SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 1-9317
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland No. 04-6558834
(State of Incorporation) (I.R.S. Employer Identification No.)
400 Centre Street, Newton, Massachusetts 02158
(Address of principal executive office) (Zip Code)
(617) 332-3990
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
Number of Common Shares outstanding at the latest practicable date,
May 5, 1995: 59,180,166 shares of beneficial interest, $.01 par
value.<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
FORM 10-Q
March 31, 1995
INDEX
PART I Financial Information Page
Item 1. Financial Statements
Balance Sheets - December 31, 1994 and
March 31, 1995 1
Statements of Income - Quarters Ended
March 31, 1994 and 1995 2
Statements of Cash Flows - Quarters Ended
March 31, 1994 and 1995 3
Notes to Financial Statements 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. Other Information
Item 6. Exhibits and reports on Form 8-K 10
Signatures<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
1994 1995
ASSETS
Real estate properties, at cost:
Land $ 63,186 $ 89,742
Buildings and improvements 609,897 772,209
-------- ----------
673,083 861,951
Less accumulated depreciation 39,570 41,405
-------- ----------
633,513 820,546
Real estate mortgages and notes, net 133,477 156,610
Cash and cash equivalents 59,766 30,864
Interest and rent receivable 4,712 6,265
Deferred interest and finance costs,
net, and other assets 8,738 13,657
-------- ----------
$840,206 $1,027,942
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ - $ 150,000
Notes and bonds payable, net 216,513 216,574
Security deposits 3,800 22,740
Due to affiliate 1,508 417
Accounts payable and accrued expenses 16,346 12,691
Shareholders' equity:
Preferred shares of beneficial
interest, $.01 par value,
50,000,000 shares authorized,
none issued - -
Common shares of beneficial interest,
$.01 par value, 100,000,000 shares
authorized, 57,385,000 shares and
59,180,166 shares issued and
outstanding, respectively 574 592
Additional paid-in capital 652,989 677,655
Cumulative net income 168,808 187,116
Dividends (220,332) (239,843)
------- --------
Total shareholders' equity 602,039 625,520
-------- ----------
-1-<PAGE>
$840,206 $1,027,942
======== ==========
</TABLE>
See accompanying notes
-2-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1994 1995
<S> <C> <C>
Revenues:
Rental income $12,470 $19,530
Interest income 5,077 6,462
------- -------
Total revenues 17,547 25,992
------- -------
Expenses:
Interest 1,259 4,131
Depreciation and amortization 2,618 4,615
General, administrative and
advisory 1,020 1,414
------- -------
Total expenses 4,897 10,160
------- -------
Income before gain on sale of
properties 12,650 15,832
Gain on sale of properties 3,994 2,476
------- -------
Net income $16,644 $18,308
======= =======
Weighted average shares
outstanding 44,596 58,554
======= =======
Per share amounts:
Income before gain on sale of
properties $ .28 $ .27
======= =======
Net income $ .37 $ .31
======= =======
</TABLE>
See accompanying notes
-3-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1994 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $16,644 $ 18,308
Adjustments to reconcile net income to
cash provided by operating activities:
Gain on sale of properties ( 3,994) ( 2,476)
Depreciation and amortization 2,618 4,615
Amortization of interest costs 158 266
(Decrease) Increase in security deposits ( 4,500) 1,000
Deferred finance costs ( 2,286) ( 919)
Changes in assets and liabilities:
Increase in interest and
rent receivable and other assets ( 1,365) ( 6,186)
Decrease in accounts payable
and accrued expenses ( 3,126) ( 3,414)
Decrease in due to affiliate ( 445) ( 1,091)
------- --------
Cash provided by operating activities 3,704 10,103
------- --------
Cash flows from investing activities:
Investments in mortgage loans (10,557) ( 11,743)
Repayment of mortgage loans 16,743 8,110
Real estate acquisitions ( 1,399) (170,861)
Sale of real estate 28,400 5,000
Loans to affiliates ( 2,700) -
------- --------
Cash used for investing activities 30,487 (169,494)
------- --------
Cash flows from financing activities:
Proceeds from issuance of shares, net 8,241 -
Proceeds from borrowings 40,000 150,000
Payments on borrowings (40,000) -
Dividends paid (14,758) ( 19,511)
------- --------
Cash (used for) provided by
financing activities (6,517) 130,489
-------- --------
Increase (decrease) in cash and cash equivalents 27,674 ( 28,902)
Cash and cash equivalents at beginning of period 13,887 59,766
------- --------
Cash and cash equivalents at end of period $41,561 $ 30,864
======= ========
-4-<PAGE>
Supplemental cash flow information:
Interest paid $ 1,287 $ 3,302
======= ========
Non-cash activities:
Purchase of real estate $ - ($42,384)
Sale of real estate - 19,500
Issuance of shares - 24,684
Investment in mortgage loan - ( 19,500)
Increase in security deposit - 17,940
</TABLE>
See accompanying notes
-5-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994 and 1995
(dollars in thousands, except per share data)
(Unaudited)
1. Basis of presentation
The financial statements of Health and Retirement Properties Trust
("the Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for interim
periods are not necessarily indicative of the results that may be
expected for the full year.
2. Tax status
The Company is a real estate investment trust under the Internal
Revenue Code of 1986, as amended. Accordingly, the Company expects not
to be subject to federal income taxes on amounts distributed to
shareholders provided it distributes at least 95% of its real estate
investment trust taxable income and meets certain other requirements for
qualifying as a real estate investment trust.
3. Dividends
On March 25, 1995, the Trustees declared a dividend on the Company's
common shares of beneficial interest with respect to the quarter ended
March 31, 1995, of $.34 per share, which will be paid on or about May
31, 1995, to shareholders of record at the close of business on April
27, 1995.
Dividends are principally based on funds from operations which is
defined as net income excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization.
Cash available for distribution may not necessarily equal funds from
operations as the cash flow of the Company is affected by other factors
not included in the funds from operations calculation. Dividends in
excess of net income are a return of capital.
4. Real estate properties
During the first quarter of 1995, the Company acquired nine nursing
properties and 21 Courtyard by Marriott hotels for approximately
$211,264. In addition, the Company sold one nursing property for
$24,500 and realized a gain of approximately $2,476. The hotels were
acquired by a wholly owned subsidary of the Company. The nursing
properties have been leased to an affiliate. These acquisitions were
funded with cash on hand, $150,000 of drawings on the revolving credit
facility and the issuance of 1,777,766 common shares of beneficial
interest. Minimum rent on the new investments is $21,615 per year and
-6-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994 and 1995
(dollars in thousands, except per share data)
(Unaudited)
4. Real estate properties-continued
additional rent is 3%-5% of revenue increases at the properties. The
initial lease term for the properties is approximately 12 years with
several renewal options. The leases on the hotel properties are secured
by a $17,940 security deposit.
During the quarter ended March 31, 1995, the Company provided
improvement financing at existing properties of approximately $2,111.
As of March 31, 1995, the Company has commitments to provide financing
totalling approximately $55,492.
5. Real estate mortgages and notes, net
In connection with the sale of the nursing properties described in
Note 4, the Company provided a $19,500 mortgage due December 31, 2000,
at 11% per annum. During January 1995, the Company provided a $11,500
mortgage secured by four assisted living properties due April 30, 2007
at 11.35%.
During the first quarter of 1995, three mortgage loans, secured by
five nursing properties, with outstanding principal balances totalling
$7,958 were repaid.
6. Indebtedness
On March 15, 1995, the Company increased its existing credit facility
to $200,000. The credit facility will mature in 1998, unless extended
by the parties. Borrowings under the credit facility bear interest, at
the Company's option, at a spread over LIBOR or Prime. At March 31,
1995, $150,000 was outstanding under the credit facility.
7. Concentration of Credit Risk
Approximately 82% of the Company's real estate investments are
invested in health care real estate and approximately 18% are in hotel
real estate. At March 31, 1995, 32% of the Company's real estate
properties, net, and real estate mortgages and notes, net, were subject
to mortgages and/or leases with Marriott International, Inc.,
("Marriott"). The financial statements of Marriott have been filed as
a part of Marriott's Quarterly Report on Form 10-Q, file number 1-12188,
for the quarter ended March 24, 1995.
-7-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994 and 1995
(dollars in thousands, except per share data)
(Unaudited)
8. Subsequent events and pro forma information
On April 3, 1995, the Company purchased and leased 11 nursing
properties and provided mortgage loans on three additional properties to
an existing tenant. The Company's aggregate investment in these
properties is approximately $20,045, and was made on terms substantially
similar to existing leases and mortgages. The minimum rent and interest
from this transaction is approximately $2,351, per annum. The initial
lease term and loans mature on 2007. The Company drew $18,000 on the
revolving credit facility to fund this transaction.
The following summarized Pro Forma Consolidated Statements of Income
assume that all of the Company's real estate financing transactions
during 1994 and 1995, and related financings had occurred of the
beginning of the presented periods and give effect to the Company's
borrowing rates throughout the periods indicated.
The summarized Pro Forma Consolidated Balance Sheet is intended to
present the financial position of the Company as if the transactions
described above and related financing had occurred on March 31, 1995.
These pro forma statements are not necessarily indicative of the
expected results of operations or the Company's financial position for
any future period. Differences could result from, but are not limited
to, additional property investments, changes in interest rates and
changes in the debt and/or equity structure of the Company.
-8-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994 and 1995
(dollars in thousands, except per share data)
(Unaudited)
8. Subsequent events and pro forma information- continued
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, March 31,
1994 1994 1995
(Unaudited)
Pro Forma Consolidated Statements of Income
<S> <C> <C> <C>
Total revenues $123,887 $31,060 $31,965
Total expenses 54,222 14,378 15,539
-------- ------- -------
Net income $ 69,655 $16,682 $16,426
======== ======= =======
Weighted average shares
outstanding 59,180 59,180 59,180
======== ======= =======
Net income per share $ 1.18 $ .28 $ .28
======== ======= =======
</TABLE>
March 31,
1995
(Unaudited)
Pro Forma Consolidated Balance Sheet
Real estate properties, net $ 881,600
Real estate mortgages and notes, net 152,686
Other assets 59,137
----------
Total Assets $1,093,423
==========
Indebtedness $ 429,574
Other liabilities 38,329
Shareholder's equity 625,520
----------
Total Liabilities and Shareholder's Equity $1,093,423
==========
-9-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Total revenues for the quarter ended March 31, 1995, increased to
$25,992,000 from $17,547,000 for the quarter ended March 31, 1994.
Rental income increased to $19,530,000 from $12,470,000 and interest
income increased to $6,462,000 from $5,077,000 during the comparable
period. Rental income increased primarily as a result of new
investments in real estate subsequent to March 31, 1994. Interest
income increased primarily because of the significantly higher cash
balances during the 1995 quarter compared to the 1994 quarter.
Total expenses for the quarter ended March 31, 1995, increased to
$10,160,000 from $4,897,000 for the quarter ended March 31, 1994. The
increase is primarily the result of increases in depreciation and
advisory fees of $1,997,000 and $388,000, respectively. Depreciation
and advisory fees increased as a result of new investments since March
31, 1994. Interest expense increased by $2,872,000 as a result of
increased borrowings and higher interest rates.
Income before gain on sale of properties increased to $15,832,000
or $.27 per share for the 1995 quarter from $12,650,000 or $.28 per
share for the 1994 quarter. The increase in income before gain on sale
of properties is primarily a result of the new investments since March
31, 1994. On a per share basis, income before gain on sale of
properties decreased because 14,457,667 common shares were issued since
March 31, 1994.
The Company bases its dividend primarily on funds from operations
during the quarter. Funds from operations is net income excluding gains
(or losses) from debt restructuring and sales of property, plus
depreciation and amortization. Cash available for distribution may not
necessarily equal funds from operations as the cash flow of the Company
is affected by other factors not included in the funds from operations
calculation. Funds from operations for the 1995 quarter was $20,814,000
or $.36 per share and $15,458,000 or $.35 per share, for the 1994
quarter. The dividends declared which relate to these quarters were
$20,121,000 or $.34 per share in 1995 and $18,932,925 or $.33 per share
in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Assets of the Company increased to $1.03 billion at March 31,
1995 from $840,206,000 at December 31, 1994. The increase is
principally the result of new real estate investments of $213,375,000.
-10-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES - Continued
At March 31, 1995, the Company had $30,864,000 of cash and cash
equivalents, and the ability to borrow up to an additional $50,000,000
under its revolving credit facility. At March 31, 1995, the Company had
outstanding commitments to provide $55,492,000 in financings.
On April 3, 1995, the Company purchased and leased 11 nursing
properties and provided mortgage loans on three additional properties to
an existing tenant. The Company's aggregate investment in these
properties is approximately $20,045,000 and was made on terms
substantially similar to existing leases and mortgages. The Minimum rent
and interest from this transaction is approximately $2,351,000 per
annum. The initial lease term and loans mature on 2007. The Company
drew $18,000,000 on the revolving credit facility to fund this
transaction.
The Company's primary focus is investments in healthcare related
real estate. At March 31, 1995, approximately 82% of the Company's
investments in real estate are health care related and approximately 18%
are hotel related. The Company is evaluating alternatives to limit or
reduce its investments in non-health care related real estate, while
concurrently providing for its shareholders with opportunities to take
advantage in hotel real estate.
The Company is continuing to seek new investments to expand and
diversify its portfolio of leased and mortgaged health care related real
estate. Approximately 78% of the Company's portfolio is leased to or
mortgage financed with eight publicly traded companies. The Company
intends to balance the use of debt and equity in such a manner that the
long term cost of funds borrowed to acquire or mortgage finance
facilities is appropriately matched, to the extend practicable, to the
terms of the investments made with such borrowed funds. As of March 31,
1995, the Company's debt as a percentage of total capitalization was
approximately 36%. Current expenses and dividends are provided for by
funds from operations.
-11-<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Courtyard by Marriott Purchase and Option Agreement (*)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1995.
-12-<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
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 duly authorized.
HEALTH AND RETIREMENT
PROPERTIES TRUST
(Registrant)
<TABLE>
<CAPTION>
<S> <C>
DATE May 12, 1995 BY /s/ David J. Hegarty
David J. Hegarty, President
DATE May 12, 1995 BY /s/ John G. Murray
John G. Murray, Executive
Vice President and Chief
Financial Officer
</TABLE>
-13-<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements of Health and Retirement Properties Trust
for the period ended March 31, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 30,864
<SECURITIES> 0
<RECEIVABLES> 6,265
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,129
<PP&E> 861,951
<DEPRECIATION> 41,405
<TOTAL-ASSETS> 1,027,942
<CURRENT-LIABILITIES> 13,108
<BONDS> 366,574
<COMMON> 592
0
0
<OTHER-SE> 624,928
<TOTAL-LIABILITY-AND-EQUITY> 1,027,942
<SALES> 0
<TOTAL-REVENUES> 25,992
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,131
<INCOME-PRETAX> 15,832
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,308
<EPS-PRIMARY> .31
<EPS-DILUTED> 0
</TABLE>
PURCHASE-SALE AND OPTION AGREEMENT
BY AND AMONG
HMH COURTYARD PROPERTIES, INC. AND
HMH PROPERTIES, INC., as Sellers,
and
HOSPITALITY PROPERTIES, INC.,
as Purchaser
___________________________
February 3, 1995<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreement . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Allocable Purchase Price . . . . . . . . . . . . . . . . 1
1.3 Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Business Day . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Camelback Ground Lease . . . . . . . . . . . . . . . . . 2
1.6 Contracts . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 C-R Offer . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 C-R Option . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Defective Property . . . . . . . . . . . . . . . . . . . 2
1.10 Documents . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Excluded Assets . . . . . . . . . . . . . . . . . . . . 2
1.12 Excluded Offer Properties . . . . . . . . . . . . . . . 2
1.13 Excluded Property Offer . . . . . . . . . . . . . . . . 3
1.14 Exclusion Notice . . . . . . . . . . . . . . . . . . . . 3
1.15 Extension Option Fee . . . . . . . . . . . . . . . . . . 3
1.16 Exercise Notice . . . . . . . . . . . . . . . . . . . . 3
1.17 Fee Properties . . . . . . . . . . . . . . . . . . . . . 3
1.18 FF&E . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 FF&E Reserve . . . . . . . . . . . . . . . . . . . . . . 3
1.20 First Offer Period . . . . . . . . . . . . . . . . . . . 3
1.21 Ground Lease Properties . . . . . . . . . . . . . . . . 3
1.22 Ground Leases . . . . . . . . . . . . . . . . . . . . . 3
1.23 HMH Courtyard . . . . . . . . . . . . . . . . . . . . . 3
1.24 HMH Properties . . . . . . . . . . . . . . . . . . . . . 3
1.25 Host . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26 HPI . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.27 Improvements . . . . . . . . . . . . . . . . . . . . . . 4
1.28 Initial Acquisition Properties . . . . . . . . . . . . . 4
1.29 Initial Acquisition Properties Ground Leases . . . . . . 4
1.30 Initial Acquisition Purchase Price . . . . . . . . . . . 4
1.31 Initial Acquisition Review Period . . . . . . . . . . . 4
1.32 Initial Closing . . . . . . . . . . . . . . . . . . . . 4
1.33 Initial Closing Date . . . . . . . . . . . . . . . . . . 4
1.34 Initial Deferred Purchase Price . . . . . . . . . . . . 4
1.35 Initial Deposit . . . . . . . . . . . . . . . . . . . . 4
1.36 Initial Option Fee . . . . . . . . . . . . . . . . . . . 4
1.37 Initial Properties Management Agreements . . . . . . . . 4
1.38 Initial Surveys . . . . . . . . . . . . . . . . . . . . 4
1.39 Initial Title Commitments . . . . . . . . . . . . . . . 4
1.40 Intangible Property . . . . . . . . . . . . . . . . . . 5
1.41 Interest Rate . . . . . . . . . . . . . . . . . . . . . 5
1.42 Jacksonville Ground Lease . . . . . . . . . . . . . . . 5
1.43 LA Airport Ground Lease . . . . . . . . . . . . . . . . 5
1.44 Leases . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.45 Management Agreement Amendments . . . . . . . . . . . . 5
1.46 Management Agreements . . . . . . . . . . . . . . . . . 6
1.47 Manager . . . . . . . . . . . . . . . . . . . . . . . . 6<PAGE>
-ii-
1.48 Norwood Ground Lease . . . . . . . . . . . . . . . . . . 6
1.49 Option . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.50 Option Closing . . . . . . . . . . . . . . . . . . . . . 6
1.51 Option Closing Date . . . . . . . . . . . . . . . . . . 6
1.52 Option Deferred Purchase Price . . . . . . . . . . . . . 6
1.53 Option Deposit . . . . . . . . . . . . . . . . . . . . . 6
1.54 Option Period . . . . . . . . . . . . . . . . . . . . . 6
1.55 Option Properties . . . . . . . . . . . . . . . . . . . 6
1.56 Option Properties Ground Leases . . . . . . . . . . . . 6
1.57 Option Properties Management Agreements . . . . . . . . 6
1.58 Option Purchase Price . . . . . . . . . . . . . . . . . 6
1.59 Option Review Period . . . . . . . . . . . . . . . . . . 7
1.60 Option Surveys . . . . . . . . . . . . . . . . . . . . . 7
1.61 Option Title Commitments . . . . . . . . . . . . . . . . 7
1.62 Permitted Encumbrances . . . . . . . . . . . . . . . . . 7
1.63 Property . . . . . . . . . . . . . . . . . . . . . . . . 7
1.64 Properties . . . . . . . . . . . . . . . . . . . . . . . 7
1.65 Purchaser . . . . . . . . . . . . . . . . . . . . . . . 7
1.66 Real Property . . . . . . . . . . . . . . . . . . . . . 7
1.67 Scottsdale Ground Lease . . . . . . . . . . . . . . . . 7
1.68 Sellers . . . . . . . . . . . . . . . . . . . . . . . . 7
1.69 Sellers' Knowledge . . . . . . . . . . . . . . . . . . . 7
1.70 Stoughton Ground Lease . . . . . . . . . . . . . . . . . 8
1.71 Syracuse Ground Lease . . . . . . . . . . . . . . . . . 8
1.72 Tenant Leases . . . . . . . . . . . . . . . . . . . . . 8
1.73 Title Company . . . . . . . . . . . . . . . . . . . . . 8
1.74 Willow Grove Ground Lease . . . . . . . . . . . . . . . 8
SECTION 2. PURCHASE-SALE; GRANT OF OPTION; DILIGENCE . . . . . . . 8
2.1 Purchase-Sale . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Grant of Option . . . . . . . . . . . . . . . . . . . . . 8
2.3 Option Period . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Diligence Inspections . . . . . . . . . . . . . . . . . . 10
2.5 Defective Properties . . . . . . . . . . . . . . . . . . 11
2.6 Title Matters . . . . . . . . . . . . . . . . . . . . . . 13
2.7 Survey Matters . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . 16
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Initial Acquisition Purchase Price . . . . . . . . . . . 17
3.3 Option Purchase Price . . . . . . . . . . . . . . . . . . 18
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE . . . . . 19
4.1 Closing Documents . . . . . . . . . . . . . . . . . . . . 19
4.2 Condition of Properties . . . . . . . . . . . . . . . . . 21
4.3 Title Policies . . . . . . . . . . . . . . . . . . . . . 21
4.4 Opinions of Counsel . . . . . . . . . . . . . . . . . . . 21
4.5 FF&E Reserve . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . 22
4.7 Hart Scott Rodino . . . . . . . . . . . . . . . . . . . . 22
4.8 Other Approvals . . . . . . . . . . . . . . . . . . . . . 22<PAGE>
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SECTION 5. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE . . . . . . 22
5.1 Exercise of Option . . . . . . . . . . . . . . . . . . . 23
5.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . 23
5.3 Closing Documents . . . . . . . . . . . . . . . . . . . . 23
5.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . 23
5.5 Hart Scott Rodino . . . . . . . . . . . . . . . . . . . . 23
5.6 Other Approvals . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . 23
6.1 Status and Authority of the Sellers . . . . . . . . . . . 23
6.2 Action of the Sellers . . . . . . . . . . . . . . . . . . 24
6.3 No Violations of Agreements . . . . . . . . . . . . . . . 24
6.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . 24
6.5 Existing Leases, Agreements, Etc. . . . . . . . . . . . . 24
6.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 24
6.7 Utilities, Etc. . . . . . . . . . . . . . . . . . . . . . 25
6.8 Compliance With Law . . . . . . . . . . . . . . . . . . . 25
6.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.10 Not A Foreign Person . . . . . . . . . . . . . . . . . . 25
6.11 Hazardous Substances . . . . . . . . . . . . . . . . . . 25
6.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 26
6.13 Operating Statements . . . . . . . . . . . . . . . . . . 26
6.14 Ground Leases . . . . . . . . . . . . . . . . . . . . . . 26
6.15 Management Agreements . . . . . . . . . . . . . . . . . . 26
6.16 FF&E Reserve . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . 28
7.1 Status and Authority of the Purchaser . . . . . . . . . . 28
7.2 Action of the Purchaser. . . . . . . . . . . . . . . . . 28
7.3 No Violations of Agreements . . . . . . . . . . . . . . . 28
7.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8. COVENANTS OF THE SELLERS . . . . . . . . . . . . . . . 29
8.1 Compliance with Laws, Etc. . . . . . . . . . . . . . . . 29
8.2 Approval of Agreements . . . . . . . . . . . . . . . . . 29
8.3 Compliance with Agreements . . . . . . . . . . . . . . . 29
8.4 Estoppel Certificates . . . . . . . . . . . . . . . . . . 29
8.5 Notice of Material Changes or Untrue
Representations . . . . . . . . . . . . . . . . . . 29
8.6 Operation of Properties . . . . . . . . . . . . . . . . . 30
SECTION 9. APPORTIONMENTS . . . . . . . . . . . . . . . . . . . . 30
9.1 Real Property Apportionments . . . . . . . . . . . . . . 30
9.2 Closing Costs . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Hart Scott Rodino . . . . . . . . . . . . . . . . . . . . 30
SECTION 10. OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . 31
10.1 C-R Rights of First Offer . . . . . . . . . . . . . . . 31
10.2 Excluded Property Right of First Offer . . . . . . . . . 32<PAGE>
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10.3 Rights of First Refusal . . . . . . . . . . . . . . . . 32
10.4 Negotiations Regarding California Properties . . . . . . 33
SECTION 11. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 33
11.1 Default by the Sellers . . . . . . . . . . . . . . . . . 33
11.2 Default by the Purchaser . . . . . . . . . . . . . . . . 34
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 34
12.1 Agreement to Indemnify . . . . . . . . . . . . . . . . . 34
12.2 Brokerage Commissions . . . . . . . . . . . . . . . . . 35
12.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . 36
12.4 Corporate Approvals . . . . . . . . . . . . . . . . . . 36
12.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . 36
12.6 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . 38
12.7 Assignment; Successors and Assigns . . . . . . . . . . . 38
12.8 Severability . . . . . . . . . . . . . . . . . . . . . . 38
12.9 Counterparts, Etc. . . . . . . . . . . . . . . . . . . . 39
12.10 Governing Law . . . . . . . . . . . . . . . . . . . . . 39
12.11 Performance on Business Days . . . . . . . . . . . . . . 39
12.12 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . 39
12.13 Section and Other Headings . . . . . . . . . . . . . . . 40
Schedule A - Allocable Purchase Prices of Acquisition
Properties
Schedule B - Allocable Purchase Prices of Option Properties
Schedule C-1-21 - Legal Descriptions of Initial
Acquisition Properties
Schedule D-1-33 - Legal Descriptions of Option Properties
Schedule E - Form of Surveyor's Certificate
Schedule F - Form of Lease
Schedule G - Initial Acquisition Properties Management
Agreements
Schedule H - Option Properties Management Agreements
Schedule I - Operating Statements
Schedule J - FF&E Reserve Amounts
Schedule K - Excluded Offer Properties<PAGE>
PURCHASE-SALE AND OPTION AGREEMENT
THIS PURCHASE-SALE AND OPTION AGREEMENT is made as of the 3rd day
of February, 1995, by and among HMH COURTYARD PROPERTIES, INC., a
Delaware corporation ("HMH Courtyard"), and HMH PROPERTIES, INC., a
Delaware corporation ("HMH Properties"), as sellers, and HOSPITALITY
PROPERTIES, INC., a Delaware corporation, as purchaser ("HPI").
WITNESSETH:
WHEREAS, HMH Courtyard and HMH Properties are the owners and
holders of the Initial Acquisition Properties and the Option Properties
(these and other capitalized terms used and not otherwise defined herein
having the meanings ascribed to such terms in Section 1); and
WHEREAS, the Purchaser desires to purchase the Initial Acquisition
Properties, acquire an option to purchase the Option Properties and
acquire certain other rights of first offer, as more fully set forth
below; and
WHEREAS, the Sellers are willing to sell the Initial Acquisition
Properties to the Purchaser, grant to the Purchaser an option to acquire
the Option Properties and grant to the Purchaser certain other rights of
first offer, subject to and upon the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, the Sellers and
the Purchaser hereby agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings
set forth below or in the Section of this Agreement referred to below:
1.1 "Agreement" shall mean this Purchase-Sale and Option
Agreement, together with Schedules A through J attached hereto, as it
and they may be amended from time to time as herein provided.
1.2 "Allocable Purchase Price" shall mean, with respect to any of
the Initial Acquisition Properties, the amount set forth in Schedule A
opposite the name of such property, and, with respect to the Option
Properties, the amount set forth in Schedule B opposite the name of such
property.
1.3 "Assets" shall mean, with respect to any Property,
collectively, all of the Real Property, the FF&E, the Contracts, the
Documents, the Improvements, the Intangible Property and the Tenant
Leases now owned or hereafter acquired by the Sellers in connection with
or relating to such Property other than any Excluded Assets with respect
to such Property. <PAGE>
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1.4 "Business Day" shall mean any day other than a Saturday,
Sunday or any other day on which banking institutions in The
Commonwealth of Massachusetts or the State of Maryland are authorized by
law or executive action to close.
1.5 "Camelback Ground Lease" shall mean the Marriott Hotel Land
Lease, dated October 5, 1988, between AE Town & Country Limited
Partnership, as landlord, and Marriott Corporation, as tenant, as the
same has been amended.
1.6 "Contracts" shall mean, with respect to any Property, all
hotel licensing agreements and other service contracts, equipment
leases, booking agreements and other arrangements or agreements to which
the Sellers are a party affecting the ownership, repair, maintenance,
management (including, without limitation, the Management Agreements),
leasing or operation of such Property, to the extent the Sellers'
interest therein is assignable or transferable.
1.7 "C-R Offer" shall have the meaning given such term in Section
10.1.
1.8 "C-R Option" shall mean the rights and options granted to the
Purchaser pursuant to Section 10.1.
1.9 "Defective Property" shall have the meaning given such term in
Section 2.5(a).
1.10 "Documents" shall mean, with respect to any Property, all
books, records and files relating to the leasing, maintenance,
management or operation of such Property belonging to the Sellers.
1.11 "Excluded Assets" shall mean, with respect to any Property,
(i) except as otherwise provided in the Leases or the Management
Agreements, any right, title or interest in the name or signage
containing the name "Marriott," "Courtyard" and other marks used by the
Sellers, Host, the Manager or any of their subsidiaries or affiliates,
(ii) all property owned by the Sellers, Host, the Manager or any of
their subsidiaries or affiliates, not normally located at such Property
and used, but not exclusively, in connection with the operation of such
Property and (iii) any other property which is the property of the
Manager or an affiliate or subsidiary of the Manager, including, without
limitation, the Proprietary Marks, Proprietary Signage and Software (as
such terms are defined in the Management Agreement) and all computer
equipment proprietary to the Manager or any affiliate or subsidiary of
the Manager.
1.12 "Excluded Offer Properties" shall have the meaning given such
term in Section 10.2.
1.13 "Excluded Property Offer" shall have the meaning given such
term in Section 10.2.
1.14 "Exclusion Notice" shall have the meaning given such term in
Section 2.2(b).<PAGE>
-3-
1.15 "Extension Option Fee" shall mean the sum of Three Million
Dollars ($3,000,000), payable in accordance with Section 3.3(c).
1.16 "Exercise Notice" shall have the meaning given such term in
Section 2.3.
1.17 "Fee Properties" shall mean, with respect to the Initial
Acquisition Properties, all of such properties identified on Schedule A
other than those denoted Ground Lease Properties, and, with respect to
the Option Properties, all of such properties identified on Schedule B
other than those denoted Ground Lease Properties.
1.18 "FF&E" shall mean, with respect to any Property, all
appliances, machinery, devices, fixtures, appurtenances, equipment,
furniture, furnishings and articles of tangible personal property of
every kind and nature whatsoever owned by the Sellers and located in or
at, or used in connection with the ownership, operation or maintenance
of such Property.
1.19 "FF&E Reserve" shall have the meaning given such term in the
Management Agreements.
1.20 "First Offer Period" shall mean the period commencing
December 23, 1994 and, if the Purchaser shall not acquire the Option
Properties, expiring February 29, 2000 or, if the Purchaser shall
acquire the Option Properties, expiring February 28, 2005.
1.21 "Ground Lease Properties" shall mean, with respect to the
Initial Acquisition Properties, the properties identified as ground
lease properties on Schedule A, and, with respect to the Option
Properties, the properties identified as ground lease properties on
Schedule B.
1.22 "Ground Leases" shall mean, collectively, the Initial
Acquisition Properties Ground Leases and the Option Properties Ground
Leases.
1.23 "HMH Courtyard" shall have the meaning given such term in the
preambles to this Agreement.
1.24 "HMH Properties" shall have the meaning given such term in
the preambles to this Agreement.
1.25 "Host" shall mean Host Marriott Corporation, a Delaware
corporation.
1.26 "HPI" shall have the meaning given such term in the preambles
to this Agreement.
1.27 "Improvements" shall mean, with respect to any Property, all
buildings, fixtures, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property
with respect to such Property.<PAGE>
-4-
1.28 "Initial Acquisition Properties" shall mean all of the Assets
relating to the properties identified on Schedule A, the legal
descriptions of which are set forth in Schedules C-1 through C-21.
1.29 "Initial Acquisition Properties Ground Leases" shall mean,
collectively, the Camelback Ground Lease, the Stoughton Ground Lease and
the Scottsdale Ground Lease.
1.30 "Initial Acquisition Purchase Price" shall have the meaning
given such term in Section 3.2.
1.31 "Initial Acquisition Review Period" shall mean the period
commencing on the date of this Agreement and expiring forty-five (45)
days thereafter or, if sooner, on the Initial Closing Date.
1.32 "Initial Closing" shall have the meaning given such term in
Section 3.1.
1.33 "Initial Closing Date" shall have the meaning given such term
in Section 3.1.
1.34 "Initial Deferred Purchase Price" shall mean an amount equal
to ten percent (10%) of the Initial Acquisition Purchase Price.
1.35 "Initial Deposit" shall mean the sum of Twenty-Five Million
Dollars ($25,000,000) paid by the Purchaser to the Sellers on or prior
to the date of this Agreement.
1.36 "Initial Option Fee" shall mean the sum of Three Million
Dollars ($3,000,000), payable in accordance with Section 3.2(c).
1.37 "Initial Properties Management Agreements" shall mean the
management agreements between the Sellers and the Manager, with respect
to the Initial Acquisition Properties, which Management Agreements are
more particularly described in Schedule G.
1.38 "Initial Surveys" shall have the meaning given such term in
Section 2.7(a).
1.39 "Initial Title Commitments" shall have the meaning given such
term in Section 2.6(a).
1.40 "Intangible Property" shall mean, with respect to any
Property, all transferable or assignable permits, certificates of
occupancy, operating permits, sign permits, development rights and
approvals, certificates, licenses, warranties and guarantees, rights to
deposits, trade names, service marks, the Contracts, telephone exchange
numbers identified with such Property held by the Sellers, and all other
transferable intangible property, miscellaneous rights, benefits and
privileges of any kind or character with respect to such Property held
by the Sellers other than the Excluded Assets.
1.41 "Interest Rate" shall mean the rate of interest earned by the
Sellers on Merrill Lynch Institutional Fund Account 3215974.<PAGE>
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1.42 "Jacksonville Ground Lease" shall mean the Marriott Hotel
Land Lease, dated November 25, 1986, between Mayo Medical Resources, as
landlord, and Marriott Corporation, as tenant, as the same has been
amended.
1.43 "LA Airport Ground Lease" shall mean the Marriott Hotel Land
Lease, dated as of November 1, 1985, between Oma El Segundo Properties,
as landlord, and Marriott Corporation, as tenant, as the same has been
amended.
1.44 "Leases" shall mean, collectively, the leases to be entered
into between the Purchaser, as landlord, and HMH HPT Courtyard, Inc., an
affiliate of the Sellers, as tenant, with respect to (i) the Initial
Acquisition Properties, and (ii), in the event that the purchase and
sale of the Option Properties shall be consummated pursuant to this
Agreement, the Option Properties, each such lease to be in the form
attached hereto as Schedule F and the Minimum Rent (as defined in the
Leases) payable pursuant to each such lease to be a per annum amount
equal to ten percent (10%) of the Allocable Purchase Price of the
Property demised thereunder.
1.45 "Management Agreement Amendments" shall mean, collectively,
an amendment to each of the Initial Properties Management Agreements to
be entered into on or prior to the Initial Closing Date and to each of
the Option Properties Management Agreements to be entered into on or
prior to the Option Closing Date confirming the Manager's consent to the
purchase and sale contemplated hereunder and providing that, as long as
the Initial Acquisition Properties and/or Option Properties are owned by
the Purchaser and managed by the Manager (i) all renewals of the
Management Agreements may only be exercised with respect to all of such
Properties or none of such Properties; (ii) all calculations of the FF&E
Reserve, expenditures from the FF&E Reserve and Incentive Management
Fees (as defined in the Management Agreements) shall be done on a
consolidated basis for all such Properties; and (iii) in the event any
of the Leases are terminated for any reason, the Purchaser shall have
the right to designate another person as "Owner" under the Management
Agreements subject to the terms and conditions of the Management
Agreements.
1.46 "Management Agreements" shall mean, collectively, the Initial
Properties Management Agreements and the Option Properties Management
Agreements.
1.47 "Manager" shall mean Courtyard Management Corporation, a
Delaware corporation.
1.48 "Norwood Ground Lease" shall mean the Land Lease, dated as of
July 29, 1988, between First Stone Ridge Associates Limited Partnership,
as landlord, and Marriott Corporation, as tenant, as the same has been
amended.
1.49 "Option" shall have the meaning given such term in Section
2.2.<PAGE>
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1.50 "Option Closing" shall have the meaning given such term in
Section 3.1(b).
1.51 "Option Closing Date" shall have the meaning given such term
in Section 3.1(b).
1.52 "Option Deferred Purchase Price" shall mean an amount equal
to ten percent (10%) of the Option Purchase Price.
1.53 "Option Deposit" shall mean the sum of Ten Million Dollars
($10,000,000) to be paid by the Purchaser to the Sellers at the time of
the giving of the Exercise Notice.
1.54 "Option Period" shall mean the period commencing on the date
of this Agreement and expiring on the earlier to occur of the first
anniversary of the Initial Closing Date and February 28, 1996.
1.55 "Option Properties" shall mean all of the Assets relating to
the properties identified on Schedule B, the legal descriptions of which
are set forth in Schedules D-1 through 33.
1.56 "Option Properties Ground Leases" shall mean, collectively,
the Jacksonville Ground Lease, the Norwood Ground Lease, the Willow
Grove Ground Lease, the Syracuse Ground Lease and the LA Airport Ground
Lease.
1.57 "Option Properties Management Agreements" shall mean the
management agreements between the Sellers and the Manager, with respect
to the Option Properties, which Management Agreements are more
particularly described in Schedule H.
1.58 "Option Purchase Price" shall have the meaning given such
term in Section 3.3.
1.59 "Option Review Period" shall mean the period commencing on
the date of the giving of the Exercise Notice and expiring forty-five
(45) days thereafter.
1.60 "Option Surveys" shall have the meaning given such term in
Section 2.7(b).
1.61 "Option Title Commitments" shall have the meaning given such
term in Section 2.6(b).
1.62 "Permitted Encumbrances" shall mean, with respect to any
Property, (a) liens for taxes, assessments and governmental charges with
respect to such Property not yet due and payable or due and payable but
not yet delinquent; (b) applicable zoning regulations and ordinances
provided the same do not prohibit or impair in any material respect use
of such Property as a Marriott Courtyard hotel as currently operated and
constructed; (c) such other nonmonetary encumbrances as do not, in the
Purchaser's reasonable opinion, impair marketability and do not
materially interfere with the use of such Property as a fully
functioning Marriott Courtyard hotel as currently operated and
constructed; (e) the Ground Leases; (f) UCC Financing Statements which<PAGE>
-7-
would be permitted pursuant to the terms of Section 21.9 of the Leases;
and (g) such other nonmonetary encumbrances with respect to such
Property which are not objected to by the Purchaser in accordance with
Sections 2.6 and 2.7.
1.63 "Property" shall mean any one of the Initial Acquisition
Properties or the Option Properties.
1.64 "Properties" shall mean, collectively, the Initial
Acquisition Properties and the Option Properties.
1.65 "Purchaser" shall mean HPI and its permitted successors and
assigns.
1.66 "Real Property" shall mean, with respect to any Property
which is a Fee Property, the real property described in the applicable
Schedule C-1 through 21 or D-1 through 33 to this Agreement, and, with
respect to any Property which is a Ground Lease Property, the leasehold
estate created by the applicable Ground Lease, together with all
easements, rights of way, privileges, licenses and appurtenances which
the Sellers may now own or hereafter acquire with respect thereto.
1.67 "Scottsdale Ground Lease" shall mean the Marriott Hotel Land
Lease, dated as of September 27, 1988, between Mayo Clinic Scottsdale,
as landlord, and Marriott Corporation, as tenant, as the same has been
amended.
1.68 "Sellers" shall mean, jointly and severally, HMH Courtyard
and HMH Properties, collectively.
1.69 "Sellers' Knowledge" shall mean the actual knowledge of Bruce
D. Wardinski, Robert Parsons, Pamela J. Murch, Pamela J. Block and Jerry
Kraisinger after inquiry to Beth Milbrath, Beth Milbrath having been
directed to consult with the general manager of the Property and the
Manager's litigation department, if appropriate, and any other
appropriate representatives of the Manager.
1.70 "Stoughton Ground Lease" shall mean the Marriott Hotel Land
Lease, dated as of August 9, 1988, between Lewis Heafitz, Trustee of
North Stoughton Industrial Park Development Trust, as landlord, and
Marriott Corporation, as tenant, as the same has been amended.
1.71 "Syracuse Ground Lease" shall mean the Marriott Hotel Land
Lease, dated September 5, 1986, between MBF Development Company, as
landlord, and Marriott Corporation, as tenant, as the same has been
amended.
1.72 "Tenant Leases" shall mean, with respect to any Property, all
leases, rental agreements or other agreements (including all amendments
or modifications thereto) which entitle any person to have rights with
respect to the use or occupancy of any portion of such Property.
1.73 "Title Company" shall mean such title insurance company as
shall have been reasonably approved by the Purchaser and the Sellers.<PAGE>
-8-
1.74 "Willow Grove Ground Lease" shall mean the Marriott Hotel
Land Lease, dated 1986, between John C. Bready, Jr., as landlord, and
Marriott Corporation, as tenant, as the same has been amended.
SECTION 2. PURCHASE-SALE; GRANT OF OPTION; DILIGENCE.
2.1 Purchase-Sale. In consideration of the mutual covenants
herein contained, the Purchaser hereby agrees to purchase from the
Sellers and the Sellers hereby agree to sell to the Purchaser, all of
the Sellers' right, title and interest in and to the Initial Acquisition
Properties for the Initial Acquisition Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2 Grant of Option. (a) In consideration of the agreement of
the Purchaser to purchase the Initial Acquisition Properties and the
payment of the Initial Acquisition Purchase Price and for other good and
valuable consideration, provided that the Purchaser shall acquire the
Initial Acquisition Properties in accordance with this Agreement, the
Sellers hereby irrevocably grant to the Purchaser an exclusive (subject
to Section 10.3) right and option (the "Option") to purchase all of the
Option Properties for the Option Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Sellers shall have the right, subject to the limitations
set forth in this paragraph (b), by written notice (the "Exclusion
Notice") to the Purchaser given within five (5) Business Days after the
giving of the Exercise Notice, to exclude from the Option Properties to
be purchased by the Purchaser hereunder certain of such Properties
designated in the Exclusion Notice; provided, however, that in no event
shall the Sellers have the right to reduce the number of Option
Properties purchased by the Purchaser pursuant to the terms of this
Agreement (including pursuant to Section 10.3) to less than twenty-three
(23) in the aggregate. Any Option Properties designated for exclusion
by the Sellers (i) shall be representative and typical of all of the
Option Properties taken as a whole and (ii) shall have rent coverage
(i.e. Operating Profit (as defined in the Management Agreements) less
ground rent divided by Minimum Rent (as defined in the Leases)) within
two (2%) percent of the rent coverage for all of the Option Properties
taken as a whole based upon the historic results for the Option
Properties for the thirteen (13) accounting periods of the Sellers
immediately preceding the Exercise Notice. In the event that the
Purchaser shall give notice to the Sellers prior to the Option Closing
Date that the Purchaser disputes in its reasonable judgment that the
Option Properties designated for exclusion by the Sellers in the
Exclusion Notice satisfy the criteria set forth in clauses (i) and (ii)
preceding, then the Option Properties to be excluded from the sale to
the Purchaser pursuant to this Agreement shall be determined as follows:
first, the Purchaser shall select two (2) Option Properties to be
acquired by the Purchaser pursuant to this Agreement; second, the
Sellers shall select one (1) Option Property to be excluded from the
sale; then, the Purchaser and the Sellers shall repeat steps first and
second until a number of Option Properties to be excluded has been
determined equal in number to that set forth in the Exclusion Notice. <PAGE>
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Failure of the Seller to give the Exclusion Notice within five (5)
Business Days after the giving of the Exercise Notice shall be a waiver
of the Sellers' rights pursuant to this Section 2.2(b) and time shall be
of the essence with respect to the giving of the Exclusion Notice. In
the event that the Sellers shall exclude any Option Properties pursuant
to this Section 2.2(c), the Option Purchase Price shall be reduced by
the aggregate of the Allocable Purchase Prices of all such excluded
Option Properties and any such excluded Option Property shall be subject
to the rights granted to the Purchaser pursuant to Section 10.1.
2.3 Option Period. The Option shall be exercisable in full, but
not in part (except as otherwise provided in Section 10.3), at any time
during the Option Period. The Option is exercisable by the giving of
written notice (the "Exercise Notice") and payment of the Option Deposit
by the Purchaser to the Sellers. Failure of the Purchaser to give the
Exercise Notice or pay the Option Deposit prior to the expiration of the
Option Period shall be deemed and shall constitute an election by the
Purchaser not to exercise the Option and time shall be of the essence
with respect to the giving of the Exercise Notice and payment of the
Option Deposit.
2.4 Diligence Inspections. (a) For the Initial Acquisition
Review Period, the Sellers shall permit the Purchaser and its
representatives to inspect the Initial Acquisition Properties and the
Improvements (including, without limitation, all roofs, electric,
mechanical and structural elements, and HVAC systems therein), to
perform due diligence, soil analysis and environmental investigations,
to examine the books of account and records of the Sellers and the
Manager with respect to the Initial Acquisition Properties (other than
the Excluded Assets), including, without limitation, all leases and
agreements affecting the Initial Acquisition Properties, and make copies
thereof, at such reasonable times as the Purchaser or its
representatives may request by notice to the Sellers and the Manager
(which notice may be oral). To the extent that, in connection with such
investigations, the Purchaser, its agents, representatives or
contractors, damages or disturbs any of the Real Property or the
Improvements located thereon, the Purchaser shall return the same to
substantially the same condition which existed immediately prior to such
damage or disturbance. The Purchaser shall indemnify, defend and hold
harmless the Sellers from and against any and all expense, loss or
damage which the Sellers may incur as a result of any act or omission of
the Purchaser or its representatives, agents or contractors in
connection with such examinations and inspections, other than any
expense, loss or damage arising from any act or omission of the Sellers
or the Manager. The foregoing indemnification agreement shall survive
the termination of this Agreement, the Initial Closing and the Option
Closing.
(b) In the event that the Purchaser shall exercise the Option, for
the Option Review Period, the Sellers shall permit the Purchaser and its
representatives to inspect the Option Properties and the Improvements
(including, without limitation, all roofs, electric, mechanical and
structural elements, and HVAC systems therein), to perform due
diligence, soil analysis and environmental investigations, to examine
the books of account and records of the Sellers and the Manager with<PAGE>
-10-
respect to the Option Properties (other than the Excluded Assets),
including, without limitation, all leases and agreements affecting the
Option Properties, and make copies thereof, at such reasonable times as
the Purchaser or its representatives may request by notice to the
Sellers and the Manager (which notice may be oral). To the extent that,
in connection with such investigations, the Purchaser, its agents,
representations or contractors, damages or disturbs any of the Real
Property or the Improvements located thereon, the Purchaser shall return
the same to substantially the same condition which existed immediately
prior to such damage or disturbance. The Purchaser shall indemnify,
defend and hold harmless the Sellers from and against any and all
expense, loss or damage which the Sellers may incur as a result of any
act or omission of the Purchaser or its representatives, agents or
contractors in connection with such examinations and inspections, other
than any expense, loss or damage arising from any act or omission of the
Sellers or the Manager. Such indemnification agreement shall survive
the termination of this Agreement, the Initial Closing and the Option
Closing. In addition, during the period after the date of this
Agreement and prior to the expiration of the Option Review Period, the
Sellers agree to provide to the Purchaser with such operating
information, from time to time, as the Purchaser may reasonably request
regarding the Option Properties and the condition and operation thereof.
2.5 Defective Properties. (a) In the event that (i) the
Purchaser reasonably determines that a Property has structural,
environmental, legal or other operational defects or conditions such
that (x) expenditures equal to or greater than seven and one-half
percent (7.5%) of the Allocable Purchase Price of such Property are
required in order to bring such Property into a satisfactory condition
in accordance with prevailing Marriott standards for like hotels or (y)
the calculation with respect to such Property of Operating Profit (as
defined in the Management Agreements) less ground rent varies by fifteen
percent (15%) or more of that set forth in the Operating Statements
described in Section 6.13 and other financial data provided by the
Sellers to the Purchaser prior to the date hereof (any such Property
being hereinafter referred to as a "Defective Property"), and (ii) the
Purchaser gives written notice thereof to the Sellers no later than the
expiration of the Initial Acquisition Review Period or Option Review
Period, as the case may be (time being of the essence with respect to
the giving of such notice), identifying the Defective Property or
Properties and the specific defects with respect thereto, the Sellers,
shall, subject to paragraph (c) below, be required to permit the
Purchaser to acquire all of the Initial Acquisition Properties or Option
Properties, as the case may be, other than such Defective Property or
Properties. Prior to the Initial Closing or the Option Closing, as the
case may be, the Sellers shall enforce all rights available against
third parties, including, without limitation, the Manager, and shall
cause any and all defects or conditions so identified by the Purchaser
to be corrected, it being expressly understood and agreed that nothing
contained herein shall be construed to relieve any such parties from any
obligations with respect to such matters.
(b) If, prior to the Initial Closing or the Option Closing, as the
case may be, (i) any Initial Acquisition Property or Option Property, as
applicable, suffers a casualty or condemnation which would cause such<PAGE>
-11-
Property or Properties to become a Defective Property, (ii) such
Property is not, prior to the applicable Closing, restored to a
condition substantially the same as the condition thereof immediately
prior to such casualty or condemnation, and (iii) the Purchaser provides
written notice of same to the Sellers no later than the Initial Closing
Date or the Option Closing, as the case may be, time being of the
essence, the Sellers shall, subject to paragraph (c) below, be required
to permit the Purchaser to acquire all of the Initial Acquisition
Properties or Option Properties, as the case may be, other than such
Defective Property or Properties. Promptly upon learning of the same,
the Sellers covenant and agree to provide the Purchaser with prompt
written notice of any casualty or condemnation affecting any Property.
(c) If the Purchaser timely identifies any Defective Property, and
the Purchaser and the Sellers shall, acting reasonably and in good faith
be unable or unwilling to agree that (x) the Sellers shall, at their
sole cost, remedy the applicable defect prior to the applicable Closing,
(y) the Purchaser shall, notwithstanding such defect, acquire the
Defective Property subject to a reduction in the Allocable Purchase
Price of the Defective Property sufficient to compensate the Purchaser
for such defect, or (z) on the substitution of another property owned by
the Sellers for such Defective Property, this Agreement shall terminate
with respect to such Defective Property and the Initial Acquisition
Purchase Price or the Option Purchase Price, as the case may be, shall
be reduced by the Allocable Purchase Price of such Defective Property.
Notwithstanding the foregoing, if more than an aggregate of three (3)
Initial Acquisition Properties or five (5) Option Properties, as the
case may be, are identified as Defective Properties or rejected by the
Purchaser pursuant to Section 2.6 or 2.7, either party may terminate
this Agreement and the transactions contemplated hereby, in which case
the Initial Deposit or the Option Deposit, as the case may be, shall be
returned to the Purchaser, together with interest thereon as provided in
Section 11.1 and no party shall have any further obligations hereunder;
provided, however, that in the event the Sellers shall be the
terminating party, the Purchaser shall have the right, exercisable by
notice given within ten (10) Business Days after the Sellers' notice to
terminate, to proceed to closing on one or more such Defective
Properties (or Properties rejected pursuant to Section 2.6 or 2.7) such
that the total amount of Initial Acquisition Properties or Option
Properties, as the case may be, deleted by the Purchaser pursuant to
this Section 2.5, Section 2.6 and Section 2.7 shall not be greater than
three (3) Initial Acquisition Properties or five (5) Option Properties,
as the case may be. In the event the Purchaser shall elect to proceed
to closing as aforesaid, (x) any notice of termination given by the
Sellers shall be null and void and of no further force or effect and (y)
in the event that any Property shall have been affected by a casualty or
taking, the Sellers shall pay over and assign to the Purchaser the
entire amount of any insurance proceeds or award paid or payable with
respect thereto less any amounts previously expended by the Sellers in
connection with repair or restoration, provided that any such repair or
restoration shall have been approved by the Purchaser (which approval
shall not be unreasonably withheld or delayed).
(d) In the event that Purchaser reasonably determines that the
calculation, with respect to the Initial Acquisition Properties or the<PAGE>
-12-
Option Properties, as the case may be, in the aggregate, of Operating
Profit (as defined in the Management Agreements) less ground rent varies
by seven and one-half percent (7.5%) or more from that set forth in the
Operating Statements described in Section 6.13 and other financial data
provided by Sellers to the Purchaser, the Purchaser shall have the right
to terminate this Agreement and the transactions contemplated hereby, in
which case the Initial Deposit or the Option Deposit, as the case may
be, shall be returned to the Purchaser, together with interest thereon
as provided in Section 11.1 and no party shall have any further
obligations hereunder.
2.6 Title Matters. (a) Within ten (10) Business Days after the
date of this Agreement, the Sellers shall order from the Title Company
and direct the Title Company promptly to deliver to the Purchaser and
the Sellers a preliminary title commitment, having an effective date
after the date of this Agreement, for an ALTA extended owner's policy of
title insurance with respect to each of the Initial Acquisition
Properties, together with complete and legible copies of all instruments
and documents referred to as exceptions to title (collectively, the
"Initial Title Commitments"). At the Sellers' election, they may also
obtain a leasehold policy of title insurance for the tenant under the
Leases.
Within ten (10) Business Days after receipt of the Initial Title
Commitments, the Purchaser shall give the Sellers notice of any title
exceptions (other than Permitted Encumbrances) which adversely affect
such Property in any material respect and as to which the Purchaser
reasonably objects. If, for any reason, the Sellers are unable to take
such actions as may be required to cause such exceptions to be removed
from the Initial Title Commitments, the Sellers shall give the Purchaser
notice thereof; it being understood and agreed that the failure of the
Sellers to give such notice within ten (10) Business Days after the
Purchaser's notice of objection shall be deemed an election by the
Sellers to remedy such matters. If the Sellers shall be unable to
remove any title defects to which the Purchaser has reasonably objected,
the Purchaser may elect (i) to terminate this Agreement with respect to
the affected Property, in which event, the Initial Acquisition Purchase
Price shall be reduced by the Allocable Purchase Price of the affected
Initial Acquisition Properties and this Agreement shall be of no further
force and effect with respect to the affected Initial Acquisition
Properties or (ii) to consummate the transactions contemplated hereby,
notwithstanding such title defect, without any abatement or reduction in
the Initial Acquisition Purchase Price on account thereof. The
Purchaser shall make any such election by written notice to the Sellers
given on or prior to the fifth Business Day after the Sellers' notice of
their inability to cure such defect. Failure of the Purchaser to give
such notice shall be deemed an election by the Purchaser to proceed in
accordance with clause (ii) above. If the Purchaser shall elect to
terminate this Agreement with respect to an aggregate of more than three
(3) of the Initial Acquisition Properties pursuant to this Section
2.6(a), Section 2.5 and Section 2.7, either the Purchaser or the Sellers
may elect to proceed in accordance with Section 2.5(c).
(b) In the event the Purchaser shall exercise the Option as herein
provided, within ten (10) Business Days after the Exercise Notice, the<PAGE>
-13-
Sellers shall order from the Title Company and direct the Title Company
promptly to deliver to the Purchaser and the Sellers a preliminary title
commitment, having an effective date after the date of the Exercise
Notice, for an ALTA extended owner's policy of title insurance with
respect to each of the Option Properties, together with complete and
legible copies of all instruments and documents referred to as
exceptions to title (collectively, the "Option Commitments"). At the
Sellers' election, they may also obtain a leasehold policy of title
insurance for the tenant under the Leases.
Within ten (10) Business Days after receipt of the Option Title
Commitments, the Purchaser shall give the Sellers notice of any title
exceptions (other than Permitted Encumbrances) which adversely affect
such Property in any material respect and as to which the Purchaser
reasonably objects. If, for any reason, the Sellers are unable to take
such actions as may be required to cause such exceptions to be removed
from the Option Title Commitments, the Sellers shall give the Purchaser
notice thereof; it being understood and agreed that the failure of the
Sellers to give such notice within ten (10) Business Days after the
Purchaser's notice of objection shall be deemed an election by the
Sellers to remedy such matters. If the Sellers shall be unable to
remove any title defects to which the Purchaser has reasonably objected,
the Purchaser may elect (i) to terminate this Agreement with respect to
the affected Property, in which event, the Option Purchase Price shall
be reduced by the Allocable Purchase Price of the affected Option
Properties and this Agreement shall be of no further force and effect
with respect to the affected Option Properties or (ii) to consummate the
transactions contemplated hereby, notwithstanding such title defect,
without any abatement or reduction in the Option Purchase Price on
account thereof. The Purchaser shall make any such election by written
notice to the Sellers given on or prior to the fifth Business Day after
the Sellers' notice of their inability to cure such defect and time
shall be of the essence with respect to the giving of such notice.
Failure of the Purchaser to give such notice shall be deemed an election
by the Purchaser to proceed in accordance with clause (ii) above. If
the Purchaser shall elect to terminate this Agreement with respect to an
aggregate of more than five (5) of the Option Properties pursuant to
this Section 2.6(b), Section 2.5 and Section 2.7, either the Purchaser
or the Sellers may elect to proceed in accordance with Section 2.5(c).
2.7 Survey Matters. (a) As soon as practicable after the date of
this Agreement, the Sellers shall arrange for the preparation of an ALTA
survey with respect to each of the Initial Acquisition Properties (the
"Initial Surveys"), by a licensed surveyor in the jurisdiction in which
each such Property is located, which (i) contains an accurate legal
description of the applicable Property, (ii) shows the exact location,
dimension and description (including applicable recording information)
of all utilities, easements, encroachments and other physical matters
affecting such Property, the number of striped parking spaces located
thereon and all applicable building set-back lines, (iii) states whether
the applicable Property is located within a 100-year flood plain and
(iv) includes a certification in the form set forth in Schedule E,
addressed to the Purchaser, the Title Company and any other persons
requested by the Purchaser or designated by the Sellers.<PAGE>
-14-
Within ten (10) Business Days after receipt of the Initial Surveys,
the Purchaser shall give the Sellers notice of any matters shown thereon
(other than Permitted Encumbrances) which adversely affect any such
Property in any material respect and as to which the Purchaser
reasonably objects. If, for any reason, the Sellers are unable to take
such actions as may be required to remedy the objectionable matters, the
Sellers shall give the Purchaser prompt notice thereof; it being
understood and agreed that the failure of the Sellers to give such
notice within ten (10) Business Days after the Purchaser's notice of
objection shall be deemed an election by the Sellers to remedy such
matters. If the Sellers shall be unable to remove any survey defect to
which the Purchaser has reasonably objected, the Purchaser may elect (i)
to terminate this Agreement with respect to the affected Property, in
which event, the Initial Acquisition Purchase Price shall be reduced by
the Allocable Purchase Price of the affected Initial Acquisition
Properties and this Agreement shall terminate and be of no further force
or effect with respect to the affected Initial Acquisition Properties or
(ii) to consummate the transactions contemplated hereby, notwithstanding
such defect, without any abatement or reduction in the Initial
Acquisition Purchase Price on account thereof. The Purchaser shall make
any such election by written notice to the Sellers given on or prior to
the fifth Business Day after the Sellers' notice of their inability to
cure such defect and time shall be of the essence with respect to the
giving of such notice. Failure of the Purchaser to give such notice
shall be deemed an election by the Purchaser to proceed in accordance
with clause (ii) above. If the Purchaser shall elect to terminate this
Agreement with respect to an aggregate of more than three (3) of the
Initial Acquisition Properties pursuant to this Section 2.7(a), Section
2.5 and Section 2.6, either the Purchaser or the Sellers may elect to
proceed in accordance with Section 2.5(c).
(b) As soon as practicable after the Exercise Notice, the Sellers
shall arrange for the preparation of an ALTA survey with respect to each
of the Option Properties (the "Option Surveys"), by a licensed surveyor
in the jurisdiction in which each such Property is located, which (i)
contains an accurate legal description of the applicable Property, (ii)
shows the exact location, dimension and description (including
applicable recording information) of all utilities, easements,
encroachments and other physical matters affecting such Property, the
number of striped parking spaces located thereon and all applicable
building set-back lines, (iii) states whether the applicable Property is
located within a 100-year flood plain and (iv) includes a certification
in the form set forth in Schedule E, addressed to the Purchaser, the
Title Company and any other persons requested by the Purchaser or
designated by the Sellers.
Within ten (10) Business Days after receipt of the Initial Surveys,
the Purchaser shall give the Sellers notice of any matters shown thereon
(other than Permitted Encumbrances) adversely affect any such Property
in any material respect and as to which the Purchaser reasonably
objects. If, for any reason, the Sellers are unable to take such
actions as may be required to remedy the objectionable matters, the
Sellers shall give the Purchaser prompt notice thereof; it being
understood and agreed that the failure of the Sellers to give such
notice within ten (10) Business Days after the Purchaser's notice of<PAGE>
-15-
objection shall be deemed an election by the Sellers to remedy such
matters. If the Sellers shall be unable to remove any survey defect to
which the Purchaser has reasonably objected, the Purchaser may elect (i)
to terminate this Agreement with respect to the affected Property, in
which event, the Option Purchase Price shall be reduced by the Allocable
Purchase Price of the affected Option Properties and this Agreement
shall terminate and be of no further force or effect with respect to the
affected Option Properties or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement
or reduction in the Option Purchase Price on account thereof. The
Purchaser shall make any such election by written notice to the Sellers
given on or prior to the fifth Business Day after the Sellers' notice of
their inability to cure such defect and time shall be of the essence
with respect to the giving of such notice. Failure of the Purchaser to
give such notice shall be deemed an election by the Purchaser to proceed
in accordance with clause (ii) above. If the Purchaser shall elect to
terminate this Agreement with respect to an aggregate of more than five
(5) of the Option Properties pursuant to this Section 2.7(b), Section
2.5 and Section 2.6, either the Purchaser or the Sellers may elect to
proceed in accordance with Section 2.5(c).
SECTION 3. PURCHASE AND SALE.
3.1 Closing. (a) The purchase and sale of the Initial
Acquisition Properties shall be consummated at a closing (the "Initial
Closing") to be held at the offices of Sullivan & Worcester, One Post
Office Square, Boston, Massachusetts, or at such other location as the
Sellers and the Purchaser may agree, at 10:00 a.m. local time, on a date
(the "Initial Closing Date") which is the later to occur of (i) the
earlier to occur of (x) the date not less than five (5) Business Days
after the giving of written notice from the Purchaser to the Sellers
designating the Initial Closing Date and (y) February 28, 1995, and (ii)
the date as of which all conditions precedent to the Initial Closing
herein set forth have either been satisfied or waived by the party in
whose favor such conditions run. In the event that the Initial Closing
shall not have occurred on or before April 30, 1995, provided that no
action for specific performance shall have been commenced by the
Purchaser to enforce this Agreement, any party shall have the right, by
the giving of written notice, to terminate this Agreement and, in such
event, the Initial Deposit, together with interest thereon, shall be
refunded to the Purchaser in accordance with Section 11.1.
(b) In the event that the Purchaser shall exercise the Option in
accordance with the terms and provisions of this Agreement, the purchase
and sale of the Option Properties shall be consummated at a closing (the
"Option Closing") to be held at the offices of Sullivan & Worcester, One
Post Office Square, Boston, Massachusetts, or at such other location as
the Sellers and the Purchaser may agree, at 10:00 a.m., local time, on a
date (the "Option Closing Date") which is the later to occur of (i) the
earlier to occur of (x) the date not less than five (5) Business Days
after the giving of written notice from the Purchaser to Sellers
designating the Option Closing Date and (y) the date ninety (90) days
after the Exercise Notice and (ii) the date as of which all conditions
precedent to the Option Closing herein set forth have either been<PAGE>
-16-
satisfied or waived by the party in whose favor such conditions run. In
the event that the Option Closing shall not have occurred on or before
June 30, 1996, provided that no action for specific performance shall
have been commenced by the Purchaser to enforce this Agreement, any
party shall have the right, by the giving of written notice, to
terminate this Agreement and, in such event, the Option Deposit,
together with interest thereon, shall be refunded to the Purchaser in
accordance with Section 11.1.
3.2 Initial Acquisition Purchase Price. (a) At the Initial
Closing, the Purchaser shall pay to the Sellers, for the Initial
Acquisition Properties, a purchase price (the "Initial Acquisition
Purchase Price") in the amount of One Hundred Seventy Nine Million Four
Hundred Thousand Dollars ($179,400,000), subject to the following
adjustments:
(i) There shall be deducted from the Initial Acquisition
Purchase Price the sum of interest accrued at the
Interest Rate on the Initial Deposit from December 23,
1994 with respect to $5,000,000 and from the date
received with respect to $20,000,000 to, but not
including, the Initial Closing Date;
(ii) There shall be deducted from the Initial Acquisition
Purchase Price the Allocable Purchase Price of any
Initial Acquisition Property as to which this Agreement
shall have been terminated pursuant to Sections 2.5, 2.6
or 2.7; and
(iii) There shall be added to or deducted from the Purchase
Price such amounts as may be required pursuant to Section
9.
(b) The Initial Acquisition Purchase Price shall be payable as
follows:
(i) The Initial Deposit has been paid by the Purchaser in
full on or prior to the date hereof;
(ii) At the Initial Closing, the balance of the Initial
Acquisition Purchase Price less the Initial Deferred
Purchase Price shall be payable by wire transfer of
immediately available funds on the Initial Closing Date
to an account or accounts to be designated by the Sellers
prior to the Initial Closing; and
(iii) The Initial Deferred Purchase Price shall be payable by
wire transfer of immediately available funds on a pro
rata basis upon the expiration or sooner termination of
any of the Leases of the Initial Acquisition Properties
(other than any termination arising from the occurrence
of any Default or Event of Default (as defined therein))
by the tenant under the Leases, to an account or accounts
to be designated by the Sellers prior to such date.<PAGE>
-17-
(c) At the Initial Closing, the Purchaser shall pay to or as
directed by Host, for the C-R Option, the Initial Option Fee by wire
transfer of immediately available federal funds on the Initial Closing
Date to an account or accounts to be designated by Host prior to such
date.
3.3 Option Purchase Price. (a) At the Option Closing, the
Purchaser shall pay to the Sellers, for the Option Properties, a
purchase price (the "Option Purchase Price") in the amount of Three
Hundred Fifty Two Million One Hundred Thousand Dollars ($352,100,000),
subject to the following adjustments:
(i) There shall be deducted from the Option Purchase Price
the sum of interest accrued at the Interest Rate on the
Option Deposit from the date of the Exercise Notice to,
but not including, the Option Closing Date;
(ii) There shall be deducted from the Option Purchase Price
the Allocable Purchase Price of any Option Property as to
which this Agreement shall have been terminated pursuant
to Sections 2.5, 2.6, 2.7, 10.1 and 2.2(b); and
(iii) There shall be added to or deducted from the Purchase
Price such amounts as may be required pursuant to Section
9.
(b) The Option Purchase Price shall be payable as follows:
(i) The Option Deposit shall be paid by the Purchaser at the
time of the giving of the Exercise Notice by wire
transfer of immediately available federal funds to an
account or accounts to be designated by the Sellers;
(ii) At the Option Closing, the balance of the Option Purchase
Price less the Option Deferred Purchase Price shall be
payable by wire transfer of immediately available funds
on the Option Closing Date, to an account or accounts to
be designated by the Sellers prior to the Option Closing;
and
(iii) The Option Deferred Purchase Price shall be payable by
wire transfer of immediately available funds on a pro
rata basis upon the expiration or sooner termination any
of the Leases of the Option Properties (other than any
termination arising from the occurrence of any Default or
Event of Default (as defined therein)) by the tenant
under the Leases, to an account or accounts to be
designated by the Sellers prior to such date.
(c) At the Option Closing, the Purchaser shall pay to or as
directed by Host, in order to extend the C-R Option, the Extension
Option Fee by wire transfer of immediately available federal funds on
the Option Closing Date to an account or accounts to be designated by
Host prior to such date.<PAGE>
-18-
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of the Purchaser to acquire the Initial Acquisition
Properties on the Initial Closing Date and the Option Properties on the
Option Closing Date shall be subject to the satisfaction of the
following conditions precedent on and as of the Initial Closing Date or
the Option Closing Date, as the case may be:
4.1 Closing Documents. The Sellers shall have delivered to the
Purchaser:
(a) A good and sufficient warranty deed with covenants against
grantor's acts, or its local equivalent, with respect to all of the
Initial Acquisition Properties which are Fee Properties or Option
Properties which are Fee Properties, as the case may be, in proper
statutory form for recording, duly executed and acknowledged by the
Sellers, conveying good and marketable title to the applicable Fee
Properties, free from all liens and encumbrances other than the
Permitted Encumbrances;
(b) With respect to all of the Initial Acquisition Properties
which are Ground Lease Properties or Option Properties which are Ground
Lease Properties, as the case may be, an assignment and assumption
agreement, in form and substance reasonably satisfactory to the Sellers
and the Purchaser, duly executed and acknowledged by the Sellers, with
respect to all of the Sellers' right, title and interest in, to and
under the applicable Ground Leases together with the written consent of
each of the lessors under the applicable Ground Leases if such consent
is required pursuant to the terms of such Ground Leases;
(c) An estoppel certificate, in form and substance reasonably
satisfactory to the Purchaser, from each of the lessors under the
applicable Ground Leases, confirming, to such lessor's knowledge, that
each such Ground Lease is in full force and effect, the amount of the
rents and other sums payable thereunder, that no default or event which
with the giving of notice and/or lapse of time could constitute a
default has occurred and is continuing thereunder, and regarding such
other matters as the Purchaser may reasonably require;
(d) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to the Sellers and the Purchaser, duly executed
and acknowledged by the Sellers, with respect to all of the Sellers'
right, title and interest in, to and under the FF&E, the Contracts, the
Documents, the Intangible Property and the Tenant Leases with respect to
the Initial Acquisition Properties or the Option Properties, as the case
may be;
(e) A certificate of a duly authorized officer of the Sellers
confirming the continued truth and accuracy of the representations and
warranties of the Sellers in this Agreement;
(f) To the extent the same are in the Sellers' possession,
originally, fully executed copies of agreements pertaining to the
Initial Acquisition Properties or Option Properties, as the case may be;<PAGE>
-19-
(g) Duly executed copies of the Leases and all of the Incidental
Documents (as such term is defined in the Leases);
(h) An estoppel certificate, in form and substance reasonably
satisfactory to the Purchaser and the Sellers, regarding such matters
with respect to the Initial Properties Management Agreements or the
Option Properties Management Agreements, as the case may be, as the
Purchaser may reasonably require;
(i) Duly executed copies of the Management Agreement Amendments;
(j) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to the
Sellers, the tenant under the Leases and the Manager; and
(k) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as the Purchaser, the Sellers, the
tenant under the Leases or the Title Company may reasonably require.
4.2 Condition of Properties. (a) All of the Initial Acquisition
Properties or Option Properties, as the case may be, and all
Improvements located thereon shall, except as otherwise provided in
Section 2.5, be in substantially the same physical condition as on the
date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of notice
and/or lapse of time could constitute a material default shall have
occurred and be continuing under any of the Ground Leases, the
Management Agreements or any other material agreement benefiting or
affecting the Initial Acquisition Properties or the Option Properties,
as the case may be, in any respect;
(c) With respect to the Option Closing Date only, no material
Default or Event of Default (as defined therein) shall have occurred and
be continuing under the Leases with respect to the Initial Acquisition
Properties;
(d) No action shall be pending or threatened for the condemnation
or taking by power of eminent domain of all or any material portion of
the Initial Acquisition Properties or the Option Properties, as the case
may be; and
(e) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Initial
Acquisition Properties or the Option Properties, as the case may be,
shall be in full force and effect.
4.3 Title Policies. The Title Company shall be prepared, subject
only to payment of the applicable premium and delivery of all conveyance
documents in recordable form, to issue title insurance policies to the
Purchaser, in form and substance satisfactory to the Purchaser in
accordance with Section 2.6, together with such affirmative coverages as
the Purchaser may reasonably require and shall have been determined by
the Title Company as available prior to the expiration of the Initial
Review Period or the Option Review Period, as the case may be.<PAGE>
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4.4 Opinions of Counsel. (a) The Purchaser shall have received a
written opinion from Pamela J. Murch, assistant general counsel to Host
and as counsel to the Sellers, in form and substance reasonably
satisfactory to the Purchaser, regarding the organization and authority
of Host, the Sellers and the tenant under the Leases, the enforceability
of this Agreement, the Leases and the Incidental Documents (as defined
in the Leases) and such other matters with respect to the transactions
contemplated by this Agreement as the Purchaser may reasonably require.
(b) The Purchaser shall have received a written opinion from
counsel to Marriott International, Inc., in form and substance
reasonably satisfactory to the Purchaser, regarding the organization and
authority of the Manager and the enforceability of the Initial
Properties Management Agreements or the Option Properties Management
Agreements, as the case may be, as amended by the Management Agreement
Amendments.
(c) The Purchaser shall have received a written opinion from local
counsel to the Purchaser, in form and substance reasonably satisfactory
to the Purchaser, regarding the compliance of the Initial Acquisition
Properties or the Option Properties, as the case may be, with respect to
zoning, licensing and such other matters as the Purchaser may reasonably
require.
4.5 FF&E Reserve. The Sellers shall transfer to the Purchaser the
FF&E Reserve, including interest accrued thereon, which the Purchaser
shall hold and apply in accordance with the Management Agreements.
4.6 Appraisal. As of the Initial Closing Date or the Option
Closing Date, as the case may be, the Purchaser shall have received and
approved an original appraisal report, dated within sixty (60) days
prior to the Initial Closing Date or the Option Closing Date, as the
case may be, addressed to the Purchaser, prepared by a qualified real
estate appraiser reasonably satisfactory to the Purchaser and indicating
an aggregate fair market value for the Initial Acquisition Properties of
not less than the Initial Acquisition Purchase Price (and an allocation
among such properties consistent with the Allocable Purchase Prices) or
indicating an aggregate fair market value for the Option Properties of
not less than the Option Purchase Price (and an allocation among such
properties consistent with the Allocable Purchase Prices), as the case
may be, such appraisals to be otherwise in form and substance reasonably
acceptable to the Purchaser.
4.7 Hart Scott Rodino. The Sellers and the Purchaser shall have
complied with all applicable provisions of the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended.
4.8 Other Approvals. The Sellers and the Purchaser shall have
received, in form and substance reasonably satisfactory to the Sellers
and the Purchaser, all required approvals and waivers, as may be
necessary or appropriate to consummate the transactions contemplated by
this Agreement.<PAGE>
-21-
SECTION 5. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE.
The obligation of the Sellers to convey the Initial Acquisition
Properties on the Initial Closing Date and the Option Properties on the
Option Closing Date to the Purchaser is subject to the satisfaction of
the following conditions precedent on and as of the Initial Closing Date
or the Option Closing Date, as the case may be:
5.1 Exercise of Option. With respect to the Option Properties
only, the Purchaser shall have exercised the Option in accordance with
the terms and conditions of this Agreement and shall have acquired the
Initial Acquisition Properties in accordance with the terms and
conditions of this Agreement.
5.2 Purchase Price. The Purchaser shall deliver to the Sellers
the balance of the Initial Purchase Price (less the Initial Deferred
Purchase Price) or Option Purchase Price (less the Option Deferred
Purchase Price) , as the case may be, payable hereunder, adjusted as
herein provided.
5.3 Closing Documents. The Purchaser shall have delivered to the
Sellers:
(a) Duly executed and acknowledged counterparts of the documents
described in Section 4.1, where applicable and the Management Agreement
Amendments;
(b) A certificate of a duly authorized officer of the Purchaser
confirming the continued truth and accuracy of the representations and
warranties of the Purchaser in this Agreement; and
(c) Certified copies of all charter documents, applicable
resolutions and certificates of incumbency with respect to the
Purchaser.
5.4 Opinion of Counsel. The Sellers shall have received a written
opinion from Sullivan & Worcester, counsel to the Purchaser, in form and
substance reasonably satisfactory to the Sellers, regarding the
organization and authority of the Purchaser, the enforceability of this
Agreement and such other matters with respect to the transactions
contemplated by this Agreement as the Sellers may reasonably require.
5.5 Hart Scott Rodino. The Sellers and the Purchaser shall have
complied with all applicable provisions of the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended.
5.6 Other Approvals. The Sellers and the Purchaser shall have
received, in form and substance reasonably satisfactory to the Sellers
and the Purchaser, all required approvals and waivers, as may be
necessary or appropriate to consummate the transactions contemplated by
this Agreement.<PAGE>
-22-
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLERS.
To induce the Purchaser to enter into this Agreement, the Sellers
represent and warrant to the Purchaser as follows:
6.1 Status and Authority of the Sellers. Each of the Sellers is a
corporation duly organized, validly existing and in corporate good
standing under the laws of its state of incorporation, and has all
requisite power and authority under the laws of such state and its
respective charter documents to enter into and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. Each of the Sellers has duly qualified to transact business in
each jurisdiction in which the nature of the business conducted by it
requires such qualification.
6.2 Action of the Sellers. Each of the Sellers has taken all
necessary action to authorize the execution, delivery and performance of
this Agreement, and upon the execution and delivery of any document to
be delivered by the Sellers on or prior to the Initial Closing Date or
Option Closing Date, as the case may be, such document shall constitute
the valid and binding obligation and agreement of each of the Sellers,
enforceable against each of the Sellers in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application
affecting the rights and remedies of creditors.
6.3 No Violations of Agreements. Neither the execution, delivery
or performance of this Agreement by the Sellers, nor compliance with the
terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon
any Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or
instrument by which any of the Sellers is bound.
6.4 Litigation. The Sellers have received no written notice of
and, to the Seller's Knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or
proceeding has begun, which (a) questions the validity of this Agreement
or any action taken or to be taken pursuant hereto, (b) will result in
any material adverse change in the business, operation, affairs or
condition of any of the Initial Acquisition Properties or the Option
Properties, (c) result in or subject the Initial Acquisition Properties
or the Option Properties to a material liability, or (d) involves
condemnation or eminent domain proceedings against any part of the
Initial Acquisition Properties or the Option Properties.
6.5 Existing Leases, Agreements, Etc. To the Sellers' Knowledge,
other than the Management Agreements, the Ground Leases and any other
agreements provided to the Purchaser not less than ten (10) days prior
to the expiration of the applicable Review Period, there are no other
material agreements affecting the Initial Acquisition Properties or the
Option Properties which will be binding on the Purchaser subsequent to
the Initial Closing Date or the Option Closing Date, as applicable.<PAGE>
-23-
6.6 Disclosure. To the Sellers' Knowledge, there is no fact or
condition which materially and adversely affects the business or
condition of the Initial Acquisition Properties or the Option Properties
which has not been set forth in this Agreement, or in the other
documents, certificates or statements furnished to the Purchaser in
connection with the transactions contemplated hereby.
6.7 Utilities, Etc. To the Sellers' Knowledge, all utilities and
services necessary for the use and operation of the Initial Acquisition
Properties and the Option Properties (including, without limitation,
road access, gas, water, electricity and telephone) are available
thereto, are of sufficient capacity to meet adequately all needs and
requirements necessary for the use and operation of such Properties and
for their respective intended purposes. To the Sellers' Knowledge, no
fact, condition or proceeding exists which would result in the
termination or impairment of the furnishing of such utilities to the
Initial Acquisition Properties or the Option Properties.
6.8 Compliance With Law. To the Sellers' Knowledge (i) the
Initial Acquisition Properties and the Option Properties and the use and
operation thereof do not violate any material federal, state, municipal
and other governmental statutes, ordinances, by-laws, rules, regulations
or any other legal requirements, including, without limitation, those
relating to construction, occupancy, zoning, adequacy of parking,
environmental protection, occupational health and safety and fire safety
applicable thereto; and (ii) there are presently in effect all material
licenses, permits and other authorizations necessary for the current
use, occupancy and operation thereof. The Sellers have not received
written notice of any threatened request, application, proceeding, plan,
study or effort which would materially adversely affect the present use
or zoning of any of the Initial Acquisition Properties or the Option
Properties or which would modify or realign any adjacent street or
highway.
6.9 Taxes. To the Sellers' Knowledge, other than the amounts
disclosed by tax bills, no taxes or special assessments of any kind
(special, bond or otherwise) are or have been levied with respect to any
of the Initial Acquisition Properties or the Option Properties, or any
portion thereof, which are outstanding or unpaid, other than amounts not
yet due and payable or, if due and payable, not yet delinquent, and, to
the Sellers' Knowledge, none will be levied prior to the Initial Closing
Date or the Option Closing Date, as the case may be.
6.10 Not A Foreign Person. None of the Sellers is a "foreign
person" within the meaning of Section 1445 of the United States Revenue
Code of 1986, as amended, and the regulations promulgated thereunder.
6.11 Hazardous Substances. Except as disclosed to the Purchaser
or as described in any environmental report delivered to the Purchaser,
to the Sellers' Knowledge, none of the Sellers nor any tenant or other
occupant or user of any of the Initial Acquisition Properties or the
Option Properties, or any portion thereof, has stored or disposed of (or
engaged in the business of storing or disposing of) or has released or
caused the release of any hazardous waste, contaminants, oil,
radioactive or other material on any of the Initial Acquisition<PAGE>
-24-
Properties or the Option Properties, or any portion thereof, the removal
of which is required or the maintenance of which is prohibited or
penalized by any applicable Federal, state or local statutes, laws,
ordinances, rules or regulations, and, to the Sellers' Knowledge, except
as disclosed to the Purchaser or as described in any environmental
report delivered to the Purchaser, the Initial Acquisition Properties
and the Option Properties are free from any such hazardous waste,
contaminants, oil, radioactive and other materials, except any such
materials maintained in accordance with applicable law.
6.12 Insurance. The Sellers have received no written notice from
any insurance carrier of defects or inadequacies in the Initial
Acquisition Properties or the Option Properties which, if uncorrected,
would result in a termination of insurance coverage or an increase in
the premiums charged therefor.
6.13 Operating Statements. Attached hereto as Schedule I are the
most current operating statements for the Initial Acquisition Properties
and the Option Properties. To the Sellers' Knowledge, such operating
statements fairly represent the operating history for the Initial
Acquisition Properties and the Option Properties for the periods covered
thereby, contain no material misstatement and do not omit any statement
or fact necessary to make the information contained therein not
materially misleading (the Purchaser acknowledging that such operating
statements relate solely to historical performance and in no way
represent a projection of future performance and the Sellers make no
representations as to the future performance of any Property).
6.14 Ground Leases. The copies of the Ground Leases heretofore
delivered by the Sellers to the Purchaser are true, correct and complete
copies thereof; the Ground Leases have not been amended except as
evidenced by amendments similarly delivered and constitute the entire
agreement between the Sellers and the applicable other parties. To the
Sellers' Knowledge, the Ground Leases are in full force and effect and
no default or event which with the giving of notice and/or lapse of time
could constitute a default thereunder has occurred with respect to the
Sellers or, to the Sellers' Knowledge, the applicable ground lessor.
6.15 Management Agreements. The copies of the Management
Agreements heretofore delivered by the Sellers to the Purchaser are
true, correct and complete copies thereof; the Management Agreements
have not been amended except as evidenced by amendments similarly
delivered or as required by this Agreement and constitute the entire
agreement between the Sellers and the Manager. To the Sellers'
Knowledge, the Management Agreements are in full force and effect and no
default or event which with the giving of notice and/or lapse of time
could constitute a default thereunder has occurred with respect to the
Sellers or, to the Sellers' Knowledge, the Manager.
6.16 FF&E Reserve. To the Sellers' Knowledge, the FF&E Reserve
for each Property is, as of the date hereof, in the amount set forth on
Schedule J. To the Sellers' Knowledge, the FF&E Reserve for each
Property has been maintained in accordance with the Management Agreement
for such Property.<PAGE>
-25-
The representations and warranties made in this Agreement by the
Sellers shall be continuing and shall be deemed remade by the Sellers as
of the Initial Closing Date or the Option Closing Date, as applicable,
with the same force and effect as if made on, and as of, such date;
provided, however, that, the Sellers shall have the right, from time to
time prior to the applicable Closing Date, to modify the representations
and warranties as a result of changes in condition of the Properties by
notice to the Purchaser and, in such event, the Purchaser shall have the
rights provided in Section 2.5. All representations and warranties made
in this Agreement by the Sellers with respect to the Initial Acquisition
Properties shall survive the Initial Closing for a period of one year
and all representations and warranties made in this Agreement by the
Sellers with respect to the Option Proper-ties shall survive the Option
Closing for a period of one year.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to the Purchaser at the Initial Closing or the
Option Closing, the Sellers disclaim the making of any representations
or warranties, express or implied, regarding the Properties or matters
affecting the Properties, whether made by the Sellers, on the Sellers'
behalf or otherwise, including, without limitation, the physical
condition of the Properties, title to or the boundaries of the Real
Property, pest control matters, soil conditions, the presence, existence
or absence of hazardous wastes, toxic substances or other environmental
matters, compliance with building, health, safety, land use and zoning
laws, regulations and orders, structural and other engineering
characteristics, traffic patterns, market data, economic conditions or
projections, and any other information pertaining to the Properties or
the market and physical environments in which they are located. The
Purchaser acknowledges (i) that the Purchaser has entered into this
Agreement with the intention of making and relying upon its own
investigation or that of third parties with respect to the physical,
environmental, economic and legal condition of each Property and (ii)
that the Purchaser is not relying upon any statements, representations
or warranties of any kind, other than those specifically set forth in
this Agreement or in any document to be delivered to the Purchaser at
the Initial Closing and the Option Closing, made (or purported to be
made) by the Sellers or anyone acting or claiming to act on the Sellers'
behalf. The Purchaser further acknowledges that it has not received
from or on behalf of the Sellers any accounting, tax, legal,
architectural, engineering, property management or other advice with
respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this
Agreement, the Purchaser shall purchase the Properties in their "as is"
condition on the Initial Closing Date or the Option Closing Date, as
applicable.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce the Sellers to enter in this Agreement, the Purchaser
represents and warrants to the Sellers as follows:<PAGE>
-26-
7.1 Status and Authority of the Purchaser. The Purchaser is a
corporation duly organized, validly existing and in corporate good
standing under the laws of the State of Delaware, and has all requisite
power and authority under the laws of such state and under its charter
documents to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The Purchaser
has duly qualified and is in good standing as a trust or unincorporated
business association in each jurisdiction in which the nature of the
business conducted by it requires such qualification.
7.2 Action of the Purchaser. The Purchaser has taken all
necessary action to authorize the execution, delivery and performance of
this Agreement, and upon the execution and delivery of any document to
be delivered by the Purchaser on or prior to the Initial Closing Date or
the Option Closing Date, as the case may be, such document shall
constitute the valid and binding obligation and agreement of the
Purchaser, enforceable against the Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
7.3 No Violations of Agreements. Neither the execution, delivery
or performance of this Agreement by the Purchaser, nor compliance with
the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon
any property or assets of the Purchaser pursuant to the terms of any
indenture, mortgage, deed of trust, note, evidence of indebtedness or
any other agreement or instrument by which the Purchaser is bound.
7.4 Litigation. No investigation, action or proceeding is pending
and, to the Purchaser's actual knowledge, no action or proceeding is
threatened and no investigation looking toward such an action or
proceeding has begun, which questions the validity of this Agreement or
any action taken or to be taken pursuant hereto.
The representations and warranties made in this Agreement by the
Purchaser shall be continuing and shall be deemed remade by the
Purchaser as of the Initial Closing Date or the Option Closing Date, as
applicable, with the same force and effect as if made on, and as of,
such date. All representations and warranties made in this Agreement by
the Purchaser with respect to the Initial Closing shall survive the
Initial Closing for a period of one year and all representations and
warranties made in this Agreement by the Purchaser with respect to the
Option Closing shall survive the Option Closing for a period of one
year.
SECTION 8. COVENANTS OF THE SELLERS.
The Sellers hereby covenant with the Purchaser between the date of
this Agreement and the Initial Closing Date or the Option Closing Date,
as the case may be, as follows:<PAGE>
-27-
8.1 Compliance with Laws, Etc. To the extent of their respective
obligations, to comply, and direct the Manager to comply, in all
material respects, with (i) all laws, regulations and other requirements
from time to time applicable of every governmental body having
jurisdiction of the Initial Acquisition Properties and the Option
Properties or the use or occupancy of the Improvements located thereon
and (ii) all terms, covenants and conditions of all of the Management
Agreements, the Ground Leases, instruments of record and other
agreements affecting the Initial Acquisition Properties and the Option
Properties.
8.2 Approval of Agreements. Except as otherwise authorized by
this Agreement, not to enter into, modify, amend or terminate the
Management Agreements, the Ground Leases or any other agreement with
respect to the Initial Acquisition Properties and the Option Properties
which would encumber or be binding upon such Properties from and after
the Initial Closing Date or the Option Closing Date, as the case may be,
without in each instance obtaining the prior written consent of the
Purchaser.
8.3 Compliance with Agreements. To the extent of their respective
obligations, to comply, and direct the Manager to comply, with each and
every material term, covenant and condition contained in the Management
Agreements, the Ground Leases and any other document or agreement
affecting the Initial Acquisition Properties and the Option Properties.
8.4 Estoppel Certificates. To request, and use reasonable efforts
to obtain, from the Manager and the landlords under the Ground Leases,
certifications, in form and substance reasonably satisfactory to the
Purchaser, regarding the status of the Management Agreements and the
Ground Leases, as the case may be.
8.5 Notice of Material Changes or Untrue Representations. Upon
learning of any material change in any condition with respect to any of
the Initial Acquisition Properties or the Option Properties or of any
event or circumstance which makes any representation or warranty of the
Sellers to the Purchaser under this Agreement untrue or misleading,
promptly to notify the Purchaser thereof (the Purchaser agreeing, on
learning of any such fact or condition, promptly to notify the Sellers
thereof).
8.6 Operation of Properties. To direct the Manager (and exercise
all rights of the Sellers with respect thereto pursuant to the
Management Agreement) to continue to operate each of the Properties as
Marriott Courtyard hotel in a good and businesslike fashion consistent
with their past practices and to cause each of the Properties to be
maintained in good working order and condition in a manner consistent
with their past practice.
SECTION 9. APPORTIONMENTS.
9.1 Real Property Apportionments. Representatives of the
Purchaser and the Sellers shall perform any and all of the adjustments
and apportionments which are appropriate and usual for a transaction of<PAGE>
-28-
this nature, taking into account the applicable provisions of the Leases
and the Management Agreements. The adjustments hereunder shall be
calculated or paid in an amount based upon a fair and reasonable
estimated accounting performed and agreed to by representatives of the
Sellers and the Purchaser at the Initial Closing or the Option Closing,
as the case may be. Subsequent final adjustments and payments shall be
made in cash or other immediately available funds as soon as practicable
after the Initial Closing Date or the Option Closing Date, as the case
may be, and in any event within ninety (90) days after such Closing
Date, based upon an agreed accounting performed by representatives of
the Sellers and the Purchaser. In the event the parties have not agreed
with respect to the adjustments required to be made pursuant to this
Section 9.1 within such ninety-day period, upon application by either
party, a certified public accountant reasonably acceptable to the
Purchaser and the Sellers shall determine any such adjustments which
have not theretofore been agreed to between the Sellers and the
Purchaser. The charges of such accountant shall be borne fifty percent
(50%) by the Sellers and fifty percent (50%) by the Purchaser.
9.2 Closing Costs. The Sellers and the Purchaser shall share
equally all costs and expenses associated with the transaction
contemplated hereby (other than any costs incurred by either party
pursuant to Section 10) except that (x) all costs and expenses incurred
in connection with any purchase money financing obtained by the
Purchaser, including, without limitation, all costs and expenses
relating to a lender's title insurance policy, surveys and all mortgage
recording taxes and filing fees, shall be paid by the Purchaser and (y)
each party shall pay its own attorneys' and accountants' fees and costs
in connection with this transaction.
9.3 Hart Scott Rodino. The Sellers and the Purchaser shall share
equally any filing fees and other costs incurred in connection with
compliance with the requirements of the Hart Scott Rodino Antitrust
Improvements Act of 1976, as amended.
The obligations of the parties under this Section 9 shall survive
the Closing.
SECTION 10. OTHER AGREEMENTS.
10.1 C-R Rights of First Offer. If, at any time during the First
Offer Period, Host or any subsidiary of Host wishes to dispose of any
interest in a Courtyard Hotel or Residence Inn property (including,
without limitation, any interest in an entity owning a Courtyard Hotel
or Residence Inn property or any real property leased to an entity
owning a Courtyard Hotel or Residence Inn property), other than any of
the Excluded Offer Properties, Host or such subsidiary, as the case may
be, shall submit to the Purchaser an offer (the "C-R Offer"), setting
forth the price and terms upon which Host, the Sellers or such
subsidiary would be willing to dispose of such interest. The Purchaser
shall have the absolute right, exercisable by the giving of written
notice thereof within thirty (30) days after receipt of the C-R Offer,
to purchase the offered interest upon the terms and conditions set forth
in the C-R Offer and upon the acceptance of such C-R Offer by the<PAGE>
-29-
Purchaser, the same shall constitute a binding agreement of purchase and
sale between the parties. Failure of the Purchaser to send such
notification within such thirty (30) day period shall constitute an
election by the Purchaser to reject the C-R Offer and time shall be of
the essence with respect to the giving of such notice by the Purchaser;
it being understood and agreed that Host and any such subsidiary shall
negotiate in good faith with the Purchaser throughout such 30-day period
to agree upon the terms and conditions of sale. If the Purchaser shall
fail to accept the C-R Offer and the parties are otherwise unable to
agree upon the applicable terms and conditions of sale prior to the
expiration of such 30-day period, Host or such subsidiary, as the case
may be, shall be free to list the offered interest for sale to
unaffiliated third parties on substantially similar terms as that set
forth in the C-R Offer; provided, however, that if such sale is not
consummated within eighteen (18) months after the expiration of such
30-day period, the provisions of this Section 10.1 shall, through and
until the expiration of the First Offer Period, apply anew to the
subject Property. The provisions of this Section 10.1 shall survive the
Initial Closing and the Option Closing; provided, however, that the
rights of the Purchaser pursuant to this Section 10.1 shall terminate in
the event that (x) the Purchaser shall fail to acquire the Initial
Acquisition Properties in accordance with the terms and conditions of
this Agreement, (y) the Purchaser shall fail to pay the Initial Option
Fee or, in the event the Purchaser shall acquire the Option Properties,
the Extension Option Fee to or as directed by Host as herein provided or
(z) this Agreement shall be terminated by the Sellers pursuant to
Section 11.2. Notwithstanding anything to the contrary set forth in
this Section 10.1, nothing contained in this Section 10.1 shall restrict
or affect Host's or any subsidiary of Host's rights or obligations under
any existing contract, partnership agreement or loan agreement or any
fiduciary obligations of Host or any subsidiary of Host or any general
partnership affected by this Section 10.1.
10.2 Excluded Property Right of First Offer. Host is currently
negotiating for the sale to Allegiance Equities, Inc. of the eighteen
Residence Inn properties set forth in Schedule K (the "Excluded Offer
Properties"). If, for any reason, the sale to Allegiance Equities, Inc.
of the Excluded Offer Properties is not consummated, the Sellers shall
give written notice thereof to the Purchaser. If, at any time during
the period commencing on the date of such notice and expiring two (2)
years thereafter, Host, the Sellers or any subsidiary of Host or the
Sellers wish to dispose of any interest in an Excluded Offer Property
(including, without limitation, any interest in any entity owning an
Excluded Offer Property or any real property leased to an entity owning
an Excluded Offer Property), Host, the Sellers or such subsidiary, as
the case may be, shall submit to the Purchaser an offer (the "Excluded
Property Offer"), setting forth the price and terms upon which the
Sellers (or such subsidiary) would be willing to dispose of such
interest. The Purchaser shall have the absolute right, exercisable by
the giving of written notice thereof within thirty (30) days after
receipt of the Excluded Property Offer, to purchase the offered interest
upon the terms and conditions set forth in the Excluded Property Offer
and upon the acceptance of the Excluded Property Offer by the Purchaser,
the same shall constitute a binding agreement of purchase and sale
between the parties. Failure of the Purchaser to send such notification<PAGE>
-30-
within such thirty (30) day period shall constitute an election by the
Purchaser to reject the Excluded Property Offer and time shall be of the
essence with respect to the giving of such notice by the Purchaser; the
Sellers agreeing that Host, the Sellers and any such subsidiaries shall
negotiate in good faith with the Purchaser throughout such 30-day period
to agree upon the terms and conditions of sale. If the Purchaser shall
fail to accept the Excluded Property Offer and the parties are otherwise
unable to agree upon the applicable terms and conditions of sale prior
to the expiration of such 30-day period, the Sellers shall be free to
list the offered interest for sale to unaffiliated third parties on
substantially similar terms as that set forth in the Excluded Property
Offer. The provisions of this Section 10.2 shall survive the Initial
Closing and Option Closing; provided, however, that the rights of the
Purchaser pursuant to this Section 10.2 shall terminate in the event
that the Purchaser shall fail to acquire the Initial Acquisition
Properties in accordance with the terms and conditions of this
Agreement. It is expressly understood and agreed that no additional fee
shall be payable with respect to the rights granted to the Purchaser
pursuant to this Section 10.2.
10.3 Rights of First Refusal. If, at any time and from time to
time during the Option Period prior to the Purchaser's giving of the
Exercise Notice, the Sellers are in possession of a bona fide offer from
an unaffiliated third party to purchase any or all of the Option
Properties which the Sellers desire to accept, or which they have
accepted, subject to the procedures set forth in this Section 10.3, the
Sellers shall have the right, notwithstanding the Option, to accept such
bona fide offer for such Properties, provided that (x) the Sellers shall
first give the Purchaser written notice of such offer, which notice
shall include a copy of such offer and (y) the Purchaser shall not elect
to acquire such Properties as hereinafter provided. The Purchaser shall
have the right, exercisable by the giving of written notice thereof to
the Sellers within ten (10) Business Days after receipt of such notice
from the Sellers, either (x) to purchase the Option Properties which are
the subject of such offer upon the terms and conditions of such offer or
(y) to purchase the Option Properties which are the subject of such
offer upon the applicable terms and conditions of this Agreement;
provided, however, that in the event that the Purchaser shall elect to
proceed in accordance with clause (y), notwithstanding anything to the
contrary set forth in this Agreement, the Purchaser shall pay a deposit
equal to twice the Option Deposit (reduced pro rata based on the
Allocable Purchase Price if less than all of the Option Properties shall
be the subject of such offer) and the ninety (90) day period set forth
in Section 2.1(b)(i)(y) shall be extended to one hundred eighty (180)
days with respect thereto. In the event that the Purchaser shall not
elect to proceed in accordance with clauses (x) or (y) preceding, the
Sellers shall be free to consummate the sale of the applicable Option
Properties on the terms and conditions set forth in the bona fide offer.
The Sellers shall not have the right to initiate the provisions of this
Section 10.3 in the event that the aggregate number of the Option
Properties transferred pursuant to this Section 10.3 (whether to the
Purchaser or any other party) shall be greater than ten (10) but less
than all of the remainder of the Option Properties.<PAGE>
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10.4 Negotiations Regarding California Properties. The Sellers
and the Purchaser acknowledge and agree that the Tenant is unwilling to
maintain earthquake insurance with respect to the Option Properties
located in California and the Purchaser is unwilling, absent such
agreement, to acquire the California Option Properties and lease them to
the Tenant. In the event that the parties are unable to negotiate a
mutually satisfactory resolution of such earthquake insurance dispute
prior to the Option Closing Date, (i) the California Option Properties
shall, automatically, be excluded from the purchase and sale hereunder,
(ii) the Option Purchase Price shall be reduced by the aggregate of the
Allocable Purchase Prices of all of the California Option Properties and
(iii) the California Option Properties shall thereafter be subject to
the rights granted to the Purchaser pursuant to Section 10.1.
SECTION 11. DEFAULT.
11.1 Default by the Sellers. If the Sellers shall have made any
representation or warranty herein which shall be untrue or misleading in
any material respect, or if the Sellers shall fail to perform any of the
material covenants and agreements contained herein to be performed by
them and such failure continues for a period of ten (10) days after
notice thereof from the Purchaser, the Purchaser may terminate this
Agreement and/or the Purchaser may pursue any and all remedies available
to it at law or in equity, including, but not limited to, a suit for
specific performance or other equitable relief. In addition to, and not
in limitation of, the foregoing, the Purchaser may require the Sellers
to return the Initial Acquisition Deposit or the Option Deposit, as the
case may be, together with interest accrued thereon at the Interest Rate
from the date such amounts were paid to the Sellers to, but not
including, the date of refund.
11.2 Default by the Purchaser. If the Purchaser shall have made
any representation or warranty herein which shall be untrue or
misleading in any material respect, or if the Purchaser shall fail to
perform any of the covenants and agreements contained herein to be
performed by it and such failure shall continue for a period of ten (10)
days after notice thereof from the Sellers, the Sellers may terminate
this Agreement. The damages that the Sellers would sustain as a result
of any such termination would be substantial but would be impracticable
and excessively costly and difficult to establish or ascertain and the
parties hereto have therefore agreed that, in such event, the Sellers
shall, as their sole remedy at law and in equity, retain the Initial
Acquisition Deposit or the Option Deposit, as the case may be, and the
Initial Option Fee and, if applicable, the Extension Option Fee, as
liquidated damages.
SECTION 12. MISCELLANEOUS.
12.1 Agreement to Indemnify. (a) Subject to any express
provisions of this Agreement to the contrary, (i) the Sellers shall
indemnify and hold harmless the Purchaser from and against any and all
obligations, claims, losses, damages, liabilities, and expenses
(including, without limitation, reasonable attorneys' and accountants'<PAGE>
-32-
fees and disbursements) arising out of (x) events, contractual
obligations, acts, or omissions of the Sellers that occurred in
connection with the ownership or operation of any Property prior to the
applicable Closing or (y) any damage to property of others or injury to
or death of any person or any claims for any debts or obligations
occurring on or about or in connection with any Property or any portion
thereof at any time or times prior to the applicable Closing, and (ii)
the Purchaser shall indemnify and hold harmless the Sellers from and
against any and all obligations, claims, losses, damages, liabilities
and expenses (including, without limitation, reasonable attorneys' and
accountants' fees and disbursements) arising out of (x) events,
contractual obligations, acts, or omissions of Purchaser that occur in
connection with the ownership or operation of any Property after the
applicable Closing, or (y) any damage to property of others or injury to
or death of any person or any claims for any debts or obligations
occurring on or about any Property or any portion thereof at any time or
times after the applicable Closing.
(b) Whenever it is provided in this Agreement that an obligation
of the Sellers will be assumed by the Purchaser after the applicable
Closing, the Purchaser shall be deemed to have also agreed to indemnify
and hold harmless the Sellers and their respective successors and
assigns from and against all claims, losses, damages, liabilities,
costs, and expenses (including, without limitation, reasonable
attorneys' and accountants' fees and expenses) arising from any failure
of the Purchaser to perform the obligation so assumed after the
applicable Closing.
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence
of any liability for which the other party is or may be responsible
under this Agreement, the party learning of such liability shall notify
the other party promptly and furnish such copies of documents (and make
originals thereof available) and such other information as such party
may have that may be used or useful in the defense of such claims and
shall afford said other party full opportunity to defend the same in the
name of such party and shall generally cooperate with said other party
in the defense of any such claim.
(d) The provisions of this Section 12.1 shall survive the Initial
Closing, the Option Closing and the termination of this Agreement.
12.2 Brokerage Commissions. Each of the parties hereto represents
to the other parties that it dealt with no broker, finder or like agent
in connection with this Agreement or the transactions contemplated
hereby, and that it reasonably believes that there is no basis for any
other person or entity to claim a commission or other compensation for
bringing about this Agreement or the transactions contemplated hereby.
The Sellers shall indemnify and hold harmless the Purchaser and its
respective legal representatives, heirs, successors and assigns from and
against any loss, liability or expense, including, reasonable attorneys'
fees, arising out of any claim or claims for commissions or other
compensation for bringing about this Agreement or the transactions
contemplated hereby made by any broker, finder or like agent, if such
claim or claims are based in whole or in part on dealings with the<PAGE>
-33-
Sellers. The Purchaser shall indemnify and hold harmless the Sellers
and their legal representatives, heirs, successors and assigns from and
against any loss, liability or expense, including, reasonable attorneys'
fees, arising out of any claim or claims for commissions or other
compensation for bringing about this Agreement or the transactions
contemplated hereby made by any broker, finder or like agent, if such
claim or claims are based in whole or in part on dealings with the
Purchaser. Nothing contained in this section shall be deemed to create
any rights in any third party. The provisions of this Section 12.2
shall survive the Initial Closing, the Option Closing and any
termination of this Agreement.
12.3 Publicity. The parties agree that no party shall, with
respect to this Agreement and the transactions contemplated hereby,
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information
regarding this Agreement or the transactions contemplated to any third
party without the consent of the other parties, which consent shall not
be unreasonably withheld. No party, or its employees shall trade in the
securities of any parent or affiliate of the Sellers or of the Purchaser
until a public announcement of the transactions contemplated by this
Agreement has been made. No party shall record this Agreement or any
notice thereof.
12.4 Corporate Approvals. (a) In the event, notwithstanding
diligent and good faith efforts, the Sellers shall be unable to obtain
the approval of the Boards of Directors of the Sellers to the
transactions contemplated by this Agreement, this Agreement may be
terminated by the Sellers by the giving of written notice thereof to the
Purchaser within five (5) Business Days after the date of this
Agreement; it being expressly understood and agreed that time shall be
of the essence with respect to the giving of such notice. If the
Sellers shall give such notice to the Purchaser within the time period
hereinabove provided, this Agreement shall terminate and be of no
further force or effect and the Sellers shall refund the Initial Deposit
to the Purchaser, together with interest thereon, in accordance with
Section 11.1. If the Sellers shall fail to give such notice within the
time period and in the manner hereinabove provided, the Sellers shall
have no further right to terminate this Agreement pursuant to this
section.
(b) In the event, notwithstanding diligent and good faith efforts,
the Purchaser shall be unable to obtain the approval of the Board of
Directors of the Purchaser to the transactions contemplated by this
Agreement, this Agreement may be terminated by the Purchaser by the
giving of written notice thereof to the Seller within five (5) Business
Days after the date of this Agreement; it being expressly understood and
agreed that time shall be of the essence with respect to the giving of
such notice. If the Purchaser shall give such notice to the Sellers
within the time period hereinabove provided, this Agreement shall
terminate and be of no further force or effect and the Sellers shall
refund the Initial Deposit to the Purchaser, together with interest
thereon, in accordance with Section 11.1. If the Purchaser shall fail
to give such notice within the time period and in the manner hereinabove<PAGE>
-34-
provided, the Purchaser shall have no further right to terminate this
Agreement pursuant to this section.
12.5 Notices. (a) Any and all notices, demands, consents,
approvals, offers, elections and other communications required or
permitted under this Agreement shall be deemed adequately given if in
writing and the same shall be delivered either in hand, by telecopier
with written acknowledgment of receipt, or by mail or Federal Express or
similar expedited commercial carrier, addressed to the recipient of the
notice, postpaid and registered or certified with return receipt
requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall
be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier,
and, in all other cases, upon the date of receipt or refusal, except
that whenever under this Agreement a notice is either received on a day
which is not a Business Day or is required to be delivered on or before
a specific day which is not a Business Day, the day of receipt or
required delivery shall automatically be extended to the next Business
Day.
(c) All such notices shall be addressed,
if to the Sellers to:
Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Mr. Bruce D. Wardinski
Treasury Department 72/924.11
[Telecopier No. (301)380-6338]
with a copy to:
Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Pamela J. Murch, Esq.
Law Department 72/923
[Telecopier No. (301)380-6332 or 3558]
If to the Purchaser, to:
Hospitality Properties, Inc.
c/o Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester<PAGE>
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One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other
address within the United States of America.
12.6 Waivers, Etc. Any waiver of any term or condition of this
Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed
to be or construed as a further or continuing waiver of any other breach
of such term, condition, covenant, representation or warranty or any
other term, condition, covenant, representation or warranty, nor shall
any failure at any time or times to enforce or require performance of
any provision hereof operate as a waiver of or affect in any manner such
party's right at a later time to enforce or require performance of such
provision or any other provision hereof. This Agreement may not be
amended, nor shall any waiver, change, modification, consent or
discharge be effected, except by an instrument in writing executed by or
on behalf of the party against whom enforcement of any amendment,
waiver, change, modification, consent or discharge is sought.
12.7 Assignment; Successors and Assigns. This Agreement and all
rights and obligations hereunder shall not be assignable by any party
without the written consent of the other parties, except that the
Purchaser may assign this Agreement to Health and Retirement Properties
Trust and to any entity wholly owned, directly or indirectly, by Health
and Retirement Properties Trust; provided, however, that, in the event
this Agreement shall be assigned to any entity wholly owned, directly or
indirectly, by Health and Retirement Properties Trust, the Purchaser
named herein shall remain liable for the obligation of the "Purchaser"
hereunder and Health and Retirement Properties Trust shall guaranty the
obligations of such Assignee hereunder. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns.
This Agreement is not intended and shall not be construed to create any
rights in or to be enforceable in any part by any other persons.
12.8 Severability. If any provision of this Agreement shall be
held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the
conflict of any provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance shall not have
the effect of rendering the provision or provisions in question invalid,
inoperative or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions
herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with
such constitution, statute or rule of public policy, but this Agreement<PAGE>
-36-
shall be reformed and construed in any such jurisdiction or case as if
such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such
jurisdiction or in such case.
12.9 Counterparts, Etc. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This
Agreement constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and shall supersede and take the
place of any other instruments purporting to be an agreement of the
parties hereto relating to the subject matter hereof. This Agreement
may not be amended or modified in any respect other than by the written
agreement of all of the parties hereto.
12.10 Governing Law. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State
of Maryland applicable to contracts between residents of Maryland which
are to be performed entirely within Maryland, regardless of (i) where
this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be
made; or (iii) where any breach of any provision of this Agreement
occurs, or any cause of action otherwise accrues; or (iv) where any
action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi)
whether the laws of the forum jurisdiction otherwise would apply the
laws of a jurisdiction other than the State of Maryland; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the
provisions of this Agreement may be brought and prosecuted in such court
or courts located in the State of Maryland as is provided by law; and
the parties consent to the jurisdiction of said court or courts located
in the State of Maryland and to service of process by registered mail,
return receipt requested, or by any other manner provided by law.
12.11 Performance on Business Days. In the event the date on
which performance or payment of any obligation of a party required
hereunder is other than a Business Day, the time for payment or
performance shall automatically be extended to the first Business Day
following such date.
12.12 Attorneys' Fees. If any lawsuit or arbitration or other
legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be
entitled to receive from the other party the prevailing party's costs
and expenses, including reasonable attorneys' fees incurred in
connection therewith, in preparation therefor and on appeal therefrom,
which amounts shall be included in any judgment therein.<PAGE>
-37-
12.13 Section and Other Headings. The headings contained in this
Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SELLERS:
HMH COURTYARD PROPERTIES, INC.
By: /s/ Bruce D. Wardinski
Its: Vice President
By: /s/ Pamela J. Murch
Its: Assistant Secretary
HMH PROPERTIES, INC.
By: /s/ Bruce D. Wardinski
Its: Vice President
By: /s/ Pamela J. Murch
Its: Assistant Secretary
PURCHASER:
HOSPITALITY PROPERTIES, INC.
By: /s/ David J. Hegarty
Its: President<PAGE>
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The undersigned hereby acknowledges and agrees to the
provisions of Section 10 of the foregoing Agreement and hereby
guarantees full performance of all of the obligations of HMH Courtyard
Properties, Inc. and HMH Properties, Inc. under the foregoing Agreement.
HOST MARRIOTT CORPORATION
By: /s/ Bruce D. Wardinski
Its: Vice President
By: /s/ Pamela J. Murch
Its: Assistant Secretary
The undersigned hereby guarantees full performance of all of
the obligations of Hospitality Properties, Inc. under the foregoing
Agreement.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
Its: Executive Vice President<PAGE>
Schedule A
Allocable Purchase Prices of Acquisition Properties
Courtyard Properties
No. of Purchase Ground
Location Units Price Rent 1
-------- ------- ---------- -------
Seattle/Bellevue 152 $11,600,000
Atlanta Airport North 152 9,900,000
Minneapolis/Edsen 149 8,800,000
Spartanburg 108 5,800,000
Boston Danvers 121 7,600,000
Kansas City South 149 8,600,000
Philadelphia Airport 152 9,700,000
Boston/Foxboro 149 10,500,000
Atlanta Midtown 168 11,300,000
Indianapolis/Carmel 149 8,800,000
Dulles/Fairfax 149 8,200,000
Raleigh/Durham Airport 152 9,900,000
Atlanta Cumberland 182 9,400,000
Detroit/Auburn Hills 148 6,500,000
Boston/Milford 151 6,000,000
Boston/Lowell 121 3,900,000
Atlanta/Jimmy Carter 121 5,000,000
Phoenix Camelback 155 8,700,000 288,647
Boston Stoughton 152 10,400,000 155,420
Scottsdale/Mayo Clinic 100 6,400,000 187,836
Mahwah 146 12,400,000
TOTALS: 3,004 $179,400,000 $631,903
-----------------
1 1994 Budget<PAGE>
Schedule B
Allocable Purchase Prices of Option Properties
Courtyard Properties
No. of Purchase Ground
Location Units Price Rent1
-------- ------- ---------- -------
Chattanooga 109 $ 9,200,000
Williamsburg 151 12,300,000
Miami Lakes 151 12,300,000
Macon 108 7,700,000
Camarillo 130 4,900,00
Quad Cities 108 7,800,000
San Jose Airport 151 15,000,000
Columbia 152 13,400,000
Kansas City Airport 149 7,600,000
Greenbelt 152 11,600,000
Wilmington 152 12,100,000
Fayetteville 108 5,800,000
Charlotte/Research Pk 151 7,900,000
Fishkill 152 11,200,000
Newport/Middletown 148 10,200,000
Pittsburgh Airport 148 9,000,000
Tinton Falls 121 5,900,000
Hanover 149 13,400,000
Arlington/Rosslyn 162 18,200,000
Boston/Woburn 121 10,200,000
Boca Raton 152 12,100,000
Milwaukee/Brookfield 148 8,500,000
Irvine/Laguna Hills 137 9,600,000
Chicago/Arlington 150 8,500,000
Dallas/Northpark 160 8,600,000
Torrance/Bus. Center 151 8,100,000
Fountain Valley 150 7,200,000
Jacksonville/Mayo Clinic 121 13,400,000 155,420
Boston/Norwood 148 11,700,000 140,293
Willow Grove 149 14,200,000 150,000
Syracuse 149 10,700,000 115,243
Los Angeles Airport 146 7,700,000 502,911
Chicago/Wabash Ave. 336 26,100,000
TOTALS: 4,892 $352,100,000 $1,063,867
-----------------
1 1994 Budget<PAGE>
Schedules C-1 through C-21
Legal Descriptions of Initial Acquisition Properties
[Exhibit omitted from this filing.]<PAGE>
Schedules D-1 through D-33
Legal Descriptions of Option Properties
[Exhibit omitted from this filing.]<PAGE>
Schedule E
Form of Surveyor's Certificate
[Exhibit omitted from this filing.]<PAGE>
Schedule F
Form of Lease
[See attached copy.]<PAGE>
LEASE AGREEMENT
DATED AS OF __________ __, 199_
BY AND BETWEEN
HOSPITALITY PROPERTIES, INC.,
AS LANDLORD,
AND
HMH HPT COURTYARD, INC.
AS TENANT<PAGE>
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounting Period . . . . . . . . . . . . . . . . 1
1.2 Additional Rent . . . . . . . . . . . . . . . . . 1
1.3 Additional Charges . . . . . . . . . . . . . . . 1
1.4 Affiliated Person . . . . . . . . . . . . . . . . 2
1.5 Agreement . . . . . . . . . . . . . . . . . . . . 2
1.6 Applicable Laws . . . . . . . . . . . . . . . . . 2
1.7 Award . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Base Gross Revenues . . . . . . . . . . . . . . . 3
1.9 Base Year . . . . . . . . . . . . . . . . . . . . 3
1.10 Business Day . . . . . . . . . . . . . . . . . . 3
1.11 Capital Addition . . . . . . . . . . . . . . . . 3
1.12 Capital Expenditure . . . . . . . . . . . . . . . 3
1.13 Claim . . . . . . . . . . . . . . . . . . . . . . 4
1.14 Code . . . . . . . . . . . . . . . . . . . . . . 4
1.15 Collective Leased Properties . . . . . . . . . . 4
1.16 Commencement Date . . . . . . . . . . . . . . . . 4
1.17 Condemnation . . . . . . . . . . . . . . . . . . 4
1.18 Condemnor . . . . . . . . . . . . . . . . . . . . 4
1.19 Consolidated Financials . . . . . . . . . . . . . 4
1.20 Date of Taking . . . . . . . . . . . . . . . . . 4
1.21 Default . . . . . . . . . . . . . . . . . . . . . 4
1.22 Distribution . . . . . . . . . . . . . . . . . . 4
1.23 Encumbrance . . . . . . . . . . . . . . . . . . . 5
1.24 Entity . . . . . . . . . . . . . . . . . . . . 5
1.25 Environment . . . . . . . . . . . . . . . . . . . 5
1.26 Environmental Obligation . . . . . . . . . . . . 5
1.27 Environmental Notice . . . . . . . . . . . . . . 5
1.28 Event of Default . . . . . . . . . . . . . . . . 5
1.29 Excess Gross Revenues . . . . . . . . . . . . . . 5
1.30 Extended Terms . . . . . . . . . . . . . . . . . 5
1.31 FF&E Reserve . . . . . . . . . . . . . . . . . . . 5
1.32 Financial Officer's Certificate . . . . . . . . . 5
1.33 Fiscal Year . . . . . . . . . . . . . . . . . . . 6
1.34 Fixed Term . . . . . . . . . . . . . . . . . . . 6
1.35 Fixtures . . . . . . . . . . . . . . . . . . . . 6
1.36 GAAP . . . . . . . . . . . . . . . . . . . . . . 6
1.37 Government Agencies . . . . . . . . . . . . . . . 6
1.38 Gross Revenues . . . . . . . . . . . . . . . . . . 6
1.39 Ground Lease . . . . . . . . . . . . . . . . . . . 6
1.40 Hazardous Substances . . . . . . . . . . . . . . 6
1.41 Host . . . . . . . . . . . . . . . . . . . . . . 7
1.42 Hotel . . . . . . . . . . . . . . . . . . . . . . 7
1.43 Hotel Mortgage . . . . . . . . . . . . . . . . . 7
1.44 Hotel Mortgagee . . . . . . . . . . . . . . . . . 7
1.45 Immediate Family . . . . . . . . . . . . . . . . . 7
1.46 Impositions . . . . . . . . . . . . . . . . . . . 7
1.47 Incidental Documents . . . . . . . . . . . . . . 9
1.48 Indebtedness . . . . . . . . . . . . . . . . . . 9
1.49 Indenture . . . . . . . . . . . . . . . . . . . . 9
1.50 Insurance Requirements . . . . . . . . . . . . . 9<PAGE>
-ii-
1.51 Interest Rate . . . . . . . . . . . . . . . . . . 9
1.52 Land . . . . . . . . . . . . . . . . . . . . . . 9
1.53 Landlord . . . . . . . . . . . . . . . . . . . . 9
1.54 Landlord Liens . . . . . . . . . . . . . . . . . . 9
1.55 Lease Year . . . . . . . . . . . . . . . . . . . 9
1.56 Leased Improvements . . . . . . . . . . . . . . . 9
1.57 Leased Intangible Property . . . . . . . . . . . 9
1.58 Leased Personal Property . . . . . . . . . . . . 10
1.59 Leased Property . . . . . . . . . . . . . . . . . 10
1.60 Legal Requirements . . . . . . . . . . . . . . . 10
1.61 Lending Institution . . . . . . . . . . . . . . . 10
1.62 Lien . . . . . . . . . . . . . . . . . . . . . . 10
1.63 Management Agreement . . . . . . . . . . . . . . 11
1.64 Manager . . . . . . . . . . . . . . . . . . . . . 11
1.65 Minimum Rent . . . . . . . . . . . . . . . . . . 11
1.66 Notice . . . . . . . . . . . . . . . . . . . . . 11
1.67 Officer's Certificate . . . . . . . . . . . . . . 11
1.68 Other Leases . . . . . . . . . . . . . . . . . . . 11
1.69 Overdue Rate . . . . . . . . . . . . . . . . . . 11
1.70 Parent . . . . . . . . . . . . . . . . . . . . . . 11
1.71 Permitted Encumbrances . . . . . . . . . . . . . 11
1.72 Permitted Liens . . . . . . . . . . . . . . . . . 11
1.73 Permitted Use . . . . . . . . . . . . . . . . . . 11
1.74 Person . . . . . . . . . . . . . . . . . . . . . 11
1.75 Pledge and Security Agreement . . . . . . . . . . 12
1.76 Purchase Agreement . . . . . . . . . . . . . . . . 12
1.77 Records . . . . . . . . . . . . . . . . . . . . . 12
1.78 Rent . . . . . . . . . . . . . . . . . . . . . . 12
1.79 Request Notice . . . . . . . . . . . . . . . . . 12
1.80 Response Notice . . . . . . . . . . . . . . . . . 12
1.81 SEC . . . . . . . . . . . . . . . . . . . . . . . 12
1.82 State . . . . . . . . . . . . . . . . . . . . . . 12
1.83 Subordinated Creditor . . . . . . . . . . . . . . 12
1.84 Subordination Agreement . . . . . . . . . . . . . 12
1.85 Subsidiary . . . . . . . . . . . . . . . . . . . 12
1.86 Successor Landlord . . . . . . . . . . . . . . . 12
1.87 Tangible Net Worth . . . . . . . . . . . . . . . 12
1.88 Tenant . . . . . . . . . . . . . . . . . . . . . 13
1.89 Tenant's Personal Property . . . . . . . . . . . 13
1.90 Term . . . . . . . . . . . . . . . . . . . . . . 13
1.91 Uniform System of Accounts . . . . . . . . . . . 13
1.92 Unsuitable for Its Permitted Use . . . . . . . . 13
1.93 Work . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 2: LEASED PROPERTY AND TERM . . . . . . . . . . . . . . . 14
2.1 Leased Property . . . . . . . . . . . . . . . . . . 14
2.2 Condition of Leased Property . . . . . . . . . . . . 15
2.3 Fixed Term . . . . . . . . . . . . . . . . . . . . 15
2.4 Extended Term . . . . . . . . . . . . . . . . . . . 16
ARTICLE 3: RENT . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Rent . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.1 Minimum Rent . . . . . . . . . . . . . . . . 16<PAGE>
-iii-
3.1.2 Additional Rent . . . . . . . . . . . . . . . 17
3.1.3 Additional Charges . . . . . . . . . . . . . 19
3.2 Late Payment of Rent, Etc. . . . . . . . . . . . . . 21
3.3 Net Lease . . . . . . . . . . . . . . . . . . . . . 22
3.4 No Termination, Abatement, Etc. . . . . . . . . . . 22
3.5 Security for Tenant's Performance . . . . . . . . . 23
ARTICLE 4: USE OF THE LEASED PROPERTY . . . . . . . . . . . . . . 23
4.1 Permitted Use . . . . . . . . . . . . . . . . . . . 23
4.1.1 Permitted Use . . . . . . . . . . . . . . . . 23
4.1.2 Necessary Approvals . . . . . . . . . . . . . 24
4.1.3 Lawful Use, Etc. . . . . . . . . . . . . . . 24
4.2 Compliance with Legal/Insurance Requirements,
Etc. . . . . . . . . . . . . . . . . . . . . . . 25
4.3 Environmental Matters . . . . . . . . . . . . . . . 25
4.3.1 Restriction on Use, Etc. . . . . . . . . . . 25
4.3.3 Survival . . . . . . . . . . . . . . . . . . 27
ARTICLE 5: MAINTENANCE AND REPAIRS . . . . . . . . . . . . . . . . 27
5.1 Maintenance and Repair . . . . . . . . . . . . . . 27
5.1.1 Tenant's Obligations . . . . . . . . . . . . 27
5.1.2 Landlord's Obligations . . . . . . . . . . . 28
5.1.3 Nonresponsibility of Landlord, Etc. . . . . . 29
5.2 Tenant's Personal Property . . . . . . . . . . . . 29
5.3 Yield Up . . . . . . . . . . . . . . . . . . . . . . 30
5.4 Management Agreement . . . . . . . . . . . . . . . 30
ARTICLE 6: IMPROVEMENTS, ETC. . . . . . . . . . . . . . . . . . . 31
6.1 Improvements to the Leased Property. . . . . . . 31
6.2 Salvage . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7: LIENS . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Liens . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Landlord's Lien . . . . . . . . . . . . . . . . . . 32
ARTICLE 8: PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . 33
ARTICLE 9: INSURANCE AND INDEMNIFICATION . . . . . . . . . . . . . 34
9.1 General Insurance Requirements . . . . . . . . . . 34
9.2 Replacement Cost . . . . . . . . . . . . . . . . . 35
9.3 Waiver of Subrogation . . . . . . . . . . . . . . . 35
9.4 Form Satisfactory, Etc . . . . . . . . . . . . . . 36
9.5 Blanket Policy . . . . . . . . . . . . . . . . . . 36
9.6 No Separate Insurance . . . . . . . . . . . . . . . 37
9.7 Indemnification of Landlord . . . . . . . . . . . . 37
ARTICLE 10: CASUALTY . . . . . . . . . . . . . . . . . . . . . . . 38
10.1 Insurance Proceeds . . . . . . . . . . . . . . . . 38
10.2 Damage or Destruction . . . . . . . . . . . . . . 38<PAGE>
-iv-
10.2.1 Damage or Destruction of Leased
Property . . . . . . . . . . . . . . . . . . . . . . 38
10.2.2 Partial Damage or Destruction . . . . . . . 38
10.2.3 Insufficient Insurance Proceeds . . . . . . 38
10.2.4 Disbursement of Proceeds . . . . . . . . . . 39
10.3 Damage Near End of Term . . . . . . . . . . . . . 40
10.4 Tenant's Property . . . . . . . . . . . . . . . . 40
10.5 Restoration of Tenant's Property . . . . . . . . . 40
10.6 No Abatement of Rent . . . . . . . . . . . . . . . 40
10.7 Waiver . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 11: CONDEMNATION . . . . . . . . . . . . . . . . . . . . . 41
11.1 Total Condemnation, Etc. . . . . . . . . . . . . . 41
11.2 Partial Condemnation . . . . . . . . . . . . . . . 41
11.3 Abatement of Rent . . . . . . . . . . . . . . . . 42
11.4 Temporary Condemnation . . . . . . . . . . . . . . 42
11.5 Allocation of Award . . . . . . . . . . . . . . . 43
ARTICLE 12: DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . 43
12.1 Events of Default . . . . . . . . . . . . . . . . 43
12.2 Remedies . . . . . . . . . . . . . . . . . . . . . 46
12.3 Tenant's Waiver . . . . . . . . . . . . . . . . . 48
12.4 Application of Funds . . . . . . . . . . . . . . . 48
12.5 Landlord's Right to Cure Tenant's Default . . . . 48
ARTICLE 13: HOLDING OVER . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 14: LANDLORD'S NOTICE OBLIGATIONS; LANDLORD
DEFAULT . . . . . . . . . . . . . . . . . . . . . 49
14.1 Landlord Notice Obligation . . . . . . . . . . . . 49
14.2 Landlord's Default . . . . . . . . . . . . . . . . 49
ARTICLE 15: INTENTIONALLY DELETED . . . . . . . . . . . . . . . . 50
ARTICLE 16: SUBLETTING AND ASSIGNMENT . . . . . . . . . . . . . . 50
16.1 Subletting and Assignment . . . . . . . . . . . . 50
16.2 Required Sublease Provisions . . . . . . . . . . . 52
16.3 Permitted Sublease . . . . . . . . . . . . . . . . 53
16.4 Sublease Limitation . . . . . . . . . . . . . . . 53
ARTICLE 17: ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS . . . . 53
17.1 Estoppel Certificates . . . . . . . . . . . . . . 53
17.2 Financial Statements . . . . . . . . . . . . . . . 54
17.3 General Operations . . . . . . . . . . . . . . . . 55
ARTICLE 18: LANDLORD'S RIGHT TO INSPECT . . . . . . . . . . . . . 55
ARTICLE 19: INTENTIONALLY DELETED . . . . . . . . . . . . . . . . 56
ARTICLE 20: HOTEL MORTGAGES . . . . . . . . . . . . . . . . . . . 56<PAGE>
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20.1 Landlord May Grant Liens . . . . . . . . . . . . . 56
20.2 Subordination of Lease . . . . . . . . . . . . . . 56
20.3 Notice to Mortgagee and Ground Landlord . . . . . 58
20.4 Transfer of Leased Property . . . . . . . . . . . 58
ARTICLE 21: ADDITIONAL COVENANTS OF TENANT . . . . . . . . . . . . 59
21.1 Prompt Payment of Indebtedness . . . . . . . . . . 59
21.2 Conduct of Business . . . . . . . . . . . . . . . 59
21.3 Maintenance of Accounts and Records . . . . . . . 59
21.4 Notice of Litigation, Etc. . . . . . . . . . . . . 59
21.5 Indebtedness of Tenant . . . . . . . . . . . . . . 60
21.6 Financial Condition of Tenant . . . . . . . . . . 61
21.7 Distributions, Payments to Affiliated
Persons, Etc . . . . . . . . . . . . . . . . . . 61
21.8 Prohibited Transactions . . . . . . . . . . . . . 61
21.9 Liens and Encumbrances . . . . . . . . . . . . . . 61
21.10 Merger; Sale of Assets; Etc . . . . . . . . . . . 61
ARTICLE 22: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 62
22.1 Limitation on Payment of Rent . . . . . . . . . . 62
22.2 No Waiver . . . . . . . . . . . . . . . . . . . . 62
22.3 Remedies Cumulative . . . . . . . . . . . . . . . 62
22.4 Severability . . . . . . . . . . . . . . . . . . 63
22.5 Acceptance of Surrender . . . . . . . . . . . . . 63
22.6 No Merger of Title . . . . . . . . . . . . . . . 63
22.7 Conveyance by Landlord . . . . . . . . . . . . . 63
22.8 Quiet Enjoyment . . . . . . . . . . . . . . . . . 63
22.9 Memorandum of Lease . . . . . . . . . . . . . . . 64
22.10 Notices . . . . . . . . . . . . . . . . . . . . . 64
22.11 Construction . . . . . . . . . . . . . . . . . . 65
22.12 Counterparts; Headings . . . . . . . . . . . . . 66
22.13 Applicable Law, Etc. . . . . . . . . . . . . . . 66
22.14 Right to Make Agreement . . . . . . . . . . . . . 67
[22.15 Ground Lease, Etc. . . . . . . . . . . . . . . . 67
EXHIBITS
A - Minimum Rent
B - Other Leases
C - The Land<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this ___ day of
_______ 199_, by and between HOSPITALITY PROPERTIES, INC., a Delaware
corporation, as landlord ("Landlord"), and HMH HPT COURTYARD, INC., a
Delaware corporation, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Leased Property
(this and other capitalized terms used and not otherwise defined herein
having the meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Leased Property to
Tenant and Tenant wishes to lease the Leased Property from Landlord, all
subject to and upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual
receipt and legal sufficiency of which are hereby acknowledged, Landlord
and Tenant hereby agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, (i) the
terms defined in this Article shall have the meanings assigned to them
in this Article and include the plural as well as the singular, (ii) all
accounting terms not otherwise defined herein shall have the meanings
assigned to them in accordance with GAAP, (iii) all references in this
Agreement to designated "Articles," "Sections" and other subdivisions
are to the designated Articles, Sections and other subdivisions of this
Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.
1.1 "Accounting Period" shall have the meaning given such
term in the Management Agreement.
1.2 "Additional Rent" shall have the meaning given such term
in Section 3.1.2(a).
1.3 "Additional Charges" shall have the meaning given such
term in Section 3.1.3.
1.4 "Affiliated Person" shall mean, with respect to any
Person, (a) in the case of any such Person which is a partnership, any
partner in such partnership, (b) in the case of any such Person which is
a limited liability company, any member of such company, (c) any other<PAGE>
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Person which is a Parent, a Subsidiary, or a Subsidiary of a Parent with
respect to such Person or to one or more of the Persons referred to in
the preceding clauses (a) and (b), (d) any other Person who is an
officer, director, trustee or employee of, or partner in, such Person or
any Person referred to in the preceding clauses (a), (b) and (c), and
(e) any other Person who is a member of the Immediate Family of such
Person or of any Person referred to in the preceding clauses (a) through
(d).
1.5 "Agreement" shall mean this Lease Agreement, including
Exhibits A to D hereto, as it and they may be amended from time to time
as herein provided.
1.6 "Applicable Laws" shall mean all applicable laws,
statutes, regulations, rules, ordinances, codes, licenses, permits and
orders, from time to time in existence, of all courts of competent
jurisdiction and Government Agencies, and all applicable judicial and
administrative and regulatory decrees, judgments and orders, including
common law rulings and determinations, relating to injury to, or the
protection of, real or personal property or human health (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 wastes whether solid, liquid or gaseous in nature, into the
Environment, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances, underground improvements (including, without limitation,
treatment or storage tanks, or water, gas or oil wells), or pollutants,
contaminants or hazardous or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature.
1.7 "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).
1.8 "Base Gross Revenues" shall mean Gross Revenues for the
Base Year; provided, however, that in the event that, with respect to
any Lease Year, or portion thereof, for any reason (including, without
limitation, a casualty or Condemnation) there shall be a reduction in
the number of rooms at the Hotel or any other Hotel (as defined in the
Other Leases) or a change in the services provided at the Hotel or such
other Hotels (including, without limitation, closing of restaurants)
from the number of rooms or the services provided during the Base Year,
in determining Additional Rent payable with respect to such Lease Year,
Base Gross Revenues shall be reduced as follows: (a) in the event of
the termination of any of the Other Leases, all Gross Revenues<PAGE>
-3-
attributable to the Leased Property demised thereunder during the Base
Year shall be subtracted from Base Gross Revenues; (b) in the event of a
complete closing of a Hotel, all Gross Revenues attributable to such
Hotel during the Base Year shall be subtracted from Base Gross Revenues
throughout the period of such closing; (c) in the event of a partial
closing of a Hotel affecting any number of guest rooms in such Hotel,
Gross Revenues attributable to guest room occupancy or guest room
services at such Hotel during the Base Year shall be ratably allocated
among all guest rooms in service at such Hotel during the Base Year and
all such Gross Revenues attributable to rooms no longer in service shall
be subtracted from Base Gross Revenues throughout the period of such
closing; (d) in the event of a closing of a restaurant, all Gross
Revenues attributable to such restaurant during the Base Year shall be
subtracted from Base Gross Revenues throughout the period of such
closing; and (e) in the event of any other change in circumstances
affecting any Hotel, Base Gross Revenues shall be equitably adjusted in
such manner as Landlord and Tenant shall reasonably agree.
1.9 "Base Year" shall mean [the 1994 Fiscal Year for the
Initial Acquisition Properties and for the Option Properties if the
Option Closing occurs prior to December 31, 1995] [the 1995 Fiscal Year
for the Option Properties if the Option Closing occurs January 1, 1996
or thereafter].
1.10 "Business Day" shall mean any day other than Saturday,
Sunday, or any other day on which banking institutions in The
Commonwealth of Massachusetts or the State of Maryland are authorized by
law or executive action to close.
1.11 "Capital Addition" shall mean any renovation, repair or
improvement to the Leased Property (or portion thereof), the cost of
which constitutes a Capital Expenditure and the making or implementation
of which requires "Owner's" consent under the Management Agreement.
1.12 "Capital Expenditure" shall mean any expenditure treated
as capital in nature in accordance with GAAP.
1.13 "Claim" shall have the meaning given such term in
Article 8.
1.14 "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.
1.15 "Collective Leased Properties" shall mean, collectively,
the Leased Property and every other Leased Property (as defined therein)
under the Other Leases.
1.16 "Commencement Date" shall mean the date of this
Agreement.
1.17 "Condemnation" shall mean (a) the exercise of any
governmental power with respect to the Leased Property, whether by legal
proceedings or otherwise, by a Condemnor of its power of condemnation,
(b) a voluntary sale or transfer of the Leased Property by Landlord to<PAGE>
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any Condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending, or (c) a taking or voluntary
conveyance of all or part of 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.
1.18 "Condemnor" shall mean any public or quasi-public
authority, or private corporation or individual, having the power of
Condemnation.
1.19 "Consolidated Financials" shall mean, for any Fiscal
Year or other accounting period of Tenant, annual audited and quarterly
unaudited financial statements of Host prepared on a consolidated basis,
including Host's consolidated balance sheet and the related statements
of income and cash flows, all in reasonable detail, and setting forth in
comparative form the corresponding figures for the corresponding period
in the preceding Fiscal Year, and prepared in accordance with GAAP
throughout the periods reflected.
1.20 "Date of Taking" shall mean the date the Condemnor has
the right to possession of the Leased Property, or any portion thereof,
in connection with a Condemnation.
1.21 "Default" shall mean any event or condition which with
the giving of notice and/or lapse of time may ripen into an Event of
Default.
1.22 "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.
1.23 "Encumbrance" shall have the meaning given such term in
Section 20.1.
1.24 "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.
1.25 "Environment" shall mean soil, surface waters, ground
waters, land, stream, sediments, surface or subsurface strata and
ambient air.
1.26 "Environmental Obligation" shall have the meaning given
such term in Section 4.3.1.<PAGE>
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1.27 "Environmental Notice" shall have the meaning given such
term in Section 4.3.1.
1.28 "Event of Default" shall have the meaning given such
term in Section 12.1.
1.29 "Excess Gross Revenues" shall mean, with respect to any
Lease Year, or portion thereof, the amount of Gross Revenues for such
Lease Year with respect to the Collective Leased Properties, or portion
thereof, in excess of Base Gross Revenues with respect to the Collective
Leased Properties for the equivalent period.
1.30 "Extended Terms" shall have the meaning given such term
in Section 2.4.
1.31 "FF&E Reserve" shall have the meaning given such term in
the Management Agreement.
1.32 "Financial Officer's Certificate" shall mean, as to any
Person, a certificate of the chief financial officer or chief accounting
officer (or such officers' authorized designee) of such Person, duly
authorized, accompanying the financial statements required to be
delivered by such Person pursuant to Section 17.2, in which such officer
shall certify (a) that such statements have been properly prepared in
accordance with GAAP and are true, correct and complete in all material
respects and fairly present the consolidated financial condition of such
Person at and as of the dates thereof and the results of its and their
operations for the periods covered thereby, and (b) certify that such
officer has reviewed this Agreement and has no knowledge of any Default
or Event of Default hereunder.
1.33 "Fiscal Year" shall have the meaning given such term in
the Management Agreement.
1.34 "Fixed Term" shall have the meaning given such term in
Section 2.3.
1.35 "Fixtures" shall have the meaning given such term in
Section 2.1(d).
1.36 "GAAP" shall mean generally accepted accounting
principles consistently applied.
1.37 "Government Agencies" shall mean any court, agency,
authority, board (including, without limitation, environmental
protection, planning and zoning), bureau, commission, department, office
or instrumentality of any nature whatsoever of any governmental or
quasi-governmental unit of the United States or 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.
1.38 "Gross Revenues" shall have the meaning given such term
in the Management Agreement. <PAGE>
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1.39 ["Ground Lease" shall mean _____________________.]
1.40 "Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter
require notification, investigation or remediation under any
federal, state or local statute, regulation, rule, ordinance,
order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant"
or "contaminant" under any present or future federal, state or
local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42
U.S.C. et seq.) and the Resource Conservation and Recovery Act
(42 U.S.C. section 6901 et seq.) and the regulations
promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous and is or becomes regulated by any governmental
authority, agency, department, commission, board, agency or
instrumentality of the United States, any state of the United
States, or any political subdivision thereof; or
(d) the presence of which on the Leased Property 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.
1.41 "Host" shall mean Host Marriott Corporation, a Delaware
corporation.
1.42 "Hotel" shall mean the Marriott Courtyard Hotel being
operated on the Leased Property. <PAGE>
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1.43 "Hotel Mortgage" shall mean any Encumbrance placed upon
the Leased Property in accordance with Article 20.
1.44 "Hotel Mortgagee" shall mean the holder of any Hotel
Mortgage.
1.45 "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.
1.46 "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, 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), assessments (including, without limitation, all assessments
for public improvements or benefit, whether or not commenced or
completed prior to the date hereof), water, sewer or other rents and
charges, excises, tax levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees), and all
other governmental charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
in respect of the Leased Property or the business conducted thereon by
Tenant (including all interest and penalties thereon due to any failure
in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon (a) Landlord's interest in the Leased Property, (b) the
Leased Property or any part thereof or any rent therefrom or any estate,
right, title or interest therein, or (c) any occupancy, operation, use
or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased
Property or any part thereof by Tenant; provided, however, that nothing
contained herein shall be construed to require Tenant to pay (i) any tax
based on net income imposed on Landlord, (ii) any net revenue tax of
Landlord, (iii) any transfer fee or other tax imposed with respect to
the sale, exchange or other disposition by Landlord of the Leased
Property or the proceeds thereof (other than in connection with the
sale, exchange or other disposition to, or in connection with a
transaction involving, Tenant), (iv) 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 (i) or (ii) preceding
is levied, assessed or imposed expressly in lieu thereof, (v) any
interest or penalties imposed on Landlord as a result of the failure of
Landlord to file any return or report timely and in the form prescribed
by law or to pay any tax or imposition, except to the extent such
failure is a result of a breach by Tenant of its obligations pursuant to<PAGE>
-8-
Section 3.1.3, (vi) any Impositions imposed on Landlord that are a
result of Landlord not being considered a "United States person" as
defined in Section 7701(a)(30) of the Code, (vii) any Impositions that
are enacted or adopted by their express terms as a substitute for any
tax that would not have been payable by Tenant pursuant to the terms of
this Agreement or (viii) any Impositions imposed as a result of a breach
of covenant or representation by Landlord in any agreement governing
Landlord's conduct or operation or as a result of the gross negligence
or willful misconduct of Landlord.
1.47 "Incidental Documents" shall mean the Pledge and
Security Agreement.
1.48 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the
obligor's balance sheet as liabilities.
1.49 "Indenture" shall mean the Indenture, dated October 8,
1993, by and between Host Marriott Hospitality, Inc., et al. and Marine
Midland Bank as Trustee, as amended from time to time.
1.50 "Insurance Requirements" shall mean all terms of any
insurance policy required by this Agreement and all requirements of the
issuer of any such policy and all orders, rules and 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.
1.51 "Interest Rate" shall mean ten percent (10%) per annum.
1.52 "Land" shall have the meaning given such term in Section
2.1(a).
1.53 "Landlord" shall have the meaning given such term in the
preambles to this Agreement.
1.54 "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 [(other than the lessor under the Ground
Lease)], or which result from any violation by Landlord of any terms of
this Agreement or the Purchase 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
[(other than the lessor under the Ground Lease)]; provided, however,
that "Landlord Lien" shall not include any lien resulting from any tax
for which Tenant is obligated to pay or indemnify Landlord against until
such time as Tenant shall have already paid to or on behalf of Landlord
the tax or the required indemnity with respect to the same.
1.55 "Lease Year" shall mean any Fiscal Year or portion
thereof, commencing with the 1995 Fiscal Year, during the Term.
1.56 "Leased Improvements" shall have the meaning given such
term in Section 2.1(b).<PAGE>
-9-
1.57 "Leased Intangible Property" shall mean all hotel
licensing agreements and other service contracts, equipment leases,
booking agreements and other arrangements or agreements affecting the
ownership, repair, maintenance, management, leasing or operation of the
Leased Property to which Landlord is a party; all books, records and
files relating to the leasing, maintenance, management or operation of
the Leased Property belonging to Landlord; all transferable or
assignable permits, certificates of occupancy, operating permits, sign
permits, development rights and approvals, certificates, licenses,
warranties and guarantees, rights to deposits, trade names, service
marks, telephone exchange numbers identified with the Leased Property,
and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character belonging to Landlord
with respect to the Leased Property.
1.58 "Leased Personal Property" shall have the meaning given
such term in Section 2.1(e).
1.59 "Leased Property" shall have the meaning given such term
in Section 2.1.
1.60 "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 status as a real estate investment
trust.
1.61 "Lending Institution" shall mean any United States
insurance company, federally insured commercial or savings bank,
national banking association, United States savings and loan
association, employees' welfare, pension or retirement fund or system,
corporate profit sharing or pension trust, college or university, or
real estate investment trust, including any corporation qualified to be
treated for federal tax purposes as a real estate investment trust, such
trust having a net worth of at least $100,000,000.
1.62 "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.
1.63 "Management Agreement" shall mean the Management
Agreement between Tenant and the Manager with respect to the Leased<PAGE>
-10-
Premises, dated September 25, 1993, together with all amendments,
modifications and supplements thereto.
1.64 "Manager" shall mean Courtyard Management Corporation, a
Delaware corporation.
1.65 "Minimum Rent" shall mean, with respect to each
Accounting Period, the sum set forth on Exhibit A.
1.66 "Notice" shall mean a notice given in accordance with
Section 22.10.
1.67 "Officer's Certificate" shall mean a certificate signed
by an officer of the certifying Entity duly authorized by the board of
directors of the certifying Entity.
1.68 "Other Leases" shall mean, collectively, the Lease
Agreements between Landlord and Tenant described on Exhibit B.
1.69 "Overdue Rate" shall mean, on any date, a per annum rate
of interest equal to the lesser of fifteen percent (15%) and the maximum
rate then permitted under applicable law.
1.70 "Parent" shall mean, with respect to any Person, any
Person which owns directly, or indirectly through one or more
Subsidiaries or Affiliated Persons, 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, such Person.
1.71 "Permitted Encumbrances" shall mean all rights,
restrictions, and easements of record set forth on Schedule B to the
applicable owner's or leasehold title insurance policy issued to
Landlord on the date hereof, plus any other such encumbrances as may
have been consented to in writing by Landlord from time to time.
1.72 "Permitted Liens" shall mean any Liens granted in
accordance with Section 21.9(a).
1.73 "Permitted Use" shall mean any use of the Leased
Property permitted pursuant to Section 4.1.1(a) or (b).
1.74 "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.
1.75 "Pledge and Security Agreement" shall mean the Pledge
and Security Agreement, dated as of the date hereof, made by Tenant for
the benefit of Landlord.
1.76 "Purchase Agreement" shall mean the Purchase-Sale and
Option Agreement, dated as of February 3, 1995, by and among Landlord,
HMH Courtyard Properties, Inc., and HMH Properties, Inc., as amended.<PAGE>
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1.77 "Records" shall have the meaning given such term in
Section 7.2.
1.78 "Rent" shall mean, collectively, the Minimum Rent,
Additional Rent and Additional Charges.
1.79 "Request Notice" shall have the meaning given such term
in Section 16.1.
1.80 "Response Notice" shall mean the meaning given such term
in Section 16.1.
1.81 "SEC" shall mean the Securities and Exchange Commission.
1.82 "State" shall mean the state or commonwealth or district
in which the Leased Property is located.
1.83 "Subordinated Creditor" shall mean any creditor of
Tenant which is a party to a Subordination Agreement in favor of
Landlord.
1.84 "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.
1.85 "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).
1.86 "Successor Landlord" shall have the meaning given such
term in Section 20.2.
1.87 "Tangible Net Worth" shall mean the excess of total
assets over total liabilities, total assets and total liabilities each
to be determined in accordance with GAAP, excluding, however, from the
determination of total assets: (a) goodwill, organizational expenses,
research and development expenses, trademarks, trade names, copyrights,
patents, patent applications, licenses and rights in any thereof, and
other similar intangibles; (b) all deferred charges or unamortized debt
discount and expense; (c) all reserves carried and not deducted from
assets; (d) treasury stock and capital stock, obligations or other
securities of, or capital contributions to, or investments in, any
Subsidiary; (e) securities which are not readily marketable; (f) any
write-up in the book value of any asset resulting from a revaluation
thereof subsequent to the Commencement Date; and (g) any items not
included in clauses (a) through (f) above that are treated as
intangibles in conformity with GAAP.
1.88 "Tenant" shall have the meaning given such term in the
preambles to this Agreement. <PAGE>
-12-
1.89 "Tenant's Personal Property" shall mean all motor
vehicles and consumable inventory and supplies, furniture, furnishings,
movable walls and partitions, equipment and machinery and all other
personal property of Tenant, if any, acquired by Tenant on and after the
date hereof and located at the Leased Property or used in Tenant's
business at the Leased Property and all modifications, replacements,
alterations and additions to such personal property installed at the
expense of Tenant, other than any items included within the definition
of Fixtures or Leased Personal Property.
1.90 "Term" shall mean, collectively, the Fixed Term and the
Extended Terms, to the extent properly exercised pursuant to the provi-
sions of Section 2.4, unless sooner terminated pursuant to the
provisions of this Agreement.
1.91 "Uniform System of Accounts" shall mean A Uniform System
of Accounts for Hotels, Eighth Revised Edition, 1986, as published by
the Hotel Association of New York City, as the same may be further
revised from time to time.
1.92 "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.
1.93 "Work" shall have the meaning given such term in Section
10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and
conditions hereinafter set forth, Landlord leases to Tenant and Tenant
leases from Landlord all of Landlord's right, title and interest in and
to all of the following (collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land, as
more particularly described in Exhibit C, 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<PAGE>
-13-
lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings and structures presently
situated upon the Land (collectively, the "Leased Improve-
ments");
(c) all easements, rights and appurtenances relating to
the Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items
of property, now or hereafter permanently affixed to or
incorporated into the Leased Improvements, including, without
limitation, all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control,
waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection
equipment, all of which, to the maximum extent permitted by
law, are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding
all items included within the category of Tenant's Personal
Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings,
moveable walls or partitions, computers or trade fixtures or
other personal property of any kind or description used or
useful in Tenant's business on or in the Leased Improvements,
and located on or in the Leased Improvements, and all
modifications, replacements, alterations and additions to such
personal property, except items, if any, included within the
category of Fixtures, but specifically excluding all items
included within the category of Tenant's Personal Property
(collectively, the "Leased Personal Property");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space (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, subject to the rights of
parties in possession, the existing state of title, including all
covenants, conditions, restrictions, reservations, mineral leases, ease-
ments 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<PAGE>
-14-
TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE
CONDITION OF THE LEASED PROPERTY. LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR
ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION
FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT
ALL SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent
permitted by law, however, Landlord hereby assigns to Tenant all of
Landlord's rights to proceed against any predecessor in title for
breaches of warranties or representations or for latent defects in the
Leased Property. Landlord shall fully cooperate with Tenant in the
prosecution of any such claims, in Landlord's or Tenant's name, all at
Tenant's sole cost and expense. Tenant shall indemnify, defend, and
hold harmless Landlord from and against any loss, cost, damage or
liability (including reasonable attorneys' fees) incurred by Landlord in
connection with such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the
"Fixed Term") shall commence on the Commencement Date and shall expire
December 31, 2006.
2.4 Extended Term. Provided that no Event of Default shall
have occurred and be continuing, this Agreement shall be in full force
and effect, and the term of all of the Other Leases shall be
simultaneously extended, the Term shall be automatically extended for
four (4) consecutive renewal terms, the first such renewal term to be
for a period of seven (7) years and the last three such renewal terms to
be for a period of ten (10) years each (collectively, the "Extended
Terms"), unless Tenant shall give Landlord Notice, not later than
sixteen (16) months prior to the scheduled expiration of the then
current Term of this Agreement (Fixed or Extended, as the case may be),
that Tenant elects not so to extend the term of this Agreement (and time
shall be of the essence with respect to the giving of such Notice). It
is expressly understood and agreed that such Notice from Tenant shall be
void and of no effect and the Term shall be automatically extended
unless Tenant shall simultaneously elect not to extend the term of the
Other Leases.
Each Extended Term shall commence on the day succeeding the
expiration of the Fixed Term or the preceding Extended Term, as the case
may be. All of the terms, covenants and provisions of this Agreement
shall apply to each such Extended Term, except that Tenant shall have no
right to extend the Term beyond the expiration of the Extended Terms.
If Tenant shall give Notice that it elects not to extend the Term in
accordance with this Section 2.4, this Agreement shall automatically
terminate at the end of the Term then in effect and Tenant shall have no
further option to extend the Term of this Agreement. Otherwise, the
extension of this Agreement shall be automatically effected without the
execution of any additional documents; it being understood and agreed,
however, that Tenant and Landlord shall execute such documents and
agreements as either party shall reasonably require to evidence the
same.<PAGE>
-15-
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay, in lawful money of the United
States of America which shall be legal tender for the payment of public
and private debts, without offset, abatement, demand or deduction
(unless otherwise expressly provided in this Agreement), Minimum Rent
and Additional Rent to Landlord and Additional Charges to the party to
whom such Additional Charges are payable, during the Term. All payments
to Landlord shall be made by wire transfer of immediately available
federal funds or by other means acceptable to Landlord in its sole
discretion. Rent for any partial Accounting Period shall be prorated on
a per diem basis.
3.1.1 Minimum Rent.
(a) Minimum Rent shall be paid in advance on the first
Business Day of each Accounting Period; provided, however,
that the first payment of Minimum Rent shall be payable on the
Commencement Date (and, if applicable, such payment shall be
prorated as provided in the last sentence of the first
paragraph of Section 3.1).
(b) Adjustments of Minimum Rent Following Disbursements
Under Sections 5.1.2(b), 10.2.4 or 11.2. Effective on the
date of each disbursement to pay for the cost of any repairs,
maintenance, renovations or replacements pursuant to Sections
5.1.2(b), 10.2.4 or 11.2, the Minimum Rent shall be increased
by a per annum amount equal to ten percent (10%) of the amount
so disbursed. If any such disbursement is made during any
Accounting Period on a day other than the first day of a
Accounting Period, Tenant shall pay to Landlord on the first
day of the immediately following Accounting Period (in
addition to the amount of Minimum Rent payable with respect to
such Accounting Period, as adjusted pursuant to this paragraph
(b)) the amount by which Minimum Rent for the preceding
Accounting Period, as adjusted for such disbursement on a per
diem basis, exceeded the amount of Minimum Rent paid by Tenant
for such preceding Accounting Period.
3.1.2 Additional Rent.
(a) Amount. For each Lease Year or portion thereof,
Tenant shall pay an aggregate amount of additional rent
("Additional Rent") with respect to such Lease Year, pursuant
to this Agreement and the Other Leases, in an amount, not less
than zero, equal to five percent (5%) of Excess Gross
Revenues.
(b) Quarterly Installments. Installments of Additional
Rent for each Lease Year or portion thereof shall be
calculated and paid quarterly in arrears, together with an
Officer's Certificate setting forth the calculation of
Additional Rent due and payable for such quarter. Copies of<PAGE>
-16-
each Accounting Period Statement (as defined in the Management
Agreement) delivered pursuant to Section 5.03 of the
Management Agreement shall be delivered to Landlord upon
receipt by Tenant and each quarterly payment of Additional
Rent shall due and payable and shall be delivered to Landlord
with the payment of the Minimum Rent next due after receipt of
such Accounting Period Statement, together with an Officer's
Certificate setting forth the calculation of Additional Rent
due and payable for such quarter.
(c) Reconciliation of Additional Rent. In addition, on
or before April 30, of each year, commencing April 30, 1996,
Tenant shall deliver to Landlord an Officer's Certificate
setting forth the Gross Revenues for the Collective Leased
Properties for such preceding Lease Year, together with an
audit of Tenant's revenues for the preceding Lease Year,
conducted by Arthur Anderson and Co., or another "Big Six",
so-called, firm of independent certified public accountants
proposed by Tenant and approved by Landlord (which approval
shall not be unreasonably withheld or delayed).
If the annual Additional Rent for such preceding Lease
Year as shown in the Officer's Certificate exceeds the amount
previously paid with respect thereto by Tenant, Tenant shall
pay such excess to Landlord at such time as the Officer's
Certificate is delivered, together with interest at the
Interest Rate, which interest shall accrue from the close of
such preceding Lease Year until the date that such certificate
is required to be delivered and, thereafter, such interest
shall accrue at the Overdue Rate, until the amount of such
difference shall be paid or otherwise discharged. If the
annual Additional Rent for such preceding Lease Year as shown
in the Officer's Certificate is less than the amount
previously paid with respect thereto by Tenant, provided that
no Event of Default shall have occurred and be continuing,
Landlord shall grant Tenant a credit against Additional Rent
next coming due in the amount of such difference, together
with interest at the Interest Rate, which interest shall
accrue from the date of payment of Tenant until the date such
credit is applied or paid, as the case may be. If such credit
cannot be made because the Term has expired prior to
application in full thereof, provided no Event of Default has
occurred and is continuing, Landlord shall pay the unapplied
balance of such credit to Tenant, together with interest at
the Interest Rate, which interest shall accrue from the date
of payment by Tenant until the date of payment by Landlord.
(d) Confirmation of Additional Rent. Tenant shall
utilize, or cause to be utilized, an accounting system for the
Collective Leased Properties in accordance with its usual and
customary practices and in accordance with GAAP, which will
accurately record all Gross Revenues and Tenant shall retain,
for at least three (3) years after the expiration of each
Lease Year, reasonably adequate records conforming to such
accounting system showing all Gross Revenues for such Lease<PAGE>
-17-
Year. Landlord, at its own expense except as provided
hereinbelow, shall have the right, exercisable by Notice to
Tenant within one (1) year after receipt of the applicable
Officer's Certificate, by its accountants or representatives
to audit the information set forth in the Officer's
Certificate referred to in subparagraph (c) above and, in
connection with such audits, to examine Tenant's 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 Additional
Rent, and either Tenant agrees with the result of such audit
or the matter is otherwise compromised with Landlord, Tenant
shall forthwith pay to Landlord the amount of the deficiency,
as finally agreed or determined, together with interest at the
Interest Rate, from the date such payment should have been
made to the date of payment thereof. If such deficiency, as
agreed upon or compromised as aforesaid, is more than three
percent (3%) of the Gross Revenues reported by Tenant for such
Lease Year and, as a result, Landlord did not receive at least
ninety-five percent (95%) of the Additional Rent payable with
respect to such Lease Year, Tenant shall pay the reasonable
cost of such audit and examination. If any such audit
discloses that Tenant paid more Additional Rent for any Lease
Year than was due hereunder, and either Landlord agrees with
the result of such audit or the matter is otherwise
determined, provided no Event of Default has occurred and is
continuing, Landlord shall grant Tenant a credit equal to the
amount of such overpayment against Additional Rent next coming
due in the amount of such difference, as finally agreed or
determined, together with interest at the Interest Rate, which
interest shall accrue from the time of payment by Tenant until
the date such credit is applied or paid, as the case may be.
If such a credit cannot be made because the Term has expired
before the credit can be applied in full, provided no Event of
Default has occurred and is continuing, Landlord shall pay the
unapplied balance of such credit to Tenant, together with
interest at the Interest Rate, which interest shall accrue
from the date of payment by Tenant until the date of payment
from Landlord.
Any proprietary information obtained by Landlord with
respect to Tenant 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 Additional Rent payable hereunder, Tenant shall pay to the<PAGE>
-18-
appropriate parties and discharge as and when due and payable the
following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to
Permitted Contests, Tenant shall pay, or cause to be paid, all
Impositions before any fine, penalty, interest or cost (other
than any opportunity cost as a result of a failure to take
advantage of any discount for early payment) may be added for
non-payment, such payments to be made directly to the taxing
authorities where feasible, and shall promptly, upon request,
furnish to Landlord copies of official receipts or other
reasonably satisfactory proof evidencing such payments. If
any such Imposition may, at the option of the taxpayer,
lawfully be paid in installments (whether or not interest
shall accrue on the unpaid balance of such Imposition), Tenant
may exercise the option to pay the same (and any accrued
interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments
during the Term as the same become due and before any fine,
penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent
required or permitted by Applicable Law, prepare and file all
tax returns and pay all taxes due in respect of Landlord's net
income, gross receipts, sales and use, single business,
transaction privilege, rent, ad valorem, franchise taxes and
taxes on its capital stock, and Tenant, at its expense, shall,
to the extent required or permitted by Applicable Laws and
regulations, prepare and file all other tax returns and
reports in respect of any Imposition as may be required by
Government Agencies. Provided no Event of Default shall have
occurred and be continuing, if any refund shall be due from
any taxing authority in respect of any Imposition paid by
Tenant, the same shall be paid over to or retained by Tenant.
Landlord and Tenant shall, upon request of the other, provide
such data as is maintained by the party to whom the request is
made with respect to the Leased Property as may be necessary
to prepare any required returns and reports. In the event
Government Agencies classify any property covered by this
Agreement as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it may
legally so file. Each party shall, to the extent it possesses
the same, provide the other, upon request, with cost and
depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord
is legally required to file personal property tax returns for
property covered by this Agreement, Landlord shall provide
Tenant with copies of assessment notices in sufficient time
for Tenant to file a protest. All Impositions assessed
against such personal property shall be (irrespective of
whether Landlord or Tenant shall file the relevant return)
paid by Tenant not later than the last date on which the same
may be made without interest or penalty.
Landlord shall give prompt Notice to Tenant and the
Manager of all Impositions payable by Tenant hereunder of<PAGE>
-19-
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).
(b) Utility Charges. Tenant shall pay or cause to be
paid all charges for electricity, power, gas, oil, water and
other utilities used in connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to be
paid all premiums for the insurance coverage required to be
maintained pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid
all other amounts, liabilities and obligations, including,
without limitation, [ground rents and other sums payable under
the Ground Lease] and all amounts payable under or with
respect to the Management Agreement (except as expressly
provided in Section 5.1.2(b)) and all agreements to indemnify
Landlord under Sections 4.3.2 and 9.7.
(e) Reimbursement for Additional Charges. If Tenant pays
or causes to be paid property taxes or similar or other
Additional Charges attributable to periods after the end of
the Term, whether upon expiration or sooner termination of
this Agreement (other than termination by reason of an Event
of Default), Tenant may, within a reasonable time after the
end of the Term, provide Notice to Landlord of its estimate of
such amounts. Landlord shall promptly reimburse Tenant for
all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of
this Agreement (unless this Agreement shall have been
terminated following an Event of Default).
3.2 Late Payment of Rent, Etc., If any installment of Minimum
Rent, Additional Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be
paid within ten (10) days after its due date, Tenant shall pay Landlord,
on demand, as Additional Charges, a late charge (to the extent permitted
by law) computed at the Overdue Rate on the amount of such installment,
from the due date of such installment to the date of payment thereof. To
the extent that Tenant pays any Additional Charges directly to Landlord
or any Hotel Mortgagee pursuant to any requirement of this Agreement,
Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due. If any
payments due from Landlord to Tenant shall not be paid within ten (10)
days after its due date, Landlord shall pay to Tenant, on demand, a late
charge (to the extent permitted by law) computed at the Overdue Rate on
the amount of such installment from the due date of such installment to
the date of payment thereof.
In the event of any failure by Tenant to pay any Additional
Charges when due, except as expressly provided in Section 3.1.3(a),<PAGE>
-20-
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
Additional Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord
so that this Agreement shall yield to Landlord the full amount of the
installments or amounts of the Rent throughout the Term, subject to any
other provisions of this Agreement which expressly provide otherwise,
including those provisions for adjustment or abatement of such Rent.
3.4 No Termination, Abatement, Etc. Except as otherwise
specifically provided in this Agreement, each of Landlord and Tenant, to
the maximum extent permitted by law, shall remain bound by this
Agreement in accordance with its terms and shall not take any action
without the consent of the other to modify, surrender or terminate this
Agreement. In addition, except as otherwise expressly provided in this
Agreement, Tenant shall not seek, or be entitled to, any abatement,
deduction, deferment or reduction of the Rent, or set-off against the
Rent, nor shall the respective obligations of Landlord and Tenant be
otherwise affected by reason of (a) any damage to or destruction of the
Leased Property or any portion thereof from whatever cause or any
Condemnation, (b) the lawful or unlawful prohibition of, or restriction
upon, Tenant's use of the Leased Property, or any portion thereof, or
the interference with such use by any Person or by reason of eviction by
paramount title; (c) any claim which Tenant may have against Landlord by
reason of any default (other than a monetary default) or breach of any
warranty by Landlord under this Agreement or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties; (d)
any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting
Landlord or any assignee or transferee of Landlord; or (e) for any other
cause whether similar or dissimilar to any of the foregoing (other than
a monetary default by Landlord); provided, however, that the foregoing
shall not apply or be construed to restrict Tenant's rights in the event
of any act or omission by Landlord constituting 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 of Default, would be payable to Tenant,
Landlord shall refund such funds to Tenant to the extent the amount<PAGE>
-21-
thereof exceeds the amount necessary to compensate Landlord for any
cost, loss or damage incurred in connection with such Event of Default.
3.5 Security for Tenant's Performance. Tenant acknowledges
that the Initial Deferred Purchase Price and the Option Deferred
Purchase Price (as defined in the Purchase Agreement) constitute
security for the faithful observance and performance by Tenant of all
the terms, covenants and conditions of this Agreement by Tenant to be
observed and performed. If any Event of Default shall occur and be
continuing, Landlord may, at its option and without prejudice to any
other remedy which Landlord may have on account thereof, appropriate and
apply the entire amount of such Contingent Purchase Prices or so much
thereof as may be necessary to compensate Landlord toward the payment of
the Rent or other sums or loss or damage sustained by Landlord due to
such breach by Tenant. It is understood and agreed that the amount of
such Contingent Purchase Prices is not to be considered as prepaid rent,
nor shall damages be limited to the amount of the amount of such
Contingent Purchase Prices. Provided this Agreement shall not be
terminated as a result of an Event of Default, such Contingent Purchase
Prices shall be paid as provided in the Purchase Agreement.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Permitted Use.
(a) Except as otherwise provided in the Management
Agreement, 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 Marriott
Courtyard hotel and any uses incidental thereto. Subject to
Section 16.3, Tenant shall not use (and shall direct the
Manager not to use) the Leased Property or any portion thereof
for any other use without the prior written consent of
Landlord. 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) [or which would constitute a default
under the Ground Lease], 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
underwriter's regulations. Tenant shall, at its sole cost
(except as expressly provided in Section 5.1.2(b)), comply (or
direct the Manager to comply) with all Insurance Requirements.
Except as otherwise provided in the Management Agreement,
Tenant shall not take or omit to take (and Tenant shall direct
the Manager not to take or omit to take) any action, the<PAGE>
-22-
taking or omission of which materially impairs the value or
the usefulness of the Leased Property or any part thereof for
its Permitted Use.
(b) In the event that, in the reasonable determination of
Tenant, it shall no longer be economically practical to
operate the Leased Property as a Marriott Courtyard hotel,
Tenant shall give Landlord Notice thereof, which Notice shall
set forth in reasonable detail the reasons therefor.
Thereafter, Landlord and Tenant shall negotiate in good faith
to agree on an alternative use for the Leased Property,
appropriate adjustments to the Additional Rent and other
related matters; provided, however, in no such event shall the
Minimum Rent be reduced or abated.
4.1.2 Necessary Approvals. Tenant shall proceed with all
due diligence and exercise best efforts to obtain and maintain, and
shall direct the Manager to obtain and maintain, all approvals necessary
to use and operate, for its Permitted Use, the Leased Property and the
Hotel located thereon under applicable law.
4.1.3 Lawful Use, Etc. Tenant shall not, and shall
direct 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 direct 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. Tenant shall not, and shall direct the Manager not to, suffer
nor permit the Leased Property, or any portion thereof, to be used in
such a manner as (i) might reasonably impair Landlord's title thereto or
to any portion thereof, or (ii) may reasonably allow a claim or claims
for adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Property or any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc.
Except as otherwise provided in the Management Agreement, subject to the
provisions of Article 8 and Section 5.1.2(b), Tenant, at its sole
expense, shall (or shall direct the Manager to) (i) 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, (ii) [perform all of Landlord's obligations as
tenant under the Ground Lease,] and (iii) 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 direct the Manager not to) store, spill
upon, dispose of or transfer to or from the Leased Property any<PAGE>
-23-
Hazardous Substance, except in compliance with all Applicable Laws.
During the Term and any other time that Tenant shall be in possession of
the Leased Property, Tenant shall maintain (and shall direct the Manager
to maintain) the Leased Property at all times free of any Hazardous
Substance (except in compliance with all Applicable Laws). Tenant shall
promptly: (a) upon receipt of notice or knowledge and shall direct the
Manager upon receipt of notice or knowledge promptly to, notify Landlord
in writing of any material change in the nature or extent of Hazardous
Substances at the Leased Property, (b) transmit to Landlord a copy of
any Community Right to Know report which is required to be filed by
Tenant or the Manager with respect to the Leased Property pursuant to
SARA Title III or any other Applicable Law, (c) transmit to Landlord
copies of any citations, orders, notices or other governmental com-
munications 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 direct 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
Tenant's and the Manager's right to contest the same in accordance with
Article 8, Tenant shall take (and shall direct 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.
4.3.2 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord and each Hotel Mortgagee, their
trustees, officers, agents, employees and beneficiaries, and any of
their respective successors or assigns with respect to this Agreement
(collectively, the "Indemnitees" and, individually, an "Indemnitee")
for, from and against any and all debts, liens, claims, causes of
action, administrative orders or notices, costs, fines, penalties or
expenses (including, without limitation, reasonable attorney's fees and
expenses) imposed upon, incurred by or asserted against any Indemnitee
resulting from, either directly or indirectly, the presence during the<PAGE>
-24-
Term (or any other time Tenant shall be possession of the Leased
Property) in, upon or under the soil or ground water of the Leased
Property or any properties surrounding the Leased Property of any
Hazardous Substances in violation of any Applicable Law or otherwise,
provided that any of the foregoing arises by reason of any failure by
Tenant, the Manager or any Person claiming by, through or under Tenant
or the Manager to perform or comply with any of the terms of this
Section 4.3, except to the extent the same arise from the gross
negligence or willful misconduct of Landlord or any other Indemnitee.
Tenant's duty herein includes, but is not limited to, costs associated
with personal injury or property damage claims as a result of the
presence prior to the expiration or sooner termination of the Term and
the surrender of the Leased Property to Landlord in accordance with the
terms of this Agreement of Hazardous Substances in, upon or under the
soil or ground water of the Leased Property in violation of any
Applicable Law. Upon Notice from Landlord and any other of the
Indemnitees, Tenant shall undertake the defense, at Tenant's sole cost
and expense, of any indemnification duties set forth herein, in which
event, Tenant shall not be liable for payment of any duplicative
attorneys' fees incurred by any Indemnitee.
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.
(a) Tenant shall, at its sole cost and expense (except as
expressly provided in Section 5.1.2(b)), or shall direct 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, reasonable wear
and tear excepted (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,
structural or nonstructural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition<PAGE>
-25-
existing prior to the commencement of the Term (concealed or
otherwise). 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 federal, state and local statutes, ordinances,
by-laws, codes, rules and regulations relating to any such
work. Tenant shall not take or omit to take (and shall direct
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. Tenant's obligations
under this Section 5.1.1(a) 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.
(b) In addition, notwithstanding anything in this
Agreement to the contrary, Tenant shall, with respect to each
Lease Year, or portion thereof, fund, or cause the Manager to
fund, into the FF&E Reserve a cash amount equal to not less
than five percent (5%) of Gross Revenues from the Leased
Property for such Lease Year, or portion thereof, which
amounts shall be applied to the cost of repairs, maintenance,
renovations and replacements to and at the Leased Property in
accordance with this Agreement and the Management Agreement.
Provided that Tenant shall comply with the provisions of this
paragraph (b) and any similar provisions of the Management
Agreement, any additional funds required for repairs,
maintenance, renovations and replacements to and at the Leased
Property in excess of those on deposit in the FF&E Reserve
shall be advanced by Landlord, subject to and in accordance
with Section 5.1.2(b).
5.1.2 Landlord's Obligations.
(a) Except as otherwise expressly provided in this
Agreement, Landlord shall not, under any circumstances, be
required to build or rebuild any improvement on the Leased
Property, or to make any repairs, replacements, alterations,
restorations or renewals of any nature or description to the
Leased Property, whether ordinary or extraordinary, structural
or nonstructural, foreseen or unforeseen, or, except as
provided in Section 5.1.2(b), to make any expenditure
whatsoever with respect thereto, or to maintain the Leased
Property in any way. Except as otherwise expressly provided
in this Agreement, Tenant hereby waives, to the maximum extent
permitted by law, the right to make repairs at the expense of
Landlord pursuant to any law in effect on the date hereof or
hereafter enacted. Landlord shall have the right to give,
record and post, as appropriate, notices of nonresponsibility
under any mechanic's lien laws now or hereafter existing.
(b) If, at any time, the Management Agreement requires
that funds be disbursed for repairs, maintenance, renovations
or replacements at or to the Leased Property (including, but<PAGE>
-26-
not limited to, pursuant to Section 8.01 and 8.03 of the
Management Agreement), or, pursuant to the terms of this
Agreement (including, without limitation, Section 4.3), Tenant
is required to make any expenditures in connection with any
repair, maintenance renovation with respect to the Leased
Property and the amount of such disbursements or expenditures
exceeds the amount on deposit in the FF&E Reserve, Tenant may,
at its election, give Landlord Notice thereof, which Notice
shall set forth, in reasonable detail, the nature of the
required repair, renovation or replacement, the estimated cost
thereof and such other information with respect thereto as
Landlord may reasonably require. Provided that no Event of
Default shall have occurred and be continuing and Tenant shall
otherwise comply with the applicable provisions of Article 6,
Landlord shall, within ten (10) Business Days after such
Notice, subject to and in accordance with the applicable
provisions of Article 6, disburse such required funds to
Tenant (or, if Tenant shall so elect, directly to the Manager
or any other Person performing the required work) and, upon
such disbursement, the Minimum Rent shall be adjusted as
provided in Section 3.1.1(b).
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 of the
State in any way, it being expressly understood Landlord's estate shall
not be subject to any such liability.
5.2 Tenant's Personal Property. Tenant shall provide and
maintain throughout the Term all such Tenant's Personal Property as
shall be necessary in order to operate in compliance with applicable
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, shall become the property of Landlord.
If, from and after the Commencement Date, Tenant acquires an interest in
any item of tangible personal property (other than motor vehicles) on,
or in connection with, the Leased Property which belongs to anyone other<PAGE>
-27-
than Tenant, Tenant shall require the agreements permitting such use to
provide that Landlord or its designee may assume Tenant's rights and
obligations under such agreement upon the termination of this Agreement
and the assumption of management or operation of the Hotel by Landlord
or its designee.
5.3 Yield Up. Upon the expiration or sooner termination of
this Agreement, Tenant shall vacate and surrender the Leased Property to
Landlord in substantially the same condition in which the Leased
Property was in on the Commencement Date, except as repaired, rebuilt,
restored, altered or added to as permitted or required by the provisions
of this Agreement, reasonable wear and tear excepted (and casualty
damage and Condemnation, in the event that this Agreement is terminated
following a casualty or 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. Consistent with the terms of the
Management Agreement, if requested by Landlord, Tenant will direct the
Manager to continue to manage the Hotel after the expiration of the Term
and for up to one hundred twenty (120) days, on such reasonable terms
(which shall include an agreement to reimburse the Manager for its
reasonable out-of-pocket costs and expenses, and reasonable
administrative costs), as Landlord shall reasonably request.
5.4 Management Agreement. Except as expressly provided in
Section 5.1.2(b), Tenant shall, at its sole cost and expense, perform
all of the obligations of "Owner" under the Management Agreement,
including, without limitation, the funding of the FF&E Reserve and, upon
the expiration or sooner termination of this Agreement, the then
existing balance of the FF&E Reserve shall be paid to or as directed by
Landlord. 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 be unreasonably 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 shall not be unreasonably withheld, delayed
or conditioned. Except as provided in the Management Agreement, Tenant
shall not agree to any change in the Manager, to any change in the
Management Agreement, terminate the Management Agreement or permit the
Manager to assign the Management Agreement without the prior written
approval of Landlord in each instance, which approval shall not be
unreasonably withheld, delayed or conditioned. 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 demand date at the Overdue Rate and Landlord shall<PAGE>
-28-
have the same rights and remedies for failure to pay such costs on
demand as for Tenant's failure to pay Minimum Rent.
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Improvements to the Leased Property. Tenant shall not
make, construct or install (and shall direct the Manager not to
construct or install) any Capital Additions 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 or Insurance Requirement applicable to the
Leased Property and (b) Landlord shall have received an Officer's
Certificate certifying as to the satisfaction of the conditions set out
in clause (a) above; provided, however, that no such consent shall be
required in the event immediate action is required to prevent imminent
danger to person or property. Prior to commencing construction of any
Capital Addition, Tenant shall submit, or shall direct the Manager to
submit, to Landlord, in writing, a proposal setting forth, in reasonable
detail, any such proposed improvement and shall provide to Landlord such
plans and specifications, and such permits, licenses, contracts and such
other information concerning the same as Landlord may reasonably
request. Landlord shall have thirty (30) days to review all materials
submitted to Landlord in connection with any such proposal. Failure of
Landlord to respond to Tenant's or the Manager's proposal within thirty
(30) days after receipt of all information and materials requested by
Landlord in connection with the proposed improvement shall be deemed to
constitute approval of the same. Without limiting the generality of the
foregoing, such proposal shall indicate the approximate projected cost
of constructing such proposed improvement and the use or uses to which
it will be put. No Capital Addition shall be made which would tie in or
connect any Leased 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. Tenant shall not finance, and shall direct 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 discretion. Any such improvements shall, upon the
expiration or sooner termination of this Agreement, remain or pass to
and become the property of Landlord, free and clear of all encumbrances
other than Permitted Encumbrances.
6.2 Salvage. All materials which are scrapped or removed in
connection with the making of either Capital Additions or non-Capital
Additions or repairs required by Article 5 shall be or become the
property of the party that paid for such work.<PAGE>
-29-
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) restric-
tions, 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 17, (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 21 and (h) Landlord Liens.
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 (except
motor vehicles), 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
Facilities (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 of the
State. 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.
ARTICLE 8
PERMITTED CONTESTS
Tenant and the Manager 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<PAGE>
-30-
with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to
pay any Claims as finally determined, (b) such contest shall not cause
Landlord or Tenant to be in default under any mortgage or deed of trust
encumbering the Leased Property (Landlord agreeing that any such
mortgage or deed of trust shall permit Tenant and the Manager to
exercise the rights granted pursuant to this Article 8) or any interest
therein or result in or reasonably be expected to result in a lien
attaching to the Leased Property, (c) no part of the Leased Property nor
any Rent therefrom shall be in any immediate danger of sale, forfeiture,
attachment or loss, and (d) Tenant shall indemnify and hold harmless
Landlord from and against any cost, claim, damage, penalty or reasonable
expense, including reasonable attorneys' fees, incurred by Landlord in
connection therewith or as a result thereof. Landlord agrees to join in
any such proceedings if required legally to prosecute such contest,
provided that Landlord shall not thereby be subjected to any liability
therefor (including, without limitation, for the payment of any costs or
expenses in connection therewith) unless Tenant agrees by agreement in
form and substance reasonably satisfactory to Landlord, to assume and
indemnify Landlord with respect to the same. Tenant shall be entitled
to any refund of any Claims and such charges and penalties or interest
thereon which have been paid by Tenant or paid by Landlord to the extent
that Landlord has been fully reimbursed by Tenant. If Tenant shall fail
(x) to pay or cause to be paid any Claims when finally determined, (y)
to provide reasonable security therefor, or (z) to prosecute or cause to
be prosecuted any such contest diligently and in good faith, Landlord
may, upon reasonable notice to Tenant (which notice may be oral and
shall not be required if Landlord shall reasonably determine that the
same is not practicable), pay such charges, together with interest and
penalties due with respect thereto, and Tenant shall reimburse Landlord
therefor, upon demand, as Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall, at all
times during the Term and at any other time Tenant shall be in
possession of the Leased Property, keep (or direct the Manager to 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, 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 percent (100%) of the then full
Replacement Cost thereof (as defined in Section 9.2);
(b) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy or endorsement<PAGE>
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covering risk of loss during the lesser of the first twelve
(12) months of reconstruction or the actual reconstruction
period necessitated by the occurrence of any of the hazards
described in subparagraph (a) above, in such amounts as may be
customary for comparable properties in the area and in an
amount sufficient to prevent Landlord or Tenant from becoming
a co-insurer;
(c) Comprehensive general liability insurance, including
bodily injury and property damage (on an occurrence basis and
on a 1973 or 1988 1SO CGL form or on a form otherwise maintain
by similarly situated tenants, including, without limitation,
broad form contractual liability, independent contractor's
hazard and completed operations coverage) in an amount not
less than Two Million Dollars ($2,000,000) per occurrence and
umbrella coverage of all such claims in an amount not less
than Twenty-Three Million Dollars ($23,000,000);
(d) Flood (if the Leased Property is located in whole or
in part within an area identified as an area having special
flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968, as
amended, or the Flood Disaster Protection Act of 1973, as
amended (or any successor acts thereto)) and such other
hazards and in such amounts as may be customary for comparable
properties in the area;
(e) Worker's compensation insurance coverage for all
persons employed by Tenant on the Leased Property with
statutory limits and otherwise with limits of and provisions
in accordance with the requirements of applicable local, State
and federal law, and employer's liability insurance as is
customarily carried by similar employers; and
(f) Such additional insurance as may be reasonably
required, from time to time, by Landlord or any Hotel
Mortgagee and which is customarily carried by comparable
lodging properties in the area.
9.2 Replacement Cost. "Replacement Cost" as used herein,
shall mean the actual replacement cost of the property requiring
replacement from time to time, including an increased cost of
construction endorsement, less exclusions provided in the standard form
of fire insurance policy. In the event either party believes that the
then full Replacement Cost has increased or decreased at any time during
the Term, such party, at its own cost, shall have the right to have such
full Replacement Cost redetermined by an independent accredited
appraiser approved by the other, which approval shall not be
unreasonably withheld or delayed. The party desiring to have the full
Replacement Cost so redetermined shall forthwith, on receipt of such
determination by such appraiser, give written notice thereof to the
other. The determination of such appraiser shall be final and binding
on the parties hereto until any subsequent determination under this
Section 9.2, and Tenant shall forthwith conform the amount of the
insurance carried to the amount so determined by the appraiser.<PAGE>
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9.3 Waiver of Subrogation. Landlord and Tenant agree that
(insofar as and to the extent that such agreement may be effective
without invalidating or making it impossible to secure insurance
coverage from responsible insurance companies doing business in 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.
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 general policy holder's rating of no less than B++ in Best's
latest rating guide. All such policies described in Sections 9.1(a)
through (d) shall include no deductible in excess of Two Hundred Fifty
Thousand Dollars ($250,000) and, with the exception of the insurance
described in Sections 9.1(e), shall name Landlord and any Hotel
Mortgagee as additional insureds, as their interests may appear. All
loss adjustments shall be payable as provided in Article 10. Tenant
shall cause all insurance premiums to be paid and shall deliver policies
or certificates thereof to Landlord prior to their effective date (and,
with respect to any renewal policy, prior to the expiration of the
existing policy). All such policies shall provide Landlord (and any
Hotel Mortgagee if required by the same) thirty (30) days prior written
notice of any material change or cancellation of such policy. In the
event Tenant shall fail to effect such insurance as herein required, to
pay the premiums therefor or to deliver such policies or certificates to
Landlord or any Hotel Mortgagee at the times required, Landlord shall
have the right, 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, Tenant's obligation to maintain the
insurance herein required may be brought within the coverage of a so-
called blanket policy or policies of insurance carried and maintained by
Tenant or the Manager, provided, that (a) the coverage thereby afforded
will not be reduced or diminished from that which would exist under a
separate policy meeting all other requirements of this Agreement, and
(b) the requirements of this Article 9 are otherwise satisfied. Without
limiting the foregoing, the amounts of insurance that are required to be
maintained pursuant to Section 9.1 shall be on a Hotel by Hotel basis,
and shall not be subject to an aggregate limit, except for products,
completed operations and flood. Notwithstanding any other provisions of
Articles 9 or 10, Tenant may permit the Manager to self insure or
otherwise retain such workers' insurance risks or portions thereof as
the Manager does with respect to other similar hotels the Manager owns,<PAGE>
-33-
leases or manages under the Marriott name in the United States pursuant
to any established self insurance program of Marriott International,
Inc.
9.6 No Separate Insurance. Tenant shall not take out
separate insurance, concurrent in form or contributing in the event of
loss with that required by this Article 9, or increase the amount of any
existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject
matter of such insurance, including Landlord and all Hotel Mortgagees,
are included therein as additional insureds and the loss is payable
under such insurance in the same manner as losses are payable under this
Agreement. In the event Tenant shall take out any such separate
insurance or increase any of the amounts of the then existing insurance,
Tenant shall give Landlord prompt Notice thereof.
9.7 Indemnification of Landlord. Notwithstanding the
existence of any insurance provided for herein and without regard to the
policy limits of any such insurance, Tenant shall protect, indemnify and
hold harmless Landlord for, from and against all liabilities, obliga-
tions, claims, damages, penalties, causes of action, costs and
reasonable expenses (including, without limitation, reasonable
attorneys' fees), to the maximum extent permitted by law, imposed upon
or incurred by or asserted against Landlord by reason of: (a) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Property or adjoining sidewalks or
rights of way, (b) any past, present or future use, misuse, non-use,
condition, management, maintenance or repair by Tenant or anyone
claiming under Tenant of the Leased Property or Tenant's Personal
Property or any litigation, proceeding or claim by governmental entities
or other third parties to which Landlord is made a party or participant
relating to the Leased Property or Tenant's Personal Property or such
use, misuse, non-use, condition, management, maintenance, or repair
thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any
Impositions that are the obligations of Tenant to pay pursuant to the
applicable provisions of this Agreement, and (d) any failure on the part
of Tenant or anyone claiming under Tenant to perform or comply with any
of the terms of this Agreement. Tenant, at its expense, shall contest,
resist and defend any such claim, action or proceeding asserted or
instituted against Landlord (and shall not be responsible for any
duplicative attorneys' fees incurred by Landlord) or may compromise or
otherwise dispose of the same, with Landlord's prior written consent
(which consent may not be unreasonably withheld or delayed). In the
event Landlord shall unreasonably withhold or delay its consent, Tenant
shall not be liable pursuant to this Section 9.7 for any incremental
increase in costs or expenses resulting therefrom. 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.<PAGE>
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ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last
clause of this sentence, all proceeds payable by reason of any loss or
damage to the Leased Property, or any portion thereof, and insured under
any policy of insurance required by Article 9 (other than the proceeds
of any business interruption insurance) shall be paid directly to
Landlord (subject to the provisions of Section 10.2) and all loss
adjustments with respect to losses payable to Landlord shall require the
prior written consent of Landlord; provided, however, that, so long as
no Event of Default shall have occurred and be continuing, all such
proceeds less than or equal to Two Hundred Fifty Thousand Dollars
$250,000) shall be paid directly to Tenant or the Manager and such
losses may be adjusted without Landlord's consent. If Tenant is
required to reconstruct or repair the Leased Property as provided
herein, such proceeds shall be paid out by Landlord from time to time
for the reasonable costs of reconstruction or repair of the Leased
Property necessitated by such damage or destruction, subject to and in
accordance with the provisions of Section 10.2.4. Provided no Default
or Event of Default has occurred and is continuing, any excess proceeds
of insurance remaining after the completion of the restoration shall be
paid to Tenant or the Manager. 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. If,
during the Term, the Leased Property shall be totally or partially
destroyed and the Hotel located thereon is thereby rendered Unsuitable
for Its Permitted Use, either Landlord or Tenant may, by the giving of
Notice thereof to the other, terminate this Agreement, whereupon, this
Agreement shall terminate and Landlord shall be entitled to retain the
insurance proceeds payable on account of such damage.
10.2.2 Partial Damage or Destruction. If, during the
Term, the Leased Property shall be totally or partially destroyed but
the Hotel is not rendered Unsuitable for Its Permitted Use, Tenant
shall, subject to Section 10.2.3, promptly restore the Hotel as provided
in Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds. If the cost of
the repair or restoration of the Leased Property exceeds the amount of
insurance proceeds received by Landlord and Tenant pursuant to Article
9(a), (c) or (d), Tenant shall give Landlord Notice thereof which notice
shall set forth in reasonable detail the nature of such deficiency and
whether Tenant shall pay and assume the amount of such deficiency
(Tenant having no obligation to do so, except that, if Tenant shall
elect to make such funds available, the same shall become an irrevocable
obligation of Tenant pursuant to this Agreement). In the event Tenant
shall elect not to pay and assume the amount of such deficiency,<PAGE>
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Landlord shall have the right (but not the obligation), exercisable at
Landlord's sole election by Notice to Tenant, given within sixty (60)
days after Tenant's notice of the deficiency, to elect to make available
for application to the cost of repair or restoration the amount of such
deficiency; provided, however, in such event, upon any disbursement by
Landlord thereof, the Minimum Rent shall be adjusted as provided in
Section 3.1.1(b). In the event that neither Landlord nor Tenant shall
elect to make such deficiency available for restoration, either Landlord
or Tenant may terminate this Agreement by Notice to the other,
whereupon, this Agreement shall terminate as provided in Section 10.2.1.
It is expressly understood and agreed, however, that, notwithstanding
anything in this Agreement to the contrary, Tenant shall be strictly
liable and solely responsible for the amount of any deductible and
shall, upon any insurable loss, pay over the amount of such deductible
to Landlord at the time and in the manner herein provided for payment of
the applicable proceeds to Landlord.
10.2.4 Disbursement of Proceeds. In the event Tenant is
required to restore the Leased Property pursuant to Section 10.2, Tenant
shall (or shall direct 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 and any additional amounts payable
by Landlord pursuant to Section 10.2.3 to Tenant regularly during the
repair and restoration period so as to permit payment for the cost of
any such restoration and repair. Any such advances shall be made not
more than monthly within ten (10) Business Days after Tenant submits to
Landlord a written requisition and substantiation therefor on AIA Forms
G702 and G703 (or on such other form or forms as may be reasonably
acceptable to Landlord). Landlord may, at its option, condition
advancement of said insurance proceeds and other amounts on (i) the
absence of any Event of Default, (ii) its approval of plans and
specifications of an architect satisfactory to Landlord (which approval
shall not be unreasonably withheld or delayed), (iii) general
contractors' estimates, (iv) architect's certificates, (v) unconditional
lien waivers of general contractors, if available, (vi) evidence of
approval by all governmental authorities and other regulatory bodies
whose approval is required and (vii) 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.
Tenant's obligation to restore the Leased Property pursuant to
this Article 10 shall be subject to the release of available insurance
proceeds by the applicable Hotel Mortgagee to Landlord or directly to
Tenant or the Manager and, in the event such proceeds are insufficient,
Landlord electing to make such deficiency available therefor (and
disbursement of such deficiency).<PAGE>
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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
fourth Extended 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 such Extended 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 in trust to pay the cost of repairing or
replacing damaged Tenant's Personal Property.
10.5 Restoration of Tenant's Property. If Tenant is required
to restore the Leased Property as hereinabove provided, Tenant shall
either (a) restore all alterations and improvements made by Tenant and
Tenant's Personal Property, or (b) replace such alterations and
improvements and Tenant's Personal Property with improvements or items
of the same or better quality and utility in the operation of the Leased
Property.
10.6 No Abatement of Rent. This Agreement shall remain in
full force and effect and Tenant's obligation to make all payments of
Rent and to pay all other charges as and when required under this
Agreement shall remain unabated during the Term notwithstanding any
damage involving the Leased Property (provided that Landlord shall
credit against such payments any amounts paid to Landlord as a
consequence of such damage under any business interruption insurance
obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any cause of damage or
destruction to the Leased Property and, to the maximum extent permitted
by law, no local or State statute, laws, rules, regulation or ordinance
in effect during the Term which provide for such a contingency shall
have any application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of
the Leased Property.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of the
Leased Property shall be taken by Condemnation or (ii) a Condemnation of
less than the whole of the Leased Property renders the Leased Property
Unsuitable for Its Permitted Use, this Agreement shall terminate and
Tenant and Landlord shall seek the Award for their interests in the
Leased Property as provided in Section 11.5. <PAGE>
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11.2 Partial Condemnation. In the event of a Condemnation of
less than the whole of the Leased Property such that the Leased Property
is still suitable for its Permitted Use, Tenant shall, or shall direct
the Manager to, to the extent of the Award and any additional amounts
disbursed by Landlord as hereinafter provided, commence promptly and
continue diligently to restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a
complete architectural unit of the same general character and condition
(as nearly as may be possible under the circumstances) as the Leased
Improvements existing immediately prior to such Condemnation, in full
compliance with all Legal Requirements, subject to the provisions of
this Section 11.2. If the cost of the repair or restoration of the
Leased Property exceeds the amount of the Award, Tenant shall give
Landlord Notice thereof which notice shall set forth in reasonable
detail the nature of such deficiency and whether Tenant shall pay and
assume the amount of such deficiency (Tenant having no obligation to do
so, except that if Tenant shall elect to make such funds available, the
same shall become an irrevocable obligation of Tenant pursuant to this
Agreement). In the event Tenant shall elect not to pay and assume the
amount of such deficiency, Landlord shall have the right (but not the
obligation), exercisable at Landlord's sole election by Notice to Tenant
given within sixty (60) days after Tenant's Notice of the deficiency, to
elect to make available for application to the cost of repair or
restoration the amount of such deficiency; provided, however, in such
event, upon any disbursement by Landlord thereof, the Minimum Rent shall
be adjusted as provided in Section 3.1.1(b). In the event that neither
Landlord nor Tenant shall elect to make such deficiency available for
restoration, either Landlord or Tenant may terminate this Agreement and
the entire Award shall be retained by Landlord.
Subject to the terms hereof, Landlord shall contribute to the
cost of restoration that part of the Award necessary to complete such
repair or restoration, together with severance and other damages awarded
for the taken Leased Improvements and any deficiency Landlord has agreed
to disburse, to Tenant regularly during the restoration period so as to
permit payment for the cost of such repair or restoration. Landlord
may, at its option, condition advancement of such Award and other
amounts on (i) the absence of any Event of Default, (ii) its approval of
plans and specifications of an architect satisfactory to Landlord (which
approval shall not be unreasonably withheld or delayed), (iii) general
contractors' estimates, (iv) architect's certificates, (v) unconditional
lien waivers of general contractors, if available, (vi) evidence of
approval by all governmental authorities and other regulatory bodies
whose approval is required and (vii) such other certificates as Landlord
may, from time to time, reasonably require. Landlord's obligation under
this Section 11.2 to disburse the Award and such other amounts shall be
subject to (x) the collection thereof by Landlord and (y) the
satisfaction of any applicable requirements of any Hotel Mortgage, and
the release of such Award by the applicable Hotel Mortgagee. Tenant's
obligation to restore the Leased Property shall be subject to the
release of the Award by the applicable Hotel Mortgagee to Landlord.
11.3 Abatement of Rent. Other than as specifically provided
in this Agreement, this Agreement shall remain in full force and effect
and Tenant's obligation to make all payments of Rent and to pay all<PAGE>
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other charges as and when required under this Agreement shall remain
unabated during the Term notwithstanding any Condemnation involving the
Leased Property. The provisions of this Article 11 shall be considered
an express agreement governing any Condemnation involving the Leased
Property and, to the maximum extent permitted by law, no local or State
statute, law, rule, regulation or ordinance in effect during the Term
which provides for such a contingency shall have any application in such
case.
11.4 Temporary Condemnation. In the event of any temporary
Condemnation of the Leased Property or Tenant's interest therein, this
Agreement shall continue in full force and effect and Tenant shall
continue to pay, in the manner and on the terms herein specified, the
full amount of the Rent. Tenant shall continue to perform and observe
all of the other terms and conditions of this Agreement on the part of
the Tenant to be performed and observed. Provided no Event of Default
has occurred and is continuing, the entire amount of any Award made for
such temporary Condemnation allocable to the Term, whether paid by way
of damages, rent or otherwise, shall be paid to Tenant. Tenant shall,
promptly upon the termination of any such period of temporary
Condemnation, at its sole cost and expense, restore the Leased Property
to the condition that existed immediately prior to such Condemnation, in
full compliance with all Legal Requirements, unless such period of
temporary Condemnation shall extend beyond the expiration of the Term,
in which event Tenant shall not be required to make such restoration.
For purposes of this Section 11.4, a Condemnation shall be deemed to be
temporary if the period of such Condemnation is not expected to, and
does not, exceed twelve (12) months.
11.5 Allocation of Award. Except as provided in Section 11.4
and the second sentence of this Section 11.5, the total Award shall be
solely the property of and payable to Landlord. Any portion of the
Award made for the taking of Tenant's leasehold interest in the Leased
Property, loss of business during the remainder of the Term, the taking
of Tenant's Personal Property, or Tenant's removal and relocation
expenses shall be the sole property of and payable to Tenant (subject to
the provisions of Section 11.2). In any Condemnation proceedings,
Landlord and Tenant shall each seek its own Award in conformity
herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of
the following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent or
any other sum (including, but not limited to, funding of the
FF&E Reserve payable hereunder when due and such failure shall
continue for a period of ten (10) days after Notice thereof;
or<PAGE>
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(b) should Tenant or the Manager fail to maintain the
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) such default shall
continue for a period of thirty (30) days after Notice thereof
from Landlord to Tenant (provided that no such Notice shall be
required if Landlord shall reasonably determine immediate
action is necessary to protect person or property); 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 (not to
exceed an additional ninety (90) days in the aggregate) as may
be necessary to cure such default with all due diligence; or
(d) should any obligation of Tenant in respect of any
Indebtedness for money borrowed or for the deferred purchase
price of any material property or services, or any guaranty
relating thereto, be declared to be or become due and payable
prior to the stated maturity thereof, or should there occur
and be continuing with respect to any such Indebtedness or
deferred purchase price any event of default under any instru-
ment or agreement evidencing or securing the same, the effect
of which is to permit the holder or holders of such instrument
or agreement or a trustee, agent or other representative on
behalf of such holder or holders, to cause such any such
obligations to become due prior to its stated maturity; or
(e) should an event of default occur and be continuing
beyond the expiration of any applicable cure period under any
of the Incidental Documents, the Other Leases, or by Host or
the Sellers (as defined therein) under the Purchase Agreement;
or
(f) should there occur a final unappealable determination
by applicable State authorities 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; or<PAGE>
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(g) should any material representation or warranty made by
Tenant or the Sellers (as defined in the Purchase Agreement)
under or in connection with this Agreement, any Incidental
Document, the Other Leases or the Purchase Agreement, or in
any document, certificate or agreement delivered in connection
herewith or therewith prove to have been false or misleading
in any material respect on the date when made or deemed made;
or
(h) should Tenant generally not be paying its debts as
they become due or should Tenant make a general assignment for
the benefit of creditors; or
(i) should any petition be filed by or against Tenant
under the Federal bankruptcy laws, or should any other
proceeding be instituted by or against Tenant seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation,
reorganization, arrangement, adjustment 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, custodian or other similar official for Tenant or for
any substantial part of the property of Tenant and such
proceeding is not dismissed within ninety (90) days after
institution thereof, or should Tenant take any action to
authorize or effect any of the actions set forth above in this
paragraph; or
(j) should Tenant cause or institute any proceeding for
its dissolution or termination; or
(k) should an event of default occur and be continuing
under any mortgage which is secured by Tenant's leasehold
interest hereunder or should the mortgagee under any such
mortgage accelerate the indebtedness secured thereby or com-
mence a foreclosure action in connection with said mortgage;
or
(l) should the estate or interest of Tenant in the Leased
Property or any part thereof be levied upon or attached in any
proceeding and the same shall not be vacated or discharged
within the later of (x) one hundred and twenty (120) days
after commencement thereof, unless the amount in dispute is
less than $250,000, in which case Tenant shall give notice to
Landlord of the dispute but Tenant may defend in any suitable
way, and (y) 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
(m) should any Event of Default (as defined in the
Management Agreement) 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<PAGE>
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(n) should Tenant at any time cease to be a direct or
indirect Subsidiary of Host;
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.
Upon the occurrence of an Event of Default, subject to the
rights of the Manager under the Management Agreement, Landlord may, in
addition to any other remedies provided herein, enter upon the Leased
Property or any portion thereof and take possession of any and all of
Tenant's Personal Property, if any, and the Records, without liability
for trespass or conversion (Tenant hereby waiving any right to notice or
hearing prior to such taking of possession by Landlord) and sell the
same at public or private sale, after giving Tenant reasonable Notice of
the time and place of any public or private sale, at which sale Landlord
or its assigns may purchase all or any portion of Tenant's Personal
Property, if any, unless otherwise prohibited by law. Unless otherwise
provided by law and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable Notice
shall be met if such Notice is given at least five (5) days before the
date of sale. The proceeds from any such disposition, less all expenses
incurred in connection with the taking of possession, holding and
selling of such property (including, reasonable attorneys' fees) shall
be applied as a credit against the indebtedness which is secured by the
security interest granted in Section 7.2. Any surplus shall be paid to
Tenant or as otherwise required by law and Tenant shall pay any
deficiency to Landlord, as Additional Charges, upon demand.
12.2 Remedies. None of (a) the termination of this Agreement
pursuant to Section 12.1, (b) the repossession of the Leased Property or
any portion thereof, (c) the failure of Landlord to re-let the Leased
Property or any portion thereof, nor (d) the reletting of all or any of
portion of the Leased Property, shall relieve Tenant of its liability
and obligations hereunder, all of which shall survive any such
termination, repossession or re-letting. In the event of any such
termination, Tenant shall forthwith pay to Landlord all Rent due and
payable with respect to the Leased Property through and including the
date of such termination. Thereafter, Tenant, until the end of what
would have been the Term of this Agreement in the absence of such
termination, and whether or not the Leased Property or any portion
thereof shall have been re-let, shall be liable to Landlord for, and
shall pay to Landlord, as current damages, the Rent and other charges
which would be payable hereunder for the remainder of the Term had such
termination not occurred, less the net proceeds, if any, of any re-
letting of the Leased Property, after deducting all reasonable expenses
in connection with such reletting, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys'
fees, advertising, expenses of employees, alteration costs and expenses
of preparation for such reletting. Tenant shall pay such current
damages to Landlord monthly on the days on which the Minimum Rent would<PAGE>
-42-
have been payable hereunder if this Agreement had not been so terminated
with respect to such of the Leased Property.
At any time after such termination, whether or not Landlord
shall have collected any such current damages, as liquidated final
damages beyond the date of such termination, at Landlord's election,
Tenant shall pay to Landlord an amount equal to the present value
(discounted at the Interest Rate) of the excess, if any, of the Rent and
other charges which would be payable hereunder from the date of such
termination (assuming that, for the purposes of this paragraph, annual
payments by Tenant on account of Impositions and Additional Rent would
be the same as payments required for the immediately preceding twelve
calendar months, or if less than twelve calendar months have expired
since the Commencement Date, the payments required for such lesser
period projected to an annual amount) for what would be the then
unexpired term of this Agreement if the same remained in effect, over
the fair market rental for the same period. Nothing contained in this
Agreement shall, however, limit or prejudice the right of Landlord to
prove and obtain in proceedings for bankruptcy or insolvency an amount
equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, the damages are
to be proved, whether or not the amount be greater than, equal to, or
less than the amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may, subject
to the rights of the Manager under the Management Agreement, (a) relet
the Leased Property or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may at Landlord's
option, be equal to, less than or exceed the period which would
otherwise have constituted the balance of the Term and may grant
concessions or free rent to the extent that Landlord considers advisable
and necessary to relet the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property or any
portion thereof as Landlord, in its sole and absolute discretion,
considers advisable and necessary for the purpose of reletting the
Leased Property; and the making of such alterations, repairs and
decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Subject to the last sentence of this
paragraph, Landlord shall in no event be liable in any way whatsoever
for any failure to relet all or any portion of the Leased Property, or,
in the event that the Leased Property is relet, for failure to collect
the rent under such reletting. To the maximum extent permitted by law,
Tenant hereby expressly waives any and all rights of redemption granted
under any present or future laws in the event of Tenant being evicted or
dispossessed, or in the event of Landlord obtaining possession of the
Leased Property, by reason of the occurrence and continuation of an
Event of Default hereunder. Landlord covenants and agrees, in the event
of any termination of this Agreement as a result of an Event of Default,
to use reasonable efforts to mitigate its damages.
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<PAGE>
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ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR
RENT OR FOR DEBT. IN ADDITION, TENANT UNDERSTANDS, ACKNOWLEDGES AND
AGREES THAT, IN THE EVENT THIS AGREEMENT IS TERMINATED PURSUANT TO
SECTION 12.1 OR 12.2, NEITHER THE INITIAL DEFERRED PURCHASE PRICE OR THE
OPTION DEFERRED PURCHASE PRICE (AS SUCH TERMS ARE DEFINED IN THE
PURCHASE AGREEMENT) SHALL BE PAID OR PAYABLE (TENANT WAIVING, ON BEHALF
OF ITSELF AND ITS AFFILIATED PERSONS, ALL CLAIMS AND CAUSES OF ACTION
WITH RESPECT THERETO).
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
Any holding over by Tenant after the expiration or sooner
termination of this Agreement shall be treated as a daily tenancy at
sufferance at a rate equal to one 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 damages (direct or indirect) sustained by
reason of any such holding over. Otherwise, such holding over shall be
on the terms and conditions set forth in this Agreement, to the extent
applicable. Nothing contained herein shall constitute the consent,
express or implied, of Landlord to the holding over of Tenant after the
expiration or earlier termination of this Agreement.<PAGE>
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ARTICLE 14
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
14.1 Landlord Notice Obligation. Landlord shall give prompt
Notice to Tenant and the Manager of any matters affecting the Leased
Property of which Landlord receives written notice or actual knowledge
and, to the extent Tenant otherwise has no notice or actual knowledge
thereof, Landlord shall be liable for any liabilities arising from the
failure to deliver such Notice to Tenant. Landlord shall not amend [the
Ground Lease,] the Management Agreement or any other agreement affecting
the Leased Property without Tenant's prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed.
14.2 Landlord's Default. If Landlord shall default in the
performance or observance of any of its covenants or obligations set
forth in this Agreement or any obligation of Landlord, if any, under any
agreement affecting the Leased Property, the performance of which is not
Tenant's obligation pursuant to this Agreement, and any such default
shall continue for a period of ten (10) days after Notice thereof with
respect to monetary defaults and thirty (30) days after Notice thereof
with respect to non-monetary defaults from Tenant to Landlord and any
applicable Hotel Mortgagee, or such additional period as may be
reasonably required to correct the same, Tenant may declare the
occurrence of a "Landlord Default" by a second Notice to Landlord and to
such Hotel Mortgagee. Thereafter, Tenant may forthwith cure the same
and, subject to the provisions of the following paragraph, invoice
Landlord for costs and expenses (including reasonable attorneys' fees
and court costs) incurred by Tenant in curing the same, together with
interest thereon from the date Landlord receives Tenant's invoice, at
the Overdue Rate. Tenant shall have no right to terminate this
Agreement for any default by Landlord hereunder and no right, for any
such default, to offset or counterclaim against any Rent or other
charges due hereunder.
If Landlord shall in good faith dispute the occurrence of any
Landlord Default and Landlord, before the expiration of the applicable
cure period, shall give Notice thereof to Tenant, setting forth, in
reasonable detail, the basis therefor, no Landlord Default shall be
deemed to have occurred and Landlord shall have no obligation with
respect thereto until final adverse determination thereof; provided,
however, that in the event of any such adverse determination, Landlord
shall pay to Tenant interest on any disputed funds at the Interest Rate,
from the date demand for such funds was made by Tenant until the date of
final adverse determination and, thereafter, at the Overdue Rate until
paid. If Tenant and Landlord shall fail, in good faith, to resolve any
such dispute within ten (10) days after Landlord's Notice of dispute,
either may submit the matter for resolution to a court of competent
jurisdiction.
ARTICLE 15
INTENTIONALLY DELETED<PAGE>
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ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment. Except as provided in
Section 16.3 below, Tenant shall not, without Landlord's prior written
consent (which consent may be given or withheld in Landlord's sole and
absolute discretion), assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer this Agreement or sublease (which term shall be
deemed to include the granting of concessions, licenses and the like),
all or any part of the Leased Property or suffer or permit this
Agreement or the leasehold estate created hereby or any other rights
arising under this Agreement to be assigned, transferred, mortgaged,
pledged, hypothecated or encumbered, in whole or in part, whether
voluntarily, involuntarily or by operation of law, or permit the use or
operation of the Leased Property by anyone other than Tenant and the
Manager, or the Leased Property to be offered or advertised for
assignment or subletting. For purposes of this Section 16.1, an
assignment of this Agreement shall be deemed to include any direct or
indirect transfer of any interest in Tenant such that Tenant shall cease
to be a direct or indirect Subsidiary of Host or any transaction
pursuant to which Tenant is merged or consolidated with another Entity
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.
Notwithstanding the foregoing, Landlord agrees that Landlord
shall not unreasonably withhold, delay or condition Landlord's consent
to an assignment of this Agreement by Tenant provided that (i) Tenant
shall simultaneously assign its interest under all of the Other Leases
to the same assignee on the same terms and conditions, (ii) the Manager
shall have granted its consent to such transfer and the Management
Agreement and all of the other Management Agreements (as defined
therein) under the Other Leases shall remain in full force and effect,
(iii) such assignee shall, in Landlord's reasonable determination, have
sufficient financial resources and liquidity to fulfill Tenant's
obligations under this Agreement and the Other Leases, and (iv) such
assignee shall not be under common control with or controlled by persons
who have been convicted of felonies involving moral turpitude in any
state or federal court. If Tenant wishes to assign this Agreement as
provided in this paragraph, Tenant shall give Landlord Notice thereof
(the "Request Notice"), which Request Notice shall identify the proposed
assignee and the terms and conditions of the assignment and shall
include appropriate information relating to such assignee demonstrating
compliance with the provisions of this paragraph. Landlord shall,
within sixty (60) days after the giving the Request Notice, give Notice
to Tenant (the "Response Notice") as to whether Landlord consents to
such transfer. Landlord shall also have the right, exercisable by
notice given in the Response Notice, to require Tenant to assign this
Agreement to a Person designated by Landlord on the same terms and
conditions as those described in the Request Notice for transfer to
Tenant's proposed assignee.
If this Agreement is assigned or if the Leased Property or any
part thereof are sublet (or occupied by anybody other than Tenant, the<PAGE>
-46-
Manager and their respective employees) Landlord may collect the rents
from such assignee, subtenant or occupant, as the case may be, and apply
the net amount collected to the Rent herein reserved, but no such col-
lection shall be deemed a waiver of the provisions set forth in the
first paragraph of this Section 16.1, the acceptance by Landlord of such
assignee, subtenant or occupant, as the case may be, as a tenant, or a
release of Tenant from the future performance by Tenant of its
covenants, agreements or obligations contained in this Agreement.
No subletting or assignment shall in any way impair the
continuing primary liability of Tenant hereunder (unless Landlord and
Tenant expressly otherwise agree that Tenant shall be released from all
obligations hereunder), and no consent to any subletting or assignment
in a particular instance shall be deemed to be a waiver of the
prohibition set forth in this Section 16.1. No assignment, subletting
or occupancy shall affect any Permitted Use. Any subletting, assignment
or other transfer of Tenant's interest under this Agreement in
contravention of this Section 16.1 shall be voidable at Landlord's
option.
16.2 Required Sublease Provisions. Any sublease of all or
any portion of the Leased Property entered into on or after the date
hereof shall 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 termina-
tion 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. 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<PAGE>
-47-
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 condi-
tions to be performed by Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a
waiver of the provisions set forth in the first paragraph of Section
16.1.
16.3 Permitted Sublease. Notwithstanding the foregoing, but
subject to the provisions of Section 16.4 and any other express
conditions or limitations set forth herein, Tenant may, in each instance
after Notice to Landlord (unless otherwise provided in the Management
Agreement), sublease space at the Leased Property for newsstand, gift
shop, parking garage, health club, restaurant, bar or commissary
purposes or similar concessions in furtherance of the Permitted Use, so
long as such subleases do not demise, in the aggregate, in excess of
three thousand (3,000) square feet, will not violate or affect any Legal
Requirement or Insurance Requirement, and Tenant shall provide such
additional insurance coverage applicable to the activities to be
conducted in such subleased space as Landlord and any Hotel Mortgagee
may reasonably require.
16.4 Sublease Limitation. For so long as Landlord or any
Affiliated Person as to Landlord shall seek to qualify as a real estate
investment trust, anything contained in this Agreement to the contrary
notwithstanding, Tenant shall not sublet the Leased Property on any
basis such that the rental to be paid by any sublessee thereunder would
be based, in whole or in part, on either (a) the income or profits
derived by the business activities of such sublessee, or (b) any other
formula such that any portion of such sublease rental would fail to
qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to
time, upon not less than ten (10) Business Days prior Notice by either
party, the party receiving such Notice shall furnish to the other an
Officer's Certificate certifying that this Agreement is unmodified and
in full force and effect (or that this Agreement is in full force and
effect as modified and setting forth the modifications), the date to<PAGE>
-48-
which the Rent has been paid, that no Default or an Event of Default has
occurred and is continuing or, if a Default or an Event of Default shall
exist, specifying in reasonable detail the nature thereof, and the steps
being taken to remedy the same, and such additional information as the
requesting party may reasonably request. Any such certificate furnished
pursuant to this Section 17.1 may be relied upon by the requesting
party, its lenders and any prospective purchaser or mortgagee of the
Leased Property or the leasehold estate created hereby.
17.2 Financial Statements. Tenant shall furnish the
following statements to Landlord:
(a) within sixty (60) days after each of the first three
quarters of any Fiscal Year, the most recent Consolidated
Financials, accompanied by the Financial Officer's
Certificate;
(b) within one hundred five (105) days after the end of
each Fiscal Year, the most recent Consolidated 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 (30) days after the end of each
Accounting Period, an unaudited operating statement prepared
on a Hotel by Hotel basis, including occupancy percentages and
average rate, accompanied by a Financial Officer's
Certificate;
(d) promptly after the sending or filing thereof, copies
of all reports which Tenant, Host or Host Marriott
Hospitality, Inc. sends to its security holders generally, and
copies of all periodic reports which Tenant, Host or Host
Marriott Hospitality, Inc. 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
forty-five (45) days Notice from Landlord, any Consolidated
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, governmental authority or
arbitrator in any litigation to which Landlord is a party, for
purposes of compliance therewith, provided that Landlord shall
pay for any costs incurred by Tenant in connection with the
preparation of the same; and
(g) promptly, upon Notice from Landlord, such other
information concerning the business, financial condition and<PAGE>
-49-
affairs of Tenant as Landlord reasonably may request from time
to time.
Landlord may at any time, and from time to time, provide any Hotel
Mortgagee with copies of any of the foregoing statements.
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 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;
(b) Not less than thirty (30) days after the commencement
of any Fiscal Year, proposed annual income and ordinary
expense and capital improvement budgets setting forth
projected income and costs and expenses projected to be
incurred by Tenant in managing, owning, maintaining and
operating the Hotel during the next succeeding Fiscal Year;
and
(c) Promptly after receipt or sending thereof, copies of
all notices given or received by Tenant under the Management
Agreement.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit, and shall direct the Manager to permit,
Landlord and its authorized representatives to inspect the Leased
Property during usual business hours upon not less than twenty-four (24)
hours' notice and to make such repairs as Landlord is permitted or
required to make pursuant to the terms of this Agreement, provided that
any inspection or repair by Landlord or its representatives will not
unreasonably interfere with Tenant's or the Manager's use and operation
of the Leased Property and further provided that in the event of an
emergency, as determined by Landlord in its reasonable discretion, prior
Notice shall not be necessary.
ARTICLE 19
INTENTIONALLY DELETED<PAGE>
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ARTICLE 20
HOTEL MORTGAGES
20.1 Landlord May Grant Liens. Without the consent of Ten-
ant, 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, provided that any such Encumbrance
shall be consistent with the requirements of Article 6 of the Management
Agreement. Any such Encumbrance shall include the right to prepay
(whether or not subject to a prepayment penalty) and shall provide
(subject to Section 20.2) that it is subject to the rights of Tenant
under this Agreement.
20.2 Subordination of Lease. Subject to Section 20.1 and
this Section 20.2, this Agreement, 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 replace-
ments thereof, and to all mortgages and deeds of trust, which may now or
hereafter affect the Leased Property or any improvements thereon and/or
any of such leases, whether or not such mortgages or deeds of trust
shall also cover other lands and/or buildings and/or leases, to each and
every advance made or hereafter to be made under such mortgages and
deeds of trust, and to all renewals, modifications, replacements and
extensions of such leases and such mortgages and deeds of trust and all
consolidations of such mortgages and deeds of trust. This section shall
be self-operative and no further instrument of subordination shall be
required. 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 Superior Mortgage other than those expressly set forth
in 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 recognize Tenant's rights under this Agreement as herein
provided and Tenant shall attorn to and recognize the Successor Landlord
as Tenant's landlord under this Agreement and Tenant shall promptly
execute and deliver any instrument that such Successor Landlord may<PAGE>
-51-
reasonably request to evidence such attornment (provided that such
instrument does not alter the terms of this Agreement), whereupon, this
Agreement shall continue in full force and effect as a direct lease
between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Agreement, except that
the Successor Landlord (unless formerly the landlord under this
Agreement or its nominee or designee) shall not be (a) liable in any way
to Tenant for any act or omission, neglect or default on the part of any
prior Landlord under this Agreement, (b) responsible for any monies
owing by or on deposit with any prior Landlord to the credit of Tenant
(except to the extent actually paid or delivered to the Successor
Landlord), (c) subject to any counterclaim or setoff which theretofore
accrued to Tenant against any prior Landlord, (d) bound by any
modification of this Agreement subsequent to such Superior Lease or
Mortgage, or by any previous prepayment of Minimum Rent or Additional
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 (subject to Landlord's obligations under Section
5.1.2(b) 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 Landlord agrees to provide Tenant with an
instrument of nondisturbance and attornment from each such Superior
Mortgagee and Superior Landlord (other than the lessor under the Ground
Lease) in form and substance reasonably satisfactory to Tenant.
Notwithstanding the foregoing, any Successor Landlord shall be liable
(a) to pay, as and when required by the Purchase Agreement, to Tenant a
pro rata portion of the Deferred Initial Purchase Price or Option
Purchase Price (as such terms are defined in the Purchase Agreement) in
accordance with the terms of the Purchase Agreement and this Agreement,
including Article 15, if and to the extent that the rights of the
Sellers under the Purchase Agreement with respect to such Deferred
Purchase Prices shall have been assigned to Tenant, (b) to pay to Tenant
any amounts owed under Section 5.1.2(b), and (c) to pay to Tenant any
portions of insurance proceeds or Awards received by Landlord or the
Successor Landlord required to be paid to Tenant pursuant to the terms
of this Agreement, and, as a condition to any mortgage, lien or lease in
respect of the Leased Property, and the subordination of this Agreement
thereto, the mortgagee, lienholder or lessor, as applicable, shall
expressly agree, for the benefit of Tenant, to make such payments, which
agreement shall be embodied in an instrument in form 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 Section 20.1 and 20.2 (which Notice<PAGE>
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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 given to such Hotel
Mortgagee or ground lessor 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.
20.4 Transfer of Leased Property. Landlord shall not,
without the consent of Tenant, transfer the Leased Property, or any
interest therein to any Person which: (i) does not have sufficient
financial resources and liquidity to fulfill "Owner's" obligations under
the Management Agreement; (ii) is in control of or controlled by Persons
who have been convicted of felonies involving moral turpitude in any
state or federal court; or (iii) is engaged in the business of operating
or franchising (as distinguished from owning) a branded hotel chain
having fifteen hundred (1,500) or more guest rooms in competition with
the Manager. An individual or entity shall not be deemed to be in the
business of operating hotels in competition with the Manager solely by
virtue of (x) the ownership of such hotels, either directly or
indirectly through subsidiaries, affiliates and partnerships, or (y)
holding a mortgage or mortgages secured
by one or more hotels. Landlord may transfer the Leased Property, or
any interest therein, to any other Person without the consent of Tenant.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Prompt Payment of Indebtedness. Tenant shall (a) pay or
cause to be paid when due all payments of principal of and premium and
interest on Tenant's Indebtedness for money borrowed and shall not
permit or suffer any such Indebtedness to become or remain in default
beyond any applicable grace or cure period, (b) pay or cause to be paid
when due all lawful claims for labor and rents, (c) pay or cause to be
paid when due all trade payables and (d) pay or cause to be paid when
due all other of Tenant's Indebtedness upon which it is or becomes
obligated, except, in each case, other than that referred to in clause
(a), to the extent payment is being contested in good faith by
appropriate proceedings in accordance with Article 8 and if Tenant shall
have set aside on its books adequate reserves with respect thereto in
accordance with GAAP, if appropriate, or unless and until foreclosure,
distraint sale or other similar proceedings shall have been commenced.
21.2 Conduct of Business. Tenant shall not engage in any
business other than the leasing and operation of the Collective Leased
Properties and shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect and in good standing
its corporate existence and its rights and licenses necessary to conduct
such business.
21.3 Maintenance of Accounts and Records. Tenant shall keep
true records and books of account of Tenant in which full, true and
correct entries will be made of dealings and transactions in relation to<PAGE>
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the business and affairs of Tenant in accordance with GAAP, where
applicable, Tenant shall apply accounting principles in the preparation
of the financial statements of Tenant which, in the judgment of and the
opinion of its independent public accountants, are in accordance with
GAAP, where applicable, except for changes approved by such independent
public accountants. Tenant shall provide to Landlord either in a
footnote to the financial statements delivered under Section 17.2 which
relate to the period in which such change occurs, or in separate
schedules to such financial statements, information sufficient to show
the effect of any such changes on such financial statements.
21.4 Notice of Litigation, Etc. Tenant shall give prompt
Notice to Landlord of any litigation or any administrative proceeding to
which it may hereafter become a party of which Tenant has notice or
actual knowledge which involves a potential liability equal to or
greater than Two Hundred Fifty Thousand Dollars ($250,000) or which may
otherwise result in any material adverse change in the business,
operations, property, prospects, results of operation or condition,
financial or other, of Tenant. Forthwith upon Tenant obtaining
knowledge of any Default, Event of Default or any default or event of
default under any agreement relating to Indebtedness for money borrowed
in an aggregate amount exceeding, at any one time, Two Hundred Fifty
Thousand Dollars ($250,000), or any event or condition that would be
required to be disclosed in a current report filed by Tenant on Form 8-K
or in Part II of a quarterly report on Form 10-Q if Tenant were required
to file such reports under the Securities Exchange Act of 1934, as
amended, Tenant shall furnish Notice thereof to Landlord specifying the
nature and period of existence thereof and what action Tenant has taken
or is taking or proposes to take with respect thereto.
21.5 Indebtedness of Tenant. Tenant shall not create, incur,
assume or guarantee, or permit to exist, or become or remain liable
directly or indirectly upon, any Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for Impositions, to the extent
that payment thereof shall not at the time be required to be
made in accordance with the provisions of Article 8;
(c) Indebtedness of Tenant in respect of judgments or
awards (i) which have been in force for less than the
applicable appeal period and in respect of which execution
thereof shall have been stayed pending such appeal or review,
or (ii) which are fully covered by insurance payable to
Tenant, or (iii) which are for an amount not in excess of
$250,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable
appeal period, so long as execution is not levied thereunder
or (y) in respect of which an appeal or proceedings for review
shall at the time be prosecuted in good faith in accordance
with the provisions of Article 8, and in respect of which
execution thereof shall have been stayed pending such appeal
or review; <PAGE>
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(d) unsecured borrowings of Tenant from its Affiliated
Persons which are by their terms expressly subordinate
pursuant to a Subordination Agreement to the payment and
performance of Tenant's obligations under this Agreement; or
(e) Indebtedness for purchase money financing in
accordance with Section 21.9(a) and other operating
liabilities incurred in the ordinary course of Tenant's
business.
21.6 Financial Condition of Tenant. Tenant shall at all
times maintain Tangible Net Worth (except as provided in the last clause
of this sentence) in an amount at least equal to the aggregate of one
year's Minimum Rent payable pursuant to this Agreement and the Other
Leases; it being expressly understood and agreed that the sum of the
Initial Deferred Purchase Price (as defined in the Purchase Agreement)
and, if Landlord shall acquire the Option Properties (as defined in the
Purchase Agreement), the Option Deferred Purchase Price (as defined in
the Purchase Agreement) may for such purpose be counted as equity at the
full amount thereof if such amounts are contributed to Tenant.
21.7 Distributions, Payments to Affiliated Persons, Etc.
Tenant shall not declare, order, pay or make, directly or indirectly,
any Distributions or any payment to any Affiliated Person of Tenant
(including payments in the ordinary course of business and payments
pursuant to management agreements with any such Affiliated Person) or
set apart any sum or property therefor, or agree to do so, if, at the
time of such proposed action, or immediately after giving effect
thereto, any an Event of Default shall exist.
21.8 Prohibited Transactions. Tenant shall not permit to
exist or enter into any agreement or arrangement whereby it engages in a
transaction of any kind with any Affiliated Person as to Tenant, except
on terms and conditions which are commercially reasonable.
21.9 Liens and Encumbrances. Except as permitted by Section
7.1, Tenant shall not create or incur or suffer to be created or
incurred or to exist any Lien on this Agreement or any of Tenant's
assets, properties, rights or income, or any of its interest therein,
now or at any time hereafter owned, other than:
(a) Security interests securing the purchase price of
equipment or personal property whether acquired before or
after the Commencement Date; provided, however, that (i) such
Lien shall at all times be confined solely to the asset in
question and (ii) the aggregate principal amount of
Indebtedness secured by any such Lien shall not exceed the
cost of acquisition or construction of the property subject
thereto;
(b) Permitted Encumbrances; and
(c) As permitted pursuant to Section 21.5.<PAGE>
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21.10 Merger; Sale of Assets; Etc. Tenant shall not (i)
sell, lease (as lessor or sublessor), transfer or otherwise dispose of,
or abandon, all or any material portion of its assets (including capital
stock) or business to any Person, (ii) merge into or with or consolidate
with any other Entity, or (iii) sell, lease (as lessor or sublessor),
transfer or otherwise dispose of, or abandon, any personal property or
fixtures or any real property; provided, however, that, notwithstanding
the provisions of clause (iii) preceding, Tenant may dispose of
equipment or fixtures which have become inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary, provided substitute equipment or
fixtures having equal or greater value and utility (but not necessarily
having the same function) have been provided.
ARTICLE 22
MISCELLANEOUS
22.1 Limitation on Payment of Rent. All agreements between
Landlord and Tenant herein are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration of
Rent, or otherwise, shall the Rent or any other amounts payable to
Landlord under this Agreement exceed the maximum permissible under
applicable law, the benefit of which may be asserted by Tenant as a
defense, and if, from any circumstance whatsoever, fulfillment of any
provision of this Agreement, at the time performance of such provision
shall be due, shall involve transcending the limit of validity
prescribed by law, or if from any circumstances Landlord should ever
receive as fulfillment of such provision such an excessive amount, then,
ipso facto, the amount which would be excessive shall be applied to the
reduction of the installment(s) of Minimum Rent next due and not to the
payment of such excessive amount. This provision shall control every
other provision of this Agreement and any other agreements between
Landlord and Tenant.
22.2 No Waiver. No failure by Landlord or Tenant to insist
upon the strict performance of any term hereof or to exercise any right,
power or remedy consequent upon a breach thereof, and no acceptance of
full or partial payment of Rent during the continuance of any such
breach, shall constitute a waiver of any such breach or of any such
term. To the maximum extent permitted by law, no waiver of any breach
shall affect or alter this Agreement, which shall continue in full force
and effect with respect to any other then existing or subsequent breach.
22.3 Remedies Cumulative. To the maximum extent permitted by
law, each legal, equitable or contractual right, power and remedy of
Landlord or Tenant, now or hereafter provided either in this Agreement
or by statute or otherwise, shall be cumulative and concurrent and shall
be in addition to every other right, power and remedy and the exercise
or beginning of the exercise by Landlord or Tenant (as applicable) of
any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Landlord of any or all of
such other rights, powers and remedies.<PAGE>
-56-
22.4 Severability. Any clause, sentence, paragraph, section
or provision of this Agreement held by a court of competent jurisdiction
to be invalid, illegal or ineffective shall not impair, invalidate or
nullify the remainder of this Agreement, but rather the effect thereof
shall be confined to the clause, sentence, paragraph, section or
provision so held to be invalid, illegal or ineffective, and this
Agreement shall be construed as if such invalid, illegal or ineffective
provisions had never been contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of
this Agreement or of the Leased Property or any part thereof, or of any
interest therein, shall be valid or effective unless agreed to and
accepted in writing by Landlord and no act by Landlord or any
representative or agent of Landlord, other than such a written
acceptance by Landlord, shall constitute an acceptance of any such
surrender.
22.6 No Merger of Title. It is expressly acknowledged and
agreed that it is the intent of the parties that there shall be no
merger of this Agreement or of the leasehold estate created hereby by
reason of the fact that the same Person may acquire, own or hold,
directly or indirectly this Agreement or the leasehold estate created
hereby and the fee estate or ground landlord's interest in the Leased
Property.
22.7 Conveyance by Landlord. If Landlord or any successor
owner of all or any portion of the Leased Property shall convey all or
any portion of the Leased Property in accordance with the terms hereof
other than as security for a debt, and the grantee or transferee of such
of the Leased Property shall expressly assume all obligations of
Landlord hereunder arising or accruing from and after the date of such
conveyance or transfer, Landlord or such successor owner, as the case
may be, shall thereupon be released from all future liabilities and
obligations of Landlord under this Agreement with respect to such of the
Leased Property arising or accruing from and after the date of such
conveyance or other transfer and all such future liabilities and
obligations shall thereupon be binding upon the new owner.
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 anyone claiming by, through or
under Landlord, but subject to (a) any Encumbrance permitted under
Article 20 or otherwise permitted to be created by Landlord hereunder,
(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. <PAGE>
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22.9 Memorandum of Lease. Neither Landlord nor Tenant shall
record this Agreement. However, Landlord and Tenant shall promptly,
upon the request of the other, enter into a short form memorandum of
this Agreement, in form suitable for recording under the laws of the
State in which reference to this Agreement, and all options contained
herein, shall be made. 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 deemed adequately
given if in writing and the same shall be delivered either in
hand, by telecopier with written acknowledgment of receipt, or
by mail or Federal Express or similar expedited commercial
carrier, addressed to the recipient of the notice, postpaid
and registered or certified with return receipt requested (if
by mail), or with all freight charges prepaid (if by Federal
Express or similar carrier).
(b) All notices required or permitted to be sent
hereunder shall be deemed to have been given for all purposes
of this Agreement upon the date of acknowledged receipt, in
the case of a notice by telecopier, and, in all other cases,
upon the date of receipt or refusal, except that whenever
under this Agreement a notice is either received on a day
which is not a Business Day or is required to be delivered on
or before a specific day which is not a Business Day, the day
of receipt or required delivery shall automatically be
extended to the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
Hospitality Properties, Inc.
c/o Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty and
Mr. John G. Murray
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to Tenant to:
Host Marriott Corporation<PAGE>
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10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Ms. Pamela J. Block, Asset Manager
Asset Management Department 72/924.68
[Telecopier No. (301)380-8608]
with a copy to:
Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Pamela J. Murch, Esq.
Law Department 72/923
[Telecopier No. (301)380-6332 or -3588]
(d) By notice given as herein provided, the parties
hereto and their respective successor and assigns shall have
the right from time to time and at any time during the term of
this Agreement to change their respective addresses effective
upon receipt by the other parties of such notice and each
shall have the right to specify as its address any other
address within the United States of America.
22.11 Construction. Anything contained in this Agreement to
the contrary notwithstanding, all claims against, and liabilities of,
Tenant or Landlord arising prior to any date of termination or
expiration of this Agreement with respect to the Leased Property shall
survive such termination or expiration. In no event shall Landlord be
liable for any consequential damages suffered by Tenant as the result of
a breach of this Agreement by Landlord. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated except
by an instrument in writing signed by the party to be charged. All the
terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Each term or provision of this Agreement to be performed by
Tenant shall be construed as an independent covenant and condition.
Time is of the essence with respect to the exercise of any rights of
Tenant 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.
Whenever it is provided in this Agreement that Tenant shall direct the
Manager to take any action, Tenant shall not be deemed to have satisfied
such obligation unless Tenant shall have exhausted all applicable rights
and remedies of Tenant as "Owner" under the Management Agreement.
Except as otherwise expressly provided with respect to the Initial
Deferred Purchase Price and the Option Deferred Purchase Price (as such
terms are defined in the Purchase Agreement), nothing contained in this
Agreement (including, without limitation, Section 3.5) shall be
construed to create or impose any liabilities or obligations and no such
liabilities or obligations shall be imposed on any of the shareholders
or beneficial owners, direct or indirect, of Landlord or Tenant
(including, but not limited, Host Marriott, Host Marriott Hospitality,
Inc. and HMH Holdings, Inc.) for the payment or performance of the
obligations or liabilities of Landlord or Tenant hereunder.<PAGE>
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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 (i)
where this Agreement is executed or delivered; or (ii) where any payment
or other performance required by this Agreement is made or required to
be made; or (iii) where any breach of any provision of this Agreement
occurs, or any cause of action otherwise accrues; or (iv) where any
action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi)
whether the laws of the forum jurisdiction otherwise would apply the
laws of a jurisdiction other than the State; or (vii) any combination of
the foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the
provisions of this Agreement may be brought and prosecuted in such court
or courts located in the State as is provided by law; and the parties
consent to the jurisdiction of said court or courts located in the State
and to service of process by registered mail, return receipt requested,
or by any other manner provided by law.
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 Ground Lease, Etc. Nothing in this Agreement shall be
construed to permit Tenant to take or omit to take any action which
would constitute a default under the Ground Lease. In the event of any
termination of the Ground Lease, this Agreement shall automatically
terminate.]
IN WITNESS WHEREOF, the parties have executed this Agreement
as a sealed instrument as of the date above first written.<PAGE>
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LANDLORD:
HOSPITALITY PROPERTIES, INC.
By: _________________________
Its (Vice) President
TENANT:
HMH HPT COURTYARD, INC.
By: _________________________
Its (Vice) President<PAGE>
EXHIBIT A
Minimum Rent
[See attached copy.]<PAGE>
EXHIBIT B
Other Leases
[See attached copy.]<PAGE>
EXHIBIT C
The Land
[See attached copy.]<PAGE>
Schedule G
Initial Acquisition Properties Management Agreements
[Exhibit omitted from this filing.]
-2-<PAGE>
Schedule H
Option Properties Management Agreements
[Exhibit omitted from this filing.]
-3-<PAGE>
Schedule I
Operating Statements
[Exhibit omitted from this filing.]
-4-<PAGE>
Schedule J
FF&E Reserve Amounts
[Exhibit omitted from this filing.]<PAGE>
Schedule K
Excluded Offer Properties
[Exhibit omitted from this filing.]<PAGE>
