SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): April 3, 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
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Item 2. Acquisition or Disposition of Assets.
On April 3, 1997, Hospitality Properties Trust (the "Company"), through
a wholly owned subsidiary, acquired seven hotels (the "Current Hotels") and
agreed to acquire seven additional hotels currently under development (the
"Future Hotels" and collectively with the Current Hotels, the "Hotels") from
subsidiaries of Marriott International, Inc. ("Marriott") for a total of
approximately $149 million. The Hotels consist of ten Residence Inn by
Marriott(R) and four Courtyard by Marriott(R) hotels. The Current Hotels are and
the Future Hotels will be leased back to and initially managed by a single
purpose wholly owned subsidiary of Marriott (the "Tenant"). The Current Hotels,
each of which was opened during the last thirteen months, contain a total of
1,001 rooms. The Future Hotels contain a total of 818 rooms and are expected to
open during 1997. The Company has agreed to acquire each of the Future Hotels
when they are completed and opened, provided that such events occur in 1997. The
purchase of the Current Hotels for an aggregate of approximately $82 million was
and the purchases of the Future Hotels for an aggregate of $67 million are
expected to be funded initially by drawings under the Company's existing $200
million revolving line of credit with DLJ Mortgage Capital Inc. The Company will
explore various alternatives in both the timing and repayment of amounts
outstanding under the revolving credit facility. 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 each of the 14 Hotels are as
follows:
Total Total
Location by State Type of Hotel Hotels Rooms
Alabama* 1 Residence Inn
1 Courtyard 2 242
California 1 Residence Inn 1 120
Georgia* 1 Residence Inn 1 120
Nevada 1 Residence Inn 1 120
Pennsylvania* 1 Residence Inn
1 Courtyard 2 234
Texas 3 Residence Inns
2 Courtyards 5 761
Virginia* 2 Residence Inns 2 222
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Total 10 Residence Inns;
4 Courtyards 14 1,819
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*Consists of Future Hotels
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The principal features of the leases of the 14 Hotels are as follows:
o Each Hotel is 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 Tenant to be in default.
o The initial lease term expires during 2014.
o At the end of the initial lease term, the Tenant has two consecutive
renewal options of 12 and 10 years, respectively.
o The leases, including the leases of the Future Hotels, require minimum
rent payments to the Company aggregating $14.9 million per year.
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 Hotel ("Total Hotel
Sales") in excess of Total Hotel Sales during the second full calender
year of operation for each of the Hotels.
o A percentage of Total Hotel Sales, initially 3% of Total Hotel Sales and
increasing to 5% of Total Hotel Sales after the second full calender
year of operations, must be escrowed periodically by the Tenant to fund
refurbishments and renovations to the Hotels. An initial deposit of $1.5
million to fund refurbishments and renovations to the 14 Hotels has been
made by the Company.
o Under certain circumstances, the Company may be required to fund major
repairs to the 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 14
Hotels is retained by the Company as security for the Tenant's
obligations under the leases. Provided that the Tenant does not default
under any of the leases, the Company must repay the security deposit to
the sellers of the 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 security deposits will not be escrowed.
o The leases of the Hotels are or will be triple net leases requiring the
Tenant to pay all operating expenses, including taxes and insurance.
Under the leases, the Tenant is also the initial operator and manager of
the Hotels.
o There are no separate management agreements between the Company or any
of its subsidiaries and any person with respect to the Hotels. However,
the Tenant has the right to enter into, amend and terminate agreements
for the management of the Hotels
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with its affiliates. The Company's prior written consent is required for
the Tenant to enter into a management agreement with a non-affiliate.
o Borrowings by the Company in respect of each of the Hotels are limited
in accordance with a formula set forth in the leases for the Hotels to
no more than 70% of the allocable purchase price of each such Hotel in
the case of a borrowing secured by a single Hotel, or 60% of the
aggregate allocable purchase prices of such Hotels in the case of a
borrowing secured by two or more of the Hotels on a combined basis.
o Any amounts which may become due to managers for operation of the Hotels
will be subordinated to all amounts due to the Company under the leases.
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 Tenant's fiscal months
following the fiscal month in which the last of the 14 Hotels is
acquired or, if earlier, the close of Tenant's November, 1998 fiscal
month (the "Initial Period") and thereafter until the first to occur of
(i) the last day of Tenant's 2003 fiscal year, (ii) the date on which
(A) the cumulative amount of guaranteed rent paid by the Tenant under
the leases or by Marriott under the guarantee in excess of the Tenant's
cumulative Cash Available for Lease 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 Hotels, or (iii) the
date on which the Tenant's minimum rent coverage (defined as Cash
Available for Lease Payments divided by minimum rents) has exceeded 130%
for four consecutive fiscal quarters. The guarantee is subject to
termination under certain circumstances upon the transfer of one or more
Hotels by the Company. Marriott's guarantee is in addition to the
retained security deposits.
This Current Report on Form 8-K contains statements which constitute
forward looking statements within the meaning of the Securities Act of 1933, as
amended and the Securities Exchange Act of 1934, as amended. These statements
include but are not limited to all references to the Future Hotels (including
their expected acquisition (including purchase price) and leasing and lease
terms (including minimum rents, term, renewal options, refurbishment reserves
and cross default provisions)) and the means of financing any purchase thereof.
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 each of
the Future Hotels is still under development and that therefore no assurance can
be given that any of the Future Hotels will be completed or acquired during 1997
or otherwise or that the terms of any such acquisition will not differ
materially from those described above. General risks associated with properties
under development, including but not limited to adverse weather, labor disputes,
engineering and other
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construction difficulties and cost overruns, may materially delay or prevent the
completion and thus the acquisition of any of the Future Hotels.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits.
10.1 Purchase and Sale Agreement by and among Residence Inn by
Marriott, Inc. and Courtyard Management Corporation, as sellers,
and Hospitality Properties Trust, as purchaser, dated April 3,
1997.
10.2 Form of Courtyard Lease Agreement by and between HPTMI
Corporation and CR14 Corporation.
10.3 Form of Residence Inn Lease Agreement by and between HPTMI
Corporation and CR14 Corporation.
10.4 Limited Rent Guaranty, dated April 3, 1997, by and among
Marriott International, Inc., as guarantor, and Hospitality
Properties Trust and HPTMI Corporation, as landlord.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
John G. Murray, President and
Chief Operating Officer
Date: April 14, 1997
Exhibit 10.1
PURCHASE AND SALE AGREEMENT
BY AND AMONG
RESIDENCE INN BY MARRIOTT, INC.
and COURTYARD MANAGEMENT CORPORATION,
as Sellers,
and
HOSPITALITY PROPERTIES TRUST,
as Purchaser
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April 3, 1997
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TABLE OF CONTENTS
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................................................7
2.5 Survey Matters...............................................7
2.6 Environmental Reports........................................8
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SECTION 3. PURCHASE AND SALE..............................................9
3.1 Closing......................................................9
3.2 Purchase Price...............................................9
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.................10
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..............................................12
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.......................................13
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..............................................14
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
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SECTION 9. APPORTIONMENTS................................................18
9.1 Real Property Apportionments................................18
9.2 Closing Costs...............................................18
SECTION 10. DEFAULT......................................................18
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...............................................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, Etc. ...........................25
Schedule A - Property Identification
Schedule B-1-14 - 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
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of the 3rd day of April,
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 Forty-Eight Million Eight
Hundred Twelve Thousand Dollars ($148,812,000).
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.
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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, (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 and (xi) any rights of the Seller to purchase land adjacent to the
Property located in Dallas, Texas.
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-14.
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-14 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 CR14 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 Commercial Settlements, Inc., acting as
agent for Commonwealth Land 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
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Closing with respect to any Property, the Sellers shall use 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 the first anniversary of the date of this Agreement. 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 to the first
anniversary of the initial Closing hereunder, 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.
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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 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
<PAGE>
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Sellers notice of any matters shown thereon (other than Permitted Encumbrances)
which adversely affect any such Property in any material respect and as to which
the Purchaser reasonably objects. If, for any reason, the Sellers are unable 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
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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.
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 the first anniversary of the initial Closing Date hereunder, 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.
<PAGE>
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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 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
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(k) Such other conveyance documents, certificates, deeds, affidavits
and other instruments as the Purchaser may reasonably require.
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:
<PAGE>
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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.
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
Five Hundred Thousand Dollars ($1,500,000) 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
<PAGE>
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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 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,
<PAGE>
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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 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.
<PAGE>
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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.
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 the first anniversary of the initial Closing Date.
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
<PAGE>
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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 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.
<PAGE>
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7.4 Litigation. No investigation, action or proceeding is pending and,
to the Purchaser's actual knowledge, no action or proceeding is threatened and
no investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
The representations and warranties made in this Agreement by the
Purchaser 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
<PAGE>
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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
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
<PAGE>
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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.
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
<PAGE>
-20-
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 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,
<PAGE>
-21-
without limitation, reasonable attorneys' and accountants' fees and expenses)
arising from any failure of the Purchaser to perform the obligation so assumed
after the applicable Closing.
(c) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the
party learning of such liability shall notify the other party promptly and
furnish such copies of documents (and make originals thereof available) and such
other information as such party may have that may be used or useful in the
defense of such claims and shall afford said other party full opportunity to
defend the same in the name of such party and shall generally cooperate with
said other party in the defense of any such claim.
(d) The provisions of this Section 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
<PAGE>
-22-
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 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]
<PAGE>
-23-
If to the Purchaser, to:
Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
(d) By notice given as herein provided, the parties hereto and their
respective 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>
-26-
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/ M. E. Dearing
Its (Vice) President
COURTYARD MANAGEMENT CORPORATION
By:/s/ M. E. Dearing
Its (Vice) President
PURCHASER:
HOSPITALITY PROPERTIES TRUST
By:/s/ John G. Murray
John G. Murray, President
<PAGE>
Schedule A
Property Identification
Allocable No. of
Property Brand Purchase Price Rooms
Charlottesville, VA RIBM $ 8,389,526 108
Fresno, CA RIBM 9,915,689 120
Homewood, AL RIBM 9,706,421 120
Atlanta Town Center RIBM 9,979,572 120
Dallas-Richardson RIBM 10,518,951 120
San Antonio Downtown RIBM 20,115,026 220
Reno, NV RIBM 9,092,938 120
Fairfax, VA RIBM 10,435,445 114
Fort Worth-Fossil Creek RIBM 9,423,684 114
Allentown, PA RIBM 10,195,116 120
Fort Worth-Fossil Creek CYBM 13,220,221 154
Houston Hobby Airport CYBM 9,626,030 153
Allentown, PA CYBM 9,037,154 114
Birmingham CYBM 9,156,227 122
------------ ---
$148,812,000 1,819
============ =====
<PAGE>
Schedules B-1 through B-14
Legal Descriptions of Properties
[See attached copies.]
<PAGE>
Schedule C
Form of Surveyor's Certificate
SURVEYOR'S CERTIFICATE
TO: Hospitality Properties Trust
and its assignees and nominees
Marriott International, Inc.
and its assignees and nominees
Commonwealth Land Title Insurance Company
RE: Survey Entitled "_______________________________________"
dated _________ ___, 1997, prepared by
The undersigned hereby certifies that the [above-referenced] [attached]
survey was prepared from an actual on-the-ground instrument survey of the
subject premises; that the same accurately shows the location of the boundaries
of the subject premises and the location of all streets, highways, alleys and
public ways crossing or abutting said premises; that the dimensions of the
improvements and the locations thereof with respect to the boundaries are
accurately shown as the same were situated on ___________ ___, 1997; that there
are no encroachments by improvements appurtenant to adjoining premises upon the
subject premises, nor from the subject premises, unless shown thereon; that all
buildings and structures, if any, lie wholly within all applicable building
restriction lines, if any, and do not violate any restriction or other recorded
agreements set forth in the [pro forma title insurance policy/commitment] for
the subject premises dated __________ __, 1997, issued to you by Commonwealth
Land Title Insurance Company, Commitment No. _______ (the "Title Policy"); that
all easements and rights of way which are appurtenant to or burden the subject
premises and (i) are referred to in the Title Commitment or (ii) are apparent
from a visual inspection are delineated thereon, and are located other than
through the existing building shown hereon; that all parking spaces, if any, are
delineated thereon; and that, except as otherwise shown thereon, the subject
premises are not located (x) within any flood hazard or flood way area or
district as designed by Federal, state or municipal authority or (y) within any
area subject to regulation by Federal, state or municipal authority as inland or
coastal wetlands, beach, estuary or the like.
Access to and egress from the subject premises and the improvements and
structures thereon to ________ Street, a public way, are provided by the means
indicated thereon. Municipal water, storm sewer facilities and telephone, gas
and electric services of public utilities are available in the locations
indicated thereon.
<PAGE>
-2-
The undersigned hereby certifies that the square footage of each parcel
delineated on the above-referenced survey is as set forth thereon, that all such
parcels are contiguous without any strips, gaps or gores existing between any of
said parcels, and that said parcels, when combined, form and create one complete
and uninterrupted parcel without any strips, gaps or gores.
This survey is made in accordance with the "Minimum Standard Detail
Requirements for Land Title Surveys" jointly established
and adopted by ALTA and ACSM in 1986.
Dated: _________ ___, 1997 _____________________________
Registered Land Surveyor
__________ #_________________
[Surveyor's Seal]
<PAGE>
Schedule D
Form of Sellers' Certificate
CLOSING CERTIFICATE
Reference is made to the Purchase and Sale Agreement, dated __________
(the "Purchase Agreement"). Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed
to such terms in the Purchase Agreement.
In connection with the consummation of the transactions contemplated by
the Purchase and Sale Agreement with respect to the properties described on
Exhibit A, the undersigned hereby certifies as follows:
1. That Substantial Completion has occurred with respect to the
Properties listed on Exhibit A;
2. That the Improvements on the Properties listed on Exhibit A include
the number of rooms as set forth in Exhibit A;
3. That the Opening Date with respect to each of the Properties listed
on Exhibit A is the date therein set forth; and
4. That the Properties are being operated as a Courtyard or Residence
Inn by Marriott hotel as set forth in Exhibit A.
Executed under seal as of this ____ day of __________, 199_.
RESIDENCE INN BY MARRIOTT, INC.
By:______________________________
Its (Vice) President
COURTYARD MANAGEMENT CORPORATION
By:______________________________
Its (Vice) President
<PAGE>
EXHIBIT A
No. of
Property Brand Rooms Opening Date
<PAGE>
Schedule E
Form of Architect's Certificate
__________ __, 199_
Reference is made to the Purchase and Sale Agreement, dated __________
(the "Purchase Agreement"), by and between [Courtyard Realty Corporation,]
Residence Inn by Marriott, Inc. and Courtyard Management Corporation, as sellers
and Hospitality Properties Trust, as purchaser (together with its successors and
assigns ("HPT").
As an inducement to HPT to acquire the properties identified on Exhibit
A to this letter (the "Properties"), we do hereby:
1. Certify to HPT that we are professional architects, duly
registered under the laws and applicable regulations of the State of
______________;
2. Certify to HPT that[, to the best of my knowledge,] the
Plans and Specifications identified on Exhibit B (the "Plans") comply
with all applicable requirements of all governmental authorities having
jurisdiction over the improvements located on the Properties,
including, without limitation, all applicable zoning laws, ordinances,
rules, regulations and restrictions (but excluding any such ordinances,
rules, regulations and restrictions relating to environmental matters);
and
3. Certify to you that[, to the best of my knowledge,] the
improvements have been substantially completed in accordance with the
Plans.
Very truly yours,
----------------------------------
By:_____________________________
Its:
<PAGE>
EXHIBIT A
The Properties
[See attached copies.]
<PAGE>
EXHIBIT B
Plans and Specifications
[See attached copies.]
<PAGE>
Schedule F
Form of Engineer's Certificate
__________ __, 199_
Reference is made to the Purchase and Sale Agreement, dated __________
(the "Purchase Agreement"), by and between [Courtyard Realty Corporation,]
Residence Inn by Marriott, Inc. and Courtyard Management Corporation, as sellers
and Hospitality Properties Trust, as purchaser (together with its successors and
assigns ("HPT").
As an inducement to HPT to acquire the properties identified on Exhibit
A to this letter (the "Properties"), we do hereby:
1. Certify to HPT that we are professional engineers, duly
registered under the laws and applicable regulations of the State of
______________;
2. Certify to HPT that[, to the best of my knowledge,] the
Plans and Specifications identified on Exhibit B comply with all
applicable requirements of all governmental authorities having
jurisdiction over the improvements located on the Properties,
including, without limitation, all applicable zoning and environmental
laws, ordinances, rules, regulations and restrictions; and
3. Certify to you that all utilities, roads and services
(including, without limitation, water and sewerage service and gas,
electricity and telephone lines) necessary for the contemplated
development and operation of each Property as set forth in Exhibit A
are available throughout such Property, can be used or tapped into in
connection with development and operation of such Property, and are of
sufficient capacity to meet adequately all needs and requirements
necessary for such development and operation of such Property.
Very truly yours,
----------------------------------
By:_____________________________
Its:
<PAGE>
EXHIBIT A
The Properties
[See attached copies.]
<PAGE>
EXHIBIT B
Plans and Specifications
[See attached copies.]
<PAGE>
Schedule G
List of Plans and Specifications
On file at the offices of the Sellers and the Purchaser.
Exhibit 10.2
LEASE AGREEMENT
DATED AS OF ______ __, 199_
BY AND BETWEEN
HPTMI CORPORATION,
AS LANDLORD,
AND
CR14 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
1.47 Hotel .......................................................8
1.48 Hotel Mortgage ..............................................8
1.49 Hotel Mortgagee .............................................8
<PAGE>
-ii-
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
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
<PAGE>
-iii-
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
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
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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
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
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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
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
<PAGE>
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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 CORPORATION, a Delaware corporation, as landlord
("Landlord"), and CR14 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
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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
April 3, 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 as a result of Landlord's status as a real estate investment trust.
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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 April 3, 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 April 3, 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
fourth Accounting Period in the Fiscal Year 2014.
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, the first such renewal term to be for a period of
twelve (12) years and the second such renewal term to be for a period of ten
(10) years (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
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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
(and, if applicable, such payment shall be prorated as provided in the
last sentence of the first paragraph of Section 3.1). Minimum Rent for
any partial Accounting Period shall be prorated on a per diem basis.
(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
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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.
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
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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 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
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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.
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"):
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(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
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
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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 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,
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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 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
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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 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
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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 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
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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 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
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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, 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
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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.
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
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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
Five Hundred Thousand Dollars ($1,500,000) 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;
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(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 Five Hundred
Thousand Dollars ($1,500,000) 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
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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
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
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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 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
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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 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
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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.
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.
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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 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
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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 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
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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 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:
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(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
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]
<PAGE>
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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.
<PAGE>
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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
<PAGE>
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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,
<PAGE>
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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.
<PAGE>
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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 CORPORATION
By:___________________________
John G. Murray, President
TENANT:
CR14 TENANT CORPORATION
By:___________________________
Its (Vice) President
<PAGE>
EXHIBIT A
Minimum Rent
[See attached copy.]
<PAGE>
EXHIBIT B
Other Leases
[See attached copy.]
<PAGE>
EXHIBIT C
The Land
[See attached copy.]
Exhibit 10.3
LEASE AGREEMENT
DATED AS OF ______ __, 199_
BY AND BETWEEN
HPTMI CORPORATION,
AS LANDLORD,
AND
CR14 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
1.47 Hotel .......................................................8
1.48 Hotel Mortgage ..............................................8
1.49 Hotel Mortgagee .............................................8
<PAGE>
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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
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
<PAGE>
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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.............................................39
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
<PAGE>
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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
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........................................54
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
Section 10.2.4 and 11.3...............................58
14.6 Special Remedy for Tenant under Section 22.8................58
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...........................63
16.4 Sublease Limitation.........................................63
<PAGE>
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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.........................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.....................................71
21.8 Liens and Encumbrances......................................72
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
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......................................77
22.13 Applicable Law, Etc.........................................77
22.14 Right to Make Agreement.....................................77
22.15 Disclosure of Information...................................78
22.16 Trademarks, Trade Names and Service Marks...................78
<PAGE>
-vi-
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 CORPORATION, a Delaware corporation, as landlord
("Landlord"), and CR14 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
April 3, 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,
<PAGE>
-3-
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 guest rooms in such Hotel, Total Hotel Sales attributable to
<PAGE>
-4-
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 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.
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 as a result of Landlord's status as a real estate investment trust.
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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 April 3, 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 April 3, 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
fourth Accounting Period in the Fiscal Year 2014.
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, the first such renewal term to be for a period of
twelve (12) years and the second such renewal term to be for a period of ten
(10) years (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
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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
(and, if applicable, such payment shall be prorated as provided in the
last sentence of the first paragraph of Section 3.1). Minimum Rent for
any partial Accounting Period shall be prorated on a per diem basis.
(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
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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.
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
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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 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
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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.
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"):
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(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
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
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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 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,
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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 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
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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 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
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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
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
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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 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
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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, 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
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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.
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
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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
Five Hundred Thousand Dollars ($1,500,000) 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;
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(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 Five Hundred
Thousand Dollars ($1,500,000) 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
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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
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
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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 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
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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 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
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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.
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.
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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 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
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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 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.
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ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "Claims") as
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to pay any
Claims 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
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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
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
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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 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.
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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 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.
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ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any 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 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
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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
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
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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) 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.
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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 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
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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 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
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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, 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
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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 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
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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 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
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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 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.
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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 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 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
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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.
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.
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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 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.
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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 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
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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 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
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(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 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
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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 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;
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(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 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
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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.
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
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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) 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.
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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.
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
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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.
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
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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.
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
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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 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.
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(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 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
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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 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
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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.
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
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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;
(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.
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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.
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
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Agreement, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law, or if from any
circumstances Landlord should ever receive as fulfillment of such provision such
an excessive amount, then, ipso facto, the amount which would be excessive shall
be applied to the reduction of the installment(s) of Minimum Rent next due and
not to the payment of such excessive amount. This provision shall control every
other provision of this Agreement and any other agreements between Landlord and
Tenant.
22.2 No Waiver. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.
22.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this Agreement, but rather the effect thereof shall be confined to
the clause, sentence, paragraph, section or provision so held to be invalid,
illegal or ineffective, and this Agreement shall be construed as if such
invalid, illegal or ineffective provisions had never been contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
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
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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
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.
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(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]
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]
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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 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.
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22.12 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
22.13 Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State
applicable to contracts between residents of the State which are to be performed
entirely within the State, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required by this
Agreement is made or required to be made; or (iii) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues; or
(iv) where any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or jurisdiction
of organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State as is provided by law; and the parties consent to the jurisdiction of
said court or courts located in the State and to service of process by
registered mail, return receipt requested, or by any other manner provided by
law.
22.14 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.
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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 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
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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.
(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
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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 CORPORATION
By:___________________________
John G. Murray, President
TENANT:
CR14 TENANT CORPORATION
By:___________________________
Its (Vice) President
<PAGE>
EXHIBIT A
Minimum Rent
[See attached copy.]
<PAGE>
EXHIBIT B
Other Leases
[See attached copy.]
<PAGE>
EXHIBIT C
The Land
[See attached copy.]
EXHIBIT 10.4
LIMITED RENT
GUARANTY
THIS LIMITED RENT GUARANTY ("Guaranty") is made as of the 3rd day of
April, 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 CORPORATION ("HPTMI"), having an
address at 400 Centre Street, Newton, Massachusetts 02158 (HPTMI together with
HPT and their its permitted successors and assigns, hereinafter referred to as
"Landlord").
RECITALS
WHEREAS, HPTMI and CR14 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
fourteen (14) 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 the 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 the
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:
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
<PAGE>
counterclaim. For purposes here, 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 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 to
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 fourteen (14)
Properties has been acquired 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.
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:
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(i) 11:59 p.m. on the last day of the Fiscal Year 2003;
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.
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 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
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<PAGE>
(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 al 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 fourteen (14)
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
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.
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"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.
"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
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.
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<PAGE>
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 event 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 term "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.
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
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<PAGE>
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.
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.
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<PAGE>
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 and 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 ben 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:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-924.11
Bethesda, Maryland 20817
Attn: Mr. Michael E. Dearing
[Telecopier No. (301) 380-5067]
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<PAGE>
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 (hereafter 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 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.
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
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<PAGE>
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 of
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 an enforcement of any provision 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
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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 of 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 waver 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 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 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 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, A COPY
OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
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"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.
G. Counterpart. The parties agree that this Limited Rent Guaranty may
be signed in counterpart.
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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/ Jeffrey Start By:/s/ Christopher S. Lynch (SEAL)
Name: Christopher S. Lynch
Title: Authorized Signatory
LANDLORD:
HOSPITALITY PROPERTIES TRUST
/s/ Marie S. Moynihan By:/s/ John G. Murray (SEAL)
Name: John G. Murray
Title: President
HPTMI CORPORATION
/s/ Marie S. Moynihan By:/s/ John G. Murray (SEAL)
Name: John G. Murray
Title: President
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EXHIBIT A
Property Expenses
The term "Property Expenses" shall mean the sum of the following items
(all to the extent incurred consistent with the terms of the Leases):
1. the cost of sales, including, without limitation, compensation,
fringe benefits, payroll taxes and other costs related to employees of Tenant
and/or the Manager (the foregoing costs shall not include salaries and other
employee costs of executive personnel of tenant and/or the Manager who do not
work at the Properties on a regular basis; except that the foregoing costs shall
include the allocable portion of the salary and other employee costs of any
general manager or other supervisory personnel assigned to a "cluster" of hotels
which includes the Properties);
2. departmental expenses incurred at departments within the Properties;
administrative and general expenses; the cost of marketing incurred by the
Properties; advertising and business promotion incurred by the Properties; heat,
light, and power; computer line charges; and routine repairs, maintenance and
minor alterations not paid from the Reserve;
3. the cost of Inventories and FAS consumed in the operation of the
Properties;
4. a reasonable reserve for uncollectible accounts receivable as
determined by the Tenant and/or Manager;
5. all costs and fees of independent professionals or other third
parties who are retained by Tenant and/or Manager to perform services required
or permitted hereunder;
6. all costs and fees of technical consultants and operational experts
who are retained or employed by Tenant, Manager and/or Affiliate of the Tenant
or Manager for specialized services (including, without limitation, quality
assurance inspectors) and the cost of attendance by employees of the Properties
at training and manpower development programs sponsored by Tenant and/or
Manager;
7. the fees and other charges paid pursuant to the terms of the
Franchise Agreement, including all franchise fees and royalty fees;
8. insurance costs and expenses as provided in Article 9 of the Leases;
9. taxes, if any, payable by or assessed against Tenant and/or Manager
related to this Agreement or to Franchisor and/or Manager's operation of the
Properties (exclusive of Tenant's and/or Manager's income taxes) and all
Impositions; and
<PAGE>
10. such other costs and expenses incurred by Tenant and/or Managers as
are specifically provided for elsewhere in the Leases or are otherwise
reasonably necessary for the proper and efficient operation of the Hotel,
provided, however, it shall not include any fees paid to the Manager pursuant to
the terms of any Management Agreement.
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