EXHIBIT 10.5
CONSOLIDATED LEASE AGREEMENT
DATED AS OF JANUARY 1, 2001
BETWEEN
EQUITY INNS PARTNERSHIP, L.P.
AS LESSOR
AND
ENN LEASING COMPANY , INC.
AS LESSEE
TABLE OF CONTENTS
ARTICLE I.............................................................1
1.1. Leased Property..................................................1
1.2. Individual Leased Property.......................................2
1.3. Separate Lease Agreements........................................2
1.4. Term.............................................................2
ARTICLE II.....................................................................2
ARTICLE III...................................................................14
3.1. Rent............................................................14
3.2. Confirmation of Percentage Rate.................................18
3.3. Additional Charges..............................................19
3.4. Rent Payable Without Deduction..................................19
3.5. Conversion of Property..........................................19
3.6. Budgets.........................................................19
3.7. Approval of Capital Budget......................................20
3.8. Capital Projects................................................21
3.9. Books and Records...............................................21
ARTICLE IV....................................................................21
4.1. Payment of Impositions..........................................21
4.2. Notice of Impositions...........................................22
4.3. Adjustment of Impositions.......................................22
4.4. Utility Charges.................................................23
4.5. Insurance Premiums..............................................23
4.6. Ground Rent.....................................................23
4.7. Franchise Fees..................................................23
ARTICLE V.....................................................................23
5.1. No Termination, Abatement, etc..................................23
5.2. Abatement Procedures............................................24
ARTICLE VI....................................................................24
6.1. Ownership of the Leased Property................................24
6.2. Lessee's Personal Property......................................24
6.3. Lessor's Representations........................................25
6.4. Lessee's Representations........................................25
6.5. Lessor's Lien...................................................25
ARTICLE VII...................................................................25
7.1. Condition of the Leased Property................................25
7.2. Use of the Leased Property......................................25
7.3. Lessor to Grant Easements, etc..................................26
ARTICLE VIII..................................................................27
8.1. Compliance with Legal and Insurance Requirements, etc...........27
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8.2. Legal Requirement Covenants.....................................27
8.3. Environmental Covenants.........................................28
ARTICLE IX....................................................................30
9.1. Maintenance and Repair..........................................30
9.2. Encroachments, Restriction, Etc.................................31
ARTICLE X.....................................................................32
10.1. Alterations....................................................32
10.2. Salvage........................................................32
10.3. Joint Use Agreements...........................................32
ARTICLE XI....................................................................32
ARTICLE XII...................................................................33
ARTICLE XIII..................................................................34
13.1. General Insurance Requirements.................................34
13.4. Workers' Compensation..........................................35
13.5. Waiver of Subrogation..........................................35
13.6. Form Satisfactory, etc.........................................36
13.7. Increase in Limits.............................................36
13.8. Blanket Policy.................................................36
13.9. Separate Insurance.............................................36
13.10. Reports On Insurance Claims...................................37
ARTICLE XIV...................................................................37
14.1. Insurance Proceeds.............................................37
14.2. Reconstruction in the Event of Damage or Destruction
Covered by Insurance...........................................37
14.3. Reconstruction in the Event of Damage or Destruction
Not Covered by Insurance.......................................39
14.4. Lessee's Property..............................................39
14.5. Abatement of Rent..............................................39
14.6. Damage Near End of Term........................................39
14.7. Waiver.........................................................39
ARTICLE XV....................................................................40
15.1. Definitions....................................................40
15.2. Parties' Rights and Obligations................................40
15.3. Total Taking...................................................40
15.4. Allocation of Award............................................40
15.5. Partial Taking.................................................41
15.6. Temporary Taking...............................................41
ARTICLE XVI...................................................................42
16.1. Events of Default..............................................42
16.2. Surrender......................................................44
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16.3. Damages........................................................44
16.4. Waiver.........................................................45
16.5. Application of Funds...........................................45
ARTICLE XVII..................................................................45
ARTICLE XVIII.................................................................46
ARTICLE XIX...................................................................46
19.1. REIT Requirements..............................................46
19.2. Lessee Officer and Employee Limitation.........................47
19.3. Payments to Affiliates of Lessee...............................48
19.4. Management Agreement...........................................48
ARTICLE XX....................................................................48
ARTICLE XXI...................................................................49
ARTICLE XXII..................................................................50
ARTICLE XXIII.................................................................51
23.1. Subletting and Assignment......................................51
23.2. Attornment.....................................................51
ARTICLE XXIV..................................................................52
ARTICLE XXV...................................................................52
ARTICLE XXVI..................................................................52
ARTICLE XXVII.................................................................53
ARTICLE XXVIII................................................................53
ARTICLE XXIX..................................................................53
ARTICLE XXX...................................................................53
30.1. Conveyance by Lessor...........................................53
30.2. Other Interests................................................53
ARTICLE XXXI..................................................................54
ARTICLE XXXII.................................................................54
ARTICLE XXXIII................................................................54
ARTICLE XXXIV.................................................................55
34.1. Lessor May Grant Mortgages.....................................55
34.2. Lessee's Right to Cure.........................................55
34.3. [INTENTIONALLY OMITTED]........................................55
34.4. Grant of Easements or Imposition of Restrictions...............56
34.5. Outparcels, Leases and Licenses................................56
ARTICLE XXXV..................................................................56
35.1. Miscellaneous..................................................56
35.2. Transition Procedures..........................................56
35.3. Waiver of Presentment, etc.....................................57
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ARTICLE XXXVI.................................................................57
ARTICLE XXXVII................................................................57
ARTICLE XXXVIII...............................................................57
ARTICLE XXXIX.................................................................58
ARTICLE XL....................................................................59
ARTICLE XLI...................................................................59
ARTICLE XLII..................................................................60
ARTICLE XLIII.................................................................60
EXHIBIT A - Legal Descriptions
EXHIBIT B - List of the Leases
EXHIBIT C - Schedule of Lease Terms
EXHIBIT D - Certain Items Classified as "Capital"
EXHIBIT E - Form of Operating Budget
EXHIBIT F - Form of Capital Budget
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CONSOLIDATED LEASE AGREEMENT
THIS CONSOLIDATED LEASE AGREEMENT (this "Lease"), made as of the 1st
day of January, 2001, by and between EQUITY INNS PARTNERSHIP, L.P., a Tennessee
limited partnership (the "Lessor"), and ENN LEASING COMPANY, INC., a Tennessee
corporation (the "Lessee"), provides as follows:
W I T N E S S E T H:
WHEREAS, Lessor and Lessee desire to enter into this Lease to evidence
the terms and conditions upon which Lessor will lease and demise to Lessee the
Leased Property, and the terms and conditions upon which Lessee will lease and
take from Lessor the Leased Property.
NOW, THEREFORE, intending to be legally bound, Lessor and Lessee agree
that Lessor, in consideration of the payment of rent by Lessee to Lessor, the
covenants and agreements to be performed by Lessee, and upon the terms and
conditions hereinafter stated, does hereby rent and lease unto Lessee, and
Lessee does hereby rent and lease from Lessor, the Leased Property.
ARTICLE I
1.1. Leased Property. The Leased Property is comprised of Lessor's
interest in the following:
(a) the various parcels of land or ground leasehold interests
which are subject to the Leases listed on Exhibit B attached hereto and more
particularly described in the legal descriptions attached hereto as Exhibit A
(the "Land");
(b) all buildings, structures and other improvements of every
kind, including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and offsite), parking
areas and roadways appurtenant to such buildings and structures presently
situated upon the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land 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 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
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by the parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of
personal property (excluding Inventory and personal property owned by Lessee)
located on, and used in connection with, the operation of the Leased
Improvements as a hotel, together with all replacements, modifications,
alterations and additions thereto; and
(f) all existing leases of space within the Leased Property
(including any security deposits or collateral held by Lessor pursuant thereto).
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, 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. Individual Leased Property. The intent of the parties is that this
Lease shall constitute a separate lease for each individual Leased Property and
not all of the Leased Properties collectively or any combination of two or more
of the Leased Properties. Unless the context otherwise requires, "Leased
Property" shall mean any individual hotel property listed in Exhibit B and shall
not mean all of the hotels collectively or any combination of two (2) or more
hotels.
1.3. Separate Lease Agreements. At the request of either Party, the
other Party shall enter into an individual lease agreement, in form and
substance substantially similar to this Lease, as to any one or more of the
hotel properties listed on Exhibit B providing for Rent attributable to such
hotel properties under this Agreement, and shall cause a subordination agreement
to be executed with respect to any management agreements affecting any hotels
subject to such individual leases.
1.4. Term. The term of the Lease (the "Term") shall commence on
January 1, 2001 (the "Commencement Date") and shall end on November 30, 2011,
unless sooner terminated or later renewed and extended in accordance with the
provisions hereof.
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ARTICLE II
Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as are at the time applicable, (c) all
references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:
Additional Charges: As defined in Section 3.3.
Affiliate: As used in this Lease 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, more than fifty percent (50%) 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). The term "person" means and includes individuals,
corporations, general and limited partnerships, stock companies or associations,
joint ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts, or other entities and governments and agencies and
political subdivisions thereof.
Annual Budgets: As used in this Lease, the term "Annual Budgets" shall
mean the Operating Budget and Capital Budget prepared, delivered and approved in
accordance with Section 3.6.
Annual Revenue Computation: As defined in Exhibit C.
Award: As defined in Section 15.1(c).
Base Rate: The rate of interest announced publicly by Citibank, N.A.,
in New York, New York, from time to time, as such bank's base rate. If no such
rate is announced or becomes discontinued, then such other rate as Lessor may
reasonably designate.
Base Rent: As defined in Article III.
Beverage Sales: Gross revenue from (i) the sale of wine, beer, liquor
or other alcoholic beverages, whether sold in the bar or lounge, delivered to a
guest room, sold at meetings or banquets or at any other location at the Leased
Property or from (ii) non-alcoholic beverages sold in the bar or lounge. Such
revenues shall not include the following:
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(a) Any gratuity or service charge added to a customer's
▇▇▇▇ or statement in lieu of a gratuity which is paid
to an employee;
(b) Any revenues that are subsequently credited, rebated or
refunded in the ordinary course of business; and
(c) Sales taxes or taxes of any other kind imposed on the
sale of alcoholic or other beverages.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which national banks in the City of New York, New York, or in
the municipality wherein the Leased Property is located are closed.
Capital Budget: As defined in Section 3.6(b).
Capital Expenditures: Amounts advanced to pay the costs of Capital
Improvements.
Capital Improvements: Improvements to (A) the external walls and
internal load-bearing walls (other than windows and plate glass) of the
Facility; (B)the roof of the Facility; (C) private roadways, parking areas,
sidewalks and curbs appurtenant thereto (other than cleaning, patching and
striping); (D) mechanical, electrical and plumbing systems that service common
areas, entire wings of the Facility or the entire Facility, including conduit
and ductwork connected thereto; and (E) items of the types described on Exhibit
D attached hereto as "Capital items" of the Facility.
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 1.4 of the Lease.
Condemnation, Condemnor: As defined in Section 15.1.
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 Items for Urban Wage Earners and Clerical Workers (1982-1984 =
100).
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.
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Date of Taking: As defined in Section 15.1(b).
Eligible Independent Contractor: A management company that meets the
following requirements:
(a) The management company does not own, directly or
indirectly, more than 35% of the outstanding stock of
Equity Inns.
(b) If the management company is a corporation, no more
than 35% of the total combined voting power of its
outstanding stock (or 35% of the total shares of all
classes of its outstanding stock) or, if it is not a
corporation, no more than 35% of the ownership
interest in its assets or profits is owned, directly
or indirectly, by one or more Persons owning 35% or
more of the outstanding stock of Equity Inns.
(c) Neither Equity Inns, the Lessor, the Lessee, nor any
Affiliate thereof derives any income from the
management company.
(d) At the time that the management company enters into a
management agreement with the Lessee to operate the
Leased Property, the management company (or any
"related person" within the meaning of Section 856(d)
(9)(F) of the Code) is actively engaged in the trade
or business of operating "qualified lodging
facilities" within the meaning of Section 856(d)(9)
(D) of the Code for any Person who is not a "related
person" within the meaning of Section 856(d)(9)(F) of
the Code with respect to Equity Inns or the Lessee
(an "Unrelated Person"). For purposes of determining
whether the requirement of this paragraph (d) has
been met, a management company shall be treated as
being actively engaged in such a trade or business if
the management company (i) derives at least 10% of
both its profits and revenue from operating
"qualified lodging facilities" within the meaning of
Section 856(d)(9)(D) of the Code for Unrelated
Persons or (ii) complies with any regulations or
other administrative guidance under Section 856(d)(9)
of the Code that provide a "safe harbor" rule with
respect to the amount of hotel management business
with Unrelated Persons that is necessary to qualify
as an "eligible independent contractor" within the
meaning of such Code section.
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.
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Environmental Laws: All applicable federal, state, local and foreign
laws and regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including, without limitation, laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. Environmental
Laws include, but are not limited to, CERCLA, FIFRA, RCRA, ▇▇▇▇ and TSCA.
Environmental Liabilities: Any and all obligations to pay the amount of
any judgment or settlement, the cost of complying with any settlement, judgment
or order for injunctive or other equitable relief, the cost of compliance or
corrective action in response to any notice, demand or request from an
Environmental Authority, the amount of any civil penalty or criminal fine, and
any court costs and reasonable amounts for attorney's fees, fees for witnesses
and experts, and costs of investigation and preparation for the 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) Failure of Lessee, Lessor, any Predecessor or the
Leased Property to comply at any time with all
Environmental Laws;
(b) Presence of any Hazardous Materials on, in, under, at
or in any way affecting the Leased Property;
(c) A Release at any time of any Hazardous Materials on,
in, at, under or in any way affecting the Leased
Property;
(d) Identification of Lessee, Lessor or any Predecessor
as a potentially responsible party under CERCLA or
under any Environmental Law similar to CERCLA;
(e) Presence at any time of any above-ground and/or
underground storage tanks, as defined in RCRA or in
any applicable Environmental Law on, in, at or under
the Leased Property or 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.
Equity Inns: Equity Inns, Inc., a Tennessee corporation.
Event of Default: As defined in Section 16.1.
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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.
Fair Market Rental: The fair market rental of the Leased Property means
the rental which a willing tenant not compelled to rent would pay a willing
landlord not compelled to lease for the use and occupancy of such Leased
Property pursuant to the Lease for the term in question, (a) assuming that
Lessee is not in default thereunder and (b) determined in accordance with the
appraisal procedures set forth in Article XXXIII or in such other manner as
shall be mutually acceptable to Lessor and Lessee.
Fair Market Value: The fair market value of the Leased Property means
an amount equal to the price that a willing buyer not compelled to buy would pay
a willing seller not compelled to sell for such Leased Property, (a) assuming
the same is unencumbered by this Lease, (b) determined in accordance with the
appraisal procedures set forth in Article XXXIII or in such other manner as
shall be mutually acceptable to Lessor and Lessee, (c) assuming that such seller
must pay customary closing costs and title premiums, and (d) taking into account
the positive or negative effect on the value of the Leased Property attributable
to the interest rate, amortization schedule, maturity date, prepayment penalty
and other terms and conditions of any encumbrance that is assumed by the
transferee. In addition, in determining the Fair Market Value with respect to
damaged or destroyed Leased Property such value shall be determined as if such
Leased Property has not been so damaged or destroyed.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fiscal Year: The 12-month period from January 1 to December 31.
Fixtures: As defined in Section 1.1.
Food Sales: Gross revenue from the sale, for on-site consumption, of
food and non-alcoholic beverages sold at the Leased Property, including in
respect to guest rooms, banquet rooms, meeting rooms and other similar rooms.
Such revenues shall not include the following:
(a) Vending machine sales;
(b) Any gratuity or service charges added to a customer's
▇▇▇▇ or statement in lieu of a gratuity which is paid
to an employee;
(c) Non-alcoholic beverages sold from the bar or lounge;
(d) Sales taxes or taxes of any other kind imposed on the
sale of food or non-alcoholic beverages; and
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(e) Any revenues that are subsequently credited, refunded
or rebated in the ordinary course of business.
Franchise Agreement: Any franchise agreement or license agreement with
a franchisor under which the Facility is operated.
Furniture and Equipment: For purposes of this Lease, 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 and bars, if any, laundry and dry
cleaning facilities, (ii) office equipment, (iii) dining room wagons, materials
handling equipment, cleaning and engineering equipment, (iv) telephone and
computerized accounting systems, and (v) vehicles.
Government: The United States of America, any state, district or
territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any political subdivision of
any of the foregoing.
Gross Operating Expenses: For purposes of this Lease, the term "Gross
Operating Expenses" shall mean all salaries and employee expense and payroll
taxes (including salaries, wages, bonuses and other compensation of all
employees at the Facility, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Lease, governmental fees and assessments, food, beverages, laundry
service expense, the cost of Inventories and fixed asset supplies, license fees,
advertising, marketing, reservation systems and any and all other operating
expenses as are reasonably necessary for the proper and efficient operation of
the Facility incurred by Lessee in accordance with the provisions hereof
(excluding, however, (i) federal, state and municipal excise, sales and use
taxes collected directly from patrons and guests or as a part of the sales price
of any goods, services or displays, such as gross receipts, admissions, cabaret
or similar or equivalent taxes paid over to federal, state or municipal
governments, (ii) expenditures by Lessor pursuant to Article XIII and (iii)
payments on any Mortgage or other mortgage or security instrument on the Leased
Property); all determined in accordance with generally accepted accounting
principles and the Uniform System. No part of Lessee's central office overhead
or general or administrative expense (as opposed to that of the Facility) shall
be deemed to be a part of Gross Operating Expenses, as herein provided; provided
that accounting services provided to the Leased Property but performed at
Lessee's central office shall be included in Gross Operating Expenses.
Reasonable out- of-pocket expenses of Lessee incurred for the account of or in
connection with the hotel operations, including but not limited to postage,
telephone charges and reasonable travel expenses of employees, officers and
other representatives and consultants of Lessee and its Affiliates, shall be
deemed to be a part of Gross Operating Expenses and such persons shall be
afforded reasonable accommodations,
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food, beverages, laundry, valet and other such services by and at the hotel
without charge to such persons or Lessee.
Gross Operating Profit: For any Fiscal Year, the excess of Gross
Revenues for such Fiscal Year over Gross Operating Expenses for such Fiscal
Year.
Gross Revenues: All revenues, receipts, and income of any kind derived
directly or indirectly by Lessee from or in connection with the Facility
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts) whether on a cash basis
or credit, paid or collected, determined in accordance with generally accepted
accounting principles and the Uniform System, excluding, however: (i) funds
furnished by Lessor, (ii) federal, state and municipal excise, sales, and use
taxes collected directly from patrons and guests or as a part of the sales price
of any goods, services or displays, such as gross receipts, admissions, cabaret
or similar or equivalent taxes and paid over to federal, state or municipal
governments, (iii) gratuities, (iv) proceeds of insurance and Condemnation, (v)
proceeds from sales other than sales in the ordinary course of business, (vi)
all loan proceeds from financing or refinancings of the hotel 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; and
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenyls, asbestos and urea
formaldehyde.
Hotel: Each hotel and/or other facility offering lodging and other
services or amenities being operated or proposed to be operated on the Leased
Property.
Impositions: Collectively, all taxes (including, without limitation,
all ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same relate to or are imposed upon
Lessee or its business conducted upon the Leased Property), assessments
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(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), water, sewer or other rents and
charges, excises, tax inspection, authorization and similar fees and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Lessee (including all
interest and penalties thereon caused by any failure in payment by Lessee),
which at any time prior to, during or with respect to the Term hereof may be
assessed or imposed on or with respect to or be a lien upon (a) Lessor's
interest in the Leased Property, (b) the Leased Property, or any part thereof or
any rent therefrom or any estate, right, title or interest therein, 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 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, or (4) any single business, gross receipts (other than a tax on any
rent received by Lessor from Lessee), transaction, privilege or similar taxes as
the same relate to or are imposed upon Lessor, except to the extent that any
tax, assessment, tax levy or charge that Lessee is obligated to pay pursuant to
the first sentence of this definition and that is in effect at any time during
the Term hereof is totally or partially repealed, and a tax, assessment, tax
levy or charge set forth in clause (1) or (2) is levied, assessed or imposed
expressly in lieu 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 Section 8.3 or Article XXII.
Initial Period: The period ending on the tenth (10th) anniversary of
the last day of the month in which the Commencement Date occurs.
Insurance Requirements: All terms of any insurance policy required by
this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of
Supplies" as defined in the Uniform System, including, but not limited to,
linens and other non-depreciable personal property, and including any property
of the type described in Section 1221(1) of the Code.
Land: As defined in Article I.
Lease: This Lease, as it relates to each Leased Property or all of the
Leased Property as the context may require.
10
Leased Improvements; Leased Property: Each as defined in Article I.
Legal Requirements: All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use or alteration thereof (whether by Lessee or otherwise),
whether or not hereafter enacted and in force, including (a) all laws, rules or
regulations pertaining to the environment, occupational health and safety and
public health, safety or welfare, and (b) any laws, rules or regulations that
may (1) require repairs, modifications or alterations in or to the Leased
Property or (2) in any way adversely affect the use and enjoyment thereof; and
all permits, licenses and authorizations and regulations relating thereto and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
Lending Institution: Any insurance company, credit company, federally
insured commercial or savings bank, national banking association, savings and
loan association, employees welfare, pension or retirement fund or system,
corporate profit sharing or pension trust, college or university, or real estate
investment trust, including any corporation qualified to be treated for federal
tax purposes as a real estate investment trust, such trust having a net worth of
at least $10,000,000.
Lessee: The Lessee designated on this Lease and its permitted
successors and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's
interest) in Lessee, the officers, directors, stockholders, employees, agents
and representatives of Lessee and any corporate stockholder, agent, or
representative of Lessee, and the respective heirs, personal representatives,
successors and assigns of any such officer, director, stockholder, employee,
agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
Lessor: The Lessor designated on this Lease and its respective
successors and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, or any other
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's or
partnership interest) in Lessor, the officers, directors, stockholders,
employees, agents and representatives of the general partner of Lessor and any
partner, agent, or representative of Lessor, and the respective heirs, personal
representatives, successors and assigns of any such officer, director, partner,
stockholder, employee, agent or representative.
11
Management Agreement: As defined in Section 19.4.
Manager: As defined in Section 19.4.
Minimum Price. The sum of (a) the equity in the Leased Property at the
time of acquisition of the Leased Property by Lessor (i.e., that portion of the
purchase price of the Leased Property paid by Lessor in cash) plus (b) other
capital expenditures on the Leased Property by Lessor after the date of
acquisition by Lessor plus (c) the unpaid principal balance of all encumbrances
against the Leased Property at the time of purchase of the Leased Property by
Lessee, less (x) all proceeds received by Lessor from any financing or
refinancing of the Leased Property after the date of acquisition by Lessor
(after payment of any debt refinanced and net of any costs and expenses incurred
in connection with such financing or refinancing, including, without limitation,
loan points, commitment fees and commissions and legal fees) and (y) the net
amount (after deduction of all reasonable legal fees and other costs and
expenses, including, without limitation, expert witness fees, incurred by Lessor
in connection with obtaining any such proceeds or award) of all insurance
proceeds received by Lessor and awards received by Lessor from any partial
Taking of the Leased Property that are not applied to restoration.
Mortgage: As defined in Section 30.2.
Notice: A notice given pursuant to Article XXXII.
Officer's Certificate: A certificate of Lessee reasonably acceptable to
Lessor, signed by the chief financial officer or other authorized officer of the
entity authorized so to sign on behalf 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 3.6(a).
Other Leases: Any other lease between Lessor and its Affiliate, as
lessor, and Lessee.
Other Income: All revenues, receipts and income of any kind derived
directly or indirectly from or in connection with the Facility and included in
Gross Revenues, other than Room Revenues, Food Sales and Beverage Sales.
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 Base
Rent or Percentage Rent.
12
Percentage Rent: As defined in Section 3.1(b).
Person: Any Government, natural person, corporation, partnership or
other legal entity.
Personal Property Taxes: All personal property taxes imposed on the
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and other personal property owned by the Lessee), together with
all replacement, modifications, alterations and additions thereto.
Predecessor: Any Person whose liabilities arising under any
Environmental Law have or may have been retained or assumed by the Lessee,
either contractually or by operation of law, relating to the Leased Property.
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.
Qualified Manager: A Manager that is (or is controlled by, controlling
or under common control with) either (a) an entity then owned or controlled by
the executive management or shareholders of Equity Inns, or (b) a professional
management company which at the time of its engagement as Manager shall be the
property manager for at least ten (10) hotel properties containing at least one
thousand three hundred (1,300) rooms exclusive of the Leased Properties.
Quarterly Revenues Computation: As defined in Exhibit 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.
Rejectable Offer Price: An amount equal to the greater of (a) the Fair
Market Value, determined as of the applicable purchase date, or (b) the Minimum
Price.
Release: A "Release" as defined in CERCLA or in any Environmental Law,
unless such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.
Rent: Collectively, the Base Rent, Percentage Rent, and Additional
Charges.
13
Revenues Computations: Shall mean, collectively, the Quarterly
Revenues Computation, and the Annual Revenues Computation.
Room Revenues: Gross revenue from the rental of guest rooms, whether
to individuals, groups or transients, at the Facility, excluding the following:
(a) the amount of all credits, rebates or refunds to
customers, guests or patrons; 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.
▇▇▇▇: The Superfund Amendments and Reauthorization Act of 1986, as
amended.
State: The State or Commonwealth of the United States in which the
Leased Property is located.
Subsidiaries: Corporations in which Lessee owns, directly or
indirectly, more than 50% of the voting stock or Control, as applicable
(individually, a "Subsidiary").
Taking: A taking or voluntary conveyance during the Term hereof of all
or part of the Leased Property, or any interest therein, or right accruing
thereto or use thereof, as the result of, or in settlement of, any Condemnation
or other eminent domain proceeding affecting the Leased Property whether or not
the same shall have actually been commenced.
Term: As defined in Section 1.4.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the other party hereto to perform any obligations of such party under
this Lease or any guaranty of this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the
Facility such that, in the good faith judgment of Lessee, reasonably exercised
and evidenced by the resolution of the governing body of the entity authorized
to act on behalf of the managing member of Lessee, the Facility cannot be
14
operated on a commercially practicable basis for its Primary Intended Use,
taking into account, among other relevant factors, the number of usable rooms
and projected revenues, such that Lessee intends to, and shall, complete the
cessation of operations from the Leased Facility.
Uniform System: Shall mean the "Uniform System of Accounts for Hotels"
(9th Revised Edition, 1996) as published by the American Hotel and Motel
Association, as it may be amended from time to time with such exceptions as may
be required by the provision of this Lease.
Unsuitable for its Primary Intended Use: A state or condition of the
Facility such that, in the good faith judgment of Lessee, reasonably exercised
and evidenced by the resolution of the governing body of the entity authorized
to act on behalf of the managing member of Lessee, due to casualty damage or
loss through Condemnation, the Facility cannot function as an integrated hotel
facility consistent with standards applicable to a well maintained and operated
hotel.
ARTICLE III
3.1. Rent. Lessee will pay to Lessor in lawful money of the United
States of America which shall be legal tender for the payment of public and
private debts, in immediately available funds, at Lessor's address set forth on
the signature page or at such other place or to such other Person, as Lessor
from time to time may designate in a Notice, all Base Rent, Percentage Rent and
Additional Charges, during the Term, as follows:
(a) Base Rent: During the period commencing on the Commencement Date and ending
at the end of the first month-end following the tenth (10th) anniversary thereof
(the "Initial Period"), the annual sum in the amount set forth on Exhibit C
hereto (as adjusted under Section 3.1(e)) as the "Base Rent" for the Leased
Property, payable in advance in equal, consecutive monthly installments, on or
before the tenth day of each calendar month of the Term ("Base Rent"); provided,
however, that the first and last monthly payments of Base Rent shall be
pro-rated as to any partial month (subject to adjustment as provided in Sections
5.2, 14.5 and 15.3); and
(b) Percentage Rent: For each Fiscal Year during the Term commencing with the
Fiscal Year beginning January 1, 2001, Tenant shall pay percentage rent
("Percentage Rent") quarterly, with respect to the four calendar quarters of
each Fiscal Year, in an amount calculated by the following formula:
The amount equal to the Quarterly Revenues Computation (as defined on
Exhibit C attached hereto)
less
an amount equal to the Base Rent paid year to date for the applicable Fiscal
Year
15
less
an amount equal to Percentage Rent paid year to date for the applicable Fiscal
Year
equals
Percentage Rent for the applicable quarter.
Notwithstanding the amounts of Percentage Rent paid quarterly
pursuant to the formula set forth above, for any Fiscal Year during the Initial
Period commencing with the Fiscal Year in which the Commencement Date occurs,
the Percentage Rent payable under this Lease shall be no less than or greater
than the amount calculated by the following formula:
The amount equal to the Annual Revenue Computation (as defined on Exhibit
C attached hereto)
less
an amount equal to Base Rent paid year to date for the applicable Fiscal Year
equals
Percentage Rent for the applicable Fiscal Year.
(c) At least one hundred twenty (120) days prior to the
expiration of the Initial Period, Lessor and Lessee shall negotiate in
good faith modifications to the Rent for the final five (5) years of
the Lease Term to adjust such Rent to market rates for hotel REIT
leases for similar hotel/motel properties at that time. In the event
Lessor and Lessee are unable to agree upon Rent terms for the final
five (5) years of the Term of the Lease, at least ninety (90) days
prior to the expiration of the Initial Period, the Rent terms for the
final five (5) years of that Lease shall be determined by a panel of
three (3) parties having generally recognized expertise in evaluating
hotel REIT leases. Lessee and the Lessor each shall have the right to
designate one panel member and the two (2) panel members so designated
will designate the third panel member. Rent terms approved by at least
two (2) of the three (3) panel members will be binding on Lessee and
Lessor for the final five (5) years of the Lease Term. In determining
the market rates for the final five (5) years of the Lease Term, the
panel members shall be instructed to consider hotel REIT lease terms
with respect to similar hotel/motel property types.
16
(d) Officer's Certificates. Within 30 days after the last day
of each quarter of each Fiscal Year (or part thereof) in the Term,
Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor, together with the applicable quarterly Percentage
Rent payment, setting forth the calculation of Percentage Rent accrued
and paid for such quarter including the Quarterly Revenues Computation.
Such quarterly payments shall be based on the formulas set forth in
Section 3.1(b). There shall be no reduction in the Base Rent regardless
of the result of the Revenue Computation.
In addition, on or before March 31 of each year, commencing
with March 31, 2001, Lessee shall deliver to Lessor an Officer's
Certificate reasonably acceptable to Lessor setting forth the
computation of the actual Percentage Rent that accrued for each quarter
of the Fiscal Year that ended on the immediately preceding December 31.
Additionally, if the annual Percentage Rent due and payable for any
Fiscal Year (as shown in the applicable Officer's Certificate) exceeds
the amount actually paid as Percentage Rent by Lessee for such year,
Lessee shall pay such excess to Lessor at the time such certificate is
delivered. If the Percentage Rent actually due and payable for such
Fiscal Year is shown by such certificate to be less than the amount
actually paid as Percentage Rent for the applicable Fiscal Year, Lessor
shall reimburse such amount to Lessee.
Any difference between the annual Percentage Rent due and
payable for any Fiscal Year (as shown in the applicable Officer's
Certificate) and the total amount of quarterly payments for such Fiscal
Year actually paid by Lessee as Percentage Rent, whether in favor of
Lessor or Lessee, shall bear interest at the Overdue Rate, which
interest shall accrue from the due date of the last quarterly payment
for the Fiscal Year until the amount of such difference shall be paid
or otherwise discharged. Any such interest payable to Lessor shall be
deemed to be and shall be payable as Additional Charges.
The obligation to pay Percentage Rent due through the date of
termination of this Lease shall survive the expiration or earlier
termination of the Term, and a final reconciliation, taking into
account, among other relevant adjustments, any adjustments which are
accrued after such expiration or termination date but which related to
Percentage Rent accrued prior to such termination date, and Lessee's
good faith best estimate of the amount of any unresolved contractual
allowances, shall be made not later than two years after such
expiration or termination date, but Lessee shall advise Lessor within
60 days after such expiration or termination date of Lessee's best
estimate at that time of the approximate amount of such adjustments,
which estimate shall not be binding on Lessee or have any legal effect
whatsoever.
(e) CPI Adjustments. For each Fiscal Year during the Term
beginning with the Fiscal Year identified as the "CPI Adjustment Date"
for each Leased Property as shown on Exhibit C, the Base Rent then in
effect, and the threshold dollar amounts of Room Revenues
17
then included in the Revenues Computations set forth in Section 3.1(b),
shall be adjusted as follows:
(1) The average Consumer Price Index for the twelve months ended on
September 30 of the most recently completed Fiscal Year shall be
divided by the average Consumer Price Index for the twelve months ended
on September 30 of the prior Fiscal Year;
(2) The new Base Rent for the then current Fiscal Year shall be equal to
the product of the Base Rent in effect in the most recently ended
Fiscal Year and the quotient obtained under subparagraph (1) above;
(3) The new threshold dollar amounts in the applicable Revenues
Computations described in Section 3.1(b) above for the then current
Fiscal Year shall be the product of the threshold dollar amounts of
Room Revenues in effect in the most recently ended Fiscal Year and the
quotient obtained in subparagraph (1) above.
The amount of any adjustment under paragraphs (e)(1)-(3) to Base
Rent and the threshold dollar amounts of Room Revenues for any Fiscal
Year shall not exceed 7% of the Base Rent and threshold dollar amounts
of Room Revenues applicable for the prior Fiscal Year.
By way of example, for Leases with a CPI Adjustment Date of
January 1, 1998 or earlier, the amount of Base Rent and the
threshold dollar amounts of Room Revenues in the Revenues Computations
for the Fiscal Year commencing January 1, 1998 shall be adjusted to
reflect any change in the average Consumer Price Index for the
twelve months ended September 30, 1997 as compared to the twelve months
ended September 30, 1996.
Lessor shall calculate the annual Consumer Price Index
adjustments as soon as reasonably possible after the Consumer Price
Index becomes available and shall notify Lessee in writing of the
amount of the annual adjustment, together with a copy of the
computation showing the adjustment amount.
Adjustments calculated as set forth above in the Base Rent and
threshold dollar amounts of Room Revenues shall be effective on the
CPI Adjustment Date set forth on Exhibit C. If Rent is paid in any
Fiscal Year prior to determination of the amount of any adjustment
to Base Rent or the threshold dollar amounts of Room Revenues
applicable for such Fiscal Year, payment adjustments for any
shortfall in or overpayment of Rent paid shall be made with the first
Base Rent payment due after the amount of the adjustments is
determined.
18
The "average Consumer Price Index" for any period shall be the
average of the Consumer Price Index for all months during the period.
(4) 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 threshold dollar amounts of Room Revenues
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 Washington, D.C. 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 Rate. 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 generally accepted
accounting principles and the Uniform System, that will accurately record all
data necessary to compute Percentage Rent, and Lessee shall retain, for at least
five years after the expiration of each Fiscal Year (and in any event until the
reconciliation described in Section 3.1(d) for such Fiscal Year has been made),
reasonably adequate records conforming to such accounting system showing all
data necessary to compute Percentage Rent for the applicable Fiscal Years.
Lessor, at its expense (except as provided hereinbelow), shall have the right
from time to time by its accountants or representatives to audit the information
that formed the basis for the data set forth in any Officer's Certificate
provided under Section 3.1(d) and, in connection with such audits, to examine
all Lessee's records (including supporting data, sales and excise tax returns
and franchise reports) reasonably required to verify Percentage Rent, subject to
any prohibitions or limitations on disclosure of any such data under Legal
Requirements. If any such audit discloses a deficiency in the payment of
Percentage Rent, and either Lessee agrees with the result of such 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; provided, however, that as to any
audit that is commenced more than two years after the date Percentage Rent for
any Fiscal Year is reported by Lessee to Lessor, the deficiency, if any, with
respect to such Percentage Rent shall bear interest at the Overdue Rate only
from the date such determination of deficiency is made unless such deficiency is
the result of gross negligence or willful misconduct on the part of Lessee, in
which case interest at the Overdue Rate will accrue from the date such payment
should have been made to the date of payment thereof. If any such audit
discloses that the Percentage Rent actually due from Lessee for any Fiscal Year
exceed those reported by Lessee by more than 3%, Lessee shall pay the cost of
such audit and examination. 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
19
safeguards, in any litigation between the parties and except further that
Lessor may disclose such information to prospective lenders. The obligations of
Lessee contained in this Section shall survive the expiration or earlier
termination of this Lease.
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 (other than Impositions which
are Lessor's obligations hereunder) 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 Charges"), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of non- payment of the Additional Charges as in
the case of non-payment of the Base Rent including, but not limited to, the
right to pay such Additional Charges on behalf of Lessee and to require
reimbursement thereof by Lessee, together with interest thereon at the Overdue
Rate. 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 on demand, as
Additional Charges, a late charge (to the extent permitted by law) computed at
the Overdue Rate on the amount of such installment, from the due date of such
installment to the date of payment thereof. To the extent that Lessee pays any
Additional Charges to Lessor pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges to the entity
to which they would otherwise be due and Lessor shall pay same from monies
received from Lessee.
3.4. Rent Payable Without Deduction. The Rent shall be paid to Lessor so that
this Lease shall yield to Lessor the full amount of the installments of Base
Rent, Percentage Rent and Additional Charges throughout the Term, all as more
fully set forth in Article V, but subject to any other provisions of this Lease
that expressly provide for adjustment or abatement of Rent or other charges or
expressly provide that certain expenses or maintenance shall be paid or
performed by Lessor.
3.5. Conversion of Property. If, during the Term, Lessee desires to provide food
and beverage operations at the Facility (other than complimentary continental
breakfast), Lessee shall give notice of such desire to Lessor. Lessor and Lessee
shall then commence negotiations to adjust Rent to reflect the proposed change
to the operation of the Facility, each acting reasonably and in good faith. All
other terms of this Lease will remain substantially the same. During
negotiations, which shall not extend beyond 60 days, Lessee shall not "convert"
the Facility and shall continue fulfilling its obligations under the existing
terms of this Lease. If no agreement is reached after such 60-day period, Lessee
shall withdraw such notice and this Lease shall continue in full force.
20
3.6. Budgets. Not later than sixty (60) days prior to the
commencement of each Fiscal Year, Lessee shall submit the following Budgets to
Lessor:
(a) An operating budget ("Operating Budget") prepared in accordance with this
Section 3.6(a), in substantially the form of Exhibit E attached hereto. The
Operating Budget shall be prepared in good faith and otherwise in accordance
with the Uniform System to the extent applicable and shall show by month and
quarter and for the full Fiscal Year in the degree of detail specified by the
Uniform System, the following:
(i) Lessee's reasonable estimate of Gross Revenues (including room rates
and Room Revenues), Gross Operating Expenses, and Gross Operating
Profits for the forthcoming Fiscal Year itemized on schedules on a
quarterly basis as approved by Lessor and Lessee, as same may be
revised or replaced from time to time by Lessee and approved by Lessor,
together with the assumptions, in narrative form, forming the basis of
such schedules.
(ii) An estimate of the amounts to be dedicated to routine, non-capital
repair and maintenance.
(iii) A cash flow projection.
(iv) Lessee's reasonable estimate of Percentage Rent by quarter for the
Fiscal Year.
(v) A narrative description of the program for advertising and marketing
the Hotel for the forthcoming Fiscal Year containing a detailed budget
itemization of the proposed advertising expenditures by category and
the assumptions, in narrative form, forming the basis of such budget
itemizations.
(b) A capital budget ("Capital Budget") in substantially the form of Exhibit F
attached hereto, containing a description in reasonable detail of the proposed
Capital Improvements and an estimate of all amounts Lessor will be requested to
provide for Capital Improvements to the Facility or any of its components for
the Fiscal Year. The Capital Budget shall be prepared in accordance with the
Uniform System to the extent applicable.
3.7. Approval of Capital Budget. Within thirty (30) days following submission of
the Capital Budget to Lessor, Lessor shall give Lessee written notice either (a)
that Lessor approves the Capital Budget or (b) indicating with reasonable
specificity the respects in which Lessor objects to the Capital Budget. In the
latter event, Lessor and Lessee shall act promptly, reasonably and in good faith
to seek to resolve Lessor's objections. In the event that Lessor and Lessee fail
to reach agreement with respect to the Capital Budget within thirty (30) days
after receipt of Lessor's written notice, Lessee and Lessor shall refer any
disputed Capital Budget matter to arbitration using procedures set forth in
21
Article XLI hereof and each party shall endeavor to cause such arbitration to
be completed as quickly as possible, but in any event not later than six (6)
months following referral to arbitration. In the event Lessor fails to deliver
the notice set forth in this section within the required time period, the
Capital Budget shall be deemed approved. Lessor shall be obligated to make all
Capital Expenditures which are pursuant to a Capital Budget which has been
approved or deemed approved in accordance with the procedures set forth above.
3.8. Capital Projects.
(a) The selection of all design professionals and contractors for capital
projects shall be made by Lessor, after consultation with Lessee. (b) Lessor may
require that all contracts in connection with capital projects be subject to
competitive bidding procedures reasonably acceptable to Lessor. Lessor shall
also have the right to review and approve all contract bids, whether
competitively bid or not. Lessor may also retain, at its sole cost and expense,
an inspecting architect or engineer to monitor costs, time, quality and
performance for all capital projects.
3.9. Books and Records. Lessee shall keep full and adequate books of account and
other records reflecting the results of operation of the Facility on an accrual
basis, all in accordance with the Uniform System and generally accepted
accounting principles and the obligations of Lessee under this Lease. The books
of account and all other records relating to or reflecting the operation of the
Facility shall be kept either at the Facility or at Lessee's offices in
Pittsburgh, Pennsylvania or Orlando, Florida and shall be available to Lessor
and its representatives and its auditors or accountants, at all reasonable times
for examination, audit, inspection, and transcription. All of such books and
records pertaining to the Facility, including, without limitation, books of
account, guest records and front office records, at all times shall be the
property of Lessor and shall not be removed from the Facility or Lessee's
offices without Lessor's approval.
ARTICLE IV
4.1. Payment of Impositions. Subject to Article XII relating to permitted
contests, Lessee will pay, or cause to be paid, all Impositions (other than Real
Estate Taxes and Personal Property Taxes, which shall be paid by Lessor) before
any fine, penalty, interest or cost may be added for non-payment, such payments
to be made directly to the taxing or other authorities where feasible, and will
promptly furnish to Lessor copies of official receipts or other satisfactory
proof evidencing such payments. Lessee's obligation to pay such Impositions
shall be deemed absolutely fixed upon the date such Impositions become a lien
upon the Leased Property or any
22
part thereof. If any such Imposition may, at the option of the taxpayer,
lawfully be paid in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), Lessee may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such Imposition) in
installments and in such event, shall pay such installments during the Term
hereof (subject to Lessee's right of contest pursuant to the provisions of
Article XII) as the same respectively become due and before any fine, penalty,
premium, further interest or cost may be added thereto. Lessor, at its expense,
shall, to the extent required or permitted by applicable law, prepare and file
all tax returns in respect of Lessor's net income, gross receipts, sales and
use, single business, transaction privilege, rent, ad valorem, franchise taxes,
Real Estate Taxes, Personal Property Taxes and taxes on its capital stock, and
Lessee, at its expense, shall, to the extent required or permitted by applicable
laws and regulations, prepare and file all other tax returns and reports in
respect of any Imposition as may be required by governmental authorities. If any
refund shall be due from any taxing authority in respect of any Imposition paid
by Lessee, the same shall be paid over to or retained by Lessee if no Event of
Default shall have occurred hereunder and be continuing. If an Event of Default
shall have occurred and be continuing, any such refund shall be paid over to or
retained by Lessor. Any such funds retained by Lessor due to an Event of Default
shall be applied as provided in Article XVI. Lessor and Lessee shall, upon
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports. Lessee shall file all Personal
Property Tax returns in such jurisdictions where it is legally required to so
file. Lessor, to the extent it possesses the same, and Lessee, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property classified as
personal property. Where Lessor is legally required to file Personal Property
Tax returns, Lessee shall provide Lessor with copies of assessment notices in
sufficient time for Lessor to file a protest. Lessor may, upon notice to Lessee,
at Lessor's option and at Lessor's sole expense, protest, appeal, or institute
such other proceedings (in its or Lessee's name) as Lessor may deem appropriate
to effect a reduction of real estate or personal property assessments for those
Impositions to be paid by Lessor, and Lessee, at Lessor's expense as aforesaid,
shall fully cooperate with Lessor in such protest, appeal, or other action.
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. ▇▇▇▇▇▇▇▇ for reimbursement of Personal
Property Taxes by Lessee to Lessor shall be accompanied by copies of a ▇▇▇▇
therefor and payment thereof which identify the personal property with respect
to which such payments are made. Lessor, however, reserves the right to effect
any such protest, appeal or other action and, upon notice to Lessee, shall
control any such activity, which shall then go forward at Lessor's sole expense.
Upon such notice, Lessee, at Lessor's expense, shall cooperate fully with such
activities.
4.2. Notice of Impositions. To the extent Lessor is notified of any
Impositions, Lessor shall give prompt Notice to Lessee of such Impositions
payable by Lessee hereunder, provided that Lessor's failure to give any such
Notice shall in no way diminish Lessee's obligations hereunder to pay such
23
Impositions, but 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.
4.3. Adjustment of Impositions. Impositions imposed in respect of the tax-fiscal
period during which the Term terminates shall be adjusted and prorated between
Lessor and Lessee, whether or not such Imposition is imposed before or after
such termination, and Lessee's obligation to pay its prorated share thereof
after termination shall survive such termination.
4.4. 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.
4.5. Insurance Premiums. Lessee will pay or cause to be paid all premiums
for the insurance coverages required to be maintained by it under Article XIII.
4.6. Ground Rent. In the event that Lessor's interest in the Land is pursuant to
a ground lease, Lessor shall be solely responsible for payment of any ground
rent due with respect to the Leased Property, and shall promptly deliver to
Lessee any default notice received by Lessor pursuant to the ground lease.
4.7. Franchise Fees. Lessee will pay or cause to be paid all franchise fees
due and owing in accordance with the terms and conditions of the Franchise
Agreement.
ARTICLE V
5.1. No Termination, Abatement, etc. Except as otherwise specifically provided
in this Lease, and except for loss of the Franchise Agreement solely by reason
of any action or inaction by Lessor, Lessee, to the extent permitted by law,
shall remain bound by this Lease in accordance with its terms and shall neither
take any action without the written consent of Lessor to modify, surrender or
terminate the same, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of the Rent, or setoff against the Rent, nor shall the
obligations of Lessee be otherwise affected by reason of (a) any damage to, or
destruction of, any Leased Property or any portion thereof from whatever cause
or any Taking of the Leased Property or any portion thereof, (b) the lawful or
unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Property, or any portion thereof, or the interference with such use by any
Person, corporation, partnership or other entity, or by reason of eviction by
paramount title, (c) any claim which Lessee has or might have against Lessor by
reason of any default or breach of any warranty by Lessor under this Lease or
any other agreement between Lessor and Lessee, or to which Lessor and Lessee are
parties, (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Lessor or any assignee or transferee of
24
Lessor, or (e) for any other cause whether similar or dissimilar to any of the
foregoing other than a discharge of Lessee from any such obligations as a matter
of law. Lessee hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now be conferred upon it by law to (1) modify,
surrender or terminate this Lease or quit or surrender the Leased Property or
any portion thereof, or (2) entitle Lessee to any abatement, reduction,
suspension or deferment of the Rent or other sums payable by Lessee hereunder,
except as otherwise specifically provided in this Lease. The obligations of
Lessee hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.
5.2. Abatement Procedures. In the event of a partial Taking as described in
Section 15.5, the Lease shall not terminate, but 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 may be submitted
by either party to arbitration in accordance with the provisions of Article XLI
hereof for resolution.
ARTICLE VI
6.1. Ownership of the Leased Property. Lessee acknowledges that the Leased
Property is the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Property upon the terms and conditions of this
Lease.
6.2. Lessee's Personal Property. Lessee will acquire and maintain through the
Term such Inventory as is required to operate the Leased Property in the manner
contemplated by this Lease. 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. Lessee, at the commencement of the Term, and from
time to time thereafter, shall provide Lessor with an accurate list of all such
items of Lessee's personal property (collectively, the "Lessee's Personal
Property"). Lessee may, subject to the first sentence of this Section 6.2 and
the conditions set forth below, remove any of Lessee's Personal Property set
forth on such list at any time during the Term or upon the expiration or any
prior termination of the Term. All of Lessee's Personal Property, other than
Inventory, not removed by Lessee within ten days following the expiration or
earlier termination of the Term shall be considered abandoned by Lessee and may
be appropriated, sold, destroyed, or otherwise disposed of by Lessor without
first giving Notice thereof to Lessee, without any payment to Lessee and without
any obligation to account therefor. Lessee will, at its expense, restore the
Leased Property to the condition required by Section 9.1(d), including repair of
all damage to the
25
Leased Property caused by the removal of Lessee's Personal Property, whether
effected by Lessee or Lessor. Subject to Article XXXVII, upon the expiration or
earlier termination of the Term, Lessor or its designee shall have the option to
purchase all Inventory on hand at the Leased Property at the time of such
expiration or termination for a sale price equal to the fair market value of
such Inventory. Lessee may make such financing arrangements, title retention
agreements, leases or other agreements with respect to the Lessee's Personal
Property as it sees fit provided that Lessee first advises Lessor of any such
arrangement and such arrangement expressly provides that in the event of
Lessee's default thereunder, Lessor (or its designee) may assume Lessee's
obligations and rights under such arrangement.
6.3. Lessor's Representations. Lessor represents and warrants that (a) Lessor
has full partnership authority to grant to the Lessee the leasehold interest
described in this Lease, and (b) that this Lease has been duly authorized by all
necessary partnership action on behalf of Lessor and by all necessary trust
action on behalf of the general partner of Lessor.
6.4. Lessee's Representations. Lessee represents and warrants that (a) Lessee is
a validly existing corporation organized under the laws of the State of
Tennessee and is qualified to do business in all states in which it is required
to so qualify due to the nature of its business activities, (b) Lessee has the
requisite power and authority to enter into this Lease and (c) this Lease has
been duly authorized by all necessary corporate action on behalf of the Lessee.
6.5. 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 of all Rent and satisfaction of all of Lessee's obligations hereunder;
provided, however, Lessor shall subordinate its lien and security interest to
that of any non-Affiliate of Lessee which finances such Lessee's personal
property or any non-Affiliate conditional seller of such Lessee's personal
property, the terms and conditions of such subordination to be satisfactory to
Lessor in the exercise of reasonable discretion. Lessee shall, upon the request
of Lessor, execute such financing statements or other documents or instruments
reasonably requested by Lessor to perfect the lien and security interests herein
granted.
ARTICLE VII
7.1. Condition of the Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property. Lessee has examined and
otherwise has knowledge of the condition of the Leased Property and has found
the same to be satisfactory for its purposes hereunder. Lessee is leasing the
Leased Property "as is" in its present condition. Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property.
LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT
OF THE LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS
26
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.
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, which consent may be granted,
denied or conditioned upon Lessor's sole discretion. No use shall be made or
permitted to be made of the Leased Property, and no acts shall be done, which
will cause the cancellation or increase the premium of any insurance policy
covering the Leased Property or any part thereof (unless another adequate policy
satisfactory to Lessor is available and Lessee pays any premium increase), nor
shall Lessee sell or permit to be kept, used or sold in or about the Leased
Property any article which may be prohibited by law or fire underwriter's
regulations. Lessee shall, at its sole cost, comply with all of the requirements
pertaining to the Leased Property of any insurance board, association,
organization or company necessary for the maintenance of insurance, as herein
provided, covering the Leased Property and Lessee's Personal Property. (c)
Subject to the provisions of Articles XIV and XV, Lessee covenants and agrees
that during the Term it will (1) operate continuously the Leased Property as a
hotel facility, (2) keep in full force and effect and comply with all the
provisions of the Franchise Agreement (except that Lessee shall have no
obligation to complete any capital improvements to the Leased Property required
by the franchisor unless the Lessor funds the costs thereof), (3) not terminate
or amend the Franchise Agreement without the consent of Lessor, (4) maintain
appropriate certifications and licenses for such use and (5) will seek to
maximize the Gross Revenues generated therefrom consistent with sound business
practices.
(d) Lessee shall not commit or suffer to be committed any waste on the Leased
Property, or in the Facility, nor shall Lessee cause or permit any nuisance
thereon. (e) Lessee shall neither suffer nor permit the Leased Property or any
portion thereof, or Lessee's Personal Property, to be used in such a manner as
(1) might reasonably tend to impair Lessor's (or Lessee's, as the case may be)
title thereto or to any portion thereof, or (2) may
27
reasonably make possible a 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, except as necessary in the ordinary and prudent
operation of the Facility on the Leased Property. (f) Lessee agrees to deliver
to Lessor upon request by Lessor from time to time a list of hotels and motels
(and locations) owned or managed by Lessee and its Affiliates.
7.3. Lessor to Grant Easements, etc. Lessor will, from time to time, so long as
no Event of Default has occurred and is continuing, at the request of Lessee and
at Lessee's cost and expense (but subject to the approval of Lessor, which
approval shall not be unreasonably withheld or delayed), (a) grant easements and
other rights in the nature of easements with respect to the Leased Property to
third parties, (b) release existing easements or other rights in the nature of
easements which are for the benefit of the Leased Property, (c) dedicate or
transfer unimproved portions of the Leased Property for road, highway or other
public purposes, (d) execute petitions to have the Leased Property annexed to
any municipal corporation or utility district, (e) execute amendments to any
covenants and restrictions affecting the Leased Property and (f) execute and
deliver to any person any instrument appropriate to confirm or effect such
grants, releases, dedications, transfers, petitions and amendments (to the
extent of its interests in the Leased Property), but only upon delivery to
Lessor of an Officer's Certificate stating that such grant, release, dedication,
transfer, petition or amendment does not interfere with the proper conduct of
the business of Lessee on the Leased Property and does not materially reduce the
value of the Leased Property.
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ARTICLE VIII
8.1. Compliance with Legal and Insurance Requirements, etc. Subject to Section
8.3(b) below and Article XII relating to permitted contests, Lessee, at its
expense, will promptly (a) comply with all applicable Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, and (b) procure, maintain and comply with
all appropriate licenses and other authorizations required for any use of the
Leased Property and Lessee's Personal Property then being made, and for the
proper erection, installation, operation and maintenance of the Leased Property
or any part thereof.
8.2. Legal Requirement Covenants. Subject to Section 8.3(b) below, Lessee
covenants and agrees that the Leased Property and Lessee's Personal Property
shall not be used for any unlawful purpose, and that Lessee shall not permit or
suffer to exist any unlawful use of the Leased Property by others. Lessee shall
acquire and maintain all appropriate licenses, certifications, permits and other
authorizations and approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use, and any other lawful use
conducted on the Leased Property as may be permitted from time to time
hereunder. Lessee further covenants and agrees that Lessee's use of the Leased
Property and maintenance, alteration, and operation of the same, and all parts
thereof, shall at all times conform to all Legal Requirements, unless the same
are finally determined by a court of competent jurisdiction to be unlawful (and
Lessee shall cause all such sub-tenants, invitees or others to so comply with
all Legal Requirements). Lessee may, however, upon prior Notice to Lessor,
contest the legality or applicability of any such Legal Requirement or any
licensure or certification decision if Lessee maintains such action in good
faith, with due diligence, without prejudice to Lessor's rights hereunder, and
at Lessee's sole expense. If by the terms of any such Legal Requirement
compliance therewith pending the prosecution of any such proceeding may legally
be delayed without the incurrence of any lien, charge or liability of any kind
against the Facility or Lessee's leasehold interest therein and without
subjecting Lessee or Lessor to any liability, civil or criminal, for failure so
to comply therewith, Lessee may delay compliance therewith until the final
determination of such proceeding. If any lien, charge or civil or criminal
liability would be incurred by reason of any such delay, Lessee, on the prior
written consent of Lessor, which consent shall not be unreasonably withheld, may
nonetheless contest as aforesaid and delay as aforesaid provided that such delay
would not subject Lessor to criminal liability and Lessee both (a) furnishes to
Lessor security reasonably satisfactory to Lessor against any loss or injury by
reason of such contest or delay and (b) prosecutes the contest with due
diligence and in good faith.
8.3. Environmental Covenants. Lessor and Lessee (in addition to, and not in
diminution of, Lessee's covenants and undertakings in Sections 8.1 and 8.2
hereof) covenant and agree as follows:
(a) At all times hereafter until the later of (i) such time as all
liabilities, duties or obligations of Lessee to the Lessor under the Leases have
29
been satisfied in full and (ii) such time as Lessee completely vacates the
Leased Property and surrenders possession of the same to Lessor, Lessee shall
fully comply with all Environmental Laws applicable to the Leased Property and
the operations thereon. Lessee agrees to give Lessor prompt written notice of
(1) all Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating
to any Environmental Liability or relating to the issuance, revocation or
change in any Environmental Authorization required for operation of the
Leased Property; (3) all Releases at, on, in, under or in any way affecting
the Leased Property, or any Release known by Lessee at, on, in or under any
property adjacent to the Leased Property; and (4) all facts, events or
conditions that could reasonably lead to the occurrence of any of the
above-referenced matters.
(b) Lessor hereby agrees to defend, indemnify and save harmless any and all
Lessee Indemnified Parties from and against any and all Environmental
Liabilities other than Environmental Liabilities which were caused by the acts,
or grossly negligent failures to act, of Lessee.
(c) Lessee hereby agrees to defend, indemnify and save harmless any and all
Lessor Indemnified Parties from and against any and all Environmental
Liabilities which were caused by the acts, or grossly negligent failures to act,
of Lessee.
(d) If any Proceeding is brought against any Indemnified Party in respect of an
Environmental Liability with respect to which such Indemnified Party may claim
indemnification under either Section 8.3(b) or (c), the Indemnifying Party, upon
request, shall at its sole expense resist and defend such Proceedings, or cause
the same to be resisted and defended by counsel designated by the Indemnified
Party and approved by the Indemnifying Party, which approval shall not be
unreasonably withheld; provided, however, that such approval shall not be
required in the case of defense by counsel designated by any insurance company
undertaking such defense pursuant to any applicable policy of insurance. Each
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel will be at the sole expense of such Indemnified Party unless
such counsel has been approved by the Indemnifying Party, which approval shall
not be unreasonably withheld. The Indemnifying Party shall not be liable for any
settlement of any such Proceeding made without its consent, which shall not be
unreasonably withheld, but if settled with the consent of the Indemnifying
Party, or if settled without its consent (if its consent shall be unreasonably
withheld), or if there be a final nonappealable judgment for an adversary party
in any such Proceeding, the Indemnifying Party shall indemnify and hold harmless
the Indemnified Parties from and against any liabilities incurred by such
Indemnified Parties by reason of such settlement or judgment.
(e) At any time any Indemnified Party has reason to believe circumstances exist
which could reasonably result in an Environmental Liability, upon reasonable
prior written notice to
30
Lessee stating such Indemnified Party's basis for such belief, an Indemnified
Party shall be given immediate access to the Leased Property (including, but not
limited to, the right to enter upon, investigate, drill ▇▇▇▇▇, take soil
borings, excavate, monitor, test, cap and use available land for the testing of
remedial technologies), Lessee's employees, and to all relevant documents and
records regarding the matter as to which a responsibility, liability or
obligation is asserted or which is the subject of any Proceeding; provided that
such access may be conditioned or restricted as may be reasonably necessary to
ensure compliance with law and the safety of personnel and facilities or to
protect confidential or privileged information. All Indemnified Parties
requesting such immediate access and cooperation shall endeavor to coordinate
such efforts to result in as minimal interruption of the operation of the Leased
Property as practicable.
(f) The indemnification rights and obligations provided for in this Article VIII
shall be in addition to any indemnification rights and obligations provided for
elsewhere in this Lease. (g) The indemnification rights and obligations provided
for in this Article VIII shall survive the termination of this Agreement.
For purposes of this Section 8.3, all amounts for which any Indemnified Party
seeks indemnification shall be computed net of (a) any actual income tax benefit
resulting therefrom to such Indemnified Party, (b) any insurance proceeds
received (net of tax effects) with respect thereto, and (c) any amounts
recovered (net of tax effects) from any third parties based on claims the
Indemnified Party has against such third parties which reduce the damages that
would otherwise be sustained; provided that in all cases, the timing of the
receipt or realization of insurance proceeds or income tax benefits or
recoveries from third parties shall be taken into account in determining the
amount of reduction of damages. Each Indemnified Party agrees to use its
reasonable efforts to pursue, or assign to Lessee or Lessor, as the case may be,
any claims or rights it may have against any third party which would materially
reduce the amount of damages otherwise incurred by such Indemnified Party.
Notwithstanding anything to the contrary contained in this Lease, if Lessor
shall become entitled to the possession of the Leased Property by virtue of the
termination of the Lease or repossession of the Leased Property, then Lessor may
assign its indemnification rights under Section 8.3 of this Lease (but not any
other rights hereunder) to any Person to whom the Lessor subsequently transfers
the Leased Property, subject to the following conditions and limitations, each
of which shall be deemed to be incorporated into the terms of such assignment,
whether or not specifically referred to therein:
(1) The indemnification rights referred to in this section may be assigned
only if a known Environmental Liability then exists or if a Proceeding is then
pending or, to the knowledge of Lessee or Lessor, then threatened with respect
to the Leased Property;
31
(2) Such indemnification rights shall be limited to Environmental Liabilities
relating to or specifically affecting the Leased Property; and
(3) Any assignment of such indemnification rights shall be limited to the
immediate transferee of Lessor and shall not extend to any such transferee's
successors or assigns.
ARTICLE IX
9.1. Maintenance and Repair.
(a) Unless caused by Lessee's negligence or willful misconduct or that of its
employees or agents, Lessee shall not be required to bear the cost of any
Capital Improvements, including (without limitation) Capital Improvements
required by the Franchisor under the Franchise Agreement. Lessor shall be
responsible for all Capital Expenditures, subject to (i) Lessor's right to
approve all Capital Expenditures, in connection with Lessor's approval or deemed
approval of the Capital Budget pursuant to Section 3.7 and (ii) Lessor's right
in its sole discretion to refuse to make any Capital Expenditure required by the
Franchisor; provided that, if such refusal results in a default under or
termination of the Franchise Agreement, Lessor shall be responsible for all
damages, termination payments payable by Lessee under the terms of the Franchise
Agreement, application fees for a new franchise license approved by Lessor,
increased royalty fees and other costs arising out of such refusal or out of the
resulting need to apply for and enter into a substitute franchise license
agreement. Except as set forth in the preceding sentence, nothing herein shall
be construed to require Lessor to build or rebuild any improvement on the Leased
Property, or to fund any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether ordinary
or extraordinary, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto, in connection with this Lease, or to maintain the Leased
Property in any way. Lessee hereby waives, to the extent permitted by law, the
right to make repairs at the expense of Lessor pursuant to any law in effect at
the time of the execution of this Lease or hereafter enacted. Lessor shall have
the right to give, record and post, as appropriate, notices of nonresponsibility
under any mechanic's lien laws now or hereafter existing. (b) Lessee will keep
the Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto that are under Lessee's control, including windows and plate glass,
parking lots, mechanical, electrical and plumbing systems and equipment
(including conduit and 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), and, except as
otherwise provided in Articles XIV or XV, 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
32
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, except as to the structural elements of the Leased
Improvements. 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. Notwithstanding any other
provision of this Lease, however, other than under Articles XIV and XV on the
conditions set forth therein, Lessee shall not be required to bear the costs of
complying with this section with respect to items classified as capital items
under U.S. generally accepted accounting principles, but shall be required to
comply with this section as to such items if and to the extent that amounts made
available therefor by Lessor from the reserve required to be established by
Lessor under Article XXXIX or are otherwise provided by Lessor. (c) Nothing
contained in this Lease and no action or inaction by Lessor shall be construed
as (i) 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 (ii) 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 accordance with Section 9.1(b) above during
the entire Term of the Lease, or damage by casualty or Condemnation (subject to
the obligations of Lessee to restore or repair as set forth herein).
9.2. Encroachments, Restriction, Etc. If any of the Leased Improvements, at any
time, materially encroach upon any property, street or right-of-way adjacent to
the Leased Property, or violate the agreements or conditions contained in any
lawful restrictive covenant or other agreement affecting the Leased Property, or
any part thereof, or impair the rights of others under any easement or
right-of-way to which the Leased Property is subject, then promptly upon the
request of Lessor or at the behest of any person affected by any such
encroachment, violation or impairment, Lessee shall, at its expense, subject to
its right to contest the existence of any encroachment, violation or impairment
and in such case, in the event of an adverse final
33
determination, either (a) obtain valid and effective waivers or settlements of
all claims, liabilities and damages resulting from each such encroachment,
violation or impairment, whether the same shall affect Lessor or Lessee or (b)
make such changes in the Leased Improvements, and take such other actions, as
Lessee in the good faith exercise of its judgment deems reasonably practicable
to remove such encroachment, and to end such violation or impairment, including,
if necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use substantially
in the manner and to the extent the Leased Improvements were operated prior to
the assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of Article X.
Lessee's obligations under this Section 9.2 shall be in addition to and shall in
no way discharge or diminish any obligation of any insurer under any policy of
title or other insurance held by Lessor.
ARTICLE X
10.1. Alterations. After receiving approval of Lessor, which approval shall not
be unreasonably withheld, Lessee shall have the right to make such additions,
modifications or improvements to the Leased Property from time to time as Lessee
deems desirable for its permitted uses and purposes, provided that such action
will not significantly alter the character or purposes or significantly detract
from the value or operating efficiency thereof and will not significantly impair
the revenue-producing capability of the Leased Property or adversely affect the
ability of the Lessee to comply with the provisions of this Lease. The cost of
such additions, modifications or improvements to the Leased Property shall be
paid by Lessee, and all such additions, modifications and improvements shall,
without payment by Lessor at any time, be included under the terms of this Lease
and upon expiration or earlier termination of this Lease shall pass to and
become the property of Lessor. Nothing set forth in this Section 10.1 is
intended to abrogate or limit Lessor's obligations to make Capital Expenditures
as set forth in the approved Capital Budget pursuant to Section 3.7.
10.2. Salvage. All materials which are scrapped or removed in connection with
the making of repairs required by Articles IX or X shall be or become the
property of Lessor or Lessee depending on which party is paying for or providing
the financing for such work.
10.3. Joint Use Agreements. If Lessee constructs additional improvements that
are connected to the Leased Property or share maintenance facilities, HVAC,
electrical, plumbing or other systems, utilities, parking or other amenities,
the parties shall enter into a mutually agreeable cross-easement or joint use
agreement, the form of which has been approved in advance by Lessor, to make
available necessary services and facilities in connection with such additional
improvements, to protect each of their respective interests in the properties
affected, and to provide for separate ownership, use, and/or financing of such
improvements.
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ARTICLE XI
Liens. Subject to the provision of Article XII relating to permitted
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, not including, however, (a) this
Lease, (b) the matters, if any, included as exceptions in the title policy
insuring Lessor's interest in the Leased Property, (c) restrictions, liens and
other encumbrances which are consented to in writing by Lessor or any easements
granted pursuant to the provisions of Section 7.3 of this Lease, (d) liens for
those taxes upon Lessor which Lessee is not required to pay hereunder, (e)
subleases permitted by Article XXIII hereof, (f) liens for Impositions or for
sums resulting from noncompliance with Legal Requirements so long as (1) the
same are not yet payable or are payable without the addition of any fine or
penalty or (2) such liens are in the process of being contested as permitted by
Article XII, (g) liens of mechanics, laborers, materialmen, suppliers or vendors
for sums either disputed or not yet due, provided that (1) the payment of such
sums shall not be postponed under any related contract for more than 60 days
after the completion of the action giving rise to such lien and such reserve or
other appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor or (2) any such liens are in
the process of being contested as permitted by Article XII hereof, and (h) any
liens which are the responsibility of Lessor pursuant to the provisions of
Article XXXIV of this Lease.
ARTICLE XII
Permitted Contests. Lessee shall have the right to contest the amount
or validity of any Imposition to be paid by Lessee or any Legal Requirement or
Insurance Requirement or any lien, attachment, levy, encumbrance, charge or
claim ("Claims") not otherwise permitted by Article XI, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon will be paid, or (b)
deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security for
the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all Claims
which may be assessed
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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 subject 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 provded in
this paragraph and to diligently prosecute any contest of the same, Lessor may,
upon ten (10) days' advance Notice to Lessee, pay such charges together with any
interest and penalties and the same shall be repayable by Lessee to Lessor as
Additional Charges at the next Payment Date provided for in this Lease;
provided, however, that should Lessor reasonably determine that the giving of
such Notice would risk loss to the Leased Property or cause damage to Lessor,
then Lessor shall give such Notice as is practical under the circumstances.
Lessor reserves the right to contest any of the Claims at its expense not
pursued by Lessee. Lessor and Lessee agree to cooperate in coordinating the
contest of any claims.
ARTICLE XIII
13.1. General Insurance Requirements.
During the Term of this Lease, Lessee shall at all times keep the
Leased Property insured with the kinds and amounts of insurance described below.
This insurance shall be written by qualified, solvent companies which can
legally write insurance in the State. The policies must name Lessor as the
insured or as an additional named insured, as the case may be. Losses shall be
payable to Lessor or Lessee as provided in this Lease. Subject to Section 13.10,
any loss adjustment with respect to the insurance coverages set forth in items
(a), (b) and (c), below 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 include:
(a) Building insurance of risks on the "Special Form" or "All Risk Form" in an
amount not less than 100% of the then full replacement cost thereof (as defined
in Section 13.3) or such other amount which is acceptable to Lessor, and
personal property insurance on the "Special Form" or "All Risk Form" in the full
amount of the replacement cost thereof;
(b) Earthquake and flood insurance in reasonable and
adequate amounts as mutually agreed by Lessor and Lessee.
(c) Insurance for loss or damage (direct and indirect)
from steam boilers, pressure vessels or similar apparatus, now or hereafter
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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;
(d) Loss of income insurance on the "Special Form" or "All
Risk Form", in the amount of the greater of (i) one year of Base Rent or (ii)
the prior Fiscal Year's Base Rent plus Percentage Rent for the benefit of
Lessor, and business income or business interruption insurance on the "Special
Form" or "All Risk Form" in amounts not less than one year of gross profit, for
the benefit of Lessee;
(e) Commercial general liability insurance, with amounts not
less than $10,000,000 covering each of the following: bodily injury, death, or
property damage liability per occurrence, personal and advertising injury,
general aggregate, products and completed operations, with respect to Lessor,
and liquor law or "dram shop" liability, if liquor or alcoholic beverages are
served on the Leased Property, with respect to Lessor and Lessee;
(f) Insurance covering such other hazards and in such amounts
as may be customary for comparable properties in the area of the Leased Property
and is available from insurance companies, insurance pools or other appropriate
companies authorized to do business in the State at rates which are economically
practicable in relation to the risks covered as may be reasonably requested by
Lessor;
(g) Fidelity bonds with limits and deductibles as may be
reasonably requested by Lessor, covering Lessee's employees in job
classifications normally bonded under prudent hotel management practices in the
United States or otherwise required by law;
(h) Worker's compensation insurance to the extent necessary
to protect Lessor and the Leased Property against Lessee's worker's compensation
claims;
(i) Vehicle liability insurance for owned, non-owned, and
hired vehicles, in the amount of $1,000,000; and
(j) Such other insurance as Lessor may reasonably request
for facilities such as the Leased Property and the operation thereof.
13.2. Responsibility for Premiums. Lessee shall keep in force the
foregoing insurance coverage at its expense.
13.3. Replacement Cost. The term "full replacement cost" as used herein
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
37
exclusions) has increased or decreased at any time during the Lease Term, it
shall have the right to have such full replacement cost re-determined.
13.4. Workers' Compensation. Lessee, at its sole cost, shall at all
times maintain adequate workers' compensation insurance coverage for all persons
employed by Lessee on the Leased Property. Such workers' compensation insurance
shall be in accordance with the requirements of applicable local, state and
federal law.
13.5. Waiver of Subrogation. All insurance policies carried by Lessor
or Lessee covering the Leased Property, the Fixtures, the Facility or Lessee's
Personal Property, including, without limitation, contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party. The parties hereto agree that their policies
will include such waiver clause or endorsement so long as the same are
obtainable without extra cost, and in the event of such an extra charge the
other party, at its election, may pay the same, but shall not be obligated to do
so.
13.6. Form Satisfactory, etc. All of the policies of insurance referred
to in this Article XIII shall be written in a form, with deductibles and by
insurance companies reasonably satisfactory to Lessor; provided, however, that
the qualitative financial condition and operating performance (or claims-paying
ability) of such insurance companies must be rated in at least the third highest
rating category of a nationally recognized statistical rating organization or
rated at least A:VIII by A.M. Best. Lessee shall be permitted to acquire
insurance through insurance companies which are Affiliates of Lessee and which
otherwise satisfy the requirements of this Article XIII, provided that the terms
of such insurance shall be no more favorable to such Affiliates than would the
same insurance if purchased from an independent third party. Lessee shall pay
all of the premiums therefor, and deliver such policies or certificates thereof
to Lessor prior to their effective date (and, with respect to any renewal
policy, 30 days prior to the expiration of the existing policy), and in the
event of the failure of Lessee either to effect such insurance as herein called
for or to pay the premiums therefor, or to deliver such policies or certificates
thereof to Lessor at the times required, Lessor shall be entitled, but shall
have no obligation, to effect such insurance and pay the premiums thereon, and
Lessee shall reimburse Lessor for any premium or premiums paid by Lessor for the
coverages required under this Section upon written demand therefor, and Lessee's
failure to repay the same within 30 days after Notice of such failure from
Lessor shall constitute an Event of Default within the meaning of Section
16.1(b). Each insurer mentioned in this Article XIII shall agree, by endorsement
to the policy or policies issued by it, or by independent instrument furnished
to Lessor, that it will give to Lessor thirty (30) days' written notice before
the policy or policies in question shall be materially altered, allowed to
expire or canceled.
13.7. 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
38
reasonable limits for such insurance to be carried and such insurance shall
thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section.
13.8. Blanket Policy. Notwithstanding anything to the contrary
contained in this Article XIII, 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 be reduced or diminished or otherwise be
different from that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article XIII are
otherwise satisfied.
13.9. Separate Insurance. Lessee shall not on Lessee's own initiative
or pursuant to the request or requirement of any third party, take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article to be furnished, or increase the amount of any then
existing insurance by securing an additional policy or additional policies,
unless all parties have an insurable interest in the subject matter of the
insurance, including in all cases Lessor, are included therein as additional
insured, and the loss is payable under such additional separate insurance in the
same manner as losses are payable under this Lease. Lessee shall immediately
notify Lessor that Lessee has obtained any such separate insurance or of the
increasing of any of the amounts of the then existing insurance.
13.10. Reports On Insurance Claims. Lessee shall promptly investigate
and make a complete and timely written report to the appropriate insurance
company, as to all accidents, claims for damage relating to the ownership,
operation, and maintenance of the Leased Property, any damage or destruction to
the Leased Property and the estimated cost of repair thereof and shall prepare
any and all reports required by any insurance company in connection therewith.
All such reports shall be timely filed with the insurance company as required
under the terms of the insurance policy involved, and a final copy of such
report shall be furnished to Lessor. Lessee shall not adjust, settle, or
compromise any insurance loss, or execute proofs of such loss, with respect to
the insurance coverages set forth in Subsections 13.1(a), 13.1(b) or 13.1(c), in
the aggregate amount of $10,000 or more, with respect to any single casualty or
other event, without the prior written consent of Lessor, which consent shall
not be unreasonably withheld, delayed or conditioned.
ARTICLE XIV
14.1. Insurance Proceeds. Subject to the provisions of Section 14.6,
all proceeds payable by reason of any loss or damage to the Leased Property, or
any portion thereof, and insured under any policy of insurance required by
Article XIII of this Lease shall be paid to Lessor and held in trust by Lessor
in an interest-bearing account, shall be made
39
available, if applicable, for reconstruction or repair, as the case may be, of
any damage to or destruction of the Leased Property, or any portion thereof,
and, if applicable, shall be paid out by Lessor from time to time for the
reasonable costs of such reconstruction or repair upon satisfaction of
reasonable terms and conditions specified by Lessor. Any excess proceeds of
insurance remaining after the completion of the restoration or reconstruction of
the Leased Property shall be equitably apportioned between Lessor and Lessee in
proportion to the then fair market values of the respective estates and
interests of Lessor and Lessee in and to the Leased Property and under this
Lease. If neither Lessor nor Lessee is required or elects to repair and restore,
and the Lease is terminated without purchase by Lessee as described in Section
14.2, all such insurance proceeds shall be retained by Lessor. All salvage
resulting from any risk covered by insurance shall belong to Lessor.
14.2. Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
(a) Except as provided in Section 14.6, if during the Term the Leased Property
is totally or partially destroyed by a risk covered by the insurance described
in Article XIII and the Facility thereby is rendered Unsuitable for its Primary
Intended Use, Lessee may, at Lessee's option, either (1) restore the Facility to
substantially the same condition as existed immediately before the damage or
destruction and otherwise in accordance with the terms of the Lease (subject to
the provisions of Section 14.2(c)), or (2) terminate the Lease with respect to
the Leased Property without further liability hereunder and all insurance
proceeds shall be equitably apportioned between Lessor and Lessee in proportion
to the then fair market values of the respective estates and interests of Lessor
and Lessee in and to the Leased Property and under this Lease. If this Lease
terminates pursuant to this Section 14.2(a), the Lessee shall pay all Rent due
through the date of such termination. If Lessee restores the facility, the
insurance proceeds shall be paid out by Lessor from time to time for the
reasonable costs of such restoration upon satisfaction of reasonable terms and
conditions, and any excess proceeds remaining after such restoration shall be
equitably apportioned between Lessor and Lessee in proportion to the then fair
market values of the respective estates and interests of Lessor and Lessee in
and to the Leased Property and under this Lease.
(b) Except as provided in Section 14.6, if during the Term the
Leased Property is partially destroyed by a risk covered by the insurance
described in Article XIII, but the Facility is not thereby rendered Unsuitable
for its Primary Intended Use, Lessee shall restore the Facility to substantially
the same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease, subject to the provisions
of Section 14.2(c). Such damage or destruction shall not terminate this Lease;
provided, however, that if Lessee cannot within a reasonable time obtain all
necessary
40
government approvals, including building permits, licenses and conditional use
permits, after diligent efforts to do so, to perform all required repair and
restoration work and to operate the Facility for its Primary Intended Use in
substantially the same manner as that existing immediately prior to such damage
or destruction and otherwise in accordance with the terms of the Lease, Lessee
may give Lessor written notice of termination of the Lease (without affecting
any other Leases then in effect between Lessor and Lessee) and terminate this
Lease with respect to the Leased Property without further liability hereunder
other than for accrued obligations hereunder and any other obligations which
survive the termination of this Lease and Lessor shall be entitled to retain all
insurance proceeds. If Lessee restores the Facility, the insurance proceeds
shall be paid out by Lessor from time to time for the reasonable costs of such
restoration upon satisfaction of reasonable terms and conditions specified by
Lessor, and any excess proceeds remaining after such restoration shall be
equitably apportioned between Lessor and Lessee in proportion to the then fair
market values of the respective estates and interests of Lessor and Lessee in
and to the Leased Property and under this Lease.
(c) If the estimated cost of the repair or restoration exceeds
the amount of proceeds received by Lessor and Lessee from the insurance required
under Article XIII (other than as a result of Lessee's failure to maintain the
types and amounts of insurance coverage required by Article XIII), and Lessee
indicates a desire to restore the Facility if adequate funds were made
available, then if Lessor elects to direct Lessee to make such repairs or
restoration, Lessor shall be obligated to contribute any excess amounts needed
to restore the Facility prior to the commencement of work thereon. Such
difference to be held in trust, together with any other insurance proceeds, for
application to the cost of repair and restoration, shall be paid by Lessor to
Lessee promptly after Lessor receives Lessee's written invoice therefor. In the
event Lessee indicates a desire to restore the Facility but Lessor declines to
provide the additional funds necessary to do so, each of Lessor or Lessee shall
have the right to terminate this Lease as to the Facility in question, without
in any way affecting this Lease with respect to any other Leased Property, by
giving notice to the other. Upon such termination all insurance proceeds with
respect to the Leased Property in question shall be retained by Lessor.
14.3. Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance. Except as provided in Section 14.6, if during the Term the
Facility is totally or substantially destroyed by a risk not covered by the
insurance described in Article XIII, whether or not such damage or destruction
renders the Facility Unsuitable for its Primary Intended Use, Lessee at its
option may either (a) 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 (subject to the provisions of Section
14.2(c)), or (b) terminate the Lease with respect to the Leased Property without
further liability hereunder. If such damage or destruction is not material,
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, and such damage or destruction shall not terminate the
Lease.
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14.4. Lessee's Property. All insurance proceeds payable by reason of
any loss of or damage to any of Lessee's Personal Property shall be paid to
Lessee; provided, however, no such payments shall diminish or reduce the
insurance payments otherwise payable to or for the benefit of Lessor hereunder.
14.5. Abatement of Rent. Any damage or destruction due to casualty
notwithstanding, this Lease shall remain in full force and effect provided that
Lessee's obligation to make rental payments and to pay all other charges
required by this Lease shall not ▇▇▇▇▇ during the period required for the
applicable repair and restoration; provided that the Lessee shall receive a
credit against such rental payments and other charges in an amount equal to any
loss of income insurance proceeds actually received by Lessor pursuant to any
loss of income insurance pursuant to Section 13.1(d).
14.6. Damage Near End of Term. Notwithstanding any provisions of
Section 14.2 or 14.3 appearing to the contrary, if damage to or destruction of
the Facility rendering it Unsuitable for its Primary Intended Use occurs during
the last 24 months of the Term, then Lessee shall have the right to terminate
this Lease by giving written notice to Lessor within thirty (30) days after the
date of damage or destruction, whereupon all accrued Rent shall be paid
immediately, and this Lease shall automatically terminate five days after the
date of such notice, without any further liability by Lessee to Lessor other
than liabilities that expressly survive a termination of this Lease.
14.7. Waiver. Lessee hereby waives any statutory rights of termination
that may arise by reason of any damage or destruction of the Facility that
Lessor is obligated to restore or may restore under any of the provisions of
this Lease.
ARTICLE XV
15.1. Definitions.
(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.
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(c) "Award" means all compensation, sums or anything of value awarded, paid
or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
15.2. Parties' Rights and Obligations. If during the Term there is
any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV.
15.3. Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of Taking by the Condemnor. If title to the fee of less than the
whole of the Leased Property is so taken or condemned, which nevertheless
renders the Leased Property Unsuitable or Uneconomic for its Primary Intended
Use, Lessee and Lessor shall each have the option, by notice to the other, at
any time prior to the Date of Taking, to terminate this Lease as of the Date of
Taking. Upon such date, if such Notice has been given, this Lease shall
thereupon cease and terminate. All Base Rent, Percentage Rent and Additional
Charges paid or payable by Lessee hereunder shall be apportioned as of the Date
of Taking, and Lessee shall promptly pay Lessor such amounts.
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 party
shall initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to the other party.
15.5. Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is still suitable for its Primary
Intended Use and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as provided in
Section 15.3, Lessee at its cost shall with all reasonable dispatch, but only to
the extent of any condemnation awards made available to Lessee and any other
sums advanced by Lessor pursuant to the next sentence, 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. If the condemnation awards are
not adequate to restore the Facility to that condition, each of Lessor and
Lessee shall have the right to terminate this
43
Lease, without in any way affecting any other leases in effect between Lessor
and Lessee, by giving Notice to the other; provided, however that, if such
termination is by Lessee, Lessor shall have the right, in its sole discretion,
to nullify the termination and keep this Lease in full force by providing,
within thirty (30) days after Lessee's Notice of termination, a Notice to Lessee
of Lessor's unconditional, legally binding obligation to be responsible for all
restoration costs in excess of the condemnation awards. If this Lease is not
terminated and Lessee restores the Facility, the condemnation awards, and any
other sums made available by Lessor as aforesaid, shall be held in trust by
Lessor and paid out by Lessor from time to time for the reasonable costs of such
restoration upon satisfaction of reasonable terms and conditions, and any excess
awards remaining after such restoration shall be retained by Lessor unless the
partial condemnation materially impairs the operations or financial performance
of the Facility, in which latter event the award shall be equitably apportioned
between Lessor and Lessee in proportion to the then fair market values of the
respective estates and interests of Lessor and Lessee in and to the Leased
Property and under this Lease.
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 terms herein
specified, the full amounts of Base Rent and Additional Charges. In addition,
Lessee shall pay Percentage Rent at a rate equal to the average Percentage Rent
during the last three preceding Fiscal Years (or if three Fiscal Years shall not
have elapsed, the average during the preceding Fiscal 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, at its sole cost and expense (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 of 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, and Lessee shall fund the balance of such costs.
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ARTICLE XVI
16.1. Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) if an Event of Default occurs under any Other Lease between Lessor and its
Affiliate, as lessor, and Lessee; or (b) if Lessee fails to make payment of the
Base Rent, Percentage Rent or Additional Charges within ten (10) days after
written notice from Lessor that the same has become due and payable; or (c)
except as set forth in Sections 16.1(b), if either party fails to observe or
perform any other term, covenant or condition of this Lease and such failure is
not cured by such party within a period of thirty (30) days after receipt by
such party of Notice thereof from the other party, unless such failure cannot
with due diligence be cured within a period of thirty (30) days, in which case
it shall not be deemed an Event of Default if such party proceeds promptly and
with due diligence to cure the failure and diligently completes the curing
thereof provided, however, in no event shall such cure period extend beyond 90
days after such Notice; or (d) if Lessee, any parent entity (which for the
purposes of this Section shall be deemed to include any direct or indirect
parent entity with effective management control over the Lessee) or lease
guarantor shall file a petition in bankruptcy or reorganization for an
arrangement pursuant to any federal or state bankruptcy law or any similar
federal or state law, or shall be adjudicated a bankrupt or shall make an
assignment for the benefit of creditors or shall admit in writing its inability
to pay its debts generally as they become due, or if a petition or answer
proposing the adjudication of Lessee, any parent entity or lease guarantor as a
bankrupt or its reorganization pursuant to any federal or state bankruptcy law
or any similar federal or state law shall be filed in any court and Lessee, any
parent entity or lease guarantor shall be adjudicated a bankrupt and such
adjudication shall not be vacated or set aside or stayed within sixty (60) days
after the entry of an order in respect thereof, or if a receiver of the Lessee,
any parent entity or lease guarantor or of the whole or substantially all of the
assets of the Lessee, any parent entity or lease guarantor shall be appointed in
any proceedings brought by the Lessee, any parent entity or lease guarantor or
if any such receiver, trustee or liquidator shall be appointed in any proceeding
brought against Lessee, any parent entity or lease guarantor shall not be
vacated or set aside or stayed within sixty (60) days after such appointment; or
(e) if Lessee, any parent entity or lease guarantor is liquidated or dissolved,
or begins proceedings toward such liquidation or dissolution, or, if Lessee, any
parent entity
45
or lease guarantor in any manner, permits the sale or divestiture of
substantially all of its assets; or (f) if the estate or interest of Lessee in
the Leased Property or any part thereof (i) is voluntarily or involuntarily
transferred, assigned, conveyed, levied upon or attached in any proceeding
(unless Lessee is contesting such lien or attachment in good faith in accordance
with Article XII hereof) or (ii) is transferred, assigned or conveyed; or (g)
if, except as a result of damage, destruction or a partial or complete
Condemnation, Lessee voluntarily ceases operations on the Leased Property for a
period in excess of thirty (30) days; or (h) if an event of default has been
declared by the franchisor under the Franchise Agreement with respect to the
Facility on the Leased Premises as a result of any action or failure to act by
the Lessee or any other person with whom Lessee contracts for management
services at the Facility (other than a failure to complete a Capital Improvement
required by the franchisor resulting from Lessor's failure to fund the Capital
Expenditure therefor pursuant to Section 9.1(b)) and Lessee has failed, within
thirty (30) days thereafter, to cure such default by either (1) curing the
underlying default under the Franchise Agreement and paying all costs and
expenses associated therewith, or (2) obtaining at Lessee's sole cost and
expense a substitute franchise license agreement with a substitute franchisor
acceptable to Lessor, on terms and conditions acceptable to Lessor; provided,
however, that if Lessee is in good faith disputing an assertion of default by
the franchisor or is proceeding diligently to cure such default, the 30-day
period shall be extended for such period of time as Lessee continues during this
period to dispute such default in good faith or diligently proceeds to cure such
default (but in any event not longer than ninety (90) days following the
assertion of default by the franchisor) and so long as there is no period during
which the Facility is not operated pursuant to a Franchise Agreement approved by
Lessor; or (i) the occurrence of an Event of Default under any guaranty of lease
in favor of Lessor with respect to Lessee's obligations under this Lease.
Then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including, but not limited to, its right to
terminate this Lease with respect to an individual Leased Property or any other
Leases identified on Exhibit B, or, in the case of a breach by Lessor under
subsection (c) above, Lessee may exercise one or more remedies available to it
herein or at law or in equity, including, but not limited to, its right to
terminate this Lease with respect to the individual Leased Property with respect
to which Lessor has breached its obligations under subsection (c) above (but not
with respect to any other Leases identified on Exhibit B.
46
If litigation is commenced with respect to any alleged default under this Lease,
the prevailing party in such litigation shall receive, in addition to its
damages incurred, such sum as the court shall determine as its reasonable
attorneys' fees, and all costs and expenses incurred in connection therewith.
No Event of Default (other than a failure to make a payment of money) shall be
deemed to exist under clause (c) during any time the curing thereof is prevented
by an Unavoidable Delay, provided that upon the cessation of such Unavoidable
Delay, Lessee remedies such default or Event of Default without further delay.
16.2. Surrender. If an Event of Default occurs (and the event giving rise to
such Event of Default has not been cured within the curative period relating
thereto as set forth in Section 16.1) and is continuing, whether or not this
Lease has been terminated pursuant to Section 16.1, Lessee shall, if requested
by Lessor so to do, immediately surrender and assign to Lessor or Lessor's
designee the Leased Property including, without limitation, any and all books,
records, files, licenses, permits and keys relating thereto, and quit the same
and Lessor may enter upon and repossess the Leased Property by reasonable force,
summary proceedings, ejectment or otherwise, and may remove Lessee and all other
persons and any and all personal property from the Leased Property, subject to
rights of any hotel guests and to any requirement of law. Lessee hereby waives
any and all requirements of applicable laws for service of notice to re-enter
the Leased Property. Lessor shall be under no obligation to, but may if it so
chooses, relet the Leased Property or otherwise mitigate Lessor's damages,
except unless otherwise required by applicable law.
16.3. Damages. Neither (a) the termination of this Lease, (b) the repossession
of the Leased Property, (c) the failure of Lessor to relet the Leased Property,
nor (d) the reletting of all or any portion thereof, shall relieve Lessee of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In the event of any such termination,
Lessee shall forthwith pay to Lessor all Rent due and payable with respect to
the Leased Property to and including the date of such termination.
Lessee shall forthwith pay to Lessor, at Lessor's option, as and for liquidated
and agreed current damages for Lessee's default, either:
(1) Without termination of Lessee's right to possession of the Leased
Property, each installment of Rent (including Percentage Rent as
determined below) and other sums payable by Lessee to Lessor under the
Lease as the same becomes due and payable, which Rent and other sums
shall bear interest at the Overdue Rate, and Lessor may enforce, by
action or otherwise, any other term or covenant of this Lease; or
47
(2) the sum of:
(A) the unpaid Rent which had been earned at the time of
termination, repossession or reletting, and
(B) the worth at the time of termination, repossession or
reletting of the amount by which the unpaid Rent for
the balance of the Term after the time of
termination, repossession or reletting, exceeds the
amount of such rental loss that Lessee proves could
be reasonably avoided and as reduced for rentals
received after the time of termination, repossession
or reletting, if and to the extent required by
applicable law, and
(C) any other amount necessary to compensate Lessor for
all the detriment proximately caused by Lessee's
failure to perform its obligations under this Lease
or which in the ordinary course of things, would be
likely to result therefrom. The worth at the time of
termination, repossession or reletting of the amount
referred to in subparagraph (B) is computed by
discounting such amount at the discount rate of the
Federal Reserve Bank of New York at the time of award
plus 1%.
Percentage Rent for the purposes of this Section 16.3 shall be a sum equal to
(i) the average of the annual amounts of the Percentage Rent for the three
Fiscal Years immediately preceding the Fiscal Year in which the termination,
re-entry or repossession takes place, or (ii) if three Fiscal Years shall not
have elapsed, the average of the Percentage Rent during the preceding Fiscal
Years during which the Lease was in effect, or (iii) if one Fiscal Year has not
elapsed, the amount derived by annualizing the Percentage Rent from the
effective date of this Lease.
16.4. Waiver. If this Lease is terminated pursuant to Section 16.1, Lessee
waives, to the extent permitted by applicable law, (a) any right to a trial by
jury in the event of summary proceedings to enforce the remedies set forth in
this Article XVI, and (b) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt and Lessor waives any
right to "▇▇▇▇▇▇ the corporate veil" of Lessee other than to the extent funds
shall have been inappropriately paid any Affiliate of Lessee following a default
resulting in an Event of Default.
16.5. Application of Funds. Any payments received by Lessor under any
of the provisions of this Lease during the existence or continuance of any Event
of Default shall be applied to Lessee's obligations in the order that Lessor may
determine or as may be prescribed by the laws of the State.
48
ARTICLE XVII
Lessor's Right to Cure Lessee's Default. If Lessee fails to make any payment or
to perform any act required to be made or performed under this Lease including,
without limitation, Lessee's failure to comply with the terms of any Franchise
Agreement other than a failure to complete improvements required by the
franchisor because the Lessor has not provided Lessee with funds therefor, 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 make such payment or perform such act for
the account and at the expense of Lessee, and may, to the extent permitted by
law, enter upon the Leased Property for such purpose and, subject to Section
16.4, take all such action thereon as, in Lessor's 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 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 XVIII
[INTENTIONALLY OMITTED]
ARTICLE XIX
19.1. REIT Requirements.
(a) Lessee understands that in order for Equity Inns to qualify as a REIT, the
following requirements (the "REIT Requirements") must be satisfied:
(i) Anything contained in this Lease to the contrary
notwithstanding, the average of the fair market value of
Lessor's personal property that is leased to the Lessee under
a lease at the beginning and end of a Fiscal Year shall not
exceed 15% of the average of the aggregate fair market values
of all of Lessor's property that is leased to Lessee under
such
49
lease at the beginning and at the end of such Fiscal Year (the
"Personal Property Limitation"). If Lessor reasonably
anticipates that the Personal Property Limitation will be
exceeded with respect to a Leased Property for any Fiscal
Year, Lessor shall notify Lessee, and Lessee either (a) shall
purchase at fair market value any personal property
anticipated to be in excess of the Personal Property
Limitation ("Excess Personal Property") either from the Lessor
or a third party or (b) shall lease the Excess Personal
Property from a third party. In either case, Lessee's Rent
obligation shall be equitably adjusted. In addition, in the
case of the purchase or lease of Excess Personal Property by
the Lessee from a third party, the Lessor's capital
expenditure reserve obligation pursuant to Article XXXIX shall
be appropriately decreased to reflect the reduced need for
Lessor-owned personal property. Notwithstanding anything to
the contrary set forth above, Lessee shall not be responsible
in any way for determining whether or not Lessee has exceeded
or will exceed the Personal Property Limitation, and shall not
be liable to Lessor or any of its shareholders in the event
that the Personal Property Limitation is exceeded, as long as
Lessee meets its obligation to acquire or lease any Excess
Personal Property as provided above. This Section 19.1 is
intended to ensure that the Rent qualifies as "rents from real
property," within the meaning of Section 856(d) of the Code,
or any similar or successor provisions thereto, and shall be
interpreted in a manner consistent with such intent.
(ii) Anything contained in this Lease to the contrary
notwithstanding, Lessee shall not sublet the Leased Property
on any basis such that the rental to be paid by the sublessee
thereunder would be based, in whole or in part, on either (a)
the income or profits derived by the business activities of
the sublessee, or (b) any other formula such that any portion
of the Rent would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or
any similar or successor provision thereto.
(iii) Lessee cannot sublet the Leased Property to any Person in
which Equity Inns, owns, directly or indirectly, a 10% or more
interest, within the meaning of Section 856(d)(2)(B) of the
Code, or any similar or successor provisions thereto.
(iv) Lessee agrees to make an election to be, and to operate as a
"taxable REIT subsidiary" of Equity Inns within the meaning of
Section 856(e) of the Code, or any similar or successor
provision thereto.
50
(v) Lessee shall not (i) directly or indirectly operate or manage
a "lodging facility" within the meaning of Section
856(d)(9)(D)(ii) of the Code or a "health care facility"
within the meaning of Section 856(e)(6)(D)(ii) or (ii)
directly or indirectly provide to any other person (under a
franchise, license, or otherwise) rights to any brand name
under which any lodging facility or health care facility is
operated; provided, however, that Lessee may provide such
rights to Manager to operate or manage a lodging facility as
long as such rights are held by Lessee as a franchisee,
licensee, or in a similar capacity and such lodging facility
is either owned by Lessee or is leased to Lessee by Lessor or
one of its Affiliates.
(vi) Lessee agrees, and agrees to use reasonable efforts to cause
its Affiliates, to use their best efforts to permit the REIT
Requirements to be satisfied. Lessee agrees and agrees to use
reasonable efforts to cause its Affiliates, to cooperate in
good faith with Equity Inns and Lessor to ensure that the REIT
Requirements are satisfied, including but not limited to,
providing Equity Inns with information about the ownership of
Lessee, and its Affiliates to the extent that such information
is reasonably available. Lessee agrees, and agrees to use
reasonable efforts to cause its Affiliates, upon request by
Equity Inns, and, where appropriate, at Equity Inns' expense,
to take reasonable action necessary to ensure compliance with
the REIT Requirements. Immediately after becoming aware that
the REIT Requirements are not, or will not be, satisfied,
Lessee shall notify, or use reasonable efforts to cause its
Affiliates to notify, Equity Inns of such noncompliance.
19.2. Lessee Officer and Employee Limitation. Anything contained in this Lease
to the contrary notwithstanding, none of the officers or employees of the Lessee
or any Lessee Affiliate shall be officers or employees of Manager (or any Person
who operates or manages the Leased Property). In addition, if a Person serves as
both (a) a director of the Lessee or Lessee Affiliate and (b) a director or
trustee and officer (or employee) of Manager (or any Person who operates or
manages the Leased Property), that Person shall not receive any compensation for
serving as a director of the Lessee or any Lessee Affiliate. If a Person serves
as both (a) director or Manager of any Lessee Affiliate (or any Person who
operates or manages the Leased Property) and (b) a director and officer (or
employee) of Lessee, that Person shall not receive any compensation for serving
as a director or Manager of such Lessee Affiliate.
19.3. Payments to Affiliates of Lessee. Notwithstanding anything to
the contrary contained in this Lease, Lessee shall make no payments to
Affiliates as Gross Operating Expenses unless expressly set forth in the
Operating Budget or an approved Capital Budget
51
or otherwise expressly agreed to in writing by Lessor, in either case, after
full written disclosure (including information regarding competitive pricing) by
Lessee to Lessor of the affiliation and any other related information requested
by Lessor. Furthermore, Lessee shall be permitted to contract with its
Affiliates for management and other services and to pay fees for such services,
provided that such contracts and fees are disclosed in writing to Lessor and
such fees shall not be included in Gross Operating Expenses and Lessee's
obligation to pay such fees shall be subordinated to Lessee's obligation to pay
Base Rent, Percentage Rent and Additional Charges to Lessor pursuant to the
terms of this Lease.
19.4. Management Agreement. Lessee agrees that in order to comply with certain
of the REIT Requirements, it will, at all times, during the Term cause the
Leased Property to be operated and managed by a management company ("Manager")
that is an Eligible Independent Contractor. Lessee shall provide Lessor with an
executed copy of all agreements relating to the management or operation of the
Facility (a "Management Agreement"). Lessor shall have the right in its sole and
absolute discretion to approve or disapprove in advance any Manager or proposed
Manager of the Facility which is not a Qualified Manager. Any Management
Agreement must provide that (i) upon termination of this Lease or termination of
Lessor's or Lessee's right to possession of the Leased Property for any reason,
the Management Agreement may be terminated by Lessor without liability for any
payment due or to become due to the Manager thereunder; (ii) any management fees
shall be subordinated to payments of Rent to Lessor hereunder; and (iii) in the
event Lessee is in default, the Manager shall, at the election of Lessor and
provided the Manager continues to be paid, and Lessor (or any party acting by or
through Lessor) agrees to perform Lessee's other obligations to Manager under
the Management Agreement which accrue subsequent to the date the Lessor makes
such election, continue to perform under the terms of the Management Agreement
for a period not to exceed ninety (90) days, provided that such election by
Lessor shall not constitute a waiver by Lessor of any rights or remedies Lessor
may have as a result of Lessee's default. No fees or other amounts payable by
Lessee to any Manager shall excuse Lessee from its obligations to pay Rent and
other amounts payable by Lessee to Lessor hereunder. No Management Agreement may
be amended or modified in any manner which materially affects the subordination
of the management fees without the prior written consent of Lessor.
ARTICLE XX
Holding Over. If Lessee for any reason remains in possession of the Leased
Property after the expiration or earlier termination of the Term, such
possession shall be as a tenant at sufferance during which time Lessee shall pay
as rental each month two times the aggregate of (a) one-twelfth of the aggregate
Base Rent and Percentage Rent payable with respect to the last Fiscal Year of
the Term, (b) all Additional Charges accruing during the applicable month and
(c) all other sums, if any, payable by Lessee under this Lease with respect to
the Leased
52
Property. During such period, Lessee shall be obligated to perform and observe
all of the terms, covenants and conditions of this Lease, but shall have no
rights hereunder other than the right, to the extent given by law to tenancies
at sufferance, to continue its occupancy and use of the Leased Property. Nothing
contained herein shall constitute the consent, express or implied, of Lessor to
the holding over of Lessee after the expiration or earlier termination of this
Lease.
ARTICLE XXI
Risk of Loss. During the Term, the risk of loss or of decrease in the enjoyment
and beneficial use of the Leased Property in consequence of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than those caused by Lessor and those claiming from, through, or under
Lessor) is assumed by Lessee except as specifically provided in this Lease, and,
in the absence of negligence, willful misconduct or breach of this Lease by
Lessor, Lessor shall in no event be answerable or accountable therefor, nor
shall any of the events mentioned in this Section entitle Lessee to any
abatement of Rent except as specifically provided in this Lease.
53
ARTICLE XXII
Indemnification. Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance, but
subject to Section 16.4 and Article VIII, Lessee will protect, indemnify, hold
harmless and defend Lessor 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, 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 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 a Condemnation proceedings), (c) any
Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the part of Lessee to perform or
comply with any of the terms of this Lease, and (e) the non-performance of any
of the terms and provisions of any and all existing and future subleases of the
Leased Property to be performed by the landlord thereunder.
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; (b) any failure on the part of Lessor to perform or comply with any of
the terms of this Lease; (c) any Impositions that are the obligations of Lessor
pursuant to the applicable provisions of this Lease; (d) any liability arising
under the Franchise Agreement as a result of inadequate funding by Lessor for
Capital Expenditures; (e) liabilities or obligations arising under the Americans
with Disabilities Act (except to the extent relating to alterations performed by
or actions taken by Lessee subsequent to the Commencement Date of this Lease);
or (f) contractual liabilities to third parties not affiliated with Lessee
(including franchisors) relating to, or arising out of, the termination of this
Lease by reason of an Event of Default by Lessor prior to the expiration of any
such third party contract.
To the extent that neither of the foregoing paragraphs applies to a
particular liability, action, claim, damage, cost or expense arising out of
operation of the Leased Property, such liability, action, claim, damage, cost or
expense shall be paid as a Gross Operating Expense.
54
Any amounts that become payable by an Indemnifying Party under this
Section shall be paid within ten (10) 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 day of payment. An
Indemnifying Party, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against the Indemnified
Party. The Indemnified Party, at its expense, shall be entitled to participate
in any such claim, action, or proceeding, and 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 XXIII
23.1. Subletting and Assignment. Subject to the provisions of Article
XIX and Section 23.2 and any other express conditions or limitations set forth
herein, Lessee may, but only with the prior written consent of Lessor, which
consent may not be unreasonably withheld or delayed, (a) assign this Lease or
sublet all or any part of the Leased Property to an Affiliate of Lessee, or (b)
sublet any retail or restaurant portion of the Leased Improvements in the normal
course of the Primary Intended Use; provided that any subletting to any party
other than an Affiliate of Lessee shall not individually as to any one such
subletting, or in the aggregate, materially diminish the actual or potential
Percentage Rent payable under this Lease. Any other assignment or subletting
shall require the express written consent of Lessor, which consent may be
withheld, delayed or conditioned in Lessor's sole discretion. In the case of a
subletting, the sublessee shall comply with the provisions of Section 23.2, and
in the case of an assignment, the assignee shall assume in writing and agree to
keep and perform all of the terms of this Lease on the part of Lessee to be kept
and performed and shall be, and become, jointly and severally liable with Lessee
for the performance thereof. Notwithstanding the above, Lessee may assign the
Lease without the consent of Lessor to any party providing a loan to Lessee or
any of its affiliates (a "Lender") provided (a) the assignment is for the
purpose of granting a collateral interest in Lessee's economic interest in the
Leases or in any future leases between Lessor and Lessee, to the Lender, or in
the economic interest of any Affiliate of Lessee in the Leases, to secure such
loan and (b) such assignment is not made in violation of Lessee's organic
documents. 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
55
assignee, as the case may be, in form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor. Any transfer of a Controlling interest in
Lessee shall be subject to the same limitations as are applicable to a direct
assignment of this Lease pursuant to this Section 23.1.
23.2. Attornment. Lessee shall insert in each sublease permitted under
Section 23.1 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 hereunder will, at Lessor's option, attorn to Lessor and
waive any right the sublessee may have to terminate the sublease or to surrender
possession thereunder as a result of the termination of this Lease, and (c) if
the sublessee receives a written Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if any,
as the case may be, shall be credited against the amounts owing by Lessee under
this Lease.
ARTICLE XXIV
Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants.
(a) At any time and from time to time upon not less than ten (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 and any prospective purchaser of the Leased Property.
(b) Throughout the Term, Lessee will furnish to Lessor all financial
statements and financial and operating information, and access to Lessee's books
and records as are required by Lessor, as reasonably determined by Lessor.
(c) At any time and from time to time upon not less than ten (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.
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ARTICLE XXV
Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining thereto
and make copies thereof, during usual business hours upon reasonable advance
notice, subject only to any business confidentiality requirements reasonably
requested by Lessee.
ARTICLE XXVI
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 XXVII
Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
ARTICLE XXVIII
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.
57
ARTICLE XXIX
No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same Person or
entity may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
ARTICLE XXX
30.1. Conveyance by Lessor. If Lessor or any successor owner of the
Leased Property conveys the Leased Property in accordance with the terms hereof
other than as security for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other transfer as to the Leased
Property and all such future liabilities and obligations shall thereupon be
binding upon the new owner.
30.2. Other Interests. This Lease and Lessee's interest hereunder shall
at all times be subject and subordinate to the lien and security title of any
deeds to secure debt, deeds of trust, mortgages, or other interests heretofore
or hereafter granted by Lessor in order to finance or refinance the Leased
Property and to any and all advances to be made thereunder and to all renewals,
modifications, consolidations, replacements, substitutions, and extensions
thereof (all of which are herein called the "Mortgage").
ARTICLE XXXI
Quiet Enjoyment. So long as Lessee pays all Rent as the same becomes
due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if any,
Lessee shall peaceably and quietly have, hold and enjoy the Leased Property for
the Term hereof, free of any claim or other action by Lessor or anyone claiming
by, through or under Lessor, but subject to all liens and encumbrances subject
to which the Leased Property was conveyed to Lessor or hereafter consented to by
Lessee or provided for herein. Notwithstanding the foregoing, Lessee shall have
the right by separate and independent action to pursue any claim it may have
against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Section.
58
ARTICLE XXXII
Notices. All notices, demands, requests, consents approvals and other
communications ("Notice" or "Notices") hereunder shall be in writing and
personally served or mailed (by registered or certified mail, return receipt
requested and postage prepaid), addressed to Lessor at its principal office, as
indicated on the signature page hereof, Attention: President, and addressed to
Lessee as indicated on the signature page hereof, Attention: Manager, or to such
other address or addresses as either party may hereafter designate. Personally
delivered Notice shall be effective upon receipt, and Notice given by mail shall
be complete at the time of deposit in the U.S. Mail system, but any prescribed
period of Notice and any right or duty to do any act or make any response within
any prescribed period or on a date certain after the service of such Notice
given by mail shall be extended five days.
ARTICLE XXXIII
Appraisers. If it becomes necessary to determine the Fair Market Value
or Fair Market Rental of the Leased Property for any purpose of this Lease, the
party required or permitted to give Notice of such required determination shall
include in the Notice the name of a person selected to act as appraiser on its
behalf. Within ten (10) days after Notice, Lessor (or Lessee, 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 forty-five (45) days after the date of the Notice
appointing the first appraiser, proceed to appraise the Leased Property to
determine the Fair Market Value or Fair Market Rental thereof as of the relevant
date (giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
shall have been so appointed, then the determination of such appraiser shall be
final and binding upon the parties. To the extent consistent with sound
appraisal practice as then existing at the time of any such appraisal, such
appraisal shall be made on a basis consistent with the basis on which the Leased
Property was appraised for purposes of determining its Fair Market Value at the
time the Leased Property was acquired by Lessor. If two appraisers are appointed
and if the difference between the amounts so determined does not exceed 5% of
the lesser of such amounts, then the Fair Market Value or Fair Market Rental
shall be an amount equal to 50% of the sum of the amounts so determined. If the
difference between the amounts so determined exceeds 5% of the lesser of such
amounts, then such two appraisers shall have twenty (20) days to appoint a third
appraiser. If no such appraiser shall have been appointed within such twenty
(20) days or within ninety (90) days of the original request for a determination
of Fair Market Value or Fair Market Rental, whichever is earlier, either Lessor
or Lessee may apply to any court having jurisdiction to have such appointment
made by such court. Any appraiser appointed by the original appraisers or by
such court shall be instructed to determine the Fair Market Value or Fair Market
Rental within 45 days after appointment of such appraiser. The determination of
the appraiser which differs most in the terms of dollar amount from the
determinations of the other two appraisers shall be excluded, and 50% of the sum
of the remaining two determinations shall be final and binding upon Lessor and
Lessee as the Fair Market Value or Fair
59
Market Rental of the Leased Property, as the case may be. This provision for
determining by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by applicable
law. Lessor and Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
appraiser appointed by it and each shall pay one-half of the fees and expenses
of the third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.
ARTICLE XXXIV
34.1. Lessor May Grant Mortgages. Without the consent of Lessee, Lessor
may, subject to the terms and conditions set forth below in this Section XXXIV,
from time to time, directly or indirectly, create or otherwise cause to exist
any Mortgage upon the Leased Property, or any portion thereof or interest
therein, whether to secure any borrowing or other means of financing or
refinancing.
34.2. Lessee's Right to Cure. Subject to the provisions of Section
34.3, if Lessor breaches any covenant to be performed by it under this Lease,
Lessee, after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to all other remedies available to Lessee,
may (but shall be under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the expense of Lessor. All
sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys' fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand or,
following entry of a final, nonappealable judgment against Lessor for such sums,
may be offset by Lessee against the Base Rent payments next accruing or coming
due. The rights of Lessee hereunder to cure and to secure payment from Lessor in
accordance with this Section 34.2 shall survive the termination of this Lease
with respect to the Leased Property.
34.3. [INTENTIONALLY OMITTED.
34.4. Grant of Easements or Imposition of Restrictions. Lessor may
not grant easements or impose restrictions with respect to any Leased Property
without the express written consent of Lessee, which consent may not be
unreasonably withheld.
34.5. Outparcels, Leases and Licenses. The Lessor, without the consent
of the Lessee, shall have the right to (a) develop, subdivide, lease, sell,
construct, operate or maintain improvements on that portion of the Land, if any,
not necessary for the operations of the Hotel, provided the intended use of such
portion of the Land would not materially interfere with the operations of the
Hotel (as determined by Lessee in its reasonable discretion), and (b) lease or
license portions of the Leased Property for telecommunications and similar or
related facilities, billboards or other uses, to the extent
60
such leases or licenses do not materially interfere with the operations of the
Hotel; provided, however, that in the event such lease or license is for a
rooftop telecommunications antennae, then the revenues received by the Lessor
shall be distributed 50% to the Lessee and 50% to the Lessor. The Lessee agrees
to (i) cooperate with Lessor or any designee of Lessor with respect to any
outparcel or lease or license which is in compliance with the provisions of this
section and (ii) terminate this Lease as to any outparcel created under this
section.
ARTICLE XXXV
35.1. Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other interest
rate provided for in any provision of this Lease are based upon a rate in excess
of the maximum rate permitted by applicable law, the parties agree that such
charges shall be fixed at the maximum permissible rate. Neither this Lease nor
any provision hereof may be changed, waived, discharged or terminated except by
a written instrument in recordable form signed by Lessor and Lessee. All the
terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The headings in this Lease are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. This Lease shall be
governed by and construed in accordance with the laws of the State, but not
including its conflicts of laws rules.
35.2. Transition Procedures. Upon the expiration or termination of the
Term of this Lease, for whatever reason, Lessor and Lessee shall do the
following (and the provisions of this Section 35.2 shall survive the expiration
or termination of this Lease until they have been fully performed) and, in
general, shall cooperate in good faith to effect an orderly transition of the
management lease or of the Facility.
(a) Transfer of Licenses. Upon the expiration or earlier termination of the
Term, Lessee shall use its best efforts (i) to transfer to Lessor or Lessor's
nominee or assignee all Franchise Agreements, 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; provided, in either case, that the costs
and expenses of any such transfer or the processing of any such application
shall be paid by Lessor or Lessor's nominee.
(b) Leases and Concessions. Lessee shall assign to Lessor
or Lessor's nominee simultaneously with the termination of this Lease, and the
61
assignee shall assume all leases and concession agreements in effect with
respect to the Facility then in Lessee's name.
(c) Books and Records. All books and records for the Facility
kept by Lessee pursuant to Section 3.7 shall be delivered promptly to Lessor or
Lessor's nominee, simultaneously with the termination of this Lease, but such
books and records shall thereafter be available to Lessee at all reasonable
times for inspection, audit, examination, and transcription for a period of one
(1) year and Lessee may retain (on a confidential basis) copies or computer
records thereof.
(d) Remittance. Lessee shall remit to Lessor or Lessor's
nominee, simultaneously with the termination of this Lease, all funds remaining,
if any, after payment of all accrued Gross Operating Expenses, and other amounts
due Lessee and after deducting the costs of any scheduled repair, replacement,
or refurbishment of Furniture and Equipment with respect to which deposits have
been made.
35.3. Waiver of Presentment, etc. Lessee waives all presentments,
demands for payment and for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein.
ARTICLE XXXVI
Memorandum of Lease. Lessor and Lessee shall promptly upon the request
of either enter into a short form memorandum of this Lease, in form suitable for
recording under the laws of the State in which reference to this Lease, and all
options contained herein, shall be made. Lessee shall pay all costs and expenses
of recording such memorandum of this Lease.
ARTICLE XXXVII
[INTENTIONALLY OMITTED]
ARTICLE XXXVIII
Compliance with Franchise Agreement. Lessee shall comply in every
respect with the provisions of the Franchise Agreement (other than requirements
with respect to funding Capital Improvements which shall be the responsibility
of Lessor) so as to avoid any default thereunder during the term of this Lease.
Lessee shall not terminate, extend, modify or enter into any Franchise Agreement
without in each instance first obtaining Lessor's prior written consent. Lessor
and Lessee agree to cooperate fully with each other in the event it becomes
necessary to obtain a Franchise Agreement extension or modification or a new
franchise for the Leased Property. If the Franchise Agreement expires prior to
the expiration of the Lease Term, Lessee, with the prior approval of Lessor,
shall endeavor to obtain a new or extended franchise license. Lessee shall be
the franchisee
62
under any such franchise agreement. In the event of a change in the franchise
for the Leased Property, Lessor and Lessee shall promptly negotiate in good
faith appropriate and mutually acceptable modifications to the Rent terms for
such Leased Property under this Lease. In the event that Lessor and Lessee are
unable to agree, within sixty (60) days after such change in the franchise, that
modifications to the Rent terms are warranted by the change in franchise or to
agree on appropriate modifications to the Rent terms either Party may elect to
submit the matter to arbitration pursuant to Article XLI hereof. During the
pendency of the negotiations and/or arbitration, Lessee shall continue to pay
Rent in accordance with the terms of the Lease, with possible retroactive
adjustments based on the outcome of the negotiations and/or arbitration. To the
extent required by the Franchise Agreement, Lessor shall secure its obligations
to make capital expenditures or pay real property taxes by either depositing the
required funds in escrow with an escrow agent acceptable to the franchisor or by
dedicating for such purpose a portion of Lessor's line of credit either by
issuance of a letter of credit in favor of the franchisor or in some other
manner acceptable to the franchisor. If upon any expiration or earlier
termination of the Lease (other than upon an Event of Default by Lessee), a
Franchise Agreement remains in effect, or would but for such expiration or
termination remain in effect, Lessor shall indemnify, defend and hold Lessee
harmless with respect to the obligations and liabilities arising thereunder
after the date of expiration or termination of this Lease.
ARTICLE XXXIX
Capital Expenditures and Reserves. Lessor agrees to establish a reserve
account together with all interest earned thereon for each Facility (the
"Capital Expenditure Reserve Account") to fund Capital Expenditures in an amount
equal to four percent (4%) of annual Room Revenues from each Facility, net of
amounts actually expended for Capital Expenditures for such Facility during any
Fiscal Year. Any funds escrowed pursuant to a Franchise Agreement or Mortgage
and designated for Capital Expenditures shall be deemed to be part of the
Capital Expenditure Reserve Account for the applicable Leased Property. Any
funds escrowed pursuant to a Mortgage may be pledged as security for such
Mortgage, which pledge may provide that, in the event of a default by Lessor
under the Mortgage, the escrowed funds may be applied to the balance of the loan
secured by the Mortgage; provided, however, that in the event the holder of the
Mortgage exercises such remedy, Lessor shall be obligated immediately to deposit
into the Capital Expenditure Reserve Account any amount which may then be
necessary to bring the funds in such account (together with any funds remaining
in any other accounts of Lessor dedicated for such purpose) up to the aggregate
level required by this Article XXXIX. The Capital Expenditure Reserve Account
for each Facility may be commingled by Lessor with similar accounts of Lessor
with respect to other hotel properties leased by Lessor to Lessee. Upon request
by Lessee not more frequently than twice a year, Lessor shall provide Lessee a
written report stating the amounts held in such Capital Expenditure Reserve
Account with respect to each Leased Property and amounts disbursed out of said
account with respect to each Leased Property during the prior Fiscal Year. Upon
written request by Lessee to Lessor stating the specific use to be made and the
reasonable approval thereof by Lessor, the funds in the Capital Expenditure
Reserve Account shall be made available by Lessor for use by Lessee for Capital
Expenditures in
63
connection with the Primary Intended Use as set forth in the approved Capital
Budget; provided, however, that no amounts made available under this Article
shall be used to purchase proerty (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 to fund the Capital
Expenditure Reserve Account shall be cumulative and any Capital Expenditures
with respect to a Facility made in a Fiscal Year (including Fiscal Years
preceding the Term of this Lease) in excess of four percent (4%) of Gross
Revenues on a cumulative basis shall be credited to the Capital Expenditure
Reserve Account for that Facility. All amounts in the Capital Expenditure
Reserve Account are the property of Lessor. Lessee shall have no interest in the
Capital Expenditure Reserve Account other than with respect to the funding of
amounts in a Capital Budget approved by Lessor.
ARTICLE XL
Catastrophic Market Changes. In the event that a Catastrophic Market
Change (as hereinafter defined) occurs with respect to the market in which a
Leased Property is located, Lessor agrees, upon written request from Lessee, to
consider in good faith marketing such Leased Property for sale to a third party;
provided, however, that the Lessor shall have no legally binding obligation to
market or sell the Leased Property. In the event that such sale is consummated,
this Lease shall be terminated upon the date of the transfer and, thereupon,
neither party shall be further obligated to the other under this Lease,
including, without limitation, any obligation by Lessee to pay Rent to Lessor
beyond the date of transfer. For purposes of this Article XL, "Catastrophic
Market Change" means a specific event or series of specific events (and not
general economic conditions), not caused in whole or in part by Lessee or
Lessee's Affiliates, which is reasonably deemed by Lessee to be permanent or
long- term and which is expected to reduce annual Gross Revenues at the Leased
Property to a level at which such annual Gross Revenues will be less than the
sum of Rent plus Gross Operating Expenses.
ARTICLE XLI
Arbitration. Except as otherwise expressly provided, in the event a
dispute should arise concerning the interpretation or application of any of the
provisions of this Agreement, the parties agree that the dispute shall be
submitted to arbitration by the American Arbitration Association under its then
prevailing rules, except as modified by this Article XLI. The Arbitration
Tribunal shall be formed of three (3) Arbitrators each of which shall have at
least five (5) years' experience in hotel operation, management or ownership,
one (1) to be appointed by each of Lessor and Lessee and the third (3rd) to be
appointed by the American Arbitration Association. The arbitration shall take
place in the county in which the Leased Property is located and shall be
conducted in the English language. The arbitration award shall be final and
binding upon the parties hereto and subject to no appeal, and shall deal with
the question of costs of arbitration and all matters related thereto. Judgment
upon the award rendered may be entered into any court having jurisdiction, or
applications may be made to such court for an order of enforcement. Any
arbitration under this Article XLI shall be submitted
64
within three (3) months following the notice which triggers the arbitration, and
shall be concluded within one (1) year thereafter. In the event either of the
foregoing deadlines are missed, either party may proceed to commence a court
proceeding to resolve the dispute.
ARTICLE XLII
Change in REIT Status or REIT Regulations. In the event that Equity
Inns terminates its status as a real estate investment trust ("REIT") for tax
purposes, or in the event that the Internal Revenue Code provisions are amended
so that REITs are permitted to operate hotels, Lessor may elect to terminate
this Lease. In the event that this Lease is so terminated, Lessor shall be
obligated to pay to Lessee a termination payment equal to the Net Present Value
(as hereinafter defined), as of the termination date of this Lease, of the cash
flow to Lessee from the operations of the Leased Property (after payment of all
Rent hereunder. The "Net Present Value" of the cash flow to Lessee from the
operations of the Leased Property shall be calculated by multiplying (a) the
average annual EBITDA (as hereinafter defined) to Lessee net of all Rent for the
three (3) Fiscal Years ended immediately prior to the termination date, times
(b) the number of Fiscal Years (or portions thereof) remaining in the Lease
Term, times (c) one hundred percent (100%) plus the average annual percentage
increase in the Consumer Price Index during the three (3) Fiscal Years ended
immediately prior to the date of sale, and (d) discounting the product of (a)
times (b) times (c) above by the Base Rate plus one percent. "EBITDA" means net
earnings before interest, taxes, depreciation and amortization.
ARTICLE XLIII
Lessor's Option to Terminate Lease. In the event Lessor enters into a
bona fide contract to sell the Leased Property, Lessor shall immediately provide
Lessee with Notice of such contract, in which event Lessee shall be permitted to
terminate the Lease effective upon the closing thereof. Effective upon such
closing, this Lease shall terminate and be of no further force and effect except
as to any obligations of the parties existing as of such date that survive
termination of this Lease. As compensation for the early termination of its
leasehold estate under this Article XLIII, Lessor shall within 90 days of such
closing either (a) pay to Lessee in cash the fair market value of Lessee's
leasehold estate hereunder as of the closing of the sale of the Leased Property
or (b) offer to lease to Lessee one or more substitute hotel facilities pursuant
to one or more leases that would create for the Lessee leasehold estates that
have an aggregate fair market value of no less than the fair market value of the
original leasehold estate, both such values as determined as of the closing of
the sale of the Leased Property. If Lessor elects and complies with the option
described in (b) above, regardless of whether Lessee enters into the lease(s)
described therein, Lessor shall have no further obligations to Lessee with
respect to compensation for the early termination of this Lease. In the event
Lessor and Lessee are unable to agree upon the fair market value of an original
or replacement leasehold estate, it shall be determined by appraisal using the
appraisal procedure set forth in Article XXXIII.
65
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 WITNESS WHEREOF, the parties have executed this Lease by
their duly authorized officers as of the date first above written.
[Signature Page Follows]
[Remainder of Page Intentionally Left Blank]
66
SIGNATURE PAGE
CONSOLIDATED LEASE AGREEMENT
LESSOR
EQUITY INNS PARTNERSHIP, L.P.
Signed and acknowledged By:
----------------------------------
in the presence of: Name:
----------------------------------
Address:
----------------------------------
State of Tennessee )
) SS.
County of Shelby )
BEFORE ME, a Notary Public in and for said State and County,
personally appeared _______________________, the ________________ of
________________________ _______________________________, a
_________________________, who acknowledged that he executed the foregoing
instrument for and on behalf of said general partner, that the same was his own
free act and deed, individually and as such officer, and the free act and deed
of the partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal
this ____ day of ________________________, 2001.
-----------------------------------
Notary Public
My commission expires:_____________
SIGNATURES CONTINUED ON NEXT PAGE
SIGNATURE PAGE
CONSOLIDATED LEASE AGREEMENT
LESSEE
ENN LEASING COMPANY, INC.
Signed and acknowledged By:
----------------------------------
in the presence of: Name:
----------------------------------
Address:
----------------------------------
State of Tennessee )
) SS.
County of Shelby )
BEFORE ME, a Notary Public in and for said State and County,
personally appeared __________________________________, the ____________ of
___________________ a ________________________, who acknowledged that he
executed the foregoing instrument for and on behalf of said
____________________, that the same was his own free act and deed, individually
and as such officer, and the free act and deed of the _________________________.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal
this ____ day of ________________________, 2001.
-----------------------------------
Notary Public
My commission expires:_____________
Exhibit A
Legal Descriptions
Exhibit B
List of Leases
Comfort Inn -- Arlington, Texas
Holiday Inn Express -- Wilkesboro, North Carolina
Hampton Inn -- Scottsdale, Arizona
Residence Inn -- Burlington, Vermont
Residence Inn -- Colorado Springs, Colorado
Hampton Inn -- Pickwick, Tennessee
Hampton Inn -- Addison, Texas
Hampton Inn -- Atlanta (Northlake), ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Inn -- Birmingham (Vestavia Hills), Alabama
Hampton Inn -- Chapel Hill, North Carolina
Hampton Inn -- Colorado Springs, Colorado
Hampton Inn -- West Columbia, South Carolina
Hampton Inn -- Little Rock, Arkansas
Hampton Inn -- Memphis (Sycamore View), Tennessee
Hampton Inn -- Nashville (▇▇▇▇▇▇ Parkway), Tennessee
Homewood Suites -- Augusta, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Inn -- San Antonio, Texas
Hampton Inn & Suites -- Memphis (Bartlett), Tennessee
Homewood Suites -- Seattle, Washington
Homewood Suites -- Chicago (Grand Avenue), Illinois
Exhibit C
Schedule of Lease Terms
Comfort Inn
Arlington, Texas
Base Rent: The annual sum of $641,423 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 30% of
the first $402,804 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69% of all
year to date Room Revenues in excess of $402,804 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 30% of
the first $805,607 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69% of all
year to date Room Revenues in excess of $805,607 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 30% of
the first $1,208,411 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69% of all
year to date Room Revenues in excess of $1,208,411 (as adjusted
under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 30% of the
first $1,611,214 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69% of all
year to date Room Revenues in excess of $1,611,214 (as adjusted
under Section 3.1(d)).
II. Holiday Inn Express
Wilkesboro, North Carolina
Base Rent: The annual sum of $235,563 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 35%
of the first $192,094 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69% of all
year to date Room Revenues in excess of $192,094 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 35% of
the first $384,188 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69% of all
year to date Room Revenues in excess of $384,188 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 35%
of the irst $576,282 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69% of all
year to date Room Revenues in excess of $576,282 (as adjusted
under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 35% of the
first $768,376 in year to date Room Revenues (as adjusted under
Section 3.1(d)) plus (b) an amount equal to 69% of all year to
date Room Revenues in excess of $768,376 (as adjusted under
Section 3.1(d)).
III. Hampton Inn
Scottsdale, Arizona
Base Rent: The annual sum of $855,415 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 37%
of the first $399,910 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 73% of all
year to date Room Revenues in excess of $399,910 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 37%
of the first $799,819 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 73% of all
year to date Room Revenues in excess of $799,819 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 37% of
the first $1,199,729 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 73% of all
year to date Room Revenues in excess of $1,199,729 (as adjusted
under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 37% of the
first $1,599,638 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 73% of all
year to date Room Revenues in excess of $1,599,638 (as adjusted
under Section 3.1(d)).
IV. Residence Inn by Marriott
Burlington, Vermont
Base Rent: The annual sum of $713,725 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 37% of
the first $465,449 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74% of all
year to date Room Revenues in excess of $465,449 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 37%
of the first $930,897 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74% of all
year to date Room Revenues in excess of $930,897 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 37%
of the first $1,396,346 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74% of all
year to date Room Revenues in excess of $1,396,346 (as adjusted
under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 37% of the
first $1,861,794 in year to date Room Revenues (as adjusted under
Section 3.1(d)) plus (b) an amount equal to 74% of all year
to date Room Revenues in excess of $1,861,794 (as adjusted under
Section 3.1(d)).
V. Residence Inn by Marriott
Colorado Springs, Colorado
Base Rent: The annual sum of $846,601 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 37%
of the first $390,076 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 75% of all
year to date Room Revenues in excess of $390,076 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 37%
of the first $780,152 year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 75% of all
year to date Room Revenues in excess of $780,152 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 37%
of the first $1,170,227 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 75%
of all year to date Room Revenues in excess of $1,170,227 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 37% of the
first $1,560,303 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 75% of all
year to date Room Revenues in excess of $1,560,303 (as adjusted
under Section 3.1(d)).
VI. Hampton Inn
Pickwick, Tennessee
Base Rent: The annual sum of $182,935 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 32%
of the first $193,618 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 65% of all
year to date Room Revenues in excess of $193,618 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 32%
of the first $376,235 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 65% of all
year to date Room Revenues in excess of $376,235 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 32%
of the first $580,853 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 65% of all
year to date Room Revenues in excess of $580,853 (as adjusted
under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 32% of the
first $774,470 in year to date Room Revenues (as adjusted under
Section 3.1(d)) plus (b) an amount equal to 65% of all year to
date Room Revenues in excess of $774,470 (as adjusted under
Section 3.1(d)).
VII. Hampton Inn
Addison, Texas
Base Rent: The annual sum of $1,062,993 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 36.2%
of the first $405,799 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.4% of all
year to date Room Revenues in excess of $405,799 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 36.2%
of the first $811,598 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.4% of all
year to date Room Revenues in excess of $811,598 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 36.2%
of the first $1,217,397 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 72.4%
of all year to date Room Revenues in excess of $1,217,397 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 36.2% of the
first $1,623,196 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.4% of all
year to date Room Revenues in excess of $1,623,196 (as adjusted
under Section 3.1(d)).
VIII. Hampton Inn
Atlanta (Northlake), Georgia
Base Rent: The annual sum of $762,362 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 35.9%
of the first $343,159 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.9% of all
year to date Room Revenues in excess of $343,159 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 35.9%
of the first $686,318 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.9% of all
year to date Room Revenues in excess of $686,318 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 35.9%
of the first $1,029,477 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 71.9%
of all year to date Room Revenues in excess of $1,029,477 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 35.9% of the
first $1,372,636 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.9% of all
year to date Room Revenues in excess of $1,372,636 (as adjusted
under Section 3.1(d)).
IX. Hampton Inn
Birmingham (Vestavia), Alabama
Base Rent: The annual sum of $623,662 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 34.9%
of the first $393,262 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69.8% of all
year to date Room Revenues in excess of $393,262 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 34.9%
of the first $786,524 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69.8% of all
year to date Room Revenues in excess of $786,524 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 34.9%
of the first $1,179,786 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 69.8%
of all year to date Room Revenues in excess of $1,179,786 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 34.9% of the
first $1,573,048 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69.8% of all
year to date Room Revenues in excess of $1,573,048 (as adjusted
under Section 3.1(d)).
▇. ▇▇▇▇▇▇▇ Inn
Chapel Hill, North Carolina
Base Rent: The annual sum of $789,003 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 36.2%
of the first $346,023 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.3% of all
year to date Room Revenues in excess of $346,023 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 36.2%
of the first $692,045 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.3% of all
year to date Room Revenues in excess of $692,045 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 36.2%
of the first $1,038,068 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 72.3%
of all year to date Room Revenues in excess of $1,038,068 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 36.2% of the
first $1,384,090 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.3% of all
year to date Room Revenues in excess of $1,384,090 (as
adjusted under Section 3.1(d)).
XI. Hampton Inn
Colorado Springs, Colorado
Base Rent: The annual sum of $490,730 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 35.6%
of the first $388,907 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.2% of all
year to date Room Revenues in excess of $388,907 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 35.6%
of the first $777,814 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.2% of all
year to date Room Revenues in excess of $777,814 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 35.6%
of the first $1,166,721 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 71.2%
of all year to date Room Revenues in excess of $1,166,721 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 35.6% of the
first $1,555,628 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.2% of all
year to date Room Revenues in excess of $1,555,628 (as
adjusted under Section 3.1(d)).
XII. ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Base Rent: The annual sum of $667,089 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 35.3%
of the first $324,225 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 70.5% of all
year to date Room Revenues in excess of $324,225 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 35.3%
of the first $648,450 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 70.5% of all
year to date Room Revenues in excess of $648,450 (as
adjusted under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 35.3%
of the first $972,675 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 70.5% of all
year to date Room Revenues in excess of $972,675 (as adjusted
under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 35.3% of the
first $1,296,900 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 70.5% of all
year to date Room Revenues in excess of $1,296,900 (as adjusted
under Section 3.1(d)).
XIII. Hampton Inn
Little Rock, Arkansas
Base Rent: The annual sum of $617,120 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 35.6%
of the first $347,416 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.3% of all
year to date Room Revenues in excess of 347,416 (as adjusted under
Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 35.6%
of the first $694,831 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.3% of all
year to date Room Revenues in excess of $694,831 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 35.6%
of the first $1,042,247 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 71.3%
of all year to date Room Revenues in excess of $1,042,247 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 35.6% of the
first $1,389,662 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71.3% of all
year to date Room Revenues in excess of $1,389,662 (as adjusted
under Section 3.1(d)).
XIV. Hampton Inn
Memphis (Sycamore View), Tennessee
Base Rent: The annual sum of $467,710 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 34.8%
of the first $408,867 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69.5% of all
year to date Room Revenues in excess of $408,867 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 34.8%
of the first $817,735 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69.5% of all
year to date Room Revenues in excess of $817,735 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 34.8%
of the first $1,226,602 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 69.5%
of all year to date Room Revenues in excess of $1,226,602 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 34.8% of the
first $1,635,469 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 69.5% of all
year to date Room Revenues in excess of $1,635,469 (as adjusted
under Section 3.1(d)).
XV. Hampton Inn
Nashville (▇▇▇▇▇▇ Parkway), Tennessee
Base Rent: The annual sum of $853,314 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 35.4%
of the first $435,058 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 70.9% of all
year to date Room Revenues in excess of $435,058 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 35.4%
of the first $870,115 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 70.9% of all
year to date Room Revenues in excess of $870,115 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 35.4%
of the first $1,305,173 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 70.9%
of all year to date Room Revenues in excess of $1,305,173 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 35.4% of the
first $1,740,230 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 70.9% of all
year to date Room Revenues in excess of $1,740,230 (as
adjusted under Section 3.1(d)).
XVI. Homewood Suites
Augusta, Georgia
Base Rent: The annual sum of $420,510 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 37.2%
of the first $271,649 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74.5% of all
year to date Room Revenues in excess of $271,649 (as
adjusted under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 37.2%
of the first $543,297 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74.5% of all
year to date Room Revenues in excess of $543,297 (as
adjusted under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 37.2%
of the first $814,946 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74.5% of all
year to date Room Revenues in excess of $814,946 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 37.2% of the
first $1,086,594 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74.5% of all
year to date Room Revenues in excess of $1,086,594 (as
adjusted under Section 3.1(d)).
XVII. Hampton Inn
San Antonio, Texas
Base Rent: The annual sum of $1,419,670 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 37%
of the first $485,609 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74% of all
year to date Room Revenues in excess of $485,609 (as
adjusted under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 37%
of the first $971,218 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74% of all
year to date Room Revenues in excess of $971,218 (as
adjusted under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 37%
of the first $1,456,826 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 74%
of all year to date Room Revenues in excess of $1,456,826 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 37% of the
first $1,942,435 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74% of all
year to date Room Revenues in excess of $1,942,435 (as
adjusted under Section 3.1(d)).
XVIII. Hampton Inn & Suites
▇▇▇▇▇▇▇▇ (Memphis), Tennessee
Base Rent: The annual sum of $824,321 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 35% of
the first $402,723 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.5% of all
year to date Room Revenues in excess of $402,723 (as
adjusted under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 35%
of the first $805,446 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.5% of all
year to date Room Revenues in excess of $805,446 (as adjusted
under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 35%
of the first $1,208,168 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 72.5%
of all year to date Room Revenues in excess of $1,208,168 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 35% of the
first $1,610,891 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 72.5% of all
year to date Room Revenues in excess of $1,610,891 (as
adjusted under Section 3.1(d)).
XIX. Homewood Suites
Seattle, Washington
Base Rent: The annual sum of $2,215,620 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 37%
of the first $926,500 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74.5% of all
year to date Room Revenues in excess of $926,500 (as adjusted
under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 37%
of the first $1,853,000 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 74.5%
of all year to date Room Revenues in excess of $1,853,000 (as
adjusted under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 37%
of the first $2,779,500 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 74.5%
of all year to date Room Revenues in excess of $2,779,500 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 37% of the
first $3,706,000 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 74.5% of all
year to date Room Revenues in excess of $3,706,000 (as adjusted
under Section 3.1(d)).
XX. Homewood Suites
Chicago (Grand Avenue), Illinois
Base Rent: The annual sum of $4,250,700 (as adjusted under Section 3.1(d)).
Percentage Rent:
1. First Quarter Revenues Computation: (a) an amount equal to 49%
of the first $2,431,725 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 71%
of all year to date Room Revenues in excess of $2,431,725 (as
adjusted under Section 3.1(d)).
2. Two Quarters Revenue Computation: (a) an amount equal to 49%
of the first $4,863,450 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 71%
of all year to date Room Revenues in excess of $4,863,450 (as
adjusted under Section 3.1(d)).
3. Three Quarters Revenue Computation: (a) an amount equal to 49%
of the first $7,295,175 in year to date Room Revenues (as
adjusted under Section 3.1(d)) plus (b) an amount equal to 71%
of all year to date Room Revenues in excess of $7,295,175 (as
adjusted under Section 3.1(d)).
4. Annual Revenue Computation: (a) an amount equal to 49% of the
first $9,726,900 in year to date Room Revenues (as adjusted
under Section 3.1(d)) plus (b) an amount equal to 71% of all
year to date Room Revenues in excess of $9,726,900 (as adjusted
under Section 3.1(d)).
Each of B.(1) through (3) for each hotel listed above shall be referred to as a
"Quarterly Revenues Computation."
Each B.(4) for each hotel listed above shall be referred to as the "Annual
Revenue Computation."
Exhibit D
Certain Items Classified as "Capital"
Exhibit E
Form of Operating Budget
Exhibit F
Form of Capital Budget