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Exhibit 10.4
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Agreement") is made and given as of this
24th day of December, 1997, by CANDLEWOOD HOTEL COMPANY, INC., a Delaware
corporation (the "Guarantor"), for the benefit of HP CW PROPERTIES TRUST, a
Maryland real estate investment trust (the "Landlord"), and HOSPITALITY
PROPERTIES TRUST, a Maryland real estate investment trust and the sole
stockholder of Landlord (together with the Landlord and their respective
successors and assigns, "HPT").
W I T N E S S E T H :
WHEREAS, pursuant to an Agreement to Lease, dated November 19, 1997 (the
"Agreement to Lease"), the Landlord and Candlewood Leasing No. 1, Inc., a
Delaware corporation (the "Tenant"), are, on the date hereof, entering into a
Lease Agreement (the "Initial Lease") with respect to certain real property, the
related improvements and personal property, as more particularly described
therein; and
WHEREAS, the Agreement to Lease contemplates that the Initial Lease will
be amended to add to the premises demised thereunder certain additional
Candlewood hotels described in the Purchase Agreement and Agreement to Lease
pursuant to certain amendments to be entered into pursuant to the Agreement to
Lease (collectively, the "Amendments" and the Initial Lease, as amended by the
Amendments, the "Lease"); and
WHEREAS, it is a condition precedent to the Landlord's entering into the
Lease that the Guarantor guarantee all of the payment and performance
obligations of the Tenant with respect to the Lease; and
WHEREAS, the transactions contemplated by the Lease are of direct
material benefit to the Guarantor;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the mutual receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. .CERTAIN TERMS. Capitalized terms used and not otherwise defined in
this Agreement shall have the meanings ascribed to such terms in the Lease. The
Lease and the Incidental Documents are herein collectively referred to as the
"Transaction Documents."
2. GUARANTEED OBLIGATIONS. For purposes of this Agreement, the term
"Guaranteed Obligations" shall mean the payment and performance of each and
every obligation of the Tenant to HPT under the Transaction Documents, whether
now existing or hereafter arising, and including, without limitation, the
payment of the full amount of the Rent payable under the Lease.
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3. REPRESENTATIONS AND COVENANTS. The Guarantor represents, warrants,
covenants and agrees that:
3.1. PERFORMANCE OF COVENANTS AND AGREEMENTS. Subject to the
limitations set forth in Section 20, during the term of this Agreement, the
Guarantor will cause the Tenant duly and punctually to perform all of the
covenants and agreements of Tenant set forth in the Transaction Documents.
3.2. VALIDITY OF AGREEMENT. The Guarantor has duly and validly
executed and delivered this Agreement; this Agreement constitutes the legal,
valid and binding obligation of the Guarantor, enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors; and the execution,
delivery and performance of this Agreement have been duly authorized by all
requisite action of the Guarantor and such execution, delivery and performance
by the Guarantor will not result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any of the property or assets
of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of
trust, note, other evidence of indebtedness, agreement or other instrument to
which the Guarantor is a party or by which the Guarantor or any property or
assets of the Guarantor is bound, or violate any provision of law applicable to
the Guarantor, or any order, writ, injunction, judgement or decree of any court
applicable to the Guarantor or any order or other public regulation of any
governmental commission, bureau or administrative agency applicable to the
Guarantor.
3.3. PAYMENT OF EXPENSES. The Guarantor agrees, as principal
obligor and not as Guarantor only, to pay to HPT forthwith, upon demand, in
immediately available Federal funds, all costs and expenses (including court
costs and reasonable legal expenses) incurred or expended by HPT in connection
with the enforcement of this Agreement, together with interest on amounts
recoverable under this Agreement from the time such amounts become due until
payment at the Interest Rate.
3.4. REPORTS. The Guarantor shall promptly provide to HPT each of
the financial reports, certificates and other documents required of the
Guarantor under the Transaction Documents.
3.5. LEGAL EXISTENCE. The Guarantor shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence.
4. GUARANTEE. The Guarantor hereby unconditionally guarantees that the
Guaranteed Obligations which are monetary obligations which become due and
payable during the term of this Agreement shall be paid in full when due and
payable, whether upon demand, at the stated or accelerated maturity thereof or
upon any mandatory or voluntary prepayment pursuant to any Transaction Document,
or otherwise, and that the Guaranteed Obligations which are performance
obligations which are required to be performed during the term of this Agreement
shall be fully performed at the times and in the manner such performance is
required by the Transaction Documents. With respect to the Guaranteed
Obligations which are monetary
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obligations, this guarantee is a guarantee of payment and not of collectibility
and is absolute and in no way conditional or contingent. In case any part of the
Guaranteed Obligations shall not have been paid when due and payable or
performed at the time performance is required, the Guarantor shall, within five
(5) days after receipt of notice from HPT, pay or cause to be paid to HPT the
amount thereof as is then due and payable and unpaid (including interest and
other charges, if any, due thereon through the date of payment in accordance
with the applicable provisions of the Transaction Documents) or perform or cause
to be performed such obligations in accordance with the Transaction Documents.
5. UNENFORCEABILITY OF GUARANTEED OBLIGATIONS, ETC. If the Tenant is for
any reason under no legal obligation to discharge any of the Guaranteed
Obligations, or if any other moneys included in the Guaranteed Obligations have
become unrecoverable from the Tenant by operation of law or for any other
reason, including, without limitation, the invalidity or irregularity in whole
or in part of any Guaranteed Obligation or of any Transaction Document or any
limitation on the liability of the Tenant thereunder or any limitation on the
method or terms of payment thereunder which may now or hereafter be caused or
imposed in any manner whatsoever, the guarantees contained in this Agreement
shall nevertheless remain in full force and effect in accordance with the terms
set forth herein and shall be binding upon the Guarantor to the same extent as
if the Guarantor at all times had been the principal debtor on all such
Guaranteed Obligations.
6. ADDITIONAL GUARANTEES. This Agreement shall be in addition to any
other guarantee or other security for the Guaranteed Obligations and it shall
not be prejudiced or rendered unenforceable by the invalidity of any such other
guarantee or security or by any waiver, amendment, release or modification
thereof.
7. CONSENTS AND WAIVERS, ETC. The Guarantor hereby acknowledges receipt
of correct and complete copies of each of the Transaction Documents and consents
to all of the terms and provisions thereof, as the same may be from time to time
hereafter amended or changed in accordance therewith, and waives, to the extent
the Guarantor lawfully may do so, (a) presentment, demand for payment, and
protest of nonpayment, of any of the Guaranteed Obligations, (b) notice of
acceptance of this Agreement and of diligence, presentment, demand and protest,
(c) notice of any default hereunder and any default, breach or nonperformance or
Event of Default under any of the Guaranteed Obligations or the Transaction
Documents, except as expressly provided in Section 4, (d) notice of the terms,
time and place of any private or public sale of collateral held as security for
the Guaranteed Obligations, (e) demand for performance or observance of, and any
enforcement of any provision of, or any pursuit or exhaustion of rights or
remedies against the Tenant or any other guarantor of the Guaranteed
Obligations, under or pursuant to the Transaction Documents, or any agreement
directly or indirectly relating thereto and any requirements of diligence or
promptness on the part of the holders of the Guaranteed Obligations in
connection therewith, and (f) any and all demands and notices of every kind and
description with respect to the foregoing or which may be required to be given
by any statute or rule of law.
8. NO IMPAIRMENT, ETC. The obligations, covenants, agreements and duties
of the Guarantor under this Agreement shall not be affected or impaired by any
assignment or transfer in
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whole or in part of any of the Guaranteed Obligations without notice to the
Guarantor, or any waiver by HPT or any holder of any of the Guaranteed
Obligations or by the holders of all of the Guaranteed Obligations of the
performance or observance by the Tenant or any other guarantor of any of the
agreements, covenants, terms or conditions contained in the Guaranteed
Obligations or the Transaction Documents or any indulgence in or the extension
of the time for payment by the Tenant or any other guarantor of any amounts
payable under or in connection with the Guaranteed Obligations or the
Transaction Documents or any other instrument or agreement relating to the
Guaranteed Obligations or of the time for performance by the Tenant or any other
guarantor of any other obligations under or arising out of any of the foregoing
or the extension or renewal thereof, or the modification or amendment (whether
material or otherwise) of any duty, agreement or obligation of the Tenant or any
other guarantor set forth in any of the foregoing, or the voluntary or
involuntary sale or other disposition of all or substantially all the assets of
the Tenant or any other guarantor or insolvency, bankruptcy, or other similar
proceedings affecting the Tenant or any other guarantor or any assets of the
Tenant or any such other guarantor, or the release or discharge of the Tenant or
any such other guarantor from the performance or observance of any agreement,
covenant, term or condition contained in any of the foregoing without the
consent of the holders of the Guaranteed Obligations by operation of law.
9. REIMBURSEMENT, SUBROGATION, ETC. The Guarantor hereby covenants and
agrees that the Guarantor will not enforce or otherwise exercise any rights of
reimbursement, subrogation, contribution or other similar rights against the
Tenant or any other person with respect to the Guaranteed Obligations prior to
the payment in full of all amounts then due and owing but unpaid with respect to
the Lease, and until the Guaranteed Obligations have been satisfied in full, the
Guarantor shall not have any right of subrogation, and the Guarantor waives any
defense it may have based upon any election of remedies by HPT which destroys
the Guarantor's subrogation rights or the Guarantor's rights to proceed against
the Tenant for reimbursement, including, without limitation, any loss of rights
the Guarantor may suffer by reason of any rights, powers or remedies of the
Tenant in connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging the indebtedness to HPT. Until all obligations of the
Tenant pursuant to the Transaction Documents shall have been paid and satisfied
in full, the Guarantor waives any right to enforce any remedy which HPT now has
or may in the future have against the Tenant, any other guarantor or any other
person and any benefit of, or any right to participate in, any security
whatsoever now or in the future held by HPT.
10. DEFEASANCE. (a) Unless sooner terminated pursuant to paragraph (b)
below, this Agreement shall terminate at such time as the Guaranteed Obligations
have been paid and performed in full and all other obligations of the Guarantor
to HPT under this Agreement have been satisfied in full; provided, however, if
at any time, all or any part of any payment applied on account of the Guaranteed
Obligations is or must be rescinded or returned for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or reorganization of
the Tenant), this Agreement, to the extent such payment is or must be rescinded
or returned, shall be deemed to have continued in existence notwithstanding any
such termination.
(b) Provided that (x) no (i) monetary Default, (ii) Default as to
which Notice thereof has been given to Tenant or (iii) Event of Default shall
have occurred and be continuing under the Lease, (y) Cash Flow (as defined
below) on a cumulative basis for a period of twelve
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(12) full consecutive Accounting Periods equals or exceeds Minimum Rent by fifty
percent (50%) with respect to such period, and (z) HPT shall receive a schedule
evidencing the foregoing, in form and substance reasonably satisfactory to HPT
prepared by a, so-called, "Big-Six" accounting firm or such other certified
public accountants as are approved by HPT (such approval not to be unreasonably
withheld, delayed or conditioned), this Agreement shall terminate ten (10)
Business Days after delivery to HPT of the financial statements described in
clause (z) preceding, and HPT shall, within ten (10) Business Days after the
written request of the Guarantor, confirm such termination by executing a
release of the Guarantor from all obligations and liabilities arising under this
Agreement subsequent to the release date and returning any unapplied balance of
the Guaranty Retained Funds (as hereinafter defined) to the Guarantor, together
with any accrued and unpaid interest thereon.
As used herein, "CASH FLOW" shall mean the net income before federal and
state income tax (or loss) of the Tenant in connection with the operation of the
Hotels, calculated in accordance with GAAP for the applicable period, as
illustrated in Exhibit A attached hereto, adjusted by adding back (a) all
extraordinary expense items, (b) depreciation and amortization, (c) interest
expense on Indebtedness permitted under the Lease, (d) Minimum Rent and
Additional Rent, (e) base management fees, incentive management fees, trade name
fees, franchise fees, royalty fees and central marketing fees paid to the
Manager to the extent subordinate to payment of rent pursuant to the Lease from
and after the occurrence of an Event of Default, and further adjusted by
deducting (f) required contributions to the FF&E Reserve and (g) all
extraordinary income items.
11. SECURITY FOR GUARANTY. As security for the obligations of the
Guarantor hereunder, HPT has retained from the aggregate purchase prices of the
Properties pursuant to the Purchase Agreement, the sum of Five Million Dollars
($5,000,000) (the "Guaranty Retained Funds"). HPT shall have no obligation to
hold the Guaranty Retained Funds in a segregated account and may commingle the
same with its general funds. Provided that no Event of Default shall have
occurred and be continuing, HPT shall credit the Guarantor or its assigns with
interest on any unapplied balance of the Guaranty Retained Funds at a rate of
11.11% per annum. Such interest shall be credited in arrears and pro rated with
respect to any partial month. Provided that (x) no (i) monetary Default, (ii)
Default as to which Notice thereof has been given to Tenant or (iii) Event of
Default shall have occurred and be continuing under the Lease, (y) Cash Flow on
a cumulative basis for a period of twelve (12) full consecutive Accounting
Periods equals or exceeds Minimum Rent by forty percent (40%) with respect to
such period, and (z) HPT shall receive a schedule evidencing the foregoing, in
form and substance reasonably satisfactory to HPT prepared by certified public
accountants approved by HPT (such approval not to be unreasonably withheld,
delayed or conditioned), HPT shall, within ten (10) Business Days after the
written request of the Guarantor, pay any unapplied balance of the Guaranty
Retained Funds, together with any accrued and unpaid interest with respect
thereto, to the Guarantor. At the written request of the Guarantor, HPT shall
credit accrued interest on the Guaranty Retained Funds against the monthly
Minimum Rent.
12. NOTICES. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with
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written acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice, postpaid
and registered or certified with return receipt requested (if by mail), or with
all freight charges prepaid (if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall
be deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to HPT to:
c/o Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. John G. Murray
[Telecopier No. (617) 969-5730]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to the Guarantor to:
Candlewood Hotel Company, Inc.
Lakepoint Office Park
9342 East Central
Witchita, Kansas 67206
Attn: Mr. Jack P. DeBoer
[Telecopier No. (316) 631-1333]
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with a copy to:
Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attn: Jon D. Demorest, Esq.
[Telecopier No. (619) 696-7419]
(d) By notice given as herein provided, the parties hereto and
their respective successors and assigns shall have the right from time to time
and at any time during the term of this Agreement to change their respective
addresses effective upon receipt by the other parties of such notice and each
shall have the right to specify as its address any other address within the
United States of America.
13. SUCCESSORS AND ASSIGNS. Whenever in this Agreement, any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, including without limitation the holders,
from time to time, of the Guaranteed Obligations; and all representations,
warranties, covenants and agreements by or on behalf of the Guarantor which are
contained in this Agreement shall inure to the benefit of HPT's successors and
assigns, including, without limitation, such holders, whether so expressed or
not; provided, however, that, if HPT shall transfer the Guaranty Retained Funds
to a person having a Net Worth less than ten (10) times the unapplied balance
thereof, HPT shall guaranty repayment thereof and payment of any accrued
interest thereon to the Guarantor in accordance with the terms of this Agreement
pursuant to a guaranty in form and substance reasonably satisfactory to the
Guarantor.
14. APPLICABLE LAW. Except as to matters regarding the internal affairs
of HPT and issues of or limitations on any personal liability of the
shareholders and trustees of HPT for obligations of HPT, as to which the laws of
the State of Maryland shall govern, this Agreement and any other instruments
executed and delivered to evidence, complete or perfect the transactions
contemplated hereby 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 any such instrument is executed or
delivered; or (ii) where any payment or other performance required by any such
instrument is made or required to be made; or (iii) where any breach of any
provision of any such instrument 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.
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 may be provided by law; and the parties
consent to the jurisdiction of said court or courts located in Massachusetts
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and to service of process by registered mail, return receipt requested, or by
any other manner provided by law.
15. MODIFICATION OF AGREEMENT. No modification or waiver of any
provision of this Agreement, nor any consent to any departure by the Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by HPT, and such modification, waiver or consent shall be effective
only in the specific instances and for the purpose for which given. No notice to
or demand on the Guarantor in any case shall entitle the Guarantor to any other
or further notice or demand in the same, similar or other circumstances.
16. WAIVER OF RIGHTS BY HPT. Neither any failure nor any delay on HPT's
part in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege.
17. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, but this Agreement
shall be reformed and construed and enforced to the maximum extent permitted by
applicable law.
18. ENTIRE CONTRACT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the subject matter hereof.
19. HEADINGS; COUNTERPARTS. Headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument,
and in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.
20. REMEDIES CUMULATIVE. No remedy herein conferred upon HPT is intended
to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
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WITNESS the execution hereof under seal as of the date above first
written.
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ PAMELA CLOUD
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Its: Assistant Secretary
ACKNOWLEDGED AND AGREED:
HP CW PROPERTIES TRUST
By: /s/ JOHN G. MURRAY
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Its: President
HOSPITALITY PROPERTIES TRUST
By: /s/ JOHN G. MURRAY
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Its: President
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