UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
Commission File Number 1-11527
HOSPITALITY PROPERTIES TRUST
Maryland 04-3262075
(State of incorporation) (IRS Employer Identification No.)
400 Centre Street, Newton, Massachusetts 02158
617-964-8389
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Class on which registered
- ------------------------------------ -----------------------
Common Shares of Beneficial Interest New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock of the registrant held
by non-affiliates was $1,286,258,190 based on the $35.00 closing price per share
for such stock on the New York Stock Exchange on March 11, 1998. For purposes of
this calculation, 280,526 Common Shares of Beneficial Interest, $0.01 par value
("Shares") held by HRPT Advisors, Inc. ("Advisors"), 4,000,000 Shares held by
Health and Retirement Properties Trust ("HRP"), and an aggregate of 10,037
shares held by the trustees and officers of the registrant, have been included
in the number of shares held by affiliates.
Number of the registrant's Shares, outstanding as of March 11, 1998:
41,040,797
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DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K is incorporated herein by
reference from the definitive Proxy Statement of Hospitality Properties Trust
(the "Company") dated March 31, 1998 for its annual meeting of shareholders
currently scheduled to be held on May 19, 1998.
---------------
CERTAIN IMPORTANT FACTORS
The Company's Annual Report on Form 10-K contains statements which
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Those statements appear in a number of
places in this Form 10-K and include statements regarding the intent, belief or
expectations of the Company, its Trustees or its officers with respect to the
declaration or payment of dividends, the consummation of additional
acquisitions, policies and plans of the Company regarding investments,
dispositions, financings, conflicts of interest or other matters, the Company's
qualification and continued qualification as a real estate investment trust or
trends affecting the Company's or any hotel's financial condition or results of
operations. 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 from those contained in the forward
looking statement as a result of various factors. Such factors include without
limitation changes in financing terms, the Company's ability or inability to
complete acquisitions and financing transactions, results of operations of the
Company's hotels and general changes in economic conditions not presently
contemplated. The accompanying information contained in this Form 10-K,
including the information under the headings "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
identifies other important factors that could cause such differences.
THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE COMPANY, DATED AUGUST 21,
1995 A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE
STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE TRUST. ALL PERSONS
DEALING WITH THE TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE TRUST
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
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HOSPITALITY PROPERTIES TRUST
1997 FORM 10-K ANNUAL REPORT
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Table of Contents
Part I
Page
<S> <C> <C>
Items 1. & 2. Business and Properties...................................................... 1
Item 3. Legal Proceedings............................................................ 21
Item 4. Submission of Matters to a Vote of Security Holders.......................... 21
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholders Matters... 21
Item 6. Selected Financial Data...................................................... 23
Item 7. Management's Discussion and Analysis of Results of Operations and Financial
Condition.................................................................... 24
Item 8. Financial Statements and Supplementary Data.................................. 28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................... 28
Part III
To be incorporated by reference from the Company's definitive
Proxy Statement for the annual meeting of shareholders
currently scheduled to be held on May 19, 1998, which is
expected to be filed not later than 120 days after the end of
the Company's fiscal year.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............. 29
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Items 1. and 2. Business and Properties
The Company. Hospitality Properties Trust (the "Company") is a real
estate investment trust ("REIT") formed in 1995 to acquire, own and lease hotels
to unaffiliated hotel operators. At December 31, 1997, the Company owned or had
commitments to acquire 135 hotels with 18,497 rooms or suites located in 35
states, for approximately $1,375 million. The Company is organized as a Maryland
real estate investment trust; its principal place of business is 400 Centre
Street, Newton, Massachusetts 02158, and its telephone number is (617) 964-8389.
The Company's principal growth strategy is to expand its investments in
hotels and to set minimum rents which produce income in excess of the Company's
cost of raising capital. The Company seeks to provide capital to unaffiliated
hotel operators who wish to divest their properties while remaining in the hotel
business as tenants and in doing so, ensure stability of cash flow through
dependable and diversified revenue sources. The Company believes that its
operating philosophy affords it opportunities to find high quality hotel
investment opportunities on attractive terms. In addition, the Company's
internal growth strategy is to participate through percentage rents in increases
in total hotel sales (including gross revenues from room rentals, food and
beverage sales and other services) at the Company's hotels.
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Properties
As of December 31, 1997, the Company owned or had commitments to purchase 135 hotels, located in 35
states.
No. of No. of Investment No. of No. of Investment
State Hotels Rooms (in thousands) State Hotels Rooms (in thousands)
----- ------ ----- -------------- ----- ------ ----- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama 3 340 $ 25,312 Nebraska 1 131 $ 6,201
Arizona 12 1,669 104,641 Nevada 1 120 9,093
California 14 1,982 151,254 New Jersey 4 572 47,767
Colorado 1 130 6,670 New Mexico 2 237 23,433
Delaware 1 152 12,100 New York 3 403 28,500
Florida 4 504 42,017 North Carolina 5 657 41,684
Georgia 11 1,473 106,971 Ohio 3 308 24,943
Illinois 3 514 38,076 Oklahoma 1 122 10,414
Indiana 2 271 18,523 Pennsylvania 7 911 71,210
Iowa 1 108 7,800 Rhode Island 1 148 10,200
Kansas 2 188 9,674 South Carolina 1 108 5,800
Kentucky 1 77 5,305 Tennessee 4 499 39,054
Louisiana 1 231 27,663 Texas 13 1,780 143,527
Maryland 4 526 44,851 Utah 3 601 58,278
Massachusetts 8 1,072 69,700 Virginia 7 936 77,349
Michigan 3 402 20,784 Washington 3 522 43,529
Minnesota 2 358 18,086 Wisconsin 1 147 8,500
---- ------ -----------
Missouri 2 298 16,200 Total (35 states) 135 18,497 $1,375,109
=== ====== ==========
</TABLE>
Upon completion of the acquisitions described below, which include six
hotels which have not been acquired as of March 11, 1998, the Company will have
investments totaling $1,375 million in 135 hotels, with 18,479 rooms, located in
35 states.
The Company's hotels are leased to and managed by special purpose
subsidiaries of unaffiliated public companies. Each of the Company's tenants are
herein referred to as "Lessees" and each of the Company's operators are herein
referred to as "Managers." The annual rent payable to the Company for its 135
hotels ("Hotels") totals $137.8 million in base rent plus percentage rent
ranging from 5% to 10% of increases in total hotel sales over a base year level.
In addition, a percentage (generally 5%) of total hotel sales is required to be
escrowed periodically by the Lessee or the Manager as a reserve for renovations
and refurbishment of the Hotels.
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Under the leases and management agreements, the Hotels are currently
operated as Courtyard by Marriott(R), Residence Inn by Marriott(R), Wyndham
Garden(R), Wyndham(R), Sumner Suites(R) or Candlewood(R) hotels.
COURTYARD BY MARRIOTT(R) HOTELS
Courtyard by Marriott(R) hotels are designed to attract both business
and leisure travelers. A typical Courtyard by Marriott(R) hotel has 145 guest
rooms. The guest rooms are larger than those in most other moderately priced
hotels and predominately offer king sized beds. Most Courtyard by Marriott(R)
hotels are situated on well landscaped grounds and typically are built around a
courtyard containing a patio, pool and socializing area that may be glass
enclosed depending upon location. Most of these hotels have lounges or lobbies,
meeting rooms, an exercise room, a small laundry room available to guests and a
restaurant or coffee shop. Generally, the guest rooms are similar in size and
furnishings to guest rooms in full service Marriott(R) hotels. In addition, many
of the same amenities as would be available in full service Marriott(R) hotels
are available in Courtyard by Marriott(R) hotels, except that restaurants may be
open only for breakfast buffets or serve limited menus, room service may not be
available and meeting and function rooms are limited in size and number.
According to Marriott, as of December 31, 1997, 330 Courtyard by Marriott(R)
hotels were open and operating nationally. The Company believes that the
Courtyard by Marriott(R) brand is a leading brand in the limited service segment
of the United States hotel industry.
The Company has invested or agreed to invest a total of $621 million in
63 Courtyard by Marriott(R) hotels which have 8,982 rooms. As of March 11, 1998
three of these hotels with an acquisition cost of $37 million have not been
purchased but are expected to be purchased periodically throughout the remainder
of 1998. The 1997 average daily rate ("ADR"), occupancy and revenue per
available room ("RevPAR') for the Company's 53 Courtyard by Marriott(R) hotels
which were open throughout 1997 were as follows:
ADR............................................ $84.29
Occupancy...................................... 81.1%
RevPAR......................................... $68.36
RESIDENCE INN BY MARRIOTT(R) HOTELS
Residence Inn by Marriott(R) hotels are designed to attract business,
governmental and family travelers who stay more than five consecutive nights.
Residence Inn by Marriott(R) hotels generally have between 80 to 130 studios,
one-bedroom and two-bedroom suites. Most Residence Inn by Marriott(R) hotels are
designed as a cluster of residential style buildings with landscaped walkways,
courtyards and recreational areas. Residence Inn by Marriott(R) hotels do not
have restaurants. All offer complimentary continental breakfast and most provide
a complimentary evening hospitality hour. In addition, each suite contains a
fully equipped kitchen and many have fireplaces. Most Residence Inn by
Marriott(R) hotels also contain swimming pools, exercise rooms, business centers
and guest laundries. According to Marriott, as of December 31, 1997, 248
Residence Inn by Marriott(R) hotels were open and operating nationally. The
Company believes that the Residence Inn by Marriott(R) brand is the leading
brand in the extended stay segment of the United States hotel industry.
The Company has invested or agreed to invest a total of $335 million in
31 Residence Inn by Marriott(R) hotels which have 3,961 suites. As of March 11,
1998 two of these hotels with an acquisition cost of $44 million have not been
purchased but are expected to be purchased periodically throughout the remainder
of 1998. The 1997 ADR, occupancy and RevPAR for the Company's 18 Residence Inn
by Marriott(R) hotels which were open through 1997 were as follows:
ADR............................................ $99.96
Occupancy...................................... 83.3%
RevPAR......................................... $83.27
WYNDHAM GARDEN(R) HOTELS
Wyndham Garden(R) hotels are mid-size, full service hotels located
primarily near suburban business centers and airports which are designed to
attract business travelers and small business groups in suburban markets. Each
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hotel contains 140 to 250 rooms and approximately 1,500 to 5,000 square feet of
meeting space. The amenities and services provided at these hotels are designed
to meet the needs of the upscale business traveler. Amenities and services in
each room include desks large enough to accommodate personal computers, longer
phone cords, high wattage light bulbs for reading, room service and access to
24-hour telecopy and mail/package service. The meeting facilities at Wyndham
Garden(R) hotels generally can accommodate groups of between 10 and 200 people
and include a flexible meeting room design, exterior views, additional phone
lines and audiovisual equipment. Wyndham Garden(R) hotels also feature a lobby
lounge, most of which have a fireplace, a library typically overlooking a
landscaped garden and a swimming pool. In addition, many Wyndham Garden(R)
hotels contain a whirlpool and an exercise facility. Each Wyndham Garden(R)
hotel contains a cafe restaurant that serves a full breakfast, lunch and dinner
menu. The Company believes that the Wyndham Garden(R) brand is one of the
leading brands in the full service suburban segment of the United States hotel
industry. The one additional Wyndham(R) hotel owned by the Company is a full
service hotel located in downtown Salt Lake City adjacent to the Salt Lake City
Salt Palace Convention Center. This hotel includes 381 rooms, 14,469 square feet
of meeting space and two restaurants/lounges. The Company believes this hotel is
a leading convention hotel in Salt Lake City.
The 11 Wyndham Garden(R) hotels owned by the Company represent a total
investment of $135 million and contain 1,940 rooms. These hotels had 1997 ADR,
occupancy and RevPAR as follows:
ADR............................................ $90.07
Occupancy...................................... 77.1%
RevPAR......................................... $69.44
The Company purchased the Wyndham(R) hotel in Salt Lake City in January
1997 for $44.0 million and in January 1998 provided $3.3 million for renovations
to this hotel. The ADR, occupancy and RevPAR for this hotel in 1997 were $94.75,
70.8% and $67.08, respectively.
SUMNER SUITES(R) HOTELS
Sumner Suites(R) hotels are all suite hotels that cater to
value-oriented business travelers. Sumner Suites(R) hotels compete in the all
suite segment of the lodging industry against such brands as Embassy Suites(R),
Hampton Inns and Suites(R) and Amerisuites(R). Each Sumner Suites(R) guest room
offers an efficient space for working which includes two phones with data ports
and voice mail, a living area which includes a coffee maker, microwave,
mini-refrigerator, sleeper-sofa and 25-inch television, and a separate bedroom
area with either one king or two double beds. Each Sumner Suites(R) hotel has an
attractive lobby lounge where free continental breakfast is provided in the
mornings and cocktails are generally available in the early evening. In
addition, all Sumner Suites(R) hotels have meeting rooms that can accommodate up
to 150 persons, fitness facilities and a pool. Sumner Suites(R) hotels are
generally high-rise hotels of six or seven stories and are of masonry
construction.
The Company has invested $140 million in its 14 Sumner Suites(R) hotels
which include 1,641 guest suites. Twelve of these hotels were built and opened
between April 1996 and August 1997, one of these hotels opened in late 1995 and
one recently re-flagged hotel has recently undergone extensive renovations. The
Company believes that the current performance of its Sumner Suites(R) hotels is
not indicative of their operating potential because of their recent development
or renovation; the ADR, occupancy and RevPAR for the 12 Sumner Suites(R) hotels
which were open for at least six months of 1997 were $72.81, 60.8% and $44.27,
respectively during 1997.
CANDLEWOOD(R) HOTELS
Candlewood(R) hotels are extended stay hotels which offer studio and
one bedroom suites that cater to business travelers expecting to stay five or
more days. Candlewood(R) hotels compete in the mid-priced extended stay segment
of the lodging industry against such other brands as Sierra Suites by
Summerfield(R), Towne Place Suites by Marriott(R) and MainStay Suites(R). Each
Candlewood(R) suite contains a kitchen area, combination living and work area
and a sleeping area. The kitchen includes a full-size microwave, full-size
refrigerator, stove, dishwasher and coffee maker. The living area contains a
convertible sofa, recliner, 25-inch television, videocassette player and compact
disc player. The work area includes an oversized desk and executive chair, two
phone lines, voice mail and a speaker phone. Each Candlewood(R) suite contains a
king size bed. Other amenities offered at each
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Candlewood(R) hotel include a fitness center, free guest laundry facilities and
a Candlewood Cupboard area where guests can purchase light meals, snacks and
other refreshments. The Company believes that Candlewood(R) will become one of
the leading brands in the mid-priced, extended stay segment of the United States
hotel industry.
The Company has agreed to invest $100 million to acquire 15 Candlewood
hotels which include 1,592 suites. One of these hotels was opened during 1998,
13 of these hotels were opened during 1997 and one was opened in May 1996. As of
March 11, 1998 one of these hotels with an acquisition cost of approximately $8
million has not been purchased but is expected to be purchased during the first
half of 1998. The Company believes that the current performance of the
Candlewood hotels is not indicative of their operating potential because of
their recent development; the ADR, occupancy and RevPAR for the three Candlewood
hotels acquired by the Company which were open for at least three quarters of
1997 were $50.62, 66.1% and $33.46, respectively during the fourth quarter of
1997.
PRINCIPAL LEASE FEATURES
The principal features of the Company's leases for the 135 Hotels are
as follows:
o In the event a lease for any Hotel is defaulted, the Company may
declare all of the leases with such Lessee to be in default.
o The initial lease terms expire between 2008 and 2014.
o At the end of the initial lease terms, each Lessee has 2 to 5
consecutive 10 to 15 year renewal options totaling 20 to 50 years.
Renewal options may be exercised only on an all or none basis for all
Hotels leased to a particular Lessee.
o The leases require minimum rent payments aggregating $137.5 million per
year.
o In addition to minimum rents, the leases of the Hotels require
percentage rents equal to 5% to 10% of total hotel sales in excess of
total hotel sales established in a base year.
o The leases for the Hotels require that a percentage (generally 5%) of
total hotel sales be escrowed periodically to fund refurbishments and
renovations to these Hotels ("FF&E Reserves"). Funds in the FF&E
Reserves are pooled for all Hotels leased to a particular Lessee and
generally may be withdrawn only for capital improvements.
o A security deposit equal to a full year's minimum rent is retained by
the Company as security for each Lessee's obligations under the leases
of the Hotels. Provided that the Lessee does not default under any of
such leases, the Company must repay the security deposit to the Lessee
at the expiration of the leases, including renewal terms, if any. No
interest will be paid by the Company on security deposits, and such
deposits are not escrowed.
o The leases of the Hotels are net leases requiring the Lessee to pay all
operating expenses, including taxes and insurance and any applicable
ground rent. Certain Lessees, under the management agreements for the
Hotels, have delegated substantially all of the Lessees' operating
responsibilities to the Managers.
o Management fees payable to the Managers for operation of the Hotels are
subordinated to minimum rents due to the Company.
The right to occupy the land underlying 10 of the Hotels was acquired
by an assignment of leasehold interest under long-term ground leases. In each
case, the remaining term of the ground lease (including renewal options) is in
excess of 41 years, and the ground lessors are unrelated to the sellers and the
Company.
Ground rent payable under the 10 ground leases is the responsibility of
the Company's Lessees and is generally calculated as a percentage of hotel
revenues. Eight of the 10 ground leases require minimum annual rent
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ranging from approximately $90,000 to $502,900 per year. If a ground lease
terminates, the lease with respect to the hotel on such ground-leased land will
also terminate. If a Lessee does not perform such obligations under the ground
lease or elects not to renew any ground lease, the Company must perform such
obligations under the ground lease or renew such ground lease in order to
protect its investments in the affected hotel. Any pledge of the Company's
interests in a ground lease may also require the consent of the applicable
ground lessor and its lenders.
INVESTMENT AND OPERATING POLICY
In order to benefit from potential property appreciation, the Company
generally prefers to own and lease properties rather than make mortgage
investments. The Company may invest in real estate joint ventures if it
concludes that by doing so it may benefit from the participation of coventurers
or that the opportunity of the Company to participate in the investment is
contingent on the use of a joint venture structure. The Company may invest in
participating, convertible or other types of mortgages if it concludes that by
doing so it may benefit from the cash flow or any appreciation in the value of
the subject property. Convertible mortgages are similar to equity participation
because they permit the lender to either participate in increasing revenues from
the property or convert some or all of that mortgage into equity ownership
interests. At December 31, 1997, all of the Company's investments were in owned
properties. The Company provides capital to unaffiliated hotel operators who
wish to divest their properties while remaining in the hotel business as
tenants. Most other public hotel REITs seek to control the operations of hotels
in which they invest by leasing their properties to affiliated tenants. These
other hotel REITs generally design their affiliated leases to capture
substantially all net operating revenues from their hotels as rent. The
Company's leases are designed so that net operating revenues from its Hotels
exceed its rents by considerable coverage margins. The Company believes that
these differences in operating philosophy afford it a competitive advantage over
other hotel REITs in finding high quality hotel investment opportunities on
attractive terms and increase the dependability of the Company's cash flows used
to pay dividends.
The Company's investment objectives include increasing per share
dividends and cash available for distribution ("CAD") from dependable and
diverse resources. To achieve these objectives, the Company seeks to operate as
follows: maintain a strong capital base of shareholders' equity; invest in high
quality properties operated by unaffiliated hotel operating companies; use
moderate debt leverage to fund additional investments which increase CAD per
Share because of positive spreads between the Company's cost of investment
capital and rent yields; design leases which require minimum rents and provide
an opportunity to participate in a percentage of increases in gross revenues at
the Company's Hotels; when market conditions permit, refinance debt with
additional equity or long term debt; and pursue diversification so that the
Company's CAD is received from diverse properties and operators.
The Company's day-to-day operations are conducted by REIT Management
and Research, Inc. ("RMR"), the Company's investment advisor. RMR originates and
presents investment opportunities to the Company's Board of Trustees.
As a REIT, the Company may not operate hotels. The Company has entered
into arrangements for operation of the Hotels. The Company's leases require the
Lessee to pay all operating expenses, including taxes and insurance and to pay
to the Company minimum rents plus percentage rents based upon increases in gross
revenues at the Hotels.
ACQUISITION POLICY
The Company is committed to pursuing growth through the acquisition of
additional hotels and intends to pursue acquisition opportunities. Generally,
the Company prefers to purchase and lease multiple hotels in one transaction
because the Company believes cross default covenants and all or none renewal
rights for multiple hotels enhance the credit characteristics of its leases and
the security of its investments. In implementing its acquisition strategy, the
Company considers a range of factors relating to proposed hotel purchases
including: (i) historical and projected cash flows; (ii) the competitive market
environment and the current or potential market position of each proposed hotel;
(iii) the availability of a qualified lessee; (iv) the physical condition of the
proposed hotel and its potential for redevelopment or expansion; (v) the
estimated replacement cost and proposed acquisition price of the proposed hotel;
(vi) the price segment in which the proposed hotel is operated; and (vii) the
strength of the
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particular national hotel management organization, if any, with which the
proposed hotel is or may become affiliated; and (viii) the hotel brand under
which the hotel operates or is expected to operate. In determining the
competitive position of a prospective hotel, the Company examines the proximity
of the proposed hotel to business, retail, academic and tourist attractions and
transportation routes, the number and characteristics of competitive hotels
within the proposed hotel's market and the existence of any barriers to entry
within that market, including zoning restrictions and financing constraints.
While the Company focuses on the acquisition of upscale limited service,
extended stay and full service hotel properties, it also considers acquisitions
in all segments of the hospitality industry.
An important part of the Company's acquisition strategy is to identify
and select qualified and experienced hotel lessees. The Company intends to
continue to select hotels for acquisition which will enhance the diversity of
its portfolio in respect to location, brand name, and lessee/operator.
DISPOSITION POLICIES
The Company has no current intention to dispose of any Hotels, although
it reserves the right to do so. The Company currently anticipates that
disposition decisions, if any, will be made by the Company based on (but not
limited to) factors such as the following: (i) potential opportunities to
increase revenues and property values by reinvesting sale proceeds; (ii) the
proposed sale prices; (iii) the strategic fit of the hotel with the rest of the
Company's portfolio; (iv) the potential for, or the existence of, any
environmental or regulatory problems; (v) the existence of alternative uses or
needs for capital; and (vi) the maintenance of the Company's qualification as a
REIT. For a description of certain tax consequences arising from disposition of
hotels, see "Federal Income Tax Considerations."
FINANCING POLICIES
The Company currently intends to employ conservative financial policies
in pursuit of its growth strategies. Although there are no limitations in the
Company's organizational documents on the amount of indebtedness it may incur,
the Company currently intends to pursue its growth strategies while maintaining
a capital structure under which its debt will not exceed 50% of its total market
capitalization. The Company may from time to time re-evaluate and modify its
current borrowing policies in light of then current economic conditions,
relative availability costs of debt and equity capital, market values of
properties, growth and acquisition opportunities and other factors and may
increase or decrease its ratio of debt to total market capitalization
accordingly.
The Board of Trustees (the "Trustees") of the Company may determine to
obtain a replacement for its current credit facilities or to seek additional
capital through additional equity offerings, debt financings, retention of cash
flow (subject to satisfying the Company's distribution requirements under the
REIT rules) or a combination of these methods. To the extent that the Board of
Trustees decides to obtain additional debt financing, the Company may do so on
an unsecured basis (or a secured basis, subject to limitations which may be
present in existing financing or other arrangements) and may seek to obtain
other lines of credit or to issue securities senior to the Shares, including
preferred shares of beneficial interest and debt securities (either of which may
be convertible into Shares or be accompanied by warrants to purchase Shares) or
to engage in transactions which may involve a sale or other conveyance of the
Company's Hotels to subsidiaries or to unaffiliated special purpose entities.
The Company may finance acquisitions through an exchange of properties or
through the issuance of additional Shares or other securities. The proceeds from
any financings by the Company may be used to pay distributions, to provide
working capital, to refinance existing indebtedness or to finance acquisitions
and expansions of existing or new properties.
Investment Advisor. Prior to January 1, 1998 the Company had an
agreement with HRPT Advisors, Inc. ("Advisors") whereby Advisors provided
investment and administrative services to the Company. Effective January 1,
1998, the Company entered into an agreement with REIT Management & Research,
Inc. ("RMR") whereby RMR provides investment and administrative services to the
Company. Advisors and RMR are Delaware corporations owned by Barry M. Portnoy
and Gerard M. Martin. Advisors' principal place of business is 400 Centre
Street, Newton, Massachusetts and its telephone number is (617) 332-3990.
Advisors also acted and RMR acts as the investment advisor to Health and
Retirement Properties Trust (NYSE:"HRP"), the holder of 4,000,000 Shares and has
other business interests. The directors of RMR are Gerard M. Martin, Barry M.
Portnoy and David J.
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Hegarty. The officers of RMR are David J. Hegarty, President and Secretary, John
G. Murray, Executive Vice President, John A. Mannix, Vice President, Thomas M.
O'Brien, Vice President, Ajay Saini, Vice President, John C. Popeo, Treasurer,
and David M. Lepore, Vice President. Mr. Murray and Mr. O'Brien are also
officers of the Company.
Employees. The Company is an advised REIT and has no employees.
Services which would otherwise be provided by employees are provided by RMR
pursuant to the Advisory Agreement (described below) and by the Managing
Trustees and officers of the Company. RMR, which administers the day-to-day
operations of the Company, has 125 full-time employees and three active
directors.
Competition. The hotel industry is highly competitive. Each of the
Hotels is located in an area that includes other hotels. Increases in the number
of hotels in a particular area could have a material adverse effect on occupancy
rates and average daily rates of the hotels located in that area. Agreements
with the operators of the Hotels restrict the right of each operator and its
affiliates for a limited period of time to own, build, operate, franchise or
manage any other hotel of the same brand within various specified areas around
the Company's Hotels. Neither the operator nor its affiliates are restricted
from operating other branded hotels in the market areas of any of the Hotels,
and after such limited period of time, the operators and their affiliates may
also compete with the Hotels by opening, managing or franchising additional
hotels under the same brand name in direct competition with the Company's
Hotels.
The Company expects to compete for hotel acquisition and financing
opportunities with entities which may have substantially greater financial
resources than the Company, including, without limitation, other publicly owned
REITs, banks, insurance companies, pension plans and public and private
partnerships. These entities may be able to accept more risk than the Company
can prudently manage, including risks with respect to the creditworthiness of
hotel operators. Such competition may reduce the number of suitable hotel
acquisition or financing opportunities available to the Company and increase the
bargaining power of hotel owners seeking to sell or finance their properties.
Seasonality. The effects of seasonality, if any, are discussed in
Management's Discussion and Analysis.
FEDERAL INCOME TAX CONSIDERATIONS
The Company has elected to be taxed as a REIT commencing with its
taxable year ending December 31, 1995. As used in this discussion of "Federal
Income Tax Consequences" and in "Erisa Plans, Keogh Plans and Individual
Retirement Accounts" below, "REIT" means a Real Estate Trust under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended and in effect from
time to time (the "Code"). The Company believes it has been organized and has
operated in a manner that qualifies it to be taxed under the Code as a REIT
commencing with that taxable year, and the Company intends to continue to
operate in a manner to so qualify. No assurance can be given, however, that the
manner in which the Company has operated or will operate qualified or will
qualify the Company to be taxed as a REIT.
The Company has obtained legal opinions from its counsel Sullivan &
Worcester LLP that the Company has been organized in conformity with the
requirements for qualification as a REIT, has qualified as a REIT for its 1995,
1996 and 1997 taxable years, and that its current and anticipated investments
and its plan of operation will enable it to continue to meet the requirements
for qualification and taxation as a REIT under the Code. These opinions are
conditioned upon the assumption that the leases, the Declaration and the
Company's Bylaws, and all other legal documents to which the Company is or has
been a party have been and will be complied with by all parties thereto, upon
the accuracy and completeness of the factual matters described in this Annual
Report, and upon representations made by the Company as to certain factual
matters relating to the Company's organization and operations and its expected
manner of operation. In addition, such opinions are based on the law then
existing and in effect on the date thereof. Opinions of counsel are not binding
on the Internal Revenue Service ("IRS"), or a court and there can be no
assurance that the IRS or a court will not take a position different from that
expressed by counsel.
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The Company's actual qualification and taxation as a REIT will depend
upon the Company's ability to meet on a continuing basis, through actual
operating results, asset composition, distribution levels, and diversity of
stock ownership, the various REIT qualification tests imposed under the Code,
discussed below. While the Company has represented that it has operated and will
operate in a manner so as to satisfy on a continuing basis the various REIT
qualification tests, Sullivan & Worcester LLP has not reviewed and will not
review compliance with these tests on a continuing basis, and no assurance can
be given that the Company has satisfied or will satisfy such tests on a
continuing basis. If the Company fails to qualify as a REIT in any year, it will
be subject to federal income taxation as if it were a domestic corporation, and
its shareholders will be taxed in the same manner as shareholders of ordinary
corporations. In such an event, the Company could be subject to potentially
significant tax liabilities, and therefore the amount of cash available for
distribution to its shareholders would be reduced or eliminated.
The following summary is based on existing law, is limited to investors
who will hold the Shares as "capital assets" within the meaning of Section 1221
of the Code (generally, property held for investment), is not exhaustive of all
possible tax considerations, and does not discuss any state, local, or foreign
tax considerations. Additionally, the following summary does not discuss the
particular tax consequences that might be relevant to holders of Shares who may
be subject to special rules under the federal income tax law, such as life
insurance companies, regulated investment companies, financial institutions,
brokers or dealers in securities or foreign currency, persons that have a
functional currency other than the U.S. dollar, persons who acquired Shares or
options to acquire Shares in connection with their employment or other
performance of services, persons subject to alternative minimum tax, persons who
hold Shares as part of a straddle, hedging transaction, or conversion
transaction or, except as specifically described herein, tax-exempt entities and
foreign persons. The sections of the Code that govern the federal income tax
qualification and treatment of a REIT and its shareholders are highly technical
and complex. The following summary is thus qualified in its entirety by the
applicable Code provisions, the rules and regulations promulgated thereunder,
and the administrative and judicial interpretations thereof, all of which are
subject to change, possibly with retroactive effect. Thus, no assurance can be
given that future legislative, judicial, or administrative actions or decisions
will not affect the accuracy of any statements in this summary. In addition, no
ruling has been or is expected to be sought from the IRS with respect to any
matter discussed herein, and there can be no assurance that the IRS or a court
will agree with the statements made herein. Accordingly, each shareholder is
urged to consult his own tax advisor with respect to the federal income tax and
other tax consequences of the purchase, holding and sale of Shares.
Taxation of the Company. If the Company qualifies for taxation as a
REIT and distributes to its shareholders at least 95% of its "real estate
investment trust taxable income" (determined by excluding any net capital gain
and before taking into account any dividends paid deduction), it generally will
not be subject to federal corporate income taxes on the amount distributed. This
deduction for dividends paid to shareholders substantially eliminates the
federal "double taxation" on earnings (once at the corporate level and again at
the shareholder level) that generally results from an investment in a
corporation.
However, even if the Company qualifies for federal income taxation as a
REIT, it may be subject to federal tax in certain circumstances. First, the
Company will be taxed at regular corporate rates on any undistributed "real
estate investment trust taxable income," including undistributed net capital
gains. Second, under certain circumstances, the Company may be subject to the
corporate "alternative minimum tax" on its items of tax preference, if any.
Third, if the Company has (i) net income from the sale or other disposition of
"foreclosure property" (generally, property acquired by the Company through
foreclosure or otherwise after a default on a loan secured by the property or on
a lease of the property) that is held primarily for sale to customers in the
ordinary course of business or (ii) other nonqualifying income from foreclosure
property, then the Company will be subject to tax on such income at the highest
regular corporate rate (currently 35%). Fourth, if the Company has net income
from prohibited transactions (generally, certain sales or other dispositions of
inventory or property held primarily for sale to customers in the ordinary
course of business, other than foreclosure property), such income will be
subject to tax at a 100% rate. Fifth, if the Company should fail to satisfy the
75% gross income test or the 95% gross income test (discussed below), but
nonetheless maintains its qualification as a REIT because certain other
requirements are met, the Company will be subject to tax at a 100% rate on the
greater of the amount by which the Company fails the 75% or the 95% test,
multiplied by a fraction intended to reflect the Company's profitability. Sixth,
if the Company should fail to distribute for any calendar year at least the sum
of (i) 85% of its REIT ordinary
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income for such year, (ii) 95% of its REIT capital gain net income for such
year, and (iii) any undistributed taxable income from prior periods, the Company
will be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed. Seventh, if the Company acquires any
asset from a C corporation (generally, a corporation subject to full corporate
level tax) in a transaction in which the basis of the asset in the Company's
hands is determined by reference to the basis of the asset in the hands of the C
corporation, and if the Company subsequently recognizes gain on the disposition
of such asset during the ten-year period beginning on the date on which the
asset was acquired by the Company, then the Company will pay tax at the highest
regular corporate tax rate (currently 35%) on the lesser of (i) the excess of
the fair market value of the asset over the Company's basis in the asset on the
date acquired by the Company and (ii) the gain recognized by the Company.
If the Company should invest in properties in foreign countries, the
Company's profits from such investments will generally be subject to tax in the
countries where such properties are located. The nature and amount of any such
taxation will depend on the laws of the countries where the properties are
located. If the Company satisfies the annual distribution requirements for
federal income tax qualification as a REIT and is therefore not subject to
federal corporate income tax on that portion of its ordinary income and capital
gain that is currently distributed to its shareholders, the Company will
generally not be able to recover the cost of any foreign tax imposed on profits
from its foreign investments by claiming foreign tax credits against its federal
income tax liability on such profits. Moreover, a REIT is not able to pass
through to its shareholders any foreign tax credits.
The Company's Wholly-Owned Subsidiaries. Section 856(i) of the Code
provides that a corporation that is a qualified REIT subsidiary (defined as any
corporation 100% of whose stock is held by the REIT at all times during the
period the corporation is in existence) shall not be treated as a separate
corporation, and all assets, liabilities, and items of income, deduction, and
credit of a qualified REIT subsidiary shall be treated as assets, liabilities
and items of income, deduction, and credit of the REIT. (For the Company's
taxable years commencing on or after January 1, 1998, a wholly-owned corporation
qualifies as a qualified REIT subsidiary even though there was a period of time
during which the Company did not own 100% of its stock; such corporation will be
treated for federal income tax purposes as though liquidated into the Company at
the time the Company acquired 100% ownership, and then reincorporated by the
Company as a qualified REIT subsidiary.) The Company believes that each of its
direct and indirect wholly-owned subsidiaries qualifies either as a qualified
REIT subsidiary within the meaning of Section 856(i) of the Code, or as a
noncorporate entity that for federal income tax purposes is not treated as
separate from its owner pursuant to Treasury Regulations under Section 7701 of
the Code. Thus, in applying all the federal income tax REIT qualification
requirements discussed herein, the Company's direct and indirect wholly-owned
subsidiaries are ignored, and all assets, liabilities, and items of income,
deduction and credit of those subsidiaries are treated as assets, liabilities
and items of income, deduction and credit of the Company.
The Company's Investments through Partnerships. The Company in the
future may invest in real estate through one or more limited or general
partnerships or limited liability companies that is treated as a partnership for
federal income tax purposes. In the case of a REIT that is a partner in a
partnership, Treasury Regulations provide that for purposes of the REIT
qualification requirements regarding income and assets discussed below, the REIT
is deemed to own its proportionate share of the assets of the partnership
corresponding to the REIT's proportionate capital interest in such partnership
and is deemed to be entitled to the income of the partnership attributable to
such proportionate share. In addition, for these purposes, the character of the
assets and gross income of the partnership generally retain the same character
in the hands of the REIT. Accordingly, the Company's proportionate share of the
assets, liabilities, and items of income of each partnership in which it is a
partner are treated as assets, liabilities, and items of income of the Company
for purposes of the income tests and asset tests discussed below. However, for
purposes of the REIT's distribution requirement discussed below, a REIT must
take into account as a partner its distributive share of the partnership's
income as determined under the general federal income tax rules governing
partners and partnerships under Sections 701 et seq. of the Code.
REIT Qualification Requirements--Generally. Section 856(a) of the Code
defines a REIT as a corporation, trust or association: (1) which is managed by
one or more trustees or directors; (2) the beneficial ownership of which is
evidenced by transferable shares or by transferable certificates of beneficial
interest; (3) which would be taxable, but for Sections 856 through 859 of the
Code, as a domestic corporation; (4) which is neither a financial institution
nor an insurance company subject to certain provisions of the Code; (5) the
beneficial ownership of which is held by 100 or more persons; (6) which is not
"closely held" as determined under the personal holding
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company stock ownership test (as applied with modifications); and (7) which
meets certain other tests regarding income, assets, and distributions, as
described below. Section 856(b) of the Code provides that conditions (1) to (4),
inclusive, must be met during the entire taxable year and that condition (5)
must be met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months. It is the Company's
belief and expectation that it has had and will have at least 100 shareholders
during the requisite period for each of its taxable years since its election to
be taxed as a REIT. There can, however, be no assurance in this connection and,
if the Company has fewer than 100 shareholders during the requisite period,
condition (5) described above will not be satisfied, and the Company would not
qualify as a REIT during such taxable year.
By reason of the "closely held" condition (6) above, the Company will
fail to qualify as a REIT for a taxable year if at any time during the last half
of such year more than 50% in value of its outstanding Shares is owned directly
or indirectly by five or fewer individuals. To help maintain conformity with
condition (6), the Declaration contains certain provisions restricting transfers
of Shares and giving the Trustees the power to redeem Shares involuntarily. For
its taxable years commencing on or after January 1, 1998, if the Company
complies with Treasury Regulations for ascertaining the ownership of its
outstanding Shares and does not know or, exercising reasonable diligence would
not have known, whether it failed condition (6), then the Company will be
treated as satisfying condition (6). Also, for its taxable years commencing on
or after January 1, 1998, the Company's failure to comply with the Treasury
Regulations for ascertaining ownership of its outstanding Shares may result in a
penalty of $25,000 ($50,000 for intentional violations). Accordingly, the
Company will, pursuant to the Treasury Regulations, request annually from record
holders of certain significant percentages of its Shares certain information
regarding the ownership of such Shares. Under the Declaration, shareholders are
required to respond to such requests for information.
The rule that an entity will fail to qualify as a REIT for a taxable
year if at any time during the last half of such year more than 50% in value of
its outstanding shares is owned directly or indirectly by five or fewer
individuals is relaxed in the case of certain pension trusts owning shares in a
REIT. Shares in a REIT held by such a pension trust are treated as held directly
by its beneficiaries in proportion to their actuarial interests in the pension
trust. Consequently, five or fewer pension trusts could own more than 50% of the
interests in an entity without jeopardizing its federal income tax qualification
as a REIT. However, as discussed below, if the REIT is a "pension-held REIT,"
each pension trust holding more than 10% of its shares (by value) generally will
be taxable on a portion of the dividends it receives from the REIT, based on the
ratio of the REIT's gross income for the year which would be unrelated trade or
business income if the REIT were a qualified pension trust to the REIT's total
gross income for the year.
To qualify as a REIT under the Code, the Company must elect to be so
treated and must meet other requirements, certain of which are summarized below,
including percentage tests relating to the sources of its gross income, the
nature of its assets, and the distribution of its income to shareholders. The
Company made such an election for 1995 and such election, assuming continuing
compliance with the federal income tax qualification tests discussed herein,
continues in effect for subsequent years.
Income Tests. There are three gross income requirements, only two of
which apply to the Company for its taxable years commencing on or after January
1, 1998. First, at least 75% of the Company's gross income (excluding gross
income from certain sales of property held primarily for sale) must be derived
directly or indirectly from investments relating to real property (including
"rents from real property"), mortgages on real property, or shares in other
REITs. When the Company receives new capital in exchange for its Shares (other
than dividend reinvestment amounts) or in a public offering of five-year or
longer debt instruments, income attributable to the temporary investment of such
new capital in stock or a debt instrument, if received or accrued within one
year of the Company's receipt of the new capital, is qualifying income under the
75% test. Second, at least 95% of the Company's gross income (excluding gross
income from certain sales of property held primarily for sale) must be derived
from such real property investments, dividends, interest, certain payments under
interest rate swap or cap agreements (and for the Company's taxable years
commencing on or after January 1, 1998, certain payments under options, futures
contracts, forward rate agreements, or similar financial instruments), and gain
from the sale or disposition of stock, securities, or real property, or from any
combination of the foregoing. Third, for the Company's taxable years ending on
or before December 31, 1997, short-term gain from the sale or other disposition
of stock or securities (including, without limitation, stock in other REITs),
dispositions of interest rate swap or cap
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agreements, and gain from certain prohibited transactions or other dispositions
of real property held for less than four years (apart from involuntary
conversions and sales of foreclosure property) must have represented less than
30% of the Company's gross income. For purposes of these three gross income
rules, income derived from a "shared appreciation provision" in a mortgage loan
is generally treated as gain recognized on the sale of the property to which it
relates. Even though the Company does not own mortgage loans that contain shared
appreciation provisions, the Company may in the future make such mortgage loans.
The Company temporarily invests working capital in short-term investments,
including shares in other REITs. Although the Company will use its best efforts
to ensure that the income generated by its investments will be of a type which
satisfies the 75% and 95% gross income tests, there can be no assurance in this
regard.
In order to qualify as "rents from real property," several requirements
must be met. First, the amount of rent received generally must not be determined
from the income or profits of any person, but may be based on receipts or sales.
Second, the Code provides that rents will not qualify as "rents from real
property" in satisfying the gross income tests if the REIT owns 10% or more of
the tenant, whether directly or under certain attribution rules. The Company
intends not to lease property to any party if rents from such property would not
so qualify. Application of the 10% ownership rule is, however, dependent upon
complex attribution rules and upon circumstances beyond the control of the
Company. Ownership, directly or by attribution, by an unaffiliated third party
of more than 10% of the Shares and more than 10% of the stock of a lessee would
result in lessee rents not qualifying as "rents from real property." The
Declaration provides that transfers or purported acquisitions, directly or by
attribution, of Shares that could result in disqualification of the Company as a
REIT are null and void and permits the Trustees to repurchase Shares to the
extent necessary to maintain the Company's status as a REIT. Nevertheless, there
can be no assurance such provisions in the Declaration will be effective to
prevent the Company's REIT status from being jeopardized under the 10% lessee
affiliate rule. Furthermore, there can be no assurance that the Company will be
able to monitor and enforce such restrictions, nor will shareholders necessarily
be aware of shareholdings attributed to them under the attribution rules. Third,
in order for its rents to qualify as "rents from real property," the Company
must not manage the property or furnish or render services to the tenants of
such property, except through an independent contractor from whom the Company
derives no income. There is an exception to this rule permitting a REIT to
perform certain customary tenant services of the sort which a tax-exempt
organization could perform without being considered in receipt of "unrelated
business taxable income." For the Company's taxable years commencing on or after
January 1, 1998, a de minimis amount of noncustomary services will not
disqualify income as rents from real property so long as the value of the
impermissible services does not exceed 1% of the gross income of the property.
Fourth, if rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." The portion of rental income treated as
attributable to personal property is determined according to the ratio of the
tax basis of the personal property to the total tax basis of the property which
is rented. Substantially all of the gross income of the Company has been and is
expected to be attributable to rental income. The Company believes that all or
substantially all such rents have qualified and will continue to qualify as
"rents from real property" for purposes of Section 856 of the Code, but if for
some reason a significant amount of such rents do not so qualify, it may be
difficult or impossible for the Company to meet the 95% or 75% gross income
tests and to qualify as a REIT for federal income tax purposes.
In order to qualify as mortgage interest on real property for purposes
of the 75% test, interest must derive from a mortgage loan secured by real
property with a fair market value at least equal to the amount of the loan. If
the amount of the loan exceeds the fair market value of the real property, the
interest will be treated as interest on a mortgage loan in a ratio equal to the
ratio of the fair market value of the real property to the total amount of the
mortgage loan.
Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the ordinary
course of business will be treated as income from a prohibited transaction that
is subject to a penalty tax at a 100% rate. This prohibited transaction income
also may have an adverse effect upon the Company's ability to satisfy the 75%
and 95% gross income tests for federal income tax qualification as a REIT. Under
existing law, whether property is held as inventory or primarily for sale to
customers in the ordinary course of a trade or business is a question of fact
that depends on all the facts and circumstances with respect to the particular
transaction. The Company intends to hold its real estate assets for
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investment with a view to long-term appreciation, to engage in the business of
developing, owning and operating its existing real estate assets and acquiring,
developing, owning and operating other real estate assets, and to make
occasional dispositions of real estate assets as is consistent with the
Company's investment objectives. There can be no assurance, however, that the
IRS might not contend that one or more dispositions is subject to the 100%
penalty tax.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if (i) the Company's failure to meet such test was due to reasonable
cause and not due to willful neglect, (ii) the Company reported the nature and
amount of each item of its income included in the 75% or 95% gross income tests
(as the case may be) for such taxable year on a schedule attached to its return,
and (iii) any incorrect information on the schedule was not due to fraud with
intent to evade tax. No similar provision provides relief if the Company failed
the 30% gross income test for the taxable years such test was applicable, and it
is not possible to state whether in all circumstances the Company would be
entitled to the benefit of the relief provisions for the 75% and 95% gross
income tests. As discussed above, even if these relief provisions do apply, a
special tax equal to 100% is imposed upon the greater of the amount by which the
Company failed the 75% test or the 95% test, multiplied by a fraction intended
to reflect the Company's profitability.
Asset Tests. At the close of each quarter of the Company's taxable
year, it must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of the Company's total assets must consist of
real estate assets (which for this purpose includes stock or debt instruments
held for not more than one year purchased with proceeds of a stock offering or a
long-term (at least five years) debt offering of the Company), cash, cash items,
shares in other REITs, and government securities. Second, not more than 25% of
the Company's total assets may be represented by securities (other than those
includible in the foregoing 75% asset class). Third, of the investments included
in the foregoing 25% asset class, the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the Company's total assets, and
the Company may not own more than 10% of any one issuer's outstanding voting
securities. President Clinton has proposed legislation that would expand this
last prohibition so that the Company would not be permitted to own more than
10%, either by vote or by value, of any one issuer's outstanding securities.
Where a failure to satisfy the foregoing asset tests results from an
acquisition of securities or other property during a quarter, the failure can be
cured by disposition of sufficient nonqualifying assets within 30 days after the
close of such quarter. The Company intends to maintain adequate records of the
value of its assets to maintain compliance with the foregoing asset tests, and
to take such action as may be required to cure any failure to satisfy the tests
within 30 days after the close of any quarter.
Annual Distribution Requirements. In order to qualify as a REIT, the
Company is required to distribute dividends (other than capital gain dividends)
to its shareholders each year in an amount at least equal to the excess of (A)
the sum of (i) 95% of the Company's "real estate investment trust taxable
income" (computed without regard to the dividends paid deduction and net capital
gain) and (ii) 95% of the net income (after tax), if any, from foreclosure
property, over (B) the sum of certain noncash income (e.g., certain imputed
rental income or certain income from transactions inadvertently failing to
qualify as like-kind exchanges). Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if declared before
the Company timely files its tax return for such earlier taxable year and if
paid on or before the first regular dividend payment after such declaration.
Also, dividends declared in October, November, or December and paid during the
following January will be treated as having been paid and received on December
31. A distribution which is not pro rata within a class of beneficial interest
in the Company entitled to a dividend, or which is not consistent with the
rights to distributions between classes of beneficial interests in the Company,
is a preferential dividend that is not taken into consideration for purposes of
the distribution requirement, and accordingly the payment of a preferential
dividend could affect the Company's ability to meet the distribution
requirement. Taking into account the Company's distribution policies (including
its dividend reinvestment plan), the Company believes that it has not made and
expects that it will not make any such preferential dividend. The distribution
requirements may be waived by the IRS if the REIT establishes that it failed to
meet them by reason of distributions previously made to meet the requirements of
the 4% excise tax discussed below. To the extent that the Company does not
distribute all of its net capital gain and all of its "real estate investment
trust taxable income," as adjusted, it will be subject to tax thereon.
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In addition, the Company will be subject to a 4% excise tax to the
extent it fails within a calendar year to make "required distributions" to its
shareholders of 85% of its ordinary income and 95% of its capital gain net
income plus the excess, if any, of the "grossed up required distribution" for
the preceding calendar year over the amount treated as distributed for such
preceding calendar year. For this purpose, the term "grossed up required
distribution" for any calendar year is the sum of the taxable income of the
Company for the calendar year (without regard to the deduction for dividends
paid) and all amounts from earlier years that are not treated as having been
distributed under the provision.
It is possible that the Company, from time to time, may not have
sufficient cash or other liquid assets to meet the 95% distribution requirements
due to timing differences between (i) the actual receipt of income and actual
payment of deductible expenses or distributions and (ii) the inclusion of such
income and deduction of such expenses or distributions in arriving at "real
estate investment trust taxable income" of the Company. The problem of
inadequate cash to make required distributions could also occur as a result of
the repayment in cash of principal amounts due on the Company's outstanding
debt, particularly in the case of "balloon" repayments or as a result of capital
losses on short-term investments of working capital. Therefore, the Company
might find it necessary to arrange for short-term or possibly long-term
borrowing, or for new equity financing, to provide funds for required
distributions, or else its REIT status for federal income tax purposes could be
jeopardized. There can be no assurance that such borrowing or financing would be
available on favorable terms.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year, although an
interest charge would be imposed upon the Company for the delay in distribution.
Although the Company may thus be able to avoid being taxed on amounts
distributed as deficiency dividends, the Company may in certain circumstances
remain liable for the 4% excise tax discussed above.
For its taxable years ending on or before December 31, 1997, the
Company was required to request annually from record holders of certain
significant percentages of its Shares certain information regarding the
ownership of such Shares, in order to qualify for the deduction for dividends
paid to its shareholders. As discussed above, for taxable years commencing on or
after January 1, 1998, the Company will continue to request such information in
order to comply with the REIT qualification requirement regarding ownership
concentration of its Shares.
Federal Income Tax Treatment of Leases. The availability to the Company
of, among other things, depreciation deductions with respect to the facilities
owned and leased by the Company will depend upon the treatment of the Company as
the owner of the facilities and the classification of the leases of the
facilities as true leases, rather than as sales or financing arrangements, for
federal income tax purposes. As to the approximately 10% of the Company's leased
facilities which constitutes personal property, it is not entirely clear that
the Company will be treated as the owner of such personal property and that the
leases will be treated as true leases with respect to such property. The Company
plans to insure its compliance with the 95% distribution requirement (and the
excise tax "required distribution" requirement) by making distributions on the
assumption that it is not entitled to depreciation deductions for the 10% of the
leased facilities which constitute personal property, but to perform all its tax
reporting by taking into account such depreciation.
In the case of certain sale-leaseback arrangements, the IRS could
assert that the Company realized prepaid rental income in the year of purchase
to the extent that the value of a leased property exceeds the purchase price
paid by the Company for that property. In litigated cases involving
sale-leasebacks which have considered this issue, courts have concluded that
buyers have realized prepaid rent where both parties acknowledged that the
purported purchase price for the property was substantially less than fair
market value and the purported rents were substantially less than the fair
market rentals. Because of the lack of clear precedent, complete assurance
cannot be given that the IRS could not successfully assert the existence of
prepaid rental income.
Additionally, Section 467 of the Code applies to a lease which provides
for rents that increase from one period to the next. Section 467 of the Code
provides that in the case of a so-called "disqualified leaseback agreement,"
rental income must be accrued at a constant rate. If such constant rent accrual
were required, the
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Company could recognize rental income in excess of cash rents and, as a result,
may fail to meet the 95% dividend distribution requirement. "Disqualified
leaseback agreements" include leaseback transactions where a principal purpose
for providing increasing rent under the agreement is the avoidance of federal
income tax. Because Section 467 of the Code directs the Treasury to issue
regulations providing that rents will not be treated as increasing for tax
avoidance purposes where the increases are based upon a fixed percentage of
lessee receipts, and because regulations proposed to be effective for
"disqualified leaseback agreements" entered into after June 3, 1996 adopt this
rule, the additional rent provisions of the Company's leases generally should
not cause the leases to be "disqualified leaseback agreements." In addition, the
legislative history of Section 467 of the Code indicates that the Treasury
should issue regulations under which leases providing for fluctuations in rents
by no more than a reasonable percentage from the average rent payable over the
term of the lease will be deemed not motivated by tax avoidance, and the
proposed regulations permit a 10% fluctuation.
Depreciation of Properties. For federal income tax purposes, the
Company generally depreciates its real property on a straight-line basis over 40
years and its personal property over 9 years.
Failure to Qualify. If the Company fails to qualify for federal income
taxation as a REIT in any taxable year, and any potentially applicable relief
provisions do not apply, the Company will be subject to tax on its taxable
income at regular corporate rates (plus any applicable minimum tax).
Distributions to shareholders in any year in which the Company fails to qualify
will not be deductible by the Company nor will they be required to be made. In
such event, to the extent of the Company's current and accumulated earnings and
profits, all distributions to shareholders will be taxable as ordinary income,
and subject to certain limitations in the Code will be eligible for the
dividends received deduction for corporations. Unless entitled to relief under
specific statutory provisions, the Company will also be disqualified from
federal income taxation as a REIT for the following four taxable years. It is
not possible to state whether in all circumstances the Company would be entitled
to statutory relief from such disqualification. Failure to qualify for even one
year could result in the Company's incurring substantial indebtedness (to the
extent borrowings are feasible) or liquidating substantial investments in order
to pay the resulting taxes.
Taxation of U.S. Shareholders--Generally. As used herein, the term
"U.S. Shareholder" means a beneficial holder of Shares that is for federal
income tax purposes (i) a citizen or resident of the United States, (ii) a
corporation or partnership (or other entity treated as a corporation or
partnership for federal income tax purposes) created or organized in or under
the laws of the United States or of any political subdivision thereof (unless
otherwise provided by Treasury Regulations), (iii) an estate the income of which
is subject to federal income taxation regardless of its source, or (iv) a trust
if a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust (or certain electing
trusts in existence on August 20, 1996 to the extent provided in Treasury
Regulations). As used herein, the term "Non-U.S. Shareholder" means a beneficial
holder of Shares that is not a U.S. Shareholder.
As long as the Company qualifies as a REIT for federal income tax
purposes, distributions (including reinvestments pursuant to the Company's
dividend reinvestment plan) made to the Company's U.S. Shareholders out of
current or accumulated earnings and profits will be taken into account by them
as ordinary income (but will not be eligible for the dividends received
deduction for corporations). Distributions that are properly designated by the
Company as capital gain dividends will be taxed as long-term capital gains (as
discussed below) to the extent they do not exceed the Company's actual net
capital gain for the taxable year, although corporate U.S. Shareholders may be
required to treat up to 20% of any such capital gain dividend as ordinary income
pursuant to Section 291 of the Code. For the Company's taxable years commencing
on or after January 1, 1998, the Company may elect to retain amounts
representing its net capital gain income. In that case, the Company will be
taxed at regular corporate capital gains tax rates on such amounts, each U.S.
Shareholder will be taxed on its proportionate share of the net capital gains
retained by the Company as though such amount were distributed and designated a
capital gain dividend, and each such U.S. Shareholder will receive a credit for
a proportionate share of the tax paid by the Company. Additionally, each U.S.
Shareholder will increase the adjusted basis in its Shares by the excess of the
amount of its proportionate share of these net capital gains over its
proportionate share of the tax paid by the Company, and both the Company and its
corporate U.S. Shareholders will make commensurate adjustments in their
respective earnings and profits for federal income tax purposes. If the Company
should elect to retain its net capital
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gain in this fashion, it will notify each U.S. Shareholder of the relevant tax
information within 60 days after the close of the Company's taxable year.
For certain noncorporate U.S. Shareholders, long-term capital gains
taken into account after May 7, 1997 are taxed at varying maximum rates of 20%,
25%, or 28%, depending upon the type of property disposed of and the holding
period in such property at the time of disposition. If the Company designates a
dividend as a capital gain dividend for any taxable year of the Company ending
after May 7, 1997 (or elects to retain a portion of its net capital gain and
have such amount treated as a distributed and designated capital gain dividend
in the manner described above), the Company may also designate the portion of
such capital gain dividend which is taxed to certain noncorporate U.S.
Shareholders at the varying maximum rates of 20%, 25%, or 28%, based upon the
type and holding period of the property disposed of by the Company. If the
Company does not make such a designation, the entire capital gain dividend will
be treated as long-term capital gain subject to the maximum 28% rate to the
noncorporate U.S. Shareholders (without regard to the period for which the U.S.
Shareholder held its Shares).
For purposes of computing the Company's earnings and profits,
depreciation on real estate is generally computed on a straight-line basis over
40 years. Distributions in excess of current or accumulated earnings and profits
will not be taxable to a U.S. Shareholder to the extent that they do not exceed
the adjusted basis of the U.S. Shareholder's Shares, but will reduce the U.S.
Shareholder's basis in such Shares. To the extent that such distributions exceed
the adjusted basis of a U.S. Shareholder's Shares, they will be included in
income as long-term capital gain (or short-term capital gain if the shares have
been held for not more than one year), with such long-term gain taxed to certain
noncorporate U.S. Shareholders at varying maximum rates of 20% or 28% depending
upon the U.S. Shareholder's holding period in the Shares. U.S. Shareholders may
not include in their respective income tax returns any net operating losses or
capital losses of the Company.
Dividends declared by the Company in October, November or December of a
taxable year to shareholders of record on a date in such month, will be deemed
to have been received by such shareholders on December 31, provided the Company
actually pays such dividends during the following January. For tax purposes, the
Company's dividends paid in 1995, 1996 and 1997 aggregated $.79, $2.34 and $2.45
respectively, of which $.000, $.344 and $.341, respectively, represented a
return of capital.
The sale or exchange of Shares will result in recognition of gain or
loss to the U.S. Shareholder in an amount equal to the difference between the
amount realized and its adjusted basis in the Shares sold or exchanged. Such a
gain or loss will be capital gain or loss, and will be long-term capital gain or
loss if the U.S. Shareholder's holding period in the Shares exceeded one year.
Long-term capital gains may be taxed to certain noncorporate U.S. Shareholders
at varying maximum rates of 20% or 28% depending upon the U.S. Shareholder's
holding period in the Shares. In addition, any loss upon a sale or exchange of
Shares by a U.S. Shareholder who has held such Shares for not more than six
months (after applying certain rules), will generally be treated as a long-term
capital loss to the extent of distributions from the Company required to be
treated by such U.S. Shareholders as long-term capital gain (including, for this
purpose, amounts constructively distributed as long-term capital gain by the
Company electing to retain its net capital gain in the manner described above).
U.S. Shareholders (other than certain corporations) who borrow funds to
finance their acquisition of Shares in the Company could be limited in the
amount of deductions allowed for the interest paid on the indebtedness incurred
in such an arrangement. Under Section 163(d) of the Code, interest paid or
accrued on indebtedness incurred or continued to purchase or carry property held
for investment is generally deductible only to the extent of the investor's net
investment income. A U.S. Shareholder's net investment income will include
dividend distributions and, if an appropriate election is made, capital gain
dividend distributions it receives from the Company; however, distributions
treated as a nontaxable return of the U.S. Shareholder's basis will not enter
into the computation of net investment income. Under Section 469 of the Code,
U.S. Shareholders (other than certain corporations) generally will not be
entitled to deduct losses from so-called passive activities except to the extent
of their income from passive activities. For purposes of these rules,
distributions received by a U.S. Shareholder from the Company will not be
treated as income from a passive activity and thus will not be available to
offset a U.S. Shareholder's passive activity losses.
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Tax preference and other items which are treated differently for
regular and alternative minimum tax purposes are to be allocated between a REIT
and its shareholders under regulations which are to be prescribed. It is
possible that these regulations would require tax preference items to be
allocated to the Company's shareholders with respect to any accelerated
depreciation claimed by the Company; however, the Company has not claimed
accelerated depreciation with respect to its existing properties.
Taxation of Certain Tax-Exempt U.S. Shareholders. In Revenue Ruling
66-106, the IRS ruled that amounts distributed by a REIT to a tax-exempt
employees' pension trust did not constitute "unrelated business taxable income,"
even though the REIT may have financed certain of its activities with
acquisition indebtedness. Although Revenue Rulings are interpretive in nature
and subject to revocation or modification by the IRS, based upon Revenue Ruling
66-106 and the analysis therein, distributions made by the Company to U.S.
Shareholders that are qualified pension plans (including individual retirement
accounts) or certain other tax-exempt entities should not constitute unrelated
business taxable income, unless such U.S. Shareholder has financed the
acquisition of its Shares with "acquisition indebtedness" within the meaning of
the Code, or the Shares are otherwise used in an unrelated trade or business
conducted by the U.S. Shareholder.
Special rules apply to certain tax-exempt pension trusts (including
so-called 401(k) plans but excluding individual retirement accounts or
government pension plans) that own more than 10% by value of a "pension-held
REIT" at any time during a taxable year commencing after December 31, 1993. Such
a pension trust may be required to treat a certain percentage of all dividends
received from the pension-held REIT during the year as unrelated business
taxable income. Such percentage is equal to the ratio of the pension-held REIT's
gross income (less direct expenses related thereto) derived from the conduct of
unrelated trades or businesses (determined as if the pension-held REIT were a
tax-exempt pension fund), to the pension-held REIT's gross income (less direct
expenses related thereto) from all sources, except that such percentage shall be
deemed to be zero unless it would otherwise equal or exceed 5%. A REIT will be
treated as a pension-held REIT only if (i) the REIT is "predominantly held" by
tax-exempt pension trusts, and (ii) the REIT would otherwise fail to satisfy the
"closely held" ownership condition discussed above if the stock or beneficial
interests in the REIT held by such tax-exempt pension trusts were viewed as held
by such tax-exempt pension trusts rather than their respective beneficiaries. A
REIT is predominantly held by tax-exempt pension trusts if at least one
tax-exempt pension trust holds more than 25% by value of the REIT's stock or
beneficial interests, or if one or more tax-exempt pension trusts (each owning
more than 10% by value of the REIT's stock or beneficial interests) own in the
aggregate more than 50% by value of the REIT's stock or beneficial interests.
Given the restrictions in its Declaration regarding ownership of its Shares, the
Company believes that it has not been, and expects that it will not be, a
pension-held REIT. However, because the Shares of the Company will be publicly
traded, no assurance can be given that the Company will not become a
pension-held REIT.
Taxation of Non-U.S. Shareholders. The rules governing the federal
income taxation of Non-U.S. Shareholders (generally, nonresident alien
individuals, foreign corporations, foreign partnerships, and foreign trusts and
estates) are highly complex, and the following discussion is intended only as a
summary of such rules. Non-U.S. Shareholders should consult with their own tax
advisors to determine the impact of federal, state, local, and foreign tax laws,
including any reporting requirements, with respect to their investment in the
Company. In general, a Non-U.S. Shareholder will be subject to regular federal
income tax in the same manner as a U.S. Shareholder with respect to its
investment in Shares if such investment is "effectively connected" with the
Non-U.S. Shareholder's conduct of a trade or business in the United States. In
addition, a corporate Non-U.S. Shareholder that receives income that is (or is
deemed) effectively connected with a trade or business in the United States may
also be subject to the 30% branch profits tax under Section 884 of the Code,
which is payable in addition to regular federal corporate income tax. The
following discussion addresses only Non-U.S. Shareholders whose investment in
Shares is not effectively connected with the conduct of a trade or business in
the United States.
A distribution by the Company to a Non-U.S. Shareholder that is not
attributable to gain from the sale or exchange by the Company of a United States
real property interest and that is not designated by the Company as a capital
gain dividend will be treated as an ordinary income dividend to the extent that
it is made out of current or accumulated earnings and profits. Generally, such a
dividend will be subject to federal income withholding tax on the gross amount
thereof at the rate of 30%, or such lower rate that may be specified by treaty
if the Non-U.S. Shareholder has in the manner prescribed by the IRS demonstrated
to the Company its entitlement to treaty benefits.
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A distribution of cash in excess of the Company's earnings and profits will be
treated first as a nontaxable return of capital that will reduce a Non-U.S.
Shareholder's basis in its Shares (but not below zero) and then as gain from the
disposition of such Shares, the tax treatment of which is discussed below. A
distribution in excess of the Company's earnings and profits may be subject to
30% (or lower treaty rate) withholding if at the time of the distribution it
cannot be determined whether the distribution will be in an amount in excess of
the Company's current and accumulated earnings and profits. If it is
subsequently determined that such distribution is, in fact, in excess of current
and accumulated earnings and profits, the Non-U.S. Shareholder may seek a refund
from the IRS. The Company expects to withhold federal income withholding tax at
the rate of 30% on the gross amount of any distributions on Shares made to a
Non-U.S. Shareholder unless a lower tax treaty applies and the required IRS form
evidencing eligibility for that reduced rate is filed with the Company.
For any year in which the Company qualifies as a REIT, distributions by
the Company that are attributable to gain from the sale or exchange of a United
States real property interest are taxed to a Non-U.S. Shareholder as if such
distributions were gains "effectively connected" with a trade or business in the
United States conducted by the Non-U.S. Shareholder. Accordingly, a Non-U.S.
Shareholder will be taxed on such amounts at the normal capital gain rates
applicable to a U.S. Shareholder (subject to any applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals). Such distributions may also be subject to a 30% branch profits tax
under Section 884 of the Code in the hands of a corporate Non-U.S. Shareholder
that is not entitled to treaty relief or exemption. The Company will be required
to withhold from distributions to Non-U.S. Shareholders, and remit to the IRS,
35% of the maximum amount of any distribution that could be designated as a
capital gain dividend. In addition, for purposes of this withholding rule, if
the Company designates prior distributions as capital gain distributions, then
subsequent distributions, up to the amount of such prior distributions, will be
treated as capital gain dividends. The amount of any tax withheld is creditable
against the Non-U.S. Shareholder's federal income tax liability, and any amount
of tax withheld in excess of that tax liability may be refunded provided that an
appropriate claim for refund is filed with the IRS.
Tax treaties may reduce the Company's withholding obligations. Under
certain treaties, however, rates below 30% generally applicable to dividends
from United States corporations may not apply to dividends from a REIT. If the
amount of tax withheld by the Company with respect to a distribution to a
Non-U.S. Shareholder exceeds such shareholder's federal income tax liability
with respect to such distribution, the Non-U.S. Shareholder may file for a
refund of such excess from the IRS. In this regard, it should be noted that the
35% withholding tax rate on capital gain dividends corresponds to the maximum
income tax rate applicable to corporate Non-U.S. Shareholders but is higher than
the 20%, 25%, and 28% maximum rates on capital gains generally applicable to
noncorporate Non-U.S. Shareholders. Treasury Regulations issued on October 6,
1997 (the "New Regulations") alter the withholding rules on dividends paid to a
Non-U.S. Shareholder, generally effective with respect to dividends paid after
December 31, 1999. Under the New Regulations, to obtain a reduced rate of
withholding under an income tax treaty, a Non-U.S. Shareholder generally will be
required to provide an Internal Revenue Service Form W-8 certifying such
Non-U.S. Shareholder's entitlement to benefits under the treaty. The New
Regulations also provide special rules to determine whether, for purposes of
determining the applicability of a tax treaty, dividends paid to a Non-U.S.
Shareholder that is an entity should be treated as paid to the entity or to
those holding an interest in that entity, and whether such entity or such
holders in the entity are entitled to benefits under the tax treaty. The New
Regulations also alter the information reporting and backup withholding rules
applicable to Non-U.S. Shareholders and, among other things, provide certain
presumptions under which a Non-U.S. Shareholder is subject to backup withholding
and information reporting until the Company receives certification from such
shareholder of its Non-U.S. Shareholder status.
If the Shares fail to constitute a "United States real property
interest" within the meaning of Section 897 of the Code, gain on sale of the
Shares by a Non-U.S. Shareholder generally will not be subject to federal income
taxation unless (i) investment in the Shares is effectively connected with the
Non-U.S. Shareholder's United States trade or business, in which case, as
discussed above, the Non-U.S. Shareholder would be subject to the same treatment
as U.S. Shareholders on such gain, or (ii) the Non-U.S. Shareholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year, in which case the nonresident alien individual
will be subject to a 30% tax on such gain.
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The Shares will not constitute a United States real property interest
if the Company is a "domestically controlled REIT." A domestically controlled
REIT is a REIT in which at all times during the preceding five-year period less
than 50% in value of its shares is held directly or indirectly by foreign
persons. It is believed that the Company has been and will continue to be a
domestically controlled REIT, and therefore that the sale of Shares by a
Non-U.S. Shareholder will not be subject to federal income taxation. However,
because the Shares are publicly traded, no assurance can be given that the
Company has been and will continue to be a domestically controlled REIT. If the
Company is not a domestically controlled REIT, whether a Non-U.S. Shareholder's
gain on sale of Shares would be subject to federal income tax as a sale of a
United States real property interest would depend upon whether the Shares were
"regularly traded" (as defined by applicable Treasury Regulations) on an
established securities market (e.g., the New York Stock Exchange, on which the
Shares are listed) and upon the size of the selling Non-U.S. Shareholder's
interest in the Company. If the gain on the sale of the Shares were subject to
federal income taxation, the Non-U.S. Shareholder would be subject to the same
treatment as a U.S. Shareholder with respect to such gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals). In any event, a purchaser of Shares from a
Non-U.S. Shareholder will not be required to withhold on the purchase price if
the purchased Shares are "regularly traded" on an established securities market
or if the Company is a domestically controlled REIT. Otherwise, the purchaser of
Shares may be required to withhold 10% of the purchase price paid to the
Non-U.S. Shareholder and to remit such amount to the IRS.
Shares owned or treated as owned by an individual who is not a citizen
or resident (as defined for United States federal estate tax purposes) of the
United States at the time of death will be includible in the individual's gross
estate for United States federal estate tax purposes unless an applicable estate
tax treaty provides otherwise.
Backup Withholding and Information Reporting Requirements. The Company
will report to its U.S. Shareholders and to the IRS the amount of dividends paid
during each calendar year and the amount of tax withheld, if any. Under the
backup withholding rules, a U.S. Shareholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless the U.S.
Shareholder (a) is a corporation or comes within certain other exempt categories
and, when required, demonstrates that fact or (b) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding rules and otherwise complies with applicable requirements of the
backup withholding rules. A U.S. Shareholder that does not provide the Company
with its correct taxpayer identification number may be subject to penalties
imposed by the IRS. In addition, the Company may be required to withhold a
portion of capital gain distributions to any U.S. Shareholder that fails to
certify its non-foreign status to the Company. Any amounts withheld under the
foregoing rules will be creditable against the U.S. Shareholder's federal income
tax liability provided that the required information is furnished to the IRS.
The Company will report to its Non-U.S. Shareholders and to the IRS
the amount of dividends paid during each calendar year and the amount of tax
withheld, if any. These information reporting requirements apply regardless of
whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities in the
country in which the Non-U.S. Shareholder resides. As discussed above,
withholding tax rates of 30% and 35% may apply to distributions on Shares to
Non-U.S. Shareholders, and the New Regulations will when effective alter the
information reporting and withholding rules applicable to Non-U.S. Shareholders.
Among other things, the New Regulations provide certain presumptions under which
a Non-U.S. Shareholder would be subject to backup withholding and information
reporting until the Company receives certification from such shareholder of its
Non-U.S. Shareholder status. As noted, the New Regulations are generally
effective with respect to dividends paid after December 31, 1999.
The payment of the proceeds from the disposition of Shares to or
through the United States office of a broker will generally be subject to
information reporting and backup withholding at a rate of 31% unless the owner,
under penalties of perjury, certifies, among other things, its status as a
Non-U.S. Shareholder, or otherwise establishes an exemption. The payment of the
proceeds from the disposition of Shares to or through a non-United States office
of a broker generally will not be subject to backup withholding and information
reporting. In the case of proceeds from a disposition of Shares paid to or
through a non-United States office of a United States broker or paid to or
through a non-United States office of a non-United States broker that is (i) a
"controlled foreign corporation" for federal income tax purposes or (ii) a
person 50% or more of whose gross income from all sources for a certain
three-year period was effectively connected with a United States trade or
business, (a) backup
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withholding will not apply unless the broker has actual knowledge that the owner
is not a Non-U.S. Shareholder, and (b) information reporting will not apply if
the broker has documentary evidence in its files that the beneficial owner is a
Non-U.S. Shareholder unless the broker has actual knowledge to the contrary.
Under the New Regulations (generally effective for payments made after December
31, 1999), in the case of proceeds from a disposition of Shares paid to or
though a non-United States office of a United States broker or paid to or
through a non-United States office of a non-United States broker that is (i) a
"controlled foreign corporation" for federal income tax purposes, (ii) a person
50% or more of whose gross income from all sources for a certain three-year
period was effectively connected with a United States trade or business, (iii) a
foreign partnership with one or more partners who are United States persons and
who in the aggregate hold more than 50% of the income or capital interest in the
partnership, or (iv) a foreign partnership engaged in the conduct of a trade or
business in the United States, (a) backup withholding will not apply unless the
broker has actual knowledge that the owner is not a Non-U.S. Shareholder, and
(b) information reporting will not apply if the Non-U.S. Shareholder certifies
its status as a Non-U.S. Shareholder and further certifies that it has not been,
and at the time the certificate is furnished reasonably expects not to be,
present in the United States for a period aggregating 183 days or more during
each calendar year to which the certification pertains.
Any amounts withheld from a payment to a Non-U.S. Shareholder will
generally be refunded (or credited against the Non-U.S. Shareholder's United
States federal income tax liability, if any), provided that the required
information is furnished to the IRS.
Other Tax Considerations. Holders of Shares should recognize that the
present federal income tax treatment of the Company may be modified by future
legislative, judicial, or administrative actions at any time, which may be
retroactive in effect, and, as a result, any such action or decision may affect
investments and commitments previously made. The rules dealing with federal
income taxation are constantly under review by persons involved in the
legislative process and by the IRS and the Treasury Department, resulting in
statutory changes as well as promulgation of new regulations, revisions to
existing regulations, and revised interpretations of established concepts. No
prediction can be made as to the likelihood of passage of any new tax
legislation or other provisions either directly or indirectly affecting the
Company or its shareholders. Revisions in federal income tax laws and
interpretations thereof could adversely affect the tax consequences of
investment in the Shares.
The Company and its shareholders may also be subject to state or local
taxation in various state or local jurisdictions, including those in which it or
they transact business or reside. The state and local tax treatment of the
Company and its shareholders may not conform to the federal income tax
consequences discussed above. Consequently, holders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
the Shares.
THE FOREGOING IS A SUMMARY DESCRIPTION OF CERTAIN MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE TAXATION OF THE COMPANY AND ITS SHAREHOLDERS,
WITHOUT CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY
PARTICULAR SHAREHOLDER. IN PARTICULAR, IT DOES NOT ADDRESS THE STATE, LOCAL OR
FOREIGN TAX ASPECTS OF THE TAXATION OF THE COMPANY AND ITS SHAREHOLDERS. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE
COULD AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. THE COMPANY AND ITS
SHAREHOLDERS MAY ALSO BE SUBJECT TO STATE OR LOCAL TAXATION IN VARIOUS STATE OR
LOCAL JURISDICTIONS, INCLUDING THOSE IN WHICH IT OR THEY TRANSACT BUSINESS OR
RESIDE. EACH HOLDER OF SHARES OF THE COMPANY SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE TAXATION OF THE COMPANY AND
ITS SHAREHOLDERS, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL
AND FOREIGN TAX LAWS.
ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
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General Fiduciary Obligations. Fiduciaries of a pension, profit-sharing
or other employee benefit plan subject to Title I of the Employee Retirement
Income Security Act of 1974 ("ERISA") ("ERISA Plan") must consider whether their
investment in the Company's Shares satisfies the diversification requirements of
ERISA, whether the investment is prudent in light of possible limitations on the
marketability of the Shares, whether such fiduciaries have authority to acquire
such Shares under the appropriate governing instrument and Title I of ERISA, and
whether such investment is otherwise consistent with their fiduciary
responsibilities. Any ERISA Plan fiduciary should also consider ERISA's
prohibition on improper delegation of control over or responsibility for "plan
assets." Trustees and other fiduciaries of an ERISA plan may incur personal
liability for any loss suffered by the plan on account of a violation of their
fiduciary responsibilities. In addition, such fiduciaries may be subject to a
civil penalty of up to 20% of any amount recovered by the plan on account of
such a violation (the "Fiduciary Penalty"). Fiduciaries of any Individual
Retirement Account ("IRA") Keogh Plan or other qualified retirement plan not
subject to Title I of ERISA because it does not cover common law employees
("Non-ERISA Plan") should consider that such an IRA or non-ERISA Plan may only
make investments that are authorized by the appropriate governing instrument.
Fiduciary shareholders should consult their own legal advisers if they have any
concern as to whether the investment is inconsistent with any of the foregoing
criteria.
Prohibited Transactions. Fiduciaries of ERISA Plans and persons making
the investment decision for an IRA or other Non-ERISA Plan should also consider
the application of the prohibited transaction provisions of ERISA and the Code
in making their investment decision. Sales and certain other transactions
between an ERISA Plan, IRA, or other Non-ERISA Plan and certain persons related
to it are prohibited transactions. The particular facts concerning the
sponsorship, operations and other investments of an ERISA Plan, IRA, or other
Non-ERISA Plan may cause a wide range of other persons to be treated as
disqualified persons or parties in interest with respect to it. A prohibited
transaction, in addition to imposing potential personal liability upon
fiduciaries of ERISA Plans, may also result in the imposition of an excise tax
under the Code or a penalty under ERISA upon the disqualified person or party in
interest with respect to the ERISA or Non-ERISA Plan or IRA. If the disqualified
person who engages in the transaction is the individual on behalf of whom an IRA
is maintained (or his beneficiary), the IRA may lose its tax-exempt status and
its assets may be deemed to have been distributed to such individual in a
taxable distribution (and no excise tax will be imposed) on account of the
prohibited transaction. Fiduciary shareholders should consult their own legal
advisers if they have any concern as to whether the investment is a prohibited
transaction.
Special Fiduciary and Prohibited Transactions Considerations. The
Department of Labor ("DOL"), which has certain administrative responsibility
over ERISA Plans as well as over IRAs and other Non-ERISA Plans, has issued a
regulation defining "plan assets." The regulation generally provides that when
an ERISA or Non-ERISA Plan or IRA acquires a security that is an equity interest
in an entity and that security is neither a "publicly offered security" nor a
security issued by an investment company registered under the Investment Company
Act of 1940, the ERISA or Non-ERISA Plan's or IRA's assets include both the
equity interest and an undivided interest in each of the underlying assets of
the entity, unless it is established either that the entity is an operating
company or that equity participation in the entity by benefit plan investors is
not significant.
The regulation defines a publicly offered security as a security that
is "widely held," "freely transferable" and either part of a class of securities
registered under the Securities Exchange Act of 1934, or sold pursuant to an
effective registration statement under the Securities Act of 1933 (provided the
securities are registered under the Securities Exchange Act of 1934 within 120
days after the end of the fiscal year of the issuer during which the offering
occurred). The Shares have been registered under the Securities Exchange Act of
1934.
The regulation provides that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. However, a security will not fail to be
"widely held" because the number of independent investors falls below 100
subsequent to the initial public offering as a result of events beyond the
issuer's control.
The regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The regulation further provides that, where a
security is part of an offering in which the minimum investment is $10,000 or
less, certain restrictions ordinarily will not, alone or in combination, affect
a finding that such securities are freely transferable. The restrictions on
20
<PAGE>
transfer enumerated in the regulation as not affecting that finding include: any
restriction on or prohibition against any transfer or assignment which would
result in a termination or reclassification of the Company for Federal or state
tax purposes, or would otherwise violate any state or Federal law or court
order; any requirement that advance notice of a transfer or assignment be given
to the Company and any requirement that either the transferor or transferee, or
both, execute documentation setting forth representations as to compliance with
any restrictions on transfer which are among those enumerated in the regulation
as not affecting free transferability, including those described in the
preceding clause of this sentence; any administrative procedure which
establishes an effective date, or an event prior to which a transfer or
assignment will not be effective; and any limitation or restriction on transfer
or assignment which is not imposed by the issuer or a person acting on behalf of
the issuer. The Company believes that the restrictions imposed under the
Declaration on the transfer of Shares do not result in the failure of the Shares
to be "freely transferable." Furthermore, the Company believes that at present
there exist no other facts or circumstances limiting the transferability of the
Shares which are not included among those enumerated as not affecting their free
transferability under the regulation, and the Company does not expect or intend
to impose in the future (or to permit any person to impose on its behalf) any
limitations or restrictions on transfer which would not be among the enumerated
permissible limitations or restrictions. However, the final regulation only
establishes a presumption in favor of a finding of free transferability, and no
guarantee can be given that the DOL or the Treasury Department will not reach a
contrary conclusion.
Assuming that the Shares will be "widely held" and that no other facts
and circumstances exist which restrict transferability of the Shares, the
Company has received an opinion of counsel that the Shares should not fail to be
"freely transferable" for purposes of the regulation due to the restrictions on
transfer of the Shares under the Declaration and that under the regulation the
Shares are publicly offered securities and the assets of the Company will not be
deemed to be "plan assets" of any ERISA Plan, IRA or other Non-ERISA Plan that
invests in the Shares.
If the assets of the Company are deemed to be plan assets under ERISA,
(i) the prudence standards and other provisions of Part 4 of Title I of ERISA
would be applicable to investments made by the Company; (ii) the person or
persons having investment discretion over the assets of ERISA Plans which invest
in the Company would be liable under the aforementioned Part 4 of Title I of
ERISA for investments made by the Company which do not conform to such ERISA
standards unless the Advisor registers as an investment adviser under the
Investment Advisers Act of 1940 and certain other conditions are satisfied; and
(iii) certain transactions that the Company might enter into in the ordinary
course of its business and operation might constitute "prohibited transactions"
under ERISA and the Code.
Item 3. Legal Proceedings
Although in the ordinary course of business the Company is or may
become involved in legal proceedings, the Company has a limited operating
history and is not aware of any material pending legal proceeding affecting the
Company or any of the Hotels for which it might become liable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's Shares are traded on the New York Stock Exchange (symbol:
HPT). The following table sets forth for the periods indicated the high and low
closing sale prices for the Shares as reported in the New York Stock Exchange
Composite Transactions reports since the Company's initial public offering.
21
<PAGE>
1995 High Low
---- ---- ---
August 22 to September 30 $ 27 $ 24 1/2
Fourth Quarter 26 3/4 24 3/8
1996 High Low
---- ---- ---
First Quarter $ 27 7/8 $ 25 1/2
Second Quarter 27 24 5/8
Third Quarter 26 7/8 25
Fourth Quarter 29 1/2 25
1997 High Low
---- ---- ---
First Quarter $ 33 $ 28 3/8
Second Quarter 32 1/8 29 3/8
Third Quarter 35 15/16 30 7/16
Fourth Quarter 38 5/16 33 1/16
The closing price of the Shares on the New York Stock Exchange on March
11, 1998, was $35.00 per Share.
As of March 6, 1998, there were 1,007 Shareholders of record and the
Company estimates that as of such date there was an excess of 75,000 beneficial
owners of the Shares.
Information about the Company's dividends paid is summarized in the
table below. Dividends are generally paid in the quarter following the quarter
to which they relate.
Dividend Annualized
Per Share Dividend Rate
--------- -------------
1995
----
Third Quarter $0.24 $2.20
Fourth Quarter 0.55 2.20
1996
----
First Quarter $0.58 $2.32
Second Quarter 0.58 2.32
Third Quarter 0.59 2.36
Fourth Quarter 0.59 2.36
1997
----
First Quarter $0.59 $2.36
Second Quarter 0.61 2.44
Third Quarter 0.62 2.48
Fourth Quarter 0.63 2.52
All dividends declared have been paid. The Company intends to continue to
declare and pay future dividends on a quarterly basis.
In order to qualify for the beneficial tax treatment accorded to REITs by
Sections 856 through 860 of the Code, the Company is required to make
distributions to shareholders which annually will be at least 95% of the
Company's "real estate investment trust taxable income" (as defined in the
Code). All distributions will be made by the Company at the discretion of the
Board of Trustees and will depend on the earnings of the Company, cash available
for distribution, the financial condition of the Company and such other factors
as the Board of Trustees
22
<PAGE>
deems relevant. The Company intends to distribute substantially all of its "real
estate investment trust taxable income" to its shareholders.
Item 6. Selected Financial Data
The following table sets forth selected financial and operating data on an
historical and a pro forma basis for the Company for the years ended December
31, 1997, 1996 and 1995. The pro forma data for 1995 is unaudited and presented
as if the Company's formation transactions, primarily the acquisition and
leasing of the 37 hotels acquired in 1995, the Company's initial public offering
of Shares, and certain other transactions described below had been consummated
as of the date or for the period presented. The pro forma data is not
necessarily indicative of what the actual financial position or results of
operations would have been, nor do they purport to represent the financial
position or results of operations for future periods.
<TABLE>
<CAPTION>
Historical Historical Historical Pro Forma
---------------------------------------------------------------------------------
February 7, 1995
Year Ended Year Ended (Inception) to Year Ended
December 31, 1997 December 31, 1996 December 31, 1995 (1) December 31, 1995
(In thousands, except per Share data)
<S> <C> <C> <C> <C>
Operating Data:
Revenues:
Rental income $ 98,561 $ 69,514 $ 19,531 $ 33,308
FF&E reserve income 14,643 12,169 4,037 6,424
Interest income 928 946 74 144
---------- ---------- ---------- ----------
Total revenues 114,132 82,629 23,642 39,876
Expenses:
Interest 15,534 5,646 5,063 --
Depreciation and amortization 31,949 20,398 5,820 9,229
General and administrative 7,496 4,921 1,410 2,616
---------- ---------- ---------- ----------
Total expenses 54,979 30,965 12,293 11,845
---------- ---------- ---------- ----------
Net income $ 59,153 $ 51,664 $ 11,349 $ 28,031
========== ========== ========== ==========
Per Share Data:
Net income per Share $ 2.15 $ 2.23 $ 2.51 $ 2.22
Weighted average Shares outstanding 27,530 23,170 4,515 12,601
Balance Sheet Data (as of December 31):
Real estate properties, net $1,207,868 $ 816,469 $ 326,752 $ 326,752
Total assets 1,313,256 871,603 338,947 338,947
Total debt 125,000 125,000 -- --
Shareholders' equity 1,007,893 645,208 297,951 297,951
- ---------
<FN>
(1) From inception on February 7, 1995, until completion of its initial public offering on August 22, 1995, the Company was a
100% owned subsidiary of HRP. The Company was initially capitalized with $1.0 million of equity and $163.3 million of debt.
The debt was provided by HRP at rates which were lower than the market rates which the Company would have paid on a stand
alone basis. Accordingly, the Company does not believe that its results of operations while it was a wholly-owned
subsidiary are comparable to subsequent periods.
</FN>
</TABLE>
23
<PAGE>
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Overview
The Company was organized on February 7, 1995 and commenced operations on March
24, 1995 with the acquisition of its first 21 hotels. The Company completed its
initial public offering of shares and acquired an additional 16 hotels on August
22, 1995. Because the Company did not operate for the entire year 1995, the
Company believes it is meaningful to an understanding of its operations to
discuss the Company's 1995 pro forma results of operations as well as its
historical results of operations.
The following discussion should be read in conjunction with the financial
statements and the notes thereto included elsewhere herein. Pro forma results
and percentage relationships set forth herein may not be indicative of the
future operations of the Company.
Historical and Pro Forma Results of Operations
Year Ended December 31, 1997 versus Year Ended December 31, 1996
The Company's assets increased to $1,313 million as of December 31, 1997 from
$872 million as of December 31, 1996. The increase resulted primarily from hotel
acquisitions completed in 1997.
In January 1997 the Company purchased a full service hotel in Salt Lake City,
Utah for $44.0 million. In March 1997 the Company agreed to acquire 10 Residence
Inn by Marriott(R) hotels (1,276 suites) and four Courtyard by Marriott(R)
hotels (543 rooms) for $149 million and acquired all these properties in 1997
after they opened. In September 1997 the Company agreed to acquire from Marriott
six Courtyard by Marriott(R) hotels (829 rooms) and three Residence Inn by
Marriott(R)) hotels (507 suites) for $129 million. As of March 11, 1998, four of
these hotels have been acquired; the remaining five are expected to be acquired
periodically during the remainder of 1998. In November 1997 the Company acquired
14 Sumner Suites(R) hotels (1,641 suites) for $140 million. In November 1997 the
Company agreed to acquire 15 Candlewood(R) hotels for $100 million. Five of
these 15 Candlewood(R) hotels were acquired in 1997. An additional nine
properties were acquired in January and March 1998. The remaining hotel is
expected to be acquired during 1998. These acquisitions were funded through the
use of cash on hand, borrowings on the Company's line of credit, and the net
proceeds from the offering of 12,000,000 common shares of beneficial interest
("Shares") in December 1997.
Total revenues in 1997 were $114.1 million versus 1996 revenues of $82.6
million. Total revenues were comprised principally of base and percentage rent
of $98.6 million and FF&E reserve income of $14.6 million in 1997 versus $69.5
million and $12.2 million, respectively, in the 1996 period. The Company's
results are reflective of the full year impact of 45 hotels acquired in 1996 and
the impact of the 1997 completion of 37 of the 53 hotel acquisitions announced
in 1997. During 1997 the Company earned percentage rent revenue of $2.5 million
($0.09/Share) versus $1.1 million ($0.05/Share) in 1996, as a result of
increases in gross hotel revenues at the Company's hotels.
Total expenses in 1997 were $55.0 million (including interest expense and
depreciation and amortization of real estate assets of $15.5 and $31.9 million,
respectively) versus 1996 expenses of $31.0 million (including interest expense
and depreciation and amortization of $5.6 million and $20.4 million,
respectively). A portion of the hotels purchased in 1997 were temporarily
financed with proceeds from the Company's line of credit which was ultimately
repaid with the proceeds of the Company's 12,000,000 Share offering in December
1997. These line of credit proceeds, plus the amounts outstanding on certain
prepayable mortgage notes issued by a subsidiary of the Company, gave rise to
interest expense of $15.5 million in 1997 versus $5.6 million in 1996 when
amounts outstanding under the Company's line of credit were smaller, were
outstanding for shorter periods and during which the Company's mortgage notes
were not in place for the entire period. The substantial increase in the number
of hotels owned by the Company has also proportionately increased the Company's
general expense levels, including depreciation and general and administrative
expenses. The Company incurred $713,000 of costs in 1997 in connection with a
terminated acquisition attempt.
24
<PAGE>
Net income in 1997 was $59.2 million ($2.15/Share) and cash available for
distribution ("CAD") was $79.3 million ($2.88/Share) versus $51.7 million ($2.23
per Share) and CAD of $60.8 million ($2.62/Share). Growth in net income and CAD
is primarily related to the effects of acquisitions in 1996 and 1997.
Cash flow provided by (used for) operating, investing and financing activities
was $81.2 million, ($347.3 million) and $309.7 million, respectively, for the
year ended December 31, 1997.
Year Ended December 31, 1996 versus Pro Forma Year Ended December 31, 1995
The Company's assets increased to $871.6 million as of December 31, 1996 from
$338.9 million at December 31, 1995. The increase primarily resulted from three
hotel portfolio acquisitions completed during 1996. In March and April of 1996,
the Company acquired 16 Courtyard by Marriott(R) hotels for $176.4 million and
18 Residence Inn(R) by Marriott hotels for $172.2 million. In May 1996, the
Company acquired 11 Wyndham Garden(R) hotels for $135.3 million. These
acquisitions were funded through the use of cash on hand, borrowings on the
Company's line of credit, and the net proceeds from the offering of 14,250,000
Shares in April 1996.
Total revenues in 1996 were $82.6 million versus pro forma 1995 revenue of $39.9
million. Total revenues were comprised principally of base and percentage rent
of $69.5 million and FF&E reserve income of $12.2 million in 1996 versus $33.3
million and $6.4 million, respectively, in the pro forma period. The Company's
results of operations in 1996 are reflective of the growth in the number of
owned hotels to 82, from 37 at year end 1995. The leases for the Company's 82
hotels at December 31, 1996 call for base rent of $81.3 million annually, versus
$32.9 million for the 37 hotels owned at December 31, 1995. During 1996, the
Company earned revenue of approximately $1.1 million ($0.05/Share) in percentage
rents from its portfolio of 53 Courtyard hotels, reflective of continued
increases in Total Hotel Sales at these properties.
Total expenses in 1996 were $31.0 million, including interest expense and
depreciation and amortization of $5.6 million and $20.4 million, respectively,
versus pro forma 1995 expenses of $11.8 million, including depreciation and
amortization of $9.2 million. A portion of the hotels purchased in 1996 were
financed with proceeds from the Company's line of credit which was ultimately
repaid with prepayable floating rate mortgages. Such debt financing in 1996 gave
rise to the $5.6 million of interest expense referred to above, versus zero for
pro forma 1995, when the Company did not use third-party debt. The substantial
increase in the number of hotels owned by the Company has also proportionately
increased the Company's general expense levels, including depreciation and
amortization and general and administrative expenses.
Net income in 1996 was $51.7 million ($2.23 per Share) and CAD for the period
was $60.8 million ($2.62 per Share), based in both cases on average outstanding
Shares for the period of 23,170,000. This compares with pro forma 1995 net
income of $28.0 million ($2.22 per Share) and CAD of $30.8 million ($2.45 per
Share), based in both cases upon 12,600,900 outstanding Shares. This 7% growth
in CAD is primarily related to the effects of the Company's 1996 hotel
acquisitions and related financing activity as well as growth in percentage rent
to $1.1 million in 1996 from $0.4 million in the 1995 pro forma period. During
April 1996, the Company completed an offering of 14,250,000 Shares raising net
proceeds of approximately $358 million to fund its acquisitions and more than
doubling its equity capitalization and shares outstanding.
Cash flow provided by (used for) operating, investing and financing activities
was $61.7 million, ($448.7 million) and $422.9 million, respectively, for the
year ended December 31, 1996.
February 7, 1995 (Inception) Through December 31, 1995
Total revenues from Inception through December 31, 1995 were $23.6 million,
which included base and percentage rent of $19.5 million and FF&E reserve income
of $4.0 million. Total expenses for the period were $12.3 million, including
interest expense and depreciation and amortization of $5.0 million and $5.8
million, respectively. Net income for the period was $11.3 million ($2.51 per
Share) and CAD for the period was $13.2 million ($2.91 per Share), based in both
cases on average outstanding Shares for the period of 4,515,000.
25
<PAGE>
From Inception until completion of its initial public offering on August 22,
1995, the Company was a 100% owned subsidiary of Health and Retirement
Properties Trust ("HRP") and was initially capitalized with $1 million of equity
and $163.3 million of debt. The debt was provided by HRP at rates which were
lower than the market rates which the Company would have paid on a stand alone
basis. Accordingly, the Company does not believe that its results of operations
while it was a wholly owned subsidiary of HRP are comparable to subsequent
periods.
Cash flow provided by (used for) operating, investing and financing activities
was $14.1 million, ($303.7 million) and $291.6 million, respectively, for the
year ended December 31, 1996.
Pro Forma Year Ended December 31, 1995
The pro forma results of operations assume that the Company's formation
transactions, the initial public offering of Shares and the acquisition and
leasing of the 37 hotels and related transactions all occurred on January 1,
1995. On this pro forma basis, total revenues would have been $39.9 million
(principally base and percentage rents of $33.3 million and FF&E reserve income
of $6.4 million). Total expenses would have been $11.8 million (including
depreciation and amortization of $9.2 million and general and administrative
expenses of $2.6 million). Net income would have been $28.0 million or $2.22 per
Share, and CAD would have been $30.8 million or $2.45 per Share, based in both
cases upon 12,600,900 Shares outstanding.
Liquidity and Capital Resources
The Company's primary source of cash to fund its dividends, interest and day to
day operations is the base and percentage rent it receives. Base rent is paid
monthly in advance and percentage rent is paid either monthly or quarterly in
arrears. This flow of funds from rent has historically been sufficient for the
Company to pay dividends, interest and meet day to day operating expenses. The
Company believes that its operating cash flow will be sufficient to meet its
operating expenses, interest and dividend payments.
In order to fund acquisitions and to accommodate occasional cash needs which may
result from timing differences between the receipt of rents and the need to pay
dividends or operating expenses, the Company has entered into a line of credit
arrangement with DLJ Mortgage Capital, Inc. ("DLJMC"). The line of credit (the
"DLJMC Line of Credit") is for up to $200 million, all of which was available at
December 31, 1997. During 1997 the Company expanded its credit facilities with
DLJMC temporarily to provide up to $455 million. Drawings under the DLJMC Line
of Credit are secured by first mortgage liens on certain of the Company's
hotels. Funds may be drawn, repaid and redrawn until maturity, and no principal
repayment is due until maturity. The DLJMC Line of Credit matures on December
31, 1998. Interest on borrowings under the DLJMC Line of Credit are payable
until maturity at a spread above LIBOR; and interest during the extended term,
if any, will be set at market rates at the time the loan is extended.
During 1996, subsidiaries of the Company issued $125 million of mortgage notes
(the "Secured Notes") secured by such subsidiaries' assets, including 18
Residence Inn by Marriott(R) and 11 Wyndham Garden(R) hotels. The mortgage loan
was financed by the issuance of $125 million commercial mortgage pass-through
certificates through a trust created by another of the Company's subsidiaries.
The certificates were sold in a Rule 144A private placement to institutional
investors. The Secured Notes carried interest that floated with one-month LIBOR
plus a spread and were due December 1, 2001, but could be prepaid by the Company
at any time without penalty. In connection with this issuance of the Secured
Notes, the Company entered into interest rate cap agreements for $125 million
(notional amount) with a major financial institution which limit the Company's
maximum interest rate exposure to 7.6925% on this debt. On March 2, 1998, the
Secured Notes were prepaid in full.
The Company expects to use existing cash balances, borrowings under the DLJMC
Line of Credit or other lines of credit and/or net proceeds of offerings of
equity or debt securities to fund future hotel acquisitions. To the extent the
Company borrows on a line of credit, the Company will explore various
alternatives in both the timing and method of repayment of such amounts. Such
alternatives may include incurring long term debt. On January 15, 1997, the
Company's shelf registration statement for up to $2 billion of securities,
including debt securities, was declared effective by the Securities and Exchange
Commission (the "SEC"). An effective shelf registration statement enables the
26
<PAGE>
Company to issue specific securities to the public on an expedited basis by
filing a prospectus supplement with the SEC.
In February 1998 the Company issued $150 million of 7.0% senior unsecured notes
due 2008. Net proceeds to the Company of approximately $148 million were used
for general business purposes and, on March 2, 1998 to repay the Secured Notes
in full.
Also in February 1998 the Company issued an aggregate 2,146,571 Shares in
connection with three separate unit investment trust arrangements established by
investment banks. These Shares were sold at market prices less an underwriting
discount. The aggregate net proceeds of these Shares offerings ($71.1 million)
will be used for the acquisition of additional hotels and for general business
purposes.
At March 11, 1998 the Company had total commitments to purchase property of
$88.7 million. Also at March 11, 1998 the Company had cash and cash equivalents
of approximately $110 million.
The Company is in the process of negotiating with a commercial bank for an
unsecured revolving credit facility. The Company expects to conclude
negotiations and documentation during the first half of 1998, enter into a new
unsecured revolving line of credit and terminate the DLJMC Line of Credit. No
assurance can be given that a new credit facility will be available to the
Company on acceptable terms.
Although there can be no assurance that the Company will consummate any debt or
equity security offerings or other financings, the Company believes it will have
access to various types of financing in the future, including debt or equity
securities offerings, with which to finance future acquisitions.
Recent Developments
On March 19, 1998 the Company closed a new unsecured revolving credit facility
of $250 million, arranged and fully underwritten by a commercial bank. The
facility has a 4 year term and bears interest at LIBOR plus a spread based on
the Company's senior debt ratings. The facility contains financial covenants
requiring the Company to, among other things, maintain a debt to Asset Value (as
defined) of no more than 50% and meet certain debt service coverage ratios (as
defined).
On March 20, 1998 the Company completed a $240 million acquisition of 15
Summerfield Suites(R) hotels, containing 1,822 suites (2,766 rooms). These
hotels are leased to the seller under a lease with an initial term through 2015
and four renewal terms of 12 years each. The lease requires base rent of $25
million annually and additional rent equal to a percentage of gross revenue
increases beginning in 1999. The acquisition was funded with a $125 million
borrowing under the Company's unsecured credit line discussed above and cash on
hand.
Seasonality
The Company's Hotels have historically experienced seasonal differences typical
of the hotel industry with higher revenues in the second and third quarters of
calendar years compared with the first and fourth quarters. This seasonality is
not expected to cause fluctuations in the Company's rental income because the
Company believes that the revenues generated by its Hotels will be sufficient
for the lessees to pay rents on a regular basis notwithstanding seasonal
fluctuations.
Inflation
The Company believes that inflation should not have a material adverse effect on
the Company. Although increases in the rate of inflation may tend to increase
interest rates which the Company may be required to pay for borrowed funds, the
Company has a policy of obtaining interest rate caps in appropriate
circumstances to protect it from interest rate increases. In addition, the
Company's leases provide for the payment of percentage rent to the Company based
on increases in total sales, and such rent should increase with inflation.
27
<PAGE>
Certain Considerations
The discussion and analysis of the Company's financial condition and results of
operations requires the Company to make certain estimates and assumptions and
contains certain statements of the Company's beliefs, intent or expectation
concerning projections, plans, future events and performance. The estimates,
assumptions and statements, such as those relating to the Company's ability to
expand its portfolio, performance of its assets, the ability to pay dividends,
its tax status as a "real estate investment trust," the ability to appropriately
balance the use of debt and equity and to access capital markets, depend upon
various factors over which the Company and/or the Company's lessees have or may
have limited or no control. Those factors include, without limitation, the
status of the economy, capital markets (including prevailing interest rates),
compliance with the changes to regulations within the hospitality industry,
competition, changes to federal, state and local legislation and other factors.
The Company cannot predict the impact of these factors, if any. However, these
factors could cause the Company's actual results for subsequent periods to be
different from those stated, estimated or assumed in this discussion and
analysis of the Company's financial condition and results of operations. The
Company believes that its estimates and assumptions are reasonable and prudent
at this time.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference
to the consolidated financial statements and schedule of Hospitality Properties
Trust included in Item 7 of the Company's Current Report on Form 8-K dated
February 11, 1998. The financial statements for HMH HPT Courtyard, Inc., a
significant lessee as of January 3, 1997 and January 2, 1998 and for the two
fiscal years ended January 2, 1998 and the period from March 24, 1995
(inception) to December 29, 1995, begin on Page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
The information in Part III (Items, 10, 11, 12 and 13) is incorporated by
reference to the Company's definitive Proxy Statement, which is expected to be
filed not later than 120 days after the end of the Company's fiscal year.
28
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedule and Reports on Form 8-K.
(a) Index to Financial Statements and Financial Statement Schedules
<TABLE>
<CAPTION>
The following financial statements HMH HPT Courtyard, Inc. a significant lessee
of Company assets are included herein on the pages indicated.
Page
<S> <C>
Report of Independent Public Accountants......................................... F-1
Balance Sheet as of January 3, 1997 and January 2, 1998.......................... F-2
Statement of Income for the period from inception through December 29, 1995
and the fiscal years ended January 3, 1997 and January 2, 1998................... F-3
Statement of Shareholder's Equity for the period from inception to December
29, 1995 and the fiscal years ended January 3, 1997 and January 2, 1998.......... F-4
Statement of Cash Flows for the period from inception
to December 29, 1995 and the fiscal years ended January 3, 1997 and
January 2, 1998.................................................................. F-5
Notes to Financial Statements.................................................... F-6
The following consolidated financial statements and schedule of Hospitality
Properties Trust are incorporated herein by reference to the Company's Current
Report on Form 8-K dated February 11, 1998, page references are to such Current
Report:
Report of Independent Public Accountants......................................... F-2
Consolidated Balance Sheet as of December 31, 1997 and December 31, 1996......... F-3
Consolidated Statement of Income for the years ended December 31, 1997 and
1996 and the period February 7, 1995 (inception) to December 31, 1995............ F-4
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1997 and 1996 and the period February 7, 1995 (inception) to
December 31, 1995................................................................ F-5
Consolidated Statement of Cash Flows for the for the years ended
December 31, 1997 and 1996 and the period February 7, 1995 (inception) to
December 31, 1995................................................................ F-6
Notes to Consolidated Financial Statements....................................... F-7
Report of Independent Public Accountants on Schedule III......................... F-11
Schedule III - Real Estate and Accumulated Depreciation.......................... F-12
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
</TABLE>
29
<PAGE>
Exhibits:
3.1 Conformed Amended and Restated Declaration of Trust dated August 21,
1995 (Filed herewith)
3.2 Conformed Amendment dated June 2, 1997 (Filed herewith)
3.3 Conformed Articles Supplementary dated June 2, 1997 (Filed herewith)
3.4 Bylaws of the Registrant (Incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 33-92330))
4.1 Form of Share Certificate (Incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 33-92330))
4.2 Rights Agreement, dated as of May 20, 1997, between Hospitality
Properties Trust and State Street Bank and Trust Company, as Rights
Agent (including the form of Rights Certificate and the form of
Articles Supplementary designating the Junior Participating Preferred
Shares) (Incorporated by reference to the Company's Current Report on
Form 8-K dated May 20, 1997)
4.3 Indenture dated as of February 25, 1998, between the Company and State
Street Bank and Trust Company (Filed herewith)
4.4 Supplemental Indenture No. 1 dated as of February 25, 1998, between the
Company and State Street Bank and Trust Company (Filed herewith)
8.1 Opinion of Sullivan & Worcester LLP as to certain tax matters (Filed
herewith)
10.1 Advisory Agreement(+) (Incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 33-92330))
10.2 Advisory Agreement by and between REIT Management & Research, Inc. and
Hospitality Properties Trust dated January 1, 1998 (+) (Incorporated by
reference to the Company's Current Report on Form 8-K dated February
11, 1998)
10.3 Hospitality Properties Trust 1995 Incentive Share Award Plan(+)
(Incorporated by reference to the Company's Registration Statement on
Form S-11 (File No. 33-92330))
10.4 Form of Revolving Credit Agreement by and between the Company and DLJ
Mortgage Capital, Inc., as amended and restated on December 29, 1995,
as further amended by Amendment No. 1, dated February 26, 1996
(Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996)
10.5 Amendment, dated November 25, 1996 to the Revolving Credit Agreement,
amended and restated on December 29, 1995, by and between the Company
and DLJ Mortgage Capital, Inc. 1996 (Incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996)
10.6 Amendment No. 3, dated November 14, 1997, to the Amended and Restated
Credit Agreement, dated as of December 29, 1995, as amended, between
the Company and DLJ Mortgage Capital, Inc. (Incorporated by reference
to the Company's Current Report on Form 8-K dated November 21, 1997)
10.7 First Supplemental Credit Agreement, dated as of November 14, 1997,
between the Company, as borrower, and DLJ Mortgage Capital, Inc. as
lender (Incorporated by reference to the Company's Current Report on
Form 8-K dated November 21, 1997)
10.8 Second Supplemental Credit Agreement, dated as of November 14, 1997,
between the Company, as borrower, and DLJ Mortgage Capital, Inc., as
lender (Incorporated by reference to the Company's Current Report on
Form 8-K dated November 21, 1997)
10.9 Promissory Note in the amount of $125,000,000 dated as of November 25,
1996 from HPTRI Corporation and HPTWN Corporation to Column Financial
Inc. (Incorporated by reference to the Company's Current Report on Form
8-K dated December 4, 1996)
10.10 Loan Agreement dated as of November 25, 1996 by and between HPTRI
Corporation and HPTWN Corporation, as borrowers, and Column Financial
Inc., as lender. (Incorporated by reference to the Company's Current
Report on Form 8-K dated December 4, 1996)
10.11 Form of Deed of Trust, Assignment of Leases and Rents and Security
Agreement from HPTRI Corporation, as Trustor, to Chicago Title
Insurance Company, as Trustee, for benefit of Column Financial, Inc.
(Incorporated by reference to the Company's Current Report on Form 8-K
dated December 4, 1996)
30
<PAGE>
10.12 Trust and Servicing agreement dated as of November 25, 1996 by and
among Hospitality Properties Mortgage Acceptance Corp., as Depositor,
AMRESCO Management, Inc., as Servicer, and The Chase Manhattan Bank, as
Trustee (Incorporated by reference to the Company's Current Report on
Form 8-K dated December 4, 1996)
10.13 Revolving Credit Agreement, dated as of March 19, 1998, among the
Company, as borrower, the institutions party thereto from time to time
as lenders, and Dresdner Bank AG, New York Branch and Grand Cayman
Branch, as Agent (Filed herewith)
10.14 Investment Manager's Subordination Agreement, dated as of March 19,
1998, among REIT Management & Research, Inc., the Company and Dresdner
Bank AG, New York Branch and Grand Cayman Branch (Filed herewith)
10.15 Purchase-Sale and Option Agreement dated as of February 3, 1995 by and
among HMH Courtyard Properties, Inc., HMH Properties, Inc. and
Hospitality Properties, Inc., as amended (Incorporated by reference to
the Company's Registration Statement on Form S-11 (File No. 33-92330))
10.16 Fifth Amendment to Purchase-Sale and Option Agreement dated February
26, 1996, by and between IIIT and IIMII Properties, Inc. (Incorporated
by reference to the Company's Registration Statement on Form S-11 (File
No. 333-1433))
10.17 Form of Courtyard Management Agreement between HMH Courtyard
Properties, Inc., d/b/a HMH Properties, Inc. and Courtyard Management
Corporation (Incorporated by reference to the Company's Registration
Statement on Form S-11 (File No. 33-92330))
10.18 Form of First Amendment to Courtyard Management Agreement between
Courtyard Management Corporation and Hospitality Properties, Inc. and
Consolidation Letter Agreement by and between Courtyard Management
Corporation and Hospitality Properties, Inc. (Incorporated by reference
to the Company's Registration Statement on Form S-11 (File No.
33-92330))
10.19 Form of Lease Agreement between Hospitality Properties, Inc. and HMH
HPT Courtyard, Inc. (Incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 33-92330))
10.20 Form of Lease Agreement between HMH HPT Residence Inn, Inc. and
Hospitality Properties Trust (Incorporated by reference to the
Company's Registration Statement on Form S-11 (File No. 333-1433))
10.21 Form of Residence Inn Management Agreement between HMH Properties, Inc.
and Residence Inn by Marriott(R), Inc. (Incorporated by reference to
the Company's Registration Statement on Form S-11 (File No. 333-1433))
10.22 Lease Agreement by and between HPTSLC Corporation, as landlord, and
WIIC Salt Lake Corporation, as tenant, dated January 1996
(Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996)
10.23 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 (Incorporated by
reference to the Company's Current Report on Form 8-K dated April 3,
1997)
10.24 Form of Courtyard Lease Agreement by and between HPTMI Corporation and
CR14 Corporation (Incorporated by reference to the Company's Current
Report on Form 8-K dated April 3, 1997)
10.25 Form of Residence Inn Lease Agreement by and between HPTMI Corporation
and CR14 Corporation (Incorporated by reference to the Company's
Current Report on Form 8-K dated April 3, 1997)
10.26 Limited Rent Guaranty, dated April 3, 1997, by and among Marriott
International, Inc., as guarantor, and Hospitality Properties Trust and
HPTMI Corporation, as landlord (Incorporated by reference to the
Company's Current Report on Form 8-K dated April 3, 1997)
10.27 Purchase and Sale Agreement, dated November 19, 1997, by and among
Candlewood Hotel Company, Inc. and certain of its affiliates, as
sellers, and the Company, as purchaser (Incorporated by reference to
the Company's Current Report on Form 8-K dated November 21, 1997)
10.28 Form of Candlewood Lease Agreement by and between a subsidiary of the
Company, as landlord, and Candlewood Leasing No. 1 Inc., as tenant
(Incorporated by reference to the Company's Current Report on Form 8-K
dated November 21, 1997)
31
<PAGE>
10.29 Form of Guaranty Agreement by and among Candlewood Hotel Company, Inc.,
a subsidiary of the Company and the Company (Incorporated by reference
to the Company's Current Report on Form 8-K dated November 21, 1997)
10.30 Purchase and Sale Agreement, dated as of October 24, 1997, by and among
ShoLodge, Inc. and certain of its affiliates, as sellers, and the
Company, as purchaser (Incorporated by reference to the Company's
Current Report on Form 8-K dated November 21, 1997)
10.31 Lease Agreement, dated as of November 19, 1997, by and between HPT
Suite Properties Trust, as landlord, and Suite Tenant, Inc., as tenant
(Incorporated by reference to the Company's Current Report on Form 8-K
dated November 21, 1997)
10.32 Limited Guaranty Agreement, dated as of November 19, 1997, by and among
Sholodge, Inc., HPT Suite Properties Trust and the Company
(Incorporated by reference to the Company's Current Report on Form 8-K
dated November 21, 1997)
10.33 Purchase Agreement, dated as of October 10, 1997, by and among
Residence Inn by Marriott, Inc. and Courtyard management Corporation,
as sellers, and the Company, as purchaser (Incorporated by reference to
the Company's Current Report on Form 8-K dated November 21, 1997)
10.34 Form of Residence Inn Lease Agreement by and between HPTMI II
Properties Trust and CR9 Tenant Corporation (Incorporated by reference
to the Company's Current Report on Form 8-K dated November 21, 1997)
10.35 Form of Courtyard Lease Agreement by and Between HPTMI II Properties
Trust and CR9 Tenant Corporation (Incorporated by reference to the
Company's Current Report on Form 8-K dated November 21, 1997)
10.36 Limited Rent Guaranty, dated as of October 10, 1997, by and among
Marriott International, Inc., the Company and HPTMI II Properties Trust
(Incorporated by reference to the Company's Current Report on Form 8-K
dated November 21, 1997)
10.37 Agreement of Purchase and Sale, dated as of March 18, 1998, between
Patriot American Hospitality Partnership, L.P. and Chatsworth
Summerfield Associates, L.P. (Filed herewith)
10.38 Assignment of Rights under Agreements of Purchase and Sale, dated as of
March 18, 1998, by Patriot American Hospitality Partnership, L.P. to
and for the benefit of HPTSHC Properties Trust (Filed herewith)
10.39 Agreement to Lease dated as of March 20, 1998 by and between HPTSHC
Properties Trust and Summerfield HPT Lease Company, L.P. (Filed
herewith)
12 Ratio of Earnings to Fixed Charges (Filed herewith)
21 Subsidiaries of the Registrant (Filed herewith)
23.1 Consents of Arthur Andersen LLP (Filed herewith)
23.2 Consent of Sullivan & Worcester LLP (included in Exhibit 8.1 to this
Annual Report)
99 The Company's Current Report on Form 8-K dated February 11, 1998 (Filed
herewith)
- ------------------
(+) Management contract or compensatory plan or agreement.
(b) During the fourth quarter of 1997, the Company filed the
following Current Reports on Form 8-K:
(i) Current Report on Form 8-K dated November 11, 1997
relating to an agreement to acquire fifteen hotels
(Items 5 and 7)
(ii) Current Report on Form 8-K dated December 12, 1997
relating to (a) certain financial statements, (b) an
underwriting agreement and (c) an opinion of counsel
relating to certain tax matters (Item 7)
32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To HMH HPT Courtyard, Inc.:
We have audited the accompanying balance sheets of HMH HPT Courtyard,
Inc. (the "Company") as of January 2, 1998 and January 3, 1997, and the related
statements of operations, shareholder's equity and cash flows for the fiscal
years ended January 2, 1998 and January 3, 1997 and for the period March 24,
1995 (inception) through December 29, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company, as of
January 2, 1998 and January 3, 1997, and the results of its operations and its
cash flows for the fiscal years ended January 2, 1998 and January 3, 1997 and
for the period March 24, 1995 (inception) through December 29, 1995, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Washington, D.C.
February 27, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
HMH HPT COURTYARD, INC.
BALANCE SHEETS
January 2, 1998 and January 3, 1997
(in thousands, except share data)
1997 1996
---- ----
<S> <C> <C>
ASSETS
Advances to manager $ 5,100 $ 5,100
Due from Marriott International, Inc. 3,233 3,481
Security deposit 50,540 50,540
-------- --------
Total assets $ 58,873 $ 59,121
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Due to Host Marriott Corporation $ 5,888 $ 4,793
Deferred gain 36,670 39,570
-------- --------
Total liabilities 42,558 44,363
-------- --------
Shareholder's equity
Common stock, no par value 100 shares authorized, issued and outstanding -- --
Additional paid-in capital 15,295 15,478
Retained earnings (deficit) 1,020 (720)
-------- --------
Total shareholder's equity 16,315 14,758
-------- --------
$ 58,873 $ 59,121
======== ========
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
HMH HPT COURTYARD, INC.
STATEMENTS OF OPERATIONS
For the Fiscal Years Ended January 2, 1998
and January 3, 1997 and for the Period from March
24, 1995 (inception) through December 29, 1995
(in thousands)
Period from March 24, 1995
(inception)
Fiscal Year through December 29, 1995
---------------------- -------------------------
1997 1996
---- ----
<S> <C> <C> <C>
REVENUES $ 108,416 $ 94,161 $ 37,813
--------- --------- ---------
EXPENSES:
Rent 52,335 46,495 19,379
FF&E contribution expense 10,595 9,289 3,810
Base and incentive management fees paid to Marriott
International, Inc. 23,323 18,318 5,156
Property taxes 7,491 6,287 2,597
Other expenses 4,583 3,390 3,262
--------- --------- ---------
Total operating expenses 98,327 83,779 34,204
--------- --------- ---------
OPERATING PROFIT BEFORE AMORTIZATION OF
DEFERRED GAIN AND CORPORATE EXPENSES 10,089 10,382 3,609
Amortization of deferred gain 2,900 2,351 675
Corporate expenses (1,991) (2,235) (1,059)
--------- --------- ---------
INCOME BEFORE INCOME TAXES 10,998 10,498 3,225
Provision for income taxes (4,400) (4,199) (1,322)
--------- --------- ---------
NET INCOME $ 6,598 $ 6,299 $ 1,903
========= ========= =========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
HMH HPT COURTYARD, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
For the Fiscal Years Ended January 2, 1998
and January 3, 1997 and for the Period from March
24, 1995 (inception) through December 29, 1995
(in thousands)
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit)
----- ------- ---------
<S> <C> <C> <C>
Net assets contributed by Host Marriott Corporation $ -- $ 25,406 $ --
Dividend to Host Marriott Corporation -- -- (2,623)
Net income -- -- 1,903
-------- -------- --------
Balance, December 29, 1995 -- 25,406 (720)
Net liabilities contributed by Host Marriott Corporation -- (9,928) --
Dividend to Host Marriott Corporation -- -- (6,299)
Net income -- -- 6,299
-------- -------- --------
Balance, January 3, 1997 -- 15,478 (720)
Adjustment to 1996 capital contribution by
Host Marriott Corporation -- (183) --
Dividend to Host Marriott Corporation -- -- (4,858)
Net income -- -- 6,598
-------- -------- --------
Balance at January 2, 1998 $ -- $ 15,295 $ 1,020
======== ======== ========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
HMH HPT COURTYARD, INC.
STATEMENTS OF CASH FLOWS
Fiscal Years Ended January 2, 1998 and
January 3, 1997 and for the Period from March 24,
1995 (inception) through December 29, 1995
(in thousands)
Period from March 24, 1995
(inception)
Fiscal Year through December 29, 1995
---------------------- -------------------------
1997 1996
---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,598 $ 6,299 $ 1,903
Adjustments to reconcile net income to cash
provided by operating activities:
Amortization of deferred gain (2,900) (2,351) (675)
Changes in operating accounts:
Increase in due to Host Marriott Corporation 1,095 3,285 1,082
Decrease in prepaid rent -- 329 2,531
Decrease (increase) in due from Marriott
International, Inc. 65 (1,263) (2,218)
------- ------- -------
Cash provided by operations 4,858 6,299 2,623
------- ------- -------
FINANCING ACTIVITIES:
Dividend to Host Marriott Corporation (4,858) (6,299) (2,623)
------- ------- -------
CASH AND CASH EQUIVALENTS, end of year $ -- $ -- $ --
======= ======= =======
SUPPLEMENTAL INFORMATION, NONCASH ACTIVITY
Balances transferred to the Company by Host Marriott
Corporation upon commencement of leases
Advances to manager $ 1,116 $ 3,984
Prepaid rent 329 2,531
Security deposits 17,640 32,900
Accrued expenses -- (426)
Deferred gain (29,013) (13,583)
-------- --------
Net (liabilities) assets contributed by Host Marriott
Corporation $ (9,928) $ 25,406
======== ========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
HMH HPT COURTYARD, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
HMH HPT Courtyard, Inc. (the "Company") was incorporated in Delaware on
February 7, 1995 as a whollyowned indirect subsidiary of Host Marriott
Corporation ("Host Marriott"). The Company had no operations prior to March 24,
1995 (the "Commencement Date").
On the Commencement Date, affiliates of Host Marriott (the "Sellers")
sold 21 Courtyard properties to Hospitality Properties Trust ("HPT"). On August
22, 1995, HPT purchased an additional 16 Courtyard properties from the Sellers.
On March 22, 1996 and April 4, 1996, a total of 16 additional Courtyard
properties were purchased by HPT for a total of 53 Courtyard hotels (the
"Hotels"). The Sellers contributed the assets and liabilities related to the
operations of such properties to the Company, including working capital advances
to the manager, prepaid rent under leasing arrangements and rights to other
assets as described in Note 2. Such assets have been accounted for at the
historical cost.
Fiscal Year
The Company's fiscal year ends on the Friday nearest to December 31.
Full year results for 1996 include 53 weeks versus 52 weeks for 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenues
Revenues represent house profit from the Hotels because the Company has
delegated substantially all of the operating decisions relating to the
generation of house profit from the Hotels to Marriott International, Inc. (the
"Manager" or "Marriott International"). House profit reflects the net revenues
flowing to the Company as lessee and represents total hotel sales less property
level expenses excluding depreciation and amortization, real and personal
property taxes, lease payments, insurance, contributions to the property
improvement fund and management fees.
On November 20, 1997, the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board reached a consensus on EITF 97-2,
"Application of FASB Statement No. 94 and APB Opinion No. 16 to Physician
Practice Management Entities and Certain Other Entities with Contractual
Management Arrangements." EITF 97-2 addresses the circumstances in which a
management entity may include the revenues and expenses of a managed entity in
its financial statements.
The Company is assessing the impact of EITF 97-2 on its policy of
excluding the property-level revenues and operating expenses of its hotels from
its statements of operations (see Note 6). If the Company concludes that EITF
97-2 should be applied to its hotels, it would include operating results of
those managed operations in its financial statements. Application EITF 97-2 to
financial statements as of and for the 52 weeks ended January 2, 1998, would
have increased both revenues and operating expenses by approximately $103
million and would have had no impact on operating profit or net income.
F-6
<PAGE>
Corporate Expenses
The Company operates as a unit of Host Marriott, utilizing Host
Marriott's employees, centralized system for cash management, insurance and
administrative services. The Company has no employees. All cash received by the
Company is deposited in and commingled with Host Marriott's general corporate
funds. Operating expenses and other cash requirements of the Company are paid by
Host Marriott and charged directly or allocated to the Company. Certain general
and administrative costs of Host Marriott are allocated to the Company,
principally based on Host Marriott's specific identification of individual cost
items and otherwise based upon estimated levels of effort devoted by its general
and administrative departments to individual entities. In the opinion of
management, the methods for allocating corporate, general and administrative
expenses and other direct costs are reasonable. It is not practicable to
estimate the costs that would have been incurred by the Company if it had been
operated on a stand-alone basis, however, management believes that these
expenses are comparable to the expected allocations by Host Marriott of general
and administrative costs on a forward-looking basis.
Concentration of Credit Risk
The Company's largest asset is the security deposit (see Note 3) which
constitutes 86% of the Company's total assets as of January 2, 1998. The
security deposit is not collateralized and is due from HPT at the termination of
the Lease.
Deferred Gain
Host Marriott contributed to the Company deferred gains relating to the
sale of the 53 Courtyard properties to HPT in 1995 and 1996. The Company is
amortizing the deferred gain over the initial term of the Lease, as defined
below.
NOTE 2. LEASE COMMITMENTS
On the Commencement Date, the Company entered into a lease for 21
Courtyard properties. On August 22, 1995, the Company entered into a lease for
an additional 16 Courtyard properties. On March 22, 1996 and April 4, 1996, the
Company entered into a lease for an additional 16 Courtyard properties
(collectively, the "Lease"). The initial term of the Lease expires in 2012.
Thereafter, the Lease automatically renews for consecutive twelveyear terms at
the option of the Company.
The Company is required to pay rents equal to aggregate minimum annual
rent of $50,635,000 ("Base Rent"), and percentage rent equal to 5% of the excess
of total hotel sales over base year total hotel sales ("Percentage Rent"). A pro
rata portion of Base Rent is due and payable in advance on the first day of
thirteen predetermined accounting periods. Percentage Rent is due and payable
quarterly in arrears. Additionally, the Company is required to make payments
when due on behalf of HPT for real estate taxes and other taxes, assessments and
similar charges arising from or related to the Hotels and their operation,
utilities, premiums on required insurance coverage, rents due under ground and
equipment leases and all amounts due under the terms of the management
agreements described below. The Company is also required to provide the Manager
with working capital to meet the operating needs of the Hotels. The Sellers had
previously made advances related to the Hotels and transferred their interest in
such amounts to the Company in the amount of $3,984,000 and $1,116,000 in 1995
and 1996, respectively.
The Lease also requires the Company to escrow, or cause the Manager to
escrow, an amount equal to 5% of the annual total hotel sales into an HPTowned
furniture, fixture and equipment reserve (the "FF&E Reserve"), which is
available for the cost of required replacements and renovation. Any requirements
for funds in excess of amounts in the FF&E Reserve shall be provided by HPT
("HPT Fundings") at the request of the Company. In the event of HPT Fundings,
Base Rent shall be adjusted upward by an amount equal to 10% of HPT Fundings.
The Company is required to maintain a minimum net worth equal to one
year's base rent. For purposes of this covenant, net worth is defined as
shareholder's equity plus the deferred gain.
As of January 2, 1998, future minimum annual rental commitments for the
Lease on the Hotels and other noncancelable leases, including the ground leases
described below, are as follows (in thousands):
F-7
<PAGE>
Operating
Other
Lease Leases
----- ------
1998 $ 50,635 $ 304
1999 50,635 151
2000 50,635 68
2001 50,635 30
2002 50,635 15
Thereafter 506,350 6
-------- --------
Total minimum lease payments $759,525 $ 574
======== ========
The land under eight of the Hotels is leased from third parties. The
ground leases have remaining terms (including all renewal options) expiring
between the years 2039 and 2067. The ground leases provide for rent based on
specific percentages of certain sales subject to minimum amounts. The minimum
rentals are adjusted at various anniversary dates throughout the lease terms, as
defined in the agreements. Total minimum lease payments exclude Percentage Rent
which was $1,771,000, $716,000 and $271,000 for 1997 and 1996 and the period
March 24, 1995 through December 29, 1995, respectively.
NOTE 3. SECURITY DEPOSIT
HPT holds $50,540,000 as a security deposit for the obligations of the
Company under the Leases (the "Security Deposit"). The Security Deposit is due
upon termination of the Lease.
NOTE 4. INCOME TAXES
The Company and Host Marriott are members of a consolidated group for
federal income tax purposes. Host Marriott has contributed the Security Deposit
and deferred gain without contributing their related tax attributes and have
agreed that the Company will not be responsible for any tax liability or benefit
associated with the Security Deposit or deferred gain. Accordingly, no deferred
tax balances are reflected in the accompanying balance sheets. There is no
difference between the basis of assets and liabilities for income tax and
financial reporting purposes other than for the Security Deposit and the
deferred gain.
The components of the Company's effective income tax rate follow:
1997 1996 1995
---- ---- ----
Statutory Federal tax rate 35.0% 35.0% 35.0%
State income tax, net of Federal
tax benefit 5.0 5.0 6.0
----- ----- -----
40.0% 40.0% 41.0%
===== ===== =====
The provision for income taxes consists of the following (in
thousands):
1997 1996 1995
---- ---- ----
Current - Federal $ 3,849 $ 3,674 $ 1,129
- State 551 575 193
------- ------- -------
$ 4,400 $ 4,199 $ 1,322
======= ======= =======
All current tax provision amounts are included in due to Host Marriott
Corporation on the accompanying balance sheets.
F-8
<PAGE>
NOTE 5. MANAGEMENT AGREEMENTS
The Sellers' rights and obligations under management agreements (the
"Agreements") with the Manager, were transferred to HPT and then through the
Leases to the Company. The Agreement has an initial term expiring in 2013 with
an option to extend the Agreement on all of the Hotels for up to 30 years. The
Agreements provide that the Manager be paid a system fee equal to 3% of hotel
sales, a base management fee of 2% of hotel sales ("Base Management Fee") and an
incentive management fee equal to 50% of available cash flow, not to exceed 20%
of operating profit, as defined ("Incentive Management Fee"). In addition, the
Manager is reimbursed for each Hotel's pro rata share of the actual costs and
expenses incurred in providing certain services on a central or regional basis
to all Courtyard by Marriott hotels operated by the Manager. Base Rent is to be
paid prior to payment of Base Management Fees and Incentive Management Fees. To
the extent Base Management Fees are so deferred, they must be paid in future
periods. If available cash flow is insufficient to pay Incentive Management
Fees, no Incentive Management Fees are earned by the Manager.
Pursuant to the terms of the Agreements, the Manager is required to
furnish the hotels with certain services ("Chain Services") which are generally
provided on a central or regional basis to all hotels in the Marriott
International hotel system. Chain Services include central training, advertising
and promotion, a national reservation system, computerized payroll and
accounting services, and such additional services as needed which may be more
efficiently performed on a centralized basis. Costs and expenses incurred in
providing such services are allocated among all domestic hotels managed, owned
or leased by Marriott International or its subsidiaries. In addition, the Hotels
participate in Marriott Rewards and Marriott's Courtyard Club programs.
The cost of these programs are charged to all hotels in the system.
The Company is obligated to provide the Manager with sufficient funds
to cover the cost of (a) certain non-routine repairs and maintenance to the
Hotels which are normally capitalized; and (b) replacements and renewals to the
Hotels' property and improvements. Under certain circumstances, the Company will
be required to establish escrow accounts for such purposes under terms outlined
in the Agreements.
Pursuant to the terms of Agreements, the Company is required to provide
Marriott International with funding for working capital to meet the operating
needs of the hotels. Marriott International converts cash advanced by the
Company into other forms of working capital consisting primarily of operating
cash, inventories and trade receivables. Under the terms of the Agreements,
Marriott International maintains possession of and sole control over the
components of working capital and accordingly, the Company reports the total
amounts so advanced to Marriott International as advances to manager in the
accompanying balance sheet. Upon termination of the Agreements, the working
capital will be returned to the Company.
NOTE 6. REVENUES
As discussed in Note 1, hotel revenues reflect house profit from the
Company's hotel properties. House profit reflects the net revenues flowing to
the Company as lessee and represents all gross hotel operating revenues, less
all gross property-level expenses, excluding depreciation, management fees, real
and personal property taxes, lease payments, insurance, contributions to the
property improvement fund and certain other costs, which are classified as
operating costs and expenses.
F-9
<PAGE>
The following table presents the detail of house profit for 1997, 1996
and from March 24, 1995 (inception) through December 29, 1995 (in thousands):
1997 1996 1995
---- ---- ----
Hotel Sales:
Rooms $189,426 $164,738 $ 66,968
Food and beverage 14,789 14,167 6,225
Other 7,674 7,138 2,999
-------- -------- --------
Total Hotel Sales 211,889 186,043 76,192
-------- -------- --------
Expenses:
Rooms (A) 39,280 34,858 14,713
Food and beverage (B) 12,657 12,133 5,044
Other operating departments (C) 2,245 1,904 827
General and administrative (D) 22,536 19,956 7,768
Utilities (E) 8,046 7,200 2,955
Repairs, maintenance and accidents (F) 8,613 6,930 2,899
Marketing and sales (G) 2,281 2,290 1,121
Chain services (H) 7,815 6,611 3,052
-------- -------- --------
Total expenses 103,473 91,882 38,379
-------- -------- --------
Revenues (House Profit) $108,416 $ 94,161 $ 37,813
======== ======== ========
(A) Includes expenses for linen, cleaning supplies, laundry, guest
supplies, reservations costs, travel agents' commissions, walked guest
expenses and wages, benefits and bonuses for employees of the rooms
department.
(B) Includes costs of food and beverages sold, china, glass, silver, paper,
and cleaning supplies and wages, benefits and bonuses for employees of
the food and beverage department.
(C) Includes expenses related to operating the telephone department.
(D) Includes management and hourly wages, benefits and bonuses, credit and
collection expenses, employee relations, guest relations, bad debt
expenses, office supplies and miscellaneous other expenses.
(E) Includes electricity, gas and water at the properties.
(F) Includes cost of repairs and maintenance and the cost of accidents at
the properties.
(G) Includes management and hourly wages, benefits and bonuses, promotional
expense and local advertising.
(H) Includes charges from the Manager for Chain Services as allowable under
the Agreements.
F-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HOSPITALITY PROPERTIES TRUST
By: /s/John G. Murray
John G. Murray
President and Chief Operating Officer
Dated: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, or by their
attorney-in-fact, in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/John G. Murray President and March 30, 1998
John G. Murray Chief Operating Officer
/s/Thomas M. O'Brien Treasurer and Chief March 30, 1998
Thomas M. O'Brien Financial Officer
Trustee March __, 1998
John L. Harrington
/s/Arthur G. Koumantzelis Trustee March 30, 1998
Arthur G. Koumantzelis
/s/William J. Sheehan Trustee March 30, 1998
William J. Sheehan
/s/Gerard M. Martin Trustee March 30, 1998
Gerard M. Martin
/s/Barry M. Portnoy Trustee March 30, 1998
Barry M. Portnoy
EXHIBIT 3.1
HOSPITALITY PROPERTIES TRUST
Amended and Restated
Declaration of Trust
May 12, 1995
As Amended and Restated on August 21, 1995
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page
<S> <C> <C>
ARTICLE I
THE TRUST; DEFINITIONS
1.1 Name......................................................................... 2
1.2 Places of Business........................................................... 2
1.3 Nature of Trust.............................................................. 2
1.4 Definitions.................................................................. 3
ARTICLE II
TRUSTEES
2.1 Number, Term of Office and Qualifications
of Trustees................................................................ 6
2.2 Compensation and Other Remuneration.......................................... 7
2.3 Resignation, Removal and Death of Trustees................................... 8
2.4 Vacancies.................................................................... 8
2.5 Successor and Additional Trustees............................................ 8
2.6 Actions by Trustees.......................................................... 9
2.7 Committees................................................................... 9
ARTICLE III
TRUSTEES' POWERS
3.1 Power and Authority of Trustees.............................................. 10
3.2 Specific Powers and Authority................................................ 10
3.3 Bylaws....................................................................... 16
ARTICLE IV
INVESTMENT POLICY AND POLICIES
WITH RESPECT TO CERTAIN
DISTRIBUTIONS TO SHAREHOLDERS
4.1 Statement of Policy.......................................................... 16
4.2 Prohibited Investments and Activities........................................ 17
4.3 Change in Investment Policies................................................ 17
ARTICLE V
THE SHARES AND SHAREHOLDERS
5.1 Description of Shares........................................................ 17
5.2 Certificates................................................................. 19
5.3 Fractional Shares............................................................ 20
<PAGE>
-ii-
5.4 Legal Ownership of Trust Estate.............................................. 20
5.5 Shares Deemed Personal Property.............................................. 20
5.6 Share Record; Issuance and Transferability
of Shares.................................................................. 20
5.7 Dividends or Distributions to Shareholders................................... 21
5.8 Transfer Agent, Dividend Disbursing
Agent and Registrar........................................................ 22
5.9 Shareholders' Meetings....................................................... 22
5.10 Proxies...................................................................... 23
5.11 Reports to Shareholders...................................................... 23
5.12 Fixing Record Date........................................................... 24
5.13 Notice to Shareholders....................................................... 24
5.14 Shareholders' Disclosure; Restrictions on
Share Transfer; Limitation on Holdings..................................... 24
5.15 Special Voting Provisions relating to Certain
Business Combinations and Control Shares................................... 28
ARTICLE VI
LIABILITY OF TRUSTEES, SHAREHOLDERS,
OFFICERS, EMPLOYEES AND AGENTS,
AND OTHER MATTERS
6.1 Limitation of Liability of Shareholders,
Trustees, Officers, Employees and Agents
for Obligations of the Trust............................................... 29
6.2 Express Exculpatory Clauses and Instruments.................................. 29
6.3 Limitation of Liability of Trustees, Officers,
Employees and Agents to the Trust and to
Shareholders for Acts and Omissions........................................ 30
6.4 Indemnification and Reimbursement of
Trustees, Officers, Employees, Agents and
Certain Other Persons...................................................... 30
6.5 Indemnification and Reimbursement of
Shareholders............................................................... 31
6.6 Right of Trustees, Officers, Employees and
Agents to Own Shares or Other Property
and to Engage in Other Business............................................ 31
6.7 Transactions Between Trustees, Officers,
Employees or Agents and the Trust.......................................... 32
6.8 Persons Dealing with Trustees, Officers,
Employees or Agents........................................................ 33
6.9 Reliance..................................................................... 33
<PAGE>
-iii-
ARTICLE VII
DURATION, AMENDMENT AND TERMINATION
OF TRUST
7.1 Duration of Trust............................................................ 34
7.2 Termination of Trust......................................................... 34
7.3 Amendment Procedure.......................................................... 35
7.4 Amendments Effective......................................................... 35
7.5 Transfer to Successor........................................................ 35
ARTICLE VIII
MISCELLANEOUS
8.1 Applicable Law............................................................... 36
8.2 Index and Headings for Reference Only........................................ 36
8.3 Successors in Interest....................................................... 36
8.4 Inspection of Records........................................................ 36
8.5 Counterparts................................................................. 37
8.6 Provisions of the Trust in Conflict with
Law or Regulations; Severability........................................... 37
8.7 Certifications............................................................... 37
</TABLE>
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
HOSPITALITY PROPERTIES TRUST
May 12, 1995
As Amended and Restated on August 21, 1995
--------------------------------------
The Declaration of Hospitality Properties Trust, as filed with the
Maryland Department of Assessments and Taxation on May 12, 1995 is hereby
amended and restated as follows:
DECLARATION OF TRUST made as of the date set forth above by the
undersigned Trustees.
WITNESSETH:
WHEREAS, the Trustees desire to create a trust for the principal
purpose of investing in real property and interests therein; and
WHEREAS, the Trustees desire that such trust qualify as a "qualified
REIT subsidiary" as long as it shall remain wholly owned by Health and
Retirement Properties Trust ("HRP") and, thereafter, as a "real estate
investment trust" under the REIT Provisions of the Internal Revenue Code, and as
a "real estate investment trust" under Title 8 of the Corporations and
Associations Article of the Annotated Code of Maryland; and
WHEREAS, in furtherance of such purpose the Trustees intend to acquire
certain real property and interests therein and to hold, manage and dispose of
all such property as Trustees in the manner hereinafter stated; and
WHEREAS, it is proposed that the beneficial interest in the Trust be
divided into transferable Shares of Beneficial Interest, evidenced by
certificates therefor, as hereinafter provided;
NOW, THEREFORE, it is hereby agreed and declared that the Trustees will
hold any and all property of every type and description which they are acquiring
or may hereafter acquire as Trustees, together with the proceeds thereof, in
trust, to manage and dispose of the same for the benefit of the holders from
time
<PAGE>
-2-
to time of the Shares of Beneficial Interest being issued and to be issued
hereunder in the manner and subject to the stipulations contained herein.
ARTICLE I
THE TRUST; DEFINITIONS
1.1 Name. The name of the Trust created by this Declaration of Trust
shall be "Hospitality Properties Trust" and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue or
be sued under that name, which name (and the word "Trust" wherever used in this
Declaration of Trust, except where the context otherwise requires) shall refer
to the Trustees collectively but not individually or personally nor to the
officers, agents, employees or Shareholders of the Trust or of such Trustees.
Under circumstances under which the Trustees determine that the use of such name
is not practicable or under circumstances in which the Trustees are
contractually bound to change that name, they may use such other designation or
they may adopt another name under which the Trust may hold property or conduct
its activities.
1.2 Places of Business. The Trust shall maintain an office in Maryland
at The Prentice-Hall Corporation System, Maryland, 11 East Chase Street,
Baltimore City, Maryland, 21202 or such other place in Maryland as the Trustees
may determine from time to time. The Resident Agent of the Trust at such office
shall be The Prentice-Hall Corporation System, Maryland. The Trust may change
such Resident Agent from time to time as the Trustees shall determine. The Trust
may have such other offices or places of business within or without the State of
Maryland as the Trustees may from time to time determine.
1.3 Nature of Trust. The Trust shall be a real estate investment trust
within the meaning of Title 8 of the Corporations and Associations Article of
the Annotated Code of Maryland. It is also intended that the Trust shall carry
on a business as a "qualified REIT subsidiary" as described in the REIT
Provisions of the Internal Revenue Code for so long as it is wholly owned by HRP
and thereafter shall qualify and carry on business as a "real estate investment
trust" as described therein. The Trust is not intended to be, shall not be
deemed to be, and shall not be treated as a general partnership, limited
partnership, joint venture, corporation or joint stock company (but nothing
herein shall preclude the Trust from being treated
<PAGE>
-3-
for tax purposes as an association under the Internal Revenue Code); nor shall
the Trustees or Shareholders or any of them for any purpose be, nor be deemed to
be, nor be treated in any way whatsoever as, liable or responsible hereunder as
partners or joint venturers. The relationship of the Shareholders to the
Trustees shall be solely that of beneficiaries of the Trust in accordance with
the rights conferred upon them by this Declaration.
1.4 Definitions. The terms defined in this Section 1.4, wherever used
in this Declaration, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified. Whenever the singular number is used
in this Declaration and when permitted by the context, the same shall include
the plural, and the masculine gender shall include the feminine and neuter
genders, and vice versa. Where applicable, calculations to be made pursuant to
any such definition shall be made in accordance with generally accepted
accounting principles as in effect from time to time except as otherwise
provided in such definition.
(a) Advisor. "Advisor" shall mean HRPT Advisors, Inc., a Delaware
corporation, or such other Person as the Trustees shall from time to time engage
to supervise the operation of the Trust and to provide the Trust with a program
of investments.
(b) Affiliate. "Affiliate" shall mean, as to any Person, (i) any other
Person who, at the time of determination, is directly or indirectly controlling,
controlled by or under common control with such Person, (ii) any other Person
who, at such time, owns beneficially, directly or indirectly, five percent (5%)
or more of the outstanding capital stock, shares or equity interests of such
Person, or (iii) any Person who is at the time of determination an officer,
director, employee, general partner or trustee of any such Person or of any
Person who, at such time, is controlling, controlled by or under common control
with such Person (excluding any trustee who is not otherwise an Affiliate of
such Person).
(c) Annual Meeting of Shareholders. "Annual Meeting of Shareholders"
shall mean the meeting described in the first sentence of Section 5.9.
(d) Annual Report. "Annual Report" shall have the meaning set forth in
Section 5.11(a).
<PAGE>
-4-
(e) Book Value. "Book Value" of an asset or assets shall mean the value
of such asset or assets of the Trust on the books of the Trust, without
deduction for depreciation or other asset valuation reserves and without
deduction for mortgages or other security interests to which such asset or
assets are subject, except that no asset shall be valued at more than its fair
market value as determined by or under procedures adopted by the Trustees, and
the underlying assets of a partnership, joint venture or other form of indirect
ownership, to the extent of the Trust's interest therein, shall be valued as if
owned directly by the Trust.
(f) Bylaws. "Bylaws" shall have the meaning set forth in Section 3.3.
(g) Declaration. "Declaration" or "this Declaration" shall mean this
Declaration of Trust, as amended, restated or modified from time to time. The
use in this Declaration of "herein" and "hereunder" shall be deemed to refer to
this Declaration and shall not be limited to the particular text, article or
section in which such words appear.
(h) Independent Trustee: "Independent Trustee" shall mean a Trustee who
is not then an officer of the Trust or an Affiliate of either HRP or the
Advisor.
(i) Internal Revenue Code. "Internal Revenue Code" shall mean the
Internal Revenue Code of 1986, as now enacted or hereafter amended, or successor
statutes and applicable rules and regulations thereunder.
(j) Invested Assets. "Invested Assets" shall mean the Book Value of all
the Real Estate Investments of the Trust.
(k) Mortgage Loans. "Mortgage Loans" shall mean notes, debentures,
bonds and other evidences of indebtedness or obligations, whether negotiable or
non-negotiable, which are secured or collateralized by Mortgages.
(l) Mortgages. "Mortgages" shall mean mortgages, deeds of trust or
other security interests in Real Property.
(m) Person. "Person" shall mean and include individuals, corporations,
limited partnerships, general partnerships, joint stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business
<PAGE>
-5-
trusts and other entities and governments and agencies and political
subdivisions thereof.
(n) Real Estate Investment. "Real Estate Investment" shall mean any
direct or indirect investment in any interest in Real Property or in any
Mortgage Loan, or in any Person whose principal purpose is to make any such
investment.
(o) Real Property. "Real Property" shall mean and include land,
leasehold interests (including but not limited to interests of a lessor or
lessee therein), rights and interests in land, and in any buildings, structures,
improvements, furnishings and fixtures located on or used in connection with
land or interests therein, but does not include investments in Mortgages,
Mortgage Loans or interests therein.
(p) REIT. "REIT" shall mean a real estate investment trust as defined
in the REIT Provisions of the Internal Revenue Code.
(q) REIT Provisions of the Internal Revenue Code. "REIT Provisions of
the Internal Revenue Code" shall mean Parts II and III of Subchapter M of
Chapter 1 of Subtitle A of the Internal Revenue Code or any successor provision.
(r) Securities. "Securities" shall mean any stock, shares, voting trust
certificates, bonds, debentures, notes or other evidences of indebtedness or in
general any instruments commonly known as "securities" or any certificates of
interest, shares or participations in, temporary or interim certificates for,
receipts for, guarantees of, or warrants, options or rights to subscribe to,
purchase or acquire any of the foregoing.
(s) Shareholders. "Shareholders" shall mean as of any particular time
all holders of record of outstanding Shares at such time.
(t) Shares. "Shares" or, as the context may require, "shares" shall
mean the shares of beneficial interest of the Trust as described in Section 5.1
hereof.
(u) Trust. "Trust" shall mean the Trust created by this Declaration.
(v) Trustees. "Trustees" shall mean, as of any particular time, the
original signatories hereto as long as they hold office hereunder and additional
and successor Trustees, and shall not include the officers, employees or agents
of the Trust or the
<PAGE>
-6-
Shareholders. Nothing herein shall be deemed to preclude the Trustees from also
serving as officers, employees or agents of the Trust or owning Shares.
(w) Trust Estate. "Trust Estate" shall mean as of any particular time
any and all property, real, personal or otherwise, tangible or intangible, which
is transferred, conveyed or paid to or purchased by the Trust or Trustees and
all rents, income, profits and gains therefrom and which at such time is owned
or held by or for the Trust or the Trustees.
ARTICLE II
TRUSTEES
2.1 Number, Term of Office and Qualifications of Trustees.
(a)(i) The number of Trustees initially need not be more than one (1).
(ii) If a Person other than HRP acquires any Shares of Beneficial
Interest of the Trust, the number of Trustees shall thenceforth be no fewer than
three (3) and no more than seven (7). Upon acquisition by a Person other than
HRP of any such Shares, the exact number of Trustees shall be five (5) until
changed by a two-thirds (2/3) vote of the Trustees or by an amendment of this
Declaration duly adopted by holders of two-thirds (2/3) of the outstanding
Shares entitled to vote. Any vacancies in the Board of Trustees created thereby
shall be filled by a majority of the Trustees then in office. The Board of
Trustees thus constituted shall be classified into three groups, with two (2)
Trustees in Group I, two (2) Trustees in Group II, and one (1) Trustee in Group
III. The Trustee in Group III shall serve for a term ending at the next annual
meeting of Shareholders after such acquisition of Shares by a Person other than
HRP; each Trustee in Group II shall serve for a term ending at the following
annual meeting of Shareholders; and each Trustee in Group I shall serve for a
term ending at the second following annual meeting of Shareholders. After the
respective terms of the groups indicated, each such group of Trustees shall be
elected for successive terms ending at the annual meeting of Shareholders held
during the third year after election.
A majority of the Trustees holding office subject to the foregoing
provisions of this paragraph (ii) shall at all times be Independent Trustees;
provided, however, that upon a failure to
<PAGE>
-7-
comply with this requirement as a result of the creation of a vacancy which must
be filled by an Independent Trustee, whether as a result of enlargement of the
Board of Trustees or the resignation, removal or death of a Trustee who is an
Independent Trustee, such requirement shall not be applicable for a period of
ninety (90) days.
(b) The names and business addresses of the initial Trustees, who shall
serve as Trustees until the first annual meeting of Shareholders (unless their
terms shall be otherwise classified pursuant to Section 2.1(a)(ii)) and until
their successors shall have been elected and qualified are as follows:
Name Address
---- -------
Barry M. Portnoy Sullivan & Worcester
One Post Office Square
Boston, MA 02109
Gerard M. Martin M & P Partners Limited
Partnership
400 Centre Street
Newton, MA 02158
The initial Trustees shall be the signatories hereto. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office prior to
the expiration of his term. Subject to the provisions of Section 2.3, each
Trustee shall hold office until the election and qualification of his successor.
There shall be no cumulative voting in the election of Trustees. A Trustee shall
be an individual at least twenty-one (21) years of age who is not under legal
disability. Unless otherwise required by law, no Trustee shall be required to
give bond, surety or security in any jurisdiction for the performance of any
duties or obligations hereunder. The Trustees in their capacity as Trustees
shall not be required to be Shareholders or to devote their entire time to the
business and affairs of the Trust.
2.2 Compensation and Other Remuneration. The Trustees shall be entitled
to receive such reasonable compensation for their services as Trustees as the
Trustees may determine from time to time. The Trustees and Trust officers shall
be entitled to receive remuneration for services rendered to the Trust in any
other capacity. Subject to Sections 6.6 and 6.7, such services may include,
without limitation, services as an officer of the Trust, legal, accounting or
other professional services, or
<PAGE>
-8-
services as a broker, transfer agent or underwriter, whether performed by a
Trustee or any Person affiliated with a Trustee.
2.3 Resignation, Removal and Death of Trustees. A Trustee may resign at
any time by giving written notice to the remaining Trustees at the principal
office of the Trust. Such resignation shall take effect on the date specified in
such notice, without need for prior accounting. A Trustee may be removed at any
time with or without cause by the affirmative vote either of all the remaining
Trustees or of the holders of Shares representing two-thirds of the total votes
authorized to be cast by Shares then outstanding and entitled to vote thereon,
voting as a single class. A Trustee judged incompetent or for whom a guardian or
conservator has been appointed shall be deemed to have resigned as of the date
of such adjudication or appointment. Upon the resignation or removal of any
Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver
such documents as the remaining Trustees shall require for the conveyance of any
Trust property held in his name, shall account to the remaining Trustees as they
require for all property which he holds as Trustee and shall thereupon be
discharged as Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall perform the acts set forth in the preceding sentence and
the discharge mentioned therein shall run to such legal representative and to
the incapacitated Trustee or the estate of the deceased Trustee, as the case may
be.
2.4 Vacancies. If any or all the Trustees cease to be Trustees
hereunder, whether by reason of resignation, removal, incapacity, death or
otherwise, such event shall not terminate the Trust or affect its continuity.
Until vacancies are filled, the remaining Trustee or Trustees (even though fewer
than three (3)) may exercise the powers of the Trustees hereunder. Vacancies
(including vacancies created by increases in number) may be filled by the
remaining Trustee or by a majority of the remaining Trustees. If at any time
there shall be no Trustees in office, successor Trustees shall be elected by the
Shareholders as provided in Section 5.9. Any Trustee elected to fill a vacancy
created by the resignation, removal or death of a former Trustee shall hold
office for the unexpired term of such former Trustee.
2.5 Successor and Additional Trustees. The right, title and interest of
the Trustees in and to the Trust Estate shall also vest in successor and
additional Trustees upon their qualification, and they shall thereupon have all
the rights and obligations of Trustees hereunder. Such right, title and interest
shall vest in the Trustees whether or not conveyancing
<PAGE>
-9-
documents have been executed and delivered pursuant to Section 2.3 or otherwise.
Appropriate written evidence of the election and qualification of successor and
additional Trustees shall be filed with the records of the Trust and in such
other offices or places as the Trustees may deem necessary, appropriate or
desirable.
2.6 Actions by Trustees. The Trustees may act with or without a
meeting. A quorum for all meetings of the Trustees shall be a majority of the
Trustees; provided, however, that, whenever pursuant to Section 6.7 or otherwise
the vote of a majority of a particular group of Trustees is required at a
meeting, a quorum for such meeting shall be a majority of the Trustees which
shall include a majority of such group. Unless specifically provided otherwise
in this Declaration, any action of the Trustees may be taken at a meeting by
vote of a majority of the Trustees present (a quorum being present) or without a
meeting by written consents of a majority of the Trustees, which consents shall
be filed with the records of meetings of the Trustees. Any action or actions
permitted to be taken by the Trustees in connection with the business of the
Trust may be taken pursuant to authority granted by a meeting of the Trustees
conducted by a telephone conference call, and the transaction of Trust business
represented thereby shall be of the same authority and validity as if transacted
at a meeting of the Trustees held in person or by written consent. The minutes
of any Trustees' meeting held by telephone shall be prepared in the same manner
as a meeting of the Trustees held in person. The acquisition or disposition of
any investment (other than investments in short-term investment Securities
described in Section 4.1) shall require the approval of a majority of Trustees,
except as otherwise provided in Section 6.7. Any agreement, deed, mortgage,
lease or other instrument or writing executed by one or more of the Trustees or
by any authorized Person shall be valid and binding upon the Trustees and upon
the Trust when authorized or ratified by action of the Trustees or as provided
in the Bylaws.
With respect to the actions of the Trustees, Trustees who have, or are
Affiliates of Persons who have, any direct or indirect interest in or connection
with any matter being acted upon may be counted for all quorum purposes under
this Section 2.6 and, subject to the provisions of Section 6.7, may vote on the
matter as to which they or their Affiliates have such interest or connection.
<PAGE>
-10-
2.7 Committees. The Trustees may appoint an audit committee and such
other standing committees as the Trustees determine. Each standing committee
shall consist of two (2) or more members; provided, however, that the Trustees
may appoint a standing committee consisting of at least one Trustee and two non-
Trustees. Each committee shall have such powers, duties and obligations as the
Trustees may deem necessary or appropriate. The standing committees shall report
their activities periodically to the Trustees.
ARTICLE III
TRUSTEES' POWERS
3.1 Power and Authority of Trustees. The Trustees, subject only to the
specific limitations contained in this Declaration, shall have, without further
or other authorization, and free from any power or control on the part of the
Shareholders, full, absolute and exclusive power, control and authority over the
Trust Estate and over the business and affairs of the Trust to the same extent
as if the Trustees were the sole owners thereof in their own right, and may do
all such acts and things as in their sole judgment and discretion are necessary
for or incidental to or desirable for carrying out or conducting the business of
the Trust. Any construction of this Declaration or any determination made in
good faith by the Trustees as to the purposes of the Trust or the existence of
any power or authority hereunder shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of the grant
of powers and authority to the Trustees. The enumeration of any specific power
or authority herein shall not be construed as limiting the aforesaid powers or
the general powers or authority or any other specified power or authority
conferred herein upon the Trustees.
3.2 Specific Powers and Authority. Subject only to the express
limitations contained in this Declaration and in addition to any powers and
authority conferred by this Declaration or which the Trustees may have by virtue
of any present or future statute or rule or law, the Trustees without any action
or consent by the Shareholders shall have and may exercise at any time and from
time to time the following powers and authorities which may or may not be
exercised by them in their sole judgment and discretion and in such manner and
upon such terms and conditions as they may from time to time deem proper:
<PAGE>
-11-
(a) to retain, invest and reinvest the capital or other funds
of the Trust in, and to acquire, purchase, or own, real or personal
property of any kind, whether tangible or intangible, wherever located
in the world, and make commitments for such investments, all without
regard to whether any such property is authorized by law for the
investment of trust funds or produces or may produce income; to possess
and exercise all the rights, powers and privileges appertaining to the
ownership of the Trust Estate; and to increase the capital of the Trust
at any time by the issuance of any additional authorized Shares or
other Securities of the Trust for such consideration as they deem
advisable;
(b) without limitation of the powers set forth in subsection
(a) above, to invest in, purchase or otherwise acquire for such
consideration as they deem proper, in cash or other property or through
the issuance of shares or through the issuance of notes, debentures,
bonds or other obligations of the Trust, and to hold for investment,
the entire or any participating interests in any Mortgage Loans or
interest in Real Property, including ownership of, or participations in
the ownership of, or rights to acquire, equity interests in Real
Property or in Persons owning, developing, improving, operating or
managing Real Property, which interests may be acquired independently
of or in connection with other investment activities of the Trust and,
in the latter case, may include rights to receive additional payments
based on gross income or rental or other income from the Real Property
or improvements thereon; and to invest in loans secured by the pledge
or transfer of Mortgage Loans;
(c) to sell, rent, lease, hire, exchange, release, partition,
assign, mortgage, pledge, hypothecate, grant security interests in,
encumber, negotiate, convey, transfer or otherwise dispose of any and
all the Trust Estate by deeds (including deeds in lieu of foreclosure),
trust deeds, assignments, bills of sale, transfers, leases, mortgages,
financing statements, security agreements and other instruments for any
of such purposes executed and delivered for and on behalf of the Trust
or the Trustees by one or more of the Trustees or by a duly authorized
officer, employee, agent or nominee of the Trust;
(d) to issue Shares, bonds, debentures, notes or other
evidences of indebtedness, which may be secured or unsecured
<PAGE>
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and may be subordinated to any indebtedness of the Trust, to such
Persons for such cash, property or other consideration (including
Securities issued or created by, or interests in, any Person) at such
time or times and on such terms as the Trustees may deem advisable and
to list any of the foregoing Securities issued by the Trust on any
securities exchange and to purchase or otherwise acquire, hold, cancel,
reissue, sell and transfer any of such Securities, and to cause the
instruments evidencing such Securities to bear an actual or facsimile
imprint of the seal of the Trust (if the Trustees shall have adopted
such a seal) and to be signed by manual or facsimile signature or
signatures (and to issue such Securities, whether or not any Person
whose manual or facsimile signature shall be imprinted thereon shall
have ceased to occupy the office with respect to which such signature
was authorized), provided that, where only facsimile signatures for the
Trust are used, the instrument shall be countersigned manually by a
transfer agent, registrar or other authentication agent; and to issue
any of such Securities of different types in combinations or units with
such restrictions on the separate transferability thereof as the
Trustees shall determine;
(e) to enter into leases of real and personal property as
lessor or lessee and to enter into contracts, obligations and other
agreements for a term, and to invest in obligations having a term,
extending beyond the term of office of the Trustees and beyond the
possible termination of the Trust, or having a lesser term;
(f) to borrow money and give negotiable or non negotiable
instruments therefor; or guarantee, indemnify or act as surety with
respect to payment or performance of obligations of third parties; to
enter into other obligations on behalf of the Trust; and to assign,
convey, transfer, mortgage, subordinate, pledge, grant security
interest in, encumber or hypothecate the Trust Estate to secure any
indebtedness of the Trust or any other of the foregoing obligations of
the Trust;
(g) to lend money, whether secured or unsecured;
(h) to create reserve funds for any purpose;
(i) to incur and pay out of the Trust Estate any charges or
expenses, and to disburse any funds of the Trust, which charges,
expenses or disbursements are, in the opinion
<PAGE>
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of the Trustees, necessary or incidental to or desirable for the
carrying out of any of the purposes of the Trust or conducting the
business of the Trust, including without limitation taxes and other
governmental levies, charges and assessments, of whatever kind or
nature, imposed upon or against the Trustees in connection with the
Trust or the Trust Estate or upon or against the Trust Estate or any
part hereof, and for any of the purposes herein;
(j) to deposit funds of the Trust in banks, trust companies,
savings and loan associations and other depositories, whether or not
such deposits will draw interest, the same to be subject to withdrawal
on such terms and in such manner and by such Person or Persons
(including any one or more Trustees or officers, employees or agents,
of the Trust) as the Trustees may determine;
(k) to possess and exercise all the rights, powers and
privileges pertaining to the ownership of all or any Mortgages or
Securities issued or created by, or interests in, any Person, forming
part of the Trust Estate, to the same extent that an individual might
do so, and, without limiting the generality of the foregoing, to vote
or give any consent, request or notice, or waive any notice, either in
person or by proxy or power of attorney, with or without power of
substitution, to one or more Persons, which proxies and powers of
attorney may be for meetings or action generally or for any particular
meeting or action, and may include the exercise of discretionary
powers;
(l) to cause to be organized or assist in organizing any
Person under the laws of any jurisdiction to acquire the Trust Estate
or any part or parts thereof or to carry on any business in which the
Trust shall directly or indirectly have any interest, and to sell,
rent, lease, hire, convey, negotiate, assign, exchange or transfer the
Trust Estate or any part or parts thereof to or with any such Person or
any existing Person in exchange for the Securities thereof or
otherwise, and to merge or consolidate the Trust with or into any
Person or merge or consolidate any Person into the Trust, and to lend
money to, subscribe for the Securities of, and enter into any contracts
with, any Person in which the Trust holds or is about to acquire
Securities or any other interest;
(m) to enter into joint ventures, general or limited
partnerships, participation or agency arrangements and any
<PAGE>
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other lawful combinations or associations, and to act as a general or
limited partner;
(n) to elect, appoint, engage or employ such officers for the
Trust as the Trustees may determine, who may be removed or discharged
at the discretion of the Trustees, such officers to have such powers
and duties, and to serve such terms, as may be prescribed by the
Trustees or by the Bylaws; to engage or employ any Persons (including,
subject to the provisions of Sections 6.6 and 6.7, any Trustee or
officer, agent or employee of the Trust and any Person in which any
Trustee, officer or agent is directly or indirectly interested or with
which he is directly or indirectly connected) as agents,
representatives, employees, or independent contractors (including
without limitation real estate advisors, investment advisors, transfer
agents, registrars, underwriters, accountants, attorneys at law, real
estate agents, managers, appraisers, brokers, architects, engineers,
construction managers, general contractors or otherwise) in one or more
capacities, and to pay compensation from the Trust for services in as
many capacities as such Person may be so engaged or employed; and to
delegate any of the powers and duties of the Trustees to any one or
more Trustees, agents, representatives, officers, employees,
independent contractors or other Persons;
(o) to determine or cause to be determined from time to time
the value of all or any part of the Trust Estate and of any services,
Securities, property or other consideration to be furnished to or
acquired by the Trust, and from time to time to revalue or cause to be
revalued all or any part of the Trust Estate in accordance with such
appraisals or other information as are, in the Trustees' sole judgment,
necessary and/or satisfactory;
(p) to collect, sue for and receive all sums of money coming
due to the Trust, and to engage in, intervene in, prosecute, join,
defend, compromise, abandon or adjust, by arbitration or otherwise, any
actions, suits, proceedings, disputes, claims, controversies, demands
or other litigation relating to the Trust, the Trust Estate or the
Trust's affairs, to enter into agreements therefor, whether or not any
suit is commenced or claim accrued or asserted and, in advance of any
controversy, to enter into agreements regarding arbitration,
adjudication or settlement thereof;
<PAGE>
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(q) to renew, modify, release, compromise, extend, consolidate
or cancel, in whole or in part, any obligation to or of the Trust or
participate in any reorganization of obligors to the Trust;
(r) to self-insure or to purchase and pay for out of the Trust
Estate insurance contracts and policies, including contracts of
indemnity, insuring the Trust Estate against any and all risks and
insuring the Trust and/or all or any of the Trustees, the Shareholders,
or the officers, employees or agents of the Trust or Persons who may
directly or indirectly control the Trust against any and all claims and
liabilities of every nature asserted by any Person arising by reason of
any action alleged to have been taken or omitted by the Trust or by the
Trustees, Shareholders, officers, employees agents or controlling
Persons whether or not the Trust would have the power to indemnify such
Person or Persons against any such claim or liability;
(s) to cause legal title to any of the Trust Estate to be held
by and/or in the name of the Trustees, or, except as prohibited by law,
by and/or in the name of the Trust or one or more of the Trustees or
any other Person, on such terms, in such manner and with such powers in
such Person as the Trustees may determine, and with or without
disclosure that the Trust or Trustees are interested therein;
(t) to adopt a fiscal year for the Trust, and from time to
time to change such fiscal year;
(u) to adopt and use a seal (but the use of a seal shall not
be required for the execution of instruments or obligations of the
Trust);
(v) to the extent permitted by law, to indemnify or enter into
agreements with respect to indemnification with any Person with which
the Trust has dealings, including without limitation any broker/dealer,
investment bank, investment advisor or independent contractor, to such
extent as the Trustees shall determine;
(w) to confess judgment against the Trust;
(x) to discontinue the operations of the Trust;
(y) to repurchase or redeem Shares and other Securities issued
by the Trust;
<PAGE>
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(z) to declare and pay dividends or distributions, consisting
of cash, property or Securities, to the holders of Shares of the Trust
out of any funds legally available therefor; and
(aa) to do all other such acts and things as are incident to
the foregoing, and to exercise all powers which are necessary or useful
to carry on the business of the Trust and to carry out the provisions
of this Declaration.
3.3 Bylaws. The Trustees may make or adopt and from time to time amend
or repeal Bylaws (the "Bylaws") not inconsistent with law or with this
Declaration, containing provisions relating to the business of the Trust and the
conduct of its affairs and in such Bylaws may define the duties of the officers,
employees and agents of the Trust.
ARTICLE IV
INVESTMENT POLICY AND POLICIES
WITH RESPECT TO CERTAIN
DISTRIBUTIONS TO SHAREHOLDERS
4.1 Statement of Policy. It shall be the general objectives of the
Trust (i) to provide current income for distribution to Shareholders through
investments in income-producing hotels and hospitality-related facilities and
other real estate investments and (ii) to provide Shareholders with the
opportunity for additional returns from a percentage of gross revenues generated
by the investment properties.
The Trust may make secured borrowings to make permitted additional Real
Estate Investments and secured or unsecured borrowings for normal working
capital needs, including the repair and maintenance of properties in which it
has invested, tenant improvements and leasing commissions. The Trust may make
such borrowings from third parties or from Affiliates of the Advisor. Interest
and other financing charges or fees to be paid on loans from such Affiliates
will not exceed the interest and other financing charges or fees which would be
charged by third party financing institutions on comparable loans for the same
purpose in the same geographic area.
To the extent that the Trust Estate has assets not otherwise invested
in accordance with this Section 4.1, it shall be the
<PAGE>
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policy of the Trustees to invest such assets in investments selected by the
Trustees or the Advisor which are consistent with the Trust's intention to
qualify as a REIT under the Internal Revenue Code.
It shall be the policy of the Trustees to make investments and to
conduct the business of the Trust in such manner as to qualify as a REIT and to
comply with the requirements of the Internal Revenue Code with respect to the
composition of investments and the derivation of the income of a real estate
investment trust as defined in the REIT Provisions of the Internal Revenue Code;
provided, however, that no Trustee, officer, employee or agent of the Trust
shall be liable for any act or omission resulting in the loss of tax benefits
under the Internal Revenue Code, except for that arising from his own wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
4.2 Prohibited Investments and Activities. The Trustees shall not:
(a) engage in any undertaking or activity that would disqualify the
Trust as a real estate investment trust under the provisions of the Internal
Revenue Code as long as a real estate investment trust is accorded substantially
the same treatment or benefits under the United States tax laws from time to
time in effect as under Sections 856-860 of the Internal Revenue Code at the
date of adoption of this Declaration; and/or
(b) use or apply land for farming, agriculture, horticulture or similar
purposes in violation of Section 8-302(b) of the Corporations and Associations
Article of the Annotated Code of Maryland.
4.3 Change in Investment Policies. The investment policies set out in
this Article IV may be changed by a vote of a majority of the Trustees.
ARTICLE V
THE SHARES AND SHAREHOLDERS
5.1 Description of Shares. The interest of the Shareholders shall be
divided into 200,000,000 shares of beneficial interest which shall be known
collectively as "Shares", all of which shall be validly issued, fully paid and
<PAGE>
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non-assessable by the Trust upon receipt of full consideration for which they
have been issued or without additional consideration if issued by way of share
dividend or share split. There shall be two classes of Shares: 100,000,000
shares of one such class shall be known as "Common Shares", $.01 par value per
share, and 100,000,000 shares of the other such class shall be known as
"Preferred Shares". Each holder of Shares shall as a result thereof be deemed to
have agreed to and be bound by the terms of this Declaration. The Shares may be
issued for such consideration as the Trustees shall deem advisable. The Trustees
are hereby expressly authorized at any time, and from time to time, to provide
for issuance of Shares upon such terms and conditions and pursuant to such
arrangements as the Trustees may determine.
The Trustees are hereby expressly authorized at any time, and from time
to time, without Shareholder approval, to set (or change if such class has
previously been established) the par value, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms, or conditions of redemption, of the Preferred Shares,
and such Preferred Shares may further be divided by the Trustees into classes or
series.
Except as otherwise determined by the Trustees with respect to any
class or series of Preferred Shares, the holders of Shares shall be entitled to
the rights and powers hereinafter set forth in this Section 5.1: The holders of
Shares shall be entitled to receive, when and as declared from time to time by
the Trustees out of any funds legally available for the purpose, such dividends
or distributions as may be declared from time to time by the Trustees. In the
event of the termination of the Trust pursuant to Section 7.1 or otherwise, or
upon the distribution of its assets, the assets of the Trust available for
payment and distribution to Shareholders shall be distributed ratably among the
holders of Shares at the time outstanding in accordance with Section 7.2. All
Shares shall have equal non-cumulative voting rights at the rate of one vote per
Share, and equal dividend, distribution, liquidation and other rights, and shall
have no preference, conversion, exchange, sinking fund or redemption rights.
Absent a contrary written agreement of the Trust authorized by the Trustees, and
notwithstanding any other determination by the Trustees with respect to any
class or series of Preferred Shares, no holder of Shares or Preferred Shares
shall be entitled as a matter of right to subscribe for or purchase any part of
any new or additional issue of Shares of any class whatsoever of the Trust, or
of securities convertible into
<PAGE>
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any shares of any class whatsoever of the Trust, whether now or hereafter
authorized and whether issued for cash or other consideration or by way of
dividend.
5.2 Certificates. Ownership of Shares shall be evidenced by
certificates. Every Shareholder shall be entitled to receive a certificate, in
such form as the Trustees shall from time to time approve, specifying the number
of Shares of the applicable class held by such Shareholder. Subject to Sections
5.6 and 5.14(c) hereof, such certificates shall be treated as negotiable and
title thereto and to the Shares represented thereby shall be transferred by
delivery thereof to the same extent in all respects as a stock certificate, and
the Shares represented thereby, of a Maryland business corporation. Unless
otherwise determined by the Trustees, such certificates shall be signed by the
Chairman, if any, and the President and shall be countersigned by a transfer
agent, and registered by a registrar if any, and such signatures may be
facsimile signatures in accordance with Section 3.2(d) hereof. There shall be
filed with each transfer agent a copy of the form of certificate so approved by
the Trustees, certified by the Chairman, President, or Secretary, and such form
shall continue to be used unless and until the Trustees approve some other form.
In furtherance of the provisions of Sections 5.1 and 5.14(c) hereof,
each Certificate evidencing Shares shall contain a legend imprinted thereon to
substantially the following effect or such other legend as the Trustees may from
time to time adopt:
REFERENCE IS MADE TO THE DECLARATION OF TRUST OF THE TRUST FOR A
STATEMENT OF ALL THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
RELATIVE RIGHTS OF EACH CLASS OR SERIES OF SHARES THAT THE TRUST IS
AUTHORIZED TO ISSUE, THE VARIATIONS IN THE RELATIVE RIGHTS AND
PREFERENCES OF ANY PREFERRED OR SPECIAL CLASS OF SHARES IN SERIES, TO
THE EXTENT THEY HAVE BEEN FIXED AND DETERMINED, AND THE AUTHORITY OF
THE TRUSTEES TO FIX AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES
OF SUBSEQUENT SERIES. ANY SUCH STATEMENT SHALL BE FURNISHED WITHOUT
CHARGE ON REQUEST TO THE TRUST AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE.
IF NECESSARY TO EFFECT COMPLIANCE BY THE TRUST WITH REQUIREMENTS OF THE
INTERNAL REVENUE CODE RELATING TO REAL ESTATE INVESTMENT TRUSTS, THE
PURPORTED TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
PROHIBITED
<PAGE>
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AND/OR INVALIDATED UPON THE TERMS AND CONDITIONS SET FORTH IN THE
DECLARATION OF TRUST. THE TRUST WILL FURNISH A COPY OF SUCH TERMS AND
CONDITIONS TO THE REGISTERED HOLDER OF THIS CERTIFICATE UPON REQUEST
AND WITHOUT CHARGE.
5.3 Fractional Shares. In connection with any issuance of Shares, the
Trustees may issue fractional Shares or may adopt provisions for the issuance of
scrip including, without limitation, the time within which any such scrip must
be surrendered for exchange into full Shares and the rights, if any, of holders
of scrip upon the expiration of the time so fixed, the rights, if any, to
receive proportional distributions, and the rights, if any, to redeem scrip for
cash, or the Trustees may in their discretion, or if they see fit at the option
of, each holder, provide in lieu of scrip for the adjustment of the fractions in
cash. The provisions of Section 5.2 hereof relative to certificates for Shares
shall apply so far as applicable to such scrip, except that such scrip may in
the discretion of the Trustees be signed by a transfer agent alone.
5.4 Legal Ownership of Trust Estate. The legal ownership of the Trust
Estate and the right to conduct the business of the Trust are vested exclusively
in the Trustees (subject to Section 3.2(s)), and the Shareholders shall have no
interest therein (other than beneficial interest in the Trust conferred by their
Shares issued hereunder) and they shall have no right to compel any partition,
division, dividend or distribution of the Trust or any of the Trust Estate.
5.5 Shares Deemed Personal Property. The Shares shall be personal
property and shall confer upon the holders thereof only the interest and rights
specifically set forth or provided for in this Declaration. The death,
insolvency or incapacity of a Shareholder shall not dissolve or terminate the
Trust or affect its continuity nor give his legal representative any rights
whatsoever, whether against or in respect of other Shareholders, the Trustees or
the Trust Estate or otherwise, except the sole right to demand and, subject to
the provisions of this Declaration, the Bylaws and any requirements of law, to
receive a new certificate for Shares registered in the name of such legal
representative, in exchange for the certificate held by such Shareholder.
5.6 Share Record; Issuance and Transferability of Shares. Records shall
be kept by or on behalf of and under the direction of the Trustees, which shall
contain the names and addresses of the Shareholders, the number of Shares held
by them respectively,
<PAGE>
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and the numbers of the certificates representing the Shares, and in which there
shall be recorded all transfers of Shares. The Trust, the Trustees and the
officers, employees and agents of the Trust shall be entitled to deem the
Persons in whose names certificates are registered on the records of the Trust
to be the absolute owners of the Shares represented thereby for all purposes of
the Trust; but nothing herein shall be deemed to preclude the Trustees or
officers, employees or agents of the Trust from inquiring as to the actual
ownership of Shares. Until a transfer is duly effected on the records of the
Trust, the Trustees shall not be affected by any notice of such transfer, either
actual or constructive.
Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing upon
delivery to the Trustees or a transfer agent of the certificate or certificates
therefor, properly endorsed or accompanied by duly executed instruments of
transfer and accompanied by all necessary documentary stamps together with such
evidence of the genuineness of each such endorsement, execution or authorization
and of other matters as may reasonably be required by the Trustees or such
transfer agent. Upon such delivery, the transfer shall be recorded in the
records of the Trust and a new certificate for the Shares so transferred shall
be issued to the transferee and in case of a transfer of only a part of the
Shares represented by any certificate, a new certificate for the balance shall
be issued to the transferor. Any Person becoming entitled to any Shares in
consequence of the death of a Shareholder or otherwise by operation of law shall
be recorded as the holder of such Shares and shall receive a new certificate
therefor but only upon delivery to the Trustees or a transfer agent of
instruments and other evidence required by the Trustees or the transfer agent to
demonstrate such entitlement, the existing certificate for such Shares and such
releases from applicable governmental authorities as may be required by the
Trustees or transfer agent. In case of the loss, mutilation or destruction of
any certificate for shares, the Trustees may issue or cause to be issued a
replacement certificate on such terms and subject to such rules and regulations
as the Trustees may from time to time prescribe. Nothing in this Declaration
shall impose upon the Trustees or a transfer agent a duty, or limit their
rights, to inquire into adverse claims.
5.7 Dividends or Distributions to Shareholders. Subject to Section 5.1,
the Trustees may from time to time declare and pay to Shareholders such
dividends or distributions in cash, property or assets of the Trust or
Securities issued by the Trust, out of
<PAGE>
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current or accumulated income, capital, capital gains, principal, interest,
surplus, proceeds from the increase or financing or refinancing of Trust
obligations, or from the sale of portions of the Trust Estate or from any other
source as the Trustees in their discretion shall determine. Shareholders shall
have no right to any dividend or distribution unless and until declared by the
Trustees. The Trustees shall furnish the Shareholders with a statement in
writing advising as to the source of the funds so distributed not later than
ninety (90) days after the close of the fiscal year in which the distribution
was made.
5.8 Transfer Agent, Dividend Disbursing Agent and Registrar. The
Trustees shall have power to employ one or more transfer agents, dividend
disbursing agents and registrars (including the Advisor or its Affiliates) and
to authorize them on behalf of the Trust to keep records to hold and to disburse
any dividends or distributions and to have and perform, in respect of all
original issues and transfers of Shares, dividends and distributions and reports
and communications to Shareholders, the powers and duties usually had and
performed by transfer agents, dividend disbursing agents and registrars of a
Maryland business corporation.
5.9 Shareholders' Meetings. There shall be an annual meeting of the
Shareholders, at such time and place as shall be determined by or in the manner
prescribed in the Bylaws, at which the Trustees shall be elected and any other
proper business may be conducted. The Annual Meeting of Shareholders shall be
held no fewer than 30 days after delivery to the Shareholders of the Annual
Report and within six (6) months after the end of each fiscal year, commencing
with the fiscal year ending December 31, 1995. Special meetings of Shareholders
may only be called by a majority of the Trustees. If there shall be no Trustees,
the officers of the Trust shall promptly call a special meeting of the
Shareholders entitled to vote for the election of successor Trustees.
No business shall be transacted by the Shareholders at a special
meeting other than business that is either (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Trustees
(or any duly authorized committee thereof) or (ii) otherwise properly brought
before the Shareholders by or at the direction of the Trustees.
The holders of Shares entitled to vote at the meeting representing a
majority of the total number of votes authorized to be cast by Shares then
outstanding and entitled to vote on any
<PAGE>
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question present in person or by proxy shall constitute a quorum at any such
meeting for action on such question. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, without regard
to class, whether or not a quorum is present, and, except as otherwise provided
in the Bylaws, the meeting may be reconvened without further notice. At any
reconvened session of the meeting at which there shall be a quorum, any business
may be transacted at the meeting as originally noticed.
Except as otherwise clearly indicated in this Declaration or the
Bylaws, whenever any action is to be taken by the Shareholders, it shall be
authorized by the affirmative vote of the holders of Shares representing a
majority of the total number of votes authorized to be cast by shares then
outstanding and entitled to vote thereon. At all elections of Trustees, voting
by Shareholders shall be conducted under the non-cumulative method and the
election of Trustees shall be by the affirmative vote of the holders of Shares
representing a majority of the total number of votes authorized to be cast by
shares then outstanding and entitled to vote thereon.
Whenever Shareholders are required or permitted to take any action by a
vote at a meeting of Shareholders, at any time any of the outstanding Shares are
held by a Person other than HRP, such action shall not be taken except by such a
vote at such a meeting of Shareholders and the Shareholders shall have no power
or right to take any action by executing written consents in lieu thereof.
5.10 Proxies. Whenever the vote or consent of a Shareholder entitled to
vote is required or permitted under this Declaration, such vote or consent may
be given either directly by such Shareholder or by a proxy in the form
prescribed in, and subject to the provisions of, the Bylaws. The Trustees may
solicit such proxies from the Shareholders or any of them entitled to vote in
any matter requiring or permitting the Shareholders' vote or consent.
5.11 Reports to Shareholders. Not later than ninety (90) days after the
close of each fiscal year of the Trust following the end of fiscal year 1995,
the Trustees shall mail or deliver a report of the business and operations of
the Trust during such fiscal year to the Shareholders, which report shall
constitute the accounting of the Trustees for such fiscal year. Subject to
Section 8-401 of the Annotated Code of Maryland, the report (the "Annual
Report") shall be in such form and have such content as the Trustees deem
proper. The Annual Report shall include a
<PAGE>
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balance sheet, an income statement and a surplus statement, each prepared in
accordance with generally accepted accounting principles. Such financial
statements shall be certified by an independent public accountant based on a
full examination of the books and records of the Trust conducted in accordance
with generally accepted auditing procedure. Manually signed copies of the Annual
Report and of the auditor's certificate will be filed with the Maryland
Department of Assessments and Taxation. A manually signed copy of the
accountant's report shall be filed with the Trustees.
5.12 Fixing Record Date. The Bylaws may provide for fixing or, in the
absence of such provision, the Trustees may fix, in advance, a date as the
record date for determining the Shareholders entitled to notice of or to vote at
any meeting of Shareholders or to express consent to any proposal without a
meeting or for the purpose of determining Shareholders entitled to receive
payment of any dividend or distribution (whether before or after termination of
the Trust) or any Annual Report or other communication from the Trustees, or for
any other purpose. The record date so fixed shall be not less than ten (10) days
nor more than sixty (60) days prior to the date of the meeting or event for the
purposes of which it is fixed.
5.13 Notice to Shareholders. Any notice of meeting or other notice,
communication or report to any Shareholder shall be deemed duly delivered to
such Shareholder when such notice, communication or report is deposited, with
postage thereon prepaid, in the United States mail, addressed to such
Shareholder at his address as it appears on the records of the Trust or is
delivered in person to such Shareholder.
5.14 Shareholders' Disclosure; Restrictions on Share Transfer;
Limitation on Holdings. At such time as any Person other than HRP shall hold any
Shares of Beneficial Interest and thereafter:
(a) Every Shareholder shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of any
Shares as the Trustees deem necessary or appropriate, in their discretion, to
comply with the REIT Provisions of the Internal Revenue Code, or to comply with
the requirements of any taxing authority or governmental agency.
(b) Whenever in good faith the Trustees deem it reasonably necessary to
protect the status of the Trust as a REIT under the Internal Revenue Code, they
may require a statement or affidavit
<PAGE>
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from each Shareholder or proposed transferee of Shares setting forth the number
of Shares already owned, directly or indirectly, by such Shareholder or proposed
transferee and any related Person specified in the form prescribed by the
Trustees for that purpose. If, in the opinion of the Trustees, which shall be
binding upon any Shareholder and any proposed transferee of Shares, but subject
to subsection (i) of this Section 5.14, any proposed transfer of Shares would
jeopardize the status of the Trust as a REIT under the Internal Revenue Code,
the Trustees shall have the right, but not the duty, to refuse to permit such
transfer.
(c) As a condition to the transfer (including, without limitation, any
sale, transfer, gift, assignment, devise or other disposition of Shares, whether
voluntary or involuntary, whether beneficially or of record, and whether
effected constructively, by operation of law or otherwise) and/or registration
of transfer of any Shares ("Excess Shares") which could in the opinion of the
Trustees result in
(i) direct or indirect ownership (as hereafter defined) of Shares
representing more than 9.8% in number, value or voting power
of the total Shares outstanding becoming concentrated in the
hands of one owner other than an Excepted Person (as such term
is defined hereafter),
(ii) the outstanding Shares of the Trust being owned by fewer than
one hundred (100) persons or
(iii) the Trust being "closely held" within the meaning of Section
856(h) of the Internal Revenue Code,
such potential owner (a "Proposed Transferee") shall file with the Trust the
statement or affidavit described in subsection (b) of this Section 5.14 no later
than the fifteenth (15th) day prior to any proposed transfer, registration of
transfer or transaction which, if consummated, would have any of the results set
forth above; provided, however, that the Trustees may waive such requirement of
prior notice upon determination that such waiver is in the best interests of the
Trust. Subject to the subsection (i) of this Section 5.14, the Trustees shall
have the power and right (i) to refuse to transfer or issue Excess Shares or
share certificates to any Proposed Transferee whose acquisition of such Excess
Shares would, in the opinion of the Trustees, result in the direct or indirect
beneficial ownership of any Excess Shares by a Person other than an Excepted
Person and (ii) to treat such Excess Shares as having been transferred not to
the Proposed
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Transferee but rather to a trustee, who shall be designated by the Trustees but
unaffiliated with either the Trust or the Proposed Transferee, for the benefit
of one or more organizations described in Sections 170(b)(1)(a) and 170(c) of
the Internal Revenue Code (each such organization being referred to herein as a
"Charitable Beneficiary") that have been designated by the Trustees. Any such
trust shall be deemed to have been established by the Shareholder for the
benefit of the Charitable Beneficiary on the day prior to the date of the
purported transfer to the Proposed Transferee, which purported transfer shall be
void ab initio and the Proposed Transferee shall be deemed never to have
acquired any interest in or with respect to the Excess Shares purportedly
transferred.
Any dividends paid or other distributions made with respect to any
Excess Shares prior to the Trust discovering that such Excess Shares have been
transferred into trust for the Charitable Beneficiary as set forth above shall
be repaid and disgorged by the Proposed Transferee to the Trust and any dividend
or other distribution declared but still unpaid or unmade shall be rescinded as
void ab initio with respect to the Proposed Transferee. Any dividends or other
distributions so repaid, disgorged or rescinded shall then be paid over to the
trustee and held in trust for the Charitable Beneficiary. Any vote cast by the
Proposed Transferee prior to the Trust discovering that such Excess Shares had
been transferred to the trustee shall be rescinded as being void ab initio and
the Proposed Transferee shall be deemed to have given an irrevocable proxy to
the trustee to vote the Excess Shares held for the benefit of the Charitable
Beneficiary.
All Excess Shares shall be deemed to be offered by the trustee for sale
to the Trust or a Person or Persons designated by the Trust for a period of
ninety (90) days following the receipt by the Trust of notice of the event that
has caused the Excess Shares to be transferred into trust as set forth above at
a price equal to the lesser of (i) the price that was paid for the Excess Shares
by the Proposed Transferee and (ii) the market price of the Excess Shares on the
date that the Trust or its designee accepts the trustee's offer to sell.
At the direction of the Trust, the trustee of any such trust shall sell
any Excess Shares held by the trust to a Person whose ownership of such shares
will not, in the judgment of the Trustees, jeopardize the Trust's status as a
REIT (a "Permitted Transferee"). If such a transfer is made, the interests of
the Charitable Beneficiary with respect to the Excess Shares shall
<PAGE>
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cease and the proceeds of the sale to the Permitted Transferee shall be payable
to the Proposed Transferee and to the Charitable Beneficiary as follows: The
Proposed Transferee shall be entitled to receive the lesser of (i) the price
paid by the Proposed Transferee for the Excess Shares or, if the Proposed
Transferee did not give value for the Excess Shares, the market price of the
Excess Shares on the day of the event that resulted in the Excess Shares being
transferred into trust as set forth above, and (ii) the price received by the
trustee from the sale of the Excess Shares. Any proceeds from the sale of Excess
Shares in excess of the amount payable to the Proposed Transferee as set forth
above shall be payable to the Charitable Beneficiary.
The following Persons are "Excepted Persons": (i) HRP, (ii) HRPT
Advisors, Inc., a Delaware corporation ("Advisors"), (iii) Affiliates of HRP or
Advisors, (iv) Persons to whom HRP's or Advisor's share ownership is
attributable or whose share ownership is attributable to HRP or Advisors and (v)
other Persons approved by the Trustees, at their option and in their sole
discretion; provided, however, that such approval shall not be granted to any
Person (and shall not extend to any Person described in clause (iii) above)
whose ownership of more than 9.8% (individually or by attribution) in number or
value of the total Shares outstanding would result, directly, indirectly or as a
result of attribution of ownership, in termination of the status of the Trust as
a REIT under the Internal Revenue Code.
If the foregoing provisions shall be determined to be void or invalid
by virtue of any legal decision, statute, rule or regulation, then the Proposed
Transferee of such Excess Shares shall be deemed, at the option of the Trust, to
have acted as agent on behalf of the Trust in acquiring such Excess Shares and
to hold such Excess Shares on behalf of the Trust.
(d) Notwithstanding any other provision of this Declaration to the
contrary, but subject to subsection (i) of this Section 5.14, any purported
acquisition of shares of the Trust (whether such purported acquisition results
from the direct or indirect acquisition or ownership (as hereafter defined) of
Shares) which would result in the disqualification of the Trust as a REIT shall
be null and void. Any such shares may be treated by the Trustees in the manner
prescribed for Excess Shares in subsection (c) of this Section 5.14.
(e) Subject only to subsection (i) of this Section 5.14, nothing
contained in this Section 5.14 or in any other provision of this Declaration
shall limit the authority of the Trustees to
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take such other action as they deem necessary or advisable to protect the Trust
and the interests of the Shareholders by preserving the Trust's status as a
REIT.
(f) If any provision of this Section 5.14 or any application of any
such provision is determined to be invalid by any federal or state court having
jurisdiction over the issues, the validity of the remaining provision shall not
be affected and other applications of such provision shall be affected only to
the extent necessary to comply with the determination of such court. To the
extent this Section 5.14 may be inconsistent with any other provision of this
Declaration, this Section 5.14 shall be controlling.
(g) It shall be the policy of the Trustees to consult with the
appropriate officials of any stock exchange on which the relevant Shares of the
Trust are listed as far as reasonably possible in advance of the final exercise
(at any time when the shares are listed on such exchange) of any powers granted
by sections (b) or (c) of this Section 5.14.
(h) For purposes of this Declaration, Shares not owned directly shall
be deemed to be owned indirectly by a Person if that Person or a group including
that Person would be the beneficial owner of such shares, as defined as of May
1, 1995, in Rule 13d-3 under the Securities Exchange Act of 1934 and/or would be
considered to own such shares by reason of the attribution rules of Section 544
or Section 856(h) of the Internal Revenue Code.
(i) Nothing in this Section 5.14 shall preclude the settlement of any
transaction entered into through the facilities of the New York Stock Exchange.
5.15 Special Voting Provisions relating to Certain Business
Combinations and Control Shares. The Trust elects not to be governed by the
provisions of Subtitles 6 and 7 of Title 3 of the Corporations and Associations
Article of the Annotated Code of Maryland.
<PAGE>
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ARTICLE VI
LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS,
EMPLOYEES AND AGENTS, AND OTHER MATTERS
6.1 Limitation of Liability of Shareholders, Trustees, Officers,
Employees and Agents for Obligations of the Trust. The Trustees and the
officers, employees and agents (including the Advisor) of the Trust, in
incurring any debts, liabilities or obligations or in taking or omitting any
other actions for or in connection with the Trust, are, and shall be deemed to
be, acting as trustees, officers, employees or agents of the Trust and not in
their own individual capacities. Except as otherwise provided in Sections 6.3
hereof with respect to liability of Trustees or officers, agents or employees of
the Trust to the Trust or to Shareholders, no Shareholder, Trustee or officer,
employee or agent (including the Advisor) of the Trust shall be liable for any
debt, claim, demand, judgment decree, liability or obligation of any kind (in
tort, contract or otherwise) of, against or with respect to the Trust or arising
out of any action taken or omitted for or on behalf of the Trust, and the Trust
shall be solely liable therefor and resort shall be had solely to the Trust
Estate for the payment or performance thereof, and no Shareholder, Trustee or
officer, employee or agent (including the Advisor) of the Trust shall be subject
to any personal liability whatsoever, in tort, contract or otherwise, to any
other Person or Persons in connection with the Trust Estate or the affairs of
the Trust (or any actions taken or omitted for or on behalf of the Trust), and
all such other Persons shall look solely to the Trust Estate for satisfaction of
claims of any nature arising in connection with the Trust Estate or the affairs
of the Trust (or any action taken or omitted for or on behalf of the Trust).
6.2 Express Exculpatory Clauses and Instruments. Any written instrument
creating an obligation of the Trust shall, to the extent practicable, include a
reference to this Declaration and provide that neither the Shareholders nor the
Trustees nor any officers, employees or agents (including the Advisor) of the
Trust shall be liable thereunder and that all Persons shall look solely to the
Trust Estate for the payment of any claim thereunder or for the performance
thereof; however, the omission of such provision from any such instrument shall
not render the Shareholders, any Trustee, or any officer, employee or agent
(including the Advisor) of the Trust liable nor shall the Shareholders, any
Trustee or any officer, employee or agent (including the Advisor) of the Trust
be liable to any one for such omission.
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6.3 Limitation of Liability of Trustees, Officers, Employees and Agents
to the Trust and to Shareholders for Acts and Omissions. To the fullest extent
permitted by Maryland statutory and decisional law, as amended or interpreted,
no Trustee, officer, employee or agent of the Trust (a) shall be personally
liable to the Trust or its Shareholders and (b) shall have any greater duties
than those established by this Declaration of Trust or, in cases as to which
such duties are not so established, than those to which the directors, officers,
employees and agents of a Maryland business corporation are subject from time to
time. No amendment of this Declaration or repeal of any of its provisions shall
limit or eliminate the limitation on liability provided to Trustees, officers,
employees and agents of the Trust hereunder with respect to any act or omission
occurring prior to such amendment or repeal.
6.4 Indemnification and Reimbursement of Trustees, Officers, Employees,
Agents and Certain Other Persons.
(a) The Trust shall indemnify (i) its Trustees and officers,
whether serving the Trust or at its request any other entity, to the
full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses
under the procedures and to the full extent permitted by law and (ii)
other employees and agents to such extent as shall be authorized by the
Trustees of the Trust or the Bylaws and be permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The
Trustees may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve
and amend from time to time such Bylaws, resolutions or contracts
implementing such provisions or such further indemnification
arrangements as may be permitted by law. No amendment of this
Declaration of Trust or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect
to acts or omissions occurring prior to such amendment or repeal.
(b) Notwithstanding anything herein to the contrary, and to
the fullest extent permitted by Maryland statutory or decisional law,
as amended or interpreted, no Trustee or officer of the Trust shall be
personally liable to the Trust or its shareholders for money damages.
No amendment of this Declaration or repeal of any of its provisions
shall limit
<PAGE>
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or eliminate the limitation on liability provided to Trustees and
officers hereunder with respect to any act or omission occurring prior
to such amendment or repeal.
6.5 Indemnification and Reimbursement of Shareholders. Any Shareholder
made a party to any action, suit or proceeding or against him a claim or
liabilities asserted by reason of the fact that he, his testate or intestate was
or is a Shareholder shall be indemnified and held harmless by the Trust against
judgments, fines, amounts paid on account thereof (whether in settlement or
otherwise) and reasonable expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense of such action, suit,
proceeding, claim or alleged liability or in connection with any appeal therein,
whether or not the same proceeds to judgment or is settled or otherwise brought
to a conclusion; provided, however, that such Shareholder gives prompt notice
thereof, executes such documents and takes such action as will permit the Trust
to conduct the defense or settlement thereof and cooperates therein. In the
event that the assets of the Trust Estate are insufficient to satisfy the
Trust's indemnity obligations hereunder, each Shareholder shall be entitled to
such indemnification pro rata from the Trust Estate.
6.6 Right of Trustees, Officers, Employees and Agents to Own Shares or
Other Property and to Engage in Other Business. Any Trustee or officer, employee
or agent of the Trust may acquire, own, hold and dispose of Shares in the Trust,
for his individual account, and may exercise all rights of a Shareholder to the
same extent and in the same manner as if he were not a Trustee or officer,
employee or agent of the Trust. Any Trustee or officer, employee or agent of the
Trust may, in his personal capacity or in the capacity of trustee, officer,
director, stockholder, partner, member, advisor or employee of any Person or
otherwise, have business interests and engage in business activities similar to
or in addition to those relating to the Trust, which interests and activities
may be similar to and competitive with those of the Trust and may include the
acquisition, syndication, holding, management, development, operation or
disposition, for his own account, or for the account of such Person or others,
of interests in Mortgages, interests in Real Property, or interests in Persons
engaged in the real estate business. Each Trustee, officer, employee and agent
of the Trust shall be free of any obligation to present to the Trust any
investment opportunity which comes to him in any capacity other than solely as
Trustee, officer, employee or agent of the Trust even if such opportunity is of
a character which, if presented to
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the Trust, could be taken by the Trust. Subject to the provisions of Section
6.8, any Trustee or officer, employee or agent of the Trust may be interested as
trustee, officer, director, stockholder, partner, member, advisor or employee
of, or otherwise have a direct or indirect interest in, any Person who may be
engaged to render advice or services to the Trust, and may receive compensation
from such Person as well as compensation as Trustee, officer, employee or agent
or otherwise hereunder. None of these activities shall be deemed to conflict
with his duties and powers as Trustee or officer, employee or agent of the
Trust.
6.7 Transactions Between Trustees, Officers, Employees or Agents and
the Trust. Except as otherwise provided by this Declaration, and in the absence
of fraud, a contract, act or other transaction between the Trust and any other
Person in which the Trust is interested, shall be valid, and no Trustee or
officer, employee or agent of the Trust shall have any liability as a result of
entering into any such contract, act or transaction, even though (a) one or more
of the Trustees or officers, employees or agents of the Trust are directly or
indirectly interested in or connected with or are trustees, partners, directors,
employees, officers or agents of such other Person, or (b) one or more of the
Trustees or officers, employees or agents of the Trust individually or jointly
with others, is a party or are parties to, or are directly or indirectly
interested in or connected with, such contract, act or transaction; provided
that in each such case (i) such interest or connection is disclosed or known to
the Trustees and thereafter the Trustees authorize or ratify such contract, act
or other transaction by affirmative vote of a majority of the Trustees who are
not so interested or (ii) such interest or connection is disclosed or known to
the Shareholders, and thereafter such contract, act or transaction is approved
by Shareholders holding a majority of the Shares then outstanding and entitled
to vote thereon.
Notwithstanding any other provision of this Declaration, the Trust may
engage in a transaction with (a) any Trustee, officer, employee or agent of the
Trust (acting in his individual capacity), (b) any director, trustee, partner,
officer, employee or agent (acting in his individual capacity) of the Advisor or
any other investment advisor of the Trust, (c) the Advisor or any other
investment advisor of the Trust or (d) an Affiliate of any of the foregoing,
provided that such transaction has, after disclosure of such affiliation, been
approved or ratified by the affirmative vote of a majority of the Trustees not
having any interest in such transaction and not Affiliates of any party to
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the transaction after a determination by them that such transaction is fair and
reasonable to the Trust and the Shareholders.
This Section 6.7 shall not prevent any sale of Shares issued by the
Trust for the public offering thereof in accordance with a registration
statement filed with the Securities and Exchange Commission under the Securities
Act of 1933. The Trustees are not restricted by this Section 6.7 from forming a
corporation, partnership, trust or other business association owned by any
Trustee, officer, employee or agent or by their nominees for the purpose of
holding title to property of the Trust or managing property of the Trust,
provided that the Trustees make a determination that the creation of such entity
for such purpose is in the best interest of the Trust.
6.8 Persons Dealing with Trustees, Officers, Employees or Agents. Any
act of the Trustees or of the officers, employees or agents of the Trust
purporting to be done in their capacity as such, shall, as to any Persons
dealing with such Trustees, officers, employees or agents, be conclusively
deemed to be within the purposes of this Trust and within the powers of such
Trustees or officers, employees or agents. No Person dealing with the Trustees
or any of them or with the officers, employees or agents of the Trust shall be
bound to see to the application of any funds or property passing into their
hands or control. The receipt of the Trustees or any of them, or of authorized
officers, employees or agents of the Trust, for moneys or other consideration,
shall be binding upon the Trust.
6.9 Reliance. The Trustees and the officers, employees and agents of
the Trust may consult with counsel (which may be a firm in which one or more of
the Trustees or the officers, employees or agents of the Trust is or are
members) and the advice or opinion of such counsel shall be full and complete
personal protection to all the Trustees and the officers, employees and agents
of the Trust in respect of any action taken or suffered by them in good faith
and in reliance on or in accordance with such advice or opinion. In discharging
their duties, Trustees or officers, employees or agents of the Trust, when
acting in good faith, may rely upon financial statements of the Trust
represented to them to fairly present the financial position or results of
operations of the Trust by the chief financial officer of the Trust or the
officer of the Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant fairly to present
the financial position or results of operations of the Trust. The Trustees and
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the officers, employees and agents of the Trust may rely, and shall be
personally protected in acting, upon any instrument or other document believed
by them to be genuine.
ARTICLE VII
DURATION, AMENDMENT AND TERMINATION OF TRUST
7.1 Duration of Trust. The duration of the Trust shall be perpetual;
provided, however, the Trust may be terminated at any time by the affirmative
vote at a meeting of Shareholders of the holders of Shares representing
two-thirds of the total number of Shares then outstanding and entitled to vote
thereon.
7.2 Termination of Trust.
(a) Upon the termination of the Trust:
(i) the Trust shall carry on no business except for the
purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of
the Trust and all the powers of the Trustees under
this Declaration shall continue until the affairs of
the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the
Trust, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any
part of the remaining Trust Estate to one or more
Persons at public or private sale (for consideration
which may consist in whole or in part of cash,
Securities or other property of any kind), discharge
or pay its liabilities, and do all other acts
appropriate to liquidate its business; and
(iii) after paying or adequately providing for the payment
of all liabilities, and upon receipt of such
releases, indemnities and refunding agreements, as
they deem necessary for their protection, the
Trustees may distribute the remaining Trust Estate
(in cash or in kind or partly each) among the
Shareholders according to their respective rights.
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(b) After termination of the Trust and distribution of the
Trust Estate to the Shareholders as herein provided, the Trustees shall
execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination and such
distribution, a copy of which instrument shall be filed with the
Maryland Department of Assessments and Taxation, and the Trustees shall
thereupon be discharged from all further liabilities and duties
hereunder and the rights and interests of all Shareholders shall
thereupon cease.
7.3 Amendment Procedure. This Declaration may be amended (except that
the provisions governing the personal liability of the Shareholders, Trustees
and of the officers, employees and agents of the Trust and the prohibition of
assessments upon Shareholders may not be amended in any respect that could
increase the personal liability of such Shareholders, Trustees or officers,
employees and agents of the Trust) at a meeting of Shareholders by holders of
Shares representing a majority (or, with respect to amendments of Article IV,
the second paragraph of Section 5.1, Section 7.1 or this Section 7.3, and
amendments inconsistent with Sections 2.1 and 5.14, at least two-thirds (2/3))
of the total number of votes authorized to be cast in respect of Shares then
outstanding and entitled to vote thereon. The approval of a two-thirds (2/3)
majority of the Trustees shall also be required for any such amendment. A
two-thirds (2/3) majority of the Trustees may, after fifteen (15) days written
notice to the Shareholders, also amend this Declaration without the vote or
consent of Shareholders if in good faith they deem it necessary to conform this
Declaration to the requirements of the REIT Provisions of the Internal Revenue
Code, but the Trustees shall not be liable for failing to do so. Actions by the
Trustees pursuant to Section 5.1 or pursuant to Section 8.6(a) that result in an
amendment to this Declaration shall be effected without vote or consent of
Shareholders.
7.4 Amendments Effective. Any amendment pursuant to any Section of this
Declaration shall not become effective until it is duly filed with the Maryland
Department of Assessments and Taxation.
7.5 Transfer to Successor. The Trustees, with the affirmative vote, at
a meeting approving a plan for this purpose, of the holders of Shares
representing two-thirds (2/3) of all votes cast at a meeting at which a quorum
is present, may (a) cause the organization of a limited partnership,
partnership, corporation, association, trust or other organization to take
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over the Trust Estate and carry on the affairs of the Trust, (b) merge the Trust
into, or sell, convey and transfer the Trust Estate to, any such limited
partnership, partnership, corporation, association, trust or organization in
exchange for Securities thereof, or beneficial interests therein, and the
assumption by such transferee of the liabilities of the Trust and (c) thereupon
terminate this Declaration and deliver such shares, Securities or beneficial
interests among the Shareholders in accordance with such plan.
ARTICLE VIII
MISCELLANEOUS
8.1 Applicable Law. This Declaration is executed and acknowledged by
the Trustees with reference to the statutes and laws of the State of Maryland,
and the rights of all parties and the construction and effect of every provision
hereof shall be subject to and construed according to the statutes and laws of
such State.
8.2 Index and Headings for Reference Only. The index and headings
preceding the text, articles and sections hereof have been inserted for
convenience and reference only and shall not be construed to affect the meaning,
construction or effect of this Declaration.
8.3 Successors in Interest. This Declaration and the Bylaws shall be
binding upon and inure to the benefit of the undersigned Trustees and their
successors, assigns, heirs, distributees and legal representatives, and every
Shareholder and his successors, assigns, heirs, distributees and legal
representatives.
8.4 Inspection of Records. Trust records shall be available for
inspection by Shareholders at the same time and in the same manner and to the
extent that comparable records of a Maryland business corporation would be
available for inspection by shareholders under the laws of the State of
Maryland. Except as specifically provided for in this Declaration or in Title 8
of the Annotated Code of Maryland, Shareholders shall have no greater right than
shareholders of a Maryland business corporation to require financial or other
information from the Trust, Trustees or officers of the Trust. Any Federal or
state securities administrator or the Maryland Department of Assessments and
Taxation shall have the right, at reasonable
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times during business hours and for proper purposes, to inspect the books and
records of the Trust.
8.5 Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
8.6 Provisions of the Trust in Conflict with Law or Regulations;
Severability.
(a) The provisions of this Declaration are severable, and if
the Trustees shall determine, with the advice of counsel, that any one
or more of such provisions (the "Conflicting Provisions") are in
conflict with the REIT Provisions of the Internal Revenue Code, the
Conflicting Provisions shall be deemed never to have constituted a part
of the Declaration; provided, however, that such determination by the
Trustees shall not affect or impair any of the remaining provisions of
this Declaration or render invalid or improper any action taken or
omitted (including but not limited to the election of Trustees) prior
to such determination. An amendment in recordable form signed by a
majority of the Trustees setting forth any such determination and
reciting that it was duly adopted by the Trustees, or a copy of this
Declaration, with the Conflicting Provisions removed pursuant to such a
determination, in recordable form, signed by a majority of the
Trustees, shall be conclusive evidence of such determination when filed
with the Maryland Department of Assessments and Taxation. The Trustees
shall not be liable for failure to make any determination under this
Section 8.6(a). Nothing in this Section 8.6(a) shall in any way limit
or affect the right of the Trustees to amend this Declaration as
provided in Section 7.3.
(b) If any provision of this Declaration shall be held invalid
or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid
or unenforceable any other provision of this Declaration, and this
Declaration shall be carried out as if any such invalid or
unenforceable provision were not contained herein.
8.7 Certifications. The following certifications shall be final and
conclusive as to any Persons dealing with the Trust:
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(a) a certification of a vacancy among the Trustees by reason
of resignation, removal, increase in the number of Trustees,
incapacity, death or otherwise, when made in writing by a majority of
the remaining Trustees;
(b) a certification as to the individuals holding office as
Trustees or officers at any particular time, when made in writing by
the secretary of the Trust;
(c) a certification that a copy of this Declaration or of the
Bylaws is a true and correct copy thereof as then in force, when made
in writing by the secretary of the Trust;
(d) a certification as to any actions by Trustees, other than
the above, when made in writing by the secretary of the Trust or by any
Trustee.
--------------------------------------------------------------
These amendments do not affect the total number of common shares of
beneficial interest, $.01 par value ("Common Shares"), authorized or issued by
the Trust. The amendment and restatement of the Declaration was authorized by
the Board of Trustees of the Trust acting by unanimous written consent on August
18, 1995 and by at least two-thirds of the stockholders of the Trust by means of
unanimous written consent obtained on August 18, 1995.
<PAGE>
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IN WITNESS WHEREOF, the undersigned have caused this Declaration of
Trust to be executed as of the day and year first written above.
/s/ Barry M. Portnoy
Name: Barry M. Portnoy
Address: Sullivan & Worcester
One Post Office Square
Boston, MA 02109
ACKNOWLEDGEMENT
Commonwealth of Massachusetts August 18, 1995
ss.
County of Suffolk
There personally appeared the above-named Barry M. Portnoy and
acknowledged the foregoing instrument to be his free act and deed.
Before me, /s/ Mary Louise Larkin
Notary Public
My commission expires:
2/10/2000
<PAGE>
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/s/ Gerard M. Martin
Name: Gerard M. Martin
Address: M&P Partners Limited
Partnership
400 Centre Street
Newton, MA 02158
ACKNOWLEDGEMENT
Commonwealth of Massachusetts August 18, 1995
ss.
County of Middlesex
There personally appeared the above-named Gerard M. Martin and
acknowledged the foregoing instrument to be his free act and deed.
Before me, /s/
Notary Public
My commission expires:
EXHIBIT 3.2
HOSPITALITY PROPERTIES TRUST
AMENDMENT TO
AMENDED AND RESTATED
DECLARATION OF TRUST
DATED AUGUST 21, 1995
The undersigned, being at least a majority of the Trustees of
Hospitality Properties Trust, a Maryland real estate investment trust having its
principal office in Baltimore City, Maryland (hereinafter called the "Trust"),
hereby certify to the Maryland State Department of Assessments and Taxation
that:
FIRST: The Trust desires to amend its Amended and Restated Declaration
of Trust as currently in effect (the "Declaration of Trust").
SECOND: Article D of the Declaration of Trust is hereby amended by
adding the following sentence at the end of the first paragraph of Section 5.1
thereof.
The Trustees are hereby expressly authorized at any time, and from time
to time, without Shareholder approval, to amend this Declaration to
increase or decrease the aggregate number of Shares or the number of
Shares of any class that the Trust has the authority to issue.
THIRD: The above amendment does not affect the total number of common
shares of beneficial interest, $.01 par value per share, authorized or issued by
the Trust.
FOURTH: The Board of Trustees of the Trust, at a meeting duly called
and held on February 5, 1997, adopted a resolution which set forth said
amendment to the Declaration of Trust and directed that said amendment be
submitted for approval by the shareholders of the Trust.
FIFTH: The shareholders of the Trust, voting at a meeting duly called
and held May 20, 1997, adopted a resolution which approved said amendment by a
vote of the holders of a majority of the issued and outstanding shares of
beneficial interest in the Trust.
<PAGE>
- 2 -
IN WITNESS WHEREOF, Hospitality Properties Trust has caused these
presents to be signed in its name and on its behalf by the undersigned, being a
majority of the Trustees of the Trust who executed this instrument as of May 20,
1997.
/s/ Gerard M. Martin /s/ Barry M. Portnoy
Gerard M. Martin Barry M. Portnoy
/s/ William J. Sheehan
William J. Sheehan
<PAGE>
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COMMONWEALTH OF MASSACHUSETTS )
)
COUNTY OF SUFFOLK )
On May 28, 1997 before me, Doreen A. Vozzella, a Notary Public in and for said
Commonwealth, personally appeared Gerard M. Martin and Barry M. Portnoy, known
to me or proved to me on the basis of satisfactory evidence, to be the persons
whose names are subscribed to the within instrument and acknowledged that each
of them executed the same.
WITNESS my hand and official seal.
Signature: /s/ Doreen A. Vozzella [OFFICIAL SEAL]
Notary Public
<PAGE>
- 4 -
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On May 27, 1997 before me, Nessa Karney Langer, a Notary Public in and for said
State, personally appeared William J. Sheehan, known to me or proved to me on
the basis of satisfactory evidence, to be the person whose name is subscribed to
the within instrument and acknowledged that he executed the same.
WITNESS my hand and official seal.
Signature: /s/ Nessa Karney Langer [OFFICIAL SEAL]
Notary Public
EXHIBIT 3.3
HOSPITALITY PROPERTIES TRUST
ARTICLES SUPPLEMENTARY
HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust,
having its principal office in Baltimore City, Maryland (hereinafter called the
"Trust"), hereby certifies to the State Department of Assessments and Taxation
of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Trustees
by Article V, Section 5.1 of the Amended and Restated Declaration of Trust of
the Trust, dated August 21, 1995, as amended, (the "Declaration"), the Board of
Trustees has duly reclassified 1,000,000 unissued Preferred Shares, of the Trust
(from among the 100,000,000 Preferred Shares, without par value, of the Trust
which are authorized) into 1,000,000 Junior Participating Preferred Shares, par
value $.01 per share, of the Trust.
SECOND: The terms (including preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption) of the Junior Participating Preferred Shares,
par value $.01 per share, are as follows:
1. Designation and Amount. The shares of such series shall be
designated as "Junior Participating Preferred Shares" and the number of shares
constituting such series shall be 1,000,000.
2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Shares ranking prior and superior
to the Junior Participating Preferred Shares with respect to dividends
(if any), the holders of Junior Participating Preferred Shares shall be
entitled to receive, when, as and if declared by the Board out of funds
legally available for the purpose, quarterly dividends payable in cash
on the 15th day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a Junior Participating Preferred Share or
fraction thereof, in an amount per share (rounded to the nearest cent)
equal to the greater of (X) $5 or (Y) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, plus 100 times the aggregate per share
amount (payable in kind) of all noncash dividends or other
distributions, other than a dividend payable in common shares of
beneficial interest, par value $.01 per share, of the Trust (the
"Common Shares") or a subdivision of the outstanding Common Shares (by
reclassification or otherwise), declared on the Common Shares, since
the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any Junior Participating Preferred Share or fraction
thereof. In the event the Trust shall at any time after May 20, 1997
(the "Rights Declaration Date") (i) declare any
<PAGE>
dividend on Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares or (iii) combine the outstanding Common
Shares into a smaller number of shares, then in each such case the
amount to which holders of shares of Junior Participating Preferred
Shares were entitled immediately prior to such event under clause (Y)
of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which
is the number of Common Shares that were outstanding immediately prior
to such event.
(b) The Board shall declare a dividend or distribution on the
Junior Participating Preferred Shares as provided in paragraph (a)
above immediately after it declares a dividend or distribution on the
Common Shares (other than a dividend payable in Common Shares);
provided that, in the event no dividend or distribution shall have been
declared on the Common Shares during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $5 per share on the Junior Participating
Preferred Shares shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding Junior Participating Preferred Shares from the Quarterly
Dividend Payment Date next preceding the date of issue of such Junior
Participating Preferred Shares unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for
the determination of holders of Junior Participating Preferred Shares
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the Junior Participating Preferred Shares in an amount less
than the total amount of such dividends at the time accrued and payable
on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board may fix a
record date for the determination of holders of Junior Participating
Preferred Shares entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not less than
10 and not more than 60 days prior to the date fixed for the payment
thereof.
3. Voting Rights. The holders of Junior Participating Preferred Shares
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each Junior Participating Preferred Share shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Trust. In the event that the Board shall at any
time after the Rights Declaration Date (i) declare any dividend on
Common Shares payable in Common Shares, (ii) subdivide the outstanding
Common Shares or (iii) combine the outstanding Common Shares into a
smaller number of shares, then in each such case the number of votes
per share to which holders of Junior Participating Preferred Shares
were entitled immediately prior to such event shall be adjusted by
multiplying such number by a
-2-
<PAGE>
fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which
is the number of Common Shares that were outstanding immediately prior
to such event.
(b) Except as otherwise provided herein or by law, the holders
of Junior Participating Preferred Shares and the holders of Common
Shares shall vote together as one class on all matters submitted to a
vote of shareholders of the Trust.
(c)
(i) If at any time dividends on any Junior Participating
Preferred Shares shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the
occurrence of such contingency shall mark the
beginning of a period (a "Default Period") which
shall extend until such time when all accrued and
unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period
on all Junior Participating Preferred Shares then
outstanding shall have been declared and paid or set
apart for payment. During each Default Period, all
holders of Preferred Shares (including holders of the
Junior Participating Preferred Shares) with dividends
in arrears in an amount equal to six (6) quarterly
dividends thereon, voting as a class, irrespective of
series, shall have the right to elect two (2)
Trustees.
(ii) During any Default Period, such voting right of the
holders of Junior Participating Preferred Shares may
be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Section 3(c)
or at an annual meeting of shareholders, and
thereafter at annual meetings of shareholders,
provided that neither such voting right nor the right
of the holders of any other series of Preferred
Shares, if any, to increase, in certain cases, the
authorized number of Trustees shall be exercised
unless the holders of ten percent (10%) in number of
Preferred Shares outstanding shall be present in
person or by proxy. The absence of a quorum of the
holders of Common Shares shall not affect the
exercise by the holders of Preferred Shares of such
voting right. At any meeting at which the holders of
Preferred Shares shall exercise such voting right
initially during an existing Default Period, they
shall have the right, voting as a class, to elect
Trustees to fill up to two (2) vacancies, if any, in
the Board or, if such right is exercised at an annual
meeting, to elect two (2) Trustees. The holders of
Preferred Shares shall have the right to make such
increase in the number of Trustees as shall be
necessary to permit the election by them at any
special meeting of two (2) Trustees. After the
holders of Preferred Shares shall have exercised
their right to elect Trustees in any Default Period
and during the continuance of such period, the number
of Trustees shall not be increased or decreased
except by vote of the holders of Preferred Shares as
herein provided or
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<PAGE>
pursuant to the rights of any equity securities
ranking senior to or pari passu with the Junior
Participating Preferred Shares, if any.
(iii) Unless the holders of Preferred Shares shall, during
an existing Default Period, have previously exercised
their right to elect Trustees, the Board may order,
or any shareholder or shareholders owning in the
aggregate not less than ten percent (10%) of the
total number of Preferred Shares outstanding,
irrespective of series, may request, the calling of a
special meeting of the holders of Preferred Shares,
which meeting shall thereupon be called by the Board
or the Chief Operating Officer of the Trust. The
Secretary of the Trust shall give notice of such
meeting and of any annual meeting at which holders of
Preferred Shares are entitled to vote pursuant to
this paragraph (c)(iii) to each holder of record of
Preferred Shares by mailing a copy of such notice to
him at his last address as the same appears on the
books of the Trust. Such meeting shall be called for
a time not earlier than fifteen (15) days and not
later than sixty (60) days after such order or
request. If such meeting is not called within sixty
(60) days after such order or request, such meeting
may be called on similar notice by any shareholder or
shareholders owning in the aggregate not less than
ten percent (10%) of the total number of Preferred
Shares outstanding. Notwithstanding the provisions of
this paragraph (c)(iii), no such special meeting
shall be called during the period within sixty (60)
days immediately preceding the date fixed for the
next annual meeting of the shareholders.
(iv) In any Default Period, the holders of Common Shares,
and (if applicable) other classes of Shares of
beneficial interest of the Trust (all Trust shares
being referred to as "Shares"), shall continue to be
entitled to elect the whole number of Trustees until
the holders of Preferred Shares shall have exercised
their rights to elect two (2) Trustees voting as a
class, after the exercise of which right, (X) the
Trustees so elected by the holders of Preferred
Shares shall continue in office until their
successors shall have been elected by such holders or
until the expiration of the Default Period, and (Y)
any vacancy in the Board shall (except as provided in
paragraph (c)(ii) of this Section 3) be filled by
vote of a majority of the remaining Trustees
theretofore elected by the holders of the class or
classes of Shares which elected the Trustee whose
office shall have become vacant. References in this
paragraph (c) to Trustees elected by the holders of a
particular class of Shares shall include Trustees
elected by such Trustees to fill vacancies as
provided in clause (Y) of the foregoing sentence.
-4-
<PAGE>
(v) Immediately upon the expiration of a Default Period,
(X) the right of the holders of Preferred Shares as a
class to elect Trustees shall cease, (Y) the term of
any Trustees elected by the holders of Preferred
Shares as a class shall terminate, and (Z) the number
of Trustees shall be such number as may be provided
for in the Declaration, any Article Supplementary or
the By-Laws of the Trust, irrespective of any
increase made pursuant to the provisions of paragraph
(c)(ii) of this Section 3 such number being subject,
however, to change thereafter in any manner provided
by law, or in the Declaration, any Article
Supplementary or the By-Laws of the Trust). Any
vacancies in the Board effected by the provisions of
clauses (Y) and (Z) in the preceding sentence may be
filled by a majority of the remaining Trustees.
(d) Except as set forth herein, holders of Junior
Participating Preferred Shares shall have no special voting rights and
their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Shares as set forth herein) for
taking any trust action.
4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Participating Preferred Shares as
provided in Section 2 are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on
Junior Participating Preferred Shares outstanding shall have been paid
in full, the Trust shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise
acquire for consideration any Shares ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Junior
Participating Preferred Shares;
(ii) declare or pay dividends on or make any other
distributions on any Shares ranking on a parity
(either as to dividends or upon liquidation,
dissolution or winding up) with the Junior
Participating Preferred Shares except dividends paid
ratably on the Junior Participating Preferred Shares
and all such parity Shares on which dividends are
payable or in arrears in proportion to the total
amounts to which the holders of all such Shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration Shares ranking on a parity (either as
to dividends or upon liquidation, dissolution or
winding up) with the Junior Participating Preferred
Shares provided that the Trust may at any time
redeem, purchase or otherwise acquire any such parity
Shares in exchange for any Shares ranking junior
(either as to
-5-
<PAGE>
dividends or upon dissolution, liquidation or winding
up) to the Junior Participating Preferred Shares;
(iv) purchase or otherwise acquire for consideration any
Junior Participating Preferred Shares, or any Shares
ranking on a parity with the Junior Participating
Preferred Shares, except pursuant to Section 8 or in
accordance with a purchase offer made in writing or
by publication (as determined by the Board) to all
holders of such shares upon such terms as the Board,
after consideration of the respective annual dividend
rates and other relative rights and preferences of
the respective series and classes, shall determine in
good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Trust shall not permit any subsidiary of the Trust to
purchase or otherwise acquire for consideration any Shares of the Trust
unless the Trust could, under paragraph (a) of this Section 4, purchase
or otherwise acquire such shares at such time and in such manner.
5. Required Shares. Any Junior Participating Preferred Shares,
purchased or otherwise acquired by the Trust in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued Preferred Shares
and may be reissued as part of a new series of Preferred Shares to be created by
resolution or resolutions of the Board, subject to the conditions and
restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Trust, no distribution shall be made to the
holders of Shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Participating
Preferred Shares, unless, prior thereto, the holders of Junior
Participating Preferred Shares shall have received $100.00 per share,
plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment (the
"Liquidation Preference"). Following the payment of the full amount of
the Liquidation Preference, no additional distributions shall be made
to the holders of Junior Participating Preferred Shares, unless, prior
thereto, the holders of Common Shares shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph (c) below to reflect such events
as stock splits, stock dividends and recapitalization with respect to
the Common Shares) (such number in clause (ii) immediately above being
referred to as the "Adjustment Number"). Subject to the rights of any
other series of Preferred Shares then outstanding, if any, following
the payment of the full amount of the Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Junior
Participating Preferred Shares and Common Shares, respectively, holders
of Junior Participating Preferred Shares and holders of shares of
Common Shares shall receive their ratable and proportionate share of
the remaining assets to be distributed in the
-6-
<PAGE>
ratio of the Adjustment Number to one (1) with respect to such Junior
Participating Preferred Shares and Common Shares, on a per Share basis,
respectively.
(b) In the event, however, that there are not sufficient
assets available to permit payment in full of the Liquidation
Preference and the liquidation preferences of all other series of
Preferred Shares, if any, which rank on a parity with the Junior
Participating Preferred Shares, then such remaining assets shall be
distributed ratably to the holders of such parity Shares (including the
Junior Participating Preferred Shares) in proportion to their
respective liquidation preferences. In the event, however, that there
are not sufficient assets available to permit payment in full of the
Common Adjustment after satisfaction of the liquidation preferences of
all series of Preferred Shares, if any, then such remaining assets
shall be distributed ratably to the holders of Common Shares.
(c) In the event the Trust shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Shares payable in
Common Shares, (ii) subdivide the outstanding Common Shares or (iii)
combine the outstanding Common Shares into a smaller number of shares,
then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of Common
Shares outstanding immediately after such event and the denominator of
which is the number of shares of Common Shares that were outstanding
immediately prior to such event.
7. Consolidation, Merger, etc. In case the Trust shall enter into any
consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other stock or securities, cash or any
other property, then in any such case the Junior Participating Preferred Shares
shall at the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of shares, securities, cash or any other property
(payable in kind), as the case may be, into which or for which each Common Share
is changed or exchanged. In the event the Trust shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Shares payable in
Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of Shares, then in each such
case the amount set forth in the preceding sentence with respect to the exchange
or change of Junior Participating Preferred Shares shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
8. Redemption. The Junior Participating Preferred Shares shall not be
redeemable.
9. Ranking. The Junior Participating Preferred Shares shall rank junior
to all other series of the Trust's Preferred Shares as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
10. Amendment. At such time as Junior Participating Preferred Shares
are outstanding, the Declaration shall not be amended, nor shall an Article
Supplementary of the Trust be filed or amended, in any manner which would
materially alter or change the powers, preferences or special
-7-
<PAGE>
rights of the Junior Participating Preferred Shares so as to affect them
adversely without the affirmative vote of the holders of a majority or more of
the outstanding Junior Participating Preferred Shares voting separately as a
class.
11. Fractional Shares. Junior Participating Preferred Shares may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of a
holder of Junior participating Preferred Shares.
IN WITNESS WHEREOF, HOSPITALITY PROPERTIES TRUST has caused these
Articles Supplementary to be signed in its name and on its behalf by a majority
of its entire Board of Trustees and witnessed by its Secretary on May 28, 1997.
WITNESS: HOSPITALITY
PROPERTIES TRUST
/s/ John G. Murray By: /s/ Gerard M. Martin
John G. Murray, Gerard M. Martin, Trustee
Secretary
By: /s/ Barry M. Portnoy
Barry M. Portnoy, Trustee
By: /s/ William J. Sheehan
William J. Sheehan, Trustee
-8-
<PAGE>
THE UNDERSIGNED, President of HOSPITALITY PROPERTIES TRUST, with
respect to the foregoing Articles Supplementary of which this Certificate is
made a part, hereby acknowledges in the name and on behalf of said Trust, the
foregoing Articles Supplementary to be the act of said Trust and hereby
certifies that the matters and facts set forth herein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
/s/ John G. Murray
John G. Murray, President
-9-
EXHIBIT 4.3
HOSPITALITY PROPERTIES TRUST
TO
STATE STREET BANK AND TRUST COMPANY
Trustee
Indenture
Dated as of February 25, 1998
Senior Debt Securities
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS1
PAGE
<S> <C> <C>
PARTIES..................................................................................................1
RECITALS.................................................................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions................................................................................1
"Act" ..............................................................................1
"Additional Amounts"...................................................................1
"Affiliate"............................................................................2
"Authenticating Agent".................................................................2
"Authorized Newspaper".................................................................2
"Bankruptcy Law".......................................................................2
"Bearer Security"......................................................................2
"Board" ..............................................................................2
"Board Resolution".....................................................................2
"Business Day".........................................................................2
"CEDEL" ..............................................................................2
"Commission"...........................................................................2
"Common Depositary"....................................................................2
"Company"..............................................................................2
"Company Request" and "Company Order"..................................................2
"Conversion Event".....................................................................2
"Corporate Trust Office"...............................................................3
"corporation"..........................................................................3
"coupon" ..............................................................................3
"Custodian"............................................................................3
"Declaration"..........................................................................3
"Defaulted Interest"...................................................................3
"Dollar" or "$"........................................................................3
"DTC" ..............................................................................3
"ECU" ..............................................................................3
"Euroclear"............................................................................3
"European Communities".................................................................3
"European Monetary System".............................................................3
"Event of Default".....................................................................3
"Exchange Date"........................................................................3
"Foreign Currency".....................................................................3
"Funds from Operations"................................................................3
"GAAP" ..............................................................................3
"Government Obligations"...............................................................3
"Holder" ..............................................................................4
"Indenture"............................................................................4
"Indexed Security".....................................................................4
"interest".............................................................................4
"Interest Payment Date"................................................................4
"Maturity".............................................................................4
- --------
1 This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture.
<PAGE>
"Officers' Certificate"................................................................4
"Opinion of Counsel"...................................................................4
"Original Issue Discount Security".....................................................4
"Outstanding"..........................................................................4
"Paying Agent".........................................................................5
"Person" ..............................................................................5
"Place of Payment".....................................................................5
"Predecessor Security".................................................................5
"Redemption Date"......................................................................5
"Redemption Price".....................................................................6
"Registered Security"..................................................................6
"Regular Record Date"..................................................................6
"Repayment Date".......................................................................6
"Responsible Officer"..................................................................6
"Security".............................................................................6
"Security Register" and "Security Registrar"...........................................6
"Significant Subsidiary"...............................................................6
"Special Record Date"..................................................................6
"Stated Maturity"......................................................................6
"Subsidiary"...........................................................................6
"Trust Indenture Act" or "TIA".........................................................6
"Trustee"..............................................................................6
"United States"........................................................................7
"United States person".................................................................7
"Yield to Maturity"....................................................................7
SECTION 102. Compliance Certificates and Opinions.......................................................7
SECTION 103. Form of Documents Delivered to Trustee.....................................................7
SECTION 104. Acts of Holders............................................................................8
SECTION 105. Notices, etc., to Trustee and Company......................................................9
SECTION 106. Notice to Holders; Waiver..................................................................9
SECTION 107. Effect of Headings and Table of Contents..................................................10
SECTION 108. Successors and Assigns....................................................................10
SECTION 109. Separability Clause.......................................................................10
SECTION 110. Benefits of Indenture.....................................................................10
SECTION 111. Governing Law.............................................................................10
SECTION 112. Legal Holidays............................................................................10
SECTION 113. No Personal Liability.....................................................................10
ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities.......................................................................11
SECTION 202. Form of Trustee's Certificate of Authentication...........................................11
SECTION 203. Securities Issuable in Global Form........................................................11
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series......................................................12
SECTION 302. Denominations.............................................................................15
SECTION 303. Execution, Authentication, Delivery and Dating............................................15
SECTION 304. Temporary Securities......................................................................16
SECTION 305. Registration, Registration of Transfer and Exchange.......................................18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities..........................................20
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<PAGE>
SECTION 307. Payment of Interest; Interest Rights Preserved............................................20
SECTION 308. Persons Deemed Owners.....................................................................22
SECTION 309. Cancellation..............................................................................22
SECTION 310. Computation of Interest...................................................................23
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture...................................................23
SECTION 402. Application of Trust Funds................................................................24
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.........................................................................24
SECTION 502. Acceleration of Maturity; Rescission and Annulment........................................25
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee...........................26
SECTION 504. Trustee May File Proofs of Claim..........................................................27
SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons....................27
SECTION 506. Application of Money Collected............................................................27
SECTION 507. Limitation on Suits.......................................................................28
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, if any, Interest and
Additional Amounts....................................................................28
SECTION 509. Restoration of Rights and Remedies........................................................28
SECTION 510. Rights and Remedies Cumulative............................................................28
SECTION 511. Delay or Omission Not Waiver..............................................................28
SECTION 512. Control by Holders of Securities..........................................................29
SECTION 513. Waiver of Past Defaults...................................................................29
SECTION 514. Waiver of Usury, Stay or Extension Laws...................................................29
SECTION 515. Undertaking for Costs.....................................................................29
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults........................................................................29
SECTION 602. Certain Rights of Trustee.................................................................30
SECTION 603. Not Responsible for Recitals or Issuance of Securities....................................31
SECTION 604. May Hold Securities.......................................................................31
SECTION 605. Money Held in Trust.......................................................................31
SECTION 606. Compensation and Reimbursement............................................................31
SECTION 607. Corporate Trustee Required; Eligibility; Conflicting Interests............................32
SECTION 608. Resignation and Removal; Appointment of Successor.........................................32
SECTION 609. Acceptance of Appointment by Successor....................................................33
SECTION 610. Merger, Conversion, Consolidation or Succession to Business...............................33
SECTION 611. Appointment of Authentication Agent.......................................................34
SECTION 612. Certain Duties and Responsibilities of the Trustee........................................35
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders..............................................36
SECTION 702. Reports by Trustee........................................................................36
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SECTION 703. Reports by Company........................................................................36
SECTION 704. Company to Furnish to Trustee Names and Addresses of Holders..............................36
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. Consolidations and Mergers of Company and Sales, Leases and Conveyances
Permitted Subject to Certain Conditions...............................................37
SECTION 802. Rights and Duties of Successor Corporation................................................37
SECTION 803. Officers' Certificate and Opinion of Counsel..............................................37
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders........................................37
SECTION 902. Supplemental Indentures with Consent of Holders...........................................38
SECTION 903. Execution of Supplemental Indentures......................................................39
SECTION 904. Effect of Supplemental Indentures.........................................................39
SECTION 905. Conformity with Trust Indenture Act.......................................................39
SECTION 906. Reference in Securities to Supplemental Indentures........................................39
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, Interest and Additional Amounts...................40
SECTION 1002. Maintenance of Office or Agency..........................................................40
SECTION 1003. Money for Securities Payments to Be Held in Trust........................................41
SECTION 1004. Existence................................................................................42
SECTION 1005. Provision of Financial Information.......................................................42
SECTION 1006. Statement as to Compliance...............................................................42
SECTION 1007. Additional Amounts.......................................................................42
SECTION 1008. Waiver of Certain Covenants..............................................................43
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.................................................................43
SECTION 1102. Election to Redeem; Notice to Trustee....................................................43
SECTION 1103. Selection by Trustee of Securities to Be Redeemed........................................43
SECTION 1104. Notice of Redemption.....................................................................44
SECTION 1105. Deposit of Redemption Price..............................................................45
SECTION 1106. Securities Payable on Redemption Date....................................................45
SECTION 1107. Securities Redeemed in Part..............................................................45
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.................................................................46
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities....................................46
SECTION 1203. Redemption of Securities for Sinking Fund................................................46
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ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article................................................................47
SECTION 1302. Repayment of Securities..................................................................47
SECTION 1303. Exercise of Option.......................................................................47
SECTION 1304. When Securities Presented for Repayment Become Due and Payable...........................47
SECTION 1305. Securities Repaid in Part................................................................48
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Applicability of Article; Company's Option to Effect Defeasance or Covenant
Defeasance............................................................................48
SECTION 1402. Defeasance and Discharge.................................................................48
SECTION 1403. Covenant Defeasance......................................................................49
SECTION 1404. Conditions to Defeasance or Covenant Defeasance..........................................49
SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust; Other
Miscellaneous Provisions..............................................................50
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May Be Called................................................51
SECTION 1502. Call, Notice and Place of Meetings.......................................................51
SECTION 1503. Persons Entitled to Vote at Meetings.....................................................51
SECTION 1504. Quorum; Action...........................................................................51
SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings......................52
SECTION 1506. Counting Votes and Recording Action of Meetings..........................................53
TESTIMONIUM.............................................................................................54
SIGNATURES..............................................................................................54
EXHIBIT A -- FORMS OF CERTIFICATION
</TABLE>
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<PAGE>
HOSPITALITY PROPERTIES TRUST
Reconciliation and tie between Trust Indenture Act of 1939, as amended
(the "TIA"), and Indenture, dated as of February 25, 1998.
TIA Section Indenture Section
Sec. 310(a)(1).......................... 607
(a)(2).......................... 607
(b)............................. 607, 608
Sec. 312(a)............................. 704
Sec. 312(c)............................. 701
Sec. 313(a)............................. 702
(c).............................. 702
Sec. 314(a)............................. 1006
(a)(4)........................... 1007
(c)(1)........................... 102
(c)(2)........................... 102
(e).............................. 102
Sec. 315(b)............................. 601
Sec. 316(a) (last sentence)............. 101 ("Outstanding")
(a)(1)(A)....................... 502, 512
(a)(1)(B)....................... 513
(b).............................. 508
Sec. 317(a)(1).......................... 503
(a)(2)........................... 504
Sec. 318(a)............................. 111
(c).............................. 111
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NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
Attention should also be directed to Section 318(c) of the TIA, which
provides that the provisions of Sections 310 to and including 317 of the TIA are
a part of and govern every qualified indenture, whether or not physically
contained therein.
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<PAGE>
INDENTURE, dated as of February 25, 1998, between HOSPITALITY
PROPERTIES TRUST, a Maryland real estate investment trust (hereinafter called
the "Company"), having its principal office at 400 Centre Street, Newton,
Massachusetts 02158, and STATE STREET BANK AND TRUST COMPANY, as Trustee
hereunder (hereinafter called the "Trustee"), having its initial Corporate Trust
Office at Two International Place, Boston, Massachusetts 02110.
RECITALS OF THE COMPANY
The Company deems it necessary to issue from time to time for
lawful purposes its unsecured debt securities (hereinafter called the
"Securities") evidencing its unsecured indebtedness, and has duly authorized the
execution and delivery of this Indenture to provide for the issuance from time
to time of the Securities, unlimited as to principal amount, to bear interest at
the rates or formulas, to mature at such times and to have such other provisions
as shall be fixed as hereinafter provided.
This Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended, that are deemed to be incorporated into this
Indenture by such Act, and shall, to the extent applicable, be governed by such
provisions.
All things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities or of a
series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the TIA,
either directly or by reference therein, have the meanings assigned to them
therein, and the terms "cash transaction" and "self-liquidating paper", as used
in TIA Section 311, shall have the meanings assigned to them in the rules of the
Commission adopted under the TIA;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Three, Article
Five, Article Six and Article Ten, are defined in those Articles.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Additional Amounts" means any additional amounts which are
required by a Security or by or pursuant to a Board Resolution, under
circumstances specified therein, to be paid by the Company in respect of certain
taxes imposed on certain Holders and which are owing to such Holders.
<PAGE>
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any authenticating agent
appointed by the Trustee pursuant to Section 611.
"Authorized Newspaper" means a newspaper, printed in the
English language or in an official language of the country of publication,
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays, and of general circulation in each place in
connection with which the term is used or in the financial community of each
such place. Whenever successive publications are required to be made in
Authorized Newspapers, the successive publications may be made in the same or in
different Authorized Newspapers in the same city meeting the foregoing
requirements and in each case on any Business Day.
"Bankruptcy Law" has the meaning specified in Section 501.
"Bearer Security" means any Security established pursuant to
Section 201 which is payable to bearer.
"Board" means the board of trustees of the Company or any
committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment
or any other particular location referred to in this Indenture or in the
Securities, means, unless otherwise specified with respect to any Securities
pursuant to Section 301, any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in that Place of
Payment or particular location are authorized or required by law, regulation or
executive order to close.
"CEDEL" means Cedel, S.A., or its successor.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties on such date.
"Common Depositary" has the meaning specified in Section 304.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" and "Company Order" mean, respectively, a
written request or order signed in the name of the Company by the President or a
Vice President, and by its Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Company, and delivered to the Trustee.
"Conversion Event" means the cessation of use of (i) a Foreign
Currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public institution
of or within the international banking community, (ii) the ECU both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities or (iii) any currency unit
(or composite currency) other than the ECU for the purposes for which it was
established.
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<PAGE>
"Corporate Trust Office" means the office of the Trustee at
which, at any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Two International
Place, Boston, Massachusetts 02110.
"corporation" includes corporations, associations, companies
and business trusts.
"coupon" means any interest coupon appertaining to a Bearer
Security.
"Custodian" has the meaning specified in Section 501.
"Declaration" has the meaning specified in Section 113.
"Defaulted Interest" has the meaning specified in Section 307.
"Dollar" or "$" means a dollar or other equivalent unit in
such coin or currency of the United States of America as at the time shall be
legal tender for the payment of public and private debts.
"DTC" means The Depository Trust Company, or any successor
thereto.
"ECU" means the European Currency Unit as defined and revised
from time to time by the Council of the European Communities.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels Office, or its successor as operator of the Euroclear System.
"European Communities" means the European Economic Community,
the European Coal and Steel Community and the European Atomic Energy Community.
"European Monetary System" means the European Monetary System
established by the Resolution of December 5, 1978 of the Council of the European
Communities.
"Event of Default" has the meaning specified in Article Five.
"Exchange Date" has the meaning specified in Section 304.
"Foreign Currency" means any currency, currency unit or
composite currency, including, without limitation, the ECU, issued by the
government of one or more countries other than the United States of America or
by any recognized confederation or association of such governments.
"Funds from Operations" for any period means the consolidated
net income of the Company and its Subsidiaries for such period without giving
effect to depreciation and amortization, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on investments
in marketable securities and any provision/benefit for income taxes for such
period, plus funds from operations of unconsolidated joint ventures, all
determined on a consistent basis in accordance with GAAP.
"GAAP" means generally accepted accounting principles in
effect from time to time as used in the United States applied on a consistent
basis.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the government which issued the
Foreign Currency in which the Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the Foreign
Currency in which the Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt;
3
<PAGE>
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the Government
Obligation evidenced by such depository receipt.
"Holder" means, in the case of a Registered Security, the
Person in whose name a Security is registered in the Security Register and, in
the case of a Bearer Security, the bearer thereof and, when used with respect to
any coupon, shall mean the bearer thereof.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
and shall include the terms of particular series of Securities established as
contemplated by Section 301; provided, however, that, if at any time more than
one Person is acting as Trustee under this instrument, "Indenture" shall mean,
with respect to any one or more series of Securities for which such Person is
Trustee, this instrument as originally executed or as it may from time to time
be supplemented or amended by one or more applicable provisions hereof and shall
include the terms of the or those particular series of Securities for which such
Person is Trustee established as contemplated by Section 301, exclusive,
however, of any provisions or terms which relate solely to other series of
Securities for which such Person is Trustee, regardless of when such terms or
provisions were adopted, and exclusive of any provisions or terms adopted by
means of one or more indentures supplemental hereto executed and delivered after
such Person had become such Trustee but to which such Person, as such Trustee,
was not a party.
"Indexed Security" means a Security the terms of which provide
that the principal amount thereof payable at Stated Maturity may be more or less
than the principal face amount thereof at original issuance.
"interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity, shall
mean interest payable after Maturity, and, when used with respect to a Security
which provides for the payment of Additional Amounts pursuant to Section 1007,
includes such Additional Amounts.
"Interest Payment Date", when used with respect to any
Security, means the Stated Maturity of an installment of interest on such
Security.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, notice of redemption, notice of
option to elect repayment or otherwise.
"Officers' Certificate" means a certificate signed by the
President or a Vice President and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company (including counsel who is an employee of the
Company) and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 502.
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption or repayment at the option of the Holder money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Securities and any coupons appertaining thereto; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made;
4
<PAGE>
(iii) Securities, except to the extent provided in Sections
1402 and 1403, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Fourteen;
(iv) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company; and
(v) Securities converted into Common Shares, Preferred Shares
or other securities of the Company pursuant to or in accordance with this
Indenture if the terms of such Securities provide for convertibility pursuant to
Section 301;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders for quorum purposes, and for the purpose of making the
calculations required by TIA Section 313, (i) the principal amount of an
Original Issue Discount Security that may be counted in making such
determination or calculation and that shall be deemed to be Outstanding for such
purpose shall be equal to the amount of principal thereof that would be (or
shall have been declared to be) due and payable, at the time of such
determination, upon a declaration of acceleration of the maturity thereof
pursuant to Section 502, (ii) the principal amount of any Security denominated
in a Foreign Currency that may be counted in making such determination or
calculation and that shall be deemed Outstanding for such purpose shall be equal
to the Dollar equivalent, determined pursuant to Section 301 as of the date such
Security is originally issued by the Company, of the principal amount (or, in
the case of an Original Issue Discount Security, the Dollar equivalent as of
such date of original issuance of the amount determined as provided in clause
(i) above) of such Security, (iii) the principal amount of any Indexed Security
that may be counted in making such determination or calculation and that shall
be deemed outstanding for such purpose shall be equal to the principal face
amount of such Indexed Security at original issuance, unless otherwise provided
with respect to such Security pursuant to Section 301, and (iv) Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of (and premium, if any) or interest on any Securities or
coupons on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities
of or within any series, means the place or places where the principal of (and
premium, if any) and interest on such Securities are payable as specified as
contemplated by Sections 301 and 1002.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon appertains shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security or
the Security to which the mutilated, destroyed, lost or stolen coupon
appertains.
"Redemption Date", when used with respect to any Security to
be redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
5
<PAGE>
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" shall mean any Security established
pursuant to Section 201 which is registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Registered Securities of or within any series means the date
specified for that purpose as contemplated by Section 301, whether or not a
Business Day.
"Repayment Date" means, when used with respect to any Security
to be repaid at the option of the Holder, the date fixed for such repayment by
or pursuant to this Indenture.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president (whether or not designated by a number or a word
or words added before or after the title "vice president"), the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer, the controller or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of such officer's knowledge and familiarity with the particular subject.
"Security" has the meaning stated in the first recital of this
Indenture and, more particularly, means any Security or Securities authenticated
and delivered under this Indenture; provided, however, that, if at any time
there is more than one Person acting as Trustee under this Indenture,
"Securities" with respect to the Indenture as to which such Person is Trustee
shall have the meaning stated in the first recital of this Indenture and shall
more particularly mean Securities authenticated and delivered under this
Indenture, exclusive, however, of Securities of any series as to which such
Person is not Trustee.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Significant Subsidiary" means any Subsidiary which is a
"significant subsidiary" (as defined in Article I, Rule 1-02 of Regulation S-X,
promulgated under the Securities Act of 1933, as amended) of the Company.
"Special Record Date" for the payment of any Defaulted
Interest on the Registered Securities of or within any series means a date fixed
by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security or a coupon representing such installment of interest
as the fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.
"Subsidiary" means a corporation a majority of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries of the Company. For the purposes of this definition,
"voting stock" means stock having voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended and as in force at the date as of which this Indenture was
executed, except as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder;
provided, however, that if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean only
the Trustee with respect to Securities of that series.
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<PAGE>
"United States" means, unless otherwise specified with respect
to any Securities pursuant to Section 301, the United States of America
(including the states and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
"United States person" means, unless otherwise specified with
respect to any Securities pursuant to Section 301, an individual who is a
citizen or resident of the United States, a corporation, partnership or other
entity created organized in or under the laws of the United States or an estate
or trust the income of which is subject to United States federal income taxation
regardless of its source.
"Yield to Maturity" means the yield to maturity, computed at
the time of issuance of a Security (or, if applicable, at the most recent
redetermination of interest on such Security) and as set forth in such Security
in accordance with generally accepted United States bond yield computation
principles.
SECTION 102. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including certificates
delivered pursuant to Section 1006) shall include:
(1) a statement that each individual signing such
certificate or opinion has read such condition or covenant and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such condition or covenant has been complied with; and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by or covered by an
opinion of any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion as to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a
certificate of or representations by counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the opinion, certificate or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such Opinion of Counsel, certificate or
representations may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or any Subsidiary stating that the information as to such factual
matters is in the possession of the Company or such Subsidiary, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations as to such matters are erroneous.
Any certificate, statement or opinion of an officer of the
Company or of counsel may be based, insofar as it relates to accounting matters,
upon a certificate or opinion or representations by an accountant or firm or
accountants in the employ of the Company, unless such officer or counsel, as the
case may be, knows, or in the exercise of reasonable
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care should know, that the certificate or opinion or representation with respect
to the accounting matters upon which his certificate, statement or opinion is
based are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders of the Outstanding Securities of
all series or one or more series, as the case may be, may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by agents duly appointed in writing. If Securities of
a series are issuable as Bearer Securities, any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders of Securities of such series may, alternatively, be
embodied in and evidenced by the record of Holders of Securities of such series
voting in favor thereof, either in person or by proxies duly appointed in
writing, at any meeting of Holders of Securities of such series duly called and
held in accordance with the provisions of Article Fifteen, or a combination of
such instruments and any such record. Except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
or record or both are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any such record
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments
or so voting at any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and conclusive
in favor of the Trustee and the Company and any agent of the Trustee or the
Company, if made in the manner provided in this Section. The record of any
meeting of Holders of Securities shall be proved in the manner provided in
Section 1506.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other reasonable manner which the Trustee deems sufficient.
(c) The ownership of Registered Securities shall be proved by
the Security Register.
(d) The ownership of Bearer Securities may be proved by the
production of such Bearer Securities or by a certificate executed, as
depositary, by any trust company, bank, banker or other depositary, wherever
situated, if such certificate shall be deemed by the Trustee to be satisfactory,
showing that at the date therein mentioned such Person had on deposit with such
depositary, or exhibited to it, the Bearer Securities therein described; or such
facts may be proved by the certificate or affidavit of the Person holding such
Bearer Securities, if such certificate or affidavit is deemed by the Trustee to
be satisfactory. The Trustee and the Company may assume that such ownership of
any Bearer Security continues until (1) another certificate or affidavit bearing
a later date issued in respect of the same Bearer Security is produced, or (2)
such Bearer Security is produced to the Trustee by some other Person, or (3)
such Bearer Security is surrendered in exchange for a Registered Security, or
(4) such Bearer Security is no longer Outstanding. The ownership of Bearer
Securities may also be proved in any other manner which the Trustee deems
sufficient.
(e) If the Company shall solicit from the Holders of
Registered Securities any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Company may, at its option, in or pursuant to
a Board Resolution, fix in advance a record date for the determination of
Holders entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose
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the Outstanding Securities shall be computed as of such record date; provided
that no such authorization, agreement or consent by the Holders on such record
date shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than eleven months after the record date.
(f) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee, any
Security Registrar, any Paying Agent, any Authenticating Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION 105. Notices, etc., to Trustee and Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Department, Re: Hospitality Properties
Trust, and specifically referring to the applicable series of
Securities, or
(2) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture or at any
other address previously furnished in writing to the Trustee by the
Company, and specifically referring to the applicable series of
Securities.
SECTION 106. Notice to Holders; Waiver. Where this Indenture
provides for notice of any event to Holders of Registered Securities by the
Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each such Holder affected by such event, at his address as
it appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders of Registered Securities is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders of Registered Securities or the sufficiency of any notice to
Holders of Bearer Securities given as provided herein. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice.
If by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification to Holders of Registered Securities
as shall be made with the approval of the Trustee shall constitute a sufficient
notification to such Holders for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise
specified with respect to any Securities pursuant to Section 301, where this
Indenture provides for notice to Holders of Bearer Securities of any event, such
notice shall be sufficiently given if published in an Authorized Newspaper in
The City of New York and in such other city or cities as may be specified in
such Securities on a Business Day, such publication to be not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. Any such notice shall be deemed to have been given on the date
of such publication or, if published more than once, on the date of the first
such publication.
If by reason of the suspension of publication of any
Authorized Newspaper or Authorized Newspapers or by reason of any other cause it
shall be impracticable to publish any notice to Holders of Bearer Securities as
provided above, then such notification to Holders of Bearer Securities as shall
be given with the approval of the Trustee shall constitute sufficient notice to
such Holders for every purpose hereunder. Neither the failure to give notice by
publication to any particular Holder of Bearer Securities as provided above, nor
any defect in any notice so published, shall affect the sufficiency of such
notice with respect to other Holders of Bearer Securities or the sufficiency of
any notice to Holders of Registered Securities given as provided herein.
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Any request, demand, authorization, direction, notice, consent
or waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 107. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 109. Separability Clause. In case any provision in
this Indenture or in any Security or coupon shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture. Nothing in this Indenture
or in the Securities or coupons, express or implied, shall give to any Person,
other than the parties hereto, any Security Registrar, any Paying Agent, any
Authenticating Agent and their successors hereunder and the Holders any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law. This Indenture and the Securities
and coupons shall be governed by and construed in accordance with the law of The
Commonwealth of Massachusetts. This Indenture is subject to the provisions of
the TIA that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 112. Legal Holidays. In any case where any Interest
Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated
Maturity or Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or any
Security or coupon other than a provision in the Securities of any series which
specifically states that such provision shall apply in lieu hereof), payment of
interest or any Additional Amounts or principal (and premium, if any) or sinking
fund payment need not be made at such Place of Payment on such date, but may be
made on the next succeeding Business Day at such Place of Payment with the same
force and effect as if made on the Interest Payment Date, Redemption Date,
Repayment Date or sinking fund payment date, or at the Stated Maturity or
Maturity; provided that no interest shall accrue on the amount so payable for
the period from and after such Interest Payment Date, Redemption Date, Repayment
Date, sinking fund payment date, Stated Maturity or Maturity, as the case may
be.
SECTION 113. No Personal Liability. THE DECLARATION OF TRUST
OF THE COMPANY, AS AMENDED AND RESTATED ON AUGUST 21, 1995, A COPY OF WHICH,
TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE
OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,
PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES
UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE
COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE
COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE
PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
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ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities. The Registered Securities,
if any, of each series and the Bearer Securities, if any, of each series and
related coupons shall be in substantially the forms as shall be established in
one or more indentures supplemental hereto or approved from time to time by or
pursuant to a Board Resolution in accordance with Section 301, shall have such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture or any indenture supplemental hereto,
and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements placed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange on which the Securities may be listed, or to conform to
usage.
Unless otherwise specified as contemplated by Section 301,
Bearer Securities shall have interest coupons attached.
The definitive Securities and coupons shall be printed,
lithographed or engraved or produced by any combination of these methods on a
steel engraved border or steel engraved borders or may be produced in any other
manner, all as determined by the officers of the Company executing such
Securities or coupons, as evidenced by their execution of such Securities or
coupons.
SECTION 202. Form of Trustee's Certificate of Authentication.
Subject to Section 611, the Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By______________________________
Authorized Officer
SECTION 203. Securities Issuable in Global Form. If Securities
of or within a series are issuable in global form, as specified in and as
contemplated by Section 301, then, notwithstanding clause (8) of Section 301 and
the provisions of Section 302, any such Security shall represent such of the
Outstanding Securities of such series as shall be specified therein and may
provide that it shall represent the aggregate amount of Outstanding Securities
of such series from time to time endorsed thereon and that the aggregate amount
of Outstanding Securities of such series represented thereby may from time to
time be increased or decreased to reflect exchanges. Any endorsement of a
Security in global form to reflect the amount, or any increase or decrease in
the amount, of Outstanding Securities represented thereby shall be made by the
Trustee in such manner and upon instructions given by such Person or Persons as
shall be specified therein or in the Company Order to be delivered to the
Trustee pursuant to Section 303 or 304. Subject to the provisions of Section 303
and, if applicable, Section 304, the Trustee shall deliver and redeliver any
Security in permanent global form in the manner and upon instructions given by
the Person or Persons specified therein or in the applicable Company Order. If a
Company Order pursuant to Section 303 or 304 has been, or simultaneously is,
delivered, any instructions by the Company with respect to endorsement or
delivery or redelivery of a Security in global form shall be in writing but need
not comply with Section 102 and need not be accompanied by an Opinion of
Counsel.
The provisions of the last sentence of Section 303 shall apply
to any Security represented by a Security in global form if such Security was
never issued and sold by the Company and the Company delivers to the Trustee the
Security in global form together with written instructions (which need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel)
with regard to the reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 303.
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Notwithstanding the provisions of Section 307, unless
otherwise specified as contemplated by Section 301, payment of principal of and
any premium and interest on any Security in permanent global form shall be made
to the Person or Persons specified therein.
Notwithstanding the provisions of Section 308 and except as
provided in the preceding paragraph, the Company, the Trustee and any agent of
the Company and the Trustee shall treat as the Holder of such principal amount
of Outstanding Securities represented by a permanent global Security (i) in the
case of a permanent global Security in registered form, the Holder of such
permanent global Security in registered form or (ii) in the case of a permanent
global Security in bearer form, Euroclear or CEDEL.
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There
shall be established in one or more Board Resolutions or pursuant to authority
granted by one or more Board Resolutions and, subject to Section 303, set forth,
or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series, any or all of the following, as applicable (each of
which (except for the matters set forth in clauses (1), (2) and (14) below), if
so provided, may be determined from time to time by the Company with respect to
unissued Securities of the series when issued from time to time):
(1) the title of the Securities of the series (which
shall distinguish the Securities of such series from all other series
of Securities);
(2) any limit upon the aggregate principal amount of
the Securities of the series that may be authenticated and delivered
under this Indenture (except for Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of,
other Securities of the series pursuant to Section 304, 305, 306, 906,
1107 or 1305);
(3) the date or dates, or the method by which such
date or dates will be determined, on which the principal of the
Securities of the series shall be payable;
(4) the rate or rates at which the Securities of the
series shall bear interest, if any, or the method by which such rate or
rates shall be determined, the date or dates from which such interest
shall accrue or the method by which such date or dates shall be
determined, the Interest Payment Dates on which such interest will be
payable and the Regular Record Date, if any, for the interest payable
on any Registered Security on any Interest Payment Date, or the method
by which such date shall be determined, and the basis upon which
interest shall be calculated if other than that of a 360-day year of
twelve 30-day months;
(5) the place or places where the principal of, any
premium and interest on and any Additional Amounts payable in respect
of, Securities of the series shall be payable, any Registered
Securities of the series may be surrendered for registration of
transfer, exchange or conversion and notices or demands to or upon the
Company in respect of the Securities of the series and this Indenture
may be served;
(6) the period or periods within which or the date or
dates on which, the price or prices at which, and other terms and
conditions upon which Securities of the series may be redeemed, in
whole or in part, at the option of the Company, if the Company is to
have the option;
(7) the obligation, if any, of the Company to redeem,
repay or purchase Securities of the series pursuant to any sinking fund
or analogous provision or at the option of a Holder thereof, and the
period or periods within which or the date or dates on which, the price
or prices at which, and other terms and
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conditions upon which Securities of the series shall be redeemed,
repaid or purchased, in whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any
integral multiple thereof, the denominations in which any Registered
Securities of the series shall be issuable and the denomination or
denominations in which any Bearer Securities of the series shall be
issuable;
(9) if other than Dollars, the Foreign Currency or
Currencies in which payment of the principal of (and premium, if any),
interest, if any, on, and Additional Amounts, if any, on the Securities
of the series shall be payable, in which the Securities of the series
shall be redeemed or purchased or in which the Securities of the series
shall be denominated;
(10) if other than the principal amount thereof, the
portion of the principal amount of Securities of the series that shall
be payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 502 or, if applicable, the portion of the principal
amount of Securities of the series that is convertible in accordance
with the provisions of this Indenture, or the method by which such
portion shall be determined;
(11) whether the amount of payments of principal of
(and premium, if any) or interest, if any, on the Securities of the
series may be determined with reference to an index, formula or other
method (which index, formula or method may be based, without
limitation, on one or more currencies, currency units, composite
currencies, commodities, equity indices or other indices), and the
manner in which such amounts shall be determined;
(12) whether the principal of (and premium, if any)
or interest, if any on or Additional Amounts, if any, on the Securities
of the series are to be payable, at the election of the Company or a
Holder thereof, in a currency or currencies, currency unit or units or
composite currency or currencies other than that in which such
Securities are denominated or stated to be payable, the period or
periods within which, and the terms and conditions upon which, such
election may be made, and the time and manner of, and identity of the
exchange rate agent with responsibility for determining the exchange
rate between the currency or currencies, currency unit or units or
composite currency or currencies in which such Securities are
denominated or stated to be payable and the currency or currencies,
currency unit or units or composite currency or currencies in which
such Securities are to be paid;
(13) provisions, if any, granting special rights to
the Holders of Securities of the series upon the occurrence of such
events as may be specified;
(14) any deletions from, modifications of or
additions to the Events of Default or covenants of the Company set
forth in this Indenture with respect to Securities of the series
(whether or not such Events of Default or covenants are consistent with
the Events of Default or covenants set forth herein);
(15) whether Securities of the series are to be
issuable as Registered Securities, Bearer Securities (with or without
coupons) or both, any restrictions applicable to the offer, sale or
delivery of Bearer Securities and the terms upon which Bearer
Securities of the series may be exchanged for Registered Securities of
the series and vice versa (if permitted by applicable laws and
regulations), whether any Securities of the series are to be issuable
initially in temporary global form and whether any Securities of the
series are to be issuable in permanent global form with or without
coupons and, if so, whether beneficial owners of interests in any such
permanent global Security may exchange such interests for Securities of
such series and of like tenor of any authorized form and denomination
and the circumstances under which any such exchanges may occur, if
other than in the manner provided in Section 305, and, if Registered
Securities of the series are to be issuable as a global Security, the
identity of the depositary for such series;
(16) the date as of which any Bearer Securities of
the series and any temporary global Security representing Outstanding
Securities of the series shall be dated if other than the date of
original issuance of the first Security of the series to be issued;
(17) the Person to whom any interest on any
Registered Security of the series shall be payable, if other than the
Person in whose name that Security (or one or more Predecessor
Securities) is
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registered at the close of business on the Regular Record Date for such
interest, the manner in which, or the Person to whom, any interest on
any Bearer Security of the series shall be payable, if otherwise than
upon presentation and surrender of the coupons appertaining thereto as
they severally mature, and the extent to which, or the manner in which,
any interest payable on a temporary global Security on an Interest
Payment Date will be paid if other than in the manner provided in
Section 304;
(18) the applicability, if any, of Sections 1402
and/or 1403 to the Securities of the series and any provisions in
modification of, in addition to or in lieu of any of the provisions of
Article Fourteen;
(19) if the Securities of such series are to be
issuable in definitive form (whether upon original issue or upon
exchange of a temporary Security of such series) only upon receipt of
certain certificates or other documents or satisfaction of other
conditions, then the form and/or terms of such certificates, documents
or conditions;
(20) if the Securities of the series are to be issued
upon the exercise of warrants, the time, manner and place for such
Securities to be authenticated and delivered;
(21) whether and under what circumstances the Company
will pay Additional Amounts as contemplated by Section 1007 on the
Securities of the series to any Holder who is not a United States
person (including any modification to the definition of such term) in
respect of any tax, assessment or governmental charge and, if so,
whether the Company will have the option to redeem such Securities
rather than pay such Additional Amounts (and the terms of any such
option);
(22) the obligation, if any, of the Company to permit
the conversion of the Securities of such series into Common Shares or
Preferred Shares of the Company or other securities, as the case may
be, and the terms and conditions upon which such conversion shall be
effected (including, without limitation, the initial conversion price
or rate, the conversion period, any adjustment of the applicable
conversion price and any requirements relative to the reservation of
such shares for purposes of conversion);
(23) the terms and conditions, if any, upon which
payment of the Securities of such series shall be subordinated to the
Securities of another series or other indebtedness of the Company
(including, without limitation, indebtedness which ranks senior to such
Securities; restrictions on payments to Holders of such Securities
while a default with respect to such senior indebtedness is continuing;
restrictions, if any, on payments to the Holders of such Securities
following an Event of Default; and any requirements for Holders of such
Securities to remit certain payments to the holders of such senior
indebtedness);
(24) if the Securities of the series are to be
guaranteed, the term and conditions of such guarantee;
(25) if other than the Trustee, the identity of each
Security Registrar and/or Paying Agent for the series; and
(26) any other terms of the series (which terms shall
not be inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons appertaining
to any Bearer Securities of such series shall be substantially identical except,
in the case of Registered Securities, as to denominations and except as may
otherwise be provided in or pursuant to the Board Resolution establishing the
series (subject to Section 303) and set forth in an Officers' Certificate or in
any indenture supplemental hereto. All Securities of any one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the Holders, for issuances of additional
Securities of such series.
If any of the terms of the Securities of any series are
established by action taken pursuant to one or more Board Resolutions, a copy of
an appropriate record of such action(s) shall be certified by the Secretary or
an Assistant Secretary of the Company and delivered to the Trustee at or prior
to the delivery of the Officers' Certificate setting forth the terms of the
Securities of such series.
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SECTION 302. Denominations. The Securities of each series
shall be issuable in such denominations as shall be specified as contemplated by
Section 301. With respect to Securities of any series denominated in Dollars, in
the absence of any such provisions, the Registered Securities of such series,
other than Registered Securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities and any coupons appertaining thereto shall be executed on behalf
of the Company by its President or one of its Vice Presidents and may be, but
shall not be required to be, attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities and
coupons may be manual or facsimile signatures of the present or any future such
authorized officer and may be imprinted or otherwise reproduced on the
Securities.
Securities or coupons bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Securities or did not hold such offices at the date of such Securities
or coupons.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series,
together with any coupon appertaining thereto, executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities; provided, however, that,
in connection with its original issuance, no Bearer Security shall be mailed or
otherwise delivered to any location in the United States; and provided further
that, unless otherwise specified with respect to any series of Securities
pursuant to Section 301, a Bearer Security may be delivered in connection with
its original issuance only if the Person entitled to receive such Bearer
Security shall have furnished a certificate in the form set forth in Exhibit A-1
to this Indenture or such other certificate as may be specified with respect to
any series of Securities pursuant to Section 301, dated no earlier than 15 days
prior to the earlier of the date on which such Bearer Security is delivered and
the date on which any temporary Security first becomes exchangeable for such
Bearer Security in accordance with the terms of such temporary Security and this
Indenture. If any Security shall be represented by a permanent global Bearer
Security, then, for purposes of this Section and Section 304, the notation of a
beneficial owner's interest therein upon original issuance of such Security or
upon exchange of a portion of a temporary global Security shall be deemed to be
delivery in connection with its original issuance of such beneficial owner's
interest in such permanent global Security. Except as permitted by Section 306,
the Trustee shall not authenticate and deliver any Bearer Security unless all
appurtenant coupons for interest then matured have been detached and cancelled.
If all the Securities of any series are not to be issued at one time and if the
Board Resolution or supplemental indenture establishing such series shall so
permit, such Company Order may set forth procedures acceptable to the Trustee
for the issuance of such Securities and determining the terms of particular
Securities of such series, such as interest rate or formula, maturity date, date
of issuance and date from which interest shall accrue. In authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to TIA Sections 315(a) through 315(d)) shall be fully protected in
relying upon,
(i) an Opinion of Counsel stating that
(a) the form or forms of such Securities and
any coupons have been established in conformity with the
provisions of this Indenture;
(b) the terms of such Securities and any
coupons have been established in conformity with the
provisions of this Indenture; and
(c) such Securities, together with any
coupons appertaining thereto, when completed by appropriate
insertions and executed and delivered by the Company to the
Trustee for authentication in accordance with this Indenture,
authenticated and delivered by the Trustee in accordance with
this Indenture and issued by the Company in the manner and
subject to any conditions specified in such Opinion of
Counsel, will constitute legal, valid and binding obligations
of the Company, enforceable in accordance with their terms,
subject to applicable bankruptcy,
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insolvency, reorganization and other similar laws of general
applicability relating to or affecting the enforcement of
creditors' rights generally and to general equitable
principles; and
(ii) an Officers' Certificate stating that all
conditions precedent provided for in this Indenture relating to the
issuance of the Securities have been complied with and that, to the
best of the knowledge of the signers of such certificate, no Event of
Default with respect to any of the Securities shall have occurred and
be continuing.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
obligations or immunities under the Securities and this Indenture or otherwise
in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the
preceding paragraph, if all the Securities of any series are not to be issued at
one time, it shall not be necessary to deliver an Officers' Certificate
otherwise required pursuant to Section 301 or a Company Order, or an Opinion of
Counsel or an Officers' Certificate otherwise required pursuant to the preceding
paragraph at the time of issuance of each Security of such series, but such
order, opinion and certificates, with appropriate modifications to cover such
future issuances, shall be delivered at or before the time of issuance of the
first Security of such series.
Each Registered Security shall be dated the date of its
authentication and each Bearer Security shall be dated as of the date specified
as contemplated by Section 301.
No Security or coupon shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless there appears on
such Security or Security to which such coupon appertains a certificate of
authentication substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized officer, and such certificate
upon any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled to
the benefits of this Indenture. Notwithstanding the foregoing, if any Security
shall have been authenticated and delivered hereunder but never issued and sold
by the Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 309 together with a written statement (which
need not comply with Section 102 and need not be accompanied by an Opinion of
Counsel) stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall be deemed never
to have been authenticated and delivered hereunder and shall never be entitled
to the benefits of this Indenture.
SECTION 304. Temporary Securities. (a) Pending the preparation
of definitive Securities of any series, the Company may execute, and upon
Company Order the Trustee shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, in registered form, or,
if authorized, in bearer form with one or more coupons or without coupons, and
with such appropriate insertions, omissions, substitutions and other variations
as the officers executing such Securities may determine, as conclusively
evidenced by their execution of such Securities. In the case of Securities of
any series, such temporary Securities may be in global form.
Except in the case of temporary Securities in global form
(which shall be exchanged in accordance with Section 304(b) or as otherwise
provided in or pursuant to a Board Resolution), if temporary Securities of any
series are issued, the Company will cause definitive Securities of that series
to be prepared without unreasonable delay. After the preparation of definitive
Securities of such series, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series upon surrender of the
temporary Securities of such series at the office or agency of the Company in a
Place of Payment for that series, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities of any series
(accompanied by any non-matured coupons appertaining thereto), the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of the same series of authorized
denominations; provided, however, that no definitive Bearer Security shall be
delivered in exchange for a temporary Registered Security; and provided further
that a definitive Bearer Security shall be delivered in exchange for a temporary
Bearer Security only in compliance with the conditions set forth in Section 303.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.
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(b) Unless otherwise provided in or pursuant to a Board
Resolution, this Section 304(b) shall govern the exchange of temporary
Securities issued in global form other than through the facilities of DTC. If
any such temporary Security is issued in global form, then such temporary global
Security shall, unless otherwise provided therein, be delivered to the London
office of a depositary or common depositary (the "Common Depositary"), for the
benefit of Euroclear and CEDEL, for credit to the respective accounts of the
beneficial owners of such Securities (or to such other accounts as they may
direct).
Without unnecessary delay but in any event not later than the
date specified in, or determined pursuant to the terms of, any such temporary
global Security (the "Exchange Date"), the Company shall deliver to the Trustee
definitive Securities, in aggregate principal amount equal to the principal
amount of such temporary global Security, executed by the Company. On or after
the Exchange Date, such temporary global Security shall be surrendered by the
Common Depositary to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge, and the Trustee shall authenticate and deliver, in exchange for
each portion of such temporary global Security, an equal aggregate principal
amount of definitive Securities of the same series of authorized denominations
and of like tenor as the portion of such temporary global Security to be
exchanged. The definitive Securities to be delivered in exchange for any such
temporary global Security shall be in bearer form, registered form, permanent
global bearer form or permanent global registered form, or any combination
thereof, as specified as contemplated by Section 301, and, if any combination
thereof is so specified, as requested by the beneficial owner thereof; provided,
however, that, unless otherwise specified in such temporary global Security,
upon such presentation by the Common Depositary, such temporary global Security
is accompanied by a certificate dated the Exchange Date or a subsequent date and
signed by Euroclear as to the portion of such temporary global Security held for
its account then to be exchanged and a certificate dated the Exchange Date or a
subsequent date and signed by CEDEL as to the portion of such temporary global
Security held for its account then to be exchanged, each in the form set forth
in Exhibit A-2 to this Indenture or in such other form as may be established
pursuant to Section 301; and provided further that definitive Bearer Securities
shall be delivered in exchange for a portion of a temporary global Security only
in compliance with the requirements of Section 303.
Unless otherwise specified in such temporary global Security,
the interest of a beneficial owner of Securities of a series in a temporary
global Security shall be exchanged for definitive Securities of the same series
and of like tenor following the Exchange Date when the account holder instructs
Euroclear or CEDEL, as the case may be, to request such exchange on his behalf
and delivers to Euroclear or CEDEL, as the case may be, a certificate in the
form set forth in Exhibit A-1 to this Indenture (or in such other forms as may
be established pursuant to Section 301), dated no earlier than 15 days prior to
the Exchange Date, copies of which certificate shall be available from the
offices of Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed
for such series of Securities and each Paying Agent. Unless otherwise specified
in such temporary global Security, any such exchange shall be made free of
charge to the beneficial owners of such temporary global Security, except that a
Person receiving definitive Securities must bear the cost of insurance, postage,
transportation and the like unless such Person takes delivery of such definitive
Securities in person at the offices of Euroclear or CEDEL. Definitive Securities
in bearer form to be delivered in exchange for any portion of a temporary global
Security shall be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of the same series and of like
tenor authenticated and delivered hereunder, except that, unless otherwise
specified as contemplated by Section 301, interest payable on a temporary global
Security on an Interest Payment Date for Securities of such series occurring
prior to the applicable Exchange Date shall be payable to Euroclear and CEDEL on
such Interest Payment Date upon delivery by Euroclear and CEDEL to the Trustee
of a certificate or certificates in the form set forth in Exhibit A-2 to this
Indenture (or in such other forms as may be established pursuant to Section
301), for credit without further interest on or after such Interest Payment Date
to the respective accounts of persons who are the beneficial owners of such
temporary global Security on such Interest Payment Date and who have each
delivered to Euroclear or CEDEL, as the case may be, a certificate dated no
earlier than 15 days prior to the Interest Payment Date occurring prior to such
Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in such
other forms as may be established pursuant to Section 301). Notwithstanding
anything to the contrary herein contained, the certifications made pursuant to
this paragraph shall satisfy the certification requirements of the preceding two
paragraphs of this Section 304 (b) and of the third paragraph of Section 303 of
this Indenture and the interests of the Persons who are the beneficial owners of
a temporary global Security with respect to which such certification was made
will be exchanged for definitive Securities of the same series and of like tenor
on the Exchange Date or the date of certification if such date occurs after the
Exchange Date, without further act or deed by such beneficial owners. Except as
otherwise provided in this paragraph, no payments of principal
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or interest owing with respect to a beneficial interest in a temporary global
Security will be made unless and until such interest in such temporary global
Security shall have been exchanged for an interest in a definitive Security. Any
interest so received by Euroclear and CEDEL and not paid as herein provided
shall be returned to the Trustee prior to the expiration of two years after such
Interest Payment Date in order to be repaid to the Company.
SECTION 305. Registration, Registration of Transfer and
Exchange. The Company shall cause to be kept at the Corporate Trust Office of
the Trustee or in any office or agency of the Company in a Place of Payment a
register for each series of Securities (the registers maintained in such office
or in any such office or agency of the Company in a Place of Payment being
herein sometimes referred to collectively as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Registered Securities and of transfers of
Registered Securities. The Security Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. The Trustee, at its Corporate Trust Office, is hereby initially appointed
"Security Registrar" for the purpose of registering Registered Securities and
transfers of Registered Securities on such Security Register as herein provided.
In the event that the Trustee shall cease to be Security Registrar, it shall
have the right to examine the Security Register at all reasonable times.
Subject to the provisions of this Section 305, upon surrender
for registration of transfer of any Registered Security of any series at any
office or agency of the Company in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Registered
Securities of the same series, of any authorized denominations and of a like
aggregate principal amount, bearing a number not contemporaneously outstanding,
and containing identical terms and provisions.
Subject to the provisions of this Section 305, at the option
of the Holder, Registered Securities of any series may be exchanged for other
Registered Securities of the same series, of any authorized denomination or
denominations and of a like aggregate principal amount, containing identical
terms and provisions, upon surrender of the Registered Securities to be
exchanged at any such office or agency. Whenever any such Registered Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Registered Securities which the Holder
making the exchange is entitled to receive. Unless otherwise specified with
respect to any series of Securities as contemplated by Section 301, Bearer
Securities may not be issued in exchange for Registered Securities.
If (but only if) permitted by the applicable Board Resolution
and (subject to Section 303) set forth in the applicable Officers' Certificate,
or in any indenture supplemental hereto, delivered as contemplated by Section
301, at the option of the Holder, Bearer Securities of any series may be
exchanged for Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor, upon surrender
of the Bearer Securities to be exchanged at any such office or agency, with all
unmatured coupons and all matured coupons in default thereto appertaining. If
the Holder of a Bearer Security is unable to produce any such unmatured coupon
or coupons or matured coupon or coupons in default, any such permitted exchange
may be effected if the Bearer Securities are accompanied by payment in funds
acceptable to the Company in an amount equal to the face amount of such missing
coupon or coupons, or the surrender of such missing coupon or coupons may be
waived by the Company and the Trustee if there is furnished to them such
security or indemnity as they may require to save each of them and any Paying
Agent harmless. If thereafter the Holder of such Security shall surrender to any
Paying Agent any such missing coupon in respect of which such a payment shall
have been made, such Holder shall be entitled to receive the amount of such
payment; provided, however, that, except as otherwise provided in Section 1002,
interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at an office or agency located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any series
is surrendered at any such office or agency in a permitted exchange for a
Registered Security of the same series and like tenor after the close of
business at such office or agency on (i) any Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) any Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of Defaulted Interest,
such Bearer Security shall be surrendered without the coupon relating to such
Interest Payment Date or proposed date for payment, as the case may be, and
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon when due in accordance
with the provisions of this Indenture. Whenever any Bearer Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
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Notwithstanding the foregoing, except as otherwise specified
as contemplated by Section 301, any permanent global Security shall be
exchangeable only as provided in this paragraph. If the depositary for any
permanent global Security is DTC, then, unless the terms of such global Security
expressly permit such global Security to be exchanged in whole or in part for
definitive Securities, a global Security may be transferred, in whole but not in
part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a successor
to DTC for such global Security selected or approved by the Company or to a
nominee of such successor to DTC. If at any time DTC notifies the Company that
it is unwilling or unable to continue as depositary for the applicable global
Security or Securities or if at any time DTC ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, if so required
by applicable law or regulation, the Company shall appoint a successor
depositary with respect to such global Security or Securities. If (x) a
successor depositary for such global Security or Securities is not appointed by
the Company within 90 days after the Company receives such notice or becomes
aware of such unwillingness, inability or ineligibility, (y) an Event of Default
has occurred and is continuing and the beneficial owners representing a majority
in principal amount of the applicable series of Securities represented by such
global Security or Securities advise DTC to cease acting as depositary for such
global Security or Securities or (z) the Company, in its sole discretion,
determines at any time that all Outstanding Securities (but not less than all)
of any series issued or issuable in the form of one or more global Securities
shall no longer be represented by such global Security or Securities, then the
Company shall execute, and the Trustee shall authenticate and deliver,
definitive Securities of like series, rank, tenor and terms in definitive form
in an aggregate principal amount equal to the principal amount of such global
Security or Securities. If any beneficial owner of an interest in a permanent
global Security is otherwise entitled to exchange such interest for Securities
of such series and of like tenor and principal amount of another authorized form
and denomination, as specified as contemplated by Section 301 and provided that
any applicable notice provided in the permanent global Security shall have been
given, then without unnecessary delay but in any event no later than the
earliest date on which such interest may be so exchanged, the Company shall
execute, and the Trustee shall authenticate and deliver, definitive Securities
in aggregate principal amount equal to the principal amount of such beneficial
owner's interest in such permanent global Security. On or after the earliest
date on which such interests may be so exchanged, such permanent global Security
shall be surrendered for exchange by DTC or such other depositary as shall be
specified in the Company Order with respect thereto to the Trustee, as the
Company's agent for such purpose; provided, however, that no such exchanges may
occur during a period beginning at the opening of business 15 days before any
selection of Securities to be redeemed and ending on the relevant Redemption
Date if the Security for which exchange is requested may be among those selected
for redemption; and provided further that no Bearer Security delivered in
exchange for a portion of a permanent global Security shall be mailed or
otherwise delivered to any location in the United States. If a Registered
Security is issued in exchange for any portion of a permanent global Security
after the close of business at the office or agency where such exchange occurs
on (i) any Regular Record Date and before the opening of business at such office
or agency on the relevant Interest Payment Date, or (ii) any Special Record Date
and before the opening of business at such office or agency on the related
proposed date for payment of Defaulted Interest, interest or Defaulted Interest,
as the case may be, will not be payable on such Interest Payment Date or
proposed date for payment, as the case may be, in respect of such Registered
Security, but will be payable on such Interest Payment Date or proposed date for
payment, as the case may be, only to the Person to whom interest in respect of
such portion or such permanent global Security is payable in accordance with the
provisions of this Indenture.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for
registration of transfer or for exchange or redemption shall (if so required by
the Company or the Security Registrar) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any
transfer.
The Company or the Trustee, as applicable, shall not be
required (i) to issue, register the transfer of or exchange any Security if such
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Securities to be
redeemed under Section 1103 and ending at the close
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of business on (A) if such Securities are issuable only as Registered
Securities, the day of the mailing of the relevant notice of redemption and (B)
if such Securities are issuable as Bearer Securities, the day of the first
publication of the relevant notice of redemption or, if such Securities are also
issuable as Registered Securities and there is no publication, the mailing of
the relevant notice of redemption, or (ii) to register the transfer of or
exchange any Registered Security so selected for redemption in whole or in part,
except, in the case of any Registered Security to be redeemed in part, the
portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so
selected for redemption except that such a Bearer Security may be exchanged for
a Registered Security of that series and of like tenor; provided that such
Registered Security shall be simultaneously surrendered for redemption, or (iv)
to issue, register the transfer of or exchange any Security which has been
surrendered for repayment at the option of the Holder, except that portion, if
any, of such Security which is not to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security or a Security with a mutilated coupon appertaining to
it is surrendered to the Trustee or the Company, together with, in proper cases,
such security or indemnity as may be required by the Company or the Trustee to
save each of them or any agent of either of them harmless, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and principal amount, containing identical terms
and provisions and bearing a number not contemporaneously outstanding, with
coupons corresponding to the coupons, if any, appertaining to the surrendered
Security.
If there shall be delivered to the Company and to the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of any
Security or coupon, and (ii) such security or indemnity as may be required by
them to save each of them and any agent of either of them harmless, then, in the
absence of written notice to the Company or the Trustee that such Security or
coupon has been acquired by a bona fide purchaser, the Company shall execute and
upon its request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series and principal
amount, containing identical terms and provisions and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.
Notwithstanding the provisions of the previous two paragraphs,
in case any such mutilated, destroyed, lost or stolen Security or coupon has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains, pay such Security or
coupon; provided, however, that payment of principal of (and premium, if any),
any interest on and any Additional Amounts with respect to, Bearer Securities
shall, except as otherwise provided in Section 1002, be payable only at an
office or agency located outside the United States and, unless otherwise
specified as contemplated by Section 301, any interest on Bearer Securities
shall be payable only upon presentation and surrender of the coupons
appertaining thereto.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any,
issued pursuant to this Section in lieu of any destroyed, lost or stolen
Security, or in exchange for a Security to which a destroyed, lost or stolen
coupon appertains, shall constitute an original additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
and its coupons, if any, or the destroyed, lost or stolen coupon shall be at any
time enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of that
series and their coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities or
coupons.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 301, interest on any Registered
Security that is payable, and is punctually paid or duly provided for, on any
Interest Payment Date shall be paid to the Person in whose
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name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Company maintained for such purpose pursuant to Section 1002;
provided, however, that each installment of interest on any Registered Security
may at the Company's option be paid by (i) mailing a check for such interest,
payable to or upon the written order of the Person entitled thereto pursuant to
Section 308, to the address of such Person as it appears on the Security
Register or (ii) transfer to an account maintained by the payee located inside
the United States.
Unless otherwise provided as contemplated by Section 301 with
respect to the Securities of any series, payment of interest may be made, in the
case of a Bearer Security, by transfer to an account maintained by the payee
with a bank located outside the United States.
Unless otherwise provided as contemplated by Section 301,
every permanent global Security will provide that interest, if any, payable on
any Interest Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the
case may be, with respect to that portion of such permanent global Security held
for its account by Cede & Co. or the Common Depositary, as the case may be, for
the purpose of permitting such party to credit the interest received by it in
respect of such permanent global Security to the accounts of the beneficial
owners thereof.
In case a Bearer Security of any series is surrendered in
exchange for a Registered Security of such series after the close of business
(at an office or agency in a Place of Payment for such series) on any Regular
Record Date and before the opening of business (at such office or agency) on the
next succeeding Interest Payment Date, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date and interest will not
be payable on such Interest Payment Date in respect of the Registered Security
issued in exchange for such Bearer Security, but will be payable only to the
Holder of such coupon when due in accordance with the provisions of this
Indenture.
Except as otherwise specified with respect to a series of
Securities in accordance with the provisions of Section 301, any interest on any
Registered Security of any series that is payable, but is not punctually paid or
duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered Holder thereof
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Registered
Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Registered
Security of such series and the date of the proposed payment (which
shall not be less than 20 days after such notice is received by the
Trustee), and at the same time the Company shall deposit with the
Trustee an amount of money in the currency or currencies, currency unit
or units or composite currency or currencies in which the Securities of
such series are payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series) equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit on
or prior to the date of the proposed payment, such money when deposited
to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted
Interest which shall not be more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of Registered Securities of such series at his address
as it appears in the Security Register not less than 10 days prior to
such Special Record Date. The Trustee may, in its discretion, in the
name and at the expense of the Company, cause a similar notice to be
published at least once in an Authorized Newspaper in each Place of
Payment, but such publications shall not be a condition precedent to
the establishment of such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Persons in whose names the Registered Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (2). In case a Bearer Security
of any series is surrendered for transfer or exchange at the office or
agency in a Place of Payment for such series after the close of
business at such office or agency on any
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Special Record Date and before the opening of business at such office
or agency on the related proposed date for payment of Defaulted
Interest, such Bearer Security shall be surrendered without the coupon
relating to such proposed date of payment and Defaulted Interest will
not be payable on such proposed date of payment in respect of the
Registered Security issued in exchange for such Bearer Security, but
will be payable only to the Holder of such coupon when due in
accordance with the provisions of this Indenture.
(2) The Company may make payment of any Defaulted
Interest on the Registered Securities of any series in any other lawful
manner not inconsistent with the requirements of any securities
exchange on which such Securities may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and
Section 305, each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by such
other Security.
SECTION 308. Persons Deemed Owners. Prior to due presentment
of a Registered Security for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
such Registered Security is registered as the owner of such Security for the
purpose of receiving payment of principal of (and premium, if any), and (subject
to Sections 305 and 307) interest on, such Registered Security and for all other
purposes whatsoever, whether or not such Registered Security is overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining
thereto shall pass by delivery. The Company, the Trustee and any agent of the
Company or the Trustee may treat the Holder of any Bearer Security and the
Holder of any coupon as the absolute owner of such Security or coupon for the
purpose of receiving payment thereof or on account thereof and for all other
purposes whatsoever, whether or not such Security or coupon is overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the
Security Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of a Security in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any global
Security, nothing herein shall prevent the Company, the Trustee, or any agent of
the Company or the Trustee, from giving effect to any written certification,
proxy or other authorization furnished by any depositary, as a Holder, with
respect to such global Security or impair, as between such depositary and owners
of beneficial interests in such global Security, the operation of customary
practices governing the exercise of the rights of such depositary (or its
nominee) as Holder of such global Security.
SECTION 309. Cancellation. All Securities and coupons
surrendered for payment, redemption, repayment at the option of the Holder,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee, and any such Securities and coupons and Securities and coupons
surrendered directly to the Trustee for any such purpose shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities so delivered shall be promptly
cancelled by the Trustee. If the Company shall so acquire any of the Securities,
however, such acquisition shall not operate as a redemption or satisfaction of
the indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. Cancelled
Securities and coupons held by the Trustee shall be destroyed by the Trustee and
the Trustee shall deliver a certificate of such destruction to the Company,
unless by a Company Order the Company directs their return to it.
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SECTION 310. Computation of Interest. Except as otherwise
specified as contemplated by Section 301 with respect to Securities of any
series, interest on the Securities of each series shall be computed on the basis
of a 360-day year consisting of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture. This
Indenture shall upon Company Request cease to be of further effect with respect
to any series of Securities specified in such Company Request (except as to any
surviving rights of registration of transfer or exchange of Securities of such
series herein expressly provided for and any right to receive Additional
Amounts, as provided in Section 1007), and the Trustee, upon receipt of a
Company Order, and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture as to
such series when
(1) either
(A) all Securities of such series
theretofore authenticated and delivered and all coupons, if
any, appertaining thereto (other than (i) coupons appertaining
to Bearer Securities surrendered for exchange for Registered
Securities and maturing after such exchange, whose surrender
is not required or has been waived as provided in Section 305,
(ii) Securities and coupons of such series which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306, (iii) coupons appertaining to
Securities called for redemption and maturing after the
relevant Redemption Date, whose surrender has been waived as
provided in Section 1106, and (iv) Securities and coupons of
such series for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(B) all Securities of such series and, in
the case of (i) or (ii) below, any coupons appertaining
thereto, not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at
their Stated Maturity within one
year, or
(iii) if redeemable at the option of the
Company, are to be called for
redemption within one year under
arrangements satisfactory to the
Trustee for the giving of notice of
redemption by the Trustee in the
name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the
Trustee as funds in trust for such purpose an amount in the
currency or currencies, currency unit or units or composite
currency or currencies in which the Securities of such series
are payable, sufficient to pay and discharge the entire
indebtedness on such Securities and such coupons not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest, and any
Additional Amounts with respect thereto, to the date of such
deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
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(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture as to such series have been complied with.
The obligations of the Company to the Trustee and any predecessor Trustee under
Section 606, the obligations of the Company to any Authenticating Agent under
Section 611 and, if money shall have been deposited with and held by the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of the
Trustee under Section 402 and the last paragraph of Section 1003 shall survive
the satisfaction and discharge of this Indenture.
SECTION 402. Application of Trust Funds. Subject to the
provisions of the last paragraph of Section 1003, all money deposited with the
Trustee pursuant to Section 401 shall be held in trust and applied by it, in
accordance with the provisions of the Securities, the coupons and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any), and any interest and Additional Amounts for whose payment such money has
been deposited with or received by the Trustee, but such money need not be
segregated from other funds except to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. "Event of Default", wherever
used herein with respect to any particular series of Securities, means any one
of the following events (whatever the reason for such Event of Default and
whether or not it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon or any
Additional Amounts payable in respect of any Security of that series or
of any coupon appertaining thereto, when such interest, Additional
Amounts or coupon becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security of that series when it becomes due and payable at
its Maturity; or
(3) default in the deposit of any sinking fund payment, when
and as due by the terms of any Security of that series; or
(4) default in the performance of, or breach of, any covenant
of the Company in this Indenture (other than a covenant a default in
whose performance or whose breach is elsewhere in this Section
specifically dealt with or which has been expressly included in this
Indenture solely for the benefit of a series of Securities other than
that series), and continuance of such default or breach for a period of
60 days after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by the
Holders of at least a majority in principal amount of the Outstanding
Securities of that series a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder; or
(5) a default under any bond, debenture, note or other
evidence of indebtedness of the Company, or under any mortgage,
indenture or other instrument of the Company (including a default with
respect to Securities of any series other than that series) under which
there may be issued or by which there may be secured any indebtedness
of the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible
or liable as obligor or guarantor), whether such indebtedness now
exists or shall hereafter be created, which default shall constitute a
failure to pay an aggregate principal amount exceeding $20,000,000 of
such indebtedness when due and payable after the expiration of any
applicable grace period with respect thereto and shall have resulted in
such indebtedness in an aggregate principal amount exceeding
$20,000,000 becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, without
such indebtedness having been discharged,
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or such acceleration having been rescinded or annulled, within a period
of 10 days after there shall have been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least a majority in principal amount of
the Outstanding Securities of that series a written notice specifying
such default and requiring the Company to cause such indebtedness to be
discharged or cause such acceleration to be rescinded or annulled and
stating that such notice is a "Notice of Default" hereunder; or
(6) the Company or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for all or substantially all of
either of its property, or
(C) orders the liquidation of the Company or any
Significant Subsidiary, and the order or decree remains
unstayed and in effect for 90 days; or
(8) any other Event of Default provided with respect to
Securities of that series.
As used in this Section 501, the term "Bankruptcy Law" means Title 11, U.S. Code
or any similar Federal or State law for the relief of debtors and the term
"Custodian" means any receiver, trustee, assignee, liquidator or other similar
official under any Bankruptcy Law.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment. If an Event of Default with respect to Securities of any series at
the time Outstanding occurs and is continuing (other than an Event of Default
described in Section 501(6) or 501(7)), then and in every such case the Trustee
or the Holders of not less than a majority in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
the Securities of that series are Original Issue Discount Securities or Indexed
Securities, such portion of the principal amount as may be specified in the
terms thereof) of all the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by the Holders), and upon any such declaration such principal or specified
portion thereof shall become immediately due and payable. If an Event of Default
described in Section 501(6) or 501(7) with respect to any series of Securities
at the time outstanding occurs, the principal amount of all of the Securities of
that series (or, in the case of any such Original Issue Discount Securities or
Indexed Securities, such portion of the principal as may be specified in the
terms thereof) will automatically, and without any action by the Trustee or any
Holder thereof, become immediately due and payable.
At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of not less than a majority in
principal amount of the Outstanding Securities of that series, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
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(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay in the currency, currency unit or
composite currency in which the Securities of such series are payable
(except as otherwise specified pursuant to Section 301 for the
Securities of such series):
(A) all overdue installments of interest on
and any Additional Amounts payable in respect of all
Outstanding Securities of that series and any related coupons,
(B) the principal of (and premium, if any,
on) any Outstanding Securities of that series which have
become due otherwise than by such declaration of acceleration
and interest thereon at the rate or rates borne by or provided
for in such Securities,
(C) to the extent that payment of such
interest is lawful, interest upon overdue installments of
interest and any Additional Amounts at the rate or rates borne
by or provided for in such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default with respect to Securities
of that series, other than the nonpayment of the principal of (or
premium, if any) or interest on Securities of that series which have
become due solely by such declaration of acceleration, have been cured
or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if:
(1) default is made in the payment of any installment
of interest or Additional Amounts, if any, on any Security of any
series and any related coupon when such interest or Additional Amount
becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal
of (or premium, if any, on) any Security of any series at its Maturity,
then the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities of such series and coupons, the whole
amount then due and payable on such Securities and coupons for principal (and
premium, if any) and interest and Additional Amounts thereon, with interest upon
any overdue principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon any overdue installments of
interest or Additional Amounts thereon, if any, at the rate or rates borne by or
provided for in such Securities, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Company or any other obligor upon such Securities
of such series and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon such Securities of such series, wherever situated.
If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series and any related coupons by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
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SECTION 504. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Securities of any series
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal of, or premium, if any, or
interest on, the Securities) shall be entitled and empowered, by intervention in
such proceeding or otherwise:
(i) to file and prove a claim for the whole amount,
or such lesser amount as may be provided for in the Securities of such
series, of principal (and premium, if any) and interest and Additional
Amount, if any, owing and unpaid in respect of the Securities and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to distribute
the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series and coupons to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel, and any other
amounts due the Trustee or any predecessor Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder of
a Security or coupon any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or coupons or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder of a Security or coupon in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities or Coupons. All rights of action and claims under this Indenture or
any of the Securities or coupons may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or coupons or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of Securities
and coupons in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected. Any money
collected by the Trustee pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest and any Additional Amounts, upon presentation of the Securities or
coupons, or both, as the case may be, and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due to the Trustee and
any predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon
the Securities and coupons for principal (and premium, if any) and
interest and any Additional Amounts payable, in respect of which or for
the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the aggregate amounts
due and payable on such Securities and coupons for principal (and
premium, if any), interest and Additional Amounts, respectively; and
THIRD: To the payment of the remainder, if any, to the
Company.
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SECTION 507. Limitation on Suits. No Holder of any Security of
any series or any related coupon shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than a majority in principal
amount of the Outstanding Securities of that series shall have made
written request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium, if any, Interest and Additional Amounts. Notwithstanding any
other provision in this Indenture, the Holder of any Security or coupon shall
have the right which is absolute and unconditional to receive payment of the
principal of (and premium, if any) and (subject to Sections 305 and 307)
interest on, and any Additional Amounts in respect of, such Security or payment
of such coupon on the respective due dates expressed in such Security or coupon
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies. If the
Trustee or any Holder of a Security or coupon has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders of Securities and coupons shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 510. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities or coupons in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders of Securities or coupons is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 511. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Security or coupon to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders of Securities or
coupons, as the case may be.
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SECTION 512. Control by Holders of Securities. The Holders of
not less than a majority in principal amount of the Outstanding Securities of
any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Securities of
such series; provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might expose it
to personal liability or be unduly prejudicial to the Holders of
Securities of such series not joining therein.
SECTION 513. Waiver of Past Defaults. The Holders of not less
than a majority in principal amount of the Outstanding Securities of any series
may on behalf of the Holders of all the Securities of such series and any
related coupons waive any past default hereunder with respect to such series and
its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on or Additional Amounts payable in respect of any Security of
such series or any related coupons, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Usury, Stay or Extension Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 515. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Security by his acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than a majority in principal amount of
the Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Security on or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults. Within 90 days after the
occurrence of any default hereunder with respect to the Securities of any
series, the Trustee shall transmit in the manner and to the extent provided in
TIA Section 313(c), notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; provided, however, that,
except in the case of a default in the payment of the principal of (or premium,
if any) or interest
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on or any Additional Amounts or sinking fund installment with respect to the
Securities of such series, the Trustee shall be protected in withholding such
notice if and so long as Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interest of the Holders
of the Securities and coupons of such series; and provided further that in the
case of any default or breach of the character specified in Section 501(4) with
respect to the Securities and coupons of such series, no such notice to Holders
shall be given until at least 60 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to the Securities of such series.
SECTION 602. Certain Rights of Trustee. Subject to the
provisions of TIA Section 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(2) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order (other than delivery of any Security, together with any coupons
appertaining thereto, to the Trustee for authentication and delivery
pursuant to Section 303 which shall be sufficiently evidenced as
provided therein) and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting to take any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon an
Officers' Certificate;
(4) the Trustee may consult with counsel and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture at
the request or direction of any of the Holders of Securities of any
series or any related coupons pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, coupon or other paper
or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action
taken, suffered or omitted by it in good faith and reasonably believed
by it to be authorized or within the discretion or rights or powers
conferred upon it by this Indenture;
(9) Any permissive right or power available to the
Trustee under this Indenture or any supplement hereto shall not be
construed to be a mandatory duty or obligation;
(10) The Trustee shall not be charged with knowledge
of any matter (including any default, other than as described in
Section 501(1), (2) or (3)) unless and except to the extent actually
known
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to a Responsible Officer of the Trustee or to the extent written notice
thereof is received by the Trustee at the Corporate Trust Office; and
(11) The Trustee shall have no liability for any
inaccuracy in the books and records of, or for any actions or omissions
of, DTC, Euroclear or CEDEL or any depository acting on behalf of any
of them.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers.
SECTION 603. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificate of authentication, and in any coupons shall be taken as
the statements of the Company, and neither the Trustee nor any Authenticating
Agent assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or coupons, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder. Neither the Trustee nor the
Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 604. May Hold Securities. The Trustee, any Paying
Agent, Security Registrar, Authenticating Agent or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and coupons and, subject to TIA Sections 310(b) and 311,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such
other agent.
SECTION 605. Money Held in Trust. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 606. Compensation and Reimbursement. The Company
agrees:
(1) to pay to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse each of the Trustee and any predecessor Trustee upon its
request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify each of the Trustee and any
predecessor Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on its
own part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(6) or Section
501(7), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable Federal or state bankruptcy,
insolvency or other similar law.
As security for the performance of the obligations of the
Company under this Section, the Trustee shall have a lien prior to the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (or premium, if any)
or interest on particular Securities or coupons.
The provisions of this Section shall survive the termination
of this Indenture.
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SECTION 607. Corporate Trustee Required; Eligibility;
Conflicting Interests. There shall at all times be a Trustee hereunder which
shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or the
requirements of Federal, state, Territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the
provisions of TIA Section 310(b) after written request therefor by the
Company or by any Holder of a Security who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under
Section 607(a) and shall fail to resign after written request therefor
by the Company or by any Holder of a Security who has been a bona fide
Holder of a Security for at least six months, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution may
remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any reason with respect to the Securities of one or more series, the Company, by
or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those series (it being
understood that any such successor Trustee may be appointed with respect to the
Securities of one or more or all of such series and that at any time there shall
be only one Trustee with respect to the Securities of any particular series).
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders of Securities and accepted appointment in the manner hereinafter
provided any Holder of a Security who has been a bona fide Holder of a Security
of such series for at least six months may, on
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behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
in the manner provided for notices to the Holders of Securities in Section 106.
Each notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor. (a) In
case of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, upon request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder, subject nevertheless to its claim, if any,
provided for in Section 606.
(b) In case of the appointment hereunder of a successor
Trustee with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto, pursuant to Article Nine hereof, wherein each successor
Trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in,
and confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless
at the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession
to Business. Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder;
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities or coupons shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities or coupons so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities or coupons. In case any Securities or coupons
shall not have been authenticated by such predecessor Trustee, any such
successor Trustee may authenticate
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and deliver such Securities or coupons, in either its own name or that of its
predecessor Trustee, with the full force and effect which this Indenture
provides for the certificate of authentication of the Trustee.
SECTION 611. Appointment of Authentication Agent. At any time
when any of the Securities remain Outstanding, the Trustee may appoint an
Authenticating Agent or Agents with respect to one or more series of Securities
which shall be authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon exchange, registration of transfer or
partial redemption or repayment thereof, and Securities so authenticated shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee hereunder. Any such
appointment shall be evidenced by an instrument in writing signed by a
Responsible Officer of the Trustee, a copy of which instrument shall be promptly
furnished to the Company. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and, except as may otherwise be provided pursuant to Section 301, shall
at all times be a bank or trust company or corporation organized and doing
business and in good standing under the laws of the United States of America or
of any State or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by federal or state
authorities. If such Authenticating Agent publishes reports of condition at
least annually, pursuant to law or the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at
any time resign by giving written notice of resignation to the Trustee for such
series and to the Company. The Trustee for any series of Securities may at any
time terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 106. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from
time to time reasonable compensation including reimbursement of its reasonable
expenses for its services under this Section.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication substantially in the
following form:
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This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:_________________________________
as Authenticating Agent
By:__________________________________
Authorized Officer
SECTION 612. Certain Duties and Responsibilities of the
Trustee.
(a) With respect to the Securities of any series, except during the
continuance of an Event of Default with respect to the Securities of such
series:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture, but shall not be under any duty to verify the contents or
accuracy thereof.
(b) In case an Event of Default with respect to the Securities of any
series has occurred and is continuing, the Trustee shall, with respect to
Securities of such series, exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) this Subsection (c) shall not be construed to limit the
effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that he Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
Outstanding Securities of any series relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture with respect to the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 612.
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(e) The Trustee shall not be liable for interest on any money or assets
held by it except to the extent the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities or coupons, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any Authenticating Agent nor any Paying Agent nor any Security Registrar shall
be held accountable by reason of the disclosure of any information as to the
names and addresses of the Holders of Securities in accordance with TIA Section
312, regardless of the source from which such information was derived, and that
the Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee. Within 60 days after May 15
of each year commencing with the first May 15 after the first issuance of
Securities pursuant to this Indenture, the Trustee shall transmit by mail to all
Holders of Securities as provided in TIA Section 313(c) a brief report dated as
of such May 15 if required by TIA Section 313(a).
SECTION 703. Reports by Company. The Company will:
(1) file with the Trustee, within 15 days after the
Company is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) which the Company
may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports
pursuant to either of such Sections, then it will file with the Trustee
and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and
periodic information, documents and reports which may be required
pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by
the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(3) transmit by mail to the Holders of Securities,
within 30 days after the filing thereof with the Trustee, in the manner
and to the extent provided in TIA Section 313(c), such summaries of any
information, documents and reports required to be filed by the Company
pursuant to paragraphs (1) and (2) of this section as may be required
by rules and regulations prescribed from time to time by the
Commission.
SECTION 704. Company to Furnish to Trustee Names and Addresses
of Holders. The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than 25 days after the Regular
Record Date for interest for each series of Securities, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the Holders of
Registered Securities of such series as of such Regular Record Date, or if there
is no Regular Record Date for interest for such series of Securities,
semiannually, upon such dates as are set forth in the Board Resolution or
indenture supplemental hereto authorizing such series, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished;
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provided, however, that, so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801. Consolidations and Mergers of Company and Sales,
Leases and Conveyances Permitted Subject to Certain Conditions. The Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other corporation; provided that in any
such case, (i) either the Company shall be the continuing corporation, or the
successor corporation (if other than the Company) formed by or resulting from
any such consolidation or merger or which shall have received the transfer of
such assets is a Person organized and existing under the laws of the United
States or any state thereof and such successor corporation shall expressly
assume the due and punctual payment of the principal of (and premium, if any)
and any interest (including all Additional Amounts, if any, payable pursuant to
Section 1007) on all of the Securities, according to their tenor, and the due
and punctual performance and observance of all of the covenants and conditions
of this Indenture to be performed by the Company by supplemental indenture,
complying with Article Nine hereof, satisfactory to the Trustee, executed and
delivered to the Trustee by such corporation and (ii) immediately after giving
effect to such transaction and treating any indebtedness which becomes an
obligation of the Company or any Subsidiary as a result thereof as having been
incurred by the Company or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or the lapse of time, or
both, would become an Event of Default, shall have occurred and be continuing.
SECTION 802. Rights and Duties of Successor Corporation. In
case of any such consolidation, merger, sale, lease or conveyance and upon any
such assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as the party of the first part, and the predecessor
corporation, except in the event of a lease, shall be relieved of any further
obligation under this Indenture and the Securities. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Company, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation, instead of the
Company, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the officers
of the Company to the Trustee for authentication, and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities had been issued at the date of the execution
hereof.
In case of any such consolidation, merger, sale, lease or
conveyance, such changes in phraseology and form (but not in substance) may be
made in the Securities thereafter to be issued as may be appropriate.
SECTION 803. Officers' Certificate and Opinion of Counsel. Any
consolidation, merger, sale, lease or conveyance permitted under Section 801 is
also subject to the condition that the Trustee receive an Officers' Certificate
and an Opinion of Counsel to the effect that any such consolidation, merger,
sale, lease or conveyance, and the assumption of the Company's obligations under
this Indenture by any successor corporation, complies with the provisions of
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders. Without the consent of any Holders of Securities or coupons, the
Company, when authorized by or pursuant to a Board Resolution, and the Trustee,
at any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
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(1) to evidence the succession of another Person to
the Company and the assumption by any such successor of the covenants
of the Company herein and in the Securities contained; or
(2) to add to the covenants of the Company for the
benefit of the Holders of all or any series of Securities (and if such
covenants are to be for the benefit of less than all series of
Securities, stating that such covenants are expressly being included
solely for the benefit of such series) or to surrender any right or
power herein conferred upon the Company; or
(3) to add any additional Events of Default for the
benefit of the Holders of all or any series of Securities (and if such
Events of Default are to be for the benefit of less than all series of
Securities, stating that such Events of Default are expressly being
included solely for the benefit of such series); provided, however,
that in respect of any such additional Events of Default such
supplemental indenture may provide for a particular period of grace
after default (which period may be shorter or longer than that allowed
in the case of other defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available to
the Trustee upon such default or may limit the right of the Holders of
a majority in aggregate principal amount of that or those series of
Securities to which such additional Events of Default apply to waive
such default; or
(4) to add to or change any of the provisions of this
Indenture to provide that Bearer Securities may be registrable as to
principal, to change or eliminate any restrictions on the payment of
principal of or any premium or interest on Bearer Securities, to permit
Bearer Securities to be issued in exchange for Registered Securities,
to permit Bearer Securities to be issued in exchange for Bearer
Securities of other authorized denominations or to permit or facilitate
the issuance of Securities in uncertificated form; provided, that any
such action shall not adversely affect the interests of the Holders of
Securities of any series or any related coupons in any material
respect; or
(5) to change or eliminate any of the provisions of
this Indenture; provided that any such change or elimination shall
become effective only when there is no Security Outstanding of any
series created prior to the execution of such supplemental indenture
which is entitled to the benefit of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of
any series and any related coupons as permitted by Sections 201 and
301, including the provisions and procedures relating to Securities
convertible into Common Shares or Preferred Shares of the Company, as
the case may be; or
(8) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Securities of one or more series and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee; or
(9) to cure any ambiguity, to correct or supplement
any provision herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture; provided such
provisions shall not adversely affect the interests of the Holders of
Securities of any series or any related coupons in any material
respect; or
(10) to supplement any of the provisions of this
Indenture to such extent as shall be necessary to permit or facilitate
the defeasance and discharge of any series of Securities pursuant to
Sections 401, 1402 and 1403; provided that any such action shall not
adversely affect the interests of the Holders of Securities of such
series and any related coupons or any other series of Securities in any
material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal amount
of all Outstanding Securities affected by such supplemental indenture, by Act of
said Holders delivered to the Company and the Trustee, the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of
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modifying in any manner the rights of the Holders of Securities and any related
coupons under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby:
(1) change the Stated Maturity of the principal of
(or premium, if any, on) or any installment of principal of or interest
on, any Security; or reduce the principal amount thereof or the rate or
amount of interest thereon or any Additional Amounts payable in respect
thereof, or any premium payable upon the redemption thereof, or change
any obligation of the Company to pay Additional Amounts pursuant to
Section 1007 (except as contemplated by Section 801(i) and permitted by
Section 901(1)), or reduce the amount of the principal of an Original
Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502 or the amount thereof provable in bankruptcy pursuant to Section
504, or adversely affect any right of repayment at the option of the
Holder of any Security, or change any Place of Payment where, or the
currency or currencies, currency unit or units or composite currency or
currencies in which, any Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption or repayment at the option of the
Holder, on or after the Redemption Date or the Repayment Date, as the
case may be), or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver with respect to such series (or
compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this
Indenture, or reduce the requirements of Section 1504 for quorum or
voting, or
(3) modify any of the provisions of this Section,
Section 513 or Section 1008, except to increase the required percentage
to effect such action or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of the Holders of Securities of such series with respect to
such covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
SECTION 903. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modification thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this Indenture shall
be modified in accordance therewith and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder and of any
coupon appertaining thereto shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental
Indentures. Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall,
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in
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the opinion of the Trustee and the Company, to any such supplemental indenture
may be prepared and executed by the Company and authenticated and delivered by
the Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, Interest
and Additional Amounts. The Company covenants and agrees for the benefit of the
Holders of each series of Securities that it will duly and punctually pay the
principal of (and premium, if any) and interest on and any Additional Amounts
payable in respect of the Securities of that series in accordance with the terms
of such series of Securities, any coupons appertaining thereto and this
Indenture. Unless otherwise specified as contemplated by Section 301 with
respect to any series of Securities, any interest due on and any Additional
Amounts payable in respect of Bearer Securities on or before Maturity, other
than Additional Amounts, if any, payable as provided in Section 1007 in respect
of principal of (or premium, if any, on) such a Security, shall be payable only
upon presentation and surrender of the several coupons for such interest
installments as are evidenced thereby as they severally mature. Unless otherwise
specified with respect to Securities of any series pursuant to Section 301, at
the option of the Company, all payments of principal may be paid by check to the
registered Holder of the Registered Security or other person entitled thereto
against surrender of such Security.
SECTION 1002. Maintenance of Office or Agency. If Securities
of a series are issuable only as Registered Securities, the Company shall
maintain in each Place of Payment for any series of Securities an office or
agency where Securities of that series may be presented or surrendered for
payment or conversion, where Securities of that series may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Company in respect of the Securities of that series and this Indenture may
be served. If Securities of a series are issuable as Bearer Securities, the
Company will maintain: (A) in the Borough of Manhattan, The City of New York, an
office or agency where any Registered Securities of that series may be presented
or surrendered for payment or conversion, where any Registered Securities of
that series may be surrendered for registration of transfer, where Securities of
that series may be surrendered for exchange, where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served and where Bearer Securities of that series and related coupons may
be presented or surrendered for payment or conversion in the circumstances
described in the following paragraph (and not otherwise); (B) subject to any
laws or regulations applicable thereto, in a Place of Payment for that series
which is located outside the United States, an office or agency where Securities
of that series and related coupons may be presented and surrendered for payment
(including payment of any Additional Amounts payable on Securities of that
series pursuant to Section 1007) or conversion; provided, however, that if the
Securities of that series are listed on the Luxembourg Stock Exchange or any
other stock exchange located outside the United States and such stock exchange
shall so require, the Company will maintain a Paying Agent for the Securities of
that series in Luxembourg or any other required city located outside the United
States, as the case may be, so long as the Securities of that series are listed
on such exchange; and (C) subject to any laws or regulations applicable thereto,
in a Place of Payment for that series located outside the United States an
office or agency where any Registered Securities of that series may be
surrendered for registration of transfer, where Securities of that series may be
surrendered for exchange and where notices and demands to or upon the Company in
respect of the Securities of that series and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of each such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, except that Bearer Securities of that series and the related coupons
may be presented and surrendered for payment (including payment of any
Additional Amounts payable on Bearer Securities of that series pursuant to
Section 1007) or conversion at the offices specified in the Security in London,
England, and the Company hereby appoints the same as its agent to receive such
respective presentations, surrenders, notices and demands, and the Company
hereby appoints the Trustee its agent to receive all such presentations,
surrenders, notices and demands.
Unless otherwise specified with respect to any Securities
pursuant to Section 301, no payment of principal, premium or interest on or
Additional Amounts in respect of Bearer Securities shall be made at any office
or agency of the Company in the United States or by check mailed to any address
in the United States or by transfer to an account maintained with a bank located
in the United States; provided, however, that, if the Securities of a series are
payable in Dollars, payment of principal of and any premium and interest on any
Bearer Security (including any Additional Amounts payable on Securities of such
series pursuant to Section 1007) shall be made at the office of the
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Company's Paying Agent in the City of Boston, if (but only if) payment in
Dollars of the full amount of such principal, premium, interest or Additional
Amounts, as the case may be, at all offices or agencies outside the United
States maintained for such purpose by the Company in accordance with this
Indenture, is illegal or effectively precluded by exchange controls or other
similar restrictions.
The Company may from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all of such purposes, and may from time to time
rescind such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in accordance with the requirements set forth above for
Securities of any series for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency. Unless otherwise specified with
respect to any Securities pursuant to Section 301 with respect to a series of
Securities, the Company hereby designates as a Place of Payment for each series
of Securities the office or agency of the Company in the City of Boston, and
initially appoints the Trustee at its Corporate Trust Office as Paying Agent in
such city and as its agent to receive all such presentations, surrenders,
notices and demands.
Unless otherwise specified with respect to any Securities
pursuant to Section 302, if and so long as the Securities of any series (i) are
denominated in a Foreign Currency or (ii) may be payable in a Foreign Currency
or so long as it is required under any other provision of this Indenture, then
the Company will maintain with respect to each such series of Securities, or as
so required, at least one exchange rate agent.
SECTION 1003. Money for Securities Payments to Be Held in
Trust. If the Company shall at any time act as its own Paying Agent with respect
to any series of any Securities and any related coupons, it will, by no later
than 11:00 am (Boston time) on each due date of the principal of (and premium,
if any), or interest on or Additional Amounts in respect of, any of the
Securities of that series, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such series
are payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay the principal (and premium, if any)
or interest or Additional Amounts so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided, and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
any series of Securities and any related coupons, it will, on or before each due
date of the principal of (and premium, if any), or interest on or Additional
Amounts in respect of, any Securities of that series, deposit with a Paying
Agent a sum (in the currency or currencies, currency unit or units or composite
currency or currencies described in the preceding paragraph) sufficient to pay
the principal (and premium, if any) or interest or Additional Amounts, so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest or Additional Amounts and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will
(1) hold all sums held by it for the payment of
principal of (and premium, if any) or interest on Securities in trust
for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities) in the making of any
such payment of principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those
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upon which such sums were held by the Company or such Paying Agent; and, upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such sums.
Except as otherwise provided in the Securities of any series,
any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of (and premium, if any) or
interest on, or any Additional Amounts in respect of, any Security of any series
and remaining unclaimed for two years after such principal (and premium, if
any), interest or Additional Amounts has become due and payable shall be paid to
the Company upon Company Request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment of such
principal of (and premium, if any) or interest on, or any Additional Amounts in
respect of, such Security, without interest thereon, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in an
Authorized Newspaper, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Existence. Subject to Article Eight, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (declaration and statutory) and
franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if the Board shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company.
SECTION 1005. Provision of Financial Information. Whether or
not the Company is subject to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, the Company will, to the extent permitted under the
Securities Exchange Act of 1934, as amended, file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13 or 15(d) (the
"Financial Statements") if the Company were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject.
The Company will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, without cost to such Holders, copies
of the annual reports and quarterly reports which the Company would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, if the Company were subject to such
Sections, and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, if the Company were subject to such Sections and (y) if
filing such documents by the Company with the Commission is not permitted under
the Securities Exchange Act of 1934, as amended, promptly upon written request
and payment of the reasonable cost of duplication and delivery, supply copies of
such documents to any prospective Holder.
SECTION 1006. Statement as to Compliance. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year, a
brief certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Indenture and,
in the event of any noncompliance, specifying such noncompliance and the nature
and status thereof. For purposes of this Section 1006, such compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
SECTION 1007. Additional Amounts. If any Securities of a
series provide for the payment of Additional Amounts, the Company will pay to
the Holder of any Security of such series or any coupon appertaining thereto
Additional Amounts as may be specified as contemplated by Section 301. Whenever
in this Indenture there is mentioned, in any context except in the case of
Section 502(1), the payment of the principal of or any premium or interest on,
or in respect of, any Security of any series or payment of any related coupon or
the net proceeds received on the sale or exchange of any Security of any series,
such mention shall be deemed to include mention of the payment of Additional
Amounts provided by the terms of such series established pursuant to Section 301
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof pursuant to such terms and express mention of the
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payment of Additional Amounts (if applicable) in any provisions hereof shall not
be construed as excluding Additional Amounts in those provisions hereof where
such express mention is not made.
Except as otherwise specified as contemplated by Section 301,
if the Securities of a series provide for the payment of Additional Amounts, at
least 20 days prior to the first Interest Payment Date with respect to that
series of Securities (or if the Securities of that series will not bear interest
prior to Maturity, the first day on which a payment of principal and any premium
is made), and at least 10 days prior to each date of payment of principal and
any premium or interest if there has been any change with respect to the matters
set forth in the below-mentioned Officers' Certificate, the Company will furnish
the Trustee and the Company's principal Paying Agent or Paying Agents, if other
than the Trustee, with an Officers' Certificate instructing the Trustee and such
Paying Agent or Paying Agents whether such payment of principal of and any
premium or interest on the Securities of that series shall be made to Holders of
Securities of that series or any related coupons who are not United States
persons without withholding for or on account of any tax, assessment or other
governmental charge described in the Securities of the series. If any such
withholding shall be required, then such Officers' Certificate shall specify by
country the amount, if any, required to be withheld on such payments to such
Holders of Securities of that series or related coupons and the Company will pay
to the Trustee or such Paying Agent the Additional Amounts required by the terms
of such Securities. In the event that the Trustee or any Paying Agent, as the
case may be, shall not so receive the above-mentioned certificate, then the
Trustee or such Paying Agent shall be entitled (i) to assume that no such
withholding or deduction is required with respect to any payment of principal or
interest with respect to any Securities of a series or related coupons until it
shall have received a certificate advising otherwise and (ii) to make all
payments of principal and interest with respect to the Securities of a series or
related coupons without withholding or deductions until otherwise advised. The
Company covenants to indemnify the Trustee and any Paying Agent for, and to hold
them harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by any of them or in reliance on any Officers'
Certificate furnished pursuant to this Section or in reliance on the Company's
not furnishing such an Officers' Certificate.
SECTION 1008. Waiver of Certain Covenants. The Company may
omit in any particular instance to comply with any term, provision or condition
set forth in Sections 1004 or 1005, if before or after the time for such
compliance the Holders of at least a majority in principal amount of all
outstanding Securities of such series, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article. Securities of any
series which are redeemable before their Stated Maturity shall be redeemable in
accordance with their terms and (except as otherwise specified as contemplated
by Section 301 for Securities of any series) in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee. The
election of the Company to redeem any Securities shall be evidenced by or
pursuant to a Board Resolution. In case of any redemption at the election of the
Company of less than all of the Securities of any series, the Company shall, at
least 45 days prior to the giving of the notice of redemption in Section 1104
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of Securities of
such series to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1103. Selection by Trustee of Securities to Be
Redeemed. If less than all the Securities of any series issued on the same day
with the same terms are to be redeemed, the particular Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Trustee, from the Outstanding Securities of such series issued on such date with
the same terms not previously called for redemption, by such method as the
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions (equal to the
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minimum authorized denomination for Securities of that series or any integral
multiple thereof) of the principal amount of Securities of such series of a
denomination larger than the minimum authorized denomination for Securities of
that series.
The Trustee shall promptly notify the Company and the Security
Registrar (if other than itself) in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Security redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security which has been or
is to be redeemed.
SECTION 1104. Notice of Redemption. Notice of redemption shall
be given in the manner provided in Section 106 and as may be further specified
in an indenture supplemental hereto, not less than 30 days nor more than 60 days
prior to the Redemption Date, unless a shorter period is specified by the terms
of such series established pursuant to Section 301, to each Holder of Securities
to be redeemed, but failure to give such notice in the manner herein provided to
the Holder of any Security designated for redemption as a whole or in part, or
any defect in the notice to any such Holder, shall not affect the validity of
the proceedings for the redemption of any other such Security or portion
thereof.
Any notice that is mailed to the Holders of Registered
Securities in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not such Holders receive such notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, accrued interest to the
Redemption Date payable as provided in Section 1106, if any, and
Additional Amounts, if any,
(3) if less than all Outstanding Securities of any
series are to be redeemed, the identification (and, in the case of
partial redemption, the principal amount) of the particular Security or
Securities to be redeemed,
(4) in case any Security is to be redeemed in part
only, the notice which relates to such Security shall state that on and
after the Redemption Date, upon surrender of such Security, the holder
will receive, without charge, a new Security or Securities of
authorized denominations for the principal amount thereof remaining
unredeemed,
(5) that on the Redemption Date the Redemption Price
and accrued interest to the Redemption Date payable as provided in
Section 1106, if any, will become due and payable upon each such
Security, or the portion thereof, to be redeemed and, if applicable,
that interest thereon shall cease to accrue on and after said date,
(6) the Place or Places of Payment where such
Securities, together in the case of Bearer Securities with all coupons
appertaining thereto, if any, maturing after the Redemption Date, are
to be surrendered for payment of the Redemption Price and accrued
interest, if any, or for conversion,
(7) that the redemption is for a sinking fund, if
such is the case,
(8) that unless otherwise specified in such notice,
Bearer Securities of any series, if any, surrendered for redemption
must be accompanied by all coupons maturing subsequent to the
Redemption Date or the amount of any such missing coupon or coupons
will be deducted from the Redemption Price, unless security or
indemnity satisfactory to the Company, the Trustee for such series and
any Paying Agent is furnished,
(9) if Bearer Securities of any series are to be
redeemed and any Registered Securities of such series are not to be
redeemed, and if such Bearer Securities may be exchanged for Registered
Securities
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not subject to redemption on this Redemption Date pursuant to Section
305 or otherwise, the last date, as determined by the Company, on which
such exchanges may be made,
(10) the CUSIP number of such Security, if any, and
(11) if applicable, that a Holder of Securities who
desires to convert Securities for redemption must satisfy the
requirements for conversion contained in such Securities, the then
existing conversion price or rate, and the date and time when the
option to convert shall expire.
Notice of redemption of Securities to be redeemed shall be
given by the Company or, at the Company's request, by the Trustee in the name
and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price. On or prior to
11:00 am (Boston time) on any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, which it may not do in the case of a sinking fund payment under
Article Twelve, segregate and hold in trust as provided in Section 1003) an
amount of money in the currency or currencies, currency unit or units or
composite currency or currencies in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay on the Redemption Date the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities or portions thereof which
are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified in the currency or currencies, currency unit or units or
composite currency or currencies in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) (together with accrued interest, if any, to the
Redemption Date), and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest) such Securities
shall, if the same were interest-bearing, cease to bear interest and the coupons
for such interest appertaining to any Bearer Securities so to be redeemed,
except to the extent provided below, shall be void. Upon surrender of any such
Security for redemption in accordance with said notice, together with all
coupons, if any, appertaining thereto maturing after the Redemption Date, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest, if any, to the Redemption Date; provided, however, that
installments of interest on Bearer Securities whose Stated Maturity is on or
prior to the Redemption Date shall be payable only at an office or agency
located outside the United States (except as otherwise provided in Section 1002)
and, unless otherwise specified as contemplated by Section 301, only upon
presentation and surrender of coupons for such interest; and provided further
that, except as otherwise provided with respect to Securities convertible into
Common Shares or Preferred Shares of the Company, installments of interest on
Registered Securities whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Security may be paid after deducting from the Redemption Price an amount equal
to the face amount of all such missing coupons, or the surrender of such missing
coupon or coupons may be waived by the Company and the Trustee if there be
furnished to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such Security
shall surrender to the Trustee or any Paying Agent any such missing coupon in
respect of which a deduction shall have been made from the Redemption Price,
such Holder shall be entitled to receive the amount so deducted; provided,
however, that interest represented by coupons shall be payable only at an office
or agency located outside the United States (except as otherwise provided in
Section 1002) and, unless otherwise specified as contemplated by Section 301,
only upon presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Security.
SECTION 1107. Securities Redeemed in Part. Any Registered
Security which is to be redeemed only in part (pursuant to the provisions of
this Article or of Article Twelve) shall be surrendered at a Place of Payment
therefor
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(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing) and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge a new Security or
Securities of the same series, of any authorized denomination as requested by
such Holder in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article. The provisions of this
Article shall be applicable to any sinking fund for the retirement of Securities
of a series except as otherwise specified as contemplated by Section 301 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by
the terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any payment in excess of such minimum amount provided
for by the terms of such Securities of any series is herein referred to as an
"optional sinking fund payment". If provided for by the terms of any Securities
of any series, the cash amount of any mandatory sinking fund payment may be
subject to reduction as provided in Section 1202. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities. The Company may, in satisfaction of all or any part of any mandatory
sinking fund payment with respect to the Securities of a series, (1) deliver
Outstanding Securities of such series (other than any previously called for
redemption) together in the case of any Bearer Securities of such series with
all unmatured coupons appertaining thereto and (2) apply as a credit Securities
of such series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, as
provided for by the terms of such Securities, or which have otherwise been
acquired by the Company; provided that such Securities so delivered or applied
as a credit have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the applicable
Redemption Price specified in such Securities for redemption through operation
of the sinking fund and the amount of such mandatory sinking fund payment shall
be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund. Not
less than 60 days prior to each sinking fund payment date for Securities of any
series, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing mandatory sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash in the currency or currencies,
currency unit or units or composite currency or currencies in which the
Securities of such series are payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series) and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202, and the optional amount, if any, to be added in cash
to the next ensuing mandatory sinking fund payment, and will also deliver to the
Trustee any Securities to be so delivered and credited. If such Officers'
Certificate shall specify an optional amount to be added in cash to the next
ensuing mandatory sinking fund payment, the Company shall thereupon be obligated
to pay the amount therein specified. Not less than 30 days before each such
sinking fund payment date the Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified in Section 1103 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in Section 1104. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Sections 1106 and 1107.
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ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article. Repayment of
Securities of any series before their Stated Maturity at the option of Holders
thereof shall be made in accordance with the terms of such Securities, if any,
and (except as otherwise specified by the terms of such series established
pursuant to Section 301) in accordance with this Article.
SECTION 1302. Repayment of Securities. Securities of any
series subject to repayment in whole or in part at the option of the Holders
thereof will, unless otherwise provided in the terms of such Securities, be
repaid at a price equal to the principal amount thereof, together with interest,
if any, thereon accrued to the Repayment Date specified in or pursuant to the
terms of such Securities. The Company covenants that on or before the Repayment
Date it will deposit with the Trustee or with a Paying Agent (or, if the Company
is acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) an amount of money in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such series
are payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay the principal (or, if so provided
by the terms of the Securities of any series, a percentage of the principal) of,
and (except if the Repayment Date shall be an Interest Payment Date) accrued
interest on, all the Securities or portions thereof, as the case may be, to be
repaid on such date.
SECTION 1303. Exercise of Option. Securities of any series
subject to repayment at the option of the Holders thereof will contain an
"Option to Elect Repayment" form on the reverse of such Securities. In order for
any Security to be repaid at the option of the Holder, the Trustee must receive
at the Place of Payment therefor specified in the terms of such Security (or at
such other place or places of which the Company shall from time to time notify
the Holders of such Securities) not earlier than 60 days nor later than 30 days
prior to the Repayment Date (1) the Security so providing for such repayment
together with the "Option to Elect Repayment" form on the reverse thereof duly
completed by the Holder or by the Holder's attorney duly authorized in writing
or (2) a telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange, or the National Association of Securities Dealers,
Inc. ("NASD"), or a commercial bank or trust company in the United States
setting forth the name of the Holder of the Security, the principal amount of
the Security, the principal amount of the Security to be repaid, the CUSIP
number, if any, or a description of the tenor and terms of the Security, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Security to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Security, will be
received by the Trustee not later than the fifth Business Day after the date of
such telegram, telex, facsimile transmission or letter; provided, however, that
such telegram, telex, facsimile transmission or letter shall only be effective
if such Security and form duly completed are received by the Trustee by such
fifth Business Day. If less than the entire principal amount of such Security is
to be repaid in accordance with the terms of such Security, the principal amount
of such Security to be repaid, in increments of the minimum denomination for
Securities of such series, and the denomination or denominations of the Security
or Securities to be issued to the Holder for the portion of the principal amount
of such Security surrendered that is not to be repaid, must be specified. The
principal amount of any security providing for repayment at the option of the
Holder thereof may not be repaid in part if, following such repayment, the
unpaid principal amount of such Security would be less than the minimum
authorized denomination of Securities of the series of which such Security to be
repaid is a part. Except as otherwise may be provided by the terms of any
Security providing for repayment at the option of the Holder thereof, exercise
of the repayment option by the Holder shall be irrevocable unless waived by the
Company.
SECTION 1304. When Securities Presented for Repayment Become
Due and Payable. If Securities of any series providing for repayment at the
option of the Holders thereof shall have been surrendered as provided in this
Article and as provided by or pursuant to the terms of such Securities, such
Securities or the portions thereof, as the case may be, to be repaid shall
become due and payable and shall be paid by the Company on the Repayment Date
therein specified, and on and after such Repayment Date (unless the Company
shall default in the payment of such Securities on such Repayment Date) such
Securities shall, if the same were interest-bearing, cease to bear interest and
the coupons for such interest appertaining to any Bearer Securities so to be
repaid, except to the extent provided below, shall be void. Upon surrender of
any such Security for repayment in accordance with such provisions, together
with all coupons, if any, appertaining thereto maturing after the Repayment
Date, the principal amount of such Security so to be repaid shall be paid by the
Company, together with accrued interest, if any, to the Repayment Date;
provided, however, that coupons whose Stated Maturity is on or prior to the
Repayment Date shall be payable only at an office
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or agency located outside the United States (except as otherwise provided in
Section 1002) and, unless otherwise specified pursuant to Section 301, only upon
presentation and surrender of such coupons; and provided further that, in the
case of Registered Securities, installments of interest, if any, whose Stated
Maturity is on or prior to the Repayment Date shall be payable (but without
interest thereon, unless the Company shall default in the payment thereof) to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
If any Bearer Security surrendered for repayment shall not be
accompanied by all appurtenant coupons maturing after the Repayment Date, such
Security may be paid after deducting from the amount payable therefor as
provided in Section 1302 an amount equal to the face amount of all such missing
coupons, or the surrender of such missing coupon or coupons may be waived by the
Company and the Trustee if there be furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Security shall surrender to the Trustee or any
Paying Agent any such missing coupon in respect of which a deduction shall have
been made as provided in the preceding sentence, such Holder shall be entitled
to receive the amount so deducted; provided, however, that interest represented
by coupons shall be payable only at an office or agency located outside the
United States (except as otherwise provided in Section 1002) and, unless
otherwise specified as contemplated by Section 301, only upon presentation and
surrender of those coupons.
If the principal amount of any Security surrendered for
repayment shall not be so repaid upon surrender thereof, such principal amount
(together with interest, if any, thereon accrued to such Repayment Date) shall,
until paid, bear interest from the Repayment Date at the rate of interest or
Yield to Maturity (in the case of Original Issue Discount Securities) set forth
in such Security.
SECTION 1305. Securities Repaid in Part. Upon surrender of any
Registered Security which is to be repaid in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Security, without service charge and at the expense of the Company, a new
Registered Security or Securities of the same series, of any authorized
denomination specified by the Holder, in an aggregate principal amount equal to
and in exchange for the portion of the principal of such Security so surrendered
which is not to be repaid.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Applicability of Article; Company's Option to
Effect Defeasance or Covenant Defeasance. If, pursuant to Section 301, provision
is made for either or both of (a) defeasance of the Securities of or within a
series under Section 1402 or (b) covenant defeasance of the Securities of or
within a series under Section 1403, then the provisions of such Section or
Sections, as the case may be, together with the other provisions of this Article
(with such modifications thereto as may be specified pursuant to Section 301
with respect to any Securities), shall be applicable to such Securities and any
coupons appertaining thereto, and the Company may at its option by Board
Resolution, at any time, with respect to such Securities and any coupons
appertaining thereto, elect to have Section 1402 (if applicable) or Section 1403
(if applicable) be applied to such Outstanding Securities and any coupons
appertaining thereto upon compliance with the conditions set forth below in this
Article.
SECTION 1402. Defeasance and Discharge. Upon the Company's
exercise of the above option applicable to this Section with respect to any
Securities of or within a series, the Company shall be deemed to have been
discharged from its obligations with respect to such Outstanding Securities and
any coupons appertaining thereto on the date the conditions set forth in Section
1404 are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by such Outstanding Securities and any
coupons appertaining thereto, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 1405 and the other Sections of
this Indenture referred to in clauses (A) and (B) below, and to have satisfied
all of its other obligations under such Securities and any coupons appertaining
thereto and this Indenture insofar as such Securities and any coupons
appertaining thereto are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Outstanding Securities and any
coupons appertaining thereto to receive, solely from the trust fund described in
Section 1404 and as more fully set forth in such
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Section, payments in respect of the principal of (and premium, if any) and
interest, if any, on such Securities and any coupons appertaining thereto when
such payments are due, (B) the Company's obligations with respect to such
Securities under Sections 305, 306, 1002 and 1003 and with respect to the
payment of Additional Amounts, if any, on such Securities as contemplated by
Section 1007, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Fourteen. Subject to compliance with this
Article Fourteen, the Company may exercise its option under this Section
notwithstanding the prior exercise of its option under Section 1403 with respect
to such Securities and any coupons appertaining thereto.
SECTION 1403. Covenant Defeasance. Upon the Company's exercise
of the above option applicable to this Section with respect to any Securities of
or within a series, the Company shall be released from its obligations under
Sections 1004 and 1005 and, if specified pursuant to Section 301, its
obligations under any other covenant, with respect to such Outstanding
Securities and any coupons appertaining thereto on and after the date the
conditions set forth in Section 1404 are satisfied (hereinafter, "covenant
defeasance"), and such Securities and any coupons appertaining thereto shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with Sections 1004 and 1005 or such other covenant, but
shall continue to be deemed "Outstanding" for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to such
Outstanding Securities and any coupons appertaining thereto, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section or such other covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or such other covenant or by reason of reference in any such
Section or such other covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a default or an Event
of Default under Section 501(4) or 501(9) or otherwise, as the case may be, but
except as specified above, the remainder of this Indenture and such Securities
and any coupons appertaining thereto shall be unaffected thereby.
SECTION 1404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section 1402 or Section
1403 to any Outstanding Securities of or within a series and any coupons
appertaining thereto:
(a) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee satisfying
the requirements of Section 607 who shall agree to comply with the
provisions of this Article Fourteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities and any coupons appertaining thereto, (1) an
amount in such currency, currencies or currency unit in which such
Securities and any coupons appertaining thereto are then specified as
payable at Stated Maturity) which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment of principal of (and premium, if any) and interest, if any, on
such Securities and any coupons appertaining thereto, or (2) Government
Obligations applicable to such Securities and coupons appertaining
thereto (determined on the basis of the currency, currencies or
currency unit in which such Securities and coupons appertaining thereto
are then specified as payable at Stated Maturity) which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before
the due date of any payment of principal of (and premium, if any) and
interest, if any, on such Securities and any coupons appertaining
thereto, money in an amount, or (3) a combination thereof in an amount,
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, (i) the principal of (and premium, if any) and interest, if
any, on such Outstanding Securities and any coupons appertaining
thereto on the Stated Maturity of such principal or installment of
principal or interest and (ii) any mandatory sinking fund payments or
analogous payments applicable to such Outstanding Securities and any
coupons appertaining thereto on the day on which such payments are due
and payable in accordance with the terms of this Indenture and of such
Securities and any coupons appertaining thereto.
(b) Such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the
Company is a party or by which it is bound.
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(c) No Event of Default or event which with notice or
lapse of time or both would become an Event of Default with respect to
such Securities and any coupons appertaining thereto shall have
occurred and be continuing on the date of such deposit or, insofar as
Sections 501(6) and 501(7) are concerned, at any time during the period
ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(d) In the case of an election under Section 1402,
the Company shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the
date of execution of this Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the Holders of such
Outstanding Securities and any coupons appertaining thereto will not
recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such defeasance had not occurred.
(e) In the case of an election under Section 1403,
the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Holders of such Outstanding Securities and any
coupons appertaining thereto will not recognize income, gain or loss
for Federal income tax purposes as a result of such covenant defeasance
and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
covenant defeasance had not occurred.
(f) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent to the defeasance under Section 1402 or the
covenant defeasance under Section 1403 (as the case may be) have been
complied with and an Opinion of Counsel to the effect that either (i)
as a result of a deposit pursuant to subsection (a) above and the
related exercise of the Company's option under Section 1402 or Section
1403 (as the case may be), registration is not required under the
Investment Company Act of 1940, as amended, by the Company, with
respect to the trust funds representing such deposit or by the Trustee
for such trust funds or (ii) all necessary registrations under said Act
have been effected.
(g) Notwithstanding any other provisions of this
Section, such defeasance or covenant defeasance shall be effected in
compliance with any additional or substitute terms, conditions or
limitations which may be imposed on the Company in connection therewith
pursuant to Section 301.
SECTION 1405. Deposited Money and Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the
last paragraph of Section 1003, all money and Government Obligations (or other
property as may be provided pursuant to Section 301) (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in
respect of any Outstanding Securities of any series and any coupons appertaining
thereto shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and any coupons appertaining thereto and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities and any coupons appertaining
thereto of all sums due and to become due thereon in respect of principal (and
premium, if any) and interest and Additional Amounts, if any, but such money
need not be segregated from other funds except to the extent required by law.
Unless otherwise specified with respect to any Security
pursuant to Section 301, if, after a deposit referred to in Section 1404(a) has
been made, (a) the Holder of a Security in respect of which such deposit was
made is entitled to, and does, elect pursuant to Section 301 or the terms of
such Security to receive payment in a currency, currency unit or composite
currency other than that in which the deposit pursuant to Section 1404(a) has
been made in respect of such Security, or (b) a Conversion Event occurs in
respect of the currency, currency unit or composite currency in which the
deposit pursuant to Section 1404(a) has been made, the indebtedness represented
by such Security and any coupons appertaining thereto shall be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any), and interest, if any, on such Security as
the same becomes due out of the proceeds yielded by converting (from time to
time as specified below in the case of any such election) the amount or other
property deposited in respect of such Security into the currency, currency unit
or composite currency in which such Security becomes payable as a result of such
election or Conversion Event based on the applicable market
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exchange rate for such currency, currency unit or composite currency in effect
on the second Business Day prior to each payment date, in the case of such an
election, or, the applicable market exchange rate in effect for such currency,
currency unit or composite currency (as nearly as feasible), in the case of such
Conversion Event.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the Government
Obligations deposited pursuant to Section 1404 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of such Outstanding Securities and any
coupons appertaining thereto.
Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or Government Obligations (or other property and any proceeds
therefrom) held by it as provided in Section 1404 which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect a
defeasance or covenant defeasance, as applicable, in accordance with this
Article.
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May Be Called. A
meeting of Holders of Securities of any series may be called at any time and
from time to time pursuant to this Article to make, give or take any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be made, given or taken by Holders of Securities
of such series.
SECTION 1502. Call, Notice and Place of Meetings. (a) The
Trustee may at any time call a meeting of Holders of Securities of any series
for any purpose specified in Section 1501, to be held at such time and at such
place in the City of Boston, or in London as the Trustee shall determine. Notice
of every meeting of Holders of Securities of any series, setting forth the time
and the place of such meeting and in general terms the action proposed to be
taken at such meeting, shall be given, in the manner provided in Section 106,
not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 25% in principal amount of the
Outstanding Securities of any series shall have requested the Trustee to call a
meeting of the Holders of Securities of such series for any purpose specified in
Section 1501, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have made the
first publication of the notice of such meeting within 21 days after receipt of
such request or shall not thereafter proceed to cause the meeting to be held as
provided herein, then the Company or the Holders of Securities of such series in
the amount above specified, as the case may be, may determine the time and the
place in the City of Boston, or in London for such meeting and may call such
meeting for such purposes by giving notice thereof as provided in subsection (a)
of this Section.
SECTION 1503. Persons Entitled to Vote at Meetings. To be
entitled to vote at any meeting of Holders of Securities of any series, a Person
shall be (1) a Holder of one or more Outstanding Securities of such series, or
(2) a Person appointed by an instrument in writing as proxy for a Holder or
Holders of one or more Outstanding Securities of such series by such Holder or
Holders. The only Persons who shall be entitled to be present or to speak at any
meeting of Holders of Securities of any series shall be the Persons entitled to
vote at such meeting and their counsel, any representatives of the Trustee and
its counsel and any representatives of the Company and its counsel.
SECTION 1504. Quorum; Action. The Persons entitled to vote a
majority in principal amount of the Outstanding Securities of a series shall
constitute a quorum for a meeting of Holders of Securities of such series;
provided, however, that if any action is to be taken at such meeting with
respect to a consent or waiver which this Indenture expressly provides may be
given by the Holders of not less than a specified percentage in principal amount
of the Outstanding Securities of a series, the Persons entitled to vote such
specified percentage in principal amount of the Outstanding Securities of such
series shall constitute a quorum. In the absence of a quorum within 30 minutes
after the time appointed for any such meeting, the meeting shall, if convened at
the request of Holders of Securities of such
51
<PAGE>
series, be dissolved. In any other case the meeting may be adjourned for a
period of not less than 10 days determined by the chairman of the meeting prior
to the adjournment of such meeting. In the absence of a quorum at any such
adjourned meeting, such adjourned meeting may be further adjourned for a period
of not less than 10 days as determined by the chairman of the meeting prior to
the adjournment of such adjourned meeting. Notice of the reconvening of any
adjourned meeting shall be given as provided in Section 1502(a), except that
such notice need be given only once not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the reconvening of
any adjourned meeting shall state expressly the percentage, as provided above,
of the principal amount of the Outstanding Securities of such series which shall
constitute a quorum.
Except as limited by the proviso to Section 902, any
resolution presented to a meeting or adjourned meeting duly reconvened at which
a quorum is present as aforesaid may be adopted by the affirmative vote of the
Holders of a majority in principal amount of the Outstanding Securities of that
series; provided, however, that, except as limited by the proviso to Section
902, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which this Indenture
expressly provides may be made, given or taken by the Holders of a specified
percentage, which is less than a majority, in principal amount of the
Outstanding Securities of a series may be adopted at a meeting or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of
Holders of Securities of any series duly held in accordance with this Section
shall be binding on all the Holders of Securities of such series and the related
coupons, whether or not present or represented at the meeting.
Notwithstanding the foregoing provisions of this Section 1504,
if any action is to be taken at a meeting of Holders of Securities of any series
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that this Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Securities affected thereby, or of the Holders of such series and
one or more additional series:
(i) there shall be no minimum quorum requirement for such
meeting; and
(ii) the principal amount of the Outstanding Securities of
such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into
account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given
or taken under this Indenture.
SECTION 1505. Determination of Voting Rights; Conduct and
Adjournment of Meetings. (a) Notwithstanding any provisions of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities of a series in regard to proof of the
holding of Securities of such series and of the appointment of proxies and in
regard to the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Securities shall be proved in the manner specified in Section 104
and the appointment of any proxy shall be proved in the manner specified in
Section 104 or by having the signature of the Person executing the proxy
witnessed or guaranteed by any trust company, bank or banker authorized by
Section 104 to certify to the holding of Bearer Securities. Such regulations may
provide that written instruments appointing proxies, regular on their face, may
be presumed valid and genuine without the proof specified in Section 104 or
other proof.
(b) The Trustee shall, by an instrument in writing appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Holders of Securities as provided in Section 1502(b), in which
case the Company or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or
proxy shall be entitled to one vote for each $1,000 principal amount of the
Outstanding Securities of such series held or represented by him; provided,
52
<PAGE>
however, that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the meeting
to be not Outstanding. The chairman of the meeting shall have no right to vote,
except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly
called pursuant to Section 1502 at which a quorum is present may be adjourned
from time to time by Persons entitled to vote a majority in principal amount of
the Outstanding Securities of such series represented at the meeting, and the
meeting may be held as so adjourned without further notice.
SECTION 1506. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of Securities
of any series shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities of such series or of their
representatives by proxy and the principal amounts and serial numbers of the
Outstanding Securities of such series held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record, at least in duplicate, of
the proceedings of each meeting of Holders of Securities of any Series shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
fact, setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 1502 and, if applicable, Section 1504.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Company and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.
This Indenture may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, as an instrument under seal, all as of the day
and year first above written.
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
Title: President and Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ James E. Mogavero
Title: Vice President
54
<PAGE>
EXHIBIT A
FORMS OF CERTIFICATION
EXHIBIT A-1
FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, as of the date hereof, and except as
set forth below, the above-captioned Securities held by you for our account (i)
are owned by person(s) that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States federal income taxation regardless of its
source ("United States person(s)"), (ii) are owned by United States person(s)
that are (a) foreign branches of United States financial institutions (financial
institutions, as defined in United States Treasury Regulations Section
2.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing
for their own account or for resale, or (b) United States person(s) who acquired
the Securities through foreign branches of United States financial institutions
and who hold the Securities through such United States financial institutions on
the date hereof (and in either case (a) or (b), each such United States
financial institutions hereby agrees, on its own behalf or through its agent,
that you may advise Hospitality Properties Trust or its agent that such
financial institutions will comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined in United States Treasury Regulations Section
1.163-5(c)(1)(i)(D)(7), and, in addition, if the owner is a United States or
foreign financial institutions described in clause (iii) above (whether or not
also described in clause (i) or (ii)), this is to further certify that such
financial institutions has not acquired the Securities for purposes of resale
directly or indirectly to a United States person or to a person within the
United States or its possessions.
As used herein, "United States" means the United States of
America (including the States and the District of Columbia); and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, Wake Island and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the above-captioned Securities held by you for our account in accordance with
your Operating Procedures if any applicable statement herein is not correct on
such date, and in the absence of any such notification it may be assumed that
this certification applies as of such date.
This certificate excepts and does not relate to (U.S.$)
_______________ of such interest in the above-captioned Securities in respect of
which we are not able to certify and as to which we understand an exchange for
an interest in a Permanent Global Security or an exchange for and delivery of
definitive Securities (or, if relevant, collection of any interest) cannot be
made until we do so certify.
We understand that this certificate may be required in
connection with certain tax legislation in the United States. If administrative
or legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: , 19
A-1
<PAGE>
To be dated no earlier than the 15th day prior to (i) the Exchange Date or (ii)
the relevant Interest Payment Date occurring prior to the Exchange Date, as
applicable]
[Name of Person Making Certification]
(Authorized
Signatory)
Name:
Title:
A-2
<PAGE>
EXHIBIT A-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR
AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE OF
A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO
OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, based solely on written
certifications that we have received in writing, by tested telex or by
electronic transmission from each of the persons appearing in our records as
persons entitled to a portion of the principal amount set forth below (our
"Member Organizations") substantially in the form attached hereto, as of the
date hereof, [U.S.$) principal amount of the above-captioned Securities (i) is
owned by person(s) that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States Federal income taxation regardless of its
source ("United States person(s)"), (ii) is owned by United States person(s)
that are (a) foreign branches of United States financial institutions (financial
institutions, as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)
are herein referred to as "financial institutions") purchasing for their own
account or for resale, or (b) United States person(s) who acquired the
Securities through foreign branches of United States financial institutions and
who hold the Securities through such United States financial institutions on the
date hereof (and in either case (a) or (b), each such financial institutions
will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder), or
(iii) is owned by United States or foreign financial institution(s) for purposes
of resale during the restricted period (as defined in United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, to the further effect, that
financial institutions described in clause (iii) above (whether or not also
described in clause (i) or (ii)) have certified that they have not acquired the
Securities for purposes of resale directly or indirectly to a United States
person or to a person within the United States or its possessions.
As used herein, "United States" means the United States of
America (including the States and the District of Columbia); and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, Wake Island and the Northern Mariana Islands.
We further certify that (i) we are not making available
herewith for exchange (or, if relevant, collection of any interest) any portion
of the temporary global Security representing the above-captioned Securities
excepted in the above-referenced certificates of Member Organizations and (ii)
as of the date hereof we have not received any notification from any of our
Member Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the part submitted herewith for
exchange (or, if relevant, collection of any interest) are no longer true and
cannot be relied upon as of the date hereof.
We understand that this certification is required in
connection with certain tax legislation in the United States. If administrative
or legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Date: 19
[To be dated no earlier than the Exchange Date or the relevant Interest Payment
Date occurring prior to the Exchange Date, as applicable]
[Morgan Guaranty Trust Company
New York, Brussels Office,]
as Operator of the Euroclear System
[Cedel S.A.]
A-3
EXHIBIT 4.4
SUPPLEMENTAL INDENTURE NO. 1
by and between
HOSPITALITY PROPERTIES TRUST
and
STATE STREET BANK AND TRUST COMPANY
as of February 25, 1998
SUPPLEMENTAL TO THE INDENTURE DATED AS OF FEBRUARY 25, 1998
------------------------------------
HOSPITALITY PROPERTIES TRUST
$150,000,000 of
7.00% Senior Notes due 2008
<PAGE>
This SUPPLEMENTAL INDENTURE NO. 1 (this "Supplemental Indenture") made
and entered into as of February 25, 1998 between HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust (the "Company"), and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, as Trustee (the "Trustee").
WITNESSETH THAT:
WHEREAS, the Company and the Trustee have executed and delivered an
Indenture, dated as of February 25, 1998 (the "Indenture"), relating to the
Company's issuance, from time to time, of various series of debt securities; and
WHEREAS, the Company has determined to issue debt securities known as
its 7.00 % Senior Notes due 2008 in an aggregate principal amount of
$150,000,000; and
WHEREAS, the Indenture provides that certain terms and conditions for
each series of debt securities issued by the Company thereunder may be set forth
in an indenture supplemental to the Indenture;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
ARTICLE 1
DEFINED TERMS
Section 1.1 The following definitions supplement, and, to the extent
inconsistent with, replace the definitions in Section 101 of the Indenture:
"Acquired Debt" means Debt of a Person (i) existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection with the acquisition
of assets from such Person's, in each case, other than Debt incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary or
such acquisition. Acquired Debt shall be deemed to be incurred on the date of
the related acquisition of assets from any Person or the date the acquired
Person becomes a Subsidiary.
"Annual Debt Service" as of any date means the maximum amount which is
expensed in any 12-month period for interest on Debt of the Company and its
Subsidiaries.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in The City of New York or in the city in which
the Corporate Trust Office of the Trustee is located, are required or authorized
to close.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participation or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into or exchangeable for capital stock), warrants or
options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations of the Company and its Subsidiaries plus amounts which
have been deducted, and minus amounts which have been added, for the following
(without duplication): (i) interest on Debt of the Company and its Subsidiaries,
(ii) cash reserves made by lessees as required by the Company's leases for
periodic replacement and refurbishment of the Company's assets, (iii) provision
for taxes of the Company and its Subsidiaries based on income, (iv) amortization
of debt discount and deferred financing costs, (v) provisions for gains and
losses on properties and property depreciation and amortization, (vi) the effect
of any noncash charge resulting from a change in accounting principles in
determining Earnings from Operations for such period and (vii) amortization of
deferred charges.
"Debt" of the Company or any Subsidiary means, without duplication, any
indebtedness of the Company or any Subsidiary, whether or not contingent, in
respect of (i) borrowed money or evidenced by bonds, notes, debentures or
similar instruments, (ii) indebtedness for borrowed money secured by any
Encumbrance existing on property owned
<PAGE>
by the Company or any Subsidiary, to the extent of the lesser of (x) the amount
of indebtedness so secured and (y) the fair market value of the property subject
to such Encumbrance, (iii) the reimbursement obligations, contingent or
otherwise, in connection with any letters of credit actually issued (other than
letters of credit issued to provide credit enhancement or support with respect
to other indebtedness of the Company or any Subsidiary otherwise reflected as
Debt hereunder) or amounts representing the balance deferred and unpaid of the
purchase price of any property or services, except any such balance that
constitutes an accrued expense or trade payable, or all conditional sale
obligations or obligations under any title retention agreement, (iv) the
principal amount of all obligations of the Company or any Subsidiary with
respect to redemption, repayment or other repurchase of any Disqualified Stock,
or (v) any lease of property by the Company or any Subsidiary as lessee which is
reflected on the Company's consolidated balance sheet as a capitalized lease in
accordance with GAAP, to the extent, in the case of items of indebtedness under
(i) through (iii) above, that any such items (other than letters of credit)
would appear as a liability on the Company's consolidated balance sheet in
accordance with GAAP, and also includes, to the extent not otherwise included,
any obligation by the Company or any Subsidiary to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), Debt of another Person (other than the Company or
any Subsidiary) (it being understood that Debt shall be deemed to be incurred by
the Company or any Subsidiary whenever the Company or such Subsidiary shall
create, assume, guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which by the terms of such Capital Stock (or by the terms
of any security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock or shares), (ii) is convertible into or exchangeable or exercisable for
Debt or Disqualified Stock, or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for common stock or shares), in each case on or prior to the
stated maturity of the Notes.
"Earnings from Operations" for any period means net earnings excluding
gains and losses on sales of investments, extraordinary items and property
valuation losses, as reflected in the financial statements of the Company and
its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security
interest of any kind.
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semiannual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption is given or
declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the Notes
being redeemed or paid. For purposes of this Supplemental Indenture and the
Notes, references in the Indenture to the payment of the principal (and premium,
if any) and interest on the Notes shall be deemed to include the payment of the
Make-Whole Amount, if any, due upon redemption with respect to the Notes.
"Notes" means the Company's 7.00% Senior Notes, due 2008, issued under
this Supplemental Indenture and the Indenture, as amended or supplemented from
time to time.
"Reinvestment Rate" means a rate per annum equal to the sum of 0.25%
(twenty-five one hundredths of one percent) plus the yield on treasury
securities at constant maturity under the heading "Week Ending" published in the
Statistical Release under the caption "Treasury Constant Maturities" for the
maturity (rounded to the nearest month) corresponding to the remaining life to
maturity, as of the payment date of the principal being redeemed or paid. If no
maturity exactly corresponds to such maturity, yields for the two published
maturities most closely corresponding to such maturity shall be calculated
pursuant to the immediately preceding sentence and the Reinvestment Rate shall
be interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release published
prior to the date of determination of the Make-Whole Amount shall be used.
"Secured Debt" means Debt secured by any mortgage, lien, charge, pledge
or security interest of any kind.
-2-
<PAGE>
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under this
Supplemental Indenture, then any publicly available source of similar market
data which shall be designated by the Company.
"Subsidiary" means any corporation or other entity of which a majority
of (i) the voting power of the voting equity securities or (ii) the outstanding
equity interests of which are owned, directly or indirectly, by the Company or
one or more other Subsidiaries of the Company. For the purposes of this
definition, "voting equity securities" means equity securities having voting
power for the election of directors, whether at all times or only so long as no
senior class of security has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) the Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined in accordance with GAAP (but excluding accounts receivable and
intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its Subsidiaries not subject to an Encumbrance
for borrowed money determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the Company
and its Subsidiaries on such date, before depreciation and amortization
determined on a consolidated basis in accordance with GAAP.
"Unsecured Debt" means Debt which is not secured by any of the
properties of the Company or any Subsidiary.
ARTICLE 2
TERMS OF THE NOTES
Section 2.1 Pursuant to Section 301 of the Indenture, the Notes shall
have the following terms and conditions:
(a) Title; Limitation on Aggregate Principal Amount; Form of Notes. The
Notes shall be Registered Securities under the Indenture and shall be known as
the Company's "7.00% Senior Notes due 2008." The Notes will be limited to an
aggregate principal amount of $150,000,000, and except as provided in this
Section and in Section 306 of the Indenture, the Company shall not execute and
the Trustee shall not authenticate or deliver Notes in excess of such principal
amount. The Notes (together with the Trustee's certificate of authentication)
shall be substantially in the form of Exhibit A hereto, which is hereby
incorporated in and made a part of this Supplemental Indenture.
The Notes will be issued in the form of one or more registered global
security without coupons ("Global Notes") which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC"), and registered in the name of
DTC's nominee, Cede & Co. Except under the circumstance described below, the
Notes will not be issuable in definitive form. Unless and until it is exchanged
in whole or in part for the individual notes represented thereby, a Global Note
may not be transferred except as a whole by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee of DTC
to a successor depository or any nominee of such successor.
So long as DTC or its nominee is the registered owner of a Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by such Global Note for all purposes under this
Supplemental Indenture. Except as described below, owners of beneficial interest
in Notes evidenced by a Global Note will not be entitled to have any of the
individual Notes represented by such Global Note registered in their names, will
not receive or be entitled to receive physical delivery of any such Notes in
definitive form and will not be considered the owners or holders thereof under
the Indenture or this Supplemental Indenture.
-3-
<PAGE>
If DTC is at any time unwilling, unable or ineligible to continue as
depository and a successor depository is not appointed by the Company within 90
days, the Company will issue individual Notes in exchange for the Global Note or
Global Notes representing such Notes. In addition, the Company may at any time
and in its sole discretion, subject to certain limitations set forth in the
Indenture, determine not to have any of such Notes represented by one or more
Global Notes and, in such event, will issue individual Notes in exchange for the
Global Note or Global Notes representing the Notes. Individual Notes so issued
will be issued in denominations of $1,000 and integral multiples thereof.
(b) Interest and Interest Rate. The Notes will bear interest at a rate
of 7.00% per annum, from February 25, 1998 or from the immediately preceding
Interest Payment Date to which interest has been paid or duly provided for,
payable semi-annually in arrears on March 1 and September 1 of each year,
commencing September 1, 1998 (each of which shall be an "Interest Payment
Date"), to the Persons in whose names the Notes are registered in the Security
Register at the close of business on the February 15 or August 15 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date (each, a "Record Date").
(c) Principal Repayment; Currency. The stated maturity of the Notes is
March 1, 2008, provided, however, the Notes may be earlier redeemed at the
option of the Company as provided in paragraph (c) below. The principal of each
Note payable on its maturity date shall be paid against presentation and
surrender thereof at the Corporate Trust Office of the Trustee, located
initially at Two International Place, Boston, Massachusetts 02110, in such coin
or currency of the United States of America as at the time of payment is legal
tender for the payment of public or private debts. The Company will not pay
Additional Amounts (as defined in the Indenture) on the Notes.
(d) Redemption at the Option of the Company; Acceleration. The Notes
will be subject to redemption at any time at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days' notice to each Holder
of Notes to be redeemed at its address appearing in the Security Register, at a
price equal to the sum of (i) the principal amount of the Notes being redeemed,
plus accrued and unpaid interest to but excluding the applicable Redemption Date
and (ii) the Make-Whole Amount. Upon the acceleration of the Notes in accordance
with Section 502 of the Indenture, the principal amount of the Notes, plus
accrued and unpaid interest thereon and the Make-Whole Amount, shall become due
and payable immediately.
(e) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to the Company shall be directed
to it at 400 Centre Street, Newton, Massachusetts 02158, Attention: President;
notices to the Trustee shall be directed to it at Two International Place,
Boston, Massachusetts 02110, Attention: Corporate Trust Department, Re:
Hospitality Properties Trust 7.00% Senior Notes due 2008.
(f) Global Note Legend. Each Global Note shall bear the following
legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
(g) Applicability of Discharge, Defeasance and Covenant Defeasance
Provisions. The Discharge, Defeasance and Covenant Defeasance provisions in
Article Fourteen of the Indenture will apply to the Notes.
-4-
<PAGE>
ARTICLE 3
ADDITIONAL COVENANTS
Section 3.1 In addition to the covenants of the Company set forth in
Article Ten of the Indenture, for the benefit of the holders of the Notes:
(a) Limitations on Incurrence of Debt.
(i) The Company will not, and will not permit any Subsidiary
to, incur any Debt if, immediately after giving effect to the
incurrence of such additional Debt and the application of the proceeds
thereof, the aggregate principal amount of all outstanding Debt of the
Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP is greater than 60% of the sum ("Adjusted Total
Assets") of (without duplication) (i) the Total Assets of the Company
and its Subsidiaries as of the end of the calendar quarter covered in
the Company's Annual Report on Form 10-K, or the Quarterly Report on
Form 10-Q, as the case may be, most recently filed with the Securities
and Exchange Commission (or, if such filing is not permitted under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
the Trustee) prior to the incurrence of such additional Debt and (ii)
the purchase price of any real estate assets or mortgages receivable
acquired, and the amount of any securities offering proceeds received
(to the extent that such proceeds were not used to acquire real estate
assets or mortgages receivable or used to reduce Debt), by the Company
or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such
additional Debt.
(ii) In addition to the foregoing limitations on the
incurrence of Debt, the Company will not, and will not permit any
Subsidiary to, incur any Secured Debt if, immediately after giving
effect to the incurrence of such additional Secured Debt and the
application of the proceeds thereof, the aggregate principal amount of
all outstanding Secured Debt of the Company and its Subsidiaries on a
consolidated basis is greater than 40% of Adjusted Total Assets.
(iii) In addition to the foregoing limitations on the
incurrence of Debt, the Company will not, and will not permit any
Subsidiary to, incur any Debt if the ratio of Consolidated Income
Available for Debt Service to the Annual Debt Service for the four
consecutive fiscal quarters most recently ended prior to the date on
which such additional Debt is to be incurred shall have been less than
1.5x, on a pro forma basis after giving effect thereto and to the
application of the proceeds therefrom, and calculated on the assumption
that (i) such Debt and any other Debt incurred by the Company and its
Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other
Debt, had occurred at the beginning of such period; (ii) the repayment
or retirement of any other Debt by the Company and its Subsidiaries
since the first date of such four-quarter period had been repaid or
retired at the beginning of such period (except that, in making such
computation, the amount of Debt under any revolving credit facility
shall be computed based upon the average daily balance of such Debt
during such period); (iii) in the case of Acquired Debt or Debt
incurred in connection with any acquisition since the first day of such
four-quarter period, the related acquisition had occurred as of the
first day of such period with appropriate adjustments with respect to
such acquisition being included in such pro forma calculation; and (iv)
in the case of any acquisition or disposition by the Company or its
Subsidiaries of any asset or group of assets since the first day of
such four-quarter period, whether by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related
repayment of Debt had occurred as of the first day of such period with
the appropriate adjustments with respect to such acquisition or
disposition being included in such pro forma calculation. If the Debt
giving rise to the need to make the foregoing calculation or any other
Debt incurred after the first day of the relevant four-quarter period
bears interest at a floating rate then, for purposes of calculating the
Annual Debt Service, the interest rate on such Debt shall be computed
on a pro forma basis as if the average interest rate which would have
been in effect during the entire such four-quarter period had been the
applicable rate for the entire such period.
(b) Maintenance of Total Unencumbered Assets. The Company and its
Subsidiaries will maintain at all times Total Unencumbered Assets of not less
than 200% of the aggregate outstanding principal amount of the Unsecured Debt of
the Company and its Subsidiaries on a consolidated basis.
-5-
<PAGE>
ARTICLE 4
ADDITIONAL EVENTS OF DEFAULT
For purposes of this Supplemental Indenture and the Notes, in addition
to the Events of Default set forth in Section 501 of the Indenture, it shall
also constitute an "Event of Default" if a default under any bond, debenture,
note or other evidence of indebtedness of the Company (including a default with
respect to any other series of securities), or under any mortgage, indenture or
other instrument of the Company under which there may be issued or by which
there may be secured or evidenced any indebtedness for money borrowed by the
Company (or by any Subsidiary, the repayment of which the Company has guaranteed
or for which the Company is directly responsible or liable as obligor or
guarantor) having an aggregate principal amount outstanding of at least
$20,000,000 , whether such indebtedness now exists or shall hereafter be
incurred or created, which default shall have resulted in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable, without such indebtedness having been
discharged or such acceleration having been rescinded or annulled within a
period of ten days after there shall have been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the outstanding Notes, a written
notice specifying such default and requiring the Company to cause such
indebtedness to be discharged or cause such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default" hereunder.
ARTICLE 5
EFFECTIVENESS
This Supplemental Indenture shall be effective for all purposes as of
the date and time this Supplemental Indenture has been executed and delivered by
the Company and the Trustee in accordance with Article Nine of the Indenture. As
supplemented hereby, the Indenture is hereby confirmed as being in full force
and effect.
ARTICLE 6
MISCELLANEOUS
Section 6.1 In the event any provision of this Supplemental Indenture
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof or any provision of the Indenture.
Section 6.2 To the extent that any terms of this Supplemental Indenture
or the Notes are inconsistent with the terms of the Indenture, the terms of this
Supplemental or the Notes shall govern and supersede such inconsistent terms.
Section 6.3 This Supplemental Indenture shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts.
Section 6.4 This Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Supplemental Indenture to be executed as an instrument under seal in their
respective corporate names as of the date first above written.
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
Name: John G. Murray
Title: President and Secretary
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ James E. Mogavero
Name: James E. Mogavero
Title: Vice President
-7-
<PAGE>
EXHIBIT A
(Face of Note)
7.00% Senior Notes due 2008
No. $__________
HOSPITALITY PROPERTIES TRUST
promises to pay to _______________________________________ or registered
assigns, the principal sum of _____________________________________ Dollars on
March 1, 2008.
Interest Payment Dates: March 1 and September 1.
Record Dates: February 15 and August 15.
CUSIP No: 44106MAA0
HOSPITALITY PROPERTIES TRUST
By:______________________________
Name:
Title:
Dated:
This is one of the Notes referred to in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
Authorized Officer
A - 1
<PAGE>
(Back of Note)
HOSPITALITY PROPERTIES TRUST
7.00% Senior Notes due 2008
Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.
1. Interest. Hospitality Properties Trust, a Maryland real estate
investment trust (the "Company"), promises to pay interest on the principal
amount of this Note at the rate and in the manner specified below.
The Company shall pay in cash interest on the principal amount of this
Note at the rate per annum of 7.00%. The Company will pay interest semi-annually
in arrears on March 1 and September 1 of each year, commencing on September 1,
1998 or if any such day is not a Business Day (as defined in the Indenture), on
the next succeeding Business Day (each an "Interest Payment Date"), to Holders
of record on the immediately preceding February 15 and August 15.
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of the Notes.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date next preceding the Interest Payment
Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. The Company, however, may pay principal, premium, if
any, and interest by check payable in such money. It may mail an interest check
to a Holder's registered address.
3. Indenture. The Company issued the Notes under an Indenture and
Supplemental Indenture No. 1 thereto, each dated as of February 25, 1998
(collectively, the "Indenture") between the Company and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject
to all such terms, and Holders of the Notes are referred to the Indenture and
such Act for a statement of such terms. The terms of the Indenture shall govern
any inconsistencies between the Indenture and the Notes. The Notes are unsecured
general obligations of the Company limited to $150,000,000 in aggregate
principal amount.
4. Optional Redemption. The Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at a redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed, plus accrued and unpaid interest
to but excluding the applicable Redemption Date and (ii) the Make-Whole Amount.
As used herein the term "Make-Whole Amount" means, in connection with
any optional redemption or accelerated payment of any Notes, the excess, if any,
of (i) the aggregate present value as of the date of such redemption or
accelerated payment of each dollar of principal being redeemed or paid and the
amount of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of such dollar if
such redemption or accelerated payment had not been made, determined by
discounting, on a semiannual basis, such principal and interest at the
Reinvestment Rate (as defined herein) (determined on the third Business Day
preceding the date such notice of redemption is given or declaration of
acceleration is made) from the respective dates on which such principal and
interest would have been payable if such redemption or accelerated payment had
not been made, over (ii) the aggregate principal amount of the Notes being
redeemed or paid.
As used herein the term "Reinvestment Rate" means a rate per annum
equal to the sum of 0.25% (twenty-five one hundredths of one percent) plus the
yield on treasury securities at constant maturity under the heading "Week
Ending" published in the Statistical Release (as defined herein) under the
caption "Treasury Constant Maturities" for the maturity (rounded to the nearest
month) corresponding to the remaining life to maturity, as of the payment date
of the principal being redeemed or paid. If no maturity exactly corresponds to
such maturity, yields for the two published
A - 2
<PAGE>
maturities most closely corresponding to such maturity shall be calculated
pursuant to the immediately preceding sentence and the Reinvestment Rate shall
be interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release published
prior to the date of determination of the Make-Whole Amount shall be used.
As used herein the term "Statistical Release" means the statistical
release designated "H.15(519)" or any successor publication which is published
weekly by the Federal Reserve System and which establishes yields on actively
traded United States government securities adjusted to constant maturities or,
if such statistical release is not published at the time of any determination
under the Supplemental Indenture, then any publicly available source of similar
market data which shall be designated by the Company.
5. Mandatory Redemption. The Company shall not be required to make
sinking fund or redemption payments with respect to the Notes.
6. Notice of Redemption. Notice of redemption shall be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at its registered address. Notes may be redeemed in part
but only in whole multiples of $1,000, unless all of the Notes held by a Holder
are to be redeemed. On and after the redemption date, interest ceases to accrue
on Notes or portions of them called for redemption.
7. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000 in
excess thereof. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Security Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Security Registrar need not exchange or register
the transfer of any Note or portion of a Note selected for redemption. Also, it
need not exchange or register the transfer of any Notes for a period of 15 days
before the mailing of a notice of redemption of Notes, or during the period
between a record date and the corresponding Interest Payment Date.
8. Defaults and Remedies. In case an Event of Default (as defined in
the Indenture) with respect to the Notes shall have occurred and be continuing,
the principal hereof may be declared, and upon such declaration shall become,
due and payable, in the manner, with the effect and subject to the provisions
provided in the Indenture.
9. Actions of Holders. The Indenture contains provisions permitting the
holders of not less than a majority of the aggregate principal amount of the
outstanding Notes, subject to certain exceptions as provided in the Indenture,
on behalf of the holders of all such Notes at a meeting duly called and held as
provided in the Indenture, to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided in
the Indenture to be made, given or taken by the holders of the Notes, including
without limitation, waiving (a) compliance by the Company with certain
provisions of the Indenture, and (b) certain past defaults under the Indenture
and their consequences. Any resolution passed or decision taken at any meeting
of the holders of the Notes in accordance with the provisions of the Indenture
shall be conclusive and binding upon such holders and upon all future holders of
this Note and other Notes issued upon the registration of transfer hereof or in
exchange heretofore or in lieu hereof
10. Persons Deemed Owners. The Company, the Trustee, and any agent of
the Company or the Trustee may deem and treat the Person in whose name this Note
is registered on the Security Register as its absolute owner for all purposes.
11. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
12. Governing Law. THE INTERNAL LAW OF THE COMMONWEALTH OF
MASSACHUSETTS SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES.
13. No Personal Liability. THE DECLARATION OF TRUST OF THE COMPANY,
AMENDED AND RESTATED ON AUGUST 21, 1995, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT
THE NAME
A - 3
<PAGE>
"HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
Hospitality Properties Trust
400 Centre Street
Newton, MA 02158
Telecopier No.: (617) 969-5730
Attention: President
A - 4
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee:
Exhibit 8.1
SULLIVAN & WORCESTER LLP
One Post Office Square
Boston, Massachusetts 02109
March 30, 1998
Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Ladies and Gentlemen:
In connection with the filing by Hospitality Properties Trust, a
Maryland real estate investment trust (the "Company"), of its Annual Report on
Form 10-K for the year ended December 31, 1997 (the "Form 10-K"), under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the following
opinion is furnished to you to be filed with the Securities and Exchange
Commission (the "SEC") as Exhibit 8.1 to the Form 10-K.
We have acted as counsel for the Company in connection with the
preparation of its Form 10-K, and we have examined originals or copies,
certified or otherwise identified to our satisfaction, of corporate records,
certificates and statements of officers and accountants of the Company and of
public officials, and such other documents as we have considered relevant and
necessary in order to furnish the opinion hereinafter set forth. Specifically,
and without limiting the generality of the foregoing, we have reviewed: (i) the
declaration of trust, as amended and restated, and the by-laws of the Company;
and (ii) the sections in the Company's Form 10-K captioned "Federal Income Tax
Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement
Accounts." With respect to all questions of fact on which our opinion is based,
we have assumed the accuracy and completeness of and have relied on the
information set forth in the Form 10-K and in the documents incorporated therein
by reference, and on representations made to us by the officers of the Company.
We have not independently verified such information; nothing has come to our
attention, however, which would lead us to believe that we are not entitled to
rely on such information.
The opinion set forth below is based upon the Internal Revenue Code of
1986, as amended, the Treasury Regulations issued thereunder, published
administrative interpretations thereof, and judicial decisions with respect
thereto, all as of the date hereof (collectively the "Tax Laws"), and upon the
Employee Retirement Income Security Act of 1974, as amended,
<PAGE>
Hospitality Properties Trust
March 30, 1998
Page 2
the Department of Labor regulations issued thereunder, published administrative
interpretations thereof, and judicial decisions with respect thereto, all as of
the date hereof (collectively, the "ERISA Laws"). No assurance can be given that
the Tax Laws or the ERISA Laws will not change. In preparing the discussions
with respect to the matters in the sections of the Form 10-K captioned "Federal
Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual
Retirement Accounts," we have made certain assumptions and expressed certain
conditions and qualifications therein, all of which assumptions, conditions and
qualifications are incorporated herein by reference.
Based upon and subject to the foregoing, we are of the opinion that the
discussions in the sections of the Form 10-K captioned "Federal Income Tax
Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement
Accounts," in all material respects are accurate and fairly summarize the Tax
Laws issues and ERISA Laws issues addressed therein, and hereby confirm that the
opinions of counsel referred to in said sections represent our opinions on the
subject matter thereof.
We hereby consent to the incorporation of this opinion by reference as
an exhibit to the Form 10-K and to the reference to our firm therein, and to the
incorporation of this opinion by reference in the Company's Registration
Statement on Form S-3 (File No. 333-43573) under the Securities Act of 1933, as
amended. In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or under the rules and regulations of the SEC
promulgated thereunder.
Very truly yours,
/s/ Sullivan & Worcester LLP
SULLIVAN & WORCESTER LLP
EXHIBIT 10.13
REVOLVING CREDIT AGREEMENT
among
HOSPITALITY PROPERTIES TRUST,
as Borrower,
THE INSTITUTIONS PARTY HERETO
FROM TIME TO TIME AS LENDERS,
and
DRESDNER BANK AG,
NEW YORK BRANCH AND GRAND CAYMAN BRANCH,
as Agent
ARRANGER:
DRESDNER KLEINWORT BENSON NORTH AMERICA LLC
Dated as of March 19, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE 1 DEFINITIONS.......................................................................................... 1
1.1 Defined Terms................................................................................. 1
1.2 Other Definitional Provisions................................................................. 22
ARTICLE 2 LOANS................................................................................................ 23
2.1 Revolving Credit Commitments.................................................................. 23
2.2 Procedure for Borrowings...................................................................... 23
2.3 Disbursement of Loans......................................................................... 23
2.4 Defaulting Lenders............................................................................ 24
ARTICLE 3 COMPENSATION, REPAYMENT AND COMMITMENT
REDUCTIONS............................................................................................. 25
3.1 Interest Rate................................................................................. 25
3.2 Commitment Fee................................................................................ 26
3.3 Maintenance of Loan Account................................................................... 26
3.4 Commitment Reductions......................................................................... 26
3.5 Voluntary Prepayments......................................................................... 27
3.6 Mandatory Payments and Prepayments............................................................ 27
3.7 Payments; Calculations........................................................................ 27
3.8 Special Provisions Relating to Eurodollar Loans............................................... 28
3.9 Increased Costs; Capital Adequacy............................................................. 30
3.10 Taxes......................................................................................... 31
3.11 Sharing of Payments........................................................................... 34
3.12 Administrative Fee............................................................................ 34
ARTICLE 4 CONDITIONS PRECEDENT................................................................................. 34
4.1 Conditions to Initial Loans................................................................... 34
4.2 Conditions Precedent to All Loans............................................................. 35
ARTICLE 5 REPRESENTATIONS AND WARRANTIES....................................................................... 36
5.1 Organization and Qualification................................................................ 36
5.2 Authority..................................................................................... 36
5.3 Enforceability................................................................................ 36
5.4 No Conflict................................................................................... 36
5.5 Consents and Filings.......................................................................... 36
5.6 Government Regulation......................................................................... 37
5.7 Solvency...................................................................................... 37
5.8 Financial Data................................................................................ 37
5.9 Names......................................................................................... 37
5.10 Locations of Offices, Records and other Property.............................................. 38
<PAGE>
5.11 Subsidiaries; Ownership of Stock.............................................................. 38
5.12 Litigation.................................................................................... 38
5.13 No Defaults................................................................................... 38
5.14 Labor Matters................................................................................. 39
5.15 ERISA......................................................................................... 39
5.16 Compliance with Law........................................................................... 39
5.17 Taxes and Tax Returns......................................................................... 40
5.18 Intellectual Property......................................................................... 40
5.19 Licenses and Permits.......................................................................... 40
5.20 Material Contracts............................................................................ 41
5.21 Use of Proceeds............................................................................... 41
5.22 Accuracy and Completeness of Information...................................................... 41
5.23 Leases and Management Agreements.............................................................. 41
5.24 Title to Hotels............................................................................... 41
5.25 REIT Compliance............................................................................... 42
5.26 Insurance..................................................................................... 42
5.27 Year 2000 Problem............................................................................. 42
5.28 Certificates and Deliveries................................................................... 42
ARTICLE 6 AFFIRMATIVE COVENANTS................................................................................ 43
6.1 Financial Reporting........................................................................... 43
6.2 Notification Requirements..................................................................... 45
6.3 Trust Existence............................................................................... 46
6.4 Books and Records; Inspections................................................................ 46
6.5 Borrower's Calculations and Certifications.................................................... 46
6.6 Taxes......................................................................................... 47
6.7 Compliance With Laws.......................................................................... 47
6.8 Insurance..................................................................................... 48
6.9 Fiscal Year................................................................................... 48
6.10 Maintenance of Property....................................................................... 48
6.11 ERISA Documents............................................................................... 48
6.12 Tradenames, Etc............................................................................... 48
6.13 Acquisitions of New Hotels.................................................................... 48
6.14 Performance of Obligations.................................................................... 48
6.15 Advisory Agreement............................................................................ 48
6.16 REIT Qualification............................................................................ 49
6.17 Annual Meetings of Lenders.................................................................... 49
6.18 Required Interest Rate Cap.................................................................... 49
6.19 Year 2000 Problems............................................................................ 50
6.20 Process Agent's Consent....................................................................... 50
ARTICLE 7 FINANCIAL COVENANTS; NEGATIVE COVENANTS............................................................... 50
7.1 Financial Covenants........................................................................... 50
7.2 Other Assets or Business...................................................................... 51
7.3 Additional Indebtedness....................................................................... 52
ii
<PAGE>
7.4 Liens......................................................................................... 52
7.5 Contingent Obligations........................................................................ 53
7.6 Restricted Payments........................................................................... 53
7.7 Investments................................................................................... 54
7.8 Affiliate Transactions........................................................................ 54
7.9 Additional Negative Pledges................................................................... 55
7.10 Additional Subsidiaries....................................................................... 55
7.11 Amendments.................................................................................... 55
7.12 Dividends..................................................................................... 55
7.13 Certain Transactions.......................................................................... 56
ARTICLE 8 EVENTS OF DEFAULT AND REMEDIES....................................................................... 56
8.1 Events of Default............................................................................. 56
8.2 Remedies...................................................................................... 57
8.3 Right of Setoff............................................................................... 58
8.4 No Marshalling; Deficiencies; Remedies Cumulative............................................. 58
8.5 Application of Payments....................................................................... 58
ARTICLE 9 THE AGENT............................................................................................ 58
9.1 Appointment of Agent.......................................................................... 58
9.2 Nature of Duties of Agent..................................................................... 59
9.3 Lack of Reliance on Agent..................................................................... 59
9.4 Certain Rights of Agent....................................................................... 59
9.5 Reliance by Agent............................................................................. 60
9.6 Indemnification of Agent...................................................................... 60
9.7 Agent in its Individual Capacity.............................................................. 60
9.8 Successor Agent............................................................................... 61
9.9 Intentionally Omitted......................................................................... 61
9.10 Defaults...................................................................................... 61
9.11 Anticipated Receipt of Funds.................................................................. 61
9.12 Miscellaneous................................................................................. 62
ARTICLE 10 MISCELLANEOUS....................................................................................... 62
10.1 GOVERNING LAW................................................................................. 62
10.2 SUBMISSION TO JURISDICTION.................................................................... 62
10.3 CERTAIN DAMAGES............................................................................... 62
10.4 SERVICE OF PROCESS............................................................................ 63
10.5 JURY TRIAL.................................................................................... 63
10.6 LIMITATION OF LIABILITY....................................................................... 63
10.7 Delays........................................................................................ 63
10.8 Notices....................................................................................... 63
10.9 Assignments and Participations................................................................ 64
10.10 Confidentiality............................................................................... 65
10.11 Reimbursement of Expenses; Indemnification.................................................... 65
10.12 Amendments and Waivers........................................................................ 66
iii
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10.13 Counterparts and Effectiveness................................................................ 67
10.14 Severability.................................................................................. 67
10.15 Maximum Rate.................................................................................. 67
10.16 Entire Agreement; Successors and Assigns...................................................... 68
10.17 Currency Translation.......................................................................... 68
10.18 Foreign Judgments............................................................................. 68
10.19 Acknowledgments............................................................................... 68
10.20 Approvals..................................................................................... 69
10.21 NONLIABILITY OF TRUSTEES...................................................................... 69
INDEX OF DEFINED TERMS.......................................................................................... 72
ANNEXES
Annex I - List of Lenders and Commitment Amounts
Annex II - List of Closing Documents
Annex III - Pricing Grid
EXHIBITS
Exhibit A - Form of Revolver Note
Exhibit B - Form of Assignment and Assumption Agreement
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Notice of Borrowing
Exhibit E - Form of Notice of Continuation/Conversion
Exhibit F - Form of Investment Manager's Subordination Agreement
Exhibit G - Form of Register
SCHEDULES
Schedule A - Disclosure Schedule
</TABLE>
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REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (as amended, modified and supplemented
from time to time, this "Agreement") is entered into as of March 19, 1998 (the
"Closing Date"), among HOSPITALITY PROPERTIES TRUST, a Maryland real estate
investment trust ("Borrower"), each institution identified as a lender on Annex
I (each, together with its successors and assigns, a "Lender"), and DRESDNER
BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH, acting as agent for itself and
the other Lenders ("Agent").
RECITALS
WHEREAS, Borrower is in the business of acquiring and owning real
property (including leasehold estates), which Borrower leases to various
companies in exchange for a stream of lease payments, and in the business of
acquiring certain mortgages;
WHEREAS, Borrower desires to obtain a revolving line of credit for
Borrower's general corporate purposes, including future acquisitions of real
property, and Arranger has arranged such a facility; and
WHEREAS, Lenders are prepared to provide such a revolving line of
credit subject to and upon the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1 DEFINITIONS
1.1 Defined Terms.
The following terms when used in this Agreement shall each have the
definition set forth below. The same definitions shall apply in all the other
Credit Documents, except where another Credit Document provides some other
express definition for any term. Terms may be used before they are defined. An
Index of Defined Terms follows the signature blocks.
"Acquisition Cost" of a Hotel means Borrower's or its Subsidiary's
actual bona-fide third party acquisition cost of such Hotel, including
reasonable and bona fide third-party
<PAGE>
transaction costs, plus the amount of any capital outlays or other capital
investments in such Hotel after initial acquisition, but excluding any operating
losses.
"Adjusted Eurodollar Rate" means, with respect to the Interest Period
for each Eurodollar Loan, the rate obtained by dividing (a) the Eurodollar Rate
for such Interest Period by (b) a percentage equal to one (1.00) minus the
stated maximum rate (stated as a decimal) of all reserves, if any, required to
be maintained against "Eurocurrency liabilities" as specified in Regulation D
(or against any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-U.S. office of any Lender to U.S.
residents).
"Advisory Agreement" means the Advisory Agreement, dated as of January
1, 1998, as extended and renewed from time to time, between Borrower and
Investment Manager, as amended, supplemented or modified from time to time in
compliance with this Agreement and the Investment Manager's Subordination
Agreement.
"Administrative Agent" means Agent or such Lender as Agent shall have
designated from time to time to perform administrative services with regard to
the Loan.
"Administrative Fee" means a fee of Fifty Thousand Dollars ($50,000)
per year payable by Borrower to Administrative Agent in equal quarterly
installments as compensation for performance of administrative services in
connection with the Loan.
"Affiliate" of a Person means another Person who directly or indirectly
controls, is controlled by, is under common control with, or is a director,
officer or partner of, such Person. A Person shall be deemed to control another
Person if (a) such Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of such other Person,
whether through the ownership of voting securities, by contract or otherwise, or
(b) for purposes of Section 7.8 only, such Person owns or controls the power to
vote, directly or indirectly, more than five percent (5%) of any class of the
Capital Stock of such other Person. Notwithstanding the foregoing, Health and
Retirement Properties Trust, a Maryland real estate investment trust, shall not
be deemed an "Affiliate."
"Applicable Margin" means a fluctuating rate of interest per annum
determined as follows.
o For a Base Rate Loan, the Applicable Margin shall be zero,
except that (as set forth in Annex III) the Applicable Margin
shall be One-Tenth of One Percent (0.10%) per annum (10 basis
points) if both: (a) no Rating is in effect for Borrower; and
(b) Borrower's Leverage Ratio equals or exceeds Forty Percent
(40%).
o For a Eurodollar Loan, the Applicable Margin shall be based on
the then-applicable Pricing Parameter in accordance with the
table set forth in Annex III.
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"Arranger" means Dresdner Kleinwort Benson North America LLC.
"Assigned Value" of any Hotel means, as of the last day of each Fiscal
Quarter, the following amount, as calculated and determined by Borrower with
Agent's approval:
o For any Hotel that the Credit Parties Have Owned for Less Than
Six Full Fiscal Quarters, an amount equal to the product of
(a) Ninety Five Percent (95%) times (b) the Credit Parties'
aggregate Acquisition Cost of such Hotel.
o For any Hotel that the Credit Parties Have Owned for Six Full
Fiscal Quarters or Longer, an amount equal to ten (10) times
the annual sum (determined on the basis of the last twelve
completed calendar months) of the following for such Hotel:
(a) Base Rent; less (b) a reasonable allocation (based on
relative Acquisition Costs) of all annual cash corporate
expenses of Borrower and its Subsidiaries (including, for
example, general and administrative overhead, including
advisory fees) except Consolidated Debt Service.
"Assignment and Assumption Agreement" means an agreement in
substantially the form of Exhibit B.
"Auditors" means Arthur Andersen LLP or another nationally recognized
firm of independent public accountants selected by Borrower and satisfactory to
Required Lenders.
"Bankruptcy Code" means Title 11 of the U.S. Code (11 U.S.C. ss.ss. 101
et seq.), as amended from time to time, and any successor statute.
"Base Rate" means a fluctuating rate of interest per annum equal at any
time to the greater at such time of (a) the Federal Funds Rate plus one-half of
one percent (0.50%) and (b) the rate which the Agent establishes as its base
lending rate from time to time. The Base Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
Agent and each of the Lenders may make loans at rates of interest at, above or
below the Base Rate.
"Base Rate Loan" means a Loan that is made or being maintained at a
rate of interest based upon the Base Rate.
"Base Rent" means the minimum or base rent that a Lease requires Lessee
to pay. The term excludes: (a) payments (such as real estate taxes, insurance
premiums, and costs of maintenance) that the Lease requires the Lessee to pay
third parties; (b) any element of rent that is conditional, contingent, or not
yet capable of determination; and (c) FF&E Deposits. If Lease(s) for multiple
Hotels do not separately allocate Base Rent to such Hotels, then Base Rent shall
be reasonably allocated between such Hotels (where necessary) in a manner
satisfactory to Agent.
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"Benefit Plan" means a "defined benefit plan" (as defined in Section 3
of ERISA) for which any Credit Party or any ERISA Affiliate has been an
"employer" (as defined in Section 3 of ERISA) within the past six years.
"Borrower" is defined in the first paragraph of this Agreement.
"Borrowing" means the incurrence of a Revolving Loan from all
Non-Defaulting Lenders on a given day (or resulting from conversions or
continuations on a given date), having in the case of Eurodollar Loans the same
Interest Period.
"Business" means Borrower's business consisting of the acquisition and
ownership of (a) real property (including leaseholds) leased to third party
Lessees pursuant to Leases, and operated by such Lessees as branded hotels and
(b) mortgage investments.
"Business Day" means any day that is not a Saturday, Sunday or a day on
which commercial banks in New York, New York are required or permitted by law to
be closed. When used in connection with Eurodollar Loans, this definition also
excludes any day on which commercial banks are not open for dealing in U.S.
dollar deposits in the London interbank market.
"Capital Expenditures" for any Person for any period means the sum of
all expenditures of such Person which would be capitalized for purposes of
financial statements for such period in accordance with GAAP (whether payable in
cash or other property or accrued as a liability), including expenditures for
maintenance and repairs which should be capitalized and the capitalized portion
of Capital Leases.
"Capital Lease" means, for any Person, any lease of property (whether
real, personal or mixed) by that Person as lessee which, in conformity with
GAAP, is required to be accounted for as a capital lease on the balance sheet of
such Person.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person other than a corporation
(including partnership interests in a partnership, member interests in a limited
liability company and beneficial interests in a trust), and any and all
warrants, options or other rights to purchase any of the foregoing.
"Cash Available for Distribution" means Funds from Operations, less
FF&E Deposits included in Funds from Operations and adjusted for any recurring
non-revenue-enhancingcapital expenditures and for non-cash expenses and non-cash
revenues, such as revenues arising from "straight-lining" of rents.
"Cash Equivalents" means any of the following, denominated in Dollars:
(a) securities issued or directly and fully guaranteed or insured by the U.S. or
any agency or instrumentality thereof (provided that the full faith and credit
of the U.S. is pledged in support thereof) having maturities of not more than
ninety (90) days from the date of acquisition ("Government Obligations"), (b)
time deposits and certificates of deposit of any commercial bank either
incorporated in the U.S. or incorporated in a foreign jurisdiction and
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<PAGE>
having a branch office in the U.S., in each case of recognized standing having
capital and surplus in excess of $500,000,000 and whose short-term commercial
paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's
is at least P-1 or the equivalent thereof (any such bank being an "Approved
Bank"), in each case with maturities of not more than ninety (90) days from the
date of acquisition, (c) commercial paper issued by an Approved Bank or the
parent corporation of an Approved Bank (so long as such parent maintains an
office in the U.S. from which it issues such commercial paper) and commercial
paper issued by any Person incorporated in the U.S. rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better by
Moody's, and in each case maturing within ninety (90) days of the date of
acquisition, (d) repurchase obligations of an Approved Bank for Government
Obligations and with a term of not more than seven (7) days, and (e) investments
in money market mutual funds having assets in excess of $2,500,000,000,
substantially all of whose assets are comprised of Government Obligations.
"Casualty Loss" means (a) the loss, damage, or destruction of any asset
owned or used by any Credit Party or (b) the condemnation, confiscation, or
other taking, in whole or in part, of any such asset.
"Change of Control" means any event, transaction or condition as a
result of which (a) the Managing Trustees (together with their Affiliates) shall
cease to own (and maintain control over) in the aggregate full beneficial
ownership with full voting and dispositive power as to at least 250,000 of the
total outstanding shares of Capital Stock of Borrower that are ordinarily
entitled to vote for its Board of Directors (which figure of 250,000 shall be
appropriately adjusted for stock splits, stock dividends, and similar
transactions) or (b) the Managing Trustees (together with their Affiliates)
shall cease to maintain Control of Investment Manager.
"Closing Date" means the date on which this Agreement is executed and
delivered, whether or not any advance of the Revolving Loan is made on such
date.
"Closing Documents List" means the List of Closing Documents attached
hereto as Annex II.
"Code" means the Internal Revenue Code of 1986, amendments thereto,
successor statutes, and regulations, rulings and guidance promulgated or issued
thereunder.
"Commitment Fee" is defined in Section 3.2.
"Common Stock" means the common shares of Borrower, par value $0.01 per
share.
"Compliance Certificate" means a written certificate, substantially in
the form of Exhibit C, executed by Borrower's Chief Financial Officer, which
shall demonstrate that as of the date of such certificate, and assuming the full
funding of any Revolver Loans then being requested by Borrower, Borrower is and
shall continue to be in compliance with the financial (and all other material)
covenants of this Agreement in all material respects. Any Compliance Certificate
shall also set forth: (a) a list of all Hotels constituting the Unencumbered
Pool (and identifying the Hotels in each Hotel Pool within the Unencumbered
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<PAGE>
Pool); (b) Borrower's certification that all Hotels so listed fully qualify
under the criteria for inclusion in the Unencumbered Pool; (c) to the extent
required by Agent from time to time, such detail and calculations as will in
Agent's judgment substantiate the certifications described in "a" and "b"; and
(d) any changes in the composition of the Unencumbered Pool since the preceding
Compliance Certificate delivered by Borrower, if any. Each Compliance
Certificate shall also have attached thereto a schedule of calculations
demonstrating compliance with the financial covenants contained in this
Agreement.
"Consolidated Debt Service" means, for any fiscal period of Borrower,
Consolidated Interest Expense plus required scheduled amortization payments
(other than payments due upon maturity) of Borrower and its Subsidiaries with
respect to Indebtedness of any of them for such period determined on a
consolidated basis in accordance with GAAP.
"Consolidated EBITDA" for a period means (a) the consolidated net
income (excluding extraordinary or unusual and non-recurring items) of Borrower
and its Subsidiaries (net of minority interests where applicable) for the period
plus (b) all Consolidated Interest Expense, income tax expense, depreciation and
amortization (including amortization of any goodwill or other intangibles) for
the period and excluding (unless already deducted in calculating net income) (c)
FF&E Deposits (and related income arising from payments made by Lessees to
Borrower or its Subsidiaries). Adjustment shall be made for any non-cash
expenses and non-cash revenues, such as for revenues arising from
"straight-lining" of rents. Except where otherwise expressly stated herein,
Consolidated EBITDA shall be measured as to the last four completed quarters on
a rolling four quarters basis.
"Consolidated Indebtedness" means all Indebtedness of Borrower and all
its Subsidiaries on a consolidated basis.
"Consolidated Interest Expense" means, for any fiscal period of
Borrower, the total interest expense (excluding amortization of paid deferred
costs, discounts or premiums, if any, and including interest expense
attributable to Capital Leases in accordance with GAAP) on all Consolidated
Indebtedness of Borrower and all its Subsidiaries for such period determined on
a consolidated basis in accordance with GAAP.
"Consolidated Secured Debt" means all Consolidated Indebtedness that is
secured by or otherwise the subject of a Lien on any property of Borrower or any
Subsidiary. The Obligations do not constitute Consolidated Secured Debt.
"Consolidated Total Assets" means, as of the date of any determination
thereof, the net book value of the assets of Borrower and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means any direct or indirect, contingent
obligation for, or guaranty of, the Indebtedness of another, except endorsements
in the ordinary course of business. The amount of any Contingent Obligation
shall be equal to the maximum reasonably anticipated liability in respect of the
obligations guarantied or otherwise supported, calculated using the assumption
that the obligor is or will be required to fully
6
<PAGE>
perform thereunder. Any particular contingent obligation shall be counted only
once for purposes of this definition.
"Control" (together with the corresponding terms "controls," "is
controlled by," or "is under common control with") means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a person or entity, whether through the ownership of voting
securities, by contract or otherwise.
"Credit Documents" means this Agreement, the Notes, each Guaranty, and
all other agreements, instruments and documents, including opinions and
certificates, now or hereafter executed and delivered in connection with any of
the foregoing, each as amended, modified and supplemented from time to time.
"Credit Parties" means, collectively, Borrower and each and all of its
Subsidiaries. "Credit Party" means any one of them.
"Debt Service Coverage Ratio" means the ratio of Consolidated EBITDA to
Consolidated Debt Service, with respect to the last four completed Fiscal
Quarters in aggregate, as of the end of each Fiscal Quarter.
"Default" means an event or condition which would constitute an Event
of Default with the giving of notice, the passage of time or both.
"Default Rate" is defined in Section 3.1(d).
"Defaulting Lender" is defined in Section 2.4(a).
"Disclosure Schedule" means the Schedule A to this Agreement labeled as
such, in form and substance satisfactory to Agent and the Lenders as of the
Closing Date.
"Dollar Equivalent" as to any monetary sum expressed in a foreign
currency means such monetary sum converted to Dollars based on the then
Prevailing Exchange Rate.
"Dollars" and the sign "$" each mean lawful money of the U.S.
"D&P" means Duff & Phelps Inc., and any successor thereto.
"Due Diligence Reports" means, as to any Hotel, environmental,
engineering, and title reports, and such other third-party reports as any Credit
Party shall obtain in connection with the acquisition of any Hotel or as Agent
shall require from time to time (but no more frequently than upon acquisition
and only for cause thereafter) to be updated, in the case of any of the
foregoing reports each dated no earlier than one year before the date of the
Credit Party's acquisition of the Hotel (with, in the case of environmental
reports, a database search at either the closing of the acquisition of such
Hotel or (b) the date such Hotel is included in the Unencumbered Pool) and
prepared by an independent vendor or consultant (including a licensed title
insurance company where applicable) satisfactory to Agent, which report(s) shall
be in form and substance satisfactory to Agent.
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"Eligible Assignee" means (i) a commercial bank organized under the
laws of the U.S., or any State thereof, and having total assets in excess of
$5,000,000,000; (ii) a commercial bank organized under the laws of any OECD
Nation or a political subdivision of any such nation, and having total assets in
excess of $5,000,000,000; provided, however, that such bank is acting through a
branch or agency located in the country in which it is organized or in another
OECD Nation or the Cayman Islands; (iii) the central bank of any OECD Nation;
(iv) an insurance company organized under the laws of the U.S. (or any State
thereof or the District of Columbia) and having total assets in excess of
$5,000,000,000 (but excluding an insurance company that is a "captive"
subsidiary of an entity that would itself not qualify as an Eligible Assignee);
(v) a savings bank or savings and loan association organized under the laws of
the U.S., or any State thereof or the District of Columbia, and having total
assets in excess of $5,000,000,000; (vi) any Lender party to this Agreement;
(vii) any Affiliate of any Lender party to this Agreement; (viii) any U.S.
Federal Reserve Bank; or (ix) any other governmentally regulated financial
institution approved by Administrative Agent, such approval not to be
unreasonably withheld. Notwithstanding the foregoing, none of the following
shall constitute an Eligible Assignee: (x) Borrower or any Affiliate of
Borrower; (y) anyone acting by, on behalf of, or pursuant to any separate
agreement or arrangement with Borrower or any Affiliate of Borrower; or (z) any
Person that, in Agent's discretion, either (a) has an adverse business
reputation or (b) is or may be acquiring its interest in the Loan for purposes
other than providing financing to Borrower in accordance with the terms and
conditions of this Agreement.
"Environmental Affiliate" means any Person whose liability for any
Environmental Claim a Credit Party has or may have retained, assumed or
otherwise become liable for (contingently or otherwise), either contractually or
by operation of law.
"Environmental Approvals" means any permit, license, approval, ruling,
variance, exemption or other authorization required under applicable
Environmental Laws.
"Environmental Claim" means, with respect to any Person, any notice,
claim, demand or similar communication (written or oral) by any other Person
alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(a) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by such Person or
(b) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
"Environmental Laws" means all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern, in each case as have been, are now, or may at any time
hereafter be in effect and as the same may be amended or modified hereafter,
including: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C.
8
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ss.ss. 9601 et seq.; the Toxic Substance Control Act, 15 U.S.C. ss.ss. 9601 et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 1802 et seq.;
the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901 et seq.; the
Clean Water Act, 33 U.S.C. ss.ss. 1251 et seq.; the Clean Air Act, 42 U.S.C.
ss.ss. 7401 et seq., and other similar federal and/or state environmental laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. ss.ss. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means any entity required to be aggregated with any
Credit Party under Sections 414(b), (c), (m) or (o) of the Code.
"Eurodollar Loan" means a Loan that is made or being maintained at a
rate of interest based upon the Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
Loan, the rate per annum (rounded upwards to the nearest whole multiple of
one-sixteenth of one percent) equal to the offered quotation of the rate for
Dollar deposits with maturities comparable to the Interest Period for which such
Eurodollar Rate will apply) which appear on the Telerate Screen Page 3750 (or
successor page) as at 11:00 a.m. London time, on the day that is two Business
Days prior to the beginning of such Interest Period (or with respect to the
initial Interest Period, the Closing Date rather than two Business Days prior to
the beginning of the initial Interest Period) and in an amount comparable to the
amount of the Loan to be outstanding during such Interest Period or, if such
Telerate shall not exist on such Business Day, an interest rate per annum equal
to the rate (rounded upward to the nearest whole multiple of one-sixteenth
(1/16) of one percent (1.00%) per annum, if such rate is not such a multiple) of
the offered quotation, if any, to first class banks in the Eurodollar market by
Agent for Dollar deposits of amounts in immediately available funds comparable
to the principal amount of the Eurodollar Loan for which the Eurodollar Rate is
being determined, with maturities comparable to the Interest Period for which
such Eurodollar Rate will apply, as of approximately 11:00 A.M. New York time
two (2) Business Days prior to the commencement of such Interest Period.
"Event of Default" is defined in Article 8.
"Excess Floating Rate Exposure" means the excess, if any, of: (a) all
Consolidated Indebtedness bearing interest at a floating rate (including the
principal amount of all Loans hereunder) over (b) an amount equal to Twenty
Percent (20%) of the sum of (i) GAAP consolidated shareholders' equity (plus
minority interests) of Borrower and its Subsidiaries; plus (ii) all long-term
funded Consolidated Indebtedness (other than Contingent Obligations).
"Expenses" means all reasonable costs and expenses of Agent (including
reasonable fees and expenses of counsel) incurred in connection with the Credit
Documents and the transactions contemplated herein and therein, including in
connection with the preparation, execution, and delivery of this Agreement and
the other Credit Documents and any amendment, waiver or consent relating hereto
or thereto, in connection with Agent's initial
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syndication efforts with respect to this Agreement and in connection with the
enforcement of this Agreement and the other Credit Documents, specifically
including (without limiting the generality of the foregoing) (a) administration
costs of Agent and costs of enforcement of the rights of Agent or any Lender
under the Credit Documents, (b) the reasonable fees and expenses of accountants,
appraisers and other consultants, experts or advisors retained by Agent, (c)
reasonable fees and expenses (including reasonable legal fees and expenses)
incurred by Agent in connection with the initial syndication of the Commitments
and the Loans, (d) the cost of fees and taxes, if any, in connection with the
filing of financing statements, if any, (e) the costs, if any, of preparing
waivers, amendments, and terminations of any of the Credit Documents, and (f)
Agent's costs of obtaining any Due Diligence Reports, if any.
"Federal Funds Rate" means a fluctuating interest rate per annum equal
at any time to the weighted average of the rates on overnight Federal Funds
transactions with members of the Federal Reserve System arranged by Federal
Funds brokers, as determined by Agent.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Fees" means the Administrative Fee and the Commitment Fee.
"FF&E Deposits" means funds that any Lease requires a Lessee to hold or
to remit to any Credit Party, which funds are to be held by such Lessee or by
such Credit Party in reserve accounts for furnishings, fixtures, and equipment
for any Hotel(s).
"Financial Statements" means the consolidated balance sheets,
statements of operations, statements of cash flows and statements of changes in
shareholder's equity of Borrower and its Subsidiaries for the period specified,
prepared in accordance with GAAP consistently applied.
"Fiscal Quarter" means a fiscal quarter of each Credit Party's Fiscal
Year, with appropriate interpolations or adjustments to accommodate variations
between the Credit Parties' fiscal quarters and those of Lessees or mortgagors.
"Fiscal Year" means the fiscal year of the applicable Credit Party,
which, for Borrower and each of its Subsidiaries as of the Closing Date, begins
on January 1 and ends on December 31 of each calendar year, with appropriate
interpolations or adjustments to accommodate variations between the Credit
Parties' fiscal years and those of Lessees or mortgagors.
"Fitch" means Fitch Investors Service, Inc., and any successor thereto.
"Funds from Operations" means consolidated net income of Borrower and
its Subsidiaries, adjusted as follows in a manner satisfactory to Agent: (a)
gains and losses from debt restructuring and sales of property shall be
excluded; (b) depreciation and amortization of real estate assets shall be added
back; and (c) appropriate adjustments shall be made for unconsolidated
partnerships and joint ventures.
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"GAAP" means generally accepted accounting principles as in effect in
the U.S. on the Closing Date and as amended from time to time, subject however
to Section 6.1(e).
"Governing Documents" of any Person means the declaration of trust,
certificate or articles of incorporation, by-laws, partnership agreement or
operating or members agreement, as the case may be, and any other organizational
or governing documents, of such Person.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any foreign, federal, state or other court or
governmental agency, authority, instrumentality or regulatory body.
"Group" is used herein as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended.
"Guaranty" means that certain Guaranty dated the Closing Date executed
by each of the Guarantors in favor of Agent and the Lenders.
"Guarantor" means each and every Subsidiary of Borrower, other than a
Subsidiary that satisfies the following conditions: (a) such Subsidiary does not
own any Hotel in the Unencumbered Pool; and (b) based on bona fide restrictions
in other credit documents with other lenders (or in the charter documents of any
Subsidiary that is not a Wholly-Owned Subsidiary), such Subsidiary is not
permitted to be a Guarantor as to the Obligations. The Guarantors are identified
in greater detail in Section 5.11 of the Disclosure Schedule.
"Highest Lawful Rate" means, at any given time during which any
Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Obligations, under the laws of the State of
New York (or the law of any other jurisdiction whose laws are mandatorily
applicable notwithstanding the provisions of this Agreement and the other Credit
Documents), or under applicable federal laws which may presently or hereafter be
in effect and which allow a higher maximum nonusurious interest rate than under
New York (or such other jurisdiction's) law, in any case after taking into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Agreement and any other Credit Documents executed
in connection herewith, and any available exemptions, exceptions and exclusions.
"Hotel" means any parcel of real property and the improvements and
business operations thereon owned or ground leased at any time (as of the
Closing Date or thereafter acquired) by Borrower or a Subsidiary the
improvements of which are operated as a hotel, whether or not such Hotel is part
of the Unencumbered Pool.
"Hotel Net Cash Flow" means the net operating cash flow of a Hotel,
after (a) all taxes (except income taxes), insurance, salaries, utilities, and
other operating expenses, all sums that the applicable Lease or Management
Agreement requires Lessee or Manager to pay
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(without duplication; excluding (i) all items payable to Manager that are
subordinated to Base Rent and (ii) Base Rent), and (b) all FF&E Deposits. Hotel
Net Cash Flow shall be determined as of any date based on the last four
completed Fiscal Quarters of the Credit Party that owns such Hotel (subject to
reasonable adjustment or interpolation to accommodate differences between such
Subsidiary's Fiscal Quarters and those of its Lessee).
"Hotel Pool" means any group of two or more Hotels leased pursuant to a
single Lease or whose Leases are cross-defaulted (as to defaults by Lessee),
together with all other Hotels whose Leases are cross-defaulted (as to defaults
by Lessee) with such Lease(s).
"Indebtedness" of a Person means (a) indebtedness for borrowed money or
for the deferred purchase price of property or services (other than trade
liabilities and security deposits or guarantee deposits incurred in the ordinary
course of business and payable in accordance with customary practices), whether
on open account or evidenced by a note, bond, debenture or similar instrument or
otherwise, (b) obligations under Capital Leases, (c) reimbursement obligations
for letters of credit, banker's acceptances or other credit accommodations, (d)
liabilities, as determined by Agent, under any Interest Rate Agreement, (e)
Contingent Obligations of such Person, (f) obligations secured by any Lien on
that Person's property, even if that Person has not assumed such obligations,
and (g) liabilities that are subordinate to the Loan. The Loan constitutes
Indebtedness of Borrower and its Subsidiaries.
"Insolvency Event" means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or business
or to effect a plan or other arrangement with its creditors, (c) such Person
shall make a general assignment for the benefit of its creditors, or consent to
or acquiesce in the appointment of a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business, (d) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar law,
or (e) such Person, or a substantial portion of its property, assets or business
shall become the subject of an involuntary proceeding or petition for its
dissolution, reorganization, or the appointment of a receiver, trustee,
custodian or liquidator and any such proceeding or petition shall not be
dismissed within one hundred twenty (120) days after commencement or filing, as
the case may be, or any order for relief shall be entered in any such
proceeding.
"Intellectual Property" means patents, patent applications, trademarks,
service marks, trade names, copyrights and other such rights, or valid licenses
thereof.
"Interest Coverage Ratio" means the ratio of Consolidated EBITDA to
Consolidated Interest Expense, considered for the last four completed Fiscal
Quarters, as of the end of each Fiscal Quarter.
"Interest Period" means, for each Eurodollar Loan, a period of one,
two, three or six months during which the interest rate for such Loan is fixed;
provided, however, that (a) no Interest Period with respect to any portion of
the Loan may end after the Maturity Date,
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and (b) whenever the last day of any Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, unless such extension
would cause the last day of such Interest Period to occur in the next following
calendar month, in which case the last day of such Interest Period shall occur
on the next preceding Business Day.
"Interest Rate Agreement" means an interest rate cap agreement or other
interest rate protection or hedge agreement.
"Interest Rate Cap" means an Interest Rate Agreement that is an
interest rate cap or other Interest Rate Agreement that imposes no obligations
on the beneficiary thereof, and is in all respects satisfactory in form and
substance to Agent.
"Investment" means (a) all expenditures made and (without duplication)
all liabilities incurred or assumed (including Contingent Obligations) for or in
connection with the acquisition of any beneficial or other interest in, all or
substantially all of the assets of, or any obligations, securities or other
Indebtedness of, a Person, and (b) all direct or indirect loans, advances,
capital contributions or transfers of property to a Person. In determining the
aggregate amount of Investments outstanding at any particular time: (1) a
guaranty shall be valued at not less than the principal amount guarantied and
outstanding; (2) returns of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution) shall
be deducted; (3) earnings, whether as dividends, interest or otherwise, shall
not be deducted; and (4) decreases in the market value shall not be deducted.
"Investment Grade Rating" of a Person means that the senior, unsecured
debt rating of such Person satisfies either of the following: (a) a rating of
BBB- or higher by S&P; or (b) a rating of Baa3 or higher by Moody's.
"Investment Manager" means REIT Management & Research, Inc., a Delaware
corporation, or such other investment manager to Borrower as Agent shall have
approved in Agent's sole and absolute discretion.
"Investment Manager's Subordination Agreement" means an agreement
between Investment Manager and Agent on behalf of the Lenders in substantially
the form of Exhibit F.
"IRS" means the U.S. Internal Revenue Service and any successor
thereto.
"Judgment Currency" is defined in Section 10.18.
"Last Financial Statement Date" means September 30, 1997.
"Lease" means a (sub)lease of a Hotel, entered into between Borrower
(or a Subsidiary) and a Lessee, provided that 100% of the payments by the Lessee
under any Lease shall constitute "rents from real property" within the meaning
of Section 856(d)(1) of the Code.
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"Lessee" means the (sub)lessee of a Hotel pursuant to a Lease, provided
that (without Agent's approval) no such (sub)lessee shall be an Affiliate of
Borrower, any Subsidiary, Investment Manager, or any Managing Trustee, except so
long as the following conditions are satisfied: (a) the affected Hotel is not
counted as part of the Unencumbered Pool; and (b) based on particular
circumstances affecting a particular Hotel Pool (e.g., default by the Lessee),
Borrower enters into interim leasing arrangements for up to one year with an
Affiliate of Borrower, any Subsidiary, Investment Manager, or any Managing
Trustee (which arrangements shall not be extended, renewed, or continued for
longer than the original one-year term); and (c) no more than one Hotel Pool is
subject to such arrangements at any one time.
"Leverage Ratio" means, as of the last day of each Fiscal Quarter of
Borrower, the quotient of (a) Consolidated Indebtedness divided by (b) the
Assigned Value of all Hotels.
"Lien" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title, or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law. The term "Lien" shall also include (and wherever a creditor holds, such
creditor shall be deemed to be secured by a Lien): (a) any so-called "negative
pledge" agreement, pursuant to which a Person owning an asset agrees with its
creditor that such Person shall not subject property of such Person (whether
specifically identified property, or a class or type of property owned by such
Person) to a Lien as defined in the first sentence of this paragraph; and (b)
any arrangement by which a Lien of the type described in the first sentence of
this paragraph (excluding a Permitted Lien) may "spring" into existence or
otherwise arise, or any Person has covenanted to create or provide such a Lien,
upon the occurrence or nonoccurrence of specified events or the passage of time.
"Loan Account" is defined in Section 3.3.
"Loans" means the Revolver Loans.
"Management Agreement" means any management agreement, operating
agreement, operating lease, license, or other arrangement for operation of a
Hotel by a Manager, entered into by the Lessee of a Hotel.
"Management Fee" means a fee payable by a Lessee to a Manager pursuant
to a Management Agreement.
"Manager" means the manager of a Hotel pursuant to a Management
Agreement.
"Managing Trustee" means either of Mr. Barry M. Portnoy, and/or Mr.
Gerard M. Martin, both having a business address c/o the Investment Manager.
"Mandatory Redeemable Obligation" means an obligation of any Credit
Party (or guarantied by any of them) which must be redeemed or paid (a) at a
fixed or determinable date, whether by operation of sinking fund or otherwise,
(b) at the option of any Person
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other than the applicable Credit Party, or (c) upon the occurrence of a
condition not solely within the control of the applicable Credit Party, such as
a redemption required to be made out of future earnings.
"Margin Stock" shall have the meaning provided for such term in
Regulations G, T, U and X of the Federal Reserve.
"Material Adverse Effect" means, as to any matter, fact, or
circumstance, that such matter, fact, or circumstance would reasonably be
expected to have: (a) a material adverse effect on the business, operations,
results of operations, assets, liabilities, prospects or condition (financial or
otherwise) of Borrower and its Subsidiaries, taken as a whole, or (b) a material
adverse effect on the ability of a Credit Party to perform its obligations under
the Credit Documents to which it is a party, or (c) the material impairment of
the ability of Agent or any Lender to enforce the Obligations.
"Material Contract" means any contract, lease or other agreement or
arrangement to which any Credit Party is a party (other than the Credit
Documents) involving aggregate consideration payable to or by any Credit Party
of $10,000,000 or more (other than contracts that by their terms may be
terminated by any party thereto in the ordinary course of business upon less
than thirty (30) days notice, and purchase orders for capital expenditures
permitted under this Agreement or which is otherwise material to the business,
operations, results of operations, assets, liabilities, prospects or condition
(financial or otherwise) of any Credit Party. Without limiting the generality of
the foregoing, all present and future Leases and the Advisory Agreement are
Material Contracts.
"Material Lessee" means any Lessee that holds Leases (whether or not
cross-defaulted) affecting Hotels having an aggregate Assigned Value equal to or
exceeding Twenty Percent (20%) of Borrower's Consolidated Total Assets.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic or hazardous substances, petroleum (including crude
oil and any fraction thereof) and petroleum products and any other gas, liquid
or solid regulated under any Environmental Law, other than those maintained in
accordance with law.
"Maturity Date" means the Revolver Maturity Date.
"Moody's" means Moody's Investors Services, Inc. or any successor
agency.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which any Credit Party or any ERISA Affiliate
has contributed within the past six years or with respect to which any Credit
Party may incur any liability.
"Non-Defaulting Lender" is defined in Section 2.4.
"Non-Pool Hotel" means a Hotel that is not a Pool Hotel.
"Note" means each Revolver Note.
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"Notice of Borrowing" is defined in Section 2.2.
"Notice of Continuation" is defined in Section 3.8(a).
"Notice of Conversion" is defined in Section 3.8(b).
"Obligations" means the collective reference to the unpaid principal
of, and the accrued and unpaid interest on, the Loans and all other obligations
and liabilities of Borrower to Agent and the Lenders (including each Credit
Party's liability for all interest that accrues after the maturity of the Loans
and all interest that accrues after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to any Credit Party, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred, that may
arise under, out of, or in connection with, this Agreement, any other Credit
Document, or any other document made, delivered or given in connection with this
Agreement, any other Credit Document or whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including all fees and disbursements of counsel to Agent and the
Lenders that are required to be paid by Borrower pursuant to the terms of any
such agreement), and all other obligations and liabilities of any or all of the
Credit Parties to Agent and/or any Lender under this Agreement, any Note or any
other Credit Document.
"OECD Nation" means a member nation of the Organization for Economic
Cooperation and Development.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Permitted Liens" is defined in Section 7.4.
"Permitted Mortgage Investments" means any leasehold or fee mortgage(s)
or deed(s) of trust held beneficially and of record by Borrower or a Subsidiary,
provided that such mortgage(s) or deed(s) of trust comply with all of the
following requirements, which shall apply cumulatively:
o The aggregate value of all such mortgage(s) and deed(s) of
trust, as determined pursuant to GAAP, shall not exceed Twenty
Percent (20%) of Consolidated Total Assets.
o The real property collateral for such mortgage(s) or deed(s)
of trust shall not be the subject of any material
Environmental Claim(s), shall be free of Materials of
Environmental Concern other than those maintained in
accordance with applicable, and shall not consist of the
(sub)leasehold estate arising under any Lease.
o No mortgagor or trustor under any such mortgage or deed of
trust shall be an Affiliate of Borrower, any Subsidiary,
Investment Manager, or any Managing Trustee.
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o Such mortgage or deed of trust shall not be subject to any
collateral assignment, hypothecation, or other Lien.
o The aggregate value of all such mortgage(s) or deed(s) of
trust that are in monetary or other material default at the
time of acquisition or origination by Borrower or a Subsidiary
shall not exceed Ten Percent (10%) of Consolidated Total
Assets.
o If Borrower were to acquire the encumbered real property,
Borrower would not then be in Default under this Agreement as
a result. Without limiting the generality of the foregoing,
the collateral shall consist solely of assets that would be
Hotels if owned by a Credit Party.
"Permitted New Indebtedness" means any Indebtedness incurred by
Borrower or any Subsidiary after the Closing Date, but only if such Indebtedness
satisfies the following requirements: (a) after taking into account such
Indebtedness Borrower is in full compliance with all provisions of this
Agreement, including the financial covenants set forth in Section 7.1; and (b)
either (i) the stated maturity date of such Indebtedness is at least 270 days
after the Maturity Date and such Indebtedness is on arm's length and upon terms
and conditions that are substantially normal and customary for comparable
indebtedness of comparable companies; or (ii) such Indebtedness is incurred by a
Subsidiary (not by Borrower) and both: (x) such Subsidiary does not own any
Hotel(s) in the Unencumbered Pool; and (y) either (1) such Indebtedness is
wholly nonrecourse to all Credit Parties or (2) after taking into account the
Recourse Exposure Amount, if any, the Credit Parties are in full compliance with
all provisions of this Agreement.
"Permitted Transaction Amount" means One Million Dollars ($1,000,000)
plus an integral multiple of Five Hundred Thousand Dollars ($500,000).
"Person" means any individual, sole proprietorship, corporation,
limited liability company, partnership, joint venture, trust, unincorporated
organization, association, institution, entity, party or government (including
any division, agency or department thereof).
"Plan" means any employee benefit plan, program or arrangement
maintained or contributed to by any Credit Party, or with respect to which any
of them may incur liability.
"Pool Hotel" means any Hotel that is part of a Hotel Pool.
"Prevailing Exchange Rate" means, as to any foreign currency, the spot
rate at which Dollars are offered on such day by Agent in New York, New York for
such foreign currency. The Prevailing Exchange Rate shall be adjusted by Agent
on a daily basis in accordance with Agent's customary procedures as in effect
from time to time for foreign currency transactions.
"Pricing Parameter" means: (a) if a Rating is presently in effect for
Borrower, then such Rating; and (b) otherwise, Borrower's Leverage Ratio.
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"Pro Rata Share" of any Lender means such Lender's proportionate
interest in the Revolver Loans, calculated as follows. Divide the amount of that
Lender's Revolver Commitment by the total amount of all Revolver Commitments at
the time, unless there are no such commitments at the time. In that event,
divide the sum of the principal amount of that Lender's outstanding Revolver
Loans by the sum of the total principal amount of all Revolver Loans outstanding
at the time. While any Lender is a Defaulting Lender, the amount of its Revolver
Commitment (or Revolver Loans, as applicable) will be deemed to be zero for
purposes of calculating Required Lenders.
"Qualified Counterparty" means: (a) Agent or any Affiliate of Agent; or
(b) a financial institution whose long term debt shall be rated not lower than
A+ by S&P and A1 by Moody's and which is otherwise satisfactory to Agent and
Borrower.
"Rating" of Borrower means the rating of Borrower's senior, unsecured
debt issued by any Rating Agency and in effect at the time of determination. For
purposes of such determination, the highest two ratings (or the two equally
highest) shall first be identified. Whichever of those two ratings is lower (if
either) shall govern. If the two highest ratings are equal, then that rating
shall be deemed Borrower's "Rating." If at any time Agent determines that the
preceding Rating cannot be determined or calculated or does not exist, or if
Borrower does not have an Investment Grade Rating, or if only one Rating Agency
has issued a rating as to Borrower, then it shall be deemed that no Rating is in
effect for Borrower.
"Rating Agency" means any of the following rating agencies: S&P;
Moody's; Fitch; or D&P.
"Recourse Exposure Amount" for any Hotel means zero, except that if a
Hotel is subject to a Lien as to which Borrower (i.e., Hospitality Properties
Trust, a Maryland real estate investment trust, as opposed to any Subsidiary
thereof) is or may become personally liable (in whole or in part) for payment of
principal and interest, then the Recourse Exposure Amount means the lesser of
(i) the excess, if any, of (a) the total amount of principal and
more-than-sixty-days-overdue interest secured by such Lien (and any other
Lien(s) equal or prior in lien to such Lien) over (b) an amount equal to
Sixty-Five Percent (65%) of the Acquisition Cost of such Hotel; or (ii) the
maximum amount of Borrower's actual or potential personal liability with respect
to the principal and more-than-sixty-days-overdue interest secured by such Lien
(and any other Lien(s) equal or prior in lien to such Lien).
"Register" means a register of the names and addresses of all Lenders,
their Revolver Commitments, and the principal amount of their Loans, as in
effect from time to time, all in substantially the form of Exhibit G.
"REIT" means a real estate investment trust as defined in Section 856
of the Code.
"Reportable Event" means any of the events described in Section 4043 of
ERISA or the regulations thereunder.
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"Required Lenders" means Lenders the Pro Rata Shares of which total
more than sixty-six and two-thirds percent (66-2/3%) of the total Pro Rata
Shares of all Lenders.
"Requirement of Law" means (a) the Governing Documents of a Person, (b)
any law, treaty, rule or regulation or determination of an arbitrator, court or
other Governmental Authority, or (c) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval binding on a Person or any of its property.
"Reset Date" means the Closing Date and, thereafter: (a) so long as
Borrower maintains a Rating, the effective date of each and every change in
Borrower's Rating, effective upon each such change; and (b) at all other times,
the first day of each calendar month.
"Restricted Payments" shall have the meaning set forth in Section 7.6.
"Retiree Health Plan" means an "employee welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides benefits to persons after
termination of employment, other than as required by Section 601 of ERISA.
"Revolver Commitment" of a Lender means its commitment to make Revolver
Loans, in an outstanding amount not to exceed, at any time, the amount set forth
opposite its name on Annex I under the heading "Revolver Commitment," plus
(without duplication) any amount so described in an Assignment and Assumption
Agreement executed by such Lender, as such aggregate amount may be reduced from
time to time. The aggregate amount of all the Revolver Commitments shall not
exceed Two Hundred Fifty Million Dollars ($250,000,000).
"Revolver Loans" is defined in Section 2.1.
"Revolver Maturity Date" means the earlier of (a) the fourth
anniversary of the Closing Date and (b) the date, if any, on which the Revolver
Loans mature by notice of prepayment, acceleration or otherwise.
"Revolver Note" means a promissory note of Borrower substantially in
the form of Exhibit A.
"SEC Filing" means any filing, report, or disclosure of any kind made
with the United States Securities and Exchange Commission relating to Borrower,
any securities issued by Borrower, or Borrower's affairs or operations.
"S&P" means Standard & Poor's Rating Group, or any successor agency.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company or other entity (a) in which that Person directly or
indirectly owns or controls shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
governing body of such entity or (b) of which that Person is a general partner
or a managing member or which that Person otherwise controls, directly or
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indirectly, whether through the ownership of voting securities, by contract or
otherwise. Without limiting the generality of the foregoing, as of the Closing
Date all Subsidiaries of Borrower are listed in Section 5.11 of the Disclosure
Schedule.
"Ten-Year Treasury Rate" means as of any date, the interest rate per
annum on such date for U.S. Government Treasury Securities with a ten (10) year
remaining term, as calculated by the U.S. Treasury and available on the screen
entitled Government Markets PX1 on the Bloomberg Information Service, or if not
so available, determined on the basis of comparable yields for comparable U.S.
obligations as published in a reputable publication designated by Agent. Where
relevant to this Agreement, the Ten-Year Treasury Rate shall be ascertained by
Borrower and certified to Agent subject to verification by Agent.
"Termination Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (b) the withdrawal of Borrower, any of its
Subsidiaries or any ERISA Affiliate from a Benefit Plan during a plan year in
which it was a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA); (c) the provision of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041(c) of ERISA); (d) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan; (e) any event or condition (1) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan or Multiemployer Plan, or (2) that
may result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (f) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of Borrower, any of its Subsidiaries or any ERISA
Affiliate from a Multiemployer Plan.
"Total Commitments" means at any time, the total Revolver Commitments
of all Lenders at such time. The Total Commitments shall not exceed Two Hundred
Fifty Million Dollars ($250,000,000).
"Type" of Loan refers to whether it is a Eurodollar Loan or a Base Rate
Loan.
"UCC" means the Uniform Commercial Code as in effect in New York from
time to time.
"Unencumbered Pool" means, collectively, all of the Hotels each of
which satisfies all of the following criteria:
o Such Hotel is, directly or indirectly, owned or leased 100% by
Borrower, and no other Person (other than a Credit Party that
is directly or indirectly 100% owned by Borrower) holds any
direct or indirect interest in such Hotel (except for
Permitted Liens).
o If such Hotel is owned or ground-leased by a Subsidiary, then
no asset of such Subsidiary is subject to a Lien (except for
Permitted Liens), and such Subsidiary has not directly or
indirectly guarantied or assumed liability for any
Indebtedness (secured or unsecured) of any Subsidiary that is
not a Credit Party.
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o If such Hotel is a Pool Hotel, then all other Pool Hotels in
the same Hotel Pool shall also be part of the Unencumbered
Pool.
o No Credit Party has pledged, hypothecated, or encumbered,
directly or indirectly, or granted any Lien (other than a
Permitted Lien) with respect to, its direct or indirect
interest in such Hotel or in the Credit Party that owns or
leases such Hotel.
o Where a Credit Party's estate in a Hotel consists of a
leasehold, such leasehold shall have a remaining term of at
least thirty-five (35) years and shall otherwise be on terms
and conditions satisfactory to Agent.
o If such Hotel is subject to a Management Agreement entered
into or modified after the Closing Date, then either: (a) such
agreement and the Manager thereunder shall have been approved
by Agent; or (b) such Management Agreement unconditionally,
automatically, and completely terminates (with no rights of
Manager nondisturbance and no rights for Manager to obtain a
new or replacement Management Agreement), automatically or at
Borrower's option, if the Lessee's estate in the Hotel
terminates.
o Such Hotel is free of Materials of Environmental Concern other
than those maintained in accordance with applicable law in all
material respects, material Environmental Claims, material
structural defects, any Liens other than Permitted Liens, all
as evidenced by Due Diligence Reports.
o Such Hotel shall be fully operational and (in the case of
rooms and suites) available for paying guests, except that no
more than the following percentage of rooms (or suites, where
applicable) may be out of service for renovation or remodeling
at any particular time:
Unencumbered Pool in Aggregate 15%
Any Non-Pool Hotel 25%
Each Hotel Pool 20%
o Such Hotel shall be subject to a Lease satisfactory to Agent
with a Lessee satisfactory to Agent, and such Lessee shall not
be in material default beyond the expiration of any notice or
cure period under its Lease or as to any material obligation
to Borrower or any Subsidiary.
o As to each Hotel in an Unencumbered Pool, either: (a) as to no
more than twenty percent (20%) of the Hotels in the
Unencumbered Pool (measured by Assigned Value), all
obligations of Lessee under its Lease shall be unconditionally
guarantied in favor of Borrower or the applicable Subsidiary
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by a Person having an Investment Grade Rating (or some other
guarantor satisfactory to Agent (all guarantors as of the
Closing Date being hereby approved)), pursuant to a form of
guaranty reasonably satisfactory to Agent; or (b) as to at
least eighty percent (80%) of the Hotels in the Unencumbered
Pool (measured by Assigned Value), Hotel Net Cash Flow from
such Hotel shall equal or exceed the following percentage of
Base Rent for such Hotel considered individually (or in the
aggregate within each Hotel Pool):
Any Non-Pool Hotel 110%
Each Hotel Pool in the Aggregate 100%
o Hotels having an Assigned Value representing at least
sixty-five percent (65%) of the aggregate Assigned Value of
the Unencumbered Pool shall be operated under brand names
satisfactory to Agent (Agent hereby approving all brand names
of Hotels in place as of the Closing Date); any franchise
arrangements relating to such brand names shall be in full
force and effect and no material uncured default shall have
occurred and be continuing beyond applicable cure periods(s)
thereunder; and, to the extent that such franchise
arrangements exist, the franchisor shall not have given notice
of intention not to renew any such arrangements, unless
Borrower shall have arranged a replacement brand name
satisfactory to Agent.
"U.S." means the United States of America.
"Wholly-Owned Subsidiary" means a wholly-owned Subsidiary of Borrower
which has guarantied the Obligations to Agent for the benefit of Agent and the
Lenders, in each case pursuant to guaranties in substantially the form of the
Guaranty executed and delivered on the Closing Date.
"Year 2000 Problem" means any significant risk that computer hardware
or software used in the business or operations of Borrower, any Subsidiary of
Borrower, or Investment Manager will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively and reliably
as in the case of times or time periods occurring before January 1, 2000.
1.2 Other Definitional Provisions.
(a) All accounting terms used in this Agreement or in any other Credit
Document shall be construed in accordance with GAAP, applied on a basis
consistent with the Financial Statements delivered to Agent covering the period
through the Last Financial Statement Date, unless otherwise specified in the
applicable Credit Document.
(b) The word "including" means "including without limitation." Each of
the words "hereof," "herein," and "hereunder" refer to this Agreement as a
whole, not to any
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particular portion of this Agreement. References to Articles, Sections, Annexes,
Schedules and Exhibits are internal references to this Agreement and to its
attachments, unless otherwise specified. The headings and the Table of Contents
are for convenience of reference only and shall not affect the meaning or
construction of any provision of this Agreement.
ARTICLE 2 LOANS
2.1 Revolving Credit Commitments. Subject to the terms and conditions
of this Agreement, each Lender severally agrees to make loans and advances to
Borrower ("Revolver Loans"), from the Closing Date through the last Business Day
before the Revolver Maturity Date, provided, that the outstanding principal
amount of such Lender's Revolver Loans must never exceed its Pro Rata Share of
the amount of the total Revolver Commitments. Revolver Loans may be voluntarily
prepaid (subject to Section 3.5) and any principal amounts so prepaid may be
reborrowed as set forth above.
2.2 Procedure for Borrowings. To request a Borrowing of Revolver Loans,
Borrower shall deliver to Agent (to all notice recipients for Agent as listed in
Annex I) a written notice, substantially in the form of Exhibit D (a "Notice of
Borrowing"), together with a Compliance Certificate. Each Notice of Borrowing
shall specify (1) whether the requested Borrowing is of Base Rate Loans or
(subject to all applicable restrictions contained in this Agreement) Eurodollar
Loans, and (2) the Business Day on which Borrower requests that such Loans be
made. Notices of Borrowing for Base Rate Loans shall be received by Agent before
11:00 A.M. New York time on the Business Day prior to the date of the proposed
Borrowing, and Notices of Borrowing for Eurodollar Loans shall be received by
Agent not later than 11:00 A.M. New York time on the third Business Day prior to
the date of the proposed Borrowing. Each Notice of Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Loans of the same
Type and, if the requested Borrowing is to consist of Eurodollar Loans, shall be
in an aggregate amount for all Lenders equal to a Permitted Transaction Amount.
Borrower shall specify in each Notice of Borrowing whether the conditions for
the requested Borrowing are satisfied. Each Notice of Borrowing shall be deemed
to automatically constitute Borrower's representation and warranty, to Agent and
to each and every Lender considered separately, that all representations and
warranties contained in this Agreement are and remain true and correct as of the
date of such Notice of Borrowing; as of the date of the making of the requested
Loan; and immediately thereafter taking into account the effect of the requested
Loan. Borrower may request a Borrowing of Loans no more than three (3) times per
month (unless an Event of Default has occurred, in which case no further
Borrowings of Loans shall be permitted). Once given, a Notice of Borrowing is
irrevocable by and binding on Borrower. Borrower shall provide to Agent a list,
with specimen signatures, of officers authorized to request Loans. Agent is
entitled to rely upon such list until it is replaced by Borrower. Agent shall
give each Lender prompt notice by telephone or facsimile transmission of a
Notice of Borrowing.
2.3 Disbursement of Loans. Subject to the determination by Agent and
the Lenders that the applicable conditions for borrowing contained in Article 4
are satisfied or duly waived, each Lender shall make available to Agent at
Agent's address, no later than
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11:00 A.M. New York time on the date of the proposed Borrowing as set forth in
the Notice of Borrowing, an amount in immediately available funds equal to such
Lender's Pro Rata Share of the requested Borrowing, provided, however, that in
no event shall such amount exceed the unutilized amount of such Lender's
Commitment to make Revolving Loans. Unless Agent receives contrary written
notice prior to the date of any such Borrowing of Loans, it is entitled to
assume that each Lender will make available its Pro Rata Share of the Borrowing
and in reliance upon that assumption, but without any obligation to do so, may
advance such Pro Rata Share on behalf of the Lender. The proceeds of Revolver
Loans shall be transmitted by Agent as reasonably requested by Borrower in its
Notice of Borrowing.
2.4 Defaulting Lenders.
(a) A Lender who fails to pay Agent its Pro Rata Share of any Loans
made available by Agent on such Lender's behalf, or who fails to pay any other
amount owing by it to Agent, is a "Defaulting Lender." Agent may recover all
such amounts owing by a Defaulting Lender on demand. If the Defaulting Lender
does not pay such amounts on Agent's demand, Agent shall promptly notify
Borrower and Borrower shall pay such amounts within five Business Days. In
addition, the Defaulting Lender shall pay Agent interest on such amount for each
day from the date it was made available by Agent to Borrower to the date it is
recovered by Agent at a rate per annum equal to (1) the overnight Federal Funds
Rate, if paid by the Defaulting Lender, or (2) the then applicable rate of
interest calculated under Article 3, plus, in each case, Agent's costs, losses
and expenses, if any, incurred as a result of the Defaulting Lender's failure to
perform its obligations. The foregoing shall not limit any rights or claims of
Borrower against any Defaulting Lender, including any rights or claims as a
result of Borrower's payment of any amounts that should have been paid by the
Defaulting Lender.
(b) The failure of any Lender to fund its Pro Rata Share of any Loan
shall not relieve any other Lender of its obligation to fund its Pro Rata Share
of such Loan. Conversely, no Lender shall be responsible for the failure of
another Lender to fund its Pro Rata Share of a Loan. Revolver Loans shall be
incurred pro rata from the Lenders (the "Non- Defaulting Lenders") which are not
Defaulting Lenders based on their Revolver Commitments, provided, that each such
Lender shall have at least one (1) Business Day's advance notice of its
obligation to fund the increased amount.
(c) Agent shall not be obligated to transfer to a Defaulting Lender any
payments made by Borrower to Agent for the Defaulting Lender's benefit; nor
shall a Defaulting Lender be entitled to the sharing of any payments hereunder.
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
Agent. Agent may hold and, in its discretion, re-lend to Borrower the amount of
all such payments received or retained by it for the account of such Defaulting
Lender. For purposes of voting or consenting to matters with respect to the
Credit Documents and determining Pro Rata Shares such Defaulting Lender shall be
deemed not to be a "Lender" and such Lender's Revolver Commitment shall be
deemed to be zero. This Section 2.4 shall remain effective with respect to such
Lender until (1) the Obligations under this Agreement shall have been declared
or shall have become immediately due and payable or (2) Required Lenders, Agent
and Borrower shall have waived such Lender's default in writing. The operation
of this Section 2.4 shall not be
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construed to increase or otherwise affect the Revolver Commitment of any Lender,
or relieve or excuse the performance by Borrower of its duties and obligations
hereunder.
(d) Nothing in this Section 2.4 shall operate as a waiver of any
default by such Defaulting Lender hereunder, or shall prejudice any rights which
Borrower, Agent, or any Lender may have against any Defaulting Lender as a
result of any default by such Defaulting Lender hereunder.
ARTICLE 3 COMPENSATION, REPAYMENT AND COMMITMENT REDUCTIONS
3.1 Interest Rate.
(a) Interest on Base Rate Loans. Borrower shall pay to Agent for the
account of the Lenders, quarterly in arrears, on the last Business Day of each
calendar quarter, interest on Base Rate Loans outstanding during such calendar
quarter at an interest rate per annum equal to the Base Rate plus the Applicable
Margin. The rate hereunder shall change each day the Base Rate changes. After
maturity of such Base Rate Loans (whether by acceleration or otherwise),
interest shall be payable upon demand. Each determination by Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(b) Interest on Eurodollar Loans. Interest on each Eurodollar Loan
shall be payable on the last day of the Interest Period for such Eurodollar Loan
(and, in the case of any Eurodollar Loan with an Interest Period of six months,
also on the three-month anniversary of the commencement of that Interest
Period), at the date of conversion of such Eurodollar Loan (or a portion
thereof) to a Base Rate Loan and at maturity of such Eurodollar Loan, as
applicable, at an interest rate per annum equal to the Adjusted Eurodollar Rate
for the Interest Period for such Eurodollar Loan plus the Applicable Margin.
After maturity of such Eurodollar Loans (whether by acceleration or otherwise),
interest shall be payable upon demand. Each determination by Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(c) Applicable Margin; Reset Dates. At any time when no Rating is in
effect for Borrower, within five Business Days after the end of each calendar
month, Borrower shall deliver to Agent a certificate executed by the President
or Chief Financial Officer of Borrower showing Borrower's calculations of the
Leverage Ratio for the calendar month just ended. The first day after the last
day of the calendar month just ended will be the applicable "Reset Date"
corresponding to such certificate delivered by Borrower. The Applicable Margin
shall be adjusted or continued, as the case may be, on each Reset Date based on
the then-current Pricing Parameter as set forth in the table set forth in Annex
III, and the Applicable Margin as so adjusted or continued shall remain in
effect until the next Reset Date.
(d) Interest After Default. Notwithstanding anything to the contrary in
this Agreement or any other Credit Document, from the date of occurrence of an
Event of
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Default until the earlier of (i) the date all Obligations have been paid and
satisfied in full or (ii) the date such Event of Default is cured or waived,
Borrower shall be obligated to pay to Agent for the account of the Lenders
interest on all amounts then outstanding under this Agreement calculated at a
rate per annum (the "Default Rate") equal to the higher of (x) the Base Rate
plus the Applicable Margin thereon, and (y) the Adjusted Eurodollar Rate plus
the Applicable Margin thereon, plus in each case two percent (2.00%) per annum
(200 basis points).
(e) Distribution of Interest. Interest on the Loans shall be allocated
by Agent to each Lender in accordance with the Pro Rata Share of Loans actually
advanced by and repaid to each Lender, and shall accrue from and including the
date such Loans are so advanced and to but excluding the date such Loans are
repaid by Borrower. Agent shall distribute interest on Loans promptly after
receiving it.
3.2 Commitment Fee. Borrower shall pay in arrears to Agent for the
account of the Lenders, on the last Business Day of each calendar quarter (in
equal quarterly installments), and on the Revolver Maturity Date, a quarterly
fee (the "Commitment Fee") calculated at a fluctuating rate per annum,
determined based on the applicable Pricing Parameter as of the most recent Reset
Date from the table set forth in Annex III, on the average unused portion of the
aggregate Revolver Commitments at the end of each day during the applicable
period. (The Commitment Fee set forth in Annex III represents an annualized
Commitment Fee, which shall be calculated for each Fiscal Quarter based on
one-quarter of the stated annualized Commitment Fee and the daily average unused
portion of the aggregate Revolver Commitments during such Fiscal Quarter.) The
annualized Commitment Fee shall be adjusted or continued, as the case may be, on
each Reset Date based on the then-current determination of the applicable
Pricing Parameter, and such annualized Commitment Fee as so adjusted or
continued shall remain in effect until the next Reset Date.
3.3 Maintenance of Loan Account. Agent shall maintain an account on its
books in the name of Borrower (the "Loan Account") in which Borrower will be
charged with all loans and advances made by the Lenders to Borrower or for
Borrower's account and the other Obligations of Borrower under the Credit
Documents, including the Revolver Loans, the Fees, and any other Obligations.
The Loan Account will be credited with all payments received by Agent from
Borrower. Absent manifest error, books and records of Agent regarding the Loan
Account shall be final, conclusive and binding on Borrower.
3.4 Commitment Reductions.
(a) On the Revolver Maturity Date, the Revolver Commitment, if any, of
each Lender shall automatically reduce to zero and may not be reinstated.
(b) Borrower may reduce or terminate the Revolver Commitments at any
time and from time to time in whole or in part; provided, that (1) such
reduction shall be of an identical percentage of each applicable Lender's
Revolver Commitment, and (2) the amount of such reduction shall be One Million
Dollars ($1,000,000) or an integral multiple thereof, and (3) Borrower shall
give Agent at least fifteen days prior written notice of each such
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reduction. Once reduced, no portion of the Revolver Commitments that has been
reduced may be reinstated.
3.5 Voluntary Prepayments. Borrower shall have the right to prepay the
Loans in whole or in part from time to time on the following terms and
conditions:
(a) Borrower shall give Agent written notice (or telephonic notice
promptly confirmed in writing), which notice shall be irrevocable, of its intent
to prepay the Loans, at least three Business Days prior to a prepayment of
Eurodollar Loans and at least one Business Day prior to a prepayment of Base
Rate Loans, which notice shall specify the amount of such prepayment and what
Types of Loans are to be prepaid and, in the case of Eurodollar Loans, the
specific Borrowing(s) pursuant to which made, which notice Agent shall promptly
transmit to each of the Lenders;
(b) each prepayment shall be in an aggregate principal amount equal to
a Permitted Transaction Amount;
(c) prepayments of Eurodollar Loans made pursuant to this Section 3.4
may only be made on the last day of the Interest Period applicable thereto,
unless Borrower pays Agent the breakage costs for each Lender required under
Section 3.8(d)(2).
3.6 Mandatory Payments and Prepayments. The aggregate balance of
Revolver Loans outstanding at any time in excess of the principal amount of
Revolver Loans that would cause Borrower to be in full compliance with the
covenants contained in this Agreement shall be due and payable immediately
without the necessity of any demand. The entire then remaining principal amount
of the Revolver Loans shall be due and payable on the Revolver Maturity Date.
Subject to Section 2.4, all repayments of any Loans shall be paid to Agent for
the account of each Lender based upon its Pro Rata Share of such Loans.
3.7 Payments; Calculations. All calculations of (i) interest hereunder
and (ii) Fees, including, without limitation, Commitment Fees, shall be made by
Agent, on the basis of a year of 365/366 days for the actual number of days
elapsed (including the first day but excluding the last day) occurring in the
period for which such interest or Fees are payable. Each determination by Agent
of interest rates, Commitment Fees, and other fees, charges, expenses and
payments hereunder shall be conclusive and binding for all purposes, absent
manifest error. Each Credit Party shall make all payments owing by it to Agent
or to any Lender hereunder or under any other Credit Document immediately
available funds at such payment office as Agent shall designate by written
notice to Borrower from time to time. Pending further written notice from Agent,
Agent hereby designates the following account:
Method of Payment:
Fedwire
Address:
Dresdner Bank AG, New York
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75 Wall Street
New York, NY 10005
ABA No.:
026 008 303
Account Name:
Hospitality Properties Trust
Attn:
Gary Jermansky
Comments: Indicate type of payment - interest,
principal, etc.
Contact: Gary Jermansky
Dresdner Bank, AG, New York
75 Wall Street
33rd Floor
New York, New York 10005
212-429-2674
212-429-2130
3.8 Special Provisions Relating to Eurodollar Loans.
(a) Continuation. With respect to any Borrowing consisting of
Eurodollar Loans, subject to Section 3.8(c) and so long as no Event of Default
has occurred and is continuing, Borrower may elect to maintain such Borrowing or
any portion thereof equal to a Permitted Transaction Amount as a Borrowing
consisting of Eurodollar Loans by selecting a new Interest Period for such
Borrowing, which new Interest Period shall commence on the last day of the
immediately preceding Interest Period. Each selection of a new Interest Period
shall be made by notice given by Borrower to Agent not later than 11:00 A.M. New
York time on the third Business Day prior to the date of any such continuation.
Such notice by Borrower of a continuation (a "Notice of Continuation") shall be
substantially in the form of Exhibit E and shall specify (i) the date of such
continuation, (ii) the Type of Loans subject to such continuation, (iii) the
aggregate amount of Loans subject to such continuation (which
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must be a Permitted Transaction Amount) and (iv) the duration of the selected
Interest Period. Borrower shall be deemed to have delivered a Notice of
Continuation (requesting another Interest Period equal to the expiring Interest
Period and contemplating a continuation of the same Borrowing in the same
amount) unless, by 11:00 A.M. New York time on the third Business Day prior to
the date of any such continuation Borrower has notified Agent otherwise in
writing. Borrower may combine Borrowings with Interest Periods which end on the
same Business Day into a single new Borrowing and may split one Borrowing into
two or more Borrowings each consisting of a Permitted Transaction Amount,
pursuant to this Section 3.8(a). If Borrower shall fail to select a new Interest
Period for any Borrowing consisting of Eurodollar Loans in accordance with this
Section 3.8(a), then such Loans will automatically, on the last day of the then
existing Interest Period therefor, continue as a Eurodollar Loan and be renewed
for the same Interest Period and the same Borrowing amount. Agent shall give
each Lender prompt notice by telephone or facsimile transmission of each Notice
of Continuation.
(b) Conversion. Subject to Section 3.8(c) and (in the case of
conversions to Eurodollar Loans) so long as no Event of Default has occurred and
is continuing, Borrower may, on any Business Day upon written notice (each such
notice, a "Notice of Conversion") given to Agent, convert the entire amount of
or a portion of all Loans of one Type comprising the same Borrowing into Loans
of another Type; provided, however, that any conversion of any Eurodollar Loans
into Base Rate Loans shall be made on, and only on, the last day of an Interest
Period for such Eurodollar Loans and, upon conversion of any Base Rate Loans
into Eurodollar Loans, Borrower shall pay accrued interest to the date of
conversion on the principal amount of Base Rate Loans converted. Each such
Notice of Conversion shall be given not later than 11:00 A.M. New York time on
the Business Day prior to the date of any proposed conversion into Base Rate
Loans and on the third Business Day prior to the date of any proposed conversion
into Eurodollar Loans. Subject to the restrictions specified above, each Notice
of Conversion shall be substantially in the form of Exhibit E and shall specify
(i) the requested date of such conversion, (ii) the Type of Loans to be
converted, (iii) the portion of such Type of Loans to be converted, (iv) the
Type of Loan such Loans are to be converted into and (v) if such conversion is
into Eurodollar Loans, the duration of the Interest Period of such Loans. Each
conversion into Eurodollar Loans shall be in an aggregate amount for the Loans
of all Lenders in an amount equal to a Permitted Transaction Amount. Borrower
may elect to convert the entire amount of or a portion of all Loans of one Type
comprising more than one Borrowing into Loans of another Type by combining such
Borrowings into one Borrowing, provided, that if the Borrowings so combined
consist of Eurodollar Loans, such Loans shall have Interest Periods ending on
the same date.
(c) Certain Limitations on Eurodollar Loans. The right of Borrower to
maintain, select, continue or convert Eurodollar Loans shall be limited as
follows:
(1) If Agent is not offering U.S. dollar deposits (in the
applicable amounts) in the London interbank market, or Agent determines that
adequate and fair means do not otherwise exist for ascertaining the Adjusted
Eurodollar Rate for Eurodollar Loans comprising any requested Borrowing,
continuation or conversion, the right of Borrower to select Eurodollar Loans for
such Borrowing, continuation or conversion or any subsequent
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Borrowing, continuation or conversion shall be suspended until Agent shall
notify Borrower and the Lenders that the circumstances causing such suspension
no longer exist, and each Loan comprising such requested Borrowing, continuation
or conversion shall be made as a Base Rate Loan.
(2) If Required Lenders shall determine and notify Agent that
the Adjusted Eurodollar Rate for Loans comprising a Borrowing will not
adequately reflect the cost to such Lenders of making or funding their
respective Loans for such Borrowing, the right of Borrower to select Eurodollar
Loans for such Borrowing shall be suspended until Agent shall notify Borrower
and the Lenders that the circumstances causing such suspension no longer exist,
and each Loan comprising such Borrowing shall be made as a Base Rate Loan.
(3) If at any time any Lender determines (which determination
shall, absent manifest error, be conclusive and binding on all parties) that the
making, continuation or conversion of any Loan as a Eurodollar Loan has become
unlawful or impermissible by reason of compliance by that Lender with any law,
governmental rule, regulation or order of any Governmental Authority (whether or
not having the force of law and whether or not failure to do so would result in
costs or penalties), then such Lender may give notice of that determination in
writing to Borrower and Agent and Agent shall promptly transmit the notice to
each other Lender. Until such Lender gives notice otherwise, the right of
Borrower to select Eurodollar Loans from that Lender shall be suspended and, to
the extent required by applicable law, rule, regulation, or order, each
Eurodollar Loan outstanding from that Lender shall automatically and immediately
convert to a Base Rate Loan.
(4) Except as otherwise expressly provided in this Agreement,
there shall not be outstanding at any one time more than an aggregate of eight
(8) Borrowings of Eurodollar Loans.
(d) Compensation.
(1) Each Notice of Continuation and Notice of Conversion shall
be irrevocable by and binding on Borrower. In the case of any Borrowing,
continuation or conversion that the related Notice of Borrowing, Notice of
Continuation or Notice of Conversion specifies is to be comprised of Eurodollar
Loans, Borrower shall indemnify each Lender against any loss, cost or expense
incurred by such Lender as a result of any failure to fulfill, on or before the
date for such Borrowing, continuation or conversion specified in such Notice of
Borrowing, Notice of Continuation or Notice of Conversion, the applicable
conditions set forth in Article 4, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or re-employment of deposits or other funds acquired by such
Lender to fund the Loan to be made by such Lender as part of such Borrowing,
continuation or conversion.
(2) If any payment of principal of, or conversion or
continuation of, any Eurodollar Loan is made other than on the last day of the
Interest Period for such Loan for any reason, Borrower shall, within ten (10)
Business Days of written demand by any Lender (a copy of which demand such
Lender shall deliver to Agent), pay to Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses,
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<PAGE>
costs or expenses which it may reasonably incur as a result of such payment,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund or maintain such Loan.
3.9 Increased Costs; Capital Adequacy.
(a) If after the date of this Agreement the adoption of or any change
in any Requirement of Law or in the interpretation or administration thereof by
any Governmental Authority (whether or not having the force of law) or
compliance by Agent or any Lender with any direction, request or requirement
(whether or not having the force of law) of any Governmental Authority or
monetary authority, including Regulation D of the Federal Reserve as from time
to time in effect (and any successor thereto), in each case after the Closing
Date:
(1) shall change the basis of taxation of payments to Agent or
any Lender in respect of the principal of or interest on any Loan made by such
Lender (other than taxes imposed on or measured by the overall net income of
Agent or such Lender, as the case may be, by the jurisdiction in which such
Person has its principal office (or lending office) or by any political
subdivision or taxing authority therein); or
(2) shall impose, modify or hold applicable any reserve,
deposit, compulsory loan or other similar requirement against assets of,
deposits with or for the account of, or other extensions of credit by, any
office of Agent or any Lender (which requirement, with respect to Loans, is not
otherwise included in the determination of the Adjusted Eurodollar Rate or the
Base Rate, as applicable);
and the result of any of the foregoing is to increase the cost to such Person of
making, converting into, continuing or maintaining Loans or of purchasing and
maintaining any participation therein, or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, Borrower shall pay to
Agent or such Lender, as the case may be, any additional amounts necessary to
compensate such Person for such increased cost or reduced receipt, together with
interest on such amount from the date of the required payment until payment in
full thereof at a rate equal at all times to the Base Rate or the Default Rate,
as applicable. If any Person becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify Borrower, through Agent,
of the event by reason of which it has become so entitled. This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
(b) If Agent or any Lender shall have determined that the applicability
of any law, rule, regulation or guideline adopted after the Closing Date
pursuant to or arising out of the July 1988 report of the Basic Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or the adoption after
the Closing Date of any other law, rule, regulation or guideline regarding
capital adequacy, or any change in any of the foregoing or in the interpretation
or administration of any of the foregoing by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance
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by any such Person or any such Person's holding company with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Person's or such holding
company's capital as a consequence of its obligations hereunder to a level below
that which such Person or such holding company could have achieved but for such
adoption, change or compliance (taking into consideration such Person's or such
holding company's policies with respect to capital adequacy) by an amount deemed
by such Person to be material, then from time to time, after submission by such
Person to Borrower (with a copy to Agent) of a written request therefor,
Borrower shall pay to such Person such additional amount or amounts as will
compensate such Person for any such reduction suffered.
(c) A certificate of Agent or the applicable Lender, as the case may
be, setting forth such amount or amounts as shall be necessary to compensate
such Person or its holding company as specified in paragraph (a) or (b) above,
as the case may be, shall be delivered to Borrower (with a copy to Agent) and
shall be conclusive absent manifest error. Borrower shall pay such Person the
amount shown as due on any such certificate delivered by it within 10 Business
Days after its receipt of the same.
3.10 Taxes.
(a) All payments made by Borrower under this Agreement and the Notes
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future taxes, levies, imposts, charges, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding (i) net income taxes or any other taxes
imposed on or measured by the net income or profits of Agent or a Lender, as the
case may be, in each case by the jurisdiction under the laws of which such
Person is organized or any political subdivision thereof or by the jurisdiction
in which the principal or applicable lending or issuing office of such Person is
located or any political subdivision thereof and (ii) U.S. withholding taxes
payable with respect to payments hereunder under laws (including any treaty,
ruling, determination or regulation, including presently issued regulations
having a future effective date) in effect on, but not any increase in U.S.
withholding tax resulting from any subsequent change in such laws (but not the
mere occurrence of a future effective date as to final regulations already in
place) occurring after, (x) the Closing Date in the case of Agent and any Person
which is a Lender as of the date of this Agreement, and (y) in the case of any
other Lender, the date of the Assignment and Acceptance Agreement pursuant to
which it became a Lender (all such non-excluded taxes, levies, imposts, charges,
deductions and withholdings the "Non-Excluded Taxes"). In addition, Borrower
agrees to pay to the relevant Governmental Authority in accordance with
applicable law any current or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or any other Credit Document ("Other Taxes"). If
any Non-Excluded Taxes or Other Taxes are required by law to be withheld from
any amounts payable to Agent or any Lender hereunder or under the Notes, the
amounts so payable to such Person shall be increased to the extent necessary to
yield to such Person interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this
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Agreement and the Notes. Whenever any Non-Excluded Taxes or Other Taxes are
payable by Borrower, upon receipt thereof Borrower shall send to Agent for its
own account or for the account of the applicable Lender, as the case may be, a
certified copy of any original official receipt received by Borrower showing
payment thereof. Borrower shall indemnify Agent and the Lenders for the full
amount of Non-Excluded Taxes, Other Taxes and any taxes imposed by any
jurisdiction on amounts payable under this Section 3.10 that are paid by such
indemnified Person (including penalties, interest and expenses arising therefrom
or with respect thereto). If Agent or a Lender receives a refund which it
determines is in respect of any Non-Excluded Taxes or Other Taxes for which such
Person has received payment from Borrower hereunder, such Person shall, within
30 days of such determination by such Person, repay such refund to Borrower,
provided that Borrower, upon the request of such Person, agrees to return such
refund (plus any penalties, interest or other charges) to such Person in the
event such Person is required to repay such refund. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the U.S. or
a State thereof shall:
(1) in the case of a Lender that is a "bank" under Section
881(c)(3)(A) of the Code:
(A) on or before the date of the first payment to such Lender
pursuant to this Agreement following the Closing Date or on or before
the effective date of the Assignment and Acceptance Agreement pursuant
to which such Person becomes a Lender, deliver to Borrower and Agent
(x) two duly completed copies of U.S. Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the case may be, and (y)
a U.S. Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be; and
(B) deliver to Borrower and Agent two further copies of any
such form or certification on or before the date that any such form or
certification expires or becomes obsolete and promptly upon the
occurrence of any event requiring a change in the most recent form
previously delivered by it to Borrower; or
(2) in the case of a Lender that is not a "bank" under Section
881(c)(3)(A) of the Code:
(A) on or before the date of the first payment to such Lender
pursuant to this Agreement following the Closing Date or on or before
the effective date of the Assignment and Acceptance Agreement pursuant
to which such Person becomes a Lender, deliver to Borrower and Agent
(i) a statement under penalties of perjury that (to the extent true)
such Lender (x) is not a "bank" under Section 881(c)(3)(A) of the Code,
is not subject to regulatory or other legal requirements as a bank in
any jurisdiction, and has not been treated as a bank for purposes of
any tax, securities law or
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other filing or submission made to any Governmental Authority, any
application made to a rating agency or qualification for any exemption
from tax, securities law or other legal requirements, (y) is not a
10-percent shareholder within the meaning of Section 881(c)(3)(B) of
the Code and (z) is not a controlled foreign corporation receiving
interest from a related person within the meaning of Section
881(c)(3)(C) of the Code and (ii) an Internal Revenue Service Form W-8;
and
(B) deliver to Borrower and Agent a further copy of said Form
W-8, or any successor applicable form or other manner of certification
on or before the date that any such Form W-8 expires or becomes
obsolete or after the occurrence of any event requiring a change in the
most recent form previously delivered by such Lender;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders any such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises Borrower and Agent, in which
case such Lender shall provide substitute or replacement forms, if any. Such
Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled
to receive payments under this Agreement without deduction or withholding of any
U.S. federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is
entitled to an exemption from U.S. backup withholding tax. Each Person that
shall become a Participant pursuant to Section 10.9(d) shall, upon the
effectiveness of the related transfer, be required to provide all of the forms
and statements required pursuant to this Section 3.10 to the Lender from which
the related participation shall have been purchased. Borrower shall be entitled,
to the extent it is required to do so by law, to deduct or withhold income or
similar taxes imposed by the U.S. (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) to the extent that such
Lender has not provided to Borrower on or prior to the date required pursuant to
this Section 3.10(b) the IRS form or forms, if any, so required to be provided
to Borrower, and Borrower shall not be obligated under this Section 3.10 to
gross-up payments to be made to such a Lender in respect of income or similar
taxes imposed by the U.S. if such Lender has not provided to Borrower on or
prior to the date so required the IRS form or forms required to be provided to
Borrower pursuant to this Section 3.10(b).
(c) Each Lender agrees to use reasonable efforts, including reasonable
efforts to change its lending office, to avoid or to minimize any amounts which
might otherwise be payable pursuant to Sections 3.9 and 3.10, provided that such
efforts do not cause the imposition on such Lender of additional costs or legal
or regulatory burdens deemed by such Lender to be material in the context.
3.11 Sharing of Payments. If any Lender obtains any payment in excess
of its Pro Rata Share of payments on account of the Revolver Loans (whether
through direct payment, right of setoff, banker's lien, counterclaim, or any
other means, including direct payment), such Lender shall immediately purchase
from the other Lenders with Revolver Commitments portions of their Revolver
Loans sufficient to cause that Lender to share the excess payment ratably with
all the other Lenders, and the Lenders shall otherwise take such actions as
shall be reasonably requested by Agent to cause such excess payment to be
equitably shared by all Lenders in proportion to Pro Rata Shares.
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3.12 Administrative Fee. Borrower shall pay Administrative Agent the
Administrative Fee in equal quarterly installments in advance, each due on the
first day of a Fiscal Quarter, except that the first installment, prorated,
shall be due promptly upon billing by Administrative Agent after the date
hereof. Notwithstanding anything to the contrary in this Agreement, no Lender
(other than Administrative Agent) shall have any interest in, or right to
receive any portion of, Administrative Fee.
ARTICLE 4 CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The obligation of each Lender to fund
its Pro Rata Share of the initial Revolver Loan (if any disbursements thereof
are made on the Closing Date) are subject to the satisfaction or waiver of the
following conditions precedent on the Closing Date:
(a) Closing Documents List. Agent and the Lenders shall have received
each of the agreements, opinions, reports, approvals, consents, certificates and
other documents set forth on the Closing Documents List, each duly executed
(where applicable) and delivered by all appropriate Persons and in form and
substance satisfactory to Agent and the Lenders.
(b) Liquidity and Financial Compliance. Agent and the Lenders shall
have received evidence satisfactory to them that Borrower will be in full
compliance with this Agreement (including the financial covenants contained in
Section 7.1) after giving effect to consummation of the transactions completed
herein and the making of any initial advance of the Revolver Loan to be funded
on the Closing Date.
(c) Fees and Expenses. All Fees and Expenses (including reasonable
attorneys' fees and expenses) payable on or before the Closing Date shall have
been paid in full, including all fees and other sums payable by Borrower
pursuant to that certain engagement letter dated January 30, 1998, between
Borrower and Arranger. (Notwithstanding the foregoing, Agent may determine to
defer Borrower's obligation to pay for certain Expenses until some later date,
such as the closing of Agent's initial syndication of this Loan. Accordingly,
Agent's failure to require Borrower to pay any such Expenses as of the Closing
Date shall not be deemed a waiver of Agent's right to require Borrower to pay
such Expenses at a later date as determined by Agent.)
(d) Structure; Due Diligence. Agent and each Lender shall have reviewed
and be satisfied with the structure, prospective liabilities (including
environmental and pension liabilities) and regulatory compliance of Borrower and
its Subsidiaries, including review of a completed audit report by Arthur
Andersen LLP and review of insurance certificates, copies of which shall have
been provided to Agent and each Lender.
(e) No Material Adverse Change. There shall not have been any material
adverse change in the financial condition, assets, operation or prospects of
Borrower since the Last Financial Statement Date.
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(f) Additional Documents. Borrower and its Subsidiaries shall have
executed and delivered (or caused to be executed and delivered) to Agent for
distribution to the Lenders any and all other information, agreements,
instruments, certificates, opinions and other documents regarding the
transactions contemplated hereby as Agent or any Lender shall request.
4.2 Conditions Precedent to All Loans. The obligation of each Lender to
fund its Pro Rata Share of any requested Loan is subject to the following
additional conditions precedent, and each Notice of Borrowing and each
acceptance of the proceeds of a Loan shall constitute a representation and
warranty by Borrower that such conditions are satisfied:
(a) Representations and Warranties. All representations and warranties
contained in this Agreement and the other Credit Documents shall be true and
correct in all material respects on and as of the date of such Notice of
Borrowing and on and as of the date such Loan is made, as if then made, other
than representations and warranties that expressly relate solely to an earlier
date;
(b) No Defaults. No Default or Event of Default shall have occurred, or
would result from the making of the requested Loan, which has not been waived;
and
(c) No Adverse Change. No event shall have occurred since the Last
Financial Statement Date, which has had or would reasonably be expected to have
a Material Adverse Effect.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES.
To induce Agent and the Lenders to enter into this Agreement and to
make the Loans and other financial accommodations described herein, Borrower
hereby represents and warrants to Agent and the Lenders that as of the Closing
Date the following representations and warranties are true in all material
respects. Such representations and warranties, and all other representations and
warranties made by any Credit Party in any other Credit Document, shall survive
the execution and delivery of the Credit Documents.
5.1 Organization and Qualification. Each Credit Party (i) is a
corporation, limited liability company, partnership or real estate investment
trust duly organized or formed, validly existing and, if applicable, in good
standing under the laws of the state of its formation; (ii) has the power and
authority to own its properties and assets and to transact the businesses in
which it is engaged; and (iii) is duly qualified and is authorized to do
business and, if applicable, is in good standing in each jurisdiction where it
is engaged in business and where such qualification is required, except where
failure to comply with any of the foregoing would not have a Material Adverse
Effect. As of the Closing Date, Section 5.1 of the Disclosure Schedule lists all
jurisdictions in which the Credit Parties are qualified to do business as
foreign entities.
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5.2 Authority. Each Credit Party has the requisite organizational power
and authority to execute, deliver and perform each of the Credit Documents to
which it is a party. All organizational action necessary for the execution,
delivery and performance of each of the Credit Documents by each Credit Party
which is a party thereto has been taken.
5.3 Enforceability. This Agreement and each other Credit Document is
the legal, valid and binding obligation of each Credit Party which is a party
thereto, enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and by general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law).
5.4 No Conflict. The execution, delivery and performance of each Credit
Document by each Credit Party which is a party thereto are not in contravention
of any Requirement of Law or any indenture, contract, lease, agreement,
instrument or other commitment to which any Credit Party is a party or by which
any Credit Party or any of their properties are bound and will not result in the
imposition of any Liens upon any of the property of any Credit Party (other than
Liens in favor of Agent).
5.5 Consents and Filings. No authorization, consent, approval, order,
license or permit from, or filing, registration or qualification with, any
Person is required in connection with the execution, delivery and performance of
this Agreement or any other Credit Document, except those that have been
obtained or made.
5.6 Government Regulation. Neither Borrower nor any Subsidiary is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, or the Investment Company Act of
1940, nor is Borrower or any Subsidiary subject to any other Requirement of Law
which purports to regulate or restrict its ability to borrow money or grant
Liens on its assets.
5.7 Solvency. Both before and after giving effect to the transactions
contemplated in this Agreement: (i) the fair saleable value of the assets of
each Credit Party is not less than the amount that will be required to pay the
probable liabilities of such Credit Party on its existing debts as they become
due; (ii) no Credit Party is engaged in, or about to become engaged in, a
business or transaction for which such Credit Party's property would constitute
unreasonably small capital in relation to such business or transaction; and
(iii) no Credit Party has incurred, intends to incur or believes that it will
incur, debts and liabilities beyond its ability to pay as such debts and
liabilities become absolute and matured.
5.8 Financial Data.
(a) Borrower has provided to Agent complete and accurate copies of
annual audited Financial Statements for the Fiscal Years 1995, 1996 and 1997
(and, after the Closing Date, for any Fiscal Year as to which this Agreement
requires Borrower to have delivered annual audited Financial Statements), and
unaudited Financial Statements for the partial Fiscal Year ended on the Last
Financial Statement Date (and, after the Closing Date, for any period as to
which this Agreement requires Borrower to have delivered unaudited
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partial-year Financial Statements). All such Financial Statements have been
prepared in accordance with GAAP consistently applied throughout the periods
involved and fairly present the respective consolidated financial positions,
results of operations and cash flows of Borrower as at such dates and for such
periods, except as otherwise specifically described in the notes to any of such
Financial Statements. As of the date of the most recent Financial Statements
delivered to Agent and each Lender, neither Borrower nor any of its Subsidiaries
has any Contingent Obligation, contingent liability or liability for taxes,
long-term leases or commitments which is not reflected in such Financial
Statements but, pursuant to GAAP, would be required to be reflected in such
Financial Statements.
(b) Borrower has provided to Agent complete and accurate copies of the
pro forma balance sheet of Borrower as of the Closing Date, giving effect to the
transactions contemplated in this Agreement to occur on the Closing Date. Such
pro forma balance sheet fairly presents the pro forma combined financial
condition of Borrower and all other Credit Parties as of the Closing Date,
giving effect to such transactions.
5.9 Names. As of the Closing Date, the only names under which each
Credit Party has conducted business during the last five years are listed in
Section 5.9 of the Disclosure Schedule.
5.10 Locations of Offices, Records and other Property. The address of
the principal place of business and chief executive office of each Credit Party
is set forth in Section 5.10 of the Disclosure Schedule (or has changed since
the Closing Date to another location as to which Borrower has complied with the
requirements of Section 7.3(f)). The books and records of each Credit Party are
maintained exclusively at such locations. The location of all real property
owned or leased by any Credit Party is set forth in Section 5.10 of the
Disclosure Schedule, except for real property first owned or leased after the
Closing Date, as to all of which Borrower has complied with the requirements of
Section 7.3(f). There is no jurisdiction in which any Credit Party owns or
leases any real property other than those jurisdictions identified in Section
5.10 of the Disclosure Schedule.
5.11 Subsidiaries; Ownership of Stock. The only direct or indirect
Subsidiaries of Borrower (after the Closing Date, other than Subsidiaries
established or acquired in accordance with Section 7.7(c)) are those listed in
Section 5.11 of the Disclosure Schedule. Section 5.11
of the Disclosure Schedule correctly indicates, for each Subsidiary that is not
a Guarantor, the basis for such Subsidiary's not being a Guarantor. Borrower is
the record and beneficial owner of all of the Capital Stock of each of its
Subsidiaries except as provided in Section 5.11 of the Disclosure Schedule or,
after the Closing Date, as otherwise disclosed in writing to Agent and not in
violation of this Agreement. Except as set forth in Section 5.11 of the
Disclosure Schedule or, after the Closing Date, as otherwise disclosed in
writing to Agent, there are no proxies, irrevocable or otherwise, with respect
to such Capital Stock, and no equity securities of any of such Subsidiaries are
or may become required to be issued by reason of any options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, any
Capital Stock of any such Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any such Subsidiary is or may become
bound to
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issue additional Capital Stock or securities convertible into or exchangeable
for such Capital Stock. All of such Capital Stock so owned by Borrower is owned
by Borrower free and clear of any Liens other than Permitted Liens.
5.12 Litigation. Except as set forth in Section 5.12 of the Disclosure
Schedule, no judgments, orders, writs or decrees are outstanding against or
affecting any Credit Party or any of the properties, rights, revenues or assets
of any Credit Party, nor is there now pending or, to the best of Borrower's
knowledge, threatened, any litigation, claim, investigation, arbitration, or
other proceeding against or affecting any Credit Party or any of the properties,
rights, revenues or assets of any Credit Party, including any counterclaim
brought in a litigation or arbitration in which any Credit Party is the
plaintiff that would result in a Material Adverse Effect.
5.13 No Defaults. To Borrower's knowledge, no Credit Party is in
default under any term of any indenture, contract, lease, agreement, instrument
or other commitment to which it is a party or by which it is bound and Borrower
knows of no dispute regarding any such indenture, contract, lease, agreement,
instrument or other commitment, in either case, which default would have a
Material Adverse Effect.
5.14 Labor Matters. There are no labor contracts to which any Credit
Party is a party. No Credit Party is engaged in any unfair labor practice that
would reasonably be expected to have a Material Adverse Effect. There is no
strike, labor dispute, union organizing activity, slowdown or stoppage pending
or, to the best knowledge of Borrower, threatened against any Credit Party
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
5.15 ERISA. No ERISA Affiliate maintains or contributes to any Plan or
is obligated to do so. No Credit Party, ERISA Affiliate, or fiduciary of any
Plan is subject to any direct or indirect liability with respect to any Plan
under any Requirement of Law or agreement.
5.16 Compliance with Law.
(a) Generally. Neither Borrower nor any other Credit Party has violated
or failed to comply with any Requirement of Law, which failure would have a
Material Adverse Effect.
(b) Compliance with Environmental Laws.
(1) Except as set forth in Section 5.16 of the Disclosure Schedule or
that would not have a Material Adverse Effect, (A) each of the Credit Parties
and, to Borrower's knowledge, Environmental Affiliates are in compliance in all
material respects with all applicable Environmental Laws, (B) each of the Credit
Parties and, to Borrower's knowledge, Environmental Affiliates have all
Environmental Approvals required to operate their businesses as presently
conducted, (C) none of the Credit Parties has received and, to the best of
Borrower's knowledge, no Environmental Affiliate has received any communication
from a Governmental Authority, employee or any other Person or group that
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alleges that such Credit Party is not in compliance in all material respects
with all Environmental Laws (which, if first received after the Closing Date,
has not been disclosed to the Lenders if and to the extent required under
Section 6.2(b)) and (D) to Borrower's knowledge, there are no circumstances
known to Borrower which may prevent or interfere with such compliance in the
future.
(2) Except as set forth in Section 5.16 of the Disclosure Schedule or
which would not have a Material Adverse Effect: there is no Environmental Claim
pending or threatened against any Credit Party or, to Borrower's knowledge,
Environmental Affiliate which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect; and, to Borrower's
knowledge, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including the release, emission, discharge or
disposal of any Material of Environmental Concern, that would reasonably be
expected to form the basis of any Environmental Claims against any Credit Party
or Environmental Affiliate, which Environmental Claims, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(3) Without limiting the generality of the foregoing, except as
disclosed in any environmental report made available to Agent or in Section 5.16
of the Disclosure Schedule, to Borrower's knowledge: (i) there are no on-site or
off-site locations at which any Credit Party or Environmental Affiliate has
stored, disposed of or arranged for the disposal of Materials of Environmental
Concern; (ii) there are no underground storage tanks located on property owned
or leased by any Credit Party or Environmental Affiliate; (iii) there is no
asbestos contained in or forming part of any building, building component,
structure or office space owned or leased by any Credit Party or Environmental
Affiliate; and (iv) no polychlorinated biphenyls ("PCB's") are used or stored at
any property owned or leased by any Credit Party or Environmental Affiliate, in
any such case that is reasonably expected to have a Material Adverse Effect.
5.17 Taxes and Tax Returns. Each Credit Party has timely filed all tax
returns it is required to file and has paid all taxes, penalties, assessments
and other governmental charges payable by it which have become due, other than
those not yet delinquent and those being contested in good faith by appropriate
proceedings and for which adequate reserves have been made in conformity with
GAAP. The information filed in such tax returns is accurate and complete in all
material respects. All deductions taken in such income tax returns are
appropriate and in accordance with applicable laws and regulations in all
material respects. No tax Liens have been filed against any assets of any Credit
Party. No deficiencies for taxes have been claimed, proposed or assessed by any
taxing or other Governmental Authority against any Credit Party; there are no
pending or threatened audits, investigations or claims for or relating to any
liability for taxes and there are no matters under discussion with any
Governmental Authority that, in any such case, could result in a material
additional liability for taxes and which would reasonably be expected to have a
Material Adverse Effect. No federal income tax returns of any Credit Party have
been audited by the Internal Revenue Service as of the Closing Date. Except as
set forth in Section 5.17 of the Disclosure Schedule, no extension of a statute
of limitations relating to taxes, assessments, fees or other governmental
charges is in effect with respect to any Credit Party. No Credit
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Party has any obligation under any written tax sharing agreement or agreement
regarding payments in lieu of income taxes with any Person other than another
Credit Party.
5.18 Intellectual Property. Each Credit Party has obtained and holds in
full force and effect all Intellectual Property, free from burdensome
restrictions, which are necessary for the operation of its business as presently
conducted, except where failure to obtain and/or hold such Intellectual Property
would not have a Material Adverse Effect. No product, process, method,
substance, part or other material presently sold or employed by any Credit Party
in connection with such business infringes any Intellectual Property owned by
any other Person.
5.19 Licenses and Permits. Each Credit Party has obtained and holds in
full force and effect, free from burdensome restrictions, all franchises,
licenses, leases, permits, certificates, authorizations, qualifications,
easements, rights of way and other rights and approvals which are necessary for
the operation of its business as presently conducted, except where the failure
to obtain such rights and approvals, individually and in the aggregate, would
not be reasonably expected to have a Material Adverse Effect. No Credit Party is
in violation of the terms or conditions of any such right or approval, which
violation would reasonably be expected to have a Material Adverse Effect.
5.20 Material Contracts. Section 5.20 of the Disclosure Schedule
contains a true, correct and complete list of all the Material Contracts in
effect on the Closing Date. Except as described in Section 5.20 of the
Disclosure Schedule and except as would not reasonably be expected to have a
Material Adverse Effect, no Material Contract contains any burdensome
restrictions on any Credit Party or any of their respective properties, all of
the Material Contracts are in full force and effect, and, to Borrower's
knowledge, no material defaults currently exist thereunder.
5.21 Use of Proceeds. No part of the proceeds of any Loan will be used
by any Credit Party to purchase or carry any Margin Stock or to extend credit to
any other Person for the purpose of purchasing or carrying any Margin Stock or
for any other purpose in violation of any Requirement of Law or the terms and
conditions of any of the Credit Documents. Neither the making of any Loan nor
the use of the proceeds thereof has been or will be in violation of or
inconsistent with the provisions of Regulations G, T, U or X of the Federal
Reserve.
5.22 Accuracy and Completeness of Information. To Borrower's knowledge,
all factual information furnished by or on behalf of any Credit Party in writing
to Agent, any Lender, or the directors, officers, employees, independent
contractors and agents of any of them for purposes of or in connection with this
Agreement or any other Credit Documents, or any transaction contemplated hereby
or thereby is or will be true and accurate in all material respects on the date
as of which such information is dated or certified and not incomplete by
omitting to state any material fact necessary to make such information not
misleading at such time.
5.23 Leases and Management Agreements. Section 5.23 of the Disclosure
Schedule correctly identifies all Leases and Management Agreements to which any
Credit Party is a
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party as of the Closing Date. To the extent that such Section summarizes Base
Rent of Leases and other economic terms of Leases and Management Agreements,
such summary is accurate and correct in all material respects. All Leases and
Management Agreements listed in such Section are in full force and effect and
have not been amended, modified, terminated or waived in any way, orally or in
writing except as disclosed in the Disclosure Schedule. No material default
beyond the expiration of any applicable notice or cure period exists under any
such Lease to which any Credit Party is a party or, to the best of Borrower's
knowledge, under any Management Agreement (whether or not a Credit Party is a
party thereto). All Leases in each of the seven groups of Leases set forth in
Section 5.23 of the Disclosure Schedule are on substantially the same terms and
conditions (other than as to amount of Base Rent and percentage rent and
identity of the leased premises).
5.24 Title to Hotels. As to all or substantially all of the Hotels,
Borrower or a Subsidiary is the insured under a policy of title insurance issued
by a title insurer licensed to do business in the jurisdiction where such Hotel
is located. As to each such policy of title insurance: (a) the coverage amount
equals or exceeds the Acquisition Cost of the related Hotel; (b) exceptions to
title do not include any Liens, except for Permitted Liens and Liens that have
been repaid as of the Closing Date; (c) no claims are pending that, if adversely
determined, would have a Material Adverse Effect; and (d) no title insurer has
given notice to the insured Person that such policy of title insurance is no
longer in effect. Except for Permitted Liens, neither Borrower nor any
Subsidiary has knowledge of any defect in title that could, individually or in
the aggregate, have a Material Adverse Effect. Borrower represents and warrants
that as of the date hereof, Borrower has terminated and repaid all previously
existing secured debt of Borrower or any other Credit Party. To the extent, if
any, that any mortgages, deeds, of trust, and other security documents relating
to such secured debt (the "Former Mortgages") have not been released of record
as of the date hereof, Borrower shall, on or before April 20, 1998, (a) cause
the record holder of each Former Mortgage to execute and acknowledge appropriate
release documentation, and (b) submit such release documentation to the
appropriate public offices for recordation. Provided that Borrower performs its
obligations under the preceding sentence, the Former Mortgages shall not be
deemed a breach of this paragraph or of any other provision of this Agreement.
5.25 REIT Compliance. Borrower fully complies with all requirements for
qualification as a REIT and has done so since its inception, except where the
failure to qualify would not have a Material Adverse Effect. None of the assets
owned, or hereafter to be acquired, by Borrower or any Subsidiary constitute (or
will constitute) property held primarily for sale to customers in the ordinary
course of Borrower's trade or business.
5.26 Insurance. All Leases require the Lessees thereunder to maintain
with respect to the Hotels insurance coverage of a nature, on terms, and
providing coverage in accordance with the insurance that a commercially
reasonable person would maintain with respect to similar properties and a
similar business. No Credit Party has received notice that any such insurance
has been cancelled, nonrenewed, or impaired in any way.
5.27 Year 2000 Problem. Borrower has reviewed its operations and those
of its Subsidiaries and of Investment Manager with a view to assessing whether
its or any of their
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respective businesses will, in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission, or other utilization of data
be vulnerable to a Year 2000 Problem. Based on such review, Borrower has no
reason to believe that a Material Adverse Effect will occur with respect to its
or its Subsidiaries' business or operations resulting from a Year 2000 Problem.
5.28 Certificates and Deliveries. At all times until all Obligations
have been paid in full and all Commitments have terminated, all Compliance
Certificates and other certificates, deliveries and reports delivered by
Borrower to Agent or any Lender pursuant to this Agreement are and shall be true
and correct in all material respects. Without limiting the generality of the
foregoing, at all times the most recent Compliance Certificate delivered by
Borrower accurately describes the Unencumbered Pool and the basis upon which
each and every Hotel in the Unencumbered Pool qualifies for inclusion in the
Unencumbered Pool.
ARTICLE 6 AFFIRMATIVE COVENANTS
Until termination of the Commitments and this Agreement and full and
final payment and satisfaction of all Obligations due hereunder or under any
other Credit Document:
6.1 Financial Reporting. Borrower shall timely deliver to Agent
(separately to each notice recipient for Agent as listed in Annex I) the
following information:
(a) Annual Financial Statements. As soon as available, but not later
than ninety (90) days after each Fiscal Year end: (i) Borrower's annual
consolidated audited Financial Statements; (ii) a comparison in reasonable
detail to the prior year audited Financial Statements; (iii) the Auditors'
unqualified opinion; (iv) a "Management Letter," if any, prepared by the
Auditors; (v) a narrative discussion of Borrower's consolidated financial
condition and results of operations and the consolidated liquidity and capital
resources for such Fiscal Year, prepared by the chief financial officer of
Borrower; and (vi) a Compliance Certificate.
(b) Projections. Not later than thirty (30) days prior to the
commencement of each Fiscal Year, projections of Borrower's financial condition,
operating budgets, and results of operations for such Fiscal Year, containing
projected consolidated annual balance sheets and statements of operations,
certified by Borrower's chief financial officer as having been made reasonably,
in good faith, and based upon the facts reasonably known to management at the
time.
(c) Quarterly Financial Statements. As soon as available, but not later
than forty-five (45) days after the end of each Fiscal Quarter (other than the
fourth Fiscal Quarter of each Fiscal Year, as to which fourth Fiscal Quarter
reports under this paragraph shall not be required): (i) Borrower's Financial
Statements as of the Fiscal Quarter then ended, and for the Fiscal Year to date;
(ii) a comparison in reasonable detail to the Financial Statements for the
corresponding periods of the prior Fiscal Year; and (iii) the certification of
the chief executive officer or chief financial officer of Borrower that such
Financial Statements have been prepared in accordance with GAAP (subject to
year-end audit adjustments).
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(d) Quarterly Supplemental Information. As soon as available, but not
later than forty-five (45) days after the end of each Fiscal Quarter: (i) a
narrative discussion of Borrower's consolidated financial condition and results
of operations and the consolidated liquidity and capital resources for such
Fiscal Quarter and Fiscal Year to date, prepared by the chief financial officer
of Borrower; (ii) a Compliance Certificate; and (iii) a report on all material
acquisitions and dispositions of assets by Borrower and its Subsidiaries during
the Fiscal Quarter (to the extent not otherwise disclosed in the Compliance
Certificate).
(e) Changes in GAAP. All accounting determinations for purposes of
determining compliance with the financial covenants contained in this Agreement
shall be made in accordance with GAAP as in effect on the Closing Date and
applied on a basis consistent in all material respects with the audited
Financial Statements delivered to Agent on or before the Closing Date. The
Financial Statements required to be delivered hereunder from and after the
Closing Date, and all financial records, shall be maintained in accordance with
GAAP. If (a) GAAP shall change from the basis used in preparing the audited
Financial Statements delivered to Agent on or before the Closing Date, (b)
Borrower (with the consent of the Auditor) intends to institute any such change
and so notifies Agent, and (c) such change would result in a change in the
method of calculation of any of the covenants, standards or terms in this
Agreement, the parties hereto agree to enter into negotiations to amend such
provisions so as equitably to reflect such change, with the desired result that
the criteria for evaluating compliance with such covenants, standards and terms
shall be the same after such change as if such change had not been made and will
only be adjusted to reflect such change in GAAP; provided, however, that no
change in GAAP that would affect the method of calculation of any of the
covenants, standards or terms of this Agreement or of any other Credit Document
shall be given effect for purposes hereof or thereof until the applicable
provisions are amended, in a manner satisfactory to Required Lenders and
Borrower, to so reflect such change in accounting principles. Until such an
amendment is so agreed, the certificates required to be delivered pursuant to
Section 6.1 demonstrating compliance with the covenants contained herein shall
include calculations setting forth the adjustments necessary to demonstrate how
Borrower is in compliance with the financial covenants based upon GAAP as in
effect on the Closing Date.
(f) Further Assurances. When requested by Agent or any Lender, any
further information regarding the business affairs and financial condition of
all or any of the Credit Parties, or any matter that is the subject of any
representation, warranty, covenant or other obligation contained in this
Agreement provided such information is available to or can be obtained by or
calculated by Borrower. Without limiting the generality of the foregoing,
Borrower shall within five (5) Business Days after request by Agent or any
Lender, which request may be made at any time but no more frequently than once
in any thirty-day period, deliver to Agent an updated and current Compliance
Certificate.
(g) Material Mortgagors and Material Lessees. Borrower shall, with
respect to each material mortgagor under any Permitted Mortgage Investment and
with respect to each Material Lessee, deliver to Agent the same reports and
information required by Sections 6.1(a)(i)(ii) and (iii) and (c)(i) and (ii),
except that: (i) every reference to Borrower and its Subsidiaries shall be
deemed to refer to such material mortgagor or Material Lessee; and (ii) the time
periods within which Borrower shall deliver such reports as to material
mortgagors
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and Material Lessees shall each be thirty days longer than the time periods set
forth in Sections 6.1(a) and (c).
(h) Failure to Timely Deliver. At any time when Borrower has failed
timely to deliver any information required to be delivered by this Agreement,
Agent may in Agent's discretion estimate the information that Borrower should
have, but failed to, deliver. All rights and obligations under this Agreement
(including Borrower's compliance with the financial covenants in Section 7.1 and
the occurrence of any Default or Event of Default) shall be determined based on
such estimated information unless and until Borrower shall have delivered actual
information in compliance with this Agreement. Nothing in this paragraph shall
be deemed to waive any Default or Event of Default arising from Borrower's
failure to deliver any information required by this Agreement.
(i) Securities and Exchange Commission Filings. Within five business
days after Borrower makes any SEC Filing, Borrower shall provide Agent with a
complete and accurate copy of such SEC Filing. Within ten business days after
Borrower becomes aware of any SEC Filing relating to Borrower made by a third
party, Borrower shall provide Agent with a complete and accurate copy of such
SEC Filing.
6.2 Notification Requirements. Borrower shall timely give Agent
(separately to each notice recipient for Agent designated on Annex I) the
following notices, each in reasonable detail:
(a) Notice of Defaults, Proceedings and Adverse Changes. Promptly, and
in any event within two (2) Business Days after Borrower becomes aware of any of
the following, a certificate of the chief executive officer or chief financial
officer of Borrower specifying the nature thereof and describing the event or
condition and any action taken or planned to be taken with respect thereto by
any Credit Party: (1) the occurrence of an Event of Default; (2) any proceeding
being instituted or threatened to be instituted (including pursuant to a cross-
claim or counterclaim) against any Credit Party in or before any federal, state,
local or foreign court, commission or other regulatory body that, if adversely
determined, would have a Material Adverse Effect; (3) any order, judgment or
decree being entered against any Credit Party or to Borrower's knowledge any of
its properties or assets that would have a Material Adverse Effect; (4) any
breach, modification, or termination of any Material Contract; or (5) any actual
change, development or event which has had or would reasonably be expected to
have a Material Adverse Effect.
(b) Environmental. Promptly and in any event within two Business Days
after the occurrence of any of the following events or conditions, a certificate
of the chief executive officer or chief financial officer of Borrower specifying
the nature of such condition and the applicable Credit Party's or Environmental
Affiliate's proposed response thereto: (1) the receipt by any Credit Party or to
Borrower's knowledge any of its Environmental Affiliates of any communication
from a Governmental Authority, employee or other Person or group that alleges
that a Credit Party or Environmental Affiliate is not in substantial compliance
with applicable Environmental Laws; (2) any Credit Party shall obtain actual
knowledge that there exists any Environmental Claim pending or threatened
against a Credit Party or Environmental Affiliate that, if adversely determined,
would have a Material Adverse Effect;
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or (3) any release, emission, discharge or disposal of any Material of
Environmental Concern that could form the basis of any Environmental Claim
against any Credit Party or Environmental Affiliate that, if adversely
determined, would have a Material Adverse Effect.
(c) ERISA Notices. Promptly, and in any event within five (5) Business
Days after receipt, any notice relating to any Credit Party's compliance with,
or obligations under, ERISA.
(d) New Material Contracts. Within five (5) Business Days after being
entered into, Borrower's entry into any new Material Contract, together with a
copy thereof and of all related or ancillary documentation.
(e) Certain Changes. At least ten (10) Business Days prior written
notice to Agent of any change in Borrower's name, identity or structure from
that described herein.
(f) Additions to Unencumbered Pool. Within ten (10) Business Days after
Borrower's acquisition of any new Hotel to be added to the Unencumbered Pool or
any change affecting a previously existing Hotel so that such Hotel will qualify
to be included in the Unencumbered Pool, notice of such acquisition or
modification, setting forth: (a) the Acquisition Cost; and (b) as to such Hotel
only, the same information that Borrower would be required to include in a
Compliance Certificate. Such notice shall be accompanied by a copy of the Lease
and Management Agreement for such Hotel and copies of any Due Diligence Reports
for such Hotel not previously delivered to Agent.
(g) Removals from Unencumbered Pool. Within ten (10) Business Days
after Borrower's disposition or other removal of any Hotel from the Unencumbered
Pool or after any Hotel previously in the Unencumbered Pool otherwise ceases to
qualify for inclusion in the Unencumbered Pool, notice of such disposition,
removal, or disqualification, setting forth: (a) the identity of the Hotel(s)
being disposed of, removed, or disqualified; and (b) the Assigned Value of such
Hotel(s).
6.3 Trust Existence. Borrower shall, and shall cause each Subsidiary of
Borrower to, (i) maintain its existence, (ii) maintain in full force and effect
all licenses, bonds, franchises, leases, trademarks and qualifications to do
business, and all patents, contracts and other rights necessary to the conduct
of their businesses, except where the failure to maintain such rights would not
reasonably be expected to have a Material Adverse Effect, and (iii) continue in,
and limit their operations to, the Business. Nothing in this paragraph shall be
deemed to prevent the transfer of interests in, or Borrower's terminating and/or
liquidating Subsidiaries from time to time, provided that after such transfer,
termination and/or liquidation Borrower and its remaining Subsidiaries are in
full compliance with this Agreement in all material respects.
6.4 Books and Records; Inspections. Borrower shall maintain, and shall
cause each other Credit Party to maintain, proper books and records in which
entries in conformity with GAAP and all requirements of law shall be made of,
and which entries shall fairly reflect, all transactions and dealings in
relation to its business and activities and books and records pertaining thereto
in such detail, form and scope as is consistent with good business
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practice. Borrower agrees that Agent or its agents and any Lender may enter upon
the premises of Borrower at any time and from time to time, during normal
business hours and upon reasonable notice under the circumstances, and at any
time at all on and after the occurrence and during the continuance of an Event
of Default, for the purposes of discussing the affairs, finances and business of
any Credit Party with any officers, employees and directors of any Credit Party.
6.5 Borrower's Calculations and Certifications. Wherever this Agreement
requires or permits Borrower to calculate any amount or ratio, or certify as to
any factual matter, Agent shall have the right, but not the obligation, to
require Borrower to promptly provide reasonable substantiation and backup for
Borrower's determination, all in a manner satisfactory to Agent, and Agent and
Agent's representatives and advisers shall have the right to inspect and review
Borrower's books and records to audit and/or otherwise determine the correctness
of Borrower's calculation or certification. If Agent determines that Borrower's
calculation or certification was incorrect, or that Agent cannot promptly
affirmatively confirm that it was correct, then Agent shall have the right but
not the obligation to replace Borrower's calculation or certification with an
estimate made in good faith by Agent or Agent's advisors or consultants. Such
estimate shall then apply for all purposes of this Agreement (including as to
Borrower's compliance with the financial covenants contained in Section 7.1 and
the occurrence or nonoccurrence of a Default or an Event of Default) unless and
until Agent has accepted Borrower's calculation or certification as to the
matter in question. Nothing in this paragraph shall be deemed to waive any
Default or Event of Default arising from Borrower's failure to accurately
deliver any certificate or calculation required by this Agreement.
6.6 Taxes. Borrower agrees to pay, when due, and to cause each other
Credit Party and to pay when due, all taxes lawfully levied or assessed against
Borrower or any other Credit Party or any of Borrower's or any Credit Party's
property before any penalty or interest accrues thereon; provided, however,
that, unless such taxes have become a federal tax or ERISA Lien on any of the
assets of a Credit Party, no such tax need be paid if the same is being
contested, in good faith, by appropriate proceedings promptly instituted and
diligently conducted and if an adequate reserve or other appropriate provision
shall have been made therefor to the extent required by GAAP.
6.7 Compliance With Laws.
(a) Generally. Borrower agrees to comply, and to cause each other
Credit Party to comply, with all Requirements of Law applicable to the operation
of its business or its assets, unless, so long as no choate tax or ERISA Lien
arises as a result thereof or in connection therewith, (a) the applicable Credit
Party is contesting such Requirement of Law in good faith, by appropriate
proceedings promptly instituted and diligently conducted and if an adequate
reserve or other appropriate provision shall have been made therefor to the
extent required by GAAP, or (b) such failure to comply would not reasonably be
expected to have a Material Adverse Effect.
(b) Environmental Laws. Without limiting the generality of the
foregoing, Borrower shall:
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(1) Comply with all Environmental Laws applicable to it, and
obtain, comply with and maintain all Environmental Approvals necessary for its
operations as conducted and as planned to be conducted except where the failure
to comply or maintain would not have a Material Adverse Effect; and (ii) take
all reasonable efforts to ensure that all of its tenants, subtenants,
contractors, subcontractors and invitees comply with all Environmental Laws, and
obtain, and comply with, any and all Environmental Approvals applicable to them
except where the failure to comply or maintain would not have a Material Adverse
Effect.
(2) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions, required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings or the failure to
comply would not reasonably be expected to have a Material Adverse Effect.
6.8 Insurance. Borrower and its Subsidiaries shall at all times cause
the applicable Lessees to maintain with respect to the Hotels insurance of a
nature, on terms, and providing coverage in accordance with the insurance that a
commercially reasonable person would maintain with respect to similar properties
and a similar business.
6.9 Fiscal Year. Borrower agrees to maintain its fiscal year, and to
cause each of its Subsidiaries to maintain its fiscal year, as a year ending
December 31.
6.10 Maintenance of Property. Borrower agrees to keep, and to cause
each other Credit Party to keep, all property necessary to their respective
businesses in good working order and condition (ordinary wear and tear excepted)
in accordance with their past operating practices and not to commit any waste
with respect to any of their properties.
6.11 ERISA Documents. Borrower will cause to be delivered to Agent,
upon Agent's request, any document relating to Borrower's or any Subsidiary's
compliance with ERISA.
6.12 Tradenames, Etc. Borrower shall, and shall cause each other Credit
Party to, do or cause to be done, all things necessary to preserve and keep in
full force and effect its patents, trademarks, service marks, trade names,
copyrights, franchises, licenses, permits, certificates, authorizations,
qualifications, accreditations, easements, rights of way and other rights,
consents and approvals, except where the failure to so preserve any of the
foregoing would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect or is otherwise expressly permitted by Section
6.3.
6.13 Acquisitions of New Hotels. To the extent that Borrower acquires
Hotels after the Closing Date and desires to include such Hotels in the
Unencumbered Pool, Borrower shall provide Agent with Due Diligence Reports for
any such Hotel(s) at least twenty (20) days before such Hotels shall be included
in the Unencumbered Pool.
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6.14 Performance of Obligations. Borrower shall, and shall cause each
other Credit Party to, perform all of its obligations under the terms of each
mortgage, indenture, security agreement, debt instrument, lease, undertaking and
contract by which it or any of its properties is bound or to which it is a party
(including all Material Contracts), if the failure to so perform, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect.
6.15 Advisory Agreement. Borrower shall maintain the Advisory Agreement
in full force and effect at all times after the Closing Date, and shall not
modify or amend the Advisory Agreement in any material respect without Agent's
prior written consent. No later than thirty days before each expiration date of
the Advisory Agreement, (a) Borrower and Investment Manager shall renew the
Advisory Agreement on substantially the same terms as are in effect on the
Closing Date, and (b) Borrower shall provide Agent with a copy of the renewal
Advisory Agreement fully signed by both parties.
6.16 REIT Qualification. Borrower is qualified as a REIT and shall at
all times hereafter continue so to qualify.
6.17 Annual Meetings of Lenders. To the extent (if any) requested by
Agent from time to time, Borrower shall cause the Managing Trustees and
Borrower's other senior executive officers to attend a meeting of the Lenders
annually to discuss the business and affairs of Borrower and the status of the
Loans. Each such meeting shall be held on a mutually agreeable date, upon
reasonable notice to all Lenders, within 100 days after the end of Borrower's
Fiscal Year, at a location in the Borough of Manhattan or as otherwise agreed by
Borrower and Agent.
6.18 Required Interest Rate Cap. If, at any time, both (a) the sum of
the Ten-Year Treasury Rate plus 1.75% per annum exceeds 9.50% per annum and (b)
any Excess Floating Rate Exposure exists, then within five Business Days after
the occurrence of the foregoing (unless at the end of such five-Business-Day
period either or both of such conditions "a" or "b" has ceased to exist),
Borrower shall purchase and fully pay for Interest Rate Cap(s) from Qualified
Counterparty(ies) (and Borrower shall thereafter maintain and continue such
Interest Rate Cap(s) through the earlier of the Revolver Maturity Date or the
date condition "a" ceases to be satisfied), and enter into such other
documentation in connection therewith as Agent shall reasonably require,
requiring the counterparty to make a stream of payments equal to the outcome,
from time to time, of the following formula:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Payments by = Excess X (Adjusted Eurodollar Rate for a 30- - 9.5% per
Counterparty Floating Rate Day LIBOR Period + Applicable annum)
Exposure Margin for Eurodollar Loans
</TABLE>
For purposes of the preceding formula, Excess Floating Rate Exposure and
Applicable Margin shall be determined as of the date that Borrower is required
to provide the Interest Rate Cap. If Excess Floating Rate Exposure or Applicable
Margin changes thereafter, then Borrower shall as requested by Agent promptly
adjust the notional amount or terms of the Interest Rate Cap or deliver
additional Interest Rate Cap(s). If an Interest Rate Cap consists of a "cap,"
then Borrower shall pay the entire cost of the Interest Rate Cap at the time
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Borrower is required to obtain it. If Borrower purchases any such Interest Rate
Cap from Agent or any Affiliate of Agent or any Lender, then all rights and
obligations of Borrower under such Interest Rate Cap shall be independent of
Borrower's rights and obligations under this Agreement, and for purposes of this
Agreement such Interest Rate Cap shall be deemed to have been issued by a
third-party Qualified Counterparty. Any Interest Rate Cap shall be issued by the
Qualified Counterparty directly in favor of Agent for the benefit of the
Lenders. To the extent that Agent receives any payments under such Interest Rate
Cap, Agent shall apply such payments first against Borrower's obligations under
this Agreement and Agent shall promptly release any excess to Borrower. If at
any time Borrower is no longer required to maintain or continue an Interest Rate
Cap pursuant to this paragraph, then provided that no uncured Event of Default
shall have occurred, Agent shall consent to cancellation of the Interest Rate
Cap in place and otherwise cooperate to facilitate its termination. If an
uncured Event of Default occurs, then Borrower shall no longer have the right to
terminate any Interest Rate Cap that is in place. If at any time Borrower is
required to deliver or maintain an Interest Rate Cap but has not done so, Agent
shall be entitled to suspend any Advances of the Loan. If Borrower fails to
obtain an Interest Rate Cap in Agent's name when and as required by this
Agreement, then Agent shall have the right, without notice to Borrower, to
obtain from any Qualified Counterparty (including Agent or an Affiliate of
Agent) such an Interest Rate Cap on terms satisfactory to Agent in its
reasonable discretion. Borrower shall pay all costs and expenses of Agent in
connection therewith, including any fees charged by the Qualified Counterparty
(including Agent or an Affiliate of Agent) issuing such Interest Rate Cap and
any reasonable attorneys' fees and disbursements incurred by Borrower in
connection therewith. Neither Agent nor any Lender shall be deemed to have
assumed any obligations or duties under such Interest Rate Cap, except to the
extent that Agent or a Lender is a Qualified Counterparty under such Interest
Rate Cap and has thereby assumed the obligations of such a Qualified
Counterparty. In such event, if such Qualified Counterparty fails to perform its
obligations under the Interest Rate Cap, then notwithstanding anything to the
contrary in this Agreement Agent shall be entitled to an offset against any sums
otherwise payable to such Qualified Counterparty under this Agreement. If any
Interest Rate Cap (including one required by this sentence) expires and
thereafter (or simultaneously with such expiration) conditions "a" and "b" set
forth at the beginning of this paragraph are satisfied, then Borrower shall
again be obligated to provide an Interest Rate Cap as required by this
paragraph.
6.19 Year 2000 Problems. Borrower shall take all action necessary to
assure that its computer-based system (and those of Investment Manager and of
all Subsidiaries) are able to process effectively data, including dates on and
after January 1, 2000, without any Year 2000 Problem. At the request of Agent or
of any Lender, Borrower shall provide Agent or such Lender with assurances and
substantiations reasonably acceptable to Agent or such Lender as to Borrower's,
its Subsidiaries', and Investment Manager's capability to process data on and
after January 1, 2000 without any Year 2000 Problem.
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6.20 Process Agent's Consent. Within thirty days after the date hereof,
Borrower shall obtain written consent (in form reasonably satisfactory to Agent)
by Corporation Service Company to serve as agent for service of process pursuant
to Section 10.4 of this Agreement.
ARTICLE 7 FINANCIAL COVENANTS; NEGATIVE COVENANTS
Until termination of the Commitments and this Agreement and full and
final payment and satisfaction of all Obligations due hereunder or under any
other Credit Document, Borrower shall comply with, and, where required, shall
cause each other Credit Party to comply with, the following covenants:
7.1 Financial Covenants. Borrower shall not at any time or for any
period (except where the following financial covenants expressly refer to
compliance as of the end of a Fiscal Quarter, in which cases compliance shall be
tested only at the end of each Fiscal Quarter) cause or permit any one or more
of the following financial covenants not to be satisfied. If for any reason or
at any time (or, where applicable, at the end of a Fiscal Quarter) any one or
more financial ratio(s) or amount(s) set forth below fails to comply with the
requirement set forth below, then regardless of the cause of such noncompliance,
such noncompliance shall constitute a Default under this Agreement.
(a) The Aggregate Assigned Value of the portion of the Unencumbered
Pool located in any single "Metropolitan Area" as defined in the Statistical
Abstract of the United States shall at no time be greater than 20% of the
aggregate Assigned Value of the Unencumbered Pool.
(b) The aggregate Assigned Value of the Unencumbered Pool shall at no
time be less than 200% times the sum of (a) the Obligations, plus (b) all other
Consolidated Indebtedness, other than Consolidated Secured Debt, plus (c) the
Recourse Exposure Amount for all Hotels.
(c) The Assigned Value of Hotels Owned by Subsidiaries that are neither
(a) Wholly- Owned Subsidiaries nor (b) Guarantors shall at no time be greater
than Ten Percent (10%) of Consolidated Total Assets.
(d) At the end of each Fiscal Quarter, Consolidated EBITDA for the
Unencumbered Pool (considered separately) divided by Consolidated Interest
Expense (excluding Consolidated Interest Expense on Consolidated Secured Debt)
shall be no less than 2.50.
(d) Consolidated Indebtedness (Leverage Ratio) shall at no time be
greater than 50% of the aggregate Assigned Value of all Hotels.
(e) At the end of each Fiscal Quarter, consolidated tangible net worth
of all Credit Parties shall be no less than $900,000,000 plus an amount equal to
80% of gross proceeds to the Credit Parties of all equity offerings (common or
preferred) consummated by any of them after the Closing Date.
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(f) Consolidated Secured Debt shall at no time be greater than 35% of
the aggregate Assigned Value of all Hotels.
(g) At the end of each Fiscal Quarter, the Debt Service Coverage Ratio
shall be no less than 2.25 to 1.
(h) At the end of each Fiscal Quarter, the Interest Expense Coverage
Ratio shall be no less than 2.50 to 1.
(i) Permitted Mortgage Investments as a percentage of Consolidated
Total Assets shall at no time be greater than Twenty Percent (20%).
7.2 Other Assets or Business. No Credit Party shall conduct any
business other than the Business. The Credit Parties shall continue to conduct
business after the Closing Date in substantially the same manner as they
conducted business before the Closing Date, subject to compliance with this
Agreement.
7.3 Additional Indebtedness. Borrower shall not, and shall not permit
any other Credit Party to, directly or indirectly incur, create, assume,
guaranty or suffer to exist any Indebtedness other than the following, subject
in all cases to the restrictions of Section 7.1:
(a) Indebtedness under the Credit Documents;
(b) Indebtedness outstanding on the Closing Date and listed in Section
7.3 of the Disclosure Schedule;
(c) Indebtedness of Borrower to any Subsidiary and Indebtedness of any
Subsidiary to Borrower or any other Subsidiary;
(d) Permitted New Indebtedness;
(e) The Advisory Agreement; and
(f) Contingent Obligations permitted by Section 7.5.
7.4 Liens. Borrower shall not, and shall not permit any other Credit
Party, directly or indirectly, to create, incur, assume, or suffer to exist any
Lien on any Hotel within the Unencumbered Pool now owned or hereafter acquired
except the following Liens ("Permitted Liens"):
(a) Liens granted to the Lenders under the Credit Documents;
(b) Liens listed in Section 7.4 of the Disclosure Schedule;
(c) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, or landlords, liens for taxes, assessments or other
governmental charges (other than choate federal tax and ERISA Liens), and other
similar Liens arising by operation
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of law, in each case for amounts that are not yet due and payable or which are
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which an adequate reserve or other appropriate
provision shall have been made to the extent required by GAAP, so long as Agent
has been notified thereof;
(d) any attachment or judgment Liens the existence of which,
individually and in the aggregate, does not constitute an Event of Default under
Section 8.1(k);
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, individually and
in the aggregate, do not materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of Borrower or any of its Subsidiaries;
(f) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(g) deposits to secure trade contracts (other than for borrowed money),
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business;
(h) the lessor's interest in property leased to Borrower or any of its
Subsidiaries pursuant to a lease permitted by this Agreement;
(i) a Lessee's interest under a Lease permitted by this Agreement and
the Manager's interest under a Management Agreement permitted by this Agreement;
and
(j) Liens in favor of other Credit Parties securing Permitted New
Indebtedness that is subordinate to the Obligations pursuant to subordination
arrangements satisfactory to Agent.
7.5 Contingent Obligations. Borrower shall not, and shall not permit
any other Credit Party to, directly or indirectly incur, assume, or suffer to
exist any Contingent Obligation, excluding:
(a) the Guaranty and other Contingent Obligations in favor of Agent or
any Lender under the Credit Documents;
(b) surety bonds described in Section 7.4(g);
(c) Contingent Obligations existing on the Closing Date and listed in
Section 7.5 of the Disclosure Schedule; and
(d) Guaranties in favor of Lessees of the obligations of other Credit
Parties under Leases.
7.6 Restricted Payments. Borrower shall not, and shall not permit any
other Credit Party to, directly or indirectly, make or cause to be made any of
the following
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payments (collectively, the "Restricted Payments") except as otherwise expressly
permitted by this Section 7.6 or with the approval of the Required Lenders in
their sole and absolute discretion: (a) declare or pay any dividend (other than
dividends payable solely in common or preferred stock of Borrower or dividends
payable to the Borrower by any Subsidiary) on, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any Capital Stock of
any Credit Party, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of any Credit Party, except for the minimum
dividends and distributions required to maintain Borrower's status as a REIT;
(b) make any optional payment or prepayment on or redemption (including, without
limitation, by making payments to a sinking or analogous fund) or repurchase of
any Indebtedness (other than Indebtedness pursuant to this Agreement or
Indebtedness owing to Borrower from one of its Subsidiaries) or of any Mandatory
Redeemable Obligation; (c) make any payment, whether of principal or interest,
on account of any Indebtedness of any Credit Party which Indebtedness is
subordinate to the Loan; or (d) make any payments to Investment Manager pursuant
to the Advisory Agreement or otherwise. Notwithstanding the foregoing, Borrower
may make any Restricted Payments that would otherwise become payable in the
ordinary course of Borrower's business, provided that: (i) both before and after
making such Restricted Payment no Default or Event of Default shall exist under
this Agreement or any of the other Credit Documents; and (ii) even after the
making of such Restricted Payment, Borrower shall be holding Cash Equivalents in
an amount sufficient to pay the next installment of interest to become due under
this Agreement after first taking into account all other payments required to be
made by or to Borrower on or before the date such payment of interest is due.
Nothing in this paragraph shall prohibit a Subsidiary that is not a Wholly-Owned
Subsidiary from paying required minimum payments that must be made to partners
or members who are not Credit Parties, pursuant to the terms of the
organizational documents of such Subsidiary.
7.7 Investments. Borrower shall not, and shall not permit any other
Credit Party to, directly or indirectly, make any Investment in any Person
(including any director, officer or employee of any Credit Party), whether in
cash, securities, or other property of any kind, other than:
(a) loans, investments and advances between the Credit Parties in
existence as of the Closing Date and described in Section 7.7 of the Disclosure
Schedule;
(b) loans and advances by (i) Borrower to any Subsidiary and (ii) any
Subsidiary to Borrower or any other Subsidiary;
(c) Investments by Borrower in Subsidiaries for the purpose of
capitalization thereof, provided that such Subsidiaries shall be formed solely
for the purpose of conducting the Business;
(e) extensions of trade credit in the ordinary course of business to
Persons who are not Affiliates of Borrower or any of its Subsidiaries;
(f) Cash Equivalents;
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(g) Investments in additional Hotels consistent with the Business and
the operation, prosecution, and expansion of the Business, and otherwise in
compliance with this Agreement; and
(h) Such other Investments as Required Lenders may approve in writing
in their sole discretion.
7.8 Affiliate Transactions. Borrower shall not, and shall not permit
any other Credit Party to, directly or indirectly, enter into any transaction
with, including, without limitation, the purchase, sale or exchange of property
or the rendering of any service to, any Affiliate of any Credit Party, except in
the ordinary course of and pursuant to the reasonable requirements of the Credit
Party's business, and upon fair and reasonable terms no less favorable to any
Credit Party than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person.
7.9 Additional Negative Pledges. Borrower shall not, and shall not
permit any other Credit Party, directly or indirectly, to create or otherwise
cause or suffer to exist or become effective, directly or indirectly, for the
benefit of any party other than Agent and the Lenders, (i) any prohibition or
restriction (including any agreement to provide equal and ratable security to
any Person in the event a Lien is granted to or for the benefit of any other
Person) on the creation or existence of any Lien upon the assets of any Credit
Party except in connection with Permitted New Indebtedness of the affected
Credit Party or (ii) any contractual obligation which may restrict or inhibit
Agent's rights or ability to sell or otherwise exercise its rights or remedies
under any of the Credit Documents after the occurrence of an Event of Default.
Borrower has disclosed to Agent that certain existing Leases or Management
Agreements restrict Borrower from granting Liens upon the related Hotels. Such
existing restrictions shall not be deemed to violate this Agreement. Borrower
represents and warrants that by entering into this Agreement, Borrower is not in
violation of such existing restrictions.
7.10 Additional Subsidiaries. Borrower shall not, and shall not permit
any Credit Party, directly or indirectly, by operation of law or otherwise, to,
merge with, consolidate with, acquire all or substantially all of the assets or
Capital Stock of, or otherwise combine with any Person, other than in connection
with (i) the creation of a Subsidiary after which Borrower and all of Borrower's
Subsidiaries remain in compliance with this Agreement in all material respects,
(ii) a Subsidiary merging with or consolidating into, or acquiring the assets
of, one or more other Subsidiaries, (iii) one or more Subsidiaries engaged in
the Business merging with or consolidating into Borrower, and (iv) any
transaction pursuant to which Borrower or a Subsidiary is the surviving and
continuing entity or succeeds to the business or pursuant to which the acquired
entity survives but becomes a Subsidiary of Borrower and Borrower is in
compliance with this Agreement in all material respects. Any newly formed
Subsidiary shall, simultaneously with its formation, join in the Guaranty unless
such Subsidiary does not satisfy the conditions to be a Guarantor.
7.11 Amendments. Borrower shall not, and shall not permit any other
Credit Party, without the prior written consent of Agent, to amend, supplement
or otherwise modify in any material respect, or waive or release any of its
material rights under or with respect to, (i)
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the Governing Documents of any Credit Party (except for Governing Documents of a
Subsidiary where the action being taken has no Material Adverse Effect), (ii)
any agreement, instrument or document (other than a Credit Document) evidencing
or relating to Indebtedness of any Credit Party (other than Indebtedness
entirely between or among Credit Parties), (iii) any Lease affecting any Hotel
in the Unencumbered Pool, or (iv) any Management Agreement affecting any Hotel
in the Unencumbered Pool (to the extent of any rights of Borrower or any other
Credit Party thereunder).
7.12 Dividends. Except to the extent necessary to permit Borrower to
maintain Borrower's status as a REIT, Borrower shall not pay or declare any
dividend or distribution to shareholders with respect to any Fiscal Year in
excess of the lesser of (a) Ninety-Five Percent (95%) of Funds from Operations
for such Fiscal Year or (b) One Hundred Percent (100%) of Cash Available for
Distribution for such Fiscal Year.
7.13 Certain Transactions. Borrower shall not consummate any purchase
or sale of assets, financing, or other transaction if, after giving effect to
such transaction, a Default or Event of Default will exist hereunder.
ARTICLE 8 EVENTS OF DEFAULT AND REMEDIES
8.1 Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) Failure to Pay. Borrower shall fail to pay any principal on any
Loan when due or Borrower shall fail to pay any interest or other amounts
payable under any Credit Document within five (5) Business Days after such
interest or other payment becoming due in accordance with the terms of the
applicable Credit Document.
(b) Breach of Certain Covenants. Any Credit Party shall fail to comply
with any covenant contained in Sections 5.24, 6.3 (as to Borrower only), 7.1,
7.2, 7.3, 7.4, 7.5, 7.6, 7.7, or 7.12 hereof.
(c) Breach of Representation or Warranty. Any material representation
or warranty made or deemed to be made by any Credit Party in this Agreement or
in any other Credit Document (or in any statement, certificate, or calculation
delivered or provided under this Agreement or any other Credit Document), shall
be false or misleading in any material respect when made or deemed to be made.
(d) Other Defaults. Any Credit Party shall fail to comply with any
provisions contained in this Agreement or any other Credit Document, other than
as set forth in Sections 8.1(a) and 8.1(b), and such failure shall continue for
thirty (30) days after its occurrence, or (if such failure is reasonably
curable) such additional period as may reasonably be required to cure the same.
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(e) Dissolution. Either (a) Borrower shall dissolve, wind up or
otherwise cease to do business, or (b) any Subsidiary shall do so and such
Subsidiary's dissolution, winding up, or cessation would have a Material Adverse
Effect.
(f) Insolvency Event. Any Credit Party shall become the subject of an
Insolvency Event, other than (in the case of a Subsidiary only) an Insolvency
Event that does not have a Material Adverse Effect.
(g) Change of Control. A Change of Control shall occur, including as a
result of death or disability of both (but not merely one) of the Managing
Trustees.
(h) Cross Default. A default or event of default shall occur (and
continue beyond any applicable grace period) under any note, agreement or
instrument evidencing any Indebtedness of Borrower or any Subsidiary (other than
the Obligations) in an aggregate principal amount in excess of $10,000,000,
which default or event of default permits the acceleration of the maturity of
such Indebtedness.
(i) Failure of Enforceability of Credit Documents; Security. Any
material covenant, agreement or obligation of any Credit Party contained in or
evidenced by any of the Credit Documents shall cease to be enforceable, or shall
be determined to be unenforceable, in accordance with its terms; or any Credit
Party shall deny or disaffirm in writing its obligations under any of the Credit
Documents.
(j) ERISA. Borrower or any Credit Party shall establish any Plan or
shall incur any liability under ERISA, without Agent's consent.
(k) Judgments. One or more judgments, writs, orders or warrants of
attachment or other similar process or decrees in an aggregate amount of
$10,000,000 or more shall be entered by a court or courts of competent
jurisdiction against any or all of the Credit Parties (other than any judgment,
writs, orders or warrants of attachment or other similar process as to which,
and only to the extent, a reputable insurance company has acknowledged coverage
thereof in writing) and (i) any such judgments, writs, orders or warrants of
attachment or other similar process or decrees shall not be stayed, discharged,
paid, bonded or vacated within 30 days or (ii) enforcement proceedings shall be
commenced by any creditor on any such judgments, writs, orders or warrants of
attachment or other similar process or decrees.
(l) Advisory Agreement. For any reason, the Advisory Agreement shall
cease to be in full force and effect.
(m) REIT Qualification. Borrower shall cease to qualify as a REIT.
8.2 Remedies. Upon the occurrence and during the continuance of an
Event of Default, Agent may, and upon the direction of Required Lenders shall,
do any or all of the following:
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(a) Acceleration. Upon the written request of the Required Lenders,
Agent shall declare all Obligations to be immediately due and payable (except
with respect to any Event of Default set forth in Section 8.1(f), in which case
all Obligations shall automatically become immediately due and payable without
the necessity of any request of the Required Lenders or notice or other demand
to Borrower) without presentment, demand, protest or any other action or
obligation of Agent or any Lender.
(b) Termination of Commitments. Upon the written request of the
Required Lenders, Agent shall, by written notice to Borrower, declare all the
Revolver Commitments to be terminated, whereupon all such Commitments shall
terminate immediately and, at all times thereafter, all Loans made by any Lender
pursuant to this Agreement shall be at such Lender's sole discretion.
(c) Other Remedies. Agent may exercise any other rights or remedies
afforded Agent or any Lender under any Credit Document or applicable law.
8.3 Right of Setoff. In addition to all rights of offset that Agent or
any Lender may have under applicable law or otherwise, upon the occurrence and
during the continuance of any Event of Default, and whether or not Agent or any
Lender has made any demand or the Obligations of any Credit Party have matured,
Agent and each Lender shall have the right to appropriate and apply to the
payment of the Obligations (in accordance with Section 8.5) all deposits and
other obligations then or thereafter owing by Agent or such Lender to such
Credit Party. Each Lender exercising such rights shall notify Agent thereof and
any amount received as a result of the exercise of such rights shall be shared
in accordance with Section 3.11.
8.4 No Marshalling; Deficiencies; Remedies Cumulative. The foregoing
remedies are not intended to be exhaustive and the full or partial exercise of
any of them shall not preclude the full or partial exercise of any other
available remedy under this Agreement, under any other Credit Document, at
equity or at law. During the pendency of any uncured Event of Default, Borrower
shall have no right to obtain any Borrowings hereunder and no right to consent
to or approve any matter that would otherwise have required Borrower's consent
under any Credit Document.
8.5 Application of Payments. Upon the occurrence and during the
continuance of an Event of Default, all amounts received by Agent pursuant to
any Credit Documents or the exercise of any rights or remedies thereunder or
under applicable law shall be applied in the following order: first, to the
payment of any Fees, expenses and other Obligations due and payable to Agent
under any of the Credit Documents, including any amounts advanced by Agent on
behalf of the Lenders; second, to the ratable payment of any Fees, expenses and
other Obligations due and payable to the Lenders under any of the Credit
Documents other than those Obligations specifically referred to in this Section
8.5; third, to the ratable payment of interest due on the Revolver Loans; and
fourth, to the ratable payment of principal due on the Revolver Loans.
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ARTICLE 9 THE AGENT
Other than Borrower's rights under Section 9.8, this Article 9 is for
the benefit of Agent and the Lenders only.
9.1 Appointment of Agent. Each Lender hereby designates Dresdner Bank
AG, New York and Grand Cayman Branches, as its agent and irrevocably authorizes
Agent to take action on its behalf under the Credit Documents, to exercise the
powers and perform the duties described therein, and to exercise such other
powers reasonably incidental thereto. Agent may perform any of its duties
through its agents or employees. In its capacity as Administrative Agent, Agent
(or any other Lender designated by Agent from time to time as Administrative
Agent) shall be entitled to the same protections, exculpations, and indemnities
as are set forth in this Article 9 with respect to Agent.
9.2 Nature of Duties of Agent. Agent has no duties or responsibilities
except those expressly set forth in the Credit Documents. Neither Agent nor any
of its officers, directors, employees or agents shall be liable for any action
taken or omitted hereunder or in connection herewith, except to the extent of
damages or losses directly caused by such Person's gross negligence or willful
misconduct. The duties of Agent shall be mechanical and administrative in
nature. Agent shall not have a fiduciary relationship to any Lender or any
participant of any Lender. Agent shall act only for the Lenders. Except for the
express obligations of Agent and the Lenders under this Agreement, neither Agent
nor any Lender assumes any obligation to any Credit Party. Neither Agent nor any
Lender assumes any agency or trust relationship with any Credit Party. Agent
shall have no liability for the acts or omissions of any subagents engaged or
selected by Agent, provided that Agent was not grossly negligent in the
engagement or selection of such subagents. Agent may deem and treat each Lender
as the holder of the Loan made by it for all purposes hereof. Agent shall not be
required to deal with any Person that has acquired a participation in any Loan.
9.3 Lack of Reliance on Agent. Independently and without reliance upon
Agent, each Lender has made and shall continue to make its own independent
investigation and analysis of the content and validity of the Credit Documents
and of the performance and creditworthiness of the Credit Parties thereunder.
Based on such documents and information as it has deemed appropriate, each
Lender has made its own credit analysis of Borrower and of whether to enter into
this Agreement. Each Lender shall, independently and without reliance upon Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any other Credit Document.
Agent assumes no responsibility and undertakes no obligation to make inquiry
with respect to such matters. Agent shall not be responsible to any Lender for
any recitals, statements, representations or warranties made by Borrower or any
officer, employee or official of Borrower or any other Person contained in this
Agreement or any other Credit Document, or in any certificate or other document
or instrument referred to or provided for it, or received by any of them under,
this Agreement or any other Credit Document, or for the value, legality,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Credit Document or any other document or instrument
referred to or provided for herein or therein, or for any failure by Borrower to
perform any obligations hereunder or thereunder.
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Agent shall not be required to keep itself informed as to Borrower's compliance
with this Agreement or any other Credit Document or any other document referred
to or provided for herein or therein or to inspect the properties or books and
records and Borrower. Except for notices, reports, and other documents and
information that this Agreement expressly requires Agent to furnish to the
Lenders, Agent shall have no duty or obligation to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of any Credit Party. Agent shall not be required to file this
Agreement, any other Credit Document, or any document or instrument referred to
herein or therein, for record, or to give notice to anyone of any of the
foregoing.
9.4 Certain Rights of Agent. Agent may request instructions from
Required Lenders at any time. If Agent requests instructions from Required
Lenders at such time with respect to any action or inaction, Agent shall be
entitled to await instructions from Required Lenders at such time before such
action or inaction. No Lender shall have any right of action based upon Agent's
action or inaction in response to instructions from Required Lenders at such
time. Any action taken or failure to act pursuant to instructions of Required
Lenders shall be binding on all Lenders and any other holder of all or any
portion of the Loan or any participation therein. Except for actions expressly
required of Agent under this Agreement, Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall have received
further assurances (which may include a requirement for cash collateral) of the
Lenders' indemnity obligations under this Article 9 in respect of any and all
liability and expense that Agent may incur by reason of taking or continuing to
take any such action.
9.5 Reliance by Agent. Agent may rely upon written or telephonic
communications it believes to be genuine and to have been signed, sent or made
by the proper person. Agent may obtain the advice of legal counsel (including,
for matters concerning Borrower, counsel for Borrower), independent public
accountants and other experts selected by it and shall have no liability for
action or inaction in good faith based upon such advice.
9.6 Indemnification of Agent. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent, to the
extent of such Lender's Pro Rata Share of the Loans, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever (including all Expenses) which may be imposed on,
incurred by or asserted against Agent in performing its duties here under or
otherwise relating to the Credit Documents, or any other documents contemplated
hereby or thereby (including any costs and expenses that Borrower is obligated
but fails to reimburse) or the enforcement of any of the terms hereof or
thereof. Notwithstanding the foregoing, no Lender shall be liable to Agent: (a)
to the extent of losses directly resulting from Agent's gross negligence or
willful misconduct; (b) with respect to any loss of principal or interest under
Agent's Loan; or (c) for any loss suffered by Agent or its Affiliate in
connection with any Interest Rate Agreement Agent may enter into with Borrower.
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9.7 Agent in its Individual Capacity. In its individual capacity, Agent
shall have the same rights and powers hereunder as any other Lender and may
exercise them as though it was not performing the duties of an agent for the
Lenders. The terms "Lenders," "Required Lenders," or any similar terms shall,
unless the context clearly otherwise indicates, include Agent in its individual
capacity. Agent and its Affiliates may accept deposits from, lend money to,
acquire equity interests in, and generally engage in any kind of banking, trust,
financial advisory or other business with Borrower or any Affiliate of Borrower
as if it were not performing the duties of an agent for the Lenders, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement and otherwise without having to account for the same to any
Lender.
9.8 Successor Agent.
(a) Agent may, upon five Business Days' notice to the Lenders and
Borrower, resign at any time by giving written notice thereof to the Lenders and
Borrower. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor Agent, which successor Agent, so long as it is reasonably
acceptable to Required Lenders and Borrower, shall be that Lender then holding
the greatest Commitment. If no successor Agent shall have been so appointed by
the Required Lenders and shall have accepted such appointment within thirty days
after notice of Agent's retirement or resignation, then the retiring Agent may,
on behalf of the Lenders, appoint one of the Lenders as successor Agent, which
successor Agent shall be subject to Borrower's reasonable approval.
(b) Upon its acceptance of the agency hereunder, a successor Agent
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations under this Agreement. The retiring Agent shall
continue to have the benefit of this Article 9 for any action or inaction while
it was Agent.
9.9 Intentionally Omitted.
9.10 Defaults. Agent shall not be deemed to have knowledge of the
occurrence of a Default or Event of Default unless Agent has received notice
from a Lender or from Borrower specifying such Default or Event of Default and
stating that such notice is a "Notice of Default." If Agent receives such a
notice, then Agent shall give prompt notice thereof to the Lenders. In addition
to Agent's right to take actions on its own accord as permitted under this
Agreement, Agent shall take such action with respect to a Default or Event of
Default as shall be directed by Required Lenders. Until Agent shall have
received such directions, Agent may act (or not act) as it deems advisable. In
no event shall Agent be required to take any action that it determines to be
contrary to law.
9.11 Anticipated Receipt of Funds. Unless Agent shall have received
notice from a Lender or from Borrower (either, as applicable, a "Payor") prior
to the date on which such Lender is to make payment hereunder to Agent of the
proceeds of a Loan or Borrower is to make payment to Agent, as the case may be
(either such payment, a "Required Payment"), which notice shall be effective
upon receipt, that Payor will not make the Required Payment in full to Agent,
Agent may assume that the Required Payment has been made in full to
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Agent on such date, and Agent in its sole and absolute discretion may, but shall
not be obligated to, in reliance upon such assumption, make the amount thereof
available to the intended recipient on such date. If and to the extent that
Payor shall not in fact have made the Required Payment in full to Agent, the
recipient of such payment (from Agent, made based upon Agent's inappropriate
reliance on Agent's receipt of the Required Payment) shall repay to Agent
forthwith on demand such amount made available to it together with interest
thereon, for each day from the date such amount was to be made available by
Agent until the date Agent recovers such amount, at the customary rate set by
Agent for the correction of errors among Lenders for three (3) Business Days and
thereafter at the Base Rate.
9.12 Miscellaneous. Notwithstanding anything to the contrary in this
Agreement, Agent shall not be bound by any waiver, amendment, supplement or
modification of this Agreement or any other Credit Document that affects its
duties, rights, or functions hereunder or thereunder unless Agent shall have
given its prior written consent thereto. Agent shall have no liabilities or
responsibilities to Borrower or any Lender on account of any Lender's (except
Agent's), or Borrower's failure to perform its obligations hereunder or under
any other Credit Document. Without consent of Borrower or any Lender, Agent may
at any time or from time to time transfer its functions as Agent hereunder to
any of its offices wherever located in the United States, provided that Agent
shall promptly notify Borrower and all Lenders thereof.
ARTICLE 10 MISCELLANEOUS
10.1 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF
THE STATE OF NEW YORK.
10.2 SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG ANY OR ALL OF THE
CREDIT PARTIES AND THE LENDERS OR AGENT, WHETHER SOUNDING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN;
PROVIDED, HOWEVER, THAT AGENT, ON BEHALF OF THE LENDERS, SHALL HAVE THE RIGHT,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST ANY OR ALL OF THE
CREDIT PARTIES AND/OR THEIR PROPERTY IN ANY LOCATION REASONABLY SELECTED BY
AGENT IN GOOD FAITH TO ENABLE AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. BORROWER AGREES THAT IT WILL
NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY
PROCEEDING BROUGHT BY AGENT. BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH AGENT HAS COMMENCED A PROCEEDING,
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INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
FORUM NON CONVENIENS.
10.3 CERTAIN DAMAGES. BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION
OR PROCEEDING TO WHICH AGENT OR ANY LENDER IS A PARTY ANY SPECIAL, EXEMPLARY,
PUNITIVE, OR CONSEQUENTIAL DAMAGES.
10.4 SERVICE OF PROCESS. BORROWER HEREBY IRREVOCABLY DESIGNATES
CORPORATION SERVICE COMPANY AS THE DESIGNEE, APPOINTEE AND AGENT OF BORROWER TO
RECEIVE, FOR AND ON BEHALF OF BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE
JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER CREDIT DOCUMENT.
10.5 JURY TRIAL. EACH OF BORROWER, AGENT, AND THE LENDERS HEREBY WAIVE
ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH
TRIAL.
10.6 LIMITATION OF LIABILITY. NEITHER AGENT NOR ANY LENDER SHALL HAVE
ANY LIABILITY TO ANY CREDIT PARTY (WHETHER SOUNDING IN TORT, CONTRACT, OR
OTHERWISE) FOR CONSEQUENTIAL DAMAGES SUFFERED BY ANY CREDIT PARTY IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH.
10.7 Delays. No delay or omission of Agent or the Lenders to exercise
any right or remedy hereunder shall impair any such right or operate as a waiver
thereof.
10.8 Notices. Except as otherwise provided herein, all notices and
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to Agent or any of the Lenders, then to its address
for notices set forth on Annex I or such other address as Agent or any Lender
may notify the other parties hereto from time to time (and in Agent's case, each
notice and each item of correspondence shall be delivered in multiple copies by
separate deliveries to each of the notice recipients designated for Agent in
Annex I), or by facsimile transmission, promptly confirmed in writing sent by
first class mail, to the appropriate telecopier number(s) set forth on Annex I
or to such other number(s) as Agent or any Lender may notify the other parties
hereto from time to time (again, in multiple separate transmissions to each of
the individuals identified in Annex I, and if to any Credit Party then to such
Credit Party at the following address or facsimile number, as applicable, or to
such other number as Credit Party may notify the other parties hereto from time
to time:
If to Borrower or any other Credit Party:
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400 Centre Street
Newton, Massachusetts 02158
Attention: Mr. Thomas M. O'Brien
(telecopy number: 617-969-5730)
(telephone number: 617-964-8389);
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Jennifer B. Clark, Esq.
(telecopy number: 617-338-2880)
(telephone number: 617-338-2406).
All such notices and correspondence shall be deemed given (i) if sent by
certified or registered mail, three Business Days after being delivered to the
U.S. Postal Service, (ii) if sent by overnight delivery service, when received
at the above stated addresses or when delivery is refused, and (iii) if sent by
telex or facsimile transmission, when receipt of such transmission is
acknowledged.
10.9 Assignments and Participations.
(a) Borrower Assignment. Borrower shall not assign this Agreement, or
any rights or obligations hereunder, without the prior written consent of Agent
and the Required Lenders.
(b) Lender Assignments. Each Lender may assign all or a portion of its
rights and obligations under this Agreement, the Notes and the other Credit
Documents, to any Eligible Assignee, upon execution and delivery to Agent, for
its acceptance and recording in the Register, of an Assignment and Assumption
Agreement, together with surrender of any Note or Notes subject to such
assignment and a processing and recordation fee of $3,000.00 payable to
Administrative Agent. No such assignment shall be for less than $5,000,000 of
the Commitments unless it is to another Lender or any Affiliate of the Lender
making such assignment or a Federal Reserve Bank or it constitutes the entire
remaining Commitment of the assigning Lender.
(c) Agent's Register. Agent shall maintain the Register and shall also
maintain a copy of each Assignment and Assumption Agreement delivered to and
accepted by it and modify the Register to give effect to each Assignment and
Assumption Agreement. Upon its receipt of each Assignment and Assumption
Agreement and surrender of the affected Note or Notes, Agent will give prompt
notice thereof to Borrower and deliver to Borrower a copy of the Assignment and
Assumption Agreement and the surrendered Note or Notes. Within five (5) Business
Days after its receipt of such notice, Borrower shall execute and deliver to
Agent a new Note or Notes to the order of the assignee in the amount of the
Revolver Commitments assumed by it and to the assignor in the amount of the
Revolver Commitment retained by it, if any. Such new Note or Notes shall
re-evidence the Indebtedness
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outstanding under the surrendered Note or Notes and shall be dated as of the
Closing Date. Agent shall be entitled to rely upon the Register exclusively for
purposes of identifying the Lenders hereunder.
(d) Lender Participations. Each Lender may sell participations (without
the consent of Agent, Borrower or any other Person) to one or more Persons in or
to all or a portion of its rights and obligations under this Agreement, the
Notes and/or the other Credit Documents. Notwithstanding a Lender's sale of a
participation interest, its obligations hereunder shall remain unchanged.
Borrower, Agent, and the other Lenders shall continue to deal solely and
directly with such Lender. No participant shall have rights to approve any
amendment or waiver of this Agreement except to the extent such amendment or
waiver would (i) increase the Revolver Commitment of the Lender from whom the
participant purchased its participation interest; (ii) reduce the principal of,
or rate or amount of interest on the Loans subject to such participation, (iii)
postpone any date fixed for any payment of principal of, or interest on, the
Loans subject to the participation interest, or (iv) release any guarantor of
the Obligations, except when otherwise permitted hereunder. In the case of any
such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights against
such Lender in respect of such participation to be those set forth in the
agreement executed by such Lender in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Lender had not sold such participation.
(e) Estoppels. In connection with Agent's initial syndication of the
Loan, Borrower shall at Borrower's expense diligently endeavor to obtain
estoppel certificates from all Lessees to the extent such certificates are
required to be delivered pursuant to the applicable Leases. Borrower shall not
be obligated to commence litigation to enforce the obligations of Lessees to
deliver estoppel certificates.
10.10 Confidentiality. Each Lender agrees that it will use reasonable
efforts not to disclose without the prior consent of Borrower any information
with respect to any Credit Party which is furnished pursuant to or in connection
with this Agreement and which is designated by Borrower to the Lenders in
writing as confidential; provided, however, that any Lender may disclose any
such information (a) to its Affiliates, employees, auditors, advisors or counsel
or to Agent or another Lender, (b) as has become generally available to the
public other than by means of a breach of this Section 10.10 by such Lender, (c)
as may be required or appropriate in any report, statement or testimony
submitted to any Governmental Authority having or claiming to have jurisdiction
over such Lender, (d) as may be required or appropriate in response to any
summons or subpoena or in connection with any litigation, (e) in order to comply
with any Requirement of Law, and (f) to any prospective or actual transferee or
participant in connection with any contemplated transfer or participation of any
of the Notes or Commitments or any interest therein by such Lender, provided,
that such transferee or participant agrees to be bound by the provisions of this
Section 10.10 as if it were a Lender.
10.11 Reimbursement of Expenses; Indemnification. Whether or not the
transactions contemplated in this Agreement are consummated:
65
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(a) Borrower shall, upon demand, pay all Expenses of Agent;
(b) Borrower shall, upon demand, pay to the Agent and any and all
Lenders all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by such
Person in (i) enforcing its rights under or in respect of this Agreement, the
other Credit Documents or any other agreement, instrument or document now or
hereafter executed and delivered in connection herewith or therewith, (ii) in
collecting the Loans or any other Obligations, and (iii) in obtaining any legal,
accounting or other advice in connection with any of the foregoing; and
(c) Borrower shall indemnify and does hereby agree to defend and hold
harmless Agent and each of the Lenders and their respective shareholders,
directors, officers, employees, agents, advisors, counsel and Affiliates (each,
an "Indemnified Person" and, collectively, the "Indemnified Persons") from and
against any and all losses, claims, damages, liabilities, deficiencies,
judgments or expenses incurred by any of them (except to the extent that it is
finally judicially determined to have resulted from the negligence or willful
misconduct of the Indemnified Person seeking indemnification) arising out of or
by reason of (x) any litigation, investigations, claims or proceedings which
arise out of or are in any way related to (i) this Agreement or any other Credit
Document or the transactions contemplated hereby or thereby, (ii) any actual or
proposed use by Borrower of the proceeds of the Loans or (iii) Agent's or the
Lenders' entering into this Agreement, the other Credit Documents or any other
agreements, instruments and documents relating hereto, including, without
limitation, amounts paid in settlement, court costs and the reasonable fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding or any advice rendered in connection with any
of the foregoing, (y) any remedial or other action taken by Borrower or any of
the Lenders in connection with compliance by Borrower or any of its
Subsidiaries, or any of their respective properties, with any foreign, federal,
state or local environmental laws, acts, rules, regulations, orders, directions,
ordinances, criteria or guidelines, and (z) any violation of, noncompliance with
or liability under any Environmental Law applicable to the operations and/or
conduct of any Credit Party or its properties, whether owned or leased (each, a
"Property"); provided, however, that Borrower shall have no obligation hereunder
to any Indemnified Person with respect to indemnified liabilities arising from
the gross negligence or willful misconduct of such Indemnified Person.
(d) Notwithstanding anything to the contrary contained in paragraph (c)
of this Section 10.10, in all such litigations, investigations, claims,
proceedings or actions, or the preparation therefore, the Indemnified Persons
shall be entitled to select their own counsel.
10.12 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement, any part of the Disclosure Schedule or any part of any other
Credit Document shall be effective unless in writing and signed by Agent and
Required Lenders, except that:
(a) the consent of all the Lenders (but only those Lenders with
Obligations being directly affected, in the case of clauses (ii) and (iii)) is
required to: (i) increase the Revolver Commitments; (ii) reduce the principal
of, or interest on, any or all of the Notes or any Fees hereunder (other than
Fees that are exclusively for the account of Agent); (iii) postpone any
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<PAGE>
date fixed for any payment in respect of principal of, or interest on, any or
all of the Notes or any Fees hereunder; (iv) change the percentage of the
Revolver Commitments, or any minimum requirement necessary for the Lenders or
Required Lenders to take any action hereunder; or (v) amend or waive this
Section 10.12(a), or change the definition of Required Lenders;
(b) if the interest rate or scheduled repayments of the Loan are being
increased (except as expressly set forth herein) or the date of any scheduled
repayment is being shortened or accelerated, the consent of Required Lenders of
the facilities taken as a whole and the consent of Required Lenders shall be
required in connection therewith;
(c) the consent of Agent shall be required for any amendment, waiver or
consent affecting the rights or duties of Agent under any Credit Document, in
addition to the consent of the Lenders otherwise required by this Section 10.12;
and
(d) the consent of Borrower shall be required for any amendment, waiver
or consent affecting the rights or duties of Borrower under any Credit Document,
in addition to the other consents required by this Section 10.12, provided, that
the Lenders and Agent may modify or waive, as among themselves, any of the
provisions of Article 9, provided that (without Borrower's consent) no such
modification or waiver made by the Lenders and Agent shall impose any
obligations upon Borrower or limit Borrower's rights.
Borrower and the Lenders hereby authorize Agent to modify this Agreement by
unilaterally amending or supplementing Annex I to reflect assignments of the
Revolver Commitments.
10.13 Counterparts and Effectiveness. This Agreement and any waiver of
amendment hereto may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. This Agreement shall become effective on
the date on which all of the parties hereto shall have signed a copy hereof
(whether the same or different copies) and shall have delivered the same to
Agent or, in the case of the Lenders, shall have given to Agent written,
telecopied or telex notice (actually received) at such office that the same has
been signed and mailed to it.
10.14 Severability. In case any provision in or obligation under this
Agreement, any or all of the Notes or the other Credit Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby.
10.15 Maximum Rate. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any other Credit Document, Borrower, Agent and
the Lenders hereby agree that all agreements among them under this Agreement and
the other Credit Documents, whether now existing or hereafter arising and
whether written or oral, are expressly limited so that in no contingency or
event whatsoever shall the amount paid, or agreed to be paid, to Agent or any
Lender for the use, forbearance, or detention of the money loaned to Borrower
and evidenced hereby or thereby or for the performance or
67
<PAGE>
payment of any covenant or obligation contained herein or therein, exceed the
Highest Lawful Rate. If due to any circumstance whatsoever, fulfillment of any
provisions of this Agreement or any of the other Credit Documents at the time
performance of such provision shall be due shall exceed the Highest Lawful Rate,
then, automatically, the obligation to be fulfilled shall be modified or reduced
to the extent necessary to limit such interest to the Highest Lawful Rate, and
if from any such circumstance any Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to Agent or any Lender for the use, forbearance,
or detention of the Obligations and other Indebtedness of Borrower to Agent or
any Lender, to the extent permitted by applicable law, shall be amortized,
prorated, allocated and spread throughout the full term of such Indebtedness,
until payment in full thereof, so that the actual rate of interest on account of
all such Indebtedness does not exceed the Highest Lawful Rate throughout the
entire term of such Indebtedness. The terms and provisions of this Section 10.15
shall control every other provision of this Agreement and each Note and all
other agreements among Borrower, Agent and the Lenders.
10.16 Entire Agreement; Successors and Assigns. This Agreement and the
other Credit Documents constitute the entire agreement among Borrower, Agent,
and the Lenders, supersede any prior agreements among them, and shall bind and
benefit Borrower, Agent and the Lenders and their respective successors and
permitted assigns.
10.17 Currency Translation. Unless specifically provided otherwise, all
dollar figures and dollar calculations under this Agreement or the other Credit
Documents are denominated in Dollars (unless otherwise specifically stated) and
all loans made hereunder will be made in Dollars. The foreign currency amount of
all totals and subtotals submitted by or on behalf of the Credit Parties to any
Lender or Agent will be converted into Dollars at the Prevailing Exchange Rate
on the date prior to submission to Agent or such Lender, or, in the case of
financial statements, in accordance with GAAP. All payments made by any Credit
Party or applied by Agent or any Lender to the Obligations shall be first
converted into Dollars at the Prevailing Exchange Rate on the date of payment or
application (if not already in Dollars) and then credited against the
Obligations.
10.18 Foreign Judgments. If for the purposes of obtaining or enforcing
a judgment in any court in any jurisdiction it becomes necessary to convert into
the currency of the country giving such judgment (the "Judgment Currency") an
amount due hereunder in Dollars, then the date of such conversion shall be known
as the "Conversion Date." If there is a change in the rate of exchange between
the Judgment Currency and Dollars occurring between the Conversion Date and the
date of actual receipt of the amount due hereunder or under such judgment, the
applicable Credit Party will, notwithstanding such judgment, to the extent
permitted by law, pay all such additional amounts as may be necessary to ensure
the amount paid and received in the Judgment Currency when converted at the rate
of exchange prevailing on the date of such receipt will produce the amount then
due in Dollars. The obligation to make such additional payment shall constitute
a separate and independent
68
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obligation of such Credit Party and shall not merge with any judgment or any
partial payment or enforcement of payment. The term "rate of exchange" used
herein shall include any premiums and costs payable in connection with the
conversion being effected.
10.19 Acknowledgments. Borrower hereby acknowledges that:
(a) It has been advised by counsel in the negotiation,
execution, and delivery of this Agreement and the other Credit Documents;
(b) Neither Agent nor any Lender has any fiduciary
relationship with or fiduciary duty to Borrower arising out of or in connection
with this Agreement or any of the other Credit Documents, and the relationship
between Agent and the Lenders on the one hand, and Borrower, on the other hand,
in connection herewith or therewith is solely that of debtor and creditor; and
(c) No joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among Borrower and the Lenders or between Borrower and
Agent.
10.20 Approvals. In all cases where the consent, approval, or any
discretionary concurrence of Agent and/or the Lenders and/or Borrower is
required, such consent shall not be unreasonably withheld, delayed or
conditioned, subject to the following provisions:
(a) Agent and the Lenders may withhold their consent for any
reason or no reason (and may be arbitrary, capricious, and unreasonable in
withholding consent) with respect to any of the following matters and any
matter(s) directly or indirectly related thereto: (i) any Change of Control,
(ii) replacement or substitution of both Managing Trustees, (iii) any change in
the Business or scope of Borrower's permitted Indebtedness or Investments or the
making of any Restricted Payments not otherwise permitted by this Agreement,
(iv) any matter that, in Agent's reasonable judgment, could or would cause a
Material Adverse Effect, (v) replacement of Investment Manager, and (vi) the
granting of any waivers or forbearances under any Credit Documents.
(b) A Person shall be deemed to be "reasonable" by
demonstrating the existence of any rational basis for such Person's
determination, disapproval, action or inaction, based upon such considerations
and factors as such Person shall have determined relevant, each given such
weight (if any) as such Person shall have determined. A Person shall not be
obligated to demonstrate that: (a) their determination, disapproval, action or
inaction is consistent with the action that an institutional lender or real
estate investor would normally or typically take in the same circumstances; (b)
there is no rational basis for the action such Person has disapproved; (c) such
Person has considered all relevant or applicable considerations or factors; or
(d) some other course of action, other than the course of action being
disapproved by such Person, would be more appropriate under the circumstances.
(c) If a Person has covenanted to be "reasonable" and, in
violation of such covenant, withholds, delays, or conditions consent or approval
as to any matter, then as the sole remedy for such wrongful withholding, delay,
or conditioning, any Person aggrieved by
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such act or omission shall be entitled to seek injunctive relief compelling such
Person to grant the consent in question or deeming such consent to have been
granted. Such injunctive relief shall constitute the sole remedy with respect to
such consent. Each party specifically waives any right to damages or any offset,
claim, defense, or counterclaim against such party's obligations under the
Credit Documents on account of any such wrongful withholding, delay, or
conditioning of consent.
10.21 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST OF BORROWER,
DATED MAY 12, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
BORROWER. ALL PERSONS DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
BORROWER:
HOSPITALITY PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ John G. Murray
----------------------------------
John G. Murray, President
AGENT:
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH, as Agent
By: /s/ Michael A. Seton
----------------------------------
Michael A. Seton, Assistant Vice
President
By: /s/ Johannes Boeckmann
----------------------------------
Johannes Boeckmann, Vice President
LENDERS:
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH, as a Lender
By: /s/ Michael A. Seton
----------------------------------
Michael A. Seton, Assistant Vice
President
By: /s/ Johannes Boeckmann
----------------------------------
Johannes Boeckmann, Vice President
<PAGE>
INDEX OF DEFINED TERMS
$ .........................................................7
Acquisition Cost .........................................................1
Adjusted Eurodollar Rate...................................................2
Administrative Agent.......................................................2
Administrative Fee.........................................................2
Advisory Agreement.........................................................2
Affiliate .........................................................2
Agent .........................................................1
Agreement .........................................................1
Applicable Margin .........................................................2
Approved Bank .........................................................5
Arranger .........................................................3
Assigned Value .........................................................3
Assignment and Assumption
Agreement................................................3
Auditors .........................................................3
Bankruptcy Code .........................................................3
Base Rate .........................................................3
Base Rate Loan .........................................................3
Base Rent .........................................................3
Benefit Plan .........................................................4
Borrower ......................................................1, 4
Borrowing .........................................................4
Business .........................................................4
Business Day .........................................................4
Capital Expenditures.......................................................4
Capital Lease .........................................................4
Capital Stock .........................................................4
Cash Available for Distribution............................................4
Cash Equivalents .........................................................4
Casualty Loss .........................................................5
Change of Control .........................................................5
Closing Date ......................................................1, 5
Closing Documents List.....................................................5
Code .........................................................5
Commitment Fee .....................................................5, 26
Common Stock .........................................................5
Compliance Certificate.....................................................5
Consolidated Debt Service..................................................6
Consolidated EBITDA........................................................6
Consolidated Indebtedness..................................................6
Consolidated Interest Expense..............................................6
Consolidated Secured Debt..................................................6
Consolidated Total Assets..................................................6
Contingent Obligation......................................................6
Control .........................................................7
Conversion Date. ........................................................68
Credit Documents .........................................................7
Credit Parties .........................................................7
Credit Party .........................................................7
D&P .........................................................7
Debt Service Coverage Ratio................................................7
Default .........................................................7
Default Rate .....................................................7, 26
Defaulting Lender .........................................................7
Defaulting Lender.........................................................24
Disclosure Schedule........................................................7
Dollar Equivalent .........................................................7
Dollars .........................................................7
Due Diligence Reports......................................................7
Eligible Assignee .........................................................8
Environmental Affiliate....................................................8
Environmental Approvals....................................................8
Environmental Claim........................................................8
Environmental Laws.........................................................8
ERISA .........................................................9
ERISA Affiliate .........................................................9
Eurodollar Loan .........................................................9
Eurodollar Rate .........................................................9
Event of Default .........................................................9
Excess Floating Rate Exposure..............................................9
Expenses .........................................................9
Federal Funds Rate........................................................10
Federal Reserve ........................................................10
Fees ........................................................10
<PAGE>
FF&E Deposits ........................................................10
Financial Statements......................................................10
Fiscal Year ........................................................10
Fitch ........................................................10
Former Mortgages ........................................................42
Funds from Operations.....................................................10
GAAP ........................................................11
Governing Documents.......................................................11
Government Obligations.....................................................4
Governmental Authority....................................................11
Group ........................................................11
Guarantor ........................................................11
Guaranty ........................................................11
Herein, ........................................................22
Hereof, ........................................................22
Hereunder ........................................................22
Highest Lawful Rate.......................................................11
Hotel ........................................................11
Hotel Net Cash Flow.......................................................11
Hotel Pool ........................................................12
Including ........................................................22
Indebtedness ........................................................12
Indemnified Person........................................................66
Indemnified Persons.......................................................66
Insolvency Event ........................................................12
Intellectual Property.....................................................12
Interest Coverage Ratio...................................................12
Interest Period ........................................................12
Interest Rate Agreement...................................................13
Interest Rate Cap ........................................................13
Investment ........................................................13
Investment Grade Rating...................................................13
Investment Manager........................................................13
Investment Manager's Subordination
Agreement...............................................13
IRS ........................................................13
Judgment Currency ....................................................13, 68
Last Financial Statement Date.............................................13
Lease ........................................................13
Lender .....................................................1, 24
Lenders ........................................................60
Lessee ........................................................14
Leverage Ratio ........................................................14
Lien ........................................................14
Loan Account ....................................................14, 26
Loans ........................................................14
Management Agreement......................................................14
Management Fee ........................................................14
Manager ........................................................14
Mandatory Redeemable Obligation...........................................14
Margin Stock ........................................................15
Material Adverse Effect...................................................15
Material Contract ........................................................15
Material Lessee ........................................................15
Materials of Environmental Concern........................................15
Maturity Date ........................................................15
Moody's ........................................................15
Multiemployer Plan........................................................15
Non-Defaulting Lender.....................................................15
Non-Defaulting Lenders....................................................24
Non-Excluded Taxes........................................................32
Non-Pool Hotel ........................................................15
Note ........................................................15
Notice of Borrowing...................................................16, 23
Notice of Continuation................................................16, 28
Notice of Conversion..................................................16, 28
Obligations ........................................................16
OECD Nation ........................................................16
Other Taxes ........................................................32
<PAGE>
Payor ........................................................61
PBGC ........................................................16
PCB's ........................................................40
Permitted Liens ....................................................16, 52
Permitted Mortgage Investments............................................16
Permitted New Indebtedness................................................17
Permitted Transaction Amount..............................................17
Person ........................................................17
Plan ........................................................17
Pool Hotel ........................................................17
Prevailing Exchange Rate..................................................17
Pricing Parameter ........................................................17
Principals ........................................................14
Pro Rata Share ........................................................18
Property ........................................................66
Qualified Counterparty....................................................18
Rate of exchange ........................................................68
Rating ........................................................18
Rating Agency ........................................................18
Recourse Exposure Amount..................................................18
Register ........................................................18
REIT ........................................................18
Reportable Event ........................................................18
Required Lenders ....................................................19, 60
Required Payment ........................................................61
Requirement of Law........................................................19
Reset Date ........................................................19
Restricted Payments...................................................19, 53
Retiree Health Plan.......................................................19
Revolver Commitment.......................................................19
Revolver Loans ....................................................19, 23
Revolver Maturity Date....................................................19
Revolver Note ........................................................19
S&P ........................................................19
SEC Filing ........................................................19
Subsidiary ........................................................19
Ten-Year Treasury Rate....................................................20
Termination Event ........................................................20
Total Commitments ........................................................20
Type ........................................................20
U.S. ........................................................22
UCC ........................................................20
Unencumbered Pool ........................................................20
Wholly-Owned Subsidiary...................................................22
Year 2000 Problem ........................................................22
<PAGE>
ANNEX I
LENDERS AND COMMITMENT AMOUNTS
NOTE: ANY NOTICE TO AGENT MUST BE DELIVERED SEPARATELY
TO ALL NOTICE RECIPIENTS DESIGNATED BELOW OR SUCH
REPLACEMENT NOTICE RECIPIENTS AS AGENT MAY DESIGNATE BY
WRITTEN NOTICE FROM TIME TO TIME.
Name and Address of Lender Revolver Commitment
- -------------------------- -------------------
Dresdner Bank AG, New York Branch and
Grand Cayman Branch $250,000,000
75 Wall Street
New York, New York 10005
Attn.: Mr. Michael A. Seton, 25th Floor
Fax No: (212) 429-2781
Mr. Gary Jermansky, 33rd Floor
Fax No.: (212) 429-2130
Mr. Ronald Rapp, 24th Floor
Fax No.: (212) 429-2793
<PAGE>
ANNEX II
LIST OF CLOSING DOCUMENTS
US$250,000,000
REVOLVING CREDIT AGREEMENT
among
HOSPITALITY PROPERTIES TRUST,
as Borrower,
THE INSTITUTIONS PARTY THERETO
AS LENDERS
and
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH,
as Agent
Dated as of March 19, 1998
L&W File No.: 021810-0055
<PAGE>
KEY
Advisors REIT Management and Research, Inc., a Delaware corporation.
Agent Dresdner Bank AG, New York Branch and Grand Cayman Branch,
as Agent
HPT Hospitality Properties Trust, a Maryland real estate
investment trust
Lenders The institutions party to the Credit Agreement as Lenders
L&W Latham & Watkins, counsel to Agent
S&W Sullivan & Worcester LLP, counsel to HPT
Definitions. Capitalized terms used and not otherwise defined herein have the
meanings ascribed to them in the Credit Agreement of which this Annex II is a
part.
II-2
<PAGE>
<TABLE>
<CAPTION>
DOCUMENT RESPONSIBLE
<S> <C>
1. DOCUMENTS RELATING TO THE REVOLVING CREDIT AGREEMENT
1.1 Revolving Credit Agreement among HPT, the Lenders and Agent, with
the following Annexes, Exhibits and Schedules attached: L&W
a. Annex I List of Lenders and Commitment Amounts
b. Annex II List of Closing Documents
c. Annex III Pricing Grid
d. Exhibit A Form of Revolver Note
e. Exhibit B Form of Assignment and Assumption Agreement
f. Exhibit C Form of Compliance Certificate
g. Exhibit D Form of Notice of Borrowing
h. Exhibit E Form of Notice of Continuation/Conversion
i. Exhibit F Form of Investment Manager's Subordination Agreement
j. Exhibit G Form of Register
k. Schedule A Disclosure Schedule HPT
1.2 Revolver Note executed by HPT in favor of Agent. L&W
1.3 Subsidiaries' Guarantee by each Subsidiary in favor of Agent. L&W
1.4 Investment Manager's Subordination Agreement by HPT and Advisors
in favor of Agent. L&W
1.5 Environmental Indemnity Agreement by HPT and each Subsidiary in
favor of Agent. L&W
1.6 Notice of Borrowing by HPT to Agent. HPT
1.7 Closing Date Compliance Certificate executed by Chief Financial
Officer of HPT. HPT
1.8 Solvency Certificate by Chief Financial Officer of HPT to Agent and
the Lenders. L&W
1.9 Copies of Material Contracts referred to in Section 5.20 of the
Credit Agreement. HPT
1.10 Financial Statements of HPT referred to in Section 5.8 of the
Credit Agreement: HPT
a. Fiscal Year 1995 (audited)
b. Fiscal Year 1996 (audited)
c. Fiscal Year 1997 up to September 30, 1997 (unaudited)
d. Closing Date Balance Sheet (pro forma)
II-3
<PAGE>
<CAPTION>
DOCUMENT RESPONSIBLE
<S> <C>
1.11 Engagement Letter Agreement between Dresdner, Kleinwort
Benson North America LLC and HPT Agent
1.12 Accounting Review Report Agent
1.13 Insurance Review Report Agent
1.14 Sources and Uses of Funds HPT
1.15 Wire Transfer Instructions HPT
2. REAL PROPERTY
2.1 Copies of all Ground Leases for Hotels HPT
2.2 Copies of Lease for each Hotel HPT
2.3 Copies of Management Agreement for each Hotel HPT
2.4 Summary of all Hotel Ground Leases L&W
2.5 Summary of all Hotel Leases L&W
2.6 Summary of all Hotel Management Agreements L&W
2.7 Payoff letter(s) from DLJ HPT
2.8 Copies of Contracts of Purchase and Sale for [4 sites] HPT
3. OPINION LETTERS
3.1 Opinion of S&W, counsel to HPT, addressed to Agent and the
Lenders. S&W
4. CORPORATE DOCUMENTS
4.1 Certificate of the Secretary of HPT certifying as to certain HPT
organizational matters, including incumbency, executed by Secretary
of HPT, with the following exhibits attached:
a. Certificate of Incorporation or Declaration of Trust of HPT,
as amended to date
b. By-laws of HPT, as amended to date
c. Relevant resolutions of the Board of Trustees of HPT.
II-4
<PAGE>
<CAPTION>
DOCUMENT RESPONSIBLE
<S> <C>
4.2 Certificate of the Secretary of each Subsidiary certifying as to HPT
certain corporate matters, including incumbency, executed by
Secretary of such Subsidiary, with the following exhibits attached:
a. Certificate of Incorporation of such Subsidiary, as amended to
date
b. By-laws of such Subsidiary, as amended to date
c. Relevant resolutions of the Board of Directors of such Subsidiary.
4.5 Certificates of Good Standing with respect to each of HPT and each HPT
Subsidiary, from:
a. Delaware, with respect to HPTCY Corporation, HPTMI
Corporation, HPTRI Corporation, HPTSLC Corporation, HPTWN
Corporation and Hospitality Properties Mortgage
Acceptance Corp.
b. Maryland, with respect to HPT, HPT CW Properties Trust,
HPTCY Properties Trust, HPTMI Properties Trust, HPTMI II
Properties Trust, HPTSHC Properties Trust, HPTSLC
Properties Trust and HPT SUITE Properties Trust
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
ANNEX III: PRICING GRID
If a Rating Is in Effect for Borrower Then Such Rating If No Rating Is in Effect for Borrower, then
Shall be the Pricing Parameter, as Follows Borrower's Leverage Ratio Shall be the
Pricing Parameter, As Follows
Rating Leverage Ratio
BBB+/Baa BBB/Baa2 BBB-/Baa3 Below Below 30% 30% or 40% or
1 or Better or Better or Better BBB-/Baa3 Higher but Higher
Below 40%
<S> <C> <C> <C> <C> <C> <C> <C>
Applicable Margin
for Base Rate Loans 0% 0% 0% 0% 0% 0% .10%
Applicable Margin
for Eurodollar Loans .875% 1.00% 1.125% 1.25% 1.25% 1.35% 1.50%
Annualized Commitment Fee .125% .15% .15% .20% .20% .20% .25%
<FN>
NOTES
1. Borrower shall be entitled to the most favorable Applicable Margin
and Commitment Fee for which Borrower qualifies at time of determination.
2. Bold column shows pricing at closing. On first Reset Date, Pricing
Parameters will be redetermined and, subject to this Agreement, will increase,
decrease, or stay constant, as applicable, based on Pricing Parameters from time
to time.
3. Annualized commitment fee is payable each Fiscal Quarter based on
average undrawn Commitments during that quarter.
</FN>
</TABLE>
<PAGE>
EXHIBIT A
REVOLVER NOTE
$_____________ New York, New York
_______ __, ____
FOR VALUE RECEIVED, the undersigned, Hospitality Properties
Trust, a Maryland real estate investment trust ("Maker"), promises to pay to
______________________ ("Lender") or order, at its offices located at
_________________________ (or at such other place as Agent shall notify Maker in
writing from time to time), the principal amount of ___________________ Dollars
($____________) or such lesser amount of the Revolver Loans (as defined in the
Credit Agreement referred to below) made or maintained by Lender as is
outstanding from time to time, with interest thereon from the date each such
Revolver Loan is made on the unpaid principal balance under this Revolver Note
(this "Note") payable at the rates and at the times set forth in that certain
Revolving Credit Agreement dated as of March 19, 1998 among Maker, Lender, the
other lenders party thereto and Dresdner Bank AG, New York Branch and Grand
Cayman Branch, as agent (as amended, modified and supplemented from time to
time, the "Credit Agreement"), including without limitation default interest as
set forth in Section 3.1(d) of the Credit Agreement. Capitalized terms used and
not otherwise defined herein shall have the meanings given to such terms in the
Credit Agreement. The principal amount under this Note shall be due and payable
on the terms set forth in the Credit Agreement, but in any event on or prior to
the Revolver Maturity Date.
This Note is secured by certain Credit Documents and is one of
the "Revolver Notes" referred to in the Credit Agreement. Reference is hereby
made to the Credit Agreement for a description of the nature and extent of the
security for this Note and the rights with respect to such security of the
holder of this Note.
This Note is subject to mandatory prepayment as provided in
Section 3.6 of the Credit Agreement and prepayment at the option of Maker as
provided in Section 3.5 of the Credit Agreement. Principal and interest shall be
payable, without defense, set off or counterclaim, in lawful money of the United
States of America in immediately available funds and otherwise in accordance
with the terms of the Credit Agreement. Each payment under this Note shall be
applied as provided in the Credit Agreement.
Upon the occurrence and during the continuance of an Event of
Default, the unpaid balance of the principal amount of this Note may become, or
may be declared to be, due and payable in the manner, upon the conditions and
with the effect provided in the Credit Agreement.
<PAGE>
The terms of this Note are subject to amendment only in the
manner provided in the Credit Agreement.
Maker promises to pay all reasonable fees, costs and expenses
incurred in the collection and enforcement of this Note. Maker hereby waives
diligence, presentment, protest, demand and notice of every kind (except such
notices as may be required under the Credit Agreement or the other Credit
Documents) and, to the full extent permitted by law, the right to plead any
statute of limitations as a defense to any demand hereunder.
This Note shall be governed by, and construed and interpreted
in accordance with, the internal laws of the State of New York without giving
effect to the conflict of law provisions thereof.
THE DECLARATION OF TRUST OF MAKER, DATED MAY 12, 1995, A COPY
OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY
FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE
OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS TO THE
TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF
MAKER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, MAKER. ALL PERSONS DEALING WITH MAKER, IN ANY
WAY, SHALL LOOK ONLY TO THE ASSETS OF MAKER FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, Maker has caused this Note to be duly
executed the day and year first above written.
HOSPITALITY PROPERTIES TRUST,
a Maryland real estate investment trust
By: _________________________
Name:
Title:
<PAGE>
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is entered
into as of the date set forth in item 3 of Annex I hereto between
_______________ ("Assignor") and ______________________ ("Assignee"). Reference
is made to the credit agreement described in Item 2 of Annex I hereto (as
amended, modified and supplemented from time to time, the "Credit Agreement").
Capitalized terms used and not otherwise defined herein have the meanings given
them in the Credit Agreement.
1. Assignor hereby sells and assigns to Assignee, and Assignee
hereby purchases and assumes from Assignor, that interest in and to all of
Assignor's rights and obligations under the Credit Agreement as of the date
hereof which represents the percentage interest specified in Item 4 of Annex I
of all outstanding rights and obligations under the Credit Agreement relating to
the facility listed in Item 4 of Annex I, including without limitation, such
interest in Assignor's Revolver Commitment (if applicable) and the Loans owing
to Assignor relating to such facility. After giving effect to such sale and
assignment Assignee's Revolver Commitment will be as set forth in Item 4 of
Annex I.
2. Assignor (i) represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Hospitality Properties Trust, a Maryland real estate
investment trust ("Borrower") or the performance or observance by Borrower of
any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto.
3. Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
therein and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Agreement; (ii)
agrees that it will, independently and without reliance, as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is eligible
as an assignee under the terms of the Credit Agreement; (iv) appoints and
authorizes Dresdner Bank AG, New York Branch and Grand Cayman Branch, to take
such action as agent (in such capacity, "Agent") on its behalf and to exercise
such powers under the Credit Agreement and the other Credit Documents as are
delegated to Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) if Assignee
is organized under the laws of a jurisdiction outside the United States,
attaches the forms prescribed by the Internal Revenue Service of the United
States certifying as to Assignee's
<PAGE>
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to Assignee under the Credit
Agreement or such other documents as are necessary to indicate that all such
payments are subject to such rates at a rate reduced by an applicable tax
treaty.
4. Following the execution of this Agreement by Assignor and
Assignee, it will be delivered to Agent for recording by Agent. The effective
date of this Assignment shall be the first date on which both Assignor and
Assignee shall have executed this Agreement and shall have received the consent
of Agent, unless otherwise specified in Item 5 of Annex I (the "Settlement
Date").
5. Upon such acceptance and recording by Agent, as of the
Settlement Date (i) Assignee shall be a party to the Credit Agreement and, to
the extent provided in this Agreement, have the rights and obligation of a
Lender thereunder and (ii) Assignor shall, to the extent provided in this
Agreement, relinquish its rights and be released from its obligations under the
Credit Agreement.
6. Upon such acceptance and recording by Agent, from and after
the Settlement Date, Agent shall make all payments under the Credit Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees (if applicable) with respect
thereto) to Assignee. On the Settlement Date, Assignee shall pay to Assignor the
principal amount of any outstanding Loans under the Credit Agreement to the
extent assigned to Assignee hereunder. Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior
to the Settlement Date directly between themselves on the Settlement Date.
7. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
8. This Agreement may be executed in one or more counterparts,
all of which shall constitute one and the same agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date set forth in Item 3 of Annex I.
[NAME OF ASSIGNOR]
as Assignor
By:___________________________
Title:________________________
[NAME OF ASSIGNEE]
as Assignee
By:___________________________
Title:________________________
ACCEPTED THIS ____ DAY OF
__________, ____
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH, as Agent
By:___________________________
Title:________________________
By:___________________________
Title:________________________
3
<PAGE>
ANNEX I TO ASSIGNMENT AND ASSUMPTION AGREEMENT
1. Borrower: Hospitality Properties Trust, a Maryland real estate
investment trust
2. Name and Date of Credit Agreement:
Revolving Credit Agreement dated as of March __, 1998 among
Borrower, the Lenders listed therein and Dresdner Bank AG, New
York Branch and Grand Cayman Branch, as Agent.
3. Date of Assignment and Assumption Agreement: _____________________
4. Amounts (as of date in Item #3 above):
a. Revolver Loans $__________
b. Revolver Commitment $__________
c. Assigned Share __________%
d. Assigned Amount of
Revolver Commitment $__________
5. Settlement Date: ____________________
6. Notice and Payment Instructions
Assignee:
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
7. Initials of Authorized Signatories:
Assignor: _____ Assignee: _____
<PAGE>
EXHIBIT C
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
[Date]
Dresdner Bank AG, New York Branch and
Grand Cayman Branch, as Agent
75 Wall Street
New York, NY 10005-2889
Attn: Mr. Michael A. Seton, 25th Floor
Mr. Gary Jermansky, 33rd Floor
Mr. Ronald Rapp, 24th Floor
Ladies and Gentlemen:
Reference is made to that certain Revolving Credit Agreement
among Hospitality Properties Trust, a Maryland real estate investment trust
("Borrower"), the institutions parties thereto as lenders, and Dresdner Bank AG,
New York Branch and Grand Cayman Branch, as agent ("Agent"), dated March __,
1998 (the "Credit Agreement"). Unless otherwise defined herein, capitalized
terms used in this certificate shall have the meaning given to them in the
Credit Agreement.
The undersigned hereby certifies to Agent and each Lender
that, as of the date hereof:
(a) I am the duly elected, qualified and acting Chief
Financial Officer of Borrower.
(b) I have reviewed the terms of the Credit Agreement, and
have reviewed, or have caused to be reviewed under my supervision, in reasonable
detail, the transactions and the condition of Borrower during the immediately
preceding [applicable period].
(c) The Borrower is in compliance with the financial (and all
other material) covenants of the Credit Agreement in all material respects. The
review described in paragraph_(b) above did not disclose the existence during or
at the end of such [applicable period], and I have no knowledge of the existence
as of the date hereof, of any condition or
<PAGE>
event which constitutes a Default or an Event of Default, except as hereinafter
set forth. Any exceptions to this paragraph (c) are described in a separate
attachment to this Certificate, which lists in detail the nature of the
condition or event, the period during which it has existed and the action which
Borrower has taken, is taking, and proposes to take with respect to such
condition or event.
(d) I further certify that, based on the review described in
paragraph_(b) above, neither Borrower nor any of its Subsidiaries at any time
during or at the end of such [applicable period], except as specifically
described in a separate attachment to this Certificate, did any of the
following:
(i) Changed its corporate name, or transacted business under
any trade name, style, or fictitious name, other than those previously described
to Agent and set forth in the Credit Agreement.
(ii) Changed the location of its chief executive office.
(iii) Changed its capital structure.
(iv) Permitted or suffered to exist any Lien or encumbrance on
any of its properties, whether real or personal, other than as specifically
permitted in the Credit Agreement.
(v) Received any notice of any kind from any federal, state or
local agency, tribunal or other authority regulating or having responsibility
for any environmental matters.
(vi) Became aware of or received notice of any breach or
violation of any material covenant contained in any instrument or agreement
respecting the Indebtedness of Borrower or any of its Subsidiaries.
(e) The figures set forth in Schedule A hereto for determining
compliance with the financial covenants set forth in the Credit Agreement are
true and complete as of the date hereof.
(f) The list of Hotels set forth in Schedule B hereto (the
"Hotel List") is a true and complete list of all Hotels that constitute the
Unencumbered Pool and the Assigned Value for each of such Hotels. Each of the
Hotels set forth in the Hotel List qualifies under the criteria for inclusion in
the Unencumbered Pool under the Credit Agreement.
(g) The Hotel List correctly identifies each Hotel Pool within
the Unencumbered Pool and each Hotel within each such Hotel Pool.
<PAGE>
(h) [If requested by Agent: The figures set forth in Schedule
C hereto for determining the accuracy of the certifications in paragraphs (f)
and (g) above are true and complete as of the date hereof.
(i)] The list of Hotels set forth in Schedule D hereto is a
true and complete list as of the date hereof of all changes in the composition
of the Unencumbered Pool as of the date hereof since the date of the immediately
preceding Compliance Certificate that was delivered by Borrower to Agent.
[remainder of page intentionally left blank]
<PAGE>
The foregoing certifications are made and delivered this _____ day of
______, ____.
Very truly yours,
___________________________
Name:_____________________,
Chief Financial Officer of
HOSPITALITY PROPERTIES TRUST,
a Maryland real estate investment trust
<PAGE>
Schedule A
Note: ("QE" means only as of the last day of a Fiscal Quarter)
- --------------------------------------------------------------------------------
Financial Ratio or Amount Compliance Requirement/Actual Amount
================================================================================
1. (a) Consolidated Secured Debt $
- --------------------------------------------------------------------------------
a. Consolidated Indebtedness $
- --------------------------------------------------------------------------------
b. Aggregate Assigned Value of $
All Hotels
- --------------------------------------------------------------------------------
c. Ratio of Consolidated Secured Required: No Higher Than 35%
Debt to Aggregate Assigned Actual:
Value of All Hotels
- --------------------------------------------------------------------------------
d. Leverage Ratio (ratio of Required: No Higher Than 50%
Consolidated Indebtedness to Actual:
Aggregate Assigned Value of
All Hotels)
================================================================================
2. (a) Aggregate Assigned Value of $
Entire Unencumbered Pool
- --------------------------------------------------------------------------------
a. Amount of Obligations $
- --------------------------------------------------------------------------------
b. Consolidated Indebtedness $
Other Than Obligations and
Consolidated Secured Debt
- --------------------------------------------------------------------------------
c. Recourse Exposure Amount for $
All Hotels
- --------------------------------------------------------------------------------
d. Sum of Items (b), (c) and (d)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
e. Ratio of Aggregate Assigned Required: At Least 200%
Value of Entire Unencumbered Actual:
Pool to Item (e))
================================================================================
3. (a) Aggregate Assigned Value of the 1. [Metropolitan Area] $
Portion of the Unencumbered Pool
Located in Each of the Four 2. [Metropolitan Area] $
"Metropolitan Areas" (as Defined in
the Statistical Abstract of the United 3. [Metropolitan Area] $
States) that Have the Greatest Such
Aggregate Assigned Values 4. [Metropolitan Area] $
- --------------------------------------------------------------------------------
a. Ratio of Each of the Four Required: No Higher Than 20% for Any
Aggregate Assigned Values Metropolitan Area
Listed in Item (a) to the Actual:
Aggregate Assigned Value of 1. [Metropolitan Area] %
the Entire Unencumbered Pool 2. [Metropolitan Area] %
(Item 2(a)) 3. [Metropolitan Area] %
4. [Metropolitan Area] %
================================================================================
4. (a) Assigned Value of Hotels Owned by $
Subsidiaries That Are Neither
Wholly-Owned Subsidiaries Nor (b)
Guarantors
- --------------------------------------------------------------------------------
a. Ratio of Item (a) to Assigned Required: No Higher Than 10%
Value of All Hotels (Item 1(c)) Actual:
================================================================================
5. (a) Consolidated EBITDA for the $
Unencumbered Pool (Considered
Separately) (QE)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
a. Consolidated Interest Expense $
(QE)
- --------------------------------------------------------------------------------
b. Consolidated Interest Expense $
on Consolidated Secured Debt
(QE)
================================================================================
c. Consolidated EBITDA for the Required: 2.50 or Higher
Unencumbered Pool Actual:
(Considered Separately) divided
by Consolidated Interest
Expense (Excluding
Consolidated Interest Expense
on Consolidated Secured Debt)
(QE)
================================================================================
6. (a) Gross Proceeds to the Credit
Parties of All Equity Offerings (Common
or Preferred) Consummated by Any of
Them After the Closing Date
- --------------------------------------------------------------------------------
a. Consolidated Tangible Net Required: At Least 80% of Item 6(a)
Worth of All Credit Parties (QE) Plus $900,000,000
Actual:
================================================================================
7. (a) Consolidated EBITDA for all Hotels $
(QE)
- --------------------------------------------------------------------------------
a. Consolidated Debt Service (QE) $
- --------------------------------------------------------------------------------
b. Consolidated Interest Expense $
(QE)
- --------------------------------------------------------------------------------
c. Debt Service Coverage Ratio Required: At Least 2.25 to 1
(Ratio of Consolidated EBITDA Actual:
for All Hotels to Consolidated
Debt Service) (QE)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
d. Interest Coverage Ratio (Ratio Required: At Least 2.50 to 1
of Consolidated EBITDA for All Actual:
Hotels to Consolidated Interest
Expense) (QE)
================================================================================
8. (a) Permitted Mortgage Investments
- --------------------------------------------------------------------------------
a. Consolidated Total Assets
- --------------------------------------------------------------------------------
b. Permitted Mortgage Investments Required: No Higher Than 20%
as a Percentage of Consolidated Actual:
Total Assets
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Schedule B
==========================================================================================================
Name of Hotel Address of Hotel Assigned Value Hotel Pool, if any, of
of Hotel which Hotel is a member
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
</TABLE>
<PAGE>
Schedule C
<PAGE>
Schedule D
The following Hotels were included in the Unencumbered Pool on [date], the date
of the immediately preceding Compliance Certificate that was delivered by
Borrower to Agent, but are not included in the Unencumbered pool as of [date]:
================================================================================
Name of Hotel Address of Hotel
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
The following Hotels were not included in the Unencumbered Pool on [date], the
date of the immediately preceding Compliance Certificate that was delivered by
Borrower to Agent, but are included in the Unencumbered pool as of [date]:
================================================================================
Name of Hotel Address of Hotel
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT D
NOTICE OF BORROWING
[DATE]
Dresdner Bank AG, New York Branch and
Grand Cayman Branch, as Agent
75 Wall Street
New York, NY 10005-2889
Attention: Mr. Michael A. Seton, 25th Floor
Mr. Gary Jermansky, 33rd Floor
Mr. Ronald Rapp, 24th Floor
Ladies and Gentlemen:
The undersigned, Hospitality Properties Trust, a Maryland real estate
investment trust ("Borrower"), refers to the Revolving Credit Agreement dated as
of March 19, 1998 among Borrower, certain institutions parties thereto as
lenders, and Dresdner Bank AG, New York Branch and Grand Cayman Branch, as Agent
(as amended, modified, and supplemented to date, the "Credit Agreement"). Unless
otherwise defined herein, capitalized terms used in this Notice of Borrowing
shall have the respective meanings given to them in the Credit Agreement.
Pursuant to Section 2.2 of the Credit Agreement, Borrower hereby gives
you irrevocable notice that it requests a Borrowing under the Credit Agreement,
and sets forth below the required information relating to such Borrowing (the
"Proposed Borrowing"):
(i) The Proposed Borrowing is of [Base Rate] [Eurodollar] Loans.
(ii) The requested date of the Proposed Borrowing is
____________________.
(iii) The aggregate amount of the Proposed Borrowing is $__________
[and, if the Proposed Borrowing is of Eurodollar Loans, the Interest Period is
[one] [two] [three] [six] months].
(iv) The account at which the requested funds shall be made available
is
- ---------------.
The undersigned hereby certifies to Agent and each Lender considered
separately that the following statements are true on the date hereof, and will
be true on the date of the Proposed Borrowing:
<PAGE>
(A) the representations and warranties contained in the Credit
Agreement and in each other Credit Document are true and
correct in all material respects before and after giving
effect to the Proposed Borrowing and to the application of the
proceeds therefrom, except to the extent that such
representations and warranties expressly relate solely to an
earlier date (in which case such representations and
warranties were true and correct on and as of such earlier
date);
(B) no event has occurred and is continuing, or would result from
such Proposed Borrowing or from the application of the
proceeds therefrom, which constitutes or would constitute a
Default or an Event of Default; and
(C) all of the other conditions to the Proposed Borrowing set
forth in the Credit Agreement have been fulfilled.
If notice of this Proposed Borrowing has been given previously by
telephone, then this notice should be considered a written confirmation of such
telephone notice.
HOSPITALITY PROPERTIES TRUST,
a Maryland real estate investment trust
By: ______________________________
Name: Thomas M. O'Brien
Title: Treasurer
2
<PAGE>
EXHIBIT E
NOTICE OF CONTINUATION/CONVERSION
Pursuant to that certain Revolving Credit Agreement dated as of March
19, 1998 among Hospitality Properties Trust ("Borrower"), certain lenders party
thereto and Dresdner Bank AG, New York Branch and Grand Cayman Branch, as agent
(as amended, modified and supplemented from time to time, the "Credit
Agreement"), this represents Borrower's request: [A: to convert $__________ in
principal amount of presently outstanding [Base Rate/Eurodollar] Loans to [Base
Rate/Eurodollar] Loans on [DATE].] [B: to continue as Eurodollar Loans Loans in
the principal amount of $__________, which are currently outstanding as
Eurodollar Loans.] [The Interest Period for such Eurodollar Loans commencing on
[DATE] is requested to be a [one/two/three/six] month period.]
The undersigned officer (in his or her capacity as an officer of
Borrower and not individually) does hereby certify on behalf of Borrower that no
Default or Event of Default has occurred and is continuing under the Credit
Agreement. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.
DATED: [DATE] HOSPITALITY PROPERTIES TRUST,
a Maryland real estate investment trust
By: ________________________________
Name: Thomas M. O'Brien
Title: Treasurer
<PAGE>
EXHIBIT F
INVESTMENT MANAGER'S SUBORDINATION AGREEMENT
INVESTMENT MANAGER'S SUBORDINATION AGREEMENT (this
"Agreement"), dated as of March 19, 1998, by and among REIT Management &
Research, Inc., a Delaware corporation, having an address at 400 Centre Street,
Newton, Massachusetts 02158 (the "Investment Manager"), Hospitality Properties
Trust, a Maryland real estate investment trust, having an address at 400 Centre
Street, Newton, Massachusetts 02158 (the "Borrower"), and Dresdner Bank AG, New
York Branch and Grand Cayman Branch, having an address at 75 Wall Street, New
York, New York 10005, as agent on behalf of the Lenders (as hereinafter defined)
(the "Agent").
R E C I T A L S:
Pursuant to that certain Revolving Credit Agreement, dated as
of the date hereof (as modified and supplemented and in effect from time to
time, the "Loan Agreement"; capitalized terms used herein and not otherwise
defined having the meanings set forth in the Loan Agreement), by and among
Borrower, as borrower; Agent, as agent; and the institutions party thereto as
lenders ("Lenders"), the Lenders have committed to make a loan (the "Loan") to
Borrower up to a maximum aggregate principal amount of $250,000,000. The Loan is
to be evidenced by, and repayable with interest thereon in accordance with, that
certain Revolver Note, dated the date hereof, executed and delivered by Borrower
to the order of Agent (as modified, supplemented or substituted and in effect
from time to time, collectively, the "Note").
Investment Manager has agreed to provide management, advisory
and administrative services and certain other services for the Borrower pursuant
to an Advisory Agreement among Investment Manager, Barry M. Portnoy, Gerard M.
Martin and Borrower (as amended, modified or supplemented and in effect from
time to time, the "Advisory Agreement").
NOW, THEREFORE, to induce the Agent to enter into the Loan
Agreement and to induce Lenders to make the Loan and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Representations of Investment Manager. Investment Manager
warrants and represents to the Agent the following as of the date hereof:
(a) The Advisory Agreement has not been assigned, modified, amended
or supplemented. The Advisory Agreement is in full force and effect,
and constitutes the entire agreement with respect to the provision of
management, advisory or administrative services to Borrower, except as
set forth therein. A true, correct and complete copy of the Advisory
Agreement is attached hereto as Exhibit A.
(b) The Advisory Agreement constitutes the legal, valid and binding
obligation of Investment Manager, enforceable against Investment
Manager in accordance with its
<PAGE>
terms, subject to general principles of equity and laws affecting the
rights and remedies of debtors and creditors generally.
(c) To Investment Manager's knowledge, Borrower is not in default
in the performance of the terms and provisions of the Advisory
Agreement, nor is there now any condition which, with the giving of
notice or lapse of time, or both, will become a default.
(d) There are no contracts, agreements or commitments between
Borrower and Investment Manager in respect of the Loan Agreement or the
provision of management, advisory or administrative services to
Borrower, except as provided in the Advisory Agreement.
(e) Investment Manager is not in material default under the terms
and provisions of the Advisory Agreement, nor is there now any
condition which, with the giving of notice or lapse of time, or both,
will become a default. No claim or dispute exists between Borrower and
Investment Manager with respect to the Advisory Agreement.
(f) Investment Manager has not assigned or encumbered its interest
under the Advisory Agreement.
(g) Investment Manager does not have any option or preferential
right to purchase all or any part of, and does not have any right,
title or interest with respect to any Hotel or any other property of
Borrower other than as advisor under the Advisory Agreement.
(h) As of the date hereof, all fees, sums, charges, costs, expenses
and other amounts due under the Advisory Agreement have been paid in
accordance with the terms of the Advisory Agreement.
2. Investment Manager's Covenants.
A. Investment Manager hereby consents and agrees to each and every
one of the following covenants and agreements for the benefit of the
Agent:
(a) Performance and Notice of Default. Investment Manager agrees
that it will (i) promptly perform and observe in all material respects
all of the covenants and agreements required to be performed and
observed by it under the Advisory Agreement, and (ii) promptly notify
Agent of any material default under the Advisory Agreement of which it
becomes aware.
(b) No Termination of Advisory Agreement. Investment Manager will
not terminate the Advisory Agreement without first providing the Agent
with at least thirty (30) days' prior written notice of such intention.
(c) Subordination of the Advisory Agreement to Liens of Lender. Any
and all liens, rights and interests (whether choate or inchoate and
including, without limitation, all
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mechanic's and materialman's liens under applicable law) owned, claimed
or held, or to be owned, claimed or held, by Investment Manager in and
to any property of the Borrower (collectively, the "Subordinated
Obligations"), are and shall be in all respects subordinate and
inferior to the liens and security interests created or to be created
for the benefit of the Agent, its successors and assigns, and securing
the repayment of the Note (including, without limitation, post-petition
interest), including, among other things, liens and security interests
with respect to the Hotels (collectively, the "Senior Obligations").
The foregoing subordination shall not affect the right of Investment
Manager to receive and use all fees paid or payable to it under the
Advisory Agreement.
(d) Agent's Right to Terminate. Upon (1) the occurrence of an Event
of Default pursuant to which the Loan is accelerated (or otherwise
becomes due and payable in full) or (2) Investment Manager committing
any act which would permit termination of the Advisory Agreement by
Borrower, the Agent shall have the right to terminate the Advisory
Agreement by giving Borrower and Investment Manager thirty (30) days
prior written notice.
(e) No Amendments to the Advisory Agreement. Investment Manager
will not amend or modify the Advisory Agreement in any material respect
without the prior written consent of the Agent, which consent shall not
be unreasonably withheld, delayed or conditioned. In the event
Investment Manager fails to secure such approval, the Advisory
Agreement shall, for the purposes of Investment Manager's obligations
to the Agent pursuant to this Agreement, be deemed not to have been
modified by such amendment.
(f) Limitation on Liens. Investment Manager will not create, incur,
assume or suffer to exist (to the extent funds are available to satisfy
such lien in accordance with the provisions of the Advisory Agreement)
any Lien upon any property of Borrower, including, without limitation,
the Hotels, except as permitted under the Loan Agreement or as
otherwise agreed to in writing by the Agent.
(g) Delivery of Notices, etc. Investment Manager shall furnish the
Agent with all material notices from any Governmental Authority or
private litigants received by Investment Manager with respect to any
Hotel.
(h) Further Assurances. Investment Manager shall (i) execute such
affidavits and certificates as the Agent shall reasonably require to
further evidence the agreements herein contained, provided same do not
increase Investment Manager's obligations set forth, contemplated or
otherwise intended hereunder, (ii) on written request from the Agent,
furnish the Agent with copies of such information as Borrower is
entitled to receive under the Advisory Agreement, and (iii) cooperate
with the Agent's representatives in any inspection of all or any
property of Borrower to the extent the Agent is permitted to enter and
inspect such property in accordance with the Loan Agreement.
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(i) Agent Not Obligated Under Advisory Agreement. Investment
Manager further agrees that nothing herein shall impose upon the Agent
any obligation for payment or performance in favor of Investment
Manager, unless the Agent has elected to assert Borrower's rights under
the Advisory Agreement, in which case the Agent shall pay Investment
Manager the sums due to Investment Manager under the terms of the
Advisory Agreement from and after the effective date of the Agent's
notice of such election to Investment Manager, and Investment Manager
shall continue performance on the Agent's behalf in accordance with the
terms of the Advisory Agreement.
(j) Agent's Reliance on Representations. Investment Manager has
executed this Agreement for the purpose of inducing the Lenders to make
the Loan and inducing Agent to enter into the Loan Agreement and with
full knowledge that the Agent and Lenders shall rely upon the
representations, warranties, covenants and agreements herein contained
when making the Loan and that but for this instrument and the
representations, warranties, covenants and agreements herein contained,
the Agent and Lenders would not take such actions.
B. Except as expressly permitted hereby, upon the occurrence and
continuance of an Event of Default under the Loan Agreement, Investment
Manager shall not request, demand or sue for, or take, accept or
receive from Borrower, by set-off or in any other manner, and Borrower
shall not make, any payment of any monies (including, without
limitation, principal or interest (including post-petition interest)
thereafter owing by Borrower to Investment Manager in respect of the
Subordinated Obligations or any security therefor, other than for
services rendered prior to such date, until the final payment in full
of the Senior Obligations; provided, however, that Investment Manager
has no obligation to continue as Investment Manager under the Advisory
Agreement if Investment Manager is not receiving compensation for its
services thereunder.
C. In the event of any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or
otherwise, of all or any part of the assets of Borrower or the proceeds
thereof, to creditors of Borrower, or upon any indebtedness of
Borrower, by reason of the liquidation, dissolution or other winding up
of Borrower or Borrower's business, or any sale, receivership,
insolvency or bankruptcy proceeding, or assignment for the benefit of
creditors, or any proceeding by or against Borrower for any relief
under any bankruptcy or insolvency law or laws relating to the relief
of debtors, readjustment of indebtedness, reorganizations, compositions
or extensions, then and in any such event any payment or distribution
of any kind or character, either in cash, securities or other property,
which shall be payable or deliverable upon or with respect to any or
all indebtedness or obligations of Borrower to Investment Manager in
respect of any of the Subordinated Obligations (including, without
limitation, interest and post-petition interest) shall be paid or
delivered directly to the Agent for application to the Senior
Obligations (including, without limitation, post-petition interest),
due or not due, until the Senior Obligations shall have first been
fully paid and satisfied; provided, however, that Investment Manager
has no obligation to continue as Investment Manager under the Advisory
Agreement if Investment Manager is not receiving compensation for its
services thereunder. Upon the occurrence and during the continuance of
an Event of
4
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Default, Investment Manager irrevocably authorizes and empowers the
Agent to demand, sue for, collect and receive every such payment or
distribution and give acquittance therefor and to file claims and take
such other proceedings, in the Agent's own name or in the name of
Investment Manager or otherwise, as the Agent may deem necessary or
advisable for the enforcement of this Agreement. Investment Manager
will execute and deliver to the Agent such powers of attorney,
assignments or other instruments as may be reasonably requested by the
Agent in order to enable the Agent to enforce any and all claims upon
or with respect to any of the Subordinated Obligations, and to collect
and receive any and all payments or distributions which may be payable
or deliverable at any time upon or with respect to any such Obligations
of Borrower.
D. Should any payment or distribution or security or proceeds thereof
be received by Investment Manager upon or with respect to any of the
Subordinated Obligations contrary to the foregoing provisions,
Investment Manager will forthwith deliver the same to the Agent in
precisely the form received (except for the endorsement or assignment
of Investment Manager where necessary) for application to the Senior
Obligations (including, without limitation, post-petition interest),
and, until so delivered, the same shall be held in trust by Investment
Manager as property of the Agent. In the event of the failure of
Investment Manager to make any such endorsement or assignment, the
Agent, or any of its officers or employees, is hereby irrevocably
authorized to make the same.
E. Investment Manager will not assign or transfer to others any claim
which it has or may hereafter have against Borrower in respect of any
of the Subordinated Obligations while any of the Senior Obligations
(including without limitation, post-petition interest) remain unpaid,
unless such assignment or transfer is made expressly subject to the
terms and conditions hereof in any instrument in form and substance
satisfactory to the Agent.
F. The Agent, at any time and from time to time, may enter into such
agreement or agreements with Borrower as the Agent may reasonably deem
proper extending the time of payment of or renewing or otherwise
altering the terms of all or any of the Senior Obligations without
notice to Investment Manager and without in any way impairing or
affecting the obligations of Investment Manager hereunder.
G. The Agent shall not be prejudiced in its right to enforce this
Agreement in respect of any of the Subordinated Obligations owing to
Investment Manager by any act or failure to act on the part of Borrower
or anyone in custody of Borrower's assets or property.
3. No Assignment. Notwithstanding anything to the contrary in the
Advisory Agreement, neither Investment Manager nor Borrower may assign the
Advisory Agreement without the prior written consent of the Agent.
4. No Waiver. No failure to exercise, and no delay in exercising, and
no course of dealing with respect to, any power, remedy or right under this
Agreement by the Agent shall operate as a waiver thereof, nor shall any single
or partial exercise thereof by the Agent preclude any other or further exercise
thereof or the exercise of any other power, remedy or right. The
5
<PAGE>
remedies provided herein are cumulative and not exclusive of any remedies
provided by applicable law and/or any of the other Credit Documents.
5. Notice. All notices, consents, approvals and requests required or
permitted hereunder shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) certified or registered United States
mail, postage prepaid, or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery,
and by telecopier (with answer back acknowledged), addressed if to Agent at its
address set forth on the first page hereof, Attention: Mr. Michael A. Seton,
25th Floor; Mr. Gary Jermansky, 33rd Floor; and Mr. Ronald Rapp, 24th Floor; if
to Investment Manager at its address set forth on the first page hereof,
Attention: President; and if to Borrower at its address set forth on the first
page hereof, Attention: Mr. Thomas M. O'Brien; or at such other address and
Person as shall be designated from time to time by any party hereto, as the case
may be, in a written notice to the other parties hereto in the manner provided
for in this Section 5. A copy of all notices, consents, approvals and requests
directed to the Agent shall be delivered to Latham & Watkins, 885 Third Avenue,
New York, New York 10022, Attention: Roger M. Zeitzeff, Esq., and Joshua Stein,
Esq., and a copy of all notices, consents, approvals and requests directed to
Investment Manager or Borrower shall be delivered to Investment Manager or
Borrower at the address set forth in the preceding sentence, with a copy of each
to: Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts
02109, Attention: Jennifer B. Clark, Esq. A notice shall be deemed to have been
given: in the case of hand delivery, at the time of delivery; in the case of
registered or certified mail, when delivered or two Business Days after mailing;
or in the case of expedited prepaid delivery and telecopy, on the Business Day
after the same was sent. A party receiving a notice which does not comply with
the technical requirements for notice under this Section 5 may elect to waive
any deficiencies and treat the notice as having been properly given.
6. Indemnity. Borrower shall indemnify, defend and hold the Agent
harmless against and from all liability, loss, damage and expense (including,
without limitation, reasonable attorney's fees and disbursements), which the
Agent may or shall incur or be subject to by reason of this Agreement, or by
reason of any action taken in good faith by the Agent hereunder, and against and
from any and all claims and demands whatsoever which may be asserted against the
Agent by reason of any alleged obligation or undertaking on its part to perform
or discharge any of the terms, covenants and conditions contained in the
Advisory Agreement, other than claims and demands arising by reason of Agent's
own fraud, gross negligence or willful misconduct. Should the Agent incur any
such liability, loss, damage or expense, the amount thereof, together with
interest thereon at the rate of interest applicable from time to time under the
Note, shall be payable by Borrower to the Agent immediately upon demand.
7. Amendments, Etc. This Agreement cannot be amended except by an
agreement in writing, signed by the Agent, Borrower and Investment Manager, and
no provision hereof may be waived except by an instrument in writing signed by
the Agent.
8. Inspection; Books and Records. Investment Manager agrees that Agent
or its agents and any Lender may enter upon the premises of Investment Manager
at any time and from time to time, during normal business hours and upon
reasonable notice under the circumstances, and at any time at all on and after
the occurrence and during the continuance of an Event of Default,
6
<PAGE>
for the purposes of discussing the affairs, finances and business of any Credit
Party and any Hotel with any of the officers, employees and directors of
Investment Manager. Such officers, employees and directors shall truthfully and
fully explain the affairs, finances and business of such Credit Party or Hotel
to Agent or its agents and any Lender, as the case may be. At any time and from
time to time on and after the occurrence and during the continuance of an Event
of Default, Investment Manager shall, at Investment Manager's sole cost and
expense, deliver to Agent within five days of Agent's request all books,
records, files, correspondence and closing documents maintained by Investment
Manager with respect to any Credit Party and any Hotel.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10. Severability. If any provision of this Agreement or the application
thereof to any person or entity or circumstance shall, to any extent, be
illegal, invalid and/or unenforceable, the remainder of this Agreement or the
application of such provision to persons or entities or circumstances other than
those as to which it is illegal, invalid and/or unenforceable, as the case may
be, shall not be affected, and each provision of this Agreement shall be legal,
valid and enforceable to the extent permitted by law. The illegality, invalidity
and/or unenforceability of any provision of this Agreement in any jurisdiction
shall not affect the legality, validity and/or enforceability thereof in any
other jurisdiction.
11. Expenses. If any suit or other proceeding is instituted by the
Agent to enforce this Agreement (or any portion hereof), Borrower shall pay,
upon demand, all of the reasonable out-of-pocket costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
the Agent in connection therewith, together with interest at the Default Rate.
The obligations of Borrower under this Section 11 shall survive the expiration
or termination of this Agreement.
12. Headings. Headings used in this Agreement are for convenience of
reference only and do not constitute part of this Agreement for any purpose.
13. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW,
BORROWER AND INVESTMENT MANAGER HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING BROUGHT BY ANY PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS
AGREEMENT.
14. SUBMISSION TO JURISDICTION. INVESTMENT MANAGER HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
INVESTMENT MANAGER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING
7
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BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
15. Cumulative Remedies. All rights and remedies set forth in this
Agreement are cumulative, and the Agent may recover judgment thereon, issue
execution therefor, and resort to every other right or remedy available at law
or in equity, without first exhausting and without affecting or impairing the
security of any right or remedy afforded hereby; and no such right or remedy set
forth in this Agreement shall be deemed exclusive of any of the remedies or
rights granted to the Agent in the Note, the Loan Agreement or any other Credit
Document. Nothing contained in this Agreement shall be deemed to limit or
restrict the rights and remedies of the Agent under any of the other documents
related to the Senior Obligations.
16. Borrower's Consent. Borrower has joined herein to evidence its
consent to all the agreements of Investment Manager contained in this Agreement.
17. Successors. This Agreement shall be binding upon and shall inure to
the benefit of each party hereto and their respective successors and assigns.
18. Counterparts. This Agreement may be executed in any number of
counterparts each of which, taken together, shall constitute one and the same
original.
19. Conflicts with Loan Agreement. Notwithstanding anything to the
contrary set forth elsewhere in this Agreement or in any other Credit Document,
this Agreement and such other Credit Documents are expressly made subject in
their entirety to the Credit Agreement and in the event of a conflict or
ambiguity created between the Credit Agreement and any provision herein (and/or
under any other Credit Document) or obligation of Borrower hereunder (and/or
under any other Credit Document), the terms of the Credit Agreement shall govern
and control.
20. Termination. Upon the Obligations being fully paid by Borrower in
accordance with the Loan Agreement, this Agreement shall be of no further
effect.
21. NO LIABILITIES OF TRUSTEES. THE DECLARATION OF TRUST OF BORROWER,
DATED MAY 12, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
BORROWER. ALL PERSONS DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
INVESTMENT MANAGER:
REIT MANAGEMENT & RESEARCH, INC.
a Delaware corporation
By:________________________________
Name:
Title:
BORROWER:
HOSPITALITY PROPERTIES TRUST,
a Maryland real estate investment trust
By:______________________________
Name:
Title:
AGENT:
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH,
as Agent
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
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EXHIBIT A
ADVISORY AGREEMENT
A copy of the Advisory Agreement, dated as of January 31, 1998, between REIT
Management & Research, Inc. and Hospitality Properties Trust has been filed with
the Securities and Exchange Commission as an exhibit to Hospitality Properties
Trust's Current Report on Form 8-K dated February 11, 1998, which exhibit is
incorporated herein by reference.
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EXHIBIT G
FORM OF REGISTER
[Intentionally Omitted.]
EXHIBIT 10.14
INVESTMENT MANAGER'S SUBORDINATION AGREEMENT
INVESTMENT MANAGER'S SUBORDINATION AGREEMENT (this "Agreement"), dated
as of March 19, 1998, by and among REIT Management & Research, Inc., a Delaware
corporation, having an address at 400 Centre Street, Newton, Massachusetts 02158
(the "Investment Manager"), Hospitality Properties Trust, a Maryland real estate
investment trust, having an address at 400 Centre Street, Newton, Massachusetts
02158 (the "Borrower"), and Dresdner Bank AG, New York Branch and Grand Cayman
Branch, having an address at 75 Wall Street, New York, New York 10005, as agent
on behalf of the Lenders (as hereinafter defined) (the "Agent").
R E C I T A L S:
Pursuant to that certain Revolving Credit Agreement, dated as of the
date hereof (as modified and supplemented and in effect from time to time, the
"Loan Agreement"; capitalized terms used herein and not otherwise defined having
the meanings set forth in the Loan Agreement), by and among Borrower, as
borrower; Agent, as agent; and the institutions party thereto as lenders
("Lenders"), the Lenders have committed to make a loan (the "Loan") to Borrower
up to a maximum aggregate principal amount of $250,000,000. The Loan is to be
evidenced by, and repayable with interest thereon in accordance with, that
certain Revolver Note, dated the date hereof, executed and delivered by Borrower
to the order of Agent (as modified, supplemented or substituted and in effect
from time to time, collectively, the "Note").
Investment Manager has agreed to provide management, advisory and
administrative services and certain other services for the Borrower pursuant to
an Advisory Agreement among Investment Manager, Barry M. Portnoy, Gerard M.
Martin and Borrower (as amended, modified or supplemented and in effect from
time to time, the "Advisory Agreement").
NOW, THEREFORE, to induce the Agent to enter into the Loan Agreement
and to induce Lenders to make the Loan and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Representations of Investment Manager. Investment Manager warrants
and represents to the Agent the following as of the date hereof:
(a) The Advisory Agreement has not been assigned, modified,
amended or supplemented. The Advisory Agreement is in full force and
effect, and constitutes the entire agreement with respect to the
provision of management, advisory or administrative services to
Borrower, except as set forth therein. A true, correct and complete
copy of the Advisory Agreement is attached hereto as Exhibit A.
(b) The Advisory Agreement constitutes the legal, valid and
binding obligation of Investment Manager, enforceable against
Investment Manager in accordance with its
<PAGE>
terms, subject to general principles of equity and laws affecting the
rights and remedies of debtors and creditors generally.
(c) To Investment Manager's knowledge, Borrower is not in
default in the performance of the terms and provisions of the Advisory
Agreement, nor is there now any condition which, with the giving of
notice or lapse of time, or both, will become a default.
(d) There are no contracts, agreements or commitments between
Borrower and Investment Manager in respect of the Loan Agreement or the
provision of management, advisory or administrative services to
Borrower, except as provided in the Advisory Agreement.
(e) Investment Manager is not in material default under the
terms and provisions of the Advisory Agreement, nor is there now any
condition which, with the giving of notice or lapse of time, or both,
will become a default. No claim or dispute exists between Borrower and
Investment Manager with respect to the Advisory Agreement.
(f) Investment Manager has not assigned or encumbered its
interest under the Advisory Agreement.
(g) Investment Manager does not have any option or
preferential right to purchase all or any part of, and does not have
any right, title or interest with respect to any Hotel or any other
property of Borrower other than as advisor under the Advisory
Agreement.
(h) As of the date hereof, all fees, sums, charges, costs,
expenses and other amounts due under the Advisory Agreement have been
paid in accordance with the terms of the Advisory Agreement.
2. Investment Manager's Covenants.
A. Investment Manager hereby consents and agrees to each and
every one of the following covenants and agreements for the benefit of
the Agent:
(a) Performance and Notice of Default. Investment Manager
agrees that it will (i) promptly perform and observe in all material
respects all of the covenants and agreements required to be performed
and observed by it under the Advisory Agreement, and (ii) promptly
notify Agent of any material default under the Advisory Agreement of
which it becomes aware.
(b) No Termination of Advisory Agreement. Investment Manager
will not terminate the Advisory Agreement without first providing the
Agent with at least thirty (30) days' prior written notice of such
intention.
(c) Subordination of the Advisory Agreement to Liens of
Lender. Any and all liens, rights and interests (whether choate or
inchoate and including, without limitation, all
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mechanic's and materialman's liens under applicable law) owned, claimed
or held, or to be owned, claimed or held, by Investment Manager in and
to any property of the Borrower (collectively, the "Subordinated
Obligations"), are and shall be in all respects subordinate and
inferior to the liens and security interests created or to be created
for the benefit of the Agent, its successors and assigns, and securing
the repayment of the Note (including, without limitation, post-petition
interest), including, among other things, liens and security interests
with respect to the Hotels (collectively, the "Senior Obligations").
The foregoing subordination shall not affect the right of Investment
Manager to receive and use all fees paid or payable to it under the
Advisory Agreement.
(d) Agent's Right to Terminate. Upon (1) the occurrence of an
Event of Default pursuant to which the Loan is accelerated (or
otherwise becomes due and payable in full) or (2) Investment Manager
committing any act which would permit termination of the Advisory
Agreement by Borrower, the Agent shall have the right to terminate the
Advisory Agreement by giving Borrower and Investment Manager thirty
(30) days prior written notice.
(e) No Amendments to the Advisory Agreement. Investment
Manager will not amend or modify the Advisory Agreement in any material
respect without the prior written consent of the Agent, which consent
shall not be unreasonably withheld, delayed or conditioned. In the
event Investment Manager fails to secure such approval, the Advisory
Agreement shall, for the purposes of Investment Manager's obligations
to the Agent pursuant to this Agreement, be deemed not to have been
modified by such amendment.
(f) Limitation on Liens. Investment Manager will not create,
incur, assume or suffer to exist (to the extent funds are available to
satisfy such lien in accordance with the provisions of the Advisory
Agreement) any Lien upon any property of Borrower, including, without
limitation, the Hotels, except as permitted under the Loan Agreement or
as otherwise agreed to in writing by the Agent.
(g) Delivery of Notices, etc. Investment Manager shall furnish
the Agent with all material notices from any Governmental Authority or
private litigants received by Investment Manager with respect to any
Hotel.
(h) Further Assurances. Investment Manager shall (i) execute
such affidavits and certificates as the Agent shall reasonably require
to further evidence the agreements herein contained, provided same do
not increase Investment Manager's obligations set forth, contemplated
or otherwise intended hereunder, (ii) on written request from the
Agent, furnish the Agent with copies of such information as Borrower is
entitled to receive under the Advisory Agreement, and (iii) cooperate
with the Agent's representatives in any inspection of all or any
property of Borrower to the extent the Agent is permitted to enter and
inspect such property in accordance with the Loan Agreement.
3
<PAGE>
(i) Agent Not Obligated Under Advisory Agreement. Investment
Manager further agrees that nothing herein shall impose upon the Agent
any obligation for payment or performance in favor of Investment
Manager, unless the Agent has elected to assert Borrower's rights under
the Advisory Agreement, in which case the Agent shall pay Investment
Manager the sums due to Investment Manager under the terms of the
Advisory Agreement from and after the effective date of the Agent's
notice of such election to Investment Manager, and Investment Manager
shall continue performance on the Agent's behalf in accordance with the
terms of the Advisory Agreement.
(j) Agent's Reliance on Representations. Investment Manager
has executed this Agreement for the purpose of inducing the Lenders to
make the Loan and inducing Agent to enter into the Loan Agreement and
with full knowledge that the Agent and Lenders shall rely upon the
representations, warranties, covenants and agreements herein contained
when making the Loan and that but for this instrument and the
representations, warranties, covenants and agreements herein contained,
the Agent and Lenders would not take such actions.
B. Except as expressly permitted hereby, upon the occurrence and
continuance of an Event of Default under the Loan Agreement, Investment
Manager shall not request, demand or sue for, or take, accept or
receive from Borrower, by set-off or in any other manner, and Borrower
shall not make, any payment of any monies (including, without
limitation, principal or interest (including post-petition interest)
thereafter owing by Borrower to Investment Manager in respect of the
Subordinated Obligations or any security therefor, other than for
services rendered prior to such date, until the final payment in full
of the Senior Obligations; provided, however, that Investment Manager
has no obligation to continue as Investment Manager under the Advisory
Agreement if Investment Manager is not receiving compensation for its
services thereunder.
C. In the event of any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or
otherwise, of all or any part of the assets of Borrower or the proceeds
thereof, to creditors of Borrower, or upon any indebtedness of
Borrower, by reason of the liquidation, dissolution or other winding up
of Borrower or Borrower's business, or any sale, receivership,
insolvency or bankruptcy proceeding, or assignment for the benefit of
creditors, or any proceeding by or against Borrower for any relief
under any bankruptcy or insolvency law or laws relating to the relief
of debtors, readjustment of indebtedness, reorganizations, compositions
or extensions, then and in any such event any payment or distribution
of any kind or character, either in cash, securities or other property,
which shall be payable or deliverable upon or with respect to any or
all indebtedness or obligations of Borrower to Investment Manager in
respect of any of the Subordinated Obligations (including, without
limitation, interest and post-petition interest) shall be paid or
delivered directly to the Agent for application to the Senior
Obligations (including, without limitation, post-petition interest),
due or not due, until the Senior Obligations shall have first been
fully paid and satisfied; provided, however, that Investment Manager
has no obligation to continue as Investment Manager under the Advisory
Agreement if Investment Manager is not receiving compensation for its
services thereunder. Upon the occurrence and during the continuance of
an Event of
4
<PAGE>
Default, Investment Manager irrevocably authorizes and empowers the
Agent to demand, sue for, collect and receive every such payment or
distribution and give acquittance therefor and to file claims and take
such other proceedings, in the Agent's own name or in the name of
Investment Manager or otherwise, as the Agent may deem necessary or
advisable for the enforcement of this Agreement. Investment Manager
will execute and deliver to the Agent such powers of attorney,
assignments or other instruments as may be reasonably requested by the
Agent in order to enable the Agent to enforce any and all claims upon
or with respect to any of the Subordinated Obligations, and to collect
and receive any and all payments or distributions which may be payable
or deliverable at any time upon or with respect to any such Obligations
of Borrower.
D. Should any payment or distribution or security or proceeds thereof
be received by Investment Manager upon or with respect to any of the
Subordinated Obligations contrary to the foregoing provisions,
Investment Manager will forthwith deliver the same to the Agent in
precisely the form received (except for the endorsement or assignment
of Investment Manager where necessary) for application to the Senior
Obligations (including, without limitation, post-petition interest),
and, until so delivered, the same shall be held in trust by Investment
Manager as property of the Agent. In the event of the failure of
Investment Manager to make any such endorsement or assignment, the
Agent, or any of its officers or employees, is hereby irrevocably
authorized to make the same.
E. Investment Manager will not assign or transfer to others any claim
which it has or may hereafter have against Borrower in respect of any
of the Subordinated Obligations while any of the Senior Obligations
(including without limitation, post-petition interest) remain unpaid,
unless such assignment or transfer is made expressly subject to the
terms and conditions hereof in any instrument in form and substance
satisfactory to the Agent.
F. The Agent, at any time and from time to time, may enter into such
agreement or agreements with Borrower as the Agent may reasonably deem
proper extending the time of payment of or renewing or otherwise
altering the terms of all or any of the Senior Obligations without
notice to Investment Manager and without in any way impairing or
affecting the obligations of Investment Manager hereunder.
G. The Agent shall not be prejudiced in its right to enforce this
Agreement in respect of any of the Subordinated Obligations owing to
Investment Manager by any act or failure to act on the part of Borrower
or anyone in custody of Borrower's assets or property.
3. No Assignment. Notwithstanding anything to the contrary in the
Advisory Agreement, neither Investment Manager nor Borrower may assign the
Advisory Agreement without the prior written consent of the Agent.
4. No Waiver. No failure to exercise, and no delay in exercising, and
no course of dealing with respect to, any power, remedy or right under this
Agreement by the Agent shall operate as a waiver thereof, nor shall any single
or partial exercise thereof by the Agent preclude any other or further exercise
thereof or the exercise of any other power, remedy or right. The
5
<PAGE>
remedies provided herein are cumulative and not exclusive of any remedies
provided by applicable law and/or any of the other Credit Documents.
5. Notice. All notices, consents, approvals and requests required or
permitted hereunder shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) certified or registered United States
mail, postage prepaid, or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery,
and by telecopier (with answer back acknowledged), addressed if to Agent at its
address set forth on the first page hereof, Attention: Mr. Michael A. Seton,
25th Floor; Mr. Gary Jermansky, 33rd Floor; and Mr. Ronald Rapp, 24th Floor; if
to Investment Manager at its address set forth on the first page hereof,
Attention: President; and if to Borrower at its address set forth on the first
page hereof, Attention: Mr. Thomas M. O'Brien; or at such other address and
Person as shall be designated from time to time by any party hereto, as the case
may be, in a written notice to the other parties hereto in the manner provided
for in this Section 5. A copy of all notices, consents, approvals and requests
directed to the Agent shall be delivered to Latham & Watkins, 885 Third Avenue,
New York, New York 10022, Attention: Roger M. Zeitzeff, Esq., and Joshua Stein,
Esq., and a copy of all notices, consents, approvals and requests directed to
Investment Manager or Borrower shall be delivered to Investment Manager or
Borrower at the address set forth in the preceding sentence, with a copy of each
to: Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts
02109, Attention: Jennifer B. Clark, Esq. A notice shall be deemed to have been
given: in the case of hand delivery, at the time of delivery; in the case of
registered or certified mail, when delivered or two Business Days after mailing;
or in the case of expedited prepaid delivery and telecopy, on the Business Day
after the same was sent. A party receiving a notice which does not comply with
the technical requirements for notice under this Section 5 may elect to waive
any deficiencies and treat the notice as having been properly given.
6. Indemnity. Borrower shall indemnify, defend and hold the Agent
harmless against and from all liability, loss, damage and expense (including,
without limitation, reasonable attorney's fees and disbursements), which the
Agent may or shall incur or be subject to by reason of this Agreement, or by
reason of any action taken in good faith by the Agent hereunder, and against and
from any and all claims and demands whatsoever which may be asserted against the
Agent by reason of any alleged obligation or undertaking on its part to perform
or discharge any of the terms, covenants and conditions contained in the
Advisory Agreement, other than claims and demands arising by reason of Agent's
own fraud, gross negligence or willful misconduct. Should the Agent incur any
such liability, loss, damage or expense, the amount thereof, together with
interest thereon at the rate of interest applicable from time to time under the
Note, shall be payable by Borrower to the Agent immediately upon demand.
7. Amendments, Etc. This Agreement cannot be amended except by an
agreement in writing, signed by the Agent, Borrower and Investment Manager, and
no provision hereof may be waived except by an instrument in writing signed by
the Agent.
8. Inspection; Books and Records. Investment Manager agrees that Agent
or its agents and any Lender may enter upon the premises of Investment Manager
at any time and from time to time, during normal business hours and upon
reasonable notice under the circumstances, and at any time at all on and after
the occurrence and during the continuance of an Event of Default,
6
<PAGE>
for the purposes of discussing the affairs, finances and business of any Credit
Party and any Hotel with any of the officers, employees and directors of
Investment Manager. Such officers, employees and directors shall truthfully and
fully explain the affairs, finances and business of such Credit Party or Hotel
to Agent or its agents and any Lender, as the case may be. At any time and from
time to time on and after the occurrence and during the continuance of an Event
of Default, Investment Manager shall, at Investment Manager's sole cost and
expense, deliver to Agent within five days of Agent's request all books,
records, files, correspondence and closing documents maintained by Investment
Manager with respect to any Credit Party and any Hotel.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10. Severability. If any provision of this Agreement or the application
thereof to any person or entity or circumstance shall, to any extent, be
illegal, invalid and/or unenforceable, the remainder of this Agreement or the
application of such provision to persons or entities or circumstances other than
those as to which it is illegal, invalid and/or unenforceable, as the case may
be, shall not be affected, and each provision of this Agreement shall be legal,
valid and enforceable to the extent permitted by law. The illegality, invalidity
and/or unenforceability of any provision of this Agreement in any jurisdiction
shall not affect the legality, validity and/or enforceability thereof in any
other jurisdiction.
11. Expenses. If any suit or other proceeding is instituted by the
Agent to enforce this Agreement (or any portion hereof), Borrower shall pay,
upon demand, all of the reasonable out-of-pocket costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
the Agent in connection therewith, together with interest at the Default Rate.
The obligations of Borrower under this Section 11 shall survive the expiration
or termination of this Agreement.
12. Headings. Headings used in this Agreement are for convenience of
reference only and do not constitute part of this Agreement for any purpose.
13. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW,
BORROWER AND INVESTMENT MANAGER HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING BROUGHT BY ANY PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS
AGREEMENT.
14. SUBMISSION TO JURISDICTION. INVESTMENT MANAGER HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
INVESTMENT MANAGER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING
7
<PAGE>
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
15. Cumulative Remedies. All rights and remedies set forth in this
Agreement are cumulative, and the Agent may recover judgment thereon, issue
execution therefor, and resort to every other right or remedy available at law
or in equity, without first exhausting and without affecting or impairing the
security of any right or remedy afforded hereby; and no such right or remedy set
forth in this Agreement shall be deemed exclusive of any of the remedies or
rights granted to the Agent in the Note, the Loan Agreement or any other Credit
Document. Nothing contained in this Agreement shall be deemed to limit or
restrict the rights and remedies of the Agent under any of the other documents
related to the Senior Obligations.
16. Borrower's Consent. Borrower has joined herein to evidence its
consent to all the agreements of Investment Manager contained in this Agreement.
17. Successors. This Agreement shall be binding upon and shall inure to
the benefit of each party hereto and their respective successors and assigns.
18. Counterparts. This Agreement may be executed in any number of
counterparts each of which, taken together, shall constitute one and the same
original.
19. Conflicts with Loan Agreement. Notwithstanding anything to the
contrary set forth elsewhere in this Agreement or in any other Credit Document,
this Agreement and such other Credit Documents are expressly made subject in
their entirety to the Credit Agreement and in the event of a conflict or
ambiguity created between the Credit Agreement and any provision herein (and/or
under any other Credit Document) or obligation of Borrower hereunder (and/or
under any other Credit Document), the terms of the Credit Agreement shall govern
and control.
20. Termination. Upon the Obligations being fully paid by Borrower in
accordance with the Loan Agreement, this Agreement shall be of no further
effect.
21. NO LIABILITIES OF TRUSTEES. THE DECLARATION OF TRUST OF BORROWER,
DATED MAY 12, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
BORROWER. ALL PERSONS DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
INVESTMENT MANAGER:
REIT MANAGEMENT & RESEARCH, INC.
a Delaware corporation
By: /s/ John G. Murray
-----------------------------------
Name: John G. Murray
Title: Executive Vice President
BORROWER:
HOSPITALITY PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ John G. Murray
-----------------------------------
Name: John G. Murray
Title: President
AGENT:
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH,
as Agent
By: /s/ Michael A. Seton
-----------------------------------
Name: Michael A. Seton
Title: Assistant Vice President
By: /s/ Johannes Boeckmann
-----------------------------------
Name: Johannes Boeckmann
Title: Vice President
9
<PAGE>
EXHIBIT A
ADVISORY AGREEMENT
A copy of the Advisory Agreement, dated as of January 31, 1998, between REIT
Management & Research, Inc. and Hospitality Properties Trust has been filed with
the Securities and Exchange Commission as an exhibit to Hospitality Properties
Trust's Current Report on Form 8-K dated February 11, 1998, which exhibit is
incorporated herein by reference.
EXHIBIT 10.37
21902 Lassen
Chatsworth, CA 91311
AGREEMENT OF PURCHASE AND SALE
between
PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P.
a Delaware limited partnership
("Patriot")
and
CHATSWORTH SUMMERFIELD ASSOCIATES, L.P.
a Kansas limited partnership
("Summerfield")
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE IA PART A..................................................................................... 6
1.1A Part B of this Agreement................................................................... 6
1.1B Part A of this Agreement................................................................... 6
ARTICLE I DEFINITIONS................................................................................ 1
1.1 Definitions................................................................................ 1
ARTICLE II PURCHASE AND SALE OF PROPERTY; DEPOSIT;
PAYMENT OF PURCHASE PRICE; TITLE........................................................... 8
2.1 Purchase and Sale.......................................................................... 8
2.2 Payment of Purchase Price.................................................................. 8
2.3 Deposit.................................................................................... 8
2.4 Submission Matters and Title Information................................................... 8
2.5 Availability of Information and Access..................................................... 9
ARTICLE III SUMMERFIELD'S REPRESENTATIONS
AND WARRANTIES............................................................................. 10
3.1 Organization and Power..................................................................... 10
3.2 Authorization and Execution................................................................ 10
3.3 Non-contravention.......................................................................... 10
3.4 No Special Taxes........................................................................... 11
3.5 Compliance with Existing Laws.............................................................. 11
3.6 Personal Property.......................................................................... 11
3.7 Operating Agreements....................................................................... 11
3.8 Insurance.................................................................................. 11
3.9 Condemnation Proceedings; Roadways......................................................... 11
3.10 Actions or Proceedings..................................................................... 12
3.11 Labor and Employment Matters............................................................... 12
3.13 Submission Matters......................................................................... 12
3.14 Bankruptcy................................................................................. 12
3.15 Hazardous Substances....................................................................... 13
3.16 Occupancy Agreements....................................................................... 13
3.17 Leased Property............................................................................ 14
3.18 Americans With Disabilities Act............................................................ 14
3.19 Structural Condition....................................................................... 14
3.20 Zoning and Platting........................................................................ 14
3.21 Access..................................................................................... 14
3.22 No Commitments............................................................................. 14
3.23 Summerfield Is Not a "Foreign Person"...................................................... 14
3.24 No Other Property Interests................................................................ 14
<PAGE>
3.25 Management Agreement....................................................................... 14
3.26 Development Agreement...................................................................... 15
3.27 Relationship to Certain Parties............................................................ 15
3.28 Liquor License............................................................................. 15
3.29 Improvements............................................................................... 15
3.30 Warranties and Guaranties.................................................................. 15
3.31 Limitations on Representations and Warranties.............................................. 15
ARTICLE IV PATRIOT'S REPRESENTATIONS AND WARRANTIES................................................... 16
4.1 Organization and Power..................................................................... 16
4.2 Authority of Patriot....................................................................... 16
4.3 Non-contravention.......................................................................... 16
4.4 Litigation................................................................................. 17
4.5 Submission Matters......................................................................... 17
4.6 Bankruptcy................................................................................. 17
ARTICLE V CONDITIONS PRECEDENT....................................................................... 17
5.1 As to Patriot's Obligations................................................................ 17
5.2 As to Summerfield's Obligations............................................................ 18
ARTICLE VI COVENANTS OF SUMMERFIELD................................................................... 19
6.1 Operating Agreements, Occupancy Agreements
and Management Agreement .................................................................. 19
6.2 Insurance.................................................................................. 20
6.3 Audited Statements......................................................................... 20
6.4 Operation of Properties Prior to Closing................................................... 20
6.5 No Marketing............................................................................... 22
6.6 Liens...................................................................................... 22
6.7 Corporate and Bulk Sales Clearance......................................................... 22
ARTICLE VII CLOSING.................................................................................... 23
7.1 Closing.................................................................................... 23
7.2 Summerfield's Deliveries................................................................... 23
7.3 Patriot's Deliveries....................................................................... 26
7.4 Mutual Deliveries.......................................................................... 27
7.5 Closing Costs.............................................................................. 27
7.6 Revenue and Expense Allocations............................................................ 27
7.7 Summerfield's Accounts Receivable.......................................................... 29
<PAGE>
ARTICLE VIII GENERAL PROVISIONS......................................................................... 30
8.1 Condemnation............................................................................... 30
8.2 Risk of Loss............................................................................... 30
8.3 Absence of Broker.......................................................................... 31
8.4 Confidentiality............................................................................ 31
8.5 Employees.................................................................................. 32
8.6 Investment Bankers......................................................................... 32
8.7 Radon Disclosure........................................................................... 32
ARTICLE IX LIABILITY OF PATRIOT, INDEMNIFICATION BY
SUMMERFIELD;DEFAULT; TERMINATION RIGHTS.................................................... 33
9.1 Expenses................................................................................... 33
9.2 Indemnification by Summerfield............................................................. 33
9.3 Indemnification by Patriot................................................................. 33
9.4 Waiver of Rights........................................................................... 34
9.5 Expiration of Representations, Warranties and Covenants.................................... 34
9.6 Deductible Amount.......................................................................... 34
9.7 Exclusivity................................................................................ 34
9.8 No Implied Representations................................................................. 35
9.9 Costs and Attorneys' Fees.................................................................. 35
9.10 Limitation of Liability.................................................................... 35
ARTICLE X TERMINATION AND ENFORCEMENT................................................................ 35
10.1 Termination Events......................................................................... 35
10.2 Termination Procedures..................................................................... 36
10.3 Effect of Termination - LIQUIDATED DAMAGES................................................. 36
10.4 Enforcement Events......................................................................... 37
ARTICLE XI MISCELLANEOUS PROVISIONS................................................................... 38
11.1 Completeness; Modification................................................................. 38
11.2 Assignments................................................................................ 38
11.3 Successors and Assigns..................................................................... 38
11.4 Days....................................................................................... 38
11.5 Governing Law.............................................................................. 38
11.6 Counterparts............................................................................... 38
11.7 Severability............................................................................... 38
11.8 Costs...................................................................................... 38
11.9 Notices.................................................................................... 39
11.10 Escrow Agent............................................................................... 40
11.11 Incorporation by Reference................................................................. 40
11.12 Further Assurances......................................................................... 40
11.13 No Partnership............................................................................. 40
11.14 Time of Essence............................................................................ 40
11.15 Signatory Exculpation...................................................................... 40
<PAGE>
11.16 Rules of Construction...................................................................... 41
</TABLE>
<PAGE>
AGREEMENT OF PURCHASE AND SALE - PART A
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made as of
this 18th day of March, 1998, between PATRIOT AMERICAN HOSPITALITY PARTNERSHIP,
L.P., a Delaware limited partnership ("Patriot"), and CHATSWORTH SUMMERFIELD
ASSOCIATES, L.P., a Kansas limited partnership ("Summerfield")
R E C I T A T I O N S:
A. Summerfield is the owner of the hotel property as identified in
Exhibit A1 attached hereto.
B. Patriot is desirous of purchasing the hotel property from
Summerfield and Summerfield is desirous of selling such hotel property to
Patriot, for the purchase price and upon the terms and conditions hereinafter
set forth.
C. It is intended that simultaneously with the execution hereof,
Patriot shall execute and deliver the Shimizu Purchase Agreements (as defined
herein).
D. After the execution and delivery of this Agreement, the partners of
SF Hotel Company, L.P. intend to execute and deliver the Contribution Agreement
(as defined herein) pursuant to which Patriot intends to acquire the management
business and brand names in the Property and in other properties which are the
subject of the Shimizu Purchase Agreement (as defined herein) together with all
the right, title and interest of the partners of SF Hotel Company, L.P. in
certain other real properties as more particularly detailed therein.
NOW, THEREFORE, in consideration of premises and in consideration of
the mutual covenants, promises and undertakings of the parties hereinafter set
forth, and for other good and valuable considerations, the receipt and
sufficiency of which is hereby acknowledged by the parties, it is agreed:
ARTICLE IA
PART A
1.1A Part B of this Agreement. Part B of this Agreement shall be
similar in form and substance to Part B in each of the Shimizu Purchase
Agreements and Part A is attached hereto to the extent that it consists of those
certain definitions, Schedules and Exhibits which are referred to in Part B but
which vary as between this Agreement and each of the Shimizu Purchase
Agreements.
1.1B Part A of this Agreement. The Schedules and Exhibits in Part A of
this Agreement appear as hereinafter set forth.
<PAGE>
IN WITNESS WHEREOF, Summerfield and Patriot have caused this Agreement
comprising both PART A and PART B hereof to be executed in their names by their
respective duly authorized representatives.
PATRIOT:
PATRIOT AMERICAN HOSPITALITY PARTNERSHIP L.P., a
Delaware limited partnership
By: PAH GP, Inc.
By: /s/ Michael Silverman
Name: Michael Silverman
Title: authorized signatory
Date of Execution: March 18, 1998
SUMMERFIELD:
CHATSWORTH SUMMERFIELD ASSOCIATES, L.P., a Kansas
limited partnership
By: SC Suites Corp., a Delaware corporation, a
general partner
By: /s/ Y. Takasaki
Name: Y. Takasaki
Title: Secretary and Treasurer
By: Summerfield Suites Holding Corporation, a
Delaware corporation, a general partner
By: /s/ B. Anthony Isaac
Name: B. Anthony Isaac
Title: President
Date of Execution: March 18, 1998
<PAGE>
SCHEDULE A1
PART 1
NAME OF SELLER
CHATSWORTH SUMMERFIELD ASSOCIATES, L.P.,
a Kansas limited partnership
PART 2
FF&E CASH RESERVE
Balance as of February 28, 1998 is $248,705.06
PART 3
PURCHASE PRICE
$10,006,248.00 of which $1,000,624.80 thereof is attributed to the
Tangible Personal Property (hereinafter defined)
PART 4
SURVEY
That survey of latest date prepared by Robert C. Olson (PLS 5490) of Psomas and
Associates pertaining to the Real Property.
<PAGE>
SCHEDULE A2
SHIMIZU PURCHASE AGREEMENTS
I Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Atlanta Buckhead
Summerfield Associates, L.P.
II Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Atlanta Perimeter
Summerfield Associates, L.P.
III Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Dulles Summerfield
Associates, L.P.
IV Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Malvern Summerfield
Associates, L.P.
V Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Orlando
International Summerfield Associates, L.P.
VI Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Orlando/Cypress
Pointe Summerfield Associates, L.P.
VII Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Princeton
Summerfield Associates, L.P.
VIII Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Westport Summerfield
Associates, L.P.
IX Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and San Bruno
Summerfield Associates, L.P.
X Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and San Jose Summerfield
Associates, L.P.
XI Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Schaumberg
Summerfield Associates, L.P.
XII Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Somerset Summerfield
Associates, L.P.
XIII Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Sunnyvale
Summerfield Associates, L.P.
XIV Agreement of Purchase and Sale of even date herewith by and between
Patriot American Hospitality Partnership, L.P. and Torrance Summerfield
Associates, L.P.
<PAGE>
SCHEDULE A3
OCCUPANCY AGREEMENTS
NONE
<PAGE>
SCHEDULE A4
OPERATING AGREEMENTS
1. Summerfield Suites Hotel - License Agreement dated as of April 7, 1997
between Summerfield Suites Management Company L.P., and Chatsworth
Summerfield Associates, L.P. to be replaced by License Agreement dated
as of Closing Date between Summerfield Suites Management Company, L.P.
and Summerfield HPT Lease Company, L.P.
<PAGE>
SCHEDULE A5
INSURANCE POLICIES
SEE ATTACHED
<PAGE>
SCHEDULE A6
PERSONAL PROPERTY LEASES
NONE
<PAGE>
SCHEDULE A7
<TABLE>
<CAPTION>
AUTHORIZATIONS
CHATSWORTH (SMR), CA
Payee Type of License Status
A. Permits Provided
<S> <C> <C>
City of Los Angeles Police Commission Permit Provided
City of Los Angeles Fire Permit Provided
City of Los Angeles Tax Registration Certificate Provided
State of California ABC Qualification of General Manager Provided
City of Los Angeles Certificate of Occupancy - Provided
Spa-Enclosure
City of Los Angeles Certificate of Occupancy - Provided
Hotel - 3 Story (Bldg. 4)?
City of Los Angeles Certificate of Occupancy - Provided
Pool Maintenance Bldg.
City of Los Angeles Certificate of Occupancy - Provided
Hotel - 2 story (Bldg. 3)
City of Los Angeles Certificate of Occupancy - Provided
Hotel - 2 story (Bldg. 2)
City of Los Angeles Certificate of Occupancy - Provided
Hotel - 3 story (Bldg. 6)
City of Los Angeles Certificate of Occupancy - Provided
Pool - Enclosure
City of Los Angeles Certificate of Occupancy - Provided
Hotel w/Office 3-story (Bldg. 1)
City of Los Angeles Certificate of Occupancy - Provided
Hotel - 3 story (Bldg. 5)
County of Los Angeles Hotel/Pool Provided
California State Board of Equalization Seller's Permit Provided
County of Los Angeles Public Health Operating Restaurant Provided
State of California ABC Type 42 On Sale Beer/Wine Provided
State of California ABC Duplicate Type 42 On Sale Beer/Wine Provided
County of Los Angeles Public Health Operating Pool Provided
B. Permits Not Provided or Expired
Appropriate Government Authority Any Spa permit, if applicable Not Provided
Appropriate Government Authority Federal Tax Stamp Permit Not Provided
</TABLE>
<PAGE>
SCHEDULE A8
DISCLOSURE SCHEDULE
SEE ATTACHED
<PAGE>
EXHIBIT A1
LEGAL DESCRIPTION
THAT PORTION OF LOT 1 OF TRACT NO. 4326, IN THE CITY OF LOS ANGELES, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON MAP RECORDED IN BOOK 48, PAGES 16
TO 19 INCLUSIVE OF MAPS, AND A PORTION OF LOT 1 OF TRACT NO. 25087, IN SAID
CITY, COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 757, PAGES 22 AND 23 OF
MAPS, AND A PORTION OF LOT 8 OF SECTION 19, CHATSWORTH PARK, IN SAID CITY,
COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 30, PAGE 91 OF MISCELLANEOUS
RECORDS, ALL IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS A
WHOLE AS FOLLOWS:
COMMENCING AT THE NORTHWESTERLY CORNER OF SAID LOT 1 OF TRACT NO. 25087; THENCE
ALONG THE NORTHERLY LINEN OF SAID LAST MENTIONED LOT 1, SOUTH 89 DEGREES 58
MINUTES 37.5 SECONDS EAST 130.00 FEET TO THE EASTERLY LINE OF THE WESTERLY
150.00 FEET OF SAID LOT 1 OF TRACT 4326; THENCE ALONG SAID EASTERLY LINE, NORTH
0 DEGREES 00 MINUTES 15 SECONDS WEST 154.58 FEET TO THE NORTHERLY LINE OF LAST
SAID LOT 1; THENCE ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58
MINUTES 15 SECONDS EAST 136.00 FEET TO THE POINT OF BEGINNING; THENCE
(1) PARALLEL WITH THE WESTERLY LINE OF LAST SAID LOT 1, SOUTH 00 DEGREES 00
MINUTES 15 SECONDS EAST 504.56 FEET TO THE NORTHERLY LINE OF LOT 2 OF
SAID TRACT NO. 4326; THENCE
(2) ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58 MINUTES
37.5 SECONDS EAST 233.35 FEET TO ITS INTERSECTION WITH A LINE LYING
519.35 FEET EASTERLY OF, AND PARALLEL WITH, MEASURED AT RIGHT ANGLES
FROM SAID WESTERLY LINE OF LOT 1 OF TRACT 4326; THENCE
(3) ALONG SAID LAST MENTIONED PARALLEL LINE, NORTH 00 DEGREES 00 MINUTES 15
SECONDS WEST 504.54 FEET TO SAID NORTHERLY LINE OF LOT 1 OF TRACT NO.
4326; THENCE
(4) ALONG SAID LAST MENTIONED NORTHERLY LINE, NORTH 89 DEGREES 58 MINUTES
15 SECONDS WEST 233.35 FEET TO THE POINT OF BEGINNING.
<PAGE>
EXHIBIT A2-1
21902 Lassen
Chatsworth, CA 91311
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS AGREEMENT, dated as of the _______ day of March, 1998 (the
"Effective Date"), by and between CHATSWORTH SUMMERFIELD ASSOCIATES, L.P., a
Kansas limited partnership ("Assignor"), and SUMMERFIELD HPT LEASE COMPANY,
L.P., a Kansas limited partnership ("Assignee"), provides:
WITNESSETH:
THAT for and in consideration of the sum of Ten Dollars ($10.00) cash
in hand paid, the covenants and promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as of the Effective Date as
follows:
(a) Assignment. Assignor hereby transfers and assigns to Assignee the
following, without warranty (except as appears in that certain Agreement of
Purchase and Sale between the parties dated of even date and pertaining to the
Property as hereinafter defined) to Assignee the following, to-wit:
(i) All of Assignor's right, title, interest and benefit,
if any, in, to, and under any and all licenses, permits, certificates
of occupancy, and similar documents pertaining, or applicable to, or in
any way connected with, the ownership or operation of the real property
described on Exhibit A attached hereto and made a part hereof for all
purposes (the "Property") and Assignor's use of the Property as a
hotel, including all improvements and amenities comprising a part of
the Property;
(ii) All right, title and interest and benefit of Assignor,
if any, in, to and under any and all rights, benefits, guaranties,
warranties, affidavits, lien waivers and agreements given heretofore or
due and with respect to the construction or composition of all
improvements comprising a part of the Property or to any appliances,
equipment, furnishings, fixtures or personal property comprising a part
of the Property, including, without limitation, all rights, guaranties,
and warranties inuring to the benefit of Assignor;
(iii) All right, title, and interest of Assignor, if any,
in and to certain (i) personal property leases including all amendments
and modifications thereto and subleases thereof, as listed on Exhibit B
attached hereto and made a part hereof for all purposes (collectively,
the "Leases"), together with all of Assignor's right, title and
interest in and to all security, escrow, breakage, refundable cleaning
fees and similar deposits and fees paid or due under the Leases and all
interest charges required by law to be accrued thereon, all rents,
issues, profits, rights of contract and otherwise with respect to the
Leases, and any estoppel or other similar certificates received by
Assignor and relating to the Leases;
(iv) All right, title, interests and benefits of Assignor,
if any, in and to all plans, specifications, drawings, surveys and
similar documents relating to the Property or to the construction of
buildings and other improvements thereon, thereover or thereunder, or
for the benefit of, or as an appurtenance to, all or any portion of the
Property;
<PAGE>
(v) All right, title, and interest of Assignor, if any, in
and to certain operating agreements relating to the Property, including
all amendments and modifications thereto, as listed on Exhibit C
attached hereto and made a part thereof for all purposes (collectively,
the "Operating Agreements");
(vi) All right, title, and interest of Assignor, if any, in
and to all occupancy agreements relating to the Property, including all
amendments and modifications thereto as listed on Exhibit D attached
hereto and made a part hereof for all purposes (collectively, the
"Occupancy Agreements"), together with all of Assignor's right, title
and interest in and to all deposits and fees paid or due under the
Occupancy Agreements and all interest charges required by law to be
accrued thereon, and all rents, issues, profits, rights of contract and
otherwise with respect to the Occupancy Agreements;
(vii) All right, title, and interest of Assignor, if any,
in and to the Intangible Personal Property, as defined in that certain
Transfer Agreement, by and between Assignee and Assignor dated March
___, 1998 (the "Transfer Agreement") relating to the Property and used
in connection with the ownership, operation, leasing, occupancy or
maintenance of the Property.
(viii) All right, title, and interest of Assignor, if any,
in and to all TWX numbers relating to the Property, being listed on
Exhibit E attached hereto and made a part hereof for all purposes
(collectively, the "TWX Numbers");
(ix) All right, title, and interest of Assignor, if any, in
and to all post office boxes relating to the Property, being more
particularly described on Exhibit F attached hereto and made a part
hereof for all purposes (collectively, the "P.O. Boxes"); and
(b) Assumption. In consideration of the assignments set forth in
paragraph (a) hereof and in accordance with the terms and conditions of the
Transfer Agreement, Assignee hereby assumes the Assumed Liabilities as defined
in the Transfer Agreement which includes, inter alia, the interests assigned in
paragraph (a) hereof (collectively, the "Assigned Interests") provided however
that notwithstanding anything herein to the contrary, the Assigned Interests do
not include any items which are capable of being leased to Tenant (as defined in
the PSA) and which are being assigned to and assumed by Patriot American
Hospitality Partnership L.P. ("PAHLP") pursuant to a certain Assignment and
Assumption Agreement of even date herewith relating to the Property by and
between Assignor and PAHLP.
(c) Further Assurances. Assignor agrees to execute or procure and
deliver to Assignee such other and further documents and instruments, or perform
such other acts as may be reasonably necessary to effect the assignment of the
Assigned Interests contained herein or otherwise evidence or effect the terms
and provisions of this Agreement.
(d) Governing Laws. This Agreement shall be governed by, and construed
and interpreted under, the laws of Delaware.
<PAGE>
(e) Successors and Assigns Bound and Benefitted. This Agreement and the
terms and provisions hereof shall inure to the benefit of, and be binding upon,
the respective successors and assigns of Assignor and Assignee.
(f) Counterparts. This Agreement may be executed and delivered in any
number of counterparts, each of which so executed and delivered shall be deemed
to be an original and all of which shall constitute one and the same instrument.
TO HAVE AND TO HOLD all of Assignor's right, title and interest in and
to the Assigned Interests, together with all rights, hereditaments and
appurtenances pertaining thereto, unto Assignee and Assignee's successors and
assigns forever; and Assignor does hereby bind itself and its successors and
assigns to warrant and defend subject to the terms and conditions of the
Transfer Agreement, all of Assignor's right, title and interest in and to the
Assigned Interests unto Assignee and Assignee's successors and assigns, against
every person whomsoever claiming or to claim the same or any part thereof, by,
through or under Assignor, but not otherwise.
IN WITNESS WHEREOF, Assignor and Assignee each has caused this
Agreement to be executed under seal by its duly authorized representative as of
the day and year first above written.
ASSIGNOR:
CHATSWORTH SUMMERFIELD
ASSOCIATES, L.P., a Kansas limited partnership
By: SC Suites Corp., a Delaware corporation, its
general partner
By:
Name:
Title:
By: Summerfield Suites Holding Corporation, a
Delaware corporation, its general partner
By:
Name:
Title:
Date of Execution:
<PAGE>
ASSIGNEE:
SUMMERFIELD HPT LEASE COMPANY, L.P.
a Kansas limited partnership
By: Summerfield HPT Lease Company LLC,
a Delaware LLC
By:
Name:
Title:
Date of Execution:
<PAGE>
EXHIBIT A ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
Legal Description
THAT PORTION OF LOT 1 OF TRACT NO. 4326, IN THE CITY OF LOS ANGELES, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON MAP RECORDED IN BOOK 48, PAGES 16
TO 19 INCLUSIVE OF MAPS, AND A PORTION OF LOT 1 OF TRACT NO. 25087, IN SAID
CITY, COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 757, PAGES 22 AND 23 OF
MAPS, AND A PORTION OF LOT 8 OF SECTION 19, CHATSWORTH PARK, IN SAID CITY,
COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 30, PAGE 91 OF MISCELLANEOUS
RECORDS, ALL IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS A
WHOLE AS FOLLOWS:
COMMENCING AT THE NORTHWESTERLY CORNER OF SAID LOT 1 OF TRACT NO. 25087; THENCE
ALONG THE NORTHERLY LINEN OF SAID LAST MENTIONED LOT 1, SOUTH 89 DEGREES 58
MINUTES 37.5 SECONDS EAST 130.00 FEET TO THE EASTERLY LINE OF THE WESTERLY
150.00 FEET OF SAID LOT 1 OF TRACT 4326; THENCE ALONG SAID EASTERLY LINE, NORTH
0 DEGREES 00 MINUTES 15 SECONDS WEST 154.58 FEET TO THE NORTHERLY LINE OF LAST
SAID LOT 1; THENCE ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58
MINUTES 15 SECONDS EAST 136.00 FEET TO THE POINT OF BEGINNING; THENCE
(1) PARALLEL WITH THE WESTERLY LINE OF LAST SAID LOT 1, SOUTH 00 DEGREES 00
MINUTES 15 SECONDS EAST 504.56 FEET TO THE NORTHERLY LINE OF LOT 2 OF
SAID TRACT NO. 4326; THENCE
(2) ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58 MINUTES
37.5 SECONDS EAST 233.35 FEET TO ITS INTERSECTION WITH A LINE LYING
519.35 FEET EASTERLY OF, AND PARALLEL WITH, MEASURED AT RIGHT ANGLES
FROM SAID WESTERLY LINE OF LOT 1 OF TRACT 4326; THENCE
(3) ALONG SAID LAST MENTIONED PARALLEL LINE, NORTH 00 DEGREES 00 MINUTES 15
SECONDS WEST 504.54 FEET TO SAID NORTHERLY LINE OF LOT 1 OF TRACT NO.
4326; THENCE
(4) ALONG SAID LAST MENTIONED NORTHERLY LINE, NORTH 89 DEGREES 58 MINUTES
15 SECONDS WEST 233.35 FEET TO THE POINT OF BEGINNING.
<PAGE>
EXHIBIT B ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
Personal Property Leases
None
<PAGE>
EXHIBIT C ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
Operating Agreements
CHATSWORTH (SMR), CA
OPERATING AGREEMENTS
1. Summerfield Suites Hotel - License Agreement dated as of April 7, 1997
between Summerfield Suites Management Company L.P., and Chatsworth
Summerfield Associates, L.P. to be replaced by License Agreement dated
of even date herewith between Summerfield Suites Management Company,
L.P. and Summerfield HPT Lease Company, L.P.
<PAGE>
EXHIBIT D ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
The Occupancy Agreements
None
<PAGE>
EXHIBIT E ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
The TWX Numbers
None
<PAGE>
EXHIBIT F ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
The P.O. Boxes
None
<PAGE>
EXHIBIT G ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
The Management Agreement
Management Agreement by and between Summerfield Suites Management Company, L.P.
and Chatsworth Summerfield Associates dated January 30, 1990 to be replaced by
Management Agreement of even date herewith by and between Summerfield Suites
Management Company, L.P. and Summerfield HPT Lease Company, L.P.
<PAGE>
EXHIBIT A2-2
21902 Lassen
Chatsworth, CA 91311
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS AGREEMENT, dated as of the _______ day of March, 1998 (the
"Effective Date"), by and between CHATSWORTH SUMMERFIELD ASSOCIATES, L.P., a
Kansas limited partnership ("Assignor"), and PATRIOT AMERICAN HOSPITALITY
PARTNERSHIP, L.P., a Delaware limited partnership ("Assignee"), provides:
WITNESSETH:
THAT for and in consideration of the sum of Ten Dollars ($10.00) cash
in hand paid, the covenants and promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as of the Effective Date as
follows:
(a) Assignment. Assignor hereby transfers and assigns to Assignee the
following, without warranty (except as appears in that certain Agreement of
Purchase and Sale between the parties dated of even date and pertaining to the
Property as hereinafter defined) to Assignee the following, to-wit:
(i) All of Assignor's right, title, interest and benefit,
if any, in, to, and under any and all licenses, permits, certificates
of occupancy, and similar documents pertaining, or applicable to, or in
any way connected with, the ownership or operation of the real property
described on Exhibit A attached hereto and made a part hereof for all
purposes (the "Property") and Assignor's use of the Property as a
hotel, including all improvements and amenities comprising a part of
the Property;
(ii) All right, title and interest and benefit of Assignor,
if any, in, to and under any and all rights, benefits, guaranties,
warranties, affidavits, lien waivers and agreements given heretofore or
due and with respect to the construction or composition of all
improvements comprising a part of the Property or to any appliances,
equipment, furnishings, fixtures or personal property comprising a part
of the Property, including, without limitation, all rights, guaranties,
and warranties inuring to the benefit of Assignor;
(iii) All right, title, and interest of Assignor, if any,
in and to certain (i) personal property leases including all amendments
and modifications thereto and subleases thereof, as listed on Exhibit B
attached hereto and made a part hereof for all purposes (collectively,
the "Leases"), together with all of Assignor's right, title and
interest in and to all security, escrow, breakage, refundable cleaning
fees and similar deposits and fees paid or due under the Leases and all
interest charges required by law to be accrued thereon, all rents,
issues, profits, rights of contract and otherwise with respect to the
Leases, and any estoppel or other similar certificates received by
Assignor and relating to the Leases;
<PAGE>
(iv) All right, title, interests and benefits of Assignor,
if any, in and to all plans, specifications, drawings, surveys and
similar documents relating to the Property or to the construction of
buildings and other improvements thereon, thereover or thereunder, or
for the benefit of, or as an appurtenance to, all or any portion of the
Property;
(v) All right, title, and interest of Assignor, if any, in
and to all TWX numbers relating to the Property, being listed on
Exhibit E attached hereto and made a part hereof for all purposes
(collectively, the "TWX Numbers");
(vi) All right, title, and interest of Assignor, if any, in
and to all post office boxes relating to the Property, being more
particularly described on Exhibit F attached hereto and made a part
hereof for all purposes (collectively, the "P.O. Boxes"); and
(b) Assumption. In consideration of the assignments set forth in
paragraph (a) hereof and in accordance with the terms and conditions of that
certain Agreement of Purchase and Sale by and between Assignor and Assignee
dated March ___, 1998 (the "PSA"), Assignee hereby assumes all of Assignor's
obligations arising and accruing from and after the Effective Date under any and
all of the interests assigned in paragraph (a) hereof (collectively, the
"Assigned Interests"), provided however that notwithstanding anything herein to
the contrary, Assignor is not transferring or assigning and Assignee is not
assuming hereunder any items used in the operation of the Hotel which are not
capable of being leased to Summerfield HPT Lease Company, L.P. ("Tenant")
pursuant to the Facility Lease (as defined in the PSA) and which are accordingly
being assigned to and assumed directly by Tenant pursuant to a certain other
Assignment and Assumption Agreement of even date herewith by and between
Assignor and Tenant.
(c) Further Assurances. Assignor agrees to execute or procure and
deliver to Assignee such other and further documents and instruments, or perform
such other acts as may be reasonably necessary to effect the assignment of the
Assigned Interests contained herein or otherwise evidence or effect the terms
and provisions of this Agreement.
(d) Governing Laws. This Agreement shall be governed by, and construed
and interpreted under, the laws of Delaware.
(e) Successors and Assigns Bound and Benefitted. This Agreement and the
terms and provisions hereof shall inure to the benefit of, and be binding upon,
the respective successors and assigns of Assignor and Assignee.
(f) Counterparts. This Agreement may be executed and delivered in any
number of counterparts, each of which so executed and delivered shall be deemed
to be an original and all of which shall constitute one and the same instrument.
TO HAVE AND TO HOLD all of Assignor's right, title and interest in and
to the Assigned Interests, together with all rights, hereditaments and
appurtenances pertaining thereto, unto Assignee and Assignee's
<PAGE>
successors and assigns forever; and Assignor does hereby bind itself and its
successors and assigns to warrant and defend subject to the terms and conditions
of the PSA, all of Assignor's right, title and interest in and to the Assigned
Interests unto Assignee and Assignee's successors and assigns, against every
person whomsoever claiming or to claim the same or any part thereof, by, through
or under Assignor, but not otherwise.
IN WITNESS WHEREOF, Assignor and Assignee each has caused this
Agreement to be executed under seal by its duly authorized representative as of
the day and year first above written.
ASSIGNOR:
CHATSWORTH SUMMERFIELD
ASSOCIATES, L.P., a Kansas limited partnership
By: SC Suites Corp., a Delaware corporation, its
general partner
By:
Name:
Title:
By: Summerfield Suites Holding Corporation, a
Delaware corporation, its general partner
By:
Name:
Title:
Date of Execution:
<PAGE>
ASSIGNEE:
PATRIOT AMERICAN HOSPITALITY
PARTNERSHIP, L.P., a Delaware limited
partnership
By: PAH GP, INC.
By:
Name:
Title:
Date of Execution:
<PAGE>
EXHIBIT A ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
Legal Description
THAT PORTION OF LOT 1 OF TRACT NO. 4326, IN THE CITY OF LOS ANGELES, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON MAP RECORDED IN BOOK 48, PAGES 16
TO 19 INCLUSIVE OF MAPS, AND A PORTION OF LOT 1 OF TRACT NO. 25087, IN SAID
CITY, COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 757, PAGES 22 AND 23 OF
MAPS, AND A PORTION OF LOT 8 OF SECTION 19, CHATSWORTH PARK, IN SAID CITY,
COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 30, PAGE 91 OF MISCELLANEOUS
RECORDS, ALL IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS A
WHOLE AS FOLLOWS:
COMMENCING AT THE NORTHWESTERLY CORNER OF SAID LOT 1 OF TRACT NO. 25087; THENCE
ALONG THE NORTHERLY LINEN OF SAID LAST MENTIONED LOT 1, SOUTH 89 DEGREES 58
MINUTES 37.5 SECONDS EAST 130.00 FEET TO THE EASTERLY LINE OF THE WESTERLY
150.00 FEET OF SAID LOT 1 OF TRACT 4326; THENCE ALONG SAID EASTERLY LINE, NORTH
0 DEGREES 00 MINUTES 15 SECONDS WEST 154.58 FEET TO THE NORTHERLY LINE OF LAST
SAID LOT 1; THENCE ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58
MINUTES 15 SECONDS EAST 136.00 FEET TO THE POINT OF BEGINNING; THENCE
(1) PARALLEL WITH THE WESTERLY LINE OF LAST SAID LOT 1, SOUTH 00 DEGREES 00
MINUTES 15 SECONDS EAST 504.56 FEET TO THE NORTHERLY LINE OF LOT 2 OF
SAID TRACT NO. 4326; THENCE
(2) ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58 MINUTES
37.5 SECONDS EAST 233.35 FEET TO ITS INTERSECTION WITH A LINE LYING
519.35 FEET EASTERLY OF, AND PARALLEL WITH, MEASURED AT RIGHT ANGLES
FROM SAID WESTERLY LINE OF LOT 1 OF TRACT 4326; THENCE
(3) ALONG SAID LAST MENTIONED PARALLEL LINE, NORTH 00 DEGREES 00 MINUTES 15
SECONDS WEST 504.54 FEET TO SAID NORTHERLY LINE OF LOT 1 OF TRACT NO.
4326; THENCE
(4) ALONG SAID LAST MENTIONED NORTHERLY LINE, NORTH 89 DEGREES 58 MINUTES
15 SECONDS WEST 233.35 FEET TO THE POINT OF BEGINNING.
<PAGE>
EXHIBIT B ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
Personal Property Leases
None
<PAGE>
EXHIBIT C ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
Operating Agreements
CHATSWORTH (SMR), CA
OPERATING AGREEMENTS
1. Summerfield Suites Hotel - License Agreement dated as of April 7, 1997
between Summerfield Suites Management Company L.P., and Chatsworth
Summerfield Associates, L.P. to be replaced by License Agreement dated
of even date herewith between Summerfield Suites Management Company,
L.P. and Summerfield HPT Lease Company, L.P.
<PAGE>
EXHIBIT D ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
The Occupancy Agreements
None
<PAGE>
EXHIBIT E ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
The TWX Numbers
None
<PAGE>
EXHIBIT F ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
The P.O. Boxes
None
<PAGE>
EXHIBIT G ATTACHED TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
The Management Agreement
Management Agreement by and between Summerfield Suites Management Company, L.P.
and Chatsworth Summerfield Associates dated January 30, 1990 to be replaced by
Management Agreement of even date herewith by and between Summerfield Suites
Management Company, L.P. and Summerfield HPT Lease Company, L.P.
<PAGE>
21901 Lassen
Chatsworth, CA 91311
EXHIBIT A3
BILL OF SALE
THE STATE OF CALIFORNIA ss.
ss.
COUNTY OF LOS ANGELES ss.
THIS BILL OF SALE, dated as of the day of March, 1998 (the "Effective
Date"), from CHATSWORTH SUMMERFIELD ASSOCIATES, L.P., a Kansas limited
partnership ("Summerfield") to PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P., a
Delaware limited partnership ("Patriot" which expression shall include its
successors and assigns), provides:
THAT for and in consideration of the conveyance made herein, the
consideration received therefor by Summerfield and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, as
of the Effective Date, Summerfield hereby grants, bargains, sells, assigns,
transfers, sets over and deliver to Patriot all of the right, title and interest
of Summerfield in and to all personal property, goods and chattels of every kind
and nature (collectively, the "Personal Property") used in connection with that
certain real estate described on Exhibit A attached hereto and made a part
hereof for all purposes, including without limitation, those items more
particularly described on Exhibit B attached hereto and made a part hereof for
all purposes, and also including without limitation, all right, title and
interest of Summerfield in and to all inventories of merchandise, supplies,
stocks and work in process, all machinery, furniture, fixtures and equipment of
every kind and type.
FURTHER, as of the Effective Date, Summerfield hereby covenants and
agrees to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon reasonable
request of Patriot, any and all agreements, instruments, papers, deeds, acts or
things, supplemental, confirmatory or otherwise, as may be reasonably required
by Patriot for the purpose of or in connection with acquiring or more
effectually vesting in Patriot or evidencing the vesting in Patriot of all of
the right, title and interest of Summerfield in and to the Personal Property.
Summerfield warrants that as of the Effective Date it is the owner of
the Personal Property, that the Personal Property is free from all liens and
encumbrances, and that Summerfield has the right to transfer title to and
deliver possession of the Personal Property to Patriot.
And Summerfield for itself, its successors and assigns, warrants, and
defends title to the Personal Property unto Patriot from and against all persons
whomsoever in accordance with the terms and provisions of that certain Agreement
of Purchase and Sale dated , 1998 by and between Patriot and Summerfield.
<PAGE>
IN WITNESS WHEREOF, Summerfield has caused this Bill of Sale to be
executed as of the day and year first above written.
Summerfield:
CHATSWORTH SUMMERFIELD
ASSOCIATES, L.P., a Kansas
limited partnership
(seal) By: SC Suites Corp., a Delaware
corporation, its general partner
By:
Name:
Title:
Date of Execution:
By: Summerfield Suites Holding
Corporation, a Delaware
corporation, its general partner
By:
Name:
Title:
Date of Execution:
<PAGE>
STATE OF ______________________ ss.
COUNTY OF _____________________ ss.
On ___________, 199__ before me, the undersigned, a Notary Public in
and for the State of California, duly commissioned and sworn, personally
appeared, __________________________, personally known to me (or proved on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s), acted, executed the instrument.
WITNESS my hand and official seal
Signature ____________________________________
STATE OF ______________________ ss.
COUNTY OF _____________________ ss.
On _____________, 199__ before me, the undersigned, a Notary Public in
and for the State of California, duly commissioned and sworn, personally
appeared, _____________________________ , personally known to me (or proved on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s), acted, executed the instrument.
WITNESS my hand and official seal
Signature ____________________________________
<PAGE>
Exhibit A
Legal Description
THAT PORTION OF LOT 1 OF TRACT NO. 4326, IN THE CITY OF LOS ANGELES, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON MAP RECORDED IN BOOK 48, PAGES 16
TO 19 INCLUSIVE OF MAPS, AND A PORTION OF LOT 1 OF TRACT NO. 25087, IN SAID
CITY, COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 757, PAGES 22 AND 23 OF
MAPS, AND A PORTION OF LOT 8 OF SECTION 19, CHATSWORTH PARK, IN SAID CITY,
COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 30, PAGE 91 OF MISCELLANEOUS
RECORDS, ALL IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS A
WHOLE AS FOLLOWS:
COMMENCING AT THE NORTHWESTERLY CORNER OF SAID LOT 1 OF TRACT NO. 25087; THENCE
ALONG THE NORTHERLY LINEN OF SAID LAST MENTIONED LOT 1, SOUTH 89 DEGREES 58
MINUTES 37.5 SECONDS EAST 130.00 FEET TO THE EASTERLY LINE OF THE WESTERLY
150.00 FEET OF SAID LOT 1 OF TRACT 4326; THENCE ALONG SAID EASTERLY LINE, NORTH
0 DEGREES 00 MINUTES 15 SECONDS WEST 154.58 FEET TO THE NORTHERLY LINE OF LAST
SAID LOT 1; THENCE ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58
MINUTES 15 SECONDS EAST 136.00 FEET TO THE POINT OF BEGINNING; THENCE
(1) PARALLEL WITH THE WESTERLY LINE OF LAST SAID LOT 1, SOUTH 00 DEGREES 00
MINUTES 15 SECONDS EAST 504.56 FEET TO THE NORTHERLY LINE OF LOT 2 OF
SAID TRACT NO. 4326; THENCE
(2) ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58 MINUTES
37.5 SECONDS EAST 233.35 FEET TO ITS INTERSECTION WITH A LINE LYING
519.35 FEET EASTERLY OF, AND PARALLEL WITH, MEASURED AT RIGHT ANGLES
FROM SAID WESTERLY LINE OF LOT 1 OF TRACT 4326; THENCE
(3) ALONG SAID LAST MENTIONED PARALLEL LINE, NORTH 00 DEGREES 00 MINUTES 15
SECONDS WEST 504.54 FEET TO SAID NORTHERLY LINE OF LOT 1 OF TRACT NO.
4326; THENCE
(4) ALONG SAID LAST MENTIONED NORTHERLY LINE, NORTH 89 DEGREES 58 MINUTES
15 SECONDS WEST 233.35 FEET TO THE POINT OF BEGINNING.
<PAGE>
EXHIBIT A4
GRANT DEED
RECORDING REQUESTED BY &
WHEN RECORDED MAIL TO:
__________________________________
__________________________________
__________________________________
Attention:________________________
MAIL TAX STATEMENTS TO:
__________________________________
__________________________________
__________________________________
================================================================================
(Space Above for Recorder's Use)
CHATSWORTH
GRANT DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
CHATSWORTH SUMMERFIELD ASSOCIATES, L.P., a Kansas limited partnership
("Grantor"), hereby grants to __________________________________, a __________
("Grantee"), the following described real property located in the City of Los
Angeles, County of Los Angeles, State of California:
Being more particularly described on "Exhibit A" attached hereto and by
this reference made a part hereof and together with all improvements
now or hereafter situated thereon, together with all rights,
privileges, appurtenances, remainders, reversions and benefits
thereunto in any wise appertaining or belonging.
This Grant Deed is made and accepted upon and subject to the covenants,
terms, and conditions of that certain Agreement of Purchase and Sale dated
___________, 1998, between Grantor and Grantee.
[SIGNATURES TO FOLLOW ON NEXT PAGE]
<PAGE>
Dated:___________, 1998
CHATSWORTH SUMMERFIELD ASSOCIATES, L.P., a
Kansas limited partnership
By: SC Suites Corp., a Delaware corporation,
its general partner
By:
Name:
Title:
By: Summerfield Suites Holding Corporation, a
Delaware corporation, its general partner
By:
Name:
Title:
<PAGE>
STATE OF __________________ ss.
COUNTY OF _________________ ss.
On ________, 199__ before me, the undersigned, a Notary Public in and
for the State of California, duly commissioned and sworn, personally appeared,
___________________________ , personally known to me (or proved on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s), acted, executed the instrument.
WITNESS my hand and official seal
Signature ______________________________
STATE OF __________________ ss.
COUNTY OF _________________ ss.
On __________, 199__ before me, the undersigned, a Notary Public in and
for the State of California, duly commissioned and sworn, personally appeared,
______________________ , personally known to me (or proved on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s), acted, executed the instrument.
WITNESS my hand and official seal
Signature ______________________________
<PAGE>
EXHIBIT A
Property Description
THAT PORTION OF LOT 1 OF TRACT NO. 4326, IN THE CITY OF LOS ANGELES, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON MAP RECORDED IN BOOK 48, PAGES 16
TO 19 INCLUSIVE OF MAPS, AND A PORTION OF LOT 1 OF TRACT NO. 25087, IN SAID
CITY, COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 757, PAGES 22 AND 23 OF
MAPS, AND A PORTION OF LOT 8 OF SECTION 19, CHATSWORTH PARK, IN SAID CITY,
COUNTY AND STATE, AS SHOWN ON MAP RECORDED IN BOOK 30, PAGE 91 OF MISCELLANEOUS
RECORDS, ALL IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS A
WHOLE AS FOLLOWS:
COMMENCING AT THE NORTHWESTERLY CORNER OF SAID LOT 1 OF TRACT NO. 25087; THENCE
ALONG THE NORTHERLY LINEN OF SAID LAST MENTIONED LOT 1, SOUTH 89 DEGREES 58
MINUTES 37.5 SECONDS EAST 130.00 FEET TO THE EASTERLY LINE OF THE WESTERLY
150.00 FEET OF SAID LOT 1 OF TRACT 4326; THENCE ALONG SAID EASTERLY LINE, NORTH
0 DEGREES 00 MINUTES 15 SECONDS WEST 154.58 FEET TO THE NORTHERLY LINE OF LAST
SAID LOT 1; THENCE ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58
MINUTES 15 SECONDS EAST 136.00 FEET TO THE POINT OF BEGINNING; THENCE
(1) PARALLEL WITH THE WESTERLY LINE OF LAST SAID LOT 1, SOUTH 00 DEGREES 00
MINUTES 15 SECONDS EAST 504.56 FEET TO THE NORTHERLY LINE OF LOT 2 OF
SAID TRACT NO. 4326; THENCE
(2) ALONG SAID LAST MENTIONED NORTHERLY LINE, SOUTH 89 DEGREES 58 MINUTES
37.5 SECONDS EAST 233.35 FEET TO ITS INTERSECTION WITH A LINE LYING
519.35 FEET EASTERLY OF, AND PARALLEL WITH, MEASURED AT RIGHT ANGLES
FROM SAID WESTERLY LINE OF LOT 1 OF TRACT 4326; THENCE
(3) ALONG SAID LAST MENTIONED PARALLEL LINE, NORTH 00 DEGREES 00 MINUTES 15
SECONDS WEST 504.54 FEET TO SAID NORTHERLY LINE OF LOT 1 OF TRACT NO.
4326; THENCE
(4) ALONG SAID LAST MENTIONED NORTHERLY LINE, NORTH 89 DEGREES 58 MINUTES
15 SECONDS WEST 233.35 FEET TO THE POINT OF BEGINNING.
<PAGE>
EXHIBIT A5
PRO-FORMA TITLE POLICY
SEE ATTACHED
<PAGE>
EXHIBIT A6
MANAGER ESTOPPEL CERTIFICATE
_____________, 1998
Summerfield HPT Lease Company L.P.
c/o Summerfield Hotel Corporation
8100 East 22nd Street, Building 500
Wichita, KS 67226
Attention: John Morse
Patriot American Hospitality Hospitality Properties Trust
Partnership, L.P. ("Patriot") c/o Sullivan and Worcester
c/o Locke Purnell Rain Harrell One Post Office Square
2200 Ross Avenue, Suite 2200 Boston, Massachusetts 02109
Dallas, Texas 75201-6776 Attention: Jennifer Clark, Esq.
Attention: J. Mitchell Bell, Esq.
Re: Management Agreement, (herein so called) dated
_______________, between _______________________________
("Summerfield") and Summerfield Suites Management Company,
L.P. ("Manager") with respect to __________________ Hotel
located in the City of ______________________,
___________________ County, _____________________ (the
"Hotel").
Gentlemen:
The undersigned Manager hereby warrants and represents as follows:
1. Manager is aware of the transactions contemplated by Patriot and its
assigns pursuant to (a) Agreement of Purchase and Sale dated _____,1998,
pertaining to the Hotel and made by and between Patriot and [insert name of
Hotel Owner] ( the "PSA") and (b) Contribution Agreement to be entered into by
Patriot, SF Hotel Company L.P. and The Seller Partners as therein defined (the "
Contribution Agreement").
2. The Management Agreement, a true and correct copy of which is
attached hereto as Exhibit A, is presently in full force and effect and has not
been amended, modified, or supplemented except as indicated in this estoppel
certificate. Except as otherwise stated herein, all capitalized terms herein
have the same meaning as that attributed to same in the Management Agreement.
3. The term of the Management Agreement is that period commencing
_________________, 19___ and terminating _______________,19__, with Manager
having the right to extend the term for ______ consecutive extension periods of
___ years each.
<PAGE>
4. The fees required to be paid Manager under the Management Agreement
are limited to the amounts set forth in Sections [insert relevant section
references] of the Management Agreement.
5. There are no fees, expense reimbursements, payments or other sums
payable by Summerfield to Manager pursuant to the Management Agreement which
arise from or are attributable to any period prior to the date of this letter.
6. There is currently no application for consent or approval pending
before Summerfield pursuant to the Management Agreement in respect of which
Manager is awaiting a response.
7. The Management Agreement represents the entire agreement between
Summerfield and Manager relating to the Hotel and there are no other agreements
or understandings relating thereto.
8. As of the date of this certificate, no Owner Terminating Events or
Operator Terminating Events have occurred, and Manager has no charge, lien,
cause of action, dispute or claim under the Management Agreement or otherwise,
against Summerfield. Manager confirms that (i) the acquisition of the Hotel by
Patriot or its assignee and (ii) the leasing of the Hotel by Patriot or its
assignee to an entity which is affiliated with Manager (the "Sale Leaseback
Transaction") shall not be deemed to be an Operator Terminating Event, as
defined in the Management Agreement, and Manager waives any entitlement in its
favor to terminate the Management Agreement arising therefrom. Manager also
confirms that neither the Sale Leaseback Transaction nor the transaction
contemplated by the Contribution Agreement will be deemed to give rise to the
Right of First Contract and Manager waives any entitlement in its favor arising
on account of the Sale Leaseback Transaction or the transactions contemplated by
the Contribution Agreement.
9. Neither Summerfield nor Manager is in default in any respect under
any of the terms, covenants and conditions of the Management Agreement and no
state of facts exists which, with the passage of time or the giving of notice,
or both, would constitute a default under the Management Agreement.
10. Manager unconditionally consents to the assignment by Summerfield
of the Management Agreement to Patriot or its assignee.
11. This certification is made knowing that Patriot, its successors and
assigns, are relying upon the representations herein made in acquiring the
Hotel.
<PAGE>
EXECUTED as of the day and year above written.
Manager:
Summerfield Suites Management Company, L.P.
By:__________________________________
Name:________________________________
Title:_______________________________
Address for Notice Purposes:
_____________________________________
_____________________________________
_____________________________________
Attachment:
Exhibit A - Management Agreement
<PAGE>
EXHIBIT A
MANAGEMENT AGREEMENT
<PAGE>
AGREEMENT OF PURCHASE AND SALE - PART B
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the indicated meanings:
"Act of Bankruptcy" shall mean if a party hereto or any general partner
thereof shall (a) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (b) admit in writing its inability to pay
its debts as they become due, (c) make a general assignment for the benefit of
its creditors, (d) file a voluntary petition or commence a voluntary case or
proceeding under the Federal Bankruptcy Code (as now or hereafter in effect),
(e) be adjudicated a bankrupt or insolvent, (f) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, (g) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case or proceeding under the Federal Bankruptcy
Code (as now or hereafter in effect), or (h) take any corporate or partnership
action for the purpose of effecting any of the foregoing; or if a proceeding or
case shall be commenced, without the application or consent of a party hereto or
any general partner thereof, in any court of competent jurisdiction seeking (1)
the liquidation, reorganization, dissolution or winding-up, or the composition
or readjustment of debts, of such party or general partner, (2) the appointment
of a receiver, custodian, trustee or liquidator for such party or general
partner or all or any substantial part of its assets, or (3) other similar
relief under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, and such proceeding or case
shall continue undismissed; or an order (including an order for relief entered
in an involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 consecutive
days.
"Agreement to Lease" shall mean that certain Agreement to Lease dated
of even date herewith, by and between HPTSHC Properties Trust and Summerfield
HPT Lease Company, L.P. with approved facility lease attached thereto pertaining
to the proposed leaseback of the Property after completion of the transaction
contemplated hereunder.
"Applicable Laws" shall mean any applicable building, zoning,
subdivision, environmental, health, safety or other governmental laws, statutes,
ordinances, resolutions, rules, codes, regulations, orders or determinations of
any Governmental Authority or of any insurance boards of underwriters (or other
body exercising similar functions), or any restrictive covenants or deed
restrictions affecting any Property or the ownership, operation, use,
maintenance or condition thereof.
"Assignment and Assumption Agreements" shall mean the assignment and
assumption agreements in the form of Exhibits A2-1 and A2-2 attached hereto.
"Authorizations" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body, department,
commission, board, bureau,
<PAGE>
instrumentality or officer, to be in force on the Effective Date or the Closing
Date with respect to the construction, ownership, operation, leasing,
maintenance, or use of the Property (hereinafter defined).
"Bill of Sale - Personal Property" shall mean the bill of sale
conveying title to the Tangible Personal Property from Summerfield to Patriot or
its designee (as Patriot shall specify) in the form of Exhibit A3 attached
hereto.
"Cal-FIRPTA Certificate" shall mean an affidavit from Summerfield under
Section 18662 of the California Revenue and Taxation Code, as amended,
certifying that Summerfield is a partnership as determined in accordance with
Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code.
"Closing" shall mean the Closing of the purchase of the Property
pursuant to this Agreement, and shall occur on the Closing Date.
"Closing Date" shall mean the date on which the Closing occurs which
shall be determined in accordance with Section 7.1.
"Closing Documents" shall mean the documents defined as such in Section
7.1 hereof.
"Contribution Agreement" shall mean that certain Contribution Agreement
which may be entered into by and between Patriot and SF Hotel Company, L.P.,
pursuant to which Patriot will acquire the management business and brand name in
the Property and each of the other properties as described in the Shimuzu
Purchase Agreements, together with all of the right, title and interest of the
partners of SF Hotel Company, L.P. in certain other real property as described
therein.
"Deed" shall mean the deed in the form of Exhibit A4 attached hereto.
"Deposit" shall mean the amount deposited with Summerfield by Patriot
pursuant to Section 2.3 hereof. The Deposit shall be held and used by
Summerfield in strict accordance with the terms and provisions of this
Agreement.
"Disclosure Schedule" shall mean Schedule A9 attached hereto and made a
part hereof.
"Development Agreement" shall mean with respect to the Property, the
agreement entered into by Summerfield which provided for the development of the
site thereof.
"Effective Date" shall mean the date this Agreement has been fully
executed and delivered by all parties hereto.
"Environmental Damages" shall mean all governmental or third-party
claims, judgments, damages, losses, penalties, fines, liabilities (including,
without limitation, punitive damages and
-2-
<PAGE>
strict liability), encumbrances, liens, costs and expenses of investigation and
defense of any claim, whether or not such is ultimately defeated, and of any
settlement or judgment, of whatever kind or nature, contingent or otherwise,
matured or unmatured, including, without limitation, attorneys' fees and
disbursements, remediation costs and consultants' fees, any of which arise as a
result of the existence of Hazardous Materials upon, about or beneath the
Property (except if such Hazardous Materials have migrated from offsite to
beneath the Property) or migrating or threatening to migrate from the Property,
or as a result of the existence of a violation of Environmental Requirements
pertaining to the Property.
"Environmental Requirements" shall mean (i) all applicable statutes,
regulations, rules, policies, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, and similar items, of all Governmental
Authorities, and (ii) all judicial, administrative and regulatory decrees,
judgments, directives and orders, in each case of (i) and (ii) relating to the
protection of human health or the environment from Hazardous Materials,
including, without limitation: (a) all requirements thereof, including, without
limitation, those pertaining to reporting, licensing, permitting, investigation
and remediation of emissions, discharges, releases or threatened releases of
Hazardous Materials into the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials; and (b) all requirements
pertaining to the protection of the health and safety of employees or the public
from Hazardous Materials.
"Escrow Agent" shall mean American Title Company, whose address is 6029
Belt Line Road, Suite 250, Dallas, Texas 75240 (telephone 972-789-8400, fax
972-789-8029).
"Expenses" shall mean expenses, trade payables and other items to be
prorated which are related to the ownership and operation of the Property which
are to be prorated pursuant to Section 7.6 hereof.
"FF&E Cash Reserves" shall mean the cash reserves maintained for the
furniture, fixtures and equipment attached to, located upon, or used in
connection with the ownership, maintenance, or operation of each Property, the
balance of which reserve as of February 28, 1998 is shown in Part 2 of Schedule
A1 attached hereto and made a part hereof.
"Financial Information" shall mean the financial information defined as
such in Section 3.12 hereof.
"FIRPTA Certificate" shall mean an affidavit from Summerfield under
Section 1445 of the Internal Revenue Code, as amended, certifying that it is not
a foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and
regulations promulgated thereunder), in form and substance satisfactory to
Patriot.
-3-
<PAGE>
"Governmental Authority" shall mean any federal, state, county,
municipal or other government or any governmental or quasi-governmental agency,
department, commission, board, bureau, officer or instrumentality, foreign or
domestic, or any of them, having jurisdiction over Summerfield, Patriot or the
Property.
"Hazardous Materials" shall mean any chemical substance: (i) which is
or becomes defined as a "hazardous substance," "hazardous waste," "hazardous
material," "pollutant," "contaminant," or "toxic," "explosive," "corrosive,"
"flammable," "infectious," "radioactive," "carcinogenic," or "mutagenic"
material under any law, regulation, rule, order, or other authority of the
federal, state or local governments, or any agency, department, commission,
board, or instrumentality thereof, regarding the protection of human health or
the environment from such chemical substances including, but not limited to, the
following federal laws and their amendments, analogous state and local laws, and
any regulations promulgated thereunder: the Clean Air Act, the Clean Water Act,
the Oil Pollution Control Act, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1986, the Emergency Planning and Community
Right to Know Act, the Solid Waste Disposal Act, the Resource Conservation and
Recovery Act, the Safe Drinking Water Act, the Federal Insecticide, Fungicide
and Rodenticide Act, and the Toxic Substances Control Act, including, without
limitation, asbestos, lead and gasoline and other petroleum products (including
crude oil or any fraction thereof); (ii) without limitation, which contains
gasoline, diesel fuel or other petroleum hydrocarbons; (iii) without limitation,
which contains drinking biphenyls or asbestos or asbestos-containing materials,
or lead, or urea formaldehyde foam insulation; or (iv) without limitation, radon
gas.
"Hotel" shall mean the hotel and related amenities located on the Land.
"Improvements" shall mean the Hotel and all other buildings,
improvements, fixtures and other items of real estate located on the Land.
"Insurance Policies" shall mean all policies of insurance maintained by
or on behalf of Summerfield pertaining to the Property, its operation (including
but not limited to policies dealing with workman's compensation and other
employee-related claims), or any part thereof together with those policies of
insurance which were maintained by or on behalf of Summerfield for the two (2)
years prior to the Effective Date.
"Intangible Personal Property" shall mean all intangible personal
property owned by Summerfield in its capacity as owner of the Property, and used
in connection with the ownership, operation, leasing, occupancy or maintenance
of the Property, including, without limitation, (1) the Authorizations, (2)
utility and development rights and privileges, business records, plans and
specifications pertaining to the Property, (3) any unpaid award for taking by
condemnation or any damage to the Real Property by reason of a change of grade
or location of or access to any street or highway which was not effective prior
to the Effective Date, (4) the share of the Rooms Ledger determined under
Section 7.6 hereof, and (5) the balance of the FF&E Cash Reserve as of the
Closing Date, excluding (a) any of the aforesaid rights which Patriot elects not
to acquire, (b) cash
-4-
<PAGE>
reserves for taxes and insurance, (c) the pre-Closing working capital on hand,
and (d) the pre-Closing accounts receivable for the Hotel; provided, however,
Intangible Personal Property shall not include any of the foregoing to the
extent transferred by Summerfield to Tenant pursuant to the Transfer Agreements.
"Land" shall mean the parcel of real estate lying and being in the
County, and State as more particularly described on Exhibit A1 attached hereto,
together with all easements, rights, privileges, remainders, reversions and
appurtenances thereunto belonging or in any way appertaining, and all of the
estate, right, title, interest, claim or demand whatsoever of Summerfield
therein, in the streets and ways adjacent thereto and in the beds thereof,
either at law or in equity, in possession or expectancy, now or hereafter
acquired.
"Leased Property" shall mean all leased items of Tangible Personal
Property.
"Loan Agreement" shall mean that certain Loan Agreement dated March 18,
1998, by and between Patriot American Hospitality Operating Partnership, L.P.
("PAHOP") and SF Hotel Company, L.P. pursuant to which PAHOP will lend and SF
Hotel Company, L.P. will borrow $17,083,333.00 in exchange for a note
convertible into a preferred partnership interest in SF Hotel Company, L.P., and
which note convertible is in approved form appended thereto.
"Management Agreement" shall mean the Management Agreements defined in
the Transfer Agreement relating to the Property.
"Manager" shall mean Summerfield Suites Management Company, L.P., in
its capacity as manager under the Management Agreement.
"Material Adverse Effect" shall mean in relation to Patriot any effect
that is materially adverse to the financial condition and results of operation
of the Property or a material increase in the obligations that Patriot is
required to assume in connection herewith and, in relation to Summerfield, any
effect that is materially adverse to the financial conditions and results of
operation of the Property or a material increase in the obligations that
Summerfield is obligated to retain in connection herewith.
"Occupancy Agreements" shall mean all leases, concession or occupancy
agreements (if any) in effect with respect to the Real Property under which any
tenants (other than Hotel guests) or concessionaires occupy space upon the Real
Property.
"Operating Agreements" shall mean all management, service, supply and
maintenance contracts, if any, in effect with respect to the Property and all
other contracts (other than the Development Agreement, the Occupancy Agreements,
and the Management Agreement) that affect the Property or are otherwise related
to the construction, ownership, operation, occupancy or maintenance of the
Property.
-5-
<PAGE>
"Owner's Title Policy" shall mean the owner's policy of title insurance
to be issued to Patriot by the Title Company in the form described in the Pro
Forma Title Policy (hereinafter defined).
"Permitted Liens" shall mean any liens (i) relating to or created,
arising or existing in connection with any tax or other governmental charge or
levy not yet due or, to the extent listed in the Disclosure Schedule, being
protested in good faith, (ii) relating to or created, arising or existing in
connection with any legal proceeding being contested in good faith, to the
extent listed in the Disclosure Schedule, (iii) other liens described in the
Disclosure Schedule, or (iv) any liens which are Permitted Title Exceptions.
"Permitted Title Exceptions" shall mean those exceptions to title to
the Real Property that appear on the Pro Forma Title Policy at Exhibit A5
attached hereto.
"Personal Property" shall mean collectively the Tangible Personal
Property and the Intangible Personal Property.
"Personal Property Leases" shall mean the leases pursuant to which
Summerfield leases, or will lease, the Leased Property.
"Pro Forma Title Policy" shall mean the pro forma policy of title
insurance in the form of Exhibit A5 attached hereto.
"Property" shall mean the Real Property and the Personal Property.
"Purchase Price" shall mean the sum specified in Part 3 of Schedule A1
attached hereto which sum shall be payable in the manner described in Section
2.2 hereof and subject to prorations as set forth herein.
"Real Property" shall mean the Land and the Improvements.
"Retained Liabilities" shall mean (except to the extent insured against
by the Owner's Title Policy) all obligations and liabilities (whether known,
unknown, accrued, absolute, matured, unmatured, contingent or otherwise),
created on or prior to the Closing Date (except those created by Patriot),
whether arising prior to or after Closing, (a) arising out of indebtedness of
Summerfield or indebtedness which affects the Property or any part thereof, (b)
arising out of contracts or agreements by which Summerfield is bound and which
are not the subject of prorations under Section 7.6 hereof, and (c) Summerfield
Expenses.
"Rooms Ledger" shall mean the final night's room revenue for the Hotel
(revenue from rooms occupied as of 12:01 a.m. on the Closing Date, exclusive of
food, beverage, telephone and similar charges which shall be retained by
Summerfield), including any sales taxes, room taxes or other taxes thereon.
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"Shimizu Purchase Agreements" shall mean collectively all of the
Agreements more particularly described in Schedule A2 attached hereto and made a
part hereof regarding the intended purchase by Patriot of the properties
described in each Agreement.
"Submission Matters" shall mean all items described in Section 2.4(a)
hereof.
"Summerfield Expenses" shall mean Expenses which are the responsibility
of Summerfield under Section 7.6.
"Summerfield's Organizational Documents" shall mean the current
partnership agreement and certificate of limited partnership and all amendments
thereto of each of the entities comprising Summerfield and its general partners.
"Survey" shall mean the survey described in Part 4 of Schedule A1
attached hereto and made a part hereof.
"Tangible Personal Property" shall mean the items of tangible personal
property consisting of all furniture, fixtures, equipment, machinery and other
personal property of every kind and nature (but expressly excluding cash-on-hand
and petty cash funds) located on or in the Real Property, used in the operation
of the Hotel and owned by Summerfield on the Closing Date, including, without
limitation, unopened inventories of food and beverages and the stock of linens,
towels, paper goods, soaps, cleaning supplies, china, glassware, silverware,
tablecloths, napkins, television sets, carpets, drapes, rugs, floor coverings,
mattresses, pillows, bed spreads and miscellaneous guest supplies, engineering
cleaning supplies and the like.
"Tenant" shall mean Summerfield HPT Lease Company, L.P.
"Title Company" shall mean Escrow Agent on behalf of Chicago Title
Insurance Company.
"Transfer Agreements" shall mean the agreements between Summerfield or
an affiliate of Summerfield and Tenant pertaining to the transfer of certain
assets and the prorations of certain liabilities associated with the Hotel.
"UCC Reports" shall mean the reports of searches of the Uniform
Commercial Code records of both the County and State in which the Property is
located.
"Utilities" shall mean public sanitary and storm sewers, natural gas,
telephone, public water facilities, electrical facilities and all other utility
facilities and services necessary or appropriate for the operation and occupancy
of the Property as a hotel.
"Warranties and Guaranties" shall mean all warranties and guaranties
relating to the Improvements or the Tangible Personal Property or any part
thereof, if any.
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ARTICLE II
PURCHASE AND SALE OF PROPERTY; DEPOSIT;
PAYMENT OF PURCHASE PRICE; TITLE
2.1 Purchase and Sale. Summerfield agrees to sell and Patriot agrees to
purchase the Property for the Purchase Price and in accordance with and subject
to, the terms and conditions hereinafter set forth.
2.2 Payment of Purchase Price. The Purchase Price shall be paid to
Summerfield at Closing by making a wire transfer of immediately available
federal funds to a designated account on behalf of Summerfield or other
applicable party as specified in writing by Summerfield.
2.3 Deposit. Within three (3) days after the execution hereof by both
Summerfield and Patriot and as a condition precedent to the effectiveness of
this Agreement, Patriot shall deliver to Escrow Agent cash in the amount of
$333,333.33 (the "Deposit"). Escrow Agent shall hold the Deposit pursuant to the
terms, conditions and provisions of this Agreement. The Deposit shall be either
(a) returned to Patriot pursuant to Article X or at Closing, or (b) delivered to
Summerfield pursuant to Article X hereto.
2.4 Submission Matters and Title Information.
(a) Summerfield has delivered the following to Patriot:
(1) Complete copies of all Occupancy Agreements in
effect as of the Effective Date, which are described on Schedule A3
attached hereto and made a part hereof.
(2) Complete copies of all Operating Agreements in
effect as of the Effective Date, which are described on Schedule A4
attached hereto and made a part hereof.
(3) A schedule setting forth the type and amounts of
insurance coverage maintained by Summerfield with respect to the
Property as of the Effective Date as described on Schedule A5 attached
hereto and made a part hereof.
(4) Financial and operating statements for the
Property through January, 1998 and for the previous calendar years in
which the Property was operating.
(5) The operating and capital expenditure budget for
the Property for the current calendar year and for the previous
calendar years in which the Property was operating.
(6) A complete list of all Leased Property and
complete copies of all Personal Property Leases, in effect as of the
Effective Date which are described on Schedule A6 attached hereto and
made a part hereof.
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(7) Copies of invoices for all ad valorem taxes and
special assessments assessed against the Property for the current
calendar year and prior calendar year, either statements for Utilities
payable for the current calendar year and the prior calendar year or
such other information as Patriot has reasonably required itemizing the
payment of utilities for the Hotel, and such information as Patriot has
reasonably required regarding current renditions or assessments on the
Property or notices relative to change in valuation for ad valorem
taxes.
(8) Copies of all parking, structural, mechanical or
other engineering reports or engineering studies related to the
Property together with copies of all soil tests, masonry tests,
percolation tests, water, oil, gas, mineral, radon, formaldehyde, PCB
or other environmental tests, audits or reports, market studies and
site plans related to the Property.
(9) Copies of complete sets of all architectural,
mechanical, structural and/or electrical plans and specifications used
in connection with the construction of or alterations or repairs to the
Property.
(10) Copies of complete sets of prototype plans for
the Property.
(11) A complete copy of the Management Agreement and
any other documents executed by Manager which modify the Management
Agreement or provide third parties with rights against Manager with
respect to the Management Agreement.
(12) Complete copies of the Authorizations listed at
Part A of Schedule A7 attached hereto and made a part hereof.
(13) Complete copies of audited financial statements
for the entities comprising Summerfield for the fiscal years ending
December 29, 1995 and January 3, 1997, and unaudited Financial
Information for calendar year 1997 and January 1998.
(14) Survey
(15) UCC Reports
(16) Pro Forma Title Policy.
2.5 Availability of Information and Access. Until the Closing, (a)
Summerfield shall, at its sole cost and expense, make available at Summerfield's
corporate offices in Wichita to Patriot, its agents, auditors, engineers.
attorneys, potential lessees and other designees, for inspection and/or copying,
copies of all correspondence, books, records, tax returns, bank statements,
financial statements, advance reservations and room bookings and function
bookings, rate schedules and any and all other materials or information relating
to the Property, and (b) upon reasonable prior notice, Summerfield shall make
available to Patriot, its agents, auditors, engineers, attorneys, potential
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lessees and other designees, the Property for purposes of inspection provided
that Patriot shall not cause any damage thereto and shall, in any event, be
liable to make good any damage which may thereby be occasioned by any act or
default on Patriot's part.
ARTICLE III
SUMMERFIELD'S REPRESENTATIONS AND WARRANTIES
To induce Patriot to enter into this Agreement and to acquire the
Property in the manner provided herein, Summerfield hereby makes the following
representations and warranties, upon each of which Summerfield acknowledges and
agrees that Patriot and its permitted assignees are entitled to rely and have
relied, subject to the limitation set forth in Section 3.31 hereof:
3.1 Organization and Power. Summerfield is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Kansas and is qualified to transact business in the state of Kansas and in the
state in which the Property is located, and has all requisite powers and all
governmental licenses, authorizations, consents and approvals to carry on its
business as now conducted and to enter into and perform its obligations
hereunder and under any document or instrument required to be executed and
delivered on behalf of Summerfield hereunder.
3.2 Authorization and Execution. This Agreement has been duly
authorized by all necessary action on the part of Summerfield, has been duly
executed and delivered by Summerfield, constitutes the valid and binding
agreement of Summerfield, and is enforceable in accordance with its terms
subject to applicable bankruptcy, reorganization, insolvency and moratorium laws
and general principles of equity. The person or persons executing this Agreement
on behalf of Summerfield have the authority to do so.
3.3 Non-contravention. The execution and delivery of, and the
performance by Summerfield of its obligations under, this Agreement do not and
will not contravene, or constitute a default under any of Summerfield's
Organizational Documents, any judgment, injunction, order or decree binding upon
Summerfield or to which the Property is subject, or, to Summerfield's knowledge,
do not and will not contravene, or constitute a default under, any provision of
applicable law or regulation, any agreement, or other instrument binding upon
Summerfield or to which the Property is subject, or result in the creation of
any lien or other encumbrance on any asset of Summerfield. Other than the
Transfer Agreements, there are no outstanding agreements (written or oral)
pursuant to which Summerfield, (or any predecessor to or representative of
Summerfield) has agreed to sell or has granted an option or right of first
refusal to purchase the Property or any part thereof except for those that will
be waived or released at or prior to Closing.
3.4 No Special Taxes. Summerfield has no knowledge of, nor has it
received any written notice of, any special taxes or assessments, including any
withholding taxes or "rollback" taxes, relating to the Property or any part
thereof or any planned public improvements that may result in a special tax or
assessment against the Property except as otherwise reflected in the Pro-Forma
Title
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Policy. Any taxes or assessments due and payable pursuant to the Permitted Title
Exceptions will be paid by the Closing Date. To the best of Summerfield's
knowledge, there are no taxes (whether special or otherwise) charges or
assessments affecting the Property which are subject to reinstatement or
escalation on a predetermined basis, specific to such Property.
3.5 Compliance with Existing Laws. Summerfield possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. Summerfield has no knowledge of any termination,
suspension, modification or limitation affecting any of the Authorizations.
Summerfield has no knowledge, nor has it received written notice within the past
two (2) years, of any existing or threatened violation of any provision of any
Applicable Laws including, but not limited to, those of environmental agencies
or insurance boards of underwriters with respect to the ownership, operation,
use, maintenance or condition of the Property, or any part thereof, or requiring
any repairs or alterations to the Property other than those that have been made
prior to the date hereof.
3.6 Personal Property. To Summerfield's knowledge, all of the Personal
Property, excluding the Leased Property, being conveyed by Summerfield hereunder
are free and clear of all liens and encumbrances, except for the Permitted
Liens, or those which will be discharged by Summerfield at Closing, and
Summerfield has good and merchantable title thereto and the right to convey same
in accordance with the terms of this Agreement.
3.7 Operating Agreements. There are no management, service, consulting,
brokerage, supply or maintenance contracts in effect with respect to the
Property other than the Operating Agreements described on Schedule A4 hereto.
Summerfield has performed in all material respects all of its obligations under
each of the Operating Agreements and there are no defaults under any of the
Operating Agreements. To Summerfield's knowledge, all other parties to the
Operating Agreements have performed all of their obligations thereunder in all
material respects, and are not in default thereunder in any material respect.
Summerfield has received no notice of any intention by any of the parties to any
of the Operating Agreements to cancel the same, nor has Summerfield canceled any
of same.
3.8 Insurance. All of Summerfield's Insurance Policies are valid and in
full force and effect and to Summerfield's knowledge Summerfield has complied
with all requirements of the insurance carriers of the Insurance Policies.
3.9 Condemnation Proceedings; Roadways. Summerfield has received no
written notice of any condemnation or eminent domain proceeding pending or
threatened against the Property or any part thereof. Summerfield has no
knowledge of any change in the route or width of any street or road adjacent to
or serving the Property or any part thereof, and Summerfield has received no
written notice of any proposed change in the route, grade or width of, or
otherwise affecting, any street or road adjacent to or serving the Property or
any part thereof.
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3.10 Actions or Proceedings. There is no action, suit or proceeding
pending or to Summerfield's knowledge threatened against or concerning
Summerfield or the Property in any court, before any arbitrator or before or by
any Governmental Authority which (a) in any manner raises any question affecting
the validity or enforceability of this Agreement, (b) could materially and
adversely affect the business, financial position or results of operations of
Summerfield or the Property, (c) could materially and adversely affect the
ability of Summerfield to perform its obligations hereunder, (d) could create a
lien on the Property or any part thereof or any interest therein, (e) is
material and concerns any past or present employee of Manager who worked at the
Hotel or (f) could otherwise adversely affect the Property or any part thereof
or any interest therein or the use, operation, condition or occupancy thereof.
3.11 Labor and Employment Matters. Neither Summerfield nor Manager is a
party to any oral or written employment contracts or agreements with respect to
the Property which will be binding on Patriot. There are no labor disputes or
organizing activities pending or threatened as to the operation or maintenance
of the Property, or any part thereof. Neither Summerfield nor Manager is a party
to any union or other collective bargaining agreement with employees employed in
connection with the ownership, operation or maintenance of the Property.
3.12 Financial Information and Submission Matters. All of Summerfield's
financial information, including, without limitation, all books and records and
financial statements ("Financial Information") fairly represents in all material
respects the financial condition of Summerfield and presents accurately the
results of the operations of the Property for the periods indicated. Between the
date of the last audited financial statement included in Summerfield's Financial
Information which was submitted to Patriot and the Effective Date, there has
been no event which (i) would be reported in footnotes to an audited financial
statement if one were available for such period or (ii) has resulted in a
Material Adverse Effect on the financial condition or in the operations of the
Property except to the extent disclosed in the unaudited financial statements
which have been delivered to Patriot prior to the Effective Date.
3.13 Submission Matters. All Submission Matters have been delivered by
Summerfield to Patriot pursuant to this Agreement and, with respect to
Submission Matters described in Section 2.4(a)(3), are true, correct and
complete in all material respects and, with respect to Submission Matters
described in Sections 2.4(a)(8), (9) and (10) Summerfield has no reason to
believe that they are not, true, correct and complete in all material respects.
Summerfield warrants the accuracy of replies as given by Summerfield (which
shall mean B. Anthony Isaac,
Roy R. Baker, John R. Morse and the General Manager of the Hotel) to Patriot,
its employees, agents and advisors in response to queries raised by them during
Patriot's due diligence investigation.
3.14 Bankruptcy. No Act of Bankruptcy has occurred with respect to
Summerfield.
3.15 Hazardous Substances. Summerfield has not received any written
notice that any previous owner, tenant, occupant or user of the Property has,
engaged in or permitted any operations or activities upon, or any use or
occupancy of the Property or any portion thereof, for the purpose
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of or in any way involving the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, dumping or disposal of any Hazardous
Materials on, under, in or about the Property in violation of any Applicable
Laws.
(a) Summerfield has not received any written notice nor has
knowledge that any Hazardous Materials have migrated from or to the
Property upon, about, or beneath other properties in violation of any
Environmental Requirements;
(b) None of the Property, nor the existing or, to
Summerfield's knowledge, prior uses, fail or failed to materially
comply with Environmental Requirements;
(c) To Summerfield's knowledge, there are no permits, licenses
or other authorizations which are required under any Environmental
Requirements with regard to the current uses of the Property and which
have not been obtained and complied with.
(d) Neither Summerfield nor, to Summerfield's knowledge, any
prior owner, occupant or user of the Property has received any written
notice concerning any alleged violation of Environmental Requirements
in connection with the Property or any liability for Environmental
Damages in connection with the Property for which Summerfield (or
Patriot after Closing) may be liable.
(e) To Summerfield's knowledge, no Hazardous Materials are
constructed, deposited, stored or otherwise located on, under, in or
about the Property in violation of any Environmental Requirements.
(f) There exists no writ, injunction, decree, order or
judgment outstanding, nor any lawsuit, claim, proceeding, citation,
summons, or, to Summerfield's knowledge investigation, pending or to
Summerfield's knowledge threatened, relating to any alleged violation
of Environmental Requirements on the Property, or relating to any
Environmental Damages.
(g) No above ground (or, to Summerfield's knowledge,
underground) chemical treatment or storage tanks, or gas or oil wells
are located on the Property.
3.16 Occupancy Agreements. There are no leases, concessions or
occupancy agreements in effect with respect to the Property other than the
Occupancy Agreements described on Schedule A3 hereto. Except as specifically
provided in the Occupancy Agreements, no tenant or concessionaire is entitled to
any rebates, allowances, free rent or rent abatement for any period after the
Closing of the transaction contemplated hereby. Summerfield has received no
notice of any intention by any of the parties to any of the Occupancy Agreements
to cancel the same, nor has Summerfield canceled any of same. No brokerage
commissions or compensation of any kind shall be due in connection with the
Occupancy Agreements, and the rents or revenues to be derived therefrom.
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3.17 Leased Property. All Personal Property Leases are in good standing
and free from default by Summerfield and, to Summerfield's knowledge, by the
lessor thereof.
3.18 Americans With Disabilities Act. Summerfield has received no
written notice that the Property is not in compliance with the Americans With
Disabilities Act.
3.19 Structural Condition. Except as disclosed in writing by
Summerfield to Patriot or Wyndham International, Inc. or their affiliates and as
contained in any engineering reports concerning the Property delivered to
Patriot, there is to Summerfield's knowledge, no latent material defect in the
Improvements or structural elements thereof, mechanical systems (including,
without limitation, all heating, ventilating, air conditioning, plumbing,
electrical, utility and sprinkler systems) therein, the utility system servicing
the Property and the roofs.
3.20 Zoning and Platting. Summerfield has no knowledge of any
proceeding and has received no written notice of any threatened action or
proceeding which could result in a modification or termination of the present
zoning of the Property.
3.21 Access. Summerfield has no knowledge of any pending and has
received no written notice of any threatened, governmental proceeding which
would limit or result in the termination of the Property's existing access to
and from public streets or roads.
3.22 No Commitments. To Summerfield's knowledge, no commitments have
been made to any Governmental Authority, utility company, school board, church
or other religious body, or any homeowners' association or any other
organization, group or individual, relating to the Property which would impose
an obligation upon Patriot to make any contribution or dedication of money or
land or to construct, install or maintain any improvements of a public or
private nature on or off the Property.
3.23 Summerfield Is Not a "Foreign Person". Summerfield is not a
"foreign person" within the meaning of Section 1445 of the Internal Revenue
Code, as amended (i.e., a foreign corporation, foreign partnership, foreign
trust, foreign estate or foreign person as those terms are defined in the
Internal Revenue Code and regulations promulgated thereunder).
3.24 No Other Property Interests. There are no property interests,
buildings, structures or other improvements or personal property that are owned
by Summerfield which are necessary for the operation of the Hotel, that are not
being conveyed pursuant to this Agreement.
3.25 Management Agreement. There are no management contracts in effect
with respect to the Property other than the Management Agreement. Summerfield
has performed in all material respects all of its obligations under the
Management Agreement and there are no defaults by Summerfield under the
Management Agreement. To Summerfield's knowledge, all other parties (whether one
or more) to the Management Agreement have performed all of their respective
obligations thereunder in all material respects, and are not in default
thereunder in any material
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respect. Summerfield has received no written notice of any intention by any of
the parties to the Management Agreement to cancel the same, nor has Summerfield
canceled the same.
3.26 Development Agreement. There is no Development Agreement currently
in effect with respect to the Property. There are no outstanding obligations to
be performed by any of the parties to any previous Development Agreement and, to
the extent that same may have existed, such Development Agreement may be
regarded as of the Effective Date hereof as having been performed in full and of
no further force or effect.
3.27 Relationship to Certain Parties. Summerfield does not, to its
knowledge, have a direct or indirect relationship to the Central States,
Southeast and Southwest Areas Pension Fund within the meaning of Section
514(c)(9)(B)(iv) of the Internal Revenue Code of 1986, as amended. The list of
partners in Summerfield as delivered by Summerfield to Patriot is true, correct
and complete.
3.28 Liquor License. Summerfield possesses all liquor licenses,
alcoholic beverage licenses and other permits and Authorizations necessary to
continue operating the facilities presently located in the Hotel and all such
liquor licenses, alcoholic beverage licenses and other permits and
Authorizations are valid and are held in the names of the operators of such
businesses or affiliates thereof.
3.29 Improvements. All Improvements have been constructed and are
owned, used and operated in accordance with the requirements of the Permitted
Title Exceptions.
3.30 Warranties and Guaranties. Summerfield shall not, on or before
Closing, release or modify the Warranties and Guaranties, if any, except with
the prior written consent of Patriot, which consent shall not be unreasonably
withheld or delayed and which shall be deemed given if not given or refused
within five (5) business days of Summerfield's request therefor in writing.
3.31 Limitations on Representations and Warranties. Each of the
representations and warranties contained in this Article III and its various
subparagraphs are intended for the benefit of Patriot and may be waived in whole
or in part, by Patriot, but only by an instrument in writing signed by Patriot.
Each of the representations and warranties shall be deemed to be modified by
such matters disclosed by (a) the Submission Matters, (b) Patriot's own due
diligence investigations prior to the Effective Date, and (c) the Disclosure
Schedule. All rights and remedies arising in connection with the untruth or
inaccuracy of any such representations and warranties as of the Closing Date
shall survive the Closing. Patriot shall promptly notify Summerfield of an
apparent untruth or inaccuracy regarding a representation or warranty given by
Summerfield hereunder if it learns of such inaccuracy following the Effective
Date from its own due diligence activities. Summerfield, at its sole cost and
expense, shall then have until the Closing Date to cure such matters to
Patriot's satisfaction, if Summerfield so elects. If Summerfield gives Patriot
written notice prior to Closing of the untruth or inaccuracy of any
representation or warranty, or Patriot otherwise obtains actual knowledge prior
to Closing of the untruth or inaccuracy of any representation or
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warranty, and Patriot nevertheless elects to close this transaction, Patriot
shall be entitled to exercise all available remedies for such breach as set
forth in Article IX hereof (subject to the condition that Patriot shall have
given Summerfield prompt written notice of such untruth or inaccuracy and the
above opportunity to cure). Any such written notice from Summerfield to Patriot
shall state in the first paragraph thereof and in all capitalized letters that
"THIS NOTICE IS GIVEN PURSUANT TO THE PURCHASE AND SALE AGREEMENT MADE AS OF
MARCH 18, 1998 AND RELATES TO THE UNTRUTH OR INACCURACY OF SUMMERFIELD'S
REPRESENTATIONS OR WARRANTIES." Patriot shall be deemed to have actual knowledge
of the untruth or inaccuracy of any representation or warranty only if such
matters are disclosed by (a) the Submission Matters, (b) Patriot's due diligence
investigation prior to the Effective Date, or (c) Disclosure Schedule and
Patriot receives written notice from Summerfield satisfying the foregoing
requirements. Except to the extent otherwise expressly provided in the second
sentence of this Section, no written notice, investigation, audit, inspection,
review or the like shall be deemed to terminate the effect of any such
representations, warranties and covenants, it being understood that Patriot has
the right to rely thereon and that each such representation and warranty
constitutes a material inducement to Patriot to execute this Agreement and to
close the transaction contemplated hereby and to pay the Purchase Price to
Summerfield.
Whenever the term "to Summerfield's knowledge" or "known to
Summerfield" is used or reference to Summerfield's belief or reason to believe
is made in this Agreement or in any representations and warranties given to
Patriot at closing, such knowledge or belief shall be the actual knowledge or
belief of B. Anthony Isaac, Roy R. Baker, John R. Morse, and the general manager
of the Hotel only, without any inquiry.
ARTICLE IV
PATRIOT'S REPRESENTATIONS AND WARRANTIES
To induce Summerfield to enter into this Agreement and to sell the
Property to Patriot, Patriot hereby makes the following representations and
warranties, upon each of which Patriot acknowledges and agrees that Summerfield
is entitled to rely and has relied:
4.1 Organization and Power. Patriot is duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
partnership powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and to enter into
and perform its obligations under this Agreement and any document or instrument
required to be executed and delivered on behalf of Patriot hereunder.
4.2 Authority of Patriot. This Agreement has been duly authorized by
all necessary action on the part of Patriot, has been duly executed and
delivered by Patriot, constitutes the valid and binding agreement of Patriot and
is enforceable in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency and moratorium laws and general principles of equity.
The person executing this Agreement on behalf of Patriot has the authority to do
so.
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4.3 Non-contravention. The execution and delivery of this Agreement and
the performance by Patriot of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, or any agreement, judgment, injunction, order, decree or other
instrument binding upon Patriot or result in the creation of any lien or other
encumbrance on any asset of Patriot.
4.4 Litigation. There is no action, suit or judicial or administrative
proceeding, pending or to Patriot's knowledge threatened, against or affecting
Patriot in any court or before any arbitrator or before any Governmental
Authority which (a) in any manner raises any question affecting the validity or
enforceability of this Agreement, (b) could materially and adversely affect the
business, financial position or results of operations of Patriot, and (c) could
materially and adversely affect the ability of Patriot to perform its
obligations hereunder.
4.5 Submission Matters. Patriot confirms that the Submission Matters
which it received prior to the Effective Date are satisfactory in all material
respects. Patriot acknowledges receipt of all of the items listed in the
Schedules attached hereto and, to the extent that there are additional items
included in the Submission Matters which are not listed in the Schedules
attached hereto, Patriot confirms that it is not aware of any items which have
not been received by it but which should have been furnished to it.
4.6 Bankruptcy. No Act of Bankruptcy has occurred with respect to
Patriot.
Wherever the term "to Patriot's knowledge" or "known to Patriot" is used in this
Agreement or in any representations and warranties given to Summerfield at
Closing, such knowledge shall be the actual knowledge of Michael Silverman,
Diane Parmerlee and Anne Raymond only, without any further inquiry.
ARTICLE V
CONDITIONS PRECEDENT
5.1 As to Patriot's Obligations. Patriot's obligation to purchase the
Property is subject to the satisfaction of the following conditions precedent:
(a) Summerfield's Deliveries. Summerfield shall have delivered
to or for the benefit of Patriot, on or before the Closing Date, all of the
documents and other information required of Summerfield pursuant to Sections 7.2
and 7.4 hereof.
(b) Representations, Warranties and Covenants: Obligations of
Summerfield. All of Summerfield's representations and warranties (set forth in
Article III) shall be true and correct in all respects as of the Closing Date as
if then made (provided that, for purposes of determining the accuracy of such
warranties and representations, any inaccuracy that does not have a Material
Adverse Effect in relation to Patriot shall be disregarded); Summerfield shall
have performed in all respects all of its covenants and other obligations under
this Agreement (provided that, for purposes
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of determining the compliance by Summerfield of such covenants as of the Closing
Date, any non-compliance by Summerfield that does not have a Material Adverse
Effect in relation to Patriot shall be disregarded); and none of the following
events have occurred with respect to the Property which could in Patriot's
reasonable judgment, materially and adversely affect the Property:
(1) a structural failure causing human fatalities;
(2) human fatalities caused by disease which is
specifically identified with the Property such as the occurrence of
Legionnaires disease; and
(3) human fatalities caused by the failure of
life/safety systems.
(c) Title Insurance. The commitment of Title Company to issue
the Owner's Title Policy to Patriot.
(d) Shimizu Purchase Agreements and Transfer Agreements. The
simultaneous consummation of the purchases contemplated by the Shimizu Purchase
Agreements and the Transfer Agreements, other than due to (a) the failure on the
part of Patriot to comply with or perform its obligations thereunder, or (b) the
occurrence of Patriot's election to terminate any Shimizu Purchase Agreement
under Section 8.1 or Section 8.2 thereof (and the termination of the related
Transfer Agreement), or (c) the occurrence of Patriot's election to terminate
one (1) Shimizu Purchase Agreement pursuant to Section 10.1(c) of such Agreement
(and the termination of the related Transfer Agreement).
(e) Agreement to Lease. The execution and delivery of the
Agreement to Lease by the parties hereto so that same is in full force and
effect and, on the Closing Date, the performance by Tenant (as defined therein)
of its obligations thereunder and the concurrent satisfaction of the conditions
precedent therein to closing thereunder and the execution and delivery by Tenant
of the Facility Lease (as defined therein).
(f) Loan Agreement. The execution and delivery of the Loan
Agreement by the parties thereto so that same is in full force and effect and,
on the Closing Date, the performance by the Borrower (as defined therein) of its
obligations thereunder and execution by Borrower of the Note (as defined
therein).
Each of the conditions contained in this Section 5.1 are intended for the
benefit of Patriot and may be waived in whole or in part, by Patriot, but only
by an instrument in writing signed by Patriot.
5.2 As to Summerfield's Obligations. Summerfield's obligations
hereunder are subject to the satisfaction of the following conditions precedent:
(a) Patriot's Deliveries. Patriot shall have delivered to or
for the benefit of Summerfield, on or before the Closing Date, the Purchase
Price and all of the documents and other
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payments required of Patriot pursuant to Sections 7.3 and 7.4 hereof.
(b) Representations, Warranties and Covenants; Obligations of
Patriot. All of Patriot's representations and warranties made in this Agreement
shall be true and correct in all respects as of the Closing Date as if then made
(provided, for purposes of determining the accuracy of such warranties and
representations any inaccuracy that does not have a Material Adverse Effect on
Summerfield shall be disregarded) and Patriot shall have performed in all
material respects all of its covenants and other obligations under this
Agreement (provided, for purposes of determining the compliance by Patriot with
such covenants as of the Closing Date, any non-compliance by Patriot that does
not have a Material Adverse Effect in relation to Summerfield shall be
disregarded).
(c) Shimizu Purchase Agreements and Transfer Agreements. The
simultaneous consummation of the purchases contemplated by the Shimizu Purchase
Agreements and the Transfer Agreements, other than due to (a) the failure on the
part of Summerfield to comply with or perform its obligations thereunder, or (b)
the occurrence of Patriot's election to terminate any Shimizu Purchase Agreement
under Section 8.1 or Section 8.2 thereof (and the termination of the related
Transfer Agreement), or (c) the occurrence of Summerfield's election to
terminate one (1) Shimizu Purchase Agreement pursuant to Section 10.1(d) of such
Agreement (and the termination of the related Transfer Agreement).
(d) Agreement to Lease. The execution and delivery of the
Agreement to Lease by the parties hereto so that same is in full force and
effect and, on the Closing Date, the performance by HPT of its obligations
thereunder and the execution and delivery by Landlord of the Facility Lease (as
defined therein).
(e) Loan Agreement. The execution and delivery of the Loan
Agreement by the parties thereto so that same is in full force and effect and,
on the Closing Date, the performance by PAHOP of its obligations thereunder and
funding of the Loan by PAHOP.
Each of the conditions contained in this Section 5.2 are intended for the
benefit of Summerfield and may be waived in whole or in part, by Summerfield,
but only by an instrument in writing signed by Summerfield.
ARTICLE VI
COVENANTS OF SUMMERFIELD
To induce Patriot to enter into this Agreement and to purchase the
Property, and to pay the Purchase Price therefor, Summerfield covenants and
agrees to the following:
6.1 Operating Agreements, Occupancy Agreements and Management
Agreement. Summerfield shall not change, modify, extend, renew or terminate any
existing, or enter into any, new Occupancy Agreements, Operating Agreements, and
Management Agreement, maintenance or repair contract, supply contract, lease in
which it is lessee or other agreements with respect to the
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Property, nor shall Summerfield enter into any agreements modifying the
Operating Agreements, Occupancy Agreements, and Management Agreement unless (a)
any such agreement or modification will not bind Patriot or the Property after
the date of Closing or (b) Summerfield has obtained Patriot's prior written
consent to such agreement or modification, which consent shall not be
unreasonably withheld or delayed and which shall be deemed given if not given or
refused within five (5) business days of Summerfield's request therefor in
writing. Summerfield agrees not to cancel any Operating Agreements unless
Patriot requests in writing that one or more should be terminated. Summerfield
shall not apply all or any part of the security or damage deposit of a tenant
under any Occupancy Agreement to obligations of such tenant except in the
ordinary course of business unless such tenant has vacated its portion of the
Property as of the Closing Date. Patriot and Summerfield hereby acknowledge that
Tenant shall, pursuant to the Transfer Agreements, assume the Operating
Agreements, and the Management Agreement (collectively, the "Agreements") that
are not terminated by Patriot pursuant to the terms hereof (all of the
Agreements not so terminated being herein called the "Assumed Agreements"). With
respect to the Assumed Agreements, Tenant shall be required at Closing to assume
all obligations thereunder accruing from and after the Closing Date.
Notwithstanding anything to the contrary set forth herein, the existing
Management Agreement between Summerfield and Manager shall be terminated and
shall be replaced by the Management Agreement to be entered into as of the
Closing Date.
6.2 Insurance. Summerfield shall pay or cause to be paid all premiums
on, and shall not allow the cancellation or expiration of any Insurance Policies
unless such policy is replaced, without any lapse of coverage, by another policy
or policies providing coverage at least as extensive as the policy or policies
being replaced.
6.3 Audited Statements. Summerfield has delivered to Patriot copies of
the audited financial statements for the fiscal years ending December 29, 1995
and January 3, 1997, and shall cooperate with Patriot's representatives and
independent public accountants to enable them to contact the auditors who
prepared such audited financial statements and to obtain, at Patriot's expense,
a reissuance of such audited financial statements in the same form and content
as presented to Patriot. Summerfield shall pay for the cost of preparation of
audited financial statements for the current fiscal year and shall ensure that
such audited financial statements shall be furnished to Patriot no later than
March 31, 1998.
6.4 Operation of Properties Prior to Closing. Summerfield covenants and
agrees with Patriot that, between the Effective Date (or such other date as
specified below) and the Closing Date:
(a) Subject to the restrictions contained herein, Summerfield
shall operate the Property in the same manner in which it has been operated
prior to the execution of this Agreement, so as to keep such Property and the
Improvements and the Tangible Personal Property (including but not limited to
the mechanical systems, plumbing, electrical, wiring, appliances, fixtures,
heating, air conditioning and ventilating equipment, elevators, boilers,
equipment, roofs, structural members and furnaces) in good condition, reasonable
wear and tear excepted, and so as to maintain the
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existing caliber of the Hotel operations conducted at the Property and the
reasonable good will of all tenants of the Property and all employees, guests
and other customers of the Hotel.
(b) Summerfield shall maintain its books of account and
records in the usual, regular and ordinary manner, in accordance with sound
accounting principles applied on a basis consistent with the basis used in
keeping its books in prior years.
(c) Summerfield shall maintain in full force and effect all
Insurance Policies.
(d) Summerfield shall use and operate the Property in
compliance in all material respects with Applicable Laws and the requirements of
any mortgage, lease, Occupancy Agreement, Operating Agreement and Insurance
Policy affecting the Property.
(e) Summerfield shall cause to be paid prior to delinquency
all ad valorem, occupancy and sales taxes due and payable with respect to the
Property or the operation of the Hotel and may, in good faith, contest or seek
reimbursement of taxes paid; provided that such contest does not subject the
Property to any potential liability or lien and does not subject Patriot to any
potential liability in the event of an unsuccessful or unsatisfactory outcome to
the contest.
(f) Summerfield shall not permit the inventory of food,
beverages, stock of linens, towels, paper goods, soaps, cleaning supplies,
china, glassware, silverware, table cloths,
napkins, miscellaneous guest supplies and engineering cleaning supplies
constituting a portion of the Tangible Personal Property to be diminished other
than as a result of the ordinary and necessary operation of the Hotel by
Summerfield.
(g) Summerfield shall not remove or cause or permit to be
removed any part or portion of the Real Property or the Tangible Personal
Property without the express written consent of Patriot unless the same is
replaced, prior to Closing, with similar items of at least equal suitability,
quality and value, free and clear of any liens or security interests other than
Permitted Liens.
(h) Summerfield and Manager shall continue to use commercially
reasonable efforts to take guest room reservations and to book functions and
meetings and otherwise to promote the business of the Property or any of them in
generally the same manner as Summerfield and Manager did prior to the execution
of this Agreement; and all advance room bookings and reservations and all
meetings and function bookings shall be booked at rates, prices and charges
heretofore customarily charged by Summerfield or Manager for such purposes, and
in accordance with Summerfield's or Manager's published rate schedules.
(i) Summerfield shall not make any agreements, other than
those described in subparagraph (h) above, which shall be binding upon Patriot
with respect to the Property or that otherwise cannot be terminated without
penalty upon thirty (30) days notice unless approved by Patriot pursuant to
Section 6.1.
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(j) Summerfield shall promptly deliver to Patriot upon
Patriot's request such reports showing the revenue and expenses of the Hotel and
all departments thereof, together with such periodic information with respect to
room reservations and other bookings, as Summerfield customarily keeps or
receives internally for its own use.
(k) Summerfield shall not enter into any employment agreements
which would be binding on Patriot with respect to the Property.
(l) Summerfield shall promptly advise Patriot of any
litigation, arbitration or administrative hearing concerning or affecting the
Property of which Summerfield obtains written notice or of which Summerfield has
knowledge.
(m) Summerfield shall not, by act or omission, breach or cause
to be breached any of the terms and conditions on its part to the part to be
performed and observed and as more particularly contained in the Operating
Agreements and the Management Agreement.
(n) Summerfield shall continue to make deposits into the FF&E
Cash Reserve in accordance with the Management Agreement and shall only expend
funds from such FF&E Cash Reserve pursuant to the capital expenditure budget, a
copy of which has been furnished to Patriot. Summerfield must obtain Patriot's
prior written approval for any proposed expenditures which have not otherwise
been sanctioned in the capital expenditure budget.
(o) Within three (3) days from the Effective Date, Summerfield
shall furnish to Patriot copies of the Authorizations referred to at Part B of
Schedule A7 together with all other Authorizations required for the proper use
of the Property and the Hotel thereon.
6.5 No Marketing. Neither Summerfield nor Manager shall market the
Property for sale or enter into discussions or negotiations with potential
purchasers of the Property.
6.6 Liens. Summerfield shall not, after the date of this Agreement,
subject the Real Property to or permit or suffer to exist any liens,
encumbrances, covenants, conditions, restrictions, easements or other title
matters or seek any zoning changes or take any other action which may affect or
modify the status of title without Patriot's prior written consent unless same
are discharged at or prior to Closing.
6.7 Corporate and Bulk Sales Clearance.
(a) If the property is located in a State in which the
transaction contemplated by this Agreement is subject to bulk sales laws then
Summerfield shall do everything necessary to comply with those laws including
the timely filing of written notices and requisite applications in the manner
specified in such bulk sales laws and shall furnish copies thereof to Patriot.
In addition, Summerfield shall obtain, prior to the Closing Date, all lien
certificates and shall use diligent efforts to obtain, prior to the Closing
Date, all clearance certificates which may be obtained pursuant to
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those laws. Copies of all such certificates shall be delivered to Patriot
promptly after receipt of same by Summerfield.
(b) If Summerfield fails to obtain any such clearance
certificate, then Patriot shall have the right to require Summerfield to enter
into such agreements and deposit such sums with the Title Company, which shall
include at Patriot's option all sums shown on any lien certificate obtained,
plus the parties' reasonable estimate of those unsettled or undetermined
liabilities of Seller as may be required for payment to the appropriate
governmental authorities to protect Patriot against loss by reason of the
non-payment by Summerfield of all taxes and other sums payable by Summerfield to
the date of conveyance and Summerfield's failure to obtain and deliver clearance
certificates showing that all reports have been filed with the relevant State
Authority and that all such taxes and other sums have been paid.
(c) Alternatively, Patriot shall have the right to reduce the
Purchase Price by an amount equal to all unpaid taxes and liabilities which are
the subject of such lien certificates or clearance certificates and apply the
amount by which the Purchase Price is so reduced to pay such taxes.
(d) Summerfield shall indemnify Patriot and save and hold
Patriot harmless from and against any claims, suits, demands, liabilities or
obligations of any kind or nature whatsoever, including all costs of defending
same, and reasonable attorneys' fees paid or incurred
in connection therewith, arising out of or relating to any claim made by any
third party or any liability asserted by any third party that any applicable
bulk sales law or like statute has not been complied with. The provisions of
this Section 6.7 shall survive the Closing of the transaction contemplated
hereby.
The foregoing covenants of Summerfield are for the benefit of Patriot
or its assignee of its permitted rights under this Agreement. The covenants
appearing at Sections 6.1, 6.2, 6.4, 6.5 and 6.6 above shall terminate and be of
no further force and effect after the Closing Date.
ARTICLE VII
CLOSING
7.1 Closing. The Closing shall occur on a business day designated by
Patriot, with at least five (5) days notice to Summerfield (which day shall be
no later than March 25, 1998). As more particularly described below, at the
Closing the parties hereto will (i) execute all of the documents listed in
Sections 7.2, 7.3 and 7.4 hereof (the "Closing Documents"), (ii) deliver the
same to Escrow Agent, and (iii) take all other action required to be taken in
respect of the transactions contemplated hereby. The Closing will occur at the
offices of Locke Purnell Rain Harrell, 2200 Ross Avenue, Suite 2200, Dallas,
Texas 75201, or at such other place as Patriot shall designate by written notice
to Summerfield given at least three (3) days prior to the Closing. At the
Closing, Escrow Agent shall return the Deposit to Patriot and shall update the
title to the Properties, Escrow Agent shall record the Deeds, release and date,
where appropriate, the Closing Documents in
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accordance with the joint instructions of Summerfield and Patriot. As provided
herein, the parties hereto will agree upon adjustments and prorations to certain
items which cannot be exactly determined at the Closing and will make the
appropriate adjustments with respect thereto. Possession of the Properties shall
be delivered to Patriot at the Closing, subject only to Permitted Title
Exceptions, Permitted Liens and the rights of tenants under the Occupancy
Agreements and guests in possession.
7.2 Summerfield's Deliveries. At the Closing, Summerfield shall
deliver, if not previously delivered by Summerfield pursuant to the terms
hereof, to Escrow Agent all of the following instruments, each of which, where
applicable, shall have been duly executed and, where applicable, acknowledged
and/or sworn on behalf of Summerfield and shall be dated as of the Closing Date:
(a) The Deed.
(b) The Bill of Sale - Personal Property.
(c) The Assignment and Assumption Agreements to Tenant and
Patriot respectively.
(d) A Manager estoppel letter substantially in the form of
Exhibit A6 attached hereto.
(e) Certificates from the applicable State taxing authority
and local taxing authorities stating that all occupancy and sales taxes due and
payable for the Property have been paid and, if any such taxes have not been
paid, the amount due and payable as of the Closing Date.
(f) Certificate(s)/Registration of Title to Tenant for any
vehicle owned by Summerfield and used in connection with the Property.
(g) Such agreements, affidavits (including any requisite
affidavits of title), estoppel certificates, statements, confirmations, releases
of lien, receipts or evidence of payments made or such other documents as may be
required by the Title Company to issue the Owner's Title Policy subject only to
the Permitted Title Exceptions.
(h) The Owner's Title Policy.
(i) The FIRPTA Certificate (or alternative, if the Property is
located in California, the CAL-FIRPTA Certificate).
(j) All original Warranties and Guaranties in Summerfield's
possession or reasonably available to Summerfield.
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(k) Appropriate resolutions of the partners comprising
Summerfield, together with all other necessary approvals and consents of
Summerfield and such documentary and other evidence as may be reasonably
required by Escrow Agent, authorizing and evidencing the authorization of (i)
the execution on behalf of Summerfield of this Agreement and the authority of
the person or persons who are executing the various documents to be executed and
delivered by Summerfield prior to, at or otherwise in connection with the
Closing, and (ii) the performance by Summerfield of its obligations hereunder
and under such documents.
(l) Current, valid, final and unconditional certificates of
occupancy for the Real Property and Improvements, issued by the appropriate
Governmental Authority.
(m) If Tenant is assuming Summerfield's obligations under any
or all of the Operating Agreements pursuant to the Transfer Agreements, the
originals of such agreements, and with respect to the material Operating
Agreements, consent to the assignment thereof acknowledged and approved by the
other parties to such Operating Agreements to the extent required by such
Operating Agreements.
(n) With respect to the material Personal Property Leases, (1)
the written consent of the lessors of such leases to such assignment, if
required by such Personal Property Leases, and (2) executed originals of all
such leases in Summerfield's possession or reasonably available to Summerfield.
(o) Copies of all Insurance Policies, all of which (other than
for any policy of worker's compensation) shall include an endorsement thereto
noting Tenant as an additional insured with respect to occurrences on or after
the date which is two (2) years prior to the Effective Date.
(p) To the extent in Summerfield's possession or reasonably
available to Summerfield, originals of the following items (which shall be
deemed delivered by Summerfield under this Section 7.2 if delivered to Tenant or
the property manager at the Hotel): (1) complete sets of all architectural,
mechanical, structural and/or electrical plans and specifications used in
connection with the construction of or alterations or repairs to the Property;
and (2) as built plans and specifications for the Property, with copies thereof
to Patriot upon receipt of Patriot's written request therefor.
(q) To the extent assignable, a written instrument executed by
Summerfield, conveying and transferring to Tenant all of Summerfield's right,
title and interest in any telephone numbers and TWX numbers relating to the
Property, and, if Summerfield maintains a post office box, conveying to Tenant
all of its interest in and to such post office box and the number associated
therewith, so as to assure a continuity in operation and communication.
(r) Duplicate originals or copies of all agreements, leases,
concession agreements and other instruments materially affecting the Property
and the Hotel and/or restaurant business
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conducted thereon in Summerfield's possession or control, which shall be deemed
delivered by Summerfield under this Section 7.2 if delivered to Tenant or the
property manager at the Hotel.
(s) All current real estate and personal property tax bills in
Summerfield's possession or under its control for taxes and assessments not yet
due and payable.
(t) If available, by delivery to the property manager at the
Hotel, a complete set of all guest registration cards, guest transcripts, guest
histories, and all other available guest information.
(u) All books, records, operating reports, appraisal reports,
files and other materials in Summerfield's possession or control which are
necessary in Patriot's discretion to maintain continuity of operation of the
Property (which items shall be deemed delivered by Summerfield under this
Section 7.2 if delivered to Tenant or the property manager at the Hotel).
(v) A current UCC Report showing no financing statements
covering the Property other than Permitted Liens and liens to be discharged on
the Closing Date.
(w) Executed originals of all Occupancy Agreements and, to the
extent available, Authorizations transferred or assigned to Patriot or Tenant,
as appropriate, at Closing as required hereunder (which items shall be deemed
delivered by Summerfield under this Section 7.2 delivered to Tenant or the
property manager at the Hotel).
(x) Summerfield's share of the closing costs and prorations
calculable hereunder which may be deducted from the Purchase Price.
(y) The liquor licenses for the Property, together with such
consents and estoppels as may reasonably be required by Tenant from the holders
of any of the liquor licenses for the Property, and any other necessary
documents which may be required to effectuate the transfer of liquor licenses.
(z) Any requisite certificate of value that must be executed
pursuant to statutory or regulatory requirements of the State in which the
Property is situate.
(aa) A Residency Affidavit (if the Property is located in
Georgia).
(bb) If the Property is located in New Jersey the delivery by
Summerfield of a Letter of Non-applicability or a Negative Declaration in
accordance with the Industrial Site Recovery Act ("ISRA") N.J.S.A. 13:1K-6 et
seq. and the regulations issued thereunder.
(cc) An opinion from Summerfield's in-house counsel, John
Morse, stating that Summerfield has duly authorized, executed and delivered to
Patriot this Agreement and all of the conveyance documents to be delivered by
Summerfield hereunder.
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(dd) The Deposit.
7.3 Patriot's Deliveries. At the Closing, Patriot shall deliver to
Escrow Agent for the benefit of Summerfield:
(a) The Purchase Price and Patriot's share of closing costs in
immediately available funds.
(b) any other document or instrument reasonably requested by
Summerfield or required hereby.
(c) An opinion of Patriot's counsel as to due authorization,
execution and delivery of this Agreement.
7.4 Mutual Deliveries. At the Closing, Patriot and Summerfield shall
mutually execute and deliver each to the other:
(a) A closing statement reflecting the adjustments and
prorations required hereunder and the allocation of income and expenses required
hereby which will be final, subject to subsequent adjustment pursuant to the
last paragraph of Section 7.6 hereof.
(b) Such other documents, instruments and undertakings as may
be required by the liquor authorities of the State where a Property is located,
or of any county or municipality or governmental entity having jurisdiction with
respect to the transfer or issue of liquor licenses or alcoholic beverage
licenses or permits for the operation of the Hotel by Tenant, to the extent not
theretofore executed and delivered.
(c) Such other and further documents, papers and instruments
as may be reasonably required and mutually agreed to by the parties hereto or
their respective counsel.
7.5 Closing Costs. Except as is explicitly provided in this Agreement,
each party hereto shall pay its own legal fees and expenses. All filing fees for
the Deed and the transfer, recording, sales or other similar taxes and surtaxes
due with respect to the transfer of title shall be evenly divided between
Summerfield and Patriot. Summerfield shall pay for the costs associated with the
releases of any deeds of trust, mortgages and other financing encumbering a
Property and for any costs associated with any corrective instruments.
Summerfield shall also pay all taxes (and, if required by applicable law, all
withholding for taxes) attributable to capital gain or income from the sale of
the Property to the extent that Patriot could otherwise have liability therefor.
Summerfield and Patriot shall each pay for half of all costs for all surveys,
environmental and other property reports, title searches, premiums for the
issuance of the Title Policy and all endorsements thereto and deletions
therefrom which are customarily required by institutional investors purchasing
property comparable to the Property. All other costs (except any costs incurred
by Summerfield or
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Patriot for its own account) in carrying out the transactions contemplated
hereunder shall be paid by the party which customarily pays for such costs in
the applicable jurisdiction.
7.6 Revenue and Expense Allocations. All revenues and expenses with
respect to the Property, and applicable to the period of time before and after
Closing, determined in accordance with sound accounting principles consistently
applied, shall be allocated between Summerfield, Patriot and Tenant as provided
herein. Summerfield shall be entitled to all revenue and shall be responsible
for all expenses for the period of time up to but not including the Closing
Date, and, pursuant to the Facility Lease referred to in the Agreement to Lease,
Tenant shall be entitled to all revenue and shall be responsible for all
expenses for the period of time from, after and including the Closing Date
(provided that housekeeping costs and the Rooms Ledger for the date of Closing
shall be shared equally between Tenant and Summerfield pursuant to the Transfer
Agreement). Subject to the last paragraph in this Section 7.6, such adjustments
shall be shown on the closing statements to be prepared as agreed upon by
Summerfield, Patriot (without regard to whether it has assigned its interest
hereunder), any assignee of Patriot and Tenant (with such supporting
documentation as the parties thereto may require being attached as exhibits to
the closing statements) and shall be deducted from or added to the Purchase
Price. Without limiting the generality of the foregoing, the following items of
revenue and expense shall be allocated at Closing unless the information which
is necessary for such allocation is not then available, in which event these
items shall be allocated as provided in the last paragraph of this Section 7.6:
(a) Current rents.
(b) Real estate and personal property taxes.
(c) Revenue and expenses under those Operating Agreements
which will be assigned to and assumed by Tenant.
(d) Utility charges (including, but not limited to, charges
for water, sewer and electricity).
(e) Value of fuel stored on the Property at the price paid for
such fuel by Summerfield, including any taxes.
(f) Installments due in 1998 on account of municipal or other
governmental improvement liens and special assessments; provided however,
Summerfield shall also be responsible for and make payment to Tenant at Closing
for the amount of such liens and special assessments which will accrue after
Closing to the extent (i) that the installments for such liens and special
assessments were not disclosed in the financial statements provided to Patriot
prior to the Effective Date, or (ii) of the amount, if any, by which the
installments for such liens and special assessments is scheduled to increase in
periods after Closing from the amounts disclosed in the financial statements
provided to Patriot prior to the Effective Date.
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(g) Insurance premiums.
(h) License and permit fees, where transferable.
(i) All other revenues and expenses of the Property,
including, but not limited to, such things as restaurant, bar and meeting room
income and expenses and the like.
(j) Charges and fees due under the Management Agreement.
(k) Sales, occupancy and liquor taxes.
(l) Use taxes (if any).
(m) Payment of costs and expenses associated with accrued but
unpaid salary, earned but unpaid vacation pay, accrued but unearned vacation
pay, pension and welfare benefits, the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") benefits, employee fringe
benefits, employee termination payments or any other employee benefits due to
Summerfield's, or Manager's employees.
(n) Such other items as are usually and customarily prorated
between purchasers and sellers of hotel properties in the area where the
Property is located.
Pursuant to the Transfer Agreements, Tenant shall receive from
Summerfield a credit for the total of (i) prepaid rents, (h) prepaid room
receipts and deposits, function receipts and deposits and other reservation
receipts and deposits, (iii) unforfeited security deposits together with
interest thereon held by Summerfield under the Occupancy Agreements, and (iv)
the value of any complimentary rooms (based upon the "rack" rate for each room)
and any complimentary food or beverages (based upon the advertised rate for each
food and beverage) provided by Summerfield from and after 12:01 a.m. on the
Closing Date. At Closing, Summerfield shall, pursuant to the Transfer Agreement,
sell to Tenant in connection with the Hotel, and Tenant shall acquire from
Summerfield, the so-called "guest ledger" as mutually approved by Patriot,
Summerfield and Tenant for the Hotel of guest accounts receivable payable to the
Hotel as of the check out time for the Hotel on the Closing Date (based on
guests and customers then using the Hotel) both (1) in occupancy from the
preceding night through check out time the morning of the Closing Date, and (2)
previously in occupancy prior to check out time on the Closing Date; provided,
however, that the term "guest ledger" shall not include any accounts receivable
which have been or are to be paid by any means other than a credit card.
Pursuant to the Transfer Agreements, Tenant shall receive a credit for
the current book value of any capital lease affecting the Property which shall
be quantified in accordance with generally accepted accounting principles.
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All subdivision and platting costs and expenses heretofore incurred by
Summerfield, including, without limitation, all subdivision exactions, fees and
costs and all dedication of land for parks and other public uses or payment of
fees in lieu thereof, shall be paid by Summerfield on or prior to the Closing
Date.
If accurate allocations cannot be made by Closing because current bills
or other necessary information are not obtainable (as, for example, in the case
of utility bills and/or real estate or personal property taxes) or appeals are
pending, the parties shall allocate such revenue or expenses on the best
available information, subject to adjustment upon receipt of the final bill or
other evidence of the applicable revenue or expense. Any revenue received or
expense incurred by Summerfield, Patriot or Tenant with respect to the Property
after the date of Closing shall be promptly allocated in the manner described
herein or the Transfer Agreement, as appropriate, and the parties shall promptly
pay or reimburse any amount due. The obligation to make the adjustments
described herein shall survive the Closing of the transaction contemplated by
this Agreement.
7.7 Summerfield's Accounts Receivable. At the Closing, Summerfield
shall prepare a list of its outstanding accounts receivable as of midnight on
the date prior to the Closing, specifying the name of each account and the
amount due to Summerfield, and shall be entitled to retain such accounts
receivable.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, Summerfield shall promptly give
written notice thereof to Patriot. If all or a Substantial Portion (as
hereinafter defined) of the Real Property is, or is to be, so condemned or sold,
Patriot shall have the right to terminate this Agreement pursuant to Section
10.1(g) hereof, and upon such a termination it is acknowledged that the related
Transfer Agreement will be terminated by the parties thereto. If Patriot elects
not to terminate this Agreement, all proceeds, awards and other payments arising
out of such condemnation or sale (actual or threatened) shall be paid or
assigned, as applicable, to Patriot at Closing, and the amount of such credit
shall constitute an Award under Article 11 of the Facility Lease as defined in
the Agreement to Lease. Summerfield shall not settle or compromise any such
proceeding without Patriot's prior written consent. If Patriot elects to
terminate this Agreement by giving Summerfield written notice thereof prior to
the Closing, the Deposit shall be promptly returned to Patriot and all rights
and obligations of Summerfield and Patriot hereunder (except those set forth
herein which expressly survive a termination of this Agreement) shall terminate
immediately. In the event any portion of the Real Property is affected by a
condemnation, sale or eminent domain action and such condemnation, sale or
eminent domain action does not constitute a Substantial Portion of the Real
Property, this Agreement shall remain in full force and effect without a
reduction in the Purchase Price except as provided below. In the event of any
such condemnation, sale or eminent domain action that does not constitute a
Substantial Portion of the
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Real Property, Patriot shall be entitled to any and all claims that Summerfield
may have to condemnation awards or any and all causes of action with respect to
such condemnation, sale or eminent domain action (all of which shall be assigned
by Summerfield to Patriot at Closing), and Summerfield shall credit to Patriot
at Closing, by an appropriate adjustment to the Purchase Price, an amount equal
to all payments (if any) theretofore received by Summerfield with respect to
such condemnation, sale or eminent domain action, and the amount of such credit
shall constitute an Award under Article 11 of the Facility Lease. For purposes
of this Section 8.1, a "Substantial Portion" shall mean a condemnation of in
excess of $500,000.00 of the Real Property. This provision shall survive the
Closing of the transaction contemplated hereby.
8.2 Risk of Loss. The risk of any loss or damage to any Property prior
to the Closing Date shall remain upon Summerfield. If any such loss or damage
which constitutes Substantial Loss or Damage occurs prior to Closing, Patriot
shall have the right to terminate this Agreement pursuant to Section 10.1(g)
hereto, and upon such termination it is acknowledged that the related Transfer
Agreement will be terminated by the parties thereto. If Patriot elects not to
terminate this Agreement, all insurance proceeds and rights to proceeds arising
out of such loss or damage shall be paid or assigned, as applicable, to Patriot
at Closing and Patriot shall receive as a credit against the Purchase Price the
amount of any deductibles under the policies of insurance covering such loss or
damage, and the amount of such credit shall constitute insurance proceeds under
Article 10 of the Facility Lease. If Patriot elects to terminate this Agreement
by giving Summerfield written notice thereof prior to the Closing, the Deposit
shall be promptly returned to Patriot and all rights and obligations of
Summerfield and Patriot hereunder (except those set forth herein which expressly
survive a termination of this Agreement) shall terminate immediately. In the
event of such termination, Patriot agrees that, to the extent that it is
commercially reasonable or prudent for it to do so, it shall, in good faith,
enter into negotiations with Summerfield for the redevelopment by Summerfield of
the damaged or destroyed Property and the sale thereof to Patriot upon
completion and stabilization, provided however that Patriot shall not be under
any obligation whatsoever to conclude such negotiations and may at any time
withdraw therefrom. In the event any Property or any part thereof or any of the
items constituting the Personal Property should be damaged or destroyed as a
result of fire or other casualty and such damage does not constitute Substantial
Loss or Damage and such damage is not repaired prior to Closing, the rights and
obligations of Summerfield and Patriot hereunder with respect to that Property
shall not be affected by such destruction or damage and Patriot shall accept
title to that Property in its destroyed or damaged condition. In such event, at
the Closing, Patriot shall receive a credit against the Purchase Price equal to
the amount of damage to that Property resulting from such loss or damage, and
the amount of such credit shall constitute insurance proceeds under Article 10
of the Facility Lease. For purposes of this Section 8.2, "Substantial Loss or
Damage" shall mean loss or damage, the cost for repair of which (as mutually
determined by Patriot and Summerfield at the time of such loss or damage)
exceeds $500,000.00 for the Real Property. In the event that Patriot and
Summerfield are unable to agree on the cost of repair of any Substantial Loss or
Damage, then such cost of repair shall be determined by an insurance adjuster
selected by Summerfield and approved by Patriot, such approval not to be
unreasonably withheld. This provision shall survive the Closing of the
transaction contemplated hereby.
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8.3 Absence of Broker. There is no real estate broker involved in this
transaction. Patriot warrants and represents to Summerfield that Patriot has not
dealt with any real estate broker in connection with this transaction, nor has
Patriot been introduced to the Property or to Summerfield by any real estate
broker, and Patriot shall indemnify Summerfield and save and hold Summerfield
harmless from and against any claims, suits, demands or liabilities of any kind
or nature whatsoever arising on account of the claim of any person, or
corporation to a real estate brokerage commission or a finder's fee as a result
of having dealt with Patriot, or as a result of having introduced Patriot to
Summerfield or to the Property. In like manner, Summerfield warrants and
represents to Patriot that Summerfield has not dealt with any real estate broker
in connection with this transaction, nor has Summerfield been introduced to
Patriot by any real estate broker, and Summerfield shall indemnify Patriot and
save and hold Patriot harmless from and against any claims, suits, demands or
liabilities of any kind or nature whatsoever arising on account of the claim of
any person, firm or corporation to a real estate brokerage commission or a
finder's fee as a result of having dealt with Summerfield in connection with
this transaction.
8.4 Confidentiality. Each party hereto shall use its reasonable efforts
to ensure that all confidential information which such party or any of its
respective representatives may now possess or may hereafter create or obtain
relating to the consummation of this transaction or the financial condition,
results of operations, business, properties, assets, liabilities or future
prospects of the other party, any affiliate or subsidiary of the other party or
any tenant, customer or supplier of such other party, shall not be published,
disclosed or made accessible by any of them, in each case without the prior
written consent of the other party; provided, however, that such restriction
shall not apply: (i) to the extent the disclosure may otherwise be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange; (ii) to the extent such
information shall have otherwise become publicly available; (iii) to disclosure
to a lender(s) for the purpose of obtaining financing in connection with this
transaction; or (iv) to third parties in connection with the obtaining of any
consent or the providing of any contractually required notification. After
Closing, Patriot shall, in its sole discretion, be free to disclose previously
confidential information related (1) to the operation of the Hotel (to the
extent that such information is of a type which is customarily disclosed by a
public company such as Patriot) and (2) to the purchase of the Hotel.
8.5 Employees. Patriot shall not have any liability under any pension,
profit sharing or welfare benefit plan that Summerfield or Manager may have
established with respect to the Property or its employees.
8.6 Investment Bankers. For purposes of this Section 8.7, "Investment
Bankers" shall mean (1) Morgan Stanley of 1585 Broadway, New York, New York
10036, and (2) NationsBank Montgomery Securities, Inc. of 600 Montgomery Street,
San Francisco, California 94111. Summerfield warrants and represents that there
are no other investment bankers involved in this transaction and that
Summerfield shall be liable to pay the fees and expenses of Investment Bankers.
Summerfield shall indemnify Patriot and save and hold Patriot harmless from and
against any
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claims, suits, demands or liabilities of any kind or nature whatsoever arising
on account of any claim of Investment Bankers or other such party whatsoever who
have dealt with Summerfield in that regard. In like manner, Patriot shall
indemnify Summerfield and save and hold Summerfield harmless from and against
any claims, suits, demands or liabilities of any kind or nature whatsoever
arising on account of the claims of any person or corporation other than
Investment Bankers who may be advising Patriot in relation to the transaction
contemplated hereby.
8.7 Radon Disclosure. If the Property is located in the State of
Florida, then as required by Florida legislation there is included herein the
following disclosure namely that Radon is a naturally occurring radioactive gas
that, when it has accumulated in a building in sufficient qualities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
the county public health unit.
ARTICLE IX
LIABILITY OF PATRIOT, INDEMNIFICATION BY SUMMERFIELD;
DEFAULT; TERMINATION RIGHTS
9.1 Expenses. Patriot is not assuming any liability for Summerfield
Expenses, and Summerfield hereby indemnifies and holds Patriot harmless from and
against any and all claims, costs, penalties, damages, losses, liabilities and
reasonable expenses (including reasonable attorneys' fees) that may at any time
be incurred by Patriot and its affiliates as a result of Summerfield's failure
to pay or provide Patriot with a credit for all Summerfield Expenses pursuant to
Section 7.6 hereof. The provisions of this Section 9.1 shall survive the Closing
of the transaction contemplated hereby. If either of the parties hereto receives
notification, in the form of an invoice, of a payment which is properly payable
by the other, then the party to whom the invoice was sent shall, within
twenty-five (25) days from receipt thereof (the "Notice Period") notify the
other party that payment is due, failing which, the other party shall not be
liable for payment of any penalty charge or interest accruing thereon for the
period commencing from the expiration of the Notice Period.
9.2 Indemnification by Summerfield. Summerfield hereby indemnifies and
holds Patriot harmless from and against any and all claims, costs, penalties,
damages, losses, liabilities and reasonable expenses (including reasonable
attorneys' fees) that may at any time be incurred by Patriot, whether before or
after Closing:
(a) that arise as a result of any inaccuracy or breach by
Summerfield of any of its representations, warranties or covenants set forth
herein; provided the ability to recover hereunder is subject to the limitations
set forth in Section 9.5 and Section 9.6 of this Agreement, and
(b) that arise as a result of any failure on the part of
Summerfield to discharge the Retained Liabilities when due.
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The provisions of this Section 9.2 shall survive the Closing of the
transaction contemplated hereby.
9.3 Indemnification by Patriot. Patriot hereby indemnifies and holds
Summerfield harmless from and against any and all claims, costs, penalties,
damages, losses, liabilities and reasonable expenses (including reasonable
attorneys' fees) that may at any time be incurred by Summerfield, whether before
or after Closing that arise as a result of any inaccuracy or breach by Patriot
of any of its representations, warranties or covenants set forth herein. The
provisions of this Section 9.3 shall survive the Closing of the transaction
contemplated hereby.
9.4 Waiver of Rights. Summerfield hereby agrees that it and its
affiliates will not seek indemnification, contribution or reimbursement from the
Manager for any payments which it is required to make under Section 9.1 or
Section 9.2 hereof.
9.5 Expiration of Representations, Warranties and Covenants. All of the
representations and warranties of Summerfield set forth in this Agreement and
the covenants set forth in Article VI of this Agreement shall terminate and
expire, and shall cease to be of any force or effect, at 10:00 a.m. (California
time) on the day which is one hundred eighty (180) days after the Closing Date,
and all liability of Summerfield with respect to such representations,
warranties and covenants shall thereupon be extinguished; provided, however,
that if, prior to such one hundred eighty (180) days expiration date, Patriot
shall have given written notice to Summerfield of its intention to exercise its
remedies hereunder with respect to a specific representation, warranty or
covenant and specifying the breach thereof in reasonable detail and prior to
fifteen (15) business days after such one hundred eighty (180) days expiration
date shall have filed a lawsuit in a court of competent jurisdiction claiming a
breach of such a representation, warranty or covenant, then the specific
indemnification claim set forth in such written notice shall survive such one
hundred eighty (180) days expiration date (and shall not be extinguished
thereby).
9.6 Deductible Amount. Without limiting the effect of any of Section
9.5 hereof, Summerfield shall not be required to make any indemnification
payment with respect to any breach of any of its representations, warranties or
covenants, except to the extent that the cumulative amount of the damages
actually incurred by Patriot which is subject to indemnification under Section
9.2(a) of this Agreement and Section 9.2(a) of the Shimizu Purchase Agreements
exceeds the Deductible Amount; and Summerfield shall only be required to pay,
and shall only be liable for, the amount by which the cumulative amount of the
damages actually incurred by Patriot actually exceeds the Deductible Amount. The
"Deductible Amount" shall be $250,000.00. The total amount of the payments that
Summerfield can be required to make under Section 9.2(a) of this Agreement and
Section 9.2(a) of the Shimizu Purchase Agreements shall be limited in the
aggregate to a maximum of $5,000,000.00, and the cumulative liability of
Summerfield and the parties defined as "Summerfield" in the Shimizu Purchase
Agreements shall in no event exceed such amount.
9.7 Exclusivity. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article IX shall be the sole and exclusive right
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and remedy exercisable by such party following the Closing with respect to any
breach by the other party hereto of any representation, warranty or covenant
contained herein. The indemnification provided for in this Article IX shall be
the exclusive right and remedy following the Closing with respect to any
inaccuracy in any representation or warranty, and with respect to any failure to
perform or comply with any covenant or agreement contained in this Agreement or
in any certificate delivered pursuant to this Agreement or in connection with
the transactions contemplated hereby or in respect of any other matter subject
to indemnification hereunder, and no claim or cause of action following the
Closing with respect to any misrepresentation or any breach or default as to any
representation, warranty, agreement or covenant contained in this Agreement
shall be enforceable unless made in accordance with the procedures, and within
the time periods, set forth in this Article IX.
9.8 No Implied Representations. Patriot and Summerfield acknowledge
that, except as expressly provided in Articles III and IV, none of the parties
has made or is making any representations or warranties whatsoever, implied or
otherwise. Without limiting the generality of the foregoing, Patriot
acknowledges that Summerfield has not made and is not making any representations
or warranties with respect to any forecasts or other information, or any
documents, made available by or on behalf of Summerfield or any of its
representatives to Patriot or any of its representatives, except to the extent
set forth in any express representation or warranty in Article III.
9.9 Costs and Attorneys' Fees. In the event of any litigation or
dispute between the parties arising out of or in any way connected with this
Agreement, resulting in any litigation, then the prevailing party in such
litigation shall be entitled to recover its costs of prosecuting and/or
defending same, including, without limitation, reasonable attorneys' fees at
trial and all appellate levels. The provisions of this Section 9.9 shall survive
the Closing of the transaction contemplated hereby.
9.10 Limitation of Liability. Notwithstanding anything herein to the
contrary, except in the case of fraud by either party, the liability of each
party hereto resulting from the breach or default by either party or pursuant to
any indemnity provided for in this Agreement shall be limited to actual damages
incurred by the injured party and except in the case of fraud by either party,
the parties hereto hereby waive their rights to recover from the other party
consequential, punitive, exemplary, and speculative damages. The provisions of
this Section 9.10 shall survive the Closing of the transaction contemplated
hereby.
ARTICLE X
TERMINATION AND ENFORCEMENT
10.1 Termination Events. This Agreement may be terminated prior to the
Closing:
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(a) by Patriot if the timely satisfaction of any condition set
forth in Section 5.1 has become impossible (other than as a result of any
failure on the part of Patriot to comply with or perform any covenant or
obligation of Patriot set forth in this Agreement);
(b) by Summerfield if the timely satisfaction of any condition
set forth in Section 5.2 has become impossible (other than as a result of any
failure on the part of Summerfield to comply with or perform any covenant or
obligation set forth in this Agreement);
(c) by Patriot if any condition set forth in Section 5.1 has
not been satisfied by the Closing Date;
(d) by Summerfield if any condition set forth in Section 5.2
has not been satisfied by the Closing Date;
(e) by Patriot if the Closing has not taken place by 10:00
a.m. (local time) on March 25, 1998 (other than as a result of any failure on
the part of Patriot to comply with or perform any covenant or obligation of
Patriot set forth in this Agreement);
(f) by Summerfield if the Closing has not taken place by 10:00
a.m. (local time) on March 25, 1998 (other than as a result of the failure on
the part of Summerfield to comply with or perform any covenant or obligation set
forth in this Agreement);
(g) by Patriot, in accordance with Section 8.1 or 8.2 hereof;
(h) by either Patriot or Summerfield if a court of competent
jurisdiction or other governmental entity shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action
after the date of this Agreement, having the effect of permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions to be
consummated on the Closing Date; or
(i) by the mutual consent of Patriot and Summerfield.
10.2 Termination Procedures. If Patriot wishes to terminate this
Agreement pursuant to Section 10.1(a), Section 10.1(c) or Section 10.1(e),
Patriot shall deliver to Summerfield a written notice stating that Patriot is
terminating this Agreement and setting forth a brief description of the basis on
which Patriot is terminating this Agreement. If Summerfield wishes to terminate
this Agreement pursuant to Section 10.1(b), Section 10.1(d) or Section 10.1(f),
Summerfield shall deliver to Patriot a written notice stating that Summerfield
is terminating this Agreement and setting forth a brief description of the basis
on which Summerfield is terminating this Agreement. With respect to a condition
other than the one described in Section 10.1(f) above, Patriot will have ten
(10) days in which to cure the condition which gives rise to the right to
terminate. With respect to a condition other than as described in Section
10.1(e) above, Summerfield will have ten (10) days in which to cure the
condition which gives rise to the right to terminate.
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10.3 Effect of Termination - LIQUIDATED DAMAGES. If this Agreement is
terminated pursuant to Section 10.1 and 10.2 hereof, all further obligations of
the parties under this Agreement shall terminate, except those which expressly
survive the termination of this Agreement; provided, however, that:
(a) if prior to, or as a result of, the termination of this
Agreement, Patriot shall have breached any provision of this Agreement, the
Deposit shall be delivered to Summerfield as its sole and exclusive remedy for
such default, it being agreed that, in the event of such a default, the damages
Summerfield would sustain as a result thereof would be difficult if not
impossible to ascertain; therefore, Summerfield and Patriot agree that, in an
effort to cause the amount of such damages to be certain, Summerfield may retain
the Deposit as full and complete liquidated damages and as Summerfield's sole
remedy;
/s/ /s/
Summerfield Patriot
(b) if prior to, or as a result of, the termination of this
Agreement, Summerfield shall have breached any provision of this Agreement, the
Deposit shall be promptly returned to Patriot and Summerfield shall reimburse
Patriot for all reasonable out-of-pocket and documented expenses incurred by
Patriot in connection with the preparation and negotiation of this Agreement,
the investigation by Patriot of the Property, and the compliance by Patriot with
its obligations under this Agreement, such amount not to exceed $67,000.00; and
The parties hereto stipulate and agree that the provisions of this
Section 10.3 are reasonable and appropriate under the circumstances existing at
the same time this Agreement is made.
/s/ /s/
Summerfield Patriot
10.4 Enforcement Events. Without prejudice to the existence of all
other rights or remedies available to the parties as provided herein, suit may
be brought for specific performance of this Agreement and for the collection of
attorneys' fees pursuant to Section 9.9 hereof:
(a) by Patriot if the Closing has not taken place by 10:00
o'clock a.m. (local time) on March 25, 1998 (other than as a result of failure
on the part of Patriot to comply with or perform any covenants or obligations of
Patriot as set forth in this Agreement);
(b) by Summerfield if the Closing has not taken place by 10:00
o'clock a.m. (local time) on March 25, 1998 (other than as a result of failure
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on the part of Summerfield to comply with or perform any covenants or
obligations of Summerfield as set forth in this Agreement) provided Summerfield
ensures that the Deposit is delivered to Patriot prior to filing such suit;
(c) by Patriot, if Summerfield shall have breached any
provision of this Agreement which could have a Material Adverse Effect on the
Property or Patriot; or
(d) by Summerfield, if Patriot shall have breached any
provision of this Agreement which could have a Material Adverse Effect on
Summerfield or the Property provided Summerfield ensures that the Deposit is
delivered to Patriot prior to filing such suit;
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Completeness; Modification. This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior and contemporaneous discussions,
understandings, agreements and negotiations between the parties hereto. This
Agreement may be modified only by a written instrument duly executed by the
parties hereto.
11.2 Assignments. Patriot may assign its rights hereunder without the
consent of Summerfield however, any such assignment shall not relieve Patriot of
its obligations under this Agreement.
11.3 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
11.4 Days. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
11.5 Governing Law. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the State of Delaware.
11.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement.
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11.7 Severability. If any term, covenant or condition of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to other persons or
circumstances, shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
11.8 Costs. Regardless of whether Closing occurs hereunder, and except
as otherwise expressly provided herein, each party hereto shall be responsible
for its own costs in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, fees of attorneys, engineers
and accountants.
11.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as designated below. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
If to Summerfield: Summerfield Hotel Corporation
8100 East 22nd Street North, Building 500
Wichita KS 67227
Attention: John Morse
With a copy to: Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco CA 94111
Attention: Paul Churchill
And with a copy to: SC Suites Corp.
461 Fifth Avenue, 3rd Floor
New York NY 10007
Attention: Anthony Chiofalo
And with a copy to: Max E. Greenberg, Trager, Toplitz & Herbst
100 Church Street
New York NY 10007
Attention: Todd Herbst
If to Patriot: Patriot American Hospitality Partnership L.P.
1950 Stemmons Freeway, Suite 6001
Dallas TX 75207
Attention: Michael Silverman and John Bohlman
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With a copy to: Hospitality Properties Trust
400 Centre Street
Newton MA 02158
Attention: John G. Murray
And with a copy to: Locke Purnell Rain Harrell
2200 Ross Avenue, Suite 2200
Dallas TX 75201
Attention: J. Mitchell Bell
And with a copy to: Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Jennifer Clark
If to Escrow Agent: American Title Company
6029 Belt Line Road, Suite 250
Dallas TX 75240
Attention: Carole Badgett
or to such other address as the intended recipient may have specified in a
notice to the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and Escrow Agent in a manner described in this Section 11.9.
11.10 Escrow Agent. Escrow Agent referred to in the definition thereof
contained in Section 1.1 hereof has agreed to act as such for the convenience of
the parties without fee or other charges for such services as Escrow Agent.
Escrow Agent shall not be liable: (a) to any of the parties for any act or
omission to act except for its own willful misconduct; (b) for any legal effect,
insufficiency, or undesirability of any instrument deposited with or delivered
by Escrow Agent or exchanged by the parties hereunder, whether or not Escrow
Agent prepared such instrument; (c) for any loss or impairment of funds that
have been deposited in escrow while those funds are in the course of collection,
or while those funds are on deposit in a financial institution, if such loss or
impairment results from the failure insolvency or suspension of a financial
institution; (d) for the expiration of any time limit or other consequence of
delay, unless a properly executed written instruction, accepted by Escrow Agent,
has instructed Escrow Agent to comply with said time limit; (e) for the default,
error, action or omission of either party to the escrow. Escrow Agent, in its
capacity as escrow agent, shall be entitled to rely on any document or paper
received by it, believed by such Escrow Agent, in good faith, to be bona fide
and genuine. In the event of any dispute as to the disposition of the Deposit,
or any monies held in escrow, or of any documents held in escrow, Escrow Agent
may, if such Escrow Agent so elects, interplead the matter by filing an
interpleader action in a court of general jurisdiction in the county or circuit
where an individual Real Property is located (to the jurisdiction of which both
parties do hereby consent), and pay into the registry of the court the Deposit,
or deposit any such documents with respect to which there is a dispute in the
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Registry of such court, whereupon such Escrow Agent shall be relieved and
released from any further liability as Escrow Agent hereunder. Escrow Agent
shall not be liable for Escrow Agent's compliance with any legal process
subpoena, writ, order, judgment and decree of any court, whether issued with or
without jurisdiction, and whether or not subsequently vacated, modified set
aside or reversed.
11.11 Incorporation by Reference. All of the exhibits attached hereto
are by this reference incorporated herein and made a part hereof.
11.12 Further Assurances. Summerfield and Patriot each covenant and
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions as described herein.
11.13 No Partnership. This Agreement does not and shall not be
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Summerfield and Patriot
specifically established hereby.
11.14 Time of Essence. Time is of the essence with respect to every
provision hereof.
11.15 Signatory Exculpation. The signatory(ies) for Patriot and
Summerfield is/are executing this Agreement in his/their capacity as
representative of Patriot or Summerfield as the case may be, and not
individually and, therefore, shall have no personal or individual liability of
any kind in connection with this Agreement and the transactions contemplated by
it.
11.16 Rules of Construction. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and
revised (or requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a
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particular party shall not be applicable in the construction and interpretation
of this Agreement or any exhibits hereto.
11.17 Effect of Sale. It is agreed that S.C. Suites Corp shall have no
liabilities or obligations pursuant to any documents to which they are not a
party either individually or as general partner of a party executing such
documents.
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RECEIPT OF ESCROW AGENT
American Title Company, as Escrow Agent, acknowledges receipt of the
amount of $333,333.33 from Patriot as described in Section 2.3 of the foregoing
Agreement of Purchase and Sale, said sum to be held pursuant to the terms and
provisions of said Agreement.
DATED this 20th day of March, 1998
AMERICAN TITLE COMPANY
By: /s/ Charles S. Badgett
Name: Charles S. Badgett
Title: Senior Vice President
-43-
<PAGE>
DESCRIPTION OF OTHER PURCHASE AND SALE AGREEMENTS
[The following note regarding other Purchase and Sale Agreements does not form a
part of the foregoing Purchase and Sale Agreement.]
The accompanying Agreement of Purchase and Sale between Patriot
American Hospitality Partnership, L.P. and Chatsworth Summerfield Associates,
L.P. is one of 15 separate purchase and sale agreements which together formed a
series of related transactions. The 14 other agreements (the "Related Purchase
and Sale Agreements"), each with a separate seller and relating to a separate
parcel or parcels of real estate and related assets (as described below), were
on the substantially same terms and conditions as the accompanying Agreement of
Purchase and Sale, except for variances described below.
Parts 1 through 3 of Exhibit A to each of the 14 Related Purchase and
Sale Agreements describe the seller, the FF&E cash reserve as of 2/28/98 and the
purchase price for the respective properties. The respective sellers named in
the Related Purchase and Sale Agreements, the property locations, the reserves
and the purchase prices in the respective Related Purchase and Sale Agreements
are as follows:
<TABLE>
<CAPTION>
FF & E CASH
RESERVE AS PURCHASE
NAME OF SELLER PROPERTY LOCATION OF 2/28/98 PRICE
<S> <C> <C> <C>
Malvern Summerfield 20 Morehall Road $112,210.95 $16,702,184.00
Associates, L.P. Malvern, PA 19355
Princeton Summerfield 4375 U.S. Route 1 South $219,289.64 $17,135,363.00
Associates, L.P. Princeton, NJ 08543
Dulles Summerfield 13700 Coppermine Road $199,124.86 $14,769,565.00
Associates, L.P. Herndon, VA 20171-3410
Orlando International 8480 International Drive $801,065.41 $19,947,407.00
Summerfield Orlando, FL 32819
Associates, L.P.
Orlando/Cypress 8751 Suiteside Drive $506,094.06 $22,197,980.00
Pointe Summerfield Orlando, FL 32836
Associates, L.P.
Atlanta Buckhead 505 Pharr Road $66,655.10 $9,292,317.00
Summerfield Atlanta, GA 30335
Associates, L.P.
Atlanta Perimeter 760 Mt. Vernon Hwy. $127,016.01 $11,504,294.00
Summerfield Atlanta, GA 30328
Associates, L.P.
Westport Summerfield 1855 Craigshire Road $178,419.79 $9,329,874.00
Associates, L.P. St. Louis, MO 63146
<PAGE>
Torrance Summerfield 19901 Prairie Avenue $346,023.94 $14,748,207.00
Associates, L.P. Torrance, CA 90503
Somerset Summerfield 260 Davidson Avenue $335,217.44 $23,607,072.00
Associates, L.P. Somerset, NJ 08873
Schaumburg 901 E. Woodfield Office St. $144,968.43 $12,075,270.00
Summerfield Schaumburg, IL 60173
Associates, L.P.
Sunnyvale 900 Hamlin Ct. $407,847.81 $26,530,762.00
Summerfield Sunnyvale, CA
Associates, L.P.
San Jose Summerfield 1602 Crane St. $176,942.46 $21,430,335.00
Associates, L.P. San Jose, CA 95122
San Bruno 1350 Huntington Avenue $156,467.19 $10,723,122.00
Summerfield San Bruno, CA 94066
Associates, L.P.
</TABLE>
The other provisions which varied among the accompanying Agreement of
Purchase and Sale and one or more of the Related Purchase and Sale Agreements
(each, a "Purchase and Sale Agreement") were the following:
o The description of the predecessor operating agreement
attached (i) as Schedule A4 to the Purchase and Sale
Agreement, and (ii) as Exhibit C to the forms of Assignment
and Assumption Agreements which are attached as Exhibits A2-1
and A2-2 to the Purchase and Sale Agreement.
o The list of insurance policies of the seller attached as
Schedule A5 to the Purchase and Sale Agreement.
o The list of personal property leases of the seller attached
(i) as Schedule A6 to the Purchase and Sale Agreement, and
(ii) as Exhibit B to the forms of Assignment and Assumption
Agreements which are attached as Exhibits A2-1 and A2-2 to the
Purchase and Sale Agreement.
o The list of third party authorizations of the seller,
including permits provided and permits to be provided or
expired, attached as Schedule A7 to the Purchase and Sale
Agreement.
o The disclosure schedule attached as Schedule A8 to the
Purchase and Sale Agreement.
o The legal description of the applicable property attached (i)
as Exhibit A1 to the Purchase and Sale Agreement, (ii) as
Exhibit A to the forms of Assignment and Assumption Agreements
which are attached as Exhibit A2-1 and A2-2 to
<PAGE>
the Purchase and Sale Agreement, (iii) as Exhibit A to the
Bill of Sale which is attached as Exhibit A3 to the Purchase
and Sale Agreement, and (iv) as Exhibit A to the form of deed
which is attached as Exhibit A4 to the Purchase and Sale
Agreement.
o Description of the Management Agreement with Summerfield
Suites Management Company, L.P. attached as Exhibit G to the
forms of Assignment and Assumption Agreements which are
attached as Exhibits A2-1 and A2-2 to the Purchase and Sale
Agreement.
o The form of deed for the applicable property attached as
Exhibit A4 to the Purchase and Sale Agreement.
o The pro-forma title policy attached as Exhibit A5 to the
Purchase and Sale Agreement.
EXHIBIT 10.38
ASSIGNMENT OF RIGHTS UNDER
AGREEMENTS OF PURCHASE AND SALE
THIS ASSIGNMENT OF RIGHTS UNDER AGREEMENTS OF PURCHASE AND SALE (the
"Assignment") is made as of this 18th day of March 1998, by PATRIOT AMERICAN
HOSPITALITY PARTNERSHIP, L.P., a Delaware partnership ("Assignor"), to and for
the benefit of HPTSHC PROPERTIES TRUST, a Maryland real estate investment trust
("Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to fifteen Agreements of Purchase and Sale, each
dated as of March 18, 1998 (collectively, the "Purchase Agreements"), by and
between Assignor and the Kansas limited partnership identified therein as
"Summerfield" (collectively, "Summerfield"), Assignor has agreed to acquire
certain hotel properties (as hereinafter defined, the "Properties"), each as
more particularly described in the Purchase Agreements;
WHEREAS, Assignor desires to assign the Purchase Agreements and all of
Assignor's rights pursuant thereto to Assignee; and
WHEREAS, Assignee desires to accept such Assignment and succeed to all
of Assignor's rights, benefits, and interests under the Purchase Agreements; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged by the parties, Assignor
hereby agrees as follows:
1. Assignor hereby transfers, conveys, assigns and delivers unto
Assignee all of Assignor's right and benefits in, to and under the Purchase
Agreements.
2. Assignee hereby assumes all of the obligations of Assignor under the
Purchase Agreements.
3. Assignor represents and warrants to Assignee that:
i. Assignor has not previously assigned any of Assignor's
interest in the Purchase Agreements to any other person or entity;
ii. The Purchase Agreements have not been amended, modified or
supplemented in any way, and represent the entire agreement of the
parties thereto as to the subject matter thereof; Assignor has not made
any election, consented to any matter or exercised any option or right
provided to it under the Purchase Agreements not previously disclosed
in writing to Assignee;
iii. To the best of Assignor's knowledge, all representations
and warranties by Summerfield under or in connection with the Purchase
Agreements, or in any document,
<PAGE>
-2-
certificate or agreement delivered in connection therewith, are true
and correct on the date hereof; and
iv. Assignor has furnished to Assignee all materials provided
to Assignor by Summerfield under Section 2.4 of each Purchase
Agreement.
4. Assignor shall protect, indemnify and hold harmless Assignee for,
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), imposed upon or incurred by or asserted against
Assignee under any Purchase Agreement or hereunder, excluding, however, (i) the
payment of the Purchase Price by Assignee specified in Part 3 of Schedule A1 of
each Purchase Agreement, and (ii) any liability of Assignee arising under any
Purchase Agreement that is determined, in a final non-appealable judgment by a
court of competent jurisdiction, to have resulted from the gross negligence,
wilful misconduct or failure of Landlord to perform the obligations of purchaser
thereunder that arise after the effective date of the Assignment Agreement. The
obligations of Assignor under this paragraph 4 shall expire and be of no further
force and effect from and after the date that a Lease Agreement with respect to
the Properties has been entered into by Assignee, as landlord, and Summerfield
HPT Lease Company, L.P., as tenant.
5. Nonliability of Trustees, Etc. THE DECLARATION OF TRUST ESTABLISHING
ASSIGNEE, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HPTSHC 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 ASSIGNEE SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, ASSIGNEE. ALL PERSONS
DEALING WITH ASSIGNEE, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF ASSIGNEE FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
<PAGE>
-3-
IN WITNESS THEREOF, the parties hereto have executed and delivered this
Assignment as of the date above first written.
ASSIGNOR:
PATRIOT AMERICAN HOSPITALITY PARTNERSHIP
L.P., a Delaware limited partnership
By: PAH GP, Inc.
By: /s/ Michael Silverman
Name: Michael Silverman
Title: Authorized Signatory
ASSIGNEE:
HPTSHC PROPERTIES TRUST, a Maryland real
estate investment trust
By: /s/ John Murray
Its: President
EXHIBIT 10.39
AGREEMENT TO LEASE
THIS AGREEMENT TO LEASE (this "Agreement") is entered into as of March
20, 1998 by and between HPTSHC PROPERTIES TRUST, a Maryland real estate
investment trust ("HPT"), and SUMMERFIELD HPT LEASE COMPANY, L.P., a Kansas
limited partnership ("Tenant").
W I T N E S S E T H:
WHEREAS, pursuant to certain Agreements of Purchase and Sale, each
dated as of March 18, 1998 (collectively, the "Purchase Agreements"), by and
between Patriot American Hospitality Partnership, L.P. ("Patriot") and the
Kansas limited partnerships identified therein as "Summerfield" (collectively,
the "Sellers"), Patriot has agreed to acquire certain hotel properties (as
hereinafter defined, the "Properties"), each as more particularly described in
the Purchase Agreements;
WHEREAS, Patriot has assigned to HPT Patriot's rights under the
Purchase Agreements to acquire the Properties pursuant to an Assignment of
Purchase Agreements dated as of even date herewith;
WHEREAS, subject to and upon the terms and conditions set forth in this
Agreement, pursuant to a Lease Agreement in the form attached hereto as Exhibit
A (the "Lease"), HPT is prepared to lease to Tenant, and Tenant is prepared to
lease from HPT, all of the Properties (this and other capitalized terms used and
not otherwise defined herein having the meanings ascribed to such terms in the
Lease);
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. Capitalized terms used in this Agreement shall have the meanings
set forth in the caption or recitals hereto or as set forth below:
(a) "Allocable Purchase Price" shall mean, with respect to any of the
Properties, the purchase Price for such Property set forth in the applicable
Purchase Agreement.
(b) "Business Day" shall have the meaning given such term in the Lease.
(c) "Closing" shall have the meaning given such term in the Purchase
Agreements
(d) "Closing Date" shall have the meaning given such term in the
Purchase Agreements.
(e) "FF&E" shall have the meaning given such term in the Lease.
<PAGE>
-2-
(f) "FF&E Funded Amount" shall mean an amount to be agreed upon by
Tenant and HPT prior to the Closing Date, which amount shall be deposited in the
FF&E Reserve at Closing.
(g) "FF&E Reserve" shall have the meaning given such term in the Lease.
(h) "Improvements" shall mean, with respect to any Property, the
meaning given such term in the Purchase Agreement for such Property.
(i) "Management Agreements" shall mean the Management Agreements to be
entered into between Tenant and the Manager providing for the management of the
Properties by the Manager, which agreements shall comply with the requirements
of Section 5.4 of the Lease, and otherwise be in form and substance and on terms
and conditions reasonably satisfactory to HPT.
(j) "Manager" shall mean Summerfield Suites Management Company, L.P., a
Kansas limited partnership.
(k) "Permitted Encumbrances" shall mean, with respect to any Property,
(a) liens for taxes, assessments and governmental charges with respect to such
Property not yet due and payable or due and payable but not yet delinquent; (b)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect use of such Property as a Summerfield Suite
hotel as currently operated and constructed; (c) such nonmonetary encumbrances
with respect to such Property that are reflected in specimen title policies or
commitments delivered to HPT prior to the date hereof, and as to which HPT has
not objected in writing prior to the date hereof; and (d) UCC Financing
Statements which would be permitted pursuant to the terms of Section 20.9 of the
Leases.
(l) "Property" shall have the meaning, with respect to any hotel
property, set forth in the Purchase Agreement for such property.
(m) "Purchase Price" shall mean, with respect to any Property of any
Seller, the Purchase Price set forth in Schedule A1 to the Purchase Agreement
for such Property.
(n) "Security Deposit" shall have the meaning given such term in the
Lease.
(o) "Title Company" shall mean Chicago Title Insurance Company or such
other title insurance company as shall have been reasonably approved by HPT and
Tenant.
(p) "Transfer Agreements" shall have the meaning given such term in the
Purchase Agreements.
2. Agreement to Lease. Subject to and upon the terms and conditions hereinafter
set forth, on the Closing Date, HPT and Tenant shall each execute and deliver
the Lease with respect to the Properties and such date shall be the Commencement
Date under the Lease.
<PAGE>
-3-
3. Base Rent. The base rent payable under the Lease for all the Properties shall
be a monthly aggregate amount equal to $2,083,334, which amount shall be
allocated among the Properties in accordance with their respective Allocable
Purchase Prices.
4. Conditions to HPT's Obligation to Close. Notwithstanding any provisions to
the contrary in the Purchase Agreements, the obligation of HPT to acquire the
Properties on the Closing Date and to enter into the Lease shall be subject to
the satisfaction of the following conditions precedent on and as of the Closing
Date:
(a) Purchase Agreement. All conditions of Closing under the Purchase
Agreements shall have been satisfied without waiver of condition not consented
to in writing by HPT.
(b) Closing Documents. HPT shall have received:
(i) The Lease, duly executed and delivered by Tenant;
(ii) A security agreement with respect to all tangible and
intangible property used in connection with the operation of the Properties, in
substantially the form attached, appropriately completed and duly executed;
(iii) A pledge and security agreement with respect to the FF&E
Reserve and all monies deposited therein, in substantially the form attached,
appropriately completed and duly executed;
(iv) A pledge and security agreement with respect to all of
the partnership interests of Tenant, in substantially the form attached,
appropriately completed and duly executed;
(v) A pledge and security agreement with respect to all of the
membership interests of the general partner of Tenant, in substantially the form
attached, appropriately completed and duly executed;
(vi) Copies of such duly executed Uniform Commercial Code
financing statements as HPT may require to perfect the security interests and
liens granted pursuant to the agreements described in clauses (ii) through (v)
above;
(vii) The Management Agreements, duly executed and delivered
by the Manager and Tenant;
(viii) Certified copies of all charter and other
organizational documents, applicable corporate resolutions and certificates of
incumbency with respect to each Seller and its general partner, Tenant and its
general partner, and the Manager under the Management Agreements; and
(ix) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as HPT or the Title Company may reasonably
require.
<PAGE>
-4-
(c) Title.
(i) HPT shall have received (or shall have obtained assurances
satisfactory to it that it will receive not later than fifteen days after the
date hereof) an ALTA survey with respect to each Property, certified to HPT,
prepared by a licensed surveyor in the jurisdiction in which such Property is
located, disclosing no matter (other than Permitted Encumbrances) which
adversely affects such Property in any material respect; and
(ii) The Title Company shall be prepared, subject only to
payment of the applicable premium, to issue title insurance policies to HPT
reflecting no lien or encumbrances other than Permitted Encumbrances, together
with such affirmative coverages as HPT may reasonably require and shall have
been determined by the Title Company as available prior to the Closing Date.
(d) Opinions of Counsel.
(i) HPT shall have received written opinions from counsel to
Patriot and the Sellers, in each case in form and substance reasonably
satisfactory to HPT; and
(ii) HPT shall have received written opinions from local
counsel to HPT, in form and substance reasonably satisfactory to HPT, regarding
the compliance of the Properties with respect to zoning (except where zoning
endorsements are available), licensing and such other matters as HPT may
reasonably require, but only to the extent opinions on such matters are
customary in the jurisdiction in which the applicable Property is located.
(e) FF&E Funded Amount. The FF&E Funded Amount shall have been
deposited in an account or accounts reasonably acceptable to HPT.
(f) Environmental Matters. HPT shall have received letters, in the form
requested by HPT, addressed to it from SCS Engineers permitting HPT to rely on
SCS Engineers' environmental assessments of the Properties. In addition, HPT
shall have received satisfactory responses to its requests for additional
information from SCS Engineers, which responses shall not indicate, in the
reasonable opinion of HPT, any environmental condition adversely affecting any
Property.
(g) Representation and Warranties; No Default. The representations and
warranties made by Tenant and its general and limited partners and by Patriot in
the Lease and the Incidental Documents to which they are a party, and in any
certificates delivered pursuant hereto or thereto, shall be true and correct on
and as of the Closing Date as if they had been made on the Closing Date; and
giving effect to the Closing, no Default or Event of Default shall have occurred
and be continuing under the Lease.
(h) Closing Costs. Notwithstanding Section 7.5 of each of the Purchase
Agreements, Tenant shall have paid such amount of the closing costs referenced
therein, or shall have reimbursed HPT for such amount of such costs, so that HPT
pays no more than 33.33% of such costs.
<PAGE>
-5-
5. Assignment. Except as would otherwise be permitted pursuant to the Lease,
Tenant shall not assign or transfer, directly or indirectly, its rights under
this Agreement without the prior written consent of HPT, which consent may be
given or withheld by HPT in HPT's sole discretion. HPT shall not assign or
transfer, directly or indirectly, its rights under this Agreement other than to
a wholly owned subsidiary of HPT without the prior written consent of Tenant,
which consent may be given or withheld by Tenant in Tenant's sole discretion.
6. Miscellaneous.
(a) Notices.
(i) 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).
(ii) 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.
(iii) 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
<PAGE>
-6-
if to Tenant to:
c/o Summerfield Hotel Corporation
8100 E. 22nd Street North
Building 500
Wichita, KS 67226
Attn: John R. Morse
Telecopier: (316) 681-5157
with a copy to:
Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111-3580
Attn: Paul Churchill
Telecopier: (415) 951-3699
(iv) 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.
(b) Publicity. The parties agree that no party shall, with respect to
this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with public officials, make any public pronouncements, issue press
releases or otherwise furnish information regarding this Agreement or the
transactions contemplated to any third party without the consent of the other
party. No party or its employees shall trade in the securities of any parent or
Affiliated Person of HPT or Tenant until a public announcement of the
transactions contemplated by this Agreement has been made.
(c) Performance on Business Days. In the event the date on which
performance or payment of any obligation of a party required hereunder is other
than a Business Day, the time for payment or performance shall automatically be
extended to the first Business Day following such date.
(d) Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of The Commonwealth
of Massachusetts applicable to contracts between residents of Massachusetts
which are to be performed entirely within Massachusetts, regardless of (i) where
this Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would
<PAGE>
-7-
apply the laws of a jurisdiction other than The Commonwealth of Massachusetts;
or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as is provided by law; and the parties consent
to the jurisdiction of said court or courts located in The Commonwealth of
Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
(e) Modification of Agreement. No modification or waiver of any
provision of this Agreement, nor any consent to any departure by any party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the other, and such modification, waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any party in any case shall entitle such party to any
other or further notice or demand in the same, similar or other circumstances.
(f) Waiver of Rights. Neither any failure nor any delay on the part of
any party in exercising any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise or the exercise of any right,
power or privilege.
(g) Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and this
Agreement shall thereupon be reformed and construed and enforced to the maximum
extent permitted by laws.
(h) Entire Contract. This Agreement, including all annexes and exhibits
hereto, constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and thereof and shall supersede and take the place
of any other instruments purporting to be an agreement of the parties hereto
relating to the transactions contemplated hereby, including, without limitation,
any letter of intent or commitment letter.
(i) 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.
(j) Binding Effect. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(k) 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
<PAGE>
-8-
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME
"HPTSHC 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>
-9-
IN WITNESS WHEREOF, HPT and Tenant have executed this Agreement under
seal as of the date above first written.
HPTSHC PROPERTIES TRUST
By: /s/ John Murray
Its: President
SUMMERFIELD HPT LEASE COMPANY, L.P., a
Kansas limited partnership
By: Summerfield HPT Lease Company L.L.C., its
General Partner
By: /s/ John R. Morse
Its:_______________________
<PAGE>
EXHIBIT A
Form of Lease
[See attached copy.]
<PAGE>
Exhibit A
MASTER LEASE AGREEMENT
DATED AS OF MARCH __, 1998
BY AND BETWEEN
HPTSHC PROPERTIES TRUST
AS LANDLORD
AND
SUMMERFIELD HPT LEASE COMPANY, L.P.,
AS TENANT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE 1
<S> <C>
DEFINITIONS..............................................................................................1
1.1 "Accountants" .............................................................................1
1.3 "Additional Charges" ......................................................................1
1.5 "Affiliated Person" .......................................................................2
1.6 "Agreement" ...............................................................................2
1.7 "Applicable Laws" .........................................................................2
1.8 "Assignment Agreement......................................................................2
1.9 "Award" ...................................................................................2
1.10 "Base Total Hotel Sales" .................................................................2
1.11 "Base Year" ..............................................................................3
1.12 "Business Day" ...........................................................................3
1.13 "Capital Addition" .......................................................................3
1.14 "Capital Expenditure" ....................................................................3
1.15 "Claim" ..................................................................................3
1.16 "Code" ...................................................................................3
1.17 "Commencement Date" ......................................................................3
1.18 "Condemnation" ...........................................................................3
1.19 "Condemnor" ..............................................................................4
1.20 "Consolidated Financials".................................................................4
1.21 "Date of Taking" .........................................................................4
1.22 "Default" ................................................................................4
1.23 "Disbursement Rate" ......................................................................4
1.24 "Distribution" ...........................................................................4
1.25 "Encumbrance" ............................................................................4
1.26 "Entity...................................................................................5
1.27 "Environment" ............................................................................5
1.28 "Environmental Obligation" ...............................................................5
1.29 "Environmental Notice" ...................................................................5
1.30 "Event of Default" .......................................................................5
1.31 "Excess Total Hotel Sales"................................................................5
1.32 "Extended Terms" .........................................................................5
1.34 "FF&E Estimate............................................................................5
1.35 "FF&E Funded Amount.......................................................................5
1.36 "FF&E Reserve.............................................................................5
1.37 "Financial Officer's Certificate" ........................................................5
1.38 "Fiscal Year" ............................................................................5
1.39 "Fixed Term" .............................................................................5
1.40 "Fixtures" ...............................................................................5
1.41 "GAAP" ...................................................................................6
1.42 "Government Agencies......................................................................6
1.43 "Hazardous Substances" ...................................................................6
1.44 "Hotel" ..................................................................................7
1.45 "Hotel Mortgage" .........................................................................7
1.46 "Hotel Mortgagee" ........................................................................7
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1.47 "Immediate Family.........................................................................7
1.48 "Impositions" ............................................................................7
1.49 "Incidental Documents" ...................................................................8
1.50 "Increased Amount" .......................................................................8
1.51 "Indebtedness" ...........................................................................8
1.52 "Insurance Requirements" .................................................................8
1.53 "Interest Rate"...........................................................................8
1.54 "Land" ...................................................................................8
1.55 "Landlord" ...............................................................................8
1.56 "Landlord Liens...........................................................................8
1.57 "Lease Year" .............................................................................8
1.58 "Leased Improvements" ....................................................................8
1.59 "Leased Intangible Property" .............................................................8
1.60 "Leased Personal Property" ...............................................................9
1.61 "Leased Property" ........................................................................9
1.62 "Legal Requirements" .....................................................................9
1.63 "Lien" ...................................................................................9
1.64 "Management Agreements"...................................................................9
1.65 "Manager" ................................................................................9
1.66 "Minimum Rent" ...........................................................................9
1.67 "Notice" .................................................................................9
1.68 "Officer's Certificate" ..................................................................9
1.69 "Overdue Rate" ..........................................................................10
1.70 "Parent..................................................................................10
1.71 "Patriot"................................................................................10
1.72 "Patriot Acquisition Date"...............................................................10
1.73 "Patriot Acquisition Documents"..........................................................10
1.74 "Patriot Contribution Agreement".........................................................10
1.75 "Patriot LP".............................................................................10
1.76 "Permitted Encumbrances" ................................................................10
1.77 "Permitted Liens" .......................................................................10
1.78 "Permitted Use" .........................................................................10
1.79 "Person" ................................................................................10
1.80 "Property"...............................................................................10
1.81 "Purchase Agreements"....................................................................10
1.82 "Records" ...............................................................................11
1.83 "Rent" ..................................................................................11
1.84 "SEC" ...................................................................................11
1.85 "Security Deposit".......................................................................11
1.86 "SHC" ...................................................................................11
1.87 "Special Charter Document Provisions"....................................................11
1.88 "Special Purpose Conditions Date"........................................................11
1.89 "State" .................................................................................11
1.90 "Subsidiary" ............................................................................11
1.91 "Subtenant"..............................................................................11
1.92 "Subtenant General Partner"..............................................................11
1.93 "Successor Landlord" ....................................................................11
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1.94 "Tangible Net Worth" ....................................................................11
1.95 "Tenant" ................................................................................12
1.96 "Tenant FF&E Security Agreement".........................................................12
1.97 "Tenant General Partner".................................................................12
1.98 "Tenant Pledge Agreement" ...............................................................12
1.99 "Tenant General Partner Pledge Agreement"................................................12
1.100 "Tenant Security Agreement..............................................................12
1.101 "Tenant's Personal Property" ...........................................................12
1.102 "Term"..................................................................................12
1.103 "Total Hotel Sales".....................................................................12
1.104 "Uniform System of Accounts" ...........................................................13
1.105 "Unsuitable for Its Permitted Use" .....................................................13
1.106 "Work" .................................................................................13
1.107 "Wyndham"...............................................................................13
ARTICLE 2
LEASED PROPERTY AND TERM................................................................................13
2.1 Leased Property...........................................................................13
2.2 Condition of Leased Property..............................................................14
2.3 Fixed Term................................................................................15
2.4 Extended Term.............................................................................15
ARTICLE 3
RENT....................................................................................................16
3.1 Rent......................................................................................16
3.1.1 Minimum Rent...................................................................16
3.1.2 Additional Rent................................................................16
3.1.3 Additional Charges.............................................................18
3.2 Late Payment of Rent, Etc.................................................................20
3.3 Net Lease.................................................................................20
3.4 No Termination, Abatement, Etc............................................................21
3.5 Security Deposit..........................................................................21
ARTICLE 4
USE OF THE LEASED PROPERTY..............................................................................23
4.1 Permitted Use.............................................................................23
4.1.1 Permitted Use..................................................................23
4.1.2 Necessary Approvals............................................................23
4.1.3 Lawful Use, Etc................................................................23
4.2 Compliance with Legal/Insurance Requirements, Etc.........................................24
4.3 Environmental Matters.....................................................................24
4.3.1 Restriction on Use, Etc........................................................24
4.3.2 Environmental Report. .........................................................25
4.3.3 Indemnification of Landlord....................................................25
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4.3.4 Survival.......................................................................26
ARTICLE 5
MAINTENANCE AND REPAIRS.................................................................................26
5.1 Maintenance and Repair....................................................................26
5.1.1 Tenant's General Obligations...................................................26
5.1.2 FF&E Reserve...................................................................26
5.1.3 Landlord's Obligations.........................................................28
5.1.4 Nonresponsibility of Landlord, Etc.............................................29
5.2 Tenant's Personal Property................................................................29
5.3 Yield Up..................................................................................29
5.4 Management Agreement......................................................................30
ARTICLE 6
IMPROVEMENTS, ETC.......................................................................................31
6.1 Improvements to the Leased Property. ....................................................31
6.2 Salvage...................................................................................31
ARTICLE 7
LIENS...................................................................................................32
7.1 Liens.....................................................................................32
7.2 Landlord's Lien...........................................................................32
ARTICLE 8
PERMITTED CONTESTS......................................................................................32
ARTICLE 9
INSURANCE AND INDEMNIFICATION...........................................................................33
9.1 General Insurance Requirements............................................................33
9.2 Replacement Cost..........................................................................34
9.3 Waiver of Subrogation.....................................................................34
9.4 Form Satisfactory, Etc....................................................................35
9.5 Blanket Policy............................................................................35
9.6 No Separate Insurance.....................................................................35
9.7 Indemnification of Landlord...............................................................36
ARTICLE 10
CASUALTY................................................................................................36
10.1 Insurance Proceeds.......................................................................36
10.2 Damage or Destruction....................................................................37
10.2.1 Damage or Destruction of Leased Property......................................37
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10.2.2 Partial Damage or Destruction.................................................37
10.2.3 Insufficient Insurance Proceeds...............................................37
10.2.4 Disbursement of Proceeds......................................................37
10.3 Damage Near End of Term..................................................................38
10.4 Tenant's Property........................................................................38
10.5 Restoration of Tenant's Property.........................................................39
10.6 No Abatement of Rent.....................................................................39
10.7 Waiver...................................................................................39
ARTICLE 11
CONDEMNATION............................................................................................39
11.1 Total Condemnation, Etc..................................................................39
11.2 Partial Condemnation.....................................................................39
11.3 Abatement of Rent........................................................................40
11.4 Temporary Condemnation...................................................................41
11.5 Allocation of Award......................................................................41
ARTICLE 12
DEFAULTS AND REMEDIES...................................................................................41
12.1 Events of Default........................................................................41
12.2 Remedies.................................................................................44
12.3 Tenant's Waiver..........................................................................45
12.4 Application of Funds.....................................................................45
12.5 Landlord's Right to Cure Tenant's Default................................................45
12.6 Sublease Termination or Modification. ..................................................45
ARTICLE 13
HOLDING OVER............................................................................................46
ARTICLE 14
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT.........................................................47
14.1 Landlord Notice Obligation...............................................................47
14.2 Landlord's Default.......................................................................47
ARTICLE 15
PURCHASE RIGHTS.........................................................................................47
15.1 First Refusal to Purchase................................................................47
15.2 Purchase by Tenant.......................................................................48
15.3 Landlord's Option to Purchase Tenant's Personal Property; Transfer of
Licenses.......................................................................................49
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ARTICLE 16
SUBLETTING AND ASSIGNMENT...............................................................................49
16.1 Subletting and Assignment................................................................49
16.2 Required Sublease Provisions.............................................................50
16.3 Permitted Sublease.......................................................................51
16.4 Patriot Acquisition......................................................................51
16.5 Sublease Limitation......................................................................53
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS..........................................................53
17.1 Estoppel Certificates....................................................................53
17.2 Financial Statements.....................................................................53
17.3 General Operations.......................................................................54
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT.............................................................................55
ARTICLE 19
HOTEL MORTGAGES.........................................................................................55
19.1 Landlord May Grant Liens.................................................................55
19.2 Subordination of Lease...................................................................55
19.3 Notice to Mortgagee and Superior Landlord................................................56
ARTICLE 20
ADDITIONAL COVENANTS OF TENANT..........................................................................57
20.1 Prompt Payment of Indebtedness...........................................................57
20.2 Conduct of Business......................................................................57
20.3 Maintenance of Accounts and Records......................................................57
20.4 Notice of Litigation, Etc................................................................57
20.5 Indebtedness of Tenant...................................................................58
20.6 Financial Condition of Tenant............................................................59
20.7 Distributions, Payments to Affiliated Persons, Etc.......................................59
20.8 Prohibited Transactions..................................................................59
20.9 Liens and Encumbrances...................................................................59
20.10 Merger; Sale of Assets; Etc.............................................................59
ARTICLE 21
REPRESENTATIONS AND WARRANTIES..........................................................................60
21.1 Representations of Tenant................................................................60
21.1.1 Status and Authority of Tenant................................................60
21.1.2 Action of Tenant..............................................................60
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21.1.3 No Violations of Agreements...................................................60
21.1.4 Litigation....................................................................60
21.1.5 Existing Leases, Agreements, Etc..............................................60
21.1.6 Disclosure....................................................................61
21.1.7 Utilities, Etc................................................................61
21.1.8 Compliance With Law...........................................................61
21.1.9 Hazardous Substances..........................................................61
21.2 Representations of Landlord..............................................................61
21.2.1 Status and Authority of Landlord..............................................61
21.2.2 Action of Landlord............................................................62
21.2.3 No Violations of Agreements...................................................62
21.2.4 Litigation....................................................................62
21.3 Survival, Etc............................................................................62
ARTICLE 22
MISCELLANEOUS...........................................................................................63
22.1 Limitation on Payment of Rent............................................................63
22.2 No Waiver................................................................................63
22.3 Remedies Cumulative......................................................................63
22.4 Severability.............................................................................63
22.5 Acceptance of Surrender..................................................................63
22.6 No Merger of Title.......................................................................64
22.7 Conveyance by Landlord...................................................................64
22.8 Quiet Enjoyment..........................................................................64
22.9 Memorandum of Lease......................................................................64
22.10 Notices.................................................................................64
22.11 Trade Area Restriction..................................................................66
22.12 Construction............................................................................66
22.13 Counterparts; Headings..................................................................67
22.14 Applicable Law, Etc.....................................................................67
22.15 Nonrecourse. ..........................................................................67
22.16 Confidentiality.........................................................................67
22.17 Nonliability of Trustees................................................................67
</TABLE>
EXHIBITS
A - The Land
B - Allocated Purchase Price
C - Restricted Trade Area
<PAGE>
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT is entered into as of this __ day of March,
1998, by and between HPTSHC PROPERTIES TRUST, a Maryland real estate investment
trust, as landlord ("Landlord"), and SUMMERFIELD HPT LEASE COMPANY, L.P., a
Kansas limited partnership, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Leased Property (this
and other capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1) described in Exhibits A-1 through
A-15; 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 "Accountants" shall have the meaning given such term in Section
3.1.2(c).
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 "Adjusted Purchase Price" shall mean, for any Property, the amount
allocated to such Property as set forth on Exhibit B, plus the aggregate amount
of all disbursements by Landlord pursuant to Sections 5.1.3(b), 10.2.3 or 11.2
with respect to such Property, plus any other amount disbursed or advanced by
Landlord to finance, or to reimburse Tenant for its financing of, any Capital
Addition to such Leased Property.
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1.5 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited liability
company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b), (d) any
other Person who is an officer, director, trustee or employee of, or partner in
or member of, such Person or any Person referred to in the preceding clauses
(a), (b) and (c), and (e) any other Person who is a member of the Immediate
Family of such Person or of any Person referred to in the preceding clauses (a)
through (d).
1.6 "Agreement" shall mean this Lease Agreement, including Exhibits A-1
through A-15, B and C hereto, as it and they may be amended from time to time as
herein provided.
1.7 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health
(except those requirements which, by definition, are solely the responsibility
of employers) or the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pesticides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature, into
the Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.
1.8 "Assignment Agreement" shall mean the Assignment of Rights under
Agreements of Purchase and Sale, dated as of the date hereof, between Patriot
American Hospitality Partnership, L.P., a Delaware partnership, and Landlord.
1.9 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert witness
fees, incurred by Landlord, in connection with obtaining any such award).
1.10 "Base Total Hotel Sales" with respect to each Property shall mean
Total Hotel Sales for such Property for the Base Year; provided, however, that
in the event that, with respect to any Lease Year, or portion thereof, for any
reason (including, without limitation, a casualty or Condemnation) there shall
be, for two hundred seventy (270) days or more in any Lease Year, a reduction in
the number of rooms at any Hotel or a change in the services provided at any
Hotel (including, without limitation, closing of restaurants or the
discontinuation of food or beverage services) from the number of rooms or the
services provided during the Base Year, in
<PAGE>
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determining Additional Rent payable with respect to such Lease Year, Base Total
Hotel Sales for such Property shall be reduced as follows: (a) in the event of
and for the duration of a complete closing of such Hotel following application
of any business interruption or Award proceeds collected with respect thereto,
Total Hotel Sales during the applicable period of the Base Year throughout the
period of such closing shall be subtracted from Base Total Hotel Sales for such
Property; (b) in the event of a partial closing of such Hotel affecting any
number of guest rooms in such Hotel and following application of any business
interruption or Award proceeds collected with respect thereto, Total Hotel Sales
for such Property attributable to guest room occupancy or guest room services at
such Hotel during the Base Year shall be ratably allocated among all guest rooms
in service at such Hotel during the Base Year and all such Total Hotel Sales
attributable to rooms no longer in service shall be subtracted from Base Total
Hotel Sales throughout the period of such closing; and (c) in the event of any
other change in circumstances affecting such Hotel, Base Total Hotel Sales shall
be equitably adjusted in such manner as Landlord and Tenant shall reasonably
agree.
1.11 "Base Year" shall mean, with respect to each Property, the 1998
Fiscal Year.
1.12 "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 Texas are authorized by law or executive action to close.
1.13 "Capital Addition" shall mean any renovation, repair or
improvement to the Leased Property (or portion thereof), the cost of which
constitutes a Capital Expenditure.
1.14 "Capital Expenditure" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.15 "Claim" shall have the meaning given such term in Article 8.
1.16 "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.17 "Commencement Date" shall mean the date of this Agreement.
1.18 "Condemnation" shall mean, with respect to any Property, (a) the
exercise of any governmental power with respect to such Property, whether by
legal proceedings or otherwise, by a Condemnor of its power of condemnation, (b)
a voluntary sale or transfer of such Property by Landlord to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending, or (c) a taking or voluntary conveyance of all or part of such
Property, or any interest therein, or right accruing thereto or use thereof, as
the result or in settlement of any Condemnation or other eminent domain
proceeding affecting such Property, whether or not the same shall have actually
been commenced.
1.19 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or Person, having the power of Condemnation.
1.20 "Consolidated Financials" shall mean:
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(a) for any Fiscal Year or other accounting period of Tenant,
annual audited and quarterly unaudited financial statements of Tenant,
including Tenant's balance sheet and the related statements of income
and cash flow; and
(b) for any Fiscal Year or other accounting period of SF Hotel
Company, L.P. ending prior to the Patriot Acquisition Date, annual
audited and quarterly unaudited financial statements of SF Hotel
Company, L.P. prepared on a consolidated basis, including SF Hotel
Company, L.P.'s consolidated balance sheet and related statements of
income and cash flow; and
(c) for any Fiscal Year or other accounting period of Patriot
and Wyndham ending after to the Patriot Acquisition Date, annual
audited and quarterly unaudited financial statements of Patriot and
Wyndham prepared on a consolidated basis, including Patriot's and
Wyndham's combined balance sheet and the related statements of income
and cash flow;
in each case 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.
1.21 "Date of Taking" shall mean the date the Condemnor has the right
to possession of such Property, or any portion thereof, in connection with a
Condemnation.
1.22 "Default" shall mean any event or condition which with the giving
of notice and/or lapse of time may ripen into an Event of Default.
1.23 "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 fifty (350) basis points.
1.24 "Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, (b) any purchase,
redemption, retirement or other acquisition of any shares of any class of
capital stock of a corporation, (c) any other distribution on or in respect of
any shares of any class of capital stock of a corporation, or (d) any return of
capital to shareholders.
1.25 "Encumbrance" shall have the meaning given such term in Section
19.1.
1.26 "Entity" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency or political
subdivision thereof or any other entity.
<PAGE>
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1.27 "Environment" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
1.28 "Environmental Obligation" shall have the meaning given such term
in Section 4.3.1.
1.29 "Environmental Notice" shall have the meaning given such term in
Section 4.3.1.
1.30 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.31 "Excess Total Hotel Sales" shall mean, with respect to any Lease
Year, or portion thereof, the amount of Total Hotel Sales for such Lease Year,
or portion thereof, in excess of Base Total Hotel Sales for the equivalent
period.
1.32 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.33 "FF&E Bank" means Bank One Texas, N.A. or other bank designated by
Tenant and approved by Landlord.
1.34 "FF&E Estimate" shall have the meaning given such term in Section
5.1.2(c).
1.35 "FF&E Funded Amount" shall mean $2,000,000.
1.36 "FF&E Reserve" shall have the meaning given such term in Section
5.1.2(a).
1.37 "Financial Officer's Certificate" shall mean, as to any Person, a
certificate of the chief financial officer or chief accounting officer (or such
officers' authorized designee) of such Person, duly authorized, accompanying the
financial statements required to be delivered by such Person pursuant to Section
17.2, in which such officer shall certify (a) that such statements have been
properly prepared in accordance with GAAP and are true, correct and complete in
all material respects and fairly present the consolidated financial condition of
such Person at and as of the dates thereof and the results of its and their
operations for the periods covered thereby, and (b) certify that no Event of
Default has occurred and is continuing hereunder.
1.38 "Fiscal Year" shall mean the calendar year.
1.39 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.40 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.41 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.42 "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or any State or any county or any political subdivision of
<PAGE>
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any of the foregoing, whether now or hereafter in existence, having jurisdiction
over Tenant or such Property or any portion thereof or the Hotel operated
thereon.
1.43 "Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or
"contaminant" under any present or future federal, state or local
statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. et seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.) and the
regulations promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, any state of the United States, or any political subdivision
thereof; or
(d) the presence of which on such Property causes or
materially threatens to cause an unlawful nuisance upon such Property
or to adjacent properties or poses or materially threatens to pose a
hazard to such Property or to the health or safety of persons on or
about such 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 any Applicable Laws
promulgated by any Government Agencies.
1.44 "Hotel" shall mean, with respect to any Property described on
Exhibits A-1 through A-15, the all suites hotel being operated on such Property.
1.45 "Hotel Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article 19.
<PAGE>
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1.46 "Hotel Mortgagee" shall mean the holder of any Hotel Mortgage.
1.47 "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.
1.48 "Impositions" shall mean collectively, all taxes (including,
without limitation, all taxes imposed under the laws of the relevant State, as
such laws may be amended from time to time, and all ad valorem, sales and use,
or similar taxes as the same relate to or are imposed upon Landlord, Tenant or
the business conducted upon the Leased Property), assessments (including,
without limitation, all assessments for public improvements or benefit, whether
or not commenced or completed prior to the date hereof), water, sewer or other
rents and charges, excises, tax levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees), and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Tenant (including all
interest and penalties thereon due to any failure in payment by Tenant), which
at any time prior to, during or in respect of the Term hereof may be assessed or
imposed on or in respect of or be a lien upon (a) Landlord's interest in the
Leased Property, (b) the Leased Property or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased Property
or any part thereof by Tenant; provided, however, that nothing contained herein
shall be construed to require Tenant to pay (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer
fee or other tax imposed with respect to the sale, exchange or other disposition
by Landlord of the Leased Property or the proceeds thereof, (iv) any single
business, gross receipts tax, transaction privilege, rent or similar taxes as
the same relate to or are imposed upon Landlord, (v) any interest or penalties
imposed on Landlord as a result of the failure of Landlord to file any return or
report timely and in the form prescribed by law or to pay any tax or imposition,
except to the extent such failure is a result of a breach by Tenant of its
obligations pursuant to Section 3.1.3, (vi) any Impositions imposed on Landlord
that are a result of Landlord not being considered a "United States person" as
defined in Section 7701(a)(30) of the Code, (vii) any Impositions that are
enacted or adopted by their express terms as a substitute for any tax that would
not have been payable by Tenant pursuant to the terms of this Agreement or
(viii) any Impositions imposed as a result of a breach of covenant or
representation by Landlord in any agreement governing Landlord's conduct or
operation or as a result of the gross negligence or willful misconduct of
Landlord.
1.49 "Incidental Documents" shall mean, collectively, the Assignment
Agreement, the Agreement to Lease, the Tenant Security Agreement, the Tenant
Pledge Agreement, the Tenant General Partner Pledge Agreement and the Tenant
FF&E Security Agreement; after the Patriot Acquisition Date, the term
"Incidental Documents" shall also be deemed to include all Patriot Acquisition
Documents delivered pursuant to Section 16.4
1.50 "Increased Amount" shall have the meaning given such term in
Section 3.5.
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1.51 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
1.52 "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.
1.53 "Interest Rate" shall mean ten percent (10%) per annum.
1.54 "Land" shall have the meaning given such term in Section 2.1(a).
1.55 "Landlord" shall have the meaning given such term in the preambles
to this Agreement and shall also include its permitted successors and assigns.
1.56 "Landlord Liens" shall mean liens on or against the Leased
Property or any payment of Rent (a) which result from any act of, or any claim
against, Landlord or any owner of a direct or indirect interest in the Leased
Property, or which result from any violation by Landlord of any terms of this
Agreement or the Purchase Agreement, or (b) which result from liens in favor of
any taxing authority by reason of any tax owed by Landlord or any fee owner of a
direct or indirect interest in the Leased Property; provided, however, that
"Landlord Lien" shall not include any lien resulting from any tax for which
Tenant is obligated to pay or indemnify Landlord against until such time as
Tenant shall have already paid to or on behalf of Landlord the tax or the
required indemnity with respect to the same.
1.57 "Lease Year" shall mean any Fiscal Year or portion thereof,
commencing with the 1998 Fiscal Year, during the Term.
1.58 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.59 "Leased Intangible Property" shall mean all hotel licensing
agreements and other service contracts, equipment leases, booking agreements and
other arrangements or agreements affecting the ownership, repair, maintenance,
management, leasing or operation of the Leased Property to which Landlord is a
party; all books, records and files relating to the leasing, maintenance,
management or operation of the Leased Property belonging to Landlord; all
transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, rights to deposits, trade names, service marks,
telephone exchange numbers identified with the Leased Property, and all other
transferable intangible property, miscellaneous rights, benefits and privileges
of any kind or character belonging to Landlord with respect to the Leased
Property.
1.60 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.61 "Leased Property" shall have the meaning given such term in
Section 2.1.
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1.62 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting any Property or the
maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate any Property for its Permitted Use, and (b) all covenants, agreements,
restrictions and encumbrances contained in any instruments at any time in force
affecting any Property, including those which may (i) require material repairs,
modifications or alterations in or to any Property or (ii) in any way materially
and adversely affect the use and enjoyment thereof, but excluding any
requirements arising as a result of Landlord's status as a real estate
investment trust.
1.63 "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.
1.64 "Management Agreements" shall mean the Management Agreements, each
dated the date hereof, between Tenant and Manager, together with all permitted
amendments, modifications and supplements thereto.
1.65 "Manager" shall mean, prior to the Patriot Acquisition Date,
Summerfield Suites Lease Company, L.P., and at all times thereafter Wyndham
Management Corporation (or other direct or indirect Subsidiary of Wyndham or
Patriot), and its permitted successors and assigns.
1.66 "Minimum Rent" shall mean, with respect to each calendar month,
the sum of $2,083,334, which amount shall be allocated among the Properties in
accordance with their Allocable Purchase Prices
1.67 "Notice" shall mean a notice given in accordance with Section
22.10.
1.68 "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.
1.69 "Overdue Rate" shall mean, on any date, a per annum rate of
interest equal to the lesser of fifteen percent (15%) and the maximum rate then
permitted under applicable law.
1.70 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly through one or more Subsidiaries or Affiliated
Persons, five percent (5%) or more of the voting or beneficial interest in, or
otherwise has the right or power (whether by contract, through ownership of
securities or otherwise) to control, such Person.
1.71 "Patriot" shall mean Patriot American Hospitality, Inc., a
Delaware corporation, and all permitted successors and assignees of such
corporation.
1.72 "Patriot Acquisition Date" shall mean the closing date under the
Patriot Contribution Agreement.
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1.73 "Patriot Acquisition Documents" shall have the meaning given such
term in Section 16.4.
1.74 "Patriot Contribution Agreement" shall mean that certain
Contribution Agreement dated as of March __, 1998 by and between Patriot and SF
Hotel Company, L.P., pursuant to which Patriot will acquire, among other things,
the management business and brand name in the Leased Property, together with all
of the right, title and interest of the partners of SF Hotel Company, L.P. in
certain other real property as described therein.
1.75 "Patriot LP" shall mean Patriot American Hospitality Partnership,
L.P., a Delaware limited partnership.
1.76 "Permitted Encumbrances" shall mean, with respect to each
Property, all rights, restrictions, and easements of record set forth on
Schedule B to the applicable owner's 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.
1.77 "Permitted Liens" shall mean any Liens granted in accordance with
Section 20.9(a).
1.78 "Permitted Use" shall mean, with respect to any Property any use
of the Leased Property permitted pursuant to Section 4.1.1.
1.79 "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.
1.80 "Property" shall have the meaning given such term in Section 2.1.
1.81 "Purchase Agreements" shall mean those fifteen Agreements of
Purchase and Sale, each dated as of March __, 1998, by and between Patriot and
the Kansas limited partnership identified therein as "Summerfield".
1.82 "Records" shall have the meaning given such term in Section 7.2.
1.83 "Rent" shall mean, collectively, the Minimum Rent, Additional Rent
and Additional Charges.
1.84 "SEC" shall mean the Securities and Exchange Commission.
1.85 "Security Deposit" shall have the meaning given such term in
Section 3.5.
1.86 "SHC" shall mean Summerfield Hotel Corporation, a Delaware
corporation.
1.87 "Special Charter Document Provisions" shall mean, collectively,
provisions similar to Sections 1.02 and 3.03 of the Agreement of Limited
Partnership of GHALP Partnership, L.P. and Sections 3, 9, 10 and 13 of the
Certificate of Incorporation of GHALP GP, Inc.
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1.88 "Special Purpose Conditions Date" shall have the meaning given
such term in Section 3.5.
1.89 "State" shall mean, with respect to any Property, the state,
commonwealth or district in which the such Property is located.
1.90 "Subsidiary" shall mean, with respect to any Person, any Entity
(a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, more than fifty percent (50%) of the voting or beneficial interest
or (b) which such Person otherwise has the right or power to control (whether by
contract, through ownership of securities or otherwise).
1.91 "Subtenant" shall have the meaning set forth in Section 16.4.
1.92 "Subtenant General Partner" shall have the meaning set forth in
Section 16.4.
1.93 "Successor Landlord" shall have the meaning given such term in
Section 19.2.
1.94 "Tangible Net Worth" shall mean the excess of total assets over
total liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total
assets: (a) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles; (b) all
deferred charges or unamortized debt discount and expense; (c) all reserves
carried and not deducted from assets; (d) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary; (e) securities which are not readily marketable; (f) any
write-up in the book value of any asset resulting from a revaluation thereof
subsequent to the Commencement Date; (g) deferred gain; and (h) any items not
included in clauses (a) through (g) above that are treated as intangibles in
conformity with GAAP; excluding, however, from the determination of total
liabilities accrued fees payable to the Manager in accordance with the
Management Agreement that are subordinated to the payment of Rents hereunder in
accordance with Section 5.4.
1.95 "Tenant" shall have the meaning given such term in the preambles
to this Agreement and shall also include its permitted successors and assigns.
1.96 "Tenant FF&E Security Agreement" shall mean the Assignment and
Security Agreement, dated as of the date hereof, made by Tenant for the benefit
of Landlord.
1.97 "Tenant General Partner" shall mean Summerfield Lease Company
L.L.C., a Delaware limited liability company.
1.98 "Tenant Pledge Agreement" shall mean the Partnership Interest
Pledge Agreement, dated as of the date hereof, made by the partners of Tenant to
Landlord.
1.99 "Tenant General Partner Pledge Agreement" shall mean the
Membership Interest Pledge Agreement, dated as of the date hereof, made by SFHC
Lease Company, L.P., the sole member of Tenant General Partner, to Landlord.
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1.100 "Tenant Security Agreement" shall mean the Pledge and Security
Agreement, dated as of the date hereof, made by Tenant for the benefit of
Landlord.
1.101 "Tenant's Personal Property" shall mean all motor vehicles and
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other tangible personal property of
Tenant, if any, acquired by Tenant on and after the date hereof and located at
the Leased Property or used in Tenant's business at the Leased Property and all
modifications, replacements, alterations and additions to such personal property
installed at the expense of Tenant, other than any items included within the
definition of Fixtures or Leased Personal Property.
1.102 "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.
1.103 "Total Hotel Sales" shall mean, with respect to each Property,
for each Fiscal Year during the Term, all revenues and receipts of every kind
derived by Tenant or any subtenant from operating such Property and parts
thereof, including, but not limited to: income (from both cash and credit
transactions) (after deductions for bad debts, and discounts for prompt or cash
payments and refunds) from rental of rooms, stores, offices, meeting, exhibit or
sales space of every kind; license, lease and concession fees and rentals (not
including gross receipts of licensees, lessees and concessionaires); income from
vending machines; health club membership fees; food and beverage sales;
wholesale and retail sales of merchandise (other than proceeds from the sale of
furnishings, fixture and equipment no longer necessary to the operation of any
Hotel, which shall be deposited in the FF&E Reserve); service charges, to the
extent not distributed to the employees at such Hotel as gratuities; and
proceeds, if any, from business interruption or other loss of income insurance;
provided, however, that Total Hotel Sales shall not include the following:
gratuities to Hotel employees; federal, state or municipal excise, sales, use or
similar taxes collected directly from patrons or guests or included as part of
the sales price of any goods or services; insurance proceeds (other than
proceeds from business interruption or other loss of income insurance); Award
proceeds (other than for a temporary Condemnation); any proceeds from any sale
of such Property or from the refinancing of any debt encumbering such Property;
proceeds from the disposition of furnishings, fixture and equipment no longer
necessary for the operation of such Hotel; interest which accrues on amounts
deposited in the FF&E Reserve; and recoveries against predecessors in title to
the extent such recoveries are compensation attributable to items not otherwise
includable in the calculation of Total Hotel Sales.
1.104 "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.
1.105 "Unsuitable for Its Permitted Use" shall mean, with respect to
any Hotel, a state or condition of such Hotel such that (a) following any damage
or destruction involving such Hotel, such Hotel cannot be operated in the good
faith judgment of Tenant on a commercially practicable basis for its Permitted
Use and it cannot reasonably be expected to be restored to
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substantially the same condition as existed immediately before such damage or
destruction, and as otherwise required by Section 10.2.4, within twelve (12)
months following such damage or destruction or such shorter period of time as to
which business interruption insurance is available to cover Rent and other costs
related to the Leased Property following such damage or destruction, or (b) as
the result of a partial taking by Condemnation, such Hotel cannot be operated,
in the good faith judgment of Tenant or the Manager on a commercially
practicable basis for its Permitted Use.
1.106 "Work" shall have the meaning given such term in Section 10.2.4.
1.107 "Wyndham" shall mean Wyndham International, Inc., a Delaware
corporation, and its permitted successors and assigns.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following (each
of items (a) through (g) below which, as of the Commencement Date, relates to
any single Hotel, a "Property" and, collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibits A-1 through A-15 attached hereto and
made a part hereof (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site),
parking areas and roadways appurtenant to such buildings and structures
presently situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or incorporated into
the Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment,
all of which, to the maximum extent permitted by law, are hereby deemed
by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, but
specifically excluding all items included within the category of
Tenant's Personal Property (collectively, the "Fixtures");
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(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other personal
property of any kind or description used or useful in Tenant's business
on or in the Leased Improvements, and located on or in the Leased
Improvements, and all modifications, replacements, alterations and
additions to such personal property, except items, if any, included
within the category of Fixtures, but specifically excluding all items
included within the category of Tenant's Personal Property
(collectively, the "Leased Personal Property");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space (including any security
deposits held by Tenant or the Manager pursuant thereto) in the Leased
Improvements to tenants thereof.
2.2 Condition of Leased Property. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Leased Property, all applicable
Legal Requirements, the lien of any financing instruments, mortgages and deeds
of trust existing prior to the Commencement Date or permitted by the terms of
this Agreement, and such other matters which would be disclosed by an inspection
of the Leased Property and the record title thereto or by an accurate survey
thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF
THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST
LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any predecessor in title for breaches of warranties or representations
or for latent defects in the Leased Property. Landlord shall fully cooperate
with Tenant in the prosecution of any such claims, in Landlord's or Tenant's
name, all at Tenant's sole cost and expense. Tenant shall indemnify, defend, and
hold harmless Landlord from and against any loss, cost, damage or liability
(including reasonable attorneys' fees) incurred by Landlord in connection with
such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and shall expire December 31, 2015.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing, this Agreement shall be in full force and effect,
the Term shall be automatically
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extended for four (4) consecutive renewal terms of twelve (12) years each
(collectively, the "Extended Terms"), unless Tenant shall give Landlord Notice,
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).
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Terms. If Tenant shall give Notice that it elects
not to extend the Term in accordance with this Section 2.4, this Agreement shall
automatically terminate at the end of the Term then in effect and Tenant shall
have no further option to extend the Term of this Agreement. Otherwise, the
extension of this Agreement shall be automatically effected without the
execution of any additional documents; it being understood and agreed, however,
that Tenant and Landlord shall execute such documents and agreements as either
party shall reasonably require to evidence the same.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Minimum Rent and Additional Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion. Rent for any partial Accounting Period shall be prorated on
a per diem basis.
3.1.1 Minimum Rent.
(a) Minimum Rent shall be paid in advance on the first
Business Day of each month; provided, however, that the first payment
of Minimum Rent shall be payable on the Commencement Date (and, if
applicable, such payment shall be prorated as provided in the last
sentence of the first paragraph of Section 3.1).
(b) Adjustments of Minimum Rent Following Disbursements Under
Sections 5.1.3(b), 10.2.3 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), 10.2.3 or
11.2 with respect to any Property, the Minimum Rent shall be increased
by a per annum amount equal to the Disbursement Rate times the amount
so disbursed. If any such disbursement is made during any month on a
day other than the first day of a month, Tenant shall pay to Landlord
on the first day of the immediately following month (in addition to the
amount of Minimum Rent payable with respect to such month, as adjusted
pursuant to this paragraph (b)) the amount by which Minimum Rent for
the preceding
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month, as adjusted for such disbursement on a per diem basis, exceeded
the amount of Minimum Rent paid by Tenant for such preceding month.
(c) Adjustments of Minimum Rent Following Partial Lease
Termination. If this Lease shall terminate with respect to any Property
but less than all of the Leased Property, Minimum Rent shall be reduced
by the affected Property's allocable share of Minimum Rent.
(d) Credits Against Minimum Rent. On the date on which Minimum
Rent is payable pursuant to this Agreement, Landlord shall credit
against the Minimum Rent then due accrued interest on the Increased
Amount pursuant to Section 3.5.
3.1.2 Additional Rent.
(a) Amount. Commencing with the second Lease Year, for each
Lease Year or portion thereof, Tenant shall pay an aggregate amount of
additional rent ("Additional Rent") with respect to each Property for
such Lease Year in an amount, not less than zero, equal to seven and
one-half percent (7.5%) of Excess Total Hotel Sales for such Property.
(b) Monthly Installments. Installments of Additional Rent for
each Lease Year or portion thereof shall be calculated and paid monthly
in arrears. Such payment shall be accompanied by an Officer's
Certificate setting forth the calculation of Additional Rent due and
payable for such month.
(c) Reconciliation of Additional Rent. On or before April 30,
1999, Tenant shall deliver to Landlord an Officer's Certificate setting
forth Total Hotel Sales for each Property for the Base Year, together
with an audit thereof by Ernst & Young LLP, Arthur Anderson and Co., or
another "Big Six," so-called, firm of independent certified public
accountants proposed by Tenant and approved by Landlord (which approval
shall not be unreasonably withheld or delayed) (the "Accountants"). In
addition, on or before April 30 of each year, commencing April 30,
2000, Tenant shall deliver to Landlord an Officer's Certificate setting
forth the Total Hotel Sales for each Property for the preceding Lease
Year and the Additional Rent payable with respect to such Property for
such Lease Year, together with an audit thereof, conducted by the
Accountants.
If the annual Additional Rent for such preceding Lease Year as
shown in the Officer's Certificate exceeds the amount previously paid
with respect thereto by Tenant, Tenant shall pay such excess to
Landlord at such time as the Officer's Certificate is delivered,
together with interest at the Interest Rate, which interest shall
accrue from the close of such preceding Lease Year until the date that
such certificate is required to be delivered and, thereafter, such
interest shall accrue at the Overdue Rate, until the amount of such
difference shall be paid or otherwise discharged. If the annual
Additional Rent for such preceding Lease Year as shown in the Officer's
Certificate is less than the amount previously paid with respect
thereto by Tenant, provided that no Event of Default shall have
occurred and be continuing, Landlord shall grant Tenant a credit
against the Rent next coming due in the amount of such difference,
together with interest at the
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Interest Rate, which interest shall accrue from the date of payment by
Tenant until the date such credit is applied or paid, as the case may
be. If such credit cannot be made because the Term has expired prior to
application in full thereof, provided no Event of Default has occurred
and is continuing, Landlord shall pay the unapplied balance of such
credit to Tenant, together with interest at the Interest Rate, which
interest shall accrue from the date of payment by Tenant until the date
of payment by Landlord.
(d) Confirmation of Additional Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for each 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 Property for
such Lease Year. Landlord, at its own expense, except as provided
hereinbelow, shall have the right, exercisable by Notice to Tenant
within one (1) year after receipt of the applicable Officer's
Certificate, by its accountants or representatives to audit the
information set forth in the Officer's Certificate referred to in
subparagraph (c) above and, in connection with such audits, to examine
Tenant's and the Manager's books and records with respect thereto
(including supporting data and sales and excise tax returns). If any
such audit discloses a deficiency in the payment of Additional Rent
and, either Tenant agrees with the result of such audit or the matter
is otherwise compromised with Landlord, Tenant shall forthwith pay to
Landlord the amount of the deficiency, as finally agreed or determined,
together with interest at the Interest Rate, from the date such payment
should have been made to the date of payment thereof. If such
deficiency, as agreed upon or compromised as aforesaid, is more than
four percent (4%) 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 the Rent next coming due in the amount of such
difference, as finally agreed or determined, together with interest at
the Interest Rate, which interest shall accrue from the time of payment
by Tenant until the date such credit is applied or paid, as the case
may be. If such a credit cannot be made because the Term has expired
before the credit can be applied in full, provided no Event of Default
has occurred and is continuing, Landlord shall pay the unapplied
balance of such credit to Tenant, together with interest at the
Interest Rate, which interest shall accrue from the date of payment by
Tenant until the date of payment from Landlord.
Any proprietary information obtained by Landlord with respect
to Tenant pursuant to the provisions of this Agreement shall be treated
as confidential, except that such information may be used, subject to
appropriate confidentiality safeguards, in any litigation between the
parties and except further that Landlord may disclose such information
to its prospective lenders, provided that Landlord shall direct and
obtain the agreement of such lenders to maintain such information as
confidential. The obligations
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of Tenant and Landlord contained in this Section 3.1.2 shall survive
the expiration or earlier termination of this Agreement.
3.1.3 Additional Charges. In addition to the Minimum Rent and
Additional Rent payable hereunder, Tenant shall pay to the appropriate parties
and discharge as and when due and payable the following (collectively,
"Additional Charges"):
(a) Impositions. Subject to Article 8 relating to permitted
contests, Tenant shall pay, or cause to be paid, all Impositions before
any fine, penalty, interest or cost (other than any opportunity cost as
a result of a failure to take advantage of any discount for early
payment) may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible, and shall promptly,
upon request, furnish to Landlord copies of official receipts or other
reasonably satisfactory proof evidencing such payments. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any
fine, penalty, premium, further interest or cost may be added thereto.
Landlord, at its expense, shall, to the extent required or permitted by
Applicable Law, prepare and file all tax returns and pay all taxes due
in respect of Landlord's net income, gross receipts, sales and use,
single business, transaction privilege, rent, ad valorem, franchise
taxes and taxes on its capital stock, and Tenant, at its expense,
shall, to the extent required or permitted by Applicable Laws and
regulations, prepare and file all other tax returns and reports in
respect of any Imposition as may be required by Government Agencies.
Provided no Event of Default shall have occurred and be continuing, if
any refund shall be due from any taxing authority in respect of any
Imposition paid by Tenant, the same shall be paid over to or retained
by Tenant. Landlord and Tenant shall, upon request of the other,
provide such data as is maintained by the party to whom the request is
made with respect to the Leased Property as may be necessary to prepare
any required returns and reports. In the event Government Agencies
classify any property covered by this Agreement as personal property,
Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Each party shall, to the
extent it possesses the same, provide the other, upon request, with
cost and depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord is legally
required to file personal property tax returns for property covered by
this Agreement, Landlord shall provide Tenant with copies of assessment
notices in sufficient time for Tenant to file a protest. All
Impositions assessed against such personal property shall be
(irrespective of whether Landlord or Tenant shall file the relevant
return) paid by Tenant not later than the last date on which the same
may be made without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has
knowledge; provided, however, that Landlord's failure to give any such
notice shall in no way diminish Tenant's obligation hereunder to pay
such Impositions (other than any penalties that accrue due to the
failure of Landlord to promptly notify Tenant), unless such failure
continues for more than twelve (12) months after the date Landlord
learned of such Imposition.
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(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) Obligations under Purchase Agreements. 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), imposed upon or incurred by or asserted
against Landlord under any Purchase Agreement or the Assignment
Agreement, excluding, however, (i) the payment of the Purchase Price by
Landlord specified in Part 3 of Schedule A1 of each Purchase Agreement,
and (ii) any liability of Landlord arising under any Purchase Agreement
that is determined, in a final non-appealable judgment by a court of
competent jurisdiction, to have resulted from the gross negligence,
wilful misconduct or failure of Landlord to perform the obligations of
purchaser thereunder that arise after the effective date of the
Assignment Agreement.
(e) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations with respect to the Leased
Property and this Agreement, including, without limitation, all amounts
payable under any equipment leases and all agreements to indemnify
Landlord under Sections 4.3.3 and 9.7.
(f) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement (other than
termination by reason of an Event of Default), Tenant may, within a
reasonable time after the end of the Term, provide Notice to Landlord
of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this
Agreement.
3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, on demand, as Additional Charges,
a late charge (to the extent permitted by law) computed at the Overdue Rate on
the amount of such installment, from the due date of such installment to the
date of payment thereof. To the extent that Tenant pays any Additional Charges
directly to Landlord or any Hotel Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due. If any payments due
from Landlord to Tenant shall not be paid within ten (10) days after its due
date, Landlord shall pay to Tenant, on demand, a late charge (to the extent
permitted by law) computed at the Overdue Rate on the amount of such installment
from the due date of such installment to the date of payment thereof.
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In the event of any failure by Tenant to pay any Additional Charges
when due, Tenant shall promptly pay and discharge, as Additional Charges, every
fine, penalty, interest and cost which is added for non-payment or late payment
of such items. Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Agreement or by statute or otherwise
in the case of non-payment of the Additional Charges as in the case of
non-payment of the Minimum Rent and Additional Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments or
amounts of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including those provisions for
adjustment or abatement of such Rent.
3.4 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Agreement, each of Landlord and Tenant, to the maximum extent
permitted by law, shall remain bound by this Agreement in accordance with its
terms and shall not take any action without the consent of the other to modify,
surrender or terminate this Agreement. In addition, except as otherwise
expressly provided in this Agreement, Tenant shall not seek, or be entitled to,
any abatement, deduction, deferment or reduction of the Rent, or set-off against
the Rent, nor shall the respective obligations of Landlord and Tenant be
otherwise affected by reason of (a) any damage to or destruction of the Leased
Property or any portion thereof from whatever cause or any Condemnation, (b) the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title; (c) any claim which
Tenant may have against Landlord by reason of any default (other than a monetary
default) or breach of any warranty by Landlord under this Agreement or any other
agreement between Landlord and Tenant, or to which Landlord and Tenant are
parties; (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or (e) for any
other cause whether similar or dissimilar to any of the foregoing (other than a
monetary default by Landlord); provided, however, that the foregoing shall not
apply or be construed to restrict Tenant's rights in the event of any act or
omission by Landlord constituting gross negligence or willful misconduct. Except
as otherwise specifically provided in this Agreement, Tenant hereby waives all
rights arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law (a) to modify, surrender or terminate this Agreement or
quit or surrender the Leased Property or any portion thereof, or (b) which would
entitle Tenant to any abatement, reduction, suspension or deferment of the Rent
or other sums payable or other obligations to be performed by Tenant hereunder.
The obligations of each party hereunder shall be separate and independent
covenants and agreements, and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Agreement. In any instance where, after the occurrence of an Event of Default,
Landlord retains funds which, but for the occurrence of such Event of Default,
would be payable to Tenant, Landlord shall refund such funds to Tenant to the
extent the amount thereof exceeds the amount necessary to compensate Landlord
for any cost, loss or damage incurred in connection with such Event of Default.
3.5 Security Deposit. Upon execution of this Agreement, Tenant shall
deposit with Landlord, in immediately available funds, the amount of Fifteen
Million Dollars ($15,000,000)
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(as such amount may be increase in accordance with the succeeding sentence, the
"Security Deposit"). Unless the Special Purpose Conditions (as hereinafter
defined) have been satisfied prior to the earlier of July 1, 1998 or the Patriot
Acquisition Date (the "Special Purpose Conditions Date"), the amount of the
Security Deposit required hereunder shall increase, effective the Special
Purpose Conditions Date, by Ten Million Dollars ($10,000,000) (the "Increased
Amount") to Twenty Five Million Dollars ($25,000,000), and Tenant shall deposit
with Landlord such additional amount by wire transfer of immediately available
funds. The Security Deposit shall be held by Landlord as security for the
faithful observance and performance by Tenant of all the terms, covenants and
conditions of this Agreement by Tenant to be observed and performed. The
Security Deposit shall not be mortgaged, assigned, transferred or otherwise
encumbered by Tenant without the prior written consent of Landlord, and any such
act on the part of Tenant without first having obtained Landlord's consent
(which consent may be given or withheld by Landlord in Landlord's sole and
absolute discretion) shall be without force and effect and shall not be binding
upon Landlord. As used herein the term "Special Purpose Conditions" shall mean,
collectively, (i) the amendment of the agreement of limited partnership of
Tenant and the operating agreement of Tenant General Partner to add the relevant
Special Charter Document Provisions thereto, and (ii) the receipt by Landlord of
an opinion of Locke Purnell Rain Harrell (A Professional Corporation) or other
counsel selected by Tenant and reasonably acceptable to Landlord, to the effect
that the Tenant and the Tenant General Partner should not be subject to
substantive consolidation in a bankruptcy proceeding involving related entities,
subject to standard and customary qualifications and assumptions. The cost and
expenses of such counsel shall be for the account of Tenant.
If any Event of Default shall occur and be continuing, Landlord may, at
its option and without prejudice to any other remedy which Landlord may have on
account thereof, appropriate and apply the entire Security Deposit or so much
thereof as may be necessary to compensate Landlord (Increased Amount, if any,
first) toward the payment of the Rent or other sums or loss or damage sustained
by Landlord due to such breach by Tenant and Tenant shall, upon demand, restore
the Security Deposit to the original sum deposited. It is understood and agreed
that the Security Deposit is not to be considered as prepaid rent, nor shall
damages be limited to the amount of the Security Deposit. Should Tenant comply
with all the terms, covenants and conditions of this Agreement, the Security
Deposit shall be returned in full to Tenant at the end of the Term. Landlord
shall have no obligation to pay interest on the Security Deposit and shall have
the right to commingle the same with Landlord's other funds; provided, however
that so long as no Event of Default shall have occurred and be continuing,
Landlord shall credit Tenant or its assigns with interest on any unapplied
balance of the Increased Amount at a rate of 11.11% per annum. Such interest
shall be credited in arrears and pro rated with respect to any partial month. If
Landlord conveys Landlord's interest under this Agreement, the Security Deposit,
or any part thereof not previously applied, may be turned over by Landlord to
Landlord's grantee, and, if so turned over, Tenant shall look solely to such
grantee for proper application of the Security Deposit in accordance with the
terms of this Section 3.5 and the return thereof in accordance herewith. No
Hotel Mortgagee shall be responsible to Tenant for the return or application of
the Security Deposit, whether or not it succeeds to the position of Landlord
hereunder, unless the Security Deposit shall have been received in hand by such
holder.
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In the event of bankruptcy or other creditor-debtor proceedings against
Tenant, the Security Deposit shall be deemed to be applied first to the payment
of the Rent and other charges due Landlord for all periods prior to the filing
of such proceedings.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Permitted Use.
(a) Tenant shall, at all times during the Term and at any
other time that Tenant shall be in possession of the Leased Property,
continuously use and operate, and cause the Manager to use and operate,
each Property as a Summerfield Suites Hotel and any uses incidental
thereto. Tenant shall not use (and shall direct the Manager not to use)
the Leased Property or any portion thereof for any other use without
the prior written consent of Landlord. No use shall be made or
permitted to be made of the Leased Property and no acts shall be done
thereon which will cause the cancellation of any insurance policy
covering the Leased Property or any part thereof (unless another
adequate policy is available), 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 (or direct the Manager to comply) with all Insurance
Requirements. Tenant shall not take or omit to take (and Tenant shall
direct the Manager not to take or omit to take) any action, the taking
or omission of which materially impairs the value or the usefulness of
any Property or any part thereof for its Permitted Use.
(b) Notwithstanding the foregoing, in the event that, in the
reasonable determination of Tenant, it shall no longer be economically
practical to operate any Property as an all suites hotel, Tenant shall
give Landlord Notice thereof, which Notice shall set forth in
reasonable detail the reasons therefor. Thereafter, Landlord and Tenant
shall negotiate in good faith to agree on an alternative use for the
Property or a replacement property therefor (in which event the
affected Property shall be transferred to Tenant or Tenant's designee),
appropriate adjustments to the Additional Rent and other related
matters; provided, however, in no such event shall the Minimum Rent be
reduced or abated.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain, and shall direct the
Manager to obtain and maintain, all approvals necessary to use and operate, for
its Permitted Use, each Property and the Hotel located thereon under applicable
law.
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4.1.3 Lawful Use, Etc. Tenant shall not, and shall direct the
Manager not to, use or suffer or permit the use of the Leased Property or
Tenant's Personal Property, if any, for any unlawful purpose. Tenant shall not,
and shall direct the Manager not to, commit or suffer to be committed any waste
on any Property, or in the related Hotel, nor shall Tenant cause or permit any
unlawful nuisance thereon or therein. Tenant shall not, and shall direct the
Manager not to, suffer nor permit any 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 such Property or any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the
provisions of Article 8 and Section 5.1.3(b), Tenant, at its sole expense, shall
(or shall direct the Manager or (following the Patriot Acquisition Date)
Subtenant to) (i) comply with all material Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair, alteration
and restoration of the Leased Property and with the terms and conditions of any
ground lease affecting the Leased Property and (ii) procure, maintain and comply
with all appropriate licenses, and other authorizations and agreements required
for any use of the Leased Property and Tenant's Personal Property, if any, then
being made, and for the proper erection, installation, operation and maintenance
of the Leased Property or any part thereof.
4.3 Environmental Matters.
4.3.1 Restriction on Use, Etc. During the Term and any other
time that Tenant shall be in possession of the Leased Property, Tenant shall not
(and shall direct the Manager not to) store, spill upon, dispose of or transfer
to or from the Leased Property any Hazardous Substance, except in quantities
that are customary in normal operation and maintenance of hotel properties, and
then only in compliance with all Applicable Laws. During the Term and any other
time that Tenant shall be in possession of any Property, Tenant shall maintain
(and shall direct the Manager to maintain) such Property at all times free of
any Hazardous Substance (except in quantities that are customary in normal
operation and maintenance of hotel properties, and then only in compliance with
all Applicable Laws). Tenant shall promptly: (a) upon receipt of notice or
knowledge and shall direct the Manager upon receipt of notice or knowledge
promptly to, notify Landlord in writing of any material change in the nature or
extent of Hazardous Substances at the Leased Property, (b) transmit to Landlord
a copy of any Community Right to Know or similar report which is required to be
filed by Tenant or the Manager with respect to the Leased Property pursuant to
SARA Title III or any other Applicable Law, and any release notification form
filed by Tenant or the Manager with respect to the Leased Property pursuant to
CERCLA or any other Applicable Law, (c) transmit to Landlord copies of any
citations, orders, notices or other governmental communications received by
Tenant or the Manager or their respective agents or representatives with respect
thereto (collectively, "Environmental Notice"), which Environmental Notice
requires a written response or any action to be taken and/or if such
Environmental Notice gives notice of and/or presents a material risk of any
material violation of any Applicable Law and/or presents a material risk of any
material cost, expense, loss or damage (an "Environmental Obligation"), (d)
observe and comply (and direct the Manager to observe and comply) with all
Applicable Laws relating to the use, maintenance and disposal of Hazardous
Substances and all orders or directives from any official, court or agency of
competent jurisdiction relating to the use or maintenance or requiring the
removal,
<PAGE>
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treatment, containment or other disposition thereof, and (e) pay or otherwise
dispose of any fine, charge or Imposition related thereto, unless Tenant or the
Manager shall contest the same in good faith and by appropriate proceedings and
the right to use and the value of the Leased Property is not materially and
adversely affected thereby.
If, at any time prior to the termination of this Agreement, Hazardous
Substances in amounts or concentrations requiring investigation or cleanup
(other than those maintained in accordance with Applicable Laws) are discovered
on the Leased Property, subject to Tenant's and the Manager's right to contest
the same in accordance with Article 8, Tenant shall take (and shall direct the
Manager to take) all actions and incur any and all expenses, as are required by
any Government Agency and by Applicable Law, (i) to clean up and remove from and
about the Leased Property all Hazardous Substances thereon, (ii) to contain and
prevent any further release or threat of release of Hazardous Substances on or
about the Leased Property and (iii) to use good faith efforts to eliminate any
further release or threat of release of Hazardous Substances on or about the
Leased Property.
4.3.2 Environmental Report. From time to time during the Term,
Landlord shall have the right to require an update of the Phase I environmental
site assessment reports furnished to Landlord prior to the date hereof with
respect to the Leased Property, which report shall be prepared by an
environmental engineering firm selected by Landlord. The costs and expenses of
such engineering firm shall be divided equally between Landlord and Tenant.
4.3.3 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord and each Hotel Mortgagee, their trustees,
officers, agents, employees and beneficiaries, and any of their respective
successors or assigns with respect to this Agreement (collectively, the
"Indemnitees" and, individually, an "Indemnitee") for, from and against any and
all debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
Indemnitee resulting from, either directly or indirectly, the presence during
the Term (or any other time Tenant shall be in possession of the Leased
Property) in, upon or under the soil or ground water of the Leased Property or
any properties surrounding the Leased Property of any Hazardous Substances in
violation of any Applicable Law or otherwise, provided that any of the foregoing
arises by reason of any failure by Tenant, the Manager or any Person claiming
by, through or under Tenant or the Manager to perform or comply with any of the
terms of this Section 4.3, except to the extent the same arise from the acts or
omissions of Landlord or any other Indemnitee or during any period that Landlord
or a Person designated by Landlord (other than Tenant) is in possession of the
Leased Property. Tenant's duty herein includes, but is not limited to, costs
associated with personal injury or property damage claims as a result of the
presence prior to the expiration or sooner termination of the Term and the
surrender of the Leased Property to Landlord in accordance with the terms of
this Agreement of Hazardous Substances in, upon or under the soil or ground
water of the Leased Property. 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.
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Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage (including, without limitation, reasonable
attorneys' fees) reasonably incurred by Landlord and arising from a failure of
Tenant to observe and perform the requirements of this Section 4.3, which
amounts shall bear interest from the date ten (10) days after written demand
therefor is given to Tenant until paid by Tenant to Landlord at the Overdue
Rate.
4.3.4 Survival. The provisions of this Section 4.3 shall
survive the expiration or sooner termination of this Agreement.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's General Obligations. Tenant shall, at its sole
cost and expense (except as expressly provided in Sections 5.1.3(b), 10.2.3 or
11.2), or shall direct the Manager or (following the Patriot Acquisition Date)
Subtenant to, keep the Leased Property and all private roadways, sidewalks and
curbs appurtenant thereto (and Tenant's Personal Property) in good order and
repair, reasonable wear and tear excepted (whether or not the need for such
repairs occurs as a result of Tenant's or the Manager's use, any prior use, the
elements or the age of the Leased Property or Tenant's Personal Property or any
portion thereof), and shall promptly make (or cause the Manager to make) all
necessary and appropriate repairs and replacements thereto of every kind and
nature, whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the commencement of the Term (concealed or otherwise). All
repairs shall be made in a good, workmanlike manner, consistent with the
Manager's and industry standards for like hotels in like locales, in accordance
with all applicable federal, state and local statutes, ordinances, by-laws,
codes, rules and regulations relating to any such work. Tenant shall not take or
omit to take (and shall direct the Manager not to take or omit to take) any
action, the taking or omission of which would materially and adversely impair
the value or the usefulness of the Leased Property or any part thereof for its
Permitted Use. Tenant's obligations under this Section 5.1.1 shall be limited in
the event of any casualty or Condemnation as set forth in Sections 10.2 and 11.2
and also as set forth in Section 5.1.3(b) and Tenant's obligations with respect
to Hazardous Substances are as set forth in Section 4.3.
5.1.2 FF&E Reserve.
(a) Concurrently with the execution of this Agreement, Tenant
has established a reserve account (the "FF&E Reserve") for each Hotel
in the FF&E Bank. The purpose of the FF&E Reserve is to cover the cost
of:
(i) Replacements and renewals to any Hotel's
furnishings, fixtures and equipment;
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(ii) Certain routine repairs and maintenance to any
Hotel building which are normally capitalized under GAAP such
as exterior and interior repainting, resurfacing building
walls, floors, roofs and parking areas, and replacing folding
walls and the like; and
(iii) Major repairs, alterations, improvements,
renewals or replacements to any Hotel's buildings' structure,
roof, or exterior facade, or to its mechanical, electrical,
heating, ventilating, air conditioning, plumbing or vertical
transportation systems.
Tenant agrees that it will, from time to time, execute such
reasonable documentation as may be requested by Landlord and any Hotel
Mortgagee to assist Landlord and such Hotel Mortgagee in establishing
or perfecting the Hotel Mortgagee's security interest in Landlord's
residual interest in the funds which are in the FF&E Reserve, it being
acknowledged and agreed that the funds in the FF&E Reserve are the
property of Tenant; provided, however, that no such documentation shall
contain any amendment to or modification of any of the provisions of
this Agreement. It is understood and agreed that, during the Term, the
FF&E Reserve may not be applied against debts secured by a Hotel
Mortgage nor shall any Hotel Mortgagee have the right to approve the
release of such funds pursuant to the terms of this Agreement unless
and until Landlord shall default in its obligations to such Hotel
Mortgagee.
(b) Throughout the Term, Tenant shall transfer (as of the end
of each month of the Term) into the FF&E Reserve an amount equal to
five percent (5%) of Total Hotel Sales for such month. Together with
the documentation provided to Landlord pursuant to Section 3.1.2(c),
Tenant shall deliver to Landlord an Officer's Certificate setting forth
the total amount of deposits made to and expenditures from the FF&E
Reserve for the preceding Fiscal Year, together with a reconciliation
of such expenditures with the applicable FF&E Estimate.
(c) Prior to execution of this Agreement with respect to the
1998 calendar year and, thereafter, each year, on or before December 1
of the preceding year, Tenant shall prepare an estimate (the "FF&E
Estimate") of FF&E Reserve expenditures necessary during the 1998
calendar year or the ensuing calendar year, as the case may be, and
shall submit such FF&E Estimate to Landlord for its review and
approval, which approval shall not be unreasonably withheld or delayed.
In the event Landlord shall fail to respond within thirty (30) days
after receipt of the FF&E Estimate, such FF&E Estimate shall be deemed
approved by Landlord. All expenditures from the FF&E Reserve shall be
(as to both the amount of each such expenditure and the timing thereof)
both reasonable and necessary, given the objective that each Hotel will
be maintained and operated to a standard comparable to competitive
hotels. All expenditures from the FF&E Reserve may only be used to pay
expenditures entered into on an "arm's length" basis with Persons that
are not Affiliated Persons of Tenant, in each case without mark-up or
the payment of allocated internal costs of Tenant or any Affiliated
Person (except for a purchasing fee that may be paid to an Affiliated
Person of Tenant in respect of any item purchased with funds from the
FF&E Reserve in an amount not to exceed 3.5% of the lower of cost or
the fair market value of such item.
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(d) Tenant shall, consistent with the FF&E Estimate approved
by Landlord, from time to time make expenditures from the FF&E Reserve
as it deems necessary provided that Tenant shall not materially deviate
from the FF&E Estimate approved by Landlord without the prior approval
of Landlord, except in the case of emergency where immediate action is
necessary to prevent imminent danger to person or property.
(e) Upon the expiration or sooner termination of this
Agreement, funds in the FF&E Reserve and all property purchased with
funds from the FF&E Reserve during the Term shall be paid, granted and
assigned to Landlord as Additional Charges.
(f) Upon execution of this Agreement, Tenant has deposited the
FF&E Funded Amount into the FF&E Reserve. The FF&E Funded Amount,
together with amounts transferred into the FF&E Reserve in accordance
with Section 5.1.2(b) hereof during the 1998 calendar year, shall be
used to fund the expenditures identified in the FF&E Estimate for the
1998 calendar year, and to the extent of any excess, subsequent years.
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 Sections 5.1.3(b), 10.2 and 11.2, to make any expenditure
whatsoever with respect thereto, or to maintain the Leased Property in
any way. Except as otherwise expressly provided in this Agreement,
Tenant hereby waives, to the maximum extent permitted by law, the right
to make repairs at the expense of Landlord pursuant to any law in
effect on the date hereof or hereafter enacted. Landlord shall have the
right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter
existing.
(b) If, at any time, funds in the FF&E Reserve shall be
insufficient for necessary and permitted expenditures thereof or,
pursuant to the terms of this Agreement, Tenant is required to make any
expenditures in connection with any repair, maintenance or renovation
with respect to the Leased Property and the amount of such
disbursements or expenditures exceeds the amount on deposit in the FF&E
Reserve or such repair, maintenance or renovation is not a permitted
expenditure from the FF&E Reserve as described in Section 5.1.2(a)(i),
(ii) and (iii), Tenant may, at its election, give Landlord Notice
thereof, which Notice shall set forth, in reasonable detail, the nature
of the required repair, renovation or replacement, the estimated cost
thereof and such other information with respect thereto as Landlord may
reasonably require. Provided that no Event of Default shall have
occurred and be continuing and Tenant shall otherwise comply with the
applicable provisions of Article 6, Landlord shall, within ten (10)
Business Days after such Notice, subject to and in accordance with the
applicable provisions of Article 6, disburse such required funds to
Tenant (or, if Tenant shall so
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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); provided, however, that, in
the event that Landlord shall elect not to disburse any funds pursuant
to this Section 5.1.3(b), Tenant's sole recourse shall be to elect not
to make the applicable repair, maintenance or renovation.
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, the Manager or
for any other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under any Mechanic's Lien Law of any State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.
5.2 Tenant's Personal Property. Tenant shall provide and maintain
throughout the Term all such Tenant's Personal Property as shall be necessary in
order to operate in compliance with applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Permitted Use and all of such Personal Property shall, upon the
expiration or earlier termination of this Agreement, become the property of
Landlord. If, from and after the Commencement Date, Tenant acquires an interest
in any item of tangible personal property (other than motor vehicles) on, or in
connection with, the Leased Property which belongs to anyone other than Tenant,
Tenant shall require the agreements permitting such use to provide that Landlord
or its designee may assume Tenant's rights and obligations under such agreement
upon the termination of this Agreement and the assumption of management or
operation of the Hotel by Landlord or its designee.
5.3 Yield Up. Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate and surrender the Leased Property to Landlord in
substantially the same condition in which the Leased Property was in on the
Commencement Date, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Agreement, reasonable wear and
tear excepted (and casualty damage and Condemnation, in the event that this
Agreement is terminated following a casualty or 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
efforts to transfer to and cooperate with Landlord or Landlord's nominee in
connection with the processing of all applications for
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licenses, operating permits and other governmental authorizations and all
contracts, including contracts with governmental or quasi-governmental Entities
which may be necessary for the use and operation of the Hotel as then operated.
If requested by Landlord, Tenant will direct the Manager to continue 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 a market rate
management fee and an agreement to reimburse the Manager for its reasonable
out-of-pocket costs and expenses, and reasonable administrative costs), as
Landlord shall reasonably request.
5.4 Management Agreement. Tenant shall not, without Landlord's prior
written consent, amend or modify the provisions of the Management Agreement
which provide (i) that all amounts due from Tenant to the Manager shall be
subordinate to all amounts due from Tenant to Landlord (provided that, as long
as no Event of Default has occurred and is continuing, Tenant may pay amounts
due the Manager under the Management Agreement), (ii) for operation of the
Leased Property under the "Summerfield" name, (iii) that the Manager and their
Affiliated Persons are prohibited from operating, managing or franchising
another Summerfield Suites hotel within the designated area on Exhibit C and
(iv) for termination thereof, at Landlord's option, upon the termination of this
Agreement. Tenant shall not take any action, grant any consent or permit any
action under the Management Agreement which might have a material adverse effect
on Landlord, without the prior written consent of Landlord; provided, however,
that Landlord's consent shall not be required in connection with any assignment
of the Manager's rights under the Management Agreement to (x) any Affiliated
Person of the Manager having the full power, right and authority to provide all
services and organizational expertise as contemplated and required by the
Management Agreement or (y) any Person who acquires all or substantially all of
the management contracts of the Manager, provided that, in either such case, the
Leased Property will retain the right to use the "Summerfield" name. In the
event of an assignment pursuant to clause (y) preceding, provided that the
successor Manager (i) assumes, in writing all obligations of the Manager under
the Management Agreement, and (ii) has a Tangible Net Worth, as of the date of
assignment, equal to the greater of the Tangible Net Worth of the Manager as of
the date of this Agreement, and the Tangible Net Worth of the Manager as of the
date of such assignment, the Manager shall be released from all liabilities
arising under the Management Agreement from and after the effective date of such
assignment. Tenant shall not agree to any change in the Manager (except as
provided in the preceding sentences), to any change in the Management Agreement
(except as provided in the preceding sentences), terminate the Management
Agreement or permit the Manager to assign the Management Agreement (except as
provided in the preceding sentences) without the prior written approval of
Landlord in each instance; provided, however, that the Manager may grant a
security interest in its right to receive payments under the Management
Agreement without Landlord's prior written approval.
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ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Improvements to the Leased Property. Tenant shall not make,
construct or install (and shall direct the Manager not to construct or install)
any Capital Additions (other than Capital Additions of the type described in
Section 5.1.2(a)(ii) and approved pursuant to Section 5.1.2(c)) with respect to
any Property without, in each instance, obtaining Landlord's prior written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned provided that (a) construction or installation of the same would not
adversely affect or violate any Legal Requirement or Insurance Requirement
applicable to such Property and (b) Landlord shall have received an Officer's
Certificate certifying as to the satisfaction of the conditions set out in
clause (a) above; provided, however, that no such consent shall be required in
the event immediate action is required to prevent imminent danger to person or
property. Prior to commencing construction of any Capital Addition, Tenant shall
submit, or shall direct the Manager or (following the Patriot Acquisition Date)
Subtenant to submit, to Landlord, in writing, a proposal setting forth, in
reasonable detail, any such proposed improvement and shall provide to Landlord
such plans and specifications, and such permits, licenses, contracts and such
other information concerning the same as Landlord may reasonably request.
Landlord shall have thirty (30) days to review all materials submitted to
Landlord in connection with any such proposal. Failure of Landlord to respond to
Tenant's or the Manager's proposal within thirty (30) days after receipt of all
information and materials requested by Landlord in connection with the proposed
improvement shall be deemed to constitute approval of the same. Without limiting
the generality of the foregoing, such proposal shall indicate the approximate
projected cost of constructing such proposed improvement and the use or uses to
which it will be put. No Capital Addition shall be made which would tie in or
connect any Leased Improvement with any other improvements on property adjacent
to such Property (and not part of the Land) including, without limitation,
tie-ins of buildings or other structures or utilities. Tenant shall not finance,
and shall direct the Manager not to finance, the cost of any construction of
such improvement by the granting of a lien on or security interest in such
Property or such improvement, or Tenant's interest therein, without the prior
written consent of Landlord, which consent may be withheld by Landlord in
Landlord's sole discretion. Any such improvements shall, upon the expiration or
sooner termination of this Agreement, remain or pass to and become the property
of Landlord, free and clear of all encumbrances other than Permitted
Encumbrances.
6.2 Salvage. All materials which are scrapped or removed in connection
with the making of either Capital Additions or non-Capital Additions or repairs
required by Article 5 shall be or become the property of the party that paid for
such work.
ARTICLE 7
LIENS
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the Leased Property or Tenant's leasehold interest therein or
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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
Section 16.1, (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
19, and (h) Landlord Liens and any other voluntary liens created by Landlord.
7.2 Landlord's Lien. In addition to any statutory landlord's lien and
in order to secure payment of the Rent and all other sums payable hereunder by
Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant's breach of this Agreement, Tenant hereby grants unto
Landlord a security interest in and an express contractual lien upon Tenant's
Personal Property (except motor vehicles and liquor licenses and permits), and
Tenant's interest in all ledger sheets, files, records, documents and
instruments (including, without limitation, computer programs, tapes and related
electronic data processing) relating to the operation of the Hotels (the
"Records") and all proceeds therefrom, subject to any Permitted Encumbrances;
and such Tenant's Personal Property shall not be removed from the Leased
Property at any time when a Default or an Event of Default has occurred and is
continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in Tenant's Personal Property and the proceeds thereof in accordance
with the provisions of the applicable laws of the relevant State. Tenant hereby
grants Landlord an irrevocable limited power of attorney, coupled with an
interest, to execute all such financing statements in Tenant's name, place and
stead. The security interest herein granted is in addition to any statutory lien
for the Rent.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "Claims") as
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to pay any
Claims as finally determined, (b) such contest shall not cause Landlord or
Tenant to be in default under any mortgage or deed of trust encumbering the
Leased Property (Landlord agreeing that any such mortgage or deed of trust shall
permit Tenant to exercise the rights granted pursuant to this Article 8) or any
interest therein or result in or reasonably be expected to result in a lien
attaching to the Leased Property, (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
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therewith or as a result of Tenant's exercise of its rights under this Article
8. Landlord agrees to join in any such proceedings if required legally to
prosecute such contest, provided that Landlord shall not thereby be subjected to
any liability therefor (including, without limitation, for the payment of any
costs or expenses in connection therewith) unless Tenant agrees by agreement in
form and substance reasonably satisfactory to Landlord, to assume and indemnify
Landlord with respect to the same. Tenant shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Tenant or paid by Landlord to the extent that Landlord has been fully
reimbursed by Tenant. If Tenant shall fail (x) to pay or cause to be paid any
Claims when finally determined, (y) to provide reasonable security therefor, or
(z) to prosecute or cause to be prosecuted any such contest diligently and in
good faith, Landlord may, upon reasonable notice to Tenant (which notice shall
not be required if Landlord shall reasonably determine that the same is not
practicable), pay such charges, together with interest and penalties due with
respect thereto, and Tenant shall reimburse Landlord therefor, upon demand, as
Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall, at all times during
the Term and at any other time Tenant shall be in possession of the Leased
Property, keep each Property and all property located therein or thereon,
insured against the risks and in the amounts as follows and shall maintain, with
respect to each Property, the following insurance:
(a) "All-risk" property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief, earthquake,
explosion of steam boilers, pressure vessels or other similar
apparatus, now or hereafter installed in the Hotel located at such
Property, with the usual extended coverage endorsements, in an amount
equal to one hundred percent (100%) of the then full Replacement Cost
thereof (as defined in Section 9.2);
(b) Business interruption insurance covering risk of loss
during the lesser of the first twelve (12) months of reconstruction or
the actual reconstruction period necessitated by the occurrence of any
of the hazards described in subparagraph (a) above, in such amounts as
may be customary for comparable properties in the area and in an amount
sufficient to prevent Landlord or Tenant from becoming a co-insurer;
(c) Comprehensive general liability insurance, including
bodily injury and property damage in a form reasonably satisfactory to
Landlord (and including, without limitation, broad form contractual
liability, independent contractor's hazard and completed operations
coverage) in an amount not less than One Million Dollars ($1,000,000)
per occurrence, Three Million Dollars ($3,000,000) in the aggregate and
umbrella coverage of all such claims in an amount not less than Fifty
Million Dollars ($50,000,000);
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(d) Flood (if such Property is located in whole or in part
within an area identified as an area having special flood hazards and
in which flood insurance has been made available under the National
Flood Insurance Act of 1968, as amended, or the Flood Disaster
Protection Act of 1973, as amended (or any successor acts thereto)) and
such other hazards and in such amounts as may be customary for
comparable properties in the area;
(e) Worker's compensation insurance coverage if required by
applicable law for all persons employed by Tenant on such Property with
statutory limits and otherwise with limits of and provisions in
accordance with the requirements of applicable local, State and federal
law, and employer's liability insurance as is customarily carried by
similar employers; and
(f) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Hotel Mortgagee and which is
customarily carried by comparable lodging properties in the area.
9.2 Replacement Cost. "Replacement Cost" as used herein shall mean the
actual replacement cost of the property requiring replacement from time to time,
including an increased cost of construction endorsement, less exclusions
provided in the standard form of fire insurance policy. In the event either
party believes that the then full Replacement Cost has increased or decreased at
any time during the Term, such party, at its own cost, shall have the right to
have such full Replacement Cost redetermined by an independent accredited
appraiser approved by the other, which approval shall not be unreasonably
withheld or delayed. The party desiring to have the full Replacement Cost so
redetermined shall forthwith, on receipt of such determination by such
appraiser, give Notice thereof to the other. The determination of such appraiser
shall be final and binding on the parties hereto until any subsequent
determination under this Section 9.2, and Tenant shall forthwith conform the
amount of the insurance carried to the amount so determined by the appraiser.
9.3 Waiver of Subrogation. Landlord and Tenant agree that (insofar as
and to the extent that such agreement may be effective without invalidating or
making it impossible to secure insurance coverage from responsible insurance
companies doing business in the relevant State) with respect to any property
loss which is covered by insurance then being carried by Landlord or Tenant,
respectively, the party carrying such insurance and suffering said loss releases
the other of and from any and all claims with respect to such loss; and they
further agree that their respective insurance companies shall have no right of
subrogation against the other on account thereof, even though extra premium may
result therefrom. In the event that any extra premium is payable by Tenant as a
result of this provision, Landlord shall not be liable for reimbursement to
Tenant for such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for, nonassessable and
be issued by insurance carriers authorized to do business in the relevant State,
having a general policy holder's rating of no less than B++ in Best's latest
rating guide. All such policies described in Sections 9.1(a) through (d) shall
include no deductible in excess of Two Hundred Fifty Thousand Dollars ($250,000)
and, with the exception of the insurance described in Sections 9.1(e), shall
name Landlord and any
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Hotel Mortgagee as additional insureds, as their interests may appear. All loss
adjustments shall be payable as provided in Article 10. Tenant shall cause all
insurance premiums to be paid and shall deliver policies or certificates of
insurance 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
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 (a) the coverage
thereby afforded will not be reduced or diminished from that which would exist
under a separate policy meeting all other requirements of this Agreement, and
(b) the requirements of this Article 9 are otherwise satisfied. Without limiting
the foregoing, the amounts of insurance that are required to be maintained
pursuant to Section 9.1 shall be on a Hotel by Hotel basis, and shall be subject
to only a per location aggregate limit, except for flood, earthquake and
umbrella coverages.
9.6 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with that
required by this Article 9, or increase the amount of any existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of such insurance, including
Landlord and all Hotel Mortgagees, are included therein as additional insureds
and the loss is payable under such insurance in the same manner as losses are
payable under this Agreement. In the event Tenant shall take out any such
separate insurance or increase any of the amounts of the then existing
insurance, Tenant shall give Landlord prompt Notice thereof.
9.7 Indemnification of Landlord. Notwithstanding the existence of any
insurance provided for herein and without regard to the policy limits of any
such insurance, Tenant shall protect, indemnify and hold harmless Landlord for,
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about any Property or adjoining sidewalks or rights of way, (b) any past,
present or future use, misuse, non-use, condition, management, maintenance or
repair by Tenant or anyone claiming under Tenant, or any prior owner or operator
of any Property, of any 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 any Property or
Tenant's Personal Property or such use, misuse, non-use, condition, management,
maintenance, or repair thereof including, failure to perform obligations (other
than Condemnation proceedings) to which Landlord is made a party, (c) any
Impositions that are the obligations of Tenant to pay pursuant to the applicable
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provisions of this Agreement, and (d) any failure on the part of Tenant or
anyone claiming under Tenant to perform or comply with any of the terms of this
Agreement. Tenant, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against Landlord (and shall
not be responsible for any duplicative attorneys' fees incurred by Landlord) or
may compromise or otherwise dispose of the same, with Landlord's prior written
consent (which consent may not be unreasonably withheld or delayed). In the
event Landlord shall unreasonably withhold or delay its consent, Tenant shall
not be liable pursuant to this Section 9.7 for any incremental increase in costs
or expenses resulting therefrom. The obligations of Tenant under this Section
9.7 are in addition to the obligations set forth in Section 4.3 and shall
survive the termination of this Agreement.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to any Property,
or any portion thereof, and insured under any policy of insurance required by
Article 9 (other than the proceeds of any business interruption insurance) shall
be paid directly to Landlord (subject to the provisions of Section 10.2) and all
loss adjustments with respect to losses payable to Landlord shall require the
prior written consent of Landlord; 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), calculated on a Property
by Property basis, shall be paid directly to Tenant and such losses may be
adjusted without Landlord's consent. If Tenant is required to reconstruct or
repair such Property as provided herein, such proceeds shall be paid out by
Landlord from time to time for the reasonable costs of reconstruction or repair
of such Property necessitated by such damage or destruction, subject to and in
accordance with the provisions of Section 10.2.4. Provided no Default or Event
of Default has occurred and is continuing, any excess proceeds of insurance
remaining after the completion of the restoration shall be paid to Tenant. In
the event that the provisions of Section 10.2.1 are applicable, the insurance
proceeds shall be retained by the party entitled thereto pursuant to Section
10.2.1. 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, any Property shall be totally or partially destroyed and the Hotel
located thereon is thereby rendered Unsuitable for Its Permitted Use, either
Landlord or Tenant may, by the giving of Notice thereof to the other, terminate
this Agreement with respect to such Property, in which event, whereupon, this
Agreement shall terminate with respect to the affected Property, Landlord shall
be entitled to retain the insurance proceeds payable on account of such damage
and Tenant shall thereafter have no obligation to pay Rent as to such Property
for periods arising after the effective date of termination.
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10.2.2 Partial Damage or Destruction. If, during the Term, any
Property shall be totally or partially destroyed but the Hotel is not rendered
Unsuitable for Its Permitted Use, Tenant shall promptly restore such Hotel as
provided in Section 10.2.4 unless this Agreement is terminated as to such Hotel
as provided in Section 10.2.3.
10.2.3 Insufficient Insurance Proceeds. If this Agreement is
not otherwise terminated pursuant to this Article 10 and the cost of the repair
or restoration of any Property exceeds the amount of insurance proceeds received
by Landlord and Tenant pursuant to Section 9.1(a), (c), (d) or, if applicable,
(f), Tenant shall give Landlord Notice thereof which notice shall set forth in
reasonable detail the nature of such deficiency and whether Tenant shall pay and
assume the amount of such deficiency (Tenant having no obligation to do so,
except that, if Tenant shall elect to make such funds available, the same shall
become an irrevocable obligation of Tenant pursuant to this Agreement). In the
event Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at
Landlord's sole election by Notice to Tenant, given within sixty (60) days after
Tenant's notice of the deficiency, to elect to make available for application to
the cost of repair or restoration the amount of such deficiency; provided,
however, in such event, upon any disbursement by Landlord thereof, the Minimum
Rent shall be adjusted as provided in Section 3.1.1(b). In the event that
neither Landlord nor Tenant shall elect to make such deficiency available for
restoration, either Landlord or Tenant may terminate this Agreement with respect
to the affected Property by Notice to the other, whereupon, this Agreement shall
terminate with respect to the affected Property as provided in Section 10.2.1.
It is expressly understood and agreed, however, that, notwithstanding anything
in this Agreement to the contrary, Tenant shall be strictly liable and solely
responsible for the amount of any deductible and shall, upon any insurable loss,
pay over the amount of such deductible to Landlord at the time and in the manner
herein provided for payment of the applicable proceeds to Landlord.
10.2.4 Disbursement of Proceeds. In the event Tenant is
required to restore any Property pursuant to Section 10.2, Tenant shall (or
shall direct the Manager or (following the Patriot Acquisition Date) Subtenant
to) commence promptly and continue diligently to perform the repair and
restoration of any Property (hereinafter called the "Work"), so as to restore
such Property in compliance with all Legal Requirements and so that such
Property shall be, to the extent practicable, substantially equivalent in value
and general utility to its general utility and value immediately prior to such
damage or destruction. Subject to the terms hereof, Landlord shall advance the
insurance proceeds and any additional amounts payable by Landlord pursuant to
Section 10.2.3 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,
delayed or conditioned), (iii) general contractors' estimates, (iv) architect's
certificates, (v) unconditional lien waivers of general contractors, if
available, (vi) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required and (vii) such other certificates
as Landlord may, from time to time, reasonably require.
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Landlord's obligation to disburse insurance proceeds under this Article
10 during the last two (2) years of the Term shall be subject to the release of
such proceeds by any Hotel Mortgagee to Landlord; otherwise each such Hotel
Mortgagee shall be obligated to make such funds available for Landlord's use in
accordance with the terms of this Agreement. If any Hotel Mortgagee shall be
unwilling to disburse insurance proceeds in accordance with the terms of this
Agreement, Tenant shall have the right, by the giving of Notice thereof to
Landlord within ten (10) Business Days after Tenant learns of such
unwillingness, to treat such Property as rendered Unsuitable for its Permitted
Use for purposes of Section 10.2.1. Tenant's obligation to restore the
applicable Property pursuant to this Article 10 shall be subject to the release
of available insurance proceeds by the applicable Hotel Mortgagee to Landlord or
directly to Tenant.
Tenant's obligation to restore the affected 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. Notwithstanding any provisions of Section
10.1 or 10.2 to the contrary, if damage to or destruction of any Property occurs
during the last twelve (12) months of the Term (including any exercised Extended
Terms) and if such damage or destruction cannot reasonably be expected to be
fully repaired and restored prior to the date that is six (6) months prior to
the end of such Term, the provisions of Section 10.2.1 shall apply as if such
Property had been totally or partially destroyed and the Hotel rendered
Unsuitable for its Permitted Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid to Tenant
and, to the extent necessary to repair or replace Tenant's Personal Property in
accordance with Section 10.5, Tenant shall hold such proceeds in trust to pay
the cost of repairing or replacing damaged Tenant's Personal Property.
10.5 Restoration of Tenant's Property. If Tenant is required to restore
any 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 such Property.
10.6 No Abatement of Rent. Unless terminated by either party pursuant
to this Article 10 (and then only with respect to the affected Property), 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 any 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 any Property and, to the maximum extent permitted by
law, no local or State statute, laws, rules, regulation or ordinance
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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 any Property or any
portion thereof.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of any Property
shall be taken by Condemnation or (ii) a Condemnation of less than the whole of
any Property renders any Property Unsuitable for Its Permitted Use, this
Agreement shall terminate with respect to such Property, Tenant and Landlord
shall seek the Award for their interests in the applicable Property as provided
in Section 11.5 and, as the effective date of taking, the Minimum Rent payable
hereunder shall be reduced by such Property's allocable share thereof.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of any Property such that such Property is still suitable for its
Permitted Use, Tenant shall, to the extent of the Award actually received by
Tenant 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 such Property exceeds the amount of the Award, Tenant
shall give Landlord Notice thereof which notice shall set forth in reasonable
detail the nature of such deficiency and whether Tenant shall pay and assume the
amount of such deficiency (Tenant having no obligation to do so, except that if
Tenant shall elect to make such funds available, the same shall become an
irrevocable obligation of Tenant pursuant to this Agreement). In the event
Tenant shall elect not to pay and assume the amount of such deficiency, Landlord
shall have the right (but not the obligation), exercisable at Landlord's sole
election by Notice to Tenant given within sixty (60) days after Tenant's Notice
of the deficiency, to elect to make available for application to the cost of
repair or restoration the amount of such deficiency; provided, however, in such
event, upon any disbursement by Landlord thereof, the Minimum Rent shall be
adjusted as provided in Section 3.1.1(b). In the event that neither Landlord nor
Tenant shall elect to make such deficiency available for restoration, either
Landlord or Tenant may terminate this Agreement with respect to the affected
Property, whereupon, the entire Award shall be retained by Landlord and Tenant
shall thereafter have no obligation to pay Rent for periods arising after the
effective date of termination.
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
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and other amounts on (i) the absence of any Event of Default, (ii) its approval
of plans and specifications of an architect satisfactory to Landlord (which
approval shall not be unreasonably withheld or delayed), (iii) general
contractors' estimates, (iv) architect's certificates, (v) unconditional lien
waivers of general contractors, if available, (vi) evidence of approval by all
governmental authorities and other regulatory bodies whose approval is required
and (vii) such other certificates as Landlord may, from time to time, reasonably
require. Landlord's obligation under this Section 11.2 to disburse the Award and
such other amounts shall be subject to (x) the collection thereof by Landlord
and (y) during the last two (2) years of the Term, the release of such Award by
the applicable Hotel Mortgagee; otherwise each such Hotel Mortgagee shall be
obligated to make such funds available for Landlord's use in accordance with the
terms of this Agreement. If any Hotel Mortgagee shall be unwilling to disburse
Award proceeds in accordance with the terms of this Agreement, by the giving of
Notice thereof to Landlord within ten (10) Business Days after Tenant learns of
such unwillingness, to treat such Property as rendered Unsuitable for its
Permitted Use for purposes of Section 11.1. Tenant's obligation to restore the
Leased Property shall be subject to the release of the Award by the applicable
Hotel Mortgagee to Landlord or directly to Tenant.
11.3 Abatement of Rent. Unless terminated by either party pursuant to
this Article 11 (and then only with respect to the affected Property), 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 any Property. The provisions of this Article 11 shall be
considered an express agreement governing any Condemnation involving any
Property and, to the maximum extent permitted by law, no local or State statute,
law, rule, regulation or ordinance in effect during the Term which provides for
such a contingency shall have any application in such case.
11.4 Temporary Condemnation. In the event of any temporary Condemnation
of any Property or Tenant's interest therein, this Agreement shall continue in
full force and effect and Tenant shall continue to pay, in the manner and on the
terms herein specified, the full amount of the Rent. Tenant shall continue to
perform and observe all of the other terms and conditions of this Agreement on
the part of 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 such Property to the condition that existed immediately prior
to such Condemnation, in full compliance with all Legal Requirements, unless
such period of temporary Condemnation shall extend beyond the expiration of the
Term, in which event Tenant shall not be required to make such restoration. For
purposes of this Section 11.4, a Condemnation shall be deemed to be temporary if
the period of such Condemnation is not expected to, and does not, exceed twelve
(12) months.
11.5 Allocation of Award. Except as provided in Section 11.4 and the
second sentence of this Section 11.5, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in any 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
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(subject to the provisions of Section 11.2). In any Condemnation proceedings,
Landlord and Tenant shall each seek its own Award in conformity herewith, at its
own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent or any
other sum (including, but not limited to, funding of the FF&E Reserve)
payable hereunder when due; or
(b) should Tenant fail to maintain the insurance coverages
required under Article 9 and such failure shall continue for ten (10)
Business Days after Notice thereof (except that no Notice shall be
required if any such insurance coverages shall have lapsed); or
(c) should Tenant default in the due observance or performance
of any of the terms, covenants or agreements contained herein to be
performed or observed by it (other than as specified in clauses (a) and
(b) above) and such default shall continue for a period of fifteen (15)
Business 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) Business Days after Notice thereof from
Landlord and thereafter prosecutes the curing of such default with all
due diligence, such period of time shall be extended to such period of
time (not to exceed an additional one hundred eighty (180) days in the
aggregate) as may be necessary to cure such default with all due
diligence; or
(d) should an event of default by Tenant or any Affiliated
Person as to Tenant occur and be continuing beyond the expiration of
any applicable cure period under any of the Incidental Documents or the
Management Agreement; or
(e) should any material representation or warranty made by
Tenant or any Affiliated Person as to Tenant under or in connection
with this Agreement or any Incidental Document or in any document,
certificate or agreement delivered in connection herewith or therewith
prove to have been false or misleading in any material respect on the
date when made or deemed made and the same shall continue for five (5)
Business Days after Notice thereof from Landlord; or
(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
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(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 Tenant a bankrupt
or insolvent, or seeking liquidation, reorganization, arrangement,
adjustment or composition of Tenant's debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or
for any substantial part of the property of Tenant and such proceeding
is not dismissed within ninety (90) days after institution thereof, or
should Tenant take any action to authorize or effect any of the actions
set forth above in this paragraph; or
(h) should Tenant cause or institute any proceeding for its
dissolution or termination; or
(i) should the estate or interest of Tenant in any Property or
any part thereof be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of (x) one
hundred and twenty (120) days after commencement thereof, unless the
amount in dispute is less than $250,000, in which case Tenant shall
give notice to Landlord of the dispute but Tenant may defend in any
suitable way, and (y) thirty (30) days after receipt by Tenant of
Notice thereof from Landlord (unless Tenant shall be contesting such
lien or attachment in good faith in accordance with Article 8); or
(j) should more than two-thirds (2/3) of the common stock of
Patriot or Wyndham outstanding from time to time cease to be paired and
traded together as a single unit and Landlord determines, in its
reasonable judgement, that the occurrence of such event could have a
material adverse effect on the ownership of operation of any Property
or on Landlord; or
(k) should any of Tenant or Manager, at any time prior to the
Patriot Acquisition Date, cease to be a direct or indirect Subsidiary
of SHC; or
(l) should any of Tenant, Subtenant or Manager at any time
after the Patriot Acquisition Date cease to be a direct or indirect
Subsidiary of Patriot or Wyndham (provided, however that it shall not
be an Event of Default if Manager ceases to be a direct or indirect
Subsidiary of Wyndham or Patriot as a consequence of a transaction in
which a Person acquires all or substantially all of the management
contracts of Manager, provided, that each Hotel will retain the right
to use the "Summerfield Suites" name); or
(m) should any provision of the Special Charter Document
Provisions be violated or modified after the Special Purpose Conditions
Date, and such violation or modification continues for ten (10)
Business Days after Notice thereof;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement with respect to any or all of the
Leased Property by giving Notice thereof to Tenant and upon the expiration of
the time, if any, fixed in such Notice, this Agreement shall terminate with
respect to all or the designated portion of the Leased Property
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and all rights of Tenant under this Agreement with respect thereto shall cease.
Landlord shall have and may exercise all rights and remedies available at law
and in equity to Landlord as a result of Tenant's breach of this Agreement.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Leased Property or any
portion thereof and take possession of any and all of Tenant's Personal
Property, if any, and the Records, without liability for trespass or conversion
(Tenant hereby waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or any portion of
Tenant's Personal Property, if any, unless otherwise prohibited by law. Unless
otherwise provided by law and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable Notice shall be
met if such Notice is given at least ten (10) days before the date of sale. The
proceeds from any such disposition, less all expenses incurred in connection
with the taking of possession, holding and selling of such property (including,
reasonable attorneys' fees) shall be applied as a credit against the
indebtedness which is secured by the security interest granted in Section 7.2.
Any surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.
12.2 Remedies. None of (a) the termination of this Agreement pursuant
to Section 12.1, (b) the repossession of the Leased Property or any portion
thereof, (c) the failure of Landlord to re-let the Leased Property or any
portion thereof, nor (d) the reletting of all or any of portion of the Leased
Property, shall relieve Tenant of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or re-letting. In the
event of any such termination, Tenant shall forthwith pay to Landlord all Rent
due and payable with respect to the Leased Property through and including the
date of such termination. Thereafter, Tenant, until the end of what would have
been the Term of this Agreement in the absence of such termination, and whether
or not the Leased Property or any portion thereof shall have been re-let, shall
be liable to Landlord for, and shall pay to Landlord, as current damages, the
Rent and other charges which would be payable hereunder for the remainder of the
Term had such termination not occurred, less the net proceeds, if any, of any
re-letting of the Leased Property, after deducting all reasonable expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, advertising,
expenses of employees, alteration costs and expenses of preparation for such
reletting. Tenant shall pay such current damages to Landlord monthly on the days
on which the Minimum Rent would have been payable hereunder if this Agreement
had not been so terminated with respect to such of the Leased Property.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord an
amount equal to the present value (discounted at the Interest Rate) of the
excess, if any, of the Rent and other charges which would be payable hereunder
from the date of such termination (assuming that, for the purposes of this
paragraph, annual payments by Tenant on account of Impositions and Additional
Rent would be the same as payments required for the immediately preceding twelve
calendar months, or if less than twelve calendar months have expired since the
Commencement Date, the payments required for such
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lesser period projected to an annual amount) for what would be the then
unexpired term of this Agreement if the same remained in effect, over the fair
market rental for the same period. Nothing contained in this Agreement shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater than, equal to, or less than the amount of the loss or damages referred
to above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (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 relevant State.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or releasing
any obligation of Tenant and without waiving or releasing any Event of Default,
may (but shall not be obligated to), at any time thereafter, make such payment
or perform such act for the account and at the expense of Tenant, and may, to
the
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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 Sublease Termination or Modification. Notwithstanding anything to
the contrary contained in this Agreement or any of the Incidental Documents:
(a) a termination of the Sublease or any Incidental Document
executed by Subtenant in connection with the termination of the
Sublease, shall not be a default or Event of Default under this
Agreement, provided that Tenant or a successor subtenant provides
Landlord with reasonably acceptable substitute collateral to replace
collateral pledged by Subtenant to secure Tenant's obligations under
the leases;
(b) a modification of Rent payable under the Sublease or the
Term of the Sublease (including, without limitation, one or more
renewals thereof) shall not be a Default or an Event of Default under
this Agreement, provided that the Sublease Rent may not be less than
the Rent payable under this Agreement, and the Sublease Term may not
exceed the Term of this Agreement, and Tenant and Subtenant may enter
into such modifications without Landlord's consent, but upon not less
than ten (10) Business Days prior written notice;
(c) at any time after the termination of the Sublease, Tenant
shall be entitled to enter into a new sublease with an entity that is,
directly or indirectly, a Subsidiary of Patriot or Wyndham, on such
terms and subject to such documentation as Landlord reasonably
requires, including, but not limited to, collateral documents pledging
Subtenant's interest in the FF&E, FF&E Reserve, and similar security
documents reasonably acceptable to Landlord; and
(d) upon a termination of this Agreement, the Sublease shall
immediately terminate.
Notwithstanding the foregoing, Landlord does not waive any breach or default
under this Agreement or the Incidental Documents, and Tenant shall not be
excused from the performance of any obligations under this Agreement or the
Incidental Documents due to the default by Subtenant under the Sublease.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to two (2) times the Minimum
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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 of any matters affecting the Leased Property of which Landlord receives
written notice or actual knowledge and, to the extent Tenant otherwise has no
notice or actual knowledge thereof, Landlord shall be liable for any liabilities
arising from the failure to deliver such Notice to Tenant.
14.2 Landlord's Default. If Landlord shall default in the performance
or observance of any of its covenants or obligations set forth in this Agreement
or any obligation of Landlord, if any, under any agreement affecting the Leased
Property, the performance of which is not Tenant's obligation pursuant to this
Agreement, and any such default shall continue for a period of ten (10) days
after Notice thereof with respect to monetary defaults and thirty (30) days
after Notice thereof with respect to non-monetary defaults from Tenant to
Landlord and any applicable Hotel Mortgagee, or such additional period as may be
reasonably required to correct the same, Tenant may declare the occurrence of a
"Landlord Default" by a second Notice to Landlord and to such Hotel Mortgagee.
Thereafter, Tenant may forthwith cure the same and, subject to the provisions of
the following paragraph, invoice Landlord for costs and expenses (including
reasonable attorneys' fees and court costs) incurred by Tenant in curing the
same, together with interest thereon (to the extent permitted by law) from the
date Landlord receives Tenant's invoice, at the Overdue Rate. Tenant shall have
no right to terminate this Agreement for any default by Landlord hereunder and
no right, for any such default, to offset or counterclaim against any Rent or
other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof; provided, however, that in the event of any such adverse determination,
Landlord shall pay to Tenant interest on any disputed funds at the Interest
Rate, from the date demand for such funds was made by Tenant until the date of
final adverse determination and, thereafter, at the Overdue Rate until paid. If
Tenant and Landlord shall fail, in good faith, to resolve any such dispute
within ten (10) days after Landlord's Notice of dispute, either may submit the
matter for resolution to a court of competent jurisdiction.
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ARTICLE 15
PURCHASE RIGHTS
15.1 First Refusal to Purchase. Provided, (a) no Default or Event of
Default shall have occurred and be continuing, (b) this Agreement shall be of
full force and effect, and (c) other than as expressly permitted or required by
Section 16 or consented to by Landlord (which consent may be given or withheld
by Landlord in its sole discretion), Tenant shall not have assigned this
Agreement or subleased all or any portion of the Leased Property, Tenant shall
have a first refusal option to purchase the Leased Property upon the same price,
terms and conditions as Landlord shall propose to sell the Leased Property, or
upon the same price, terms and conditions of any offer from a third party to
purchase the Leased Property which Landlord intends to accept (or has accepted
subject to Tenant's right of first refusal herein provided); provided, however,
that, if the proposed purchase price is for other than cash, Tenant shall have
the right to purchase the Leased Property on cash equivalent terms determined by
the agreement of the parties or, if they cannot agree within ten (10) Business
Days, by arbitration in accordance with the rules of the American Arbitration
Association then in effect. If, during the Term, Landlord reaches such agreement
with a third party or proposes to offer the Leased Property for sale, Landlord
shall promptly give written notice to Tenant of the purchase price and all other
material terms and conditions of such agreement or proposed sale and Tenant
shall have sixty (60) days thereafter to exercise Tenant's option to purchase by
written notice to Landlord thereof. Failure of Tenant to respond within such
60-day period shall be deemed a waiver of Tenant's right to purchase the Leased
Property with respect to such offer pursuant to this Section 15.1. If Tenant
exercises its option, the sale to Tenant shall be consummated upon the same
terms and conditions as contained in such agreement or Landlord's notice of the
proposed sale. If Tenant shall not exercise its option to purchase within the
time period and in the manner above provided, Landlord shall be free to sell the
Leased Property to such third party at the price and upon terms substantially
similar to those offered to Tenant. The rights granted to Tenant pursuant to
this Section 15.1 shall not apply to any financing or sale-leaseback transaction
or any transaction pursuant to which Landlord is merged or consolidated with
another Person; provided, however, that any Person who shall acquire the Leased
Premises shall acquire them subject to, and shall be bound by, the provisions of
this Section 15.1. The provisions of this Section 15.1 shall inure to the
benefit of Tenant and any permitted successors and assigns of Tenant pursuant to
this Agreement.
15.2 Purchase by Tenant. In the event that, in the reasonable
determination of Tenant, it shall no longer be economically practical to operate
any Property as an "all suites" hotel, and Tenant and Landlord have not agreed
on an alternative use for such Property or on the substitution of one or more
other properties for such Property as provided in Section 4.1.1(b), Tenant may
permanently cease operation of such Property (notwithstanding Section 4.1.1(a))
and concurrently give Landlord irrevocable written Notice (i) of Tenant's
election to terminate this Agreement with respect to such Property and
simultaneously purchase such Property from Landlord for a purchase price equal
to one hundred twenty five percent (125%) of the Adjusted Purchase Price for
such Property (the "Buyout Price") and (ii) certifying that Tenant has
permanently ceased operating such Property as an "all suites" hotel. Such
purchase shall occur on the Business Day designated in such Notice, which shall
be a date not later than ninety (90) days after the date of such Notice (the
"Purchase Date"). Landlord shall, upon receipt from
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Tenant of the Buyout Price for such Property, together with full payment of any
unpaid Rent and other charges due and payable with respect to any period ending
on or before the Purchase Date, and so long as no Default or Event of Default
shall have occurred and be continuing at such time, deliver to Tenant an
appropriate deed and other instruments, conveying the entire interest of
Landlord in and to such Property to Tenant, free and clear of all encumbrances
created through the act or omission of Landlord, and such other documents as are
customarily and reasonably required of sellers by title companies or purchasers.
This Agreement shall thereupon terminate as to such Property. The Buyout Price
and all other amounts to be paid to Landlord on the Purchase Date shall be paid
in immediately available funds as directed by Landlord. Other than as
specifically provided above, such Property shall be conveyed to Tenant on an "as
is" basis, and in its then physical condition. The closing of any such sale
shall be contingent upon and subject to Tenant's obtaining any required
governmental consents and approvals for such transfer, provided that Landlord
shall reasonably cooperate with Tenant in obtaining such consents and approvals.
All expenses of such conveyance, including, without limitation, all transfer and
sales taxes, documentary fees, the fees and expenses of counsel to Landlord and
the cost of any title examination or title insurance, shall be for the account
of Tenant.
15.3 Landlord's Option to Purchase Tenant's Personal Property; Transfer
of Licenses. Landlord shall have the option to purchase Tenant's Personal
Property, at the expiration or termination of this Agreement, for an amount
equal to the then net market value thereof (current replacement cost as
determined by appraisal less accumulated depreciation on Tenant's books
pertaining thereto), subject to, and with appropriate price adjustments for, all
equipment leases, conditional sale contracts, UCC-1 financing statements and
other encumbrances to which such Personal Property is subject. Upon the
expiration or sooner termination of this Agreement, Tenant shall use its best
efforts to transfer and assign to Landlord or its designee, or assist Landlord
or its designee in obtaining, any contracts, licenses, and certificates required
for the then operation of the Leased Property.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment. Except as provided in Section 16.3 and
Section 16.4, Tenant shall not, without Landlord's prior written consent (which
consent may be given or withheld in Landlord's sole and absolute, good faith,
discretion), assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer this Agreement or sublease (which term shall be deemed to include the
granting of concessions, licenses and the like), all or any part of the Leased
Property or suffer or permit this Agreement or the leasehold estate created
hereby or any other rights arising under this Agreement to be assigned,
transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in
part, whether voluntarily, involuntarily or by operation of law, or permit the
use or operation of the Leased Property by anyone other than Tenant and the
Manager, or the Leased Property to be offered or advertised for assignment or
subletting. For purposes of this Section 16.1, an assignment of this Agreement
shall be deemed to include any direct or indirect transfer of any interest in
Tenant such that Tenant shall cease to be a direct or indirect Subsidiary of SHC
at any time prior to the Patriot Acquisition Date, or of Wyndham or Patriot at
any time after the Patriot Acquisition Date, or any transaction pursuant to
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which Tenant is merged or consolidated with another Entity or pursuant to which
all or substantially all of Tenant's assets are transferred to any other Entity,
as if such change in control or transaction were an assignment of this
Agreement.
If this Agreement is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant, the Manager and
their respective employees or hotel guests) Landlord may collect the rents from
such assignee, subtenant or occupant, as the case may be, and apply the net
amount collected to the Rent herein reserved, but no such collection shall be
deemed a waiver of the provisions set forth in the first paragraph of this
Section 16.1, the acceptance by Landlord of such assignee, subtenant or
occupant, as the case may be, as a tenant, or a release of Tenant from the
future performance by Tenant of its covenants, agreements or obligations
contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder (unless Landlord and Tenant expressly
otherwise agree that Tenant shall be released from all obligations hereunder),
and no consent to any subletting or assignment in a particular instance shall be
deemed to be a waiver of the prohibition set forth in this Section 16.1. No
assignment, subletting or occupancy shall affect any Permitted Use. Any
subletting, assignment or other transfer of Tenant's interest under this
Agreement in contravention of this Section 16.1 shall be voidable at Landlord's
option.
16.2 Required Sublease Provisions. Any sublease of all or any portion
of the Leased Property entered into on or after the date hereof shall provide
(a) that it is subject and subordinate to this Agreement and to the matters to
which this Agreement is or shall be subject or subordinate; (b) that in the
event of termination of this Agreement or reentry or dispossession of Tenant by
Landlord under this Agreement, Landlord may, at its option, terminate such
sublease or take over all of the right, title and interest of Tenant, as
sublessor under such sublease, and such subtenant shall, at Landlord's option,
attorn to Landlord pursuant to the then executory provisions of such sublease,
except that neither Landlord nor any Hotel Mortgagee, as holder of a mortgage or
as Landlord under this Agreement, if such mortgagee succeeds to that position,
shall (i) be liable for any act or omission of Tenant under such sublease, (ii)
be subject to any credit, counterclaim, offset or defense which theretofore
accrued to such subtenant against Tenant, (iii) be bound by any previous
modification of such sublease not consented to in writing by Landlord or by any
previous prepayment of more than one (1) month's Rent, (iv) be bound by any
covenant of Tenant to undertake or complete any construction of the Leased
Property or any portion thereof, (v) be required to account for any security
deposit of the subtenant other than any security deposit actually delivered to
Landlord by Tenant, (vi) be bound by any obligation to make any payment to such
subtenant or grant any credits, except for services, repairs, maintenance and
restoration provided for under the sublease that are performed after the date of
such attornment, (vii) be responsible for any monies owing by Tenant to the
credit of such subtenant, or (viii) be required to remove any Person occupying
any portion of the Leased Property; and (c), in the event that such subtenant
receives a written Notice from Landlord or any Hotel Mortgagee stating that an
Event of Default has occurred and is continuing, such subtenant shall thereafter
be obligated to pay all rentals accruing under such sublease directly to the
party giving such Notice or as such party may direct. All rentals received from
such subtenant by Landlord or the Hotel Mortgagee, as the case may be, shall be
credited against the amounts owing by Tenant under this Agreement and such
sublease shall provide that the
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subtenant thereunder shall, at the request of Landlord, execute a suitable
instrument in confirmation of such agreement to attorn. An original counterpart
of each such sublease and assignment and assumption, duly executed by Tenant and
such subtenant or assignee, as the case may be, in form and substance reasonably
satisfactory to Landlord, shall be delivered promptly to Landlord and (a) in the
case of an assignment, the assignee shall assume in writing and agree to keep
and perform all of the terms of this Agreement on the part of Tenant to be kept
and performed and shall be, and become, jointly and severally liable with Tenant
for the performance thereof and (b) in case of either an assignment or
subletting, Tenant shall remain primarily liable, as principal rather than as
surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Tenant
hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 16.1.
16.3 Permitted Sublease. Notwithstanding the foregoing, including,
without limitation, Section 16.1, but subject to the provisions of Section 16.5
and any other express conditions or limitations set forth herein Tenant may, in
each instance after Notice to Landlord, 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 two
thousand (2,000) square feet per Property, will not violate or affect any Legal
Requirement or Insurance Requirement, and Tenant shall provide such additional
insurance coverage applicable to the activities to be conducted in such
subleased space as Landlord and any Hotel Mortgagee may reasonably require.
16.4 Patriot Acquisition. Notwithstanding the foregoing, including,
without limitation, Section 16.1, but subject to the provisions of Section 16.5
and any other express conditions or limitations set forth herein, neither the
transfer of interests in the Tenant and the General Partner, nor the sublease of
the Leased Property to a Delaware limited partnership, the sole general partner
of which is a Delaware corporation, each of which shall be is a direct or
indirect Subsidiary of Patriot or Wyndham (the "Subtenant" and the "Subtenant
General Partner," respectively) , in either case as contemplated in the Patriot
Contribution Agreement, shall be deemed to violate any provision of this
Agreement or any Incidental Document, provided that the following conditions
shall have been satisfied to the satisfaction of Landlord prior to such transfer
or sublease:
(a) Landlord shall have received the following agreements
(collectively, the "Patriot Acquisition Documents"), each duly executed
by the parties thereto, and each in form and substance reasonably
satisfactory to Landlord:
(i) a sublease agreement between Tenant and
Subtenant;
(ii) a pledge and security agreement by Subtenant for
the benefit of Landlord granting a security interest in the
assets of Subtenant, and otherwise similar in form to the
Tenant Security Agreement;
(iii) an assignment and security agreement by
Subtenant for the benefit of Landlord granting a security
interest and lien in Subtenant's interest in the
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FF&E Reserve, and otherwise similar in form to the Tenant FF&E
Security Agreement;
(iv) a partnership interest pledge agreement by all
partners in Subtenant (including, without limitation, the
Subtenant General Partner) for the benefit of Landlord
granting a lien and security interest in their interests in
Subtenant, and otherwise similar in form to the Tenant Pledge
Agreement;
(v) a pledge agreement by all partners and/or members
in Subtenant General Partner for the benefit of Landlord
granting a lien and security interest in their interests in
Subtenant General Partner; and
(vi) a guaranty agreement by Subtenant, Subtenant
General Partner and Tenant General Partner in favor of the
Landlord guaranteeing all obligations of Tenant; and
(vii) amendments to the Tenant Pledge Agreement and
the Tenant General Partner Pledge Agreement, reflecting, among
other things, the transfer of the limited partnership interest
in Tenant and the membership interest in Tenant General
Partner to Patriot LP and the assumption by Patriot LP of the
obligations of "Assignor" thereunder;
(b) Each party to each Patriot Acquisition Documents shall
have taken such action as Landlord shall have requested in order to
perfect, or continue the perfection of, the security interests and
pledges created pursuant to the Patriot Acquisition Documents or the
other Incidental Documents, as amended, with the priority required
thereby;
(c) Landlord shall have received evidence satisfactory to it
that charter or other organizational documents of Subtenant and
Subtenant General Partner contain Special Charter Document Provisions;
(d) The Patriot Acquisition shall have been consummated in
accordance with the terms of the Patriot Contribution Agreement,
without waiver of condition that could reasonably be expected to have a
material adverse effect upon any Property or the interests of Landlord
under this Agreement or any Incidental Document;
(e) Giving effect to the Patriot Acquisition, no Default or
Event of Default shall have occurred and be continuing;
(f) Landlord shall have received a certificate of a senior
executive officer of Patriot confirming satisfaction of the conditions
described in paragraphs (d) and (e) above;
(g) Landlord shall have received such other documents,
opinions and certificates (including without limitation, evidence of
licensure and permits, opinions of counsel to Patriot, and certificates
of public officials and of officers of parties to the
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Patriot Acquisition Documents) as Landlord shall have reasonably
requested, each of which shall be in form and substance reasonably
satisfactory to Landlord; and
(h) Tenant shall have paid or caused to be paid all
out-of-pocket costs and expenses of Landlord incurred in connection
with the Patriot Acquisition.
16.5 Sublease Limitation. For so long as Landlord or any Affiliated
Person as to Landlord shall seek to qualify as a real estate investment trust,
anything contained in this Agreement to the contrary notwithstanding, Tenant
shall not sublet the Leased Property on any basis such that the rental to be
paid by any sublessee thereunder would be based, in whole or in part, on the
income or profits derived by the business activities of such sublessee, any
other formula such that any portion of such sublease rental would fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code, or any similar or successor provision thereto or would otherwise
disqualify Landlord for treatment as a real estate investment trust.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) Business Days prior Notice by either party, the party
receiving such Notice shall furnish to the other an Officer's Certificate
certifying that this Agreement is unmodified and in full force and effect (or
that this Agreement is in full force and effect as modified and setting forth
the modifications), the date to which the Rent has been paid, that no Default or
an Event of Default has occurred and is continuing or, if a Default or an Event
of Default shall exist, specifying in reasonable detail the nature thereof, and
the steps being taken to remedy the same, and such additional information as the
requesting party may reasonably request. Any such certificate furnished pursuant
to this Section 17.1 may be relied upon by the requesting party, its lenders and
any prospective purchaser or mortgagee of the Leased Property or the leasehold
estate created hereby.
17.2 Financial Statements. Tenant shall furnish or cause to have
furnished, as applicable, the following statements to Landlord:
(a) within forty-five (45) days after each of the first three
quarters of any Fiscal Year, the most recent Consolidated Financials,
accompanied by the Financial Officer's Certificate;
(b) within 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 reasonably satisfactory to
Landlord and accompanied by a Financial Officer's Certificate;
(c) within thirty (30) days after the end of each month, an
unaudited operating statement, prepared on a Hotel by Hotel basis and a
combined basis, including occupancy percentages and average rate,
accompanied by a Financial Officer's Certificate;
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(d) promptly after the sending or filing thereof, copies of
all reports which Tenant, SHC (prior to the Patriot Acquisition Date)
or Patriot (following the Patriot Acquisition Date), sends to its
security holders generally, and copies of all periodic reports which
Tenant, SHC (prior to the Patriot Acquisition Date) or Patriot
(following the Patriot Acquisition Date) files with the SEC or any
stock exchange on which its shares are listed or traded;
(e) at any time and from time to time upon not less than
twenty (20) days Notice from Landlord, any Consolidated Financials or
any other financial reporting information required to be filed by
Landlord with any securities and exchange commission, the SEC or any
successor agency, or any other governmental authority, or required
pursuant to any order issued by any court, governmental authority or
arbitrator in any litigation to which Landlord is a party, for purposes
of compliance therewith; and
(f) promptly, upon Notice from Landlord, such other
information concerning the business, financial condition and affairs of
Tenant, SHC (prior to the Patriot Acquisition Date) and Patriot and
Wyndham (following the Patriot Acquisition Date), as Landlord
reasonably may request from time to time.
Landlord may at any time, and from time to time, provide any Hotel
Mortgagee with copies of any of the foregoing statements.
In addition, Landlord shall have the right, from time to time at
Landlord's sole cost and expense, upon reasonable Notice, during Tenant's
customary business hours, to cause Tenant's books and records with respect to
the Leased Property to be audited by auditors selected by Landlord at the place
where such books and records are customarily kept.
17.3 General Operations. Tenant shall furnish to Landlord:
(a) Within thirty (30) days after receipt or modification
thereof, copies of all licenses with respect to any Hotel authorizing
Tenant and/or the Manager to operate such Hotel for its Permitted Use;
(b) Not less than thirty (30) days after the commencement of
any Fiscal Year, proposed annual income and ordinary expense and
capital improvement budgets, setting forth projected income and costs
and expenses projected to be incurred by Tenant in managing, owning,
maintaining and operating the Hotels, on both a combined and a
Hotel-by-Hotel basis, during the next succeeding Fiscal Year; and
(c) Promptly after receipt or sending thereof, copies of all
notices given or received by Tenant under the Management Agreement.
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ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit, and shall direct the Manager to permit, Landlord
and its authorized representatives to inspect the Leased Property during usual
business hours upon not less than twenty-four (24) hours' notice and to make
such repairs as Landlord is permitted or required to make pursuant to the terms
of this Agreement, provided that any inspection or repair by Landlord or its
representatives will not unreasonably interfere with Tenant's 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
HOTEL MORTGAGES
19.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord
may, subject to the terms and conditions set forth in this Section 19.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Notwithstanding anything
to the contrary set forth in Section 19.2, any such Encumbrance shall include
the right to prepay (whether or not subject to a prepayment penalty) and shall
provide (subject to Section 19.2) that it is subject to the rights of Tenant
under this Agreement.
19.2 Subordination of Lease. Subject to Section 19.1 and this Section
19.2, this Agreement, any and all rights of Tenant hereunder, are and shall be
subject and subordinate to any ground or master lease, and all renewals,
extensions, modifications and replacements thereof, and to all mortgages and
deeds of trust, which may now or hereafter affect the Leased Property or any
improvements thereon and/or any of such leases, whether or not such mortgages or
deeds of trust shall also cover other lands and/or buildings and/or leases, to
each and every advance made or hereafter to be made under such mortgages and
deeds of trust, and to all renewals, modifications, replacements and extensions
of such leases and such mortgages and deeds of trust and all consolidations of
such mortgages and deeds of trust. This section shall be self-operative and no
further instrument of subordination shall be required provided that Tenant has
received a nondisturbance and attornment agreement from each Superior Mortgagee
and/or Superior Landlord, consistent with the provisions of this Section 19.2
and otherwise in form and substance reasonably satisfactory to Tenant. In
confirmation of such subordination, Tenant shall promptly execute, acknowledge
and deliver any instrument that Landlord, the lessor under any such lease or the
holder of any such mortgage or the trustee or beneficiary of any deed of trust
or any of their respective successors in interest may reasonably request to
evidence such subordination. Any lease to which this Agreement is, at the time
referred to, subject and subordinate is herein called "Superior Lease" and the
lessor of a Superior Lease or its successor in interest at the time referred to,
is herein called "Superior Landlord" and any mortgage or deed of trust to which
this Agreement is, at the time referred to, subject and subordinate, is herein
called "Superior Mortgage" and the holder, trustee or beneficiary of a Superior
Mortgage is
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herein called "Superior Mortgagee". Tenant shall have no obligations under any
Superior Lease or Superior Mortgage other than those expressly set forth in this
Section 19.2.
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Agreement (any such person, "Successor Landlord"),
whether through possession or foreclosure action or delivery of a new lease or
deed, or otherwise, such Successor Landlord shall recognize Tenant's rights
under this Agreement as herein provided and Tenant shall attorn to and recognize
the Successor Landlord as Tenant's landlord under this Agreement and Tenant
shall promptly execute and deliver any instrument that such Successor Landlord
may 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 Landlord under this Agreement or its nominee or designee) shall not be
(a) liable in any way to Tenant for any act or omission, neglect or default on
the part of any prior Landlord under this Agreement, (b) responsible for any
monies owing by or on deposit with any prior Landlord to the credit of Tenant
(except to the extent actually paid or delivered to the Successor Landlord), (c)
subject to any counterclaim or setoff which theretofore accrued to Tenant
against any prior Landlord, (d) bound by any modification of this Agreement
subsequent to such Superior Lease or Mortgage, or by any previous prepayment of
Minimum Rent or Additional Rent for more than one (1) month in advance of the
date due hereunder, which was not approved in writing by the Superior Landlord
or the Superior Mortgagee thereto, (e) liable to Tenant beyond the Successor
Landlord's interest in the Leased Property and the rents, income, receipts,
revenues, issues and profits issuing from the Leased Property, (f) responsible
for the performance of any work to be done by Landlord under this Agreement to
render the Leased Property ready for occupancy by Tenant (subject to Landlord's
obligations under Section 5.1.3(b) or with respect to any insurance or
Condemnation proceeds), or (g) required to remove any Person occupying the
Leased Property or any part thereof, except if such person claims by, through or
under the Successor Landlord. Tenant agrees at any time and from time to time to
execute a suitable instrument in confirmation of Tenant's agreement to attorn,
as aforesaid and Landlord agrees to provide Tenant with an instrument of
nondisturbance and attornment from each such Superior Mortgagee and Superior
Landlord in form and substance reasonably satisfactory to Tenant. Nothing
contained in this Section 19.2 shall relieve Landlord from any liability to
Tenant under this Agreement following the exercise of remedies by a Superior
Mortgagee.
19.3 Notice to Mortgagee and Superior Landlord. Subsequent to the
receipt by Tenant of Notice from Landlord as to the identity of any Hotel
Mortgagee or Superior Landlord under a lease with Landlord, as ground lessee,
which includes the Leased Property as part of the demised premises and which
complies with Section 19.1 and 19.2 (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 or Superior Landlord at the address set forth in
the above described Notice, and the curing of any of Landlord's defaults by such
Hotel Mortgagee or Superior Landlord shall be treated as performance by
Landlord.
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ARTICLE 20
ADDITIONAL COVENANTS OF TENANT
20.1 Prompt Payment of Indebtedness. Tenant shall (a) pay or cause to
be paid when due all payments of principal of and premium and interest on
Tenant's Indebtedness for money borrowed and shall not permit or suffer any such
Indebtedness to become or remain in default beyond any applicable grace or cure
period, (b) pay or cause to be paid when due all lawful claims for labor and
rents with respect to the Leased Property, (c) pay or cause to be paid when due
all trade payables and (d) pay or cause to be paid when due all other of
Tenant's Indebtedness upon which it is or becomes obligated, except, in each
case, other than that referred to in clause (a), to the extent payment is being
contested in good faith by appropriate proceedings in accordance with Article 8
and if Tenant shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP, if appropriate, or unless and until
foreclosure, distraint sale or other similar proceedings shall have been
commenced.
20.2 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Leased Property 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 or partnership existence, as
applicable, and its rights and licenses necessary to conduct such business.
20.3 Maintenance of Accounts and Records. Tenant shall keep true
records and books of account of Tenant in which full, true and correct entries
will be made of dealings and transactions in relation to the business and
affairs of Tenant in accordance with GAAP, where applicable, Tenant shall apply
accounting principles in the preparation of the financial statements of Tenant
which, in the judgment of and the opinion of its independent public accountants,
are in accordance with GAAP, where applicable, except for changes approved by
such independent public accountants. Tenant shall provide to Landlord either in
a footnote to the financial statements delivered under Section 17.2 which relate
to the period in which such change occurs, or in separate schedules to such
financial statements, information sufficient to show the effect of any such
changes on such financial statements.
20.4 Notice of Litigation, Etc. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which it may
hereafter become a party of which Tenant has notice or actual knowledge which
involves a potential uninsured liability equal to or greater than Two Hundred
Fifty Thousand Dollars ($250,000) or which, in Tenant's reasonable opinion, 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.
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20.5 Indebtedness of Tenant. Tenant shall not create, incur, assume or
guarantee, or permit to exist, or become or remain liable directly or indirectly
upon, any Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for Impositions, to the extent that
payment thereof shall not at the time be required to be made in
accordance with the provisions of Article 8;
(c) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period
and in respect of which execution thereof shall have been stayed
pending such appeal or review, or (ii) which are fully covered by
insurance payable to Tenant, or (iii) which are for an amount not in
excess of $250,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable appeal
period, so long as execution is not levied thereunder or (y) in respect
of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of Article
8, and in respect of which execution thereof shall have been stayed
pending such appeal or review;
(d) operating liabilities incurred in the ordinary course of
Tenant's business;
(e) Indebtedness incurred to finance the acquisition of
equipment or personal property acquired in accordance with Section 6.1;
provided that (i) the terms of such Indebtedness permit assumption by
Landlord or an Affiliated Person thereof, and are otherwise approved by
Landlord in writing (which approval shall not be unreasonably withheld,
delayed or conditioned), and (ii) any Lien securing such Indebtedness
is permitted by Section 20.9(a); and
(f) fees payable to the Manager pursuant to the Management
Agreement; provided however that (i) no fees shall be paid to the
Manager upon the occurrence and during the continuance of a Default or
Event of Default and (ii) such fees shall be fully subordinated in
right of payment the payment of Rent hereunder.
20.6 Financial Condition of Tenant. Tenant shall at all times maintain
Tangible Net Worth in an amount of not less than $15,000,000 (provided, however,
that it is expressly understood and agreed that the amount of the Security
Deposit may for such purpose be counted as equity at the full amount thereof).
20.7 Distributions, Payments to Affiliated Persons, Etc. Tenant shall
not declare, order, pay or make, directly or indirectly, any Distribution or
payment to, or investment in, any Affiliated Person of Tenant (including
payments in the ordinary course of business and payments pursuant to management
agreements with any such Affiliated Person) or set apart any sum or property
therefor, or agree to do so, if, at the time of such proposed action, or
immediately after giving effect thereto, an Event of Default shall exist.
Otherwise, as long as no Event of Default shall have occurred and be continuing,
Tenant may make Distributions, loans and payments to
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Affiliated Persons (other than from the FF&E Reserve, which shall be governed by
Section 5.1.2) without restriction.
20.8 Prohibited Transactions. Tenant shall not permit to exist or enter
into any agreement or arrangement whereby it engages in a transaction of any
kind with any Affiliated Person as to Tenant, except on terms and conditions
which are commercially reasonable or as otherwise provided in Section 20.5(e).
20.9 Liens and Encumbrances. Except as permitted by Section 7.1, Tenant
shall not create or incur or suffer to be created or incurred or to exist any
Lien on this Agreement or any of Tenant's assets, properties, rights or income,
or any of its interest therein, now or at any time hereafter owned, other than:
(a) Liens securing Indebtedness incurred in accordance with
Section 20.5(e); provided, however, that (i) such Lien shall at all
times be confined solely to the asset in question, and (ii) the
aggregate principal amount of Indebtedness secured by any such Lien
shall not exceed the cost of acquisition or construction of the
property subject thereto;
(b) Permitted Encumbrances; and
(c) As permitted pursuant to Section 20.5(b) or (c).
20.10 Merger; Sale of Assets; Etc. Except as otherwise permitted by
this Agreement, 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 21
REPRESENTATIONS AND WARRANTIES
21.1 Representations of Tenant. To induce Landlord to enter into this
Agreement, Tenant represents and warrants to Landlord as follows:
21.1.1 Status and Authority of Tenant. Tenant is a limited
partnership duly organized, validly existing and in corporate good standing
under the laws of the State of Kansas. The Tenant General Partner is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. Each of Tenant and the Tenant General Partner
Tenant have all requisite power and authority under the laws of its state of
formation and
<PAGE>
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its respective charter documents to enter into and perform its obligations under
this Agreement and the Incidental Documents and to consummate the transactions
contemplated hereby. Each of Tenant and the Tenant General Partner has duly
qualified to transact business in each jurisdiction in which the nature of the
business conducted by it requires such qualification.
21.1.2 Action of Tenant. Each of Tenant and Tenant General
Partner have taken all necessary action to authorize the execution, delivery and
performance of this Agreement; this Agreement constitutes the valid and binding
obligation and agreement of Tenant, enforceable against Tenant 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.
21.1.3 No Violations of Agreements. Neither the execution,
delivery or performance of this Agreement by Tenant, 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 Tenant or the Leased
Property pursuant to the terms of any indenture, mortgage, deed of trust, note,
evidence of indebtedness or any other material agreement or instrument by which
Tenant or, to Tenant's knowledge, the Leased Property is bound.
21.1.4 Litigation. To Tenant's knowledge, and except as set
forth in sections 3.9 and 3.10 of the Disclosure Schedule attached to the
Purchase Agreements, no action or proceeding is pending or 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, will result in any material adverse change in the business,
operation, affairs or condition of the Leased Property or Tenant, result in or
subject the Leased Property or Tenant to a material liability, or involves
condemnation or eminent domain proceedings against any part of the Leased
Property.
21.1.5 Existing Leases, Agreements, Etc. To Tenant's
knowledge, other than any agreements provided to Landlord prior to the date
hereof, there are no material agreements affecting the Leased Property which
will be binding on Landlord subsequent to the Commencement Date.
21.1.6 Disclosure. To Tenant's knowledge there is no fact or
condition which materially and adversely affects the business or condition of
the Leased Property which has not been set forth in this Agreement or in the
other documents, certificates or statements furnished to Landlord in connection
with the transactions contemplated hereby.
21.1.7 Utilities, Etc. To Tenant's knowledge, all utilities
and services necessary for the use and operation of the Leased Property
(including, without limitation, road access, gas, water, electricity and
telephone) are available thereto, are of sufficient capacity to meet adequately
all needs and requirements necessary for the current use and operation of the
Leased Property and for its intended purposes. To Tenant's knowledge, no fact,
condition or proceeding exists which would result in the termination or material
impairment of the furnishing of such utilities to the Leased Property.
<PAGE>
-59-
21.1.8 Compliance With Law. To Tenant's knowledge, the Leased
Property 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 there are presently in effect all material licenses,
permits and other authorizations necessary for the current use, occupancy and
operation thereof. To Tenant's knowledge, there is no threatened request,
application, proceeding, plan, study or effort which would materially adversely
affect the present use or zoning of the Leased Property or which would modify or
realign any adjacent street or highway in a manner which would materially
adversely affect the use and operation of the Leased Property.
21.1.9 Hazardous Substances. Except as disclosed to Landlord
in writing or as described in any environmental report delivered to Landlord, to
Tenant's knowledge, no tenant or other occupant or user of the Leased Property,
or any portion thereof, has stored or disposed of (or engaged in the business of
storing or disposing of) or has released or caused the release of any Hazardous
Substances, and, to Tenant's knowledge, except as disclosed to Landlord in
writing or as described in any environmental report delivered to Landlord, the
Leased Property is free from any such Hazardous Substances, except any such
materials maintained in accordance with Applicable Law.
21.2 Representations of Landlord. To induce Tenant to enter in this
Agreement, Landlord represents and warrants to Tenant as follows:
21.2.1 Status and Authority of Landlord. Landlord is a real
estate investment trust duly organized, validly existing and in corporate good
standing under the laws of the State of Maryland. Landlord has all requisite
power and authority under the laws of its state of formation and its respective
charter documents to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. Landlord has duly
qualified to transact business in each jurisdiction in which the nature of the
business conducted by it requires such qualification.
21.2.2 Action of Landlord. Landlord has taken all necessary
action to authorize the execution, delivery and performance of this Agreement;
this Agreement constitutes the valid and binding obligation and agreement of
Landlord, enforceable against Landlord in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
21.2.3 No Violations of Agreements. Neither the execution,
delivery or performance of this Agreement by Landlord, nor compliance with the
terms and provisions hereof, will result in any material 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 material
property or assets of Landlord pursuant to the terms of any material indenture,
mortgage, deed of trust, note, evidence of indebtedness or any other agreement
or instrument by which Landlord is bound.
<PAGE>
-60-
21.2.4 Litigation. No investigation, action or proceeding is
pending and, to Landlord's knowledge, no action or proceeding is threatened and
no investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
21.3 Survival, Etc. The representations and warranties set forth in
Sections 21.1.5 shall remain in effect only for a one-year period after the date
hereof. Except as otherwise expressly provided in this Agreement, Tenant
disclaims the making of any representations or warranties, express or implied,
regarding the Leased Property or matters affecting the Leased Property, whether
made by Tenant, on Tenant's behalf or otherwise, including, without limitation,
the physical condition of the Leased Property, title to or the boundaries of the
Land, 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
Leased Property or the market and physical environments in which it is located.
Landlord acknowledges (i) that Landlord 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 the Leased Property and (ii) that Landlord is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
Landlord by Tenant. Landlord further acknowledges that it has not received from
or on behalf of Tenant 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, Landlord shall purchase the Leased Property in
its "as is" condition on the date hereof.
ARTICLE 22
MISCELLANEOUS
22.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under applicable law, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
<PAGE>
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22.2 No Waiver. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.
22.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this Agreement, but rather the effect thereof shall be confined to
the clause, sentence, paragraph, section or provision so held to be invalid,
illegal or ineffective, and this Agreement shall be construed as if such
invalid, illegal or ineffective provisions had never been contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
22.6 No Merger of Title. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
22.7 Conveyance by Landlord. If Landlord or any successor owner of all
or any portion of the Leased Property shall convey all or any portion of the
Leased Property in accordance with the terms hereof other than as security for a
debt, and the grantee or transferee of such of the Leased Property shall
expressly assume all obligations of Landlord hereunder arising or accruing from
and after the date of such conveyance or transfer, Landlord or such successor
owner, as the case may be, shall, provided such successor owner shall have a
Tangible Net Worth of not less than Five Million Dollars ($5,000,000), (y) such
conveyance shall occur subsequent to the first anniversary of the Commencement
Date and (z) Landlord shall transfer in cash any unapplied balance of the
Security Deposit to such successor owner, thereupon be released from all future
liabilities and obligations of Landlord under this Agreement with respect to
such of the Leased Property arising or accruing from and after the date of such
conveyance or other transfer and all such future liabilities and obligations
shall thereupon be binding upon the new owner.
<PAGE>
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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 19 or otherwise permitted to be created
by Landlord hereunder provided that the holder of such Encumbrance has, to the
extent appropriate, executed a nondisturbance agreement pursuant to Section 19.2
or a subordination agreement in form and substance reasonably acceptable to
Tenant, (b) all Permitted Encumbrances, (c) liens as to obligations of Landlord
that are either not yet due or which are being contested in good faith and by
proper proceedings, provided the same do not materially interfere with Tenant's
ability to operate the Hotel, and (d) liens that have been consented to in
writing by Tenant. Except as otherwise provided in this Agreement, no failure by
Landlord to comply with the foregoing covenant shall give Tenant any right to
cancel or terminate this Agreement or abate, reduce or make a deduction from or
offset against the Rent or any other sum payable under this Agreement, or to
fail to perform any other obligation of Tenant hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Agreement. However, Landlord and Tenant shall promptly, upon the request of the
other, enter into a short form memorandum of this Agreement, in form suitable
for recording under the laws of the relevant State in which reference to this
Agreement, and all options contained herein, shall be made. The parties shall
share equally all costs and expenses of recording such memorandum.
22.10 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with return receipt requested (if
by mail), or with all freight charges prepaid (if by Federal Express or
similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
<PAGE>
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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 (prior to the Patriot Acquisition Date) to:
c/o Summerfield Hotel Corporation
8100 E. 22nd Street North
Building 500
Wichita, KS 67226
Attn: John R. Morse
Telecopier: (316) 681-5157
<PAGE>
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with a copy to:
Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111-3580
Attn: Paul Churchill
if to Tenant (after the Patriot Acquisition Date) to:
c/o Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn: General Counsel
Telecopier: 214-863-1986
with a copy to:
Locke, Purnell, Rain, Harrell
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Attn: J. Mitchell Bell, Esq.
Telecopier No. (214) 740-8800
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time
to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address
any other address within the United States of America.
22.11 Trade Area Restriction. Neither Tenant nor any of its Affiliated
Persons shall own, build, franchise, manage or operate any Summerfield Suites
hotel within the designated area on Exhibit C, at any time during the Term; it
being expressly understood and agreed that hotels other than Summerfield Suites
hotels (e.g., garden, full service, Sierra Suites or resort hotels) are not
subject to the foregoing restriction.
22.12 Construction. Anything contained in this Agreement to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such termination or
expiration. In no event shall Landlord be liable for any consequential damages
suffered by Tenant as the result of a breach of this Agreement by Landlord.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
to be charged. All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Each term or provision of this Agreement to be performed
by Tenant shall be construed as an independent covenant and condition. Time is
of the essence with respect to the provisions of this Agreement. Except as
otherwise set forth in
<PAGE>
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this Agreement, any obligations of Tenant (including without limitation, any
monetary, repair and indemnification obligations) and Landlord shall survive the
expiration or sooner termination of this Agreement.
22.13 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
22.14 Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of The Commonwealth
of Massachusetts applicable to contracts between residents of The Commonwealth
of Massachusetts which are to be performed entirely within The Commonwealth of
Massachusetts, regardless of (i) where this Agreement is executed or delivered;
or (ii) where any payment or other performance required by this Agreement is
made or required to be made; or (iii) where any breach of any provision of this
Agreement occurs, or any cause of action otherwise accrues; or (iv) where any
action or other proceeding is instituted or pending; or (v) the nationality,
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
The Commonwealth of Massachusetts; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as is provided by law; and the parties consent
to the jurisdiction of said court or courts located in The Commonwealth of
Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
22.15 Nonrecourse. Nothing contained in this Agreement shall be
construed to impose any liabilities or obligations on SHC or any of its
shareholders for the payment or performance of the obligations or liabilities of
Tenant under this Agreement.
22.16 Confidentiality. Except to prospective lenders and purchasers or
as may be required by law, the SEC or any securities and exchange commission,
Landlord shall not disclose any of Tenant's confidential or proprietary
information to any Person.
22.17 Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HPTSHC PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL
<PAGE>
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PERSONS DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF
LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
HPTSHC PROPERTIES TRUST
By:___________________________
Its (Vice) President
TENANT:
SUMMERFIELD HPT LEASE COMPANY, L.P., a
Kansas limited partnership
By: Summerfield HPT Lease Company
L.L.C., its General Partner
By: /s/ B.Anthony Isaac
Its: President
<PAGE>
EXHIBITS A-1 THROUGH A-15
The Land
[See attached copies.]
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Allocated Purchase Prices
Amount of
Amount of Purchase Price
Allocated Purchase Price Allocable to
Purchase Allocable to Personal
Name of Hotel Price Real Estate Property
------------- ----- ----------- --------
<S> <C> <C> <C>
Atlanta Buckhead, GA $9,292,317 $8,363,085 $929,232
Atlanta Perimeter, GA $11,504,294 $10,353,865 $1,150,429
Chatsworth, CA $10,006,248 $9,005,623 $1,000,625
Dulles, DC $14,769,565 $13,292,609 $1,476,957
Malvern, PA $16,702,184 $15,031,966 $1,670,218
Orlando International Drive, FL $19,947,407 $17,952,666 $1,994,741
Orlando Lake Buena Vista, FL $22,197,980 $19,978,182 $2,219,798
Princeton, NJ $17,135,363 $15,421,827 $1,713,536
St. Louis, MO $9,329,874 $8,396,887 $932,987
San Francisco Airport, CA $10,723,122 $9,650,810 $1,072,312
San Jose, CA $21,430,335 $19,287,302 $2,143,034
Schaumburg, IL $12,075,270 $10,867,743 $1,207,527
Somerset, NJ $23,607,072 $21,246,365 $2,360,707
Sunnyvale, CA $26,530,762 $23,877,686 $2,653,076
Torrance, CA $14,748,207 $13,273,386 $1,474,821
----------- ----------- ----------
TOTALS $240,000,000 $216,000,000 $24,000,000
============ ============ ===========
</TABLE>
<PAGE>
EXHIBIT C
Restricted Trade Area
[See attached copy.]
<PAGE>
EXHIBIT D
Disclosure Schedule
[See attached copy.]
<TABLE>
<CAPTION>
Exhibit 12
Hospitality Properties Trust
Computation of Ratio to Fixed Charges
(in thousands, except ratio amounts)
For the Period
February 7, 1995
(inception) to For the Year For the Year
December 31, ended December ended December
1995 31, 1996 31, 1997
<S> <C> <C> <C>
Income $11,349 $51,664 $59,153
Fixed Charges 5,063 5,646 15,534
------- ------- -------
Adjusted Earnings $16,412 $57,310 $74,687
======= ======= =======
Fixed charges:
Interest on indebtedness and amortizaton of
deferred finance cost $ 5,063 $ 5,646 $15,534
------- ------- -------
Total Fixed Charges $ 5,063 $ 5,646 $15,534
======= ======= =======
Ratio of Earnings to Fixed Charges 3.24x 10.15x 4.81x
</TABLE>
Exhibit 21
Subsidiary State of Incorporation
- ----------------------------------------------- -----------------------
HPTCY Corporation Delaware
HPTRI Corporation Delaware
HPTWN Corporation Delaware
Hospitality Properties Mortgage Acceptance Corp. Delaware
HPTSLC Corporation Delaware
HPTMI Corporation Delaware
HPTMI II Properties Trust Maryland
HPT Suite Properties Trust Maryland
HPT CW Properties Trust Maryland
HPTSHC Properties Trust Maryland
HPTCY Properties Trust Maryland
HPTMI Properties Trust Maryland
HPTSLC Properties Trust Maryland
HPTRI Properties Trust Maryland
HPTWN Properties Trust Maryland
EXHIBIT 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our
reports incorporated into this Form 10-K into the Company's previously filed
Registration Statement File No. 333-43573.
/s/ Arthur Andersen LLP
Washington, D.C.
March 30, 1998
EXHIBIT 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 11, 1998
HOSPITALITY PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland
(State or other 1-11527 04-3262075
jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
400 Centre Street, Newton, MA 02158
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-964-8389
<PAGE>
CERTAIN IMPORTANT FACTORS
This Current Report contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Those statements appear in a number of places in this Current Report and
include statements regarding the intent, belief or expectations of Hospitality
Properties Trust (the "Company"), its Trustees or its officers with respect to
the declaration or payment of dividends, the consummation of additional
acquisitions, policies and plans of the Company regarding investments,
dispositions, financings, conflicts of interest or other matters, the Company's
qualification and continued qualification as a real estate investment trust or
trends affecting the Company's or any hotel's financial condition or results of
operations. 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 from those contained in the forward
looking statement as a result of various factors. Such factors include without
limitation changes in financing terms, the Company's ability or inability to
complete acquisitions and financing transactions, results of operations of the
Company's hotels and general changes in economic conditions not presently
contemplated. The accompanying information contained in this Form 8-K, including
the information under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and in the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1996, including under
the captions "Item 5 Business and Properties" and in Exhibit 99 thereof,
identifies other important factors that could cause such differences.
THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE COMPANY, DATED AUGUST 21,
1995 A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE
STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE TRUST. ALL PERSONS
DEALING WITH THE TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE TRUST
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
2
<PAGE>
Item 5. Other Events
A. The Company issued an aggregate of 12,000,000 common shares of beneficial
interest in its previously announced and reported public offering. The
shares were issued on December 12, 1997, and the gross proceeds were $397
million. The net proceeds were used to pay all outstanding borrowings under
the Company's revolving line of credit which were at a floating rate, for
hotel acquisitions and for general business purposes.
B. The Company entered into an Advisory Agreement (the "New Advisory
Agreement") with REIT Management & Research, Inc., a Delaware corporation
(the "New Advisor"). The New Advisory Agreement was effective as of January
1, 1998 and replaced the Advisory Agreement dated as of November 20, 1986,
as amended (the "Old Advisory Agreement"), between the Company and HRPT
Advisors, Inc., a Delaware corporation (the "Old Advisor"). The terms of
the New Advisory Agreement are substantially the same as those of the Old
Advisory Agreement. The persons who were officers and directors of the Old
Advisor as of December 31, 1997 are the officers and directors of the New
Advisor, each holding the same office or offices. They are David J.
Hegarty, President and Secretary, John G. Murray, Executive Vice President,
John A. Mannix, Vice President, Thomas M. O'Brien, Vice President, Ajay
Saini, Vice President, David M. Lepore, Vice President and John Popeo,
Treasurer, and Gerard M. Martin and Barry M. Portnoy, as Directors. Each of
Messrs. Martin and Portnoy own 50% of the outstanding capital stock of both
the Old Advisor and the New Advisor.
C. Management's Discussion and Analysis of Results of Operations and Financial
Condition
The following information is provided in connection with the financial
statements filed as Item 7 to this Current Report.
Overview
The Company was organized on February 7, 1995 and commenced operations on
March 24, 1995 with the acquisition of its first 21 hotels. The Company
completed its initial public offering of shares and acquired an additional 16
hotels on August 22, 1995. Because the Company did not operate for the entire
year 1995, the Company believes it is meaningful to an understanding of its
operations to discuss the Company's 1995 pro forma results of operations as well
as its historical results of operations.
The following discussion should be read in conjunction with the financial
statements and the notes thereto included elsewhere herein. Pro forma results
and percentage relationships set forth in the financial highlights section and
in such financial statements may not be indicative of the future operations of
the Company.
Historical and Pro Forma Results of Operations
Year Ended December 31, 1997 versus Year Ended December 31, 1996
The Company's assets increased to $1,313 million as of December 31, 1997
from $872 million as of December 31, 1996. The increase resulted primarily from
hotel acquisitions completed in 1997.
In January 1997 the Company purchased a full service hotel in Salt Lake
City, Utah for $44.0 million. In March 1997 the Company agreed to acquire 10
Residence Inn by Marriott(R) hotels (1,276 suites) and four Courtyard by
Marriott(R) hotels (543 rooms) for $149 million and acquired all these
properties in 1997 after they opened. In September 1997 the Company agreed to
acquire from Marriott six Courtyard by Marriott(R) hotels (829 rooms) and three
Residence Inn by Marriott(R) hotels (507 suites) for $129 million. As of
February 11, 1998, three of these hotels have been acquired; the remaining six
are expected to be acquired periodically during the remainder of 1998. In
November 1997 the Company acquired 14 Sumner Suites(R) hotels (1,641 suites) for
$140 million. In November 1997 the Company agreed to acquire 15 Candlewood(R)
hotels for $100 million. Five of these 15 Candlewood(R) hotels were acquired in
1997. An additional 5 properties were acquired in January 1998. The remaining
hotels are expected to be acquired during 1998. These acquisitions were funded
through the use of cash on hand, borrowings on the company's line of credit, and
the net proceeds from the offering of 12,000,000 common shares of beneficial
interest ("Shares") in December 1997.
Total revenues in 1997 were $114.1 million versus 1996 revenues of $82.6
million. Total revenues were comprised principally of base and percentage rent
of $98.6 million and FF&E reserve income of $14.6 million in 1997 versus $69.5
million and $12.2 million, respectively, in the 1996 period. The Company's
results are reflective of the full year impact of 45 hotels acquired in 1996 and
the impact of the 1997 completion of 37 of the 53 hotel acquisitions announced
in 1997. During 1997 the Company earned percentage rent revenue of $2.5 million
($0.09/Share) versus $1.1 million ($0.05/Share) in 1996, as a result of
increases in gross hotel revenues at the Company's hotels.
Total expenses in 1997 were $55.0 million (including interest expense and
depreciation and amortization of real estate assets of $15.5 and $31.9 million,
respectively) versus 1996 expenses of $31.0 million (including interest expense
and depreciation and amortization of $5.6 million and $20.4 million,
respectively). A portion of the hotels purchased in 1997 were temporarily
financed with proceeds from the Company's line of credit which was ultimately
repaid with the proceeds of the Company's 12,000,000 Share offering in December
1997. These line of credit proceeds, plus the amounts outstanding on certain
prepayable mortgage notes issued by a subsidiary of the Company, gave rise to
interest expense of $15.5 million in 1997 versus $5.6 million in 1996 when
amounts on the Company's line of credit were smaller, were outstanding for
shorter periods and during which the Company's mortgage notes were not in place
for the entire period. The substantial increase in the number of hotels owned by
3
<PAGE>
the Company has also proportionately increased the Company's general expense
levels, including depreciation and general and administrative expenses. The
Company incurred $713,000 of costs in 1997 in connection with a terminated
acquisition attempt.
Net income in 1997 was $59.2 million ($2.15/Share) and cash available for
distribution ("CAD") was $79.3 million ($2.88/Share) versus $51.7 million ($2.23
per Share) and CAD of $60.8 million ($2.62/Share). Growth in net income and CAD
is primarily related to the effects of acquisitions in 1996 and 1997.
Cash flow provided by (used for) operating, investing and financing
activities was $81.2 million, ($347.3 million) and $309.7 million, respectively,
for the year ended December 31, 1997.
Year Ended December 31, 1996 versus Pro Forma Year Ended December 31, 1995
The Company's assets increased to $871.6 million as of December 31, 1996
from $338.9 million at December 31, 1995. The increase primarily resulted from
three hotel portfolio acquisitions completed during 1996. In March and April of
1996, the Company acquired 16 Courtyard by Marriott(R) hotels for $176.4 million
and 18 Residence Inn(R) by Marriott hotels for $172.2 million. In May 1996, the
Company acquired 11 Wyndham Garden(R) hotels for $135.3 million. These
acquisitions were funded through the use of cash on hand, borrowings on the
Company's line of credit, and the net proceeds from the offering of 14,250,000
Shares in April 1996.
Total revenues in 1996 were $82.6 million versus pro forma 1995 revenue of
$39.9 million. Total revenues were comprised principally of base and percentage
rent of $69.5 million and FF&E reserve income of $12.2 million in 1996 versus
$33.3 million and $6.4 million, respectively, in the pro forma period. The
Company's results of operations in 1996 are reflective of the growth in the
number of owned hotels to 82, from 37 at year end 1995. The leases for the
Company's 82 hotels at December 31, 1996 call for base rent of $81.3 million
annually, versus $32.9 million for the 37 hotels owned at December 31, 1995.
During 1996, the Company earned revenue of approximately $1.1 million
($0.05/Share) in percentage rents from its portfolio of 53 Courtyard hotels,
reflective of continued increases in Total Hotel Sales at these properties.
Total expenses in 1996 were $31.0 million, including interest expense and
depreciation and amortization of $5.6 million and $20.4 million, respectively,
versus pro forma 1995 expenses of $11.8 million, including depreciation and
amortization of $9.2 million. A portion of the hotels purchased in 1996 were
financed with proceeds from the Company's line of credit which was ultimately
repaid with prepayable floating rate mortgages. Such debt financing in 1996 gave
rise to the $5.6 million of interest expense referred to above, versus zero for
pro forma 1995, when the Company did not use third-party debt. The substantial
increase in the number of hotels owned by the Company has also proportionately
increased the Company's general expense levels, including depreciation and
amortization and general and administrative expenses.
Net income in 1996 was $51.7 million ($2.23 per Share) and CAD for the
period was $60.8 million ($2.62 per Share), based in both cases on average
outstanding Shares for the period of 23,170,000. This compares with pro forma
1995 net income of $28.0 million ($2.22 per Share) and CAD of $30.8 million
($2.45 per Share), based in both cases upon 12,600,900 outstanding Shares. This
7% growth in CAD is primarily related to the effects of the Company's 1996 hotel
acquisitions and related financing activity as well as growth in percentage rent
to $1.1 million in 1996 from $0.4 million in the 1995 pro forma period. During
April 1996, the Company completed an offering of 14,250,000 Shares raising net
proceeds of approximately $358 million to fund its acquisitions and more than
doubling its equity capitalization and shares outstanding.
Cash flow provided by (used for) operating, investing and financing
activities was $61.7 million, ($448.7 million) and $422.9 million, respectively,
for the year ended December 31, 1996.
February 7, 1995 (Inception) Through December 31, 1995
Total revenues from Inception through December 31, 1995 were $23.6 million,
which included base and percentage rent of $19.5 million and FF&E reserve income
of $4.0 million. Total expenses for the period were $12.3 million, including
interest expense and depreciation and amortization of $5.0 million and $5.8
million, respectively. Net income for the period was $11.3 million ($2.51 per
Share) and CAD for the period was $13.2 million ($2.91 per Share), based in both
cases on average outstanding Shares for the period of 4,515,000.
From Inception until completion of its initial public offering on August
22, 1995, the Company was a 100% owned subsidiary of Health and Retirement
Properties Trust ("HRP") and was initially capitalized with $1 million of equity
and $163.3 million of debt. The debt was
4
<PAGE>
provided by HRP at rates which were lower than the market rates which the
Company would have paid on a stand alone basis. Accordingly, the Company does
not believe that its results of operations while it was a wholly owned
subsidiary of HRP are comparable to subsequent periods.
Cash flow provided by (used for) operating, investing and financing
activities was $14.1 million, ($303.7 million) and $291.6 million, respectively,
for the year ended December 31, 1996.
Pro Forma Year Ended December 31, 1995
The pro forma results of operations assume that the Company's formation
transactions, the initial public offering of Shares and the acquisition and
leasing of the 37 hotels and related transactions all occurred on January 1,
1995. On this pro forma basis, total revenues would have been $39.9 million
(principally base and percentage rents of $33.3 million and FF&E reserve income
of $6.4 million). Total expenses would have been $11.8 million (including
depreciation and amortization of $9.2 million and general and administrative
expenses of $2.6 million). Net income would have been $28.0 million or $2.22 per
Share, and CAD would have been $30.8 million or $2.45 per Share, based in both
cases upon 12,600,900 Shares outstanding.
Liquidity and Capital Resources
The Company's primary source of cash to fund its dividends, interest and
day to day operations is the base and percentage rent it receives. Base rent is
paid monthly in advance and percentage rent is paid either monthly or quarterly
in arrears. This flow of funds from rent has historically been sufficient for
the Company to pay dividends, interest and meet day to day operating expenses.
The Company believes that its operating cash flow will be sufficient to meet its
operating expenses, interest and dividend payments.
In order to fund acquisitions and to accommodate occasional cash needs
which may result from timing differences between the receipt of rents and the
need to pay dividends or operating expenses, the Company has entered into a line
of credit arrangement was with DLJ Mortgage Capital, Inc. ("DLJMC"). The line of
credit (the "DLJMC Line of Credit") is for up to $200 million, all of which was
available at December 31, 1997. During 1997 the Company expanded its credit
facilities with DLJMC temporarily to provide up to $455 million. Drawings under
the DLJMC Line of Credit are secured by first mortgage liens on certain of the
Company's hotels. Funds may be drawn, repaid and redrawn until maturity, and no
principal repayment is due until maturity. The DLJMC Line of Credit matures on
December 31, 1998. Interest on borrowings under the DLJMC Line of Credit are
payable until maturity at a spread above LIBOR; and interest during the extended
term, if any, will be set at market rates at the time the loan is extended.
During 1996, subsidiaries of the Company issued $125 million of mortgage
notes (the "Notes") secured by such subsidiaries' assets, including 18 Residence
Inn by Marriott(R) and 11 Wyndham Garden(R) hotels. The mortgage loan was
financed by the issuance of $125 million commercial mortgage pass-through
certificates through a trust created by another of the Company's subsidiaries.
The certificates were sold in a Rule 144A private placement to institutional
investors. The Notes carry interest that floats with one-month LIBOR plus a
spread and are due December 1, 2001, but may be prepaid by the Company at any
time without penalty. In connection with this issuance of the Notes, the Company
entered into interest rate cap agreements for $125 million (notional amount)
with a major financial institution which limit the Company's maximum interest
rate exposure to 7.6925% on this debt.
The Company expects to use existing cash balances, borrowings under the
DLJMC Line of Credit or other lines of credit and/or net proceeds of offerings
of equity or debt securities to fund future hotel acquisitions. To the extent
the Company borrows on a line of credit, the Company will explore various
alternatives in both the timing and method of repayment of such amounts. Such
alternatives may include incurring long term debt. On January 15, 1997, the
Company's shelf registration statement for up to $2 billion of securities,
including debt securities, was declared effective by the Securities and Exchange
Commission (the "SEC"). An effective shelf registration statement enables the
Company to issue specific securities to the public on an expedited basis by
filing a prospectus supplement with the SEC.
The Company has recently held preliminary discussions with several banks
concerning the possibility of replacing the DLJMC Line of Credit. The Company is
also exploring the prepayment of the Notes with the proceeds of an issuance of
unsecured term debt securities. No assurance can be made that a new credit
facility will be available to the Company on acceptable terms or that a
prepayment of the Notes will occur.
5
<PAGE>
Although there can be no assurance that the Company will consummate any
debt or equity security offerings or other financings, the Company believes it
will have access to various types of financing in the future, including debt or
equity securities offerings, with which to finance future acquisitions.
Seasonality
The Company's hotels have historically experienced seasonal differences
typical of the hotel industry with higher revenues in the second and third
quarters of calendar years compared with the first and fourth quarters. This
seasonality is not expected to cause fluctuations in the Company's rental income
because the Company believes that the revenues generated by its hotels will be
sufficient for the lessees to pay rents on a regular basis notwithstanding
seasonal fluctuations.
Inflation
The Company believes that inflation should not have a material adverse
effect on the Company. Although increases in the rate of inflation may tend to
increase interest rates which the Company may be required to pay for borrowed
funds, the Company has a policy of obtaining interest rate caps in appropriate
circumstances to protect it from interest rate increases. In addition, the
Company's leases provide for the payment of percentage rent to the Company based
on increases in total sales, and such rent should increase with inflation.
Certain Considerations
The discussion and analysis of the Company's financial condition and
results of operations requires the Company to make certain estimates and
assumptions and contains certain statements of the Company's beliefs, intent or
expectation concerning projections, plans, future events and performance. The
estimates, assumptions and statements, such as those relating to the Company's
ability to expand its portfolio, performance of its assets, the ability to pay
dividends, its tax status as a "real estate investment trust," the ability to
appropriately balance the use of debt and equity and to access capital markets,
depend upon various factors over which the Company and/or the Company's lessees
have or may have limited or no control. Those factors include, without
limitation, the status of the economy, capital markets (including prevailing
interest rates), compliance with the changes to regulations within the
hospitality industry, competition, changes to federal, state and local
legislation and other factors. The Company cannot predict the impact of these
factors, if any. However, these factors could cause the Company's actual results
for subsequent periods to be different from those stated, estimated or assumed
in this discussion and analysis of the Company's financial condition and results
of operations. The Company believes that its estimates and assumptions are
reasonable and prudent at this time.
Item 7. Financial Statements and Schedule and Exhibits
(a) Index to Financial Statements and Financial Statement Schedule (see
index on page F-1).
(a) List of exhibits.
10 Advisory Agreement by and between REIT Management & Research, Inc. and
Hospitality Properties Trust dated January 1, 1998.
12 Ratio of Earnings to Fixed Charges.
23 Consent of Arthur Andersen LLP.
27 Financial data schedule.
6
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheet as of December 31, 1997 and 1996 .............. F-3
Consolidated Statement of Income for the years ended December 31, 1997
and 1996 and the period February 7, 1995 (inception) to December 31, 1995. F-4
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1997 and 1996 and the period February 7, 1995 (inception)
to December 31, 1995...................................................... F-5
Consolidated Statement of Cash Flows for the years ended December 31,
1997 and 1996 and the period February 7, 1995 (inception) to December
31, 1995.................................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
Report of Independent Public Accountants on Schedule III ................. F-11
Schedule III - Real Estate and Accumulated Depreciation .................. F-12
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
Hospitality Properties Trust:
We have audited the accompanying consolidated balance sheet of Hospitality
Properties Trust (the "Company") as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for the years ended December 31, 1997, 1996 and the period from February 7, 1995
(inception) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hospitality
Properties Trust as of December 31, 1997 and 1996 and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1996,
and for the period from February 7, 1995 (inception) to December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 16, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
CONSOLIDATED BALANCE SHEET
As of December 31,
----------------------------
1997 1996
(in thousands, except Share
data)
<S> <C> <C>
ASSETS
Real estate properties, at cost:
Land ................................................. $ 179,928 $ 143,462
Buildings and improvements ........................... 1,086,107 699,225
---------- ---------
1,266,035 842,687
Less accumulated depreciation ........................ (58,167) (26,218)
---------- ---------
1,207,868 816,469
Cash and cash equivalents ............................. 81,728 38,073
Rent receivable ....................................... 1,623 1,671
Restricted cash (FF&E reserve) ........................ 11,165 7,277
Other assets, net ..................................... 10,872 8,113
---------- ---------
$1,313,256 $ 871,603
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Security deposits ..................................... $ 146,662 $ 81,360
Debt .................................................. 125,000 125,000
Dividends payable ..................................... 24,493 15,846
Due to affiliate ...................................... 2,464 2,376
Accounts payable and other ............................ 6,744 1,813
---------- ---------
Total liabilities .................................... 305,363 226,395
Shareholders' equity:
Preferred shares of beneficial interest, no par value,
100,000,000 shares authorized, none issued .......... -- --
Common shares of beneficial interest, $.01 par value,
100,000,000 shares authorized, 38,878,295 and
26,856,800 shares issued and outstanding ............ 389 269
Additional paid-in capital ........................... 1,033,073 656,253
Cumulative net income ................................ 122,166 63,013
Dividends (paid or declared) ......................... (147,735) (74,327)
---------- ---------
Total shareholders' equity ........................... 1,007,893 645,208
---------- ---------
$1,313,256 $ 871,603
========== =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
CONSOLIDATED STATEMENT OF INCOME
February 7, 1995
Year Ended December 31, (inception) to
--------------------------- December 31,
1997 1996 1995
(in thousands, except per Share data)
<S> <C> <C> <C>
Revenues:
Rental income ............................................... $ 98,561 $ 69,514 $ 19,531
FF&E reserve income ......................................... 14,643 12,169 4,037
Interest income ............................................. 928 946 74
--------- -------- --------
Total revenues ............................................ 114,132 82,629 23,642
--------- -------- --------
Expenses:
Interest (including amortization of deferred finance costs
of $1,340, $341 and $24, respectively)...................... 15,534 5,646 5,063
Depreciation and amortization of real estate assets ......... 31,949 20,398 5,820
Terminated acquisition costs ................................ 713 -- --
General and administrative .................................. 6,783 4,921 1,410
--------- -------- --------
Total expenses ............................................ 54,979 30,965 12,293
--------- -------- --------
Net income ................................................... $ 59,153 $ 51,664 $ 11,349
========= ======== ========
Weighted average Shares outstanding .......................... 27,530 23,170 4,515
Net income per Share ......................................... $ 2.15 $ 2.23 $ 2.51
========= ======== ========
See accompanying notes.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Additional Cumulative
Number Of Common Paid-In Net
Shares Shares Capital Income Dividends Total
(in thousands, except Share data)
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization as of
February 7, 1995 (inception) . 40,000 $ -- $ 960 $ -- $ -- $ 960
Issuance of Common Shares of
Beneficial Interest, net ..... 12,560,000 126 296,980 -- -- 297,106
Stock grants .................. 900 -- 22 -- -- 22
Net income .................... -- -- -- 11,349 -- 11,349
Dividends (paid or declared) .. -- -- -- -- (11,486) (11,486)
---------- ---- ---------- -------- ---------- ----------
Balance at December 31, 1995 .. 12,600,900 $126 $ 297,962 $ 11,349 $ (11,486) $ 297,951
========== ==== ========== ======== ========== ==========
Issuance of Common Shares of
Beneficial Interest, net ..... 14,250,000 $143 $ 358,136 $ -- $ -- $ 358,279
Stock grants .................. 5,900 -- 155 -- -- 155
Net income .................... -- -- -- 51,664 -- 51,664
Dividends (paid or declared) .. -- -- -- -- (62,841) (62,841)
---------- ---- ---------- -------- ---------- ----------
Balance at December 31, 1996 .. 26,856,800 $269 $ 656,253 $ 63,013 $ (74,327) $ 645,208
========== ==== ========== ======== ========== ==========
Issuance of Common Shares of
Beneficial Interest, net ..... 12,000,000 $120 $ 376,146 $ -- $ -- $ 376,266
Stock grants .................. 21,495 -- 674 -- -- 674
Net income .................... -- -- -- 59,153 -- 59,153
Dividends (paid or declared) .. -- -- -- -- (73,408) (73,408)
---------- ---- ---------- -------- ---------- ----------
Balance at December 31, 1997 .. 38,878,295 $389 $1,033,073 $122,166 $ (147,735) $1,007,893
========== ==== ========== ======== ========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended February 7, 1995
December 31, (inception) to
------------------------------ December 31,
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 59,153 $ 51,664 $ 11,349
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization .............................. 31,949 20,398 5,820
Amortization of deferred finance costs as interest ......... 1,340 341 24
FF&E reserve income ........................................ (14,643) (12,169) (4,037)
Changes in assets and liabilities:
Increase in rent receivable and other assets ............. (469) (1,566) (182)
Increase in accounts payable and other ................... 3,419 1,926 396
Increase in due to affiliate ............................. 476 1,149 770
---------- ---------- ----------
Cash provided by operating activities .................... 81,225 61,743 14,140
---------- ---------- ----------
Cash flows from investing activities:
Real estate acquisitions ..................................... (409,799) (491,638) (332,648)
Increase in security deposits ................................ 65,302 48,460 32,900
Purchase of FF&E reserve ..................................... (2,794) (5,500) (3,904)
---------- ---------- ----------
Cash used in investing activities ........................ (347,291) (448,678) (303,652)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of Shares, net ........................ 376,266 358,279 198,088
Draws on credit facility and debt issuance ................... 261,000 240,650 --
Repayments of credit facility ................................ (261,000) (115,650) --
Deferred finance costs incurred .............................. (1,784) (6,481) (1,885)
Borrowings and advances from HRP ............................. -- -- 165,241
Payments on borrowings and advances from HRP ................. -- -- (65,241)
Dividends paid ............................................... (64,761) (53,925) (4,556)
---------- ---------- ----------
Cash provided by financing activities .................... 309,721 422,873 291,647
---------- ---------- ----------
Increase in cash and cash equivalents ......................... $ 43,655 $ 35,938 $ 2,135
Cash and cash equivalents at beginning of period .............. 38,073 2,135 --
---------- ---------- ----------
Cash and cash equivalents at end of period .................... $ 81,728 $ 38,073 $ 2,135
========== ========== ==========
Supplemental cash flow information:
Cash paid for interest ....................................... $ 14,086 $ 4,652 $ 5,039
Non-cash investing and financing activities:
Property managers' deposits in FF&E reserve .................. 14,213 12,100 3,862
Purchases of fixed assets with FF&E reserve .................. (13,549) (15,665) (2,424)
Issuance of Shares to HRP .................................... -- -- 100,000
Cancellation of indebtedness to HRP .......................... -- -- (100,000)
</TABLE>
See accompanying notes.
F-6
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per Share and percent data)
1. Organization and Commencement of Operations
Hospitality Properties Trust (HPT) is a Maryland real estate investment
trust organized on February 7, 1995. HPT, which invests in income producing
hotel and lodging related real estate, was a 100% owned subsidiary of Health and
Retirement Properties Trust (HRP) from its inception through August 22, 1995,
when it completed its initial public offering of Shares (the IPO). HRP remains
an affiliate of HPT, owning approximately 10.3% of HPT's issued and outstanding
Shares as of December 31, 1997. HPT commenced operations on March 24, 1995. At
December 31, 1997 HPT, directly and through subsidiaries, had purchased 119
properties and committed to purchase an additional 16 properties.
The properties of HPT and its subsidiaries (the Company) are leased to and
managed by subsidiaries (the Lessees and the Managers) of companies unaffiliated
with HPT: Host Marriott Corporation; Marriott International, Inc. (Marriott);
Patriot American Hospitality; Candlewood Hotel Company, Inc.; and ShoLodge, Inc.
2. Summary of Significant Accounting Policies
Consolidation. These consolidated financial statements include the accounts
of HPT and its subsidiaries. All intercompany transactions have been eliminated.
Real estate properties. Real estate properties are recorded at cost.
Depreciation is provided for on a straight-line basis over estimated useful
lives of 7 to 40 years. The Company periodically evaluates the carrying value of
its long-lived assets in accordance with Statement of Financial Accounting
Standards No. 121 (FAS 121), which it adopted on January 1, 1996. The adoption
of FAS 121 had no effect on the Company's financial statements.
Cash and cash equivalents. Highly liquid investments with maturities of
three months or less at date of purchase are considered to be cash equivalents.
The carrying amount of cash and cash equivalents is equal to its fair value.
Deferred finance costs. Costs incurred to secure certain borrowings are
capitalized and amortized over the terms of the related borrowing, and were
$7,371, $5,352 and $1,861 at December 31, 1997, 1996 and 1995, respectively, net
of accumulated amortization of $1,143, $313 and $24, respectively.
Financial Instruments--interest rate cap agreements. Certain subsidiaries
of HPT have entered interest rate protection agreements to limit the Company's
exposure to risks of rising interest rates. The cost of the agreements is
included in interest expense ratably over the life of the arrangement. Amounts
receivable from the counterparties to the cap agreements are accrued as
adjustments to interest expense. At December 31, 1997 and 1996, the net carrying
value of such agreements was $1,988 and $2,498, respectively, and the fair value
of such agreements was $802 and $2,756, respectively. Interest rates have not
exceeded the cap amounts and no balances were receivable under the cap
agreements at December 31, 1997 and 1996.
Revenue recognition. Rental income from operating leases is recognized on a
straight line basis over the life of the lease agreements. Additional rent and
interest income is recognized as earned.
Net income per share. Net income per share is computed using the weighted
average number of shares outstanding during the period. The Company has no
common share equivalents.
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts. Actual results could
differ from those estimates.
Income taxes. The Company is a real estate investment trust under the
Internal Revenue Code of 1986. The Company is not subject to Federal income
taxes on its net income provided it distributes its taxable income to
shareholders and meets certain other requirements.
F-7
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except per Share and percent data)
New Accounting Pronouncements. The Financial Accounting Standards Board has
issued Financial Accounting Standards Board Statement No. 128 "Earnings Per
Share" ("FAS 128"), Statement No. 129 "Disclosure of Information about Capital
Structure" ("FAS 129"), Statement No. 130 "Reporting Comprehensive Income" ("FAS
130") and Statement No. 131 "Disclosures About Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 128 and FAS 129 were adopted for the
Company's 1997 financial statements. The adoption of each of these had no impact
on the Company's financial statements. FAS 130 and FAS 131 must be adopted for
the Company's 1998 financial statements. The Company anticipates that FAS 130
and FAS 131 will have no impact on the Company's financial statements.
3. Real Estate Properties
The Company's hotel properties are leased pursuant to long term operating
leases with initial terms expiring between 2008 and 2014. The leases provide for
various renewal terms generally totaling 20-50 years unless the Lessee properly
notifies the Company in accordance with the leases. Each lease is a triple net
lease and generally requires the Lessee to pay: base rent, percentage rent of
between 5% and 10% of increases in total hotel sales over a base year, 5% FF&E
reserve escrows, and all operating costs associated with the leased property.
Each Lessee has posted a security deposit equal to one year's base rent. Each of
the Company's properties is part of a pool of properties leased to a single
tenant. At December 31, 1997, the Company maintained seven pools of properties,
ranging in number of properties from nine to 53. Each property within a pool is
subject to certain lease provisions including all-or-none renewals, cross
defaults and the ability to use FF&E reserves generated by all hotels within a
pool for the maintenance and refurbishment of any hotel within such pool. The
FF&E reserve may be used by the Manager and Lessee to maintain the properties in
good working order and repair. If the FF&E reserve is not available to fund such
expenditures, the Company may make such expenditures, in which case annual base
rent will be increased by a minimum of 10% of the amount so funded.
During 1995, the Company purchased and leased 37 hotels for a total
purchase price of approximately $329,000. In 1996, the Company purchased and
leased an additional 45 hotels for an aggregate purchase price of approximately
$484,000. During 1997, the company agreed to purchase and lease up to an
additional 53 hotels for an aggregate purchase price of approximately $562,000.
As of December 31, 1997, the Company had completed the acquisition and leasing
of 119 hotels properties and had outstanding commitments, subject to the
satisfaction of certain conditions by the sellers of such properties, to
purchase an additional 16 hotel properties for an aggregate purchase price of
$155,158.
Future minimum lease payments to be received by the Company during the
remaining initial terms of its leases total $1,742,784 ($120,062 annually). As
of December 31, 1997, the weighted average remaining initial term of the
Company's leases was 14 years, and the weighted average remaining total term
(including all renewal options) was 53.4 years.
4. Indebtedness
As of December 31, 1997 and 1996, the Company had no borrowings outstanding
under its $200,000 revolving acquisition credit facility ("Credit Facility")
which provides for interest on borrowings at one-month LIBOR plus a premium.
Borrowings, if any, may be repaid and reborrowed as necessary until December 31,
1998, at which time outstanding balances may, at the Company's option (subject
to lender consent), be either repaid or converted into a 10-year loan. The
Credit Facility is secured by certain assets of HPT and one of its subsidiaries.
The weighted average interest rate on Credit Facility borrowings outstanding
during 1997 and 1996 was 7.27% and 7.05%, respectively. There were no borrowings
outstanding at any time under the Credit Facility during the 1995 period.
During 1997, the Company temporarily expanded its credit facility with the
same lender to provide up to an additional $255,000 (the "Expanded Facility")
through December 31, 1997. No amounts were outstanding under the Expanded
Facility as of December 31, 1997.
During 1996, certain subsidiaries of the Company issued $125,000 of notes
(Notes) which require payment of interest only through their maturity in
December 2001, at which time the principal balance is due. The Notes are
prepayable at any time without penalty. Interest on the Notes is equal to one
month LIBOR plus a premium.
F-8
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except per Share and percent data)
The Notes are non-recourse to HPT and its subsidiaries and are secured by first
mortgages on hotels owned by certain subsidiaries of the Company having a net
carrying value of $319,538 at December 31, 1997. Approximately $30,820 of annual
minimum lease payments are attributed to such hotels. Generally, among other
restrictions, the terms of the Notes limit the ability of certain subsidiaries
of the Company to incur significant secured or unsecured liabilities and
restrict the use of proceeds from any sale or other disposition of the
encumbered assets. The Notes carried a weighted average interest rate in 1997 of
6.44% and from their date of issuance to December 31, 1996 of 6.32%. At December
31, 1997 and 1996, the Notes carried an interest rate of 6.69% and 6.07%,
respectively. The carrying amount of the Notes is equal to their fair value.
5. Transactions with Affiliates
The Company has an agreement with HRPT Advisors, Inc. (the "Advisor")
whereby the Advisor provides investment, management and administrative services
to the Company. The Advisor is compensated at an annual rate equal to 0.7% of
HPT's average real estate investments up to the first $250,000 of such
investments and 0.5% thereafter plus an incentive fee based upon improvements in
cash available for distribution per Share (as defined). Cash advisory fees
earned for the years ended 1997, 1996 and for period from February 7, 1995
(inception) to December 31, 1995 were $5,299, $3,915 and $1,292 respectively. As
of December 31, 1997 the Advisor owned 264,595 shares of HPT. Incentive advisory
fees are paid to Advisors in restricted Common Shares based on a formula. The
Company accrued $551 and $463 in incentive fees during 1997 and 1996
respectively. In February of 1997 the Company issued 14,595 restricted Common
Shares to the Advisor satisfying the 1996 fee. The 1997 fee will be paid in
restricted Common Shares in 1998.
From time to time the Company may seek short term borrowings from the
Advisor. During 1997, the Company made one such borrowing of $7,000 which was
outstanding for 60 days. Interest paid to the Advisor totaled $62. The Advisor
is under no obligation to make funds available to the Company.
As of January 1, 1998, the functions of the Advisor were assumed by REIT
Management & Research, Inc. ("RMR"), a newly formed affiliate of the Advisor
under a new advisory agreement on substantially the same terms as the previous
agreement. The Advisor and RMR are each owned by Gerard M. Martin and Barry M.
Portnoy, who also serve as Managing Trustees of the Company.
6. Concentration
The Company's assets are income producing lodging related real estate
located throughout the United States. The Company's lessees are:
<TABLE>
<CAPTION>
Annual
Number of Initial % of Minimum % of
Subsidiaries of Properties Investment Total Rent Total
<S> <C> <C> <C> <C> <C>
Host Marriott Corp. .................. 53 $ 505,000 37% $ 50,500 37%
Host Marriott Corp. .................. 18 172,000 13% 17,200 13%
Patriot American Hospitality ......... 12 180,000 13% 18,000 13%
Marriott International, Inc. ......... 14 149,000 11% 14,900 11%
Marriott International, Inc. ......... 9 129,000 9% 12,900 9%
ShoLodge, Inc. ....................... 14 140,000 10% 14,000 10%
Candlewood Hotel Company ............. 15 100,000 7% 10,000 7%
-- ---------- -- -------- --
135 $1,375,000 100% $137,500 100%
</TABLE>
At December 31, 1997 the Company was committed to purchase 16 of the
properties shown in the table above with allocated initial investment and annual
minimum rent of $155,158 and $15,516, respectively.
At December 31, 1997 the Company's 119 hotels contain 16,527 rooms and are
located in 30 states, with 5% to 11% of its hotels in each of Virginia,
Pennsylvania, Massachusetts, Arizona, Georgia, Texas, and California. Including
the commitments to purchase 16 properties, the Company's 135 hotels contain
18,497 rooms and are located in 35 states.
F-9
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except per Share and percent data)
7. Pro Forma Information (Unaudited)
In December 1997 the Company agreed to acquire and net lease 53 hotels for
a total of $562,000 (including 16 hotels which as of December 31, 1997 had not
been acquired). In December 1997 the Company completed an offering of 12,000
Shares. Assuming the acquisition and leasing of these hotels and the completion
of the December Shares offering had occurred on January 1, 1997, unaudited pro
forma 1997 revenues, net income and earnings per share would have been $153,116,
$83,715, and $2.17 respectively.
In the opinion of management, all adjustments necessary to reflect the
effects of the transactions discussed above have been reflected in the pro forma
data. The unaudited pro forma data is not necessarily indicative of what the
actual consolidated results of operations for the Company would have been for
the years indicated, nor does it purport to represent the results of operations
for the Company for future periods.
8. Selected Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly results of operations
of the Company for 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997
----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Revenues ......................... $25,477 $28,276 $29,017 $31,362
Net Income ....................... 14,910 14,926 15,017 14,300
Net Income per Share ............. .56 .56 .56 .48
Dividends paid per Share (3) ..... .59 .61 .62 .63
<CAPTION>
1996
---------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Revenues ......................... $10,334 $23,011 $24,878 $24,406
Net Income ....................... 6,622 14,623 15,446 14,973
Net Income per Share ............. .53 .56 .58 .56
Dividends paid per Share (3)...... .58 .58 .59 .59
<CAPTION>
1995
--------------------------
Third Fourth
Quarter(1) Quarter
<S> <C> <C>
Revenues ......................... $7,853 $9,998
Net income ....................... 3,623 6,989
Net income per Share ............. .24(2) .55
Dividends paid per Share (3)...... .24 .55
- ------------
<FN>
(1) HPT's IPO occurred August 22, 1995 and accordingly the third quarter 1995
figures for revenues and net income partially relate to periods prior to
the IPO.
(2) Represents the per Share amount of net income from the IPO date to
September 30, 1995.
(3) Amounts represent dividends declared with respect to the periods shown.
</FN>
</TABLE>
F-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
Hospitality Properties Trust:
We have audited in accordance with generally accepted auditing standards
the consolidated financial statements of Hospitality Properties Trust and have
issued our report thereon dated January 16, 1998. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
on pages F-12 and F-13 is the responsibility of Hospitality Properties Trust's
management and is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 16, 1998
F-11
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in millions)
Gross Amount at
Initial Costs December 31, 1997
---------------------- ---------------------------------
Subsequent
Buildings & Costs Buildings & Accumulated Date of
Description Encumbrances Land Improvements Capitalized Land Improvements Total Depreciation Acquisition
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
59 Courtyard
by Marriott(R)
hotels $ -- $ 98 $443 $4 $98 $447 $545 $(24) 1995/1996/1997
29 Residence
Inn by
Marriott(R)
hotels 70 49 221 1 49 222 271 (6) 1996/1997
14 Sumner
Suites(R)
hotels -- 13 114 -- 13 114 127 -- 1997
12 Wyndham
Garden(R) hotels 55 16 153 -- 16 153 169 (6) 1996/1997
5 Candlewood(R)
hotels -- 3 30 -- 3 30 33 -- 1997
-------------------------------------------------------------------------------------------------
Total $ 125 $179 $961 $5 $179 $966 $1,145 $(36)
=================================================================================================
<CAPTION>
Date
Of Depreciation
Description Construction Life
<S> <C> <C>
59 Courtyard 1987
by Marriott(R) through
hotels 1997 15-40 years
29 Residence
Inn by 1989
Marriott(R) through
hotels 1997 15-40 years
14 Sumner
Suites(R) 1992/1993
hotels 1996/1997 15-40 years
1987
12 Wyndham through
Garden(R) hotels 1990 15-40 years
5 Candlewood(R)
hotels 1996/1997 15-40 years
</TABLE>
The accompanying notes are an integral part of this schedule.
F-12
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO SCHEDULE III
DECEMBER 31, 1997
(In thousands)
(A) The change in accumulated depreciation for the period from February 7,
1995 (inception) to December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period.................. $ 16,701 $ 3,679 $ --
Additions: Depreciation expense................ 19,241 13,022 3,679
--------- --------- --------
Balance at close of period...................... $ 35,942 $ 16,701 $ 3,679
========= ========= ========
</TABLE>
(B) The change in total cost of properties for the period from January 1,
1996 to December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Balance at beginning of period .......................... $ 773,497 $ 305,447
Additions: Hotel acquisitions and capital expenditures.. 371,476 468,050
---------- ----------
Balance at close of period .............................. $1,144,973 $ 773,497
========== ==========
</TABLE>
(C) The net tax basis of the Company's real estate properties was
$1,108,000 million as of December 31, 1997.
F-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOSPITALITY PROPERTIES TRUST
By: /s/ Thomas M. O'Brien
----------------------------------
Thomas M. O'Brien, Treasurer
and Chief Financial Officer
Date: February 11, 1998
