EXHIBIT 10.i
LEASE AGREEMENT
BETWEEN
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
AND
CERTAIN LAND TRUST TRUSTEES
("Landlord")
AND
COURTYARD MANAGEMENT CORPORATION
("Tenant")
TABLE OF CONTENTS
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ARTICLE I - DEFINITION OF TERMS......................................................2
1.01 Definition of Terms.......................................................2
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1.02 Terms Defined in Other Sections..........................................12
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ARTICLE II - LEASE OF THE HOTELS....................................................14
2.01 Granting Clause..........................................................14
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2.02 Operating Permits........................................................14
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2.03 Non-Discrimination.......................................................14
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ARTICLE III - OWNERSHIP OF HOTELS...................................................15
3.01 Ownership of Hotels......................................................15
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3.02 Subordination, Nondisturbance, and Attornment............................15
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ARTICLE IV - TERM...................................................................17
4.01 Term.....................................................................17
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4.02 Termination Fee..........................................................18
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4.03 Performance Termination..................................................19
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4.04 Actions to be Taken Upon Termination.....................................20
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ARTICLE V - RENT....................................................................22
5.01 Annual Rent..............................................................22
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5.02 Additional Rent..........................................................22
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5.03 Distribution of Operating Profit.........................................23
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5.04 Accounting and Interim Payment...........................................27
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5.05 Advances to Avoid Foreclosure............................................28
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5.06 Application of Sale and Loan Proceeds....................................28
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ARTICLE VI - [THIS ARTICLE INTENTIONALLY OMITTED]...................................30
ARTICLE VII - HOTEL WORKING CAPITAL AND FIXED ASSET SUPPLIES........................31
7.01 Hotel Working Capital, Inventories, and Fixed Asset Supplies.............31
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ARTICLE VIII - REPAIRS, MAINTENANCE, AND REPLACEMENTS...............................32
8.01 Repairs and Maintenance..................................................32
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8.02 Repairs and Equipment Reserve............................................32
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8.03 Building Alterations, Improvements, Renewals, and Replacements...........34
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8.04 Liens....................................................................35
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8.05 Ownership of Replacements................................................35
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ARTICLE IX - BOOKKEEPING AND BANK ACCOUNTS..........................................36
9.01 Books and Records........................................................36
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9.02 Hotel Accounts and Expenditures..........................................36
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9.03 Annual Operating Projection; Five-Year Forecast..........................36
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9.04 Operating Losses; Credit.................................................37
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ARTICLE X - TRADEMARK AND TRADE NAME................................................38
10.01 Courtyard by Marriott Name..............................................38
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10.02 Purchase of Inventories and Fixed Asset Supplies........................38
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10.03 Breach of Covenant......................................................38
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10.04 Computer Software and Equipment.........................................38
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ARTICLE XI - HOTELS.................................................................40
11.01 Payment of Ground Rent and Other Charges................................40
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11.02 Use, Operation of Hotels and Quiet Enjoyment............................40
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11.03 Chain Services..........................................................41
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11.04 Landlord's Right to Inspect.............................................41
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ARTICLE XII - INSURANCE.............................................................42
12.01 Property Insurance......................................................42
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12.02 Operational Insurance...................................................42
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12.03 Coverage................................................................43
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12.04 Cost and Expense........................................................43
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12.05 Policies and Endorsements...............................................43
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ARTICLE XIII - TAXES................................................................45
13.01 Real Estate, Personal Property and Other Taxes..........................45
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ARTICLE XIV - HOTEL EMPLOYEES.......................................................46
14.01 Employees...............................................................46
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ARTICLE XV - DAMAGE, CONDEMNATION, AND AIR FORCE MAJEURE............................47
15.01 Damage and Repair.......................................................47
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15.02 Condemnation............................................................47
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15.03 Force Majeure...........................................................47
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ARTICLE XVI - DEFAULTS..............................................................49
16.01 Defaults................................................................49
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16.02 Remedies................................................................49
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ARTICLE XVII - WAIVER AND PARTIAL INVALIDITY........................................52
17.01 Waiver..................................................................52
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17.02 Partial Invalidity......................................................52
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ARTICLE XVIII - ASSIGNMENT..........................................................53
18.01 Assignment..............................................................53
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18.02 Collateral Assignment...................................................53
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ARTICLE XIX - SALE OF HOTELS........................................................54
19.01 Right of Sale by Landlord...............................................54
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19.02 Rights of Tenant on Sale of Hotels......................................54
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19.03 Meaning of "Sale" and "Sell"............................................55
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ARTICLE XX - ARBITRATION............................................................56
20.01 Arbitration.............................................................56
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ARTICLE XXI - MISCELLANEOUS.........................................................57
21.01 Right to Make Agreement.................................................57
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21.02 Consents................................................................57
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21.03 Agency..................................................................57
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21.04 Confidentiality.........................................................57
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21.05 Applicable Law..........................................................57
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21.06 Other Operations........................................................58
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21.07 Headings................................................................58
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21.08 Notices.................................................................58
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21.09 Entire Agreement........................................................59
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21.10 Limited Liability.......................................................59
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21.11 Memorandum of Lease.....................................................59
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21.12 Severability............................................................59
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21.13 Counterparts............................................................60
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21.14 Trustees................................................................60
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LEASE AGREEMENT
This LEASE AGREEMENT (this "Agreement") is executed as of the 1st day
of January, 1994 (the "Effective Date"), by COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited partnership with its principal offices at ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, LA SALLE NATIONAL TRUST, N.A., a
national banking association, as trustee under Trust Agreement dated December 9,
1986 and known as Trust No. 111800, with its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ALEXANDER TITLE AGENCY, INC., a
Virginia corporation, as trustee under (a) the Hampton Courtyard by Marriott
Limited Partnership Land Trust, (b) the Virginia Beach Courtyard by Marriott
Limited Partnership Land Trust, (c) the ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Courtyard by Marriott
Limited Partnership Land Trust, (d) the Richmond Courtyard by Marriott Limited
Partnership Land Trust, and (e) the Courtyard by Marriott Limited Partnership
Land Trust, with its principal offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (collectively, the "Landlord"), and COURTYARD MANAGEMENT
CORPORATION, a Delaware corporation with its principal offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Tenant").
RECITALS
WHEREAS, Landlord has heretofore acquired forty-nine (49) Courtyard by
Marriott Hotels that are located as described in Exhibit A; and
WHEREAS, Landlord desires to let to Tenant and Tenant desires to hire,
lease and operate the Hotels, all on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
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ARTICLE I
DEFINITION OF TERMS
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1.01 Definition of Terms
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The following terms when used in this Agreement shall have the
meanings indicated:
"Accounting Period" means the four (4) week accounting periods having
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the same beginning and ending dates as Tenant's four (4) week accounting
periods, except that an Accounting Period may occasionally contain five (5)
weeks when necessary to conform Tenant's accounting system to the calendar. A
calendar showing Accounting Period ending dates for Accounting Periods through
Fiscal Year 2000 is attached hereto as Exhibit B.
"Additional MI Guaranties" shall mean, jointly, (i) that certain Debt
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and Tenant Change Guaranty given by MI to the Lenders and Citibank, N.A., as
agent, and (ii) that certain MI Guaranty given by MI to the Lenders and
Citibank, N.A., as agent, both dated of even date with the Loan Agreements and
both as amended from time to time in accordance with their terms, provided that
no such amendment that would have a material adverse effect on Tenant's rights
or obligations hereunder shall be effective against Tenant without Tenant's
prior written approval, both of which are being given by MI pursuant to the
requirements of the Loan Agreements.
"Administrative and General Expenses" shall mean costs and expenses
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that would constitute administrative and general costs and expenses under the
Uniform System of Accounts, including, without limitation, (a) cash overages and
shortages at the Hotels, (b) commissions paid to credit card companies, (c)
credit and collection costs, (d) the cost of data processing services, other
than rental of equipment, (e) the cost of dues and subscriptions for the hotel
and staff, (f) the cost of recruiting, relocating and training employees, (g)
the cost of internal audits conducted by Tenant or its Affiliates and with
respect to which the reasonable cost incurred by Tenant or its Affiliates is
billed by Tenant or its Affiliates, (h) the cost of internal communication
systems such as pagers, copiers and phones, (i) the payments made for guest
property lost or damaged in excess of the amounts recovered from insurance, (j)
the cost of operating supplies such as printed forms, manuals, postage,
facsimiles and telegrams, (k) the cost of professional fees such as those of
attorneys and accountants, (l) a charge adequate to provide for the probable
loss in collection of accounts, (m) the cost of contract security, (n) the cost
of transportation other than that directly related to guests, (o) the cost of
travel expenses and entertainment expenses of employees of Tenant traveling on
or otherwise pertaining to business for the Hotels, (p) the cost of employee
uniforms, and (q) the cost of employee relations and incentives.
"Affiliate/Affiliates or Affiliated Persons" shall mean, when used
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with reference to a specified Person, (i) any Person that directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with the specified Person, (ii) any Person that is an officer of,
partner in, or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner, or
trustee, or with respect to which the specified Person serves in a similar
capacity, (iii) any Person that, directly or indirectly, is the beneficial owner
of ten percent (10%) or more of any class of equity securities of the specified
Person or of which the specified Person is directly or indirectly the owner of
ten percent (10%) or more of any class of equity securities, and (iv) any
relative or spouse of the specified Person who makes his or her home with that
of the specified Person. Affiliate/Affiliates or Affiliated Persons of Landlord
or the general partner of Landlord does not include a Person who is a partner in
a partnership or joint venture with Landlord or any other Affiliate if such
Person is not otherwise an Affiliate of Landlord or the general partner of
Landlord. For purposes of this definition, all shares of stock, partnership
interests or similar interests in a corporation, partnership or other Person
owned by a spouse, sibling, parent, child, or grandchild of an individual, by
any such relative of a spouse of such
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individual or by any relative of such individual or spouse who makes his or her
home with such individual or spouse shall be deemed to be owned by that
individual. For purposes of this Agreement, neither Landlord, any partner of
Landlord, HM, any subsidiary of HM, nor any partnership in which HM or an HM
subsidiary is a partner shall be considered to be an Affiliate of Tenant, MI or
any MI Ground Lessor, unless, by reason of transactions occurring subsequent to
the date hereof, such person would be an Affiliate under the foregoing
definition.
"Agent" shall have the meaning ascribed to it in the Loan Agreements.
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"Bankruptcy Code" means the U.S. Bankruptcy Code, 11 U.S.C. (S)(S)101
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et seq., together with all amendments, modifications and replacements as the
same may exist on any relevant date.
"Base Price" shall mean, as to each Hotel, that amount set forth
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opposite the name of the Hotel as shown on Exhibit C attached hereto.
"Central Office Functions" shall mean certain functions performed for
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the general benefit of the Courtyard by Marriott System by personnel not
normally located at the Hotels and include corporate planning and policy
activities, corporate financial planning, legislative and governmental
representation, corporate human resources planning and benefits planning, in-
house legal services and trademark protection relating to proprietary marks
(including trademarks, trade names, symbols, logos, slogans, designs, insignia,
devices, service marks, and distinctive designs of buildings and signs, and
combinations thereof) which are used generally in the Courtyard by Marriott
System. Any service which is defined as being included within the term "Chain
Services" shall not also be included within "Central Office Functions." Any
function which is defined as being included within the term "Central Office
Functions" shall not also be included in any Deduction other than the Deduction
for the Tenant's Priority Base Retention. The Central Office Functions which are
provided to the Hotels shall be generally consistent with those Central Office
Functions which are provided to other comparable Courtyard by Marriott hotels
within the Courtyard by Marriott System.
"Chain Services" shall mean those certain services furnished to the
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Hotels which are furnished generally on a central or regional basis to other
hotels in the Courtyard by Marriott System. Chain Services shall include: (i)
national and central sales office services; central operational support for
rooms, food and beverage and engineering; central training services; career
development; relocation of central management personnel; central safety and loss
prevention services; central advertising and promotion (including direct and
image media and advertising administration); centralized consumer affairs; to
the extent not charged or allocated directly to the Hotels as a Deduction, the
national and regional reservations system service and inventory and revenue
management services; centralized computer payroll and accounting services;
centralized computer system development, support and operating costs; central
monitoring and management support from "line management" personnel such as area
managers; (ii) such additional services as are or may be, from time to time,
furnished centrally or regionally for the benefit of hotels in the Courtyard by
Marriott System or in substitution for services now performed at individual
hotels which may be more efficiently performed on a group basis; provided,
however, that services not currently included in Chain Services pursuant to (i)
and (ii) above shall only be added to "Chain Services" if, and to the extent
that such services: (a) are not Central Office Functions (it being understood
that Tenant's sole means of covering the costs and expenses incurred by it in
connection with the Central Office Functions shall be Tenant's Priority Base
Retention) or System Functions (it being understood that Tenant's sole means of
covering the costs and expenses incurred by it in connection with the System
Functions shall be retention of the Tenant's Priority System Retention); (b) are
not services relating to non-routine work (it being understood that the cost and
expense of such non-routine services shall be Deductions as set forth in
Paragraph 4 of the definition of Deductions), and (c) are either (x) new
services (i.e., not previously performed at or for the Hotels) or (y) services
which theretofore had been
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performed at the Hotels, but which can be performed more efficiently and
economically on a centralized, regional or other basis.
"Combined Loan Documents" shall have the meaning ascribed to it in the
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Loan Agreements, provided, however, that no amendment of any of the Combined
Loan Documents that would have a material adverse effect on Tenant's rights or
obligations hereunder shall be effective against Tenant without Tenant's prior
written approval.
"Computer Lease" means a lease or other agreement under which computer
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equipment located in one or more Hotels is leased (including the license, if
any, of operating software therefor).
"Courtyard by Marriott System" shall mean the group of hotels managed,
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leased, or otherwise operated by Tenant (or one or more of its Affiliates) from
time to time, which hotel group is operated, as of the Effective Date, under the
trade name "Courtyard by Marriott".
"CPI" means the Consumer Price Index, all items for All Urban
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Consumers, U.S. City Average and (a) using 1982-1984 as the standard reference
base period equal to 100 or (b) if the CPI ceases to be issued with the
reference base period referred to in clause (a) for any time period for which
the CPI is to be determined hereunder, using for the CPI for the time period for
which such reference base period is not used the standard reference base period
for such time period times a conversion factor that will convert such CPI to a
value corresponding to a 1982-1984 base period equal to 100.
"Cumulative Capital" means One Hundred Twenty-one Million, Fifty-three
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Thousand Dollars ($121,053,000.00), which is the amount of money or agreed value
of other real or personal property (other than evidences of indebtedness)
actually contributed to Landlord; provided, however, that, for purposes of
Severance Leases, Cumulative Capital shall be an amount equal to (a) in the case
of Severance Lease involving a new landlord but the same tenant in possession
immediately before the transaction giving rise to the need for a Severance
Lease, (i) if the new landlord is not an Affiliate of the lender pursuant to a
loan on the Hotels immediately before the transaction giving rise to the need
for the Severance Lease, the difference between the purchase price paid by such
new landlord to acquire the Hotel(s) subject to the Severance Lease and the
principal amount of indebtedness referred to in (a) and (b) of the definition of
Deemed Debt Service, which principal amount shall be subject to reduction
pursuant to the provisos as described in said definition, or (ii) if the new
landlord acquired the Hotel(s) by deed in lieu of foreclosure or pursuant to a
foreclosure wherein the new landlord or its Affiliate was the lender whose loan
was in default, then Cumulative Capital shall be an amount equal to the
remainder of (y) the sum of the Base Prices of the Hotel(s) subject to the
Severance Lease less (z) the principal amount of indebtedness referred to in (a)
and (b) of the definition of Deemed Debt Service, which principal amount shall
be subject to reduction pursuant to the same provisos as described in said
definition.
"Cumulative Tenant Period" shall mean, at any Payment Date, the three
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or four (as the case may be) consecutive Accounting Periods ending with the
Accounting Period that ends on the date that is closest to, but at least thirty
(30) days before, such Payment Date. Notwithstanding the preceding sentence, (a)
the first Cumulative Tenant Period shall begin on February 26, 1994 and shall
end on ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) the Cumulative Tenant Period for the February 1, 1997
Payment Date shall end with (and include) the Accounting Period ending January
3, 1997 and (c) the Cumulative Tenant Period for the February 1, 1998 Payment
Date shall end with (and include) the Accounting Period ending January 2, 1998.
The first and last day of each Cumulative Tenant Period through June 18, 1999 is
set forth on Exhibit D attached hereto.
"Current Ground Rent" shall mean the ground rent due and payable,
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exclusive of any Deferred Ground Rent, to the MI Ground Lessors under the MI
Ground Leases each Fiscal Year.
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"Debt Service" shall mean all payments required to be made (a)(1)
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under the Combined Loan Documents, except Excess Principal Payments, so long as
either of the Loan Agreements is in effect, and (2) under the terms of any loan
obtained to refinance all or any part of the indebtedness under the Combined
Loan Documents or any successive financing or refinancing thereof (any financing
or refinancing referred to in this clause (a)(2), a "Refinancing"), provided
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that the principal amount of any Refinancing, when added to the amount of
indebtedness under the applicable Loan documents, if any, that will not be paid
off as part of such Refinancing shall not exceed all obligations due under the
applicable loan documents at the time of such refinancing or, if such amount is
less than Three Hundred Million Dollars ($300,000.000), then Three Hundred
Million Dollars ($300,000,000), which $300,000,000 limit shall be reduced each
time the Hotel Term of any Hotel or Hotels is terminated to an amount equal to
$300,000,000 times a fraction, the numerator of which shall be the sum of the
Base Prices of those Hotels, the Hotel Terms of which have not been terminated,
and the denominator of which shall be the Total Base Price; (b) under the terms
of any loan incurred to fund the cost of any expansion of those Hotels, the
Hotel Term of which has not been terminated; and (c) under the terms of any loan
incurred to fund expenditures made pursuant to Section 8.03 with respect to
those Hotels, the Hotel Term of which has not been terminated or, as to (b) and
(c) above, any Refinancing of said loans but only as it relates to those Hotels,
the Hotel Term of which has not been terminated.
"Deductions" means for each Fiscal Year the following expenses,
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without duplication, incurred in operating the Hotels
1. The cost of sales including, without limitation, salaries,
wages, employee benefits, payroll taxes and other costs related to the Hotels'
employees (the foregoing costs shall not include salaries and other employee
costs of executive personnel of Tenant who do not work at the Hotels on a
regular basis except that the foregoing costs shall include the allocable
portion of the salary and other employee costs of central personnel the cost of
whom are not included within the definitions of Chain Services or System
Functions assigned to a "cluster" of hotels which includes one or more of the
Hotels; provided, however, that such allocable portion of salary and employee
costs shall be a Deduction only to the extent that such costs relate directly to
the Hotels;
2. Departmental expenses; Administrative and General
Expenses; the cost of the Hotels' advertising, marketing and business promotion;
all utility costs including but not limited to the cost of heat, light, power
and water; and the cost of routine maintenance, repairs and minor alterations
which are treated as Deductions under Section 8.01;
3. The cost of Inventories and Fixed Asset Supplies consumed
in the operation of the Hotels;
4. The reasonable cost and expense of technical consultants
and operational experts (including employees of Tenant or one of its Affiliates)
who perform specialized services in connection with non-routine Hotel work;
provided, however, that the costs and expenses of employees of Tenant or one of
its Affiliates so incurred shall only be Deductions to the extent such costs and
expenses are reasonable and competitively priced, as compared to similar work
done by outside consultants or experts;
5. The Tenant's Priority Base Retention;
6. The Tenant's Priority System Retention;
7. Subject to and in accordance with Section 11.03.B, the
Hotels' prorata share of costs and expenses incurred by Tenant (or its
Affiliate) in providing Chain Services;
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8. The Hotels' fair share of costs and expenses incurred in
connection with sales, advertising, marketing and/or promotional programs
developed for or within the Courtyard by Marriott System, such as (without
limitation) the Courtyard Club, where such costs and expenses are not deducted
as either departmental expenses under Paragraph 2 above or as Chain Services
under Paragraph 7 above;
9. Insurance costs and expenses as provided in Article XII;
10. Taxes, if any, payable by or assessed against Tenant
related to this Agreement or to Tenant's operation of the Hotels (exclusive of
Tenant's income taxes or franchise taxes) and all Impositions assessed against
the Hotels;
11. Amounts which are required to be transferred into the
Reserve in accordance with the provisions of Section 8.02;
12. All sums charged to the Hotels for room reservations
obtained for the Hotels through the reservation system used by Tenant, but in no
event in excess of the amount charged, on a per reservation basis, for similarly
computed activity to other Hotels in the Courtyard by Marriott System using such
reservation system;
13. Such other costs and expenses incurred by Tenant or its
Affiliates as are specifically provided for elsewhere in this Agreement or are
otherwise reasonably necessary for the proper and efficient operation of the
Hotels so long as such other reasonably necessary costs and expenses are
commonly treated as Deductions with respect to other hotels owned, leased or
managed by Tenant or its Affiliates in the Courtyard by Marriott System;
14. Ground rent paid or (as to the current Accounting Quarter)
payable under any Third Party Ground leases covering the land on which any of
the Hotels are located;
15. The amount of any additional funds supplied by Tenant for
Hotel Working Capital, Inventories, and Fixed Asset Supplies pursuant to Section
7.01 over and above the amount of Initial Working Capital; and
16. At Tenant's option, lease payments pursuant to leases of
any FF&E and motor vehicles as described in Section 8.02.A.3 to the extent such
payments are not made out of the Reserve and provided, however, that Tenant
shall be entitled to treat such lease payments as Deductions only to the extent
the indebtedness incurred under such leases does not exceed Thirty-five Thousand
Dollars ($35,000) in the case of Hotels having only one vehicle and Sixty
Thousand Dollars ($60,000) in the case of Hotels having more than one vehicle
(which amounts shall be adjusted upward each Fiscal Year to reflect the
percentage increase in the CPI as announced for November of the immediately
preceding Fiscal Year over the CPI announced for December 1993, provided that if
such percentage increase is a negative number in any given Fiscal Year, then
there shall be no increase in such amount over the previous Fiscal Year) per
Hotel per Fiscal Year; and for purposes of this Item 16, "indebtedness incurred"
shall mean the fair market value at the time of leasing of the FF&E and vehicles
covered by such leases.
The term "Deductions" shall not include (i) debt service payments
pursuant to any loan or rental payments pursuant to any MI Ground Lease, both of
the foregoing shall be paid by Landlord from its own funds (except as provided
in Section 5.03) and not from Gross Revenues nor from the Reserve; (ii) the
excess of any amounts paid to HM or Affiliates of Tenant or of HM for goods and
services over the customary charges for such goods and services; (iii) as to
Central Office Functions, any amounts in excess of the Tenant's Priority Base
Retention; (iv) as to System Functions, any amounts in excess of the Tenant's
Priority System Retention; (v) as to Chain Services,
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any amounts in excess of the amounts allowed under Section 11.03; and (vi) any
amounts paid with funds from the Reserve.
"Deemed Debt Service" shall mean all scheduled payments of interest
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and principal that would be required to be made by a borrower with respect to a
loan (the "Deemed Loan") (a) in a principal amount equal to the Combined
Obligations (as defined in the Loan Agreements) of the Landlord, as borrower,
outstanding on the Final Maturity Date (as defined in the MI Guaranty), assuming
such loan provided for (i) annual payments of principal equal to Seven Million
Dollars ($7,000,000) and (ii) interest payments at an interest rate equal to the
Eurodollar Rate (as defined in the Loan Agreements) for successive three month
Interest Periods (as defined in the Loan Agreements) with the first such
Interest Period commencing on the Final Maturity Date, plus the Applicable
Margin (as defined in the Loan Agreements) that would have been in effect from
time to time before the Final Maturity Date (as defined in the MI Guaranty)
under the Loan Agreements (and for any period after the Final Maturity Date, at
the Eurodollar Rate plus the highest Applicable Margin); or (b) if a Refinancing
has occurred, in a principal amount equal to the total payment obligations of
the borrower outstanding thereunder on the date on which all such amounts become
due and payable, whether by acceleration or maturity, assuming annual
amortization in an amount no less than the principal amount that would have been
due in the year in which the total payment obligations of the borrower became
due and payable, other than so-called balloon payments, and an annual interest
rate equal to the average of the highest rate (other than the default rate, if
any) and the lowest rate in effect for such year (but with amortization and
interest in no event less than the amounts specified in clauses (a)(i) and (ii),
respectively); provided, however, that the amounts determined in both (a) and
(b) above shall be applicable to Deemed Debt Service for all 49 Hotels and, in
any case in which a Severance Lease applies to fewer than all 49 Hotels, the
amount calculated pursuant to (a) or (b) above shall be reduced to an amount
equal to the amount so calculated times a fraction, the numerator of which shall
be the greater of the sum of the Base Prices or the sum of the actual purchase
prices (in the case of a voluntary sale) of all Hotels subject to such Severance
Lease and the denominator of which shall be the Total Base Price; and further
provided that each time thereafter that the Hotel Term of any Hotel or Hotels
subject to such Severance Lease is terminated, the amount so calculated shall be
reduced to an amount equal to the amount calculated times a fraction, the
numerator of which shall be the greater of the sum of the Base Prices or the sum
of the actual purchase prices (in the case of a voluntary sale) of those Hotels,
the Hotel Term of which has not been terminated, and the denominator of which
shall be the sum of the Base Prices of all Hotels originally included in the
Severance Lease.
"Deferred Ground Rent" shall mean ground rent due to the MI Ground
--------------------
Lessors under the MI Ground Leases but not paid when due pursuant to the
provisions of the MI Ground Leases.
"Excess Principal Payments" shall mean payments of principal required
-------------------------
under any provisions of the Loan Agreements other than Sections 2.02 and 2.03
thereof.
"FF&E" means (i) furniture, fixtures, furnishings, and equipment, and
----
(ii) FF&E Replacements.
"FF&E Lease" means a lease of any FF&E located in one or more Hotels
----------
other than a TV System Lease, a Telephone Lease, a Computer Lease, or a lease of
a motor vehicle used primarily for transporting Hotel guests.
"FF&E Replacements" means the items enumerated in Paragraphs (1) and
-----------------
(2) of Section 8.02.A .
"Five Year Forecast" shall have the meaning ascribed to it in Section
------------------
9.03.B.
-8-
"Fiscal Year" means Tenant's Fiscal Year, which now 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. Exhibit B attached
hereto shows the ending dates of each Fiscal Year through Fiscal Year 2000. Any
partial Fiscal Year between the Effective Date and the commencement of the first
full Fiscal Year shall be a separate Fiscal Year. A partial Fiscal Year between
the end of the last full Fiscal Year and the termination of the Agreement shall,
for purposes of the Agreement, constitute a separate Fiscal Year. If Tenant's
Fiscal Year is changed in the future, appropriate adjustment to the Agreement's
reporting and accounting procedures shall be made. No such change or adjustment
shall, however, alter the term of the Agreement or in any way reduce the
distributions of Operating Profit or other payments due Landlord or Tenant
hereunder.
"Fixed Asset Supplies" means supply items, including linen, china,
--------------------
glassware, tableware, and similar items.
"Gross Loan Proceeds" means the cumulative proceeds received by
-------------------
Landlord from time to time (a) from any Refinancing or (b) from any borrowing by
Landlord for distribution to Landlord or its partners, in either case including
the proceeds of a sale and leaseback on which no taxable gain is recognized for
Federal income tax purposes.
"Gross Revenues" means for each Fiscal Year all revenue and income of
--------------
any kind derived from the Hotels and all departments and parts thereof,
including rentals or other payments from lessees, licensees, or concessionaires
in the Hotels (but not including gross receipts of any such lessees, licensees,
or concessionaires except as may be received by or on behalf of Tenant as rent),
the proceeds of business interruption insurance and the proceeds of telephone
charges, all determined in accordance with generally accepted accounting
principles, excluding all refunds, rebates, discounts, and credits of a similar
nature, given, paid, or returned by Landlord or Tenant in the course of
obtaining such revenue and income. Nevertheless, any amounts received,
recognized, or realized in the nature of the following shall not be included as
Gross Revenues: (i) applicable sales, use, and excise taxes or similar
governmental charges collected directly from patrons or guests, or as part of
the sales price of any goods, services, or displays (including, without
limitation, occupancy, gross receipts, admission, cabaret, or similar or
equivalent taxes); (ii) gratuities; (iii) Gross Sale Proceeds or Sale Proceeds,
Gross Loan Proceeds or Loan Proceeds, and any other loan proceeds; (iv) interest
earned on any reserves, including the FF&E Reserve; and (v) proceeds from the
sale of used FF&E.
"Gross Sale Proceeds" means the cumulative proceeds received by
-------------------
Landlord from time to time from (i) the exchange, condemnation, eminent domain
taking, casualty, sale, or other disposition of all or a portion of Landlord's
assets, or (ii) the liquidation of Landlord's property interest in the Hotels in
connection with a dissolution of Landlord.
"HM" means Host Marriott Corporation (formerly named Marriott
--
Corporation).
"HM Debt Service Guaranty" shall mean that certain Amended and
------------------------
Restated Debt Service Guaranty of even date with the Loan Agreements given to
the Lenders by HM pursuant to the requirements of the Loan Agreements, as such
Guaranty may be amended from time to time in accordance with its terms, provided
that no such amendment that would have a material adverse effect on Tenant's
rights or obligations hereunder shall be effective against Tenant without
Tenant's prior written approval.
"Hotel" or "Hotels" shall refer individually or collectively to the up
----- ------
to forty-nine (49) hotels that are located as set forth on Exhibit A but, as to
this Agreement, shall not include any Hotels the Hotel Term of which has been
terminated or which Hotel(s) are subject to a Severance Lease. The term "Hotel"
or "Hotels" shall incorporate not only the legal interest in the real estate
(either fee or leasehold) but all easement or other appurtenant rights along
with all improvements constructed or to be constructed thereon and all FF&E and
supplies installed therein.
-9-
"Initial Reserve Deposit" shall mean the initial deposit of funds of
-----------------------
Landlord made to the Reserve, which deposit shall be equal to that portion of
the amount held in reserve pursuant to the Management Agreement on December 31,
1993 (the effective date of termination of the Management Agreement) that is
fairly allocable to the forty-nine (49) Hotels.
"Initial Working Capital" shall mean the Working Capital in the
-----------------------
aggregate amount of One Million, One Hundred Eighty-eight Thousand, Seven
Hundred Forty Dollars ($1,188,740.00), which is that portion of Net Working
Capital allocable to the forty-nine (49) Hotels.
"Inventories" means "Inventories" as defined in the Uniform System of
-----------
Accounts, such as 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.
"Lenders" means the lenders under the Loan Agreements.
-------
"Loan Agreements" means two amended and restated Loan Agreements dated
---------------
as of April 7, 1994 among Landlord as borrower, the Lenders party thereto, and
Citibank, N.A., as Agent for the Lenders, providing financing for the Hotels,
both as amended from time to time in accordance with their terms, provided that
no such amendment that would have a material adverse effect on Tenant's rights
or obligations hereunder shall be effective against Tenant without Tenant's
prior written approval.
"Loan Proceeds" means Gross Loan Proceeds minus (i) first, funds used
-------------
to pay commercially reasonable transaction costs in connection with such
Refinancing or borrowing, and (ii) second, funds used for contemporaneous
repayment of indebtedness related to the Loan Agreements or any Refinancing.
"Management Agreement" means the Management Agreement dated August 14,
--------------------
1986 between Landlord, as owner, and Tenant, as manager (as such agreement was
amended from time to time in accordance with its terms), that covered all forty-
nine (49) of the Hotels plus one additional hotel.
"MI" means Marriott International, Inc.
--
"MI Backup Guaranty" shall mean that certain Backup Debt Service
------------------
Guaranty of even date with the Loan Agreements given to the Lenders and Agent by
MI pursuant to the requirements of the Loan Agreements, as such Guaranty may be
amended from time to time in accordance with its terms, provided that no such
amendment that would have a material adverse effect on Tenant's rights or
obligations hereunder shall be effective against Tenant without Tenant's prior
written approval.
"MI Ground Leases" means those certain ground leases, covering the
----------------
land underlying certain of the Hotels, between MI or an MI subsidiary, and their
successors and assigns, as landlord, and Landlord (or, in certain cases one of
the Trustees), as tenant, as amended from time to time in accordance with their
terms, provided that no such amendment that would have a material adverse effect
on Tenant's rights or obligations hereunder shall be effective against Tenant
without Tenant's prior written approval.
"MI Ground Lessors" means the landlords under the MI Ground Leases and
-----------------
their successors and assigns.
"Net Working Capital" means the difference between the original
-------------------
Working Capital supplied by Landlord as owner under the Management Agreement
(which covered fifty (50) hotels)
-10-
less the total amount of Working Capital returned to landlord as owner under the
Management Agreement, which net amount is One Million, Two Hundred Thirteen
Thousand Dollars ($1,213,000.00).
Notes shall mean either (a) the International Subordinated A Note(s)
-----
(as defined in the MI Backup Guaranty), (b) the International Subordinated B
Note(s) (as defined in the Debt and Tenant Change Guaranty described in the
definition of "Additional MI Guaranties"), (c) the International Subordinated C
Note(s) (as defined in the MI Guaranty described in the definition of "MI
Additional Guaranties"), (d) the Host Subordinated Note (as defined in the HM
Debt Service Guaranty), or (e) the promissory note(s) given pursuant to a
Foreclosure Avoidance Loan, in each case as the context requires.
"Opening Date" means the opening date of each Hotel, as heretofore
------------
established and set forth on Exhibit E.
"Operating Loss" means a negative Operating Profit.
--------------
"Operating Profit" means for any Fiscal Year the excess of Gross
----------------
Revenues over Deductions.
"Paid Over Amounts" shall mean all amounts paid over to the Agent by
-----------------
HM, MI, Tenant, and the MI Ground Lessors pursuant to the Consolidated Amended
and Restated Subordination Agreement made by HM, MI, CBM One Corporation,
Tenant, and the MI Ground Lessors, and Landlord in favor of the Lenders and
Citibank, N.A., of even date with the Loan Agreements, as same may be amended
from time to time in accordance with its terms, provided that no such amendment
that would have an adverse effect on Tenant's rights or obligations hereunder
shall be effective against Tenant without Tenant's prior written approval, and
which is being given pursuant to the requirements of the Loan Agreements.
"Payment Date" means each August 1, November 1, February 1, and May 1.
------------
"Person" means any individual, partnership, corporation, trust, or
------
other legal entity.
"Priority Return" means an annual non-cumulative priority return to
---------------
Landlord equal to ten percent (10%) of the remainder of Cumulative Capital less
cumulative distributions to the partners of Landlord of Sale Proceeds and Loan
Proceeds.
"Sale Proceeds" means cumulative Gross Sale Proceeds minus (a) first,
-------------
funds used to pay commercially reasonable transaction costs in connection with a
sale, (b) second, funds used to establish the escrow of funds required in
Section 13.01.B, (c) third, funds required to be used and used for repayment of
indebtedness related to the loans under the Loan Agreements (or any prior
refinancing thereof), and (d) fourth, in the case of a condemnation, eminent
domain, taking or casualty, funds used to pay all costs of repairing, restoring,
replacing, and reconstructing the affected Hotel(s) or portions thereof. Sale
Proceeds shall not include the proceeds from the sale of used FF&E not in
connection with the disposition of a Hotel.
"Severance Lease" shall mean a new lease covering one or more Hotels
---------------
acquired by a new landlord in a transaction in which less than all of the Hotels
are acquired but pursuant to which the then Tenant remains in possession. Each
Severance Lease shall commence immediately upon the Termination of the Hotel
Term(s) of the Hotel(s) subject to the Severance Lease and shall continue for a
period equal to the then remaining period of this Agreement including any
remaining Renewal Terms. Subject to the exceptions stated herein, the Severance
Lease shall be upon all of the terms, covenants, and conditions as contained in
this Agreement with such additional prorations,
-11-
adjustments and changes as are appropriate, in the determination of the new
landlord and Tenant, both acting reasonably, to reflect the number and value of
the Hotels subject to the Severance Lease.
"Telephone Lease" means a lease of the telephones and/or other
---------------
telecommunication systems and equipment located in one or more Hotels.
"Tenant's Earnings" shall mean, for each Fiscal Year, that portion of
-----------------
Operating Profit retained by Tenant pursuant to Section 5.03 and not paid to
Landlord or others, including any Affiliates of Tenant, on Landlord's behalf.
"Tenant's Priority Base Retention" shall mean an amount equal to three
--------------------------------
percent (3%) of Gross Revenues for each Fiscal Year (or portion thereof) that
shall be retained by Tenant out of Gross Revenues to cover the cost and expenses
incurred by Tenant and its Affiliates in connection with the Central Office
Functions. Tenant's Priority Base Retention shall be a Deduction from Gross
Revenues in determining Operating Profit.
"Tenant's Priority System Retention" shall mean an amount equal to
----------------------------------
three percent (3%) of Gross Revenues for each Fiscal Year (or portion thereof)
that shall be retained by Tenant out of Gross Revenues to cover the cost and
expenses incurred by Tenant in connection with certain functions ("System
Functions") which are for the benefit of the Courtyard by Marriott System, are
not Central Office Functions or Chain Services, and are performed by personnel
not normally located at the Hotels. System Functions shall be limited to
divisional executive management, divisional financial planning, divisional
contracting, divisional product (including food products) planning and
development, divisional human resources planning and development, divisional
marketing planning, and services of Tenant's technical and operational experts
making routine inspection and consultation visits to the Hotels (but
specifically excluding "line management" personnel such as area managers and
services of Tenant's or Tenant's Affiliate's Architecture and Construction
personnel who provide design, procurement, construction or related services).
Any function included within the term "System Functions" shall not also be
included in any Deduction other than the Deduction for the Tenant's Priority
System Retention.
"Termination" means the expiration or sooner cessation of this
-----------
Agreement with respect to a given Hotel or Hotels.
"Termination Fee Term" shall mean, as to each Hotel, the period
--------------------
beginning on the later of August 14, 1986 or the Opening Date and ending on the
date on which the obligation to pay the Termination Fee arises.
"Third Party Ground Leases" means (a) the Sublease Agreement dated
-------------------------
April 5, 1983 between Crow-Atlanta Retail, Ltd., as sublandlord, and Marriott
Corporation, as subtenant, as assigned by Marriott Corporation to the Landlord
by an assignment dated August 19, 1986, and (b) the Ground Lease dated May 6,
1985, between A. E. Properties, Ltd., as landlord, and Marriott Corporation, as
tenant, as assigned by Marriott Corporation to the Landlord by an assignment
dated December 9, 1986.
"Total Base Price" shall mean an amount equal to Three Hundred
----------------
Seventy-Three Million, One Hundred Forty-Eight Thousand, Nine Hundred Ninety-
Nine Dollars ($373,148,999), which is the sum of the Base Prices of all 49
Hotels.
"Trustees" shall mean the La Salle National Trust, N.A. and Alexander
--------
Title Agency, Inc., and their successors and assigns, as trustees of the land
trusts described in the preamble of this Agreement.
-12-
"TV System Lease" means a lease or other agreement under which
---------------
equipment (excluding television sets) for the transmission into Hotel rooms of
televised programming is leased or otherwise provided, regardless of whether
such lease or other agreement contains a right or option to purchase such
equipment.
"Uniform System of Accounts" means the Uniform System of Accounts for
--------------------------
Hotels, Eighth Revised Edition, 1986, as published by the Hotel Association of
New York City, Inc.
"Working Capital" means funds which are reasonably necessary for the
---------------
day-to-day operation of the business of the Hotels, including, without
limitation, amounts sufficient for the maintenance of change and ▇▇▇▇▇ cash
funds, operating bank accounts, accounts receivable, payrolls, prepaid expenses,
and funds required to maintain Inventories, less accounts payable and accrued
current liabilities.
1.02 Terms Defined in Other Sections
-------------------------------
The following terms when used in the Agreement shall have the meanings
described in the Agreement as indicated below:
"Additional Rent" - Section 5.02.A.
---------------
"Agreement" - Preamble.
---------
"Annual Operating Projection" - Section 9.03.A.
---------------------------
"Annual Operating Statement" - Section 9.01.
--------------------------
"Annual Rent" - Section 5.01.
-----------
"Building Estimate" - Section 8.03.A.
-----------------
"Economic Gain" - Section 4.02.C.
-------------
"Effective Date" - Preamble.
--------------
"Five-Year Forecast" - Section 9.03.B.
------------------
"Foreclosure Avoidance Loan" - Section 5.05.
--------------------------
"Hotel Term" - Section 4.01.B.
----------
"Impositions" - Section 13.01.
-----------
"Initial Term" - Section 4.01.B.
------------
"Landlord" - Preamble.
--------
"Qualified Arbitrator" - Section 20.01.B.
--------------------
"Refinancing" - Section 1.01 (within the definition of "Debt
-----------
Service").
"Renewal Term(s)" - Section 4.01.B.
---------------
"Rent Letter" - Section 5.04.A.
-----------
-13-
"Repairs and Equipment Estimate" - Section 8.02.D.
------------------------------
"Reserve" - Section 8.02.A.
-------
"System Functions" - Section 1.01 (within the definition of "Tenant's
----------------
Priority System Retention").
"Tenant" - Preamble.
------
"Termination Fee" - Section 4.02.A.
---------------
"Trustee(s)" - Section 21.14.
----------
END OF ARTICLE I
-14-
ARTICLE II
LEASE OF THE HOTELS
-------------------
2.01 Granting Clause
---------------
In consideration of the rentals, covenants, and agreements to be paid,
kept, and performed hereunder, Landlord, for the term and on the conditions
hereinafter set forth, leases to Tenant and Tenant leases and takes from
Landlord the Hotels.
2.02 Operating Permits
-----------------
Landlord agrees upon request by Tenant to sign promptly and without
charge applications for licenses, permits, or other instruments necessary for
operation of the Hotels.
2.03 Non-Discrimination
------------------
The parties recognize that Tenant and its Affiliates act as lessee or
manager of certain other hotels, some of which may be owned by MI, the parent of
Tenant, or its Affiliates or by other third parties. Certain of these hotels,
now or in the future, may be located within the general geographical area of one
or more of the Hotels. Tenant shall institute reasonable internal controls and
procedures to ensure that no favoritism shall be accorded to such other hotels
on the basis of the ownership thereof and that, at all times, Tenant will
operate the various hotels that it leases, owns, or manages, including the
Hotels, in a non-discriminatory manner. Tenant shall have no liability under
this Section 2.03 unless it can be shown that it has acted in willful disregard
of this provision.
END OF ARTICLE II
-15-
ARTICLE III
OWNERSHIP OF HOTELS
-------------------
3.01 Ownership of Hotels
-------------------
A. Landlord covenants that it has and will keep and maintain fee or
leasehold title to each of the Hotels free and clear of any and all liens,
encumbrances, or other charges, except as follows:
1. Easements or other encumbrances (other than those described in
subsections 2, 3, 4 and 5 hereof) that do not adversely affect the operation of
any Hotel by Tenant;
2. Mortgages, deeds of trust, or similar security instruments
pursuant to the Loan Agreements (all as amended from time to time in accordance
with their terms, provided that no such amendment that would have a material
adverse effect on Tenant's rights or obligations hereunder shall be effective
against Tenant without Tenant's prior written approval) and any Refinancings
that contain a provision reasonably acceptable to Tenant's counsel that this
Agreement will not be subject to forfeiture or Termination other than in
accordance with the terms hereof, notwithstanding a default under such mortgage,
deed of trust, or security instrument;
3. Liens for taxes, assessments, levies, or other public charges
not yet due or that are being contested in good faith; and
4. The terms and conditions of any Third Party Ground Leases or
MI Ground Leases for the land in effect on Effective Date on which any of the
Hotels are located
B. Landlord shall pay and discharge, at or prior to the due date, (i)
any and all installments of principal and interest due and payable upon any
mortgage, deed of trust, or like instrument described in this Section and shall
indemnify Tenant from and against all claims and litigation and damages (other
than damages representing Tenant's lost profits) arising from the failure to
make such payments as and when required and (ii) any and all charges for capital
expenditures assessed pursuant to any covenants, conditions and restrictions
affecting the Hotels.
C. Landlord agrees that, in the event it acquires fee title to the
land underlying any of the Hotels that are subject to a Third Party Ground Lease
or an MI Ground Lease, any resultant merger of its interest in any such ground
lease into its newly-acquired fee title shall not result in a termination of
this Agreement.
3.02 Subordination, Nondisturbance, and Attornment
---------------------------------------------
A. Tenant agrees that this Agreement, each Severance Lease, and any
extensions, renewals, replacements or modifications to either of them and all
right and interest of Tenant in and to the Hotels shall, at the option of any
mortgagee pursuant to any Refinancing, be subject and subordinate to such
mortgage provided that such mortgagee agrees in writing, in an instrument
recordable in each jurisdiction in which a Hotel is located that is reasonably
acceptable to Tenant's counsel and has been previously approved in writing by
Tenant's counsel, that in the event the mortgagee or any other party comes into
possession of any of the Hotels by virtue of a foreclosure, deed or assignment
in lieu of foreclosure or other transfer pursuant to such mortgage, Tenant shall
not be disturbed in its rights hereunder so long as Tenant is not in material
default hereunder.
B. Provided that such mortgagee has delivered to Tenant the
recordable instrument described in subsection A above, in the event that such
mortgagee or any other party
-16-
comes into possession of any of the Hotels by virtue of a foreclosure, deed or
assignment in lieu of foreclosure, or other transfer pursuant to such mortgage,
Tenant shall be obligated to such mortgagee or such third party to perform all
of the terms and conditions of this Agreement for the balance of the remaining
term but subject to Tenant's rights to terminate pursuant to Section 19.02.B.2
hereof.
END OF ARTICLE III
-17-
ARTICLE IV
TERM
----
4.01 Term
----
A. The term of this Agreement shall be from the Effective Date
to the last occurring expiration date of any Hotel Term (as defined in
subsection B) for the last Hotel to which this Agreement applies.
B. For each Hotel, the "Hotel Term" shall consist of an "Initial
Term" and the "Renewal Term(s)." The "Initial Term" of all Hotels except those
located in Maryland shall begin on the Effective Date and, unless sooner
terminated as herein provided, shall continue to December 31, 2007. Except as
provided below for the Hotels located in California, Maryland, New York, and
Pennsylvania, and unless Tenant elects not to renew as provided below, the Hotel
Term shall thereafter be renewed automatically without notice for each Hotel, on
the same terms and conditions contained herein, for each of five (5) successive
periods of ten (10) Fiscal Years, provided that Tenant is not then in default
hereunder. With respect to the Hotels located in California, after the Initial
Terms, the Hotel Terms shall thereafter be renewed automatically without notice
by Tenant, on the same terms and conditions contained herein, for each of two
(2) successive periods of ten (10) Fiscal Years, provided that Tenant is not
then in default hereunder, and further provided, however, that in no event shall
the Hotel Terms of the Hotels located in California extend beyond thirty-four
(34) calendar years. With respect to the Hotel located in New York, after the
Initial Term, the Hotel Term shall thereafter be renewed automatically without
notice by Tenant, on the same terms and conditions contained herein, for each of
three (3) successive periods of ten (10) Fiscal Years followed by one (1) period
of four (4) Fiscal Years, provided that Tenant is not then in default hereunder,
and further provided, however, that in no event shall the Hotel Term of the
Hotel located in New York extend beyond forty-eight (48) calendar years. With
respect to the Hotel located in Pennsylvania, after the Initial Term, the Hotel
Term shall thereafter be renewed automatically without notice by Tenant, on the
same terms and conditions contained herein, for one (1) period of ten (10)
Fiscal Years followed by one (1) period of five (5) Fiscal Years, provided that
Tenant is not then in default hereunder, and further provided, however, that in
no event shall the Hotel Term of the Hotel located in Pennsylvania extend beyond
twenty-nine (29) calendar years, with the last day of such Hotel Term, assuming
Tenant does not elect not to renew, being December 31, 2022. With respect to the
Hotels located in Maryland, the "Initial Term" shall begin on the Effective Date
and, unless sooner terminated as herein provided, shall continue to December 31,
2000; and Tenant shall have the option, to be exercised by written notice to
Landlord on or before June 30, 1999 and thereafter on or before June 30 of each
of 2006, 2013, 2020, and 2027, as applicable, to renew the Hotel Terms of the
Maryland Hotels on the same terms and conditions as contained herein, for each
of six (6) successive periods of seven (7) calendar years each, with Tenant's
notice of renewal in each case being required to be given on June 30 of the last
year of the applicable Renewal Term. Each successive period of ten (10), seven
(7), five (5) or four (4), as applicable, Fiscal Years for which the Lease may
be renewed as to the various Hotels, automatically or by notice, as applicable,
shall be called a "Renewal Term". If Tenant elects not to renew the term of this
Agreement as to any Hotel other than those located in Maryland following
expiration of the then current Initial Term or Renewal Term, it shall give
Landlord notice of non-renewal at least one hundred (180) days prior to the
expiration of the then current Initial Term or Renewal Term and shall
nevertheless continue to occupy and operate the Hotel(s) in question as Tenant
hereunder until the earlier to occur of (i) the later of the expiration of the
Initial Term or the Renewal Term, whichever is in effect on the last date on
which notice of non-renewal could be given, or the three year anniversary of the
last date on which notice of non-renewal could be given, (ii) three years after
the expiration of the then current term, or (iii) such time as Landlord effects
a sale of the Hotel(s) or secures a new tenant or operator but, in any such
case, not earlier than the expiration of the then current term of this
Agreement. If Tenant does not timely elect to renew the Hotel Term as to any
Hotel located in Maryland, then the Hotel Term as to any
-18-
such Hotel shall terminate on the last day of the Initial Term or Renewal Term
then in effect as to such Hotel(s). Tenant may, at its option, elect not to
renew for any Renewal Term with respect to any one (1) or more of the Hotels at
any given time. Notwithstanding any other provision of this Lease, including,
without limitation, Section 4.04 hereof, there is no current obligation on the
part of either Landlord or Tenant that Tenant continue to occupy or operate any
of the Hotels beyond the applicable Hotel Term.
C. The Hotel Term with respect to each of the Hotels subject to a
ground lease shall not exceed the term of the applicable ground lease. Landlord
agrees that with respect to any ground lease that is about to expire it will
deliver a written notice to Tenant no later than ninety (90) days before the
last day on which Landlord can elect to renew the term of said ground lease,
informing Tenant of the impending expiration of the ground lease and whether
Landlord will elect to renew the ground lease for said applicable renewal
period.
4.02 Termination Fee
---------------
A. If the Hotel Term of a particular Hotel is terminated before the
natural expiration (and assuming the exercise of all Renewal Terms) thereof due
solely to either (i) the provisions of Section 15.01 or 15.02 with respect to a
casualty or condemnation, or (ii) upon a sale of a Hotel in accordance with the
terms of Article XIX, then Tenant shall, except as provided below, receive from
Landlord a termination fee (the "Termination Fee") in an amount determinable
under Section 4.02.B below. The purpose of the Termination Fee is to compensate
Tenant for the loss of earnings from operation of the Hotel due to a premature
termination of this Agreement as to a particular Hotel or Hotels. No Termination
Fee shall be due upon a foreclosure, deed in lieu of foreclosure, or any other
transfer taking place pursuant to the Combined Loan Documents after acceleration
or maturity of the obligations thereunder but before such obligations are
satisfied in full or extinguished.
B. The Termination Fee shall be an amount equal to the net present
value, as computed by Tenant, of the reasonably anticipated amount of Tenant's
Earnings over the next ensuing forty (40) years or, if he then remaining term of
this Agreement for the Hotel for which the calculation is made (assuming the
exercise of all Renewal Terms) is less than forty (40) years, such lesser
period. The discount rate to be employed in making such computation shall be a
percentage equal to the sum of (i) three percentage points plus (ii) the then
base rate of interest charged by Citibank, N.A. (or its successor). Such fee
computation shall not be binding on Landlord unless the firm of independent
auditors regularly employed by Landlord has reported on the mathematical
accuracy of the computation and that the forecast used as the basis for
computing such anticipated earnings was prepared using assumptions that are
reasonable as a basis for forecasting anticipated earnings over the period in
question. Nevertheless, the Termination Fee shall in no event exceed the
percentage set forth in the table below, of the "Economic Gain," as defined in
Section 4.02.C, applicable to the year of the particular Termination Fee Term in
which the right to a Termination Fee accrues:
Year of Termination Fee Term Percentage
---------------------------- -------------------------------------------------
1-15 50%
16-40 49% in year 16, declining by one percentage point per
year thereafter.
-19-
C. For purposes hereof, "Economic Gain" shall mean (i) any Sale
Proceeds minus (ii) 113% (123% in the 21st and subsequent years of the
Termination Fee Term) of the sum of (1) Landlord's original cost basis of the
Hotel and FF&E when Landlord acquired the Hotels (as shown on Exhibit F attached
hereto and not including the cost of any FF&E Replacements, repairs,
maintenance, building improvements, alterations, or replacements or other costs
incurred after completion of each Hotel) involved in the condemnation, casualty,
or sale, plus (2) the cost of any structural repairs or replacements
necessitated by previous condemnations or casualties in excess of insurance or
condemnation proceeds received as a result of a casualty or condemnation
occurring prior to any casualty or condemnation triggering Landlord's obligation
hereunder to pay a Termination Fee.
D. If the Termination Fee exceeds the available Sale Proceeds,
the amount, if any, of such excess shall not be due.
E. The Termination Fee due under subsection A shall be paid in
full by Landlord to Tenant upon the later to occur of (i) the termination of
this Agreement as to that particular Hotel, or (ii) the date on which the Sale
Proceeds become available to Landlord. In the event of any Sale Proceeds
represented by evidences of indebtedness, Landlord shall assign to Tenant,
without recourse, all or such portion of the principal amount thereof (and any
interest accruing thereon) as equals that portion of the Termination Fee not
other wise paid. Any such assignment shall be deemed payment of the Termination
Fee to the extent of the principal amount so assigned.
F. Any dispute between Landlord and Tenant with respect to the
Termination Fee or the obligation of Landlord or Tenant thereunder shall, at the
request of either party, be submitted to arbitration in accordance with Article
XX.
4.03 Performance Termination
-----------------------
A. If the average of the Operating Profit (computed for purposes
of this Section 4.03 only (a) by adding back thereto (i) any Impositions or (ii)
any funds supplied by Tenant for Working Capital, Inventories, or Fixed Asset
Supplies over and above Initial Working Capital pursuant to Section 7.01, or
(iii) any taxes (including any penalties, fines, and interest added thereto)
payable by or assessed against Landlord or Tenant related to Tenant's lease
hereunder of the Hotels and the personal property located therein, but (b) with
a deduction for the annual ground rent payable on all MI Ground Leases, whether
paid or deferred) during any three (3) consecutive Fiscal Years during the term
of this Agreement fails to equal or exceed the lesser of (I) eight percent (8%)
of the sum of the aggregate original costs incurred by Landlord with respect to
purchase of the Hotels then subject to this Agreement and any subsequent
expansions thereof, or (2) the sum of (i) the average annual amount of the
interest portion of Debt Service with respect to such Fiscal Years plus (ii) $5
million, Landlord shall, subject to the conditions of Section 4.03.B, have the
option to terminate this Agreement. Such option may be exercised by serving
written notice of Landlord's election to terminate this Agreement upon Tenant
not later than ninety (90) days after receipt of the Annual Operating Statement
for such third consecutive Fiscal Year. Such notice shall state the basis on
which Landlord asserts the right of termination and shall show all mathematical
calculations constituting the basis therefor.
B. Upon receipt of Landlord's written notice of termination under
Section 4.03.A, Tenant shall have the option, to be exercised within thirty (30)
days after receipt of said notice, to pay to Landlord the amount of any
deficiency described in clauses (1) and (2) of Section 4.03.A and which
constituted the basis of said notice. If Tenant does not exercise its option to
make the payment permitted by this Section 4.03.B, then this Agreement shall
terminate as of the end of the third (3rd) full Accounting Period following the
date on which Tenant receives Landlord's written notice of termination under
Section 4.03.A; provided, however, that such period of time shall be extended as
required by applicable law pertaining to the termination of the employment of
the
-20-
employees at the Hotels either for the minimum period required by law in order
not to be in violation thereof or for such lesser period as may be permitted if
certain payments are made (but only if such payments are made by Landlord).
4.04 Actions to be Taken Upon Termination
------------------------------------
A. Upon termination of this Agreement, the following shall be
applicable:
1. Tenant shall, within ninety (90) days after termination
of this Agreement, prepare and deliver to Landlord a final accounting statement
with respect to the Hotels, as more particularly described in Section 9.01
hereof, along with a statement of any sums due from Landlord to Tenant or from
Tenant to Landlord pursuant hereto, dated as of the date of termination. Within
thirty (30) days after the receipt by Landlord 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 from Gross Revenues attributable to the final
Fiscal Year of the Term, unless the Termination occurs as a result of a default
by either party, in which case the defaulting party shall pay such cost. Tenant
and Landlord 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.
2. Tenant shall release and transfer to Landlord any of
Landlord's funds which are held or controlled by Tenant with respect to the
Hotels with the exception of funds to be held in escrow pursuant to Sections
12.04, 13.01.B and 14.01.C, funds necessary to compensate Tenant pursuant to
Section 7.01, funds necessary to reimburse Tenant pursuant to Sections 5.05 and
9.04, and otherwise in accordance herewith.
3. Tenant shall make available to Landlord such books and
records respecting the Hotels (including those from prior years, subject to
Tenant's reasonable records retention policies) as will be needed by Landlord to
prepare the accounting statements, in accordance with the Uniform System of
Accounts, for the Hotels for the year in which the Termination occurs and for
any subsequent year.
4. Tenant shall (to the extent permitted by law or by
applicable agreement) assign to Landlord or to the new tenant all subleases,
concession agreements, operating licenses and permits for the Hotels which have
been issued in Tenant's name (including liquor and restaurant licenses, if any);
provided that if Tenant has expended any of its own funds in the acquisition of
any of such licenses or permits, Landlord shall reimburse Tenant therefor if it
has not done so already.
5. Various other actions shall be taken, as described in
this Agreement, including, but not limited to, the actions described in Sections
7.01, 10.02, 10.04.C, 12.04, and 14.01.C.
6. Tenant shall peacefully vacate and surrender the Hotels
to Landlord.
B. Upon Termination of the Hotel Term of one or more but less
than all Hotels prior to termination of this Agreement, the parties shall make
such prorations, adjustments and changes to this Agreement as are appropriate,
in the determination of Landlord and Tenant, both acting reasonably, and the
following shall be applicable:
1. If Tenant is not to continue operating the Hotel(s) being
terminated, then:
-21-
a. Tenant shall release and transfer to Landlord that
portion of Landlord's funds properly allocable to the Hotel which are held or
controlled by Tenant with respect to the Hotels with the exception of funds to
be held in escrow pursuant to Sections 12.04, 13.01.B, and 14.01.C, funds
necessary to compensate Tenant pursuant to Section 7.01, funds necessary to
reimburse Tenant pursuant to Section 9.04, and otherwise in accordance herewith.
b. Tenant shall (to the extent permitted by law or by
applicable agreement) assign to Landlord or to the new tenant all subleases,
concession agreements, operating licenses and permits for the Hotel which have
been issued in Tenant's name (including liquor and restaurant licenses, if any);
provided that if Tenant has expended any of its own funds in the acquisition of
any of such licenses or permits, Landlord shall reimburse Tenant therefor if it
has not done so already.
c. Various other actions shall be taken, as described
in this Agreement, including, but not limited to, the actions described in
Sections 7.01, 10.02, 10.04.C, 12.04, and 14.01.C.
d. Tenant shall peacefully vacate and surrender the
Hotel to Landlord; or
2. If Tenant will continue to operate the Hotel(s) being
terminated, then:
a. Tenant and the new landlord shall enter into a
Severance Lease as to such Hotel(s). To the extent permitted by law, each
Severance Lease and this covenant shall automatically be superior to all rights,
liens and interests intervening between the date of this Agreement and the
recordation of a memorandum or short form of each such Severance Lease. The
provisions of this Section 4.04.B.2.a shall be self-executing and the new
landlord shall execute one or more Severance Leases as herein provided and a
memorandum or short form of such Severance Lease in form reasonably satisfactory
to Tenant and any other documents reasonably requested by Tenant to evidence the
creation of the leasehold under the Severance Lease. If either the new landlord
or Tenant shall fail to enter into a Severance Lease upon the occurrence of the
events described herein, the Severance Lease shall nonetheless be and shall be
construed to be in full force and effect, the parties' actually entering into
said Severance Lease in such instance constituting merely evidentiary
confirmation of such Severance Lease and not a condition precedent to the
effectiveness thereof.
b. Tenant shall release and transfer to Landlord that
portion of Landlord's funds properly allocable to the Hotel which are held or
controlled by Tenant with respect to the Hotels with the exception of funds to
be held in escrow pursuant to Sections 12.04, 13.01.B, and 14.01.C, funds
necessary to compensate Tenant pursuant to Section 7.01, funds necessary to
reimburse Tenant pursuant to Section 9.04, and otherwise in accordance herewith.
c. Various other actions shall be taken, as described in
this Agreement, including, but not limited to, the actions described in Sections
7.01, 10.02, 10.04.C, 12.04, 13.01.B, and 14.01.C.
C. The provisions of this Section 4.04 shall survive termination of
this Agreement.
END OF ARTICLE IV
-22-
ARTICLE V
RENT
----
5.01 Annual Rent
-----------
A. Tenant agrees to pay Landlord during the Initial Term and any
Renewal Terms hereof annual rental with respect to each Fiscal Year (the "Annual
Rent") equal to (1) (a) eighty-five percent (85%) of Operating Profit in each
Fiscal Year until such time as the partners of Landlord have received cumulative
distributions of Loan Proceeds equal to Sixty Million, Five Hundred Twenty-Six
Thousand, Five Hundred Dollars ($60,526,500), less (b) an amount equal to the
sum of any Deductions for Hotel Working Capital, Inventories, and Fixed Asset
Supplies to which Tenant is entitled under Section 7.01 and the amount of all
Deductions for taxes (including fines, penalties, and interest, if any, added
thereto) payable by or assessed against Landlord or Tenant related to Tenant's
lease of the Hotels and the personal property located therein from Landlord,
multiplied by .15, and thereafter, (2) (a) seventy-five percent (75%) of
Operating Profit for each Fiscal Year, less (b) an amount equal to the sum of
any Deductions for Hotel Working Capital, Inventories, and Fixed Asset Supplies
to which Tenant is entitled under Section 7.01 and the amount of all Deductions
for taxes (including fines, penalties, and interest, if any, added thereto)
payable by or assessed against Landlord or Tenant related to Tenant's lease of
the Hotels and the personal property located therein from Landlord, multiplied
by .25. Notwithstanding Tenant's agreement to pay Annual Rent to Landlord, a
portion of Annual Rent may be (x) paid by Tenant directly to the MI Ground
Lessors on Landlord's behalf, (y) paid by Tenant directly to MI under the MI
Backup Guaranties and the Additional MI Guaranties on Landlord's behalf, and (z)
retained by Tenant to satisfy certain obligations of Landlord to Tenant, but
only in accordance with Section 5.03.
B. Notwithstanding the foregoing, as to any Severance Lease, (1) if
the Annual Rent being paid by Tenant has been reduced from the amount stated in
Section 5.01.A(1) to the amount stated in Section 5.01.A.2 prior to the
transaction giving rise to the Severance Lease, then Annual Rent under the
Severance Lease shall be the amount stated in Section 5.01.A.2; and (2) (a) if
the Annual Rent being paid by Tenant has not been reduced from the amount stated
in Section 5.01.A(1) to the amount stated in Section 5.01.A(2) prior to the
transaction giving rise to the Severance Lease, then under the Severance Lease,
Annual Rent shall be equal to eighty-five percent (85%) of Operating Profit less
the amounts stated in Section 5.01.A(1)(b) of the Severance Lease until the new
landlord has received a cumulative return of equity (through (y) Loan Proceeds
or (z) distributions of Operating Profit in excess of the Priority Return) equal
to fifty percent (50%) of its original investment of equity in the Hotels
covered by the Severance Lease and (b) thereafter, Annual Rental shall be equal
to seventy-five percent (75%) of Operating Profit less the amounts stated in
Section 5.01.A(2)(b) of the Severance Lease.
5.02 Additional Rent
---------------
A. The term "Additional Rent" as used hereinafter shall mean the
excess, if any, of (1) the aggregate amount paid by Tenant in each Fiscal Year
under Section 5.03 to (a) Landlord or, on Landlord's behalf, to parties other
than Landlord or Tenant, (b) Tenant as repayment of Foreclosure Avoidance Loans,
(c) Tenant as reimbursement of Additional Rent paid in previous Fiscal Years,
and (d) Tenant as payment on any due but unpaid Termination Fee, over (2) Annual
Rent.
B. It shall be the obligation of Landlord to refund to Tenant any
Additional Rent paid by Tenant; provided, however, that such refund shall be
made to Tenant only from Operating Profit in future Fiscal Years as provided in
Section 5.03. Such refund shall be made without interest. Upon termination of
this Agreement as to all of the Hotels, Landlord shall have no further liability
for any refund of Additional Rent previously paid by Tenant.
-23-
5.03 Distribution of Operating Profit
--------------------------------
A. For each Fiscal Year until the earlier to occur of (i)
satisfaction in full of all obligations of Landlord under the Combined Loan
Documents, or (ii) a foreclosure, deed in lieu of foreclosure or any other
transfer having taken place as to all Hotels under any of the Combined Loan
Documents, Operating Profit, to the extent available, shall be distributed by
Tenant as follows (without duplication):
1. First, an amount equal to Debt Service shall be paid to
Landlord to be used to pay such obligations; then
2. An amount equal to administrative expenses of Landlord, as
set forth on Exhibit G attached hereto, in an aggregate amount not to exceed Two
Hundred Fifty Thousand Dollars ($250,000) in Fiscal Year 1994, and thereafter an
amount equal to Two Hundred Fifty Thousand Dollars ($250,000) as adjusted upward
each Fiscal Year so that such amount reflects the percentage increase in the CPI
as announced for November of the immediately preceding Fiscal Year over the CPI
announced for December 1993, provided that if such percentage increase is a
negative number in any given Fiscal Year, then there shall be no increase in
such amount over the previous Fiscal Year, shall be paid to Landlord, provided
that, with respect to interim amounts paid to Landlord pursuant to Section 5.04,
the amount of Operating Profit paid to Landlord pursuant to this subsection
shall be limited to the amount of such expenses for which Tenant has received
written notice from Landlord no later than five (5) days after the last day of
the Accounting Period for which the interim payment is being made and provided
that such notice contains an itemized listing of the expenses for which the
distribution is to be made; then
3. On Landlord's behalf, an amount equal to the Current Ground
Rent due under all MT Ground Leases shall be paid (prorata, if necessary) to the
MI Ground Lessors; then
4. a. For such time as the outstanding principal balance under
the Loan Agreements is greater than Three Hundred Million Dollars ($300,000,000)
as of the last day of the Cumulative Tenant Period as computed by Agent in
accordance with the Loan Agreements, any and all remaining Operating Profit
shall be paid to Landlord to be used to pay the Excess Principal Payments;
b. For such time as the outstanding principal balance under
the Loan Agreements is greater than Two Hundred Fifty Million Dollars
($250,000,000) as of the last day of the Cumulative Tenant Period as computed by
Agent in accordance with the Loan Agreements, but less than or equal to Three
Hundred Million Dollars ($300,000,000) as of the last day of the Cumulative
Tenant Period as computed by Agent in accordance with the Loan Agreements, then
the remaining Operating Profit shall, except as to any Operating Profit from any
Accounting Periods covered by Section 5.03.A.4.d below, be distributed as
follows:
i. Eighty percent (80%) of any remaining Operating
Profit shall be paid to Landlord to be used by Landlord to pay down the loan
balance under the Loan Agreements; and
ii. Twenty percent (20%) of any remaining Operating
Profit shall be distributed as follows:
(a) first, an amount equal to the Deferred Ground
Rent (and any Paid Over Amounts with respect thereto if not reflected therein),
plus interest accrued thereon on all MI Ground Leases shall be paid (prorata, if
necessary) to the extent not previously reimbursed to the MI Ground Lessors, on
Landlord's behalf, to the MI Ground Lessors; then
-24-
(b) an amount equal to all payments made by MI to
the Lenders under the MI Backup Guaranty (and any Paid Over Amounts with respect
thereto if not reflected therein), plus interest accrued thereon, as evidenced
by the Note(s), shall be paid, to the extent not previously reimbursed to MI, on
Landlord's behalf, to MI; then
(c) an amount equal to all payments made by HM to
the Lenders under the HM Debt Service Guaranty (and any Paid Over Amounts with
respect thereto if not reflected therein), plus interest accrued thereon, as
evidenced by the Note(s), shall be paid to Landlord, to the extent not
previously reimbursed to HM, to be used to repay HM for making such payments;
then
(d) an amount equal to all payments made by MI to
the Lenders under the Additional MI Guaranties (and any Paid Over Amounts with
respect thereto if not reflected therein), plus interest accrued thereon, as
evidenced by the Note(s), shall be paid, to the extent not previously reimbursed
to MI, on Landlord's behalf, to MI; then
(e) an amount equal to the Priority Return shall be
paid to Landlord; then
(f) an amount equal to the excess, if any, of
Annual Rent over the sum of the Priority Return plus the amount of the
distribution made to Landlord under Section 5.03.A.1, up to but not exceeding
fifty percent (50%) of such remaining Operating Profit, shall be paid to
Landlord; then
(g) an amount equal to the unrefunded Additional
Rent (and any Paid Over Amounts with respect thereto if not reflected therein)
shall be retained by Tenant to be applied by Tenant to the refund of such
Additional Rent; then
(h) an amount equal to the outstanding balance of
any Foreclosure Avoidance Loans (and any Paid Over Amounts with respect thereto
if not reflected therein), including interest accrued thereon as evidenced by
the Note(s), shall be retained by Tenant and applied by Tenant to repayment of
the Foreclosure Avoidance Loans; then
(i) an amount equal to any due but unpaid
Termination Fee (and any Paid Over Amounts with respect thereto if not reflected
therein) shall be retained by Tenant to be applied by Tenant to the payment of
such Termination Fee; then
(j) if the amount paid to Landlord under Section
5.03.A.4.b.ii(f) above was less than the excess of Annual Rent over the sum of
the Priority Return plus the amount of the distribution made to Landlord under
Section 5.03.A.1, then an amount equal to such deficiency shall be paid to
Landlord; and then
(k) any and all remaining Operating Profit shall be
retained by Tenant.
c. If the outstanding principal balance under the Loan Agreements is
less than or equal to Two Hundred Fifty Million Dollars ($250,000,000) as of the
last day of the Cumulative Tenant Period, as computed by Agent in accordance
with the Loan Agreements, then the remaining Operating Profit, except as to
Operating Profit from any Accounting Periods covered by Section 5.03.A.4.d
below, shall be distributed as follows:
i. Seventy-five percent (75%) of such remaining Operating Profit
shall be paid to Landlord to be used by Landlord to pay down the loan balance
under the Loan Agreements; and
-25-
ii. Twenty-five percent (25%) of such remaining Operating Profit
shall be distributed with the same priority and to the same parties for the same
purposes as set forth in Section 5.03.A.4.b.ii(a) through (k).
d. Notwithstanding the provisions of Sections 5.03.A.4.b and c above,
one hundred percent (100%) of all Operating Profit remaining after the
distributions described in Sections 5.03.A.1, 2 and 3 above from the Cumulative
Tenant Period (without regard to Fiscal Year end adjustments) applicable to a
Payment Date on which either (i) a Potential Default (as defined in the Loan
Agreements) consisting of the nonpayment by the Landlord of any principal or
interest due and payable under either of the Loan Agreements or (ii) an Event of
Default (as defined in the Loan Agreements), in either case of which Tenant has
been given written notice from Lenders within ten (10) days after such Payment
Date, shall have occurred and be continuing on such Payment Date, shall be paid
to Landlord to be used by Landlord to pay the amounts required by the Loan
Agreements. To the extent any portion of such Operating Profit has been
previously retained by Tenant and not paid out to others on Landlord's behalf,
Tenant shall, within ten (10) days after receipt of Agent's notice, pay such
Operating Profit retained by Tenant to Landlord to be used by Landlord to make
such payment. To the extent Tenant has distributed any part of such Operating
Profit to Landlord or to MI or the MI Ground Lessors on Landlord's behalf,
Tenant shall have no obligation to pay such portion to Landlord out of its own
funds or future amounts to be retained by it pursuant to this Section 5.03, it
being understood that any obligation of Landlord, MI or the MI Ground Lessors to
disgorge any portion of such Operating Profit previously distributed to them
shall be pursuant to a direct agreement between Landlord and/or Lenders and MI
and the MI Ground Lessors, as applicable.
B. Commencing with the occurrence of the event described in Section
5.03.A(i) and for each Fiscal Year thereafter during the term of this Agreement,
Operating Profit, to the extent available, shall be distributed as follows
(without duplication):
1. An amount equal to Debt Service shall be paid to Landlord to
be used by Landlord to pay such Debt Service; then
2. An amount equal to administrative expenses of Landlord, as set
forth on Exhibit G attached hereto, in an aggregate amount not to exceed Two
Hundred Fifty Thousand Dollars ($250,000) in Fiscal Year 1994, and thereafter an
amount equal to Two Hundred Fifty Thousand Dollars ($250,000) as adjusted upward
each Fiscal Year so that such amount reflects the percentage increase in the CPI
as announced for November of the immediately preceding Fiscal Year over the CPI
announced for December 1993, provided that if such percentage Increase is a
negative number in any given Fiscal Year, then there shall be no increase in
such amount over the previous Fiscal Year, shall be paid to Landlord, provided
that, with respect to interim amounts paid to Landlord pursuant to Section 5.04,
the amount of Operating Profit paid to Landlord pursuant to this subsection
shall be limited to the amount of such expenses for which Tenant has received
written notice from Landlord no later than five (5) days after the last day of
the Accounting Period for which the interim payment is being made and provided
that such notice contains an itemized listing of the expenses for which the
distribution is to be made; then
3. On Landlord's behalf, an amount equal to the Current Ground
Rent due under all MI Ground Leases shall be paid (prorata, if necessary) by
Tenant to the MI Ground Lessors; then
4. An amount equal to the Deferred Ground Rent (and any Paid Over
Amounts with respect thereto if not reflected therein), plus interest accrued
thereon, on all MI Ground Leases shall be paid (prorata, if necessary), to the
extent not previously reimbursed to the MI Ground Lessors, on Landlord's behalf,
to the MI Ground Lessors; then
-26-
5. An amount equal to all payments made by MI to the Lenders
under the MI Backup Guaranty (and any Paid Over Amounts with respect thereto if
not reflected therein), plus interest accrued thereon, as evidenced by the
Note(s), shall be paid, to the extent not previously reimbursed to MI, on
Landlord's behalf, to MI; then
6. An amount equal to all payments made by HM to the Lenders
under the HM Debt Service Guaranty (and any Paid Over Amounts with respect
thereto if not reflected therein), plus interest accrued thereon, as evidenced
by the Note(s), shall be paid to Landlord, to the extent not previously
reimbursed to HM, to be used to repay HM for making such payments; then
7. An amount equal to all payments made by MI to the Lenders
under the Additional MI Guaranties (and any Paid Over Amounts with respect
thereto if not reflected therein), plus interest accrued thereon, as evidenced
by the Note(s), shall be paid, to the extent not previously reimbursed to MI, on
Landlord's behalf, to MI; then
8. An amount equal to the Priority Return shall be paid to
Landlord; then
9. An amount equal to the excess, if any, of Annual Rent over the
sum of the Priority Return plus Debt Service, up to but not exceeding fifty
percent (50%) of such remaining Operating Profit, shall be paid to Landlord;
then
10. An amount equal to the unrefunded Additional Rent (and any
Paid Over Amounts with respect thereto if not reflected therein) shall be
retained by Tenant to be applied by Tenant to the refund of such Additional
Rent; then
11. An amount equal to the outstanding balance of any Foreclosure
Avoidance Loans (and any Paid Over Amounts with respect thereto if not reflected
therein), including interest accrued thereon as evidenced by the promissory note
provided for in Section 5.05, shall be retained by Tenant and applied by Tenant
to repayment of the Foreclosure Avoidance Loans; then
12. An amount equal to any due but unpaid Termination Fee shall be
retained by Tenant to be applied by Tenant to the payment of such Termination
Fee (and any Paid Over Amounts with respect thereto if not reflected therein);
then
13. If the amount paid to Landlord under Section 5.03.B.9 was less
than the excess of Annual Rent over the sum of the Priority Return plus Debt
Service, then an amount equal to such deficiency shall be paid to Landlord; and
then
14. Any and all remaining Operating Profit shall be retained by
Tenant.
C. For each Fiscal Year (i) commencing with the event described in
Section 5.03.A(ii) in the event of a foreclosure, deed in lieu of foreclosure,
or any other transfer having taken place as to all Hotels under the Combined
Loan Documents, which transfer occurs simultaneously as to all Hotels then
subject to this Agreement, or (ii) with respect to any Severance Lease,
Operating Profit, to the extent available, shall be distributed as follows
(without duplication):
1. An amount equal to Deemed Debt Service shall be paid to the new
landlord; then
2. On the new landlord's behalf, an amount equal to the Current
Ground Rent due under all, if any, MI Ground Leases affecting the applicable
Hotel(s) shall be paid (prorata, if necessary) by Tenant to the MI Ground
Lessors; then
-27-
3. An amount equal to the Deferred Ground Rent, plus interest
accrued thereon, on any MI Ground Leases affecting the applicable Hotel(s) shall
be paid (prorata, if necessary), to the extent not previously reimbursed to the
MI Ground Lessors, on the new landlord's behalf, to the MI Ground Lessors
(including Deferred Ground Rent applicable to all Hotels (in the case of C(i)
above) or only to the Hotel(s) subject to the Severance Lease (in the case of
C(ii) above) that accrued prior to the Severance Lease); then
4. An amount equal to the Priority Return shall be paid to the
new landlord; then
5. An amount equal to the excess, if any, of Annual Rent over
the sum of the Priority Return plus Deemed Debt Service, up to but not exceeding
fifty percent (50%) of such remaining Operating Profit, shall be paid to the new
landlord; then
6. An amount equal to the unrefunded Additional Rent shall be
retained by Tenant to be applied by Tenant to the refund of such Additional Rent
(not including any unrefunded Additional Rent owed to Tenant prior to the event
described in C(i) above or prior to the Severance Lease, whichever is
applicable); then
7. An amount equal to the outstanding balance of any
Foreclosure Avoidance Loans, including interest accrued thereon as evidenced by
the Note(s), shall be retained by Tenant and applied by Tenant to repayment of
the Foreclosure Avoidance Loans (not including amounts owed to Tenant on any
Foreclosure Avoidance Loans made prior to the event described in C(i) above or
prior to the Severance Lease, whichever is applicable); then
8. An amount equal to any due but unpaid Termination Fee shall
be retained by Tenant to be applied by Tenant to the payment of such Termination
Fee (not including any unpaid Termination Fee that accrued prior to the event
described in C(i) above or prior to the Severance Lease, whichever is
applicable); then
9. If the amount paid to the new landlord under Section
5.03.C.5 was less than the excess of Annual Rent over the sum of the Priority
Return plus Deemed Debt Service, then an amount equal to such deficiency shall
be paid to the new landlord; and then
10. Any and all remaining Operating Profit shall be retained by
Tenant.
5.04 Accounting and Interim Payment
------------------------------
A. Within twenty (20) days after the close of each Accounting
Period, Tenant shall submit an interim accounting, or "Rent Letter",
substantially in the form of Exhibit H attached hereto, to Landlord showing
Gross Revenues, Deductions, Operating Profit, and the application thereof under
Section 5.03 on an aggregate basis. Tenant shall transfer with each Rent Letter
any interim amounts of Annual Rent and Additional Rent to be paid to Landlord,
which amounts shall be a reasonable estimate of the portions of Annual Rent and
Additional Rent allocable to such Accounting Period.
B. Calculations and payments of Annual Rent and Additional Rent and
applications of Operating Profit made with respect to each Accounting Period
shall be accounted for cumulatively within each Fiscal Year. Within seventy-five
(75) days after the close of each Fiscal Year, Tenant shall submit an
accounting, as more fully described in Section 9.01, for such Fiscal Year to
Landlord, which accounting shall be controlling over the interim accountings.
Any deficiency in the amount of Annual Rent or Additional Rent as shown by the
Fiscal Year accounting shall be promptly paid by Tenant to Landlord or to others
on Landlord's behalf in accordance with Section 5.03. Any overpayment of Annual
Rent or Additional Rent made by Tenant as shown by the Fiscal
-28-
Year accounting shall be a credit against both Annual Rent and Additional Rent
owed by Tenant to Landlord in succeeding Accounting Periods. If this Agreement
is terminated for any reason before Tenant has recovered all such overpayments,
then Tenant shall be entitled to recover the remaining amount of such
overpayments from either of the following sources: (i) by deduction from any of
Landlord's funds which are held or controlled by Tenant, or (ii) Landlord shall
pay Tenant the remaining amount of such credit out of any Sale Proceeds. No
adjustment shall be made for any Operating Loss in a preceding or subsequent
Fiscal Year.
5.05 Advances to Avoid Foreclosure
-----------------------------
The parties agree that Tenant shall have no liability with respect to
any obligations of Landlord. However, Tenant shall have the right, but not the
obligation, to make Debt Service payments on behalf of Landlord as and to the
extent necessary to avoid the foreclosure of any lien or security interest
applicable to a particular Hotel or Hotels. Any such payments (each of which
shall be referred to as a "Foreclosure Avoidance Loan") shall be deemed a loan
by Tenant to Landlord in such amount, shall bear annual interest at two
percentage points over the base rate of interest charged by Citibank, N.A. (or
its successor) and shall be repayable by Landlord on the date that is fifteen
(15) years after the date of each Foreclosure Avoidance Loan or, if earlier,
upon termination of this Agreement. Tenant shall be entitled to reimburse itself
for such Foreclosure Avoidance Loans in accordance with Section 5.03. Landlord
shall evidence each Foreclosure Avoidance Loan by executing a promissory note
payable to Tenant in the principal amount of each Foreclosure Avoidance Loan and
bearing interest as aforesaid.
5.06 Application of Sale and Loan Proceeds
-------------------------------------
Landlord agrees that Gross Sale Proceeds shall be applied to the uses
described and in the order listed in (a), (b), (c) and (d) of the definition of
Sale Proceeds. Loan Proceeds and Sale Proceeds shall be applied, and Landlord
shall be obligated to apply same, in the following manner:
A. First, an amount equal to the funds required for the escrows as
set forth in Sections 12.04 and 14.01.C; then
B. An amount equal to the Deferred Ground Rent (and any Paid Over
Amounts with respect thereto if not reflected therein) on all Hotels subject to
MI Ground Leases, if any, shall be paid (prorata, if necessary), to the extent
not previously reimbursed, to the MI Ground Lessors; then
C. An amount equal to all payments made by MI to the Lenders under
the MI Backup Guaranty (and any Paid Over Amounts with respect thereto if not
reflected therein), plus interest accrued thereon as evidenced by the Note(s),
if any, shall be paid, to the extent not previously reimbursed, to MI (but this
shall not apply to a distribution of Sale Proceeds or Loan Proceeds received by
a new landlord as described in Section 5.03.C(i) or under a Severance Lease);
then
D. An amount equal to all payments made by HM to the Lenders under
the HM Debt Service Guaranty (and any Paid Over Amounts with respect thereto if
not reflected therein), plus interest accrued thereon as evidenced by the
Note(s), if any, shall be paid, to the extent not previously reimbursed, to HM
(but this shall not apply to a distribution of Sale Proceeds or Loan Proceeds
received by a new landlord as described in Section 5.03.C(i) or under a
Severance Lease), then
E. An amount equal to all payments made by MI to the Lenders under
the Additional MI Guaranties (and any Paid Over Amounts with respect thereto if
not reflected therein), plus interest accrued thereon as evidenced by the
Note(s), if any, shall be paid (prorata, if necessary),
-29-
to the extent not previously reimbursed, to MI (but this shall not apply to a
distribution of Sale Proceeds or Loan Proceeds received by a new landlord as
described in Section 5.03.C(i) or under a Severance Lease); then
F. An amount equal to the unrefunded Additional Rent (and any Paid
Over Amounts with respect thereto if not reflected therein), if any, shall be
paid to Tenant (but, after the event described in Section 5.03.C(i) and as to a
Severance Lease, this shall include only such amounts accruing to Tenant after
such event or under such Severance Lease after the commencement of the Severance
Lease, whichever is applicable); then
G. An amount equal to the outstanding balance of any Foreclosure
Avoidance Loans (and any Paid Over Amounts with respect thereto if not reflected
therein), including interest thereon as evidenced by the Note(s), if any, shall
be paid to Tenant (but, after the event described in Section 5.03.C(i) and as to
a Severance Lease, this shall include only such amounts accruing to Tenant after
such event or under such Severance Lease after the commencement of the Severance
Lease, whichever is applicable); then
H. An amount equal to any outstanding deficiencies owed Tenant
pursuant to Section 9.04 (and any Paid Over Amounts with respect thereto if not
reflected therein), if any, shall be paid to Tenant (but, after the event
described in Section 5.03.C(i) and as to a Severance Lease, this shall include
only such amounts accruing to Tenant after such event or under such Severance
Lease after the commencement of the Severance Lease, whichever is applicable);
then
I. An amount equal to any uncompensated amounts owed to Tenant
pursuant to Section 7.01 (and any Paid Over Amounts with respect thereto if not
reflected therein), if any, shall be paid to Tenant (but, after the event
described in Section 5.03.C(i) and as to a Severance Lease, this shall include
only such amounts accruing to Tenant after such event and under such Severance
Lease after the commencement of the Severance Lease, whichever is applicable);
then
J. An amount equal to any unpaid Termination Fee (and any Paid Over
Amounts with respect thereto if not reflected therein), if any, owed Tenant
pursuant to Section 4.02 (but, after the event described in Section 5.03.C(i) or
as to a Severance Lease, this shall include only such amounts accruing to Tenant
after such event and under such Severance Lease after the commencement of the
Severance Lease, whichever is applicable); and then
K. The remaining balance of the Loan Proceeds or Sale Proceeds, as
the case may be, shall be retained by Landlord (or the new landlord in the case
of a Severance Lease).
The Landlord and Tenant agree that MI, HM, and the MI Ground Lessors
are intended third party beneficiaries of the rights and obligations set forth
in this Section 5.06. As such third party beneficiaries, MI, HM, and the MI
Ground Lessors, in addition to Tenant, shall have all remedies available at law
or in equity for the enforcement of the obligations set forth herein. In
addition to all such remedies, in the event Landlord fails to apply Loan
Proceeds or Sale Proceeds in accordance with the provisions hereof, Tenant shall
have the right, notwithstanding any other provision in this Agreement to the
contrary or Tenant's obligation to pay Annual Rent or Additional Rent to
Landlord, to offset all amounts owed as described in subsections A through K
above against any future Annual Rent or Additional Rent, and to pay MI, HM, the
MI Ground Lessors, and itself in accordance with the provisions of this Section
5.06 out of such offset amounts. Any amounts offset by Tenant shall not,
however, affect the amounts required to be distributed by Tenant to Landlord to
be used to make payments to Lenders as specifically set forth in Sections
5.03.A.1, 5.03.A.4.a, 5.03.A.4.b.i, 5.03.A.4.c.i, 5.03.A.4.d. and 5.03.C.1. The
provisions of this Section 5.06 shall survive any Termination as to any
particular Hotel or Hotels and any termination of this Agreement.
END OF ARTICLE V
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ARTICLE VI
[THIS ARTICLE INTENTIONALLY OMITTED]
END OF ARTICLE VI
-31-
ARTICLE VII
HOTEL WORKING CAPITAL AND FIXED ASSET SUPPLIES
----------------------------------------------
7.01 Hotel Working Capital, Inventories, and Fixed Asset Supplies
------------------------------------------------------------
From time to time additional funds may be necessary to maintain Hotel
Working Capital, Inventories, and Fixed Asset Supplies at levels reasonably
determined by Tenant to be necessary to satisfy the needs of the Hotels as their
operation may then require. Tenant shall be entitled to take as Deductions any
additional necessary funds supplied by it for such purposes and shall use such
funds only for Hotel Working Capital, Inventories and Fixed Asset Supplies in
accordance with the purposes of this Agreement. Upon Termination, Tenant shall
leave in the Hotels for Landlord any unused Inventories, except for Inventories
purchased by Tenant under Section 10.02. Fixed Asset Supplies, including
additions and replacements thereto, shall remain the property of Landlord
throughout the term of this Agreement, except for Fixed Asset Supplies purchased
by Tenant under Section 10.02. Upon termination of this Agreement, Tenant shall
pay to Landlord the difference, if any, between Initial Working Capital and
funds supplied by Tenant for additional Working Capital, Inventories, and Fixed
Asset Supplies. If Working Capital at the time of termination (for any reason)
of this Agreement is inadequate to fully compensate Tenant for such additional
funds supplied by Tenant, then Tenant shall be entitled to deduct such
deficiency from either of the following sources: (i) by deduction from any funds
of Landlord then held or controlled by Tenant, or (ii) out of any Sale Proceeds.
Upon the Termination of the Hotel Term of a particular Hotel prior to
termination of this Agreement, Tenant shall disburse to Landlord the difference,
if any, between that portion of Initial Working Capital properly allocable to
the Hotel and that portion of funds supplied by Tenant for additional Working
Capital, Inventories, and Fixed Asset Supplies properly allocable to the Hotel
after payment by Tenant of all charges properly payable out of such Working
Capital with respect to the particular Hotel unless Tenant will continue
operating the Hotel pursuant to Section 19.02.B, in which case Tenant shall
continue to hold such amount for the benefit of the new owner of the Hotel to be
used in the operation of the Hotel.
END OF ARTICLE VII
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ARTICLE VIII
REPAIRS, MAINTENANCE, AND REPLACEMENTS
--------------------------------------
8.01 Repairs and Maintenance
-----------------------
Tenant shall, on Landlord's behalf and as Landlord's agent with
respect to such obligation, maintain each Hotel in good repair and condition and
in conformity with applicable laws and regulations and shall make or cause to be
made such routine maintenance, repairs, and minor alterations, the cost of which
can be expensed under generally accepted accounting principles, as it, from time
to time, deems necessary for such purposes. The cost of such maintenance,
repairs, and alterations shall be paid from Gross Revenues and shall be treated
as a Deduction in determining Operating Profit.
8.02 Repairs and Equipment Reserve
-----------------------------
A. Tenant shall, on behalf of Landlord and in Landlord's name but
with Tenant having the sole authority to make withdrawals or transact other
business with respect thereto, establish and maintain, on a consolidated basis,
an escrow reserve account (the "Repair and Equipment Reserve" or the "Reserve")
in a bank designated by Landlord. The Reserve shall be used to cover the cost of
FF&E Replacements consisting of:
1. Replacements and renewals related solely to the FF&E of a
Hotel (including communication systems and computer systems);
2. Certain routine repairs and maintenance to the building
structures of a Hotel, the cost of which is normally capitalized under generally
accepted accounting principles, 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 alterations, improvements,
renewals, or replacements to the structure of the building or to its mechanical,
electrical, heating, ventilating, air conditioning, plumbing, or vertical
transportation systems, the cost of which are Landlord's sole responsibility
under Section 8.03; and
3. Lease payments for any FF&E and motor vehicles that are
leased instead of purchased and not treated as Deductions pursuant to Item 16 of
the definition of Deductions.
B. As of the Effective Date, Landlord and Tenant shall make the
Initial Reserve Deposit into the Reserve. Except as provided below and subject
to the provisions of Section 8.02.E, for each Fiscal Year during the term of
this Agreement, Tenant shall transfer into the Reserve an amount equal to five
percent (5%) of Gross Revenues attributable to each such Hotel for such period
of time. Commencing with Fiscal Year 1997, Tenant shall have the right, but not
the obligation, to increase the amount it transfers into the Reserve to any
amount to greater than five percent (5%) but not exceeding six percent (6%) of
Gross Revenues for such Fiscal Year and each successive Fiscal Year if, based
upon a review of capital requirements for the Hotels, such increase is mutually
agreed upon by Landlord and Tenant; provided, however, that Landlord's agreement
to increase the amount to be transferred into the Reserve to up to six percent
(6%) of Gross Revenues shall not be required if Operating Profit for each of
Fiscal Years 1994 through 1996 equals or exceeds the amounts shown as Operating
Profit on Exhibit I. For purposes of the preceding sentence, Operating Profit
shall be computed by adding back thereto (i) any Deductions for Working Capital,
Inventories, or Fixed Asset Supplies over and above Initial Working Capital
pursuant to Section 7.01, or (ii) any taxes (including any penalties, fines, and
interest added thereto) payable by or assessed against Landlord or Tenant
related to Tenant's lease hereunder of the Hotels and personal property located
therein. Notwithstanding the foregoing, no deduction and transfer into the
Reserve will be required to the
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extent that such deduction and transfer, when added to amounts already in the
Reserve, would make the then balance exceed the gross amount of the transfers
for the previous eight (8) Fiscal Years. Any amounts held in the Reserve may be
allocated among the Hotels and may be applied as set forth in this Article VIII
without regard to the source of such amounts. Any interest which accrues on any
amounts held in the Reserve shall be retained therein without reduction of
Tenant's obligation to make transfers thereto. All amounts held in the Reserve
shall belong to Landlord.
C. Tenant shall, on behalf of Landlord and as Landlord's agent with
respect to such obligation, from time to time make such (i) replacements and
renewals to each Hotel's FF&E, and (ii) repairs to each Hotel of the nature
described in Section 8.02.A.2, as it deems necessary, and (iii) lease payments
as described in Section 8.02.A.3 as it deems necessary, up to the balance in the
Reserve. No expenditures will be made other than as set forth in the approved
Repairs and Equipment Estimate and in no event may expenditures be made in
excess of such balance without the prior approval of Landlord; provided,
however, that (1) Tenant may effect emergency repairs necessary to prevent
further loss or damage without such approval, and (2) Tenant may, in its sole
discretion, expend up to ten thousand dollars ($10,000) per Hotel (as adjusted
upward each Fiscal Year to reflect the percentage increase in the CPI announced
for November of the immediately preceding Fiscal Year over the CPI announced for
December 1993, provided that if such percentage increase is a negative number in
any given Fiscal Year, then there shall be no increase in such amount over the
previous Fiscal Year) in each Fiscal Year for matters not contemplated in the
Repairs and Equipment Estimate. At the end of each Fiscal Year, any amounts
remaining in the Reserve shall be carried forward to the next Fiscal Year.
Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel
shall be deposited in the Reserve without reduction of Tenant's obligation to
make transfers thereto. Expenditures made by Tenant out of the Reserve for
replacements and renewals to the Hotels' FF&E, repairs to each Hotel of the
nature described in Section 8.02.A.2, and lease payments as described in Section
8.02.A.3 shall not also be treated as Deductions. Upon the Termination of the
Hotel Term of a particular Hotel prior to termination of this Agreement, Tenant
shall disburse to Landlord from the Reserve the amount held in the Reserve
properly allocable to such Hotel after payment by Tenant of all charges properly
payable out of the Reserve with respect to the particular Hotel unless Tenant
will continue operating such Hotel, in which case Tenant shall transfer the
amount held in the Reserve properly allocable to such Hotel to a new account for
the benefit of the new owner of the Hotel. Upon termination of this Agreement
and after payment by Tenant of all charges properly payable out of the Reserve,
Tenant shall pay to Landlord all amounts held in the Reserve unless Tenant will
continue operating some or all of the Hotels, in which case Tenant shall
transfer all amounts held in the Reserve, in the event Tenant will continue
operating all of the Hotels, or the amount held in the Reserve properly
allocable to the Hotels Tenant will continue operating, to one or more new
accounts for the benefit of the new landlord(s) of the Hotels. If for any reason
Tenant is prohibited, in contradiction to the terms stated above, from
transferring such Reserve funds to one or more new accounts for the benefit of
the new landlord(s), then Tenant shall be entitled, in addition to the transfers
into the Reserve provided in Section 8.02.B, to transfer from Gross Revenues
into the new Reserve account an amount equal to Twenty Thousand, Four Hundred
Dollars ($20,400) per Hotel that Tenant will continue to lease from or operate
for such new landlord(s). Tenant, in its sole but reasonable discretion, and
subject to the exceptions stated below, shall decide whether to purchase or
lease any replacement FF&E or motor vehicles used in transporting Hotel guests.
If Tenant enters into any lease of replacement FF&E or motor vehicles used in
transporting Hotel guests, it shall do so on Landlord's behalf and as Landlord's
agent; or, upon Tenant's recommendation and request, Landlord shall directly
enter into such leases. Notwithstanding the foregoing, Tenant shall not and
shall not require Landlord to enter into any lease other than (i) Telephone
Leases, (ii) Computer Leases, (iii) TV System Leases, (iv) FF&E Leases, and (v)
leases of vehicles used in transporting Hotel guests. With respect to FF&E
Leases only, Tenant shall be required to obtain Landlord's prior written
approval before entering into or requesting that Landlord enter into any FF&E
Lease, if (a) the fair market value of the FF&E with respect to all FF&E Leases
relating to each Hotel (including those being entered into) would exceed at any
time $200,000 in respect of such Hotel, (b) the FF&E to be covered by such FF&E
-34-
Lease is FF&E that is not customarily leased in the hotel industry in the United
States, or (c) such FF&E Lease is on payment terms (including amount and time of
payment) materially more favorable to the lessor thereof than payment terms
customary in the hotel industry in the United States for similar leases. With
respect to TV System Leases only, Tenant shall be required to obtain Landlord's
prior written approval before entering into or requesting the Landlord enter
into any TV System Lease, if (a) the equipment to be covered by such TV System
Lease is not customarily leased in the hotel industry in the United States or
(b) such TV System Lease is on payment terms (including amount and time of
payment) materially more favorable to the lessor thereof than payment terms
customary in the hotel industry in the United States for similar leases. In
cases described in the preceding two sentences, Landlord's approval shall not be
unreasonably withheld; provided, however, that the failure of Lenders to approve
such leasing proposal shall justify Landlord in withholding its approval.
D. Tenant shall annually prepare a written estimate (the "Repairs
and Equipment Estimate") for FF&E Replacements necessary for the forthcoming
Fiscal Year and shall submit the Repairs and Equipment Estimate to Landlord at
the same time it submits the Annual Operating Projection described in Section
9.03. The Repairs and Equipment Estimate shall be prepared on a consolidated
basis showing proposed expenditures as to each Hotel and the Hotels
collectively. It shall also indicate the estimated time schedule for making such
replacements and renewals. Landlord shall review the Repairs and Equipment
Estimate submitted in good faith by Tenant. If Landlord shall fail to approve
such Repairs and Equipment Estimate as to one or more or all of the Hotels
within thirty (30) days of the receipt thereof, or if Tenant does not agree to
any modifications made by Landlord within fifteen (15) days, Tenant shall have
the option of terminating this Agreement as to those Hotels as to which
agreement was not reached upon giving thirty (30) days written notice to
Landlord. If Tenant does not so notify Landlord, it shall continue to occupy and
operate the Hotels in question as provided under this Agreement without making
the FF&E Replacements to which Landlord did not agree.
E. The percentage contributions for the Reserve described in
Section 8.02.B are estimates. As the Hotels age, these percentages may not be
sufficient to keep the Reserve at the levels necessary to make the replacements
and renewals to one or more or all of the Hotels' FF&E, or to make the repairs
to the Hotel buildings of the nature described in Section 8.02.A.2, required to
maintain the Hotels in first-class condition. If the Repairs and Equipment
Estimate prepared in good faith by Tenant exceeds the available funds in the
Reserve, Landlord shall:
1. Agree to increase the annual percentage in Section 8.02.B
to provide the additional funds required, or
2. Provide outside financing for the additional funds
required, in which event the principal and interest payments on such financing
(but not the expenditure of such additional funds from the Reserve after their
deposit into the Reserve) shall constitute Deductions.
A failure or refusal by Landlord to agree to 1 or 2 above within a
sixty (60) day period after Tenant's request therefor shall entitle Tenant,
within thirty (30) days thereafter, to notify Landlord that it will terminate
this Agreement as to those Hotels as to which agreement was not reached as of a
date six (6) months after the date of Tenant's notice.
8.03 Building Alterations, Improvements, Renewals, and Replacements
--------------------------------------------------------------
A. Tenant shall prepare an annual estimate of aggregate
expenditures necessary for alterations (including major repairs), improvements,
renewals, and replacements (which alterations, improvements, renewals, and
replacements are not among those referred to in Section 8.02.A.2) to the
structural, mechanical, electrical, heating, ventilating, air conditioning,
plumbing, and vertical transportation elements of each of the Hotels (the
"Building Estimate") and shall submit
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such Building Estimate to Landlord for its approval at the same time the Annual
Operating Projection is submitted. The Building Estimate shall be prepared on a
consolidated basis showing proposed expenditures as to each Hotel. Tenant shall
not make any expenditures for such purposes until Landlord approves the Building
Estimate; provided that if such alterations, improvements, renewals, or
replacements to the Hotels (whether included in the Building Estimate or the
need for which arises at any time during any Fiscal Year) are required by reason
of any law, ordinance, regulation, or order of a competent governmental
authority, or are otherwise required for the continued orderly operation of the
Hotels. Tenant shall give Landlord notice thereof and shall be authorized, on
Landlord's behalf and as Landlord's agent, to take appropriate remedial action
without such approval if Landlord does not act. Tenant shall, on Landlord's
behalf and as Landlord's agent, make such alterations, improvements, renewals,
and replacements in accordance with the provisions hereof; and the cost of all
such alterations, improvements, renewals, or replacements shall be borne solely
by Landlord.
B. If Landlord does not approve the Building Estimate as to one or
more or all of the Hotels within thirty (30) days after it has been submitted,
Tenant shall have the option, to be exercised by written notice within thirty
(30) days thereafter, of terminating this Agreement as to those Hotels as to
which agreement was not reached upon giving thirty (30) days written notice to
Landlord.
8.04 Liens
-----
Tenant and Landlord severally shall use their best efforts to prevent
any mechanics', materialmen's and similar liens from being filed against any
Hotel that arise from any such alterations, improvements, renewals, or
replacements in or to such Hotel. They shall cooperate fully in obtaining the
release of any such liens, and the cost thereof, if the lien was not occasioned
by the fault of either party, shall be paid for by Landlord. If the lien arises
as a result of the fault of either party, then the party at fault shall bear the
cost of obtaining the lien release.
8.05 Ownership of Replacements
-------------------------
All alterations, improvements, renewals, or replacements made or
acquired under Article VIII shall be Landlord's property.
END OF ARTICLE VIII
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ARTICLE IX
BOOKKEEPING AND BANK ACCOUNTS
-----------------------------
9.01 Books and Records
-----------------
Books of control and account shall be kept on the accrual basis and in
all material respects in accordance with the Uniform System of Accounts, with
the exceptions provided in this Agreement. Landlord may at reasonable intervals
upon two (2) business days' notice during Tenant's normal business hours examine
such records. Within seventy-five (75) days following the close of each Fiscal
Year, Tenant shall furnish Landlord a statement (the "Annual Operating
Statement") in the form attached as Exhibit J hereto summarizing operations of
all Hotels in the aggregate for such Fiscal Year and a certificate of Tenant's
chief accounting officer or his designee certifying that such year-end statement
is true and correct. Landlord shall have ninety (90) days after receipt to
examine and review said statement and to notify Tenant if it wishes to have said
statement audited. If Landlord raises no objections within said ninety (90) day
period, then such statement shall be deemed to be conclusively accepted by
Landlord as being true and correct, and Landlord shall have no right thereafter
to question its accuracy. Landlord shall be required to commence any audit of
which it has timely notified Tenant within ten (10) days after the date of such
notice and to work diligently to and complete said audit within ninety (90) days
after commencement. All reviews and audits by Landlord as provided herein shall
be at Landlord's sole cost and expense.
9.02 Hotel Accounts and Expenditures
-------------------------------
A. All funds derived from operation of the Hotels shall be
deposited in a bank and in an account chosen by Tenant subject to the reasonable
approval of Landlord. Withdrawals from said accounts shall be made by
representatives of Tenant whose signatures have been authorized. Reasonable
▇▇▇▇▇ cash funds shall be maintained at each Hotel.
B. All payments Tenant makes hereunder shall be made from
authorized bank accounts, or ▇▇▇▇▇ cash funds, or from Working Capital under
Section 7.01. Tenant shall not be required to make any advance or payment to or
for the account of Landlord except as otherwise provided herein, and Tenant
shall not be obligated to incur any liability or obligation for Landlord's
account without assurances satisfactory to Tenant in Tenant's sole discretion
that Landlord will provide necessary funds for the discharge thereof. Debts and
liabilities Tenant incurs as a result of its occupation and operation of the
Hotels under the terms hereof (other than debts and liabilities incurred in a
manner inconsistent with the terms hereof), whether asserted before or after the
termination of this Agreement, will be paid by Landlord to the extent funds are
not available for that purpose from the operation of the Hotels.
9.03 Annual Operating Projection; Five-Year Forecast
-----------------------------------------------
A. Tenant shall submit to Landlord for its review five (5) days
before the first day of each Fiscal Year an "Annual Operating Projection". Such
projection shall be on a consolidated basis, shall include a projection for
Chain Services, and shall be in the form of Exhibit K attached hereto. Tenant
shall use its best efforts to adhere to the Annual Operating Projection. It is
understood, however, that the Annual Operating Projection is an estimate only
and unforeseen circumstances such as, but not limited to, those relating to
costs of labor, material, services, and supplies, casualty, operation of law,
economic and market conditions, and Acts of God may make adherence to the Annual
Operating Projection impracticable, and therefore Tenant shall have the right to
depart therefrom for such causes or other similar causes.
B. Except as stated below, Tenant shall submit to Landlord each
Fiscal Year, promptly upon but no later than thirty (30) days after its
completion a "Five-Year Forecast". Tenant's
-37-
obligation to submit such a Five-Year Forecast shall be in effect only for so
long as Tenant is required in the normal course of its business by its own or
MI's corporate requirements to prepare same. Such forecast shall be on a
consolidated basis for each of the five Fiscal Years commencing with the
immediately following Fiscal Year and shall be in the form of Exhibit L attached
hereto. Due to the difficulty in forecasting beyond one year, any reliance by
Landlord or others on such forecast shall be at their own risk and Tenant shall
be under no obligation to achieve the results set forth in such forecast.
9.04 Operating Losses; Credit
------------------------
A. To the extent there is an Operating Loss for any Accounting
Period, additional funds in the amount of any such deficiency shall be provided
by Landlord within ten (10) days if Tenant gives written notice to Landlord of
such Operating Loss. To the extent Tenant elects not to so collect or Landlord
does not so forward upon request, Tenant shall be entitled to a credit in the
amount of any such deficiency against both Annual Rent and Additional Rent owed
by Tenant to Landlord in succeeding Accounting Periods. If Landlord fails to
provide additional funds in the amount of such Operating Loss within such ten
(10) day period, Tenant shall have the option of terminating this Agreement upon
not less than thirty (30) days written notice to Landlord. If this Agreement is
terminated for any reason before Tenant has recovered all such deficiencies,
then Tenant shall be entitled to recover the remaining deficiencies from either
of the following sources: (i) by deduction from any of Landlord's funds which
Tenant holds or controls, or (ii) out of any Sale Proceeds or Loan Proceeds.
B. In no event shall either party borrow money in the name of or
pledge the credit of the other.
END OF ARTICLE IX
-38-
ARTICLE X
TRADEMARK AND TRADE NAME
------------------------
10.01 Courtyard by Marriott Name
--------------------------
During the term of this Agreement, each Hotel shall be known as a
Courtyard by Marriott, with such additional identification as may be necessary
to provide local identification. If the name of the Courtyard by Marriott System
is changed, the name of the Hotels shall change to conform thereto and
references herein to "Courtyard" and "Courtyard by Marriott" shall be deemed
references to such new name. The names "Courtyard" and "Courtyard by Marriott,"
when used alone or in connection with another word or words, and the Courtyard
or Courtyard by Marriott trademarks, trade names, symbols, logos, and designs
shall in all events remain the exclusive property of MI, and nothing contained
herein shall confer on Landlord the right to use the Courtyard or Courtyard by
Marriott names, trademarks, trade names, symbols, logos, or designs otherwise
than in strict accordance with the terms of this Agreement. Except as provided
in Section 10.02, upon Termination, any use of or right to use the Courtyard or
Courtyard by Marriott names, trademarks, trade names, symbols, logos, or designs
by Landlord shall cease forthwith and Landlord shall promptly remove from each
Hotel at Landlord's cost any signs or similar items that contain the Courtyard
or Courtyard by Marriott names, trademarks, trade names, symbols, logos, or
designs; provided, however, that Landlord shall not be required to change its
legal name ("Courtyard by Marriott Limited Partnership") to remove "Courtyard by
Marriott" from its name.
10.02 Purchase of Inventories and Fixed Asset Supplies
------------------------------------------------
A. Upon Termination, either of this entire Agreement or with
respect to a given Hotel, Tenant shall have the option, to be exercised within
thirty (30) days after Termination, to purchase, at their then book value, any
items of such Hotel's Inventories and Fixed Asset Supplies as may be marked with
the Courtyard or Courtyard by Marriott names or any Courtyard or Courtyard by
Marriott trademark, trade name, symbol, logo or design. If Tenant does not
exercise such option, Landlord will use any items not so purchased exclusively
in connection with the Hotel in which they are located until they are consumed.
10.03 Breach of Covenant
------------------
Tenant and/or its Affiliates shall have the right, in case of any
breach of the covenants of this Article X by Landlord or others claiming through
it, to injunctive relief and to any other right or remedy available at law or in
equity. This Article X shall survive Termination.
10.04 Computer Software and Equipment
-------------------------------
A. Any computer software (including upgrades and replacements) at
any of the Hotels that is owned by Tenant, MI, any Affiliate of MI, or the
licensor of any of them, is proprietary to Tenant, MI, such MI Affiliate, or the
licensor of any of them, whichever is applicable, and shall in all events remain
the exclusive property of Tenant, MI, such MI Affiliate, or the licensor of any
of them, as the case may be, and nothing contained in this Agreement shall
confer on Landlord the right to use any such software.
B. Upon Termination as to any particular Hotel and upon
termination of this Agreement, Tenant shall have the right to remove from the
Hotel or Hotels, as applicable, without compensation to Landlord, (1) any
computer software (including upgrades and replacements), including without
limitation, the PMS and ▇▇▇▇▇▇ software, owned by Tenant, MI, any Affiliate of
MI, or the licensor of any of them, and (2) any computer equipment utilized as
part of a centralized
-39-
reservation system or owned by a party other than Landlord, except any computer
equipment leased to Landlord pursuant to a financing lease as provided for in
Article VIII.
C. Tenant shall, upon Termination as to any particular Hotel Term
and upon termination of this Agreement, provide Landlord with a copy of the data
stored in the software described in Section 10.04.A.
END OF ARTICLE X
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ARTICLE XI
HOTELS
------
11.01 Payment of Ground Rent and Other Charges
----------------------------------------
Landlord covenants to properly pay and discharge (i) any ground rent
due under any ground leases applicable to any of the Hotels, and (ii) any
payments and charges in the ordinary course of the business of the Hotels
necessary to ensure continued operation of the Hotels by Tenant; provided,
however, that Landlord irrevocably directs Tenant to pay and discharge all
payments and charges set forth in subsections (i) and (ii) above and Tenant
agrees to make such payments to the extent of the availability of Gross Revenues
after payment of or accrual for all other Deductions, in the case of Third Party
Ground Leases and payments due and charges incurred under subsection (ii) above,
and to the extent of the availability of Operating Profit and according to the
order of disbursement of Operating Profit pursuant to Section 5.03, in the case
of MI Ground Leases.
11.02 Use, Operation of Hotels and Quiet Enjoyment
--------------------------------------------
A. Tenant shall operate the Hotels as hotels and for no other use and
under standards comparable to those prevailing for other Courtyard by Marriott
hotels operated by Tenant or its Affiliates and for all activities in connection
therewith that are customary and usual to such an operation; provided, however,
that Tenant shall not be held to such standard if Landlord fails (i) to approve
the Repairs and Equipment Estimate or provide funds necessary to pay for the
repairs, replacements, and renewals covered therein in the event funds in the
Reserve are inadequate, or (ii) to approve the Building Estimate or provide
funds necessary to pay for the alterations, improvements, renewals and
replacements covered therein, in either case if Landlord's failure to so approve
or provide funds prevents Tenant from maintaining such standard. Tenant shall,
except as otherwise provided in this Agreement, be responsible for the proper
and efficient operation of the Hotels.
B. Tenant shall have the option to terminate the Agreement with
respect to a given Hotel at any time upon sixty (60) days' written notice to
Landlord in the event of a withdrawal or revocation, by any lawful governing
body having jurisdiction thereof, of any license or permit required for Tenant's
performance hereunder as to such Hotel where such withdrawal or revocation is
due to circumstances beyond Tenant's control.
C. Except as otherwise provided herein, Tenant shall, during the
Term, operate each of the Hotels continuously except to the extent and for such
time as Tenant is unable to operate any of the Hotels according to the standards
set forth herein as a result of (1) damage or destruction caused by fire,
casualty, or other cause, (2) condemnation, (3) any of the occurrences described
in Section 15.03, or (4) all or any portion of any Hotel being closed for
alterations, improvements, renewals, rebuilding, or repairs.
D. Tenant shall, upon the request of Landlord or Landlord's
mortgagees, or the agent of either of them, make a qualified representative from
Tenant's corporate staff available at reasonable times and intervals to answer
questions regarding the operation of the Hotels.
E. Tenant shall use reasonable efforts to comply with and abide by
all applicable laws and regulations, including, without limitation,
environmental laws and regulations, pertaining to its operation of the Hotels,
provided that (i) all costs and expenses of such compliance shall be paid from
Gross Revenues as Deductions or from the Reserve, whichever is applicable under
the provisions of this Agreement, and (ii) Tenant shall have the right, but not
the obligation, subject to Landlord's prior written approval which approval
shall not be unreasonably withheld, to contest or
-41-
oppose, by appropriate proceedings, any such laws and regulations; the
reasonable expenses of such contest shall be paid from Gross Revenues as
Deductions.
F. Possession of the Hotels shall be delivered to Tenant on the
Effective Date, and Tenant shall quietly hold, occupy, and enjoy the Hotels
throughout the term of this Agreement without any hindrance, ejection, or
molestation by Landlord or anyone claiming under or through Landlord, subject,
nevertheless, to the terms and conditions of this Agreement.
11.03 Chain Services
--------------
A. Tenant shall, beginning with the Effective Date and thereafter
during the Term of this Agreement, cause Chain Services to be furnished to the
Hotels.
B. Costs and expenses incurred in the providing of Chain Services
shall be allocated on a fair and equitable basis among all Courtyard by Marriott
hotels owned, leased, operated or managed by Tenant or its Affiliates in the
United States which benefit from these services. Such allocation shall be made
without regard to any "caps" or other limitations on the amount which Tenant or
its Affiliates may charge to a given hotel, pursuant to agreements which Tenant
(or its Affiliates) may have with the owner of such hotel. Any excess of that
portion of such costs and expenses which is fairly allocated to a given hotel
over the "cap" which may be in effect with regard to that hotel shall be paid by
Tenant from its own funds and shall not be a Deduction. Tenant shall make no
profit from amounts paid for Chain Services. In no event will the total charge
for all of the Chain Services which are described in the definition of Chain
Services in Section 1.01 (exclusive of reservation system services), for any
given Fiscal Year, exceed five percent (5%) of Gross Revenues for such Fiscal
Year. The parties hereby stipulate that the limitation set forth in the
preceding sentence is intended to apply only to the services which are currently
listed (as of the Effective Date) in the definition of Chain Services in Section
1.01; accordingly, if there are types of expenditures which were originally
treated as Deductions (other than pursuant to Paragraph 7 of the definition of
"Deductions" in Section 1.01), but which are later determined to be more
properly treated as Chain Services, such expenditures shall be treated as
Deductions pursuant to said Paragraph 7 of the definition of "Deductions"
without regard to the aforesaid limitation. If services currently provided as
Chain Services are subsequently determined to be appropriately charged as
Deductions, the cost of the services will continue to be considered as a Chain
Service cost in determining the total charge allowed under the "cap" of five
percent (5%) of Gross Revenues.
11.04 Landlord's Right to Inspect
---------------------------
Landlord, Landlord's mortgagees, and the agents of both of them shall
have access to any Hotel at any and all reasonable times for the purpose of
protecting the same against fire or other casualty, prevention of damage to such
Hotel, inspection, making repairs, or showing such Hotel to prospective
purchasers, tenants, or mortgagees.
END OF ARTICLE XI
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ARTICLE XII
INSURANCE
---------
12.01 Property Insurance
------------------
A. Tenant shall, commencing with the Effective Date and thereafter
throughout the term of this Agreement, procure and maintain, with insurance
companies of recognized responsibility approved by Landlord in its reasonable
discretion, a minimum of the following insurance:
1. Insurance on each Hotel (including contents) against loss
or damage by fire, lightning and all other risks covered by the usual standard
extended coverage endorsements, with such deductible limits as are generally
established by Tenant and its Affiliates at the other hotels it operates under
the Courtyard by Marriott name in the United States, all in an amount not less
than the full replacement cost thereof exclusive of excavation, footings and
foundation costs;
2. Insurance against loss or damage from explosion of
boilers, pressure vessels, pressure pipes and sprinklers, to the extent
applicable, installed in each Hotel;
3. Business interruption insurance covering loss of profits
and necessary continuing expenses for interruptions caused by any occurrence
covered by the insurance referred to in Section 12.01.A.1 and 2, of a type and
in amounts and with such deductible limits as are generally established by
Tenant and its Affiliates at the other hotels it operates under the Courtyard by
Marriott name in the United States.
B. All policies of insurance required under Section 12.01.A. 1 and
2 shall be carried with the Landlord, the holder of the first-lien permanent
mortgage on the Hotels, and the landlords under the Third Party Ground Leases
and the MI Ground Leases (where applicable) as additional insureds and loss
payees, as the case may be, except that, so long as the Combined Loan Documents
are in effect, such policies shall show Citibank, N.A., as agent (or, if
applicable, the successor agent) for the Lenders, in place of the Lenders
themselves as mortgagee; and any losses thereunder shall be payable to the
parties as their respective interests may appear.
12.02 Operational Insurance
---------------------
Tenant shall, commencing with the Effective Date and thereafter
throughout the Term, procure and maintain, using funds deducted from Gross
Revenues, with insurance companies approved by Landlord, the following
insurance:
A. Workers' compensation and employer's liability insurance as may
be required under applicable laws covering all of Tenant's employees at each
Hotel, with such deductible limits or self-insured retentions as are generally
established by Tenant or its Affiliates at the other hotels it operates under
the Courtyard by Marriott name in the United States;
B. Fidelity bonds, with reasonable limits and deductibles to be
determined by Tenant, covering its employees in job classifications normally
bonded in the other hotels it operates under the Courtyard by Marriott name in
the United States or as otherwise required by law, and comprehensive crime
insurance to the extent Tenant and Landlord mutually agree it is necessary for
each Hotel;
C. Commercial general liability insurance against claims for
personal injury, death or property damage occurring on, in, or about each Hotel,
and automobile insurance on vehicles operated in conjunction with each Hotel,
with a combined single limit of not less than
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Twenty-five Million Dollars ($25,000,000) for each occurrence for personal
injury, death and property damage, with such deductible limits or self-insured
retentions as are generally established by Tenant or its Affiliates at the other
hotels it operates under the Courtyard by Marriott name in the United States;
and
D. Such other insurance in amounts as Landlord and Tenant in their
reasonable judgment deems advisable for protection against claims, liabilities
and losses arising out of or connected with the operation of the Hotels.
12.03 Coverage
--------
All insurance described in Sections 12.01 and 12.02 may be obtained by
Tenant by endorsement or equivalent means under its blanket insurance policies,
provided that such blanket policies substantially fulfill the requirements
specified herein. Deductible limits and retentions shall be as provided in the
blanket policies covering the hotels operated by Tenant and its Affiliates under
the Courtyard by Marriott name in the United States. In addition, in the case of
insurance described in Sections 12.01 and 12.02, Tenant may insure through its
Affiliates, or its Affiliates may otherwise retain such risks, if, where legally
required to do so, such Affiliates are legally qualified to do so.
12.04 Cost and Expense
----------------
Insurance premiums and any costs or expenses with respect to the
insurance described in Sections 12.01 and 12.02, including insurance reinsured
by an Affiliate of Tenant, shall be Deductions in determining Operating Profit.
Premiums on policies for more than one year shall be charged prorata over the
period of the policies. The expenses incurred in maintaining Tenant's self-
insurance program shall be charged on an equitable basis to the hotels
participating in such programs. Any reserves, losses, costs, damages or expenses
which are uninsured (as long as Tenant maintains proper insurance and does not
abrogate policies), or fall within deductible limits or self-insured retentions
as are generally established by Tenant or its Affiliates, shall be treated as a
cost of insurance and shall be Deductions in determining Operating Profit. Upon
termination, either of this entire Agreement or with respect to a given Hotel,
an escrow fund in an amount reasonably acceptable to Tenant shall be established
from Gross Revenues (or, if Gross Revenues are not sufficient, with funds
provided by Landlord) to cover the amount of any deductible limits or self-
insured retentions and all other costs which will eventually have to be paid by
either Landlord or Tenant with respect to pending or contingent claims,
including those which arise after Termination for causes arising during the term
of the Agreement; provided, however, that such escrow shall not include any
amounts expected to be covered by insurance proceeds (exclusive of deductibles
and self-insured retentions).
12.05 Policies and Endorsements
-------------------------
A. Where permitted, all insurance provided under Section 12.02
shall name Landlord, Tenant, Lenders, and the landlords under the Third Party
Ground Leases and the MI Ground Leases (where applicable) as additional insureds
as their interests may appear. Tenant shall deliver to Landlord certificates of
insurance with respect to all policies procured, including existing, additional
and renewal policies and, in the case of insurance about to expire, shall
deliver certificates of insurance with respect to the renewal policies not less
than ten (10) days prior to the respective dates of expiration.
B. All policies of insurance provided for under Article XII shall,
to the extent obtainable, have attached thereto an endorsement that such policy
shall not be canceled or materially changed without at least thirty (30) days'
prior written notice to Landlord, Lenders, Tenant, and landlords under the Third
Party Ground Leases and the MI Ground Leases (where applicable).
-44-
END OF ARTICLE XII
-45-
ARTICLE XIII
TAXES
-----
13.01 Real Estate, Personal Property and Other Taxes
----------------------------------------------
A. The cost of all real estate and personal property taxes
(including tax, if any, on the lease of personal property payable by or assessed
against Landlord or Tenant), levies, assessments and similar charges on or
relating to each Hotel (the "Impositions") during the term of this Agreement,
including any such amounts required to be paid under ground leases, shall be
borne solely by Landlord. The term "Impositions" shall include any fines,
penalties, or interest with respect to tax, if any, on the lease of personal
property payable by or assessed against Landlord or Tenant. Except as provided
below, Tenant shall, on Landlord's behalf and to the extent of the availability
of Gross Revenues after payment or accrual for all other Deductions, pay all
Impositions from Gross Revenues, before any fine, penalty, or interest is added
thereto or lien placed on any Hotel or this Agreement, unless payment thereof is
in good faith being contested and enforcement thereof is stayed. Notwithstanding
the foregoing, (i) Landlord shall make any necessary filings with respect to any
taxes that might be payable by or assessed against Landlord or Tenant pertaining
to the lease of personal property and, at Landlord's request, Tenant shall pay
any such taxes and any fines, penalties and interest added thereto to the extent
of the availability of Gross Revenues after payment of or accrual for all other
Deductions, and (ii) Tenant shall not be liable for any fines, penalties, or
interest that is added to taxes, if any, payable by or assessed against Landlord
or Tenant related to Tenant's lease of personal property from Landlord under
this Agreement. Except as provided in Section 5.01, any such payments and
accruals for such payments shall be a Deduction in determining Operating Profit.
Landlord shall, within five (5) days of receipt, furnish Tenant with copies of
any official tax bills and assessments that it may receive for any of the
Hotels. Either Tenant or Landlord may initiate proceedings to contest any
Imposition. All reasonable costs of any such contest shall be paid from Gross
Revenues and treated as a Deduction and the non-initiating party shall
reasonably cooperate with the initiating party.
B. Upon any termination, either of this entire Agreement or with
respect to a given Hotel, an escrow fund in an amount reasonably acceptable to
Tenant shall be established from Gross Revenues (or, if Gross Revenues are not
sufficient, with funds provided by Landlord) to cover all taxes (including any
fines, penalties, or interest that may be added thereto), if any, that might, in
Tenant's reasonable judgment, be payable or assessed against Landlord or Tenant
related to Tenant's lease of personal property from Landlord under this
Agreement.
END OF ARTICLE XIII
-46-
ARTICLE XIV
HOTEL EMPLOYEES
---------------
14.01 Employees
---------
A. All personnel employed at each Hotel shall at all times be the
employees of or otherwise provided by the Tenant. Tenant shall have absolute
discretion to hire, fire, promote, supervise, direct, and train all employees at
each Hotel, to fix their compensation and, generally, establish and maintain all
policies relating to employment.
B. Tenant shall be permitted to provide free accommodations and
amenities to its employees and representatives living at or visiting each Hotel
in connection with its operation of the Hotels. No person shall otherwise be
given gratuitous accommodations or services without prior joint approval of
Landlord and Tenant except in accordance with usual practices of the hotel and
travel industry.
C. At termination, either of this entire Agreement or with respect
to a given Hotel, other than by reason of a default of Tenant hereunder, an
escrow fund shall be established from Gross Revenues (or, if Gross Revenues are
not sufficient, with funds provided by Landlord) to reimburse Tenant for all
costs and expenses incurred by Tenant in terminating its employees at the
affected Hotels, such as severance pay, unemployment compensation, and other
employee liability costs arising out of the termination of employment by Tenant
of Tenant's employees at such Hotel or of all the Hotels, as the case may be.
END OF ARTICLE XIV
-47-
ARTICLE XV
DAMAGE, CONDEMNATION, AND AIR FORCE MAJEURE
-------------------------------------------
15.01 Damage and Repair
-----------------
A. If, during the term hereof, any of the Hotels are damaged or
destroyed by fire, casualty, or other cause, Landlord shall, at its cost and
expense and with all reasonable diligence, repair or replace the damaged or
destroyed portion of such Hotel to the same condition as existed previously. To
the extent available, proceeds from the insurance described in Section 12.01
shall be applied to such repairs or replacements. If a Hotel is so damaged or
destroyed that Landlord reasonably determines that it cannot be repaired or
replaced within one (1) year of the fire, casualty, or other cause, Landlord
shall have the option on sixty (60) days' written notice to terminate this
Agreement as to such Hotel and Tenant shall be entitled to the Termination Fee
provided by Section 4.02, which shall be paid in accordance with the provisions
of Section 5.06.
B. If damage or destruction to any Hotel from any cause materially
and adversely affects the operation of such Hotel and Landlord fails to promptly
commence and complete the repairing, rebuilding, or replacement of the same
(other than with respect to a Hotel as to which a termination is effected under
Section 15.01.A above) so that such Hotel shall be substantially the same as it
was before such damage or destruction, Tenant may elect to terminate this
Agreement as to such Hotel on sixty (60) days' written notice, whereupon Tenant
shall be entitled to the Termination Fee provided by Section 4.02, which shall
be paid in accordance with the provisions of Section 5.06, it being agreed that
Tenant shall not have the right to terminate after Landlord has commenced such
repairs, rebuilding, or replacements unless Landlord thereafter fails to
diligently and continuously pursue completion of such repairs, rebuilding, or
replacements.
15.02 Condemnation
------------
A. If all or substantially all of any Hotel shall be taken in any
eminent domain, condemnation, compulsory acquisition, or similar proceeding by
any competent authority for any public or quasi-public use or purpose, or if a
portion of such Hotel shall be so taken, but the result is that Landlord deems
it unreasonable to continue to operate such Hotel, this Agreement shall
terminate and Tenant shall be entitled to the Termination Fee provided by
Section 4.02, which shall be paid in accordance with the provisions of Section
5.06. In order to provide funds with which to pay the Termination Fee, Landlord
shall initiate such proceedings against the condemning authorities to recover
any damages to which it may be entitled. Tenant shall have no independent right
to bring any action claiming damages or an award as a result of a condemnation.
B. If a portion of any Hotel shall be taken as a result of one of
the events described in Section 15.02.A, or an entire Hotel is affected on a
temporary basis, and as a result it is not unreasonable to continue to operate
such Hotel, this Agreement shall not terminate. Nevertheless, so much of any
award for any such partial taking or condemnation as shall be necessary to
render such Hotel equivalent to its condition before such event shall be used
for such purpose; Landlord shall retain the balance of such award, if any.
15.03 Force Majeure
-------------
If acts of God, acts of war, civil disturbance, or governmental
action, including the revocation of any license or permit necessary for the
operation contemplated under this Agreement where such revocation is not due to
Tenant's fault, or any other causes beyond the control of Tenant, shall, in
Tenant's reasonable opinion have a significant adverse effect upon operations of
any Hotel, then Tenant shall have the right to terminate this Agreement as to
such Hotel on sixty (60) days'
-48-
written notice to Landlord; provided, however, that this Section 15.03 shall not
apply to any Hotel that suffers damage or destruction to which Section 15.01 is
applicable.
END OF ARTICLE XV
-49-
ARTICLE XVI
DEFAULTS
--------
16.01 Defaults
--------
The following shall constitute "events of default" to the extent
permitted by applicable law:
A. The failure of either party to make any payment required to be
made in accordance with the terms hereof within ten (10) days after written
notice that such payment has not been made;
B. The failure of either party to perform, keep, or fulfill any of
the other covenants, undertakings, obligations, or conditions set forth in this
Agreement, and the failure to cure such default within thirty (30) days after
notice of said failure or, if such default is not susceptible of being cured
within thirty (30) days, the failure to commence said cure within thirty (30)
days and thereafter to complete said cure within the shortest commercially
reasonable time;
C. If by order of a court of competent jurisdiction a receiver or
liquidator of the property of either party shall be appointed and shall not be
dismissed within sixty (60) days after such appointment;
D. If either party shall be liquidated or dissolved, if either
party shall file a voluntary bankruptcy seeking liquidation or dissolution, or
if a petition or an answer proposing the liquidation or dissolution of either
party under the Federal Bankruptcy Code or any similar law, federal or state,
shall be filed in, and approved by, any court; or
E. If any of the creditors of either party shall file a petition
to liquidate or dissolve such party under the Federal Bankruptcy Code or any
similar law, federal or state, and if such petition shall not be discharged or
denied within sixty (60) days after the date on which such petition was filed.
16.02 Remedies
--------
A. It is the intention of the parties that this Agreement shall be
non-terminable upon the occurrence of an event of default unless it can be shown
that any other remedy afforded by law or equity is inadequate. Accordingly, if
either party alleges that the other party has committed a default hereunder, the
party alleging such default shall first serve a notice and demand upon the other
party outlining the facts of the alleged default and requesting its cure. Such
other party shall have ten (10) days within which to reply and may either admit
the default or dispute the same in whole or in part.
B. If the party alleged to be in default admits or is deemed to
have admitted the default it shall:
1. In the case of a non-monetary default, cure the default
within thirty (30) days, or, if such default is not susceptible of being cured
within thirty (30) days, proceed immediately to cure the default in the shortest
commercially reasonable time.
2. In the case of a monetary default, pay the amount
demanded within ten (10) days.
-50-
C. Except for an event of default occurring under Section 16.01.C,
D or E, if the party alleged to be in default disputes the claim of default
within said ten (10) days and if the parties are unable to reconcile such
dispute within the following thirty (30) days, or if the party alleged to be in
default acknowledges the default but fails to cure same within the applicable
time period, then the manner shall be settled by arbitration in accordance with
Article XX. The matters to be decided by arbitration are (i) whether the alleged
default occurred (if the parry alleged to be in default has timely disputed the
claim of default) and (ii) the appropriate remedy or remedies to which the non-
defaulting party is entitled, including termination if the arbitrators determine
that no other remedy afforded by law or equity is adequate and, in the case of a
termination decision against Tenant, such remedy shall include, at the non-
defaulting party's request, the arbitrators' order to Tenant to vacate the
Hotels within seventy-five (75) days after the date of such decision.
D. If the party alleged to be in default neither acknowledges nor
disputes the claim of default, such party shall be deemed to have admitted the
default.
E. Upon a final, binding, and nonappealable determination in favor
of the non-defaulting party, including a determination that the non-defaulting
party's remedy, whether exclusive or nonexclusive, is termination of this
Agreement after consideration of the provisions of Section 16.02.A, the non-
defaulting party shall have up to ninety (90) days after the date such
determination becomes final, binding, and nonappealable to deliver notice of
termination to the defaulting party; and this Agreement shall terminate on the
date set forth in such notice, which date shall be not less than seventy-five
(75) days nor more than one hundred fifty (150) days after the date of such
notice. If the non-defaulting party fails to exercise such termination remedy
within the time period set forth above, then such remedy shall be null and void
as to the applicable default. Notwithstanding the foregoing, if the arbitrators,
at the non-defaulting party's request, order the Tenant (in accordance
-51-
with C above) to vacate the Hotels within seventy-five (75) days after the date
of the arbitrators decision, Tenant shall so vacate without the need for any
further notice from Landlord.
END OF ARTICLE XVI
-52-
ARTICLE XVII
WAIVER AND PARTIAL INVALIDITY
-----------------------------
17.01 Waiver
------
Failure of either party to insist on strict performance of any of the
terms or provisions of this Agreement, or to exercise any option, right, or
remedy herein contained, shall not be construed as a waiver or 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.
17.02 Partial Invalidity
------------------
If any portion of the 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 inserted herein except when such construction would operate
as an undue hardship on Tenant or Landlord or constitute a substantial deviation
from the general intent and purpose of said parties as reflected in this
Agreement.
END OF ARTICLE XVII
-53-
ARTICLE XVIII
ASSIGNMENT
----------
18.01 Assignment
----------
A. Neither party shall assign or transfer or permit the assignment
or transfer of this Agreement without the prior written consent of the other,
provided, however that Tenant shall have the right without such consent, to (1)
assign its interest in the Agreement to any of its Affiliates (other than any
Affiliate which may be a partner of Landlord), and any such assignee shall be
deemed to be the Tenant for the purposes of the Agreement, and (2) sublease
shops or grant concessions at the Hotels on commercially reasonable terms so
long as the terms of any such subleases or concessions do not exceed the term of
the Agreement. Nothing contained herein shall prevent an assignment of the
Agreement in connection with an approved sale of the Hotels pursuant to Section
19.02.B.
B. If either party consents to an assignment of the 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 the Agreement. An assignment by either Landlord
or Tenant of its interest in the Agreement shall not relieve Landlord or Tenant,
as the case may be, from their respective obligations under the Agreement, and
shall inure to the benefit of, and be binding upon, their respective successors,
heirs, legal representatives, or assigns.
18.02 Collateral Assignment
---------------------
Landlord and Tenant may each from time to time collaterally assign and
mortgage its interest under this Agreement to secure indebtedness under the
Combined Loan Documents, or under any extensions, modifications, replacements,
or Refinancings. In connection with any such collateral assignment, Tenant and
Landlord shall each, on request of any lenders, enter into such supplemental
agreements as may obligate Tenant or Landlord to (i) provide the lenders with
notice of any default by Landlord or Tenant hereunder and thereafter permit the
lenders to effect a cure thereof within a reasonable period, (ii) supply the
lenders with copies of any notices or other communications contemplated by this
Agreement, (iii) subordinate Tenant's interest in this Agreement to the rights
of the lenders upon foreclosure of any mortgage, deed of trust, security
agreement, or like instrument against the Hotels or by a deed or assignment in
lieu of foreclosure so long as such lenders enter into the written
nondisturbance agreement described in Section 3.02, (iv) attorn to and recognize
the lenders or their assignees as being Landlord, according to the terms set
forth in Section 3.02.B, or Tenant, as the case may be, hereunder upon
conveyance of title to the Hotels or of the Tenant's interest in this Agreement
to the Lenders or assignees, whether such conveyance is upon foreclosure of a
mortgage, deed of trust, security agreement, or like instrument or by a deed or
assignment in lieu of foreclosure, and (v) containing such other provisions as
are customary for the protection of Landlord, Tenant, and the lenders.
END OF ARTICLE XVIII
-54-
ARTICLE XIX
SALE OF HOTELS
--------------
19.01 Right of Sale by Landlord
-------------------------
Landlord reserves the right at all times and from time to time to sell
any one or more or all of the Hotels subject, however, in each such case, to
rights of Tenant provided by Section 19.02. Upon any such proposed sale,
Landlord shall send a notice thereof to the Tenant at least thirty (30) days
before the date on which such sale is proposed to close. Such notice shall set
forth (i) the name, address, and business of the proposed purchaser, (ii) the
proposed sales price or method by which such price is to be determined, and
(iii) whether or not it is proposed that the provisions of this Agreement remain
in effect.
19.02 Rights of Tenant on Sale of Hotels
----------------------------------
A. Except as provided in Sections 19.02.B and 19.02.C, this
Agreement will terminate as to a particular Hotel upon the conveyance of title
of such Hotel and the simultaneous payment to the Tenant of its Termination Fee
as provided in Section 4.02.
B. If Landlord sells a Hotel, such sale will be, at Landlord's
election, either:
1. Free and clear of this Agreement, in which event this
Agreement shall terminate as to such Hotel and Tenant shall be entitled to
payment of its Termination Fee as provided in Section 4.02 simultaneously with
conveyance of title to such Hotel; provided, however, that Landlord may not
before December 31, 2001 sell more than fifteen (15) Hotels free and clear of
this Agreement; or
2. Subject to the continuation in effect of occupancy by
Tenant under a Severance Lease or, at Tenant's option, management by Tenant
pursuant to a management agreement having no less favorable terms to Tenant than
this Agreement or that is otherwise reasonably satisfactory to Tenant, in which
event Tenant may either (i) consent to the continuation in effect of such lease
or management arrangement, or (ii) if, in its sole discretion, Tenant reasonably
believes and so notifies the Landlord within thirty (30) days after notice of
the proposed closing of sale, that any one or more of the following is true: (1)
the proposed purchaser is a competitor of Tenant or any Affiliate of Tenant, (2)
the business character and reputation of the proposed purchaser has not been
firmly established, or (3) the financial condition and prospects of the proposed
purchaser may not be adequate to the discharge of the obligations of Landlord
under this Agreement (or replacement agreement), cause the termination of this
Agreement as to such Hotel and require the payment of a Termination Fee as
provided in Section 4.02 simultaneously with the conveyance of title to the
Hotels.
C. Notwithstanding the provisions of Section 4.02 hereof and this
Section 19.02, no Termination Fee shall be due or payable if a Hotel or Hotels
are sold, condemned, or destroyed and Tenant or an Affiliate thereof continues
to lease or manage such Hotel or Hotels, whether or not pursuant to this
Agreement.
D. In the event this Agreement is terminated in its entirety upon
a sale of all of the Hotels, Landlord shall repay to Tenant simultaneously with
the conveyance of title to such Hotels, any and all indebtedness, if any, owing
by Landlord to Tenant excepting, however, any unrefunded Additional Rent.
E. In the event this Agreement is terminated in part only with
respect to the sale of one or more Hotels, Landlord shall repay to Tenant
simultaneously with the conveyance of
-55-
title to such Hotels, that fraction of any indebtedness (other than any
unrefunded Additional Rent, which shall continue to be owing in accordance with
the terms of this Agreement), if any, owing to Tenant of which the numerator is
the Gross Revenues attributable to the Hotel or Hotels being sold for the most
recently concluded Fiscal Year, and the denominator of which is the Gross
Revenues attributable to all the Hotels for such Fiscal Year.
19.03 Meaning of "Sale" and "Sell"
----------------------------
As used in this Article XIX, "sale" or "sell" shall not refer to the
condemnation or destruction of any Hotel.
END OF ARTICLE XIX
-56-
ARTICLE XX
ARBITRATION
-----------
20.01 Arbitration
-----------
A. Disputes and remedies specifically mentioned herein as a matter
to be decided by arbitration shall be resolved in accordance with the commercial
rules of the American Arbitration Association (or its successor) in Washington,
D.C. then in effect and pursuant to the Federal Arbitration Act. The decision of
the arbitrators shall be final and binding on the parties. The arbitrators shall
have no right to amend or modify this Agreement.
B. Additional procedures to be complied with in connection with
any arbitration are as follows:
1. Landlord and Tenant shall each appoint a fit and impartial
person as arbitrator who shall have had at least ten (10) years' experience in a
calling connected with the subject matter of the dispute (a "Qualified
Arbitrator"). Such appointment shall be signed in writing by each party to the
other. If either Landlord or Tenant shall fail to appoint a Qualified Arbitrator
within ten (10) days after written notice from the other party to make such
appointment, then the party having made such appointment shall apply to the
American Arbitration Association (or its successor) in Washington, D.C. for the
appointment of a second Qualified Arbitrator and the two so appointed shall
appoint a third Qualified Arbitrator. If such two Qualified Arbitrators fail to
agree on a third Qualified Arbitrator within ten (10) days after appointment of
the second Qualified Arbitrator, then the American Arbitration Association in
Washington, D.C. (or its successor) shall appoint such third Qualified
Arbitrator.
2. The decision of the arbitrators shall be rendered within
thirty (30) days after appointment of the third arbitrator. Such decision shall
be in writing, shall contain a reasonably detailed explanation of the basis for
the decision, and shall be in duplicate, one counterpart thereof to be delivered
to each of Landlord and Tenant. A judgment of a court of competent jurisdiction
may be entered on the award of the arbitrators.
3. If a dispute shall be submitted to arbitration, notice of
appointment of the arbitrators shall be given by Landlord to any first
mortgagee. Such first mortgagee shall then have the right to participate in the
arbitration proceedings, provided that such participation shall be in
association with Landlord and shall not (i) entitle such first mortgagee to
participate in the appointment of Tenant's arbitrator, (ii) allow it to appoint
an additional arbitrator, or (iii) enlarge Landlord's or Tenant's rights in such
arbitration proceedings.
4. If under the provision of this Agreement a matter shall be
submitted to arbitration and Landlord shall fail timely to appoint an
arbitrator, the first mortgagee, if any, shall be entitled to appoint an
arbitrator to represent Landlord's interests.
END OF ARTICLE XX
-57-
ARTICLE XXI
MISCELLANEOUS
-------------
21.01 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 hereunder, shall violate any provision of law or any 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 that has not
been given or taken, or at the time of the transaction involved shall not have
been given or taken. Each party covenants that it has and will continue to have
throughout the term of this Agreement and any extensions thereof, the full right
to enter into this Agreement and perform its obligations thereunder.
21.02 Consents
--------
Wherever in this Agreement the consent or approval of Landlord or
Tenant is required, such consent, agreement or approval shall not be
unreasonably withheld, conditioned or delayed, shall be in writing and shall be
executed by a duly authorized officer or agent of the party granting such
consent, agreement or approval. If either Landlord or Tenant fails to respond
within thirty (30) days to a written request by the other party for a consent,
agreement or approval, such consent, agreement or approval shall be deemed to
have been given.
21.03 Agency
------
In the event that Tenant is deemed to act as Landlord's agent under
the terms of this Agreement, such agency is coupled with an interest and may not
be terminated by Landlord until the expiration of the term of this Agreement,
except as provided in Articles IV, XV, XVI, or XIX.
21.04 Confidentiality
---------------
The parties agree that matters set forth in and information, budgets,
and reports generated as a result of 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
written consent of the other party except as may be reasonably necessary (i) to
obtain licenses, permits and other public approvals necessary for the
refurbishment or operation of the Hotels, (ii) in connection with Landlord's
financing of the Hotels or any sale of any Hotel, (iii) in connection with a
sale of a controlling interest in Landlord, Tenant, or MI, (iv) in connection
with an audit or other investigation conducted pursuant to this Agreement or the
Landlord's or Tenant's interest in any of the Hotels, or (v) in connection with
a foreclosure sale on Landlord's interest in the Hotels, or (vi) as required by
law; provided, however, that all parties to whom the matters set forth in this
Agreement and information, budgets, and reports generated as a result of this
Agreement are to be disclosed, except under the circumstances described in (i),
(v) and (vi) above, shall have, prior to such disclosure, signed a
confidentiality agreement with respect to such matters for the benefit of
Landlord and Tenant.
21.05 Applicable Law
--------------
The Agreement shall be construed under and shall be governed by the
laws of the State of Maryland except that matters specifically mentioned herein
as matters to be decided by arbitration shall be arbitrated in accordance with
Article XX.
-58-
21.06 Other Operations
----------------
Nothing herein shall be construed to prohibit, limit or restrict
Tenant or any of its Affiliates from developing, owning, operating, managing,
leasing, or franchising, either directly or indirectly, any Marriott hotel,
Marriott Suites, Marriott Inn, Courtyard by Marriott, Fairfield Inn, Residence
Inn, or any other lodging or related facility of any kind or nature in the
market area where any of the Hotels are located.
21.07 Headings
--------
Headings of articles and sections are inserted only for convenience
and are not to be construed as a limitation on the scope of the particular
articles or sections to which they refer.
21.08 Notices
-------
Notices, statements, and other communications to be given under the
terms of this Agreement shall be in writing and delivered by hand against
receipt or sent by certified mail, registered mail, return receipt requested or
by Express Mail service, or overnight courier postage prepaid:
To Landlord:
-----------
Courtyard by Marriott Limited Partnership
c/o Host Marriott Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Law Department 72.923/Host Marriott
Deputy General Counsel
-59-
To Tenant:
---------
Courtyard Management Corporation
c/o Marriott International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Dept. 51.933.15
Courtyard Management Corporation
c/o Marriott International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Law Department 52.923
Hotel Operations
or at such other address as is from time to time designated by the party
receiving the notice. Any such notice that is properly mailed shall for purposes
of establishing that the sending party complied with the applicable time
limitations set forth herein be deemed to have been served as of five (5) days
after said posting, but shall not be binding on the addressee until received.
21.09 Entire Agreement
----------------
This Agreement, with other writings signed by the parties stated to be
supplemental hereto and instruments to be executed and delivered hereunder,
constitute the entire agreement between the parties, supersede all prior
understandings and writings, and may be changed only by writings signed by the
parties.
21.10 Limited Liability
-----------------
Tenant agrees that no limited partner of Landlord, if any, shall have
any personal liability hereunder in excess of such limited partner's
contribution to the capital of Landlord.
21.11 Memorandum of Lease
-------------------
Landlord and Tenant shall, simultaneously with the execution of this
Agreement, execute memoranda or short forms of this Agreement containing the
names of the parties, legal descriptions for the land underlying the Hotels, the
term of the Lease, and such other provisions as either party may require in such
forms as may be required for recording purposes in each jurisdiction in which a
Hotel is located. It is agreed that a Trustee's execution of any such memorandum
is not required or applicable with respect to any memorandum or short form of
this Agreement recorded to give notice of this Lease as it relates to any Hotel
the legal title to which is not held by such Trustee. The cost and expense of
recording the memoranda, short forms or, where necessary, a duplicate original
of the Agreement (including any deed stamps, transfer taxes and similar costs),
shall be borne by the Landlord; and, if Tenant undertakes the recording,
Landlord shall promptly reimburse Tenant for all such costs and expenses
incurred by Tenant. No recording shall take place, however, until such time as
either party requires recording. Each party agrees that it will not record the
Agreement in its entirety unless such a recording is required to protect the
rights of either party or unless required by applicable law.
21.12 Severability
------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or
-60-
unenforceability, without invalidating the remaining provisions hereof or
thereof or affecting the validity or enforceability of such provision in any
other jurisdiction unless the severing of such provision would undermine the
essence of the Agreement itself.
21.13 Counterparts
------------
This Agreement may be executed in several counterparts and by
different parties thereto in separate counterparts, each of which shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
21.14 Trustees
--------
The Trustees join in the execution of this Agreement as the holders of
legal title to certain of the Hotels and at the request and direction of
Courtyard by Marriott Limited Partnership, which is the beneficiary under all of
the trusts described in the preamble to this Agreement. It is understood that
nothing contained herein shall be construed as creating any liability on the
Trustees, and it is agreed that all obligations and liabilities of Landlord are
those of Courtyard by Marriott Limited Partnership, and its successors and
assigns, and not those of the Trustees.
-61-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal as of the day and year first written above.
Witnesses:
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
----------------------------- By: CBM ONE CORPORATION,
Printed Name: General Partner
-----------------------------
Printed Name:
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (SEAL)
------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
Attest: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Assistant Secretary
[SEAL]
Witnesses: LA SALLE NATIONAL TRUST, N.A.,
not personally but as Trustee under
Trust Agreement dated December 9,
----------------------------------- 1986 and known as Trust Number 111800
Printed Name:
----------------------
By: (SEAL)
---------------------------------
Printed Name:
----------------------------------- -----------------------
Printed Name: Title:
---------------------- ------------------------------
Attest:
-----------------------------
Printed Name:
-----------------------
Title:
------------------------------
-62-
ALEXANDER TITLE AGENCY, INC., a Virginia
corporation, not personally but as Trustee of the
Virginia Beach Courtyard by Marriott Limited
Partnership Land Trust, the Herndon/Reston
Courtyard by Marriott Limited Partnership Land
Trust, the Courtyard by Marriott Limited
Partnership Land Trust, the Richmond Courtyard by
Marriott Limited Partnership Land Trust, and the
Hampton Beach Courtyard by Marriott Limited
Partnership Land Trust
Witnesses:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇-▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇'▇▇▇▇▇▇
----------------------------
▇▇▇▇ ▇'▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (SEAL)
----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Vice President
Attest: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇
Assistant Secretary
-63-
Witnesses: COURTYARD MANAGEMENT
CORPORATION
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇-▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇'▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇'▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. Best (SEAL)
------------------------------
▇▇▇▇▇ ▇. Best
Vice President
Attest: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
[SEAL]
Illinois Exculpation Clause:
This Lease Agreement is executed by LA SALLE NATIONAL TRUST, N.A., not
personally, but as Trustee under Trust No. 111800 in the exercise of the power
and authority conferred upon and vested in it as such Trustee (and said LA SALLE
NATIONAL TRUST, N.A. hereby warrants that it possesses full power and authority
to execute the Instrument) and it is expressly understood and agreed that
nothing contained herein shall be construed as creating any liability on the
part of said LA SALLE NATIONAL TRUST, N.A. personally to perform any covenant,
either express or implied, herein contained, all such liability, if any, being
hereby waived by the Tenant and by every person now or hereafter claiming any
right hereunder; and that so far as the said LA SALLE NATIONAL TRUST, N.A.
personally is concerned, the Tenant shall look solely to the Hotels hereby
leased for the payment thereof. Trustee does not warrant, indemnify, defend
title nor is it responsible for any environmental damage.
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 14th day of April, 1994, before me, the undersigned officer,
personally appeared ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (residing at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, MD 20878) and ▇▇▇▇▇▇ ▇▇▇▇▇ (residing at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ 20895), personally known and acknowledged themselves to me to be
the Vice President and Assistant Secretary respectively of CBM One Corporation,
a Delaware corporation and general partner of COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited partnership, and that as such officers, being
duly authorized to do so pursuant to its by-laws or a resolution of its board of
directors, executed and acknowledged the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by themselves as such
officer(s) as their free and voluntary act and deed and the voluntary act and
deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Printed Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL] May 21, 1994
--------------------------------------------
--------------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 14th day of April, 1994, before me, the undersigned officer,
personally appeared ▇▇▇▇▇ ▇. Best (residing at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇
20854) and ▇▇▇▇ ▇. ▇▇▇▇▇▇ (residing at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
20903), personally known and acknowledged themselves to me to be the Vice
President and Assistant Secretary respectively of COURTYARD MANAGEMENT
CORPORATION, a Delaware corporation, and that as such officers, being duly
authorized to do so pursuant to its by-laws or a resolution of its board of
directors, executed and acknowledged the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by themselves as such
officer(s) as their free and voluntary act and deed and the voluntary act and
deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
Printed Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL] May 21, 1994
-------------------------------------------
--------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF ▇▇▇▇ )
I, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, the undersigned, a Notary Public in and for
said County, in the State aforesaid, DO HEREBY CERTIFY that ▇▇▇▇▇▇ ▇. ▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of LA SALLE NATIONAL TRUST, N.A. personally known to me to be
the same person whose name is subscribed to the foregoing instrument as such Sr.
Vice President & Asst. Secretary appeared before me this day in person and
acknowledged that they signed and delivered said instrument as their own free
and voluntary act of said bank, as trustee as aforesaid, for the uses and
purposes therein set forth; and said Asst. Secretary then and there acknowledged
that she did affix the seal of said bank to said instrument as her own free and
voluntary act and as the free and voluntary act of said bank, as trustee as
aforesaid, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 13 day of April, 1994.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------
Printed Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------
Notary Public [SEAL]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of April, 1994, before me, the undersigned officer,
personally appeared ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (residing at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇), personally known and acknowledged to me to be Vice
President of Alexander Title Agency, Inc. and that as such officer, being duly
authorized to do so pursuant to its by-laws or a resolution of its board of
directors, and being informed of the contents of such instrument, executed and
acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as such officer as his free and
voluntary act and deed and the voluntary act and deed of said corporation, and
by affixing the corporate seal of such corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Printed Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL] May 21, 1994
--------------------------------------------
--------------------------
EXHIBIT B
---------
LAND
----
BEGINNING at a point which is located in the northerly margin of the right of
way of ▇▇▇▇▇▇▇▇ Road (60 foot right of way), which point is located along a tie
line S 68-41-15 E 813.21 feet from an iron marking the intersection of the
easterly margin of the right of way of Arrowridge Boulevard (80 foot right of
way) and the southerly margin of the right of way of ▇▇▇▇▇▇▇▇ Road; thence, N
29-15-12 E 56.00 feet to a point; thence, N 07-25-00 E 165.00 feet to a point;
thence, N 00-30-00 W 133.00 feet to a point; thence, N 89-30-00 E 130.00 feet to
a point; thence, S 60-44-33 E 376.48 feet to a point; thence, S 07-14-40 W
411.07 feet to a point which is located in the northerly margin of the right of
way of ▇▇▇▇▇▇▇▇ Road; thence, continuing with said margin of ▇▇▇▇▇▇▇▇ Road N 60-
44-48 W 516.01 feet to the point and place of Beginning, containing 4.304 acres,
more or less, all as shown on that survey dated August 8, 1985 and prepared by
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and Associates, P.A.
Line 8 above should read as follows:
thence, N 28-15-12 E 56.00 feet to a point; thence, N 07-
TOGETHER WITH that certain Slope Easement and Agreement recorded in Book 5142,
Page 24, Mecklenburg County Public Registry.
EXCEPT FROM the premises above described a 10 ft. wide strip taken for road
widening purposes along ▇▇▇▇▇▇▇▇ Road.