above-named Anthony Pangaro, known to me
to be the President of LHA-II, Inc., and acknowledged that he executed the
foregoing instrument on behalf of said corporation as general partner of
Logan Harborside Associates II Limited Partnership, as his free act and
deed, and that he was duly authorized to act on behalf of said corporation
as general partner, before me
/S/ THOMAS G. SCHNORR
---------------------------------------
Thomas G. Schnoor, Notary Public
My commission expires: March 16, 1995
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. June 26, 1991
Then personally appeared the above-named Lee Mac Donald, known to me
to be the Assistant Vice President of Shawmut Bank, N.A., and acknowledged
that she executed the foregoing instrument on behalf of said corporation as
trustee, as her free act and deed, and that she was duly authorized to act
on behalf of said corporation, before me
[ executed signature ]
---------------------------------------
Notary Public
My commission expires: December 2, 1994
<PAGE>
6/25/91
JOINDER BY LANDLORD
The undersigned, as Landlord under the Ground Lease, joins in the
foregoing First Amendment for the sole purpose of consenting thereto.
MASSACHUSETTS PORT AUTHORITY
By: /S/ GEORGE A. O'BRIEN
------------------------------
Its: Secretary-Treasurer
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. June 26, 1991
Then personally appeared the above-named George A. O'Brien, known to
me to be the Secretary-Treasurer of the Massachusetts Port Authority, and
acknowledged that he executed the foregoing instrument on behalf of the
Massachusetts Port Authority as his free act and deed, and that he was duly
authorized to act on behalf of said corporation, before me.
[ executed signature ]
---------------------------------------
Notary Public
My commission expires: March 13, 1992
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH
REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,024
<SECURITIES> 0
<RECEIVABLES> 6,612
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,086
<PP&E> 475,202
<DEPRECIATION> (2,431)
<TOTAL-ASSETS> 499,458
<CURRENT-LIABILITIES> 7,339
<BONDS> 43,456
<COMMON> 152
0
0
<OTHER-SE> 233,066
<TOTAL-LIABILITY-AND-EQUITY> 499,458
<SALES> 0
<TOTAL-REVENUES> 11,727
<CGS> 0
<TOTAL-COSTS> 5,917
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,289
<INCOME-PRETAX> 4,805
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,805
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<CHANGES> 0
<NET-INCOME> 4,805
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
