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EXHIBIT 10.2.
LEASE AGREEMENT
DATED AS OF JUNE ___, 1997
BETWEEN
INNKEEPERS SUMMERFIELD GENERAL, L.P.
AS LESSOR
AND
SUMMERFIELD SUITES LEASE COMPANY, L.P.
AS LESSEE
IN CONNECTION WITH THE
_____________ SUMMERFIELD SUITES HOTEL
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TABLE OF CONTENTS
ARTICLE 1........................................................................1
1.1. Leased Property.........................................................1
1.2. Term....................................................................2
1.3. Initial Transition......................................................4
ARTICLE 2........................................................................4
2.1. Definitions........................................................4
ARTICLE 3.......................................................................16
3.1. Rent...................................................................16
3.2. Confirmation of Percentage Rent........................................20
3.3. Additional Charges.....................................................21
3.4. No Set Off.............................................................22
3.5. Annual Budget..........................................................22
3.6. Books and Records......................................................25
3.7. Performance Failures...................................................25
3.8. Changes in Operations..................................................29
ARTICLE 4.......................................................................29
4.1. Payment of Impositions.................................................29
4.2. Notice of Impositions..................................................30
4.3. Adjustment of Impositions..............................................31
4.4. Utility Charges........................................................31
ARTICLE 5.......................................................................31
5.1. No Termination, Abatement, etc.........................................31
ARTICLE 6.......................................................................32
6.1. Ownership of the Leased Property.......................................32
6.2. Lessee's Personal Property.............................................32
6.3. Lessor's Lien..........................................................32
ARTICLE 7.......................................................................33
7.1. Condition of the Leased Property.......................................33
7.2. Use of the Leased Property.............................................34
ARTICLE 8.......................................................................36
8.1. Compliance with Legal and Insurance Requirements, etc..................36
8.2. Legal Requirement Covenants............................................36
8.3. Environmental Covenants................................................37
ARTICLE 9.......................................................................40
9.1. Maintenance and Repair; Capital Expenditures...........................40
9.2. Encroachments, Restrictions, Etc.......................................41
ARTICLE 10......................................................................42
10.1. Alterations...........................................................42
10.2. Salvage...............................................................43
10.3. Lessor Alterations....................................................43
ARTICLE 11......................................................................43
11.1. Liens.................................................................43
ARTICLE 12......................................................................44
12.1. Permitted Contests....................................................44
ARTICLE 13......................................................................45
13.1. General Insurance Requirements........................................45
13.2. Replacement Cost......................................................47
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13.3. (Intentionally omitted)...............................................47
13.4. Waiver of Subrogation.................................................47
13.5. Form Satisfactory, etc................................................48
13.6. Increase in Limits....................................................48
13.7. Blanket Policy........................................................48
13.8. Separate Insurance....................................................49
13.9. Reports On Insurance Claims...........................................49
ARTICLE 14......................................................................49
14.1. Insurance Proceeds....................................................49
14.2. Reconstruction in the Event of Damage or Destruction Covered by
Insurance.............................................................50
14.3. Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance or When Holder Will Not Release Insurance Proceeds.......51
14.4. Lessee's Property and Business Interruption Insurance.................51
14.5. Abatement of Rent.....................................................51
ARTICLE 15......................................................................52
15.1. Definition............................................................52
15.2. Parties' Rights and Obligations.......................................52
15.3. Total Taking..........................................................52
15.4. Allocation of Award...................................................53
15.5. Partial Taking........................................................53
15.6. Temporary Taking......................................................54
ARTICLE 16......................................................................54
16.1. Events of Default.....................................................54
16.2. Remedies..............................................................56
16.3. Waiver................................................................58
16.4. Application of Funds..................................................58
ARTICLE 17......................................................................58
17.1. Lessor's Right to Cure Lessee's Default...............................58
ARTICLE 18......................................................................59
18.1. Personal Property Limitation..........................................59
18.2. Sublease Rent Limitation..............................................59
18.3. Sublease Lessee Limitation............................................60
18.4. Lessee Ownership Limitation...........................................60
18.5. Director, Officer and Employee Limitation.............................60
ARTICLE 19......................................................................61
19.1. Holding Over..........................................................61
ARTICLE 20......................................................................61
20.1. Indemnification.......................................................61
ARTICLE 21......................................................................62
21.1. Subletting and Assignment.............................................62
21.2. Attornment............................................................63
21.3. Management Agreement..................................................63
ARTICLE 22......................................................................64
22.1. Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants............................................64
ARTICLE 23......................................................................67
23.1. Regular Meetings; Lessor's Right to Inspect...........................67
ARTICLE 24......................................................................68
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24.1. No Waiver.............................................................68
ARTICLE 25......................................................................68
25.1. Remedies Cumulative...................................................68
ARTICLE 26......................................................................68
26.1. Acceptance of Surrender...............................................68
ARTICLE 27......................................................................69
27.1. No Merger of Title....................................................69
ARTICLE 28......................................................................69
28.1. Conveyance by Lessor..................................................69
28.2. Lessor May Grant Liens................................................69
ARTICLE 29......................................................................72
29.1. Quiet Enjoyment.......................................................72
ARTICLE 30......................................................................72
30.1. Notices...............................................................72
ARTICLE 31......................................................................73
31.1. Appraisers............................................................73
ARTICLE 32......................................................................74
32.1. Lessee's Right to Cure................................................74
ARTICLE 33......................................................................74
33.1. Miscellaneous.........................................................74
33.2. Transition Procedures.................................................75
33.3. Waiver of Presentment, etc............................................76
33.4. Standard of Discretion................................................77
33.5. Action for Damages....................................................77
33.6. Lease Assumption in Bankruptcy Proceeding.............................77
33.7. Intra-Family Transfers................................................77
ARTICLE 34......................................................................78
34.1. Memorandum of Lease...................................................78
ARTICLE 35......................................................................78
ARTICLE 36......................................................................78
36.1. Lessor's Option to Terminate Lease; Lessee's Limited Rights
of First Offer........................................................78
ARTICLE 37......................................................................81
37.1. Compliance with Franchise Agreement...................................81
ARTICLE 38......................................................................82
38.1. Capital Expenditures..................................................82
ARTICLE 39......................................................................83
39.1. Lessor's Default......................................................83
ARTICLE 40......................................................................84
40.1. Arbitration...........................................................84
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40.2. Alternative Arbitration...............................................84
40.3. Arbitration Procedures................................................84
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LIST OF EXHIBITS
Exhibit A - Property Description
Exhibit B - Other Properties
Exhibit C - Percentage Rent Formula
Exhibit D - Room Revenues
LIST OF SCHEDULES
Schedule 9.1(b) - Required Capital Improvements (5/10/15 Re-do)
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LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "Lease"), made as of the
________ day of June, 1997, by and between INNKEEPERS SUMMERFIELD GENERAL, L.P.,
a Virginia limited partnership (hereinafter called "Lessor"), and SUMMERFIELD
SUITES LEASE COMPANY, L.P., a Kansas limited partnership (hereinafter called
"Lessee"), provides as follows.
W I T N E S S E T H:
Contemporaneously with the execution hereof, Lessor or its Affiliates
acquired (i) the Leased Property (as hereinafter defined)and certain Other
Properties, and (ii) Lessor is entering with Lessee into the Other Leases; and
Lessor and Lessee now wish to enter into this Lease.
NOW, THEREFORE, 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
1
1.1. Leased Property.
The leased property (the "Leased Property") is comprised of
Lessor's interest in the following:
(a) the land 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 off-site), 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 and 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
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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 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.
(a) The term of the Lease (the "Term") shall commence on the
date hereof (the "Commencement Date") and shall end on the fifteenth anniversary
of the last day of the Accounting Period in which the Commencement Date occurs,
unless sooner terminated in accordance with the provisions hereof. Lessor and
Lessee acknowledge that the Commencement Date is the date of Lessor's
acquisition of the Leased Property.
(b) Lessee may elect to extend this Lease for two (2)
consecutive periods of seven and one-half years (each, a "Renewal Term") by
providing written Notice (a "Renewal Notice") to Lessor no sooner than thirty
(30) months and no later than twenty four (24) months prior to the end of the
Term or the Renewal Term, as applicable. A Renewal Notice, if given, shall be
irrevocable, but it shall not preclude Lessor from exercising any of its rights
to terminate this Lease in accordance with the provisions
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hereof. Lessee acknowledges that Lessor will rely on any Renewal Notice received
from Lessee and not pursue opportunities to select another lessee for the
Facility and will be materially damaged if Lessee fails subsequently to act as
lessee for the applicable Renewal Term for any reason other than Lessor's
termination of the Lease in accordance herewith. No Renewal Notice may be given
or shall be effective if an Event of Default shall have occurred and, if curable
hereunder, shall not have been cured.
The terms of the Lease during a Renewal Term shall be the same
as the terms hereof, except with respect to the amount of Base Rent payable in
each Lease Year of the Renewal Term and the dollar amounts used in the formula
set forth on Exhibit C with respect to the calculation of Percentage Rent, all
of which shall be modified to reflect the then-current market rates for
comparable leases, as shall be determined (each, a "Determination" and together,
the "Determinations") by agreement of the parties or, if the parties cannot
agree before the date which is six (6) months before the end of the then-current
Term or Renewal Term, as applicable (the "Third Party Date"), by one or more
third parties, as follows. If the parties have not agreed on the Determinations
by the Third Party Date, the parties shall, within five (5) days thereafter,
select a mutually acceptable third-party to make the Determinations. If the
parties have not agreed on a mutually acceptable third-party within five (5)
days after the Third-Party Date, the parties shall, within ten (10) days after
the Third-Party Date, designate in a written Notice delivered to the other party
a third-party to make the Determinations. If a party fails to so designate a
third-party within such ten (10) day period, the third party designated by the
other party shall make the Determinations hereunder and both parties shall be
bound thereby. If the parties each designate third-parties within such ten (10)
day period, the two third- parties so designated shall select a third
third-party within twenty-five (25) days after the Third-Party Date. Each of the
third-parties so designated shall submit Determinations hereunder within sixty
(60) days after the Third-Party Date. For each Determination, the average of the
two closest amounts submitted by the three third-parties shall become the amount
deemed included in the Lease commencing at the beginning of the applicable
Renewal Term.
Determinations made by third-parties shall be such
third-parties' estimates of the terms that would be agreed upon by a willing
lessor and a willing lessee, which are unaffiliated, and with each having
knowledge of the applicable business, hotel product and market, and this Lease.
In making the Determinations, the third-parties shall consider similar or
analogous terms in other comparable leases or documents entered
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into or in effect at the time between parties that are not Affiliates
("Unaffiliated Leases"). Unaffiliated Leases shall include, without limitation,
any lease (a) between parties with respect to which ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is not a
director and/or executive officer of both and (b) if the lessee and lessor or
their parent companies each are registered, or have registered securities, under
the federal Securities Act of 1933 or Securities Exchange Act of 1934, each as
amended.
1.3. Initial Transition.
Simultaneously with the execution of this Lease, (i) an
Affiliate of Lessee has agreed to deliver to Lessee, in immediately available
funds, a sum equal to the amount of all deposits, prepaid revenue and similar
accounts existing at or with respect to the Leased Property as of the
Commencement Date, and in consideration of entering into this Lease, Lessee
shall be entitled to retain all such cash and other accounts for its own use and
(ii) Lessee shall acquire for fair market value from Lessor or the contributor
of the Leased Property to Lessor all of the Inventory existing at the Leased
Property.
ARTICLE
2
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
Lease 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 GAAP, (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:
Accounting Period: The four (4) week periods commencing on a Saturday
and ending on a Friday designated by Lessee as the fiscal periods of the
Facility, except that an Accounting Period may occasionally contain five (5)
weeks when necessary to conform Lessee's accounting system to the calendar. Each
Lease Year shall contain thirteen (13) consecutive Accounting Periods and shall
end on the Friday closest to December 31st of such Lease Year.
Additional Charge(s): As defined in Section 3.3.
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Affiliate: The term "Affiliate" of a Person shall mean (a) any 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, ten 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, by contract or otherwise.
Annual Budget: As used in this Lease, the term "Annual Budget" shall
mean an Operating Budget and a Capital Budget prepared by Lessee and approved by
Lessor in accordance with Section 3.5.
Award: As defined in Section 15.1(c).
Base Rate: The prime rate (or base rate) reported in the Money Rates
column or comparable section of The Wall Street Journal, Eastern Edition, as the
rate then in effect for corporate loans at large U.S. money center commercial
banks, whether or not such rate has actually been charged by any such bank. If
no such rate is reported in The Wall Street Journal, Eastern Edition or if such
rate is discontinued, then Base Rate shall mean such other successor or
comparable rate as Lessor may reasonably designate.
Base Rent: As defined in Article 3.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which national banks in the City of Palm Beach, Florida, or in
the municipality wherein the Leased Property is located are closed.
Capital Budget: As defined in Section 3.5.
Capital Expenditures: Amounts advanced to pay the costs of Capital
Improvements.
Capital Expenditures Allowance: As defined in Article 38.
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Capital Impositions: Taxes, assessments or similar charges imposed upon
or levied against the Leased Property for the costs of public improvements,
including, without limitation, roads, sidewalks, public lighting fixtures,
utility lines, storm sewers drainage facilities, and similar improvements.
Capital Improvements: Improvements to the Leased Property and
replacement or refurbishing of Fixtures and of Furniture and Equipment, all as
designated as capital improvements by and determined in accordance with GAAP.
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.
Company: Innkeepers USA Trust, a Maryland real estate investment trust.
Condemnation, Condemnor: As defined in Section 15.1.
Consolidated Financials: For any fiscal year or other accounting period
for (i) Lessee and (ii) Lessee and Lessee's Affiliates, if any, that lease hotel
properties from Lessor or its Affiliates, a balance sheet and statements of
operations, partners' capital and cash flow (or, in the case of a corporation,
statements of operations, retained earnings and cash flow) for such period and
for the period from the beginning of the respective fiscal year to the end of
such period and the related balance sheet as at the end of such period, together
with the notes to any such yearly statement, all in such detail as may be
required by the SEC with respect to filings made by the Company or Lessor, and
setting forth in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, and prepared in accordance
with GAAP and audited annually (and quarterly if required by the SEC) by Coopers
& ▇▇▇▇▇▇▇ L.L.P. or another so-called "Big Six" firm of independent certified
public accountants selected by Lessor. Consolidated Financials shall be prepared
on the basis of a fiscal year ending on the Friday closest to December 31.
Consumer Price Index: The "Consumer Price Index" published by the
Bureau of Labor Statistics of the United States Department of Labor, U.S. City
Average, All Item for Urban Wage Earners and Clerical Workers (1982-1984=100).
Date of Taking: As defined in Section 15.1(b).
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Emergency Expenditures: Expenditures required to take necessary or
appropriate actions to respond to Emergency Situations.
Emergency Situations: Fire, any other casualty, or any other events,
circumstances or conditions which threaten the safety or physical well-being of
the Facility's guests or employees or which involve the risk of material
property damage or material loss to the Facility.
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.
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 actual or potential 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, any Predecessor, the Leased Property or any
property used therein and arising out of:
(a) the failure to comply at any time with all Environmental
Laws applicable to the Leased Property;
(b) the presence of any Hazardous Materials on, in, under, at
or in any way affecting the Leased Property;
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(c) a Release or threatened Release of any Hazardous Materials
on, in, at, under or in any way affecting the Leased Property;
(d) the identification of Lessee, Lessor or any Predecessor as
a potentially responsible party under CERCLA or under any other Environmental
Law;
(e) the 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 any adjacent site or facility; 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 or any adjoining
property.
Event of Default: As defined in Section 16.1.
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.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fixtures: As defined in Section 1.1.
Franchise Agreement: The franchise agreement or license agreement with
Summerfield Suites Management Company, L.P., or any other franchisor under which
the Facility is operated.
Furniture and Equipment: The terms "furniture and equipment" shall mean
collectively all 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 and restaurants, and laundry and dry cleaning facilities, (ii)
office equipment, (iii) dining room wagons, materials handling equipment, and
cleaning and engineering equipment, (iv) telephone and computerized accounting
systems, and (v) vehicles.
GAAP: Generally accepted accounting principles as are at the time
applicable and otherwise consistently applied.
Government: The United States of America, any city, county, state,
district or territory thereof, any foreign nation, any
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▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ or other political division
thereof, or any political subdivision of any of the foregoing.
Gross Operating Expenses: The term "Gross Operating Expenses" shall
have the same meaning as the term "Total Costs and Expenses" contained in the
Uniform System and shall include all salaries and employee expenses and payroll
taxes (including salaries, wages, bonuses and other compensation of all
employees of the Facility, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, governmental fees and assessments, food,
beverages, laundry service expense, the cost of Inventory, 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 13, (iii)
Real Estate Taxes and Personal Property Taxes, (iv) payments on any Mortgage or
other security instrument on the Facility, and (v) depreciation and
amortization; all determined in accordance with GAAP 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, except the accounting fee, data processing fee and legal fee
currently being charged to the Facility as of the date hereof.
Gross Operating Profit: For any Lease Year, the excess of Gross
Revenues over Gross Operating Expenses.
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) whether on a cash basis
or credit, paid or collected, determined in accordance with GAAP 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 Awards,
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(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;
(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;
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos and urea formaldehyde;
(f) Asbestos or asbestos containing materials;
(g) Urea Formaldehyde foam insulation; and
(h) Radon gas.
Holder: Any holder of a Mortgage, any purchaser of the Leased Property
or any portion thereof at a foreclosure sale or any sale in lieu thereof, or any
designee of any of the foregoing.
Impositions: Collectively, all taxes (including, without limitation,
all ad valorem, sales and use, occupancy, single business, gross receipts,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Lessee or Lessor or Lessee's business conducted upon the Leased
Property), assessments (including, without limitation, all private property
association assessments and 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
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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, or (c) 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. Nothing
contained in this definition of Impositions shall be construed to require Lessee
to pay (1) any tax based on net income (whether denominated as a franchise or
capital stock or other tax) imposed on Lessor or any other person, or (2) any
net or gross revenue tax of Lessor or any other person, or (3) any tax imposed
with respect to the sale, exchange or other disposition by Lessor of any Leased
Property or the proceeds thereof.
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 any provision of this Lease.
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, china, silver, glassware and other non-depreciable personal property,
and any property of the type described in Section 1221(1) of the Code.
Land: As defined in Article 1.
Lease: This Lease.
Lease Year: Any thirteen (13) consecutive Accounting Periods ending on
the Friday closest to December 31, or any shorter period at the beginning or the
end of the Term.
Lease Master Agreement: That certain Lease Master Agreement of even
date herewith relating to this Lease and the Other Leases.
Leased Improvements: As defined in Article 1.
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Leased Property: As defined in Section 1.1.
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, operation 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 necessary or appropriate
to operate the Leased Property for its Primary Intended Use and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Lessee (other than encumbrances hereafter created by
Lessor without the consent of Lessee), at any time in force affecting the Leased
Property.
Lessee: The Lessee designated on this Lease and its 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 in Lessee, the officers,
directors, stockholders, partners, members, employees, agents and
representatives of any of the foregoing Persons and any corporate stockholder,
agent, or representative of any of the foregoing Persons, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, partner, member, 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, including
the Company, any other Person against whom any claim for indemnification may be
asserted hereunder as a result of a direct or indirect ownership interest in
Lessor, the officers, trustees, directors, stockholders, partners, members,
employees, agents and representatives of any of the foregoing Persons and of any
stockholder, partner, member, agent, or representative of any of the foregoing
Persons, and the respective heirs, personal representatives, successors and
assigns of any such officer,
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trustee, director, partner, member, stockholder, employee, agent or
representative.
Lessor's Audit: An audit by Lessor's independent certified public
accountants of the operation of the Leased Property during any Lease Year, which
audit may, at Lessor's election, be either a complete audit of the Leased
Property's operations or an audit of Room Revenues realized from the operation
of the Leased Property during such Lease Year.
Management Agreement: As defined in Section 21.3.
Manager: As defined in Section 21.3.
Market Decline: As defined in Section 3.7(b).
Mortgage: As defined in Section 28.2.
Notice: A notice given pursuant to Article 30.
Officer's Certificate: A certificate of Lessee reasonably acceptable to
Lessor, signed by the chief financial officer or another officer duly authorized
so to sign by Lessee or a general partner of Lessee, or any other person whose
power and authority to act has been authorized by delegation in writing by any
such officer.
Operating Budget: As defined in Section 3.5.
Other Leases: The leases of the Other Properties.
Other Properties: The properties described on Exhibit B attached
hereto, as the same may be amended from time to time pursuant to the provisions
of the Lease Master Agreement.
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.
Payment Date: Any due date for the payment of any installment of Rent.
Percentage Rent: As defined in Article 3.
Performance Failure: A Revenue Performance Shortfall, a Market Decline
or a Profit Decline.
Person: The term "Person" means and includes individuals, corporations,
general and limited partnerships, limited liability companies, stock companies
or associations, joint ventures,
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associations, companies, trusts, banks, trust companies, land trusts, business
trusts, or other entities and any Government and agencies and political
subdivisions thereof.
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 replacements, modifications, alterations and additions thereto.
Predecessor: Any Person whose liabilities arising under any
Environmental Law have or may have been retained or assumed by Lessor or Lessee
pursuant to the provisions of this Lease.
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.
Profit Decline: As defined in Section 3.7(c).
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.
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 Base Rent, Percentage Rent, and Additional
Charges.
Revenue Performance Shortfall: As defined in Section 3.7(a).
Room Revenues: Gross revenue from the rental of guest rooms, whether to
individuals, groups or transients, at the Facility, determined in a manner
consistent with the Uniform System and excluding the following:
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(a) The amount of all credits, bad debt write-off rebates or
refunds to customers, guests or patrons; and
(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.
Lessee agrees that bad-debt expenses will be recorded in a
manner which is consistent with the past practice of the current operator of the
Facility for bad debt writeoffs.
▇▇▇▇: The Superfund Amendments and Reauthorization Act of 1986, as
amended.
SEC: The U.S. Securities and Exchange Commission or any successor
agency.
State: The State or Commonwealth of the United States in which the
Leased Property is located.
STR Reports: Reports compiled by ▇▇▇▇▇ Travel Research which contain
historical supply and demand, occupancy, and average rate information for the
Facility and hotels with which it competes.
Subsidiaries: Corporations or other entities in which Lessee owns,
directly or indirectly, 50% or more of the voting rights or control, as
applicable (individually, a "Subsidiary").
Taking: A permanent or temporary 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.
Tax Law Change: A change in the Code (including, without limitation, a
change in the Treasury regulations promulgated thereunder) or in the judicial or
administrative interpretations of the Code, which will permit the Company or a
wholly-owned subsidiary of the Company to operate the Facility as a hotel
without adversely affecting the Company's qualification for taxation as a real
estate investment trust under the applicable provisions of the Code.
Term: As defined in Section 1.2.
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Termination Fee: As defined in Section 36.1(d).
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delay: Delay 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,
condemnation or other similar causes beyond the reasonable control of the party
responsible for performing an obligation hereunder, provided that lack of funds
shall not be deemed a cause beyond the reasonable control of either party hereto
unless such lack of funds is caused by the breach of the other party's
obligation to perform any obligations of such other party under this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the
Facility such that in the reasonable judgment of Lessor the Facility cannot be
operated on a commercially practicable basis for its Primary Intended Use, such
that Lessor intends to, and shall, cease operation of the Facility.
Uniform System: Shall mean the Uniform System of Accounts for Hotels
(9th Revised Edition, 1996) as published by the Hotel Association of New York
City, Inc., as the same may hereafter be revised, and as the same is interpreted
and applied by the Lessor's independent certified public accountants in
connection with any audit.
Unsuitable for its Primary Intended Use: A state or condition of the
Facility such that in the reasonable judgment of Lessor the Facility (i) cannot
function as an integrated hotel facility consistent with standards applicable to
a well maintained and operated hotel comparable in quality and function to that
of the Facility prior to the damage or loss and, (ii) notwithstanding the
application of insurance proceeds that may occur under Section 14.1, will remain
unsuitable for its Primary Intended Use for a period of 90 days or more.
ARTICLE
3
3.1. Rent.
Lessee will pay to Lessor, by wire transfer, in lawful money
of the United States of America which shall be legal tender for the payment of
public and private debts, at Lessor's address set forth in Article 30 hereof or
at such other place or to such other Person as Lessor from time to time may
designate in a
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Notice, all Base Rent, Percentage Rent and Additional Charges, during the Term,
as follows:
(a) For the short 1997 Lease Year commencing on the date
hereof, the Rent payable in each remaining Accounting Period shall be
(i) (A) the amount of base rent ("Base Rent")
set forth on Exhibit C for such Accounting Period, plus (B) the aggregate amount
of Base Rent set forth on Exhibit C for all preceding Accounting Periods in the
Lease Year for which Base Rent and Percentage Rent was due less (C) an amount
equal to the Base Rent paid for the Lease Year to date; provided, however, that
the first payment of Base Rent shall be prorated as to any partial Accounting
Period; plus
(ii) Percentage Rent, calculated as set forth in
(c)(ii) below. Rent for each Accounting Period in the 1997 Lease Year shall be
paid on or before the fifteenth (15th) day of the next Accounting Period;
(b) For the 1998 and all subsequent Lease Years, the Rent
payable in each Accounting Period shall equal
(i) (A) the amount of Base Rent set forth on
Exhibit C forsuch Lease Year (subject to increase as set forth in Subparagraph
(d) hereof), divided by (B) thirteen (13) multiplied by (C) the number of
Accounting Periods elapsed during the Lease Year, less (D) an amount equal to
the Base Rent and Percentage Rent paid for the Lease Year to date, provided,
however, that (1) Base Rent shall be prorated as to any Lease Year which is less
than thirteen Accounting Periods, and (2) the last payment of Base Rent shall be
pro rated as to any partial Accounting Period; plus
(ii) percentage rent ("Percentage Rent"),
calculated by the following formula:
For any Accounting Period, Percentage Rent shall equal:
The amount equal to the Period Revenues Computation (defined
below)
less
an amount equal to the Base Rent paid for the Lease Year to
date (including the amount paid or payable for such Accounting
Period under (b)(i) above
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less
an amount equal to the Percentage Rent paid for the Lease Year
to date.
Base Rent for each Accounting Period during such period of the
Term shall be payable in arrears in consecutive installments, on or before the
first business day of each subsequent Accounting Period. Percentage Rent for
each Accounting Period during such period of the Term shall be paid on or before
the fifteenth (15th) day of the next Accounting Period. In no event shall
Percentage Rent be less than zero. For purposes of defining the Period Revenues
Computation:
(A) "Cumulative Period Portion" shall mean a fraction having
as its numerator the total number of Accounting Periods (including partial
Accounting Periods) in a Lease Year which have elapsed prior to the Accounting
Period in which a payment of Percentage Rent is due, and having as its
denominator the total number of Accounting Periods (including partial Accounting
Periods) in the Lease Year. For example, the Cumulative Period Portion in a
13-Accounting Period Lease Year for the first Accounting Period Percentage Rent
payment due on the 15th day of the second Accounting Period will be 1/13 and for
the second Accounting Period Percentage Rent payment due on the tenth day of the
third Accounting Period will be 2/13, and such progression shall continue for
each successive Accounting Period so that the Cumulative Period Portion for the
thirteenth Accounting Period Percentage Rent payment due on the tenth day of the
first Accounting Period of the next Lease Year will be 13/13 or 100%.
(B) "First Tier Room Revenue Percentage," and "Second Tier
Room Revenue Percentage," shall mean the percentages corresponding to each of
such terms as set forth on Exhibit C.
(C) "Annual Room Revenues Break Point" shall mean the amount
of annual Room Revenues corresponding to each of such terms as set forth on
Exhibit D.
(D) The "Period Revenues Computation" shall be the amount
obtained by adding, for the applicable Lease Year, (i) an amount equal to the
First Tier Room Revenue Percentage of all year-to-date Room Revenues up to (but
not exceeding) the Cumulative Period Portion of the Annual Room Revenues Break
Point, and (ii) an amount equal to the Second Tier Room Revenue Percentage of
all year-to-date Room Revenues in excess of the Cumulative Period Portion of the
Annual Room Revenues Break Point.
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If the Term begins or ends in the middle of a calendar year,
then the number of Accounting Periods falling within the Term during such
calendar year shall constitute a separate Lease Year. In that event, the Annual
Room Revenues Break Point shall be multiplied by a fraction equal to (x) the
number of Accounting Periods (including partial Accounting Periods) in the Lease
Year divided by (y) thirteen (13), and the Cumulative Period Portion for each of
the Accounting Periods in such Lease Year shall be determined as set forth in
the definition of Cumulative Period Portion above.
(d) Officer's Certificates. An Officer's Certificate shall be
delivered to Lessor with each Percentage Rent payment setting forth the
calculation of the Percentage Rent payment for the most recently completed
Accounting Period of each Lease Year in the Term. There shall be no reduction in
Base Rent regardless of the results of the Period Revenues Computation.
Percentage Rent shall be subject to confirmation and adjustment, if applicable,
as set forth in Section 3.2.
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, shall be made not later
than sixty (60) days after such expiration or termination date.
(e) CPI Adjustments. For each Lease Year during the Term
beginning with the Lease Year commencing on or about January 1, 1998, the Base
Rent then in effect and the Annual Room Revenues Break Point then included in
the Revenues Computation set forth in Section 3.1(b)(ii), shall be increased as
follows:
(i) For the Lease Year commencing January 1,
1999, and for each Lease Year thereafter during the Term, the Consumer
Price Index for the day before the day that the new Lease Year
commences (the "Measurement Date") shall be divided by the Consumer
Price Index for the day that is twelve months preceding the Measurement
Date;
(ii) The new Base Rent for the then current Lease
Year shall be the product of the Base Rent in effect in the most
recently ended Lease Year and the quotient obtained under subparagraph
(i) above; and
(iii) The new Annual Room Revenues Break Point in
the Revenues Computation described in Section 3.1(b)(ii) above for the
then current Lease Year shall be the product
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of the Annual Room Revenues Break Point in effect in the most recently
ended Lease Year and the quotient obtained in subparagraph (i) above.
In no event shall the Base Rent or the Annual Room Revenues
Break Point be reduced as a result of any changes in the Consumer Price Index.
Adjustments calculated as set forth above in the Base Rent and
the Annual Room Revenues Break Point shall be effective on the first day of each
Lease Year to which such adjusted amounts apply. If Rent is paid prior to the
determination of the amount of any adjustment to Base Rent or the Annual Room
Revenues Break Point applicable for such period, whether because of a delay in
the publication of the Consumer Price Index for the Measurement Date or because
of any other reason, payment adjustments for any shortfall in or overpayment of
Rent paid shall be made with the first Base Rent and Percentage Rent payments
due after the amount of the adjustments are determined.
If (1) a significant change is made in the number or nature
(or both) of items used in determining the Consumer Price Index, or (2) the
Consumer Price Index shall be discontinued for any reason, the Bureau of Labor
Statistics shall be requested to furnish a new index comparable to the Consumer
Price Index, together with information which will make possible a conversion to
the new index in computing the adjusted Base Rent and Annual Room Revenues Break
Point hereunder. If for any reason the Bureau of Labor Statistics does not
furnish such an index and such information, the parties will instead mutually
select, accept and use such other index or comparable statistics on the cost of
living in various U.S. cities that is computed and published by an agency of the
United States or a responsible financial periodical of recognized authority.
3.2. CONFIRMATION OF PERCENTAGE RENT.
Lessee shall utilize, or cause to be utilized, an accounting
system for the Leased Property in accordance with its usual and customary
practices, and in accordance with GAAP and the Uniform System, that will
accurately record all data necessary to compute Percentage Rent, and Lessee
shall retain, for at least five (5) years after the expiration of each Lease
Year, reasonably adequate records conforming to such accounting system showing
all data necessary to conduct Lessor's Audit and to compute Percentage Rent for
the applicable Lease Years. Lessor shall have the right, for a period of two
years following each Lease Year, from time to time, by its accountants or
representatives, to audit such information in connection with Lessor's Audit,
and to examine all Lessee's records (including
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supporting data and sales and excise tax returns) reasonably required to
complete Lessor's Audit and to verify Percentage Rent, subject to any
prohibitions or limitations on disclosure of any such data under Legal
Requirements. If any Lessor's Audit discloses a deficiency in the payment of
Percentage Rent, and either Lessee agrees with the result of Lessor's Audit or
the matter is otherwise determined or compromised, Lessee shall forthwith pay to
Lessor the amount of the deficiency, as finally agreed or determined, together
with interest at the Overdue Rate from the date when said payment should have
been made to the date of payment thereof. If any Lessor's Audit discloses a
deficiency in the determination or reporting of Room Revenue which, as finally
agreed or determined, exceeds 3%, Lessee shall pay the costs of the portion of
Lessor's Audit allocable to the determination of Gross Revenues (the "Revenue
Audit"). Any proprietary information obtained by Lessor pursuant to the
provisions of this Section shall be treated as confidential, except that such
information may be used, subject to appropriate confidentiality safeguards, in
any litigation between the parties and except further that Lessor may disclose
such information to prospective lenders, investors and underwriters and to any
other persons to whom disclosure is necessary to comply with applicable laws,
regulations and government requirements. The obligations of Lessee contained in
this Section shall survive the expiration or earlier termination of this Lease.
Any dispute as to the existence or amount of any deficiency in the payment of
Percentage Rent as disclosed by Lessor's Audit shall, if not otherwise settled
by the parties, be submitted to arbitration pursuant to the provisions of
Section 40.2.
3.3. Additional Charges.
In addition to the Base Rent and 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 3.3, 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 3.3 being additional rent hereunder
and being referred to herein collectively as the "Additional Charge(s)"), 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 Base
Rent. If any installment of Base Rent, 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 within
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ten (10) days of demand, as Additional Charges, an amount equal to the interest
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 the same
from monies received from Lessee.
3.4. No Set Off.
Rent shall be paid to Lessor without set off, deduction or
counterclaim, subject to Lessee's right to assert any claim or mandatory
counterclaim in any action brought by either party under this Lease.
3.5. Annual Budget.
(a) Not later than October 15 of each Lease Year, Lessee shall
prepare and submit to Lessor a preliminary Room Revenues budget for the
subsequent Lease Year on an Accounting Period basis, together with any
assumptions made then-to-date by Lessee, in narrative form, forming the basis of
such schedules.
(b) Not later than November 15 of each Lease Year, Lessee
shall prepare and submit to Lessor an operating budget (the "Operating Budget")
and a capital budget (the "Capital Budget") prepared in accordance with the
requirements of this Section 3.5 for the subsequent Lease Year. The Operating
Budget and the Capital Budget (together, the "Annual Budget") shall be prepared
in accordance with the Uniform System to the extent applicable and show by
Accounting Period and for the subsequent Lease Year as a whole in the degree of
detail specified by the Uniform System for monthly statements, and in accordance
with the detail level of monthly financial statements, the following:
(i) Lessee's reasonable estimate of Gross
Revenues, Gross Operating Expenses and Gross Operating Profit (including room
rates and Room Revenues) for the forthcoming Lease Year itemized on schedules on
an Accounting Period basis as approved by Lessor and Lessee, together with the
assumptions, in narrative form, forming the basis of such schedules.
(ii) An estimate of the amounts to be spent for
the repair, replacement, or refurbishment of Furniture and Equipment.
(iii) An estimate of the amounts to be spent on
Capital Improvements during the current and the next five (5)
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Lease Years, including a project-by-project schedule of estimated start and
completion dates.
(iv) A cash flow projection.
(v) A narrative description of the program for
marketing and managing the Facility for the forthcoming Lease Year, including,
among other things, details as to significant accounts and customers, competitor
performance (to the extent Lessee can obtain same without unreasonable effort),
existing, new and projected supply analysis, demand analysis, estimated market
penetration by market segment (to the extent Lessee can obtain same without
unreasonable effort), target accounts, marketing and advertising budgets,
changes in personnel policies, staffing levels, major events plans, franchise
issues and other matters affecting the performance and operation of the
Facility, and containing a detailed budget itemization of proposed expenditures
by category and the assumptions, in narrative form, forming the basis of such
budget itemization.
(vi) Lessee's estimate for each Accounting Period
of the Lease Year of Percentage Rent, including Room Revenues.
Lessor shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve, disapprove or change the entries
and information appearing in the Annual Budget. If the parties are not able to
reach agreement on the Annual Budget for any Lease Year during Lessor's thirty
(30) day review period, the parties shall attempt in good faith during the
subsequent thirty (30) day period to resolve any disputes, which attempt shall
include, if requested by either party, at least one (1) meeting of
executive-level officers of Lessor and Lessee. In the event the parties are
still not able to reach agreement on the Annual Budget for any particular Lease
Year after complying with the foregoing requirements of this Section 3.5, the
parties shall adopt such portions of the Operating Budget and the Capital Budget
as they may have agreed upon, and any matters not agreed upon shall be referred
to arbitration as provided for in Section 40.2 hereof. Pending the results of
such arbitration or the earlier agreement of the parties, (i) if the Operating
Budget has not been agreed upon, for the first ninety (90) days of the new Lease
Year the Leased Property will be operated in a manner reflecting the prior Lease
Year's actual revenues, and thereafter the Leased Property will be operated for
the full Lease Year (including the first 90 days thereof) in a manner consistent
with the prior Lease Year's Operating Budget, in each case adjusted pursuant to
Section 3.1(e) hereof until a new Operating Budget is adopted, and (ii) if the
Capital Budget has not been agreed upon, no Capital Expenditures shall be made
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unless the same are set forth in a previously approved Capital Budget or are
specifically required by Lessor or are otherwise required to comply with Legal
Requirements or to make Emergency Expenditures.
The Annual Budget, once approved and as approved, shall form
the basis on which expenditures for the Leased Property shall be made. Unless
such expenditures are otherwise permitted in writing by Lessor or are Emergency
Expenditures, Lessee agrees to use its best efforts not to cause or permit any
expenditures for a Lease Year in excess of those set forth in the Capital
Budget, or any expenditures for a Lease Year that exceed one hundred five
percent (105%) of the total expenditures for operating expenses contemplated by
the approved Operating Budget for such Lease Year ("Excess Expenditures"). If,
notwithstanding Lessee's best efforts, Excess Expenditures are contemplated,
Lessee shall provide Lessor a written explanation of such expenditures, which
shall include (a) estimates of the Excess Expenditures, (b) the basis upon which
such estimates were made, (c) the reasons for such variances from the budgeted
expenses for such items and (d) the Lessee's plan, if any, to reduce such
expenditures in the future or avoid expenditures on such items which are in
excess of the amounts budgeted for such items in the future. Lessee shall
consider in good faith any proposals by Lessor of alternatives to reduce or
avoid any Excess Expenditures on an item greater than 105% of the amount
budgeted for the item. Lessee shall provide Lessor any additional information
regarding Excess Expenditures, and from time to time provide Lessor with status
reports on the Excess Expenditures and the implementation of any plan to reduce
or avoid such Excess Expenditures, each as reasonably requested by Lessor or its
representatives. Notwithstanding the foregoing, expenditures in excess of 105%
of the amount budgeted for an item in an Operating Budget may be made by Lessee
(i) for Real Estate Taxes, Personal Property Taxes, and insurance and utility
expenses resulting from unanticipated rate changes,(ii) if such expenditures are
Emergency Expenditures and (iii) for rooms costs and utilities as a result of
and in proportion to a corresponding increase in occupancy over the amounts
projected in the Operating Budget. Lessee shall promptly report to Lessor in
writing any actual or anticipated deviation from the Operating Budget or Capital
Budget resulting from the application of the preceding sentence. In the event
that Lessee fails to provide the Notices, information or reports required under
this Section 3.5, then Lessor, in addition to its other rights and remedies
under this Lease and under applicable law, shall have the right to submit the
matter to arbitration under Section 40.1 hereof.
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3.6. 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 GAAP 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 (whether maintained by Lessee or
Manager) shall be kept either at the Facility or at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇.
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, 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 (whether maintained by Lessee or Manager) 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 Lessor's prior written approval. Lessee shall be
entitled to make copies of any or all such books and records for its own files.
Lessee's obligations under this Section 3.6 shall survive termination of this
Lease for any reason.
3.7. Performance Failures.
(a) If, with respect to two (2) out of any three (3)
consecutive Lease Years during the Term commencing on or after January 1, 1998,
Lessee shall fail to realize from the operation of the Facility an amount equal
to at least ninety percent (90%) of Room Revenues as set forth in the Annual
Budget for such Lease Year, such failure shall constitute a "Revenue Performance
Shortfall" under this Lease, except to the extent such failure is caused by an
Unavoidable Occurrence. The existence of a Revenue Performance Shortfall for any
Lease Year shall be determined by Lessor on the basis of the first Officer's
Certificate delivered by Lessee to Lessor in the subsequent Lease Year pursuant
to the requirements of the first paragraph of Section 3.1(d) and shall be
subject to confirmation pursuant to Section 3.2. Notwithstanding the foregoing,
no Lease Year that would otherwise be included in the period of a Revenue
Performance Shortfall shall be so included if the Lessor and its Affiliates
receive Rent payments from the Lessee and its Affiliates under this Lease and
the Other Leases which, in the aggregate, amount to 95% (the "Overall Shortfall
Cure Percentage") of the aggregate Rent budgeted for such Lease Year in the
Operating Budgets for the facility and the other hotel properties leased under
the Other Leases (each such Lease Year, an "Excluded Lease Year"). Lessee and
its Affiliates as a group may rely on the foregoing for a total of five (5)
Excluded Lease Years and, thereafter, the Overall Shortfall Cure Percentage
shall increase to 100%.
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(b) If, with respect to any Lease Year during the Term, (i)
the RevPAR Yield Index of the Leased Property as of the end of such Lease Year
shall have declined by more than fifteen (15) percentage points (the "Decline
Percentage") from ______ percent (____%) [i.e., the Leased Property's RevPAR
Yield Index at the beginning of the Term] (the "RevPAR Index Baseline") and (ii)
the RevPAR Yield Index shall have declined below ninety-five percent (95%), such
combined decline shall constitute a "Market Decline" under this Lease, except to
the extent such failure is caused by an Unavoidable Occurrence. [For Cumberland
and Sierra: Beginning with the period commencing on June 30, 1998, the RevPAR
Index Baseline shall be reset to the Yield Index for the Hotel for the 12-months
ended June 30, 1998.] As used herein, "RevPAR Yield Index," when used with
respect to the Leased Property, shall mean the percentage amount obtained by
dividing the RevPAR of the Leased Property by the RevPAR of the Leased
Property's Competitive Set, with the terms "RevPAR" and "Competitive Set" having
the meanings ascribed to them in STR Reports. Lessor and Lessee shall work in
good faith to determine any additions and deletions to the Leased Property's
Competitive Set, and any resetting of the RevPAR Index Baseline as necessary to
reflect changed circumstances, on or before December 15 of each Lease Year, with
such changes to be applicable for the following Lease Year. In the event Lessor
and Lessee cannot agree to the Leased Property's Competitive Set or the RevPAR
Index Baseline changes by December 15 of any Lease Year, such unagreed items
shall be determined by ▇▇▇▇▇ Travel Research (or, if it refuses or is unable to
do so, by arbitration pursuant to Section 40.2). The costs of resetting the
Leased Property's Competitive Set or the RevPAR Index Baseline shall be borne
equally by the parties. The existence of a Market Decline shall be determined on
the basis of a STR Report which contains a full calendar year calculation of the
RevPAR Yield Index of the Leased Property. If STR Reports are no longer
published or do not contain sufficient information for the determination of a
Market Decline, the existence of a Market Decline shall instead be determined,
using the methodology presently employed by STR Reports, from information on the
RevPAR Yield Index of the Leased Property contained in any other publication
reasonably selected by Lessor and recognized by the hotel industry as being an
authoritative source of such information or, if no such publication exists, from
an analysis of the RevPAR Yield Index of the Leased Property conducted at the
joint expense of the parties by any nationally recognized accounting firm with a
hospitality division of which neither Lessor or an Affiliate of Lessor nor
Lessee or an Affiliate of Lessee is a significant client. Notwithstanding the
foregoing, a "Market Decline" shall not be deemed to have occurred in a Lease
Year if the Lessee makes a cash payment to Lessor on the due date of the final
Rent payment
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for such Lease Year in an amount equal to (a) the Rent that would have been paid
if the Room Revenues for such Lease Year equaled the amount necessary to cause
the RevPAR Yield Index for the Lease Year to be ninety-five percent (95%) and
(b) the Rent paid for such Lease Year. Any payment made under the immediately
preceding sentence shall be deemed Rent paid with respect to the Lease Year.
Lessor shall have no obligation to repay any amount advanced by Lessee to cure a
Market Decline. The Lessee may only cure a Market Decline in two Lease Years.
(c) If, with respect to any Lease Year during the Term, the
ratio of Gross Operating Profit to Gross Revenues ("GOP Percentage") is five (5)
percentage points less than the ratio of Gross Operating Profit to Gross
Revenues actually achieved in the prior Lease Year ("Prior Year GOP
Percentage"), such event shall constitute a "Profit Decline" under this Lease;
provided, however, that the foregoing shall not constitute a Profit Decline
under this Lease to the extent that the decline results from an Unavoidable
Occurrence, generally prevailing market conditions (including without limitation
those conditions affecting the hotel industry generally) within five (5) miles
of the Facility, or major renovations or other construction which materially
reduces the availability of rooms at the Facility. The existence of a Profit
Decline shall be determined on the basis of the year-end financial information
submitted by Lessee to Lessor pursuant to Article 22 and shall be subject to
confirmation by Lessor's Audit. Notwithstanding the foregoing, a "Profit
Decline" shall not be deemed to have occurred in a Lease Year if the Lessee
makes a cash payment to Lessor on the due date of the final Rent payment for
such Lease Year in an amount equal to (a) the Rent that would have been paid if
Room Revenues for such Lease Year equaled the amount necessary to increase the
Gross Revenues for the Lease Year to an amount which, given the actual Gross
Operating Expenses for such Lease Year, would have produced a GOP Percentage
which is less than five percentage points less than the Prior Year GOP
Percentage less (b) the Rent paid for such Lease Year. Any payment made under
the immediately preceding sentence shall be deemed Rent paid with respect to the
Lease Year. Lessor shall have no obligation to repay any amount advanced by
Lessee to cure a Profit Decline. The Lessee may only cure a Profit Decline in
two Lease Years.
(d) Upon the occurrence of a Revenue Performance Shortfall,
Lessor shall have the right, subject to subsection (e) of this section 3.7, at
Lessor's option, to terminate this Lease upon thirty (30) days' notice (the
"Notice Period") to Lessee, in which event Lessee shall immediately surrender
the Leased Property to Lessor, and, if Lessee fails to so surrender, Lessor
shall have the right, without notice, to enter upon and take possession of the
Leased Property and to expel or remove Lessee
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and its effects without being liable for prosecution or any claim for damages
therefor; and Lessee shall, and hereby agrees to, indemnify Lessor for the total
of (1) in the event that Lessee does not promptly surrender the Leased Property,
the reasonable costs of recovering the Leased Property and all other losses,
liabilities and reasonable expenses incurred by Lessor in connection with
Lessee's failure to surrender; (2) the unpaid Rent earned as of the date of
termination, plus interest at the Overdue Rate accruing after the due date; and
(3) all other sums of money then owing by Lessee to Lessor. Except as provided
in the Lease Master Agreement, termination of this Lease and recovery of the
Rent and other amounts as aforesaid shall constitute Lessor's sole remedy for
the Revenue Performance Shortfall, and Lessee shall not be liable to Lessor for
damages arising therefrom.
(e) Lessor's right to terminate the Lease pursuant to
subsection (d) above following any Lease Year, shall be subject to Lessee's
right to cure the Revenue Performance Shortfall occurring thereunder with
respect to such Lease Year, by making a cash payment to Lessor during the Notice
Period equal to the difference between the Percentage Rent actually paid for the
Lease Year and ninety percent (90%) (the "Hotel Shortfall Cure Percentage") of
the Percentage Rent budgeted for the Lease Year in the Annual Budget for the
Lease Year. Any payment made by Lessee under this subsection (e) shall be deemed
Rent paid with respect to the Lease Year. Lessor shall have no obligation to
repay any amount advanced by Lessee to cure a Revenue Performance Shortfall. The
Lessee may only cure two Revenue Performance Shortfalls, occurring under
subparagraph (d) by paying Lessor based on a 90% Hotel Shortfall Cure
Percentage. Thereafter, the Hotel Shortfall Cure Percentage shall be 100%.
(f) For the purposes of this Section 3.7, the term
"Unavoidable Occurrence" shall mean the occurrence of strikes, lockouts, labor
unrest, inability to procure materials, power or other utility failure, acts of
God, governmental restrictions, enemy action, civil commotion, fire, casualty,
condemnation or other similar causes beyond the reasonable control of Lessee;
provided, as to Subsections (a) and (b) above, that any such occurrence is an
extraordinary, as opposed to a routine or cyclical, material event that was not
reasonably foreseeable when the then-applicable Annual Budget was prepared (or,
if foreseeable, the provision for such event in the Annual Budget was denied by
Lessor).
(g) Upon a Transfer, as defined in Section 9 of the Lease
Master Agreement, (i) the cure rights set forth in subsections (b) and (c) above
shall not be available to the Transferee, (ii) the Overall Shortfall Cure
Percentage applicable
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to the Transferee under this Lease at all times shall be 100% and (iii) the
Decline Percentage applicable to the Transferee at all times shall be 10%.
3.8. Changes in Operations.
Without Lessor's prior written consent, which shall not be
unreasonably withheld, Lessee shall not (i) provide food and/or beverage
operations at the Facility if not presently provided, (ii) discontinue any food
and/or beverage operations which are presently provided, or (iii) convert a
subtenant, licensee or concessionaire to an operating department of the Facility
or vice-versa.
ARTICLE
4
4.1. Payment of Impositions.
Subject to Article 12 relating to permitted contests, Lessee
will pay, or cause to be paid, all Impositions other than Real Estate Taxes and
Personal Property Taxes, before any fine, penalty, interest or cost may be added
for nonpayment, 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 12) 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. Lessee shall submit copies of Real Estate Taxes and
Personal Property Tax invoices to Lessor upon Lessee's receipt of such invoices.
If any refund shall be due from any taxing authority in respect of any
Imposition paid
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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 been declared by Lessor 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 16. Any refund for Real
Estate Taxes and Personal Property Taxes shall be promptly remitted to Lessor.
Lessor and Lessee shall, upon request of the other, cooperate with the other
party and otherwise 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. 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. 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 of real estate assessments, and
Lessee, at Lessor's expense as aforesaid, shall fully cooperate with Lessor 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 proceed at Lessor's sole expense. Upon such notice, Lessee, at Lessor's
expense, shall cooperate fully with such activities. To the extent received by
it, Lessee shall furnish Lessor with copies of all assessment notices for Real
Estate Taxes at least thirty (30) days before the date in sufficient time for
Lessor to file any protest with respect to such tax must be made and pay such
taxes without penalty.
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 if Lessee did not otherwise
have knowledge of such Imposition sufficient to permit it to pay same, such
failure shall obviate any default hereunder for a reasonable time after Lessee
receives Notice of any Imposition which it is obligated to pay during the first
taxing period applicable thereto.
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4.3. Adjustment of Impositions.
Impositions payable by Lessee which are 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. Utility Charges.
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.
ARTICLE
5
5.1. No Termination, Abatement, etc.
Except as otherwise specifically provided in this Lease,
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 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) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Lessor or any assignee or transferee of Lessor, or (c) 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 default under this Lease
by Lessor, 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 or set off against 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
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express provisions of this Lease or by termination of this Lease other than by
reason of an Event of Default.
ARTICLE
6
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.
At commencement of the Term, Lessee shall purchase for fair
market value from Lessor or the Contributor of the Leased Property to Lessor all
Inventory at the Leased Property. At all times during the Term, Lessee shall
maintain Inventory consistent with the amount of inventory which is customarily
maintained in a hotel of the type and character of the Facility and is otherwise
required to operate the Leased Property in the manner contemplated by this Lease
and in compliance with the Franchise Agreement and all Legal Requirements. All
Inventory shall be the property of Lessee. Lessee may (and shall as provided
hereinbelow), 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) owned by Lessee (collectively, the "Lessee's Personal
Property"). Lessee may, subject to the following sentence of this Section 6.2,
remove any of Lessee's Personal Property at any time during the Term or upon the
expiration or any prior termination of the Term. All of Lessee's Personal
Property not removed by Lessee within thirty 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(d), including repair of
all damage to the Leased Property caused by the removal of Lessee's Personal
Property, whether effected by Lessee or Lessor.
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 such lien and security
interest shall remain attached to such Lessee's Personal Property until payment
in full
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of all Rent and satisfaction of all of Lessee's obligations hereunder; provided,
however, Lessor shall subordinate its lien and security interest only 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,
execute such financing statements or other documents or instruments reasonably
requested by Lessor to perfect the lien and security interests herein granted.
ARTICLE
7
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", "with all
faults", and in its present condition. Except as otherwise specifically provided
herein, 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. Lessor shall have the right to proceed against any
predecessor in title for breaches of warranties or representations or for latent
defects in the Leased Property, and Lessor shall, if requested by Lessee, assign
any such right to Lessee (other than claims against Affiliates of Lessee). If
either party determines to exercise such right, the other party shall fully
cooperate in the prosecution of any such claim, in Lessor's or Lessee's name,
all at the cost and expense of the prosecuting party, who hereby agrees to
indemnify, defend and hold harmless the other party from and against any claims,
obligations and liabilities against or incurred by such other party in
connection with such cooperation, and who further agrees to apply all amounts
realized from the prosecution of such claim, less its expenses in connection
therewith, to remedy such breach or cure such defect.
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7.2. Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise its best efforts to 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, or such other use as otherwise approved by Lessor (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. No use
other than the Primary Intended Use shall be made or permitted to be made of the
Leased Property, and no acts shall be done other than the Primary Intended Use,
which will cause the cancellation or 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 is prohibited by law or fire underwriter's
regulations. Lessee shall 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, which compliance shall be
performed at Lessee's sole cost.
(c) Subject to the provisions of Articles 14 and 15, Lessee
covenants and agrees that during the Term it will either directly or through an
approved manager (1) operate continuously the Leased Property as a hotel
facility, (2) keep in full force and effect and comply in all material respects
with all the provisions of the Franchise Agreement, (3) not terminate or amend
in any respect the Franchise Agreement without the consent of Lessor, (4)
maintain appropriate certifications and licenses for such use and (5) keep
Lessor advised of the status of any material litigation affecting the Leased
Property.
(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
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claim or claims of adverse usage or adverse possession by the public, as such,
or of implied dedication of the Leased Property or any portion thereof.
(f) Lessee shall comply with all of the Lessor's covenants, in
any loan agreement or other financing arrangement, applicable to this Lease or
the operation of the Leased Property. Notwithstanding the foregoing, Lessee
shall not be obligated to comply with Lessor's covenants in any loan agreements
which (A)(i) are not customary, (ii) are not otherwise contemplated by this
Lease Agreement or any agreement or instrument executed by Lessee in connection
herewith for the benefit of Lessor, and (iii)(x) materially and adversely affect
the operations at the Facility or (y) materially increase Lessee's costs of
doing business or decrease revenues, unless in cases where Subsection (iii)(y)
is relied upon by Lessee the additional cost thereof is borne by Lessor, or (B)
obligate Lessee to guarantee repayment of any debt of Lessor, or (C) require any
indemnification undertakings other than customary undertakings with respect to
servicing agents or similar administrative agents which administer escrow
accounts into which Lessee may deposit Rent payments as required by Lessor's
lenders or other servicing agents. Lessor will provide Lessee with not less than
fifteen (15), and will attempt in good faith to provide not less than thirty
(30), days prior written notice of the terms of such covenants, and if Lessee is
relying upon Subsection (iii)(y), Lessee shall within five (5) days of receipt
of such notice, notify Lessor in writing of any anticipated material additional
costs which Lessee may incur. Lessor shall then notify Lessee in writing whether
it agrees to pay or reimburse Lessee for the material additional cost thereof as
incurred by Lessee, and Lessee's receipt of such notice shall be a condition
precedent to Lessee's obligation to comply with such covenants. Lessor shall
have the right to dispute Lessee's reliance on Subsections (A)-(C) or Lessee's
estimates of additional costs pursuant to Subsection (A)(iii)(y), and either
party may submit any such disputes to arbitration under the provisions of
Article 40.
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ARTICLE
8
8.1. Compliance with Legal and Insurance Requirements, etc.
Subject to Section 8.2, 8.3(b) below and Article 12 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.
(a) Subject to Section 8.3(b) below, Lessee covenants and
agrees that the Leased Property and Lessee's Personal Property shall not be used
by anyone other than Lessor for any unlawful purpose, and that Lessee shall use
all commercially reasonable efforts not to permit or suffer to exist any
unlawful use of the Leased Property by others. Lessee shall acquire and maintain
all licenses, certifications, permits and other authorizations and approvals
required 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 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 its
sub-tenants, invitees or others to so comply with all Legal Requirements).
(b) As between Lessor and Lessee, Lessee is solely responsible
for all liabilities or obligations of any kind with respect to employees at the
Leased Property during the Term. Without limiting the generality of the
foregoing sentence, Lessee is solely responsible for any required compliance
with the Worker Adjustment, Retraining and Notification Act of 1988 (WARN) or
any similar state law applicable to the Leased Property; any required compliance
with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(COBRA); and all alleged and actual obligations and claims arising from or
relating to any employment agreement, collective bargaining agreement or
employee benefit plans, any grievances, arbitrations, or unfair labor practice
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charges, and relating to compliance with any applicable state or federal labor
employment law, including but not limited to all laws pertaining to
discrimination, workers' compensation, unemployment compensation, occupational
safety and health, unfair labor practices, family and medical leave, and wages,
hours or employee benefits. Lessee agrees to indemnify and defend and hold
harmless Lessor from and against any claims relating to any of the foregoing
matters. Lessee further agrees to reimburse Lessor for any and all losses,
damages, costs, expenses, liabilities and obligations of any kind, including
without limitation reasonable attorney's fees and other legal costs and
expenses, incurred by Lessor in connection with any of the foregoing matters.
Notwithstanding the Lessee's obligations under Section 8.1 to obtain
and maintain all permits and licenses required for the use of the Leased
Property, and without limiting any obligations of Lessee hereunder, if (i)
applicable law requires that the owner (rather than a lessee) of a hotel be the
licensee under the required liquor license for the Facility or (ii) the former
owner of the Facility is holding the liquor license and continuing to exercise
management and supervision of the liquor services at the Facility pending
transfer of the license to Lessor or Lessee, the Lessee shall indemnify and hold
the Lessor harmless from any liability, damages or claims (a) arising in
connection with liquor operations at the Facility during such period of time,
except for the Lessor's gross negligence or willful misconduct or (b) made by or
through the former owner with respect to liquor operations at the Facility.
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 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, except to the extent that such compliance would require
the remediation of Environmental Liabilities for which Lessee has no indemnity
obligations under Section 8.3(b). 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; and (3) all Releases at, on, in, under or in any way
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affecting the Leased Property, or any Release known by Lessee at, on, in or
under any property adjacent to the Leased Property; in each case as to which it
has actual knowledge.
(b) Lessee hereby agrees to defend, indemnify and save
harmless any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities except to the extent that the same (i) are caused by
the intentionally wrongful acts or grossly negligent failures to act of Lessor,
or (ii) result from Releases or other violations of Environmental Laws
originating on adjacent property but affecting the Leased Property (a
"Migration"), provided that such exclusions shall not apply to the extent that
the Migration has been exacerbated by Lessee's act or negligent failure to act.
(c) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities to the extent that the same were caused by the
intentionally wrongful acts or grossly negligent failures to act of Lessor.
(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 (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 Indemnifying Party and approved by the Indemnified 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 a conflict of interest prevents representation of such
Indemnified Party by the counsel selected by the Indemnifying Party and such
separate counsel has been approved by the Indemnifying Party, which approval
shall not be unreasonably withheld. The Indemnifying Party shall not be liable
for any 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.
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(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 the Lessee and the Lessor 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), Manager and Lessee's or Manager'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 8 shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease, provided that in the event of
a conflict between the provisions of this Section 8.3 and Article 20, the
provisions of this Section 8.3 shall control.
(g) The indemnification rights and obligations provided for in
this Article 8 shall survive the termination of this Lease.
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.
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ARTICLE
9
9.1. Maintenance and Repair; Capital Expenditures.
(a) 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, HVAC, mechanical,
electrical and plumbing systems and equipment (including conduit and ductwork),
and non-load bearing interior walls, 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 but subject to the obligation to make necessary
and appropriate repairs and replacements as provided in this Section 9.1(a)),
and, except as otherwise provided in Article 14 or Article 15, with reasonable
promptness, make all necessary and appropriate repairs, replacements and
improvements thereto of every kind and nature, whether interior or exterior,
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term of this Lease
(concealed or otherwise), or required by any governmental agency having
jurisdiction over the Leased Property. Lessee, however, 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. If Lessee fails to make any required repairs or replacements after
fifteen (15) days notice from Lessor, or after such longer period as may be
reasonably required provided that Lessee at all times diligently proceeds with
such repair or replacement, then Lessor shall have the right, but shall not be
obligated, to make such repairs or replacements on behalf of and for the account
of Lessee. In such event, such work shall be paid for in full by Lessee as
Additional Charges.
(b) Subject to Lessor's obligation to make available to the
Lessee amounts for Capital Expenditures as set forth in Article 38, Lessee shall
be required to make all Capital Expenditures in accordance with the Capital
Budgets, and required in connection with (i) Emergency Situations, (ii) Legal
Requirements, (iii) maintenance of the Franchise Agreement, (iv) the performance
by Lessee of its obligations under this Lease, and (v) other additions to the
Leased Property as it may
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reasonably deem appropriate and that are permitted hereunder during the Term.
Without limitation (or duplication) as to Capital Improvements that may be
required to be made as set forth in the Capital Budgets or required by the
Franchisor, Lessee shall complete the Capital Improvements described on Schedule
9.1(b). 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 non-responsibility under any
mechanic's lien laws now or hereafter existing.
(c) Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (1) constituting the request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof, or (2)
giving Lessee any right, power or permission to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against Lessor
in respect thereof or to make any agreement that may create, or in any way be
the basis for any right, title, interest, lien, claim or other encumbrance upon
the estate of Lessor in the Leased Property, or any portion thereof.
(d) 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 good order and repair in
accordance with Section 9.1(a) above, as would a prudent owner of comparable
property, during the entire Term) or damage by casualty or Condemnation (subject
to the obligation of Lessee to restore or repair as set forth in this 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 a Leased
Property, or violate the agreements or conditions contained in any lawful
restrictive covenant or other agreement affecting a Leased Property, or any part
thereof, or impair the rights of others under any easement or right of way to
which said Leased Property is subject, then promptly upon the
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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 10. 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
10
10.1. Alterations.
After first obtaining the written approval of Lessor, which
shall not be unreasonably withheld, Lessee shall have the right, but not the
obligation, 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 alter the character or purposes of
the Leased Property or detract from the value or operating efficiency thereof
and will not 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. All such work shall be performed in a first class manner in accordance
with all applicable governmental rules and regulations and after receipt of all
required permits and licenses. 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.
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10.2. Salvage.
All materials which are scrapped or removed in connection with
the making of repairs required by Articles 9 or 10 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. Lessor Alterations.
Lessor shall have the right, but not the obligation, to make
such other additions to the Leased Property as it may reasonably deem
appropriate during the Term, subject to the Lessee's approval which shall not be
unreasonably withheld. All such work shall be done after reasonable notice to
and coordination with Lessee, so as to minimize any disruptions or interference
with the operation of the Facility.
ARTICLE
11
11.1. Liens.
Subject to the provision of Article 12 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 resulting from the action
or inaction of Lessee, or any attachment, levy, claim or encumbrance in respect
of the Rent, excluding, however, (a) this Lease, (b) the matters, if any,
included as exceptions or insured against 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, (d) liens for those taxes which
Lessee is not required to pay hereunder, (e) subleases permitted by Article 21
hereof, (f) liens for Impositions or for sums resulting from noncompliance with
Legal Requirements so long as (1) the same are not yet delinquent or (2) such
liens are in the process of being contested as permitted by Article 12, (g)
liens of mechanics, laborers, suppliers or vendors for sums either disputed or
not yet due provided that any such liens for disputed sums are in the process of
being contested as permitted by Article 12 hereof, and (h) any liens which are
the responsibility of Lessor pursuant to the provisions of Article 32 of this
Lease.
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ARTICLE
12
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 any lien,
attachment, levy, encumbrance, charge or claim (any such Imposition, Legal
Requirement, lien, attachment, levy, encumbrance, charge or claim herein
referred to as "Claims") not otherwise permitted by Article 11, by appropriate
legal proceedings in good faith and with due diligence (but this shall 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 and legal fees anticipated
to be incurred in connection therewith 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 thereon and legal fees anticipated to be incurred 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 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
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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 only 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
13
13.1. General Insurance Requirements.
(a) Coverages. During the Term of this Lease, the Leased
Property shall at all times be insured with the kinds and amounts of insurance
described below. This insurance shall be written by companies authorized to
issue insurance in the State. The policies must name the Lessor as an additional
named insured, and the Manager shall also be named as an additional insured
under the coverages described in Sections 13.1(a)(iv) through (xi). Losses
shall be payable to Lessor or Lessee as provided in this Lease. Any loss
adjustment for coverages insuring both parties shall require the written consent
of Lessor and Lessee, each acting reasonably and in good faith. Evidence of
insurance shall be deposited with Lessor. The policies on the Leased Property,
including the Leased Improvements, Fixtures and Lessee's Personal Property,
shall satisfy the requirements of the Franchise Agreement and of any ground
lease, mortgage, security agreement or other financing lien affecting the Leased
Property and at a minimum shall include:
(i) Building insurance on the "Special Form" (formerly
"All Risk" form) (including earthquake and flood in reasonable amounts
if and as determined by Lessor, in the exercise of its reasonable
discretion, or Lessor's underwriters or lenders) 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, air
conditioning systems, piping and machinery, and sprinklers, if any, now
or hereafter installed in the Facility, in the minimum amount of
$5,000,000 or in such greater amounts as are then customary or as may
be reasonably requested by Lessor from time to time;
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(iii) Loss of income insurance on the "Special Form", in
the amount of eighteen (18) months of the sum of Base Rent plus
Percentage Rent (based on the last Lease Year of operation or, to the
extent the Leased Property has not been operated for an entire 18-month
Lease Year, based on prorated Percentage Rent) for the benefit of
Lessor, and business interruption insurance on the "Special Form" in
the amount of eighteen (18) months of gross profit, for the benefit of
Lessee;
(iv) Commercial general liability insurance, with amounts
not less than $1,000,000 combined single limit for each occurrence and
$2,000,000 for the aggregate of all occurrences within each policy
year, as well as excess liability (umbrella) insurance with limits of
at least $50,000,000 per occurrence, 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) Fidelity bonds or blanket crime policies with limits
and deductibles as may be reasonably determined by Lessor, covering
Lessee's and/or Manager's employees in job classifications normally
bonded under prudent hotel management practices in the United States or
otherwise required by law;
(vi) Workers' compensation insurance to the extent
necessary to protect Lessor, Lessee and the Leased Property against
Lessee's and/or Manager's ▇▇▇▇▇▇▇'▇ compensation claims to the extent
required by applicable state laws;
(vii) Comprehensive form vehicle liability insurance for
owned, non-owned, and hired vehicles, in the amount of $1,000,000;
(viii) Garagekeeper's legal liability insurance covering
both comprehensive and collision-type losses with a limit of liability
of $3,000,000 for any one occurrence, of which coverage in excess of
$1,000,000 may be provided by way of an excess liability policy;
(ix) Innkeeper's legal liability insurance covering
property of guests while on the Leased Property for which Lessor is
legally responsible with a limit of not less
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than $2,000 per guest and $50,000 in any one occurrence or $25,000
annual aggregate;
(x) Safe deposit box legal liability insurance covering
property of guests while in a safe deposit box on the Leased Property
for which Lessor is legally responsible with a limit of not less than
$50,000 in any one occurrence; and
(xi) Insurance covering such other hazards (such as plate
glass or other common risks) and in such amounts as may be (A) required
by a Holder, or (B) 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 determined by
Lessor.
(b) Responsibility for Insurance. Lessee shall obtain the
insurance and pay the premiums for the coverages described in Section 13.1(a)
above. The Lessee shall also be responsible for any and all deductibles in
connection with such coverages. In the event that Lessor can obtain comparable
insurance coverage required to be carried by Lessee from comparable insurers and
at a cost significantly less than that at which Lessee can obtain such coverage,
the parties shall cooperate in good faith to obtain such coverage at the lower
cost and the Lessee shall pay the premiums therefor.
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 has increased or decreased at any time during the Term, it
shall have the right to have such full replacement cost redetermined.
13.3. (Intentionally omitted)
13.4. Waiver of Subrogation.
All insurance policies 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. Each
party agrees
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to seek recovery from any applicable insurance coverage prior to seeking
recovery against the other party.
13.5. Form Satisfactory, etc.
All of the policies of insurance referred to in this Article
13 shall be written in a form, with deductibles and by insurance companies
satisfactory to Lessor and shall satisfy the requirements of any ground lease,
mortgage, security agreement or other financing lien on the Leased Property and
of the Franchise Agreement. The Lessee shall pay all of the premiums therefor,
and deliver copies of such policies or certificates thereof to the 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
the Lessee either to effect such insurance as herein called for or to pay the
premiums therefor, or to deliver such policies or certificates thereof to the
Lessor at the times required, the Lessor shall be entitled, but shall have no
obligation, after 10 days' Notice to Lessee (or after less than 10 days' Notice
if required to prevent the expiration of any existing policy), to effect such
insurance and pay the premiums therefor, and to be reimbursed by Lessee for any
such premiums upon written demand therefor. Each insurer mentioned in this
Article 13 shall agree, by endorsement to the policy or policies issued by it,
or by independent instrument furnished to the 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.
13.6. Increase 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. If the parties fail to agree on such limits, the matter shall be
referred to arbitration as provided for in Article 40.
13.7. Blanket Policy.
Notwithstanding anything to the contrary contained in this
Article 13, Lessee 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; provided, however, that the coverage afforded to Lessor
and Lessee will not
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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 13 are otherwise satisfied.
13.8. Separate Insurance.
Neither Lessor nor Lessee shall on its 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. Each party shall
immediately notify the other party that it 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,
all claims for damage relating to the ownership, operation, and maintenance of
the Facility, and 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 copy of all such reports shall be furnished to Lessor.
Lessee shall be authorized to adjust, settle or compromise any insurable loss,
or to execute proofs of such losses, in the aggregate, of [$50,000] or less,
with respect to any single casualty or other event.
ARTICLE
14
14.1. Insurance Proceeds.
Subject to the provision of Section 13.9, all proceeds of the
insurance contemplated by Sections 13.1(a)(i) and (ii) 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 13 of this Lease shall be paid to
Lessor and held in trust in an interest bearing account and made available,
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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 Lessor. If neither Lessor nor Lessee is required or elects to repair
and restore, and the Lease is terminated as described in Section 14.2, all such
insurance proceeds shall be retained by Lessor except for any amount thereof
paid with respect to Lessee's Personal Property. All salvage resulting from any
risk covered by insurance shall belong to Lessor, except to the extent of
salvage relating to Lessee's Personal Property.
14.2. Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
(a) If during the Term the Leased Property is totally or
partially destroyed by a risk covered by the insurance described in Article 13
and the Facility thereby is rendered Unsuitable for its Primary Intended Use,
the Lease shall terminate as of the date of the casualty and neither Lessor nor
Lessee shall have any further liability hereunder except for any liabilities
which have arisen prior to or which survive such termination, and Lessor shall
be entitled to retain all insurance proceeds except for any amount thereof paid
with respect to Lessee's Personal Property.
(b) If during the Term the Leased Property is partially
destroyed by a risk covered by the insurance described in Article 13, but the
Facility is not thereby rendered Unsuitable for its Primary Intended Use, Lessor
or, at the election of Lessor, 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. 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 terms and conditions
specified by Lessor, and any excess proceeds remaining after such restoration
shall be paid to Lessor except for any amount thereof paid with respect to
Lessee's Personal Property.
(c) If the cost of the repair or restoration exceeds the
amount of proceeds received by Lessor from the insurance required under Article
13, Lessor shall agree to contribute any excess amounts needed to restore the
Facility prior to requiring
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Lessee to commence such work. Such difference shall be made available by Lessor,
together with any other insurance proceeds, for application to the cost of
repair and restoration in accordance with the provisions of Section 14.2(b).
14.3. Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance or When Holder Will Not Release Insurance Proceeds.
If during the Term the Facility is totally or materially
damaged or destroyed by a risk not covered by the insurance described in Article
13, or, notwithstanding the provisions of Section 14.2(b), if the Holder will
not make the proceeds of such insurance available to Lessor for restoration of
the Facility, whether or not in either event such damage or destruction renders
the Facility Unsuitable for its Primary Intended Use, Lessor, at its option,
shall either, (a) at Lessor'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) terminate the Lease and neither Lessor nor Lessee shall have any further
liability thereunder except for any liabilities which have arisen or occurred
prior to such termination and those which expressly survive termination of this
Lease. If such damage or destruction is determined by Lessor not to be material,
Lessor may, at Lessor'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 and Business Interruption Insurance.
All insurance proceeds payable by reason of any loss of or
damage to any of Lessee's Personal Property and the business interruption
insurance maintained for the benefit of Lessee 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. Abatement of Rent.
Any damage or destruction due to casualty notwithstanding, and
provided the Lease has not otherwise been terminated, this Lease shall remain in
full force and effect and Lessee's obligation to pay Rent required by this Lease
shall remain unabated by any damage or destruction which does not result in a
reduction of Gross Revenues. If and to the extent that any damage or destruction
results in a reduction of Gross
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Revenues which would otherwise be realizable from the operation of the Facility,
then Lessor shall receive all loss of income insurance and Lessee shall have no
obligation to pay Rent in excess of the amount of Percentage Rent, if any,
realizable from Gross Revenues generated by the operation of the Leased Property
during the existence of such damage or destruction.
ARTICLE
15
15.1. Definition.
(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 15.
15.3. Total Taking.
If title to the fee of the whole of the Leased Property is
condemned by any Condemnor, 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 for its Primary Intended Use or Uneconomic for its Primary
Intended Use, then either Lessee or Lessor shall 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 Base Rent, Percentage Rent
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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.
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, neither
Lessor nor Lessee shall initiate, prosecute or acquiesce in any proceedings that
may result in a diminution of any Award payable to the other.
15.5. Partial Taking.
(a) If title to less than the whole of the Leased Property is
condemned, and the Leased Property is not Unsuitable for its Primary Intended
Use or Uneconomic for its Primary Intended Use, or if Lessor is entitled but
elects not to terminate this Lease as provided in Section 15.3, then Lessor or,
at Lessor's election, Lessee shall, with all reasonable dispatch and to the
extent that the Holder permits the application of the Award therefor and the
Award is sufficient therefor, 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. Lessor and Lessee shall each contribute
to the cost of restoration that part of its Award specifically allocated to such
restoration, if any, together with severance and other damages awarded for the
taken Leased Improvements; provided, however, that the amount of such
contribution shall not exceed such cost.
(b) In the event of a partial Taking as described in Section
15.5(a), which does not result in a termination of this Lease by Lessor, the
Base Rent shall be abated in the manner and to the extent that is fair, just and
equitable to both Lessee and Lessor, taking into consideration, among other
relevant factors, the number of usable rooms, the amount of square footage, or
the revenues affected by such partial Taking. If Lessor and Lessee are unable to
agree upon the amount of such abatement within 30 days after such partial
Taking, the matter shall be submitted to Arbitration as provided for in Section
40.2 hereof.
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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, and Lessee shall
continue to pay, in the manner and at the times herein specified, the full
amounts of Base Rent and Additional Charges, but only to the extent of the Award
made to Lessee for such Condemnation allocable to the Term. In addition, to the
extent of the remaining balance, if any, of the Award made for such Condemnation
allocable to the Term (after payment of Base Rent and Additional Charges),
Lessee shall pay Percentage Rent at a rate equal to the average Percentage Rent
during the last three preceding full Lease Years (or if three full Lease Years
shall not have elapsed, the average during the preceding full Lease Years).
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 in this Section 15.6
described, 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 Lessee. Lessee covenants that upon the termination of any such
period of temporary use or occupancy it will, to the extent that its Award is
sufficient therefor and subject to Lessor's contribution as set forth below,
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 Lessee shall not be required to make such restoration. If
restoration is required hereunder, Lessor shall contribute to the cost of such
restoration that portion of its entire Award that is specifically allocated to
such restoration in the judgment or order of the court, if any.
ARTICLE
16
16.1. Events of Default.
Any one or more of the following events shall constitute an
Event of Default hereunder:
(a) if Lessee fails to make any payment of Base Rent or
Percentage Rent or Additional Charges within ten (10) days after receipt by the
Lessee of Notice from Lessor that the same
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has become due and payable, provided that Lessor shall not be required to give
any such Notice more than twice in any Lease Year and that any third or
subsequent failure by Lessee during such Lease Year to make any payment of Base
Rent or Percentage Rent on the date the same becomes due and payable shall
constitute an immediate Event of Default; or
(b) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not curable, or if
curable is not cured by Lessee within a period of 30 days after receipt by the
Lessee of Notice thereof from Lessor, unless such failure is curable but 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 (i) Lessee, within such 30 day period,
proceeds with due diligence to cure the failure and thereafter diligently
completes the curing thereof within 120 days of Lessor's Notice to Lessee, which
120-day period shall cease to run during any period that a cure of such failure
is prevented by an Unavoidable Delay and shall resume running upon the cessation
of such Unavoidable Delay, and (ii) the failure does not result in a notice or
declaration of default under any material contract or agreement to which Lessor,
the Company, or any Affiliate of either of them is a party or by which any of
their assets are bound; or
(c) if Lessee or Manager shall (i) be generally not paying its
debts as they become due, (ii) file, or consent by answer or otherwise to the
filing against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment for
the benefit of its creditors, (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its assets, (v) be adjudicated insolvent
or (vi) take corporate action for the purpose of any of the foregoing; or if a
court or governmental authority of competent jurisdiction shall enter an order
appointing, without consent by Lessee, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its assets, or if an order for relief shall be entered in
any case or proceeding for liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of Lessee, or if any petition for any
such relief shall be filed against Lessee and such petition shall not be
dismissed within 60 days; or
(d) if Lessee or Manager is liquidated or dissolved, or begins
proceedings toward such liquidation or dissolution, or,
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in any manner, ceases to do business or permits the sale or divestiture of
substantially all of its assets; or
(e) 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; or
(f) if, except as a result of and to the extent required by
damage, destruction, Condemnation or Unavoidable Delay, Lessee ceases operations
on the Leased Property; or
(g) if notice of a default or an event of default has been
given by the franchisor under the Franchise Agreement with respect to the
Facility on the Leased Property, which default or event of default is not cured
within applicable cure periods and does not arise directly from Lessor's breach
of any of its obligations under this Lease; or
(h) if a Performance Failure has occurred and not been cured
in accordance with this Lease; or
(i) if an Event of Default based on a failure to pay Rent when
due occurs under any of the Other Leases; or
(j) if a Default by Lessee shall occur under the Lease Master
Agreement.
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.
16.2. Remedies.
Upon the occurrence of an Event of Default, Lessor shall have the
right, at Lessor's option, to elect to do any one or more of the following
without further notice or demand to Lessee: (a) terminate this Lease, in which
event Lessee shall immediately surrender the Leased Property to Lessor, and, if
Lessee fails to so surrender, Lessor shall have the right, without notice, to
enter upon and take possession of the Leased Property and to expel or remove
Lessee and its effects without being liable for prosecution or any claim for
damages therefor; and Lessee shall, and hereby agrees to, indemnify Lessor for
all loss and damage which Lessor suffers by reason of such termination,
including without limitation, damages in an amount equal to the total of (1) the
reasonable costs of recovering the Leased Property in the event that Lessee does
not promptly surrender the Leased
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Property, and all other reasonable expenses incurred by Lessor in connection
with Lessee's default; and (2) the unpaid Rent earned as of the date of
termination, plus interest at the Overdue Rate accruing after the due date; (3)
the total Rent (including Percentage Rent as determined below) which Lessor
would have received under this Lease for the remainder of the Term, but
discounted to the then present value at a rate of twelve percent (12%) per
annum, less the fair market rental value of the balance of the Term as of the
time of such default discounted to the then present value at a rate of twelve
percent (12%) per annum; and (4) all other sums of money and damages owing by
Lessee to Lessor; or (b) enter upon and take possession of the Leased Property
without terminating this Lease and without being liable to prosecution or any
claim for damages therefor, and, if Lessor elects, relet the Leased Property on
such terms as Lessor deems advisable, in which event Lessee shall pay to Lessor
on demand the reasonable cost of repossessing the Leased Property and any
deficiency between the Rent payable hereunder (including Percentage Rent as
determined below) and the rent paid under such reletting; provided, however,
that Lessee shall not be entitled to any excess payments received by Lessor from
such reletting. Lessor's failure to relet the Leased Property shall not release
or affect Lessee's liability for Rent or for damages; or (c) enter the Leased
Property without terminating this Lease and without being liable for prosecution
or any claim for damages therefor and maintain the Leased Property and repair or
replace any damage thereto or do anything for which Lessee is responsible
hereunder. Lessee shall reimburse Lessor immediately upon demand for any expense
which Lessor incurs in thus effecting Lessee's compliance under this Lease, and
Lessor shall not be liable to Lessee for any damages with respect thereto.
Notwithstanding anything herein to the contrary, Lessee shall not be liable to
Lessor for consequential, punitive or exemplary damages.
The rights granted to Lessor in this Section 16.2 shall be
cumulative of every other right or remedy provided in this Lease or which Lessor
may otherwise have at law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies or constitute a forfeiture or
waiver of Rent or damages accruing to Lessor by reason of any Event of Default
under this Lease.
Percentage Rent for the purposes of this Section 16.2 shall be
a sum equal to (i) the average of the annual amounts of the Percentage Rent for
the three full Lease Years immediately preceding the Lease Year in which the
termination, re-entry or repossession takes place, or (ii) if three full Lease
Years shall not have elapsed, the average of the Percentage Rent during the
preceding full Lease Years during which the Lease was in effect,
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or (iii) if one full Lease Year has not elapsed, the amount derived by
annualizing the Percentage Rent from the effective date of this Lease.
16.3. Waiver.
Each party waives, to the extent permitted by applicable law,
any right to a trial by jury in any proceedings brought by either party to
enforce the provisions of this Lease, including, without limitation, proceedings
to enforce the remedies set forth in this Article 16, and Lessee waives the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt. Lessor waives any right to "▇▇▇▇▇▇ the corporate veil" of
Lessee other than to the extent funds shall have been paid to any Affiliate of
Lessee following a default leading to any Event of Default, and then only to the
extent of such payments.
16.4. 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 Lessor may determine or as may
be prescribed by the laws of the State.
ARTICLE
17
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, and fails
to cure the same within the relevant time periods provided in Section 16.1,
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 upon Notice to Lessee 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 16.2, take all such action thereon as, in Lessor's opinion,
may be necessary or appropriate therefor. 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
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Lessor, 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
18
18.1. Personal Property Limitation.
(a) Anything contained in this Lease to the contrary
notwithstanding, the average of the adjusted tax bases of the items of Lessor's
personal property that are leased to Lessee under this Lease at the beginning
and at the end of any Lease Year shall not exceed 15% of the average of the
aggregate adjusted tax bases of the real and personal property contained in the
Leased Property at the beginning and at the end of such Lease Year (the
"Personal Property Limitation"). If Lessor reasonably anticipates that the
Personal Property Limitation will be exceeded with respect to the Leased
Property for any Lease Year, Lessor shall notify Lessee, and Lessee shall
purchase items of personal property anticipated by Lessor to be in excess of the
Personal Property Limitation ("Excess Personal Property Items") either from
Lessor or a third party. If the Excess Personal Property Items are purchased
from Lessor, the purchase prices of such Excess Personal Property Items shall be
equal to the adjusted tax bases of such Excess Personal Property Items in the
hands of Lessor as of the closing of the purchase.
(b) If Lessee purchases Excess Personal Property Items, the
Rent shall be reduced for the Accounting Period in which such purchase occurs
and each of sixty-four (64) succeeding Accounting Periods by an amount each
Accounting Period equal to two percent (2%) of the aggregate purchase prices of
such Excess Personal Property Items.
(c) If Lessee purchases Excess Personal Property Items, the
amount required by Lessor to be deposited in the Capital Expenditure Reserve
pursuant to Article 38 hereof shall be reduced for the Lease Year during which
such purchase occurs by an amount equal to the aggregate purchase prices of such
Excess Personal Property Items.
18.2. Sublease Rent Limitation.
Anything contained in this Lease to the contrary
notwithstanding, Lessee shall not sublet the Leased Property or enter into any
similar arrangement 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
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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.
18.3. Sublease Lessee Limitation.
Anything contained in this Lease to the contrary
notwithstanding, Lessee shall not sublease the Leased Property to, or enter into
any similar arrangement with, any Person in which the Company owns, directly or
indirectly, a 10% or greater interest, within the meaning of Section
856(d)(2)(B) of the Code, or any similar or successor provisions thereto.
18.4. Lessee Ownership Limitation.
Anything contained in this Lease to the contrary
notwithstanding, neither party shall take, or permit to take, any action that
would cause the Company to own, directly or indirectly, a 10% or greater
interest in the Lessee within the meaning of Section 856(d)(2)(B) of the Code,
or any similar or successor provision thereto.
18.5. Director, Officer and Employee Limitation.
Anything contained in this Lease to the contrary
notwithstanding, Lessor and Lessee shall cooperate to ensure that (i) no
officers or employees of Lessor or the Company shall be officers or employees
of, or own any ownership interest in, Lessee or any Affiliate thereof (or any
Person who furnishes or renders services to the tenants of the Leased Property,
or manages or operates the Leased Property), and (ii) no officers or employees
of Lessee or any Affiliate thereof (or of 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 Lessor or the Company.
Furthermore, if a Person serves as both (a) a director or trustee of Lessor, the
Company or any other Affiliate of Lessor and (b) a director and officer (or
employee) of the Lessee (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 (excluding reimbursement for expenses)
for serving as a trustee of the Lessor, the Company or the other Affiliate of
Lessor.
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ARTICLE
19
19.1. 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 Accounting Period two times the aggregate of (a) one-thirteenth
of the aggregate Base Rent and Percentage Rent payable with respect to the last
Lease 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
20
20.1. Indemnification.
Subject to the last sentence of Section 13.4, 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 attorneys'
fees and expenses), to the extent permitted by law, including those resulting
from a Lessor Indemnified Party's own negligence but excluding those resulting
from a Lessor Indemnified Party's gross negligence or willful misconduct,
imposed upon or incurred by or asserted against Lessor Indemnified Parties by
reason of: (a) 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
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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, other than any portion of Real
Estate Taxes that the Lessor is obligated to pay under 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 nonperformance 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.
Subject to the last sentence of Section 13.4, 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 (a) the gross negligence or willful
misconduct of Lessor arising in connection with this Lease or (b) any failure on
the part of Lessor to perform or comply with any of the terms of this Lease.
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. Any
such amounts shall be reduced by insurance proceeds received and any other
recovery (net of costs) obtained by the Indemnified Party. 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 the Indemnifying Party may not compromise or
otherwise dispose of the same without the consent of the Indemnified 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
21
21.1. Subletting and Assignment.
In addition to the provisions of Article 18 and Sections 21.2,
21.3 and any other express consents, conditions,
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limitations or other provisions set forth herein and in the Lease Master
Agreement, Lessee shall not assign this Lease or hereafter sublease all or any
part of the Leased Property without first obtaining the written consent of
Lessor. In the case of a permitted subletting, the sublessee shall comply with
the provisions of Section 21.2 and 21.3, and in the case of a permitted
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.
21.2. Attornment.
Lessee shall insert in each future sublease permitted under
Section 21.1 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 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.
21.3. Management Agreement.
Lessor shall have the right to approve any management or
agency agreement relating to the management or operation of the Facility
(collectively, the "Management Agreement"), any modifications to the Management
Agreement affecting the fees, costs or expenses payable or collectible
thereunder, and any other material modification to the Management Agreement.
Lessor's approval shall not be unreasonably withheld. The Management Agreement
shall provide, among other things, that (i)
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upon termination of this Lease or termination of Lessee's right to possession of
the Leased Property for any reason whatsoever, the Management Agreement may be
terminated by Lessor without liability for any payment due or to become due to
the manager of the Facility (the "Manager"), and (ii) all fees and other amounts
payable by Lessee to the Manager shall be subordinate on a month to month basis
to Rent and other amounts payable by Lessee to Lessor hereunder prior to the
existence of an Event of Default, and shall be at all times subordinate to Rent
and such other amounts after the occurrence of an Event of Default. Lessor
consents to Summerfield Suites Management Company, L.P., a Kansas limited
partnership, as the initial Manager of the Facility.
ARTICLE
22
22.1. Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants.
(a) At any time and from time to time upon not less than 10
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, any underwriter and any prospective purchaser of the
Leased Property.
(b) Lessee will furnish, at Lessee's cost and expense except
as noted below, the following statements and operating information to Lessor,
each in a form satisfactory to Lessor:
(i) Consolidated Financials of Lessee for each Accounting
Period of each Lease Year, and for each Accounting Period in the Lease
Year-to-date, within 20 days after the end of such Accounting Period;
(ii) Consolidated Financials of Lessee and each Affiliate
of Lessee, if any, that leases hotel properties from Lessor or its
Affiliates, for each Accounting Period of each Lease Year, and for each
Accounting Period in the Lease Year to date, within 20 days after the
end of such Accounting Period;
(iii) audited Consolidated Financials of Lessee for each
Lease Year, including the auditor's report thereon,
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within 60 days after the end of such year. The fees and expenses of the
auditor incurred in connection with conducting such audits and
delivering such reports shall be paid by Lessor;
(iv) audited Consolidated Financials of Lessee and each
Affiliate of Lessee that leases hotel properties from Lessor or its
Affiliates, if any, for each Lease Year, including the auditor's report
thereon, within 60 days after the end of such year. The fees and
expenses of the auditor incurred in connection with conducting such
audits and delivering such reports shall be paid by Lessor;
(v) with reasonable promptness, such other information
respecting the financial condition and affairs of Lessee (A) as Lessor
or the Company may require or may deem desirable in its discretion to
file with or provide to the SEC or any other governmental agency or any
other Person, all in the form, and either audited or unaudited, as
Lessor may request in Lessor's reasonable discretion, and (B) as may be
reasonably necessary to confirm compliance by Lessee and its Affiliates
with the requirements of this Lease;
(vi) each Monday, a statement showing the Rooms Revenue,
occupancy and revenue per available room for (a) the Facility and (b)
the Facility and any other hotel property leased by Lessee or its
Affiliates from Lessor or its Affiliates, for both (i)each day in the
seven day period ended the immediately preceding Friday and (ii) such
seven day period in the aggregate.
(vii) on or before the 20th day of each Accounting Period,
a balance sheet, and detailed profit and loss and cash flow statements
showing the financial position of the Facility as at the end of the
preceding Accounting Period, the results of operation of the Facility
for such preceding Accounting Period and the Lease Year-to-date and the
average daily rate, occupancy and revenue-per-available room of the
Facility in such preceding Accounting Period (including a comparison to
the Operating Budget as approved);
(viii) on or before the 20th day of each Accounting Period,
the general manager's written critique of the financial report
submitted pursuant to subsection (vii) immediately above, setting forth
in narrative form any variations during the preceding Accounting Period
from the Annual Budget and including a preview of the Facility's
financial operations during the current Accounting Period;
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(ix) on or before the 15th day of each April, July and
October during the Term, an updated estimate for each calendar quarter
remaining in the Lease Year of the information required by Sections
3.5(a) and (e) hereof;
(x) monthly STR Reports within five (5) days of Lessee's
receipt thereof;
(xi) within five (5) days of Lessee's receipt thereof, any
inspection reports received from the franchisor under the Franchise
Agreement; and
(xii) such other information as Lessor may reasonably
request and that Lessee can provide without unreasonable expense.
(c) 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. Any such certificate furnished pursuant to this
Section may be relied upon by Lessee, any lender, any underwriter and any
purchaser of the assets of Lessee.
(d) If Company or Lessor proposes to include in any submission
or filing with its lender, stock exchange or the SEC, Consolidated Financials of
Lessee delivered or required to be delivered hereunder and the consent of
Lessee's auditor is required for such inclusion, Lessee shall use commercially
reasonable efforts to cause its auditor to deliver promptly to Lessor the
auditor's consent, in the form required, to the inclusion in the submission or
filing of the Consolidated Financials (including the report of the auditor, if
the Consolidated Financials to be included are audited). Lessee shall reasonably
cooperate with Lessor regarding Lessee's auditor's compliance with such requests
with the purpose of minimizing costs and delays. Lessee shall reasonably
cooperate with all requests made by its auditor, Lessor or the SEC to promptly
provide to the auditor, Lessor or SEC such information or documents, including
consents and representation letters, as may be necessary or desirable in
connection with the preparation, delivery, audit or inclusion in SEC filings,
submissions or other public documents, of information, including financial
information, related to the Leased Property, the operation and financial results
of the Leased Property, and the financial
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results and condition of the Lessee. Without limiting the foregoing, the
information shall be sufficient to permit the preparation of a Management's
Discussion and Analysis of Results of Operations and Financial Condition with
respect to the Lessee as may be required to be included in reports and documents
filed by the Company with the SEC. Lessee shall not be obligated to incur
material additional expense to prepare any reports or information not
specifically provided for herein that Lessor or Company may be required or elect
to file with the SEC, and such material additional third-party costs shall be
paid or reimbursed by Lessor.
ARTICLE
23
23.1. Regular Meetings; Lessor's Right to Inspect.
(a) Lessee agrees that the regional manager, the general
manager, the director of marketing/sales, and the chief engineer for the
Facility will meet with Lessor and its representatives on a monthly basis at the
Facility throughout each Lease Year in order to discuss all aspects of the
management, maintenance and operation of the Facility. If agreed upon by Lessor
and Lessee, such meetings may be held by conference call.
(b) Lessee shall permit Lessor and its authorized
representatives, which may include auditors, underwriters and rating agencies,
as frequently as reasonably requested by Lessor to (i) inspect the Leased
Property and Lessee's accounts and records pertaining thereto, including general
accounting records, corporate records and agreements relating to the operations
of the Leased Property and Lessee's financial condition, and make copies
thereof, and (ii) conduct audits, all during usual business hours upon
reasonable advance notice, subject only to any business confidentiality
requirements reasonably requested by Lessee. In conducting such inspections
Lessor shall not unreasonably interfere with the conduct of Lessee's business at
the Leased Property.
(c) Lessee will, on a space available basis, provide customary
gratuitous accommodations to Lessor and its representatives in connection with
all such meetings and inspections.
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ARTICLE
24
24.1. 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.
ARTICLE
25
25.1. Remedies Cumulative.
To the extent permitted by law but subject to Article 39 and
any other provisions of this Lease expressly limiting the rights, powers and
remedies of either Lessor or Lessee, 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
26
26.1. 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.
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ARTICLE
27
27.1. 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
28
28.1. Conveyance by Lessor.
Lessor shall have the unrestricted right to mortgage or
otherwise convey the Leased Property to a Holder. If Lessor conveys the Leased
Property in accordance with the terms hereof other than to a Holder, and the
grantee or transferee of the Leased Property expressly assumes in writing all
obligations of Lessor hereunder arising or accruing from and after the date of
such conveyance or transfer, Lessor 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. If Lessee is not reasonably satisfied that the new
owner is a capable, reliable and qualified Person of good reputation and
character, Lessee may terminate this Lease upon sixty (60) days' Notice to
Lessor given within thirty (30) days after Lessee receives Notice of such
conveyance.
28.2. Lessor May Grant Liens.
(a) Subject to Section 7.2, without the consent of Lessee,
Lessor may from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement upon the Leased
Property, or any portion thereof or interest therein, or upon Lessor's interest
in this Lease, whether to secure any borrowing or other means of financing or
refinancing. 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
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called the "Mortgage"), provided that the Mortgage and all security agreements
delivered by Lessor in connection therewith shall be subject to Lessee's rights
under this Lease to receive all Gross Revenues of the Facility prior to the
earlier of the occurrence of an Event of Default or the date that this Lease is
terminated by the Holder of the Mortgage in the exercise of its remedies
thereunder. In confirmation of such subordination, 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 and its successors and assigns, provided Lessee receives customary and
reasonable non-disturbance protection while it is not in default hereunder. The
Lessee shall comply with any material covenants with respect to the Lessee
contained in such instrument of subordination. 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, 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.
(b) Lessee shall, upon the request of Lessor or any existing
or future Holder, (i) provide Holder with copies of all licenses, permits,
occupancy agreements, operating agreements, leases, contracts and similar
agreements reasonably requested in connection with any existing or proposed
financing of the Leased Property, and (ii) execute, or cause the Manager or any
relevant Affiliate to execute, such estoppel agreements and collateral
assignments with respect to the Facility's liquor license and any of the other
aforementioned agreements as Holder may reasonably request in connection with
any such financing, provided that no such estoppel agreement or collateral
assignment shall in any way affect the Term or affect adversely in any material
respect any rights of Lessee under this Lease.
(c) No act or failure to act on the part of Lessor which would
entitle Lessee under the terms of this Lease, or by law, to be relieved of any
of Lessee's obligations hereunder (including, without limitation, its obligation
to pay Rent) or to terminate this Lease, shall result in a release or
termination of such obligations of Lessee or a termination of this Lease unless:
(i) Lessee shall have first given written notice of Lessor's act or failure to
act to the Holder, specifying the act or failure to act on the part of Lessor
which would give basis to Lessee's rights; and (ii) the Holder, after receipt of
such notice, shall have failed or refused to correct or cure the condition
complained of within a reasonable time thereafter (in no event less than sixty
(60) days), which shall include a reasonable time
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for such Holder to obtain possession of the Leased Property, if possession is
reasonably necessary for the Holder to correct or cure the condition, or to
foreclose such Mortgage, and if the Holder notifies the Lessee of its intention
to take possession of the Leased Property or to foreclosure such Mortgage, and
correct or cure such condition. If such Holder is prohibited by any process or
injunction issued by any court or by reason of any action by any court having
jurisdiction or any bankruptcy, debtor rehabilitation or insolvency proceedings
involving Lessor from commencing or prosecuting foreclosure or other appropriate
proceedings in the nature thereof, provided, however, that the Lease shall
continue to be in full force and effect, the times for commencing or prosecuting
such foreclosure or other proceedings shall be extended for the period of such
prohibition.
(d) Lessee shall deliver by notice delivered in the manner
provided in Article 30 to any Holder who gives Lessee written notice of its
status as a Holder, at such Holder's address stated in the Holder's written
notice or at such other address as the Holder may designate by later written
notice to Lessee, a duplicate copy of any and all notices regarding any default
which Lessee may from time to time give or serve upon Lessor pursuant to the
provisions of this Lease. Copies of such notices given by Lessee to Lessor shall
be delivered to such Holder simultaneously with delivery to Lessor. No such
notice by Lessee to Lessor hereunder shall be deemed to have been given unless
and until a copy thereof has been mailed to such Holder.
(e) At any time, and from time to time, upon not less than ten
(10) days' notice by a Holder to Lessee, Lessee shall deliver to such Holder an
estoppel certificate certifying as to the information required in paragraph (c)
of Article 22, and such other information as may be reasonably requested by such
Holder. Any such certificate may be relied upon by such Holder.
(f) Lessee shall cooperate in all reasonable respects, and as
generally described in Section 33.2 of this Lease, with any transfer of the
Leased Property to a Holder that succeeds to the interest of Lessor in the
Leased Property (including, without limitation, in connection with the transfer
of any franchise, license, lease, permit, contract, agreement, or similar item
to such Holder or such Holder's designee necessary or appropriate to operate the
Leased Property). Lessor and Lessee shall cooperate in (i) including in this
Lease by suitable amendment from time to time any provision which may be
requested by any proposed Holder, or may otherwise be reasonably necessary, to
implement the provisions of this Article and (ii) entering into any further
agreement with or at the request of any Holder which may be reasonably requested
or required by such Holder in furtherance or confirmation of the provisions of
this Article; provided,
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however, that any such amendment or agreement shall not in any way affect the
Term nor affect adversely in any material respect any rights of Lessor or Lessee
under this Lease.
ARTICLE
29
29.1. 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 and/or cure 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 and not claiming by, through or under Lessee, but
subject to all liens and encumbrances subject to which the Leased Property was
conveyed to Lessor or hereafter consented to by Lessee in writing or provided
for herein. 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
30
30.1. Notices.
All notices, demands, requests, consents, approvals and other
communications ("Notice" or "Notices") hereunder shall be in writing and
personally served or mailed (by express or overnight mail, courier, or
registered or certified mail, return receipt requested and postage prepaid), (i)
if to Lessor at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and (ii) if to Lessee at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Mr. B. ▇▇▇▇▇▇▇ ▇▇▇▇▇, or to such
other address or addresses as either party may hereafter designate. Personally
delivered Notices shall be effective upon receipt, and Notice given by mail
shall be complete at the time of deposit in the U.S. Mail system or with a
recognized overnight mail courier, 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.
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ARTICLE
31
31.1. 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, then,
except as otherwise expressly provided in 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
10 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 10 days after the date of the
Notice appointing the second 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. 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 10 days to appoint a third
appraiser. If no such appraiser shall have been appointed within such 10 days or
within 60 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 30
days after appointment of such appraiser. The determination of the appraiser
which differs most in 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
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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
32
32.1. Lessee's Right to Cure.
Subject to the provisions of Article 39, if Lessor breaches
any covenant to be performed by it under this Lease, Lessee, after Notice to and
demand upon Lessor as provided in Article 39, without waiving or releasing any
obligation hereunder, 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. The rights of Lessee hereunder to cure and to secure payment
from Lessor in accordance with this Article 32 shall survive the termination of
this Lease with respect to the Leased Property.
ARTICLE
33
33.1. 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 is
based upon a rate in excess of the maximum rate permitted by applicable law, the
parties agree that such charges shall be fixed at and limited to 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
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accordance with the laws of the State, but not including its conflicts of laws
rules.
33.2. Transition Procedures.
Upon any expiration or termination of the Term, Lessor and
Lessee shall do the following and, in general, shall cooperate in good faith to
effect an orderly transition of the management or lease of the Facility. The
provisions of this Section 33.2 shall survive the expiration or termination of
this Lease until they have been fully performed. Nothing contained herein shall
limit Lessor's rights and remedies under this Lease if such termination occurs
as the result of an Event of Default.
(a) Transfer of Franchise Agreement. The Franchise Agreement
shall be assigned, at Lessor's option, effective on the termination date,
without fee, cost, or penalty, and without the imposition of a product
improvement (or similar) plan, to (i) Lessor, (ii) JF Hotel, Inc. or an
Affiliate of JF Hotel, Inc., or (iii) another designee of Lessor of good
reputation and with experience in operating hotels.
(b) 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 (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, including Lessee (or its Affiliate)
continuing to operate the liquor operations under its licenses with Lessor
agreeing to indemnify and hold Lessee (or its Affiliate) harmless as a result
thereof except for the gross negligence or willful misconduct of Lessee;
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.
(c) 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, contracts, concession agreements and
agreements in effect with respect to the Facility then in Lessee's name which
are designated by Lessor.
(d) Books and Records. To the extent that Lessor has not
already received copies thereof, all books and records (including computer and
computer-generated records) for the
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Facility kept by Lessee pursuant to Section 3.6 (or copies thereof) shall be
delivered simultaneously with the termination of this Agreement to Lessor or
Lessor's nominee.
(e) Receivables and Payables, etc. Lessee shall be entitled to
retain all cash, bank accounts and house banks, and to collect all Gross
Revenues and accounts receivable accrued through the termination date. Lessee
shall be responsible for the payment of Rent, all operating expenses of the
Facility and all other obligations of Lessee accrued under this Lease as of the
termination date, and Lessor shall be responsible for all operating expenses of
the Facility accruing after the termination date.
(f) Final Accounting. Lessee shall, within forty five (45)
days after the expiration or termination of the Term, prepare and deliver to
Lessor a final accounting statement, dated as of the date of the expiration or
termination, as more particularly described in Article 22, along with a
statement of any sums due from Lessee to Lessor pursuant hereto and payment of
such funds.
(g) Inventory. Lessee shall insure that the Leased Property,
at the date of such termination or expiration, has Inventory of a substantially
equivalent nature and amount as exists at the Leased Property on the
Commencement Date, and Lessor shall acquire such Inventory from Lessee by paying
Lessee the fair market value thereof, calculated on the same basis as the
parties determined the fair market value of the Inventory purchased by Lessee on
the Commencement Date.
(i) Option to Purchase Lessee's Personal Property. Upon the
expiration or termination of the Term, Lessor shall have the option to purchase
Lessee's Personal Property related to the Leased Property at fair market value.
(h) Surrender. Lessee shall peacefully and immediately vacate
and surrender the Leased Property to Lessor or Lessor's designee, shall turn
over all keys to Lessor and Lessor's designee and shall not interfere with
Lessor or any new Lessee or Manager.
33.3. 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.
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33.4. Standard of Discretion.
In any provision of this Lease requiring or permitting the
exercise by Lessor or Lessee of such party's approval, election, decision,
consent, judgment, determination or words of similar import (collectively, an
"Approval"), such Approval may, unless otherwise expressly specified in such
provision, be given or withheld in such party's sole, absolute and unreviewable
discretion. Any Approval which by the terms of this Lease may not be
unreasonably withheld shall also not be unreasonably delayed.
33.5. Action for Damages.
In any suit or other claim brought by either party seeking
damages against the other party for breach of its obligations under this Lease,
the party against whom such claim is made shall be liable to the other party
only for actual damages and not for consequential, punitive or exemplary
damages.
33.6. Lease Assumption in Bankruptcy Proceeding.
If an Event of Default occurs and Lessee has filed or has had
filed against it a petition in bankruptcy or for reorganization or other relief
pursuant to the federal bankruptcy code, Lessee shall promptly move the court
presiding over the proceeding to assume the Lease pursuant to 11 U.S.C. ss.365,
without seeking an extension of the time to file said motion.
33.7. Intra-Family Transfers.
Lessee acknowledges that Lessor may transfer legal title to
the Leased Property one or more times to Affiliates of the Lessor in which
Innkeepers USA Limited Partnership or the Company owns a majority interest
(each, an "Affiliated Lessor"). Lessee hereby consents to such transfers
provided that, in each case, this Lease is assumed by the Affiliated Lessor in
its entirety and without modification, except to the extent that Lessor, or the
Affiliated Lessor that then owns the Leased Property, specifically retains any
obligations accrued through the date of transfer hereunder. Lessee covenants
that in connection with such transfers, Lessee will execute and deliver to
Lessor, the Affiliated Lessor and/or their representatives appropriate estoppels
and other documentation requested by them, including an amendment to this Lease,
for the purposes of reflecting and acknowledging the Affiliated Lessor's
interests as lessor hereunder.
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ARTICLE
34
34.1. 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
35
(Intentionally Omitted)
ARTICLE
36
36.1. Lessor's Option to Terminate Lease; Lessee's Limited Rights of
First Offer.
(a) In the event Lessor enters into a bona fide contract to
sell the Leased Property to a non-Affiliate other than Lessee or an Affiliate of
Lessee, or in the event of a Tax Law Change resulting in Lessor's determination
to terminate this Lease and the Other Leases, then in either such event Lessor
may terminate the Lease by giving not less than sixty (60) days prior Notice to
Lessee of Lessor's election to terminate the Lease upon the closing under such
contract or upon a date specified by Lessor which is on or after the effective
date of the Tax Law Change. Effective upon such date, 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 and all
Rent including Percentage Rent and Additional Charges shall be adjusted as of
the termination date.
(b) As compensation for the early termination of its leasehold
estate under this Article 36 because of a sale of the Leased Property, Lessor
shall not more than one (1) year prior to the anticipated termination date of
the Lease and in any event within ninety (90) days of the closing of such sale,
either (i) pay to Lessee the "Termination Fee" (as defined below) or (ii) offer
to lease to Lessee one or more substitute suite 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 the
original leasehold estate (a "Comparable Lease"), such value to be
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determined as of the closing of the sale of the Leased Property. Lessee's
acceptance of the Comparable Lease shall not be unreasonably withheld. If Lessee
rejects the Comparable Lease, Lessor shall pay the Termination Fee to Lessee. In
the event Lessor and Lessee are unable to agree upon the fair market value of an
original or replacement leasehold estate, it shall be determined by appraisal
using the appraisal procedure set forth in Article 31.
(c) As compensation for the early termination of its leasehold
estate under this Article 36 because of a Tax Law Change, (i) Lessor shall, not
more than one (1) year prior to the anticipated termination date of the Lease
and in any event within ninety (90) days of such termination, pay to Lessee the
Termination Fee and (ii) prior to the anticipated termination date and effective
on the date thereof, Lessor and Lessee (or an Affiliate of Lessee) shall enter
into a new management agreement for the Facility for a term equal to the
remaining term of the Lease and a management fee equal to three percent (3%) of
gross revenues, and containing other terms consistent with those for comparable
hotels. The fair market value of such new management agreement shall be credited
against the payment made by Lessor to Lessee pursuant to clause (i) of the
immediately preceding sentence. In calculating such fair market value, fees
payable under the new management agreement shall be projected for the remaining
term of the Lease on the basis which is most reasonable under the circumstances.
In the event Lessor and Lessee are unable to agree on any provisions of the new
management agreement, the matter shall be referred to arbitration as provided
for in Article 40 hereof.
(d) (i) 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. In computing fair market value of a leasehold
estate and a new management agreement, the appraiser shall discount all future
income and fees to the then present value at a rate equal to the Prime Rate plus
2% per annum.
(ii) The Termination Fee shall equal the "Net Present
Value" (as defined below) of the "Lessee Leakage" (as defined below) for (a) the
remaining Lease Years of the Term or, (b) if the termination occurs less than
five Lease Years from the end of the Term, the remaining Lease Years in the Term
plus one year (the "Determination Period"). "Lessee Leakage" for any Lease Year
is defined as the net operating income of the Facility, determined in accordance
with GAAP and as if no Management Agreement existed, less Rent paid and payable
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hereunder. The "Net Present Value" of the Lessee Leakage for the Determination
Period shall be determined by (A) averaging the Lessee Leakage actually realized
by Lessee for the three most recently ended Lease Years (or all full Lease Years
if less than three full Lease Years have elapsed since the Commencement Date)
(the "Valuation Period"), (B) averaging the CPI determined under Section 3.1(e)
for each Lease Year in the Valuation Period (the "Average CPI Increase"), (C)
assuming that Lessee Leakage in the first Lease Year of the Determination Period
is the average Lessee Leakage (as determined under subsection (A) above) plus
the Average CPI Increase and that the Lessee Leakage in each subsequent Lease
Year in the Determination Period is the deemed Lessee Leakage for the previous
Lease Year increased by the Average CPI Increase, (D) discounting the deemed
Lessee Leakage in each Lease Year of the Determination Period to then-present
value at a rate of twelve percent (12%) per annum and (E) aggregating the sum of
such present values.
(e) In the event that Lessor terminates this Lease upon less
than sixty (60) days written notice pursuant to the provisions of this Article
36 or pursuant to any other provisions of this Lease except for the provisions
allowing Lessor to terminate this Lease under Articles 14 or 15 or upon the
occurrence of an Event of Default, the parties agree that on and after the
effective date of such termination, hotel personnel employed by Lessee
immediately prior to the effective date of termination will either be employed
by Lessor or its designee, or Lessor or its designee will take such other action
with respect to their employment, which may include notification of the
prospective termination of their employment, so as, in any case, to insure that
Lessee does not incur any liability pursuant to the WARN Act. In that event,
Lessor hereby agrees to defend, indemnify and hold harmless Lessee from and
against any and all manner of claims, actions, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
relating to or arising from Lessor's breach of this covenant, including, without
limitation, any liability, costs and expenses arising out of asserted or actual
violation of the requirements of the WARN Act. Further, Lessor or its designee
shall assume all COBRA liabilities and COBRA obligations to the Facility's
personnel, which Lessee shall or may incur in connection with such termination
of this Lease, and Lessor hereby agrees to defend, indemnify and hold harmless
Lessee from and against any and all manner of claims, actions, liabilities,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) relating to or resulting from Lessor's breach of the
foregoing covenant with respect to COBRA matters, including, without limitation,
any liability, costs and expenses arising out of any asserted or actual
violation of the requirements of the COBRA any legislation. Upon Lessor's
written
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request to Lessee, Lessee shall take all action that is reasonable to notify,
advise and cooperate with Lessor in order to assist Lessor in complying with the
WARN Act or COBRA legislation and to mitigate Lessor's expense or liability with
respect to the WARN Act and COBRA legislation.
(f) If Lessor determines to sell the Facility, Lessee shall
first offer to negotiate Lessee's purchase of the Facility by providing written
notice (the "Offer Notice") of its intention to sell the Facility. If Lessee
responds in writing within ten (10) days of receipt of the Offer Notice that it
wishes to pursue negotiations for the purchase of the Facility, Lessee and
Lessor shall, in the forty (40) day period after Lessee's receipt of the Offer
Notice (the "Negotiation Period"), negotiate the price and other terms of a sale
of the Facility to Lessee and enter into definitive documentation with respect
thereto. Such documentation shall provide for a closing no later than three (3)
months after Lessee's receipt of the Offer Notice and shall contain such other
terms and conditions as are acceptable to both the Lessee and the Lessor. If
Lessee does not respond to the Offer Notice within ten (10) days, or if Lessee
and Lessor have not entered into definitive documentation with respect to a sale
within the Negotiation Period, Lessor shall be free to offer the Facility for
sale to any other party and, subject to Section (a), (b) and (d) above, close
any such sale. Notwithstanding the foregoing, Lessor shall not be obligated to
comply with this Subsection (e) if (i) the sale contemplated by the Lessor
includes ten (10) or more of the hotels leased by Lessee or its Affiliates
pursuant to this Lease or Other Leases with Lessor or its Affiliates or (ii) an
Event of Default shall have occurred and, if curable hereunder, shall not have
been cured.
ARTICLE
37
37.1. 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, except to the extent that Lessee is prevented from
complying with the Franchise Agreement because of Lessor's breach of its
obligations to comply with Article 38. It is the intent of the parties hereto
that Lessee shall comply in every respect with the provisions of the Franchise
Agreement so as to avoid any default thereunder during the Term. Lessee shall
not terminate or enter into any modification of the Franchise Agreement without
in each instance first obtaining Lessor's
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written consent. 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, and in any transfer of the Franchise
Agreement to Lessor or any designee thereof or any other successor to Lessee
upon the termination of this Lease.
ARTICLE
38
38.1. Capital Expenditures.
(a) Lessor shall be obligated to make available to Lessee an
amount equal to 4% of Room Revenues from the Facility during each Lease Year
("Capital Expenditures Allowance"). Upon written request by Lessee to Lessor
stating the specific use to be made and subject to the approval thereof by
Lessor, which approval shall not be unreasonably withheld, such funds shall be
made available by Lessor for Capital Expenditures set forth in the Capital
Budget; provided, however, that no Capital Expenditures shall be made 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. 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 have no interest in any accrued obligation of Lessor
hereunder after the termination of this Lease. All Capital Improvements shall be
owned by Lessor subject to the provisions of this Lease.
(b) Lessor's obligation with respect to Capital Expenditures
shall be limited to amounts available in the Capital Expenditures Reserve. No
arbitration resulting from the failure of Lessor and Lessee to agree on the
Capital Budget shall increase Lessor's obligation for Capital Expenditures
beyond the amount set forth in the immediately preceding sentence.
(c) Unless the Lessor and Lessee otherwise agree in writing,
Lessee shall complete the Capital Improvements set forth on Schedule 9.1(b) by
the dates and in the manner described on Schedule 9.1(b).
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ARTICLE
39
39.1. Lessor's Default.
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 a
breach if Lessor proceeds within such 30-day period, with due diligence, to cure
the failure and thereafter diligently completes the curing thereof. 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. If
Lessor does not cure any such failure within the applicable time period as
aforesaid, Lessee may declare the existence of a "Lessor Default" by a second
Notice to Lessor. Thereafter, Lessee may forthwith cure the same in accordance
with the provisions of Article 32, subject to the provisions of the following
paragraph. Lessee shall have no right to terminate this Lease for any Lessor
Default and no right, for any such Lessor Default, to offset or counterclaim
against any Rent or other charges due hereunder.
If Lessor shall in good faith dispute the occurrence of any
Lessor Default and Lessor, before the expiration of the applicable cure period,
shall give Notice thereof to Lessee, setting forth, in reasonable detail, the
basis therefor, no Lessor Default shall be deemed to have occurred and Lessor
shall have no obligation with respect thereto until final adverse determination
thereof, whether through arbitration or otherwise; provided, however, that in
the event of any such adverse determination, Lessor shall pay to Lessee interest
on any disputed funds at the Base Rate, from the date demand for such funds was
made by Lessee until the date of final adverse determination and, thereafter, at
the Overdue Rate until paid. If Lessee and Lessor shall fail, in good faith, to
resolve any such dispute within ten (10) days after Lessor's Notice of dispute,
either may submit the matter for determination by arbitration, but only if such
matter is required to be submitted to arbitration pursuant to any provision of
this Lease, or otherwise by a court of competent jurisdiction.
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ARTICLE
40
40.1. Arbitration.
Except as set forth in Section 40.2, in each case specified in
this Lease in which it shall become necessary to resort to arbitration, such
arbitration shall be determined as provided in this Section 40.1. The party
desiring such arbitration shall give Notice to that effect to the other party,
and an arbitrator shall be selected by mutual agreement of the parties, or if
they cannot agree within thirty (30) days of such notice, by appointment made by
the American Arbitration Association ("AAA") from among the members of its
panels who are qualified and who have experience in resolving matters of a
nature similar to the matter to be resolved by arbitration.
40.2. Alternative Arbitration.
In each case specified in this Lease for a matter to be
submitted to arbitration pursuant to the provisions of this Section 40.2, Lessor
shall be entitled to designate any nationally recognized accounting firm with a
hospitality division of which Lessor or an Affiliate of Lessor is not a
significant client to serve as arbitrator of such dispute within fifteen (15)
days after written demand for arbitration is received or sent by Lessor. In the
event Lessor fails to make such designation within such fifteen (15) day period,
Lessee shall be entitled to designate any nationally recognized accounting firm
with a hospitality division of which Lessee or an Affiliate of Lessee is not a
significant client to serve as arbitrator of such dispute within fifteen (15)
days after Lessor fails to timely make such designation. In the event no
nationally recognized accounting firm satisfying such qualifications is
available and willing to serve as arbitrator, the arbitration shall instead be
administered as set forth in Section 40.1.
40.3. Arbitration Procedures.
In any arbitration commenced pursuant to Sections 40.1 or
40.2, a single arbitrator shall be designated and shall resolve the dispute. The
arbitrator's decision shall be binding on all parties and shall not be subject
to further review or appeal except as otherwise allowed by applicable law. Upon
the failure of either party (the "non-complying party") to comply with his
decision, the arbitrator shall be empowered, at the request of the other party,
to order such compliance by the non-complying party and to supervise or arrange
for the supervision of the non-complying party's obligation to comply with the
arbitrator's decision, all at the expense of the non-complying
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party. To the maximum extent practicable, the arbitrator and the parties, and
the AAA if applicable, shall take any action necessary to insure that the
arbitration shall be concluded within ninety (90) days of the filing of such
dispute. The fees and expenses of the arbitrator shall be shared equally by
Lessor and Lessee except as otherwise specified above in this Section 40.3.
Unless otherwise agreed in writing by the parties or required by the arbitrator
or AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Lessee and Lessor regarding the Facility during the arbitration.
[Signature Page follows]
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized representatives as of the date first above written.
LESSOR:
-------
INNKEEPERS SUMMERFIELD GENERAL, L.P., a
Virginia limited partnership
By: Innkeepers Financial Corporation IV,
a Virginia corporation, its General
Partner
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
LESSEE:
-------
SUMMERFIELD SUITES LEASE COMPANY, L.P.,
a Kansas limited partnership
By: Summerfield Suites Lease
Corporation, a Kansas corporation,
its General Partner
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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