EXHIBIT 10.1
TERMINATION AGREEMENT
Termination Agreement (this "Agreement") dated October 27, 2003 among
HPT CW Properties Trust ("HPT CW"), Xxxx X. Xxxxxx, Trustee of HPT CW MA Realty
Trust ("HPT CW MA"), HH HPTCW II Properties LLC ("HPTCW II" and collectively
with HPT CW and HPT CW MA, the "Landlord"), Hospitality Properties Trust ("HPT"
and together with Landlord, the "Guaranteed Parties"), Candlewood Hotel Company,
Inc. ("Guarantor") and Candlewood Leasing No. 1, Inc. ("Tenant").
RECITALS
Pursuant to an Agreement to Lease dated as of November 19, 1997, HPT CW
and Tenant entered into a Second Amended and Restated Lease Agreement dated as
of April 12, 2002, as amended by a First Amendment to Second Amended and
Restated Lease Agreement dated as of July 21, 2003, between the Landlord and the
Tenant (as amended, the "Second Amended Lease") with respect to the real
property, related improvements and personal property described therein.
Capitalized terms not defined in this Agreement shall have the meanings given
therefor in the Second Amended Lease.
As a condition precedent to Landlord entering into the Second Amended
Lease, the Guarantor guaranteed all payment and performance obligations of the
Tenant with respect to the Second Amended Lease to the Guaranteed Parties
pursuant to a Third Amended and Restated Guaranty Agreement dated July 21, 2003
(the "Guaranty").
Guarantor desires to be relieved of its obligations under the Guaranty,
which the Guaranteed Parties are willing to do on the terms and conditions set
forth in this Agreement.
Contemporaneously with the execution of this Agreement, Guarantor and
certain of its Subsidiaries and HPT are entering into that certain Purchase and
Sale Agreement (the "HPT Purchase Agreement") and Six Continents Hotels, Inc.
("SCH"), Guarantor and Candlewood Hotel Company, L.L.C. are entering into an
Asset Purchase Agreement (the "SCH Purchase Agreement").
NOW, THEREFORE, it is agreed:
1. Termination of the Guaranty. The Guaranteed Parties hereby
acknowledge termination of the Guaranty at 11:59 pm on the Effective Date
(hereafter defined) and release the Guarantor from any and all of its
obligations set forth therein arising thereafter; provided the conditions set
forth in Section 6 below are satisfied and further provided Guarantor's
obligations under the proviso in Section 10 of the Guaranty shall not be
terminated with respect to and Guarantor shall remain liable to the Guaranteed
Parties thereunder with respect to, payments made prior to 11:59 pm on the
Effective Date.
2. Termination of the Second Amended Lease. Landlord and Tenant hereby
agree that the term of the Second Amended Lease shall terminate at 11:59 pm on
the Effective Date provided the conditions set forth in Section 6 below are
satisfied and further provided the consideration described in Section 4, below,
is paid.
3. Surrender of Leased Property and Tenant's Personal Property. Tenant
agrees that, on the Effective Date, Tenant shall surrender the Leased Property
to the
Landlord in substantially the same condition as the Leased Property is in
on the date of this Agreement except as repaired, rebuilt, restored, altered or
added to as permitted or required by the Second Amended Lease, reasonable wear
and tear excepted (and casualty damage and Condemnation excepted if the Second
Amended Lease is terminated following such casualty or Condemnation as provided
therein). Upon the occurrence of the Effective Date and the satisfaction of the
conditions in Section 6 below, Tenant shall be conclusively deemed to have
satisfied its obligations under the immediately preceding sentence and under
Section 5.3 of the Second Amended Lease, and Landlord shall have no right to
bring any claim for monetary damages or other relief against Tenant or Guarantor
for any alleged violation of any such obligations. For purposes of Articles 10
and 11 of the Second Amended Lease, any casualty, destruction or Condemnation of
the Leased Property after the date of this Agreement and prior to the Effective
Date shall be treated as if it had occurred during the last two (2) years of the
Term. In addition, Tenant acknowledges that, in accordance with the terms of
Section 5.2 of the Second Amended Lease, all of Tenant's Personal Property shall
become the property of Landlord on the Effective Date, and, in connection
therewith, Tenant agrees to execute and deliver a xxxx of sale in substantially
the form attached as Exhibit A, conveying Tenant's Personal Property to Landlord
or its designee as of the Effective Date.
4. Consideration to Landlord. In consideration for Landlord's execution
and performance of this Agreement, Tenant hereby agrees that on the Effective
Date Tenant shall cause the FF&E Reserves to be paid to Landlord by wire
transfer and that Landlord may retain the Retained Funds less $2,500,000, which
amount shall be released by Landlord to Tenant and paid by wire transfer on the
Effective Date.
5. Termination of Security Agreements and Certain Prior Agreements.
Provided the conditions set forth in Section 6 below are satisfied, on the
Effective Date, without further action by Landlord, Tenant or Guarantor: (a) the
Stock Pledge Agreement, (b) the Security Agreement, (c) the FF&E Pledge and (d)
those agreements listed in Exhibit B (collectively the "Prior Agreements") shall
be terminated without recourse to Tenant or Guarantor, and Landlord shall return
the certificate evidencing the stock of Tenant to Guarantor.
6. Compliance with Second Amended Lease. It is a condition to this
Agreement becoming effective that on the Effective Date, no Event of Default
arising from the failure to pay Rent or any other sum due under the Second
Amended Lease shall exist.
7. Timing of Rent Payments. Anything contained in the Second Amended
Lease to the contrary notwithstanding, Landlord and Tenant hereby agree that
payments of Minimum Rent and Additional Rent, if any, due pursuant to the Second
Amended Lease for each of the November, 2003, December, 2003 and January, 2004
Accounting Periods shall be paid on the 15th day of such Accounting Period.
Notwithstanding the foregoing, if payment of Rent for any such Accounting Period
is not made as provided in this Section 7, then such non-payment shall
constitute an Event of Default under the Second Amended Lease.
8. Assets and Trade Payables; Impositions.
(a) From and after the Effective Date, Landlord or its designee
shall be solely responsible for collecting all current assets ("Current Assets")
and for paying all current trade payables which are disclosed to Landlord
pursuant to the good faith estimate
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and/or the Final Calculation which Tenant is required to prepare in accordance
this Section 8 ("Current Trade Payables") that arose in connection with Tenant's
(or its affiliates) operation of the Leased Property prior to the Effective
Date. On or before the date that is ten (10) days prior to the Effective Date,
Tenant shall provide Landlord with a good faith estimate of what the total
Current Assets and Current Trade Payables will be on the Closing Date. Such
estimate shall be provided to Landlord for information purposes only. Within
thirty (30) days after the Effective Date, Tenant shall provide Landlord with a
calculation of the actual amount of the Current Assets and the Current Trade
Payables as of the Effective Date (the "Final Calculation"). The Final
Calculation shall be made on an accrual basis in accordance with GAAP and shall
provide for reasonable allowances for uncollectible Current Assets in accordance
with GAAP. Landlord shall have five (5) Business Days after its receipt of the
Final Calculation to approve or reject the same. If Landlord does not approve or
reject the Final Calculation within such five (5) Business Day period, Landlord
shall be deemed to have approved the Final Calculation. Within three (3)
Business Days after Landlord's approval of the Final Calculation, (i) if the
amount of the Current Assets determined therein exceeds the amount of the
Current Trade Payables determined therein, then Landlord or its designee shall
pay such excess amount to Tenant in immediately available funds and (ii) if the
amount of the Current Trade Payables determined therein exceeds the amount of
the Current Assets determined therein, then Guarantor and Tenant shall pay such
excess amount to Landlord or its designee in immediately available funds. Such
payment shall be a final settlement of the Current Assets and the Current Trade
Payables. If Landlord and Tenant are not able to reach agreement on the Final
Calculation within five (5) Business Days after Landlord's rejection of the
same, then a certified public accountant reasonably acceptable to the parties
hereto shall determine any portion of the Final Calculation that shall not
theretofore have been agreed to by the parties hereto. The charges for such
accountant shall be borne equally by the parties to such disputed amount. Tenant
and Guarantor hereby acknowledge and agree that nothing contained in this
Section 8 shall construed so as to relieve Tenant of any of its obligations to
make any payments required to be made by it under the Lease, including, without
limitation, any Minimum Rent, Additional Rent or Additional Charges (except to
the extent that such Additional Charges constitute Current Trade Payables).
(b) On the Effective Date, a fair and reasonable estimated
accounting of all Impositions with respect to the Leased Property shall be
performed and agreed to by Landlord and Tenant. All Impositions imposed upon the
Leased Property for all periods prior to and including the Effective Date shall
be for the account of Tenant and all Impositions imposed upon the Leased
Property for all periods after the Effective Date shall be for the account of
Landlord. All adjustments to be made as a result of such accounting shall be
paid to the party entitled thereto in immediately available funds on the
Effective Date. All Impositions for which current bills are not available as of
the Closing Date or the date of the Final Calculation, if applicable, including,
without limitation, real estate and personal property taxes, shall be
apportioned based on 100% of the most recent actual xxxx available.
Notwithstanding anything contained herein to the contrary, the Impositions with
respect to each Leased Property shall be calculated and allocated in accordance
with the local custom and practice for such Leased Property as determined by
Chicago Title Insurance Company.
9. Representations.
(a) Each of Guarantor and Tenant, jointly and severally, represent
and warranty to the Guaranteed Parties that:
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(i) to their knowledge, there is no Event of Default or
Default by either the Landlord or Tenant under the Second Amended
Lease; and
(ii) the execution and delivery of this Agreement, the HPT
Purchase Agreement and the SCH Purchase Agreement and the transactions
contemplated hereby and thereby were duly approved by the boards of
directors of Guarantor and the Guarantor's Subsidiaries party thereto
at meetings duly held on October 26, 2003.
(b) The Guaranteed Parties, jointly and severally represent and
warrant to the Guarantor and Tenant that to their knowledge, there is no Event
of Default or Default by either the Landlord or Tenant under the Second Amended
Lease.
10. Release. On the Effective Date and provided the conditions set
forth in Section 6 above have been satisfied, the Guaranteed Parties hereby
waive, release, and discharge to the fullest extent permitted by law any and all
claims, causes of action, demands, suits, costs, expenses and damages existing
on or before 11:59 pm on the Effective Date in any way related to or connected
with Tenant or Guarantor or their respective affiliates that the Guaranteed
Parties may have, of whatsoever nature and kind whether arising at law or at
equity (whether based in contract, tort, or any other theory) against Tenant,
Guarantor or their respective affiliates and their respective shareholders,
officers, directors, members, employees, agents, attorneys or other
representatives based in whole or in part on the Second Amended Lease, the
Guaranty, the Stock Pledge Agreement, the Security Agreement, the FF&E Pledge,
the Prior Agreements and/or any other document executed and delivered in
connection therewith or on facts known or knowable to the Guaranteed Parties on
the Effective Date, provided nothing in this Section 10 shall release or
discharge Guarantor from its obligations to the Guaranteed Parties under the
proviso in Section 10 of the Guaranty as set forth in Section 1 above or
otherwise under this Agreement.
11. Effective Date. The term "Effective Date" shall mean the date on
which all conditions for closing under each of the HPT Purchase Agreement and
the SCH Purchase Agreement shall have been satisfied and the closings under each
have occurred.
12. Cooperation; Access. To facilitate Landlord's acceptance of
Tenant's surrender of the Leased Property, following the date of this Agreement
upon reasonable notice, Guarantor will and will cause Tenant to permit the
Guaranteed Parties and their respective representatives to inspect, during
Guarantor's normal business hours, the Leased Property, to examine the books,
records and other information of Guarantor and Tenant related to the Leased
Property, and to consult with the employees of Guarantor and Tenant at such
reasonable times as the Guaranteed Parties and or their respective
representatives may reasonably request by notice to Guarantor (which notice may
be oral). Guarantor agrees to provide to the Guaranteed Parties with such
information, from time to time, as the Guaranteed Parties may reasonably
request, (a) regarding the Leased Properties and the condition and operation
thereof, (b) relating to the values of the Fixtures and Leased Personal Property
and (c) required to determine results of operations of the Leased Property
through the Effective Date. In addition, promptly upon HPT's request and at
HPT's sole cost and expense, such audited and unaudited financial and other
information and certifications required by HPT in connection with its reporting
obligations under the Securities Exchange Act of 1934, and if required or
requested, to permit HPT to incorporate any information included in filings made
by Guarantor with the Securities
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Exchange Commission. The Guaranteed Parties shall indemnify, defend and hold
harmless Guarantor and Tenant from and against any and all expense, loss or
damage which they incur as a result of any act or omission of the Guaranteed
Parties or their respective representatives in connection with such inspection
and examination, other than to the extent that any expense, loss or damage
arises from any negligence or misconduct of Guarantor or Tenant.
13. Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Date,
by action taken or authorized by the Board of Directors of the terminating party
or parties, whether before or after Stockholder Approval:
(a) by mutual written consent of HPT and Guarantor;
(b) by either HPT or Guarantor if the Transactions shall not have
been consummated prior to February 28, 2004 (the "Outside Date"); provided
however that the right to terminate this Agreement under this Section 13 (b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Transactions to occur on or before the Outside Date;
(c) by either HPT or Guarantor if "Stockholder Approval" (as
defined in the HPT Purchase Agreement) is not obtained by reason of the failure
to obtain the required vote at a duly held meeting of Guarantor's stockholders
or at any adjournment thereof;
(d) by either HPT or Guarantor if either the HPT Purchase
Agreement or the SCH Purchase Agreement has been terminated; or
(e) by HPT if the conditions set forth in Section 6 are not
satisfied on the Effective Date.
14. Effect of Termination. In the event of termination of this
Agreement by either HPT or Guarantor as provided in Section 13, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of HPT or Guarantor or their respective Subsidiaries, officers or directors
except with respect to any liabilities or damages incurred or suffered by a
party as a result of the willful and material breach by the other party of any
of its covenants or other agreements set forth in this Agreement and except as
otherwise provided in the HPT Purchase Agreement.
15. Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than Massachusetts; or (vii) any combination of
the foregoing.
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To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as is provided by law; and the parties consent
to the jurisdiction of said court or courts located in Massachusetts and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH
WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS,
(C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 15.
16. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but such counterparts, when taken
together, shall constitute one agreement.
17. Binding Effect. This Agreement shall inure to the benefit of, and
shall be binding upon, the parties hereto and their respective legal
representatives, successors and assigns.
18. Further Assurances. The parties hereby agree to execute such
further documents or instruments as may be necessary or appropriate to carry out
the intention of this Agreement, including, without limitation, on the Effective
Date and provided the conditions set forth in Section 6 above have been
satisfied, upon request of Guarantor, HPT will deliver a certificate confirming
the termination of the Guaranty, the Second Amended Lease, the Stock Pledge
Agreement, the FF&E Pledge and the Prior Agreements, and that the release in
Section 10 above has become effective, all in accordance with the terms of this
Agreement.
19. Entire Agreement; Waiver. This Agreement contains the entire
agreement between the parties hereto and shall be binding upon and inure to the
benefit of their respective heirs, representatives, successors and permitted
assigns. Any agreement hereinafter made shall be ineffective to change, modify,
waive, release, discharge, terminate or effect an abandonment hereto, in whole
or in part, unless such agreement is in writing and signed by the parties
hereto.
20. Interpretation. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or
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burden of proof shall arise favoring or disfavoring a party by virtue of the
authorship of any provision of this Agreement.
21. Public Announcements. The timing and content of all announcements
regarding any aspect of this Agreement to the financial community, government
agencies, employees or the public generally shall be mutually agreed upon in
advance, unless HPT, or Guarantor is advised by counsel that any such
announcement or other disclosure not mutually agreed upon in advance is required
to be made by law, by New York Stock Exchange rule or by American Stock Exchange
rule, or Nasdaq National Market rule, in which case to the extent practicable,
the party making the announcement or disclosure will consult with the other
party and use reasonable efforts to agree on the nature, extent and form of the
announcement or disclosure. Notwithstanding anything to the contrary contained
in this Agreement, the parties (and each employee, representative, or other
agent of the parties) may disclose to any and all persons, without limitation of
any kind, the tax treatment and tax structure of the transaction, and all
materials of any kind (including opinions or other tax analyses) that are
provided to the taxpayer relating to such tax treatment and tax structure.
22. Declaration of Trust of HPT. The Declaration of Trust of HPT, a
copy of which is duly filed with the Department of Assessments and Taxation of
the State of Maryland, provides that the name "Hospitality Properties Trust"
refers to the trustees under such Declaration of Trust collectively as trustees,
but not individually or personally, and that no trustee, officer, stockholder,
employee or agent of HPT shall be held to any personal liability, jointly or
severally, for any obligation of, or claim against, HPT. All persons dealing
with HPT in any way shall look only to the assets of HPT for the payment of any
sum or the performance of any obligation.
23. Declaration of Trust of HPT CW. The Declaration of Trust of HPT CW,
a copy of which is duly filed with the Department of Assessments and Taxation of
the State of Maryland, provides that the name "HPT CW Properties Trust" refers
to the trustees under such Declaration of Trust collectively as trustees, but
not individually or personally, and that no trustee, officer, stockholder,
employee or agent of HPT CW shall be held to any personal liability, jointly or
severally, for any obligation of, or claim against, HPT CW. All persons dealing
with HPT CW in any way shall look only to the assets of HPT CW for the payment
of any sum or the performance of any obligation.
24. Post-Closing Agreement. Landlord hereby extends the time for Tenant
and Guarantor to fulfill all their obligations under Sections 1 and 3 of that
certain Post-Closing Agreement, dated as of July 21, 2003 among Guaranteed
Parties, Guarantor and Tenant, from the dates set forth therein to the Effective
Date.
[Remainder of the page intentionally left blank; signatures on next page]
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Executed under seal as of the date first above written.
HPT CW PROPERTIES TRUST
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: President
HPT CW MA REALTY TRUST
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Xxxx X. Xxxxxx,
as Trustee and not individually
HH HPTCW II PROPERTIES LLC
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: President
HOSPITALITY PROPERTIES TRUST
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: President
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ Xxxx X. XxXxxx
------------------------------------------
Name: Xxxx X. XxXxxx
Title: Chairman & Chief Executive Officer
CANDLEWOOD LEASING NO. 1, INC.
By: /s/ Xxxx X. XxXxxx
------------------------------------------
Name: Xxxx X. XxXxxx
Title: Chairman & Chief Executive Officer
[Signature page to Termination Agreement]
The following exhibits have been omitted and will be supplementally furnished to
the Securities and Exchange Commission upon request:
Exhibit A Form of Xxxx of Sale
Exhibit B Schedule of certain Prior Agreements
