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): March 23, 1999
HOSPITALITY PROPERTIES TRUST
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Maryland 1-11527 04-3262075
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
</TABLE>
400 Centre Street, Newton, Massachusetts 02458
(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 statements 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 information contained in the Company's Form 8-K dated February
11, 1999, including the information under the heading "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.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro Forma Financial Information.
Index to Unaudited Consolidated Pro Forma Financial Statements and Other Data
(see index on page F-1).
(c) Exhibits.
10.1 Purchase and Sale Agreement, dated as of December 29, 1998, by
and among Residence Inn by Marriott, Inc., Courtyard Management
Corporation, Nashville Airport Hotel, LLC, St. Louis Airport
Hotel, LLC and Towneplace Management Corporation, as sellers,
and the Company, as purchaser.
10.2 Limited Rent Guaranty, dated as of December 29, 1998, by and
among Marriott International, Inc., the Company and HPTMI III
Properties Trust.
10.3 Agreement to Lease, dated as of December 29, 1998, by and
between the Company and CRTM17 Tenant Corporation (including
form of lease).
12.1 Computation of Pro Forma Ratio of Earnings to Fixed Charges
12.2 Computation of Pro Forma Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
-2-
<PAGE>
HOSPITALITY PROPERTIES TRUST
Index to Unaudited Pro Forma Consolidated Financial Statements and Other Data
1. Introduction to Unaudited Pro Forma Consolidated Financial Statements
and Other Data.......................................................... F-2
2. Unaudited Pro Forma Consolidated Balance Sheet and Other Data as of
December 31, 1998....................................................... F-3
3. Unaudited Pro Forma Consolidated Statement of Income and Other Data for
the Year Ended December 31, 1998........................................ F-4
4. Notes to Unaudited Pro Forma Consolidated Financial Statements and
Other Data.............................................................. F-5
F-1
<PAGE>
HOSPITALITY PROPERTIES TRUST
Introduction to Unaudited Pro Forma Consolidated Financial Statements
and Other Data
The following unaudited pro forma consolidated balance sheet at December 31,
1998 is intended to present the consolidated financial position of the Company
as if the transactions described in the notes hereto (the "Transactions") were
consummated at December 31, 1998. The following unaudited pro forma consolidated
statement of income is intended to present the consolidated results of
operations of the Company as if the Transactions were consummated on January 1,
1998. These unaudited pro forma consolidated financial statements should be read
in conjunction with, and are qualified in their entirety by reference to, the
separate consolidated financial statements of the Company for the year ended
December 31, 1998, incorporated herein by reference to the Company's Current
Report on Form 8-K dated February 11, 1999. These unaudited adjusted pro forma
consolidated financial statements are not necessarily indicative of what the
actual consolidated financial position or results of operations of the Company
would have been as of the date or for the period indicated, nor do they purport
to represent the expected consolidated financial position or results of
operations of the Company for any future period. Differences may result from,
among other considerations, future changes in the Company's portfolio of
investments, changes in interest rates, changes in the capital structure of the
Company, delays in the acquisition of certain properties or any determination
not to complete the acquisition of any hotel properties and changes in operating
expenses.
The following unaudited pro forma consolidated balance sheet and unaudited pro
forma consolidated statements of income were prepared pursuant to the Securities
and Exchange Commission's rules for the presentation of pro forma data. The pro
forma and adjusted pro forma other data give effect to the consummation by the
Company of the Transactions. Certain properties expected to be acquired by the
Company are currently under construction or development by the sellers. Other
properties were under construction during the period presented when they were
owned or under development by the sellers. The accompanying pro forma
information does not give further effect to the completion of construction or
the related lease commencement for any period prior thereto. Construction
projects not completed by December 31, 1998 are likewise not reflected in the
pro forma balance sheet. Rather, the effect of completion of construction of
these properties is presented separately from the pro forma information as
described in the accompanying notes. The Company believes that a display of such
adjusted pro forma data is meaningful and relevant to the understanding of the
Transactions and, accordingly has presented such data in the final two columns,
labeled "Other Data," on the accompanying pages.
F-2
<PAGE>
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Consolidated Balance Sheet and Other Data
As of December 31, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
Pro Forma Other Data
--------- ----------
Pro Forma Other Adjusted Pro
Historical (A) Adjustments Pro Forma Adjustments Forma
-------------- ----------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
Assets
Real estate properties $1,887,735 $200,395 (B) $2,088,130 $97,341(G) $2,185,471
Accumulated depreciation (112,924) -- (112,924) -- (112,924)
---------- -------- ---------- ------- ----------
1,774,811 200,395 1,975,206 97,341 2,072,547
Cash and cash equivalents 24,610 (23,942)(C) 668 (200)(H) 468
Restricted cash (FF&E Reserve) 22,797 -- 22,797 -- 22,797
Other assets, net 15,420 -- 15,420 -- 15,420
---------- -------- ---------- ------- ----------
$1,837,638 $176,453 $2,014,091 $97,141 $2,111,232
========== ======== ========== ======= ==========
Liabilities and Shareholders' Equity
Senior notes, net of discount $414,753 $ -- $414,753 $ -- $ 414,753
Revolving debt -- 57,000(D) 57,000 87,000 (I) 144,000
Security and other deposits 206,018 22,803(E) 228,821 10,141 (J) 238,962
Other liabilities 43,010 -- 43,010 -- 43,010
Shareholders' equity:
__% Series A Cumulative Redeemable Preferred Shares -- 96,650(F) 96,650 -- 96,650
Common shares of beneficial interest 456 -- 456 -- 456
Additional paid-in capital 1,230,849 -- 1,230,849 -- 1,230,849
Cumulative net income 203,507 -- 203,507 -- 203,507
Dividends (260,955) -- (260,955) -- (260,955)
---------- -------- ---------- ------- ----------
Total shareholders' equity 1,173,857 96,650 1,270,507 -- 1,270,507
---------- -------- ---------- ------- ----------
$1,837,638 $176,453 $2,014,091 $97,141 $2,111,232
========== ======== ========== ======= ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
and other data.
F-3
<PAGE>
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Consolidated Statement of Income and Other Data
For the Year Ended December 31, 1998
(amounts in thousands, except per share and ratio amounts)
<TABLE>
<CAPTION>
Pro Forma Other Data
--------- ----------
Pro Forma Other Adjusted Pro
Historical (K) Adjustments Pro Forma Adjustments Forma
-------------- ----------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income $157,223 $32,603 (L) $189,826 $26,718(S) $216,544
FF&E reserve income 16,108 1,104 (M) 17,212 -- 17,212
Interest income 1,630 -- 1,630 -- 1,630
-------- ------- -------- ------- --------
Total revenues 174,961 33,707 208,668 26,718 235,386
-------- ------- -------- ------- --------
Expenses:
Depreciation and amortization of
real estate assets 54,757 9,965 (N) 64,722 8,614(T) 73,336
Interest 21,751 16,900 (O) 38,651 5,873(U) 44,524
General and administrative 10,471 1,508 (P) 11,979 1,304(V) 13,283
------- ------- -------- ------- --------
Total expenses 86,979 28,373 115,352 15,791 131,143
------- ------- -------- ------- --------
Income before extraordinary item and preferred dividends 87,982 5,334 93,316 10,927 104,243
------- ------- -------- ------- --------
__% Series A preferred share dividends -- 9,500 (Q) 9,500 -- 9,500
------- ------- -------- ------- --------
Income before extraordinary item available
for common shareholders $87,982 $(4,166) $ 83,816 $10,927 $94,743
======= ======= ======== ======= =======
Weighted average common shares outstanding 42,317 3,279 (R) 45,596 -- 45,596
======= ======= ======== ======= =======
Income before extraordinary item available for common
shareholders per share $2.08 $1.84 $2.08
===== ===== =====
Ratio of Earnings to Fixed Charges 5.0x 3.4x 3.3x
Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends 5.0x 2.7x 2.8x
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
and other data.
F-4
<PAGE>
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data
(dollars in thousands)
Pro Forma Consolidated Balance Sheet Adjustments
A. Represents the audited historical consolidated balance sheet of the
Company at December 31, 1998.
B. Represents the purchase of 25 hotels open but not acquired as of December
31, 1998.
<TABLE>
<S> <C>
Cash purchase prices:
Three Candlewood(R)hotels $ 22,668
Four TownePlace Suites by Marriott(R)hotels 24,887
Eighteen Homestead Suites(R)hotels 129,040
Purchase price withheld as security deposit 22,803
Closing costs 997
--------
Total $200,395
========
</TABLE>
C. Represents the net effect of the pro forma adjustments on cash.
D. Represents pro forma net borrowings under the credit facility after
completion of the proposed issuance of $100 million Series A Perpetual
Preferred Shares (the "Proposed Offering") and the purchase of the hotels
discussed in B, above.
E. Represents security deposits held or to be held by the Company as a result
of purchasing and leasing the following hotels:
<TABLE>
<S> <C>
Three Candlewood(R)hotels $ 3,932
Four TownePlace Suites by Marriott(R)hotels 2,911
Eighteen Homestead Suites(R)hotels 15,960
-------
Total $22,803
=======
</TABLE>
F. Represents net proceeds from the Proposed Offering.
Other Data
Consolidated Balance Sheet Adjustments
G. Represents the purchase of 9 hotels acquired or to be acquired, but not open
as of December 31, 1998:
<TABLE>
<S> <C>
Cash purchase prices:
Three Courtyard by Marriott(R)hotels $29,716
Three Residence Inn by Marriott(R)hotels 31,904
Three TownePlace Suites by Marriott(R)hotels 25,096
Purchase price withheld as security deposits 10,141
Closing costs 484
-------
Total $97,341
=======
</TABLE>
H. Represents the net effect of the other adjustments on cash.
I. Represents other pro forma net borrowings by the Company under the credit
facility to complete the planned acquisition of hotels still under
development as of December 31, 1998.
J. Represents security deposits held by the Company as a result of purchasing
and leasing the following hotels:
<TABLE>
<S> <C>
Three Courtyard by Marriott(R)hotels $ 3,475
Three Residence Inn by Marriott(R)hotels 3,731
Three TownePlace Suites by Marriott(R)hotels 2,935
--------
Total $10,141
=======
</TABLE>
F-5
<PAGE>
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data -
continued
(dollars in thousands)
Pro Forma Consolidated Income Statement Adjustments
K. Represents the audited historical income statement of the Company for the
year ended December 31, 1998.
L. Represents the pro forma effect of leases entered and to be entered for
hotels open during the periods presented. This pro forma effect is derived
as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
-----------
<S> <C>
Pro forma Minimum Rent $ 186,390
Pro forma Percentage Rent 3,436
Amounts included in historical Minimum Rent (153,787)
Amounts included in historical Percentage Rent (3,436)
---------
$ 32,603
=========
</TABLE>
Certain of the hotels owned by the Company as of December 31, 1998 were
under development and others are currently under development by the sellers
of these properties. The Company is not contractually obligated to acquire
these hotels until they are substantially completed. The foregoing pro forma
income statement assumes the hotels, which were completed prior to December
31, 1998 were acquired as of their completion date.
M. FF&E Reserve escrow accounts for all of HPT's Marriott(R) brand hotels are
owned by HPT and periodic payments into these escrow accounts are recorded
as additional rent under generally accepted accounting principles ("GAAP").
A pro forma adjustment to record additional rent relating to FF&E escrow
contributions of $1,104 has been made for four hotels acquired in December
1998 which were open and operating throughout 1998. No pro forma adjustment
for the FF&E Reserve income related to newly constructed hotels purchased
and to be purchased by HPT from Marriott has been made, as this amount
cannot be calculated. The FF&E Reserve for HPT's Wyndham(R), Sumner
Suites(R), Candlewood(R), Summerfield Suites(R) and Homestead Village(R)
hotels remains the property of the respective tenants during the lease term.
HPT has a security interest in these escrow accounts and at the end of the
lease term, any remaining funds in these FF&E Reserves must be paid to HPT.
Under GAAP, the FF&E Reserve for the leases relating to these hotels is not
recorded as income by HPT.
N. Represents the impact of the pro forma transactions on depreciation expense
for the entire period presented.
O. Represents the following adjustments to interest expense:
o Eliminating interest on the $125 million CMBS Notes repaid upon the
issuance of the 7% Senior Notes in February 1998 including amortization
of deferred financing costs.
o Adding interest on $57 million of proceeds from HPT's $300 million
credit facility used to fund the acquisition Transactions discussed in
B above.
o Adding interest, including amortization of deferred financing costs, for
the year ended December 31, 1998, on the senior notes issued during
1998.
o Adding amortization of deferred financing costs related to the Credit
Facility.
P. Represents the estimated impact of the Transactions on general and
administrative expenses of the Company for the periods presented.
Q. Represents dividends accrued on the Proposed Offering at an assumed rate of
9.5%.
R. Represents the weighted average impact of common shares of beneficial
interest issued by the Company during 1998.
F-6
<PAGE>
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data -
continued
(dollars in thousands)
Other Data
Consolidated Income Statement Adjustments
S. Represents the effect of leases entered and to be entered for the
transactions described in Note G above, since the beginning of the periods
presented. The effect of these leases is derived as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Adjusted Pro forma Minimum Rent $213,108
Adjusted Pro forma Percentage Rent 3,436
Amounts included in pro forma Minimum Rent (186,390)
Amounts included in pro forma Percentage Rent (3,436)
--------
$ 26,718
========
</TABLE>
T. Represents the impact of the transactions described in Note G above, on
depreciation expense for the entire period presented.
U. Represents interest on the credit facility borrowings to be made in
connection with the transactions described in Note G above, at LIBOR plus
contractual spreads for the entire periods presented. The average applicable
LIBOR rate was 5.6% for the year ended December 31, 1998.
V. Represents the estimated impact of the transactions described in Note G
above, on general and administrative expenses of the Company.
F-7
<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: March 23, 1999
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
by and among
RESIDENCE INN BY MARRIOTT, INC.,
COURTYARD MANAGEMENT CORPORATION,
NASHVILLE AIRPORT HOTEL, LLC, ST. LOUIS AIRPORT
HOTEL, LLC AND TOWNEPLACE MANAGEMENT CORPORATION,
as Sellers,
and
HOSPITALITY PROPERTIES TRUST,
as Purchaser
---------------------------
December 29, 1998
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS......................................................1
1.1 Actual Knowledge of the Designated Individuals.................1
1.2 Agreement......................................................2
1.3 Agreement to Lease.............................................2
1.4 Allocable Purchase Price.......................................2
1.5 Assets.........................................................2
1.6 Business Day...................................................2
1.7 Closing........................................................2
1.8 Closing Date...................................................2
1.9 Contracts......................................................2
1.10 Defective Property.............................................2
1.11 Environmental Reports..........................................3
1.12 Excluded Assets................................................3
1.13 FAS ...........................................................3
1.14 FF&E...........................................................3
1.15 Franchise Agreement............................................3
1.16 Hotel..........................................................3
1.17 HPT ...........................................................3
1.18 Improvements...................................................3
1.19 Intangible Property............................................4
1.20 Interests......................................................4
1.21 Inventories....................................................4
1.22 Leases.........................................................4
1.23 Limited Rent Guaranty......................................4
1.24 LLC Parties................................................4
1.25 Nashville LLC..................................................4
1.26 Nashville Property.............................................4
1.27 Norcross Property..............................................4
1.28 Opening Date...................................................4
1.29 Owner Agreement................................................5
1.30 Permitted Encumbrances.........................................5
1.31 Plans and Specifications.......................................5
1.32 Property.......................................................5
1.33 Properties.....................................................5
1.34 Proprietary Information........................................5
1.35 Purchaser......................................................5
1.36 Real Property..................................................5
1.37 Reserve........................................................6
1.38 Retained Funds.................................................6
1.39 Sellers........................................................6
1.40 St. Louis Property.............................................6
1.41 Stock Pledge...................................................6
1.42 Substantial Completion.........................................6
1.43 Surveys........................................................6
1.44 Tenant.........................................................6
1.45 Title Commitments..............................................6
<PAGE>
-ii-
1.46 Title Company..................................................6
1.47 Yorktown Property..............................................7
SECTION 2. PURCHASE AND SALE; DILIGENCE......................................7
2.1 Purchase and Sale..............................................7
2.2 Diligence Inspections..........................................7
2.3 Defective Properties...........................................8
2.4 Title Matters..................................................9
2.5 Survey Matters................................................10
2.6 Environmental Reports.........................................11
SECTION 3. PURCHASE AND SALE................................................11
3.1 Closing.......................................................11
3.2 Purchase Price................................................12
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE....................12
4.1 Closing Documents.............................................12
4.2 Condition of Properties, Etc..................................14
4.3 Title Policies and Surveys....................................14
4.4 Opinions of Counsel...........................................15
SECTION 5. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE.......................15
5.1 Purchase Price................................................15
5.2 Closing Documents.............................................15
5.3 Opinion of Counsel............................................16
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLERS........................16
6.1 Status and Authority of the Sellers...........................16
6.2 Action of the Sellers.........................................17
6.3 No Violations of Agreements...................................17
6.4 Litigation....................................................17
6.5 Existing Agreements, Etc......................................17
6.6 Disclosure....................................................18
6.7 Utilities, Etc................................................18
6.8 Compliance With Law...........................................18
6.9 Not A Foreign Person..........................................19
6.10 Hazardous Substances..........................................19
6.11 Insurance.....................................................20
6.12 Substantial Completion........................................20
6.13 Condition of Properties.......................................20
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................22
7.1 Status and Authority of the Purchaser.........................22
7.2 Action of the Purchaser.......................................22
7.3 No Violations of Agreements...................................22
7.4 Litigation....................................................23
SECTION 8. COVENANTS OF THE SELLERS.........................................23
8.1 Compliance with Laws, Etc.....................................23
8.2 Approval of Agreements........................................23
8.3 Compliance with Agreements....................................24
<PAGE>
-iii-
8.4 Substantial Completion........................................24
8.5 Notice of Material Changes or Untrue
Representations...........................................24
8.6 Correction of Defects.........................................24
SECTION 9. APPORTIONMENTS...................................................24
9.1 Real Property Apportionments..................................24
9.2 Closing Costs.................................................25
SECTION 10. DEFAULT.........................................................25
10.1 Default by the Sellers.......................................25
10.2 Default by the Purchaser.....................................26
SECTION 11. SPECIAL PROVISIONS RE NASHVILLE PROPERTY........................26
11.1 Purchaser's Right to Acquire Interests. ....................27
11.2 Additional Closing Documents. ..............................27
11.4 Right to Receive Rent and Payments...........................29
SECTION 12. MISCELLANEOUS...................................................29
12.1 Agreement to Indemnify.......................................29
12.2 Brokerage Commissions........................................30
12.3 Publicity....................................................31
12.4 Notices......................................................31
12.5 Waivers, Etc.................................................33
12.6 Assignment; Successors and Assigns...........................33
12.7 Severability.................................................34
12.8 Counterparts, Etc............................................34
12.9 Governing Law................................................34
12.10 Performance on Business Days.................................35
12.11 Attorneys' Fees..............................................35
12.12 Section and Other Headings...................................35
12.13 Nonliability of Trustees, Etc. .............................35
Schedule A - Property Identification
Schedule B-1-17 - Legal Descriptions of Properties
Schedule C - Form of Surveyor's Certificate
Schedule D - Form of Sellers' Closing Certificate
Schedule E - Form of Architect's Certificate
Schedule F - Form of Substitute Architect's
Certificate
Schedule G - Form of Second Substitute Architect's
Certificate
Schedule H - Form of Engineer's Certificate
Schedule I - Form of Substitute Engineer's Certificate
Schedule J - Form of Second Substitute Engineer's
Certificate
Schedule K - Plans and Specifications
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of the 29th day of
December, 1998, by and among RESIDENCE INN BY MARRIOTT, INC., COURTYARD
MANAGEMENT CORPORATION AND TOWNEPLACE MANAGEMENT CORPORATION, each a Delaware
corporation, and NASHVILLE AIRPORT HOTEL, LLC ("Nashville LLC") AND ST. LOUIS
AIRPORT HOTEL, LLC, each a Delaware limited liability company, as sellers, and
HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust ("HPT"),
as purchaser.
W I T N E S E T H :
WHEREAS, the Sellers are the owners of the Properties (this and other
capitalized terms used and not otherwise defined herein having the meanings
ascribed to such terms in Section 1); and
WHEREAS, the Purchaser desires to purchase the Properties from the
Sellers and the Sellers are willing to sell the Properties to the Purchaser,
subject to and upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, the Sellers and the
Purchaser hereby agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1 "Actual Knowledge of the Designated Individuals" shall mean, with
respect to any Property, the actual knowledge of the general manager, controller
and chief engineer of the Hotel located at such Property and of the chief
regional engineer of Marriott International, Inc. responsible for the region in
which the applicable Property is located.
1.2 "Agreement" shall mean this Purchase and Sale Agreement, together
with Schedules A through K attached hereto, as it and they may be amended from
time to time as herein provided.
<PAGE>
-2-
1.3 "Agreement to Lease" shall mean that certain Agreement to Lease,
dated as of the date hereof, by and between the Tenant and the Purchaser.
1.4 "Allocable Purchase Price" shall mean, with respect to each
Property, the amount set forth in Schedule A opposite the name of such Property,
it being understood and agreed that the aggregate amount of the Allocable
Purchase Prices of the Properties shall be Two Hundred One Million Seven Hundred
Twenty Thousand Dollars ($201,720,000).
1.5 "Assets" shall mean, with respect to any Property, collectively,
all of the Real Property, the FF&E, the Contracts, the Improvements and the
Intangible Property now owned or hereafter (but prior to the Closing Date with
respect to such Property) acquired by the Sellers in connection with or relating
to such Property other than any Excluded Assets with respect to such Property.
1.6 "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of Maryland are authorized by law or executive action to close.
1.7 "Closing" shall have the meaning given such term in Section 3.1.
1.8 "Closing Date" shall have the meaning given such term in Section
3.1.
1.9 "Contracts" shall mean, with respect to any Property, all equipment
leases relating to telephone switches and voice mail to which the Sellers are a
party, to the extent the Sellers' interest therein is assignable or
transferable; provided, however, that "Contracts" shall not include any such
agreements to the extent they relate to properties other than the Properties.
1.10 "Defective Property" shall have the meaning given such term in
Section 2.3(a).
1.11 "Environmental Reports" shall have the meaning given such term in
Section 2.6.
1.12 "Excluded Assets" shall mean, with respect to any Property, (i)
any right, title or interest in the name or signage containing the name
"Marriott," "Courtyard," "Residence Inn," "TownePlace" and other marks used, or
that may in the future be used, by the Sellers or their affiliates, (ii) all
property owned by the Sellers, not normally located at such Property and used,
<PAGE>
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but not exclusively, in connection with the operation of such Property, (iii)
all items, tangible or intangible, consisting of Proprietary Information, (iv)
computer software, (v) FAS, (vi) any Inventories located at the Properties,
(vii) working capital, including cash and accounts receivable, (viii) all books,
ledger sheets, files and records, (ix) all contracts pertaining to the operation
of the Hotels other than the Contracts, and (x) any software, manuals, brochures
or directives used by the Sellers in the operation of the Hotels that will be
issued by the franchisor to the Tenant, as franchisee, under the Franchise
Agreements.
1.13 "FAS" shall have the meaning given such term in the Leases.
1.14 "FF&E" shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
owned by the Sellers and located in or at, or used in connection with the
ownership, operation or maintenance of such Property, other than motor vehicles.
1.15 "Franchise Agreement" shall have the meaning given such term in
the Agreement to Lease.
1.16 "Hotel" shall have the meaning given such term in the Leases.
1.17 "HPT" shall have the meaning given such term in the preamble to
this Agreement.
1.18 "Improvements" shall mean, with respect to any Property, all
buildings, fixtures, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property with
respect to such Property.
1.19 "Intangible Property" shall mean, with respect to any Property,
all transferable or assignable (a) permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals granted by any public
body or by any private party pursuant to a recorded instrument relating to such
Property and (b) certificates, licenses, warranties and guarantees and the
Contracts held by the Sellers, other than (x) the Excluded Assets and (y) such
permits, operating permits, certificates, licenses and approvals which are
transferred to the Tenant in order to permit the Tenant to operate such Property
properly in accordance with the terms of the Leases.
1.20 "Interests" shall mean all of the membership interests in the
Nashville LLC.
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1.21 "Inventories" shall have the meaning given such term in the
Leases.
1.22 "Leases" shall mean, collectively, the leases to be entered into
pursuant to the Agreement to Lease.
1.23 "Limited Rent Guaranty" shall have the meaning given such term in
the Agreement to Lease.
1.24 "LLC Parties" shall mean, collectively, the LLC and each of its
members.
1.25 "Nashville LLC" shall have the meaning given such term in the
preamble to this Agreement.
1.26 "Nashville Property" shall mean the full service Marriott Hotel
located at 600 Marriott Drive, Nashville, Tennessee.
1.27 "Norcross Property" shall mean the TownePlace Suites Hotel located
at 6640 Bay Circle, Norcross, Georgia.
1.28 "Opening Date" shall mean, with respect to any Property, the date
as of which all Improvements located at such Property, including, without
limitation, all guest rooms and/or suites, shall be open for business to the
public as a Courtyard by Marriott Hotel, Residence Inn by Marriott Hotel,
TownePlace Suites Hotel or Marriott hotel, as the case may be, in accordance
with applicable brand standards.
1.29 "Owner Agreement" shall have the meaning given such term in the
Agreement to Lease.
1.30 "Permitted Encumbrances" shall mean, with respect to any Property,
(a) liens for taxes, assessments and governmental charges with respect to such
Property not yet due and payable or due and payable but not yet delinquent; (b)
applicable zoning regulations and ordinances and other governmental laws,
ordinances and regulations provided the same do not prohibit or impair in any
material respect use of such Property as a Marriott Courtyard, Residence Inn,
TownePlace Suites or Marriott Hotel as contemplated by this Agreement, the
Leases and the Franchise Agreements; (c) such other nonmonetary encumbrances as
do not, in the Purchaser's reasonable opinion, impair marketability and do not
prohibit or impair in any material respect the use of such Property as a fully
functioning Marriott Courtyard, Residence Inn, TownePlace Suites or Marriott
Hotel, as the case may be, as contemplated by this Agreement, the Leases and the
Franchise Agreements; (d) UCC Financing Statements which would be permitted
pursuant to the terms of Section 21.9 of the Leases; and (e) such
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other nonmonetary encumbrances with respect to such Property which are not
objected to by the Purchaser in accordance with Sections 2.4 and 2.5.
1.31 "Plans and Specifications" shall mean, with respect to each
Property, the plans and specifications identified on Schedule K with respect to
such Property.
1.32 "Property" shall mean any one of the Properties.
1.33 "Properties" shall mean, collectively, all of the Assets relating
to the Properties identified on Schedule A, the legal descriptions of which are
set forth in Schedules B-1 through B-17.
1.34 "Proprietary Information" shall have the meaning given such term
in the Leases.
1.35 "Purchaser" shall mean HPT and its permitted successors and
assigns.
1.36 "Real Property" shall mean, with respect to any Property, the real
property described in the applicable Schedule B-1 through B-17 to this
Agreement, together with all easements, rights of way, privileges, licenses and
appurtenances which the Sellers may now own or hereafter acquire with respect
thereto.
1.37 "Reserve" shall have the meaning given such term in the Leases.
1.38 "Retained Funds" shall mean, with respect to each Property, the
amount set forth in Schedule A with respect to such Property.
1.39 "Sellers" shall mean, collectively, the persons identified as
sellers in the first paragraph of this Agreement, and their permitted successors
and assigns, jointly and severally.
1.40 "St. Louis Property" shall mean the full service Marriott Hotel
located at I-70 at Lambert Airport, St. Louis, Missouri.
1.41 "Stock Pledge" shall have the meaning given such term in the
Agreement to Lease.
1.42 "Substantial Completion" shall mean, with respect to any Property,
physical completion of the Improvements on such Property, including, without
limitation, physical completion of a hotel of the brand and consisting of the
number of rooms set
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forth on Schedule A, consistent with the Plans and Specifications therefor
(other than so-called "punch-list" items as do not individually or in the
aggregate impair use of such Property for its intended use), free of all liens
and encumbrances (other than Permitted Encumbrances) such that the Opening Date
shall have occurred and the Improvements may be used for their intended use.
1.43 "Surveys" shall have the meaning given such term in Section 2.5.
1.44 "Tenant" shall mean CRTM17 Tenant Corporation, a Delaware
corporation.
1.45 "Title Commitments" shall have the meaning given such term in
Section 2.4.
1.46 "Title Company" shall mean Commercial Settlements, Inc., as agent
for Commonwealth Title Insurance Company, or such other title insurance company
as shall have been approved by the Purchaser and the Sellers.
1.47 "Yorktown Property" shall mean the TownePlace Suites Hotel located
at 200 A/B Cybernetics Way, Yorktown, Virginia.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1 Purchase and Sale. In consideration of the mutual covenants herein
contained, the Purchaser hereby agrees to purchase from the Sellers and the
Sellers hereby agree to sell to the Purchaser, all of the Sellers' right, title
and interest in and to each of the Properties (or, in the case of the Nashville
Property, the Interests as set forth in Section 11.1) for the respective
Allocable Purchase Prices relating thereto, subject to and in accordance with
the terms and conditions of this Agreement.
2.2 Diligence Inspections. At all times prior to Closing, the Sellers
shall permit the Purchaser and its representatives to inspect the Properties and
the Improvements (including, without limitation, all roofs, electric, mechanical
and structural elements, and HVAC systems therein) and to perform due diligence,
soil analysis and environmental investigations, at such reasonable times as the
Purchaser or its representatives may request by notice to the Sellers (which
notice may be oral). At all such times, the Purchaser and its representatives
shall minimize any resulting interference with the Sellers' ongoing construction
at the Properties or the Sellers' operation of the Properties as a hotel. To the
extent that, in connection with such investigations, the Purchaser, its agents,
representatives
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or contractors, damages or disturbs any of the Assets, the Purchaser shall
return the same to substantially the same condition which existed immediately
prior to such damage or disturbance. The Purchaser shall indemnify, defend and
hold harmless the Sellers from and against any and all expense, loss or damage
(including, without limitation, reasonable attorneys' fees) which the Sellers
may incur as a result of any act or omission of the Purchaser or its
representatives, agents or contractors in connection with such examinations and
inspections, other than any expense, loss or damage arising from any act or
omission of the Sellers. The foregoing indemnification agreement shall survive
the termination of this Agreement and the Closings hereunder. In addition, prior
to the Closing with respect to any Property, the Sellers shall use reasonable
efforts to cooperate with the Purchaser to the extent that the Purchaser
reasonably requests to review copies of specific data and factual materials in
the Sellers' possession relating to such Properties as to which a Closing has
not yet occurred; provided, however, that the Sellers shall specifically not be
required to provide the Purchaser with copies of (x) any records of committee
presentations, reports or similar records, or (y) any records containing
evaluation and/or analytical information prepared by employees of the Sellers or
their affiliates.
2.3 Defective Properties. (a) If, prior to the Closing with respect to
any Property, the Purchaser reasonably determines that a Property has
structural, environmental or legal defects such that (x) expenditures equal to
or greater than three percent (3%) of the Allocable Purchase Price of such
Property are required in order to bring such Property into a satisfactory
condition in the Purchaser's reasonable determination (any such Property being
hereinafter referred to as a "Defective Property"), the Purchaser shall give
written notice thereof to the Sellers, within ten (10) Business Days after
acquiring actual knowledge of the applicable defect (time being of the essence
with respect to the giving of such notice), identifying the Defective Property
or Properties and the specific defects with respect thereto. The Sellers shall
thereupon have the right, but not the obligation, at their sole cost and
expense, to elect, by notice given to the Purchaser within thirty (30) days
after the Purchaser's notice of defect, to cause Substantial Completion of such
Defective Property or Properties, to occur, free of such defects, prior to
December 31, 1999 or, in the case of the Nashville Property or the St. Louis
Property, to cure any such defects with respect thereto, prior to December 31,
1999. Failure of the Sellers to give such notice prior to the expiration of such
30-day period shall be deemed an election by the Sellers to cure such defect. If
the Sellers shall be unwilling or unable to cure such defect, the Purchaser
shall only be required (and the Sellers shall be required to permit the
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Purchaser) to acquire all of the Properties, other than such Defective Property
or Properties.
(b) If, prior to the Closing with respect to any Property (i) such
Property suffers a casualty or condemnation which would cause such Property to
become a Defective Property, (ii) such Property is not, prior to December 31,
1999, restored to a condition of Substantial Completion, and (iii) the Purchaser
provides written notice of same to the Sellers no later than the first
anniversary of the initial Closing Date hereunder, time being of the essence
with respect to the giving of such notice, the Purchaser shall only be required
(and the Sellers shall be required to permit the Purchaser) to acquire all of
the Properties other than such Defective Property or Properties. Promptly upon
learning of the same, the Sellers covenant and agree to provide the Purchaser
with prompt written notice of any casualty or condemnation affecting any
Property.
2.4 Title Matters. Prior to the date hereof, the Sellers and Purchaser
have ordered from the Title Company and directed the Title Company promptly to
deliver to the Purchaser and the Sellers a preliminary title commitment for an
ALTA extended owner's policy and ALTA leasehold policy of title insurance with
respect to each of the Properties, together with complete and legible copies of
all instruments and documents referred to as exceptions to title (collectively,
the "Title Commitments").
Within fifteen (15) Business Days after receipt of a Title Commitment
with respect to any Property, the Purchaser shall give the Sellers notice of any
title exceptions (other than Permitted Encumbrances) which adversely affect such
Property in any material respect and as to which the Purchaser reasonably
objects. If, for any reason, the Sellers are unable or unwilling to take such
actions as may be required to cause such exceptions to be removed from the Title
Commitments, the Sellers shall give the Purchaser notice thereof; it being
understood and agreed that the failure of the Sellers to give such notice within
fifteen (15) Business Days after the Purchaser's notice of objection shall be
deemed an election by the Sellers not to remedy such matters. If the Sellers
shall be unwilling or unable to remove any title defects to which the Purchaser
has reasonably objected, the Purchaser may elect (i) to terminate this Agreement
with respect to the affected Property, in which event, this Agreement shall be
of no further force and effect with respect to such Property or (ii) to
consummate the transactions contemplated hereby, notwithstanding such title
defect, without any abatement or reduction in the Allocable Purchase Price of
the affected Property on account thereof. The Purchaser shall make any such
election by written notice to the Sellers given on or prior to the fifth
Business Day after the Sellers' notice of their inability or unwillingness to
cure such defect. Failure of the
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Purchaser to give such notice shall be deemed an election by the Purchaser to
proceed in accordance with clause (ii) above.
2.5 Survey Matters. Prior to the date hereof, the Sellers and the
Purchaser have arranged for the preparation of an as-built ALTA survey with
respect to each of the Properties (collectively, the "Surveys"), by a licensed
surveyor in the jurisdiction in which each such Property is located, which (i)
contains an accurate legal description of the applicable Property, (ii) shows
the exact location, dimension and description (including applicable recording
information) of all utilities, easements, encroachments and other physical
matters affecting such Property, the number of striped parking spaces located
thereon and all applicable building set-back lines, (iii) states whether the
applicable Property is located within a 100- year flood plain and (iv) includes
a certification in the form set forth in Schedule C for the benefit of the
parties identified therein.
Within fifteen (15) Business Days after receipt of a Survey with
respect to any Property, the Purchaser shall give the Sellers notice of any
matters shown thereon (other than Permitted Encumbrances) which adversely affect
any such Property in any material respect and as to which the Purchaser
reasonably objects. If, for any reason, the Sellers are unable or unwilling to
take such actions as may be required to remedy the objectionable matters, the
Sellers shall give the Purchaser prompt notice thereof; it being understood and
agreed that the failure of the Sellers to give such notice within fifteen (15)
Business Days after the Purchaser's notice of objection shall be deemed an
election by the Sellers not to remedy such matters. If the Sellers shall be
unable or unwilling to remove any survey defect to which the Purchaser has
reasonably objected, the Purchaser may elect (i) to terminate this Agreement
with respect to the affected Property, in which event this Agreement shall
terminate and be of no further force or effect with respect to the affected
Property or (ii) to consummate the transactions contemplated hereby,
notwithstanding such defect, without any abatement or reduction in the Allocable
Purchase Price of the affected Property on account thereof. The Purchaser shall
make any such election by written notice to the Sellers given on or prior to the
fifth Business Day after the Sellers' notice of their inability or unwillingness
to cure such defect and time shall be of the essence with respect to the giving
of such notice. Failure of the Purchaser to give such notice shall be deemed an
election by the Purchaser to proceed in accordance with clause (ii) above.
2.6 Environmental Reports. In a timely manner, the Sellers and
Purchaser shall order, with respect to each Property, Phase I environmental
reports from an environmental engineering firm
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reasonably acceptable to the Purchaser and the Sellers (collectively, the
"Environmental Reports").
Within fifteen (15) Business Days after receipt of an Environmental
Report with respect to any Property, the Purchaser shall give the Sellers notice
of any matters or omissions therein as to which the Purchaser reasonably
objects. If, for any reason, the Sellers are unable or unwilling to take such
actions as may be required to cause such matters to be remedied or addressed to
the reasonable satisfaction of the Purchaser, the Sellers shall give the
Purchaser notice thereof; it being understood and agreed that the failure of the
Sellers to give such notice within fifteen (15) Business Days after the
Purchaser's notice of objection shall be deemed an election by the Sellers not
to remedy such matters. If the Sellers shall be unwilling or unable to remedy or
address any matters or omissions to which the Purchaser has reasonably objected,
the Purchaser may elect (i) to terminate this Agreement with respect to the
affected Property, in which event, this Agreement shall be of no further force
and effect with respect to such Property or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement or
reduction in the Allocable Purchase Price of the affected Property on account
thereof. The Purchaser shall make any such election by written notice to the
Sellers given on or prior to the fifth Business Day after the Sellers' notice of
their inability or unwillingness to cure such defect. Failure of the Purchaser
to give such notice shall be deemed an election by the Purchaser to proceed in
accordance with clause (ii) above.
SECTION 3. PURCHASE AND SALE.
3.1 Closing. (a) The purchase and sale of the Properties or, in the
case of the Nashville Property in accordance with Section 11, the Interests,
shall be consummated at one or more closings (each, a "Closing") to be held at
the offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts, or at such other location as the Sellers and the Purchaser may
agree, at 10:00 a.m. local time, the Closing with respect to any Property to
occur on a date (each, a "Closing Date") designated in writing by the Sellers,
which date shall not be less than ten (10) Business Days nor more than thirty
(30) Business Days after notice from the Sellers to the Purchaser that
Substantial Completion and the Opening Date have occurred with respect to such
Property (and which notice shall identify the proposed Closing Date) or, if
later, the date as of which all conditions precedent to the Closing herein set
forth with respect to the applicable Property have either been satisfied or
waived by the party in whose favor such conditions run. In the event that
Closings with respect to all of the Properties shall not
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have occurred on or before December 31, 1999, provided that no action for
specific performance shall have been commenced by the Purchaser to enforce this
Agreement, any party shall, provided such party shall not be in default
hereunder, have the right, by the giving of written notice, to terminate this
Agreement with respect to all of the Properties as to which a Closing has not
yet occurred as of the date of termination.
3.2 Purchase Price. The Allocable Purchase Prices shall be payable as
follows:
(a) At each Closing, the Allocable Purchase Price of each Property
being closed on less the amount of the Retained Funds with respect thereto shall
be payable by wire transfer of immediately available funds on the applicable
Closing Date to an account or accounts to be designated by the Sellers prior to
such Closing; and
(b) Except as otherwise provided in the Leases, the Retained Funds with
respect to each such Property shall be payable by wire transfer of immediately
available funds upon the expiration or sooner termination of the Lease with
respect to such Property, in accordance with the terms of the applicable Lease,
to an account or accounts to be designated by the Sellers prior to such date.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of the Purchaser to acquire each of the Properties on
the applicable Closing Date shall be subject to the satisfaction or waiver of
the following conditions precedent on and as of such Closing Date:
4.1 Closing Documents. Except as otherwise set forth in Section 11 with
respect to the Nashville Property if the Purchaser shall elect to acquire the
Interests, the Sellers shall have delivered to the Purchaser with respect to the
applicable Property:
(a) A good and sufficient warranty deed with covenants against
grantor's acts, or its local equivalent, in proper statutory form for recording,
duly executed and acknowledged by the Sellers, conveying good and marketable
title to the applicable Properties, free from all liens and encumbrances other
than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to the Sellers and the Purchaser, duly executed and
acknowledged by the Sellers, with respect to all of the Sellers' right, title
and interest in, to and under the FF&E, the Contracts, the Intangible Property
and
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the Sellers' rights under all builder's warranties with respect to the
applicable Properties;
(c) To the extent the same are in the Sellers' possession, originally,
fully executed copies of all agreements constituting Assets;
(d) Duly executed copies of the Leases, the Limited Rent Guaranty, the
Stock Pledge and all of the Incidental Documents (as such term is defined in the
Leases);
(e) The tenant under the Leases shall have entered into a Franchise
Agreement with respect to each of the applicable Properties;
(f) With respect to each Property other than the Nashville Property or
the St. Louis Property, a copy of the final duly issued certificate of occupancy
for the applicable Property;
(g) With respect to each Property other than the Nashville Property or
the St. Louis Property, a Sellers' closing certificate in the form attached
hereto as Schedule D;
(h) With respect to each Property other than the Nashville Property and
the St. Louis Property, an architect's certificate in the form attached hereto
as Schedule E or, if despite using commercially reasonable efforts but without
incurring any material out of pocket expenses, the Sellers are unable to obtain
(i) a third party architect's certificate addressed to HPT prior to the
applicable Closing Date, a certificate in the form attached hereto as Schedule F
or (ii) any third party architect prior to the applicable Closing Date, a
certificate in the form attached hereto as Schedule G;
(i) With respect to each Property other than the Nashville Property and
the St. Louis Property, an engineer's certificate in the form attached hereto as
Schedule H or, if despite using commercially reasonable efforts but without
incurring any material out of pocket expenses, the Sellers are unable to obtain
(i) a third party engineer's certificate addressed to HPT prior to the
applicable Closing Date, a certificate in the form attached hereto as Schedule I
or (ii) any third party engineer's certificate prior to the applicable Closing
Date, a certificate in the form attached hereto as Schedule J;
(j) Certified copies of all charter documents, applicable corporate
resolutions and certificates of incumbency with respect to the Sellers, the
tenant under the Leases, the Guarantor under the Limited Rent Guaranty and such
other persons as the Purchaser may reasonably require; and
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(k) Such other conveyance documents, certificates, deeds, affidavits
and other instruments as the Purchaser may reasonably require.
4.2 Condition of Properties, Etc.
(a) No action shall be pending or threatened for the condemnation or
taking by power of eminent domain of all or any material portion of the
applicable Properties;
(b) All material licenses, permits and other authorizations necessary
for the current use, occupancy and operation of the Properties shall be in full
force and effect; and
(c) The Purchaser shall have received an engineer's report, in form and
substance reasonably satisfactory to the Purchaser, confirming that Substantial
Completion has occurred or, in the case of the Nashville Property and the St.
Louis Property, that such Properties are in a physical condition satisfactory to
the Purchaser.
4.3 Title Policies and Surveys.
(a) The Title Company shall be prepared, subject only to payment of the
applicable premium and delivery of all conveyance documents in recordable form,
to issue title insurance policies to the Purchaser with respect to the
applicable Properties, in form and substance satisfactory to the Purchaser in
accordance with Section 2.4, together with such affirmative coverages as the
Purchaser may reasonably require and shall have been determined by the Title
Company as available as provided in Section 2.4.
(b) The Purchaser shall have received an as-built survey with respect
to the applicable Properties, such survey to be consistent with the requirements
of Section 2.5.
4.4 Opinions of Counsel. The Purchaser shall have received a written
opinion from counsel to the Sellers (which may be its in-house counsel), in form
and substance reasonably satisfactory to the Purchaser, regarding the
organization and authority of the Sellers and the Tenant, the guarantor under
the Limited Rent Guaranty and such other persons as the Purchaser may reasonably
require, the enforceability of this Agreement, the Leases, the Limited Rent
Guaranty, the Stock Pledge and the Incidental Documents (as defined in the
Leases) and such other matters with respect to the transactions contemplated by
this Agreement as the Purchaser may reasonably require.
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SECTION 5. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE.
The obligation of the Sellers to convey each of the Properties (or the
Interests, as provided in Section 11, in the case of the Nashville Property) on
the applicable Closing Date to the Purchaser is subject to the satisfaction or
waiver of the following conditions precedent on and as of such Closing Date:
5.1 Purchase Price. The Purchaser shall deliver to the Sellers the
Allocable Purchase Prices of the applicable Properties as provided in Section
3.2.
5.2 Closing Documents. The Purchaser shall have delivered to the
Sellers:
(a) Duly executed and acknowledged counterparts of the documents
described in Section 4.1, where applicable;
(b) A certificate of a duly authorized officer of the Purchaser
confirming the continued truth and accuracy of the representations and
warranties of the Purchaser in this Agreement;
(c) A duly executed original counterpart of the Owner Agreement;
(d) Certified copies of all charter documents, applicable resolutions
and certificates of incumbency with respect to the Purchaser and such other
persons as the Sellers or the Tenant may reasonably require; and
(e) The Purchaser shall have caused an aggregate amount of Three
Million Three Hundred Seventy-Seven Thousand Seven Hundred Dollars ($3,377,700)
to be deposited in the Reserve at the time of the initial Closing hereunder.
5.3 Opinion of Counsel. The Sellers and the Tenant shall have received
a written opinion from Sullivan & Worcester LLP, counsel to the Purchaser, in
form and substance reasonably satisfactory to the Sellers, regarding the
organization and authority of the Purchaser and the landlord under the Leases,
the enforceability of this Agreement and the Leases and such other matters with
respect to the transactions contemplated by this Agreement as the Sellers and
the Tenant may reasonably require.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLERS.
To induce the Purchaser to enter into this Agreement, the Sellers
represent and warrant to the Purchaser as follows:
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6.1 Status and Authority of the Sellers. Each of the Sellers is duly
organized, validly existing and in good standing under the laws of its state of
formation, and has all requisite power and authority under the laws of such
state and its respective charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. Each of the Sellers and all members of the Sellers have duly qualified
to transact business in each jurisdiction in which the nature of the business
conducted by it requires such qualification, except where such failure to
qualify would not have a material adverse effect on any of the Sellers or the
transactions contemplated hereby.
6.2 Action of the Sellers. Each of the Sellers and all members of the
Sellers have taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and upon the execution and delivery of any
document to be delivered by the Sellers on or prior to any Closing, such
document shall constitute the valid and binding obligation and agreement of each
of the Sellers, enforceable against each of the Sellers in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors and general principles of equity.
6.3 No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by the Sellers, nor compliance with the terms and
provisions hereof, will result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any Property pursuant to the
terms of, any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument by which any of the Sellers is bound.
6.4 Litigation. The Sellers have received no written notice of and, to
the Sellers' actual knowledge, no action or proceeding is pending or, to the
Sellers' actual knowledge, threatened and the Sellers have received no written
notice of and, to the Sellers' actual knowledge, no investigation looking toward
such an action or proceeding has begun, which (a) questions the validity of this
Agreement or any action taken or to be taken pursuant hereto, (b) will result in
any material adverse change in the business, operation, affairs or condition of
any of the Properties, (c) may result in or subject any of the Properties to a
material liability, or (d) involves condemnation or eminent domain proceedings
against any material part of the Properties.
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6.5 Existing Agreements, Etc. Other than (x) documents recorded in the
public records, (y) the documents to be assigned to the Purchaser pursuant to
the terms hereof, and (z) agreements and easements with governmental bodies and
utility companies which are reasonably necessary for the development and
operation of the Properties as contemplated by this Agreement and the Leases,
there are no material agreements, leases, licenses or occupancy agreements
affecting the Properties which will be binding on the Purchaser subsequent to
the Closing Date.
6.6 Disclosure. (a) With respect to each of the Properties other than
the Nashville Property or the St. Louis Property, to the Sellers' actual
knowledge, there is no fact or condition which materially and adversely affects
the physical condition of such Property which has not been set forth in this
Agreement, or in the other documents, certificates or statements furnished to
the Purchaser in connection with the transactions contemplated hereby.
(b) With respect to each of the Nashville Property or the St. Louis
Property, to the Actual Knowledge of the Designated Individuals, there is no
fact or condition which materially and adversely affects the physical condition
of such Property which has not been set forth in this Agreement, or in the other
documents, certificates or statements furnished to the Purchaser in connection
with the transactions contemplated hereby.
6.7 Utilities, Etc. With respect to each of the Properties other than
the Nashville Property or the St. Louis Property, all utilities and services
necessary for the use and operation of such Property (including, without
limitation, road access, water, electricity and telephone) are available
thereto, are of sufficient capacity to meet adequately all needs and
requirements necessary for the use and operation of such Property and for its
respective intended purposes. With respect to each of the Properties other than
the Nashville Property or the St. Louis Property, to the Sellers' knowledge, no
fact, condition or proceeding exists which would result in the termination or
impairment of the furnishing of such utilities to such Property.
6.8 Compliance With Law. (a) With respect to each of the Properties
other than the Nashville Property or the St. Louis Property, to the Sellers'
actual knowledge (i) such 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 (ii) there are presently or, at
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the Closing there will be, in effect all material licenses, permits and other
authorizations necessary for the then current use, occupancy and operation
thereof. The Sellers have not received written notice of any threatened request,
application, proceeding, plan, study or effort which would materially adversely
affect the present use or zoning of any of the Properties or which would modify
or realign any street or highway adjacent to such Property.
(b) With respect to each of the Nashville Property and the St. Louis
Property, to the Actual Knowledge of the Designated Individuals, (i) such
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 (ii) there are presently or, at the Closing there will
be, in effect all material licenses, permits and other authorizations necessary
for the then current use, occupancy and operation thereof (The Purchaser hereby
acknowledging that, the Sellers, after diligent inquiry, have been unable to
locate the certificates of occupancy for either the Nashville Property or the
St. Louis Property).
6.9 Not A Foreign Person. None of the Sellers is a "foreign person"
within the meaning of Section 1445 of the United States Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
6.10 Hazardous Substances. (a) With respect to each of the Properties
other than the Nashville property or the St. Louis Property, except as disclosed
to the Purchaser or as described in any environmental report delivered to the
Purchaser, to the Sellers' knowledge, none of the Sellers or any other occupant
or user of such Property, or any portion thereof, has stored or disposed of (or
engaged in the business of storing or disposing of) or has released or caused
the release of any hazardous waste, contaminants, oil, radioactive or other
material on such Property, or any portion thereof, the removal of which is
required or the maintenance of which is prohibited or penalized by any
applicable Federal, state or local statutes, laws, ordinances, rules or
regulations, and, to the Sellers' actual knowledge, except as disclosed to the
Purchaser or as described in any environmental report delivered to the
Purchaser, such Property is free from any such hazardous waste, contaminants,
oil, radioactive and other materials, except any such materials maintained in
accordance with applicable law.
(b) With respect to each of the Nashville Property and the St. Louis
Property, except as disclosed to the Purchaser or as
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described in any environmental report delivered to the Purchaser or obtained by
the Purchaser from any environmental consulting firm, to the Actual Knowledge of
the Designated Individuals, none of the Designated Individuals or any other
occupant or user of such Property, or any portion thereof, has stored or
disposed of (or engaged in the business of storing or disposing of) or has
released or caused the release of any hazardous waste, contaminants, oil,
radioactive or other material on such Property, or any portion thereof, the
removal of which is required or the maintenance of which is prohibited or
penalized by any applicable Federal, state or local statutes, laws, ordinances,
rules or regulations, and, to the Actual Knowledge of the Designated
Individuals, except as disclosed to the Purchaser or as described in any
environmental report delivered to the Purchaser, such Property is free from any
such hazardous waste, contaminants, oil, radioactive and other materials, except
any such materials maintained in accordance with applicable law.
6.11 Insurance. The Sellers have received no written notice from any
insurance carrier of defects or inadequacies in any of the Properties which, if
uncorrected, would result in a termination of insurance coverage or an increase
in the premiums charged therefor.
6.12 Substantial Completion. (Other than the Nashville Property, the
Norcross Property, the St. Louis Property and the Yorktown Property on which
existing Hotels are located), as of the date hereof, the Sellers reasonably
anticipate that Substantial Completion of all of the Properties will occur on or
before December 31, 1999.
6.13 Condition of Properties. To the actual knowledge of the Sellers,
each of the Properties (other than the Nashville Property and the St. Louis
Property) is, or on the applicable Closing Date will be, in good working order
and repair, mechanically and structurally sound, free from material defects in
materials and workmanship.
The representations and warranties made in this Agreement by the
Sellers are made as of the date hereof and shall, except with respect to the
matters set forth in Section 6.12, be deemed remade by the Sellers as of each
Closing Date for the Property or Properties then being conveyed by the Sellers,
with the same force and effect as if made on, and as of, such date; provided,
however, that, the Sellers shall have the right, from time to time prior to the
applicable Closing Date, with respect to any Property as to which a Closing has
not yet occurred, to modify the representations and warranties as a result of
changes in the physical condition of or receipt of additional information
regarding any such Properties by notice to the Purchaser and, in such event, the
Purchaser shall have the rights provided in
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Section 2.3. All representations and warranties made in this Agreement by the
Sellers shall survive the applicable Closing for a period of one year.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to the Purchaser at the Closing, the Sellers disclaim
the making of any representations or warranties, express or implied, regarding
the Properties or matters affecting the Properties, whether made by the Sellers,
on the Sellers' behalf or otherwise, including, without limitation, the physical
condition of the Properties, title to or the boundaries of the Real Property,
pest control matters, soil conditions, the presence, existence or absence of
hazardous wastes, toxic substances or other environmental matters, compliance
with building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Properties or the market and physical environments in which they are located.
The Purchaser acknowledges (i) that the Purchaser has entered into this
Agreement with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of each Property and (ii) that the Purchaser is not relying upon
any statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
the Purchaser at the Closing, made by the Sellers or anyone acting on the
Sellers' behalf. The Purchaser further acknowledges that it has not received
from or on behalf of the Sellers any accounting, tax, legal, architectural,
engineering, property management or other advice with respect to this
transaction and is relying solely upon the advice of third party accounting,
tax, legal, architectural, engineering, property management and other advisors.
Subject to the provisions of this Agreement, the Purchaser shall purchase the
Properties in their "as is" condition on the Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce the Sellers to enter in this Agreement, the Purchaser
represents and warrants to the Sellers as follows:
7.1 Status and Authority of the Purchaser. The Purchaser is a Maryland
real estate investment trust duly organized, validly existing under the laws of
the State of Maryland, and has all requisite power and authority under the laws
of such state and under its charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The Purchaser has duly
<PAGE>
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qualified and is in good standing as a trust or unincorporated business
association in each jurisdiction in which the nature of the business conducted
by it requires such qualification, except where such failure to qualify would
not have a material adverse effect on the Purchaser or the transactions
contemplated hereby.
7.2 Action of the Purchaser. The Purchaser has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and delivery of any document to be delivered by the
Purchaser on or prior to the Closing Date such document shall constitute the
valid and binding obligation and agreement of the Purchaser, enforceable against
the Purchaser in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors and general
principles of equity.
7.3 No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by the Purchaser, nor compliance with the terms
and provisions hereof, will result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of the
Purchaser pursuant to the terms of any indenture, mortgage, deed of trust, note,
evidence of indebtedness or any other agreement or instrument by which the
Purchaser is bound.
7.4 Litigation. No investigation, action or proceeding is pending and,
to the Purchaser's actual knowledge, no action or proceeding is threatened and
no investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
The representations and warranties made in this Agreement by the
Purchaser are made as of the date hereof and shall be deemed remade by the
Purchaser as of the applicable Closing Date with the same force and effect as if
made on, and as of, such date. All representations and warranties made in this
Agreement by the Purchaser shall survive the applicable Closing for a period of
one year.
SECTION 8. COVENANTS OF THE SELLERS.
The Sellers hereby covenant with the Purchaser as follows:
8.1 Compliance with Laws, Etc. From the date of this Agreement to the
Closing Date for any Property, to comply in all material respects, with (i) all
laws, regulations and other
<PAGE>
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requirements affecting such Property from time to time applicable of every
governmental body having jurisdiction of such Property or the use or occupancy
of the Improvements located thereon and (ii) all terms, covenants and
conditions, instruments of record and other agreements affecting such Property.
8.2 Approval of Agreements. From the date of this Agreement to the
Closing Date for any Property, except as otherwise authorized by this Agreement,
not to enter into, modify, amend or terminate any agreement which would encumber
or be binding upon such Property from and after the applicable Closing Date,
without in each instance obtaining the prior written consent of the Purchaser,
which consent shall not be unreasonably withheld, delayed or conditioned;
provided, however, the Sellers shall not be required to obtain the consent of
the Purchaser as to any agreements or easements with government bodies and
utility companies necessary for the development and operation of such Property
as contemplated by this Agreement and the Leases (it being understood and
agreed, however, that the Purchaser shall retain any rights to object to the
same set forth elsewhere in this Agreement).
8.3 Compliance with Agreements. From the date of this Agreement to the
Closing Date for any Property, to comply with each and every material term,
covenant and condition contained in any document or agreement affecting such
Property.
8.4 Substantial Completion. From the date of this Agreement to the
Closing Date for any Property, to use reasonable efforts to cause Substantial
Completion of such Property to occur as soon as reasonably practicable after the
date hereof, subject to any events of force majeure.
8.5 Notice of Material Changes or Untrue Representations. From the date
of this Agreement to the Closing Date for any Property, upon learning of any
material change in any condition with respect to such Property or of any event
or circumstance which makes any representation or warranty of the Sellers to the
Purchaser under this Agreement untrue, promptly to notify the Purchaser thereof
(the Purchaser agreeing, on learning of any such fact or condition, promptly to
notify the Sellers thereof).
8.6 Correction of Defects. Other than with respect to the Nashville
Property and the St. Louis Property, to complete, at the Sellers' sole cost, all
punch-list items and to correct, at the Sellers' sole cost, all defects that are
discovered and disclosed by or to the Sellers within one hundred eighty (180)
days after the applicable Closing Date. The Purchaser shall cooperate with the
Sellers in enforcing any applicable warranties or guaranties with respect to
such defects. The provisions of this Section 8.6 shall survive any Closing under
this Agreement.
<PAGE>
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SECTION 9. APPORTIONMENTS.
9.1 Real Property Apportionments. Representatives of the Purchaser and
the Sellers shall perform any and all of the adjustments and apportionments
which are appropriate and usual for a transaction of this nature, taking into
account the applicable provisions of the Leases. The adjustments hereunder shall
be calculated or paid in an amount based upon a fair and reasonable estimated
accounting performed and agreed to by representatives of the Sellers and the
Purchaser at the applicable Closing. Subsequent final adjustments and payments
shall be made in cash or other immediately available funds as soon as
practicable after the Closing Date, and in any event within ninety (90) days
after such Closing Date, based upon an agreed accounting performed by
representatives of the Sellers and the Purchaser. In the event the parties have
not agreed with respect to the adjustments required to be made pursuant to this
Section 9.1 within such ninety-day period, upon application by either party, a
certified public accountant reasonably acceptable to the Purchaser and the
Sellers shall determine any such adjustments which have not theretofore been
agreed to between the Sellers and the Purchaser. The charges of such accountant
shall be borne fifty percent (50%) by the Sellers and fifty percent (50%) by the
Purchaser.
9.2 Closing Costs. The Sellers and the Purchaser shall share equally
all costs and expenses associated with the transaction contemplated hereby,
including, without limitation, title and recording fees and taxes, local counsel
fees (limited to those incurred in connection with usual and customary local
counsel services in similar real estate transactions), title insurance for both
the Purchaser and the Tenant, marketing studies, survey and environmental
reports, except that each party shall pay its own attorneys' and accountants'
fees and costs in connection with this transaction.
The obligations of the parties under this Section 9 shall survive the
Closings.
SECTION 10. DEFAULT.
10.1 Default by the Sellers. If the Sellers shall have made any
representation or warranty herein which shall be untrue in any material respect
when made or updated as herein provided, or if the Sellers shall fail to perform
any of the material covenants and agreements contained herein or the Agreement
to Lease to be performed by them and such failure continues for a period of ten
(10) days (or such additional period, not to extend beyond December 31, 1999, as
may be reasonably required to
<PAGE>
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effectuate a cure of the same) after notice thereof from the Purchaser, the
Purchaser may terminate this Agreement with respect to the affected Property or
Properties and/or the Purchaser may pursue any and all remedies available to it
at law or in equity, including, but not limited to, a suit for specific
performance or other equitable relief; provided, however, that, (x) in no event
shall the Sellers be liable for consequential damages and (y) in no event shall
the aggregate liability of the Sellers hereunder exceed an amount equal to the
sum of (i) ten percent of the Allocable Purchase Price of the affected Property
or Properties, (ii) actual costs and expenses incurred by the Purchaser with
respect to the affected Property or Properties, (iii) costs of collection
(including, without limitation, reasonable attorneys' fees) and (iv) interest at
10% per annum on all such amounts from the date of demand until paid. It is
understood and agreed that for purposes of this Section 10.1, if a default
results from a false representation or warranty, such default shall be deemed
cured if the events, conditions, acts or omissions giving rise to the falsehood
are cured within the applicable cure period even though, as a technical matter,
such representation or warranty was false as of the date actually made.
10.2 Default by the Purchaser. If the Purchaser shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or if the Purchaser shall fail to perform any of the covenants
and agreements contained herein or the Agreement to Lease to be performed by it
and such failure shall continue for a period of ten (10) days (or such
additional period, not to extend beyond December 31, 1999, as may be reasonably
required to effectuate a cure of the same) after notice thereof from the
Sellers, the Sellers may, as their sole and exclusive remedy, at law, in equity,
terminate this Agreement with respect to any Property or Properties as to which
a Closing shall not yet have occurred, whereupon, the Purchaser shall pay to the
Sellers, as liquidated damages and not as a penalty, an amount equal to the sum
of (i) ten percent of the Allocable Purchase Price of the affected Property or
Properties, (ii) actual costs and expenses incurred by the Sellers with respect
to the affected Property or Properties, (iii) costs of collection (including,
without limitation, reasonable attorneys' fees) and (iv) interest at 10% per
annum on all such amounts from the date of demand until paid. It is understood
and agreed that for purposes of this Section 10.2, if a default results from a
false representation or warranty, such default shall be deemed cured if the
events, conditions, acts or omissions giving rise to the falsehood are cured
within the applicable cure period even though, as a technical matter, such
representation or warranty was false as of the date actually made.
<PAGE>
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SECTION 11. SPECIAL PROVISIONS RE NASHVILLE PROPERTY.
11.1 Purchaser's Right to Acquire Interests. The Purchaser may, in its
sole discretion, elect, by notice given to the Sellers prior to the Closing Date
with respect to the Nashville Property, to acquire the Interests (in lieu of the
Nashville Property) for the Allocable Purchase Price of the Nashville Property,
subject to and in accordance with the terms and conditions of this Section 11
and Article 9.
11.2 Additional Closing Documents. The members of the LLC shall have
delivered to the Purchaser in lieu of the documents described in Section
4.1(a)and (b), an assignment of the Interests, in form and substance reasonably
satisfactory to the Purchaser and such members, duly executed and acknowledged
by each such member, conveying the Interests, free from all liens and
encumbrances.
11.3 Additional Representations and Warranties. In addition to the
representations and warranties set forth in Section 6, if the Purchaser shall
elect to acquire the Interests, the Nashville LLC and its members shall be
deemed to make the following representations and warranties to the Purchaser as
of the applicable Closing Date, each of which shall survive such Closing:
(a) Neither the execution, delivery or performance of this Agreement by
the LLC Parties, nor compliance with the terms and provisions hereof, will
result in any breach of the terms, conditions or provisions of, or conflict with
or constitute a default under, or result in the creation of any lien, charge or
encumbrance upon the Interests, the Nashville LLC or any LLC Party pursuant to
the terms of any indenture, mortgage, deed of trust, note, evidence of
indebtedness or any other agreement or instrument by which the LLC, the
Interests or any of the LLC Parties is bound.
(b) No LLC Party has received written notice of and, to the actual
knowledge of each of the LLC Parties, no action or proceeding is pending or, to
the actual knowledge of each of the LLC Parties, threatened and no LLC Party has
received written notice of and, to the actual knowledge of each of the LLC
Parties, no investigation looking toward such an action or proceeding has begun,
which (i) will result in any material adverse change in the business, operation,
affairs or condition the Nashville LLC or (ii) may result in or subject any of
the Interests or the Nashville LLC to a material liability.
(c) Other than (x) documents recorded in the public records, (y) the
documents to be assigned to the Purchaser pursuant to the terms hereof, and (z)
agreements and easements
<PAGE>
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with governmental bodies and utility companies which are reasonably necessary
for the development and operation of the Properties as contemplated by this
Agreement and the Leases, there are no material agreements, leases, licenses or
occupancy agreements affecting the Interests or the Nashville LLC which will be
binding on the Purchaser or Nashville LLC subsequent to the Closing Date.
(d) The Nashville LLC has prepared and timely filed with the
appropriate governmental authorities all federal, state and local income and
business tax returns and all sales and use and other tax returns; such returns
are true, correct and complete in all material respects; and any and all taxes
due and payable for periods ending on or prior to the applicable Closing Date
will have been paid by the Closing Date, and any and all taxes in respect of
periods commencing on or prior to the applicable Closing Date and ending after
such date shall be apportioned in the manner prescribed by Article 9 and Section
11.1 herein.
(e) Except for its cash accounts, the sole asset of the Nashville LLC
is the Nashville Property. As of the applicable Closing Date, the Nashville LLC
will have no outstanding, unsatisfied or executory obligations or liabilities,
subsequent to the applicable Closing Date. Capitol Hotel Services, Inc. owns
good and indefeasible title to one hundred percent (100%) of the Interests, free
and clear of all liens, mortgages, pledges, security interests, conditional
sales or other title retention agreements, encumbrances, claims, rights,
covenants, restrictions, warrants, options, or charges of any kind. The
Nashville LLC is duly formed and validly existing in the State of Delaware.
(f) The Nashville LLC has no employees, is not a party to any
employment agreements and has no former employees.
(g) For federal income tax purposes, Nashville LLC has at all times
since it organization been classified as a "disregarded entity" under Section
301.7701-3(b)(l)(ii) of the Treasury Regulations under the Internal Revenue Case
of 1986, as amended, and for all state and local income tax purposes, Nashville
LLC has at all times since its organization been similarly classified under
comparable provisions of state and local income tax law.
11.4 Right to Receive Rent and Payments. The Purchaser and the Sellers
agree that Capitol Hotel Services, Inc. shall be entitled to receive (a) any and
all distributions of rent due under the lease agreement applicable to the
Nashville Property accruing up to the date of the Closing of the Nashville
Property and (b) any refunds or payments due under the contract pursuant to
which the Nashville LLC acquired the Nashville Property, and such parties agree
to execute any documentation reasonably
<PAGE>
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necessary to effectuate such agreement. The provisions of this Section 11.4
shall survive the Closing on such Property.
SECTION 12. MISCELLANEOUS.
12.1 Agreement to Indemnify. (a) Subject to any express provisions of
this Agreement to the contrary, from and after any closing, with respect to the
applicable Property, (i) the Sellers shall indemnify and hold harmless the
Purchaser from and against any and all obligations, claims, losses, damages,
liabilities, and expenses (including, without limitation, reasonable attorneys'
and accountants' fees and disbursements) arising out of (x) events or
contractual obligations, acts, or omissions of the Sellers that occurred in
connection with the ownership or operation of any Property prior to the
applicable Closing or (y) any damage to property of others or injury to or death
of any person or any claims for any debts or obligations occurring on or about
or in connection with any Property or any portion thereof at any time or times
prior to the applicable Closing, and (ii) the Purchaser shall indemnify and hold
harmless the Sellers from and against any and all obligations, claims, losses,
damages, liabilities and expenses (including, without limitation, reasonable
attorneys' and accountants' fees and disbursements) arising out of (x) events,
contractual obligations, acts, or omissions of the Purchaser that occur in
connection with the ownership or operation of any Property after the applicable
Closing, or (y) any damage to property of others or injury to or death of any
person or any claims for any debts or obligations occurring on or about any
Property or any portion thereof at any time or times after the applicable
Closing. The provisions of this Section 12.1 shall apply neither to any
liabilities or obligations with respect to hazardous substances, the liabilities
of the parties with respect thereto being governed by applicable law nor to any
liabilities or obligations with respect to the physical condition of the
Properties, the liabilities of the parties with respect thereto being governed
by other provisions of this Agreement.
(b) Whenever it is provided in this Agreement that an obligation of the
Sellers will be assumed by the Purchaser after the applicable Closing, the
Purchaser shall be deemed to have also agreed to indemnify and hold harmless the
Sellers and their respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of the Purchaser to perform the obligation so assumed after the
applicable Closing.
(c) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the
<PAGE>
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existence of any liability for which the other party is or may be responsible
under this Agreement, the party learning of such liability shall notify the
other party promptly and furnish such copies of documents (and make originals
thereof available) and such other information as such party may have that may be
used or useful in the defense of such claims and shall afford said other party
full opportunity to defend the same in the name of such party and shall
generally cooperate with said other party in the defense of any such claim.
(d) The provisions of this Section 12.1 shall survive the Closings
hereunder and the termination of this Agreement.
12.2 Brokerage Commissions. Each of the parties hereto represents to
the other parties that it dealt with no broker, finder or like agent in
connection with this Agreement or the transactions contemplated hereby, and that
it reasonably believes that there is no basis for any other person or entity to
claim a commission or other compensation for bringing about this Agreement or
the transactions contemplated hereby. The Sellers shall indemnify and hold
harmless the Purchaser and its heirs, successors and assigns from and against
any loss, liability or expense, including reasonable attorneys' fees, arising
out of any claim or claims for commissions or other compensation for bringing
about this Agreement or the transactions contemplated hereby made by any broker,
finder or like agent, if such claim or claims are based in whole or in part on
dealings with the Sellers. The Purchaser shall indemnify and hold harmless the
Sellers and their respective heirs, successors and assigns from and against any
loss, liability or expense, including reasonable attorneys' fees, arising out of
any claim or claims for commissions or other compensation for bringing about
this Agreement or the transactions contemplated hereby made by any broker,
finder or like agent, if such claim or claims are based in whole or in part on
dealings with the Purchaser. Nothing contained in this section shall be deemed
to create any rights in any third party. The provisions of this Section 12.2
shall survive the Closings hereunder and any termination of this Agreement.
12.3 Publicity. The parties agree that no party shall, with respect to
this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with public officials, make any public pronouncements, issue press
releases or otherwise furnish information regarding this Agreement or the
transactions contemplated hereby to any third party without the consent of the
other parties, which consent shall not be unreasonably withheld, except as may
be required by law or as may be reasonably necessary, on a confidential basis,
to inform any rating agencies, potential sources of financing, financial
analysts, or to entities involved with a sale of a controlling interest in the
<PAGE>
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Sellers, the Purchaser or any of their affiliates or to receive legal,
accounting and/or tax advice; provided, however, that, if such information is
required to be disclosed by law, the party so disclosing the information will
use reasonable efforts to give notice to the other parties as soon as such party
learns that it must make such disclosure.
12.4 Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to the Sellers to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52/924.11
Bethesda, Maryland 20817
Attn: Mr. Michael E. Dearing
[Telecopier No. (301) 380-5067]
with a copy to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52/923.00
Bethesda, Maryland 20817
Attn: Kimberly S. Perini, Esq.
[Telecopier No. (301) 380-6727]
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and to:
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, MD 21201-2978
Attn: James D. Wright, Esq.
[Telecopier No. (410) 244-7742]
if to the Purchaser, to:
Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
(d) By notice given as herein provided, the parties hereto and their
respective successor and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
12.5 Waivers, Etc. Any waiver of any term or condition of this
Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
<PAGE>
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12.6 Assignment; Successors and Assigns. This Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties, except that the Purchaser may assign this
Agreement to any entity wholly owned, directly or indirectly, by the Purchaser;
provided, however, that, in the event this Agreement shall be assigned to any
entity wholly owned, directly or indirectly, by the Purchaser, Hospitality
Properties Trust shall remain fully and primarily liable for the obligations of
the "Purchaser" hereunder. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns. This Agreement is not intended and shall not
be construed to create any rights in or to be enforceable in any part by any
other persons.
12.7 Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
12.8 Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof. This Agreement may not be amended or modified in any
respect other than by the written agreement of all of the parties hereto.
12.9 Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of the State of Maryland
applicable to contracts between residents of Maryland which are to be performed
entirely within Maryland,
<PAGE>
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regardless of (i) where this Agreement is executed or delivered; or (ii) where
any payment or other performance required by this Agreement is made or required
to be made; or (iii) where any breach of any provision of this Agreement occurs,
or any cause of action otherwise accrues; or (iv) where any action or other
proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principal place of business, or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum jurisdiction
otherwise would apply the laws of a jurisdiction other than the State of
Maryland; (vii) the location of the Properties or any applicable Property, or
(viii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of Maryland as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of Maryland and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
12.10 Performance on Business Days. In the event the date on which
performance or payment of any obligation of a party required hereunder is other
than a Business Day, the time for payment or performance shall automatically be
extended to the first Business Day following such date.
12.11 Attorneys' Fees. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of this
Agreement, the prevailing party therein shall be entitled to receive from the
other party the prevailing party's costs and expenses, including reasonable
attorneys' fees incurred in connection therewith, in preparation therefor and on
appeal therefrom, which amounts shall be included in any judgment therein.
12.12 Section and Other Headings. The headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
12.13 Nonliability of Trustees, Etc. THE DECLARATION OF TRUST
ESTABLISHING THE PURCHASER, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF THE PURCHASER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY,
<PAGE>
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FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE PURCHASER. ALL PERSONS DEALING WITH
THE PURCHASER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE PURCHASER FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SELLERS:
RESIDENCE INN BY MARRIOTT, INC.
By: /s/ Catherine L. Young
Its (Vice) President
COURTYARD MANAGEMENT CORPORATION
By: /s/ Catherine L. Young
Its (Vice) President
TOWNEPLACE MANAGEMENT CORPORATION
By: /s/ Catherine L. Young
Its (Vice) President
NASHVILLE AIRPORT HOTEL, LLC
By: Capitol Hotel Services, Inc.,
its sole member
By: /s/ Catherine L. Young
Its (Vice) President
<PAGE>
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ST. LOUIS AIRPORT HOTEL, LLC
By:Capitol Hotel Services, Inc.,
its sole member
By:/s/ Catherine L. Young
Its (Vice) President
PURCHASER:
HOSPITALITY PROPERTIES TRUST
By: /s/ John G. Murray
John G. Murray, President
CONSENT OF CAPITOL HOTEL
SERVICES, INC. TO SECTION 11
CAPITOL HOTEL SERVICES, INC.
By:/s/ Catherine L. Young
Its (Vice) President
EXHIBIT 10.2
LIMITED RENT
GUARANTY
THIS LIMITED RENT GUARANTY ("Guaranty") is made as of the 29th day of
December, 1998 by MARRIOTT INTERNATIONAL, INC., having an address at Marriott
Drive, Washington, D.C. 20058 (hereinafter referred to as "Guarantor") and
HOSPITALITY PROPERTIES TRUST ("HPT") and HPTMI III PROPERTIES TRUST ("HPTMI"),
having an address at 400 Centre Street, Newton, Massachusetts 02458 (HPTMI
together with HPT and their permitted successors and assigns, hereinafter
referred to as "Landlord").
RECITALS
WHEREAS, HPTMI and CRTM17 Tenant Corporation, a Delaware corporation
(hereinafter referred to as "Tenant") have agreed to enter into various leases,
from time to time for certain hotels located or to be located in the United
States (hereinafter collectively referred to as the "Leases" and individually as
the "Lease") pursuant to the terms of a certain Purchase and Sale Agreement
dated even date herewith (the "Agreement") in connection with the sale of
seventeen (17) hotels from Affiliated Persons of Guarantor to Landlord (the
"Properties"); and
WHEREAS, Guarantor owns all of the stock in Tenant, and it is a
condition precedent to the Landlord's entering into the Leases with Tenant that
Guarantor guarantee payment of Guaranteed Rent (defined herein) under the
Leases; and
WHEREAS, the transactions contemplated by the Agreement and the Leases
are of direct, material and substantial benefit to Guarantor; and
WHEREAS, words not otherwise defined herein, whether or not capitalized
herein, shall have the meanings given to them in each Lease.
NOW, THEREFORE, WITNESSETH, in consideration of the agreement of
Landlord to enter into the Leases with Tenant and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Guarantor hereby covenants and agrees as follows:
SECTION 1
GUARANTY
Subject to the terms and provisions of this Guaranty, Guarantor hereby
unconditionally guarantees to Landlord the full, complete, and timely payment by
Tenant of all Minimum Rent (as defined in each Lease) and Additional Rent (as
defined in each Lease) (hereinafter collectively referred to as "Guaranteed
Rent") due and payable under all of the Leases for the Guaranty Term, without
deduction by reason of any setoff (except to
<PAGE>
the extent of any set-offs to which Tenant is expressly entitled pursuant to the
terms of the Leases), defense, or counterclaim. For purposes hereof, it is
expressly understood and agreed that "Guaranteed Rent" shall not include any
sums for damages arising from an Event of Default or termination of any Lease,
specifically including damages relating to the acceleration of any rent due
under any Lease in excess of the Minimum Rent and Additional Rent payable during
the Guaranty Term in accordance with the terms of the Leases. In the event that
there is an Event of Default by Tenant pursuant to the terms of a Lease,
Landlord hereby agrees to use reasonable efforts to mitigate its damages.
A. If during the Guaranty Term Tenant shall fail to pay all or any
portion of the Guaranteed Rent when due, Guarantor shall pay (without first
requiring the Landlord to proceed against Tenant, any other person, or any other
security) to Landlord all Guaranteed Rent due and unpaid. Guarantor shall make
payment of such Guaranteed Rent within four (4) Business Days of receipt by
Guarantor of notice from Landlord of Tenant's failure to pay such Guaranteed
Rent. Interest at the Disbursement Rate shall accrue and be owing and due by
Guarantor to Landlord for any Guaranteed Rent not paid within such four (4)
Business Day period.
Notwithstanding the above, in the event that there is an
Exercise of Rights by Landlord (as defined hereinafter in Section 6.B hereof),
the above-referenced period of "four (4) Business Days" shall be "ten (10)
Business Days."
B. In the event Guarantor and Tenant should each pay the same
Guaranteed Rent, Landlord shall promptly return to Guarantor the Guaranteed Rent
paid by Guarantor.
SECTION 2
TERM OF GUARANTY
Guarantor's obligations hereunder shall be limited to Guaranteed Rent
accruing during a period commencing on the date hereof and shall continue in
effect as set forth in subsections A. and B. hereinbelow (the "Guaranty Term"):
A. The Guaranty Term shall continue until the first to occur of the
following events, and thereafter as provided in subsection B.
(i) the expiration of six (6) full Accounting Periods after
the expiration of the Accounting Period in which the last of the seventeen (17)
Properties has been acquired by Landlord, or
(ii) the expiration of nineteen (19) full Accounting Periods
after the expiration of the Accounting Period in which the first Property has
been acquired by Landlord.
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<PAGE>
B. Expiration of Term. Thereafter, the Guaranty Term shall continue in
full force and effect until, and shall terminate on the first to occur of one of
the following events:
(i) 11:59 p.m. on the last day of the Accounting Period ending
closest to September 30, 2005; or
(ii) the expiration of the first entire Fiscal Year of Tenant
in which the Aggregate Amount Funded (as defined herein)
exceeds twenty percent (20%) of the Total Property Purchase
Price (as defined herein) paid to Guarantor or its Affiliated
Persons for the Properties which were acquired by Landlord.
The Aggregate Amount Funded shall be determined annually, in
arrears, at the end of each Fiscal Year, except that no such
determination shall be required for the Fiscal Year of Tenant
which includes, or is subsequent to, the Accounting Period
ending closest to September 30, 2005. Tenant and/or Guarantor
shall make such determination and give notice to Landlord of
such amount within one hundred twenty (120) days of the
expiration of the then applicable Fiscal Year. This
determination shall be deemed conclusively accurate unless
Landlord gives written notice to Tenant and/or Guarantor of
its objections to such determination within thirty (30) days
of its receipt of Tenant's and/or Guarantor's determination.
To establish that the Aggregate Amount Funded has exceeded
twenty percent (20%) of the Total Property Purchase Price
within the applicable Fiscal Year, Guarantor shall send a
notice to Landlord, including the following documents: (i) a
letter from Guarantor's auditor affirming that the auditor has
reviewed the Aggregate Amount Funded determination for each
Fiscal Year and has found no material errors or omissions
therein (or such other similar statement as the auditor's
policies and procedures then permit the auditor to make in
providing review and confirmation of calculations of this
kind), (ii) a certificate of an officer of Guarantor affirming
the accuracy and completeness of the Aggregate Amount Funded
determination, and (iii) a copy of the calculation of the
Aggregate Amount Funded determination.
Landlord, at its sole cost and expense (except as provided
hereinbelow), shall be entitled to perform an independent
audit to confirm the accuracy of the Aggregate Amount Funded
determination submitted by Guarantor, such audit to be
commenced not later than ninety (90) days after Tenant or
Guarantor submits its
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<PAGE>
determination, and, in the event that Guarantor's
determination is shown to be materially inaccurate in
Guarantor's favor (which the parties agree shall constitute a
deviation of 3% or more), the cost of the audit shall be borne
by Guarantor. If such independent audit establishes that the
Aggregate Amount Funded did not exceed twenty percent (20%) of
the Total Property Purchase Price, this Guaranty shall
continue in full force and effect.
or
(iii) the date on which Minimum Rent Coverage (as defined
herein) equals or exceeds one hundred and thirty percent
(130%) of the Minimum Rent for four (4) consecutive Fiscal
Quarters (for clarification, it is agreed that such date shall
be the last day of such fourth consecutive Fiscal Quarter). To
establish that the Minimum Rent Coverage has met the 130%
standard set forth hereinabove, Guarantor shall send a notice
to Landlord, which notice shall include: (i) a letter from
Guarantor's auditor affirming that the auditor has reviewed
the Minimum Rent Coverage determination for each quarter and
has found no material errors or omissions therein (or such
other similar statement as the auditor's policies and
procedures then permit the auditor to make in providing review
and confirmation of calculations of this kind), (ii) a
certificate of an officer of Guarantor affirming the accuracy
and completeness of the Minimum Rent Coverage determination,
and (iii) a copy of the calculation of the Minimum Rent
Coverage determination.
Landlord, at its sole cost and expense (except as provided
hereinbelow), shall be entitled to perform an independent
audit to confirm the accuracy of the Minimum Rent Coverage
determination submitted by Guarantor, such audit to be
commenced not later than ninety (90) days after Tenant or
Guarantor submits its audit, and, in the event that
Guarantor's determination is shown to be materially inaccurate
in Guarantor's favor (which the parties agree shall constitute
a deviation of 3% or more), the cost of the audit shall be
borne by Guarantor. If such independent audit establishes that
the Minimum Rent Coverage did not exceed the aforementioned
one hundred and thirty percent (130%) this Guaranty shall
continue in full force and effect.
"Aggregate Amount Funded" is the cumulative amount of Guaranteed Rent
paid by Tenant (pursuant to the terms of the Leases for all of the
Properties acquired by Landlord) and Guarantor (pursuant to the terms
of this Guaranty) in excess of total cumulative Cash Available for
Lease Payment for the time period beginning on the
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earlier to occur of: (i) the expiration of six full Accounting Periods
after the expiration of the Accounting Period in which the last of the
seventeen (17) Properties is purchased by Landlord, or (ii) the
expiration of nineteen (19) full Accounting Periods after the
expiration of the Accounting Period in which the first Property has
been acquired by Landlord.
"Minimum Rent Coverage" is Cash Available For Lease Payment (as defined
herein) for all of the Properties acquired by Landlord divided by
Minimum Rent for all of the Properties acquired by Landlord, each
calculated for each Fiscal Quarter.
"Cash Available For Lease Payment" is defined as Total Hotel Sales for
all of the Properties from the date each is acquired by Landlord less
Property Expenses for all of the Properties from the date each is
acquired by Landlord; provided, however, for purposes of calculating
Minimum Rent Coverage, Cash Available for Lease Payment shall be
determined assuming an annual deposit by Tenant into the Reserve of an
amount equal to (a) 5% of Total Hotel Sales for each of the (i) the St.
Louis and Nashville full service hotels, (ii) the Residence Inn By
Marriott Hotels, (iii) Courtyard By Marriott Hotels and (b) 6% of Total
Hotel Sales for each of the Towneplace Suites By Marriott Hotels.
"Property Expenses" is defined on Exhibit A attached hereto.
"Total Property Purchase Price" is defined as the sum of the Allocable
Purchase Prices (as defined in the Agreement), from time to time, paid
by Landlord for the Properties.
C. Early Termination. Notwithstanding any term or provision to the
contrary contained herein, if either of the following events shall occur, this
Guaranty shall terminate in its entirety on the earlier to occur of:
(i) a transfer of any of the Properties by Landlord (other
than to HPT or to any wholly owned subsidiary of HPT) for which the Minimum Rent
Coverage determined solely for the Property(ies) being transferred exceeds the
Minimum Rent Coverage for the Collective Leased Properties for the then most
recently ended Fiscal Quarter; provided, however, any transfer to a Superior
Mortgagee pursuant to Article 20 of the Lease will not be deemed to be a
transfer pursuant to this subsection (i), or
(ii) a transfer of any of the Properties by Landlord to a
Person who meets any one of the criteria set forth in Section 15.1(i), (ii),
(iii) or (iv) of the Lease.
Within fifteen (15) Business Days of its receipt of
hereinafter described Notice from Landlord, Guarantor hereby agrees that it will
give Notice to Landlord whether or not Guarantor would declare this Guaranty
terminated due to the occurrence of either event set forth hereinabove. Any
Notice from Landlord must contain such
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<PAGE>
information as may be reasonably necessary for Guarantor to determine if either
event would occur, including all information necessary for Guarantor to
determine if the events set forth in Section 15.1(i), (ii), (iii) or (iv) of the
Lease would occur.
SECTION 3
TERMINATION AS TO SPECIFIC PROPERTIES
In the event any of the following events shall occur, this Guaranty
shall be modified, as set forth hereinbelow:
A. The termination of a Lease of a Property, or Properties pursuant to
the terms and provisions of the Lease, other than a termination due to an Event
of Default by Tenant, or
B. The transfer by Landlord of a Property, or Properties, pursuant to
the terms and provisions of the Lease, other than a transfer to HPT or to any
wholly owned subsidiary of HPT, or as permitted by Article 20 of the Lease.
As used herein, the term "Deleted Property" shall mean that Property or
Properties referenced in Subsections A and/or B hereinabove.
In the event either of the above-described events shall occur (a) the
Guaranty shall not apply to the Guaranteed Rent for the Deleted Property
accruing from and after the date of such event, and (b) with respect to all
periods subsequent to the events set forth in subsections A and/or B
hereinabove, the terms "Minimum Rent Coverage", "Cash Available for Lease
Payment" and "Total Property Purchase Price" shall refer only to the Properties
other than the Deleted Property, and the term "Aggregate Amount Funded" shall
refer to the sum of (i) all Guaranteed Rent paid by Tenant and Guarantor
pursuant to Leases for all of the Properties up to the date of such event, and
(ii) all Guaranteed Rent paid by Tenant and Guarantor pursuant to Leases for
Properties other than Deleted Properties from and after the date of such event.
SECTION 4
CONSENT TO LEASE
Guarantor hereby unconditionally consents to the terms, covenants, and
conditions of the Leases.
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<PAGE>
SECTION 5
WAIVERS BY GUARANTOR
Guarantor hereby waives notice of acceptance of this Guaranty by
Landlord and any and all notices and demands of every kind and description which
may be required to be given by any statute or rule of law. Guarantor agrees that
the liability of Guarantor hereunder shall in no way be affected, diminished, or
released by (i) any forbearance or indulgence which may be granted to Tenant (or
to any successor thereto or to any person or entity which shall have assumed the
obligations thereof), or (ii) any waiver of any term, covenant, or condition in
the Leases by Landlord, or (iii) the acceptance of additional security.
SECTION 6
ENFORCEMENT BY LANDLORD
A. Other Rights: Subject to the terms and provisions of this Section,
Guarantor agrees that this Guaranty may be enforced by Landlord without
enforcing any rights it may have against any other Person or any collateral.
Guarantor further agrees that nothing herein contained shall prevent Landlord
from suing on any of the Leases or from exercising any other right available to
it under the Leases or against any other Person. The exercise of any of the
aforementioned rights shall not constitute a legal or equitable discharge of
Guarantor, it being the purpose and intent of Guarantor that its obligations
under this Guaranty shall be absolute and unconditional until the termination of
this Guaranty pursuant to the terms of this Guaranty.
B. Exercise of Rights: Notwithstanding any term or provision contained
in the Guaranty to the contrary, in the event Landlord or any Affiliated Person
shall become the record or beneficial owner of the issued and outstanding shares
of stock of Tenant, pursuant to the exercise of rights (the "Exercise of
Rights") contained in the Indemnity Pledge and Security Agreement dated even
date herewith by Guarantor, as pledgor, and Landlord, as pledgee, this Guaranty
shall be modified, as follows:
(i) From and after the date of an Exercise of Rights for
purposes of determining the amount of Guaranteed Rent which Guarantor is liable
hereunder, Tenant shall be conclusively deemed to have paid to Landlord all of
the Cash Available for Lease Payment (up to the full amount of Guaranteed Rent
due), calculated on an Accounting Period by Accounting Period, and not a
cumulative basis.
(ii) From and after the date of an Exercise of Rights,
Landlord shall cause Tenant to supply to Guarantor all information as Guarantor
may reasonably request in writing to aid Guarantor in determining the Aggregate
Amount Funded, Minimum Rent Coverage and Cash Available for Lease Payment.
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<PAGE>
(iii) From and after the date of an Exercise of Rights,
Landlord shall thereafter pay to Guarantor all Retained Funds at such time or
times as the Retained Funds would otherwise be owing and due to Tenant, subject
to the provisions of the applicable Lease(s).
C. Payment of Expenses: Guarantor agrees, as principal obligor and not
as a guarantor only, to pay to Landlord forthwith upon demand, in immediately
available Federal funds, all costs and expenses to third parties (including
court costs and reasonable legal expenses) incurred or expended by Landlord in
connection with the enforcement of this Guaranty, together with interest on
amounts recoverable under this Guaranty from the time such amounts become due
until payment at the Disbursement Rate. Guarantor's covenants and agreements set
forth in this section shall survive the termination of this Guaranty.
SECTION 7
CLAIMS BY GUARANTOR AGAINST TENANT
Nothing hereunder contained shall operate as a release or discharge, in
whole or in part, of any claim of Guarantor against Tenant by subrogation or
otherwise, by reason of any act done or any payment made by Guarantor pursuant
to the provisions of this Guaranty; but all such claims shall be subordinate to
the claims of Landlord.
SECTION 8
NOTICES
A. Any and all notices, demands, consents, approvals, offers, elections
and other communications required or permitted under this Guaranty shall be
deemed adequately given if in writing and the same shall be delivered either in
hand, by telecopier with written acknowledgment of receipt, or by mail or
Federal Express or similar expedited commercial carrier, addressed to the
recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
B. All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Guaranty upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Guaranty a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
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C. All such notices shall be addressed,
if to Landlord to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to Guarantor to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-924.11
Bethesda, Maryland 20817
Attn: Treasurer
[Telecopier No. (301) 380-5067]
with a copy to
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-923.00
Bethesda, Maryland 20817
Attn: U.S. Lodging Operations Attorney
[Telecopier No. (301) 380-6727]
D. By notice given as herein provided the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Guaranty to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
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SECTION 9
APPLICABLE LAW; JURISDICTION
Guarantor hereby acknowledges, consents, and agrees (i) that the
provisions of this Guaranty and the rights of all parties mentioned herein shall
be governed by the laws of the State of Maryland and interpreted and construed
in accordance with such laws (excluding Maryland conflict of laws) and (ii) that
the United States District Court of the District of Maryland and any court of
competent jurisdiction in the State of Maryland shall have jurisdiction in any
proceeding instituted to enforce this Guaranty, and any objections to venue are
hereby waived.
SECTION 10
BINDING EFFECT
The rights, powers, privileges, and discretions (hereinafter referred
to as the "rights") to which Landlord may be entitled hereunder shall inure to
the benefit of Landlord and Landlord's successors and assigns. All the rights of
Landlord are cumulative and not alternative and may be enforced successively or
concurrently. Failure of Landlord to exercise any of its rights shall not be
deemed a waiver thereof, and no waiver of any of its rights shall be deemed to
apply to any other rights. The terms, covenants, and conditions of or imposed
upon Guarantor herein shall be binding upon the successors and assigns of
Guarantor.
SECTION 11
SEVERABILITY
In case any provision (or any part of any provision) contained in this
Guaranty shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision (or remaining part of the affected provision) of this
Guaranty, but this Guaranty shall be construed as if such invalid, illegal, or
unenforceable provision (or part thereof) had never been contained herein but
only to the extent it is invalid, illegal, or unenforceable.
SECTION 12
GRAMMAR
When used herein, the singular shall include the plural; the plural the
singular; and the use of any gender shall be applicable to all genders.
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SECTION 13
TIME OF THE ESSENCE
Time is of the essence.
SECTION 14
CAPTIONS
The captions appearing in this Guaranty are inserted only as a matter
of convenience and do not define, limit, construe, or describe the scope or
intent of the sections of this Guaranty nor in any way affect this Guaranty.
SECTION 15
MISCELLANEOUS
A. Unenforceability of Guaranteed Obligations, Etc. If Tenant is for
any reason (other than by reason of any waiver, discharge or other event
pursuant to the terms of the Leases) under no legal obligation to pay any of the
Guaranteed Rent, or if any other moneys included in the Guaranteed Rent have
become unrecoverable from Tenant by operation of law or for any other reason,
the obligations of Guarantor contained in this Agreement shall nevertheless
remain in full force and effect and shall be binding upon Guarantor.
B. Consents and Waivers. Guarantor hereby acknowledges receipt of
correct and complete copies of the Leases, and consents to all of the terms and
provisions thereof, as the same may be from time to time hereafter amended or
changed in accordance therewith, and waives (a) notice of any default hereunder
and any default, breach or nonperformance of Event of Default with respect to
any of the Guaranteed Rent under the Leases, (b) demand for performance or
observance of, and any enforcement of any provision of, or any pursuit or
exhaustion of rights or remedies against Tenant, under or pursuant to the
Leases, or any agreement directly or indirectly relating thereto and any
requirements of diligence or promptness on the part of Landlord in connection
therewith, and (c) to the extent Guarantor lawfully may do so, any and all
demand and notices of every kind and description with respect to the foregoing
or which may be required to be given by any statute or rule of law and any
defense of any kind which it may now or hereafter have with respect to this
Guaranty, or the Leases or the Guaranteed Rent; provided, however, that after
any Exercise of Rights by Landlord, Landlord shall not amend the Leases to
increase the amount of Minimum Rent or Additional Rent payable without
Guarantor's consent and Landlord shall give Guarantor copies of any Notices of
Default pursuant to the Leases.
C. No Impairment. The obligations, covenants, agreements and duties of
Guarantor under this Guaranty shall not be affected or impaired by any waiver by
Landlord
11
<PAGE>
of all of the Guaranteed Rent or the performance or observance by Tenant of any
of the agreements, covenants, terms or conditions contained in the Lease or any
indulgence in or the extension of the time for payment or performance by Tenant
of any amounts payable under or in connection with the Leases or any other
instrument or agreement relating to the Guaranteed Rent or of the time for
performance by Tenant of any other obligations under or arising out of any of
the foregoing or the extension or renewal thereof, or the modification or
amendment (whether material or otherwise) of any duty, agreement or obligation
of Tenant set forth in any of the Leases, or the voluntary or involuntary sale
or other disposition of all or substantially all the assets of Tenant or
insolvency, bankruptcy, or other similar proceedings affecting Tenant or any
assets of Tenant, or the release or discharge of Tenant from the performance or
observance of any agreement, covenant, term or condition contained in any
agreement, covenant, term or condition contained in any of the foregoing by
operation of law, or any other cause, whether similar or dissimilar to the
foregoing.
D. Reimbursement, Subrogation, Etc. Guarantor hereby covenants and
agrees that it shall not enforce or otherwise exercise any rights of
reimbursement, subrogation, contribution or other similar rights against Tenant
or any other person with respect to the Guaranteed Rent prior to the payment in
full of the obligations of Tenant under the Leases. Until all obligations of
Tenant under the Leases shall have been paid and performed in full, Guarantor
shall have no right of subrogation, and Guarantor waives any defense it may have
based upon any election of remedies by Landlord which destroys Guarantor's
subrogation rights or Guarantor's rights to proceed against Tenant for
reimbursement, (including, without limitation, any loss of rights Guarantor may
suffer by reason of any rights, powers or remedies of Tenant in connection with
any anti-deficiency laws or any other laws limiting, qualifying or discharging
the indebtedness to Landlord).
E. Remedies Cumulative. No remedy herein conferred upon Landlord is
intended to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
F. HPT's Liability. THE DECLARATION OF TRUST ESTABLISHING HPT AND
HPTMI, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST"
REFERS TO THE 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.
12
<PAGE>
G. Counterpart. The parties agree that this Limited Rent Guaranty may
be signed in counterpart.
IN WITNESS WHEREOF, Guarantor has caused this instrument to be duly
executed under seal and delivered as of the date first above written.
ATTEST: GUARANTOR:
MARRIOTT INTERNATIONAL, INC.
/s/ Aliza L. Carrino By: /s/ Catherine L. Young (SEAL)
Name: Catherine L. Young
Title: Authorized Signatory
LANDLORD:
HOSPITALITY PROPERTIES TRUST
/s/ Jennifer B. Clark By: /s/ John G. Murray (SEAL)
Name: John Murray
Title: President
HPTMI III PROPERTIES TRUST
/s/ Jennifer B. Clark By:/s/ John G. Murray (SEAL)
Name: John Murray
Title: President
13
<PAGE>
EXHIBIT A
Property Expenses
The term "Property Expenses" shall mean the sum of the following items,
to the extent incurred consistent with the terms of the Leases:
1. the cost of sales, including, without limitation, compensation,
fringe benefits, payroll taxes and other costs related to employees of Tenant
and/or the Manager (the foregoing costs shall not include salaries and other
employee costs of executive personnel of Tenant and/or the Manager who do not
work at the Properties on a regular basis; except that the foregoing costs shall
include the allocable portion of the salary and other employee costs of any
general manager or other supervisory personnel assigned to a "cluster" of hotels
which includes the Properties);
2. departmental expenses incurred at departments within the Properties;
administrative and general expenses; the cost of marketing incurred by the
Properties; advertising and business promotion incurred by the Properties; heat,
light, and power; computer line charges; and routine repairs, maintenance and
minor alterations not paid from the Reserve;
3. the cost of Inventories and FAS consumed in the operation of the
Properties;
4. a reasonable reserve for uncollectible accounts receivable as
determined by the Tenant and/or Manager;
5. all costs and fees of independent professionals or other third
parties who are retained by Tenant and/or Manager to perform services required
or permitted hereunder;
6. all costs and fees of technical consultants and operational experts
who are retained or employed by Tenant, Manager and/or Affiliates of the Tenant
or Manager for specialized services (including, without limitation, quality
assurance inspectors) and the cost of attendance by employees of the Properties
at training and manpower development programs sponsored by Tenant and/or
Manager;
7. the fees and other charges paid pursuant to the terms of the
Franchise Agreement, including all franchise fees and royalty fees;
8. insurance costs and expenses as provided in Article 9 of the Leases;
9. taxes, if any, payable by or assessed against Tenant and/or Manager
related to this Agreement or to Franchisor and/or Manager's operation of the
Properties (exclusive of Tenant's and/or Manager's income taxes) and all
Impositions; and
14
<PAGE>
10. such other costs and expenses incurred by Tenant and/or Manager as
are specifically provided for elsewhere in the Leases or are otherwise
reasonably necessary for the proper and efficient operation of the Hotel,
provided, however, it shall not include any fees paid to the Manager pursuant to
the terms of any Management Agreement.
15
EXIBIT 10.3
AGREEMENT TO LEASE
THIS AGREEMENT TO LEASE (this "Agreement") is entered into as of the
29th day of December, 1998, by and between HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust ("HPT"), and CRTM17 TENANT CORPORATION, a
Delaware corporation ("Tenant").
W I T N E S S E T H:
WHEREAS, pursuant to a Purchase and Sale Agreement, dated as of the
date hereof (the "Purchase Agreement"), by and among HPT, as purchaser, and
Residence Inn by Marriott, Inc., Courtyard Management Corporation, TownePlace
Management Corporation, Nashville Airport Hotel, LLC and St. Louis Airport
Hotel, LLC, as sellers, HPT is planning to acquire, through a wholly owned
subsidiary ("HPT Sub"), those certain properties, as more particularly described
in Exhibits A-1 through A-17, attached hereto and made a part hereof; and
WHEREAS, subject to and upon the terms and conditions set forth in this
Agreement, pursuant to a Lease Agreement in the form attached hereto as Exhibit
B (the "Lease"), HPT has agreed to cause HPT Sub to lease to Tenant, and Tenant
has agreed to lease from HPT Sub, all of the Properties (this and other
capitalized terms used and not otherwise defined herein having the meanings
ascribed to such terms in the Purchase Agreement and, to the extent not defined
in the Purchase Agreement, 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. Agreement to Lease. Subject to and upon the terms and conditions
hereinafter set forth, on each date on which HPT or HPT Sub acquires title to
any of the Properties, HPT, or HPT Sub, as the case may be, and Tenant shall
each execute and deliver a Lease with respect to such Property and such date
shall be the Commencement Date under such Lease.
2. Base Rent. The Minimum Rent payable under each Lease for each Lease
Year shall be the respective amounts set forth in Exhibit C.
<PAGE>
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3. Representations of Tenant, Etc. As an inducement to HPT to enter
into this Agreement, Tenant hereby represents and warrants to HPT that, as of
the date hereof and as of the date on which Tenant executes a Lease pursuant to
this Agreement:
(a) Status and Authority of Tenant, Etc. Tenant is a corporation duly
organized and validly existing under the laws of its state of incorporation and
has all requisite power and authority (corporate and other) under the laws of
such state and its respective charter documents to own its property and assets,
to enter into and perform its obligations under this Agreement and the Leases
and to transact the business in which it is engaged or presently proposes to
engage. Tenant is duly qualified in each jurisdiction in which the nature of the
business conducted or to be conducted by it requires such qualification.
(b) Corporate Action of Tenant, Etc. Tenant has taken all necessary
action (corporate or other) under its charter documents to authorize the
execution, delivery and performance of this Agreement and the Leases and each
such instrument constitutes, or will upon execution constitute, the valid and
binding obligation and agreement of Tenant enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization or similar
laws of general application affecting the rights and remedies of creditors and
moratorium laws from time to time in effect, and except to the extent that the
availability of equitable relief may be subject to the discretion of the court
before which any proceeding therefor might be brought.
(c) No Violations of Other Agreements, Etc. Neither the execution and
delivery of this Agreement or the Leases by Tenant, nor compliance with the
terms and provisions hereof or thereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of Tenant pursuant to the terms of any other indenture, mortgage, deed of
trust, note, evidence of indebtedness, agreement or other instrument to which
Tenant may be a party or by which Tenant or any of its properties may be bound,
or violate any provisions of laws, or any applicable order, writ, injunction,
judgment or decree of any court, or any order or other public regulation of any
governmental commission, bureau or administrative agency.
(d) Judgments; Litigation. Except as previously disclosed to HPT in
writing, there are no judgments presently outstanding and unsatisfied against
Tenant or any of its properties, and neither Tenant nor any of its properties
are involved in any material litigation at law or in equity, or any proceeding
before any court, or by or before any governmental or administrative
<PAGE>
-3-
agency, which litigation or proceeding could materially adversely affect Tenant,
and, to the knowledge of Tenant, no such material litigation or proceeding is,
to the knowledge of Tenant, threatened against Tenant, and no investigation
looking toward such a proceeding has begun or is contemplated.
(e) Disclosure. (a) With respect to each of the Properties other than
the Nashville Property and the St. Louis Property, to the actual knowledge of
Tenant, there is no fact or condition which materially and adversely affects the
physical condition of such Property which has not been set forth in this
Agreement or in the other documents, certificates or statements furnished to HPT
in connection with the transactions contemplated hereby.
(b) With respect to each of the Nashville Property and the St.
Louis Property, to the Actual Knowledge of the Designated Individuals, there is
no fact or condition which materially and adversely affects the physical
condition of such Property which has not been set forth in this Agreement or in
the other documents, certificates or statements furnished to HPT in connection
with the transactions contemplated hereby.
4. Representations of HPT. As an inducement to Tenant to enter into
this Agreement, HPT hereby represents to Tenant that, as of the date hereof and
as of the date on which HPT or HPT Sub executes a Lease pursuant to this
Agreement:
(a) HPT Authority. HPT is a real estate investment trust duly organized
and validly existing under the laws of the State of Maryland, having all
requisite power and authority to carry on its business as such business is
presently being conducted and to enter into this Agreement and the Leases and to
consummate the transactions contemplated hereby and thereby.
(b) Status and Authority of HPT Sub. HPT Sub is a real estate
investment trust duly organized and validly existing under the laws of the State
of Maryland and has all requisite power and authority (trust or other) under the
laws of such state and its charter documents to own its property and assets, to
enter into and perform its obligations under this Agreement and the Leases and
to transact the business in which it is engaged or presently proposes to engage.
HPT Sub is duly qualified in each jurisdiction in which the nature of the
business conducted or to be conducted by it requires such qualification, except
where such failure to qualify would not have a material adverse effect on HPT
Sub or the transactions contemplated hereby.
(c) Trust Action of HPT Sub, Etc. HPT Sub has taken all necessary
action (trust or other) under its charter documents to authorize the execution,
delivery and performance of this
<PAGE>
-4-
Agreement and the Leases and each such instrument constitutes, or will upon
execution constitute, the valid and binding obligation and agreement of HPT Sub,
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization or similar laws of general applicable affecting the
rights and remedies of creditors and moratorium laws from time to time in
effect, and except to the extent that the availability of equitable relief may
be subject to the discretion of the court before which any proceeding therefor
might be brought.
5. Additional Tenant Obligations. On or before the Commencement Date of
each Lease, Tenant shall cause each of the following to be delivered to HPT (the
obligation of HPT to enter into the Leases being subject to such delivery):
(a) On the initial Closing Date, a limited rent guaranty (the "Limited
Rent Guaranty"), made by Marriott International, Inc. (the "Guarantor"), in
favor of HPT Sub, the Limited Rent Guaranty to be the form attached hereto as
Exhibit D, and on each subsequent Closing Date, a confirmation thereof;
(b) A franchise agreement (the "Franchise Agreement") between Tenant
and the Guarantor, the Franchise Agreement to be in the form attached hereto as
Exhibit E;
(c) On the initial Closing Date, an Indemnity and Stock Pledge
Agreement (the "Stock Pledge"), made by the Guarantor in favor of HPT Sub, the
Stock Pledge to be in the form attached hereto as Exhibit F; and
(d) Any other Incidental Documents required by the Lease.
6. Additional Landlord Obligations. On or before the Commencement Date
of any Lease, HPT shall cause an owner agreement in the form attached hereto as
Exhibit G (the "Owner Agreement"), on the initial Closing Date, a guaranty of
the landlord's obligations thereunder in the form attached hereto as Exhibit H
and on each subsequent Closing Date, a confirmation thereof, to be delivered to
Tenant with respect to the Property demised under the Leases (the obligation of
Tenant to enter into each such Lease being subject to delivery of such Owner
Agreement and guaranty).
7. Condition Precedent. The obligations of the parties hereunder with
respect to each Property shall be subject to the consummation of the
transactions contemplated by the Purchase Agreement with respect to such
Property.
<PAGE>
-5-
8. Notices. All notices required or desired to be given hereunder shall
be given in the manner provided in Section 22.10 of the Lease.
9. Assignment. Except as expressly set forth in Article 16 of 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. Except as expressly set
forth in Article 15 of the Lease, 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.
10. Default.
(a) Default by Tenant. If Tenant shall have made any representation or
warranty herein which shall be untrue in any material respect when made or at
the time of execution of a Lease, or if Tenant shall fail to perform any of the
covenants and agreements contained herein to be performed by Tenant and such
failure continues for a period of ten (10) days after notice thereof from HPT
(or such additional period, not to extend beyond December 31, 1999, as may be
reasonably required to cure the same) or if the Sellers are in default of the
Purchase Agreement pursuant to Section 10.1 thereof, HPT may terminate this
Agreement and/or pursue any and all remedies available to HPT at law or in
equity, including, but not limited to, a suit for specific performance or other
equitable relief; provided, however, that, (x) in no event shall Tenant be
liable for consequential damages and (y) in no event shall the aggregate
liability of Tenant hereunder exceed an amount equal to the sum of (i) ten
percent of the Allocable Purchase Price of the affected Property or Properties,
(ii) actual costs and expenses incurred by HPT with respect to the affect
Property and Properties, (iii) costs of collection (including, without
limitation, reasonable attorneys' fees) and (iv) interest at 10% per annum on
all such amounts from the date of demand until paid. Any sums paid by Sellers as
a result of their default pursuant to any term of the Purchase Agreement shall
be a credit towards any sums to be paid by Tenant hereunder. It is understood
and agreed that, for purposes of this Section, if a default results from a false
representation or warranty, such default shall be deemed cured if the events,
conditions, acts or omissions giving rise to the falsehood are cured within the
applicable cure period even though, as a technical matter, such representation
or warranty was false as of the date actually made.
(b) Default by HPT. If HPT shall have made any representation or
warranty herein which shall be untrue in any
<PAGE>
-6-
material respect when made or at the time of execution of a Lease, or if HPT
shall fail to perform any of the covenants and agreements contained herein to be
performed by it and such failure shall continue for a period of ten (10) days
(or such additional period, not to extend beyond December 31, 1999 as may be
reasonably required to cure the same) after notice thereof from Tenant or if HPT
is in default of the Purchase Agreement pursuant to Section 10.2 thereof, Tenant
may terminate this Agreement and/or pursuant any and all remedies available to
Tenant at law or in equity, including, but not limited to, a suit for specific
performance or other equitable relief; provided, however, that (x) in no event
shall HPT be liable for consequential damages and (y) in no event shall the
aggregate liability of HPT hereunder exceed the sum of (i) ten percent of the
Allocable Purchase Price of the affected Property or Properties, (ii) actual
costs and expenses incurred by the Tenant with respect to the affected Property
or Properties, (iii) costs of collection (including, without limitation,
reasonable attorneys' fees) and (iv) interest of collection (including, without
limitation, reasonable attorneys' fees) and (iv) interest at 10% per annum on
all such amounts from the date of demand until paid. Any sums paid by HPT as a
result of its default pursuant to any term of the Purchase Agreement shall be a
credit towards any sum to be paid by HPT hereunder. It is understood and agreed
that, for purposes of this Section, if a default results from a false
representation or warranty, such default shall be deemed cured if the events,
conditions, acts or omissions giving rise to the falsehood are cured within the
applicable cure period event though, as a technical matter, such representation
or warranty was false as of the date actually made.
11. Miscellaneous.
(a) Expenses. Except as set forth in Section 9.2 of the Purchase
Agreement, HPT and Tenant shall each pay their own professional expenses
incident to the negotiation, preparation and carrying out of this Agreement,
including, without limitation, all fees and expenses of their respective
counsel. HPT and Tenant shall share equally the cost of all recording fees,
transfer fees and other like costs and expenses.
(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 the press, any public body or authority or to any
third party without the consent of the other parties, which consent shall not be
unreasonably withheld, except as may be required by law or as may be reasonably
necessary, on a
<PAGE>
-7-
confidential basis, to inform any rating agencies, potential sources of
financing, financial analysts, or to entities involved with the sale of a
controlling interest in the Tenant, the Guarantor, HPT, HPT Sub or any of their
Affiliated Persons; provided, however, that, if such information is required to
be disclosed by law, the party so disclosing the information will use its
reasonable efforts to give notice to the other party of such disclosure as soon
as such party learns that it must make such disclosure.
(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.
12. Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State of
Maryland applicable to contracts between residents of Maryland which are to be
performed entirely within Maryland, regardless of (i) where this Agreement is
executed or delivered; or (ii) where any payment or other performance required
by this Agreement is made or required to be made; or (iii) where any breach of
any provision of this Agreement occurs, or any cause of action otherwise
accrues; or (iv) where any action or other proceeding is instituted or pending;
or (v) the nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi) whether the
laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction
other than the State of Maryland; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of Maryland as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of Maryland and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
13. 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.
<PAGE>
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14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. Nonliability of Trustees, Etc. THE DECLARATION OF TRUST
ESTABLISHING HPT, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF HPT SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY,
FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HPT. ALL PERSONS DEALING WITH HPT, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HPT FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
<PAGE>
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20. Nonliability of Officers, Etc. NO TRUSTEE, OFFICER, SHAREHOLDER,
EMPLOYEE OR AGENT OF TENANT SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TENANT. ALL PERSONS DEALING
WITH TENANT, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TENANT FOR THE PAYMENT
OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, HPT and Tenant have executed this Agreement under
seal as of the date above first written.
HOSPITALITY PROPERTIES TRUST
By: /s/John G. Murray
John G. Murray, President
CRTM17 TENANT CORPORATION
By: /s/ Catherine L. Young
Its (Vice) President
<PAGE>
EXHIBIT B
Form of Lease
[See attached copy.]
<PAGE>
LEASE AGREEMENT
DATED AS OF ______ __, 199_
BY AND BETWEEN
HPTMI III PROPERTIES TRUST,
AS LANDLORD,
AND
CRTM17 TENANT CORPORATION,
AS TENANT
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS...........................................................1
1.1 Accounting Period................................................2
1.2 Additional Rent .................................................2
1.3 Additional Charges ..............................................2
1.4 Affiliated Person ...............................................2
1.5 Agreement .......................................................2
1.6 Agreement to Lease...............................................3
1.7 Allocable Purchase Price.........................................3
1.8 Applicable Laws .................................................3
1.9 Applicable Percentage............................................3
1.10 Award ..........................................................4
1.11 Base Hotel Sales ...............................................4
1.12 Base Year ......................................................5
1.13 Business Day ...................................................5
1.14 Capital Addition ...............................................6
1.15 Capital Expenditure ............................................6
1.16 Claim ..........................................................6
1.17 Code ...........................................................6
1.18 Collective Leased Properties ...................................6
1.19 Commencement Date ..............................................6
[1.20 Commencement of Expansion......................................6
1.21 Competitor......................................................6
1.22 Condemnation ...................................................6
1.23 Condemnor ......................................................7
1.24 Consolidated Financials ........................................7
1.25 Date of Taking .................................................7
1.26 Default ........................................................7
1.27 Disbursement Rate ..............................................7
1.28 Distribution ...................................................7
1.29 Encumbrance ....................................................7
1.30 Entity......................................................7
1.31 Environment ....................................................8
1.32 Environmental Notice ...........................................8
1.33 Environmental Obligation .......................................8
1.34 Event of Default ...............................................8
1.35 Excess Hotel Sales..............................................8
1.37 Extended Terms .................................................8
1.38 FAS ............................................................8
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1.39 Financial Officer's Certificate ................................8
1.40 Fiscal Quarter .................................................9
1.41 Fiscal Year ....................................................9
1.42 Fixed Term .....................................................9
1.43 Fixtures .......................................................9
1.44 Franchise Agreement.............................................9
1.45 Franchisor .....................................................9
1.46 GAAP ...........................................................9
1.47 Government Agencies.............................................9
1.48 Guarantor .....................................................10
1.49 Hazardous Substances ..........................................10
1.50 Hotel .........................................................11
1.51 Hotel Mortgage ................................................11
1.52 Hotel Mortgagee ...............................................11
1.53 HPT ...........................................................11
1.54 HPT Guaranty ..................................................11
1.55 Immediate Family...............................................11
1.56 Impositions ...................................................11
1.57 Incidental Documents ..........................................13
1.58 Indebtedness ..................................................13
1.59 Index .........................................................13
1.60 Insurance Requirements ........................................13
1.61 Interest Rate..................................................13
1.62 Inventories ...................................................13
1.63 Land ..........................................................14
1.64 Landlord ......................................................14
1.65 Landlord Default ..............................................14
1.66 Landlord Liens.................................................14
1.67 Lease Year ....................................................14
1.68 Leased Improvements ...........................................14
1.69 Leased Intangible Property ....................................14
1.70 Leased Personal Property ......................................14
1.71 Leased Property ...............................................15
1.72 Legal Requirements ............................................15
1.73 Lien ..........................................................15
1.74 Limited Rent Guaranty .........................................15
1.75 Management Agreement ..........................................15
1.76 Manager .......................................................15
1.77 Minimum Rent ..................................................15
1.78 Notice ........................................................16
1.79 Officer's Certificate .........................................16
1.80 Other Leases...................................................16
1.81 Overdue Rate ..................................................16
1.82 Owner Agreement................................................16
1.83 Parent.........................................................16
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1.84 Permitted Encumbrances ........................................16
1.85 Permitted Liens ...............................................16
1.86 Permitted Use .................................................16
1.87 Person ........................................................16
1.88 Proprietary Information .......................................17
1.89 Purchase Agreement.............................................17
1.90 Purchase Documents.............................................17
1.91 Rent ..........................................................17
1.92 Request Notice ................................................17
1.94 Reserve........................................................17
1.95 Reserve Estimate ..............................................18
1.96 Response Notice ...............................................18
1.97 Retained Funds.................................................18
1.98 SEC ...........................................................18
1.99 State .........................................................18
1.100 Stock Pledge Agreement .......................................18
1.101 Subordinated Creditor ........................................18
1.102 Subordination Agreement ......................................18
1.103 Subsidiary ...................................................18
1.104 Successor Landlord ...........................................19
1.105 Tangible Net Worth ...........................................19
1.106 Tenant .......................................................19
1.107 Tenant's Personal Property ...................................19
1.108 Term .........................................................19
1.109 Total Hotel Sales.............................................20
1.110 Uniform System of Accounts ...................................20
1.111 Unsuitable for Its Permitted Use .............................20
1.112 Work .........................................................21
ARTICLE 2
LEASED PROPERTY AND TERM.............................................21
2.1 Leased Property.................................................21
2.2 Condition of Leased Property................................22
2.3 Fixed Term......................................................23
2.4 Extended Term...............................................23
ARTICLE 3
RENT.................................................................24
3.1 Rent............................................................24
3.2 Late Payment of Rent, Etc...................................31
3.3 Net Lease...................................................31
3.4 No Termination, Abatement, Etc..............................32
3.5 Security for Tenant's Performance...............................33
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ARTICLE 4
USE OF THE LEASED PROPERTY...........................................33
4.1 Permitted Use...................................................33
4.2 Compliance with Legal/Insurance Requirements, Etc...............35
4.3 Environmental Matters...........................................35
ARTICLE 5
MAINTENANCE AND REPAIRS..............................................38
5.1 Maintenance and Repair..........................................38
5.2 Tenant's Personal Property......................................43
5.3 Yield Up........................................................44
5.4 Management Agreement............................................45
ARTICLE 6
IMPROVEMENTS, ETC....................................................46
6.1 Improvements to the Leased Property. ..........................46
6.2 Salvage.........................................................47
6.3 Equipment Leases................................................47
6.4 [For FS St. Louis and Nashville: Required Work.................47
6.5 [For Nashville: Hotel Expansion................................48
ARTICLE 7
LIENS................................................................51
ARTICLE 8
PERMITTED CONTESTS...................................................51
ARTICLE 9
INSURANCE AND INDEMNIFICATION........................................52
9.1 General Insurance Requirements..................................52
9.2 Replacement Cost................................................54
9.3 Waiver of Subrogation...........................................54
9.4 Form Satisfactory, Etc..........................................55
9.5 Blanket Policy..................................................56
9.6 No Separate Insurance...........................................56
9.7 Indemnification of Landlord.....................................56
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ARTICLE 10
CASUALTY.............................................................57
10.1 Insurance Proceeds.............................................57
10.2 Damage or Destruction..........................................58
10.3 Damage Near End of Term........................................60
10.4 Tenant's Property..............................................60
10.5 Restoration of Tenant's Property...............................60
10.6 No Abatement of Rent...........................................61
10.7 Waiver.........................................................61
ARTICLE 11
CONDEMNATION.........................................................61
11.1 Total Condemnation, Etc........................................61
11.2 Partial Condemnation...........................................61
11.3 Disbursement of Award..........................................62
11.4 Abatement of Rent..............................................63
11.5 Temporary Condemnation.........................................63
11.6 Allocation of Award............................................64
ARTICLE 12
DEFAULTS AND REMEDIES................................................64
12.1 Events of Default..............................................64
12.2 Remedies.......................................................67
12.3 Tenant's Waiver................................................69
12.4 Application of Funds...........................................69
12.5 Landlord's Right to Cure Tenant's Default......................69
12.6 Retained Funds.................................................70
12.7 Good Faith Dispute.............................................70
ARTICLE 13
HOLDING OVER.........................................................70
ARTICLE 14
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT......................71
14.1 Landlord Notice Obligation.....................................71
14.2 Landlord's Default.............................................71
14.3 Special Remedies for Landlord Funding Default..................72
14.4 Remedy after Landlord Transfer.................................73
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14.5 Special Remedy after Landlord Default under
Section 10.2.4 and 11.3.....................................73
14.6 Special Remedy for Tenant under Section 22.8...................73
ARTICLE 15
TRANSFERS BY LANDLORD................................................74
15.1 Transfer of Leased Property....................................74
15.2 Conditions of Transfer.........................................74
ARTICLE 16
SUBLETTING AND ASSIGNMENT............................................75
16.1 Subletting and Assignment......................................75
16.2 Required Sublease Provisions...................................77
16.3 Permitted Sublease and Assignment..............................79
16.4 Sublease Limitation............................................79
16.5 Special Crestline Assignment...................................80
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.......................80
17.1 Estoppel Certificates..........................................80
17.2 Financial Statements...........................................81
17.3 General Operations.............................................82
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT..........................................83
ARTICLE 19
ALTERNATIVE DISPUTE RESOLUTION.......................................83
19.1 Negotiation and Mediation......................................83
19.2 Arbitration....................................................83
ARTICLE 20
HOTEL MORTGAGES......................................................85
20.1 Landlord May Grant Liens.......................................85
20.2 Subordination of Lease.........................................85
20.3 Notices........................................................87
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ARTICLE 21
ADDITIONAL COVENANTS OF TENANT.......................................87
21.1 Conduct of Business............................................87
21.2 Maintenance of Accounts and Records............................88
21.3 Notice of Litigation, Etc......................................88
21.4 Indebtedness of Tenant.........................................88
21.5 Financial Condition of Tenant..................................89
21.6 Distributions, Payments to Affiliated Persons, Etc.............89
21.7 Prohibited Transactions........................................90
21.8 Liens and Encumbrances.........................................90
21.9 Merger; Sale of Assets; Etc....................................90
ARTICLE 22
MISCELLANEOUS........................................................91
22.1 Limitation on Payment of Rent..................................91
22.2 No Waiver......................................................91
22.3 Remedies Cumulative............................................92
22.4 Severability...................................................92
22.5 Acceptance of Surrender........................................92
22.6 No Merger of Title.............................................92
22.7 Conveyance by Landlord.........................................92
22.8 Quiet Enjoyment................................................93
22.9 Memorandum of Lease............................................93
22.10 Notices.......................................................94
22.11 Construction; Nonrecourse.....................................95
22.12 Counterparts; Headings........................................96
22.13 Applicable Law, Etc...........................................96
22.14 Right to Make Agreement.......................................97
22.15 Disclosure of Information.....................................97
22.16 Trademarks, Trade Names and Service Marks.....................98
EXHIBITS
A - Minimum Rent
B - Other Leases
C - The Land
[For FS St. Louis and Nashville: D - Required Work]
[For FS Nashville: E - Nashville Expansion]
[For FS Nashville: F - Total Hotel Sales]
Schedule 1 - Crestline Financials
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this ___ day of __________,
199_, by and between HPTMI III PROPERTIES TRUST, a Maryland real estate
investment trust, as landlord ("Landlord"), and CRTM17 TENANT CORPORATION, a
Delaware corporation, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Leased Property (this
and other capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and
Tenant wishes to lease the Leased Property from Landlord, all subject to and
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article shall have the meanings assigned to them in this Article and include the
plural as well as the singular, (ii) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and
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other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.1 "Accounting Period" shall mean each four (4) week accounting period
of Tenant, except that an Accounting Period may, from time to time, include five
(5) weeks in order to conform Tenant's accounting system to Tenant's Fiscal
Year. If Tenant shall, for a bona fide business reason, change its Accounting
Periods during the Term, appropriate adjustments, if any, shall be made with
respect to the timing of certain accounting and reporting requirements of this
Agreement; provided, however, that, in no event shall any such change or
adjustment increase or reduce any monetary obligation under this Agreement.
1.2 "Additional Rent" shall have the meaning given such term in Section
3.1.2(a).
1.3 "Additional Charges" shall have the meaning given such term in
Section 3.1.3.
1.4 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited liability
company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b), (d) any
other Person who is an officer, director, trustee or employee of, or partner in,
such Person or any Person referred to in the preceding clauses (a), (b) and (c),
and (e) any other Person who is a member of the Immediate Family of such Person
or of any Person referred to in the preceding clauses (a) through (d); provided,
however, that, notwithstanding the foregoing, as of the date hereof, Host
Marriott Corporation, Sodexho Marriott Services, Inc., or any of their
Affiliated Persons are not Affiliated Persons as to Tenant or the Guarantor.
1.5 "Agreement" shall mean this Lease Agreement, including all Exhibits
and Schedules hereto, as it and they may be amended from time to time as herein
provided.
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1.6 "Agreement to Lease" shall mean the Agreement to Lease, dated as of
December 29, 1998, by and between HPT and the Tenant, as amended from time to
time.
1.7 "Allocable Purchase Price" shall have the meaning given such term
in the Purchase Agreement.
1.8 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health
(except those requirements which, by definition, are solely the responsibility
of employers) or the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pesti cides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature, into
the Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.
1.9 "Applicable Percentage" shall mean, with respect to any Accounting
Period, or portion thereof, [for RIs: , with respect to the period beginning on
the Commencement Date and ending on the last day of the first full Fiscal Year
of operation of the Hotel, two percent (2%)] [for CYs: , with respect to the
period beginning on the Commencement Date and ending on the last day of the
first full Fiscal Year of operation of the Hotel, three percent (3%)] [for TPs:
, with respect to the period beginning
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on the Commencement Date and ending on the last of the first full Fiscal Year of
operation of the Hotel, four percent (4%)] [for FS: , with respect to the period
beginning on the Commencement Date and ending on the last day of the first full
Fiscal Year of operation of the Hotel, five percent (5%)], [for RIs and CYs:
with respect to the second full Fiscal Year of operation of the Hotel, four
percent (4%)] [for TPs and FS: with respect to the second full Fiscal Year of
operation of the Hotel, five percent (5%)] and, with respect to each Fiscal Year
thereafter, [for CYs, RIs and FS: five percent (5%)] [for TPs: six percent
(6%)].
1.10 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of the Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses, including, without limitation, expert witness fees, incurred
by Landlord, in connection with obtaining any such award).
1.11 "Base Hotel Sales" shall mean, when used with reference to any
Lease Year, Total Hotel Sales for the Base Year and, when used with reference to
the first, second or third Fiscal Quarters of any Fiscal Year, 3/13 of Total
Hotel Sales for the Base Year and, when used with reference to the fourth Fiscal
Quarter of any Fiscal Year, 4/13 of Total Hotel Sales for the Base Year [For FS:
(and in the event of Additional Rent being due for any partial Fiscal Quarter in
the first Lease Year Additional Rent accrues, Base Hotel Sales for such partial
Fiscal Quarter shall be 1/13 or 2/13 of Total Hotel Sales for the Base Year
depending on whether such partial Fiscal Quarter consists of one or two
Accounting Periods, respectively)]; provided, however, that in the event that,
with respect to any Lease Year, or portion thereof, for any reason (including,
without limitation, a casualty or Condemnation) there shall be, for one hundred
eighty (180) days or more in any Lease Year, a reduction in the number of rooms
at the Hotel or a change in the services provided at the Hotel (including,
without limitation, closing of restaurants) from the number of rooms or the
services provided during the Base Year, in determining Additional Rent payable
with respect to such Lease Year, Base Hotel Sales shall be reduced as follows:
(a) in the event of a complete closing of the Hotel, Total Hotel Sales
attributable to such Hotel during the Base Year shall be subtracted from Base
Hotel Sales throughout the period of such
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closing; (b) in the event of a partial closing of the Hotel affecting any number
of guest rooms in such Hotel, Total Hotel Sales attributable to guest room
occupancy or guest room services at such Hotel during the Base Year shall be
ratably allocated among all guest rooms in service at such Hotel during the Base
Year and all such Total Hotel Sales attributable to rooms no longer in service
shall be subtracted from Base Hotel Sales throughout the period of such closing;
(c) in the event of a closing of a restaurant, all Total Hotel Sales attributed
to such restaurant during the Base Year shall be subtracted from Base Hotel
Sales throughout the period of such closing; and (e) in the event of any other
change in circumstances affecting the Hotel, Base Hotel Sales shall be equitably
adjusted in such manner as Landlord and Tenant shall reasonably agree. [For FS
Nashville: Notwithstanding the foregoing, if the Expansion occurs, then all
references herein to the Base Year shall be deemed to be the Reset Base Year as
provided in Section 6.4.]
1.12 "Base Year" shall mean [for CY, RI and TP: the second full Fiscal
Year of operation of the Hotel] [for FS: the thirteen (13) Accounting Periods
starting with the eighth (8th) Accounting Period of the 1999 Fiscal Year and
ending with the seventh (7th) Accounting Period of the 2000 Fiscal Year;
provided, however, if there shall occur, prior to the expiration of the Base
Year described in the preceding clause, any force majeure which causes a
material decline in Total Hotel Sales [for CY, RI and TP: during the second full
Fiscal Year of operation of the Hotel] and [for FS: during the thirteen (13)
Accounting Periods starting with the eighth (8th) Accounting Period of the 1999
Fiscal Year and ending with the seventh (7th) Accounting Period of the 2000
Fiscal Year, the Base Year shall be adjusted to be the first full Fiscal Year of
operation of the Hotel after the termination of any such force majeure event.
1.13 "Business Day" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of Maryland are authorized by law or executive action to close.
1.14 "Capital Addition" shall mean any renovation, renewal, addition,
alteration, replacement, repair or improvement to the
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Leased Property (or portion thereof), the cost of which constitutes a Capital
Expenditure.
1.15 "Capital Expenditure" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.16 "Claim" shall have the meaning given such term in Article 8.
1.17 "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.18 "Collective Leased Properties" shall mean, collectively, the
Leased Property and every other Leased Property (as defined therein) under the
Other Leases.
1.19 "Commencement Date" shall mean the date of this Agreement.
[1.20 "Commencement of Expansion" shall have the meaning given such
term in the Section 6.4.]
1.21 "Competitor" shall have the meaning given such term in the
Franchise Agreement.
1.22 "Condemnation" shall mean (a) the exercise of any governmental
power with respect to the Leased Property, whether by legal proceedings or
otherwise, by a Condemnor of its power of condemnation, (b) a voluntary sale or
transfer of the Leased Property by Landlord to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are pending,
or (c) a taking or voluntary conveyance of all or part of the Leased Property,
or any interest therein, or right accruing thereto or use thereof, as the result
or in settlement of any Condemnation or other eminent domain proceeding
affecting the Leased Property, whether or not the same shall have actually been
commenced.
1.23 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
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1.24 "Consolidated Financials" shall mean, for any Fiscal Year or other
accounting period of Tenant, annual audited and quarterly unaudited financial
statements of the Guarantor prepared on a consolidated basis, including the
Guarantor's consolidated balance sheet and the related statements of income and
cash flows, all in reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal Year,
and prepared in accordance with GAAP throughout the periods reflected.
1.25 "Date of Taking" shall mean the date the Condemnor has the right
to possession of the Leased Property, or any portion thereof, in connection with
a Condemnation.
1.26 "Default" shall mean any event or condition existing which with
the giving of notice and/or lapse of time would ripen into an Event of Default.
1.27 "Disbursement Rate" shall mean an annual rate of interest equal to
the greater of, as of the date of determination, (i) the Interest Rate and (ii)
the per annum rate for ten (10) year U.S. Treasury Obligations as published in
The Wall Street Journal plus three hundred (300) basis points.
1.28 "Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, (b) any purchase,
redemption retirement or other acquisition of any shares of any class of capital
stock of Tenant, (c) any other distribution on or in respect of any shares of
any class of capital stock of Tenant, or (d) any return of capital to
shareholders of Tenant.
1.29 "Encumbrance" shall have the meaning given such term in Section
20.1.
1.30 "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.
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1.31 "Environment" shall mean soil, surface waters, ground waters,
land, streams, sediments, surface or subsurface strata and ambient air.
1.32 "Environmental Notice" shall have the meaning given such term in
Section 4.3.1.
1.33 "Environmental Obligation" shall have the meaning given such term
in Section 4.3.1.
1.34 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.35 "Excess Hotel Sales" shall mean, with respect to any Lease Year or
Fiscal Quarter, or portion thereof, as applicable, the amount of Total Hotel
Sales for such period, in excess of Base Hotel Sales for the equivalent period.
1.36 [For FS Nashville: "Expansion" shall have the meaning given such
term in Section 6.4.]
1.37 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.38 "FAS" shall mean all items included within "Property and
Equipment" under the Uniform System of Accounts, including, but not limited to,
linen, china, glassware, tableware, uniforms and similar items, whether used in
connection with public space or guest rooms.
1.39 "Financial Officer's Certificate" shall mean, as to any Person, a
certificate of the chief financial officer or chief accounting officer (or such
officers' authorized designee) of such Person, duly authorized, accompanying the
financial statements required to be delivered by such Person pursuant to Section
17.2, in which such officer shall certify that such statements have been
properly prepared in accordance with GAAP and fairly present the consolidated
financial condition of such Person at and as of the dates thereof and the
results of its and their operations for the periods covered thereby.
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1.40 "Fiscal Quarter" shall mean, with respect to the first, second and
third quarter of any Fiscal Year, the first, second and third, respectively,
three (3) Accounting Periods of such Fiscal Year and, with respect to the fourth
quarter of any Fiscal Year, the final four (4) Accounting Periods of such Fiscal
Year.
1.41 "Fiscal Year" shall mean each fiscal year of Tenant, each such
fiscal year to consist of thirteen Accounting Periods. If Tenant shall, for a
bona fide business reason, change its Fiscal Year during the Term, appropriate
adjustments, if any, shall be made with respect to the timing of certain
accounting and reporting requirements of this Agreement; provided, however,
that, in no event shall any such change or adjustment increase or reduce any
monetary obligation under this Agreement.
1.42 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.43 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.44 "Franchise Agreement" shall mean the Franchise Agreement, dated as
of the date hereof, between Tenant and the Franchisor with respect to the Hotel,
as amended from time to time.
1.45 "Franchisor" shall mean Marriott International, Inc., its
successors and assigns.
1.46 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.47 "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or the Hotel operated thereon.
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1.48 "Guarantor" shall mean Marriott International, Inc., a Delaware
corporation, its successors and assigns.
1.49 "Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or
"contaminant" under any present or future federal, state or local
statute, regulation, rule or ordi nance or amendments thereto
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. et seq.) and the
Resource Conservation and Recovery Act (42 U.S.C. section 6901 et seq.)
and the regulations promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, any state of the United States, or any political subdivision
thereof; or
(d) the presence of which on the Leased Property causes or
materially threatens to cause an unlawful nuisance upon the Leased
Property or to adjacent properties or poses or materially threatens to
pose a hazard to the Leased Property or to the health or safety of
persons on or about the Leased Property; or
(e) without limitation, which contains gasoline, diesel fuel
or other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated
biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
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(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or
may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988, or any Applicable Laws promulgated by any
Government Agencies.
1.50 "Hotel" shall mean the [Residence Inn by Marriott] [Courtyard by
Marriott] [TownePlace Suites] [Marriott] hotel being operated on the Leased
Property.
1.51 "Hotel Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article 20.
1.52 "Hotel Mortgagee" shall mean the holder of any Hotel Mortgage.
1.53 "HPT" shall mean Hospitality Properties Trust, a Maryland real
estate investment trust, and its permitted successors and assigns.
1.54 "HPT Guaranty" shall mean the guaranty agreement, dated as of the
date hereof, made by HPT for the benefit of Tenant, as amended.
1.55 "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.
1.56 "Impositions" shall mean collectively, all taxes (including,
without limitation, all taxes imposed under the laws of the State, as such laws
may be amended from time to time, and all ad valorem, sales and use, single
business, gross receipts, transaction privilege, rent or similar taxes as the
same relate to or are imposed upon Landlord, Tenant or the business conducted
upon the Leased Property), assessments (including, without limitation, all
assessments for public improvements or benefit, whether or not commenced or
completed prior to the date hereof), water, sewer or other rents and charges,
excises, tax levies,
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fees (including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, or foreseen or unforeseen, of
every character in respect of the Leased Property or the business conducted
thereon by Tenant (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon (a) Landlord's interest in the Leased Property, (b) the Leased Property or
any part thereof or any rent therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with the Leased Property or the
leasing or use of the Leased Property or any part thereof by Tenant; provided,
however, that nothing contained herein shall be construed to require Tenant to
pay (i) any tax based on net income, net worth or capital imposed on Landlord,
(ii) any net revenue tax of Landlord, (iii) any transfer fee or other tax
imposed with respect to the sale, exchange or other disposition by Landlord of
the Leased Property or the proceeds thereof (other than in connection with the
sale, exchange or other disposition to, or in connection with a transaction
involving, Tenant), (iv) any single business, gross receipts tax (other than a
tax on any rent received by Landlord from Tenant provided that such gross
receipts tax on such rent is expressly in lieu of any other tax, assessment,
levy or charge otherwise excluded from this definition of Impositions),
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Landlord, except to the extent that any tax, assessment, tax levy
or charge that would otherwise be an Imposition under this definition which is
in effect at any time during the Term hereof is totally or partially repealed,
and a tax, assessment, tax levy or charge set forth in clause (i) or (ii)
preceding is levied, assessed or imposed expressly in lieu thereof, (v) any
interest or penalties 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
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express terms as a substitute for any tax that would not have been payable by
Tenant pursuant to the terms of this Agreement or (viii) any Impositions imposed
as a result of a breach of covenant or representation by Landlord in any
agreement governing Landlord's conduct or operation or as a result of the
negligence or willful misconduct of Landlord.
1.57 "Incidental Documents" shall mean, collectively, the Limited Rent
Guaranty, the Franchise Agreement, the Stock Pledge Agreement and the Owner
Agreement.
1.58 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
1.59 "Index" shall mean the Consumer Price Index for Urban Wage Earners
and Clerical Workers, All-Cities, All Items 1982- 1984 = 100, as published by
the Bureau of Labor Statistics or, in the event publication thereof ceases, by
reference to whatever index then published by the United States Department of
Labor at that time is most nearly comparable as a measure of general changes in
price levels for urban areas, as reasonably determined by Landlord and Tenant.
1.60 "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.
1.61 "Interest Rate" shall mean ten percent (10%) per annum.
1.62 "Inventories" shall mean "Inventories" as defined in the Uniform
System of Accounts, including, but not limited to, provisions in storerooms,
refrigerators, pantries and kitchens; beverages in wine cellars and bars; other
merchandise intended for sale; fuel; mechanical supplies; stationery; and other
expensed supplies and similar items.
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1.63 "Land" shall have the meaning given such term in Section 2.1(a).
1.64 "Landlord" shall have the meaning given such term in the preambles
to this Agreement and shall include its permitted successors and assigns.
1.65 "Landlord Default" shall have the meaning given such term in
Section 14.2.
1.66 "Landlord Liens" shall mean liens on or against the Leased
Property or any payment of Rent (a) which result from any act of, or any claim
against, Landlord or any owner (other than Tenant) of a direct or indirect
interest in the Leased Property, or which result from any violation by Landlord
of any terms of this Agreement or the Purchase Agreement, or (b) which result
from liens in favor of any taxing authority by reason of any tax owed by
Landlord or any fee owner of a direct or indirect interest in the Leased
Property; provided, however, that "Landlord Lien" shall not include any lien
resulting from any tax for which Tenant is obligated to pay or indemnify
Landlord against until such time as Tenant shall have already paid to or on
behalf of Landlord the tax or the required indemnity with respect to the same.
1.67 "Lease Year" shall mean any Fiscal Year during the Term and any
partial Fiscal Year at beginning or end of the Term.
1.68 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.69 "Leased Intangible Property" shall mean all Intangible Property
(as defined therein) acquired by Landlord with respect to the Leased Property
pursuant to the Purchase Agreement.
1.70 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.71 "Leased Property" shall have the meaning given such term in
Section 2.1.
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1.72 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Leased Property or
the maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate the Leased Property for its Permitted Use, and (b) all covenants,
agreements, restrictions and encumbrances contained in any instruments at any
time in force affecting the Leased Property as of the date hereof, or to which
Tenant has consented or required to be granted pursuant to Applicable Laws,
including those which may (i) require material repairs, modifications or
alterations in or to the Leased Property or (ii) in any way materially and
adversely affect the use and enjoyment thereof, but excluding any requirements
arising as a result of Landlord's status as a real estate investment trust.
1.73 "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.
1.74 "Limited Rent Guaranty" shall mean the limited rent guaranty
agreement, dated as of the date hereof, made by the Guarantor in favor of
Landlord, as amended from time to time.
1.75 "Management Agreement" shall mean any agreement entered into by
Tenant with respect to the management and operation of the Leased Property.
1.76 "Manager" shall mean the person designated by and acting as
Manager pursuant to a Management Agreement.
1.77 "Minimum Rent" shall mean, with respect to each Accounting Period,
the sum set forth on Exhibit A.
1.78 "Notice" shall mean a notice given in accordance with Section
22.10.
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1.79 "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.
1.80 "Other Leases" shall mean, collectively, any Lease Agreements
between Landlord and Tenant with respect to the properties described on Exhibit
B.
1.81 "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.
1.82 "Owner Agreement" shall mean the Owner Agreement pertaining to the
Leased Property, dated as of the date hereof, among Landlord, Tenant and the
Franchisor, as amended from time to time.
1.83 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly through one or more Subsidiaries or Affiliated
Persons, fifty-one percent (51%) or more of the voting or beneficial interest
in, or otherwise has the right or power (whether by contract, through ownership
of securities or otherwise) to control, such Person.
1.84 "Permitted Encumbrances" shall mean all rights, restrictions, and
easements of record set forth on Schedule B to the applicable owner's or
leasehold title insurance policy issued to Landlord on the date hereof, plus any
other such encumbrances as may have been consented to in writing by Landlord
from time to time.
1.85 "Permitted Liens" shall mean any Liens granted in accordance with
Section 21.8(a).
1.86 "Permitted Use" shall mean any use of the Leased Property
permitted pursuant to Section 4.1.1(a) or (b).
1.87 "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.
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1.88 "Proprietary Information" shall mean (a) all computer software and
accompanying documentation (including all future upgrades, enhancements,
additions, substitutions and modifications thereof), other than computer
software which is commercially available, which are used by Tenant in connection
with the property management system, the reservation system and all future
electronic systems developed by Tenant for use in the Hotel, (b) all manuals,
brochures and directives used by Tenant at the Hotel regarding the procedures
and techniques to be used in operating the Hotel, (c) customer lists, and (d)
employee records which must remain confidential either under Legal Requirements
or under reasonable corporate policies of Tenant; provided, however, that
"Proprietary Information" shall not include any software, manuals, brochures or
directives issued by Franchisor to Tenant, as franchisee, under the Franchise
Agreement.
1.89 "Purchase Agreement" shall mean the Purchase and Sale Agreement,
dated as of December 29, 1998, by and among HPT, as purchaser, and Residence Inn
by Marriott, Inc., Courtyard Management Corporation, TownePlace Management
Corporation, St. Louis Airport Hotel, LLC and Nashville Airport Hotel, LLC, as
sellers, as amended.
1.90 "Purchase Documents" shall mean, collectively, the Purchase
Agreement and the Agreement to Lease.
1.91 "Rent" shall mean, collectively, the Minimum Rent, Additional Rent
and Additional Charges.
1.92 "Request Notice" shall have the meaning given such term in Section
16.1.
1.93 [For FS St. Louis and Nashville: "Required Work" shall have the
meaning given such term in Section 6.4.]
1.94 "Reserve" shall have the meaning given such term in Section
5.1.2(a).
1.95 "Reserve Estimate" shall have the meaning given such term in
Section 5.1.2(c).
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1.96 "Response Notice" shall mean the meaning given such term in
Section 16.1.
1.97 "Retained Funds" shall have the meaning given such term in the
Purchase Agreement.
1.98 "SEC" shall mean the Securities and Exchange Commission.
1.99 "State" shall mean the state or commonwealth or district in which
the Leased Property is located.
1.100 "Stock Pledge Agreement" shall mean the Indemnity Pledge and
Security Agreement, dated December 29, 1998, made by the Guarantor in favor of
Landlord, as amended.
1.101 "Subordinated Creditor" shall mean any creditor of Tenant which
is a party to a Subordination Agreement in favor of Landlord.
1.102 "Subordination Agreement" shall mean any agreement executed by a
Subordinated Creditor pursuant to which the payment and performance of Tenant's
obligations to such Subordinated Creditor are subordinated to the payment and
performance of Tenant's obligations to Landlord under this Agreement.
1.103 "Subsidiary" shall mean, with respect to any Person, any Entity
(a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, fifty-one percent (51%) or more of the voting or beneficial
interest or (b) which such Person otherwise has the right or power to control
(whether by contract, through ownership of securities or otherwise); it being
understood and agreed that, as of the date hereof, (x) neither Host Marriott
Corporation nor Sodexho Marriott Services, Inc. is a Subsidiary of the Guarantor
and (y) the Guarantor is not a Subsidiary of Host Marriott Corporation or
Sodexho Marriott Services, Inc.
1.104 "Successor Landlord" shall have the meaning given such term in
Section 20.2.
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1.105 "Tangible Net Worth" shall mean the excess of total assets over
total liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total
assets: (a) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles; (b) all
deferred charges or unamortized debt discount and expense; (c) all reserves
carried and not deducted from assets; (d) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary; (e) securities which are not readily marketable; (f) any
write-up in the book value of any asset resulting from a revaluation thereof
subsequent to the Commencement Date; (g) deferred gain; and (h) any items not
included in clauses (a) through (g) above that are treated as intangibles in
conformity with GAAP.
1.106 "Tenant" shall have the meaning given such term in the preambles
to this Agreement and shall include its permitted successors and assigns.
1.107 "Tenant's Personal Property" shall mean all motor vehicles and
consumable Inventories and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other tangible personal property of
Tenant, if any, acquired by Tenant on and after the date hereof and located at
the Leased Property or used in Tenant's business at the Leased Property and all
modifications, replacements, alterations and additions to such personal property
installed at the expense of Tenant, other than any items included within the
definition of Proprietary Information.
1.108 "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.
1.109 "Total Hotel Sales" shall mean, for each Fiscal Year, or Fiscal
Quarter, during the Term, all revenues and receipts of every kind derived by
Tenant from operating the Leased Property and parts thereof, including, but not
limited to: income (from
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both cash and credit transactions), after deductions for bad debts, and
discounts for prompt or cash payments and refunds, from rental of rooms, stores,
offices, meeting, exhibit or sales space of every kind; license, lease and
concession fees and rentals (not including gross receipts of licensees, lessees
and concessionaires); income from vending machines; health club membership fees;
food and beverage sales; wholesale and retail sales of merchandise (other than
proceeds from the sale of furnishings, fixture and equipment no longer necessary
to the operation of the Hotel, which shall be deposited in the Reserve); service
charges, to the extent not distributed to the employees at the Hotel as
gratuities; and proceeds paid to Tenant, if any, from business interruption or
other loss of income insurance; provided, however, that Total Hotel Sales shall
not include the following: gratuities to Hotel employees; federal, state or
municipal excise, sales, occupancy, use or similar taxes collected directly from
patrons or guests or included as part of the sales price of any goods or
services; insurance proceeds (other than proceeds from business interruption or
other loss of income insurance paid to Tenant); Award proceeds (other than for a
temporary Condemnation); any proceeds from any sale of the Leased Property or
from the refinancing of any debt encumbering the Leased Property; proceeds from
the disposition of furnishings, fixture and equipment no longer necessary for
the operation of the Hotel; and interest which accrues on amounts deposited in
the Reserve. [In addition, Total Hotel Sales shall not include any amounts paid
or payable with respect to the agreement with Lanier.] [For FS Nashville:
Notwithstanding the foregoing, upon the Commencement of Expansion, Total Hotel
Sales shall have the meaning set forth in Section 6.4.]
1.110 "Uniform System of Accounts" shall mean A Uniform System of
Accounts for Hotels, Ninth Revised Edition, 1996, as published by the Hotel
Association of New York City, as the same
may be further revised from time to time.
1.111 "Unsuitable for Its Permitted Use" shall mean a state or
condition of the Hotel such that (a) following any damage or destruction
involving the Hotel, the Hotel cannot be operated in the good faith judgment of
Tenant on a commercially practicable basis for its Permitted Use and it cannot
reasonably be expected to be restored to substantially the same condition as
existed immediately before such damage or destruction, and as otherwise
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required by Section 10.2.4, within nine (9) months following such damage or
destruction or such shorter period of time as to which business interruption
insurance is available to cover Rent and other costs related to the Leased
Property following such damage or destruction, or (b) as the result of a partial
taking by Condemnation, the Hotel cannot be operated, in the good faith judgment
of Tenant on a commercially and economically practicable basis for its Permitted
Use in light of then existing circumstances.
1.112 "Work" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following
(collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibit C, attached hereto and made a part
hereof (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and 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,
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electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, all of
which, to the maximum extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, but
specifically excluding all items included within the category of
Tenant's Personal Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures located on or in the
Leased Improvements, and all modifications, replacements, alterations
and additions to such property, except items, if any, included within
the category of Fixtures, but specifically excluding all items included
within the category of Tenant's Personal Property (collectively, the
"Leased Personal Property");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space (including any security
deposits held by Tenant pursuant thereto) in the Leased Improvements to
tenants thereof.
2.2 Condition of Leased Property. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Leased Property, all applicable
Legal Requirements, the lien of any financing instruments, mortgages and deeds
of trust existing prior to the Commencement Date or permitted by the terms of
this Agreement, and such other matters which would be disclosed by an 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
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OR EMPLOYEES WITH RESPECT THERETO, EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND
TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION
OF THE LEASED PROPERTY. EXCEPT AS EXPRESSLY SET FORTH HEREIN, LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any predecessor in title, contractors and materialmen for breaches of
warranties or representations or for latent defects in the Leased Property.
Landlord shall fully cooperate with Tenant in the prosecution of any such
claims, in Landlord's or Tenant's name, all at Tenant's sole cost and expense.
Tenant shall indemnify, defend, and hold harmless Landlord from and against any
loss, cost, damage or liability (including reasonable attorneys' fees) incurred
by Landlord in connection with such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and shall expire on the last day of the
Fiscal Year 2013.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing and the term of all of the Other Leases shall be
simultaneously extended, the Term shall be automatically extended for two (2)
consecutive renewal terms, of ten (10) years each (collectively, the "Extended
Terms"), unless Tenant shall give Landlord Notice, in Tenant's sole and absolute
discretion, not later than two (2) years prior to the scheduled expiration of
the then current Term of this Agreement (Fixed or Extended, as the case may be),
that Tenant elects not so to extend the term of this Agreement (and time shall
be of the essence with respect to the giving of such Notice). It is expressly
understood and agreed that such Notice from Tenant shall be void and of no
effect and the Term shall be automatically extended unless Tenant shall
simultaneously elect not to extend the term of the Other Leases.
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as
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the case may be. All of the terms, covenants and provisions of this Agreement
shall apply to each such Extended Term, except that Tenant shall have no right
to extend the Term beyond the expiration of the Extended Terms. If Tenant shall
give Notice that it elects not to extend the Term in accordance with this
Section 2.4, this Agreement shall automatically terminate at the end of the Term
then in effect and Tenant shall have no further option to extend the Term of
this Agreement. Otherwise, the extension of this Agreement shall be
automatically effected without the execution of any additional documents; it
being understood and agreed, however, that Tenant and Landlord shall execute
such documents and agreements as either party shall reasonably require to
evidence the same.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Minimum Rent and Additional Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion.
3.1.1 Minimum Rent.
(a) Minimum Rent shall be paid in advance on the first
Business Day of each Accounting Period; provided, however, that the
first payment of Minimum Rent shall be payable on the Commencement
Date. Minimum Rent for any partial Accounting Period shall be prorated
on a per diem basis.
(b) Adjustments of Minimum Rent Following Disbursements Under
Sections 5.1.3(b), [For Nashville: 6.4,] 10.2 or 11.2. Effective on the
date of each disbursement by Landlord pursuant to Sections 5.1.3(b),
[For Nashville: 6.4,] 10.2 or 11.2, the Minimum Rent payable with
respect to each Accounting Period shall be increased by
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an amount equal to the quotient obtained by dividing (i) a per annum
amount equal to the Disbursement Rate, determined as of the date of
Tenant's Notice to Landlord identifying the amount of and requirement
for the applicable funds, times the amount so disbursed, by (ii)
thirteen. If any such disbursement is made during any Accounting Period
on a day other than the first day of an Accounting Period, Tenant shall
pay to Landlord on the first day of the immediately following
Accounting Period (in addition to the amount of Minimum Rent payable
with respect to such Accounting Period, as adjusted pursuant to this
paragraph (b)) the amount by which Minimum Rent for the preceding
Accounting Period, as adjusted for such disbursement on a per diem
basis, exceeded the amount of Minimum Rent actually paid by Tenant for
such preceding Accounting Period.
3.1.2 Additional Rent.
(a) Amount. During each Lease Year or portion thereof,
commencing with the first Lease Year [for CYs, RIs and TPs: following
the later to occur of the end of the Base Year and the second full year
of operation of the Hotel] [for FS: following the Base Year], Tenant
shall pay additional rent ("Additional Rent") pursuant to this
Agreement, in an amount, not less than zero, equal to seven percent
(7%) of Excess Hotel Sales.
(b) Quarterly Payments. Additional Rent for each Lease Year or
portion thereof shall be calculated and paid each Fiscal Quarter in
arrears. Each such payment shall be made within 45 days after the end
of each Fiscal Quarter and shall be accompanied by an Officer's
Certificate setting forth the calculation of Additional Rent due and
payable for such Fiscal Quarter. The installment due with respect to
each Fiscal Quarter shall be equal to the Additional Rent due on Excess
Hotel Sales for all Fiscal Quarters elapsed during the applicable Lease
Year less amounts previously paid with respect thereto by Tenant.
Amounts due shall be determined by measuring Total Hotel Sales for all
Fiscal Quarters elapsed against Base Hotel Sales for the equivalent
period during the Base Year. Landlord shall not be required to refund
payments of Additional Rent if in subsequent
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Fiscal Quarters Total Hotel Sales are less than Base Hotel Sales or
cumulative Total Hotel Sales are less than cumulative Base Hotel Sales.
(c) Reconciliation of Additional Rent. In addition, on or
before April 30 of each year, commencing April 30, following the Base
Year, Tenant shall deliver to Landlord an Officer's Certificate setting
forth the Total Hotel Sales for each of the four Fiscal Quarters in
such preceding Lease Year, together with an audit of Total Hotel Sales
for the preceding Lease Year, conducted by Arthur Andersen LLP, or
another "Big Five", so-called, firm of independent certified public
accountants proposed by Tenant and approved by Landlord (which approval
shall not be unreasonably withheld or delayed). Landlord shall
reimburse Tenant for the reasonable cost of such audit.
If the Additional Rent in any Fiscal Quarter of such preceding
Lease Year as shown in the Officer's Certificate exceeds the amount
previously paid with respect thereto by Tenant, Tenant shall pay such
excess to Landlord at such time as the Officer's Certificate is
delivered, together with interest at the Disbursement Rate, which
interest shall accrue from the close of such preceding Fiscal Quarter
of such Lease Year until the date that such certificate is required to
be delivered (or, if sooner, the date Tenant pays such excess to
Landlord) and, thereafter, such interest shall accrue at the Overdue
Rate, until the amount of such difference shall be paid or otherwise
discharged. If the Additional Rent for any Fiscal Quarter as shown in
the Officer's Certificate is less than the amount previously paid with
respect thereto by Tenant, provided that no Event of Default shall have
occurred and be continuing, Landlord shall, at Tenant's election, pay
such difference to Tenant within ten (10) Business Days after Tenant's
written request therefor or grant Tenant a credit in the amount of such
difference against Additional Rent next coming due under this Agreement
or, at Tenant's election, under any of the Other Leases, in any case,
such payment or credit to be made together with interest at the
Disbursement Rate, which interest shall accrue from the date of payment
of Tenant until the date such credit is applied or paid, as the case
may be. If such credit cannot be made because the Term has
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expired prior to application in full thereof, provided no Event of
Default has occurred and is continuing, Landlord shall pay the
unapplied balance of such credit to Tenant, together with interest at
the Disbursement Rate, which interest shall accrue from the date of
payment by Tenant until the date of payment by Landlord.
(d) Confirmation of Additional Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices and in accordance
with GAAP, which will accurately record all Total Hotel Sales and
Tenant shall retain, for at least three (3) years after the expiration
of each Lease Year, reasonably adequate records conforming to such
accounting system showing all Total Hotel Sales for such Lease Year.
Landlord, at its own expense except as provided hereinbelow, shall have
the right, exercisable by Notice to Tenant given within one (1) year
after receipt of the applicable Officer's Certificate, by its
accountants or representatives to audit the information set forth in
the Officer's Certificate referred to in subparagraph (c) above and, in
connection with such audits, to examine Tenant's books and records with
respect thereto (including supporting data and sales and excise tax
returns). If Landlord does not commence an audit within such 1-year
period, such Officer's Certificate shall be deemed conclusively to be
accepted by Landlord as correct and Landlord shall have no further
right to challenge the same. Landlord shall use commercially reasonable
efforts to complete any such audit as soon as practicable. If any such
audit discloses a deficiency in the payment of Additional Rent, and
either Tenant agrees with the result of such audit or the matter is
otherwise determined, Tenant shall forthwith pay to Landlord the amount
of the deficiency, as finally agreed or determined, together with
interest at the Interest Rate, from the date such payment should have
been made to the date of payment thereof. If such deficiency, as agreed
upon or compromised as aforesaid, is more than three percent (3%) of
the Total Hotel Sales reported by Tenant for such Lease Year and, as a
result, Landlord did not receive at least ninety-five percent (95%) of
the Additional Rent payable with respect to such Lease Year, Tenant
shall pay the reasonable cost of such audit and examination. If any
such audit
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discloses that Tenant paid more Additional Rent for any Lease Year than
was due hereunder, and either Landlord agrees with the result of such
audit or the matter is otherwise determined, provided no Event of
Default has occurred and is continuing, Landlord shall grant Tenant a
credit equal to the amount of such overpayment against Additional Rent
next coming due in the amount of such difference, as finally agreed or
determined, together with interest at the Disbursement Rate, which
interest shall accrue from the time of payment by Tenant until the date
such credit is applied or paid, as the case may be. If such a credit
cannot be made because the Term has expired before the credit can be
applied in full, provided no Event of Default has occurred and is
continuing, Landlord shall pay the unapplied balance of such credit to
Tenant, together with interest at the Disbursement Rate, which interest
shall accrue from the date of payment by Tenant until the date of
payment from Landlord.
Any Proprietary Information obtained by Landlord with respect
to Tenant pursuant to the provisions of this Agreement shall be treated
as confidential, except that such information may be used, subject to
confidentiality safeguards mutually acceptable to Landlord and Tenant,
in any litigation between the parties and except further that, subject
to the terms of Section 22.16, Landlord may disclose such information
to its prospective lenders, provided that Landlord shall direct and
obtain the agreement of such lenders to maintain such information as
confidential. The obligations of Tenant and Landlord contained in this
Section 3.1.2 shall survive the expiration or earlier termination of
this Agreement.
3.1.3 Additional Charges. In addition to the Minimum Rent and
Additional Rent payable hereunder, Tenant shall pay to the appropriate parties
and discharge as and when due and payable the following (collectively,
"Additional Charges"):
(a) Impositions. Subject to Article 8 relating to permitted
contests, Tenant shall pay, or cause to be paid, all Impositions before
any fine, penalty, interest or cost (other than any opportunity cost as
a result of a failure to take advantage of any discount for early
payment) may be
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added for non-payment, such payments to be made directly to the taxing
authorities where feasible, and shall promptly, upon request, furnish
to Landlord copies of official receipts or other reasonably
satisfactory proof evidencing such payments. If any such Imposition
may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such
Imposition), Tenant may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during the
Term as the same become due and before any fine, penalty, premium,
further interest or cost may be added thereto. Landlord, at its
expense, shall, to the extent required or permitted by Applicable Law,
prepare and file all tax returns and pay all taxes due in respect of
Landlord's net income, gross receipts, sales and use, single business,
transaction privilege, rent, ad valorem, franchise taxes and taxes on
its capital stock, and Tenant, at its expense, shall, to the extent
required or permitted by Applicable Laws, prepare and file all other
tax returns and reports in respect of any Imposition as may be required
by Government Agencies. Provided no Event of Default shall have
occurred and be continuing, if any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall
be paid over to or retained by Tenant. Landlord and Tenant shall, upon
request of the other, provide such data as is maintained by the party
to whom the request is made with respect to the Leased Property as may
be necessary to prepare any required returns and reports. In the event
Government Agencies classify any property covered by this Agreement as
personal property, Tenant shall file all personal property tax returns
in such jurisdictions where it may legally so file. Each party shall,
to the extent it possesses the same, provide the other, upon request,
with cost and depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord is legally
required to file personal property tax returns for property covered by
this Agreement, Landlord shall file the same with reasonable
cooperation from Tenant. Landlord shall provide Tenant with copies of
assessment notices in sufficient time for Tenant to prepare a protest
which Landlord shall file, at Tenant's written request. All Impositions
assessed against such
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personal property shall be (irrespective of whether Landlord or Tenant
shall file the relevant return) paid by Tenant not later than the last
date on which the same may be made without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has
knowledge; provided, however, that Landlord's failure to give any such
notice shall in no way diminish Tenant's obligation hereunder to pay
such Impositions (except that Landlord shall be responsible for any
interest or penalties incurred as a result of Landlord's failure
promptly to forward the same).
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities
used in connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained
pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations arising in connection with
the Leased Property except those obligations expressly assumed by
Landlord pursuant to the provisions of this Agreement or expressly
stated not to be an obligation of Tenant pursuant to this Agreement.
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement (other than
termination by reason of an Event of Default), Tenant may, within a
reasonable time after the end of the Term, provide Notice to Landlord
of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this
Agreement (unless this Agreement shall have been terminated following
an Event of Default).
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3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, within five (5) days after
Landlord's written demand therefor, as Additional Charges, a late charge (to the
extent permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord or any Hotel Mortgagee pursuant to any requirement of this Agreement,
Tenant shall be relieved of its obligation to pay such Additional Charges to the
Entity to which they would otherwise be due and Landlord shall pay when due, or
cause the applicable Hotel Mortgagee to pay when due, such Additional Charges to
the Entity to which they are due. If any payments due from Landlord to Tenant
shall not be paid within ten (10) days after its due date, Landlord shall pay to
Tenant, on demand, a late charge (to the extent permitted by law) computed at
the Overdue Rate on the amount of such installment from the due date of such
installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional Charges
when due, except as expressly provided in Section 3.1.3(a), Tenant shall
promptly pay and discharge, as Additional Charges, every fine, penalty, interest
and cost which may be added for non-payment or late payment of such items.
Landlord shall have all legal, equitable and contractual rights, powers and
remedies provided either in this Agreement or by statute or otherwise in the
case of non-payment of the Additional Charges as in the case of non-payment of
the Minimum Rent and Additional Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments or
amounts of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including, without limitation,
those provisions for adjustment, refunding or abatement of such Rent and for the
funding of Landlord's obligations pursuant to Section 5.1.3.
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3.4 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Agreement, each of Landlord and Tenant, to the maximum extent
permitted by law, shall remain bound by this Agreement in accordance with its
terms and shall not take any action without the consent of the other to modify,
surrender or terminate this Agreement. In addition, except as otherwise
expressly provided in this Agreement, Tenant shall not seek, or be entitled to,
any abatement, deduction, refund, deferment or reduction of the Rent, or set-off
against the Rent, nor, except as otherwise expressly provided in this Agreement,
shall the respective obligations of Landlord and Tenant be otherwise affected by
reason of (a) any damage to or destruction of the Leased Property or any portion
thereof from whatever cause or any Condemnation; (b) the lawful or unlawful
prohibition of, or restriction upon, Tenant's use of the Leased Property, or any
portion thereof, or the interference with such use by any Person or by reason of
eviction by paramount title; (c) any claim which Tenant may have against
Landlord by reason of any default (other than a monetary default) or breach of
any warranty by Landlord under this Agreement or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties; (d) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord; or (e) for any other cause whether similar or
dissimilar to any of the foregoing (other than a monetary default by Landlord);
provided, however, that the foregoing shall not apply or be construed to
restrict Tenant's rights in the event of any act or omission by Landlord
constituting negligence or willful misconduct. Except as otherwise specifically
provided in this Agreement, Tenant hereby waives all rights arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law,
to (a) modify, surrender or terminate this Agreement or quit or surrender the
Leased Property or any portion thereof, or (b) entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable or other
obligations to be performed by Tenant hereunder. The obligations of each party
hereunder shall be separate and independent covenants and agreements, and the
Rent and all other sums payable by Tenant hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated,
off-set, reduced or abated pursuant to the express provisions of this Agreement.
In any instance where, after the
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occurrence of an Event of Default, Landlord retains, or is retaining, funds
which, but for the occurrence of such Event of Default, would be payable to
Tenant, Landlord shall refund such funds to Tenant to the extent the amount
thereof exceeds the amount necessary to compensate Landlord as a result of such
Event of Default, promptly upon determination of such amount.
3.5 Security for Tenant's Performance. Tenant acknowledges that the
Retained Funds with respect to the Collective Leased Properties constitute
security for the faithful observance and performance by Tenant of all the terms,
covenants and conditions of this Agreement and the Other Leases by Tenant to be
observed and performed. If any Event of Default shall occur and be continuing
under this Agreement or the Other Leases, Landlord may, at its option and
without prejudice to any other remedy which Landlord may have on account
thereof, appropriate and apply the amount of such Retained Funds as may be
necessary to compensate Landlord toward the payment of the Rent or other sums
due Landlord under this Agreement or the Other Leases, as the case may be, as a
result of such breach by Tenant. It is understood and agreed that the aggregate
amount of the Retained Funds is not to be considered as prepaid rent, nor shall
damages be limited to the amount of the amount of the Retained Funds. Upon the
expiration or sooner termination of this Agreement, any unapplied balance of the
Retained Funds allocable to the Leased Property shall be paid by wire transfer
to an account or accounts designated by the Sellers under the Purchase Agreement
(or by Tenant if the Sellers so designate). Notwithstanding anything to the
contrary contained herein, Landlord shall not appropriate and apply any portion
of the Retained Funds until it has exhausted any available rights and remedies
pursuant to the Limited Rent Guaranty.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Permitted Use.
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(a) Tenant shall, at all times during the Term and at any
other time that Tenant shall be in possession of the Leased Property,
continuously use and operate, the Leased Property as a [Residence Inn
by Marriott hotel] [Courtyard by Marriott hotel] [TownePlace Suites
hotel] [Marriott Hotel] (or as a hotel under any successor brand name)
and any uses incidental thereto in accordance with the terms of the
Franchise Agreement. Subject to Section 16.3, Tenant shall not use the
Leased Property or any portion thereof for any other use without the
prior written consent of Landlord. No use shall be made or permitted to
be made of the Leased Property and no acts shall be done thereon which
will cause the cancellation of any insurance policy covering the Leased
Property or any part thereof (unless another adequate policy is
available), nor shall Tenant sell or otherwise provide or permit to be
kept, used or sold in or about the Leased Property any article which
may be prohibited by law or by the standard form of fire insurance
policies, or any other insurance policies required to be carried
hereunder, or fire underwriter's regulations. Tenant shall, at its sole
cost (except as expressly provided in Section 5.1.3(b)), comply with
all Insurance Requirements. Tenant shall not take or omit to take any
action, the taking or omission of which materially impairs the value or
the usefulness of the Leased Property or any part thereof for its
Permitted Use.
(b) In the event that, in the reasonable determination of
Tenant, it shall no longer be economically practical to operate the
Leased Property as a [Residence Inn by Marriott hotel] [Courtyard by
Marriott hotel] [TownePlace Suites hotel] [Marriott hotel] or if the
Franchisor shall terminate the Franchise Agreement, Tenant shall give
Landlord Notice thereof, which Notice shall set forth in reasonable
detail the reasons therefor. Thereafter, Landlord and Tenant shall
negotiate in good faith to agree on an alternative use for the Leased
Property, appropriate adjustments to the Additional Rent, the Reserve
and other related matters; provided, however, in no such event shall
the Minimum Rent be reduced or abated. In the event that operating the
Leased Property for such alternative use shall be outside of Tenant's
expertise as reasonably determined by Tenant,
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Tenant may engage a third party Manager, reasonably acceptable to
Landlord, for such purpose.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise commercially reasonable efforts to obtain and maintain
all approvals necessary to use and operate, for its Permitted Use, the Leased
Property and the Hotel located thereon under applicable law. Landlord shall, at
Tenant's expense, cooperate with Tenant in this regard, including executing all
applications and consents required to be signed by Landlord in order for Tenant
to obtain and maintain such approvals.
4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or
permit the use of the Leased Property or Tenant's Personal Property, if any, for
any unlawful purpose. Tenant shall not commit or suffer to be committed any
waste on the Leased Property, or in the Hotel, nor shall Tenant cause or permit
any unlawful nuisance thereon or therein. Tenant shall not suffer nor permit the
Leased Property, or any portion thereof, to be used in such a manner as (i)
might reasonably impair Landlord's title thereto or to any portion thereof, or
(ii) may reasonably allow a claim or claims for adverse usage or adverse
possession by the public, as such, or of implied dedication of the Leased
Property or any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the
provisions of Article 8, Tenant, at its sole expense, shall (i) comply with
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair, alteration and restoration of the Leased Property, and (ii)
comply with all appropriate licenses, and other authorizations and agreements
required for any use of the Leased Property and Tenant's Personal Property, if
any, then being made and which are material to the operation of the Leased
Property as a hotel, and for the proper operation and maintenance of the Leased
Property or any part thereof.
4.3 Environmental Matters.
4.3.1 Restriction on Use, Etc. During the Term and any other
time that Tenant shall be in possession of the Leased
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Property, Tenant shall not store, spill upon, dispose of or transfer to or from
the Leased Property any Hazardous Substance, except in compliance with all
Applicable Laws. During the Term and any other time that Tenant shall be in
possession of the Leased Property, Tenant shall maintain the Leased Property at
all times free of any Hazardous Substance (except in compliance with all
Applicable Laws). Tenant shall promptly: (a) upon receipt of notice or
knowledge, notify Landlord in writing of any material change in the nature or
extent of Hazardous Substances at the Leased Property, (b) transmit to Landlord
a copy of any Community Right to Know report which is required to be filed by
Tenant with respect to the Leased Property pursuant to SARA Title III or any
other Applicable Law, (c) transmit to Landlord copies of any citations, orders,
notices or other governmental com munications received by Tenant or its agents
or representatives with respect thereto (collectively, "Environmental Notice"),
which Environmental Notice requires a written response or any action to be taken
and/or if such Environmental Notice gives notice of and/or presents a material
risk of any material violation of any Applicable Law and/or presents a material
risk of any material cost, expense, loss or damage (an "Environmental
Obligation"), (d) observe and comply with all Applicable Laws relating to the
use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction relating
to the use or maintenance or requiring the removal, treatment, containment or
other disposition thereof, and (e) pay or otherwise dispose of any fine, charge
or Imposition related thereto, unless Tenant shall contest the same in good
faith and by appropriate proceedings and the right to use and the value of the
Leased Property is not materially and adversely affected thereby.
If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Applicable Laws) are
discovered on the Leased Property, subject to Tenant's right to contest the same
in accordance with Article 8, Tenant shall take all actions and incur any and
all expenses, as may be reasonably necessary and as may be required by any
Government Agency, (i) to clean up and remove from and about the Leased Property
all Hazardous Substances thereon, (ii) to contain and prevent any further
release or threat of release of Hazardous Substances on or about the Leased
Property and (iii) to use good faith efforts to eliminate any further release or
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threat of release of Hazardous Substances on or about the Leased Property.
4.3.2 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord and each Hotel Mortgagee, their trustees,
officers, agents, employees and beneficiaries, and any of their respective
successors or assigns with respect to this Agreement (collectively, the
"Indemnitees" and, individually, an "Indemnitee") for, from and against any and
all debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
Indemnitee resulting from, either directly or indirectly, the presence during
the Term (or any other time Tenant shall be possession of the Leased Property)
in, upon or under the soil or ground water of the Leased Property or any
properties surrounding the Leased Property of any Hazardous Substances in
violation of any Applicable Law or otherwise, provided that any of the foregoing
arises by reason of any failure by Tenant or any Person claiming by, through or
under Tenant, to perform or comply with any of the terms of this Section 4.3,
except to the extent the same arise from the gross negligence or willful
misconduct of Landlord or any other Indemnitee. Tenant's duty herein includes,
but is not limited to, costs associated with personal injury or property damage
claims as a result of the presence prior to the expiration or sooner termination
of the Term and the surrender of the Leased Property to Landlord in accordance
with the terms of this Agreement of Hazardous Substances in, upon or under the
soil or ground water of the Leased Property in violation of any Applicable Law.
Upon Notice from Landlord and any other of the Indemnitees, Tenant shall
undertake the defense, at Tenant's sole cost and expense, of any indemnification
duties set forth herein, in which event, Tenant shall not be liable for payment
of any duplicative attorneys' fees incurred by any Indemnitee.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage (including, without limitation, reasonable
attorneys' fees) incurred by Landlord and arising from a failure of Tenant
strictly to observe and perform the requirements of this Section 4.3, which
amounts shall bear interest from the date ten (10) days after written demand
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therefor is given to Tenant until paid by Tenant to Landlord at the Overdue
Rate.
Tenant's obligations pursuant to the terms of this Section 4.3.2 are
subject to Tenant's right to use the Reserve for the purposes set forth in
Section 5.1.2(a)(v).
4.3.3 Survival. As to conditions which exist prior to the
expiration or sooner termination of this Agreement, the provisions of this
Section 4.3 shall survive the expiration or sooner termination of this
Agreement.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost and expense (except as
expressly provided in Sections 5.1.2 and 5.1.3(b)), keep the Leased
Property and all private roadways, sidewalks and curbs located thereon
(and Tenant's Personal Property, if any) in good order and repair,
reasonable wear and tear excepted (whether or not the need for such
repairs occurs as a result of Tenant's use, any prior use, the elements
or the age of the Leased Property or Tenant's Personal Property, if
any, or any portion thereof), and shall promptly make all necessary and
appropriate repairs and replacements thereto of every kind and nature,
whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term (concealed or
otherwise). All repairs shall be made in a good, workmanlike manner,
consistent with the industry standards for like hotels in like locales,
in accordance with all applicable federal, state and local statutes,
ordinances, by-laws, codes, rules and regulations relating to any such
work. Tenant shall not take or omit to take any action, the taking or
omission of which would materially and adversely impair the value or
the usefulness of the Leased Property or
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any part thereof for its Permitted Use. Tenant's obligations under this
Section 5.1.1(a) shall be limited in the event of any casualty or
Condemnation as set forth in Sections 10.2 and 11.2 and Tenant's
obligations with respect to Hazardous Substances are as set forth in
Section 4.3.
5.1.2 Reserve.
(a) Prior to or simultaneously with the execution of this
Agreement, Landlord has deposited an aggregate amount of Three Million
Three Hundred Seventy-Seven Thousand Seven Hundred Dollars ($3,377,700)
with respect to the Collective Leased Properties, such sum to be held
in an interest bearing reserve account established by Tenant (the
"Reserve") in a bank designated by Landlord and approved by Tenant. All
interest earned on the Reserve shall be added to and remain a part of
the Reserve. Tenant shall be the only party entitled to withdraw funds
from the Reserve until an Event of Default shall occur, Landlord
agreeing, however, that, following the occurrence of an Event of
Default and until such time as this Agreement shall have been
terminated, Landlord shall continue to make payments from the Reserve
to contractors and materialmen pursuant to contracts made by Tenant for
items which are permitted Reserve expenditures, provided that Landlord
shall reasonably determine that there are adequate Reserve funds
available therefor. The purpose of the Reserve is to cover the cost of:
(i) Replacements, renewals and additions to the furniture,
furnishings, fixtures and equipment at the Hotel and the other
hotels located at the Collective Leased Properties;
(ii) Routine repairs, renovations, renewals, additions,
alterations, improvements or replacements and maintenance to
the Leased Property and the buildings and improvements located
at the Collective Leased Properties which are normally
capitalized under GAAP such as exterior and interior
repainting, resurfacing building walls, floors, roofs and
parking areas, and replacing folding walls and the like;
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(iii) Major repairs, renovations, additions, alterations,
improvements, renewals or replacements to the Leased Property
and the buildings and improvements located at the Collective
Leased Properties, including, without limitation, with respect
to their structure, roof, or exterior facade, and to their
mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems;
(iv) All lease payments for equipment and other personal property
reasonably necessary for the operation of the Hotel and the
hotels located at the Collective Leased Properties; and
(v) Repairs, replacements and renewals and other expenditures
costing in excess of $25,000 per Lease Year at the Collective
Leased Properties that are, in each case, not otherwise
covered under (i)through (iii) above but are required to
comply with Legal Requirements and Insurance Requirements.
(b) Throughout the Term, Tenant shall transfer (as of the
end of each Accounting Period of the Term) into the Reserve an amount
equal to the Applicable Percentage of Total Hotel Sales for such
Accounting Period; provided; however, that Tenant shall have no
obligation to fund and/or transfer any funds to the Reserve until such
time as the Reserve balance would equal One Million Three Hundred
Seventy-Seven Thousand Seven Hundred Dollars ($1,377,700) had Tenant
funded the Reserve as required by the preceding clause of this
sentence. Together with the documentation provided to Landlord pursuant
to Section 3.1.2(c), Tenant shall deliver to Landlord an Officer's
Certificate setting forth the total amount of deposits made to and
expenditures from the Reserve for the preceding Fiscal Year, together
with a comparison of such expenditures with the applicable Reserve
Estimate.
(c) Each year, on or before December 1 of the preceding
year, Tenant shall prepare an estimate (the "Reserve Estimate") of
Reserve expenditures necessary during the ensuing Fiscal Year, and
shall submit such Reserve Estimate to Landlord for its review. All
expenditures from
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the Reserve shall be (as to both the amount of each such expenditure
and the timing thereof) both reasonable and necessary, given the
objective that the Hotel will be maintained and operated to a standard
comparable to competitive properties and in accordance with the
standards set forth in the Franchise Agreement.
(d) Tenant shall from time to time make expenditures from
the Reserve as it deems necessary in accordance with Section 5.1.2(a).
Tenant shall provide to Landlord, within forty (40) Business Days after
the end of each Accounting Period, a statement setting forth, on a line
item basis, Reserve expenditures made to date and any variances or
anticipated variances and/or amendments from the Reserve Estimate.
(e) All funds in the Reserve, all interest earned thereon
and all property purchased with funds from the Reserve shall be and
remain the property of Landlord.
(f) It is understood and agreed that the Reserve pursuant to
this Agreement and the Other Leases shall be maintained and used on a
consolidated basis such that all Reserve funds shall be deposited in a
single account and Tenant may apply any funds therein to any of the
Collective Leased Properties in accordance with the terms of this
Agreement and Other Leases.
(g) If Landlord wishes to grant a security interest in or
create another encumbrance on the Reserve, all or any part of the
existing or future funds therein, or any general intangible in
connection therewith, the instrument granting such security interest or
creating such other encumbrance shall expressly provide that such
security interest or encumbrance is subject to the rights of Tenant
with respect to the Reserve as set forth herein. The form and substance
of such provision shall be subject to Tenant's prior written approval,
which approval shall not be unreasonably withheld, delayed or
conditioned.
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5.1.3 Landlord's Obligations.
(a) Except as otherwise expressly provided in this
Agreement, Landlord shall not, under any circumstances, be required to
build or rebuild any improvement on the Leased Property, or to make any
repairs, replacements, alterations, restorations or renewals of any
nature or description to the Leased Property, whether ordinary or
extraordinary, structural or nonstructural, foreseen or unforeseen, or,
except as provided in Section 5.1.3(b), to make any expenditure
whatsoever with respect thereto, or to maintain the Leased Property in
any way. Except as otherwise expressly provided in this Agreement,
Tenant hereby waives, to the maximum extent permitted by law, the right
to make repairs at the expense of Landlord pursuant to any law in
effect on the date hereof or hereafter enacted. Landlord shall have the
right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter
existing.
(b) If, at any time, funds in the Reserve shall be
insufficient or are reasonably projected to be insufficient for
necessary and permitted expenditures thereof, Tenant may, at its
election, give Landlord Notice thereof, which Notice shall set forth,
in reasonable detail, the nature of the required or permitted action,
the estimated cost thereof (including the amount which is in excess of
the amount of funds in the Reserve) and such other information with
respect thereto as Landlord may reasonably require. Provided that (i)
no Event of Default shall have occurred and be continuing as to which
(x) ninety (90) days or less shall have elapsed after Notice of the
occurrence thereof from Landlord to Tenant or (y) Landlord shall have
commenced enforcing and is diligently pursuing enforcing its rights and
remedies, and (ii) Tenant shall otherwise comply with the applicable
provisions of Article 6,(unless Landlord notifies Tenant prior to the
expiration of such ten (10) Business Day period that it disputes such
obligation pursuant to the applicable provisions of this Agreement), or
such later dates as Tenant may direct by reasonable prior Notice,
subject to and in accordance with the applicable provisions of Article
6, Landlord shall disburse such
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required funds to Tenant (or, if Tenant shall so elect, directly to the
Manager or any other Person performing the required work) and, upon
such disbursement, the Minimum Rent shall be adjusted as provided in
Section 3.1.1(b). Any dispute with respect to Landlord's obligation to
disburse any funds pursuant to this Section 5.1.3(b), shall be resolved
in accordance with the applicable provisions of Article 19 and, in the
event of a determination in favor of Tenant pursuant to Article 19,
Landlord shall disburse any applicable amounts within ten (10) Business
Days after the arbitrators' determination. Whenever reasonably
possible, Landlord shall identify disputed items on a line item basis.
5.1.4 Nonresponsibility of Landlord, Etc. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property, or any part thereof, are hereby
charged with notice that liens on the Leased Property or on Landlord's interest
therein are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished by Tenant or for any
other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under any Mechanic's Lien Law of the State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.
5.2 Tenant's Personal Property. Tenant shall provide and maintain
throughout the Term all such Tenant's Personal Property and such other personal
property as shall be necessary in order to operate in compliance with applicable
Legal Requirements and Insurance Requirements and otherwise in accordance with
customary
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practice in the industry for the Permitted Use. If, from and after the
Commencement Date, Tenant acquires an interest in any item of tangible personal
property (other than motor vehicles) on, or in connection with, the Leased
Property which belongs to anyone other than Tenant and for which the fair market
value, as reasonably determined by Tenant, exceeds the product of One Thousand
Dollars ($1,000), adjusted as provided below, multiplied by the number of hotel
rooms or suites at the Leased Property, Tenant shall require the agreements
permitting such use to provide that Landlord or its designee may assume Tenant's
rights and obligations under such agreement upon the termination of this
Agreement and the assumption of management or operation of the Hotel by Landlord
or its designee. Notwithstanding anything to the contrary contained herein, at
the expiration or sooner termination of the Term, Landlord may, in its sole and
absolute discretion, elect either (i) to give Tenant Notice that Tenant shall be
required, within ten (10) Business Days after such expiration or termination, to
remove all FAS and Inventories from the Leased Property or (ii) to pay Tenant's
cost of such FAS and Inventories. Failure of Landlord to make such election
shall be deemed an election to proceed in accordance with clause (ii) preceding.
The $1,000 amount referred to above shall be increased from time to time by an
amount equal to $1,000 multiplied by a fraction, the denominator of which shall
be the Index for the nearest month prior to the Commencement Date and the
numerator of which shall be the Index for the nearest month for which the Index
is available prior to the first day of the Accounting Period in which such
determination is being made.
5.3 Yield Up. Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate and surrender the Leased Property to Landlord in
substantially the same condition in which the Leased Property was in on the
Commencement Date, except as repaired, replaced, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Agreement,
reasonable wear and tear (and casualty damage and Condemnation, in the event
that this Agreement is terminated following a casualty or total Condemnation in
accordance with Article 10 or Article 11) excepted.
In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith, commercially reasonable efforts to
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transfer to and cooperate with Landlord or Landlord's nominee in connection with
the processing of all applications for licenses, operating permits and other
governmental authorizations and all contracts entered into by Tenant, including
contracts with governmental or quasi-governmental Entities which may be
necessary for the use and operation of the Hotel as then operated, but excluding
(i) all insurance contracts and multi-property contracts not limited in scope to
the Collective Leased Properties the Leases for which are being terminated
simultaneously,(ii) all contracts and leases with Affiliated Persons, (iii)
utility deposits and (iv) telephone numbers (which telephone numbers Tenant
shall be required to convey to Landlord only if this Agreement is terminated as
a result of an Event of Default). Landlord shall indemnify and hold Tenant
harmless for all claims, costs and expenses (including reasonable attorneys'
fees) arising from acts or omissions by Landlord under such contracts subsequent
to the date of transfer thereof to Landlord. If requested by Landlord on or
before the date which is at least 60 days prior to such expiration or earlier
termination of this Agreement, Tenant will continue to manage the Hotel after
the expiration of the Term and for up to one hundred twenty (120) days, on such
reasonable terms (which shall include an agreement to reimburse Tenant for its
reasonable out-of-pocket costs and expenses, and reasonable administrative costs
and a management fee equal to 10% of Total Hotel Sales), as Landlord and Tenant
shall reasonably agree.
5.4 Management Agreement. Tenant may from time to time, without
Landlord's consent, enter into, amend (except as provided in clauses (i) and
(ii) below) and/or terminate Management Agreements with its Affiliated Persons
delegating operational authority for the day-to-day operation of the Hotel to a
Manager who is an Affiliated Person as to Tenant provided that any such
Management Agreement shall provide (i) that all amounts due from Tenant to the
Manager shall be subordinate to all amounts due from Tenant to Landlord, and
(ii) for the termination thereof upon the termination of this Agreement or the
Franchise Agreement. Except as otherwise provided in Sections 4.1.1(b) and
14.3(c), Tenant shall not otherwise enter into, amend or modify any Management
Agreement with a Person that is not an Affiliated Person as to Tenant without
Landlord's prior written consent. Landlord shall have no right to enforce
Tenant's rights under any such Management Agreement.
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ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Improvements to the Leased Property. Prior to commencing
construction of any Capital Addition constituting additions or modifications to
any structural elements of the Hotel, the cost of which is reasonably estimated
to exceed [For CY, RI and TP: $250,000] [For FS: $1,000,000] (as adjusted as
provided below) (other than any Capital Addition which is reasonably required to
be made immediately in order to prevent imminent damage or danger to person or
property), Tenant shall submit to Landlord, in writing, a proposal setting
forth, in reasonable detail, any such proposed improvement and cost estimate
therefor and shall provide to Landlord such plans and specifications, and such
permits, licenses, contracts and such other information concerning the same as
Landlord may reasonably request. Landlord shall have twenty (20) Business Days
to review all materials submitted to Landlord in connection with any such
proposal. Failure of Landlord to respond to Tenant's proposal within twenty (20)
Business Days after receipt of all information and materials requested by
Landlord in connection with the proposed improvement shall be deemed to
constitute approval of the same. Landlord's approval shall not be withheld as to
any such Capital Addition that is required to comply with the Franchise
Agreement. In the event that any dispute shall arise with respect to Landlord's
withholding of its approval pursuant to this Section 6.1, such dispute shall be
resolved in accordance with the applicable provisions of Article 19. No Capital
Addi tion shall be made which would tie in or connect any Leased Improvement
with any other improvements on property adjacent to the Leased Property (and not
part of the Land) including, without limitation, tie-ins of buildings or other
structures or utilities (other than connections to public utilities). Tenant
shall not finance the cost of any construction of such improvement by the
granting of a lien on or security interest in the Leased Property or such
improvement, or Tenant's interest therein, without the prior written consent of
Landlord, which consent may be withheld by Landlord in Landlord's sole
discretion. Any such improvements shall, upon the expiration or sooner
termination of this Agreement, remain or pass to and become the property of
Landlord, free and clear of all encumbrances other than Permitted
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Encumbrances. The [For CY, RI and TP: $250,000 and for FS: $1,000,000] limit
referred to above shall be increased from time to time to an amount equal to
[For CY, RI and TP: $250,000 and for FS: $1,000,000] multiplied by a fraction,
the denominator of which shall be the Index for the nearest month prior to the
Commencement Date and the numerator of which shall be the Index for the nearest
month for which the Index is available prior to the first day of the Accounting
Period in which such determination is being made.
6.2 Salvage. Other than Tenant's Personal Property, all materials which
are scrapped or removed in connection with the making of either Capital
Additions or non-Capital Additions or repairs pursuant to Articles 5 or 6 shall
be disposed of by Tenant and the net proceeds thereof, if any, shall be
deposited in the Reserve.
6.3 Equipment Leases. Landlord shall enter into such leases of
equipment and personal property as Tenant may reasonably request from time to
time, provided that the form and substance thereof shall be reasonably
satisfactory to Landlord. Tenant shall prepare and deliver to Landlord all such
lease documents for which Landlord's execution is necessary and Landlord shall
promptly, upon approval thereof, execute and deliver such documents to Tenant.
Tenant shall, throughout the Term, be responsible for performing all of
Landlord's obligations under all such documents and agreements.
[6.4 For FS St. Louis and Nashville: Required Work. Tenant shall cause
the work described in Exhibit D (the "Required Work") to be completed in a good
and workmanlike manner consistent with Marriott standards for like hotels in a
timely manner based on the dates set forth in Exhibit D. The Required Work shall
be performed in accordance with the applicable provisions of this Agreement. The
cost of the Required Work shall be funded from the FF&E Reserve.
[6.5 For FS Nashville: Hotel Expansion. Landlord and Tenant agree that
Tenant may, at its option, at any time prior to the third anniversary of the
Commencement Date commence to construct an expansion of the Hotel to consist of
approximately 100 guest rooms, approximately 12,000 square foot of meeting
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space and a parking garage, all as more particularly described in Exhibit E
attached hereto and made a part hereof (the "Expansion"), subject to and upon
the terms and conditions herein set forth. The Expansion shall be deemed to
commence when construction of any renovation, addition, alteration, replacement
or improvement relating to the Expansion adversely impacts the business
operation of the Hotel or interferes with the use of the Hotel in the ordinary
course of business (the "Commencement of Expansion"). Tenant shall give Landlord
not less than ten (10) Business Days notice of the Commencement of Expansion.
The Expansion shall be performed in a good and workmanlike manner consistent
with Marriott standards for like hotels. The Expansion shall be performed in
accordance with the applicable provisions of this Agreement, including, without
limitation, Section 6.1. Any time Landlord's approval is required in connection
with the Expansion, such approval shall not be unreasonably withheld, delayed or
conditioned.
If commenced, Tenant shall use diligent efforts to complete the
Expansion within three (3) years after the Commencement of the Expansion,
subject to delays occasioned by force majeure. Completion of the Expansion shall
be deemed to occur upon the physical completion of the Expansion as set forth on
Exhibit E, consistent with the plans and specifications therefor (other than
so-called "punch-list" items as do not individually or in the aggregate impair
use of the Expansion for its intended use), free of all liens and encumbrances
(other than Permitted Encumbrances) such that the Expansion may be used for its
intended use (the "Completion of Expansion"). Landlord agrees to disburse to
Tenant (or, if Tenant shall so elect, directly to the Manager or any other
Person performing the Expansion) from time to time as hereinafter provided, an
aggregate amount of up to [Sixteen Million Dollars ($16,000,000)] (the
"Aggregate Commitment") together with all costs incurred, including hard costs
and soft costs, on the following terms and conditions:
(a) At the time of each disbursement, no monetary Event of Default
shall have occurred and be continuing;
(b) At least fifteen (15) Business Days before the date on which Tenant
desires a disbursement to be made hereunder, Tenant shall submit to Landlord a
written requisition and the substantiation therefor which shall include bills
and invoices
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with respect to the work for which reimbursement is sought, together with such
other information with respect thereto as Landlord may reasonably require; and
(c) Such requisitions shall be made not more frequently than monthly
and for amounts not less than $100,000 or the undisbursed balance of the
Aggregate Commitment.
Until satisfaction of the requirements set forth below, any
disbursement shall be for ninety percent (90%)of the aggregate funds requested
unless retainage is otherwise provided for in the applicable construction
contract. Upon any disbursement by Landlord pursuant to this Section 6.5,
Minimum Rent shall increase as provided in Section 3.1.1(b).
Final disbursement by Landlord shall not be made until the Completion
of Expansion and until Tenant shall have delivered to Landlord with respect to
the Expansion:
(i) A copy of the final duly issued certificate of occupancy for the
Expansion;
(ii) An architect's certificate in the form attached to the Purchase
Agreement as Schedule E, Schedule F or Schedule G, as applicable;
(iii) An engineer's certificate in the form attached to the Purchase
Agreement as Schedule H, Schedule I or Schedule J, as applicable; and
(iv) Such other certificates, deeds, affidavits and other instruments
as may reasonably be required in order to enable Landlord to obtain a
date down endorsement to Landlord's owner's policy of title insurance
and increase the amount thereof by an amount not less than the
Aggregate Commitment.
If Tenant shall perform the Expansion, then, notwithstanding anything
to the contrary set forth in this Agreement, the provisions of this Agreement
with respect to Additional Rent shall be modified as follows:
(i) From the Fiscal Quarter in which the Commencement of the Expansion
occurs through the end of the Fiscal Year
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following the Reset Base Year (as defined below), Total Hotel Sales
shall be deemed to be the amounts set forth in Exhibit F;
(ii) The Base Year shall be reset as the period (the "Reset Base Year") of
thirteen (13) Accounting Periods starting with the fourteenth
Accounting Period following the Accounting Period in which the
Completion of Expansion occurs; provided, however, if there shall
occur, prior to the expiration of the Reset Base Year described in the
preceding clause, any force majeure which causes a material decline in
Total Hotel Sales during the thirteen (13) Accounting Periods starting
with the fourteenth Accounting Period following the Accounting Period
in which completion of the Expansion occurs, the Reset Base Year shall
be adjusted to be the first full Fiscal Year of operation following
completion of the Expansion after the termination of any such force
majeure event; and
(iii) During each of the three (3) Fiscal Years following the Reset Base
Year, Additional Rent shall be equal to the greater of (x) the
Additional Rent payable pursuant to the terms of this Agreement and (y)
the Additional Rent payable for the immediately preceding Fiscal Year.]
ARTICLE 7
LIENS
Subject to Article 8, Tenant shall not, directly or indirectly, create
or allow to remain and shall promptly discharge, at its expense, any lien,
encumbrance, attachment, title retention agreement or claim upon the Leased
Property or Tenant's leasehold interest therein or any attachment, levy, claim
or encumbrance in respect of the Rent, other than (a) Permitted Encumbrances,
(b) restrictions, liens and other encumbrances which are consented to in writing
by Landlord, (c) liens for those taxes of Landlord which Tenant is not required
to pay hereunder, (d) subleases permitted by Article 17, (e) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (i) the same are not yet due and payable, or (ii) are being contested in
accordance with Article
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8, (f) liens of mechanics, laborers, materialmen, suppliers or vendors incurred
[For FS Nashville: in connection with the Expansion or] in the ordinary course
of business that are not yet due and payable or are for sums [For FS Nashville
and St. Louis: for which Landlord has not met its funding obligations or] that
are being contested in accordance with Article 8, (g) any Hotel Mortgages or
other liens which are the responsibility of Landlord pursuant to the provisions
of Article 21 and (h) Landlord Liens.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "Claims") as
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to pay any
Claims required hereunder to be paid by Tenant as finally determined, (b) such
contest shall not cause Landlord or Tenant to be in default under any mortgage
or deed of trust encumbering the Leased Property (Landlord agreeing that any
such mortgage or deed of trust shall permit Tenant to exercise the rights
granted pursuant to this Article 8) or any interest therein or result in a lien
attaching to the Leased Property, unless such lien is fully bonded or otherwise
secured to the reasonable satisfaction of Landlord, (c) no part of the Leased
Property nor any Rent therefrom shall be in any immediate danger of sale,
forfeiture, attachment or loss, and (d) Tenant shall indemnify and hold harmless
Landlord from and against any cost, claim, damage, penalty or reasonable
expense, including reasonable attorneys' fees, incurred by Landlord in
connection therewith or as a result thereof. Landlord agrees to join in any such
proceedings if required legally to prosecute such contest, provided that
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith) unless Tenant agrees by agreement in form and substance reasonably
satisfactory to Landlord, to assume and indemnify Landlord with respect to the
same. Tenant shall be
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entitled to any refund of any Claims and such charges and penalties or interest
thereon which have been paid by Tenant or paid by Landlord to the extent that
Landlord has been reimbursed by Tenant. If Tenant shall fail (x) to pay or cause
to be paid any Claims when finally determined, (y) to provide reasonable
security therefor, or (z) to prosecute or cause to be prosecuted any such
contest diligently and in good faith, Landlord may, upon Notice to Tenant, pay
such charges, together with interest and penalties due with respect thereto, and
Tenant shall reimburse Landlord therefor, upon demand, as Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall, at all times during
the Term and at any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property and all property located therein or thereon,
insured against the risks and in the amounts as follows and shall maintain the
following insurance:
(a) "All-risk" property insurance, including insurance against loss or
damage by fire, vandalism and malicious mischief, earthquake, explosion of steam
boilers, pressure vessels or other similar apparatus, now or hereafter installed
in the Hotel located at the Leased Property, with equivalent coverage as that
provided by the usual extended coverage endorsements, in an amount equal to one
hundred percent (100%) of the then full Replacement Cost thereof excluding
foundation and excavation (as defined in Section 9.2) (except that the foregoing
shall not be construed to require Tenant to maintain earthquake insurance if the
same is unavailable on commercially reasonable terms, provided Tenant gives
Landlord prior Notice thereof, and except that the amount of earthquake
insurance shall not necessarily be 100% of the then full Replacement Cost). The
parties agree that such earthquake insurance can be provided through a blanket
earthquake insurance program with limits adequate to protect the regional
aggregate probable maximum loss for all properties under the blanket program.
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(b) Business interruption and blanket earnings plus extra expense under
a rental value insurance policy or endorsement covering risk of loss during the
lesser of the first twelve (12) months of reconstruction or the actual
reconstruction period necessitated by the occurrence of any of the hazards
described in subparagraph (a) above, in such amounts as may be customary for
comparable properties managed or leased by the Guarantor and its Affiliated
Persons and in an amount sufficient to prevent Landlord or Tenant from becoming
a co-insurer;
(c) Comprehensive general liability insurance, including bodily injury
and property damage (on an occurrence basis and on a 1973 or 1988 ISO CGL form
or on a form customarily maintained by similarly situated tenants, including,
without limitation, broad form contractual liability, independent contractor's
hazard and completed operations coverage) in an amount not less than Two Million
Dollars ($2,000,000) per occurrence and umbrella coverage of all such claims in
an amount not less than Twenty-Three Million Dollars ($23,000,000);
(d) Flood (if the Leased Property is located in whole or in part within
an area identified as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968, as amended, or the Flood Disaster Protection Act of 1973, as amended (or
any successor acts thereto)) and such other hazards and in such amounts as may
be available under the National Flood Insurance Program for comparable
properties in the area;
(e) Worker's compensation insurance coverage for all persons employed
by Tenant on the Leased Property with statutory limits and otherwise with limits
of and provisions in accordance with the requirements of applicable local, State
and federal law, and employer's liability insurance as is customarily carried by
similar employers (as to which, if qualified, Tenant may self insure); and
(f) Such additional insurance as may be reasonably required, from time
to time, by Landlord or any Hotel Mortgagee and which is customarily carried by
comparable lodging properties in the area.
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9.2 Replacement Cost. "Replacement Cost" as used herein, shall mean the
actual replacement cost of the property requiring replacement from time to time,
including an increased cost of construction endorsement, less exclusions
provided in the standard form of fire insurance policy. In the event either
party believes that the then full Replacement Cost has increased or decreased at
any time during the Term, such party, at its own cost, shall have the right to
have such full Replacement Cost redetermined by an independent accredited
appraiser approved by the other, which approval shall not be unreasonably
withheld or delayed. The party desiring to have the full Replacement Cost so
redetermined shall forthwith, on receipt of such determination by such
appraiser, give Notice thereof to the other. The determina tion of such
appraiser shall be final and binding on the parties hereto until any subsequent
determination under this Section 9.2, and Tenant shall forthwith conform the
amount of the insurance carried to the amount so determined by the appraiser.
Such replacement value determination will not be necessary so long as the Leased
Property is insured through a blanket replacement value policy.
9.3 Waiver of Subrogation. Landlord and Tenant agree that (insofar as
and to the extent that such agreement may be effective without invalidating or
making it impossible to secure insurance coverage from responsible insurance
companies doing business in the State) with respect to any property loss which
is covered by insurance then being carried by Landlord or Tenant, respectively,
the party carrying such insurance and suffering said loss releases the other of
and from any and all claims with respect to such loss; and they further agree
that their respective insurance companies shall have no right of subrogation
against the other on account thereof, even though extra premium may result
therefrom. In the event that any extra premium is payable by Tenant as a result
of this provision, Landlord shall not be liable for reimbursement to Tenant for
such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for, nonassessable and,
except for umbrella, worker's compensation, flood and earthquake coverage, be
issued by insurance carriers authorized to do business in the State, having a
general policy holder's rating of no less than B++ in Best's
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latest rating guide. All such policies described in Sections 9.1(a) through (d)
shall include no deductible in excess of that carried by the Guarantor and its
Affiliated Persons at similar properties and, with the exception of the
insurance described in Sections 9.1(e), shall name Landlord and any Hotel
Mortgagee as additional insureds, as their interests may appear and to the
extent of their indemnity. All loss adjustments shall be payable as provided in
Article 10. Tenant shall cause all insurance premiums to be paid and shall
deliver policies or certificates thereof to Landlord prior to their effective
date (and, with respect to any renewal policy, prior to the expiration of the
existing policy). All such policies shall provide Landlord (and any Hotel
Mortgagee if required by the same) thirty (30) days prior written notice of any
material change or cancellation of such policy. In the event Tenant shall fail
to effect such insurance as herein required, to pay the premiums therefor or to
deliver such policies or certificates to Landlord or any Hotel Mortgagee at the
times required, Landlord shall have the right, but not the obligation, subject
to the provisions of Section 12.5, to acquire such insurance and pay the
premiums therefor, which amounts shall be payable to Landlord, upon demand, as
Additional Charges, together with interest accrued thereon at the Overdue Rate
from the date such payment is made until (but excluding) the date repaid.
9.5 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant, provided, that the policies meet the
requirements of this Agreement.
9.6 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with that
required by this Article 9, or increase the amount of any existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of such insurance, including
Landlord and all Hotel Mortgagees, are included therein as additional insureds
and the loss is payable under such insurance in the same manner as losses are
payable under this Agreement. In the event Tenant shall take out any such
separate
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insurance or increase any of the amounts of the then existing insurance, Tenant
shall give Landlord prompt Notice thereof.
9.7 Indemnification of Landlord. Notwithstanding the existence of any
insurance provided for herein and without regard to the policy limits of any
such insurance, Tenant shall protect, indemnify and hold harmless Landlord for,
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about the Leased Property or adjoining sidewalks or rights of way under Tenant's
control, (b) any use, misuse, non-use, condition, management, maintenance or
repair by Tenant or anyone claiming under Tenant of the Leased Property or
Tenant's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which Landlord is made a party
or participant relating to the Leased Property or Tenant's Personal Property or
such use, misuse, non-use, condition, management, maintenance, or repair thereof
including, failure to perform obligations (other than Condemnation proceedings)
to which Landlord is made a party, and (c) any Impositions that are the
obligations of Tenant to pay pursuant to the applicable provisions of this
Agreement; provided, however, that Tenant's obligations hereunder shall not
apply to any liability, obligation, claim, damage, penalty, cause of action,
cost or expense to the extent the same arises from any negligence or willful
misconduct of Landlord, its employees, agents or invitees. Tenant, at its
expense, shall contest, resist and defend any such claim, action or proceeding
asserted or instituted against Landlord (and shall not be responsible for any
duplicative attorneys' fees incurred by Landlord) or may compromise or otherwise
dispose of the same, with Landlord's prior written consent (which consent may
not be unreasonably withheld or delayed). In the event Landlord shall
unreasonably withhold or delay its consent, Tenant shall not be liable pursuant
to this Section 9.7 for any incremental increase in costs or expenses resulting
therefrom. The obligations of Tenant under this Section 9.7 are in addition to
the obligations set forth in Section 4.3 and shall survive the termination of
this Agreement.
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ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any property policy of
insurance required by Article 9 (other than the proceeds of any business
interruption insurance) shall be paid directly to Landlord (subject to the
provisions of Section 10.2) and all loss adjustments with respect to property
losses payable to Tenant shall require the prior written consent of Landlord;
provided, however, that, so long as no Event of Default shall have occurred and
be continuing, all such proceeds less than or equal to [For CY, RI and TP: Two
Hundred Fifty Thousand Dollars ($250,000) and for FS: One Million Dollars
($1,000,000)] shall be paid directly to Tenant and such losses may be adjusted
without Landlord's consent. If Tenant is required to reconstruct or repair the
Leased Property as provided herein, such proceeds shall be paid out by Landlord
from time to time for the reasonable costs of reconstruction or repair of the
Leased Property necessitated by such damage or destruction, subject to and in
accordance with the provisions of Section 10.2.4. Provided no Default or Event
of Default has occurred and is continuing, any excess proceeds of insurance
remaining after the completion of the restoration shall be paid to Tenant. In
the event that the provisions of Section 10.2.1 are applicable, the insurance
proceeds shall be retained by the party entitled thereto pursuant to Section
10.2.1. All salvage resulting from any risk covered by insurance shall belong to
Landlord, provided any rights to the same have been waived by the insurer.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property. If, during
the Term, the Leased Property shall be totally or partially destroyed and the
Hotel located thereon is thereby rendered Unsuitable for Its Permitted Use,
Tenant may, by the giving of Notice thereof to Landlord, terminate this
Agreement, whereupon, this Agreement shall terminate and Landlord shall be
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entitled to retain the insurance proceeds payable on account of such damage.
10.2.2 Partial Damage or Destruction. If, during the Term,
the Leased Property shall be totally or partially destroyed but the Hotel is not
rendered Unsuitable for Its Permitted Use, Tenant shall, subject to Section
10.2.3, promptly restore the Hotel as provided in Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds. If the cost of the
repair or restoration of the Leased Property exceeds the amount of insurance
proceeds received by Landlord and Tenant pursuant to Article 9(a), (c), (d) or,
if applicable, (e), Tenant shall give Landlord Notice thereof which notice shall
set forth in reasonable detail the nature of such deficiency and whether Tenant
shall pay and assume the amount of such deficiency (Tenant having no obligation
to do so, except that, if Tenant shall elect to make such funds available, the
same shall become an irrevocable obligation of Tenant pursuant to this
Agreement). In the event Tenant shall elect not to pay and assume the amount of
such deficiency, Landlord shall have the right (but not the obligation),
exercisable at Landlord's sole election by Notice to Tenant, given within sixty
(60) days after Tenant's notice of the deficiency, to elect to make available
for application to the cost of repair or restoration the amount of such
deficiency; provided, however, in such event, upon any disbursement by Landlord
thereof, the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). In
the event that neither Landlord nor Tenant shall elect to make such deficiency
available for restoration, either Landlord or Tenant may terminate this
Agreement by Notice to the other, whereupon, this Agreement shall terminate as
provided in Section 10.2.1. It is expressly understood and agreed, however,
that, notwithstanding anything in this Agreement to the contrary, Tenant shall
be strictly liable and solely responsible for the amount of any deductible
(other than deductibles under the then existing earthquake insurance maintained
in accordance with Section 9.1) and shall, upon any insurable loss, pay over the
amount of such deductible to Landlord at the time and in the manner herein
provided for payment of the applicable proceeds to Landlord.
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10.2.4 Disbursement of Proceeds. In the event Tenant is
required to restore the Leased Property pursuant to Section 10.2, Tenant shall
commence promptly and continue diligently to perform the repair and restoration
of the Leased Property (hereinafter called the "Work"), so as to restore the
Leased Property in compliance with all Legal Requirements and so that the Leased
Property shall be, to the extent practicable, substantially equivalent in value
and general utility to its general utility and value immediately prior to such
damage or destruction. Subject to the terms hereof, Landlord shall advance the
insurance proceeds and any additional amounts payable by Landlord pursuant to
Section 10.2.3 to Tenant regularly during the repair and restoration period so
as to permit payment for the cost of any such restoration and repair. Any such
advances shall be made not more than monthly within ten (10) Business Days after
Tenant submits to Landlord a written requisition and substantiation therefor on
AIA Forms G702 and G703 (or on such other form or forms as may be reasonably
acceptable to Landlord). Landlord may, at its option, condition advancement of
said insurance proceeds and other amounts on (i) the absence of any Event of
Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld or
delayed), (iii) general contractors' estimates, (iv) architect's certificates,
(v) unconditional lien waivers of general contractors, if available, (vi)
evidence of approval by all governmental authorities and other regulatory bodies
whose approval is required and (vii) such other certificates as Landlord may,
from time to time, reasonably require.
Landlord's obligation to disburse insurance proceeds under this Article
10 shall be subject to the release of such proceeds by any Hotel Mortgagee to
Landlord.
Tenant's obligation to restore the Leased Property pursuant to this
Article 10 shall be subject to the release of available insurance proceeds by
the applicable Hotel Mortgagee to Landlord or directly to Tenant and, in the
event such proceeds are insufficient, Landlord electing to make such deficiency
available therefor (and disbursement of such deficiency).
10.3 Damage Near End of Term.
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Notwithstanding any provisions of Section 10.1 or 10.2 to the contrary,
if damage to or destruction of the Leased Property occurs during the last twelve
(12) months of the then Term (including any exercised Extended Term) and if such
damage or destruction cannot reasonably be expected to be fully repaired and
restored prior to the date that is nine (9) months prior to the end of such Term
(including any exercised Extended Term), the provisions of Section 10.2.1 shall
apply as if the Leased Property had been totally or partially destroyed and the
Hotel rendered Unsuitable for its Permitted Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid to Tenant
and, to the extent necessary to repair or replace Tenant's Personal Property in
accordance with Section 10.5, Tenant shall hold such proceeds in trust to pay
the cost of repairing or replacing damaged Tenant's Personal Property.
10.5 Restoration of Tenant's Property. If Tenant is required to restore
the Leased Property as hereinabove provided, Tenant shall either (a) restore all
alterations and improvements made by Tenant and Tenant's Personal Property, or
(b) replace such alterations and improvements and Tenant's Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
10.6 No Abatement of Rent. This Agreement shall remain in full force
and effect and Tenant's obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall remain unabated
during the Term notwithstanding any damage involving the Leased Property
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any cause of damage or destruction
to the Leased Property and, to the maximum extent permitted by law, no local or
State statute, laws, rules, regulation or ordinance in effect during the Term
which provide for such a contingency shall have any application in such case.
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10.7 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of the Leased
Property shall be taken by Condemnation or (ii) a Condemnation of less than the
whole of the Leased Property renders the Leased Property Unsuitable for Its
Permitted Use, this Agreement shall terminate and Tenant and Landlord shall seek
the Award for their interests in the Leased Property as provided in Section
11.5.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of the Leased Property such that the Leased Property is not rendered
Unsuitable for Its Permitted Use, Tenant shall, to the extent of the Award and
any additional amounts disbursed by Landlord as hereinafter provided, commence
promptly and continue diligently to restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to such Condemnation, in full compliance with all Legal
Requirements, subject to the provisions of this Section 11.2. If the cost of the
repair or restoration of the Leased Property exceeds the amount of the Award,
Tenant shall give Landlord Notice thereof which notice shall set forth in
reasonable detail the nature of such deficiency and whether Tenant shall pay and
assume the amount of such deficiency (Tenant having no obligation to do so,
except that if Tenant shall elect to make such funds available, the same shall
become an irrevocable obligation of Tenant pursuant to this Agreement). In the
event Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at
Landlord's sole election by Notice to Tenant given within sixty (60) days after
Tenant's Notice of the deficiency, to elect to make available for application to
the cost of repair or restoration the amount of such deficiency; provided,
however,
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in such event, upon any disbursement by Landlord thereof, the Minimum Rent shall
be adjusted as provided in Section 3.1.1(b). In the event that neither Landlord
nor Tenant shall elect to make such deficiency available for restoration, either
Landlord or Tenant may terminate this Agreement and the entire Award shall be
retained by Landlord.
11.3 Disbursement of Award. Subject to the terms hereof, Landlord shall
contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements and any deficiency Landlord has agreed
to disburse, to Tenant regularly during the restoration period so as to permit
payment for the cost of such repair or restoration. Landlord may, at its option,
condition advancement of such Award and other amounts on (i) the absence of any
Event of Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld or
delayed), (iii) general contractors' estimates, (iv) architect's certificates,
(v) unconditional lien waivers of general contractors, if available, (vi)
evidence of approval by all governmental authorities and other regulatory bodies
whose approval is required and (vii) such other certificates as Landlord may,
from time to time, reasonably require. Landlord's obligation under this Section
11.3 to disburse the Award and such other amounts shall be subject to (x) the
collection thereof by Landlord and (y) the satisfaction of any applicable
requirements of any Hotel Mortgage, and the release of such Award by the
applicable Hotel Mortgagee. Tenant's obligation to restore the Leased Property
shall be subject to the release of the Award by the applicable Hotel Mortgagee
to Landlord.
11.4 Abatement of Rent. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property. The provisions
of this Article 11 shall be considered an express agreement governing any
Condemnation involving the Leased Property and, to the maximum extent permitted
by law, no local or State statute, law, rule, regulation or ordinance in effect
during the Term
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which provides for such a contingency shall have any application in such case.
11.5 Temporary Condemnation. In the event of any temporary Condemnation
of the Leased Property or Tenant's interest therein, this Agreement shall
continue in full force and effect and Tenant shall continue to pay, in the
manner and on the terms herein specified, the full amount of the Rent. Tenant
shall continue to perform and observe all of the other terms and conditions of
this Agreement on the part of the Tenant to be performed and observed. Provided
no Event of Default has occurred and is continuing, the entire amount of any
Award made for such temporary Condemnation allocable to the Term, whether paid
by way of damages, rent or otherwise, shall be paid to Tenant. Tenant shall,
promptly upon the termination of any such period of temporary Condemnation, at
its sole cost and expense, restore the Leased Property to the condition that
existed immediately prior to such Condemnation, in full compliance with all
Legal Requirements, unless such period of temporary Condemnation shall extend
beyond the expiration of the Term, in which event Tenant shall not be required
to make such restoration. For purposes of this Section 11.5, a Condemnation
shall be deemed to be temporary if the period of such Condemnation is not
expected to, and does not, exceed twelve (12) months.
11.6 Allocation of Award. Except as provided in Section 11.5 and the
second sentence of this Section 11.6, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property, or
Tenant's removal and relocation expenses shall be the sole property of and
payable to Tenant (subject to the provisions of Section 11.2). In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
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12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent or any other sum
(including, but not limited to, funding of the Reserve), payable hereunder when
due and such failure shall continue for a period of ten (10) days after Notice
thereof; or
(b) should Tenant fail to maintain the insurance coverages required
under Article 9 and such failure shall continue for ten (10) days after Notice
thereof (except that no Notice shall be required if any such insurance coverages
shall have lapsed); or
(c) should Tenant default in the due observance or performance of any
of the terms, covenants or agreements contained herein to be performed or
observed by it (other than as specified in clauses (a) and (b) above) and such
default shall continue for a period of thirty (30) days after Notice thereof
from Landlord to Tenant; provided, however, that if such default is susceptible
of cure but such cure cannot be accomplished with due diligence within such
period of time and if, in addition, Tenant commences to cure or cause to be
cured such default within fifteen (15) days after Notice thereof from Landlord
and thereafter prosecutes the curing of such default with all due diligence,
such period of time shall be extended to such period of time as may be necessary
to cure such default with all due diligence; or
(d) should a material event of default by Tenant or its Affiliated
Persons occur and be continuing beyond the expiration of any applicable cure
period under any of the Incidental Documents or the Other Leases; or
(e) should any material representation or warranty made by Tenant or
any of its Affiliated Persons under or in connection with this Agreement, any
Incidental Document or the Other Leases, or in any document, certificate or
agreement delivered in connection herewith prove to have been false in any
material respect on the date when made or deemed made and such default shall
continue for a period of fifteen (15) days after Notice thereof from Landlord to
Tenant; provided, however, that (x) if such default is susceptible of cure but
such cure cannot be
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accomplished with due diligence within such period of time and if, in addition,
Tenant commences to cure or cause to be cured such default within fifteen (15)
days after Notice thereof from Landlord and thereafter prosecutes the curing of
such default with all due diligence, such period of time shall be extended to
such period of time as may be necessary to cure such default with all due
diligence; or
(f) should Tenant generally not be paying its debts as they become due
or should Tenant make a general assignment for the benefit of creditors; or
(g) should any petition be filed by or against Tenant under the Federal
bankruptcy laws, or should any other proceeding be instituted by or against
Tenant seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or for any
substantial part of the property of Tenant and such proceeding is not dismissed
within ninety (90) days after institution thereof, or should Tenant take any
action to authorize any of the actions set forth above in this paragraph; or
(h) should Tenant cause or institute any proceeding for its dissolution
or termination; or
(i) should an event of default occur and be continuing under any
mortgage which is secured by Tenant's leasehold interest hereunder or should the
mortgagee under any such mortgage accelerate the indebtedness secured thereby or
commence a foreclosure action in connection with said mortgage; provided,
however, that (x) if such default is susceptible of cure but such cure cannot be
accomplished with due diligence within such period of time and if, in addition,
Tenant commences to cure or cause to be cured such default within fifteen (15)
days after Notice thereof from Landlord and thereafter prosecutes the curing of
such default with all due diligence, such period of time shall be extended to
such period of time as may be necessary to cure such default with all due
diligence; or
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(j) unless Tenant shall be contesting such lien or attachment in good
faith in accordance with Article 8, should the estate or interest of Tenant in
the Leased Property or any part thereof be levied upon or attached in any
proceeding and the same shall not be vacated, discharged or fully bonded or
otherwise secured to the reasonable satisfaction of Landlord within the later of
(x) one hundred and twenty (120) days after commencement thereof, unless the
amount in dispute is less than $250,000, in which case Tenant shall give notice
to Landlord of the dispute but Tenant may defend in any suitable way, and (y)
thirty (30) days after receipt by Tenant of Notice thereof from Landlord; or
(k) should Tenant at any time cease to be a direct or indirect
Subsidiary of the Guarantor, except as expressly permitted by Article 16;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement by giving Notice thereof to Tenant
and upon the expiration of the time, if any, fixed in such Notice, this
Agreement shall terminate and all rights of Tenant under this Agreement shall
cease. Landlord shall have and may exercise all rights and remedies available at
law and in equity to Landlord as a result of Tenant's breach of this Agreement.
Landlord hereby agrees and consents to any cure of any Default or Event
of Default tendered or performed by the Guarantor within the same cure period
afforded to Tenant herein.
12.2 Remedies. None of (a) the termination of this Agreement pursuant
to Section 12.1, (b) the repossession of the Leased Property or any portion
thereof, (c) the failure of Landlord to re-let the Leased Property or any
portion thereof, nor (d) the reletting of all or any portion of the Leased
Property, shall relieve Tenant of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or re-letting. In the
event of any termination of this Agreement, 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
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liable to Landlord for, and shall pay to Landlord, as current damages, the Rent
and other charges which would be payable hereunder for the remainder of the Term
had such termination not occurred, less the net proceeds, if any, of any
re-letting of the Leased Property, after deducting all reasonable expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, advertising,
expenses of employees, alteration costs and expenses of preparation for such
reletting. Tenant shall pay such current damages to Landlord monthly on the days
on which the Minimum Rent would have been payable hereunder if this Agreement
had not been so terminated with respect to such of the Leased Property.
At any time after such termination, whether or not Landlord shall have
collected any Rent owing and due up to and including the date of termination of
this Agreement, as liquidated final damages beyond the date of such termination
and in lieu of Landlord's right to receive any other damages due to the
termination of this Agreement, at Landlord's election, Tenant shall pay to
Landlord an amount equal to the present value (discounted at the Interest Rate)
of the excess, if any, of the Rent and other charges which would be payable
hereunder from the date of such termination (assuming that, for the purposes of
this paragraph, annual payments by Tenant on account of Impositions and
Additional Rent would be the same as payments required for the immediately
preceding thirteen Accounting Periods, or if less than thirteen Accounting
Periods have expired since the Commencement Date, the payments required for such
lesser period projected to an annual amount) for what would be the then
unexpired term of this Agreement if the same remained in effect, over the fair
market rental for the same period; provided, however, that Tenant shall be
entitled to a credit from Landlord in the amount of any unapplied balance of the
Retained Funds, whereupon Landlord and its Affiliated Persons shall have no
further obligation to pay the portion of the Retained Funds so credited to
Tenant or any of its Affiliated Persons. Nothing contained in this Agreement
shall, however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved,
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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
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Event of Default) shall be applied to Tenant's current and past due obligations
under this Agreement in such order as Landlord may determine or as may be
prescribed by the laws of the State.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or releasing
any obligation of Tenant and without waiving or releasing any Event of Default,
may (but shall not be obligated to), at any time thereafter, make such payment
or perform such act for the account and at the expense of Tenant, and may, to
the maximum extent permitted by law, enter upon the Leased Property or any
portion thereof for such purpose and take all such action thereon as, in
Landlord's sole and absolute discretion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Retained Funds. Notwithstanding any term or provision to the
contrary herein, in the event that this Agreement is terminated pursuant to
Section 12.1 or 12.2, Landlord shall credit any unapplied balance of the
Retained Funds to any claims or damages to which Landlord is entitled and to the
extent that any portion of the Retained Funds allocable to the Leased Property
remain after such credit, Landlord shall promptly pay such portion as provided
in the Purchase Agreement.
12.7 Good Faith Dispute. If Tenant shall in good faith dispute the
occurrence of any Default and Tenant, before the expiration of the applicable
cure period, shall give Notice thereof to Landlord, setting forth, in reasonable
detail, the basis therefor, no Event of Default shall be deemed to have occurred
and, provided Tenant shall escrow disputed amounts, if any, pursuant to an
escrow arrangement reasonably acceptable to Landlord and Tenant; provided,
however, that in the event of any such adverse determination, Tenant shall pay
to Landlord interest
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on any disputed funds at the Disbursement Rate, from the date demand for such
funds was made by Landlord until the date of final adverse determination and,
thereafter, at the Overdue Rate until paid. If Landlord and Tenant shall fail,
in good faith, to resolve any such dispute within ten (10) Business Days after
Tenant's Notice of dispute, either may submit the matter for resolution to a
court of competent jurisdiction. In the event that such court shall determine a
Default, in fact, exists, Tenant shall have the applicable cure period from the
date of the final non-appealable determination of the court to cure such
Default.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to one and one half (1.5) times the Rent and other charges herein provided
(prorated on a daily basis). Tenant shall also pay to Landlord all damages
(direct or indirect) sustained by reason of any such holding over. Otherwise,
such holding over shall be on the terms and conditions set forth in this
Agreement, to the extent applicable. Nothing contained herein shall constitute
the consent, express or implied, of Landlord to the holding over of Tenant after
the expiration or earlier termination of this Agreement.
ARTICLE 14
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
14.1 Landlord Notice Obligation. Landlord shall give prompt Notice to
Tenant and the Manager of any matters affecting the Leased Property of which
Landlord receives written notice or actual knowledge and, to the extent Tenant
otherwise has no notice or actual knowledge thereof, Landlord shall be liable
for any liabilities, costs, damages or claims (including reasonable attorneys'
fees) arising from the failure to deliver such Notice to Tenant. Landlord shall
not amend any material agreement affecting the Leased Property without Tenant's
prior written
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consent, which consent shall not be unreasonably withheld, conditioned or
delayed.
14.2 Landlord's Default. If Landlord shall default in the performance
or observance of any of its covenants or obligations set forth in this Agreement
or if HPT shall default in its obligations under the HPT Guaranty or the Owner
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, or if a Landlord Default (as defined
therein) shall occur and be continuing under any of the Other Leases, Tenant may
declare the occurrence of a "Landlord Default" by giving Notice of such
declaration to Landlord and to such Hotel Mortgagee. Thereafter, Tenant may (but
shall have no obligation to) cure the same and, subject to the provisions of the
following paragraph, invoice Landlord for costs and expenses (including
reasonable attorneys' fees and court costs) incurred by Tenant in curing the
same, together with interest thereon from the date Landlord receives Tenant's
invoice, at the Overdue Rate. Except as otherwise expressly provided herein to
the contrary, Tenant shall have no right to terminate this Agreement for any
default by Landlord hereunder and no right, for any such default, to offset or
counterclaim against any Rent or other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default (other than a dispute pursuant to 5.1.3(b) which shall be addressed as
therein provided) and Landlord, before the expiration of the applicable cure
period, shall give Notice thereof to Tenant, setting forth, in reasonable
detail, the basis therefor, no Landlord Default shall be deemed to have occurred
and Landlord shall have no obligation with respect thereto until final adverse
determination thereof; provided, however, that in the event of any such adverse
determination, Landlord shall pay to Tenant interest on any disputed funds at
the Disbursement Rate, from the date demand for such funds was made by Tenant
until the date of final adverse determination and, thereafter, at the Overdue
Rate until paid. If Tenant and Landlord shall fail, in good faith, to resolve
any such dispute within ten (10) days after Landlord's Notice of dispute, either
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may submit the matter for resolution to a court of competent jurisdiction.
14.3 Special Remedies for Landlord Funding Default. In the event of any
Landlord Default arising under Section 5.1.3(b) [For FS: or Section 6.5] and a
decision in Tenant's favor with respect thereto pursuant to Article 19, Tenant
shall have the right, in Tenant's sole discretion, in addition to all other
remedies of Tenant hereunder, to exercise any one or more of the following
remedies:
(a) Tenant may fund the deficient amounts and offset the aggregate
amount thereof plus interest thereon from the date of funding at the
Disbursement Rate against any Additional Rent payable by Tenant subsequent to
the date of advance pursuant to this Agreement and the Other Leases until
recouped;
(b) Tenant may terminate the Franchise Agreement with respect to the
Leased Property (but not with respect to any of the other Collective Leased
Properties);
(c) Tenant may, notwithstanding the provisions of Section 5.4 or
Article 16, engage a Manager who is not an Affiliated Person as to Tenant or
assign this Agreement or sublease all (but not less than all) of the Leased
Property to a Person who is not an Affiliated Person as to Tenant provided, in
any such case, such Person shall be reasonably acceptable to Landlord,
whereupon, this Agreement shall be amended to exclude the Leased Property from
the benefits and burdens of the Reserve; or
(d) Tenant may, provided that the Leased Property is not then subject
to a Hotel Mortgage or owned by any Person who acquired title by, or any Person
claiming by, through or under any Person who acquired title by, foreclosure or
deed in lieu thereof, terminate this Agreement, whereupon, (i) the Other Leases
shall be amended to (x) eliminate any reference to this Agreement in the
definition therein of "Other Leases" and (y) eliminate any reference to the
Leased Property in the definition therein of "Collective Leased Properties",
(ii) the Limited Rent Guaranty shall terminate only with respect to and only to
the extent applicable to this Agreement and (iii) Landlord shall pay any
unapplied balance of the Retained Funds allocable to the Leased Property as
provided in the Purchase Agreement.
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14.4 Remedy after Landlord Transfer. In the event Landlord shall
transfer its interest in the Leased Property other than to a Person who acquired
title by foreclosure or deed in lieu thereof, or any Person claiming by, through
or under such a Person, Tenant may, thereafter, upon the occurrence and during
the continuance of any Landlord Default, terminate this Agreement by thirty (30)
days prior Notice thereof to the then Landlord; provided, however, that if such
Landlord Default shall be cured prior to the expiration of such 30-day period,
such notice of termination shall be null and void.
14.5 Special Remedy after Landlord Default under Section 10.2.4 and
11.3. If a Landlord Default shall occur in connection with Landlord's funding
obligations under Section 10.2.4 or Section 11.3, Tenant shall have the right,
in Tenant's sole discretion, in addition to all other remedies of Tenant
hereunder, to offset amounts Landlord has failed to disburse in accordance with
the terms thereof and as to which a Landlord Default has occurred against the
Minimum Rent and Additional Rent payable hereunder.
14.6 Special Remedy for Tenant under Section 22.8. If a Landlord
Default shall occur under Section 22.8, the Minimum Rent shall abate to the
extent of and during the duration of any interruption in Tenant's quiet
enjoyment of the Leased Property.
ARTICLE 15
TRANSFERS BY LANDLORD
15.1 Transfer of Leased Property. Except as otherwise provided in
Article 20, Landlord shall not transfer the Leased Property, or any interest
therein, directly or indirectly, to any Person which: (i) does not have
sufficient financial resources to fulfill Landlord's obligations hereunder; (ii)
is in control of or controlled by Persons who have been convicted of felonies;
(iii) is a Competitor or (iv) fails expressly to assume, in writing, the
obligations of Landlord under this Agreement without the prior written consent
of Tenant, which consent may be given or withheld by Tenant in Tenant's sole and
absolute discretion. Otherwise, subject to the provisions of Section 15.2,
Landlord
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may transfer the Leased Property, or an interest therein, to any Person without
the consent of, but upon not less than ten (10) Business Days prior Notice to,
Tenant.
15.2 Conditions of Transfer. Any transfer of the Leased Property
permitted by Section 15.1 shall be subject to the prior or simultaneous
satisfaction of the following conditions:
(a) The Retained Funds with respect to the Leased Property shall, at
the election of Landlord, (i) be deposited in an escrow account on terms and
conditions reasonably satisfactory to Tenant; (ii) be treated as prepaid Minimum
Rent for the last year of the Term and Landlord and Tenant shall, prior to the
transfer, enter into an amendment to this Agreement reflecting such treatment,
such amendment to be in form and substance reasonably satisfactory to Landlord
and Tenant; (iii) be paid to Tenant at a discounted rate based on the interest
rate published in The Wall Street Journal for U.S. Treasury Obligations having a
maturity, closest in time to the last day of the then current Term (including,
for this purpose, all exercised Extended Terms); or (iv) be likewise transferred
to a successor obligor whose unsecured long term debt is rated investment grade
by a nationally recognized rating agency or another successor obligor
satisfactory to Tenant in its sole discretion and all Landlord obligations with
respect to the same expressly assumed in writing pursuant to an assumption
agreement in form and substance reasonably satisfactory to Tenant and pursuant
to which, inter alia, such successor obligor expressly recognizes Tenant's right
to receive the Retained Funds in accordance with the terms of this Agreement;
(b) The definition of "Other Leases" and "Collective Leased Properties"
set forth in this Agreement shall be amended to eliminate any references to any
of the Other Leases or Collective Leased Properties not simultaneously
transferred to the successor to Landlord under this Agreement, and the reference
to "Other Leases" and "Collective Leased Properties" set forth in the Other
Leases shall no longer include this Agreement or the Leased Property.
(c) If Landlord's interest under this Agreement shall be transferred
other than in connection with a transfer of Landlord's interest under all of the
Other Leases to the same
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transferee, a portion of the then current balance in the Reserve shall be
allocated to the Leased Property, as reasonably determined by Tenant based on
Tenant's reasonable and good faith estimate as to the Leased Property's
projected requirements for Reserve fundings relative to the projected
requirements for Reserve fundings for the other Collective Leased Properties;
(d) Any transferee of Landlord pursuant to this Article 15 shall
expressly assume in writing the obligations of Landlord under this Agreement;
and
(e) Any overpayments of Additional Rent held by Landlord shall be
refunded to Tenant prior to such transfer.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment. Except as provided in Section 16.3,
Tenant shall not, without Landlord's prior written consent (which consent may be
given or withheld in Landlord's sole and absolute discretion), assign, mortgage,
pledge, hypothecate, encumber or otherwise transfer this Agreement or sublease
(which term shall be deemed to include the granting of concessions, licenses and
the like), all or any part of the Leased Property or suffer or permit this
Agreement or the leasehold estate created hereby or any other rights arising
under this Agreement to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or operation of the
Leased Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting. For purposes of this Section
16.1, an assignment of this Agreement shall be deemed to include the following
(for purposes of this Section 16.1, a "Corporate Transfer"): any direct or
indirect transfer of any interest in Tenant such that Tenant shall cease to be a
direct or indirect Subsidiary of the Guarantor or any transaction pursuant to
which Tenant is merged or consolidated with another Entity which is not the
Guarantor or an Affiliated Person of the Guarantor or pursuant to which all or
substantially all of Tenant's assets are transferred to any other Entity, as if
such change in control or
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transaction were an assignment of this Agreement but shall not include any
involuntary liens or attachments contested by Tenant in good faith in accordance
with Article 8.
Notwithstanding the foregoing if, after giving effect to a Corporate
Transfer, Tenant, or all or substantially all of Tenant's assets, would be owned
or controlled by a Person who would, in connection therewith, acquire all or
substantially all of one or more or all of the Courtyard, Residence Inn,
TownePlace Suites or Marriott Hotels business of the Guarantor and its direct
and indirect Subsidiaries, provided that, in Landlord's reasonable determination
such Person and its controlling parties (x) shall have sufficient expertise and
financial resources to carry on the Courtyard or Residence Inn business
consistent with historical practices and (y) shall not be convicted felons,
Landlord shall, at Tenant's request, waive the restrictions set forth in this
Section 16.1 with respect to such Corporate Transfer and no consent by Landlord
shall be required with respect thereto. If Landlord fails to give Notice of such
waiver (or the withholding thereof) within twenty (20) Business Days after
Tenant's written request therefor, such waiver shall be deemed given.
If this Agreement is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant) Landlord may
collect the rents from such assignee, subtenant or occupant, as the case may be,
and apply the net amount collected to the Rent herein reserved, but no such col
lection shall be deemed a waiver of the provisions set forth in the first
paragraph of this Section 16.1, the acceptance by Landlord of such assignee,
subtenant or occupant, as the case may be, as a tenant, or a release of Tenant
from the future performance by Tenant of its covenants, agreements or
obligations contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder (unless Landlord and Tenant expressly
otherwise agree that Tenant shall be released from all obligations hereunder)
except as set forth in this Section 16.1, 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
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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. Upon an assignment permitted under Section 16.3(c), the transferor
Tenant shall be released from all liabilities and obligations under this
Agreement arising subsequent to the effective date of such assignment.
16.2 Required Sublease Provisions. Except for subleases entered into
for the purposes of complying with the liquor licensing laws of the State, any
sublease of all or any portion of the Leased Property entered into on or after
the date hereof shall provide (a) that it is subject and subordinate to this
Agreement and to the matters to which this Agreement is or shall be subject or
subordinate; (b) that in the event of termination of this Agreement or reentry
or dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Hotel
Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or omission
of Tenant under such sublease, (ii) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant,
(iii) be bound by any previous prepayment of more than one (1) Accounting
Period, (iv) be bound by any covenant of Tenant to undertake or complete any
construction of the Leased Property or any portion thereof, (v) be required to
account for any security deposit of the subtenant other than any security
deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person oc cupying any portion of the Leased
Property; and (c), in the event that such subtenant receives a written Notice
from Landlord or any Hotel Mortgagee stating that an Event of Default has
occurred and is continuing, such subtenant shall thereafter be obligated to pay
all rentals accruing under such sublease directly to the party giving such
Notice or as such party may direct. All
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rentals received from such subtenant by Landlord or the Hotel Mortgagee, as the
case may be, shall be credited against the amounts owing by Tenant under this
Agreement and such sublease shall provide that the subtenant thereunder shall,
at the request of Landlord, execute a suitable instrument in confirmation of
such agreement to attorn. An original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such subtenant or
assignee, as the case may be, in form and substance reasonably satisfactory to
Landlord, shall be delivered promptly to Landlord and (a) in the case of an
assignment, the assignee shall assume in writing and agree to keep and perform
all of the terms of this Agreement on the part of Tenant to be kept and
performed and shall (except in the event of an assignment pursuant to Section
16.3(c)) be, and become, jointly and severally liable with Tenant for the
performance thereof and (b) in case of either an assignment or subletting
(except in the event of an assignment pursuant to Section 16.3(c)), Tenant shall
remain primarily liable, as principal rather than as surety, for the prompt
payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 16.1.
16.3 Permitted Sublease and Assignment. Notwithstanding the foregoing,
but subject to the provisions of Section 16.4 and any other express conditions
or limitations set forth herein, Tenant may, in each instance after Notice to
Landlord, (a) sublease space at the Leased Property for newsstand, gift shop,
parking garage, health club, restaurant, bar or commissary purposes or similar
concessions in furtherance of the Permitted Use, so long as such subleases do
not demise, in the aggregate, in excess of three thousand (3,000) square feet
(exclusive of any parking garage subleases), will not violate or affect any
Legal Requirement or Insurance Requirement, and Tenant shall provide such
additional insurance coverage applicable to the activities to be conducted in
such subleased space as Landlord and any Hotel Mortgagee may reasonably require;
(b) in the event that there is a Corporate Transfer permitted pursuant to
Section 16.1, as a result of which all or substantially all of the assets with
respect to one or more, but not all, of the Residence Inn by
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Marriott, Courtyard by Marriott, TownePlace Suites or Marriott Hotel brands are
transferred to a Person that is not an Affiliated Person as to Tenant, sublease
the Leased Property or assign Tenant's rights under this Agreement to an
Affiliated Person as to Tenant or the Guarantor which retains all or
substantially all of the assets of the brand or brands not so transferred,
provided all of the Collective Leased Properties or Other Leases operated under
the same brand or brands are so subleased or assigned, as the case may be; and
(c) in the event that Landlord transfers the Leased Property to a Person other
than HPT or any Affiliated Person as to HPT or Landlord (unless all of the Other
Leases are simultaneously transferred to the same Person), assign Tenant's
rights under this Agreement to an Affiliated Person as to Tenant or the
Guarantor.
16.4 Sublease Limitation. For so long as Landlord or any Affiliated
Person as to Landlord shall seek to qualify as a real estate investment trust,
anything contained in this Agreement to the contrary notwithstanding, Tenant
shall not sublet the Leased Property on any basis such that the rental to be
paid by any sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of such sublessee,
or (b) any other formula such that any portion of such sublease rental would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto (it being
understood and agreed that no agreements in effect as of the Commencement Date
violate the foregoing restrictions).
16.5 Special Crestline Assignment. Notwithstanding anything herein to
the contrary, Landlord shall not unreasonably withhold its consent to an
assignment of this Agreement to a wholly owned Subsidiary of Crestline Capital
Corporation ("Crestline") provided that (i) no Event of Default shall have
occurred and be continuing, (ii) Affiliated Persons of the Guarantor shall
continue to manage the Leased Property pursuant to a management agreement
satisfactory to Landlord; (iii) the terms of the amended transaction shall be
economically neutral to Landlord in Landlord's sole and absolute discretion;
(iv) the then current income statement and balance sheet of Crestline as of the
date of assignment shall not be materially and adversely different from those
attached hereto as Schedule 1; (v) each of the Other Leases is simultaneously
assigned; (vi) the Guarantor's
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guaranty of this Agreement and the Other Leases shall be in full force and
effect or an alternative arrangement satisfactory to Landlord in its sole
discretion shall be provided (it being understood and agreed, however, that,
upon such assignment, Tenant shall be released hereunder); (vii) any other
agreements between Landlord, Tenant and their Affiliated Persons shall be
appropriately amended; and (viii) Tenant shall pay all costs and expenses
(including reasonable attorneys' fees) incurred by Landlord in connection with
such assignment.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) Business Days prior Notice by either party, the party
receiving such Notice shall furnish to the other an Officer's Certificate
certifying that this Agreement is unmodified and in full force and effect (or
that this Agreement is in full force and effect as modified and setting forth
the modifications), the date to which the Rent has been paid, that no Default or
an Event of Default has occurred and is continuing or, if a Default or an Event
of Default shall exist, specifying in reasonable detail the nature thereof, and
the steps being taken to remedy the same, and such additional information as the
requesting party may reasonably request. If such additional information
reasonably requires more than ten (10) Business Days to provide, the party
furnishing such information shall be entitled to such additional period to
respond to such request as may be reasonably required under the circumstances.
Any such certificate furnished pursuant to this Section 17.1 may be relied upon
by the requesting party, its lenders and any prospective purchaser or mortgagee
of the Leased Property or the leasehold estate created hereby.
17.2 Financial Statements. Tenant shall furnish the following
statements to Landlord:
(a) as soon as publicly available or, in the event the same shall no
longer be required to be made public, within forty-five (45) days after each of
the first three Fiscal Quarters of any Fiscal Year, the most recent Consolidated
Financials;
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(b) as soon as publicly available or, in the event the same shall no
longer be required to be made public, within ninety (90) days after the end of
each Fiscal Year, the most recent Consolidated Financials for such year,
certified by an independent certified public accountant;
(c) within thirty (30) days after the end of each Accounting Period, an
unaudited operating statement prepared on a Hotel by Hotel basis, including
occupancy percentages and average rate; and
(d) promptly after the sending or filing thereof, copies of all reports
which Tenant or the Guarantor sends to its security holders generally, and
copies of all periodic reports which Tenant or the Guarantor files with the SEC
or any stock exchange on which its shares are listed or traded.
In addition, Tenant shall provide Landlord with information relating to
Tenant and its operation of the Leased Property that (a) may be required in
order for Landlord to prepare financial statements in accordance with GAAP or to
comply with applicable securities laws and regulations and the SEC's
interpretation thereof and (b) is of the type that the Guarantor and its
Affiliated Persons customarily prepare for other hotel owners; provided,
however, that (i) Tenant reserves the right, in good faith, to challenge and
require Landlord to use commercially reasonable efforts to challenge any
assertion by the SEC, any other applicable regulatory authority, or Landlord's
independent public accountants that applicable law, regulations or GAAP require
the provision or publication of Proprietary Information, (ii) Landlord shall
not, without Tenant's consent (which consent shall not be unreasonably withheld,
delayed or conditioned), acquiesce to any such challenged assertion until
Landlord has exhausted all reasonable available avenues of administrative
review, and (iii) Landlord shall consult with Tenant in pursuing any such
challenge and will allow Tenant to participate therein if and to the extent that
Tenant so elects. Landlord acknowledges that the foregoing does not constitute
an agreement by Tenant either to join in any Landlord filing with or appearance
before the SEC or any other regulatory authority or to take or consent to any
other action which would cause Tenant to be liable to any third party for any
statement or information
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other than those statements incorporated by reference pursuant to clause (a)
above.
Subject to any Hotel Mortgagee entering into such confidentiality agreement with
Tenant as Tenant may reasonably require, Landlord may at any time, and from time
to time, provide any Hotel Mortgagee with copies of any of the foregoing
statements.
In addition, Landlord shall have the right, from time to time at
Landlord's sole cost and expense, upon reasonable Notice, during Tenant's
customary business hours, to cause Tenant's books and records with respect to
the Leased Property to be audited by auditors selected by Landlord at the place
where such books and records are customarily kept, provided that, prior to
conducting such audit, Landlord shall enter into a confidentiality agreement
with Tenant, such agreement to be in form and substance reasonably satisfactory
to Landlord, Tenant and the Guarantor.
17.3 General Operations. Tenant shall furnish to Landlord, not less
than seventy-five (75) days after the commencement of any Fiscal Year, proposed
annual budgets in a form consistent with the then standards for the same brand
of hotels as the Hotel setting forth projected income and costs and expenses
projected to be incurred by Tenant in managing, leasing, maintaining and
operating the Hotel during the then current Fiscal Year.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property during usual business hours upon not less than
twenty-four (24) hours' notice and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of this Agreement, provided that any
inspection or repair by Landlord or its representatives will not unreasonably
interfere with Tenant's use and operation of the Leased Property and further
provided that in the event of an emergency, as determined by Landlord in its
reasonable discretion, prior Notice shall not be necessary.
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ARTICLE 19
ALTERNATIVE DISPUTE RESOLUTION
19.1 Negotiation and Mediation. Any and all disputes or disagreements
arising out of or relating to Landlord's obligations to disburse funds pursuant
to Section 5.1.3(b) for which Landlord has timely given Notice pursuant to
Section 5.1.3(b) shall be resolved through negotiations or, at the election of
either party, if the dispute is not so resolved within 30 days after Landlord's
Notice of dispute, through mediation or, at the election of either party if such
mediation has not conclusively resolved such dispute within ninety (90) days
after commencement thereof, by binding arbitration conducted in accordance with
Section 19.2.
19.2 Arbitration.
(a) The party electing arbitration pursuant to Section 19.1 shall give
Notice to that effect to the other party and shall in such Notice appoint an
individual as arbitrator on its behalf. Within 15 days after such Notice, the
other party, by Notice to the initiating party, shall appoint a second
individual as arbitrator on its behalf. The arbitrators thus appointed shall
appoint a third individual, and such three arbitrators shall as promptly as
possible determine such dispute; provided, however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall proceed to determine
such dispute; and
(ii) if the two (2) arbitrators appointed by the parties shall be
unable to agree, within 15 days after the appointment of the
second arbitrator, upon the appointment of a third arbitrator,
they shall give written Notice to the parties of such failure
to agree, and, if the parties fail to agree upon the selection
of a third arbitrator within 15 days after the arbitrators
appointed by the parties give Notice as aforesaid, then either
of the parties upon Notice to the other party may request such
appointment by the then Chief Judge of the United States
District
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Court for the State of Maryland, or in such Judge's absence,
refusal, failure or inability to act, may apply for a court
appointment of such third arbitrator.
(b) Each arbitrator shall be a fit and impartial person who shall have
had at least five years' experience in the operation or ownership of hotel
properties.
(c) The arbitration shall be conducted within the State of Maryland
and, to the extent consistent with this Section 19.2, in accordance with the
rules of the American Arbitration Association. The arbitrators shall render
their decision and award, upon the concurrence of at least two of their number,
within 30 days after the appointment of the third arbitrator. Such decision and
award shall be in writing and shall be final, binding and enforceable against
the parties and shall be non-appealable, and counterpart copies thereof shall be
delivered to each of the parties. In rendering such decision and award, the
arbitrators shall not add to, subtract from or otherwise modify the provisions
of this Agreement. Judgment may be had on the decision and award of the
arbitrator(s) so rendered in any court of competent jurisdiction.
(d) Each party shall pay the fees and expenses of the one of the two
original arbitrators appointed by or for such party, and the fees and expenses
of the third arbitrator and all other expenses of the arbitration (other than
the fees and disbursements of attorneys or witnesses for each party) shall be
borne by the parties equally.
ARTICLE 20
HOTEL MORTGAGES
20.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord
may, subject to the terms and conditions set forth in this Section 20.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or
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refinancing, provided that any such Encumbrance, when added to all existing
Encumbrances affecting the Leased Property, shall not secure a maximum principal
amount in excess of (x) seventy percent (70%) of the Allocable Purchase Price of
the Leased Property if secured only by the Leased Property or sixty percent
(60%) of the Allocable Purchase Prices of such Collective Leased Properties as
secure such Encumbrance if secured by the Leased Property and one or more of the
other Collective Leased Properties or (y) a sixty percent (60%) loan to value
ratio if one or more of the Collective Leased Properties are pooled with other
Marriott brand properties. Any such Encumbrance shall provide (subject to
Section 20.2) that it is subject to the rights of Tenant under this Agreement.
Landlord shall not cross collateralize the Leased Property with any property
which is not flagged as a Marriott brand.
20.2 Subordination of Lease. Subject to Section 20.1 and this Section
20.2, upon Notice from Landlord, Tenant shall execute and deliver an agreement,
in form and substance reasonably satisfactory to Landlord and Tenant,
subordinating this Agreement to any Encumbrance permitted pursuant to Section
20.1; provided, however, that such subordination shall be on the express
condition that the terms of this Agreement shall be recognized by the mortgagee
or holder of the deed of trust and any purchaser of the Leased Property at any
foreclosure sale (a "Successful Purchaser") and that such mortgagee, holder or
Successful Purchaser shall honor and be bound by this Agreement and that,
notwithstanding any default by Landlord under such Encumbrance or any
foreclosure thereof, Tenant's possession of the Leased Property and rights and
obligations under this Agreement shall not be affected thereby and this
Agreement shall not be terminated other than in accordance with its terms. The
foregoing agreements shall be binding on any purchaser of the Leased Property at
foreclosure. Any mortgage or deed of trust to which this Agreement is, at the
time referred to, subject and subordinate, is herein called "Superior Mortgage"
and the holder, trustee or beneficiary of a Superior Mortgage is herein called
"Superior Mortgagee". Tenant shall have no obligations under any Superior
Mortgage other than those expressly set forth in this Section 20.2.
If any Superior Mortgagee or the nominee or designee of any Superior
Mortgagee or any Successful Purchaser, shall succeed to
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the rights of Landlord under this Agreement (any such person, "Successor
Landlord"), whether through possession or foreclosure action or delivery of a
new lease or deed, or otherwise, such Successor Landlord shall recognize
Tenant's rights under this Agreement as herein provided and Tenant shall attorn
to and recognize the Successor Landlord as Tenant's landlord under this
Agreement and Tenant shall promptly execute and deliver any instrument that such
Successor Landlord may reasonably request to evidence such attornment (provided
that such instrument does not alter the terms of this Agreement), whereupon,
this Agreement shall continue in full force and effect as a direct lease between
the Successor Landlord and Tenant upon all of the terms, conditions and
covenants as are set forth in this Agreement, except that the Successor Landlord
(unless formerly the landlord under this Agreement or its nominee or designee)
shall not be (a) liable in any way to Tenant for any act or omission, neglect or
default on the part of any prior Landlord under this Agreement, (b) responsible
for any monies owing by or on deposit with any prior Landlord to the credit of
Tenant (except to the extent actually paid or delivered to the Successor
Landlord), (c) subject to any counterclaim or setoff which theretofore accrued
to Tenant against any prior Landlord, (d) bound by any modification of this
Agreement subsequent to such Superior Lease or Mortgage, or by any previous
prepayment of Minimum Rent or Additional Rent for more than one (1) month in
advance of the date due hereunder, which was not approved in writing by the
Superior Landlord or the Superior Mortgagee thereto, (e) liable to Tenant beyond
the Successor Landlord's interest in the Leased Property and the rents, income,
receipts, revenues, issues and profits issuing from the Leased Property, or (f)
required to remove any Person occupying the Leased Property or any part thereof,
except if such person claims by, through or under the Successor Landlord. Tenant
agrees at any time and from time to time to execute a suitable instrument in
confirmation of Tenant's agreement to attorn, as aforesaid and Landlord agrees
to provide Tenant with an instrument of nondisturbance and attornment from each
such Superior Mortgagee and Superior Landlord in form and substance reasonably
satisfactory to Tenant. Notwithstanding the foregoing, any Successor Landlord
and/or Superior Mortgagee shall be liable to pay to Tenant any portions of
insurance proceeds or Awards received by the Successor Landlord and/or Superior
Mortgagee required to be paid to Tenant pursuant to the terms of this Agreement,
and, as a condition to any mortgage, lien or
<PAGE>
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lease in respect of the Leased Property, and the subordination of this Agreement
thereto, the mortgagee, lienholder or lessor, as applicable, shall expressly
agree, for the benefit of Tenant, to make such payments, which agreement shall
be embodied in an instrument in form reasonably satisfactory to Tenant.
20.3 Notices. Subsequent to the receipt by Tenant of Notice from
Landlord as to the identity of any Hotel Mortgagee which complies with Section
20.1 and 20.2 (which Notice shall be accompanied by a copy of the applicable
mortgage or lease), no notice from Tenant to Landlord as to the Leased Property
shall be effective unless and until a copy of the same is given to such Hotel
Mortgagee at the address set forth in the above described Notice, and the curing
of any of Landlord's defaults by such Hotel Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Collective Leased Properties and
activities incidental thereto and shall do or cause to be done all things
necessary to preserve, renew and keep in full force and effect and in good
standing its corporate existence and its rights and licenses necessary to
conduct such business.
21.2 Maintenance of Accounts and Records. Tenant shall keep true
records and books of account of Tenant in which full, true and correct entries
will be made of dealings and transactions in relation to the business and
affairs of Tenant in accordance with GAAP, where applicable.
21.3 Notice of Litigation, Etc. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which it may
hereafter become a party of which Tenant has notice or actual knowledge which
involves a potential liability equal to or greater than Two Hundred Fifty
Thousand Dollars ($250,000) or which may otherwise result in any material
adverse change in the business, operations, property, prospects,
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results of operation or condition, financial or other, of Tenant. Forthwith upon
Tenant obtaining knowledge of any Default, Event of Default or any default or
event of default under any agreement relating to Indebtedness for money borrowed
in an aggregate amount exceeding, at any one time, Two Hundred Fifty Thousand
Dollars ($250,000), or any event or condition that would be required to be
disclosed in a current report filed by Tenant on Form 8-K or in Part II of a
quarterly report on Form 10-Q if Tenant were required to file such reports under
the Securities Exchange Act of 1934, as amended, Tenant shall furnish Notice
thereof to Landlord specifying the nature and period of existence thereof and
what action Tenant has taken or is taking or proposes to take with respect
thereto.
21.4 Indebtedness of Tenant. Tenant shall not create, incur, assume or
guarantee, or permit to exist, or become or remain liable directly or indirectly
upon, any Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for Impositions, to the extent that payment
thereof shall not at the time be required to be made in accordance with the
provisions of Article 8;
(c) Indebtedness of Tenant in respect of judgments or awards (i) which
have been in force for less than the applicable appeal period and in respect of
which execution thereof shall have been stayed pending such appeal or review, or
(ii) which are fully covered by insurance payable to Tenant, or (iii) which are
for an amount not in excess of $250,000 in the aggregate at any one time
outstanding and (x) which have been in force for not longer than the applicable
appeal period, so long as execution is not levied thereunder or (y) in respect
of which an appeal or proceedings for review shall at the time be prosecuted in
good faith in accordance with the provisions of Article 8, and in respect of
which execution thereof shall have been stayed pending such appeal or review;
(d) unsecured borrowings of Tenant from its Affiliated Persons which
are by their terms expressly subordinate pursuant to a Subordination Agreement
to the payment and performance of Tenant's obligations under this Agreement; or
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(e) Indebtedness for purchase money financing in accordance with
Section 21.9(a) and other indebtedness incurred in the ordinary course of
Tenant's business, including the leasing of personal property.
21.5 Financial Condition of Tenant. As of the date of this Agreement,
Tenant's Tangible Net Worth is an amount at least equal to the aggregate of one
year's Minimum Rent payable pursuant to this Agreement and the Other Leases; it
being expressly understood and agreed that the Retained Funds may for such
purpose be counted as equity at the full amount thereof (without any discount as
to its value for any reason, notwithstanding anything to the contrary provided
for by GAAP) if such amounts are contributed to Tenant.
21.6 Distributions, Payments to Affiliated Persons, Etc. Tenant shall
not declare, order, pay or make, directly or indirectly, any Distributions or
any payment to any Affiliated Person of Tenant (other than payments in the
ordinary course of business on commercially reasonable terms and payments
pursuant to the terms of the Franchise Agreement) or set apart any sum or
property therefor, or agree to do so, if, at the time of such proposed action,
or immediately after giving effect thereto, any Event of Default shall exist;
provided, however, that Tenant may resume making such Distributions if Landlord
shall not commence, within ninety (90) days after Notice by Landlord to Tenant
of the occurrence of any such Event of Default, to enforce its rights and
remedies with respect thereto and diligently pursue enforcement of such rights
and remedies thereafter.
21.7 Prohibited Transactions. At any time an Event of Default shall
have occurred and be continuing, Tenant shall not permit to exist or enter into
any agreement or arrangement (other than the Franchise Agreement) whereby it
engages in a transaction of any kind with any Affiliated Person as to Tenant,
except on terms and conditions which are commercially reasonable.
21.8 Liens and Encumbrances. Except as permitted by Section 7.1, Tenant
shall not create or incur or suffer to be created or incurred or to exist any
Lien on this Agreement or any of Tenant's assets, properties, rights or income,
or any of its interest therein, now or at any time hereafter owned, other than:
<PAGE>
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(a) Security interests securing the purchase price of equipment or
personal property whether acquired before or after the Commencement Date;
provided, however, that (i) such Lien shall at all times be confined solely to
the asset in question and (ii) the aggregate principal amount of Indebtedness
secured by any such Lien shall not exceed the cost of acquisition or
construction of the property subject thereto;
(b) Permitted Encumbrances;
(c) As permitted pursuant to Section 21.4; and
(d) Liens which do not exceed $250,000 in the aggregate and which are
fully bonded or otherwise secured to the reasonable satisfaction of Landlord.
21.9 Merger; Sale of Assets; Etc. Except as expressly permitted by
Article 16, Tenant shall not (i) sell, lease (as lessor or sublessor), transfer
or otherwise dispose of, or abandon, all or any material portion of its assets
(including capital stock) or business to any Person, (ii) merge into or with or
consolidate with any other Entity, or (iii) sell, lease (as lessor or
sublessor), transfer or otherwise dispose of, or abandon, any personal property
or fixtures or any real property; provided, however, that, notwithstanding the
provisions of clause (iii) preceding, Tenant may dispose of equipment, furniture
or fixtures which have become inadequate, obsolete, worn-out, unsuitable,
undesirable or unnecessary, provided substitute equipment, furniture or fixtures
having equal or greater value and utility (but not necessarily having the same
function) have been provided.
ARTICLE 22
MISCELLANEOUS
22.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under applicable law, the benefit of which
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may be asserted by Tenant as a defense, and if, from any circumstance
whatsoever, fulfillment of any provision of this Agreement, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, or if from any circumstances Landlord should ever
receive as fulfillment of such provision such an excessive amount, then, ipso
facto, the amount which would be excessive shall be applied to the reduction of
the installment(s) of Minimum Rent next due and not to the payment of such
excessive amount. This provision shall control every other provision of this
Agreement and any other agreements between Landlord and Tenant.
22.2 No Waiver. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.
22.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this Agreement, but rather the effect thereof shall be confined to
the clause, sentence, paragraph, section or provision so held to be invalid,
illegal or ineffective, and this Agreement shall be construed as if such
invalid, illegal or ineffective provisions had never been contained therein.
<PAGE>
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22.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
22.6 No Merger of Title. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
22.7 Conveyance by Landlord. If Landlord or any successor owner of all
or any portion of the Leased Property shall convey all or any portion of the
Leased Property in accordance with the terms hereof (specifically including
Article 15) other than as security for a debt, and the grantee or transferee of
such of the Leased Property shall expressly assume all obligations of Landlord
hereunder arising or accruing from and after the date of such conveyance or
transfer, Landlord or such successor owner, as the case may be, shall thereupon
be released from all future li abilities and obligations of Landlord under this
Agreement with respect to such of the Leased Property arising or accruing from
and after the date of such conveyance or other transfer and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
22.8 Quiet Enjoyment. Provided that no Event of Default shall have
occurred and be continuing, Tenant shall peaceably and quietly have, hold and
enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be created
by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings, provided the same do not materially
interfere with Tenant's ability to operate the Hotel and (d) liens that have
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been consented to in writing by Tenant. Except as otherwise provided in this
Agreement, no failure by Landlord to comply with the foregoing covenant shall
give Tenant the right to cancel or terminate this Agreement or abate, reduce or
make a deduction from or offset against the Rent or any other sum payable under
this Agreement, or to fail to perform any other obligation of Tenant hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Agreement. However, Landlord and Tenant shall promptly, upon the request of the
other, enter into a short form memorandum of this Agreement, in form suitable
for recording under the laws of the State in which reference to this Agreement,
and all options contained herein, shall be made. The parties shall share equally
all costs and expenses of recording such memorandum.
22.10 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this Agreement
shall be deemed adequately given if in writing and the same shall be delivered
either in hand, by telecopier with written acknowledgment of receipt, or by mail
or Federal Express or similar expedited commercial carrier, addressed to the
recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
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(c) All such notices shall be addressed,
if to Landlord to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to Tenant to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-924.11
Bethesda, Maryland 20817
Attn: Treasurer
[Telecopier No. (301) 380-5067]
with a copy to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52-923.00
Bethesda, Maryland 20817
Attn: U.S. Lodging Operations Attorney
[Telecopier No. (301) 380-6727]
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
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22.11 Construction; Nonrecourse. Anything contained in this Agreement
to the contrary notwithstanding, all claims against, and liabilities of, Tenant
or Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such termination or
expiration. In no event shall Landlord be liable for any consequential damages
suffered by Tenant as the result of a breach of this Agreement by Landlord.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by all the
parties thereto. All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Each term or provision of this Agreement to be
performed by Tenant shall be construed as an independent covenant and condition.
Time is of the essence with respect to the exercise of any rights of Tenant or
Landlord under this Agreement. Except as otherwise set forth in this Agreement,
any obligations arising prior to the expiration or sooner termination of this
Agreement of Tenant (including without limitation, any monetary, repair and
indemnification obligations) and Landlord shall survive the expiration or sooner
termination of this Agreement; provided, however, that each party shall be
required to give the other Notice of any such surviving and unsatisfied
obligations within one year after the expiration or sooner termination of this
Agreement. Except as otherwise expressly provided with respect to the Retained
Funds, nothing contained in this Agreement shall be construed to create or
impose any liabilities or obligations and no such liabilities or obligations
shall be imposed on any of the shareholders, beneficial owners, direct or
indirect, officers, directors, trustees, employees or agents of Landlord or
Tenant for the payment or performance of the obligations or liabilities of
Landlord or Tenant hereunder.
22.12 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
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22.13 Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State
applicable to contracts between residents of the State which are to be performed
entirely within the State, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required by this
Agreement is made or required to be made; or (iii) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues; or
(iv) where any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or jurisdiction
of organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State as is provided by law; and the parties consent to the jurisdiction of
said court or courts located in the State and to service of process by
registered mail, return receipt requested, or by any other manner provided by
law.
22.14 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.
22.15 Disclosure of Information.
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(a) The parties hereto agree that the matters set forth in this
Agreement and any revenue, expense, net profit, rate and occupancy information
provided on a hotel by hotel basis are strictly confidential and each party will
make every effort to ensure that the information is not disclosed to any Person
that is not an Affiliated Person as to any party (including the press) without
the prior written consent of the other party, except as may be required by law
and as may be reasonably necessary to obtain licenses, permits and other public
approvals necessary for the refurbishment or operation of the Hotel, or, subject
to the restrictions of Section 22.15(b) relative to the contents of any
Prospectus, in connection with a Landlord financing, a sale of the Hotel, or a
sale of a controlling interest in Landlord, Tenant or the Guarantor.
(b) No reference to Tenant or any of its Affiliated Persons will be
made in any prospectus, private placement memorandum, offering circular or
offering documentation related thereto (collectively, the "Prospectus"), issued
by Landlord or any of its Affiliated Persons, which is designated to interest
potential investors in the Hotel, unless Tenant has previously received a copy
of all such references. No Prospectus shall include rate and occupancy data or
revenue, expense or net profit information on a hotel by hotel basis (as
distinguished from a collective basis). Regardless of whether Tenant so receives
a copy of the Prospectus, neither Tenant nor its Affiliated Persons will be
deemed a sponsor of the offering described in the Prospectus, nor will it have
any responsibility for the Prospectus, and the Prospectus will so state. Unless
Tenant agrees in advance, the Prospectus will not include any trademark,
symbols, logos or designs of Tenant or any of its Affiliated Persons. Landlord
shall indemnify, defend and hold Tenant harmless from and against all loss,
costs, liability and damage (including reasonable attorneys' fees and expenses,
and all cost of litigation) arising out of any Prospectus or the offering
described therein; and this obligation of Landlord shall survive termination of
this Agreement.
22.16 Trademarks, Trade Names and Service Marks.
(a) The names "Marriott", "Courtyard by Marriott", "Marriott
Courtyard", "Residence Inn", "Residence Inn by Marriott", "Marriott Residence
Inn", "TownePlace Suites" and
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"TownePlace Suites by Marriott" (each of the foregoing names, together with any
combination thereof, collectively, the "Trade Names") when used along or in
connection with another word or words, and the Marriott, Courtyard by Marriott,
Residence Inn by Marriott or TownePlace Suites trademarks, service marks, other
trade names, symbols, logos and designs shall in all events remain the exclusive
property of Franchisor or its Affiliated Persons, and nothing contained in this
Agreement shall confer on Landlord the right to use any of the Trade Names, or
the Marriott, Courtyard by Marriott, or Residence Inn by Marriott or TownePlace
Suites trademarks, service marks, other trade names, symbols, logos or designs
other than in strict accordance with the terms of this Agreement. Upon
termination of this Agreement and the Other Leases, any use of or right to use
any of the Trade Names, or any of the Marriott, Courtyard by Marriott, Residence
Inn by Marriott or TownePlace Suites trademarks, service marks, other trade
names, symbols, logos or designs by Landlord shall be governed by the Franchise
Agreement and/or Owner's Agreement, upon termination of this Agreement, and, if
the Franchise Agreement or a replacement Franchise Agreement will not remain in
effect, Landlord shall promptly remove from the Hotel any signs or similar items
which contain any of the Trade Names, trademarks, service marks, other trade
names, symbols, logos or designs. If Landlord has not removed such signs or
similar items within ten (10) Business Days after termination of this Agreement,
Tenant shall have the right to do so at Landlord's expense. Included under the
terms of this section are all trademarks, service marks, trade names, symbols,
logos or designs used in conjunction with the Hotel, including, but not limited
to, restaurant names, lounge names, etc., whether or not the marks contain the
"Marriott" name or the Courtyard by Marriott or Residence Inn by Marriott or the
TownePlace Suites name. The right to use such trademarks, service marks, trade
names, symbols, logos or designs belongs exclusively to Tenant, and the use
thereof inures to the benefit of Tenant whether or not the same are registered
and regardless of the source of the same. The provisions of this Section
22.16(a) shall survive termination of this Agreement.
(b) Any computer software (including upgrades and replacements) at the
Hotel owned by Tenant or any of its Affiliated Persons, or the licensor of any
of them is proprietary to Tenant or any of its Affiliated Persons, or the
licensor of
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any of them and shall in all events remain the exclusive property of Tenant or
any of its Affiliated Persons or the licensor of any of them, as the case may
be, and nothing contained in this Agreement shall confer on Landlord the right
to use any of such software. Tenant shall have the right to remove from the
Hotel without compensation to Landlord any computer software (including upgrades
and replacements), including, without limitation, the system software, owned by
Tenant or any of its Affiliated Persons or the licensor of any of them. Further,
upon termination of this Agreement, Tenant shall be entitled to remove from the
Hotel without compensation to Landlord any computer equipment utilized as part
of a centralized reservation system or owned by a party other than the Landlord.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
HPTMI III PROPERTIES TRUST
By:___________________________
John G. Murray, President
TENANT:
CRTM17 TENANT CORPORATION
By:___________________________
Its (Vice) President
Hospitality Properties Trust
Computation of Pro Forma Ratio of Earnings to Fixed Charges
(amounts in thousands, except ratio amounts)
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
------------------------------------
Adjusted
Historical Pro Forma Pro Forma
---------- --------- ---------
<S> <C> <C> <C>
Income before extraordinary item and preferred dividends $ 87,982 $ 93,316 $104,243
Fixed charges 21,751 38,651 44,524
-------- -------- --------
Adjusted earnings $109,733 $131,967 $148,767
======== ======== ========
Fixed charges and preferred dividends:
Interest on indebtedness and
amortization of deferred
finance costs $ 21,751 $ 38,651 $ 44,524
-------- -------- --------
Total fixed charges $ 21,751 $ 38,651 $ 44,524
======== ======== ========
Ratio of earnings to fixed charges 5.0x 3.4x 3.3x
======== ======== ========
</TABLE>
The above computation should be read in conjunction with the unaudited pro forma
consolidated financial statements and other data included elsewhere in the Form
8-K to which this computation is an exhibit.
Hospitality Properties Trust
Computation of Pro Forma Ratio of Earnings to
Combined Fixed Charges and
Preferred Dividends (amounts in
thousands, except ratio amounts)
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
------------------------------------
Adjusted
Historical Pro Forma Pro Forma
---------- --------- ---------
<S> <C> <C> <C>
Income before extraordinary item available for common shareholders $ 87,982 $ 83,816 $ 94,743
Fixed charges and preferred dividends 21,751 48,151 54,024
-------- -------- --------
Adjusted earnings $109,733 $131,967 $148,767
======== ======== ========
Fixed charges and preferred dividends:
Interest on indebtedness and
amortization of deferred
finance costs $ 21,751 $ 38,651 $ 44,524
Preferred dividends declared -- 9,500 9,500
-------- -------- --------
Total fixed charges and preferred dividends $ 21,751 $ 48,151 $ 54,024
======== ======== ========
Ratio of earnings to combined fixed charges and preferred dividends 5.0x 2.7x 2.8x
===== ===== =====
</TABLE>
The above computation should be read in conjunction with the unaudited pro forma
consolidated financial statements and other data included elsewhere in the Form
8-K to which this computation is an exhibit.
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement (File No. 333-43573) and prospectus
supplement of our reports dated January 15, 1999 included in Hospitality
Properties Trust's Form 8-K dated February 11, 1999 and to all references to our
Firm included in this registration statement.
/s/ Arthur Andersen LLP
Washington, D.C.
March 22, 1999
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Prospectus Supplement to the Registration Statement (Form S-3 No. 333-43573) of
Hospitality Properties Trust for the registration of 4,000,000 Shares Series A
Cumulative Redeemable Preferred Shares filed on or about March 23, 1999, and to
the incorporation by reference therein of our report dated February 3, 1998,
with respect to the combined financial statements of SC Suites Summerfield
Partnerships included in Hospitality Properties Trust's Current Report on Form
8-K dated April 15, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Wichita, Kansas
March 18, 1999
