SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 24, 1997
ShoLodge, Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
0-19840 62-1015641
(Commission File Number) (I.R.S. Employer Identification
Number)
130 Maple Drive North
Hendersonville, TN
(Address of principal executive offices)
37075
(Zip Code)
615-264-8000
(Registrant's telephone number)
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ITEM 5 - OTHER EVENTS.
On October 24, 1997, ShoLodge, Inc. and various subsidiaries
entered into agreements to sell 14 Sumner Suites hotels to Hospitality
Properties Trust for an aggregate purchase price of $140 million and to
leaseback the properties pursuant to lease agreements to be executed at
closing. The press release issued by ShoLodge, Inc. is filed herewith as
an exhibit.
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
The following exhibits are being filed herewith:
10.1.Purchase and Sale Agreement by and between ShoLodge, Inc.
And Certain of its Affiliates, as Sellers, and Hospitality Properties
Trust, as Purchaser, dated October 24, 1997.
10.2 Agreement to Lease between Hospitality Properties Trust and
ShoLodge, Inc. dated October 24, 1997
10.3 Form of Lease Agreement to be entered into between certain
Affiliates of ShoLodge, Inc., as Tenant, and Hospitality Properties Trust,
as Landlord.
10.4 Form of Security Agreement to be entered into between
certain Affiliates of ShoLodge, Inc., as Tenant, and Hospitality Properties
Trust, as Secured Party.
10.5 Form of Assignment and Security Agreement to be entered into
between certain Affiliates of ShoLodge, Inc., as Assignor, and Hospitality
Properties Trust, as Assignee.
10.6 Form of Stock Pledge Agreement to be entered into between
ShoLodge, Inc., as Pledgor, and Hospitality Properties Trust, as Secured
Party.
10.7 Form of Limited Guaranty Agreement to be entered into by
ShoLodge, Inc., as Guarantor, for the benefit of Hospitality Properties
Trust.
99.1.Press release issued by ShoLodge, Inc. on October 27, 1997.
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Signatures
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SHOLODGE, INC.
Date: October 27, 1997 By : /s/ Michael Corbett
Michael Corbett
Chief Financial Officer
Exhibit 10.1
PURCHASE AND SALE AGREEMENT
by and among
SHOLODGE, INC. AND CERTAIN OF ITS AFFILIATES
as Sellers,
and
HOSPITALITY PROPERTIES TRUST,
as Purchaser
___________________________
October 24, 1997
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS...............................1
1.1 Adjacent Land...................................1
1.2 Agreement.......................................1
1.3 Agreement to Lease..............................2
1.4 Allocable Purchase Price........................2
1.5 Assets..........................................2
1.6 Business Day....................................2
1.7 Closing.........................................2
1.8 Closing Date....................................2
1.9 Contracts.......................................2
1.10 Defective Property..............................2
1.11 Documents.......................................2
1.12 Far West........................................2
1.13 Fee Properties..................................2
1.14 FF&E............................................2
1.15 Ground Lease ...................................3
1.16 Ground Lease Property...........................3
1.17 Hotel...........................................3
1.18 Improvements....................................3
1.19 Intangible Property.............................3
1.20 Lease...........................................3
1.21 Midwest.........................................3
1.22 Mobat...........................................3
1.23 Permitted Encumbrances..........................3
1.24 Properties......................................4
1.25 Purchase Price..................................4
1.26 Purchaser.......................................4
1.27 Real Property...................................4
1.28 Retained Funds..................................4
1.29 Review Period...................................4
1.30 Sellers.........................................4
1.31 ShoLodge........................................4
1.32 ShoLodge Parties................................4
1.33 Shoney's .......................................4
1.34 Sunshine .......................................4
1.35 Surveys.........................................4
1.36 Tenant..........................................4
1.37 Tenant Leases...................................5
1.38 Texas...........................................5
1.39 Title Commitments...............................5
1.40 Title Company...................................5
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SECTION 2. PURCHASE AND SALE; DILIGENCE..............5
2.1 Purchase and Sale................................5
2.2 Diligence Inspections............................5
2.3 Defective Properties.............................6
2.4 Title Matters. .................................7
2.5 Survey Matters...................................8
SECTION 3. PURCHASE AND SALE.........................9
3.1 Closing..........................................9
3.2 Purchase Price...................................9
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE9
4.1 Closing Documents................................9
4.2 Condition of Properties.........................10
4.3 Title Policies..................................11
4.4 Opinions of Counsel.............................11
4.5 Market Studies..................................11
4.6 FF&E Reserve Funding............................11
4.7 Certain Documents and Exhibits..................11
SECTION 5. CONDITIONS TO SHOLODGE PARTIES' OBLIGATION
TO CLOSE......................................12
5.1 Purchase Price..................................12
5.2 Closing Documents...............................12
5.3 Opinion of Counsel..............................12
5.4 Certain Documents and Exhibits..................12
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SHOLODGE
PARTIES.......................................13
6.1 Status and Authority of the ShoLodge Parties....13
6.2 Action of the ShoLodge Parties..................13
6.3 No Violations of Agreements.....................13
6.4 Litigation......................................13
6.5 Existing Leases, Agreements, Etc................14
6.6 Disclosure......................................14
6.7 Utilities, Etc..................................14
6.8 Compliance With Law.............................14
6.9 Taxes...........................................14
6.10 Not A Foreign Person............................15
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6.11 Hazardous Substances............................15
6.12 Insurance.......................................15
6.13 Ground Lease....................................15
6.14 Ownership of Sellers............................15
6.15 Adjacent Land...................................15
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER17
7.1 Status and Authority of the Purchaser...........17
7.2 Action of the Purchaser.........................17
7.3 No Violations of Agreements.....................17
7.4 Litigation......................................17
SECTION 8. COVENANTS OF THE SHOLODGE PARTIES........18
8.1 Compliance with Laws, Etc.......................18
8.2 Approval of Agreements..........................18
8.3 Estoppel Certificates...........................18
8.4 Notice of Material Changes or Untrue
Representations...............................18
8.5 Operation of Properties.........................18
8.6 Financial Information...........................18
SECTION 9. APPORTIONMENTS...........................19
9.1 Real Property Apportionments....................19
9.2 Closing Costs...................................19
SECTION 10. DEFAULT.................................19
10.1 Default by the ShoLodge Parties................19
10.2 Default by the Purchaser.......................20
SECTION 11. MISCELLANEOUS...........................20
11.1 Agreement to Indemnify.........................20
11.2 Brokerage Commissions..........................21
11.3 Publicity......................................21
11.4 Notices........................................22
11.5 Waivers, Etc...................................23
11.6 Assignment; Successors and Assigns.............23
11.7 Severability...................................23
11.8 Counterparts, Etc..............................24
11.9 Governing Law..................................24
11.10 Performance on Business Days...................24
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11.11 Attorneys' Fees................................25
11.12 Section and Other Headings.....................25
11.13 Nonliability of Trustees.......................25
Schedule A - The Properties; Allocable Purchase Prices
Schedule B-1-14 - Legal Descriptions
Schedule C - Form of Surveyor's Certificate
Schedule D - Materials Regarding Tempe and Albuquerque Lots
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of the ____ day of
October, 1997, by and among (i) SHOLODGE, INC.,("SHOLODGE"), (ii) SUNSHINE
INNS, INC. ("SUNSHINE"), (iii) SOUTHEAST TEXAS INNS, INC. ("TEXAS"), (iv)
MIDWEST INNS, INC. ("MIDWEST"), (v) FAR WEST INNS, INC. ("FAR WEST"), (vi)
SHONEY'S INN, INC. ("SHONEY'S"), (vii) MOBAT, INC. ("MOBAT"), each a
Tennessee corporation, and (viii) THE HOTEL GROUP, INC., a Kansas
corporation (together with Sunshine, Texas, Midwest, Far West, Shoney's and
Mobat, jointly and severally, the "SELLERS") and HOSPITALITY PROPERTIES
TRUST, a Maryland real estate investment trust ("PURCHASER").
WITNESSETH:
WHEREAS, the Sellers are the owners of all the Fee Properties and the
holders of the tenant's interest under the Ground Lease (all capitalized
terms used and not otherwise defined herein having the meanings ascribed to
such terms in SECTION 1); and
WHEREAS, the Purchaser desires to purchase the Properties, as more
fully set forth below; and
WHEREAS, the Sellers are willing to sell all of the Fee Properties to
the Purchaser and assign the tenant's interest under the Ground Lease to
the Purchaser, subject to and upon the terms and conditions hereinafter set
forth; and
WHEREAS, ShoLodge owns, directly or indirectly, all of the outstanding
capital stock of the Sellers and the transactions contemplated by this
Agreement are of direct and material benefit to ShoLodge;
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 ShoLodge Parties
and the Purchaser hereby agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1 "ADJACENT LAND" shall mean vacant land owned by the ShoLodge
Parties and their affiliates adjacent to the Properties located in San
Antonio, Texas, Atlanta, Georgia, Dallas, Texas, Austin, Texas and
Hendersonville, Tennessee.
1.2 "AGREEMENT" shall mean this Purchase and Sale Agreement, together
with SCHEDULES A THROUGH D attached hereto, as it and they may be amended
from time to time as herein provided.
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1.3 "AGREEMENT TO LEASE" shall mean that certain Agreement to Lease,
dated as of the date hereof, by and between the Purchaser and ShoLodge, as
it may be amended, restated, supplemented or otherwise modified from time
to time.
1.4 "ALLOCABLE PURCHASE PRICE" shall mean, with respect to any
Property, the applicable amount set forth on SCHEDULE A to this Agreement.
1.5 "ASSETS" shall mean, with respect to any Hotel, collectively, all
of the Real Property, the FF&E, the Contracts,
the Documents, the Improvements, the Intangible Property and the Tenant
Leases owned by any of the Sellers in connection with or relating to such
Hotel.
1.6 "BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or any other day on which banking institutions in The Commonwealth of
Massachusetts or the State of New York are authorized by law or executive
action to close.
1.7 "CLOSING" shall have the meaning given such term in SECTION 3.1.
1.8 "CLOSING DATE" shall have the meaning given such term in SECTION
3.1.
1.9 "CONTRACTS" shall mean, with respect to any Property, all hotel
licensing agreements and other service contracts, equipment leases, booking
agreements and other arrangements or agreements to which any of the Sellers
is a party affecting the ownership, repair, maintenance, management,
leasing or operation of such Property, to the extent the Sellers' interest
therein is assignable or transferable.
1.10 "DEFECTIVE PROPERTY" shall have the meaning given such term in
SECTION 2.3(A).
1.11 "DOCUMENTS" shall mean, with respect to any Property, all books,
records and files relating to the leasing, maintenance, management or
operation of such Property.
1.12 "FAR WEST" shall have the meaning given such term in the first
paragraph of this Agreement.
1.13 "FEE PROPERTIES" shall mean all of the Properties identified on
SCHEDULE A other than the Properties located in Dallas, Galleria, Texas.
1.14 "FF&E" shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture,
furnishings and articles of tangible personal property of every kind and
nature whatsoever (other than motor vehicles) owned by any of the Sellers
and located in or at, or used in connection with the ownership, operation
or maintenance of such Property.
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1.15 "GROUND LEASE" shall mean the Ground Lease, dated January 24,
1996, by and between Christian Chapel CME Church, as landlord, and Texas,
as tenant, as amended from time to time.
1.16 "GROUND LEASE PROPERTY" shall mean the Property identified on
SCHEDULE A as located in Dallas, Galleria, Texas.
1.17 "HOTEL" shall mean each hotel located at the properties
identified on SCHEDULE A, the legal descriptions of which are set forth on
SCHEDULES B-1 THROUGH B-14.
1.18 "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.
1.19 "INTANGIBLE PROPERTY" shall mean, with respect to any Property,
all transferable or assignable permits, certificates of occupancy,
operating permits, sign permits, development rights and approvals,
certificates, licenses, warranties and guarantees, the Contracts, telephone
exchange numbers identified with such Property held by any of the Sellers
and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to such
Property held by any of the Sellers, except for liquor licenses or to the
extent held by or transferred to the Tenant under the Lease.
1.20 "LEASE" shall mean the lease to be entered into between the
Purchaser or its subsidiary, as landlord, and the Tenant, as tenant, with
respect to the Properties pursuant to the Agreement to Lease.
1.21 "MIDWEST" shall have the meaning given such term in the first
paragraph of this Agreement.
1.22 "MOBAT" shall have the meaning given such term in the first
paragraph of this Agreement.
1.23 "PERMITTED ENCUMBRANCES" shall mean, with respect to any
Property, (a) liens for taxes, assessments and governmental charges with
respect to such Property not yet due and payable or due and payable but not
yet delinquent; (b) applicable zoning regulations and ordinances provided
the same do not prohibit or impair in any material respect use of such
Property as an all suites 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 all suites hotel as
currently operated and constructed; (d) the Ground Lease; (e) UCC Financing
Statements which would be permitted pursuant to the terms of Section 21.9
of the Lease; and (f) such other nonmonetary encumbrances with respect to
such Property which are not objected to by the Purchaser in accordance with
SECTIONS 2.4 AND 2.5.
<PAGE>
1.24 "PROPERTIES" shall mean, collectively, all of the Assets relating
to the properties identified on SCHEDULE A, the legal descriptions of which
are set forth in SCHEDULES B-1-B-14.
1.25 "PURCHASE PRICE" shall have the meaning given such term in
SECTION 3.2.
1.26 "PURCHASER" shall have the meaning given such term in the first
paragraph of this Agreement.
1.27 "REAL PROPERTY" shall mean, with respect to any Property which is
a Fee Property, the real property described in the applicable SCHEDULE B-1
THROUGH B-14, 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 own with respect thereto.
1.28 "RETAINED FUNDS" shall mean an amount equal to ten percent (10%)
of the Purchase Price of the Properties.
1.29 "REVIEW PERIOD" shall mean the period commencing on the date of
this Agreement and expiring on the first to occur of the date thirty (30)
days after the date of this Agreement and the Closing Date.
1.30 "SELLERS" shall have the meaning given such term in the first
paragraph of this Agreement.
1.31 "SHOLODGE" shall have the meaning given such term in the first
paragraph of this Agreement.
1.32 "SHOLODGE PARTIES" shall mean, collectively, ShoLodge and the
Sellers, jointly and severally.
1.33 "SHONEY'S" shall have the meaning given such term in the first
paragraph of this Agreement.
1.34 "SUNSHINE" shall have the meaning given such term in the first
paragraph of this Agreement.
1.35 "SURVEYS" shall have the meaning given such term in SECTION 2.5.
1.36 "TENANT" shall have the meaning given such term in the Agreement
to Lease.
1.37 "TENANT LEASES" shall mean, with respect to any Property, all
leases, rental agreements or other agreements (other than agreements for
letting of rooms or other facilities to hotel guests) (including all
amendments or modifications thereto) which entitle any person to have
rights with respect to the use or occupancy of any portion of such
Property.
<PAGE>
1.38 "TEXAS" shall have the meaning given such term in the first
paragraph of this Agreement.
1.39 "TITLE COMMITMENTS" shall have the meaning given such term in
SECTION 2.4.
1.40 "TITLE COMPANY" shall mean American Title Company of Dallas,
Texas, or such other title insurance company as shall have been selected by
the Purchaser and approved by the Sellers, which approval shall not be
unreasonably withheld, delayed or conditioned.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1 PURCHASE AND SALE. In consideration of the mutual covenants
herein contained, the Purchaser hereby agrees to purchase from the Sellers
and ShoLodge hereby agrees to cause the Sellers to sell and the Sellers
hereby agree to sell to the Purchaser, all of the Sellers' right, title and
interest in and to the Properties for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2 DILIGENCE INSPECTIONS. For the Review Period and, thereafter,
until Closing, the Sellers shall permit the Purchaser and its
representatives to inspect the Properties and the Improvements (including,
without limitation, all roofs, electric, mechanical and structural
elements, and HVAC systems therein), to perform due diligence, soil
analysis and environmental investigations, to examine the books of account
and records of the Sellers with respect to the Properties, including,
without limitation, all leases and agreements affecting the Properties, and
make copies thereof, at such reasonable times as the Purchaser or its
representatives may request by notice to the Sellers (which notice may be
oral). To the extent that, in connection with such investigations, the
Purchaser, its agents, representatives or contractors, damages or disturbs
any of the Real Property, the Improvements or FF&E located thereon, the
Purchaser shall return the same to substantially the same condition which
existed immediately prior to such damage or disturbance. Neither the
Purchaser nor any of its agents, representatives or contractors shall have
any right whatsoever to alter the condition of any Property, or portion
thereof, without the prior written consent of the Sellers, which consent
shall not be unreasonably withheld, delayed or conditioned. In no event
shall any such inspection include any drilling into or under the surface of
any Property, soil sampling, water sampling or similar activities commonly
known as a "Phase II environmental study" without the prior written consent
of the Sellers, which consent shall not be unreasonably withheld, delayed
or conditioned. In the event that the transactions contemplated by this
Agreement are not closed and consummated for any reason, the Purchaser
shall, upon the Sellers' request, deliver to the Sellers all tests, reports
and inspections of the Properties made and conducted by the Purchaser or
for its benefit or any other documents or information the Purchaser has
received pursuant to this Agreement. The Purchaser shall indemnify, defend
and hold harmless the Sellers from and against any and all expense, loss or
damage which the Sellers may incur as a result of any act or omission of
the Purchaser or its representatives, agents or contractors in connection
with such examinations and inspections, other than to the extent that any
expense, loss or damage arises from any negligence or misconduct of the
Sellers. The provisions of this SECTION 2.2 shall survive the termination
of this Agreement and the Closing.
<PAGE>
2.3 DEFECTIVE PROPERTIES. (a) In the event that (i) the Purchaser
reasonably determines that a Property has structural, environmental or
other structural defects or conditions such that (x) expenditures equal to
or greater than three percent (3%) of the Allocable Purchase Price of such
Property are required in order to bring such Property into a reasonably
satisfactory condition in accordance with prevailing standards, as the case
may be, for like hotels, (y) the calculation with respect to such Property
of net operating income varies by three percent (3%) or more of that set
forth in the financial data provided by the ShoLodge Parties to the
Purchaser prior to the date hereof, or (z), in the case of the Ground Lease
Property, if the Purchaser shall determine that it is dissatisfied with any
material provision of the Ground Lease (any such Property being hereinafter
referred to as a "DEFECTIVE PROPERTY"), and (ii) the Purchaser gives
written notice thereof to the ShoLodge Parties no later than the expiration
of the Review Period (time being of the essence with respect to the giving
of such notice), identifying the Defective Property or Defective Properties
and the specific defects with respect thereto, the ShoLodge Parties shall,
subject to paragraph (c) below, be required to permit the Purchaser to
acquire all of the Properties other than such Defective Property or
Defective Properties.
(b) If, prior to the Closing, (i) any Property suffers a casualty or
condemnation which would cause such Property or Properties to become a
Defective Property, (ii) such Property is not, prior to the Closing,
restored to a condition substantially the same as the condition thereof
immediately prior to such casualty or condemnation, and (iii) the Purchaser
provides written notice of same to the ShoLodge Parties no later than the
Closing Date, time being of the essence, the ShoLodge Parties shall be
required to permit the Purchaser to acquire all of the Properties other
than such Defective Property or Properties. Promptly upon learning of the
same, the ShoLodge Parties covenant and agree to provide the Purchaser with
prompt written notice of any casualty or condemnation affecting any
Property.
(c) If the Purchaser timely identifies any Defective Property and the
Purchaser and the ShoLodge Parties shall, acting reasonably and in good
faith be unable or unwilling to agree that (x) the ShoLodge Parties shall,
at their sole cost, remedy the applicable defect prior to the Closing (in
which event the ShoLodge Parties shall have the right to adjourn the
Closing Date for up to ninety (90) days for such purpose), (y) the
Purchaser shall, notwithstanding such defect, acquire the Defective
Property subject to a reduction in the 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 ShoLodge
Parties for such Defective Property, this Agreement shall, at the
Purchaser's option, terminate with respect to such Defective Property and
the Purchase Price shall be reduced by the Allocable Purchase Price of such
Defective Property.
2.4 TITLE MATTERS. Prior to execution of this Agreement, the
Purchaser has ordered from the Title Company and directed the Title Company
promptly to deliver to the Purchaser a preliminary title commitment, for an
<PAGE>
ALTA extended owner's policy of title insurance with respect to each of the
Properties, together with complete and legible copies of all instruments
and documents referred to as exceptions to title (collectively, the "TITLE
COMMITMENTS").
Within ten (10) Business Days after receipt of the Title Commitments,
the Purchaser shall give the ShoLodge Parties notice of any title
exceptions (other than Permitted Encumbrances) which adversely affect any
Property in any material respect and as to which the Purchaser reasonably
objects. If, for any reason, the ShoLodge Parties are unable or unwilling
to take such actions as may be required to cause such exceptions to be
removed from the Title Commitments, the ShoLodge Parties shall give the
Purchaser notice thereof; it being understood and agreed that the failure
of the ShoLodge Parties to give such notice within ten (10) Business Days
after the Purchaser's notice of objection shall be deemed an election by
the ShoLodge Parties to remedy such matters. If the ShoLodge Parties shall
be unable or unwilling to remove any title defects to which the Purchaser
has reasonably objected, the Purchaser may elect (i) to terminate this
Agreement with respect to the affected Property, in which event, the
Purchase Price shall be reduced by the Allocable Purchase Price of the
affected Properties and this Agreement shall be of no further force and
effect with respect to the affected Properties or (ii) to consummate the
transactions contemplated hereby, notwithstanding such title defect,
without any abatement or reduction in the Purchase Price on account
thereof. The Purchaser shall make any such election by written notice to
the ShoLodge Parties given on or prior to the fifth Business Day after the
ShoLodge Parties' notice of their unwillingness or inability to cure such
defect. Failure of the Purchaser to give such notice shall be deemed an
election by the Purchaser to proceed in accordance with clause (ii) above
and such exception shall be deemed a Permitted Encumbrance.
2.5 SURVEY MATTERS. Prior to execution of this Agreement, the
ShoLodge Parties have arranged for the preparation of an ALTA survey with
respect to each of the Properties (the "SURVEYS") by a licensed surveyor in
the jurisdiction in which each such Property is located, which (i) contains
an accurate legal description of the applicable Property, (ii) shows the
exact location, dimension and description (including applicable recording
information) of all utilities, easements, encroachments and other physical
matters affecting such Property, the number of striped parking spaces
located thereon and all applicable building set-back lines, (iii) states
whether the applicable Property is located within a 100-year flood plain
and (iv) includes a certification in the form set forth in SCHEDULE C, or
such other form as may be acceptable to the Purchaser, addressed to the
Purchaser, the Title Company and any other persons requested by the
Purchaser or designated by the ShoLodge Parties.
Within ten (10) Business Days after receipt of the Surveys, the
Purchaser shall give the ShoLodge Parties notice of any matters shown
thereon (other than Permitted Encumbrances) which adversely affect any such
Property in any material respect and as to which the Purchaser reasonably
objects. If, for any reason, the ShoLodge Parties are unwilling or unable
to take such actions as may be required to remedy the objectionable
matters, the ShoLodge Parties shall give the Purchaser prompt notice
thereof; it being understood and agreed that the failure of the ShoLodge
Parties to give such notice within ten (10) Business Days after the
Purchaser's notice of objection shall be deemed an election by the ShoLodge
Parties to remedy such matters. If the ShoLodge Parties shall be unwilling
<PAGE>
or unable to remove any survey defect to which the Purchaser has reasonably
objected, the Purchaser may elect (i) to terminate this Agreement with
respect to the affected Property, in which event, the Purchase Price shall
be reduced by the Allocable Purchase Price of the affected Properties and
this Agreement shall terminate and be of no further force or effect with
respect to the affected Properties or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement or
reduction in the Purchase Price on account thereof. The Purchaser shall
make any such election by written notice to the ShoLodge Parties given on
or prior to the fifth Business Day after the ShoLodge Parties' notice of
their inability to cure such defect and time shall be of the essence with
respect to the giving of such notice. Failure of the Purchaser to give
such notice shall be deemed an election by the Purchaser to proceed in
accordance with clause (ii) above and such matter shall be deemed a
Permitted Encumbrance.
SECTION 3. PURCHASE AND SALE.
3.1 CLOSING. The purchase and sale of the Properties shall be
consummated at a closing (the "CLOSING") to be held at the offices of
Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts, or
at such other location as the ShoLodge Parties and the Purchaser may agree,
at 10:00 a.m. local time, on a date (the "CLOSING DATE") which is the later
to occur of (i) November 10, 1997 and (ii) the date as of which all
conditions precedent to the Closing herein set forth have either been
satisfied or waived by the party in whose favor such conditions run. In
the event that the Closing shall not have occurred on or before January 30,
1998, either party shall have the right, provided such party is not in
default under this Agreement, by the giving of written notice thereof to
the other, to terminate this Agreement.
3.2 PURCHASE PRICE. (a) At the Closing, the Purchaser shall pay to
the ShoLodge Parties, for the Properties, a purchase price (the "PURCHASE
PRICE") in the amount of One Hundred Forty Million Dollars ($140,000,000),
less the amount of the Retained Funds, which amount shall be held and paid
in accordance with the applicable provisions of the Lease, except that
there shall be added to or deducted from the Purchase Price such amounts as
may be required pursuant to SECTION 9.
(b) The Purchase Price shall be payable at the Closing by wire
transfer of immediately available funds on the Closing Date to an account
or accounts to be designated by the ShoLodge Parties prior to the Closing.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of the Purchaser to acquire the Properties on the
Closing Date shall be subject to the satisfaction of the following
conditions precedent on and as of the Closing Date:
4.1 CLOSING DOCUMENTS. The ShoLodge Parties shall have delivered to
the Purchaser:
<PAGE>
(a) With respect to all of the Fee Properties, a good and sufficient
warranty deed with covenants against grantor's acts, or its local
equivalent, in proper statutory form for recording, duly executed and
acknowledged by the Sellers, conveying good and marketable title to the
applicable Fee Properties, free from all liens and encumbrances other than
the Permitted Encumbrances;
(b) With respect to all of the Ground Lease Property, an assignment
and assumption agreement, in form and substance reasonably satisfactory to
the Sellers and the Purchaser, duly executed and acknowledged by the holder
of the ground tenant's interest, with respect to all of such tenant's
right, title and interest in, to and under the Ground Lease together with
the written consent of the lessor under the Ground Lease if such consent is
required pursuant to the terms of such Ground Lease;
(c) An estoppel certificate, in form and substance reasonably
satisfactory to the Purchaser, from the lessor under the Ground Lease,
confirming, to such party's knowledge, that the Ground Lease, is in full
force and effect, the amount of the rents and other sums payable
thereunder, that, to the knowledge of the certifying party, 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
Properties;
(e) A duly executed copy of the Lease, all of the Incidental
Documents (as such term is defined in the Lease) and all other documents
and sums required to be delivered by the ShoLodge Parties and/or the Tenant
pursuant to the Agreement to Lease;
(f) Certified copies of all charter documents, applicable corporate
resolutions and certificates of incumbency with respect to the ShoLodge
Parties and the Tenant; and
(g) Such other conveyance documents, certificates, deeds, affidavits
and other instruments as the Purchaser or the Title Company may reasonably
require to effectuate the transactions contemplated by this Agreement.
4.2 CONDITION OF PROPERTIES. (a) All the Improvements located on
the Real Property shall, except as otherwise provided in SECTION 2.3, be in
substantially the same physical condition as on the date of this Agreement,
ordinary wear and tear excepted;
(b) No material default or event which with the giving of notice
and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or
affecting the Properties in any respect;
<PAGE>
(c) No action shall be pending or threatened for the condemnation or
taking by power of eminent domain of all or any material portion of the
Properties which would render any Property a Defective Property; and
(d) All material licenses, permits and other authorizations necessary
for the current use, occupancy and operation of the Properties shall be in
full force and effect.
4.3 TITLE POLICIES. The Title Company shall be prepared, subject
only to payment of the applicable premium and endorsement fees and delivery
of all conveyance documents in recordable form, to issue title insurance
policies to the Purchaser, in form and substance reasonably satisfactory to
the Purchaser in accordance with SECTION 2.4, together with such
affirmative coverages as the Purchaser may reasonably require and shall
have been determined by the Title Company as available prior to the
expiration of the Review Period.
4.4 OPINIONS OF COUNSEL. (a) The Purchaser shall have received a
written opinion from counsel to the ShoLodge Parties, which counsel shall
be reasonably acceptable to the Purchaser, in form and substance reasonably
satisfactory to the Purchaser, regarding the organization and authority of
the ShoLodge Parties and the Tenant, the enforceability of this Agreement,
the Lease and the Incidental Documents (as defined in the Lease) and such
other matters with respect to the transactions contemplated by this
Agreement as the Purchaser may reasonably require.
(b) The Purchaser shall have received a zoning diligence memorandum
from local counsel to the Purchaser, in form and substance reasonably
satisfactory to the Purchaser, regarding the compliance of the Properties
with respect to zoning, licensing and such other matters as the Purchaser
may reasonably require.
4.5 MARKET STUDIES. As of the Closing Date, the Purchaser shall have
received and approved original market study reports, dated within sixty
(60) days prior to the Closing Date, addressed to the Purchaser, prepared
by a qualified real estate appraiser reasonably satisfactory to the
Purchaser, such market studies to be otherwise in form and substance
reasonably acceptable to the Purchaser.
4.6 FF&E RESERVE FUNDING. The FF&E Funded Amount (as defined in the
Lease) shall have been deposited in accordance with the Lease.
4.7 CERTAIN DOCUMENTS AND EXHIBITS. (a) The Purchaser and the owners
of the Adjacent Land shall have entered into an easement and restriction
agreement with respect to all Adjacent Land providing, INTER ALIA, (i)
that, other than in the case of the San Antonio, Texas Adjacent Land, no
building more than thirty feet in height shall be constructed on the
Adjacent Land, (ii) for driveway and other easements over the Adjacent Land
for the benefit of the Real Property adjacent thereto, (iii) that, other
than in the case of the San Antonio, Texas Adjacent Land, such Adjacent
Land may be used only for restaurant purposes or other uses approved by the
Purchaser (which approval shall not be unreasonably withheld, delayed or
conditioned), and (iv) covering such other matters as the Purchaser may
reasonably require, such easement and restriction agreement to be otherwise
<PAGE>
in form and substance reasonably satisfactory to the Purchaser and the
ShoLodge Parties.
(b) The Purchaser and the applicable ShoLodge Parties shall have
entered into a reconveyance agreement providing, INTER ALIA, (i) for the
reconveyance of a portion of the Real Property located in Tempe, Arizona
and Albuquerque, New Mexico as shown on and in accordance with SCHEDULE D,
attached hereto and made a part hereof, upon final subdivision thereof,
(ii) for an easement and restriction agreement, substantially similar to
that described in paragraph (a) above, to be entered into with respect to
such subdivided parcels and (iii) for such other matters as Purchaser may
reasonably require, such reconveyance agreement to be otherwise in form and
substance reasonably satisfactory to the Purchaser and the ShoLodge
Parties.
(c) The Purchaser and the Tenant shall have approved the form of
Exhibit D to the Lease, such approval not to be unreasonably withheld,
delayed or conditioned.
SECTION 5. CONDITIONS TO SHOLODGE PARTIES' OBLIGATION TO CLOSE.
The obligation of the ShoLodge Parties to convey the Properties on the
Closing Date to the Purchaser is subject to the satisfaction of the
following conditions precedent on and as of the Closing Date:
5.1 PURCHASE PRICE. The Purchaser shall deliver to the ShoLodge
Parties the Purchase Price payable hereunder, adjusted as herein provided,
less the amount of the Retained Funds.
5.2 CLOSING DOCUMENTS. The Purchaser shall have delivered to the
Sellers:
(a) Duly executed and acknowledged counterparts of the documents
described in SECTION 4.1, where applicable; and
(b) Certified copies of all charter documents, applicable resolutions
and certificates of incumbency with respect to the Purchaser.
5.3 OPINION OF COUNSEL. The ShoLodge Parties shall have received a
written opinion from Sullivan & Worcester LLP, counsel to the Purchaser, in
form and substance reasonably satisfactory to the ShoLodge Parties,
regarding the organization and authority of the Purchaser and such other
matters with respect to the transactions contemplated by this Agreement as
the ShoLodge Parties may reasonably require.
5.4 CERTAIN DOCUMENTS AND EXHIBITS. The Purchaser and the ShoLodge
Parties shall have entered into the agreements and approved the exhibit
described in SECTION 4.7.
<PAGE>
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SHOLODGE PARTIES.
To induce the Purchaser to enter into this Agreement, the ShoLodge
Parties represent and warrant to the Purchaser as follows:
6.1 STATUS AND AUTHORITY OF THE SHOLODGE PARTIES. Each of the
ShoLodge Parties 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 ShoLodge Parties has duly qualified to transact
business in each jurisdiction in which the nature of the business conducted
by it requires such qualification, except where failure to do so could not
reasonably be expected to have a material adverse effect.
6.2 ACTION OF THE SHOLODGE PARTIES. Each of the ShoLodge Parties has
taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and upon the execution and delivery of any
document to be delivered by any of the ShoLodge Parties on or prior to the
Closing Date, such document shall constitute the valid and binding
obligation and agreement of such ShoLodge Party, enforceable against such
ShoLodge Party in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws of general application affecting the rights and remedies of creditors.
6.3 NO VIOLATIONS OF AGREEMENTS. Neither the execution, delivery or
performance of this Agreement by any of the ShoLodge Parties, nor
compliance with the terms and provisions hereof, will result in any breach
of the terms, conditions or provisions of, or conflict with or constitute a
default under, or result in the creation of any lien, charge or encumbrance
upon any Property 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 ShoLodge Parties is bound.
6.4 LITIGATION. None of the ShoLodge Parties has received written
notice of and, to each of the ShoLodge Party'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 Properties, (c) will result in or subject the
Properties to a material liability, or (d) involves condemnation or eminent
domain proceedings against any material part of the Properties.
6.4 EXISTING LEASES, AGREEMENTS, ETC. Other than the Ground Lease
and any other agreements provided to the Purchaser not less than ten (10)
days prior to the expiration of the Review Period, there are no other
material agreements affecting the Properties which will be binding on the
Purchaser subsequent to the Closing Date which the Purchaser cannot
terminate on thirty (30) days notice without payment of premium or penalty.
<PAGE>
6.6 DISCLOSURE. To each of the ShoLodge Party's knowledge, there is
no fact or condition which materially and adversely affects the business or
condition of the 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 each of the ShoLodge Party's knowledge, all
utilities and services necessary for the use and operation of the
Properties (including, without limitation, road access, gas, water,
electricity and telephone) are available thereto and are of sufficient
capacity to meet adequately all needs and requirements necessary for the
current use and operation of the Properties. To each of the ShoLodge
Party's knowledge, no fact, condition or proceeding exists which would
result in the termination or material impairment of the furnishing of such
utilities to the Properties.
6.8 COMPLIANCE WITH LAW. To each of the ShoLodge Party's knowledge,
except as disclosed to the Purchaser in writing not less than ten (10)
days' prior to the expiration of the Review Period, including in any
engineering report, (i) the Properties and the current use and operation
thereof do not violate any material federal, state, municipal and other
governmental statutes, ordinances, by-laws, rules, regulations or any other
legal requirements, including, without limitation, those relating to
construction, occupancy, zoning, adequacy of parking, environmental
protection, occupational health and safety and fire safety applicable
thereto; and (ii) there are presently in effect all material licenses,
permits and other authorizations necessary for the current use, occupancy
and operation thereof. Except as disclosed to the Purchaser in writing not
less than ten (10) days' prior to the expiration of the Review Period, none
of the ShoLodge Parties has received written notice of any threatened
request, application, proceeding, plan, study or effort which would
materially adversely affect the present use or zoning of any of the
Properties or which would modify or realign any adjacent street or highway
in a material and adverse way.
6.9 TAXES. To each of the ShoLodge Party's 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 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.
6.10 NOT A FOREIGN PERSON. None of the ShoLodge Parties is a "foreign
person" within the meaning of Section 1445 of the United States Internal
Revenue Code of 1986, as amended, and the treasury regulations promulgated
thereunder.
6.11 HAZARDOUS SUBSTANCES. Except as disclosed to the Purchaser or as
described in any environmental report delivered to the Purchaser prior to
the expiration of the Review Period, to each of the ShoLodge Party's
knowledge, none of the ShoLodge Parties nor any tenant or other occupant or
user of any of the Properties, or any portion thereof, has stored or
disposed of (or engaged in the business of storing or disposing of) or has
released or caused the release of any hazardous waste, contaminants, oil,
radioactive or other material on any of the Properties, or any portion
thereof, the removal of which is required or the maintenance of which is
<PAGE>
prohibited or penalized by any applicable Federal, state or local statutes,
laws, ordinances, rules or regulations, and, to each of the ShoLodge
Party's knowledge, except as disclosed to the Purchaser or as described in
any environmental report delivered to the Purchaser prior to the expiration
of the Review Period, the Properties are free from any such hazardous
waste, contaminants, oil, radioactive and other materials, except any such
materials maintained in accordance with applicable law.
6.12 INSURANCE. None of the ShoLodge Parties has received written
notice from any insurance carrier of defects or inadequacies in the
Properties which, if uncorrected, would result in a termination of
insurance coverage or a material increase in the premiums charged therefor.
6.13 GROUND LEASE. The copy of the Ground Lease heretofore delivered
by the ShoLodge Parties to the Purchaser is a true, correct and complete
copy thereof; the Ground Lease has not been amended except as evidenced by
amendments similarly delivered and constitutes the entire agreement between
the parties thereto. To each of the ShoLodge Party's knowledge, the Ground
Lease is 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 any party thereto.
6.14 OWNERSHIP OF SELLERS. ShoLodge is the sole owner, directly or
indirectly, of all of the issued and outstanding beneficial interests in
the Sellers and the transactions contemplated by this Agreement are of
direct material benefit to ShoLodge.
6.15 ADJACENT LAND. No ShoLodge Party or any of its affiliates owns
any property adjacent to the Properties which is not being conveyed to the
Purchaser pursuant to this Agreement other than the Adjacent Land.
The representations and warranties made in this Agreement by the
ShoLodge Parties shall be continuing and shall be deemed remade by the
ShoLodge Parties as of the Closing Date with the same force and effect as
if made on, and as of, such date; PROVIDED, HOWEVER, that, the ShoLodge
Parties shall have the right, from time to time prior to the 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 2.3. The ShoLodge
Parties' liability with respect to all representations and warranties made
in this Agreement by the ShoLodge Parties with respect to the Properties
shall survive the Closing for a period of one (1) year, after which the
ShoLodge Parties shall have no liability with respect thereto other than as
to any matters for which claims have been asserted prior to the expiration
of such one (1) year period.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to the Purchaser at the Closing, the ShoLodge
Parties disclaim the making of any representations or warranties, express
or implied, regarding the Properties or matters affecting the Properties,
whether made by the ShoLodge Parties, on the ShoLodge Parties' behalf or
otherwise, including, without limitation, the physical condition of the
Properties, title to or the boundaries of the Real Property, pest control
<PAGE>
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
Closing made by the ShoLodge Parties. The Purchaser further acknowledges
that it has not received from or on behalf of the ShoLodge Parties any
accounting, tax, legal, architectural, engineering, property management or
other advice with respect to this transaction and is relying solely upon
the advice of third party accounting, tax, legal, architectural,
engineering, property management and other advisors. Subject to the
provisions of this Agreement, the Purchaser shall purchase the Properties
in their "as is" condition on the Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce the ShoLodge Parties to enter in this Agreement, the
Purchaser represents and warrants to the ShoLodge Parties as follows:
7.1 STATUS AND AUTHORITY OF THE PURCHASER. The Purchaser is a
Maryland real estate investment trust duly organized, validly existing and
in trust good standing under the laws of the State of Maryland, and has all
requisite power and authority under the laws of such state and under its
charter documents to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The
Purchaser has duly qualified and is in good standing as a trust or
unincorporated business association in each jurisdiction in which the
nature of the business conducted by it requires such qualification, except
where the failure to do so could not reasonably be expected to have a
material adverse effect.
7.2 ACTION OF THE PURCHASER. The Purchaser has taken all necessary
action to authorize the execution, delivery and performance of this
Agreement, and upon the execution and delivery of any document to be
delivered by the Purchaser on or prior to the Closing Date such document
shall constitute the valid and binding obligation and agreement of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting
the rights and remedies of creditors.
7.3 NO VIOLATIONS OF AGREEMENTS. Neither the execution, delivery or
performance of this Agreement by the Purchaser, nor compliance with the
terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon
any property or assets of the Purchaser pursuant to the terms of any
<PAGE>
indenture, mortgage, deed of trust, note, evidence of indebtedness or any
other agreement or instrument by which the Purchaser is bound.
7.4 LITIGATION. No investigation, action or proceeding is pending
and, to the Purchaser's knowledge, no action or proceeding is threatened
and no investigation looking toward such an action or proceeding has begun,
which questions the validity of this Agreement or any action taken or to be
taken pursuant hereto.
The representations and warranties made in this Agreement by the
Purchaser shall be continuing and shall be deemed remade by the Purchaser
as of the Closing Date with the same force and effect as if made on, and as
of, such date. The Purchaser's liability with respect to all
representations and warranties made in this Agreement by the Purchaser
shall survive the Closing for a period of one (1) year, after which the
Purchaser shall have no liability with respect thereto other than as to any
matters for which claims have been asserted prior to the expiration of such
one (1) year period.
SECTION 8. COVENANTS OF THE SHOLODGE PARTIES.
The ShoLodge Parties hereby covenant with the Purchaser between the
date of this Agreement and the Closing Date as follows:
8.1 COMPLIANCE WITH LAWS, ETC. To comply or to cause compliance with
in all material respects with (i) all applicable laws, regulations and
other requirements from time to time of every governmental body having
jurisdiction of the Properties or the use or occupancy of the Improvements
located on the Real Property and (ii) all terms, covenants and conditions
of the Ground Lease and all instruments of record and other agreements
affecting Properties.
8.2 APPROVAL OF AGREEMENTS. Except as otherwise authorized by this
Agreement or in the ordinary course of business, not to enter into, modify,
amend or terminate the Ground Lease or any other agreement with respect to
the Properties which would encumber or be binding upon such Properties from
and after the Closing Date without in each instance obtaining the prior
written consent of the Purchaser, which consent shall not be unreasonably
withheld, delayed or conditioned.
8.3 ESTOPPEL CERTIFICATES. To request, and use reasonable efforts to
obtain, from the landlord under the Ground Lease, certifications, in form
and substance reasonably satisfactory to the Purchaser, regarding the
status of the Ground Lease.
8.4 NOTICE OF MATERIAL CHANGES OR UNTRUE REPRESENTATIONS. Upon
learning of any material change in any condition with respect to any of the
Properties or of any event or circumstance which makes any representation
or warranty of the ShoLodge Parties to the Purchaser under this Agreement
untrue or misleading in any material respect, promptly to notify the
Purchaser thereof (the Purchaser agreeing, on learning of any such fact or
condition, promptly to notify the ShoLodge Parties thereof).
<PAGE>
8.5 OPERATION OF PROPERTIES. To continue to operate each of the
Properties as a Sumner Suite 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.
8.6 FINANCIAL INFORMATION. To provide to the Purchaser, promptly
upon request at the ShoLodge Parties' sole cost and expense, such audited
and unaudited financial and other information and certifications of the
ShoLodge Parties with respect to the ShoLodge Parties and the Properties as
the Purchaser may from time to time reasonably request in order to comply
with any applicable securities laws and/or any rules, regulations or
requirements of the Securities and Exchange Commission and, if required or
requested, to permit the Purchaser to incorporate by reference any
information included in filings made by ShoLodge with the Securities and
Exchange Commission.
SECTION 9. APPORTIONMENTS.
9.1 REAL PROPERTY APPORTIONMENTS. Representatives of the Purchaser
and the ShoLodge Parties shall perform any and all of the adjustments and
apportionments which are appropriate and usual for a transaction of this
nature and taking into account the simultaneous execution of the Lease.
The adjustments hereunder shall be calculated or paid in an amount based
upon a fair and reasonable estimated accounting performed and agreed to by
representatives of the ShoLodge Parties and the Purchaser at or prior to
the Closing. Subsequent final adjustments and payments shall be made in
cash or other immediately available funds as soon as practicable after the
Closing Date and in any event within ninety (90) days after such Closing
Date, based upon an agreed accounting performed by representatives of the
ShoLodge Parties and the Purchaser. In the event the parties have not
agreed with respect to the adjustments required to be made pursuant to this
SECTION 9.1 within such ninety-day period, upon application by either
party, Deloitte & Touche LLP or other certified public accountants
reasonably acceptable to the Purchaser and the ShoLodge Parties shall
determine any such adjustments which have not theretofore been agreed to
between the ShoLodge Parties and the Purchaser. The charges of such
accountant shall be borne by the ShoLodge Parties.
9.2 CLOSING COSTS. The ShoLodge Parties shall pay all costs and
expenses associated with the transactions contemplated hereby, including,
without limitation, recording costs, title insurance premiums, the costs
and expenses of preparing engineering and environmental reports, market
studies and appraisals and the reasonable costs and expenses of legal
counsel retained by the Purchaser.
The obligations of the parties under this SECTION 9 shall survive the
Closing.
<PAGE>
SECTION 10. DEFAULT.
10.1 DEFAULT BY THE SHOLODGE PARTIES. If the ShoLodge Parties shall
have made any representation or warranty herein which shall be untrue or
misleading in any material respect, or if the ShoLodge Parties shall fail
to perform any of the material covenants and agreements contained herein to
be performed by the ShoLodge Parties and such failure continues for a
period of ten (10) days after notice thereof from the Purchaser or if the
Tenant shall default in its obligations under the Agreement to Lease and
such default shall continue beyond the expiration of any applicable cure
period, the Purchaser may terminate this Agreement and/or the Purchaser may
pursue any and all remedies available to it at law or in equity, including,
but not limited to, a suit for specific performance or other equitable
relief.
10.2 DEFAULT BY THE PURCHASER. If the Purchaser shall have made any
representation or warranty herein which shall be untrue or misleading in
any material respect, or if the Purchaser shall fail to perform any of the
covenants and agreements contained herein to be performed by it and such
failure shall continue for a period of ten (10) days after notice thereof
from the ShoLodge Parties or if HPT shall default in its obligations under
the Agreement to Lease and such default shall continue beyond the
expiration of any applicable cure period, the ShoLodge Parties may, as its
sole and exclusive remedy at law and in equity, terminate this Agreement.
In the event that the ShoLodge Parties shall so terminate this Agreement,
the Purchaser shall thereupon pay to the ShoLodge Parties, as liquidated
damages and not as a penalty, the sum of One Million Dollars ($1,000,000),
whereupon, the Purchaser shall have no further monetary or, except as
expressly provided herein, nonmonetary obligations hereunder.
SECTION 11. MISCELLANEOUS.
11.1 AGREEMENT TO INDEMNIFY. (a)Subject to any express provisions of
this Agreement to the contrary, (i) the ShoLodge Parties shall indemnify
and hold harmless the Purchaser from and against any and all obligations,
claims, losses, damages, liabilities, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and disbursements)
arising out of (x) events, contractual obligations, acts or omissions of
the ShoLodge Parties that occurred in connection with the ownership or
operation of any Property prior to the Closing or (y) any damage to
property of others or injury to or death of any person or any claims for
any debts or obligations occurring on or about or in connection with any
Property or any portion thereof at any time or times prior to the Closing,
and (ii) the Purchaser shall indemnify and hold harmless the ShoLodge
Parties from and against any and all obligations, claims, losses, damages,
liabilities and expenses (including, without limitation, reasonable
attorneys' and accountants' fees and disbursements) arising out of (x)
events, contractual obligations, acts or omissions of Purchaser that occur
in connection with the ownership or operation of any Property on or after
the Closing, or (y) any damage to property of others or injury to or death
of any person or any claims for any debts or obligations occurring on or
about any Property or any portion thereof at any time or times after the
Closing.
<PAGE>
(b) Whenever it is provided in this Agreement that an obligation of
the ShoLodge Parties will be assumed by the Purchaser on or after the
Closing, the Purchaser shall be deemed to have also agreed to indemnify and
hold harmless the ShoLodge Parties and their respective successors and
assigns from and against all claims, losses, damages, liabilities, costs,
and expenses (including, without limitation, reasonable attorneys' and
accountants' fees and expenses) arising from any failure of the Purchaser
to perform the obligation so assumed on or after the Closing.
(c) Whenever either party shall learn through the filing of a claim
or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other
party promptly and furnish such copies of documents (and make originals
thereof available) and such other information as such party may have that
may be used or useful in the defense of such claims and shall afford said
other party full opportunity to defend the same in the name of such party
and shall generally cooperate with said other party in the defense of any
such claim.
(d) The provisions of this SECTION 11.1 shall survive the Closing and
the termination of this Agreement.
11.2 BROKERAGE COMMISSIONS. Each of the parties hereto represents to
the other parties that, except Montgomery Securities, it dealt with no
broker, finder or like agent in connection with this Agreement or the
transactions contemplated hereby. The ShoLodge Parties shall be solely
responsible for and shall indemnify and hold harmless the Purchaser and its
respective legal representatives, heirs, successors and assigns from and
against any loss, liability or expense, including, reasonable attorneys'
fees, arising out of any claim or claims for commissions or other
compensation for bringing about this Agreement or the transactions
contemplated hereby made by Montgomery Securities or any other broker,
finder or like agent other than such loss, liability or expense arising
from the Purchaser's breach of its representation made in this SECTION
11.2. The provisions of this SECTION 11.2 shall survive the Closing and
any termination of this Agreement.
11.3 PUBLICITY. The parties agree that no party shall, with respect
to this Agreement and the transactions contemplated hereby, contact or
conduct negotiations with public officials, make any public pronouncements,
issue press releases or otherwise furnish information regarding this
Agreement or the transactions contemplated to any third party without the
consent of the other parties, which consent shall not be unreasonably
withheld, delayed or conditioned, except as required by law or unless such
action is taken based on advice of counsel given in good faith. No party,
or its employees shall trade in the securities of any parent or affiliate
of the Sellers or of the Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall
record this Agreement or any notice thereof, except as required by law or
unless such action is taken based on advice of counsel given in good faith.
11.4 NOTICES. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
<PAGE>
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 ShoLodge Parties to:
ShoLodge, Inc.
130 Maple Drive North
Hendersonville, Tennessee 37075
Attn: Mr. Leon L. Moore
[Telecopier No. (615) 264-1758]
with a copy to:
Boult Cummings Conners & Berry, PLC
414 Union Street, Suite 1600
Nashville, Tennessee 37219
Attn: Patrick L. Alexander, Esq.
[Telecopier No. (615) 252-6362]
If to the Purchaser, to:
Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
<PAGE>
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time
and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other
address within the United States of America.
11.5 WAIVERS, ETC. Any waiver of any term or condition of this
Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to
be or construed as a further or continuing waiver of any other breach of
such term, condition, covenant, representation or warranty or any other
term, condition, covenant, representation or warranty, nor shall any
failure at any time or times to enforce or require performance of any
provision hereof operate as a waiver of or affect in any manner such
party's right at a later time to enforce or require performance of such
provision or any other provision hereof. This Agreement may not be
amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of
the party against whom enforcement of any amendment, waiver, change,
modification, consent or discharge is sought.
11.6 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and all
rights and obligations hereunder shall not be assignable by any party
without the written consent of the other parties, except that (x) Purchaser
may assign this Agreement to any entity wholly owned, directly or
indirectly, by the Purchaser (PROVIDED, HOWEVER, that, in the event this
Agreement shall be assigned to any entity wholly owned, directly or
indirectly, by the Purchaser, Hospitality Properties Trust shall remain
liable for the obligation of the "Purchaser" hereunder) and (y) after the
Closing, the Sellers may assign its surviving rights, if any, under this
Agreement to the Tenant. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement is not
intended and shall not be construed to create any rights in or to be
enforceable in any part by any other persons.
11.7 SEVERABILITY. If any provision of this Agreement shall be held
or deemed to be, or shall in fact be, invalid, inoperative or unenforceable
as applied to any particular case in any jurisdiction or jurisdictions, or
in all jurisdictions or in all cases, because of the conflict of any
provision with any constitution or statute or rule of public policy or for
any other reason, such circumstance shall not have the effect of rendering
<PAGE>
the provision or provisions in question invalid, inoperative or
unenforceable in any other jurisdiction or in any other case or
circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to the extent that such
other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and
such provision reformed so that it would be valid, operative and
enforceable to the maximum extent permitted in such jurisdiction or in such
case.
11.8 COUNTERPARTS, ETC. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to
the subject matter hereof.
11.9 GOVERNING LAW. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts
which are to be performed entirely within Massachusetts, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be
made; or (iii) where any breach of any provision of this Agreement occurs,
or any cause of action otherwise accrues; or (iv) where any action or other
proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principal place of business, or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum
jurisdiction otherwise would apply the laws of a jurisdiction other than
The Commonwealth of Massachusetts; or (vii) any combination of the
foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions
of this Agreement may be brought and prosecuted in such court or courts
located in The Commonwealth of Massachusetts as is provided by law; and the
parties consent to the jurisdiction of said court or courts located in The
Commonwealth of Massachusetts and to service of process by registered mail,
return receipt requested, or by any other manner provided by law.
11.10 PERFORMANCE ON BUSINESS DAYS. In the event the date on which
performance or payment of any obligation of a party required hereunder is
other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
11.11 ATTORNEYS' FEES. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of
this Agreement, the prevailing party therein 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>
11.12 SECTION AND OTHER HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
11.13 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
THE PURCHASER, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY
AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE PURCHASER SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR
CLAIM AGAINST, THE PURCHASER. ALL PERSONS DEALING WITH THE PURCHASER, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE PURCHASER FOR THE PAYMENT OF
ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SHOLODGE PARTIES:
SHOLODGE, INC.
By:LEON MOORE
Its President
SUNSHINE INNS, INC.
By:LEON MOORE
Its President
SOUTHEAST TEXAS INNS, INC.
By:LEON MOORE
Its President
MIDWEST INNS, INC.
By:LEON MOORE
Its President
<PAGE>
FAR WEST INNS, INC.
By:LEON MOORE
Its President
SHONEY'S INN, INC.
By:LEON MOORE
Its President
MOBAT, INC.
By:RICHARD JOHNSON
Its (Vice) President
THE HOTEL GROUP, INC.
By:LEON MOORE
Its President
PURCHASER:
HOSPITALITY PROPERTIES TRUST
By:JOHN G. MURRAY
Its:PRESIDENT
<PAGE>
SCHEDULE A
THE PROPERTIES
LOCATIONALLOCABLE PURCHASE PRICE
Tampa, FL $ 4,311,803
San Antonio, Riverwalk, TX 14,131,789
Fort Wayne, IN 9,692,801
Albuquerque, NM 11,518,052
El Paso, TX 9,148,840
Hendersonville, TN 7,511,675
Cumberland, GA 9,598,544
Gwinett, GA 11,330,331
Columbus, OH 13,415,320
Atlanta Airport, GA 10,316,742
Dallas, Galleria, TX 11,189,621
Austin, TX 9,231,065
Tempe, AZ 10,067,959
Tucson, AZ 8,535,458
$140,000,000
<PAGE>
SCHEDULE B-1 THROUGH B-14
LEGAL DESCRIPTIONS OF PROPERTIES
[See attached copies.]
<PAGE>
SCHEDULE C
FORM OF SURVEYOR'S CERTIFICATE
SURVEYOR'S CERTIFICATE
TO: Hospitality Properties Trust
and its assignees or nominees
400 Centre Street
Newton, MA 02158
RE: Survey Entitled "_______________________________________"
DATED _________ ___, 1997, PREPARED BY
The undersigned hereby certifies that the above-referenced survey was
prepared from an actual on-the-ground instrument survey of the subject
premises; that the same accurately shows the location of the boundaries of
the subject premises and the location of all streets, highways, alleys and
public ways crossing or abutting said premises; that the dimensions of the
improvements and the locations thereof with respect to the boundaries are
accurately shown as the same were situated on ___________ ___, 1996; that
there are no encroachments by improvements appurtenant to adjoining premises
upon the subject premises, nor from the subject premises, unless shown
thereon; that all buildings and structures, if any, lie wholly within all
applicable building restriction lines, if any, and do not violate any
restriction or other recorded agreements set forth in the title insurance
commitment for the subject premises dated __________ __, 1997, issued to you
by _________ Title Insurance Company, Commitment No. _______ (the "TITLE
POLICY"); that all easements and rights of way which are appurtenant to or
burden the subject premises and (i) are referred to in the Title Commitment
or (ii) are apparent from a visual inspection are delineated thereon, and
are located other than through the existing building shown hereon; that all
parking spaces, if any, are delineated thereon; and that, except as
otherwise shown thereon, the subject premises are not located (x) within any
flood hazard or flood way area or district as designed by Federal, state or
municipal authority or (y) within any area subject to regulation by Federal,
state or municipal authority as inland or coastal wetlands, beach, estuary
or the like.
Access to and egress from the subject premises and the improvements
and structures thereon to ________ Street, a public way, are provided by the
means indicated thereon. Municipal water, storm sewer facilities and
telephone, gas and electric services of public utilities are available in
the locations indicated thereon.
<PAGE>
The undersigned hereby certifies that the square footage of each
parcel delineated on the above-referenced survey is as set forth thereon,
that all such parcels are contiguous without any strips, gaps or gores
existing between any of said parcels, and that said parcels, when combined,
form and create one complete and uninterrupted parcel without any strips,
gaps or gores.
This survey is made in accordance with the "Minimum Standard Detail
Requirements for Land Title Surveys" jointly established and adopted by ALTA
and ACSM in 1986.
Dated: _________ ___, 1997 ___________________________
Registered Land Surveyor
__________#_______________
[Surveyor's Seal]
<PAGE>
SCHEDULE D
Materials Regarding Tempe
AND ALBUQUERQUE LOTS
[See attached copies.]
Exhibit 10.2
AGREEMENT TO LEASE
THIS AGREEMENT TO LEASE (this "AGREEMENT") is entered into as of
the 24 day of October, 1997, by and between HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust ("HPT"), and SHOLODGE, INC., a
Tennessee corporation ("SHOLODGE").
W I T N E S S E T H:
WHEREAS, pursuant to a Purchase and Sale Agreement, dated as of
the date hereof (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "PURCHASE AGREEMENT"), by and
among HPT and ShoLodge and certain of its wholly owned subsidiaries, HPT,
either directly or through a wholly owned subsidiary (such entity,
"LANDLORD"), is planning to acquire those certain properties, as more
particularly described in the Purchase Agreement; and
WHEREAS, subject to and upon the terms and conditions set forth
in this Agreement, pursuant to a Lease Agreement in the form attached
hereto as EXHIBIT A (the "LEASE"), HPT has agreed to lease or cause
Landlord to lease to a wholly owned subsidiary of ShoLodge, ("TENANT"), and
ShoLodge has agreed to cause Tenant to lease from Landlord, all of the
Properties (this and other capitalized terms used and not otherwise defined
herein having the meanings ascribed to such terms in the Purchase Agreement
and/or the Lease);
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the mutual
receipt and legal sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. AGREEMENT TO LEASE. Subject to and upon the terms and
conditions hereinafter set forth, on the date on which Landlord acquires
fee simple title to each of the Fee Properties and the ground tenant's
interest with respect to the Ground Lease Properties, Landlord and Tenant
shall each execute and deliver the Lease and such date shall be the
Commencement Date under the Lease.
2. REPRESENTATIONS OF TENANT, ETC. As an inducement to
Landlord to enter into the Lease, ShoLodge shall cause Tenant to represent
and warrant to Landlord, as of the Closing Date, that:
(a) STATUS AND AUTHORITY OF TENANT, ETC. Tenant is a
corporation duly organized and validly existing under the laws of its state
of incorporation and has all requisite power and authority (corporate and
other) under the laws of such state and its respective charter documents to
own its property and assets, to enter into and perform its obligations
under the Lease and to transact the business in which it is engaged or
presently proposes to engage. Tenant is duly qualified in each
<PAGE>
jurisdiction in which the nature of the business conducted or to be
conducted by it requires such qualification, except where failure to do so
could not reasonably be expected to have a material adverse effect.
(b) CORPORATE ACTION OF TENANT, ETC. Tenant has taken all
necessary action (corporate or other) under its charter documents to
authorize the execution, delivery and performance of the Lease, and the
Lease constitutes the valid and binding obligation and agreement of Tenant
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization or similar laws of general application affecting
the rights and remedies of creditors.
(c) NO VIOLATIONS OF OTHER AGREEMENTS, ETC. Neither the
execution and delivery of the Lease by Tenant, nor compliance with the
terms and provisions thereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon
any property or assets of Tenant pursuant to the terms of any indenture,
mortgage, deed of trust, note, evidence of indebtedness, agreement or other
instrument to which Tenant may be a party or by which it or its property is
bound, or violate any provisions of laws, or any applicable order, writ,
injunction, judgment or decree of any court, or any order or other public
regulation of any governmental commission, bureau or administrative agency.
(d) JUDGMENTS; LITIGATION. There are no judgments
presently outstanding and unsatisfied against Tenant or any of its
properties, and none of Tenant or any of its properties are involved in any
material litigation at law or in equity, or any proceeding before any
court, or by or before any governmental or administrative agency, which
litigation or proceeding could materially and adversely affect Tenant, and
no such material litigation or proceeding is, to the knowledge of Tenant,
threatened against Tenant, and no investigation looking toward such a
proceeding has begun or is contemplated.
(e) DISCLOSURE. To the knowledge of Tenant, neither this
Agreement nor any other document, certificate or statement furnished to HPT
by or on behalf of Tenant in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. To the knowledge of Tenant, there is no fact or
condition which materially and adversely affects the business, operations,
affairs, properties or condition of Tenant which has not been set forth in
this Agreement or in the other documents, certificates or statements
furnished to HPT in connection with the transactions contemplated hereby.
Tenant's liability with respect to the representations and
warranties set forth in this Agreement shall survive the Commencement Date.
3. REPRESENTATIONS OF LANDLORD. As an inducement to the Tenant
to enter into the Lease, HPT shall cause Landlord to represent to Tenant,
as of the Closing Date, that:
(a) STATUS AND AUTHORITY OF LANDLORD. Landlord is a
Maryland real estate investment trust duly organized, validly existing and
<PAGE>
in trust good standing under the laws of the State of Maryland, and has all
requisite power and authority under the laws of such state and under its
charter documents to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. Landlord
has duly qualified and is in good standing as a trust or unincorporated
business association in each jurisdiction in which the nature of the
business conducted by it requires such qualification, except where failure
to do so could not reasonably be expected to have a material adverse
effect.
(b) ACTION OF LANDLORD. Landlord has taken all necessary
action to authorize the execution, delivery and performance of the Lease,
and the Lease constitutes the valid and binding obligation and agreement of
Landlord, enforceable against Landlord in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
(c) NO VIOLATIONS OF AGREEMENTS. Neither the execution,
delivery or performance of the Lease by Landlord, nor compliance with the
terms and provisions hereof or thereof, will result in any breach of the
terms, conditions or provisions of, or conflict with or constitute a
default under, or result in the creation of any lien, charge or encumbrance
upon any property or assets of Landlord pursuant to the terms of any
indenture, mortgage, deed of trust, note, evidence of indebtedness or any
other agreement or instrument by which Landlord or its property is bound,
or violate any provisions of laws, or any applicable order, writ,
injunction, judgment or decree of any court, or any order or other public
regulation of any governmental commission, bureau or administrative agency.
(d) JUDGMENTS; LITIGATION. There are no judgments
presently outstanding and unsatisfied against Landlord or any of its
properties, and neither Landlord nor any of its properties are involved in
any material litigation at law or in equity, or any proceeding before any
court, or by or before any governmental or administrative agency, which
litigation or proceeding could materially and adversely affect Landlord,
and no such material litigation or proceeding is, to the knowledge of
Landlord, threatened against Landlord, and no investigation looking toward
such a proceeding has begun or is contemplated.
Landlord's liability with respect to the representations and
warranties set forth in this Agreement shall survive the Commencement Date.
4. ADDITIONAL TENANT OBLIGATIONS. On or before the
Commencement Date, ShoLodge shall cause each of the following to be
delivered to HPT (the obligation of Landlord to enter into the Lease being
subject to such delivery):
(a) A security agreement with respect to all tangible
personal property owned by Tenant and used in connection with the operation
of the Properties, such security agreement to create a first lien and
security interest in such property and to be otherwise in the form attached
hereto as EXHIBIT B;
<PAGE>
(b) Such financing statements as Landlord may reasonably
require to perfect the interests and liens granted pursuant to the security
agreement described in paragraph (a) above;
(c) An assignment and security agreement with respect to
the FF&E Reserve, such assignment and security agreement to create a first
lien in the FF&E Reserve and to be otherwise in the form attached hereto as
EXHIBIT C;
(d) A stock pledge agreement with respect to all of the
issued and outstanding stock of Tenant, together with a stock power in
blank, such stock pledge and security agreement to create a first lien and
security interest in such shares and to be in the form attached hereto as
EXHIBIT D; and
(e) A limited guaranty agreement with respect to Tenant's
obligations under the Lease in the form attached hereto as EXHIBIT F.
5. CONDITION PRECEDENT. The obligations of the parties
hereunder shall be subject to the consummation of the transactions
contemplated by the Purchase Agreement.
6. NOTICES. All notices required or desired to be given
hereunder shall be given in the manner provided in Section 11.4 of the
Purchase Agreement.
7. ASSIGNMENT. ShoLodge shall not assign or transfer, directly
or indirectly, its rights under this Agreement without the prior written
consent of HPT, which consent may be given or withheld by HPT in HPT's sole
discretion. HPT shall not assign or transfer, directly or indirectly, its
rights under this Agreement other than to a wholly owned subsidiary of HPT
without the prior written consent of ShoLodge, which consent may be given
or withheld by Tenant in ShoLodge's sole discretion.
8. DEFAULT.
(a) DEFAULT BY SHOLODGE. If ShoLodge shall fail to perform
any of the covenants and agreements contained herein to be performed by
ShoLodge and such failure continues for a period of ten (10) days after
notice thereof from HPT, HPT may terminate this Agreement and/or pursue any
and all remedies available to HPT at law or in equity, including, but not
limited to, a suit for specific performance or other equitable relief. A
default by the ShoLodge Parties under the Purchase Agreement shall be
deemed a default by ShoLodge under this Agreement.
(b) DEFAULT BY HPT. If HPT shall fail to perform any of
the covenants and agreements contained herein to be performed by it and
such failure shall continue for a period of ten (10) days after notice
thereof from ShoLodge, ShoLodge may terminate this Agreement and/or pursue
any and all remedies available to ShoLodge at law or in equity, including,
but not limited to, a suit for specific performance or other equitable
<PAGE>
relief. A default by the Purchaser under the Purchase Agreement shall be
deemed a default by HPT under this Agreement.
9. MISCELLANEOUS.
(a) EXPENSES. Tenant shall pay its and HPT's expenses
incident to the negotiation, preparation and carrying out of this
Agreement, including, without limitation, all reasonable fees and expenses
of HPT's counsel. Tenant shall also pay the cost of all recording fees,
transfer fees and other like costs and expenses incident to this Agreement.
(b) PUBLICITY. The parties agree that no party shall, with
respect to this Agreement and the transactions contemplated hereby, contact
or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information
regarding this Agreement or the transactions contemplated to any third
party without the consent of the other party, which consent shall not be
unreasonably withheld, delayed or conditioned, except as required by law or
unless such action is taken based on advice of counsel given in good faith.
No party or its employees shall trade in the securities of HPT or ShoLodge
until a public announcement of the transactions contemplated by this
Agreement has been made.
(c) PERFORMANCE ON BUSINESS DAYS. In the event the date on
which performance or payment of any obligation of a party required
hereunder is other than a Business Day, the time for payment or performance
shall automatically be extended to the first Business Day following such
date.
10. APPLICABLE LAW, ETC. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of The
Commonwealth of Massachusetts applicable to contracts between residents of
Massachusetts which are to be performed entirely within Massachusetts,
regardless of (i) where this Agreement is executed or delivered; or
(ii) where any payment or other performance required by this Agreement is
made or required to be made; or (iii) where any breach of any provision of
this Agreement occurs, or any cause of action otherwise accrues; or (iv)
where any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi) whether
the laws of the forum jurisdiction otherwise would apply the laws of a
jurisdiction other than The Commonwealth of Massachusetts; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions
of this Agreement may be brought and prosecuted in such court or courts
located in The Commonwealth of Massachusetts as is provided by law; and
the parties consent to the jurisdiction of said court or courts located in
The Commonwealth of Massachusetts and to service of process by registered
mail, return receipt requested, or by any other manner provided by law.
11. MODIFICATION OF AGREEMENT. No modification or waiver of any
provision of this Agreement, nor any consent to any departure by any party
<PAGE>
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the other, and such modification, waiver or consent
shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any party in any case shall entitle
such party to any other or further notice or demand in the same, similar or
other circumstances.
12. WAIVER OF RIGHTS. Neither any failure nor any delay on the
part of any party in exercising any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise or the exercise of
any right, power or privilege.
13. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby and this Agreement shall thereupon be reformed and
construed and enforced to the maximum extent permitted by laws.
14. ENTIRE CONTRACT. This Agreement, including all annexes and
exhibits hereto, constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and thereof and shall
supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the transactions contemplated
hereby, including, without limitation, any letter of intent or commitment
letter.
15. COUNTERPARTS; HEADINGS. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but
which, when taken together, shall constitute but one instrument and shall
become effective as of the date hereof when copies hereof, which, when
taken together, bear the signatures of each of the parties hereto shall
have been signed. Headings in this Agreement are for purposes of reference
only and shall not limit or affect the meaning of the provisions hereof.
16. BINDING EFFECT. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
17. NONLIABILITY OF TRUSTEES, ETC. THE DECLARATION OF TRUST
ESTABLISHING HPT, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO
(THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY
AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HPT SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, HPT. ALL PERSONS DEALING WITH HPT, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF HPT FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
<PAGE>
IN WITNESS WHEREOF, HPT and ShoLodge have executed this Agreement
under seal as of the date above first written.
HOSPITALITY PROPERTIES TRUST
By:JOHN G. MURRAY
Its President
SHOLODGE, INC.
By:LEON MOORE
Its President
<PAGE>
EXHIBIT A
FORM OF LEASE
[See attached copy.]
<PAGE>
EXHIBIT B
FORM OF SECURITY AGREEMENT
[See attached copy.]
<PAGE>
EXHIBIT C
FORM OF FF&E PLEDGE
[See attached copy.]
<PAGE>
EXHIBIT D
FORM OF STOCK PLEDGE AGREEMENT
[See attached copy.]
<PAGE>
EXHIBIT E
FORM OF LIMITED GUARANTY AGREEMENT
[See attached copy.]
Exhibit 10.3
LEASE AGREEMENT
Dated as of ______ __, 1997
By and Between
_____ TRUST,
AS LANDLORD,
AND
______________________________,
AS TENANT
<PAGE>
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS...................................1
1.1 Accounting Period................................1
1.2 Additional Charges ..............................2
1.4 Affiliated Person ...............................2
1.5 Agreement .......................................2
1.6 Applicable Laws .................................2
1.7 Applicable Percentage ...........................2
1.8 Award ...........................................3
1.9 Base Total Hotel Sales ..........................3
1.10 Base Year ......................................3
1.11 Business Day ...................................4
1.12 Capital Addition ...............................4
1.13 Capital Expenditure ............................4
1.14 Claim ..........................................4
1.15 Code ...........................................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 ........................................5
1.22 Disbursement Rate ..............................5
1.23 Distribution ...................................5
1.24 Easement Agreement..............................5
1.25 Encumbrance.....................................5
1.26 Entity..........................................5
1.27 Environment ....................................5
1.28 Environmental Obligation .......................5
1.29 Environmental Notice ...........................5
1.30 Event of Default ...............................5
1.31 Excess Total Hotel Sales........................6
1.32 Extended Terms .................................6
1.33 FF&E Estimate...................................6
1.34 FF&E Funded Amount..............................6
1.36 FF&E Reserve....................................6
1.37 Financial Officer's Certificate ................6
1.38 Fiscal Year ....................................6
1.39 Fixed Term .....................................6
1.40 Fixtures .......................................6
1.41 GAAP ...........................................6
1.42 Government Agencies.............................7
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1.43 Ground Lease ...................................7
1.45 Hazardous Substances ...........................7
1.46 Hotel ..........................................8
1.47 Hotel Mortgage .................................8
1.48 Hotel Mortgagee ................................8
1.49 Immediate Family................................8
1.50 Impositions ....................................8
1.51 Incidental Documents ...........................9
1.52 Indebtedness ...................................9
1.53 Insurance Requirements .........................9
1.54 Interest Rate...................................9
1.55 Land ..........................................10
1.56 Landlord ......................................10
1.57 Landlord Liens.................................10
1.58 Lease Year ....................................10
1.59 Leased Improvements ...........................10
1.60 Leased Intangible Property ....................10
1.61 Leased Personal Property ......................10
1.62 Leased Property ...............................10
1.63 Legal Requirements ............................10
1.64 Lien ..........................................11
1.65 Management Agreement ..........................11
1.66 Manager .......................................11
1.67 Minimum Rent ..................................11
1.68 Net Worth .....................................11
1.70 Officer's Certificate .........................11
1.71 Overdue Rate ..................................11
1.72 Parent.........................................11
1.73 Permitted Encumbrances ........................12
1.74 Permitted Liens ...............................12
1.75 Permitted Use .................................12
1.76 Person ........................................12
1.77 Property.......................................12
1.78 Purchase Agreement.............................12
1.79 Records .......................................12
1.80 Rent ..........................................12
1.81 Retained Funds.................................12
1.83 Security Agreement.............................12
1.84 ShoLodge.......................................13
1.85 State .........................................13
1.86 Stock Pledge Agreement ........................13
1.87 Subordinated Creditor .........................13
1.88 Subordination Agreement .......................13
1.89 Subsidiary ....................................13
1.90 Successor Landlord ............................13
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1.91 Tampa Renovation ..............................13
1.92 Tenant ........................................13
1.93 Tenant's Personal Property ....................13
1.94 Term ..........................................14
1.95 Total Hotel Sales..............................14
1.96 Uniform System of Accounts ....................14
1.97 Unsuitable for Its Permitted Use ..............14
1.98 Work ..........................................15
ARTICLE 2: LEASED PROPERTY AND TERM.....................15
2.1 Leased Property.................................15
2.2 Condition of Leased Property....................16
2.3 Fixed Term......................................17
2.4 Extended Term...................................17
ARTICLE 3: RENT...............................................17
3.1 Rent............................................17
3.1.1 Minimum Rent..............................18
3.1.2 Additional Rent...........................18
3.1.3 Additional Charges........................21
3.2 Late Payment of Rent, Etc.......................22
3.3 Net Lease.......................................23
3.4 No Termination, Abatement, Etc..................23
3.5 Retained Funds..................................24
ARTICLE 4 USE OF THE LEASED PROPERTY....................25
4.1 Permitted Use...................................25
4.1.1 Permitted Use.............................25
4.1.2 Necessary Approvals.......................26
4.1.3 Lawful Use, Etc...........................26
4.2 Compliance with Legal/Insurance Requirements,
Etc..............................................26
4.3 Environmental Matters...........................27
4.3.1 Restriction on Use, Etc...................27
4.3.2 Indemnification of Landlord...............27
4.3.3 Survival..................................28
ARTICLE 5: MAINTENANCE AND REPAIRS......................29
5.1 Maintenance and Repair..........................29
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5.1.1 Tenant's General Obligations..............29
5.1.2 FF&E Reserve..............................29
5.1.3 Landlord's Obligations....................31
5.1.4 Nonresponsibility of Landlord, Etc........32
5.2 Tenant's Personal Property......................32
5.3 Yield Up........................................33
5.4 Management Agreement............................33
ARTICLE 6: IMPROVEMENTS, ETC............................34
6.1 Improvements to the Leased Property. ..........34
6.2 Salvage.........................................35
ARTICLE 7: LIENS........................................35
7.1 Liens...........................................35
7.2 Landlord's Lien.................................35
ARTICLE 8: PERMITTED CONTESTS...........................36
ARTICLE 9: INSURANCE AND INDEMNIFICATION................37
9.1 General Insurance Requirements..................37
9.2 Replacement Cost................................38
9.3 Waiver of Subrogation...........................38
9.4 Form Satisfactory, Etc..........................39
9.5 Blanket Policy..................................39
9.6 No Separate Insurance...........................39
9.7 Indemnification of Landlord.....................40
ARTICLE 10: CASUALTY....................................40
10.1 Insurance Proceeds.............................40
10.2 Damage or Destruction..........................41
10.2.1 Damage or Destruction of Leased
Property.........................................41
10.2.2 Partial Damage or Destruction............41
10.2.3 Insufficient Insurance Proceeds..........41
10.2.4 Disbursement of Proceeds.................42
10.3 Damage Near End of Term........................43
10.4 Tenant's Property..............................43
10.5 Restoration of Tenant's Property...............43
10.6 No Abatement of Rent...........................44
10.7 Waiver.........................................44
<PAGE>
ARTICLE 11: CONDEMNATION................................44
11.1 Total Condemnation, Etc........................44
11.2 Partial Condemnation...........................44
11.3 Abatement of Rent..............................46
11.4 Temporary Condemnation.........................46
11.5 Condemnation Near End of Term..................46
11.6 Allocation of Award............................46
ARTICLE 12: DEFAULTS AND REMEDIES.......................47
12.1 Events of Default..............................47
12.2 Remedies.......................................49
12.3 Tenant's Waiver................................51
12.4 Application of Funds...........................51
12.5 Landlord's Right to Cure Tenant's Default......51
ARTICLE 13: HOLDING OVER................................52
ARTICLE 14: LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT52
14.1 Landlord Notice Obligation.....................52
14.2 Landlord's Default.............................52
14.3 Indemnification of Tenant......................53
ARTICLE 15: PURCHASE RIGHTS.............................54
ARTICLE 16: SUBLETTING AND ASSIGNMENT...................54
16.1 Subletting and Assignment......................54
16.2 Required Sublease Provisions...................55
16.3 Permitted Sublease.............................56
16.4 Sublease Limitation............................57
ARTICLE 17: ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS....57
17.1 Estoppel Certificates..........................57
17.2 Financial Statements...........................57
ARTICLE 18: LANDLORD'S RIGHT TO INSPECT.................58
ARTICLE 19: EASEMENTS...................................59
<PAGE>
19.1 Grant of Easements.............................59
19.2 Exercise of Rights by Tenant...................59
19.3 Permitted Encumbrances.........................59
ARTICLE 20: HOTEL MORTGAGES.............................59
20.1 Landlord May Grant Liens.......................59
20.2 Subordination of Lease.........................60
20.3 Notice to Mortgagee and Superior Landlord......61
ARTICLE 21: ADDITIONAL COVENANTS OF TENANT..............62
21.1 Prompt Payment of Indebtedness.................62
21.2 Conduct of Business............................62
21.3 Maintenance of Accounts and Records............62
21.4 Notice of Litigation, Etc......................62
21.5 Indebtedness of Tenant.........................63
21.6 Financial Condition of Tenant..................64
21.7 Distributions, Payments to Affiliated Persons,
Etc.............................................64
21.8 Prohibited Transactions........................64
21.9 Liens and Encumbrances.........................64
21.10 Merger; Sale of Assets; Etc...................64
ARTICLE 22: MISCELLANEOUS...............................65
22.1 Limitation on Payment of Rent..................65
22.2 No Waiver......................................65
22.3 Remedies Cumulative............................65
22.4 Severability...................................66
22.5 Acceptance of Surrender........................66
22.6 No Merger of Title.............................66
22.7 Conveyance by Landlord.........................66
22.8 Quiet Enjoyment................................67
22.9 Memorandum of Lease............................67
22.10 Notices.......................................67
22.11 Trade Area Restriction........................68
22.12 Construction..................................69
22.13 Counterparts; Headings........................69
22.14 Applicable Law, Etc...........................69
22.15 Right to Make Agreement.......................70
22.16 Nonrecourse...................................70
22.17 Attorneys' Fees...............................70
22.18 Nonliability of Trustees......................70
<PAGE>
EXHIBITS
A-1 through A-14 - The Land
B - Restricted Trade Area
C - Allocation of Minimum Rent
D - Tampa Renovation Plans and Budget
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this ___ day of _________,
1997, by and between _____, a Maryland real estate investment trust, as
landlord ("LANDLORD"), and _________________, a ____________ corporation,
as tenant ("TENANT").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Leased Property (this
and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in ARTICLE 1) described in EXHIBIT A-1
THROUGH A-13 and holds the tenant's interest under the Ground Lease with
respect to the Property described in EXHIBIT A-14; 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.
1.3 "ACCOUNTING PERIOD" shall mean each four (4) week accounting
period of Tenant, except that an Accounting Period may, from time to time,
include five (5) weeks in order to conform Tenant's accounting system to
Tenant's Fiscal Year.
1.2 "ADDITIONAL CHARGES" shall have the meaning given such term in
SECTION 3.1.3.
1.3 "ADDITIONAL RENT" shall have the meaning given such term in
SECTION 3.1.2(A).
<PAGE>
1.4 "AFFILIATED PERSON" shall mean, with respect to any Person, (a)
in the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited
liability company, any member of such company, (c) any other Person which
is a Parent, a Subsidiary, or a Subsidiary of a Parent with respect to such
Person or to one or more of the Persons referred to in the preceding
clauses (a) and (b), (d) any other Person who is an officer, director,
trustee or employee of, or partner in or member of, such Person or any
Person referred to in the preceding clauses (a), (b) and (c), and (e) any
other Person who is a member of the Immediate Family of such Person or of
any Person referred to in the preceding clauses (a) through (d).
1.5 "AGREEMENT" shall mean this Lease Agreement, including EXHIBITS
A-1 THROUGH A-14, B AND C hereto, as it and they may be amended from time
to time as herein provided.
1.6 "APPLICABLE LAWS" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from
time to time in existence, of all courts of competent jurisdiction and
Government Agencies, and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to injury to, or the protection of, real or
personal property or human health or the Environment, including, without
limitation, all valid and lawful requirements of courts and other
Government Agencies pertaining to reporting, licensing, permitting,
investigation, remediation and removal of underground improvements
(including, without limitation, treatment or storage tanks, or water, gas
or oil wells), or emissions, discharges, releases or threatened releases of
Hazardous Substances, chemical substances, pesticides, petroleum or
petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature,
into the Environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances, underground improvements (including, without
limitation, treatment or storage tanks, or water, gas or oil wells), or
pollutants, contaminants or hazardous or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature.
1.7 "APPLICABLE PERCENTAGE" shall mean (a) three percent (3%) with
respect to the 1998 Fiscal Year; (b) four percent (4%) with respect to the
1999 Fiscal Year; and (c) five percent (5%) with respect to each Fiscal
Year thereafter during the Term.
1.8 "AWARD" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert
witness fees, incurred by Landlord, in connection with obtaining any such
award).
1.9 "BASE TOTAL HOTEL SALES" shall mean Total Hotel Sales for the
Base Year; PROVIDED, HOWEVER, that in the event that, with respect to any
Lease Year, or portion thereof, for any reason (including, without
limitation, a casualty or Condemnation) there shall be a reduction of five
percent (5%) or more in the number of rooms at any Hotel or a change in the
services provided at any Hotel (including, without limitation, if
applicable, the closing of restaurants or the discontinuation of food or
<PAGE>
beverage services) from the number of rooms or the services provided during
the Base Year, in determining Additional Rent payable with respect to such
Lease Year, Base Total Hotel Sales shall be reduced as follows: (a) in the
event of the termination of this Lease with respect to any Property
pursuant to ARTICLE 10, 11 OR 12, all Total Hotel Sales attributable to
such Property during the Base Year shall be subtracted from Base Total
Hotel Sales, appropriately prorated based on time elapsed if such
termination occurs on a date other than the first day of any Fiscal Year;
(b) in the event of a complete closing of a Hotel, all Total Hotel Sales
attributable to such Hotel during the Base Year shall be subtracted from
Base Total Hotel Sales throughout the period of such closing; (c) in the
event of a partial closing of a Hotel affecting five percent (5%) or more
of the guest rooms in such Hotel, Total Hotel Sales attributable to guest
room occupancy or guest room services at such Hotel during the Base Year
shall be ratably allocated among all guest rooms in service at such Hotel
during the Base Year and all such Total Hotel Sales attributable to rooms
no longer in service shall be subtracted from Base Total Hotel Sales
throughout the period of such closing; (d) in the event of a closing of a
restaurant, all Total Hotel Sales attributable to such restaurant during
the Base Year shall be subtracted from Base Total Hotel Sales throughout
the period of such closing; and (e) in the event of any other change in
circumstances affecting any Hotel, Base Total Hotel Sales shall be
equitably adjusted in such manner as Landlord and Tenant shall reasonably
agree.
1.10 "BASE YEAR" shall mean the 1998 Fiscal Year with respect to all
of the Properties other than those located in Arizona and the thirteen
Accounting Periods commencing July 13, 1998 with respect to the Properties
located in Arizona.
1.11 "BUSINESS DAY" shall mean any day other than Saturday, Sunday,
or any other day on which banking institutions in The Commonwealth of
Massachusetts or the State of New York are authorized by law or executive
action to close.
1.12 "CAPITAL ADDITION" shall mean any renovation, repair or
improvement to the Leased Property (or portion thereof), the cost of which
constitutes a Capital Expenditure.
1.13 "CAPITAL EXPENDITURE" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.14 "CLAIM" shall have the meaning given such term in ARTICLE 8.
1.15 "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.
1.16 "COMMENCEMENT DATE" shall mean the date of this Agreement.
1.17 "CONDEMNATION" shall mean, with respect to any Property, (a) the
exercise of any governmental power with respect to such Property, whether
by legal proceedings or otherwise, by a Condemnor of its power of
condemnation, (b) a voluntary sale or transfer of such Property by Landlord
to any Condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending, or (c) a taking or voluntary
<PAGE>
conveyance of all or part of such Property, or any interest therein, or
right accruing thereto or use thereof, as the result or in settlement of
any condemnation or other eminent domain proceeding affecting such
Property, whether or not the same shall have actually been commenced.
1.18 "CONDEMNOR" shall mean any public or quasi-public Person, having
the power of Condemnation.
1.19 "CONSOLIDATED FINANCIALS" shall mean, for any Fiscal Year or
other accounting period of ShoLodge, annual audited and quarterly unaudited
financial statements of ShoLodge prepared on a consolidated basis,
including ShoLodge's consolidated balance sheet and the related statements
of income and cash flows, all in reasonable detail, and setting forth in
comparative form the corresponding figures for the corresponding period in
the preceding Fiscal Year, and prepared in accordance with GAAP throughout
the periods reflected.
1.20 "DATE OF TAKING" shall mean, with respect to any Property, the
date the Condemnor has the right to possession of such Property, or any
portion thereof, in connection with a Condemnation.
1.21 "DEFAULT" shall mean any event or condition which with the
giving of notice and/or lapse of time would ripen into an Event of Default.
1.22 "DISBURSEMENT RATE" shall mean an annual rate of interest, as of
the date of determination, equal to the greater of (i) the Interest Rate
and (ii) the per annum rate for fifteen (15) year U.S. Treasury Obligations
as published in THE WALL STREET JOURNAL plus three hundred fifty (350)
basis points.
1.23 "DISTRIBUTION" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in
respect of any shares of any class of capital stock of Tenant, (b) any
purchase, redemption, retirement or other acquisition of any shares of any
class of capital stock of a corporation, (c) any other distribution on or
in respect of any shares of any class of capital stock of a corporation or
(d) any return of capital to shareholders.
1.24 "EASEMENT AGREEMENT" shall mean any conditions, covenants and
restrictions, easements, declarations, licenses and other agreements which
are Permitted Encumbrances and such other agreements as may be granted in
accordance with SECTION 19.1.
1.25 "ENCUMBRANCE" shall have the meaning given such term in SECTION
20.1.
1.26 "ENTITY" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust
company, land trust, business trust, cooperative, any government or agency,
authority or political subdivision thereof or any other entity.
<PAGE>
1.27 "ENVIRONMENT" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
1.28 "ENVIRONMENTAL OBLIGATION" shall have the meaning given such
term in SECTION 4.3.1.
1.29 "ENVIRONMENTAL NOTICE" shall have the meaning given such term in
SECTION 4.3.1.
1.30 "EVENT OF DEFAULT" shall have the meaning given such term in
SECTION 12.1.
1.31 "EXCESS TOTAL HOTEL SALES" shall mean, with respect to any Lease
Year, or portion thereof, the amount of Total Hotel Sales for such Lease
Year, or portion thereof, in excess of Base Total Hotel Sales for the
equivalent period.
1.32 "EXTENDED TERMS" shall have the meaning given such term in
SECTION 2.4.
1.33 "FF&E ESTIMATE" shall have the meaning given such term in
SECTION 5.1.2(C).
1.34 "FF&E FUNDED AMOUNT" shall mean an amount equal to Five Hundred
Thousand Dollars less any amounts paid prior to the date hereof with
respect to the Tampa Renovation in accordance with EXHIBIT D and approved
by Landlord.
1.35 "FF&E PLEDGE" shall mean the Assignment and Security Agreement,
dated as of the date hereof, made by Tenant for the benefit of Landlord.
1.36 "FF&E RESERVE" shall have the meaning given such term in SECTION
5.1.2(A).
1.37 "FINANCIAL OFFICER'S CERTIFICATE" shall mean, as to any Person,
a certificate of the chief executive officer, chief financial officer or
chief accounting officer (or such officers' authorized designee) of such
Person, duly authorized, accompanying the financial statements required to
be delivered by such Person pursuant to SECTION 17.2, in which such officer
shall certify (a) that such statements have been properly prepared in
accordance with GAAP and are true, correct and complete in all material
respects and fairly present the consolidated financial condition of such
Person at and as of the dates thereof and the results of its and their
operations for the periods covered thereby, and (b), in the event that the
certifying party is an officer of Tenant and the certificate is being given
in such capacity, certify that no Event of Default has occurred and is
continuing hereunder.
1.38 "FISCAL YEAR" shall mean the 52 or 53 week period ending on the
last Sunday of each calendar year.
1.39 "FIXED TERM" shall have the meaning given such term in SECTION
2.3.
1.40 "FIXTURES" shall have the meaning given such term in SECTION
2.1(D).
<PAGE>
1.41 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.42 "GOVERNMENT AGENCIES" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning
and zoning), bureau, commission, department, office or instrumentality of
any nature whatsoever of any governmental or quasi-governmental unit of the
United States or any State or any county or any political subdivision of
any of the foregoing, whether now or hereafter in existence, having
jurisdiction over Tenant or the Leased Property or any portion thereof or
any Hotel operated thereon.
1.43 "GROUND LEASE" shall mean the Ground Lease, dated January 24,
1996, between Christian Chapel CME Church, as landlord, and Southeast Texas
Inns, Inc., as tenant, as amended from time to time.
1.44 "GUARANTY" shall mean the Limited Guaranty Agreement, dated the
date hereof, made by ShoLodge for the benefit of Landlord and Hospitality
Properties Trust.
1.45 "HAZARDOUS SUBSTANCES" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or
"contaminant" under any present or future federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ET SEQ.) and the Resource Conservation and
Recovery Act (42 U.S.C. section 6901 ET SEQ.) and the regulations
promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, any
state of the United States, or any political subdivision thereof; or
(d) the presence of which on the Leased Property, or any portion
thereof, causes or materially threatens to cause an unlawful nuisance upon
the Leased Property, or any portion thereof, or to adjacent properties or
poses or materially threatens to pose a hazard to the Leased Property, or
any portion thereof, or to the health or safety of persons on or about the
Leased Property, or any portion thereof; or
(e) without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated biphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
<PAGE>
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or
may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988.
1.46 "HOTEL" shall mean, with respect to any Property described on
EXHIBIT A-1 THROUGH A-14, the all suites hotel being operated on such
Property.
1.47 "HOTEL MORTGAGE" shall mean any Encumbrance placed upon the
Leased Property in accordance with ARTICLE 20.
1.48 "HOTEL MORTGAGEE" shall mean the holder of any Hotel Mortgage.
1.49 "IMMEDIATE FAMILY" shall mean, with respect to any individual,
such individual's spouse, parents, brothers, sisters, children (natural or
adopted), stepchildren, grandchildren, grandparents, parents-in-law,
brothers-in-law, sisters-in-law, nephews and nieces.
1.50 "IMPOSITIONS" shall mean collectively, all taxes (including,
without limitation, all taxes imposed under the laws of any State, as such
laws may be amended from time to time, and all ad valorem, sales and use,
or similar taxes as the same relate to or are imposed upon Landlord, Tenant
or the business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof),
water, sewer or other rents and charges, excises, tax levies, fees
(including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, or foreseen or unforeseen,
of every character in respect of the Leased Property or the business
conducted thereon by Tenant (including all interest and penalties thereon
due to any failure in payment by Tenant), which at any time prior to,
during or in respect of the Term hereof may be assessed or imposed on or in
respect of or be a lien upon (a) Landlord's interest in the Leased
Property, (b) the Leased Property or any part thereof or any rent therefrom
or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, or sales from, or activity conducted on,
or in connection with the Leased Property or the leasing or use of the
Leased Property or any part thereof by Tenant; PROVIDED, HOWEVER, that
nothing contained herein shall be construed to require Tenant to pay and
the term "Impositions" shall not include (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any
transfer fee (but excluding any mortgage or similar tax payable in
connection with a Hotel Mortgage) or other tax imposed with respect to the
sale, exchange or other disposition by Landlord of the Leased Property or
the proceeds thereof, (iv) any single business, gross receipts tax,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Landlord, (v) any interest or penalties imposed on Landlord as
a result of the failure of Landlord to file any return or report timely and
in the form prescribed by law or to pay any tax or imposition, except to
the extent such failure is a result of a breach by Tenant of its
obligations pursuant to SECTION 3.1.3, (vi) any impositions imposed on
Landlord that are a result of Landlord not being considered a "United
<PAGE>
States person" as defined in Section 7701(a)(30) of the Code, (vii) any
impositions that are enacted or adopted by their express terms as a
substitute for any tax that would not have been payable by Tenant pursuant
to the terms of this Agreement or (viii) any impositions imposed as a
result of a breach of covenant or representation by Landlord in any
agreement governing Landlord's conduct or operation or as a result of the
negligence or willful misconduct of Landlord.
1.51 "INCIDENTAL DOCUMENTS" shall mean the Guaranty, the Security
Agreement, the Stock Pledge Agreement and the FF&E Pledge.
1.52 "INDEBTEDNESS" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the
obligor's balance sheet as liabilities.
1.53 "INSURANCE REQUIREMENTS" shall mean all terms of any insurance
policy required by this Agreement and all requirements of the issuer of any
such policy and all orders, rules and regulations and any other
requirements of the National Board of Fire Underwriters (or any other body
exercising similar functions) binding upon Landlord, Tenant or the Leased
Property.
1.54 "INTEREST RATE" shall mean ten percent (10%) per annum.
1.55 "LAND" shall have the meaning given such term in SECTION 2.1(A).
1.56 "LANDLORD" shall have the meaning given such term in the
preambles to this Agreement and shall also include its permitted successors
and assigns.
1.57 "LANDLORD LIENS" shall mean liens on or against the Leased
Property or any payment of Rent (a) which result from any act of, or any
claim against, Landlord or any owner of a direct or indirect interest in
the Leased Property, or which result from any violation by Landlord of any
terms of this Agreement or the Purchase Agreement, or (b) which result from
liens in favor of any taxing authority by reason of any tax owed by
Landlord or any fee owner of a direct or indirect interest in the Leased
Property; PROVIDED, HOWEVER, that "LANDLORD LIEN" shall not include any
lien resulting from any tax for which Tenant is obligated to pay or
indemnify Landlord against until such time as Tenant shall have already
paid to or on behalf of Landlord the tax or the required indemnity with
respect to the same.
1.58 "LEASE YEAR" shall mean any Fiscal Year or portion thereof,
commencing with the 1998 Fiscal Year, during the Term.
1.59 "LEASED IMPROVEMENTS" shall have the meaning given such term in
SECTION 2.1(B).
1.60 "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,
<PAGE>
certificates of occupancy, operating permits, sign permits, development
rights and approvals, certificates, licenses, warranties and guarantees,
rights to deposits, trade names, service marks, telephone exchange numbers
identified with the Leased Property, and all other transferable intangible
property, miscellaneous rights, benefits and privileges of any kind or
character belonging to Landlord with respect to the Leased Property other
than liquor licenses.
1.61 "LEASED PERSONAL PROPERTY" shall have the meaning given such term
in SECTION 2.1(E).
1.62 "LEASED PROPERTY" shall have the meaning given such term in
SECTION 2.1.
1.63 "LEGAL REQUIREMENTS" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting the
Leased Property or the maintenance, construction, alteration or operation
thereof, whether now or hereafter enacted or in existence, including,
without limitation, (a) all permits, licenses, authorizations, certificates
and regulations necessary to operate any Property for its Permitted Use,
and (b) all covenants, agreements, restrictions and encumbrances contained
in any instruments at any time in force affecting any Property, including
those which may (i) require material repairs, modifications or alterations
in or to any Property or (ii) in any way materially and adversely affect
the use and enjoyment thereof, but excluding any requirements arising as a
result of Landlord's status as a real estate investment trust.
1.64 "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.
1.65 "MANAGEMENT AGREEMENT" shall mean any management agreement
entered into by Tenant with respect to all or any portion of the Leased
Property, together with all amendments, modifications and supplements
thereto.
1.66 "MANAGER" shall mean any manager under a Management Agreement.
1.67 "MINIMUM RENT" shall mean an amount equal to One Million Seventy-
Six Thousand Nine Hundred Twenty-Three Dollars ($1,076,923) per Accounting
Period.
1.68 "NET WORTH" shall mean the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with GAAP.
1.69 "NOTICE" shall mean a notice given in accordance with SECTION
22.10.
1.70 "OFFICER'S CERTIFICATE" shall mean a certificate signed by an
officer or other duly authorized individual of the certifying Entity duly
authorized by the board of directors or other governing body of the
certifying Entity.
<PAGE>
1.71 "OVERDUE RATE" shall mean, on any date, a PER ANNUM rate of
interest equal to the lesser of thirteen percent (13%) and the maximum rate
then permitted under applicable law.
1.72 "PARENT" shall mean, with respect to any Person, any Person which
owns directly, or indirectly through one or more Subsidiaries or Affiliated
Persons, fifty percent (50%) or more of the voting or beneficial interest
in, or otherwise has the right or power (whether by contract, through
ownership of securities or otherwise) to control, such Person.
1.73 "PERMITTED ENCUMBRANCES" shall mean, with respect to any
Property, all rights, restrictions, and easements of record set forth on
Schedule B to the applicable owner's or leasehold title insurance policy
issued to Landlord in connection with the transactions contemplated by the
Purchase Agreement with respect to such Property, plus any other
encumbrances as may be "Permitted Encumbrances" under the Purchase
Agreement or as may have been consented to in writing by Landlord and
Tenant from time to time.
1.74 "PERMITTED LIENS" shall mean any Liens granted in accordance with
SECTION 21.9(A).
1.75 "PERMITTED USE" shall mean, with respect to any Property, any use
of such Property permitted pursuant to SECTION 4.1.1.
1.76 "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.
1.77 "PROPERTY" shall have the meaning given such term in SECTION 2.1.
1.78 "PURCHASE AGREEMENT" shall mean the Purchase and Sale Agreement,
dated as of October __, 1997, by and between Hospitality Properties Trust
and ShoLodge and certain of its Subsidiaries, as it may be amended,
restated, supplemented or otherwise modified from time to time.
1.79 "RECORDS" shall have the meaning given such term in SECTION 7.2.
1.80 "RENT" shall mean, collectively, the Minimum Rent, Additional
Rent and Additional Charges.
1.81 "RETAINED FUNDS" shall mean a cash amount equal to Fourteen
Million Dollars ($14,000,000).
1.82 "SEC" shall mean the Securities and Exchange Commission.
1.83 "SECURITY AGREEMENT" shall mean the Security Agreement, dated as
of the date hereof, made by Tenant for the benefit of Landlord, as it may
be amended, restated, supplemented or otherwise modified from time to time.
<PAGE>
1.84 "SHOLODGE" shall mean ShoLodge, Inc., a Tennessee corporation,
its successors and assigns.
1.85 "STATE" shall mean, with respect to any Property, the state,
commonwealth or district in which the such Property is located.
1.86 "STOCK PLEDGE AGREEMENT" shall mean the Stock Pledge Agreement,
dated as of the date hereof, made by ShoLodge to Landlord with respect to
the stock of Tenant, as it may be amended, restated, supplemented or
otherwise modified from time to time.
1.87 "SUBORDINATED CREDITOR" shall mean any creditor of Tenant which
is a party to a Subordination Agreement in favor of Landlord.
1.88 "SUBORDINATION AGREEMENT" shall mean any agreement (and any
amendments thereto) executed by a Subordinated Creditor pursuant to which
the payment and performance of Tenant's obligations to such Subordinated
Creditor are subordinated to the payment and performance of Tenant's
obligations to Landlord under this Agreement.
1.89 "SUBSIDIARY" shall mean, with respect to any Person, any Entity
(a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, twenty percent (20%) or more of the voting or beneficial
interest or (b) which such Person otherwise has the right or power to
control (whether by contract, through ownership of securities or
otherwise).
1.90 "SUCCESSOR LANDLORD" shall have the meaning given such term in
SECTION 20.2.
1.91 "TAMPA RENOVATION" shall mean the renovation of the Hotel located
in Tampa, Florida in accordance with the plans and specifications and
budget therefor attached hereto as EXHIBIT D.
1.92 "TENANT" shall have the meaning given such term in the preambles
to this Agreement and shall also include its permitted successors and
assigns.
1.93 "TENANT'S PERSONAL PROPERTY" shall mean all motor vehicles and
consumable inventory and supplies, furniture, furnishings, movable walls
and partitions, equipment and machinery and all other tangible personal
property of Tenant, if any, acquired by Tenant on and after the date hereof
and located at the Leased Property or used in Tenant's business at the
Leased Property and all modifications, replacements, alterations and
additions to such personal property installed at the expense of Tenant,
other than any items included within the definition of Fixtures or Leased
Personal Property.
1.94 "TERM" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of
SECTION 2.4, unless sooner terminated pursuant to the provisions of this
Agreement.
<PAGE>
1.95 "TOTAL HOTEL SALES" shall mean, for each Fiscal Year during the
Term, all revenues and receipts of every kind derived by Tenant from
operating the Leased Property and parts thereof, including, but not limited
to: income (from both cash and credit transactions), after deductions for
bad debts, and discounts for prompt or cash payments and refunds, from
rental of rooms, stores, offices, meeting, exhibit or sales space of every
kind; license, lease and concession fees and rentals (not including gross
receipts of licensees, lessees and concessionaires); income from vending
machines; health club membership fees; food and beverage sales; wholesale
and retail sales of merchandise (other than proceeds from the sale of
furnishings, fixture and equipment no longer necessary to the operation of
any Hotel, which shall be deposited in the FF&E Reserve); service charges,
to the extent not distributed to the employees at any Hotel as gratuities;
and proceeds, if any, from business interruption or other loss of income
insurance; PROVIDED, HOWEVER, that Total Hotel Sales shall not include the
following: gratuities to or collected on behalf of Hotel employees;
federal, state or municipal excise, sales, use, occupancy or similar taxes
collected directly from patrons or guests or included as part of the sales
price of any goods or services; insurance proceeds (other than proceeds
from business interruption or other loss of income insurance); Award
proceeds (other than for a temporary Condemnation); any proceeds from any
sale of the Leased Property or from the refinancing of any debt encumbering
the Leased Property; proceeds from the disposition of furnishings, fixture
and equipment no longer necessary for the operation of any Hotel; interest
which accrues on amounts deposited in the FF&E Reserve; and any Retained
Funds and other advance deposits, until and unless the same are forfeited
to Tenant or applied for the purpose for which they were collected; and
interest income from any bank account or investment of Tenant.
1.96 "UNIFORM SYSTEM OF ACCOUNTS" shall mean A UNIFORM SYSTEM OF
ACCOUNTS FOR HOTELS, Eighth Revised Edition, 1986, as published by the
Hotel Association of New York City, as the same may be further revised from
time to time.
1.97 "UNSUITABLE FOR ITS PERMITTED USE" shall mean, with respect to
such Hotel, a state or condition of such Hotel such that (a) following any
damage or destruction involving a Hotel, such Hotel cannot be operated in
the good faith judgment of Tenant on a commercially practicable basis for
its Permitted Use and it cannot reasonably be expected to be restored to
substantially the same condition as existed immediately before such damage
or destruction, and as otherwise required by SECTION 10.2.4, within twelve
(12) months following such damage or destruction or such shorter period of
time as to which business interruption insurance is available to cover Rent
and other costs related to the applicable Property following such damage or
destruction, or (b) as the result of a partial taking by Condemnation, such
Hotel cannot be operated, in the good faith judgment of Tenant, on a
commercially practicable basis for its Permitted Use.
1.98 "WORK" shall have the meaning given such term in SECTION 10.2.4.
<PAGE>
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 LEASED PROPERTY. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from
Landlord all of Landlord's right, title and interest in and to all of the
following (each of items (a) through (g) below which, as of the
Commencement Date, relates to any single Hotel, a "PROPERTY" and,
collectively, the "LEASED PROPERTY"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in EXHIBIT A-1 THROUGH A-14, attached hereto and
made a part hereof (the "LAND");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site),
parking areas and roadways appurtenant to such buildings and structures
presently situated upon the Land (collectively, the "LEASED IMPROVEMENTS");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or incorporated into the
Leased Improvements, including, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which, to the
maximum extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Tenant's Personal Property (collectively,
the "FIXTURES");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other personal property
of any kind or description used or useful in Tenant's business on or in the
Leased Improvements, and located on or in the Leased Improvements, and all
modifications, replacements, alterations and additions to such personal
property, except items, if any, included within the category of Fixtures,
but specifically excluding all items included within the category of
Tenant's Personal Property (collectively, the "LEASED PERSONAL PROPERTY");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space in the Leased Improvements.
2.2 CONDITION OF LEASED PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
<PAGE>
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants,
conditions, restrictions, reservations, mineral leases, easements and other
matters of record or that are visible or apparent on the Leased Property,
all applicable Legal Requirements, the lien of any financing instruments,
mortgages and deeds of trust existing prior to the Commencement Date or
permitted by the terms of this Agreement, and such other matters which
would be disclosed by an inspection of the Leased Property and the record
title thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT
HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND
THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION
OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT
THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT
OF THE CONDITION OF THE LEASED PROPERTY. LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR
ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR
ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by
law, however, Landlord hereby assigns to Tenant all of Landlord's rights to
proceed against any predecessor in title for breaches of warranties or
representations or for latent defects in the Leased Property. Landlord
shall fully cooperate with Tenant in the prosecution of any such claims, in
Landlord's or Tenant's name, all at Tenant's sole cost and expense. Tenant
shall indemnify, defend, and hold harmless Landlord from and against any
loss, cost, damage or liability (including reasonable attorneys' fees)
incurred by Landlord in connection with such cooperation.
2.3 FIXED TERM. The initial term of this Agreement (the "FIXED
TERM") shall commence on the Commencement Date and shall expire January 31,
2008.
2.4 EXTENDED TERM. Provided that no Event of Default shall have
occurred and be continuing, the Term shall be automatically extended for
five (5) consecutive renewal terms of ten (10) years each (collectively,
the "EXTENDED TERMS"), unless Tenant shall give Landlord Notice, not later
than eighteen (18) months prior to the scheduled expiration of the then
current Term of this Agreement (Fixed or Extended, as the case may be),
that Tenant elects not so to extend the term of this Agreement.
Each Extended Term shall commence on the day succeeding the
expiration of the Fixed Term or the preceding Extended Term, as the case
may be. All of the terms, covenants and provisions of this Agreement shall
apply to each such Extended Term, except that Tenant shall have no right to
extend the Term beyond the expiration of the Extended Terms. If Tenant
shall give Notice that it elects not to extend the Term in accordance with
this SECTION 2.4, this Agreement shall automatically terminate at the end
of the Term then in effect and Tenant shall have no further option to
extend the Term of this Agreement. Otherwise, the extension of this
Agreement shall be automatically effected without the execution of any
additional documents; it being understood and agreed, however, that Tenant
<PAGE>
and Landlord shall execute such documents and agreements as either party
shall reasonably require to evidence the same.
ARTICLE 3
RENT
3.1 RENT. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private
debts, without offset, abatement, demand or deduction (unless otherwise
expressly provided in this Agreement), Minimum Rent and Additional Rent to
Landlord and Additional Charges to the party to whom such Additional
Charges are payable, during the Term. All payments to Landlord shall be
made by wire transfer of immediately available federal funds or by other
means acceptable to Landlord in its sole discretion. Rent for any partial
Accounting Period shall be prorated on a per diem basis.
3.1.1 MINIMUM RENT.
(a) PAYMENTS. Minimum Rent shall be paid in advance on the
first Business Day of each Accounting Period; PROVIDED, HOWEVER, that the
first payment of Minimum Rent shall be payable on the Commencement Date
(and, if applicable, such payment shall be prorated as provided in the last
sentence of the first paragraph of SECTION 3.1).
(b) ADJUSTMENTS OF MINIMUM RENT FOLLOWING DISBURSEMENTS
UNDER SECTIONS 5.1.3(B), 10.2.3 AND 11.2. Effective on the date of each
disbursement to pay for the cost of any repairs, maintenance, renovations
or replacements pursuant to SECTIONS 5.1.3(B), 10.2.3 OR 11.2, the annual
Minimum Rent shall be increased by a PER ANNUM amount equal to the
Disbursement Rate times the amount so disbursed. If any such disbursement
is made during any month on a day other than the first Business Day of an
Accounting Period, Tenant shall pay to Landlord on the first Business Day
of the immediately following Accounting Period (in addition to the amount
of Minimum Rent payable with respect to such Accounting Period, as adjusted
pursuant to this paragraph (b)) the amount by which Minimum Rent for the
preceding Accounting Period, as adjusted for such disbursement on a per
diem basis, exceeded the amount of Minimum Rent paid by Tenant for such
preceding Accounting Period.
(c) ADJUSTMENTS OF MINIMUM RENT FOLLOWING PARTIAL LEASE
TERMINATION. If this Lease shall terminate with respect to any Property
but less than all of the Leased Property, Minimum Rent shall be reduced by
the affected Property's allocable share of Minimum Rent as set forth in
EXHIBIT C.
3.1.2 ADDITIONAL RENT.
(a) AMOUNT. Tenant shall pay additional rent ("ADDITIONAL
RENT") with respect to each Lease Year beginning with the 1999 Lease Year,
in an amount, not less than zero, equal to eight percent (8%) of Excess
Total Hotel Sales.
<PAGE>
(b) ACCOUNTING PERIOD INSTALLMENTS. Installments of
Additional Rent for each Lease Year or portion thereof shall be calculated
and paid with respect to each Accounting Period in arrears on the first
Business Day of each Accounting Period, based on Total Hotel Sales for the
preceding year, together with an Officer's Certificate setting forth the
calculation of Additional Rent due and payable for such Accounting Period.
(c) RECONCILIATION OF ADDITIONAL RENT. On or before April
30, 1999, Tenant shall deliver to Landlord an Officer's Certificate setting
forth Total Hotel Sales for the Base Year (other than with respect to the
Hotels located in Tempe and Tucson), together with an audit thereof by
Deloitte & Touche LLP or another firm of independent certified public
accountants proposed by Tenant and approved by Landlord (which approval
shall not be unreasonably withheld, delayed or conditioned). On or before
November 15, 1999, Tenant shall deliver to Landlord an Officer's
Certificate setting forth Total Hotel Sales for the Base Year for the Tempe
and Tucson Properties, together with an audit thereof by Deloitte & Touche
LLP or another firm of independent certified public accountants proposed by
Tenant and approved by Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned). On or before April 30, of each year,
commencing April 30, 2000, Tenant shall deliver to Landlord an Officer's
Certificate setting forth the Total Hotel Sales for the preceding Lease
Year and the Additional Rent payable with respect to such Lease Year,
together with an audit thereof, by Deloitte & Touche LLP or another firm of
independent certified public accountants proposed by Tenant and approved by
Landlord (which approval shall not be unreasonably withheld, delayed or
conditioned).
If the annual Additional Rent for such preceding Lease Year as shown
in the Officer's Certificate exceeds the amount previously paid with
respect thereto by Tenant, Tenant shall pay such excess to Landlord at such
time as the Officer's Certificate is delivered, together with interest at
the Interest Rate, which interest shall accrue from the close of such
preceding Lease Year until the date that such certificate is required to be
delivered and, thereafter, such interest shall accrue at the Overdue Rate,
until the amount of such difference shall be paid or otherwise discharged.
If the annual Additional Rent for such preceding Lease Year as shown in the
Officer's Certificate is less than the amount previously paid with respect
thereto by Tenant, provided that no Event of Default shall have occurred
and be continuing, Landlord shall grant Tenant a credit against the Rent
next coming due in the amount of such difference, together with interest at
the Interest Rate, which interest shall accrue from the date of payment by
Tenant until the date such credit is applied or paid, as the case may be.
If such credit cannot be made because the Term has expired prior to
application in full thereof, provided no Event of Default has occurred and
is continuing, Landlord shall pay the unapplied balance of such credit to
Tenant, together with interest at the Interest Rate, which interest shall
accrue from the date of payment by Tenant until the date of payment by
Landlord.
(d) CONFIRMATION OF ADDITIONAL RENT. Tenant shall utilize,
or cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices and in accordance with
GAAP, which will accurately record all Total Hotel Sales and Tenant shall
<PAGE>
retain, for at least three (3) years after the expiration of each Lease
Year, reasonably adequate records conforming to such accounting system
showing all Total Hotel Sales for such Lease Year. Landlord, at its own
expense, except as provided hereinbelow, shall have the right, exercisable
by Notice to Tenant within one (1) year after receipt of the applicable
Officer's Certificate, by its accountants or representatives, to audit the
information set forth in the Officer's Certificate referred to in
subparagraph (c) above and, in connection with such audits, to examine
Tenant's books and records with respect thereto (including supporting data
and sales and excise tax returns). If any such audit discloses a
deficiency in the payment of Additional Rent and, either Tenant agrees with
the result of such audit or the matter is otherwise compromised with
Landlord, Tenant shall forthwith pay to Landlord the amount of the
deficiency, as finally agreed or determined, together with interest at the
Interest Rate, from the date such payment should have been made to the date
of payment thereof. If such deficiency, as agreed upon or compromised as
aforesaid, is more than five percent (5%) of Additional Rent paid by Tenant
for such Lease Year and, as a result, Landlord did not receive at least
ninety-five percent (95%) of the Additional Rent payable with respect to
such Lease Year, Tenant shall pay the reasonable cost of such audit and
examination. If any such audit discloses that Tenant paid more Additional
Rent for any Lease Year than was due hereunder, and either Landlord agrees
with the result of such audit or the matter is otherwise determined,
provided no Event of Default has occurred and is continuing, Landlord shall
grant Tenant a credit equal to the amount of such overpayment against the
Rent next coming due in the amount of such difference, as finally agreed or
determined, together with interest at the Interest Rate, which interest
shall accrue from the time of payment by Tenant until the date such credit
is applied or paid, as the case may be. If such a credit cannot be made
because the Term has expired before the credit can be applied in full,
provided no Event of Default has occurred and is continuing, Landlord shall
pay the unapplied balance of such credit to Tenant, together with interest
at the Interest Rate, which interest shall accrue from the date of payment
by Tenant until the date of payment from Landlord.
Any proprietary information obtained by Landlord with respect to
Tenant pursuant to the provisions of this Agreement shall be treated as
confidential, except that such information may be used, subject to
appropriate confidentiality safeguards, in any litigation between the
parties and except further that Landlord may disclose such information to
its prospective lenders, provided that Landlord shall direct and obtain the
agreement of such lenders to maintain such information as confidential.
The obligations of Tenant and Landlord contained in this SECTION 3.1.2
shall survive the expiration or earlier termination of this Agreement.
3.1.3 ADDITIONAL CHARGES. In addition to the Minimum Rent and
Additional Rent payable hereunder, Tenant shall pay to the appropriate
parties and discharge as and when due and payable the following
(collectively, "ADDITIONAL CHARGES"):
(a) IMPOSITIONS. Subject to ARTICLE 8 relating to
permitted contests, Tenant shall pay, or cause to be paid, all Impositions
before any fine, penalty, interest or cost (other than any opportunity cost
as a result of a failure to take advantage of any discount for early
payment) may be added for non-payment, such payments to be made directly to
the taxing authorities where feasible, and shall promptly, upon request,
furnish to Landlord copies of official receipts or other reasonably
satisfactory proof evidencing such payments. If any such Imposition may,
at the option of the taxpayer, lawfully be paid in installments (whether or
<PAGE>
not interest shall accrue on the unpaid balance of such Imposition), Tenant
may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Imposition) in installments and, in such event,
shall pay such installments during the Term as the same become due and
before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or
permitted by Applicable Law, prepare and file all tax returns and pay all
taxes due in respect of Landlord's net income, gross receipts, sales and
use, single business, transaction privilege, rent, ad valorem, franchise
taxes and taxes on its capital stock, and Tenant, at its expense, shall, to
the extent required or permitted by Applicable Laws and regulations,
prepare and file all other tax returns and reports in respect of any
Imposition as may be required by Government Agencies. Provided no Event of
Default shall have occurred and be continuing, if any refund shall be due
from any taxing authority in respect of any Imposition paid by Tenant, the
same shall be paid over to or retained by Tenant. Landlord and Tenant
shall, upon request of the other, provide such data as is maintained by the
party to whom the request is made with respect to the Leased Property as
may be necessary to prepare any required returns and reports. In the event
Government Agencies classify any property covered by this Agreement as
personal property, Tenant shall file all personal property tax returns in
such jurisdictions where it may legally so file. Each party shall, to the
extent it possesses the same, provide the other, upon request, with cost
and depreciation records necessary for filing returns for any property so
classified as personal property. Where Landlord is legally required to
file personal property tax returns for property covered by this Agreement,
Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to file a protest. All Impositions assessed
against such personal property shall be (irrespective of whether Landlord
or Tenant shall file the relevant return) paid by Tenant not later than the
last date on which the same may be made without interest or penalty,
subject to the provisions of ARTICLE 8.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has
knowledge; PROVIDED, HOWEVER, that Landlord's failure to give any
such notice shall in no way diminish Tenant's obligation hereunder to
pay such Impositions, unless such failure continues for more than
ninety (90) days after the date Landlord learned of such Imposition.
(b) UTILITY CHARGES. Tenant shall pay or cause to be paid
all charges for electricity, power, gas, oil, water and other utilities
used in connection with the Leased Property.
(c) INSURANCE PREMIUMS. Tenant shall pay or cause to be
paid all premiums for the insurance coverage required to be maintained
pursuant to ARTICLE 9.
(d) OTHER CHARGES. Tenant shall pay or cause to be paid
all other amounts, liabilities and obligations, including, without
limitation, ground rents and other sums payable under the Ground Lease and
all amounts payable under any equipment leases and all agreements to
indemnify Landlord under SECTIONS 4.3.2 AND 9.7.
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(e) REIMBURSEMENT FOR ADDITIONAL CHARGES. If Tenant pays
or causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon expiration
or sooner termination of this Agreement (other than termination by reason
of an Event of Default), Tenant may, within a reasonable time after the end
of the Term, provide Notice to Landlord of its estimate of such amounts.
Landlord shall promptly reimburse Tenant for all payments of such taxes and
other similar Additional Charges that are attributable to any period after
the Term of this Agreement.
3.2 LATE PAYMENT OF RENT, ETC. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional
Charges which are payable directly to Landlord) shall not be paid within
ten (10) days after its due date, Tenant shall pay Landlord, on demand, as
Additional Charges, a late charge (to the extent permitted by law) computed
at the Overdue Rate on the amount of such installment, from the due date of
such installment to the date of payment thereof. To the extent that Tenant
pays any Additional Charges directly to Landlord or any Hotel Mortgagee
pursuant to any requirement of this Agreement, Tenant shall be relieved of
its obligation to pay such Additional Charges to the Entity to which they
would otherwise be due. If any payments due from Landlord to Tenant shall
not be paid within ten (10) days after its due date, Landlord shall pay to
Tenant, on demand, a late charge (to the extent permitted by law) computed
at the Overdue Rate on the amount of such installment from the due date of
such installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional Charges
when due, Tenant shall promptly pay and discharge, as Additional Charges,
every fine, penalty, interest and cost which is added for non-payment or
late payment of such items. Landlord shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Agreement
or by statute or otherwise in the case of non-payment of the Additional
Charges as in the case of non-payment of the Minimum Rent and Additional
Rent.
3.3 NET LEASE. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments
or amounts of the Rent throughout the 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
<PAGE>
default) or breach of any warranty by Landlord under this Agreement or any
other agreement between Landlord and Tenant, or to which Landlord and
Tenant are parties; (d) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Landlord or any assignee or transferee of Landlord;
or (e) for any other cause whether similar or dissimilar to any of the
foregoing (other than a monetary default by Landlord); PROVIDED, HOWEVER,
that the foregoing shall not apply or be construed to restrict Tenant's
rights in the event of any act or omission by Landlord constituting
negligence or willful misconduct. Except as otherwise specifically
provided in this Agreement, Tenant hereby waives all rights arising from
any occurrence whatsoever, which may now or hereafter be conferred upon it
by law (a) to modify, surrender or terminate this Agreement or quit or
surrender the Leased Property or any portion thereof, or (b) which would
entitle Tenant to any abatement, reduction, suspension or deferment of the
Rent or other sums payable or other obligations to be performed by Tenant
hereunder. The obligations of Tenant hereunder shall be separate and
independent covenants and agreements, and the Rent and all other sums
payable by Tenant hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the
express provisions of this Agreement. In any instance where, after the
occurrence of an Event of Default, Landlord retains funds which, but for
the occurrence of such Event of Default, would be payable to Tenant,
Landlord shall refund such funds to Tenant to the extent the amount thereof
exceeds the amount necessary to compensate Landlord for any cost, loss or
damage incurred in connection with such Event of Default.
3.5 RETAINED FUNDS. Pursuant to the Purchase Agreement, Landlord is
holding the Retained Funds as security for the faithful observance and
performance by Tenant of all the terms, covenants and conditions of this
Lease by Tenant to be observed and performed. The Retained Funds shall not
be mortgaged, assigned, transferred or otherwise encumbered by Tenant or
any of its Affiliated Persons without the prior written consent of Landlord
and any such act on the part of Tenant or any of its Affiliated Persons
without first having obtained Landlord's consent shall be without force and
effect and shall not be binding upon Landlord.
If an Event of Default shall occur and be continuing, Landlord may,
at its option and without prejudice to any other remedy which Landlord may
have on account thereof, appropriate and apply the entire Retained Funds or
so much thereof as may be necessary to compensate Landlord toward the
payment of Rent or other sums or loss or damage sustained by Landlord due
to such breach on the part of Tenant. It is understood and agreed that the
Retained Funds are not to be considered as prepaid rent, nor shall damages
be limited to the amount of the Retained Funds. Provided no Event of
Default shall have occurred and be continuing, any unapplied balance of the
Retained Funds shall be paid to Tenant or its Affiliated Persons at the end
of the Term or, in the event of any early termination of this Lease with
respect to any Property, such portion thereof as is allocable to such
Property (as reasonably determined by Landlord) upon such termination.
Landlord shall have no obligation to pay interest on the Retained Funds and
shall have the right to commingle the same with Landlord's other funds. If
Landlord conveys Landlord's interest under this Lease, the Retained Funds,
or any part thereof not previously applied, shall be turned over by
Landlord to Landlord's grantee, and, if so turned over, Tenant, subject to
the provisions of SECTION 22.7, shall look solely to such grantee for
proper application of the Retained Funds in accordance with the terms of
<PAGE>
this SECTION 3.5 and the return thereof in accordance herewith. The holder
of a mortgage on the Leased Property shall not be responsible to Tenant for
the return or application of the Retained Funds, if it succeeds to the
position of Landlord hereunder, unless the Retained Funds shall have been
received in hand by such holder.
In the event of bankruptcy or other creditor-debtor proceedings
against Tenant, the Retained Funds shall be deemed to be applied first to
the payment of Rent and other charges due Landlord for all periods prior to
the filing of such proceedings.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 PERMITTED USE.
4.1.1 PERMITTED USE. (a) Tenant shall, at all times during the
Term, subject to temporary periods for the repair of damage caused by
casualty or Condemnation, continuously use and operate each Property as an
all suites hotel and any uses incidental thereto. Tenant shall not use or
permit to be used any Property or any portion thereof for any other use
without the prior written consent of Landlord, which approval shall not be
unreasonably withheld, delayed or conditioned. Tenant shall not change the
brand of the Hotels without Landlord's prior written consent, which consent
shall not be unreasonably withheld, delayed or conditioned, it being agreed
that, on the Commencement Date, the Hotels shall be operated under the
"Sumner Suites" brand. No use shall be made or permitted to be made of any
Property and no acts shall be done thereon which will cause the
cancellation of any insurance policy covering such Property or any part
thereof (unless another adequate policy is available), nor shall Tenant
sell or otherwise provide or permit to be kept, used or sold in or about
any Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required
to be carried hereunder, or fire underwriter's regulations. Tenant shall,
at its sole cost, comply with all Insurance Requirements.
(b) In the event that, in the reasonable determination of Tenant,
it shall no longer be economically practical to operate the Leased Property
as an all suites hotel, Tenant shall give Landlord Notice thereof, which
Notice shall set forth in reasonable detail the reasons therefor.
Thereafter, Landlord and Tenant shall negotiate in good faith to agree on
an alternative use for the Property or a replacement property therefor (in
which event the affected Leased Property shall be transferred to Tenant or
Tenant's designee), appropriate adjustments to the Additional Rent and
other related matters; PROVIDED, HOWEVER, in no such event shall the
Minimum Rent be reduced or abated.
4.1.2 NECESSARY APPROVALS. Tenant shall proceed with all due
diligence and exercise reasonable efforts to obtain and maintain all
<PAGE>
approvals necessary to use and operate, for its Permitted Use, each
Property and the Hotel located thereon under applicable law.
4.1.3 LAWFUL USE, ETC. Tenant shall not use or suffer or permit
the use of the Leased Property or Tenant's Personal Property, if any, for
any unlawful purpose. Tenant shall not, and shall direct the Manager not
to, commit or suffer to be committed any waste on any Property, or in any
Hotel, nor shall Tenant cause or permit any unlawful nuisance thereon or
therein. Tenant shall not, and shall direct the Manager not to, suffer nor
permit the Leased Property, or any portion thereof, to be used in such a
manner as (i) may materially and adversely impair Landlord's title thereto
or to any portion thereof, or (ii) may reasonably allow a claim or claims
for adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Property or any portion thereof.
4.2 COMPLIANCE WITH LEGAL/INSURANCE REQUIREMENTS, ETC. Subject to
the provisions of ARTICLE 8 AND SECTION 5.1.3(B), Tenant, at its sole
expense, shall (i) comply with all material Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance,
repair, alteration and restoration of the Leased Property and with the
terms and conditions of the Ground Lease and/or any sublease affecting the
Leased Property, (ii) perform all obligations of the landlord under any
sublease affecting the Leased Property and (iii) procure, maintain and
comply with all material licenses, and other authorizations and agreements
required for any use of the Leased Property and Tenant's Personal Property,
if any, then being made, and for the proper erection, installation,
operation and maintenance of the Leased Property or any part thereof.
4.3 ENVIRONMENTAL MATTERS.
4.3.1 RESTRICTION ON USE, ETC. During the Term and any other time
that Tenant shall be in possession of the Leased Property, Tenant shall not
store, spill upon, dispose of or transfer to or from the Leased Property
any Hazardous Substance, except in compliance with all Applicable Laws.
During the Term and any other time that Tenant shall be in possession of
the Leased Property, Tenant shall maintain (and shall direct the Manager to
maintain) the Leased Property at all times free of any Hazardous Substance
(except in compliance with all Applicable Laws). Tenant shall promptly:
(a) upon receipt of notice or knowledge and shall direct the Manager upon
receipt of notice or knowledge promptly to, notify Landlord in writing of
any material change in the nature or extent of Hazardous Substances at the
Leased Property, (b) transmit to Landlord a copy of any report which is
required to be filed with respect to the Leased Property pursuant to SARA
Title III or any other Applicable Law, (c) transmit to Landlord copies of
any citations, orders, notices or other governmental communications
received by Tenant or its agents or representatives with respect thereto
(collectively, "ENVIRONMENTAL NOTICE"), which Environmental Notice requires
a written response or any action to be taken and/or if such Environmental
Notice gives notice of and/or presents a material risk of any material
violation of any Applicable Law and/or presents a material risk of any
material cost, expense, loss or damage (an "ENVIRONMENTAL OBLIGATION"),
(d), subject to the provisions of ARTICLE 8, observe and comply with all
Applicable Laws relating to the use, maintenance and disposal of Hazardous
Substances and all orders or directives from any official, court or agency
of competent jurisdiction relating to the use or maintenance or requiring
the removal, treatment, containment or other disposition thereof, and (e)
subject to the provisions of ARTICLE 8, pay or otherwise dispose of any
fine, charge or Imposition related thereto.
If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Applicable Laws)
are discovered on the Leased Property, subject to Tenant's right to contest
the same in accordance with ARTICLE 8, Tenant shall take all actions and
incur any and all expenses, as are required by any Government Agency and by
Applicable Law, (i) to clean up and remove from and about the Leased
Property all Hazardous Substances thereon, (ii) to contain and prevent any
further release or threat of release of Hazardous Substances on or about
the Leased Property and (iii) to use good faith efforts to eliminate any
further release or threat of release of Hazardous Substances on or about
the Leased Property.
4.3.2 INDEMNIFICATION OF LANDLORD. Tenant shall protect, indemnify
and hold harmless Landlord and each Hotel Mortgagee, their trustees,
officers, agents, employees and beneficiaries, and any of their respective
successors or assigns with respect to this Agreement (collectively, the
"INDEMNITEES" and, individually, an "INDEMNITEE") for, from and against any
and all debts, liens, claims, causes of action, administrative orders or
notices, costs, fines, penalties or expenses (including, without
limitation, reasonable attorney's fees and expenses) imposed upon, incurred
by or asserted against any Indemnitee resulting from, either directly or
indirectly, the presence during the Term (or any other time Tenant shall be
in possession of the Leased Property) in, upon or under the soil or ground
water of the Leased Property or any properties surrounding the Leased
Property of any Hazardous Substances in violation of any Applicable Law or
otherwise, provided that any of the foregoing arises by reason of any
failure by Tenant or any Person claiming by, through or under Tenant to
perform or comply with any of the terms of this SECTION 4.3, except to the
extent the same arise from the acts or omissions of Landlord or any other
Indemnitee or during any period that Landlord or a Person designated by
Landlord (other than Tenant) is in possession of the Leased Property.
Tenant's duty herein includes, but is not limited to, costs associated with
personal injury or property damage claims as a result of the presence prior
to the expiration or sooner termination of the Term and the surrender of
the Leased Property to Landlord in accordance with the terms of this
Agreement of Hazardous Substances in, upon or under the soil or ground
water of the Leased Property in violation of any Applicable Law. Upon
Notice from Landlord and any other of the Indemnitees, Tenant shall
undertake the defense, at Tenant's sole cost and expense, of any
indemnification duties set forth herein, in which event, Tenant shall not
be liable for payment of any duplicative attorneys' fees incurred by any
Indemnitee.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage (including, without limitation,
reasonable attorneys' fees) reasonably incurred by Landlord and arising
from a failure of Tenant to observe and perform the requirements of this
SECTION 4.3, which amounts shall bear interest from the date ten (10)
Business Days after written demand therefor is given to Tenant until paid
by Tenant to Landlord at the Overdue Rate.
4.3.3 SURVIVAL. The provisions of this SECTION 4.3 shall survive
the expiration or sooner termination of this Agreement.
<PAGE>
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 MAINTENANCE AND REPAIR.
5.5.1 TENANT'S GENERAL OBLIGATIONS. Tenant shall, at its sole cost
and expense (except as expressly provided in SECTION 5.1.3(B)), keep the
Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto (and Tenant's Personal Property) in good order and repair,
reasonable wear and tear excepted (whether or not the need for such repairs
occurs as a result of Tenant's use, any prior use, the elements or the age
of the Leased Property or Tenant's Personal Property or any portion
thereof), and shall promptly make all necessary and appropriate repairs and
replacements thereto of every kind and nature, whether interior or
exterior, structural or nonstructural, ordinary or extraordinary, foreseen
or unforeseen or arising by reason of a condition existing prior to the
commencement of the Term (concealed or otherwise). All repairs shall be
made in a good, workmanlike manner, consistent with industry standards for
like hotels in like locales, in accordance with all applicable federal,
state and local statutes, ordinances, codes, rules and regulations relating
to any such work. Tenant shall not take or omit to take any action, the
taking or omission of which would materially and adversely impair the value
or the usefulness of the Leased Property or any material part thereof for
its Permitted Use. Tenant's obligations under this SECTION 5.1.1 shall be
limited in the event of any casualty or Condemnation as set forth in
SECTIONS 10.2 AND 11.2 and also as set forth in SECTION 5.1.3(B) and
Tenant's obligations with respect to Hazardous Substances are as set forth
in SECTION 4.3.
5.1.2 FF&E RESERVE.
(a) Upon execution of this Agreement, Tenant has
established a reserve account (the "FF&E RESERVE") in a bank designated by
Tenant and approved by Landlord. The purpose of the FF&E Reserve is to
cover the cost of:
(i) Replacements and renewals to any Hotel's
furnishings, fixtures and equipment;
(ii) Certain routine repairs and maintenance to any
Hotel building which are normally capitalized under GAAP such as exterior
and interior repainting, resurfacing building walls, floors, roofs and
parking areas, and replacing folding walls and the like; and
(iii)Major repairs, alterations, improvements, renewals
or replacements to any Hotel's buildings' structure, roof, or exterior
facade, or to its mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems.
Tenant agrees that it will, from time to time, execute such
reasonable documentation as may be requested by Landlord and any Hotel
<PAGE>
Mortgagee to assist Landlord and such Hotel Mortgagee in establishing
or perfecting the Hotel Mortgagee's security interest in Landlord's
residual interest in the funds which are in the FF&E Reserve;
PROVIDED, HOWEVER, that no such documentation shall contain any
amendment to or modification of any of the provisions of this
Agreement. It is acknowledged and agreed that, during the Term, funds
in the FF&E Reserve are the property of Tenant.
(b) Throughout the Term, Tenant shall transfer (within ten (10)
Business Days after the end of each Accounting Period during the Term) into
the FF&E Reserve an amount equal to the Applicable Percentage of Total
Hotel Sales for such Accounting Period. Together with the documentation
provided to Landlord pursuant to SECTION 3.1.2(C), Tenant shall deliver to
Landlord an Officer's Certificate setting forth the total amount of
deposits made to and expenditures from the FF&E Reserve for the preceding
Fiscal Year, together with a reconciliation of such expenditures with the
applicable FF&E Estimate.
(c) With respect to each Lease Year, Tenant shall prepare an
estimate (the "FF&E ESTIMATE") of FF&E Reserve expenditures necessary
during the ensuing Fiscal Year, and shall submit such FF&E Estimate to
Landlord, on or before December 1 of the preceding Lease Year, for its
review and approval, which approval shall not be unreasonably withheld,
delayed or conditioned. In the event that Landlord shall fail to respond
within thirty (30) days after receipt of the FF&E Estimate, such FF&E
Estimate shall be deemed approved by Landlord. All expenditures from the
FF&E Reserve shall be (as to both the amount of each such expenditure and
the timing thereof) both reasonable and necessary, given the objective that
the Hotels will be maintained and operated to a standard comparable to
competitive hotels. All amounts from the FF&E Reserve shall be paid to
Persons who are not Affiliated Persons of Tenant without mark-up or
allocated internal costs by Tenant or its Affiliated Persons except that
Tenant may use Affiliated Persons to provide goods and services if Landlord
has granted its prior written approval thereof or the cost is the lesser of
(x) the lowest of two competitive bids therefor submitted by non-Affiliated
Persons of Tenant and (y) fair market.
(d) Tenant shall, consistent with the FF&E Estimate approved by
Landlord, from time to time make expenditures from the FF&E Reserve as it
deems necessary provided that Tenant shall not materially deviate from the
FF&E Estimate approved by Landlord without the prior approval of Landlord,
which approval shall not be unreasonably withheld, delayed or conditioned,
except in the case of emergency where immediate action is necessary to
prevent imminent harm to person or property.
(e) Upon the expiration or sooner termination of this Agreement,
funds in the FF&E Reserve and all property purchased with funds from the
FF&E Reserve during the Term shall be paid, granted and assigned to
Landlord as Additional Charges.
(f) Upon execution of this Agreement, Tenant has deposited the
FF&E Funded Amount into the FF&E Reserve. Notwithstanding anything to the
contrary set forth in this SECTION 5.1.2, such funds may be used by Tenant
solely for the purpose of completing the Tampa Renovation in accordance
with EXHIBIT D, unless otherwise agreed by Landlord in writing.
<PAGE>
5.1.3 LANDLORD'S OBLIGATIONS.
(a) Except as otherwise expressly provided in this Agreement,
Landlord shall not, under any circumstances, be required to build or
rebuild any improvement on the Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, or to maintain the Leased
Property in any way. Except as otherwise expressly provided in this
Agreement, Tenant hereby waives, to the maximum extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law in
effect on the date hereof or hereafter enacted. Landlord shall have the
right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter existing.
(b) If, at any time, funds in the FF&E Reserve shall be
insufficient for necessary and permitted expenditures thereof or, pursuant
to the terms of this Agreement, Tenant is required to make any expenditures
in connection with any repair, maintenance or renovation with respect to
the Leased Property and the amount of such disbursements or expenditures
exceeds the amount on deposit in the FF&E Reserve or such repair,
maintenance or renovation is not a permitted expenditure from the FF&E
Reserve as described in SECTION 5.1.2(A)(I), (II) AND (III), Tenant may, at
its election, give Landlord Notice thereof, which Notice shall set forth,
in reasonable detail, the nature of the required repair, renovation or
replacement, the estimated cost thereof and such other information with
respect thereto as Landlord may reasonably require. Provided that no Event
of Default shall have occurred and be continuing and Tenant shall otherwise
comply with the applicable provisions of ARTICLE 6, Landlord shall, within
ten (10) Business Days after such Notice, subject to and in accordance with
the applicable provisions of ARTICLE 6, disburse such required funds to
Tenant (or, if Tenant shall so elect, directly to any other Person
performing the required work) and, upon such disbursement, the Minimum Rent
shall be adjusted as provided in SECTION 3.1.1(B); PROVIDED, HOWEVER, that,
in the event that Landlord shall elect not to disburse any funds pursuant
to this SECTION 5.1.3(B), Tenant's sole recourse shall be to elect not to
make the applicable repair, maintenance or renovation, and such failure
shall, except with respect to the Tampa Renovation, not be deemed a Default
or Event of Default. Tenant shall include a good faith projection of funds
required pursuant to this SECTION 5.1.3(B) in the FF&E Estimate.
5.1.4 NONRESPONSIBILITY OF LANDLORD, ETC. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting
with Tenant with respect to the Leased Property, or any part thereof, are
hereby charged with notice that liens on the Leased Property or on
Landlord's interest therein are expressly prohibited and that they must
look solely to Tenant to secure payment for any work done or material
furnished by Tenant or for any other purpose during the term of this
Agreement.
Nothing contained in this Agreement shall be deemed or construed in
any way as constituting the consent or request of Landlord, express or
implied, by inference or otherwise, to any contractor, subcontractor,
laborer or materialmen for the performance of any labor or the furnishing
of any materials for any alteration, addition, improvement or repair to the
Leased Property or any part thereof or as giving Tenant any right, power or
<PAGE>
authority to contract for or permit the rendering of any services or the
furnishing of any materials that would give rise to the filing of any lien
against the Leased Property or any part thereof nor to subject Landlord's
estate in the Leased Property or any part thereof to liability under any
mechanic's lien law of any State in any way, it being expressly understood
Landlord's estate shall not be subject to any such liability.
5.2 TENANT'S PERSONAL PROPERTY. Tenant shall provide and maintain
throughout the Term all such Tenant's Personal Property as shall be
necessary in order to operate in compliance with applicable material Legal
Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Permitted Use, and all of such
Tenant's Personal Property shall, upon the expiration or earlier
termination of this Agreement, become the property of Landlord. If, from
and after the Commencement Date, Tenant acquires an interest in any item of
tangible personal property (other than motor vehicles) on, or in connection
with, the Leased Property which belongs to anyone other than Tenant, Tenant
shall require the agreements permitting such use to provide that Landlord
or its designee may assume Tenant's rights and obligations under such
agreement upon the termination of this Agreement and the assumption of
management or operation of the Hotel by Landlord or its designee.
5.3 YIELD UP. Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate and surrender the Leased Property to
Landlord in substantially the same condition in which the Leased Property
was in on the Commencement Date, except as repaired, rebuilt, restored,
altered or added to as permitted or required by the provisions of this
Agreement, reasonable wear and tear excepted (and casualty damage and
Condemnation, in the event that this Agreement is terminated following a
casualty or Condemnation in accordance with ARTICLE 10 or ARTICLE 11
excepted), and except for repairs Tenant elects not to make pursuant to
SECTION 5.1.3(B).
In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith efforts to transfer to and cooperate with Landlord or Landlord's
nominee in connection with the processing of all applications for licenses,
operating permits and other governmental authorizations and all contracts,
including contracts with governmental or quasi-governmental Entities which
may be necessary for the use and operation of the Hotel as then operated.
If requested by Landlord, Tenant will direct the Manager to continue, or if
there is no Manager, Tenant shall continue to manage one or more of the
Hotels after the expiration of the Term and for up to one (1) year, on such
reasonable terms (which shall include a market rate management fee,
customary royalty for non-exclusive license to use the trademarks then
being used at the Leased Property and an agreement to reimburse the Manager
or Tenant, as the case may be, for its reasonable out-of-pocket costs and
expenses, and reasonable administrative costs), as Landlord shall
reasonably request.
5.4 MANAGEMENT AGREEMENT. Tenant shall not, without Landlord's prior
written consent (which consent shall not be unreasonably withheld, delayed
or conditioned), enter into, or amend or modify the provisions of any
Management Agreement. Any Management Agreement shall be subordinate to
<PAGE>
this Agreement and shall provide, INTER ALIA, that all amounts due from
Tenant to the Manager shall be subordinate to all amounts due from Tenant
to Landlord (provided that, as long as no Event of Default has occurred and
is continuing, Tenant may pay all amounts due to a Manager pursuant to a
Management Agreement) and for termination thereof, at Landlord's option,
upon the termination of this Agreement. Tenant shall not take any action,
grant any consent or permit any action under any Management Agreement which
might have a material adverse effect on Landlord, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld,
delayed or conditioned.
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 IMPROVEMENTS TO THE LEASED PROPERTY. Tenant shall not make,
construct or install any Capital Additions (other than Capital Additions of
the type described in SECTION 5.1.2(A)(II) or 5.1.2(A)(III) and approved
pursuant to SECTION 5.1.2(C)) without, in each instance, obtaining
Landlord's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned provided that (a) construction or
installation of the same would not adversely affect or violate any material
Legal Requirement or Insurance Requirement applicable to the Leased
Property and (b) Landlord shall have received an Officer's Certificate
certifying as to the satisfaction of the conditions set out in clause (a)
above; PROVIDED, HOWEVER, that no such consent shall be required in the
event immediate action is required to prevent imminent harm to person or
property. Prior to commencing construction of any Capital Addition, Tenant
shall submit to Landlord, in writing, a proposal setting forth, in
reasonable detail, any such proposed improvement and shall provide to
Landlord such plans and specifications, and such permits, licenses,
contracts and such other information concerning the same as Landlord may
reasonably request. Landlord shall have thirty (30) days to review all
materials submitted to Landlord in connection with any such proposal.
Failure of Landlord to respond to Tenant's proposal within such 30-day
period shall be deemed approval thereof. Without limiting the generality
of the foregoing, such proposal shall indicate the approximate projected
cost of constructing such proposed improvement and the use or uses to which
it will be put. No Capital Addition shall be made which would tie in or
connect any Leased Improvements with any other improvements on property
adjacent to the Leased Property (and not part of the Land) including,
without limitation, tie-ins of buildings or other structures or utilities.
Except as permitted herein, Tenant shall not finance the cost of any
construction of such improvement by the granting of a lien on or security
interest in the Leased Property or such improvement, or Tenant's interest
therein, without the prior written consent of Landlord, which consent may
be withheld by Landlord in Landlord's sole discretion. Any such
improvements shall, upon the expiration or sooner termination of this
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>
ARTICLE 7
LIENS
7.1 LIENS. Subject to ARTICLE 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or
claim upon the Leased Property or Tenant's leasehold interest therein or
any attachment, levy, claim or encumbrance in respect of the Rent, other
than (a) Permitted Encumbrances, (b) restrictions, liens and other
encumbrances which are consented to in writing by Landlord, (c) liens for
those taxes of Landlord which Tenant is not required to pay hereunder, (d)
subleases permitted by ARTICLE 16, (e) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (i) the
same are not yet due and payable, or (ii) are being contested in accordance
with ARTICLE 8, (f) liens of mechanics, laborers, materialmen, suppliers or
vendors incurred in the ordinary course of business that are not yet due
and payable or are for sums that are being contested in accordance with
ARTICLE 8, (g) any Hotel Mortgages or other liens which are the
responsibility of Landlord pursuant to the provisions of ARTICLE 20 and (h)
Landlord Liens and any other voluntary liens created by Landlord.
7.2 LANDLORD'S LIEN. In addition to any statutory landlord's lien
and in order to secure payment of the Rent and all other sums payable
hereunder by Tenant, and to secure payment of any loss, cost or damage
which Landlord may suffer by reason of Tenant's breach of this Agreement,
Tenant hereby grants unto Landlord, to the maximum extent permitted by
Applicable Law, a security interest in and an express contractual lien upon
Tenant's Personal Property (except motor vehicles and liquor licenses and
permits), and Tenant's interest in all ledger sheets, files, records,
documents and instruments (including, without limitation, computer
programs, tapes and related electronic data processing) relating to the
operation of the Hotels (the "RECORDS") and all proceeds therefrom, subject
to any Permitted Encumbrances; and such Tenant's Personal Property shall
not be removed from the Leased Property at any time when an Event of
Default has occurred and is continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in Tenant's Personal Property and the proceeds thereof in
accordance with the provisions of the applicable laws of the State. During
the continuance of an Event of Default, Tenant hereby grants Landlord an
irrevocable limited power of attorney, coupled with an interest, to execute
all such financing statements in Tenant's name, place and stead. The
security interest herein granted is in addition to any statutory lien for
the Rent.
<PAGE>
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental
Obligation, lien, attachment, levy, encumbrance, charge or claim
(collectively, "CLAIMS") as to the Leased Property, by appropriate legal
proceedings, conducted in good faith and with due diligence, provided that
(a) the foregoing shall in no way be construed as relieving, modifying or
extending Tenant's obligation to pay any Claims as finally determined, (b)
such contest shall not cause Landlord or Tenant to be in default under any
mortgage or deed of trust encumbering the Leased Property (Landlord
agreeing that any such mortgage or deed of trust shall permit Tenant to
exercise the rights granted pursuant to this ARTICLE 8) or any interest
therein or result in or reasonably be expected to result in a lien
attaching to the Leased Property (unless Tenant shall provide Landlord with
a bond or other assurance reasonably acceptable to Landlord with respect to
any such lien), (c) no part of the Leased Property nor any Rent therefrom
shall be in any immediate danger of sale, forfeiture, attachment or loss,
and (d) Tenant shall indemnify and hold harmless Landlord from and against
any cost, claim, damage, penalty or reasonable expense, including
reasonable attorneys' fees, incurred by Landlord in connection therewith or
as a result thereof. Landlord agrees to join in any such proceedings if
required legally to prosecute such contest, provided that Landlord shall
not thereby be subjected to any liability therefor (including, without
limitation, for the payment of any costs or expenses in connection
therewith) unless Tenant agrees by agreement in form and substance
reasonably satisfactory to Landlord, to assume and indemnify Landlord with
respect to the same. Tenant shall be entitled to any refund of any Claims
and such charges and penalties or interest thereon which have been paid by
Tenant or paid by Landlord to the extent that Landlord has been fully
reimbursed by Tenant. If Tenant shall fail (x) to pay or cause to be paid
any Claims when finally determined, (y) to provide reasonable security
therefor or (z) to prosecute or cause to be prosecuted any such contest
diligently and in good faith, Landlord may, upon reasonable notice to
Tenant (which notice shall not be required if Landlord shall reasonably
determine that the same is not practicable), pay such charges, together
with interest and penalties due with respect thereto, and Tenant shall
reimburse Landlord therefor, upon demand, as
Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 GENERAL INSURANCE REQUIREMENTS. Tenant shall, at all times
during the Term and at any other time Tenant shall be in possession of the
Leased Property, keep the Leased Property and all property located therein
or thereon, insured against the risks and in the amounts as follows and
shall maintain, with respect to each Property, the following insurance:
<PAGE>
(a) "All-risk" property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief, earthquake,
explosion of steam boilers, pressure vessels or other similar apparatus,
now or hereafter installed in the Hotel located at such Property, with the
usual extended coverage endorsements, in an amount equal to one hundred
percent (100%) of the then full Replacement Cost thereof (as defined in
SECTION 9.2);
(b) Business interruption insurance covering risk of loss during
the lesser of the first twelve (12) months of reconstruction or the actual
reconstruction period necessitated by the occurrence of any of the hazards
described in subparagraph (a) above, in such amounts as may be customary
for comparable properties in the area and in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer;
(c) Comprehensive general liability insurance, including bodily
injury and property damage in a form reasonably satisfactory to Landlord
(and including, without limitation, broad form contractual liability,
independent contractor's hazard and completed operations coverage) in an
amount not less than One Million Dollars ($1,000,000) per occurrence, Two
Million Dollars ($2,000,000) in the aggregate and umbrella coverage of all
such claims in an amount not less than Fifty Million Dollars ($50,000,000);
(d) Flood (if such Property is located in whole or in part
within an area identified as an area having special flood hazards and in
which flood insurance has been made available under the National Flood
Insurance Act of 1968, as amended, or the Flood Disaster Protection Act of
1973, as amended (or any successor acts thereto)) in such amounts as may be
customary for comparable properties in the area;
(e) Worker's compensation insurance coverage if required by
applicable law for all persons employed by Tenant on such Property with
statutory limits and otherwise with limits of and provisions in accordance
with the requirements of applicable local, State and federal law, and
employer's liability insurance as is customarily carried by similar
employers; and
(f) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Hotel Mortgagee and which is
customarily carried by comparable lodging properties in the area.
9.2 REPLACEMENT COST. "REPLACEMENT COST" as used herein, shall mean
the actual replacement cost of the property requiring replacement from time
to time, including an increased cost of construction endorsement, less
exclusions provided in the standard form of fire insurance policy. In the
event either party believes that the then full Replacement Cost has
increased or decreased at any time during the Term, such party, at its own
cost, shall have the right to have such full Replacement Cost redetermined
by an independent accredited appraiser approved by the other, which
approval shall not be unreasonably withheld or delayed. The party desiring
to have the full Replacement Cost so redetermined shall forthwith, on
receipt of such determination by such appraiser, give Notice thereof to the
other. The determination of such appraiser shall be final and binding on
the parties hereto until any subsequent determination under this SECTION
<PAGE>
9.2, and Tenant shall forthwith conform the amount of the insurance carried
to the amount so determined by the appraiser.
9.3 WAIVER OF SUBROGATION. Landlord and Tenant agree that (insofar
as and to the extent that such agreement may be effective without
invalidating or making it impossible to secure insurance coverage from
responsible insurance companies doing business in any State) with respect
to any property loss which is covered by insurance then being carried by
Landlord or Tenant, respectively, the party carrying such insurance and
suffering said loss releases the other of and from any and all claims with
respect to such loss; and they further agree that their respective
insurance companies shall have no right of subrogation against the other on
account thereof, even though extra premium may result therefrom. In the
event that any extra premium is payable by Tenant as a result of this
provision, Landlord shall not be liable for reimbursement to Tenant for
such extra premium.
9.4 FORM SATISFACTORY, ETC. All insurance policies and endorsements
required pursuant to this ARTICLE 9 shall be fully paid for, nonassessable
and be issued by insurance carriers authorized to do business in the State,
having a general policy holder's rating of no less than B++ in Best's
latest rating guide. All such policies described in SECTIONS 9.1(A)
THROUGH (D) shall include no deductible in excess of Two Hundred Fifty
Thousand Dollars ($250,000) (with the exception of insurance described in
SECTION 9.1(A) providing coverage for windstorm which may have a deductible
not exceeding five percent (5%) of the policy amount for such insurance or
such lesser amount as may be usual and customary in the insurance industry
for like properties) and, with the exception of the insurance described in
SECTIONS 9.1(E), shall name Landlord and any Hotel Mortgagee as additional
insureds, as their interests may appear. All loss adjustments shall be
payable as provided in ARTICLE 10, except that losses under SECTIONS 9.1(C)
AND (E) shall be payable directly to the party entitled thereto. Tenant
shall cause all insurance premiums to be paid and shall deliver policies or
certificates thereof to Landlord prior to their effective date (and, with
respect to any renewal policy, prior to the expiration of the existing
policy). All such policies shall provide Landlord (and any Hotel Mortgagee
if required by the same) thirty (30) days prior written notice of any
material change or cancellation of such policy. In the event Tenant shall
fail to effect such insurance as herein required, to pay the premiums
therefor or to deliver such policies or certificates to Landlord or any
Hotel Mortgagee at the times required, Landlord shall have the right, upon
Notice to Tenant, but not the obligation, to acquire such insurance and pay
the premiums therefor, which amounts shall be payable to Landlord, upon
demand, as Additional Charges, together with interest accrued thereon at
the Overdue Rate from the date such payment is made until (but excluding)
the date repaid.
9.5 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this ARTICLE 9, Tenant's obligation to maintain the insurance
herein required may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant, provided,
that (a) the coverage thereby afforded will not be reduced or diminished
from that which would exist under a separate policy meeting all other
requirements of this Agreement, and (b) the requirements of this ARTICLE 9
are otherwise satisfied. Without limiting the foregoing, the amounts of
insurance that are required to be maintained pursuant to SECTION 9.1 shall
<PAGE>
be on a Hotel by Hotel basis, and shall not be subject to an aggregate
limit, except for flood, earthquake and umbrella coverages.
9.6 NO SEPARATE INSURANCE. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with
that required by this ARTICLE 9, or increase the amount of any existing
insurance by securing an additional policy or additional policies, unless
all parties having an insurable interest in the subject matter of such
insurance, including Landlord and all Hotel Mortgagees, are included
therein as additional insureds and the loss is payable under such insurance
in the same manner as losses are payable under this Agreement. In the
event Tenant shall take out any such separate insurance or increase any of
the amounts of the then existing insurance, Tenant shall give Landlord
prompt Notice thereof.
9.7 INDEMNIFICATION OF LANDLORD. Notwithstanding the existence of
any insurance provided for herein and without regard to the policy limits
of any such insurance, Tenant shall protect, indemnify and hold harmless
Landlord for, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and reasonable expenses
(including, without limitation, reasonable attorneys' fees), to the maximum
extent permitted by law, imposed upon or incurred by or asserted against
Landlord by reason of: (a) any accident, injury to or death of persons or
loss of or damage to property occurring on or about the Leased Property or
adjoining sidewalks or rights of way, (b) any past, present or future use,
misuse, non-use, condition, management, maintenance or repair by Tenant or
anyone claiming under Tenant of the Leased Property or Tenant's Personal
Property or any litigation, proceeding or claim by governmental entities or
other third parties to which Landlord is made a party or participant
relating to the Leased Property or Tenant's Personal Property or such use,
misuse, non-use, condition, management, maintenance, or repair thereof
including, failure to perform obligations (other than Condemnation
proceedings) to which Landlord is made a party, (c) any Impositions that
are the obligations of Tenant to pay pursuant to the applicable provisions
of this Agreement, and (d) any failure on the part of Tenant or anyone
claiming under Tenant to perform or comply with any of the terms of this
Agreement. Tenant, at its expense, shall contest, resist and defend any
such claim, action or proceeding asserted or instituted against Landlord
(and shall not be responsible for any duplicative attorneys' fees incurred
by Landlord) or may compromise or otherwise dispose of the same, with
Landlord's prior written consent (which consent may not be unreasonably
withheld, delayed or conditioned). The obligations of Tenant under this
SECTION 9.7 are in addition to the obligations set forth in SECTION 4.3 and
shall survive the termination of this Agreement.
ARTICLE 10
CASUALTY
10.1 INSURANCE PROCEEDS. Except as provided in the last clause of
this sentence, all proceeds payable by reason of any loss or damage to any
Property, or any portion thereof, and insured under any policy of insurance
required by ARTICLE 9 (other than the proceeds of any business interruption
insurance) shall be paid directly to Landlord (subject to the provisions of
<PAGE>
SECTION 10.2) and all loss adjustments with respect to losses payable to
Landlord shall require the prior written consent of Landlord, which consent
shall not be unreasonably withheld, delayed or conditioned; PROVIDED,
HOWEVER, that, so long as no Event of Default shall have occurred and be
continuing, all such proceeds less than or equal to Five Hundred Thousand
Dollars ($500,000) shall be paid directly to Tenant and such losses may be
adjusted without Landlord's consent. If Tenant is required to reconstruct
or repair any Property as provided herein, such proceeds shall be paid out
by Landlord from time to time for the reasonable costs of reconstruction or
repair of such Property necessitated by such damage or destruction, subject
to and in accordance with the provisions of SECTION 10.2.4. Provided no
Default or Event of Default has occurred and is continuing, any excess
proceeds of insurance remaining after the completion of the restoration
shall be paid to Tenant. In the event that the provisions of SECTION
10.2.1 are applicable, the insurance proceeds shall be retained by the
party entitled thereto pursuant to SECTION 10.2.1.
10.2 DAMAGE OR DESTRUCTION.
10.2.1 DAMAGE OR DESTRUCTION OF LEASED PROPERTY.
If, during the Term, any Property shall be totally or partially destroyed
and the Hotel located thereon is thereby rendered Unsuitable for Its
Permitted Use, Tenant may, by the giving of Notice thereof to Landlord,
within ninety (90) days after the date of casualty, terminate this
Agreement with respect to such Property, in which event, Landlord shall be
entitled to retain the insurance proceeds payable on account of such
damage, except that Landlord shall pay to Tenant any net proceeds in excess
of the replacement cost of such Property reasonably allocable to the value
of Tenant's leasehold, Tenant's Personal Property and Capital Additions
paid for by Tenant.
10.2.2 PARTIAL DAMAGE OR DESTRUCTION. If, during the Term, any
Property shall be totally or partially destroyed but the Hotel is not
rendered Unsuitable for Its Permitted Use, Tenant shall promptly restore
such Hotel as provided in SECTION 10.2.4 unless this Agreement is
terminated as to such Hotel as provided in SECTION 10.2.3.
10.2.3 INSUFFICIENT INSURANCE PROCEEDS. If this Agreement is
not otherwise terminated pursuant to this ARTICLE 10 and the cost of the
repair or restoration of the applicable Property exceeds the amount of
insurance proceeds received by Landlord and Tenant pursuant to SECTION
9(A), (C), (D) OR, IF APPLICABLE, (F), Tenant shall give Landlord Notice
thereof which notice shall set forth in reasonable detail the nature of
such deficiency and whether Tenant shall pay and assume the amount of such
deficiency (Tenant having no obligation to do so, except that, if Tenant
shall elect to make such funds available, the same shall become an
irrevocable obligation of Tenant pursuant to this Agreement). In the event
Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at
Landlord's sole election by Notice to Tenant, given within sixty (60) days
after Tenant's notice of the deficiency, to elect to make available for
application to the cost of repair or restoration the amount of such
deficiency; PROVIDED, HOWEVER, in such event, upon any disbursement by
Landlord thereof, the Minimum Rent shall be adjusted as provided in SECTION
3.1.1(B). In the event that neither Landlord nor Tenant shall elect to
<PAGE>
make such deficiency available for restoration, either Landlord or Tenant
may terminate this Agreement with respect to the affected Property by
Notice to the other, whereupon, this Agreement shall terminate and
insurance proceeds shall be distributed as provided in SECTION 10.2.1. It
is expressly understood and agreed, however, that, notwithstanding anything
in this Agreement to the contrary, Tenant shall be strictly liable and
solely responsible for the amount of any deductible and shall, upon any
insurable loss, pay over the amount of such deductible to Landlord at the
time and in the manner herein provided for payment of the applicable
proceeds to Landlord.
10.2.4 DISBURSEMENT OF PROCEEDS. In the event Tenant is
required to restore any Property pursuant to SECTION 10.2 and this
Agreement is not terminated as to such Property pursuant to this ARTICLE
10, Tenant shall commence promptly and continue diligently to perform the
repair and restoration of such Property (hereinafter called the "WORK"), so
as to restore such Property in material compliance with all Legal
Requirements and so that such Property shall be, to the extent practicable,
substantially equivalent in value and general utility to its general
utility and value immediately prior to such damage or destruction. Subject
to the terms hereof, Landlord shall advance the insurance proceeds and any
additional amounts payable by Landlord pursuant to SECTION 10.2.3 or
otherwise deposited with Landlord to Tenant regularly during the repair and
restoration period so as to permit payment for the cost of any such
restoration and repair. Any such advances shall be made not more than
monthly within ten (10) Business Days after Tenant submits to Landlord a
written requisition and substantiation therefor on AIA Forms G702 and G703
(or on such other form or forms as may be reasonably acceptable to
Landlord). Landlord may, at its option, condition advancement of such
insurance proceeds and other amounts on (i) the absence of any Event of
Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned), (iii) general contractors' estimates,
(iv) architect's certificates, (v) unconditional lien waivers of general
contractors, if available, (vi) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required, (vii),
if Tenant has elected to advance deficiency funds pursuant to SECTION
10.2.3, Tenant depositing the amount thereof with Landlord and (viii) such
other certificates as Landlord may, from time to time, reasonably require.
Landlord's obligation to disburse insurance proceeds under this
ARTICLE 10 during the last two (2) years of the Term (including any
automatic renewals thereof) shall be subject to the release of such
proceeds by any Hotel Mortgagee to Landlord. If any Hotel Mortgagee shall
be unwilling to disburse insurance proceeds in accordance with the terms of
this Agreement, Tenant shall have the right, by the giving of Notice
thereof to Landlord within ten (10) Business Days after Tenant learns of
such unwillingness, to treat such Property as rendered Unsuitable for its
Permitted Use for purposes of SECTION 10.2.1. Tenant's obligation to
restore the applicable Property pursuant to this ARTICLE 10 shall be
subject to the release of available insurance proceeds by the applicable
Hotel Mortgagee to Landlord or directly to Tenant.
10.3 DAMAGE NEAR END OF TERM. Notwithstanding any provisions of
SECTION 10.1 OR 10.2 to the contrary, if damage to or destruction of any
Property occurs during the last two (2) years of the Term (including any
automatic Extended Terms) and if such damage or destruction cannot
reasonably be expected to be fully repaired and restored prior to the date
that is twelve (12) months prior to the end of the Term, the provisions of
<PAGE>
SECTION 10.2.1 shall apply as if such Property had been totally or
partially destroyed and the Hotel thereon rendered Unsuitable for its
Permitted Use.
10.4 TENANT'S PROPERTY. All insurance proceeds payable by reason of
any loss of or damage to any of Tenant's Personal Property shall be paid to
Tenant and, to the extent necessary to repair or replace Tenant's Personal
Property in accordance with SECTION 10.5, Tenant shall hold such proceeds
in trust to pay the cost of repairing or replacing damaged Tenant's
Personal Property.
10.5 RESTORATION OF TENANT'S PROPERTY. If Tenant is required to
restore any Property as hereinabove provided and this Agreement is not
terminated as to such Property pursuant to the terms of ARTICLE 10, Tenant
shall either (a) restore all alterations and improvements made by Tenant
and Tenant's Personal Property, or (b) replace such alterations and
improvements and Tenant's Personal Property with improvements or items of
the same or better quality and utility in the operation of such Property.
If Tenant is not required to restore and does not, in fact, restore, Tenant
shall pay over to Landlord the amount, if any, of insurance proceeds
received by Tenant with respect to any of Tenant's Personal Property which
was purchased with funds from the FF&E Reserve.
10.6 NO ABATEMENT OF RENT. Except as expressly provided herein, this
Agreement shall remain in full force and effect and Tenant's obligation to
make all payments of Rent and to pay all other charges as and when required
under this Agreement shall remain unabated during the Term notwithstanding
any damage involving the Leased Property (provided that Landlord shall
credit against such payments any amounts paid to Landlord as a consequence
of such damage under any business interruption insurance obtained by Tenant
hereunder). The provisions of this ARTICLE 10 shall be considered an
express agreement governing any cause of damage or destruction to the
Leased Property and, to the maximum extent permitted by law, no local or
State statute, laws, rules, regulation or ordinance in effect during the
Term which provide for such a contingency shall have any application in
such case.
10.7 WAIVER. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased
Property, or any portion thereof.
ARTICLE 11
CONDEMNATION
11.1 TOTAL CONDEMNATION, ETC. If either (i) the whole of any Property
shall be taken by Condemnation or (ii) a Condemnation of less than the
whole of any Property renders any Property Unsuitable for Its Permitted
Use, this Agreement shall terminate with respect to such Property, Tenant
and Landlord shall seek the Award for their interests in the applicable
Property as provided in SECTION 11.6 and, as the effective date of taking,
the Minimum Rent payable hereunder shall be reduced by such Property's
allocable share thereof as set forth in EXHIBIT C.
<PAGE>
11.2 PARTIAL CONDEMNATION. In the event of a Condemnation of less
than the whole of any Property such that such Property is still suitable
for its Permitted Use, Tenant shall commence promptly and continue
diligently to restore the untaken portion of the applicable Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly
as may be possible under the circumstances) as such Leased Improvements
existing immediately prior to such Condemnation, in material compliance
with all Legal Requirements, subject to and unless this Agreement is
terminated pursuant to the provisions of this SECTION 11.2. If the cost of
the repair or restoration of the affected Property exceeds the amount of
the Award, Tenant shall give Landlord Notice thereof which notice shall set
forth in reasonable detail the nature of such deficiency and whether Tenant
shall pay and assume the amount of such deficiency (Tenant having no
obligation to do so, except that if Tenant shall elect to make such funds
available, the same shall become an irrevocable obligation of Tenant
pursuant to this Agreement). In the event Tenant shall elect not to pay
and assume the amount of such deficiency, Landlord shall have the right
(but not the obligation), exercisable at Landlord's sole election by Notice
to Tenant given within sixty (60) days after Tenant's Notice of the
deficiency, to elect to make available for application to the cost of
repair or restoration the amount of such deficiency; PROVIDED, HOWEVER, in
such event, upon any disbursement by Landlord thereof, the Minimum Rent
shall be adjusted as provided in SECTION 3.1.1(B). In the event that
neither Landlord nor Tenant shall elect to make such deficiency available
for restoration, either Landlord or Tenant may terminate this Agreement
with respect to the affected Property and the entire Award shall be
allocated as set forth in SECTION 11.6.
Subject to the terms hereof, Landlord shall contribute to the cost of
restoration that part of the Award necessary to complete such repair or
restoration, together with severance and other damages awarded for the
taken Leased Improvements and any other amounts deposited with or payable
by Landlord, to Tenant regularly during the restoration period so as to
permit payment for the cost of such repair or restoration. Landlord may,
at its option, condition advancement of such Award and other amounts on (i)
the absence of any Event of Default, (ii) its approval of plans and
specifications of an architect satisfactory to Landlord (which approval
shall not be unreasonably withheld, delayed or conditioned), (iii) general
contractors' estimates, (iv) architect's certificates, (v) unconditional
lien waivers of general contractors, if available, (vi) evidence of
approval by all governmental authorities and other regulatory bodies whose
approval is required, (vii), if Tenant has elected to advance deficiency
funds pursuant to the preceding paragraph, Tenant depositing the amount
thereof with Landlord and (viii) such other certificates as Landlord may,
from time to time, reasonably require. Landlord's obligation under this
SECTION 11.2 to disburse the Award and such other amounts shall be subject
to (x) the collection thereof by Landlord and (y) during the last two (2)
years of the Term (including any exercised renewals thereof), the release
of such Award by the applicable Hotel Mortgagee. If any Hotel Mortgagee
shall be unwilling to disburse Award proceeds in accordance with the terms
of this Agreement, Tenant shall have the right, by the giving of Notice
thereof to Landlord within ten (10) Business Days after Tenant learns of
such unwillingness, to treat such Property as rendered Unsuitable for its
Permitted Use for purposes of SECTION 11.1. Tenant's obligation to restore
the Leased Property shall be subject to the release of the Award by the
applicable Hotel Mortgagee to Landlord or directly to Tenant.
<PAGE>
11.3 ABATEMENT OF RENT. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and
Tenant's obligation to make all payments of Rent and to pay all other
charges as and when required under this Agreement shall remain unabated
during the Term notwithstanding any Condemnation involving the Leased
Property, or any portion thereof. The provisions of this ARTICLE 11 shall
be considered an express agreement governing any Condemnation involving the
Leased Property and, to the maximum extent permitted by law, no local or
State statute, law, rule, regulation or ordinance in effect during the Term
which provides for such a contingency shall have any application in such
case.
11.4 TEMPORARY CONDEMNATION. In the event of any temporary
Condemnation of any Property or Tenant's interest therein, this Agreement
shall continue in full force and effect and Tenant shall continue to pay,
in the manner and on the terms herein specified, the full amount of the
Rent. Tenant shall continue to perform and observe all of the other terms
and conditions of this Agreement on the part of the Tenant to be performed
and observed. Provided no Event of Default has occurred and is continuing,
the entire amount of any Award made for such temporary Condemnation
allocable to the Term, whether paid by way of damages, rent or otherwise,
shall be paid to Tenant. Tenant shall, promptly upon the termination of
any such period of temporary Condemnation, at its sole cost and expense,
restore the Leased Property to the condition that existed immediately prior
to such Condemnation, in material compliance with all applicable Legal
Requirements, unless such period of temporary Condemnation shall extend
beyond the expiration of the Term, in which event Tenant shall not be
required to make such restoration.
11.5 CONDEMNATION NEAR END OF TERM. Notwithstanding any provisions of
SECTIONS 11.2 OR 11.3 to the contrary, if Condemnation of any Property
occurs during the last two (2) years of the Term (including any automatic
Extended Terms) and if restoration cannot reasonably be expected to be
completed prior to the date that is twelve (12) months prior to the end of
the Term, the provisions of SECTION 11.1 shall apply as if such Property
had been totally or partially taken and the Hotel thereon rendered
Unsuitable for its Permitted Use.
11.6 ALLOCATION OF AWARD. Except as provided in SECTION 11.4 and the
second sentence of this SECTION 11.6, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of
business during the remainder of the Term, the taking of Tenant's Personal
Property (other than any such property purchased with the FF&E Reserve),
the taking of Capital Additions paid for by Tenant and Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant.
In any Condemnation proceedings, Landlord and Tenant shall each seek its
own Award in conformity herewith, at its own expense.
<PAGE>
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT" hereunder:
(a) should Tenant fail to make any payment of the Rent or any
other sum (including, but not limited to, funding of the FF&E Reserve)
payable hereunder when due; or
(b) should Tenant fail to maintain the insurance coverages
required under ARTICLE 9 and such failure shall continue for ten (10)
Business Days after Notice thereof (except that no Notice shall be required
if any such insurance coverages shall have lapsed); or
(c) should Tenant default in the due observance or performance
of any of the terms, covenants or agreements contained herein to be
performed or observed by it (other than as specified in clauses (a) and (b)
above) and such default shall continue for a period of thirty (30) days
after Notice thereof from Landlord to Tenant; PROVIDED, HOWEVER, that if
such default is susceptible of cure but such cure cannot be accomplished
with due diligence within such period of time and if, in addition, Tenant
commences to cure or cause to be cured such default within thirty (30) days
after Notice thereof from Landlord and thereafter prosecutes the curing of
such default with all due diligence, such period of time shall be extended
to such period of time (not to exceed an additional one (1) year in the
aggregate) as may be necessary to cure such default with all due diligence;
or
(d) should any obligation of Tenant in excess of One Million
Dollars ($1,000,000) in respect of any Indebtedness for money borrowed or
for any material property or services, or any guaranty relating thereto, be
declared to be or become due and payable prior to the stated maturity
thereof, or should there occur and be continuing with respect to any such
Indebtedness any event of default under any instrument or agreement
evidencing or securing the same, the effect of which is to permit the
holder or holders of such instrument or agreement or a trustee, agent or
other representative on behalf of such holder or holders, to cause such any
such obligations to become due prior to its stated maturity; or
(e) should an event of default by ShoLodge or Tenant or any
Affiliated Person as to ShoLodge or Tenant occur and be continuing beyond
the expiration of any applicable cure period under any of the Incidental
Documents or by the ShoLodge Parties (as defined therein) under the
Purchase Agreement; or
(f) should any material representation or warranty made by
Tenant or the ShoLodge Parties (as defined in the Purchase Agreement) under
or in connection with this Agreement or any Incidental Document or, for the
period expiring on the first anniversary of the Commencement Date, the
Purchase Agreement, or in any document, certificate or agreement delivered
in connection herewith or therewith, prove to have been false or misleading
<PAGE>
in any material respect on the date when made or deemed made and the same
shall continue for five (5) Business Days after Notice thereof from
Landlord; or
(g) should Tenant generally not be paying its debts as they
become due or should Tenant make a general assignment for the benefit of
creditors; or
(h) should any petition be filed by or against Tenant under the
Federal bankruptcy laws, or should any other proceeding be instituted by or
against Tenant seeking to adjudicate Tenant a bankrupt or insolvent, or
seeking liquidation, reorganization, arrangement, adjustment or composition
of Tenant's debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for Tenant or for any substantial part of the property of
Tenant and such proceeding is not dismissed within one hundred eighty (180)
days after institution thereof; or
(i) should Tenant cause or institute any proceeding for its
dissolution or termination; or
(j) should the estate or interest of Tenant in the Leased
Property or any part thereof be levied upon or attached in any proceeding
and the same shall not be vacated or discharged within the later of (x) two
hundred seventy (270) days after commencement thereof, unless the amount in
dispute is less than $1,000,000, in which case Tenant shall give notice to
Landlord of the dispute but Tenant may defend in any suitable way, and (y)
two hundred seventy (270) days after receipt by Tenant of Notice thereof
from Landlord (unless Tenant shall be contesting such lien or attachment in
good faith in accordance with ARTICLE 8); or
(k) should Tenant at any time cease to be a wholly owned, direct
or indirect, Subsidiary of ShoLodge;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement with respect to any or all of
the Leased Property by giving Notice thereof to Tenant and upon the
expiration of the time, if any, fixed in such Notice, this Agreement shall
terminate with respect to all or the designated portion of the Leased
Property and all rights of Tenant under this Agreement with respect thereto
shall cease. Landlord shall have and may exercise all rights and remedies
available at law and in equity to Landlord as a result of Tenant's breach
of this Agreement.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Leased Property or
any portion thereof and take possession of any and all of Tenant's Personal
Property, if any, and the Records, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to
such taking of possession by Landlord) and sell the same at public or
private sale, after giving Tenant reasonable Notice of the time and place
of any public or private sale, at which sale Landlord or its assigns may
purchase all or any portion of Tenant's Personal Property, if any, unless
otherwise prohibited by law. Unless otherwise provided by law and without
intending to exclude any other manner of giving Tenant reasonable notice,
<PAGE>
the requirement of reasonable Notice shall be met if such Notice is given
at least ten (10) days before the date of sale. The proceeds from any such
disposition, less all expenses incurred in connection with the taking of
possession, holding and selling of such property (including, reasonable
attorneys' fees) shall be applied as a credit against the indebtedness
which is secured by the security interest granted in SECTION 7.2. Any
surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.
12.2 REMEDIES. None of (a) the termination of this Agreement pursuant
to SECTION 12.1, (b) the repossession of the Leased Property or any portion
thereof, (c) the failure of Landlord to re-let the Leased Property or any
portion thereof, nor (d) the reletting of all or any of portion of the
Leased Property, shall relieve Tenant of its liability and obligations
hereunder, all of which shall survive any such termination, repossession or
re-letting. In the event of any such termination, Tenant shall forthwith
pay to Landlord all Rent due and payable with respect to the Leased
Property through and including the date of such termination. Thereafter,
Tenant, until the end of what would have been the Term of this Agreement in
the absence of such termination, and whether or not the Leased Property or
any portion thereof shall have been re-let, shall be liable to Landlord
for, and shall pay to Landlord, as current damages, the Rent (Additional
Rent to be reasonably calculated by Landlord based on historical Total
Hotel Sales) and other charges which would be payable hereunder for the
remainder of the Term had such termination not occurred, less the net
proceeds, if any, of any re-letting of the Leased Property, after deducting
all reasonable expenses in connection with such reletting, including,
without limitation, all repossession costs, brokerage commissions, legal
expenses, attorneys' fees, advertising, expenses of employees, alteration
costs and expenses of preparation for such reletting. Tenant shall pay
such current damages to Landlord monthly on the days on which the Minimum
Rent would have been payable hereunder if this Agreement had not been so
terminated with respect to such of the Leased Property.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the
date of such termination, at Landlord's election, Tenant shall pay to
Landlord an amount equal to the present value (discounted at the Interest
Rate) of the excess, if any, of the Rent and other charges which would be
payable hereunder from the date of such termination (assuming that, for the
purposes of this paragraph, annual payments by Tenant on account of
Impositions and Additional Rent would be the same as payments required for
the immediately preceding twelve calendar months, or if less than twelve
calendar months have expired since the Commencement Date, the payments
required for such lesser period projected to an annual amount) for what
would be the then unexpired term of this Agreement if the same remained in
effect, over the fair market rental for the same period. Nothing contained
in this Agreement shall, however, limit or prejudice the right of Landlord
to prove and obtain in proceedings for bankruptcy or insolvency an amount
equal to the maximum allowed by any statute or rule of law in effect at the
time when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater than, equal to, or less than
the amount of the loss or damages referred to above.
<PAGE>
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (a) relet
the Leased Property or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may at Landlord's option,
be equal to, less than or exceed the period which would otherwise have
constituted the balance of the Term and may grant concessions or free rent
to the extent that Landlord considers advisable and necessary to relet the
same, and (b) may make such reasonable alterations, repairs and decorations
in the Leased Property or any portion thereof as Landlord, in its sole and
absolute discretion, considers advisable and necessary for the purpose of
reletting the Leased Property; and the making of such alterations, repairs
and decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Subject to the last sentence of this
paragraph and as long as Landlord uses reasonable efforts to mitigate its
damages as provided in such sentence, Landlord shall in no event be liable
in any way whatsoever for any failure to relet all or any portion of the
Leased Property, or, in the event that the Leased Property is relet, for
failure to collect the rent under such reletting. To the maximum extent
permitted by law, Tenant hereby expressly waives any and all rights of
redemption granted under any present or future laws in the event of Tenant
being evicted or dispossessed, or in the event of Landlord obtaining
possession of the Leased Property, by reason of the occurrence and
continuation of an Event of Default hereunder. Landlord covenants and
agrees, in the event of any termination of this Agreement as a result of an
Event of Default, to use reasonable efforts to mitigate its damages.
12.3 TENANT'S WAIVER. IF THIS AGREEMENT IS TERMINATED PURSUANT TO
SECTION 12.1 OR 12.2, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY
RIGHT TO A TRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE
REMEDIES SET FORTH IN THIS ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR
HEREAFTER IN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 APPLICATION OF FUNDS. Any payments received by Landlord under
any of the provisions of this Agreement during the existence or continuance
of any Event of Default (and any payment made to Landlord rather than
Tenant due to the existence of any Event of Default) shall be applied to
Tenant's current and past due obligations under this Agreement in such
order as Landlord may determine or as may be prescribed by the laws of the
State. Any balance shall be paid to Tenant.
12.5 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If an Event of
Default shall have occurred and be continuing, Landlord, after Notice to
Tenant (which Notice shall not be required if Landlord shall reasonably
determine immediate action is necessary to protect person or property),
without waiving or releasing any obligation of Tenant and without waiving
or releasing any Event of Default, may (but shall not be obligated to), at
any time thereafter, make such payment or perform such act for the account
and at the expense of Tenant, and may, to the maximum extent permitted by
law, enter upon the Leased Property or any portion thereof for such purpose
and take all such action thereon as, in Landlord's sole and absolute
discretion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Tenant. All reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by
<PAGE>
Landlord in connection therewith, together with interest thereon (to the
extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on
demand.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a
rate equal to two (2) times the Minimum Rent and other charges herein
provided (prorated on a daily basis). Tenant shall also pay to Landlord
all damages (direct or indirect) sustained by reason of any such holding
over. Otherwise, such holding over shall be on the terms and conditions
set forth in this Agreement, to the extent applicable. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Agreement.
ARTICLE 14
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
14.1 LANDLORD NOTICE OBLIGATION. Notwithstanding anything to the
contrary contained herein, Landlord shall give prompt Notice to Tenant of
any matters affecting the Leased Property of which Landlord receives
written notice or actual knowledge and, to the extent Tenant otherwise has
no notice or actual knowledge thereof, Landlord shall be liable for any
liabilities arising from the failure to deliver such Notice to Tenant.
14.2 LANDLORD'S DEFAULT. If Landlord shall default in the performance
or observance of any of its covenants or obligations set forth in this
Agreement or any obligation of Landlord, if any, under any agreement
affecting the Leased Property, the performance of which is not Tenant's
obligation pursuant to this Agreement, and any such default shall continue
for a period of five (5) Business Days after Notice thereof with respect to
monetary defaults and twenty (20) Business Days after Notice thereof with
respect to non-monetary defaults from Tenant to Landlord and any applicable
Hotel Mortgagee, or such additional period as may be reasonably required to
correct the same, provided Landlord is proceeding with due diligence to
correct the same, Tenant may declare the occurrence of a "LANDLORD DEFAULT"
by a second Notice to Landlord and to such Hotel Mortgagee. Thereafter,
Tenant may forthwith cure the same and, subject to the provisions of the
following paragraph, invoice Landlord for costs and expenses (including
reasonable attorneys' fees and court costs) incurred by Tenant in curing
the same, together with interest thereon (to the extent permitted by law)
from the date Landlord receives Tenant's invoice until paid, at the Overdue
Rate, and/or offset such amounts against Additional Rent due and payable
hereunder. Tenant shall have no right to terminate this Agreement for any
default by Landlord hereunder and no right, for any such default, to offset
<PAGE>
or counterclaim against any Rent or other charges due hereunder, except
with respect to Additional Rent as set forth in the preceding sentence.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period,
shall give Notice thereof to Tenant, setting forth, in reasonable detail,
the basis therefor, no Landlord Default shall be deemed to have occurred
and Landlord shall have no obligation with respect thereto until final
adverse determination thereof; PROVIDED, HOWEVER, that in the event of any
such adverse determination, Landlord shall pay to Tenant interest on any
disputed funds at the Interest Rate, from the date demand for such funds
was made by Tenant until the date of final adverse determination and,
thereafter, at the Overdue Rate until paid. If Tenant and Landlord shall
fail, in good faith, to resolve any such dispute within ten (10) days after
Landlord's Notice of dispute, either may submit the matter for resolution
to a court of competent jurisdiction.
14.3 INDEMNIFICATION OF TENANT. Notwithstanding the existence of any
insurance provided for herein and without regard to the policy limits of
any such insurance, Landlord shall protect, indemnify and hold harmless
Tenant for, from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and reasonable expenses (including,
without limitation, reasonable attorneys' fees), to the maximum extent
permitted by law, imposed upon or incurred by or asserted against Tenant by
reason of: (a) any Impositions that are the obligations of Landlord to pay
pursuant to the applicable provisions of this Agreement, and (b) any
failure on the part of Landlord or anyone claiming under Landlord to
perform or comply with any of the terms of this Agreement. Landlord, at
its expense, shall contest, resist and defend any such claim, action or
proceeding asserted or instituted against Tenant (and shall not be
responsible for any duplicative attorneys' fees incurred by Tenant) or may
compromise or otherwise dispose of the same, with Tenant's prior written
consent (which consent may not be unreasonably withheld, delayed or
conditioned). The obligations of Landlord under this SECTION 14.3 shall
survive termination of this Agreement.
ARTICLE 15
PURCHASE RIGHTS
Landlord shall have the option to purchase Tenant's Personal Property,
at the expiration or termination of this Agreement, for an amount equal to
the then net market value thereof (current replacement cost as determined
by agreement of the parties or, in the absence of such agreement,
appraisal, less accumulated depreciation on Tenant's books pertaining
thereto), subject to, and with appropriate price adjustments for, all
equipment leases, conditional sale contracts, UCC-1 financing statements
and other encumbrances to which such Personal Property is subject (except
that any such property purchased with the FF&E Reserve shall be transferred
to Landlord as provided in SECTION 5.1.2(E)). Upon the expiration or
sooner termination of this Agreement, Tenant shall use its reasonable
efforts to transfer and assign to Landlord or its designee, or assist
Landlord or its designee in obtaining, any contracts, licenses, and
certificates required for the then operation of the Leased Property.
<PAGE>
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 SUBLETTING AND ASSIGNMENT. Except as provided in SECTION 16.3,
Tenant shall not, without Landlord's prior written consent (which consent
may be given or withheld in Landlord's sole and absolute discretion),
assign, mortgage, pledge, hypothecate, encumber or otherwise transfer this
Agreement or sublease (which term shall be deemed to include the granting
of concessions, licenses and the like but shall not be deemed to include
the lodging of hotel guests consistent with the Permitted Use), all or any
part of the Leased Property or suffer or permit this Agreement or the
leasehold estate created hereby or any other rights arising under this
Agreement to be assigned, transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the use or operation of the Leased Property by
anyone other than Tenant, or the Leased Property to be offered or
advertised for assignment or subletting; PROVIDED, HOWEVER, that an
assignment to a wholly owned Subsidiary (direct or indirect) of ShoLodge
shall be permitted without the consent of, but upon Notice to, Landlord.
For purposes of this SECTION 16.1, an assignment of this Agreement shall be
deemed to include any direct or indirect transfer of any interest in Tenant
such that Tenant shall cease to be a wholly owned direct or indirect
Subsidiary of ShoLodge 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, unless such Entity is a wholly owned Subsidiary (direct or
indirect) of ShoLodge.
If this Agreement is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant and their
respective employees or hotel guests) Landlord may collect the rents from
such assignee, subtenant or occupant, as the case may be, and apply the net
amount collected to the Rent herein reserved, but no such collection shall
be deemed a waiver of the provisions set forth in the first paragraph of
this SECTION 16.1, the acceptance by Landlord of such assignee, subtenant
or occupant, as the case may be, as a tenant, or a release of Tenant from
the future performance by Tenant of its covenants, agreements or
obligations contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder (unless Landlord and Tenant expressly
otherwise agree that Tenant shall be released from all obligations
hereunder), and no consent to any subletting or assignment in a particular
instance shall be deemed to be a waiver of the prohibition set forth in
this SECTION 16.1. No assignment, subletting or occupancy shall affect any
Permitted Use. Any subletting, assignment or other transfer of Tenant's
interest under this Agreement in contravention of this SECTION 16.1 shall
be voidable at Landlord's option.
16.2 REQUIRED SUBLEASE PROVISIONS. Any sublease of all or any portion
of the Leased Property entered into on or after the date hereof shall
provide (a) that it is subject and subordinate to this Agreement and to the
matters to which this Agreement is or shall be subject or subordinate; (b)
<PAGE>
that in the event of termination of this Agreement or reentry or
dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title
and interest of Tenant, as sublessor under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the
then executory provisions of such sublease, except that neither Landlord
nor any Hotel Mortgagee, as holder of a mortgage or as Landlord under this
Agreement, if such mortgagee succeeds to that position, shall (i) be liable
for any act or omission of Tenant under such sublease, (ii) be subject to
any credit, counterclaim, offset or defense which theretofore accrued to
such subtenant against Tenant, (iii) be bound by any previous modification
of such sublease not consented to in writing by Landlord or by any previous
prepayment of more than one (1) month's rent, (iv) be bound by any covenant
of Tenant to undertake or complete any construction of the Leased Property
or any portion thereof, (v) be required to account for any Retained Funds
of the subtenant other than any Retained Funds actually delivered to
Landlord by Tenant, (vi) be bound by any obligation to make any payment to
such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease that are
performed after the date of such attornment, (vii) be responsible for any
monies owing by Tenant to the credit of such subtenant unless actually
delivered to Landlord by Tenant, or (viii) be required to remove any Person
occupying any portion of the Leased Property; and (c), in the event that
such subtenant receives a written Notice from Landlord or any Hotel
Mortgagee stating that an Event of Default has occurred and is continuing,
such subtenant shall thereafter be obligated to pay all rentals accruing
under such sublease directly to the party giving such Notice or as such
party may direct. All rentals received from such subtenant by Landlord or
the Hotel Mortgagee, as the case may be, shall be credited against the
amounts owing by Tenant under this Agreement and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord,
execute a suitable instrument in confirmation of such agreement to attorn.
An original counterpart of each such sublease and assignment and
assumption, duly executed by Tenant and such subtenant or assignee, as the
case may be, in form and substance reasonably satisfactory to Landlord,
shall be delivered promptly to Landlord and (a) in the case of an
assignment, the assignee shall assume in writing and agree to keep and
perform all of the terms of this Agreement on the part of Tenant to be kept
and performed and shall be, and become, jointly and severally liable with
Tenant for the performance thereof and (b) in case of either an assignment
or subletting, Tenant shall remain primarily liable, as principal rather
than as surety, for the prompt payment of the Rent and for the performance
and observance of all of the covenants and conditions to be performed by
Tenant hereunder.
The provisions of this SECTION 16.2 shall not be deemed a waiver of
the provisions set forth in the first paragraph of SECTION 16.1.
16.3 PERMITTED SUBLEASE. Notwithstanding the foregoing, including,
without limitation, SECTION 16.2, but subject to the provisions of SECTION
16.4 and any other express conditions or limitations set forth herein,
Tenant may, in each instance after Notice to Landlord, sublease space at
any Property for newsstand, car rental agency, business services office,
gift shop, parking garage, health club, restaurant, bar or commissary
<PAGE>
purposes or other concessions in furtherance of the Permitted Use, so long
as such subleases do not demise, in the aggregate, in excess of two
thousand (2,000) square feet per Property or, in the case of a restaurant
or bar, four thousand (4,000) square feet per Property, will not violate or
affect any Legal Requirement or Insurance Requirement, and Tenant shall
provide such additional insurance coverage applicable to the activities to
be conducted in such subleased space as Landlord and any Hotel Mortgagee
may reasonably require.
16.4 SUBLEASE LIMITATION. For so long as Landlord or any Affiliated
Person as to Landlord shall seek to qualify as a real estate investment
trust, anything contained in this Agreement to the contrary
notwithstanding, Tenant shall not sublet the Leased Property on any basis
such that the rental to be paid by any sublessee thereunder would be based,
in whole or in part, on the income or profits derived by the business
activities of such sublessee, any other formula such that any portion of
such sublease rental would fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Code, or any similar or
successor provision thereto or would otherwise disqualify Landlord for
treatment as a real estate investment trust.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 ESTOPPEL CERTIFICATES. At any time and from time to time, but
not more than a reasonable amount of times per year, upon not less than ten
(10) Business Days prior Notice by either party, the party receiving such
Notice shall furnish to the other an Officer's Certificate certifying that
this Agreement is unmodified and in full force and effect (or that this
Agreement is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, that no Default
or an Event of Default has occurred and is continuing or, if a Default or
an Event of Default shall exist, specifying in reasonable detail the nature
thereof, and the steps being taken to remedy the same, and such additional
information as the requesting party may reasonably request. Any such
certificate furnished pursuant to this SECTION 17.1 may be relied upon by
the requesting party, its lenders and any prospective purchaser or
mortgagee of the Leased Property or the leasehold estate created hereby.
17.2 FINANCIAL STATEMENTS. Tenant shall furnish or cause ShoLodge to
furnish, as applicable, the following statements to Landlord:
(a) within fifty (50) days after each of the first three fiscal
quarters of any Fiscal Year, the most recent Consolidated Financials,
accompanied by the Financial Officer's Certificate;
(b) within one hundred (100) days after the end of each Fiscal
Year, the most recent Consolidated Financials and financials of Tenant for
such year, certified by an independent certified public accountant
reasonably satisfactory to Landlord and accompanied by a Financial
Officer's Certificate;
<PAGE>
(c) within thirty (30) days after the end of each month, an
unaudited operating statement and statement of capital expenditures
prepared on a Hotel by Hotel basis and a combined basis, including
occupancy percentages and average rate, accompanied by a Financial
Officer's Certificate;
(d) at any time and from time to time upon not less than twenty
(20) days Notice from Landlord or such additional period as may be
reasonable under the circumstances, any Consolidated Financials, Tenant
financials or any other audited or unaudited financial reporting
information required to be filed by Landlord with any securities and
exchange commission, the SEC or any successor agency, or any other
governmental authority, or required pursuant to any order issued by any
court, governmental authority or arbitrator in any litigation to which
Landlord is a party, for purposes of compliance therewith; and
(e) promptly, upon Notice from Landlord, such other information
concerning the business, financial condition and affairs of Tenant and
ShoLodge as Landlord reasonably may request from time to time.
Landlord may at any time, and from time to time, provide any Hotel
Mortgagee with copies of any of the foregoing statements, subject to
Landlord obtaining the agreement of such Hotel Mortgagee to maintain such
statements and the information therein as confidential.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property during usual business hours upon not less than
forty-eight (48) hours' notice and to make such repairs as Landlord is
permitted or required to make pursuant to the terms of this Agreement,
provided that any inspection or repair by Landlord or its representatives
will not unreasonably interfere with Tenant's use and operation of the
Leased Property and further provided that in the event of an emergency, as
determined by Landlord in its reasonable discretion, prior Notice shall not
be necessary.
ARTICLE 19
EASEMENTS
19.1 GRANT OF EASEMENTS. Provided no Event of Default has occurred
and is continuing, Landlord will join in granting and, if necessary,
modifying or abandoning such rights-of-way, easements and other interests
as may be reasonably requested by Tenant for ingress and egress, and
electric, telephone, gas, water, sewer and other utilities so long as:
<PAGE>
(a) the instrument creating, modifying or abandoning any such
easement, right-of-way or other interest is satisfactory to and approved by
Landlord (which approval shall not be unreasonably withheld, delayed or
conditioned); and
(b) Landlord receives an Officer's Certificate from Tenant
stating (i) that such grant, modification or abandonment is not detrimental
to the proper conduct of business on such Property, (ii) the consideration,
if any, being paid for such grant, modification or abandonment (which
consideration shall be paid by Tenant), (iii) that such grant, modification
or abandonment does not impair the use or value of such Property for the
Permitted Use, and (iv) that, for as long as this Agreement shall be in
effect, Tenant will perform all obligations, if any, of Landlord under any
such instrument.
19.2 EXERCISE OF RIGHTS BY TENANT. So long as no Event of Default has
occurred and is continuing, Tenant shall have the right to exercise all
rights of Landlord under the Easement Agreements and, in connection
therewith, Landlord shall execute and promptly return to Tenant such
documents as Tenant shall reasonably request. Tenant shall perform all
obligations of Landlord under the Easement Agreements.
19.3 PERMITTED ENCUMBRANCES. Any agreements entered into in
accordance with SECTION 19.1 shall be deemed a Permitted Encumbrance.
ARTICLE 20
HOTEL MORTGAGES
20.1 LANDLORD MAY GRANT LIENS. Without the consent of Tenant,
Landlord may, subject to the terms and conditions set forth in this SECTION
20.1, from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement ("ENCUMBRANCE")
upon the Leased Property, or any portion thereof or interest therein,
whether to secure any borrowing or other means of financing or refinancing.
Notwithstanding anything to the contrary set forth in SECTION 20.2, any
such Encumbrance shall include the right to prepay (whether or not subject
to a prepayment penalty) and shall provide (subject to SECTION 20.2) that
it is subject to the rights of Tenant under this Agreement.
20.2 SUBORDINATION OF LEASE. Subject to SECTION 20.1 and this SECTION
20.2, this Agreement and any and all rights of Tenant hereunder, are and
shall be subject and subordinate to any ground or master lease, and all
renewals, extensions, modifications and replacements thereof, and to all
mortgages and deeds of trust, which may now or hereafter affect the Leased
Property or any improvements thereon and/or any of such leases, whether or
not such mortgages or deeds of trust shall also cover other lands and/or
buildings and/or leases, to each and every advance made or hereafter to be
made under such mortgages and deeds of trust, and to all renewals,
modifications, replacements and extensions of such leases and such
mortgages and deeds of trust and all consolidations of such mortgages and
deeds of trust. This section shall be self-operative and no further
<PAGE>
instrument of subordination shall be required provided that Tenant has
received a nondisturbance and attornment agreement from each Superior
Mortgagee (as defined below), consistent with the provisions of this
SECTION 20.2 and otherwise in form and substance reasonably satisfactory to
Tenant. In confirmation of such subordination, Tenant shall promptly
execute, acknowledge and deliver any instrument that Landlord, the lessor
under any such lease or the holder of any such mortgage or the trustee or
beneficiary of any deed of trust or any of their respective successors in
interest may reasonably request to evidence such subordination. Any lease
to which this Agreement is, at the time referred to, subject and
subordinate is herein called "SUPERIOR LEASE" and the lessor of a Superior
Lease or its successor in interest at the time referred to is herein called
"SUPERIOR LANDLORD" and any mortgage or deed of trust to which this
Agreement is, at the time referred to, subject and subordinate is herein
called "SUPERIOR MORTGAGE" and the holder, trustee or beneficiary of a
Superior Mortgage is herein called "SUPERIOR MORTGAGEE".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to
the rights of Landlord under this Agreement (any such person, "SUCCESSOR
LANDLORD"), whether through possession or foreclosure action or delivery of
a new lease or deed, or otherwise, such Successor Landlord shall recognize
Tenant's rights under this Agreement as herein provided and Tenant shall
attorn to and recognize the Successor Landlord as Tenant's landlord under
this Agreement and Tenant shall promptly execute and deliver any instrument
that such Successor Landlord may reasonably request to evidence such
attornment (provided that such instrument does not alter the terms of this
Agreement), whereupon, this Agreement shall continue in full force and
effect as a direct lease between the Successor Landlord and Tenant upon all
of the terms, conditions and covenants as are set forth in this Agreement,
except that the Successor Landlord (unless formerly the landlord under this
Agreement or its nominee or designee) shall not be (a) liable in any way to
Tenant for any act or omission, neglect or default on the part of any prior
Landlord under this Agreement, (b) responsible for any monies owing by or
on deposit with any prior Landlord to the credit of Tenant (except to the
extent actually paid or delivered to the Successor Landlord), (c) subject
to any counterclaim or setoff which theretofore accrued to Tenant against
any prior Landlord, (d) bound by any modification of this Agreement
subsequent to such Superior Lease or Mortgage, or by any previous
prepayment of Rent for more than one (1) month in advance of the date due
hereunder, which was not approved in writing by the Superior Landlord or
the Superior Mortgagee thereto, (e) liable to Tenant beyond the Successor
Landlord's interest in the Leased Property and the rents, income, receipts,
revenues, issues and profits issuing from the Leased Property, (f)
responsible for the performance of any work to be done by the Landlord
under this Agreement to render the Leased Property ready for occupancy by
Tenant, or (g) required to remove any Person occupying the Leased Property
or any part thereof, except if such person claims by, through or under the
Successor Landlord. Tenant agrees at any time and from time to time to
execute a suitable instrument in confirmation of Tenant's agreement to
attorn, as aforesaid and Landlord agrees to provide Tenant with an
instrument of nondisturbance and attornment from each such Superior
Mortgagee and Superior Landlord in form and substance reasonably
satisfactory to Tenant. Nothing contained in this SECTION 20.2 shall
relieve Landlord from any liability to Tenant under this Agreement
following the exercise of remedies by a Superior Mortgagee.
<PAGE>
20.3 NOTICE TO MORTGAGEE AND SUPERIOR LANDLORD. Subsequent to the
receipt by Tenant of Notice from Landlord as to the identity of any Hotel
Mortgagee or Superior Landlord under a lease with Landlord, as ground
lessee, which includes the Leased Property as part of the demised premises
and which complies with SECTION 20.1 AND 20.2 (which Notice shall be
accompanied by a copy of the applicable mortgage or lease), no Notice from
Tenant to Landlord as to a default by Landlord under this Agreement shall
be effective with respect to a Hotel Mortgagee or Superior Landlord unless
and until a copy of the same is given to such Hotel Mortgagee or Superior
Landlord at the address set forth in the above described Notice, and the
curing of any of Landlord's defaults within the applicable notice and cure
periods set forth in SECTION 14.2 by such Hotel Mortgagee or Superior
Landlord shall be treated as performance by Landlord.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 PROMPT PAYMENT OF INDEBTEDNESS. Tenant shall (a) pay or cause to
be paid when due all payments of principal of and premium and interest on
Tenant's Indebtedness for money borrowed and shall not permit or suffer any
such Indebtedness to become or remain in default beyond any applicable
grace or cure period, (b) pay or cause to be paid when due all lawful
claims for labor and rents with respect to the Leased Property, (c) pay or
cause to be paid when due all trade payables and (d) pay or cause to be
paid when due all other of Tenant's Indebtedness upon which it is or
becomes obligated, except, in each case, other than that referred to in
clause (a), to the extent payment is being contested in good faith by
appropriate proceedings in accordance with ARTICLE 8 and if Tenant shall
have set aside on its books adequate reserves with respect thereto in
accordance with GAAP, if appropriate, or unless and until foreclosure,
distraint sale or other similar proceedings shall have been commenced.
21.2 CONDUCT OF BUSINESS. Tenant shall not engage in any business
other than the leasing and operation of the Leased Property (including any
incidental or ancillary business relating thereto) and shall do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect and in good standing its corporate existence and its rights and
licenses necessary to conduct such business.
21.3 MAINTENANCE OF ACCOUNTS AND RECORDS. Tenant shall keep true
records and books of account of Tenant in which full, true and correct
entries will be made of dealings and transactions in relation to the
business and affairs of Tenant in accordance with GAAP. Tenant shall apply
accounting principles in the preparation of the financial statements of
Tenant which, in the judgment of and the opinion of its independent public
accountants, are in accordance with GAAP, where applicable, except for
changes approved by such independent public accountants. Tenant shall
provide to Landlord either in a footnote to the financial statements
delivered under SECTION 17.2 which relate to the period in which such
change occurs, or in separate schedules to such financial statements,
information sufficient to show the effect of any such changes on such
financial statements.
<PAGE>
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 Five Hundred
Thousand Dollars ($500,000) 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, Five Hundred
Thousand Dollars ($500,000), 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 $500,000 in the
aggregate at any one time outstanding and (x) which have been in force for
not longer than the applicable appeal period, so long as execution is not
levied thereunder or (y) in respect of which an appeal or proceedings for
review shall at the time be prosecuted in good faith in accordance with the
provisions of ARTICLE 8, and in respect of which execution thereof shall
have been stayed pending such appeal or review;
(d) unsecured borrowings of Tenant from its Affiliated Persons
which are by their terms expressly subordinate pursuant to a Subordination
Agreement to the payment and performance of Tenant's obligations under this
Agreement; or
(e) Indebtedness for purchase money financing in accordance with
SECTION 21.9(A) and other operating liabilities incurred in the ordinary
course of Tenant's business.
21.6 FINANCIAL CONDITION OF TENANT. Tenant shall at all times
maintain Net Worth (except as provided in the last clause of this sentence)
in an amount at least equal to the aggregate of one year's Minimum Rent
payable pursuant to this Agreement; it being expressly understood and
agreed that the right to receive the Retained Funds, if assigned to Tenant,
may for such purpose be counted as equity at the full amount thereof.
<PAGE>
21.7 DISTRIBUTIONS, PAYMENTS TO AFFILIATED PERSONS, ETC. Tenant shall
not declare, order, pay or make, directly or indirectly, any Distributions
or any payment to any Affiliated Person of Tenant (including payments in
the ordinary course of business and payments pursuant to Management
Agreements with any such Affiliated Person) or set apart any sum or
property therefor, or agree to do so, if, at the time of such proposed
action, or immediately after giving effect thereto, any Event of Default
shall have occurred and be continuing. Otherwise, as long as no Event of
Default shall have occurred and be continuing, Tenant may make
Distributions and payments to Affiliated Persons (other than from the FF&E
Reserve which shall be governed by SECTION 5.1.2) without restriction.
21.8 PROHIBITED TRANSACTIONS. Tenant shall not permit to exist or
enter into any agreement or arrangement whereby it engages in a transaction
of any kind with any Affiliated Person as to Tenant, except on terms and
conditions which are commercially reasonable.
21.9 LIENS AND ENCUMBRANCES. Except as permitted by SECTION 7.1 and
SECTION 21.5, Tenant shall not create or incur or suffer to be created or
incurred or to exist any Lien on this Agreement or any of Tenant's assets,
properties, rights or income, or any of its interest therein, now or at any
time hereafter owned, other than:
(a) Security interests securing the purchase price of equipment
or personal property whether acquired before or after the Commencement
Date; PROVIDED, HOWEVER, that (i) such Lien shall at all times be confined
solely to the asset in question and (ii) the aggregate principal amount of
Indebtedness secured by any such Lien shall not exceed the cost of
acquisition or construction of the property subject thereto;
(b) Permitted Encumbrances; and
(c) As permitted pursuant to SECTION 21.5.
21.10 MERGER; SALE OF ASSETS; ETC. Tenant shall not (i) sell, lease
(as lessor or sublessor), transfer or otherwise dispose of, or abandon, all
or any material portion of its assets (including capital stock) or business
to any Person, unless such Person is a wholly owned Subsidiary, direct or
indirect, of ShoLodge (in which event Tenant shall give Landlord prior
Notice thereof), (ii) merge into or with or consolidate with any other
Entity, unless such Entity is a wholly owned Subsidiary, direct or
indirect, of ShoLodge (in which event Tenant shall give Landlord prior
Notice thereof), or (iii) sell, lease (as lessor or sublessor), transfer or
otherwise dispose of, or abandon, any personal property or fixtures or any
real property; PROVIDED, HOWEVER, that, notwithstanding the provisions of
clause (iii) preceding, Tenant may dispose of equipment or fixtures which
have become inadequate, obsolete, worn-out, unsuitable, undesirable or
unnecessary, provided substitute equipment or fixtures having equal or
greater value and utility (but not necessarily having the same function)
have been provided.
<PAGE>
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.
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.
<PAGE>
22.6 NO MERGER OF TITLE. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this
Agreement or of the leasehold estate created hereby by reason of the fact
that the same Person may acquire, own or hold, directly or indirectly this
Agreement or the leasehold estate created hereby and the fee estate or
ground landlord's interest in the Leased Property.
22.7 CONVEYANCE BY LANDLORD. If Landlord or any successor owner of
all or any portion of the Leased Property shall convey all or any portion
of the Leased Property in accordance with the terms hereof other than as
security for a debt, and the grantee or transferee of such of the Leased
Property shall expressly assume all obligations of Landlord hereunder
arising or accruing from and after the date of such conveyance or transfer,
Landlord or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of Landlord under this
Agreement with respect to such of the Leased Property arising or accruing
from and after the date of such conveyance or other transfer and all such
future liabilities and obligations shall thereupon be binding upon the new
owner; PROVIDED, HOWEVER, that, Landlord shall not be released from
liability with respect to the Retained Funds unless such successor shall
have a Net Worth equal to or greater than ten (10) times the unapplied
balance of the Retained Funds. If such successor shall not satisfy the
aforesaid Net Worth requirement, Landlord shall, in a guaranty in form and
substance reasonably satisfactory to Tenant, guaranty payment of the
Retained Funds in accordance with this Agreement and the Purchase
Agreement.
22.8 QUIET ENJOYMENT. Tenant shall peaceably and quietly have, hold
and enjoy the Leased Property for the Term, free of hindrance or
molestation by Landlord or anyone claiming by, through or under Landlord,
but subject to (a) any Encumbrance permitted under ARTICLE 20 or otherwise
permitted to be created by Landlord hereunder provided that the holder of
such Encumbrance has, to the extent appropriate, executed a nondisturbance
agreement pursuant to SECTION 20.2 or a subordination agreement in form and
substance reasonably acceptable to Tenant, (b) all Permitted Encumbrances,
(c) liens as to obligations of Landlord that are either not yet due or
which are being contested in good faith and by proper proceedings, provided
the same do not materially interfere with Tenant's ability to operate the
Hotels and (d) liens that have been consented to in writing by Tenant.
Except as otherwise provided in this Agreement, no failure by Landlord to
comply with the foregoing covenant shall give Tenant any right to cancel or
terminate this Agreement or abate, reduce or make a deduction from or
offset against the Rent or any other sum payable under this Agreement
(except as expressly provided in SECTION 14.2), or to fail to perform any
other obligation of Tenant hereunder.
22.9 MEMORANDUM OF LEASE. Neither Landlord nor Tenant shall record
this Agreement. However, Landlord and Tenant shall promptly, upon the
request of the other, enter into a short form memorandum of this Agreement,
in form suitable for recording under the laws of the State in which
reference to this Agreement, and all options contained herein, shall be
made. Tenant shall pay all costs and expenses of recording such
memorandum.
<PAGE>
22.10 NOTICES.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall
be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial
carrier, addressed to the recipient of the notice, postpaid and registered
or certified with return receipt requested (if by mail), or with all
freight charges prepaid (if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall
be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and,
in all other cases, upon the date of receipt or refusal, except that
whenever under this Agreement a notice is either received on a day which is
not a Business Day or is required to be delivered on or before a specific
day which is not a Business Day, the day of receipt or required delivery
shall automatically be extended to the next Business Day.
(c) All such notices shall be addressed,
if to Landlord:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to Tenant to:
ShoLodge, Inc.
130 Maple Drive North
Hendersonville, Tennessee 37075
Attn: Mr. Leon L. Moore
[Telecopier No. (615) 264-1758]
<PAGE>
with a copy to:
Boult Cummings Conners & Berry, PLC
414 Union Street, Suite 1600
Nashville, Tennessee 37219
Attn: Patrick L. Alexander, Esq.
[Telecopier No. (615) 252-6362]
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other
address within the United States of America.
22.11 TRADE AREA RESTRICTION. Neither Tenant, ShoLodge nor any of
their Affiliated Persons shall own, build, franchise, manage or operate all
suite hotel of the same brand as the Hotels within the designated areas on
EXHIBIT B, at any time during the Term.
22.12 CONSTRUCTION. Anything contained in this Agreement to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such
termination or expiration. In no event shall Landlord be liable for any
consequential damages suffered by Tenant as the result of a breach of this
Agreement by Landlord. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated except by an instrument in
writing signed by the party to be charged. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Each term or
provision of this Agreement to be performed by Tenant shall be construed as
an independent covenant and condition. Time is of the essence with respect
to the provisions of this Agreement. Except as otherwise set forth in this
Agreement, any obligations of Tenant (including without limitation, any
monetary, repair and indemnification obligations) and Landlord shall
survive the expiration or sooner termination of this Agreement.
22.13 COUNTERPARTS; HEADINGS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which,
when taken together, shall constitute but one instrument and shall become
effective as of the date hereof when copies hereof, which, when taken
together, bear the signatures of each of the parties hereto shall have been
signed. Headings in this Agreement are for purposes of reference only and
shall not limit or affect the meaning of the provisions hereof.
22.14 APPLICABLE LAW, ETC. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of The
Commonwealth of Massachusetts applicable to contracts between residents of
Massachusetts which are to be performed entirely within Massachusetts,
regardless of (i) where this Agreement is executed or delivered; or (ii)
<PAGE>
where any payment or other performance required by this Agreement is made
or required to be made; or (iii) where any breach of any provision of this
Agreement occurs, or any cause of action otherwise accrues; or (iv) where
any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi) whether
the laws of the forum jurisdiction otherwise would apply the laws of a
jurisdiction other than Massachusetts; or (vii) any combination of the
foregoing. Notwithstanding the foregoing, the laws of the State shall
apply to the perfection and priority of liens upon and the disposition of
any Property.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions
of this Agreement may be brought and prosecuted in such court or courts
located in The Commonwealth of Massachusetts as is provided by law; and the
parties consent to the jurisdiction of said court or courts located in
Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
22.15 RIGHT TO MAKE AGREEMENT. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation
of any transaction contemplated hereby, shall violate any provision of any
law, or any judgment, writ, injunction, order or decree of any court or
governmental authority having jurisdiction over it; nor result in or
constitute a breach or default under any indenture, contract, other
commitment or restriction to which it is a party or by which it is bound;
nor require any consent, vote or approval which has not been given or
taken, or at the time of the transaction involved shall not have been given
or taken. Each party covenants that it has and will continue to have
throughout the term of this Agreement and any extensions thereof, the full
right to enter into this Agreement and perform its obligations hereunder.
22.16 NONRECOURSE. Nothing contained in this Agreement shall be
construed to impose any liabilities or obligations on Tenant's
shareholders, officers, directors, agents or employees (or any
shareholders, officers, directors, agents or employees of any of the
foregoing) for the performance of the obligations of Landlord or Tenant
hereunder.
22.17 ATTORNEYS' FEES. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of
this Agreement, the prevailing party therein shall be entitled to receive
from the other party the prevailing party's costs and expenses, including
reasonable attorneys' fees incurred in connection therewith, in preparation
therefor and on appeal therefrom, which amounts shall be included in any
judgment therein.
22.18 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME
"____________________________" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD
<PAGE>
TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR
CLAIM AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
By:
Its:
TENANT:
By:
Its:
ShoLodge, Inc. hereby acknowledges and agrees to be bound by the provisions
of SECTION 22.11 of the foregoing Lease Agreement.
SHOLODGE, INC.
By:
Its:
Date: _______ __, 1997
<PAGE>
EXHIBIT A-1 THROUGH A-14
THE LAND
[See attached copies.]
<PAGE>
EXHIBIT B
DESIGNATED AREAS
PROPERTY AREA
Tampa, FL 3 miles
San Antonio, Riverwalk, TX3 miles
Fort Wayne, IN 10 miles
Albuquerque, NM 3 miles
El Paso, TX 3 miles
Hendersonville, TN 5 miles
Cumberland, GA 3 miles
Gwinett, GA 3 miles
Columbus, OH 3 miles
Atlanta Airport, GA 3 miles
Dallas, Galleria, TX 3 miles
Austin, TX 5 miles
Tempe, AZ 3 miles
Tucson, AZ 3 miles
<PAGE>
EXHIBIT C
ALLOCABLE RENTS
PROPERTY ALLOCABLE RENT PER ACCOUNTING PERIOD
Tampa, FL $ 33,168
San Antonio, Riverwalk, TX 108,706
Fort Wayne, IN 74,560
Albuquerque, NM 88,600
El Paso, TX 70,376
Tempe, AZ 77,446
Tucson, AZ 65,657
Hendersonville, TN 57,782
Cumberland, Smyrna, GA 73,835
Gwinett, Duluth, GA 87,156
Columbus, OH 103,195
Atlanta Airport, GA 79,360
Dallas, Galleria, TX 86,074
Austin, TX 71,008
<PAGE>
EXHIBIT D
TAMPA RENOVATION PLANS AND BUDGET
[See attached copies.]
Exhibit 10.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT") is entered into as of
this _____ day of _______, 1997, by and between ________ ______________, a
________ ___________ (the "TENANT"), and _________________________, a
Maryland real estate investment trust "SECURED PARTY").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Lease Agreement, dated as of the
date hereof (the "LEASE"), the Secured Party leased to the Tenant and the
Tenant leased from the Secured Party certain premises, as more particularly
described in EXHIBITS A-1 THROUGH A-14, attached hereto and made a part
hereof, and subject to and upon the terms and conditions set forth in the
Lease; and
WHEREAS, as security for the payment and performance of each and
every obligation and liability of the Tenant to the Secured Party under the
Lease (collectively, the "OBLIGATIONS"), including, without limitation, the
payment of the Rent (this and other capitalized terms used and not
otherwise defined herein having the meanings ascribed to such terms in
SECTION 1), the Tenant has agreed to grant to the Secured Party a first and
perfected lien and security interest in the Collateral;
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 parties hereto
hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings specified below:
"BUSINESS DAY" shall have the meaning given such term in the
Lease.
"COLLATERAL" shall mean all of the Tenant's right, title and
interest in and under or arising out of all and any personal property,
intangibles and fixtures of any type or description which constitute or
arise from the operation, maintenance or repair of the Leased Property,
together with any and all additions, replacements, products and proceeds,
including, but not limited to, the following:
(a) all goods, including, without limitation, the Equipment;
(b) all of the Leased Intangible Property;
(c) all Licenses; and
<PAGE>
(d) all other personal property or fixtures of any nature
whatsoever which relate to the operation, maintenance or
repair of the Leased Property and all property from time to
time described in any financing statement signed by the
Tenant naming the Secured Party as secured party.
"EQUIPMENT" shall mean all structures, improvements, fixtures and
items of machinery, equipment and other tangible personal property which
constitute, arise from or relate to the operation, maintenance or repair of
the Leased Property, together with all repairs, replacements, improvements,
substitutions, extensions or renewals thereof or additions thereto, all
parts, additions and accessories incorporated therein or affixed thereto,
and all cash and non-cash proceeds therefrom.
"EVENT OF DEFAULT" shall have the meaning given such term in
SECTION 4.
"HOTELS" shall have the meaning given such term in the Lease.
"INSTRUMENT" shall have the meaning give such term in Article 3
of the Uniform Commercial Code, as in effect from time to time in the
jurisdiction in which any of the Collateral is located.
"LEASED INTANGIBLE PROPERTY" shall have the meaning given such
term in the Lease.
"LEASED PROPERTY" shall have the meaning given such term in the
Lease.
"LEASE" shall have the meaning given such term in the preambles
to this Agreement.
"LICENSES" shall mean all licenses, permits, rights of use,
covenants or rights otherwise benefiting or permitting the use and
operation of the Leased Property or any part thereof pertaining to the
operation, maintenance or repair of the Leased Property, other than liquor
licenses.
"OBLIGATIONS" shall have the meaning given such term in the
preambles to this Agreement.
"OVERDUE RATE" shall have the meaning given such term in the
Lease.
"PERSON" shall have the meaning given such term in the Lease.
"RENT" shall have the meaning given such term in the Lease.
SECTION 2. SECURITY INTEREST. As security for the prompt
payment and performance of all the Obligations, the Tenant hereby grants,
pledges, transfers and assigns to the Secured Party, its successors and
<PAGE>
assigns and all other holders from time to time of the Obligations, a
continuing security interest under the Uniform Commercial Code from time to
time in effect in the jurisdiction in which any of the Collateral is
located in and a continuing lien upon all of the Tenant's right, title and
interest in the Collateral, together with any and all additions thereto and
replacements, products and proceeds thereof, whether now existing or
hereafter arising or acquired and wherever located.
SECTION 3. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Tenant represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this
Agreement, as follows:
(a) The chief executive offices and chief place of business
of the Tenant is set forth in SCHEDULE 1 and the Tenant will not move its
chief executive office or its chief place of business or operations without
giving prior written notice thereof to the Secured Party. The originals of
all documents evidencing Collateral and the only original books of account
and records of the Tenant relating thereto are, and will continue to be,
kept at such chief executive office or the Hotels.
(b) The name of the Tenant is as set forth on the signature
page hereto. The name under which each of the Hotels is operated is set
forth on SCHEDULE 2. The Tenant shall not change such names, conduct its
business at or related to the Hotel in any other name or take title to any
Collateral in any other name, except as otherwise permitted by the Lease
without prior written notification to Secured Party.
(c) The Secured Party is authorized (but is under no
obligation) to make, upon ten (10) Business Days' notice to the Tenant
(except in the case of exigent circumstances, in which circumstances upon
such notice, if any, as may then be reasonably practical), any payments
which in the Secured Party's opinion are necessary to discharge any liens
which have or may take priority over the lien hereof, upon the failure of
the Tenant to make such payments within the time permitted therein. The
Tenant shall have no claim against the Secured Party by reason of its
decision not to make any payments or perform such obligations permitted
under this SECTION 3(C). The Tenant shall repay to the Secured Party any
sums paid by the Secured Party upon demand. Any sums paid and expenses
incurred by the Secured Party pursuant to this paragraph shall bear
interest at the Overdue Rate.
(d) If any of the Collateral at any time becomes evidenced
by an Instrument, the Tenant shall promptly deliver such Instrument to the
Secured Party, appropriately endorsed to the order of the Secured Party, to
be held pursuant to this Agreement.
SECTION 4. EVENT OF DEFAULT. For purposes of this Agreement,
the term "EVENT OF DEFAULT" shall mean (a) the occurrence of an Event of
Default under the Lease; (b) the failure of the Tenant to comply with any
of its covenants or obligations under this Agreement and the continuance
thereof for a period of thirty (30) days after written notice thereof;
PROVIDED, HOWEVER, that if such default is susceptible of cure but such
cure cannot be accomplished with due diligence within such period of time
and if in addition the Tenant commences to cure or cause to be cured such
default within thirty (30) days after written notice thereof from the
<PAGE>
Secured Party and thereafter prosecutes the curing of such default with all
due diligence, such period of time shall be extended to such period of time
(not to exceed an additional one (1) year in the aggregate) as may be
necessary to cure such default with all due diligence; or (c) any
representation or warranty contained herein or made by the Tenant in
connection herewith shall prove to have been false or misleading in any
material respect when made.
SECTION 5. REMEDIES.
(a) Upon the occurrence and during the continuation of an
Event of Default, in addition to any rights and remedies now or hereafter
granted under applicable law, under the Lease or under any other documents
or agreements entered into in connection herewith or therewith, and not by
way of limitation of any such rights and remedies, the Secured Party shall
have all of the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any applicable jurisdiction, and the right,
without notice to, or assent by, the Tenant, to the extent permitted by
law, in the name of the Tenant or in the name of the Secured Party or
otherwise:
(i) with respect to the Leased Intangible Property and any other
accounts receivable, general intangibles and contract rights, to ask for,
demand, collect, receive, compound and give acquittance therefor or any
part thereof, to extend the time of payment of, compromise or settle for
cash, credit or otherwise, and upon any terms and conditions, any thereof,
to endorse the name of the Tenant on any checks, drafts or other orders or
instruments for the payment of moneys payable to the Tenant which shall be
issued in respect thereof, to exercise and enforce any rights and remedies
in respect thereof, to file any claims, commence, maintain or discontinue
any actions, suits or other proceedings deemed by the Secured Party
necessary or advisable for the purpose of collecting or enforcing payment
and performance thereof, to make test verifications thereof, to notify any
or all account debtors thereunder to make payment thereof directly to the
Secured Party for the account of the Secured Party and to require the
Tenant to forthwith give similar notice to the account debtors, and to
require the Tenant forthwith to account for and transmit to the Secured
Party in the same form as received all proceeds (other than physical
property) of collection thereof received by the Tenant and, until so
transmitted, to hold the same in trust for the Secured Party and not
commingle such proceeds with any other funds of the Tenant;
(ii) to take possession of any or all of the Collateral and to
use, hold, store, operate, merge and/or control the same and to exclude the
Tenant and all Persons claiming under it wholly or partly therefrom, and,
for that purpose, to enter, with the aid and assistance of any Person or
Persons and with or without legal process, any premises where the
Collateral, or any part thereof, are, or may be, placed or assembled, and
to remove any such Collateral;
(iii) from time to time, at the expense of the Tenant, to make
all such repairs, replacements, alterations, additions and improvements to
and of the Collateral as the Secured Party may reasonably deem proper; to
collect and receive all rents, issues, profits, fees and other income of
the same and every part thereof which may be applied to pay the expenses of
holding and operating the Collateral and of all maintenance and repairs and
<PAGE>
to make all payments which the Secured Party may be required or may elect
to make, if any, for taxes, assessments, insurance and other charges upon
the Collateral and all other payments which the Secured Party may be
required or authorized to make under any provision of this Agreement
(including, without limitation, reasonable legal costs and attorneys'
fees);
(iv) upon notice to such effect, and if reasonably necessary to
protect Secured Party's interest in the Collateral, to require the Tenant
to deliver, at the Tenant's expense, any or all Collateral which is
reasonably movable to the Secured Party at a place designated by the
Secured Party; and
(v) without obligation to resort to other security, at any time
and from time to time, to sell, re-sell, assign and deliver all or any of
the Collateral, in one or more parcels at the same or different times, and
all right, title and interest, claim and demand therein and right of
redemption thereof, at public or private sale, for cash, upon credit or for
future delivery, and at such price or prices and on such terms as the
Secured Party may determine, with the amounts realized from any such sale
to be applied to the Secured Obligations in the manner determined by the
Secured Party.
The Tenant hereby agrees that all of the foregoing may be effected without
advertisement (except as hereinafter provided or as may be required by
law), all of which (except as hereinafter provided) are hereby expressly
waived, to the maximum extent permitted by law. The Secured Party shall
not be obligated to do any of the acts hereinabove authorized and in the
event that the Secured Party elects to do any such act, the Secured Party
shall not be responsible to the Tenant except for the Secured Party's gross
negligence or willful misconduct.
(b) Upon the occurrence of an Event of Default, the Secured
Party may take legal proceedings for the appointment of a receiver or
receivers (to which the Secured Party shall be entitled as a matter of
right) to take possession of the Collateral pending the sale thereof
pursuant either to the powers of sale granted by this Agreement or to a
judgment, order or decree made in any judicial proceeding for the
foreclosure or involving the enforcement of this Agreement. If, after the
exercise of any or all of such rights and remedies, any of the Obligations
shall remain unpaid or unsatisfied, the Tenant shall remain liable for any
deficiency or performance thereof, as applicable.
(c) Upon any sale of any of the Collateral, whether made under
the power of sale hereby given or under judgment, order or decree in any
judicial proceeding for the foreclosure or involving the enforcement of
this Agreement:
(i) the Secured Party may bid for and purchase the property
being sold and, upon compliance with the terms of sale, may hold, retain
and possess and dispose of such property in its own absolute right without
further accountability, and may, in paying the purchase money therefor,
deliver any instruments evidencing the Obligations or agree to the
satisfaction of all or a portion of the Obligations in lieu of cash in
payment of the amount which shall be payable thereon, and such instruments,
in case the amounts so payable thereon shall be less than the amount due
<PAGE>
thereon, shall be returned to the Secured Party after being appropriately
stamped to show partial payment;
(ii) the Secured Party may make and deliver to the purchaser or
purchasers a good and sufficient deed, bill of sale and instrument of
assignment and transfer of the property sold;
(iii) all right, title, interest, claim and demand whatsoever,
either at law or in equity or otherwise, of the Tenant of, in and to the
property so sold shall be divested; such sale shall be a perpetual bar both
at law and in equity against the Tenant, its successors and assigns, and
against any and all Persons claiming or who may claim the property sold or
any part thereof from, through or under the Tenant, its successors or
assigns; and
(iv) the receipt of the Secured Party or of the officer thereof
making such sale shall be a sufficient discharge to the purchaser or
purchasers at such sale for his or their purchase money, and such purchaser
or purchasers, and his or their assigns or personal representatives, shall
not, after paying such purchase money and receiving such receipt of the
Secured Party or of such officer therefor, be obliged to see to the
application of such purchase money or be in any way answerable for any
loss, misapplication or nonapplication thereof.
In the event of any sale of Collateral pursuant to this SECTION 5, the
Secured Party shall, at least 10 days before such sale, give the Tenant
written, telegraphic or telex notice of its intention to sell, except that,
if the Secured Party shall determine in its reasonable discretion that any
of the Collateral threatens to decline in value, any such sale may be made
upon three (3) days' written, telegraphic or telex notice to the Tenant,
which time periods the Tenant hereby agrees are reasonable.
SECTION 6. APPLICATION OF MONEYS. All moneys which the Secured Party
shall receive pursuant hereto shall first be applied (to the extent
thereof) to the payment of all reasonable costs and expenses incurred in
connection with the administration and enforcement of, or the preservation
of any rights under, this Agreement or any of without limitation, the
reasonable fees and disbursements of its counsel and agents), and the
balance, if any, shall be applied first to accrued and unpaid interest,
charges and fees on, and then to outstanding principal of, any Obligations
of the Tenant to the Secured Party, and then to any other amounts
outstanding on any such Obligations and then to the Tenant unless otherwise
provided by law or directed by a court of competent jurisdiction.
SECTION 7. WAIVERS, ETC. To the extent permitted by law the Tenant
hereby waives presentment, demand, protest and, except as is otherwise
specifically provided herein, all other demands and notices in connection
with this Agreement or the enforcement of the rights of the Secured Party
hereunder and waives all rights to require a marshaling of assets by the
Secured Party.
The Secured Party shall not be required to marshal any present or
future security for (including without limitation this Agreement and the
Collateral pledged hereunder), or guaranties of, the Obligations or any of
<PAGE>
them, or to resort to such security or guaranties in any particular order;
and all of the rights hereunder and in respect of such securities and
guaranties shall be cumulative and in addition to all other rights, however
existing or arising. To the maximum extent permitted by applicable law,
the Tenant hereby agrees that it will not invoke any law relating to the
marshalling of collateral which, might cause delay in or impede the
enforcement of the Secured Party's rights under this Agreement or under any
other instrument evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is
secured or guaranteed, and, to the maximum extent permitted by applicable
law, the Tenant hereby irrevocably waives the benefits of all such laws.
SECTION 8. FURTHER ASSURANCES, ETC. From time to time hereafter, the
Tenant will execute and deliver, or will cause to be executed and
delivered, such additional instruments, certificates or documents and will
take all such actions as the Secured Party may reasonably request for the
purposes of implementing or effectuating the provisions of this Agreement.
SECTION 9. MISCELLANEOUS.
(a) The Tenant agrees that its obligations and the rights of
the Secured Party hereunder and in respect of the Obligations may be
enforced by specific performance hereof and thereof and by temporary,
preliminary and/or final injunctive relief relating hereto and thereto,
without necessity for proof by the Secured Party or any holder of the
Obligations that it would otherwise suffer irreparable harm, and the Tenant
hereby consents to the issuance of such specific and injunctive relief.
(b) Any notice or demand upon the Tenant or the Secured Party
shall be deemed to have been sufficiently given when given in accordance
with Section 22.10 of the Lease.
(c) None of the terms and conditions of this Agreement may be
changed, waived, modified or varied in any manner whatsoever unless in
writing duly signed by the Tenant and the Secured Party. No notice to or
demand on the Tenant in any case shall entitle the Tenant to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Secured Party to any other or further
action in any circumstances without notice or demand.
(d) The obligations of the Tenant hereunder shall remain in
full force and effect without regard to, and shall not be impaired by, (i)
any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of the Tenant; (ii) any exercise or
non-exercise, or any waiver of, any right, remedy, power or privilege under
or in respect of this Agreement, the Lease or any document or agreement
executed in connection herewith or therewith, the Obligations or any
security for any of the Obligations; or (iii) any amendment to or
modification of any of the Lease or any document or agreement executed in
connection herewith or therewith, the Obligations or any security for any
of the Obligations; whether or not the Tenant shall have notice or
knowledge of any of the foregoing. The rights and remedies of the Secured
Party herein provided for are cumulative and not exclusive of any rights or
<PAGE>
remedies which the Secured Party would otherwise have, including, without
limitation, under the Lease or any document or agreement executed in
connection herewith or therewith. This Agreement is intended as a
supplement for and is not intended to supersede in any respect the Lease or
any document or agreement executed in connection herewith or therewith.
(e) This Agreement shall be binding upon the Tenant and its
successors and assigns and shall inure to the benefit of the Secured Party,
and its respective successors and assigns. All agreements, representations
and warranties made herein shall survive the execution and delivery of this
Agreement.
(f) The descriptive headings of the several sections of this
Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
(g) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibitions or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(h) This Agreement shall be interpreted, construed, applied and
enforced in accordance with the laws of The Commonwealth of Massachusetts
applicable to contracts between residents of Massachusetts which are to be
performed entirely within Massachusetts, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any
cause of action otherwise accrues; or (iv) where any action or other
proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principal place of business, or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum
jurisdiction otherwise would apply the laws of a jurisdiction other than
Massachusetts; or (vii) any combination of the foregoing. Notwithstanding
the foregoing, the laws of the State shall apply to the perfection and
priority of liens upon and the disposition of any Property.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions
of this Agreement may be brought and prosecuted in such court or courts
located in The Commonwealth of Massachusetts as is provided by law; and the
parties consent to the jurisdiction of said court or courts located in
Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
(i) THE DECLARATION OF TRUST ESTABLISHING THE SECURED PARTY, A
COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS
DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "_______________________" REFERS TO THE
<PAGE>
TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,
EMPLOYEE OR AGENT OF THE SECURED PARTY SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF OR CLAIM AGAINST,
THE SECURED PARTY. ALL PERSONS DEALING WITH THE SECURED PARTY, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF THE SECURED PARTY FOR THE PAYMENT OF ANY
SUM OR THE PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal as of the date first above written.
TENANT:
By:
Its (Vice) President
SECURED PARTY:
By:
Its (Vice) President
<PAGE>
EXHIBITS A-1 THROUGH A-14
LEASED PREMISES
[See attached copy.]
<PAGE>
SCHEDULE 1
CHIEF EXECUTIVE OFFICE:
130 Maple Drive North
Hendersonville, Tennessee 37075
PRINCIPAL PLACE OF BUSINESS
130 Maple Drive North
Hendersonville, Tennessee 37075
<PAGE>
SCHEDULE 2
Sumner Suite Hotel - Tampa, Florida
Sumner Suite Hotel - Cumberland, Georgia
Sumner Suite Hotel - San Antonio/Riverwalk, Texas
Sumner Suite Hotel - Dallas/Galleria, Texas
Sumner Suite Hotel - El Paso, Texas
Sumner Suite Hotel - Atlanta Airport, Georgia
Sumner Suite Hotel - Cumberland, Georgia
Sumner Suite Hotel - Gwinett, Georgia
Sumner Suite Hotel - Fort Wayne, Indiana
Sumner Suite Hotel - Alburquerque, New Mexico
Sumner Suite Hotel - Columbus, Ohio
Sumner Suite Hotel - Hendersonville, Tennessee
Sumner Suite Hotel - Tempe, Arizona
Sumner Suite Hotel - Tucson, Arizona
Exhibit 10.5
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "ASSIGNMENT") is
made as of the ____ day of ________, 1997 by and between
________________________, a ___________________ (the "ASSIGNOR"), and
________________, a ___________________ (the "ASSIGNEE").
W I T N E S S E T H :
WHEREAS, pursuant to a Lease Agreement, dated as of _____ __,
1997 (the "LEASE"), the Assignee has leased to the Assignor and the
Assignor has leased from the Assignee certain premises as more particularly
described in and subject to and upon the terms and conditions set forth in
the Lease; and
WHEREAS, as security for the payment and performance of each and
every obligation and liability of the Assignor to the Assignee under the
Lease (collectively, the "OBLIGATIONS"), including, without limitation, the
payment of the Rent (this and other capitalized terms used and not
otherwise defined herein having the meanings ascribed to such terms in the
Lease), the Assignor has agreed to grant to the Assignee a first and
perfected lien and security interest in the Account (as hereinafter
defined);
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, the Assignor hereby
agrees with the Assignee as follows:
1. Subject to the terms and conditions hereinafter set forth,
the Assignor hereby assigns, transfers, pledges, conveys and grants to the
Assignee, as security for the payment and performance of the Obligations,
all of the right, title and interest of the Assignor in and to [Bank Name],
Account No. __________ (the "ACCOUNT"), all certificates of deposit,
commercial paper, United States Treasury bills, stocks, bonds and other
documents, instruments and assets held in the Account and any and all
substitutions, replacements and renewals thereof and all proceeds of the
foregoing (collectively, the "COLLATERAL").
2. The Assignor agrees promptly to execute and deliver all
documents and instruments deemed necessary by the Assignee to perfect the
Assignee's security interest in the Collateral and, in the event that the
Assignor fails to execute and deliver any such documents and instruments,
the Assignor hereby authorizes the Assignee to execute and deliver the same
in the name of the Assignor pursuant to the power of attorney granted to
the Assignee in Paragraph 6 below.
3. Upon the occurrence and during the continuance of an Event
of Default (as defined in the Lease), the Assignee, without further
authorization, may authorize [Bank Name] (the "INVESTMENT MANAGER") to
distribute the Collateral to the Assignee (properly endorsed or assigned to
the Assignee), sell, assign, negotiate or otherwise dispose of the
<PAGE>
Collateral and may apply all principal, interest and other proceeds
received by the Assignee from time to time with respect to the Collateral
in reduction of the Obligations. Any balance of the Collateral remaining
after such application until payment in full of the Obligations, shall be
and remain the Collateral hereunder.
4. To the extent permitted by law, the Assignor hereby waives
any notice of sale or other disposition of all or any part of the
Collateral and the exercise of any other right or remedy of the Assignee
existing after the occurrence and during the continuance of any Event of
Default, and, to the extent any such notice is required and cannot be
waived, the Assignor agrees that if such notice is given in the manner and
to the address or addresses then required pursuant to this Assignment at
least five (5) Business Days (as defined in the Lease) before the time of
the sale or other disposition, such notice shall be deemed reasonable and
shall fully satisfy any legal requirements for the giving of said notice.
5. The Assignor represents that the Account is the only account
in which deposits of the FF&E Reserve will be made and that, as of the date
hereof, the balance in the Account is
________________________________________ Dollars ($__________).
6. Upon the occurrence and during the continuance of an Event
of Default, the Assignor hereby appoints the Assignee as the Assignor's
true and lawful attorney-in-fact to execute all documents and instruments
and take all actions, in the Assignor's name or otherwise, as the Assignee
shall deem necessary or expedient, to cause the Collateral and the proceeds
thereof to be received by the Assignee and to be made available to the
Assignee for the purposes herein specified. The power of attorney hereby
granted includes, without limitation, the right to endorse, in the
Assignor's name, to the order of the Assignee, all checks received by the
Assignee as proceeds of the Collateral, to execute, in the Assignor's name,
and to deliver to the Assignee, all documents and instruments necessary to
transfer the Collateral to the Assignee and to apply the funds received
upon the negotiation of such checks or the sale of any of the Collateral as
set forth herein. The power of attorney contained herein is irrevocable
and is coupled with an interest and it shall terminate upon the payment in
full of the Obligations.
7. To the extent permitted by law, the Assignor hereby
indemnifies the Assignee and holds the Assignee harmless from and against
all losses, costs, damages, fees and expenses whatsoever with respect to
the exercise of the foregoing power of attorney and the exercise of the
other rights and privileges granted to the Assignee hereunder, including,
without limitation, the right to use, possess or dispose of the Collateral
by the Assignee in accordance with the terms of this Assignment,
responsible only for the application of such cash or property as the
Assignee shall actually receive pursuant to the terms hereof. The failure
or omission of the Assignee's to do any of the things or exercise any of
the rights, interests, powers and authorities herein shall not be construed
to be a waiver of any of such rights, interests, powers and authorities.
8.The Assignee shall not be obligated to exercise any power or
privilege herein granted and shall not be responsible for failure to do any
or all of the things for which rights, interests, power and authority are
hereby conveyed. The Assignee shall be responsible only for the
<PAGE>
application of such cash or other property as the Assignee shall actually
receive pursuant to the terms hereof. The failure or omission of the
Assignee to do any of the things or exercise any of the rights, interests,
powers and authorities herein shall not be construed to be a waiver of any
of such rights, interests, powers and authorities.
9. The Assignor agrees to execute, upon the Assignee's request,
any and all other and further instruments deemed necessary or desirable by
the Assignee to carry these presents into effect, including, without
limitation, a notice in the form attached hereto as EXHIBIT A.
10. The Assignor covenants and agrees that, except as otherwise
permitted by the Lease, it will not, at any time during the term of this
Assignment, further convey or encumber the Collateral in any manner
whatsoever; and the Assignor agrees it will do all things necessary to
maintain the enforceability and priority of the Assignee's security
interest in the Collateral.
11. This instrument is a security agreement under the Uniform
Commercial Code and vests in the Assignee, in addition to the other rights
and privileges herein contained, all of the rights, powers and privileges
of a secured party under the Uniform Commercial Code.
12. Whenever any notice, demand or request may, properly be
given hereunder, the same shall always be sufficient if given in the manner
and to the address or addresses then required pursuant to Section 22.10 of
the Lease.
13.This Agreement shall inure to the benefit of the Assignee,
its successors and assigns, and shall be binding upon the Assignor, and its
successors and assigns.
14. This Agreement shall be interpreted, construed, applied and
enforced in accordance with the laws of The Commonwealth of Massachusetts
applicable to contracts between residents of Massachusetts which are to be
performed entirely within Massachusetts, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any
cause of action otherwise accrues; or (iv) where any action or other
proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principal place of business, or jurisdiction otherwise would
apply the laws of a jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would
apply the laws of a jurisdiction other than Massachusetts; or (vii) any
combination of the foregoing. Notwithstanding the foregoing, the laws of
the State shall apply to the perfection and priority of liens upon and the
disposition of any Collateral.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions
of this Agreement may be brought and prosecuted in such court or courts
located in The Commonwealth of Massachusetts as is provided by law; and the
parties consent to the jurisdiction of said court or courts located in
<PAGE>
Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
15. THE DECLARATION OF TRUST ESTABLISHING ASSIGNEE, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY
FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "_______________________" REFERS TO THE
TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,
EMPLOYEE OR AGENT OF ASSIGNEE SHALL BE HELD TO ANY PERSONAL LIABILITY,
JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF OR CLAIM AGAINST, ASSIGNEE.
ALL PERSONS DEALING WITH ASSIGNEE, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF ASSIGNEE FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
this Assignment to be executed under seal as of the day and year first
above written.
ASSIGNOR:
By:
Its (Vice) President
ASSIGNEE:
By:
Its (Vice) President
<PAGE>
EXHIBIT A
ACCOUNT NOTICE
[See attached copy.]
Exhibit 10.6
STOCK PLEDGE
THIS STOCK PLEDGE (this "AGREEMENT") is made and given as of this
_____ day of _______, 1997, by SHOLODGE, INC., a Tennessee corporation (the
"PLEDGOR"), for the benefit of ________________, a Maryland real estate
investment trust (together with its successors and assigns, the "SECURED
PARTY").
W I T N E S S E T H:
WHEREAS, pursuant to a Lease Agreement, dated as of _____ __,
1997 (the "LEASE"), the Secured Party leased to
______________________________, a _________________________ (the "TENANT"),
and the Tenant leased from the Secured Party certain premises as more
particularly described in and subject to and upon the terms and conditions
set forth in the Lease; and
WHEREAS, the Pledgor owns all of the outstanding shares of
capital stock of the Tenant and shall derive direct substantial benefit
from the transactions contemplated by the Lease; and
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the mutual receipt and legal sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. CERTAIN TERMS. Capitalized terms used and not
otherwise defined in this Agreement shall have the meanings ascribed to
such terms in the Lease.
SECTION 2. PLEDGE. The Pledgor hereby pledges to the Secured
Party the shares of capital stock of the Tenant (the "PLEDGED STOCK")
listed in EXHIBIT A attached hereto (the Pledged Stock and any additional
securities or collateral pledged hereunder, collectively, the "PLEDGED
COLLATERAL"), and the Pledgor hereby grants to the Secured Party a security
interest in all of the Pledged Collateral as security for the due and
punctual payment and performance of the Secured Obligations (as hereinafter
defined).
SECTION 3. SECURED OBLIGATIONS. For purposes of this Agreement,
the term "SECURED OBLIGATIONS" shall mean the payment and performance of
each and every obligation of the Tenant to the Secured Party, under the
Lease, whether now existing or hereafter arising, and including, without
limitation, payment of the Rent.
SECTION 4. REPRESENTATIONS OF THE PLEDGOR. The Pledgor
covenants that the Pledged Stock is duly and validly pledged to the Secured
Party in accordance with law and the Pledgor shall warrant and defend the
Secured Party's right, title and security interest in and to the Pledged
Stock against the claims and demands of all persons whomsoever. The
Pledgor represents and warrants to the Secured Party that the Pledgor has
good title to all the Pledged Stock, free and clear of all claims,
mortgages, pledges, liens, security interests and other encumbrances of
<PAGE>
every nature whatsoever; that the Pledged Stock is not subject to any
restriction on transfer contained in the charter documents or by-laws of
the Tenant or in any agreement or instrument to which the Tenant or the
Pledgor are a party or by which the Tenant or the Pledgor is bound which
would prohibit or restrict the pledge of the Pledged Stock hereunder or the
disposition thereof upon default hereunder; that all of the Pledged Stock
has been duly and validly issued and is fully paid and nonassessable; and
that the Pledged Stock constitutes all of the presently issued and
outstanding shares of the capital stock of the Tenant. The Pledgor
covenants and agrees that if any additional shares of the capital stock of
the Tenant are acquired by the Pledgor after the date hereof the same shall
constitute a part of the Pledged Collateral and shall be pledged with the
Secured Party as provided in SECTION 2 upon such acquisition.
SECTION 5. COVENANTS OF THE PLEDGOR. The Pledgor hereby
covenants and agrees that it shall not sell, convey or otherwise dispose of
any of the Pledged Collateral nor create, incur or permit to exist any
pledge, mortgage, lien, charge, encumbrance or any security interest
whatsoever with respect to any of the Pledged Collateral or the proceeds
thereof, other than the liens on and security interests in the Pledged
Collateral created hereby. The Pledgor further covenants and agrees that
it shall not consent to or approve the issuance of any additional shares of
the capital stock of the Tenant.
SECTION 6. DISTRIBUTIONS, ETC. Upon the dissolution, winding
up, liquidation or reorganization of the Tenant, whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the
benefit of creditors or any other marshalling of the assets and liabilities
of the Tenant, if any sum shall be paid or any property shall be
distributed upon or with respect to any of the Pledged Collateral, such sum
shall be paid over to the Secured Party, to be held as collateral security
for the Secured Obligations. If any stock dividend shall be declared on
any of the Pledged Collateral, or any share of stock or fraction thereof
shall be issued pursuant to any stock split involving any of the Pledged
Collateral, or any distribution of capital (excluding cash dividends) shall
be made on any of the Pledged Collateral, [or any property shall be
distributed upon or with respect to the Pledged Collateral pursuant to
recapitalization or reclassification of the capital of the Tenant], the
shares or other property so distributed shall be delivered to the Secured
Party to be held as collateral security for the Secured Obligations.
SECTION 7. EVENT OF DEFAULT. For purposes of this Agreement,
the term "EVENT OF DEFAULT" shall mean (a) the occurrence of an Event of
Default under the Lease; (b) the failure of the Pledgor to comply with any
of its covenants or obligations under this Agreement and the continuation
thereof for a period of thirty 30 days after written notice thereof;
PROVIDED, HOWEVER, that if such default is susceptible of cure but such
cure cannot be accomplished with due diligence within such period of time
and if in addition the Pledgor commences to cure or cause to be cured such
default within thirty (30) days after written notice thereof from the
Secured Party and thereafter prosecutes the curing of such default with all
due diligence, such period of time shall be extended to such period of time
(not to exceed an additional one (1) year in the aggregate) as may be
necessary to cure such default with all due diligence; or (c) any
representation or warranty contained herein or made by the Pledgor in
connection herewith shall prove to have been false or misleading in any
material respect when made.
<PAGE>
SECTION 8. REMEDIES. (a) Upon the occurrence of an Event of
Default, the Secured Party may cause all or any of the Pledged Collateral
to be transferred into its name or into the name of its nominee or
nominees, subject to the provisions of the Uniform Commercial Code or other
applicable law.
(b) Upon the occurrence and during the continuance of an Event
of Default, the Secured Party shall be entitled to exercise the voting
power with respect to the Pledged Collateral, to receive and retain, as
collateral security for the Secured Obligations, any and all dividends or
other distributions at any time and from time to time declared or made upon
any of the Pledged Collateral, and to exercise any and all such rights of
payment, conversion, exchange, subscription or any other rights, privileges
or options pertaining to the Pledged Collateral as if it were the absolute
owner thereof, including, without limitation, all such rights under any
shareholders agreement, and further including, without limitation, the
right to exchange, at its discretion, any and all of the Pledged Collateral
upon the merger, consolidation, reorganization, recapitalization or other
readjustment of the Tenant, upon the exercise of any such right, privilege
or option pertaining to the Pledged Collateral, and in connection
therewith, to deposit and deliver any and all of the Pledged Collateral
with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Secured Party may
determine.
(c) Upon the occurrence and during the continuance of an Event
of Default, the Secured Party shall have all of the rights and remedies of
a secured party under the Uniform Commercial Code or other applicable law
and shall have the right to sell, resell, assign and deliver all or any of
the Pledged Collateral in one or more parcels at any exchange or broker's
board or at public or private sale. The Secured Party shall give the
Pledgor at least ten (10) days' prior written notice of the time and place
of any public sale thereof or of the time after which any private sale or
any other intended disposition thereof is to be made. Any such notice
shall be deemed to meet any requirement hereunder or under any applicable
law (including the Uniform Commercial Code) that reasonable notification be
given of the time and place of such sale or other disposition. Such notice
may be given without any demand of performance or other demand, all such
demands being hereby expressly waived by the Pledgor to the extent
permitted by applicable law. All such sales shall be at such commercially
reasonable price or prices as the Secured Party shall deem best and either
for cash or on credit or for future delivery (without assuming any
responsibility for credit risk). At any such sale or sales, the Secured
Party may purchase any or all of the Pledged Collateral to be sold thereat
upon such terms as the Secured Party may deem best. Upon any such sale or
sales, the Pledged Collateral so purchased shall be held by the purchaser
absolutely free from any claims or rights of any kind or nature of the
Pledgor, including any equity of redemption and any similar rights, all
such equity of redemption and any similar rights being hereby expressly
waived and released by the Pledgor to the extent permitted by applicable
law. In the event any consent, approval or authorization of any
governmental agency will be necessary to effectuate any such sale or sales,
the Pledgor shall execute, and hereby agrees to cause the Tenant to
execute, all such applications or other instruments as may be required.
The proceeds of any such sale or sales, together with any other additional
collateral security at the time received and held hereunder, shall be
received and applied: FIRST, to the payment of all costs and expenses of
<PAGE>
such sale, including attorneys' fees; and SECOND, to the payment of the
Secured Obligations in such order of priority as the Secured Party shall
determine; and any surplus thereafter remaining shall be paid to the
Pledgor or to whomever may be legally entitled thereto (including, if
applicable, any subordinated creditor of the Pledgor).
The Pledgor recognizes that the Secured Party may be unable to
effect a public sale of all or a part of the Pledged Collateral by reason
of certain prohibitions contained in the Securities Act of 1933, and may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire
such Pledged Collateral for their own accounts, for investment and not with
a view to the distribution or resale thereof. The Pledgor agrees that
private sales so made may be at prices and upon other terms less favorable
to the seller than if such Pledged Collateral were sold at public sales,
and that the Secured Party shall have no obligation to delay sale of any
such Pledged Collateral for the period of time necessary to permit such
Pledged Collateral to be registered for public sale under the Securities
Act of 1933. The Pledgor agrees that private sales made under the
foregoing circumstances may be deemed to have been made in a commercially
reasonable manner. Nothing herein shall be deemed to require the Pledgor
to effect a registration of the Pledged Collateral under the Securities Act
of 1933.
(d) Upon the occurrence and during the continuance of any Event
of Default, the Secured Party, in its discretion, may demand, sue for
and/or collect any money or property at any time due, payable or
receivable, to which it may be entitled hereunder, on account of or in
exchange for any of the Pledged Collateral. Upon the occurrence and during
the continuance of any Event of Default, the Secured Party shall further
have the right, for and in the name, place and stead of the Pledgor, to
execute endorsements, assignments, or other instruments of conveyance or
transfer with respect to all or any of the Pledged Collateral.
(e) The Secured Party shall not be obligated to do any of the
acts hereinabove authorized and in the event that the Secured Party elects
to do any such act, the Secured Party shall not be responsible to the
Pledgor, other than for gross negligence or willful misconduct.
SECTION 9. RIGHTS OF SECURED PARTY. No course of dealing
between the Pledgor and the Secured Party nor any failure to exercise, nor
any delay in exercising, on the part of the Secured Party, any right, power
or privilege hereunder or under any of the Secured Obligations, shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided and provided under any
of the Secured Obligations are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law, including, without
limitation, the rights and remedies of a secured party under the Uniform
Commercial Code.
SECTION 10. ASSIGNMENT, ETC. No waiver by the Secured Party or
by any other holder of Secured Obligations of any default shall be
effective unless in writing nor operate as a waiver of any other default or
of the same default on a future occasion. In the event of a sale or
assignment by the Secured Party of its interest under the Lease, the
<PAGE>
Secured Party may assign or transfer its rights and interest under this
Agreement in whole or in part to the purchaser or assignee of such
interest, whereupon such purchaser or purchasers shall become vested with
all of the powers and rights given to the Secured Party hereunder, and the
Secured Party shall thereafter be forever released and fully discharged
from any liability or responsibility thereafter arising hereunder with
respect to the rights and interests so assigned.
SECTION 11. DUTY OF SECURED PARTY. Beyond the exercise of
reasonable care to assure the safe custody of the Pledged Collateral while
held hereunder, the Secured Party shall have no duty or liability to
collect any sums due in respect thereof or to protect or preserve rights
pertaining thereto, and shall be relieved of all responsibility for the
Pledged Collateral upon surrendering the same to the Pledgor.
SECTION 12. WAIVERS, ETC. To the extent permitted by applicable
law, the Pledgor, on its own behalf and on behalf of its successors and
assigns, hereby waives presentment, demand, payment, notice of dishonor,
protest and, except as otherwise provided herein, all other demands and
notices in connection with this Agreement or the enforcement of the rights
of the Secured Party hereunder or in connection with any Secured
Obligations. The Secured Party may release, supersede, exchange or modify
any collateral security it may from time to time hold and release,
surrender or modify the liability of any third party without giving notice
hereunder to the Pledgor. The Secured Party shall be under no duty to
exhaust its rights against any such collateral security or any such third
party before realizing on the Pledged Collateral. Such modifications,
changes, renewals, releases or other actions shall in no way affect the
Pledgor' obligations hereunder.
The Pledgor further waives any right it may have under the
Constitution of The Commonwealth of Massachusetts (or under the
constitution of any other state in which the any of the Pledged Collateral
may be located), or under the Constitution of the United States of America,
to notice (except for notice specifically required hereby) or to a judicial
hearing prior to the exercise of any right or remedy provided by this
Agreement to the Secured Party, and waives its rights, if any, to set aside
or invalidate any sale duly consummated in accordance with the foregoing
provisions hereof on the grounds (if such be the case) that the sale was
consummated without a prior judicial hearing. THE PLEDGOR'S WAIVERS UNDER
THIS SECTION 12 HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY AND
AFTER THE Pledgor HAS BEEN APPRISED AND COUNSELED BY ITS ATTORNEYS AS TO
THE NATURE THEREOF AND ITS POSSIBLE ALTERNATIVE RIGHTS.
SECTION 13. FURTHER ASSURANCES AS TO COLLATERAL;
ATTORNEY-IN-FACT. From time to time hereafter, the Pledgor shall execute
and deliver, or will cause to be executed and delivered, such additional
instruments, certificates or documents (including without limitation
financing statements, renewal statements, collateral assignments and other
security documents), and shall take all such actions, as the Secured Party
may reasonably request, for the purposes of implementing or effectuating
the provisions of this Agreement or of more fully perfecting or renewing
the Secured Party's rights with respect to the Pledged Collateral (or with
respect to any additions thereto or replacements or proceeds thereof or
<PAGE>
with respect to any other property or assets hereafter acquired by the
Pledgor which may be deemed to be a part of the Pledged Collateral)
pursuant hereto and thereto. The Secured Party is hereby appointed the
attorney-in-fact, with full power of substitution, of the Pledgor for the
purpose of carrying out the provisions of this Agreement and taking any
action, including, without limitation, executing, delivering and filing
applications, certificates, instruments and other documents and papers with
governmental authorities, and executing any instruments, including without
limitation, assignments, conveyances and transfers which are required to be
taken or executed by the Pledgor under this Agreement, on its behalf and in
its name which appointment is coupled with an interest, is irrevocable and
durable and shall survive the subsequent dissolution, disability or
incapacity of the Pledgor; PROVIDED, HOWEVER, that the Secured Party shall
not be entitled to take any action required of the Pledgor under this
Agreement unless the Secured Party has made written demand on the Pledgor
to take such action and the Pledgor, having been afforded a reasonable time
to take such action, fails to do so.
SECTION 14. NOTICES. (a) Any and all notices, demands,
consents, approvals, offers, elections and other communications required or
permitted under this Agreement shall be deemed adequately given if in
writing and the same shall be delivered either in hand, by telecopier with
written acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with return receipt requested (if by
mail), or with all freight charges prepaid (if by Federal Express or
similar carrier).
(b) All notices required or permitted to be sent hereunder shall
be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and,
in all other cases, upon the date of receipt or refusal, except that
whenever under this Agreement a notice is either received on a day which is
not a Business Day or is required to be delivered on or before a specific
day which is not a Business Day, the day of receipt or required delivery
shall automatically be extended to the next Business Day.
(c) All such notices shall be addressed,
if to the Secured Party to:
__________________
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
<PAGE>
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to the Pledgor to:
______________________________
c/o ShoLodge, Inc.
130 Maple Drive North
Hendersonville, Tennessee 37075
Attn: Mr. Leon L. Moore
[Telecopier No. (615)264-1758]
with a copy to:
Boult Cummings Conners & Berry, PLC
414 Union Street, Suite 1600
Nashville, Tennessee 37219
Attn: Patrick L. Alexander, Esq.
[Telecopier No. (615) 252-6362]
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other
address within the United States of America or to such other address as the
party to whom such notice is directed may have designated in writing to the
other parties hereto.
SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and the term "Secured Party" shall be
deemed to include any other holder or holders of any of the Secured
Obligations. Where the context so permits or requires, terms defined
herein in the singular number shall include the plural, and in the plural
number, the singular. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, each of
which, when so executed and delivered, shall be an original and all of
which shall together constitute one and the same agreement.
SECTION 16. REINSTATEMENT. This Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time any amount
received by the Secured Party in respect of the Pledged Collateral is
rescinded or must otherwise be restored or returned by the Secured Party
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization
<PAGE>
of the Pledgor or upon the appointment of any intervenor or conservator of,
or trustee or similar official for the Pledgor or any substantial part of
its or property, or otherwise, all as though such payments had not been
made.
SECTION 17. RESTRICTIONS ON TRANSFER. To the extent that any
restrictions imposed by any shareholders agreement, the Articles of
Incorporation or charter of the Tenant or any other document or instrument
would in any way affect or impair the pledge of the Pledged Collateral
hereunder or the exercise by the Secured Party of any right granted
hereunder including, without limitation, the right of the Secured Party to
dispose of the Pledged Collateral upon the occurrence of any Event of
Default, the Pledgor hereby waives such restrictions, and hereby agree that
they will take any action which the Secured Party may reasonably request in
order that the Secured Party may obtain and enjoy the full rights and
benefits granted to the Secured Party by this Agreement free of any such
restrictions.
SECTION 18. APPLICABLE LAW. This Agreement and any other
instruments executed and delivered to evidence, complete or perfect the
transactions contemplated hereby and thereby shall be interpreted,
construed, applied and enforced in accordance with the laws of The
Commonwealth of Massachusetts applicable to contracts between residents of
Massachusetts which are to be performed entirely within Massachusetts
regardless of (i) where any such instrument is executed or delivered; or
(ii) where any payment or other performance required by any such instrument
is made or required to be made; or (iii) where any breach of any provision
of any such instrument occurs, or any cause of action otherwise accrues; or
(iv) where any action or other proceeding is instituted or pending; or (v)
the nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi) whether
the laws of the forum jurisdiction otherwise would apply the laws of a
jurisdiction other than The Commonwealth of Massachusetts; or (vii) any
combination of the foregoing. Notwithstanding the foregoing, the laws of
the jurisdiction where any of the Pledged Collateral is situated or
otherwise has a situs will apply to the perfection, disposition and
realization upon such Pledged Collateral.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions
of this Agreement may be brought and prosecuted in such court or courts
located in The Commonwealth of Massachusetts as may be provided by law; and
the parties consent to the jurisdiction of said court or courts located in
The Commonwealth of Massachusetts and to service of process by registered
mail, return receipt requested, or by any other manner provided by law.
SECTION 19. SEVERABILITY. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected
or impaired thereby, but this Agreement shall be reformed and construed and
enforced to the maximum extent permitted by applicable law.
SECTION 20. ENTIRE CONTRACT. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject
<PAGE>
matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to
the subject matter hereof.
SECTION 21. HEADINGS; COUNTERPARTS. Headings in this Agreement
are for purposes of reference only and shall not limit or otherwise affect
the meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument, and in pleading or proving any provision
of this Agreement, it shall not be necessary to produce more than one of
such counterparts.
SECTION 22. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST
ESTABLISHING THE SECURED PARTY, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT
OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE
NAME "_______________________" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE SECURED PARTY SHALL
BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION
OF OR CLAIM AGAINST, THE SECURED PARTY. ALL PERSONS DEALING WITH THE
SECURED PARTY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE SECURED
PARTY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
WITNESS the execution hereof under seal as of the date above
first written.
By:
Its (Vice) President
<PAGE>
EXHIBIT A
PLEDGED STOCK
[See attached photocopy.]
Exhibit 10.7
LIMITED GUARANTY AGREEMENT
THIS LIMITED GUARANTY AGREEMENT (this "AGREEMENT") is made and
given as of this _____ day of ________, 1997, by SHOLODGE, INC., a
Tennessee corporation (the "GUARANTOR"), for the benefit of ____________
AND HOSPITALITY PROPERTIES TRUST, each a Maryland real estate investment
trust (collectively, together with their successors and assigns, "HPT").
W I T N E S S E T H :
WHEREAS, pursuant to a Lease Agreement, dated as of the date
hereof (the "LEASE"), ______________ has agreed to lease to
_________________, a _________ corporation (the "TENANT"), certain real
property, the related improvements and personal property, comprising
fourteen (14) Sumner Suite hotels, as more particularly described in the
Lease; and
WHEREAS, it is a condition precedent to ______________'s entering
into the Lease that the Guarantor guarantee on a limited basis as set forth
herein all of the payment and performance obligations of the Tenant with
respect to the Lease; and
WHEREAS, the transactions contemplated by the Lease are of direct
material benefit to the Guarantor;
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the mutual receipt and legal sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. CERTAIN TERMS. Capitalized terms used and not otherwise
defined in this Agreement shall have the meanings ascribed to such terms in
the Lease. The Lease and the Incidental Documents are herein collectively
referred to as the "TRANSACTION DOCUMENTS."
2. GUARANTEED OBLIGATIONS. For purposes of this Agreement, the
term "GUARANTEED OBLIGATIONS" shall mean the payment and performance of
each and every obligation of the Tenant to HPT under the Transaction
Documents, whether now existing or hereafter arising, and including,
without limitation, the payment of the full amount of the Rent payable
under the Lease.
3. REPRESENTATIONS AND COVENANTS. The Guarantor represents,
warrants, covenants and agrees that:
3.1 PERFORMANCE OF COVENANTS AND AGREEMENTS. Subject to the
limitations set forth in SECTION 20, during the term of this Agreement, the
Guarantor will cause the Tenant duly and punctually to perform all of the
covenants and agreements set forth in the Transaction Documents.
<PAGE>
3.2 VALIDITY OF AGREEMENT. The Guarantor has duly and
validly executed and delivered this Agreement; this Agreement constitutes
the legal, valid and binding obligation of the Guarantor, enforceable
against the Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors; and the execution, delivery and performance of this
Agreement have been duly authorized by all requisite action of the
Guarantor and such execution, delivery and performance by the Guarantor
will not result in any breach of the terms, conditions or provisions of, or
conflict with or constitute a default under, or result in the creation of
any lien, charge or encumbrance upon any of the property or assets of the
Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust,
note, other evidence of indebtedness, agreement or other instrument to
which the Guarantor is a party or by which the Guarantor or any property or
assets of the Guarantor is bound, or violate any provision of law
applicable to the Guarantor, or any order, writ, injunction, judgement or
decree of any court applicable to the Guarantor or any order or other
public regulation of any governmental commission, bureau or administrative
agency applicable to the Guarantor.
3.3 PAYMENT OF EXPENSES. The Guarantor agrees, as
principal obligor and not as Guarantor only, to pay to HPT forthwith, upon
demand, in immediately available Federal funds, all costs and expenses
(including court costs and reasonable legal expenses) incurred or expended
by HPT in connection with the enforcement of this Agreement, together with
interest on amounts recoverable under this Agreement from the time such
amounts become due until payment at the Interest Rate, but recourse
therefor shall be limited as provided in SECTION 20.
3.4 REPORTS. The Guarantor shall promptly provide to HPT
each of the financial reports, certificates and other documents required of
the Guarantor under the Transaction Documents.
3.5 LEGAL EXISTENCE. During the term of this Agreement,
the Guarantor shall do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence.
4. GUARANTEE. Subject to the limitations set forth in SECTION
20, the Guarantor hereby unconditionally guarantees that the Guaranteed
Obligations which are monetary obligations which become due and payable
during the term of this Agreement shall be paid in full when due and
payable, whether upon demand, at the stated or accelerated maturity thereof
or upon any mandatory or voluntary prepayment pursuant to any Transaction
Document, or otherwise, and that the Guaranteed Obligations which are
performance obligations which are required to be performed during the term
of this Agreement shall be fully performed at the times and in the manner
such performance is required by the Transaction Documents. With respect to
the Guaranteed Obligations which are monetary obligations, this guarantee
is a guarantee of payment and not of collectibility and is absolute and in
no way conditional or contingent, subject to the limitations set forth in
SECTION 20. In case any part of the Guaranteed Obligations shall not have
been paid when due and payable or performed at the time performance is
<PAGE>
required, the Guarantor shall, within five (5) days after receipt of notice
from HPT, subject to the limitations set forth in SECTION 20, pay or cause
to be paid to HPT the amount thereof as is then due and payable and unpaid
(including interest and other charges, if any, due thereon through the date
of payment in accordance with the applicable provisions of the Transaction
Documents) or perform or cause to be performed such obligations in
accordance with the Transaction Documents.
5. UNENFORCEABILITY OF GUARANTEED OBLIGATIONS, ETC. If the
Tenant is for any reason under no legal obligation to discharge any of the
Guaranteed Obligations, or if any other moneys included in the Guaranteed
Obligations have become unrecoverable from the Tenant by operation of law
or for any other reason, including, without limitation, the invalidity or
irregularity in whole or in part of any Guaranteed Obligation or of any
Transaction Document or any limitation on the liability of the Tenant
thereunder or any limitation on the method or terms of payment thereunder
which may now or hereafter be caused or imposed in any manner whatsoever,
the guarantees contained in this Agreement shall nevertheless remain in
full force and effect in accordance with the terms set forth herein and
shall be binding upon the Guarantor to the same extent as if the Guarantor
at all times had been the principal debtor on all such Guaranteed
Obligations.
6. ADDITIONAL GUARANTEES. This Agreement shall be in addition
to any other guarantee or other security for the Guaranteed Obligations and
it shall not be prejudiced or rendered unenforceable by the invalidity of
any such other guarantee or security or by any waiver, amendment, release
or modification thereof.
7. CONSENTS AND WAIVERS, ETC. The Guarantor hereby
acknowledges receipt of correct and complete copies of each of the
Transaction Documents and consents to all of the terms and provisions
thereof, as the same may be from time to time hereafter amended or changed
in accordance therewith, and waives, to the extent the Guarantor lawfully
may do so, (a) presentment, demand for payment, and protest of nonpayment,
of any of the Guaranteed Obligations, (b) notice of acceptance of this
Agreement and of diligence, presentment, demand and protest, (c) notice of
any default hereunder and any default, breach or nonperformance or Event of
Default under any of the Guaranteed Obligations or the Transaction
Documents, except as expressly provided in SECTION 4, (d) notice of the
terms, time and place of any private or public sale of collateral held as
security for the Guaranteed Obligations, (e) demand for performance or
observance of, and any enforcement of any provision of, or any pursuit or
exhaustion of rights or remedies against the Tenant or any other guarantor
of the Guaranteed Obligations, under or pursuant to the Transaction
Documents, or any agreement directly or indirectly relating thereto and any
requirements of diligence or promptness on the part of the holders of the
Guaranteed Obligations in connection therewith, and (f) any and all demands
and notices of every kind and description with respect to the foregoing or
which may be required to be given by any statute or rule of law.
8. NO IMPAIRMENT, ETC. The obligations, covenants, agreements
and duties of the Guarantor under this Agreement shall not be affected or
impaired by any assignment or transfer in whole or in part of any of the
Guaranteed Obligations without notice to the Guarantor, or any waiver by
<PAGE>
HPT or any holder of any of the Guaranteed Obligations or by the holders of
all of the Guaranteed Obligations of the performance or observance by the
Tenant or any other guarantor of any of the agreements, covenants, terms or
conditions contained in the Guaranteed Obligations or the Transaction
Documents or any indulgence in or the extension of the time for payment by
the Tenant or any other guarantor of any amounts payable under or in
connection with the Guaranteed Obligations or the Transaction Documents or
any other instrument or agreement relating to the Guaranteed Obligations or
of the time for performance by the Tenant or any other guarantor of any
other obligations under or arising out of any of the foregoing or the
extension or renewal thereof, or the modification or amendment (whether
material or otherwise) of any duty, agreement or obligation of the Tenant
or any other guarantor set forth in any of the foregoing, or the voluntary
or involuntary sale or other disposition of all or substantially all the
assets of the Tenant or any other guarantor or insolvency, bankruptcy, or
other similar proceedings affecting the Tenant or any other guarantor or
any assets of the Tenant or any such other guarantor, or the release or
discharge of the Tenant or any such other guarantor from the performance or
observance of any agreement, covenant, term or condition contained in any
of the foregoing without the consent of the holders of the Guaranteed
Obligations by operation of law.
9. REIMBURSEMENT, SUBROGATION, ETC. The Guarantor hereby
covenants and agrees that, as long as no Event of Default has occurred and
is continuing under the Transaction Documents, the Guarantor will not
enforce or otherwise exercise any rights of reimbursement, subrogation,
contribution or other similar rights against the Tenant or any other person
with respect to the Guaranteed Obligations prior to the payment in full of
all amounts then due and owing but unpaid with respect to the Lease, and
until the Guaranteed Obligations have been satisfied in full, the Guarantor
shall not have any right of subrogation, and the Guarantor waives any
defense it may have based upon any election of remedies by HPT which
destroys the Guarantor's subrogation rights or the Guarantor's rights to
proceed against the Tenant for reimbursement, including, without
limitation, any loss of rights the Guarantor may suffer by reason of any
rights, powers or remedies of the Tenant in connection with any
anti-deficiency laws or any other laws limiting, qualifying or discharging
the indebtedness to HPT. Until all obligations of the Tenant pursuant to
the Transaction Documents shall have been paid and satisfied in full, the
Guarantor waives any right to enforce any remedy which HPT now has or may
in the future have against the Tenant, any other guarantor or any other
person and any benefit of, or any right to participate in, any security
whatsoever now or in the future held by HPT.
10. DEFEASANCE. (a) Except as expressly provided in paragraph
(b) below, this Agreement shall terminate at such time as the Guaranteed
Obligations have been paid and performed in full and all other obligations
of the Guarantor to HPT under this Agreement have been satisfied in full;
PROVIDED, HOWEVER, if at any time, all or any part of any payment applied
on account of the Guaranteed Obligations is or must be rescinded or
returned for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of the Tenant), this Agreement, to
the extent such payment is or must be rescinded or returned, shall be
deemed to have continued in existence notwithstanding any such termination.
<PAGE>
(b) Provided that no (i) monetary Default, (ii) Default as to
which Notice thereof has been given to Tenant or (iii) Event of Default
shall have occurred and be continuing under the Lease, (y) Cash Flow (as
defined below) for a period of thirteen (13) full consecutive Accounting
Periods equals or exceeds Eighteen Million Five Hundred Thousand Dollars
($18,500,000) with respect to such period, and (z) HPT shall receive a
schedule evidencing the foregoing, in form and substance reasonably
satisfactory to HPT prepared by a, so-called, "Big-Six" accounting firm or
such other certified public accountants as are approved by HPT (such
approval not to be unreasonably withheld, delayed or conditioned), this
Agreement shall terminate ten (10) Business Days after delivery to HPT of
the financial statements described in clause (z) preceding, and HPT shall,
within ten (10) Business Days after the written request of the Guarantor,
confirm such termination by executing a release of the Guarantor from all
obligations and liabilities arising under this Agreement subsequent to the
release date and returning any unapplied balance of the Guaranty Deposit
(as hereinafter defined) to the Guarantor, together with any accrued and
unpaid interest thereon.
As used herein, "CASH FLOW" shall mean the net income (or loss)
of Tenant in connection with the operation of the Hotels before income
taxes, calculated in accordance with GAAP, PLUS (a) all extraordinary
expense items, (b) depreciation and amortization, (c) interest expense on
Indebtedness permitted under the Lease, (d) base management fees, incentive
management fees, trade name fees, franchise fees, royalty fees and central
marketing fees paid to the Manager to the extent subordinate to payment of
rent pursuant to the Lease from and after the occurrence of an Event of
Default MINUS (e) required contributions to the FF&E Reserve and (f) all
extraordinary income items.
11. 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.
<PAGE>
(c) All such notices shall be addressed,
if to HPT to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to the Guarantor to:
ShoLodge, Inc.
130 Maple Drive North
Hendersonville, Tennessee 37075
Attn: Mr. Leon L. Moore
[Telecopier No. (615) 264-1758]
with a copy to:
Boult Cummings Conners & Berry, PLC
414 Union Street, Suite 1600
Nashville, Tennessee 37219
Attn: Patrick L. Alexander, Esq.
[Telecopier No. (615) 252-6362]
(d) By notice given as herein provided, the parties hereto and
their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other
address within the United States of America.
12. SUCCESSORS AND ASSIGNS. Whenever in this Agreement, any of
the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party, including without
limitation the holders, from time to time, of the Guaranteed Obligations;
and all representations, warranties, covenants and agreements by or on
behalf of the Guarantor which are contained in this Agreement shall inure
<PAGE>
to the benefit of HPT's successors and assigns, including without
limitation said holders, whether so expressed or not; PROVIDED, HOWEVER,
that, if HPT shall transfer the Guaranty Deposit to a person having a Net
Worth less than ten (10) times the unapplied balance thereof, HPT shall
guaranty repayment thereof and payment of any accrued interest thereon to
the Guarantor in accordance with the terms of this Agreement pursuant to a
guaranty in form and substance reasonably satisfactory to the Guarantor.
13. APPLICABLE LAW. Except as to matters regarding the internal
affairs of HPT and issues of or limitations on any personal liability of
the shareholders and trustees of HPT for obligations of HPT, as to which
the laws of the State of Maryland shall govern, this Agreement and any
other instruments executed and delivered to evidence, complete or perfect
the transactions contemplated hereby shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts
which are to be performed entirely within Massachusetts, regardless of (i)
where any such instrument is executed or delivered; or (ii) where any
payment or other performance required by any such instrument is made or
required to be made; or (iii) where any breach of any provision of any such
instrument occurs, or any cause of action otherwise accrues; or (iv) where
any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi) whether
the laws of the forum jurisdiction otherwise would apply the laws of a
jurisdiction other than Massachusetts; or (vii) any combination of the
foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions
of this Agreement may be brought and prosecuted in such court or courts
located in The Commonwealth of Massachusetts as may be provided by law; and
the parties consent to the jurisdiction of said court or courts located in
Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
14. MODIFICATION OF AGREEMENT. No modification or waiver of any
provision of this Agreement, nor any consent to any departure by the
Guarantor therefrom, shall in any event be effective unless the same shall
be in writing and signed by HPT, and such modification, waiver or consent
shall be effective only in the specific instances and for the purpose for
which given. No notice to or demand on the Guarantor in any case shall
entitle the Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
15. WAIVER OF RIGHTS BY HPT. Neither any failure nor any delay
on HPT's part in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise or the exercise of
any other right, power or privilege.
16. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
<PAGE>
provisions contained herein shall not in any way be affected or impaired
thereby, but this Agreement shall be reformed and construed and enforced to
the maximum extent permitted by applicable law.
17. ENTIRE CONTRACT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof and shall supersede and take the place of any other instruments
purporting to be an agreement of the parties hereto relating to the subject
matter hereof.
18. HEADINGS; COUNTERPARTS. Headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument, and in pleading or proving any provision
of this Agreement, it shall not be necessary to produce more than one of
such counterparts.
19. REMEDIES CUMULATIVE. No remedy herein conferred upon HPT is
intended to be exclusive of any other remedy, and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
20. LIMITATION ON GUARANTOR'S LIABILITY. Notwithstanding
anything to the contrary contained herein, the liability of the Guarantor
hereunder, and HPT's recourse to the assets of the Guarantor hereunder,
shall be limited to the sum (the "GUARANTY DEPOSIT") of Fourteen Million
Dollars ($14,000,000), which amount has been deposited with HPT on the date
hereof. HPT shall have no obligation to hold the Guaranty Deposit in a
segregated account and may commingle the same with its general funds.
Provided that no Event of Default shall have occurred and be continuing,
HPT shall credit the Guarantor or its assigns with interest on any
unapplied balance of the Guaranty Deposit at a rate of 11.11% per annum.
Such interest shall be credited in arrears and pro rated with respect to
any partial month. Upon the termination of this Agreement in accordance
with SECTION 10, HPT shall refund any unapplied balance of the Guaranty
Deposit, together with any accrued and unpaid interest with respect
thereto, to the Guarantor. In the event HPT shall fail to refund any
unapplied balance of the Guaranty Deposit and accrued interest to the
Guarantor on the date due, HPT shall thereafter pay the Guarantor interest
thereon at the Overdue Rate until paid. At the written request of the
Guarantor, HPT shall credit accrued interest on the Guaranty Deposit
against the monthly Minimum Rent.
WITNESS the execution hereof under seal as of the date above
first written.
SHOLODGE, INC.
By:
Its (Vice) President
ACKNOWLEDGED AND AGREED:
By:
Its (Vice) President
HOSPITALITY PROPERTIES TRUST
By:
Its (Vice) President
Exhibit 99.1
Contact: Michael A. Corbett
Chief Financial Officer
(615) 264-8000
SHOLODGE ANNOUNCES STRATEGIC ALLIANCE WITH
HOSPITALITY PROPERTIES TRUST
Hendersonville, Tennessee (October 27, 1997) - ShoLodge, Inc. (Nasdaq/NM:
LODG) today announced that it has entered into a strategic alliance with
Hospitality Properties Trust (NYSE:HPT). As part of the alliance, ShoLodge
will sell and leaseback 14 Sumner Suites hotels for a total price of $140
million. In addition, the two companies have signed a letter of intent for
further transactions for Sumner Suites hotels that contemplate additional
investments by HPT of $150 million.
ShoLodge is the owner, operator, and developer of the Sumner
Suites brand and also owns, develops, manages, and franchises the Shoney's
Inns and Shoney's Inns & Suites brand. HPT is a real estate investment
trust which has $1.2 billion of investments in hotels that are leased to
unaffiliated hotel operating companies.
The 14 Sumner Suites hotels have a total of 1,641 suites and are
located in Arizona, Florida, Georgia, Ohio, Indiana, New Mexico, Tennessee,
and Texas. A newly formed wholly owned subsidiary of ShoLodge will lease
all 14 Sumner Suites hotels from HPT for an initial term of ten years with
five, ten-year renewal options. The transaction is expected to close in
November 1997.
ShoLodge will retain ownership of two Sumner Suites hotels
located in Houston and SanAntonio, Texas; those Sumner Suites under
construction and development in Colorado Springs, Colorado; Overland Park,
Kansas; Pine Knoll Shores and Charlotte, North Carolina; Irving and Grand
Prairie, Texas; and 10 additional locations in various stages of
development.
-MORE-
<PAGE>
Sumner Suites hotels address the very desirable mid-market, all-
suites segment of the hospitality industry. They feature deluxe
continental breakfast service, swimming pool, an exercise facility,
approximately 1,500 square feet of meeting space, and are primarily
targeted toward business travelers and families looking for spacious
accommodations at a reasonable price.
Commenting on the announcement, Leon Moore, chairman, president
and chief executive officer of ShoLodge, said, "We are very pleased to
announce this alliance with HPT. Both HPT and ShoLodge have a successful
and proven track record in the lodging industry. The sale of these initial
14 Sumner Suites coupled with our proven managerial ability to develop,
build, and operate these properties provides us with a solid base to
aggressively accelerate our growth strategy of opening additional Sumner
Suites. We expect the transaction will have a significant accretive effect
beginning with 1998."
ShoLodge owns, develops, and operates the Sumner Suites brand of
hotels and owns, develops, operates, and franchises Shoney's Inns and
Shoney's Inns & Suites.
