SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 21, 1997
HOSPITALITY PROPERTIES TRUST
(Exact name of registrant as specified in charter)
Maryland 1-11527 04-3262075
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
400 Centre Street, Newton, Massachusetts 02158
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 617-964-8389
<PAGE>
Item 5. Other Events.
Fifteen Candlewood(R) Hotels
On November 19, 1997, Hospitality Properties Trust (together with its
subsidiaries, the "Company") and Candlewood Hotel Company, Inc. and certain of
its subsidiaries (collectively, "Candlewood") entered into a Purchase and Sale
Agreement and an Agreement to Lease (collectively, the "Candlewood Documents")
pursuant to which the Company will acquire 15 Candlewood(R) Hotels
(collectively, the "CW Hotels") from Candlewood for a purchase price of $100
million. Upon acquisition, the Company will lease the CW Hotels to a wholly
owned subsidiary of Candlewood (the "CW Tenant"). The CW Hotels, 10 of which
have been recently completed and five of which are currently under development,
contain a total of 1,592 suites. The Company plans to fund the purchase of the
CW Hotels initially by drawing on the Company's line of credit and/or its bridge
financing facilities, which together total $455 million (the "Credit
Facilities"), in each case provided by DLJ Mortgage Capital, Inc. The Company
intends to commence an offering of equity securities (the "Equity Offering"), a
portion of the proceeds of which would be applied to repay such indebtedness. If
such offering is not consummated or if the net proceeds thereof are insufficient
for the purpose, the Company would explore various alternatives in both the
timing and repayment of amounts outstanding under the Credit Facilities. Such
alternatives may include the issuance of public or private equity or debt,
including long term debt.
The location and number of suites of the 15 CW Hotels are as follows:
No. of
Location by State CW Hotels Total Suites
----------------- --------- ------------
Alabama 1 98
Arizona 1 98
California 1 122
Colorado 1 130
Kansas 2 188
Kentucky 1 77
Michigan 1 121
Nebraska 1 131
Ohio 1 77
Pennsylvania 1 110
Texas 1 122
Utah 2 220
Virginia 1 98
--- ---
Total 15 1,592
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<PAGE>
The principal features of the agreed form of the lease of the 15 CW
Hotels will be as follows:
o The CW 15 Hotels will be the subject of a single lease.
o The initial lease term will expire December 31, 2011.
o At the end of the initial lease term, the CW Tenant will have three
consecutive renewal options of 15 years.
o The lease will require minimum rent payments to the Company aggregating
$10 million per year.
o In addition to minimum rents, the lease will require percentage rents
equal to 10% of all revenues and receipts of every kind derived from
guest or customers related to the operation of each CW Hotel ("Total CW
Hotel Sales") in excess of Total CW Hotel Sales for such hotel during
the second year of operation.
o A percentage of Total CW Hotel Sales, initially 3% of Total CW Hotel
Sales for 1998, increasing to 4% of Total CW Hotel Sales for 1999 and
to 5% of Total CW Hotel Sales thereafter, will be escrowed monthly by
the CW Tenant to fund refurbishments and renovations to the CW Hotels.
o Under certain circumstances, the Company may be required to fund major
repairs to the CW Hotels, in which event annual minimum rent will be
increased by a minimum of 10% of the amount funded.
o The lease of the CW Hotels will be a triple net lease requiring the CW
Tenant to pay all operating expenses, including taxes and insurance.
o A security deposit equal to 10% of the purchase price of each of the 15
CW Hotels will be retained by the Company as security for the CW
Tenant's obligations under the lease. The Company must repay any
unapplied balance of the security deposit to Candlewood at the
expiration of the lease without default, including renewal terms, if
any. No interest will be paid by the Company on the security deposit,
and the security deposit will not be escrowed.
o The Company's prior written consent is required for the CW Tenant to
enter into, amend or modify the provisions of, any management
agreement.
o Any amount which may become due to managers for operation of the CW
Hotels will be subordinated to all amounts due to the Company under the
lease.
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<PAGE>
o Candlewood Hotel Company, Inc. ("CWHC") will guaranty all obligations
of the CW Tenant under the lease, including the full amount of the rent
payable under the lease. Provided no defaults have occurred and are
continuing under the lease, the CWHC guaranty terminates at such time
as cash flow of the CW Tenant exceeds minimum rent for 12 consecutive
months by 50%. The CWHC guaranty will be secured by a $5 million
deposit to be retained by the Company, the unapplied balance of which
will be required to be refunded to CWHC, provided no default has
occurred and is continuing, at such time as cash flow of the CW Tenant
exceeds minimum rent for 12 consecutive months by 40%. Provided no
defaults have occurred and are continuing, the Company will be required
to pay 11.11% per annum interest on the guaranty deposit. The guaranty
deposit will not be escrowed.
While the Company has entered into the Candlewood Documents for the
acquisition of the CW Hotels, the purchase of the CW Hotels is subject to the
satisfaction of a number of conditions, certain of which unless satisfied could
result in one or more of the CW Hotels not being acquired. See "Certain
Information" below.
Fourteen Sumner Suite(R) Hotels
On November 19, 1997, the Company, through a wholly owned subsidiary,
acquired 14 Sumner Suite(R) hotels (the "Sumner Hotels") from ShoLodge, Inc. and
certain direct and indirect wholly owned subsidiaries of ShoLodge, Inc. for a
purchase price of $140 million. The Sumner Hotels are leased to a wholly owned
subsidiary of ShoLodge (the "Sumner Tenant") and managed by ShoLodge, Inc.
("ShoLodge"). The Sumner Hotels, 13 of which were developed within the past two
years and the remaining one of which is being substantially renovated at this
time, contain a total of 1,641 suites. The purchase of the Sumner Hotels was
funded by drawings under the Credit Facilities. A portion of the proceeds of the
Equity Offering, if it occurs, would be applied to repay such indebtedness. If
such offering is not consummated or if the net proceeds thereof are insufficient
for the purpose, the Company will explore various alternatives in both the
timing and repayment of amounts outstanding under the Credit Facilities. Such
alternatives may include the issuance of public or private equity or debt,
including long term debt.
-4-
<PAGE>
The location and number of suites of the 14 Sumner Hotels are as
follows:
No. of
Location by State Sumner Hotels Total Suites
----------------- ------------- ------------
Arizona 2 247
Florida 1 55
Georgia 3 375
Indiana 1 122
New Mexico 1 125
Ohio 1 125
Tennessee 1 100
Texas 4 492
--- ----
Total 14 1,641
The principal features of the lease of the 14 Sumner Hotels are as
follows:
o The 14 Sumner Hotels are the subject of a single lease.
o The initial lease term expires January 31, 2008.
o At the end of the initial lease term, the Sumner Tenant has five
consecutive renewal options of 10 years.
o The lease requires minimum rent payments to the Company aggregating $14
million per year.
o In addition to minimum rents, the lease requires percentage rents equal
to 8% of all revenues and receipts of every kind derived from guests or
customers related to the operation of each of the Sumner Hotels ("Total
Sumner Hotel Sales") in excess of Total Sumner Hotel Sales for such
hotel during 1998 (except for Sumner Hotels located in Arizona, for
which the applicable period of measure is the thirteen accounting
periods beginning July 13, 1998).
o A percentage of Total Sumner Hotel Sales, initially 3% of Total Sumner
Hotel Sales for 1998, increasing to 4% of Total Sumner Hotel Sales for
1999 and to 5% of Total Sumner Hotel Sales thereafter, must be escrowed
periodically by the Sumner Tenant to fund refurbishments and
renovations to the Sumner Hotels.
o Under certain circumstances, the Company may be required to fund major
repairs to the Sumner Hotels, in which event annual minimum rent will
be increased by a minimum of 10% of the amount funded.
-5-
<PAGE>
o The lease of the Sumner Hotels is a triple net lease requiring the
Sumner Tenant to pay all operating expenses, including taxes and
insurance. The Sumner Tenant has entered into a management agreement
with ShoLodge for management of the Sumner Hotels.
o A security deposit equal to 10% of the purchase price of each of the 14
Sumner Hotels was retained by the Company as security for the Sumner
Tenant's obligations under the lease. The Company must repay any
unapplied balance of the security deposit to the sellers of the
ShoLodge Hotels at the expiration of the lease, including renewal
terms, if any. No interest will be paid by the Company on the security
deposit, and the security deposit will not be escrowed.
o The Company's prior written consent is required for the Sumner Tenant
to amend or modify the provisions of its management agreement with
ShoLodge.
o Any amount which may become due to managers for operation of the Sumner
Hotels is required to be subordinated to all amounts due to the Company
under the lease.
o ShoLodge has provided a limited recourse guaranty of the obligations of
the Sumner Tenant under the lease, including the full amount of the
rent payable under the lease. Provided no defaults have occurred and
are continuing under the lease, the ShoLodge guaranty terminates at
such time as cash flow of the Sumner Tenant equals or exceeds $18.5
million for thirteen consecutive accounting periods. Recourse under the
guaranty is limited to a $14 million deposit retained by the Company,
the unapplied balance of which is required to be refunded to ShoLodge
upon termination of the ShoLodge guaranty. Provided no defaults have
occurred and are continuing, the Company is required to pay 11.11% per
annum interest on the $14 million guaranty deposit. The guaranty
deposit is not escrowed.
Nine Marriott(R) Hotels
In October 1997 the Company, through a wholly owned subsidiary, agreed
to acquire from subsidiaries of Marriott International, Inc. ("Marriott") nine
hotels (the "Marriott Hotels") currently under development for a purchase price
of approximately $129.4 million. The Marriott Hotels consist of three Residence
Inn by Marriott(R) and six Courtyard by Marriott(R) hotels. The Marriott Hotels
will be leased to a wholly owned subsidiary of Marriott (the "Marriott Tenant")
and managed by a wholly owned subsidiary of Marriott. The Marriott Hotels
contain a total of 1,336 rooms/suites. As of February 21, 1997, two of these
hotels have been acquired; the remaining seven are expected to be acquired
periodically during 1997 and 1998. The purchase of the two Marriott Hotels was
funded initially by drawings under the Credit Facilities. The Company plans to
fund the future acquisitions with drawings under the Credit Facilities and/or a
portion of the proceeds of the Equity Offering, if it occurs. The Company will
explore various alternatives in both the timing and repayment of remaining
-6-
<PAGE>
amounts outstanding under the Credit Facilities. Such alternatives may include
the issuance of public or private equity or debt, including long term debt.
The location, type and number of rooms of the nine Marriott Hotels are
as follows:
<TABLE>
<CAPTION>
No. of Total
Location by State Type of Marriott Hotel Marriott Hotels Rooms/Suites
- ----------------- ---------------------- --------------- ------------
<S> <C> <C> <C>
Arizona Courtyard 1 160
California Courtyard 2 270
Louisiana Residence Inn 1 231
Maryland Residence Inn 1 120
New Jersey Residence Inn 1 156
North Carolina Courtyard 1 123
Oklahoma Courtyard 1 122
Virginia Courtyard 1 154
--- ----
Total 3 Residence Inns; 9 1,336
6 Courtyards
</TABLE>
The principal features of the leases of the nine Marriott Hotels are or
will be as follows:
o Each Marriott Hotel is or will be the subject of a separate lease.
However, in the event any of these leases is defaulted, the Company may
declare all of the leases with the Marriott Tenant to be in default.
o The initial lease term expires during 2012.
o At the end of the initial lease term, the Marriott Tenant has two
consecutive renewal options of 10 years.
o The leases require minimum rent payments to the Company aggregating
$14.9 million per year for all nine leases.
o In addition to minimum rents, each lease requires percentage rents
equal to 7% of all revenues and receipts of every kind derived from
guest or customers related to the operation of the applicable Marriott
Hotel ("Total Marriott Hotel Sales") in excess of Total Marriott Hotel
Sales during the second full calender year of operation for each of the
Marriott Hotels.
o A percentage of Total Marriott Hotel Sales, initially 2% in the case of
Residence Inns and 3% in the case of Courtyards, increasing to 4% of
Total Marriott Hotel Sales for the second full calender year of
operations and to 5% of Total Marriott Hotel Sales after the second
full calender year of operations, must be escrowed periodically by the
Marriott
-7-
<PAGE>
Tenant to fund refurbishments and renovations to the Marriott Hotels.
An initial deposit of approximately $1.3 million was made by the
Company to the escrow account.
o Under certain circumstances, the Company may be required to fund major
repairs to the Marriott Hotels, in which event annual minimum rents
will be increased by a minimum of 10% of the amount funded.
o A security deposit equal to 10% of the purchase price of each of the
nine Marriott Hotels is retained by the Company as security for the
Marriott Tenant's obligations under the leases. The Company must repay
any unapplied balance of the security deposit to the sellers of the
Marriott Hotels at the expiration of the leases, including renewal
terms, if any. No interest will be paid by the Company on any security
deposit, and no security deposit will be escrowed.
o The leases of the Marriott Hotels are or will be triple net leases
requiring the Marriott Tenant to pay all operating expenses, including
taxes and insurance. The Marriott Tenant has entered into a management
agreement with a Marriott subsidiary as manager of the Marriott Hotels.
In connection with the franchise agreements with the Marriott Tenant,
Marriott imposes certain restrictions (including approval rights) and
obligations relating to changes of tenants or changes of ownership of
the hotel property.
o Management fees and other amounts (other than franchise, royalty and
similar fees and expenses) which may become due to managers for
operation of the Marriott Hotels are required to be subordinated to all
amounts due to the Company under the leases.
o Borrowings by the Company in respect of each of the Marriott Hotels are
limited in accordance with a formula set forth in the leases for the
Marriott Hotels to no more than 70% of the allocable purchase price of
each such Marriott Hotel in the case of a borrowing secured by a single
Marriott Hotel, or 60% of the aggregate allocable purchase prices of
such Marriott Hotels in the case of a borrowing secured by two or more
of the Marriott Hotels on a combined basis.
o Marriott will guarantee payment of a portion of rent under the leases.
The guarantee covers minimum and additional rent obligations during the
period ending at the close of the sixth of Marriott Tenant's accounting
periods following the accounting period in which the last of the nine
Marriott Hotels is acquired or, if earlier, the expiration of 19 full
accounting periods after the Company's acquisition of the first
Marriott Hotel (the "Initial Period") and thereafter until the first to
occur of (i) the last day of Marriott Tenant's accounting period ending
closest to September 30, 2004, (ii) the expiration of the first entire
fiscal year of the Marriott Tenant in which (A) the cumulative amount
of guaranteed rent paid by the Marriott Tenant under the leases or by
Marriott under the guarantee in excess of the Marriott Tenant's
cumulative Cash Available for Lease
-8-
<PAGE>
Payments (as defined in the guarantee) after the end of the Initial
Period exceeds (B) 20% of the total purchase price paid by the Company
for the Marriott Hotels or (iii) the date on which the Marriott
Tenant's minimum rent coverage (defined as Cash Available for Lease
Payments divided by minimum rents) equals or exceeds 130% for four
consecutive fiscal quarters. The guarantee is subject to termination
under certain circumstances upon the transfer of one or more Marriott
Hotels by the Company. Marriott's guarantee is in addition to the
retained security deposits.
Expanded Credit Facilities
In 1995 the Company entered into an agreement with DLJ Mortgage
Capital, Inc. ("DLJMC") for a $200 million revolving line of credit. This line
of credit was secured by mortgages on certain hotels owned by the Company and
required draw fees and payment of interest at a spread over one month LIBOR. In
October and November 1997 the Company and DLJMC entered agreements to change and
supplement the terms of this credit facility (as so changed and supplemented,
the "Credit Facilities") as follows: (i) in addition to the $200 million line of
credit which may be drawn, repaid and redrawn through December 1998, the Company
has obtained additional credit facilities under which prior to December 31, 1997
the Company may borrow up to an additional $255 million which may not be redrawn
after it is repaid; (ii) no additional mortgages are required to be recorded to
secure drawings under the Credit Facilities until November 1998 (or the
occurrence of an event of default thereunder); and (iii) the interest rate and
draw fees are reduced to 125 basis points over one month LIBOR and 0.5%,
respectively, of amounts drawn and outstanding. As of November 21, 1997, $261
million was outstanding under the Credit Facilities.
Certain Information
This Current Report on Form 8-K contains statements which constitute
forward looking statements. These statements include but are not limited to all
references to the hotels to be acquired (including their expected acquisition
(including purchase price) and leasing and lease terms (including minimum rents,
term, renewal options, refurbishment reserves and cross default provisions)).
Readers are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially as a result of various factors. Such
factors include without limitation the factors included in Exhibit 99,
"Investment Considerations," to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996. Additionally, readers are cautioned that certain
of the hotels to be acquired are still under development and that therefore no
assurance can be given that any of such hotels will be completed or acquired
during 1997 and 1998 or otherwise or that the terms of any such acquisition will
not differ materially from those described in this Report. General risks
associated with properties under development, including but not limited to
adverse weather, labor disputes, engineering and other construction difficulties
and cost
-9-
<PAGE>
overruns, may materially delay or prevent the completion and thus the
acquisition of any of the hotels to be acquired.
-10-
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of Businesses Acquired.
Limited Service I Hotels
Report of Independent Public Accountants
Combined Statement of Revenues and Expenses for the Fiscal
Year Ended January 3, 1997 and the Thirty-Six Weeks Ended
September 12, 1997 (unaudited)
Combined Statement of Assets, Liabilities and Net Investments
and Advances as of January 3, 1997 and September 12, 1997
(unaudited)
Combined Statement of Cash Flows for the Fiscal Year Ended
January 3, 1997 and the Thirty-Six Weeks Ended September 12,
1997 (unaudited)
Notes to Combined Financial Statements as of January 3, 1997
and September 12, 1997 (unaudited)
Limited Service II Hotels
Report of Independent Public Accountants
Combined Statement of Revenues and Expenses for the Fiscal
Year Ended January 3, 1997 and the Thirty-Six Weeks Ended
September 12, 1997 (unaudited)
Combined Statement of Assets, Liabilities and Net Investments
and Advances as of January 3, 1997 and September 12, 1997
(unaudited)
Combined Statement of Cash Flows for the Fiscal Year Ended
January 3, 1997 and the Thirty-Six Weeks Ended September 12,
1997 (unaudited)
Notes to Combined Financial Statements as of January 3, 1997
and September 12, 1997 (unaudited)
Renthotel Utah, L.C.
Independent Auditors' Report
Balance Sheets as of December 31, 1996 and 1995
Statements of Operations for the Years Ended December 31, 1996
and 1995
-11-
<PAGE>
Statements of Changes in Members Deficit for the Years Ended
December 31, 1996 and 1995
Statements of Cash Flows for the Years Ended December 31, 1996
and 1995
Notes to Financial Statements for the Years Ended December 31,
1996 and 1995
(b) Pro Forma Financial Information.
Introduction to Unaudited Pro Forma Financial Statements and
Other Data
Pro Forma Income Statements and Other Data for the Year Ended
December 31, 1996 and the Nine Months Ended September 30, 1997
Pro Forma Balance Sheet and Other Data as of September 30,
1997
Notes to Unaudited Pro Forma Financial Statements and Other
Data
(c) Exhibits.
10.1 Purchase and Sale Agreement, dated as of November 19, 1997, by
and among Candlewood Hotel Company, Inc. and certain of its
affiliates, as sellers, and the Company, as purchaser.
10.2 Form of Candlewood Lease Agreement by and between a subsidiary
of the Company, as landlord, and Candlewood Leasing No. 1,
Inc., as tenant.
10.3 Form of Guaranty Agreement by and among Candlewood Hotel
Company, Inc., a subsidiary of the Company and the Company.
10.4 Purchase and Sale Agreement, dated as of October 24, 1997, by
and among ShoLodge, Inc. and certain of its affiliates, as
sellers, and the Company, as purchaser.
10.5 Lease Agreement, dated as of November 19, 1997, by and between
HPT Suite Properties Trust, as landlord, and Suite Tenant,
Inc., as tenant.
10.6 Limited Guaranty Agreement, dated as of November 19, 1997, by
and among ShoLodge, Inc., HPT Suite Properties Trust and the
Company.
-12-
<PAGE>
10.7 Purchase Agreement, dated as of October 10, 1997, by and among
Residence Inn By Marriott, Inc. and Courtyard Management
Corporation, as sellers, and the Company, as purchaser.
10.8 Form of Residence Inn Lease Agreement by and between HPTMI II
Properties Trust and CR9 Tenant Corporation.
10.9 Form of Courtyard Lease Agreement by and between HPTMI II
Properties Trust and CR9 Tenant Corporation.
10.10 Limited Rent Guaranty, dated as of October 10, 1997, by and
among Marriott International, Inc., the Company and HPTMI II
Properties Trust.
10.11 Amendment No. 3, dated November 14, 1997, to the Amended and
Restated Credit Agreement, dated as of December 29, 1995, as
amended, between the Company and DLJ Mortgage Capital, Inc.
10.12 First Supplemental Credit Agreement, dated as of November 14,
1997, between the Company, as borrower, and DLJ Mortgage
Capital, Inc., as lender.
10.13 Second Supplemental Credit Agreement, dated as of November 14,
1997, between the Company, as borrower, and DLJ Mortgage
Capital, Inc., as lender.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants
23.3 Consent of Reznick Fedder & Silverman, Independent Public
Accountants
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<PAGE>
Report of Independent Public Accountants
To the Owners of the
Limited Service I Hotels (as defined in Note 1):
We have audited the accompanying combined statement of assets, liabilities and
net investments and advances of the Limited Service I Hotels, as defined in Note
1, as of January 3, 1997, and the related combined statements of revenues and
expenses and cash flows for the fiscal year then ended. These financial
statements are the responsibility of the management of Marriott International,
Inc. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1 and are not intended to be a complete
presentation of the Limited Service I Hotels' assets, liabilities and net
investments and advances, revenues and expenses or cash flows.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets, liabilities and net investments and advances
of the Limited Service I Hotels as of January 3, 1997, and their revenues and
expenses and their cash flows for the fiscal year then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.,
November 21, 1997
F-1
<PAGE>
Limited Service I Hotels
Combined Statement of Revenues and Expenses
For the Fiscal Year Ended January 3, 1997 and the
Thirty-six Weeks Ended September 12, 1997
(in thousands)
Thirty-six
Fiscal weeks
year ended
ended September
January 12, 1997
3, 1997 (unaudited)
--------- -----------
Hotel revenues:
Rooms $3,412 $2,717
Other 384 257
------ ------
Total hotel revenues 3,796 2,974
------ ------
Operating expenses 2,317 1,435
------ ------
Hotel revenues over operating expenses 1,479 1,539
------ ------
Other expenses 907 355
------ ------
Revenues over expenses before income taxes 572 1,184
Provision for income taxes 223 462
------ ------
Revenues over expenses $ 349 $ 722
====== ======
The accompanying notes are an integral part of this combined statement.
F-2
<PAGE>
<TABLE>
<CAPTION>
Limited Service I Hotels
Combined Statement of Assets, Liabilities
and Net Investments and Advances
(in thousands)
As of
As of September
January 3, 12, 1997
1997 (unaudited)
--------- -----------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 52 $ 16
Accounts receivable and other 152 60
Property and equipment, net 72,932 27,780
Other assets 522 299
------- -------
$73,658 $28,155
======= =======
Liabilities and Net Investments and Advances
Accounts payable and accrued expenses $ 3,719 $ 1,618
Net investments and advances 69,939 26,537
------- -------
$73,658 $28,155
======= =======
</TABLE>
The accompanying notes are an integral part of this combined statement.
F-3
<PAGE>
<TABLE>
<CAPTION>
Limited Service I Hotels
Combined Statement of Cash Flows
For the Fiscal Year Ended January 3, 1997 and the
Thirty-six Weeks Ended September 12, 1997
(in thousands)
Fiscal Thirty-six
year weeks ended
ended September
January 12, 1997
3, 1997 (unaudited)
---------- ------------
<S> <C> <C>
Cash flows from operating activities:
Revenues over expenses $ 349 $ 722
Adjustments to reconcile to cash provided by (used in)
operations:
Depreciation and amortization 495 --
(Increase) decrease in accounts receivable and other (148) 92
(Increase) decrease in other assets (500) 223
Increase (decrease) in accounts payable and accrued
expenses 3,719 (2,101)
--------- ---------
Cash provided by (used in) operations 3,915 (1,064)
--------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment -- 109,988
Additions to property and equipment (68,704) (44,950)
--------- ---------
Cash (used in) provided by investing activities (68,704) 65,038
--------- ---------
Cash flows from financing activities:
Net advances from (to) Marriott International, Inc. 64,837 (64,010)
--------- ---------
Increase (decrease) in cash and cash equivalents 48 (36)
Cash and cash equivalents at beginning of year 4 52
--------- ---------
Cash and cash equivalents at end of year $ 52 $ 16
========= =========
</TABLE>
The accompanying notes are an integral part of this combined statement.
F-4
<PAGE>
Limited Service I Hotels
Notes to Combined Financial Statements
As of January 3, 1997 and September 12, 1997 (unaudited)
NOTE 1. BASIS OF PRESENTATION:
Basis of Presentation
Marriott International, Inc. ("Marriott") develops, franchises and operates
Residence Inn by Marriott Hotels ("Residence Inn") and Courtyard by Marriott
Hotels ("Courtyard"), including the 14 properties listed below (collectively,
the "Limited Service I Hotels" and, individually, the "Hotel" or "Hotels").
Effective December 23, 1996, Marriott entered into an agreement to sell and
lease back the Limited Service I Hotels to Hospitality Properties Trust ("HPT"),
a Maryland real estate investment trust, for sales proceeds of $148.8 million.
The dates on which certain of the Hotels were sold to HPT and leased back by
wholly owned subsidiaries of Marriott are indicated in the table below:
<TABLE>
<CAPTION>
Residence Inn Date of Sale Courtyard Date of Sale
------------- ------------ --------- ------------
<S> <C> <C> <C>
Fresno, CA April 3, 1997 Ft. Worth-Fossil Creek, TX April 3, 1997
Reno, NV April 3, 1997 Houston Hobby, TX April 3, 1997
Dallas-Richardson, TX April 3, 1997 Allentown/Bethlehem, PA October 10, 1997
Ft. Worth-Fossil Creek, TX April 3, 1997 Birmingham, AL -
San Antonio, TX April 3, 1997
Birmingham, AL April 25, 1997
Charlottesville, VA April 25, 1997
Atlanta-Town Center, GA May 23, 1997
Allentown/Bethlehem, PA October 10, 1997
Fairfax-Fairlakes, VA October 10, 1997
</TABLE>
The date of sale indicated above represents the date of closing and transfer of
the property deed from Marriott to HPT. The accompanying combined statement of
revenues and expenses for the fiscal year ended January 3, 1997 reflects the
operations of the Fresno, CA Residence Inn and the Houston Hobby, TX Courtyard
which were completed and commenced operations during the period. All other
Hotels presented above with the exception of the Allentown/Bethlehem, PA
Residence Inn and the Birmingham, AL Courtyard were substantially completed and
commenced operations during the thirty-six week period ended September 12, 1997.
Operations of the Hotels are included in the accompanying combined statements of
revenues and expenses
F-5
<PAGE>
from the commencement of operations through the earlier of the applicable date
of sale to HPT or September 12, 1997.
Assets and liabilities have been stated at Marriott's historical cost basis in
the accompanying combined statement of assets, liabilities and net investments
and advances for Hotels that have not been sold to HPT as of the end of the
period presented.
The accompanying combined financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. The Limited Service I Hotels, for the periods presented,
historically operated as an integral part of Marriott. Marriott has not
historically allocated or charged individual units for interest on net advances
and no such expenses are reflected in the accompanying combined financial
statements. Accordingly, the accompanying combined financial statements are not
intended to be a complete presentation of the Limited Service I Hotels' assets,
liabilities and net investments and advances, revenues and expenses or cash
flows.
Marriott has not historically allocated or charged individual units for
corporate overhead, corporate general and administrative or other corporate
costs, and no such expenses are reflected in the accompanying combined financial
statements. Changes in net investments and advances represent the combined
revenues and expenses of the Hotels adjusted for cash transferred between
Marriott and the Hotels.
An analysis of the activity in this balance for the fiscal year ended January 3,
1997, and the thirty-six weeks ended September 12, 1997, is as follows:
(in thousands)
Balance December 29, 1995 $ 4,753
Revenues over expenses 349
Net advances from Marriott 64,837
--------
Balance January 3, 1997 69,939
Revenues over expenses (unaudited) 722
Other capital contribution from Marriott 19,886
Net advances to Marriott (unaudited) (64,010)
--------
Balance September 12, 1997 (unaudited) $ 26,537
========
The average net investments and advances for the fiscal year ended January 3,
1997 and the thirty-six weeks ended September 12, 1997 was approximately $37
million and $48 million, respectively.
F-6
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Hotel Revenues
Total Hotel revenues in the accompanying combined statements of revenues and
expenses represents all revenues and receipts derived from guests or other
customers related to Marriott's operation of the Limited Service I Hotels.
Operating Expenses
Operating expenses in the accompanying combined statements of revenues and
expenses relate to the ongoing lodging operations within the Hotels and include
property payroll, utilities, repairs and maintenance and other Hotel property
operating costs.
Other Expenses
Other expenses in the accompanying combined statements of revenues and expenses
relate primarily to depreciation and amortization as well as real estate and
property taxes.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year
The Limited Service I Hotels' fiscal year ends on the Friday nearest to December
31.
Property and Equipment
Property and equipment is recorded at cost, including interest and real estate
taxes incurred during development and construction. Replacements and
improvements are capitalized during the useful life of the property.
Depreciation is computed using the straight line method over the estimated
useful lives of the assets, generally 40 years for buildings and improvements
and 3 to 10 years for furniture and equipment.
F-7
<PAGE>
No depreciation is recorded by the Hotels for the period from December 23, 1996
(the date Marriott entered into the agreement to sell the Hotels to HPT) to the
date of sale (the "holding period"). During the holding period, operations of
the Hotels are reported in the combined statements of revenues and expenses and
interest is not capitalized.
Cash and Cash Equivalents
The Limited Service I Hotels consider all highly liquid investments with a
maturity of three months or less at the date of purchase to be cash equivalents.
Cash and cash equivalents generated by the Hotels are transferred to Marriott.
Operating expenses, capital expenditures and other cash requirements of the
Limited Service I Hotels are paid by Marriott and charged directly to the
Hotels.
Income Taxes
The accompanying combined statements of revenues and expenses present income
taxes based upon the combined effective Federal and state tax rates of 39% for
the fiscal year ended January 3, 1997 and the thirty-six weeks ended September
12, 1997.
NOTE 3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
January 3, September 12,
1997 1997
(unaudited)
Land and land improvements $ 10,619 $ 2,948
Buildings and leasehold improvements 11,499 11,265
Furniture and equipment 2,389 1,600
Construction in progress 48,920 11,967
-------- --------
73,427 27,780
Less-accumulated depreciation (495) --
-------- --------
Property and equipment, net $ 72,932 $ 27,780
======== ========
F-8
<PAGE>
Report of Independent Public Accountants
To the Owners of the
Limited Service II Hotels (as defined in Note 1):
We have audited the accompanying combined statement of assets, liabilities and
net investments and advances of the Limited Service II Hotels, as defined in
Note 1, as of January 3, 1997, and the related combined statements of revenues
and expenses and cash flows for the fiscal year then ended. These financial
statements are the responsibility of the management of Marriott International,
Inc. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1 and are not intended to be a complete
presentation of the Limited Service II Hotels' assets, liabilities and net
investments and advances, revenues and expenses or cash flows.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets, liabilities and net investments and advances
of the Limited Service II Hotels as of January 3, 1997, and their revenues and
expenses and their cash flows for the fiscal year then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.,
November 21, 1997
F-9
<PAGE>
Limited Service II Hotels
Combined Statement of Revenues and Expenses
For the Fiscal Year Ended January 3, 1997 and the
Thirty-six Weeks Ended September 12, 1997
(in thousands)
Thirty-six
Fiscal year weeks ended
ended September 12,
January 3, 1997
1997 (unaudited)
----------- -------------
Hotel revenues:
Rooms $-- $ 631
Other -- 80
--- -----
Total hotel revenues -- 711
--- -----
Operating expenses -- 491
--- -----
Hotel revenues over operating expenses -- 220
--- -----
Other expenses -- 272
--- -----
Revenues under expenses before income taxes -- (52)
Credit for income taxes -- 20
--- -----
Revenues under expenses $-- $ (32)
=== =====
The accompanying notes are an integral part of this combined statement.
F-10
<PAGE>
<TABLE>
<CAPTION>
Limited Service II Hotels
Combined Statement of Assets, Liabilities
and Net Investments and Advances
(in thousands)
As of
As of September 12,
January 3, 1997
1997 (unaudited)
---------- -------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ 59
Accounts receivable and other -- 76
Property and equipment, net 10,365 59,768
Other assets 13 579
------- -------
$10,378 $60,482
======= =======
Liabilities and Net Investments and Advances
Accounts payable and accrued expenses $ 220 $ 2,330
Net investments and advances 10,158 58,152
------- -------
$10,378 $60,482
======= =======
</TABLE>
The accompanying notes are an integral part of this combined statement.
F-11
<PAGE>
<TABLE>
<CAPTION>
Limited Service II Hotels
Combined Statement of Cash Flows
For the Fiscal Year Ended January 3, 1997 and the
Thirty-six Weeks Ended September 12, 1997
(in thousands)
Thirty-six
Fiscal year weeks ended
ended September 12,
January 3, 1997
1997 (unaudited)
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Revenues under expenses $ -- $ (32)
Adjustments to reconcile to cash provided by
operations:
Depreciation and amortization -- 154
Increase in accounts receivable and other -- (76)
Increase in other assets -- (566)
Increase in accounts payable and accrued
expenses -- 2,110
-------- --------
Cash provided by operations -- 1,590
-------- --------
Cash flows from investing activities:
Additions to property and equipment (10,365) (49,557)
Increase in other assets (13) --
-------- --------
Cash used in investing activities (10,378) (49,557)
-------- --------
Cash flows from financing activities:
Net advances from Marriott International, Inc. 10,158 48,026
-------- --------
Decrease in accounts payable and accrued
expenses related to construction and
development 220 --
-------- --------
Cash provided by financing activities 10,378 48,026
-------- --------
Increase in cash and cash equivalents -- 59
Cash and cash equivalents at beginning of year -- --
-------- --------
Cash and cash equivalents at end of year $ -- $ 59
======== ========
</TABLE>
The accompanying notes are an integral part of this combined statement.
F-12
<PAGE>
Limited Service II Hotels
Notes to Combined Financial Statements
As of January 3, 1997 and September 12, 1997 (unaudited)
NOTE 1. BASIS OF PRESENTATION:
Basis of Presentation
Marriott International, Inc. ("Marriott") develops, franchises and operates
Residence Inn by Marriott Hotels ("Residence Inn") and Courtyard by Marriott
Hotels ("Courtyard"), including the 9 properties listed below (collectively, the
"Limited Service II Hotels" and, individually, the "Hotel" or "Hotels").
Effective August 12, 1997, Marriott entered into an agreement to sell and lease
back the Limited Service II Hotels to Hospitality Properties Trust ("HPT"), a
Maryland real estate investment trust, for sales proceeds of $129.4 million.
Residence Inn Date of Sale Courtyard Date of Sale
- ------------- ------------ --------- ------------
New Orleans, LA - Tempe, AZ October 10, 1997
BWI Airport, MD - Pleasant Hill, CA October 10, 1997
Parsipanny, NJ - San Ramon, CA -
Durham, NC -
Oklahoma City, OK -
Richmond, VA -
The date of sale indicated above represents the date of closing and transfer of
the property deed from Marriott to HPT. None of the Hotels commenced operations
during the fiscal year ended January 3, 1997. During the thirty-six week period
ended September 12, 1997, development was substantially completed and operations
commenced at the New Orleans, LA Residence Inn and the Pleasant Hill, CA and
Tempe, AZ Courtyards. Operations of these Hotels are included in the
accompanying combined statement of revenues and expenses for the thirty-six week
period ended September 12, 1997, from the commencement of operations through
September 12, 1997.
Assets and liabilities have been stated at Marriott's historical cost basis in
the accompanying combined statements of assets, liabilities and net investments
and advances as of January 3, 1997 and September 12, 1997.
The accompanying combined financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. The Limited Service II Hotels, for the periods presented,
historically operated as an integral part of
F-13
<PAGE>
Marriott. Marriott has not historically allocated or charged individual units
for interest on net advances and no such expenses are reflected in the
accompanying combined financial statements. Accordingly, the accompanying
combined financial statements are not intended to be a complete presentation of
the Limited Service II Hotels' assets, liabilities and net investments and
advances, revenues and expenses or cash flows.
Marriott has not historically allocated or charged individual units for
corporate overhead, corporate general and administrative or other corporate
costs, and no such expenses are reflected in the accompanying combined financial
statements. Changes in net investments and advances represent the combined
revenues and expenses of the Hotels adjusted for cash transferred between
Marriott and the Hotels.
An analysis of the activity in this balance for the fiscal year ended January 3,
1997, and the thirty-six weeks ended September 12, 1997, is as follows:
(in thousands)
Balance December 29, 1995 $ --
Net advances from Marriott 10,158
--------
Balance January 3, 1997 10,158
Revenues under expenses (unaudited) (32)
Net advances from Marriott (unaudited) 48,026
--------
Balance September 12, 1997 (unaudited) $ 58,152
========
The average net investments and advances for the fiscal year ended January 3,
1997 and the thirty-six weeks ended September 12, 1997 was approximately $5
million and $34 million, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Hotel Revenues
Total Hotel revenues in the accompanying combined statements of revenues and
expenses represents all revenues and receipts derived from guests or other
customers related to Marriott's operation of the Limited Service II Hotels.
F-14
<PAGE>
Operating Expenses
Operating expenses in the accompanying combined statements of revenues and
expenses relate to the ongoing lodging operations within the Hotels and include
property payroll, utilities, repairs and maintenance and other Hotel property
operating costs.
Other Expenses
Other expenses in the accompanying combined statements of revenues and expenses
relate primarily to depreciation and amortization as well as real estate and
property taxes.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year
The Limited Service II Hotels' fiscal year ends on the Friday nearest to
December 31.
Property and Equipment
Property and equipment is recorded at cost, including interest and real estate
taxes incurred during development and construction. Replacements and
improvements are capitalized during the useful life of the property.
Depreciation is computed using the straight line method over the estimated
useful lives of the assets, generally 40 years for buildings and improvements
and 3 to 10 years for furniture and equipment.
No depreciation is recorded by the Hotels for the period from August 12, 1997
(the date Marriott entered into the agreement to sell the Hotels to HPT) to the
date of sale (the "holding period"). During the holding period, operations of
the Hotels are reported in the combined statements of revenues and expenses and
interest is not capitalized.
Cash and Cash Equivalents
The Limited Service II Hotels consider all highly liquid investments with a
maturity of three months or less at the date of purchase to be cash equivalents.
Cash and cash equivalents generated by the Hotels are transferred to Marriott.
Operating expenses, capital expenditures and other cash requirements of the
Limited Service II Hotels are paid by Marriott and charged directly to the
Hotels.
F-15
<PAGE>
Income Taxes
The accompanying combined statement of revenues and expenses for the thirty-six
weeks ended September 12, 1997, presents income taxes based upon the combined
effective Federal and state tax rates of 39%.
NOTE 3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
September
January 12, 1997
3, 1997 (unaudited)
--------- -----------
Land and land improvements $ 4,661 $ 19,488
Buildings and leasehold improvements -- 19,789
Furniture and equipment -- 3,637
Construction in progress 5,704 17,008
-------- --------
10,365 59,922
Less - accumulated depreciation -- (154)
-------- --------
Property and equipment, net $ 10,365 $ 59,768
======== ========
F-16
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
RENTHOTEL UTAH, L.C.
DECEMBER 31, 1996 AND 1995
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members
Renthotel Utah, L.C.
We have audited the accompanying balance sheets of Renthotel Utah, L.C. as
of December 31, 1996 and 1995, and the related statements of operations,
members' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Renthotel Utah, L.C. as of
December 31, 1996 and 1995, and the results of its operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles.
As discussed in note F, the Company sold the hotel on January 7, 1997.
REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
March 4, 1997
F-18
<PAGE>
<TABLE>
<CAPTION>
Renthotel Utah, L.C.
BALANCE SHEETS
December 31,
ASSETS
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 247,589 $ 273,083
Accounts receivable, net of allowance
for doubtful accounts of $6,000 and $39,388 815,790 386,996
Inventories 209,296 178,576
Prepaid expenses 99,139 140,718
------------ ------------
Total current assets 1,371,814 979,373
------------ ------------
PROPERTY AND EQUIPMENT
Land 1,300,000 1,300,000
Building 16,767,194 16,752,160
Furniture and equipment 5,210,104 4,965,354
Less accumulated depreciation (3,799,118) (2,639,069)
------------ ------------
19,478,180 20,378,445
------------ ------------
OTHER ASSETS
Goodwill, net of accumulated
amortization of $319,952 and $227,672 3,371,334 3,463,614
Preopening costs, net of accumulated
amortization of $39,340 and $27,826 18,231 29,745
Deposits 2,720 2,720
------------ ------------
3,392,285 3,496,079
------------ ------------
$ 24,242,279 $ 24,853,897
============ ============
LIABILITIES AND MEMBERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,424,111 $ 1,103,937
Current portion of long-term debt 22,878,328 882,761
Due to City Hotels USA, Inc. 30,078 81,065
Advance deposit on sale of hotel 150,000 --
------------ ------------
Total current liabilities 24,482,517 2,067,763
LONG-TERM DEBT -- 22,860,807
------------ ------------
24,482,517 24,928,570
COMMITMENTS -- --
MEMBERS' DEFICIT (240,238) (74,673)
------------ ------------
$ 24,242,279 $ 24,853,897
============ ============
</TABLE>
See notes to financial statements
F-19
<PAGE>
<TABLE>
<CAPTION>
Renthotel Utah, L.C.
STATEMENTS OF OPERATIONS
Year ended December 31,
1996 1995
---- ----
<S> <C> <C>
Revenues
Rooms $ 9,475,851 $ 8,028,939
Food and beverage 2,555,966 2,436,960
Telephone 388,368 381,459
Garage 211,548 179,349
Other 107,111 97,195
------------ ------------
12,738,844 11,123,902
------------ ------------
Departmental expenses
Rooms 2,152,423 1,712,187
Food and beverage 1,898,205 1,993,213
Telephone 192,506 189,489
Garage 65,338 52,869
------------ ------------
4,308,472 3,947,758
------------ ------------
Gross operating income 8,430,372 7,176,144
------------ ------------
Unallocated operating expenses
Energy costs 297,756 284,201
Administrative 1,012,629 981,937
Property, operations and maintenance 390,502 414,998
Sales and marketing 882,625 909,390
------------ ------------
2,583,512 2,590,526
------------ ------------
Net operating income before interest
expense, fixed charges and other deductions 5,846,860 4,585,618
------------ ------------
Interest expense, fixed charges and other deductions
Depreciation and amortization 1,263,843 1,236,765
Interest expense 1,847,956 1,885,601
Real estate and personal property tax 403,275 488,236
Management fees 414,176 361,527
Incentive management fees 117,682 61,723
Insurance expense 130,378 148,599
Royalty fees 284,454 228,593
Consulting 150,000 50,000
Restaurant grand opening -- 54,305
Recruiting and relocation expenses -- 92,892
Operating leases 57,688 53,634
Other expenses 34,200 28,531
------------ ------------
4,703,652 4,690,406
------------ ------------
NET EARNINGS (LOSS) $ 1,143,208 $ (104,788)
============ ============
</TABLE>
See notes to financial statements
F-20
<PAGE>
<TABLE>
<CAPTION>
Renthotel Utah, L.C.
STATEMENTS OF CHANGES IN MEMBERS' DEFICIT
Year ended December 31, 1996 and 1995
Affiliated
Shareholder
C.H. of Heritage Heritage
Corp. Hotel Hotel Total
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Members' capital (deficit), December 31, 1994 $ 644,886 $ 71,957 $ (301) $ 716,542
Cash distributions (617,784) (68,574) (69) (686,427)
Net loss (94,309) (10,468) (11) (104,788)
----------- ----------- ----------- -----------
Members' deficit, December 31, 1995 (67,207) (7,085) (381) (74,673)
Cash distributions (1,177,896) (14,985) (115,892) (1,308,773)
Transfer of ownership -- 22,070 (22,070) --
Net earnings 1,028,887 -- 114,321 1,143,208
----------- ----------- ----------- -----------
Members' capital (deficit), December 31, 1996 $ (216,216) $ -- $ (24,022) $ (240,238)
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
F-21
<PAGE>
<TABLE>
<CAPTION>
Renthotel Utah, L.C.
STATEMENTS OF CASH FLOWS
Year ended December 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 1,143,208 $ (104,788)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities
Depreciation 1,160,049 1,132,563
Amortization 103,794 104,202
Increase (decrease) in provision for bad debts (33,388) 22,433
(Increase) decrease in accounts receivable (395,406) 178,047
(Increase) decrease in inventories (30,720) 38,860
(Increase) decrease in prepaid expenses 41,579 (173)
Increase in accounts payable and accrued expenses 320,174 82,870
Decrease in due to City Hotels USA, Inc. (50,987) (29,909)
----------- -----------
Net cash provided by operating activities 2,258,303 1,424,105
----------- -----------
Cash flows from investing activities
Additions to building, furniture and equipment (259,784) (954,035)
Increase in advance deposits 150,000 --
----------- -----------
Net cash used in investing activities (109,784) (954,035)
----------- -----------
Cash flows from financing activity
Proceeds from long-term debt -- 409,347
Principal payments on long-term debt (865,240) (280,762)
Payment of distributions (1,308,773) (686,427)
----------- -----------
Net cash used in financing activities (2,174,013) (557,842)
----------- -----------
NET DECREASE IN CASH AND CASH (25,494) (87,772)
EQUIVALENTS
Cash and cash equivalents, beginning of year 273,083 360,855
----------- -----------
Cash and cash equivalents, end of year $ 247,589 $ 273,083
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 1,718,591 $ 1,889,919
=========== ===========
</TABLE>
See notes to financial statements
F-22
<PAGE>
Renthotel Utah, L.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Company
Renthotel Utah, L.C. (the "Company") was incorporated under the laws of
the State of Utah on July 1, 1993. At December 31, 1995, the Company had
the following investors (Members) under the following percentages of
ownership:
CH Corp 90.00%
Heritage Hotel, L.L.C. .01%
Affiliated Individual Member 9.99%
On January 1, 1996, the Affiliated Individual Member transferred its
entire ownership to Heritage Hotel, L.L.C. At December 31, 1996, the
Company had the following investors (Members) under the following
percentages of ownership:
CH Corp. 90.00%
Heritage Hotel, L.L.C. 10.00%
On July 29, 1993 (the date of acquisition), the Company purchased a
381-room hotel known as the Doubletree Hotel (the "Hotel") located in
Salt Lake City, Utah. Concurrent with the acquisition, the Company
entered into a license agreement with Doubletree Hotel Systems, Inc.
("Doubletree"). The Hotel is managed by City Hotels USA, Inc. ("CHUSA"),
an affiliated entity. Cash distributions and profit and loss are
allocated to the members pro-rata in proportion to their percentage of
ownership interest. As discussed in note F, the company sold the hotel on
January 7, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
F-23
<PAGE>
Renthotel Utah, L.C.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Cash Equivalents
For purposes of the statement of cash flows, the Company considers cash
invested in overnight accounts and other short-term liquid investments
with an original maturity of three months or less to be cash equivalents.
Inventories
Inventories, consisting of food, beverage, linens and china are stated at
the lower of cost or market using the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight line method over the approximate estimated useful lives of
the assets as follows:
Building 40 years
Furniture and equipment 5 -7 years
Preopening Costs
Preopening costs of $57,571 include legal and other costs incurred to
acquire the Hotel and are being amortized over 60 months.
Goodwill
Goodwill of $3,691,286 is being amortized over 40 years using the
straight-line method.
Revenue
Revenue is recognized when earned.
Income Taxes
No provision for federal and state income taxes is made in the
accompanying statements of operations as the Company is a Utah Limited
Liability Company, and as such, any income or loss is passed through
directly to the Members and is taxable at their level.
F-24
<PAGE>
Renthotel Utah, L.C.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE B - LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consists of the following:
1996 1995
---- ----
Promissory note payable to Eurobelgian
Re-Limited, (a subsidiary of an
affiliated entity), interest at 7 1/2%
until July 31, 1998, thereafter fixed at
.75% over Wall Street Journal prime rate
in effect on that date, through maturity
on July 31, 2003; interest paid
quarterly through September 30, 1996;
thereafter requiring principal payments
semiannually and interest payments
quarterly; uncollateralized. As
discussed in note F, the Company sold
the Hotel on January 7, 1997. On that
date, the note was paid in full with a
penalty of $65,130. Interest expense for
the Eurobelgian Re-Limited note in 1996
and 1995 was $286,733 and $316,927,
respectively. $3,473,584 $4,153,584
Mortgage payable to a bank, interest at
8% until July 31, 1997, thereafter fixed
at 8.5% through maturity on August 1,
2002; principal and interest payable
monthly; a balloon payment for the
outstanding balance of approximately
$18,483,183 is due in full on August 1,
2002, collateralized by a deed of trust
on the Hotel. As discussed in note F,
the Company sold the Hotel on January 7,
1997. On that date, the loan was paid in
full without penalties. Interest
expensed for the mortgage note in 1996
and 1995 was $1,561,223 and $1,568,674,
respectively. 19,404,744 19,589,984
---------- -----------
Total debt 22,878,328 23,743,568
Less: current portion 22,878,328 882,761
---------- -----------
Long-term debt $ - $22,860,807
========== ===========
F-25
<PAGE>
Renthotel Utah, L.C.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE B - LONG-TERM DEBT (Continued)
If the Company had not sold the Hotel, the combined aggregate maturities
of long-term debt for each of the next five years and thereafter would
have been as follows:
Mortgage
Eurobelgian payable to
Re-Limited bank
----------- ----------
1997 $ 680,000 $ 178,968
1998 680,000 135,114
1999 700,000 25,553
2000 700,000 38,551
2001 700,00 167,166
Thereafter 13,584 18,859,392
NOTE C - COMMITMENTS
Management Agreements
The Company entered into a hotel management agreement with CHUSA on July
29, 1993, under which CHUSA is to manage the Hotel commencing from the
date of the agreement through July 31, 2003. Pursuant to the management
agreement, a management fee calculated up to 3.75 percent of total
revenues (3.25 percent during 1996 and 1995), as defined, is payable to
CHUSA each month. Management fee expense for the year ended December 31,
1996 was $414,176, of which $28,653 was included in accounts payable and
accrued expenses at year end. Management fee expense for the year ended
December 31, 1995 was $361,527, of which $19,277 was included in accounts
payable and accrued expenses at year end.
Operating Agreement
An incentive management fee is payable to an affiliated member, in the
amount of 8.25% of total cash available, as defined in the operating
agreement. Total incentive management fee expense was $117,682 for the
year ended December 31, 1996 and $61,723 for the year ended December 31,
1995.
F-26
<PAGE>
Renthotel Utah, L.C.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE C - COMMITMENTS (Continued)
License Agreement
On July 29, 1993, the Company entered into a license agreement with
Doubletree expiring December 31, 2008. The agreement allows the Company
to provide hotel services to the public under the name Doubletree Hotel
as long as it follows the standards and specifications in the system
designed by Doubletree. The system includes a computerized reservation
network; marketing programs and materials; training programs and
materials; standards, specification and policies for furnishings,
operations, appearance and service of the Hotel; and other requirements
which Doubletree may, from time to time, provide. Under the agreement,
the Company is required to pay a monthly royalty fee of 2 3/4% through
July 31, 1996, of gross room revenue, as defined, and 3% for the
remainder of the license term, as defined; a marketing fee of 1 1/4% of
gross revenue, as defined; and a reservation fee for each reservation of
the Hotel made through the system at an amount determined by Doubletree.
The marketing and reservation fees may be subject to change by
Doubletree. The Company incurred royalty, marketing, and reservation fees
of $583,625 for the year ended December 31, 1996, and $549,970 for the
year ended December 31, 1995. At December 31, 1996 and 1995, $231,709 and
$225,388, respectively, of these fees were payable.
CHUSA has guaranteed the performance of this license agreement should the
Company default on the terms and conditions described within the
agreement.
Operating Leases
The Company has entered into agreements for operating leases on equipment
which carry varying terms and payments. Total expense for operating
leases was $57,688 for the year ended December 31, 1996 and $53,634 for
the year ended December 31, 1995. As discussed in note F, the Company
sold the Hotel on January 7, 1997. On that date, the Company assigned its
obligations under the operating leases to the purchaser.
F-27
<PAGE>
Renthotel Utah, L.C.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE D - RELATED PARTY TRANSACTIONS
The Company entered into a consulting agreement with CHUSA on January 1,
1995, under which CHUSA is to provide guidance and direction in the
operation of the Hotel. A fee of $50,000 was incurred for the year ended
December 31, 1995.
During 1996, the Company entered into a consulting agreement with CHUSA
under which CHUSA is to provide guidance and direction in the disposition
of the Hotel. A fee of $150,000 was incurred for the year ended December
31, 1996.
At December 31, 1996 and 1995, $30,078 and $81,065, respectively, is due
to CHUSA for consulting fees, management fees and reimbursable expenses.
NOTE E - RENOVATION OF THE HOTEL
During 1994, the Company began construction of the planned renovation of
the Hotel which was substantially completed in April of 1995. Total
expenditures in 1995 were $933,818. The total construction costs were
subsequently recorded as property and equipment in 1995.
NOTE F - SUBSEQUENT EVENT
On January 7, 1997, the company sold the Hotel consisting of the land,
building, furniture and equipment and inventories. The gross sales price
is $44,000,000. The purchase price on July 29, 1993 was $25,000,000.
F-28
<PAGE>
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Financial Statements and Other Data
The following unaudited adjusted pro forma balance sheet at September 30,
1997 is intended to present the financial position of the Company as if the
transactions described in the Notes (the "Transactions") were consummated at
September 30, 1997. The following unaudited adjusted pro forma statements of
income are intended to present the results of operations of the Company as if
the Transactions were consummated on January 1, 1996. These unaudited adjusted
pro forma financial statements should be read in conjunction with, and are
qualified in their entirety by reference to, the separate financial statements
of the Company and certain of the acquired hotel properties, each as of and for
the year ended December 31, 1996 and for the nine months ended September 30,
1997, incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 and the Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1997.
These unaudited adjusted pro forma financial statements are not
necessarily indicative of the expected financial position or results of
operations of the company for any future period. Differences would result from,
among other considerations, future changes in the Company's portfolio of
investments, changes in interest rates, changes in the capital structure of the
Company, inability of the Company to complete the proposed equity offering or
complete the equity offering on terms consistent with those used herein, delays
in the acquisition of certain properties and changes in the Company's operating
expenses.
The following unaudited pro forma balance sheet and unaudited pro forma
statements of income were prepared pursuant to the Securities and Exchange
Commission's rules for the presentation of pro forma data. The pro forma and
adjusted pro forma data give effect to the consummation by the Company of the
Transactions. Certain properties expected to be acquired by the Company are
currently under construction or development by the sellers. Other properties
were under construction during the periods presented when they were owned or
under development by the sellers. The accompanying pro forma operating data does
not give further effect to the completion of construction or the related lease
commencement for any period prior thereto. Construction projects not completed
by September 30, 1997 are likewise not reflected in the pro forma balance sheet
data. Rather, the effect of completion of construction of these properties is
presented separately from the pro forma data as described in the accompanying
notes. The Company believes that a display of such adjusted pro forma data is
meaningful and relevant to the understanding of the Transactions and,
accordingly has presented such data in the final two columns, labeled "Other
Data," on the accompanying pages.
F-29
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
PRO FORMA INCOME STATEMENTS AND OTHER DATA
(amounts in thousand, except per share data)
(unaudited)
Proforma Other Data
------------------------------------ --------------------------------
Historical Pro Forma Other Adjusted
1996 [M] Adjustments Pro Forma Adjustments Pro Forma
------------- -------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Rental Revenue $69,514 $23,443 [N] $92,957 $43,160 [U] $136,117
FF&E Reserve Income 12,169 1,174 [O] 13,343 - 13,343
Other Income 946 (538)[P] 408 - 408
------------- -------------- ------------- ------------- ------------
Total Revenue 82,629 24,079 106,708 43,160 149,868
------------- -------------- ------------- ------------- ------------
Expenses
Depreciation and Amortization 20,398 8,076 [Q] 28,474 13,608 [V] 42,082
Interest 5,646 3,122 [R] 8,768 7,860 [W] 16,628
General and Administrative 4,921 927 [S] 5,848 2,970 [X] 8,818
------------- -------------- ------------- ------------- ------------
Total Expenses 30,965 12,125 43,090 24,438 67,528
------------- -------------- ------------- ------------- ------------
Net Income $51,664 $11,954 $63,618 $18,722 $82,340
============= ============== ============= ============= ============
Weighted Average Shares Outstanding 23,170 13,687 [T] 36,857 - 36,857
============= ============== ============= ============= ============
Earnings Per Share $2.23 $1.73 $2.23
============= ============= ============
<CAPTION>
Proforma Other Data
---------------------------------- ---------------------------------
Historical
Nine Months
Ended
September 30, Pro Forma Other Adjusted
1997 [O] Adjustments Pro Forma Adjustments Pro Forma
------------------------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Rental Revenue $71,158 $9,322 [N] $80,480 $22,823 [U] $103,303
FF&E Reserve Income 11,138 - 11,138 - 11,138
Other Income 474 - 474 - 474
------------- --------------- -------------- ------------- ------------
Total Revenue 82,770 9,322 92,092 22,823 114,915
Expenses
Depreciation and Amortization 22,528 3,480 [Q] 7,098 [V] 33,106
Interest 10,602 (3,914)[R] 6,688 6,020 [W] 12,708
General and Administrative 4,787 109 [S] 4,896 1,718 [X] 6,614
------------- --------------- -------------- ------------- ------------
Total Expenses 37,917 (325) 37,592 14,836 52,428
------------- --------------- -------------- ------------- ------------
Net Income $44,853 $9,647 $54,500 $7,987 $62,487
============= =============== ============== ============= ============
Weighted Average Shares 26,871 10,000 [T] 36,871 - 36,871
============= =============== ============== ============= ============
Earnings Per Share $1.67 $1.48 $1.69
============= ============== ============
</TABLE>
F-30
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
PRO FORMA BALANCE SHEET AND OTHER DATA
(dollars in thousands)
(unaudited)
Pro Forma Other Data
---------------------------------- ----------------------------------
Historical
September 30, Pro Forma Pro Forma Adjustments Adjusted
1997 [A] Adjustments Pro Forma
-------------------------------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Real estate properties $1,006,740 $201,876 [B] $1,208,616 $208,368 [I] $1,416,984
Accumulated depreciation (48,746) - (48,746) - (48,746)
------------- -------------- ------------- ------------- -------------
957,994 201,876 1,159,870 208,368 1,368,238
Cash and cash equivalents 13,955 73,170 [C] 87,125 (73,170)[J] 13,955
FF&E reserve (restricted cash) 11,759 1,294 [D] 13,053 - 13,053
Rent Receivable 782 - 782 - 782
Other assets 8,290 - 8,290 - 8,290
------------- -------------- ------------- ------------- -------------
$ 992,780 $276,340 $ 1,256,070 $ 135,198 $1,404,318
============= ============== ============= ============= =============
Liabilities and
Shareholders' Equity
Term debt $125,000 $ - $125,000 $ - $125,000
Revolving debt 104,000 (104,000) [E] - 111,168 [K] 111,168
Security deposits 102,359 35,790 [F] 138,149 24,030 [L] 162,179
Other liabilities 2,957 - 2,957 - 2,957
Shareholder's equity
Common shares of beneficial
interest 269 100 [G] 369 - 369
Additional paid-in capital 656,906 344,450 [H] 1,001,356 - 1,001,356
Cumulative net income 107,866 - 107,866 - 107,866
Dividends (106,577) - (106,577) - (106,577)
------------- -------------- ------------- ------------- -------------
Total shareholders' equity 658,464 344,550 1,003,014 - 1,003,014
------------- -------------- ------------- ------------- -------------
$ 992,780 $276,340 $1,269,120 $135,198 $1,404,318
============= ============== ============= ============= =============
</TABLE>
F-31
<PAGE>
Hospitality Properties Trust
Notes to Unaudited Pro Forma Financial Statements and Other Data
(dollars in thousands, except per share data)
Pro Forma Balance Sheet Adjustments
A. Represents the historical balance sheet of the Company at September 30,
1997.
B. Represents the purchase of the 22 hotels open but not acquired as of
September 30, 1997:
Cash purchase prices
2 Courtyard by Marriott(R)hotels $ 24,130
14 Sumner Suites(R)hotels 112,000
6 Candlewood(R)hotels 28,952
Purchase price withheld as Security and Guarantee deposits 35,790
Closing Cost 1,004
--------
Total $201,876
========
C. Represents the net effect of the pro forma adjustments on cash.
D. Represents FF&E Reserve cash acquired by the Company in connection with the
purchase of six Courtyard by Marriott(R) and three Residence Inn by
Marriott(R) hotels. Title to the FF&E Reserves for other hotels to be
acquired will be held by the tenant; the Company will have security and
remainder interests in FF&E Reserve escrows owned by its tenants.
E. Represents pro forma net repayments by the Company on its credit facilities
from the proceeds of the offering of Shares.
F. Represents security deposits and other deposits held by the Company as a
result of purchasing and leasing the following hotels:
2 Courtyard by Marriott(R)hotels $ 2,680
14 Sumner Suites(R)hotels 28,000
6 Candlewood(R)hotels 5,110
-------
Total $35,790
========
G. Represents the par value ($0.01) of Shares expected to be issued in the
proposed Offering.
H. Represents the following:
Gross proceeds expected from the proposed Offering
(10,000,000 shares at $36.375/share) $ 363,750
Estimated expenses of the proposed Offering (19,200)
---------
Net Proceeds of the proposed Offering 344,550
Par value of Shares (100)
---------
Additional Paid-In Capital $ 344,450
=========
F-32
<PAGE>
Other Data
Balance Sheet Adjustments
I. Represents the purchase of the 20 hotels acquired but not open as of
September 30, 1997:
Cash purchase prices
6 Courtyard by Marriott(R)hotels $ 59,021
5 Residence Inn by Marriott(R)hotels 68,231
9 Candlewood(R)hotels 56,049
Purchase price withheld as Security and Guarantee deposits 24,030
Closing Costs 1,037
--------
Total $208,368
========
The above hotels are properties the Company expects to purchase from
sellers upon completion of construction, of which 5 were completed and
purchased by the Company between September 30 and November 19, 1997 for
an aggregate purchase price of $56,479.
J. Represents use of pro forma cash raised by the Company in connection with
the offering for the purchase of hotels described in Note I.
K. Represents adjusted net borrowing by the Company on its credit
facilities.
L. Represents security deposits and other deposits held by the Company as a
result of purchasing and leasing the following hotels:
6 Courtyard by Marriott(R)hotels $ 6,558
5 Residence Inn by Marriott(R)hotels 7,582
9 Candlewood(R)hotels 9,890
-------
Total $24,030
=======
F-33
<PAGE>
Notes to Unaudited Adjusted Pro Forma Financial Statements
(dollars in thousands, except per share data)
Pro Forma Income Statement Adjustments
M. Represents the historical income statement of the Company for the period
presented.
N. Represents the pro forma effect of leases entered and to be entered for
hotels open during the period presented. This pro forma effect is derived
as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months
Ended Ended
December 31, September 30,
1996 1997
<S> <C> <C>
Pro forma Minimum Rent $ 91,834 $ 78,422
Pro forma Percentage Rent 1,123 2,058
Amounts included in historical Minimum Rent (68,419) (69,100)
Amounts included in historical Percentage Rent (1,095) (2,058)
-------- --------
$ 23,443 $ 9,322
======== ========
</TABLE>
Certain of the hotels owned by the Company as of September 30, 1997 were
under development and others are currently under development by the
sellers of these properties. The Company is not contractually obligated
to acquire these hotels until they are substantially completed. The
foregoing pro forma income statements assume the hotels, which were
completed prior to September 30, 1997 were acquired as of their
completion date; however, pro forma percentage rent is limited to those
hotels which were in actual operation since January 1, 1996. Percentage
rent which is based upon a percentage or gross revenue increases cannot
be calculated for unopened hotels under development.
O. Represents the effect of the Company's 1996 acquisition of 16 Courtyard
by Marriott(R)and 18 Residence Inns by Marriott(R)on FF&E Reserve income.
FF&E Reserve escrow accounts for all of the Company's Courtyard by
Marriott(R)and Residence Inn by Marriott(R)hotels are owned by the
Company and periodic payments into these escrow accounts are recorded as
additional rent under generally accepted accounting principles ("GAAP").
Pro forma escrowed amounts represent 5% of total hotel revenues at such
hotels prior to the purchase date by the Company for the period
presented. No pro forma adjustment for the FF&E Reserve income related to
the newly constructed hotels purchased and to be purchased by the Company
from Marriott has been made, as these amounts cannot be calculated.
The FF&E Reserve for the renovation and refurbishment of the Company's
Wyndham(R), Sumner Suites(R) and Candlewood(R) hotels remains the
property of these respective tenants during the lease term. The Company
has a security interest in these escrow accounts and at the end of the
lease term, any remaining funds in these FF&E Reserves must be paid to
F-34
<PAGE>
the Company. Under GAAP the FF&E Reserve for the Leases relating to these
hotels is not recorded as income by the Company.
P. Represents the pro forma reduction in interest income during 1996 from
the effect of cash investments between the time of capital raising
activities and acquisitions by the Company.
Q. Represents the impact of the purchases and proposed purchases of hotels
from their date of completion to the end of the period presented on
depreciation expense.
R. Represents interest on pro forma Term Debt ($125,000) at LIBOR plus the
contractual spreads for the entire period presented, plus amortization of
deferred financing costs. The average applicable LIBOR rate was 5.446%
for the year ended December 31, 1996 and 5.598% for the nine months ended
September 30, 1997. The pro forma annual impact on interest expense of a
1/8% change in LIBOR is $156.
S. Represents estimated impact of the transactions described in Note N on
general and administrative expenses of the Company.
T. Represents the impact of additional Shares issued in the proposed
Offering, plus, for the year ended December 31, 1996 the impact of
additional Shares issued by the Company in April 1996.
F-35
<PAGE>
Other Data
Income Statement Adjustments
U. Represents the adjusted pro forma effect of leases entered and to be
entered since January 1, 1996. This adjusted pro forma effect is derived
as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months
Ended Ended
December 31, September 30,
1996 1997
<S> <C> <C>
Adjusted Pro forma Minimum Rent $ 134,994 $ 101,245
Adjusted Pro forma Percentage Rent 1,123 2,058
Amounts included in pro forma Minimum Rent (92,862) (78,422)
Amounts included in pro forma Percentage Rent (1,095) (2,058)
--------- ---------
$ 43,160 $ 22,823
========= =========
</TABLE>
V. Represents the full period's impact of the purchases and proposed
purchases of hotels on depreciation expense.
W. Represents interest on adjusted pro forma borrowings under the Company's
credit facilities ($111,168) at LIBOR plus contractual spreads for the
entire period presented, plus amortization of deferred financing costs.
The average applicable LIBOR rate was 5.446% for the year ended December
31, 1996 and 5.598% for the nine months ended September 30, 1997. The
adjusted pro forma impact on interest expense of a 1/8% change in LIBOR
is $139.
X. Represents estimated impact of the transactions on general and
administrative expenses of the Company.
F-36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
John G. Murray, President and
Chief Operating Officer
Date: November 21, 1997
<PAGE>
LIST OF EXHIBITS
10.1 Purchase and Sale Agreement, dated as of November 19, 1997, by and
among Candlewood Hotel Company, Inc. and certain of its affiliates,
as sellers, and the Company, as purchaser.
10.2 Form of Candlewood Lease Agreement by and between a subsidiary of the
Company, as landlord, and Candlewood Leasing No. 1, Inc., as tenant.
10.3 Form of Guaranty Agreement by and among Candlewood Hotel Company,
Inc., a subsidiary of the Company and the Company.
10.4 Purchase and Sale Agreement, dated as of October 24, 1997, by and
among ShoLodge, Inc. and certain of its affiliates, as sellers, and
the Company, as purchaser.
10.5 Lease Agreement, dated as of November 19, 1997, by and between HPT
Suite Properties Trust, as landlord, and Suite Tenant, Inc., as
tenant.
10.6 Limited Guaranty Agreement, dated as of November 19, 1997, by and
among ShoLodge, Inc., HPT Suite Properties Trust and the Company.
10.7 Purchase Agreement, dated as of October 10, 1997, by and among
Residence Inn By Marriott, Inc. and Courtyard Management Corporation,
as sellers, and the Company, as purchaser.
10.8 Form of Residence Inn Lease Agreement by and between HPTMI II
Properties Trust and CR9 Tenant Corporation.
10.9 Form of Courtyard Lease Agreement by and between HPTMI II Properties
Trust and CR9 Tenant Corporation.
10.10 Limited Rent Guaranty, dated as of October 10, 1997, by and among
Marriott International, Inc., the Company and HPTMI II Properties
Trust.
10.11 Amendment No. 3, dated November 14, 1997, to the Amended and Restated
Credit Agreement, dated as of December 29, 1995, as amended, between
the Company and DLJ Mortgage Capital, Inc.
10.12 First Supplemental Credit Agreement, dated as of November 14, 1997,
between the Company, as borrower, and DLJ Mortgage Capital, Inc., as
lender.
10.13 Second Supplemental Credit Agreement, dated as of November 14, 1997,
between the Company, as borrower, and DLJ Mortgage Capital, Inc., as
lender.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3 Consent of Reznick Fedder & Silverman, Independent Public Accountants
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
by and among
CANDLEWOOD HOTEL COMPANY, INC. AND CERTAIN OF ITS AFFILIATES,
as Sellers,
and
HOSPITALITY PROPERTIES TRUST,
as Purchaser
---------------------------
November 19, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 1. DEFINITIONS...........................................................................................1
1.1 Agreement..........................................................................................1
1.2 Agreement to Lease.................................................................................1
1.3 Allocable Purchase Price...........................................................................1
1.4 Assets.............................................................................................2
1.5 Business Day.......................................................................................2
1.6 Candlewood.........................................................................................2
1.7 Candlewood Parties ................................................................................2
1.8 Closing............................................................................................2
1.9 Closing Date.......................................................................................2
1.10 Contracts..........................................................................................2
1.11 Defective Property.................................................................................2
1.12 Documents..........................................................................................2
1.13 FF&E...............................................................................................2
1.14 Guaranty...........................................................................................2
1.15 Guaranty Retained Funds............................................................................2
1.16 Hotel..............................................................................................3
1.17 Improvements.......................................................................................3
1.18 Intangible Property................................................................................3
1.19 Lease..............................................................................................3
1.20 Opening Date.......................................................................................3
1.21 Permitted Encumbrances.............................................................................3
1.22 Plans and Specifications...........................................................................3
1.23 Properties.........................................................................................3
1.24 Purchase Price.....................................................................................4
1.25 Purchaser..........................................................................................4
1.26 Real Property......................................................................................4
1.27 Retained Funds ....................................................................................4
1.28 Review Period......................................................................................4
1.29 Sellers............................................................................................4
1.30 Substantial Completion.............................................................................4
1.31 Surveys............................................................................................4
1.32 Tenant.............................................................................................4
1.33 Tenant Leases......................................................................................4
1.34 Title Commitments..................................................................................4
1.35 Title Company......................................................................................4
SECTION 2. PURCHASE AND SALE; DILIGENCE..........................................................................5
2.1 Purchase and Sale...................................................................................5
2.2 Diligence Inspections...............................................................................5
2.3 Defective Properties................................................................................5
2.4 Title Matters. ....................................................................................6
2.5 Survey Matters......................................................................................7
SECTION 3. PURCHASE AND SALE.....................................................................................8
3.1 Closing.............................................................................................8
3.2 Purchase Price......................................................................................9
<PAGE>
-ii-
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.........................................................9
4.1 Closing Documents...................................................................................9
4.2 Condition of Properties............................................................................10
4.3 Title Policies.....................................................................................10
4.4 Opinions of Counsel................................................................................11
SECTION 5. CONDITIONS TO CANDLEWOOD PARTIES' OBLIGATION
TO CLOSE.....................................................................................11
5.1 Purchase Price.....................................................................................11
5.2 Closing Documents..................................................................................11
5.3 Opinion of Counsel.................................................................................11
SECTION 6. REPRESENTATIONS AND WARRANTIES OF
CANDLEWOOD PARTIES...........................................................................12
6.1 Status and Authority of the Candlewood Parties.....................................................12
6.2 Action of the Candlewood Parties...................................................................12
6.3 No Violations of Agreements........................................................................12
6.4 Litigation.........................................................................................12
6.5 Existing Leases, Agreements, Etc...................................................................13
6.6 Disclosure.........................................................................................13
6.7 Utilities, Etc.....................................................................................13
6.8 Compliance With Law................................................................................13
6.9 Taxes..............................................................................................13
6.10 Not A Foreign Person...............................................................................14
6.11 Hazardous Substances...............................................................................14
6.12 Insurance..........................................................................................14
6.13 Ownership of Sellers...............................................................................14
6.14 Substantial Completion.............................................................................14
6.15 Condition of Properties............................................................................14
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................................................15
7.1 Status and Authority of the Purchaser..............................................................15
7.2 Action of the Purchaser............................................................................16
7.3 No Violations of Agreements........................................................................16
7.4 Litigation.........................................................................................16
SECTION 8. COVENANTS OF THE CANDLEWOOD PARTIES..................................................................16
8.1 Compliance with Laws, Etc..........................................................................17
8.2 Approval of Agreements.............................................................................17
8.3 Notice of Material Changes or Untrue
Representations..............................................................................17
8.4 Substantial Completion.............................................................................17
8.5 Financial Information..............................................................................17
SECTION 9. APPORTIONMENTS.......................................................................................17
9.1 Real Property Apportionments.......................................................................17
9.2 Closing Costs......................................................................................18
<PAGE>
-iii-
SECTION 10. DEFAULT.............................................................................................18
10.1 Default by the Candlewood Parties.................................................................18
10.2 Default by the Purchaser..........................................................................18
SECTION 11. MISCELLANEOUS.......................................................................................19
11.1 Agreement to Indemnify............................................................................19
11.2 Brokerage Commissions.............................................................................20
11.3 Publicity.........................................................................................20
11.4 Notices...........................................................................................20
11.5 Waivers, Etc......................................................................................22
11.6 Assignment; Successors and Assigns................................................................22
11.7 Severability......................................................................................22
11.8 Counterparts, Etc.................................................................................23
11.9 Governing Law.....................................................................................23
11.10 Performance on Business Days......................................................................23
11.11 Attorneys' Fees...................................................................................23
11.12 Section and Other Headings........................................................................24
11.13 Nonliability of Trustees..........................................................................24
</TABLE>
Schedule A - The Properties; Allocable Purchase Prices
Schedule B-1-15 - Legal Descriptions
Schedule C - Form of Surveyor's Certificate
Schedule D - Form of Seller's Certificate
Schedule E - Form of Architect's Certificate
Schedule F - Form of Engineer's Certificate
Schedule G - List of Plans and Specifications
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of the 19th day of
November, 1997, by and among (i) CANDLEWOOD HOTEL COMPANY, INC. ("Candlewood"),
a Delaware corporation, (ii) the fifteen entities listed as "sellers" on the
signature pages of this Agreement (each, individually, a "Seller" and
collectively, the "Sellers") and HOSPITALITY PROPERTIES TRUST, a Maryland real
estate investment trust ("Purchaser").
WITNESSETH:
WHEREAS, the Sellers are the owners of all the Properties (all
capitalized terms used and not otherwise defined herein having the meanings
ascribed to such terms in Section 1); and
WHEREAS, the Purchaser desires to purchase the Properties, as more
fully set forth below; and
WHEREAS, the Sellers are willing to sell all of the Properties to the
Purchaser, subject to and upon the terms and conditions hereinafter set forth;
and
WHEREAS, Candlewood owns, directly or indirectly, all of the
outstanding capital stock of the Sellers and the transactions contemplated by
this Agreement are of direct and material benefit to Candlewood;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, the Candlewood Parties and
the Purchaser hereby agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1 "Agreement" shall mean this Purchase and Sale Agreement, together
with Schedules A through G attached hereto, as it and they may be amended from
time to time as herein provided.
1.2 "Agreement to Lease" shall mean that certain Agreement to Lease,
dated as of the date hereof, by and between the Purchaser and Candlewood, as it
may be amended, restated, supplemented or otherwise modified from time to time.
1.3 "Allocable Purchase Price" shall mean, with respect to each
Property, the amount set forth in Schedule A opposite the name of such Property,
it being understood and agreed that the
<PAGE>
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aggregate amount of the Allocable Purchase Prices of the Properties shall be One
Hundred Million Dollars ($100,000,000).
1.4 "Assets" shall mean, with respect to any Hotel, collectively, all
of the Real Property, the FF&E, the Contracts, the Documents, the Improvements,
the Intangible Property and the Tenant Leases owned by any of the Sellers in
connection with or relating to such Hotel.
1.5 "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of New York are authorized by law or executive action to close.
1.6 "Candlewood" shall have the meaning given such term in the first
paragraph of this Agreement.
1.7 "Candlewood Parties" shall mean, collectively, Candlewood and the
Sellers.
1.8 "Closing" shall have the meaning given such term in Section 3.1.
1.9 "Closing Date" shall have the meaning given such term in Section
3.1.
1.10 "Contracts" shall mean, with respect to any Property, all hotel
licensing agreements and other service contracts, equipment leases, booking
agreements and other arrangements or agreements to which any of the Sellers is a
party affecting the ownership, repair, maintenance, management, leasing or
operation of such Property, to the extent the Sellers' interest therein is
assignable or transferable.
1.11 "Defective Property" shall have the meaning given such term in
Section 2.3(a).
1.12 "Documents" shall mean, with respect to any Property, all books,
records and files relating to the leasing, maintenance, management or operation
of such Property.
1.13 "FF&E" shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
(other than motor vehicles) owned by any of the Sellers and located in or at, or
used in connection with the ownership, operation or maintenance of such
Property.
1.14 "Guaranty" shall mean the guaranty to be executed pursuant to the
Agreement to Lease.
1.15 "Guaranty Retained Funds" shall mean an amount equal to Five
Million Dollars ($5,000,000).
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1.16 "Hotel" shall mean each hotel located at the properties identified
on Schedule A, the legal descriptions of which are set forth on Schedules B-1
through B-15.
1.17 "Improvements" shall mean, with respect to any Property, all
buildings, fixtures, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property with
respect to such Property.
1.18 "Intangible Property" shall mean, with respect to any Property,
all transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, the Contracts, telephone exchange numbers identified
with such Property held by any of the Sellers and all other transferable
intangible property, miscellaneous rights, benefits and privileges of any kind
or character with respect to such Property held by any of the Sellers.
1.19 "Lease" shall mean the lease to be entered into between the
Purchaser or its subsidiary, as landlord, and the Tenant, as tenant, with
respect to the Properties pursuant to the Agreement to Lease, as amended,
modified or supplemented from time to time.
1.20 "Opening Date" shall mean, with respect to any Property, the date
as of which all Improvements located at such Property, including, without
limitation, all guest rooms and/or suites, shall be open for business to the
public as a Candlewood hotel, in accordance with applicable brand standards.
1.21 "Permitted Encumbrances" shall mean, with respect to any Property,
(a) liens for taxes, assessments and governmental charges with respect to such
Property not yet due and payable or due and payable but not yet delinquent; (b)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect use of such Property as an extended stay hotel
as currently operated and constructed; (c) such other nonmonetary encumbrances
as do not, in the Purchaser's reasonable opinion, impair marketability and do
not materially interfere with the use of such Property as a fully functioning
Candlewood hotel; (d) UCC Financing Statements which would be permitted pursuant
to the terms of Section 21.9 of the Lease; and (e) such other nonmonetary
encumbrances with respect to such Property which are not objected to by the
Purchaser in accordance with Sections 2.4 and 2.5.
1.22 "Plans and Specifications" shall mean, with respect to each
Property, the plans and specifications identified on Schedule G with respect to
such Property.
1.23 "Properties" shall mean, collectively, all of the Assets relating
to the properties identified on Schedule A, the legal descriptions of which are
set forth in Schedules B-1--B-15.
<PAGE>
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1.24 "Purchase Price" shall mean the sum of the Allocable Purchase
Prices, but in no event more than One Hundred Million Dollars ($100,000,000).
1.25 "Purchaser" shall have the meaning given such term in the first
paragraph of this Agreement.
1.26 "Real Property" shall mean, with respect to any Property, the real
property described in the applicable Schedule B-1 through B-15, together with
all easements, rights of way, privileges, licenses and appurtenances which the
Sellers may own with respect thereto.
1.27 "Retained Funds" shall mean, with respect to each Property, an
amount equal to ten percent (10%) of the Allocable Purchase Price of such
Property.
1.28 "Review Period" shall mean the period commencing on the date of
this Agreement and expiring on the first to occur of the date thirty (30) days
after the date of this Agreement and the Closing Date.
1.29 "Sellers" shall have the meaning given such term in the first
paragraph of this Agreement.
1.30 "Substantial Completion" shall mean, with respect to any Property,
physical completion of the Improvements on such Property, including, without
limitation, physical completion of a hotel of the brand and consisting of the
number of rooms set forth on Schedule A, consistent with the Plans and
Specifications therefor (other than so-called "punch-list" items as do not
individually or in the aggregate impair use of such Property for its intended
use), free of all liens and encumbrances (other than Permitted Encumbrances)
such that the Opening Date shall have occurred and the Improvements may be used
for their intended use.
1.31 "Surveys" shall have the meaning given such term in Section 2.5.
1.32 "Tenant" shall have the meaning given such term in the Agreement
to Lease.
1.33 "Tenant Leases" shall mean, with respect to any Property, all
leases, rental agreements or other agreements (other than agreements for letting
of rooms or other facilities to hotel guests) (including all amendments or
modifications thereto) which entitle any person to have rights with respect to
the use or occupancy of any portion of such Property.
1.34 "Title Commitments" shall have the meaning given such term in
Section 2.4.
1.35 "Title Company" shall mean Stewart Title Company, or such other
title insurance company as shall have been selected by
<PAGE>
-5-
the Purchaser and approved by the Sellers, which approval shall not be
unreasonably withheld, delayed or conditioned.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1 Purchase and Sale. In consideration of the mutual covenants herein
contained, the Purchaser hereby agrees to purchase from the Sellers and
Candlewood hereby agrees to cause the Sellers to sell and the Sellers hereby
agree to sell to the Purchaser, all of the Sellers' right, title and interest in
and to the Properties for the Purchase Price, subject to and in accordance with
the terms and conditions of this Agreement.
2.2 Diligence Inspections. For the Review Period and, thereafter, until
Closing, the Sellers shall permit the Purchaser and its representatives to
inspect the Properties and the Improvements (including, without limitation, all
roofs, electric, mechanical and structural elements, and HVAC systems therein),
to perform due diligence, soil analysis and environmental investigations, to
examine the books of account and records of the Sellers with respect to the
Properties, including, without limitation, all leases and agreements affecting
the Properties, and make copies thereof, at such reasonable times as the
Purchaser or its representatives may request by notice to the Sellers (which
notice may be oral). To the extent that, in connection with such investigations,
the Purchaser, its agents, representatives or contractors, damages or disturbs
any of the Real Property, the Improvements or FF&E located thereon, the
Purchaser shall, at its expense, return the same to substantially the same
condition which existed immediately prior to such damage or disturbance. Neither
the Purchaser nor any of its agents, representatives or contractors shall have
any right whatsoever to alter the condition of any Property, or portion thereof,
without the prior written consent of the Sellers, which consent shall not be
unreasonably withheld, delayed or conditioned. The Purchaser shall indemnify,
defend and hold harmless the Sellers from and against any and all expense, loss
or damage which the Sellers may incur as a result of any act or omission of the
Purchaser or its representatives, agents or contractors in connection with such
examinations and inspections, other than to the extent that any expense, loss or
damage arises from any negligence or misconduct of the Sellers. The provisions
of this Section 2.2 shall survive the termination of this Agreement and the
Closing.
2.3 Defective Properties. (a) In the event that (i) the Purchaser
reasonably determines that a Property has structural, environmental or other
structural defects or conditions such that (x) expenditures equal to or greater
than three percent (3%) of the Allocable Purchase Price of such Property are
required in order to bring such Property into a reasonably satisfactory
condition in accordance with prevailing standards, as the case may be, for like
hotels, or (y), with respect to Properties as to which the Opening Date has
already occurred, the calculation with
<PAGE>
-6-
respect to such Property of net operating income varies by three percent (3%) or
more of that set forth in the financial data provided by the Candlewood Parties
to the Purchaser prior to the date hereof (any such Property being hereinafter
referred to as a "Defective Property"), and (ii) the Purchaser gives written
notice thereof to the Candlewood Parties no later than the expiration of the
Review Period (time being of the essence with respect to the giving of such
notice), identifying the Defective Property or Defective Properties and the
specific defects with respect thereto, the Candlewood Parties shall, subject to
paragraph (c) below, be required to permit the Purchaser to acquire all of the
Properties other than such Defective Property or Defective Properties.
(b) If, prior to the applicable Closing, (i) any Property suffers a
casualty or condemnation which would cause such Property or Properties to become
a Defective Property, (ii) such Property is not, prior to the Closing, restored
to a condition substantially the same as the condition thereof immediately prior
to such casualty or condemnation, and (iii) the Purchaser provides written
notice of same to the Candlewood Parties no later than the applicable Closing
Date, time being of the essence, the Candlewood Parties shall, subject to
paragraph (c) below, be required to permit the Purchaser to acquire all of the
Properties other than such Defective Property or Properties. Promptly upon
learning of the same, the Candlewood Parties covenant and agree to provide the
Purchaser with prompt written notice of any casualty or condemnation affecting
any Property.
(c) If the Purchaser timely identifies any Defective Property and the
Purchaser and the Candlewood Parties shall, acting reasonably and in good faith
be unable or unwilling to agree that (x) the Candlewood Parties shall, at their
sole cost, remedy the applicable defect prior to the applicable Closing (in
which event the Candlewood Parties shall have the right to adjourn the
applicable Closing Date for up to ninety (90) days for such purpose), (y) the
Purchaser shall, notwithstanding such defect, acquire the Defective Property
subject to a reduction in the Allocable Purchase Price of the Defective Property
sufficient to compensate the Purchaser for such defect (in which event the
applicable Seller shall retain all available insurance or condemnation proceeds)
or (z) on the substitution of another property owned by the Candlewood Parties
for such Defective Property, this Agreement shall, at the Purchaser's option,
terminate with respect to such Defective Property and the Purchase Price shall
be reduced by the Allocable Purchase Price of such Defective Property.
2.4 Title Matters. Promptly upon execution of this Agreement, the
Candlewood Parties shall order from the Title Company and direct the Title
Company promptly to deliver to the Purchaser a preliminary title commitment, for
an ALTA extended owner's policy of title insurance with respect to each of the
Properties, together with complete and legible copies of all
<PAGE>
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instruments and documents referred to as exceptions to title (collectively, the
"Title Commitments").
Within ten (10) Business Days after receipt of the Title Commitments,
the Purchaser shall give the Candlewood Parties notice of any title exceptions
(other than Permitted Encumbrances) which adversely affect any Property in any
material respect and as to which the Purchaser reasonably objects. If, for any
reason, the Candlewood Parties are unable or unwilling to take such actions as
may be required to cause such exceptions to be removed from the Title
Commitments, the Candlewood Parties shall give the Purchaser notice thereof; it
being understood and agreed that the failure of the Candlewood Parties to give
such notice within ten (10) Business Days after the Purchaser's notice of
objection shall be deemed an election by the Candlewood Parties not to remedy
such matters. If the Candlewood Parties shall be unable or unwilling to remove
any title defects to which the Purchaser has reasonably objected, the Purchaser
may elect (i) to terminate this Agreement with respect to the affected Property,
in which event, the Purchase Price shall be reduced by the Allocable Purchase
Price of the affected Properties and this Agreement shall be of no further force
and effect with respect to the affected Properties or (ii) to consummate the
transactions contemplated hereby, notwithstanding such title defect, without any
abatement or reduction in the Purchase Price on account thereof. The Purchaser
shall make any such election by written notice to the Candlewood Parties given
on or prior to the fifth Business Day after the Candlewood Parties' notice of
their unwillingness or inability to cure such defect. Failure of the Purchaser
to give such notice shall be deemed an election by the Purchaser to proceed in
accordance with clause (ii) above and such exception shall be deemed a Permitted
Encumbrance.
2.5 Survey Matters. Upon execution of this Agreement, the Candlewood
Parties shall arrange for the preparation of an ALTA survey with respect to each
of the Properties (the "Surveys") by a licensed surveyor in the jurisdiction in
which each such Property is located, which (i) contains an accurate legal
description of the applicable Property, (ii) shows the exact location, dimension
and description (including applicable recording information) of all utilities,
easements, encroachments and other physical matters affecting such Property, the
number of striped parking spaces located thereon and all applicable building
set-back lines, (iii) states whether the applicable Property is located within a
100-year flood plain and (iv) includes a certification in the form set forth in
Schedule C, or such other form as may be acceptable to the Purchaser, addressed
to the Purchaser, the Title Company and any other persons requested by the
Purchaser or designated by the Candlewood Parties.
Within ten (10) Business Days after receipt of the Surveys, the
Purchaser shall give the Candlewood Parties notice of any matters shown thereon
(other than Permitted Encumbrances) which
<PAGE>
-8-
adversely affect any such Property in any material respect and as to which the
Purchaser reasonably objects. If, for any reason, the Candlewood Parties are
unwilling or unable to take such actions as may be required to remedy the
objectionable matters, the Candlewood Parties shall give the Purchaser prompt
notice thereof; it being understood and agreed that the failure of the
Candlewood Parties to give such notice within ten (10) Business Days after the
Purchaser's notice of objection shall be deemed an election by the Candlewood
Parties not to remedy such matters. If the Candlewood Parties shall be unwilling
or unable to remove any survey defect to which the Purchaser has reasonably
objected, the Purchaser may elect (i) to terminate this Agreement with respect
to the affected Property, in which event, the Purchase Price shall be reduced by
the Allocable Purchase Price of the affected Properties and this Agreement shall
terminate and be of no further force or effect with respect to the affected
Properties or (ii) to consummate the transactions contemplated hereby,
notwithstanding such defect, without any abatement or reduction in the Purchase
Price on account thereof. The Purchaser shall make any such election by written
notice to the Candlewood Parties given on or prior to the fifth Business Day
after the Candlewood Parties' notice of their inability to cure such defect and
time shall be of the essence with respect to the giving of such notice. Failure
of the Purchaser to give such notice shall be deemed an election by the
Purchaser to proceed in accordance with clause (ii) above and such matter shall
be deemed a Permitted Encumbrance.
SECTION 3. PURCHASE AND SALE.
3.1 Closing. The purchase and sale of the Properties shall be
consummated at one or more closings (each, a "Closing") to be held at the
offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts, or at such other location as the Sellers and the Purchaser may
agree, at 10:00 a.m. local time, the Closing with respect to any Property to
occur on a date (each, a "Closing Date") designated in writing by the Sellers,
which date shall not be less than ten (10) Business Days nor more than thirty
(30) Business Days after notice from the Sellers to the Purchaser that
Substantial Completion and the Opening Date have occurred with respect to such
Property (and which notice shall identify the proposed Closing Date) or, if
later, the date as of which all conditions precedent to the Closing herein set
forth with respect to the applicable Property have either been satisfied or
waived by the party in whose favor such conditions run. In the event that
Closings with respect to all of the Properties shall not have occurred on or
before March 31, 1998, provided that no action for specific performance shall
have been commenced by the Purchaser to enforce this Agreement, any party shall,
provided such party shall not be in default hereunder, have the right, by the
giving of written notice, to terminate this Agreement with respect to all of the
Properties as to which a Closing has not yet occurred as of the date of
termination.
<PAGE>
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3.2 Purchase Price. The Allocable Purchase Prices shall be payable as
follows:
(a) At each Closing, the Allocable Purchase Price of each Property
being purchased, less the amount of the Retained Funds with respect thereto and,
in the case of the first closing only, less the amount of the Guaranty Retained
Funds, shall be payable by wire transfer of immediately available funds on the
applicable Closing Date to an account or accounts to be designated by the
Sellers prior to such Closing;
(b) Except as otherwise provided in the Lease, the Retained Funds with
respect to each Property shall be payable by wire transfer of immediately
available funds upon the expiration or sooner termination of the Lease, in
accordance with the terms of the Lease, to an account or accounts to be
designated by the Sellers prior to such date; and
(c) Except as otherwise provided in the Guaranty, the Guaranty Retained
Funds shall be payable by wire transfer of immediately available funds in
accordance with the terms of the Guaranty, to an account or accounts to be
designed by Candlewood prior to such date.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of the Purchaser to acquire each of the Properties on
the applicable Closing Date shall be subject to the satisfaction of the
following conditions precedent on and as of such Closing Date:
4.1 Closing Documents. The applicable Candlewood Parties shall have
delivered to the Purchaser with respect to the applicable Property:
(a) A good and sufficient warranty deed with covenants against
grantor's acts, or its local equivalent, in proper statutory form for recording,
duly executed and acknowledged by the Sellers, conveying good and marketable
title to the applicable Fee Properties, free from all liens and encumbrances
other than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to the Sellers and the Purchaser, duly executed and
acknowledged by the Sellers, with respect to all of the Sellers' right, title
and interest in, to and under the FF&E, the Contracts, the Documents, the
Intangible Property and the Tenant Leases with respect to the Properties and the
Sellers' rights under all builder's warranties with respect to the applicable
Property;
(c) A copy of the final duly issued certificate of occupancy for each
of the applicable Properties;
<PAGE>
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(d) A Sellers' closing certificate in the form attached hereto as
Schedule D;
(e) An architect's certificate in the form attached hereto as Schedule
E;
(f) An engineer's certificate in the form attached hereto as Schedule
F;
(g) A duly executed copy of the Lease, or applicable amendment thereto,
all of the Incidental Documents (as such term is defined in the Lease) and all
other documents and sums required to be delivered by the Candlewood Parties
and/or the Tenant pursuant to the Agreement to Lease;
(h) Certified copies of all charter documents, applicable corporate
resolutions and certificates of incumbency with respect to the applicable
Candlewood Parties and the Tenant; and
(i) Such other conveyance documents, certificates, deeds, affidavits
and other instruments as the Purchaser or the Title Company may reasonably
require to effectuate the transactions contemplated by this Agreement.
4.2 Condition of Properties.
(a) No material default or event which with the giving of notice and/or
lapse of time could constitute a material default shall have occurred and be
continuing under any material agreement benefiting or affecting the applicable
Properties in any respect;
(b) No action shall be pending or threatened for the condemnation or
taking by power of eminent domain of all or any material portion of the
applicable Properties which would render any Property a Defective Property;
(c) All material licenses, permits and other authorizations necessary
for the current use, occupancy and operation of the applicable Properties shall
be in full force and effect;
(d) The Purchaser shall have received an engineer's report, in form and
substance reasonably satisfactory to the Purchaser, confirming that Substantial
Completion has occurred; and
(e) No Default or Event of Default (as defined therein) shall have
occurred and be continuing under the Lease.
4.3 Title Policies and Surveys. (a) The Title Company shall be
prepared, subject only to payment of the applicable premium and endorsement fees
and delivery of all conveyance documents in recordable form, to issue title
insurance policies to the Purchaser with respect to the applicable Properties,
in form and substance reasonably satisfactory to the Purchaser in
<PAGE>
-11-
accordance with Section 2.4, together with such affirmative coverages as the
Purchaser may reasonably require and shall have been determined by the Title
Company as available prior to the expiration of the Review Period.
(b) The Purchaser shall have received an as-built survey with respect
to the applicable Properties, such survey to be consistent with the requirements
of Section 2.5.
4.4 Opinions of Counsel. (a) The Purchaser shall have received a
written opinion from counsel to the Candlewood Parties, which counsel shall be
reasonably acceptable to the Purchaser, in form and substance reasonably
satisfactory to the Purchaser, regarding the organization and authority of the
Candlewood Parties and the Tenant, the enforceability of this Agreement, the
Lease or amendment thereto, as the case may be, and the Incidental Documents (as
defined in the Lease) and such other matters with respect to the transactions
contemplated by this Agreement as the Purchaser may reasonably require.
(b) The Purchaser shall have received a zoning diligence memorandum
from local counsel to the Purchaser, in form and substance reasonably
satisfactory to the Purchaser, regarding the compliance of the Properties with
respect to zoning, licensing and such other matters as the Purchaser may
reasonably require.
SECTION 5. CONDITIONS TO CANDLEWOOD PARTIES' OBLIGATION TO CLOSE.
The obligation of the Candlewood Parties to convey the Properties on
the applicable Closing Date to the Purchaser is subject to the satisfaction of
the following conditions precedent on and as of such Closing Date:
5.1 Purchase Price. The Purchaser shall deliver to the Candlewood
Parties the Allocable Purchase Prices of the applicable Properties as provided
in Section 3.2.
5.2 Closing Documents. The Purchaser shall have delivered to the
Sellers:
(a) Duly executed and acknowledged counterparts of the documents
described in Section 4.1, where applicable; and
(b) Certified copies of all charter documents, applicable resolutions
and certificates of incumbency with respect to the Purchaser.
5.3 Opinion of Counsel. The Candlewood Parties shall have received a
written opinion from Sullivan & Worcester LLP, counsel to the Purchaser, in form
and substance reasonably satisfactory to the Candlewood Parties, regarding the
organization and authority of the Purchaser and such other matters with respect
to
<PAGE>
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the transactions contemplated by this Agreement as the Candlewood Parties may
reasonably require.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF CANDLEWOOD PARTIES.
To induce the Purchaser to enter into this Agreement, each of
Candlewood, with respect to all Properties, and, each Seller, with respect to
its Property, represent and warrant to the Purchaser as follows:
6.1 Status and Authority of the Candlewood Parties. It is a corporation
or limited liability company duly organized, validly existing and in good
standing under the laws of its state of incorporation or formation, and has all
requisite power and authority under the laws of such state and its respective
charter documents to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. It has duly qualified to
transact business in each jurisdiction in which the nature of the business
conducted by it requires such qualification, except where failure to do so could
not reasonably be expected to have a material adverse effect.
6.2 Action of the Candlewood Parties. It has taken all necessary action
to authorize the execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by it on or prior to
the Closing Date, such document shall constitute its valid and binding
obligation and agreement, enforceable against such Candlewood Party in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
6.3 No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement, nor compliance with the terms and provisions
hereof, will result in any breach of the terms, conditions or provisions of, or
conflict with or constitute a default under, or result in the creation of any
lien, charge or encumbrance upon its Property pursuant to the terms of any
indenture, mortgage, deed of trust, note, evidence of indebtedness or any other
agreement or instrument by which it is bound.
6.4 Litigation. It has received no written notice of and, to its
knowledge, no action or proceeding is pending or threatened and no investigation
looking toward such an action or proceeding has begun, which (a) questions the
validity of this Agreement or any action taken or to be taken pursuant hereto,
(b) will result in any material adverse change in the business, operation,
affairs or condition of its Property, (c) will result in or subject its Property
to a material liability, or (d)
<PAGE>
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involves condemnation or eminent domain proceedings against any material part of
its Property.
6.5 Existing Leases, Agreements, Etc. Other than any agreements
provided to the Purchaser not less than ten (10) days prior to the expiration of
the Review Period, there are no other material agreements affecting its Property
which will be binding on the Purchaser subsequent to the Closing Date which the
Purchaser cannot terminate on thirty (30) days notice without payment of premium
or penalty.
6.6 Disclosure. To its knowledge, there is no fact or condition which
materially and adversely affects the business or condition of its Property which
has not been set forth in this Agreement or in the other documents, certificates
or statements furnished to the Purchaser in connection with the transactions
contemplated hereby.
6.7 Utilities, Etc. To its knowledge, all utilities and services
necessary for the use and operation of its Property (including, without
limitation, road access, gas, water, electricity and telephone) are available
thereto and are of sufficient capacity to meet adequately all needs and
requirements necessary for the current use and operation of its Property. To its
knowledge, no fact, condition or proceeding exists which would result in the
termination or material impairment of the furnishing of such utilities to its
Property.
6.8 Compliance With Law. To its knowledge, except as disclosed to the
Purchaser in writing not less than ten (10) days' prior to the expiration of the
Review Period, including in any engineering report, (i) its Property and the
current use and operation thereof do not violate any material federal, state,
municipal and other governmental statutes, ordinances, by-laws, rules,
regulations or any other legal requirements, including, without limitation,
those relating to construction, occupancy, zoning, adequacy of parking,
environmental protection, occupational health and safety and fire safety
applicable thereto; and (ii) at the time of the applicable Closing there will be
in effect all material licenses, permits and other authorizations necessary for
the current use, occupancy and operation thereof. Except as disclosed to the
Purchaser in writing not less than ten (10) days' prior to the expiration of the
Review Period, none of the Candlewood Parties has received written notice of any
threatened request, application, proceeding, plan, study or effort which would
materially adversely affect the present use or zoning of its Property or which
would modify or realign any adjacent street or highway in a material and adverse
way.
6.9 Taxes. To its knowledge, other than the amounts disclosed by tax
bills, no taxes or special assessments of any kind (special, bond or otherwise)
are or have been levied with respect to its Property, or any portion thereof,
which are
<PAGE>
-14-
outstanding or unpaid, other than amounts not yet due and payable or, if due and
payable, not yet delinquent.
6.10 Not A Foreign Person. It is not a "foreign person" within the
meaning of Section 1445 of the United States Internal Revenue Code of 1986, as
amended, and the treasury regulations promulgated thereunder.
6.11 Hazardous Substances. Except as disclosed to the Purchaser or as
described in any environmental report delivered to the Purchaser prior to the
expiration of the Review Period, to its knowledge, neither it nor any tenant or
other occupant or user of any of its Property, or any portion thereof, has
stored or disposed of (or engaged in the business of storing or disposing of) or
has released or caused the release of any hazardous waste, contaminants, oil,
radioactive or other material on its Property, or any portion thereof, the
removal of which is required or the maintenance of which is prohibited or
penalized by any applicable Federal, state or local statutes, laws, ordinances,
rules or regulations, and, to each of the Candlewood Party's knowledge, except
as disclosed to the Purchaser or as described in any environmental report
delivered to the Purchaser prior to the expiration of the Review Period, its
Property is free from any such hazardous waste, contaminants, oil, radioactive
and other materials, except any such materials maintained in accordance with
applicable law.
6.12 Insurance. It has not received written notice from any insurance
carrier of defects or inadequacies in its Property which, if uncorrected, would
result in a termination of insurance coverage or a material increase in the
premiums charged therefor.
6.13 Ownership of Sellers. Candlewood is the sole owner, directly or
indirectly, of all of the issued and outstanding beneficial interests in the
Sellers and the transactions contemplated by this Agreement are of direct
material benefit to Candlewood.
6.14 Substantial Completion. As of the date hereof, Candlewood
reasonably anticipates that Substantial Completion of all of the Properties will
occur on or before March 31, 1998.
6.15 Condition of Properties. To its knowledge, its Property is, or on
the applicable Closing Date will be, in good working order and repair,
mechanically and structurally sound, free from material defects in materials and
workmanship.
The representations and warranties made in this Agreement by the
Candlewood Parties are made as of the date hereof and shall be deemed remade by
the Candlewood Parties as of the applicable Closing Date for the Property or
Properties then being conveyed by the Sellers, with the same force and effect as
if made on, and as of, such date; provided, however, that, the Candlewood
Parties shall have the right, from time to time prior to the applicable
<PAGE>
-15-
Closing Date, with respect to any Property as to which a Closing has not yet
occurred, to modify the representations and warranties by notice to the
Purchaser and, in such event, the Purchaser shall have the rights provided in
Section 2.3. All representations and warranties made in this Agreement by the
Candlewood Parties shall survive the applicable Closing for a period of one year
thereafter.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to the Purchaser at the Closing, the Candlewood
Parties disclaim the making of any representations or warranties, express or
implied, regarding the Properties or matters affecting the Properties, whether
made by the Candlewood Parties, on the Candlewood Parties' behalf or otherwise,
including, without limitation, the physical condition of the Properties, title
to or the boundaries of the Real Property, pest control matters, soil
conditions, the presence, existence or absence of hazardous wastes, toxic
substances or other environmental matters, compliance with building, health,
safety, land use and zoning laws, regulations and orders, structural and other
engineering characteristics, traffic patterns, market data, economic conditions
or projections, and any other information pertaining to the Properties or the
market and physical environments in which they are located. The Purchaser
acknowledges (i) that the Purchaser has entered into this Agreement with the
intention of making and relying upon its own investigation or that of third
parties with respect to the physical, environmental, economic and legal
condition of each Property and (ii) that the Purchaser is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
the Purchaser at any Closing, made by the Candlewood Parties or anyone acting on
the Candlewood Parties' behalf. The Purchaser further acknowledges that it has
not received from or on behalf of the Candlewood Parties any accounting, tax,
legal, architectural, engineering, property management or other advice with
respect to this transaction and is relying solely upon the advice of third party
accounting, tax, legal, architectural, engineering, property management and
other advisors. Subject to the provisions of this Agreement, the Purchaser shall
purchase the Properties in their "as is" condition on each Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce the Candlewood Parties to enter in this Agreement, the
Purchaser represents and warrants to the Candlewood Parties as follows:
7.1 Status and Authority of the Purchaser. The Purchaser is a Maryland
real estate investment trust duly organized, validly existing and in trust good
standing under the laws of the State of Maryland, and has all requisite power
and authority
<PAGE>
-16-
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 indenture, mortgage, deed of trust, note,
evidence of indebtedness or any other agreement or instrument by which the
Purchaser is bound.
7.4 Litigation. No investigation, action or proceeding is pending and,
to the Purchaser's knowledge, no action or proceeding is threatened and no
investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
The representations and warranties made in this Agreement by the
Purchaser shall be continuing and shall be deemed remade by the Purchaser as of
the applicable Closing Date with the same force and effect as if made on, and as
of, such date. The Purchaser's liability with respect to all representations and
warranties made in this Agreement by the Purchaser shall survive the applicable
Closing for a period of one (1) year thereafter.
SECTION 8. COVENANTS OF THE CANDLEWOOD PARTIES.
Candlewood, with respect to all Properties, and each Seller, with
respect to its Property, hereby covenant with the Purchaser between the date of
this Agreement and the Closing Date as follows:
<PAGE>
-17-
8.1 Compliance with Laws, Etc. To comply or to cause compliance with in
all material respects with (i) all applicable laws, regulations and other
requirements from time to time of every governmental body having jurisdiction of
its Property or the use or occupancy of the Improvements located on the Real
Property and (ii) all terms, covenants and conditions of all instruments of
record and other agreements affecting its Property.
8.2 Approval of Agreements. Except as otherwise authorized by this
Agreement or in the ordinary course of business, not to enter into, modify,
amend or terminate any other agreement with respect to its Property which would
encumber or be binding upon its Property from and after the applicable Closing
Date without in each instance obtaining the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld, delayed or
conditioned.
8.3 Notice of Material Changes or Untrue Representations. Upon learning
of any material change in any condition with respect to its Property or of any
event or circumstance which makes any representation or warranty of the
Candlewood Parties to the Purchaser under this Agreement untrue or misleading in
any material respect, promptly to notify the Purchaser thereof (the Purchaser
agreeing, on learning of any such fact or condition, promptly to notify the
Candlewood Parties thereof).
8.4 Substantial Completion. From the date of this Agreement to the
Closing Date for any Property, to use reasonable efforts to cause Substantial
Completion of such Property to occur as soon as reasonably practicable after the
date hereof, subject to any events of force majeure.
8.5 Financial Information. To provide to the Purchaser, promptly upon
request at the Candlewood Parties' sole cost and expense, such audited and
unaudited financial and other information and certifications of the Candlewood
Parties with respect to the Candlewood Parties and the Properties as the
Purchaser may from time to time reasonably request in order to comply with any
applicable securities laws and/or any rules, regulations or requirements of the
Securities and Exchange Commission and, if required or requested, to permit the
Purchaser to incorporate by reference any information included in filings made
by Candlewood with the Securities and Exchange Commission. Notwithstanding the
foregoing, the Candlewood Parties shall not be required to provide, pursuant to
this Agreement, audited financial information with respect to individual
Properties, unless the Purchaser shall pay for the cost thereof.
SECTION 9. APPORTIONMENTS.
9.1 Real Property Apportionments. Representatives of the Purchaser and
the Candlewood Parties shall perform any and all of
<PAGE>
-18-
the adjustments and apportionments which are appropriate and usual for a
transaction of this nature and taking into account the simultaneous execution of
the Lease. The adjustments hereunder shall be calculated or paid in an amount
based upon a fair and reasonable estimated accounting performed and agreed to by
representatives of the Candlewood Parties and the Purchaser at or prior to the
Closing. Subsequent final adjustments and payments shall be made in cash or
other immediately available funds as soon as practicable after the Closing Date
and in any event within ninety (90) days after such Closing Date, based upon an
agreed accounting performed by representatives of the Candlewood Parties and the
Purchaser. In the event the parties have not agreed with respect to the
adjustments required to be made pursuant to this Section 9.1 within such
ninety-day period, upon application by either party, Ernst & Young, LLP or other
certified public accountants reasonably acceptable to the Purchaser and the
Candlewood Parties shall determine any such adjustments which have not
theretofore been agreed to between the Candlewood Parties and the Purchaser. The
charges of such accountant shall be borne by the Candlewood Parties.
9.2 Closing Costs. The Candlewood Parties shall pay all costs and
expenses associated with the transactions contemplated hereby, including,
without limitation, recording costs, title insurance premiums, the costs and
expenses of preparing engineering and environmental reports, market studies and
appraisals and the reasonable costs and expenses of legal counsel retained by
the Purchaser.
The obligations of the parties under this Section 9 shall survive the
Closing.
SECTION 10. DEFAULT.
10.1 Default by the Candlewood Parties. If the Candlewood Parties shall
have made any representation or warranty herein which shall be untrue or
misleading in any material respect, or if the Candlewood Parties shall fail to
perform any of the material covenants and agreements contained herein to be
performed by the Candlewood Parties and such failure continues for a period of
ten (10) days after notice thereof from the Purchaser or if the Tenant shall
default in its obligations under the Agreement to Lease and such default shall
continue beyond the expiration of any applicable cure period, the Purchaser may
terminate this Agreement and/or the Purchaser may pursue any and all remedies
available to it at law or in equity, including, but not limited to, a suit for
specific performance or other equitable relief.
10.2 Default by the Purchaser. If the Purchaser shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or if the Purchaser shall fail to perform any of the covenants
and agreements contained
<PAGE>
-19-
herein to be performed by it and such failure shall continue for a period of ten
(10) days after notice thereof from the Candlewood Parties or if the Purchaser
shall default in its obligations under the Agreement to Lease and such default
shall continue beyond the expiration of any applicable cure period, the
Candlewood Parties may, as its sole and exclusive remedy at law and in equity,
terminate this Agreement. In the event that the Candlewood Parties shall so
terminate this Agreement, the Purchaser shall thereupon pay to the Candlewood
Parties, as liquidated damages and not as a penalty, the sum of Two Hundred
Fifty Thousand Dollars ($250,000) plus all expenses incurred by the Candlewood
Parties in connection with the transactions contemplated hereby, whereupon, the
Purchaser shall have no further monetary or, except as expressly provided
herein, nonmonetary obligations hereunder.
SECTION 11. MISCELLANEOUS.
11.1 Agreement to Indemnify. (a) Subject to any express provisions of
this Agreement to the contrary, (i) the Candlewood Parties shall indemnify and
hold harmless the Purchaser from and against any and all obligations, claims,
losses, damages, liabilities, and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and disbursements) arising out of
(x) events, contractual obligations, acts or omissions of the Candlewood Parties
that occurred in connection with the ownership or operation of any Property
prior to the Closing or (y) any damage to property of others or injury to or
death of any person or any claims for any debts or obligations occurring on or
about or in connection with any Property or any portion thereof at any time or
times prior to the Closing, and (ii) the Purchaser shall indemnify and hold
harmless the Candlewood Parties from and against any and all obligations,
claims, losses, damages, liabilities and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and disbursements)
arising out of (x) events, contractual obligations, acts or omissions of
Purchaser that occur in connection with the ownership or operation of any
Property on or after the Closing, or (y) any damage to property of others or
injury to or death of any person or any claims for any debts or obligations
occurring on or about any Property or any portion thereof at any time or times
after the Closing.
(b) Whenever it is provided in this Agreement that an obligation of the
Candlewood Parties will be assumed by the Purchaser on or after the Closing, the
Purchaser shall be deemed to have also agreed to indemnify and hold harmless the
Candlewood Parties and their respective successors and assigns from and against
all claims, losses, damages, liabilities, costs, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and expenses)
arising from any failure of the Purchaser to perform the obligation so assumed
on or after the Closing.
<PAGE>
-20-
(c) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the
party learning of such liability shall notify the other party promptly and
furnish such copies of documents (and make originals thereof available) and such
other information as such party may have that may be used or useful in the
defense of such claims and shall afford said other party full opportunity to
defend the same in the name of such party and shall generally cooperate with
said other party in the defense of any such claim.
(d) The provisions of this Section 11.1 shall survive the Closing and
the termination of this Agreement.
11.2 Brokerage Commissions. Each of the parties hereto represents to
the other parties that, except Donaldson, Lufkin & Jenrette, it dealt with no
broker, finder or like agent in connection with this Agreement or the
transactions contemplated hereby. The Candlewood Parties shall be solely
responsible for and shall indemnify and hold harmless the Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
any loss, liability or expense, including, reasonable attorneys' fees, arising
out of any claim or claims for commissions or other compensation for bringing
about this Agreement or the transactions contemplated hereby made by Donaldson,
Lufkin & Jenrette or any other broker, finder or like agent other than such
loss, liability or expense arising from the Purchaser's breach of its
representation made in this Section 11.2. The provisions of this Section 11.2
shall survive the Closing and any termination of this Agreement.
11.3 Publicity. The parties agree that no party shall, with respect to
this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with public officials, make any public pronouncements, issue press
releases or otherwise furnish information regarding this Agreement or the
transactions contemplated to any third party without the consent of the other
parties, which consent shall not be unreasonably withheld, delayed or
conditioned, except as required by law or unless such action is taken based on
advice of counsel given in good faith. No party, or its employees shall trade in
the securities of any parent or affiliate of the Sellers or of the Purchaser
until a public announcement of the transactions contemplated by this Agreement
has been made. No party shall record this Agreement or any notice thereof,
except as required by law or unless such action is taken based on advice of
counsel given in good faith.
11.4 Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier,
<PAGE>
-21-
addressed to the recipient of the notice, postpaid and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to the Candlewood Parties to:
Candlewood Hotel Company, Inc.
Lakepoint Office Park
9342 East Central
Wichita, Kansas 67206
Attn: Mr. Jack P. DeBoer
[Telecopier No. (316) 631-1333]
with a copy to:
Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attn: Jon D. Demorest, Esq.
[Telecopier No. (619) 696-7419]
If to the Purchaser, to:
Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon
<PAGE>
-22-
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 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
<PAGE>
-23-
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>
-24-
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.
CANDLEWOOD PARTIES:
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ Warren D. Fix
Executive Vice President
CANDLEWOOD WICHITA NORTHEAST, LLC
CANDLEWOOD ENGLEWOOD, LLC
CANDLEWOOD JEFFERSONTOWN, LLC
CANDLEWOOD BLUE ASH, LLC
CANDLEWOOD BIRMINGHAM, LLC
CANDLEWOOD LOS ANGELES, CA-LAKE
FOREST, LLC
CANDLEWOOD OMAHA, LLC
CANDLEWOOD PHOENIX METRO, AZ, LLC
CANDLEWOOD NORTH TEMPLE, LLC
CANDLEWOOD HORSHAM, PA, LLC
CANDLEWOOD FT. UNION, UT, LLC
CANDLEWOOD SOUTHFIELD, LLC
CANDLEWOOD HAMPTON, LLC
CANDLEWOOD WICHITA AIRPORT, LLC
CANDLEWOOD HOUSTON, TX-TOWN &
COUNTRY, LLC
By: CANDLEWOOD HOTEL COMPANY, INC.,
manager
By: /s/ Warren D. Fix
Warren D. Fix
Executive Vice President
<PAGE>
-25-
PURCHASER:
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
Its: President and
Chief Operating Officer
EXHIBIT 10.2
LEASE AGREEMENT
Dated as of ______ __, 199_
by and between
_____ TRUST,
AS LANDLORD,
AND
CANDLEWOOD LEASING NO. 1, INC.,
AS TENANT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1: DEFINITIONS...........................................................................................1
1.1 Accounting Period.........................................................................1
1.2 Additional Charges .......................................................................1
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 Candlewood................................................................................4
1.13 Capital Addition .........................................................................4
1.14 Capital Expenditure ......................................................................4
1.15 Claim ....................................................................................4
1.16 Code .....................................................................................4
1.17 Commencement Date ........................................................................4
1.18 Condemnation .............................................................................4
1.19 Condemnor ................................................................................4
1.20 Consolidated Financials ..................................................................4
1.21 Date of Taking ...........................................................................5
1.22 Default ..................................................................................5
1.23 Designated Areas .........................................................................5
1.24 Disbursement Rate ........................................................................5
1.25 Distribution .............................................................................5
1.26 Easement Agreement........................................................................5
1.27 Encumbrance...............................................................................5
1.28 Entity....................................................................................5
1.29 Environment ..............................................................................5
1.30 Environmental Obligation .................................................................5
1.31 Environmental Notice .....................................................................5
1.32 Event of Default .........................................................................6
1.33 Excess Total Hotel Sales..................................................................6
1.34 Extended Terms ...........................................................................6
1.35 FF&E Estimate.............................................................................6
1.37 FF&E Reserve..............................................................................6
1.38 Financial Officer's Certificate ..........................................................6
1.39 Fiscal Year ..............................................................................6
1.40 Fixed Term ...............................................................................6
1.41 Fixtures .................................................................................6
1.42 GAAP .....................................................................................6
1.43 Government Agencies.......................................................................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
<PAGE>
-ii-
1.53 Insurance Requirements ...................................................................9
1.54 Interest Rate.............................................................................9
1.55 Land .....................................................................................9
1.56 Landlord .................................................................................9
1.57 Landlord Default ........................................................................10
1.58 Landlord Liens...........................................................................10
1.59 Lease Year ..............................................................................10
1.60 Leased Improvements .....................................................................10
1.61 Leased Intangible Property ..............................................................10
1.62 Leased Personal Property ................................................................10
1.63 Leased Property .........................................................................10
1.64 Legal Requirements ......................................................................10
1.65 Lien ....................................................................................11
1.66 Management Agreement ....................................................................11
1.67 Manager .................................................................................11
1.68 Minimum Rent ............................................................................11
1.69 Net Worth ...............................................................................11
1.71 Officer's Certificate ...................................................................11
1.73 Overdue Rate ............................................................................11
1.74 Parent...................................................................................12
1.75 Permitted Encumbrances ..................................................................12
1.76 Permitted Liens .........................................................................12
1.77 Permitted Use ...........................................................................12
1.78 Person ..................................................................................12
1.79 Property.................................................................................12
1.80 Purchase Documents.......................................................................12
1.81 Records .................................................................................12
1.82 Rent ....................................................................................12
1.83 Retained Funds...........................................................................12
1.85 Security Agreement.......................................................................13
1.86 State ...................................................................................13
1.87 Stock Pledge Agreement ..................................................................13
1.88 Subordinated Creditor ...................................................................13
1.89 Subordination Agreement .................................................................13
1.90 Subsidiary ..............................................................................13
1.91 Successor Landlord ......................................................................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
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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....................................................28
4.3.3 Survival.......................................................................28
ARTICLE 5: MAINTENANCE AND REPAIRS..............................................................................29
5.1 Maintenance and Repair....................................................................29
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
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9.6 No Separate Insurance.....................................................................40
9.7 Indemnification of Landlord...............................................................40
ARTICLE 10: CASUALTY............................................................................................41
10.1 Insurance Proceeds.......................................................................41
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..............................................42
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.........................................................44
10.6 No Abatement of Rent.....................................................................44
10.7 Waiver...................................................................................44
ARTICLE 11: CONDEMNATION........................................................................................44
11.1 Total Condemnation, Etc..................................................................44
11.2 Partial Condemnation.....................................................................45
11.3 Abatement of Rent........................................................................46
11.4 Temporary Condemnation...................................................................46
11.5 Condemnation Near End of Term............................................................46
11.6 Allocation of Award......................................................................47
ARTICLE 12: DEFAULTS AND REMEDIES...............................................................................47
12.1 Events of Default........................................................................47
12.2 Remedies.................................................................................50
12.3 Tenant's Waiver..........................................................................51
12.4 Application of Funds.....................................................................51
12.5 Landlord's Right to Cure Tenant's Default................................................52
ARTICLE 13: HOLDING OVER........................................................................................52
ARTICLE 14: LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT.....................................................52
14.1 Landlord Notice Obligation...............................................................52
14.2 Landlord's Default.......................................................................53
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.......................................................................57
16.4 Sublease Limitation......................................................................57
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ARTICLE 17: ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS......................................................57
17.1 Estoppel Certificates....................................................................57
17.2 Financial Statements.....................................................................58
ARTICLE 18: LANDLORD'S RIGHT TO INSPECT.........................................................................59
ARTICLE 19: EASEMENTS...........................................................................................59
19.1 Grant of Easements.......................................................................59
19.2 Exercise of Rights by Tenant.............................................................60
19.3 Permitted Encumbrances...................................................................60
ARTICLE 20: HOTEL MORTGAGES.....................................................................................60
20.1 Landlord May Grant Liens.................................................................60
20.2 Subordination of Lease...................................................................60
20.3 Notice to Mortgagee and Superior Landlord................................................62
ARTICLE 21: ADDITIONAL COVENANTS OF TENANT......................................................................62
21.1 Prompt Payment of Indebtedness...........................................................62
21.2 Conduct of Business......................................................................63
21.3 Maintenance of Accounts and Records......................................................63
21.4 Notice of Litigation, Etc................................................................63
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..................................................................65
21.9 Liens and Encumbrances...................................................................65
21.10 Merger; Sale of Assets; Etc..............................................................65
ARTICLE 22: MISCELLANEOUS.......................................................................................66
22.1 Limitation on Payment of Rent............................................................66
22.2 No Waiver................................................................................66
22.3 Remedies Cumulative......................................................................66
22.4 Severability.............................................................................66
22.5 Acceptance of Surrender..................................................................67
22.6 No Merger of Title.......................................................................67
22.7 Conveyance by Landlord...................................................................67
22.8 Quiet Enjoyment..........................................................................67
22.9 Memorandum of Lease......................................................................68
22.10 Notices..................................................................................68
22.11 Trade Area Restriction...................................................................69
22.12 Construction.............................................................................70
22.13 Counterparts; Headings...................................................................70
22.14 Applicable Law, Etc......................................................................70
22.15 Right to Make Agreement..................................................................71
22.16 Attorneys' Fees..........................................................................71
22.17 Nonrecourse..............................................................................71
22.18 Nonliability of Trustees.................................................................71
</TABLE>
<PAGE>
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EXHIBITS
A-1 through A-15 - The Land
B - Restricted Trade Area
C - Allocation of Minimum Rent
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this ___ day of _________,
199__, by and between _____, a Maryland real estate investment trust, as
landlord ("Landlord"), and CANDLEWOOD LEASING NO. 1, INC., a Delaware
corporation, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Leased Property (this
and other capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1) described in Exhibit A-1 through
A- ; and
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and
Tenant wishes to lease the Leased Property from Landlord, all subject to and
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article shall have the meanings assigned to them in this Article and include the
plural as well as the singular, (ii) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.1 "Accounting Period" shall mean each calendar month.
1.2 "Additional Charges" shall have the meaning given such term in
Section 3.1.3.
1.3 "Additional Rent" shall have the meaning given such term in Section
3.1.2(a).
<PAGE>
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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,
B and C hereto, as it and they may be amended from time to time as herein
provided.
1.6 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health or
the Environment, including, without limitation, all valid and lawful
requirements of courts and other Government Agencies pertaining to reporting,
licensing, permitting, investigation, remediation and removal of underground
improvements (including, without limitation, treatment or storage tanks, or
water, gas or oil wells), or emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pesticides, petroleum or
petroleum products, pollutants, contaminants or hazardous or toxic substances,
materials or wastes whether solid, liquid or gaseous in nature, into the
Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.
1.7 "Applicable Percentage" shall mean (a) three percent (3%) with
respect to the 1997 and 1998 Fiscal Years; (b) four percent (4%) with respect to
the 1999 Fiscal Year; and (c) five percent (5%) with respect to each Fiscal Year
thereafter during the Term.
<PAGE>
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1.8 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert witness
fees, incurred by Landlord, in connection with obtaining any such award).
1.9 "Base Total Hotel Sales" shall mean, with respect to any Property,
Total Hotel Sales at such Property for the Base Year; provided, however, that in
the event that, with respect to any Lease Year, or portion thereof, for any
reason (including, without limitation, a casualty or Condemnation) there shall
be a reduction of five percent (5%) or more in the number of rooms at any Hotel
or a change in the services provided at any Hotel (including, without
limitation, if applicable, the closing of restaurants or the discontinuation of
food or beverage services) from the number of rooms or the services provided
during the Base Year, in determining Additional Rent payable with respect to
such Lease Year, Base Total Hotel Sales with respect to the affected Property
shall be reduced as follows: (a) in the event of the termination of this Lease
with respect to any Property pursuant to Article 10, 11 or 12, all Total Hotel
Sales attributable to such Property during the Base Year shall be subtracted
from Base Total Hotel Sales, appropriately prorated based on time elapsed if
such termination occurs on a date other than the first day of any Fiscal Year;
(b) in the event of a complete closing of a Hotel, all Total Hotel Sales
attributable to such Hotel during the Base Year shall be subtracted from Base
Total Hotel Sales throughout the period of such closing; (c) in the event of a
partial closing of a Hotel affecting five percent (5%) or more of the guest
rooms in such Hotel, Total Hotel Sales attributable to guest room occupancy or
guest room services at such Hotel during the Base Year shall be ratably
allocated among all guest rooms in service at such Hotel during the Base Year
and all such Total Hotel Sales attributable to rooms no longer in service shall
be subtracted from Base Total Hotel Sales throughout the period of such closing;
(d) in the event of a closing of a restaurant, all Total Hotel Sales
attributable to such restaurant during the Base Year shall be subtracted from
Base Total Hotel Sales throughout the period of such closing; and (e) in the
event of any other change in circumstances affecting any Hotel, Base Total Hotel
Sales shall be equitably adjusted in such manner as Landlord and Tenant shall
reasonably agree.
1.10 "Base Year" shall mean, with respect to any Property, the period
commencing on the first anniversary of the first full day of the first full
calendar month following the Opening Date of the Hotel located at such Property
and expiring on the day preceding the second anniversary of such Opening Date.
<PAGE>
-4-
1.11 "Business Day" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of New York are authorized by law or executive action to close.
1.12 "Candlewood" shall mean Candlewood Hotel Company, Inc., a Delaware
corporation, its successors and assigns.
1.13 "Capital Addition" shall mean any renovation, repair or
improvement to the Leased Property (or portion thereof), the cost of which
constitutes a Capital Expenditure.
1.14 "Capital Expenditure" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.15 "Claim" shall have the meaning given such term in Article 8.
1.16 "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.17 "Commencement Date" shall mean the date of this Agreement.
1.18 "Condemnation" shall mean, with respect to any Property, (a) the
exercise of any governmental power with respect to such Property, whether by
legal proceedings or otherwise, by a Condemnor of its power of condemnation, (b)
a voluntary sale or transfer of such Property by Landlord to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending, or (c) a taking or voluntary conveyance of all or part of such
Property, or any interest therein, or right accruing thereto or use thereof, as
the result or in settlement of any condemnation or other eminent domain
proceeding affecting such Property, whether or not the same shall have actually
been commenced.
1.19 "Condemnor" shall mean any public or quasi-public Person, having
the power of Condemnation.
1.20 "Consolidated Financials" shall mean, for any Fiscal Year or other
accounting period of Candlewood, annual audited and quarterly unaudited
financial statements of Candlewood prepared on a consolidated basis, including
Candlewood's consolidated balance sheet and the related statements of income and
cash flows, all in reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal Year,
and prepared in accordance with GAAP throughout the periods reflected.
<PAGE>
-5-
1.21 "Date of Taking" shall mean, with respect to any Property, the
date the Condemnor has the right to possession of such Property, or any portion
thereof, in connection with a Condemnation.
1.22 "Default" shall mean any event or condition which with the giving
of notice and/or lapse of time would ripen into an Event of Default.
1.23 "Designated Areas" shall have the meaning given such term in
Section 22.11.
1.24 "Disbursement Rate" shall mean an annual rate of interest, as of
the date of determination, equal to the greater of (i) the Interest Rate and
(ii) the per annum rate for fifteen (15) year U.S. Treasury Obligations as
published in The Wall Street Journal plus three hundred fifty (350) basis
points.
1.25 "Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, (b) any purchase,
redemption, retirement or other acquisition of any shares of any class of
capital stock of a corporation, (c) any other distribution on or in respect of
any shares of any class of capital stock of a corporation or (d) any return of
capital to shareholders.
1.26 "Easement Agreement" shall mean any conditions, covenants and
restrictions, easements, declarations, licenses and other agreements which are
Permitted Encumbrances and such other agreements as may be granted in accordance
with Section 19.1.
1.27 "Encumbrance" shall have the meaning given such term in Section
20.1.
1.28 "Entity" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency, authority or
political subdivision thereof or any other entity.
1.29 "Environment" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
1.30 "Environmental Obligation" shall have the meaning given such term
in Section 4.3.1.
1.31 "Environmental Notice" shall have the meaning given such term in
Section 4.3.1.
<PAGE>
-6-
1.32 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.33 "Excess Total Hotel Sales" shall mean, with respect to any
Property, with respect to any Lease Year, or portion thereof, the amount of
Total Hotel Sales for such Property for such Lease Year, or portion thereof, in
excess of Base Total Hotel Sales for such Property for the equivalent period
during the Base Year.
1.34 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.35 "FF&E Estimate" shall have the meaning given such term in Section
5.1.2(c).
1.36 "FF&E Pledge" shall mean the Assignment and Security Agreement,
dated as of the date hereof, made by Tenant for the benefit of Landlord.
1.37 "FF&E Reserve" shall have the meaning given such term in Section
5.1.2(a).
1.38 "Financial Officer's Certificate" shall mean, as to any Person, a
certificate of the chief executive officer, chief financial officer or chief
accounting officer (or such officers' authorized designee) of such Person, duly
authorized, accompanying the financial statements required to be delivered by
such Person pursuant to Section 17.2, in which such officer shall certify (a)
that such statements have been properly prepared in accordance with GAAP and are
true, correct and complete in all material respects and fairly present the
consolidated financial condition of such Person at and as of the dates thereof
and the results of its and their operations for the periods covered thereby, and
(b), in the event that the certifying party is an officer of Tenant and the
certificate is being given in such capacity, certify that no Event of Default
has occurred and is continuing hereunder.
1.39 "Fiscal Year" shall mean the calendar year.
1.40 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.41 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.42 "GAAP" shall mean generally accepted accounting principles
consistently applied.
<PAGE>
-7-
1.43 "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or any State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or any Hotel operated thereon.
1.44 "Guaranty" shall mean the Guaranty Agreement, dated the date
hereof, made by Candlewood for the benefit of Landlord and Hospitality
Properties Trust.
1.45 "Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or
"contaminant" under any present or future federal, state or local
statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. et seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.) and the
regulations promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, any state of the United States, or any political subdivision
thereof; or
(d) the presence of which on the Leased Property, or any
portion thereof, causes or materially threatens to cause an unlawful
nuisance upon the Leased Property, or any portion thereof, or to
adjacent properties or poses or materially threatens to pose a hazard
to the Leased Property, or any portion thereof, or to the health or
safety of persons on or about the Leased Property, or any portion
thereof; or
(e) without limitation, which contains gasoline, diesel fuel
or other petroleum hydrocarbons or volatile organic compounds; or
<PAGE>
-8-
(f) without limitation, which contains polychlorinated
biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or
may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988.
1.46 "Hotel" shall mean, with respect to any Property, the hotel being
operated on such Property.
1.47 "Hotel Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article 20.
1.48 "Hotel Mortgagee" shall mean the holder of any Hotel Mortgage.
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
<PAGE>
-9-
Tenant; provided, however, that nothing contained herein shall be construed to
require Tenant to pay and the term "Impositions" shall not include (i) any tax
based on net income imposed on Landlord, (ii) any net revenue tax of Landlord,
(iii) any transfer fee (but excluding any mortgage or similar tax payable in
connection with a Hotel Mortgage) or other tax imposed with respect to the sale,
exchange or other disposition by Landlord of the Leased Property or the proceeds
thereof, (iv) any single business, gross receipts tax, transaction privilege,
rent or similar taxes as the same relate to or are imposed upon Landlord, (v)
any interest or penalties imposed on Landlord as a result of the failure of
Landlord to file any return or report timely and in the form prescribed by law
or to pay any tax or imposition, except to the extent such failure is a result
of a breach by Tenant of its obligations pursuant to Section 3.1.3, (vi) any
impositions imposed on Landlord that are a result of Landlord not being
considered a "United States person" as defined in Section 7701(a)(30) of the
Code, (vii) any impositions that are enacted or adopted by their express terms
as a substitute for any tax that would not have been payable by Tenant pursuant
to the terms of this Agreement or (viii) any impositions imposed as a result of
a breach of covenant or representation by Landlord in any agreement governing
Landlord's conduct or operation or as a result of the negligence or willful
misconduct of Landlord.
1.51 "Incidental Documents" shall mean the Guaranty, the Security
Agreement, the Stock Pledge Agreement and the FF&E Pledge.
1.52 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
1.53 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Agreement and all requirements of the issuer of any such
policy and all orders, rules and 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.
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1.57 "Landlord Default" shall have the meaning given such term in
Section 14.2.
1.58 "Landlord Liens" shall mean liens on or against the Leased
Property or any payment of Rent (a) which result from any act of, or any claim
against, Landlord or any owner of a direct or indirect interest in the Leased
Property, or which result from any violation by Landlord of any terms of this
Agreement or the Purchase Documents, or (b) which result from liens in favor of
any taxing authority by reason of any tax owed by Landlord or any fee owner of a
direct or indirect interest in the Leased Property; provided, however, that
"Landlord Lien" shall not include any lien resulting from any tax for which
Tenant is obligated to pay or indemnify Landlord against until such time as
Tenant shall have already paid to or on behalf of Landlord the tax or the
required indemnity with respect to the same.
1.59 "Lease Year" shall mean any Fiscal Year or portion thereof during
the Term.
1.60 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.61 "Leased Intangible Property" shall mean all hotel licensing
agreements and other service contracts, equipment leases, booking agreements and
other arrangements or agreements affecting the ownership, repair, maintenance,
management, leasing or operation of the Leased Property to which Landlord is a
party; all books, records and files relating to the leasing, maintenance,
management or operation of the Leased Property belonging to Landlord; all
transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, rights to deposits, trade names, service marks,
telephone exchange numbers identified with the Leased Property, and all other
transferable intangible property, miscellaneous rights, benefits and privileges
of any kind or character belonging to Landlord with respect to the Leased
Property other than liquor licenses.
1.62 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.63 "Leased Property" shall have the meaning given such term in
Section 2.1.
1.64 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Leased Property or
the maintenance, construction, alteration or operation thereof, whether now or
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hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate any Property for its Permitted Use, and (b) all covenants, agreements,
restrictions and encumbrances contained in any instruments at any time in force
affecting any Property, including those which may (i) require material repairs,
modifications or alterations in or to any Property or (ii) in any way materially
and adversely affect the use and enjoyment thereof, but excluding any
requirements arising as a result of Landlord's status as a real estate
investment trust.
1.65 "Lien" shall mean any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind, or any
transfer of property or assets for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors.
1.66 "Management Agreement" shall mean any management agreement entered
into by Tenant with respect to all or any portion of the Leased Property,
together with all amendments, modifications and supplements thereto.
1.67 "Manager" shall mean any manager under a Management Agreement.
1.68 "Minimum Rent" shall mean an amount equal to
___________________________________ Dollars ($_________) per Accounting Period.
1.69 "Net Worth" shall mean the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with GAAP.
1.70 "Notice" shall mean a notice given in accordance with Section
22.10.
1.71 "Officer's Certificate" shall mean a certificate signed by an
officer or other duly authorized individual of the certifying Entity duly
authorized by the board of directors or other governing body of the certifying
Entity.
1.72 "Opening Date" shall have the meaning given such term in the
Purchase Documents.
1.73 "Overdue Rate" shall mean, on any date, a per annum rate of
interest equal to the lesser of fifteen percent (15%) and the maximum rate then
permitted under applicable law.
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1.74 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly through one or more Subsidiaries or Affiliated
Persons, fifty percent (50%) or more of the voting or beneficial interest in, or
otherwise has the right or power (whether by contract, through ownership of
securities or otherwise) to control, such Person.
1.75 "Permitted Encumbrances" shall mean, with respect to any Property,
all rights, restrictions, and easements of record set forth on Schedule B to the
applicable owner's or leasehold title insurance policy issued to Landlord in
connection with the transactions contemplated by the Purchase Documents with
respect to such Property, plus any other encumbrances as may be "Permitted
Encumbrances" under the Purchase Documents or as may have been consented to in
writing by Landlord and Tenant from time to time.
1.76 "Permitted Liens" shall mean any Liens granted in accordance with
Section 21.9(a).
1.77 "Permitted Use" shall mean, with respect to any Property, any use
of such Property permitted pursuant to Section 4.1.1.
1.78 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits.
1.79 "Property" shall have the meaning given such term in Section 2.1.
1.80 "Purchase Documents" shall mean, collectively, the Purchase and
Sale Agreement, dated as of November __, 1997, by and among Hospitality
Properties Trust, Candlewood and certain of Candlewood's Subsidiaries and the
Agreement to Lease, dated as of November __, 1997, by and among Hospitality
Properties Trust and Candlewood, as they may be amended, restated, supplemented
or otherwise modified from time to time.
1.81 "Records" shall have the meaning given such term in Section 7.2.
1.82 "Rent" shall mean, collectively, the Minimum Rent,
Additional Rent and Additional Charges.
1.83 "Retained Funds" shall mean a cash amount equal to
_____________________ Dollars ($__________).
1.84 "SEC" shall mean the Securities and Exchange Commission.
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1.85 "Security Agreement" shall mean the Security Agreement, dated as
of the date hereof, made by Tenant for the benefit of Landlord, as it may be
amended, restated, supplemented or otherwise modified from time to time.
1.86 "State" shall mean, with respect to any Property, the state,
commonwealth or district in which the such Property is located.
1.87 "Stock Pledge Agreement" shall mean the Stock Pledge Agreement,
dated as of the date hereof, made by Candlewood to Landlord with respect to the
stock of Tenant, as it may be amended, restated, supplemented or otherwise
modified from time to time.
1.88 "Subordinated Creditor" shall mean any creditor of Tenant which is
a party to a Subordination Agreement in favor of Landlord.
1.89 "Subordination Agreement" shall mean any agreement (and any
amendments thereto) executed by a Subordinated Creditor pursuant to which the
payment and performance of Tenant's obligations to such Subordinated Creditor
are subordinated to the payment and performance of Tenant's obligations to
Landlord under this Agreement.
1.90 "Subsidiary" shall mean, with respect to any Person, any Entity
(a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, twenty percent (20%) or more of the voting or beneficial interest
or (b) which such Person otherwise has the right or power to control (whether by
contract, through ownership of securities or otherwise).
1.91 "Successor Landlord" shall have the meaning given such term in
Section 20.2.
1.92 "Tenant" shall have the meaning given such term in the preambles
to this Agreement and shall also include its permitted successors and assigns.
1.93 "Tenant's Personal Property" shall mean all motor vehicles and
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other tangible personal property of
Tenant, if any, acquired by Tenant on and after the date hereof and located at
the Leased Property or used in Tenant's business at the Leased Property and all
modifications, replacements, alterations and additions to such personal property
installed at the expense of Tenant, other than any items included within the
definition of Fixtures or Leased Personal Property.
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1.94 "Term" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement.
1.95 "Total Hotel Sales" shall mean, with respect to any Property, for
each Fiscal Year during the Term, all revenues and receipts of every kind
derived by Tenant from operating such Property and parts thereof, including, but
not limited to: income (from both cash and credit transactions), after
deductions for bad debts, and discounts for prompt or cash payments and refunds,
from rental of rooms, stores, offices, meeting, exhibit or sales space of every
kind; license, lease and concession fees and rentals (not including gross
receipts of licensees, lessees and concessionaires); income from vending
machines; health club membership fees; food and beverage sales; wholesale and
retail sales of merchandise (other than proceeds from the sale of furnishings,
fixture and equipment no longer necessary to the operation of the Hotel located
thereon, which shall be deposited in the FF&E Reserve); service charges, to the
extent not distributed to the employees at the Hotel located thereon as
gratuities; and proceeds, if any, from business interruption or other loss of
income insurance; provided, however, that Total Hotel Sales shall not include
the following: gratuities to or collected on behalf of Hotel employees; federal,
state or municipal excise, sales, use, occupancy or similar taxes collected
directly from patrons or guests or included as part of the sales price of any
goods or services; insurance proceeds (other than proceeds from business
interruption or other loss of income insurance); Award proceeds (other than for
a temporary Condemnation); any proceeds from any sale of such Property or from
the refinancing of any debt encumbering such Property; proceeds from the
disposition of furnishings, fixture and equipment no longer necessary for the
operation of the Hotel located thereon; interest which accrues on amounts
deposited in the FF&E Reserve; and any security deposits and other 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
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and it cannot reasonably be expected to be restored to substantially the same
condition as existed immediately before such damage or destruction, and as
otherwise required by Section 10.2.4, within twelve (12) months following such
damage or destruction or such shorter period of time as to which business
interruption insurance is available to cover Rent and other costs related to the
applicable Property following such damage or destruction, or (b) as the result
of a partial taking by Condemnation, such Hotel cannot be operated, in the good
faith judgment of Tenant, on a commercially practicable basis for its Permitted
Use.
1.98 "Work" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following (each
of items (a) through (g) below which, as of the Commencement Date, relates to
any single Hotel, a "Property" and, collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibit A-1 through A- , attached hereto and
made a part hereof (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site),
parking areas and roadways appurtenant to such buildings and structures
presently situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating
to the Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or incorporated into
the Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and
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fire and theft protection equipment, all of which, to the maximum
extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Tenant's Personal Property
(collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other personal
property of any kind or description used or useful in Tenant's business
on or in the Leased Improvements, and located on or in the Leased
Improvements, and all modifications, replacements, alterations and
additions to such personal property, except items, if any, included
within the category of Fixtures, but specifically excluding all items
included within the category of Tenant's Personal Property
(collectively, the "Leased Personal Property");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space in the Leased
Improvements.
2.2 Condition of Leased Property. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Leased Property, all applicable
Legal Requirements, the lien of any financing instruments, mortgages and deeds
of trust existing prior to the Commencement Date or permitted by the terms of
this Agreement, and such other matters which would be disclosed by an inspection
of the Leased Property and the record title thereto or by an accurate survey
thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF
THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST
LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any
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predecessor in title for breaches of warranties or representations or for latent
defects in the Leased Property. Landlord shall fully cooperate with Tenant in
the prosecution of any such claims, in Landlord's or Tenant's name, all at
Tenant's sole cost and expense. Tenant shall indemnify, defend, and hold
harmless Landlord from and against any loss, cost, damage or liability
(including reasonable attorneys' fees) incurred by Landlord in connection with
such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and shall expire December 31, 2011.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing, the Term shall be automatically extended for three
(3) consecutive renewal terms of fifteen (15) years each (collectively, the
"Extended Terms"), unless Tenant shall give Landlord Notice, not later than
eighteen (18) months prior to the scheduled expiration of the then current Term
of this Agreement (Fixed or Extended, as the case may be), that Tenant elects
not so to extend the term of this Agreement.
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Terms. If Tenant shall give Notice that it elects
not to extend the Term in accordance with this Section 2.4, this Agreement shall
automatically terminate at the end of the Term then in effect and Tenant shall
have no further option to extend the Term of this Agreement. Otherwise, the
extension of this Agreement shall be automatically effected without the
execution of any additional documents; it being understood and agreed, however,
that Tenant and Landlord shall execute such documents and agreements as either
party shall reasonably require to evidence the same.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Minimum Rent and Additional Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or
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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 subsequent to the Base Year, in
an amount, not less than zero, equal to ten percent (10%) of Excess
Total Hotel Sales with respect to each Property.
(b) Accounting Period Installments. Installments of Additional
Rent for each Lease Year or portion thereof shall be calculated and
paid with respect to each Accounting Period in arrears on the first
Business Day of each
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Accounting Period, based on Total Hotel Sales for the preceding year,
together with an Officer's Certificate setting forth the calculation of
Additional Rent due and payable for such Accounting Period.
(c) Reconciliation of Additional Rent. On or before April 30
of the calendar year immediately following the Base Year for any
Property, Tenant shall deliver to Landlord an Officer's Certificate
setting forth Total Hotel Sales for such Property for the Base Year,
together with an audit thereof by Ernst & Young, LLP or another firm of
independent certified public accountants proposed by Tenant and
approved by Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned). On or before April 30, of each year
thereafter, Tenant shall deliver to Landlord an Officer's Certificate
setting forth the Total Hotel Sales for such Property for the preceding
Lease Year and the Additional Rent payable with respect to such Lease
Year with respect to such Property, together with an audit thereof, by
Ernst & Young, LLP or another firm of independent certified public
accountants proposed by Tenant and approved by Landlord (which approval
shall not be unreasonably withheld, delayed or conditioned).
If the annual Additional Rent for such preceding Lease Year as shown in
the Officer's Certificate exceeds the amount previously paid with respect
thereto by Tenant, Tenant shall pay such excess to Landlord at such time as the
Officer's Certificate is delivered, together with interest at the Interest Rate,
which interest shall accrue from the close of such preceding Lease Year until
the date that such certificate is required to be delivered and, thereafter, such
interest shall accrue at the Overdue Rate, until the amount of such difference
shall be paid or otherwise discharged. If the annual Additional Rent for such
preceding Lease Year as shown in the Officer's Certificate is less than the
amount 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
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the Leased Property in accordance with its usual and customary
practices and in accordance with GAAP, which will accurately record all
Total Hotel Sales and Tenant shall retain, for at least three (3) years
after the expiration of each Lease Year, reasonably adequate records
conforming to such accounting system showing all Total Hotel Sales for
such Lease Year. Landlord, at its own expense, except as provided
hereinbelow, shall have the right, exercisable by Notice to Tenant
within one (1) year after receipt of the applicable Officer's
Certificate, by its accountants or representatives, to audit the
information set forth in the Officer's Certificate referred to in
subparagraph (c) above and, in connection with such audits, to examine
Tenant's books and records with respect thereto (including supporting
data and sales and excise tax returns). If any such audit discloses a
deficiency in the payment of Additional Rent and, either Tenant agrees
with the result of such audit or the matter is otherwise compromised
with Landlord, Tenant shall forthwith pay to Landlord the amount of the
deficiency, as finally agreed or determined, together with interest at
the Interest Rate, from the date such payment should have been made to
the date of payment thereof. If such deficiency, as agreed upon or
compromised as aforesaid, is more than five percent (5%) of Additional
Rent paid by Tenant for such Lease Year and, as a result, Landlord did
not receive at least ninety-five percent (95%) of the Additional Rent
payable with respect to such Lease Year, Tenant shall pay the
reasonable cost of such audit and examination. If any such audit
discloses that Tenant paid more Additional Rent for any Lease Year than
was due hereunder, and either Landlord agrees with the result of such
audit or the matter is otherwise determined, provided no Event of
Default has occurred and is continuing, Landlord shall grant Tenant a
credit equal to the amount of such overpayment against the Rent next
coming due in the amount of such difference, as finally agreed or
determined, together with interest at the Interest Rate, which interest
shall accrue from the time of payment by Tenant until the date such
credit is applied or paid, as the case may be. If such a credit cannot
be made because the Term has expired before the credit can be applied
in full, provided no Event of Default has occurred and is continuing,
Landlord shall pay the unapplied balance of such credit to Tenant,
together with interest at the Interest Rate, which interest shall
accrue from the date of payment by Tenant until the date of payment
from Landlord.
Any proprietary information obtained by Landlord with respect to Tenant
pursuant to the provisions of this Agreement shall be treated as confidential,
except that such information may be used, subject to appropriate confidentiality
safeguards,
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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 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
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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, if any, and all amounts payable under any
equipment leases and all agreements to indemnify Landlord under
Sections 4.3.2 and 9.7.
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement (other than
termination by reason of an Event of Default), Tenant may, within a
reasonable time after the end of the Term, provide Notice to Landlord
of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this
Agreement.
3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as
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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
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than a monetary default) or breach of any warranty by Landlord under this
Agreement or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties; (d) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Landlord or any assignee or transferee of Landlord; or (e)
for any other cause whether similar or dissimilar to any of the foregoing (other
than a monetary default by Landlord); provided, however, that the foregoing
shall not apply or be construed to restrict Tenant's rights in the event of any
act or omission by Landlord constituting negligence or willful misconduct.
Except as otherwise specifically provided in this Agreement, Tenant hereby
waives all rights arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law (a) to modify, surrender or terminate this
Agreement or quit or surrender the Leased Property or any portion thereof, or
(b) which would entitle Tenant to any abatement, reduction, suspension or
deferment of the Rent or other sums payable or other obligations to be performed
by Tenant hereunder. The obligations of Tenant hereunder shall be separate and
independent covenants and agreements, and the Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Agreement. In any instance where, after the occurrence of an
Event of Default, Landlord retains funds which, but for the occurrence of such
Event of Default, would be payable to Tenant, Landlord shall refund such funds
to Tenant to the extent the amount thereof exceeds the amount necessary to
compensate Landlord for any cost, loss or damage incurred in connection with
such Event of Default.
3.5 Retained Funds. Pursuant to the Purchase Documents, Landlord is
holding the Retained Funds as security for the faithful observance and
performance by Tenant of all the terms, covenants and conditions of this Lease
by Tenant to be observed and performed. The Retained Funds shall not be
mortgaged, assigned, transferred or otherwise encumbered by Tenant or any of its
Affiliated Persons without the prior written consent of Landlord and any such
act on the part of Tenant or any of its Affiliated Persons without first having
obtained Landlord's consent shall be without force and effect and shall not be
binding upon Landlord.
If an Event of Default shall occur and be continuing, Landlord may, at
its option and without prejudice to any other remedy which Landlord may have on
account thereof, appropriate 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
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shall damages be limited to the amount of the Retained Funds. Provided no Event
of Default shall have occurred and be continuing, any unapplied balance of the
Retained Funds shall be paid to Tenant or its Affiliated Persons at the end of
the Term or, in the event of any early termination of this Lease with respect to
any Property, such portion thereof as is allocable to such Property (as
reasonably determined by Landlord) upon such termination. Landlord shall have no
obligation to pay interest on the Retained Funds and shall have the right to
commingle the same with Landlord's other funds. If Landlord conveys Landlord's
interest under this Lease, the Retained Funds, or any part thereof not
previously applied, shall be turned over by Landlord to Landlord's grantee, and,
if so turned over, Tenant shall look solely to such grantee for proper
application of the Retained Funds in accordance with the terms of this Section
3.5 and the return thereof in accordance herewith. The holder of a mortgage on
the Leased Property shall not be responsible to Tenant for the return or
application of the Retained Funds, if it succeeds to the position of Landlord
hereunder, unless the Retained Funds shall have been received in hand by such
holder.
In the event of bankruptcy or other creditor-debtor proceedings against
Tenant, the Retained Funds shall be deemed to be applied first to the payment of
Rent and other charges due Landlord for all periods prior to the filing of such
proceedings.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Permitted Use. (a) Tenant shall, at all times during the
Term, subject to temporary periods for the repair of damage caused by casualty
or Condemnation, continuously use and operate each Property as an extended stay
hotel and any uses incidental thereto. Tenant shall not use or permit to be used
any Property or any portion thereof for any other use without the prior written
consent of Landlord, which approval shall not be unreasonably withheld, delayed
or conditioned. Tenant shall not change the brand of the Hotels without
Landlord's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned, it being agreed that, on the Commencement
Date, the Hotels shall be operated under the "Candlewood Hotel" brand. No use
shall be made or permitted to be made of any Property and no acts shall be done
thereon which will cause the cancellation of any insurance policy covering such
Property or any part thereof (unless another adequate policy is available), nor
shall Tenant sell or otherwise provide or permit to be kept, used or sold in or
about any Property any article which may be
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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 any Property as
a Candlewood hotel, Tenant shall give Landlord Notice thereof, which Notice
shall set forth in reasonable detail the reasons therefor. Thereafter, Landlord
and Tenant shall negotiate in good faith to agree on an alternative use for the
Property or a replacement property therefor (in which event the affected
Property shall be transferred to Tenant's designee), appropriate adjustments to
the Additional Rent and other related matters; provided, however, in no such
event shall the Minimum Rent be reduced or abated.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise reasonable efforts to obtain and maintain all approvals
necessary to use and operate, for its Permitted Use, each Property and the Hotel
located thereon under applicable law.
4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or
permit the use of the Leased Property or Tenant's Personal Property, if any, for
any unlawful purpose. Tenant shall not, and shall direct the Manager not to,
commit or suffer to be committed any waste on any Property, or in any Hotel, nor
shall Tenant cause or permit any unlawful nuisance thereon or therein. Tenant
shall not, and shall direct the Manager not to, suffer nor permit the Leased
Property, or any portion thereof, to be used in such a manner as (i) may
materially and adversely impair Landlord's title thereto or to any portion
thereof, or (ii) may reasonably allow a claim or claims for adverse usage or
adverse possession by the public, as such, or of implied dedication of the
Leased Property or any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the
provisions of Article 8 and Section 5.1.3(b), Tenant, at its sole expense, shall
(i) comply with all material Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration and restoration
of the Leased Property and with the terms and conditions of any sublease
affecting the Leased Property, (ii) perform all obligations of the landlord
under any sublease affecting the Leased Property and (iii) procure, maintain and
comply with all material licenses, and other authorizations and agreements
required for any use of the Leased Property and Tenant's Personal Property, if
any, then being made, and for the proper erection, installation, operation and
maintenance of the Leased Property or any part thereof.
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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.
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4.3.2 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord and each Hotel Mortgagee, their trustees,
officers, agents, employees and beneficiaries, and any of their respective
successors or assigns with respect to this Agreement (collectively, the
"Indemnitees" and, individually, an "Indemnitee") for, from and against any and
all debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
Indemnitee resulting from, either directly or indirectly, the presence during
the Term (or any other time Tenant shall be in possession of the Leased
Property) in, upon or under the soil or ground water of the Leased Property or
any properties surrounding the Leased Property of any Hazardous Substances in
violation of any Applicable Law, provided that any of the foregoing arises by
reason of any failure by Tenant or any Person claiming by, through or under
Tenant to perform or comply with any of the terms of this Section 4.3, except to
the extent the same arise from the acts or omissions of Landlord or any other
Indemnitee or during any period that Landlord or a Person designated by Landlord
(other than Tenant) is in possession of the Leased Property. Tenant's duty
herein includes, but is not limited to, costs associated with personal injury or
property damage claims as a result of the presence prior to the expiration or
sooner termination of the Term and the surrender of the Leased Property to
Landlord in accordance with the terms of this Agreement of Hazardous Substances
in, upon or under the soil or ground water of the Leased Property in violation
of any Applicable Law. Upon Notice from Landlord and any other of the
Indemnitees, Tenant shall undertake the defense, at Tenant's sole cost and
expense, of any indemnification duties set forth herein, in which event, Tenant
shall not be liable for payment of any duplicative attorneys' fees incurred by
any Indemnitee.
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.
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ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's General Obligations. Tenant shall, at its sole
cost and expense (except as expressly provided in Section 5.1.3(b)), keep the
Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto (and Tenant's Personal Property) in good order and repair, reasonable
wear and tear excepted (whether or not the need for such repairs occurs as a
result of Tenant's use, any prior use, the elements or the age of the Leased
Property or Tenant's Personal Property or any portion thereof), and shall
promptly make all necessary and appropriate repairs and replacements thereto of
every kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the commencement of the Term (concealed
or otherwise). All repairs shall be made in a good, workmanlike manner,
consistent with industry standards for like hotels in like locales, in
accordance with all applicable federal, state and local statutes, ordinances,
codes, rules and regulations relating to any such work. Tenant shall not take or
omit to take any action, the taking or omission of which would materially and
adversely impair the value or the usefulness of the Leased Property or any
material part thereof for its Permitted Use. Tenant's obligations under this
Section 5.1.1 shall be limited in the event of any casualty or Condemnation as
set forth in Sections 10.2 and 11.2 and also as set forth in Section 5.1.3(b)
and Tenant's obligations with respect to Hazardous Substances are as set forth
in Section 4.3.
5.1.2 FF&E Reserve.
(a) Upon execution of this Agreement, Tenant has established a
reserve account (the "FF&E Reserve") in a bank designated by Tenant and
approved by Landlord. The purpose of the FF&E Reserve is to cover the
cost of:
(i) Replacements and renewals to any Hotel's furnishings,
fixtures and equipment;
(ii) Certain routine repairs and maintenance to any Hotel
building which are normally capitalized under GAAP such as
exterior and interior repainting, resurfacing building
walls, floors, roofs and parking areas, and replacing
folding walls and the like; and
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(iii) Major repairs, alterations, improvements, renewals or
replacements to any Hotel's buildings' structure, roof, or
exterior facade, or to its mechanical, electrical, heating,
ventilating, air conditioning, plumbing or vertical
transportation systems.
Tenant agrees that it will, from time to time, execute such
reasonable documentation as may be requested by Landlord and any Hotel
Mortgagee to assist Landlord and such Hotel Mortgagee in establishing
or perfecting the Hotel Mortgagee's security interest in Landlord's
residual interest in the funds which are in the FF&E Reserve; provided,
however, that no such documentation shall contain any amendment to or
modification of any of the provisions of this Agreement. It is
acknowledged and agreed that, during the Term, funds in the FF&E
Reserve are the property of Tenant.
(b) Throughout the Term, Tenant shall transfer (within ten
(10) Business Days after the end of each Accounting Period during the
Term) into the FF&E Reserve an amount equal to the Applicable
Percentage of Total Hotel Sales for such Accounting Period. Together
with the documentation provided to Landlord pursuant to Section
3.1.2(c), Tenant shall deliver to Landlord an Officer's Certificate
setting forth the total amount of deposits made to and expenditures
from the FF&E Reserve for the preceding Fiscal Year, together with a
reconciliation of such expenditures with the applicable FF&E Estimate.
(c) With respect to each Lease Year, Tenant shall prepare an
estimate (the "FF&E Estimate") of FF&E Reserve expenditures necessary
during the ensuing Fiscal Year, and shall submit such FF&E Estimate to
Landlord, on or before December 1 of the preceding Lease Year, for its
review and approval, which approval shall not be unreasonably withheld,
delayed or conditioned. In the event that Landlord shall fail to
respond within thirty (30) days after receipt of the FF&E Estimate,
such FF&E Estimate shall be deemed approved by Landlord. All
expenditures from the FF&E Reserve shall be (as to both the amount of
each such expenditure and the timing thereof) both reasonable and
necessary, given the objective that the Hotels will be maintained and
operated to a standard comparable to competitive hotels. All amounts
from the FF&E Reserve shall be paid to Persons who are not Affiliated
Persons of Tenant without mark-up or allocated internal costs by Tenant
or its Affiliated Persons.
(d) Tenant shall, consistent with the FF&E Estimate approved
by Landlord, from time to time make expenditures from the FF&E Reserve
as it deems necessary provided that
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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) Notwithstanding anything to the contrary set forth in this
Agreement, no portion of the FF&E Reserve may be used for "punch-list"
or other initial construction items, the cost of which shall be the
sole responsibility of Tenant and its Affiliated Persons.
5.1.3 Landlord's Obligations.
(a) Except as otherwise expressly provided in this Agreement,
Landlord shall not, under any circumstances, be required to build or
rebuild any improvement on the Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, or to maintain the Leased
Property in any way. Except as otherwise expressly provided in this
Agreement, Tenant hereby waives, to the maximum extent permitted by
law, the right to make repairs at the expense of Landlord pursuant to
any law in effect on the date hereof or hereafter enacted. Landlord
shall have the right to give, record and post, as appropriate, notices
of nonresponsibility under any mechanic's lien laws now or hereafter
existing.
(b) If, at any time, funds in the FF&E Reserve shall be
insufficient for necessary and permitted expenditures thereof or,
pursuant to the terms of this Agreement, Tenant is required to make any
expenditures in connection with any repair, maintenance or renovation
with respect to the Leased Property and the amount of such
disbursements or expenditures exceeds the amount on deposit in the FF&E
Reserve or such repair, maintenance or renovation is not a permitted
expenditure from the FF&E Reserve as described in Section 5.1.2(a)(i),
(ii) and (iii), Tenant may, at its election, give Landlord Notice
thereof, which Notice shall set forth, in reasonable detail, the nature
of the required repair, renovation or replacement, the estimated cost
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thereof and such other information with respect thereto as Landlord may
reasonably require. Provided that no Event of Default shall have
occurred and be continuing and Tenant shall otherwise comply with the
applicable provisions of Article 6, Landlord shall, within ten (10)
Business Days after such Notice, subject to and in accordance with the
applicable provisions of Article 6, disburse such required funds to
Tenant (or, if Tenant shall so elect, directly to any other Person
performing the required work) and, upon such disbursement, the Minimum
Rent shall be adjusted as provided in Section 3.1.1(b); provided,
however, that, in the event that Landlord shall elect not to disburse
any funds pursuant to this Section 5.1.3(b), Tenant's sole recourse
shall be to elect not to make the applicable repair, maintenance or
renovation, and such failure shall, except as otherwise provided in
Section 5.1.2(f), not be deemed a Default or Event of Default. Tenant
shall include a good faith projection of funds required pursuant to
this Section 5.1.3(b) in the FF&E Estimate.
5.1.4 Nonresponsibility of Landlord, Etc. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property, or any part thereof, are hereby
charged with notice that liens on the Leased Property or on Landlord's interest
therein are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished by Tenant or for any
other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under any mechanic's lien law of any State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.
5.2 Tenant's Personal Property. Tenant shall provide and maintain
throughout the Term all such Tenant's Personal Property as shall be necessary in
order to operate in compliance with applicable material Legal Requirements and
Insurance Requirements and otherwise in accordance with customary practice in
the industry for the Permitted Use, and all of such Tenant's Personal
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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 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
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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
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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.
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
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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.
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
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that Landlord has been fully reimbursed by Tenant. If Tenant shall fail (x) to
pay or cause to be paid any Claims when finally determined, (y) to provide
reasonable security therefor or (z) to prosecute or cause to be prosecuted any
such contest diligently and in good faith, Landlord may, upon reasonable notice
to Tenant (which notice shall not be required if Landlord shall reasonably
determine that the same is not practicable), pay such charges, together with
interest and penalties due with respect thereto, and Tenant shall reimburse
Landlord therefor, upon demand, as Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall, at all times during
the Term and at any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property and all property located therein or thereon,
insured against the risks and in the amounts as follows and shall maintain, with
respect to each Property, the following insurance:
(a) "All-risk" property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief, earthquake,
explosion of steam boilers, pressure vessels or other similar
apparatus, now or hereafter installed in the Hotel located at such
Property, with the usual extended coverage endorsements, in an amount
equal to one hundred percent (100%) of the then full Replacement Cost
thereof (as defined in Section 9.2);
(b) Business interruption insurance covering risk of loss
during the lesser of the first twelve (12) months of reconstruction or
the actual reconstruction period necessitated by the occurrence of any
of the hazards described in subparagraph (a) above, in such amounts as
may be customary for comparable properties in the area and in an amount
sufficient to prevent Landlord or Tenant from becoming a co-insurer;
(c) Comprehensive general liability insurance, including
bodily injury and property damage in a form reasonably satisfactory to
Landlord (and including, without limitation, broad form contractual
liability, independent contractor's hazard and completed operations
coverage) in an amount not less than Ten Million Dollars ($10,000,000)
per occurrence, Twenty Million Dollars ($20,000,000) in the aggregate
and umbrella coverage of all such claims in an amount not less than
Fifty Million Dollars ($50,000,000);
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(d) Flood (if such Property is located in whole or in part
within an area identified as an area having special flood hazards and
in which flood insurance has been made available under the National
Flood Insurance Act of 1968, as amended, or the Flood Disaster
Protection Act of 1973, as amended (or any successor acts thereto)) in
such amounts as may be customary for comparable properties in the area;
(e) Worker's compensation insurance coverage if required by
applicable law for all persons employed by Tenant on such Property with
statutory limits and otherwise with limits of and provisions in
accordance with the requirements of applicable local, State and federal
law, and employer's liability insurance as is customarily carried by
similar employers; and
(f) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Hotel Mortgagee and which is
customarily carried by comparable lodging properties in the area.
9.2 Replacement Cost. "Replacement Cost" as used herein, shall mean the
actual replacement cost of the property requiring replacement from time to time,
including an increased cost of construction endorsement, less exclusions
provided in the standard form of fire insurance policy. In the event either
party believes that the then full Replacement Cost has increased or decreased at
any time during the Term, such party, at its own cost, shall have the right to
have such full Replacement Cost redetermined by an independent accredited
appraiser approved by the other, which approval shall not be unreasonably
withheld or delayed. The party desiring to have the full Replacement Cost so
redetermined shall forthwith, on receipt of such determination by such
appraiser, give Notice thereof to the other. The determination of such appraiser
shall be final and binding on the parties hereto until any subsequent
determination under this Section 9.2, and Tenant shall forthwith conform the
amount of the insurance carried to the amount so determined by the appraiser.
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
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payable by Tenant as a result of this provision, Landlord shall not be liable
for reimbursement to Tenant for such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for, nonassessable and
be issued by insurance carriers authorized to do business in the State, having a
general policy holder's rating of no less than A in Best's latest rating guide.
All such policies described in Sections 9.1(a) through (d) shall include no
deductible in excess of Two Hundred Fifty Thousand Dollars ($250,000) (with the
exception of insurance described in Section 9.1(a) providing coverage for
windstorm which may have a deductible not exceeding five percent (5%) of the
policy amount for such insurance or such lesser amount as may be usual and
customary in the insurance industry for like properties) and, with the exception
of the insurance described in Sections 9.1(e), shall name Landlord and any Hotel
Mortgagee as additional insureds, as their interests may appear. All loss
adjustments shall be payable as provided in Article 10, except that losses under
Sections 9.1(c) and (e) shall be payable directly to the party entitled thereto.
Tenant shall cause all insurance premiums to be paid and shall deliver policies
or certificates thereof to Landlord prior to their effective date (and, with
respect to any renewal policy, prior to the expiration of the existing policy).
All such policies shall provide Landlord (and any Hotel Mortgagee if required by
the same) thirty (30) days prior written notice of any material change or
cancellation of such policy. In the event Tenant shall fail to effect such
insurance as herein required, to pay the premiums therefor or to deliver such
policies or certificates to Landlord or any Hotel Mortgagee at the times
required, Landlord shall have the right, upon Notice to Tenant, but not the
obligation, to acquire such insurance and pay the premiums therefor, which
amounts shall be payable to Landlord, upon demand, as Additional Charges,
together with interest accrued thereon at the Overdue Rate from the date such
payment is made until (but excluding) the date repaid.
9.5 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant, provided, that (a) the coverage
thereby afforded will not be reduced or diminished from that which would exist
under a separate policy meeting all other requirements of this Agreement, and
(b) the requirements of this Article 9 are otherwise satisfied. Without limiting
the foregoing, the amounts of insurance that are required to be maintained
pursuant to Section 9.1 shall be on a Hotel by Hotel basis, and shall not be
subject to an aggregate limit, except for flood, earthquake and umbrella
coverages.
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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 the following,
except to the extent caused by Landlord's negligence on willful misconduct or a
Landlord Default: (a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Leased Property or adjoining
sidewalks or rights of way, (b) any past, present or future use, misuse,
non-use, condition, management, maintenance or repair by Tenant or anyone
claiming under Tenant of the Leased Property or Tenant's Personal Property or
any litigation, proceeding or claim by governmental entities or other third
parties to which Landlord is made a party or participant relating to the Leased
Property or Tenant's Personal Property or such use, misuse, non-use, condition,
management, maintenance, or repair thereof including, failure to perform
obligations (other than Condemnation proceedings) to which Landlord is made a
party, (c) any Impositions that are the obligations of Tenant to pay pursuant to
the applicable provisions of this Agreement, and (d) any failure on the part of
Tenant or anyone claiming under Tenant to perform or comply with any of the
terms of this Agreement. Tenant, at its expense, shall contest, resist and
defend any such claim, action or proceeding asserted or instituted against
Landlord (and shall not be responsible for any duplicative attorneys' fees
incurred by Landlord) or may compromise or otherwise dispose of the same, with
Landlord's prior written consent (which consent may not be unreasonably
withheld, delayed or conditioned). The obligations of Tenant under this Section
9.7 are in addition to the obligations set forth in Section 4.3 and shall
survive the termination of this Agreement.
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ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to any Property,
or any portion thereof, and insured under any policy of insurance required by
Article 9 (other than the proceeds of any business interruption insurance) shall
be paid directly to Landlord (subject to the provisions of Section 10.2) and all
loss adjustments with respect to losses payable to Landlord shall require the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, delayed or conditioned; provided, however, that, so long as no Event
of Default shall have occurred and be continuing, all such proceeds less than or
equal to Five Hundred Thousand Dollars ($500,000) shall be paid directly to
Tenant and such losses may be adjusted without Landlord's consent. If 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.
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10.2.3 Insufficient Insurance Proceeds. If this Agreement is
not otherwise terminated pursuant to this Article 10 and the cost of the repair
or restoration of the applicable Property exceeds the amount of insurance
proceeds received by Landlord and Tenant pursuant to Section 9(a), (c), (d) or,
if applicable, (f), Tenant shall give Landlord Notice thereof which notice shall
set forth in reasonable detail the nature of such deficiency and whether Tenant
shall pay and assume the amount of such deficiency (Tenant having no obligation
to do so, except that, if Tenant shall elect to make such funds available, the
same shall become an irrevocable obligation of Tenant pursuant to this
Agreement). In the event Tenant shall elect not to pay and assume the amount of
such deficiency, Landlord shall have the right (but not the obligation),
exercisable at Landlord's sole election by Notice to Tenant, given within sixty
(60) days after Tenant's notice of the deficiency, to elect to make available
for application to the cost of repair or restoration the amount of such
deficiency; provided, however, in such event, upon any disbursement by Landlord
thereof, the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). In
the event that neither Landlord nor Tenant shall elect to make such deficiency
available for restoration, either Landlord or Tenant may terminate this
Agreement with respect to the affected Property by Notice to the other,
whereupon, this Agreement shall terminate and insurance proceeds shall be
distributed as provided in Section 10.2.1. It is expressly understood and
agreed, however, that, notwithstanding anything in this Agreement to the
contrary, Tenant shall be strictly liable and solely responsible for the amount
of any deductible and shall, upon any insurable loss, pay over the amount of
such deductible to Landlord at the time and in the manner herein provided for
payment of the applicable proceeds to Landlord.
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
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requisition and substantiation therefor on AIA Forms G702 and G703 (or on such
other form or forms as may be reasonably acceptable to Landlord). Landlord may,
at its option, condition advancement of such insurance proceeds and other
amounts on (i) the absence of any Event of Default, (ii) its approval of plans
and specifications of an architect satisfactory to Landlord (which approval
shall not be unreasonably withheld, delayed or conditioned), (iii) general
contractors' estimates, (iv) architect's certificates, (v) conditional lien
waivers of general contractors, if available, (vi) evidence of approval by all
governmental authorities and other regulatory bodies whose approval is required,
(vii), if Tenant has elected to advance deficiency funds pursuant to Section
10.2.3, Tenant depositing the amount thereof with Landlord and (viii) such other
certificates as Landlord may, from time to time, reasonably require.
Landlord's obligation to disburse insurance proceeds under this Article
10 during the last two (2) years of the Term (including any automatic renewals
thereof) shall be subject to the release of such proceeds by any Hotel Mortgagee
to Landlord. If any Hotel Mortgagee shall be unwilling to disburse insurance
proceeds in accordance with the terms of this Agreement, Tenant shall have the
right, by the giving of Notice thereof to Landlord within ten (10) Business Days
after Tenant learns of such unwillingness, to treat such Property as rendered
Unsuitable for its Permitted Use for purposes of Section 10.2.1. Tenant's
obligation to restore the applicable Property pursuant to this Article 10 shall
be subject to the release of available insurance proceeds by the applicable
Hotel Mortgagee to Landlord or directly to Tenant.
10.3 Damage Near End of Term. Notwithstanding any provisions of Section
10.1 or 10.2 to the contrary, if damage to or destruction of any Property occurs
during the last two (2) years of the Term (including any automatic Extended
Terms) and if such damage or destruction cannot reasonably be expected to be
fully repaired and restored prior to the date that is twelve (12) months prior
to the end of the Term, the provisions of Section 10.2.1 shall apply as if such
Property had been totally or partially destroyed and the Hotel thereon rendered
Unsuitable for its Permitted Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid to Tenant
and, to the extent necessary to repair or replace Tenant's Personal Property in
accordance with Section 10.5, Tenant shall hold such proceeds in trust to pay
the cost of repairing or replacing damaged Tenant's Personal Property.
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10.5 Restoration of Tenant's Property. If Tenant is required to restore
any Property as hereinabove provided and this Agreement is not terminated as to
such Property pursuant to the terms of Article 10, Tenant shall either (a)
restore all alterations and improvements made by Tenant and Tenant's Personal
Property, or (b) replace such alterations and improvements and Tenant's Personal
Property with improvements or items of the same or better quality and utility in
the operation of such Property. If Tenant is not required to restore and does
not, in fact, restore, Tenant shall pay over to Landlord the amount, if any, of
insurance proceeds received by Tenant with respect to any of Tenant's Personal
Property which was purchased with funds from the FF&E Reserve.
10.6 No Abatement of Rent. Except as expressly provided herein, this
Agreement shall remain in full force and effect and Tenant's obligation to make
all payments of Rent and to pay all other charges as and when required under
this Agreement shall remain unabated during the Term notwithstanding any damage
involving the Leased Property (provided that Landlord shall credit against such
payments any amounts paid to Landlord as a consequence of such damage under any
business interruption insurance obtained by Tenant hereunder). The provisions of
this Article 10 shall be considered an express agreement governing any cause of
damage or destruction to the Leased Property and, to the maximum extent
permitted by law, no local or State statute, laws, rules, regulation or
ordinance in effect during the Term which provide for such a contingency shall
have any application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property,
or any portion thereof.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of any Property
shall be taken by Condemnation or (ii) a Condemnation of less than the whole of
any Property renders any Property Unsuitable for Its Permitted Use, this
Agreement shall terminate with respect to such Property, Tenant and Landlord
shall seek the Award for their interests in the applicable Property as provided
in Section 11.6 and, as the effective date of taking, the Minimum Rent payable
hereunder shall be reduced by such Property's allocable share thereof as set
forth in Exhibit C.
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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) conditional lien waivers of general contractors, if available,
(vi) evidence of approval by all governmental authorities and other regulatory
bodies whose approval is required, (vii), if Tenant has elected to advance
deficiency funds pursuant to the preceding paragraph, Tenant depositing the
amount thereof with Landlord and (viii) such other
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certificates as Landlord may, from time to time, reasonably require. Landlord's
obligation under this Section 11.2 to disburse the Award and such other amounts
shall be subject to (x) the collection thereof by Landlord and (y) during the
last two (2) years of the Term (including any exercised renewals thereof), the
release of such Award by the applicable Hotel Mortgagee. If any Hotel Mortgagee
shall be unwilling to disburse Award proceeds in accordance with the terms of
this Agreement, Tenant shall have the right, by the giving of Notice thereof to
Landlord within ten (10) Business Days after Tenant learns of such
unwillingness, to treat such Property as rendered Unsuitable for its Permitted
Use for purposes of Section 11.1. Tenant's obligation to restore the Leased
Property shall be subject to the release of the Award by the applicable Hotel
Mortgagee to Landlord or directly to Tenant.
11.3 Abatement of Rent. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property, or any portion
thereof. The provisions of this Article 11 shall be considered an express
agreement governing any Condemnation involving the Leased Property and, to the
maximum extent permitted by law, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such a
contingency shall have any application in such case.
11.4 Temporary Condemnation. In the event of any temporary Condemnation
of any Property or Tenant's interest therein, this Agreement shall continue in
full force and effect and 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
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restoration cannot reasonably be expected to be completed prior to the date that
is twelve (12) months prior to the end of the Term, the provisions of Section
11.1 shall apply as if such Property had been totally or partially taken and the
Hotel thereon rendered Unsuitable for its Permitted Use.
11.6 Allocation of Award. Except as provided in Section 11.4 and the
second sentence of this Section 11.6, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property
(other than any such property purchased with the FF&E Reserve), the taking of
Capital Additions paid for by Tenant and Tenant's removal and relocation
expenses shall be the sole property of and payable to Tenant. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent or any
other sum (including, but not limited to, funding of the FF&E Reserve)
payable hereunder when due; or
(b) should Tenant fail to maintain the insurance coverages
required under Article 9 and such failure shall continue for ten (10)
Business Days after Notice thereof (except that no Notice shall be
required if any such insurance coverages shall have lapsed); or
(c) should Tenant default in the due observance or performance
of any of the terms, covenants or agreements contained herein to be
performed or observed by it (other 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
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period of time (not to exceed an additional ninety (90) days in the
aggregate) as may be necessary to cure such default with all due
diligence; or
(d) should any obligation of Tenant in respect of any
Indebtedness for money borrowed or for any material property or
services, or any guaranty relating thereto, be declared to be or become
due and payable prior to the stated maturity thereof, or should there
occur and be continuing with respect to any such Indebtedness any event
of default under any instrument or agreement evidencing or securing the
same, the effect of which is to permit the holder or holders of such
instrument or agreement or a trustee, agent or other representative on
behalf of such holder or holders, to cause such any such obligations to
become due prior to its stated maturity; or
(e) should an event of default by Candlewood or Tenant or any
Affiliated Person as to Candlewood or Tenant occur and be continuing
beyond the expiration of any applicable cure period under any of the
Incidental Documents or by the Candlewood Parties (as defined therein)
under the Purchase Documents; or
(f) should any material representation or warranty made by
Tenant or the Candlewood Parties (as defined in the Purchase Documents)
under or in connection with this Agreement or any Incidental Document
or the Purchase Documents, or in any document, certificate or agreement
delivered in connection herewith or therewith, prove to have been false
or misleading in any material respect on the date when made or deemed
made and the same shall continue for five (5) Business Days after
Notice thereof from Landlord; or
(g) should Tenant generally not be paying its debts as they
become due or should Tenant make a general assignment for the benefit
of creditors; or
(h) should any petition be filed by or against Tenant under
the Federal bankruptcy laws, or should any other proceeding be
instituted by or against Tenant seeking to adjudicate Tenant a bankrupt
or insolvent, or seeking liquidation, reorganization, arrangement,
adjustment or composition of Tenant's debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or
for any substantial part of the property of Tenant and such proceeding
is not dismissed
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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) ninety (90) days after commencement thereof, unless the
amount in dispute is less than $250,000, in which case Tenant shall
give notice to Landlord of the dispute but Tenant may defend in any
suitable way, and (y) two hundred seventy (270) days after receipt by
Tenant of Notice thereof from Landlord (unless Tenant shall be
contesting such lien or attachment in good faith in accordance with
Article 8); or
(k) should Tenant at any time cease to be a wholly owned,
direct or indirect, Subsidiary of Candlewood;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement with respect to any or all of the
Leased Property by giving Notice thereof to Tenant and upon the expiration of
the time, if any, fixed in such Notice, this Agreement shall terminate with
respect to all or the designated portion of the Leased Property and all rights
of Tenant under this Agreement with respect thereto shall cease. Landlord shall
have and may exercise all rights and remedies available at law and in equity to
Landlord as a result of Tenant's breach of this Agreement.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Leased Property or any
portion thereof and take possession of any and all of Tenant's Personal
Property, if any, and the Records, without liability for trespass or conversion
(Tenant hereby waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or any portion of
Tenant's Personal Property, if any, unless otherwise prohibited by law. Unless
otherwise provided by law and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable Notice shall be
met if such Notice is given at least ten (10) days before the date of sale. The
proceeds from any such disposition, less all expenses incurred in connection
with the taking of possession, holding and selling of such property (including,
reasonable attorneys' fees) shall be applied as a credit against the
indebtedness which is secured by the
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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
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bankruptcy or insolvency an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the proceedings in
which, the damages are to be proved, whether or not the amount be greater than,
equal to, or less than the amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to relet the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property or any portion
thereof as Landlord, in its sole and absolute discretion, considers advisable
and necessary for the purpose of reletting the Leased Property; and the making
of such alterations, repairs and decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. Subject to the last
sentence of this paragraph and as long as Landlord uses reasonable efforts to
mitigate its damages as provided in such sentence, Landlord shall in no event be
liable in any way whatsoever for any failure to relet all or any portion of the
Leased Property, or, in the event that the Leased Property is relet, for failure
to collect the rent under such reletting. To the maximum extent permitted by
law, Tenant hereby expressly waives any and all rights of redemption granted
under any present or future laws in the event of Tenant being evicted or
dispossessed, or in the event of Landlord obtaining possession of the Leased
Property, by reason of the occurrence and continuation of an Event of Default
hereunder. Landlord covenants and agrees, in the event of any termination of
this Agreement as a result of an Event of Default, to use reasonable efforts to
mitigate its damages.
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
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may determine or as may be prescribed by the laws of the State. Any balance
shall be paid to Tenant.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or releasing
any obligation of Tenant and without waiving or releasing any Event of Default,
may (but shall not be obligated to), at any time thereafter, make such payment
or perform such act for the account and at the expense of Tenant, and may, to
the maximum extent permitted by law, enter upon the Leased Property or any
portion thereof for such purpose and take all such action thereon as, in
Landlord's sole and absolute discretion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to two (2) times the Minimum Rent and other charges herein provided
(prorated on a daily basis). Tenant shall also pay to Landlord all damages
(direct or indirect) sustained by reason of any such holding over. Otherwise,
such holding over shall be on the terms and conditions set forth in this
Agreement, to the extent applicable. Nothing contained herein shall constitute
the consent, express or implied, of Landlord to the holding over of Tenant after
the expiration or earlier termination of this Agreement.
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
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thereof, Landlord shall be liable for any liabilities arising from the failure
to deliver such Notice to Tenant.
14.2 Landlord's Default. If Landlord shall default in the performance
or observance of any of its covenants or obligations set forth in this Agreement
or any obligation of Landlord, if any, under any agreement affecting the Leased
Property, the performance of which is not Tenant's obligation pursuant to this
Agreement, and any such default shall continue for a period of five (5) Business
Days after Notice thereof with respect to monetary defaults and twenty (20)
Business Days after Notice thereof with respect to non-monetary defaults from
Tenant to Landlord and any applicable Hotel Mortgagee, or such additional period
as may be reasonably required to correct the same, provided Landlord is
proceeding with due diligence to correct the same, Tenant may declare the
occurrence of a "Landlord Default" by a second Notice to Landlord and to such
Hotel Mortgagee. Thereafter, Tenant may forthwith cure the same and, subject to
the provisions of the following paragraph, invoice Landlord for costs and
expenses (including reasonable attorneys' fees and court costs) incurred by
Tenant in curing the same, together with interest thereon (to the extent
permitted by law) from the date Landlord receives Tenant's invoice until paid,
at the Overdue Rate, and/or offset such amounts against Additional Rent due and
payable hereunder; provided, however, that, from and after the bankruptcy of
Landlord, Tenant may offset such amounts against Minimum Rent and/or Additional
Rent payable hereunder. Tenant shall have no right to terminate this Agreement
for any default by Landlord hereunder and no right, for any such default, to
offset or counterclaim against any Rent or other charges due hereunder, as set
forth in the preceding sentence.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof; provided, however, that in the event of any such adverse determination,
Landlord shall pay to Tenant interest on any disputed funds at the Interest
Rate, from the date demand for such funds was made by Tenant until the date of
final adverse determination and, thereafter, at the Overdue Rate until paid. If
Tenant and Landlord shall fail, in good faith, to resolve any such dispute
within ten (10) days after Landlord's Notice of dispute, either may submit the
matter for resolution to a court of competent jurisdiction.
14.3 Indemnification of Tenant. Notwithstanding the existence of any
insurance provided for herein and without regard to the policy limits of any
such insurance, Landlord shall
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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 the following, except to the extent caused
by Tenant's negligence, willful misconduct or Default: (a) any Impositions that
are the obligations of Landlord to pay pursuant to the applicable provisions of
this Agreement, and (b) any failure on the part of Landlord or anyone claiming
under Landlord to perform or comply with any of the terms of this Agreement.
Landlord, at its expense, shall contest, resist and defend any such claim,
action or proceeding asserted or instituted against Tenant (and shall not be
responsible for any duplicative attorneys' fees incurred by Tenant) or may
compromise or otherwise dispose of the same, with Tenant's prior written consent
(which consent may not be unreasonably withheld, delayed or conditioned). The
obligations of Landlord under this Section 14.3 shall survive termination of
this Agreement.
ARTICLE 15
PURCHASE RIGHTS
Landlord shall have the option to purchase Tenant's Personal Property,
at the expiration or termination of this Agreement, for an amount equal to the
then net market value thereof (current replacement cost as determined by
agreement of the parties or, in the absence of such agreement, appraisal),
subject to, and with appropriate price adjustments for, all equipment leases,
conditional sale contracts, UCC-1 financing statements and other encumbrances to
which such Personal Property is subject (except that any such property purchased
with the FF&E Reserve shall be transferred to Landlord as provided in Section
5.1.2(e)). Upon the expiration or sooner termination of this Agreement, Tenant
shall use its reasonable efforts to transfer and assign to Landlord or its
designee, or assist Landlord or its designee in obtaining, any contracts,
licenses, and certificates required for the then operation of the Leased
Property.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment. Except as provided in Section 16.3,
Tenant shall not, without Landlord's prior written consent (which consent may be
given or withheld in Landlord's sole and absolute discretion), assign, mortgage,
pledge, hypothecate, encumber or otherwise transfer this Agreement or
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sublease (which term shall be deemed to include the granting of concessions,
licenses and the like but shall not be deemed to include the lodging of hotel
guests consistent with the Permitted Use), all or any part of the Leased
Property or suffer or permit this Agreement or the leasehold estate created
hereby or any other rights arising under this Agreement to be assigned,
transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in
part, whether voluntarily, involuntarily or by operation of law, or permit the
use or operation of the Leased Property by anyone other than Tenant, or the
Leased Property to be offered or advertised for assignment or subletting;
provided, however, that an assignment to a wholly owned subsidiary (direct or
indirect) of Candlewood shall be permitted without the consent of, but upon
Notice to, Landlord. For purposes of this Section 16.1, an assignment of this
Agreement shall be deemed to include any direct or indirect transfer of any
interest in Tenant such that Tenant shall cease to be a wholly owned direct or
indirect subsidiary of Candlewood or any transaction pursuant to which Tenant or
Candlewood is merged or consolidated with another Entity or pursuant to which
all or substantially all of Tenant's or Candlewood's assets are transferred to
any other Entity, as if such change in control or transaction were an assignment
of this Agreement, unless such Entity is a wholly owned Subsidiary (direct or
indirect) of Candlewood.
If this Agreement is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant and their
respective employees or hotel guests) Landlord may collect the rents from such
assignee, subtenant or occupant, as the case may be, and apply the net amount
collected to the Rent herein reserved, but no such collection shall be deemed a
waiver of the provisions set forth in the first paragraph of this Section 16.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its covenants, agreements or obligations contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder (unless Landlord and Tenant expressly
otherwise agree that Tenant shall be released from all obligations hereunder),
and no consent to any subletting or assignment in a particular instance shall be
deemed to be a waiver of the prohibition set forth in this Section 16.1. No
assignment, subletting or occupancy shall affect any Permitted Use. Any
subletting, assignment or other transfer of Tenant's interest under this
Agreement in contravention of this Section 16.1 shall be voidable at Landlord's
option.
16.2 Required Sublease Provisions. Any sublease of all or any portion
of the Leased Property entered into on or after the date hereof shall provide
(a) that it is subject and subordinate
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to this Agreement and to the matters to which this Agreement is or shall be
subject or subordinate; (b) that in the event of termination of this Agreement
or reentry or dispossession of Tenant by Landlord under this Agreement, Landlord
may, at its option, terminate such sublease or take over all of the right, title
and interest of Tenant, as sublessor under such sublease, and such subtenant
shall, at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Hotel
Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or omission
of Tenant under such sublease, (ii) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant,
(iii) be bound by any previous modification of such sublease not consented to in
writing by Landlord or by any previous prepayment of more than one (1) month's
rent, (iv) be bound by any covenant of Tenant to undertake or complete any
construction of the Leased Property or any portion thereof, (v) be required to
account for any Retained Funds of the subtenant other than any Retained Funds
actually delivered to Landlord by Tenant, (vi) be bound by any obligation to
make any payment to such subtenant or grant any credits, except for services,
repairs, maintenance and restoration provided for under the sublease that are
performed after the date of such attornment, (vii) be responsible for any monies
owing by Tenant to the credit of such subtenant unless actually delivered to
Landlord by Tenant, or (viii) be required to remove any Person occupying any
portion of the Leased Property; and (c), in the event that such subtenant
receives a written Notice from Landlord or any Hotel Mortgagee stating that an
Event of Default has occurred and is continuing, such subtenant shall thereafter
be obligated to pay all rentals accruing under such 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
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Rent and for the performance and observance of all of the covenants and
conditions to be performed by Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 16.1.
16.3 Permitted Sublease. Notwithstanding the foregoing, including,
without limitation, Section 16.2, but subject to the provisions of Section 16.4
and any other express conditions or limitations set forth herein, Tenant may, in
each instance after Notice to Landlord, sublease space at any Property for
newsstand, car rental agency, business services office, gift shop, parking
garage, health club, restaurant, bar or commissary purposes or other concessions
in furtherance of the Permitted Use, so long as such subleases do not demise, in
the aggregate, in excess of two thousand (2,000) square feet per Property or, in
the case of a restaurant or bar, four thousand (4,000) square feet per Property,
will not violate or affect any Legal Requirement or Insurance Requirement, and
Tenant shall provide such additional insurance coverage applicable to the
activities to be conducted in such subleased space as Landlord and any Hotel
Mortgagee may reasonably require.
16.4 Sublease Limitation. For so long as Landlord or any Affiliated
Person as to Landlord shall seek to qualify as a real estate investment trust,
anything contained in this Agreement to the contrary notwithstanding, Tenant
shall not sublet the Leased Property on any basis such that the rental to be
paid by any sublessee thereunder would be based, in whole or in part, on the net
income or profits derived by the business activities of such sublessee, any
other formula such that any portion of such sublease rental would fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code, or any similar or successor provision thereto or would otherwise
disqualify Landlord for treatment as a real estate investment trust.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to time, but not
more than a reasonable amount of times per year, upon not less than ten (10)
Business Days prior Notice by either party, the party receiving such Notice
shall furnish to the other an Officer's Certificate 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
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Default or an Event of Default has occurred and is continuing or, if a Default
or an Event of Default shall exist, specifying in reasonable detail the nature
thereof, and the steps being taken to remedy the same, and such additional
information as the requesting party may reasonably request. Any such certificate
furnished pursuant to this Section 17.1 may be relied upon by the requesting
party, its lenders and any prospective purchaser or mortgagee of the Leased
Property or the leasehold estate created hereby.
17.2 Financial Statements. Tenant shall furnish or cause Candlewood to
furnish, as applicable, the following statements to Landlord:
(a) within forty-five (45) days after each of the first three
fiscal quarters of any Fiscal Year, the most recent Consolidated
Financials, accompanied by the Financial Officer's Certificate;
(b) within ninety (90) days after the end of each Fiscal Year,
the most recent Consolidated Financials and financials of Tenant for
such year, certified by an independent certified public accountant
reasonably satisfactory to Landlord and accompanied by a Financial
Officer's Certificate;
(c) within forty-five (45) days after the end of each month,
an unaudited operating statement and statement of capital expenditures
prepared on a Hotel by Hotel basis and a combined basis, including
occupancy percentages and average rate, accompanied by a Financial
Officer's Certificate;
(d) at any time and from time to time upon not less than
twenty (20) days Notice from Landlord or such additional period as may
be reasonable under the circumstances, any Consolidated Financials,
Tenant financials or any other audited or unaudited financial reporting
information required to be filed by Landlord with any securities and
exchange commission, the SEC or any successor agency, or any other
governmental authority, or required pursuant to any order issued by any
court, governmental authority or arbitrator in any litigation to which
Landlord is a party, for purposes of compliance therewith; provided,
however, that, except as to calculations pertaining to Total Hotel
Sales, Tenant shall not be required to provide audited financials with
respect to individual Hotels unless Landlord shall agree to pay for the
cost thereof; and
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(e) promptly, upon Notice from Landlord, such other
information concerning the business, financial condition and affairs of
Tenant and Candlewood as Landlord reasonably may request from time to
time.
Landlord may at any time, and from time to time, provide any Hotel
Mortgagee with copies of any of the foregoing statements, subject to Landlord
obtaining the agreement of such Hotel Mortgagee to maintain such statements and
the information therein as confidential.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property during usual business hours upon not less than
forty-eight (48) hours' notice and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of this Agreement, provided that any
inspection or repair by Landlord or its representatives will not unreasonably
interfere with Tenant's use and operation of the Leased Property and further
provided that in the event of an emergency, as determined by Landlord in its
reasonable discretion, prior Notice shall not be necessary.
ARTICLE 19
EASEMENTS
19.1 Grant of Easements. Provided no Event of Default has occurred and
is continuing, Landlord will join in granting and, if necessary, modifying or
abandoning such rights-of-way, easements and other interests as may be
reasonably requested by Tenant for ingress and egress, and electric, telephone,
gas, water, sewer and other utilities so long as:
(a) the instrument creating, modifying or abandoning any such
easement, right-of-way or other interest is satisfactory to and
approved by Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned); and
(b) Landlord receives an Officer's Certificate from Tenant
stating (i) that such grant, modification or abandonment is not
detrimental to the proper conduct of business on such Property, (ii)
the consideration, if any, being paid for such grant, modification or
abandonment (which consideration shall be paid by Tenant), (iii) that
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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 instrument of subordination shall be required provided that
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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
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performance of any work to be done by the Landlord under this Agreement to
render the Leased Property ready for occupancy by Tenant, or (g) required to
remove any Person occupying the Leased Property or any part thereof, except if
such person claims by, through or under the Successor Landlord. Tenant agrees at
any time and from time to time to execute a suitable instrument in confirmation
of Tenant's agreement to attorn, as aforesaid and Landlord agrees to provide
Tenant with an instrument of nondisturbance and attornment from each such
Superior Mortgagee and Superior Landlord in form and substance reasonably
satisfactory to Tenant. Nothing contained in this Section 20.2 shall relieve
Landlord from any liability to Tenant under this Agreement following the
exercise of remedies by a Superior Mortgagee.
20.3 Notice to Mortgagee and Superior Landlord. Subsequent to the
receipt by Tenant of Notice from Landlord as to the identity of any Hotel
Mortgagee or Superior Landlord under a lease with Landlord, as ground lessee,
which includes the Leased Property as part of the demised premises and which
complies with Section 20.1 and 20.2 (which Notice shall be accompanied by a copy
of the applicable mortgage or lease), no Notice from Tenant to Landlord as to a
default by Landlord under this Agreement shall be effective with respect to a
Hotel Mortgagee or Superior Landlord unless and until a copy of the same is
given to such Hotel Mortgagee or Superior Landlord at the address set forth in
the above described Notice, and the curing of any of Landlord's defaults within
the applicable notice and cure periods set forth in Section 14.2 by such Hotel
Mortgagee or Superior Landlord shall be treated as performance by Landlord.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Prompt Payment of Indebtedness. Tenant shall (a) pay or cause to
be paid when due all payments of principal of and premium and interest on
Tenant's Indebtedness for money borrowed and shall not permit or suffer any such
Indebtedness to become or remain in default beyond any applicable grace or cure
period, (b) pay or cause to be paid when due all lawful claims for labor and
rents with respect to the Leased Property, (c) pay or cause to be paid when due
all trade payables and (d) pay or cause to be paid when due all other of
Tenant's Indebtedness upon which it is or becomes obligated, except, in each
case, other than that referred to in clause (a), to 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
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appropriate, or unless and until foreclosure, distraint sale or other similar
proceedings shall have been commenced.
21.2 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Leased Property (including any incidental
or ancillary business relating thereto) and shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect and in
good standing its corporate existence and its rights and licenses necessary to
conduct such business.
21.3 Maintenance of Accounts and Records. Tenant shall keep true
records and books of account of Tenant in which full, true and correct entries
will be made of dealings and transactions in relation to the business and
affairs of Tenant in accordance with GAAP. Tenant shall apply accounting
principles in the preparation of the financial statements of Tenant which, in
the judgment of and the opinion of its independent public accountants, are in
accordance with GAAP, where applicable, except for changes approved by such
independent public accountants. Tenant shall provide to Landlord either in a
footnote to the financial statements delivered under Section 17.2 which relate
to the period in which such change occurs, or in separate schedules to such
financial statements, information sufficient to show the effect of any such
changes on such financial statements.
21.4 Notice of Litigation, Etc. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which it may
hereafter become a party of which Tenant has notice or actual knowledge which
involves a potential liability equal to or greater than Two Hundred Fifty
Thousand Dollars ($250,000) or which may otherwise result in any material
adverse change in the business, operations, property, prospects, results of
operation or condition, financial or other, of Tenant. Forthwith upon Tenant
obtaining knowledge of any Default, Event of Default or any default or event of
default under any agreement relating to Indebtedness for money borrowed in an
aggregate amount exceeding, at any one time, Two Hundred Fifty Thousand Dollars
($250,000), or any event or condition that would be required to be disclosed in
a current report filed by Tenant on Form 8-K or in Part II of a quarterly report
on Form 10-Q if Tenant were required to file such reports under the Securities
Exchange Act of 1934, as amended, Tenant shall furnish Notice thereof to
Landlord specifying the nature and period of existence thereof and what action
Tenant has taken or is taking or proposes to take with respect thereto.
21.5 Indebtedness of Tenant. Tenant shall not create, incur, assume or
guarantee, or permit to exist, or become or
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remain liable directly or indirectly upon, any Indebtedness except the
following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for Impositions, to the extent that
payment thereof shall not at the time be required to be made in
accordance with the provisions of Article 8;
(c) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period
and in respect of which execution thereof shall have been stayed
pending such appeal or review, or (ii) which are fully covered by
insurance payable to Tenant, or (iii) which are for an amount not in
excess of $250,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable appeal
period, so long as execution is not levied thereunder or (y) in respect
of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of Article
8, and in respect of which execution thereof shall have been stayed
pending such appeal or review;
(d) unsecured borrowings of Tenant from its Affiliated Persons
which are by their terms expressly subordinate pursuant to a
Subordination Agreement to the payment and performance of Tenant's
obligations under this Agreement; or
(e) Indebtedness for purchase money financing in accordance
with Section 21.9(a) and other operating liabilities incurred in the
ordinary course of Tenant's business.
21.6 Financial Condition of Tenant. Tenant shall at all times maintain
Net Worth (except as provided in the last clause of this sentence) in an amount
at least equal to the aggregate of one year's Minimum Rent payable pursuant to
this Agreement; it being expressly understood and agreed that the right to
receive the Retained Funds, if assigned to Tenant, may for such purpose be
counted as equity at the full amount thereof and that accrued and unpaid
subordinated amounts due from Tenant to its Affiliated Persons may be included
in Net Worth.
21.7 Distributions, Payments to Affiliated Persons, Etc. Tenant shall
not declare, order, pay or make, directly or indirectly, any Distributions or
any payment to any Affiliated Person of Tenant (including payments in the
ordinary course of business and payments pursuant to Management Agreements with
any such Affiliated Person) or set apart any sum or property
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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. Without Landlord's prior written
consent (which consent may be given or withheld in Landlord's sole discretion),
Tenant shall not (i) sell, lease (as lessor or sublessor), transfer or otherwise
dispose of, or abandon, all or any material portion of its assets (including
capital stock) or business to any Person, unless such Person is a wholly owned
Subsidiary, direct or indirect, of Candlewood (in which event Tenant shall give
Landlord prior Notice thereof), (ii) merge into or with or consolidate with any
other Entity, unless such Entity is a wholly owned Subsidiary, direct or
indirect, of Candlewood (in which event Tenant shall give Landlord prior Notice
thereof), or (iii) sell, lease (as lessor or sublessor), transfer or otherwise
dispose of, or abandon, any personal property or fixtures or any real property;
provided, however, that, notwithstanding the provisions of clause (iii)
preceding, Tenant may dispose of equipment or fixtures which have become
inadequate, obsolete, worn-out, unsuitable, undesirable or
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unnecessary, provided substitute equipment or fixtures having equal or greater
value and utility (but not necessarily having the same function) have been
provided.
ARTICLE 22
MISCELLANEOUS
22.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under applicable law, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
22.2 No Waiver. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.
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
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shall not impair, invalidate or nullify the remainder of this Agreement, but
rather the effect thereof shall be confined to the clause, sentence, paragraph,
section or provision so held to be invalid, illegal or ineffective, and this
Agreement shall be construed as if such invalid, illegal or ineffective
provisions had never been contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
22.6 No Merger of Title. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
22.7 Conveyance by Landlord. If Landlord or any successor owner of all
or any portion of the Leased Property shall convey all or any portion of the
Leased Property in accordance with the terms hereof other than as security for a
debt, and the grantee or transferee of such of the Leased Property shall
expressly assume all obligations of Landlord hereunder arising or accruing from
and after the date of such conveyance or transfer, Landlord or such successor
owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Landlord under this Agreement with respect to
such of the Leased Property arising or accruing from and after the date of such
conveyance or other transfer and all such future liabilities and obligations
shall thereupon be binding upon the new owner; provided, however, that Landlord
shall not be released from liability with respect to the Retained Funds unless
such successor shall have a Net Worth equal to or greater than ten (10) times
the unapplied balance of the Retained Funds. If such successor shall not satisfy
the aforesaid Net Worth requirement, Landlord shall, in a guaranty in form and
substance reasonably satisfactory to Tenant, guaranty payment of the Retained
Funds in accordance with this Agreement and the Purchase Documents.
22.8 Quiet Enjoyment. Tenant shall peaceably and quietly have, hold and
enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be created
by Landlord hereunder provided that the holder of such
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Encumbrance has, to the extent appropriate, executed a nondisturbance agreement
pursuant to Section 20.2 or a subordination agreement in form and substance
reasonably acceptable to Tenant, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings, provided the same do not materially
interfere with Tenant's ability to operate the Hotels and (d) liens that have
been consented to in writing by Tenant. Except as otherwise provided in this
Agreement, no failure by Landlord to comply with the foregoing covenant shall
give Tenant any right to cancel or terminate this Agreement or abate, reduce or
make a deduction from or offset against the Rent or any other sum payable under
this Agreement (except as expressly provided in Section 14.2), or to fail to
perform any other obligation of Tenant hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Agreement. However, Landlord and Tenant shall promptly, upon the request of the
other, enter into a short form memorandum of this Agreement, in form suitable
for recording under the laws of the State in which reference to this Agreement,
and all options contained herein, shall be made. Tenant shall pay all costs and
expenses of recording such memorandum.
22.10 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with return receipt requested (if
by mail), or with all freight charges prepaid (if by Federal Express or
similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
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(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:
------------------------------
------------------------------
Attn: ________________________
[Telecopier No. (___) ___-____]
with a copy to:
------------------------------
------------------------------
Attn: ________________________
[Telecopier No. (___) ___-____]
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time
to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address
any other address within the United States of America.
22.11 Trade Area Restriction. Neither Tenant, Candlewood nor any of
their Affiliated Persons shall own, build, franchise, manage or operate a hotel
of the same brand as the Hotels within the designated areas on Exhibit B (the
"Designated Areas"), at any time during the Term.
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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) 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.
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To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as is provided by law; and the parties consent
to the jurisdiction of said court or courts located in Massachusetts and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
22.15 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.
22.16 Attorneys' Fees. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of this
Agreement, the prevailing party therein shall be entitled to receive from the
other party the prevailing party's costs and expenses, including reasonable
attorneys' fees incurred in connection therewith, in preparation therefor and on
appeal therefrom, which amounts shall be included in any judgment therein.
22.17 Nonrecourse. Nothing contained in this Agreement shall be
construed to impose any liabilities or obligations on Tenant's shareholders,
officers, directors, agents or employees (or any shareholders, officers,
directors, agents or employees of any of the foregoing) for the performance of
the obligations of Landlord or Tenant hereunder.
22.18 Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "____________________________"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD,
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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:
CANDLEWOOD LEASING NO. 1, INC.
By:___________________________
Its:_____________________
Candlewood Hotel Company, Inc. hereby acknowledges and agrees to
be bound by the provisions of Section 22.11 of the foregoing
Lease Agreement.
CANDLEWOOD HOTEL COMPANY, INC.
By:_____________________________
Its:_______________________
Date: _______ __, 199__
EXHIBIT 10.3
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Agreement") is made and given as of this
_____ day of ________, 199_, by CANDLEWOOD HOTEL COMPANY, INC., a Delaware
corporation (the "Guarantor"), for the benefit of ____________, a Maryland real
estate investment trust (the "Landlord"), and HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust and the sole stockholder of Landlord
(together with the Landlord and their respective successors and assigns, "HPT").
W I T N E S S E T H :
WHEREAS, pursuant to an Agreement to Lease, dated November __, 1997
(the "Agreement to Lease"), the Landlord and Candlewood Leasing No. 1, Inc., a
Delaware corporation (the "Tenant"), are, on the date hereof, entering into a
Lease Agreement (the "Initial Lease") with respect to certain real property, the
related improvements and personal property, as more particularly described
therein; and
WHEREAS, the Agreement to Lease contemplates that the Initial Lease
will be amended to add to the premises demised thereunder certain additional
Candlewood hotels described in the Purchase Agreement and Agreement to Lease
pursuant to certain amendments to be entered into pursuant to the Agreement to
Lease (collectively, the "Amendments" and the Initial Lease, as amended by the
Amendments, the "Lease"); and
WHEREAS, it is a condition precedent to the Landlord's entering into
the Lease that the Guarantor guarantee all of the payment and performance
obligations of the Tenant with respect to the Lease; and
WHEREAS, the transactions contemplated by the Lease are of direct
material benefit to the Guarantor;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the mutual receipt and legal sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Terms. Capitalized terms used and not otherwise defined in
this Agreement shall have the meanings ascribed to such terms in the Lease. The
Lease and the Incidental Documents are herein collectively referred to as the
"Transaction Documents."
2. Guaranteed Obligations. For purposes of this Agreement, the term
"Guaranteed Obligations" shall mean the payment and performance of each and
every obligation of the
<PAGE>
-2-
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 of Tenant set forth in the Transaction Documents.
3.2 Validity of Agreement. The Guarantor has duly and validly
executed and delivered this Agreement; this Agreement constitutes the legal,
valid and binding obligation of the Guarantor, enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors; and the execution,
delivery and performance of this Agreement have been duly authorized by all
requisite action of the Guarantor and such execution, delivery and performance
by the Guarantor will not result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any of the property or assets
of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of
trust, note, other evidence of indebtedness, agreement or other instrument to
which the Guarantor is a party or by which the Guarantor or any property or
assets of the Guarantor is bound, or violate any provision of law applicable to
the Guarantor, or any order, writ, injunction, judgement or decree of any court
applicable to the Guarantor or any order or other public regulation of any
governmental commission, bureau or administrative agency applicable to the
Guarantor.
3.3 Payment of Expenses. The Guarantor agrees, as principal
obligor and not as Guarantor only, to pay to HPT forthwith, upon demand, in
immediately available Federal funds, all costs and expenses (including court
costs and reasonable legal expenses) incurred or expended by HPT in connection
with the enforcement of this Agreement, together with interest on amounts
recoverable under this Agreement from the time such amounts become due until
payment at the Interest Rate.
3.4 Reports. The Guarantor shall promptly provide to HPT each
of the financial reports, certificates and other documents required of the
Guarantor under the Transaction Documents.
<PAGE>
-3-
3.5 Legal Existence. The Guarantor shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence.
4. Guarantee. The Guarantor hereby unconditionally guarantees that the
Guaranteed Obligations which are monetary obligations which become due and
payable during the term of this Agreement shall be paid in full when due and
payable, whether upon demand, at the stated or accelerated maturity thereof or
upon any mandatory or voluntary prepayment pursuant to any Transaction Document,
or otherwise, and that the Guaranteed Obligations which are performance
obligations which are required to be performed during the term of this Agreement
shall be fully performed at the times and in the manner such performance is
required by the Transaction Documents. With respect to the Guaranteed
Obligations which are monetary obligations, this guarantee is a guarantee of
payment and not of collectibility and is absolute and in no way conditional or
contingent. In case any part of the Guaranteed Obligations shall not have been
paid when due and payable or performed at the time performance is required, the
Guarantor shall, within five (5) days after receipt of notice from HPT, pay or
cause to be paid to HPT the amount thereof as is then due and payable and unpaid
(including interest and other charges, if any, due thereon through the date of
payment in accordance with the applicable provisions of the Transaction
Documents) or perform or cause to be performed such obligations in accordance
with the Transaction Documents.
5. Unenforceability of Guaranteed Obligations, Etc. If the Tenant is
for any reason under no legal obligation to discharge any of the Guaranteed
Obligations, or if any other moneys included in the Guaranteed Obligations have
become unrecoverable from the Tenant by operation of law or for any other
reason, including, without limitation, the invalidity or irregularity in whole
or in part of any Guaranteed Obligation or of any Transaction Document or any
limitation on the liability of the Tenant thereunder or any limitation on the
method or terms of payment thereunder which may now or hereafter be caused or
imposed in any manner whatsoever, the guarantees contained in this Agreement
shall nevertheless remain in full force and effect in accordance with the terms
set forth herein and shall be binding upon the Guarantor to the same extent as
if the Guarantor at all times had been the principal debtor on all such
Guaranteed Obligations.
6. Additional Guarantees. This Agreement shall be in addition to any
other guarantee or other security for the Guaranteed Obligations and it shall
not be prejudiced or rendered unenforceable by the invalidity of any such other
guarantee or security or by any waiver, amendment, release or modification
thereof.
7. Consents and Waivers, Etc. The Guarantor hereby acknowledges receipt
of correct and complete copies of each of
<PAGE>
-4-
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 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.
<PAGE>
-5-
9. Reimbursement, Subrogation, Etc. The Guarantor hereby covenants and
agrees that the Guarantor will not enforce or otherwise exercise any rights of
reimbursement, subrogation, contribution or other similar rights against the
Tenant or any other person with respect to the Guaranteed Obligations prior to
the payment in full of all amounts then due and owing but unpaid with respect to
the Lease, and until the Guaranteed Obligations have been satisfied in full, the
Guarantor shall not have any right of subrogation, and the Guarantor waives any
defense it may have based upon any election of remedies by HPT which destroys
the Guarantor's subrogation rights or the Guarantor's rights to proceed against
the Tenant for reimbursement, including, without limitation, any loss of rights
the Guarantor may suffer by reason of any rights, powers or remedies of the
Tenant in connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging the indebtedness to HPT. Until all obligations of the
Tenant pursuant to the Transaction Documents shall have been paid and satisfied
in full, the Guarantor waives any right to enforce any remedy which HPT now has
or may in the future have against the Tenant, any other guarantor or any other
person and any benefit of, or any right to participate in, any security
whatsoever now or in the future held by HPT.
10. Defeasance. (a) Unless sooner terminated pursuant to paragraph (b)
below, this Agreement shall terminate at such time as the Guaranteed Obligations
have been paid and performed in full and all other obligations of the Guarantor
to HPT under this Agreement have been satisfied in full; provided, however, if
at any time, all or any part of any payment applied on account of the Guaranteed
Obligations is or must be rescinded or returned for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or reorganization of
the Tenant), this Agreement, to the extent such payment is or must be rescinded
or returned, shall be deemed to have continued in existence notwithstanding any
such termination.
(b) Provided that (x) no (i) monetary Default, (ii) Default as to which
Notice thereof has been given to Tenant or (iii) Event of Default shall have
occurred and be continuing under the Lease, (y) Cash Flow (as defined below) on
a cumulative basis for a period of twelve (12) full consecutive Accounting
Periods equals or exceeds Minimum Rent by fifty percent (50%) with respect to
such period, and (z) HPT shall receive a schedule evidencing the foregoing, in
form and substance reasonably satisfactory to HPT prepared by a, so-called,
"Big-Six" accounting firm or such other certified public accountants as are
approved by HPT (such approval not to be unreasonably withheld, delayed or
conditioned), this Agreement shall terminate ten (10) Business Days after
delivery to HPT of the financial statements described in clause (z) preceding,
and HPT shall, within ten (10) Business Days after the written request of the
Guarantor, confirm such termination by executing a release of the Guarantor from
all obligations and liabilities arising under this Agreement subsequent to the
release date and returning any unapplied
<PAGE>
-6-
balance of the Guaranty Retained Funds (as hereinafter defined) to the
Guarantor, together with any accrued and unpaid interest thereon.
As used herein, "Cash Flow" shall mean the net income before federal
and state income tax (or loss) of the Tenant in connection with the operation of
the Hotels, calculated in accordance with GAAP for the applicable period, as
illustrated in Exhibit A attached hereto, adjusted by adding back (a) all
extraordinary expense items, (b) depreciation and amortization, (c) interest
expense on Indebtedness permitted under the Lease, (d) Minimum Rent and
Additional Rent, (e) base management fees, incentive management fees, trade name
fees, franchise fees, royalty fees and central marketing fees paid to the
Manager to the extent subordinate to payment of rent pursuant to the Lease from
and after the occurrence of an Event of Default, and further adjusted by
deducting (f) required contributions to the FF&E Reserve and (g) all
extraordinary income items.
11. Security for Guaranty. As security for the obligations of the
Guarantor hereunder, HPT has retained from the aggregate purchase prices of the
Properties pursuant to the Purchase Agreement, the sum of Five Million Dollars
($5,000,000) (the "Guaranty Retained Funds"). HPT shall have no obligation to
hold the Guaranty Retained Funds in a segregated account and may commingle the
same with its general funds. Provided that no Event of Default shall have
occurred and be continuing, HPT shall credit the Guarantor or its assigns with
interest on any unapplied balance of the Guaranty Retained Funds at a rate of
11.11% per annum. Such interest shall be credited in arrears and pro rated with
respect to any partial month. Provided that (x) no (i) monetary Default, (ii)
Default as to which Notice thereof has been given to Tenant or (iii) Event of
Default shall have occurred and be continuing under the Lease, (y) Cash Flow on
a cumulative basis for a period of twelve (12) full consecutive Accounting
Periods equals or exceeds Minimum Rent by forty percent (40%) with respect to
such period, and (z) HPT shall receive a schedule evidencing the foregoing, in
form and substance reasonably satisfactory to HPT prepared by certified public
accountants approved by HPT (such approval not to be unreasonably withheld,
delayed or conditioned), HPT shall, within ten (10) Business Days after the
written request of the Guarantor, pay any unapplied balance of the Guaranty
Retained Funds, together with any accrued and unpaid interest with respect
thereto, to the Guarantor. At the written request of the Guarantor, HPT shall
credit accrued interest on the Guaranty Retained Funds against the monthly
Minimum Rent.
12. Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier,
<PAGE>
-7-
addressed to the recipient of the notice, postpaid and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to HPT to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to the Guarantor to:
Candlewood Hotel Company, Inc.
Lakepoint Office Park
9342 East Central
Witchita, Kansas 67206
Attn: Mr. Jack P. DeBoer
[Telecopier No. (316) 631-1333]
with a copy to:
Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attn: Jon D. Demorest, Esq.
[Telecopier No. (619) 696-7419]
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon
<PAGE>
-8-
receipt by the other parties of such notice and each shall have the right to
specify as its address any other address within the United States of America.
13. Successors and Assigns. Whenever in this Agreement, any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, including without limitation the holders,
from time to time, of the Guaranteed Obligations; and all representations,
warranties, covenants and agreements by or on behalf of the Guarantor which are
contained in this Agreement shall inure to the benefit of HPT's successors and
assigns, including, without limitation, such holders, whether so expressed or
not; provided, however, that, if HPT shall transfer the Guaranty Retained Funds
to a person having a Net Worth less than ten (10) times the unapplied balance
thereof, HPT shall guaranty repayment thereof and payment of any accrued
interest thereon to the Guarantor in accordance with the terms of this Agreement
pursuant to a guaranty in form and substance reasonably satisfactory to the
Guarantor.
14. Applicable Law. Except as to matters regarding the internal affairs
of HPT and issues of or limitations on any personal liability of the
shareholders and trustees of HPT for obligations of HPT, as to which the laws of
the State of Maryland shall govern, this Agreement and any other instruments
executed and delivered to evidence, complete or perfect the transactions
contemplated hereby shall be interpreted, construed, applied and enforced in
accordance with the laws of The Commonwealth of Massachusetts applicable to
contracts between residents of Massachusetts which are to be performed entirely
within Massachusetts, regardless of (i) where any such instrument is executed or
delivered; or (ii) where any payment or other performance required by any such
instrument is made or required to be made; or (iii) where any breach of any
provision of any such instrument occurs, or any cause of action otherwise
accrues; or (iv) where any action or other proceeding is instituted or pending;
or (v) the nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi) whether the
laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction
other than Massachusetts; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as may be provided by law; and the parties
consent to the jurisdiction of said court or courts located in Massachusetts and
to service of process by registered mail, return receipt requested, or by any
other manner provided by law.
15. Modification of Agreement. No modification or waiver of any
provision of this Agreement, nor any consent to any
<PAGE>
-9-
departure by the Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by HPT, and such modification, waiver or
consent shall be effective only in the specific instances and for the purpose
for which given. No notice to or demand on the Guarantor in any case shall
entitle the Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
16. Waiver of Rights by HPT. Neither any failure nor any delay on HPT's
part in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege.
17. Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, but this Agreement
shall be reformed and construed and enforced to the maximum extent permitted by
applicable law.
18. Entire Contract. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the subject matter hereof.
19. Headings; Counterparts. Headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument,
and in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.
20. Remedies Cumulative. No remedy herein conferred upon HPT is
intended to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
<PAGE>
-10-
WITNESS the execution hereof under seal as of the date above first
written.
CANDLEWOOD HOTEL COMPANY, INC.
By:___________________________
Its (Vice) President
ACKNOWLEDGED AND AGREED:
____________________________
By:_________________________
Its (Vice) President
HOSPITALITY PROPERTIES TRUST
By:_________________________
Its (Vice) President
EXHIBIT 10.4
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
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
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
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
<PAGE>
-ii-
SECTION 3. PURCHASE AND SALE.....................................................................................9
3.1 Closing.............................................................................................9
3.2 Purchase Price......................................................................................9
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.........................................................9
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
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 PURCHASER..........................................................17
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
<PAGE>
-iii-
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
11.11 Attorneys' Fees...................................................................................25
11.12 Section and Other Headings........................................................................25
11.13 Nonliability of Trustees..........................................................................25
</TABLE>
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 24th 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,
<PAGE>
-2-
as it and they may be amended from time to time as herein provided.
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
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personal property of every kind and nature whatsoever (other than motor
vehicles) owned by any of the Sellers and located in or at, or used in
connection with the ownership, operation or maintenance of such Property.
1.15 "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
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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.
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.
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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.
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
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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.
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
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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 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
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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 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.
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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:
(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
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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;
(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.
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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 in form and substance reasonably satisfactory to the Purchaser and the
ShoLodge Parties.
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(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.
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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.
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6.5 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.
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.
<PAGE>
-15-
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 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
<PAGE>
-16-
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 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.
<PAGE>
-17-
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 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
<PAGE>
-18-
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).
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
<PAGE>
-19-
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.
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
<PAGE>
-20-
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>
-21-
(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
<PAGE>
-22-
Agreement has been made. No party shall record this Agreement or any notice
thereof, except as required by law or unless such action is taken based on
advice of counsel given in good faith.
11.4 Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to the 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>
-23-
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
<PAGE>
-24-
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
11.8 Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
11.9 Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than The Commonwealth of Massachusetts; or
(vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as is provided by law; and the parties consent
to the jurisdiction of said court or courts located in The Commonwealth of
Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
11.10 Performance on Business Days. In the event the date on which
performance or payment of any obligation of a party required hereunder is other
than a Business Day, the time for
<PAGE>
-25-
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.
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.
<PAGE>
-26-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SHOLODGE PARTIES:
SHOLODGE, INC.
By: /s/ Leon Moore
Its President
SUNSHINE INNS, INC.
By: /s/ Leon Moore
Its President
SOUTHEAST TEXAS INNS, INC.
By: /s/ Leon Moore
Its President
MIDWEST INNS, INC.
By: /s/ Leon Moore
Its President
FAR WEST INNS, INC.
By: /s/ Leon Moore
Its President
SHONEY'S INN, INC.
By: /s/ Leon Moore
Its President
MOBAT, INC.
By: /s/ Robert Marlowe
Its President
THE HOTEL GROUP, INC.
By: /s/ Leon Moore
Its President
PURCHASER:
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
Its: President
EXHIBIT 10.5
LEASE AGREEMENT
Dated as of November 19, 1997
By and Between
HPT SUITE PROPERTIES TRUST,
AS LANDLORD,
AND
SUITE TENANT, INC.,
AS TENANT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
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
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
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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
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
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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
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
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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
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 DEFAULT.....................................................52
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
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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
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
</TABLE>
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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 19th day of November,
1997, by and between HPT SUITE PROPERTIES TRUST, a Maryland real estate
investment trust, as landlord ("Landlord"), and SUITE TENANT, INC., a Tennessee
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.
1.1 "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.
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1.2 "Additional Charges" shall have the meaning given such term in
Section 3.1.3.
1.3 "Additional Rent" shall have the meaning given such term in Section
3.1.2(a).
1.4 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited liability
company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b), (d) any
other Person who 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%)
<PAGE>
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with respect to the 1999 Fiscal Year; and (c) five percent (5%) with respect to
each Fiscal Year thereafter during the Term.
1.8 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert witness
fees, incurred by Landlord, in connection with obtaining any such award).
1.9 "Base Total Hotel Sales" shall mean, with respect to each Property,
Total Hotel Sales for such Property for the Base Year in the event the Base Year
consists of 52 weeks, or, in the event the Base Year consists of 53 weeks, (x)
Total Hotel Sales for such Property for the Base Year, (y) divided by 53 and
then (z) multiplied by 52; provided, however, that in the event that, with
respect to any Lease Year, or portion thereof, for any reason (including,
without limitation, a casualty or Condemnation) there shall be a reduction of
five percent (5%) or more in the number of rooms at any Hotel or a change in the
services provided at any Hotel (including, without limitation, if applicable,
the closing of restaurants or the discontinuation of food or beverage services)
from the number of rooms or the services provided during the Base Year, in
determining Additional Rent payable with respect to such Lease Year, Base Total
Hotel Sales 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.
<PAGE>
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1.10 "Base Year" shall mean, with respect to each Property other than
any Property located in Arizona, the 1998 Fiscal Year, and, with respect to each
Property located in Arizona, 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 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
<PAGE>
-5-
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.
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.
<PAGE>
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1.30 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.31 "Excess Total Hotel Sales" shall mean, with respect to any
Property, with respect to any Lease Year, or portion thereof, the amount of
Total Hotel Sales for such Property for such Lease Year, or portion thereof, in
excess of Base Total Hotel Sales for such Property for the equivalent period;
provided, however, that if any Lease Year consists of 53 weeks, Excess Total
Hotel Sales shall equal the amount of (i) (x) Total Hotel Sales for the
applicable Property for the applicable Lease Year (y) divided by 53 and then (z)
multiplied by 52 in excess of (ii) Base Total Hotel Sales for such Property.
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.
<PAGE>
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1.40 "Fixtures" shall have the meaning given such term in Section
2.1(d).
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
<PAGE>
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(d) the presence of which on the Leased Property, or any
portion thereof, causes or materially threatens to cause an unlawful
nuisance upon the Leased Property, or any portion thereof, or to
adjacent properties or poses or materially threatens to pose a hazard
to the Leased Property, or any portion thereof, or to the health or
safety of persons on or about the Leased Property, or any portion
thereof; or
(e) without limitation, which contains gasoline, diesel fuel
or other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated
biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or
may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988.
1.46 "Hotel" shall mean, with respect to any Property 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
<PAGE>
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governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Tenant (including all
interest and penalties thereon due to any failure in payment by Tenant), which
at any time prior to, during or in respect of the Term hereof may be assessed or
imposed on or in respect of or be a lien upon (a) Landlord's interest in the
Leased Property, (b) the Leased Property or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased Property
or any part thereof by Tenant; provided, however, that nothing contained herein
shall be construed to require Tenant to pay and the term "Impositions" shall not
include (i) any tax based on net income imposed on Landlord, (ii) any net
revenue tax of Landlord, (iii) any transfer fee (but excluding any mortgage or
similar tax payable in connection with a Hotel Mortgage) or other tax imposed
with respect to the sale, exchange or other disposition by Landlord of the
Leased Property or the proceeds thereof, (iv) any single business, gross
receipts tax, transaction privilege, rent or similar taxes as the same relate to
or are imposed upon Landlord, (v) any interest or penalties imposed on Landlord
as a result of the failure of Landlord to file any return or report timely and
in the form prescribed by law or to pay any tax or imposition, except to the
extent such failure is a result of a breach by Tenant of its obligations
pursuant to Section 3.1.3, (vi) any impositions imposed on Landlord that are a
result of Landlord not being considered a "United States person" as defined in
Section 7701(a)(30) of the Code, (vii) any impositions that are enacted or
adopted by their express terms as a substitute for any tax that would not have
been payable by Tenant pursuant to the terms of this Agreement or (viii) any
impositions imposed as a result of a breach of covenant or representation by
Landlord in any agreement governing Landlord's conduct or operation or as a
result of the negligence or willful misconduct of Landlord.
1.51 "Incidental Documents" shall mean the Guaranty, the Security
Agreement, the Stock Pledge Agreement and the FF&E Pledge.
1.52 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
1.53 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Agreement and all requirements of the issuer of any such
policy and all orders, rules and regulations and any other requirements of the
National Board of
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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, 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).
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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.
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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).
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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.
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,
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furnishings, movable walls and partitions, equipment and machinery and all other
tangible personal property of Tenant, if any, acquired by Tenant on and after
the date hereof and located at the Leased Property or used in Tenant's business
at the Leased Property and all modifications, replacements, alterations and
additions to such personal property installed at the expense of Tenant, other
than any items included within the definition of Fixtures or Leased Personal
Property.
1.94 "Term" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement.
1.95 "Total Hotel Sales" shall mean, with respect to each Property, for
each Fiscal Year during the Term, all revenues and receipts of every kind
derived by Tenant from operating such Property and parts thereof, including, but
not limited to: income (from both cash and credit transactions), after
deductions for bad debts, and discounts 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 such Property or from the refinancing of any debt
encumbering such Property; proceeds from the disposition of furnishings, fixture
and equipment no longer necessary for the operation of any Hotel; interest which
accrues on amounts deposited in the FF&E Reserve; and any security deposits and
other advance deposits, until and unless the same are forfeited to Tenant or
applied for the purpose for which they were collected; and interest income from
any bank account or investment of Tenant.
1.96 "Uniform System of Accounts" shall mean A Uniform System of
Accounts for Hotels, Eighth Revised Edition, 1986, as
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published by the Hotel Association of New York City, as the same may be further
revised from time to time.
1.97 "Unsuitable for Its Permitted Use" shall mean, with respect to
such Hotel, a state or condition of such Hotel such that (a) following any
damage or destruction involving a Hotel, such Hotel cannot be operated in the
good faith judgment of Tenant on a commercially practicable basis for its
Permitted Use and it cannot reasonably be expected to be restored to
substantially the same condition as existed immediately before such damage or
destruction, and as otherwise required by Section 10.2.4, within twelve (12)
months following such damage or destruction or such shorter period of time as to
which business interruption insurance is available to cover Rent and other costs
related to the applicable Property following such damage or destruction, or (b)
as the result of a partial taking by Condemnation, such Hotel cannot be
operated, in the good faith judgment of Tenant, on a commercially practicable
basis for its Permitted Use.
1.98 "Work" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following (each
of items (a) through (g) below which, as of the Commencement Date, relates to
any single Hotel, a "Property" and, collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibit A-1 through A-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;
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(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
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
<PAGE>
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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 and Landlord shall execute such documents and agreements as either
party shall reasonably require to evidence the same.
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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.
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3.1.2 Additional Rent.
(a) Amount. Tenant shall pay additional rent ("Additional
Rent") with respect to each Property with respect to each Lease Year
beginning with the 1999 Lease Year, in an amount, not less than zero,
equal to eight percent (8%) of Excess Total Hotel Sales for such
Property.
(b) Accounting Period Installments. Installments of Additional
Rent for each Lease Year or portion thereof shall be calculated and
paid with respect to each Accounting Period in arrears on the first
Business Day of 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 each Property 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 each of 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 each Property for the preceding Lease Year and the Additional Rent
payable with respect to such Property for such Lease Year, together
with an audit thereof, by 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,
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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 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
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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 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
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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
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any equipment leases and all agreements to indemnify Landlord under
Sections 4.3.2 and 9.7.
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement (other than
termination by reason of an Event of Default), Tenant may, within a
reasonable time after the end of the Term, provide Notice to Landlord
of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this
Agreement.
3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, on demand, as Additional Charges,
a late charge (to the extent permitted by law) computed at the Overdue Rate on
the amount of such installment, from the due date of such installment to the
date of payment thereof. To the extent that Tenant pays any Additional Charges
directly to Landlord or any Hotel Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due. If any payments due
from Landlord to Tenant shall not be paid within ten (10) days after its due
date, Landlord shall pay to Tenant, on demand, a late charge (to the extent
permitted by law) computed at the Overdue Rate on the amount of such installment
from the due date of such installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional Charges
when due, Tenant shall promptly pay and discharge, as Additional Charges, every
fine, penalty, interest and cost which is added for non-payment or late payment
of such items. Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Agreement or by statute or otherwise
in the case of non-payment of the Additional Charges as in the case of
non-payment of the Minimum Rent and Additional Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments or
amounts of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including those provisions for
adjustment or abatement of such Rent.
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3.4 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Agreement, each of Landlord and Tenant, to the maximum extent
permitted by law, shall remain bound by this Agreement in accordance with its
terms and shall not take any action without the consent of the other to modify,
surrender or terminate this Agreement. In addition, except as otherwise
expressly provided in this Agreement, Tenant shall not seek, or be entitled to,
any abatement, deduction, deferment or reduction of the Rent, or set-off against
the Rent, nor shall the respective obligations of Landlord and Tenant be
otherwise affected by reason of (a) any damage to or destruction of the Leased
Property or any portion thereof from whatever cause or any Condemnation, (b) the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title; (c) any claim which
Tenant may have against Landlord by reason of any default (other than a monetary
default) or breach of any warranty by Landlord under this Agreement or any other
agreement between Landlord and Tenant, or to which Landlord and Tenant are
parties; (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or (e) for any
other cause whether similar or dissimilar to any of the foregoing (other than a
monetary default by Landlord); provided, however, that the foregoing shall not
apply or be construed to restrict Tenant's rights in the event of any act or
omission by Landlord constituting negligence or willful misconduct. Except as
otherwise specifically provided in this Agreement, Tenant hereby waives all
rights arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law (a) to modify, surrender or terminate this Agreement or
quit or surrender the Leased Property or any portion thereof, or (b) which would
entitle Tenant to any abatement, reduction, suspension or deferment of the Rent
or other sums payable or other obligations to be performed by Tenant hereunder.
The obligations of Tenant hereunder shall be separate and independent covenants
and agreements, and the Rent and all other sums payable by Tenant hereunder
shall continue to be payable in all events unless the obligations to pay the
same shall be terminated pursuant to the express provisions of this Agreement.
In any instance where, after the occurrence of an Event of Default, Landlord
retains funds which, but for the occurrence of such Event of Default, would be
payable to Tenant, Landlord shall refund such funds to Tenant to the extent the
amount thereof exceeds the amount necessary to compensate Landlord for any cost,
loss or damage incurred in connection with such Event of Default.
3.5 Retained Funds. Pursuant to the Purchase 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
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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 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
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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 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.
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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.
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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
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perform the requirements of this Section 4.3, which amounts shall bear interest
from the date ten (10) Business Days after written demand therefor is given to
Tenant until paid by Tenant to Landlord at the Overdue Rate.
4.3.3 Survival. The provisions of this Section 4.3 shall
survive the expiration or sooner termination of this Agreement.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's General Obligations. Tenant shall, at its sole
cost and expense (except as expressly provided in Section 5.1.3(b)), keep the
Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto (and Tenant's Personal Property) in good order and repair, reasonable
wear and tear excepted (whether or not the need for such repairs occurs as a
result of Tenant's use, any prior use, the elements or the age of the Leased
Property or Tenant's Personal Property or any portion thereof), and shall
promptly make all necessary and appropriate repairs and replacements thereto of
every kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the commencement of the Term (concealed
or otherwise). All repairs shall be made in a good, workmanlike manner,
consistent with industry standards for like hotels in like locales, in
accordance with all applicable federal, state and local statutes, ordinances,
codes, rules and regulations relating to any such work. Tenant shall not take or
omit to take any action, the taking or omission of which would materially and
adversely impair the value or the usefulness of the Leased Property or any
material part thereof for its Permitted Use. Tenant's obligations under this
Section 5.1.1 shall be limited in the event of any casualty or Condemnation as
set forth in Sections 10.2 and 11.2 and also as set forth in Section 5.1.3(b)
and Tenant's obligations with respect to Hazardous Substances are as set forth
in Section 4.3.
5.1.2 FF&E Reserve.
(a) Upon execution of this Agreement, Tenant has established a
reserve account (the "FF&E Reserve") in a bank designated by Tenant and
approved by Landlord. The purpose of the FF&E Reserve is to cover the
cost of:
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(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
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
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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.
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.
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(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 authority to contract for or
permit the rendering of any
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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,
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for its reasonable out-of-pocket costs and expenses, and reasonable
administrative costs), as Landlord shall reasonably request.
5.4 Management Agreement. Tenant shall not, without Landlord's prior
written consent (which consent shall not be unreasonably withheld, delayed or
conditioned), enter into, or amend or modify the provisions of any Management
Agreement. Any Management Agreement shall be subordinate to this Agreement and
shall provide, inter alia, that all amounts due from Tenant to the Manager shall
be subordinate to all amounts due from Tenant to Landlord (provided that, as
long as no Event of Default has occurred and is continuing, Tenant may pay all
amounts due to a Manager pursuant to a Management Agreement) and for termination
thereof, at Landlord's option, upon the termination of this Agreement. Tenant
shall not take any action, grant any consent or permit any action under any
Management Agreement which might have a material adverse effect on Landlord,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, delayed or conditioned.
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Improvements to the Leased Property. Tenant shall not make,
construct or install any Capital Additions (other than Capital Additions of the
type described in Section 5.1.2(a)(ii) or 5.1.2(a)(iii) and approved pursuant to
Section 5.1.2(c)) without, in each instance, obtaining Landlord's prior written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned provided that (a) construction or installation of the same would not
adversely affect or violate any material Legal Requirement or Insurance
Requirement applicable to the Leased Property and (b) Landlord shall have
received an Officer's Certificate certifying as to the satisfaction of the
conditions set out in clause (a) above; provided, however, that no such consent
shall be required in the event immediate action is required to prevent imminent
harm to person or property. Prior to commencing construction of any Capital
Addition, Tenant shall submit to Landlord, in writing, a proposal setting forth,
in reasonable detail, any such proposed improvement and shall provide to
Landlord such plans and specifications, and such permits, licenses, contracts
and such other information concerning the same as Landlord may reasonably
request. Landlord shall have thirty (30) days to review all materials submitted
to Landlord in connection with any such proposal. Failure of Landlord to respond
to Tenant's proposal within such 30-day period shall be deemed approval thereof.
Without limiting the generality of the foregoing, such proposal shall indicate
the approximate projected cost of constructing
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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.
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
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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.
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,
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provided that Landlord shall not thereby be subjected to any liability therefor
(including, without limitation, for the payment of any costs or expenses in
connection therewith) unless Tenant agrees by agreement in form and substance
reasonably satisfactory to Landlord, to assume and indemnify Landlord with
respect to the same. Tenant shall be entitled to any refund of any Claims and
such charges and penalties or interest thereon which have been paid by Tenant or
paid by Landlord to the extent that Landlord has been fully reimbursed by
Tenant. If Tenant shall fail (x) to pay or cause to be paid any Claims when
finally determined, (y) to provide reasonable security therefor or (z) to
prosecute or cause to be prosecuted any such contest diligently and in good
faith, Landlord may, upon reasonable notice to Tenant (which notice shall not be
required if Landlord shall reasonably determine that the same is not
practicable), pay such charges, together with interest and penalties due with
respect thereto, and Tenant shall reimburse Landlord therefor, upon demand, as
Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall, at all times during
the Term and at any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property and all property located therein or thereon,
insured against the risks and in the amounts as follows and shall maintain, with
respect to each Property, the following insurance:
(a) "All-risk" property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief, earthquake,
explosion of steam boilers, pressure vessels or other similar
apparatus, now or hereafter installed in the Hotel located at such
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
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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 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,
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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
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Article 9 are otherwise satisfied. Without limiting the foregoing, the amounts
of insurance that are required to be maintained pursuant to Section 9.1 shall be
on a Hotel by Hotel basis, and shall not be subject to an aggregate limit,
except for flood, earthquake and umbrella coverages.
9.6 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with that
required by this Article 9, or increase the amount of any existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of such insurance, including
Landlord and all Hotel Mortgagees, are included therein as additional insureds
and the loss is payable under such insurance in the same manner as losses are
payable under this Agreement. In the event Tenant shall take out any such
separate insurance or increase any of the amounts of the then existing
insurance, Tenant shall give Landlord prompt Notice thereof.
9.7 Indemnification of Landlord. Notwithstanding the existence of any
insurance provided for herein and without regard to the policy limits of any
such insurance, Tenant shall protect, indemnify and hold harmless Landlord for,
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about the Leased Property or adjoining sidewalks or rights of way, (b) any past,
present or future use, misuse, non-use, condition, management, maintenance or
repair by Tenant or anyone claiming under Tenant of the Leased Property or
Tenant's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which Landlord is made a party
or participant relating to the Leased Property or Tenant's Personal Property or
such use, misuse, non-use, condition, management, maintenance, or repair thereof
including, failure to perform obligations (other than Condemnation proceedings)
to which Landlord is made a party, (c) any Impositions that are the obligations
of Tenant to pay pursuant to the applicable provisions of this Agreement, and
(d) any failure on the part of Tenant or anyone claiming under Tenant to perform
or comply with any of the terms of this Agreement. Tenant, at its expense, shall
contest, resist and defend any such claim, action or proceeding asserted or
instituted against Landlord (and shall not be responsible for any duplicative
attorneys' fees incurred by Landlord) or may compromise or otherwise dispose of
the same, with Landlord's prior written consent (which consent may not be
unreasonably withheld, delayed or conditioned). The obligations of Tenant under
this Section 9.7 are in addition to the
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obligations set forth in Section 4.3 and shall survive the termination of this
Agreement.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to any Property,
or any portion thereof, and insured under any policy of insurance required by
Article 9 (other than the proceeds of any business interruption insurance) shall
be paid directly to Landlord (subject to the provisions of Section 10.2) and all
loss adjustments with respect to losses payable to Landlord shall require the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, delayed or conditioned; provided, however, that, so long as no Event
of Default shall have occurred and be continuing, all such proceeds less than or
equal to Five Hundred Thousand Dollars ($500,000) shall be paid directly to
Tenant and such losses may be adjusted without Landlord's consent. If 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,
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Tenant shall promptly restore such Hotel as provided in Section 10.2.4 unless
this Agreement is terminated as to such Hotel as provided in Section 10.2.3.
10.2.3 Insufficient Insurance Proceeds. If this Agreement is
not otherwise terminated pursuant to this Article 10 and the cost of the repair
or restoration of the applicable Property exceeds the amount of insurance
proceeds received by Landlord and Tenant pursuant to Section 9(a), (c), (d) or,
if applicable, (f), Tenant shall give Landlord Notice thereof which notice shall
set forth in reasonable detail the nature of such deficiency and whether Tenant
shall pay and assume the amount of such deficiency (Tenant having no obligation
to do so, except that, if Tenant shall elect to make such funds available, the
same shall become an irrevocable obligation of Tenant pursuant to this
Agreement). In the event Tenant shall elect not to pay and assume the amount of
such deficiency, Landlord shall have the right (but not the obligation),
exercisable at Landlord's sole election by Notice to Tenant, given within sixty
(60) days after Tenant's notice of the deficiency, to elect to make available
for application to the cost of repair or restoration the amount of such
deficiency; provided, however, in such event, upon any disbursement by Landlord
thereof, the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). In
the event that neither Landlord nor Tenant shall elect to make such deficiency
available for restoration, either Landlord or Tenant may terminate this
Agreement with respect to the affected Property by Notice to the other,
whereupon, this Agreement shall terminate and insurance proceeds shall be
distributed as provided in Section 10.2.1. It is expressly understood and
agreed, however, that, notwithstanding anything in this Agreement to the
contrary, Tenant shall be strictly liable and solely responsible for the amount
of any deductible and shall, upon any insurable loss, pay over the amount of
such deductible to Landlord at the time and in the manner herein provided for
payment of the applicable proceeds to Landlord.
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.
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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 Section 10.2.1 shall apply as if such
Property had been totally or partially destroyed and the Hotel thereon rendered
Unsuitable for its Permitted Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid to Tenant
and, to the extent necessary to repair or replace Tenant's Personal Property in
accordance with Section 10.5, Tenant shall hold such proceeds in trust to pay
the cost of repairing or replacing damaged Tenant's Personal Property.
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10.5 Restoration of Tenant's Property. If Tenant is required to restore
any Property as hereinabove provided and this Agreement is not terminated as to
such Property pursuant to the terms of Article 10, Tenant shall either (a)
restore all alterations and improvements made by Tenant and Tenant's Personal
Property, or (b) replace such alterations and improvements and Tenant's Personal
Property with improvements or items of the same or better quality and utility in
the operation of such Property. If Tenant is not required to restore and does
not, in fact, restore, Tenant shall pay over to Landlord the amount, if any, of
insurance proceeds received by Tenant with respect to any of Tenant's Personal
Property which was purchased with funds from the FF&E Reserve.
10.6 No Abatement of Rent. Except as expressly provided herein, this
Agreement shall remain in full force and effect and Tenant's obligation to make
all payments of Rent and to pay all other charges as and when required under
this Agreement shall remain unabated during the Term notwithstanding any damage
involving the Leased Property (provided that Landlord shall credit against such
payments any amounts paid to Landlord as a consequence of such damage under any
business interruption insurance obtained by Tenant hereunder). The provisions of
this Article 10 shall be considered an express agreement governing any cause of
damage or destruction to the Leased Property and, to the maximum extent
permitted by law, no local or State statute, laws, rules, regulation or
ordinance in effect during the Term which provide for such a contingency shall
have any application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property,
or any portion thereof.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of any Property
shall be taken by Condemnation or (ii) a Condemnation of less than the whole of
any Property renders any Property Unsuitable for Its Permitted Use, this
Agreement shall terminate with respect to such Property, Tenant and Landlord
shall seek the Award for their interests in the applicable Property as provided
in Section 11.6 and, as the effective date of taking, the Minimum Rent payable
hereunder shall be reduced by such Property's allocable share thereof as set
forth in Exhibit C.
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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
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require. Landlord's obligation under this Section 11.2 to disburse the Award and
such other amounts shall be subject to (x) the collection thereof by Landlord
and (y) during the last two (2) years of the Term (including any exercised
renewals thereof), the release of such Award by the applicable Hotel Mortgagee.
If any Hotel Mortgagee shall be unwilling to disburse Award proceeds in
accordance with the terms of this Agreement, Tenant shall have the right, by the
giving of Notice thereof to Landlord within ten (10) Business Days after Tenant
learns of such unwillingness, to treat such Property as rendered Unsuitable for
its Permitted Use for purposes of Section 11.1. Tenant's obligation to restore
the Leased Property shall be subject to the release of the Award by the
applicable Hotel Mortgagee to Landlord or directly to Tenant.
11.3 Abatement of Rent. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property, or any portion
thereof. The provisions of this Article 11 shall be considered an express
agreement governing any Condemnation involving the Leased Property and, to the
maximum extent permitted by law, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such a
contingency shall have any application in such case.
11.4 Temporary Condemnation. In the event of any temporary Condemnation
of any Property or Tenant's interest therein, this Agreement shall continue in
full force and effect and 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
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Term, the provisions of Section 11.1 shall apply as if such Property had been
totally or partially taken and the Hotel thereon rendered Unsuitable for its
Permitted Use.
11.6 Allocation of Award. Except as provided in Section 11.4 and the
second sentence of this Section 11.6, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property
(other than any such property purchased with the FF&E Reserve), the taking of
Capital Additions paid for by Tenant and Tenant's removal and relocation
expenses shall be the sole property of and payable to Tenant. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent or any
other sum (including, but not limited to, funding of the FF&E Reserve)
payable hereunder when due; or
(b) should Tenant fail to maintain the insurance coverages
required under Article 9 and such failure shall continue for ten (10)
Business Days after Notice thereof (except that no Notice shall be
required if any such insurance coverages shall have lapsed); or
(c) should Tenant default in the due observance or performance
of any of the terms, covenants or agreements contained herein to be
performed or observed by it (other 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
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(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 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
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(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, 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.
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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.
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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
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obligation of Tenant and without waiving or releasing any Event of Default, may
(but shall not be obligated to), at any time thereafter, make such payment or
perform such act for the account and at the expense of Tenant, and may, to the
maximum extent permitted by law, enter upon the Leased Property or any portion
thereof for such purpose and take all such action thereon as, in Landlord's sole
and absolute discretion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Tenant. All reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by Landlord
in connection therewith, together with interest thereon (to the extent permitted
by law) at the Overdue Rate from the date such sums are paid by Landlord until
repaid, shall be paid by Tenant to Landlord, on demand.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to two (2) times the Minimum Rent and other charges herein provided
(prorated on a daily basis). Tenant shall also pay to Landlord all damages
(direct or indirect) sustained by reason of any such holding over. Otherwise,
such holding over shall be on the terms and conditions set forth in this
Agreement, to the extent applicable. Nothing contained herein shall constitute
the consent, express or implied, of Landlord to the holding over of Tenant after
the expiration or earlier termination of this Agreement.
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
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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 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
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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.
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
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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) 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
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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 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
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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
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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;
(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
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unreasonably interfere with Tenant's use and operation of the Leased Property
and further provided that in the event of an emergency, as determined by
Landlord in its reasonable discretion, prior Notice shall not be necessary.
ARTICLE 19
EASEMENTS
19.1 Grant of Easements. Provided no Event of Default has occurred and
is continuing, Landlord will join in granting and, if necessary, modifying or
abandoning such rights-of-way, easements and other interests as may be
reasonably requested by Tenant for ingress and egress, and electric, telephone,
gas, water, sewer and other utilities so long as:
(a) the instrument creating, modifying or abandoning any such
easement, right-of-way or other interest is satisfactory to and
approved by Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned); and
(b) Landlord receives an Officer's Certificate from Tenant
stating (i) that such grant, modification or abandonment is not
detrimental to the proper conduct of business on such Property, (ii)
the consideration, if any, being paid for such grant, modification or
abandonment (which consideration shall be paid by Tenant), (iii) that
such grant, modification or abandonment does not impair the use or
value of such Property for the Permitted Use, and (iv) that, for as
long as this Agreement shall be in effect, Tenant will perform all
obligations, if any, of Landlord under any such instrument.
19.2 Exercise of Rights by Tenant. So long as no Event of Default has
occurred and is continuing, Tenant shall have the right to exercise all rights
of Landlord under the Easement Agreements and, in connection therewith, Landlord
shall execute and promptly return to Tenant such documents as Tenant shall
reasonably request. Tenant shall perform all obligations of Landlord under the
Easement Agreements.
19.3 Permitted Encumbrances. Any agreements entered into in accordance
with Section 19.1 shall be deemed a Permitted Encumbrance.
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ARTICLE 20
HOTEL MORTGAGES
20.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord
may, subject to the terms and conditions set forth in this Section 20.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Notwithstanding anything
to the contrary set forth in Section 20.2, any such Encumbrance shall include
the right to prepay (whether or not subject to a prepayment penalty) and shall
provide (subject to Section 20.2) that it is subject to the rights of Tenant
under this Agreement.
20.2 Subordination of Lease. Subject to Section 20.1 and this Section
20.2, this Agreement and any and all rights of Tenant hereunder, are and shall
be subject and subordinate to any ground or master lease, and all renewals,
extensions, modifications and replacements thereof, and to all mortgages and
deeds of trust, which may now or hereafter affect the Leased Property or any
improvements thereon and/or any of such leases, whether or not such mortgages or
deeds of trust shall also cover other lands and/or buildings and/or leases, to
each and every advance made or hereafter to be made under such mortgages and
deeds of trust, and to all renewals, modifications, replacements and extensions
of such leases and such mortgages and deeds of trust and all consolidations of
such mortgages and deeds of trust. This section shall be self-operative and no
further instrument of subordination shall be required provided that Tenant has
received a nondisturbance and attornment agreement from each Superior Mortgagee
(as defined below), consistent with the provisions of this Section 20.2 and
otherwise in form and substance reasonably satisfactory to Tenant. In
confirmation of such subordination, Tenant shall promptly execute, acknowledge
and deliver any instrument that Landlord, the lessor under any such lease or the
holder of any such mortgage or the trustee or beneficiary of any deed of trust
or any of their respective successors in interest may reasonably request to
evidence such subordination. Any lease to which this Agreement is, at the time
referred to, subject and subordinate is herein called "Superior Lease" and the
lessor of a Superior Lease or its successor in interest at the time referred to
is herein called "Superior Landlord" and any mortgage or deed of trust to which
this Agreement is, at the time referred to, subject and subordinate is herein
called "Superior Mortgage" and the holder, trustee or beneficiary of a Superior
Mortgage is herein called "Superior Mortgagee".
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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.
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
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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
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which relate to the period in which such change occurs, or in separate schedules
to such financial statements, information sufficient to show the effect of any
such changes on such financial statements.
21.4 Notice of Litigation, Etc. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which it may
hereafter become a party of which Tenant has notice or actual knowledge which
involves a potential liability equal to or greater than 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;
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(d) unsecured borrowings of Tenant from its Affiliated Persons
which are by their terms expressly subordinate pursuant to a
Subordination Agreement to the payment and performance of Tenant's
obligations under this Agreement; or
(e) Indebtedness for purchase money financing in accordance
with Section 21.9(a) and other operating liabilities incurred in the
ordinary course of Tenant's business.
21.6 Financial Condition of Tenant. Tenant shall at all times maintain
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.
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
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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.
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
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acceptance of full or partial payment of Rent during the continuance of any such
breach, shall constitute a waiver of any such breach or of any such term. To the
maximum extent permitted by law, no waiver of any breach shall affect or alter
this Agreement, which shall continue in full force and effect with respect to
any other then existing or subsequent breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.
22.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this Agreement, but rather the effect thereof shall be confined to
the clause, sentence, paragraph, section or provision so held to be invalid,
illegal or ineffective, and this Agreement shall be construed as if such
invalid, illegal or ineffective provisions had never been contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
22.6 No Merger of Title. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
22.7 Conveyance by Landlord. If Landlord or any successor owner of all
or any portion of the Leased Property shall convey all or any portion of the
Leased Property in accordance with the terms hereof other than as security for a
debt, and the grantee or transferee of such of the Leased Property shall
expressly assume all obligations of Landlord hereunder arising or accruing from
and after the date of such conveyance or transfer, Landlord or such successor
owner, as the case may be, shall thereupon be
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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.
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
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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:
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
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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) 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
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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.
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22.18 Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HPT SUITE PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
HPT SUITE PROPERTIES TRUST
By: /s/ John G. Murray
Its President
TENANT:
SUITE TENANT, INC.
By: /s/ Leon Moore
Its President
ShoLodge, Inc. hereby acknowledges and agrees to be bound by the
provisions of Section 22.11 of the foregoing Lease Agreement.
SHOLODGE, INC.
By: /s/ Leon Moore
Its President
Date: November 19, 1997
EXHIBIT 10.6
LIMITED GUARANTY AGREEMENT
THIS LIMITED GUARANTY AGREEMENT (this "Agreement") is made and given as
of this 19th day of November, 1997, by SHOLODGE, INC., a Tennessee corporation
(the "Guarantor"), for the benefit of HPT SUITE PROPERTIES TRUST and HOSPITALITY
PROPERTIES TRUST, each a Maryland real estate investment trust (collectively,
together with their successors and assigns, "HPT").
W I T N E S S E T H :
WHEREAS, pursuant to a Lease Agreement, dated as of the date hereof
(the "Lease"), HPT Suite Properties Trust has agreed to lease to Suite Tenant,
Inc., a Delaware 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 HPT Suite Properties Trust'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.
<PAGE>
-2-
3. Representations and Covenants. The Guarantor represents, warrants,
covenants and agrees that:
3.1 Performance of Covenants and Agreements. Subject to the
limitations set forth in Section 20, during the term of this Agreement, the
Guarantor will cause the Tenant duly and punctually to perform all of the
covenants and agreements set forth in the Transaction Documents.
3.2 Validity of Agreement. The Guarantor has duly and validly
executed and delivered this Agreement; this Agreement constitutes the legal,
valid and binding obligation of the Guarantor, enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors; and the execution,
delivery and performance of this Agreement have been duly authorized by all
requisite action of the Guarantor and such execution, delivery and performance
by the Guarantor will not result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any of the property or assets
of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of
trust, note, other evidence of indebtedness, agreement or other instrument to
which the Guarantor is a party or by which the Guarantor or any property or
assets of the Guarantor is bound, or violate any provision of law applicable to
the Guarantor, or any order, writ, injunction, judgement or decree of any court
applicable to the Guarantor or any order or other public regulation of any
governmental commission, bureau or administrative agency applicable to the
Guarantor.
3.3 Payment of Expenses. The Guarantor agrees, as principal
obligor and not as Guarantor only, to pay to HPT forthwith, upon demand, in
immediately available Federal funds, all costs and expenses (including court
costs and reasonable legal expenses) incurred or expended by HPT in connection
with the enforcement of this Agreement, together with interest on amounts
recoverable under this Agreement from the time such amounts become due until
payment at the Interest Rate, 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
<PAGE>
-3-
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 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
<PAGE>
-4-
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 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
<PAGE>
-5-
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.
(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
<PAGE>
-6-
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>
-7-
(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 to the benefit of HPT's successors and
assigns, including without limitation said
<PAGE>
-8-
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.
<PAGE>
-9-
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 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
<PAGE>
-10-
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: /s/ Leon Moore
Its President
ACKNOWLEDGED AND AGREED:
HPT SUITE PROPERTIES TRUST
By: /s/ John G. Murray
Its President
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
Its President
EXHIBIT 10.7
PURCHASE AND SALE AGREEMENT
BY AND AMONG
RESIDENCE INN BY MARRIOTT, INC.
and COURTYARD MANAGEMENT CORPORATION,
as Sellers,
and
HOSPITALITY PROPERTIES TRUST,
as Purchaser
---------------------------
October 10, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 1. DEFINITIONS...........................................................................................1
1.1 Agreement..........................................................................................1
1.2 Agreement to Lease.................................................................................1
1.3 Allocable Purchase Price...........................................................................1
1.4 Assets.............................................................................................1
1.5 Business Day.......................................................................................2
1.6 Closing............................................................................................2
1.7 Closing Date.......................................................................................2
1.8 Contracts..........................................................................................2
1.9 Defective Property.................................................................................2
1.10 Environmental Reports..............................................................................2
1.11 Excluded Assets....................................................................................2
1.12 FAS................................................................................................2
1.13 FF&E...............................................................................................2
1.14 Franchise Agreement................................................................................3
1.15 HPT................................................................................................3
1.16 Improvements.......................................................................................3
1.17 Intangible Property................................................................................3
1.18 Inventories........................................................................................3
1.19 Leases.............................................................................................3
1.20 Limited Rent Guaranty..............................................................................3
1.21 Opening Date.......................................................................................3
1.22 Owner's Agreement..................................................................................3
1.23 Permitted Encumbrances.............................................................................3
1.24 Plans and Specifications...........................................................................4
1.25 Property...........................................................................................4
1.26 Properties.........................................................................................4
1.27 Proprietary Information............................................................................4
1.28 Purchaser..........................................................................................4
1.29 Real Property......................................................................................4
1.30 Reserve............................................................................................4
1.31 Retained Funds.....................................................................................4
1.32 Sellers............................................................................................4
1.33 Stock Pledge.......................................................................................4
1.34 Substantial Completion.............................................................................4
1.35 Surveys............................................................................................5
1.36 Tenant.............................................................................................5
1.37 Title Commitments..................................................................................5
1.38 Title Company......................................................................................5
SECTION 2. PURCHASE-SALE; DILIGENCE..............................................................................5
2.1 Purchase-Sale.......................................................................................5
2.2 Diligence Inspections...............................................................................5
2.3 Defective Properties................................................................................6
2.4 Title Matters.......................................................................................6
2.5 Survey Matters..................................................................................7
2.6 Environmental Reports...............................................................................8
<PAGE>
-ii-
SECTION 3. PURCHASE AND SALE.....................................................................................9
3.1 Closing.............................................................................................9
3.2 Purchase Price......................................................................................9
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.........................................................9
4.1 Closing Documents..................................................................................10
4.2 Condition of Properties, Etc.......................................................................11
4.3 Title Policies and Surveys.........................................................................11
4.4 Opinions of Counsel................................................................................11
SECTION 5. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE...........................................................11
5.1 Purchase Price.....................................................................................11
5.2 Closing Documents..................................................................................12
5.3 Opinion of Counsel.................................................................................12
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLERS............................................................12
6.1 Status and Authority of the Sellers................................................................12
6.2 Action of the Sellers..............................................................................12
6.3 No Violations of Agreements........................................................................13
6.4 Litigation.........................................................................................13
6.5 Existing Agreements, Etc...........................................................................13
6.6 Disclosure.........................................................................................13
6.7 Utilities, Etc.....................................................................................13
6.8 Compliance With Law................................................................................14
6.9 Not A Foreign Person...............................................................................14
6.10 Hazardous Substances...............................................................................14
6.11 Insurance..........................................................................................14
6.12 Substantial Completion.............................................................................15
6.13 Condition of Properties............................................................................15
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................................................16
7.1 Status and Authority of the Purchaser..............................................................16
7.2 Action of the Purchaser............................................................................16
7.3 No Violations of Agreements........................................................................16
7.4 Litigation.........................................................................................16
SECTION 8. COVENANTS OF THE SELLERS.............................................................................17
8.1 Compliance with Laws, Etc..........................................................................17
8.2 Approval of Agreements.............................................................................17
8.3 Compliance with Agreements.........................................................................17
8.4 Substantial Completion.............................................................................17
8.5 Notice of Material Changes or Untrue
Representations..............................................................................17
8.6 Correction of Defects..............................................................................18
<PAGE>
-iii-
SECTION 9. APPORTIONMENTS.......................................................................................18
9.1 Real Property Apportionments.......................................................................18
9.2 Closing Costs......................................................................................18
SECTION 10. DEFAULT.............................................................................................19
10.1 Default by the Sellers............................................................................19
10.2 Default by the Purchaser..........................................................................19
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......................................................................................24
11.8 Counterparts, Etc.................................................................................24
11.9 Governing Law.....................................................................................24
11.10 Performance on Business Days......................................................................25
11.11 Attorneys' Fees...................................................................................25
11.12 Section and Other Headings........................................................................25
11.13 Nonliability of Trustees, Etc. ..................................................................25
</TABLE>
Schedule A - Property Identification
Schedule B-1-9 - Legal Descriptions of Properties
Schedule C - Form of Surveyor's Certificate
Schedule D - Form of Sellers' Closing Certificate
Schedule E - Form of Architect's Certificate
Schedule F - Form of Engineer's Certificate
Schedule G - Plans and Specifications
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of the 10th day of October,
1997, by and among RESIDENCE INN BY MARRIOTT, INC. and COURTYARD MANAGEMENT
CORPORATION, each a Delaware corporation, as sellers, and HOSPITALITY PROPERTIES
TRUST, a Maryland real estate investment trust ("HPT"), as purchaser.
W I T N E S S E T H :
WHEREAS, the Sellers are the owners of the Properties (this and other
capitalized terms used and not otherwise defined herein having the meanings
ascribed to such terms in Section 1); and
WHEREAS, the Purchaser desires to purchase the Properties from the
Sellers and the Sellers are willing to sell the Properties to the Purchaser,
subject to and upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, the Sellers and the
Purchaser hereby agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1 "Agreement" shall mean this Purchase and Sale Agreement, together
with Schedules A through G attached hereto, as it and they may be amended from
time to time as herein provided.
1.2 "Agreement to Lease" shall mean that certain Agreement to Lease,
dated as of the date hereof, by and between the Tenant and the Purchaser.
1.3 "Allocable Purchase Price" shall mean, with respect to each
Property, the amount set forth in Schedule A opposite the name of such Property,
it being understood and agreed that the aggregate amount of the Allocable
Purchase Prices of the Properties shall be One Hundred Twenty-Nine Million Three
Hundred Seventy-Seven Thousand Dollars ($129,377,000).
1.4 "Assets" shall mean, with respect to any Property, collectively,
all of the Real Property, the FF&E, the Contracts, the Improvements and the
Intangible Property now owned or hereafter (but prior to the Closing Date with
respect to such Property) acquired by the Sellers in connection with or relating
to such Property other than any Excluded Assets with respect to such Property.
<PAGE>
-2-
1.5 "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of Maryland are authorized by law or executive action to close.
1.6 "Closing" shall have the meaning given such term in Section 3.1.
1.7 "Closing Date" shall have the meaning given such term in Section
3.1.
1.8 "Contracts" shall mean, with respect to any Property, all equipment
leases relating to telephone switches and voice mail to which the Sellers are a
party, to the extent the Sellers' interest therein is assignable or
transferable; provided, however, that "Contracts" shall not include any such
agreements to the extent they relate to properties other than the Properties.
1.9 "Defective Property" shall have the meaning given such term in
Section 2.3(a).
1.10 "Environmental Reports" shall have the meaning given such term in
Section 2.6.
1.11 "Excluded Assets" shall mean, with respect to any Property, (i)
any right, title or interest in the name or signage containing the name
"Marriott," "Courtyard," "Residence Inn" and other marks used, or that may in
the future be used, by the Sellers or their affiliates, (ii) all property owned
by the Sellers, not normally located at such Property and used, but not
exclusively, in connection with the operation of such Property, (iii) all items,
tangible or intangible, consisting of Proprietary Information, (iv) computer
software, (v) FAS, (vi) any Inventories located at the Properties, (vii) working
capital, including cash and accounts receivable, (viii) all books, ledger
sheets, files and records, (ix) all contracts pertaining to the operation of the
Hotels other than the Contracts, and (x) any software, manuals, brochures or
directives used by the Sellers in the operation of the Hotels that will be
issued by the franchisor to the Tenant, as franchisee, under the Franchise
Agreements.
1.12 "FAS" shall have the meaning given such term in the Leases.
1.13 "FF&E" shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
owned by the Sellers and located in or at, or used in connection with the
ownership, operation or maintenance of such Property, other than motor vehicles.
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1.14 "Franchise Agreement" shall have the meaning given such term in
the Agreement to Lease.
1.15 "HPT" shall have the meaning given such term in the preambles to
this Agreement.
1.16 "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.
1.17 "Intangible Property" shall mean, with respect to any Property,
all transferable or assignable (a) permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals granted by any public
body or by any private party pursuant to a recorded instrument relating to such
Property and (b) certificates, licenses, warranties and guarantees and the
Contracts held by the Sellers, other than (x) the Excluded Assets and (y) such
permits, operating permits, certificates, licenses and approvals which are
transferred to the Tenant in order to permit the Tenant to operate such Property
properly in accordance with the terms of the Leases.
1.18 "Inventories" shall have the meaning given such term in the
Leases.
1.19 "Leases" shall mean, collectively, the leases to be entered into
pursuant to the Agreement to Lease.
1.20 "Limited Rent Guaranty" shall have the meaning given such term in
the Agreement to Lease.
1.21 "Opening Date" shall mean, with respect to any Property, the date
as of which all Improvements located at such Property, including, without
limitation, all guest rooms and/or suites, shall be open for business to the
public as a Courtyard by Marriott or Residence Inn by Marriott hotel, as the
case may be, in accordance with applicable brand standards.
1.22 "Owner's Agreement" shall have the meaning given such term in the
Agreement to Lease.
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 and other governmental laws,
ordinances and regulations provided the same do not prohibit or impair in any
material respect use of such Property as a Marriott Courtyard or Residence Inn
hotel as contemplated by this Agreement, the Leases and the Franchise
Agreements; (c) such other nonmonetary encumbrances as do not, in the
Purchaser's reasonable opinion, impair marketability and do not prohibit or
impair in any material respect the use of such Property as a
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fully functioning Marriott Courtyard or Residence Inn hotel as contemplated by
this Agreement, the Leases and the Franchise Agreements; (e) UCC Financing
Statements which would be permitted pursuant to the terms of Section 21.9 of the
Leases; and (g) such other nonmonetary encumbrances with respect to such
Property which are not objected to by the Purchaser in accordance with Sections
2.4 and 2.5.
1.24 "Plans and Specifications" shall mean, with respect to each
Property, the plans and specifications identified on Schedule G with respect to
such Property.
1.25 "Property" shall mean any one of the Properties.
1.26 "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 through B-9.
1.27 "Proprietary Information" shall have the meaning given such term
in the Leases.
1.28 "Purchaser" shall mean HPT and its permitted successors and
assigns.
1.29 "Real Property" shall mean, respect to any Property, the real
property described in the applicable Schedule B-1 through B-9 to this Agreement,
together with all easements, rights of way, privileges, licenses and
appurtenances which the Sellers may now own or hereafter acquire with respect
thereto.
1.30 "Reserve" shall have the meaning given such term in the Leases.
1.31 "Retained Funds" shall mean, with respect to each Property, an
amount equal to ten percent (10%) of the Allocable Purchase Price of such
Property.
1.32 "Sellers" shall mean, collectively, the persons identified as
sellers in the first paragraph of this Agreement, and their permitted successors
and assigns, jointly and severally.
1.33 "Stock Pledge" shall have the meaning given such term in the
Agreement to Lease.
1.34 "Substantial Completion" shall mean, with respect to any Property,
physical completion of the Improvements on such Property, including, without
limitation, physical completion of a hotel of the brand and consisting of the
number of rooms set forth on Schedule A, consistent with the Plans and
Specifications therefor (other than so-called "punch-list" items as do not
individually or in the aggregate impair use of such Property for its intended
use), free of all liens and encumbrances (other than
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Permitted Encumbrances) such that the Opening Date shall have occurred and the
Improvements may be used for their intended use.
1.35 "Surveys" shall have the meaning given such term in Section 2.5.
1.36 "Tenant" shall mean CR9 Tenant Corporation, a Delaware
corporation.
1.37 "Title Commitments" shall have the meaning given such term in
Section 2.4.
1.38 "Title Company" shall mean Chicago Title Insurance Corporation or
such other title insurance company as shall have been approved by the Purchaser
and the Sellers.
SECTION 2. PURCHASE-SALE; DILIGENCE.
2.1 Purchase-Sale. In consideration of the mutual covenants herein
contained, the Purchaser hereby agrees to purchase from the Sellers and the
Sellers hereby agree to sell to the Purchaser, all of the Sellers' right, title
and interest in and to each of the Properties for the respective Allocable
Purchase Prices relating thereto, subject to and in accordance with the terms
and conditions of this Agreement.
2.2 Diligence Inspections. At all times prior to 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) and to perform due diligence,
soil analysis and environmental investigations, at such reasonable times as the
Purchaser or its representatives may request by notice to the Sellers (which
notice may be oral). At all such times, the Purchaser and its representations
shall minimize any resulting interference with the Sellers' ongoing construction
at the Properties or the Sellers' operation of the Properties as a hotel. To the
extent that, in connection with such investigations, the Purchaser, its agents,
representatives or contractors, damages or disturbs any of the Assets, the
Purchaser shall return the same to substantially the same condition which
existed immediately prior to such damage or disturbance. The Purchaser shall
indemnify, defend and hold harmless the Sellers from and against any and all
expense, loss or damage (including, without limitation, reasonable attorneys'
fees) which the Sellers may incur as a result of any act or omission of the
Purchaser or its representatives, agents or contractors in connection with such
examinations and inspections, other than any expense, loss or damage arising
from any act or omission of the Sellers or the Manager. The foregoing
indemnification agreement shall survive the termination of this Agreement and
the Closings hereunder. In addition, prior to the Closing with respect to any
Property, the Sellers shall use
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reasonable efforts to cooperate with the Purchaser to the extent that the
Purchaser reasonably requests to review copies of specific data and factual
materials in the Sellers' possession relating to such Properties as to which a
Closing has not yet occurred; provided, however, that the Sellers shall
specifically not be required to provide the Purchaser with copies of (x) any
records of committee presentations, reports or similar records, or (y) any
records containing evaluation and/or analytical information prepared by
employees of the Sellers or their affiliates.
2.3 Defective Properties. (a) If the Purchaser reasonably determines
that a Property has structural, environmental or legal defects 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 satisfactory condition in the Purchaser's reasonable determination (any
such Property being hereinafter referred to as a "Defective Property"), the
Purchaser shall give written notice thereof to the Sellers, within ten (10)
Business Days after acquiring actual knowledge of the applicable defect (time
being of the essence with respect to the giving of such notice), identifying the
Defective Property or Properties and the specific defects with respect thereto.
The Sellers shall thereupon have the right, but not the obligation, at their
sole cost and expense, to elect, by notice given to the Purchaser within thirty
(30) days after the Purchaser's notice of defect, to cause Substantial
Completion of such Defective Property or Properties to occur, free of such
defects, prior to January 1, 1999. Failure of the Sellers to give such notice
prior to the expiration of such 30-day period shall be deemed an election by the
Sellers to cure such defect. If the Sellers shall be unwilling or unable to cure
such defect, the Purchaser shall only be required (and the Sellers shall be
required to permit the Purchaser) to acquire all of the Properties, other than
such Defective Property or Properties.
(b) If, prior to the Closing with respect to any Property (i) such
Property suffers a casualty or condemnation which would cause such Property to
become a Defective Property, (ii) such Property is not, prior January 1, 1999,
restored to a condition of Substantial Completion, and (iii) the Purchaser
provides written notice of same to the Sellers no later than the first
anniversary of the initial Closing Date hereunder, time being of the essence
with respect to the giving of such notice, the Purchaser shall only be required
(and the Sellers 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 Sellers covenant and agree to provide the Purchaser
with prompt written notice of any casualty or condemnation affecting any
Property.
2.4 Title Matters. Prior to the date hereof, the Sellers and Purchaser
shall have ordered from the Title Company and directed the Title Company
promptly to deliver to the Purchaser
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and the Sellers a preliminary title commitment for an ALTA extended owner's
policy and ALTA leasehold 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 fifteen (15) Business Days after receipt of a Title Commitment
with respect to any Property, the Purchaser shall give the Sellers notice of any
title exceptions (other than Permitted Encumbrances) which adversely affect such
Property in any material respect and as to which the Purchaser reasonably
objects. If, for any reason, the Sellers are unable or unwilling to take such
actions as may be required to cause such exceptions to be removed from the Title
Commitments, the Sellers shall give the Purchaser notice thereof; it being
understood and agreed that the failure of the Sellers to give such notice within
fifteen (15) Business Days after the Purchaser's notice of objection shall be
deemed an election by the Sellers not to remedy such matters. If the Sellers
shall be unwilling or unable to remove any title defects to which the Purchaser
has reasonably objected, the Purchaser may elect (i) to terminate this Agreement
with respect to the affected Property, in which event, this Agreement shall be
of no further force and effect with respect to such Property or (ii) to
consummate the transactions contemplated hereby, notwithstanding such title
defect, without any abatement or reduction in the Allocable Purchase Price of
the affected Property on account thereof. The Purchaser shall make any such
election by written notice to the Sellers given on or prior to the fifth
Business Day after the Sellers' notice of their inability or unwillingness 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.
2.5 Survey Matters. Prior to the date hereof, the Sellers and the
Purchaser shall have arranged for the preparation of an ALTA survey with respect
to each of the Properties (collectively, the "Surveys"), by a licensed surveyor
in the 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 for the benefit of the parties identified
therein.
Within fifteen (15) Business Days after receipt of a Survey with
respect to any Property, the Purchaser shall give the Sellers notice of any
matters shown thereon (other than Permitted Encumbrances) which adversely affect
any such Property in any material respect and as to which the Purchaser
reasonably
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objects. If, for any reason, the Sellers are unable or unwilling to take such
actions as may be required to remedy the objectionable matters, the Sellers
shall give the Purchaser prompt notice thereof; it being understood and agreed
that the failure of the Sellers to give such notice within fifteen (15) Business
Days after the Purchaser's notice of objection shall be deemed an election by
the Sellers not to remedy such matters. If the Sellers shall be unable or
unwilling 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 this Agreement shall terminate and be
of no further force or effect with respect to the affected Property or (ii) to
consummate the transactions contemplated hereby, notwithstanding such defect,
without any abatement or reduction in the Allocable Purchase Price of the
affected Property on account thereof. The Purchaser shall make any such election
by written notice to the Sellers given on or prior to the fifth Business Day
after the Sellers' notice of their inability or unwillingness 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.
2.6 Environmental Reports. In a timely manner, the Sellers and
Purchaser shall order, with respect to each Property, Phase I environmental
reports from an environmental engineering firm reasonably acceptable to the
Purchaser and the Sellers (collectively, the "Environmental Reports").
Within fifteen (15) Business Days after receipt of an Environmental
Report with respect to any Property, the Purchaser shall give the Sellers notice
of any matters or omissions therein as to which the Purchaser reasonably
objects. If, for any reason, the Sellers are unable or unwilling to take such
actions as may be required to cause such matters to be remedied or addressed to
the reasonable satisfaction of the Purchaser, the Sellers shall give the
Purchaser notice thereof; it being understood and agreed that the failure of the
Sellers to give such notice within fifteen (15) Business Days after the
Purchaser's notice of objection shall be deemed an election by the Sellers not
to remedy such matters. If the Sellers shall be unwilling or unable to remedy or
address any matters or omissions 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, this Agreement shall be of no further force
and effect with respect to such Property or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement or
reduction in the Allocable Purchase Price of the affected Property on account
thereof. The Purchaser shall make any such election by written notice to the
Sellers given on or prior to the fifth Business Day after the Sellers' notice of
their inability or unwillingness to cure such defect. Failure of the Purchaser
to give such notice shall be
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deemed an election by the Purchaser to proceed in accordance with clause (ii)
above.
SECTION 3. PURCHASE AND SALE.
3.1 Closing. (a) The purchase and sale of the Properties shall be
consummated at one or more closings (each, a "Closing") to be held at the
offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts, or at such other location as the Sellers and the Purchaser may
agree, at 10:00 a.m. local time, the Closing with respect to any Property to
occur on a date (each, a "Closing Date") designated in writing by the Sellers,
which date shall not be less than ten (10) Business Days nor more than thirty
(30) Business Days after notice from the Sellers to the Purchaser that
Substantial Completion and the Opening Date have occurred with respect to such
Property (and which notice shall identify the proposed Closing Date) or, if
later, the date as of which all conditions precedent to the Closing herein set
forth with respect to the applicable Property have either been satisfied or
waived by the party in whose favor such conditions run. In the event that
Closings with respect to all of the Properties shall not have occurred on or
before January 1, 1999, provided that no action for specific performance shall
have been commenced by the Purchaser to enforce this Agreement, any party shall,
provided such party shall not be in default hereunder, have the right, by the
giving of written notice, to terminate this Agreement with respect to all of the
Properties as to which a Closing has not yet occurred as of the date of
termination.
3.2 Purchase Price. The Allocable Purchase Prices shall be payable as
follows:
(a) At each Closing, the Allocable Purchase Price of each Property
being closed on less the amount of the Retained Funds with respect thereto shall
be payable by wire transfer of immediately available funds on the applicable
Closing Date to an account or accounts to be designated by the Sellers prior to
such Closing; and
(b) Except as otherwise provided in the Leases, the Retained Funds with
respect to each such Property shall be payable by wire transfer of immediately
available funds upon the expiration or sooner termination of the Lease with
respect to such Property, in accordance with the terms of the applicable Lease,
to an account or accounts to be designated by the Sellers prior to such date.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of the Purchaser to acquire each of the Properties on
the applicable Closing Date shall be subject to the
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satisfaction or waiver of the following conditions precedent on and as of such
Closing Date:
4.1 Closing Documents. The Sellers shall have delivered to the
Purchaser with respect to the applicable Property:
(a) A good and sufficient warranty deed with covenants against
grantor's acts, or its local equivalent, in proper statutory form for recording,
duly executed and acknowledged by the Sellers, conveying good and marketable
title to the applicable Properties, free from all liens and encumbrances other
than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to the Sellers and the Purchaser, duly executed and
acknowledged by the Sellers, with respect to all of the Sellers' right, title
and interest in, to and under the FF&E, the Contracts, the Intangible Property
and the Sellers' rights under all builder's warranties with respect to the
applicable Properties;
(c) To the extent the same are in the Sellers' possession, originally,
fully executed copies of all agreements constituting Assets;
(d) Duly executed copies of the Leases, the Limited Rent Guaranty, the
Stock Pledge and all of the Incidental Documents (as such term is defined in the
Leases);
(e) The tenant under the Leases shall have entered into a Franchise
Agreement with respect to each of the applicable Properties;
(f) A copy of the final duly issued certificate of occupancy for each
of the applicable Properties;
(g) A Sellers' closing certificate in the form attached hereto as
Schedule D;
(h) An architect's certificate in the form attached hereto as Schedule
E;
(i) An engineer's certificate in the form attached hereto as Schedule
F;
(j) Certified copies of all charter documents, applicable corporate
resolutions and certificates of incumbency with respect to the Sellers, the
tenant under the Leases, the Guarantor under the Limited Rent Guaranty and such
other persons as the Purchaser may reasonably require; and
(k) Such other conveyance documents, certificates, deeds, affidavits
and other instruments as the Purchaser may reasonably require.
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4.2 Condition of Properties, Etc.
(a) No action shall be pending or threatened for the condemnation or
taking by power of eminent domain of all or any material portion of the
applicable Properties;
(b) 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; and
(c) The Purchaser shall have received an engineer's report, in form and
substance reasonably satisfactory to the Purchaser, confirming that Substantial
Completion has occurred.
4.3 Title Policies and Surveys.
(a) The Title Company shall be prepared, subject only to payment of the
applicable premium and delivery of all conveyance documents in recordable form,
to issue title insurance policies to the Purchaser with respect to the
applicable Properties, in form and substance 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 as provided in Section 2.4.
(b) The Purchaser shall have received an as-built survey with respect
to the applicable Properties, such survey to be consistent with the requirements
of Section 2.5.
4.4 Opinions of Counsel. The Purchaser shall have received a written
opinion from counsel to the Sellers (which may be its in-house counsel), in form
and substance reasonably satisfactory to the Purchaser, regarding the
organization and authority of the Sellers and the Tenant, the guarantor under
the Limited Rent Guaranty and such other persons as the Purchaser may reasonably
require, the enforceability of this Agreement, the Leases, the Limited Rent
Guaranty, the Stock Pledge and the Incidental Documents (as defined in the
Leases) and such other matters with respect to the transactions contemplated by
this Agreement as the Purchaser may reasonably require.
SECTION 5. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE.
The obligation of the Sellers to convey each of the Properties on the
applicable Closing Date to the Purchaser is subject to the satisfaction or
waiver of the following conditions precedent on and as of such Closing Date:
5.1 Purchase Price. The Purchaser shall deliver to the Sellers the
Allocable Purchase Prices of the applicable Properties as provided in Section
3.2.
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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;
(b) A certificate of a duly authorized officer of the Purchaser
confirming the continued truth and accuracy of the representations and
warranties of the Purchaser in this Agreement;
(c) A duly executed original counterpart of the Owner's Agreement;
(d) Certified copies of all charter documents, applicable resolutions
and certificates of incumbency with respect to the Purchaser and such other
persons as the Sellers or the Tenant may reasonably require; and
(e) The Purchaser shall have caused an aggregate amount of One Million
Two Hundred Ninety-Three Thousand Seven Hundred Seventy Dollars ($1,293,770) to
be deposited in the Reserve at the time of the initial Closing hereunder.
5.3 Opinion of Counsel. The Sellers and the Tenant shall have received
a written opinion from Sullivan & Worcester LLP, counsel to the Purchaser, in
form and substance reasonably satisfactory to the Sellers, regarding the
organization and authority of the Purchaser and the landlord under the Leases,
the enforceability of this Agreement and the Leases and such other matters with
respect to the transactions contemplated by this Agreement as the Sellers and
the Tenant may reasonably require.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLERS.
To induce the Purchaser to enter into this Agreement, the Sellers
represent and warrant to the Purchaser as follows:
6.1 Status and Authority of the Sellers. Each of the Sellers is a
corporation duly organized, validly existing and in corporate good standing
under the laws of its state of incorporation, and has all requisite power and
authority under the laws of such state and its respective charter documents to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. Each of the Sellers has duly qualified to
transact business in each jurisdiction in which the nature of the business
conducted by it requires such qualification, except where such failure to
qualify would not have a material adverse effect on any of the Sellers or the
transactions contemplated hereby.
6.2 Action of the Sellers. Each of the Sellers has taken all necessary
action to authorize the execution, delivery and
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performance of this Agreement, and upon the execution and delivery of any
document to be delivered by the Sellers on or prior to any Closing, such
document shall constitute the valid and binding obligation and agreement of each
of the Sellers, enforceable against each of the Sellers in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors and general principles of equity.
6.3 No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by the Sellers, nor compliance with the terms and
provisions hereof, will result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any Property pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument by which any of the Sellers is bound.
6.4 Litigation. The Sellers have received no written notice of and, to
the Sellers' actual knowledge, no action or proceeding is pending or, to the
Sellers' actual knowledge, threatened and the Sellers have received no written
notice of and, to the Sellers' actual knowledge, 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) may result in or subject any of the Properties to a
material liability, or (d) involves condemnation or eminent domain proceedings
against any material part of the Properties.
6.5 Existing Agreements, Etc. Other than (x) documents recorded in the
public records, (y) the documents to be assigned to the Purchaser pursuant to
the terms hereof, and (z) agreements and easements with governmental bodies and
utility companies which are reasonably necessary for the development and
operation of the Properties as contemplated by this Agreement and the Leases,
there are no material agreements, leases, licenses or occupancy agreements
affecting the Properties which will be binding on the Purchaser subsequent to
the Closing Date.
6.6 Disclosure. To the Sellers' actual knowledge, there is no fact or
condition which materially and adversely affects the physical condition of any
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. All utilities and services necessary for the use
and operation of the Properties (including, without limitation, road access,
water, electricity and telephone) are
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available thereto, are of sufficient capacity to meet adequately all needs and
requirements necessary for the use and operation of such Properties and for
their respective intended purposes. To the Sellers' knowledge, no fact,
condition or proceeding exists which would result in the termination or
impairment of the furnishing of such utilities to any of the Properties.
6.8 Compliance With Law. To the Sellers' knowledge (i) the Properties
and the use and operation thereof do not violate any material federal, state,
municipal and other governmental statutes, ordinances, by-laws, rules,
regulations or any other legal requirements, including, without limitation,
those relating to construction, occupancy, zoning, adequacy of parking,
environmental protection, occupational health and safety and fire safety
applicable thereto; and (ii) there are presently or, at the Closing there will
be, in effect all material licenses, permits and other authorizations necessary
for the then current use, occupancy and operation thereof. The Sellers have not
received written notice of any threatened request, application, proceeding,
plan, study or effort which would materially adversely affect the present use or
zoning of any of the Properties or which would modify or realign any adjacent
street or highway.
6.9 Not A Foreign Person. None of the Sellers is a "foreign person"
within the meaning of Section 1445 of the United States Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
6.10 Hazardous Substances. Except as disclosed to the Purchaser or as
described in any environmental report delivered to the Purchaser, to the
Sellers' knowledge, none of the Sellers or any other occupant or user of any of
the Properties, or any portion thereof, has stored or disposed of (or engaged in
the business of storing or disposing of) or has released or caused the release
of any hazardous waste, contaminants, oil, radioactive or other material on any
of the Properties, or any portion thereof, the removal of which is required or
the maintenance of which is prohibited or penalized by any applicable Federal,
state or local statutes, laws, ordinances, rules or regulations, and, to the
Sellers' knowledge, except as disclosed to the Purchaser or as described in any
environmental report delivered to the Purchaser, 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.
6.11 Insurance. The Sellers have received no written notice from any
insurance carrier of defects or inadequacies in any of the Properties which, if
uncorrected, would result in a termination of insurance coverage or an increase
in the premiums charged therefor.
<PAGE>
-15-
6.12 Substantial Completion. As of the date hereof, the Sellers
reasonably anticipate that Substantial Completion of all of the Properties will
occur on or before January 1, 1999.
6.13 Condition of Properties. To the actual knowledge of the Sellers,
each of the Properties is, or on the applicable Closing Date will be, in good
working order and repair, mechanically and structurally sound, free from
material defects in materials and workmanship.
The representations and warranties made in this Agreement by the
Sellers are made as of the date hereof and shall, except with respect to the
matters set forth in Section 6.12, be deemed remade by the Sellers as of each
Closing Date for the Property or Properties then being conveyed by the Sellers,
with the same force and effect as if made on, and as of, such date; provided,
however, that, the Sellers shall have the right, from time to time prior to the
applicable Closing Date, with respect to any Property as to which a Closing has
not yet occurred, to modify the representations and warranties as a result of
changes in physical condition of any Properties by notice to the Purchaser and,
in such event, the Purchaser shall have the rights provided in Section 2.3. All
representations and warranties made in this Agreement by the Sellers shall
survive the applicable Closing for a period of one year.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to the Purchaser at the Closing, the Sellers disclaim
the making of any representations or warranties, express or implied, regarding
the Properties or matters affecting the Properties, whether made by the Sellers,
on the Sellers' behalf or otherwise, including, without limitation, the physical
condition of the Properties, title to or the boundaries of the Real Property,
pest control matters, soil conditions, the presence, existence or absence of
hazardous wastes, toxic substances or other environmental matters, compliance
with building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Properties or the market and physical environments in which they are located.
The Purchaser acknowledges (i) that the Purchaser has entered into this
Agreement with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of each Property and (ii) that the Purchaser is not relying upon
any statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
the Purchaser at the Closing, made by the Sellers or anyone acting on the
Sellers' behalf. The Purchaser further acknowledges that it has not received
from or on behalf of the Sellers any accounting, tax, legal, architectural,
engineering, property management or other advice with respect to this
transaction and is relying solely
<PAGE>
-16-
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 Sellers to enter in this Agreement, the Purchaser
represents and warrants to the Sellers as follows:
7.1 Status and Authority of the Purchaser. The Purchaser is a Maryland
real estate investment trust duly organized, validly existing 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 such
failure to qualify would not have a material adverse effect on the Purchaser or
the transactions contemplated hereby.
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 and general
principles of equity.
7.3 No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by the Purchaser, nor compliance with the terms
and provisions hereof, will result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of the
Purchaser pursuant to the terms of any indenture, mortgage, deed of trust, note,
evidence of indebtedness or any other agreement or instrument by which the
Purchaser is bound.
7.4 Litigation. No investigation, action or proceeding is pending and,
to the Purchaser's actual knowledge, no action or proceeding is threatened and
no investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
<PAGE>
-17-
The representations and warranties made in this Agreement by the
Purchaser are made as of the date hereof and shall be deemed remade by the
Purchaser as of the applicable Closing Date with the same force and effect as if
made on, and as of, such date. All representations and warranties made in this
Agreement by the Purchaser shall survive the applicable Closing for a period of
one year.
SECTION 8. COVENANTS OF THE SELLERS.
The Sellers hereby covenant with the Purchaser as follows:
8.1 Compliance with Laws, Etc. From the date of this Agreement to the
Closing Date for any Property, to comply in all material respects, with (i) all
laws, regulations and other requirements affecting such Property from time to
time applicable of every governmental body having jurisdiction of such Property
or the use or occupancy of the Improvements located thereon and (ii) all terms,
covenants and conditions, instruments of record and other agreements affecting
such Property.
8.2 Approval of Agreements. From the date of this Agreement to the
Closing Date for any Property, except as otherwise authorized by this Agreement,
not to enter into, modify, amend or terminate any agreement which would encumber
or be binding upon such Property from and after the applicable Closing Date,
without in each instance obtaining the prior written consent of the Purchaser,
which consent shall not be unreasonably withheld, delayed or conditioned;
provided, however, the Sellers shall not be required to obtain the consent of
the Purchaser as to any agreements or easements with government bodies and
utility companies necessary for the development and operation of such Property
as contemplated by this Agreement and the Leases (it being understood and
agreed, however, that the Purchaser shall retain any rights to object to the
same set forth elsewhere in this Agreement).
8.3 Compliance with Agreements. From the date of this Agreement to the
Closing Date for any Property, to comply with each and every material term,
covenant and condition contained in any document or agreement affecting such
Property.
8.4 Substantial Completion. From the date of this Agreement to the
Closing Date for any Property, to use reasonable efforts to cause Substantial
Completion of such Property to occur as soon as reasonably practicable after the
date hereof, subject to any events of force majeure.
8.5 Notice of Material Changes or Untrue Representations. From the date
of this Agreement to the Closing Date for any Property, upon learning of any
material change in any condition with respect to such Property or of any event
or circumstance which makes any representation or warranty of the Sellers to the
<PAGE>
-18-
Purchaser under this Agreement untrue, promptly to notify the Purchaser thereof
(the Purchaser agreeing, on learning of any such fact or condition, promptly to
notify the Sellers thereof).
8.6 Correction of Defects. To complete, at the Sellers' sole cost, all
punch-list items and to correct, at the Sellers' sole cost, all defects that are
discovered and disclosed by or to the Sellers within one hundred eighty (180)
days after the applicable Closing Date. The Purchaser shall cooperate with the
Sellers in enforcing any applicable warranties or guaranties with respect to
such defects. The provisions of this Section 8.6 shall survive any Closing under
this Agreement.
SECTION 9. APPORTIONMENTS.
9.1 Real Property Apportionments. Representatives of the Purchaser and
the Sellers shall perform any and all of the adjustments and apportionments
which are appropriate and usual for a transaction of this nature, taking into
account the applicable provisions of the Leases. The adjustments hereunder shall
be calculated or paid in an amount based upon a fair and reasonable estimated
accounting performed and agreed to by representatives of the Sellers and the
Purchaser at the applicable 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 Sellers and the Purchaser. In the event the parties have
not agreed with respect to the adjustments required to be made pursuant to this
Section 9.1 within such ninety-day period, upon application by either party, a
certified public accountant reasonably acceptable to the Purchaser and the
Sellers shall determine any such adjustments which have not theretofore been
agreed to between the Sellers and the Purchaser. The charges of such accountant
shall be borne fifty percent (50%) by the Sellers and fifty percent (50%) by the
Purchaser.
9.2 Closing Costs. The Sellers and the Purchaser shall share equally
all costs and expenses associated with the transaction contemplated hereby,
including, without limitation, title and recording fees and taxes, local counsel
fees (limited to those incurred in connection with usual and customary local
counsel services in similar real estate transactions), title insurance for both
the Purchaser and the Tenant, marketing studies, survey and environmental
reports, except that each party shall pay its own attorneys' and accountants'
fees and costs in connection with this transaction.
The obligations of the parties under this Section 9 shall survive the
Closings.
<PAGE>
-19-
SECTION 10. DEFAULT.
10.1 Default by the Sellers. If the Sellers shall have made any
representation or warranty herein which shall be untrue in any material respect
when made or updated as herein provided, or if the Sellers shall fail to perform
any of the material covenants and agreements contained herein or the Agreement
to Lease to be performed by them and such failure continues for a period of ten
(10) days (or such additional period, not to extend beyond the first anniversary
of the date hereof, as may be reasonably required to effectuate a cure of the
same) after notice thereof from the Purchaser, the Purchaser may terminate this
Agreement with respect to the affected Property or Properties 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; provided, however, that, (x) in no event shall the Sellers be
liable for consequential damages and (y) in no event shall the aggregate
liability of the Sellers hereunder exceed an amount equal to the sum of (i) ten
percent of the Allocable Purchase Price of the affected Property or Properties,
(ii) actual costs and expenses incurred by the Purchaser with respect to the
affected Property or Properties, (iii) costs of collection (including, without
limitation, reasonable attorneys' fees) and (iv) interest at 10% per annum on
all such amounts from the date of demand until paid. It is understood and agreed
that for purposes of this Section 10.1, if a default results from a false
representation or warranty, such default shall be deemed cured if the events,
conditions, acts or omissions giving rise to the falsehood are cured within the
applicable cure period even though, as a technical matter, such representation
or warranty was false as of the date actually made.
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 or the Agreement to Lease to be performed by it
and such failure shall continue for a period of ten (10) days (or such
additional period, not to extend beyond the first anniversary of the date
hereof, as may be reasonably required to effectuate a cure of the same) after
notice thereof from the Sellers, the Sellers may, as their sole and exclusive
remedy, at law, in equity, terminate this Agreement with respect to any Property
or Properties as to which a Closing shall not yet have occurred, whereupon, the
Purchaser shall pay to the Sellers, as liquidated damages and not as a penalty,
an amount equal to the sum of (i) ten percent of the Allocable Purchase Price of
the affected Property or Properties, (ii) actual costs and expenses incurred by
the Sellers with respect to the affected Property or Properties, (iii) costs of
collection (including, without limitation, reasonable attorneys' fees) and (iv)
interest at 10% per annum on all such amounts from the date of demand until
paid. It is understood and agreed that for purposes of this Section
<PAGE>
-20-
10.2, if a default results from a false representation or warranty, such default
shall be deemed cured if the events, conditions, acts or omissions giving rise
to the falsehood are cured within the applicable cure period even though, as a
technical matter, such representation or warranty was false as of the date
actually made.
SECTION 11. MISCELLANEOUS.
11.1 Agreement to Indemnify. (a) Subject to any express provisions of
this Agreement to the contrary, from and after any closing, with respect to the
applicable Property, (i) the Sellers shall indemnify and hold harmless the
Purchaser from and against any and all obligations, claims, losses, damages,
liabilities, and expenses (including, without limitation, reasonable attorneys'
and accountants' fees and disbursements) arising out of (x) events or
contractual obligations, acts, or omissions of the Sellers that occurred in
connection with the ownership or operation of any Property prior to the
applicable Closing or (y) any damage to property of others or injury to or death
of any person or any claims for any debts or obligations occurring on or about
or in connection with any Property or any portion thereof at any time or times
prior to the applicable Closing, and (ii) the Purchaser shall indemnify and hold
harmless the Sellers from and against any and all obligations, claims, losses,
damages, liabilities and expenses (including, without limitation, reasonable
attorneys' and accountants' fees and disbursements) arising out of (x) events,
contractual obligations, acts, or omissions of Purchaser that occur in
connection with the ownership or operation of any Property after the applicable
Closing, or (y) any damage to property of others or injury to or death of any
person or any claims for any debts or obligations occurring on or about any
Property or any portion thereof at any time or times after the applicable
Closing. The provisions of this Section 11.1 shall not apply to any liabilities
or obligations with respect to hazardous substances, the liabilities of the
parties with respect thereto being governed by applicable law.
(b) Whenever it is provided in this Agreement that an obligation of the
Sellers will be assumed by the Purchaser after the applicable Closing, the
Purchaser shall be deemed to have also agreed to indemnify and hold harmless the
Sellers and their respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of the Purchaser to perform the obligation so assumed after the
applicable Closing.
(c) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the
party learning of such
<PAGE>
-21-
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 Closings
hereunder and the termination of this Agreement.
11.2 Brokerage Commissions. Each of the parties hereto represents to
the other parties that it dealt with no broker, finder or like agent in
connection with this Agreement or the transactions contemplated hereby, and that
it reasonably believes that there is no basis for any other person or entity to
claim a commission or other compensation for bringing about this Agreement or
the transactions contemplated hereby. The Sellers shall indemnify and hold
harmless the Purchaser and its heirs, successors and assigns from and against
any loss, liability or expense, including, reasonable attorneys' fees, arising
out of any claim or claims for commissions or other compensation for bringing
about this Agreement or the transactions contemplated hereby made by any broker,
finder or like agent, if such claim or claims are based in whole or in part on
dealings with the Sellers. The Purchaser shall indemnify and hold harmless the
Sellers and their respective heirs, successors and assigns from and against any
loss, liability or expense, including, reasonable attorneys' fees, arising out
of any claim or claims for commissions or other compensation for bringing about
this Agreement or the transactions contemplated hereby made by any broker,
finder or like agent, if such claim or claims are based in whole or in part on
dealings with the Purchaser. Nothing contained in this section shall be deemed
to create any rights in any third party. The provisions of this Section 11.2
shall survive the Closings hereunder 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 hereby to any third party without the consent of the
other parties, which consent shall not be unreasonably withheld, except as may
be required by law or as may be reasonably necessary, on a confidential basis,
to inform any rating agencies, potential sources of financing, financial
analysts, or to entities involved with a sale of a controlling interest in the
Sellers, the Purchaser or any of their affiliates or to receive legal,
accounting and/or tax advice; provided, however, that, if such information is
required to be disclosed by law, the party so disclosing the information will
use reasonable efforts to give
<PAGE>
-22-
notice to the other parties as soon as such party learns that it must make such
disclosure.
11.4 Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to the Sellers to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52/924.11
Bethesda, Maryland 20817
Attn: Mr. Michael E. Dearing
[Telecopier No. (301) 380-5067]
with a copy to:
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, MD 21201-2978
Attn: James D. Wright, Esq.
[Telecopier No. (410) 244-7742]
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>
-23-
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 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.
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 the 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 fully and primarily liable for the obligations of
the "Purchaser" hereunder. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns. This Agreement is not intended and shall not
be construed to create any rights in or to be enforceable in any part by any
other persons.
<PAGE>
-24-
11.7 Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
11.8 Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof. This Agreement may not be amended or modified in any
respect other than by the written agreement of all of the parties hereto.
11.9 Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of the State of Maryland
applicable to contracts between residents of Maryland which are to be performed
entirely within Maryland, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required by this
Agreement is made or required to be made; or (iii) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues; or
(iv) where any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or jurisdiction
of organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State of Maryland; or (vii) any combination of the foregoing.
<PAGE>
-25-
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of Maryland as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of Maryland and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
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.
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, 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>
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SELLERS:
RESIDENCE INN BY MARRIOTT, INC.
By: /s/ C. S. Lynch
Its (Vice) President
COURTYARD MANAGEMENT CORPORATION
By: /s/ C. S. Lynch
Its (Vice) President
PURCHASER:
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
John G. Murray, President
EXHIBIT 10.8
[RESIDENCE INN]
LEASE AGREEMENT
DATED AS OF ______ __, 199_
BY AND BETWEEN
HPTMI II PROPERTIES TRUST,
AS LANDLORD,
AND
CR9 TENANT CORPORATION,
AS TENANT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1: DEFINITIONS...........................................................................................1
1.1 Accounting Period..................................................................................1
1.2 Additional Rent ...................................................................................2
1.3 Additional Charges ................................................................................2
1.4 Affiliated Person .................................................................................2
1.5 Agreement .........................................................................................2
1.6 Agreement to Lease.................................................................................2
1.7 Allocable Purchase Price...........................................................................2
1.8 Applicable Laws ...................................................................................2
1.9 Applicable Percentage..............................................................................3
1.10 Award .............................................................................................3
1.11 Base Hotel Sales ..................................................................................3
1.12 Base Year .........................................................................................4
1.13 Business Day ......................................................................................4
1.14 Capital Addition ..................................................................................4
1.15 Capital Expenditure ...............................................................................4
1.16 Claim .............................................................................................4
1.17 Code ..............................................................................................4
1.18 Collective Leased Properties ......................................................................4
1.19 Commencement Date .................................................................................4
1.20 Condemnation ......................................................................................5
1.21 Condemnor .........................................................................................5
1.22 Consolidated Financials ...........................................................................5
1.23 Date of Taking ....................................................................................5
1.24 Default ...........................................................................................5
1.25 Disbursement Rate .................................................................................5
1.26 Distribution ......................................................................................5
1.27 Encumbrance .......................................................................................6
1.28 Entity.........................................................................................6
1.29 Environment .......................................................................................6
1.30 Environmental Notice ..............................................................................6
1.31 Environmental Obligation ..........................................................................6
1.32 Event of Default ..................................................................................6
1.33 Excess Hotel Sales.................................................................................6
1.34 Extended Terms ....................................................................................6
1.35 FAS ...............................................................................................6
1.36 Financial Officer's Certificate ...................................................................6
1.37 Fiscal Quarter ....................................................................................6
1.38 Fiscal Year .......................................................................................7
1.39 Fixed Term ........................................................................................7
1.40 Fixtures ..........................................................................................7
1.41 Franchise Agreement................................................................................7
1.42 Franchisor ........................................................................................7
1.43 GAAP ..............................................................................................7
1.44 Government Agencies................................................................................7
1.45 Guarantor .........................................................................................7
1.46 Hazardous Substances ..............................................................................7
1.47 Hotel .............................................................................................8
1.48 Hotel Mortgage ....................................................................................8
1.49 Hotel Mortgagee ...................................................................................8
1.50 HPT ...............................................................................................9
1.51 HPT Guaranty ......................................................................................9
1.52 Immediate Family...................................................................................9
<PAGE>
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1.53 Impositions .......................................................................................9
1.54 Incidental Documents .............................................................................10
1.55 Indebtedness .....................................................................................10
1.56 Index ............................................................................................10
1.57 Insurance Requirements ...........................................................................10
1.58 Interest Rate.....................................................................................10
1.59 Inventories ......................................................................................10
1.60 Land .............................................................................................11
1.61 Landlord .........................................................................................11
1.62 Landlord Liens....................................................................................11
1.63 Lease Year .......................................................................................11
1.64 Leased Improvements ..............................................................................11
1.65 Leased Intangible Property .......................................................................11
1.66 Leased Personal Property .........................................................................11
1.67 Leased Property ..................................................................................11
1.68 Legal Requirements ...............................................................................11
1.69 Lien .............................................................................................12
1.70 Limited Rent Guaranty ............................................................................12
1.71 Management Agreement .............................................................................12
1.72 Manager ..........................................................................................12
1.73 Minimum Rent .....................................................................................12
1.74 Notice ...........................................................................................12
1.75 Officer's Certificate ............................................................................12
1.76 Other Leases......................................................................................12
1.77 Overdue Rate .....................................................................................12
1.78 Owner's Agreement.................................................................................12
1.79 Parent............................................................................................13
1.80 Permitted Encumbrances ...........................................................................13
1.81 Permitted Liens ..................................................................................13
1.82 Permitted Use ....................................................................................13
1.83 Person ...........................................................................................13
1.84 Proprietary Information ..........................................................................13
1.85 Purchase Agreement................................................................................13
1.86 Purchase Documents................................................................................13
1.87 Rent .............................................................................................14
1.88 Request Notice ...................................................................................14
1.89 Reserve...........................................................................................14
1.90 Reserve Estimate .................................................................................14
1.91 Response Notice ..................................................................................14
1.92 Retained Funds....................................................................................14
1.93 SEC ..............................................................................................14
1.94 State ............................................................................................14
1.95 Stock Pledge Agreement ...........................................................................14
1.96 Subordinated Creditor ............................................................................14
1.97 Subordination Agreement ..........................................................................14
1.98 Subsidiary .......................................................................................14
1.99 Successor Landlord ...............................................................................14
1.100 Tangible Net Worth ...............................................................................15
1.101 Tenant ...........................................................................................15
1.102 Tenant's Personal Property .......................................................................15
1.103 Term .............................................................................................15
1.104 Total Hotel Sales.................................................................................15
1.105 Uniform System of Accounts .......................................................................16
1.106 Unsuitable for Its Permitted Use .................................................................16
1.107 Work .............................................................................................16
<PAGE>
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ARTICLE 2: LEASED PROPERTY AND TERM.............................................................................16
2.1 Leased Property....................................................................................16
2.2 Condition of Leased Property...................................................................17
2.3 Fixed Term.........................................................................................18
2.4 Extended Term..................................................................................18
ARTICLE 3: RENT.................................................................................................19
3.1 Rent...............................................................................................19
3.2 Late Payment of Rent, Etc......................................................................24
3.3 Net Lease......................................................................................25
3.4 No Termination, Abatement, Etc.................................................................25
3.5 Security for Tenant's Performance..................................................................26
ARTICLE 4: USE OF THE LEASED PROPERTY...........................................................................27
4.1 Permitted Use......................................................................................27
4.2 Compliance with Legal/Insurance Requirements, Etc..................................................28
4.3 Environmental Matters..............................................................................28
ARTICLE 5: MAINTENANCE AND REPAIRS..............................................................................31
5.1 Maintenance and Repair.............................................................................31
5.2 Tenant's Personal Property.........................................................................35
5.3 Yield Up...........................................................................................36
5.4 Management Agreement...............................................................................37
ARTICLE 6: IMPROVEMENTS, ETC....................................................................................37
6.1 Improvements to the Leased Property. .............................................................37
6.2 Salvage............................................................................................38
6.3 Equipment Leases...................................................................................38
ARTICLE 7: LIENS................................................................................................38
ARTICLE 8: PERMITTED CONTESTS...................................................................................39
ARTICLE 9: INSURANCE AND INDEMNIFICATION........................................................................40
9.1 General Insurance Requirements.....................................................................40
9.2 Replacement Cost...................................................................................41
9.3 Waiver of Subrogation..............................................................................42
9.4 Form Satisfactory, Etc.............................................................................42
9.5 Blanket Policy.....................................................................................42
9.6 No Separate Insurance..............................................................................43
9.7 Indemnification of Landlord........................................................................43
ARTICLE 10: CASUALTY............................................................................................44
10.1 Insurance Proceeds................................................................................44
10.2 Damage or Destruction.............................................................................44
10.3 Damage Near End of Term; Damage from Earthquake...................................................46
10.4 Tenant's Property.................................................................................47
10.5 Restoration of Tenant's Property..................................................................47
10.6 No Abatement of Rent..............................................................................47
10.7 Waiver............................................................................................48
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ARTICLE 11: CONDEMNATION........................................................................................48
11.1 Total Condemnation, Etc...........................................................................48
11.2 Partial Condemnation..............................................................................48
11.3 Disbursement of Award.............................................................................49
11.4 Abatement of Rent.................................................................................49
11.5 Temporary Condemnation............................................................................49
11.6 Allocation of Award...............................................................................50
ARTICLE 12: DEFAULTS AND REMEDIES...............................................................................50
12.1 Events of Default.................................................................................50
12.2 Remedies..........................................................................................53
12.3 Tenant's Waiver...................................................................................54
12.4 Application of Funds..............................................................................55
12.5 Landlord's Right to Cure Tenant's Default.........................................................55
12.6 Retained Funds....................................................................................55
12.7 Good Faith Dispute................................................................................55
ARTICLE 13: HOLDING OVER........................................................................................56
ARTICLE 14: LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT.....................................................56
14.1 Landlord Notice Obligation........................................................................56
14.2 Landlord's Default................................................................................56
14.3 Special Remedies for Landlord Funding Default.....................................................57
14.4 Remedy after Landlord Transfer....................................................................58
14.5 Special Remedy after Landlord Default under
Sections 10.2.4 and 11.3..............................................................58
14.6 Special Remedy for Tenant under Section 22.8......................................................58
ARTICLE 15: TRANSFERS BY LANDLORD...............................................................................59
15.1 Transfer of Leased Property.......................................................................59
15.2 Conditions of Transfer............................................................................59
ARTICLE 16: SUBLETTING AND ASSIGNMENT...........................................................................60
16.1 Subletting and Assignment.........................................................................60
16.2 Required Sublease Provisions......................................................................62
16.3 Permitted Sublease and Assignment.................................................................63
16.4 Sublease Limitation...............................................................................63
ARTICLE 17: ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS......................................................64
17.1 Estoppel Certificates.............................................................................64
17.2 Financial Statements..............................................................................64
17.3 General Operations................................................................................65
ARTICLE 18: LANDLORD'S RIGHT TO INSPECT.........................................................................66
ARTICLE 19: ALTERNATIVE DISPUTE RESOLUTION......................................................................66
19.1 Negotiation and Mediation.........................................................................66
19.2 Arbitration.......................................................................................66
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ARTICLE 20: HOTEL MORTGAGES.....................................................................................67
20.1 Landlord May Grant Liens..........................................................................67
20.2 Subordination of Lease............................................................................68
20.3 Notices...........................................................................................69
ARTICLE 21: ADDITIONAL COVENANTS OF TENANT......................................................................70
21.1 Conduct of Business...............................................................................70
21.2 Maintenance of Accounts and Records...............................................................70
21.3 Notice of Litigation, Etc.........................................................................70
21.4 Indebtedness of Tenant............................................................................70
21.5 Financial Condition of Tenant.....................................................................71
21.6 Distributions, Payments to Affiliated
Persons, Etc..........................................................................71
21.7 Prohibited Transactions...........................................................................72
21.8 Liens and Encumbrances............................................................................72
21.9 Merger; Sale of Assets; Etc.......................................................................72
ARTICLE 22: MISCELLANEOUS.......................................................................................73
22.1 Limitation on Payment of Rent.....................................................................73
22.2 No Waiver.........................................................................................73
22.3 Remedies Cumulative...............................................................................73
22.4 Severability......................................................................................73
22.5 Acceptance of Surrender...........................................................................74
22.6 No Merger of Title................................................................................74
22.7 Conveyance by Landlord............................................................................74
22.8 Quiet Enjoyment...................................................................................74
22.9 Memorandum of Lease...............................................................................75
22.10 Notices...........................................................................................75
22.11 Construction; Nonrecourse.........................................................................76
22.12 Counterparts; Headings............................................................................77
22.13 Applicable Law, Etc...............................................................................77
22.14 Right to Make Agreement...........................................................................78
22.15 Disclosure of Information.........................................................................78
22.16 Trademarks, Trade Names and Service Marks.........................................................79
</TABLE>
EXHIBITS
A - Minimum Rent
B - Other Leases
C - The Land
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this ___ day of __________,
199_, by and between HPTMI II PROPERTIES TRUST, a Maryland real estate
investment trust, as landlord ("Landlord"), and CR9 TENANT CORPORATION, a
Delaware corporation, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Leased Property (this
and other capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and
Tenant wishes to lease the Leased Property from Landlord, all subject to and
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article shall have the meanings assigned to them in this Article and include the
plural as well as the singular, (ii) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.1 "Accounting Period" shall 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. If Tenant shall, for a bona fide business reason, change its Accounting
Period during the Term, appropriate adjustments, if
<PAGE>
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any, shall be made with respect to the timing of certain accounting and
reporting requirements of this Agreement; provided, however, that, in no event
shall any such change or adjustment increase or reduce any monetary obligation
under this Agreement.
1.2 "Additional Rent" shall have the meaning given such term in Section
3.1.2(a).
1.3 "Additional Charges" shall have the meaning given such term in
Section 3.1.3.
1.4 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited liability
company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b), (d) any
other Person who is an officer, director, trustee or employee of, or partner in,
such Person or any Person referred to in the preceding clauses (a), (b) and (c),
and (e) any other Person who is a member of the Immediate Family of such Person
or of any Person referred to in the preceding clauses (a) through (d); provided,
however, that, notwithstanding the foregoing, in no event shall Host Marriott
Corporation or any of its Affiliated Persons be deemed an Affiliated Person as
to Tenant or the Guarantor.
1.5 "Agreement" shall mean this Lease Agreement, including Exhibits A
to C hereto, as it and they may be amended from time to time as herein provided.
1.6 "Agreement to Lease" shall mean the Agreement to Lease, dated as of
September __, 1997, by and between HPT and the Tenant, as amended from time to
time.
1.7 "Allocable Purchase Price" shall have the meaning given such term
in the Purchase Agreement.
1.8 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health
(except those requirements which, by definition, are solely the responsibility
of employers) or the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies
<PAGE>
-3-
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, pesti
cides, 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.
1.9 "Applicable Percentage" shall mean, with respect to any Accounting
Period, or portion thereof, with respect to the period beginning on the
Commencement Date and ending on the last day of the first full Fiscal Year of
operation of the Hotel, two percent (2%), with respect to the second full Fiscal
Year of operation of the Hotel, four percent (4%) and, with respect to each
Fiscal Year thereafter, five percent (5%).
1.10 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of the Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses, including, without limitation, expert witness fees, incurred
by Landlord, in connection with obtaining any such award).
1.11 "Base Hotel Sales" shall mean, when used with reference to any
Lease Year, Total Hotel Sales for the Base Year and, when used with reference to
the first, second or third Fiscal Quarters of any Fiscal Year, 3/13 of Total
Hotel Sales for the Base Year and, when used with reference to the fourth Fiscal
Quarter of any Fiscal Year, 4/13 of 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, for one hundred eighty (180) days or more in any
Lease Year, a reduction in the number of rooms at the Hotel or a change in the
services provided at the Hotel (including, without limitation, closing of
restaurants) from the number of rooms or the services provided during the Base
Year, in determining Additional Rent payable with respect to such Lease Year,
Base Hotel Sales shall be reduced as follows: (a) in the event of a complete
closing of the Hotel, Total Hotel Sales attributable to such Hotel during the
Base Year shall be subtracted from Base Hotel Sales throughout the period of
such closing; (b) in the event of a partial closing of the Hotel affecting any
number of
<PAGE>
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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 Hotel Sales throughout the period of such closing;
(c) in the event of a closing of a restaurant, all Total Hotel Sales attributed
to such restaurant during the Base Year shall be subtracted from Base Hotel
Sales throughout the period of such closing; and (e) in the event of any other
change in circumstances affecting the Hotel, Base Hotel Sales shall be equitably
adjusted in such manner as Landlord and Tenant shall reasonably agree.
1.12 "Base Year" shall mean the second full calendar year of operation
of the Hotel; provided, however, if there shall occur, prior to the expiration
of the second full calendar year of operation of the Hotel, any force majeure
which causes a material decline in Total Hotel Sales during the second full
calendar year of operation of the Hotel, the Base Year shall be adjusted to be
the first full calendar year of operation of the Hotel after the termination of
any such force majeure event.
1.13 "Business Day" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of Maryland are authorized by law or executive action to close.
1.14 "Capital Addition" shall mean any renovation, renewal, addition,
alteration, replacement, repair or improvement to the Leased Property (or
portion thereof), the cost of which constitutes a Capital Expenditure.
1.15 "Capital Expenditure" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.16 "Claim" shall have the meaning given such term in Article 8.
1.17 "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.
1.18 "Collective Leased Properties" shall mean, collectively, the
Leased Property and every other Leased Property (as defined therein) under the
Other Leases.
1.19 "Commencement Date" shall mean the date of this Agreement.
<PAGE>
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1.20 "Condemnation" shall mean (a) the exercise of any governmental
power with respect to the Leased Property, whether by legal proceedings or
otherwise, by a Condemnor of its power of condemnation, (b) a voluntary sale or
transfer of the Leased Property by Landlord to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are pending,
or (c) a taking or voluntary conveyance of all or part of the Leased Property,
or any interest therein, or right accruing thereto or use thereof, as the result
or in settlement of any Condemnation or other eminent domain proceeding
affecting the Leased Property, whether or not the same shall have actually been
commenced.
1.21 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
1.22 "Consolidated Financials" shall mean, for any Fiscal Year or other
accounting period of Tenant, annual audited and quarterly unaudited financial
statements of the Guarantor prepared on a consolidated basis, including the
Guarantor'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.
1.23 "Date of Taking" shall mean the date the Condemnor has the right
to possession of the Leased Property, or any portion thereof, in connection with
a Condemnation.
1.24 "Default" shall mean any event or condition existing which with
the giving of notice and/or lapse of time would ripen into an Event of Default.
1.25 "Disbursement Rate" shall mean an annual rate of interest equal to
the greater of, as of the date of determination, (i) the Interest Rate and (ii)
the per annum rate for ten (10) year U.S. Treasury Obligations as published in
The Wall Street Journal plus three hundred (300) basis points.
1.26 "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 Tenant, (c) any other distribution on or in respect of any shares of
any class of capital stock of Tenant, or (d) any return of capital to
shareholders of Tenant.
<PAGE>
-6-
1.27 "Encumbrance" shall have the meaning given such term in Section
20.1.
1.28 "Entity" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency or political
subdivision thereof or any other entity.
1.29 "Environment" shall mean soil, surface waters, ground waters,
land, streams, sediments, surface or subsurface strata and ambient air.
1.30 "Environmental Notice" shall have the meaning given such term in
Section 4.3.1.
1.31 "Environmental Obligation" shall have the meaning given such term
in Section 4.3.1.
1.32 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.33 "Excess Hotel Sales" shall mean, with respect to any Lease Year or
Fiscal Quarter, or portion thereof, as applicable, the amount of Total Hotel
Sales for such period, in excess of Base Hotel Sales for the equivalent period.
1.34 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.35 "FAS" shall mean all items included within "Property and
Equipment" under the Uniform System of Accounts, including, but not limited to,
linen, china, glassware, tableware, uniforms and similar items, whether used in
connection with public space or guest rooms.
1.36 "Financial Officer's Certificate" shall mean, as to any Person, a
certificate of the chief financial officer or chief accounting officer (or such
officers' authorized designee) of such Person, duly authorized, accompanying the
financial statements required to be delivered by such Person pursuant to Section
17.2, in which such officer shall certify that such statements have been
properly prepared in accordance with GAAP 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.
1.37 "Fiscal Quarter" shall mean, with respect to the first, second and
third quarter of any Fiscal Year, the first, second and third, respectively,
three (3) Accounting Periods of
<PAGE>
-7-
such Fiscal Year and, with respect to the fourth quarter of any Fiscal Year, the
final four (4) Accounting Periods of such Fiscal Year.
1.38 "Fiscal Year" shall mean each fiscal year of Tenant, each such
fiscal year to consist of thirteen Accounting Periods. If Tenant shall, for a
bona fide business reason, change its Fiscal Year during the Term, appropriate
adjustments, if any, shall be made with respect to the timing of certain
accounting and reporting requirements of this Agreement; provided, however,
that, in no event shall any such change or adjustment increase or reduce any
monetary obligation under this Agreement.
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).
1.41 "Franchise Agreement" shall mean the Franchise Agreement, dated as
of the date hereof, between Tenant and the Franchisor with respect to the Hotel,
as amended from time to time.
1.42 "Franchisor" shall mean Marriott International, Inc., its
successors and assigns.
1.43 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.44 "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or the Hotel operated thereon.
1.45 "Guarantor" shall mean Marriott International, Inc., a Delaware
corporation, its successors and assigns.
1.46 "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
<PAGE>
-8-
(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 ordi nance or amendments thereto
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. et seq.) and the
Resource Conservation and Recovery Act (42 U.S.C. section 6901 et seq.)
and the regulations promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, any state of the United States, or any political subdivision
thereof; or
(d) the presence of which on the Leased Property causes or
materially threatens to cause an unlawful nuisance upon the Leased
Property or to adjacent properties or poses or materially threatens to
pose a hazard to the Leased Property or to the health or safety of
persons on or about the Leased Property; or
(e) without limitation, which contains gasoline, diesel fuel
or other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated
biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or
may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988, or any Applicable Laws promulgated by any
Government Agencies.
1.47 "Hotel" shall mean the Residence Inn by Marriott hotel being
operated on the Leased Property.
1.48 "Hotel Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article 20.
1.49 "Hotel Mortgagee" shall mean the holder of any Hotel Mortgage.
<PAGE>
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1.50 "HPT" shall mean Hospitality Properties Trust, a Maryland real
estate investment trust.
1.51 "HPT Guaranty" shall mean the guaranty agreement, dated as of the
date hereof, made by HPT for the benefit of Tenant, as amended.
1.52 "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.
1.53 "Impositions" shall mean collectively, all taxes (including,
without limitation, all taxes imposed under the laws of the State, as such laws
may be amended from time to time, and all ad valorem, sales and use, single
business, gross receipts, transaction privilege, rent or similar taxes as the
same relate to or are imposed upon Landlord, Tenant or the business conducted
upon the Leased Property), assessments (including, without limitation, all
assessments for public improvements or benefit, whether or not commenced or
completed prior to the date hereof), water, sewer or other rents and charges,
excises, tax levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Leased Property or the
business conducted thereon by Tenant (including all interest and penalties
thereon due to any failure in payment by Tenant), which at any time prior to,
during or in respect of the Term hereof may be assessed or imposed on or in
respect of or be a lien upon (a) Landlord's interest in the Leased Property, (b)
the Leased Property or any part thereof or any rent therefrom or any estate,
right, title or interest therein, or (c) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Leased Property or the leasing or use of the Leased Property or any part
thereof by Tenant; provided, however, that nothing contained herein shall be
construed to require Tenant to pay (i) any tax based on net income, net worth or
capital imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any
transfer fee or other tax imposed with respect to the sale, exchange or other
disposition by Landlord of the Leased Property or the proceeds thereof (other
than in connection with the sale, exchange or other disposition to, or in
connection with a transaction involving, Tenant), (iv) any single business,
gross receipts tax (other than a tax on any rent received by Landlord from
Tenant provided that such gross receipts tax on such rent is expressly in lieu
of any other tax, assessment, levy or charge otherwise excluded from this
definition of Impositions), transaction privilege, rent or
<PAGE>
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similar taxes as the same relate to or are imposed upon Landlord, except to the
extent that any tax, assessment, tax levy or charge that would otherwise be an
Imposition under this definition which is in effect at any time during the Term
hereof is totally or partially repealed, and a tax, assessment, tax levy or
charge set forth in clause (i) or (ii) preceding is levied, assessed or imposed
expressly in lieu thereof, (v) any interest or penalties imposed on Landlord as
a result of the failure of Landlord to file any return or report timely and in
the form prescribed by law or to pay any tax or imposition, except to the extent
such failure is a result of a breach by Tenant of its obligations pursuant to
Section 3.1.3, (vi) any Impositions imposed on Landlord that are a result of
Landlord not being considered a "United States person" as defined in Section
7701(a)(30) of the Code, (vii) any Impositions that are enacted or adopted by
their express terms as a substitute for any tax that would not have been payable
by Tenant pursuant to the terms of this Agreement or (viii) any Impositions
imposed as a result of a breach of covenant or representation by Landlord in any
agreement governing Landlord's conduct or operation or as a result of the
negligence or willful misconduct of Landlord.
1.54 "Incidental Documents" shall mean, collectively, the Limited Rent
Guaranty, the Franchise Agreement, the Stock Pledge Agreement and the Owner's
Agreement.
1.55 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
1.56 "Index" shall mean the Consumer Price Index for Urban Wage Earners
and Clerical Workers, All-Cities, All Items 1982- 1984 = 100, as published by
the Bureau of Labor Statistics or, in the event publication thereof ceases, by
reference to whatever index then published by the United States Department of
Labor at that time is most nearly comparable as a measure of general changes in
price levels for urban areas, as reasonably determined by Landlord and Tenant.
1.57 "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.
1.58 "Interest Rate" shall mean ten percent (10%) per annum.
1.59 "Inventories" shall mean "Inventories" as defined in the Uniform
System of Accounts, including, but not limited to,
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provisions in storerooms, refrigerators, pantries and kitchens; beverages in
wine cellars and bars; other merchandise intended for sale; fuel; mechanical
supplies; stationery; and other expensed supplies and similar items.
1.60 "Land" shall have the meaning given such term in Section 2.1(a).
1.61 "Landlord" shall have the meaning given such term in the preambles
to this Agreement and shall include its permitted successors and assigns.
1.62 "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 (other than Tenant) 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.
1.63 "Lease Year" shall mean any Fiscal Year during the Term and any
partial Fiscal Year at beginning or end of the Term.
1.64 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.65 "Leased Intangible Property" shall mean all Intangible Property
(as defined therein) acquired by Landlord with respect to the Leased Property
pursuant to the Purchase Agreement.
1.66 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.67 "Leased Property" shall have the meaning given such term in
Section 2.1.
1.68 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Leased Property or
the maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate the Leased Property for its
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Permitted Use, and (b) all covenants, agreements, restrictions and encumbrances
contained in any instruments at any time in force affecting the Leased Property
as of the date hereof, or to which Tenant has consented or required to be
granted pursuant to Applicable Laws, including those which may (i) require
material repairs, modifications or alterations in or to the Leased Property or
(ii) in any way materially and adversely affect the use and enjoyment thereof,
but excluding any requirements arising as a result of Landlord's status as a
real estate investment trust.
1.69 "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.
1.70 "Limited Rent Guaranty" shall mean the limited rent guaranty
agreement, dated as of the date hereof, made by the Guarantor in favor of
Landlord, as amended from time to time.
1.71 "Management Agreement" shall mean any agreement entered into by
Tenant with respect to the management and operation of the Leased Property.
1.72 "Manager" shall mean the person designated by and acting as
Manager pursuant to a Management Agreement.
1.73 "Minimum Rent" shall mean, with respect to each Accounting Period,
the sum set forth on Exhibit A.
1.74 "Notice" shall mean a notice given in accordance with Section
22.10.
1.75 "Officer's Certificate" shall mean a certificate signed by an
officer of the certifying Entity duly authorized by the board of directors of
the certifying Entity.
1.76 "Other Leases" shall mean, collectively, any Lease Agreements
between Landlord and Tenant with respect to the properties described on Exhibit
B.
1.77 "Overdue Rate" shall mean, on any date, a per annum rate of
interest equal to the lesser of fifteen percent (15%) and the maximum rate then
permitted under applicable law.
1.78 "Owner's Agreement" shall mean the Owner's Agreement, dated as of
the date hereof, between Landlord and the Franchisor, as amended from time to
time.
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1.79 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly through one or more Subsidiaries or Affiliated
Persons, fifty-one percent (51%) 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.
1.80 "Permitted Encumbrances" shall mean all rights, restrictions, and
easements of record set forth on Schedule B to the applicable owner's or
leasehold title insurance policy issued to Landlord on the date hereof, plus any
other such encumbrances as may have been consented to in writing by Landlord
from time to time.
1.81 "Permitted Liens" shall mean any Liens granted in accordance with
Section 21.9(a).
1.82 "Permitted Use" shall mean any use of the Leased Property
permitted pursuant to Section 4.1.1(a) or (b).
1.83 "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.
1.84 "Proprietary Information" shall mean (a) all computer software and
accompanying documentation (including all future upgrades, enhancements,
additions, substitutions and modifications thereof), other than computer
software which is commercially available, which are used by Tenant in connection
with the property management system, the reservation system and all future
electronic systems developed by Tenant for use in the Hotel, (b) all manuals,
brochures and directives used by Tenant at the Hotel regarding the procedures
and techniques to be used in operating the Hotel, (c) customer lists, and (d)
employee records which must remain confidential either under Legal Requirements
or under reasonable corporate policies of Tenant; provided, however, that
"Proprietary Information" shall not include any software, manuals, brochures or
directives issued by Franchisor to Tenant, as franchisee, under the Franchise
Agreement.
1.85 "Purchase Agreement" shall mean the Purchase and Sale Agreement,
dated as of September __, 1997, by and between HPT, as purchaser, and Residence
Inn by Marriott, Inc. and Courtyard Management Corporation, as amended.
1.86 "Purchase Documents" shall mean, collectively, the Purchase
Agreement and the Agreement to Lease.
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1.87 "Rent" shall mean, collectively, the Minimum Rent, Additional Rent
and Additional Charges.
1.88 "Request Notice" shall have the meaning given such term in Section
16.1.
1.89 "Reserve" shall have the meaning given such term in Section
5.1.2(a).
1.90 "Reserve Estimate" shall have the meaning given such term in
Section 5.1.2(c).
1.91 "Response Notice" shall mean the meaning given such term in
Section 16.1.
1.92 "Retained Funds" shall have the meaning given such term in the
Purchase Agreement.
1.93 "SEC" shall mean the Securities and Exchange Commission.
1.94 "State" shall mean the state or commonwealth or district in which
the Leased Property is located.
1.95 "Stock Pledge Agreement" shall mean the Indemnity and Stock Pledge
Agreement, dated October __, 1997, made by the Guarantor in favor of Landlord,
as amended.
1.96 "Subordinated Creditor" shall mean any creditor of Tenant which is
a party to a Subordination Agreement in favor of Landlord.
1.97 "Subordination Agreement" shall mean any agreement executed by a
Subordinated Creditor pursuant to which the payment and performance of Tenant's
obligations to such Subordinated Creditor are subordinated to the payment and
performance of Tenant's obligations to Landlord under this Agreement.
1.98 "Subsidiary" shall mean, with respect to any Person, any Entity
(a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, fifty-one percent (51%) or more of the voting or beneficial
interest or (b) which such Person otherwise has the right or power to control
(whether by contract, through ownership of securities or otherwise); it being
understood and agreed that, as of the date hereof, (x) Host Marriott Corporation
is not a Subsidiary of the Guarantor and (y) the Guarantor is not a Subsidiary
of Host Marriott Corporation.
1.99 "Successor Landlord" shall have the meaning given such term in
Section 20.2.
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1.100 "Tangible Net Worth" shall mean the excess of total assets over
total liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total
assets: (a) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles; (b) all
deferred charges or unamortized debt discount and expense; (c) all reserves
carried and not deducted from assets; (d) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary; (e) securities which are not readily marketable; (f) any
write-up in the book value of any asset resulting from a revaluation thereof
subsequent to the Commencement Date; (g) deferred gain; and (h) any items not
included in clauses (a) through (g) above that are treated as intangibles in
conformity with GAAP.
1.101 "Tenant" shall have the meaning given such term in the preambles
to this Agreement and shall include its permitted successors and assigns.
1.102 "Tenant's Personal Property" shall mean all motor vehicles and
consumable Inventories 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 Proprietary Information.
1.103 "Term" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement.
1.104 "Total Hotel Sales" shall mean, for each Fiscal Year, or Fiscal
Quarter, 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
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operation of the Hotel, which shall be deposited in the Reserve); service
charges, to the extent not distributed to the employees at the Hotel as
gratuities; and proceeds paid to Tenant, if any, from business interruption or
other loss of income insurance; provided, however, that Total Hotel Sales shall
not include the following: gratuities to Hotel employees; federal, state or
municipal excise, sales, occupancy, use 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 paid to Tenant); 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 the Hotel; and interest which accrues on amounts deposited in
the Reserve.
1.105 "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.
1.106 "Unsuitable for Its Permitted Use" shall mean a state or
condition of the Hotel such that (a) following any damage or destruction
involving the Hotel, the Hotel cannot be operated in the good faith judgment of
Tenant 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 nine (9) months following such damage or destruction
or such shorter period of time as to which business interruption insurance is
available to cover Rent and other costs related to the Leased Property following
such damage or destruction, or (b) as the result of a partial taking by
Condemnation, the Hotel cannot be operated, in the good faith judgment of Tenant
on a commercially and economically practicable basis for its Permitted Use in
light of then existing circumstances.
1.107 "Work" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and
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interest in and to all of the following (collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibit C, attached hereto and made a part
hereof (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and 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 located on or in the
Leased Improvements, and all modifications, replacements, alterations
and additions to such property, except items, if any, included within
the category of Fixtures, but specifically excluding all items included
within the category of Tenant's Personal Property (collectively, the
"Leased Personal Property");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space (including any security
deposits held by Tenant pursuant thereto) in the Leased Improvements to
tenants thereof.
2.2 Condition of Leased Property. Tenant acknowledges receipt and
delivery of possession of the Leased Property and
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Tenant accepts the Leased Property in its "as is" condition, subject to the
rights of parties in possession, the existing state of title, including all
covenants, conditions, restrictions, reservations, mineral leases, easements and
other matters of record or that are visible or apparent on the Leased Property,
all applicable Legal Requirements, the lien of any financing instruments,
mortgages and deeds of trust existing prior to the Commencement Date or
permitted by the terms of this Agreement, and such other matters which would be
disclosed by an inspection of the Leased Property and the record title thereto
or by an accurate survey thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE
LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF
SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR
LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT THERETO, EXCEPT AS EXPRESSLY SET
FORTH HEREIN, AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT
OF THE CONDITION OF THE LEASED PROPERTY. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
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, contractors and materialmen
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 on the last day of the
tenth Accounting Period in the Fiscal Year 2012.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing and the term of all of the Other Leases shall be
simultaneously extended, the Term shall be automatically extended for two (2)
consecutive renewal terms of ten (10) years each (collectively, the "Extended
Terms"), unless Tenant shall give Landlord Notice, in Tenant's sole and absolute
discretion, not later than two (2) years prior to the scheduled expiration of
the then current Term of this Agreement (Fixed or Extended, as the case may be),
that Tenant elects not so to extend the term of this Agreement (and time shall
be of the essence with respect to the giving of such Notice). It is
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expressly understood and agreed that such Notice from Tenant shall be void and
of no effect and the Term shall be automatically extended unless Tenant shall
simultaneously elect not to extend the term of the Other Leases.
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Terms. If Tenant shall give Notice that it elects
not to extend the Term in accordance with this Section 2.4, this Agreement shall
automatically terminate at the end of the Term then in effect and Tenant shall
have no further option to extend the Term of this Agreement. Otherwise, the
extension of this Agreement shall be automatically effected without the
execution of any additional documents; it being understood and agreed, however,
that Tenant and Landlord shall execute such documents and agreements as either
party shall reasonably require to evidence the same.
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.
3.1.1 Minimum Rent.
(a) Minimum Rent shall be paid in advance on the first
Business Day of each Accounting Period; provided, however, that the
first payment of Minimum Rent shall be payable on the Commencement
Date.
(b) Adjustments of Minimum Rent Following Disbursements Under
Sections 5.1.3(b), 10.2 or 11.2. Effective on the date of each
disbursement to pay for the cost of any repairs, maintenance,
renovations or replacements pursuant to Sections 5.1.3(b), 10.2 or
11.2, the Minimum Rent shall be increased by a per annum amount equal
to the Disbursement Rate, determined as of the date of Tenant's Notice
to Landlord identifying the amount of and
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requirement for the applicable funds, times the amount so disbursed. If
any such disbursement is made during any Accounting Period on a day
other than the first day of a Accounting Period, Tenant shall pay to
Landlord on the first day of the immediately following Accounting
Period (in addition to the amount of Minimum Rent payable with respect
to such Accounting Period, as adjusted pursuant to this paragraph (b))
the amount by which Minimum Rent for the preceding Accounting Period,
as adjusted for such disbursement on a per diem basis, exceeded the
amount of Minimum Rent actually paid by Tenant for such preceding
Accounting Period.
3.1.2 Additional Rent.
(a) Amount. For each Lease Year or portion thereof, commencing
with the first Lease Year following the Base Year, Tenant shall pay
additional rent ("Additional Rent") with respect to such Lease Year,
pursuant to this Agreement, in an amount, not less than zero, equal to
seven percent (7%) of Excess Hotel Sales.
(b) Quarterly Installments. Installments of Additional Rent
for each Lease Year or portion thereof shall be calculated and paid
each Fiscal Quarter in arrears. Payment of each such installment shall
be made within 45 days after the end of each Fiscal Quarter and shall
be accompanied by an Officer's Certificate setting forth the
calculation of Additional Rent due and payable for such Fiscal Quarter.
The installment due with respect to each Fiscal Quarter shall be equal
to the Additional Rent due on Excess Hotel Sales for all Fiscal
Quarters elapsed during the applicable Fiscal Year less amounts
previously paid with respect thereto by Tenant. Amounts due shall be
determined by measuring Total Hotel Sales for all Fiscal Quarters
elapsed against Base Total Hotel Sales for the equivalent period during
the Base Year.
(c) Reconciliation of Additional Rent. In addition, on or
before April 30, of each year, commencing April 30, following the Base
Year, Tenant shall deliver to Landlord an Officer's Certificate setting
forth the Total Hotel Sales for such preceding Lease Year, together
with an audit of Total Hotel Sales for the preceding Lease Year,
conducted by Arthur Andersen LLP, or another "Big Six", so-called, firm
of independent certified public accountants proposed by Tenant and
approved by Landlord (which approval shall not be unreasonably withheld
or delayed). Landlord shall reimburse Tenant for the reasonable cost of
such audit.
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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 Disbursement Rate, which interest shall
accrue from the close of such preceding Lease Year until the date that
such certificate is required to be delivered (or, if sooner, the date
Tenant pays such excess to Landlord) 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, at Tenant's election, pay such difference
to Tenant within ten (10) Business Days after Tenant's written request
therefor or grant Tenant a credit in the amount of such difference
against Additional Rent next coming due under this Agreement or, at
Tenant's election, under any of the Other Leases, in any case, such
payment or credit to be made together with interest at the Disbursement
Rate, which interest shall accrue from the date of payment of Tenant
until the date such credit is applied or paid, as the case may be. If
such credit cannot be made because the Term has expired prior to
application in full thereof, provided no Event of Default has occurred
and is continuing, Landlord shall pay the unapplied balance of such
credit to Tenant, together with interest at the Disbursement Rate,
which interest shall accrue from the date of payment by Tenant until
the date of payment by Landlord.
(d) Confirmation of Additional Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices and in accordance
with GAAP, which will accurately record all Total Hotel Sales and
Tenant shall retain, for at least three (3) years after the expiration
of each Lease Year, reasonably adequate records conforming to such
accounting system showing all Total Hotel Sales for such Lease Year.
Landlord, at its own expense except as provided hereinbelow, shall have
the right, exercisable by Notice to Tenant given 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 Landlord does not commence an audit within such 1-year
period, such
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Officer's Certificate shall be deemed conclusively to be accepted by
Landlord as correct and Landlord shall have no further right to
challenge the same. Landlord shall use commercially reasonable efforts
to complete any such audit as soon as practicable. 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
determined, Tenant shall forthwith pay to Landlord the amount of the
deficiency, as finally agreed or determined, together with interest at
the Interest Rate, from the date such payment should have been made to
the date of payment thereof. If such deficiency, as agreed upon or
compromised as aforesaid, is more than three percent (3%) of the Total
Hotel Sales reported by Tenant for such Lease Year and, as a result,
Landlord did not receive at least ninety-five percent (95%) of the
Additional Rent payable with respect to such Lease Year, Tenant shall
pay the reasonable cost of such audit and examination. If any such
audit discloses that Tenant paid more Additional Rent for any Lease
Year than was due hereunder, and either Landlord agrees with the result
of such audit or the matter is otherwise determined, provided no Event
of Default has occurred and is continuing, Landlord shall grant Tenant
a credit equal to the amount of such overpayment against Additional
Rent next coming due in the amount of such difference, as finally
agreed or determined, together with interest at the Disbursement 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 Disbursement 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
confidentiality safeguards mutually acceptable to Landlord and Tenant,
in any litigation between the parties and except further that, subject
to the terms of Section 22.16, 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.
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3.1.3 Additional Charges. In addition to the Minimum Rent and
Additional Rent payable hereunder, Tenant shall pay to the appropriate parties
and discharge as and when due and payable the following (collectively,
"Additional Charges"):
(a) Impositions. Subject to Article 8 relating to permitted
contests, Tenant shall pay, or cause to be paid, all Impositions before
any fine, penalty, interest or cost (other than any opportunity cost as
a result of a failure to take advantage of any discount for early
payment) may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible, and shall promptly,
upon request, furnish to Landlord copies of official receipts or other
reasonably satisfactory proof evidencing such payments. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any
fine, penalty, premium, further interest or cost may be added thereto.
Landlord, at its expense, shall, to the extent required or permitted by
Applicable Law, prepare and file all tax returns and pay all taxes due
in respect of Landlord's net income, gross receipts, sales and use,
single business, transaction privilege, rent, ad valorem, franchise
taxes and taxes on its capital stock, and Tenant, at its expense,
shall, to the extent required or permitted by Applicable Laws, 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 file the
same with reasonable cooperation from Tenant. Landlord shall provide
Tenant with copies of assessment notices in sufficient time for Tenant
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to prepare a protest which Landlord shall file, at Tenant's written
request. All Impositions assessed against such personal property shall
be (irrespective of whether Landlord or Tenant shall file the relevant
return) paid by Tenant not later than the last date on which the same
may be made without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has
knowledge; provided, however, that Landlord's failure to give any such
notice shall in no way diminish Tenant's obligation hereunder to pay
such Impositions (except that Landlord shall be responsible for any
interest or penalties incurred as a result of Landlord's failure
promptly to forward the same).
(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 arising in connection with
the Leased Property except those obligations expressly assumed by
Landlord pursuant to the provisions of this Agreement or expressly
stated not to be an obligation of Tenant pursuant to this Agreement.
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement (other than
termination by reason of an Event of Default), Tenant may, within a
reasonable time after the end of the Term, provide Notice to Landlord
of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this
Agreement (unless this Agreement shall have been terminated following
an Event of Default).
3.2 Late Payment of Rent, Etc., If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, within five (5) days after
Landlord's written demand therefor, as Additional Charges, a late charge (to the
extent permitted by law) computed at the Overdue
<PAGE>
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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 and
Landlord shall pay when due, or cause the applicable Hotel Mortgagee to pay when
due, such Additional Charges to the Entity to which they are due. If any
payments due from Landlord to Tenant shall not be paid within ten (10) days
after its due date, Landlord shall pay to Tenant, on demand, a late charge (to
the extent permitted by law) computed at the Overdue Rate on the amount of such
installment from the due date of such installment to the date of payment
thereof.
In the event of any failure by Tenant to pay any Additional Charges
when due, except as expressly provided in Section 3.1.3(a), Tenant shall
promptly pay and discharge, as Additional Charges, every fine, penalty, interest
and cost which may be added for non-payment or late payment of such items.
Landlord shall have all legal, equitable and contractual rights, powers and
remedies provided either in this Agreement or by statute or otherwise in the
case of non-payment of the Additional Charges as in the case of non-payment of
the Minimum Rent and Additional Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments or
amounts of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including, without limitation,
those provisions for adjustment, refunding or abatement of such Rent and for the
funding of Landlord's obligations pursuant to Section 5.1.3.
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, refund, deferment or reduction of the Rent, or set-off
against the Rent, nor, except as otherwise expressly provided in this Agreement,
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
<PAGE>
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or by reason of eviction by paramount title; (c) any claim which Tenant may have
against Landlord by reason of any default (other than a monetary default) or
breach of any warranty by Landlord under this Agreement or any other agreement
between Landlord and Tenant, or to which Landlord and Tenant are parties; (d)
any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Landlord or
any assignee or transferee of Landlord; or (e) for any other cause whether
similar or dissimilar to any of the foregoing (other than a monetary default by
Landlord); provided, however, that the foregoing shall not apply or be construed
to restrict Tenant's rights in the event of any act or omission by Landlord
constituting negligence or willful misconduct. Except as otherwise specifically
provided in this Agreement, Tenant hereby waives all rights arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law,
to (a) modify, surrender or terminate this Agreement or quit or surrender the
Leased Property or any portion thereof, or (b) entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable or other
obligations to be performed by Tenant hereunder. The obligations of each party
hereunder shall be separate and independent covenants and agreements, and the
Rent and all other sums payable by Tenant hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated,
off-set, reduced or abated pursuant to the express provisions of this Agreement.
In any instance where, after the occurrence of an Event of Default, Landlord
retains, or is retaining, 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 as a result of such Event of Default, promptly upon determination of
such amount.
3.5 Security for Tenant's Performance. Tenant acknowledges that the
Retained Funds with respect to the Collective Leased Properties constitute
security for the faithful observance and performance by Tenant of all the terms,
covenants and conditions of this Agreement and the Other Leases by Tenant to be
observed and performed. If any Event of Default shall occur and be continuing
under this Agreement or the Other Leases, Landlord may, at its option and
without prejudice to any other remedy which Landlord may have on account
thereof, appropriate and apply the amount of such Retained Funds as may be
necessary to compensate Landlord toward the payment of the Rent or other sums
due Landlord under this Agreement or the Other Leases, as the case may be, as a
result of such breach by Tenant. It is understood and agreed that the aggregate
amount of the Retained Funds is not to be considered as prepaid rent, nor shall
damages be limited to the amount of the amount of the Retained Funds. Upon the
expiration or sooner termination of this Agreement, any
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unapplied balance of the Retained Funds allocable to the Leased Property shall
be paid by wire transfer to an account or accounts designated by the Sellers
under the Purchase Agreement (or by Tenant if the Sellers so designate).
Notwithstanding anything to the contrary contained herein, Landlord shall not
appropriate and apply any portion of the Retained Funds until it has exhausted
any available rights and remedies pursuant to the Limited Rent Guaranty.
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 and at any
other time that Tenant shall be in possession of the Leased Property,
continuously use and operate, the Leased Property as a Residence Inn by
Marriott hotel (or as a hotel under any successor brand name) and any
uses incidental thereto in accordance with the terms of the Franchise
Agreement. Subject to Section 16.3, Tenant shall not use the Leased
Property or any portion thereof for any other use without the prior
written consent of Landlord. No use shall be made or permitted to be
made of the Leased Property and no acts shall be done thereon which
will cause the cancellation of any insurance policy covering the Leased
Property or any part thereof (unless another adequate policy is
available), nor shall Tenant sell or otherwise provide or permit to be
kept, used or sold in or about the Leased Property any article which
may be prohibited by law or by the standard form of fire insurance
policies, or any other insurance policies required to be carried
hereunder, or fire underwriter's regulations. Tenant shall, at its sole
cost (except as expressly provided in Section 5.1.3(b)), comply with
all Insurance Requirements. Tenant shall not take or omit to take any
action, the taking or omission of which materially impairs the value or
the usefulness of the Leased Property or any part thereof for its
Permitted Use.
(b) In the event that, in the reasonable determination of
Tenant, it shall no longer be economically practical to operate the
Leased Property as a Residence Inn by Marriott hotel or if the
Franchisor shall terminate the Franchise Agreement, Tenant shall give
Landlord Notice thereof, which Notice shall set forth in reasonable
detail the reasons therefor. Thereafter, Landlord and Tenant shall
negotiate in good faith to agree on an alternative use for the Leased
<PAGE>
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Property, appropriate adjustments to the Additional Rent, the Reserve
and other related matters; provided, however, in no such event shall
the Minimum Rent be reduced or abated. In the event that operating the
Leased Property for such alternative use shall be outside of Tenant's
expertise as reasonably determined by Tenant, Tenant may engage a third
party Manager, reasonably acceptable to Landlord, for such purpose.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise commercially reasonable efforts to obtain and maintain
all approvals necessary to use and operate, for its Permitted Use, the Leased
Property and the Hotel located thereon under applicable law. Landlord shall, at
Tenant's expense, cooperate with Tenant in this regard, including executing all
applications and consents required to be signed by Landlord in order for Tenant
to obtain and maintain such approvals.
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 commit or suffer to be committed any
waste on the Leased Property, or in the Hotel, nor shall Tenant cause or permit
any unlawful nuisance thereon or therein. Tenant shall not suffer nor permit the
Leased Property, or any portion thereof, to be used in such a manner as (i)
might reasonably impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably allow a claim or claims for adverse usage or adverse
possession by the public, as such, or of implied dedication of the Leased
Property or any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the
provisions of Article 8, Tenant, at its sole expense, shall (i) comply with
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair, alteration and restoration of the Leased Property, and (ii)
comply with all appropriate licenses, and other authorizations and agreements
required for any use of the Leased Property and Tenant's Personal Property, if
any, then being made and which are material to the operation of the Leased
Property as a hotel, and for the proper 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
<PAGE>
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and any other time that Tenant shall be in possession of the Leased Property,
Tenant shall 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, notify Landlord in writing of
any material change in the nature or extent of Hazardous Substances at the
Leased Property, (b) transmit to Landlord a copy of any Community Right to Know
report which is required to be filed by Tenant with respect to the Leased
Property pursuant to SARA Title III or any other Applicable Law, (c) transmit to
Landlord copies of any citations, orders, notices or other governmental com
munications received by Tenant or 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)
observe and comply with all Applicable Laws relating to the use, maintenance and
disposal of Hazardous Substances and all orders or directives from any official,
court or agency of competent jurisdiction relating to the use or maintenance or
requiring the removal, treatment, containment or other disposition thereof, and
(e) pay or otherwise dispose of any fine, charge or Imposition related thereto,
unless Tenant shall contest the same in good faith and by appropriate
proceedings and the right to use and the value of the Leased Property is not
materially and adversely affected thereby.
If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Applicable Laws) are
discovered on the Leased Property, subject to Tenant's right to contest the same
in accordance with Article 8, Tenant shall take all actions and incur any and
all expenses, as may be reasonably necessary and as may be required by any
Government Agency, (i) to clean up and remove from and about the Leased Property
all Hazardous Substances thereon, (ii) to contain and prevent any further
release or threat of release of Hazardous Substances on or about the Leased
Property and (iii) to use good faith efforts to eliminate any further release or
threat of release of Hazardous Substances on or about the Leased Property.
4.3.2 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord and each Hotel Mortgagee, their trustees,
officers, agents, employees and beneficiaries, and any of their respective
successors or assigns with respect to this Agreement (collectively, the
"Indemnitees" and, individually, an "Indemnitee") for, from and against any and
all debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including,
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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
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
gross negligence or willful misconduct of Landlord or any other Indemnitee.
Tenant's duty herein includes, but is not limited to, costs associated with
personal injury or property damage claims as a result of the presence prior to
the expiration or sooner termination of the Term and the surrender of the Leased
Property to Landlord in accordance with the terms of this Agreement of Hazardous
Substances in, upon or under the soil or ground water of the Leased Property in
violation of any Applicable Law. Upon Notice from Landlord and any other of the
Indemnitees, Tenant shall undertake the defense, at Tenant's sole cost and
expense, of any indemnification duties set forth herein, in which event, Tenant
shall not be liable for payment of any duplicative attorneys' fees incurred by
any Indemnitee.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage (including, without limitation, reasonable
attorneys' fees) incurred by Landlord and arising from a failure of Tenant
strictly to observe and perform the requirements of this Section 4.3, which
amounts shall bear interest from the date ten (10) days after written demand
therefor is given to Tenant until paid by Tenant to Landlord at the Overdue
Rate.
Tenant's obligations pursuant to the terms of this Section 4.3.2 are
subject to Tenant's right to use the Reserve for the purposes set forth in
Section 5.1.2(a)(v).
4.3.3 Survival. As to conditions which exist prior to the
expiration or sooner termination of this Agreement, the provisions of this
Section 4.3 shall survive the expiration or sooner termination of this
Agreement.
<PAGE>
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ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost and expense (except as
expressly provided in Sections 5.1.2 and 5.1.3(b)), keep the Leased
Property and all private roadways, sidewalks and curbs located thereon
(and Tenant's Personal Property, if any) in good order and repair,
reasonable wear and tear excepted (whether or not the need for such
repairs occurs as a result of Tenant's use, any prior use, the elements
or the age of the Leased Property or Tenant's Personal Property, if
any, or any portion thereof), and shall promptly make 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 the industry standards for like hotels in like locales,
in accordance with all applicable federal, state and local statutes,
ordinances, by-laws, codes, rules and regulations relating to any such
work. Tenant shall not take or omit to take any action, the taking or
omission of which would materially and adversely impair the value or
the usefulness of the Leased Property or any part thereof for its
Permitted Use. Tenant's obligations under this Section 5.1.1(a) shall
be limited in the event of any casualty or Condemnation as set forth in
Sections 10.2 and 11.2 and Tenant's obligations with respect to
Hazardous Substances are as set forth in Section 4.3.
5.1.2 Reserve.
(a) Prior to or simultaneously with the execution of this
Agreement, Landlord has deposited an aggregate amount of One Million
Two Hundred Ninety-Three Thousand Seven Hundred Seventy Dollars
($1,293,770) with respect to the Collective Leased Properties, such sum
to be held in an interest bearing reserve account established by Tenant
(the "Reserve") in a bank designated by Landlord and approved by
Tenant. All interest earned on the Reserve shall be added to and remain
apart of the Reserve. Tenant shall be the only party entitled to
withdraw funds from the Reserve until an Event of Default shall occur,
Landlord agreeing, however, that, following the occurrence of an Event
of Default and
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until such time as this Agreement shall have been terminated, Landlord
shall continue to make payments from the Reserve to contractors and
materialmen pursuant to contracts made by Tenant for items which are
permitted Reserve expenditures, provided that Landlord shall reasonably
determine that there are adequate Reserve funds available therefor. The
purpose of the Reserve is to cover the cost of:
(i) Replacements, renewals and additions to the furniture,
furnishings, fixtures and equipment at the Hotel and the other
hotels located at the Collective Leased Properties;
(ii) Routine repairs, renovations, renewals, additions,
alterations, improvements or replacements and maintenance to
the Leased Property and the buildings and improvements located
at the Collective Leased Properties 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;
(iii) Major repairs, renovations, additions, alterations,
improvements, renewals or replacements to the Leased Property
and the buildings and improvements located at the Collective
Leased Properties, including, without limitation, with respect
to their structure, roof, or exterior facade, and to their
mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems;
(iv) All lease payments for equipment and other personal property
reasonably necessary for the operation of the Hotel and the
hotels located at the Collective Leased Properties; and
(v) Repairs, replacements and renewals; and other expenditures
costing in excess of $25,000 per Lease Year at the Collective
Leased Properties; provided, in each case, such repairs,
replacements, renewals or other expenditures are required to
comply with Legal Requirements and Insurance Requirements.
(b) Throughout the Term, Tenant shall transfer (as of the
end of each Accounting Period of the Term) into the Reserve an amount
equal to the Applicable Percentage of Total Hotel Sales for such
Accounting Period; provided; however, that Tenant shall have no
obligation to fund and/or transfer any funds to the Reserve until such
time as the Reserve balance would equal One Million Two Hundred Ninety-
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Three Thousand Seven Hundred Seventy Dollars ($1,293,770) had Tenant
funded the Reserve as required by the preceding clause of this
sentence. 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 Reserve for the preceding Fiscal Year, together
with a comparison of such expenditures with the applicable Reserve
Estimate.
(c) Each year, on or before December 1 of the preceding
year, Tenant shall prepare an estimate (the "Reserve Estimate") of
Reserve expenditures necessary during the ensuing Fiscal Year, and
shall submit such Reserve Estimate to Landlord for its review. All
expenditures from the 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 Hotel will be maintained and operated to a
standard comparable to competitive properties and in accordance with
the standards set forth in the Franchise Agreement.
(d) Tenant shall from time to time make expenditures from
the Reserve as it deems necessary in accordance with Section 5.1.2(a).
Tenant shall provide to Landlord, within forty (40) Business Days after
the end of each Accounting Period, a statement setting forth, on a line
item basis, Reserve expenditures made to date and any variances or
anticipated variances and/or amendments from the Reserve Estimate.
(e) All funds in the Reserve, all interest earned thereon
and all property purchased with funds from the Reserve shall be and
remain the property of Landlord.
(f) It is understood and agreed that the Reserve pursuant to
this Agreement and the Other Leases shall be maintained and used on a
consolidated basis such that all Reserve funds shall be deposited in a
single account and Tenant may apply any funds therein to any of the
Collective Leased Properties in accordance with the terms of this
Agreement and Other Leases.
(g) If Landlord wishes to grant a security interest in or
create another encumbrance on the Reserve, all or any part of the
existing or future funds therein, or any general intangible in
connection therewith, the instrument granting such security interest or
creating such other encumbrance shall expressly provide that such
security interest or encumbrance is subject to the rights of Tenant
with respect to the Reserve as set forth herein. The form and substance
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of such provision shall be subject to Tenant's prior written approval,
which approval shall not be unreasonably withheld, delayed or
conditioned.
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,
except as provided in Section 5.1.3(b), to make any expenditure
whatsoever with respect thereto, or to maintain the Leased Property in
any way. Except as otherwise expressly provided in this Agreement,
Tenant hereby waives, to the maximum extent permitted by law, the right
to make repairs at the expense of Landlord pursuant to any law in
effect on the date hereof or hereafter enacted. Landlord shall have the
right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter
existing.
(b) If, at any time, funds in the Reserve shall be
insufficient or are reasonably projected to be insufficient for
necessary and permitted expenditures thereof, Tenant may, at its
election, give Landlord Notice thereof, which Notice shall set forth,
in reasonable detail, the nature of the required or permitted action,
the estimated cost thereof (including the amount which is in excess of
the amount of funds in the Reserve) and such other information with
respect thereto as Landlord may reasonably require. Provided that (i)
no Event of Default shall have occurred and be continuing as to which
(x) ninety (90) days or less shall have elapsed after Notice of the
occurrence thereof from Landlord to Tenant or (y) Landlord shall have
commenced enforcing and is diligently pursuing enforcing its rights and
remedies, and (ii) Tenant shall otherwise comply with the applicable
provisions of Article 6, Landlord shall, within ten (10) Business Days
after such Notice, or such later dates as Tenant may direct by
reasonable prior Notice, subject to and in accordance with the
applicable provisions of Article 6, disburse such required funds to
Tenant (or, if Tenant shall so elect, directly to the Manager or any
other Person performing the required work) and, upon such disbursement,
the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). In
the event that any dispute shall arise with respect to Landlord's
obligation to disburse any funds pursuant to this Section 5.1.3(b),such
dispute shall be resolved in accordance with the applicable provisions
of
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Article 19. Whenever reasonably possible, Landlord shall identify
disputed items on a line item basis.
5.1.4 Nonresponsibility of Landlord, Etc. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property, or any part thereof, are hereby
charged with notice that liens on the Leased Property or on Landlord's interest
therein are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished by Tenant or for any
other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under any Mechanic's Lien Law of the State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.
5.2 Tenant's Personal Property. Tenant shall provide and maintain
throughout the Term all such Tenant's Personal Property and such other personal
property as shall be necessary in order to operate in compliance with applicable
Legal Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Permitted Use. 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 and for which the fair market
value, as reasonably determined by Tenant, exceeds the product of One Thousand
Dollars ($1,000), adjusted as provided below, multiplied by the number of hotel
rooms or suites at the Leased Property, 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. Notwithstanding anything to the contrary contained herein, at
the expiration or sooner termination of the Term, Landlord may, in its sole and
absolute discretion, elect either (i) to give Tenant Notice that Tenant shall be
required, within ten (10) Business Days after such expiration or termination, to
remove all FAS and Inventories from
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the Leased Property or (ii) to pay Tenant's cost of such FAS and Inventories.
Failure of Landlord to make such election shall be deemed an election to proceed
in accordance with clause (ii) preceding. The $1,000 amount referred to above
shall be increased from time to time by an amount equal to $1,000 multiplied by
a fraction, the denominator of which shall be the Index for the nearest month
prior to the Commencement Date and the numerator of which shall be the Index for
the nearest month for which the Index is available prior to the first day of the
Accounting Period in which such determination is being made.
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, replaced, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Agreement,
reasonable wear and tear (and casualty damage and Condemnation, in the event
that this Agreement is terminated following a casualty or total Condemnation in
accordance with Article 10 or Article 11) excepted.
In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith, commercially reasonable 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 entered into by Tenant, including contracts
with governmental or quasi-governmental Entities which may be necessary for the
use and operation of the Hotel as then operated, but excluding (i) all insurance
contracts and multi- property contracts not limited in scope to the Collective
Leased Properties the Leases for which are being terminated simultaneously,(ii)
all contracts and leases with Affiliated Persons, (iii) utility deposits and
(iv) telephone numbers (which telephone numbers Tenant shall be required to
convey to Landlord only if this Agreement is terminated as a result of an Event
of Default). Landlord shall indemnify and hold Tenant harmless for all claims,
costs and expenses (including reasonable attorneys' fees) arising from acts or
omissions by Landlord under such contracts subsequent to the date of transfer
thereof to Landlord. If requested by Landlord on or before the date which is at
least 60 days prior to such expiration or earlier termination of this Agreement,
Tenant will continue to manage the Hotel after the expiration of the Term and
for up to one hundred twenty (120) days, on such reasonable terms (which shall
include an agreement to reimburse Tenant for its reasonable out-of-pocket costs
and expenses, and reasonable administrative costs and a management fee equal to
10% of Total Hotel Sales), as Landlord and Tenant shall reasonably agree.
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5.4 Management Agreement. Tenant may from time to time, without
Landlord's consent, enter into, amend (except as provided in clauses (i) and
(ii) below) and/or terminate Management Agreements with its Affiliated Persons
delegating operational authority for the day-to-day operation of the Hotel to a
Manager who is an Affiliated Person as to Tenant provided that any such
Management Agreement shall provide (i) that all amounts due from Tenant to the
Manager shall be subordinate to all amounts due from Tenant to Landlord, and
(ii) for the termination thereof upon the termination of this Agreement or the
Franchise Agreement. Except as otherwise provided in Sections 4.1.1(b) and
14.3(c), Tenant shall not otherwise enter into, amend or modify any Management
Agreement with a Person that is not an Affiliated Person as to Tenant without
Landlord's prior written consent. Landlord shall have no right to enforce
Tenant's rights under any such Management Agreement.
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Improvements to the Leased Property. Prior to commencing
construction of any Capital Addition constituting additions or modifications to
any structural elements of the Hotel, the cost of which is reasonably estimated
to exceed $250,000 (as adjusted as provided below) (other than any Capital
Addition which is reasonably required to be made immediately in order to prevent
imminent damage or danger to person or property), Tenant shall submit to
Landlord, in writing, a proposal setting forth, in reasonable detail, any such
proposed improvement and cost estimate therefor and shall provide to Landlord
such plans and specifications, and such permits, licenses, contracts and such
other information concerning the same as Landlord may reasonably request.
Landlord shall have twenty (20) Business Days to review all materials submitted
to Landlord in connection with any such proposal. Failure of Landlord to respond
to Tenant's proposal within twenty (20) Business Days after receipt of all
information and materials requested by Landlord in connection with the proposed
improvement shall be deemed to constitute approval of the same. Landlord's
approval shall not be withheld as to any such Capital Addition that is required
to comply with the Franchise Agreement. In the event that any dispute shall
arise with respect to Landlord's withholding of its approval pursuant to this
Section 6.1, such dispute shall be resolved in accordance with the applicable
provisions of Article 19. No Capital Addition shall be made which would tie in
or connect any Leased Improvement with any other improvements on property
adjacent to the Leased Property (and not part of the Land) including, without
limitation, tie-ins of buildings or other structures or utilities. Tenant shall
not
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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. The $250,000 limit referred to
above shall be increased from time to time to an amount equal to $250,000
multiplied by a fraction, the denominator of which shall be the Index for the
nearest month prior to the Commencement Date and the numerator of which shall be
the Index for the nearest month for which the Index is available prior to the
first day of the Accounting Period in which such determination is being made.
6.2 Salvage. Other than Tenant's Personal Property, all materials which
are scrapped or removed in connection with the making of either Capital
Additions or non-Capital Additions or repairs pursuant to Articles 5 or 6 shall
be disposed of by Tenant and the net proceeds thereof, if any, shall be
deposited in the Reserve.
6.3 Equipment Leases. Landlord shall enter into such leases of
equipment and personal property as Tenant may reasonably request from time to
time, provided that the form and substance thereof shall be reasonably
satisfactory to Landlord. Tenant shall prepare and deliver to Landlord all such
lease documents for which Landlord's execution is necessary and Landlord shall
promptly, upon approval thereof, execute and deliver such documents to Tenant.
Tenant shall, throughout the Term, be responsible for performing all of
Landlord's obligations under all such documents and agreements.
ARTICLE 7
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 17, (e) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (i) the same are not yet due and
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payable, or (ii) are being contested in accordance with Article 8, (f) liens of
mechanics, laborers, materialmen, suppliers or vendors incurred in the ordinary
course of business that are not yet due and payable or are for sums that are
being contested in accordance with Article 8, (g) any Hotel Mortgages or other
liens which are the responsibility of Landlord pursuant to the provisions of
Article 21 and (h) Landlord Liens.
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 required hereunder to be paid by Tenant 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 a lien
attaching to the Leased Property, unless such lien is fully bonded or otherwise
secured to the reasonable satisfaction of Landlord, (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 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
Notice to Tenant, pay such charges, together with interest and
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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 the
following insurance:
(a) "All-risk" property insurance, including insurance
against loss or damage by fire, vandalism and malicious mischief,
earthquake, explosion of steam boilers, pressure vessels or other
similar apparatus, now or hereafter installed in the Hotel located at
the Leased Property, with equivalent coverage as that provided by the
usual extended coverage endorsements, in an amount equal to one hundred
percent (100%) of the then full Replacement Cost thereof excluding
foundation and excavation (as defined in Section 9.2) (except that the
foregoing shall not be construed to require Tenant to maintain
earthquake insurance if the same is unavailable on commercially
reasonable terms, provided Tenant gives Landlord prior Notice thereof,
and except that the amount of earthquake insurance shall not
necessarily be 100% of the then full Replacement Cost). The parties
agree that such earthquake insurance can be provided through a blanket
earthquake insurance program with limits adequate to protect the
regional aggregate probable maximum loss for all properties under the
blanket program.
(b) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy or endorsement 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 managed
or leased by the Guarantor and its Affiliated Persons and in an amount
sufficient to prevent Landlord or Tenant from becoming a co-insurer;
(c) Comprehensive general liability insurance, including
bodily injury and property damage (on an occurrence basis and on a 1973
or 1988 ISO CGL form or on a form customarily maintained by similarly
situated tenants, including, without limitation, broad form contractual
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liability, independent contractor's hazard and completed operations
coverage) in an amount not less than Two Million Dollars ($2,000,000)
per occurrence and umbrella coverage of all such claims in an amount
not less than Twenty-Three Million Dollars ($23,000,000);
(d) Flood (if the Leased Property is located in whole or in
part within an area identified as an area having special flood hazards
and in which flood insurance has been made available under the National
Flood Insurance Act of 1968, as amended, or the Flood Disaster
Protection Act of 1973, as amended (or any successor acts thereto)) and
such other hazards and in such amounts as may be available under the
National Flood Insurance Program for comparable properties in the area;
(e) Worker's compensation insurance coverage for all persons
employed by Tenant on the Leased Property with statutory limits and
otherwise with limits of and provisions in accordance with the
requirements of applicable local, State and federal law, and employer's
liability insurance as is customarily carried by similar employers (as
to which, if qualified, Tenant may self insure); 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 determina tion of such
appraiser shall be final and binding on the parties hereto until any subsequent
determination under this Section 9.2, and Tenant shall forthwith conform the
amount of the insurance carried to the amount so determined by the appraiser.
Such replacement value determination will not be necessary so long as the Leased
Property is insured through a blanket replacement value policy.
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9.3 Waiver of Subrogation. Landlord and Tenant agree that (insofar as
and to the extent that such agreement may be effective without invalidating or
making it impossible to secure insurance coverage from responsible insurance
companies doing business in the State) with respect to any property loss which
is covered by insurance then being carried by Landlord or Tenant, respectively,
the party carrying such insurance and suffering said loss releases the other of
and from any and all claims with respect to such loss; and they further agree
that their respective insurance companies shall have no right of subrogation
against the other on account thereof, even though extra premium may result
therefrom. In the event that any extra premium is payable by Tenant as a result
of this provision, Landlord shall not be liable for reimbursement to Tenant for
such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for, nonassessable and,
except for umbrella, worker's compensation, flood and earthquake coverage, be
issued by insurance carriers authorized to do business in the State, having a
general policy holder's rating of no less than B++ in Best's latest rating
guide. All such policies described in Sections 9.1(a) through (d) shall include
no deductible in excess of that carried by the Guarantor and its Affiliated
Persons at similar 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 and to the extent of their indemnity.
All loss adjustments shall be payable as provided in Article 10. Tenant shall
cause all insurance premiums to be paid and shall deliver policies or
certificates thereof to Landlord prior to their effective date (and, with
respect to any renewal policy, prior to the expiration of the existing policy).
All such policies shall provide Landlord (and any Hotel Mortgagee if required by
the same) thirty (30) days prior written notice of any material change or
cancellation of such policy. In the event Tenant shall fail to effect such
insurance as herein required, to pay the premiums therefor or to deliver such
policies or certificates to Landlord or any Hotel Mortgagee at the times
required, Landlord shall have the right, but not the obligation, subject to the
provisions of Section 12.5, to acquire such insurance and pay the premiums
therefor, which amounts shall be payable to Landlord, upon demand, as Additional
Charges, together with interest accrued thereon at the Overdue Rate from the
date such payment is made until (but excluding) the date repaid.
9.5 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance
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carried and maintained by Tenant, provided, that the policies meet the
requirements of this Agreement.
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 under Tenant's
control, (b) any 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, and (c) any Impositions that are the
obligations of Tenant to pay pursuant to the applicable provisions of this
Agreement; provided, however, that Tenant's obligations hereunder shall not
apply to any liability, obligation, claim, damage, penalty, cause of action,
cost or expense to the extent the same arises from any negligence or willful
misconduct of Landlord, its employees, agents or invitees. Tenant, at its
expense, shall contest, resist and defend any such claim, action or proceeding
asserted or instituted against Landlord (and shall not be responsible for any
duplicative attorneys' fees incurred by Landlord) or may compromise or otherwise
dispose of the same, with Landlord's prior written consent (which consent may
not be unreasonably withheld or delayed). In the event Landlord shall
unreasonably withhold or delay its consent, Tenant shall not be liable
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pursuant to this Section 9.7 for any incremental increase in costs or expenses
resulting therefrom. The obligations of Tenant under this Section 9.7 are in
addition to the obligations set forth in Section 4.3 and shall survive the
termination of this Agreement.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any property policy of
insurance required by Article 9 (other than the proceeds of any business
interruption insurance) shall be paid directly to Landlord (subject to the
provisions of Section 10.2) and all loss adjustments with respect to property
losses payable to Tenant shall require the prior written consent of Landlord;
provided, however, that, so long as no Event of Default shall have occurred and
be continuing, all such proceeds less than or equal to Two Hundred Fifty
Thousand Dollars ($250,000) shall be paid directly to Tenant and such losses may
be adjusted without Landlord's consent. If Tenant is required to reconstruct or
repair the Leased Property as provided herein, such proceeds shall be paid out
by Landlord from time to time for the reasonable costs of reconstruction or
repair of the Leased Property necessitated by such damage or destruction,
subject to and in accordance with the provisions of Section 10.2.4. Provided no
Default or Event of Default has occurred and is continuing, any excess proceeds
of insurance remaining after the completion of the restoration shall be paid to
Tenant. In the event that the provisions of Section 10.2.1 are applicable, the
insurance proceeds shall be retained by the party entitled thereto pursuant to
Section 10.2.1. All salvage resulting from any risk covered by insurance shall
belong to Landlord, provided any rights to the same have been waived by the
insurer.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property. If, during
the Term, the Leased Property shall be totally or partially destroyed and the
Hotel located thereon is thereby rendered Unsuitable for Its Permitted Use,
Tenant may, by the giving of Notice thereof to Landlord, terminate this
Agreement, whereupon, this Agreement shall terminate and Landlord shall be
entitled to retain the insurance proceeds payable on account of such damage.
10.2.2 Partial Damage or Destruction. If, during the Term,
the Leased Property shall be totally or partially
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destroyed but the Hotel is not rendered Unsuitable for Its Permitted Use, Tenant
shall, subject to Section 10.2.3, promptly restore the Hotel as provided in
Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds. If the cost of the
repair or restoration of the Leased Property exceeds the amount of insurance
proceeds received by Landlord and Tenant pursuant to Article 9(a), (c), (d) or,
if applicable, (e), 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 by Notice to the other, whereupon, this Agreement shall terminate as
provided in Section 10.2.1. It is expressly understood and agreed, however,
that, notwithstanding anything in this Agreement to the contrary, Tenant shall
be strictly liable and solely responsible for the amount of any deductible
(other than deductibles under the then existing earthquake insurance maintained
in accordance with Section 9.1) and shall, upon any insurable loss, pay over the
amount of such deductible to Landlord at the time and in the manner herein
provided for payment of the applicable proceeds to Landlord.
10.2.4 Disbursement of Proceeds. In the event Tenant is
required to restore the Leased Property pursuant to Section 10.2, Tenant shall
commence promptly and continue diligently to perform the repair and restoration
of the Leased Property (hereinafter called the "Work"), so as to restore the
Leased Property in compliance with all Legal Requirements and so that the Leased
Property shall be, to the extent practicable, substantially equivalent in value
and general utility to its general utility and value immediately prior to such
damage or destruction. Subject to the terms hereof, Landlord shall advance the
insurance proceeds and any additional amounts payable by Landlord pursuant to
Section 10.2.3 to Tenant regularly during the repair and restoration period so
as to permit payment for the cost of any such restoration and repair. Any such
advances shall be made not more than monthly within ten (10) Business Days after
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Tenant submits to Landlord a written requisition and substantiation therefor on
AIA Forms G702 and G703 (or on such other form or forms as may be reasonably
acceptable to Landlord). Landlord may, at its option, condition advancement of
said insurance proceeds and other amounts on (i) the absence of any Event of
Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld or
delayed), (iii) general contractors' estimates, (iv) architect's certificates,
(v) unconditional lien waivers of general contractors, if available, (vi)
evidence of approval by all governmental authorities and other regulatory bodies
whose approval is required and (vii) such other certificates as Landlord may,
from time to time, reasonably require.
Landlord's obligation to disburse insurance proceeds under this Article
10 shall be subject to the release of such proceeds by any Hotel Mortgagee to
Landlord.
Tenant's obligation to restore the Leased Property pursuant to this
Article 10 shall be subject to the release of available insurance proceeds by
the applicable Hotel Mortgagee to Landlord or directly to Tenant and, in the
event such proceeds are insufficient, Landlord electing to make such deficiency
available therefor (and disbursement of such deficiency).
10.3 Damage Near End of Term; Damage from Earthquake.
(a) Notwithstanding any provisions of Section 10.1 or 10.2
to the contrary, if damage to or destruction of the Leased Property
occurs during the last twelve (12) months of the then Term (including
any exercised Extended Term) and if such damage or destruction cannot
reasonably be expected to be fully repaired and restored prior to the
date that is nine (9) months prior to the end of such Term (including
any exercised Extended Term), the provisions of Section 10.2.1 shall
apply as if the Leased Property had been totally or partially destroyed
and the Hotel rendered Unsuitable for its Permitted Use.
(b) Notwithstanding any provisions of Section 10.1 or 10.2
to the contrary, if (x) Material Earthquake Damage (as defined below)
to the Leased Property occurs and (y) Tenant was not required to
maintain earthquake insurance pursuant to Section 9.1, Tenant shall
have the right, by the giving of Notice thereof to Landlord within
sixty (60) days after the date of earthquake, to terminate this
Agreement. If Tenant shall so elect to terminate this Agreement, this
Agreement shall terminate as of the date of such earthquake, provided
that Tenant shall pay to Landlord, on or before the date of such
Notice, an amount equal to the lesser of (x)
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the Minimum Rent payable for the balance of the applicable Term
(without giving effect to such termination but after giving effect to
any exercised Extended Term) and (y) Eight Million Five Hundred
Thousand Dollars ($8,500,000), which payment may be made, at Tenant's
election, by application thereto of the Retained Funds.
For purposes of this Section 10.3(b), "Material Earthquake
Damage" shall mean damage or destruction of the Leased Property
resulting from earthquake, the repair or restoration of which will cost
in excess of an amount equal to One Million Five Hundred Thousand
Dollars ($1,500,000) multiplied by a fraction, the denominator of which
shall be the Index for the nearest month prior to the date of this
Agreement and the numerator of which shall be the Index for the nearest
month prior to the date of such earthquake.
(c) It is expressly understood and agreed that, in the event
Tenant elects or is required to repair any damage or destruction to the
Leased Property resulting from earthquake and as to which Tenant was
not required to maintain insurance pursuant to Section 9.1 or as to
which Tenant maintained coverage pursuant to Section 9.1 but the
proceeds thereof are inadequate, provided that not less than five full
Lease Years remain in the Term (including any exercised Extended Term),
Tenant may use funds from the Reserve to pay for the restoration and
repair costs and Landlord shall be obligated to disburse additional
funds subject to and upon the terms and conditions of Section 5.1.3(b).
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid to Tenant
and, to the extent necessary to repair or replace Tenant's Personal Property in
accordance with Section 10.5, Tenant shall hold such proceeds in trust to pay
the cost of repairing or replacing damaged Tenant's Personal Property.
10.5 Restoration of Tenant's Property. If Tenant is required to restore
the Leased Property as hereinabove provided, Tenant shall either (a) restore all
alterations and improvements made by Tenant and Tenant's Personal Property, or
(b) replace such alterations and improvements and Tenant's Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
10.6 No Abatement of Rent. This Agreement shall remain in full force
and effect and Tenant's obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall remain unabated
during the
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Term notwithstanding any damage involving the Leased Property (provided that
Landlord shall credit against such payments any amounts paid to Landlord as a
consequence of such damage under any business interruption insurance obtained by
Tenant hereunder). The provisions of this Article 10 shall be considered an
express agreement governing any cause of damage or destruction to the Leased
Property and, to the maximum extent permitted by law, no local or State statute,
laws, rules, regulation or ordinance in effect during the Term which provide for
such a contingency shall have any application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of the Leased
Property shall be taken by Condemnation or (ii) a Condemnation of less than the
whole of the Leased Property renders the Leased Property Unsuitable for Its
Permitted Use, this Agreement shall terminate and Tenant and Landlord shall seek
the Award for their interests in the Leased Property as provided in Section
11.5.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of the Leased Property such that the Leased Property is not rendered
Unsuitable for Its Permitted Use, Tenant shall, to the extent of the Award and
any additional amounts disbursed by Landlord as hereinafter provided, commence
promptly and continue diligently to restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to such Condemnation, in full compliance with all Legal
Requirements, subject to the provisions of this Section 11.2. If the cost of the
repair or restoration of the Leased Property exceeds the amount of the Award,
Tenant shall give Landlord Notice thereof which notice shall set forth in
reasonable detail the nature of such deficiency and whether Tenant shall pay and
assume the amount of such deficiency (Tenant having no obligation to do so,
except that if Tenant shall elect to make such funds available, the same shall
become an irrevocable obligation of Tenant pursuant to this Agreement). In the
event Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at
Landlord's sole election by Notice to Tenant given
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within sixty (60) days after Tenant's Notice of the deficiency, to elect to make
available for application to the cost of repair or restoration the amount of
such deficiency; provided, however, in such event, upon any disbursement by
Landlord thereof, the Minimum Rent shall be adjusted as provided in Section
3.1.1(b). In the event that neither Landlord nor Tenant shall elect to make such
deficiency available for restoration, either Landlord or Tenant may terminate
this Agreement and the entire Award shall be retained by Landlord.
11.3 Disbursement of Award. Subject to the terms hereof, Landlord shall
contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements and any deficiency Landlord has agreed
to disburse, to Tenant regularly during the restoration period so as to permit
payment for the cost of such repair or restoration. Landlord may, at its option,
condition advancement of such Award and other amounts on (i) the absence of any
Event of Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld or
delayed), (iii) general contractors' estimates, (iv) architect's certificates,
(v) unconditional lien waivers of general contractors, if available, (vi)
evidence of approval by all governmental authorities and other regulatory bodies
whose approval is required and (vii) such other certificates as Landlord may,
from time to time, reasonably require. Landlord's obligation under this Section
11.3 to disburse the Award and such other amounts shall be subject to (x) the
collection thereof by Landlord and (y) the satisfaction of any applicable
requirements of any Hotel Mortgage, and the release of such Award by the
applicable Hotel Mortgagee. Tenant's obligation to restore the Leased Property
shall be subject to the release of the Award by the applicable Hotel Mortgagee
to Landlord.
11.4 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. 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.
11.5 Temporary Condemnation. In the event of any temporary Condemnation
of the Leased Property or Tenant's interest therein,
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this Agreement shall continue in full force and effect and Tenant shall continue
to pay, in the manner and on the terms herein specified, the full amount of the
Rent. Tenant shall continue to perform and observe all of the other terms and
conditions of this Agreement on the part of the Tenant to be performed and
observed. Provided no Event of Default has occurred and is continuing, the
entire amount of any Award made for such temporary Condemnation allocable to the
Term, whether paid by way of damages, rent or otherwise, shall be paid to
Tenant. Tenant shall, promptly upon the termination of any such period of
temporary Condemnation, at its sole cost and expense, restore the Leased
Property to the condition that existed immediately prior to such Condemnation,
in full compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration. For purposes of this
Section 11.4, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twelve (12) months.
11.6 Allocation of Award. Except as provided in Section 11.4 and the
second sentence of this Section 11.5, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property, or
Tenant's removal and relocation expenses shall be the sole property of and
payable to Tenant (subject to the provisions of Section 11.2). In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent or
any other sum (including, but not limited to, funding of the Reserve),
payable hereunder when due and such failure shall continue for a period
of ten (10) days after Notice thereof; or
(b) should Tenant fail to maintain the insurance coverages
required under Article 9 and such failure shall continue for ten (10)
days after Notice thereof (except that
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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 fifteen (15) days after Notice thereof from
Landlord and thereafter prosecutes the curing of such default with all
due diligence, such period of time shall be extended to such period of
time as may be necessary to cure such default with all due diligence;
or
(d) should a material event of default by Tenant or its
Affiliated Persons occur and be continuing beyond the expiration of any
applicable cure period under any of the Incidental Documents or the
Other Leases; or
(e) should any material representation or warranty made by
Tenant or any of its Affiliated Persons under or in connection with
this Agreement, any Incidental Document or the Other Leases, or in any
document, certificate or agreement delivered in connection herewith
prove to have been false in any material respect on the date when made
or deemed made and such default shall continue for a period of fifteen
(15) days after Notice thereof from Landlord to Tenant; provided,
however, that (x) if such default is susceptible of cure but such cure
cannot be accomplished with due diligence within such period of time
and if, in addition, Tenant commences to cure or cause to be cured such
default within fifteen (15) days after Notice thereof from Landlord and
thereafter prosecutes the curing of such default with all due
diligence, such period of time shall be extended to such period of time
as may be necessary to cure such default with all due diligence; or
(f) 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
(g) should any petition be filed by or against Tenant under
the Federal bankruptcy laws, or should any other proceeding be
instituted by or against Tenant seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, reorganization, arrangement,
adjustment or
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composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for Tenant or for any substantial
part of the property of Tenant and such proceeding is not dismissed
within ninety (90) days after institution thereof, or should Tenant
take any action to authorize any of the actions set forth above in this
paragraph; or
(h) should Tenant cause or institute any proceeding for its
dissolution or termination; or
(i) should an event of default occur and be continuing under
any mortgage which is secured by Tenant's leasehold interest hereunder
or should the mortgagee under any such mortgage accelerate the
indebtedness secured thereby or commence a foreclosure action in
connection with said mortgage; provided, however, that (x) if such
default is susceptible of cure but such cure cannot be accomplished
with due diligence within such period of time and if, in addition,
Tenant commences to cure or cause to be cured such default within
fifteen (15) days after Notice thereof from Landlord and thereafter
prosecutes the curing of such default with all due diligence, such
period of time shall be extended to such period of time as may be
necessary to cure such default with all due diligence; or
(j) unless Tenant shall be contesting such lien or
attachment in good faith in accordance with Article 8, 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, discharged or fully bonded or otherwise secured to the
reasonable satisfaction of Landlord within the later of (x) one hundred
and twenty (120) days after commencement thereof, unless the amount in
dispute is less than $250,000, in which case Tenant shall give notice
to Landlord of the dispute but Tenant may defend in any suitable way,
and (y) thirty (30) days after receipt by Tenant of Notice thereof from
Landlord; or
(k) should Tenant at any time cease to be a direct or
indirect Subsidiary of the Guarantor, except as expressly permitted by
Article 16;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement by giving Notice thereof to Tenant
and upon the expiration of the time, if any, fixed in such Notice, this
Agreement shall terminate and all rights of Tenant under this Agreement shall
cease. Landlord
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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.
Landlord hereby agrees and consents to any cure of any Default or Event
of Default tendered or performed by the Guarantor within the same cure period
afforded to Tenant herein.
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 portion of the Leased
Property, shall relieve Tenant of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or re-letting. In the
event of any such termination, Tenant shall forthwith pay to Landlord all Rent
due and payable with respect to the Leased Property through and including the
date of such termination. Thereafter, Tenant, until the end of what would have
been the Term of this Agreement in the absence of such termination, and whether
or not the Leased Property or any portion thereof shall have been re-let, shall
be liable to Landlord for, and shall pay to Landlord, as current damages, the
Rent and other charges which would be payable hereunder for the remainder of the
Term had such termination not occurred, less the net proceeds, if any, of any
re-letting of the Leased Property, after deducting all reasonable expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, advertising,
expenses of employees, alteration costs and expenses of preparation for such
reletting. Tenant shall pay such current damages to Landlord monthly on the days
on which the Minimum Rent would 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 Rent owing and due up to and including the date of termination of
this Agreement, as liquidated final damages beyond the date of such termination
and in lieu of Landlord's right to receive any other damages due to the
termination of this Agreement, 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 thirteen Accounting Periods, or if less than thirteen Accounting
Periods have expired since the Commencement Date, the payments required for such
lesser period
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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; provided, however, that Tenant shall be entitled to a credit from
Landlord in the amount of any unapplied balance of the Retained Funds, whereupon
Landlord and its Affiliated Persons shall have no further obligation to pay the
portion of the Retained Funds so credited to Tenant or any of its Affiliated
Persons. Nothing contained in this Agreement shall, however, limit or prejudice
the right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency an amount equal to the maximum allowed by any statute or rule of law
in effect at the time when, and governing the proceedings in which, the damages
are to be proved, whether or not the amount be greater than, equal to, or less
than the amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to relet the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property or any portion
thereof as Landlord, in its sole and absolute discretion, considers advisable
and necessary for the purpose of reletting the Leased Property; and the making
of such alterations, repairs and decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. Subject to the last
sentence of this paragraph, 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.
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12.4 Application of Funds. Any payments received by Landlord under any
of the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's current and past
due obligations under this Agreement in such order as Landlord may determine or
as may be prescribed by the laws of the State.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or releasing
any obligation of Tenant and without waiving or releasing any Event of Default,
may (but shall not be obligated to), at any time thereafter, make such payment
or perform such act for the account and at the expense of Tenant, and may, to
the maximum extent permitted by law, enter upon the Leased Property or any
portion thereof for such purpose and take all such action thereon as, in
Landlord's sole and absolute discretion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Retained Funds. Notwithstanding any term or provision to the
contrary herein, in the event that this Agreement is terminated pursuant to
Section 12.1 or 12.2, Landlord shall credit any unapplied balance of the
Retained Funds to any claims or damages to which Landlord is entitled and to the
extent that any portion of the Retained Funds allocable to the Leased Property
remain after such credit, Landlord shall promptly pay such portion as provided
in the Purchase Agreement.
12.7 Good Faith Dispute. If Tenant shall in good faith dispute the
occurrence of any Default and Tenant, before the expiration of the applicable
cure period, shall give Notice thereof to Landlord, setting forth, in reasonable
detail, the basis therefor, no Event of Default shall be deemed to have occurred
and, provided Tenant shall escrow disputed amounts, if any, pursuant to an
escrow arrangement reasonably acceptable to Landlord and Tenant; provided,
however, that in the event of any such adverse determination, Tenant shall pay
to Landlord interest on any disputed funds at the Disbursement Rate, from the
date demand for such funds was made by Landlord until the date of final adverse
determination and, thereafter, at the Overdue Rate until paid. If Landlord and
Tenant shall fail, in good faith, to resolve any such dispute within ten (10)
Business Days after
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Tenant's Notice of dispute, either may submit the matter for resolution to a
court of competent jurisdiction. In the event that such court shall determine a
Default, in fact, exists, Tenant shall have the applicable cure period from the
date of the final non-appealable determination of the court to cure such
Default.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to one and one half (1.5) times the Rent and other charges herein provided
(prorated on a daily basis). Tenant shall also pay to Landlord all damages
(direct or indirect) sustained by reason of any such holding over. Otherwise,
such holding over shall be on the terms and conditions set forth in this
Agreement, to the extent applicable. Nothing contained herein shall constitute
the consent, express or implied, of Landlord to the holding over of Tenant after
the expiration or earlier termination of this Agreement.
ARTICLE 14
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
14.1 Landlord Notice Obligation. Landlord shall give prompt Notice to
Tenant and the Manager of any matters affecting the Leased Property of which
Landlord receives written notice or actual knowledge and, to the extent Tenant
otherwise has no notice or actual knowledge thereof, Landlord shall be liable
for any liabilities, costs, damages or claims (including reasonable attorneys'
fees) arising from the failure to deliver such Notice to Tenant. Landlord shall
not amend any material agreement affecting the Leased Property without Tenant's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed.
14.2 Landlord's Default. If Landlord shall default in the performance
or observance of any of its covenants or obligations set forth in this Agreement
or if HPT shall default in its obligations under the HPT Guaranty or the Owner's
Agreement and any such default shall continue for a period of ten (10) days
after Notice thereof with respect to monetary defaults and thirty (30) days
after Notice thereof from Tenant to Landlord and any applicable Hotel Mortgagee,
or such additional period as may be reasonably required to correct the same, or
if a Landlord Default (as defined therein) shall occur and be continuing under
any of
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the Other Leases, Tenant may declare the occurrence of a "Landlord Default" by
giving Notice of such declaration to Landlord and to such Hotel Mortgagee.
Thereafter, Tenant may (but shall have no obligation to) cure the same and,
subject to the provisions of the following paragraph, invoice Landlord for costs
and expenses (including reasonable attorneys' fees and court costs) incurred by
Tenant in curing the same, together with interest thereon from the date Landlord
receives Tenant's invoice, at the Overdue Rate. Except as otherwise expressly
provided herein to the contrary, Tenant shall have no right to terminate this
Agreement for any default by Landlord hereunder and no right, for any such
default, to offset or counterclaim against any Rent or other charges due
hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof; provided, however, that in the event of any such adverse determination,
Landlord shall pay to Tenant interest on any disputed funds at the Disbursement
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 Special Remedies for Landlord Funding Default. In the event of any
Landlord Default arising under Section 5.1.3(b), and after a decision in
Tenant's favor with respect thereto pursuant to Article 19, Tenant shall have
the right, in Tenant's sole discretion, in addition to all other remedies of
Tenant hereunder, to exercise any one or more of the following remedies:
(a) Tenant may fund the deficient amounts and offset the
aggregate amount thereof plus interest thereon from the date of funding
at the Disbursement Rate against any Additional Rent payable by Tenant
subsequent to the date of advance pursuant to this Agreement and the
Other Leases until recouped;
(b) Tenant may terminate the Franchise Agreement with
respect to the Leased Property (but not with respect to any of the
other Collective Leased Properties);
(c) Tenant may, notwithstanding the provisions of Section
5.4 or Article 16, engage a Manager who is not an Affiliated Person as
to Tenant or assign this Agreement or
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sublease all (but not less than all) of the Leased Property to a Person
who is not an Affiliated Person as to Tenant provided, in any such
case, such Person shall be reasonably acceptable to Landlord,
whereupon, this Agreement shall be amended to exclude the Leased
Property from the benefits and burdens of the Reserve; or
(d) Tenant may, provided that the Leased Property is not
then subject to a Hotel Mortgage or owned by any Person who acquired
title by, or any Person claiming by, through or under any Person who
acquired title by, foreclosure or deed in lieu thereof, terminate this
Agreement, whereupon, (i) the Other Leases shall be amended to (x)
eliminate any reference to this Agreement in the definition therein of
"Other Leases" and (y) eliminate any reference to the Leased Property
in the definition therein of "Collective Leased Properties", (ii) the
Limited Rent Guaranty shall terminate only with respect to and only to
the extent applicable to this Agreement and (iii) Landlord shall pay
any unapplied balance of the Retained Funds allocable to the Leased
Property as provided in the Purchase Agreement.
14.4 Remedy after Landlord Transfer. In the event Landlord shall
transfer its interest in the Leased Property other than to a Person who acquired
title by foreclosure or deed in lieu thereof, or any Person claiming by, through
or under such a Person, Tenant may, thereafter, upon the occurrence and during
the continuance of any Landlord Default, terminate this Agreement by thirty (30)
days prior Notice thereof to the then Landlord; provided, however, that if such
Landlord Default shall be cured prior to the expiration of such 30-day period,
such notice of termination shall be null and void.
14.5 Special Remedy after Landlord Default under Sections 10.2.4 and
11.3. If a Landlord Default shall occur in connection with Landlord's funding
obligations under Section 10.2.4 or Section 11.3, Tenant shall have the right,
in Tenant's sole discretion, in addition to all other remedies of Tenant
hereunder, to offset amounts Landlord has failed to disburse in accordance with
the terms thereof and as to which a Landlord Default has occurred against the
Minimum Rent and Additional Rent payable hereunder.
14.6 Special Remedy for Tenant under Section 22.8. If a Landlord
Default shall occur under Section 22.8, the Minimum Rent shall abate to the
extent of and during the duration of any interruption in Tenant's quiet
enjoyment of the Leased Property.
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ARTICLE 15
TRANSFERS BY LANDLORD
15.1 Transfer of Leased Property. Except as otherwise provided in
Article 20, Landlord shall not transfer the Leased Property, or any interest
therein, directly or indirectly, to any Person which: (i) does not have
sufficient financial resources to fulfill Landlord's obligations hereunder; (ii)
is in control of or controlled by Persons who have been convicted of felonies;
(iii) is engaged in the business of operating or franchising (as distinguished
from owning) a branded hotel chain having fifteen hundred (1,500) or more guest
rooms in competition with Tenant, the Guarantor or their Affiliated Persons or
(iv) fails expressly to assume, in writing, the obligations of Landlord under
this Agreement without the prior written consent of Tenant, which consent may be
given or withheld by Tenant in Tenant's sole and absolute discretion. For
purposes of this Section 5.1, a Person shall not be deemed to be in the business
of operating hotels in competition with Tenant, the Guarantor or their
Affiliated Persons solely by virtue of (x) the ownership of such hotels, either
directly or indirectly through Subsidiaries, Affiliated Persons and Entities, or
(y) holding a mortgage or mortgages secured by one or more hotels. Otherwise,
subject to the provisions of Section 15.2, Landlord may transfer the Leased
Property, or an interest therein, to any Person without the consent of, but upon
not less than ten (10) Business Days prior Notice to, Tenant.
15.2 Conditions of Transfer. Any transfer of the Leased Property
permitted by Section 15.1 shall be subject to the prior or simultaneous
satisfaction of the following conditions:
(a) The Retained Funds with respect to the Leased Property
shall, at the election of Landlord, (i) be deposited in an escrow
account on terms and conditions reasonably satisfactory to Tenant; (ii)
be treated as prepaid Minimum Rent for the last year of the Term and
Landlord and Tenant shall, prior to the transfer, enter into an
amendment to this Agreement reflecting such treatment, such amendment
to be in form and substance reasonably satisfactory to Landlord and
Tenant; (iii) be paid to Tenant at a discounted rate based on the
interest rate published in The Wall Street Journal for U.S. Treasury
Obligations having a maturity, closest in time to the last day of the
then current Term (including, for this purpose, all exercised Extended
Terms); or (iv) be likewise transferred to a successor obligor whose
unsecured long term debt is rated investment grade by a nationally
recognized rating agency or another successor obligor satisfactory to
Tenant in its sole discretion and all Landlord obligations with respect
to the same expressly assumed in writing pursuant to an assumption
agreement in form and substance reasonably satisfactory to
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Tenant and pursuant to which, inter alia, such successor obligor
expressly recognizes Tenant's right to receive the Retained Funds in
accordance with the terms of this Agreement;
(b) The definition of "Other Leases" and "Collective Leased
Properties" set forth in this Agreement shall be amended to eliminate
any references to any of the Other Leases or Collective Leased
Properties not simultaneously transferred to the successor to Landlord
under this
Agreement;
(c) If Landlord's interest under this Agreement shall be
transferred other than in connection with a transfer of Landlord's
interest under all of the Other Leases to the same transferee, a
portion of the then current balance in the Reserve shall be allocated
to the Leased Property, as reasonably determined by Tenant based on
Tenant's reasonable and good faith estimate as to the Leased Property's
projected requirements for Reserve fundings relative to the projected
requirements for Reserve fundings for the other Collective Leased
Properties;
(d) Any transferee of Landlord pursuant to this Article 15
shall expressly assume in writing the obligations of Landlord under
this Agreement; and
(e) Any overpayments of Additional Rent held by Landlord
shall be refunded to Tenant prior to such transfer.
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), all or any part of the Leased Property or suffer or permit this
Agreement or the leasehold estate created hereby or any other rights arising
under this Agreement to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or operation of the
Leased Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting. For purposes of this Section
16.1, an assignment of this Agreement shall be deemed to include the
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following (for purposes of this Section 16.1, a "Corporate Transfer"): any
direct or indirect transfer of any interest in Tenant such that Tenant shall
cease to be a direct or indirect Subsidiary of the Guarantor or any transaction
pursuant to which Tenant is merged or consolidated with another Entity which is
not the Guarantor or an Affiliated Person of the Guarantor 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
but shall not include any involuntary liens or attachments contested by Tenant
in good faith in accordance with Article 8.
Notwithstanding the foregoing if, after giving effect to a Corporate
Transfer, Tenant, or all or substantially all of Tenant's assets, would be owned
or controlled by a Person who would, in connection therewith, acquire all or
substantially all of the Residence Inn or Courtyard business of the Guarantor
and its direct and indirect Subsidiaries, provided that, in Landlord's
reasonable determination such Person and its controlling parties (x) shall have
sufficient expertise and financial resources to carry on the Residence Inn or
Courtyard business consistent with historical practices and (y) shall not be
convicted felons, Landlord shall, at Tenant's request, waive the restrictions
set forth in this Section 16.1 with respect to such Corporate Transfer and no
consent by Landlord shall be required with respect thereto. If Landlord fails to
give Notice of such waiver (or the withholding thereof) within twenty (20)
Business Days after Tenant's written request therefor, such waiver shall be
deemed given.
If this Agreement is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant) Landlord may
collect the rents from such assignee, subtenant or occupant, as the case may be,
and apply the net amount collected to the Rent herein reserved, but no such col
lection shall be deemed a waiver of the provisions set forth in the first
paragraph of this Section 16.1, the acceptance by Landlord of such assignee,
subtenant or occupant, as the case may be, as a tenant, or a release of Tenant
from the future performance by Tenant of its covenants, agreements or
obligations contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder (unless Landlord and Tenant expressly
otherwise agree that Tenant shall be released from all obligations hereunder),
and no consent to any subletting or assignment in a particular instance shall be
deemed to be a waiver of the prohibition set forth in this Section 16.1. No
assignment, subletting or occupancy shall affect any Permitted Use. Any
subletting, assignment or other transfer of Tenant's interest under this
Agreement in contravention of this Section 16.1 shall be voidable at Landlord's
option.
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16.2 Required Sublease Provisions. Except for subleases entered into
for the purposes of complying with the liquor licensing laws of the State, any
sublease of all or any portion of the Leased Property entered into on or after
the date hereof shall provide (a) that it is subject and subordinate to this
Agreement and to the matters to which this Agreement is or shall be subject or
subordinate; (b) that in the event of termination of this Agreement or reentry
or dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Hotel
Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or omission
of Tenant under such sublease, (ii) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant,
(iii) be bound by any previous prepayment of more than one (1) Accounting
Period, (iv) be bound by any covenant of Tenant to undertake or complete any
construction of the Leased Property or any portion thereof, (v) be required to
account for any security deposit of the subtenant other than any security
deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person oc cupying 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)
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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 and Assignment. Notwithstanding the foregoing,
but subject to the provisions of Section 16.4 and any other express conditions
or limitations set forth herein, Tenant may, in each instance after Notice to
Landlord, (a) sublease space at the Leased Property for newsstand, gift shop,
parking garage, health club, restaurant, bar or commissary purposes or similar
concessions in furtherance of the Permitted Use, so long as such subleases do
not demise, in the aggregate, in excess of three thousand (3,000) square feet
(exclusive of any parking garage subleases), 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;
and (b), in the event that there is a Corporate Transfer permitted pursuant to
Section 16.1, as a result of which all or substantially all of the assets with
respect to either, but not both, of the Residence Inn by Marriott or Courtyard
by Marriott brand are transferred to a Person that is not an Affiliated Person
as to Tenant, sublease the Leased Property or assign Tenant's rights under this
Agreement to an Affiliated Person as to Tenant or the Guarantor which retains
all or substantially all of the assets of the brand not so transferred, provided
all of the Collective Leased Properties or Other Leases operated under the same
brand are so subleased or assigned, as the case may be.
16.4 Sublease Limitation. For so long as Landlord or any Affiliated
Person as to Landlord shall seek to qualify as a real estate investment trust,
anything contained in this Agreement to the contrary notwithstanding, Tenant
shall not sublet the Leased Property on any basis such that the rental to be
paid by any sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of such sublessee,
or (b) any other formula such that any portion of such sublease rental would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
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ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) Business Days prior Notice by either party, the party
receiving such Notice shall furnish to the other an Officer's Certificate
certifying that this Agreement is unmodified and in full force and effect (or
that this Agreement is in full force and effect as modified and setting forth
the modifications), the date to which the Rent has been paid, that no Default or
an Event of Default has occurred and is continuing or, if a Default or an Event
of Default shall exist, specifying in reasonable detail the nature thereof, and
the steps being taken to remedy the same, and such additional information as the
requesting party may reasonably request. If such additional information
reasonably requires more than ten (10) Business Days to provide, the party
furnishing such information shall be entitled to such additional period to
respond to such request as may be reasonably required under the circumstances.
Any such certificate furnished pursuant to this Section 17.1 may be relied upon
by the requesting party, its lenders and any prospective purchaser or mortgagee
of the Leased Property or the leasehold estate created hereby.
17.2 Financial Statements. Tenant shall furnish the following
statements to Landlord:
(a) as soon as publicly available or, in the event the same
shall no longer be required to be made public, within forty-five (45)
days after each of the first three Fiscal Quarters of any Fiscal Year,
the most recent Consolidated Financials;
(b) as soon as publicly available or, in the event the same
shall no longer be required to be made public, within ninety (90) days
after the end of each Fiscal Year, the most recent Consolidated
Financials for such year, certified by an independent certified public
accountant;
(c) within thirty (30) days after the end of each Accounting
Period, an unaudited operating statement prepared on a Hotel by Hotel
basis, including occupancy percentages and average rate; and
(d) promptly after the sending or filing thereof, copies of
all reports which Tenant or the Guarantor sends to its security holders
generally, and copies of all periodic reports which Tenant or the
Guarantor files with the SEC or any stock exchange on which its shares
are listed or traded.
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In addition, Tenant shall provide Landlord with information relating to
Tenant and its operation of the Leased Property that (a) may be required in
order for Landlord to prepare financial statements in accordance with GAAP or to
comply with applicable securities laws and regulations and the SEC's
interpretation thereof and (b) is of the type that the Guarantor and its
Affiliated Persons customarily prepare for other hotel owners; provided,
however, that (i) Tenant reserves the right, in good faith, to challenge and
require Landlord to use commercially reasonable efforts to challenge any
assertion by the SEC, any other applicable regulatory authority, or Landlord's
independent public accountants that applicable law, regulations or GAAP require
the provision or publication of Proprietary Information, (ii) Landlord shall
not, without Tenant's consent (which consent shall not be unreasonably withheld,
delayed or conditioned), acquiesce to any such challenged assertion until
Landlord has exhausted all reasonable available avenues of administrative
review, and (iii) Landlord shall consult with Tenant in pursuing any such
challenge and will allow Tenant to participate therein if and to the extent that
Tenant so elects. Landlord acknowledges that the foregoing does not constitute
an agreement by Tenant either to join in any Landlord filing with or appearance
before the SEC or any other regulatory authority or to take or consent to any
other action which would cause Tenant to be liable to any third party for any
statement or information other than those statements incorporated by reference
pursuant to clause (a) above.
Subject to any Hotel Mortgagee entering into such confidentiality
agreement with Tenant as Tenant may reasonably require, Landlord may at any
time, and from time to time, provide any Hotel Mortgagee with copies of any of
the foregoing statements.
In addition, Landlord shall have the right, from time to time at
Landlord's sole cost and expense, upon reasonable Notice, during Tenant's
customary business hours, to cause Tenant's books and records with respect to
the Leased Property to be audited by auditors selected by Landlord at the place
where such books and records are customarily kept, provided that, prior to
conducting such audit, Landlord shall enter into a confidentiality agreement
with Tenant, such agreement to be in form and substance reasonably satisfactory
to Landlord, Tenant and the Guarantor.
17.3 General Operations. Tenant shall furnish to Landlord, not less
than seventy-five (75) days after the commencement of any Fiscal Year, proposed
annual budgets in a form consistent with the then standards for the same brand
of hotels as the Hotel setting forth projected income and costs and expenses
projected to be incurred by Tenant in managing, leasing, maintaining and
operating the Hotel during the then current Fiscal Year.
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ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property during usual business hours upon not less than
twenty-four (24) hours' notice and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of this Agreement, provided that any
inspection or repair by Landlord or its representatives will not unreasonably
interfere with Tenant's 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
ALTERNATIVE DISPUTE RESOLUTION
19.1 Negotiation and Mediation. Any and all disputes or disagreements
arising out of or relating to Landlord's obligations to disburse funds pursuant
to Section 5.1.3(b) shall be resolved through negotiations or, at the election
of either party, if the dispute is not so resolved within 30 days after Notice
from either party commencing such negotiations, through mediation or, at the
election of either party if such mediation has not conclusively resolved such
dispute within ninety (90) days after commencement thereof, by binding
arbitration conducted in accordance with Section 19.2.
19.2 Arbitration.
(a) The party electing arbitration pursuant to Section 19.1
shall give Notice to that effect to the other party and shall in such
Notice appoint an individual as arbitrator on its behalf. Within 15
days after such Notice, the other party, by Notice to the initiating
party, shall appoint a second individual as arbitrator on its behalf.
The arbitrators thus appointed shall appoint a third individual, and
such three arbitrators shall as promptly as possible determine such
dispute; provided, however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall proceed to determine
such dispute; and
(ii) if the two (2) arbitrators appointed by the parties shall be
unable to agree, within 15 days after the appointment of the
second arbitrator, upon the appointment of a third
arbitrator, they shall give
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written Notice to the parties of such failure to agree, and,
if the parties fail to agree upon the selection of a third
arbitrator within 15 days after the arbitrators appointed by
the parties give Notice as aforesaid, then either of the
parties upon Notice to the other party may request such
appointment by the then Chief Judge of the United States
District Court for the State of Maryland, or in such Judge's
absence, refusal, failure or inability to act, may apply for
a court appointment of such third arbitrator.
(b) Each arbitrator shall be a fit and impartial person who
shall have had at least five years' experience in the operation or
ownership of hotel properties.
(c) The arbitration shall be conducted within the State of
Maryland and, to the extent consistent with this Section 19.2, in
accordance with the rules of the American Arbitration Association. The
arbitrators shall render their decision and award, upon the concurrence
of at least two of their number, within 30 days after the appointment
of the third arbitrator. Such decision and award shall be in writing
and shall be final, binding and enforceable against the parties and
shall be non-appealable, and counterpart copies thereof shall be
delivered to each of the parties. In rendering such decision and award,
the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Agreement. Judgment may be had on the decision and
award of the arbitrator(s) so rendered in any court of competent
jurisdiction.
(d) Each party shall pay the fees and expenses of the one of
the two original arbitrators appointed by or for such party, and the
fees and expenses of the third arbitrator and all other expenses of the
arbitration (other than the fees and disbursements of attorneys or
witnesses for each party) shall be borne by the parties equally.
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
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refinancing, provided that any such Encumbrance shall not secure a maximum
principal amount in excess of (x) seventy percent (70%) of the Allocable
Purchase Price of the Leased Property if secured only by the Leased Property or
sixty percent (60%) of the Allocable Purchase Prices of such Collective Leased
Properties as secure such Encumbrance if secured by the Leased Property and one
or more of the other Collective Leased Properties or (y) a sixty percent (60%)
loan to value ratio if one or more of the Collective Leased Properties are
pooled with other Marriott brand properties. Any such Encumbrance shall provide
(subject to Section 20.2) that it is subject to the rights of Tenant under this
Agreement. Landlord shall not cross collateralize the Leased Property with any
property which is not flagged as a Marriott brand.
20.2 Subordination of Lease. Subject to Section 20.1 and this Section
20.2, upon Notice from Landlord, Tenant shall execute and deliver an agreement,
in form and substance reasonably satisfactory to Landlord and Tenant,
subordinating this Agreement to any Encumbrance permitted pursuant to Section
20.1; provided, however, that such subordination shall be on the express
condition that the terms of this Agreement shall be recognized by the mortgagee
or holder of the deed of trust and any purchaser of the Leased Property at any
foreclosure sale (a "Successful Purchaser") and that such mortgagee, holder or
Successful Purchaser shall honor and be bound by this Agreement and that,
notwithstanding any default by Landlord under such Encumbrance or any
foreclosure thereof, Tenant's possession of the Leased Property and rights and
obligations under this Agreement shall not be affected thereby and this
Agreement shall not be terminated other than in accordance with its terms. The
foregoing agreements shall be binding on any purchaser of the Leased Property at
foreclosure. Any mortgage or deed of trust to which this Agreement is, at the
time referred to, subject and subordinate, is herein called "Superior Mortgage"
and the holder, trustee or beneficiary of a Superior Mortgage is herein called
"Superior Mortgagee". Tenant shall have no obligations under any Superior
Mortgage other than those expressly set forth in this Section 20.2.
If any Superior Mortgagee or the nominee or designee of any Superior
Mortgagee or any Successful Purchaser, 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
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alter the terms of this Agreement), whereupon, this Agreement shall continue in
full force and effect as a direct lease between the Successor Landlord and
Tenant upon all of the terms, conditions and covenants as are set forth in this
Agreement, except that the Successor Landlord (unless formerly the landlord
under this Agreement or its nominee or designee) shall not be (a) liable in any
way to Tenant for any act or omission, neglect or default on the part of any
prior Landlord under this Agreement, (b) responsible for any monies owing by or
on deposit with any prior Landlord to the credit of Tenant (except to the extent
actually paid or delivered to the Successor Landlord), (c) subject to any
counterclaim or setoff which theretofore accrued to Tenant against any prior
Landlord, (d) bound by any modification of this Agreement subsequent to such
Superior Lease or Mortgage, or by any previous prepayment of Minimum Rent or
Additional Rent for more than one (1) month in advance of the date due
hereunder, which was not approved in writing by the Superior Landlord or the
Superior Mortgagee thereto, (e) liable to Tenant beyond the Successor Landlord's
interest in the Leased Property and the rents, income, receipts, revenues,
issues and profits issuing from the Leased Property, or (f) 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. Notwithstanding the foregoing, any Successor Landlord and/or Superior
Mortgagee shall be liable to pay to Tenant any portions of insurance proceeds or
Awards received by the Successor Landlord and/or Superior Mortgagee required to
be paid to Tenant pursuant to the terms of this Agreement, and, as a condition
to any mortgage, lien or lease in respect of the Leased Property, and the
subordination of this Agreement thereto, the mortgagee, lienholder or lessor, as
applicable, shall expressly agree, for the benefit of Tenant, to make such
payments, which agreement shall be embodied in an instrument in form reasonably
satisfactory to Tenant.
20.3 Notices. Subsequent to the receipt by Tenant of Notice from
Landlord as to the identity of any Hotel Mortgagee 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 the Leased Property
shall be effective unless and until a copy of the same is given to such Hotel
Mortgagee at the address set forth in the above described Notice, and the curing
of any of Landlord's defaults by such Hotel Mortgagee or ground lessor shall be
treated as performance by Landlord.
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ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Collective Leased Properties and
activities incidental 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.
21.2 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, where applicable.
21.3 Notice of Litigation, Etc. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which it may
hereafter become a party of which Tenant has notice or actual knowledge which
involves a potential liability equal to or greater than Two Hundred Fifty
Thousand Dollars ($250,000) or which may otherwise result in any material
adverse change in the business, operations, property, prospects, results of
operation or condition, financial or other, of Tenant. Forthwith upon Tenant
obtaining knowledge of any Default, Event of Default or any default or event of
default under any agreement relating to Indebtedness for money borrowed in an
aggregate amount exceeding, at any one time, Two Hundred Fifty Thousand Dollars
($250,000), or any event or condition that would be required to be disclosed in
a current report filed by Tenant on Form 8-K or in Part II of a quarterly report
on Form 10-Q if Tenant were required to file such reports under the Securities
Exchange Act of 1934, as amended, Tenant shall furnish Notice thereof to
Landlord specifying the nature and period of existence thereof and what action
Tenant has taken or is taking or proposes to take with respect thereto.
21.4 Indebtedness of Tenant. Tenant shall not create, incur, assume or
guarantee, or permit to exist, or become or remain liable directly or indirectly
upon, any Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for Impositions, to the extent
that payment thereof shall not at the time be required to be made in
accordance with the provisions of Article 8;
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(c) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period
and in respect of which execution thereof shall have been stayed
pending such appeal or review, or (ii) which are fully covered by
insurance payable to Tenant, or (iii) which are for an amount not in
excess of $250,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable appeal
period, so long as execution is not levied thereunder or (y) in respect
of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of Article
8, and in respect of which execution thereof shall have been stayed
pending such appeal or review;
(d) unsecured borrowings of Tenant from its Affiliated
Persons which are by their terms expressly subordinate pursuant to a
Subordination Agreement to the payment and performance of Tenant's
obligations under this Agreement; or
(e) Indebtedness for purchase money financing in accordance
with Section 21.9(a) and other indebtedness incurred in the ordinary
course of Tenant's business, including the leasing of personal
property.
21.5 Financial Condition of Tenant. As of the date of this Agreement,
Tenant's Tangible Net Worth is an amount at least equal to the aggregate of one
year's Minimum Rent payable pursuant to this Agreement and the Other Leases; it
being expressly understood and agreed that the Retained Funds may for such
purpose be counted as equity at the full amount thereof (without any discount as
to its value for any reason, notwithstanding anything to the contrary provided
for by GAAP) if such amounts are contributed to Tenant.
21.6 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 (other than payments in the
ordinary course of business on commercially reasonable terms and payments
pursuant to the terms of the Franchise Agreement) 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 exist;
provided, however, that Tenant may resume making such Distributions if Landlord
shall not commence, within ninety (90) days after Notice by Landlord to Tenant
of the occurrence of any such Event of Default, to enforce its rights and
remedies with respect thereto and diligently pursue enforcement of such rights
and remedies thereafter.
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21.7 Prohibited Transactions. At any time an Event of Default shall
have occurred and be continuing, Tenant shall not permit to exist or enter into
any agreement or arrangement (other than the Franchise Agreement) 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.
21.8 Liens and Encumbrances. Except as permitted by Section 7.1, Tenant
shall not create or incur or suffer to be created or incurred or to exist any
Lien on this Agreement or any of Tenant's assets, properties, rights or income,
or any of its interest therein, now or at any time hereafter owned, other than:
(a) 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;
(c) As permitted pursuant to Section 21.5; and
(d) Liens which do not exceed $250,000 in the aggregate and
which are fully bonded or otherwise secured to the reasonable
satisfaction of Landlord.
21.9 Merger; Sale of Assets; Etc. Except as expressly permitted by
Article 16, Tenant shall not (i) sell, lease (as lessor or sublessor), transfer
or otherwise dispose of, or abandon, all or any material portion of its assets
(including capital stock) or business to any Person, (ii) merge into or with or
consolidate with any other Entity, or (iii) sell, lease (as lessor or
sublessor), transfer or otherwise dispose of, or abandon, any personal property
or fixtures or any real property; provided, however, that, notwithstanding the
provisions of clause (iii) preceding, Tenant may dispose of equipment or
fixtures which have become inadequate, obsolete, worn-out, unsuitable,
undesirable or unnecessary, provided substitute equipment or fixtures having
equal or greater value and utility (but not necessarily having the same
function) have been provided.
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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
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construed as if such invalid, illegal or ineffective provisions had never been
contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
22.6 No Merger of Title. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
22.7 Conveyance by Landlord. If Landlord or any successor owner of all
or any portion of the Leased Property shall convey all or any portion of the
Leased Property in accordance with the terms hereof (specifically including
Article 15) 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 li abilities and obligations of Landlord under this
Agreement with respect to such of the Leased Property arising or accruing from
and after the date of such conveyance or other transfer and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
22.8 Quiet Enjoyment. Provided that no Event of Default shall have
occurred and be continuing, Tenant shall peaceably and quietly have, hold and
enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be created
by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings, provided the same do not materially
interfere with Tenant's ability to operate the Hotel and (d) liens that have
been consented to in writing by Tenant. Except as otherwise provided in this
Agreement, no failure by Landlord to comply with the foregoing covenant shall
give Tenant the 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
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this Agreement, or to fail to perform any other obligation of Tenant hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Agreement. However, Landlord and Tenant shall promptly, upon the request of the
other, enter into a short form memorandum of this Agreement, in form suitable
for recording under the laws of the State in which reference to this Agreement,
and all options contained herein, shall be made. The parties shall share equally
all costs and expenses of recording such memorandum.
22.10 Notices.
(a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under
this Agreement shall be deemed adequately given if in writing and the
same shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with return receipt requested (if
by mail), or with all freight charges prepaid (if by Federal Express or
similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
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with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to Tenant to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-924.11
Bethesda, Maryland 20817
Attn: Treasurer
[Telecopier No. (301) 380-5067]
with a copy to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-923.00
Bethesda, Maryland 20817
Attn: Lodging Operations Attorney
[Telecopier No. (301) 380-6727]
(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.
22.11 Construction; Nonrecourse. 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 all the
parties thereto. All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Each term or provision of this Agreement to be
performed by Tenant shall be construed as an independent covenant and condition.
Time is of the essence with respect to the exercise of any rights of Tenant or
Landlord under this Agreement. Except as otherwise set forth in this Agreement,
any obligations arising prior to the expiration or sooner termination of this
Agreement
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of Tenant (including without limitation, any monetary, repair and
indemnification obligations) and Landlord shall survive the expiration or sooner
termination of this Agreement; provided, however, that each party shall be
required to give the other Notice of any such surviving and unsatisfied
obligations within one year after the expiration or sooner termination of this
Agreement. Except as otherwise expressly provided with respect to the Retained
Funds, nothing contained in this Agreement shall be construed to create or
impose any liabilities or obligations and no such liabilities or obligations
shall be imposed on any of the shareholders, beneficial owners, direct or
indirect, officers, directors, trustees, employees or agents of Landlord or
Tenant for the payment or performance of the obligations or liabilities of
Landlord or Tenant hereunder.
22.12 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
22.13 Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State
applicable to contracts between residents of the State which are to be performed
entirely within the State, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required by this
Agreement is made or required to be made; or (iii) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues; or
(iv) where any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or jurisdiction
of organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State as is provided by law; and the parties consent to the jurisdiction of
said court or courts located in the State and to service of process by
registered mail, return receipt requested, or by any other manner provided by
law.
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22.14 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.
22.15 Disclosure of Information.
(a) The parties hereto agree that the matters set forth in
this Agreement and any revenue, expense, net profit, rate and occupancy
information provided on a hotel by hotel basis are strictly
confidential and each party will make every effort to ensure that the
information is not disclosed to any Person that is not an Affiliated
Person as to any party (including the press) without the prior written
consent of the other party, except as may be required by law and as may
be reasonably necessary to obtain licenses, permits and other public
approvals necessary for the refurbishment or operation of the Hotel,
or, subject to the restrictions of Section 22.15(b) relative to the
contents of any Prospectus, in connection with a Landlord financing, a
sale of the Hotel, or a sale of a controlling interest in Landlord,
Tenant or the Guarantor.
(b) No reference to Tenant or any of its Affiliated Persons
will be made in any prospectus, private placement memorandum, offering
circular or offering documentation related thereto (collectively, the
"Prospectus"), issued by Landlord or any of its Affiliated Persons,
which is designated to interest potential investors in the Hotel,
unless Tenant has previously received a copy of all such references. No
Prospectus shall include rate and occupancy data or revenue, expense or
net profit information on a hotel by hotel basis (as distinguished from
a collective basis). Regardless of whether Tenant so receives a copy of
the Prospectus, neither Tenant nor its Affiliated Persons will be
deemed a sponsor of the offering described in the Prospectus, nor will
it have any responsibility for the Prospectus, and the Prospectus will
so state. Unless Tenant agrees in advance, the Prospectus will not
include any trademark, symbols, logos or designs of Tenant or any of
its
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Affiliated Persons. Landlord shall indemnify, defend and hold Tenant
harmless from and against all loss, costs, liability and damage
(including reasonable attorneys' fees and expenses, and all cost of
litigation) arising out of any Prospectus or the offering described
therein; and this obligation of Landlord shall survive termination of
this Agreement.
22.16 Trademarks, Trade Names and Service Marks.
(a) The names "Marriott", "Residence Inn", "Residence Inn by
Marriott" and "Marriott Residence Inn" (each of the foregoing names,
together with any combination thereof, collectively, the "Trade Names")
when used along or in connection with another word or words, and the
Marriott or Residence Inn by Marriott trademarks, service marks, other
trade names, symbols, logos and designs shall in all events remain the
exclusive property of Franchisor or its Affiliated Persons, and nothing
contained in this Agreement shall confer on Landlord the right to use
any of the Trade Names, or the Marriott or Residence Inn by Marriott
trademarks, service marks, other trade names, symbols, logos or designs
other than in strict accordance with the terms of this Agreement. Upon
termination of this Agreement and the Other Leases, any use of or right
to use any of the Trade Names, or any of the Marriott or Residence Inn
by Marriott trademarks, service marks, other trade names, symbols,
logos or designs by Landlord shall be governed by the Franchise
Agreement and/or Owner's Agreement, upon termination of this Agreement,
and, if the Franchise Agreement or a replacement Franchise Agreement
will not remain in effect, Landlord shall promptly remove from the
Hotel any signs or similar items which contain any of the Trade Names,
trademarks, service marks, other trade names, symbols, logos or
designs. If Landlord has not removed such signs or similar items within
ten (10) Business Days after termination of this Agreement, Tenant
shall have the right to do so at Landlord's expense. Included under the
terms of this section are all trademarks, service marks, trade names,
symbols, logos or designs used in conjunction with the Hotel,
including, but not limited to, restaurant names, lounge names, etc.,
whether or not the marks contain the "Marriott" name or Residence Inn
by Marriott name. The right to use such trademarks, service marks,
trade names, symbols, logos or designs belongs exclusively to Tenant,
and the use thereof inures to the benefit of Tenant whether or not the
same are registered and regardless of the source of the same. The
provisions of this Section 22.17(a) shall survive termination of this
Agreement.
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(b) Any computer software (including upgrades and
replacements) at the Hotel owned by Tenant or any of its Affiliated
Persons, or the licensor of any of them is proprietary to Tenant or any
of its Affiliated Persons, or the licensor of any of them and shall in
all events remain the exclusive property of Tenant or any of its
Affiliated Persons or the licensor of any of them, as the case may be,
and nothing contained in this Agreement shall confer on Landlord the
right to use any of such software. Tenant shall have the right to
remove from the Hotel without compensation to Landlord any computer
software (including upgrades and replacements), including, without
limitation, the system software, owned by Tenant or any of its
Affiliated Persons or the licensor of any of them. Further, upon
termination of this Agreement, Tenant shall be entitled to remove from
the Hotel without compensation to Landlord any computer equipment
utilized as part of a centralized reservation system or owned by a
party other than the Landlord.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
HPTMI II PROPERTIES TRUST
By:___________________________
John G. Murray, President
TENANT:
CR9 TENANT CORPORATION
By:___________________________
Its (Vice) President
EXHIBIT 10.9
[COURTYARD]
LEASE AGREEMENT
DATED AS OF ______ __, 199_
BY AND BETWEEN
HPTMI II PROPERTIES TRUST,
AS LANDLORD,
AND
CR9 TENANT CORPORATION,
AS TENANT
<PAGE>
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS........................................................1
1.1 Accounting Period...............................................1
1.2 Additional Rent ................................................2
1.3 Additional Charges .............................................2
1.4 Affiliated Person ..............................................2
1.5 Agreement ......................................................2
1.6 Agreement to Lease..............................................2
1.7 Allocable Purchase Price........................................2
1.8 Applicable Laws ................................................2
1.9 Applicable Percentage...........................................3
1.10 Award ..........................................................3
1.11 Base Hotel Sales ...............................................3
1.12 Base Year ......................................................4
1.13 Business Day ...................................................4
1.14 Capital Addition ...............................................4
1.15 Capital Expenditure ............................................4
1.16 Claim ..........................................................4
1.17 Code ...........................................................4
1.18 Collective Leased Properties ...................................4
1.19 Commencement Date ..............................................4
1.20 Condemnation ...................................................4
1.21 Condemnor ......................................................5
1.22 Consolidated Financials ........................................5
1.23 Date of Taking .................................................5
1.24 Default ........................................................5
1.25 Disbursement Rate ..............................................5
1.26 Distribution ...................................................5
1.27 Encumbrance ....................................................5
1.28 Entity..........................................................6
1.29 Environment ....................................................6
1.30 Environmental Notice ...........................................6
1.31 Environmental Obligation .......................................6
1.32 Event of Default ...............................................6
1.33 Excess Hotel Sales..............................................6
1.34 Extended Terms .................................................6
1.35 FAS ............................................................6
1.36 Financial Officer's Certificate ................................6
1.37 Fiscal Quarter .................................................6
1.38 Fiscal Year ....................................................7
1.39 Fixed Term .....................................................7
1.40 Fixtures .......................................................7
1.41 Franchise Agreement.............................................7
1.42 Franchisor .....................................................7
1.43 GAAP ...........................................................7
1.44 Government Agencies.............................................7
1.45 Guarantor ......................................................7
1.46 Hazardous Substances ...........................................7
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1.47 Hotel ..........................................................8
1.48 Hotel Mortgage .................................................8
1.49 Hotel Mortgagee ................................................8
1.50 HPT ............................................................8
1.51 HPT Guaranty ...................................................8
1.52 Immediate Family................................................9
1.53 Impositions ....................................................9
1.54 Incidental Documents ..........................................10
1.55 Indebtedness ..................................................10
1.56 Index .........................................................10
1.57 Insurance Requirements ........................................10
1.58 Interest Rate..................................................10
1.59 Inventories ...................................................10
1.60 Land ..........................................................10
1.61 Landlord ......................................................11
1.62 Landlord Liens.................................................11
1.63 Lease Year ....................................................11
1.64 Leased Improvements ...........................................11
1.65 Leased Intangible Property ....................................11
1.66 Leased Personal Property ......................................11
1.67 Leased Property ...............................................11
1.68 Legal Requirements ............................................11
1.69 Lien ..........................................................12
1.70 Limited Rent Guaranty .........................................12
1.71 Management Agreement ..........................................12
1.72 Manager .......................................................12
1.73 Minimum Rent ..................................................12
1.74 Notice ........................................................12
1.75 Officer's Certificate .........................................12
1.76 Other Leases...................................................12
1.77 Overdue Rate ..................................................12
1.78 Owner's Agreement..............................................12
1.79 Parent.........................................................12
1.80 Permitted Encumbrances ........................................13
1.81 Permitted Liens ...............................................13
1.82 Permitted Use .................................................13
1.83 Person ........................................................13
1.84 Proprietary Information .......................................13
1.85 Purchase Agreement.............................................13
1.86 Purchase Documents.............................................13
1.87 Rent ..........................................................13
1.88 Request Notice ................................................13
1.89 Reserve........................................................13
1.90 Reserve Estimate ..............................................14
1.91 Response Notice ...............................................14
1.92 Retained Funds.................................................14
1.93 SEC ...........................................................14
1.94 State .........................................................14
1.95 Stock Pledge Agreement ........................................14
1.96 Subordinated Creditor .........................................14
1.97 Subordination Agreement .......................................14
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1.98 Subsidiary ....................................................14
1.99 Successor Landlord ............................................14
1.100 Tangible Net Worth ............................................14
1.101 Tenant ........................................................15
1.102 Tenant's Personal Property ....................................15
1.103 Term ..........................................................15
1.104 Total Hotel Sales..............................................15
1.105 Uniform System of Accounts ....................................16
1.106 Unsuitable for Its Permitted Use ..............................16
1.107 Work ..........................................................16
ARTICLE 2: LEASED PROPERTY AND TERM..........................................16
2.1 Leased Property.................................................16
2.2 Condition of Leased Property....................................17
2.3 Fixed Term......................................................18
2.4 Extended Term...................................................18
ARTICLE 3: RENT..............................................................19
3.1 Rent............................................................19
3.2 Late Payment of Rent, Etc.......................................24
3.3 Net Lease.......................................................25
3.4 No Termination, Abatement, Etc..................................25
3.5 Security for Tenant's Performance...............................26
ARTICLE 4: USE OF THE LEASED PROPERTY........................................27
4.1 Permitted Use...................................................27
4.2 Compliance with Legal/Insurance Requirements, Etc...............28
4.3 Environmental Matters...........................................28
ARTICLE 5: MAINTENANCE AND REPAIRS...........................................30
5.1 Maintenance and Repair..........................................30
5.2 Tenant's Personal Property......................................35
5.3 Yield Up........................................................35
5.4 Management Agreement............................................36
ARTICLE 6: IMPROVEMENTS, ETC.................................................37
6.1 Improvements to the Leased Property. ..........................37
6.2 Salvage.........................................................38
6.3 Equipment Leases................................................38
ARTICLE 7: LIENS.............................................................38
ARTICLE 8: PERMITTED CONTESTS................................................38
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ARTICLE 9: INSURANCE AND INDEMNIFICATION.....................................39
9.1 General Insurance Requirements..................................39
9.2 Replacement Cost................................................41
9.3 Waiver of Subrogation...........................................41
9.4 Form Satisfactory, Etc..........................................42
9.5 Blanket Policy..................................................42
9.6 No Separate Insurance...........................................42
9.7 Indemnification of Landlord.....................................43
ARTICLE 10: CASUALTY.........................................................43
10.1 Insurance Proceeds.............................................43
10.2 Damage or Destruction..........................................44
10.3 Damage Near End of Term; Damage from Earthquake................46
10.4 Tenant's Property..............................................47
10.5 Restoration of Tenant's Property...............................47
10.6 No Abatement of Rent...........................................47
10.7 Waiver.........................................................47
ARTICLE 11: CONDEMNATION.....................................................48
11.1 Total Condemnation, Etc........................................48
11.2 Partial Condemnation...........................................48
11.3 Disbursement of Award..........................................48
11.4 Abatement of Rent..............................................49
11.5 Temporary Condemnation.........................................49
11.6 Allocation of Award............................................50
ARTICLE 12: DEFAULTS AND REMEDIES............................................50
12.1 Events of Default..............................................50
12.2 Remedies.......................................................52
12.3 Tenant's Waiver................................................54
12.4 Application of Funds...........................................54
12.5 Landlord's Right to Cure Tenant's Default......................54
12.6 Retained Funds.................................................55
12.7 Good Faith Dispute.............................................55
ARTICLE 13: HOLDING OVER.....................................................55
ARTICLE 14: LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT..................56
14.1 Landlord Notice Obligation.....................................56
14.2 Landlord's Default.............................................56
14.3 Special Remedies for Landlord Funding Default..................57
14.4 Remedy after Landlord Transfer.................................58
14.5 Special Remedy after Landlord Default under
Section 10.2.4 and 11.3..................................58
14.6 Special Remedy for Tenant under Section 22.8...................58
<PAGE>
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ARTICLE 15: TRANSFERS BY LANDLORD............................................58
15.1 Transfer of Leased Property....................................58
15.2 Conditions of Transfer.........................................59
ARTICLE 16: SUBLETTING AND ASSIGNMENT........................................60
16.1 Subletting and Assignment......................................60
16.2 Required Sublease Provisions...................................61
16.3 Permitted Sublease and Assignment..............................62
16.4 Sublease Limitation............................................63
ARTICLE 17: ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS...................63
17.1 Estoppel Certificates..........................................63
17.2 Financial Statements...........................................64
17.3 General Operations.............................................65
ARTICLE 18: LANDLORD'S RIGHT TO INSPECT......................................65
ARTICLE 19: ALTERNATIVE DISPUTE RESOLUTION...................................66
19.1 Negotiation and Mediation......................................66
19.2 Arbitration....................................................66
ARTICLE 20: HOTEL MORTGAGES..................................................67
20.1 Landlord May Grant Liens.......................................67
20.2 Subordination of Lease.........................................68
20.3 Notices........................................................69
ARTICLE 21: ADDITIONAL COVENANTS OF TENANT...................................69
21.1 Conduct of Business............................................69
21.2 Maintenance of Accounts and Records............................69
21.3 Notice of Litigation, Etc......................................70
21.4 Indebtedness of Tenant.........................................70
21.5 Financial Condition of Tenant..................................71
21.6 Distributions, Payments to Affiliated Persons,
Etc......................................................71
21.7 Prohibited Transactions........................................71
21.8 Liens and Encumbrances.........................................71
21.9 Merger; Sale of Assets; Etc....................................72
ARTICLE 22: MISCELLANEOUS....................................................72
22.1 Limitation on Payment of Rent..................................72
22.2 No Waiver......................................................73
22.3 Remedies Cumulative............................................73
22.4 Severability...................................................73
22.5 Acceptance of Surrender........................................73
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22.6 No Merger of Title.............................................73
22.7 Conveyance by Landlord.........................................74
22.8 Quiet Enjoyment................................................74
22.9 Memorandum of Lease............................................74
22.10 Notices........................................................74
22.11 Construction; Nonrecourse......................................76
22.12 Counterparts; Headings.........................................76
22.13 Applicable Law, Etc............................................77
22.14 Right to Make Agreement........................................77
22.15 Disclosure of Information......................................77
22.16 Trademarks, Trade Names and Service Marks......................78
EXHIBITS
A - Minimum Rent
B - Other Leases
C - The Land
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this ___ day of __________,
199_, by and between HPTMI II PROPERTIES TRUST, a Maryland real estate
investment trust, as landlord ("Landlord"), and CR9 TENANT CORPORATION, a
Delaware corporation, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Leased Property (this
and other capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and
Tenant wishes to lease the Leased Property from Landlord, all subject to and
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article shall have the meanings assigned to them in this Article and include the
plural as well as the singular, (ii) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.1 "Accounting Period" shall 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. If Tenant shall, for a bona fide business reason, change its Accounting
Period during the Term, appropriate adjustments, if any, shall be made with
respect to the timing of certain
<PAGE>
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accounting and reporting requirements of this Agreement; provided, however,
that, in no event shall any such change or adjustment increase or reduce any
monetary obligation under this Agreement.
1.2 "Additional Rent" shall have the meaning given such term in Section
3.1.2(a).
1.3 "Additional Charges" shall have the meaning given such term in
Section 3.1.3.
1.4 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited liability
company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b), (d) any
other Person who is an officer, director, trustee or employee of, or partner in,
such Person or any Person referred to in the preceding clauses (a), (b) and (c),
and (e) any other Person who is a member of the Immediate Family of such Person
or of any Person referred to in the preceding clauses (a) through (d); provided,
however, that, notwithstanding the foregoing, in no event shall Host Marriott
Corporation or any of its Affiliated Persons be deemed an Affiliated Person as
to Tenant or the Guarantor.
1.5 "Agreement" shall mean this Lease Agreement, including Exhibits A
to C hereto, as it and they may be amended from time to time as herein provided.
1.6 "Agreement to Lease" shall mean the Agreement to Lease, dated as of
September __, 1997, by and between HPT and the Tenant, as amended from time to
time.
1.7 "Allocable Purchase Price" shall have the meaning given such term
in the Purchase Agreement.
1.8 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health
(except those requirements which, by definition, are solely the responsibility
of employers) or the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation,
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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, pesti cides, 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.
1.9 "Applicable Percentage" shall mean, with respect to any Accounting
Period, or portion thereof, with respect to the period beginning on the
Commencement Date and ending on the last day of the first full Fiscal Year of
operation of the Hotel, three percent (3%)], with respect to the second full
Fiscal Year of operation of the Hotel, four percent (4%) and, with respect to
each Fiscal Year thereafter, five percent (5%).
1.10 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of the Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses, including, without limitation, expert witness fees, incurred
by Landlord, in connection with obtaining any such award).
1.11 "Base Hotel Sales" shall mean, when used with reference to any
Lease Year, Total Hotel Sales for the Base Year and, when used with reference to
the first, second or third Fiscal Quarters of any Fiscal Year, 3/13 of Total
Hotel Sales for the Base Year and, when used with reference to the fourth Fiscal
Quarter of any Fiscal Year, 4/13 of 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, for one hundred eighty (180) days or more in any
Lease Year, a reduction in the number of rooms at the Hotel or a change in the
services provided at the Hotel (including, without limitation, closing of
restaurants) from the number of rooms or the services provided during the Base
Year, in determining Additional Rent payable with respect to such Lease Year,
Base Hotel Sales shall be reduced as follows: (a) in the event of a complete
closing of the Hotel, Total Hotel Sales attributable to such Hotel during the
Base Year shall be subtracted from Base Hotel Sales throughout the period of
such closing; (b) in the event of a partial closing of the Hotel affecting any
number of guest rooms in such Hotel, Total Hotel Sales attributable to
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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 Hotel Sales throughout the period of such
closing; (c) in the event of a closing of a restaurant, all Total Hotel Sales
attributed to such restaurant during the Base Year shall be subtracted from Base
Hotel Sales throughout the period of such closing; and (e) in the event of any
other change in circumstances affecting the Hotel, Base Hotel Sales shall be
equitably adjusted in such manner as Landlord and Tenant shall reasonably agree.
1.12 "Base Year" shall mean the second full calendar year of operation
of the Hotel; provided, however, if there shall occur, prior to the expiration
of the second full calendar year of operation of the Hotel, any force majeure
which causes a material decline in Total Hotel Sales during the second full
calendar year of operation of the Hotel, the Base Year shall be adjusted to be
the first full calendar year of operation of the Hotel after the termination of
any such force majeure event.
1.13 "Business Day" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of Maryland are authorized by law or executive action to close.
1.14 "Capital Addition" shall mean any renovation, renewal, addition,
alteration, replacement, repair or improvement to the Leased Property (or
portion thereof), the cost of which constitutes a Capital Expenditure.
1.15 "Capital Expenditure" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.16 "Claim" shall have the meaning given such term in Article 8.
1.17 "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.
1.18 "Collective Leased Properties" shall mean, collectively, the
Leased Property and every other Leased Property (as defined therein) under the
Other Leases.
1.19 "Commencement Date" shall mean the date of this Agreement.
1.20 "Condemnation" shall mean (a) the exercise of any governmental
power with respect to the Leased Property, whether
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by legal proceedings or otherwise, by a Condemnor of its power of condemnation,
(b) a voluntary sale or transfer of the Leased Property by Landlord to any
Condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending, or (c) a taking or voluntary conveyance of all or part
of the Leased Property, or any interest therein, or right accruing thereto or
use thereof, as the result or in settlement of any Condemnation or other eminent
domain proceeding affecting the Leased Property, whether or not the same shall
have actually been commenced.
1.21 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
1.22 "Consolidated Financials" shall mean, for any Fiscal Year or other
accounting period of Tenant, annual audited and quarterly unaudited financial
statements of the Guarantor prepared on a consolidated basis, including the
Guarantor'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.
1.23 "Date of Taking" shall mean the date the Condemnor has the right
to possession of the Leased Property, or any portion thereof, in connection with
a Condemnation.
1.24 "Default" shall mean any event or condition existing which with
the giving of notice and/or lapse of time would ripen into an Event of Default.
1.25 "Disbursement Rate" shall mean an annual rate of interest equal to
the greater of, as of the date of determination, (i) the Interest Rate and (ii)
the per annum rate for ten (10) year U.S. Treasury Obligations as published in
The Wall Street Journal plus three hundred (300) basis points.
1.26 "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 Tenant, (c) any other distribution on or in respect of any shares of
any class of capital stock of Tenant, or (d) any return of capital to
shareholders of Tenant.
1.27 "Encumbrance" shall have the meaning given such term in Section
20.1.
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1.28 "Entity" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency or political
subdivision thereof or any other entity.
1.29 "Environment" shall mean soil, surface waters, ground waters,
land, streams, sediments, surface or subsurface strata and ambient air.
1.30 "Environmental Notice" shall have the meaning given such term in
Section 4.3.1.
1.31 "Environmental Obligation" shall have the meaning given such term
in Section 4.3.1.
1.32 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.33 "Excess Hotel Sales" shall mean, with respect to any Lease Year or
Fiscal Quarter, or portion thereof, as applicable, the amount of Total Hotel
Sales for such period, in excess of Base Hotel Sales for the equivalent period.
1.34 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.35 "FAS" shall mean all items included within "Property and
Equipment" under the Uniform System of Accounts, including, but not limited to,
linen, china, glassware, tableware, uniforms and similar items, whether used in
connection with public space or guest rooms.
1.36 "Financial Officer's Certificate" shall mean, as to any Person, a
certificate of the chief financial officer or chief accounting officer (or such
officers' authorized designee) of such Person, duly authorized, accompanying the
financial statements required to be delivered by such Person pursuant to Section
17.2, in which such officer shall certify that such statements have been
properly prepared in accordance with GAAP 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.
1.37 "Fiscal Quarter" shall mean, with respect to the first, second and
third quarter of any Fiscal Year, the first, second and third, respectively,
three (3) Accounting Periods of such Fiscal Year and, with respect to the fourth
quarter of any Fiscal Year, the final four (4) Accounting Periods of such Fiscal
Year.
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1.38 "Fiscal Year" shall mean each fiscal year of Tenant, each such
fiscal year to consist of thirteen Accounting Periods. If Tenant shall, for a
bona fide business reason, change its Fiscal Year during the Term, appropriate
adjustments, if any, shall be made with respect to the timing of certain
accounting and reporting requirements of this Agreement; provided, however,
that, in no event shall any such change or adjustment increase or reduce any
monetary obligation under this Agreement.
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).
1.41 "Franchise Agreement" shall mean the Franchise Agreement, dated as
of the date hereof, between Tenant and the Franchisor with respect to the Hotel,
as amended from time to time.
1.42 "Franchisor" shall mean Marriott International, Inc., its
successors and assigns.
1.43 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.44 "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or the Hotel operated thereon.
1.45 "Guarantor" shall mean Marriott International, Inc., a Delaware
corporation, its successors and assigns.
1.46 "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 ordi nance or amendments thereto
including, without limitation,
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the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. et seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et
seq.) and the regulations promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, any state of the United States, or any political subdivision
thereof; or
(d) the presence of which on the Leased Property causes or
materially threatens to cause an unlawful nuisance upon the Leased
Property or to adjacent properties or poses or materially threatens to
pose a hazard to the Leased Property or to the health or safety of
persons on or about the Leased Property; or
(e) without limitation, which contains gasoline, diesel fuel
or other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated
biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or
may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988, or any Applicable Laws promulgated by any
Government Agencies.
1.47 "Hotel" shall mean the Courtyard by Marriott hotel being operated
on the Leased Property.
1.48 "Hotel Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article 20.
1.49 "Hotel Mortgagee" shall mean the holder of any Hotel Mortgage.
1.50 "HPT" shall mean Hospitality Properties Trust, a Maryland real
estate investment trust.
1.51 "HPT Guaranty" shall mean the guaranty agreement, dated as of the
date hereof, made by HPT for the benefit of Tenant, as amended.
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1.52 "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.
1.53 "Impositions" shall mean collectively, all taxes (including,
without limitation, all taxes imposed under the laws of the State, as such laws
may be amended from time to time, and all ad valorem, sales and use, single
business, gross receipts, transaction privilege, rent or similar taxes as the
same relate to or are imposed upon Landlord, Tenant or the business conducted
upon the Leased Property), assessments (including, without limitation, all
assessments for public improvements or benefit, whether or not commenced or
completed prior to the date hereof), water, sewer or other rents and charges,
excises, tax levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Leased Property or the
business conducted thereon by Tenant (including all interest and penalties
thereon due to any failure in payment by Tenant), which at any time prior to,
during or in respect of the Term hereof may be assessed or imposed on or in
respect of or be a lien upon (a) Landlord's interest in the Leased Property, (b)
the Leased Property or any part thereof or any rent therefrom or any estate,
right, title or interest therein, or (c) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Leased Property or the leasing or use of the Leased Property or any part
thereof by Tenant; provided, however, that nothing contained herein shall be
construed to require Tenant to pay (i) any tax based on net income, net worth or
capital imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any
transfer fee or other tax imposed with respect to the sale, exchange or other
disposition by Landlord of the Leased Property or the proceeds thereof (other
than in connection with the sale, exchange or other disposition to, or in
connection with a transaction involving, Tenant), (iv) any single business,
gross receipts tax (other than a tax on any rent received by Landlord from
Tenant provided that such gross receipts tax on such rent is expressly in lieu
of any other tax, assessment, levy or charge otherwise excluded from this
definition of Impositions), transaction privilege, rent or similar taxes as the
same relate to or are imposed upon Landlord, except to the extent that any tax,
assessment, tax levy or charge that would otherwise be an Imposition under this
definition which is in effect at any time during the Term hereof is totally or
partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (i) or (ii) preceding is levied, assessed or imposed expressly in lieu
thereof, (v) any interest or penalties
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imposed on Landlord as a result of the failure of Landlord to file any return or
report timely and in the form prescribed by law or to pay any tax or imposition,
except to the extent such failure is a result of a breach by Tenant of its
obligations pursuant to Section 3.1.3, (vi) any Impositions imposed on Landlord
that are a result of Landlord not being considered a "United States person" as
defined in Section 7701(a)(30) of the Code, (vii) any Impositions that are
enacted or adopted by their express terms as a substitute for any tax that would
not have been payable by Tenant pursuant to the terms of this Agreement or
(viii) any Impositions imposed as a result of a breach of covenant or
representation by Landlord in any agreement governing Landlord's conduct or
operation or as a result of the negligence or willful misconduct of Landlord.
1.54 "Incidental Documents" shall mean, collectively, the Limited Rent
Guaranty, the Franchise Agreement, the Stock Pledge Agreement and the Owner's
Agreement.
1.55 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
1.56 "Index" shall mean the Consumer Price Index for Urban Wage Earners
and Clerical Workers, All-Cities, All Items 1982- 1984 = 100, as published by
the Bureau of Labor Statistics or, in the event publication thereof ceases, by
reference to whatever index then published by the United States Department of
Labor at that time is most nearly comparable as a measure of general changes in
price levels for urban areas, as reasonably determined by Landlord and Tenant.
1.57 "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.
1.58 "Interest Rate" shall mean ten percent (10%) per annum.
1.59 "Inventories" shall mean "Inventories" as defined in the Uniform
System of Accounts, including, but not limited to, provisions in storerooms,
refrigerators, pantries and kitchens; beverages in wine cellars and bars; other
merchandise intended for sale; fuel; mechanical supplies; stationery; and other
expensed supplies and similar items.
1.60 "Land" shall have the meaning given such term in Section 2.1(a).
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1.61 "Landlord" shall have the meaning given such term in the preambles
to this Agreement and shall include its permitted successors and assigns.
1.62 "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 (other than Tenant) 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.
1.63 "Lease Year" shall mean any Fiscal Year during the Term and any
partial Fiscal Year at beginning or end of the Term.
1.64 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.65 "Leased Intangible Property" shall mean all Intangible Property
(as defined therein) acquired by Landlord with respect to the Leased Property
pursuant to the Purchase Agreement.
1.66 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.67 "Leased Property" shall have the meaning given such term in
Section 2.1.
1.68 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Leased Property or
the maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate the Leased Property for its Permitted Use, and (b) all covenants,
agreements, restrictions and encumbrances contained in any instruments at any
time in force affecting the Leased Property as of the date hereof, or to which
Tenant has consented or required to be granted pursuant to Applicable Laws,
including those which may (i) require material repairs, modifications or
alterations in or to the Leased Property or (ii) in any way materially and
adversely affect the use and enjoyment thereof, but excluding any requirements
arising
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as a result of Landlord's status as a real estate investment trust.
1.69 "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.
1.70 "Limited Rent Guaranty" shall mean the limited rent guaranty
agreement, dated as of the date hereof, made by the Guarantor in favor of
Landlord, as amended from time to time.
1.71 "Management Agreement" shall mean any agreement entered into by
Tenant with respect to the management and operation of the Leased Property.
1.72 "Manager" shall mean the person designated by and acting as
Manager pursuant to a Management Agreement.
1.73 "Minimum Rent" shall mean, with respect to each Accounting Period,
the sum set forth on Exhibit A.
1.74 "Notice" shall mean a notice given in accordance with Section
22.10.
1.75 "Officer's Certificate" shall mean a certificate signed by an
officer of the certifying Entity duly authorized by the board of directors of
the certifying Entity.
1.76 "Other Leases" shall mean, collectively, any Lease Agreements
between Landlord and Tenant with respect to the properties described on Exhibit
B.
1.77 "Overdue Rate" shall mean, on any date, a per annum rate of
interest equal to the lesser of fifteen percent (15%) and the maximum rate then
permitted under applicable law.
1.78 "Owner's Agreement" shall mean the Owner's Agreement, dated as of
the date hereof, between Landlord and the Franchisor, as amended from time to
time.
1.79 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly through one or more Subsidiaries or Affiliated
Persons, fifty-one percent (51%) 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.
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1.80 "Permitted Encumbrances" shall mean all rights, restrictions, and
easements of record set forth on Schedule B to the applicable owner's or
leasehold title insurance policy issued to Landlord on the date hereof, plus any
other such encumbrances as may have been consented to in writing by Landlord
from time to time.
1.81 "Permitted Liens" shall mean any Liens granted in accordance with
Section 21.9(a).
1.82 "Permitted Use" shall mean any use of the Leased Property
permitted pursuant to Section 4.1.1(a) or (b).
1.83 "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.
1.84 "Proprietary Information" shall mean (a) all computer software and
accompanying documentation (including all future upgrades, enhancements,
additions, substitutions and modifications thereof), other than computer
software which is commercially available, which are used by Tenant in connection
with the property management system, the reservation system and all future
electronic systems developed by Tenant for use in the Hotel, (b) all manuals,
brochures and directives used by Tenant at the Hotel regarding the procedures
and techniques to be used in operating the Hotel, (c) customer lists, and (d)
employee records which must remain confidential either under Legal Requirements
or under reasonable corporate policies of Tenant; provided, however, that
"Proprietary Information" shall not include any software, manuals, brochures or
directives issued by Franchisor to Tenant, as franchisee, under the Franchise
Agreement.
1.85 "Purchase Agreement" shall mean the Purchase and Sale Agreement,
dated as of September __, 1997, by and between HPT, as purchaser, and Residence
Inn by Marriott, Inc. and Courtyard Management Corporation, as amended.
1.86 "Purchase Documents" shall mean, collectively, the Purchase
Agreement and the Agreement to Lease.
1.87 "Rent" shall mean, collectively, the Minimum Rent, Additional Rent
and Additional Charges.
1.88 "Request Notice" shall have the meaning given such term in Section
16.1.
1.89 "Reserve" shall have the meaning given such term in Section
5.1.2(a).
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1.90 "Reserve Estimate" shall have the meaning given such term in
Section 5.1.2(c).
1.91 "Response Notice" shall mean the meaning given such term in
Section 16.1.
1.92 "Retained Funds" shall have the meaning given such term in the
Purchase Agreement.
1.93 "SEC" shall mean the Securities and Exchange Commission.
1.94 "State" shall mean the state or commonwealth or district in which
the Leased Property is located.
1.95 "Stock Pledge Agreement" shall mean the Indemnity and Stock Pledge
Agreement, dated October __, 1997, made by the Guarantor in favor of Landlord,
as amended.
1.96 "Subordinated Creditor" shall mean any creditor of Tenant which is
a party to a Subordination Agreement in favor of Landlord.
1.97 "Subordination Agreement" shall mean any agreement executed by a
Subordinated Creditor pursuant to which the payment and performance of Tenant's
obligations to such Subordinated Creditor are subordinated to the payment and
performance of Tenant's obligations to Landlord under this Agreement.
1.98 "Subsidiary" shall mean, with respect to any Person, any Entity
(a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, fifty-one percent (51%) or more of the voting or beneficial
interest or (b) which such Person otherwise has the right or power to control
(whether by contract, through ownership of securities or otherwise); it being
understood and agreed that, as of the date hereof, (x) Host Marriott Corporation
is not a Subsidiary of the Guarantor and (y) the Guarantor is not a Subsidiary
of Host Marriott Corporation.
1.99 "Successor Landlord" shall have the meaning given such term in
Section 20.2.
1.100 "Tangible Net Worth" shall mean the excess of total assets over
total liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total
assets: (a) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles; (b) all
deferred charges or unamortized debt discount and expense; (c) all reserves
carried and not deducted
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from assets; (d) treasury stock and capital stock, obligations or other
securities of, or capital contributions to, or investments in, any Subsidiary;
(e) securities which are not readily marketable; (f) any write-up in the book
value of any asset resulting from a revaluation thereof subsequent to the
Commencement Date; (g) deferred gain; and (h) any items not included in clauses
(a) through (g) above that are treated as intangibles in conformity with GAAP.
1.101 "Tenant" shall have the meaning given such term in the preambles
to this Agreement and shall include its permitted successors and assigns.
1.102 "Tenant's Personal Property" shall mean all motor vehicles and
consumable Inventories 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 Proprietary Information.
1.103 "Term" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement.
1.104 "Total Hotel Sales" shall mean, for each Fiscal Year, or Fiscal
Quarter, 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 the Hotel, which shall be
deposited in the Reserve); service charges, to the extent not distributed to the
employees at the Hotel as gratuities; and proceeds paid to Tenant, if any, from
business interruption or other loss of income insurance; provided, however, that
Total Hotel Sales shall not include the following: gratuities to Hotel
employees; federal, state or municipal excise, sales, occupancy, use or similar
taxes collected directly from patrons or guests or included as part of the sales
price of any goods or services; insurance proceeds
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(other than proceeds from business interruption or other loss of income
insurance paid to Tenant); 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 the Hotel; and interest which accrues on amounts deposited in the
Reserve.
1.105 "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.
1.106 "Unsuitable for Its Permitted Use" shall mean a state or
condition of the Hotel such that (a) following any damage or destruction
involving the Hotel, the Hotel cannot be operated in the good faith judgment of
Tenant 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 nine (9) months following such damage or destruction
or such shorter period of time as to which business interruption insurance is
available to cover Rent and other costs related to the Leased Property following
such damage or destruction, or (b) as the result of a partial taking by
Condemnation, the Hotel cannot be operated, in the good faith judgment of Tenant
on a commercially and economically practicable basis for its Permitted Use in
light of then existing circumstances.
1.107 "Work" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following
(collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibit C, attached hereto and made a part
hereof (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and
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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 located on or in the
Leased Improvements, and all modifications, replacements, alterations
and additions to such property, except items, if any, included within
the category of Fixtures, but specifically excluding all items included
within the category of Tenant's Personal Property (collectively, the
"Leased Personal Property");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space (including any security
deposits held by Tenant pursuant thereto) in the Leased Improvements to
tenants thereof.
2.2 Condition of Leased Property. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, 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
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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, EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND TENANT
WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE
LEASED PROPERTY. EXCEPT AS EXPRESSLY SET FORTH HEREIN, 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, contractors and materialmen 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 on the last day of the
tenth Accounting Period in the Fiscal Year 2012.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing and the term of all of the Other Leases shall be
simultaneously extended, the Term shall be automatically extended for two (2)
consecutive renewal terms of ten (10) years each (collectively, the "Extended
Terms"), unless Tenant shall give Landlord Notice, in Tenant's sole and absolute
discretion, not later than two (2) years prior to the scheduled expiration of
the then current Term of this Agreement (Fixed or Extended, as the case may be),
that Tenant elects not so to extend the term of this Agreement (and time shall
be of the essence with respect to the giving of such Notice). It is expressly
understood and agreed that such Notice from Tenant shall be void and of no
effect and the Term shall be automatically extended unless Tenant shall
simultaneously elect not to extend the term of the Other Leases.
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except
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that Tenant shall have no right to extend the Term beyond the expiration of the
Extended Terms. If Tenant shall give Notice that it elects not to extend the
Term in accordance with this Section 2.4, this Agreement shall automatically
terminate at the end of the Term then in effect and Tenant shall have no further
option to extend the Term of this Agreement. Otherwise, the extension of this
Agreement shall be automatically effected without the execution of any
additional documents; it being understood and agreed, however, that Tenant and
Landlord shall execute such documents and agreements as either party shall
reasonably require to evidence the same.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Minimum Rent and Additional Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion.
3.1.1 Minimum Rent.
(a) Minimum Rent shall be paid in advance on the first
Business Day of each Accounting Period; provided, however, that the
first payment of Minimum Rent shall be payable on the Commencement
Date.
(b) Adjustments of Minimum Rent Following Disbursements Under
Sections 5.1.3(b), 10.2 or 11.2. Effective on the date of each
disbursement to pay for the cost of any repairs, maintenance,
renovations or replacements pursuant to Sections 5.1.3(b), 10.2 or
11.2, the Minimum Rent shall be increased by a per annum amount equal
to the Disbursement Rate, determined as of the date of Tenant's Notice
to Landlord identifying the amount of and requirement for the
applicable funds, times the amount so disbursed. If any such
disbursement is made during any Accounting Period on a day other than
the first day of a Accounting Period, Tenant shall pay to Landlord on
the first day of the immediately following Accounting Period (in
addition to the amount of Minimum Rent payable with respect to such
Accounting Period, as adjusted pursuant to this paragraph (b)) the
amount by which Minimum Rent for the preceding Accounting Period, as
adjusted for such
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disbursement on a per diem basis, exceeded the amount of Minimum Rent
actually paid by Tenant for such preceding Accounting Period.
3.1.2 Additional Rent.
(a) Amount. For each Lease Year or portion thereof, commencing
with the first Lease Year following the Base Year, Tenant shall pay
additional rent ("Additional Rent") with respect to such Lease Year,
pursuant to this Agreement, in an amount, not less than zero, equal to
seven percent (7%) of Excess Hotel Sales.
(b) Quarterly Installments. Installments of Additional Rent
for each Lease Year or portion thereof shall be calculated and paid
each Fiscal Quarter in arrears. Payment of each such installment shall
be made within 45 days after the end of each Fiscal Quarter and shall
be accompanied by an Officer's Certificate setting forth the
calculation of Additional Rent due and payable for such Fiscal Quarter.
The installment due with respect to each Fiscal Quarter shall be equal
to the Additional Rent due on Excess Hotel Sales for all Fiscal
Quarters elapsed during the applicable Fiscal Year less amounts
previously paid with respect thereto by Tenant. Amounts due shall be
determined by measuring Total Hotel Sales for all Fiscal Quarters
elapsed against Base Total Hotel Sales for the equivalent period during
the Base Year.
(c) Reconciliation of Additional Rent. In addition, on or
before April 30, of each year, commencing April 30, following the Base
Year, Tenant shall deliver to Landlord an Officer's Certificate setting
forth the Total Hotel Sales for such preceding Lease Year, together
with an audit of Total Hotel Sales for the preceding Lease Year,
conducted by Arthur Andersen LLP, or another "Big Six", so-called, firm
of independent certified public accountants proposed by Tenant and
approved by Landlord (which approval shall not be unreasonably withheld
or delayed). Landlord shall reimburse Tenant for the reasonable cost of
such audit.
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 Disbursement Rate, which interest shall
accrue from the close of such preceding Lease Year until the date that
such certificate is required to be delivered (or, if sooner, the date
Tenant pays such excess to Landlord) and, thereafter, such interest
shall accrue at the Overdue Rate,
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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, at
Tenant's election, pay such difference to Tenant within ten (10)
Business Days after Tenant's written request therefor or grant Tenant a
credit in the amount of such difference against Additional Rent next
coming due under this Agreement or, at Tenant's election, under any of
the Other Leases, in any case, such payment or credit to be made
together with interest at the Disbursement Rate, which interest shall
accrue from the date of payment of Tenant until the date such credit is
applied or paid, as the case may be. If such credit cannot be made
because the Term has expired prior to application in full thereof,
provided no Event of Default has occurred and is continuing, Landlord
shall pay the unapplied balance of such credit to Tenant, together with
interest at the Disbursement Rate, which interest shall accrue from the
date of payment by Tenant until the date of payment by Landlord.
(d) Confirmation of Additional Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices and in accordance
with GAAP, which will accurately record all Total Hotel Sales and
Tenant shall retain, for at least three (3) years after the expiration
of each Lease Year, reasonably adequate records conforming to such
accounting system showing all Total Hotel Sales for such Lease Year.
Landlord, at its own expense except as provided hereinbelow, shall have
the right, exercisable by Notice to Tenant given 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 Landlord does not commence an audit within such 1-year
period, such Officer's Certificate shall be deemed conclusively to be
accepted by Landlord as correct and Landlord shall have no further
right to challenge the same. Landlord shall use commercially reasonable
efforts to complete any such audit as soon as practicable. 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 determined, Tenant shall forthwith pay to Landlord the amount
of the deficiency, as finally agreed or determined, together with
interest at the Interest Rate,
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from the date such payment should have been made to the date of payment
thereof. If such deficiency, as agreed upon or compromised as
aforesaid, is more than three percent (3%) of the Total Hotel Sales
reported by Tenant for such Lease Year and, as a result, Landlord did
not receive at least ninety-five percent (95%) of the Additional Rent
payable with respect to such Lease Year, Tenant shall pay the
reasonable cost of such audit and examination. If any such audit
discloses that Tenant paid more Additional Rent for any Lease Year than
was due hereunder, and either Landlord agrees with the result of such
audit or the matter is otherwise determined, provided no Event of
Default has occurred and is continuing, Landlord shall grant Tenant a
credit equal to the amount of such overpayment against Additional Rent
next coming due in the amount of such difference, as finally agreed or
determined, together with interest at the Disbursement 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 Disbursement 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
confidentiality safeguards mutually acceptable to Landlord and Tenant,
in any litigation between the parties and except further that, subject
to the terms of Section 22.16, 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
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added for non-payment, such payments to be made directly to the taxing
authorities where feasible, and shall promptly, upon request, furnish
to Landlord copies of official receipts or other reasonably
satisfactory proof evidencing such payments. If any such Imposition
may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such
Imposition), Tenant may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during the
Term as the same become due and before any fine, penalty, premium,
further interest or cost may be added thereto. Landlord, at its
expense, shall, to the extent required or permitted by Applicable Law,
prepare and file all tax returns and pay all taxes due in respect of
Landlord's net income, gross receipts, sales and use, single business,
transaction privilege, rent, ad valorem, franchise taxes and taxes on
its capital stock, and Tenant, at its expense, shall, to the extent
required or permitted by Applicable Laws, 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 file the same with reasonable
cooperation from Tenant. Landlord shall provide Tenant with copies of
assessment notices in sufficient time for Tenant to prepare a protest
which Landlord shall file, at Tenant's written request. All Impositions
assessed against such personal property shall be (irrespective of
whether Landlord or Tenant shall file the relevant return) paid by
Tenant not later than the last date on which the same may be made
without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has
knowledge; provided, however, that Landlord's
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failure to give any such notice shall in no way diminish Tenant's
obligation hereunder to pay such Impositions (except that Landlord
shall be responsible for any interest or penalties incurred as a result
of Landlord's failure promptly to forward the same).
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities
used in connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained
pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations arising in connection with
the Leased Property except those obligations expressly assumed by
Landlord pursuant to the provisions of this Agreement or expressly
stated not to be an obligation of Tenant pursuant to this Agreement.
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement (other than
termination by reason of an Event of Default), Tenant may, within a
reasonable time after the end of the Term, provide Notice to Landlord
of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this
Agreement (unless this Agreement shall have been terminated following
an Event of Default).
3.2 Late Payment of Rent, Etc., If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, within five (5) days after
Landlord's written demand therefor, 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 and Landlord shall pay when due, or
cause the applicable Hotel Mortgagee to pay when due, such Additional Charges to
the Entity to which they are due. If any payments due from Landlord to Tenant
shall not be paid within ten (10) days after its due date,
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Landlord shall pay to Tenant, on demand, a late charge (to the extent permitted
by law) computed at the Overdue Rate on the amount of such installment from the
due date of such installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional Charges
when due, except as expressly provided in Section 3.1.3(a), Tenant shall
promptly pay and discharge, as Additional Charges, every fine, penalty, interest
and cost which may be added for non-payment or late payment of such items.
Landlord shall have all legal, equitable and contractual rights, powers and
remedies provided either in this Agreement or by statute or otherwise in the
case of non-payment of the Additional Charges as in the case of non-payment of
the Minimum Rent and Additional Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments or
amounts of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including, without limitation,
those provisions for adjustment, refunding or abatement of such Rent and for the
funding of Landlord's obligations pursuant to Section 5.1.3.
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, refund, deferment or reduction of the Rent, or set-off
against the Rent, nor, except as otherwise expressly provided in this Agreement,
shall the respective obligations of Landlord and Tenant be otherwise affected by
reason of (a) any damage to or destruction of the Leased Property or any portion
thereof from whatever cause or any Condemnation, (b) the lawful or unlawful
prohibition of, or restriction upon, Tenant's use of the Leased Property, or any
portion thereof, or the interference with such use by any Person or by reason of
eviction by paramount title; (c) any claim which Tenant may have against
Landlord by reason of any default (other than a monetary default) or breach of
any warranty by Landlord under this Agreement or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties; (d) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord; or (e) for any other cause whether similar or
dissimilar to any of the foregoing (other than a monetary default
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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, to (a) modify, surrender or terminate this Agreement or quit or
surrender the Leased Property or any portion thereof, or (b) entitle Tenant to
any abatement, reduction, suspension or deferment of the Rent or other sums
payable or other obligations to be performed by Tenant hereunder. The
obligations of each party hereunder shall be separate and independent covenants
and agreements, and the Rent and all other sums payable by Tenant hereunder
shall continue to be payable in all events unless the obligations to pay the
same shall be terminated, off-set, reduced or abated pursuant to the express
provisions of this Agreement. In any instance where, after the occurrence of an
Event of Default, Landlord retains, or is retaining, 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 as a result of such Event of Default, promptly
upon determination of such amount.
3.5 Security for Tenant's Performance. Tenant acknowledges that the
Retained Funds with respect to the Collective Leased Properties constitute
security for the faithful observance and performance by Tenant of all the terms,
covenants and conditions of this Agreement and the Other Leases by Tenant to be
observed and performed. If any Event of Default shall occur and be continuing
under this Agreement or the Other Leases, Landlord may, at its option and
without prejudice to any other remedy which Landlord may have on account
thereof, appropriate and apply the amount of such Retained Funds as may be
necessary to compensate Landlord toward the payment of the Rent or other sums
due Landlord under this Agreement or the Other Leases, as the case may be, as a
result of such breach by Tenant. It is understood and agreed that the aggregate
amount of the Retained Funds is not to be considered as prepaid rent, nor shall
damages be limited to the amount of the amount of the Retained Funds. Upon the
expiration or sooner termination of this Agreement, any unapplied balance of the
Retained Funds allocable to the Leased Property shall be paid by wire transfer
to an account or accounts designated by the Sellers under the Purchase Agreement
(or by Tenant if the Sellers so designate). Notwithstanding anything to the
contrary contained herein, Landlord shall not appropriate and apply any portion
of the Retained Funds until it has exhausted any available rights and remedies
pursuant to the Limited Rent Guaranty.
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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 and at any
other time that Tenant shall be in possession of the Leased Property,
continuously use and operate, the Leased Property as a Courtyard by
Marriott hotel (or as a hotel under any successor brand name) and any
uses incidental thereto in accordance with the terms of the Franchise
Agreement. Subject to Section 16.3, Tenant shall not use the Leased
Property or any portion thereof for any other use without the prior
written consent of Landlord. No use shall be made or permitted to be
made of the Leased Property and no acts shall be done thereon which
will cause the cancellation of any insurance policy covering the Leased
Property or any part thereof (unless another adequate policy is
available), nor shall Tenant sell or otherwise provide or permit to be
kept, used or sold in or about the Leased Property any article which
may be prohibited by law or by the standard form of fire insurance
policies, or any other insurance policies required to be carried
hereunder, or fire underwriter's regulations. Tenant shall, at its sole
cost (except as expressly provided in Section 5.1.3(b)), comply with
all Insurance Requirements. Tenant shall not take or omit to take any
action, the taking or omission of which materially impairs the value or
the usefulness of the Leased Property or any part thereof for its
Permitted Use.
(b) In the event that, in the reasonable determination of
Tenant, it shall no longer be economically practical to operate the
Leased Property as a Courtyard by Marriott hotel or if the Franchisor
shall terminate the Franchise Agreement, Tenant shall give Landlord
Notice thereof, which Notice shall set forth in reasonable detail the
reasons therefor. Thereafter, Landlord and Tenant shall negotiate in
good faith to agree on an alternative use for the Leased Property,
appropriate adjustments to the Additional Rent, the Reserve and other
related matters; provided, however, in no such event shall the Minimum
Rent be reduced or abated. In the event that operating the Leased
Property for such alternative use shall be outside of Tenant's
expertise as reasonably determined by Tenant, Tenant may engage a third
party Manager, reasonably acceptable to Landlord, for such purpose.
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4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise commercially reasonable efforts to obtain and maintain
all approvals necessary to use and operate, for its Permitted Use, the Leased
Property and the Hotel located thereon under applicable law. Landlord shall, at
Tenant's expense, cooperate with Tenant in this regard, including executing all
applications and consents required to be signed by Landlord in order for Tenant
to obtain and maintain such approvals.
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 commit or suffer to be committed any
waste on the Leased Property, or in the Hotel, nor shall Tenant cause or permit
any unlawful nuisance thereon or therein. Tenant shall not suffer nor permit the
Leased Property, or any portion thereof, to be used in such a manner as (i)
might reasonably impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably allow a claim or claims for adverse usage or adverse
possession by the public, as such, or of implied dedication of the Leased
Property or any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the
provisions of Article 8, Tenant, at its sole expense, shall (i) comply with
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair, alteration and restoration of the Leased Property, and (ii)
comply with all appropriate licenses, and other authorizations and agreements
required for any use of the Leased Property and Tenant's Personal Property, if
any, then being made and which are material to the operation of the Leased
Property as a hotel, and for the proper 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 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, notify Landlord in
writing of any material change in the nature or extent of Hazardous Substances
at the Leased Property, (b) transmit to Landlord a copy of any Community Right
to Know report which is required to be filed by Tenant with respect to the
Leased Property pursuant to SARA Title
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III or any other Applicable Law, (c) transmit to Landlord copies of any
citations, orders, notices or other governmental com munications received by
Tenant or 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) observe and comply with all Applicable Laws
relating to the use, maintenance and disposal of Hazardous Substances and all
orders or directives from any official, court or agency of competent
jurisdiction relating to the use or maintenance or requiring the removal,
treatment, containment or other disposition thereof, and (e) pay or otherwise
dispose of any fine, charge or Imposition related thereto, unless Tenant shall
contest the same in good faith and by appropriate proceedings and the right to
use and the value of the Leased Property is not materially and adversely
affected thereby.
If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Applicable Laws) are
discovered on the Leased Property, subject to Tenant's right to contest the same
in accordance with Article 8, Tenant shall take all actions and incur any and
all expenses, as may be reasonably necessary and as may be required by any
Government Agency, (i) to clean up and remove from and about the Leased Property
all Hazardous Substances thereon, (ii) to contain and prevent any further
release or threat of release of Hazardous Substances on or about the Leased
Property and (iii) to use good faith efforts to eliminate any further release or
threat of release of Hazardous Substances on or about the Leased Property.
4.3.2 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord and each Hotel Mortgagee, their trustees,
officers, agents, employees and beneficiaries, and any of their respective
successors or assigns with respect to this Agreement (collectively, the
"Indemnitees" and, individually, an "Indemnitee") for, from and against any and
all debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
Indemnitee resulting from, either directly or indirectly, the presence during
the Term (or any other time Tenant shall be possession of the Leased Property)
in, upon or under the soil or ground water of the Leased Property or any
properties surrounding the Leased Property of any Hazardous Substances in
violation of any Applicable Law or otherwise, provided that any of the foregoing
arises by reason of any failure by Tenant or any Person claiming
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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 gross negligence or
willful misconduct of Landlord or any other Indemnitee. Tenant's duty herein
includes, but is not limited to, costs associated with personal injury or
property damage claims as a result of the presence prior to the expiration or
sooner termination of the Term and the surrender of the Leased Property to
Landlord in accordance with the terms of this Agreement of Hazardous Substances
in, upon or under the soil or ground water of the Leased Property in violation
of any Applicable Law. Upon Notice from Landlord and any other of the
Indemnitees, Tenant shall undertake the defense, at Tenant's sole cost and
expense, of any indemnification duties set forth herein, in which event, Tenant
shall not be liable for payment of any duplicative attorneys' fees incurred by
any Indemnitee.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage (including, without limitation, reasonable
attorneys' fees) incurred by Landlord and arising from a failure of Tenant
strictly to observe and perform the requirements of this Section 4.3, which
amounts shall bear interest from the date ten (10) days after written demand
therefor is given to Tenant until paid by Tenant to Landlord at the Overdue
Rate.
Tenant's obligations pursuant to the terms of this Section 4.3.2 are
subject to Tenant's right to use the Reserve for the purposes set forth in
Section 5.1.2(a)(v).
4.3.3 Survival. As to conditions which exist prior to the
expiration or sooner termination of this Agreement, the provisions of this
Section 4.3 shall survive the expiration or sooner termination of this
Agreement.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost and expense (except as
expressly provided in Sections 5.1.2 and 5.1.3(b)), keep the Leased
Property and all private roadways, sidewalks and curbs located thereon
(and Tenant's Personal Property, if any) in good order and repair,
reasonable wear and tear excepted (whether or not the need for such
repairs occurs as a result of Tenant's use, any prior use, the elements
or the age of the Leased Property or Tenant's Personal Property, if
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any, 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 the industry standards for like hotels in like locales,
in accordance with all applicable federal, state and local statutes,
ordinances, by-laws, codes, rules and regulations relating to any such
work. Tenant shall not take or omit to take any action, the taking or
omission of which would materially and adversely impair the value or
the usefulness of the Leased Property or any part thereof for its
Permitted Use. Tenant's obligations under this Section 5.1.1(a) shall
be limited in the event of any casualty or Condemnation as set forth in
Sections 10.2 and 11.2 and Tenant's obligations with respect to
Hazardous Substances are as set forth in Section 4.3.
5.1.2 Reserve.
(a) Prior to or simultaneously with the execution of this
Agreement, Landlord has deposited an aggregate amount of One Million
Two Hundred Ninety-Three Thousand Seven Hundred Seventy Dollars
($1,293,770) with respect to the Collective Leased Properties, such sum
to be held in an interest bearing reserve account established by Tenant
(the "Reserve") in a bank designated by Landlord and approved by
Tenant. All interest earned on the Reserve shall be added to and remain
apart of the Reserve. Tenant shall be the only party entitled to
withdraw funds from the Reserve until an Event of Default shall occur,
Landlord agreeing, however, that, following the occurrence of an Event
of Default and until such time as this Agreement shall have been
terminated, Landlord shall continue to make payments from the Reserve
to contractors and materialmen pursuant to contracts made by Tenant for
items which are permitted Reserve expenditures, provided that Landlord
shall reasonably determine that there are adequate Reserve funds
available therefor. The purpose of the Reserve is to cover the cost of:
(i) Replacements, renewals and additions to the furniture,
furnishings, fixtures and equipment at the Hotel and the other
hotels located at the Collective Leased Properties;
(ii) Routine repairs, renovations, renewals, additions,
alterations, improvements or replacements and maintenance to
the Leased Property and the buildings
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and improvements located at the Collective Leased Properties
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;
(iii) Major repairs, renovations, additions, alterations,
improvements, renewals or replacements to the Leased Property
and the buildings and improvements located at the Collective
Leased Properties, including, without limitation, with respect
to their structure, roof, or exterior facade, and to their
mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems;
(iv) All lease payments for equipment and other personal property
reasonably necessary for the operation of the Hotel and the
hotels located at the Collective Leased Properties; and
(v) Repairs, replacements and renewals; and other expenditures
costing in excess of $25,000 per Lease Year at the Collective
Leased Properties; provided, in each case, such repairs,
replacements, renewals or other expenditures are required to
comply with Legal Requirements and Insurance Requirements.
(b) Throughout the Term, Tenant shall transfer (as of the
end of each Accounting Period of the Term) into the Reserve an amount
equal to the Applicable Percentage of Total Hotel Sales for such
Accounting Period; provided; however, that Tenant shall have no
obligation to fund and/or transfer any funds to the Reserve until such
time as the Reserve balance would equal One Million Two Hundred
Ninety-Three Thousand Seven Hundred Seventy Dollars ($1,293,770) had
Tenant funded the Reserve as required by the preceding clause of this
sentence. 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 Reserve for the preceding Fiscal Year, together
with a comparison of such expenditures with the applicable Reserve
Estimate.
(c) Each year, on or before December 1 of the preceding
year, Tenant shall prepare an estimate (the "Reserve Estimate") of
Reserve expenditures necessary during the ensuing Fiscal Year, and
shall submit such Reserve Estimate to Landlord for its review. All
expenditures from the Reserve shall be (as to both the amount of each
such expenditure and the timing thereof) both reasonable and
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necessary, given the objective that the Hotel will be maintained and
operated to a standard comparable to competitive properties and in
accordance with the standards set forth in the Franchise Agreement.
(d) Tenant shall from time to time make expenditures from
the Reserve as it deems necessary in accordance with Section 5.1.2(a).
Tenant shall provide to Landlord, within forty (40) Business Days after
the end of each Accounting Period, a statement setting forth, on a line
item basis, Reserve expenditures made to date and any variances or
anticipated variances and/or amendments from the Reserve Estimate.
(e) All funds in the Reserve, all interest earned thereon
and all property purchased with funds from the Reserve shall be and
remain the property of Landlord.
(f) It is understood and agreed that the Reserve pursuant to
this Agreement and the Other Leases shall be maintained and used on a
consolidated basis such that all Reserve funds shall be deposited in a
single account and Tenant may apply any funds therein to any of the
Collective Leased Properties in accordance with the terms of this
Agreement and Other Leases.
(g) If Landlord wishes to grant a security interest in or
create another encumbrance on the Reserve, all or any part of the
existing or future funds therein, or any general intangible in
connection therewith, the instrument granting such security interest or
creating such other encumbrance shall expressly provide that such
security interest or encumbrance is subject to the rights of Tenant
with respect to the Reserve as set forth herein. The form and substance
of such provision shall be subject to Tenant's prior written approval,
which approval shall not be unreasonably withheld, delayed or
conditioned.
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,
except as provided in Section 5.1.3(b), to make any expenditure
whatsoever with respect thereto, or to maintain the Leased Property in
any way. Except as otherwise expressly provided in this Agreement,
Tenant hereby waives,
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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 Reserve shall be
insufficient or are reasonably projected to be insufficient for
necessary and permitted expenditures thereof, Tenant may, at its
election, give Landlord Notice thereof, which Notice shall set forth,
in reasonable detail, the nature of the required or permitted action,
the estimated cost thereof (including the amount which is in excess of
the amount of funds in the Reserve) and such other information with
respect thereto as Landlord may reasonably require. Provided that (i)
no Event of Default shall have occurred and be continuing as to which
(x) ninety (90) days or less shall have elapsed after Notice of the
occurrence thereof from Landlord to Tenant or (y) Landlord shall have
commenced enforcing and is diligently pursuing enforcing its rights and
remedies, and (ii) Tenant shall otherwise comply with the applicable
provisions of Article 6, Landlord shall, within ten (10) Business Days
after such Notice, or such later dates as Tenant may direct by
reasonable prior Notice, subject to and in accordance with the
applicable provisions of Article 6, disburse such required funds to
Tenant (or, if Tenant shall so elect, directly to the Manager or any
other Person performing the required work) and, upon such disbursement,
the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). In
the event that any dispute shall arise with respect to Landlord's
obligation to disburse any funds pursuant to this Section 5.1.3(b),such
dispute shall be resolved in accordance with the applicable provisions
of Article 19. Whenever reasonably possible, Landlord shall identify
disputed items on a line item basis.
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
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performance of any labor or the furnishing of any materials for any alteration,
addition, improvement or repair to the Leased Property or any part thereof or as
giving Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of any lien against the Leased Property or any part thereof
nor to subject Landlord's estate in the Leased Property or any part thereof to
liability under any Mechanic's Lien Law of the State in any way, it being
expressly understood Landlord's estate shall not be subject to any such
liability.
5.2 Tenant's Personal Property. Tenant shall provide and maintain
throughout the Term all such Tenant's Personal Property and such other personal
property as shall be necessary in order to operate in compliance with applicable
Legal Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Permitted Use. 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 and for which the fair market
value, as reasonably determined by Tenant, exceeds the product of One Thousand
Dollars ($1,000), adjusted as provided below, multiplied by the number of hotel
rooms or suites at the Leased Property, 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. Notwithstanding anything to the contrary contained herein, at
the expiration or sooner termination of the Term, Landlord may, in its sole and
absolute discretion, elect either (i) to give Tenant Notice that Tenant shall be
required, within ten (10) Business Days after such expiration or termination, to
remove all FAS and Inventories from the Leased Property or (ii) to pay Tenant's
cost of such FAS and Inventories. Failure of Landlord to make such election
shall be deemed an election to proceed in accordance with clause (ii) preceding.
The $1,000 amount referred to above shall be increased from time to time by an
amount equal to $1,000 multiplied by a fraction, the denominator of which shall
be the Index for the nearest month prior to the Commencement Date and the
numerator of which shall be the Index for the nearest month for which the Index
is available prior to the first day of the Accounting Period in which such
determination is being made.
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, replaced, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Agreement,
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reasonable wear and tear (and casualty damage and Condemnation, in the event
that this Agreement is terminated following a casualty or total Condemnation in
accordance with Article 10 or Article 11) excepted.
In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith, commercially reasonable 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 entered into by Tenant, including contracts
with governmental or quasi-governmental Entities which may be necessary for the
use and operation of the Hotel as then operated, but excluding (i) all insurance
contracts and multi-property contracts not limited in scope to the Collective
Leased Properties the Leases for which are being terminated simultaneously,(ii)
all contracts and leases with Affiliated Persons, (iii) utility deposits and
(iv) telephone numbers (which telephone numbers Tenant shall be required to
convey to Landlord only if this Agreement is terminated as a result of an Event
of Default). Landlord shall indemnify and hold Tenant harmless for all claims,
costs and expenses (including reasonable attorneys' fees) arising from acts or
omissions by Landlord under such contracts subsequent to the date of transfer
thereof to Landlord. If requested by Landlord on or before the date which is at
least 60 days prior to such expiration or earlier termination of this Agreement,
Tenant will continue to manage the Hotel after the expiration of the Term and
for up to one hundred twenty (120) days, on such reasonable terms (which shall
include an agreement to reimburse Tenant for its reasonable out-of-pocket costs
and expenses, and reasonable administrative costs and a management fee equal to
10% of Total Hotel Sales), as Landlord and Tenant shall reasonably agree.
5.4 Management Agreement. Tenant may from time to time, without
Landlord's consent, enter into, amend (except as provided in clauses (i) and
(ii) below) and/or terminate Management Agreements with its Affiliated Persons
delegating operational authority for the day-to-day operation of the Hotel to a
Manager who is an Affiliated Person as to Tenant provided that any such
Management Agreement shall provide (i) that all amounts due from Tenant to the
Manager shall be subordinate to all amounts due from Tenant to Landlord, and
(ii) for the termination thereof upon the termination of this Agreement or the
Franchise Agreement. Except as otherwise provided in Sections 4.1.1(b) and
14.3(c), Tenant shall not otherwise enter into, amend or modify any Management
Agreement with a Person that is not an Affiliated Person as to Tenant without
Landlord's prior written consent. Landlord shall have no right to enforce
Tenant's rights under any such Management Agreement.
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ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Improvements to the Leased Property. Prior to commencing
construction of any Capital Addition constituting additions or modifications to
any structural elements of the Hotel, the cost of which is reasonably estimated
to exceed $250,000 (as adjusted as provided below) (other than any Capital
Addition which is reasonably required to be made immediately in order to prevent
imminent damage or danger to person or property), Tenant shall submit to
Landlord, in writing, a proposal setting forth, in reasonable detail, any such
proposed improvement and cost estimate therefor and shall provide to Landlord
such plans and specifications, and such permits, licenses, contracts and such
other information concerning the same as Landlord may reasonably request.
Landlord shall have twenty (20) Business Days to review all materials submitted
to Landlord in connection with any such proposal. Failure of Landlord to respond
to Tenant's proposal within twenty (20) Business Days after receipt of all
information and materials requested by Landlord in connection with the proposed
improvement shall be deemed to constitute approval of the same. Landlord's
approval shall not be withheld as to any such Capital Addition that is required
to comply with the Franchise Agreement. In the event that any dispute shall
arise with respect to Landlord's withholding of its approval pursuant to this
Section 6.1, such dispute shall be resolved in accordance with the applicable
provisions of Article 19. No Capital Addition shall be made which would tie in
or connect any Leased Improvement with any other improvements on property
adjacent to the Leased Property (and not part of the Land) including, without
limitation, tie-ins of buildings or other structures or utilities. Tenant shall
not finance 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. The $250,000 limit referred to
above shall be increased from time to time to an amount equal to $250,000
multiplied by a fraction, the denominator of which shall be the Index for the
nearest month prior to the Commencement Date and the numerator of which shall be
the Index for the nearest month for which the Index is available prior to the
first day of the Accounting Period in which such determination is being made.
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6.2 Salvage. Other than Tenant's Personal Property, all materials which
are scrapped or removed in connection with the making of either Capital
Additions or non-Capital Additions or repairs pursuant to Articles 5 or 6 shall
be disposed of by Tenant and the net proceeds thereof, if any, shall be
deposited in the Reserve.
6.3 Equipment Leases. Landlord shall enter into such leases of
equipment and personal property as Tenant may reasonably request from time to
time, provided that the form and substance thereof shall be reasonably
satisfactory to Landlord. Tenant shall prepare and deliver to Landlord all such
lease documents for which Landlord's execution is necessary and Landlord shall
promptly, upon approval thereof, execute and deliver such documents to Tenant.
Tenant shall, throughout the Term, be responsible for performing all of
Landlord's obligations under all such documents and agreements.
ARTICLE 7
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 17, (e) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (i) the same are not yet due and payable, or (ii) are being contested in
accordance with Article 8, (f) liens of mechanics, laborers, materialmen,
suppliers or vendors incurred in the ordinary course of business that are not
yet due and payable or are for sums that are being contested in accordance with
Article 8, (g) any Hotel Mortgages or other liens which are the responsibility
of Landlord pursuant to the provisions of Article 21 and (h) Landlord Liens.
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,
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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 required
hereunder to be paid by Tenant 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 a lien attaching to the
Leased Property, unless such lien is fully bonded or otherwise secured to the
reasonable satisfaction of Landlord, (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 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 Notice to Tenant, 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 the
following insurance:
(a) "All-risk" property insurance, including insurance
against loss or damage by fire, vandalism and
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malicious mischief, earthquake, explosion of steam boilers, pressure
vessels or other similar apparatus, now or hereafter installed in the
Hotel located at the Leased Property, with equivalent coverage as that
provided by the usual extended coverage endorsements, in an amount
equal to one hundred percent (100%) of the then full Replacement Cost
thereof excluding foundation and excavation (as defined in Section 9.2)
(except that the foregoing shall not be construed to require Tenant to
maintain earthquake insurance if the same is unavailable on
commercially reasonable terms, provided Tenant gives Landlord prior
Notice thereof and except that the amount of earthquake insurance shall
not necessarily be 100% of the then full Replacement Cost). The parties
agree that such earthquake insurance can be provided through a blanket
earthquake insurance program with limits adequate to protect the
regional aggregate probable maximum loss for all properties under the
blanket program.
(b) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy or endorsement 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 managed
or leased by the Guarantor and its Affiliated Persons and in an amount
sufficient to prevent Landlord or Tenant from becoming a co-insurer;
(c) Comprehensive general liability insurance, including
bodily injury and property damage (on an occurrence basis and on a 1973
or 1988 ISO CGL form or on a form customarily maintained by similarly
situated tenants, including, without limitation, broad form contractual
liability, independent contractor's hazard and completed operations
coverage) in an amount not less than Two Million Dollars ($2,000,000)
per occurrence and umbrella coverage of all such claims in an amount
not less than Twenty-Three Million Dollars ($23,000,000);
(d) Flood (if the Leased Property is located in whole or in
part within an area identified as an area having special flood hazards
and in which flood insurance has been made available under the National
Flood Insurance Act of 1968, as amended, or the Flood Disaster
Protection Act of 1973, as amended (or any successor acts thereto)) and
such other hazards and in such amounts as may be available under the
National Flood Insurance Program for comparable properties in the area;
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(e) Worker's compensation insurance coverage for all persons
employed by Tenant on the Leased Property with statutory limits and
otherwise with limits of and provisions in accordance with the
requirements of applicable local, State and federal law, and employer's
liability insurance as is customarily carried by similar employers (as
to which, if qualified, Tenant may self insure); 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 determina tion of such
appraiser shall be final and binding on the parties hereto until any subsequent
determination under this Section 9.2, and Tenant shall forthwith conform the
amount of the insurance carried to the amount so determined by the appraiser.
Such replacement value determination will not be necessary so long as the Leased
Property is insured through a blanket replacement value policy.
9.3 Waiver of Subrogation. Landlord and Tenant agree that (insofar as
and to the extent that such agreement may be effective without invalidating or
making it impossible to secure insurance coverage from responsible insurance
companies doing business in the State) with respect to any property loss which
is covered by insurance then being carried by Landlord or Tenant, respectively,
the party carrying such insurance and suffering said loss releases the other of
and from any and all claims with respect to such loss; and they further agree
that their respective insurance companies shall have no right of subrogation
against the other on account thereof, even though extra premium may result
therefrom. In the event that any extra premium is payable by Tenant as a result
of this provision, Landlord shall not be liable for reimbursement to Tenant for
such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and endorsements
required pursuant to this Article 9 shall be fully
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paid for, nonassessable and, except for umbrella, worker's compensation, flood
and earthquake coverage, be issued by insurance carriers authorized to do
business in the State, having a general policy holder's rating of no less than
B++ in Best's latest rating guide. All such policies described in Sections
9.1(a) through (d) shall include no deductible in excess of that carried by the
Guarantor and its Affiliated Persons at similar 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 and to
the extent of their indemnity. All loss adjustments shall be payable as provided
in Article 10. Tenant shall cause all insurance premiums to be paid and shall
deliver policies or certificates thereof to Landlord prior to their effective
date (and, with respect to any renewal policy, prior to the expiration of the
existing policy). All such policies shall provide Landlord (and any Hotel
Mortgagee if required by the same) thirty (30) days prior written notice of any
material change or cancellation of such policy. In the event Tenant shall fail
to effect such insurance as herein required, to pay the premiums therefor or to
deliver such policies or certificates to Landlord or any Hotel Mortgagee at the
times required, Landlord shall have the right, but not the obligation, subject
to the provisions of Section 12.5, to acquire such insurance and pay the
premiums therefor, which amounts shall be payable to Landlord, upon demand, as
Additional Charges, together with interest accrued thereon at the Overdue Rate
from the date such payment is made until (but excluding) the date repaid.
9.5 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant, provided, that the policies meet the
requirements of this Agreement.
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
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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 under Tenant's control, (b) any 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, and (c) any
Impositions that are the obligations of Tenant to pay pursuant to the applicable
provisions of this Agreement; provided, however, that Tenant's obligations
hereunder shall not apply to any liability, obligation, claim, damage, penalty,
cause of action, cost or expense to the extent the same arises from any
negligence or willful misconduct of Landlord, its employees, agents or invitees.
Tenant, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against Landlord (and shall not be
responsible for any duplicative attorneys' fees incurred by Landlord) or may
compromise or otherwise dispose of the same, with Landlord's prior written
consent (which consent may not be unreasonably withheld or delayed). In the
event Landlord shall unreasonably withhold or delay its consent, Tenant shall
not be liable pursuant to this Section 9.7 for any incremental increase in costs
or expenses resulting therefrom. The obligations of Tenant under this Section
9.7 are in addition to the obligations set forth in Section 4.3 and shall
survive the termination of this Agreement.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any property policy of
insurance required by Article 9 (other than the proceeds of any business
interruption insurance) shall be paid directly to Landlord (subject to the
provisions of Section 10.2) and all loss adjustments with respect
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to property losses payable to Tenant shall require the prior written consent of
Landlord; provided, however, that, so long as no Event of Default shall have
occurred and be continuing, all such proceeds less than or equal to Two Hundred
Fifty Thousand Dollars ($250,000) shall be paid directly to Tenant and such
losses may be adjusted without Landlord's consent. If Tenant is required to
reconstruct or repair the Leased Property as provided herein, such proceeds
shall be paid out by Landlord from time to time for the reasonable costs of
reconstruction or repair of the Leased Property necessitated by such damage or
destruction, subject to and in accordance with the provisions of Section 10.2.4.
Provided no Default or Event of Default has occurred and is continuing, any
excess proceeds of insurance remaining after the completion of the restoration
shall be paid to Tenant. In the event that the provisions of Section 10.2.1 are
applicable, the insurance proceeds shall be retained by the party entitled
thereto pursuant to Section 10.2.1. All salvage resulting from any risk covered
by insurance shall belong to Landlord, provided any rights to the same have been
waived by the insurer.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property. If, during
the Term, the Leased Property shall be totally or partially destroyed and the
Hotel located thereon is thereby rendered Unsuitable for Its Permitted Use,
Tenant may, by the giving of Notice thereof to Landlord, terminate this
Agreement, whereupon, this Agreement shall terminate and Landlord shall be
entitled to retain the insurance proceeds payable on account of such damage.
10.2.2 Partial Damage or Destruction. If, during the Term,
the Leased Property shall be totally or partially destroyed but the Hotel is not
rendered Unsuitable for Its Permitted Use, Tenant shall, subject to Section
10.2.3, promptly restore the Hotel as provided in Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds. If the cost of the
repair or restoration of the Leased Property exceeds the amount of insurance
proceeds received by Landlord and Tenant pursuant to Article 9(a), (c), (d) or,
if applicable, (e), 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
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deficiency, to elect to make available for application to the cost of repair or
restoration the amount of such deficiency; provided, however, in such event,
upon any disbursement by Landlord thereof, the Minimum Rent shall be adjusted as
provided in Section 3.1.1(b). In the event that neither Landlord nor Tenant
shall elect to make such deficiency available for restoration, either Landlord
or Tenant may terminate this Agreement by Notice to the other, whereupon, this
Agreement shall terminate as provided in Section 10.2.1. It is expressly
understood and agreed, however, that, notwithstanding anything in this Agreement
to the contrary, Tenant shall be strictly liable and solely responsible for the
amount of any deductible (other than deductibles under the then existing
earthquake insurance maintained in accordance with Section 9.1) and shall, upon
any insurable loss, pay over the amount of such deductible to Landlord at the
time and in the manner herein provided for payment of the applicable proceeds to
Landlord.
10.2.4 Disbursement of Proceeds. In the event Tenant is
required to restore the Leased Property pursuant to Section 10.2, Tenant shall
commence promptly and continue diligently to perform the repair and restoration
of the Leased Property (hereinafter called the "Work"), so as to restore the
Leased Property in compliance with all Legal Requirements and so that the Leased
Property shall be, to the extent practicable, substantially equivalent in value
and general utility to its general utility and value immediately prior to such
damage or destruction. Subject to the terms hereof, Landlord shall advance the
insurance proceeds and any additional amounts payable by Landlord pursuant to
Section 10.2.3 to Tenant regularly during the repair and restoration period so
as to permit payment for the cost of any such restoration and repair. Any such
advances shall be made not more than monthly within ten (10) Business Days after
Tenant submits to Landlord a written requisition and substantiation therefor on
AIA Forms G702 and G703 (or on such other form or forms as may be reasonably
acceptable to Landlord). Landlord may, at its option, condition advancement of
said insurance proceeds and other amounts on (i) the absence of any Event of
Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld or
delayed), (iii) general contractors' estimates, (iv) architect's certificates,
(v) unconditional lien waivers of general contractors, if available, (vi)
evidence of approval by all governmental authorities and other regulatory bodies
whose approval is required and (vii) such other certificates as Landlord may,
from time to time, reasonably require.
Landlord's obligation to disburse insurance proceeds under this Article
10 shall be subject to the release of such proceeds by any Hotel Mortgagee to
Landlord.
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Tenant's obligation to restore the Leased Property pursuant to this
Article 10 shall be subject to the release of available insurance proceeds by
the applicable Hotel Mortgagee to Landlord or directly to Tenant and, in the
event such proceeds are insufficient, Landlord electing to make such deficiency
available therefor (and disbursement of such deficiency).
10.3 Damage Near End of Term; Damage from Earthquake.
(a) Notwithstanding any provisions of Section 10.1 or 10.2
to the contrary, if damage to or destruction of the Leased Property
occurs during the last twelve (12) months of the then Term (including
any exercised Extended Term) and if such damage or destruction cannot
reasonably be expected to be fully repaired and restored prior to the
date that is nine (9) months prior to the end of such Term (including
any exercised Extended Term), the provisions of Section 10.2.1 shall
apply as if the Leased Property had been totally or partially destroyed
and the Hotel rendered Unsuitable for its Permitted Use.
(b) Notwithstanding any provisions of Section 10.1 or 10.2
to the contrary, if (x) Material Earthquake Damage (as defined below)
to the Leased Property occurs and (y) Tenant was not required to
maintain earthquake insurance pursuant to Section 9.1, Tenant shall
have the right, by the giving of Notice thereof to Landlord within
sixty (60) days after the date of earthquake, to terminate this
Agreement. If Tenant shall so elect to terminate this Agreement, this
Agreement shall terminate as of the date of such earthquake, provided
that Tenant shall pay to Landlord, on or before the date of such
Notice, an amount equal to the lesser of (x) the Minimum Rent payable
for the balance of the applicable Term (without giving effect to such
termination but after giving effect to any exercised Extended Term) and
(y) Eight Million Five Hundred Thousand Dollars ($8,500,000), which
payment may be made, at Tenant's election, by application thereto of
the Retained Funds.
For purposes of this Section 10.3(b), "Material Earthquake
Damage" shall mean damage or destruction of the Leased Property
resulting from earthquake, the repair or restoration of which will cost
in excess of an amount equal to One Million Five Hundred Thousand
Dollars ($1,500,000) multiplied by a fraction, the denominator of which
shall be the Index for the nearest month prior to the date of this
Agreement and the numerator of which shall be the Index for the nearest
month prior to the date of such earthquake.
(c) It is expressly understood and agreed that, in the event
Tenant elects or is required to repair any damage
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or destruction to the Leased Property resulting from earthquake and as
to which Tenant was not required to maintain insurance pursuant to
Section 9.1 or as to which Tenant maintained coverage pursuant to
Section 9.1 but the proceeds thereof are inadequate, provided that not
less than five full Lease Years remain in the Term (including any
exercised Extended Term), Tenant may use funds from the Reserve to pay
for the restoration and repair costs and Landlord shall be obligated to
disburse additional funds subject to and upon the terms and conditions
of Section 5.1.3(b).
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid to Tenant
and, to the extent necessary to repair or replace Tenant's Personal Property in
accordance with Section 10.5, Tenant shall hold such proceeds in trust to pay
the cost of repairing or replacing damaged Tenant's Personal Property.
10.5 Restoration of Tenant's Property. If Tenant is required to restore
the Leased Property as hereinabove provided, Tenant shall either (a) restore all
alterations and improvements made by Tenant and Tenant's Personal Property, or
(b) replace such alterations and improvements and Tenant's Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
10.6 No Abatement of Rent. This Agreement shall remain in full force
and effect and Tenant's obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall remain unabated
during the Term notwithstanding any damage involving the Leased Property
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any cause of damage or destruction
to the Leased Property and, to the maximum extent permitted by law, no local or
State statute, laws, rules, regulation or ordinance in effect during the Term
which provide for such a contingency shall have any application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property.
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ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of the Leased
Property shall be taken by Condemnation or (ii) a Condemnation of less than the
whole of the Leased Property renders the Leased Property Unsuitable for Its
Permitted Use, this Agreement shall terminate and Tenant and Landlord shall seek
the Award for their interests in the Leased Property as provided in Section
11.5.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of the Leased Property such that the Leased Property is not rendered
Unsuitable for Its Permitted Use, Tenant shall, to the extent of the Award and
any additional amounts disbursed by Landlord as hereinafter provided, commence
promptly and continue diligently to restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to such Condemnation, in full compliance with all Legal
Requirements, subject to the provisions of this Section 11.2. If the cost of the
repair or restoration of the Leased Property exceeds the amount of the Award,
Tenant shall give Landlord Notice thereof which notice shall set forth in
reasonable detail the nature of such deficiency and whether Tenant shall pay and
assume the amount of such deficiency (Tenant having no obligation to do so,
except that if Tenant shall elect to make such funds available, the same shall
become an irrevocable obligation of Tenant pursuant to this Agreement). In the
event Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at
Landlord's sole election by Notice to Tenant given within sixty (60) days after
Tenant's Notice of the deficiency, to elect to make available for application to
the cost of repair or restoration the amount of such deficiency; provided,
however, in such event, upon any disbursement by Landlord thereof, the Minimum
Rent shall be adjusted as provided in Section 3.1.1(b). In the event that
neither Landlord nor Tenant shall elect to make such deficiency available for
restoration, either Landlord or Tenant may terminate this Agreement and the
entire Award shall be retained by Landlord.
11.3 Disbursement of Award. Subject to the terms hereof, Landlord shall
contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements and any deficiency Landlord has agreed
to disburse, to Tenant regularly during the restoration period so as
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to permit payment for the cost of such repair or restoration. Landlord may, at
its option, condition advancement of such Award and other amounts on (i) the
absence of any Event of Default, (ii) its approval of plans and specifications
of an architect satisfactory to Landlord (which approval shall not be
unreasonably withheld or delayed), (iii) general contractors' estimates, (iv)
architect's certificates, (v) unconditional lien waivers of general contractors,
if available, (vi) evidence of approval by all governmental authorities and
other regulatory bodies whose approval is required and (vii) such other
certificates as Landlord may, from time to time, reasonably require. Landlord's
obligation under this Section 11.3 to disburse the Award and such other amounts
shall be subject to (x) the collection thereof by Landlord and (y) the
satisfaction of any applicable requirements of any Hotel Mortgage, and the
release of such Award by the applicable Hotel Mortgagee. Tenant's obligation to
restore the Leased Property shall be subject to the release of the Award by the
applicable Hotel Mortgagee to Landlord.
11.4 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. 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.
11.5 Temporary Condemnation. In the event of any temporary Condemnation
of the Leased Property or Tenant's interest therein, this Agreement shall
continue in full force and effect and Tenant shall continue to pay, in the
manner and on the terms herein specified, the full amount of the Rent. Tenant
shall continue to perform and observe all of the other terms and conditions of
this Agreement on the part of the Tenant to be performed and observed. Provided
no Event of Default has occurred and is continuing, the entire amount of any
Award made for such temporary Condemnation allocable to the Term, whether paid
by way of damages, rent or otherwise, shall be paid to Tenant. Tenant shall,
promptly upon the termination of any such period of temporary Condemnation, at
its sole cost and expense, restore the Leased Property to the condition that
existed immediately prior to such Condemnation, in full compliance with all
Legal Requirements, unless such period of temporary Condemnation shall extend
beyond the expiration of the Term, in which event Tenant shall not be required
to make such restoration. For purposes of this Section 11.4, a
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Condemnation shall be deemed to be temporary if the period of such Condemnation
is not expected to, and does not, exceed twelve (12) months.
11.6 Allocation of Award. Except as provided in Section 11.4 and the
second sentence of this Section 11.5, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property, or
Tenant's removal and relocation expenses shall be the sole property of and
payable to Tenant (subject to the provisions of Section 11.2). In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent or
any other sum (including, but not limited to, funding of the Reserve),
payable hereunder when due and such failure shall continue for a period
of ten (10) days after Notice thereof; or
(b) should Tenant fail to maintain the insurance coverages
required under Article 9 and such failure shall continue for ten (10)
days after Notice thereof (except that no Notice shall be required if
any such insurance coverages shall have lapsed); or
(c) should Tenant default in the due observance or
performance of any of the terms, covenants or agreements contained
herein to be performed or observed by it (other than as specified in
clauses (a) and (b) above) 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 fifteen (15) days after Notice thereof from
Landlord and thereafter prosecutes the curing of such default with all
due diligence, such period of time shall be extended to such
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period of time as may be necessary to cure such default with all due
diligence; or
(d) should a material event of default by Tenant or its
Affiliated Persons occur and be continuing beyond the expiration of any
applicable cure period under any of the Incidental Documents or the
Other Leases; or
(e) should any material representation or warranty made by
Tenant or any of its Affiliated Persons under or in connection with
this Agreement, any Incidental Document or the Other Leases, or in any
document, certificate or agreement delivered in connection herewith
prove to have been false in any material respect on the date when made
or deemed made and such default shall continue for a period of fifteen
(15) days after Notice thereof from Landlord to Tenant; provided,
however, that (x) if such default is susceptible of cure but such cure
cannot be accomplished with due diligence within such period of time
and if, in addition, Tenant commences to cure or cause to be cured such
default within fifteen (15) days after Notice thereof from Landlord and
thereafter prosecutes the curing of such default with all due
diligence, such period of time shall be extended to such period of time
as may be necessary to cure such default with all due diligence; or
(f) 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
(g) should any petition be filed by or against Tenant under
the Federal bankruptcy laws, or should any other proceeding be
instituted by or against Tenant seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or
for any substantial part of the property of Tenant and such proceeding
is not dismissed within ninety (90) days after institution thereof, or
should Tenant take any action to authorize any of the actions set forth
above in this paragraph; or
(h) should Tenant cause or institute any proceeding for its
dissolution or termination; or
(i) should an event of default occur and be continuing under
any mortgage which is secured by Tenant's leasehold interest hereunder
or should the mortgagee under
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any such mortgage accelerate the indebtedness secured thereby or
commence a foreclosure action in connection with said mortgage;
provided, however, that (x) if such default is susceptible of cure but
such cure cannot be accomplished with due diligence within such period
of time and if, in addition, Tenant commences to cure or cause to be
cured such default within fifteen (15) days after Notice thereof from
Landlord and thereafter prosecutes the curing of such default with all
due diligence, such period of time shall be extended to such period of
time as may be necessary to cure such default with all due diligence;
or
(j) unless Tenant shall be contesting such lien or
attachment in good faith in accordance with Article 8, 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, discharged or fully bonded or otherwise secured to the
reasonable satisfaction of Landlord within the later of (x) one hundred
and twenty (120) days after commencement thereof, unless the amount in
dispute is less than $250,000, in which case Tenant shall give notice
to Landlord of the dispute but Tenant may defend in any suitable way,
and (y) thirty (30) days after receipt by Tenant of Notice thereof from
Landlord; or
(k) should Tenant at any time cease to be a direct or
indirect Subsidiary of the Guarantor, except as expressly permitted by
Article 16;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement by giving Notice thereof to Tenant
and upon the expiration of the time, if any, fixed in such Notice, this
Agreement shall terminate and all rights of Tenant under this Agreement shall
cease. Landlord shall have and may exercise all rights and remedies available at
law and in equity to Landlord as a result of Tenant's breach of this Agreement.
Landlord hereby agrees and consents to any cure of any Default or Event
of Default tendered or performed by the Guarantor within the same cure period
afforded to Tenant herein.
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 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
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termination, Tenant shall forthwith pay to Landlord all Rent due and payable
with respect to the Leased Property through and including the date of such
termination. Thereafter, Tenant, until the end of what would have been the Term
of this Agreement in the absence of such termination, and whether or not the
Leased Property or any portion thereof shall have been re-let, shall be liable
to Landlord for, and shall pay to Landlord, as current damages, the Rent and
other charges which would be payable hereunder for the remainder of the Term had
such termination not occurred, less the net proceeds, if any, of any re-letting
of the Leased Property, after deducting all reasonable expenses in connection
with such reletting, including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alteration costs and expenses of preparation for such reletting.
Tenant shall pay such current damages to Landlord monthly on the days on which
the Minimum Rent would 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 Rent owing and due up to and including the date of termination of
this Agreement, as liquidated final damages beyond the date of such termination
and in lieu of Landlord's right to receive any other damages due to the
termination of this Agreement, 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 thirteen Accounting Periods, or if less than thirteen Accounting
Periods 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; provided, however, that Tenant shall be
entitled to a credit from Landlord in the amount of any unapplied balance of the
Retained Funds, whereupon Landlord and its Affiliated Persons shall have no
further obligation to pay the portion of the Retained Funds so credited to
Tenant or any of its Affiliated Persons. 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.
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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, 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.
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
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thereafter, make such payment or perform such act for the account and at the
expense of Tenant, and may, to the maximum extent permitted by law, enter upon
the Leased Property or any portion thereof for such purpose and take all such
action thereon as, in Landlord's sole and absolute discretion, may be necessary
or appropriate therefor. No such entry shall be deemed an eviction of Tenant.
All reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) incurred by Landlord in connection therewith, together with
interest thereon (to the extent permitted by law) at the Overdue Rate from the
date such sums are paid by Landlord until repaid, shall be paid by Tenant to
Landlord, on demand.
12.6 Retained Funds. Notwithstanding any term or provision to the
contrary herein, in the event that this Agreement is terminated pursuant to
Section 12.1 or 12.2, Landlord shall credit any unapplied balance of the
Retained Funds to any claims or damages to which Landlord is entitled and to the
extent that any portion of the Retained Funds allocable to the Leased Property
remain after such credit, Landlord shall promptly pay such portion as provided
in the Purchase Agreement.
12.7 Good Faith Dispute. If Tenant shall in good faith dispute the
occurrence of any Default and Tenant, before the expiration of the applicable
cure period, shall give Notice thereof to Landlord, setting forth, in reasonable
detail, the basis therefor, no Event of Default shall be deemed to have occurred
and, provided Tenant shall escrow disputed amounts, if any, pursuant to an
escrow arrangement reasonably acceptable to Landlord and Tenant; provided,
however, that in the event of any such adverse determination, Tenant shall pay
to Landlord interest on any disputed funds at the Disbursement Rate, from the
date demand for such funds was made by Landlord until the date of final adverse
determination and, thereafter, at the Overdue Rate until paid. If Landlord and
Tenant shall fail, in good faith, to resolve any such dispute within ten (10)
Business Days after Tenant's Notice of dispute, either may submit the matter for
resolution to a court of competent jurisdiction. In the event that such court
shall determine a Default, in fact, exists, Tenant shall have the applicable
cure period from the date of the final non-appealable determination of the court
to cure such Default.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to one and one half (1.5) times the
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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. Landlord shall give prompt Notice to
Tenant and the Manager of any matters affecting the Leased Property of which
Landlord receives written notice or actual knowledge and, to the extent Tenant
otherwise has no notice or actual knowledge thereof, Landlord shall be liable
for any liabilities, costs, damages or claims (including reasonable attorneys'
fees) arising from the failure to deliver such Notice to Tenant. Landlord shall
not amend any material agreement affecting the Leased Property without Tenant's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed.
14.2 Landlord's Default. If Landlord shall default in the performance
or observance of any of its covenants or obligations set forth in this Agreement
or if HPT shall default in its obligations under the HPT Guaranty or the Owner's
Agreement and any such default shall continue for a period of ten (10) days
after Notice thereof with respect to monetary defaults and thirty (30) days
after Notice thereof from Tenant to Landlord and any applicable Hotel Mortgagee,
or such additional period as may be reasonably required to correct the same, or
if a Landlord Default (as defined therein) shall occur and be continuing under
any of the Other Leases, Tenant may declare the occurrence of a "Landlord
Default" by giving Notice of such declaration to Landlord and to such Hotel
Mortgagee. Thereafter, Tenant may (but shall have no obligation to) cure the
same and, subject to the provisions of the following paragraph, invoice Landlord
for costs and expenses (including reasonable attorneys' fees and court costs)
incurred by Tenant in curing the same, together with interest thereon from the
date Landlord receives Tenant's invoice, at the Overdue Rate. Except as
otherwise expressly provided herein to the contrary, Tenant shall have no right
to terminate this Agreement for any default by Landlord hereunder and no right,
for any such default, to offset or counterclaim against any Rent or other
charges due hereunder.
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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 Disbursement
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 Special Remedies for Landlord Funding Default. In the event of any
Landlord Default arising under Section 5.1.3(b), and after a decision in
Tenant's favor with respect thereto pursuant to Article 19, Tenant shall have
the right, in Tenant's sole discretion, in addition to all other remedies of
Tenant hereunder, to exercise any one or more of the following remedies:
(a) Tenant may fund the deficient amounts and offset the
aggregate amount thereof plus interest thereon from the date of funding
at the Disbursement Rate against any Additional Rent payable by Tenant
subsequent to the date of advance pursuant to this Agreement and the
Other Leases until recouped;
(b) Tenant may terminate the Franchise Agreement with
respect to the Leased Property (but not with respect to any of the
other Collective Leased Properties);
(c) Tenant may, notwithstanding the provisions of Section
5.4 or Article 16, engage a Manager who is not an Affiliated Person as
to Tenant or assign this Agreement or sublease all (but not less than
all) of the Leased Property to a Person who is not an Affiliated Person
as to Tenant provided, in any such case, such Person shall be
reasonably acceptable to Landlord, whereupon, this Agreement shall be
amended to exclude the Leased Property from the benefits and burdens of
the Reserve; or
(d) Tenant may, provided that the Leased Property is not
then subject to a Hotel Mortgage or owned by any Person who acquired
title by, or any Person claiming by, through or under any Person who
acquired title by, foreclosure or deed in lieu thereof, terminate this
Agreement, whereupon, (i) the Other Leases shall be amended to (x)
eliminate any reference to this Agreement in the definition therein of
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"Other Leases" and (y) eliminate any reference to the Leased Property
in the definition therein of "Collective Leased Properties", (ii) the
Limited Rent Guaranty shall terminate only with respect to and only to
the extent applicable to this Agreement and (iii) Landlord shall pay
any unapplied balance of the Retained Funds allocable to the Leased
Property as provided in the Purchase Agreement.
14.4 Remedy after Landlord Transfer. In the event Landlord shall
transfer its interest in the Leased Property other than to a Person who acquired
title by foreclosure or deed in lieu thereof, or any Person claiming by, through
or under such a Person, Tenant may, thereafter, upon the occurrence and during
the continuance of any Landlord Default, terminate this Agreement by thirty (30)
days prior Notice thereof to the then Landlord; provided, however, that if such
Landlord Default shall be cured prior to the expiration of such 30-day period,
such notice of termination shall be null and void.
14.5 Special Remedy after Landlord Default under Section 10.2.4 and
11.3. If a Landlord Default shall occur in connection with Landlord's funding
obligations under Section 10.2.4 or Section 11.3, Tenant shall have the right,
in Tenant's sole discretion, in addition to all other remedies of Tenant
hereunder, to offset amounts Landlord has failed to disburse in accordance with
the terms thereof and as to which a Landlord Default has occurred against the
Minimum Rent and Additional Rent payable hereunder.
14.6 Special Remedy for Tenant under Section 22.8. If a Landlord
Default shall occur under Section 22.8, the Minimum Rent shall abate to the
extent of and during the duration of any interruption in Tenant's quiet
enjoyment of the Leased Property.
ARTICLE 15
TRANSFERS BY LANDLORD
15.1 Transfer of Leased Property. Except as otherwise provided in
Article 20, Landlord shall not transfer the Leased Property, or any interest
therein, directly or indirectly, to any Person which: (i) does not have
sufficient financial resources to fulfill Landlord's obligations hereunder; (ii)
is in control of or controlled by Persons who have been convicted of felonies;
(iii) is engaged in the business of operating or franchising (as distinguished
from owning) a branded hotel chain having fifteen hundred (1,500) or more guest
rooms in competition with Tenant, the Guarantor or their Affiliated Persons or
(iv) fails expressly to assume, in writing, the obligations of Landlord under
this Agreement without the prior written consent of Tenant, which
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consent may be given or withheld by Tenant in Tenant's sole and absolute
discretion. For purposes of this Section 5.1, a Person shall not be deemed to be
in the business of operating hotels in competition with Tenant, the Guarantor or
their Affiliated Persons solely by virtue of (x) the ownership of such hotels,
either directly or indirectly through Subsidiaries, Affiliated Persons and
Entities, or (y) holding a mortgage or mortgages secured by one or more hotels.
Otherwise, subject to the provisions of Section 15.2, Landlord may transfer the
Leased Property, or an interest therein, to any Person without the consent of,
but upon not less than ten (10) Business Days prior Notice to, Tenant.
15.2 Conditions of Transfer. Any transfer of the Leased Property
permitted by Section 15.1 shall be subject to the prior or simultaneous
satisfaction of the following conditions:
(a) The Retained Funds with respect to the Leased Property
shall, at the election of Landlord, (i) be deposited in an escrow
account on terms and conditions reasonably satisfactory to Tenant; (ii)
be treated as prepaid Minimum Rent for the last year of the Term and
Landlord and Tenant shall, prior to the transfer, enter into an
amendment to this Agreement reflecting such treatment, such amendment
to be in form and substance reasonably satisfactory to Landlord and
Tenant; (iii) be paid to Tenant at a discounted rate based on the
interest rate published in The Wall Street Journal for U.S. Treasury
Obligations having a maturity, closest in time to the last day of the
then current Term (including, for this purpose, all exercised Extended
Terms); or (iv) be likewise transferred to a successor obligor whose
unsecured long term debt is rated investment grade by a nationally
recognized rating agency or another successor obligor satisfactory to
Tenant in its sole discretion and all Landlord obligations with respect
to the same expressly assumed in writing pursuant to an assumption
agreement in form and substance reasonably satisfactory to Tenant and
pursuant to which, inter alia, such successor obligor expressly
recognizes Tenant's right to receive the Retained Funds in accordance
with the terms of this Agreement;
(b) The definition of "Other Leases" and "Collective Leased
Properties" set forth in this Agreement shall be amended to eliminate
any references to any of the Other Leases or Collective Leased
Properties not simultaneously transferred to the successor to Landlord
under this
Agreement;
(c) If Landlord's interest under this Agreement shall be
transferred other than in connection with a
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transfer of Landlord's interest under all of the Other Leases to the
same transferee, a portion of the then current balance in the Reserve
shall be allocated to the Leased Property, as reasonably determined by
Tenant based on Tenant's reasonable and good faith estimate as to the
Leased Property's projected requirements for Reserve fundings relative
to the projected requirements for Reserve fundings for the other
Collective Leased Properties;
(d) Any transferee of Landlord pursuant to this Article 15
shall expressly assume in writing the obligations of Landlord under
this Agreement; and
(e) Any overpayments of Additional Rent held by Landlord
shall be refunded to Tenant prior to such transfer.
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), all or any part of the Leased Property or suffer or permit this
Agreement or the leasehold estate created hereby or any other rights arising
under this Agreement to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or operation of the
Leased Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting. For purposes of this Section
16.1, an assignment of this Agreement shall be deemed to include the following
(for purposes of this Section 16.1, a "Corporate Transfer"): any direct or
indirect transfer of any interest in Tenant such that Tenant shall cease to be a
direct or indirect Subsidiary of the Guarantor or any transaction pursuant to
which Tenant is merged or consolidated with another Entity which is not the
Guarantor or an Affiliated Person of the Guarantor 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 but
shall not include any involuntary liens or attachments contested by Tenant in
good faith in accordance with Article 8.
Notwithstanding the foregoing if, after giving effect to a Corporate
Transfer, Tenant, or all or substantially all of
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Tenant's assets, would be owned or controlled by a Person who would, in
connection therewith, acquire all or substantially all of the Courtyard or
Residence Inn business of the Guarantor and its direct and indirect
Subsidiaries, provided that, in Landlord's reasonable determination such Person
and its controlling parties (x) shall have sufficient expertise and financial
resources to carry on the Courtyard or Residence Inn business consistent with
historical practices and (y) shall not be convicted felons, Landlord shall, at
Tenant's request, waive the restrictions set forth in this Section 16.1 with
respect to such Corporate Transfer and no consent by Landlord shall be required
with respect thereto. If Landlord fails to give Notice of such waiver (or the
withholding thereof) within twenty (20) Business Days after Tenant's written
request therefor, such waiver shall be deemed given.
If this Agreement is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant) Landlord may
collect the rents from such assignee, subtenant or occupant, as the case may be,
and apply the net amount collected to the Rent herein reserved, but no such col
lection shall be deemed a waiver of the provisions set forth in the first
paragraph of this Section 16.1, the acceptance by Landlord of such assignee,
subtenant or occupant, as the case may be, as a tenant, or a release of Tenant
from the future performance by Tenant of its covenants, agreements or
obligations contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder (unless Landlord and Tenant expressly
otherwise agree that Tenant shall be released from all obligations hereunder),
and no consent to any subletting or assignment in a particular instance shall be
deemed to be a waiver of the prohibition set forth in this Section 16.1. No
assignment, subletting or occupancy shall affect any Permitted Use. Any
subletting, assignment or other transfer of Tenant's interest under this
Agreement in contravention of this Section 16.1 shall be voidable at Landlord's
option.
16.2 Required Sublease Provisions. Except for subleases entered into
for the purposes of complying with the liquor licensing laws of the State, any
sublease of all or any portion of the Leased Property entered into on or after
the date hereof shall provide (a) that it is subject and subordinate to this
Agreement and to the matters to which this Agreement is or shall be subject or
subordinate; (b) that in the event of termination of this Agreement or reentry
or dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease,
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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
prepayment of more than one (1) Accounting Period, (iv) be bound by any covenant
of Tenant to undertake or complete any construction of the Leased Property or
any portion thereof, (v) be required to account for any security deposit of the
subtenant other than any security deposit actually delivered to Landlord by
Tenant, (vi) be bound by any obligation to make any payment to such subtenant or
grant any credits, except for services, repairs, maintenance and restoration
provided for under the sublease that are performed after the date of such
attornment, (vii) be responsible for any monies owing by Tenant to the credit of
such subtenant, or (viii) be required to remove any Person oc cupying 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 and Assignment. Notwithstanding the foregoing,
but subject to the provisions of Section 16.4 and any other express conditions
or limitations set forth herein, Tenant may, in each instance after Notice to
Landlord, (a)
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sublease space at the Leased Property for newsstand, gift shop, parking garage,
health club, restaurant, bar or commissary purposes or similar concessions in
furtherance of the Permitted Use, so long as such subleases do not demise, in
the aggregate, in excess of three thousand (3,000) square feet (exclusive of any
parking garage subleases), 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; and (b), in the event
that there is a Corporate Transfer permitted pursuant to Section 16.1, as a
result of which all or substantially all of the assets with respect to either,
but not both, of the Residence Inn by Marriott or Courtyard by Marriott brand
are transferred to a Person that is not an Affiliated Person as to Tenant,
sublease the Leased Property or assign Tenant's rights under this Agreement to
an Affiliated Person as to Tenant or the Guarantor which retains all or
substantially all of the assets of the brand not so transferred, provided all of
the Collective Leased Properties or Other Leases operated under the same brand
are so subleased or assigned, as the case may be.
16.4 Sublease Limitation. For so long as Landlord or any Affiliated
Person as to Landlord shall seek to qualify as a real estate investment trust,
anything contained in this Agreement to the contrary notwithstanding, Tenant
shall not sublet the Leased Property on any basis such that the rental to be
paid by any sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of such sublessee,
or (b) any other formula such that any portion of such sublease rental would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) Business Days prior Notice by either party, the party
receiving such Notice shall furnish to the other an Officer's Certificate
certifying that this Agreement is unmodified and in full force and effect (or
that this Agreement is in full force and effect as modified and setting forth
the modifications), the date to 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. If such
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additional information reasonably requires more than ten (10) Business Days to
provide, the party furnishing such information shall be entitled to such
additional period to respond to such request as may be reasonably required under
the circumstances. Any such certificate furnished pursuant to this Section 17.1
may be relied upon by the requesting party, its lenders and any prospective
purchaser or mortgagee of the Leased Property or the leasehold estate created
hereby.
17.2 Financial Statements. Tenant shall furnish the following
statements to Landlord:
(a) as soon as publicly available or, in the event the same
shall no longer be required to be made public, within forty-five (45)
days after each of the first three Fiscal Quarters of any Fiscal Year,
the most recent Consolidated Financials;
(b) as soon as publicly available or, in the event the same
shall no longer be required to be made public, within ninety (90) days
after the end of each Fiscal Year, the most recent Consolidated
Financials for such year, certified by an independent certified public
accountant;
(c) within thirty (30) days after the end of each Accounting
Period, an unaudited operating statement prepared on a Hotel by Hotel
basis, including occupancy percentages and average rate; and
(d) promptly after the sending or filing thereof, copies of
all reports which Tenant or the Guarantor sends to its security holders
generally, and copies of all periodic reports which Tenant or the
Guarantor files with the SEC or any stock exchange on which its shares
are listed or traded.
In addition, Tenant shall provide Landlord with information relating to
Tenant and its operation of the Leased Property that (a) may be required in
order for Landlord to prepare financial statements in accordance with GAAP or to
comply with applicable securities laws and regulations and the SEC's
interpretation thereof and (b) is of the type that the Guarantor and its
Affiliated Persons customarily prepare for other hotel owners; provided,
however, that (i) Tenant reserves the right, in good faith, to challenge and
require Landlord to use commercially reasonable efforts to challenge any
assertion by the SEC, any other applicable regulatory authority, or Landlord's
independent public accountants that applicable law, regulations or GAAP require
the provision or publication of Proprietary Information, (ii) Landlord shall
not, without Tenant's consent (which consent shall not be unreasonably withheld,
delayed or conditioned), acquiesce to any such challenged assertion until
Landlord has
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exhausted all reasonable available avenues of administrative review, and (iii)
Landlord shall consult with Tenant in pursuing any such challenge and will allow
Tenant to participate therein if and to the extent that Tenant so elects.
Landlord acknowledges that the foregoing does not constitute an agreement by
Tenant either to join in any Landlord filing with or appearance before the SEC
or any other regulatory authority or to take or consent to any other action
which would cause Tenant to be liable to any third party for any statement or
information other than those statements incorporated by reference pursuant to
clause (a) above.
Subject to any Hotel Mortgagee entering into such confidentiality
agreement with Tenant as Tenant may reasonably require, Landlord may at any
time, and from time to time, provide any Hotel Mortgagee with copies of any of
the foregoing statements.
In addition, Landlord shall have the right, from time to time at
Landlord's sole cost and expense, upon reasonable Notice, during Tenant's
customary business hours, to cause Tenant's books and records with respect to
the Leased Property to be audited by auditors selected by Landlord at the place
where such books and records are customarily kept, provided that, prior to
conducting such audit, Landlord shall enter into a confidentiality agreement
with Tenant, such agreement to be in form and substance reasonably satisfactory
to Landlord, Tenant and the Guarantor.
17.3 General Operations. Tenant shall furnish to Landlord, not less
than seventy-five (75) days after the commencement of any Fiscal Year, proposed
annual budgets in a form consistent with the then standards for the same brand
of hotels as the Hotel setting forth projected income and costs and expenses
projected to be incurred by Tenant in managing, leasing, maintaining and
operating the Hotel during the then current Fiscal Year.
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
twenty-four (24) hours' notice and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of this Agreement, provided that any
inspection or repair by Landlord or its representatives will not unreasonably
interfere with Tenant's 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.
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ARTICLE 19
ALTERNATIVE DISPUTE RESOLUTION
19.1 Negotiation and Mediation. Any and all disputes or disagreements
arising out of or relating to Landlord's obligations to disburse funds pursuant
to Section 5.1.3(b) shall be resolved through negotiations or, at the election
of either party, if the dispute is not so resolved within 30 days after Notice
from either party commencing such negotiations, through mediation or, at the
election of either party if such mediation has not conclusively resolved such
dispute within ninety (90) days after commencement thereof, by binding
arbitration conducted in accordance with Section 19.2.
19.2 Arbitration.
(a) The party electing arbitration pursuant to Section 19.1
shall give Notice to that effect to the other party and shall in such
Notice appoint an individual as arbitrator on its behalf. Within 15
days after such Notice, the other party, by Notice to the initiating
party, shall appoint a second individual as arbitrator on its behalf.
The arbitrators thus appointed shall appoint a third individual, and
such three arbitrators shall as promptly as possible determine such
dispute; provided, however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall proceed to determine
such dispute; and
(ii) if the two (2) arbitrators appointed by the parties shall be
unable to agree, within 15 days after the appointment of the
second arbitrator, upon the appointment of a third arbitrator,
they shall give written Notice to the parties of such failure
to agree, and, if the parties fail to agree upon the selection
of a third arbitrator within 15 days after the arbitrators
appointed by the parties give Notice as aforesaid, then either
of the parties upon Notice to the other party may request such
appointment by the then Chief Judge of the United States
District Court for the State of Maryland, or in such Judge's
absence, refusal, failure or inability to act, may apply for a
court appointment of such third arbitrator.
(b) Each arbitrator shall be a fit and impartial person who
shall have had at least five years' experience in the operation or
ownership of hotel properties.
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(c) The arbitration shall be conducted within the State of
Maryland and, to the extent consistent with this Section 19.2, in
accordance with the rules of the American Arbitration Association. The
arbitrators shall render their decision and award, upon the concurrence
of at least two of their number, within 30 days after the appointment
of the third arbitrator. Such decision and award shall be in writing
and shall be final, binding and enforceable against the parties and
shall be non-appealable, and counterpart copies thereof shall be
delivered to each of the parties. In rendering such decision and award,
the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Agreement. Judgment may be had on the decision and
award of the arbitrator(s) so rendered in any court of competent
jurisdiction.
(d) Each party shall pay the fees and expenses of the one of
the two original arbitrators appointed by or for such party, and the
fees and expenses of the third arbitrator and all other expenses of the
arbitration (other than the fees and disbursements of attorneys or
witnesses for each party) shall be borne by the parties equally.
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, provided that any such
Encumbrance shall not secure a maximum principal amount in excess of (x) seventy
percent (70%) of the Allocable Purchase Price of the Leased Property if secured
only by the Leased Property or sixty percent (60%) of the Allocable Purchase
Prices of such Collective Leased Properties as secure such Encumbrance if
secured by the Leased Property and one or more of the other Collective Leased
Properties or (y) a sixty percent (60%) loan to value ratio if one or more of
the Collective Leased Properties are pooled with other Marriott brand
properties. Any such Encumbrance shall provide (subject to Section 20.2) that it
is subject to the rights of Tenant under this Agreement. Landlord shall not
cross collateralize the Leased Property with any property which is not flagged
as a Marriott brand.
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20.2 Subordination of Lease. Subject to Section 20.1 and this Section
20.2, upon Notice from Landlord, Tenant shall execute and deliver an agreement,
in form and substance reasonably satisfactory to Landlord and Tenant,
subordinating this Agreement to any Encumbrance permitted pursuant to Section
20.1; provided, however, that such subordination shall be on the express
condition that the terms of this Agreement shall be recognized by the mortgagee
or holder of the deed of trust and any purchaser of the Leased Property at any
foreclosure sale (a "Successful Purchaser") and that such mortgagee, holder or
Successful Purchaser shall honor and be bound by this Agreement and that,
notwithstanding any default by Landlord under such Encumbrance or any
foreclosure thereof, Tenant's possession of the Leased Property and rights and
obligations under this Agreement shall not be affected thereby and this
Agreement shall not be terminated other than in accordance with its terms. The
foregoing agreements shall be binding on any purchaser of the Leased Property at
foreclosure. Any mortgage or deed of trust to which this Agreement is, at the
time referred to, subject and subordinate, is herein called "Superior Mortgage"
and the holder, trustee or beneficiary of a Superior Mortgage is herein called
"Superior Mortgagee". Tenant shall have no obligations under any Superior
Mortgage other than those expressly set forth in this Section 20.2.
If any Superior Mortgagee or the nominee or designee of any Superior
Mortgagee or any Successful Purchaser, 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 Minimum Rent
or
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Additional Rent for more than one (1) month in advance of the date due
hereunder, which was not approved in writing by the Superior Landlord or the
Superior Mortgagee thereto, (e) liable to Tenant beyond the Successor Landlord's
interest in the Leased Property and the rents, income, receipts, revenues,
issues and profits issuing from the Leased Property, or (f) 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. Notwithstanding the foregoing, any Successor Landlord and/or Superior
Mortgagee shall be liable to pay to Tenant any portions of insurance proceeds or
Awards received by the Successor Landlord and/or Superior Mortgagee required to
be paid to Tenant pursuant to the terms of this Agreement, and, as a condition
to any mortgage, lien or lease in respect of the Leased Property, and the
subordination of this Agreement thereto, the mortgagee, lienholder or lessor, as
applicable, shall expressly agree, for the benefit of Tenant, to make such
payments, which agreement shall be embodied in an instrument in form reasonably
satisfactory to Tenant.
20.3 Notices. Subsequent to the receipt by Tenant of Notice from
Landlord as to the identity of any Hotel Mortgagee 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 the Leased Property
shall be effective unless and until a copy of the same is given to such Hotel
Mortgagee at the address set forth in the above described Notice, and the curing
of any of Landlord's defaults by such Hotel Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Collective Leased Properties and
activities incidental 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.
21.2 Maintenance of Accounts and Records. Tenant shall keep true
records and books of account of Tenant in which full,
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true and correct entries will be made of dealings and transactions in relation
to the business and affairs of Tenant in accordance with GAAP, where applicable.
21.3 Notice of Litigation, Etc. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which it may
hereafter become a party of which Tenant has notice or actual knowledge which
involves a potential liability equal to or greater than Two Hundred Fifty
Thousand Dollars ($250,000) or which may otherwise result in any material
adverse change in the business, operations, property, prospects, results of
operation or condition, financial or other, of Tenant. Forthwith upon Tenant
obtaining knowledge of any Default, Event of Default or any default or event of
default under any agreement relating to Indebtedness for money borrowed in an
aggregate amount exceeding, at any one time, Two Hundred Fifty Thousand Dollars
($250,000), or any event or condition that would be required to be disclosed in
a current report filed by Tenant on Form 8-K or in Part II of a quarterly report
on Form 10-Q if Tenant were required to file such reports under the Securities
Exchange Act of 1934, as amended, Tenant shall furnish Notice thereof to
Landlord specifying the nature and period of existence thereof and what action
Tenant has taken or is taking or proposes to take with respect thereto.
21.4 Indebtedness of Tenant. Tenant shall not create, incur, assume or
guarantee, or permit to exist, or become or remain liable directly or indirectly
upon, any Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for Impositions, to the extent
that payment thereof shall not at the time be required to be made in
accordance with the provisions of Article 8;
(c) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period
and in respect of which execution thereof shall have been stayed
pending such appeal or review, or (ii) which are fully covered by
insurance payable to Tenant, or (iii) which are for an amount not in
excess of $250,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable appeal
period, so long as execution is not levied thereunder or (y) in respect
of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of Article
8, and in respect of which execution thereof shall have been stayed
pending such appeal or review;
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(d) unsecured borrowings of Tenant from its Affiliated
Persons which are by their terms expressly subordinate pursuant to a
Subordination Agreement to the payment and performance of Tenant's
obligations under this Agreement; or
(e) Indebtedness for purchase money financing in accordance
with Section 21.9(a) and other indebtedness incurred in the ordinary
course of Tenant's business, including the leasing of personal
property.
21.5 Financial Condition of Tenant. As of the date of this Agreement,
Tenant's Tangible Net Worth is an amount at least equal to the aggregate of one
year's Minimum Rent payable pursuant to this Agreement and the Other Leases; it
being expressly understood and agreed that the Retained Funds may for such
purpose be counted as equity at the full amount thereof (without any discount as
to its value for any reason, notwithstanding anything to the contrary provided
for by GAAP) if such amounts are contributed to Tenant.
21.6 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 (other than payments in the
ordinary course of business on commercially reasonable terms and payments
pursuant to the terms of the Franchise Agreement) 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 exist;
provided, however, that Tenant may resume making such Distributions if Landlord
shall not commence, within ninety (90) days after Notice by Landlord to Tenant
of the occurrence of any such Event of Default, to enforce its rights and
remedies with respect thereto and diligently pursue enforcement of such rights
and remedies thereafter.
21.7 Prohibited Transactions. At any time an Event of Default shall
have occurred and be continuing, Tenant shall not permit to exist or enter into
any agreement or arrangement (other than the Franchise Agreement) 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.
21.8 Liens and Encumbrances. Except as permitted by Section 7.1, Tenant
shall not create or incur or suffer to be created or incurred or to exist any
Lien on this Agreement or any of Tenant's assets, properties, rights or income,
or any of its interest therein, now or at any time hereafter owned, other than:
(a) Security interests securing the purchase price of
equipment or personal property whether acquired before or
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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;
(c) As permitted pursuant to Section 21.5; and
(d) Liens which do not exceed $250,000 in the aggregate and
which are fully bonded or otherwise secured to the reasonable
satisfaction of Landlord.
21.9 Merger; Sale of Assets; Etc. Except as expressly permitted by
Article 16, Tenant shall not (i) sell, lease (as lessor or sublessor), transfer
or otherwise dispose of, or abandon, all or any material portion of its assets
(including capital stock) or business to any Person, (ii) merge into or with or
consolidate with any other Entity, or (iii) sell, lease (as lessor or
sublessor), transfer or otherwise dispose of, or abandon, any personal property
or fixtures or any real property; provided, however, that, notwithstanding the
provisions of clause (iii) preceding, Tenant may dispose of equipment or
fixtures which have become inadequate, obsolete, worn-out, unsuitable,
undesirable or unnecessary, provided substitute equipment or fixtures having
equal or greater value and utility (but not necessarily having the same
function) have been provided.
ARTICLE 22
MISCELLANEOUS
22.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under applicable law, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
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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.
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.
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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 (specifically including
Article 15) 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 li abilities and obligations of Landlord under this
Agreement with respect to such of the Leased Property arising or accruing from
and after the date of such conveyance or other transfer and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
22.8 Quiet Enjoyment. Provided that no Event of Default shall have
occurred and be continuing, Tenant shall peaceably and quietly have, hold and
enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be created
by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings, provided the same do not materially
interfere with Tenant's ability to operate the Hotel and (d) liens that have
been consented to in writing by Tenant. Except as otherwise provided in this
Agreement, no failure by Landlord to comply with the foregoing covenant shall
give Tenant the right to cancel or terminate this Agreement or abate, reduce or
make a deduction from or offset against the Rent or any other sum payable under
this Agreement, or to fail to perform any other obligation of Tenant hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Agreement. However, Landlord and Tenant shall promptly, upon the request of the
other, enter into a short form memorandum of this Agreement, in form suitable
for recording under the laws of the State in which reference to this Agreement,
and all options contained herein, shall be made. The parties shall share equally
all costs and expenses of recording such memorandum.
22.10 Notices.
(a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under
this Agreement shall be deemed adequately given if in writing and the
same shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or
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similar expedited commercial carrier, addressed to the recipient of the
notice, postpaid and registered or certified with return receipt
requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
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:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-924.11
Bethesda, Maryland 20817
Attn: Treasurer
[Telecopier No. (301) 380-5067]
with a copy to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-923.00
Bethesda, Maryland 20817
Attn: Lodging Operations Attorney
[Telecopier No. (301) 380-6727]
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(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.
22.11 Construction; Nonrecourse. 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 all the
parties thereto. All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Each term or provision of this Agreement to be
performed by Tenant shall be construed as an independent covenant and condition.
Time is of the essence with respect to the exercise of any rights of Tenant or
Landlord under this Agreement. Except as otherwise set forth in this Agreement,
any obligations arising prior to the expiration or sooner termination of this
Agreement of Tenant (including without limitation, any monetary, repair and
indemnification obligations) and Landlord shall survive the expiration or sooner
termination of this Agreement; provided, however, that each party shall be
required to give the other Notice of any such surviving and unsatisfied
obligations within one year after the expiration or sooner termination of this
Agreement. Except as otherwise expressly provided with respect to the Retained
Funds, nothing contained in this Agreement shall be construed to create or
impose any liabilities or obligations and no such liabilities or obligations
shall be imposed on any of the shareholders, beneficial owners, direct or
indirect, officers, directors, trustees, employees or agents of Landlord or
Tenant for the payment or performance of the obligations or liabilities of
Landlord or Tenant hereunder.
22.12 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
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22.13 Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State
applicable to contracts between residents of the State which are to be performed
entirely within the State, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required by this
Agreement is made or required to be made; or (iii) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues; or
(iv) where any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or jurisdiction
of organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State as is provided by law; and the parties consent to the jurisdiction of
said court or courts located in the State and to service of process by
registered mail, return receipt requested, or by any other manner provided by
law.
22.14 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.
22.15 Disclosure of Information.
(a) The parties hereto agree that the matters set forth in
this Agreement and any revenue, expense, net profit, rate and occupancy
information provided on a hotel by hotel basis are strictly
confidential and each party will make every effort to ensure that the
information is not disclosed to any Person that is not an Affiliated
Person as to any party (including the press) without the prior written
consent of the other party, except as may be required by law
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and as may be reasonably necessary to obtain licenses, permits and
other public approvals necessary for the refurbishment or operation of
the Hotel, or, subject to the restrictions of Section 22.15(b) relative
to the contents of any Prospectus, in connection with a Landlord
financing, a sale of the Hotel, or a sale of a controlling interest in
Landlord, Tenant or the Guarantor.
(b) No reference to Tenant or any of its Affiliated Persons
will be made in any prospectus, private placement memorandum, offering
circular or offering documentation related thereto (collectively, the
"Prospectus"), issued by Landlord or any of its Affiliated Persons,
which is designated to interest potential investors in the Hotel,
unless Tenant has previously received a copy of all such references. No
Prospectus shall include rate and occupancy data or revenue, expense or
net profit information on a hotel by hotel basis (as distinguished from
a collective basis). Regardless of whether Tenant so receives a copy of
the Prospectus, neither Tenant nor its Affiliated Persons will be
deemed a sponsor of the offering described in the Prospectus, nor will
it have any responsibility for the Prospectus, and the Prospectus will
so state. Unless Tenant agrees in advance, the Prospectus will not
include any trademark, symbols, logos or designs of Tenant or any of
its Affiliated Persons. Landlord shall indemnify, defend and hold
Tenant harmless from and against all loss, costs, liability and damage
(including reasonable attorneys' fees and expenses, and all cost of
litigation) arising out of any Prospectus or the offering described
therein; and this obligation of Landlord shall survive termination of
this Agreement.
22.16 Trademarks, Trade Names and Service Marks.
(a) The names "Marriott", "Courtyard by Marriott" and
"Marriott Courtyard" (each of the foregoing names, together with any
combination thereof, collectively, the "Trade Names") when used along
or in connection with another word or words, and the Marriott or
Courtyard by Marriott trademarks, service marks, other trade names,
symbols, logos and designs shall in all events remain the exclusive
property of Franchisor or its Affiliated Persons, and nothing contained
in this Agreement shall confer on Landlord the right to use any of the
Trade Names, or the Marriott or Courtyard by Marriott trademarks,
service marks, other trade names, symbols, logos or designs other than
in strict accordance with the terms of this Agreement. Upon termination
of this Agreement and the Other Leases, any use of or right to use any
of the Trade Names, or any of the Marriott or Courtyard by Marriott
trademarks, service marks,
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other trade names, symbols, logos or designs by Landlord shall be
governed by the Franchise Agreement and/or Owner's Agreement, upon
termination of this Agreement, and, if the Franchise Agreement or a
replacement Franchise Agreement will not remain in effect, Landlord
shall promptly remove from the Hotel any signs or similar items which
contain any of the Trade Names, trademarks, service marks, other trade
names, symbols, logos or designs. If Landlord has not removed such
signs or similar items within ten (10) Business Days after termination
of this Agreement, Tenant shall have the right to do so at Landlord's
expense. Included under the terms of this section are all trademarks,
service marks, trade names, symbols, logos or designs used in
conjunction with the Hotel, including, but not limited to, restaurant
names, lounge names, etc., whether or not the marks contain the
"Marriott" name or the Courtyard by Marriott name. The right to use
such trademarks, service marks, trade names, symbols, logos or designs
belongs exclusively to Tenant, and the use thereof inures to the
benefit of Tenant whether or not the same are registered and regardless
of the source of the same. The provisions of this Section 22.17(a)
shall survive termination of this Agreement.
(b) Any computer software (including upgrades and
replacements) at the Hotel owned by Tenant or any of its Affiliated
Persons, or the licensor of any of them is proprietary to Tenant or any
of its Affiliated Persons, or the licensor of any of them and shall in
all events remain the exclusive property of Tenant or any of its
Affiliated Persons or the licensor of any of them, as the case may be,
and nothing contained in this Agreement shall confer on Landlord the
right to use any of such software. Tenant shall have the right to
remove from the Hotel without compensation to Landlord any computer
software (including upgrades and replacements), including, without
limitation, the system software, owned by Tenant or any of its
Affiliated Persons or the licensor of any of them. Further, upon
termination of this Agreement, Tenant shall be entitled to remove from
the Hotel without compensation to Landlord any computer equipment
utilized as part of a centralized reservation system or owned by a
party other than the Landlord.
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IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
HPTMI II PROPERTIES TRUST
By:___________________________
John G. Murray, President
TENANT:
CR9 TENANT CORPORATION
By:___________________________
Its (Vice) President
EXHIBIT 10.10
10/7/97
LIMITED RENT
GUARANTY
THIS LIMITED RENT GUARANTY ("Guaranty") is made as of the 10th day of
October, 1997 by MARRIOTT INTERNATIONAL, INC., having an address at Marriott
Drive, Washington, D.C. 20058 (hereinafter referred to as "Guarantor") and
HOSPITALITY PROPERTIES TRUST ("HPT") and HPTMI II PROPERTIES TRUST ("HPTMI"),
having an address at 400 Centre Street, Newton, Massachusetts 02158 (HPTMI
together with HPT and their permitted successors and assigns, hereinafter
referred to as "Landlord").
RECITALS
WHEREAS, HPTMI and CR9 Tenant Corporation, a Delaware corporation
(hereinafter referred to as "Tenant") have agreed to enter into various leases,
from time to time for certain hotels located or to be located in the United
States (hereinafter collectively referred to as the "Leases" and individually as
the "Lease") pursuant to the terms of a certain Purchase and Sale Agreement
dated even date herewith (the "Agreement") in connection with the sale of nine
(9) hotels from Affiliated Persons of Guarantor to Landlord (the "Properties");
and
WHEREAS, Guarantor owns all of the stock in Tenant, and it is a
condition precedent to the Landlord's entering into the Leases with Tenant that
Guarantor guarantee payment of Guaranteed Rent (defined herein) under the
Leases; and
WHEREAS, the transactions contemplated by the Agreement and the Leases
are of direct, material and substantial benefit to Guarantor; and
WHEREAS, words not otherwise defined herein, whether or not capitalized
herein, shall have the meanings given to them in each Lease.
NOW, THEREFORE, WITNESSETH, in consideration of the agreement of
Landlord to enter into the Leases with Tenant and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor hereby covenants and agrees as follows:
<PAGE>
SECTION 1
GUARANTY
Subject to the terms and provisions of this Guaranty, Guarantor hereby
unconditionally guarantees to Landlord the full, complete, and timely payment by
Tenant of all Minimum Rent (as defined in each Lease) and Additional Rent (as
defined in each Lease) (hereinafter collectively referred to as "Guaranteed
Rent") due and payable under all of the Leases for the Guaranty Term, without
deduction by reason of any set-off (except to the extent of any set-offs to
which Tenant is expressly entitled pursuant to the terms of the Lease), defense,
or counterclaim. For purposes hereof, it is expressly understood and agreed that
"Guaranteed Rent" shall not include any sums for damages arising from an Event
of Default or termination of the Lease, specifically including damages relating
to the acceleration of any rent due under the Lease in excess of the Minimum
Rent and Additional Rent payable during the Guaranty Term in accordance with the
terms of the Leases. In the event that there is an Event of Default by Tenant
pursuant to the terms of a Lease, Landlord hereby agrees to use reasonable
efforts to mitigate its damages.
A. If during the Guaranty Term Tenant shall fail to pay all or any
portion of the Guaranteed Rent when due, Guarantor shall pay (without first
requiring the Landlord to proceed against Tenant, any other person, or any other
security) to Landlord all Guaranteed Rent due and unpaid. Guarantor shall make
payment of such Guaranteed Rent within four (4) Business Days of receipt by
Guarantor of notice from Landlord of Tenant's failure to pay such Guaranteed
Rent. Interest at the Disbursement Rate shall accrue and be owing and due by
Guarantor to Landlord for any Guaranteed Rent not paid within such four (4)
Business Day period.
Notwithstanding the above, in the event that there is an
Exercise of Rights by Landlord (as defined hereinafter in Section 6.B hereof),
the above-referenced period of "four (4) Business Days" shall be "ten (10)
Business Days."
B. In the event Guarantor and Tenant should each pay the same
Guaranteed Rent, Landlord shall promptly return to Guarantor the Guaranteed Rent
paid by Guarantor.
SECTION 2
TERM OF GUARANTY
Guarantor's obligations hereunder shall be limited to Guaranteed Rent
accruing during a period commencing on the date hereof and shall continue in
effect as set forth in subsections A. and B. hereinbelow (the "Guaranty Term"):
A. The Guaranty Term shall continue until the first to occur of the
following events, and thereafter as provided in subsection B.
(i) the expiration of six (6) full Accounting Periods after the
expiration of the Accounting Period in which the last of the nine (9) Properties
has been acquired by Landlord, or
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(ii) the expiration of nineteen (19) full Accounting Periods after the
expiration of the Accounting Period in which the first Property has been
acquired by Landlord.
B. Expiration of Term. Thereafter, the Guaranty Term shall continue in
full force and effect until, and shall terminate on the first to occur of one of
the following events:
(i) 11:59 p.m. on the last day of the Accounting Period ending
closest to September 30, 2004; or
(ii) the expiration of the first entire Fiscal Year of Tenant in
which the Aggregate Amount Funded (as defined herein) exceeds
twenty percent (20%) of the Total Property Purchase Price (as
defined herein) paid to Guarantor or its Affiliated Persons
for the Properties which were acquired by Landlord.
The Aggregate Amount Funded shall be determined annually, in
arrears, at the end of each Fiscal Year, except that no such
determination shall be required for the Fiscal Year of Tenant
which includes, or is subsequent to, the Accounting Period
ending closest to September 30, 2004. Tenant and/or Guarantor
shall make such determination and give notice to Landlord of
such amount within one hundred twenty (120) days of the
expiration of the then applicable Fiscal Year. This
determination shall be deemed conclusively accurate unless
Landlord gives written notice to Tenant and/or Guarantor of
its objections to such determination within thirty (30) days
of its receipt of Tenant's and/or Guarantor's determination.
To establish that the Aggregate Amount Funded has exceeded
twenty percent (20%) of the Total Property Purchase Price
within the applicable Fiscal Year, Guarantor shall send a
notice to Landlord, including the following documents: (i) a
letter from Guarantor's auditor affirming that the auditor has
reviewed the Aggregate Amount Funded determination for each
Fiscal Year and has found no material errors or omissions
therein (or such other similar statement as the auditor's
policies and procedures then permit the auditor to make in
providing review and confirmation of calculations of this
kind), (ii) a certificate of an officer of Guarantor affirming
the accuracy and completeness of the Aggregate Amount Funded
determination, and (iii) a copy of the calculation of the
Aggregate Amount Funded determination.
Landlord, at its sole cost and expense (except as provided
hereinbelow), shall be entitled to perform an independent
audit to confirm the accuracy of the Aggregate Amount Funded
determination submitted by Guarantor, such audit to be
commenced not later than ninety (90) days after Tenant or
Guarantor submits its determination, and, in the event that
Guarantor's determination is shown to be materially inaccurate
in Guarantor's favor (which the parties agree
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shall constitute a deviation of 3% or more), the cost of the
audit shall be borne by Guarantor. If such independent audit
establishes that the Aggregate Amount Funded did not exceed
twenty percent (20%) of the Total Property Purchase Price,
this Guaranty shall continue in full force and effect.
or
(iii) the date on which Minimum Rent Coverage (as defined herein)
equals or exceeds one hundred and thirty percent (130%) of the
Minimum Rent for four (4) consecutive Fiscal Quarters (for
clarification, it is agreed that such date shall be the last
day of such fourth consecutive Fiscal Quarter). To establish
that the Minimum Rent Coverage has met the 130% standard set
forth hereinabove, Guarantor shall send a notice to Landlord,
which notice shall include: (i) a letter from Guarantor's
auditor affirming that the auditor has reviewed the Minimum
Rent Coverage determination for each quarter and has found no
material errors or omissions therein (or such other similar
statement as the auditor's policies and procedures then permit
the auditor to make in providing review and confirmation of
calculations of this kind), (ii) a certificate of an officer
of Guarantor affirming the accuracy and completeness of the
Minimum Rent Coverage determination, and (iii) a copy of the
calculation of the Minimum Rent Coverage determination.
Landlord, at its sole cost and expense (except as provided
hereinbelow), shall be entitled to perform an independent
audit to confirm the accuracy of the Minimum Rent Coverage
determination submitted by Guarantor, such audit to be
commenced not later than ninety (90) days after Tenant or
Guarantor submits its audit, and, in the event that
Guarantor's determination is shown to be materially inaccurate
in Guarantor's favor (which the parties agree shall constitute
a deviation of 3% or more), the cost of the audit shall be
borne by Guarantor. If such independent audit establishes that
the Minimum Rent Coverage did not exceed the aforementioned
one hundred and thirty percent (130%) this Guaranty shall
continue in full force and effect.
"Aggregate Amount Funded" is the cumulative amount of Guaranteed Rent
paid by Tenant (pursuant to the terms of the Leases for all of the
Properties acquired by Landlord) and Guarantor (pursuant to the terms
of this Guaranty) in excess of total cumulative Cash Available for
Lease Payment for the time period beginning on the earlier to occur of:
(i) the expiration of six full Accounting Periods after the expiration
of the Accounting Period in which the last of the nine (9) Properties
is purchased by Landlord, or (ii) the expiration of nineteen (19) full
Accounting Periods after the expiration of the Accounting Period in
which the first Property has been acquired by Landlord.
"Minimum Rent Coverage" is Cash Available For Lease Payment (as defined
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<PAGE>
herein) for all of the Properties acquired by Landlord divided by Base
Rent for all of the Properties acquired by Landlord, each calculated
for each Fiscal Quarter.
"Cash Available For Lease Payment" is defined as Total Hotel Sales for
all of the Properties from the date each is acquired by Landlord less
Property Expenses for all of the Properties from the date each is
acquired by Landlord; provided, however, for purposes of calculating
Minimum Rent Coverage, Cash Available for Lease Payment shall be
determined assuming an annual deposit by Tenant into the Reserve of an
amount equal to 5% of Total Hotel Sales.
"Property Expenses" is defined on Exhibit A attached hereto.
"Total Property Purchase Price" is defined as the sum of the Allocable
Purchase Prices (as defined in the Agreement), from time to time, paid
by Landlord for the Properties.
C. Early Termination. Notwithstanding any term or provision to the
contrary contained herein, if either of the following events shall occur, this
Guaranty shall terminate in its entirety on the earlier to occur of:
(i) a transfer of any of the Properties by Landlord (other
than to any Affiliated Person as to Landlord) for which the Minimum Rent
Coverage determined solely for the Property(ies) being transferred exceeds the
Minimum Rent Coverage for the Collective Leased Properties for the then most
recently ended Fiscal Quarter; provided, however, any transfer to a Superior
Mortgagee pursuant to Article 20 of the Lease will not be deemed to be a
transfer pursuant to this subsection (i), or
(ii) a transfer of any of the Properties by Landlord to a
Person who meets any one of the criteria set forth in Section 15.1(i), (ii),
(iii) or (iv) of the Lease.
Within fifteen (15) Business Days of its receipt of
hereinafter described Notice from Landlord, Guarantor hereby agrees that it will
give Notice to Landlord whether or not Guarantor would declare this Guaranty
terminated due to the occurrence of either event set forth hereinabove. Any
Notice from Landlord must contain such information as may be reasonably
necessary for Guarantor to determine if either event would occur, including all
information necessary for Guarantor to determine if the events set forth in
Section 15.1(i), (ii), (iii) or (iv) of the Lease would occur.
SECTION 3
TERMINATION AS TO SPECIFIC PROPERTIES
In the event any of the following events shall occur, this Guaranty
shall be modified, as set forth hereinbelow:
A. The termination of a Lease of a Property, or Properties pursuant to
the terms and provisions of the Lease, other than a termination due to an Event
of Default by Tenant, or
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B. The transfer by Landlord of a Property, or Properties, pursuant to
the terms and provisions of the Lease, other than a transfer to any Affiliated
Person as to Landlord, or as permitted by Article 20 of the Lease.
As used herein, the term "Deleted Property" shall mean that Property or
Properties referenced in Subsection A and/or B hereinabove.
In the event either of the above-described events shall occur (a) the
Guaranty shall not apply to the Guaranteed Rent for the Deleted Property
accruing from and after the date of such event, and (b) with respect to all
periods subsequent to the events set forth in subsection A. and/or B.
hereinabove, the terms "Minimum Rent Coverage", "Cash Available for Lease
Payment" and "Total Property Purchase Price" shall refer only to the Properties
other than the Deleted Property, and the term "Aggregate Amount Funded" shall
refer to the sum of (i) all Guaranteed Rent paid by Tenant and Guarantor
pursuant to Leases for all of the Properties up to the date of such event, and
(ii) all Guaranteed Rent paid by Tenant and Guarantor pursuant to Leases for
Properties other than Deleted Properties from and after the date of such event.
SECTION 4
CONSENT TO LEASE
Guarantor hereby unconditionally consents to the terms, covenants, and
conditions of the Leases.
SECTION 5
WAIVERS BY GUARANTOR
Guarantor hereby waives notice of acceptance of this Guaranty by
Landlord and any and all notices and demands of every kind and description which
may be required to be given by any statute or rule of law. Guarantor agrees that
the liability of Guarantor hereunder shall in no way be affected, diminished, or
released by (i) any forbearance or indulgence which may be granted to Tenant (or
to any successor thereto or to any person or entity which shall have assumed the
obligations thereof), or (ii) any waiver of any term, covenant, or condition in
the Leases by Landlord, or (iii) the acceptance of additional security.
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<PAGE>
SECTION 6
ENFORCEMENT BY LANDLORD
A. Other Rights: Subject to the terms and provisions of this Section,
Guarantor agrees that this Guaranty may be enforced by Landlord without
enforcing any rights it may have against any other Person or any collateral.
Guarantor further agrees that nothing herein contained shall prevent Landlord
from suing on any of the Leases or from exercising any other right available to
it under the Leases or against any other Person. The exercise of any of the
aforementioned rights shall not constitute a legal or equitable discharge of
Guarantor, it being the purpose and intent of Guarantor that its obligations
under this Guaranty shall be absolute and unconditional until the termination of
this Guaranty pursuant to the terms of this Guaranty.
B. Exercise of Rights: Notwithstanding any term or provision contained
in the Guaranty to the contrary, in the event Landlord or any Affiliated Person
shall become the record or beneficial owner of the issued and outstanding shares
of stock of Tenant, pursuant to the exercise of rights (the "Exercise of
Rights") contained in the Indemnity Pledge and Security Agreement dated even
date herewith by Guarantor, as pledgor, and Landlord, as pledgee, this Guaranty
shall be modified, as follows:
(i) From and after the date of an Exercise of Rights for
purposes of determining the amount of Guaranteed Rent which Guarantor is liable
hereunder, Tenant shall be conclusively deemed to have paid to Landlord all of
the Cash Available for Lease Payment (up to the full amount of Guaranteed Rent
due), calculated on an Accounting Period by Accounting Period, and not a
cumulative, basis.
(ii) From and after the date of an Exercise of Rights,
Landlord shall cause Tenant to supply to Guarantor all information as Guarantor
may reasonably request in writing to aid Guarantor in determining the Aggregate
Amount Funded, Minimum Rent Coverage and Cash Available for Lease Payment.
(iii) From and after the date of an Exercise of Rights,
Landlord shall thereafter pay to Guarantor all Retained Funds at such time or
times as the Retained Funds would otherwise be owing and due to Tenant, subject
to the provisions of the applicable Lease(s).
C. Payment of Expenses: Guarantor agrees, as principal obligor and not
as a guarantor only, to pay to Landlord forthwith upon demand, in immediately
available Federal funds, all costs and expenses to third parties (including
court costs and reasonable legal expenses) incurred or expended by Landlord in
connection with the enforcement of this Guaranty, together with interest on
amounts recoverable under this Guaranty from the time such amounts become due
until payment at the Disbursement Rate. Guarantor's covenants and agreements set
forth in this section shall survive the termination of this Guaranty.
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SECTION 7
CLAIMS BY GUARANTOR AGAINST TENANT
Nothing hereunder contained shall operate as a release or discharge, in
whole or in part, of any claim of Guarantor against Tenant by subrogation or
otherwise, by reason of any act done or any payment made by Guarantor pursuant
to the provisions of this Guaranty; but all such claims shall be subordinate to
the claims of Landlord.
SECTION 8
NOTICES
A. Any and all notices, demands, consents, approvals, offers, elections
and other communications required or permitted under this Guaranty 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 Guaranty 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
Guaranty a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
C. All such notices shall be addressed,
if to Landlord to:
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 Guarantor to:
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Marriott International, Inc.
10400 Fernwood Road, Dept. 52-924.11
Bethesda, Maryland 20817
Attn: Mr. Michael E. Dearing
[Telecopier No. (301) 380-5067]
with a copy to
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-923.00
Bethesda, Maryland 20817
Attn: Kimberly S. Perini, Esq.
[Telecopier No. (301) 380-6727]
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 Guaranty 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.
SECTION 9
APPLICABLE LAW; JURISDICTION
Guarantor hereby acknowledges, consents, and agrees (i) that the
provisions of this Guaranty and the rights of all parties mentioned herein shall
be governed by the laws of the State of Maryland and interpreted and construed
in accordance with such laws (excluding Maryland conflict of laws) and (ii) that
the United States District Court of the District of Maryland and any court of
competent jurisdiction in the State of Maryland shall have jurisdiction in any
proceeding instituted to enforce this Guaranty, and any objections to venue are
hereby waived.
SECTION 10
BINDING EFFECT
The rights, powers, privileges, and discretions (hereinafter referred
to as the "rights") to which Landlord may be entitled hereunder shall inure to
the benefit of Landlord and Landlord's successors and assigns. All the rights of
Landlord are cumulative and not alternative and may be enforced successively or
concurrently. Failure of Landlord to exercise any of its rights shall not be
deemed a waiver thereof, and no waiver of any of its rights shall be deemed to
apply to any other rights. The terms, covenants, and conditions of or imposed
upon Guarantor herein shall be binding upon the successors and assigns of
Guarantor.
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SECTION 11
SEVERABILITY
In case any provision (or any part of any provision) contained in this
Guaranty shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision (or remaining part of the affected provision) of this
Guaranty, but this Guaranty shall be construed as if such invalid, illegal, or
unenforceable provision (or part thereof) had never been contained herein but
only to the extent it is invalid, illegal, or unenforceable.
SECTION 12
GRAMMAR
When used herein, the singular shall include the plural; the plural the
singular; and the use of any gender shall be applicable to all genders.
SECTION 13
TIME OF THE ESSENCE
Time is of the essence.
SECTION 14
CAPTIONS
The captions appearing in this Guaranty are inserted only as a matter
of convenience and do not define, limit, construe, or describe the scope or
intent of the sections of this Guaranty nor in any way affect this Guaranty.
SECTION 15
MISCELLANEOUS
A. Unenforceability of Guaranteed Obligations, Etc. If Tenant is for
any reason (other than by reason of any waiver, discharge or other event
pursuant to the terms of the Leases) under no legal obligation to pay any of the
Guaranteed Rent, or if any other moneys included in the Guaranteed Rent have
become unrecoverable from Tenant by operation of law or for any other reason,
the obligations of Guarantor contained in this Agreement shall nevertheless
remain in full force and effect and shall be binding upon Guarantor.
B. Consents and Waivers. Guarantor hereby acknowledges receipt of
correct and complete copies of the Leases, 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 (a) notice of any default hereunder
and any default, breach or nonperformance of Event of Default with respect to
any of the Guaranteed Rent under the Leases, (b) demand for performance or
observance of, and any enforcement of any provision
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of, or any pursuit or exhaustion of rights or remedies against Tenant, under or
pursuant to the Leases, or any agreement directly or indirectly relating thereto
and any requirements of diligence or promptness on the part of Landlord in
connection therewith, and (c) to the extent Guarantor lawfully may do so, any
and all demand 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 and
any defense of any kind which it may now or hereafter have with respect to this
Guaranty, or the Leases or the Guaranteed Rent; provided, however, that after
any Exercise of Rights by Landlord, Landlord shall not amend the Leases to
increase the amount of Minimum Rent or Additional Rent payable without
Guarantor's consent and Landlord shall give Guarantor copies of any Notices of
Default pursuant to the Leases.
C. No Impairment. The obligations, covenants, agreements and duties of
Guarantor under this Guaranty shall not be affected or impaired by any waiver by
Landlord of all of the Guaranteed Rent or the performance or observance by
Tenant of any of the agreements, covenants, terms or conditions contained in the
Lease or any indulgence in or the extension of the time for payment or
performance by Tenant of any amounts payable under or in connection with the
Leases or any other instrument or agreement relating to the Guaranteed Rent or
of the time for performance by Tenant 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 Tenant set forth in any of the Leases, or the voluntary or
involuntary sale or other disposition of all or substantially all the assets of
Tenant or insolvency, bankruptcy, or other similar proceedings affecting Tenant
or any assets of Tenant, or the release or discharge of Tenant from the
performance or observance of any agreement, covenant, term or condition
contained in any agreement, covenant, term or condition contained in any of the
foregoing by operation of law, or any other cause, whether similar or dissimilar
to the foregoing.
D. Reimbursement, Subrogation, Etc. Guarantor hereby covenants and
agrees that it shall not enforce or otherwise exercise any rights of
reimbursement, subrogation, contribution or other similar rights against Tenant
or any other person with respect to the Guaranteed Rent prior to the payment in
full of the obligations of Tenant under the Leases. Until all obligations of
Tenant under the Leases shall have been paid and performed in full, Guarantor
shall have no right of subrogation, and Guarantor waives any defense it may have
based upon any election of remedies by Landlord which destroys Guarantor's
subrogation rights or Guarantor's rights to proceed against Tenant for
reimbursement, (including, without limitation, any loss of rights Guarantor may
suffer by reason of any rights, powers or remedies of Tenant in connection with
any anti-deficiency laws or any other laws limiting, qualifying or discharging
the indebtedness to Landlord).
E. Remedies Cumulative. No remedy herein conferred upon Landlord 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.
F. HPT's Liability. THE DECLARATION OF TRUST ESTABLISHING HPT AND
HPTMI, 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
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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.
G. Counterpart. The parties agree that this Limited Rent Guaranty may
be signed in counterpart.
IN WITNESS WHEREOF, Guarantor has caused this instrument to be duly
executed under seal and delivered as of the date first above written.
ATTEST: GUARANTOR:
MARRIOTT INTERNATIONAL, INC.
/s/ Jeff B. Stant By: /s/ Christopher S. Lynch(SEAL)
Name: Christopher S. Lynch
Title: Authorized Signatory
LANDLORD:
HOSPITALITY PROPERTIES TRUST
/s/ Alexander A. Notopoulos, Jr. By: /s/ John G. Murray (SEAL)
Name: John G. Murray
Title: President
HPTMI II PROPERTIES TRUST
/s/ Alexander A. Notopoulos, Jr. By: /s/ John G. Murray (SEAL)
Name: John G. Murray
Title: President
-12-
EXHIBIT 10.11
AMENDMENT NO. 3
AMENDMENT NO. 3 dated as of November 14, 1997 (this "Amendment")
between HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust
(the "Borrower"), and DLJ MORTGAGE CAPITAL, INC., a Delaware corporation (the
"Lender").
W I T N E S S E T H:
WHEREAS the Borrower and the Lender have entered into a Revolving
Credit Agreement dated as of August 22, 1995, as amended and restated in its
entirety by that certain Amended and Restated Revolving Credit Agreement dated
as of December 29, 1995, as amended further by Amendment No. 1 to Amended and
Restated Revolving Credit Agreement dated as of February 26, 1996, those certain
two side letters each dated February 29, 1996, that certain side letter dated
March 22, 1996, and that certain side letter dated March 1997, as further
amended by Amendment No. 2 dated as of October 10, 1997 (as the same may be
amended and/or modified from time to time, the "Credit Agreement");
WHEREAS the Borrower has requested certain amendments to the Credit
Agreement; and
WHEREAS, subject to the terms and conditions set forth herein, the
Lender is willing to make such amendments.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. Each term used herein which is defined in the
Credit Agreement shall have the meaning assigned to such term in the Credit
Agreement.
SECTION 2. Representations and Warranties. The Borrower
acknowledges, covenants, warrants, represents and agrees that:
(a) no Material Adverse Change or Material Adverse Effect has occurred
since December 29, 1996;
(b) there are no judgments against the Borrower or any of its
Subsidiaries in any court of the United States and there is no litigation,
active, pending or threatened, against the Borrower or any of its Subsidiaries
which
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might adversely affect the Borrower's or any of its Subsidiaries' ability
to pay when due any amounts which may become payable in respect of the Loans;
(c) no default, nor event which with notice and/or passage of time
would constitute a default, has occurred and is continuing under the Loan
Documents;
(d) there are no offsets, defenses or counterclaims to the Borrower's
obligations under the Loans and the Loan Documents; and
(e) the Borrower has not entered into any agreements with creditors or
third parties that expressly or otherwise prohibit the Borrower from entering
into this Amendment.
SECTION 3. Amendment to Section 1.1 of the Credit Agreement. (a) The
Borrower and the Lender hereby agree that the following definitions are either
amended and restated in their entirety to read as follows or added in their
appropriate alphabetical order to Section 1.1 of the Credit Agreement:
"Commitment" means the Revolving Credit Commitment and the Term Loan
Commitment, collectively.
"Courtyard Hotel" means a hotel property operated as a Courtyard by
Marriott(R) and managed by Marriott International, Inc.
"Final Borrowing Date" means December 31, 1997.
"First Supplemental Facility" means the First Supplemental Credit
Agreement dated as of November 14, 1997 between the Borrower and the Lender in
the aggregate principal amount of up to $75,000,000, as the same may hereafter
be amended, supplemented or otherwise modified from time to time.
"Lending Office" means, with respect to the Lender, the office located
at 277 Park Avenue, New York, New York 10172 or such other office of the Lender
as the Lender may from time to time specify to the Borrower.
"Loan" or "Loans" means a Revolving Credit Loan or Revolving Credit
Loans and/or a Term Loan or Term Loans, as the context shall require.
"Mortgage Documents" means with respect to any Hotel Facility, a
Mortgage, a Subordination Nondisturbance Agreement and the other documents
relating thereto, including financing statements on Form UCC-1, subject to
appropriate revisions for state or property specific requirements.
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"Notes" means the Revolving Credit Note and the Term Note,
collectively.
"Perfection Event" means the earlier of November 1, 1998 and the
occurrence of an Event of Default.
"Proposed Hotel Facility" means any Real Estate or Lease comprising an
operating facility offering hotel or other lodging services which the Borrower
proposes to include as collateral for the Loans.
"Proposed Hotel Facility Statement" means a certificate of a
Responsible Officer providing each of the following:
(i) details of the location of the Proposed Hotel Facility and
the real estate interest;
(ii) certification (based on information available to the
Borrower after diligent enquiry) as to the proposed annual Base Rent
under the proposed Operating Lease of the Proposed Hotel Facility;
(iii) audited balance sheets if available, or pro forma
balance sheets, of the owner or operator of the Proposed Hotel
Facility, and the related consolidated statements of income, retained
earnings and cash flows of such owner or operator for its previous
three (3) fiscal years;
(iv) audited balance sheets if available, or pro forma balance
sheets, in respect of the Proposed Hotel Facility and the related
consolidated statements of operations, changes in owner's equity
(deficit) and cash flows in respect of such Proposed Hotel Facility,
for the previous three (3) fiscal years;
(v) a written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any
significant environmental, health and safety violations, hazards or
liabilities to which the owner or operator of the Proposed Hotel
Facility may be subject, which report shall demonstrate, to the
reasonable satisfaction of the Lender, that the Proposed Hotel Facility
and the operations thereof are in compliance in all material respects
with all applicable Environmental Laws and are not subject to any
material Environmental Liabilities and Costs;
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(vi) a copy of the proposed form of Operating Lease and, if
applicable, Management Agreement;
(vii) a copy of the proposed form of Limited Rent Guaranty, if
applicable;
(viii) the names of the proposed Operating Lessee and, if
applicable, Manager;
(ix) a copy of a recent market study in respect of the
Proposed Hotel Facility;
(x) a current title report and survey in respect of the
Proposed Hotel Facility, issued by a title company/surveyor reasonably
acceptable to the Lender; and
(xi) a written report of an investigation by an engineering
consultant reasonably acceptable to the Lender.
"Revolving Credit Commitment" means the obligation of the Lender to
make Revolving Credit Loans in an aggregate amount not to exceed $200,000,000
(as the same may be reduced from time to time pursuant to Section 2.4).
"Revolving Credit Loan" or "Revolving Credit Loans" means the revolving
credit loan or loans made by the Lender to the Borrower pursuant to Article II.
"Revolving Credit Note" means a promissory note of the Borrower payable
to the order of the Lender in a principal amount equal to the amount of the
Revolving Credit Commitment as originally in effect, in substantially the form
of Exhibit A-1, evidencing the aggregate Indebtedness of the Borrower to the
Lender resulting from the Revolving Credit Loans made by the Lender.
"Second Supplemental Facility" means the Second Supplemental Credit
Agreement dated as of November 14, 1997 between the Borrower and the Lender in
the aggregate principal amount of up to $130,000,000, as the same may hereafter
be amended, supplemented or otherwise modified from time to time.
"Supplemental Facilities" means the First Supplemental Facility and the
Second Supplemental Facility, collectively.
"Term Loan Commitment" means the obligation of such Lender to make Term
Loans to the Company in an aggregate amount not to exceed $50,000,000 (as the
same may be reduced from time to time pursuant to Section 2.4).
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"Term Loan" or "Term Loans" means the term loan or loans made by the
Lender to the Borrower pursuant to Article II.
"Term Loan Effective Date" means the date of first Term Loan made
pursuant to Article II.
"Term Note" means a promissory note of the Borrower payable to the
order of the Lender in a principal amount equal to the amount of the Term
Commitment as originally in effect, in substantially the form of Exhibit A-2,
evidencing the aggregate Indebtedness of the Borrower to the Lender resulting
from the Term Loans made by the Lender.
(b) The definition of "Second Facility" is hereby deleted and any
references in the Credit Agreement to Second Facility shall be deemed to refer
to the "Supplemental Facilities".
SECTION 4. Amendment to Section 2.1 of the Credit Agreement. The
Borrower and the Lender hereby agree that Section 2.1 of the Credit Agreement is
amended and restated in its entirety to read as follows:
2.1 The Loans. On the terms and subject to the conditions contained in
this Agreement, the Lender agrees to make to the Borrower from time to
time on any Business Day (a) during the period from the date hereof to
and including the Final Maturity Date Revolving, Credit Loans in an
aggregate outstanding amount not to exceed the Revolving Credit
Commitment, and (b) during the period from the date hereof to and
including the Final Borrowing Date, Term Loans in an aggregate amount
not to exceed the Term Loan Commitment. Within the limits of the
Revolving Credit Commitment and subject to the other terms and
conditions hereof, amounts prepaid pursuant to Section 2.6(b) in
respect of Revolving Credit Loans may be reborrowed under this Section
2.1 up to and including the Final Maturity Date. After the Final
Maturity Date, no portion of the Revolving Credit Commitment may be
borrowed or reborrowed and no portion of the Term Loan Commitment may
be borrowed. The Revolving Credit Loans shall be evidenced by the
Revolving Credit Note and the Term Loans shall be evidenced by the Term
Note. The Lender is authorized to endorse, at any time, the date and
amount of each Revolving Credit Loan or Term Loan and the date and
amount of each payment of principal with respect to the Revolving
Credit Loans or Terms Loans (as the case may be) on the schedule
annexed to and constituting a part of the Revolving Credit Note
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and Term Note, respectively, which endorsement shall constitute prima
facie evidence of the accuracy of the information endorsed.
SECTION 5. Amendment to Section 2.2 of the Credit Agreement. The
Borrower and the Lender hereby agree that the first and second sentences of
Section 2.2(a) of the Credit Agreement is amended and restated in its entirety
to read as follows:
Each Loan shall be made on notice, given by the Borrower to the Lender
not later than 12:00 noon (New York City time) on the fifth (5th)
Business Day prior to the date of the proposed Loan. Each such notice
(a "Notice of Borrowing") shall be in substantially the form of Exhibit
B, specifying therein (i) the date of such proposed Loan, (ii) the
amount of such proposed Loan, (iii) the account or accounts to which
the Loan should be made, (iv) the details of the Approved Hotel
Facility or Facilities or other permitted use for which the proceeds of
the proposed Loan shall be used, and (v) whether the proposed Loan is a
Revolving Credit Loan or a Term Loan.
SECTION 6. Amendment to Section 2.4 of the Credit Agreement. The
Borrower and the Lender hereby agree that Section 2.4 of the Credit Agreement is
amended and restated in its entirety to read as follows:
2.4. Reduction and Termination of the Commitment. The Borrower may,
upon at least three Business Days' prior notice to the Lender,
terminate in whole or reduce in part the unused portions of either
Commitment without premium or penalty; provided, however, that the Term
Loan Commitment shall be reduced to zero before any reduction in the
Revolving Credit Commitment can be made; and provided, further, any
partial reduction shall be in the aggregate amount of not less than
$10,000,000.
SECTION 7. Amendment to Section 2.6 of the Credit Agreement. The
Borrower and the Lender hereby agree that Section 2.6 of the Credit Agreement is
amended as follows:
(a) The first sentence of Section 2.6(a) is amended and restated in
full as follows:
The Borrower may, upon at least ten (10) Business Days' prior notice to
the Lender, stating the proposed date and aggregate principal amount of
the prepayment, prepay the outstanding
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principal amount of the Loans in whole or in part, together with
accrued interest to the date of such prepayment on the principal amount
prepaid without premium or penalty; provided that the Loans under the
Supplemental Facilities shall have been theretofore repaid in full; and
provided, however, further, that any prepayment of the Loans bearing
interest at the Eurodollar Rate made other than on the last day of an
Interest Period for the Loans to be repaid shall be subject to payment
by the Borrower to the Lender of any costs, fees or expenses incurred
by the Lender in connection with such prepayment including, without
limitation, any costs to unwind any Eurodollar Rate contracts or
Interest Rate Contracts. Any partial prepayment shall be applied first
to the Term Loans and second to the Revolving Credit Loans, and, in the
case of the Revolving Credit Loans and Terms Loans, to the installments
of principal of such Loans in the inverse order of maturity. (b) The
following Section 2.6(d) is added to Section 2.6:
(d) Upon receipt by the Borrower or its Subsidiaries of
proceeds of any issuance of debt or equity securities, the
Borrower shall forthwith prepay the Loans and the Loans made
under the Supplemental Facilities in the following order:
First, to the repayment of the Loans made under the Second
Supplemental Facility, Second, to the repayment of the Loans
made under the First Supplemental Facility, Third, to the Term
Loan, and Fourth, to the Revolving Credit Loans.
SECTION 8. Amendment to Article III of the Credit Agreement.
The Borrower and the Lender hereby agree that Article III of the Credit
Agreement is amended and restated in full as follows:
ARTICLE III
Preparation of Mortgage Documents and
Approval of Proposed Hotel Facilities
Section 3.1. Recordation and Filing of Mortgage Documents, Etc.
(a) The Lender shall hold and not record or file any of the
Collateral Documents executed by the Borrower and delivered to
the Lender (i) pursuant to Section 14 of Amendment No. 2 to the
Credit Agreement dated as of October 10, 1997 and Section 23 of
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Amendment No. 3 to the Credit Agreement dated as of November 14, 1997
or (ii) on or after November 19, 1997 pursuant to Section 3.2(b) unless
and until a Perfection Event shall have occurred, provided that the
Lender may record modifications to the mortgages and deed of trust of
record as of the date hereof. On or after the occurrence of a
Perfection Event, the Lender may in its absolute discretion cause one
or more of such Collateral Documents to be recorded or filed in the
appropriate recording or filing office (to the extent recordable or
fileable). In addition, the Borrower shall promptly deliver to the
Lender upon a Perfection Event, the following with respect to each of
the Hotel Facilities:
(i) a commitment for a title insurance policy (the "Title
Insurance Policy") issued by a title company acceptable to the
Lender, in such form and amounts as are reasonably acceptable
to the Lender, insuring that the Mortgage covering such
property is a valid first priority Lien on such property
subject only to such exceptions to title as shall be
acceptable to the Lender in its reasonable discretion and
containing such endorsements and affirmative insurance as the
Lender may reasonably require and as are obtainable in the
applicable jurisdiction, and true copies of each document,
instrument or certificate required by the terms of each such
policy or Mortgage to be, or have been, filed, recorded,
executed or delivered in connection therewith;
(ii) a current ALTA survey and surveyor's certification as to
such Hotel Facility in form and substance reasonably
satisfactory to the Lender; and
(iii) copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective
financing statements which name the Borrower or any Subsidiary
of the Borrower (under its present name or any previous name)
as debtor and which are filed in the jurisdictions referred to
above, together with copies of such other financing statements
(none of which shall cover the Collateral purported to be
covered by the Security Agreement).
(b) The Borrower shall pay to the Lender, or as the Lender may
direct, (i) all title insurance premiums, documentary, stamp
or intangible taxes, recording fees and mortgage taxes payable
in connection with the recording of any of
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the Loan Documents or the issuance of the Title Insurance
Policies, and (ii) the reasonable fees and out of pocket
expenses of counsel to the Lender and local counsel connection
with the preparation, execution, review and delivery of the
Mortgage Documents.
(c) The Borrower, on behalf of itself and each of its
Subsidiaries, hereby appoints the Lender its attorney-in-fact
to execute, acknowledge and deliver for and in the name of the
Borrower or any of its Subsidiaries, as applicable, any and
all of the Mortgage Documents for the Collateral Properties
and/or the Proposed Hotel Facilities which the Borrower or any
of its Subsidiaries fails to execute, acknowledge and/or
deliver in accordance with the terms hereof, and this power,
being coupled with an interest, shall be irrevocable as long
as any part of the Obligations remains unpaid.
Section 3.2. Approval of Proposed Hotel Facilities.
(a) In the event that the Borrower desires to provide to the
Lender as collateral to secure the Borrower's Obligations a
Proposed Hotel Facility, the Borrower shall request in writing
the Lender's consent, which request shall be accompanied by a
Proposed Hotel Facility Statement (together with all documents
referred to therein) in respect of the Proposed Hotel Facility
and such other information as the Lender may reasonably
require. The Lender's consent shall not be unreasonably
withheld.
(b) Upon the approval of any Proposed Hotel Facility, the
Lender shall prepare Mortgage Documents for such Proposed
Hotel Facility and the parties shall cooperate in the
preparation and delivery of such Mortgage Documents
(including, without limitation, ordering commitments for the
title insurance policies, ALTA surveys and UCC- searches,
obtaining estoppel certificates and retaining counsel,
including local counsel for purposes of reviewing the Mortgage
Documents and rendering opinions with respect to such
documents in form and substance acceptable to the Lender as
set forth in Section 4.1(b)). The parties acknowledge and
agree that Liens on certain of the Real Estate and Leases may
have been or hereafter be granted as collateral security for
the Supplemental
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Facilities pursuant to the terms thereof and that to the
extent mortgage documents are executed and delivered in
respect of any such Real Estate or Lease as security for
either Supplemental Facility, such Real Estate or Lease shall
be deemed to not be collateral for the Loans made pursuant to
this Agreement. In addition, the parties acknowledge that
Liens on certain Real Estate and Leases have been granted in
connection with the issuance of $125,000,000 aggregate
principal amount of Hospitality Properties Mortgage Acceptance
Corp. Commercial Mortgage Pass-Through Certificates Series
1996-C1 and are therefore not available as collateral to
secure the repayment of the Loans hereunder or the loans made
under the Supplemental Facilities.
SECTION 9. Amendment to Section 8.2 of the Credit Agreement. (a) The
Borrower and the Lender hereby agree that Section 8.2(a)(vi) of the Credit
Agreement is amended and restated in its entirety to read as follows:
(vi) Indebtedness of the Borrower or any of its Subsidiaries arising
under the Supplemental Facilities.
(b) The Borrower and the Lender hereby agree that the following Section
8.2(a)(vii) shall be added to Section 8.2 of the Credit Agreement:
(vii) The mortgage loan made November 25, 1996 in the aggregate
principal amount of $125,000,000 by Column Financial, Inc., as
originator, to HPTRI Corporation and HPTWN Corporation, as borrowers.
SECTION 10. Amendment to Section 10.2 of the Credit Agreement. The
Borrower and the Lender hereby agree that the address for the Lender and its
copy address appearing in Section 10.2 of the Credit Agreement is amended and
restated in its entirety to read as follows:
If to the Lender, at its address at:
277 Park Avenue
New York, New York 10172
Attention: James W. Roiter, Managing Director
(telecopy number: 212-892-4096)
(telephone number: 212-892-4900)
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with a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Thomas Patrick Dore, Jr., Esq.
(telecopy number: 212-450-4800)
(telephone number: 212-450-4000)
SECTION 11. Amendment to Exhibits A and B of the Credit Agreement. (a)
Exhibit A of the Credit Agreement shall be renamed "Exhibit A-1" and all
references to Exhibit A throughout the Credit Agreement shall be deemed to refer
to Exhibit A-1. In addition, all references in Exhibit A-1 to "Loans" shall be
deemed to refer to "Revolving Credit Loans".
(b) Attached as Exhibit A hereto is the form of the Term Note, which
shall be added to the Credit Agreement as Exhibit A-2.
(c) The form of the Notice of Borrowing (Exhibit B to the Credit
Agreement) is hereby amended and restated to read in full as set forth in the
attached Exhibit B.
SECTION 12. Ratification of Credit Agreement. Except as specifically
amended herein, all of the terms, covenants, conditions and stipulations
contained in the Credit Agreement and all of the other Loan Documents are hereby
ratified and confirmed in all respects and shall continue to apply with full
force and effect.
SECTION 13. Amendments, Waivers, Etc. Neither this Amendment nor any
other Loan Document nor any provision hereof or thereof may be modified,
amended, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
SECTION 14. Counterparts. This Amendment may be executed in one or more
counterparts each of which shall be an original but all of which when taken
together shall constitute one and the same instrument. The failure of any party
listed below to execute, acknowledge or join in this Amendment, or any
counterpart hereof, shall not relieve the other signatories from the obligations
hereunder.
SECTION 15. Governing Law. This Amendment is and shall be deemed to be
a contract entered into pursuant to the laws of the State of New York and shall
in all respects be governed, construed, applied and enforced in accordance with
the laws of the State of New York.
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SECTION 16. Submission to Jurisdiction. The Borrower agrees to submit
to personal jurisdiction in the State of New York in any action or proceeding
arising out of this Amendment. In furtherance of such agreement, the Borrower
hereby agrees and consents that without limiting other methods of obtaining
jurisdiction, personal jurisdiction over the Borrower in any such action or
proceeding may be obtained within or without the jurisdiction of any court
located in New York and that any process or notice of motion or other
application to any such court in connection with any such action or proceeding
may be served upon the Borrower by registered or certified mail to, or by
personal service at, the last known address of the Borrower, whether such
address be within or without the jurisdiction of any such court. The Borrower
hereby agrees that the venue of any litigation arising in connection with the
indebtedness, or in respect of any of the obligations of the Borrower under this
Amendment, shall, to the extent permitted by law, be in New York County.
SECTION 17. Successors and Assigns. This Amendment is binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
SECTION 18. No Partnership. Nothing in this Amendment or any other Loan
Document is intended to or shall be deemed to create any rights or obligations
of partnership, joint venture, or similar association among the parties hereto.
SECTION 19. Separability. If any term, covenant, provision or condition
of this Amendment or any of the other Loan Documents shall be held to be
invalid, illegal or unenforceable in any respect, this Amendment shall be
construed without such term, covenant, provision or condition.
SECTION 20. Waiver of Jury Trial. The parties hereto hereby irrevocably
and unconditionally waive any and all rights to trial by jury in any action,
suit or counterclaim arising in connection with, out of or otherwise related to
this Amendment and every other Loan Document heretofore, now or hereafter
executed and/or delivered in connection therewith, the Loans and all other
obligations of the Borrower related thereto or in any way related to this
transaction or otherwise with respect to the Mortgaged Properties.
SECTION 21. Non-recourse. THE DECLARATION OF TRUST OF THE BORROWER,
DATED MAY 12, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO ("THE
DECLARATION"), IS DULY FILED IN THE OFFICE OF 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,
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OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE BORROWER SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, THE BORROWER. ALL PERSONS DEALING WITH THE BORROWER, IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF THE BORROWER FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
SECTION 22. Conditions to Effectiveness. (a) It shall be a condition to
the effectiveness of this Amendment, and the Lender has entered into this
Amendment in reliance thereon, that the "Conditions Subsequent" set forth in
Section 14 of Amendment No. 2 dated as of October 10, 1997 shall have been
satisfied. The parties expect that the satisfaction of the conditions of said
Section 14 shall result in the satisfaction of the Loan to Value Requirement,
provided that nothing herein shall be construed as relieving the Borrower of its
obligation to comply with Section 6.5 of the Credit Agreement.
(b) On or prior to the Term Loan Effective Date, the Lender shall have
received the following, each dated the Term Loan Effective Date unless otherwise
indicated, in form and substance reasonably satisfactory to the Lender:
(i) The Term Note to the order of the Lender.
(ii) A certificate of the Secretary or an Assistant Secretary
of each Loan Party certifying (A) the resolutions of its Board of
Trustees or Directors, as appropriate, approving each Loan Document to
which it is a party, (B) all documents evidencing other necessary trust
or corporate action, as appropriate, and required governmental and
third party approvals, licenses and consents with respect to each Loan
Document to which it is a party and the transactions contemplated
thereby, (C) a copy of its and each of its Subsidiaries' declaration of
trust, certificates of incorporation and By-Laws, as appropriate, as of
the Closing Date, and (D) the names and true signatures of each of its
officers who has been authorized to execute and deliver any Loan
Document or other document required hereunder to be executed and
delivered by or on behalf of such Person.
(iii) A copy of the declaration of trust or articles or
certificate of incorporation, as appropriate, of each Loan Party and of
each of its Subsidiaries (if any) which is not a Loan Party certified
as of a recent date by the Secretary of State of the state of formation
of such Loan Party or Subsidiary, together with certificates of such
official attesting to the good standing of each such Loan Party and
Subsidiary.
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(iv) A favorable opinion of Sullivan & Worcester, counsel to
the Loan Parties, in substantially the form of Exhibit D to the Credit
Agreement, and as to such other matters as the Lender may reasonably
request, provided that with respect to documents governed by, or other
matters concerning the application of, New York law, Sullivan &
Worcester shall deliver an addendum to such opinion within twenty (20)
days of the Closing Date.
(v) An Assignment Agreement in respect of the Management
Agreement for each Courtyard Hotel, duly executed by the Borrower or
its Subsidiary, as applicable, and the Manager.
(vi) Security Agreement in respect of the FF&E Reserves for
each Courtyard Hotel, duly executed by the Borrower or its Subsidiary,
as applicable, the Operating Lessee and the Manager.
(vii) A copy of the Operating Lease and Management Agreement
in respect of each Courtyard Hotel, each certified by a Responsible
Officer.
(viii) Evidence that the insurance required by the terms of
the Collateral Documents and by Section 7.4 of the Credit Agreement is
in full force and effect.
(ix) A certificate, signed by a Responsible Officer of the
Borrower, addressing any significant environmental, health and safety
violations, hazards or liabilities to which the Borrower or any of its
Subsidiaries may be subject and with respect to which the Lender has
not previously been informed.
(x) A certificate, signed by a Responsible Officer of the
Borrower, stating that the statements set forth in Section 4.2 (a) and
(b) of the Credit Agreement are true and correct on the Closing Date,
after giving effect to the Loans being made on the Closing Date.
(xi) A guaranty agreement, in form and substance reasonably
satisfactory to the Lender, duly executed by each Subsidiary of the
Borrower owning a Courtyard Hotel.
(xii) A stock pledge agreement, in form and substance
reasonably satisfactory to the Lender, duly executed by each Subsidiary
of the Borrower owning a Courtyard Hotel.
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(xiii) For each Hotel Facility with respect to which a Title
Insurance Policy was previously delivered to the Lender pursuant to
Section 4.2(d)(i) of the Credit Agreement, (A) an endorsement to such
policy, insuring that such policy continues to insure the Mortgage of
such Hotel Facility as a valid first priority Lien, and (B) a
modification of the mortgage or deed of trust confirming that the lien
extends to the Term Loans.
(xiv) Such additional documents, information and materials as
the Lender may reasonably request.
(c) The Lender shall have received evidence satisfactory to it that
all costs and accrued and unpaid fees and expenses (including, without
limitation, legal fees and expenses) required to be paid to the Lender to the
extent due and payable, have been paid.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
HOSPITALITY PROPERTIES TRUST
By: /s/ Thomas O'Brien
Title: Treasurer and
Chief Financial Officer
DLJ MORTGAGE CAPITAL, INC.
By: /s/ Dante LaRocca
Title: Senior Vice President
Approved and Agreed:
Subsidiary Guarantor:
HPTCY CORPORATION
By: /s/ Adam Portnoy
Title:
EXHIBIT 10.12
UP TO U.S. $75,000,000
FIRST SUPPLEMENTAL
CREDIT AGREEMENT
Dated as of November 14, 1997
Between
HOSPITALITY PROPERTIES TRUST
as Borrower
and
DLJ MORTGAGE CAPITAL, INC.
as Lender
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
----------------------
PAGE
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
SECTION 1.01. Defined Terms....................................................................1
SECTION 1.02. Computation of Time Periods.....................................................21
ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. The Loans.......................................................................21
SECTION 2.02. Making the Loans................................................................21
SECTION 2.03. Intentionally Omitted...........................................................22
SECTION 2.04. Reduction and Termination of the Commitment.....................................22
SECTION 2.06. Prepayments.....................................................................22
SECTION 2.07. Continuation of Loans at the Eurodollar Rate....................................23
SECTION 2.09. Interest Rate Determination and Protection......................................24
SECTION 2.10. Increased Costs.................................................................24
SECTION 2.11. Illegality......................................................................25
SECTION 2.12. Capital Adequacy................................................................25
SECTION 2.13. Payments and Computations.......................................................26
SECTION 2.14. Taxes...........................................................................26
ARTICLE 3
PREPARATION OF MORTGAGE DOCUMENTS AND APPROVAL OF PROPOSED
HOTEL FACILITIES
SECTION 3.01. Recordation and Filing of Mortgage Documents, Etc...............................27
SECTION 3.02. Approval of Proposed Hotel Facilities...........................................28
ARTICLE 4
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to the Initial Loan........................................29
SECTION 4.02. Conditions Precedent to Each Loan...............................................32
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Existence; Compliance with Law..................................................34
SECTION 5.02. Power; Authorization; Enforceable Obligations...................................34
<PAGE>
PAGE
SECTION 5.03. Taxes...........................................................................35
SECTION 5.04. Full Disclosure.................................................................36
SECTION 5.05. Financial Matters...............................................................36
SECTION 5.06. Litigation......................................................................37
SECTION 5.07. Margin Regulations..............................................................37
SECTION 5.08. Ownership of Borrower and HRPT Advisors; Subsidiaries...........................37
SECTION 5.09. ERISA...........................................................................38
SECTION 5.10. Liens...........................................................................39
SECTION 5.11. [Intentionally Omitted]..........................................................39
SECTION 5.12. No Burdensome Restrictions; No Defaults; Contractual
Obligations...........................................................................39
SECTION 5.13. No Investments..................................................................40
SECTION 5.14. Government Regulation...........................................................40
SECTION 5.15. Insurance.......................................................................40
SECTION 5.16. Employees.......................................................................40
SECTION 5.17. Force Majeure...................................................................41
SECTION 5.18. Use of Proceeds.................................................................41
SECTION 5.19. Environmental Protection........................................................41
SECTION 5.20. Contractual Obligations Concerning Assets.......................................43
SECTION 5.21. Status as REIT..................................................................43
SECTION 5.22. Real Property...................................................................43
SECTION 5.23. Operator and Advisor: Compliance with Law.......................................44
SECTION 5.24. Operating Leases, Limited Rent Guaranties, Management
Agreement and Advisory Agreement......................................................45
SECTION 5.25. FF&E Reserves...................................................................46
ARTICLE 6
FINANCIAL COVENANTS
SECTION 6.01. Limitation and Indebtedness.....................................................46
SECTION 6.02. Limitation on Secured Indebtedness..............................................46
SECTION 6.03. Interest Expense Coverage.......................................................46
SECTION 6.04. Maintenance of Tangible Net Worth...............................................47
SECTION 6.05. Maintenance of Loan to Value Requirement........................................47
ARTICLE 7
AFFIRMATIVE COVENANTS
SECTION 7.01. Compliance with Laws, Etc.......................................................47
SECTION 7.02. Conduct of Business.............................................................47
SECTION 7.03. Payment of Taxes, Etc...........................................................47
SECTION 7.04. Maintenance of Insurance........................................................48
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PAGE
SECTION 7.05. Preservation of Existence, Etc..................................................48
SECTION 7.06. Access..........................................................................48
SECTION 7.07. Keeping of Books................................................................49
SECTION 7.08. Maintenance of Properties, Etc..................................................49
SECTION 7.09. Performance and Compliance with Other Covenants.................................49
SECTION 7.10. Application of Proceeds.........................................................49
SECTION 7.11. Financial Statements............................................................49
SECTION 7.12. Reporting Requirements..........................................................51
SECTION 7.13. Leases and Operating Leases.....................................................54
SECTION 7.14. [Intentionally Omitted]..........................................................54
SECTION 7.15. Employee Plans..................................................................54
SECTION 7.16. [Intentionally Omitted]..........................................................55
SECTION 7.17. Fiscal Year.....................................................................55
SECTION 7.18. Environmental Matters...........................................................55
SECTION 7.19. [Intentionally Omitted]..........................................................55
SECTION 7.20. REIT Requirements...............................................................55
SECTION 7.21. Maintenance of FF&E Reserves....................................................56
SECTION 7.22. Further Assurances..............................................................56
ARTICLE 8
NEGATIVE COVENANTS
SECTION 8.01. Liens, Etc......................................................................56
SECTION 8.02. Indebtedness....................................................................58
SECTION 8.03. Lease Obligations...............................................................59
SECTION 8.04. [Intentionally Omitted]..........................................................59
SECTION 8.05. Mergers, Stock Issuances, Asset Sales, Etc......................................59
SECTION 8.06. Investments.....................................................................60
SECTION 8.07. Change in Nature of Business or Organizational
Documents.............................................................................61
SECTION 8.08. Modification of Material Agreements.............................................61
SECTION 8.09. Accounting Changes..............................................................61
SECTION 8.10. Transactions with Affiliates....................................................61
SECTION 8.11. Environmental Matters...........................................................62
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.01. Events of Default...............................................................62
SECTION 9.02. Remedies........................................................................65
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PAGE
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Amendments, Etc................................................................66
SECTION 10.02. Notices, Etc...................................................................66
SECTION 10.03. No Waiver; Remedies............................................................67
SECTION 10.04. Costs; Expenses; Indemnities...................................................67
SECTION 10.05. Right of Set-off...............................................................69
SECTION 10.06. Binding Effect.................................................................69
SECTION 10.07. Assignments and Participations.................................................69
SECTION 10.08. Governing Law; Severability....................................................70
SECTION 10.09. Submission of Jurisdiction; Service of Process.................................70
SECTION 10.10. Section Titles.................................................................71
SECTION 10.11. Execution in Counterparts......................................................71
SECTION 10.12. Entire Agreement...............................................................71
SECTION 10.13. Confidentiality................................................................71
SECTION 10.14. Waiver of Jury Trial...........................................................71
SECTION 10.15. NON-LIABILITY OF TRUSTEES......................................................72
SECTION 10.16. Refinancing and/or Securitization..............................................72
SECTION 10.17. Cooperation with Rating Agencies...............................................72
SECTION 10.18. Securitization Financials......................................................73
</TABLE>
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SCHEDULES
Schedule 1.01 - List of Collateral Properties
Schedule 5.08(c) - List of Subsidiaries
Schedule 5.19 - Environmental Matters
Schedule 5.20 - Asset Purchase or Sale Commitments
Schedule 5.22(a) - Owned Real Estate
Schedule 5.22(b) - Leased Real Estate
Schedule 5.22(c) - Defects in Improvements
Schedule 8.01 - Existing Liens
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EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Negative Pledge Agreement
Exhibit D - Form of Opinion of Counsel for the Loan Parties
Exhibit E - Form of Mortgage
Exhibit F - Form of Assignment Agreement
Exhibit G - Form of Operating Lease
Exhibit H - Form of Security Agreement
Exhibit I - Form of Subordination Agreement
Exhibit J - Form of Subordination, Non-Disturbance and Attornment
Agreement
Exhibit K - Form of Subsidiary Guaranty
Exhibit L - Form of Stock Pledge Agreement
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FIRST SUPPLEMENTAL CREDIT AGREEMENT, dated as of the 14th day of
November, 1997 (this "Agreement"), between HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust (the "Borrower") and DLJ MORTGAGE CAPITAL,
INC. a Delaware corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lender make advances of up
to $75,000,000 in aggregate principal amount outstanding at any one time, for
the purposes hereinafter specified; and
WHEREAS, the Lender is willing to make funds available for such
purposes upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Advisor" means HRPT Advisors or such other Person as shall act as an
advisor to the Borrower, whether pursuant to the Advisory Agreement, or an
agreement analogous to the Advisory Agreement, with the prior written consent of
the Lender.
"Advisory Agreement" means the Advisory Agreement, dated as of August
21, 1995, between the Borrower and the Advisor, as amended, supplemented or
modified from time to time in a manner not inconsistent with the terms hereof or
of the Subordination Agreement.
"Affiliate" means, as to any Person, any Subsidiary of such Person and
any other Person which, directly or indirectly, controls, is controlled by or is
under common control with such Person and includes each officer or director or
trustee or general partner of such Person, and each Person who is the beneficial
owner of 10% or more of any class of voting Stock of such Person. For the
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
<PAGE>
"Agreement" means this First Supplemental Credit Agreement, together
with all Exhibits and Schedules hereto, as the same may be amended, supplemented
or otherwise modified from time to time.
"Approved Hotel Facility" means any Proposed Hotel Facility approved by
the Lender pursuant to Section 3.02.
"Asset Sale" means any sale, conveyance, transfer, assignment, lease or
other disposition (including, without limitation, by merger or consolidation and
whether by operation of law or otherwise) by the Borrower or any of its
Subsidiaries to any Person of any Stock of any of its Subsidiaries, any Stock
Equivalents of any of its Subsidiaries or any Mortgaged Property but excluding
Operating Leases.
"Asset Sale Proceeds" means payments received by the Borrower or any of
its Subsidiaries (including, without limitation, any payments received by way of
deferred payment of principal pursuant to a note or receivable or otherwise, but
only as and when received) from any Asset Sale (after repayment of any
Indebtedness other than the Loans secured by the Mortgaged Property subject of
such Asset Sale to the extent such Indebtedness is permitted hereunder), in each
case net of the amount of (i) brokers' and advisors' fees and commissions
payable other than to an Affiliate of the Borrower in connection with such Asset
Sale, (ii) all foreign, federal, state and local taxes payable as a direct
consequence of such Asset Sale, (iii) the reasonable fees and expenses
attributable to such Asset Sale, to the extent not included in clause (i),
except to the extent payable to any Affiliate of the Borrower, and (iv) any
amount required to be paid to any Person (other than the Borrower and any of its
Subsidiaries) owning a beneficial interest in the property or assets sold.
"Assignment Agreement" means, with respect to each Mortgaged Property
that is operated by a manager pursuant to a Management Agreement, an agreement
substantially in the form of Exhibit F, or such other form as the Lender shall
approve, such approval not to be unreasonably withheld, delayed or conditioned,
executed by the Borrower, the Lender and the Manager, assigning to the Lender,
the Management Agreement relating thereto.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall be
equal at all times to the higher of:
(1) the rate of interest announced publicly by Citibank, N.A. in New
York, New York, from time to time, as such bank's prime rate; and
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(2) the sum (adjusted to the nearest 1/4 of one percent or, if there
is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i)
one and one-half percent (1 1/2%) per annum plus (ii) the Federal Funds Rate.
"Base Rent" means, for any period, the base or fixed rent or percentage
rent during such period payable by an Operating Lessee pursuant to the terms of
an Operating Lease.
"Business Day" means a day of the year on which banks are not required
or authorized to close in New York City and a day on which dealings are also
carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period, the
aggregate of all expenditures by such Person and its consolidated Subsidiaries,
except interest capitalized during construction, during such period for
property, plant or equipment, including, without limitation, renewals,
improvements, replacements and capitalized repairs, that would be reflected as
additions to property, plant or equipment on a consolidated balance sheet of
such Person and its Subsidiaries prepared in conformity with GAAP. For the
purpose of this definition, the purchase price of equipment which is acquired
simultaneously with the trade-in of existing equipment owned by such Person or
any of its Subsidiaries or with insurance proceeds shall be included in Capital
Expenditures only to the extent of the gross amount of such purchase price less
the credit granted by the seller of such equipment being traded in at such time
or the amount of such proceeds, as the case may be.
"Capital Financing Indebtedness" means the principal amount of all
Indebtedness incurred or assumed in connection with any Capital Expenditures,
all Capitalized Lease Obligations and all other Indebtedness (including purchase
money Indebtedness) incurred solely for the purpose of financing or refinancing
the acquisition of assets or properties.
"Capitalized Lease" means, as to any Person, any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in conformity with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.
"Closing Date" means the date on which the first Loan is made pursuant
to this Credit Agreement.
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"Code" means the Internal Revenue Code of 1986 (or any successor
legislation thereto), as amended from time to time.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien is granted under any of the Collateral Documents.
"Collateral Documents" means, the Negative Pledge Agreements, the
Assignment Agreements, the Mortgage Documents, the Security Agreements, the
Subsidiary Guaranties and any other document now or hereafter executed and
delivered by a Loan Party granting a Lien on any of its property to secure
payment of the Obligations.
"Collateral Properties" means the Real Estate and Leases described on
Schedule 1.01.
"Commitment" has the meaning specified in Section 2.01.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent of such Person in incurring the Contingent Obligation is to provide
assurance to the obligee of such Indebtedness or Contractual Obligation that
such Indebtedness or Contractual Obligation will be paid or discharged, or that
any agreement relating thereto will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected (in whole or in part)
against loss in respect thereof. Contingent Obligations of a Person include,
without limitation, (a) the direct or indirect guarantee, endorsement (other
than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of an obligation
of another Person, and (b) any liability of such Person for an obligation of
another Person through any agreement (contingent or otherwise) (i) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of a loan, advance, stock purchase, capital contribution or otherwise),
(ii) to maintain the solvency or any balance sheet item, level of income or
financial condition of another Person, (iii) to make take-or-pay or similar
payments, if required, regardless of non-performance by any other party or
parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee)
property, or to purchase or sell services, primarily for the purpose of enabling
the debtor to make payment of such obligation or to assure the holder of such
obligation against loss, or (v) to supply funds to or in any other manner invest
in such other Person (including, without limitation, to pay for property or
services irrespective of whether such property is received or such services are
rendered), if in the case of any agreement described
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under subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary
purpose or intent thereof is as described in the preceding sentence. The amount
of any Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported.
"Contract" means any contract, agreement, undertaking, indenture, note,
bond, loan, instrument, lease, conditional sales contract, mortgage, deed of
trust, license, franchise, insurance policy, commitment or other arrangement or
agreement.
"Contractual Obligation" of any Person means any obligation, agreement,
undertaking or similar provision of any security issued by such Person or of any
Contract (excluding a Loan Document) to which such Person is a party or by which
it or any of its property is bound or to which any of its properties is subject.
"Default" means any event which with the passing of time or the giving
of notice or both would become an Event of Default.
"DOL" means the United States Department of Labor, or any successor
thereto.
"Dollars" and the sign "$" each mean the lawful money of the United
States of America.
"Environmental Claim" means any accusation, allegation, notice of
violation, action, claim, Environmental Lien, demand, abatement or other Order
or direction (conditional or otherwise) by any Governmental Authority or any
other Person for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or restriction, resulting from or based upon (i) the existence,
or the continuation of the existence, of a Release (including, without
limitation, sudden or non-sudden accidental or non-accidental Releases) of, or
exposure to, any Hazardous Material or odor, audible noise or other nuisance, or
other Release in, into or onto the environment (including, without limitation,
the air, soil, surface water or groundwater) at, in, by, from or related to any
property owned, operated or leased by the Borrower or any of its Subsidiaries or
any activities or operations thereof; (ii) the environmental aspects of the
transportation, storage, treatment or disposal of Hazardous Materials in
connection with any property owned, operated or leased by the Borrower or any of
its Subsidiaries or their operations or facilities; or (iii) the violation, or
alleged violation, of any Environmental Laws, Orders or Environmental Permits of
or from any Governmental Authority relating to
5
<PAGE>
environmental matters connected with any property owned, leased or operated by
the Borrower or any of its Subsidiaries.
"Environmental Laws" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
requirement relating in any way to the environment, natural resources, or public
or employee health and safety and includes, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. ss. 1801 et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. ss. 136 et seq., the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the Toxic Substances Control
Act, 15 U.S.C. ss. 2601 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq.,
the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Occupational Safety and
Health Act, 29 U.S.C. ss. 651 et seq., and the Oil Pollution Act of 1990, 33
U.S.C. ss. 2701 et seq., as such laws have been amended or supplemented, and the
regulations promulgated pursuant thereto, and all analogous state and local
statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim.
"Environmental Lien" means any Lien in favor of any Governmental
Authority arising under any Environmental Law.
"Environmental Permit" means any Permit required under any applicable
Environmental Laws or Order and all supporting documents associated therewith.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control or treated as a single employer with any Loan
Party within the meaning of Section 414 (b), (c), (m) or (o) of the Code.
"ERISA Event" means (i) an event described in Sections 4043(b)(1), (2),
(3), (5), (6), (8) or (9) of ERISA with respect to a Pension Plan; (ii) the
withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or
partial
6
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withdrawal of any Loan Party or any ERISA Affiliate from any Multiemployer Plan
or the insolvency of any Multiemployer Plan; (iv) the filing of a notice of
intent to terminate a Pension Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (v) the institution of proceedings by
the PBGC to terminate or appoint a trustee to administer a Pension Plan or
Multiemployer Plan; (vi) the failure to make any required contribution to a
Pension Plan; (vii) any other event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; (viii) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA; (ix) a prohibited transaction (as described in Code Section 4975 or ERISA
Section 406) shall occur with respect to any Plan; or (x) any Loan Party or
ERISA Affiliate shall request a minimum funding waiver from the IRS with respect
to any Pension Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, for any Interest Period, an interest rate per
annum equal to the sum of (a) the rate per annum obtained by dividing (i) the
rate of interest determined by the Lender to be the average (rounded upward to
the nearest whole multiple of 1/16 of 1% per annum, if such average is not such
a multiple) of the rates for Dollar deposits which appear on the display
designated as page "LIBO" on the Reuter Monitor Money Rates Service (or such
other page as may replace such page or that service for the purpose of
displaying London interbank offered rates for major banks) (the "Reuters Page"),
as of 11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the Loan during such
Interest Period and for a period equal to such Interest Period by (ii) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such
Interest Period, plus (b) 1.25%. If the Lender is unable to ascertain the
interest rate referred to in (i) above from the Reuters Page, such rate shall be
determined from such financial reporting service or other information as shall
be reasonably determined by the Lender.
"Eurodollar Rate Reserve Percentage" for any Interest Period means the
reserve percentage applicable two Business Days before the first day of such
]Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities
which
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<PAGE>
includes deposits by reference to which the Eurodollar Rate is determined)
having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 9.01.
"Existing Facility" means the revolving credit facility in the maximum
principal amount of up to $250,000,000 evidenced by that certain Revolving
Credit Agreement dated as of August 22, 1995, as amended and restated pursuant
to that certain Amended and Restated Revolving Credit Agreement dated as of
December 29, 1995, as further amended pursuant to that certain Amendment No. 1
to Amended and Restated Revolving Credit Agreement dated as of February 26,
1996, as further amended by those certain side letters dated February 29, 1996
and March 1997, as further amended by Amendment No. 2 to Amended and Restated
Revolving Credit Agreement dated as of October 10, 1997, as further amended by
Amendment No. 3 to Amended and Restated Credit Agreement dated as of the date
hereof, each by and between the Borrower and the Lender, as the same may
hereafter be amended, modified or supplemented.
"Fair Market Value" means with respect to any Hotel Facility at any
date, the value thereof reasonably determined by the Lender by dividing the Base
Rents from such Hotel Property by ten percent (10%).
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Lender from three Federal funds brokers of
recognized standing selected by it.
"FF&E Reserve" means any reserve fund established in respect of any
Hotel Facility.
"Final Borrowing Date" means December 31, 1997.
"Final Maturity Date" means December 31, 1998.
"Financial Officer's Certificate" has the meaning specified in Section
7.11(c).
"Fiscal Quarter" means each of the three month periods ending on March
31, June 30, September 30 and December 31.
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"Fiscal Year" means the twelve month period ending on December 31.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination except that, for purposes of Article 6, GAAP shall be determined
on the basis of such principles in effect on the date hereof and consistent with
those used in the preparation of the audited financial statements referred to in
Section 5.05.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Material" means any substance, material or waste which is
regulated by any Governmental Authority of the United States or other national
government, including, without limitation, any material, substance or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"Hotel Facility" means each of (a) the Collateral Properties, and (b)
the Approved Hotel Facilities.
"HRPT Advisors" means HRPT Advisors, Inc., a Delaware corporation.
"Improvements" has the meaning specified in Section 5.22(c).
"Indebtedness" of any Person means (i) all indebtedness of such Person
for borrowed money (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured) or for the deferred purchase price of
property or services, (ii) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments, (iii) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to
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repossession or sale of such property), (iv) all Capitalized Lease Obligations
of such Person, (v) all Contingent Obligations of such Person, (vi) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Stock or Stock Equivalents of such Person, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (vii) all
obligations of such Person under Interest Rate Contracts, and (viii) all
Indebtedness referred to in clause (i), (ii), (iii), (iv), (v), (vi) or (vii)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and general intangibles) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (ix) in the case of the Borrower, the Obligations, and (x)
all liabilities of such Person that would be shown on a balance sheet of such
Person prepared in conformity with GAAP.
"Indemnitees" has the meaning specified in Section 10.04.
"Interest Period" means, in the case of any Loan, (i) initially, the
period commencing on the date such Loan is made and ending one (1) month
thereafter, and (ii) thereafter, a period commencing on the last day of the
immediately preceding Interest Period therefor and ending one (1) month
thereafter; provided, however, that:
(a) if any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless the result of such extension would be to extend such
Interest Period into another calendar month, in which event such Interest Period
shall end on the immediately preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
(c) if the Borrower, by written notice to the Lender given no later
than two (2) Business Days prior to the expiration of an Interest Period for any
Loan, requests a one day interest period for such Loan, the Interest Period for
such Loan shall mean a period of one day (the "1 Day Interest Period"); provided
that in no event shall any Loan have a 1 Day Interest Period for a period in
excess of thirty (30) consecutive days (the "Limited Period"), and upon the
expiration of the Limited Period in respect of any Loan, such Loan shall
automatically be continued at the one (1) month Interest Period specified above.
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"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Investments" has the meaning specified in Section 8.06.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Leases" means, with respect to the Borrower or any of its
Subsidiaries, all of those leasehold estates in real property owned by the
Borrower or such Subsidiary, as lessee, as such may be amended, supplemented or
otherwise modified from time to time to the extent permitted by this Agreement.
"Legal Proceedings" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"Lending Office" means, with respect to the Lender, the office located
at 277 Park Avenue, New York, New York 10172 or such other office of the Lender
as the Lender may from time to time specify to the Borrower.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrange ment of any kind or nature whatsoever intended to secure
payment of any Indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a Capitalized Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing,
under the Uniform Commercial Code or comparable law of any jurisdiction, of any
financing statement naming the owner of the asset to which such Lien relates as
debtor (excluding precautionary filings.
"Limited Rent Guaranty" means, with respect to any Real Estate or
Lease, a guaranty by a Tenant Guarantor of the obligations of the Operating
Lessee under the Operating Lease.
"Loan" or "Loans" means the loan or loans made or to be made by the
Lender to the Borrower pursuant to Article 2.
"Loan Documents" means, collectively, this Agreement, the Note, the
Collateral Documents and each certificate, agreement or document executed by a
Loan Party and delivered to the Lender in connection with or pursuant to any of
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the foregoing, as such agreements, documents or instruments may be amended,
modified or supplemented from time to time.
"Loan Party" means the Borrower and each Subsidiary and Affiliate of
the Borrower which executes and delivers a Loan Document.
"Loan to Value Requirement" means the requirement that at any time the
aggregate principal amount of the Loans outstanding at such time shall not
exceed fifty percent (50%) of the aggregate of the Fair Market Values for all of
the Mortgaged Properties.
"Management Agreement" means an agreement, if any, relating to the
operation and/or management of a Hotel Facility between the Borrower and the
Manager, or between the Operating Lessee and Manager, in such form as shall be
approved by the Lender, which approval shall not be unreasonably withheld,
delayed or conditioned.
"Manager" means such manager as shall be approved by the Lender (which
approval shall not be unreasonably withheld, delayed or conditioned), as manager
under a Management Agreement.
"Material Adverse Change" means a material adverse change in any of (i)
the condition (financial or otherwise), business, performance, prospects,
operations or properties of (A) any Loan Party and its Subsidiaries taken as one
enterprise, (B) any Operating Lessee, (C) any Manager, or (D) the Advisor (ii)
the legality, validity or enforceability of any Loan Document or any Operating
Lease or any Limited Rent Guaranty, Management Agreement or Advisory Agreement
(iii) the perfection or priority of the Liens granted pursuant to the Collateral
Documents, (iv) the ability of the Borrower to repay the Obligations or of any
Loan Party to perform its material obligations under any Loan Document, (v) the
ability of any Operating Lessee to perform obligations under any Operating Lease
or of any Tenant Guarantor to perform its obligations under any Limited Rent
Guaranty, (vi) the ability of any Manager to perform its obligations under any
Management Agreement; (vii) the ability of the Advisor to perform its
obligations under the Advisory Agreement or (viii) the rights and remedies of
the Lender under the Loan Documents.
"Material Adverse Effect" means an effect that results in or causes, or
has a reasonable likelihood of resulting in or causing, a Material Adverse
Change.
"Mortgages" means the mortgages, deeds to secure debt or deeds of trust
securing, inter alia, the Obligations, made or required herein to be made by the
Borrower or any of its Subsidiaries in substantially the form of Exhibit E, as
such
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Mortgages may be amended, supplemented or otherwise modified from time to time.
"Mortgage Documents" means with respect to any Hotel Facility, a
Mortgage, a Subordination, Nondisturbance and Attornment Agreement and the other
documents relating thereto, including financing statements on Form UCC-1,
subject to appropriate revisions for state or property specific requirements.
"Mortgaged Property" means any property subject to a Mortgage in favor
of the Lender.
"Multiemployer Plan" means, as of any applicable date, a multiemployer
plan, as defined in Section 4001(a)(3) of ERISA, and to which any Loan Party,
any of its Subsidiaries or any ERISA Affiliate is making, is obligated to make,
or within the six-year period ending at such date, has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
"Negative Pledge Agreement" means, in respect of each Hotel Facility,
an agreement, in substantially the form of Exhibit C, executed by the Borrower
or the Subsidiary owning such Hotel Facility, as such agreement may be amended,
supplemented or otherwise modified from time to time.
"Net Income (Loss)" means, for any Person for any period, the aggregate
of net income (or loss) of such Person and its Subsidiaries for such period,
determined on a consolidated basis in conformity with GAAP.
"Net Interest Expense" means, for any Person for any period, gross
interest expense in respect of all Indebtedness of such Person and its
Subsidiaries for such period determined on a consolidated basis in conformity
with GAAP, less the following for such Person and its Subsidiaries determined on
a consolidated basis in conformity with GAAP: (a) the sum of (i) interest
capitalized during construction for such period, (ii) interest income for such
period, and (iii) gains for such period on Interest Rate Contracts (to the
extent not included in interest income above and to the extent not deducted in
the calculation of such gross interest expense), plus the following for such
Person and its Subsidiaries determined on a consolidated basis in conformity
with GAAP: (b) the sum of (i) losses for such period on Interest Rate Contracts
(to the extent not included in such gross interest expense), and (ii) the
amortization of upfront costs or fees for such period associated with Interest
Rate Contracts (to the extent not included in gross interest expense).
"Net Worth" of any Person means at any date the excess of (a) the total
assets of such Person and its Subsidiaries at such date determined on a
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consolidated basis in conformity with GAAP over (b) all obligations which in
conformity with GAAP would be included in determining total liabilities as shown
on the liabilities side of a consolidated balance sheet of such Person and its
Subsidiaries at such date.
"Note" means a promissory note of the Borrower payable to the order of
the Lender in a principal amount equal to the amount of the Commitment as
originally in effect, in substantially the form of Exhibit A, evidencing the
aggregate Indebtedness of the Borrower to the Lender resulting from the Loans
made by the Lender.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Obligations" means the Loans and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, any Affiliate of the Lender or any Indemnitee, of every type and
description, present or future, whether or not evidenced by any note, guaranty
or other instrument, arising under this Agreement or under any other Loan
Document, whether or not for the payment of money, loan, guaranty,
indemnification, foreign exchange transaction or Interest Rate Contract or in
any other manner, whether direct or indirect (including, without limitation,
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term "Obligations"
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements and any other sum chargeable to the Borrower under this
Agreement or any other Loan Document.
"Other Supplemental Facility" means the Second Supplemental Credit
Agreement dated as of the date hereof between the Borrower and the Lender in the
aggregate principal amount of up to $130,000,000, as the same may hereafter be
amended, supplemented or otherwise modified from time to time.
"Operating Lease" means a lease or sublease relating to any Real Estate
or Lease, between the Borrower or any of its Subsidiaries, as lessor, and the
Operating Lessee, as lessee, substantially in the form of the lease annexed as
Exhibit G hereto or such other form as shall be approved by the Lender, which
approval shall not be unreasonably withheld, delayed or conditioned.
"Operating Lessee" means with respect to any Hotel Facility any of CR14
Tenant Corporation, a Delaware corporation, CR9 Tenant Corporation, a Delaware
corporation, or another wholly-owned subsidiary of Marriott International, Inc.
or such other lessee as shall be approved by the Lender (which approval shall
not be unreasonably withheld, delayed or conditioned), as lessee under the
Operating Lease relating to such Hotel Facility.
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"Operator" means the Operating Lessee and/or the Manager (as the case
may be) responsible for the operation and management of any Real Estate or
Lease.
"Order" means any order, injunction, judgment, decree, ruling,
assessment or arbitration award.
"Other Taxes" has the meaning specified in Section 2.14(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Pension Plan" means a plan, other than a Multiemployer Plan, which is
covered by Title IV of ERISA or Code Section 412 and which any Loan Party, any
of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Perfection Event" means the earlier of November 1, 1998 and the
occurrence of an Event of Default.
"Permit" means any permit, approval, authorization, license, variance,
registration, permission or consent required from a Governmental Authority under
an applicable Requirement of Law.
"Permitted Lien" means any Lien permitted under Section 8.01.
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a Governmental
Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which any Loan Party or any of its Subsidiaries maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.
"Proposed Hotel Facility" means any Real Estate or Lease comprising an
operating facility offering hotel or other lodging services which the Borrower
proposes to include as collateral for the Loans.
"Proposed Hotel Facility Statement" means a certificate of a
Responsible Officer providing each of the following:
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(i) details of the location of the Proposed Hotel Facility and
the real estate interest;
(ii) certification (based on information available to the
Borrower after diligent enquiry) as to the proposed annual Base Rent
under the proposed Operating Lease of the Proposed Hotel Facility;
(iii) audited balance sheets if available, or pro forma
balance sheets, of the owner or operator of the Proposed Hotel
Facility, and the related consolidated statements of income, retained
earnings and cash flows of such owner or operator for its previous
three (3) fiscal years;
(iv) audited balance sheets if available, or pro forma balance
sheets, in respect of the Proposed Hotel Facility and the related
consolidated statements of operations, changes in owner's equity
(deficit) and cash flows in respect of such Proposed Hotel Facility,
for the previous three (3) fiscal years;
(v) a written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any
significant environmental, health and safety violations, hazards or
liabilities to which the owner or operator of the Proposed Hotel
Facility may be subject, which report shall demonstrate, to the
reasonable satisfaction of the Lender, that the Proposed Hotel Facility
and the operations thereof are in compliance in all material respects
with all applicable Environmental Laws and are not subject to any
material Environmental Liabilities and Costs;
(vi) a copy of the proposed form of Operating Lease and, if
applicable, Management Agreement;
(vii) a copy of the proposed form of Limited Rent Guaranty, if
applicable;
(viii) the names of the proposed Operating Lessee and, if
applicable, Manager;
(ix) a copy of a recent market study in respect of the
Proposed Hotel Facility;
(x) a current title report and survey in respect of the
Proposed Hotel Facility, issued by a title company/surveyor reasonably
acceptable to the Lender; and
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(xi) a written report of an investigation by an engineering
consultant reasonably acceptable to the Lender.
"Rating Agency" shall mean any nationally recognized statistical agency
selected by the Lender including, without limitation, Duff & Phelps Rating Co.,
Fitch Investors Services, Inc., Moody's Investors Services, Inc., and/or
Standard and Poors Corporation, collectively, and any successor to any of them;
provided, however, that at any time during which the Loans are an asset of a
securitization, "Rating Agency" shall mean the rating agency or rating agencies
that from time to time rate the securities issued in connection with such
securitization.
"Real Estate" means all of those plots, pieces or parcels of land now
owned or hereafter acquired by the Borrower or any of its Subsidiaries (the
"Land"), including, without limitation, those listed on Schedule 5.22(a),
together with the right, title and interest of the Borrower or such Subsidiary,
if any, in and to the streets, the land lying in the bed of any streets, roads
or avenues, opened or proposed, in front of, adjoining or abutting the Land to
the center line thereof, the air space and development rights pertaining to the
Land and the right to use such air space and development rights, all rights of
way, privileges, liberties, tenements, hereditaments and appurtenances belonging
or in any way appertaining thereto, all fixtures, all easements now or hereafter
benefitting the Land and all royalties and rights appertaining to the use and
enjoyment of the Land, including, without limitation, all alley, vault,
drainage, mineral, water, oil and gas rights, together with all of the buildings
and other improvements now or hereafter erected on the Land, and any fixtures
appurtenant thereto.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the indoor or outdoor environment or into or
out of any property.
"Remedial Action" means all actions including, without limitation, any
Capital Expenditures, required or voluntarily undertaken to (i) clean up,
remove, treat or in any other way address any Hazardous Material or other
substance in the indoor or outdoor environment, (ii) prevent the Release or
threat of Release, or minimize the further Release, of any Hazardous Material or
other substance so it does not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment, (iii) perform
pre-remedial studies and investigations or post-remedial monitoring and care, or
(iv) bring facilities on any property owned, leased or operated by the Borrower
or any of its Subsidiaries into compliance with all Environmental Laws and
Environmental Permits.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
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such Person, and all federal, state and local laws, rules and regulations,
including, without limitation, federal, state or local securities, antitrust and
licensing laws, all food, health and safety laws, and all applicable trade laws
and requirements, including, without limitation, all disclosure requirements of
Environmental Laws, ERISA and all orders, judgments, decrees or other
determinations of any Governmental Authority or arbitrator, applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer" means, with respect to any Person, any of the
principal executive officers or general partners of such Person.
"Secured Indebtedness" of any Person means any Indebtedness of such
Person for which the obligations thereunder are secured by a Lien on any assets
of such Person.
"Security Agreement" means, with respect to each Hotel Facility, an
agreement in substantially the form of Exhibit H or such other form as shall be
approved by the Lender (which approval shall not be unreasonably withheld,
delayed or conditioned), executed by the Borrower and the other parties thereto,
granting to the Lender a security interest in the Borrower's interest in the
FF&E Reserve.
"Solvent" means, with respect to any Person, that the value of the
assets of such Person (both at fair value and present fair saleable value) is,
on the date of determination, greater than the total amount of liabilities
(including, without limitation, contingent and unliquidated liabilities) of such
Person as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and does not have
unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Stock" means shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or non-voting, and
includes, without limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any stock, whether or not presently convertible, exchangeable or
exercisable.
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"Stock Pledge Agreement" means the Stock Pledge Agreement of a
Subsidiary of the Borrower formed for the purpose of acquiring Hotel Facilities,
substantially in the form of Exhibit L, as amended, supplemented or modified
from time to time in a manner or inconsistent with the terms thereof and hereof.
"Subordination Agreement" means an agreement among the Lender, the
Advisor and the Borrower, substantially in the form annexed as Exhibit I, as
amended, supplemented or modified from time to time in a manner not inconsistent
with the terms thereof and hereof.
"Subordination, Nondisturbance and Attornment Agreement" means with
respect to any Hotel Facility an agreement between the Lender and the relevant
Operating Lessee substantially in the form attached as Exhibit J and made a part
hereof or such other form as shall be approved by the Lender, as amended,
supplemented or modified from time to time in a manner not inconsistent with the
terms thereof and hereof.
"Subsidiary Guaranty" means the guaranty of a Subsidiary of the
Borrower formed for the purpose of acquiring Hotel Facilities, substantially in
the form of Exhibit K, as amended, supplemented or modified from time to time in
a manner not inconsistent with the terms thereof and hereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which an aggregate of 50% or more of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors, managers, trustees or other controlling persons, is, at the time,
directly or indirectly, owned or controlled by such Person and/or one or more
Subsidiaries of such Person (irrespective of whether, at the time, Stock of any
other class or classes of such entity shall have or might have voting power by
reason of the happening of any contingency).
"Tangible Net Worth" of any Person means, at any date, the Net Worth of
such Person at such date, excluding, however, from the determination of the
total assets of such Person at such date, (i) all goodwill, organizational
expenses, research and development expenses, trademarks, trade names,
copyrights, patents, patent applications, licenses and rights in any thereof,
and other similar intangibles, (ii) all prepaid expenses, deferred charges or
unamortized debt discount and expense, (iii) all reserves carried and not
deducted from assets, (iv) treasury stock and capital stock, obligations or
other securities of, or capital contributions to, or investments in, any
Subsidiary of such Person, (v) securities which are not readily marketable, (vi)
cash held in a sinking or other analogous fund established for the purpose of
redemption, retirement, defeasance or prepayment of any Stock or Indebtedness,
(vii) any write-up in the book value of any asset resulting from a revaluation
thereof, and (viii) any items not included in
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clauses (i) through (vii) above which are treated as intangibles in conformity
with GAAP.
"Tax Affiliate" means, as to any Person, (i) any Subsidiary of such
Person, and (ii) any Affiliate of such Person with which such Person files or is
eligible to file consolidated, combined or unitary tax returns.
"Tax Return" has the meaning specified in Section 5.03.
"Taxes" has the meaning specified in Section 2.14(a).
"Tenant Guarantor" of any Operating Lessee means the parent of such
Operating Lessee who executes and delivers a Limited Rent Guaranty.
"Title Insurance Policies" has the meaning specified in Section 3.02.
"Total Assets" of any Person means, at any date, the aggregate value of
all assets of such Person, determined on the basis of cost of each such asset to
such Person without reduction for depreciation or adjustments due to asset
reappraisals or otherwise.
"Total Base Rents" means, for any period, the aggregate sum of Base
Rents for such period payable under any Operating Leases in effect during such
period, determined on a consolidated basis.
"Unsecured Indebtedness" of any Person means any Indebtedness of such
Person for which the obligations thereunder are not secured by a pledge of or
other encumbrance on any assets of such Person.
SECTION 1.02. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.
SECTION 1.04. Certain Terms. (a) The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, and not to any particular Article, Section, subsection or clause in this
Agreement. References herein to an Exhibit, Schedule, Article, Section,
subsection or clause
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refer to the appropriate Exhibit or Schedule to, or Article, Section, subsection
or clause in this Agreement.
(b) The term "Lender" includes its successors and each assignee of the
Lender who becomes a party hereto pursuant to Section 10.07.
ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. The Loans. On the terms and subject to the conditions
contained in this Agreement, the Lender agrees to make loans (each a "Loan" and
collectively, the "Loans") to the Borrower from time to time on any Business Day
during the period from the date hereof to and including the Final Borrowing Date
in an aggregate outstanding amount not to exceed Seventy-Five Million Dollars
($75,000,000) (the "Commitment") at any time, to be used for the purposes
identified in Section 5.18. No portion of the Commitment may be borrowed after
the Final Borrowing Date. The Loans shall be evidenced by the Note. The Lender
is authorized to endorse, at any time, the date and amount of each Loan and the
date and amount of each payment of principal with respect to the Loans on the
schedule annexed to and constituting a part of the Note, which endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
SECTION 2.02. Making the Loans. (a) Each Loan shall be made on notice,
given by the Borrower to the Lender not later than 12:00 noon (New York City
time) on the fifth (5th) Business Day prior to the date of the proposed Loan.
Each such notice (a "Notice of Borrowing") shall be in substantially the form of
Exhibit B, specifying therein (i) the date of such proposed Loan, (ii) the
amount of such proposed Loan, (iii) the account or accounts to which the Loan
should be made, and (iv) details of the Approved Hotel Facility for which the
proceeds of the proposed Loan shall be used.
(b) Upon fulfillment of the applicable conditions set forth in Article
4, the Lender shall on the date of the proposed Loan, make available to the
Borrower at the account or accounts specified in the Notice of Borrowing, in
immediately available federal funds, the Loan.
(c) The Borrower may not request more than one (1) Loan per calendar
month.
(d) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. The Borrower shall indemnify the Lender against any loss, cost or
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expense incurred by the Lender as a result of any failure to fulfill on or
before the date specified in any Notice of Borrowing for a proposed Loan the
applicable conditions set forth in Article 4, including, without limitation, any
loss (including, without limitation, loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Lender to fund any Loan to be made by the Lender
when such Loan, as a result of such failure, is not made on such date.
SECTION 2.03. Intentionally Omitted.
SECTION 2.04. Reduction and Termination of the Commitment. The Borrower
may, upon at least three Business Days' prior notice to the Lender, terminate in
whole or reduce in part the unused portions of the Commitment without premium or
penalty; provided, however, that each partial reduction shall be in the
aggregate amount of not less than $10,000,000.
SECTION 2.05. Repayment. The Borrower shall repay the entire unpaid
principal amount of all and any Loans on the Final Maturity Date.
SECTION 2.06. Prepayments. (a) The Borrower may, upon at least ten (10)
Business Days' prior notice to the Lender, stating the proposed date and
aggregate principal amount of the prepayment, prepay the outstanding principal
amount of the Loans in whole or in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid, without premium or
penalty; provided that the Loans under the Second Supplemental Facility shall
have been theretofore repaid in full; and provided, however, that any prepayment
of the Loans bearing interest at the Eurodollar Rate made other than on the last
day of an Interest Period for the Loans to be repaid shall be subject to payment
by the Borrower to the Lender of any costs, fees or expenses incurred by the
Lender in connection with such prepayment including, without limitation, any
costs to unwind any Eurodollar Rate contracts or Interest Rate Contracts. Upon
the giving of such notice of prepayment by the Borrower, the principal amount of
the Loans specified to be prepaid shall become due and payable on the date
specified for such prepayment.
(b) If at any time the aggregate principal amount of Loans outstanding
at such time exceeds the Commitment, the Borrower shall forthwith prepay the
Loans then outstanding in an amount equal to such excess, together with accrued
interest.
(c) The Borrower shall forthwith prepay the Loans upon receipt by the
Borrower or its Subsidiaries of Asset Sale Proceeds in connection with an Asset
Sale of a Mortgaged Property in an amount equal to such Asset Sale Proceeds,
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together with accrued interest to the date of such prepayment on the principal
amount prepaid.
(d) Upon receipt by the Borrower or its Subsidiaries of proceeds of
any issuance of debt or equity securities, the Borrower shall forthwith prepay
the Loans and the Loans made under the Other Supplemental Facility and the
Existing Facility in the following order: First, to the repayment of the Loans
made under the Other Supplemental Facility, Second, to the repayment of the
Loans made under this Agreement, Third, to the Term Loan (as defined in the
Existing Facility) made under the Existing Facility, and Fourth, to the
Revolving Loans (as defined in the Existing Facility) made under the Existing
Facility.
SECTION 2.07. Continuation of Loans at the Eurodollar Rate. At the end
of any Interest Period with respect to the Loans, unless the Borrower has given
notice pursuant to Section 2.06(a), the Loans will automatically be continued
for an additional Interest Period at the Eurodollar Rate for such Interest
Period.
SECTION 2.08. Interest. The Borrower shall pay interest on the unpaid
principal amount of each Loan from the date thereof until the principal amount
thereof shall be paid in full at a rate per annum equal at all times during the
applicable Interest Period for each Loan to the Eurodollar Rate for such
Interest Period, payable on the last day of such Interest Period and on the
Final Maturity Date; provided, however, that during the continuance of an Event
of Default, all Loans shall bear interest, payable on demand, at a rate per
annum equal at all times to 2% above the Eurodollar Rate in effect until the
maturity of the Loans or the end of such Interest Period, whichever occurs
first, and thereafter at the greater of (x) 2% per annum above the Base Rate in
effect from time to time and (y) 2% per annum above the rate per annum required
to be paid on the Loans immediately prior to the date on which such Event of
Default occurred.
SECTION 2.09. Interest Rate Determination and Protection. (a) The
Eurodollar Rate for each Interest Period for Loans shall be determined by the
Lender two Business Days before the first day of such Interest Period.
(b) The Lender shall give prompt notice to the Borrower of the
applicable interest rate determined by the Lender for purposes of Section 2.09.
(c) If (i) the Lender determines, which determination shall be
conclusive in the absence of manifest error, that quotations of interest rates
for the relevant deposits referred to in the definition of "Eurodollar Rate" are
not being provided in the relevant amounts or for the relevant maturities for
purposes of determining the rates of interest for the Loans as provided herein,
or (ii) the Lender determines, which determination shall be conclusive in the
absence of manifest error, that the Eurodollar Rate for any Interest Period
therefor will not adequately
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reflect the cost to the Lender of making the Loans or funding or maintaining the
Loans for such Interest Period, the Lender shall forthwith so notify the
Borrower, whereupon
(A) each Loan will automatically, on the last day of
the then existing Interest Period therefor, convert so as to
accrue interest at an interest rate per annum equal to the
Base Rate in effect from time to time; and
(B) the obligations of the Lender to make Loans at
the Eurodollar Rate shall be suspended until the Lender shall
notify the Borrower that the Lender has determined that the
circumstances causing such suspension no longer exist;
provided that, during the period of such suspension, the
obligations of the Lender to make Loans at the Eurodollar Rate
shall convert to obligations to make Loans at the Base Rate in
effect from time to time.
SECTION 2.10. Increased Costs. If, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation (other
than any change by way of imposition or increase of reserve requirements
included in determining the Eurodollar Rate Reserve Percentage) or (ii)
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to the Lender of agreeing to make or making, funding or
maintaining any Loans at the Eurodollar Rate, then the Borrower shall from time
to time, upon demand by the Lender, pay to the Lender additional amounts
sufficient to compensate the Lender for such increased cost. A certificate as to
the amount of such increased cost, submitted to the Borrower by the Lender,
shall be conclusive and binding for all purposes, absent manifest error. If the
Borrower so notifies the Lender within five Business Days after the Lender
notifies the Borrower of any increased cost pursuant to the foregoing provisions
of this Section 2.10, the Borrower may either (A) prepay in full all Loans
bearing interest at the Eurodollar Rate then outstanding in accordance with
Section 2.10 and, additionally, reimburse the Lender for such increased cost in
accordance with this Section 2.10, or (B) require the Lender to, and the Lender
shall, convert all Loans bearing interest at the Eurodollar Rate into Loans
bearing interest at the Base Rate in effect from time to time, and additionally,
reimburse the Lender for such increased cost in accordance with this Section
2.10, provided that in the event that the election in (B) is made by the
Borrower, the Lender's obligations to make Loans hereunder shall thereafter be
deemed to be obligations to make Loans at the Base Rate in effect from time to
time.
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SECTION 2.11. Illegality. Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the interpretation of
any law or regulation shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for the Lender or its
Lending Office to make Loans at the Eurodollar Rate or to continue to fund or
maintain Loans at the Eurodollar Rate, then, on notice thereof and demand
therefor by the Lender to the Borrower (i) the obligation of the Lender to make
or to continue the Loans bearing interest at the Eurodollar Rate shall
terminate, (ii) the Borrower shall forthwith prepay in full all Loans then
outstanding, together with interest accrued thereon (and until paid in full, all
such Loans bearing interest at the Eurodollar Rate then outstanding shall accrue
interest at an interest rate per annum equal to the Base Rate in effect from
time to time); provided that the Borrower shall not be required to prepay such
Loans if the Borrower, within five Business Days of such notice and demand,
requires the Lender to convert such Loans to Loans bearing interest at the Base
Rate in effect from time to time.
SECTION 2.12. Capital Adequacy. If (i) the introduction of or any
change in or in the interpretation of any law or regulation, (ii) compliance
with any law or regulation, or (iii) compliance with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by the Lender or any corporation controlling the Lender and the
Lender reasonably determines that such amount is based upon the existence of the
Lender's Commitment and Loans and its other commitment and loans of this type,
then, upon demand by the Lender, the Borrower shall pay to the Lender, from time
to time as specified by the Lender, additional amounts sufficient to compensate
the Lender in the light of such circumstances, to the extent that the Lender
reasonably determines such increase in capital to be allocable to the existence
of the Lender's Commitment and Loans. A certificate as to such amounts submitted
to the Borrower by the Lender shall be conclusive and binding for all purposes
absent manifest error.
SECTION 2.13. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Note not later than 12:00 noon (New York
City time) on the day when due, in U.S. Dollars, to the Lender at its address
referred to in Section 10.02 in immediately available funds without set-off or
counterclaim, to be applied in accordance with the terms of this Agreement.
Payment received by the Lender after 12:00 noon (New York City time) shall be
deemed to be received on the next Business Day.
(b) All computations of interest shall be made by the Lender on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable.
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Each determination by the Lender of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be;
provided, however, that if such extension would cause payment of interest on or
principal of any Loan to be made in the next calendar month, such payment shall
be made on the next preceding Business Day.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower under
each Loan Document shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes measured
by the Lender's net income, and franchise taxes imposed on the Lender, by the
jurisdiction under the laws of which the Lender is organized or any political
subdivision thereof and taxes measured by the Lender's net income, and franchise
taxes imposed on the Lender, by the jurisdiction of the Lender's Lending Office
or any political subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to the Lender (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including, without limitation, deductions applicable to additional
sums payable under this Section 2.14) the Lender receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
applicable law, and (iv) the Borrower shall deliver to the Lender evidence of
such payment to the relevant taxation or other authority.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction which arise from any payment made under any Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, any Loan Document (collectively, "Other Taxes").
(c) The Borrower will indemnify the Lender for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.14) paid by
the Lender and any liability (including, without limitation, for penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such
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Taxes or Other Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days from the date the Lender makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes, the Borrower will furnish to the Lender, at its address referred to in
Section 10.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.14 shall survive the payment in full of the Obligations.
ARTICLE 3
PREPARATION OF MORTGAGE DOCUMENTS AND APPROVAL OF PROPOSED HOTEL
FACILITIES
SECTION 3.01. Recordation and Filing of Mortgage Documents, Etc. (a)
The Lender shall hold and not record or file any of the Collateral Documents
executed by the Borrower and delivered to the Lender pursuant to Section 4.01 or
Section 3.02(b) unless and until a Perfection Event shall have occurred. On or
after the occurrence of a Perfection Event, the Lender may in its absolute
discretion cause one or more of such Collateral Documents to be recorded or
filed in the appropriate recording or filing office (to the extent recordable or
fileable). In addition, the Borrower shall promptly deliver to the Lender upon a
Perfection Event, the following with respect to each of the Hotel Facilities:
(i) a commitment for a title insurance policy (the "Title
Insurance Policy") issued by a title company acceptable to the Lender,
in such form and amounts as are reasonably acceptable to the Lender,
insuring that the Mortgage covering such property is a valid first
priority Lien on such property subject only to such exceptions to title
as shall be acceptable to the Lender in its reasonable discretion and
containing such endorsements and affirmative insurance as the Lender
may reasonably require and as are obtainable in the applicable
jurisdiction, and true copies of each document, instrument or
certificate required by the terms of each such policy or Mortgage to
be, or have been, filed, recorded, executed or delivered in connection
therewith;
(ii) a current ALTA survey and surveyor's certification as to
such Hotel Facility in form and substance reasonably satisfactory to
the Lender; and
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(iii) copies of Requests for Information or Copies (Form UCC-
11), or equivalent reports, listing all effective financing statements
which name the Borrower or any Subsidiary of the Borrower (under its
present name or any previous name) as debtor and which are filed in the
jurisdictions referred to above, together with copies of such other
financing statements (none of which shall cover the Collateral
purported to be covered by the Security Agreement).
(b) The Borrower shall pay to the Lender, or as the Lender may direct,
(i) all title insurance premiums, documentary, stamp or intangible taxes,
recording fees and mortgage taxes payable in connection with the recording of
any of the Loan Documents or the issuance of the Title Insurance Policies, and
(ii) the reasonable fees and out of pocket expenses of counsel to the Lender and
local counsel connection with the preparation, execution, review and delivery of
the Mortgage Documents.
(c) The Borrower, on behalf of itself and each of its Subsidiaries,
hereby appoints the Lender its attorney-in-fact to execute, acknowledge and
deliver for and in the name of the Borrower or any of its Subsidiaries, as
applicable, any and all of the Mortgage Documents for the Collateral Properties
and/or the Proposed Hotel Facilities which the Borrower or any of its
Subsidiaries fails to execute, acknowledge and/or deliver in accordance with the
terms hereof, and this power, being coupled with an interest, shall be
irrevocable as long as any part of the Obligations remains unpaid.
SECTION 3.02. Approval of Proposed Hotel Facilities. (a) In the event
that the Borrower desires to provide to the Lender as collateral to secure the
Borrower's Obligations a Proposed Hotel Facility, the Borrower shall request in
writing the Lender's consent, which request shall be accompanied by a Proposed
Hotel Facility Statement (together with all documents referred to therein) in
respect of the Proposed Hotel Facility and such other information as the Lender
may reasonably require. The Lender's consent shall not be unreasonably withheld.
(b) Upon the approval of any Proposed Hotel Facility, the Lender shall
prepare Mortgage Documents for such Proposed Hotel Facility and the parties
shall cooperate in the preparation and delivery of such Mortgage Documents
(including, without limitation, ordering commitments for the title insurance
policies, ALTA surveys and UCC-searches, obtaining estoppel certificates and
retaining counsel, including local counsel for purposes of reviewing the
Mortgage Documents and rendering opinions with respect to such documents in form
and substance acceptable to the Lender as set forth in Section 4.01(p)). The
parties acknowledge and agree that Liens on certain of the Real Estate and
Leases may have been or hereafter be granted as collateral security for the
Existing Facility
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and the Other Supplemental Facility pursuant to the terms thereof and that to
the extent mortgage documents are executed and delivered in respect of any such
Real Estate or Lease as security for the Existing Facility or the Other
Supplemental Facility, such Real Estate or Lease shall be deemed to not be
collateral for the Loans made pursuant to this Agreement. In addition, the
parties acknowledge that Liens on certain Real Estate and Leases have been
granted in connection with the issuance of $125,000,000 aggregate principal
amount of Hospitality Properties Mortgage Acceptance Corp. Commercial Mortgage
Pass-Through Certificates Series 1996-C1 and are therefore not available as
collateral to secure the repayment of the Loans hereunder or the loans made
under the Existing Facility or the Other Supplemental Facility.
ARTICLE 4
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to the Initial Loan. The obligation
of the Lender to make the initial Loan is subject to satisfaction of the
conditions precedent that the Lender shall have received, on the Closing Date,
the following, each dated the Closing Date unless otherwise indicated, in form
and substance reasonably satisfactory to the Lender:
(a) The Note to the order of the Lender.
(b) A certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying (i) the resolutions of its Board of Trustees or Directors,
as appropriate, approving each Loan Document to which it is a party, (ii) all
documents evidencing other necessary trust or corporate action, as appropriate,
and required governmental and third party approvals, licenses and consents with
respect to each Loan Document to which it is a party and the transactions
contemplated thereby, (iii) a copy of its and each of its Subsidiaries'
declaration of trust, certificates of incorporation and By-Laws, as appropriate,
as of the Closing Date, and (iv) the names and true signatures of each of its
officers who has been authorized to execute and deliver any Loan Document or
other document required hereunder to be executed and delivered by or on behalf
of such Person.
(c) A copy of the declaration of trust or articles or certificate of
incorporation, as appropriate, of each Loan Party and of each of its
Subsidiaries (if any) which is not a Loan Party certified as of a recent date by
the Secretary of State of the state of formation of such Loan Party or
Subsidiary, together with certificates of such official attesting to the good
standing of each such Loan Party and Subsidiary.
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(d) Favorable opinions of Sullivan & Worcester and Piper & Marbury,
counsel to the Loan Parties, in substantially the forms attached as Exhibit D,
and as to such other matters as the Lender may reasonably request.
(e) A Negative Pledge Agreement in respect of each of the Hotel
Facilities including, without limitation, each Collateral Property, duly
executed and acknowledged by the Borrower or its Subsidiary, as applicable.
(f) A copy of the Operating Lease and Management Agreement, if any, in
respect of each Hotel Facility, each certified by a Responsible Officer.
(g) Evidence that the insurance required by the terms of the
Collateral Documents and by Section 7.04 is in full force and effect.
(h) A written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any significant
environmental, health and safety violations, hazards or liabilities to which the
Borrower or any of its Subsidiaries may be subject, which report shall
demonstrate, to the reasonable satisfaction of the Lender, that the Borrower and
its Subsidiaries and their operations are in compliance in all material respects
with all applicable Environmental Laws and are not subject to any material
Environmental Liabilities and Costs.
(i) Such additional documents, information and materials as the Lender
may reasonably request.
(j) The Lender shall have received evidence satisfactory to it that
all costs and accrued and unpaid fees and expenses (including, without
limitation, legal fees and expenses) required to be paid to the Lender under
Section 10.04, to the extent then due and payable, have been paid.
(k) A certificate, signed by a Responsible Officer of the Borrower,
stating that the statements set forth in Section 4.02(a) and 4.02(b) are true
and correct on the Closing Date, after giving effect to the Loans being made on
the Closing Date.
(l) A copy of the Advisory Agreement certified by a Responsible
Officer.
(m) The Subordination Agreement duly executed and acknowledged by the
Borrower and the Advisor.
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(n) A Mortgage duly executed and acknowledged by the Borrower or a
Subsidiary of the Borrower for each Collateral Property, in such amount as shall
be reasonably acceptable to the Lender, securing all of the Obligations.
(o) Financing Statements on form UCC-1 duly executed by the Borrower
under the applicable Uniform Commercial Code to be filed in connection with each
Mortgage, in form and substance reasonably satisfactory to the Lender, to
perfect the Lien on and security interest in the Mortgaged Property covered by
the Uniform Commercial Code.
(p) An opinion reasonably satisfactory to the Lender of counsel and/or
local counsel retained by the Borrower with respect to the due execution and
delivery, validity and enforceability of the Mortgage Documents and such other
matters as may be reasonably required by the Lender.
(q) (i) Duly executed and acknowledged landlord consents from all
lessors under all the Leases comprising Collateral Properties, in form and
substance reasonably satisfactory to the Lender, (ii) duly executed and
acknowledged non-disturbance and attornment agreements with the mortgagees,
ground lessors and sublessors of property subject to Leases comprising
Collateral Properties, in form and substance reasonably satisfactory to the
Lender, (iii) duly executed and acknowledged consents from all mortgagees,
ground lessors and sublessors of property subject to Leases comprising
Collateral Properties, in form and substance reasonably satisfactory to the
Lender, (iv) duly executed and acknowledged estoppel certificates, dated not
earlier than 30 days prior to the date of the Loan, from each landlord, ground
lessor, sublessor and lessee of a Collateral Property, in form and substance
reasonably satisfactory to the Lender, (v) duly executed and acknowledged,
non-disturbance and attornment agreements (in recordable form) from each lessee
(other than the Borrower or its Subsidiary) of a Collateral Property, unless
such lessee's lease, by its terms, is subject and subordinate to the Lien of the
applicable Mortgage provided that, notwithstanding the foregoing, a
subordination, non-disturbance and attornment agreement in the form attached as
Exhibit J and made a part hereof or such other form as shall be approved by the
Lender (which approval shall not be unreasonably withheld, delayed or
conditioned), duly executed and acknowledged by the Borrower or its Subsidiary
and the Operating Lessee shall be required in respect of each such Collateral
Property, and (vi) evidence satisfactory to the Lender that all such consents
and agreements, and a memorandum of each Lease comprising a Collateral Property,
have been filed or recorded in all appropriate public records or delivered to
the title company providing title insurance thereon, as the case may be.
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(r) Assignment Agreement in respect of the Management Agreement for
Collateral Property, if any, duly executed by the Borrower or its Subsidiary, as
applicable, and the Manager.
(s) Security Agreement in respect of the FF&E Reserves for such
Collateral Property duly executed by the Borrower or its Subsidiary, as
applicable, the Operating Lessee and, if applicable, the Manager.
(t) Financing Statements on Form UCC-1 under the Uniform Commercial
Code of all jurisdictions as may be necessary or, in the reasonable opinion of
the Lender, desirable to perfect the security interest created by the Security
Agreement for such Collateral Property.
(u) Subsidiary Guaranty duly executed by each Subsidiary of the
Borrower owning a Collateral Property.
(v) Stock Pledge Agreements duly executed by each Subsidiary of the
Borrower owing a Collateral Property.
SECTION 4.02. Conditions Precedent to Each Loan. The obligation of the
Lender to make any Loan (including the Loan being made by the Lender on the
Closing Date) shall be subject to the further conditions precedent that:
(a) The following statements shall be true on the date of such Loan,
before and after giving effect thereto and to the application of the proceeds
therefrom (and the acceptance by the Borrower of the proceeds of such Loan shall
constitute a representation and warranty by the Borrower that on the date of
such Loan such statements are true):
(i) The representations and warranties of the Borrower
contained in Article 5 and of each Loan Party in the other Loan
Documents are correct on and as of such date as though made on and as
of such date;
(ii) No Default or Event of Default will result from the Loans
being made on such date; and
(iii) The Loan to Value Requirement is satisfied.
(b) The making of the Loans on such date does not violate any
Requirement of Law and is not enjoined, temporarily, preliminarily or
permanently.
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(c) The Lender shall have received, on or before such date, in respect
of any Hotel Facility including, without limitation, any Approved Hotel
Facilities, for which the same have not been delivered pursuant to Section
4.01(e), 4.01(f), 4.01(g), 4.01(h), 4.01(i), 4.01(n), 4.01(o), 4.01(p), 4.01(q),
4.01(r), 4.01(s), 4.01(t), 4.01(u) and 4.01(v), the documents and other
materials described in such paragraphs.
(d) The Borrower shall have paid the reasonable fees and out of pocket
expenses of counsel to the Lender and local counsel, in connection with the
preparation, execution, review and delivery of the Loan Documents delivered
pursuant to this Agreement.
(e) The Lender shall have received such additional documents,
information and materials as the Lender may reasonably request.
(f) The Lender shall have received a fee equal to 0.50% of the amount
of the Loan.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender that:
SECTION 5.01. Existence; Compliance with Law. Each Loan Party and each
of its Subsidiaries (i) is a real estate investment trust or a corporation, as
the case may be, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation; (ii) is duly qualified or licensed
and in good standing under the laws of each jurisdiction where such
qualification is necessary, except for failures which in the aggregate have no
Material Adverse Effect; (iii) has all requisite power and authority and the
legal right to own, pledge and mortgage its properties, to lease (as lessee) the
properties that it leases as lessee, to lease or sublease (as lessor) the
properties it owns and/or leases (as lessee) and to conduct its business as now
or currently proposed to be conducted; (iv) is in compliance with its
declaration of trust or certificate of incorporation and by-laws, as
appropriate; (v) is in compliance with all other applicable Requirements of Law
except for such non-compliances as in the aggregate have no Material Adverse
Effect; and (vi) has all necessary licenses, permits, consents or approvals from
or by, has made all necessary filings with, and has given all necessary notices
to, each Governmental Authority having jurisdiction, to the extent required for
such ownership, leasing and conduct, except for licenses, permits, consents or
approvals which can be obtained by the taking of ministerial action to
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secure the grant or transfer thereof or failures which in the aggregate have no
Material Adverse Effect.
SECTION 5.02. Power; Authorization; Enforceable Obligations. (a) The
execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party and the consummation of the transactions contemplated
hereby:
(i) are within such Loan Party's corporate or trust powers, as
appropriate;
(ii) have been or, at the time of delivery thereof pursuant to
Article 3 or 4, will have been duly authorized by all necessary
corporate or trust action, as appropriate, including, without
limitation, the consent of any trustees or stockholders where required;
(iii) do not and will not (A) contravene any Loan Party's or
any of its Subsidiaries' respective declaration of trust, certificate
of incorporation or by-laws or other comparable governing documents,
(B) violate any other applicable Requirement of Law (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), or any order or decree of any Governmental
Authority or arbitrator, (C) conflict with or result in the breach of,
or constitute a default under, or result in or permit the termination
or acceleration of, any material Contractual Obligation of any Loan
Party or any of its Subsidiaries, or (D) result in the creation or
imposition of any Lien upon any of the property of any Loan Party or
any of its Subsidiaries, other than those in favor of the Lender
pursuant to the Collateral Documents; and
(iv) do not require the consent of, authorization by, approval
of, notice to, or filing or registration with, any Governmental
Authority or any other Person, other than those which have been or will
be, prior to the Closing Date, obtained or made and copies of which
have been or will be delivered to the Lender pursuant to Section 4.01
and/or Article 3 hereof, and each of which on the Closing Date will be
in full force and effect, and any consents, authorizations, approvals
of, notices to or filings or registrations required to be delivered
under Article 3 or 4 hereof.
(b) This Agreement has been, and each of the other Loan Documents will
have been upon delivery thereof pursuant to Article 3 or 4 hereof, duly executed
and delivered by each Loan Party thereto. This Agreement is, and the other Loan
Documents will be, when delivered hereunder, the legal, valid and binding
obligation of each Loan Party thereto, enforceable against it in accordance with
its terms, except as may be limited by bankruptcy, insolvency,
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reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
SECTION 5.03. Taxes. All federal, state, local and foreign tax returns,
reports and statements (collectively, the "Tax Returns") which, to the best
knowledge and belief of the Borrower, are required to be filed by the Borrower
or any of its Tax Affiliates have been filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns, are required to be
filed, all such Tax Returns are true and correct in all material respects, and
all taxes, charges and other impositions due and payable have been timely paid
prior to the date on which any fine, penalty, interest, late charge or loss may
be added thereto for non-payment thereof, except where contested in good faith
and by appropriate proceedings if adequate reserves therefor have been
established on the books of the Borrower or such Tax Affiliate in conformity
with GAAP. If applicable, proper and accurate amounts have been withheld by the
Borrower and each of its respective Tax Affiliates from their respective
employees (if any) for all periods in full and complete compliance with the tax,
social security and unemployment withholding provisions of applicable federal,
state, local and foreign law and such withholdings have been timely paid to the
respective Governmental Authorities. None of the Borrower or any of its Tax
Affiliates has (i) executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any charges other than
those that in the aggregate would have no Material Adverse Effect; (ii) agreed
or been requested to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise other than those that in
the aggregate would have no Material Adverse Effect; or (iii) any obligation
under any written tax sharing agreement.
SECTION 5.04. Full Disclosure. No written statement prepared or
furnished by or on behalf of any Loan Party or any of its Affiliates in
connection with any of the Loan Documents or the consummation of the
transactions contemplated thereby, and no financial statement delivered pursuant
hereto or thereto, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading. All facts known to the Borrower which are material to an
understanding of the financial condition, business, properties or prospects of
the Borrower and its Subsidiaries taken as one enterprise have been disclosed to
the Lender.
SECTION 5.05. Financial Matters. (a) The balance sheet of the Borrower
as of December 31, 1996, and the related statement of income, retained earnings
and cash flow of the Borrower for the period from January 1, 1995 to December
31, 1996, certified by Arthur Andersen, LLP, copies of which have been furnished
to the Lender, fairly present the financial condition of the Borrower as
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of such date and the consolidated results of the operations of the Borrower for
the period ended on such date, all in conformity with GAAP.
(b) Since December 31, 1996, there has been no Material Adverse Change
and there have been no events or developments that in the aggregate have had a
Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries had at December
31, 1996 any material obligation, contingent liability or liability for taxes,
long-term leases or unusual forward or long-term commitment which is not
reflected in the balance sheet at such date referred to in subsection (a) above
or in the notes thereto.
(d) The Borrower is, and on a consolidated basis the Borrower and its
Subsidiaries are, Solvent.
SECTION 5.06. Litigation. There are no pending or, to the knowledge of
the Borrower, threatened actions, investigations or proceedings affecting the
Borrower or, to the knowledge of the Borrower, any Operator or any of their
respective properties or revenues before any court, Governmental Authority or
arbitrator, other than those that in the aggregate, if adversely determined,
would have no Material Adverse Effect. The performance of any action by (a) any
Loan Party required or contemplated by any of the Loan Documents or (b) any
Operator required or contemplated by any Operating Lease or Management Agreement
is not (in the case of (b) only, to the knowledge of the Borrower) restrained or
enjoined (either temporarily, preliminarily or permanently), and no material
adverse condition has been imposed by any Governmental Authority or arbitrator
upon any of the foregoing transactions contemplated by the aforementioned
documents.
SECTION 5.07. Margin Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
SECTION 5.08. Ownership of Borrower and HRPT Advisors; Subsidiaries.
(a) The authorized capital stock of the Borrower consists of 100,000,000 common
shares of beneficial interest, $0.01 par value per share, of which approximately
26,872,000 shares are issued and outstanding on the date hereof, and 100,000,000
preferred shares of beneficial interest, without par value, none of which shares
are issued and outstanding on the date hereof. On the date hereof all of the
outstanding capital stock of the Borrower is validly issued, fully paid and
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non-assessable and at least 250,000 shares of such stock is owned beneficially
and of record by HRPT Advisors. Other than as described in the Shelf
Registration Statement relating to future offerings of up to $500,000,000 of
common shares of beneficial interest in the Borrower (or in reports incorporated
by reference therein), no authorized but unissued shares, no treasury shares
and, to the best knowledge of the Borrower, no other outstanding shares of
capital stock of the Borrower are subject to any option, warrant, right of
conversion or purchase or any similar right. Other than as described in the
Shelf Registration Statement relating to future offerings of up to $500,000,000
of common shares of beneficial interest in the Borrower (or in reports
incorporated by reference therein), there are no agreements or understandings
with respect to the voting, sale or transfer of any shares of capital stock of
the Borrower, or to the best knowledge of the Borrower, any agreement
restricting the transfer or hypothecation of any such shares.
(b) The authorized capital stock of HRPT Advisors consists of 100,000
shares of common stock, $0.01 par value per share, of which 1,000 shares are
issued and outstanding as of the date hereof. All of the outstanding capital
stock of HRPT Advisors has been validly issued, is fully paid and non-assessable
and at least 51% of such stock is owned, in the aggregate, beneficially and of
record by Barry M. Portnoy and/or Gerard M. Martin, free and clear of all Liens
as of the date of this Agreement. No authorized but unissued shares, no treasury
shares and, to the best knowledge of the Borrower, no other outstanding shares
of capital stock of HRPT Advisors are subject to any option, warrant, right of
conversion or purchase or any similar right. There are no agreements or
understandings with respect to the voting, sale or transfer of any shares of
capital stock of HRPT Advisors, or to the best knowledge of the Borrower, any
agreement restricting the transfer or hypothecation of any such shares.
(c) Set forth on Schedule 5.08(c) hereto is a complete and accurate
list showing, as of the date hereof, all Subsidiaries of the Borrower and, as to
each such Subsidiary, the jurisdiction of its incorporation, the number of
shares of each class of Stock authorized, the number outstanding on the date
hereof and the percentage of the outstanding shares of each such class owned
(directly or indirectly) by the Borrower. No Stock of any Subsidiary of the
Borrower is subject to any outstanding option, warrant, right of conversion or
purchase or any similar right. All of the outstanding capital Stock of each such
Subsidiary has been validly issued, is fully paid and non-assessable and is
owned by the Borrower, free and clear of all Liens. Neither the Borrower nor any
such Subsidiary is a party to, or has knowledge of, any agreement restricting
the transfer or hypothecation of any shares of Stock of any such Subsidiary,
other than the Loan Documents. As of the date hereof, the Borrower does not own
or hold, directly or indirectly, any capital stock or equity security of, or any
equity interest in, any Person other than such Subsidiaries.
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SECTION 5.09. ERISA. (a) There are no Multiemployer Plans.
(b) Each Plan and any related trust intended to qualify under Code
Section 401 or 501 has been determined by the IRS to be so qualified and to the
best knowledge of the Borrower nothing has occurred which would cause the loss
of such qualification.
(c) None of the Borrower, any of its Subsidiaries or any ERISA
Affiliate, with respect to any Pension Plan, has failed to make any contribution
or pay any amount due as required by Section 412 of the Code or Section 302 of
ERISA or the terms of any such plan, and all required contributions and benefits
have been paid in accordance with the provisions of each such plan.
(d) There are no pending or, to the knowledge of the Borrower,
threatened claims, actions or proceedings (other than claims for benefits in the
normal course), relating to any Plan other than those that in the aggregate, if
adversely determined, would have no Material Adverse Effect.
(e) No Pension Plan has any unfunded accrued benefit liabilities, as
determined by using reasonable actuarial assumptions utilized by such plan's
actuary for funding purposes. Within the last five years none of the Borrower,
any of its Subsidiaries or any ERISA Affiliate has caused a Pension Plan with
any such liabilities to be transferred outside of its "controlled group" (within
the meaning of Section 4001(a)(14) of ERISA).
(f) No Plan provides for continuing health, disability, accident or
death benefits or coverage for any participant or his or her beneficiary after
such partici pant's termination of employment (except as may be required by
Section 4980B of the Code and at the sole expense of the participant or the
beneficiary) which would result in the aggregate under all Plans in a liability
in an amount which would have a Material Adverse Effect.
SECTION 5.10. Liens. There are no Liens of any nature whatsoever on any
Hotel Facilities of the Borrower or any of its Subsidiaries other than those
permitted by Section 8.01. The forms of the Collateral Documents attached hereto
are sufficient to grant to the Lender fully perfected first priority Liens in
and to the Collateral subject only to Permitted Liens.
SECTION 5.11. [Intentionally Omitted].
SECTION 5.12. No Burdensome Restrictions; No Defaults; Contractual
Obligations. (a) Neither the Borrower nor any of its Subsidiaries is in default
beyond the expiration of any applicable notice or grace period under or with
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respect to any Contractual Obligation owed by it and, to the knowledge of the
Borrower, no other party is in default beyond the expiration of any applicable
notice or grace period under or with respect to any Contractual Obligation owed
to the Borrower or to any of its Subsidiaries, other than those defaults which
in the aggregate have no Material Adverse Effect.
(b) No Event of Default or Default has occurred and is continuing.
(c) There is no Requirement of Law that has not been complied with by
the Borrower, the compliance with which by the Borrower or any of its
Subsidiaries would have a Material Adverse Effect.
(d) No Subsidiary of the Borrower is subject to any Contractual
Obligation restricting or limiting its ability to transfer its assets to the
Borrower or to declare or make any dividend payment or other distribution on
account of any shares of any class of its Stock or its ability to purchase,
redeem, or otherwise acquire for value or make any payment in respect of any
such shares or any shareholder rights.
SECTION 5.13. No Investments. Except as permitted by Section 8.06, none
of the Borrower or any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person or maintains any Investment.
SECTION 5.14. Government Regulation. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended, or subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or any other federal or state statute or
regulation such that its ability to incur Indebtedness is limited, or its
ability to consummate the transactions contemplated hereby or by any other Loan
Document, or the exercise by the Lender of rights and remedies hereunder or
thereunder, is impaired. The making of the Loans by the Lender, the application
of the proceeds and repayment thereof by the Borrower and the consummation of
the transactions contemplated by the Loan Documents will not violate any
provision of any of the foregoing or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
SECTION 5.15. Insurance. All policies of insurance of any kind or
nature owned by or issued to the Borrower or any of its Subsidiaries, or issued
in respect of any real property owned or leased by the Borrower or any of its
Subsidiaries including, without limitation, policies of life, fire, theft,
product liability, public liability, property damage, other casualty, employee
fidelity, workers' compensation and employee health and welfare insurance, are
in full force and
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effect and are of a nature and provide such coverage (except earthquake
coverage) as is sufficient and as is customarily carried by companies of the
size and character of such Person. None of the Borrower or any of its
Subsidiaries has been refused insurance for which it applied or had any policy
of insurance terminated (other than at its request). Lender confirms and agrees
that the policies of insurance owned by or issued to the Operating Lessee in
respect of any Hotel Facility shall be sufficient for the purposes of this
representation provided that the same comply with the terms of the Operating
Lease relating thereto.
SECTION 5.16. Employees. Neither the Borrower nor any of its
Subsidiaries has any employees and none of them has ever engaged employees.
SECTION 5.17. Force Majeure. Neither the business nor the properties of
the Borrower or any of its Subsidiaries are currently suffering from the effects
of any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance), other than those which in
the aggregate have no Material Adverse Effect.
SECTION 5.18. Use of Proceeds. The proceeds of the Loans are being used
by the Borrower or its Subsidiaries solely to pay the purchase price of Approved
Hotel Facilities and for the payment of related transaction costs, fees and
expenses.
SECTION 5.19. Environmental Protection. Except as disclosed on Schedule
5.19:
(a) all real property leased, owned or operated by the Borrower or any
of its Subsidiaries is free from contamination by any Hazardous Material which
could reasonably be expected to subject the Borrower or any of its Subsidiaries
to Environmental Liabilities and Costs that could in the aggregate have a
Material Adverse Effect;
(b) the operations of the Borrower and each of its Subsidiaries, and
the operations at any real property leased, owned or operated by the Borrower or
any of its Subsidiaries are in material compliance in all respects with all
applicable Environmental Laws;
(c) neither the Borrower nor any of its Subsidiaries have liabilities
with respect to Hazardous Materials, and no facts or circumstances exist which
could give rise to liabilities with respect to Hazardous Materials which could
reasonably be expected to subject the Borrower or any of its Subsidiaries to
Environmental Liabilities and Costs that could in the aggregate have a Material
Adverse Effect;
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(d) (i) the Borrower and its Subsidiaries and, to the best knowledge
of the Borrower and its Subsidiaries, the Operators have obtained, currently
maintained and have all Environmental Permits necessary for their operations and
are in material compliance with such Environmental Permits, except to the extent
that the failure to obtain or maintain such Permits or to be in compliance
therewith would not, in the aggregate, have a Material Adverse Effect, (ii)
there are no Legal Proceedings pending nor, to the best knowledge of the
Borrower and its Subsidiaries, threatened to revoke, or alleging the violation
of, such Environmental Permits, other than Legal Proceedings which, if adversely
determined, would not, in the aggregate, have a Material Adverse Effect and
(iii) neither the Borrower nor any of its Subsidiaries or, to the best knowledge
of the Borrower and its Subsidiaries, the Operators have received any notice
from any Governmental Authority to the effect that there is lacking any
Environmental Permit required in connection with the current use or operation of
any property leased, owned or operated by the Borrower or any of its
Subsidiaries;
(e) neither the Borrower's nor any of its Subsidiaries' current
facilities and operations, nor, to the best knowledge of the Borrower and its
Subsidiaries, any Operator or predecessor of the Borrower or any of its
Subsidiaries, nor any of their past facilities and operations, nor any owner of
premises leased or operated by the Borrower and its Subsidiaries, are subject to
any outstanding written Order or Contract, including Environmental Liens, with
any Governmental Authority or other Person, or to any federal, state, local,
foreign or territorial investigation respecting (i) Environmental Laws, (ii)
Remedial Action, (iii) any Environmental Claim, or (iv) the Release or
threatened Release of any Hazardous Material, the compliance with which, in any
case, is reasonably likely to have a Material Adverse Effect;
(f) neither the Borrower, nor any of its Subsidiaries or, to the best
knowledge of the Borrower and its Subsidiaries, any of the Operators are subject
to any pending Legal Proceeding alleging the violation of any Environmental Law
which, if adversely determined is reasonably likely to have a Material Adverse
Effect, nor, to the best knowledge of the Borrower and its Subsidiaries, are any
such proceedings threatened;
(g) neither the Borrower nor any of its Subsidiaries nor, to the best
knowledge of the Borrower and its Subsidiaries, any Operators or predecessor of
the Borrower or any of its Subsidiaries, nor any owner of premises leased by the
Borrower or any of its Subsidiaries, have filed any notice under federal, state
or local, territorial or foreign law indicating past or present treatment,
storage, or disposal of or reporting a Release of Hazardous Material into the
environment, in the case of any Operator, with respect to Hotel Facilities only;
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(h) none of the operations of the Borrower or any of its Subsidiaries
or, to the best knowledge of the Borrower and its Subsidiaries, of any Operators
or predecessor of the Borrower or any of its Subsidiaries, or of any owner of
premises leased by the Borrower or any of its Subsidiaries, involve or
previously involved the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 (in effect
as of the date of this Agreement) or any state, local, territorial or foreign
equivalent, in the case of any Operator, with respect to Hotel Facilities only;
and
(i) there is not now, nor has there been in the past, on, in or under
any real property leased or owned by the Borrower or any of its Subsidiaries (i)
any underground storage tanks or surface tanks, dikes or impoundments, (ii) any
asbestos-containing materials, (iii) any polychlorinated biphenyls, or (iv) any
radioactive substances, the existence of which, in any case, is reasonably
likely to have a Material Adverse Effect.
SECTION 5.20. Contractual Obligations Concerning Assets. Other than as
described on Schedule 5.20, as of the date hereof, neither the Borrower nor any
of its Subsidiaries owns or holds, or is obligated under or a party to, any
option, right of first refusal, or other contractual right to purchase or
acquire, or any Contractual Obligation to effect an Asset Sale of, any asset or
property owned or leased by the Borrower or any of its Subsidiaries.
SECTION 5.21. Status as REIT. The Borrower is organized in conformity
with the requirements for qualification as a real estate investment trust under
the Code. Borrower has met all of the requirements for qualification as a real
estate investment trust under the Code for its fiscal year ended December 31,
1996. The Borrower is in a position to qualify for its current fiscal year as a
real estate investment trust under the Code and its proposed methods of
operation will enable it to so qualify.
SECTION 5.22. Real Property. (a) The Borrower and its Subsidiaries own
good, clean and marketable fee simple absolute title to or valid leasehold
interests in, all of the Collateral Properties, which Collateral Properties are
at the date hereof described in Schedule 5.22 and none of such properties and
assets is subject to any Lien, except Liens granted to the Lender pursuant to
the Loan Documents or permitted hereunder or thereunder. The Borrower and its
Subsidiaries have received all deeds, assignments, waivers, consents,
non-disturbance and recognition or similar agreements, bills of sale and other
documents, and have duly effected all recordings, filings and other actions
reasonably necessary to establish, protect and perfect the Borrower's and its
Subsidiaries' right, title and interest in and to all such property.
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(b) None of the Collateral Properties are leased at the date hereof by
the Borrower or any of its Subsidiaries.
(c) Except as disclosed on Schedule 5.22(c) and those which in the
aggregate have no Material Adverse Effect, (i) all components of all
improvements included within the Collateral Properties (collectively,
"Improvements"), including, without limitation, the roofs and structural
elements thereof and the heating, ventilation, air conditioning, plumbing,
electrical, mechanical, sewer, waste water, storm water, paving and parking
equipment, systems and facilities included therein, are in good working order
and repair; and (ii) all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other similar
systems serving the Collateral Properties are installed and operating and are
sufficient to enable the Collateral Properties to continue to be used and
operated in the manner currently being used and operated, and none of the
Borrower or any of its Subsidiaries has any knowledge of any factor or condition
that could result in the termination or material impairment of the furnishing
thereof. No Improvement or portion thereof is dependent for its access,
operation or utility on any land, building or other Improvement not included in
the real property owned or leased by the Borrower or any of its Subsidiaries.
(d) All Permits required to have been issued or appropriate to enable
all Collateral Properties owned or leased by the Borrower or any of its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used have been lawfully issued and are in full
force and effect, other than those which in the aggregate have no Material
Adverse Effect.
(e) Neither the Borrower nor, to its knowledge, any Operator has
received any notice, or has any knowledge, of (i) any pending, threatened or
contemplated condemnation proceeding affecting any Collateral Properties owned
or leased by the Borrower or any of its Subsidiaries or any part thereof, or
(ii) any proposed termination or impairment of any parking at any such owned or
leased real property or (iii) any sale or other disposition of any Collateral
Properties owned or leased by the Borrower or any of its Subsidiaries or any
part thereof in lieu of condemnation, in each case, other than those which in
the aggregate have no Material Adverse Effect.
(f) No material portion of any Collateral Properties owned or leased
by the Borrower or any of its Subsidiaries has suffered any material damage by
fire or other casualty loss which has not heretofore been completely repaired
and restored to its original condition or which will not be completely repaired
or restored to its original condition within twelve (12) months from the date
hereof. No portion of any Collateral Properties, that is not covered by adequate
flood insurance, owned or leased by the Borrower or any of its Subsidiaries is
located in
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a special flood hazard area as designated by any Federal Governmental
Authorities.
SECTION 5.23. Operator and Advisor: Compliance with Law. (a) To the
best knowledge of the Borrower and its Subsidiaries, each Operator (i) has full
power and authority and the legal right to own, lease (or sublease), manage and
operate (as applicable) the Hotel Facilities it operates and to conduct the
business in which it is currently engaged with respect to any real property
owned or leased by the Borrower or any of its Subsidiaries, (ii) is duly
qualified or licensed and is in good standing under the laws of each
jurisdiction where its ownership, lease (or sublease), management or operation
of any real property owned or leased by the Borrower or any of its Subsidiaries
requires such qualification, and (iii) is in compliance with all Requirements of
Law applicable to the real property owned or leased by the Borrower or any of
its Subsidiaries operated or managed by it, or applicable to the operation or
management thereof, except to the extent that the failure to comply therewith is
not reasonably likely to have, in the aggregate, a Material Adverse Effect.
(b) To the best knowledge of Borrower and its Subsidiaries, the
Advisor (i) has full power and authority and legal right to conduct the business
in which it is presently engaged and to perform its obligations under the
Advisory Agreement, (ii) is duly qualified or licensed and is in good standing
under the laws of each jurisdiction where the conduct of its business requires
such qualification, and (iii) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith is not reasonably
likely to have, in the aggregate, a Material Adverse Effect.
SECTION 5.24. Operating Leases, Limited Rent Guaranties, Management
Agreement and Advisory Agreement. Each of the Operating Leases, Limited Rent
Guaranties and Management Agreements, if any, in respect of the Hotel Facilities
and the Advisory Agreement is in full force and effect and is a legally valid
and binding obligation of the Borrower or its Subsidiaries and the other parties
thereto, subject to such exceptions which are not reasonably likely to have, in
the aggregate, a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries has mortgaged, pledged or otherwise encumbered any of the Operating
Leases, Management Agreements or Advisory Agreements or its rights thereunder
including, without limitation, its right to obtain rental, interest or other
payments under the Operating Leases, other than by way of such mortgages,
pledges or encumbrances in favor of the Lender. Neither the Borrower nor any of
its Subsidiaries has collected any rents becoming due under any Operating Lease
more than 30 days in advance. All rent and other sums and charges payable by any
Operating Lessee under each Operating Lease to which it is a party are current,
no notice of default or termination under any such Operating Lease is
outstanding, to the knowledge of the Borrower no termination event or condition
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or uncured default on the part of the Operating Lessee exists under any
Operating Lease, and to the knowledge of the Borrower no event of default has
occurred which, with the giving of notice or the lapse of time or both, would
constitute such a default or termination event or condition or uncured default
on the part of the Borrower or its Subsidiaries or the Operators (as the case
may be), subject to such exceptions which are not reasonably likely to have, in
the aggregate, a Material Adverse Effect. As to all of the Leases, the Borrower
and each of its Subsidiaries has performed all of its repair and maintenance
obligations (if any) and, to the best knowledge and belief of the Borrower, each
Operating Lessee under each Operating Lease to which it is a party has performed
all of its repair and maintenance obligations, subject to such exceptions which
are not reasonably likely to have, in the aggregate, a Material Adverse Effect.
SECTION 5.25. FF&E Reserves. An FF&E Reserve has been established in
respect of each Collateral Property and is currently funded as required by the
terms of the Operating Lease and/or the Management Agreement relating thereto.
An FF&E Reserve shall be established in respect of each Approved Hotel Facility
from and after the date of the acquisition thereof, which FF&E Reserve shall be
currently funded as required by the terms of the Operating Lease and/or the
Management Agreement relating thereto.
ARTICLE 6
FINANCIAL COVENANTS
As long as any of the Obligations or Commitment remain outstanding,
unless the Lender otherwise consents in writing the Borrower agrees with the
Lender that:
SECTION 6.01. Limitation and Indebtedness. The Borrower shall maintain
during each Fiscal Quarter on a consolidated basis, a ratio, expressed as a
percentage, of (a) the total Indebtedness for borrowed money (including, without
limitation, the Obligations and all Capitalized Lease Obligations) of the
Borrower and its Subsidiaries to (b) Total Assets of the Borrower and its
Subsidiaries not in excess of fifty-six percent (56%).
SECTION 6.02. Limitation on Secured Indebtedness. The Borrower shall
maintain during each Fiscal Quarter on a consolidated basis a ratio, expressed
as a percentage, of (a) total Secured Indebtedness (including, without
limitation, Obligations and all Capitalized Lease Obligations) of the Borrower
and its Subsidiaries to (b) Total Assets of the Borrower and its Subsidiaries
not in excess of fifty-six percent (56%).
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SECTION 6.03. Interest Expense Coverage. The Borrower shall maintain at
the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending on
March 31, 1998, a ratio of (a) Total Base Rents for such Fiscal Quarter to (b)
Net Interest Expense for such Fiscal Quarter, of not less than 2:1.
SECTION 6.04. Maintenance of Tangible Net Worth. The Borrower shall
maintain during each Fiscal Quarter a Tangible Net Worth of not less than
$200,000,000.
SECTION 6.05. Maintenance of Loan to Value Requirement. The Borrower
shall maintain during each Fiscal Quarter the Loan to Value Requirement.
ARTICLE 7
AFFIRMATIVE COVENANTS
As long as any of the Obligations or the Commitment remain outstanding,
unless the Lender otherwise consents in writing, the Borrower agrees with the
Lender that:
SECTION 7.01. Compliance with Laws, Etc. The Borrower shall comply, and
shall cause each of its Subsidiaries and, with respect to Hotel Facilities only,
each Operator to comply, in all material respects with all Requirements of Law,
Contractual Obligations, commitments, instruments, licenses, permits and
franchises, including, without limitation, all Permits; provided, however, that
the Borrower shall not be deemed in default of this Section 7.01 if all such
non-compliances in the aggregate have no Material Adverse Effect.
SECTION 7.02. Conduct of Business. The Borrower shall (a) conduct, and
shall cause each of its Subsidiaries to conduct, its business in the ordinary
course, such business being to acquire, own and lease hotels to unaffiliated
tenants; and (b) perform and observe, and cause each of its Subsidiaries to
perform and observe, all the terms, covenants and conditions required to be
performed and observed by it under its Contractual Obligations (including,
without limitation, to pay all rent and other charges payable under any lease
and all debts and other obligations as the same become due), and do, and cause
its Subsidiaries to do, all things necessary to preserve and to keep unimpaired
its rights under such Contractual Obligations; provided, however, that, in the
case of each of clauses(a) and (b), the Borrower shall not be deemed in default
of this Section 7.02 if all such failures in the aggregate have no Material
Adverse Effect.
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SECTION 7.03. Payment of Taxes, Etc. The Borrower shall pay and
discharge, and shall cause each of its Subsidiaries to pay and discharge, before
the same shall become delinquent, all lawful governmental claims, taxes,
assessments, charges and levies, except where contested in good faith, by proper
proceedings, if adequate reserves therefor have been established on the books of
the Borrower or the appropriate Subsidiary in conformity with GAAP; provided,
however, that the Borrower shall not be deemed in default of this Section 7.03
if all such uncontested non-payments in the aggregate have no Material Adverse
Effect and, with respect to any Mortgaged Property, the Borrower and each such
Subsidiary otherwise complies with the provisions of the Mortgage in respect
thereof.
SECTION 7.04. Maintenance of Insurance. The Borrower shall maintain, or
shall cause the Operators to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower or such Subsidiary
operates and as otherwise satisfactory to the Lender, in its sole judgment
exercised reasonably, and, in any event, all insurance required by any
Collateral Document. All such insurance shall name the Lender as additional
insured or loss payee, as the Lender shall determine. The Borrower will furnish
to the Lender from time to time such information as may be reasonably requested
as to such insurance. The Lender acknowledges that (i) no earthquake insurance
has been obtained with respect to any Hotel Facilities in California and (ii)
insurance maintained by the Operating Lessee in respect of any Hotel Facility
shall be sufficient for the purposes of this covenant provided that such
insurance complies with the terms of the Operating Lease relating thereto.
SECTION 7.05. Preservation of Existence, Etc. The Borrower shall
preserve and maintain, and shall cause each of its Subsidiaries to preserve and
maintain, its existence (except as permitted under Section 8.05) and its rights
(charter and statutory) and franchises, except to the extent that the failure to
preserve and maintain such rights and/or franchises would not have a Material
Adverse Effect.
SECTION 7.06. Access. The Borrower shall upon reasonable advance
notice, at any reasonable time and from time to time, permit the Lender, or any
agents or representatives of the Lender, to (a) examine and make copies of and
abstracts from the records and books of account of the Borrower and each of its
Subsidiaries, (b) visit the properties of the Borrower and each of its
Subsidiaries, (c) discuss the affairs, finances and accounts of the Borrower and
each of its Subsidiaries with any of their respective officers or directors, and
(d) communicate directly with the Borrower's independent certified public
accountants. The Borrower shall authorize its independent certified public
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accountants to disclose to the Lender any and all financial statements and other
information of any kind, including, without limitation, copies of any management
letter, or the substance of any oral information that such accountants may have
with respect to the business, financial condition, results of operations or
other affairs of the Borrower or any of its Subsidiaries.
SECTION 7.07. Keeping of Books. The Borrower shall keep, and shall
cause each of its Subsidiaries to keep, proper books of record and account, in
accordance with GAAP, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Borrower and each such
Subsidiary.
SECTION 7.08. Maintenance of Properties, Etc. The Borrower shall
maintain and preserve, and shall cause each of its Subsidiaries and each
Operator to maintain and preserve, (i) all of its Hotel Facilities in good
working order and condition, and (ii) all rights, permits, licenses, approvals
and privileges (including, without limitation, all Permits) which are used or
useful or necessary in the conduct of its business, in the case of an Operator,
with respect to Hotel Facilities only; provided, however, that the Borrower
shall not be deemed in default of this Section 7.08 if all such failures in the
aggregate have no Material Adverse Effect.
SECTION 7.09. Performance and Compliance with Other Covenants. The
Borrower shall perform and comply with, and shall cause each of its Subsidiaries
to perform and comply with, each of the covenants and agreements set forth in
any Contractual Obligation to which it or any of its Subsidiaries is a party;
provided, however, that the Borrower shall not be deemed in default of this
Section 7.09 if all such failures in the aggregate have no Material Adverse
Effect.
SECTION 7.10. Application of Proceeds. The Borrower shall use the
entire amount of the proceeds of the Loans as provided in Section 5.18.
SECTION 7.11. Financial Statements. The Borrower shall furnish to the
Lender:
(a) as soon as available and in any event within 45 days after the end
of each Fiscal Quarter of each Fiscal Year (other than the last Fiscal Quarter
of such Fiscal Year), consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such quarter and consolidated statements of
income, retained earnings and cash flow of the Borrower and its Subsidiaries for
the period commencing at the end of the previous Fiscal Year and ending with the
end of such Fiscal Quarter, all prepared in conformity with GAAP and certified
by the chief financial officer of the Borrower as fairly presenting the
financial condition and results of operations of the Borrower and its
Subsidiaries at such date and for
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such period, subject to normal year-end audit adjustments, together with (i) a
certificate of said officer stating that no Default or Event of Default has
occurred and is continuing or, if a Default or an Event of Default has occurred
and is continuing, a statement as to the nature thereof and the action which the
Borrower proposes to take with respect thereto, (ii) a schedule in form
reasonably satisfactory to the Lender of the computations used by the Borrower
in determining compliance with all financial covenants contained herein, and
(iii) a written discussion and analysis by the management of the Borrower of the
financial statements furnished in respect of such Fiscal Quarter;
(b) as soon as available and in any event within 90 days after the end
of each Fiscal Year, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such year and consolidated statements of income,
retained earnings and cash flow of the Borrower and its Subsidiaries for such
Fiscal Year, all prepared in conformity with GAAP and certified, in the case of
such consolidated financial statements, without qualification as to the scope of
the audit or as to the Borrower being a going concern by Arthur Andersen LLP or
other independent public accountants of recognized national standing, together
with (i) a certificate of such accounting firm stating that in the course of the
regular audit of the business of the Borrower and its Subsidiaries, which audit
was conducted by such accounting firm in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge that a
Default or Event of Default has occurred and is continuing, or, if in the
opinion of such accounting firm, a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof, (ii) a schedule in form
reasonably satisfactory to the Lender of the computations used by such
accountants in determining, as of the end of such Fiscal Year, the Borrower's
compliance with all financial covenants contained herein, and (iii) a written
discussion and analysis by the management of the Borrower of the financial
statements furnished in respect of such Fiscal Year;
(c) as soon as available and in any event within 60 days after the end
of each fiscal quarter of each fiscal year, in each case of any Operating Lessee
(other than the last fiscal quarter of such fiscal year) consolidated balance
sheets and statements of income and cash flow in respect of such Operating
Lessee and the Tenant Guarantor, if any, for such fiscal quarter, all prepared
in conformity with GAAP and certified by the chief financial officer or chief
accounting officer (or such officer's authorized designee) of the Operating
Lessee or the Tenant Guarantor, duly authorized, as fairly presenting the
consolidated financial conditions and results of operations of such Operating
Lessee and Tenant Guarantor at such date and for such period, subject to normal
year-end adjustments, together with a certificate of said officer stating that
no Default or Event of Default has occurred and is continuing under the relevant
Operating Lease(s) (said certification, the "Financial Officer's Certificate")
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(d) as soon as available, and in any event within 105 days after the
end of each fiscal year of any Operating Lessee, consolidated balance sheets and
statements of income, retained earnings and cash flow in respect of such
Operating Lessee and the Tenant Guarantor for such fiscal year, all prepared in
conformity with GAAP and certified without qualification as to the scope of the
audit by independent public accountants of recognized national standing,
together with a Financial Officer's Certificate;
(e) within thirty (30) days after the end of each Accounting Period
(as defined in the Management Agreement) or if there is no Management Agreement,
within thirty (30) days after the end of each calendar month, an unaudited
operating statement in respect of each Hotel Facility, including occupancy
percentages and average rate, accompanied by a Financial Officer's Certificate;
(f) promptly after the same are received by the Borrower, a copy of
each management letter provided to the Borrower by its independent certified
public accountants which refers in whole or in part to any inadequacy, defect,
problem, qualification or other lack of fully satisfactory accounting controls
utilized by the Borrower or any of its Subsidiaries or any Operating Lessee.
SECTION 7.12. Reporting Requirements. The Borrower shall furnish to
the Lender:
(a) prior to any Asset Sale, a notice (i) describing the assets being
sold and (ii) stating the estimated Asset Sales Proceeds in respect of such
Asset Sale;
(b) as soon as available and in any event within 30 days prior to the
end of each Fiscal Year, an annual budget of the Borrower and its Subsidiaries
for the succeeding Fiscal Year, displaying on a quarterly basis anticipated
balance sheets, forecasted Capital Expenditures, working capital requirements,
rent revenues, contributions by Operating Lessees to any FF&E Reserves, interest
income, net income, cash flow and sales, all on a consolidated basis;
(c) promptly and in any event within 30 days after the Borrower, any
of its Subsidiaries or any ERISA Affiliate knows or has reason to know that any
ERISA Event has occurred, a written statement of the chief financial officer or
other appropriate officer of the Borrower describing such ERISA Event or waiver
request and the action, if any, which the Borrower, its Subsidiaries and ERISA
Affiliates propose to take with respect thereto and a copy of any notice filed
by or with the PBGC or the IRS pertaining thereto;
(d) promptly and in any event within 10 days after receipt thereof, a
copy of any adverse notice, determination letter, ruling or opinion the
Borrower,
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any of its Subsidiaries or any ERISA Affiliate receives from the PBGC, DOL or
IRS with respect to any Plan, other than those which, in the aggregate, do not
have any reasonable likelihood of resulting in a Material Adverse Change;
(e) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any domestic or foreign Governmental Authority or
arbitrator, affecting the Borrower, any of its Subsidiaries, any Operator or any
Tenant Guarantor (subject to the Borrower having received notice or knowledge
thereof), except those which in the aggregate, if adversely determined, would
have no Material Adverse Effect;
(f) promptly and in any event within five (5) Business Days after the
Borrower becomes aware of the existence of (i) any Default or Event of Default,
(ii) any breach or non-performance of, or any default under any Operating Lease,
Management Agreement, Advisory Agreement or any Contractual Obligation which is
material to the business, prospects, operations or financial condition of the
Borrower and its Subsidiaries taken as one enterprise, or (iii) any Material
Adverse Change or any event, development or other circumstance which has
reasonable likelihood of causing or resulting in a Material Adverse Change,
telephonic or telecopied notice in reasonable detail specifying the nature of
such Default, Event of Default, breach, non-performance, default, event,
development or circumstance, including, without limitation, the anticipated
effect thereof, which notice (if by telephone) shall be promptly confirmed in
writing within five days;
(g) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to its security holders generally, and copies
of all reports and registration statements which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission or any national
securities exchange or the National Association of Securities Dealers, Inc.;
(h) upon the request of the Lender copies of all federal, state and
local tax returns and reports filed by the Borrower or any of its Subsidiaries
in respect of taxes measured by income (excluding sales, use and like taxes);
(i) promptly and in any event within five days of the Borrower or any
Subsidiary learning of any of the following, written notice to the Lender of any
of the following:
(i) the Release or threatened Release of any Hazardous
Material on or from any property owned, operated or leased by the
Borrower of any of its Subsidiaries and any written order, notice,
permit, application or other written communication or report received
by the Borrower, any of its Subsidiaries or any Operator in connection
with or relating to any such
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Release or threatened Release, unless such Release or threatened
Release is not reasonably likely to have a Material Adverse Effect;
(ii) any notice or claim to the effect that the Borrower, any
of its Subsidiaries or any Operator is or may be liable to any Person
as a result of the Release or threatened Release of any Hazardous
Material into the environment that could reasonably be expected to have
a Material Adverse Effect;
(iii) receipt by the Borrower, any of its Subsidiaries or any
Operator of notification that any real or personal property of the
Borrower or any of its Subsidiaries is subject to an Environmental Lien
that could reasonably be expected to have a Material Adverse Effect;
(iv) any Remedial Action taken by the Borrower, any of its
Subsidiaries or (if known to the Borrower) any Operator or any other
Person in response to any Hazardous Material on, under or about any
real property owned, operated or leased by the Borrower or any of its
Subsidiaries, unless such Remedial Action is not reasonably likely to
have a Material Adverse Effect;
(v) receipt by the Borrower, any of its Subsidiaries or any
Operator of any notice of violation of, or knowledge by the Borrower,
any of its Subsidiaries or any Operator that there exists a condition
which may result in a violation by the Borrower, any of its
Subsidiaries or any Operator of, any Environmental Law, unless such
violation is not reasonably likely to have a Material Adverse Effect;
(vi) the commencement of any judicial or administrative
proceeding or investigation alleging a violation of any Environmental
Law; or
(vii) any proposed acquisition of stock, assets or real
property, or any proposed leasing of property by the Borrower or any of
its Subsidiaries, unless such action is not reasonably likely to have a
Material Adverse Effect;
(j) upon written request by the Lender, a report providing an update
of the status of any Environmental Claim, Remedial Action or any other issue
identified in any notice or report required pursuant to this Section 7.12;
(k) promptly, such additional financial and other information
respecting the financial or other condition of any Operators, the Advisor or the
Borrower or any of its Subsidiaries or the status or condition of any real
property owned or
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leased by the Borrower or its Subsidiaries, or the operation thereof which the
Borrower is entitled to or can otherwise reasonably obtain, as the Lender from
time to time reasonably request; and
(l) such other information respecting the business, properties,
condition, financial or otherwise, or operations of the Borrower, any of its
Subsidiaries or any Operators as the Lender may from time to time reasonably
request.
SECTION 7.13. Leases and Operating Leases. The Borrower shall provide
the Lender with a copy of each lease of any Collateral Property to which the
Borrower or any Subsidiary of the Borrower is then a party, whether as lessor or
lessee. The Borrower shall, and shall cause each of its Subsidiaries to, (i)
comply in all material respects with all of their respective obligations under
all of their respective Leases and Operating Leases now or hereafter held
respectively by them with respect to real property, including, without
limitation, the Leases set forth in Schedule 5.22(b); (ii) not modify, amend,
cancel, extend or otherwise change in any materially adverse manner any of the
terms, covenants or conditions of any such Leases or Operating Leases; (iii)
provide the Lender with a copy of each notice of default under any Lease or
Operating Leases received by the Borrower or any Subsidiary of the Borrower
immediately upon receipt thereof and deliver to the Lender a copy of each notice
of default sent by the Borrower or any Subsidiary of the Borrower under any
Operating Lease or Lease simultaneously with its delivery of such notice under
such Operating Lease or Lease; (iv) notify the Lender, not later than 30 days
prior to the date of the expiration of the term of any Lease, of the Borrower's
or any Subsidiary of the Borrower's intention either to renew or to not renew
any such Lease, and, if the Borrower or any Subsidiary of the Borrower intends
to renew such Lease, the terms and conditions of such renewal; and (v) maintain
each Operating Lease in full force and effect in all material respects and
enforce the material obligations of the Operating Lessee thereunder, in a timely
manner.
SECTION 7.14. [Intentionally Omitted].
SECTION 7.15. Employee Plans. For each Plan and any related trust
hereafter adopted or maintained by a Loan Party or any of its ERISA Affiliates
intended to qualify under Code Section 125, 401 or 501, the Borrower shall (i)
seek, and cause such of its ERISA Affiliates to seek, and receive determination
letters from the IRS to the effect that such plan is so qualified; and (ii)
cause such plan to be so qualified.
SECTION 7.16. [Intentionally Omitted].
SECTION 7.17. Fiscal Year. The Borrower shall maintain as its Fiscal
Year the twelve month period ending on December 31 of each year.
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SECTION 7.18. Environmental Matters. (a) The Borrower shall comply and
shall cause each of its Subsidiaries and, with respect to Hotel Facilities only,
each Operator to comply in all material respects with all applicable
Environmental Laws currently or hereafter in effect.
(b) If the Lender at any time has a reasonable basis to believe that
there may be a material violation of any Environmental Law by Borrower any of
its Subsidiaries or any Operator related to any Hotel Facility, or real property
adjacent thereto, then Borrower agrees, upon request from the Lender, to provide
the Lender, at Borrower's expense, with such reports, certificates, engineering
studies or other written material or data as the Lender may reasonably require
so as to reasonably satisfy the Lender that Borrower or such Subsidiary or
Operator is in material compliance with all applicable Environmental Laws.
Furthermore, the Lender shall have the right upon prior notice (except in the
case of an emergency) to inspect during normal business hours any real property
owned, operated or leased by Borrower or any of its Subsidiaries if at any time
the Lender has a reasonable basis to believe that there may be such a material
violation of Environmental Law.
(c) The Borrower shall, and shall cause each of its Subsidiaries and,
with respect to Hotel Facilities only, each Operator to, take such Remedial
Action or other action as required by Environmental Laws, as any Governmental
Authority requires, except to the extent contested in good faith and by proper
proceedings, or as is appropriate and consistent with good business practice.
SECTION 7.19. [Intentionally Omitted].
SECTION 7.20. REIT Requirements. The Borrower shall operate its
business at all times so as to satisfy all requirements necessary to qualify as
a real estate investment trust under Section 856 through 860 of the Code. The
Borrower will maintain adequate records so as to comply with all record-keeping
requirements relating to the qualification of the Borrower as a real estate
investment trust as required by the Code and applicable regulations of the
Department of the Treasury promulgated thereunder and will properly prepare and
timely file with the IRS all returns and reports required thereby. The Borrower
will request from its shareholders all shareholder information required by the
Code and applicable regulations of the Department of Treasury promulgated
thereunder.
SECTION 7.21. Maintenance of FF&E Reserves. The Borrower shall cause
the Operator to maintain FF&E Reserves in respect of each Hotel Facility,
pursuant to the terms of the Operating Lease and/or Management Agreement
relating thereto and shall direct the Operator to deliver to the Lender
simultaneously with delivery to the Borrower or its Subsidiaries, copies of any
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reports, statements or other information required to be supplied to the Borrower
or its Subsidiary under any Operating Lease or Management Agreement for any
Hotel Facility. The Borrower shall not commingle, or permit the commingling of,
other funds with the funds in the FF&E Reserves except to the extent permitted
by the Management Agreement or Operating Lease, as applicable.
SECTION 7.22. Further Assurances. At any time upon the request of the
Lender, the Borrower will, promptly and at its expense, execute, acknowledge and
deliver such further documents and do such other acts and things as the Lender
may reasonably request to provide for payment of the Loans made hereunder and
interest thereon in accordance with the terms of this Agreement.
ARTICLE 8
NEGATIVE COVENANTS
As long as any of the Obligations or Commitment remain outstanding,
without the written consent of the Lender, the Borrower agrees with the Lender
that:
SECTION 8.01. Liens, Etc. The Borrower shall not create or suffer to
exist, and shall not permit any of its Subsidiaries to create or suffer to
exist, any Lien upon or with respect to any of its or such Subsidiary's
properties, whether now owned or hereafter acquired, or assign, or permit any of
its Subsidiaries to assign, any right to receive income therefrom, except for
the following and the Lender hereby consents to the following liens
notwithstanding the provisions of any Negative Pledge Agreement:
(a) Liens created pursuant to the Loan Documents;
(b) Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors or other similar Persons incurred by
the Borrower or any of its Subsidiaries in the ordinary course of business which
secure its obligations to such Person; provided, however, that (i) the Borrower
or such Subsidiary is not in default with respect to such payment obligation to
such Person, (ii) the Borrower or such Subsidiary is in good faith and by
appropriate proceedings diligently contesting such obligation and adequate
provision is made for the payment thereof, or (iii) all such failures in the
aggregate have no Material Adverse Effect;
(c) Liens (excluding Environmental Liens) securing taxes, assessments
or governmental charges or levies; provided, however, that (i) neither the
Borrower nor any of its Subsidiaries is in default in respect of any payment
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obligation with respect thereto unless the Borrower or such Subsidiary is in
good faith and by appropriate proceedings diligently contesting such obligation
and adequate provision is made for the payment thereof, and (ii) all such
failures in the aggregate have no Material Adverse Effect;
(d) Zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or use
of the property or assets of the Borrower or any of its Subsidiaries or impair,
in any material manner, the use of such property for the purposes for which such
property is held by the Borrower or any such Subsidiary;
(e) Liens in favor of landlords securing operating leases permitted by
Section 8.03;
(f) Liens existing on the date of this Agreement and disclosed on
Schedule 8.01, and Liens permitted by the Existing Facility or the Other
Supplemental Facility, or the Loan Documents thereunder;
(g) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(h) Any attachment or judgment Lien not constituting an Event of
Default under Section 9.01(f);
(i) Any (i) interest or title of a lessor or sublessor under any
Capitalized Lease or any operating lease not prohibited by this Agreement, (ii)
restriction or encumbrance that the interest or title of such lessor or
sublessor may be subject to, or (iii) subordination of the interest of the
lessee or sublessee under such lease to any restriction or encumbrance referred
to in the preceding clause (ii);
(j) Liens arising from filing UCC financing statements relating solely
to leases permitted by this Agreement;
(k) Deposits in the ordinary course of business to secure liabilities
to insurance carriers, lessors, utilities and other service providers;
(l) Purchase money security interests (including mortgages,
conditional sales, Capitalized Leases and any other title retention or deferred
purchase devices) in personal property of the Borrower or any of its
Subsidiaries in an
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amount not exceeding $200,000 in respect of each Hotel Facility, existing or
created at the time of acquisition thereof or within 60 days thereafter.
(m) Any Lien securing the renewal, extension or refunding of any
Indebtedness or other Obligation secured by any Lien permitted by this Section
8.01 provided that such renewal, extension or refunding is otherwise permitted
by this Agreement and the amount of such Indebtedness or other Obligation
secured by such Lien and the assets subject to such Lien are not increased.
(n) Any Lien securing Indebtedness permitted pursuant to Sections
8.02(a)(v), 8.02(a)(vi) and 8.02(a)(vii).
SECTION 8.02. Indebtedness. (a) The Borrower shall not create, incur or
suffer to exist, or permit any of its Subsidiaries to create, incur or suffer to
exist, any Indebtedness, or incur, assume, endorse, be or become liable for, or
guarantee, directly or indirectly, or permit or suffer to exist, any Contingent
Obligation, except:
(i) Indebtedness and Contingent Obligations in respect of the
Obligations or evidenced by a Loan Document;
(ii) current liabilities in respect of taxes, assessments and
governmental charges or levies incurred, or claims for labor,
materials, inventory, services, supplies and rentals incurred, or for
goods or services purchased, in the ordinary course of business
consistent with the past practice of the Borrower and its Subsidiaries;
(iii) Indebtedness of the Borrower consisting of fees and
expenses referred to in Section 4.01(j) and 4.02(d);
(iv) Indebtedness of the Borrower or any of its Subsidiaries
under Capital Financing Indebtedness in respect of each Hotel Facility
in an aggregate amount for such Hotel Facility not exceeding
$200,000.00 at any one time outstanding; and
(v) Indebtedness of the Borrower or any of its Subsidiaries
comprising pre-existing Indebtedness secured by Real Estate and any
personal property located thereon, which the Borrower or any of its
Subsidiaries assumes in connection with the acquisition of such Real
Estate, in an aggregate amount not exceeding $25,000,000.
(vi) Indebtedness of the Borrower or any of its Subsidiaries
arising pursuant to the Existing Facility or the Other Supplemental
Facility.
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(vii) The mortgage loan made November 25, 1996 in the
aggregate principal amount of $125,000,000 by Column Financial, Inc.,
as originator, to HPTRI Corporation and HPTWN Corporation.
(viii) Indebtedness between the Borrower and any of its
wholly-owned Subsidiaries.
(b) The Borrower shall not cancel, or permit any of its Subsidiaries
to cancel, any claim or Indebtedness owed to it except for adequate
consideration and in the ordinary course of business.
SECTION 8.03. Lease Obligations. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become or remain liable as lessee or
guarantor or other surety with respect to any lease, whether an operating lease
or a Capitalized Lease, of any property (whether real or personal or mixed),
whether now owned or hereafter acquired, which (i) the Borrower or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person, or (ii) the Borrower or any of its Subsidiaries intends to use for
substantially the same purposes as any other property which has been or is to be
sold or transferred by that entity to any other Person in connection with such
lease.
SECTION 8.04. [Intentionally Omitted].
SECTION 8.05. Mergers, Stock Issuances, Asset Sales, Etc. (a) The
Borrower shall not sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its assets or properties, and shall not, and shall not
permit any of its Subsidiaries to, (i) merge with any Person, or (ii)
consolidate with any Person other than (A) the merger of a Subsidiary of the
Borrower into a wholly-owned Subsidiary of the Borrower that is a Loan Party, or
(B) the merger of a wholly-owned Subsidiary of the Borrower into the Borrower.
(b) The Borrower shall not transfer, or permit any of its Subsidiaries
to issue or transfer, any Stock or Stock Equivalents of any Subsidiary other
than any such issuance or transfer (i) by a Subsidiary of the Borrower to a
wholly-owned Subsidiary of the Borrower that is a Loan Party or (ii) by a
wholly-owned Subsidiary of the Borrower to the Borrower, without the prepayment
of the Loans or the prepayment of the loans made under the Other Supplemental
Facility and the Existing Facility, as described in Section 2.06(d).
(c) The Borrower shall not and shall not permit any of its
Subsidiaries to effect, enter into, consummate or suffer to exist any Asset Sale
(other than an Asset Sale with respect to Mortgaged Properties as to which
subsection (d) below
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shall apply) without the prior written consent of the Lender, such consent not
to be unreasonably withheld or delayed.
(d) The Borrower shall not and shall not permit any of its
Subsidiaries to effect, enter into, consummate or suffer to exist any Asset Sale
with respect to any Mortgaged Property without (y) the prior written consent of
the Lender, such consent not to be unreasonably withheld or delayed, and (z)
prepayment of the Loans pursuant to Section 2.06(c).
In the event that an Asset Sale of a Mortgaged Property is entered into
in violation of any of the provisions of this Section 8.05(d), in addition to
the other rights and remedies of the Lender hereunder, the Borrower shall
forthwith prepay the Loans upon receipt by the Borrower of its Subsidiaries of
the Asset Sale Proceeds relating thereto, in an amount equal to such Asset Sale
Proceeds, together with accrued interest to the date of such prepayment on the
principal amount prepaid.
SECTION 8.06. Investments. The Borrower shall not, directly or
indirectly, make or maintain, or permit any of its Subsidiaries to make or
maintain, any loan or advance to any Person or own, purchase or otherwise
acquire, or permit any of its Subsidiaries to own, purchase or otherwise
acquire, any Stock, Stock Equivalents, other equity interest, obligations or
other securities of, or all or substantially all of the assets of, any Person or
all or substantially all of the assets constituting the business of a division,
branch or other unit operation of any Person, or enter into any joint venture or
partnership with, or make or maintain, or permit any of its Subsidiaries to make
or maintain, any capital contribution to, or otherwise invest in, any Person or
incorporate or organize any Subsidiary which was not in existence on the Closing
Date (any such transaction being an "Investment"), except Investments consisting
of (a) the Stock of wholly-owned Subsidiaries of the Borrower, (b) cash
equivalent securities in the ordinary course of business or (c) the purchase of
the Approved Hotel Facilities.
SECTION 8.07. Change in Nature of Business or Organizational Documents.
(a) The Borrower shall not make, and shall not permit any of its Subsidiaries to
make, any material change in the nature or conduct of its business as carried on
at the date hereof.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, amend its declaration of trust, certificate of incorporation or
by-laws other than for amendments which in the aggregate have no Material
Adverse Effect.
SECTION 8.08. Modification of Material Agreements. The Borrower shall
not, and shall not permit any of its Subsidiaries to, (i) alter, rescind,
terminate, amend, supplement, waive or otherwise modify any provision of or
permit any
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breach or default to exist under the Advisory Agreement without the prior
written consent of the Lender; or (ii) alter, amend, modify, rescind, terminate,
supplement or waive any of their respective rights under, or fail to comply in
all material respects with, any of its material obligations arising under any
Operating Lease or Management Agreement; provided, however, that, with respect
to any such failure to comply with any such obligations, the Borrower shall not
be deemed in default of this Section 8.08 if all such failures in the aggregate
would have no Material Adverse Effect; and provided, further, that in the event
of any material breach or event of default by a Person other than the Borrower
or any of its Subsidiaries, the Borrower shall promptly notify the Lender of any
such breach or event of default and take all such action as may be reasonably
necessary in order to endeavor to avoid having such breach or event of default
have a Material Adverse Effect.
SECTION 8.09. Accounting Changes. The Borrower shall not make, nor
permit any of its Subsidiaries to make, any change in accounting treatment and
reporting practices or tax reporting treatment, except as required by GAAP or
law and disclosed to the Lender.
SECTION 8.10. Transactions with Affiliates. The Borrower shall not, and
shall not permit any of its Subsidiaries, to enter into any transaction directly
or indirectly with or for the benefit of any Affiliate of the Borrower
(including, without limitation, employment contracts or contracts involving the
payment of management or consulting fees, guaranties and assumptions of
obligations of any such Affiliate) except for (A) transactions in the ordinary
course of business on a basis no less favorable to the Borrower or such
Subsidiary as would be obtained in a comparable arm's length transaction with a
Person not an Affiliate, and (B) salaries and other employee compensation and
benefits to officers or directors of the Borrower or any of its Subsidiaries
commensurate with current compensation and benefit levels.
SECTION 8.11. Environmental Matters. (a) The Borrower shall not, and
shall not permit any of its Subsidiaries or any Operator, or, to the extent
practicable, any other Person to dispose of any Hazardous Material by placing it
in or on the ground or waters of any property owned, operated or leased by the
Borrower or any of its Subsidiaries, except as in compliance with all applicable
Environmental Laws currently and hereinafter in effect; provided, however, that
the Borrower shall not be deemed in default of this provision if all such
disposals in the aggregate would have no Material Adverse Effect.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries or any Operator, or, to the extent practicable, any other Person
to, dispose or to arrange for the disposal of any Hazardous Material on any
property owned, operated or leased by any other Person, except as in compliance
with all
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applicable Environmental Laws currently and hereinafter in effect; provided,
however, that the Borrower shall not be deemed in default of this provision if
all such disposals in the aggregate would have no Material Adverse Effect.
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.01. Events of Default. Each of the following events shall be
an Event of Default:
(a) The Borrower shall fail to pay any principal (including, without
limitation, mandatory prepayments of principal) of, or interest on, any Loan,
any fee, any other amount due hereunder or under the other Loan Documents or
other of the Obligations when the same becomes due and payable; or
(b) Any representation or warranty made or deemed made by any Loan
Party in any Loan Document or by any Loan Party (or any of its officers) in
writing in connection with any Loan Document shall prove to have been incorrect
in any material respect when made or deemed made; or
(c) Any Loan Party shall fail to perform or observe (i) any term,
covenant or agreement contained in Articles 4 or 8 or in any Collateral
Document, or (ii) any other term, covenant or agreement contained in this
Agreement or in any other Loan Document if such failure under this clause (ii)
shall remain unremedied for fifteen (15) days after the date on which written
notice thereof shall have been given to the Borrower by the Lender; or
(d) Any Loan Party or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Indebtedness of such Loan Party or
Subsidiary (excluding Indebtedness evidenced by the Note) beyond the period of
grace (not to exceed 30 days), if any, with respect thereto (whether the same
becomes due and payable by scheduled maturity, required prepayment,
acceleration, demand or otherwise); or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Indebtedness,
if the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall become or be declared to be due and payable, or any Loan Party or any of
its Subsidiaries shall be required to repurchase or offer to repurchase such
Indebtedness, prior to the stated maturity thereof; or
(e) Any Loan Party or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its
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debts generally, or shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against any Loan Party or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a custodian, receiver,
trustee or other similar official for it or for any substantial part of its
property and, in the case of any such proceedings instituted against any Loan
Party or any of its Subsidiaries (but not instituted by it), either such
proceedings shall remain undismissed or unstayed for a period of sixty (60) days
or any of the actions sought in such proceedings shall occur; or any Loan Party
or any of its Subsidiaries shall take any corporate action to authorize any of
the actions set forth above in this Section 9.01(e); or
(f) One or more judgments or orders for the payment of money in an
aggregate amount in excess of $100,000 to the extent not fully covered by
insurance shall be rendered against any Loan Party or any of its Subsidiaries
and either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order, or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) An ERISA Event shall occur which, in the reasonable determination
of the Lender, is reasonably likely to have a Material Adverse Effect; or
(h) The Borrower or any of its Subsidiaries shall have entered into
any consent or settlement decree or agreement or similar arrangement with an
Governmental Authority or any judgment, order, decree or similar action shall
have been entered against the Borrower or any of its Subsidiaries or any
Operator, in any case based on or arising from the violation of or pursuant to
any Environmental Law, or the generation, storage, transportation, treatment,
disposal or Release of any Hazardous Material and such judgment, order, decree
or similar action is reasonably likely to have a Material Adverse Effect; or
(i) Any material provision of any Collateral Document after delivery
thereof under Article 4 shall for any reason cease to be valid and binding on
any Loan Party thereto, or any Loan Party shall so state in writing; or
(j) Any Collateral Document after delivery thereof pursuant to Article
4 shall, for any reason, cease to create a valid Lien on any of the Collateral
purported to be covered thereby or such Lien shall cease to be a perfected and
first priority Lien, or any Loan Party shall so state in writing; or
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(k) There shall occur a Material Adverse Change or an event which is
reasonable likely to have a Material Adverse Effect; or
(l) The Lender shall have determined in good faith, and shall have so
given notice to the Borrower, that the Borrower has at any time ceased to be in
a position to qualify, or has not qualified, as a real estate investment trust
for any of the purposes of the provisions of the Code applicable to real estate
investment trusts; provided that no Event of Default under this subsection shall
be deemed to have occurred and be continuing if, within 10 days after notice of
any such determination is given to the Borrower, the Borrower shall have
furnished the Lender with an opinion of the Borrower's tax counsel (who shall be
reasonably satisfactory to the Lender) to the effect that the Borrower is then
in a position to so qualify, or has so qualified, as the case may be, which
opinion shall not contain any material qualification unsatisfactory to the
Lender; or
(m) HRPT Advisors shall cease at any time to (A) hold beneficially and
of record at least 250,000 of the issued and outstanding common shares and each
other class of equity securities of the Borrower (adjusted for any division,
reclassification or stock dividend in respect of Common Shares), or (B) hold the
power to direct or cause the direction of the management and policies of the
Borrower; or
(n) Barry M. Portnoy and Gerard M. Martin shall cease at any time to
(A) hold beneficially and of record, in the aggregate, at least 51% of the
issued and outstanding common shares and each other class of equity securities
of HRPT Advisors (adjusted for any division, reclassification or stock dividend
in respect of Common Shares), or (B) hold the power to direct or cause the
direction of the management and policies of HRPT Advisors; or
(o) HRPT Advisors shall cease to be the sole Advisor to Borrower
pursuant to and in accordance with the Advisory Agreement, without the Lender's
prior written consent or the Advisory Agreement shall be materially amended,
supplemented or modified without the Lender's prior written consent; or
(p) Advisor shall default in the observance or performance of any
material provision of the Subordination Agreement; or
(q) Any Manager shall default in the observance or performance of any
material provision of a Management Agreement and such defaults, in the
aggregate, are reasonably likely to have a Material Adverse Effect; or
(r) Any Operating Lessee shall default in the observance or
performance of any material provision of an Operating Lease and such defaults,
in the aggregate, are reasonably likely to have a Material Adverse Effect.
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SECTION 9.02. Remedies. If there shall occur and be continuing any
Event of Default, the Lender (i) by notice to the Borrower, may declare the
obligation of the Lender to make Loans to be terminated, whereupon the same
shall forthwith terminate, and (ii) may by notice to the Borrower, declare the
Loans, all interest thereon and all other amounts and Obligations payable under
this Agreement to be forthwith due and payable, whereupon the Note, all such
interest and all such amounts and Obligations (to the extent permitted by
applicable law), shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; provided, however, that upon the
occurrence of the Event of Default specified in Section 9.01(e), (A) the
obligation of the Lender to make Loans shall automatically be terminated and (B)
the Loans, all such interest and all such amounts and Obligations shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower. In addition to the remedies set forth above, the Lender may
exercise any remedies provided for by the Collateral Documents in accordance
with the terms thereof or any other remedies provided by applicable law.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be in writing and signed by the
Lender, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 10.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including, without limitation,
telegraphic, telex, telecopy or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered by hand.
If to the Borrower, at its address at:
400 Centre Street
Newton, Massachusetts 02158
Attention: Mr. John G. Murray
(telecopy number: 617-332-2261)
(telephone number: 617-964-8389)
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with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Esq.
(telecopy number: 617-338-2800)
(telephone number: 617-338-2880)
If to the Lender, at its address at
277 Park Avenue
New York, New York 10172
Attention: James W. Roiter, Managing Director
(telecopy number: 212-892-4096)
(telephone number: 212-892-4900)
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Thomas Patrick Dore, Jr., Esq.
(telecopy number: 212-450-4800)
(telephone number: 212-450-4000)
or, as to the Borrower or the Lender, at such other address as shall be
designated by such party in a written notice to the other party. All such
notices and communications shall, when mailed, telegraphed, telexed, telecopied,
cabled or delivered, be effective three (3) Business Days after being deposited
in the mails, delivered to the telegraph company, confirmed by telex answerback,
telecopied with confirmation of receipt, delivered to the cable company or
delivered by hand to the addressee, respectively, except that notices and
communications to the Lender pursuant to Article 2 shall not be effective until
received by the Lender.
SECTION 10.03. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under any
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
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SECTION 10.04. Costs; Expenses; Indemnities. (a) The Borrower agrees to
pay to the Lender or as the Lender may direct, on demand, all costs and expenses
of the Lender (including, without limitation, the fees and out-of-pocket
expenses of counsel, retained by the Lender) in connection with the
modification, amendment or enforcement (whether through negotiation, legal
proceedings or otherwise) of this Agreement and the other Loan Documents.
(b) The Borrower agrees to indemnify and hold harmless the Lender and
its Affiliates, and the directors, officers, employees, agents, attorneys,
consultants and advisors of or to any of the foregoing (including, without
limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth in Article 4) (each of the
foregoing being an "Indemnitee") from and against any and all claims, damages,
liabilities, obligations, losses, penalties, actions, judgments, suits, costs,
disbursements and expenses of any kind or nature (including, without limitation,
fees and disbursements of counsel to any such Indemnitee and experts, engineers
and consultants and the costs of investigation and feasibility studies) which
may be imposed on, incurred by or asserted against any such Indemnitee in
connection with or arising out of any investigation, litigation or proceeding,
whether or not any such Indemnitee is a party thereto, whether direct, indirect,
or consequential and whether based on any federal, state or local law or other
statutory regulation, securities or commercial law or regulation, or under
common law or in equity, or on contract, tort or otherwise, in any manner
relating to or arising out of or based upon or attributable to this Agreement,
any other Loan Document, any document delivered hereunder or thereunder, any
Obligation, or any act, event or transaction related or attendant to any
thereof, including, without limitation, (i) arising from any misrepresentation
or breach of warranty under Section 5.19 or any Environmental Claim or any
Environmental Lien or any Remedial Action arising out of or based upon anything
relating to real property owned, leased or operated by the Borrower or any of
its Subsidiaries and the facilities or operations (collectively, the
"Indemnified Matters"); provided, however, that the Borrower shall not have any
obligation under this Section 10.04(b) to an Indemnitee with respect to any
Indemnified Matter caused by or resulting from the gross negligence or willful
misconduct of that Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order.
(c) If the Lender receives any payment of principal of any Loan other
than on the last day of an Interest Period relating to such Loan, as a result of
any payment made by the Borrower or acceleration of the maturity of the Note
pursuant to Section 9.02 or for any other reason, the Borrower shall, upon
demand by the Lender, pay to the Lender all amounts required to compensate the
Lender for any additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without limitation, any loss
(including, without limitation, loss of anticipated profits), cost or expense
incurred by reason of the
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liquidation or reemployment of deposits or other funds acquired by the Lender to
fund or maintain such Loan.
(d) The Borrower shall indemnify the Lender for, and hold the Lender
harmless from and against, any and all claims for brokerage commissions, fees
and other compensation made against the Lender for any broker, finder or
consultant with respect to any agreement, arrangement or understanding made by
or on behalf of any Loan Party or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement.
(e) The Borrower agrees that any indemnification or other protection
provided to any Indemnitee pursuant to this Agreement (including, without
limitation, pursuant to this Section 10.04) or any other Loan Document shall (i)
survive payment of the Obligations and (ii) inure to the benefit of any Person
who was at any time an Indemnitee under this Agreement or any other Loan
Document.
(f) The provisions of this Section 10.04 shall survive any termination
of this Agreement.
SECTION 10.05. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Lender
to or for the credit or the account of the Borrower against any and all of the
Obligations now or hereafter existing whether or not the Lender shall have made
any demand under this Agreement or any Note or any other Loan Document and
although such Obligations may be unmatured. The Lender agrees promptly to notify
the Borrower after any such set-off and application made by the Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lender under this
Section are in addition to the other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
SECTION 10.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Lender and thereafter
shall be binding upon and inure to the benefit of the Borrower and the Lender
and their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender.
SECTION 10.07. Assignments and Participations. (a) The Lender may sell,
transfer, negotiate or assign to one or more other financial institutions all or
a
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portion of its Commitment, the Loans owing to it and an interest in the Note
held by it and a commensurate portion of its rights and obligations hereunder
and under the other Loan Documents subject to the proviso to subparagraph (c)
below.
(b) The Lender may sell participations to one or more banks or other
Persons in or to all or a portion of its rights and obligations under the Loan
Documents (including, without limitation, all or a portion of the Commitment,
the Loans owing to it and the Note held by it). In the event of the sale of any
participation by the Lender, (i) the Lender's obligations under the Loan
Documents (including, without limitation, the Commitment) shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Lender shall remain
the holder of such Note and Obligations for all purposes of this Agreement, and
(iv) the Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement.
(c) Each participant shall be entitled to the benefits of Sections
2.10, 2.12 and 2.14 as if it were a Lender; provided, however, that anything
herein to the contrary notwithstanding, the Borrower shall not, at any time, be
obligated to pay to any participant of any interest of the Lender, under Section
2.10, 2.12 or 2.14, any sum in excess of the sum which the Borrower would have
been obligated to pay Lender in respect of such interest had such assignment not
been effected or had such participation not been sold.
(d) The Borrower shall cooperate with Lender, at no cost or expense to
the Borrower, and any other party to whom the Lender may assign or sell
participations (or negotiate for such assignment or sale) in all or a portion of
the Commitment, the Loans owing to it and an interest in the Note. Such
cooperation of the part of the Borrower shall include but shall not be limited
to the execution and delivery of (i) amendments, modifications and/or
supplements to one or more Loan Documents, in form and substance as may be
required by Lender, and (ii) the execution and delivery of one or more
additional promissory notes, at no cost or expense to the Borrower; provided
however, that such promissory notes, amendments, modifications and/or
supplements do not materially increase the obligations of the Borrower or
materially diminish the rights of the Borrower under the Loan Documents.
SECTION 10.08. Governing Law; Severability. This Agreement and the Note
and the rights and obligations of the parties hereto and thereto shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this agreement shall be prohibited by or invalid under
applicable
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law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
SECTION 10.09. Submission of Jurisdiction; Service of Process. (a) Any
legal action or proceeding with respect to this Agreement or the Note or any
document related thereto may be brought in the courts of the State of New York
or of the United States of America for the Southern District of New York, and,
by execution and delivery of this Agreement, the Borrower hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably
waive any objection, including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens, which any of them may
now or hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.
(b) The Borrower irrevocably consents to the service of process of any
of the aforesaid courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the borrower
at its address provided herein.
(c) Nothing contained in this Section 10.09 shall affect the right of
the Lender or any holder of the Note to serve process in any other manner
permitted by law or commence legal proceedings or otherwise proceed against the
Borrower in any other jurisdiction.
SECTION 10.10. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
SECTION 10.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 10.12. Entire Agreement. This Agreement, together with all of
the other Loan Documents and all certificates and documents delivered hereunder
or thereunder embody the entire agreement of the parties and supersedes all
prior agreements and understandings relating to the subject matter hereof.
SECTION 10.13. Confidentiality. The Lender agrees to keep information
obtained by it pursuant hereto and the other Loan Documents confidential in
accordance with the Lender's customary practices and agrees that it will only
use such information in connection with the transactions contemplated by this
Agreement and not disclose any of such information other than (i) to the
Lender's
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employees, representatives and agents who are or are expected to be involved in
the evaluation of such information in connection with the transactions
contemplated by this Agreement and who are advised of the confidential nature of
such information, (ii) to the extent such information presently is or hereafter
becomes available to the Lender, as the case may be, on a non-confidential basis
from a source other than the Borrower, (iii) to the extent disclosure is
required by law, regulation or judicial order or requested or required by bank
regulators or auditors, or (iv) to assignees or participants or potential
assignees or participants who agree to be bound by the provisions of this
sentence.
SECTION 10.14. Waiver of Jury Trial. Each of the parties hereto waives
any right it may have to trial by jury in respect of any litigation based on, or
arising out of, under or in connection with this Agreement or any other Loan
Document, or any course of conduct, course of dealing, verbal or written
statement or action of any party hereto.
SECTION 10.15. NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST OF
THE BORROWER, DATED MAY 12, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO ("THE DECLARATION"), IS DULY FILED IN THE OFFICE OF 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 BORROWER SHALL BE HELD
TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, THE BORROWER. ALL PERSONS DEALING WITH THE BORROWER, IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF THE BORROWER FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
SECTION 10.16. Refinancing and/or Securitization. The Borrower shall
engage the Lender as book running lead manager on any equity or debt offering so
long as the Indebtedness evidenced by this Agreement or the Other Supplemental
Facility is outstanding. In the event the Loans become the subject of a
securitization underwritten by the Lender or any of its Affiliates, the Borrower
and the Lender shall amend this Agreement to provide that the Obligations are
non-recourse to the Borrower or its Subsidiaries. Furthermore, the Borrower
shall, provided it receives at least fifteen (15) Business Days written notice
of the Lender's request therefor, deliver a 10(b)(5) opinion and a
nonconsolidation opinion, each at the Borrower's sole cost and expense, in form
and substance and delivered by counsel acceptable to the Lender and the Rating
Agency, as may be required by the Lender and/or the Rating Agency in
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connection with such securitization. The Borrower shall undertake all actions
(including structural reorganization including, without limitation, transferring
assets to a special/single purpose and bankruptcy remote entity, if appropriate)
necessary to enable its counsel to issue the opinion. The Borrower's failure to
deliver the opinions required hereby or otherwise comply with the provisions of
this Section 10.16 and the following Sections 10.17 through 10.18, shall
constitute an "Event of Default" hereunder.
SECTION 10.17. Cooperation with Rating Agencies. The Borrower covenants
and agrees that in the event the Lender decides to include the Loans as an asset
of a securitization, the Borrower shall upon the Lender's written request (a)
proceed to establish a cash management system and escrow accounts as required by
the Rating Agencies or the Lender, whereby all revenues shall be deposited
directly into an account in the name of the Lender to pay real estate taxes,
insurance premiums, monthly debt service and capital improvement reserves, with
the excess being available to the Borrower for its use, (b) gather any
environmental or engineering information required by the Rating Agency in
connection with such a securitization, (c) at the Lender's request, meet with
representatives of the Rating Agency to discuss the business and operations of
the Mortgaged Properties, and (d) cooperate with the requests of the Lender or
the Rating Agency in connection with all of the foregoing.
SECTION 10.18. Securitization Financials. The Borrower covenants and
agrees that, upon the Lender's written request therefor in connection with a
securitization, in which the Loans are to be included as an asset, the Borrower
shall promptly deliver audited financial statements and related documentation
prepared by an independent certified public accountant that satisfy securities
laws and requirements for use in a public registration statement (which may
include up to three (3) years of historical audited financial statements).
Notwithstanding anything to the contrary in Sections 10.16, 10.17 and this
Section 10.18, the Lender agrees that the Loans shall not be included as an
asset of a securitization which is effective on or before the Final Maturity
Date.
[remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
HOSPITALITY PROPERTIES TRUST
By:/s/ Thomas O'Brien
Name: Thomas O'Brien
Title: Treasurer and
Chief Financial Officer
DLJ MORTGAGE CAPITAL, INC.
By:/s/ N. Dante LaRocca
Name: N. Dank LaRocca
Title: Senior Vice President
EXHIBIT 10.13
UP TO U.S. $130,000,000
SECOND SUPPLEMENTAL
CREDIT AGREEMENT
Dated as of November 14, 1997
Between
HOSPITALITY PROPERTIES TRUST
as Borrower
and
DLJ MORTGAGE CAPITAL, INC.
as Lender
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
----------------------
PAGE
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
SECTION 1.01. Defined Terms....................................................................1
SECTION 1.02. Computation of Time Periods.....................................................21
ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. The Loans.......................................................................21
SECTION 2.02. Making the Loans................................................................21
SECTION 2.03. Intentionally Omitted...........................................................22
SECTION 2.04. Reduction and Termination of the Commitment.....................................22
SECTION 2.06. Prepayments.....................................................................22
SECTION 2.07. Continuation of Loans at the Eurodollar Rate....................................23
SECTION 2.09. Interest Rate Determination and Protection......................................24
SECTION 2.10. Increased Costs.................................................................24
SECTION 2.11. Illegality......................................................................25
SECTION 2.12. Capital Adequacy................................................................25
SECTION 2.13. Payments and Computations.......................................................26
SECTION 2.14. Taxes...........................................................................26
ARTICLE 3
PREPARATION OF MORTGAGE DOCUMENTS AND APPROVAL OF PROPOSED
HOTEL FACILITIES
SECTION 3.01. Recordation and Filing of Mortgage Documents, Etc...............................27
SECTION 3.02. Approval of Proposed Hotel Facilities...........................................28
ARTICLE 4
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to the Initial Loan........................................29
SECTION 4.02. Conditions Precedent to Each Loan...............................................32
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Existence; Compliance with Law..................................................34
SECTION 5.02. Power; Authorization; Enforceable Obligations...................................34
<PAGE>
PAGE
SECTION 5.03. Taxes...........................................................................35
SECTION 5.04. Full Disclosure.................................................................36
SECTION 5.05. Financial Matters...............................................................36
SECTION 5.06. Litigation......................................................................37
SECTION 5.07. Margin Regulations..............................................................37
SECTION 5.08. Ownership of Borrower and HRPT Advisors; Subsidiaries...........................37
SECTION 5.09. ERISA...........................................................................38
SECTION 5.10. Liens...........................................................................39
SECTION 5.11. [Intentionally Omitted]..........................................................39
SECTION 5.12. No Burdensome Restrictions; No Defaults; Contractual
Obligations....................................................................39
SECTION 5.13. No Investments..................................................................40
SECTION 5.14. Government Regulation...........................................................40
SECTION 5.15. Insurance.......................................................................40
SECTION 5.16. Employees.......................................................................40
SECTION 5.17. Force Majeure...................................................................41
SECTION 5.18. Use of Proceeds.................................................................41
SECTION 5.19. Environmental Protection........................................................41
SECTION 5.20. Contractual Obligations Concerning Assets.......................................43
SECTION 5.21. Status as REIT..................................................................43
SECTION 5.22. Real Property...................................................................43
SECTION 5.23. Operator and Advisor: Compliance with Law.......................................45
SECTION 5.24. Operating Leases, Limited Rent Guaranties, Management
Agreement and Advisory Agreement...............................................45
SECTION 5.25. FF&E Reserves...................................................................46
ARTICLE 6
FINANCIAL COVENANTS
SECTION 6.01. Limitation and Indebtedness.....................................................46
SECTION 6.02. Limitation on Secured Indebtedness..............................................46
SECTION 6.03. Interest Expense Coverage.......................................................47
SECTION 6.04. Maintenance of Tangible Net Worth...............................................47
SECTION 6.05. Maintenance of Loan to Value Requirement........................................47
ARTICLE 7
AFFIRMATIVE COVENANTS
SECTION 7.01. Compliance with Laws, Etc.......................................................47
SECTION 7.02. Conduct of Business.............................................................47
SECTION 7.03. Payment of Taxes, Etc...........................................................48
SECTION 7.04. Maintenance of Insurance........................................................48
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PAGE
SECTION 7.05. Preservation of Existence, Etc..................................................48
SECTION 7.06. Access..........................................................................48
SECTION 7.07. Keeping of Books................................................................49
SECTION 7.08. Maintenance of Properties, Etc..................................................49
SECTION 7.09. Performance and Compliance with Other Covenants.................................49
SECTION 7.10. Application of Proceeds.........................................................49
SECTION 7.11. Financial Statements............................................................49
SECTION 7.12. Reporting Requirements..........................................................51
SECTION 7.13. Leases and Operating Leases.....................................................54
SECTION 7.14. [Intentionally Omitted]..........................................................54
SECTION 7.15. Employee Plans..................................................................55
SECTION 7.16. [Intentionally Omitted]..........................................................55
SECTION 7.17. Fiscal Year.....................................................................55
SECTION 7.18. Environmental Matters...........................................................55
SECTION 7.19. [Intentionally Omitted]..........................................................55
SECTION 7.20. REIT Requirements...............................................................55
SECTION 7.21. Maintenance of FF&E Reserves....................................................56
SECTION 7.22. Further Assurances..............................................................56
ARTICLE 8
NEGATIVE COVENANTS
SECTION 8.01. Liens, Etc......................................................................56
SECTION 8.02. Indebtedness....................................................................58
SECTION 8.03. Lease Obligations...............................................................59
SECTION 8.04. [Intentionally Omitted]..........................................................59
SECTION 8.05. Mergers, Stock Issuances, Asset Sales, Etc......................................59
SECTION 8.06. Investments.....................................................................60
SECTION 8.07. Change in Nature of Business or Organizational
Documents.....................................................................61
SECTION 8.08. Modification of Material Agreements.............................................61
SECTION 8.09. Accounting Changes..............................................................61
SECTION 8.10. Transactions with Affiliates....................................................61
SECTION 8.11. Environmental Matters...........................................................62
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.01. Events of Default...............................................................62
SECTION 9.02. Remedies........................................................................65
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PAGE
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Amendments, Etc................................................................66
SECTION 10.02. Notices, Etc...................................................................66
SECTION 10.03. No Waiver; Remedies............................................................67
SECTION 10.04. Costs; Expenses; Indemnities...................................................67
SECTION 10.05. Right of Set-off...............................................................69
SECTION 10.06. Binding Effect.................................................................69
SECTION 10.07. Assignments and Participations.................................................69
SECTION 10.08. Governing Law; Severability....................................................70
SECTION 10.09. Submission of Jurisdiction; Service of Process.................................70
SECTION 10.10. Section Titles.................................................................71
SECTION 10.11. Execution in Counterparts......................................................71
SECTION 10.12. Entire Agreement...............................................................71
SECTION 10.13. Confidentiality................................................................71
SECTION 10.14. Waiver of Jury Trial...........................................................71
SECTION 10.15. NON-LIABILITY OF TRUSTEES......................................................72
SECTION 10.16. Refinancing and/or Securitization..............................................72
SECTION 10.17. Cooperation with Rating Agencies...............................................72
SECTION 10.18. Securitization Financials......................................................73
</TABLE>
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PAGE
SCHEDULES
Schedule 1.01 - List of Collateral Properties
Schedule 5.08(c) - List of Subsidiaries
Schedule 5.19 - Environmental Matters
Schedule 5.20 - Asset Purchase or Sale Commitments
Schedule 5.22(a) - Owned Real Estate
Schedule 5.22(b) - Leased Real Estate
Schedule 5.22(c) - Defects in Improvements
Schedule 8.01 - Existing Liens
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PAGE
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Negative Pledge Agreement
Exhibit D - Form of Opinion of Counsel for the Loan Parties
Exhibit E - Form of Mortgage
Exhibit F - Form of Assignment Agreement
Exhibit G - Form of Operating Lease
Exhibit H - Form of Security Agreement
Exhibit I - Form of Subordination Agreement
Exhibit J - Form of Subordination, Non-Disturbance and Attornment
Agreement
Exhibit K - Form of Subsidiary Guaranty
Exhibit L - Form of Stock Pledge Agreement
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SECOND SUPPLEMENTAL CREDIT AGREEMENT, dated as of the 14th day of
November, 1997 (this "Agreement"), between HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust (the "Borrower") and DLJ MORTGAGE CAPITAL,
INC. a Delaware corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lender make advances of up
to $130,000,000 in aggregate principal amount outstanding at any one time, for
the purposes hereinafter specified; and
WHEREAS, the Lender is willing to make funds available for such
purposes upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Advisor" means HRPT Advisors or such other Person as shall act as an
advisor to the Borrower, whether pursuant to the Advisory Agreement, or an
agreement analogous to the Advisory Agreement, with the prior written consent of
the Lender.
"Advisory Agreement" means the Advisory Agreement, dated as of August
21, 1995, between the Borrower and the Advisor, as amended, supplemented or
modified from time to time in a manner not inconsistent with the terms hereof or
of the Subordination Agreement.
"Affiliate" means, as to any Person, any Subsidiary of such Person and
any other Person which, directly or indirectly, controls, is controlled by or is
under common control with such Person and includes each officer or director or
trustee or general partner of such Person, and each Person who is the beneficial
owner of 10% or more of any class of voting Stock of such Person. For the
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
<PAGE>
"Agreement" means this Second Supplemental Credit Agreement, together
with all Exhibits and Schedules hereto, as the same may be amended, supplemented
or otherwise modified from time to time.
"Approved Hotel Facility" means any Proposed Hotel Facility approved by
the Lender pursuant to Section 3.02.
"Asset Sale" means any sale, conveyance, transfer, assignment, lease or
other disposition (including, without limitation, by merger or consolidation and
whether by operation of law or otherwise) by the Borrower or any of its
Subsidiaries to any Person of any Stock of any of its Subsidiaries, any Stock
Equivalents of any of its Subsidiaries or any Mortgaged Property but excluding
Operating Leases.
"Asset Sale Proceeds" means payments received by the Borrower or any of
its Subsidiaries (including, without limitation, any payments received by way of
deferred payment of principal pursuant to a note or receivable or otherwise, but
only as and when received) from any Asset Sale (after repayment of any
Indebtedness other than the Loans secured by the Mortgaged Property subject of
such Asset Sale to the extent such Indebtedness is permitted hereunder), in each
case net of the amount of (i) brokers' and advisors' fees and commissions
payable other than to an Affiliate of the Borrower in connection with such Asset
Sale, (ii) all foreign, federal, state and local taxes payable as a direct
consequence of such Asset Sale, (iii) the reasonable fees and expenses
attributable to such Asset Sale, to the extent not included in clause (i),
except to the extent payable to any Affiliate of the Borrower, and (iv) any
amount required to be paid to any Person (other than the Borrower and any of its
Subsidiaries) owning a beneficial interest in the property or assets sold.
"Assignment Agreement" means, with respect to each Mortgaged Property
that is operated by a manager pursuant to a Management Agreement, an agreement
substantially in the form of Exhibit F, or such other form as the Lender shall
approve, such approval not to be unreasonably withheld, delayed or conditioned,
executed by the Borrower, the Lender and the Manager, assigning to the Lender,
the Management Agreement relating thereto.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall be
equal at all times to the higher of:
(1) the rate of interest announced publicly by Citibank, N.A. in New
York, New York, from time to time, as such bank's prime rate; and
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(2) the sum (adjusted to the nearest 1/4 of one percent or, if there
is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i)
one and one-half percent (1 1/2%) per annum plus (ii) the Federal Funds Rate.
"Base Rent" means, for any period, the base or fixed rent or percentage
rent during such period payable by an Operating Lessee pursuant to the terms of
an Operating Lease.
"Business Day" means a day of the year on which banks are not required
or authorized to close in New York City and a day on which dealings are also
carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period, the
aggregate of all expenditures by such Person and its consolidated Subsidiaries,
except interest capitalized during construction, during such period for
property, plant or equipment, including, without limitation, renewals,
improvements, replacements and capitalized repairs, that would be reflected as
additions to property, plant or equipment on a consolidated balance sheet of
such Person and its Subsidiaries prepared in conformity with GAAP. For the
purpose of this definition, the purchase price of equipment which is acquired
simultaneously with the trade-in of existing equipment owned by such Person or
any of its Subsidiaries or with insurance proceeds shall be included in Capital
Expenditures only to the extent of the gross amount of such purchase price less
the credit granted by the seller of such equipment being traded in at such time
or the amount of such proceeds, as the case may be.
"Capital Financing Indebtedness" means the principal amount of all
Indebtedness incurred or assumed in connection with any Capital Expenditures,
all Capitalized Lease Obligations and all other Indebtedness (including purchase
money Indebtedness) incurred solely for the purpose of financing or refinancing
the acquisition of assets or properties.
"Capitalized Lease" means, as to any Person, any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in conformity with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.
"Closing Date" means the date on which the first Loan is made pursuant
to this Credit Agreement.
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"Code" means the Internal Revenue Code of 1986 (or any successor
legislation thereto), as amended from time to time.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien is granted under any of the Collateral Documents.
"Collateral Documents" means, the Negative Pledge Agreements, the
Assignment Agreements, the Mortgage Documents, the Security Agreements, the
Subsidiary Guaranties and any other document now or hereafter executed and
delivered by a Loan Party granting a Lien on any of its property to secure
payment of the Obligations.
"Collateral Properties" means the Real Estate and Leases described on
Schedule 1.01.
"Commitment" has the meaning specified in Section 2.01.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent of such Person in incurring the Contingent Obligation is to provide
assurance to the obligee of such Indebtedness or Contractual Obligation that
such Indebtedness or Contractual Obligation will be paid or discharged, or that
any agreement relating thereto will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected (in whole or in part)
against loss in respect thereof. Contingent Obligations of a Person include,
without limitation, (a) the direct or indirect guarantee, endorsement (other
than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of an obligation
of another Person, and (b) any liability of such Person for an obligation of
another Person through any agreement (contingent or otherwise) (i) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of a loan, advance, stock purchase, capital contribution or otherwise),
(ii) to maintain the solvency or any balance sheet item, level of income or
financial condition of another Person, (iii) to make take-or-pay or similar
payments, if required, regardless of non-performance by any other party or
parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee)
property, or to purchase or sell services, primarily for the purpose of enabling
the debtor to make payment of such obligation or to assure the holder of such
obligation against loss, or (v) to supply funds to or in any other manner invest
in such other Person (including, without limitation, to pay for property or
services irrespective of whether such property is received or such services are
rendered), if in the case of any agreement described
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under subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary
purpose or intent thereof is as described in the preceding sentence. The amount
of any Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported.
"Contract" means any contract, agreement, undertaking, indenture, note,
bond, loan, instrument, lease, conditional sales contract, mortgage, deed of
trust, license, franchise, insurance policy, commitment or other arrangement or
agreement.
"Contractual Obligation" of any Person means any obligation, agreement,
undertaking or similar provision of any security issued by such Person or of any
Contract (excluding a Loan Document) to which such Person is a party or by which
it or any of its property is bound or to which any of its properties is subject.
"Default" means any event which with the passing of time or the giving
of notice or both would become an Event of Default.
"DOL" means the United States Department of Labor, or any successor
thereto.
"Dollars" and the sign "$" each mean the lawful money of the United
States of America.
"Environmental Claim" means any accusation, allegation, notice of
violation, action, claim, Environmental Lien, demand, abatement or other Order
or direction (conditional or otherwise) by any Governmental Authority or any
other Person for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or restriction, resulting from or based upon (i) the existence,
or the continuation of the existence, of a Release (including, without
limitation, sudden or non- sudden accidental or non-accidental Releases) of, or
exposure to, any Hazardous Material or odor, audible noise or other nuisance, or
other Release in, into or onto the environment (including, without limitation,
the air, soil, surface water or groundwater) at, in, by, from or related to any
property owned, operated or leased by the Borrower or any of its Subsidiaries or
any activities or operations thereof; (ii) the environmental aspects of the
transportation, storage, treatment or disposal of Hazardous Materials in
connection with any property owned, operated or leased by the Borrower or any of
its Subsidiaries or their operations or facilities; or (iii) the violation, or
alleged violation, of any Environmental Laws, Orders or Environmental Permits of
or from any Governmental Authority relating to
5
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environmental matters connected with any property owned, leased or operated by
the Borrower or any of its Subsidiaries.
"Environmental Laws" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
requirement relating in any way to the environment, natural resources, or public
or employee health and safety and includes, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. ss. 1801 et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. ss. 136 et seq., the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the Toxic Substances Control
Act, 15 U.S.C. ss. 2601 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq.,
the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Occupational Safety and
Health Act, 29 U.S.C. ss. 651 et seq., and the Oil Pollution Act of 1990, 33
U.S.C. ss. 2701 et seq., as such laws have been amended or supplemented, and the
regulations promulgated pursuant thereto, and all analogous state and local
statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim.
"Environmental Lien" means any Lien in favor of any Governmental
Authority arising under any Environmental Law.
"Environmental Permit" means any Permit required under any applicable
Environmental Laws or Order and all supporting documents associated therewith.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control or treated as a single employer with any Loan
Party within the meaning of Section 414 (b), (c), (m) or (o) of the Code.
"ERISA Event" means (i) an event described in Sections 4043(b)(1), (2),
(3), (5), (6), (8) or (9) of ERISA with respect to a Pension Plan; (ii) the
withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or
partial
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withdrawal of any Loan Party or any ERISA Affiliate from any Multiemployer Plan
or the insolvency of any Multiemployer Plan; (iv) the filing of a notice of
intent to terminate a Pension Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (v) the institution of proceedings by
the PBGC to terminate or appoint a trustee to administer a Pension Plan or
Multiemployer Plan; (vi) the failure to make any required contribution to a
Pension Plan; (vii) any other event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; (viii) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA; (ix) a prohibited transaction (as described in Code Section 4975 or ERISA
Section 406) shall occur with respect to any Plan; or (x) any Loan Party or
ERISA Affiliate shall request a minimum funding waiver from the IRS with respect
to any Pension Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, for any Interest Period, an interest rate per
annum equal to the sum of (a) the rate per annum obtained by dividing (i) the
rate of interest determined by the Lender to be the average (rounded upward to
the nearest whole multiple of 1/16 of 1% per annum, if such average is not such
a multiple) of the rates for Dollar deposits which appear on the display
designated as page "LIBO" on the Reuter Monitor Money Rates Service (or such
other page as may replace such page or that service for the purpose of
displaying London interbank offered rates for major banks) (the "Reuters Page"),
as of 11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the Loan during such
Interest Period and for a period equal to such Interest Period by (ii) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such
Interest Period, plus (b) 1.25%. If the Lender is unable to ascertain the
interest rate referred to in (i) above from the Reuters Page, such rate shall be
determined from such financial reporting service or other information as shall
be reasonably determined by the Lender.
"Eurodollar Rate Reserve Percentage" for any Interest Period means the
reserve percentage applicable two Business Days before the first day of such
]Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities
which
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<PAGE>
includes deposits by reference to which the Eurodollar Rate is determined)
having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 9.01.
"Existing Facility" means the revolving credit facility in the maximum
principal amount of up to $250,000,000 evidenced by that certain Revolving
Credit Agreement dated as of August 22, 1995, as amended and restated pursuant
to that certain Amended and Restated Revolving Credit Agreement dated as of
December 29, 1995, as further amended pursuant to that certain Amendment No. 1
to Amended and Restated Revolving Credit Agreement dated as of February 26,
1996, as further amended by those certain side letters dated February 29, 1996
and March 1997, as further amended by Amendment No. 2 to Amended and Restated
Revolving Credit Agreement dated as of October 10, 1997, as further amended by
Amendment No. 3 to Amended and Restated Credit Agreement dated as of the date
hereof, each by and between the Borrower and the Lender, as the same may
hereafter be amended, modified or supplemented.
"Fair Market Value" means with respect to any Hotel Facility at any
date, the value thereof reasonably determined by the Lender by dividing the Base
Rents from such Hotel Property by ten percent (10%).
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Lender from three Federal funds brokers of
recognized standing selected by it.
"FF&E Reserve" means any reserve fund established in respect of any
Hotel Facility.
"Final Borrowing Date" means December 31, 1997.
"Final Maturity Date" means December 31, 1998.
"Financial Officer's Certificate" has the meaning specified in Section
7.11(c).
"Fiscal Quarter" means each of the three month periods ending on March
31, June 30, September 30 and December 31.
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"Fiscal Year" means the twelve month period ending on December 31.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination except that, for purposes of Article 6, GAAP shall be determined
on the basis of such principles in effect on the date hereof and consistent with
those used in the preparation of the audited financial statements referred to in
Section 5.05.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Material" means any substance, material or waste which is
regulated by any Governmental Authority of the United States or other national
government, including, without limitation, any material, substance or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"Hotel Facility" means each of (a) the Collateral Properties, and (b)
the Approved Hotel Facilities.
"HRPT Advisors" means HRPT Advisors, Inc., a Delaware corporation.
"Improvements" has the meaning specified in Section 5.22(c).
"Indebtedness" of any Person means (i) all indebtedness of such Person
for borrowed money (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured) or for the deferred purchase price of
property or services, (ii) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments, (iii) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to
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repossession or sale of such property), (iv) all Capitalized Lease Obligations
of such Person, (v) all Contingent Obligations of such Person, (vi) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Stock or Stock Equivalents of such Person, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (vii) all
obligations of such Person under Interest Rate Contracts, and (viii) all
Indebtedness referred to in clause (i), (ii), (iii), (iv), (v), (vi) or (vii)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and general intangibles) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (ix) in the case of the Borrower, the Obligations, and (x)
all liabilities of such Person that would be shown on a balance sheet of such
Person prepared in conformity with GAAP.
"Indemnitees" has the meaning specified in Section 10.04.
"Interest Period" means, in the case of any Loan, (i) initially, the
period commencing on the date such Loan is made and ending one (1) month
thereafter, and (ii) thereafter, a period commencing on the last day of the
immediately preceding Interest Period therefor and ending one (1) month
thereafter; provided, however, that:
(a) if any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless the result of such extension would be to extend such
Interest Period into another calendar month, in which event such Interest Period
shall end on the immediately preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
(c) if the Borrower, by written notice to the Lender given no later
than two (2) Business Days prior to the expiration of an Interest Period for any
Loan, requests a one day interest period for such Loan, the Interest Period for
such Loan shall mean a period of one day (the "1 Day Interest Period"); provided
that in no event shall any Loan have a 1 Day Interest Period for a period in
excess of thirty (30) consecutive days (the "Limited Period"), and upon the
expiration of the Limited Period in respect of any Loan, such Loan shall
automatically be continued at the one (1) month Interest Period specified above.
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"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Investments" has the meaning specified in Section 8.06.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Leases" means, with respect to the Borrower or any of its
Subsidiaries, all of those leasehold estates in real property owned by the
Borrower or such Subsidiary, as lessee, as such may be amended, supplemented or
otherwise modified from time to time to the extent permitted by this Agreement.
"Legal Proceedings" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"Lending Office" means, with respect to the Lender, the office located
at 277 Park Avenue, New York, New York 10172 or such other office of the Lender
as the Lender may from time to time specify to the Borrower.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrange ment of any kind or nature whatsoever intended to secure
payment of any Indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a Capitalized Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing,
under the Uniform Commercial Code or comparable law of any jurisdiction, of any
financing statement naming the owner of the asset to which such Lien relates as
debtor (excluding precautionary filings.
"Limited Rent Guaranty" means, with respect to any Real Estate or
Lease, a guaranty by a Tenant Guarantor of the obligations of the Operating
Lessee under the Operating Lease.
"Loan" or "Loans" means the loan or loans made or to be made by the
Lender to the Borrower pursuant to Article 2.
"Loan Documents" means, collectively, this Agreement, the Note, the
Collateral Documents and each certificate, agreement or document executed by a
Loan Party and delivered to the Lender in connection with or pursuant to any of
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the foregoing, as such agreements, documents or instruments may be amended,
modified or supplemented from time to time.
"Loan Party" means the Borrower and each Subsidiary and Affiliate of
the Borrower which executes and delivers a Loan Document.
"Loan to Value Requirement" means the requirement that at any time the
aggregate principal amount of the Loans outstanding at such time shall not
exceed fifty percent (50%) of the aggregate of the Fair Market Values for all of
the Mortgaged Properties.
"Management Agreement" means an agreement, if any, relating to the
operation and/or management of a Hotel Facility between the Borrower and the
Manager, or between the Operating Lessee and Manager, in such form as shall be
approved by the Lender, which approval shall not be unreasonably withheld,
delayed or conditioned.
"Manager" means such manager as shall be approved by the Lender (which
approval shall not be unreasonably withheld, delayed or conditioned), as manager
under a Management Agreement.
"Material Adverse Change" means a material adverse change in any of (i)
the condition (financial or otherwise), business, performance, prospects,
operations or properties of (A) any Loan Party and its Subsidiaries taken as one
enterprise, (B) any Operating Lessee, (C) any Manager, or (D) the Advisor (ii)
the legality, validity or enforceability of any Loan Document or any Operating
Lease or any Limited Rent Guaranty, Management Agreement or Advisory Agreement
(iii) the perfection or priority of the Liens granted pursuant to the Collateral
Documents, (iv) the ability of the Borrower to repay the Obligations or of any
Loan Party to perform its material obligations under any Loan Document, (v) the
ability of any Operating Lessee to perform obligations under any Operating Lease
or of any Tenant Guarantor to perform its obligations under any Limited Rent
Guaranty, (vi) the ability of any Manager to perform its obligations under any
Management Agreement; (vii) the ability of the Advisor to perform its
obligations under the Advisory Agreement or (viii) the rights and remedies of
the Lender under the Loan Documents.
"Material Adverse Effect" means an effect that results in or causes, or
has a reasonable likelihood of resulting in or causing, a Material Adverse
Change.
"Mortgages" means the mortgages, deeds to secure debt or deeds of trust
securing, inter alia, the Obligations, made or required herein to be made by the
Borrower or any of its Subsidiaries in substantially the form of Exhibit E, as
such
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Mortgages may be amended, supplemented or otherwise modified from time to time.
"Mortgage Documents" means with respect to any Hotel Facility, a
Mortgage, a Subordination, Nondisturbance and Attornment Agreement and the other
documents relating thereto, including financing statements on Form UCC-1,
subject to appropriate revisions for state or property specific requirements.
"Mortgaged Property" means any property subject to a Mortgage in favor
of the Lender.
"Multiemployer Plan" means, as of any applicable date, a multiemployer
plan, as defined in Section 4001(a)(3) of ERISA, and to which any Loan Party,
any of its Subsidiaries or any ERISA Affiliate is making, is obligated to make,
or within the six-year period ending at such date, has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
"Negative Pledge Agreement" means, in respect of each Hotel Facility,
an agreement, in substantially the form of Exhibit C, executed by the Borrower
or the Subsidiary owning such Hotel Facility, as such agreement may be amended,
supplemented or otherwise modified from time to time.
"Net Income (Loss)" means, for any Person for any period, the aggregate
of net income (or loss) of such Person and its Subsidiaries for such period,
determined on a consolidated basis in conformity with GAAP.
"Net Interest Expense" means, for any Person for any period, gross
interest expense in respect of all Indebtedness of such Person and its
Subsidiaries for such period determined on a consolidated basis in conformity
with GAAP, less the following for such Person and its Subsidiaries determined on
a consolidated basis in conformity with GAAP: (a) the sum of (i) interest
capitalized during construction for such period, (ii) interest income for such
period, and (iii) gains for such period on Interest Rate Contracts (to the
extent not included in interest income above and to the extent not deducted in
the calculation of such gross interest expense), plus the following for such
Person and its Subsidiaries determined on a consolidated basis in conformity
with GAAP: (b) the sum of (i) losses for such period on Interest Rate Contracts
(to the extent not included in such gross interest expense), and (ii) the
amortization of upfront costs or fees for such period associated with Interest
Rate Contracts (to the extent not included in gross interest expense).
"Net Worth" of any Person means at any date the excess of (a) the total
assets of such Person and its Subsidiaries at such date determined on a
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consolidated basis in conformity with GAAP over (b) all obligations which in
conformity with GAAP would be included in determining total liabilities as shown
on the liabilities side of a consolidated balance sheet of such Person and its
Subsidiaries at such date.
"Note" means a promissory note of the Borrower payable to the order of
the Lender in a principal amount equal to the amount of the Commitment as
originally in effect, in substantially the form of Exhibit A, evidencing the
aggregate Indebtedness of the Borrower to the Lender resulting from the Loans
made by the Lender.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Obligations" means the Loans and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, any Affiliate of the Lender or any Indemnitee, of every type and
description, present or future, whether or not evidenced by any note, guaranty
or other instrument, arising under this Agreement or under any other Loan
Document, whether or not for the payment of money, loan, guaranty,
indemnification, foreign exchange transaction or Interest Rate Contract or in
any other manner, whether direct or indirect (including, without limitation,
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term "Obligations"
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements and any other sum chargeable to the Borrower under this
Agreement or any other Loan Document.
"Other Supplemental Facility" means the First Supplemental Credit
Agreement dated as of the date hereof between the Borrower and the Lender in the
aggregate principal amount of up to $75,000,000, as the same may hereafter be
amended, supplemented or otherwise modified from time to time.
"Operating Lease" means a lease or sublease relating to any Real Estate
or Lease, between the Borrower or any of its Subsidiaries, as lessor, and the
Operating Lessee, as lessee, substantially in the form of the lease annexed as
Exhibit G hereto or such other form as shall be approved by the Lender, which
approval shall not be unreasonably withheld, delayed or conditioned.
"Operating Lessee" means with respect to any Hotel Facility any
wholly-owned subsidiary of Sholodge, Inc. or such other lessee as shall be
approved by the Lender (which approval shall not be unreasonably withheld,
delayed or conditioned), as lessee under the Operating Lease relating to such
Hotel Facility.
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"Operator" means the Operating Lessee and/or the Manager (as the case
may be) responsible for the operation and management of any Real Estate or
Lease.
"Order" means any order, injunction, judgment, decree, ruling,
assessment or arbitration award.
"Other Taxes" has the meaning specified in Section 2.14(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" means a plan, other than a Multiemployer Plan, which is
covered by Title IV of ERISA or Code Section 412 and which any Loan Party, any
of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Perfection Event" means the earlier of November 1, 1998 and the
occurrence of an Event of Default.
"Permit" means any permit, approval, authorization, license, variance,
registration, permission or consent required from a Governmental Authority under
an applicable Requirement of Law.
"Permitted Lien" means any Lien permitted under Section 8.01.
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a Governmental
Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which any Loan Party or any of its Subsidiaries maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.
"Proposed Hotel Facility" means any Real Estate or Lease comprising an
operating facility offering hotel or other lodging services which the Borrower
proposes to include as collateral for the Loans.
"Proposed Hotel Facility Statement" means a certificate of a
Responsible Officer providing each of the following:
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(i) details of the location of the Proposed Hotel Facility and
the real estate interest;
(ii) certification (based on information available to the
Borrower after diligent enquiry) as to the proposed annual Base Rent
under the proposed Operating Lease of the Proposed Hotel Facility;
(iii) audited balance sheets if available, or pro forma
balance sheets, of the owner or operator of the Proposed Hotel
Facility, and the related consolidated statements of income, retained
earnings and cash flows of such owner or operator for its previous
three (3) fiscal years;
(iv) audited balance sheets if available, or pro forma balance
sheets, in respect of the Proposed Hotel Facility and the related
consolidated statements of operations, changes in owner's equity
(deficit) and cash flows in respect of such Proposed Hotel Facility,
for the previous three (3) fiscal years;
(v) a written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any
significant environmental, health and safety violations, hazards or
liabilities to which the owner or operator of the Proposed Hotel
Facility may be subject, which report shall demonstrate, to the
reasonable satisfaction of the Lender, that the Proposed Hotel Facility
and the operations thereof are in compliance in all material respects
with all applicable Environmental Laws and are not subject to any
material Environmental Liabilities and Costs;
(vi) a copy of the proposed form of Operating Lease and, if
applicable, Management Agreement;
(vii) a copy of the proposed form of Limited Rent Guaranty, if
applicable;
(viii) the names of the proposed Operating Lessee and, if
applicable, Manager;
(ix) a copy of a recent market study in respect of the
Proposed Hotel Facility;
(x) a current title report and survey in respect of the
Proposed Hotel Facility, issued by a title company/surveyor reasonably
acceptable to the Lender; and
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(xi) a written report of an investigation by an engineering
consultant reasonably acceptable to the Lender.
"Rating Agency" shall mean any nationally recognized statistical agency
selected by the Lender including, without limitation, Duff & Phelps Rating Co.,
Fitch Investors Services, Inc., Moody's Investors Services, Inc., and/or
Standard and Poors Corporation, collectively, and any successor to any of them;
provided, however, that at any time during which the Loans are an asset of a
securitization, "Rating Agency" shall mean the rating agency or rating agencies
that from time to time rate the securities issued in connection with such
securitization.
"Real Estate" means all of those plots, pieces or parcels of land now
owned or hereafter acquired by the Borrower or any of its Subsidiaries (the
"Land"), including, without limitation, those listed on Schedule 5.22(a),
together with the right, title and interest of the Borrower or such Subsidiary,
if any, in and to the streets, the land lying in the bed of any streets, roads
or avenues, opened or proposed, in front of, adjoining or abutting the Land to
the center line thereof, the air space and development rights pertaining to the
Land and the right to use such air space and development rights, all rights of
way, privileges, liberties, tenements, hereditaments and appurtenances belonging
or in any way appertaining thereto, all fixtures, all easements now or hereafter
benefitting the Land and all royalties and rights appertaining to the use and
enjoyment of the Land, including, without limitation, all alley, vault,
drainage, mineral, water, oil and gas rights, together with all of the buildings
and other improvements now or hereafter erected on the Land, and any fixtures
appurtenant thereto.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the indoor or outdoor environment or into or
out of any property.
"Remedial Action" means all actions including, without limitation, any
Capital Expenditures, required or voluntarily undertaken to (i) clean up,
remove, treat or in any other way address any Hazardous Material or other
substance in the indoor or outdoor environment, (ii) prevent the Release or
threat of Release, or minimize the further Release, of any Hazardous Material or
other substance so it does not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment, (iii) perform
pre-remedial studies and investigations or post-remedial monitoring and care, or
(iv) bring facilities on any property owned, leased or operated by the Borrower
or any of its Subsidiaries into compliance with all Environmental Laws and
Environmental Permits.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
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such Person, and all federal, state and local laws, rules and regulations,
including, without limitation, federal, state or local securities, antitrust and
licensing laws, all food, health and safety laws, and all applicable trade laws
and requirements, including, without limitation, all disclosure requirements of
Environmental Laws, ERISA and all orders, judgments, decrees or other
determinations of any Governmental Authority or arbitrator, applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer" means, with respect to any Person, any of the
principal executive officers or general partners of such Person.
"Secured Indebtedness" of any Person means any Indebtedness of such
Person for which the obligations thereunder are secured by a Lien on any assets
of such Person.
"Security Agreement" means, with respect to each Hotel Facility, an
agreement in substantially the form of Exhibit H or such other form as shall be
approved by the Lender (which approval shall not be unreasonably withheld,
delayed or conditioned), executed by the Borrower and the other parties thereto,
granting to the Lender a security interest in the Borrower's interest in the
FF&E Reserve.
"Solvent" means, with respect to any Person, that the value of the
assets of such Person (both at fair value and present fair saleable value) is,
on the date of determination, greater than the total amount of liabilities
(including, without limitation, contingent and unliquidated liabilities) of such
Person as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and does not have
unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Stock" means shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or non-voting, and
includes, without limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any stock, whether or not presently convertible, exchangeable or
exercisable.
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"Stock Pledge Agreement" means the Stock Pledge Agreement of a
Subsidiary of the Borrower formed for the purpose of acquiring Hotel Facilities,
substantially in the form of Exhibit L, as amended, supplemented or modified
from time to time in a manner or inconsistent with the terms thereof and hereof.
"Subordination Agreement" means an agreement among the Lender, the
Advisor and the Borrower, substantially in the form annexed as Exhibit I, as
amended, supplemented or modified from time to time in a manner not inconsistent
with the terms thereof and hereof.
"Subordination, Nondisturbance and Attornment Agreement" means with
respect to any Hotel Facility an agreement between the Lender and the relevant
Operating Lessee substantially in the form attached as Exhibit J and made a part
hereof or such other form as shall be approved by the Lender, as amended,
supplemented or modified from time to time in a manner not inconsistent with the
terms thereof and hereof.
"Subsidiary Guaranty" means the guaranty of a Subsidiary of the
Borrower formed for the purpose of acquiring Hotel Facilities, substantially in
the form of Exhibit K, as amended, supplemented or modified from time to time in
a manner not inconsistent with the terms thereof and hereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which an aggregate of 50% or more of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors, managers, trustees or other controlling persons, is, at the time,
directly or indirectly, owned or controlled by such Person and/or one or more
Subsidiaries of such Person (irrespective of whether, at the time, Stock of any
other class or classes of such entity shall have or might have voting power by
reason of the happening of any contingency).
"Tangible Net Worth" of any Person means, at any date, the Net Worth of
such Person at such date, excluding, however, from the determination of the
total assets of such Person at such date, (i) all goodwill, organizational
expenses, research and development expenses, trademarks, trade names,
copyrights, patents, patent applications, licenses and rights in any thereof,
and other similar intangibles, (ii) all prepaid expenses, deferred charges or
unamortized debt discount and expense, (iii) all reserves carried and not
deducted from assets, (iv) treasury stock and capital stock, obligations or
other securities of, or capital contributions to, or investments in, any
Subsidiary of such Person, (v) securities which are not readily marketable, (vi)
cash held in a sinking or other analogous fund established for the purpose of
redemption, retirement, defeasance or prepayment of any Stock or Indebtedness,
(vii) any write-up in the book value of any asset resulting from a revaluation
thereof, and (viii) any items not included in
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clauses (i) through (vii) above which are treated as intangibles in conformity
with GAAP.
"Tax Affiliate" means, as to any Person, (i) any Subsidiary of such
Person, and (ii) any Affiliate of such Person with which such Person files or is
eligible to file consolidated, combined or unitary tax returns.
"Tax Return" has the meaning specified in Section 5.03.
"Taxes" has the meaning specified in Section 2.14(a).
"Tenant Guarantor" of any Operating Lessee means the parent of such
Operating Lessee who executes and delivers a Limited Rent Guaranty.
"Title Insurance Policies" has the meaning specified in Section 3.02.
"Total Assets" of any Person means, at any date, the aggregate value of
all assets of such Person, determined on the basis of cost of each such asset to
such Person without reduction for depreciation or adjustments due to asset
reappraisals or otherwise.
"Total Base Rents" means, for any period, the aggregate sum of Base
Rents for such period payable under any Operating Leases in effect during such
period, determined on a consolidated basis.
"Unsecured Indebtedness" of any Person means any Indebtedness of such
Person for which the obligations thereunder are not secured by a pledge of or
other encumbrance on any assets of such Person.
SECTION 1.02. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.
SECTION 1.04. Certain Terms. (a) The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, and not to any particular Article, Section, subsection or clause in this
Agreement. References herein to an Exhibit, Schedule, Article, Section,
subsection or clause
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refer to the appropriate Exhibit or Schedule to, or Article, Section, subsection
or clause in this Agreement.
(b) The term "Lender" includes its successors and each assignee of the
Lender who becomes a party hereto pursuant to Section 10.07.
ARTICLE 2
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. The Loans. On the terms and subject to the conditions
contained in this Agreement, the Lender agrees to make loans (each a "Loan" and
collectively, the "Loans") to the Borrower from time to time on any Business Day
during the period from the date hereof to and including the Final Borrowing Date
in an aggregate outstanding amount not to exceed One Hundred Thirty Million
Dollars ($130,000,000) (the "Commitment") at any time, to be used for the
purposes identified in Section 5.18. No portion of the Commitment may be
borrowed after the Final Borrowing Date. The Loans shall be evidenced by the
Note. The Lender is authorized to endorse, at any time, the date and amount of
each Loan and the date and amount of each payment of principal with respect to
the Loans on the schedule annexed to and constituting a part of the Note, which
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed.
SECTION 2.02. Making the Loans. (a) Each Loan shall be made on notice,
given by the Borrower to the Lender not later than 12:00 noon (New York City
time) on the fifth (5th) Business Day prior to the date of the proposed Loan.
Each such notice (a "Notice of Borrowing") shall be in substantially the form of
Exhibit B, specifying therein (i) the date of such proposed Loan, (ii) the
amount of such proposed Loan, (iii) the account or accounts to which the Loan
should be made, and (iv) details of the Approved Hotel Facility for which the
proceeds of the proposed Loan shall be used.
(b) Upon fulfillment of the applicable conditions set forth in Article
4, the Lender shall on the date of the proposed Loan, make available to the
Borrower at the account or accounts specified in the Notice of Borrowing, in
immediately available federal funds, the Loan.
(c) The Borrower may not request more than one (1) Loan per calendar
month.
(d) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. The Borrower shall indemnify the Lender against any loss, cost or
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expense incurred by the Lender as a result of any failure to fulfill on or
before the date specified in any Notice of Borrowing for a proposed Loan the
applicable conditions set forth in Article 4, including, without limitation, any
loss (including, without limitation, loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Lender to fund any Loan to be made by the Lender
when such Loan, as a result of such failure, is not made on such date.
SECTION 2.03. Intentionally Omitted.
SECTION 2.04. Reduction and Termination of the Commitment. The Borrower
may, upon at least three Business Days' prior notice to the Lender, terminate in
whole or reduce in part the unused portions of the Commitment without premium or
penalty; provided, however, that each partial reduction shall be in the
aggregate amount of not less than $10,000,000.
SECTION 2.05. Repayment. The Borrower shall repay the entire unpaid
principal amount of all and any Loans on the Final Maturity Date.
SECTION 2.06. Prepayments. (a) The Borrower may, upon at least ten (10)
Business Days' prior notice to the Lender, stating the proposed date and
aggregate principal amount of the prepayment, prepay the outstanding principal
amount of the Loans in whole or in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid, without premium or
penalty; provided, however, that any prepayment of the Loans bearing interest at
the Eurodollar Rate made other than on the last day of an Interest Period for
the Loans to be repaid shall be subject to payment by the Borrower to the Lender
of any costs, fees or expenses incurred by the Lender in connection with such
prepayment including, without limitation, any costs to unwind any Eurodollar
Rate contracts or Interest Rate Contracts. Upon the giving of such notice of
prepayment by the Borrower, the principal amount of the Loans specified to be
prepaid shall become due and payable on the date specified for such prepayment.
(b) If at any time the aggregate principal amount of Loans outstanding
at such time exceeds the Commitment, the Borrower shall forthwith prepay the
Loans then outstanding in an amount equal to such excess, together with accrued
interest.
(c) The Borrower shall forthwith prepay the Loans upon receipt by the
Borrower or its Subsidiaries of Asset Sale Proceeds in connection with an Asset
Sale of a Mortgaged Property in an amount equal to such Asset Sale Proceeds,
together with accrued interest to the date of such prepayment on the principal
amount prepaid.
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(d) Upon receipt by the Borrower or its Subsidiaries of proceeds of
any issuance of debt or equity securities, the Borrower shall forthwith prepay
the Loans and the Loans made under the Other Supplemental Facility and the
Existing Facility in the following order: First, to the repayment of the Loans
made under this Agreement, Second, to the repayment of the Loans made under the
Other Supplemental Facility, Third, to the Term Loan (as defined in the Existing
Facility) made under the Existing Facility, and Fourth, to the Revolving Loans
(as defined in the Existing Facility) made under the Existing Facility.
SECTION 2.07. Continuation of Loans at the Eurodollar Rate. At the end
of any Interest Period with respect to the Loans, unless the Borrower has given
notice pursuant to Section 2.06(a), the Loans will automatically be continued
for an additional Interest Period at the Eurodollar Rate for such Interest
Period.
SECTION 2.08. Interest. The Borrower shall pay interest on the unpaid
principal amount of each Loan from the date thereof until the principal amount
thereof shall be paid in full at a rate per annum equal at all times during the
applicable Interest Period for each Loan to the Eurodollar Rate for such
Interest Period, payable on the last day of such Interest Period and on the
Final Maturity Date; provided, however, that during the continuance of an Event
of Default, all Loans shall bear interest, payable on demand, at a rate per
annum equal at all times to 2% above the Eurodollar Rate in effect until the
maturity of the Loans or the end of such Interest Period, whichever occurs
first, and thereafter at the greater of (x) 2% per annum above the Base Rate in
effect from time to time and (y) 2% per annum above the rate per annum required
to be paid on the Loans immediately prior to the date on which such Event of
Default occurred.
SECTION 2.09. Interest Rate Determination and Protection. (a) The
Eurodollar Rate for each Interest Period for Loans shall be determined by the
Lender two Business Days before the first day of such Interest Period.
(b) The Lender shall give prompt notice to the Borrower of the
applicable interest rate determined by the Lender for purposes of Section 2.09.
(c) If (i) the Lender determines, which determination shall be
conclusive in the absence of manifest error, that quotations of interest rates
for the relevant deposits referred to in the definition of "Eurodollar Rate" are
not being provided in the relevant amounts or for the relevant maturities for
purposes of determining the rates of interest for the Loans as provided herein,
or (ii) the Lender determines, which determination shall be conclusive in the
absence of manifest error, that the Eurodollar Rate for any Interest Period
therefor will not adequately reflect the cost to the Lender of making the Loans
or funding or maintaining the Loans for such Interest Period, the Lender shall
forthwith so notify the Borrower, whereupon
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(A) each Loan will automatically, on the last day of the
then existing Interest Period therefor, convert so as to
accrue interest at an interest rate per annum equal to the
Base Rate in effect from time to time; and
(B) the obligations of the Lender to make Loans at the
Eurodollar Rate shall be suspended until the Lender shall
notify the Borrower that the Lender has determined that the
circumstances causing such suspension no longer exist;
provided that, during the period of such suspension, the
obligations of the Lender to make Loans at the Eurodollar Rate
shall convert to obligations to make Loans at the Base Rate in
effect from time to time.
SECTION 2.10. Increased Costs. If, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation (other
than any change by way of imposition or increase of reserve requirements
included in determining the Eurodollar Rate Reserve Percentage) or (ii)
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to the Lender of agreeing to make or making, funding or
maintaining any Loans at the Eurodollar Rate, then the Borrower shall from time
to time, upon demand by the Lender, pay to the Lender additional amounts
sufficient to compensate the Lender for such increased cost. A certificate as to
the amount of such increased cost, submitted to the Borrower by the Lender,
shall be conclusive and binding for all purposes, absent manifest error. If the
Borrower so notifies the Lender within five Business Days after the Lender
notifies the Borrower of any increased cost pursuant to the foregoing provisions
of this Section 2.10, the Borrower may either (A) prepay in full all Loans
bearing interest at the Eurodollar Rate then outstanding in accordance with
Section 2.10 and, additionally, reimburse the Lender for such increased cost in
accordance with this Section 2.10, or (B) require the Lender to, and the Lender
shall, convert all Loans bearing interest at the Eurodollar Rate into Loans
bearing interest at the Base Rate in effect from time to time, and additionally,
reimburse the Lender for such increased cost in accordance with this Section
2.10, provided that in the event that the election in (B) is made by the
Borrower, the Lender's obligations to make Loans hereunder shall thereafter be
deemed to be obligations to make Loans at the Base Rate in effect from time to
time.
SECTION 2.11. Illegality. Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the interpretation of
any law or regulation shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for the Lender or its
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Lending Office to make Loans at the Eurodollar Rate or to continue to fund or
maintain Loans at the Eurodollar Rate, then, on notice thereof and demand
therefor by the Lender to the Borrower (i) the obligation of the Lender to make
or to continue the Loans bearing interest at the Eurodollar Rate shall
terminate, (ii) the Borrower shall forthwith prepay in full all Loans then
outstanding, together with interest accrued thereon (and until paid in full, all
such Loans bearing interest at the Eurodollar Rate then outstanding shall accrue
interest at an interest rate per annum equal to the Base Rate in effect from
time to time); provided that the Borrower shall not be required to prepay such
Loans if the Borrower, within five Business Days of such notice and demand,
requires the Lender to convert such Loans to Loans bearing interest at the Base
Rate in effect from time to time.
SECTION 2.12. Capital Adequacy. If (i) the introduction of or any
change in or in the interpretation of any law or regulation, (ii) compliance
with any law or regulation, or (iii) compliance with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by the Lender or any corporation controlling the Lender and the
Lender reasonably determines that such amount is based upon the existence of the
Lender's Commitment and Loans and its other commitment and loans of this type,
then, upon demand by the Lender, the Borrower shall pay to the Lender, from time
to time as specified by the Lender, additional amounts sufficient to compensate
the Lender in the light of such circumstances, to the extent that the Lender
reasonably determines such increase in capital to be allocable to the existence
of the Lender's Commitment and Loans. A certificate as to such amounts submitted
to the Borrower by the Lender shall be conclusive and binding for all purposes
absent manifest error.
SECTION 2.13. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Note not later than 12:00 noon (New York
City time) on the day when due, in U.S. Dollars, to the Lender at its address
referred to in Section 10.02 in immediately available funds without set-off or
counterclaim, to be applied in accordance with the terms of this Agreement.
Payment received by the Lender after 12:00 noon (New York City time) shall be
deemed to be received on the next Business Day.
(b) All computations of interest shall be made by the Lender on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable. Each determination by the Lender of an interest rate hereunder shall
be conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
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next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be;
provided, however, that if such extension would cause payment of interest on or
principal of any Loan to be made in the next calendar month, such payment shall
be made on the next preceding Business Day.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower under
each Loan Document shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes measured
by the Lender's net income, and franchise taxes imposed on the Lender, by the
jurisdiction under the laws of which the Lender is organized or any political
subdivision thereof and taxes measured by the Lender's net income, and franchise
taxes imposed on the Lender, by the jurisdiction of the Lender's Lending Office
or any political subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to the Lender (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including, without limitation, deductions applicable to additional
sums payable under this Section 2.14) the Lender receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
applicable law, and (iv) the Borrower shall deliver to the Lender evidence of
such payment to the relevant taxation or other authority.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction which arise from any payment made under any Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, any Loan Document (collectively, "Other Taxes").
(c) The Borrower will indemnify the Lender for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.14) paid by
the Lender and any liability (including, without limitation, for penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Lender makes
written demand therefor.
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(d) Within 30 days after the date of any payment of Taxes or Other
Taxes, the Borrower will furnish to the Lender, at its address referred to in
Section 10.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.14 shall survive the payment in full of the Obligations.
ARTICLE 3
PREPARATION OF MORTGAGE DOCUMENTS AND APPROVAL OF PROPOSED HOTEL
FACILITIES
SECTION 3.01. Recordation and Filing of Mortgage Documents, Etc. (a)
The Lender shall hold and not record or file any of the Collateral Documents
executed by the Borrower and delivered to the Lender pursuant to Section 4.01 or
Section 3.02(b) unless and until a Perfection Event shall have occurred. On or
after the occurrence of a Perfection Event, the Lender may in its absolute
discretion cause one or more of such Collateral Documents to be recorded or
filed in the appropriate recording or filing office (to the extent recordable or
fileable). In addition, the Borrower shall promptly deliver to the Lender upon a
Perfection Event, the following with respect to each of the Hotel Facilities:
(i) a commitment for a title insurance policy (the "Title
Insurance Policy") issued by a title company acceptable to the Lender,
in such form and amounts as are reasonably acceptable to the Lender,
insuring that the Mortgage covering such property is a valid first
priority Lien on such property subject only to such exceptions to title
as shall be acceptable to the Lender in its reasonable discretion and
containing such endorsements and affirmative insurance as the Lender
may reasonably require and as are obtainable in the applicable
jurisdiction, and true copies of each document, instrument or
certificate required by the terms of each such policy or Mortgage to
be, or have been, filed, recorded, executed or delivered in connection
therewith;
(ii) a current ALTA survey and surveyor's certification as to
such Hotel Facility in form and substance reasonably satisfactory to
the Lender; and
(iii) copies of Requests for Information or Copies (Form UCC-
11), or equivalent reports, listing all effective financing statements
which name the Borrower or any Subsidiary of the Borrower (under its
present name or any previous name) as debtor and which are filed in the
jurisdictions referred to above, together with copies of such other
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financing statements (none of which shall cover the Collateral
purported to be covered by the Security Agreement).
(b) The Borrower shall pay to the Lender, or as the Lender may direct,
(i) all title insurance premiums, documentary, stamp or intangible taxes,
recording fees and mortgage taxes payable in connection with the recording of
any of the Loan Documents or the issuance of the Title Insurance Policies, and
(ii) the reasonable fees and out of pocket expenses of counsel to the Lender and
local counsel connection with the preparation, execution, review and delivery of
the Mortgage Documents.
(c) The Borrower, on behalf of itself and each of its Subsidiaries,
hereby appoints the Lender its attorney-in-fact to execute, acknowledge and
deliver for and in the name of the Borrower or any of its Subsidiaries, as
applicable, any and all of the Mortgage Documents for the Collateral Properties
and/or the Proposed Hotel Facilities which the Borrower or any of its
Subsidiaries fails to execute, acknowledge and/or deliver in accordance with the
terms hereof, and this power, being coupled with an interest, shall be
irrevocable as long as any part of the Obligations remains unpaid.
SECTION 3.02. Approval of Proposed Hotel Facilities. (a) In the event
that the Borrower desires to provide to the Lender as collateral to secure the
Borrower's Obligations a Proposed Hotel Facility, the Borrower shall request in
writing the Lender's consent, which request shall be accompanied by a Proposed
Hotel Facility Statement (together with all documents referred to therein) in
respect of the Proposed Hotel Facility and such other information as the Lender
may reasonably require. The Lender's consent shall not be unreasonably withheld.
(b) Upon the approval of any Proposed Hotel Facility, the Lender shall
prepare Mortgage Documents for such Proposed Hotel Facility and the parties
shall cooperate in the preparation and delivery of such Mortgage Documents
(including, without limitation, ordering commitments for the title insurance
policies, ALTA surveys and UCC-searches, obtaining estoppel certificates and
retaining counsel, including local counsel for purposes of reviewing the
Mortgage Documents and rendering opinions with respect to such documents in form
and substance acceptable to the Lender as set forth in Section 4.01(p)). The
parties acknowledge and agree that Liens on certain of the Real Estate and
Leases may have been or hereafter be granted as collateral security for the
Existing Facility and the Other Supplemental Facility pursuant to the terms
thereof and that to the extent mortgage documents are executed and delivered in
respect of any such Real Estate or Lease as security for the Existing Facility
or the Other Supplemental Facility, such Real Estate or Lease shall be deemed to
not be collateral for the Loans made pursuant to this Agreement. In addition,
the parties
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acknowledge that Liens on certain Real Estate and Leases have been granted in
connection with the issuance of $125,000,000 aggregate principal amount of
Hospitality Properties Mortgage Acceptance Corp. Commercial Mortgage Pass-
Through Certificates Series 1996-C1 and are therefore not available as
collateral to secure the repayment of the Loans hereunder or the loans made
under the Existing Facility or the Other Supplemental Facility.
ARTICLE 4
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to the Initial Loan. The obligation
of the Lender to make the initial Loan is subject to satisfaction of the
conditions precedent that the entire maximum principal amount of the other
Supplemental Facility shall have been advanced to the Borrower and that the
Lender shall have received, on the Closing Date, the following, each dated the
Closing Date unless otherwise indicated, in form and substance reasonably
satisfactory to the Lender:
(a) The Note to the order of the Lender.
(b) A certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying (i) the resolutions of its Board of Trustees or Directors,
as appropriate, approving each Loan Document to which it is a party, (ii) all
documents evidencing other necessary trust or corporate action, as appropriate,
and required governmental and third party approvals, licenses and consents with
respect to each Loan Document to which it is a party and the transactions
contemplated thereby, (iii) a copy of its and each of its Subsidiaries'
declaration of trust, certificates of incorporation and By-Laws, as appropriate,
as of the Closing Date, and (iv) the names and true signatures of each of its
officers who has been authorized to execute and deliver any Loan Document or
other document required hereunder to be executed and delivered by or on behalf
of such Person.
(c) A copy of the declaration of trust or articles or certificate of
incorporation, as appropriate, of each Loan Party and of each of its
Subsidiaries (if any) which is not a Loan Party certified as of a recent date by
the Secretary of State of the state of formation of such Loan Party or
Subsidiary, together with certificates of such official attesting to the good
standing of each such Loan Party and Subsidiary.
(d) Favorable opinions of Sullivan & Worcester and Piper & Marbury,
counsel to the Loan Parties, in substantially the forms attached as Exhibit D,
and as to such other matters as the Lender may reasonably request.
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(e) A Negative Pledge Agreement in respect of each of the Hotel
Facilities including, without limitation, each Collateral Property, duly
executed and acknowledged by the Borrower or its Subsidiary, as applicable.
(f) A copy of the Operating Lease and Management Agreement, if any, in
respect of each Hotel Facility, each certified by a Responsible Officer.
(g) Evidence that the insurance required by the terms of the
Collateral Documents and by Section 7.04 is in full force and effect.
(h) A written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any significant
environmental, health and safety violations, hazards or liabilities to which the
Borrower or any of its Subsidiaries may be subject, which report shall
demonstrate, to the reasonable satisfaction of the Lender, that the Borrower and
its Subsidiaries and their operations are in compliance in all material respects
with all applicable Environmental Laws and are not subject to any material
Environmental Liabilities and Costs.
(i) Such additional documents, information and materials as the Lender
may reasonably request.
(j) The Lender shall have received evidence satisfactory to it that
all costs and accrued and unpaid fees and expenses (including, without
limitation, legal fees and expenses) required to be paid to the Lender under
Section 10.04, to the extent then due and payable, have been paid.
(k) A certificate, signed by a Responsible Officer of the Borrower,
stating that the statements set forth in Section 4.02(a) and 4.02(b) are true
and correct on the Closing Date, after giving effect to the Loans being made on
the Closing Date.
(l) A copy of the Advisory Agreement certified by a Responsible
Officer.
(m) The Subordination Agreement duly executed and acknowledged by the
Borrower and the Advisor.
(n) A Mortgage duly executed and acknowledged by the Borrower or a
Subsidiary of the Borrower for each Collateral Property, in such amount as shall
be reasonably acceptable to the Lender, securing all of the Obligations.
(o) Financing Statements on form UCC-1 duly executed by the Borrower
under the applicable Uniform Commercial Code to be filed in
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connection with each Mortgage, in form and substance reasonably satisfactory to
the Lender, to perfect the Lien on and security interest in the Mortgaged
Property covered by the Uniform Commercial Code.
(p) An opinion reasonably satisfactory to the Lender of counsel and/or
local counsel retained by the Borrower with respect to the due execution and
delivery, validity and enforceability of the Mortgage Documents and such other
matters as may be reasonably required by the Lender.
(q) (i) Duly executed and acknowledged landlord consents from all
lessors under all the Leases comprising Collateral Properties, in form and
substance reasonably satisfactory to the Lender, (ii) duly executed and
acknowledged non-disturbance and attornment agreements with the mortgagees,
ground lessors and sublessors of property subject to Leases comprising
Collateral Properties, in form and substance reasonably satisfactory to the
Lender, (iii) duly executed and acknowledged consents from all mortgagees,
ground lessors and sublessors of property subject to Leases comprising
Collateral Properties, in form and substance reasonably satisfactory to the
Lender, (iv) duly executed and acknowledged estoppel certificates, dated not
earlier than 30 days prior to the date of the Loan, from each landlord, ground
lessor, sublessor and lessee of a Collateral Property, in form and substance
reasonably satisfactory to the Lender, (v) duly executed and acknowledged
subordination, non-disturbance and attornment agreements (in recordable form)
from each lessee (other than the Borrower or its Subsidiary) of a Collateral
Property, unless such lessee's lease, by its terms, is subject and subordinate
to the Lien of the applicable Mortgage provided that, notwithstanding the
foregoing, a subordination, non-disturbance and attornment agreement in the form
attached as Exhibit J and made a part hereof or such other form as shall be
approved by the Lender (which approval shall not be unreasonably withheld,
delayed or conditioned), duly executed and acknowledged by the Borrower or its
Subsidiary and the Operating Lessee shall be required in respect of each such
Collateral Property, and (vi) evidence satisfactory to the Lender that all such
consents and agreements, and a memorandum of each Lease comprising a Collateral
Property, have been filed or recorded in all appropriate public records or
delivered to the title company providing title insurance thereon, as the case
may be.
(r) Assignment Agreement in respect of the Management Agreement for
Collateral Property, if any, duly executed by the Borrower or its Subsidiary, as
applicable, and the Manager.
(s) Security Agreement in respect of the FF&E Reserves for such
Collateral Property duly executed by the Borrower or its Subsidiary, as
applicable, the Operating Lessee and, if applicable, the Manager.
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(t) Financing Statements on Form UCC-1 under the Uniform Commercial
Code of all jurisdictions as may be necessary or, in the reasonable opinion of
the Lender, desirable to perfect the security interest created by the Security
Agreement for such Collateral Property.
(u) Subsidiary Guaranty duly executed by each Subsidiary of the
Borrower owning a Collateral Property.
(v) Stock Pledge Agreements duly executed by each Subsidiary of the
Borrower owing a Collateral Property.
SECTION 4.02. Conditions Precedent to Each Loan. The obligation of the
Lender to make any Loan (including the Loan being made by the Lender on the
Closing Date) shall be subject to the further conditions precedent that:
(a) The following statements shall be true on the date of such Loan,
before and after giving effect thereto and to the application of the proceeds
therefrom (and the acceptance by the Borrower of the proceeds of such Loan shall
constitute a representation and warranty by the Borrower that on the date of
such Loan such statements are true):
(i) The representations and warranties of the Borrower
contained in Article 5 and of each Loan Party in the other Loan
Documents are correct on and as of such date as though made on and as
of such date;
(ii) No Default or Event of Default will result from the Loans
being made on such date; and
(iii) The Loan to Value Requirement is satisfied.
(b) The making of the Loans on such date does not violate any
Requirement of Law and is not enjoined, temporarily, preliminarily or
permanently.
(c) The Lender shall have received, on or before such date, in respect
of any Hotel Facility including, without limitation, any Approved Hotel
Facilities, for which the same have not been delivered pursuant to Section
4.01(e), 4.01(f), 4.01(g), 4.01(h), 4.01(i), 4.01(n), 4.01(o), 4.01(p), 4.01(q),
4.01(r), 4.01(s), 4.01(t), 4.01(u) and 4.01(v), the documents and other
materials described in such paragraphs.
(d) The Borrower shall have paid the reasonable fees and out of pocket
expenses of counsel to the Lender and local counsel, in connection with the
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preparation, execution, review and delivery of the Loan Documents delivered
pursuant to this Agreement.
(e) The Lender shall have received such additional documents,
information and materials as the Lender may reasonably request.
(f) The Lender shall have received a fee equal to 0.50% of the amount
of the Loan.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender that:
SECTION 5.01. Existence; Compliance with Law. Each Loan Party and each
of its Subsidiaries (i) is a real estate investment trust or a corporation, as
the case may be, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation; (ii) is duly qualified or licensed
and in good standing under the laws of each jurisdiction where such
qualification is necessary, except for failures which in the aggregate have no
Material Adverse Effect; (iii) has all requisite power and authority and the
legal right to own, pledge and mortgage its properties, to lease (as lessee) the
properties that it leases as lessee, to lease or sublease (as lessor) the
properties it owns and/or leases (as lessee) and to conduct its business as now
or currently proposed to be conducted; (iv) is in compliance with its
declaration of trust or certificate of incorporation and by-laws, as
appropriate; (v) is in compliance with all other applicable Requirements of Law
except for such non-compliances as in the aggregate have no Material Adverse
Effect; and (vi) has all necessary licenses, permits, consents or approvals from
or by, has made all necessary filings with, and has given all necessary notices
to, each Governmental Authority having jurisdiction, to the extent required for
such ownership, leasing and conduct, except for licenses, permits, consents or
approvals which can be obtained by the taking of ministerial action to secure
the grant or transfer thereof or failures which in the aggregate have no
Material Adverse Effect.
SECTION 5.02. Power; Authorization; Enforceable Obligations. (a) The
execution, delivery and performance by each Loan Party of the Loan Documents
to which it is a party and the consummation of the transactions contemplated
hereby:
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(i) are within such Loan Party's corporate or trust powers, as
appropriate;
(ii) have been or, at the time of delivery thereof pursuant to
Article 3 or 4, will have been duly authorized by all necessary
corporate or trust action, as appropriate, including, without
limitation, the consent of any trustees or stockholders where required;
(iii) do not and will not (A) contravene any Loan Party's or
any of its Subsidiaries' respective declaration of trust, certificate
of incorporation or by-laws or other comparable governing documents,
(B) violate any other applicable Requirement of Law (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), or any order or decree of any Governmental
Authority or arbitrator, (C) conflict with or result in the breach of,
or constitute a default under, or result in or permit the termination
or acceleration of, any material Contractual Obligation of any Loan
Party or any of its Subsidiaries, or (D) result in the creation or
imposition of any Lien upon any of the property of any Loan Party or
any of its Subsidiaries, other than those in favor of the Lender
pursuant to the Collateral Documents; and
(iv) do not require the consent of, authorization by, approval
of, notice to, or filing or registration with, any Governmental
Authority or any other Person, other than those which have been or will
be, prior to the Closing Date, obtained or made and copies of which
have been or will be delivered to the Lender pursuant to Section 4.01
and/or Article 3 hereof, and each of which on the Closing Date will be
in full force and effect, and any consents, authorizations, approvals
of, notices to or filings or registrations required to be delivered
under Article 3 or 4 hereof.
(b) This Agreement has been, and each of the other Loan Documents will
have been upon delivery thereof pursuant to Article 3 or 4 hereof, duly executed
and delivered by each Loan Party thereto. This Agreement is, and the other Loan
Documents will be, when delivered hereunder, the legal, valid and binding
obligation of each Loan Party thereto, enforceable against it in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
SECTION 5.03. Taxes. All federal, state, local and foreign tax returns,
reports and statements (collectively, the "Tax Returns") which, to the best
knowledge and belief of the Borrower, are required to be filed by the Borrower
or any of its Tax Affiliates have been filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns, are required to be
filed,
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all such Tax Returns are true and correct in all material respects, and all
taxes, charges and other impositions due and payable have been timely paid prior
to the date on which any fine, penalty, interest, late charge or loss may be
added thereto for non-payment thereof, except where contested in good faith and
by appropriate proceedings if adequate reserves therefor have been established
on the books of the Borrower or such Tax Affiliate in conformity with GAAP. If
applicable, proper and accurate amounts have been withheld by the Borrower and
each of its respective Tax Affiliates from their respective employees (if any)
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities. None of the Borrower or any of its Tax Affiliates has
(i) executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any charges other than those that in the
aggregate would have no Material Adverse Effect; (ii) agreed or been requested
to make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise other than those that in the aggregate would have
no Material Adverse Effect; or (iii) any obligation under any written tax
sharing agreement.
SECTION 5.04. Full Disclosure. No written statement prepared or
furnished by or on behalf of any Loan Party or any of its Affiliates in
connection with any of the Loan Documents or the consummation of the
transactions contemplated thereby, and no financial statement delivered pursuant
hereto or thereto, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading. All facts known to the Borrower which are material to an
understanding of the financial condition, business, properties or prospects of
the Borrower and its Subsidiaries taken as one enterprise have been disclosed to
the Lender.
SECTION 5.05. Financial Matters. (a) The balance sheet of the Borrower
as of December 31, 1996, and the related statement of income, retained earnings
and cash flow of the Borrower for the period from January 1, 1995 to December
31, 1996, certified by Arthur Andersen, LLP, copies of which have been furnished
to the Lender, fairly present the financial condition of the Borrower as of such
date and the consolidated results of the operations of the Borrower for the
period ended on such date, all in conformity with GAAP.
(b) Since December 31, 1996, there has been no Material Adverse Change
and there have been no events or developments that in the aggregate have had a
Material Adverse Effect.
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(c) Neither the Borrower nor any of its Subsidiaries had at December
31, 1996 any material obligation, contingent liability or liability for taxes,
long-term leases or unusual forward or long-term commitment which is not
reflected in the balance sheet at such date referred to in subsection (a) above
or in the notes thereto.
(d) The Borrower is, and on a consolidated basis the Borrower and its
Subsidiaries are, Solvent.
SECTION 5.06. Litigation. There are no pending or, to the knowledge of
the Borrower, threatened actions, investigations or proceedings affecting the
Borrower or, to the knowledge of the Borrower, any Operator or any of their
respective properties or revenues before any court, Governmental Authority or
arbitrator, other than those that in the aggregate, if adversely determined,
would have no Material Adverse Effect. The performance of any action by (a) any
Loan Party required or contemplated by any of the Loan Documents or (b) any
Operator required or contemplated by any Operating Lease or Management Agreement
is not (in the case of (b) only, to the knowledge of the Borrower) restrained or
enjoined (either temporarily, preliminarily or permanently), and no material
adverse condition has been imposed by any Governmental Authority or arbitrator
upon any of the foregoing transactions contemplated by the aforementioned
documents.
SECTION 5.07. Margin Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
SECTION 5.08. Ownership of Borrower and HRPT Advisors; Subsidiaries.
(a) The authorized capital stock of the Borrower consists of 100,000,000 common
shares of beneficial interest, $0.01 par value per share, of which approximately
26,872,000 shares are issued and outstanding on the date hereof, and 100,000,000
preferred shares of beneficial interest, without par value, none of which shares
are issued and outstanding on the date hereof. On the date hereof all of the
outstanding capital stock of the Borrower is validly issued, fully paid and
non-assessable and at least 250,000 shares of such stock is owned beneficially
and of record by HRPT Advisors. Other than as described in the Shelf
Registration Statement relating to future offerings of up to $500,000,000 of
common shares of beneficial interest in the Borrower (or in reports incorporated
by reference therein), no authorized but unissued shares, no treasury shares
and, to the best knowledge of the Borrower, no other outstanding shares of
capital stock of the Borrower are subject to any option, warrant, right of
conversion or
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purchase or any similar right. Other than as described in the Shelf Registration
Statement relating to future offerings of up to $500,000,000 of common shares of
beneficial interest in the Borrower (or in reports incorporated by reference
therein), there are no agreements or understandings with respect to the voting,
sale or transfer of any shares of capital stock of the Borrower, or to the best
knowledge of the Borrower, any agreement restricting the transfer or
hypothecation of any such shares.
(b) The authorized capital stock of HRPT Advisors consists of 100,000
shares of common stock, $0.01 par value per share, of which 1,000 shares are
issued and outstanding as of the date hereof. All of the outstanding capital
stock of HRPT Advisors has been validly issued, is fully paid and non-assessable
and at least 51% of such stock is owned, in the aggregate, beneficially and of
record by Barry M. Portnoy and/or Gerard M. Martin, free and clear of all Liens
as of the date of this Agreement. No authorized but unissued shares, no treasury
shares and, to the best knowledge of the Borrower, no other outstanding shares
of capital stock of HRPT Advisors are subject to any option, warrant, right of
conversion or purchase or any similar right. There are no agreements or
understandings with respect to the voting, sale or transfer of any shares of
capital stock of HRPT Advisors, or to the best knowledge of the Borrower, any
agreement restricting the transfer or hypothecation of any such shares.
(c) Set forth on Schedule 5.08(c) hereto is a complete and accurate
list showing, as of the date hereof, all Subsidiaries of the Borrower and, as to
each such Subsidiary, the jurisdiction of its incorporation, the number of
shares of each class of Stock authorized, the number outstanding on the date
hereof and the percentage of the outstanding shares of each such class owned
(directly or indirectly) by the Borrower. No Stock of any Subsidiary of the
Borrower is subject to any outstanding option, warrant, right of conversion or
purchase or any similar right. All of the outstanding capital Stock of each such
Subsidiary has been validly issued, is fully paid and non-assessable and is
owned by the Borrower, free and clear of all Liens. Neither the Borrower nor any
such Subsidiary is a party to, or has knowledge of, any agreement restricting
the transfer or hypothecation of any shares of Stock of any such Subsidiary,
other than the Loan Documents. As of the date hereof, the Borrower does not own
or hold, directly or indirectly, any capital stock or equity security of, or any
equity interest in, any Person other than such Subsidiaries.
SECTION 5.09. ERISA. (a) There are no Multiemployer Plans.
(b) Each Plan and any related trust intended to qualify under Code
Section 401 or 501 has been determined by the IRS to be so qualified and to the
best knowledge of the Borrower nothing has occurred which would cause the loss
of such qualification.
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(c) None of the Borrower, any of its Subsidiaries or any ERISA
Affiliate, with respect to any Pension Plan, has failed to make any contribution
or pay any amount due as required by Section 412 of the Code or Section 302 of
ERISA or the terms of any such plan, and all required contributions and benefits
have been paid in accordance with the provisions of each such plan.
(d) There are no pending or, to the knowledge of the Borrower,
threatened claims, actions or proceedings (other than claims for benefits in the
normal course), relating to any Plan other than those that in the aggregate, if
adversely determined, would have no Material Adverse Effect.
(e) No Pension Plan has any unfunded accrued benefit liabilities, as
determined by using reasonable actuarial assumptions utilized by such plan's
actuary for funding purposes. Within the last five years none of the Borrower,
any of its Subsidiaries or any ERISA Affiliate has caused a Pension Plan with
any such liabilities to be transferred outside of its "controlled group" (within
the meaning of Section 4001(a)(14) of ERISA).
(f) No Plan provides for continuing health, disability, accident or
death benefits or coverage for any participant or his or her beneficiary after
such partici pant's termination of employment (except as may be required by
Section 4980B of the Code and at the sole expense of the participant or the
beneficiary) which would result in the aggregate under all Plans in a liability
in an amount which would have a Material Adverse Effect.
SECTION 5.10. Liens. There are no Liens of any nature whatsoever on any
Hotel Facilities of the Borrower or any of its Subsidiaries other than those
permitted by Section 8.01. The forms of the Collateral Documents attached hereto
are sufficient to grant to the Lender fully perfected first priority Liens in
and to the Collateral subject only to Permitted Liens.
SECTION 5.11. [Intentionally Omitted].
SECTION 5.12. No Burdensome Restrictions; No Defaults; Contractual
Obligations. (a) Neither the Borrower nor any of its Subsidiaries is in default
beyond the expiration of any applicable notice or grace period under or with
respect to any Contractual Obligation owed by it and, to the knowledge of the
Borrower, no other party is in default beyond the expiration of any applicable
notice or grace period under or with respect to any Contractual Obligation owed
to the Borrower or to any of its Subsidiaries, other than those defaults which
in the aggregate have no Material Adverse Effect.
(b) No Event of Default or Default has occurred and is continuing.
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(c) There is no Requirement of Law that has not been complied with by
the Borrower, the compliance with which by the Borrower or any of its
Subsidiaries would have a Material Adverse Effect.
(d) No Subsidiary of the Borrower is subject to any Contractual
Obligation restricting or limiting its ability to transfer its assets to the
Borrower or to declare or make any dividend payment or other distribution on
account of any shares of any class of its Stock or its ability to purchase,
redeem, or otherwise acquire for value or make any payment in respect of any
such shares or any shareholder rights.
SECTION 5.13. No Investments. Except as permitted by Section 8.06, none
of the Borrower or any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person or maintains any Investment.
SECTION 5.14. Government Regulation. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended, or subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or any other federal or state statute or
regulation such that its ability to incur Indebtedness is limited, or its
ability to consummate the transactions contemplated hereby or by any other Loan
Document, or the exercise by the Lender of rights and remedies hereunder or
thereunder, is impaired. The making of the Loans by the Lender, the application
of the proceeds and repayment thereof by the Borrower and the consummation of
the transactions contemplated by the Loan Documents will not violate any
provision of any of the foregoing or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
SECTION 5.15. Insurance. All policies of insurance of any kind or
nature owned by or issued to the Borrower or any of its Subsidiaries, or issued
in respect of any real property owned or leased by the Borrower or any of its
Subsidiaries including, without limitation, policies of life, fire, theft,
product liability, public liability, property damage, other casualty, employee
fidelity, workers' compensation and employee health and welfare insurance, are
in full force and effect and are of a nature and provide such coverage (except
earthquake coverage) as is sufficient and as is customarily carried by companies
of the size and character of such Person. None of the Borrower or any of its
Subsidiaries has been refused insurance for which it applied or had any policy
of insurance terminated (other than at its request). Lender confirms and agrees
that the policies of insurance owned by or issued to the Operating Lessee in
respect of any
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Hotel Facility shall be sufficient for the purposes of this representation
provided that the same comply with the terms of the Operating Lease relating
thereto.
SECTION 5.16. Employees. Neither the Borrower nor any of its
Subsidiaries has any employees and none of them has ever engaged employees.
SECTION 5.17. Force Majeure. Neither the business nor the properties of
the Borrower or any of its Subsidiaries are currently suffering from the effects
of any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance), other than those which in
the aggregate have no Material Adverse Effect.
SECTION 5.18. Use of Proceeds. The proceeds of the Loans are being used
by the Borrower or its Subsidiaries solely to pay the purchase price of Approved
Hotel Facilities and for the payment of related transaction costs, fees and
expenses.
SECTION 5.19. Environmental Protection. Except as disclosed on Schedule
5.19:
(a) all real property leased, owned or operated by the Borrower or any
of its Subsidiaries is free from contamination by any Hazardous Material which
could reasonably be expected to subject the Borrower or any of its Subsidiaries
to Environmental Liabilities and Costs that could in the aggregate have a
Material Adverse Effect;
(b) the operations of the Borrower and each of its Subsidiaries, and
the operations at any real property leased, owned or operated by the Borrower or
any of its Subsidiaries are in material compliance in all respects with all
applicable Environmental Laws;
(c) neither the Borrower nor any of its Subsidiaries have liabilities
with respect to Hazardous Materials, and no facts or circumstances exist which
could give rise to liabilities with respect to Hazardous Materials which could
reasonably be expected to subject the Borrower or any of its Subsidiaries to
Environmental Liabilities and Costs that could in the aggregate have a Material
Adverse Effect;
(d) (i) the Borrower and its Subsidiaries and, to the best knowledge
of the Borrower and its Subsidiaries, the Operators have obtained, currently
maintained and have all Environmental Permits necessary for their operations and
are in material compliance with such Environmental Permits, except to the extent
that the failure to obtain or maintain such Permits or to be in compliance
therewith would not, in the aggregate, have a Material Adverse Effect, (ii)
there
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are no Legal Proceedings pending nor, to the best knowledge of the Borrower and
its Subsidiaries, threatened to revoke, or alleging the violation of, such
Environmental Permits, other than Legal Proceedings which, if adversely
determined, would not, in the aggregate, have a Material Adverse Effect and
(iii) neither the Borrower nor any of its Subsidiaries or, to the best knowledge
of the Borrower and its Subsidiaries, the Operators have received any notice
from any Governmental Authority to the effect that there is lacking any
Environmental Permit required in connection with the current use or operation of
any property leased, owned or operated by the Borrower or any of its
Subsidiaries;
(e) neither the Borrower's nor any of its Subsidiaries' current
facilities and operations, nor, to the best knowledge of the Borrower and its
Subsidiaries, any Operator or predecessor of the Borrower or any of its
Subsidiaries, nor any of their past facilities and operations, nor any owner of
premises leased or operated by the Borrower and its Subsidiaries, are subject to
any outstanding written Order or Contract, including Environmental Liens, with
any Governmental Authority or other Person, or to any federal, state, local,
foreign or territorial investigation respecting (i) Environmental Laws, (ii)
Remedial Action, (iii) any Environmental Claim, or (iv) the Release or
threatened Release of any Hazardous Material, the compliance with which, in any
case, is reasonably likely to have a Material Adverse Effect;
(f) neither the Borrower, nor any of its Subsidiaries or, to the best
knowledge of the Borrower and its Subsidiaries, any of the Operators are subject
to any pending Legal Proceeding alleging the violation of any Environmental Law
which, if adversely determined is reasonably likely to have a Material Adverse
Effect, nor, to the best knowledge of the Borrower and its Subsidiaries, are any
such proceedings threatened;
(g) neither the Borrower nor any of its Subsidiaries nor, to the best
knowledge of the Borrower and its Subsidiaries, any Operators or predecessor of
the Borrower or any of its Subsidiaries, nor any owner of premises leased by the
Borrower or any of its Subsidiaries, have filed any notice under federal, state
or local, territorial or foreign law indicating past or present treatment,
storage, or disposal of or reporting a Release of Hazardous Material into the
environment, in the case of any Operator, with respect to Hotel Facilities only;
(h) none of the operations of the Borrower or any of its Subsidiaries
or, to the best knowledge of the Borrower and its Subsidiaries, of any Operators
or predecessor of the Borrower or any of its Subsidiaries, or of any owner of
premises leased by the Borrower or any of its Subsidiaries, involve or
previously involved the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 (in effect
as of the
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date of this Agreement) or any state, local, territorial or foreign equivalent,
in the case of any Operator, with respect to Hotel Facilities only; and
(i) there is not now, nor has there been in the past, on, in or under
any real property leased or owned by the Borrower or any of its Subsidiaries (i)
any underground storage tanks or surface tanks, dikes or impoundments, (ii) any
asbestos-containing materials, (iii) any polychlorinated biphenyls, or (iv) any
radioactive substances, the existence of which, in any case, is reasonably
likely to have a Material Adverse Effect.
SECTION 5.20. Contractual Obligations Concerning Assets. Other than as
described on Schedule 5.20, as of the date hereof, neither the Borrower nor any
of its Subsidiaries owns or holds, or is obligated under or a party to, any
option, right of first refusal, or other contractual right to purchase or
acquire, or any Contractual Obligation to effect an Asset Sale of, any asset or
property owned or leased by the Borrower or any of its Subsidiaries.
SECTION 5.21. Status as REIT. The Borrower is organized in conformity
with the requirements for qualification as a real estate investment trust under
the Code. Borrower has met all of the requirements for qualification as a real
estate investment trust under the Code for its fiscal year ended December 31,
1996. The Borrower is in a position to qualify for its current fiscal year as a
real estate investment trust under the Code and its proposed methods of
operation will enable it to so qualify.
SECTION 5.22. Real Property. (a) The Borrower and its Subsidiaries own
good, clean and marketable fee simple absolute title to or valid leasehold
interests in, all of the Collateral Properties, which Collateral Properties are
at the date hereof described in Schedule 5.22 and none of such properties and
assets is subject to any Lien, except Liens granted to the Lender pursuant to
the Loan Documents or permitted hereunder or thereunder. The Borrower and its
Subsidiaries have received all deeds, assignments, waivers, consents,
non-disturbance and recognition or similar agreements, bills of sale and other
documents, and have duly effected all recordings, filings and other actions
reasonably necessary to establish, protect and perfect the Borrower's and its
Subsidiaries' right, title and interest in and to all such property.
(b) The Dallas, Texas Collateral Property listed on Schedule 5.22 is a
leasehold property. Schedule 5.22 sets forth the information regarding the
commencement date, termination date, renewal options (if any) and annual base
rents for each year until the Final Maturity Date. To the best knowledge of the
Borrower, such lease is valid and enforceable in accordance with its terms and
is in full force and effect. The Borrower has delivered to the Lender a true and
complete copy of such lease and all documents affecting the rights or
obligations
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of the Borrower or any of its Subsidiaries which is a party thereto, including,
without limitation, any non-disturbance and recognition agreements,
subordination agreements, attornment agreements and agreements regarding the
term or rental of any of the leases.
(c) Except as disclosed on Schedule 5.22 and those which in the
aggregate have no Material Adverse Effect, (i) all components of all
improvements included within the Collateral Properties (collectively,
"Improvements"), including, without limitation, the roofs and structural
elements thereof and the heating, ventilation, air conditioning, plumbing,
electrical, mechanical, sewer, waste water, storm water, paving and parking
equipment, systems and facilities included therein, are in good working order
and repair; and (ii) all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other similar
systems serving the Collateral Properties are installed and operating and are
sufficient to enable the Collateral Properties to continue to be used and
operated in the manner currently being used and operated, and none of the
Borrower or any of its Subsidiaries has any knowledge of any factor or condition
that could result in the termination or material impairment of the furnishing
thereof. No Improvement or portion thereof is dependent for its access,
operation or utility on any land, building or other Improvement not included in
the real property owned or leased by the Borrower or any of its Subsidiaries.
(d) All Permits required to have been issued or appropriate to enable
all Collateral Properties owned or leased by the Borrower or any of its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used have been lawfully issued and are in full
force and effect, other than those which in the aggregate have no Material
Adverse Effect.
(e) Neither the Borrower nor, to its knowledge, any Operator has
received any notice, or has any knowledge, of (i) any pending, threatened or
contemplated condemnation proceeding affecting any Collateral Properties owned
or leased by the Borrower or any of its Subsidiaries or any part thereof, or
(ii) any proposed termination or impairment of any parking at any such owned or
leased real property or (iii) any sale or other disposition of any Collateral
Properties owned or leased by the Borrower or any of its Subsidiaries or any
part thereof in lieu of condemnation, in each case, other than those which in
the aggregate have no Material Adverse Effect.
(f) No material portion of any Collateral Properties owned or leased
by the Borrower or any of its Subsidiaries has suffered any material damage by
fire or other casualty loss which has not heretofore been completely repaired
and restored to its original condition or which will not be completely repaired
or restored to its original condition within twelve (12) months from the date
hereof.
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No portion of any Collateral Properties, that is not covered by adequate flood
insurance, owned or leased by the Borrower or any of its Subsidiaries is located
in a special flood hazard area as designated by any Federal Governmental
Authorities.
SECTION 5.23. Operator and Advisor: Compliance with Law. (a) To the
best knowledge of the Borrower and its Subsidiaries, each Operator (i) has full
power and authority and the legal right to own, lease (or sublease), manage and
operate (as applicable) the Hotel Facilities it operates and to conduct the
business in which it is currently engaged with respect to any real property
owned or leased by the Borrower or any of its Subsidiaries, (ii) is duly
qualified or licensed and is in good standing under the laws of each
jurisdiction where its ownership, lease (or sublease), management or operation
of any real property owned or leased by the Borrower or any of its Subsidiaries
requires such qualification, and (iii) is in compliance with all Requirements of
Law applicable to the real property owned or leased by the Borrower or any of
its Subsidiaries operated or managed by it, or applicable to the operation or
management thereof, except to the extent that the failure to comply therewith is
not reasonably likely to have, in the aggregate, a Material Adverse Effect.
(b) To the best knowledge of Borrower and its Subsidiaries, the
Advisor (i) has full power and authority and legal right to conduct the business
in which it is presently engaged and to perform its obligations under the
Advisory Agreement, (ii) is duly qualified or licensed and is in good standing
under the laws of each jurisdiction where the conduct of its business requires
such qualification, and (iii) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith is not reasonably
likely to have, in the aggregate, a Material Adverse Effect.
SECTION 5.24. Operating Leases, Limited Rent Guaranties, Management
Agreement and Advisory Agreement. Each of the Operating Leases, Limited Rent
Guaranties and Management Agreements, if any, in respect of the Hotel Facilities
and the Advisory Agreement is in full force and effect and is a legally valid
and binding obligation of the Borrower or its Subsidiaries and the other parties
thereto, subject to such exceptions which are not reasonably likely to have, in
the aggregate, a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries has mortgaged, pledged or otherwise encumbered any of the Operating
Leases, Management Agreements or Advisory Agreements or its rights thereunder
including, without limitation, its right to obtain rental, interest or other
payments under the Operating Leases, other than by way of such mortgages,
pledges or encumbrances in favor of the Lender. Neither the Borrower nor any of
its Subsidiaries has collected any rents becoming due under any Operating Lease
more than 30 days in advance. All rent and other sums and charges payable by any
Operating Lessee under each Operating Lease to which it is a party are
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current, no notice of default or termination under any such Operating Lease is
outstanding, to the knowledge of the Borrower no termination event or condition
or uncured default on the part of the Operating Lessee exists under any
Operating Lease, and to the knowledge of the Borrower no event of default has
occurred which, with the giving of notice or the lapse of time or both, would
constitute such a default or termination event or condition or uncured default
on the part of the Borrower or its Subsidiaries or the Operators (as the case
may be), subject to such exceptions which are not reasonably likely to have, in
the aggregate, a Material Adverse Effect. As to all of the Leases, the Borrower
and each of its Subsidiaries has performed all of its repair and maintenance
obligations (if any) and, to the best knowledge and belief of the Borrower, each
Operating Lessee under each Operating Lease to which it is a party has performed
all of its repair and maintenance obligations, subject to such exceptions which
are not reasonably likely to have, in the aggregate, a Material Adverse Effect.
SECTION 5.25. FF&E Reserves. An FF&E Reserve has been established in
respect of each Collateral Property and is currently funded as required by the
terms of the Operating Lease and/or the Management Agreement relating thereto.
An FF&E Reserve shall be established in respect of each Approved Hotel Facility
from and after the date of the acquisition thereof, which FF&E Reserve shall be
currently funded as required by the terms of the Operating Lease and/or the
Management Agreement relating thereto.
ARTICLE 6
FINANCIAL COVENANTS
As long as any of the Obligations or Commitment remain outstanding,
unless the Lender otherwise consents in writing the Borrower agrees with the
Lender that:
SECTION 6.01. Limitation and Indebtedness. The Borrower shall maintain
during each Fiscal Quarter on a consolidated basis, a ratio, expressed as a
percentage, of (a) the total Indebtedness for borrowed money (including, without
limitation, the Obligations and all Capitalized Lease Obligations) of the
Borrower and its Subsidiaries to (b) Total Assets of the Borrower and its
Subsidiaries not in excess of fifty-six percent (56%).
SECTION 6.02. Limitation on Secured Indebtedness. The Borrower shall
maintain during each Fiscal Quarter on a consolidated basis a ratio, expressed
as a percentage, of (a) total Secured Indebtedness (including, without
limitation, Obligations and all Capitalized Lease Obligations) of the Borrower
and its
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Subsidiaries to (b) Total Assets of the Borrower and its Subsidiaries not in
excess of fifty-six percent (56%).
SECTION 6.03. Interest Expense Coverage. The Borrower shall maintain at
the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending on
March 31, 1998, a ratio of (a) Total Base Rents for such Fiscal Quarter to (b)
Net Interest Expense for such Fiscal Quarter, of not less than 2:1.
SECTION 6.04. Maintenance of Tangible Net Worth. The Borrower shall
maintain during each Fiscal Quarter a Tangible Net Worth of not less than
$200,000,000.
SECTION 6.05. Maintenance of Loan to Value Requirement. The Borrower
shall maintain during each Fiscal Quarter the Loan to Value Requirement.
ARTICLE 7
AFFIRMATIVE COVENANTS
As long as any of the Obligations or the Commitment remain outstanding,
unless the Lender otherwise consents in writing, the Borrower agrees with the
Lender that:
SECTION 7.01. Compliance with Laws, Etc. The Borrower shall comply, and
shall cause each of its Subsidiaries and, with respect to Hotel Facilities only,
each Operator to comply, in all material respects with all Requirements of Law,
Contractual Obligations, commitments, instruments, licenses, permits and
franchises, including, without limitation, all Permits; provided, however, that
the Borrower shall not be deemed in default of this Section 7.01 if all such
non- compliances in the aggregate have no Material Adverse Effect.
SECTION 7.02. Conduct of Business. The Borrower shall (a) conduct, and
shall cause each of its Subsidiaries to conduct, its business in the ordinary
course, such business being to acquire, own and lease hotels to unaffiliated
tenants; and (b) perform and observe, and cause each of its Subsidiaries to
perform and observe, all the terms, covenants and conditions required to be
performed and observed by it under its Contractual Obligations (including,
without limitation, to pay all rent and other charges payable under any lease
and all debts and other obligations as the same become due), and do, and cause
its Subsidiaries to do, all things necessary to preserve and to keep unimpaired
its rights under such Contractual Obligations; provided, however, that, in the
case of each of clauses(a)
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and (b), the Borrower shall not be deemed in default of this Section 7.02 if all
such failures in the aggregate have no Material Adverse Effect.
SECTION 7.03. Payment of Taxes, Etc. The Borrower shall pay and
discharge, and shall cause each of its Subsidiaries to pay and discharge, before
the same shall become delinquent, all lawful governmental claims, taxes,
assessments, charges and levies, except where contested in good faith, by proper
proceedings, if adequate reserves therefor have been established on the books of
the Borrower or the appropriate Subsidiary in conformity with GAAP; provided,
however, that the Borrower shall not be deemed in default of this Section 7.03
if all such uncontested non-payments in the aggregate have no Material Adverse
Effect and, with respect to any Mortgaged Property, the Borrower and each such
Subsidiary otherwise complies with the provisions of the Mortgage in respect
thereof.
SECTION 7.04. Maintenance of Insurance. The Borrower shall maintain, or
shall cause the Operators to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower or such Subsidiary
operates and as otherwise satisfactory to the Lender, in its sole judgment
exercised reasonably, and, in any event, all insurance required by any
Collateral Document. All such insurance shall name the Lender as additional
insured or loss payee, as the Lender shall determine. The Borrower will furnish
to the Lender from time to time such information as may be reasonably requested
as to such insurance. The Lender acknowledges that (i) no earthquake insurance
has been obtained with respect to any Hotel Facilities in California and (ii)
insurance maintained by the Operating Lessee in respect of any Hotel Facility
shall be sufficient for the purposes of this covenant provided that such
insurance complies with the terms of the Operating Lease relating thereto.
SECTION 7.05. Preservation of Existence, Etc. The Borrower shall
preserve and maintain, and shall cause each of its Subsidiaries to preserve and
maintain, its existence (except as permitted under Section 8.05) and its rights
(charter and statutory) and franchises, except to the extent that the failure to
preserve and maintain such rights and/or franchises would not have a Material
Adverse Effect.
SECTION 7.06. Access. The Borrower shall upon reasonable advance
notice, at any reasonable time and from time to time, permit the Lender, or any
agents or representatives of the Lender, to (a) examine and make copies of and
abstracts from the records and books of account of the Borrower and each of its
Subsidiaries, (b) visit the properties of the Borrower and each of its
Subsidiaries, (c) discuss the affairs, finances and accounts of the Borrower and
each of its
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Subsidiaries with any of their respective officers or directors, and (d)
communicate directly with the Borrower's independent certified public
accountants. The Borrower shall authorize its independent certified public
accountants to disclose to the Lender any and all financial statements and other
information of any kind, including, without limitation, copies of any management
letter, or the substance of any oral information that such accountants may have
with respect to the business, financial condition, results of operations or
other affairs of the Borrower or any of its Subsidiaries.
SECTION 7.07. Keeping of Books. The Borrower shall keep, and shall
cause each of its Subsidiaries to keep, proper books of record and account, in
accordance with GAAP, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Borrower and each such
Subsidiary.
SECTION 7.08. Maintenance of Properties, Etc. The Borrower shall
maintain and preserve, and shall cause each of its Subsidiaries and each
Operator to maintain and preserve, (i) all of its Hotel Facilities in good
working order and condition, and (ii) all rights, permits, licenses, approvals
and privileges (including, without limitation, all Permits) which are used or
useful or necessary in the conduct of its business, in the case of an Operator,
with respect to Hotel Facilities only; provided, however, that the Borrower
shall not be deemed in default of this Section 7.08 if all such failures in the
aggregate have no Material Adverse Effect.
SECTION 7.09. Performance and Compliance with Other Covenants. The
Borrower shall perform and comply with, and shall cause each of its Subsidiaries
to perform and comply with, each of the covenants and agreements set forth in
any Contractual Obligation to which it or any of its Subsidiaries is a party;
provided, however, that the Borrower shall not be deemed in default of this
Section 7.09 if all such failures in the aggregate have no Material Adverse
Effect.
SECTION 7.10. Application of Proceeds. The Borrower shall use the
entire amount of the proceeds of the Loans as provided in Section 5.18.
SECTION 7.11. Financial Statements. The Borrower shall furnish to the
Lender:
(a) as soon as available and in any event within 45 days after the end
of each Fiscal Quarter of each Fiscal Year (other than the last Fiscal Quarter
of such Fiscal Year), consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such quarter and consolidated statements of
income, retained earnings and cash flow of the Borrower and its Subsidiaries for
the period commencing at the end of the previous Fiscal Year and ending with the
end of
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such Fiscal Quarter, all prepared in conformity with GAAP and certified by the
chief financial officer of the Borrower as fairly presenting the financial
condition and results of operations of the Borrower and its Subsidiaries at such
date and for such period, subject to normal year-end audit adjustments, together
with (i) a certificate of said officer stating that no Default or Event of
Default has occurred and is continuing or, if a Default or an Event of Default
has occurred and is continuing, a statement as to the nature thereof and the
action which the Borrower proposes to take with respect thereto, (ii) a schedule
in form reasonably satisfactory to the Lender of the computations used by the
Borrower in determining compliance with all financial covenants contained
herein, and (iii) a written discussion and analysis by the management of the
Borrower of the financial statements furnished in respect of such Fiscal
Quarter;
(b) as soon as available and in any event within 90 days after the end
of each Fiscal Year, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such year and consolidated statements of income,
retained earnings and cash flow of the Borrower and its Subsidiaries for such
Fiscal Year, all prepared in conformity with GAAP and certified, in the case of
such consolidated financial statements, without qualification as to the scope of
the audit or as to the Borrower being a going concern by Arthur Andersen LLP or
other independent public accountants of recognized national standing, together
with (i) a certificate of such accounting firm stating that in the course of the
regular audit of the business of the Borrower and its Subsidiaries, which audit
was conducted by such accounting firm in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge that a
Default or Event of Default has occurred and is continuing, or, if in the
opinion of such accounting firm, a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof, (ii) a schedule in form
reasonably satisfactory to the Lender of the computations used by such
accountants in determining, as of the end of such Fiscal Year, the Borrower's
compliance with all financial covenants contained herein, and (iii) a written
discussion and analysis by the management of the Borrower of the financial
statements furnished in respect of such Fiscal Year;
(c) as soon as available and in any event within 60 days after the end
of each fiscal quarter of each fiscal year, in each case of any Operating Lessee
(other than the last fiscal quarter of such fiscal year) consolidated balance
sheets and statements of income and cash flow in respect of such Operating
Lessee and the Tenant Guarantor, if any, for such fiscal quarter, all prepared
in conformity with GAAP and certified by the chief financial officer or chief
accounting officer (or such officer's authorized designee) of the Operating
Lessee or the Tenant Guarantor, duly authorized, as fairly presenting the
consolidated financial conditions and results of operations of such Operating
Lessee and Tenant Guarantor at such date and for such period, subject to normal
year-end
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adjustments, together with a certificate of said officer stating that no Default
or Event of Default has occurred and is continuing under the relevant Operating
Lease(s) (said certification, the "Financial Officer's Certificate").
(d) as soon as available, and in any event within 105 days after the
end of each fiscal year of any Operating Lessee, consolidated balance sheets and
statements of income, retained earnings and cash flow in respect of such
Operating Lessee and the Tenant Guarantor for such fiscal year, all prepared in
conformity with GAAP and certified without qualification as to the scope of the
audit by independent public accountants of recognized national standing,
together with a Financial Officer's Certificate;
(e) within thirty (30) days after the end of each Accounting Period
(as defined in the Management Agreement) or if there is no Management Agreement,
within thirty (30) days after the end of each calendar month, an unaudited
operating statement in respect of each Hotel Facility, including occupancy
percentages and average rate, accompanied by a Financial Officer's Certificate;
(f) promptly after the same are received by the Borrower, a copy of
each management letter provided to the Borrower by its independent certified
public accountants which refers in whole or in part to any inadequacy, defect,
problem, qualification or other lack of fully satisfactory accounting controls
utilized by the Borrower or any of its Subsidiaries or any Operating Lessee.
SECTION 7.12. Reporting Requirements. The Borrower shall furnish to
the Lender:
(a) prior to any Asset Sale, a notice (i) describing the assets being
sold and (ii) stating the estimated Asset Sales Proceeds in respect of such
Asset Sale;
(b) as soon as available and in any event within 30 days prior to the
end of each Fiscal Year, an annual budget of the Borrower and its Subsidiaries
for the succeeding Fiscal Year, displaying on a quarterly basis anticipated
balance sheets, forecasted Capital Expenditures, working capital requirements,
rent revenues, contributions by Operating Lessees to any FF&E Reserves, interest
income, net income, cash flow and sales, all on a consolidated basis;
(c) promptly and in any event within 30 days after the Borrower, any
of its Subsidiaries or any ERISA Affiliate knows or has reason to know that any
ERISA Event has occurred, a written statement of the chief financial officer or
other appropriate officer of the Borrower describing such ERISA Event or waiver
request and the action, if any, which the Borrower, its Subsidiaries and ERISA
Affiliates propose to take with respect thereto and a copy of any notice filed
by or with the PBGC or the IRS pertaining thereto;
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(d) promptly and in any event within 10 days after receipt thereof, a
copy of any adverse notice, determination letter, ruling or opinion the
Borrower, any of its Subsidiaries or any ERISA Affiliate receives from the PBGC,
DOL or IRS with respect to any Plan, other than those which, in the aggregate,
do not have any reasonable likelihood of resulting in a Material Adverse Change;
(e) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any domestic or foreign Governmental Authority or
arbitrator, affecting the Borrower, any of its Subsidiaries, any Operator or any
Tenant Guarantor (subject to the Borrower having received notice or knowledge
thereof), except those which in the aggregate, if adversely determined, would
have no Material Adverse Effect;
(f) promptly and in any event within five (5) Business Days after the
Borrower becomes aware of the existence of (i) any Default or Event of Default,
(ii) any breach or non-performance of, or any default under any Operating Lease,
Management Agreement, Advisory Agreement or any Contractual Obligation which is
material to the business, prospects, operations or financial condition of the
Borrower and its Subsidiaries taken as one enterprise, or (iii) any Material
Adverse Change or any event, development or other circumstance which has
reasonable likelihood of causing or resulting in a Material Adverse Change,
telephonic or telecopied notice in reasonable detail specifying the nature of
such Default, Event of Default, breach, non-performance, default, event,
development or circumstance, including, without limitation, the anticipated
effect thereof, which notice (if by telephone) shall be promptly confirmed in
writing within five days;
(g) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to its security holders generally, and copies
of all reports and registration statements which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission or any national
securities exchange or the National Association of Securities Dealers, Inc.;
(h) upon the request of the Lender copies of all federal, state and
local tax returns and reports filed by the Borrower or any of its Subsidiaries
in respect of taxes measured by income (excluding sales, use and like taxes);
(i) promptly and in any event within five days of the Borrower or any
Subsidiary learning of any of the following, written notice to the Lender of any
of the following:
(i) the Release or threatened Release of any Hazardous
Material on or from any property owned, operated or leased by the
Borrower of any
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of its Subsidiaries and any written order, notice, permit, application
or other written communication or report received by the Borrower, any
of its Subsidiaries or any Operator in connection with or relating to
any such Release or threatened Release, unless such Release or
threatened Release is not reasonably likely to have a Material Adverse
Effect;
(ii) any notice or claim to the effect that the Borrower, any
of its Subsidiaries or any Operator is or may be liable to any Person
as a result of the Release or threatened Release of any Hazardous
Material into the environment that could reasonably be expected to have
a Material Adverse Effect;
(iii) receipt by the Borrower, any of its Subsidiaries or any
Operator of notification that any real or personal property of the
Borrower or any of its Subsidiaries is subject to an Environmental Lien
that could reasonably be expected to have a Material Adverse Effect;
(iv) any Remedial Action taken by the Borrower, any of its
Subsidiaries or (if known to the Borrower) any Operator or any other
Person in response to any Hazardous Material on, under or about any
real property owned, operated or leased by the Borrower or any of its
Subsidiaries, unless such Remedial Action is not reasonably likely to
have a Material Adverse Effect;
(v) receipt by the Borrower, any of its Subsidiaries or any
Operator of any notice of violation of, or knowledge by the Borrower,
any of its Subsidiaries or any Operator that there exists a condition
which may result in a violation by the Borrower, any of its
Subsidiaries or any Operator of, any Environmental Law, unless such
violation is not reasonably likely to have a Material Adverse Effect;
(vi) the commencement of any judicial or administrative
proceeding or investigation alleging a violation of any Environmental
Law; or
(vii) any proposed acquisition of stock, assets or real
property, or any proposed leasing of property by the Borrower or any of
its Subsidiaries, unless such action is not reasonably likely to have a
Material Adverse Effect;
(j) upon written request by the Lender, a report providing an update
of the status of any Environmental Claim, Remedial Action or any other issue
identified in any notice or report required pursuant to this Section 7.12;
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(k) promptly, such additional financial and other information
respecting the financial or other condition of any Operators, the Advisor or the
Borrower or any of its Subsidiaries or the status or condition of any real
property owned or leased by the Borrower or its Subsidiaries, or the operation
thereof which the Borrower is entitled to or can otherwise reasonably obtain, as
the Lender from time to time reasonably request; and
(l) such other information respecting the business, properties,
condition, financial or otherwise, or operations of the Borrower, any of its
Subsidiaries or any Operators as the Lender may from time to time reasonably
request.
SECTION 7.13. Leases and Operating Leases. The Borrower shall provide
the Lender with a copy of each lease of Collateral Property to which the
Borrower or any Subsidiary of the Borrower is then a party, whether as lessor or
lessee. The Borrower shall, and shall cause each of its Subsidiaries to, (i)
comply in all material respects with all of their respective obligations under
all of their respective Leases and Operating Leases now or hereafter held
respectively by them with respect to real property, including, without
limitation, the Leases set forth in Schedule 5.22(b); (ii) not modify, amend,
cancel, extend or otherwise change in any materially adverse manner any of the
terms, covenants or conditions of any such Leases or Operating Leases; (iii)
provide the Lender with a copy of each notice of default under any Lease or
Operating Leases received by the Borrower or any Subsidiary of the Borrower
immediately upon receipt thereof and deliver to the Lender a copy of each notice
of default sent by the Borrower or any Subsidiary of the Borrower under any
Operating Lease or Lease simultaneously with its delivery of such notice under
such Operating Lease or Lease; (iv) notify the Lender, not later than 30 days
prior to the date of the expiration of the term of any Lease, of the Borrower's
or any Subsidiary of the Borrower's intention either to renew or to not renew
any such Lease, and, if the Borrower or any Subsidiary of the Borrower intends
to renew such Lease, the terms and conditions of such renewal; and (v) maintain
each Operating Lease in full force and effect in all material respects and
enforce the material obligations of the Operating Lessee thereunder, in a timely
manner.
SECTION 7.14. [Intentionally Omitted].
SECTION 7.15. Employee Plans. For each Plan and any related trust
hereafter adopted or maintained by a Loan Party or any of its ERISA Affiliates
intended to qualify under Code Section 125, 401 or 501, the Borrower shall (i)
seek, and cause such of its ERISA Affiliates to seek, and receive determination
letters from the IRS to the effect that such plan is so qualified; and (ii)
cause such plan to be so qualified.
SECTION 7.16. [Intentionally Omitted].
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SECTION 7.17. Fiscal Year. The Borrower shall maintain as its Fiscal
Year the twelve month period ending on December 31 of each year.
SECTION 7.18. Environmental Matters. (a) The Borrower shall comply and
shall cause each of its Subsidiaries and, with respect to Hotel Facilities only,
each Operator to comply in all material respects with all applicable
Environmental Laws currently or hereafter in effect.
(b) If the Lender at any time has a reasonable basis to believe that
there may be a material violation of any Environmental Law by Borrower any of
its Subsidiaries or any Operator related to any Hotel Facility, or real property
adjacent thereto, then Borrower agrees, upon request from the Lender, to provide
the Lender, at Borrower's expense, with such reports, certificates, engineering
studies or other written material or data as the Lender may reasonably require
so as to reasonably satisfy the Lender that Borrower or such Subsidiary or
Operator is in material compliance with all applicable Environmental Laws.
Furthermore, the Lender shall have the right upon prior notice (except in the
case of an emergency) to inspect during normal business hours any real property
owned, operated or leased by Borrower or any of its Subsidiaries if at any time
the Lender has a reasonable basis to believe that there may be such a material
violation of Environmental Law.
(c) The Borrower shall, and shall cause each of its Subsidiaries and,
with respect to Hotel Facilities only, each Operator to, take such Remedial
Action or other action as required by Environmental Laws, as any Governmental
Authority requires, except to the extent contested in good faith and by proper
proceedings, or as is appropriate and consistent with good business practice.
SECTION 7.19. [Intentionally Omitted].
SECTION 7.20. REIT Requirements. The Borrower shall operate its
business at all times so as to satisfy all requirements necessary to qualify as
a real estate investment trust under Section 856 through 860 of the Code. The
Borrower will maintain adequate records so as to comply with all record-keeping
requirements relating to the qualification of the Borrower as a real estate
investment trust as required by the Code and applicable regulations of the
Department of the Treasury promulgated thereunder and will properly prepare and
timely file with the IRS all returns and reports required thereby. The Borrower
will request from its shareholders all shareholder information required by the
Code and applicable regulations of the Department of Treasury promulgated
thereunder.
SECTION 7.21. Maintenance of FF&E Reserves. The Borrower shall cause
the Operator to maintain FF&E Reserves in respect of each Hotel Facility,
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pursuant to the terms of the Operating Lease and/or Management Agreement
relating thereto and shall direct the Operator to deliver to the Lender
simultaneously with delivery to the Borrower or its Subsidiaries, copies of any
reports, statements or other information required to be supplied to the Borrower
or its Subsidiary under any Operating Lease or Management Agreement for any
Hotel Facility. The Borrower shall not commingle, or permit the commingling of,
other funds with the funds in the FF&E Reserves except to the extent permitted
by the Management Agreement or Operating Lease, as applicable.
SECTION 7.22. Further Assurances. At any time upon the request of the
Lender, the Borrower will, promptly and at its expense, execute, acknowledge and
deliver such further documents and do such other acts and things as the Lender
may reasonably request to provide for payment of the Loans made hereunder and
interest thereon in accordance with the terms of this Agreement.
ARTICLE 8
NEGATIVE COVENANTS
As long as any of the Obligations or Commitment remain outstanding,
without the written consent of the Lender, the Borrower agrees with the Lender
that:
SECTION 8.01. Liens, Etc. The Borrower shall not create or suffer to
exist, and shall not permit any of its Subsidiaries to create or suffer to
exist, any Lien upon or with respect to any of its or such Subsidiary's
properties, whether now owned or hereafter acquired, or assign, or permit any of
its Subsidiaries to assign, any right to receive income therefrom, except for
the following and the Lender hereby consents to the following liens
notwithstanding the provisions of any Negative Pledge Agreement:
(a) Liens created pursuant to the Loan Documents;
(b) Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors or other similar Persons incurred by
the Borrower or any of its Subsidiaries in the ordinary course of business which
secure its obligations to such Person; provided, however, that (i) the Borrower
or such Subsidiary is not in default with respect to such payment obligation to
such Person, (ii) the Borrower or such Subsidiary is in good faith and by
appropriate proceedings diligently contesting such obligation and adequate
provision is made for the payment thereof, or (iii) all such failures in the
aggregate have no Material Adverse Effect;
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(c) Liens (excluding Environmental Liens) securing taxes, assessments
or governmental charges or levies; provided, however, that (i) neither the
Borrower nor any of its Subsidiaries is in default in respect of any payment
obligation with respect thereto unless the Borrower or such Subsidiary is in
good faith and by appropriate proceedings diligently contesting such obligation
and adequate provision is made for the payment thereof, and (ii) all such
failures in the aggregate have no Material Adverse Effect;
(d) Zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or use
of the property or assets of the Borrower or any of its Subsidiaries or impair,
in any material manner, the use of such property for the purposes for which such
property is held by the Borrower or any such Subsidiary;
(e) Liens in favor of landlords securing operating leases permitted by
Section 8.03;
(f) Liens existing on the date of this Agreement and disclosed on
Schedule 8.01, and Liens permitted by the Existing Facility or the Other
Supplemental Facility, or the Loan Documents thereunder;
(g) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(h) Any attachment or judgment Lien not constituting an Event of
Default under Section 9.01(f);
(i) Any (i) interest or title of a lessor or sublessor under any
Capitalized Lease or any operating lease not prohibited by this Agreement, (ii)
restriction or encumbrance that the interest or title of such lessor or
sublessor may be subject to, or (iii) subordination of the interest of the
lessee or sublessee under such lease to any restriction or encumbrance referred
to in the preceding clause (ii);
(j) Liens arising from filing UCC financing statements relating solely
to leases permitted by this Agreement;
(k) Deposits in the ordinary course of business to secure liabilities
to insurance carriers, lessors, utilities and other service providers;
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(l) Purchase money security interests (including mortgages, conditional
sales, Capitalized Leases and any other title retention or deferred purchase
devices) in personal property of the Borrower or any of its Subsidiaries in an
amount not exceeding $200,000 in respect of each Hotel Facility, existing or
created at the time of acquisition thereof or within 60 days thereafter.
(m) Any Lien securing the renewal, extension or refunding of any
Indebtedness or other Obligation secured by any Lien permitted by this Section
8.01 provided that such renewal, extension or refunding is otherwise permitted
by this Agreement and the amount of such Indebtedness or other Obligation
secured by such Lien and the assets subject to such Lien are not increased.
(n) Any Lien securing Indebtedness permitted pursuant to Sections
8.02(a)(v), 8.02(a)(vi) and 8.02(a)(vii).
SECTION 8.02. Indebtedness. (a) The Borrower shall not create, incur or
suffer to exist, or permit any of its Subsidiaries to create, incur or suffer to
exist, any Indebtedness, or incur, assume, endorse, be or become liable for, or
guarantee, directly or indirectly, or permit or suffer to exist, any Contingent
Obligation, except:
(i) Indebtedness and Contingent Obligations in respect of the
Obligations or evidenced by a Loan Document;
(ii) current liabilities in respect of taxes, assessments and
governmental charges or levies incurred, or claims for labor,
materials, inventory, services, supplies and rentals incurred, or for
goods or services purchased, in the ordinary course of business
consistent with the past practice of the Borrower and its Subsidiaries;
(iii) Indebtedness of the Borrower consisting of fees and
expenses referred to in Section 4.01(j) and 4.02(d);
(iv) Indebtedness of the Borrower or any of its Subsidiaries
under Capital Financing Indebtedness in respect of each Hotel Facility
in an aggregate amount for such Hotel Facility not exceeding
$200,000.00 at any one time outstanding; and
(v) Indebtedness of the Borrower or any of its Subsidiaries
comprising pre-existing Indebtedness secured by Real Estate and any
personal property located thereon, which the Borrower or any of its
Subsidiaries assumes in connection with the acquisition of such Real
Estate, in an aggregate amount not exceeding $25,000,000.
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(vi) Indebtedness of the Borrower or any of its Subsidiaries
arising pursuant to the Existing Facility or the Other Supplemental
Facility.
(vii) The mortgage loan made November 25, 1996 in the
aggregate principal amount of $125,000,000 by Column Financial, Inc.,
as originator, to HPTRI Corporation and HPTWN Corporation.
(viii) Indebtedness between the Borrower and any of its
wholly-owned Subsidiaries.
(b) The Borrower shall not cancel, or permit any of its Subsidiaries
to cancel, any claim or Indebtedness owed to it except for adequate
consideration and in the ordinary course of business.
SECTION 8.03. Lease Obligations. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become or remain liable as lessee or
guarantor or other surety with respect to any lease, whether an operating lease
or a Capitalized Lease, of any property (whether real or personal or mixed),
whether now owned or hereafter acquired, which (i) the Borrower or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person, or (ii) the Borrower or any of its Subsidiaries intends to use for
substantially the same purposes as any other property which has been or is to be
sold or transferred by that entity to any other Person in connection with such
lease.
SECTION 8.04. [Intentionally Omitted].
SECTION 8.05. Mergers, Stock Issuances, Asset Sales, Etc. (a) The
Borrower shall not sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its assets or properties, and shall not, and shall not
permit any of its Subsidiaries to, (i) merge with any Person, or (ii)
consolidate with any Person other than (A) the merger of a Subsidiary of the
Borrower into a wholly-owned Subsidiary of the Borrower that is a Loan Party, or
(B) the merger of a wholly-owned Subsidiary of the Borrower into the Borrower.
(b) The Borrower shall not transfer, or permit any of its Subsidiaries
to issue or transfer, any Stock or Stock Equivalents of any Subsidiary other
than any such issuance or transfer (i) by a Subsidiary of the Borrower to a
wholly-owned Subsidiary of the Borrower that is a Loan Party or (ii) by a
wholly-owned Subsidiary of the Borrower to the Borrower, without the prepayment
of the Loans or the prepayment of the loans made under the Other Supplemental
Facility and the Existing Facility, as described in Section 2.06(d).
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(c) The Borrower shall not and shall not permit any of its Subsidiaries
to effect, enter into, consummate or suffer to exist any Asset Sale (other than
an Asset Sale with respect to Mortgaged Properties as to which subsection (d)
below shall apply) without the prior written consent of the Lender, such consent
not to be unreasonably withheld or delayed.
(d) The Borrower shall not and shall not permit any of its
Subsidiaries to effect, enter into, consummate or suffer to exist any Asset Sale
with respect to any Mortgaged Property without (y) the prior written consent of
the Lender, such consent not to be unreasonably withheld or delayed, and (z)
prepayment of the Loans pursuant to Section 2.06(c).
In the event that an Asset Sale of a Mortgaged Property is entered into
in violation of any of the provisions of this Section 8.05(d), in addition to
the other rights and remedies of the Lender hereunder, the Borrower shall
forthwith prepay the Loans upon receipt by the Borrower of its Subsidiaries of
the Asset Sale Proceeds relating thereto, in an amount equal to such Asset Sale
Proceeds, together with accrued interest to the date of such prepayment on the
principal amount prepaid.
SECTION 8.06. Investments. The Borrower shall not, directly or
indirectly, make or maintain, or permit any of its Subsidiaries to make or
maintain, any loan or advance to any Person or own, purchase or otherwise
acquire, or permit any of its Subsidiaries to own, purchase or otherwise
acquire, any Stock, Stock Equivalents, other equity interest, obligations or
other securities of, or all or substantially all of the assets of, any Person or
all or substantially all of the assets constituting the business of a division,
branch or other unit operation of any Person, or enter into any joint venture or
partnership with, or make or maintain, or permit any of its Subsidiaries to make
or maintain, any capital contribution to, or otherwise invest in, any Person or
incorporate or organize any Subsidiary which was not in existence on the Closing
Date (any such transaction being an "Investment"), except Investments consisting
of (a) the Stock of wholly-owned Subsidiaries of the Borrower, (b) cash
equivalent securities in the ordinary course of business or (c) the purchase of
the Approved Hotel Facilities.
SECTION 8.07. Change in Nature of Business or Organizational Documents.
(a) The Borrower shall not make, and shall not permit any of its Subsidiaries to
make, any material change in the nature or conduct of its business as carried on
at the date hereof.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, amend its declaration of trust, certificate of incorporation or
by-laws other than for amendments which in the aggregate have no Material
Adverse Effect.
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SECTION 8.08. Modification of Material Agreements. The Borrower shall
not, and shall not permit any of its Subsidiaries to, (i) alter, rescind,
terminate, amend, supplement, waive or otherwise modify any provision of or
permit any breach or default to exist under the Advisory Agreement without the
prior written consent of the Lender; or (ii) alter, amend, modify, rescind,
terminate, supplement or waive any of their respective rights under, or fail to
comply in all material respects with, any of its material obligations arising
under any Operating Lease or Management Agreement; provided, however, that, with
respect to any such failure to comply with any such obligations, the Borrower
shall not be deemed in default of this Section 8.08 if all such failures in the
aggregate would have no Material Adverse Effect; and provided, further, that in
the event of any material breach or event of default by a Person other than the
Borrower or any of its Subsidiaries, the Borrower shall promptly notify the
Lender of any such breach or event of default and take all such action as may be
reasonably necessary in order to endeavor to avoid having such breach or event
of default have a Material Adverse Effect.
SECTION 8.09. Accounting Changes. The Borrower shall not make, nor
permit any of its Subsidiaries to make, any change in accounting treatment and
reporting practices or tax reporting treatment, except as required by GAAP or
law and disclosed to the Lender.
SECTION 8.10. Transactions with Affiliates. The Borrower shall not, and
shall not permit any of its Subsidiaries, to enter into any transaction directly
or indirectly with or for the benefit of any Affiliate of the Borrower
(including, without limitation, employment contracts or contracts involving the
payment of management or consulting fees, guaranties and assumptions of
obligations of any such Affiliate) except for (A) transactions in the ordinary
course of business on a basis no less favorable to the Borrower or such
Subsidiary as would be obtained in a comparable arm's length transaction with a
Person not an Affiliate, and (B) salaries and other employee compensation and
benefits to officers or directors of the Borrower or any of its Subsidiaries
commensurate with current compensation and benefit levels.
SECTION 8.11. Environmental Matters. (a) The Borrower shall not, and
shall not permit any of its Subsidiaries or any Operator, or, to the extent
practicable, any other Person to dispose of any Hazardous Material by placing it
in or on the ground or waters of any property owned, operated or leased by the
Borrower or any of its Subsidiaries, except as in compliance with all applicable
Environmental Laws currently and hereinafter in effect; provided, however, that
the Borrower shall not be deemed in default of this provision if all such
disposals in the aggregate would have no Material Adverse Effect.
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(b) The Borrower shall not, and shall not permit any of its
Subsidiaries or any Operator, or, to the extent practicable, any other Person
to, dispose or to arrange for the disposal of any Hazardous Material on any
property owned, operated or leased by any other Person, except as in compliance
with all applicable Environmental Laws currently and hereinafter in effect;
provided, however, that the Borrower shall not be deemed in default of this
provision if all such disposals in the aggregate would have no Material Adverse
Effect.
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.01. Events of Default. Each of the following events shall be
an Event of Default:
(a) The Borrower shall fail to pay any principal (including, without
limitation, mandatory prepayments of principal) of, or interest on, any Loan,
any fee, any other amount due hereunder or under the other Loan Documents or
other of the Obligations when the same becomes due and payable; or
(b) Any representation or warranty made or deemed made by any Loan
Party in any Loan Document or by any Loan Party (or any of its officers) in
writing in connection with any Loan Document shall prove to have been incorrect
in any material respect when made or deemed made; or
(c) Any Loan Party shall fail to perform or observe (i) any term,
covenant or agreement contained in Articles 4 or 8 or in any Collateral
Document, or (ii) any other term, covenant or agreement contained in this
Agreement or in any other Loan Document if such failure under this clause (ii)
shall remain unremedied for fifteen (15) days after the date on which written
notice thereof shall have been given to the Borrower by the Lender; or
(d) Any Loan Party or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Indebtedness of such Loan Party or
Subsidiary (excluding Indebtedness evidenced by the Note) beyond the period of
grace (not to exceed 30 days), if any, with respect thereto (whether the same
becomes due and payable by scheduled maturity, required prepayment,
acceleration, demand or otherwise); or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Indebtedness,
if the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall become or be declared to be due and payable, or any Loan Party or any of
its
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Subsidiaries shall be required to repurchase or offer to repurchase such
Indebtedness, prior to the stated maturity thereof; or
(e) Any Loan Party or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against any Loan Party or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a custodian, receiver,
trustee or other similar official for it or for any substantial part of its
property and, in the case of any such proceedings instituted against any Loan
Party or any of its Subsidiaries (but not instituted by it), either such
proceedings shall remain undismissed or unstayed for a period of sixty (60) days
or any of the actions sought in such proceedings shall occur; or any Loan Party
or any of its Subsidiaries shall take any corporate action to authorize any of
the actions set forth above in this Section 9.01(e); or
(f) One or more judgments or orders for the payment of money in an
aggregate amount in excess of $100,000 to the extent not fully covered by
insurance shall be rendered against any Loan Party or any of its Subsidiaries
and either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order, or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) An ERISA Event shall occur which, in the reasonable determination
of the Lender, is reasonably likely to have a Material Adverse Effect; or
(h) The Borrower or any of its Subsidiaries shall have entered into
any consent or settlement decree or agreement or similar arrangement with an
Governmental Authority or any judgment, order, decree or similar action shall
have been entered against the Borrower or any of its Subsidiaries or any
Operator, in any case based on or arising from the violation of or pursuant to
any Environmental Law, or the generation, storage, transportation, treatment,
disposal or Release of any Hazardous Material and such judgment, order, decree
or similar action is reasonably likely to have a Material Adverse Effect; or
(i) Any material provision of any Collateral Document after delivery
thereof under Article 4 shall for any reason cease to be valid and binding on
any Loan Party thereto, or any Loan Party shall so state in writing; or
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(j) Any Collateral Document after delivery thereof pursuant to Article
4 shall, for any reason, cease to create a valid Lien on any of the Collateral
purported to be covered thereby or such Lien shall cease to be a perfected and
first priority Lien, or any Loan Party shall so state in writing; or
(k) There shall occur a Material Adverse Change or an event which is
reasonable likely to have a Material Adverse Effect; or
(l) The Lender shall have determined in good faith, and shall have so
given notice to the Borrower, that the Borrower has at any time ceased to be in
a position to qualify, or has not qualified, as a real estate investment trust
for any of the purposes of the provisions of the Code applicable to real estate
investment trusts; provided that no Event of Default under this subsection shall
be deemed to have occurred and be continuing if, within 10 days after notice of
any such determination is given to the Borrower, the Borrower shall have
furnished the Lender with an opinion of the Borrower's tax counsel (who shall be
reasonably satisfactory to the Lender) to the effect that the Borrower is then
in a position to so qualify, or has so qualified, as the case may be, which
opinion shall not contain any material qualification unsatisfactory to the
Lender; or
(m) HRPT Advisors shall cease at any time to (A) hold beneficially and
of record at least 250,000 of the issued and outstanding common shares and each
other class of equity securities of the Borrower (adjusted for any division,
reclassification or stock dividend in respect of Common Shares), or (B) hold the
power to direct or cause the direction of the management and policies of the
Borrower; or
(n) Barry M. Portnoy and Gerard M. Martin shall cease at any time to
(A) hold beneficially and of record, in the aggregate, at least 51% of the
issued and outstanding common shares and each other class of equity securities
of HRPT Advisors (adjusted for any division, reclassification or stock dividend
in respect of Common Shares), or (B) hold the power to direct or cause the
direction of the management and policies of HRPT Advisors; or
(o) HRPT Advisors shall cease to be the sole Advisor to Borrower
pursuant to and in accordance with the Advisory Agreement, without the Lender's
prior written consent or the Advisory Agreement shall be materially amended,
supplemented or modified without the Lender's prior written consent; or
(p) Advisor shall default in the observance or performance of any
material provision of the Subordination Agreement; or
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(q) Any Manager shall default in the observance or performance of any
material provision of a Management Agreement and such defaults, in the
aggregate, are reasonably likely to have a Material Adverse Effect; or
(r) Any Operating Lessee shall default in the observance or
performance of any material provision of an Operating Lease and such defaults,
in the aggregate, are reasonably likely to have a Material Adverse Effect.
SECTION 9.02. Remedies. If there shall occur and be continuing any
Event of Default, the Lender (i) by notice to the Borrower, may declare the
obligation of the Lender to make Loans to be terminated, whereupon the same
shall forthwith terminate, and (ii) may by notice to the Borrower, declare the
Loans, all interest thereon and all other amounts and Obligations payable under
this Agreement to be forthwith due and payable, whereupon the Note, all such
interest and all such amounts and Obligations (to the extent permitted by
applicable law), shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; provided, however, that upon the
occurrence of the Event of Default specified in Section 9.01(e), (A) the
obligation of the Lender to make Loans shall automatically be terminated and (B)
the Loans, all such interest and all such amounts and Obligations shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower. In addition to the remedies set forth above, the Lender may
exercise any remedies provided for by the Collateral Documents in accordance
with the terms thereof or any other remedies provided by applicable law.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be in writing and signed by the
Lender, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 10.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including, without limitation,
telegraphic, telex, telecopy or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered by hand.
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If to the Borrower, at its address at:
400 Centre Street
Newton, Massachusetts 02158
Attention: Mr. John G. Murray
(telecopy number: 617-332-2261)
(telephone number: 617-964-8389)
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Alexander A. Notopoulos, Esq.
(telecopy number: 617-338-2800)
(telephone number: 617-338-2880)
If to the Lender, at its address at
277 Park Avenue
New York, New York 10172
Attention: James W. Roiter, Managing Director
(telecopy number: 212-892-4096)
(telephone number: 212-892-4900)
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Thomas Patrick Dore, Jr., Esq.
(telecopy number: 212-450-4800)
(telephone number: 212-450-4000)
or, as to the Borrower or the Lender, at such other address as shall be
designated by such party in a written notice to the other party. All such
notices and communications shall, when mailed, telegraphed, telexed, telecopied,
cabled or delivered, be effective three (3) Business Days after being deposited
in the mails, delivered to the telegraph company, confirmed by telex answerback,
telecopied with confirmation of receipt, delivered to the cable company or
delivered by hand to the addressee, respectively, except that notices and
communications to the Lender pursuant to Article 2 shall not be effective until
received by the Lender.
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SECTION 10.03. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under any
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 10.04. Costs; Expenses; Indemnities. (a) The Borrower agrees to
pay to the Lender or as the Lender may direct, on demand, all costs and expenses
of the Lender (including, without limitation, the fees and out-of-pocket
expenses of counsel, retained by the Lender) in connection with the
modification, amendment or enforcement (whether through negotiation, legal
proceedings or otherwise) of this Agreement and the other Loan Documents.
(b) The Borrower agrees to indemnify and hold harmless the Lender and
its Affiliates, and the directors, officers, employees, agents, attorneys,
consultants and advisors of or to any of the foregoing (including, without
limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth in Article 4) (each of the
foregoing being an "Indemnitee") from and against any and all claims, damages,
liabilities, obligations, losses, penalties, actions, judgments, suits, costs,
disbursements and expenses of any kind or nature (including, without limitation,
fees and disbursements of counsel to any such Indemnitee and experts, engineers
and consultants and the costs of investigation and feasibility studies) which
may be imposed on, incurred by or asserted against any such Indemnitee in
connection with or arising out of any investigation, litigation or proceeding,
whether or not any such Indemnitee is a party thereto, whether direct, indirect,
or consequential and whether based on any federal, state or local law or other
statutory regulation, securities or commercial law or regulation, or under
common law or in equity, or on contract, tort or otherwise, in any manner
relating to or arising out of or based upon or attributable to this Agreement,
any other Loan Document, any document delivered hereunder or thereunder, any
Obligation, or any act, event or transaction related or attendant to any
thereof, including, without limitation, (i) arising from any misrepresentation
or breach of warranty under Section 5.19 or any Environmental Claim or any
Environmental Lien or any Remedial Action arising out of or based upon anything
relating to real property owned, leased or operated by the Borrower or any of
its Subsidiaries and the facilities or operations (collectively, the
"Indemnified Matters"); provided, however, that the Borrower shall not have any
obligation under this Section 10.04(b) to an Indemnitee with respect to any
Indemnified Matter caused by or resulting from the gross negligence or willful
misconduct of that Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order.
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(c) If the Lender receives any payment of principal of any Loan other
than on the last day of an Interest Period relating to such Loan, as a result of
any payment made by the Borrower or acceleration of the maturity of the Note
pursuant to Section 9.02 or for any other reason, the Borrower shall, upon
demand by the Lender, pay to the Lender all amounts required to compensate the
Lender for any additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without limitation, any loss
(including, without limitation, loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by the Lender to fund or maintain such Loan.
(d) The Borrower shall indemnify the Lender for, and hold the Lender
harmless from and against, any and all claims for brokerage commissions, fees
and other compensation made against the Lender for any broker, finder or
consultant with respect to any agreement, arrangement or understanding made by
or on behalf of any Loan Party or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement.
(e) The Borrower agrees that any indemnification or other protection
provided to any Indemnitee pursuant to this Agreement (including, without
limitation, pursuant to this Section 10.04) or any other Loan Document shall (i)
survive payment of the Obligations and (ii) inure to the benefit of any Person
who was at any time an Indemnitee under this Agreement or any other Loan
Document.
(f) The provisions of this Section 10.04 shall survive any termination
of this Agreement.
SECTION 10.05. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Lender
to or for the credit or the account of the Borrower against any and all of the
Obligations now or hereafter existing whether or not the Lender shall have made
any demand under this Agreement or any Note or any other Loan Document and
although such Obligations may be unmatured. The Lender agrees promptly to notify
the Borrower after any such set-off and application made by the Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lender under this
Section are in addition to the other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
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SECTION 10.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Lender and thereafter
shall be binding upon and inure to the benefit of the Borrower and the Lender
and their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender.
SECTION 10.07. Assignments and Participations. (a) The Lender may sell,
transfer, negotiate or assign to one or more other financial institutions all or
a portion of its Commitment, the Loans owing to it and an interest in the Note
held by it and a commensurate portion of its rights and obligations hereunder
and under the other Loan Documents subject to the proviso to subparagraph (c)
below.
(b) The Lender may sell participations to one or more banks or other
Persons in or to all or a portion of its rights and obligations under the Loan
Documents (including, without limitation, all or a portion of the Commitment,
the Loans owing to it and the Note held by it). In the event of the sale of any
participation by the Lender, (i) the Lender's obligations under the Loan
Documents (including, without limitation, the Commitment) shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Lender shall remain
the holder of such Note and Obligations for all purposes of this Agreement, and
(iv) the Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement.
(c) Each participant shall be entitled to the benefits of Sections
2.10, 2.12 and 2.14 as if it were a Lender; provided, however, that anything
herein to the contrary notwithstanding, the Borrower shall not, at any time, be
obligated to pay to any participant of any interest of the Lender, under Section
2.10, 2.12 or 2.14, any sum in excess of the sum which the Borrower would have
been obligated to pay Lender in respect of such interest had such assignment not
been effected or had such participation not been sold.
(d) The Borrower shall cooperate with Lender, at no cost or expense to
the Borrower, and any other party to whom the Lender may assign or sell
participations (or negotiate for such assignment or sale) in all or a portion of
the Commitment, the Loans owing to it and an interest in the Note. Such
cooperation of the part of the Borrower shall include but shall not be limited
to the execution and delivery of (i) amendments, modifications and/or
supplements to one or more Loan Documents, in form and substance as may be
required by Lender, and (ii) the execution and delivery of one or more
additional promissory notes, at no cost or expense to the Borrower; provided
however, that such promissory notes, amendments, modifications and/or
supplements do not materially increase the
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obligations of the Borrower or materially diminish the rights of the Borrower
under the Loan Documents.
SECTION 10.08. Governing Law; Severability. This Agreement and the Note
and the rights and obligations of the parties hereto and thereto shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
SECTION 10.09. Submission of Jurisdiction; Service of Process. (a) Any
legal action or proceeding with respect to this Agreement or the Note or any
document related thereto may be brought in the courts of the State of New York
or of the United States of America for the Southern District of New York, and,
by execution and delivery of this Agreement, the Borrower hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably
waive any objection, including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens, which any of them may
now or hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.
(b) The Borrower irrevocably consents to the service of process of any
of the aforesaid courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the borrower
at its address provided herein.
(c) Nothing contained in this Section 10.09 shall affect the right of
the Lender or any holder of the Note to serve process in any other manner
permitted by law or commence legal proceedings or otherwise proceed against the
Borrower in any other jurisdiction.
SECTION 10.10. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
SECTION 10.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
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SECTION 10.12. Entire Agreement. This Agreement, together with all of
the other Loan Documents and all certificates and documents delivered hereunder
or thereunder embody the entire agreement of the parties and supersedes all
prior agreements and understandings relating to the subject matter hereof.
SECTION 10.13. Confidentiality. The Lender agrees to keep information
obtained by it pursuant hereto and the other Loan Documents confidential in
accordance with the Lender's customary practices and agrees that it will only
use such information in connection with the transactions contemplated by this
Agreement and not disclose any of such information other than (i) to the
Lender's employees, representatives and agents who are or are expected to be
involved in the evaluation of such information in connection with the
transactions contemplated by this Agreement and who are advised of the
confidential nature of such information, (ii) to the extent such information
presently is or hereafter becomes available to the Lender, as the case may be,
on a non-confidential basis from a source other than the Borrower, (iii) to the
extent disclosure is required by law, regulation or judicial order or requested
or required by bank regulators or auditors, or (iv) to assignees or participants
or potential assignees or participants who agree to be bound by the provisions
of this sentence.
SECTION 10.14. Waiver of Jury Trial. Each of the parties hereto waives
any right it may have to trial by jury in respect of any litigation based on, or
arising out of, under or in connection with this Agreement or any other Loan
Document, or any course of conduct, course of dealing, verbal or written
statement or action of any party hereto.
SECTION 10.15. NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST OF
THE BORROWER, DATED MAY 12, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO ("THE DECLARATION"), IS DULY FILED IN THE OFFICE OF 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 BORROWER SHALL BE HELD
TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, THE BORROWER. ALL PERSONS DEALING WITH THE BORROWER, IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF THE BORROWER FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
SECTION 10.16. Refinancing and/or Securitization. The Borrower shall
engage the Lender as book running lead manager on any equity or debt offering
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so long as the Indebtedness evidenced by this Agreement or the Other
Supplemental Facility is outstanding. In the event the Loans become the subject
of a securitization underwritten by the Lender or any of its Affiliates, the
Borrower and the Lender shall amend this Agreement to provide that the
Obligations are non-recourse to the Borrower or its Subsidiaries. Furthermore,
the Borrower shall, provided it receives at least fifteen (15) Business Days
written notice of the Lender's request therefor, deliver a 10(b)(5) opinion and
a nonconsolidation opinion, each at the Borrower's sole cost and expense, in
form and substance and delivered by counsel acceptable to the Lender and the
Rating Agency, as may be required by the Lender and/or the Rating Agency in
connection with such securitization. The Borrower shall undertake all actions
(including structural reorganization including, without limitation, transferring
assets to a special/single purpose and bankruptcy remote entity, if appropriate)
necessary to enable its counsel to issue the opinion. The Borrower's failure to
deliver the opinions required hereby or otherwise comply with the provisions of
this Section 10.16 and the following Sections 10.17 through 10.18, shall
constitute an "Event of Default" hereunder.
SECTION 10.17. Cooperation with Rating Agencies. The Borrower covenants
and agrees that in the event the Lender decides to include the Loans as an asset
of a securitization, the Borrower shall upon the Lender's written request (a)
proceed to establish a cash management system and escrow accounts as required by
the Rating Agencies or the Lender, whereby all revenues shall be deposited
directly into an account in the name of the Lender to pay real estate taxes,
insurance premiums, monthly debt service and capital improvement reserves, with
the excess being available to the Borrower for its use, (b) gather any
environmental or engineering information required by the Rating Agency in
connection with such a securitization, (c) at the Lender's request, meet with
representatives of the Rating Agency to discuss the business and operations of
the Mortgaged Properties, and (d) cooperate with the requests of the Lender or
the Rating Agency in connection with all of the foregoing.
SECTION 10.18. Securitization Financials. The Borrower covenants and
agrees that, upon the Lender's written request therefor in connection with a
securitization, in which the Loans are to be included as an asset, the Borrower
shall promptly deliver audited financial statements and related documentation
prepared by an independent certified public accountant that satisfy securities
laws and requirements for use in a public registration statement (which may
include up to three (3) years of historical audited financial statements).
Notwithstanding anything to the contrary in Sections 10.16, 10.17 and this
Section 10.18, the Lender agrees that the Loans shall not be included as an
asset of a securitization which is effective on or before the Final Maturity
Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
HOSPITALITY PROPERTIES TRUST
By:/s/ John Murray
Name: John Murray
Title: President
DLJ MORTGAGE CAPITAL, INC.
By: /s/ N. Dante LaRocca
Name: N. Dante LaRocca
Title: Senior Vice President
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in Hospitality Properties Trust's Registration
Statement No. 333-17983 of our reports dated November 21, 1997 included in
Hospitality Properties Trust's Form 8-K dated November 21,1997 and to all
references to our Firm included in this registration statement.
Arthur Andersen LLP
Washington, D.C.
November 21, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in Hospitality Properties Trust's Registration
Statement No. 333-17983 of our reports dated January 10, 1997 for Hospitality
Properties Trust and February 28, 1997 for HMH HPT Courtyard, Inc. and HMH HPT
Residence Inn, Inc. included in Hospitality Properties Trusts's Form 10-K for
the year ended December 31, 1996 and to all references to our Firm included in
this registration statement.
Arthur Andersen LLP
Washington, D.C.
November 21, 1997
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in Hospitality Properties Trust's Registration
Statement No. 333-17983 of our reports dated March 4, 1997 included in
Hospitality Properties Trust's Form 8-K dated November 21,1997 and to all
references to our Firm included in this registration statement.
Reznick Fedder & Silverman
Bethesda, Maryland
November 21, 1997
