EXHIBIT 10.14
INVESTMENT MANAGER'S SUBORDINATION AGREEMENT
INVESTMENT MANAGER'S SUBORDINATION AGREEMENT (this "Agreement"), dated
as of March 19, 1998, by and among REIT Management & Research, Inc., a Delaware
corporation, having an address at 000 Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000
(the "Investment Manager"), Hospitality Properties Trust, a Maryland real estate
investment trust, having an address at 000 Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000 (the "Borrower"), and Dresdner Bank AG, New York Branch and Grand Cayman
Branch, having an address at 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as agent
on behalf of the Lenders (as hereinafter defined) (the "Agent").
R E C I T A L S:
Pursuant to that certain Revolving Credit Agreement, dated as of the
date hereof (as modified and supplemented and in effect from time to time, the
"Loan Agreement"; capitalized terms used herein and not otherwise defined having
the meanings set forth in the Loan Agreement), by and among Borrower, as
borrower; Agent, as agent; and the institutions party thereto as lenders
("Lenders"), the Lenders have committed to make a loan (the "Loan") to Borrower
up to a maximum aggregate principal amount of $250,000,000. The Loan is to be
evidenced by, and repayable with interest thereon in accordance with, that
certain Revolver Note, dated the date hereof, executed and delivered by Borrower
to the order of Agent (as modified, supplemented or substituted and in effect
from time to time, collectively, the "Note").
Investment Manager has agreed to provide management, advisory and
administrative services and certain other services for the Borrower pursuant to
an Advisory Agreement among Investment Manager, Xxxxx X. Xxxxxxx, Xxxxxx X.
Xxxxxx and Borrower (as amended, modified or supplemented and in effect from
time to time, the "Advisory Agreement").
NOW, THEREFORE, to induce the Agent to enter into the Loan Agreement
and to induce Lenders to make the Loan and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Representations of Investment Manager. Investment Manager warrants
and represents to the Agent the following as of the date hereof:
(a) The Advisory Agreement has not been assigned, modified,
amended or supplemented. The Advisory Agreement is in full force and
effect, and constitutes the entire agreement with respect to the
provision of management, advisory or administrative services to
Borrower, except as set forth therein. A true, correct and complete
copy of the Advisory Agreement is attached hereto as Exhibit A.
(b) The Advisory Agreement constitutes the legal, valid and
binding obligation of Investment Manager, enforceable against
Investment Manager in accordance with its
terms, subject to general principles of equity and laws affecting the
rights and remedies of debtors and creditors generally.
(c) To Investment Manager's knowledge, Borrower is not in
default in the performance of the terms and provisions of the Advisory
Agreement, nor is there now any condition which, with the giving of
notice or lapse of time, or both, will become a default.
(d) There are no contracts, agreements or commitments between
Borrower and Investment Manager in respect of the Loan Agreement or the
provision of management, advisory or administrative services to
Borrower, except as provided in the Advisory Agreement.
(e) Investment Manager is not in material default under the
terms and provisions of the Advisory Agreement, nor is there now any
condition which, with the giving of notice or lapse of time, or both,
will become a default. No claim or dispute exists between Borrower and
Investment Manager with respect to the Advisory Agreement.
(f) Investment Manager has not assigned or encumbered its
interest under the Advisory Agreement.
(g) Investment Manager does not have any option or
preferential right to purchase all or any part of, and does not have
any right, title or interest with respect to any Hotel or any other
property of Borrower other than as advisor under the Advisory
Agreement.
(h) As of the date hereof, all fees, sums, charges, costs,
expenses and other amounts due under the Advisory Agreement have been
paid in accordance with the terms of the Advisory Agreement.
2. Investment Manager's Covenants.
A. Investment Manager hereby consents and agrees to each and
every one of the following covenants and agreements for the benefit of
the Agent:
(a) Performance and Notice of Default. Investment Manager
agrees that it will (i) promptly perform and observe in all material
respects all of the covenants and agreements required to be performed
and observed by it under the Advisory Agreement, and (ii) promptly
notify Agent of any material default under the Advisory Agreement of
which it becomes aware.
(b) No Termination of Advisory Agreement. Investment Manager
will not terminate the Advisory Agreement without first providing the
Agent with at least thirty (30) days' prior written notice of such
intention.
(c) Subordination of the Advisory Agreement to Liens of
Lender. Any and all liens, rights and interests (whether xxxxxx or
inchoate and including, without limitation, all
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mechanic's and materialman's liens under applicable law) owned, claimed
or held, or to be owned, claimed or held, by Investment Manager in and
to any property of the Borrower (collectively, the "Subordinated
Obligations"), are and shall be in all respects subordinate and
inferior to the liens and security interests created or to be created
for the benefit of the Agent, its successors and assigns, and securing
the repayment of the Note (including, without limitation, post-petition
interest), including, among other things, liens and security interests
with respect to the Hotels (collectively, the "Senior Obligations").
The foregoing subordination shall not affect the right of Investment
Manager to receive and use all fees paid or payable to it under the
Advisory Agreement.
(d) Agent's Right to Terminate. Upon (1) the occurrence of an
Event of Default pursuant to which the Loan is accelerated (or
otherwise becomes due and payable in full) or (2) Investment Manager
committing any act which would permit termination of the Advisory
Agreement by Borrower, the Agent shall have the right to terminate the
Advisory Agreement by giving Borrower and Investment Manager thirty
(30) days prior written notice.
(e) No Amendments to the Advisory Agreement. Investment
Manager will not amend or modify the Advisory Agreement in any material
respect without the prior written consent of the Agent, which consent
shall not be unreasonably withheld, delayed or conditioned. In the
event Investment Manager fails to secure such approval, the Advisory
Agreement shall, for the purposes of Investment Manager's obligations
to the Agent pursuant to this Agreement, be deemed not to have been
modified by such amendment.
(f) Limitation on Liens. Investment Manager will not create,
incur, assume or suffer to exist (to the extent funds are available to
satisfy such lien in accordance with the provisions of the Advisory
Agreement) any Lien upon any property of Borrower, including, without
limitation, the Hotels, except as permitted under the Loan Agreement or
as otherwise agreed to in writing by the Agent.
(g) Delivery of Notices, etc. Investment Manager shall furnish
the Agent with all material notices from any Governmental Authority or
private litigants received by Investment Manager with respect to any
Hotel.
(h) Further Assurances. Investment Manager shall (i) execute
such affidavits and certificates as the Agent shall reasonably require
to further evidence the agreements herein contained, provided same do
not increase Investment Manager's obligations set forth, contemplated
or otherwise intended hereunder, (ii) on written request from the
Agent, furnish the Agent with copies of such information as Borrower is
entitled to receive under the Advisory Agreement, and (iii) cooperate
with the Agent's representatives in any inspection of all or any
property of Borrower to the extent the Agent is permitted to enter and
inspect such property in accordance with the Loan Agreement.
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(i) Agent Not Obligated Under Advisory Agreement. Investment
Manager further agrees that nothing herein shall impose upon the Agent
any obligation for payment or performance in favor of Investment
Manager, unless the Agent has elected to assert Borrower's rights under
the Advisory Agreement, in which case the Agent shall pay Investment
Manager the sums due to Investment Manager under the terms of the
Advisory Agreement from and after the effective date of the Agent's
notice of such election to Investment Manager, and Investment Manager
shall continue performance on the Agent's behalf in accordance with the
terms of the Advisory Agreement.
(j) Agent's Reliance on Representations. Investment Manager
has executed this Agreement for the purpose of inducing the Lenders to
make the Loan and inducing Agent to enter into the Loan Agreement and
with full knowledge that the Agent and Lenders shall rely upon the
representations, warranties, covenants and agreements herein contained
when making the Loan and that but for this instrument and the
representations, warranties, covenants and agreements herein contained,
the Agent and Lenders would not take such actions.
B. Except as expressly permitted hereby, upon the occurrence and
continuance of an Event of Default under the Loan Agreement, Investment
Manager shall not request, demand or xxx for, or take, accept or
receive from Borrower, by set-off or in any other manner, and Borrower
shall not make, any payment of any monies (including, without
limitation, principal or interest (including post-petition interest)
thereafter owing by Borrower to Investment Manager in respect of the
Subordinated Obligations or any security therefor, other than for
services rendered prior to such date, until the final payment in full
of the Senior Obligations; provided, however, that Investment Manager
has no obligation to continue as Investment Manager under the Advisory
Agreement if Investment Manager is not receiving compensation for its
services thereunder.
C. In the event of any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or
otherwise, of all or any part of the assets of Borrower or the proceeds
thereof, to creditors of Borrower, or upon any indebtedness of
Borrower, by reason of the liquidation, dissolution or other winding up
of Borrower or Borrower's business, or any sale, receivership,
insolvency or bankruptcy proceeding, or assignment for the benefit of
creditors, or any proceeding by or against Borrower for any relief
under any bankruptcy or insolvency law or laws relating to the relief
of debtors, readjustment of indebtedness, reorganizations, compositions
or extensions, then and in any such event any payment or distribution
of any kind or character, either in cash, securities or other property,
which shall be payable or deliverable upon or with respect to any or
all indebtedness or obligations of Borrower to Investment Manager in
respect of any of the Subordinated Obligations (including, without
limitation, interest and post-petition interest) shall be paid or
delivered directly to the Agent for application to the Senior
Obligations (including, without limitation, post-petition interest),
due or not due, until the Senior Obligations shall have first been
fully paid and satisfied; provided, however, that Investment Manager
has no obligation to continue as Investment Manager under the Advisory
Agreement if Investment Manager is not receiving compensation for its
services thereunder. Upon the occurrence and during the continuance of
an Event of
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Default, Investment Manager irrevocably authorizes and empowers the
Agent to demand, xxx for, collect and receive every such payment or
distribution and give acquittance therefor and to file claims and take
such other proceedings, in the Agent's own name or in the name of
Investment Manager or otherwise, as the Agent may deem necessary or
advisable for the enforcement of this Agreement. Investment Manager
will execute and deliver to the Agent such powers of attorney,
assignments or other instruments as may be reasonably requested by the
Agent in order to enable the Agent to enforce any and all claims upon
or with respect to any of the Subordinated Obligations, and to collect
and receive any and all payments or distributions which may be payable
or deliverable at any time upon or with respect to any such Obligations
of Borrower.
D. Should any payment or distribution or security or proceeds thereof
be received by Investment Manager upon or with respect to any of the
Subordinated Obligations contrary to the foregoing provisions,
Investment Manager will forthwith deliver the same to the Agent in
precisely the form received (except for the endorsement or assignment
of Investment Manager where necessary) for application to the Senior
Obligations (including, without limitation, post-petition interest),
and, until so delivered, the same shall be held in trust by Investment
Manager as property of the Agent. In the event of the failure of
Investment Manager to make any such endorsement or assignment, the
Agent, or any of its officers or employees, is hereby irrevocably
authorized to make the same.
E. Investment Manager will not assign or transfer to others any claim
which it has or may hereafter have against Borrower in respect of any
of the Subordinated Obligations while any of the Senior Obligations
(including without limitation, post-petition interest) remain unpaid,
unless such assignment or transfer is made expressly subject to the
terms and conditions hereof in any instrument in form and substance
satisfactory to the Agent.
F. The Agent, at any time and from time to time, may enter into such
agreement or agreements with Borrower as the Agent may reasonably deem
proper extending the time of payment of or renewing or otherwise
altering the terms of all or any of the Senior Obligations without
notice to Investment Manager and without in any way impairing or
affecting the obligations of Investment Manager hereunder.
G. The Agent shall not be prejudiced in its right to enforce this
Agreement in respect of any of the Subordinated Obligations owing to
Investment Manager by any act or failure to act on the part of Borrower
or anyone in custody of Borrower's assets or property.
3. No Assignment. Notwithstanding anything to the contrary in the
Advisory Agreement, neither Investment Manager nor Borrower may assign the
Advisory Agreement without the prior written consent of the Agent.
4. No Waiver. No failure to exercise, and no delay in exercising, and
no course of dealing with respect to, any power, remedy or right under this
Agreement by the Agent shall operate as a waiver thereof, nor shall any single
or partial exercise thereof by the Agent preclude any other or further exercise
thereof or the exercise of any other power, remedy or right. The
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remedies provided herein are cumulative and not exclusive of any remedies
provided by applicable law and/or any of the other Credit Documents.
5. Notice. All notices, consents, approvals and requests required or
permitted hereunder shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) certified or registered United States
mail, postage prepaid, or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery,
and by telecopier (with answer back acknowledged), addressed if to Agent at its
address set forth on the first page hereof, Attention: Xx. Xxxxxxx X. Xxxxx,
00xx Xxxxx; Xx. Xxxx Xxxxxxxxx, 33rd Floor; and Xx. Xxxxxx Xxxx, 24th Floor; if
to Investment Manager at its address set forth on the first page hereof,
Attention: President; and if to Borrower at its address set forth on the first
page hereof, Attention: Xx. Xxxxxx X. X'Xxxxx; or at such other address and
Person as shall be designated from time to time by any party hereto, as the case
may be, in a written notice to the other parties hereto in the manner provided
for in this Section 5. A copy of all notices, consents, approvals and requests
directed to the Agent shall be delivered to Xxxxxx & Xxxxxxx, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxxxxx, Esq., and Xxxxxx Xxxxx,
Esq., and a copy of all notices, consents, approvals and requests directed to
Investment Manager or Borrower shall be delivered to Investment Manager or
Borrower at the address set forth in the preceding sentence, with a copy of each
to: Xxxxxxxx & Worcester LLP, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, Attention: Xxxxxxxx X. Xxxxx, Esq. A notice shall be deemed to have been
given: in the case of hand delivery, at the time of delivery; in the case of
registered or certified mail, when delivered or two Business Days after mailing;
or in the case of expedited prepaid delivery and telecopy, on the Business Day
after the same was sent. A party receiving a notice which does not comply with
the technical requirements for notice under this Section 5 may elect to waive
any deficiencies and treat the notice as having been properly given.
6. Indemnity. Borrower shall indemnify, defend and hold the Agent
harmless against and from all liability, loss, damage and expense (including,
without limitation, reasonable attorney's fees and disbursements), which the
Agent may or shall incur or be subject to by reason of this Agreement, or by
reason of any action taken in good faith by the Agent hereunder, and against and
from any and all claims and demands whatsoever which may be asserted against the
Agent by reason of any alleged obligation or undertaking on its part to perform
or discharge any of the terms, covenants and conditions contained in the
Advisory Agreement, other than claims and demands arising by reason of Agent's
own fraud, gross negligence or willful misconduct. Should the Agent incur any
such liability, loss, damage or expense, the amount thereof, together with
interest thereon at the rate of interest applicable from time to time under the
Note, shall be payable by Borrower to the Agent immediately upon demand.
7. Amendments, Etc. This Agreement cannot be amended except by an
agreement in writing, signed by the Agent, Borrower and Investment Manager, and
no provision hereof may be waived except by an instrument in writing signed by
the Agent.
8. Inspection; Books and Records. Investment Manager agrees that Agent
or its agents and any Lender may enter upon the premises of Investment Manager
at any time and from time to time, during normal business hours and upon
reasonable notice under the circumstances, and at any time at all on and after
the occurrence and during the continuance of an Event of Default,
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for the purposes of discussing the affairs, finances and business of any Credit
Party and any Hotel with any of the officers, employees and directors of
Investment Manager. Such officers, employees and directors shall truthfully and
fully explain the affairs, finances and business of such Credit Party or Hotel
to Agent or its agents and any Lender, as the case may be. At any time and from
time to time on and after the occurrence and during the continuance of an Event
of Default, Investment Manager shall, at Investment Manager's sole cost and
expense, deliver to Agent within five days of Agent's request all books,
records, files, correspondence and closing documents maintained by Investment
Manager with respect to any Credit Party and any Hotel.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10. Severability. If any provision of this Agreement or the application
thereof to any person or entity or circumstance shall, to any extent, be
illegal, invalid and/or unenforceable, the remainder of this Agreement or the
application of such provision to persons or entities or circumstances other than
those as to which it is illegal, invalid and/or unenforceable, as the case may
be, shall not be affected, and each provision of this Agreement shall be legal,
valid and enforceable to the extent permitted by law. The illegality, invalidity
and/or unenforceability of any provision of this Agreement in any jurisdiction
shall not affect the legality, validity and/or enforceability thereof in any
other jurisdiction.
11. Expenses. If any suit or other proceeding is instituted by the
Agent to enforce this Agreement (or any portion hereof), Borrower shall pay,
upon demand, all of the reasonable out-of-pocket costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
the Agent in connection therewith, together with interest at the Default Rate.
The obligations of Borrower under this Section 11 shall survive the expiration
or termination of this Agreement.
12. Headings. Headings used in this Agreement are for convenience of
reference only and do not constitute part of this Agreement for any purpose.
13. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW,
BORROWER AND INVESTMENT MANAGER HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING BROUGHT BY ANY PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS
AGREEMENT.
14. SUBMISSION TO JURISDICTION. INVESTMENT MANAGER HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
INVESTMENT MANAGER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING
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BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
15. Cumulative Remedies. All rights and remedies set forth in this
Agreement are cumulative, and the Agent may recover judgment thereon, issue
execution therefor, and resort to every other right or remedy available at law
or in equity, without first exhausting and without affecting or impairing the
security of any right or remedy afforded hereby; and no such right or remedy set
forth in this Agreement shall be deemed exclusive of any of the remedies or
rights granted to the Agent in the Note, the Loan Agreement or any other Credit
Document. Nothing contained in this Agreement shall be deemed to limit or
restrict the rights and remedies of the Agent under any of the other documents
related to the Senior Obligations.
16. Borrower's Consent. Borrower has joined herein to evidence its
consent to all the agreements of Investment Manager contained in this Agreement.
17. Successors. This Agreement shall be binding upon and shall inure to
the benefit of each party hereto and their respective successors and assigns.
18. Counterparts. This Agreement may be executed in any number of
counterparts each of which, taken together, shall constitute one and the same
original.
19. Conflicts with Loan Agreement. Notwithstanding anything to the
contrary set forth elsewhere in this Agreement or in any other Credit Document,
this Agreement and such other Credit Documents are expressly made subject in
their entirety to the Credit Agreement and in the event of a conflict or
ambiguity created between the Credit Agreement and any provision herein (and/or
under any other Credit Document) or obligation of Borrower hereunder (and/or
under any other Credit Document), the terms of the Credit Agreement shall govern
and control.
20. Termination. Upon the Obligations being fully paid by Borrower in
accordance with the Loan Agreement, this Agreement shall be of no further
effect.
21. NO LIABILITIES OF TRUSTEES. THE DECLARATION OF TRUST OF BORROWER,
DATED MAY 12, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
BORROWER. ALL PERSONS DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
INVESTMENT MANAGER:
REIT MANAGEMENT & RESEARCH, INC.
a Delaware corporation
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Executive Vice President
BORROWER:
HOSPITALITY PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: President
AGENT:
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH,
as Agent
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
By: /s/ Xxxxxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxxxxx Xxxxxxxxx
Title: Vice President
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EXHIBIT A
ADVISORY AGREEMENT
A copy of the Advisory Agreement, dated as of January 31, 1998, between REIT
Management & Research, Inc. and Hospitality Properties Trust has been filed with
the Securities and Exchange Commission as an exhibit to Hospitality Properties
Trust's Current Report on Form 8-K dated February 11, 1998, which exhibit is
incorporated herein by reference.
