FIRST AMENDED AND RESTATED
MASTER LEASE AGREEMENT
DATED AS OF NOVEMBER 26, 2002
BETWEEN
▇▇▇▇▇▇▇▇ HOSPITALITY LIMITED PARTNERSHIP
AND
E & P FINANCING LIMITED PARTNERSHIP
AS LESSOR
AND
TRS LEASING SUBSIDIARY, LLC
AS LESSEE
AND
SOLOMONS BEACON INN LIMITED PARTNERSHIP
AS WITHDRAWING LESSOR
TABLE OF CONTENTS
ARTICLE I ............................................................................. 1
1.1 Leased Property ................................................................ 1
---------------
1.2 Term ........................................................................... 2
----
ARTICLE II ............................................................................ 2
2.1 Definitions .................................................................... 2
-----------
ARTICLE III .......................................................................... 11
3.1 Rent .......................................................................... 11
----
3.2 Additional Charges ............................................................ 12
------------------
3.3 Lease Provision ............................................................... 12
---------------
3.4 Conversion of Property ........................................................ 12
----------------------
3.5 Books and Records ............................................................. 13
-----------------
ARTICLE IV ........................................................................... 13
4.1 Payment of Impositions ........................................................ 13
----------------------
4.2 Notice of Impositions ......................................................... 14
---------------------
4.3 Adjustment of Impositions ..................................................... 14
-------------------------
4.4 Maintenance ................................................................... 14
-----------
4.5 Insurance Premiums ............................................................ 14
------------------
ARTICLE V ............................................................................ 14
5.1 No Termination ................................................................ 14
--------------
ARTICLE VI ........................................................................... 15
6.1 Ownership of the Leased Property .............................................. 15
--------------------------------
6.2 Lessee's Personal Property .................................................... 15
--------------------------
6.3 Lessor's Lien ................................................................. 16
-------------
ARTICLE VII .......................................................................... 16
7.1 Condition of the Leased Property .............................................. 16
--------------------------------
7.2 Use of the Leased Property .................................................... 17
--------------------------
7.3 Lessor to Grant Easements, etc. ............................................... 18
-------------------------------
ARTICLE VIII ......................................................................... 18
8.1 Compliance with Legal and Insurance Requirements, etc. ........................ 18
------------------------------------------------------
8.2 Legal Requirement Covenants ................................................... 18
---------------------------
8.3 Environmental Covenants ....................................................... 19
-----------------------
ARTICLE IX ........................................................................... 21
9.1 Capital Improvements, Maintenance and Repair .................................. 21
--------------------------------------------
9.2 Encroachments, Restrictions, Etc. ............................................. 22
---------------------------------
ARTICLE X ............................................................................ 22
10.1 Alterations ................................................................. 22
-----------
10.2 Salvage ..................................................................... 23
-------
10.3 Joint Use Agreements ........................................................ 23
--------------------
ARTICLE XI ........................................................................... 23
11.1 Liens ....................................................................... 23
-----
ARTICLE XII .......................................................................... 23
12.1 Permitted Contests .......................................................... 23
------------------
ARTICLE XIII ......................................................................... 24
13.1 General Insurance Requirements .............................................. 24
------------------------------
i
13.2 Replacement Cost ................................................................. 26
----------------
13.3 Worker's Compensation ............................................................ 26
---------------------
13.4 Waiver of Subrogation ............................................................ 26
---------------------
13.5 Form Satisfactory, etc. .......................................................... 26
-----------------------
13.6 Change in Limits ................................................................. 27
----------------
13.7 Blanket Policy ................................................................... 27
--------------
13.8 Separate Insurance ............................................................... 27
------------------
13.9 Reports On Insurance Claims ...................................................... 27
---------------------------
ARTICLE XIV .............................................................................. 27
14.1 Insurance Proceeds ............................................................... 27
------------------
14.2 Reconstruction in the Event of Damage or Destruction Covered by Insurance ........ 28
-------------------------------------------------------------------------
14.3 Reconstruction in the Event of Damage or Destruction Not Covered by Insurance .... 29
-----------------------------------------------------------------------------
14.4 Lessee's Property ................................................................ 29
-----------------
14.5 Damage Near End of Term .......................................................... 29
-----------------------
14.6 Waiver ........................................................................... 29
------
ARTICLE XV ............................................................................... 29
15.1 Definitions ...................................................................... 29
-----------
15.2 Parties' Rights and Obligations .................................................. 30
-------------------------------
15.3 Total Taking ..................................................................... 30
------------
15.4 Allocation of Award .............................................................. 30
-------------------
15.5 Partial Taking ................................................................... 30
--------------
15.6 Temporary Taking ................................................................. 31
----------------
15.7 Lessee's Offer ................................................................... 31
--------------
ARTICLE XVI .............................................................................. 31
16.1 Events of Default ................................................................ 31
-----------------
16.2 Surrender ........................................................................ 32
---------
16.3 Damages .......................................................................... 33
-------
16.4 Waiver ........................................................................... 33
------
16.5 Application of Funds ............................................................. 34
--------------------
ARTICLE XVII ............................................................................. 34
17.1 Lessor's Right to Cure Lessee's Default .......................................... 34
---------------------------------------
ARTICLE XVIII ............................................................................ 34
18.1 Provisions Relating to Purchase of the Leased Property ........................... 34
------------------------------------------------------
ARTICLE XIX .............................................................................. 35
19.1 Personal Property Limitation ..................................................... 35
----------------------------
19.2 Sublease Rent Limitation ......................................................... 35
------------------------
19.3 Sublease Tenant Limitation ....................................................... 35
--------------------------
19.4 TRS Election and Limitations ..................................................... 35
----------------------------
19.5 Manager Officer and Employee Limitation .......................................... 36
---------------------------------------
ARTICLE XX ............................................................................... 36
20.1 Holding Over ..................................................................... 37
------------
ARTICLE XXI .............................................................................. 37
21.1 Risk of Loss ..................................................................... 37
------------
ARTICLE XXII ............................................................................. 37
22.1 Indemnification .................................................................. 37
---------------
ARTICLE XXIII ............................................................................ 38
ii
23.1 Subletting and Assignment ................................................... 38
-------------------------
23.2 Attornment .................................................................. 38
----------
ARTICLE XXIV ......................................................................... 39
24.1 Officer's Certificates; Lessor's Estoppel Certificates and Covenants ........ 39
--------------------------------------------------------------------
ARTICLE XXV .......................................................................... 39
25.1 Lessor's Right to Inspect ................................................... 39
-------------------------
ARTICLE XXVI ......................................................................... 39
26.1 No Waiver ................................................................... 39
---------
ARTICLE XXVII ........................................................................ 40
27.1 Remedies Cumulative ......................................................... 40
-------------------
ARTICLE XVIII ........................................................................ 40
28.1 Acceptance of Surrender ..................................................... 40
-----------------------
ARTICLE XXIX ......................................................................... 40
29.1 No Merger of Title .......................................................... 40
------------------
ARTICLE XXX .......................................................................... 40
30.1 Conveyance by Lessor ........................................................ 40
--------------------
30.2 Other Interests ............................................................. 40
---------------
ARTICLE XXXI ......................................................................... 41
31.1 Quiet Enjoyment ............................................................. 41
---------------
ARTICLE XXXII ........................................................................ 41
32.1 Notices ..................................................................... 41
-------
ARTICLE XXXIII ....................................................................... 41
33.1 Appraisers .................................................................. 41
----------
ARTICLE XXXIV ........................................................................ 42
34.1 Lessor May Grant Liens ...................................................... 42
----------------------
34.2 Lessee's Right to Cure ...................................................... 43
----------------------
34.3 Breach by Lessor ............................................................ 43
----------------
ARTICLE XXXV ......................................................................... 43
35.1 Miscellaneous ............................................................... 43
-------------
35.2 Transition Procedures ....................................................... 43
---------------------
35.3 Waiver of Presentment, etc. ................................................. 44
---------------------------
ARTICLE XXXVI ........................................................................ 44
36.1 Memorandum of Lease ......................................................... 44
-------------------
ARTICLE XXXVII ....................................................................... 44
37.1 Lessor's Option to Purchase Assets of Lessee ................................ 44
--------------------------------------------
ARTICLE XXXVIII ...................................................................... 45
38.1 Lessor's Option to Terminate Lease .......................................... 45
----------------------------------
ARTICLE XXXIX ........................................................................ 45
39.1 Compliance with Franchise Agreement ......................................... 45
-----------------------------------
ARTICLE XL ........................................................................... 46
40.1 Room Set-Aside .............................................................. 46
--------------
40.2 Capital Expenditures ........................................................ 46
--------------------
40.3 Prohibited Expenditures ..................................................... 46
-----------------------
ARTICLE XLI .......................................................................... 47
-----------
41.1 SBILP ....................................................................... 47
-----
Exhibit A - Hotel Properties
Exhibit B - Excluded Properties
Schedule 1 to Exhibit B
iii
FIRST AMENDED AND RESTATED
MASTER LEASE AGREEMENT
THIS FIRST AMENDED AND RESTATED MASTER LEASE AGREEMENT (hereinafter
called "Lease"), made as of the 26th day of November, 2002 by and between
▇▇▇▇▇▇▇▇ Hospitality Limited Partnership, a Virginia limited partnership and E&P
Financing Limited Partnership, a Maryland limited partnership (hereinafter
called "Lessor"), and TRS Leasing Inc., a Virginia corporation (hereinafter
called "Lessee"), provides as follows.
W I T N E S S E T H:
Lessor and Solomons Beacon Inn Limited Partnership, a Maryland limited
partnership (hereinafter called "SBILP"), as lessor, and Lessee, as lessee, are
the parties to that Master Lease Agreement dated as of January 1, 2002 (the
"Original Lease"), pursuant to which Lessee leases the Leased Property and the
Excluded Property (as such terms are hereinafter defined).
Lessor, Lessee and SBILP desire to amend and restate the Original Lease
on the terms set forth herein in order, among other things, to reflect the
withdrawal of SBILP as a party to the Original Lease and the exclusion of the
Excluded Property from the property subject to the Original Lease, all effective
as of the Commencement Date (as hereinafter defined).
Lessor owns fee title to, or a leasehold interest in, the Leased
Property.
Lessor and Lessee wish to enter into this Lease which shall constitute
a separate lease for each Leased Property.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend and
restate the Original Lease, and Lessor, in consideration of the payment of rent
by Lessee to Lessor, the covenants and agreements to be performed by Lessee, and
upon the terms and conditions hereinafter stated, does hereby rent and lease
unto Lessee, and Lessee does hereby rent and lease from Lessor, the Leased
Property.
ARTICLE I
1.1 Leased Property. The leased property (the "Leased Property") is
comprised of Lessor's interest in each of the hotel properties described in
Exhibit "A" attached hereto, as it may be amended from time to time (each a
"Leased Property"), as follows:
(a) the land or ground leasehold interests described in Exhibit
"A" attached hereto and by reference incorporated herein (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and offsite), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land or the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property required for or incidental to the use of the Leased Improvements as a
hotel, including all components thereof, now and hereafter permanently affixed
to or incorporated into the Leased Improvements, including, without limitation,
all furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, all of which to the
greatest extent permitted by law are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of
personal property (excluding Inventory and personal property owned by Lessee)
located on, and used in connection with, the operation of the Leased
Improvements as a hotel, together with all replacements, modifications,
alterations and additions thereto; and
(f) all existing leases of space within the Leased Property
(including any security deposits or collateral held by Lessor pursuant thereto).
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT
REPRESENTATION OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE
RIGHTS OF PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING
ALL COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF.
1.2 Term. The term of the Lease (the "Term") shall commence on the
date hereof (the "Commencement Date") and shall end on the tenth anniversary of
the last day of the month in which the Commencement Date occurs unless sooner
terminated in accordance with the provisions hereof.
ARTICLE II
2.1 Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as are at the time applicable, (c) all
references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:
2
Additional Charges: As defined in Section 3.2.
Affiliate: As to any Person, (a) any other Person that, directly or
indirectly, controls or is controlled by or is under common control with such
Person, (b) any other Person that owns, beneficially, directly or indirectly,
five percent or more of the outstanding capital stock, shares or equity
interests of such Person, or (c) any officer, director, employee, partner or
trustee of such Person or any Person controlling, controlled by or under common
control with such Person (excluding trustees and Persons serving in similar
capacities who are not otherwise an Affiliate of such Person). For the purposes
of this definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, partnership interests or other
equity interests.
Award: As defined in Section 15.1(c).
Base Rate: The rate of interest announced publicly by Citibank, N.A.,
in New York, New York, or any successor bank from time to time, as such bank's
base rate. If no such rate is announced or becomes discontinued, then such other
rate as Lessor may reasonably designate.
Percentage Rent: As defined in Section 3.1(a).
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which national banks in the City of Washington, D.C., or in the
municipality wherein the Leased Property is located, are closed.
Capitalization Date: The effective date, as determined by Lessor, of
the transfer, directly or indirectly, by Lessor to Lessee of all of Lessor's
right, title and interest in and to all Furniture and Equipment and other items
of personal property owned by Lessor and located on, and used in connection
with, the operation of the Leased Improvements as a hotel.
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
Condemnation, Condemnor: As defined in Section XV.
Date of Taking: As defined in Section 15.1(b).
Encumbrance: As defined in Section XXXIV.
Environmental Authority: Any department, agency or other body or
component of any Government that exercises any form of jurisdiction or authority
under any Environmental Law.
3
Environmental Authorization: Any license, permit, order, approval,
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All applicable federal, state, local and foreign
laws and regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including without limitation laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. Environmental
Laws include but are not limited to CERCLA, FIFRA, RCRA, ▇▇▇▇ and TSCA.
Environmental Liabilities: Any and all obligations to pay the amount of
any judgment or settlement, the cost of complying with any settlement, judgment
or order for injunctive or other equitable relief, the cost of compliance or
corrective action in response to any notice, demand or request from an
Environmental Authority, the amount of any civil penalty or criminal fine, and
any court costs and reasonable amounts for attorney's fees, fees for witnesses
and experts, and costs of investigation and preparation for defense of any claim
or any Proceeding, regardless of whether such Proceeding is threatened, pending
or completed, that may be or have been asserted against or imposed upon Lessor,
Lessee, the Leased Property or any property used therein and arising out of:
(a) Failure of Lessee, or Lessor to comply at any time with all
Environmental Laws;
(b) Presence of any Hazardous Materials on, in, under, at or in
any way affecting the Leased Property;
(c) A Release at any time of any Hazardous Materials on, in,
at, under or in any way affecting the Lease Property;
(d) Identification of Lessee or Lessor as a potentially
responsible party under CERCLA or under any Environmental Law similar to CERCLA;
(e) Presence at any time of any above-ground and/or underground
storage tanks, as defined in RCRA or in any applicable Environmental Law on, in,
at or under the Leased Property; or
(f) Any and all claims for injury or damage to persons or
property arising out of exposure to Hazardous Materials originating or located
at the Leased Property, or resulting from operation thereof.
Event of Default: As defined in Section XVI.
Facility: The hotel and/or other facility offering lodging and other
services or amenities being operated or proposed to be operated on the Leased
Property.
4
Fair Market Rental: The fair market rental of the Leased Property means
the rental which a willing tenant not compelled to rent would pay a willing
landlord not compelled to lease for the use and occupancy of such Leased
Property pursuant to the Lease for the term in question, (a) assuming that
Lessee is not in default thereunder and (b) determined in accordance with the
appraisal procedures set forth in Article XXXIII or in such other manner as
shall be mutually acceptable to Lessor and Lessee.
Fair Market Value: The fair market value of the Leased Property means
an amount equal to the price that a willing buyer not compelled to buy would pay
a willing seller not compelled to sell for such Leased Property, (a) assuming
the same is unencumbered by this Lease, (b) determined in accordance with the
appraisal procedures set forth in Article XXXIII or in such other manner as
shall be mutually acceptable to Lessor and Lessee, (c) assuming that such seller
must pay customary closing costs and title premiums, and (d) taking into account
the positive or negative effect on the value of the Leased Property attributable
to the interest rate, amortization schedule, maturity date, prepayment penalty
and other terms and conditions of any encumbrance that is assumed by the
transferee. In addition, in determining the Fair Market Value with respect to
damaged or destroyed Leased Property such value shall be determined as if such
Leased Property had not been so damaged or destroyed.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fiscal Year: The 12-month period from January 1 through December 31,
except for the Fiscal Year ending December 31, 2002, which shall mean the period
from the Commencement Date through December 31, 2002.
Fixtures: As defined in Section 1.1.
Franchise Agreement: Any franchise agreement or license agreement with
a franchisor under which the Facility is operated.
Furniture and Equipment: Collectively, all carpet, furniture,
furnishings, wall coverings, fixtures and hotel equipment and systems located
at, or used in connection with, the Facility, together with all replacements
therefor and additions thereto, including, without limitation, (i) all equipment
and systems required for the operation of kitchens, bars, if any, restaurants,
if any, and laundry and dry cleaning facilities, (ii) dining room wagons,
materials handling equipment, cleaning and engineering equipment, (iii)
telephone and computerized accounting systems, and (iv) vehicles.
Government: The United States of America, any state, district or
territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any political subdivision of
any of the foregoing.
Gross Operating Expenses: All of the following with respect to the
Facility: reasonable and customary salaries and employee expense and payroll
taxes (including salaries, wages, bonuses and other compensation of all
employees at the Facility, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section IX,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this
5
Agreement, governmental fees and assessments, food, beverages, laundry service
expense, the cost of Inventories and fixed asset supplies, license fees,
advertising, marketing, reservation systems and any and all other operating
expenses as are reasonably necessary for the proper and efficient operation of
the Facility incurred by Lessee in accordance with the provisions hereof
(excluding, however, (i) federal, state and municipal excise, sales and use
taxes collected directly from patrons and guests or as a part of the sales price
of any goods, services or displays, such as gross receipts, admissions, cabaret
or similar or equivalent taxes paid over to federal, state or municipal
governments, (ii) the cost of insurance to be provided under Article XIII, (iii)
expenditures by Lessor pursuant to Article XIII and (iv) payments on any
Mortgage or other mortgage or security instrument on the Facility); all
determined in accordance with generally accepted accounting principles and the
Uniform System. No part of Lessee's central office overhead or general or
administrative expense (as opposed to that of the Facility) shall be deemed to
be a part of Gross Operating Expenses, as herein provided. Reasonable
out-of-pocket expenses of Lessee incurred for the account of or in connection
with the Facility operations, including but not limited to postage, telephone
charges and reasonable travel expenses of employees, officers and other
representatives and consultants of Lessee and its Affiliates, shall be deemed to
be a part of Gross Operating Expenses and such persons shall be afforded
reasonable accommodations, food, beverages, laundry, valet and other such
services by and at the Facility without charge to such persons or Lessee.
Gross Operating Profit: For any Fiscal Year, the excess of Gross
Revenues for such Fiscal Year over Gross Operating Expenses for such Fiscal
Year.
Gross Revenues: All revenues, receipts, and income of any kind derived
directly or indirectly by Lessee from or in connection with the Facility
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts unless such party is an
Affiliate of the Lessee in which case the gross receipts shall be included)
whether on a cash basis or credit, paid or collected, determined in accordance
with generally accepted accounting principles and the Uniform System, excluding,
however: (i) funds furnished by Lessor, (ii) federal, state and municipal
excise, sales, and use taxes collected directly from patrons and guests or as a
part of the sales price of any goods, services or displays, such as gross
receipts, admissions, cabaret or similar or equivalent taxes and paid over to
federal, state or municipal governments, (iii) gratuities, (iv) proceeds of
insurance and condemnation, (v) proceeds from sales other than sales in the
ordinary course of business, (vi) all loan proceeds from financing or
refinancings of the Facility or interests therein or components thereof, (vii)
judgments and awards, except any portion thereof arising from normal business
operations of the hotel, and (viii) items constituting "allowances" under the
Uniform System.
Hazardous Materials: All chemicals, pollutants, contaminants, wastes
and toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in RCRA or in any
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or in any
Environmental Law;
6
(c) Toxic substances, as defined in TSCA or in any
Environmental Law;
(d) Insecticides, fungicides, or rodenticides, as defined in
FIFRA or in any Environmental Law; and
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos and urea formaldehyde.
Hotel Property: All Furniture and Equipment and other personal property
required to operate the Leased Property in the manner contemplated by this Lease
from and after the Capitalization Date.
Impositions: Collectively, all taxes (including, without limitation,
all ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same relate to or are imposed upon
Lessee or its business conducted upon the Leased Property) including Real Estate
Taxes and Personal Property Taxes, assessments (including, without limitation,
all assessments for public improvements or benefit, whether or not commenced or
completed prior to the date hereof and whether or not to be completed within the
Term), ground rents, water, sewer or other rents and charges, excises, tax
inspection, authorization and similar fees and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Leased Property or the
business conducted thereon by Lessee (including all interest and penalties
thereon caused by any failure in payment by Lessee), which at any time prior to,
during or with respect to the Term hereof may be assessed or imposed on or with
respect to or be a lien upon (a) Lessor's interest in the Leased Property, (b)
the Leased Property, or any part thereof or any rent therefrom or any estate,
right, title or interest therein, (c) the Hotel Property, or (d) any occupancy,
operation, use or possession of, or sales from, or activity conducted on or in
connection with the Leased Property, or the leasing or use of the Leased
Property or any part thereof by Lessee.
Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified
Party pursuant to Section 8.3 or Article XXII.
Insurance Requirements: All terms of any insurance policy required by
this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of
Supplies" as defined in the Uniform System, including, but not limited to,
linens and other non-depreciable personal property.
Land: As defined in Article I.
Lease: This Lease.
Leased Improvements; Leased Property: Each as defined in Article I.
7
Legal Requirements: All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use or alteration thereof (whether by Lessee or otherwise),
whether or not hereafter enacted and in force, including (a) all laws, rules or
regulations pertaining to the environment, occupational health and safety and
public health, safety or welfare, and (b) any laws, rules or regulations that
may (1) require repairs, modifications or alterations in or to the Leased
Property or (2) in any way adversely affect the use and enjoyment thereof; and
all permits, licenses and authorizations and regulations relating thereto and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
Lending Institution: Any insurance company, credit company, federally
insured commercial or savings bank, national banking association, savings and
loan association, employees welfare, pension or retirement fund or system,
corporate profit sharing or pension trust, college or university, or real estate
investment trust, including any corporation qualified to be treated for federal
tax purposes as a real estate investment trust, such trust having a net worth of
at least $10,000,000.
Lessee: The Lessee designated on this Lease and its respective
permitted successors and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's
interest) in Lessee, the officers, directors, stockholders, employees, agents
and representatives of Lessee and any corporate stockholder, agent, or
representative of Lessee, and the respective heirs, personal representatives,
successors and assigns of any such officer, director, stockholder, employee,
agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
Lessor: The Lessor designated on this Lease and its respective
successors and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, any other
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's or
partnership interest) in Lessor, the officers, directors, stockholders,
employees, agents and representatives of the general partner of Lessor and any
partner, agent, or representative of Lessor, and the respective heirs, personal
representatives, successors and assigns of any such officer, director, partner,
stockholder, employee, agent or representative.
Minimum Price: The sum of (a) the equity in the Leased Property at the
time of acquisition of the Leased Property by Lessor (i.e., that portion of the
purchase price of the Leased Property paid by Lessor in cash or exchange for
partnership interests in the Lessor) plus (b) other capital expenditures on the
Leased Property made by Lessor after the date hereof plus (c) the unpaid
principal balance of all encumbrances against the Leased Property at the time of
purchase of the Leased Property by Lessee, less (x) all proceeds received by
Lessor from any
8
financing or refinancing of the Leased Property after the date hereof (after
payment of any debt refinanced and net of any costs and expenses incurred in
connection with such financing or refinancing, including, without limitation,
loan points, commitment fees and commissions and legal fees) and (y) the net
amount (after deduction of all reasonable legal fees and other costs and
expenses, including without limitation expert witness fees, incurred by Lessor
in connection with obtaining any such proceeds or award) of all insurance
proceeds received by Lessor and awards received by Lessor from any partial
Taking of the Leased Property that are not applied to restoration.
Mortgage: As defined in Section 30.2.
Notice: A notice given pursuant to Article XXXII.
Officer's Certificate: A certificate of Lessee reasonably acceptable to
Lessor, signed by the chief financial officer or another officer authorized so
to sign by the board of directors or limited liability company agreement of
Lessee, or any other person whose power and authority to act has been authorized
by delegation in writing by any such officer.
Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Other Revenues: Gross revenue from the operation of the Facility
excluding:
(a) Room Revenues;
(b) the amount of all credit, rebates or refunds to customers,
guests or patrons;
(c) all sales taxes or any other taxes imposed on such
revenues.
Payment Date: Any due date for the payment of any installment of
Percentage Rent.
Percentage Rent: As defined in Section 3.1(a).
Person: Any Government, natural person, corporation, partnership,
limited liability company, joint venture, association, trust, or other legal
entity.
Personal Property Taxes: All personal property taxes imposed on the
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and other personal property owned by the Lessee), together with
all replacement, modifications, alterations and additions thereto.
Primary Intended Use: As defined in Section 7.2(b).
Proceeding: Any judicial action, suit or proceeding (whether civil or
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
9
RCRA: The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes: All real estate taxes, including general and special
assessments, if any, which are imposed upon the Land and any improvements
thereon.
Rejectable Offer Price: An amount equal to the greater of (a) the Fair
Market Value, determined as of the applicable purchase date, or (b) the Minimum
Price.
Release: A "Release" as defined in CERCLA or in any Environmental Law,
unless such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.
Rent: Collectively, the Percentage Rent and Additional Charges.
Room Revenues: Gross revenue from the rental of guest rooms, whether to
individuals, groups or transients, at the Facility, excluding the following:
(a) the amount of all credits, rebates or refunds to customers,
guests or patrons;
(b) all sales taxes or any other taxes imposed on the rental of
such guest rooms; and
(c) any fees collected for amenities including, but not limited
to: telephone, laundry, movies or concessions.
▇▇▇▇: The Superfund Amendments and Reauthorization Act of 1986, as
amended.
State: The State or Commonwealth of the United States in which the
Leased Property is located.
Subsidiaries: Corporations in which Lessee owns, directly or
indirectly, more than 50% of the voting stock or control, as applicable
(individually, a "Subsidiary").
Taking: A taking or voluntary conveyance during the Term hereof of all
or part of the Leased Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of, any Condemnation
or other eminent domain proceeding affecting the Leased Property whether or not
the same shall have actually been commenced.
Term: As defined in Section 1.2.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the
10
other party hereto to perform any obligations of such party under this Lease or
any guaranty of this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the
Facility (after the application of any insurance proceeds if any) such that, in
the good faith judgment of Lessee, reasonably exercised and evidenced by the
resolution of the board of directors or other governing body of Lessee, the
Facility cannot be operated on a commercially practicable basis for its Primary
Intended Use, taking into account, among other relevant factors, the number of
usable rooms and projected revenues, such that Lessee intends to, and shall,
complete the cessation of operations from the Facility.
Uniform System: The Uniform System of Accounts for Hotels (8th Revised
Edition, 1986) as published by the Hotel Association of New York City, Inc., as
same may hereafter be revised.
Unsuitable for its Primary Intended Use: A state or condition of the
Facility (after the application of insurance proceeds if any) such that, in the
good faith judgment of Lessee, reasonably exercised and evidenced by the
resolution of the board of directors or other governing body of Lessee, due to
casualty damage or loss through Condemnation, the Facility cannot function as an
integrated hotel facility consistent with standards applicable to a well
maintained and operated hotel.
ARTICLE III
3.1 Rent. Lessee covenants and agrees to pay to Lessor in lawful
money of the United States of America which shall be legal tender for the
payment of public and private debts, in immediately available funds without
deduction or offset, at Lessor's address set forth in Article XXXII hereof or at
such other place or to such other Person as Lessor from time to time may
designate in a Notice, all Percentage Rent and Additional Charges, during the
Term, for each Leased Property as set forth on Exhibit "A" hereto.
(a) Percentage Rent. During the Term, Lessee shall pay
percentage rent ("Percentage Rent") quarterly in arrears in an amount equal to
30% of all quarterly Room Revenue; provided, however, that, on the
Capitalization Date, Percentage Rent shall be reduced to an amount equal to 25%
of all quarterly Room Revenue, and such reduction shall be effective retroactive
to the Capitalization Date, if the Capitalization Date occurs in 2002, or to
January 1 of the year in which the Capitalization Date occurs, if the
Capitalization Date occurs after 2002.
(b) Officer's Certificates. An Officer's Certificate shall be
delivered to Lessor quarterly setting forth the calculation of the related
quarterly Percentage Rent payments 30 days after the end of each such period of
each Fiscal Year (or part thereof) in the Term. The Percentage Rent payments for
the periods to which the Officer's Certificates relate shall accompany such
Officer's Certificate. Such quarterly payments shall be based on the formula set
forth in Section 3.1(a). If Percentage Rent is reduced from 30% to 25% as
provided in Section 3.1(a), then, not later than 30 days after the
Capitalization Date, Lessee shall deliver to Lessor an Officer's Certificate
setting forth the recalculation of all Percentage Rent payments previously paid
for the year in which the Capitalization Date occurred. If Lessee has paid to
11
Lessor Percentage Rent payments in excess of the recalculated Percentage Rent
payments, then the amount of such excess shall be credited against the next
Percentage Rent payments due from Lessee to Lessor until the amount of such
excess has been credited in full.
The obligation to pay Percentage Rent shall survive the
expiration or earlier termination of the Term, and a final reconciliation,
taking into account, among other relevant adjustments, any adjustments which are
accrued after such expiration or termination date but which related to
Percentage Rent accrued prior to such termination date, and Lessee's good faith
allowances, shall be made not later than two years after such expiration or
termination date, but Lessee shall advise Lessor within 60 days after such
expiration or termination date of Lessee's best estimate at that time of the
approximate amount of such adjustments, which estimate shall not be binding on
Lessee or have any legal effect whatsoever. The accrual of Percentage Rent shall
cease with the termination of the Lease.
3.2 Additional Charges. In addition to the Percentage Rent, (a)
Lessee also will pay and discharge as and when due and payable all other
amounts, liabilities, obligations and Impositions that Lessee assumes or agrees
to pay under this Lease, and (b) in the event of any failure on the part of
Lessee to pay any of those items referred to in clause (a) of this Section 3.2,
Lessee also will promptly pay and discharge every fine, penalty, interest and
cost that may be added for non-payment or late payment of such items (the items
referred to in clauses (a) and (b) of this Section 3.2 being additional rent
hereunder and being referred to herein collectively as the "Additional
Charges"), and Lessor shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of non-payment of the Additional Charges as in the case of non-payment
of the Percentage Rent. The Lessee's obligations regarding the payment of
Impositions are set out in Section 4.1. If any installment of Percentage Rent or
Additional Charges (but only as to those Additional Charges that are payable
directly to Lessor) shall not be paid on its due date, Lessee will pay Lessor on
demand, as Additional Charges, a late charge (to the extent permitted by law)
computed at the Overdue Rate on the amount of such installment, from the due
date of such installment to the date of payment thereof. To the extent that
Lessee pays any Additional Charges to Lessor pursuant to any requirement of this
Lease, Lessee shall be relieved of its obligation to pay such Additional Charges
to the entity to which they would otherwise be due and Lessor shall pay same
from monies received from Lessee.
3.3 Lease Provision. The Rent shall be paid so that this Lease shall
yield to Lessor the full amount of the installments of Percentage Rent and
Additional Charges throughout the Term, all as more fully set forth in Article
V, but subject to any other provisions of this Lease that expressly provide for
adjustment of Rent or other charges or expressly provide that certain expenses
or maintenance shall be paid or performed by Lessor.
3.4 Conversion of Property. If, during the Term, Lessee desires to
provide food and beverage operations at the Facility (other than complimentary
continental breakfast), Lessee shall give notice of such desire to Lessor.
Lessor and Lessee shall then commence negotiations to adjust Rent to reflect the
proposed change to the operation of the Facility, each acting reasonably and in
good faith. All other terms of this Lease will remain substantially the same.
During negotiations, which shall not extend beyond 60 days, Lessee shall not
"convert" the Facility and shall continue fulfilling its obligations under the
existing terms of this Lease. If no agreement is
12
reached after such 60-day period, Lessee shall withdraw such notice and this
Lease shall continue in full force. Once the "conversion" is approved or the
Lessor has approved such operations, the Lessee may lease such converted
facilities. If the Lessee desires to relet such facilities, the Lessor shall
approve the terms of such lease unless its terms are the same or more
advantageous to the Lessor than those of the prior lease.
3.5 Books and Records. Lessee shall keep full and adequate books of
account and other records reflecting the results of operation of the Facility on
an accrual basis, all in accordance with the Uniform System and generally
accepted accounting principles and the obligations of Lessee under this Lease.
The books of account and all other records relating to or reflecting the
operation of the Facility shall be kept either at the Facility or at Lessee's
offices in Columbia, Maryland, or Norfolk, Nebraska and shall be available to
Lessor and its representatives and its auditors or accountants, at all
reasonable times for examination, audit, inspection, and transcription. All of
such books and records pertaining to the Facility including, without limitation,
books of account, guest records and front office records, at all times shall be
the property of Lessor and shall not be removed from the Facility or Lessee's
offices without the approval of Lessor.
ARTICLE IV
4.1 Payment of Impositions. Subject to Article VII relating to
permitted contests, Lessee will pay, or cause to be paid, all Impositions before
any fine, penalty, interest or cost may be added for non-payment, such payments
to be made directly to the taxing or other authorities where feasible, and will
promptly furnish to Lessor copies of official receipts or other satisfactory
proof evidencing such payments. Lessee's obligation to pay such Impositions
shall be deemed absolutely fixed upon the date such Impositions become a lien
upon the Leased Property or any part thereof. If any such Imposition may, at the
option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Lessee may
exercise the option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and in such event, shall pay such
installments during the Term hereof (subject to Lessee's right of contest
pursuant to the provisions of Article XII as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto. Lessor, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of Lessor's net
income, gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock, and Lessee, at
its expense, shall, to the extent required or permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any Imposition as may be required by governmental authorities. If any refund
shall be due from any taxing authority in respect of any Imposition paid by
Lessee, the same shall be paid over to or retained by Lessee if no Event of
Default shall have occurred hereunder and be continuing. If an Event of Default
shall have occurred and be continuing, any such refund shall be paid over to or
retained by Lessor. Any such funds retained by Lessor due to an Event of Default
shall be applied as provided in Article XVI. Lessor and Lessee shall, upon
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports. Lessee shall file all Personal
Property Tax returns in such jurisdictions where it is legally required to so
13
file. Lessor, to the extent it possesses the same, and Lessee, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property classified as
personal property. Where Lessor is legally required to file Personal Property
Tax returns, Lessee shall provide Lessor with copies of assessment notices in
sufficient time for Lessor to file a protest. Lessor may, upon notice to Lessee,
at Lessor's option and at Lessor's sole expense, protest, appeal, or institute
such other proceedings (in its or Lessee's name) as Lessor may deem appropriate
to effect a reduction for those Impositions to be paid by Lessor, and Lessee, at
Lessor's expense as aforesaid, shall fully cooperate with Lessor in such
protest, appeal, or other action. Lessee may, at its sole expense, and upon
notice to Lessor, protest, appeal or institute such other proceedings (in its or
in Lessor's name) as Lessee may deem appropriate to effect a reduction for these
Impositions to be paid by the Lessee, and Lessor, at Lessee's expense, shall
fully cooperate with Lessee in such protest, appeal or other action. Lessor
hereby agrees to indemnify, defend, and hold harmless Lessee from and against
any claims, obligations, and liabilities against or incurred by Lessee in
connection with such cooperation. Lessor, however, reserves the right to effect
any such protest, appeal or other action and, upon notice to Lessee, shall
control any such activity, which shall then go forward at Lessor's sole expense.
Upon such notice, Lessee, at Lessor's expense, shall cooperate fully with such
activities. If requested by any lender of the Lessor relating to the Leased
Property, the Lessee shall provide any funds for the escrow of any Imposition,
and the Lessee shall received any income on such escrowed funds and shall
receive any funds released from such escrow.
4.2 Notice of Impositions. Lessor shall give prompt Notice to Lessee
of all Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, provided that Lessor's failure to give any such Notice shall in no
way diminish Lessee's obligations hereunder to pay such Impositions, but such
failure shall obviate any default hereunder for a reasonable time after Lessee
receives Notice or has otherwise acquired knowledge of any Imposition which it
is obligated to pay during the first taxing period applicable thereto.
4.3 Adjustment of Impositions. Impositions imposed in respect of the
tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's obligation to pay its prorated
share thereof after termination shall survive such termination.
4.4 Maintenance. Lessee will be solely responsible for obtaining and
maintaining utility services to the Leased Property and will pay or cause to be
paid all charges for electricity, gas, oil, water, sewer and other utilities
used in the Leased Property during the Term.
4.5 Insurance Premiums. To the extent provided in Section 13.1(b),
Lessee will pay or cause to be paid all premiums for the insurance coverages
required to be maintained by it under Article XIII.
ARTICLE V
5.1 No Termination. Except as otherwise specifically provided in this
Lease, and except for loss of the Franchise Agreement solely by reason of any
action or inaction by Lessor, Lessee, to the extent permitted by law, shall
remain bound by this Lease in accordance with its terms and shall neither take
any action without the written consent of Lessor to modify, surrender
14
or terminate the same, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of the Rent, or setoff against the Rent, nor shall the
obligations of Lessee be otherwise affected by reason of (a) any damage to, or
destruction of, any Leased Property or any portion thereof from whatever cause
or any Taking of the Leased Property or any portion thereof, (b) the lawful or
unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Property, or any portion thereof, or the interference with such use by any
Person, corporation, partnership or other entity, (c) any claim which Lessee has
or might have against Lessor by reason of any default or breach of any warranty
by Lessor under this Lease or any other agreement between Lessor and Lessee, or
to which Lessor and Lessee are parties, (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor,
or (e) for any other cause whether similar or dissimilar to any of the foregoing
other than a discharge of Lessee from any such obligations as a matter of law.
Lessee hereby specifically waives all rights, arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law to (1)
modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (2) entitle Lessee to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Lessee hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease or by
termination of this Lease other than by reason of an Event of Default.
ARTICLE VI
6.1 Ownership of the Leased Property. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the possession and use of the Leased Property upon the terms and conditions of
this Lease.
6.2 Lessee's Personal Property.
(a) Lessee will acquire and maintain throughout the Term such
Inventory as is required to operate the Leased Property in the manner
contemplated by this Lease and, from and after the Capitalization Date, all
Hotel Property. Lessee may (and shall as provided herein below), at its expense,
install, affix or assemble or place on any parcels of the Land or in any of the
Leased Improvements, any items of personal property (including Inventory and
Hotel Property) owned by Lessee. Lessee, at the commencement of the Term, and
from time to time thereafter, shall provide Lessor with an accurate list of all
such items of Lessee's personal property (collectively, the "Lessee's Personal
Property"). Lessee may, subject to the first sentence of this Section 6.2 and
the conditions set forth below, remove any of Lessee's Personal Property set
forth on such list at any time during the Term or upon the expiration or any
prior termination of the Term. All of Lessee's Personal Property, other than
Inventory, not removed by Lessee within ten days following the expiration or
earlier termination of the Term shall be considered abandoned by Lessee and may
be appropriated, sold, destroyed or otherwise disposed of by Lessor without
first giving Notice thereof to Lessee, without any payment to Lessee and without
any obligation to account therefor. Lessee will, at its expense, restore the
Leased Property to the condition required by Section 9.1(a), including repair of
all damage to the Leased
15
Property caused by the removal of Lessee's Personal Property, effected by
Lessee. Upon the expiration or earlier termination of the Term, Lessor or its
designee shall have the option to purchase all Inventory and any or all Hotel
Property on hand at the Leased Property at the time of such expiration or
termination for a sale price equal to the fair market value of such Inventory.
Lessee may make such financing arrangements, title retention agreements, leases
or other agreements with respect to the Lessee's Personal Property as it sees
fit provided that Lessee first advises Lessor of any such arrangement and such
arrangement expressly provides that in the event of Lessee's default thereunder,
Lessor (or its designee) may assume Lessee's obligations and rights under such
arrangement.
(b) From and after the Capitalization Date, Lessee, at its
expense, shall acquire and maintain, and install, affix or assemble or place on
the Land and in the Leased Improvements, all Hotel Property, all of which shall
be deemed to be part of Lessee's Personal Property for all purposes hereunder,
and none of which shall be deemed to be Leased Property with respect to any
period after the Capitalization Date.
6.3 Lessor's Lien. To the fullest extent permitted by applicable law,
Lessor is granted a lien and security interest on all Lessee's Personal Property
now or hereinafter placed in or upon the Leased Property and the Lessee's bank
accounts, with the exception of the Lessee's central disbursement, payroll and
concentration bank accounts (the "Depository Accounts"), and such lien and
security interest shall remain attached to such Lessee's Personal Property and
Depository Accounts until payment in full of all Rent and satisfaction of all of
Lessee's obligations hereunder; provided, however, Lessor shall subordinate its
lien and security interest to that of any non-Affiliate of Lessee which finances
such Lessee's Personal Property or any non-Affiliate conditional seller of such
Lessee's Personal Property, the terms and conditions of such subordination to be
satisfactory to Lessor in the exercise of reasonable discretion. Lessee shall,
upon the request of Lessor, title the Depository Accounts in the name of the
Lessor or execute such financing statements or other documents or instruments
reasonably requested by Lessor to perfect the lien and security interests herein
granted. In addition, the Lessor shall have unrestricted access to the
Depository Accounts. To the extent that the Lessor withdraws from the Depository
Accounts more than the rent and other obligations of the Lessee to the Lessor,
the excess shall be a loan from the Lessee to the Lessor, repayable upon demand
by the Lessee.
ARTICLE VII
7.1 Condition of the Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property. Lessee has examined and otherwise
has knowledge of the condition of the Leased Property and has found the same to
be satisfactory for its purposes hereunder. Lessee is leasing the Leased
Property "as is" in its present condition. Lessee waives any claim or action
against Lessor in respect of the condition of the Leased Property. LESSOR MAKES
NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT THE LEASED
PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT. Provided,
however,
16
to the extent permitted by law, Lessor shall allow Lessee the benefit of all of
Lessor's rights to proceed against any predecessor in title other than Lessee
(or an Affiliate of Lessee which conveyed the Property to Lessor) for breaches
of warranties or representations or for latent defects in the Leased Property.
Lessor shall fully cooperate with Lessee in the prosecution of any such claim,
in Lessor's or Lessee's name, all at Lessee's sole cost and expense. Lessee
hereby agrees to indemnify, defend and hold harmless Lessor from and against any
claims, obligations and liabilities against or incurred by Lessor in connection
with such cooperation. Provided, however, that nothing herein shall be deemed to
limit Lessor's obligations under Section XL and 40.2.
7.2 Use of the Leased Property.
(a) Lessee covenants that it will obtain and to maintain all
approvals needed to use and operate the Leased Property and the Facility under
applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased Property
only as a hotel facility, and for such other uses as may be necessary or
incidental to such use (the "Primary Intended Use"). Lessee shall not use the
Leased Property or any portion thereof for any other use without the prior
written consent of Lessor, which consent may be granted, denied or conditioned
in Lessor's sole discretion. No use shall be made or permitted to be made of the
Leased Property, and no acts shall be done, which will cause the cancellation or
substantially increase the premium of any insurance policy covering the Leased
Property or any part thereof (unless another adequate policy satisfactory to
Lessor is available and Lessee pays any premium increase), nor shall Lessee sell
or permit to be kept, used or sold in or about the Leased Property any article
which may be prohibited by law or fire underwriter's regulations. Lessee shall,
at its sole cost, comply with all of the requirements pertaining to the Leased
Property of any insurance board, association, organization or company necessary
for the maintenance of insurance, as herein provided, covering the Leased
Property and Lessee's Personal Property.
(c) Subject to the provisions of Articles XIV and XV, Lessee
covenants and agrees that during the Term it will (1) operate continuously the
Leased Property as a hotel facility, (2) keep in full force and effect and
materially comply with all the provisions of the Franchise Agreement (except
that Lessee shall have no obligation to complete any improvements to the Leased
Property required by the franchisor unless the Lessor funds the cost thereof),
(3) not terminate or amend the Franchise Agreement without the consent of
Lessor, (4) maintain appropriate certifications and licenses for such use and
(5) will seek to maximize the Gross Revenues generated therefrom consistent with
sound business practices.
(d) Lessee shall not commit or suffer to be committed any waste
on the Leased Property, or in the Facility, nor shall Lessee cause or permit any
nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property
or any portion thereof, or Lessee's Personal Property, to be used in such a
manner as (1) might reasonably tend to impair Lessor's (or Lessee's, as the case
may be) title thereto or to any portion thereof, or (2) may reasonably make
possible a claim or claims of adverse usage or adverse possession by
17
the public, as such, or of implied dedication of the Leased Property or any
portion thereof, except as necessary in the ordinary and prudent operation of
the Facility on the Leased Property.
7.3 Lessor to Grant Easements, etc. Lessor will, from time to time,
so long as no Event of Default has occurred and is continuing, at the request of
Lessee and at Lessee's cost and expense (but subject to the approval of Lessor,
which approval shall not be unreasonably withheld or delayed), (a) grant
easements and other rights in the nature of easements with respect to the Leased
Property to third parties, (b) release existing easements or other rights in the
nature of easements which are for the benefit of the Leased Property, (c)
dedicate or transfer unimproved portions of the Leased Property for road,
highway or other public purposes, (d) execute petitions to have the Leased
Property annexed to any municipal corporation or utility district, (e) execute
amendments to any covenants and restrictions affecting the Leased Property and
(f) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications, transfers, petitions and amendments
(to the extent of its interests in the Leased Property), but only upon delivery
to Lessor of an Officer's Certificate stating that such grant, release,
dedication, transfer, petition or amendment does not interfere with the proper
conduct of the business of Lessee on the Leased Property and does not materially
reduce the value of the Leased Property.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, etc. Subject to
Section 8.3(b) below and Article XII relating to permitted contests, Lessee, at
its expense, will promptly (a) comply with all applicable Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, and (b) procure, maintain and comply with
all appropriate licenses and other authorizations required for any use of the
Leased Property and Lessee's Personal Property then being made, and for the
proper erection, installation, operation and maintenance of the Leased Property
or any part thereof.
8.2 Legal Requirement Covenants. Subject to Section 8.3(b) below,
Lessee covenants and agrees that the Leased Property and Lessee's Personal
Property shall not be used for any unlawful purpose, and that Lessee shall not
permit or suffer to exist any unlawful use of the Leased Property by others.
Lessee shall acquire and maintain all appropriate licenses, certifications,
permits and other authorizations and approvals needed to operate the Leased
Property in its customary manner for the Primary Intended Use, and any other
lawful use conducted on the Leased Property as may be permitted from time to
time hereunder. Lessee further covenants and agrees that Lessee's use of the
Leased Property and maintenance, alteration, and operation of the same, and all
parts thereof, shall at all times materially conform to all Legal Requirements,
unless the same are finally determined by a court of competent jurisdiction to
be unlawful (and Lessee shall cause all such sub-tenants, invitees or others to
so materially comply with all Legal Requirements). Lessee may, however, upon
prior Notice to Lessor, contest the legality or applicability of any such Legal
Requirement or any licensure or certification decision if Lessee maintains such
action in good faith, with due diligence, without prejudice to Lessor's rights
hereunder, and at Lessee's sole expense. If by the terms of any such Legal
Requirement compliance therewith pending the prosecution of any such proceeding
may legally be delayed without the incurrence of any lien, charge or liability
of any kind against the Facility or Lessee's leasehold interest therein and
without subjecting Lessee or Lessor to any
18
liability, civil or criminal, for failure so to comply therewith, Lessee may
delay compliance therewith until the final determination of such proceeding. If
any lien, charge or civil or criminal liability would be incurred by reason of
any such delay, Lessee, on the prior written consent of Lessor, which consent
shall not be unreasonably withheld, may nonetheless contest as aforesaid and
delay as aforesaid provided that such delay would not subject Lessor to criminal
liability and Lessee both (a) furnishes to Lessor security reasonably
satisfactory to Lessor against any loss or injury by reason of such contest or
delay and (b) prosecutes the contest with due diligence and in good faith.
8.3 Environmental Covenants. Lessor and Lessee (in addition to, and
not in diminution of, Lessee's covenants and undertakings in Sections 8.1 and
8.2 hereof) covenant and agree as follows:
(a) At all times hereafter until the later of (i) such time as
all liabilities, duties or obligations of Lessee to the Lessor under the Lease
have been satisfied in full and (ii) such time as Lessee completely vacates the
Leased Property and surrenders possession of the same to Lessor, Lessee shall
fully comply with all Environmental Laws applicable to the Leased Property and
the operations thereon. Lessee agrees to give Lessor prompt written notice of
(1) all Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating to
any Environmental Liability or relating to the issuance, revocation or change in
any Environmental Authorization required for operation of the Leased Property;
(3) all Releases at, on, in, under or in any way affecting the Leased Property,
or any Release known by Lessee at, on, in or under any property adjacent to the
Leased Property; and (4) all facts, events or conditions that could reasonably
lead to the occurrence of any of the above-referenced matters.
(b) Lessor hereby agrees to defend, indemnify and save harmless
any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities other than Environmental Liabilities which were caused
by the acts or grossly negligent failures to act of Lessee.
(c) Lessee hereby agrees to defend, indemnify and save harmless
any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities which were caused by the acts or grossly negligent
failures to act of Lessee.
(d) If any Proceeding is brought against any Indemnified Party
in respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Section 8.3(b) or 8.3(c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnified Party and approved by the Indemnifying Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless such counsel has been approved by the Indemnifying
Party, which approval shall not be unreasonably withheld. The Indemnifying Party
shall not be liable for any
19
settlement of any such Proceeding made without its consent, which shall not be
unreasonably withheld, but if settled with the consent of the Indemnifying
Party, or if settled without its consent (if its consent shall be unreasonably
withheld), or if there be a final, nonappealable judgment for an adversary party
in any such Proceeding, the Indemnifying Party shall indemnify and hold harmless
the Indemnified Parties from and against any liabilities incurred by such
Indemnified Parties by reason of such settlement or judgment.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to Lessee stating such Indemnified Party's
basis for such belief, an Indemnified Party shall be given immediate access to
the Leased Property (including, but not limited to, the right to enter upon,
investigate, drill ▇▇▇▇▇, take soil borings, excavate, monitor, test, cap and
use available land for the testing of remedial technologies), Lessee's
employees, and to all relevant documents and records regarding the matter as to
which a responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may be conditioned or
restricted as may be reasonably necessary to ensure compliance with law and the
safety of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable.
(f) The indemnification rights and obligations provided for in
this Article VIII shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease.
(g) The indemnification rights and obligations provided for in
this Article VIII shall survive the termination of this Agreement.
For purposes of this Section 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (a) any actual
income tax benefit resulting therefrom to such Indemnified Party, (b) any
insurance proceeds received (net of tax effects) with respect thereto, and (c)
any amounts recovered (net of tax effects) from any third parties based on
claims the Indemnified Party has against such third parties which reduce the
damages that would otherwise be sustained; provided that in all cases, the
timing of the receipt or realization of insurance proceeds or income tax
benefits or recoveries from third parties shall be taken into account in
determining the amount of reduction of damages. Each Indemnified Party agrees to
use its reasonable efforts to pursue, or assign to Lessee or Lessor, as the case
may be, any claims or rights it may have against any third party which would
materially reduce the amount of damages otherwise incurred by such Indemnified
Party.
Notwithstanding anything to the contrary contained in this
Agreement, if Lessor shall become entitled to the possession of the Leased
Property by virtue of the termination of the Lease or repossession of the Leased
Property, then Lessor may assign its indemnification rights under Section 8.3 of
this Agreement (but not any other rights hereunder) to any Person to whom the
Lessor subsequently transfers the Leased Property, subject to the following
conditions and limitations, each of which shall be deemed to be incorporated
into the terms of such assignment, whether or not specifically referred to
therein:
20
(1) The indemnification rights referred to in this section
may be assigned only if a known Environmental Liability then
exists or if a Proceeding is then pending or, to the knowledge of
Lessee or Lessor, then threatened with respect to the Leased
Property.
(2) Such indemnification rights shall be limited to
Environmental Liabilities relating to or specifically affecting
the Leased Property; and
(3) Any assignment of such indemnification rights shall be
limited to the immediate transferee of Lessor, and shall not
extend to any such transferree's successors or assigns.
ARTICLE IX
9.1 Capital Improvements, Maintenance and Repair.
(a) Subject to Section 9.1(b), Lessee will keep the Leased
Property and all private roadways, sidewalks and curbs appurtenant thereto that
are under Lessee's control, including windows and plate glass, parking lots,
mechanical, electrical and plumbing systems and equipment (including conduit and
ductware), and non-load bearing interior walls, and all Hotel Property in good
order and repair, except for ordinary wear and tear (whether or not the need for
such repairs occurred as a result of Lessee's use, any prior use, the elements
or the age of the Leased Property, or any portion thereof), and, except as
otherwise provided in Articles XIV or XV, with reasonable promptness, make all
necessary and appropriate repairs thereto of every kind and nature, whether
interior or exterior, ordinary or extraordinary, foreseen or unforeseen, or
required by any governmental agency having jurisdiction over the Leased
Property, except as to the structural elements of the Leased Improvements and
underground utilities.
(b) Notwithstanding any other provision of this Lease, unless
the need for compliance with Section 9.1(a) is caused by Lessee's negligence or
willful misconduct or that of its employees or agents, Lessee shall not be
required to bear the costs of complying with Section 9.1(a) with respect to
items classified as either (i) capital items under U.S. generally accepted
accounting principles or (ii) Fixtures or, prior to the Capitalization Date,
Furniture and Equipment in, on, or under the Facility or its components, except
to the extent (X) that amounts are available therefor from Lessor under Article
XL or otherwise or (Y) required under Articles XIV and XV on the conditions set
forth therein.
(c) Article XL sets forth the only obligations of Lessor to
fund the cost of any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether ordinary
or extraordinary, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto, in connection with this Lease, or to maintain the Leased
Property in any way. Lessee hereby waives, to the extent permitted by law, the
right to make repairs at the expense of Lessor pursuant to any law in effect at
the time of the execution of this Lease or hereafter enacted. Lessor shall have
the right to give, record and post, as appropriate, notices of nonresponsibility
under any mechanic's lien laws now or hereafter existing.
21
(d) Lessee shall be permitted to prosecute claims against
Lessor's predecessors in title for breach of any representation or warranty or
for any latent defects in the Leased Property to be maintained by Lessee unless
Lessor is already diligently pursuing such a claim. All repairs shall, to the
extent reasonably achievable, be at least equivalent in quality to the original
work. Lessee will not take or omit to take any action, the taking or omission of
which might materially impair the value or the usefulness of the Leased Property
or any part thereof for its Primary Intended Use.
(e) Intentionally Omitted.
(f) Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the condition in
which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in accordance with Section
9.1(a) above during the entire Term of the Lease), or damage by casualty or
Condemnation (subject to the obligations of Lessee to restore or repair as set
forth in the Lease).
9.2 Encroachments, Restrictions, Etc. If any of the Leased
Improvements, at any time, materially encroach upon any property, street or
right-of-way adjacent to the Leased Property, or violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting the Leased Property, or any part thereof, or impair the rights of
others under any easement or right-of-way to which the Leased Property is
subject, then promptly upon the request of Lessor or at the behest of any person
affected by any such encroachment, violation or impairment, Lessee shall, at its
expense, subject to its right to contest the existence of any encroachment,
violation or impairment and, in such case, in the event of an adverse final
determination, either (a) obtain valid and effective waivers or settlements of
all claims, liabilities and damages resulting from each such encroachment,
violation or impairment, whether the same shall affect Lessor or Lessee or (b)
make such changes in the Leased Improvements, and take such other actions, as
Lessee in the good faith exercise of its judgment deems reasonably practicable
to remove such encroachment, and to end such violation or impairment, including,
if necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use substantially
in the manner and to the extent the Leased Improvements were operated prior to
the assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of Article X.
Lessee's obligations under this Section 9.2 shall be in addition to and shall in
no way discharge or diminish any obligation of any insurer under any policy of
title or other insurance held by Lessor.
ARTICLE X
10.1 Alterations. After receiving approval of Lessor, which approval
shall not be unreasonably withheld, Lessee shall have the right to make such
additions, modifications or improvements to the Leased Property from time to
time as Lessee deems desirable for its permitted uses and purposes, provided
that such action will not significantly alter the character or purposes or
significantly detract from the value or operating efficiency thereof and will
not
22
significantly impair the revenue-producing capability of the Leased Property or
adversely affect the ability of the Lessee to comply with the provisions of this
Lease. The cost of such additions, modifications or improvements to the Leased
Property shall be paid by Lessee, and all such additions, modifications and
improvements shall, without payment by Lessor at any time, be included under the
terms of this Lease and upon expiration or earlier termination of this Lease
shall pass to and become the property of Lessor.
10.2 Salvage. All materials which are scrapped or removed in
connection with the making of repairs required by Articles IX or X shall be or
become the property of Lessor or Lessee depending on which party is paying for
or providing the financing for such work.
10.3 Joint Use Agreements. If Lessee constructs additional
improvements that are connected to the Leased Property or share maintenance
facilities, HVAC, electrical, plumbing or other systems, utilities, parking or
other amenities, the parties shall enter into a mutually agreeable
cross-easement or joint use agreement, the form of which has been approved in
advance by Lessor, to make available necessary services and facilities in
connection with such additional improvements, to protect each of their
respective interests in the properties affected, and to provide for separate
ownership, use, and/or financing of such improvements.
ARTICLE XI
11.1 Liens. Subject to the provision of Article XII relating to
permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (a) this Lease, (b) the matters, if any, included as exceptions in the
title policy insuring Lessor's interest in the Leased Property, (c)
restrictions, liens and other encumbrances which are consented to in writing by
Lessor or any easements granted pursuant to the provisions of Section 7.3 of
this Lease, (d) liens for those taxes upon Lessor which Lessee is not required
to pay hereunder, (e) subleases permitted by Article XXIII hereof, (f) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (1) the same are not yet payable or are payable without the addition of
any fine or penalty or (2) such liens are in the process of being contested as
permitted by Article XII, (g) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either disputed or not yet due provided that (1)
the payment of such sums shall not be postponed under any related contract for
more than 60 days after the completion of the action giving rise to such lien
and such reserve or other appropriate provisions as shall be required by law or
generally accepted accounting principles shall have been made therefor and (2)
any such liens are in the process of being contested as permitted by Article XII
hereof, (h) any liens which are the responsibility of Lessor pursuant to the
provisions of Article XXXIV of this Lease.
ARTICLE XII
12.1 Permitted Contests. Lessee shall have the right to contest the
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement or Insurance Requirement or any lien, attachment, levy, encumbrance,
charge or claim ("Claims") not otherwise permitted by Article XI, by appropriate
legal proceedings in good faith and with due diligence (but this shall
23
not be deemed or construed in any way to relieve, modify or extend Lessee's
covenants to pay or its covenants to cause to be paid any such charges at the
time and in the manner as in this Article provided), on condition, however, that
such legal proceedings shall not operate to relieve Lessee from its obligations
hereunder and shall not cause the sale or risk the loss of any portion of the
Leased Property, or any part thereof, or cause Lessor or Lessee to be in default
under any mortgage, deed of trust, security deed or other agreement encumbering
the Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon will be paid, or (b)
deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security for
the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all Claims
which may be assessed against or become a Claim on the Leased Property, or any
part thereof, in said legal proceedings. Lessee shall furnish Lessor and any
lender of Lessor with reasonable evidence of such deposit within five days of
the same. Lessor agrees to join in any such proceedings at Lessee's expense if
the same be required to legally prosecute such contest of the validity of such
Claims; provided, however, that Lessor shall not thereby be subjected to any
liability for the payment of any costs or expenses in connection with any
proceedings brought by Lessee; and Lessee covenants to indemnify and save
harmless Lessor from any such costs or expenses. Lessee shall be entitled to any
refund of any Claims and such charges and penalties or interest thereon which
have been paid by Lessee or paid by Lessor and for which Lessor has been fully
reimbursed. In the event that Lessee fails to pay any Claims when due or to
provide the security therefor as provided in this paragraph and to diligently
prosecute any contest of the same, Lessor may, upon ten days advance Notice to
Lessee, pay such charges together with any interest and penalties and the same
shall be repayable by Lessee to Lessor as Additional Charges at the next Payment
Date provided for in this Lease. Provided, however, that should Lessor
reasonably determine that the giving of such Notice would risk loss to the
Leased Property or cause damage to Lessor, then Lessor shall give such Notice as
is practical under the circumstances. Lessor reserves the right to contest any
of the Claims at its expense not pursued by Lessee. Lessor and Lessee agree to
cooperate in coordinating the contest of any claims.
ARTICLE XIII
13.1 General Insurance Requirements.
(a) Coverages. During the Term of this Lease, Lessee shall at
all times keep the Leased Property and Hotel Property insured with the kinds and
amounts of insurance described below provided, however, that the Lessor shall be
responsible for payment of any insurance requested by it pursuant to paragraph
(ix) of Section 13.1(a) of this Lease if not of a type customarily kept by
similar business and properties. This insurance shall be written by companies
licensed and authorized to issue insurance in the State. The policies must name
Lessor as the insured or as an additional named insured, as the case may be.
Losses shall be payable to Lessor or Lessee as provided in this Lease. Any loss
adjustment shall require the written consent of Lessor and Lessee, each acting
reasonably and in good faith. Evidence of
24
insurance shall be deposited with Lessor. The policies on the Leased Property,
including the Leased Improvements, Fixtures and Lessee's Personal Property,
shall include:
(i) Building insurance on the "Special Form" (formerly
"All Risk" form) (which may include earthquake and flood in reasonable amounts
as determined by Lessor) in an amount not less than 100% of the then full
replacement cost thereof (as defined in Section 13.2) or such other amount which
is acceptable to Lessor, and personal property insurance on the "Special Form"
in the full amount of the replacement cost thereof;
(ii) Insurance for loss or damage (direct and indirect)
from steam boilers, pressure vessels or similar apparatus, now or hereafter
installed in the Facility, in the minimum amount of $5,000,000 or in such lesser
or greater amounts as are then customary or as may be reasonably requested by
Lessor from time to time;
(iii) Loss of income insurance on the "Special Form", in
the amount of one year of Percentage Rent for the benefit of Lessor, and
business interruption insurance on the "Special Form" in the amount of one year
of gross profit, for the benefit of Lessor or Lessee;
(iv) Commercial general liability insurance, with amounts
not less than $10,000,000 covering each of the following: bodily injury, death,
or property damage liability per occurrence, personal and advertising injury,
general aggregate, products and completed operations, with respect to Lessor,
and "all risk legal liability" (including liquor law or "dram shop" liability,
if liquor or alcoholic beverages are served on the Leased Property) with respect
to Lessor and Lessee;
(v) Insurance covering such other hazards and in such
amounts as may be customary for comparable properties in the area of the Leased
Property and is available from insurance companies, insurance pools or other
appropriate companies authorized to do business in the State at rates which are
economically practicable in relation to the risks covered as may be reasonably
requested by Lessor;
(vi) Fidelity bonds with limits and deductibles as may be
reasonably requested by Lessor, covering Lessee's employees in job
classifications normally bonded under prudent hotel management practices in the
United States or otherwise required by law;
(vii) Workmen's compensation insurance to the extent
necessary to protect Lessor and the Leased Property against Lessee's ▇▇▇▇▇▇▇'▇
compensation claims;
(viii) Vehicle liability insurance for owned, non-owned,
and hired vehicles, in the amount of $1,000,000; and
(ix) Such other insurance as Lessor may reasonably
request for facilities such as the Leased Property and the operation thereof.
(b) Responsibility for Premiums. Lessee shall keep in force the
foregoing insurance coverages at its expense; provided, however, that Lessor
shall reimburse Lessee for any other casualty coverages required by Lessor not
specifically required in (i) - (viii) of
25
subsection (a) above. If requested by any Lender of the Lessor relating to the
Leased Property, the Lessee shall provide any funds for the escrow of any
insurance premiums, and the Lessee shall receive any income on such escrowed
funds and shall receive any funds released from such account.
13.2 Replacement Cost. The term "full replacement cost" as used herein
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
exclusions) has increased or decreased at any time during the Lease Term, it
shall have the right to have such full replacement cost re-determined.
13.3 Worker's Compensation. Lessee, at its sole cost, shall at all
times maintain adequate worker's compensation insurance coverage for all persons
employed by Lessee on the Leased Property. Such worker's compensation insurance
shall be in accordance with the requirements of applicable local, state and
federal law.
13.4 Waiver of Subrogation. All insurance policies carried by Lessor
or Lessee covering the Leased Property, the Fixtures, the Facility or Lessee's
Personal Property, including, without limitation, contents, fire and casualty
insurance shall expressly waive any right of subrogation on the part of the
insurer against the other party. The parties hereto agree that their policies
will include such waiver clause or endorsement so long as the same are
obtainable without extra cost, and in the event of such an extra charge the
other party, at its election, may pay the same, but shall not be obligated to do
so. Each party agrees to seek recovery from any applicable insurance coverage
available to such party prior to seeking recovery against the other.
13.5 Form Satisfactory, etc. All of the policies of insurance referred
to in this Article XIII shall be written in a form, with deductibles and by
insurance companies satisfactory to Lessor and also shall meet and satisfy the
requirements of any ground lessor, lender or franchisor having any interest in
the Leased Premises. Subject to the right to reimbursement or credit specified
in Section XIII, Lessee shall pay all of the premiums therefor, and deliver such
policies or certificates thereof to Lessor prior to their effective date (and,
with respect to any renewal policy, 30 days prior to the expiration of the
existing policy), and in the event of the failure of Lessee either to effect
such insurance as herein called for or to pay the premiums therefor, or to
deliver such policies or binding certificates thereof to Lessor at the times
required, Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor, and Lessee shall reimburse Lessor for
any premium or premiums paid by Lessor for the coverages required under this
Section (other than the premiums required to be paid or reimbursed to Lessee by
Lessor in accordance with Section 13.1(b)) upon written demand therefor, and
Lessee's failure to repay the same within 30 days after Notice of such failure
from Lessor shall constitute an Event of Default within the meaning of Section
16.1(c). Each insurer mentioned in this Article XIII shall agree, by endorsement
to the policy or policies issued by it, or by independent instrument furnished
to Lessor, that it will give to Lessor 30 days' written notice before the policy
or policies in question shall be materially altered, allowed to expire or
canceled.
26
13.6 Change in Limits. If either Lessor or Lessee at any time deems
the limits of the personal injury or property damage under the comprehensive
public liability insurance then carried to be either excessive or insufficient,
Lessor and Lessee shall endeavor in good faith to agree on the proper and
reasonable limits for such insurance to be carried and such insurance shall
thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section.
13.7 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article XIII, Lessee or Lessor may bring the insurance
provided for herein within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee or Lessor; provided,
however, that the coverage afforded to Lessor and Lessee will not be reduced or
diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided further that the
requirements of this Article XIII are otherwise satisfied.
13.8 Separate Insurance. Lessee shall not on Lessee's own initiative
or pursuant to the request or requirement of any third party, take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article to be furnished, or increase the amount of any then
existing insurance by securing an additional policy or additional policies,
unless all parties having an insurable interest in the subject matter of the
insurance, including in all cases Lessor, are included therein as additional
insureds, and the loss is payable under such additional separate insurance in
the same manner as losses are payable under this Lease. Lessee shall immediately
notify Lessor that Lessee has obtained any such separate insurance or of the
increasing of any of the amounts of the then existing insurance.
13.9 Reports On Insurance Claims. Lessee shall promptly investigate
and make a complete and timely written report to the appropriate insurance
company as to all accidents, claims for damage relating to the ownership,
operation, and maintenance of the Facility, any damage or destruction to the
Facility and the estimated cost of repair thereof and shall prepare any and all
reports required by any insurance company in connection therewith. All such
reports shall be timely filed with the insurance company as required under the
terms of the insurance policy involved, and a final copy of such report shall be
furnished to Lessor. Lessee shall be authorized to adjust, settle, or compromise
any insurance loss, or to execute proofs of such loss, in the aggregate amount
of $5,000 or less, with respect to any single casualty or other event.
ARTICLE XIV
14.1 Insurance Proceeds. Subject to the provisions of Section 14.6,
and the senior rights of any lender, all proceeds payable by reason of any loss
or damage to the Leased Property, or any portion thereof, and insured under any
policy of insurance required by Article XIII of this Lease shall be paid to
Lessor and held in trust by Lessor in an interest-bearing account, shall be made
available, if applicable, for reconstruction or repair, as the case may be, of
any damage to or destruction of the Leased Property, or any portion thereof,
and, if applicable, shall be paid out by Lessor from time to time for the
reasonable costs of such reconstruction or repair upon satisfaction of
reasonable terms and conditions specified by Lessor. Any excess proceeds of
insurance remaining after the completion of the restoration or reconstruction of
the Leased Property shall be paid to Lessee. If neither Lessor nor Lessee is
required or elects to
27
repair and restore, and the Lease is terminated without purchase by Lessee as
described in Section 14.2, all such insurance proceeds shall be retained by
Lessor. All salvage resulting from any risk covered by insurance shall belong to
Lessor.
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
(a) Except as provided in Section 14.5, if during the Term the
Leased Property is totally or partially destroyed by a risk covered by the
insurance described in Article XIII and the Facility thereby is rendered
Unsuitable for its Primary Intended Use, Lessee shall, at Lessee's option,
either (1) restore the Facility to substantially the same condition as existed
immediately before the damage or destruction and otherwise in accordance with
the terms of the Lease, or (2) offer to acquire the Leased Property from Lessor
for a purchase price equal to the Rejectable Offer Price of the Leased Property.
If Lessee restores the Facility, the insurance proceeds shall be paid out by
Lessor from time to time for the reasonable costs of such restoration upon
satisfaction of reasonable terms and conditions, and any excess proceeds
remaining after such restoration shall be paid to Lessee. If Lessee acquires the
Leased Property, Lessee shall receive the insurance proceeds. If Lessor does not
accept Lessee's offer so to purchase the Leased Property within 90 days, Lessee
may withdraw its offer to purchase the Leased Property and, if so withdrawn,
Lessee may terminate the Lease with respect to the Leased Property without
further liability hereunder and Lessor shall be entitled to retain all insurance
proceeds.
(b) Except as provided in Section 14.5, if during the Term the
Leased Property is partially destroyed by a risk covered by the insurance
described in Article XIII, but the Facility is not thereby rendered Unsuitable
for its Primary Intended Use, Lessee shall restore the Facility to substantially
the same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease. Such damage or destruction
shall not terminate this Lease; provided, however, that if Lessee cannot within
a reasonable time obtain all necessary government approvals, including building
permits, licenses and conditional use permits, after diligent efforts to do so,
to perform all required repair and restoration work and to operate the Facility
for its Primary Intended Use in substantially the same manner as that existing
immediately prior to such damage or destruction and otherwise in accordance with
the terms of the Lease, Lessee may make a written offer to Lessor to purchase
the Leased Property for a purchase price equal to the Rejectable Offer Price of
the Leased Property determined without regard to such damage or destruction. If
Lessee makes such offer and Lessor does not accept the same within 30 days after
Lessee delivers its offer to Lessor, Lessee shall withdraw such offer, in which
event this Lease shall remain in full force and effect and Lessee shall
immediately proceed to restore the Facility to substantially the same condition
as existed immediately before such damage or destruction and otherwise in
accordance with the terms of the Lease. If Lessee restores the Facility, the
insurance proceeds shall be paid out by Lessor from time to time for the
reasonable costs of such restoration upon satisfaction of reasonable terms and
conditions specified by Lessor, and any excess proceeds remaining after such
restoration shall be paid to Lessee.
(c) If the cost of the repair or restoration exceeds the amount
of proceeds received by Lessor from the insurance required under Article XIII,
Lessee shall be obligated to contribute any excess amounts needed to restore the
Facility prior to commencing work thereon.
28
Such difference shall be paid by Lessee to Lessor promptly after Lessee receives
Lessor's written invoice therefore, to be held in trust, together with any other
insurance proceeds, for application to the cost of repair and restoration.
(d) If Lessor accepts Lessee's offer to purchase the Leased
Property under this Article, this Lease shall terminate as to the Leased
Property upon payment of the purchase price, and Lessor shall remit to Lessee
all insurance proceeds pertaining to the Leased Property being held in trust by
Lessor.
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance.
Except as provided in Section 14.5, if during the Term the Facility is
totally or materially destroyed by a risk not covered by the insurance described
in Article XIII, whether or not such damage or destruction renders the Facility
Unsuitable for its Primary Intended Use, Lessee at its option shall either, (a)
at Lessee's sole cost and expense, restore the Facility to substantially the
same condition it was in immediately before such damage or destruction and such
damage or destruction shall not terminate this Lease, or (b) make a written
offer to purchase the Leased Property for a purchase price equal to the
Rejectable Offer Price of the Leased Property without regard to such damage or
destruction. If Lessor does not accept Lessee's offer so to purchase the Leased
Property within 90 days after Lessee delivers its offer to Lessor, Lessee may
withdraw its offer to purchase the Leased Property and, if so withdrawn, Lessee
may terminate the Lease with respect to the Leased Property without further
liability hereunder. If such damage or destruction is not material, Lessee
shall, at Lessee's sole cost and expense, restore the Facility to substantially
the same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease, and such damage or
destruction shall not terminate the Lease.
14.4 Lessee's Property. All insurance proceeds payable by reason of
any loss of or damage to any of Lessee's Personal Property shall be paid to
Lessee; provided, however, no such payments shall diminish or reduce the
insurance payments otherwise payable to or for the benefit of Lessor hereunder.
14.5 Damage Near End of Term. Notwithstanding any provisions of
Section 14.2 or 14.3 appearing to the contrary, if damage to or destruction of
the Facility rendering it unsuitable for its Primary Intended Use occurs during
the last 24 months of the Term, then either party shall have the right to
terminate this Lease by giving written notice to the other within 30 days after
the date of damage or destruction, whereupon all accrued Rent shall be paid
immediately, and this Lease shall automatically terminate five days after the
date of such notice.
14.6 Waiver. Lessee hereby waives any statutory rights of termination
that may arise by reason of any damage or destruction of the Facility that
Lessor is obligated to restore or may restore under any of the provisions of
this Lease.
ARTICLE XV
15.1 Definitions.
29
(a) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "Date of Taking" means the date the Condemnor has the right
to possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
15.2 Parties' Rights and Obligations. If during the Term there is any
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this Article XV.
15.3 Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, subject to the provisions of Section
15.6, this Lease shall cease and terminate as of the Date of Taking by the
Condemnor. If title to the fee of less than the whole of the Leased Property is
so taken or condemned, which nevertheless renders the Leased Property Unsuitable
or Uneconomic for its Primary Intended Use, Lessee and Lessor shall each have
the option, by notice to the other, at any time prior to the Date of Taking, to
terminate this Lease as of the Date of Taking. Upon such date, if such Notice
has been given, this Lease shall thereupon cease and terminate. All Percentage
Rent and Additional Charges paid or payable by Lessee hereunder shall be
apportioned as of the Date of Taking, and Lessee shall promptly pay Lessor such
amounts. In the event of any such termination, the provisions of Section 15.7
shall apply.
15.4 Allocation of Award. The total Award made with respect to the
Leased Property or for loss of rent, or for Lessor's loss of business beyond the
Term, shall be solely the property of and payable to Lessor. Any Award made for
loss of Lessee's business during the remaining Term, if any, for the taking of
Lessee's Personal Property, or for removal and relocation expenses of Lessee in
any such proceedings shall be the sole property of and payable to Lessee. In any
Condemnation proceedings Lessor and Lessee shall each seek its Award in
conformity herewith, at its respective expense; provided, however, Lessee shall
not initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to Lessor.
15.5 Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is still suitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as provided in
Section 15.3, Lessee at the expense of the Lessor shall with all reasonable
dispatch restore the untaken portion of any Leased Improvements so that such
Leased Improvements constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as the Leased Improvements existing immediately prior to the Condemnation. In
the event of any Condemnation as described in this Section 15.5, the entire
amount of the Award shall be paid to the Lessor.
30
15.6 Temporary Taking. If the whole or any part of the Leased Property
or of Lessee's interest under this Lease is condemned by any Condemnor for its
temporary use or occupancy, this Lease shall not terminate by reason thereof,
Lessee, however, shall be released from its obligations to pay, in the manner
and at the terms herein specified, the Additional Charges. Except only to the
extent that Lessee may be prevented from so doing pursuant to the terms of the
order of the Condemnor, Lessee shall continue to perform and observe all of the
other terms, covenants, conditions and obligations hereof on the part of the
Lessee to be performed and observed, as though such Condemnation had not
occurred. In the event of any Condemnation as described this Section 15.6, the
entire amount of any Award made for such Condemnation allocable to the Term of
this Lease, whether paid by way of damages, rent or otherwise, shall be paid to
Lessor. Lessor covenants that upon the termination of any such period of
temporary use or occupancy it will, at its sole cost and expense, restore the
Leased Property as nearly as may be reasonably possible to the condition in
which the same was immediately prior to such Condemnation, unless such period of
temporary use or occupancy extends beyond the expiration of the Term, in which
case Lessor shall not be required to make such restoration.
15.7 Lessee's Offer. In the event of the termination of this Lease as
provided in Section 15.3, Lessee shall offer to acquire the Leased Property from
Lessor for a purchase price equal to the Rejectable Offer Price of the Leased
Property without regard to such taking and, if accepted, Lessee shall receive
the entire Award. If Lessor does not accept Lessee's offer to purchase the
Leased Property, Lessee shall withdraw its offer to purchase the Leased Property
and, if so withdrawn, Lessee may terminate the Lease with respect to the Leased
Property without further liability hereunder, except for payment of Rent as
provided in the penultimate sentence of Section 15.3 or for matters which by
their express terms survive termination of this Lease, and Lessor shall be
entitled to retain the Award except as provided in Section 15.4.
ARTICLE XVI
16.1 Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) if an event of default occurs, which is not cured, under
any other lease between Lessor or any Affiliate of Lessor and Lessee or any
Affiliate of Lessee; or
(b) if Lessee fails to make payment of the Percentage Rent or
Additional Charges within ten days after the same becomes due and payable;
(c) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by Lessee
within a period of 30 days after receipt by the Lessee of Notice thereof from
Lessor, unless such failure cannot with due diligence be cured within a period
of 30 days, in which case it shall not be deemed an Event of Default if Lessee
proceeds promptly and with due diligence to cure the failure and diligently
completes the curing thereof provided, however, in no event shall such cure
period extend beyond 90 days after such Notice; or
(d) if the Lessee shall file a petition in bankruptcy or
reorganization for an arrangement pursuant to any federal or state bankruptcy
law or any similar federal or state law,
31
or shall be adjudicated a bankrupt or shall make an assignment for the benefit
of creditors or shall admit in writing its inability to pay its debts generally
as they become due, or if a petition or answer proposing the adjudication of the
Lessee as a bankrupt or its reorganization pursuant to any federal or state
bankruptcy law or any similar federal or state law shall be filed in any court
and the Lessee shall be adjudicated a bankrupt and such adjudication shall not
be vacated or set aside or stayed within 60 days after the entry of an order in
respect thereof, or if a receiver of the Lessee or of the whole or substantially
all of the assets of the Lessee shall be appointed in any proceeding brought by
the Lessee or if any such receiver, trustee or liquidator shall be appointed in
any proceeding brought against the Lessee and shall not be vacated or set aside
or stayed within 120 days after such appointment; or
(e) if Lessee is liquidated or dissolved, or begins proceedings
toward such liquidation or dissolution, or, in any manner, permits the sale or
divestiture of substantially all of its assets; or
(f) if the estate or interest of Lessee in the Leased Property
or any part thereof is voluntarily or involuntarily transferred, assigned,
conveyed, levied upon or attached in any proceeding (unless Lessee is contesting
such lien or attachment in good faith in accordance with Article XI hereof); or
(g) if, except as a result of damage, destruction or a partial
or complete Condemnation, Lessee voluntarily ceases operations on the Leased
Property; or
(h) if a material event of default has been declared by the
franchisor under the Franchise Agreement with respect to the Facility on the
Leased Premises which has not been cured within any applicable cure period or
such Franchise Agreement has been terminated as a result of any action or
failure to act by the Lessee; then, and in any such event, Lessor may exercise
one or more remedies available to it herein or at law or in equity, including
but not limited to its right to terminate this Lease by giving Lessee not less
than ten days' Notice of such termination except in the case of a default under
Sections 16.1(e), 16.1(f), or 16.1(g), in which case notice shall not be
required.
If litigation is commenced with respect to any alleged default
under this Lease, the prevailing party in such litigation shall receive, in
addition to its damages incurred, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith.
No Event of Default (other than a failure to make a payment of
money) shall be deemed to exist under clause (d) during any time for up to one
year the curing thereof is prevented by an Unavoidable Delay, provided that upon
the cessation of such Unavoidable Delay, Lessee remedies such default or Event
of Default without further delay.
16.2 Surrender. If an Event of Default occurs (and the event giving
rise to such Event of Default has not been cured within the curative period
relating thereto as set forth in Section XVI) and is continuing, whether or not
this Lease has been terminated pursuant to Section XVI, Lessee shall, if
requested by Lessor so to do, immediately surrender and assign to Lessor or
Lessor's designee the Leased Property including, without limitation, any and all
books,
32
records, files, licenses, permits and keys relating thereto, and quit the same
and Lessor may enter upon and repossess the Leased Property by reasonable force,
summary proceedings, ejectment or otherwise, and may remove Lessee and all other
persons and any and all personal property from the Leased Property, subject to
rights of any hotel guests and to any requirement of law. Lessee hereby waives
any and all requirements of applicable laws for service of notice to re-enter
the Leased Property. Lessor shall be under no obligation to, but may if it so
chooses, relet the Leased Property or otherwise mitigate Lessor's damages.
16.3 Damages. Neither (a) the termination of this Lease, (b) the
repossession of the Leased Property, (c) the failure of Lessor to relet the
Leased Property, nor (d) the reletting of all or any portion thereof, shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all Rent due and payable
with respect to the Leased Property to and including the date of such
termination.
Lessee shall forthwith pay to Lessor, at Lessor's option, as and for
liquidated and agreed current damages for Lessee's default, either:
(1) Without termination of Lessee's right to possession of
the Leased Property, each installment of Rent and other sums
payable by Lessee to Lessor under the Lease as the same becomes
due and payable, which Rent and other sums shall bear interest at
the Overdue Rate, and Lessor may enforce, by action or otherwise,
any other term or covenant of this Lease;
(2) the sum of:
(A) the unpaid Rent which had been earned at the time
of termination, repossession or reletting, and
(B) the worth at the time of termination,
repossession or reletting of the amount by which the unpaid
Rent for the balance of the Term after the time of
termination, repossession or reletting, exceeds the amount
of such rental loss that Lessee proves could be reasonably
avoided and as reduced for rentals received after the time
of termination, repossession or reletting, if and to the
extent required by applicable law, the worth at the time of
termination, repossession or reletting of the amount
referred to in this subparagraph 16.3(2)(B) is computed by
discounting such amount at the discount rate of the Federal
Reserve Bank of New York at the time of award plus 1%, and
(C) any other amount necessary to compensate Lessor
for all the detriment proximately caused by Lessee's
failure to perform its obligations under this Lease or
which in the ordinary course of things, would be likely to
result therefrom.
16.4 Waiver. If this Lease is terminated pursuant to Article XXVI,
Lessee waives, to the extent permitted by applicable law, (a) any right to a
trial by jury in the event of summary
33
proceedings to enforce the remedies set forth in this Article XVI, and (b) the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt and Lessor waives any right to "▇▇▇▇▇▇ the corporate veil"
of Lessee other than to the extent funds shall have been inappropriately paid
any Affiliate of Lessee following a default resulting in an Event of Default.
16.5 Application of Funds. Any payments received by Lessor under any
of the provisions of this Lease during the existence or continuance of any Event
of Default shall be applied to Lessee's obligations in the order that such
obligations are due or as may be prescribed by the laws of the State.
ARTICLE XVII
17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails to make
any payment or to perform any act required to be made or performed under this
Lease including, without limitation, Lessee's failure to comply with the terms
of any Franchise Agreement other than a failure to complete improvements
required by the franchisor because the Lessor has not provided Lessee with the
funds therefor, and fails to cure the same within the relevant time periods
provided in Article XVI, Lessor, without waiving or releasing any obligation of
Lessee, and without waiving or releasing any obligation or default, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of Lessee, and may, to the
extent permitted by law, enter upon the Leased Property for such purpose and,
subject to Section 16.4, take all such action thereon as, in Lessor's reasonable
opinion, may be necessary or appropriate therefore. Before entering the Leased
Property for the purposes provided in this Article XVI, Lessor shall notify the
Lessee of its intention to enter the Leased Property unless such Notice would be
impractical. No such entry shall be deemed an eviction of Lessee. All sums so
paid by Lessor and all costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses, in each case to the extent permitted by
law) so incurred, together with a late charge thereon (to the extent permitted
by law) at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessors, shall be paid by Lessee to Lessor on demand. The
obligations of Lessee and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.
ARTICLE XVIII
18.1 Provisions Relating to Purchase of the Leased Property. If Lessee
purchases the Leased Property from Lessor pursuant to any of the terms of this
Lease, the closing of the purchase shall occur 90 days after Lessor accepts
Lessee's offer to purchase the Leased Property, unless the provision of the
Lease under which such offer was made specifies a different closing date, in
which case the date set forth in such provision shall be the closing date. At
such closing, Lessor shall, upon receipt from Lessee of the applicable purchase
price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to
Lessee an appropriate limited or special warranty deed or other conveyance
conveying the entire interest of Lessor in and to the Leased Property to Lessee
free and clear of all encumbrances other than (a) those that Lessee has agreed
hereunder to pay or discharge, (b) those mortgage liens, if any, that Lessee has
agreed in writing to accept and to take title subject to, (c) encumbrances,
easements, licenses or rights of way required to be imposed on the Leased
Property under Section 7.3, (d) any other encumbrances permitted to be imposed
on
34
the Leased Property under the provisions of Article XXXIV that are assumable at
no cost to Lessee or to which Lessee may take subject without cost to Lessee and
relating to the period of time after the purchase (e) any taxes not yet due and
payable; and (f) those encumbrances created, requested or consented to by
Lessee. The difference between the applicable purchase price and the total of
the encumbrances assumed or taken subject to shall be paid in cash to Lessor or
as Lessor may direct, in federal or other immediately available funds, except as
otherwise mutually agreed by Lessor and Lessee. All expenses of such conveyance,
including, without limitation, the cost of title examination or title insurance,
if desired by Lessee, Lessee's attorneys' fees incurred in connection with such
conveyance and release, and transfer taxes and recording fees, shall be paid by
Lessee. Lessor shall pay its attorney's fees. This Article XVIII is subject to
the prior rights of any lender whose lien is secured by the Leased Premises.
ARTICLE XIX
19.1 Personal Property Limitation. Anything contained in this Lease to
the contrary notwithstanding, the average of the fair market values of the items
of personal property that are leased to the Lessee under this Lease at the
beginning and at the end of any Fiscal Year shall not exceed 15% of the average
of the fair market values of the Leased Property at the beginning and at the end
of such Fiscal Year. This Section 19.1 is intended to ensure that the Rent
qualifies as "rents from real property," within the meaning of Section 856(d) of
the Code, or any similar or successor provisions thereto, and shall be
interpreted in a manner consistent with such intent.
19.2 Sublease Rent Limitation. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublet the Leased Property on any
basis such that the rental or other amounts to be paid by the sublessee
thereunder would be based, in whole or in part, on either (a) the net income or
profits derived by the business activities of the sublessee, or (b) any other
formula such that any portion of the Rent would fail to qualify as "rents from
real property" within the meaning of Section 856(d) of the Code, or any similar
or successor provision thereto.
19.3 Sublease Tenant Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublease the Leased Property or
any portions thereof to any Person in which ▇▇▇▇▇▇▇▇ Hospitality Trust, Inc.
owns, directly or indirectly, a 10% or more interest, within the meaning of
Section 856(d)(2)(B) of the Code, or any similar or successor provisions
thereto.
19.4 TRS Election and Limitations. Lessee agrees to make an election
to be and to operate as a "taxable REIT subsidiary" of ▇▇▇▇▇▇▇▇ Hospitality
Trust, Inc. within the meaning of Section 856(1) of the Code. Lessee shall not
(A) directly or indirectly operate or manage a "lodging facility" within the
meaning of Section 856(d)(9)(D)(ii) of the Code or a "health care facility"
within the meaning of Section 856(e)(6)(D)(ii) of the Code or (B) directly or
indirectly provide to any other person (under a franchise, license, or
otherwise) rights to any brand name under which any lodging facility or health
care facility is operated; provided, however, that Lessee may provide such
rights to a manager to operate or manage a lodging facility as long as such
rights are held by Lessee as a franchisee, licensee, or in a similar capacity
and such lodging facility is either owned by Lessee or is leased to Lessee by
Lessor or one of its Affiliates. Lessee
35
agrees that it will, at all times during the Term, cause the Leased Property to
be operated and managed by a manager that meets all of the following
requirements
(a) The manager does not own, directly or indirectly, more than
35% of the outstanding stock of ▇▇▇▇▇▇▇▇ Hospitality Trust, Inc.
(b) If the manager is a corporation, no more than 35% of the
total combined voting power of its outstanding stock (or 35% of the total shares
of all classes of its outstanding stock) or, if it is not a corporation, no more
than 35% of the ownership interest in its assets or net profits is owned,
directly or indirectly, by one or more Persons owning 35% or more of the
outstanding stock of ▇▇▇▇▇▇▇▇ Hospitality Trust, Inc.
(c) Neither ▇▇▇▇▇▇▇▇ Hospitality Trust, Inc., the Lessor, the
Lessee, nor any Affiliate thereof derives any income from the manager, except
for income from the leasing of the Norfolk, Nebraska office building.
(d) At the time that the manager enters into a management
agreement with the Lessee to operate the Leased Property, the manager (or any
"related person" within the meaning of Section 856(d)(9)(F) of the Code) is
actively engaged in the trade or business of operating "qualified lodging
facilities" within the meaning of Section 856(d)(9)(D) of the Code for any
Person who is not a "related person" within the meaning of Section 856(d)(9)(F)
of the Code with respect to ▇▇▇▇▇▇▇▇ Hospitality Trust, Inc or the Lessee (an
"Unrelated Person"). For purposes of determining whether the requirement of this
paragraph (d) has been met, a manager shall be treated as being actively engaged
in such a trade or business if the manager (i) derives at least 10% of both its
profits and revenue from operating "qualified lodging facilities" within the
meaning of Section 856(d)(9)(D) of the Code for Unrelated Persons or (ii)
complies with any regulations or other administrative guidance under Section
856(d)(9) of the Code that provide a "safe harbor " rule with respect to the
amount of hotel management business with Unrelated Persons that is necessary to
qualify as an "eligible independent contractor" within the meaning such Code
section.
19.5 Manager Officer and Employee Limitation. Anything contained in
this Lease to the contrary notwithstanding, none of the officers or employees of
the manager (or any Person who furnishes or renders services to the tenants of
the Leased Property, or manages or operates the Leased Property) shall be
officers or employees of ▇▇▇▇▇▇▇▇ Hospitality Trust, Inc. In addition, if a
Person serves as both (a) a director of the manager (or any Person who furnishes
or renders services to the tenants of the Leased Property, or manages or
operates the Leased Property) and (b) a trustee and officer (or employee) of
▇▇▇▇▇▇▇▇ Hospitality Trust, Inc. that Person shall not receive any compensation
for serving as a director of the manager (or any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property). Furthermore, if a Person serves as both (a) a trustee of
▇▇▇▇▇▇▇▇ Hospitality Trust, Inc. and (b) a director and officer (or employee) of
the manager (or any Person who furnishes or renders services to the tenants of
the Leased Property, or manages or operates the Leased Property), that Person
shall not receive any compensation for serving as a trustee of ▇▇▇▇▇▇▇▇
Hospitality Trust, Inc.
36
ARTICLE XX
20.1 Holding Over. If Lessee for any reason remains in possession of
the Leased Property after the expiration or earlier termination of the Term,
such possession shall be as a tenant at sufferance during which time Lessee
shall pay as rental each month two times the aggregate of (a) one-twelfth of the
aggregate Percentage Rent payable with respect to the last Fiscal Year of the
Term, (b) all Additional Charges accruing during the applicable month and (c)
all other sums, if any, payable by Lessee under this Lease with respect to the
Leased Property. During such period, Lessee shall be obligated to perform and
observe all of the terms, covenants and conditions of this Lease, but shall have
no rights hereunder other than the right, to the extent given by law to
tenancies at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease.
ARTICLE XXI
21.1 Risk of Loss. During the Term, the risk of loss or of decrease in
the enjoyment and beneficial use of the Leased Property in consequence of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than those caused by Lessor and those claiming from, through
or under Lessor) is assumed by Lessee, and, in the absence of gross negligence,
willful misconduct or breach of this Lease by Lessor pursuant to Section 34.3,
Lessor shall in no event be answerable or accountable therefor, nor shall any of
the events mentioned in this Section entitle Lessee to any abatement of Rent
except as specifically provided in this Lease.
ARTICLE XXII
22.1 Indemnification. Notwithstanding the existence of any insurance,
and without regard to the policy limits of any such insurance or self-insurance,
but subject to the last sentence of Section 13.4 if any insurance coverage is
applicable, Section 16.4 and Article VII, Lessee will protect, indemnify, hold
harmless and defend Lessor Indemnified Parties from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorney's fees and expenses) to the
extent permitted by law imposed upon or incurred or asserted against Lessor
Indemnified Parties by reason of: any accident, injury to or death of persons or
loss of or damage to property occurring on or about the Leased Property or
adjoining sidewalks, including without limitation any claims under liquor
liability, "dram shop" or similar laws, (b) any past, present or future use,
misuse, non-use, condition, management, maintenance or repair by Lessee or any
of its agents, employees or invitees of the Leased Property or Lessee's Personal
Property or any litigation, proceeding or claim by governmental entities or
other third parties to which a Lessor Indemnified Party is made a party or
participant related to such use, misuse, non-use, condition, management,
maintenance, or repair thereof by Lessee or any of its agents, employees or
invitees, including any failure of Lessee or any of its agents, employees or
invitees to perform any obligations under this Lease or imposed by applicable
law (other than arising out of Condemnation proceedings), (c) any Impositions
that are the obligations of Lessee pursuant to the applicable provisions of this
Lease, (d) any failure on the part of Lessee to perform or comply with any of
the terms of this Lease, and (e) the non-performance of any of the terms and
provisions of any and all existing and future subleases of the Leased Property
to be performed by the landlord thereunder and (f) the gross negligent acts and
omissions and willful misconduct of Lessee.
37
Lessor shall indemnify, save harmless and defend Lessee Indemnified
Parties from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses imposed upon or incurred by or
asserted against Lessee Indemnified Parties as a result of the gross negligence
or willful misconduct of Lessor arising in connection with this Lease. The
Lessor's obligations to indemnify Lessee Indemnified Parties shall be limited to
the value of Lessor's equity interest in the Facilities. Nothing herein shall be
construed as requiring Lessor to indemnify a Lessee Indemnified Party against
its own grossly negligent acts and omissions and willful misconduct.
Any amounts that become payable by an Indemnifying Party under this
Section shall be paid within ten days after liability therefor on the part of
the Indemnifying Party is determined by litigation or otherwise, and if not
timely paid, shall bear a late charge (to the extent permitted by law) at the
Overdue Rate from the date of such determination to the date of payment. An
Indemnifying Party, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against the Indemnified
Party. The Indemnified Party, at its expense, shall be entitled to participate
in any such claim, action, or proceeding, and neither the Indemnifying Party nor
the Indemnified Party may compromise or otherwise dispose of the same without
the consent of the Indemnified Party or the Indemnifying Party, which may not be
unreasonably withheld. Nothing herein shall be construed as indemnifying a
Lessor Indemnified Party against its own grossly negligent acts or omissions or
willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
ARTICLE XXIII
23.1 Subletting and Assignment. Subject to the provisions of Article
XIX and Section 23.2 and any other express conditions or limitations set forth
herein, Lessee may not without the consent of Lessor, which consent may be
withheld in Lessor's sole discretion, (a) assign this Lease or sublet all or any
part of the Leased Property or (b) sublet any retail or restaurant portion of
the Leased Improvements in the normal course of the Primary Intended Use;
provided that any subletting to any party other than an Affiliate of Lessee
shall not individually as to any one such subletting, or in the aggregate,
materially diminish the Rent payable under this Lease. In the case of a
subletting, the sublessee shall comply with the provisions of Section 23.2, and
in the case of an assignment, the assignee shall assume in writing and agree to
keep and perform all of the terms of this Lease on the part of Lessee to be kept
and performed and shall be, and become, jointly and severally liable with Lessee
for the performance thereof. In case of either an assignment or subletting made
during the Term, Lessee shall remain primarily liable, as principal rather than
as surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Lessee
hereunder. An original counterpart of each such sublease and assignment and
assumption, duly executed by Lessee and such sublessee or assignee, as the case
may be, in form and substance satisfactory to Lessor, shall be delivered
promptly to Lessor.
23.2 Attornment. Lessee shall insert in each sublease permitted under
Article XXIII provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) if this Lease terminates before
38
the expiration of such sublease, the sublessee thereunder will, at Lessor's
option, attorn to Lessor and waive any right the sublessee may have to terminate
the sublease or to surrender possession thereunder as a result of the
termination of this Lease, and (c) if the sublessee receives a written Notice
from Lessor or Lessor's assignees, if any, stating that an uncured Event of
Default exists under this Lease, the sublessee shall thereafter be obligated to
pay all rentals accruing under said sublease directly to the party giving such
Notice, or as such party may direct. All rentals received from the sublessee by
Lessor or Lessor's assignees, if any, as the case may be, shall be credited
against the amounts owing by Lessee under this Lease.
ARTICLE XXIV
24.1 Officer's Certificates; Lessor's Estoppel Certificates and
Covenants.
(a) At any time and from time to time upon not less than 30
days Notice by Lessor, Lessee will furnish to Lessor an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor or Lessee, and such other information as may be reasonably requested
by Lessor. Any such certificate furnished pursuant to this Section may be relied
upon by Lessor, any lender and any prospective purchaser of the Leased Property.
(b) At any time and from time to time upon not less than 10
days Notice by Lessee, Lessor will furnish to Lessee or to any person designated
by Lessee an estoppel certificate certifying that this Lease is unmodified and
in full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications), the date to which Rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee.
ARTICLE XXV
25.1 Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining thereto
and make copies thereof, during usual business hours upon reasonable advance
notice, subject only to any business confidentiality requirements reasonably
requested by Lessee.
ARTICLE XXVI
26.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
39
ARTICLE XXVII
27.1 Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
ARTICLE XXVIII
28.1 Acceptance of Surrender. No surrender to Lessor of this Lease or
of the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor and no act
by Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
ARTICLE XXIX
29.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same person
or entity may acquire, own or hold, directly or indirectly: (a) this Lease or
the leasehold estate created hereby or any interest in this Lease or such
leasehold estate and (b) the fee estate in the Leased Property.
ARTICLE XXX
30.1 Conveyance by Lessor. If Lessor or any successor owner of the
Leased Property conveys the Leased Property in accordance with the terms hereof
other than as security for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other transfer as to the Leased
Property and all such future liabilities and obligations shall thereupon be
binding upon the new owner.
30.2 Other Interests. This Lease and Lessee's interest hereunder shall
at all times be subject and subordinate to the lien and security title of any
deeds to secure debt, deeds of trust, mortgages, or other interests heretofore
or hereafter granted by Lessor or which otherwise encumber or affect the Leased
Property and to any and all advances to be made thereunder and to all renewals,
modifications, consolidations, replacements, substitutions, and extensions
thereof (all of which are herein called the "Mortgage"). In confirmation of such
subordination, however, Lessee shall, at Lessor's request, promptly execute,
acknowledge and deliver any instrument which may be required to evidence
subordination to any Mortgage and attornment to the holder thereof, conditioned
upon receipt of a nondisturbance clause. In the event of Lessee's failure to
deliver such subordination and if the Mortgage does not change any term of the
Lease, Lessor may, in addition to any other remedies for breach of covenant
hereunder, execute, acknowledge,
40
and deliver the instrument as the agent or attorney-in-fact of Lessee, and
Lessee hereby irrevocably constitutes Lessor its attorney-in-fact for such
purpose, Lessee acknowledging that the appointment is coupled with an interest
and is irrevocable. Lessee hereby waives and releases any claim it might have
against Lessor or any other party for any actions lawfully taken by the holder
of any Mortgage.
ARTICLE XXXI
31.1 Quiet Enjoyment. So long as Lessee pays all Rent as the same
becomes due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if any,
Lessee shall peaceably and quietly have, hold and enjoy the Leased Property for
the Term hereof, free of any claim or other action by Lessor or anyone claiming
by, through or under Lessor, but subject to all liens and encumbrances subject
to which the Leased Property was conveyed to Lessor or hereafter consented to by
Lessee or provided for herein and free and clear of any interference by Lessor
with Lessee's use and occupancy of the premises. Notwithstanding the foregoing,
Lessee shall have the right by separate and independent action to pursue any
claim it may have against Lessor as a result of a breach by Lessor of the
covenant of quiet enjoyment contained in this Section.
ARTICLE XXXII
32.1 Notices. All notices, demands, requests, consents approvals and
other communications ("Notice" or "Notices") hereunder shall be in writing and
personally served or mailed (by registered or certified mail, return receipt
requested and postage prepaid or by overnight courier), if to Lessor at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and if to Lessee ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at or to such other address or addresses as
either party may hereafter designate. Personally delivered Notice shall be
effective upon receipt, and Notice given by mail shall be complete at the time
of deposit in the U.S. Mail system, but any prescribed period of Notice and any
right or duty to do any act or make any response within any prescribed period or
on a date certain after the service of such Notice given by mail shall be
extended five days.
ARTICLE XXXIII
33.1 Appraisers. If it becomes necessary to determine the Fair Market
Value or Fair Market Rental of the Leased Property for any purpose of this
Lease, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a person selected to act
as appraiser on its behalf. Within 20 days after Notice, Lessor (or Lessee, as
the case may be) shall by Notice to Lessee (or Lessor, as the case may be)
appoint a second person as appraiser on its behalf. The appraisers thus
appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) with at least five
years experience in the State appraising property similar to the Leased
Property, shall, within 45 days after the date of the Notice appointing the
first appraiser, proceed to appraise the Leased Property to determine the Fair
Market Value or Fair Market Rental thereof as of the relevant date (giving
effect to the impact, if any, of inflation from the date of their decision to
the relevant date); provided, however, that if only one appraiser shall have
been so appointed, then the determination of such appraiser shall be final and
binding upon the parties.
41
To the extent consistent with sound appraisal practice as then existing at the
time of any such appraisal, such appraisal shall be made on a basis consistent
with the basis on which the Leased Property was appraised for purposes of
determining its Fair Market Value at the time the Leased Property was acquired
by Lessor. If two appraisers are appointed and if the difference between the
amounts so determined does not exceed 5% of the lesser of such amounts, then the
Fair Market Value or Fair Market Rental shall be an amount equal to 50% of the
sum of the amounts so determined. If the difference between the amounts so
determined exceeds 5% of the lesser of such amounts, then such two appraisers
shall have 20 days to appoint a third appraiser. If no such appraiser shall have
been appointed within such 20 days or within 90 days of the original request for
a determination of Fair Market Value or Fair Market Rental, whichever is
earlier, either Lessor or Lessee may apply to any court having jurisdiction to
have such appointment made by such court. Any appraiser appointed by the
original appraisers or by such court shall be instructed to determine the Fair
Market Value or Fair Market Rental within 45 days after appointment of such
appraiser. The determination of the appraiser which differs most in the terms of
dollar amount from the determinations of the other two appraisers shall be
excluded, and 50% of the sum of the remaining two determinations shall be final
and binding upon Lessor and Lessee as the Fair Market Value or Fair Market
Rental of the Leased Property, as the case may be. This provision for
determining by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by applicable
law. Lessor and Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.
ARTICLE XXXIV
34.1 Lessor May Grant Liens. Without the consent of Lessee, Lessor
may, subject to the terms and conditions set forth below in this Section 34.1,
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title retention agreement ("Encumbrance") upon the
Leased Property, or any portion thereof or interest therein, whether to secure
any borrowing or other means of financing or refinancing. Any such Encumbrance
shall (a) contain the right to prepay (whether or not subject to a prepayment
penalty); (b) provide that it is subject to the rights of Lessee under this
Lease and (c) contain the Agreement by the holder of the Encumbrance that it
will (1) give Lessee the same notice, if any, given to Lessor of any default or
acceleration of any obligation underlying any such Encumbrance or any sale in
foreclosure under such Encumbrance, (2) permit Lessee to cure any such default
on Lessor's behalf within any applicable cure period, and Lessee shall be
reimbursed by Lessor for any and all costs incurred in effecting such cure,
including without limitation out-of-pocket costs incurred to effect any such
cure (including reasonable attorneys' fees) and (3) permit Lessee to appear by
its representative and to bid at any sale in foreclosure made with respect to
any such Encumbrance. Upon the request of Lessor, Lessee shall subordinate this
Lease to the lien of a new mortgage on the Leased Property and agree to attorn
to the new mortgagee, on the condition that the proposed mortgagee executes a
non-disturbance agreement recognizing this Lease, and agreeing, for itself and
its successors and assigns, to comply with the provisions of this Article XXXIV.
42
34.2 Lessee's Right to Cure. Subject to the provisions of Section
34.3, if Lessor breaches any covenant to be performed by it under this Lease,
Lessee, after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to all other remedies available to Lessee,
may (but shall be under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the expense of Lessor. All
sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys' fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand or,
following entry of a final, nonappealable judgment against Lessor for such sums,
may be offset by Lessee against the Rent payments next accruing or coming due.
The rights of Lessee hereunder to cure and to secure payment from Lessor in
accordance with this Section 34.2 shall survive the termination of this Lease
with respect to the Leased Property.
34.3 Breach by Lessor. It shall be a breach of this Lease if Lessor
fails to observe or perform any term, covenant or condition of this Lease on its
part to be performed and such failure continues for a period of 30 days after
Notice thereof from Lessee, unless such failure cannot with due diligence be
cured within a period of 30 days, in which case such failure shall not be deemed
to continue if Lessor, within such 30-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof within
90 days. The time within which Lessor shall be obligated to cure any such
failure also shall be subject to extension of time due to the occurrence of any
Unavoidable Delay.
ARTICLE XXXV
35.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable law,
the parties agree that such charges shall be fixed at the maximum permissible
rate. Neither this Lease nor any provision hereof may be changed, waived,
discharged or terminated except by a written instrument in recordable form
signed by Lessor and Lessee. All the terms and provisions of this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. The headings in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. This
Lease shall be governed by and construed in accordance with the laws of the
State, but not including its conflicts of laws rules. This Agreement, together
with the Exhibits hereto, constitutes the entire Agreement between the parties
relating to the subject matter hereof and supersedes all prior agreements and
understandings (including the Original Lease), oral or written, between the
parties relating to the subject matter hereof.
35.2 Transition Procedures. Upon the expiration or termination of the
Term of this Lease, for whatever reason, Lessor and Lessee shall do the
following (and the provisions of this Section 35.2 shall survive the expiration
or termination of this Agreement until they have been fully performed) and, in
general, shall cooperate in good faith to effect an orderly transition of the
management lease or of the Facility.
43
(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use its best efforts (i) to transfer to
Lessor or Lessor's nominee all licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities, that may be necessary for the
operation of the Facility, including any Franchise Agreement (collectively,
"Licenses"), or (ii) if such transfer is prohibited by law or Lessor otherwise
elects, to cooperate with Lessor or Lessor's nominee in connection with the
processing by Lessor or Lessor's nominee of any applications for, all Licenses;
provided, in either case, that the costs and expenses of any such transfer or
the processing of any such application shall be paid by Lessor or Lessor's
nominee
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Agreement, and the
assignee shall assume all leases and concession agreements in effect with
respect to the Facility then in Lessee's name.
(c) Books and Records. All books and records for the Facility
kept by Lessee pursuant to Section 3.5 shall be delivered promptly to Lessor or
Lessor's nominee, simultaneously with the termination of this Agreement, but
such books and records shall thereafter be available to Lessee at all reasonable
times for inspection, audit, examination, and transcription for a period of one
(1) year and Lessee may retain (on a confidential basis) copies or computer
records thereof
(d) Remittance. Lessee shall remit to Lessor or Lessor's
nominee, simultaneously with the termination of this Lease, all funds remaining,
if any, after payment of all accrued Gross Operating Expenses, and other amounts
due Lessee and after deducting the costs of any scheduled repair, replacement,
or refurbishment of Furniture and Equipment with respect to which deposits have
been made.
35.3 Waiver of Presentment, etc. Lessee waives all presentments,
demands for payment and for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein
ARTICLE XXXVI
36.1 Memorandum of Lease. Lessor and Lessee shall promptly upon the
request of either enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State in which reference to this
Lease, and all options contained herein, shall be made. Lessee shall pay all
costs and expenses of recording such memorandum of this Lease.
ARTICLE XXXVII
37.1 Lessor's Option to Purchase Assets of Lessee. Effective on not
less than 90 days prior Notice given at any time within 180 days before the
expiration of the Term, but not later than 90 days prior to such expiration, or
upon such shorter Notice period as shall be appropriate if this Lease is
terminated prior to its expiration date, Lessor shall have the option to
purchase all (but not less than all) of the assets of Lessee, tangible and
intangible, relating to the Leased Property (other than this Lease), at the
expiration or termination of this Lease for an amount
44
(payable in cash on the expiration date of this Lease) equal to the fair market
value thereof as appraised in conformity with Article XXXIII, except that the
appraisers need not be members of the American Institute of Real Estate
Appraisers, but rather shall be appraisers having at least ten years experience
in valuing similar assets. Notwithstanding any such purchase, Lessor shall
obtain no rights to any trade name or logo used in connection with the Franchise
Agreement unless separate agreement as to such use is reached with the
applicable franchisor.
ARTICLE XXXVIII
38.1 Lessor's Option to Terminate Lease. In the event Lessor enters
into a bona fide contract to sell the Leased Property to a non-Affiliate, Lessor
may terminate the Lease by giving not less than 30 days prior Notice to Lessee
of Lessor's election to terminate the Lease effective upon the closing under
such contract or Lessor may convey the Lease pursuant to Article XXX. Effective
upon such closing, this Lease shall terminate and be of no further force and
effect except as to any obligations of the parties existing as of such date that
survive termination of this Lease. As compensation for the early termination of
its leasehold estate under this Article XXVIII, Lessor shall within six months
of such closing either (a) pay to Lessee the fair market value of the Lessee's
leasehold estate hereunder as the Lease Termination Payment or (b) offer to
lease to Lessee one or more substitute hotel facilities pursuant to one or more
leases that would create for the Lessee leasehold estates that have an aggregate
fair market value of no less than the fair market value of Lessee's leasehold
estate hereunder, with the fair market value of Lessee's leasehold estate
hereunder determined as of the closing of the sale of the Lease Property. If
Lessor elects and complies with the option described in (b) above, regardless of
whether Lessee enters into the lease(s) described therein, Lessor shall have no
further obligations to Lessee with respect to compensation for the early
termination of this Lease. In the event Lessor and Lessee are unable to agree
upon the fair market value of an original or replacement leasehold estate within
30 days, it shall be determined by appraisal using the appraisal procedure set
forth in Article XXXIII.
For the purposes of this Section, fair market value of the leasehold
estate means, as applicable, an amount equal to the price that a willing buyer
not compelled to buy would pay a willing seller not compelled to sell for
Lessee's leasehold estate under this Lease or an offered replacement leasehold
estate.
ARTICLE XXXIX
39.1 Compliance with Franchise Agreement. To the extent any of the
provisions of the Franchise Agreement impose a greater obligation on Lessee than
the corresponding provisions of the Lease, then Lessee shall be obligated to
comply with, and to take all reasonable actions necessary to prevent breaches or
defaults under, the provisions of the Franchise Agreement. It is the intent of
the parties hereto that, except as otherwise specifically provided by this
Lease, Lessee shall comply in every respect with the provisions of the Franchise
Agreement so as to avoid any default thereunder during the term of this Lease.
Lessor and Lessee agree to cooperate fully with each other in the event it
becomes necessary to obtain a franchise extension or modification or a new
franchise for the Leased Property.
45
ARTICLE XL
40.1 Room Set-Aside.
(a) Lessee is obligated to repair or replace in any Fiscal Year
Fixtures and Furniture and Equipment (i) as required by the terms of any
Franchise Agreement, (ii) as required by Article IX and Article XXXIX and (iii)
otherwise when and in a manner it deems fit, to the extent funds are available
therefor from amounts the Lessor is obligated to make available to Lessee under
this Section 40.1 or otherwise makes available to Lessee. During the Term Lessor
shall be obligated to make available to Lessee for repairing or replacing
Fixtures and Furniture and Equipment an amount equal to 4% of Room Revenues from
the Facility for each twelve month period. Lessor shall be required to make such
amounts available to Lessee on a quarterly basis. Upon written request by Lessee
to Lessor stating the specific use to be made and the reasonable approval
thereof by Lessor, such funds shall be made available by Lessor for use by
Lessee for periodic repairing or replacement of Fixtures and Furniture and
Equipment that constitute Leased Property in connection with the Primary
Intended Use. Lessor's obligation shall be cumulative, but not compounded, and
any amounts that have accrued hereunder shall be payable in future periods for
such uses and in accordance with the procedure set forth herein. Lessee shall be
obligated to return any funds forwarded by Lessor pursuant to this Article XL,
but not spent for (i) repair or replacement of Fixtures and Furniture and
Equipment that constitute Leased Property in connection with the Primary
Intended Use or (ii) Capital Expenditures pursuant to Section 40.2. Other than
as specifically set forth above in this Article XL, Lessee shall have no
interest in any accrued obligation of Lessor hereunder and Lessor shall have no
obligation to segregate or separate any such funds for the benefit of Lessee.
(b) Notwithstanding any provision of Section 40.1(a) to the
contrary, after the Capitalization Date:
(i) Lessee is obligated to repair or replace all
Fixtures, Furniture and Equipment and Hotel Property (x) as required by the
terms of any Franchise Agreement, (y) as required by Article IX and Article
XXXIX, and (z) otherwise when and in a manner it deems fit in order to operate
the Leased Property in the manner contemplated by this Lease; and
(ii) Lessee is obligated to pay all costs and expenses of
any and all repairs and replacements required to be made pursuant to this
Section 40.1(b).
40.2 Capital Expenditures. Lessor shall be obligated to pay the actual
costs of any items that are classified as capital items under U.S. generally
accepted accounting principles which are necessary for the continued operation
of the Facility and otherwise approved by Lessor. To the extent that at the end
of a Fiscal Year the amount set aside exceeds the amount spent on repair or
replacement of Fixtures and Furniture and Equipment, the Lessee may apply such
excess amount towards Lessor's obligations under Article XL.
40.3 Prohibited Expenditures. No amounts made available under this
Article shall be used to purchase property (other than "real property" within
the meaning of Treasury Regulations Section 1.856-3(d)), to the extent that
doing so would cause the Lessor to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code.
46
ARTICLE XLI
41.1 SBILP. Lessor, Lessee and, by its signature below, SBILP hereby
agree as follows:
(a) SBILP hereby consents to the amendment and restatement of the
Original Lease as set forth in this Lease.
(b) Upon the execution and delivery of this Lease, Lessee shall, and
does hereby, surrender to SBILP all right, title and interest of Lessee in and
to that property, real or personal, tangible or intangible, described on Exhibit
"B" attached hereto (the "Excluded Property"), free and clear of all liens and
encumbrances of any nature whatsoever arising by through or under Lessee.
(c) SBILP is hereby released from all liabilities and obligations of
SBILP arising or accruing under the Original Lease from and after the
Commencement Date.
(d) Transfer of Licenses. Promptly upon request of SBILP from time to
time made, Lessee shall use its best efforts (i) to transfer to SBILP or its
nominee all licenses, operating permits and other governmental authorizations
and all contracts, including contracts with governmental or quasi-governmental
entities, that constitute Excluded Property or that may be necessary for the
operation of any facility constituting Excluded Property (an "Excluded
Facility"), including any franchise or license agreement with a franchisor under
which any such Excluded Facility is operated (collectively, "Excluded
Licenses"), or (ii) if such transfer is prohibited by law or SBILP otherwise
elects, to cooperate with SBILP or SBILP's nominee in connection with the
processing by SBILP or its nominee of any applications for, all Excluded
Licenses; provided, in either case, that the costs and expenses of any such
transfer or the processing of any such application shall be paid by SBILP or its
nominee.
(e) Leases and Concessions. Lessee shall assign to SBILP or its
nominee simultaneously with the execution and delivery of this Lease, and the
assignee shall assume, all leases and concession agreements in effect with
respect to any Excluded Facility then in Lessee's name.
(f) Books and Records. All books and records for any Excluded
Facility kept by Lessee pursuant to Section 3.5 of the Original Lease shall be
delivered promptly to SBILP or its nominee, simultaneously with the execution
and delivery of this Lease, but such books and records shall thereafter be
available to Lessee at all reasonable times for inspection, audit, examination,
and transcription for a period of one (1) year and Lessee may retain (on a
confidential basis) copies or computer records thereof.
(g) Remittance. Lessee shall remit to SBILP or its nominee, promptly
following the execution and delivery of this Lease, all funds remaining, if any,
after payment of all accrued Gross Operating Expenses (as such term is defined
in the Original Lease) with respect to the Excluded Facilities for the period
prior to the Commencement Date, and other amounts due Lessee with respect to the
Excluded Facilities for the period prior to the Commencement Date.
47
(h) Further Cooperation. Lessor and SBILP shall cooperate in good
faith to effect an orderly transition of the Excluded Property.
48
IN WITNESS WHEREOF, the parties have executed this Lease by their
duly authorized officers as of the date first above written.
▇▇▇▇▇▇▇▇ HOSPITALITY LIMITED PARTNERSHIP
By: ▇▇▇▇▇▇▇▇ Hospitality REIT Trust,
its general partner
By: ▇▇▇▇▇▇▇▇ Hospitality REIT Trust,
its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
E&P FINANCING LIMITED PARTNERSHIP
By: E&P REIT Trust,
its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
TRS LEASING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
ACKNOWLEDGED AND AGREED:
SOLOMONS BEACON INN
LIMITED PARTNERSHIP
By: Solomons GP, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President