EXHIBIT 10.2
COURTYARD
HPT5 PORTFOLIO
MANAGEMENT AGREEMENT
by and between
COURTYARD MANAGEMENT CORPORATION
as "MANAGER"
and
HPT TRS MI-135, INC.
as "TENANT"
Dated as of June 15, 2001
TABLE OF CONTENTS
Page
ARTICLE I APPOINTMENT OF MANAGER
1.01 APPOINTMENT.....................................................................................1
1.02 MANAGEMENT OF THE HOTELS........................................................................2
1.03 SERVICES PROVIDED BY MANAGER....................................................................5
1.04 EMPLOYEES.......................................................................................6
1.05 RIGHT TO INSPECT................................................................................6
1.06 Right of Offset.................................................................................7
1.07 Condition of the Hotels.........................................................................7
ARTICLE II TERM
2.01 TERM............................................................................................8
ARTICLE III COMPENSATION OF MANAGER
3.01 MANAGEMENT FEES.................................................................................9
3.02 OPERATING PROFIT...............................................................................10
ARTICLE IV ACCOUNTING, BOOKKEEPING AND BANK ACCOUNTS
4.01 ACCOUNTING, INTERIM PAYMENT AND ANNUAL RECONCILIATION..........................................11
4.02 BOOKS AND RECORDS..............................................................................15
4.03 ACCOUNTS, EXPENDITURES.........................................................................16
4.04 ANNUAL OPERATING PROJECTION....................................................................18
4.05 WORKING CAPITAL................................................................................18
4.06 FIXED ASSET SUPPLIES...........................................................................19
ARTICLE V REPAIRS, MAINTENANCE AND REPLACEMENTS
5.01 MANAGER'S MAINTENANCE OBLIGATION...............................................................19
5.02 REPAIRS AND MAINTENANCE TO BE PAID FROM GROSS REVENUES.........................................20
5.03 ITEMS TO BE PAID FROM RESERVES.................................................................20
5.04 RESERVE ESTIMATES..............................................................................22
5.05 ADDITIONAL REQUIREMENTS FOR RESERVE............................................................22
5.06 OWNERSHIP OF REPLACEMENTS......................................................................23
5.07 OBLIGATION TO PROVIDE ADDITIONAL RESERVE FUNDS.................................................23
5.08 ADDITIONAL REQUIREMENTS RELATING TO CERTAIN CAPITAL IMPROVEMENTS...............................24
5.09 SPECIAL PROVISION RE: HOTEL IN EMERYVILLE, CALIFORNIA..........................................25
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TABLE OF CONTENTS
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ARTICLE VI INSURANCE, DAMAGE, CONDEMNATION, AND FORCE MAJEURE
6.01 INSURANCE......................................................................................26
6.02 DAMAGE AND REPAIR..............................................................................30
6.03 DAMAGE NEAR END OF TERM........................................................................33
6.04 TENANT'S OPTION TO OBTAIN CERTAIN INSURANCE....................................................33
6.05 CONDEMNATION...................................................................................34
6.06 PARTIAL CONDEMNATION...........................................................................34
6.07 DISBURSEMENT OF AWARD..........................................................................35
6.08 TEMPORARY CONDEMNATION.........................................................................36
6.09 ALLOCATION OF AWARD............................................................................36
6.10 EFFECT OF CONDEMNATION.........................................................................36
ARTICLE VII TAXES; other charges
7.01 REAL ESTATE AND PERSONAL PROPERTY TAXES........................................................36
ARTICLE VIII OWNERSHIP OF THE HOTELS
8.01 OWNERSHIP OF THE HOTELS........................................................................38
8.02 NO COVENANTS, CONDITIONS OR RESTRICTIONS.......................................................39
8.03 LIENS; CREDIT..................................................................................40
ARTICLE IX DEFAULTS
9.01 MANAGER EVENTS OF DEFAULT......................................................................40
9.02 REMEDIES FOR MANAGER DEFAULTS..................................................................42
9.03 ADDITIONAL REMEDIES FOR MANAGER RECOURSE DEFAULTS..............................................44
9.04 NON-RECOURSE PROVISION.........................................................................44
9.05 Good FAITH DISPUTE By MANAGER..................................................................45
9.06 TENANT EVENTS of DEFAULT.......................................................................45
9.07 REMEDIES FOR TENANT DefAults...................................................................47
9.08 GOOD FaiTh DispUte BY TeNant...................................................................47
9.09 LANDLORD DEFAULTS..............................................................................48
ARTICLE X ASSIGNMENT AND SALE
10.01 ASSIGNMENT.....................................................................................48
10.02 SALE OF THE HOTEL..............................................................................50
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TABLE OF CONTENTS
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ARTICLE XI MISCELLANEOUS
11.01 RIGHT TO MAKE AGREEMENT........................................................................51
11.02 ACTIONS BY MANAGER.............................................................................51
11.03 RELATIONSHIP...................................................................................51
11.04 APPLICABLE LAW.................................................................................52
11.05 RECORDATION....................................................................................52
11.06 HEADINGS.......................................................................................52
11.07 NOTICES........................................................................................52
11.08 ENVIRONMENTAL MATTERS..........................................................................53
11.09 CONFIDENTIALITY................................................................................55
11.10 PROJECTIONS....................................................................................55
11.11 ACTIONS TO BE TAKEN UPON TERMINATION...........................................................55
11.12 TRADEMARKS, TRADE NAMES AND SERVICE MARKS......................................................58
11.13 WAIVER.........................................................................................58
11.14 PARTIAL INVALIDITY.............................................................................59
11.15 SURVIVAL.......................................................................................59
11.16 NEGOTIATION OF AGREEMENT.......................................................................59
11.17 INTENTIONALLY DELETED..........................................................................59
11.18 ENTIRE AGREEMENT...............................................................................59
11.19 AFFILIATES.....................................................................................59
11.20 COMPETING FACILITIES...........................................................................60
11.21 TRADE AREA RESTRICTION.........................................................................60
11.22 ARBITRATION....................................................................................61
11.23 PERMITTED CONTESTS.............................................................................61
11.24 ESTOPPEL CERTIFICATES..........................................................................62
11.25 INDEMNIFICATION................................................................................62
11.26 PROHIBITED TRANSACTIONS........................................................................63
11.27 REMEDIES CUMULATIVE............................................................................63
11.28 AMENDMENTS AND MODIFICATIONS...................................................................63
11.29 CONSTRUCTION; NONRECOURSE......................................................................63
11.30 COUNTERPARTS; HEADINGS.........................................................................64
11.31 NO POLITICAL CONTRIBUTIONS.....................................................................64
11.32 SINGLE AGREEMENT...............................................................................64
11.33 REIT QUALIFICATION.............................................................................64
11.34 FURTHER COMPLIANCE WITH SECTION 856(D) OF THE CODE.............................................64
11.35 ADVERSE REGULATORY EVENT.......................................................................65
11.36 COMMERCIAL LEASES..............................................................................66
11.37 WAIVER OF JURY TRIAL...........................................................................66
ARTICLE XII DEFINITION OF TERMS
12.01 DEFINITION OF TERMS............................................................................66
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Exhibit A The Sites
Exhibit B and B-1 Trade Area
Exhibit C Existing Leases
Addendum Property Information
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THIS MANAGEMENT AGREEMENT (this "Agreement") is executed as of the 15th
day of June 2001, by HPT TRS MI-135, INC. ("Tenant"), a Delaware corporation,
with a mailing address at c/o Hospitality Properties Trust, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and COURTYARD MANAGEMENT CORPORATION ("Manager"), a
Delaware corporation, with a mailing address at c/o Marriott International,
Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
R E C I T A L S:
A. HPTMI Properties Trust, a Maryland real estate investment trust
("Landlord") is the owner of fee title to the parcels of real property (the
"Sites") described on Exhibit A attached to this Agreement and incorporated
herein on which certain improvements have been constructed consisting of a
building or buildings containing in each instance the number of Guest Rooms as
specified on the Addenda hereto (as the same shall be amended and revised from
time to time), and certain other amenities and related facilities (the
"Buildings"). Each Site and the Buildings on each such Site, in addition to
certain other rights, improvements, and personal property as more particularly
described in Section 12.01 hereof, are individually referred to as a "Hotel" and
are collectively referred to as the "Hotels." Pursuant to the Leases, Landlord
has leased the Hotels (except for certain assets of Tenant or Manager included
within the definition of Hotels) which are subject to this Agreement to Tenant.
B. Tenant desires to engage Manager to manage and operate the Hotels
for the account of Tenant, and Manager desires to accept such engagement upon
the terms and conditions set forth in this Agreement.
C. Pursuant to the Leases, Tenant has leased or shall lease other
hotels from Landlord or an Affiliate of Landlord to be managed by Affiliates of
Manager, as and when such properties are made subject to the Lease (all
properties subject to the Leases at any given time are collectively, the
"Portfolio Properties"). Manager and Tenant have agreed that revenues, working
capital, reserves and other items from the Portfolio Properties will be pooled,
disbursed and distributed in accordance with the terms and conditions of the
Pooling Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and other good and valuable consideration, the receipt of which
is hereby acknowledged, Tenant and Manager agree as follows:
ARTICLE I
APPOINTMENT OF MANAGER
1.01 Appointment. Subject to the provisions of this Agreement, Tenant
hereby appoints and employs Manager to supervise, direct and control the
management,
promotion and operation of the Hotels throughout the Term. Manager accepts said
appointment and agrees to manage the Hotels during the Term in accordance with
the terms and conditions of this Agreement. The Hotels shall each be known as a
Courtyard by Marriott, or Marriott Courtyard with such additional identification
as may be necessary to provide local identification. If the name of the
Courtyard by Marriott System is changed, Manager will change the name of the
Hotels to conform thereto. All capitalized terms shall have the meaning ascribed
to them in Article XII hereof.
1.02 Management of the Hotels.
A. Manager shall manage and operate the Hotels in an efficient and
economical manner consistent with standards prevailing in other hotels in the
System, including all activities in connection therewith which are customary and
usual to such an operation (all of the foregoing, the "Operating Standards").
Manager shall, in connection with the Hotels and in accordance with the System
Standards, the Operating Standards and the terms of this Agreement, perform each
of the following functions (provided that in all cases, except as otherwise set
forth in this Agreement, the costs and expenses of performing such functions
shall be Deductions):
1. Recruit, employ, supervise, direct and (when appropriate)
discharge all of the employees at the Hotels.
2. Establish prices, rates and charges for services provided in
the Hotels, including Guest Room rates.
3. Establish and revise, as necessary, administrative policies and
procedures, including policies and procedures for the control of revenue and
expenditures, for the purchasing of supplies and services, for the control of
credit, and for the scheduling of maintenance, and verify that the foregoing
procedures are operating in a sound manner.
4. Manage expenditures to replenish Inventories and Fixed Asset
Supplies, make payments on accounts payable and collect accounts receivable.
5. Arrange for and supervise public relations and advertising and
prepare marketing plans.
6. Procure all Inventories and replacement Fixed Asset Supplies.
7. Prepare and deliver interim accountings, annual accountings,
Annual Operating Projections, Reserve Estimates, and such other information as
is required by this Agreement.
8. Plan, execute and supervise repairs, maintenance alterations
and improvements at the Hotels.
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9. Provide, or cause to be provided, risk management services
relating to the types of insurance required to be obtained or provided by
Manager under this Agreement.
10. Obtain and keep in full force and effect, either in its own
name or in Tenant's name, as may be required by applicable law, any and all
licenses and permits to the extent same is within the control of Manager (or, if
same is not within the control of Manager, Manager shall use all due diligence
and reasonable efforts to obtain and keep same in full force and effect).
11. Reasonably cooperate (provided that Manager shall not be
obligated to enter into any amendments of this Agreement) in any attempt(s):
(a) to effectuate a Sale of a Hotel under the terms of this
Agreement (provided that nothing herein shall affect the provisions of Section
10.02); or
(b) to effectuate a direct or indirect sale or other
disposition of the Landlord's interest in a Hotel as permitted under the Owner
Agreement; or
(c) to obtain any Qualifying Mortgage.
12. Subject to the requirements of Section 10.01 hereof, negotiate
and administer, on behalf of Tenant, leases, subleases, licenses and concession
agreements for all public space at the Hotels, including all stores, office
space and lobby space.
13. On behalf of Tenant, negotiate, enter into and administer
service contracts and licenses for the operation of the Hotels, including
contracts and licenses for health and safety systems maintenance, electricity,
gas, telephone, cleaning, elevator and boiler maintenance, air conditioning
maintenance, laundry and dry cleaning, master television service, use of
copyrighted materials (such as music and videos), entertainment and other
services as Manager deems advisable.
14. Negotiate, enter into and administer contracts for the use of
banquet and meeting facilities and guest rooms by groups and individuals.
15. Take reasonable action to collect and institute in its own
name or in the name of Tenant or a Hotel, in each instance as Manager in its
reasonable discretion deems appropriate, legal actions or proceedings to collect
charges, rent or other income derived from the operation of the Hotels or to
oust or dispossess guests, tenants, members or other persons in possession
therefrom, or to cancel or terminate any lease, license or concession agreement
for the breach thereof or default thereunder by the tenant, licensee or
concessionaire.
16. Make representatives available to consult with and advise
Tenant or Tenant's designee at Tenant's reasonable request concerning policies
and procedures affecting the conduct of the business of the Hotels.
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17. Collect on behalf of Tenant and account for and remit to
governmental authorities all applicable excise, sales, occupancy and use taxes
or similar governmental charges collected by or at the Hotels directly from
guests, members or other patrons, or as part of the sales price of any goods,
services or displays, such as gross receipts, admission or similar or equivalent
taxes, duties, levies or charges.
18. Keep Tenant advised of significant events which occur with
respect to the Hotel which might reasonably be expected to have a material
adverse effect on the financial performance or value of the Hotel.
19. Perform such other tasks with respect to the Hotel as are
customary and consistent with the Operating Standards and the System Standards.
B. The operation of the Hotels shall be under the exclusive supervision
and control of Manager which, except as otherwise specifically provided in this
Agreement, shall be responsible for the proper and efficient operation of the
Hotels. Subject to the terms of this Agreement, Manager shall have discretion
and control, free from interference, interruption or disturbance, in all matters
relating to management and operation of the Hotels, including, without
limitation, the following: charges for Guest Rooms and commercial space; credit
policies; food and beverage services; employment policies; granting of leases,
subleases, licenses and concessions for shops and agencies within the Hotels
consistent with the provisions of Section 10.01 hereof; receipt, holding and
disbursement of funds; maintenance of bank accounts; procurement of Inventories
(including initial inventories), supplies and services; promotion and publicity;
payment of costs and expenses as are specifically provided for in this Agreement
or are otherwise reasonably necessary for the proper and efficient operation of
the Hotels; and, generally, all activities necessary for operation of the
Hotels.
C. Manager shall use reasonable efforts to comply with and abide by all
Legal Requirements and Insurance Requirements pertaining to its operation of the
Hotels, provided that Manager shall have the right, but not the obligation, in
its reasonable discretion, to contest or oppose, by appropriate proceedings, any
such laws and regulations in accordance with Section 11.23 hereof. Except as
expressly provided to the contrary in this Agreement, all costs and expenses of
such compliance with respect to each Hotel shall be paid from Gross Revenues as
Deductions in the computation of Operating Profit of such Hotel or from the
Reserve of such Hotel, whichever is applicable, and the reasonable expenses of
any such contest shall be paid from Gross Revenues as Deductions with respect to
such Hotel.
D. Manager shall use due diligence and exercise commercially reasonable
efforts to obtain and maintain all approvals necessary to use and operate the
Hotels in accordance with the System Standards, Operating Standards and Legal
Requirements. Tenant shall cooperate with Manager in this regard and, in
connection therewith, shall execute all applications and consents required to be
executed by Tenant in order for Manager to obtain and maintain such approvals.
All costs incurred by Tenant in this regard shall be included in Deductions for
the applicable Hotel.
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E. Manager shall not use, and shall exercise commercially reasonable
efforts to prevent the use of, the Hotels and Manager's personal property used
in connection with the Hotels, if any, for any unlawful purpose. Manager shall
not commit, and shall use commercially reasonable efforts to prevent the
commission, of any waste at the Hotels. Manager shall not use, and shall use
commercially reasonable efforts to prevent the use of, the Hotels in such a
manner as will constitute an unlawful nuisance thereon or therein. Manager shall
use commercially reasonable efforts to prevent the use of the Hotels in such a
manner as might reasonably be expected to impair Tenant's or Landlord's title
thereto or any portion thereof or might reasonably be expected to give rise for
a claim or claims for adverse use or adverse possession by the public, as such,
or of implied dedication of the Hotels or any portion thereof.
F. Manager shall, to the extent within Manager's control, use
commercially reasonable efforts to cause Tenant to be in compliance with the
Lease for each Hotel, and the costs of the same shall be paid as Deductions for
the applicable Hotel hereunder except as otherwise specifically provided for in
this Agreement.
1.03 Services Provided by Manager. Commencing on the Effective Date
with respect to each Hotel and thereafter during the Term, Manager shall cause
to be furnished the following services:
A. System divisional executive management, divisional financial
planning, divisional contracting, divisional product planning and development,
divisional human resources planning and development, divisional marketing
planning, and services of Manager's technical and operational experts making
periodic inspection and consultation visits to the Hotels (but specifically
excluding "line management" personnel such as area managers and services of
Manager's architecture and construction personnel who provide design,
procurement, construction or related services) (collectively, "System
Services");
B. Marriott corporate planning and policy services, Marriott financial
planning and corporate financial services, Marriott corporate executive
management, in-house legal services, and protection of the "Marriott" trade
name, logos, trademarks and service marks ("Central Office Services"); and
C. Certain services which are furnished generally on a central or
regional basis to other hotels in the System which are managed by Manager,
Marriott, or any Affiliate, and which benefit each Hotel as a participant in the
System as follows: (i) national sales office services; central operational
support for rooms, food and beverage and engineering; central training services;
career development; management personnel relocation; central safety and loss
prevention services; central advertising and promotion (including direct and
image media and advertising administration); consumer affairs to the extent not
charged or allocated directly to a Hotel as a Deduction; the national and
regional reservations system service and inventory and revenue management
services; centralized payroll and accounting services; computer system
development, support and operating costs; central monitoring and management
support from "line management" personnel such as area managers; and (ii) such
additional central or regional services as are or may be, from time to time,
furnished for the benefit of hotels in the System or in
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substitution for services now performed at individual hotels which may be more
efficiently performed on a group basis (the items set forth in (i) and (ii) of
this sentence, collectively, "Chain Services"). Other than the charges for the
national and regional reservation system services, the charges for the Chain
Services which are listed in clause (i) above shall be included in each Hotel's
Base Management Fee; the charges for the national and regional reservation
system services shall be paid from each Hotel's Gross Revenues as Deductions.
Such charges shall be allocated to the Hotels in a manner consistent with other
hotels in the System.
1.04 Employees.
A. All personnel employed at the Hotels shall at all times be the
employees of Manager. Subject to the terms of this Agreement, Manager shall have
absolute discretion with respect to all personnel employed at the Hotels,
including, without limitation, decisions regarding hiring, promoting,
transferring, compensating, supervising, terminating, directing and training all
employees at the Hotels, and, generally, establishing and maintaining all
policies relating to employment; provided however that Manager shall use
commercially reasonable efforts to comply with all Legal Requirements pertaining
thereto and not enter into any written employment agreements with any person
which purport to bind the Tenant and/or purport to be effective regardless of a
Termination, without obtaining Tenant's consent, which consent may be withheld
in Tenant's sole and absolute discretion. Manager shall comply with all Legal
Requirements regarding labor relations; if either Manager or Tenant shall be
required, pursuant to any such Legal Requirement, to recognize a labor union or
to enter into a collective bargaining with a labor union, the party so required
shall promptly notify the other party pursuant to this Section 1.04. Manager
shall indemnify Landlord and Tenant for all costs and expenses (including
reasonable attorneys' fees) incurred by either of them if either of them are
joined in or made party to any suit or cause of action alleging that Manager has
failed to comply with all Legal Requirements pertaining to the employment of
Manager's employees at one or more of the Hotels, the costs of which shall not
be a Deduction.
B. Manager shall decide which, if any, of the employees of the Hotels
shall reside at the Hotels (provided that Tenant's prior approval shall be
obtained if more than two (2) such employees and their immediate families reside
at any Hotel), and shall be permitted to provide free accommodations and
amenities to its employees and representatives living at or visiting the Hotels
in connection with its management or operation. No person shall otherwise be
given gratuitous accommodations or services without prior joint approval of
Tenant and Manager except in accordance with usual practices of the hotel and
travel industry.
C. Manager shall identify, appoint, assign, instruct and supervise
employees in connection with the operation of the Hotels which Manager deems
necessary or advisable for the operation of the Hotels.
1.05 Right to Inspect. Manager shall permit Landlord and Tenant and
their respective authorized representatives to inspect or show the Hotels during
usual business
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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 the Lease,
provided that any inspection or repair by Landlord or its representatives shall
not unreasonably interfere with the use and operation of the Hotels and further
provided that in the event of an emergency as determined by Landlord in its
reasonable discretion, prior notice shall not be required.
1.06 Right of Offset. Manager acknowledges that it shall not have, in
any instance, a right of offset against Tenant's First Priority or Tenant's
Third Priority with respect to any Hotel under any circumstances (or against
Aggregate Tenant's First Priority or Aggregate Tenant's Third Priority with
respect to Hotels for which the Pooling Agreement is in effect). Manager shall
have the right to offset against amounts due to Tenant with respect to any Hotel
pursuant to Section 3.02.B hereof (and against amounts due to Tenant pursuant to
Section 2.02.A of the Pooling Agreement with respect to Hotels for which the
Pooling Agreement is in effect), but in all events excluding amounts due to
Tenant as Tenant's First Priority, Tenant's Third Priority, Aggregate Tenant's
First Priority or Aggregate Tenant's Third Priority, amounts (i) which Landlord
or Tenant fail to advance to the Reserve for such Hotel which either of them is
required to make as provided for herein or in the Lease or Owner Agreement (in
each instance as determined by Arbitration, if applicable), or (ii) due under a
final judgement against Tenant obtained by Manager with respect to such Hotel,
or (iii) which Tenant fails to pay to Manager in violation of Section 4.01.D.2
of this Agreement with respect to such Hotel. Except as expressly provided
above, Manager shall not offset against the amounts owed to Tenant hereunder or
under the Pooling Agreement.
1.07 Condition of the Hotels. Subject to the provisions of Article V
hereof with respect to Reserves (and any provision in connection therewith
contained in the Owner Agreement), Manager acknowledges receipt and delivery of
possession of each Hotel, and Manager accepts each Hotel in its "as is"
condition as of the Effective Date for such Hotel, subject to the rights of
parties in possession, the existing title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Hotels, all applicable Legal
Requirements, the lien of any financing instruments, mortgages and deeds of
trust existing prior to the Effective Date for such Hotel and permitted by the
terms of this Agreement, and such other matters which would be disclosed by an
inspection of the Hotels and the record title thereto or by an accurate survey
thereof. MANAGER REPRESENTS THAT IT HAS INSPECTED THE HOTELS AND ALL OF THE
FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON
ANY REPRESENTATION OR WARRANTY OF TENANT, LANDLORD OR ANY OF THEIR AGENTS OR
EMPLOYEES WITH RESPECT THERETO, EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND
MANAGER WAIVES ANY CLAIM OR ACTION AGAINST TENANT AND LANDLORD IN RESPECT OF THE
CONDITION OF THE HOTELS. EXCEPT AS EXPRESSLY SET FORTH HEREIN, TENANT AND
LANDLORD MAKE NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE HOTELS OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
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OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT. To the maximum extent permitted by law, however, Tenant hereby assigns
to Manager all of Tenant's rights to proceed against any predecessor in title,
contractors and materialmen for breaches of warranties or representations or for
latent defects in the Hotels. Tenant shall fully cooperate with Manager in the
prosecution of any such claims, in Tenant's or Manager's name, the cost of which
shall be a Deduction for the applicable Hotel hereunder. Notwithstanding
anything to the contrary in this Section 1.07, no provision hereof shall be
deemed to affect Manager's right to use or call for additional deposits into the
Reserve for any Hotel as provided for herein or in the Owner Agreement or in the
Lease.
ARTICLE II
TERM
2.01 Term.
A. The Term of this Agreement shall be, for each Hotel, from the
Effective Date for each Hotel as set forth on the applicable Addendum or as
otherwise provided for in the Agreement to Lease (and which will be added to the
Addenda as applicable) to the expiration or earlier termination of the "Initial
Term" and, if exercised in accordance with the terms hereof, the "Renewal
Term(s)." The Initial Term for each Hotel shall begin on the Effective Date for
such Hotel as set forth in the preceding sentence, and, unless sooner terminated
as provided in this Agreement, shall continue until the last day of the Fiscal
Year ending closest to December 31, 2019. Provided that (1) the Tenant's First
Priority Coverage Ratio is at least 1.1 in the third to last Fiscal Year (a)
prior to the end of the Initial Term (as a condition of exercising the first
Renewal Term) and (b) prior to the end of the first Renewal Term (as a condition
of exercising the second Renewal Term), (2) Manager and its Affiliates have
renewed all of the Other Management Agreements for the first Renewal Term or
second Renewal Term, as applicable in accordance with their terms, (3) all of
the Franchise Agreements shall have been extended for the First Renewal Term or
the Second Renewal Term, as applicable, and (4) there exists at the time of
renewal no Manager Event of Default under this Agreement or any of the Other
Management Agreements beyond the expiration of any applicable notice and cure
period and for which Tenant has, at such time, the right to terminate this
Agreement, the Term shall thereafter automatically be extended for each of two
(2) successive periods of fifteen (15) Fiscal Years (each, a Renewal Term),
unless Manager gives Tenant and Landlord written notice of Manager's decision
not to extend on or before the date which is twenty-four (24) months prior to
the date of the expiration of the Initial Term or first Renewal Term (as the
case may be), time being of the essence.
B. Each Renewal Term shall commence on the day succeeding the
expiration of the Initial Term or the preceding Renewal Term, as the case may
be. All of the terms, covenants and provisions of this Agreement shall apply to
each such Renewal Term, except that the Term shall not be extended beyond the
last day of the Fiscal Year ending closest to December 31, 2049. If Manager
shall give notice that it elects not to extend the term in accordance with this
Section 2.01, this Agreement shall automatically terminate
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at the end of the Term then in effect and Manager 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 Manager and Tenant
shall execute such documents and agreements as either party shall reasonably
require to evidence the same.
ARTICLE III
COMPENSATION OF MANAGER
3.01 Management Fees. In consideration of the services provided to
Tenant so that the Hotels become members of the System and in consideration of
the management services to be performed during the Term, Manager shall be paid,
with respect to each Hotel, the sum of the following as its management fees:
A. The System Fee;
B. The Priority Management Fee;
C. The Base Management Fee;
D. The First Incentive Management Fee; plus
E. The Second Incentive Management Fee.
So long as the Pooling Agreement has not been terminated in accordance
with its terms with respect to the Hotels, payments of the Priority Management
Fee, the Base Management Fee, the First Incentive Management Fee and the Second
Incentive Management Fee shall be made at the time, and in the amounts, provided
for under the Pooling Agreement. Notwithstanding anything herein to the
contrary, if, in any Fiscal Year or portion thereof prior to the termination of
the Pooling Agreement in accordance with its terms with respect to one or more
of the Hotels, the Base Management Fee, the First Incentive Management Fee or
the Second Incentive Management Fee with respect to such Hotels are not payable
in full under the Pooling Agreement, the Manager shall not be entitled to the
payment of the portion of the Base Management Fee, the First Incentive
Management Fee or the Second Incentive Management Fee not payable under the
terms of the Pooling Agreement for such Fiscal Year or partial Fiscal Year with
respect to such Hotels, and in no event shall Tenant be liable for the payment
of any such unpaid portion to Manager. Notwithstanding anything herein to the
contrary, if, in any Fiscal Year after the termination of the Pooling Agreement
in accordance with its terms or with respect to a Hotel, the Base Management
Fee, the First Incentive Management Fee or the Second Incentive Management Fee
with respect to such Hotel is not payable under Section 3.02.B hereof with
respect to such Hotel, Manager shall not be entitled to the payment of the
portion of the Base Management Fee, the First Incentive Management Fee or the
Second Incentive Management Fee not payable under Section 3.02.B hereof with
respect to such Hotel, and in no event shall Tenant be liable for the payment of
such portion of the Base Management Fee, the First Incentive Management Fee or
the Second Incentive Management Fee to Manager with respect to such Hotel.
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3.02 Operating Profit.
A. So long as the Pooling Agreement has not been terminated in
accordance with its terms with respect to one or more of the Hotels Operating
Profit for such Hotels shall be distributed, to the extent available, as
provided in the Pooling Agreement and the provisions of Section 3.02.B shall not
apply.
B. For any period during the Term after the termination of the Pooling
Agreement in accordance with its terms with respect to one or more of the Hotels
Operating Profit for each such Hotel shall be distributed in the following order
of priority:
1. First, to Tenant, in an amount equal to Tenant's First Priority
for such Hotel.
2. Second, to Tenant, in an amount equal to Tenant's Second
Priority for such Hotel.
3. Third, to Tenant, in an amount equal to Tenant's Third Priority
for such Hotel.
4. Fourth, to Tenant, in an amount necessary to replenish all
Holdback Agreement Advances allocable to such Hotel.
5. Fifth, to (i) Tenant, in an amount necessary to reimburse
Tenant for all Tenant Working Capital Advances and Tenant Operating Loss
Advances made by Tenant, from time to time (collectively, "Tenant Advances")
with respect to such Hotel which have not yet been repaid by distributions
pursuant to this Section 3.02.B.5, and (ii) to Marriott, in an amount necessary
to reimburse Marriott or any Affiliate for all Additional Marriott Advances made
by Marriott or any Affiliate (including Manager) allocable to such Hotel and all
Additional Manager Advances from time to time which have not yet been repaid by
distributions pursuant to this Section 3.02.B.5. If at any time the amounts
available for distribution to Tenant and Marriott with respect to a Hotel
pursuant to this Section 3.02.B.5 ("Available Funds") are insufficient (a) to
repay to Tenant all outstanding Tenant Advances with respect to a Hotel (the
"Sum Due Tenant"), and (b) to repay to Marriott all outstanding Additional
Marriott Advances and Additional Manager Advances with respect to a Hotel (the
"Sum Due Marriott"), then (x) Tenant shall be paid from the Available Funds for
such Hotel the amount obtained by multiplying a number equal to the amount of
the Available Funds by a fraction, the numerator of which is the Sum Due Tenant
and the denominator of which is the sum of the Sum Due Tenant plus the Sum Due
Marriott, and (y) Marriott shall be paid from the Available Funds the amount
obtained by multiplying a number equal to the amount of the Available Funds for
such Hotel by a fraction, the numerator of which is the Sum Due Marriott and the
denominator of which is the sum of the Sum Due Tenant plus the Sum Due Marriott.
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6. Sixth, to Manager, in an amount equal to the Priority
Management Fee for such Hotel.
7. Seventh, to Manager, in an amount equal to the Base Management
Fee for such Hotel.
8. Eighth, to Manager, in an amount equal to the First Incentive
Management Fee for such Hotel (however, in no event shall any amount be due or
payable by Manager pursuant to this clause (8) in the event the First Incentive
Management Fee for any Hotel is equal to or less than Zero Dollars ($0.00).
9. Ninth, to Manager, in an amount equal to the Second Incentive
Management Fee for such Hotel;
10. Tenth, to Tenant, the balance, if any.
C. For any period after the Pooling Agreement has been terminated in
accordance with its terms with respect to one or more of the Hotels, if Tenant
does not receive on or before the first day of each Accounting Period Tenant's
First Priority for any such Hotel from Operating Profit, Marriott Guaranty
Advances or Holdback Agreement Advances which Tenant elects in its discretion to
make (a "Tenant's First Priority Deficiency"), and further provided that if
Manager does not fund such Tenant's First Priority Deficiency (as an Additional
Manager Advance hereunder) within ten (10) days of receiving a written request
for the same from Tenant, Tenant shall have the right to effect a Termination of
this Agreement with respect to such Hotel by written notice to Manager, which
Termination shall be effective as of the effective date which is set forth in
said notice, provided that said effective date shall be at least thirty (30)
days after the date of said notice. Such Termination (i) shall be in accordance
with the provisions of Section 11.11 of this Agreement, (ii) shall constitute a
Manager Default, and (iii) shall entitle Tenant to all rights and remedies
available to it with respect to a Manager Default as provided for in Article IX
hereof.
ARTICLE IV
ACCOUNTING, BOOKKEEPING AND BANK ACCOUNTS
4.01 Accounting, Interim Payment and Annual Reconciliation.
A. Within twenty (20) days after the close of each Accounting Period,
Manager shall deliver an interim accounting to Tenant and Landlord showing for
each Hotel, Gross Revenues, Gross Room Revenues, occupancy percentage and
average daily rate, Deductions, Operating Profit, and applications and
distributions thereof together with an Officer's Certificate. Only if the
Pooling Agreement has been terminated in accordance with its terms with respect
to one or more Hotels, the following provisions for interim distributions shall
apply with respect to such Hotels. Notwithstanding the order of distribution of
Operating Profit set forth in Section 3.02.B, for each Accounting Period,
Manager shall, with each interim accounting, transfer to Tenant any interim
amounts due Tenant, transfer to Marriott any interim amounts due to Marriott,
and retain
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any interim amounts due to Manager under Section 3.02.B, including, without
limitation, the Base Management Fee calculated on a year-to-date basis for such
Fiscal Year. If the portion of Operating Profit to be distributed to Tenant
pursuant to Items 1, 2, 3, 4 or 5 of Section 3.02.B is insufficient to pay each
of such interim amounts then due in full following the end of any Accounting
Period, any such interim amounts left unpaid shall be paid from and to the
extent of Operating Profit available therefor at the time distributions are made
following successive Accounting Periods until such interim amounts are paid in
full, and such payments shall be made from such available Operating Profit in
the same order of priority as other payments made on account of such items
following such Accounting Periods. If the portion of Operating Profit to be
distributed to Marriott or Manager pursuant to Items 5, 6 or 7 of Section 3.02.B
is insufficient to pay each of such interim amounts then due in full following
the end of any Accounting Period, any such interim amounts left unpaid shall be
paid from and to the extent of Operating Profit available therefor at the time
distributions are made following successive Accounting Periods until such
interim amounts are paid in full, and such payments shall be made from such
available Operating Profit in the same order of priority as other payments made
on account of such items following such Accounting Periods. The portion of
Operating Profit to be distributed as interim distributions to Tenant for
Tenant's First Priority and Tenant's Third Priority for the then current Fiscal
Year for each Hotel, as well as the portion of Operating Profit to be retained
by Manager as its First Incentive Management Fee and Second Incentive Management
Fee for each Hotel, shall be determined by applying in each instance a
cumulative prorated amount to such Tenant's First Priority, Tenant's Third
Priority, the First Incentive Management Fee and the Second Incentive Management
Fee (calculated on a year-to-date basis, with the prorated amount being
one-thirteenth (1/13) of the total amount for each of such items for each
Accounting Period of each Fiscal Year) to the year-to-date cumulative Operating
Profit of such Hotel (all such portions being hereinafter collectively referred
to as the "Prorated Portions"). In each Accounting Period after the first
Accounting Period of a Fiscal Year, inclusive, the Prorated Portions shall be
adjusted to reflect distributions to Tenant, and retention by Manager, of
Operating Profit with respect to such Prorated Portions for prior Accounting
Periods during the then current Fiscal Year. All the distributions shall be made
in the order of priority as set forth in Section 3.02 hereof.
B. When required under Section 5.05 hereunder, the Manager shall
deliver to Tenant and Landlord statements to be provided under Section 5.05.B
hereof. In addition, on or before April 30 of each year, simultaneously with the
delivery of the statements to be provided under Section 4.01.D hereof,
commencing on the April 30 following the Effective Date, Manager shall deliver
to Tenant and Landlord an Officer's Certificate setting forth the total amount
of deposits made to, and expenditures from, each Reserve for the preceding
Fiscal Year, together with a comparison of such expenditures with the applicable
Reserve Estimate.
C. 1. Calculations and payments of the Base Management Fee, the First
Incentive Management Fee, the Second Incentive Management Fee, Tenant's First
Priority, Tenant's Second Priority and Tenant's Third Priority for each Hotel
and distributions of Operating Profit made with respect to each Accounting
Period within a Fiscal Year for each Hotel shall be accounted for cumulatively.
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2. Within sixty (60) days after the end of each Fiscal Year,
Manager shall deliver to Tenant and Landlord a statement in reasonable detail
summarizing the operations of the Hotels with respect to which this Agreement
was in effect for the immediately preceding Fiscal Year and an Officer's
Certificate of Manager's chief accounting officer certifying that such year-end
statement is true and correct. The parties shall, within ten (10) Business Days
after Tenant's receipt of such statement, make any adjustments, by cash payment,
in the amounts paid or retained for such Fiscal Year as are needed because of
the final figures set forth in such statement; provided, however, that during
any period prior to the termination of the Pooling Agreement in accordance with
its terms with respect to any of the Hotels, the year-end adjustments for such
Hotel shall be made pursuant to the Pooling Agreement. Such final accounting
shall be controlling over the interim accountings and shall be final subject to
adjustments required as a result of an audit requested by Landlord or Tenant
below. No adjustment shall be made for any Operating Loss or Operating Profit
for any Hotel in a preceding or subsequent Fiscal Year. Notwithstanding the
foregoing, in no event shall deposits into any Reserve or distributions to
Tenant of Tenant's First Priority for any Hotel be subject to adjustment.
D. 1. In addition, on or before April 30 of each Fiscal Year,
commencing on the April 30 following the date hereof, Manager shall deliver to
Tenant and Landlord an Officer's Certificate setting forth the totals of Gross
Revenues, Deductions, and the calculation of Tenant's Second Priority and
Operating Profit After First Incentive Management Fee for each Hotel with
respect to which this Agreement was in effect for the preceding Fiscal Year,
together with an audit thereof conducted by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, or another
so-called "Big Five" firm of independent certified public accountants proposed
by Manager and approved by Tenant and Landlord (which approval shall not be
unreasonably withheld or delayed). The cost of such audit with respect to each
Hotel shall be a Deduction for such Hotel.
2. If Tenant's Second Priority or any other amounts due to
Tenant as shown in the Officer's Certificate provided in Section 4.01.D.1 above
for any Hotel exceed the amounts previously paid with respect thereto to Tenant,
Manager shall promptly pay such excess to Tenant 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 Year until the
date that such certificate is required to be delivered and, thereafter, such
interest shall accrue at the Overdue Rate, until the amount of such difference
shall be paid or otherwise discharged. Manager shall notify Tenant of such
payment and the amount thereof and Manager shall promptly render a statement to
Tenant setting forth the adjustments required to be made to the distributions
under Section 3.02.B for such Fiscal Year and the parties shall promptly make,
and cause their respective Affiliates to make, any adjustments or additional
payments or reimbursements required to comply with such revised statement. If
Tenant's Second Priority due as shown in the Officer's Certificate for any Hotel
is less than the amount previously paid with respect thereto to Tenant, Tenant
shall within ten (10) Business Days of receipt of written request from Manager,
pay such excess to Manager, together with interest at the Disbursement Rate,
which interest shall accrue from the date of such overpayment until it is
repaid. Manager shall notify Tenant of the requirement of such payment and the
amount thereof and Manager shall promptly render a statement to Tenant setting
forth the
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adjustments required to be made to the distributions under Section 3.02.B for
such Fiscal Year and the parties shall promptly make, and cause their respective
Affiliates to make promptly, any adjustments or additional payments or
reimbursements required to comply with such revised statement.
E. To the extent there is an Operating Loss for any Accounting Period
for any Hotel, Tenant shall have the right, without any obligation and in its
sole and absolute discretion, to advance funds required to fund such deficiency
within twenty (20) days after Manager has delivered written notice thereof to
Tenant; provided, however, during any period in which any Hotel is subject to
the Pooling Agreement the determination of any Operating Loss for such Hotel
shall be made based on the aggregate of the Operating Profit and Operating
Losses of all Portfolio Properties and Tenant's rights shall be governed by the
terms and provisions of the Pooling Agreement. Any Operating Loss so funded by
Tenant shall constitute a "Tenant Operating Loss Advance." If Tenant does not
fund such Operating Loss, Manager shall also have the right, within twenty (20)
days after such initial twenty (20) day period, without any obligation and in
its sole and absolute discretion, to advance funds required to fund such
Operating Loss, and any such advance shall constitute an Additional Manager
Advance with respect to such Hotel. Tenant Operating Loss Advances shall be
repaid in accordance with Section 3.02.B.5 hereof, and Additional Manager
Advances shall be repaid in accordance with Section 3.02.B.5 hereof. If neither
party elects to advance funds required to fund such deficiency pursuant to this
Section 4.01.E, either party may elect by written notice to the other to
terminate this Agreement with respect to such Hotel, which termination shall be
effective thirty (30) days after the date such notice is given (such notice to
be given no later than thirty (30) days after the last date by which Manager may
elect to fund such Operating Loss) and otherwise in accordance with the
provisions of Section 11.11 hereof. Such Termination (i) shall be in accordance
with the provisions of Section 11.11 of this Agreement, (ii) shall constitute a
Manager Default, and (iii) shall entitle Tenant to all rights and remedies
available to it with respect to a Manager Default as provided for in Article IX
hereof; provided, however, as a condition to Manager so electing to terminate
this Agreement with respect to such Hotel, Marriott shall make a binding written
offer to Tenant and Landlord to terminate the Franchise Agreement for such Hotel
and the Owner's Agreement to the extent the same relates to the Hotel without
cost or penalty to Tenant or Landlord, which offer shall be irrevocable for a
period of one hundred twenty (120) days after such termination.
F. Manager shall provide to Landlord and Tenant with each interim
accounting an Officer's Certificate setting forth the calculation of Tenant's
Second Priority due and payable for such Accounting Period for each Hotel.
G. 1. In addition, Manager shall provide Landlord and Tenant with
information relating to the Hotels and public information relating to Manager
and its Affiliates that (a) may be required in order for Landlord or Tenant as
the case may be to prepare financial statements in accordance with GAAP or to
comply with applicable securities laws and regulations and the SEC's
interpretation thereof, (b) may be required for Tenant or Landlord to prepare
federal, state or local tax returns, or (c) is of the type that Manager
customarily prepares for other hotel owners; provided, however, that (i)
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Manager reserves the right, in good faith, to challenge and require Landlord and
Tenant to use commercially reasonable efforts to challenge any assertion by the
SEC, any other applicable regulatory authority, or Landlord's or Tenant's
independent public accountants that applicable law, regulations or GAAP require
the provision or publication of Proprietary Information, (ii) Landlord and
Tenant shall not, without Manager's consent (which consent shall not be
unreasonably withheld, delayed or conditioned), acquiesce to any such challenged
assertion until Landlord and Tenant have exhausted all reasonable available
avenues of administrative review, and (iii) Landlord and Tenant shall consult
with Manager in pursuing any such challenge and will allow Manager to
participate therein if and to the extent that Manager so elects. Landlord and
Tenant acknowledge that the foregoing does not constitute an agreement by
Manager either to join in any Landlord and Tenant filing with or appearance
before the SEC or any other regulatory authority or to take or consent to any
other action which would cause Manager to be liable to any third party for any
statement or information other than those statements incorporated by reference
pursuant to clause (a) above.
2. Subject to such Person entering into a confidentiality
agreement with Manager as Manager may reasonably require, Tenant may at any
time, and from time to time, provide copies of any of the statements furnished
under this Section 4.01 to any Person which has made or is contemplating making
a Qualifying Mortgage or other lender with respect to one or more of the Hotels.
3. In addition, Landlord and Tenant shall have the right, from
time to time at Landlord's or Tenant's (as the case may be) sole cost and
expense, upon reasonable written notice, during Manager's customary business
hours, to cause Manager's books and records with respect to the Hotels to be
audited by auditors selected by Landlord or Tenant (as the case may be) at the
place or places where such books and records are customarily kept, provided
that, prior to conducting such audit, Landlord or Tenant, as the case may be,
shall enter into a confidentiality agreement with Manager, such agreement to be
in form and substance reasonably satisfactory to Landlord or Tenant (as the case
may be) and Manager.
4.02 Books and Records.
A. Books of control and account pertaining to operations at the Hotels
shall be kept on the accrual basis and in all material respects in accordance
with the Uniform System of Accounts and in accordance with GAAP, with the
exceptions, if any, provided in this Agreement and the Pooling Agreement, to the
extent applicable which will accurately record the Gross Revenues of the Hotels
and applications thereof. Manager shall retain, for at least three (3) years
after the expiration of each Fiscal Year, reasonably adequate records showing
Gross Revenues and applications thereof for the Hotels for such Fiscal Year
(which obligation shall survive termination hereof).
B. Tenant may at reasonable intervals during Manager's normal business
hours examine such books and records including, without limitation, supporting
data and sales and excise tax returns. If Tenant desires, at its own expense, to
audit, examine, or review the annual operating statement which is described in
Section 4.01.C, Tenant shall
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notify Manager in writing within one (1) year after receipt of such statement of
its intention to audit and begin such audit within such one (1) year after
Manager's receipt of such notice. Tenant shall use commercially reasonable
efforts to complete such audit as soon as practicable after the commencement
thereof, subject to reasonable extension if Tenant's or its accountant's
inability to complete the audit within such time is caused by Manager. If Tenant
does not make such an audit, then such statement shall be deemed to be
conclusively accepted by Tenant as being correct, and Tenant shall have no right
thereafter, except for adjustments made pursuant to an audit requested by
Landlord under the Owner Agreement or in the event of fraud by Manager, to
question or examine the same. If any audit by Tenant or Landlord as aforesaid
(1) discloses an understatement of any net amounts due Tenant and its
Affiliates, in the aggregate, hereunder (and, prior to the termination of the
Pooling Agreement in accordance with its terms with respect to the Hotels and
the Other Management Agreements for the Fiscal Year in question) Manager shall,
and shall cause its Affiliates, to promptly pay Tenant such net amounts found to
be due, plus interest thereon at the Overdue Rate from the date such amounts
should originally have been paid, or (2) discloses that Manager and its
Affiliates have not received, in the aggregate, any net amounts due them
hereunder (and, prior to the termination of the Pooling Agreement in accordance
with its terms with respect to the Hotels and the Other Management Agreements
for the Fiscal Year in question), Tenant shall, and shall cause its Affiliates,
to promptly pay Manager such net amounts, plus interest thereon (at the Prime
Rate plus one percent (1%) per annum) from the date such amounts should
originally have been paid. Manager shall promptly after completion of the
adjustments required as a result of any such audit, render a statement to Tenant
setting for that adjustments required to be made to the distributions under
Section 3.02.B for such Fiscal Year which reflect all adjustments made to the
amounts due Tenant, Marriott and/or Manager as a result of such audit and the
parties shall make and cause their respective Affiliates to make any adjustments
or additional payments or reimbursements required to comply with such revised
statement. Any dispute concerning the correctness of an audit by Tenant shall be
settled by Arbitration. Manager shall pay the cost of any audit revealing
understatement of Operating Profit or Tenant's Second Priority by more than
three percent (3%), and such amount shall not be a Deduction from Gross
Revenues.
4.03 Accounts, Expenditures.
A. Tenant irrevocably authorizes and directs Manager to pay and Manager
agrees to pay (or repay, as applicable), without notice, demand or request
therefor, but in each instance subject to the provisions of the Pooling
Agreement, if applicable, and the Marriott Guaranty Agreement, if applicable,
with respect to each of the Hotels: (1) Tenant's First Priority (which shall be
due on the first Business Day of each Accounting Period), Tenant's Second
Priority and Tenant's Third Priority, to Tenant when due and payable hereunder,
to the extent of the sufficiency of Operating Profit therefor, and (2) (i)
replenishment of any Holdback Agreement Advances to Tenant subject to the
provisions of this Agreement, (ii) distributions to Tenant and Marriott with
respect to Tenant Advances and Additional Marriott Advances and Additional
Manager Advances, (iii) any Priority Management Fee to itself (iv) the Base
Management Fee to itself, and (v) any other distributions provided for in
Section 3.02.B, in each of the foregoing instances set forth in this Section
4.03.A (2) (i) through (v), at the time interim
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distributions are made pursuant to Section 4.01 hereof (except as otherwise set
forth in Section 4.03.B.1 below), and to the extent of the sufficiency of, and
in the order of, distribution of Operating Profit under Section 3.02.B. Subject
to Section 4.03.D, Manager is authorized to, and shall, make all expenditures
required to be made hereunder with respect to the operation of the Hotels, but
only from funds available for such payments under the terms of this Agreement or
under the terms of the Pooling Agreement, if applicable, or under the Marriott
Guaranty Agreement, if applicable.
B. 1. The parties acknowledge that Tenant, to ensure that Tenant has
sufficient funds timely to pay Minimum Rent due pursuant to the Leases, must
receive, and Manager agrees to pay to Tenant subject to the sufficiency of funds
available therefore pursuant to this Agreement and the Marriott Guaranty
Agreement, Tenant's First Priority on the first day of each Accounting Period
and, thus, Tenant is required to be paid Tenant's First Priority before
Operating Profit for such Accounting Period is determined. As a result, it is
possible that Manager will pay Tenant's First Priority for the Hotels prior to
determining whether Operating Profit for such Accounting Period was adequate to
cover such Tenant's First Priority. If for any given Accounting Period it is
determined that Operating Profit was inadequate to cover any such payments of
Tenant's First Priority that were made by Manager with respect to such
Accounting Period, that portion of Tenant's First Priority paid with respect to
such Accounting Period in excess of Operating Profit for such Accounting Period
shall be deemed to be advances by Manager constituting a Marriott Guaranty
Advance pursuant to the Marriott Guaranty Agreement to the extent of the
availability of funds therefor pursuant to the terms thereof, and otherwise, an
Additional Manager Advance, in each instance which shall be repaid as provided
in the Pooling Agreement or Section 3.02.B hereof, as applicable.
2. Notwithstanding anything herein to the contrary, within twenty
(20) days after the end of each Accounting Period, Manager or Marriott shall
determine whether either of a Marriott Guaranty Advance or an Additional Manager
Advance was made with respect to such Accounting Period, and if Marriott or
Manager has made such an advance with respect to such Accounting Period,
Marriott or Manager shall advise Tenant in writing of the type and amount of
such advance (each such notice, an "Advance Notice"). Tenant may, in its sole
discretion, elect immediately to repay any Additional Manager Advance. This
paragraph shall only be applicable with respect to advances made or deemed made
to fund the payment of Tenant's First Priority.
C. Subject to the terms of the Pooling Agreement, as appropriate, all
escrow reserve accounts and funds derived from the operation of the Hotels shall
be deposited by Manager in a bank account(s) in a bank designated by Manager.
Withdrawals from said accounts shall be made solely by representatives of
Manager whose signatures have been authorized. Reasonable ▇▇▇▇▇ cash funds shall
be maintained at the Hotels.
D. Manager shall not be required to make any advance or payment
hereunder or to or for the account of Tenant except out of funds available
therefor pursuant to the terms of this Agreement except as otherwise set forth
herein or in any of the Incidental Documents, and Manager shall not be obligated
to incur any liability or obligation for Tenant's account without assurances
satisfactory to Manager that necessary funds for the
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discharge thereof will be provided by Tenant. In any event, if any such
liability or obligation is incurred by Manager for Tenant's account and Marriott
does not have funds available under the Pooling Agreement or Manager does not
have funds hereunder if the Pooling Agreement is not in effect with respect to
the applicable Hotel to pay such amount on or before twenty (20) days after the
end of the Accounting Period in which such liability or obligation was paid, the
amount advanced to pay such obligation shall be an Additional Manager Advance
which shall be repaid as provided in Section 3.02.B hereof.
4.04 Annual Operating Projection. Manager shall furnish to Tenant for
its review, on or before (i) thirty (30) days after the commencement of any
Fiscal Year commencing after the Effective Date with respect to each Hotel, and
(ii) in the case of the first partial Fiscal Year of operations of a Hotel,
within thirty (30) days after the Effective Date with respect to such Hotel, a
statement of the estimated financial results of the operation of each such Hotel
during the then current Fiscal Year ("Annual Operating Projection"). Such
projection shall project the estimated Gross Revenues, departmental profits,
Deductions, and Operating Profit for the forthcoming Fiscal Year for each such
Hotel. Manager agrees to take reasonable steps to ensure that, at Tenant's
request, qualified personnel from Manager's staff are available to explain such
Annual Operating Projections to Tenant. A meeting (or meetings) for such purpose
shall be held, at Tenant's request, within a reasonable period of time after the
submission to Tenant of the Annual Operating Projection. Manager will at all
times give good faith consideration to Tenant's suggestions regarding any Annual
Operating Projection. Manager shall thereafter submit to Tenant, by no later
than seventy-five (75) days after the beginning of such Fiscal Year, a modified
Annual Operating Projection if any changes are made following receipt of
comments from Tenant. Manager shall endeavor to adhere to the Annual Operating
Projection. It is understood, however, that the Annual Operating Projection is
an estimate only and that unforeseen circumstances such as, but not limited to,
the costs of labor, material, services and supplies, casualty, operation of law,
or economic and market conditions may make adherence to the Annual Operating
Projection impracticable, and Manager shall be entitled to depart therefrom due
to causes of the foregoing nature; provided, however, that nothing herein shall
be deemed to authorize Manager to take any action prohibited by this Agreement
or to reduce Manager's other rights or obligations hereunder.
4.05 Working Capital.
A. Manager shall provide the Initial Working Capital for each Hotel.
Manager represents that in its good faith judgment the Initial Working Capital
that it shall provide for each Hotel is in an amount that is reasonable and
customary for a hotel of the size and type of the Hotel as of the Effective Date
for such Hotel. Subject to the terms of the Pooling Agreement, at any time after
the twelve (12) month anniversary of the Effective Date with respect to any
Hotel, upon written notice from Manager, Tenant shall have the right, without
any obligation and in its sole and absolute discretion, to advance any
additional funds, over and above the Initial Working Capital necessary to
maintain Working Capital at levels determined by Manager to be reasonably
necessary to satisfy the needs of the Hotels as their operation may from time to
time require within ten (10)
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days of such request. Any such request by Manager shall be accompanied by a
reasonably detailed explanation of the reasons for the request. All funds so
advanced for Working Capital shall be utilized by Manager on behalf of Tenant
for the purposes of this Agreement pursuant to cash-management policies
established for the System provided, however, that so long as any of the Hotels
are subject to the Pooling Agreement, the Working Capital for such Hotels will
be pooled with working capital provided under the Other Management Agreements
and may be used to fund working capital needs for all Portfolio Properties. If
Tenant does not advance such additional Working Capital within ten (10) days
after notice, Manager shall have the right, without any obligation and in its
sole and absolute discretion to advance such additional Working Capital within
ten (10) days after such initial ten (10) day period, and all such advances
shall constitute Tenant Working Capital Advances or Additional Manager Advances,
as applicable, and shall be repaid as provided in Section 3.02.B.5 hereof. If
neither party elects to advance funds required to fund such deficiency pursuant
to this Section 4.05.A, either party may elect by written notice to the other to
terminate this Agreement with respect to the affected Hotel, which termination
shall be effective thirty (30) days after the date such notice is given and
otherwise in accordance with the provisions of Section 11.11 hereof. Such
Termination (i) shall be in accordance with the provisions of Section 11.11 of
this Agreement, (ii) shall constitute a Manager Default, and (iii) shall entitle
Tenant to all rights and remedies available to it with respect to a Manager
Default as provided for in Article IX hereof; provided, however, as a condition
to Manager so electing to terminate this Agreement with respect to such Hotel,
Marriott shall make a binding written offer to Tenant and Landlord to terminate
the Franchise Agreement for such Hotel and the Owner's Agreement to the extent
the same relates to the Hotel without cost or penalty to Tenant or Landlord,
which offer shall be irrevocable for a period of one hundred twenty (120) days
after such termination..
B. Subject to the Pooling Agreement, upon Termination, Manager shall
disburse to Tenant all Working Capital remaining after payment of all Deductions
and all amounts owed to Manager hereunder and amounts payable by Tenant
hereunder (including funds to be held in escrow under Sections 6.01.F and
11.01.I).
4.06 Fixed Asset Supplies. Any additional Fixed Asset Supplies, over
and above those provided by Manager or its Affiliates pursuant to the Agreement
to Lease or the Purchase and Sale Agreement, which are necessary to maintain
Fixed Asset Supplies at levels determined by Manager to be necessary to satisfy
the needs of each Hotel, as their operation may from time to time require, shall
be paid from Gross Revenues of such Hotel as Deductions. Such additional Fixed
Asset Supplies shall remain the property of Tenant throughout the Term of this
Agreement and upon Termination, except for Fixed Asset Supplies purchased by
Manager pursuant to Section 11.11.E.
ARTICLE V
REPAIRS, MAINTENANCE AND REPLACEMENTS
5.01 Manager's Maintenance Obligation. Except as provided in Section
5.02 hereof, and subject to the availability of sufficient funds in the
applicable Reserves,
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Manager shall maintain the Hotels including all private roadways, sidewalks and
curbs located thereon in good order and repair, reasonable wear and tear
excepted (whether or not the need for such repairs occurs as a result of
Tenant's or Manager's use, any prior use, the elements or the age of the Hotels,
or any portion thereof), and in conformity with Legal Requirements, System
Standards, Operating Standards and any Existing CC&R's or Future CC&R's (which
Future CC&R's must be approved in writing by Manager if the same may be
reasonably expected to interfere in any material way with the operation of or
financial performance of a Hotel). Except as provided in Section 5.02 hereof,
and subject to the availability of sufficient funds in the applicable Reserve
for each Hotel with respect to capital items, and the sufficiency of Gross
Revenue and Working Capital for each Hotel otherwise, in each instance, as
applicable, Manager shall promptly make or cause to be made all necessary and
appropriate repairs, replacements, renewals, and additions 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, renovations, alterations, improvements, renewals, replacements or
additions shall be made in a good, workmanlike manner, consistent with Manager's
and industry standards for like hotels in like locales, in accordance with all
applicable federal, state and local statutes, ordinances, by-laws, codes, rules
and regulations relating to any such work. Subject to the availability of
sufficient funds in the applicable Reserve for each Hotel or otherwise available
pursuant to this Agreement, Manager shall not take or omit to take any action,
with respect to the Hotel (and not the System as a whole) the taking or omission
of which would materially and adversely impair the value of any Hotel or any
part thereof for its use as a hotel. The cost and expense incurred in connection
with Manager's obligations hereunder shall be paid either from funds provided by
Tenant or Landlord as provided for herein, Gross Revenues, Working Capital or
from the Reserves, pursuant to Sections 5.02 and 5.03 below. Nothing in this
Agreement shall modify any obligation of Marriott or Manager under the Purchase
and Sale Agreement or the Agreement to Lease.
5.02 Repairs and Maintenance to be Paid from Gross Revenues. Manager
shall promptly make or cause to be made, such routine maintenance, repairs and
minor alterations as it determines are necessary to comply with Manager's
obligations under Section 5.01. The phrase "routine maintenance, repairs, and
minor alterations" as used in this Section 5.02 shall include only those which
are normally expensed under generally accepted accounting principles
consistently applied. The cost of such maintenance, repairs and alterations
shall be paid from Gross Revenue for such Hotel (and not from such Hotel's
Reserve) and shall be treated as a Deduction in determining Operating Profit for
such Hotel.
5.03 Items to be Paid from Reserves.
A. To the extent funds are in the applicable Reserves for each Hotel or
such funds are provided by Tenant or Landlord under Section 5.07 hereof, Manager
shall promptly make or cause to be made, all of the items listed in Section
5.03.B below as are necessary to comply with Manager's obligations under Section
5.01 hereof. The cost of
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such items shall be paid from the applicable Reserve and not from Gross Revenues
of a Hotel.
B. Manager shall establish for each Hotel an interest bearing escrow
reserve account (each a "Reserve" and collectively the "Reserves"), which
Reserves shall not be comingled with any other funds except for the Reserves of
other Portfolio Properties, in a bank or similar institution designated by
Manager and reasonably acceptable to Tenant and Landlord, to cover the cost of:
1. Replacements, renewals and additions related to the FF&E at
each Hotel; and
2. Subject to Section 5.02 hereof, routine or non-major repairs,
renovations, renewals, additions, alterations, improvements or replacements and
maintenance to each Hotel which are normally capitalized (as opposed to
expensed) under generally accepted accounting principles consistently applied,
such as exterior and interior repainting; resurfacing building walls, floors,
roofs and parking areas; and replacing folding walls and the like (but which are
not major repairs, alterations, improvements, renewals, replacements, or
additions to each Hotel's structure, roof, or exterior facade, or to its
mechanical, electrical, heating, ventilating, air conditioning, plumbing or
vertical transportation systems); and
3. Major repairs, renovations, additions, alterations,
improvements, renewals or replacements to each Hotel including, without
limitation, with respect to its structure, roof, or exterior facade, and to its
mechanical, electrical, heating, ventilating, air conditioning, plumbing or
vertical transportation systems; and
4. All lease payments for equipment and other personal property
reasonably necessary for the operation of each Hotel; and
5. Repairs, renewals or replacements, and other expenditures
having a cost, in the aggregate, in excess of $25,000 per Fiscal Year at each
Hotel that are, in each case, not otherwise covered under 1 through 3 above but
are required to comply with Legal Requirements and Insurance Requirements.
C. Upon the Effective Date, Manager shall transfer the existing Reserve
for each Hotel as provided in the Agreement to Lease and applicable Purchase and
Sale Agreement, in the amount set forth on each applicable Addendum. After the
Effective Date, Manager shall transfer into the Reserve for each Hotel amounts
as provided on the applicable Addendum. Transfers into each Reserve shall be
made at the time of each interim accounting described in Section 4.01.A hereof.
All amounts transferred to each Reserve shall be deducted from Gross Revenues in
determining Operating Profit for the applicable Hotel and shall be deposited in
the special Reserve account described in Section 5.03.B.
D. Manager shall from time to time, with respect to each Hotel, make
expenditures for the items described in Sections 5.03.B.1, B.2, B.3, B.4 and
B.5, as it
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deems necessary without the approval of Landlord or Tenant. At the end of each
Fiscal Year, any amounts remaining in the Reserve for a Hotel shall be carried
forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer
necessary to the operation of a Hotel shall be added to the Reserve for such
Hotel, and shall not be included in Gross Revenue for such Hotel. The Reserves
will be kept in interest-bearing accounts, and any interest which accrues
thereon shall be retained in such Reserve. Neither (1) proceeds from the
disposition of FF&E, nor (2) interest which accrues on amounts held in the
Reserves, shall (a) result in any reduction in the required contributions to the
Reserves set forth in Section 5.03.C above, nor (b) be included in Gross
Revenues.
5.04 Reserve Estimates.
Manager shall prepare and deliver to Tenant and Landlord on or before
December 1 of each Fiscal Year for their review an estimate for each Hotel
(each, a "Reserve Estimate") of the Reserve expenditures necessary during the
ensuing Fiscal Year for (1) replacements, renewals, and additions to the FF&E of
such Hotel and (2) repairs, renovations, additions, alterations, improvements,
renewals or replacements to such Hotel of the nature described in Section
5.03.B, for the succeeding Fiscal Year. Manager agrees to take reasonable steps
to ensure that, at Tenant's or Landlord's request, qualified personnel from
Manager's staff are available to explain each proposed Reserve Estimate with
respect to expenditures described in Section 5.03.B.3. A meeting (or meetings)
for such purpose shall be held, at Tenant's or Landlord's request, within a
reasonable period of time after the submission to Tenant or Landlord described
in each Reserve Estimate. Any disputes as to items in each Reserve Estimate for
expenditures described in Section 5.03.B.3 shall be resolved as set forth in
Sections 5.07.D and 5.07.E hereof. Such expenditures shall be funded from the
applicable Reserve to the extent funds are available therefor or from funds
provided under Section 5.07 hereof.
5.05 Additional Requirements for Reserve.
A. All expenditures from the Reserves shall be (as to both the amount
of each such expenditure and the timing thereof) both reasonable and necessary
given the objective that the Hotels will be maintained and operated to a
standard comparable to competitive properties and in accordance with the
Operating Standards and the System Standards.
B. Manager shall provide to Tenant and 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 applicable Reserve Estimate.
C. Notwithstanding anything contained herein to the contrary, it is
understood and agreed that so long as the Pooling Agreement is applicable to the
Hotels, the Reserves pursuant to this Agreement and the Other Management
Agreements to which the Pooling Agreement is then applicable shall be maintained
and used on a pooled basis such that all Reserve funds shall be deposited in a
single account and Manager and the managers under the Other Management
Agreements may apply any funds therein to
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any of the Portfolio Properties in accordance with the terms of this Agreement,
the Other Management Agreements, and the Pooling Agreement.
D. Other than Tenant's or Manager's personal property, all materials
which are scrapped or removed in connection with the making of any major or
non-major repairs, renovation, additions, alterations, improvements, removals or
replacements as described in Section 5.03.B above, or Section 5.08 below should
be disposed of by Manager and the net proceeds thereof shall be deposited in the
applicable Reserve and not included in Gross Revenue.
5.06 Ownership of Replacements. All repairs, renovations, additions,
alterations, improvements, renewals or replacements made pursuant to this
Article V, and all amounts kept in the Reserves, shall, except as otherwise
provided in this Agreement, be the property of Tenant or Landlord, as
applicable, as provided under the Lease.
5.07 Obligation To Provide Additional Reserve Funds.
A. Notwithstanding any provision herein to the contrary, no
expenditures in excess of the applicable Reserves shall be made without the
approval of the Tenant during the last two years of a Lease Term (unless Tenant
has exercised its rights for a Renewal Term) except those required by reason of
or under any Insurance Requirement or Legal Requirement, or otherwise required
for the continued safe and orderly operation of each Hotel.
B. If, at any time, the funds in any Reserve shall be insufficient or
are reasonably projected to be insufficient for necessary and permitted
expenditures thereof, Manager shall give Landlord and Tenant written 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 such Reserve) and such other
information with respect thereto as Landlord or Tenant may reasonably require,
and the following shall apply: Provided that (1) there then exists no Manager
Default hereunder, and (2) Manager shall otherwise comply with the provisions of
Section 5.08 hereof, if applicable, Tenant shall, within thirty (30) Business
Days after such notice, or such later date as Manager may direct by reasonable
prior notice, disburse (or cause Landlord to disburse) such required funds to
Manager for deposit into the Reserves as one or more lump sum contributions, in
which event Tenant's First Priority with respect to such Hotel shall be adjusted
as provided for herein in the definition of Tenant's First Priority and the
Addendum for such Hotel shall be revised in accordance therewith.
C. If Landlord or Tenant disputes Manager's request for a lump sum
contribution to a Reserve, Manager shall attempt to resolve such dispute through
negotiation. If after one meeting (or conference call) of direct negotiations
between Manager and Landlord or Tenant, as applicable, any party determines that
open issues cannot be resolved within sixty (60) days, such matters shall be
submitted to Arbitration. Tenant and Landlord shall, to the extent possible,
identify items in dispute on a line by line basis.
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D. A failure or refusal by Landlord to provide the additional funds
required in accordance with Section 5.07.B above within the time period set
forth in Section 5.07.B (including after any Arbitration, if applicable) shall
entitle Manager, at its option, to notify Tenant in writing that Manager may
terminate this Agreement with respect to the applicable Hotel if Tenant does not
advance such funds. Tenant shall promptly thereafter, fund the amounts required
to be contributed to such Reserve. If Tenant does not deposit in such Reserve
the additional funds required in accordance with Section 5.07.B within thirty
(30) days after receipt of such notice of intent to terminate, Manager may, in
its sole and absolute discretion, (i) provided Landlord's interest in the Hotel
is not then subject to a Qualifying Mortgage or owned by a Person who acquired
such interest pursuant to a Qualifying Mortgage (or a deed-in-lieu in connection
therewith), elect to terminate this Agreement with respect to the applicable
Hotel by written notice to Tenant and this Agreement shall terminate with
respect to the applicable Hotel as of the date that is one hundred eighty (180)
days after the date of Tenant's receipt of Manager's notice, and which
termination shall otherwise be in accordance with the provisions of Section
11.11 hereof, or (ii) exercise any remedy available at law or in equity (except
as specifically limited herein) or (iii) without obligation, fund all or a
portion of the amounts required to be contributed to such Reserve (a "Manager
Reserve Advance"). Under the Lease, Tenant is entitled to offset amounts
required for the repayment of any Manager Reserve Advance against Additional
Rent due pursuant to the Lease. Tenant agrees and authorizes Manager to make
payments to reimburse Manager for such advances, by deducting such amounts from
Operating Profit owed to Tenant as Tenant's Second Priority, to the full extent
to which Tenant is entitled to an offset against Additional Rent due from Tenant
to Landlord pursuant to the Lease. Landlord has pursuant to the Owner Agreement,
instructed Manager that, to the extent of Landlord's right, title and interest
therein, Manager may disburse and apply amounts held by Manager for Tenant which
would be payable by Tenant to Landlord as Additional Rent due pursuant to the
Lease to repay any Manager Reserve Advance until paid in full. Notwithstanding
the foregoing, the parties acknowledge and agree that while the Pooling
Agreement is in effect with respect to two or more Hotels, Manager's termination
right pursuant to this Section 5.07.F shall only be exercised with respect to
all or none of the Hotels which are subject to the Pooling Agreement.
5.08 Additional Requirements Relating to Certain Capital Improvements.
A. Prior to commencing construction of any additions or modifications
to any structural elements of any Hotel, the cost of which is reasonably
estimated to exceed $250,000 (as adjusted as provided below) (a "Capital
Addition") (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 or to subject Manager, Tenant or Landlord to criminal liability),
Manager shall submit, to Tenant and Landlord in writing, a proposal setting
forth, in reasonable detail, any such proposed improvement and cost estimate
therefor and shall provide to Tenant and to Landlord such plans and
specifications, and such permits, licenses, contracts and such other information
concerning the same as Landlord or Tenant may reasonably request. Landlord and
Tenant shall have twenty (20) Business Days to approve or disapprove all
materials submitted to Landlord or Tenant, as the case may be, in connection
with any such
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proposal. Failure of Landlord or Tenant to respond to the Manager's proposal
within twenty (20) Business Days after receipt of all information and materials
requested by Landlord or Tenant (if applicable) in connection with the proposed
improvement shall be deemed to constitute approval of the same by the failing
party.
B. In the event any dispute shall arise with respect to the withholding
of any approval by either Landlord or Tenant, Manager shall meet with Landlord
and Tenant to discuss the objections of Landlord or Tenant, and Manager,
Landlord and Tenant shall attempt in good faith to resolve any disagreement
relating to the proposal submitted by Manager. If after sixty (60) days such
disagreement has not been resolved, any party may submit the issue to
Arbitration. No Capital Addition shall be made which would tie-in or connect a
Hotel with any other improvements on property adjacent to such Hotel (and not
part of the Site) including, without limitation, tie-ins of buildings or other
structures or utilities (other than connections to public utilities). Manager
shall not finance the cost of any construction of such improvements by the
granting of a lien on, or security interest in, such Hotel or Manager's interest
therein without the prior written consent of Landlord, which consent may be in
Landlord's sole discretion.
C. The $250,000 limit referred to above shall be increased from time to
time to an amount equal to $250,000 multiplied by a fraction, the denominator of
which shall be the Index for the nearest month prior to the Effective 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.
D. Landlord and Tenant may not withhold their approval of Capital
Addition described in this Section 5.08 with respect to such items as are (1)
required in order for the Hotels to comply with System Standards or Operating
Standards; or (2) required by reason of or under any Insurance Requirement or
Legal Requirement, or otherwise required for the continued safe and orderly
operation of each Hotel.
5.09 Special Provision Re: Hotel in Emeryville, California.
A. With respect to the Hotel located in Emeryville, California only
(the "Emeryville Hotel"), Manager will continue to own the existing FF&E for
such Hotel, and Manager covenants to use all of such existing FF&E in the
operation and management of such Hotel. Any replacement FF&E obtained pursuant
to this Agreement shall not be the property of Manager but shall be the property
of Tenant. Upon any sale or disposition of any of the existing FF&E for the
Emeryville Hotel, any proceeds received from the same shall be placed into the
Reserve for such Hotel, and Manager shall have no further ownership right or
interest therein, and shall thereafter only have the right to use the same
pursuant to the terms of this Agreement. Manager represents to Tenant that the
existing FF&E for the Emeryville Hotel is in compliance in all material respects
with System Standards and is otherwise, in Manager's best judgment, adequate,
appropriate and at levels that are at least equal to those found at other
similarly situated hotels comparable to the Hotel. Upon any expiration or
termination of this Agreement Manager covenants to convey good and marketable
title to Tenant of any remaining of the existing FF&E for the Emeryville Hotel
to Tenant for One Dollar ($1.00). The
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provisions of Section 5.03.D shall be applicable to the existing FF&E provided
by Manager with respect to the Emeryville Hotel, and the non-recourse provisions
of Section 9.04 hereof shall not be applicable with respect to Manager's
obligation pursuant to this Section 5.09.
B. (i) Manager shall use commercially reasonable efforts to comply with
the requirements of the Site Closure Report and Cap Management Plan authored by
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ on November 30, 2000 and approved by the California
Department of Toxic Substances Control on December 1, 2000. All costs associated
with and expenditures required for compliance with the Site Closure Report and
Cap Management Plan will be Deductions.
(ii) Manager shall use commercially reasonable efforts to
comply with the requirements of the Third Implementation Agreement to
Disposition and Development Agreement executed by Emeryville Redevelopment
Agency and Courtyard Management Corporation, dated May 18, 1999. All costs
associated with any expenditures required for compliance with the Third
Implementation Agreement to Disposition and Development
ARTICLE VI
INSURANCE, DAMAGE, CONDEMNATION, AND FORCE MAJEURE
6.01 Insurance.
A. Manager shall at all times during the Term and at any other times
Manager shall be in possession of the Hotels, keep the Hotels and all property
located therein or thereon, insured on behalf of Tenant and Landlord pursuant to
the terms of this Agreement. Manager shall obtain and maintain, either with
insurance companies of recognized responsibility or by legally qualifying itself
as a self insurer, a minimum of the following insurance:
1. "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 Hotels, 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 foundations and excavation
(as defined in Section 6.01.C) (except that the foregoing shall not be construed
to require Manager to maintain earthquake insurance if the same is unavailable
on commercially reasonable terms, provided Manager gives Tenant prior written
notice thereof and except that the amount of earthquake insurance shall not
necessarily be 100% of the then full Replacement Cost with an agreed amount
endorsement and sufficient limits to avoid a co-insurance penalty. 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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2. 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 Manager or its Affiliates in the
surrounding area and in an amount sufficient to prevent Landlord or Tenant from
becoming a co-insurer;
3. Commercial 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 Hotels, including,
without limitation, broad form contractual liability, independent contractor's
hazard and completed operations coverage, aggregate limit per location
endorsement) 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) per occurrence (provided, however,
that with respect to commercial general liability insurance, Manager will not
self insure against any loss or claim (i) in an amount more than Ten Million
Dollars ($10,000,000) unless such self insurance is provided on a fronted basis
through an insurance company meeting the requirements set forth in Section
6.02.D hereof, and (ii) Marriott provides Tenant with a guaranty in form and
substance reasonably satisfactory to Tenant with respect to any claims against
which Manager has self insured;
4. Flood (if s Hotel 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 and customary for
comparable properties in the area;
5. Worker's compensation insurance coverage for all persons
employed by Manager at the Hotels with statutory limits and otherwise with
limits of and provisions in accordance with the requirements of applicable
local, state and federal law, and employer's liability insurance as is
customarily carried by similar employers; and
6. Such additional insurance as may be required, from time to time
by (A) the Existing CC&R's in effect on the date hereof and Future CC&R's
approved in writing by Manager to the extent such approval is required pursuant
to Section 8.02 hereof, or (B) Landlord, or (C) any Mortgagee under a Qualifying
Mortgage, and which, with respect to (B) and (C) above, is reasonably required
and customarily carried by comparable lodging properties in the area.
B. 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 (to the extent permitted hereby) or Manager, provided, that such blanket
policies fulfill the requirements contained herein.
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C. "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 Landlord, Tenant or Manager
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 parties, 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
written notice thereof to the other parties. The determination of such appraiser
shall be final and binding on the parties hereto until any subsequent
determination under this Section 6.01.C and Manager 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 s Hotel is
insured through a blanket replacement value policy.
D. All policies of insurance required under Section 6.01.A shall be
carried in the name of Manager. The property policies required under Section
6.01.A.1, Section 6.01.A.2, Section 6.01A.4 and Section 6.01.A.6 shall include
Tenant and Landlord as additional insureds as their interests may appear. The
liability policies required under Section 6.01.A.3 shall include Tenant and
Landlord as additional named insureds. Upon notice by Tenant or Landlord, as
applicable, Manager shall also have the policies required under Section
6.01.A.1, Section 6.01.A.2, Section 6.01.A.3 and Section 6.01.A.6 include any
Mortgagee as an additional insured (or as Mortgagee, as applicable). Any
property losses thereunder shall be payable to the respective parties as their
interests may appear. All insurance policies and endorsements required pursuant
to this Section 6.01.A.1 through 6.01.A.4 shall be fully paid for, nonassessable
and, except for umbrella, worker's compensation, flood and earthquake coverage,
shall be issued by insurance carriers authorized to do business in the State,
having a general policy holder's rating of no less than B++ in Best's latest
rating guide. All such policies described in Sections 6.01.A.1 through 6.01.A.4
shall include no deductible in excess of Two Hundred Fifty Thousand Dollars
($250,000) (excluding the insurance in Section 6.01.A.4 and other high hazard
risks, including, but not limited to, earthquake, flood and windstorm with
respect to which such deductibles shall be in an amount as is customarily
carried by operators of similar facilities). All loss adjustments shall be
payable as provided in Section 6.01.G. hereof. All such policies shall provide
Tenant, Landlord and any Mortgagee under a Qualifying Mortgage if required by
the same thirty (30) days' prior written notice of any material change or
cancellation of such policy and the property insurance policies shall provide
for a waiver of subrogation, to the extent available.
E. Manager shall deliver to Tenant and Landlord certificates of
insurance with respect to all policies so procured and, in the case of insurance
policies about to expire, shall deliver certificates with respect to the renewal
thereof. All certificates of insurance provided for under this Section 6.01
shall, to the extent obtainable, state that the insurance shall not be canceled
or materially changed without at least thirty (30) days' prior written notice to
the certificate holder. In the event Manager shall fail to effect such insurance
as herein required, to pay the premiums therefor, or to deliver, within fifteen
(15) days of a request therefor, such certificates to Tenant or any Qualifying
Mortgage,
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Tenant shall have the right, but not the obligation, to acquire such insurance
and pay the premiums therefor, which amounts shall be payable to Tenant, upon
demand, as a Deduction, together with interest accrued thereon at the Overdue
Rate (which interest shall not be a Deduction, but shall be paid by Manager)
from the date such payment is made until (but excluding) the date repaid.
F. Insurance premiums and any other costs or expenses with respect to
the insurance or self-insurance required under Section 6.01.A., including any
Insurance Retention (as defined below), shall be Deductions. Such premiums and
costs shall be allocated on an equitable basis to the hotels participating under
Manager's blanket insurance or self-insurance programs. Any reserves, losses,
costs or expenses (including any deductibles) which are not required to be
insured and are not insured shall be treated as a cost of insurance and shall be
Deductions, and claims which are required to be insured against, to the extent
not so insured, and over and above any deductible permitted hereunder, shall be
paid by Manager at its own costs and expense and not as a Deduction. Upon
Termination, an escrow fund in an amount acceptable to Manager based on
actuarial loss projections for Hotels in the System shall be established from
Gross Revenues and used by Manager to cover the amount of any Insurance
Retention and all other costs which will eventually have to be paid by either
Tenant or Manager with respect to pending or contingent claims, including those
which arise after Termination for causes arising during the Term. If Gross
Revenues are insufficient to meet the requirements of such escrow fund, then
Tenant shall deliver to Manager, within ten (10) days after receipt of Manager's
written request therefor, the sums necessary to establish such escrow fund; and
if Tenant fails to timely deliver such sums to Manager, Manager shall have the
right (without affecting Manager's other remedies under this Agreement) to
withdraw the amount of such expenses from Working Capital provided by Tenant or
any other funds of Tenant held by or under the control of Manager or held by
Marriott under the Pooling Agreement and available to pay Aggregate Deductions
(as defined in the Pooling Agreement). For purposes of this Section 6.01.F,
"Insurance Retention" shall mean the amount of any loss or reserve under
Manager's blanket insurance or self-insurance programs which is allocated to the
Hotel, not to exceed the higher of (A) the maximum per occurrence limit
established for similar hotels participating in such programs, or (B) the
insurance policy deductible on any loss which may fall within high hazard
classifications as mandated by the insurer (e.g., earthquake, flood, windstorm
on coastal properties, etc.). If the Hotel is not a participant under Manager's
blanket insurance or self-insurance programs, "Insurance Retention" shall mean
the amount of any loss or reserve allocated to the Hotel, not to exceed the
insurance policy deductible.
G. Except as provided in the last clause of this sentence, all proceeds
payable by reason of any loss or damage to a Hotel, or any portion thereof, and
insured under any policy of property insurance required by Section 6.01.A.1 and
Section 6.01.A.4, inclusive, (other than the proceeds of any business
interruption insurance under Section 6.01.A.2 and liability insurance under
Section 6.01.A.3) shall be paid directly to Landlord as its interest may appear
(subject to the provisions of Section 6.02) and all loss adjustments with
respect to losses payable to Tenant shall require the prior written consent of
Landlord; provided, however, that so long as no event of default under the Lease
or under this Agreement shall have occurred or be continuing, all such proceeds
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less than or equal to Five Hundred Thousand Dollars ($500,000) shall be paid
directly to Manager and such losses may be adjusted without Landlord's consent.
If Tenant is required to reconstruct or repair a Hotel 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 Hotel necessitated by such damage or
destruction, subject to and in accordance with the provisions of Section 6.02.
Any excess proceeds of insurance shall be distributed as Operating Profit under
the provisions of Section 3.02.B hereof, provided that the amount of such excess
proceeds of insurance shall not be included in Gross Room Revenues or Gross
Revenues for the purposes of calculating the System Fee, the Base Management
Fee, the First Incentive Management Fee and the Second Incentive Management Fee.
In the event that the provisions of Section 6.02.A are applicable, the insurance
proceeds shall be retained by the party entitled thereto pursuant to Section
6.02.A. 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.
H. 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
insurance then being carried by Manager, Tenant or Landlord, the party carrying
such insurance or suffering said loss releases Manager, Tenant and Landlord of
and from any and all claims with respect to such loss and such party further
agrees that any insurance companies shall have no right of subrogation against
Tenant, Landlord or Manager 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, the same shall be paid from Gross Revenues or Working
Capital as a Deduction.
I. Manager shall not take out separate insurance, concurrent in form or
contributing in the event of loss with that required by this Article VI, or
increase the amount of any existing insurance by securing an additional policy
or additional policies, which may diminish the proceeds which will be paid
pursuant to the policies required by this Article VI, unless all parties having
an insurable interest in the subject matter of such insurance, including Tenant,
Landlord and all 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 policies required by this Article VI. In the event Manager shall take
out any such separate insurance or increase any of the amounts of the then
existing insurance as described in the preceding sentence, Manager shall give
prompt notice to Tenant thereof.
6.02 Damage and Repair.
A. If, during the Term with respect to any Hotel, such Hotel shall be
totally or partially destroyed and the Hotel is thereby rendered Unsuitable for
Its Permitted Use, (1) Manager may terminate this Agreement with respect to such
Hotel by sixty (60) days written notice to Tenant and Landlord, or (2) if the
Lease has been terminated as a result of such casualty, the Tenant may terminate
this Agreement with respect to such Hotel by written notice to Manager and
Landlord, whereupon, this Agreement and the Lease, with
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respect to such Hotel, shall terminate and Landlord shall be entitled to retain
the insurance proceeds payable on account of such damage.
B. If, during the Term with respect to any Hotel, such Hotel is damaged
or destroyed by fire, casualty or other cause but is not rendered Unsuitable for
Its Permitted Use and the Lease is not terminated in accordance with its terms
with respect to such Hotel, Tenant shall, subject to Sections 6.02.C and 6.02.D
below, provided there is then no Manager Default, forward to Manager the funds
necessary to repair or replace the damaged or destroyed portion of the Hotel to
the same condition as existed previously and Manager shall have the right to
discontinue operating the Hotel to the extent it deems necessary to comply with
applicable law, ordinance, regulation or order or as necessary for the safe and
orderly operation of the Hotel.
C. If the cost of the repair or restoration of a Hotel is less than the
sum of the deductible plus the amount of insurance proceeds received by Landlord
or Tenant, Tenant shall be required to make available the funds necessary (minus
the amount of such deductible) to cause such Hotel to be repaired and restored
to the extent insurance proceeds are made available by Landlord for such repair
and restoration. The amount of such deductible shall be funded first, from the
Reserve for the applicable hotel, and to the extent such Reserve is insufficient
therefor, the balance shall be funded by Tenant, and any such funding by Tenant
shall result in an adjustment to Tenant's First Priority with respect to such
Hotel as if Tenant had made a lump sum deposit into the Reserve for such Hotel,
in the manner set forth in the definition of Tenant's First Priority, and the
Addendum applicable to such Hotel shall be revised in accordance therewith. If
the cost of the repair or restoration of such Hotel exceeds the amount of
insurance proceeds received by Landlord, plus the deductible amount, Manager
shall give notice to Tenant and Landlord setting forth in reasonable detail the
nature of such deficiency, and Tenant shall promptly thereafter advise Manager
in writing 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). 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 written notice to Tenant and Manager,
given within sixty (60) days after Manager's notice of the deficiency, to elect
to make available for application to the cost of repair or restoration the
amount of such deficiency. In the event that neither Landlord nor Tenant shall
elect to make such deficiency available for restoration, (1) Manager may effect
Termination of this Agreement with respect to such Hotel by written notice to
Tenant and Landlord or (2) if the Lease has been terminated with respect to such
Hotel as a result of such casualty, the Tenant may effect a Termination of this
Agreement with respect to such Hotel by written notice to Manager and Landlord,
whereupon, this Agreement shall terminate with respect to such Hotel as provided
in Section 6.02.A. Except for deductibles which are addressed above, any
reserves, losses, costs or expenses which are uninsured (and which are not
required to be insured hereunder) and which are not self-insured hereunder shall
be treated as a cost of insurance and shall be Deductions.
D. In the event Tenant is required to make available the funds
necessary to restore a Hotel, Tenant shall promptly do so and such funds shall
be used to perform the
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repair and restoration of such Hotel (hereinafter called the "Work"), so as to
restore such Hotel in compliance with all Legal Requirements and so that such
Hotel 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 and in compliance with System Standards and Operating
Standards. Manager shall, at Tenant's request, provide general supervisory
services with respect to completion of such work as part of the services
provided hereunder in consideration of the management fees paid to Manager,
however, Manager shall not be obligated to provide additional secure services
unless Tenant and Manager enter into separate arrangements to provide such
services and for stated additional consideration. Subject to the terms of the
Lease, Landlord shall advance the insurance proceeds and any additional amounts
payable by Landlord pursuant to this Section 6.02.D 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 an "Event of Default" under the Lease, (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.
E. All business interruption insurance proceeds shall be paid to
Manager and included in Gross Revenues. Any casualty which does not result in a
Termination of this Agreement with respect to the applicable Hotel shall not
excuse the payment of sums due to Tenant hereunder with respect to such Hotel.
F. Manager hereby waives any statutory rights of termination which may
arise by reason of any damage to or destruction of any Hotel.
G. Special Provisions Applicable to Hotels in the States of California
or Washington.
(a) With respect to any Hotels located in the States of California or
Washington, the following shall apply: Notwithstanding any provisions of Section
6.02 or 6.03 to the contrary, if (x) Material Earthquake Damage to any Hotel
occurs and (y) Manager was not required to maintain earthquake insurance with
respect to such Hotel pursuant to Section 6.01, Manager shall have the right, by
the giving of written notice to Tenant within sixty (60) days after the date of
earthquake, to effect a Termination of this Agreement with respect to the
affected Hotel (which Termination shall not be deemed due to a Manager Default),
this Agreement shall terminate with respect to such Hotel as of the date of such
earthquake, provided that Manager shall pay to Tenant, on or before the date of
giving such written notice, an amount equal to the lesser of (i) the Tenant's
First Priority for such Hotel payable for the balance of the applicable Term
(without
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giving effect to such termination but after giving effect to any exercised
Renewal Term) and (ii) the "Purchase Price" for such Hotel as set forth in the
Purchase and Sale Agreement applicable to such Hotel, which payment may be made,
at Manager's request, by application thereto of funds held by Tenant pursuant to
the Holdback Agreement.
(b) For purposes of this Section 6.02.G, "Material Earthquake Damage"
shall mean damage or destruction of a Hotel resulting from earthquake, the
repair or restoration of which will cost in excess of an amount equal to One
Million Five Hundred Thousand Dollars ($1,500,000) multiplied by a fraction, the
denominator of which shall be the Index for the nearest month prior to the date
on which Landlord acquired its interest in the Hotel and the numerator of which
shall be the Index for the nearest month prior to the date of such earthquake.
(c) It is expressly understood and agreed that, in the event Manager
elects or is required to repair any damage or destruction to a Hotel resulting
from earthquake and as to which Manager was not required to maintain insurance
pursuant to Section 6.01 hereof or as to which Manager maintained coverage
pursuant to Section 6.01 hereof but the proceeds thereof are inadequate,
provided that not less than five full years remain in the Term (including any
exercised Renewal Terms), Manager may use funds from the Reserve for such Hotel
to pay for the restoration and repair costs and Landlord and Tenant shall be
required to disburse additional funds subject to and upon the terms and
conditions of Section 5.07 hereof.
6.03 Damage Near End of Term. Notwithstanding any provisions of Section
6.01 or 6.02 hereof to the contrary (but subject to the provisions of Section
6.02.G above), if damage to or destruction of any Hotel occurs during the last
twelve (12) months of the then Term (including any exercised Renewal 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 Renewal Term), the provisions of Section 6.02.A
shall apply as if such Hotel had been totally or partially destroyed and such
Hotel operated thereon rendered Unsuitable for its Permitted Use.
6.04 Tenant's Option to Obtain Certain Insurance. Tenant may, at its
option, from time to time by written notice to Manager which shall be delivered
no later than sixty (60) days prior to the natural expiration of the insurance
policies which Manager has obtained pursuant to Section 6.01.A.1, 2 and 4,
procure and maintain the insurance specified in Section 6.01.A.1, 2 and 4 (in
which case Manager shall allow such policies obtained by it under Section
6.01.A.1, 2 and 4 to expire), subject to the following terms and conditions:
A. All policies of insurance shall be carried in the name of Tenant,
with Manager as an additional insured. Any property losses thereunder shall be
payable to the respective parties as their interests may appear.
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B. Tenant shall deliver to Manager and Landlord certificates of
insurance with respect to all policies so procured and, in the case of insurance
policies about to expire, shall deliver certificates with respect to the renewal
thereof.
C. All such certificates of insurance shall, to the extent obtainable,
state that the insurance shall not be canceled or materially changed without at
least thirty (30) days' prior written notice to the certificate holder.
D. Premiums for such insurance coverage shall be treated as Deductions,
provided that if the cost of such insurance procured by Tenant exceeds the cost
of Manager's comparable coverage by more than ten percent (10%), all such excess
costs shall be the sole responsibility of Tenant and shall not be a Deduction.
E. Should Tenant exercise its option to procure any of the insurance
described in this Section 6.04, Tenant hereby waives its rights of recovery from
Manager or any of its Affiliates (and their respective directors, officers,
shareholders, agents and employees) for loss or damage to any Hotel, and any
resultant interruption of business, resulting from an occurrence or event
covered by the insurance so procured by Tenant.
F. Should Tenant exercise its rights to obtain the insurance described
in this Section 6.04, Tenant acknowledges that until Tenant gives Manager not
less than sixty (60) days advance notice that Tenant is rescinding such exercise
Manager is under no obligation to thereafter include such Hotels in its blanket
insurance program (with respect to the coverage described in Section 6.01.A.1, 2
and 4) for the balance of the Term of this Agreement. However, upon a Sale of a
Hotel, a successor Tenant shall have the right, notwithstanding the fact that
the previous Tenant may have obtained insurance in accordance with this Section
6.04, to have such Hotel included in Manager's blanket insurance program
(provided that such Hotel, as of that point in time, satisfies the applicable
criteria for admission to such program, as established by the program's
insurance carriers) by making a written request to Manager for such inclusion
not later than thirty (30) days after the date of which such party becomes the
Tenant.
G. All insurance procured by Tenant hereunder shall be obtained from
reputable insurance companies reasonably acceptable to Manager and shall
otherwise comply with the provisions of this Article VI.
6.05 Condemnation. If either (i) the whole of a Hotel shall be taken by
Condemnation, or (ii) a Condemnation of less than the whole of a Hotel renders
such Hotel Unsuitable for Its Permitted Use, this Agreement shall terminate and
Tenant and Landlord shall seek the Award for their interests in such Hotel as
provided in the Lease. In addition, Manager shall have the right to initiate
such proceedings as it deems advisable to recover any damages to which Manager
may be entitled; provided, however, that Manager shall be entitled to retain the
award or compensation it may obtain through such proceedings which are conducted
separately from those of Tenant and Landlord only if such award or compensation
does not reduce the award or compensation otherwise available to Tenant and
Landlord. For this purpose, any award or
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compensation received by any holder of a Mortgage on a Hotel shall be deemed to
be an award of compensation received by Landlord.
6.06 Partial Condemnation. In the event of a Condemnation of less than
the whole of a Hotel such that such Hotel is not rendered Unsuitable for Its
Permitted Use, Manager shall, to the extent of the Award and any additional
amounts disbursed by Tenant or Landlord as hereinafter provided, commence
promptly and continue diligently to restore the untaken portion of such Hotel so
that such Hotel shall constitute a complete architectural unit of the same
general character and condition (as nearly as may be possible under the
circumstances) as the Hotel located thereon existing immediately prior to such
Condemnation, in full compliance with all Legal Requirements, subject to the
provisions of this Section 6.06. Manager shall, at Tenant's request, provide
general supervisory services with respect to completion of such work as part of
the services provided hereunder in consideration of the management fees paid to
Manager, however, Manager shall not be obligated to provide additional services
unless Tenant and Manager enter into separate arrangements to provide such
services and for stated additional consideration. If the cost of the repair or
restoration of the Hotel exceeds the amount of the Award, Manager shall give
Landlord and Tenant written notice thereof, which notice shall set forth in
reasonable detail the nature of such deficiency, and Tenant shall promptly
thereafter advise Manager in writing whether Tenant will 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 and Manager 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. In the event
neither Landlord nor Tenant shall elect to make such deficiency available for
restoration, either Manager or Tenant may terminate this Agreement with respect
to such Hotel.
6.07 Disbursement of Award. Subject to the terms hereof, Tenant or
Landlord, as applicable, 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 such Hotel and any deficiency Tenant or
Landlord, as applicable, has agreed to disburse, to Manager 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 and Tenant's obligation under this Section 6.07 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
Qualifying Mortgage, and the release of such Award by the
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applicable Mortgagee. Tenant's obligation to restore the applicable Hotel shall
be subject to the release of the Award to Landlord by the applicable Mortgagee
under a Qualifying Mortgage.
6.08 Temporary Condemnation. In the event of any temporary Condemnation
of a Hotel or Tenant's interest therein, this Agreement shall continue in full
force and effect. 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 Manager and shall constitute Gross Revenues. Tenant
shall, promptly upon the termination of any such period of temporary
Condemnation, at its sole cost and expense, restore such Hotel 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 6.08, 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.
6.09 Allocation of Award. Except as provided in Section 6.07 and
Section 6.08 and the second and third sentences of this Section 6.09, 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 a Hotel, loss of
business, the taking of Tenant's Personal Property, or Tenant's removal and
relocation expenses shall be the sole property of, and payable to, Tenant. Any
portion of the Award made for the taking of Manager's interest in a Hotel or
Manager's loss of business during the remainder of the Term hereof shall be the
sole property of, and payable to, Manager, subject to the provisions of Section
6.05 hereof. In any Condemnation proceedings, Landlord, Tenant, and Manager
shall each seek its own Award in conformity herewith, at its own expense.
6.10 Effect of Condemnation. Any condemnation which does not result in
a Termination of this Agreement in accordance with its terms with respect to the
applicable Hotel shall not excuse the payment of sums due to Tenant hereunder
with respect to such Hotel and this Agreement shall remain in full force and
effect.
ARTICLE VII
TAXES; OTHER CHARGES
7.01 Real Estate and Personal Property Taxes.
A. Subject to Section 11.23 relating to permitted contests, Manager
shall pay, from Gross Revenues for each Hotel, all Impositions with respect to
such Hotel, before any fine, penalty, interest or cost (other than any
opportunity cost as a result of a failure to take advantage of any discount for
early payment) may be added for non-payment, such payments to be made directly
to the taxing authorities where feasible, and shall promptly, upon request,
furnish to Landlord and Tenant copies of official receipts or other reasonably
satisfactory proof evidencing such payments. Any such payments shall be a
Deduction in determining Operating Profit for such Hotel. If any such Imposition
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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), Manager 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. Manager shall,
upon request, provide such data as is maintained by Manager with respect to any
Hotel as may be necessary to prepare any required returns and reports by
Landlord or Tenant.
Tenant shall give, and will use reasonable efforts to cause Landlord to
give, copies of official tax bills and assessments which it may receive with
respect to any Hotel and prompt notice to Tenant and Manager of all Impositions
payable by Tenant under the Lease of which Tenant or Landlord, as the case may
be, at any time has knowledge; provided, however, that Landlord's or Tenant's
failure to give any such notice shall in no way diminish Manager's obligation
hereunder to pay such Impositions (except that Landlord or Tenant, as
applicable, shall be responsible for any interest or penalties incurred as a
result of Landlord's or Tenant's, as applicable, failure promptly to forward the
same).
B. The word "Impositions" as used in this Agreement shall include, but
not be limited to, franchise taxes under the laws of the State of Tennessee and
gross receipt or general excise taxes or sales taxes payable on (i) Rent payable
to Landlord, (ii) all sums payable to Tenant pursuant to this Agreement (or the
Pooling Agreement with respect to Hotels to which the Pooling Agreement is
applicable), and (iii) all sums payable to Manager pursuant to this Agreement as
System Fees or management fees (or pursuant to the Pooling Agreement with
respect to Hotels to which the Pooling Agreement is applicable), if any, but
shall not include the following, all of which shall be paid from the applicable
Reserve, and not from Gross Revenues:
1. Special assessments (regardless of when due or whether they are
paid as a lump sum or in installments over time) imposed because of facilities
which are constructed by or on behalf of the assessing jurisdiction (for
example, roads, sidewalks, sewers, culverts, etc.) which directly benefit the
Hotel (regardless of whether or not they also benefit other buildings), which
assessments shall be treated as capital costs of construction and not as
Deductions; provided, however, (a) such amounts shall be paid by Manager if
Manager is required to do so under the Purchase and Sale Agreement or Agreement
to Lease, and (b) such amounts shall be paid as a Deduction if such assessments
were reflected in the pro forma budgets prepared by Manager and delivered to
Landlord and Tenant prior to the date of execution and delivery of the Agreement
to Lease; and
2. "Impact Fees" (regardless of when due or whether they are paid
as a lump sum or in installments over time) which are required as a condition to
the issuance of site plan approval, zoning variances or building permits, which
impact fees shall be treated as capital costs of construction and not as
Deductions.
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C. Notwithstanding anything herein to the contrary, each of Tenant and
Manager shall pay from its own funds (and not from Gross Revenues of any Hotel
or any Reserve) any franchise, corporate, estate, inheritance, succession,
capital levy or transfer tax imposed on Tenant or Manager, as applicable, or any
income tax imposed (but not gross receipt or general excise taxes) on any income
of Tenant or Manager (including distributions to Tenant pursuant to Article III
hereof).
D. Manager shall cause to be paid, with respect to each Hotel, when
due, from Gross Revenues, as Deductions, for such Hotel, to the extent of the
sufficiency of funds available therefore:
1. Utility Charges - all charges for electricity, power, gas, oil,
water and other utilities used in connection with each Hotel.
2. Insurance Premiums - all premiums for the insurance coverage
required to be maintained pursuant to Section 6.01 hereof.
3. Other Charges - all other amounts, liabilities and obligations
arising in connection with the operation of each Hotel except those obligations
expressly assumed by Landlord or Tenant pursuant to the provisions of this
Agreement or any of the Incidental Documents or expressly stated not to be paid
from Gross Revenues of a Hotel pursuant to this Agreement.
ARTICLE VIII
OWNERSHIP OF THE HOTELS
8.01 Ownership of the Hotels.
A. Tenant hereby covenants that it will not hereafter impose or consent
to the imposition of any liens, encumbrances or other charges, except as
follows:
1. easements or other encumbrances that do not adversely affect
the operation of a Hotel by Manager and that are not prohibited pursuant to
Section 8.02 of this Agreement;
2. mortgages which constitute Qualifying Mortgages and related
security instruments;
3. liens for taxes, assessments, levies or other public charges
not yet due or due but not yet payable; or
4. equipment leases for office equipment, telephone, motor
vehicles and other property approved by Manager.
B. Subject to liens permitted to Section 8.01.A hereof and further
subject to liens permitted to be placed by Landlord pursuant to the Owner
Agreement, Tenant
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covenants that, so long as there is no Manager Default under this Agreement,
Manager shall quietly hold, occupy and enjoy the Hotels throughout the Term
hereof free from hindrance, ejection or molestation by Tenant or Landlord or
other party claiming under, through or by right of Tenant or Landlord. Tenant
agrees to pay and discharge any payments and charges and, at its expense, to
prosecute all appropriate actions, judicial or otherwise, necessary to assure
such free and quiet occupation as set forth in the preceding sentence.
8.02 No Covenants, Conditions or Restrictions.
A. Tenant covenants that, as of the Effective Date and during the Term
of this Agreement with respect to each Hotel, Tenant will not enter into (unless
Manager has given its prior written consent thereto, which consent shall not be
unreasonably withheld, conditioned or delayed) any covenants, conditions or
restrictions, including reciprocal easement agreements or cost-sharing
arrangements (collectively referred to as "Future CC&R's") affecting any Site or
Hotel (i) which would prohibit or limit Manager from operating such Hotel in
accordance with System Standards, including related amenities of such Hotel; or
(ii) which would allow such Hotel facilities (for example, parking spaces) to be
used by persons other than guests, invitees or employees of such Hotel. With
respect to each Hotel, Manager hereby consents to (a) any easements, covenants,
conditions or restrictions, including without limitation any reciprocal easement
agreements or cost-sharing agreements, existing as of the date Landlord acquired
title to such Hotel, and (b) any of the foregoing items with respect to such
Hotel existing as of the date hereof and of which Manager has knowledge (all of
the foregoing, collectively, the "Existing CC&R's").
B. All financial obligations imposed on Tenant or on a Hotel pursuant
to any Future CC&R's for which Manager's consent is required under Section
8.02.A above shall be paid by Tenant from its own funds, and not from Gross
Revenues of a Hotel or from the Reserve of a Hotel, unless Manager has given its
prior written consent to such Future CC&R's as required under Section 8.02.A.
C. Manager shall manage, operate, maintain and repair each Hotel in
compliance with all obligations imposed on Tenant, Landlord or such Hotel
pursuant to any Existing CC&R's or Future CC&R's (unless the Manager's consent
is required for such Future CC&R's and Manager does not consent to such Future
CC&R's) to the extent such Existing CC&R's and Future CC&R's relate to the
management, operation, maintenance and repair of such Hotel.
8.03 Liens; Credit. Manager and Tenant shall use commercially
reasonable efforts to prevent any liens from being filed against any Hotel which
arise from any maintenance, repairs, alterations, improvements, renewals or
replacements in or to such Hotels. They shall cooperate and Tenant shall cause
the Landlord to cooperate fully in obtaining the release of any such liens, and
the cost thereof, if the lien was not occasioned by the fault of a party, shall
be treated the same as the cost of the matter to which it relates. If the lien
arises as a result of the fault of a party, then the party at fault shall bear
the cost of obtaining the lien release. In no event shall any party borrow money
in the
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name of, or pledge the credit of, any other party. Manager shall not allow any
lien to exist with respect to its interest in this Agreement.
Subject to the right to contest matters set forth in Section 11.23
hereof and for encumbrances permitted under Section 8.01 hereof, Manager shall
not, to the extent funds to pay the same are provided on a timely basis as
required hereunder, directly or indirectly, create or allow to remain and shall
promptly discharge any lien, encumbrance, attachment, title retention agreement
or claim upon any Hotel, except (a) existing liens for those taxes of Landlord
which Manager is not required to pay hereunder, (b) 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
Section 11.23, (c) liens of mechanics, laborers, materialmen, suppliers or
vendors incurred in the ordinary course of business that are not yet due and
payable or are for sums that are being contested in accordance with Section
11.23 and (d) any Mortgages or other liens which are the responsibility of
Landlord.
ARTICLE IX
DEFAULTS
9.01 Manager Events of Default. Each of the following shall constitute
a "Manager Event of Default" to the extent permitted by applicable law:
A. The filing by Manager of a voluntary petition in bankruptcy or
insolvency or a petition for reorganization under any bankruptcy law, or the
admission by Manager that it is unable to pay its debts as they become due, or
the institution of any proceeding by Manager for its dissolution or termination.
Upon the occurrence of any Manager Event of Default as described under this
Section 9.01.A, said Manager Event of Default shall be deemed a "Manager
Default" under this Agreement.
B. The consent by Manager to an involuntary petition in bankruptcy or
the failure to vacate, within ninety (90) days from the date of entry thereof,
any order approving an involuntary petition by Manager. Upon the occurrence of
any Manager Event of Default as described under this Section 9.01.B, said
Manager Event of Default shall be deemed a "Manager Default" under this
Agreement.
C. The entering of an order, judgment or decree by any court of
competent jurisdiction, on the application of a creditor, adjudicating Manager
as bankrupt or insolvent or approving a petition seeking reorganization or
appointing a receiver, trustee, or liquidator of all or a substantial part of
Manager's assets, and such order, judgment or decree's continuing unstayed and
in effect for an aggregate of sixty (60) days (whether or not consecutive). Upon
the occurrence of any Manager Event of Default as described under this Section
9.01.C, said Manager Event of Default shall be deemed a "Manager Default" under
this Agreement.
D. The failure of Marriott or Manager or any Affiliate of either of
them to make any payment required to be made in accordance with the terms of
this Agreement,
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or any Incidental Document on or before the date due. Upon the occurrence of any
Manager Event of Default as described under this Section 9.01.D, said Manager
Event of Default shall be deemed a "Manager Default" under this Agreement if
Marriott or Manager or such Affiliate fails to cure such Manager Event of
Default (1) within any applicable notice and cure period, if any, provided in
the document pursuant to which such payment is to be made, or (2) otherwise,
eight (8) days after receipt of written notice from the other party to such
document demanding such cure.
E. The failure of Marriott or Manager or any Affiliate of either of
them to perform, keep or fulfill any of the other covenants, undertakings,
obligations or conditions set forth in this Agreement or in any Incidental
Document on or before the date required for the same. Upon the occurrence of any
Manager Event of Default as described under this Section 9.01.E, said Manager
Event of Default shall be deemed a "Manager Default" under this Agreement if
Marriott or Manager or such Affiliate fails to cure such Manager Event of
Default within thirty (30) days after receipt of written notice from Tenant
demanding such cure, or, if the Manager Event of Default is suscpetible of cure,
but such cure cannot be accomplished within said thirty (30) day period of time,
if Marriott or Manager or such Affiliate fails to commence the cure of such
Manager Event of Default within fifteen (15) days of such notice or thereafter
fails to diligently pursue such efforts to completion.
F. The failure of Manager to maintain insurance coverages required to
be maintained by Manager under Article VI hereof (excluding insurance maintained
by Tenant pursuant to Section 6.04 hereof), and such failure shall constitute a
Manager Default hereunder if it continues for eight (8) days after written
notice thereof from Tenant (except that no notice shall be required if any such
insurance coverage shall have lapsed).
G. Any material representation or warranty made by Manager or any
Affiliate in this Agreement or in any Incidental Document proves to have been
false in any material respect on the date when made or deemed made, and the same
shall constitute a Manager Default if Manager fails to cure or change the fact
or event which caused such representation or warranty to have been false when
made or deemed made within fifteen (15) Business Days of receiving notice of
such falseness from Tenant, provided, however, that if such default is
susceptible of cure but such cure can not reasonably be accomplished with the
use of due diligence within such period of time and if, in addition, Manager
commences to cure or cause to be cured such default within fifteen (15) Business
Days after receiving notice thereof from Tenant and thereafter prosecutes the
cure of such default with due diligence, such period of time shall be extended
to such period of time as may be reasonably necessary to cure such default with
due diligence.
H. The occurrence of any other event described in this Agreement as a
Manager Default, including without limitation, the events described in Section
3.02.C, 4.01.E and 4.5.A of this Agreement, or the occurrence of a Manager
Default as described in that certain Management Agreement dated of even date
herewith between an Affiliate of Manager and an Affiliate of Tenant with respect
to the Marriott's Kauai Resort and
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Beach Club, or the occurrence of a Manager Default as described in the Pooling
Agreement.
9.02 Remedies for Manager Defaults.
A. In the event of a Manager Default, Tenant shall have the right to:
(1) terminate this Agreement with respect to the applicable Hotel under which
such Manager Default arose by written notice to Manager, which termination shall
be effective as of the effective date which is set forth in said notice,
provided that said effective date shall be at least thirty (30) days after the
date of said notice; (2) institute forthwith any and all proceedings permitted
by law or equity (provided they are not specifically barred under the terms of
this Agreement), including, without limitation, actions for specific performance
and/or damages; or (3) avail itself of the remedies described in Section 9.03.
B. In the event of a Manager Default, and provided that Tenant desires
to terminate this Agreement with respect to Hotels other than the applicable
Hotel under which the circumstances giving rise to such Manager Default arose,
Tenant shall have the right to do so provided that Tenant, to the extent it may
legally do so, must simultaneously terminate this Agreement as to all Hotels
which are at such time subject to this Agreement and all Other Management
Agreements with respect to all other Portfolio Properties which are at such time
subject to Other Management Agreements.
C. None of (a) the termination of this Agreement in connection with a
Manager Default, (b) the repossession of any Hotel or any portion thereof, (c)
the failure of Tenant to engage a replacement manager for any Hotel or any
portion thereof, nor (d) the engagement of any replacement manager for all or
any portion of a Hotel, shall relieve Manager of its liability and obligations
hereunder, all of which shall survive any such termination, repossession or
engagement. In the event of any termination of this Agreement with respect to a
Hotel as a result of a Manager Default, Manager shall forthwith pay to Tenant
all amounts due and payable with respect to such Hotel through and including the
date of such termination. Thereafter, Manager, until the end of what would have
been the Term of this Agreement in the absence of such termination, and whether
or not a replacement manager shall have been engaged for such Hotel or any
portion thereof, shall be liable to Tenant for, and shall pay to Tenant, as
current damages, the amounts which Tenant would have received hereunder for the
remainder of the Term had such termination not occurred, less the net amounts,
if any, received from a replacement manager, after deducting all reasonable
expenses in connection with such engaging such replacement, including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
attorneys' fees, advertising, expenses of employees, alteration costs and
expenses of preparation for such engagement. Manager shall pay such current
damages to Tenant as soon after the end of each Accounting Period as practicable
to determine the amount of the same.
D. At any time after such termination, whether or not Tenant shall have
collected any amounts 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 Tenant's right to receive any other damages due to
the termination of this Agreement,
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at Tenant's election, Manager shall pay to Tenant an amount equal to the present
value (discounted at a rate equal to 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 Term) of the excess, if any, of the amounts which Tenant
would have been entitle to receive hereunder from the date of such termination
based on the then market conditions; provided, however, that Manager shall be
entitled to a credit from Tenant in the amount of any unapplied balance of the
Holdback, provided that thereupon Tenant and its Affiliates shall have no
further obligation to pay the portion of the Holdback so credited to Manager or
any of its Affiliates. Nothing contained in this Agreement shall, however, limit
or prejudice the right of Tenant to prove and obtain in proceedings for
bankruptcy or insolvency an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the proceedings in
which, the damages are to be proved, whether or not the amount be greater than,
equal to, or less than the amount of the loss or damages referred to above.
E. In case of any Manager Default resulting in Manager being obligated
to vacate a Hotel, Tenant may (a) engage a replacement manager for such Hotel or
any part or parts thereof, either in the name of Tenant or otherwise, for a term
or terms which may at Tenant'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 other accommodations to the extent that Tenant reasonably
considers advisable and necessary to engage such replacement manager(s), and (b)
may make such reasonable alterations, repairs and decorations in a Hotel or any
portion thereof as Tenant, in its sole and absolute discretion, considers
advisable and necessary for the purpose of engaging a replacement manager for
such Hotel; and the making of such alterations, repairs and decorations shall
not operate or be construed to release Manager from liability hereunder as
aforesaid. Subject to the last sentence of this paragraph, Tenant shall in no
event be liable in any way whatsoever for any failure to a engage a replacement
manager for such Hotel, or, in the event a replacement manager is engaged, for
failure to collect amounts due Tenant in connection therewith. To the maximum
extent permitted by law, Manager hereby expressly waives any and all rights of
redemption granted under any present or future laws in the event of Manager
being evicted or dispossessed, or in the event of Tenant obtaining possession of
a Hotel, by reason of the occurrence and continuation of a Manager Default
hereunder. Tenant covenants and agrees, in the event of any termination of this
Agreement as a result of a Manager Default, to use reasonable efforts to
mitigate its damages.
F. Any payments received by Tenant under any of the provisions of this
Agreement during the existence or continuance of a Manager Default (and any
payment made to Tenant from others rather than Manager due to the existence of
any Manager Default) shall be applied to Manager's current and past due
obligations under this Agreement in such order as Tenant may determine or as may
be prescribed by applicable law.
G. If a Manager Default shall have occurred and be continuing, Tenant,
after notice to Manager (which notice shall not be required if Tenant shall
reasonably determine immediate action is necessary to protect person or
property), without waiving
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or releasing any obligation of Manager and without waiving or releasing any
Manager 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
Manager, and may, to the maximum extent permitted by law, enter upon a Hotel or
any portion thereof for such purpose and take all such action thereon as, in
Tenant's sole and absolute discretion, may be necessary or appropriate therefor.
No such entry shall be deemed an eviction of Manager or result in the
termination hereof. All reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by Tenant 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 Tenant until repaid, shall
be paid by Manager to Tenant, on demand.
9.03 Additional Remedies for Manager Recourse Defaults.
A. Upon the occurrence of a Manager Default under the provisions of
Section 9.01.D, the amount owed to Tenant or any Affiliate of Tenant pursuant
thereto shall accrue interest, at an annual rate equal to the Overdue Rate, from
and after the date on which such payment was originally due.
B. The rights granted under this Article IX shall not be in
substitution for, but shall be in addition, to, any and all rights and remedies
available to Tenant (including, without limitation, injunctive relief and
damages) by reason of applicable provisions of law or equity.
C. Upon the occurrence of a Manager Default with respect to a Hotel,
Manager shall permit Landlord and/or Tenant to enter upon the applicable Hotel
for the purposes of effecting a cure for such Manager Default, provided (i)
Landlord and/or Tenant, as applicable, act strictly in accordance with the terms
of the Lease, and (ii) Landlord and/or Tenant, as applicable, do not
unreasonably interfere with the operation of such Hotel.
9.04 Non-Recourse Provision. Notwithstanding anything in this Agreement
to the contrary, but subject to the balance of this Section 9.04 and further
subject to Manager's obligations in Section 5.09 hereof, Manager's obligations
pursuant to this Agreement and the Pooling Agreement are in all instances
non-recourse to Manager, and in the event of any claim, suit or cause of action
by Tenant against Manager pursuant to or in connection with this Agreement or
the Pooling Agreement or the transactions contemplated by either of them,
Tenant's sole recourse against Manager shall be with respect to amounts held by
Marriott or Manager for the account of Tenant pursuant to this Agreement or the
Pooling Agreement, and to amounts available pursuant to the Marriott Guaranty
and to amounts available pursuant to the Holdback Agreement, and Manager shall
have no other liability beyond the extent thereof with respect to any such
claim, suit or cause of action. Notwithstanding the foregoing, this Section 9.04
shall not be applicable with respect to (a) fraud committed by Manager, (b)
misapplication or misappropriation of funds committed by Manager, (c) the
willful misconduct of Manager, (d) the gross negligence of Manager, or (e)
losses against which Manager has elected to self insure pursuant to Section 6.01
hereof. This Section 9.04 shall not be construed to
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limit any right of set-off to which Tenant may be entitled with respect to any
amount to which Manager or any Affiliate may be entitled pursuant to this
Agreement, any Other Management Agreement or the Pooling Agreement, and Tenant
shall be entitled to set-off against amounts owed by Tenant to Manager hereunder
amounts owed to Tenant under this Agreement or any Incidental Document, but
excluding in any event Systems Fees due to Manager hereunder or under any Other
Management Agreement and any fees due to Marriott pursuant to any Franchise
Agreement.
9.05 Good Faith Dispute By Manager. If Manager shall in good faith
dispute the occurrence of any Manager Default and Manager, before the expiration
of the applicable cure period, shall give notice thereof to Tenant, setting
forth, in reasonable detail, the basis therefor, no Manager Default shall be
deemed to have occurred provided Manager shall escrow disputed amounts, if any,
pursuant to an escrow arrangement reasonably acceptable to Tenant and Manager;
provided, however, that in the event that any dispute is ultimately determined
against Manager, then Manager shall pay to Tenant interest on any disputed funds
at the Overdue Rate, from the date demand for such funds was made by Tenant
until paid. If Tenant and Manager shall fail, in good faith, to resolve any such
dispute within ten (10) Business Days after Manager'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 Manager Default, in fact, exists,
Manager shall have the applicable cure period from the date of the final
non-appealable determination of the court to cure such Manager Default.
9.06 Tenant Events of Default. Each of the following shall constitute a
"Tenant Event of Default" to the extent permitted by applicable law:
A. The filing by Tenant of a voluntary petition in bankruptcy or
insolvency or a petition for reorganization under any bankruptcy law, or the
admission by Tenant that it is unable to pay its debts as they become due, or
the institution of any proceeding by Tenant for its dissolution or termination.
Upon the occurrence of any Tenant Event of Default as described under this
Section 9.06.A, said Tenant Event of Default shall be deemed a "Tenant Default"
under this Agreement.
B. The consent by Tenant to an involuntary petition in bankruptcy or
the failure to vacate, within ninety (90) days from the date of entry thereof,
any order approving an involuntary petition by Tenant. Upon the occurrence of
any Tenant Event of Default as described under this Section 9.06.B, said Tenant
Event of Default shall be deemed a "Tenant Default" under this Agreement.
C. The entering of an order, judgment or decree by any court of
competent jurisdiction, on the application of a creditor, adjudicating Tenant as
bankrupt or insolvent or approving a petition seeking reorganization or
appointing a receiver, trustee, or liquidator of all or a substantial part of
Tenant's assets, and such order, judgment or decree's continuing unstayed and in
effect for an aggregate of sixty (60) days (whether or not consecutive). Upon
the occurrence of any Tenant Event of Default as described under this Section
9.06.C, said Tenant Event of Default shall be deemed a "Tenant Default" under
this Agreement.
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D. The failure of Tenant to make any payment (or cause to be made any
payment by any Affiliate of Tenant which is a party thereto) required to be made
in accordance with the terms of this Agreement or any Incidental Document on or
before the date due. Upon the occurrence of any Tenant Event of Default as
described under this Section 9.06.D, said Tenant Event of Default shall be
deemed a "Tenant Default" under this Agreement if Tenant fails to cure such
Tenant Event of Default (1) within any applicable notice and cure period, if
any, provided in the document pursuant to which such payment is to be made, or
(2) otherwise, eight (8) days after receipt of written notice from the other
party to such document demanding such cure.
E. The failure of Tenant to perform, keep or fulfill any of the other
covenants, undertakings, obligations or conditions set forth in this Agreement
or any Incidental Document. Upon the occurrence of any Tenant Event of Default
as described under this Section 9.06.E, said Tenant Event of Default shall be
deemed a "Tenant Default" under this Agreement if Tenant fails to cure the
Tenant Event of Default within thirty (30) days after receipt of written notice
from Tenant demanding such cure, or, if the Tenant Event of Default is
susceptible of cure, but such cure cannot be accomplished within said thirty
(30) day period of time, if Manager fails to commence the cure of such Tenant
Event of Default within fifteen (15) days of such notice or thereafter fails to
diligently pursue such efforts to completion.
F. Any material representation or warranty made by Tenant or any
Affiliate in this Agreement or in any Incidental Document proves to have been
false in any material respect on the date when made or deemed made, and the same
shall constitute a Tenant Default if Tenant fails to cure or change the fact or
event which caused such representation or warranty to have been false when made
within fifteen (15) Business Days of receiving notice of such falseness from
Manager, provided, however, that if such default is susceptible of cure but such
cure can not reasonably be accomplished with the use of due diligence within
such period of time and if, in addition, Tenant commences to cure or cause to be
cured such default within fifteen (15) Business Days after receiving notice
thereof from Manager and thereafter prosecutes the cure of such default with due
diligence, such period of time shall be extended to such period of time as may
be reasonably necessary to cure such default with due diligence.
G. The occurrence of an event of default beyond any applicable notice
and cure period under any obligation, agreement, instrument or document which is
secured in whole or in part by Tenant's or Landlord's interest in any Hotel or
should the holder of such security accelerate the indebtedness secured thereby
or commence a foreclosure thereof. Upon the occurrence of any Tenant Event of
Default as described under this Section 9.06.G, said Tenant Event of Default
shall be deemed a "Tenant Default" under this Agreement.
9.07 Remedies for Tenant Defaults.
A. In the event of a Tenant Default, Manager shall have the right to
institute forthwith any and all proceedings permitted by law or equity (provided
they are not specifically barred under the terms of this Agreement), including,
without limitation,
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actions for specific performance and/or damages. Except as expressly provided in
this Agreement, Manager shall have no right to terminate this Agreement by
reason of a Tenant Event of Default or a Tenant Default. In the event of a
termination as described in this Section 9.07 with respect to any Hotel, Manager
shall retain all of its rights under the Owner Agreement with respect to such
Hotel.
B. Upon the occurrence of a Tenant Default pursuant to any of Sections
9.06.A, 9.06.B or 9.06.C hereof, or which arises with respect to a violation by
Tenant of Section 10.02 hereof with respect to a Sale of a Hotel in violation of
such provision or by Landlord with respect to a violation of Article 6 of the
Owner's Agreement or Section 8.01.A.2 with respect to the encumbering of a Hotel
by Tenant by a Mortgage which is not a Qualifying Mortgage, or by Landlord with
respect to a violation of Article V of the Owner's Agreement, Manager shall
have, in addition to all other rights and remedies provided for herein, the
right to effect a Termination of this Agreement. Notwithstanding the foregoing
sentence, so long as a Hotel is subject to a Qualifying Mortgage or owned by a
Person who acquired such interest pursuant to a Qualifying Mortgage (or a
deed-in-lieu in connection therewith), Manager shall not exercise the
termination right provided for in this Section 9.07.B if the Tenant Default
described herein is also a default pursuant to the terms of such Qualifying
Mortgage so long as the mortgagee thereunder is diligently pursuing its remedies
to cure the event or circumstance which created such Tenant Default as described
in this Section 9.07.B.
C. Manager and/or any Affiliate shall be entitled, in case of any
breach of the covenants of Section 11.11.E by Tenant or others claiming through
it, to injunctive relief and to any other right or remedy available at law. The
provisions of this Section 9.07.C shall survive Termination.
9.08 Good Faith Dispute By Tenant. If Tenant shall in good faith
dispute the occurrence of any Tenant Default and Tenant, before the expiration
of the applicable cure period, shall give notice thereof to Manager, setting
forth, in reasonable detail, the basis therefor, no Tenant Default shall be
deemed to have occurred and Tenant shall have no obligation with respect thereto
until final adverse determination thereof; provided, however, that in the event
that such dispute is ultimately determined against Tenant, then Tenant shall pay
to Manager interest of any disputed funds at the Overdue Rate from the date
demand for such funds was made by Manager until paid. If Manager and Tenant
shall fail, in good faith, to resolve any such dispute within ten (10) 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 Tenant 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.
9.09 Landlord Defaults. Each of the following shall constitute
"Landlord Defaults": (1) The failure of Landlord to provide funds to any Reserve
on or before the date such funds are required to be paid under Section 5.07.B
hereof or under the Owner Agreement (after any Arbitration, if applicable), (2)
the failure of Landlord to make insurance or condemnation proceeds available for
repair, restoration or replacement required under the Owner Agreement, (3) the
imposition by Landlord of a Mortgage
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against any Hotel which is not a Qualifying Mortgage, (4) the permitting by
Landlord of a lien on Landlord's interest in any Hotel in violation of the terms
hereof of or the Owner Agreement, or (5) a Landlord Sale of any Hotel occurs in
violation of the Owner Agreement.
If a Landlord Default occurs, Tenant shall have no remedies under this
Agreement with respect to such Landlord Default, but reserves its rights and
remedies under the Lease. Notwithstanding anything herein to the contrary,
Manager shall be entitled to exercise any and all of the remedies of Manager
with respect to a Landlord Default under the Owner Agreement.
ARTICLE X
ASSIGNMENT AND SALE
10.01 Assignment.
A. Except as provided in Section 10.01.D, Manager shall not assign
mortgage, pledge, hypothecate or otherwise transfer its interest in all or any
portion of this Agreement or any rights arising under this Agreement or suffer
or permit such interests or rights 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
Hotels by anyone other than Manager or Tenant. For purposes of this Section
10.01.A, an assignment of this Agreement shall be deemed to include the
following (for purposes of this Section 10.01.A, a "Corporate Transfer"): any
direct or indirect transfer of any interest in Manager such that Manager shall
cease to be an Affiliate of Marriott or any transaction pursuant to which
Manager is merged or consolidated with another entity which is not Marriott or
an Affiliate of Marriott or pursuant to which all or substantially all of
Manager's assets are transferred to any other entity, as if such change in
control or transaction were an assignment of this Agreement but shall not
include any involuntary liens or attachments contested by Manager in good faith
in accordance with Section 11.23 of this Agreement.
B. Notwithstanding the foregoing, if, after giving effect to a
Corporate Transfer, Manager, or all or substantially all of Manager's assets,
would be owned or controlled by a Person who would, in connection therewith,
acquire all or substantially all of the Courtyard business of Marriott, provided
that (I) such Person ratifies in writing the obligations of Manager pursuant to
this Agreement, and (II) in Tenant's reasonable determination, such Person and
its controlling parties (w) shall have sufficient expertise and financial
resources to carry on the such business consistent with historical practices,
(x) shall not be convicted felons, (y) shall qualify as an "eligible independent
contractor" under Section 856(d)(9) of the Code and (z) shall otherwise satisfy
the requirements of Section 10.01.C hereunder, Tenant shall at Manager's
request, waive the restrictions set forth in this Section 10.01 with respect to
such Corporate Transfer and no consent by Tenant shall be required with respect
thereto. If Tenant fails to give notice of such waiver (or the withholding
thereof) within twenty (20) Business Days after Manger's written request
therefor, such waiver shall be deemed given.
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C. Notwithstanding the terms of Section 10.01.A, Manager shall have the
right, without Tenant's consent, to (1) assign its interest in all or part of
this Agreement to Marriott or any Affiliate of Marriott, (2) sublease or grant
concessions or licenses to shops or any other space at a Hotel so long as the
terms of any such subleases or concessions do not exceed the Term of this
Agreement, provided that (a) such subleases and concessions are for newsstand,
gift shop, parking garage, health club, restaurant, bar or commissary purposes
or similar concessions, (b) such subleases do not have a term in excess of the
lesser of five (5) years or the remaining Term under this Agreement and (c) do
not demise, (i) in the aggregate, in excess of three thousand (3,000) square
feet of any Hotel, or (ii) for any single sublease, in excess of 1,000 square
feet of any Hotel, (d) any such sublease, license or concession to an Affiliate
of a Manager shall be on terms consistent with those that would be reached
through arms-length negotiation, (e) for so long as Landlord or any Affiliate of
Landlord shall seek to qualify as a real estate investment trust, anything
contained in this Agreement to the contrary notwithstanding, Manager shall not
sublet or otherwise enter into any agreement with respect to a Hotel on any
basis such that the rental or other fees to be paid by any sublessee thereunder
would be based, in whole or in part, on either (i) the income or profits derived
by the business activities of such sublessee, or (ii) 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 Internal Revenue Code
of 1986, as amended, or any similar or successor provision thereto, and (f) such
lease or concession will not violate or affect any Legal Requirement or
Insurance Requirement, and Manager shall obtain or cause the subtenant to obtain
such additional insurance coverage applicable to the activities to be conducted
in such subleased space as Landlord and any Mortgagee under a Qualifying
Mortgage may reasonably require, (3) assign its interest in this Agreement in
connection with a merger or consolidation or a sale of all or substantially all
of the assets of Manager or Marriott, and (4) assign its interest in this
Agreement in connection with a merger or consolidation or a sale of all or
substantially all of the System assets (including associated management
agreements) owned by Marriott and its Subsidiaries.
D. Tenant shall not assign or transfer its interest in this Agreement
without the prior written consent of Manager; provided, however, that Tenant
shall have the right, without such consent, to (1) assign its interest in this
Agreement in connection with a Sale of a Hotel which complies with the
provisions of Section 10.02 of this Agreement, (2) assign its interest hereunder
to Landlord or an Affiliate of Landlord under the terms of the Lease or the
Owner Agreement, (3) assign its interest hereunder to Manager or an Affiliate of
Manager, and (4) assign its interest hereunder to an Affiliate of Tenant in a
corporate restructuring of Tenant or any of its Affiliates, provided such
assignment complies with the provisions of Section 10.02 of this Agreement.
E. In the event either party consents to an assignment of this
Agreement by the other, no further assignment shall be made without the express
consent in writing of such party, unless such assignment may otherwise be made
without such consent pursuant to the terms of this Agreement. An assignment by
Tenant of its interest in this Agreement approved or permitted pursuant to the
terms hereof shall relieve Tenant from its obligations under this Agreement with
respect to the Hotel to which such assignment pertains arising from and after
the effective date of such assignment. An assignment by
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Manager of its interest in this Agreement shall not relieve Manager from its
obligations under this Agreement with respect to the Hotel to which such
assignment pertains unless such assignment occurs in the context of a sale of
all or substantially all of the Courtyard business of Marriott and its
Affiliates and which is otherwise permitted or approved, if required, pursuant
to this Agreement, in which event Manager shall be so relieved from such
obligations arising from and after the effective date of such assignment.
10.02 Sale of the Hotel.
A. Tenant may enter into a Sale of a Hotel to any Person which (1) is
an Affiliate of Tenant, and (2) who assumes Tenant's obligations with respect to
such Hotel under this Agreement, the Owner Agreement (to the extent applicable
to the Hotel being sold), the corresponding Franchise Agreement and, to the
extent applicable with respect to the "deconsolidation" provisions thereof, the
Pooling Agreement (or ratifies each of such obligations if such Sale of a Hotel
is pursuant to a transfer of a Controlling Interest in Tenant). Tenant shall not
enter into any Sale of a Hotel to any Person which is not an Affiliate of Tenant
(a) which does not have sufficient financial resources to fulfill Tenant's
obligations with respect to such Hotel under this Agreement, the Owner Agreement
(to the extent applicable to the Hotel), the Franchise Agreement, and, to the
extent applicable as set forth in the preceding sentence, the Pooling Agreement;
(b) which is in control of, or is controlled by, Persons who have been convicted
of felonies involving moral turpitude in any state or federal court; (c) which
owns or has an equity interest in a hotel brand, tradename, system, or chain
having at least five (5) hotels (excluding a mere franchisee or mere passive
investor); and (d) which fails to expressly assume in writing the obligations of
Tenant hereunder and under the Owner Agreement (to the extent applicable to the
Hotel), the Franchise Agreement, and, to the extent applicable as set forth in
the preceding sentence, the Pooling Agreement.
B. Tenant shall provide written notice of any proposed Sale of a Hotel
and shall provide to Manager such information concerning the proposed
transferee's financial condition, ownership and business interests and as may be
reasonably necessary or appropriate in order for Manager to determine if such
transfer is consistent with the above provisions.
C. In connection with any Sale of a Hotel, Manager and the purchaser or
its tenant shall enter into a new management agreement with Manager, which new
management agreement will be on all of the terms and conditions of this
Agreement (with revisions as reasonably required to account for the fact that
such management agreement may be applicable to less than all of the Hotels
subject to this Agreement) except that the Initial Term and Renewal Term(s) of
any such new management agreement shall consist only of the balance of the
Initial Term and Renewal Term(s) remaining under this Agreement at the time of
execution of such new management agreement. Such new management agreement shall
be executed by Manager and such new tenant at the time of closing of a Sale of
the Hotel, and a memorandum of such new management agreement shall be executed
by the parties and recorded immediately following recording of the deed or
memorandum of lease or assignment and prior to recordation of any other
documents.
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ARTICLE XI
MISCELLANEOUS
11.01 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution of this Agreement nor the finalization of the
transactions contemplated hereby shall violate any provision of law or judgment,
writ, injunction, order or decree of any court or governmental authority having
jurisdiction over it; 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; or require any consent, vote or approval which has not
been 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.
11.02 Actions By Manager. Manager covenants and agrees that it shall
not take any action which would be binding upon Tenant or Landlord except to the
extent it is permitted to do so pursuant to the terms of this Agreement.
11.03 Relationship. In the performance of this Agreement, Manager shall
act solely as an independent contractor, except that in the performance of this
Agreement, Manager shall have all fiduciary duties of an agent to a principal
under applicable law and Tenant shall have all fiduciary duties of a principal
to an agent under applicable law. Neither this Agreement nor any agreements,
instruments, documents or transactions contemplated hereby shall in any respect
be interpreted, deemed or construed as making Manager a partner or joint
venturer with, or agent of, Tenant, except that, in the performance of this
Agreement, Manager will have the fiduciary duties of an agent and Tenant will
have the fiduciary duties of a principal. Tenant and Manager agree that neither
party will make any contrary assertion, claim or counterclaim in any action,
suit, arbitration or other legal proceedings involving Tenant and Manager.
Nothing contained herein is intended to, nor shall be construed as, creating any
landlord-tenant relationship between Manager and Tenant or between Manager and
Landlord. Each of Manager and Tenant shall prepare and shall cause their
Affiliates to prepare their financial statements and tax returns consistent with
the foregoing characterization.
11.04 Applicable Law. The Agreement shall be construed under and shall
be governed by the laws of the state of Maryland without regard to its "choice
of law" rules.
11.05 Recordation. The terms and provisions of this Agreement shall run
with the parcel of land designated as the Site, and with Tenant's interest
therein, and shall be binding upon all successors to such interest. The parties
shall execute simultaneously with this Agreement sufficient copies of a
"Memorandum of Management Agreement" in recordable form satisfactory to both
parties, which Memorandum of Management Agreement shall, if legally permitted,
be recorded or registered (or such other steps shall be taken by the parties as
are necessary, to the extent legally permitted, to give official notice to all
third parties that this Agreement binds the Hotels) promptly following the
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Effective Date of this Agreement in each jurisdiction in which a Hotel is
located. Any cost of such recordation shall be paid by Manager.
11.06 Headings. Headings of articles and sections are inserted only for
convenience and are in no way to be construed as a limitation on the scope of
the particular articles or sections to which they refer.
11.07 Notices. Notices, statements and other communications to be given
under the terms of the Agreement shall be in writing and delivered by hand
against receipt or sent by certified or registered mail or Express Mail service,
postage prepaid, return receipt requested or by nationally utilized overnight
delivery service, addressed to the parties as follows:
To Tenant: HPT TRS MI-135, INC.
c/o Hospitality Properties Trust
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
with copy to: ▇▇▇▇▇▇▇▇ & Worcester LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Sander ▇. ▇▇▇, Esq.
To Manager: Courtyard Management Corporation
c/o Marriott International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Law Department 52.923 - Hotel Operations
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to: Courtyard Management Corporation
c/o Marriott International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Dept. Lodging Financial Analysis
Department of Courtyard by Marriott
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Marriott International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Treasury Department - Dept. 924.04
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to: ▇▇▇▇▇▇▇, Baetjer and ▇▇▇▇▇▇, LLP
1800 Mercantile Bank and Trust ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as is from time to time designated by the party
receiving the notice. Any such notice that is mailed in accordance herewith
shall be deemed received when delivery is received or refused, as the case may
be. Additionally, notices may be given by telephone facsimile transmission,
provided that an original copy of said transmission shall be delivered to the
addressee by nationally utilized overnight delivery service on the second
business day following such transmission. Telephone facsimiles shall be deemed
delivered on the date of such transmission.
11.08 Environmental Matters.
A. Subject to Section 11.08.D hereof and the sufficiency of funds in
each applicable Reserve, during the Term or at any other time while Manager is
in possession of the Hotel, (1) Manager shall not store, spill upon, dispose of
or transfer to or from any Hotel any Hazardous Substance, except in compliance
with all Legal Requirements, (2) Manager shall maintain the Hotels at all times
free of any Hazardous Substance (except in compliance with all Legal
Requirements), and (3) Manager (a) upon receipt of notice or knowledge shall
promptly notify Landlord and Tenant in writing of any material change in the
nature or extent of Hazardous Substances at any Hotel, (b) shall file and
transmit to Landlord and Tenant a copy of any Community Right to Know report
which is required to be filed by the Manager with respect to any Hotel pursuant
to ▇▇▇▇ Title III or any other Legal Requirements, (c) shall transmit to
Landlord and Tenant copies of any citations, orders, notices or other
governmental communications received by Manager 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
Legal Requirement and/or presents a material risk of any material cost, expense,
loss or damage (an "Environmental Obligation"), (d) shall observe and comply
with all Legal Requirements 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) shall
pay or otherwise dispose of any fine, charge or Imposition related thereto,
unless Tenant or the Manager shall contest the same in good faith and by
appropriate proceedings and the right to use and the value of any Hotel is not
materially and adversely affected thereby.
B. Subject to Sections 11.08.C and 11.08.D below and the sufficiency of
funds in each applicable Reserve, in the event of the discovery of Hazardous
Substances other than those maintained in accordance with Legal Requirements on
any portion of any Site or in any Hotel during the Term of this Agreement,
Manager shall promptly (i) clean up and remove from and about such Hotel all
Hazardous Substances thereon, (ii)
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contain and prevent any further release or threat of release of Hazardous
Substances on or about such Hotel, and (iii) use good faith efforts to eliminate
any further release or threat of release of Hazardous Substances on or about
such Hotel, and (iv) otherwise effect a remediation of the problem in accordance
with (1) the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., as amended; (2) the regulations promulgated
thereunder, from time to time; (3) all federal, state and local laws, rules and
regulations (now or hereafter in effect) dealing with the use, generation,
treatment, storage, disposal or abatement of Hazardous Substances; and (4) the
regulations promulgated thereunder, from time to time (collectively referred to
as "Environmental Laws").
C. The actual costs incurred or the estimated costs to be incurred with
respect to any costs that have been or are to be incurred under Section 11.08.B
above are herein collectively referred to as, the "Environmental Costs". Any
costs incurred by Tenant with respect to any judgment or settlement approved by
Manager (such approval shall not be unreasonably withheld, conditioned or
delayed with respect to any third party claims including, without limitation,
claims by Landlord arising under the Lease), including reasonable attorney fees
incurred with respect to such claims, as a result of release or threat of
release of Hazardous Substances on or about any of the Hotels are herein
referred to as the "Other Environmental Costs". The Environmental Costs and the
Other Environmental Costs are collectively referred to herein as the "Section
11.08 Costs".
D. All Environmental Costs, Other Environmental Costs and Section 11.08
Costs with respect to each Hotel shall be paid from the applicable Reserve for
such Hotel; provided, however, that if any of the foregoing costs arise as a
result of the gross negligence or willful misconduct of Manager or any employee
of Manager, such costs shall be paid by Manager at its sole cost and expense and
not as a Deduction, and Manager shall indemnify Tenant for any loss, cost, claim
or expense (including reasonable attorneys' fees) incurred by Tenant in
connection therewith.
11.09 Confidentiality.
A. The parties hereto agree that the matters set forth in this
Agreement are strictly confidential and each party will make every effort to
ensure that the information is not disclosed to any outside person or entities
(including the press) without the prior written consent of the other party
except 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 Hotels, or in connection with financing or proposed financing
of the Hotels, a Sale of a Hotel, or a sale of a controlling interest in Tenant,
Manager, or Marriott or is required to be disclosed under the Lease.
B. No reference to Manager or to any Affiliate will be made in any
prospectus, private placement memorandum, offering circular or offering
documentation related thereto (collectively referred to as the "Prospectus"),
issued by Tenant or an Affiliate, which is designated to interest potential
investors in a Hotel, unless Manager has previously received a copy of all such
references. However, regardless of whether
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Manager does or does not so receive a copy of all such references, neither
Manager nor any Affiliate 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 Manager agrees in advance, the Prospectus will
not include any trademark, symbols, logos or designs of Manager or any
Affiliates. Tenant shall indemnify, defend and hold Manager harmless from and
against all loss, costs, liability and damage (including attorneys' fees and
expenses, and the cost of litigation) arising out of any Prospectus or the
offering described therein, and this obligation of Tenant shall survive any
Termination of this Agreement.
11.10 Projections. Tenant acknowledges that any written or oral
projections, pro formas, or other similar information that has been, prior to
execution of this Agreement, or will, during the Term of this Agreement, be
provided by Manager, Marriott, or any Affiliate to Tenant is for information
purposes only and that Manager, Marriott, and any such Affiliate do not
guarantee that the Hotels will achieve the results set forth in any such
projections, pro formas, or other similar information. Any such projections, pro
formas, or other similar information are based on assumptions and estimates, and
unanticipated events may occur subsequent to the date of preparation of such
projections, pro formas, and other similar information. Therefore, the actual
results achieved by the Hotels are likely to vary from the estimates contained
in any such projections, pro formas, or other similar information and such
variations might be material.
11.11 Actions to be Taken Upon Termination. Upon a Termination of this
Agreement with respect to any Hotel, the following shall be applicable:
A. Manager shall, within ninety (90) days after Termination of this
Agreement with respect to one or more Hotels, prepare and deliver to Tenant a
final accounting statement with respect to the applicable Hotels, as more
particularly described in Section 4.01 hereof, along with a statement of any
sums due from Tenant to Manager pursuant hereto, dated as of the date of
Termination. Within thirty (30) days of the receipt by Tenant of such final
accounting statement, the parties will make whatever cash adjustments are
necessary pursuant to such final statement. The cost of preparing such final
accounting statement shall be a Deduction, unless the Termination occurs as a
result of a Default by either party, in which case the defaulting party shall
pay such cost. Manager and Tenant acknowledge that there may be certain
adjustments for which the information will not be available at the time of the
final accounting and the parties agree to readjust such amounts and make the
necessary cash adjustments when such information becomes available, provided,
however, that all accounts shall be deemed final two (2) years after
Termination.
B. Manager shall release and transfer to Tenant, or cause Marriott
under the Pooling Agreement to release and transfer to Tenant, any of Tenant's
funds which are held or controlled by Manager or Marriott with respect to the
applicable Hotels, with the exception of funds of Tenant to be held in escrow
pursuant to Section 6.01.F and Section 11.11.I and otherwise in accordance
herewith. All amounts in the applicable
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Reserves shall be applied to any amounts payable from such Reserves hereunder or
under the Owner Agreement and the balance shall be paid to Landlord.
C. Manager shall make available to Tenant such books and records
respecting the applicable Hotels (including those from prior years, subject to
Manager's reasonable records retention policies) as will be needed by Tenant to
prepare the accounting statements, in accordance with the Uniform System of
Accounts, for the applicable Hotels for the year in which the Termination occurs
and for any subsequent year.
D. Manager shall (to the extent permitted by law) assign to Tenant or
to the new manager all operating licenses and permits for the applicable Hotels
which have been issued in Manager's name (including liquor and restaurant
licenses, if any).
E. If any applicable Franchise Agreements have been terminated, Manager
shall have the option, to be exercised within thirty (30) days after
Termination, to purchase, at their then book value, any items of the applicable
Hotels' Inventories and Fixed Asset Supplies as may be marked with any Trade
Name, or any Marriott or Courtyard by Marriott trademark, other trade name,
symbol, logo or design. In the event Manager does not exercise such option,
Tenant agrees that it will use any such items not so purchased exclusively in
connection with the applicable Hotels until they are consumed.
F. Manager shall, at Tenant's sole cost and expense, use good faith
commercially reasonable efforts to transfer to and cooperate with Tenant or
Tenant's designee in connection with the processing of all applications for
licenses, operating permits and other governmental authorizations and all
contracts entered into by Manager, including contracts with governmental or
quasi-governmental entities which Manager has entered into with respect to the
use and operation of the applicable Hotels as then operated (and Tenant will
assume responsibility for all of the same), but excluding (i) all insurance
contracts and multi-property contracts not limited in scope to the applicable
Hotels or other Portfolio Properties (if applicable), (ii) all contracts and
leases with Affiliates of Manager, (iii) utility deposits, and (iv) telephone
numbers for the applicable Hotels (which telephone numbers Manager shall be
required to convey to Tenant only if this Agreement is terminated as the result
of an Event of Default by Manager). Tenant shall indemnify and hold Manager
harmless for all claims, costs and expenses (including reasonable attorneys'
fees) arising from acts or omissions by Tenant or Tenant's designee under such
contracts subsequent to the earlier of the date of Termination or the date of
transfer thereof to Tenant or Tenant's designee.
G. Tenant shall have the right to operate the improvements on the
applicable Sites without modifying the architectural design of same,
notwithstanding the fact that such design or certain features thereof may be
proprietary to Manager and/or protected by trademarks or service marks held by
Manager or an Affiliate, provided that such use shall be confined to the
applicable Sites.
H. Any computer software (including upgrades and replacements) at the
applicable Hotels owned by Manager, Marriott, an Affiliate, or the licensor of
any of
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them is proprietary to Manager, Marriott, such Affiliate, or the licensor of any
of them and shall in all events remain the exclusive property of Manager,
Marriott, the Affiliate or the licensor of any of them, as the case may be, and
nothing contained in this Agreement shall confer on Tenant the right to use any
of such software. Subject to the terms and conditions of the Franchise
Agreement, Manager shall have the right to remove from the applicable Hotels
without compensation to Tenant any computer software (including upgrades and
replacements), including, without limitation, the System software, owned by
Manager, Marriott, any Affiliate or the licensor of any of them. Furthermore,
upon Termination, Manager shall be entitled to remove from the applicable Hotels
without compensation to Tenant any computer equipment utilized as part of a
centralized reservation system or owned by a party other than Tenant, unless a
Franchise Agreement is in place and such equipment is to be provided pursuant to
the Franchise Agreement.
I. If this Agreement with respect to one or more Hotels is terminated
for any reason, other than a Termination by reason of a Manager Default
hereunder, and in any event excluding a termination which occurs as a result of
the expiration of the Term hereof, an escrow fund for each Hotel shall be
established from Gross Revenues of such Hotel to reimburse Manager for all
reasonable costs and expenses incurred by Manager in terminating its employees
at such Hotel, such as severance pay, unemployment compensation, employment
relocation, and other employee liability costs arising out of the termination of
employment of Manager's employees at such Hotel. If Gross Revenues of each of
such Hotels are insufficient to meet the requirements of such escrow fund for
such Hotel, then Manager shall have the right to withdraw the amount of such
expenses from Working Capital or any other funds of Tenant (specifically
excluding any interest Tenant may have in the Reserve for such Hotel) with
respect to such Hotel held by or under the control of Manager or Marriott
hereunder or under the Pooling Agreement, if applicable.
J. Various other actions shall be taken, as described in this
Agreement, including, but not limited to, the actions described in Section 4.05
and Section 6.01.F.
K. Manager shall peacefully vacate and surrender the applicable Hotels
to Tenant.
L. Upon expiration of the entire Term of this Agreement and expiration
of the Lease in accordance with their respective terms (and not as a result of a
Default or Event of Default), Tenant shall have no further liability for
repayment of Additional Manager Advances, Additional Marriott Advances, Holdback
Agreement Advances, and any other advances made by Marriott or Manager pursuant
to this Agreement or the Pooling Agreement.
The provisions of this Section 11.11 shall survive Termination.
11.12 Trademarks, Trade Names and Service Marks. The names "Marriott,"
"Courtyard," "Courtyard by Marriott" and "Marriott Courtyard" (each of the
foregoing names, together with any combination thereof, are collectively
referred to as the "Trade Names") when used alone or in connection with another
word or words, and the Marriott
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or Courtyard by Marriott trademarks, service marks, other trade names, symbols,
logos and designs shall in all events remain the exclusive property of the
Franchisor under the Franchise Agreements and nothing contained in this
Agreement shall confer on Tenant the right to use any of the Trade Names, or the
Marriott or Courtyard by Marriott trademarks, service marks, other trade names,
symbols, logos or designs affiliated or used therewith otherwise than in strict
accordance with the terms of this Agreement. Except as provided in Section
11.11.E and the Franchise Agreement, upon termination of this Agreement with
respect to any Hotel, any use of or right to use any of the Trade Names, or any
of the Marriott or Courtyard by Marriott trademarks, service marks, other trade
names, symbols, logos or designs by Tenant shall cease forthwith and Tenant
shall promptly remove from such Hotel any signs or similar items which contain
any of said Trade Names, trademarks, service marks, other trade names, symbols,
logos or designs in accordance with the Franchise Agreement and this Agreement.
If Tenant has not removed such signs or similar items within ten (10) days,
Manager shall have the right to do so. The cost of such removal shall be a
Deduction for such Hotel attributable to the Accounting Period in which such
Termination occurs. Included under the terms of this Section are all trademarks,
service marks, trade names, symbols, logos or designs used in conjunction with
such Hotel, including but not limited to restaurant names, lounge names, etc.,
whether or not the marks contain the "Marriott" name or the Courtyard by
Marriott name. The right to use such trademarks, service marks, trade names,
symbols, logos or designs belongs exclusively to Marriott, and the use thereof
inures to the benefit of Marriott whether or not the same are registered and
regardless of the source of the same. The provisions of this Section 11.12 shall
survive Termination.
11.13 Waiver. The failure of either party to insist upon a strict
performance of any of the terms or provisions of the Agreement, or to exercise
any option, right or remedy contained in this Agreement, shall not be construed
as a waiver or as a relinquishment for the future of such term, provision,
option, right or remedy, but the same shall continue and remain in full force
and effect. No waiver by either party of any term or provision hereof shall be
deemed to have been made unless expressed in writing and signed by such party.
11.14 Partial Invalidity. If any portion of this Agreement shall be
declared invalid by order, decree or judgment of a court, this Agreement shall
be construed as if such portion had not been so inserted except when such
construction would operate as an undue hardship on Manager or Tenant or
constitute a substantial deviation from the general intent and purpose of said
parties as reflected in this Agreement.
11.15 Survival. Except as otherwise specifically provided herein, the
rights and obligations of the parties herein shall not survive any Termination.
11.16 Negotiation of Agreement. Each of Manager and Tenant is a
business entity having substantial experience with the subject matter of this
Agreement and has fully participated in the negotiation and drafting of this
Agreement. Accordingly, this Agreement shall be construed without regard to the
rule that ambiguities in a document are to be construed against the draftsman.
No inferences shall be drawn from the fact that the final, duly executed
Agreement differs in any respect from any previous draft hereof.
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11.17 [Intentionally deleted].
11.18 Entire Agreement. This Agreement and the Incidental Documents,
together with any other writings signed by the parties expressly stated to be
supplemental hereto and together with any instruments to be executed and
delivered pursuant to this Agreement, constitutes the entire agreement between
the parties and supersedes all prior understandings and writings, and may be
changed only by a writing signed by the parties hereto.
11.19 Affiliates. Manager shall be entitled to contract with companies
that are Affiliates (or companies in which Manager has an ownership interest if
such interest is not sufficient to make such a company an Affiliate) to provide
goods and/or services to the Hotels; provided that the prices and/or terms for
such goods and/or services are competitive. Additionally, Manager may contract
for the purchase of goods and services for the Hotels with third parties that
have other contractual relationships with Manager, Marriott and their
Affiliates, so long as the prices and terms are competitive. In determining,
pursuant to the foregoing, whether such prices and/or terms are competitive,
they will be compared to the prices and/or terms which would be available from
reputable and qualified parties for goods and/or services of similar quality,
and the goods and/or services which are being purchased shall be grouped in
reasonable categories, rather than being compared item by item. Any dispute as
to whether prices and/or terms are competitive shall be referred to Arbitration
as provided in Section 11.22. The prices paid may include overhead and the
allowance of a reasonable return to Manager's Affiliates (or companies in which
Manager has an ownership interest if such interest is not sufficient to make
such a company an Affiliate), provided that such prices are competitive as
provided for herein. Tenant acknowledges and agrees that, with respect to any
purchases of goods or services pursuant to this Section 11.19, and subject to
the foregoing qualification that prices and/or terms are competitive, Manager's
Affiliates may retain for their own benefit any allowances, credits, rebates,
commissions and discounts received with respect to any such purchases.
11.20 Competing Facilities. Except as provided in Section 11.21,
neither this Agreement nor anything implied by the relationship between Manager
and Tenant shall prohibit any Marriott or any Affiliate thereof from
constructing, operating, promoting, and/or authorizing others to construct,
operate, or promote one or more Marriott Hotels, Marriott Resorts, Marriott
Suites Hotels, ▇▇▇▇-▇▇▇▇▇▇▇ Hotels, Renaissance Hotels, Conference Centers by
Marriott, Residence Inn by Marriott Hotels, Courtyard by Marriott Hotels,
Fairfield Inns, Fairfield Suites, TownePlace Suites by Marriott, SpringHill
Suites by Marriott, or any other lodging concepts, time-share facilities,
restaurants, or other business operations of any type, at any location,
including a location proximate to the Sites. Tenant acknowledges, accepts and
agrees further that Marriott and its Affiliates retain the right, from time to
time, to construct or operate, or both, or promote or acquire, or authorize or
otherwise license others to construct or operate, or both, or promote or acquire
any hotels, lodging concepts or products, restaurants or other business
operations of any type whatsoever, including, but not by way of limitation,
those listed above, at any location including one or more sites which may be
adjacent, adjoining or proximate to the Site, which business operations may be
in direct
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competition with the Hotels and that any such exercise may adversely affect the
operation of the Hotels.
11.21 Trade Area Restriction.
A. Notwithstanding anything to the contrary in this Management
Agreement and without limitation Marriott's obligations with respect to the
Franchise Agreement entered into with respect to any Hotel, neither Manager nor
any Affiliate shall operate or open any hotel as a Courtyard by Marriott hotel
nor shall Manager or any Affiliate authorize a third party to operate or open
any hotel as a Courtyard by Marriott hotel within the area designated on Exhibit
B with respect to any Hotel (the "Restricted Trade Area"), until after the Trade
Area Restriction Expiration Date set forth on the Addendum for such Hotel,
unless such hotel (1) is owned or leased by HPT or an Affiliate; (2) is owned,
operated, managed or franchised by Marriott or its Affiliates and has been so
identified in writing at or prior to the time of the execution of the Purchase
and Sale Agreement; (3) is part of an acquisition by Marriott or its Affiliates
of an interest in a chain or group of not less than five (5) hotels (such
acquisition to occur in a single transaction or a series of related
transactions); (4) has been so identified in writing by Marriott or its
Affiliates as planned to be developed, acquired, operated, managed or franchised
by Marriott or its Affiliates prior to the time of execution of the Purchase and
Sale Agreement; or (5) is a replacement of any of the properties identified in
(1) through (4) above with a property having not more than one hundred ten
percent (110%) of the Guest Rooms of the hotel so replaced or an expansion of
any of the properties otherwise permitted to be located in the Restricted Trade
Area under this Section 11.21.A, such expansion not to increase the number of
Guest Rooms at such hotel by more than 10%.
B. Subsequent to each applicable Trade Area Restriction Expiration
Date, Marriott and its Affiliates shall be free to open or operate, and
authorize a third party to open and operate any hotel as a Courtyard by Marriott
hotel within the Restricted Trade Area for each Hotel, except that if Marriott
or its Affiliates shall determine to obtain, either through development or
purchase, any hotel to be operated as a Courtyard by Marriott hotel within any
Restricted Trade Area, Manager shall or shall cause such Affiliates to give HPT
notice thereof and to negotiate, in good faith, at the election of HPT, for the
acquisition thereof by HPT and the lease thereof to an Affiliate of HPT on the
terms and conditions of the Lease and the management of such property by Manager
in accordance with the terms of this Agreement, except with respect to the
amount of the purchase price, initial working capital, tenant's first priority,
tenant's second priority, tenant's third priority and the minimum rent payable
with respect thereto. Manager or its Affiliates, however, shall not be obligated
to provide notice until the development or purchase of the Courtyard by Marriott
hotel has been fully approved by the Board of Directors of Marriott or its
Affiliates. Moreover, the foregoing requirement of good faith negotiation shall
not bind Tenant, HPT, Marriott or any of their Affiliates to proceed with a
transaction with respect to the identified hotel unless the purchase price
thereof and minimum rent payable with respect thereto, tenant's first priority,
tenant's second priority and tenant's third priority is agreed upon within
thirty (30) business days after the commencement of negotiations with respect
thereto. This paragraph B shall not apply to hotels that (a) are developed,
acquired, or owned by parties other than Marriott and its
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Affiliates, (b) are part of an acquisition by Marriott or its Affiliates of an
interest in a chain or group of at least five (5) hotels (in a single
transaction or series of related transactions), or (c) are a replacement of any
hotel otherwise permitted to be located in any Restricted Trade Area under
Section 11.21.A or an expansion of any of the properties otherwise permitted
under Section 11.21.A.
11.22 Arbitration. Landlord, Tenant and Manager agree that any disputes
for which Arbitration is provided under this Agreement and the Owner Agreement
shall be subject to one arbitration process which shall be binding on Landlord,
Manager and Tenant. For purposes of this Agreement, the Lease and the Owner
Agreement, Arbitration shall be conducted as provided in the Owner Agreement.
11.23 Permitted Contests. Manager shall have the right to contest the
amount or validity of any Imposition, Legal Requirement, Insurance Requirement,
lien, attachment, levy, encumbrance, charge or claim (collectively, "Claims") as
to any Hotel, by appropriate legal proceedings, conducted in good faith and with
due diligence, provided that (a) such contest shall not cause Landlord or Tenant
to be in default under any Qualifying Mortgage or reasonably be expected to
result in a lien attaching to such Hotel, unless such lien is fully bonded or
otherwise secured to the reasonable satisfaction of Landlord, (b) no part of a
Hotel nor any Gross Revenues therefrom shall be in any immediate danger of sale,
forfeiture, attachment or loss, and (c) Manager shall indemnify and hold
harmless Tenant and Landlord from and against any cost, claim, damage, penalty
or reasonable expense, including reasonable attorneys' fees, incurred by Tenant
or Landlord in connection therewith or as a result thereof. Tenant agrees to
sign all required applications and otherwise cooperate with Manager in
expediting the matter, provided that Tenant shall not thereby be subjected to
any liability therefor (including, without limitation, for the payment of any
costs or expenses in connection therewith), and any such costs or expenses
incurred in connection therewith shall be paid as a Deduction with respect to
the applicable Hotel. Landlord shall, in the Owner Agreement, agree 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) and Manager agrees by agreement in form and substance
reasonably satisfactory to Landlord, to assume and indemnify Landlord with
respect to the same. Any amounts paid under any such indemnity of Manager to
Tenant or Landlord shall be a Deduction with respect to such Hotel. Any refund
of any Claims and such charges and penalties or interest thereon which amount
shall be paid to Manager and included in Gross Revenues of such Hotel.
11.24 Estoppel Certificates. Each party to this Agreement shall at any
time and from time to time, upon not less than thirty (30) days' prior notice
from the other party, execute, acknowledge and deliver to such other party, or
to any third party specified by such other party, a statement in writing: (a)
certifying that this Agreement is unmodified and in full force and effect (or if
there have been modifications, that the same, as modified, is in full force and
effect and stating the modifications); (b) stating whether or not to the best
knowledge of the certifying party (i) there is a continuing default by the
non-certifying party in the performance or observance of any covenant, agreement
or
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condition contained in this Agreement, or (ii) there shall have occurred any
event which, with the giving of notice or passage of time or both, would become
such a default, and, if so, specifying each such default or occurrence of which
the certifying party may have knowledge; (c) stating the date to which
distributions of Operating Profit have been made; and (d) stating such other
information as the non-certifying party may reasonably request. Such statement
shall be binding upon the certifying party and may be relied upon by the
non-certifying party and/or such third party specified by the non-certifying
party as aforesaid, including, without limitation its lenders and any
prospective purchaser or mortgagee of any Hotel or the leasehold estate created
by the Lease. The obligations set forth in this Section 11.24 shall survive
Termination (that is, each party shall, on request, within the time period
described above, execute and deliver to the non-certifying party and to any such
third party a statement certifying that this Agreement has been terminated).
11.25 Indemnification. Subject to the provisions of Section 9.04
hereof, and notwithstanding the existence of any insurance provided for herein
and without regard to the policy limits of any such insurance, Manager shall
protect, indemnify and hold harmless Tenant and 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 Tenant or 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 Hotels or adjoining sidewalks or rights of way under
Manager's control, (b) any use, misuse, non-use, condition, management,
maintenance or repair by Manager or anyone claiming under Manager of the Hotels
or Tenant's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which Tenant is made a party or
participant relating to the Hotel's 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 Tenant is made a party, (c) any Impositions that are the obligations of
Manager to pay pursuant to the applicable provisions of this Agreement, and (d)
infringement and other claims relating to the propriety marks of Marriott or
Manager with respect to any Hotel; provided, however, that Manager'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 Tenant, its employees, agents or invitees.
Manager, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against Tenant (and shall not be
responsible for any duplicative attorneys' fees incurred by Tenant) or may
compromise or otherwise dispose of the same, with Tenant's prior written consent
(which consent may not be unreasonably withheld or delayed). In the event Tenant
shall unreasonably withhold or delay its consent, Manager shall not be liable
pursuant to this Section 11.25 for any incremental increase in costs or expenses
resulting therefrom. The obligations of Manager under this Section 11.25 are in
addition to the obligations set forth in Section 11.08.D and shall survive a
Termination of this Agreement. The indemnification provided for in this Section
11.25 shall not be applicable to Environmental Costs, Other Environmental Costs
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or Section 11.08 Costs, with respect to which a specific indemnity is provided
in Section 11.08 hereof, to the extent addressed therein.
11.26 Prohibited Transactions. At any time during which an Event of
Default shall have occurred and be continuing, Manager 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 an Affiliate of Manager,
except on terms and conditions which are commercially reasonable and have been
negotiated at arm's length.
11.27 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Tenant or Manager,
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 Tenant
or Manager (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Tenant of
any or all of such rights, powers and remedies.
11.28 Amendments and Modifications. This Agreement shall not be
modified or amended except in writing signed by both parties.
11.29 Construction; Nonrecourse. Anything contained in this Agreement
to the contrary notwithstanding, all claims against, and liabilities of, Manager
or Tenant arising prior to any date of termination or expiration of this
Agreement with respect to any Hotel shall survive such termination or
expiration. In no event shall Tenant be liable for any consequential damages
suffered by Manager as the result of a breach of this Agreement by Tenant.
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 Manager shall be construed as an independent covenant and
condition. Time is of the essence with respect to the exercise of any rights of
Manager or Tenant 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 Manager (including without limitation, any monetary, repair
and indemnification obligations) and Tenant shall survive the expiration or
sooner termination of this Agreement. 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 Tenant or its Affiliates or Manager or its Affiliates for the
payment or performance of the obligations or liabilities of Tenant or Manager,
as applicable, hereunder.
11.30 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
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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.
11.31 No Political Contributions. Notwithstanding any contained in this
Agreement to the contrary, no money or property of the Hotels shall be paid or
used or offered, nor shall Tenant or Manager directly or indirectly use or
offer, consent or agree to use or offer, any money or property of the Hotels (i)
in aid of any political party, committee or organization, (ii) in aid of any
corporation, joint stock or other association organized or maintained for
political purposes, (iii) in aid of any candidate for political office or
nomination for such office, (iv) in connection with any election, (v) for any
political purpose whatever, or (vi) for the reimbursement or indemnification of
any person for any money or property so used.
11.32 Single Agreement. The parties hereto acknowledge and agree that
this Agreement and the Other Management Agreements are intended to constitute,
and shall constitute, a single transaction.
11.33 REIT Qualification. Manager shall not take any action which would
cause Landlord's rental income from Tenant under the Leases for the Hotels to
fail to qualify as "rents from real property" pursuant to Sections 856(d)(8)(B)
and 856(d)(9) of the Code.
11.34 Further Compliance With Section 856(d) of the Code. Manager
represents that, as of the date hereof, it is an "eligible independent
contractor" as defined under Section 856(d)(9)(A) of the Code, and further
agrees that it shall maintain such status except to the extent events outside of
Manager's control may affect Manager's independent contractor status. Landlord,
Manager and Tenant agree to cooperate in good faith to the purpose and effect
that Manager retain such status. This covenant shall apply for so long as one or
more of the Hotels are owned by Landlord (or a successor or permitted assignee)
and leased to Tenant (or a successor or a permitted assignee) as part of an
ownership structure that is subject to REIT tax requirements. Without limiting
the foregoing, Manager shall do each of the foregoing:
A. Manager shall exercise its powers, privileges, responsibilities
and obligations under this Agreement (and related documents) so as to cause each
Hotel to qualify as a "qualified lodging facility" pursuant to Section
856(d)(9)(D) of the Code. In furtherance of the foregoing, Manager shall comply
with any regulations or other administrative guidance now or hereafter existing
with respect to qualification as an "eligible independent contractor" under said
Section 856(d)(9)(A). Without limiting any of the foregoing, Manager shall not
authorize any wagering activities to be conducted at or in connection with any
Hotel and Manager shall ensure that at least one-half of the guest rooms in each
such Hotel are used on a transient basis and that no Hotel will include
amenities and facilities which are not customary for similarly situated
properties.
B. None of Manager or any of its Affiliates (either individually
or collectively) shall own, within the meaning of Section 856(d)(5) of the Code,
either
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directly or indirectly, more than thirty-five percent (35%) of the shares of HPT
(whether by vote, value or number of shares).
C. To the extent within the reasonable control of Manager and each
Affiliate, neither Manager nor any Affiliate shall permit more than thirty-five
percent (35%) of the total combined voting power of Manager's or such Affiliates
outstanding stock (or thirty-five percent (35%) of the total shares of all
classes of its outstanding stock) to be owned, within the meaning of Section
856(d)(5) of the Code, directly or indirectly, by one or more persons owning
thirty-five percent (35%) or more of the outstanding stock of HPT and Manager
and its Affiliates shall otherwise comply with any regulations or other
administrative guidance now or hereafter existing under said Section 856(d)(5)
of the Code with respect to such ownership limits.
D. Manager, or a person who is a "related person" within the
meaning of Section 856(d)(9)(F) of the Code (a "Related Person"), shall be
actively engaged in the trade or business of operating or managing "qualified
lodging facilities" for one or more persons who are not Related Persons with
respect to HPT or Tenant ("Unrelated Persons"). Manager or such Related Person
shall derive at least ten percent (10%) of each of its revenue and profit from
operating or managing "qualified operating facilities" within the meaning of
Section 856(d)(9)(D) of the Code for Unrelated Persons and shall comply with any
regulations or other administrative guidance now or hereafter existing under
Section 856(d)(9) of the Code with respect to the amount of hotel management
business that needs to be conducted with Unrelated Persons in order for Manager
to qualify as an "eligible independent contractor" under said Section 856(d)(9).
11.35 Adverse Regulatory Event. In the event of an Adverse Regulatory
Event arising from or in connection with this Agreement, Tenant and Manager
shall work together in good faith to amend this Agreement to eliminate the
impact of such Adverse Regulatory Effect. For purposes of this Agreement, the
term "Adverse Regulatory Effect" means any time that a law, statute, ordinance,
code, rule or regulation imposes upon Tenant (or could imposes upon Tenant in
Tenant's reasonable opinion), any material threat to either Landlord's status as
a "real estate investment trust" under the Code or to the treatment of amounts
paid to such Landlord as "rents from real property" under Section 856(d) of the
Code. Each of Manager and Tenant shall inform the other of any Adverse
Regulatory Event of which it is aware and which it believes likely to impair
compliance of any of the Hotels with respect to the aforementioned sections of
the Code.
11.36 Commercial Leases. For so long as one or more of the Hotels are
owned by Landlord and leased to Tenant as part of an ownership structure that is
subject to REIT tax requirements, Manager agrees that Manager shall not enter
into any sublease with respect to any Hotel (or any part thereof) without first
providing Landlord with a copy thereof. Landlord shall have twenty (20) days
from the date of its receipt of such proposed sublease to give written notice to
Manager indicating whether such sublease would, in Landlord's reasonable
judgment, provide for a rental to be paid by the sublessee thereunder based (or
considered to be based), in whole or in part, on the income or profits derived
by the business activities of the sublessee, or any other formula, such
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that any portion of the rent payable under the sublease would fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the Code, or
any similar or successor provisions thereto. If Landlord provides timely notice
of its determination that such proposed sublease would provide for such a rental
then Manager will not enter into such proposed sublease. If Landlord shall fail
to give Manager such written notice within such twenty (20) day period, Landlord
shall be estopped from claiming that such sublease violates the terms of this
Section 11.36.
11.37 Waiver of Jury Trial. Tenant and Manager each hereby absolutely,
irrevocably and unconditionally waive trial by jury in any litigation, claim,
action, suit or proceeding, at law or in equity, arising out of, pertaining to
or in any way associated with this Agreement or the covenants, undertakings,
representations or warranties set forth herein or the relationships of the
parties hereto.
ARTICLE XII
DEFINITION OF TERMS
12.01 Definition of Terms.
The following terms when used in this Agreement and the Addendum
attached hereto shall have the meanings indicated:
"Accounting Period" shall mean the four (4) week accounting periods
having the same beginning and ending dates as Manager's four (4) week accounting
periods, except that an Accounting Period may occasionally contain five (5)
weeks when necessary to conform Manager's accounting system to the calendar.
"Addenda" shall mean the Addenda attached hereto from time to time.
"Additional Manager Advances" shall mean advances by Manager under
Sections 4.01.E, 4.03.B, 4.03.D, 4.05.A, and 9.03.B hereof.
"Additional Marriott Advance" shall mean an Additional Marriott Advance
under the Pooling Agreement, and if the Pooling Agreement does not apply to any
Hotel, the portion of such Additional Marriott Advances determined to be
allocable to such Hotel in accordance with the Pooling Agreement.
"Additional Rent" shall, for any period, for each Hotel, mean the
amount of Additional Rent allocable to such Hotel which accrued under the Lease
for such period.
"Advance Notice" shall have the meaning ascribed to that term in
Section 4.03.B.2 hereof.
"Affiliate" shall mean with respect to 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
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which is a limited liability company, any member of such company, (c) any other
Person which is a Parent, or Subsidiary or a Subsidiary or Parent with respect
to such Person or to one or more of the persons referred to in the preceding
clauses (a) and (b), and (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).
"Agreement" shall mean this Management Agreement between Tenant and
Manager, including the exhibits and the Addenda from time to time attached
hereto.
"Agreement to Lease" shall mean the Agreement to Lease and Manage by
and among Marriott, Landlord, Tenant, Manager, and affiliates of Marriott dated
as of June 15, 2001, with respect to the Hotels and the other Portfolio
Properties.
"Annual Operating Projection" shall have the meaning ascribed to it in
Section 4.04 hereof.
"Arbitration" shall mean the process described in Section 11.22 hereof.
"Available Funds" shall have the meaning ascribed to that term in
Section 3.02.B.2 hereof.
"Award" shall have the meaning ascribed to it in the Lease.
"Base Gross Revenues" shall mean, for each Hotel, the amount set forth
on the applicable Addendum for such Hotel, and if not included on such an
Addendum, then Gross Revenues for the Base Year for each Hotel, provided,
however, that in the event that, with respect to any Fiscal 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
Fiscal Year, a reduction in the number of rooms at a Hotel or a change in the
services provided at a Hotel (including, without limitation, closing of
restaurants) from the number of rooms or the services provided during the Base
Year, in determining Tenant's Second Priority payable with respect to such
Fiscal Year, Base Gross Revenues shall be reduced as follows: (a) in the event
of a complete closing of a Hotel, Gross Revenues attributable to the Hotel
during the Base Year shall be subtracted from Base Gross Revenues throughout the
period of such closing; (b) in the event of a partial closing of the Hotel
affecting any number of guest rooms in such Hotel, Gross Revenues attributable
to guest room occupancy or guest room service 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 Gross Revenues throughout the period of
such closing; (c) in the event of a closing of a restaurant, all Gross Revenues
attributable to such restaurant during the Base Year shall be subtracted from
Base Gross Revenues for such Hotel throughout the period of such closing; and
(d) in the event of any other change in circumstances affecting a Hotel, Base
Gross Revenues shall be equitably adjusted in such manner as Manager and Tenant
shall reasonably agree.
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"Base Management Fee" shall, during any given Fiscal Year (or portion
thereof), mean, for each Hotel, an amount equal to the positive difference
obtained by subtracting the System Fee for such Hotel for such period from an
amount equal to seven percent (7%) of Gross Revenues for such Hotel for such
period.
"Base Year" shall mean, for each Hotel, the year set forth on the
Addendum applicable to such Hotel, and if not set forth on an Addendum, for each
Hotel acquired by Landlord prior to the date hereof, the second full Fiscal Year
of operation of such Hotel; and for each Hotel acquired by Landlord on or after
the date hereof, the 2002 Fiscal Year (which begins on or about December 29,
2001); provided, however, if there shall occur or shall have occurred, prior to
the expiration of the Base Year described in the preceding clause, any force
majeure with respect to a Hotel which causes or shall have caused a material
decline in Gross Revenues during the second full Fiscal Year of operation of
such Hotel, the Base Year shall be adjusted to be the first full Fiscal Year of
operation of such Hotel after the termination of any such force majeure event.
"Buildings" shall have the meaning ascribed to that term in Section A
of the Recitals.
"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.
"Capital Addition" shall have the meaning ascribed to that term in
Section 5.08.A hereof.
"Central Office Services" shall have the meaning ascribed to that term
in Section 1.03 hereof.
"Chain Services" shall have the meaning ascribed to that term in
Section 1.03; provided, however, that the Base Management Fee for each Hotel is
intended to cover only the services currently listed (as of the Effective Date)
in clause (i) of the definition of Chain Services in Section 1.03 other than the
charges for the national and regional reservations system service which shall be
paid as a Deduction. Accordingly, if there are expenditures that were originally
treated as Deductions but that are later determined to be more properly treated
as Chain Services, or if additional central or regional services are (after the
Effective Date) furnished for the benefit of hotels in the System, each Hotels'
allocable share of such expenditures shall be treated as Deductions and shall
not be covered by the Base Management Fee for such Hotels. Conversely, if there
are expenditures that were (as of the Effective Date) listed in clause (i) of
the definition of Chain Services and included in Chain Services (as of the
Effective Date) but that are later determined to be more properly furnished at
the Hotels instead of on a central or regional basis, such expenditures shall
not later be treated as a Deduction but shall continue to be covered by the Base
Management Fee for each of such Hotels. Any fees for services not included in
the Base Management Fee for the Hotels shall be consistent with fees established
for the System.
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"Claims" shall have the meaning ascribed to that term in Section 11.23
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Condemnation" shall mean, with respect to any Hotel, (a) the exercise
of any governmental power with respect to such Hotel or any interest therein,
whether by legal proceedings or otherwise, by a Condemnor of its power of
condemnation, (b) a voluntary sale or transfer of any Hotel or any interest
therein, to any Condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending, or (c) a taking or voluntary
conveyance of any Hotel 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 any Hotel or any interest therein, whether or not
the same shall have actually been commenced.
"Condemnor" shall mean any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
"Controlling Interest" shall mean (i) if the Person is a corporation,
the right to exercise, directly or indirectly, more than fifty percent (50%) of
the voting rights attributable to the shares of such Person (through ownership
of such shares or by contract), or (ii) if the Person is not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the business, management or policies of such Person.
"Deduction" shall have the meaning ascribed to that term in the
definition of Operating Profit. Deductions shall not include (i) payments with
respect to items for Manager has given an indemnity, to the extent of such
indemnity, (ii) payments with respect to items for which Manager has agreed to
be liable at its own cost and expense herein, (iii) any item specifically stated
not to be a Deduction herein, and (iv) any item for which Manager or any
Affiliate has agreed to be liable (other than at the cost and expense of Tenant
or any Affiliate) under the terms of any Incidental Document or any other
agreement between Manager or any Affiliate and Tenant or any Affiliate.
"Default" shall have the meaning ascribed to that term in Section 9.01.
"Disbursement Rate" shall have the meaning ascribed to that term in the
Leases.
"Effective Date" shall have the meaning ascribed to that term in the
Preamble.
"Environmental Costs" shall have the meaning ascribed to that term in
Section 11.08.C hereof.
"Environmental Laws" shall have the meaning ascribed to that term in
Section 11.08.B hereof.
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"Environmental Notice" shall have the meaning ascribed to that term in
Section 11.08.A hereof.
"Environmental Obligation" shall have the meaning ascribed to that term
in Section 11.08.A hereof.
"Estimated Costs" shall have the meaning ascribed to that term in
Section 11.08.D hereof.
"Excess Gross Revenues" shall mean, with respect to each Hotel, for any
Fiscal Year, the amount of Gross Revenues for such Fiscal Year in excess of Base
Gross Revenues, prorated for any partial Fiscal Year.
"Existing CC&R's" shall have the meaning ascribed to that term in
Section 8.02.A.
"Existing Leases" shall mean the leases set forth on Exhibit C attached
hereto, to the extent the same have not been previously assigned pursuant to the
Agreement to Lease.
"Event of Default" shall have the meaning ascribed to that term in
Section 9.01.
"FF&E" shall mean furniture, furnishings, fixtures, kitchen appliances,
vehicles, carpeting and equipment, including front desk and back-of-the house
computer equipment, but shall not include Fixed Asset Supplies or any computer
software of any type (including upgrades and replacements) owned by Manager,
Marriott, an Affiliate of Manager or Marriott, or the licensor of any of them.
"First Incentive Management Fee" shall mean: (a) for each Hotel
acquired by Landlord prior to the date hereof, an amount equal to the number
obtained by subtracting from a number equal to what would have been the
Operating Profit for such Hotel had this Agreement been in effect with respect
to such Hotel for the entire 2001 Fiscal Year (which 2001 Fiscal Year began on
or about December 30, 2000), (i) the sum of the distributions which would have
been made if such Hotel had been subject to this Agreement for the entire 2001
Fiscal Year pursuant to Sections 3.02.B.1 through 3.02.B.7 hereof, and (ii) Six
Thousand Four Hundred Fifty One Dollars ($6,451.00), and (b) for each Hotel
acquired by Landlord on or after the date hereof, Zero Dollars ($0.00).
"Fiscal Year" shall mean Manager's Fiscal Year which as of the
Effective Date ends at midnight on the Friday closest to December 31 in each
calendar year; the new Fiscal Year begins on the Saturday immediately following
said Friday. Any partial Fiscal Year between the Effective Date and the
commencement of the first full Fiscal Year shall constitute a separate Fiscal
Year. A partial Fiscal Year between the end of the last full Fiscal Year and the
Termination of this Agreement shall also constitute a separate Fiscal Year. If
Manager's Fiscal Year is changed in the future, appropriate adjustment to this
Agreement's reporting and accounting procedures shall be made; provided,
however, that
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no such change or adjustment shall alter the term of this Agreement or in any
way reduce or in any material respect delay the distributions of Operating
Profit or other payments due hereunder.
"Fixed Asset Supplies" shall mean 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.
"Franchise Agreement" means, with respect to each Hotel, the Franchise
Agreement entered into pursuant to the Agreement to Lease with respect to such
Hotel by and between Marriott and Tenant, as the same may be amended, modified
or supplemented from time to time.
"Franchisor" shall have the meaning ascribed to that term in each
Franchise Agreement.
"Future CC&R's" shall have the meaning ascribed to that term in Section
8.02.A hereof.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"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
Hotels operated thereon.
"Gross Revenues" shall mean for any period with respect to each Hotel,
all revenues and receipts of every kind derived from operating such Hotel and
all departments and parts thereof during such period, including, but not limited
to: income (from both cash and credit transactions) after deductions for bad
debts and discounts for prompt cash payments and refunds from rental of Guest
Rooms and other spaces at the Hotel, telephone charges, stores, offices, 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; income from parking; health club membership fees; food
and beverage sales; wholesale and retail sales of merchandise; service charges;
and proceeds, if any, from business interruption or other loss of income
insurance; provided, however, that Gross Revenues shall not include the
following: gratuities to employees of the Hotels; federal, state or municipal
excise, sales or use taxes or any other taxes collected directly from patrons or
guests or included as part of the sales price of any goods or services; proceeds
from the sale of FF & E; interest received or accrued with respect to the funds
in the Reserves or the other operating accounts of the Hotels; any refunds,
rebates, discounts and credits of a similar nature, given, paid or returned in
the course of obtaining Gross Revenues or components thereof; insurance
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proceeds (other than proceeds from business interruption or other loss of income
insurance; condemnation proceeds (other than for a temporary taking); or any
proceeds from any Sale of a Hotel or from the refinancing of any debt
encumbering any Hotel.
"Gross Room Revenues" shall include with respect to each Hotel, all
gross revenues attributable to or payable for rental of guest rooms at such
Hotel, after deductions for bad debts and discounts for prompt cash payments and
refunds from Rental of Guest Rooms, including, without limitation, all credit
transactions, whether or not collected, but excluding (i) any sales or room
taxes collected by Manager for transmittal to the appropriate taxing authority,
and (ii) any revenues from sales or rentals of ancillary goods, such as VCR
rentals, telephone income and fireplace log sales and sales from in-room service
bars. Gross Room Revenues shall also include the proceeds from any business
interruption insurance applicable to loss of revenues due to the
non-availability of guest rooms and for guaranteed no-show revenue which is
collected. Gross Room Revenues shall be accounted for in accordance with the
Uniform System of Accounts.
"Guest Room" shall mean with respect to each Hotel, a lodging unit in
such Hotel.
"Hazardous Substances" shall mean any substance:
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
which is or becomes defined as a "hazardous waste", "hazardous
material" or "hazardous substance" or "pollutant" or "contaminant"
under any present or future federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. et seq.) and the Resource Conservation and
Recovery Act (42 U.S.C. section 6901 et seq.) and the regulations
promulgated thereunder; or
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
the presence of which at a Hotel causes or materially
threatens to cause an unlawful nuisance upon such Hotel or to adjacent
properties or poses or materially threatens to pose a hazard to such
Hotel or to the health or safety of persons on or about such Hotel; or
without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds; or
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without limitation, which contains polychlorinated biphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
without limitation, which contains or emits radioactive
particles, waves or material; or
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.
"Holdback Agreement" shall mean the Holdback Agreement dated as of June
15, 2001 between Marriott and Tenant.
"Holdback Agreement Advances" shall mean advances which Tenant elects,
in its discretion, to make, pursuant to the terms of the Holdback Agreement.
"Hotel" shall mean each Site together with the Buildings and all other
improvements constructed or to be constructed on such Site pursuant to this
Agreement, and all FF&E installed or located on such Site or in the Buildings,
and all easements or other appurtenant rights thereto owned by Landlord together
with, for purposes of this Agreement, all office equipment, telephone equipment,
motor vehicles, and other equipment leased by Tenant as permitted hereunder and
Fixed Asset Supplies at such Hotel, in each of the foregoing instances as and
when the same hereunder subject to the terms of this Agreement.
"HPT" shall mean Hospitality Properties Trust, its successors and
permitted assigns.
"Impositions" shall have the meaning ascribed to that term in the Lease
with the exclusions set forth in Section 7.01.C hereof.
"Incidental Documents" shall mean all documents entered into by
Marriott, Manager, Tenant, Landlord, HPT, the managers under the Other
Management Agreements and/or Marriott Kauai, Inc. in connection with the
transactions contemplated by the Agreement to Lease, which documents are
specifically enumerated in Sections 11(a) and 12(a) of such Agreement to Lease.
"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 Manager and Tenant.
"Initial Term" shall have the meaning ascribed to that term in Section
2.01.A hereof.
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"Initial Working Capital" shall mean, with respect to each Hotel, the
amount of Initial Working Capital for such Hotel as set forth on the applicable
Addendum.
"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 the Hotels.
"Insurance Retention" shall have the meaning ascribed to that term in
Section 6.01.F hereof.
"Inventories" shall mean "Inventories" as defined in the Uniform System
of Accounts, such as, 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.
"Landlord" shall mean as of any date the landlord under the Lease as of
such date.
"Landlord Default" shall have the meaning ascribed to that term in
Section 9.01.F hereof.
"Landlord Sale of a Hotel" shall have the meaning ascribed to term
"Sale of a Hotel" in the Owner Agreement.
"Leases" shall mean the Lease Agreements between Landlord and Tenant
(in certain instances, as assignee of an Affiliate of Marriott) in effect from
time to time relating to the Hotels and other Portfolio Properties and any
replacement leases of the Hotels and other Portfolio Properties by the fee owner
thereof to Tenant which provides for the Landlord to fund additional capital
investment as provided for under such initial lease, and any amendments,
waivers, modifications thereto approved by Manager in writing, which approval
shall not be unreasonably withheld provided the same does not (a) impose any
material cost, expense or obligation upon Manager or (b) reduce any amounts that
would otherwise be payable to Manager hereunder or (c) otherwise be expended to
interfere with the operation and maintenance of the Hotels or Manager's
obligations hereunder.
"Lease Term" shall have the meaning ascribed to that term under the
Lease.
"Lease Year" shall mean each Fiscal Year with the initial Lease Year
commencing on the commencement of the Lease term and ending on the Friday
closest to December 31.
"Legal Requirements" shall mean, with respect to each Hotel, all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions affecting
such Hotel or the maintenance, construction, alteration or operation thereof,
whether now or hereafter enacted or in
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existence, including, without limitation, (a) all permits, licenses,
authorizations, certificates and regulations necessary to operate such Hotels,
and (b) all covenants, agreements, restrictions and encumbrances contained in
any instruments at any time in force affecting such Hotels which either (A) do
not require the approval of Manager, or (B) have been approved by Manager as
required hereby, including those which may (i) require material repairs,
modifications or alterations in or to such Hotels 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, and (c) all valid and lawful requirements of courts and other
government agencies or authorities pertaining to reporting, licensing,
permitting, investigation, remediation and removal of underground improvements
(including, without limitation, treatment or storage tanks, or water, gas or oil
▇▇▇▇▇), or emissions, discharges, releases or threatened releases of Hazardous
Substances, chemical substances, pesticides, petroleum or petroleum products,
pollutants, contaminants or hazardous or toxic substances, materials or wastes
whether solid, liquid or gaseous in nature, into the environment, or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, underground improvements
(including, without limitation, treatment or storage tanks, or water, gas or oil
▇▇▇▇▇), or pollutants, contaminants or hazardous or toxic substances, materials
or wastes, whether solid, liquid of gaseous in nature.
"License" shall mean any license, permit, decree, act, order,
authorization or other approval or instrument which is necessary in order to
operate each Hotel in accordance with Legal Requirements and pursuant to System
Standards and otherwise in accordance with this Agreement.
"Marriott Limited Rent Guaranty" shall mean that certain Amended and
Restated Limited Rent Guaranty dated as of June 15, 2001 by and between Marriott
and an Affiliate of Tenant with respect to the Existing Leases.
"Marriott Guaranty Agreement" shall mean the Guaranty dated as of June
15, 2001 by and between Marriott and Tenant.
"Manager" shall have the meaning ascribed to it in the Preamble hereto
or shall mean any successor or permitted assign, as applicable.
"Manager Default" shall have the meaning ascribed to such term in
Section 9.01.
"Manager Event of Default" shall have the meaning ascribed to such term
in Section 9.01.
"Manager's Reserve Advance" shall have the meaning ascribed to it in
Section 5.07.F hereof.
"Marketing Fund" shall mean that certain fund (or any successor to such
fund) maintained by Marriott, to pay for the following System costs: all costs
associated with developing, preparing, producing, directing, administering,
conducting, maintaining and
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disseminating advertising, marketing, promotional and public relations
materials, programs, campaigns, sales and marketing seminars and training
programs, and similar activities of every kind and nature, including the
Courtyard by Marriott directory; and conducting market research; provided,
however, that any costs described in this definition of Marketing Fund may, at
the option of the Manager and any association which may be formed by the
Courtyard by Marriott franchisees, be charged directly to each hotel in the
System on the basis of actual use by or benefit to each hotel and, in such
event, shall become Deductions. Tenant shall contribute to the Marketing Fund
two percent (2%) of Gross Room Revenues of each Hotel or such other amount (not
to exceed three percent (3%) of Gross Room Revenues as may be provided for
members of the System by Franchisor from time to time, and such contribution
shall be a Deduction.
"Marriott" shall mean Marriott International, Inc., a Delaware
corporation.
"Marriott Companies" shall mean Manager, Marriott, and any Affiliate of
Manager or Marriott.
"Marriott Guaranty Advances" shall mean advances under the Marriott
Guaranty Agreement allocated to pay, inter alia, Tenant's First Priority with
respect to the Hotel.
"Minimum Rent" shall, for each Hotel, for any period, mean the amount
of Minimum Rent allocable to such Hotel which accrues under the Lease for such
period.
"Mortgage" shall mean any mortgage indebtedness obtained by Landlord to
finance a Hotel, and may take the form of a mortgage, deed of trust or security
document customarily in use in the jurisdiction in which the Site for such Hotel
is located.
"Mortgagee" shall mean the holder of any Mortgage.
"Officer's Certificate" shall mean a certificate executed by the
Manager's chief accounting officer which certifies that with respect to interim
accountings and the annual statement delivered under Section 4.01.D.2 hereof,
that the accompanying accounting or statement has been properly prepared in
accordance with GAAP and fairly presents the financial operations of the Hotels.
"Operating Loss" shall mean, with respect to each Hotel, a negative
Operating Profit for such Hotel.
"Operating Profit" shall mean, with respect to each Hotel, the excess
of Gross Revenues over the following deductions, but excluding (i) payments with
respect to items for Manager has given an indemnity, to the extent of such
indemnity, (ii) payments with respect to items for which Manager has agreed to
be liable at its own cost and expense herein, (iii) any item specifically stated
not to be a Deduction herein, and (iv) any item for which Manager or any
Affiliate has agreed to be liable (other than at the cost and expense of Tenant
or any Affiliate) under the terms of any Incidental Document or any other
agreement between Manager or any Affiliate and Tenant or any Affiliate
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("Deductions") incurred by Manager in accordance with the Operating Standards
and the terms of this Agreement, on behalf of Tenant, in operating the Hotel:
1. the cost of sales, including, without limitation, compensation,
fringe benefits, payroll taxes and other costs related to Hotel employees (the
foregoing costs shall not include salaries and other employee costs of executive
personnel of Manager who do not work at the Hotel 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 Hotel);
2. departmental expenses incurred at departments within the Hotel;
administrative and general expenses; the cost of marketing incurred by the
Hotel; advertising and business promotion incurred by the Hotel; heat, light,
and power; computer line charges; and routine repairs, maintenance and minor
alterations treated as Deductions under Section 5.02;
3. the cost of Inventories and Fixed Asset Supplies consumed in
the operation of the Hotel;
4. a reasonable reserve for uncollectible accounts receivable as
determined by Manager;
5. all costs and fees of independent professionals or other third
parties who are retained by 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 Manager and/or Affiliates of the Manager
for specialized services (including, without limitation, quality assurance
inspectors) and the cost of attendance by employees of the Hotel at training and
manpower development programs sponsored by Manager;
7. the System Fee;
8. insurance costs and expenses as provided in Section 6.01
hereof;
9. taxes, if any, payable by or assessed against Manager related
to this Agreement or to Manager's operation of the Hotel (exclusive of Manager's
income taxes) and all Impositions;
10. transfers to the Hotel's Reserve required pursuant to Section
5.03.C hereof;
11. transfers required to be made, as they may change from time to
time, to the Marketing Fund in order for the Hotel to remain a member of the
System and shall be consistent with policies established for the System;
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12. all usual and customary sums charged to the Hotel for room
reservations obtained for the Hotel through the reservation system used by
Manager or through other reservation facilities operated by Manager or its
Affiliates which are charged to members of the System;
13. the Hotel's share of the costs and expenses of participating
in programs and activities prescribed for members of the System (including those
central or regional services set forth in Section 1.03(c)(ii) hereof) to the
extent such costs are not paid from the Marketing Fund (and which shall be
consistent with policies established for the system);
14. the costs of commercially reasonable efforts of causing the
Hotel to be in compliance with each and every provision of the Lease (regardless
of whether or not such compliance is a requirement of this Agreement);
15. such other costs and expenses incurred by Manager as are
specifically provided for elsewhere in this Agreement or are otherwise
reasonably necessary for the proper and efficient operation of the Hotel; and
16. such other costs and expenses paid to Landlord or Tenant
pursuant to the Lease or this Agreement, if such costs and expenses would have
been a Deduction if paid directly by Manager to a third person in respect of the
Hotel.
The term "Deductions" shall not include (a) debt service payments
pursuant to any Mortgage, and (b) payments pursuant to equipment leases or other
forms of financing obtained by Tenant for the FF&E located in or connected with
a Hotel, both of which shall be paid or caused to be paid by Tenant from its own
funds, the Reserve to the extent permitted hereunder, or from funds provided by
Landlord under the Lease.
The term "Deductions" shall not include (a) Rent payable under the
Lease, (b) any reimbursement to Manager for advances Manager makes with respect
to a Hotel as permitted hereunder, and (c) the Priority Management Fee, the Base
Management Fee, the First Incentive Management Fee and the Second Incentive
Management Fee for any Hotel.
"Operating Profit After First Incentive Management Fee" shall mean, for
each Hotel, for any period, the amount of Operating Profit remaining after
deducting amounts paid or payable in respect of items (1) through (7) of Section
3.02.B hereof.
"Operating Standards" shall have the meaning ascribed to such term in
Section 1.02.A hereof.
"Other Environmental Costs" shall have the meaning ascribed to such
term in Section 11.08.C hereof.
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"Other Franchise Agreements" means the Franchise Agreements between
Marriott or an Affiliate and Tenant with respect to the Portfolio Properties
other than the Hotels.
"Other Management Agreements" means the Management Agreements between
Manager or an Affiliate and Tenant with respect to the Portfolio Properties
other than the Hotels.
"Overdue Rate" shall have the meaning ascribed to that term in the
Lease.
"Owner Agreement" shall mean the Owner Agreement dated of even date
herewith by and among Landlord, Tenant, Marriott and Manager with respect to the
Hotels and other Portfolio Properties.
"Parent" shall mean, with respect to any Person, any Person who owns
directly, or indirectly through one or more Subsidiaries or Affiliates, greater
than fifty percent of the voting or beneficial interest in, or otherwise has the
right or power (whether by contract, through ownership or securities or
otherwise) to control, such Person.
"Person" shall mean any individual or entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such individual
or entity where the context so admits.
"Pooling Agreement" means initially the Pooling Agreement by and among
Manager, Marriott, Tenant and others dated as of the date of the Agreement to
Lease and any subsequent Pooling Agreement under which the Gross Revenues,
Working Capital, and Reserves of the Hotels are pooled with Gross Revenues,
Working Capital and Reserves of the other Portfolio Properties, as the same may
be supplemented, amended, or modified from time to time.
"Portfolio Properties" shall mean, as of any date, the Hotels subject
to the Pooling Agreement together with the other properties whose Gross
Revenues, Working Capital and Reserves are as of such date pooled with the Gross
Revenues, Working Capital and Reserves of the Hotels under the Pooling
Agreement.
"Prime Rate" shall mean the "base rate" of interest announced from time
to time by Bankers Trust Company, New York, New York.
"Priority Management Fee" shall mean, for each Hotel, an amount equal
to all Marriott Guaranty Advances made with respect to such Hotel and for which
a corresponding Priority Management Fee has not previously been paid to Manager.
"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 or Manager in
connection with the
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property management system, the reservation system and all future electronic
systems developed by Tenant or Manager for use in any Hotel, (b) all manuals,
brochures and directives used by Tenant or Manager at any Hotel regarding the
procedures and techniques to be used in operating any such Hotel, (c) customer
lists, and (d) employee records which must remain confidential either under
Legal Requirements or under reasonable corporate policies of Tenant or Manager;
provided, however, that "Proprietary Information" shall not include any
software, manuals, brochures or directives issued by Marriott, as Franchisor to
Tenant, as franchisee, under the Franchise Agreement.
"Prorated Portion" shall have the meaning ascribed to such term in
Section 4.01.A hereof.
"Prospectus" shall have the meaning ascribed to such term in Section
11.09.B hereof.
"Purchase and Sale Agreement" shall mean the Purchase and Sale
Agreement identified on the Addendum hereto.
"Qualifying Mortgage" shall have the meaning ascribed to such term in
the Owner Agreement.
"Renewal Term(s)" shall have the meaning ascribed to it in Section 2.01
hereof.
"Rent" shall mean, for any period, for each Hotel, Minimum Rent,
Additional Rent and Special Additional Rent allocated to such Hotel and accrued
under the Lease for such Hotel for such period, provided the same does not
exceed, in each instance, the corresponding amounts of Tenant's First Priority,
Tenant's Second Priority and Tenant's Third Priority with respect to each such
Hotel.
"Replacement Cost" shall have the meaning ascribed to such term in
Section 6.01.C hereof.
"Reserve" shall have the meaning ascribed to such term in Section
5.03.B hereof.
"Reserve Estimate" shall have the meaning ascribed to such term in
Section 5.04.A hereof.
"Restricted Trade Area" shall have the meaning ascribed to it in
Section 11.21 hereof.
"Sale of a Hotel" shall mean any sale, assignment, transfer or other
disposition, for value or otherwise, voluntary or involuntary, of the Tenant's
leasehold title to a Hotel and related property. For purposes of this Agreement,
a Sale of a Hotel shall also include a lease (or sublease) of all or
substantially all of Tenant's leasehold interest in a Hotel and any sale,
assignment, transfer or other disposition, for value or otherwise, voluntary or
involuntary, in a single transaction or a series of transactions, of the
Controlling Interest
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in Tenant, but shall not include any conveyance other than a conveyance of a
Controlling Interest in Tenant, Landlord or the immediate Parent of Tenant.
"Second Incentive Management Fee" shall mean for each Hotel an amount
that is equal to fifty percent (50%) of Operating Profit After First Incentive
Management Fee for such Hotel in any Fiscal Year (or portion thereof).
"Section 11.08 Costs" shall have the meaning ascribed to such term in
Section 11.08.C hereof.
"Site" shall have the meaning ascribed to that term in Section A of the
Recitals.
"State" means, with respect to each Hotel, the state in which such
Hotel is located.
"Subsidiary" shall mean, with respect to any Person, any entity (a) in
which such Person owns directly, or indirectly, greater than fifty percent of
the voting or beneficial interest or (b) which such Person otherwise has the
right or power to control (whether by contract, through ownership or securities
or otherwise).
"Sum Due Marriott" shall have the meaning ascribed to that term in
Section 3.02.B.5 hereof.
"Sum Due Tenant" shall have the meaning ascribed to that term in
Section 3.02.B.5 hereof.
"System" shall mean all hotels which are operated under the Trade Names
listed on the Addenda.
"System Fee" shall mean, with respect to each Hotel, during any Fiscal
Year, an amount equal to five and one-half (5.5%) percent of Gross Room Revenues
of such Hotel.
"System Services" shall have the meaning ascribed to that term in
Section 1.03.
"System Standards" shall mean either (or both as the context requires)
of the following two categories of standards: (i) the operational standards (for
example, services offered to guests, cleanliness, staffing, employee
compensation and benefits, Chain Services, frequent traveler programs and other
similar programs, etc.); and (ii) the physical standards (for example, quality
of the Improvements, FF&E, and Fixed Asset Supplies, frequency of FF&E
replacements, etc.); each of such standards shall be the standard which is
generally prevailing or in the process of being implemented at other hotels in
the System, on a fair and consistent basis with other hotels in the System,
including all services and facilities in connection therewith that are customary
and usual at comparable hotels in the System; provided, however, that if the
market area or the
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physical peculiarities of the Hotels warrant, in the reasonable judgment of
Manager, a deviation from such standards shall be permitted.
"Tenant" shall have the meaning ascribed to that term in the Preamble
or shall mean any successor or permitted assignee, as applicable.
"Tenant Advances" shall have the meaning ascribed to it in Section
3.02.B.5 hereof.
"Tenant Default" shall have the meaning ascribed to it in Section 9.06.
"Tenant Event of Default" shall have the meaning ascribed to it in
Section 9.06.
"Tenant Operating Loss Advances" shall have the meaning ascribed to
that term in Section 4.01.E hereof.
"Tenant Reserve Advance" means an advance by Tenant under Section
5.07.F hereof.
"Tenant's First Priority" shall mean, for each Hotel, for each full
Fiscal Year, an amount equal to the amount set forth on the applicable Addenda,
or a pro rata portion thereof in any partial Fiscal Year; provided, however,
effective on the date of each disbursement by Landlord pursuant to Section
5.1.3(b), 10.2 or 11.2 of the Lease for such Hotel or by Tenant pursuant to
Section 5.07 hereof with respect to such Hotel, in each instance at the request
of or with the approval of Landlord, the Tenant's First Priority payable with
respect to each Accounting Period for such Hotel shall be increased by an amount
equal to the quotient obtained by dividing (a) the greater of (i) ten and
four-tenths percent (10.4%), and (ii) a per annum amount equal to the
Disbursement Rate determined as of the date of Manager's notice identifying the
amount of and requirement for the applicable funds(or the dates on which such
sums are advanced if no such notice is given), times the amount so disbursed, by
(ii) thirteen (13). If any such disbursement is made during any Accounting
Period on a day other than the first day of an Accounting Period, the Tenant's
First Priority payable for such Hotel on the first day of the immediately
following Accounting Period (after having been so increased) shall be further
increased (but only for such instant Accounting Period) by the amount by which
Tenant's First Priority for the preceding Accounting Period, as adjusted for
disbursement on a per diem basis, exceeded the amount of Tenant's First Priority
actually paid to Tenant for such preceding Accounting Period.
"Tenant's First Priority Coverage Ratio" shall mean with respect to the
Portfolio Properties (or any of the Hotel if such Hotels are not subject to a
Pooling Agreement), for any period, the quotient of (i) the Aggregate Operating
Profit for all of the Portfolio Properties (or the Operating Profit for any of
the Hotels if such Hotel is not subject to a Pooling Agreement) during such
period, divided by (ii) the Aggregate Tenant's First Priority for all of the
Portfolio Properties (or the Tenant's First Priority for any of the Hotels if
such Hotel is not subject to a Pooling Agreement) during such period.
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"Tenant's First Priority Deficiency" shall have the meaning ascribed to
such term in Section 3.02.C hereof.
"Tenant's Personal Property" shall mean all motor vehicles, 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 a Hotel or
used in Tenant's business at a Hotel, and all modifications, replacements,
alterations and additions to such personal property.
"Tenant's Second Priority" shall mean, for each Hotel, an amount equal
to seven percent (7%) of Excess Gross Revenues for such Hotel.
"Tenant's Third Priority" shall mean, for each Hotel acquired by
Landlord prior to the date hereof, an amount equal to Zero Dollars ($0.00), and
for each Hotel acquired by Landlord on or after the date hereof, for each full
Fiscal Year, the amount set forth on the applicable Addendum for such Hotel, or
a pro rata portion thereof in any partial Fiscal Year.
"Tenant Working Capital Advances" shall mean the aggregate of all funds
remitted by Tenant to Manager in order to fund additional Working Capital under
Section 4.05 hereof, or pursuant to the Pooling Agreement to the extent
allocable to the Hotels.
"Term" shall have the meaning ascribed to that term in Section 2.01
hereof.
"Termination" shall mean, with respect to each Hotel, the expiration or
sooner cessation of the Term with respect to such Hotel.
"Trade Names" shall have the meaning ascribed to it in Section 11.21
hereof.
"Trade Area Restriction Expiration Date" shall mean Trade Area
Restriction Expiration Date set forth on each Addenda.
"Uniform System of Accounts" shall mean the Uniform System of Accounts
for the Lodging Industry, Ninth Revised Edition, 1996, as published by the
Educational Institute of the American Hotel and Motel Association.
"Unsuitable for Its Permitted Use" shall mean, with respect to a Hotel,
a state or condition of such Hotel such that (a) following any damage or
destruction involving such Hotel, such Hotel cannot be operated in the good
faith judgment of Manager on a commercially practicable basis and it cannot
reasonably be expected to be restored to substantially the same condition as
existed immediately before such damage or destruction and otherwise as required
under Section 6.02.D. hereof, 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 Hotel
following such damage or destruction, or (b) as the result of a partial taking
by
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Condemnation, such Hotel cannot be operated, in the good faith judgment of
Manager on a commercially practicable basis in light of then existing
circumstances.
"Work" shall have the meaning ascribed to that term in Section 6.02.D
hereof.
"Working Capital" shall mean, with respect to each Hotel, funds that
are used in the day-to-day operation of the business of such Hotel, including,
without limitation, amounts sufficient for the maintenance of change and ▇▇▇▇▇
cash funds, amounts deposited, in operating bank accounts, receivables, amounts
deposited in payroll accounts, prepaid expenses and funds required to maintain
Inventories, less accounts payable and accrued current liabilities.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal as of the day and year first written above.
TENANT:
WITNESS: HPT TRS MI-135, INC., a
Delaware corporation
By:
----------------------------------- --------------------------------
Print Name:________________________ Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
MANAGER:
COURTYARD MANAGEMENT
WITNESS: CORPORATION, a Delaware corporation
By:
----------------------------------- --------------------------------
Print Name:______________________ Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
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EXHIBIT A
THE SITES
EXHIBIT B
TRADE AREA
The Restricted Trade Area for each Hotel is the area within a five-mile radius
of such Hotel. If there exists any conflicts between the narrative of the
Restricted Trade Area and any attached map, the narrative shall control.
EXHIBIT C
EXISTING LEASES